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Nigerian Stocks record worst quarterly drop since 2009

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

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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.  

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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.  

READ MORE: What Warren Buffet will do if he traded Nigerian stocks

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.” 

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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.  

READ ALSO: COVID-19: NSE extends time for submission of audited financial statements

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.

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

Patricia

  

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.

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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.

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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.”

READ ALSO: Positive outlook as Africa FinTech attracts over $100 million in investments

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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.”

READ MORE: Blockchain technology expected to tackle Africa’s challenges across industries

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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:

Patricia

“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.”

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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.

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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.

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READ MOREL: El Rufai declares zero RoW charges for broadband infrastructure in Kaduna

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.

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(READ MORE: Covid-19: Timeline of every pronouncement made by Nigeria to support the economy)

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.

READ ALSO: Debtors Africa in partnership with Proshare Launches Searchable Database on Delinquent Debtors and Report on NPLs

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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.

Patricia

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.

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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.

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COVID-19: FCMB reschedule operations

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.

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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).

READ ALSO: COVID-19: Western diplomats warn of disease explosion, poor handling by government

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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.

 

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READ ALSO: Bill Gates says Trump’s WHO funding suspension is dangerous

Patricia
DateConfirmed caseNew casesTotal deathsNew deathsTotal recoveryActive casesCritical cases
May 29, 202093023872612269763447
May 28, 202089151822595259260647
May 27, 202087333892545250159787
May 26, 2020834427624916238557107
May 25, 202080682292337231155247
May 24, 202078393132265226353607
May 23, 202075262652210217451317
May 22, 2020726124522110200750337
May 21, 2020701633921111190748987
May 20, 202066772842008184046377
May 19, 202064012261921173444757
May 18, 202061752161919164443407
May 17, 202059593881826159441837
May 16, 202056211761765147239737
May 15, 202054452881713132039544
May 14, 202051621931683118038154
May 13, 202049711841646107037374
May 12, 20204787146158695936704
May 11, 202046412421521090235894
May 10, 202043992481421777834794
May 9, 202041512391271174532784
May 8, 202039123861181067931154
May 7, 20203526381108460128184
May 6, 20203145195104553425071
May 5, 2020295014899548123704
May 4, 2020280224594641722912
May 3, 2020255817088240020702
May 2, 20202388220861735119522
May 1, 20202170238691035117512
April 30, 2020193220459731715562
April 29, 2020172819652730713692
April 28, 2020153219545425512322
April 27, 20201337644102559942
April 26, 20201273914152399942
April 25, 20201182873632229252
April 24, 202010951143312088552
April 23, 20209811083231977532
April 22, 2020873912931976482
April 21, 20207821172631975602
April 20, 2020665382311884662
April 19, 2020627862221704362
April 18, 2020541482021663562
April 17, 2020493511841593172
April 16, 2020442351311522772
April 15, 2020407341211282672
April 14, 202037330111992632
April 13, 202034320100912422
April 12, 20203235100852282
April 11, 202031813103702382
April 10, 20203051770582402
April 9, 20202881471512302
April 8, 20202742260442262
April 7, 20202541661442042
April 6, 2020238650351982
April 5, 20202321851331942
April 4, 2020214540251850
April 3, 20202092542251800
April 2, 20201841020201620
April 1, 2020174352091630
March 31, 202013982091280
March 30, 2020131202181210
March 29, 2020111221031070
March 28, 20208919103850
March 27, 2020705103660
March 26, 20206514102620
March 25, 2020517102480
March 24, 2020444102410
March 23, 20204010112370
March 22, 2020308002280
March 21, 20202210001210
March 20, 2020124001110
March 19, 20208000170
March 18, 20208500170
March 17, 20203100030
March 16, 20202000020
March 15, 20202000020
March 14, 20202000020
March 13, 20202000020
March 12, 20202000020
March 11, 20202000020
March 10, 20202000020
March 9, 20202100020
March 8, 20201000010
March 7, 20201000010
March 6, 20201000010
March 5, 20201000010
March 4, 20201000010
March 3, 20201000010
March 2, 20201000010
March 1, 20201000010
February 29, 20201000010
February 28, 20201100010

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