Nigeria’s exchange rate at the NAFEX window appreciated against the dollar to close at N385.75/$1 during intraday trading on Tuesday, October 20.

Also, the naira depreciated against the dollar, closing at N463/$1 at the parallel market on Tuesday, October 20, 2020, despite another round of forex allocation to BDCs by the CBN.

This is also as businesses shut down due to the outbreak of violence in some parts of the country including Lagos during the protest against the special anti-robbery unit (SARS) and police brutality by the Nigerian youth.

Parallel market: According to information from Abokifx, a prominent FX tracking website, at the black market where forex is traded unofficially, the Naira depreciated against the dollar to close at N463/$1 on Tuesday. This represents a N1 drop when compared to the N462/$1 that it exchanged for on Monday, October 19.

Current developments

• The local currency had strengthened by about 7.8% within the one week in September at the black market, as the CBN introduced some measures targeted at exporters and importers, in order to try to boost the supply of dollars in the foreign exchange market, and reduce the high demand for forex by traders. The measure
• The CBN has sold over $500 million to BDCs since they resumed forex sales on Monday, September 7, 2020. This was expected to inject more liquidity to the retail end of the foreign exchange market and discourage hoarding and speculation.
• However, the exchange rate against the dollar has remained volatile after the initial gains made, following the CBN’s resumption of sales of dollars to the BDCs.
• The President of the Association of Bureau De Change Operators, Aminu Gwadebe, said he expects the impact of the extra liquidity in the market to be gradual.
• Despite the drop in speculative buying of foreign exchange, the huge demand backlog by manufacturers and foreign investors still puts pressure and creates a volatile situation in the foreign exchange market.

NAFEX: The Naira appreciated against the dollar at the Investors and Exporters (I&E) window on Monday, closing at N386/$1.

• This represents a 25 kobo drop when compared with the N385.75/$1 that it exchanged for on Monday, October 19.
• The opening indicative rate was N386.38 to a dollar on Tuesday. This represents a 38 kobo drop when compared to the N386 that was recorded on Monday.
• The N392.79 to a dollar is the highest rate during intraday trading before closing at N386. It also sold for as low as N384/$1 during intraday trading.

Forex turnover: Forex turnover at the Investor and Exporters (I&E) window declined by 72.9% on Tuesday, October 20, 2020.

• According to the data tracked by Nairametrics from FMDQ, forex turnover dropped from $120.93 million on Monday, October 19, 2020, to $32.67 million on Tuesday, October 20, 2020.
• The CBN is still struggling to clear the backlog of foreign exchange demand, especially by foreign investors wishing to repatriate back their funds.
• The drop in forex supply after the huge increase 2 trading days ago reinforces the volatility of the foreign exchange market. The supply of dollars has been on a decline for months due to low oil prices and the absence of foreign capital inflow into the country.
• As part of the measure to check forex abuse and check illegal transactions, the CBN last month directed the freezing of accounts of about 38 companies.
• The average daily forex sale for last week was about $169.93 million, which represents a huge increase from the $34.5 million that was recorded the previous week.
• Total forex trading at the NAFEX window in the month of August was about $857 million, compared to $937 million in July.
• The exchange rate is still being affected by low oil prices, dollar scarcity, a backlog of forex demand and a shaky economy that has been hit by the coronavirus pandemic.
• According to Reuters, currency traders said that the naira is expected to be stable this week as banks limit foreign exchange transactions by both firms and individual buyers on the unofficial black market to curb speculation

Nigerian bourse closed in a near stalemate, as the All Share Index improved 0.03% to 28,665.82 points. A total volume of 297.3 million units of shares, valued at N2.96billion exchanged hands in 4,736deals.

UBA was the most traded shares by volume at 72.4million units, while ZENITHBANK topped by value N568million.

Nigerian bourse market breadth index was positive with 23 gainers against 17 losers. INTBREW (+9.90%) led the gainer’s chart today, while MOBIL (-4.60%) topped the laggards.

Sector performance

• NSE Consumer Goods Index: Up by +1.86% on buy-interests in INTBREW (+9.90%), NB (+4.67%), and FLOURMILL (+4.55%).
• NSE Insurance Index: Down by -1.17% on price depreciation in CORNERST (-4.76%) and AIICO (-4.49%).
• NSE Banking Index: Declined by -1.02% due to sell-offs in UBA (-2.82%), ACCESS (-2.52%), and GUARANTY (-1.30%).
• NSE Oil & Gas Index: Dipped by -0.89% due to the decline in MOBIL (-4.60%).
• NSE Industrial Index: Fell by -0.17% on the back of a loss in WAPCO (-2.16%)

Top gainers

1. INTBREW up 9.90% to close at N6.44
2. NB up 4.67% to close at N51.5
3. FLOURMILL up 4.55% to close at N23
4. UACN up 4.48% to close at N7
5. JBERGER up 2.66% to close at N17.35

Top Losers

1. MOBIL down 4.60% to close at N178.3
2. GUINNESS down 3.68% to close at N17
3. GUARANTY down 1.30% to close at N30.4
4. WAPCO down 2.16% to close at N18.1
5. UNILEVER down 2.59% to close at N13.15

Outlook

Nigerian bourse ended relatively flat on Tuesday amid higher oil prices and COVID-19 raging onslaughts infecting over 40 million people globally.

• The major theme distorting the mind of local investors is the shutdown of economic activities at Nigeria’s major economic hubs which include Lagos, Edo, and Oyo. This weighed on the bulls’ resolve to increase their buying pressure.
• Trading activities turned relatively impressive amid the prevailing macro, showing the high intensity of protests by Nigerian youths clamouring for police reforms.
• Nairametrics envisage cautious buying, as the prevailing macro shows a significant amount of armed miscreants distorting the peaceful protests recently.

Secure Electronic Technology Plc (SET Plc) recorded a post-tax loss of N14.4M in Q3 2020, triggered by a high dealer’s commission. 

A cursory analysis of the Q3 2020 results of Secure Electronic Technology Plc (SET Plc) indicates that the Q3 2020 post-tax loss reduced by 33.7% from N21.7M in the same quarter last year. 

READ: For SET Plc, failure in lottery shifts focus to online gaming

Highlights 

• Revenue increased by 1.0% 
• Prizes/winnings increased by 0.52% 
• Dealers commission increased by 3.42%    
• Net income decreased by 14.71% 
• Administrative expenses decreased by 21.21%  
• Operating loss decreased by 34.62% 
• Financial charges increased by 68.23% 

READ: MTN: Data subscriptions triggered surge in Q2 2020 Revenues

What you should know

• A cursory analysis of the latest results of the company reveals that revenues generated from lottery sales and gaming products increased by 1% in Q3 2020 relative to Q3 2019, despite COVID-19 pandemic disruptions that have affected revenues of most businesses worldwide.
• YoY, revenue decreased by 2.15% from N3.18B in 2019 (9-months) relative to N3.11B in 2020 (9-months) – indicating that COVID-19 might have impacted the activities of the company, when considered on a yearly basis.   
• While the company was able to increase revenues by 1%, reduce its operating loss by 34.62%, and reduce its administrative expenses by 21.21%; high dealers commission and administrative expenses as well as finance charges which increased by 68.23% contributed to the post-tax loss recorded.  
• Dealers commission and administrative expenses constitute a drag on the company’s profitability. Dealer’s commission was 36.12% of revenues in the period under consideration while prizes/winnings were 60.35%. Administrative expenses was 137.16% of net income in the quarter under consideration. 
• The post-tax loss is an indication that there was no distributable profit. Thus, the Earnings Per Share (EPS) of the company would be a deficit; so that Q3 2020 EPS was –0.26 kobo.  

READ: Infinity Trust Mortgage Bank Plc suffers 2.21% drop in Q3 revenues

The shares currently trade at N0.20 per unit. The highest price for a unit of share in 52 weeks was N0.20 and the lowest N0.20, indicating that the share price of the company has been stable. A total of 20,212 units was sold in the last seven days trades. Shares outstanding is 5.63 billion units and its market capitalization as at close of business Friday 16th October 2020 was N1.13 billion. 

Interlinked Technologies Plc operates in the same sub-sector as SET Plc – Speciality. Its share price is N2.91. The highest price for a unit of share in 52 weeks was N2.91 and the lowest N2.91 – indicating that the share price of the company has been stable. A total of 141,020 units was sold in the last seven days trades. Shares outstanding is 236.7 million units and its market capitalization as at close of business Friday 16th October 2020 was N688.80 million.  

READ: Pharmaceuticals: Pharma-Deko’s revenue declines by 49.4% in H1 2020

Background

Secure Electronic Technology Plc (SET Plc), formerly known as National Sports Lottery was incorporated in 2000 with an exclusive 30-year license granted by the FG to operate the National Lottery in Nigeria.

SET Plc started out as a gaming/lottery company. While online gaming remains a major part of its operations. Aside from lottery and gaming, the company now explores other business areas within the ambit of technology and data management. 

READ: SAHCO suffers 92% decline in profit, as travel restrictions bite harder

Today, the company is involved in the vending of airtime, provision of card payment solutions, trivia promo syndication, provision of central database and information processing services, as well as treasury/asset management services.