Business News
Nigerian Senate to review investment laws in supporting Nigeria’s capital market
The Senate will revisit more investment laws to support the development and growth of the Nigerian capital market.
The Senate will revisit more investment laws to support the development and growth of the Nigerian capital market. The laws to be revisited include the Investment and Securities Act, the main law governing the capital market, the Petroleum Industry Bill (PIB) and pension fund management among others.
Chairman, Senate Committee on Capital Market, Senator Ibikunle Amosun, assured stakeholders that the Senate would provide necessary tools for the growth of the market.
Amosun disclosed in Lagos during the visit of the Senate Committee on Capital Market to the Nigerian Stock Exchange (NSE) and FMDQ Holdings Plc.
The former Ogun State governor added that the national assembly will do everything possible to strengthen investors’ protection and the growth of the market.
(READ MORE: Senate considers petrol subsidy removal, naira devaluation)
According to him, the Senate Capital Market Committee will look at the possibility of increasing investments from Pension Fund Administrators to the stock market, which will enhance market liquidity in the Nigerian bourse
Amosun buttressed that the capital market has a role to play in rescuing the economy at this critical stage in the light of the coronavirus pandemic which has hit global financial markets. He said,
“The capital market is a potent avenue for deepening our economy. We have always talked about diversification which is essential to growing the economy and that is why the capital market has to play a very significant role in that aspect.
“Let me reassure that we will create that enabling environment for investors as well as to take out necessary policies to support the market and so we are urging investors not to press the panic button yet.”
Nigerian Stock Exchange (NSE), CEO, Mr. Oscar Onyema, explained that the that Nigeria remains an attractive investment destination as Africa’s most populous country, positioned to be a top 20 economy by 2030 and top 10 by 2050.
Business News
IMF advises banks to suspend dividend payment
However, halting dividend payments may not go down well for many retail and institutional investors, who rely on bank dividends for regular income.
In an article published on its website, International Monetary Fund (IMF) Managing Director, Kristalina Georgieva, advised banks to halt dividend payment for now. According to her, with the expectation of a deep recession in 2020 and partial recovery in 2021, banks’ resilience will be tested. Therefore, having in place strong capital and liquidity positions to support fresh credit will be essential.
According to the article, one of the steps needed to reinforce bank buffers is retaining earnings from ongoing operations which are not insignificant.
IMF staff calculate that the 30 global systemically important banks distributed about US$250bn in dividends and share buybacks last year.
READ MORE: State Governments: Another cycle of non-payment of salaries to begin soon
In a circular dated January 31, 2018, the Central Bank of Nigeria (CBN) stipulated new conditions for eligibility of Nigerian banks to pay dividend and the quantum of dividend to be paid out by banks who are eligible. Prior to the release of the circular, dividend payout policy for Nigerian banks had been spelt out in Section 16(1) of BOFIA 2004 (as amended) and Prudential Guidelines for DMBs of 2010. The circular provided guidelines and restrictions around divdidend payout for banks based on NPL ratio, CRR levels, and Capital Adequacy Ratio (CAR).
However, there were no regulatory restriction on dividend payout for banks that meet the minimum capital adequacy ratio, have a CRR of “low” or “moderate” and an NPL ratio of not more than 5%. However, it is expected that the Board of such institutions will recommend payouts based on effective risk assessment and economic realities. Indeed, current economic realities demand caution.
Current economic realities mean that banks face asset quality threats, further devaluation threat which may impact capital in some cases, and lower profits which in turn affects the quantum of capital retained. Ideally, these should reflect in NPL ratio and CAR ratio and should immediately restrict banks’ ability to pay dividend. However, there is usually a time lag before these ratios begin to reflect the new economic realities. Therefore, IMF’s advise may come in handy for many banks.
(READ MORE: Software security limitations cited as major reason for Covid-19 bank rush)
That said, halting dividend payments may not go down well for many retail and institutional investors, who rely on bank dividends for regular income. Banks like Zenith and Guaranty Trust have a good history of consistent dividend payment with attractive yields which is a major attraction for many shareholders.
CSL STOCKBROKERS LIMITED CSL Stockbrokers,
Member of the Nigerian Stock Exchange,
First City Plaza, 44 Marina,
PO Box 9117,
Lagos State,
NIGERIA.
Economy & Politics
CBN reduces MPR to 12.50%, holds other metrics
Central Bank of Nigeria (CBN) has reduced the Monetary Policy Rate (MPR) from 13.50% to 12.50% and retains CRR at 27.5%, Liquidity ratio at 30%.
The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has reduced the Monetary Policy Rate (MPR) from 13.50% to 12.50%.
Governor, CBN, Godwin Emefiele, disclosed this while reading the communique at the end of the MPC meeting on Thursday in Abuja. Meanwhile, other parameters such as the Cash Reserve Ratio (CRR) remained at 27.5%, Liquidity ratio at 30%.
Highlights of the Committee’s decision
- MPC cuts MPR by 100 basis points to 12.50%
- CRR stood at 27.5%
- The Liquidity Ratio was also kept at 30%
CBN MPC cuts policy rate by 100 basis points to 12.5 %, maintains other parameters constant.
— Central Bank of Nigeria (@cenbank) May 28, 2020
According to Emefiele, the decision of the MPC to reduce the Monetary Policy Rate was informed by the impact of the Covid-19 pandemic on the economy, increased inflationary pressure, restrictions in international trade and more.
He highlighted the decline in the nation’s GDP as well as the decline in the manufacturing and non-manufacturing purchasing index which were attributable to slower growth in production, rate of unemployment, amongst others.
Economy & Politics
Buhari seeks approval from green chamber to borrow fresh $5.5billion
FG also seek approval for the revised 2020-2022 mid-term expenditure framework (MTEF) which became necessary as a result of the crash in crude oil prices and the cut in the production output.
President Muhammadu Buhari is seeking the approval of the House of Representatives to borrow fund to finance capital projects at the federal and state (to support state governors) levels in the 2020 budget.
This request was disclosed via the official twitter handle of the House of Representatives.
The president’s letter, which indicated that the fund would be sourced locally and internationally, was read on the floor of the House of Representatives by the Speaker, Femi Gbajabiamila, during plenary on Thursday, May 28, 2020.
In the letter to the lower chamber, Buhari, is also seeking the approval for the revised 2020-2022 mid-term expenditure framework (MTEF) which became necessary as a result of the crash in crude oil prices and the cut in the production output.
Although the tweet did not contain the total amount of loan that is being requested, reports suggests that the President is seeking approval to borrow the sum of $5.513 billion from external sources to finance 2020 budget deficit and support state governments to meet challenges caused by the coronavirus pandemic.
President @Mbuhari is also seeking the House approval to borrow locally & internationally to finance capital projects as well as finance projects to support state governors in the 2020 budget
The letter was referred to the House Committee on loans & debt management. #HousePlenary— House of Reps NGR (@HouseNGR) May 28, 2020
Details shortly…
Stanley
March 22, 2020 at 12:46 am
Please, how many of these legislators have invested some of their capital in the Nigerian bourse; we need to know because we expect them to lead the way in bringing back local & foreign investors to the bourse.