FEATURED

Nigerian Stocks record worst quarterly drop since 2009

This could be a sign of what is to happen to the economy this year.

Published

2 months ago

April 1, 2020

Research Team

Nigerian stocks record worst quarterly drop since 2009

A whopping 37% in March 2009 remains the largest quarterly drop the Nigerian Stock Exchange has recorded. It’s a year that will eventually see stocks fall to 33.79%, the worst on record after the 45.7% drop of the disastrous 2007.

Another type of Tsunami is underway and just like in 2010 it is already wreaking havoc on markets globally and in Nigeria. The Nigerian Stock Market lost over 18.75% in March, partly driven by the crude oil war between Saudi Arabia and Russia. The COVID-19 pandemic has also added to the woes experienced by investors culminating in a quarterly loss of 20.3%, the worst since the forgettable experience in March 10 years ago.

The losses spared very few stocks. From brewery giant NB Plc to consumer goods giants, Nestle and Unilever and Telco giant MTN, investors lost billions. Banking stocks also felt the brunt. The FUGAZ, acronym for Nigeria’s top 5 banks skids into losses some as high as 40%. The market rout took no prisoners and defied whatever fundamentals some of the most capitalized companies could boast of. Bluechips stocks are now so cheap some are now priced lower than their earnings per share.

Apart from stocks, Nigeria’s Eurobond prices have also fallen drastically in the last month. Bond yields fell to as low as 12% during the month as foreign investors sold down assets in emerging markets including Nigeria. A trader informed Nairametrics that “for now foreign investors just want their money back and have instructed a fire sale of all their assets.”

Nigeria’s 2049 Eurobond Yields traded at a yield of 12.81% as prices fell to $72.94. The coupon rate for this loan about 9.2%. The shorter ended 2021, 28th January bond yields sold for $97.29 with a yield of 10.09%. Bond yields are inversely correlated to their underlying prices. The lower the price of a bond the higher the yields. A falling bond price is often associated with higher risk consideration.

The effect of the sell-offs could also be felt on the exchange rate. Nigeria’s naira first dropped to N380 at the I&E window where foreign investors buy and sell dollars before falling to as low as N390/$1/. This forced the central bank to devalue the naira to N380 for BDC’s. The naira’s one-year forward price, which gives an indication of where the currency could trade in a year’s time, fell about 11.3% against the dollar. The non-deliverable forwards market in London priced the naira at N515 to the dollar in a year’s time while naira futures contracts of the same tenor were quoted at N385.

The Nigerian Stock Exchange is often the bellwether for the economy and going by the extent of the losses recorded during the quarter it is nearly inevitable that we will avoid a recession. The effects of the COVID-19 lockdown is likely to get things worse just as oil prices fall below the $20 support level. This suggests we may not have seen the worst just yet.

A further devaluation could occur as the oil price war ratchets up. Nigeria’s inflation rate situation will likely get worse amidst a dwindling purchasing power. As more people struggle, slowly recalibrating their income and spending patterns, businesses will struggle to keep up with sales piling up unsold inventories. Soon, the solid fundamentals recorded in 2019 will disappear instigating a further stock market rout. Borrowers could also start to default on their loans sending non-performing loans back to levels seen in 2016.

This is the worst-case scenario. It could get better but only when oil prices rebound and the Coronavirus is defeated.

Research Team

Nairametrics Research team tracks, collates, maintains and manages a rich database of macro-economic and micro-economic data from Nigeria and Africa. Our analysts share some of the data collated on Nairametrics, using formats such as docs, tables and charts etc. The team also publishes research based analysis as articles on a regular basis.

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Cryptocurrency

KPMG, PwC, Accenture prepare to become Crypto auditors

Big Four firms and other leading brands are working with several crypto and blockchain firms on ways to combat interoperability, regulatory challenges and development of the technology.

Published

2 hours ago

May 30, 2020

Olumide Adesina

KPMG, PwC, Blockchain technology expected to tackle Africa’s challenges across multiple industries

No doubt, the Blockchain technology, along with the adoption of cryptocurrencies, is getting bigger. The business end of the market is expected to reach $21 billion over the next five years.

Expectedly, professional services giants are now taking a larger role in tackling new challenges in the market, the Big Four firms and other leading brands are working with several crypto and blockchain firms on ways to combat interoperability, regulatory challenges and development of the technology.

Henri Arslanian, PwC’s global crypto leader, told Cointelegraph that the Big Four firms majorly have a vital role in the advancement of the cryptocurrency ecosystem, saying:

“Although Bitcoin was designed with a trustless ideology, the reality is that the industry still requires trusted entities to catalyze the development of the ecosystem.”

Arslanian added that when he first joined PwC years back, few people took crypto seriously. However, he saw an increasing demand for crypto assets, with some businesses starting to accept Bitcoin payments from clients.

“Over the last couple of months, we’ve expanded our work. We recently closed the first-ever crypto fundraising deal at PwC, in which we led a $14 million Series A round for a Swiss-based crypto firm with Asian family offices. We are also the auditor for BC Group, a publicly listed crypto company in Hong Kong.”

BC Group CEO, Hugh Madden, also said that BC’s vision was to make use of crypto assets in Asia’s financial market. In turn, BC Group must set standards for compliance, security, and performance. Madden buttressed on the role of audits play by saying:

“Auditing, like regulatory clarity, provides confidence to all stakeholders that companies are operating transparently and adhering to expected industry standards. As the business of digital assets continues to grow and mature, and compliance and regulatory standards become more robust, auditors will continue to play a pivotal role.”

KPMG United States blockchain audit leader, Erich Braun, further contributed by saying that a business’s blockchain system should be developed with the intent to meet both accounting and operational needs to meet with accounting standards:

“SEC issuers will want to design blockchain technologies to support the entity’s internal control over financial reporting. Being able to prove how these technologies achieve their aims in a well-controlled environment is critical to a successful blockchain strategy. If the technology is not auditable, the immense benefits it brings, such as increasing efficiencies and cutting costs, may not be realized.”

Henri Arslanian, added in his closing remarks that the Big Four firms are indeed the most important players for the crypto asset space. He said:

“I believe the Big Four firms will serve as the bridge between the crypto ecosystem and the institutional world. It is good for both the crypto ecosystem and for professional services firms like ours as a new source of clients that we can help.”

FEATURED

What you need to know as banks rebrand CBN intervention funds to woo borrowers

CBN is releasing cheap funds to strategic sectors of the economy to hopefully restart the economy and possibly save the Nation from looming recession.

Published

7 hours ago

May 30, 2020

Op-Ed Contributor

LDR: Growing the real sector by fiat?, Rapid increase in food prices temporary – Emefiele, CBN and other industry stakeholders establish N1 billion Bankers’ Charitable Endowment Fund , How the CBN’s OMO restriction is affecting the market , Nigerian economy to grow by 2.38% in Q4 - CBN, New CBN report shows Nigerians will reduce consumption of luxury items, Banks violating CBN’s directive on N50 charge on accounts, send contradictory messages, What is on Godwin Emefiele’s mind?, These CBN policies are contradictory and stifling on banks, What you need to know as Banks rebrand CBN intervention funds to woo borrowers, CBN extends timeframe for submission of audited financial statements by other financial institutions

If like me you follow Nigerian Banks across social media networks, then like me you must have rebroadcasted some of their colorful advertising telling the world of their low-interest loans to fight COVID- 19, and hopefully restart the economy. One thing you must have noticed, however, during those rebroadcasts is how highlights of the advertisements- rates, tenor, and target industries- are the same no matter the brand.

Well, that is because the Banks are all advertising the same product; CBN’s intervention funds.

What does that mean?

CBN in a bid to reclaim the economic frontiers already lost to the COVID- 19 pandemics is releasing cheap funds to strategic sectors of the economy to hopefully restart the economy and possibly save the Nation from looming recession.

In April 14, 2020, a press release by the CBN Governor titled “Turning the COVID- 19 tragedy into an opportunity for a new Nigeria”, he highlighted a three-phase approach to tackling the pandemic to include an immediate, short term and medium term timelines of 0-3months, 0-12months and 0-3 years respectively. Critical to these phases are different aspects of the economy that need to be tackled in each phase. These key sectors include the health sector, manufacturing, and infrastructure, while others include agriculture and power.

To this end, the CBN has provided easily accessible loans to businesses in these sectors at below the market rate. These loans could either be overdrafts or long term loans that come with a moratorium, are accessible through the DMBs who assess the prospective borrower’s creditworthiness, and pass the same to the CBN for ratification and approval.

The intervention funds are placed in the following categories: Micro, Small, Medium Enterprises Development Fund (MSMEDF), Commercial Agric Credit Scheme (CACS), and the Real Sector Support Facility (RSSF) which funds the N100billion credit support intervention for the health sector.

All the loans are reasonably priced at 9% except for the health sector loans which are presently 5% and will revert to 9% in March of 2021.

Why the intervention?

Because the CBN believes that by accompanying these funds with the necessary policies and regulatory backings that they can revamp the Nigerian economy by fast-tracking the development of the Nigerian economy through these sectors. A move that will generate employment, diversify revenue base, provide input for the industrial sector and ultimately increase foreign exchange earnings.

This is what the CBN is all about.

What’s in it for the Banks?

Apart from the obvious- a spread on the loan amount, commissions on transactions, and other ancillary charges, the Banks are also playing their roles in working towards a better economy where we can all thrive.

So, when next you come across such advertisements… tell the next person. Let’s build a better economy together.

Coronavirus

Covid-19 Update in Nigeria

On the 29th of May 2020, 387 new confirmed cases and 2 deaths were recorded in Nigeria bringing the total confirmed cases recorded in the country to 9,302.

Published

14 hours ago

May 30, 2020

Samuel Oyekanmi

The spread of novel Corona Virus Disease (COVID-19) in Nigeria continues to rise as the latest statistics provided by the Nigeria Centre for Disease Control reveal Nigeria now has 9,302 confirmed cases.

On the 29th of May 2020, 387 new confirmed cases and 2 deaths were recorded in Nigeria.

To date, 9302 cases have been confirmed, 2697 cases have been discharged and 261 deaths have been recorded in 35 states and the Federal Capital Territory.

Covid-19 Case Updates- May 29th 2020

Total Number of Cases – 9,302
Total Number Discharged – 2,697
Total Deaths – 261
Total Tests Carried out – 58.726

The 387 new cases were reported from 14 states- Lagos (254), FCT (29), Jigawa (24), Edo (22), Oyo (15), Rivers (14), Kaduna (11), Borno (6), Kano (3), Plateau (2), Yobe( 2), Gombe (2), Bauchi (2), Ondo (1).

The latest numbers bring Lagos state total confirmed cases to 4377, followed by Kano (942), Abuja at 564, Katsina (358), Oyo (275), Jigawa (265), Borno (264), Edo (262), Ogun (246), Bauchi (236), Kaduna (232), Rivers (190), Gombe (154), Sokoto (116), Plateau (101).

Kwara State has recorded 87 cases, Zamfara (76), Nasarawa (62), Delta (57), Yobe (49), Akwa Ibom (45), Osun (44), Ebonyi (40), Adamawa (38), Imo (34), Kebbi (33), Niger (30), Ondo (25), Ekiti (20), Taraba and Enugu (18), Bayelsa (12), Anambra (11), Abia (10), Benue (7), while Kogi state has recorded 2 cases.

Lock Down and Curfew

In a move to combat the spread of the pandemic disease, President Muhammadu Buhari directed the cessation of all movements in Lagos and the FCT for an initial period of 14 days, which took effect from 11 pm on Monday, 30th March 2020.

The movement restriction, which was extended by another two-weeks period, has been partially put on hold with some businesses commencing operations from May 4. On April 27th, 2020, President Muhammadu Buhari declared an overnight curfew from 8 pm to 6 am across the country, as part of new measures to contain the spread of the COVID-19. This comes along with the phased and gradual easing of lockdown measures in FCT, Lagos, and Ogun States, which took effect from Saturday, 2nd May 2020, at 9 am.

Date	Confirmed case	New cases	Total deaths	New deaths	Total recovery	Active cases	Critical cases
May 29, 2020	9302	387	261	2	2697	6344	7
May 28, 2020	8915	182	259	5	2592	6064	7
May 27, 2020	8733	389	254	5	2501	5978	7
May 26, 2020	8344	276	249	16	2385	5710	7
May 25, 2020	8068	229	233	7	2311	5524	7
May 24, 2020	7839	313	226	5	2263	5360	7
May 23, 2020	7526	265	221	0	2174	5131	7
May 22, 2020	7261	245	221	10	2007	5033	7
May 21, 2020	7016	339	211	11	1907	4898	7
May 20, 2020	6677	284	200	8	1840	4637	7
May 19, 2020	6401	226	192	1	1734	4475	7
May 18, 2020	6175	216	191	9	1644	4340	7
May 17, 2020	5959	388	182	6	1594	4183	7
May 16, 2020	5621	176	176	5	1472	3973	7
May 15, 2020	5445	288	171	3	1320	3954	4
May 14, 2020	5162	193	168	3	1180	3815	4
May 13, 2020	4971	184	164	6	1070	3737	4
May 12, 2020	4787	146	158	6	959	3670	4
May 11, 2020	4641	242	152	10	902	3589	4
May 10, 2020	4399	248	142	17	778	3479	4
May 9, 2020	4151	239	127	11	745	3278	4
May 8, 2020	3912	386	118	10	679	3115	4
May 7, 2020	3526	381	108	4	601	2818	4
May 6, 2020	3145	195	104	5	534	2507	1
May 5, 2020	2950	148	99	5	481	2370	4
May 4, 2020	2802	245	94	6	417	2291	2
May 3, 2020	2558	170	88	2	400	2070	2
May 2, 2020	2388	220	86	17	351	1952	2
May 1, 2020	2170	238	69	10	351	1751	2
April 30, 2020	1932	204	59	7	317	1556	2
April 29, 2020	1728	196	52	7	307	1369	2
April 28, 2020	1532	195	45	4	255	1232	2
April 27, 2020	1337	64	41	0	255	994	2
April 26, 2020	1273	91	41	5	239	994	2
April 25, 2020	1182	87	36	3	222	925	2
April 24, 2020	1095	114	33	1	208	855	2
April 23, 2020	981	108	32	3	197	753	2
April 22, 2020	873	91	29	3	197	648	2
April 21, 2020	782	117	26	3	197	560	2
April 20, 2020	665	38	23	1	188	466	2
April 19, 2020	627	86	22	2	170	436	2
April 18, 2020	541	48	20	2	166	356	2
April 17, 2020	493	51	18	4	159	317	2
April 16, 2020	442	35	13	1	152	277	2
April 15, 2020	407	34	12	1	128	267	2
April 14, 2020	373	30	11	1	99	263	2
April 13, 2020	343	20	10	0	91	242	2
April 12, 2020	323	5	10	0	85	228	2
April 11, 2020	318	13	10	3	70	238	2
April 10, 2020	305	17	7	0	58	240	2
April 9, 2020	288	14	7	1	51	230	2
April 8, 2020	274	22	6	0	44	226	2
April 7, 2020	254	16	6	1	44	204	2
April 6, 2020	238	6	5	0	35	198	2
April 5, 2020	232	18	5	1	33	194	2
April 4, 2020	214	5	4	0	25	185	0
April 3, 2020	209	25	4	2	25	180	0
April 2, 2020	184	10	2	0	20	162	0
April 1, 2020	174	35	2	0	9	163	0
March 31, 2020	139	8	2	0	9	128	0
March 30, 2020	131	20	2	1	8	121	0
March 29, 2020	111	22	1	0	3	107	0
March 28, 2020	89	19	1	0	3	85	0
March 27, 2020	70	5	1	0	3	66	0
March 26, 2020	65	14	1	0	2	62	0
March 25, 2020	51	7	1	0	2	48	0
March 24, 2020	44	4	1	0	2	41	0
March 23, 2020	40	10	1	1	2	37	0
March 22, 2020	30	8	0	0	2	28	0
March 21, 2020	22	10	0	0	1	21	0
March 20, 2020	12	4	0	0	1	11	0
March 19, 2020	8	0	0	0	1	7	0
March 18, 2020	8	5	0	0	1	7	0
March 17, 2020	3	1	0	0	0	3	0
March 16, 2020	2	0	0	0	0	2	0
March 15, 2020	2	0	0	0	0	2	0
March 14, 2020	2	0	0	0	0	2	0
March 13, 2020	2	0	0	0	0	2	0
March 12, 2020	2	0	0	0	0	2	0
March 11, 2020	2	0	0	0	0	2	0
March 10, 2020	2	0	0	0	0	2	0
March 9, 2020	2	1	0	0	0	2	0
March 8, 2020	1	0	0	0	0	1	0
March 7, 2020	1	0	0	0	0	1	0
March 6, 2020	1	0	0	0	0	1	0
March 5, 2020	1	0	0	0	0	1	0
March 4, 2020	1	0	0	0	0	1	0
March 3, 2020	1	0	0	0	0	1	0
March 2, 2020	1	0	0	0	0	1	0
March 1, 2020	1	0	0	0	0	1	0
February 29, 2020	1	0	0	0	0	1	0
February 28, 2020	1	1	0	0	0	1	0