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Spotlight Stories

How to access CBN’s N250 billion intervention fund for gas sector

Loan shall be determined based on the activity and shall not exceed N10 billion per obligor.

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How to access CBN's N250 billion intervention fund for gas sector, BOC Gases Nigeria Plc proposes a final dividend of N0.30k

The Central Bank of Nigeria has set N10 billion as the maximum loan an obligor can access under its N250bn intervention fund for the gas sector.

This was disclosed by the apex bank in its new guideline titled ‘Framework for the implementation of an intervention facility for the national gas expansion programme’.

READ: USA will continue to partner with the AfDB – Steve Mnuchin

Terms of loan

Part of the term loan conditions for manufacturers, processors, wholesale distributors, was that the term loan, “Shall be determined based on the activity and shall not exceed N10 billion per obligor, Working capital is maximum of N500m per obligor.”

Why it matters: The CBN must have introduced the N250billion intervention facility to help stimulate investment in the gas value chain as part of its efforts to stimulate finance to critical sectors of the economy.

READ: Banks’ loans to private sector increase by N3.50 trillion in one year – CBN

It stated that “The low level of investment in the industry had resulted in the minimal production and utilisation of Compressed Natural Gas and Liquefied Petroleum Gas as clean alternative sources of domestic energy in Nigeria

“Failure to harness its gas resources has had negative consequences for the country, economic, environmental, fiscal and social, particularly as the industry has the potential to engender rapid growth in Nigeria’s non-oil economy.”

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It added that the objectives of the facility included improved access to finance for private sector investments in the domestic gas value chain; and also to stimulate investments in the development of infrastructure to optimise the domestic gas resources for economic development.

READ: Report accuses World Bank of ‘toying’ with Nigeria over $1.5 billion loan

The CBN said it also aimed to fast-track the adoption of CNG as the fuel of choice for transportation and power generation, as well as LPG as the fuel of choice for domestic cooking, transportation and captive power.

The development would also fast-track the development of gas-based industries particularly petrochemical (fertilizer, methanol, etc) to support large industries, such as agriculture, textile, and related industries; provide leverage for additional private sector investments in the domestic gas market; and boost employment across the country.

Click here to read the guidelines of the intervention fund.

Abiola has spent about 14 years in journalism. His career has covered some top local print media like TELL Magazine, Broad Street Journal, The Point Newspaper.The Bloomberg MEI alumni has interviewed some of the most influential figures of the IMF, G-20 Summit, Pre-G20 Central Bank Governors and Finance Ministers, Critical Communication World Conference.The multiple award winner is variously trained in business and markets journalism at Lagos Business School, and Pan-Atlantic University. You may contact him via email - [email protected]

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    Financial Services

    How to invest in Nigerian Eurobonds

    Before investing in Eurobonds, weigh the bond’s risk characteristics and set them against the interest rate to know if it is worth it.

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    Treasury Market T-bills, African Finance Corp. issues $750 million 7-year Eurobond at lowest yield to date

    As of 2019, Nigeria’s Eurobonds were regarded as one of the top 5 best-performing Eurobonds in the world.

    Although Nigeria’s Eurobonds remain one of the most profitable in the investment world, not many individuals know how to invest in them. The Federal Government and a number of corporate organisations in the country subscribe to Eurobonds and issue them quite often, lending credence to their attractiveness as an investment tool.

    What is Eurobond?

    Basically, Eurobonds are financial instruments issued by a country or corporate organisation in a currency different from the currency of the issuer.

    Nigeria typically issues Eurobond instruments denominated in US dollars. For example, the 6.75% $500 million January 2021 Eurobond was denominated in US dollars.

    There is the sovereign, which is referred to as a government bond, and the corporate bond. Eurobonds operate like fixed income securities in terms of bond instruments. It has a coupon, an interest rate paid on bonds (which is paid bi-annually), a price at which the bond will be purchased, and also a yield.

    The price and yield have an inverse relationship meaning that when the price goes up, the yield comes down. When the yield is coming down, the instrument is trading at a premium compared to when it was issued.

    An investor can buy Eurobonds while the primary auction is ongoing or later, at the secondary market, for those who were unable to participate in the primary auction.

    READ: Nigeria’s Eurobond yield hit 12.8% as investors flee emerging markets

    How to invest in Nigerian Eurobonds

    The process of investing in Eurobonds in Nigeria is not any different from that of investing in local bonds. Both bonds can be bought from either the primary market at the initial offer level or at the secondary market for existing bonds.

    All that is required is for the investor to complete the tender for the Federal Government of Nigeria or corporate bonds form, submit the tender through any of the authorized dealers and make the required payment when the bid is successful.

    Basically, for banks, your account has to be funded with the desired currency. For instance, to buy a dollar-denominated Eurobond which is the conventional one issued in Nigeria, you have to fund your account with dollars, then send an instruction for the bond purchase.

    READ: FG redeems $500 million Eurobond

    Be mindful of the bond’s risk profile before investing

    Eurobonds can either be corporate or government bonds. Corporate bonds may offer higher interest rates than government-issued Eurobonds but they also come with higher risk.

    If you want to invest in Eurobonds, ensure that you weigh the risk characteristics of the bonds and set them against the interest rate to know if it is worth it. Most Eurobonds come with credit ratings, which serve as a measure of their quality and risk profile.

    Usually, bonds with the highest quality credit ratings come with the lowest yields while bonds with lower credit ratings offer higher yields. The yield, in this sense, is a measure of the bond issuer’s creditworthiness meaning that the greater the credit risk on an investment, the higher the yield investors would demand to compensate for it.

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    READ: Investing in Nigerian Bonds – A Beginners Guide

    How to obtain an FG Eurobond

    When bonds are issued at the primary market, the issuance document contains a list of the banks or brokers that have been authorized to sell the bonds. The FGN issued bonds are purchased through the Primary Dealer Market Makers (PDMMs). These are banks appointed by the Debt Management Office (DMO), to act as authorized dealers of FGN bonds.

    Can you fund a Eurobond with a naira account?

    Not at the moment! You need a dollar account (domiciliary account) that is funded but your bank can easily guide you on how to obtain one.

    Next is to fill out instruction documents after which the bank will send you a market price and the expected yield. The bank then debits your account for the purchase. Every six months or on the specified coupon dates, you will receive your coupon and at maturity, you will get your principal back if the issuer does not default. A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from the issue date until maturity.

    READ: How to read stock market tables

    Here is a simplified example of the process:

    You walk into a branch of your bank and ask to purchase $100,000 worth of Eurobonds. Note that your domiciliary account should already be funded with the amount. You would be required to fill out and sign the letter of instruction which would then be sent to the bank’s treasury unit for processing. The treasury unit responds with the available Eurobond prices and requests you to confirm the purchase. When that is done, the treasury unit executes the deal and holds it in their custody.

    You can also sell the bonds at the secondary market.

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    Minimum investment as an individual

    The minimum conventional investment tranche is $200,000, but a $100,000 worth of investment is also permissible. Amounts lower than this are however problematic because the secondary market trades in tranches of $200,000.

    READ: Your “beard gang” is affecting the valuation of this global firm

    Can people invest through mutual funds?

    Basically, what mutual funds do is amass investors’ funds and buy Eurobonds in the secondary market. A mutual fund is just like a vehicle that helps you to buy bonds so that you are not faced with the issuer’s risk directly. Therefore, individuals or institutions can also buy Eurobonds through mutual funds.

    Mutual funds make it possible for you to participate in bond-buying with less than the statutory amount since they operate by pooling resources together from a large number of investors.

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    Market Views

    Ethereum breaks $4000 and 5 Big Takes for the week

    The 2nd week of May promises to be a profitable week, spurred on by the activities of last week.

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    What you should know before investing in Cryptocurrency

    The 2nd week of May promises to be a profitable week, spurred on by the activities last week. Here are the key events that affected the economy and markets last week.

    What are the regulators doing?

    CBN made the news in two major ways. Firstly, the apex bank indefinitely extended the Naira4dollar scheme for diaspora remittances. The initiative rewards recipients N5 for every $1 they receive through IMTOs and commercial banks. It was initially supposed to end on May 8th. Many analysts we have spoken to seem to believe this is another form of naira devaluation.

    Another interesting news from the CBN was its plans to reject the continuous importation of maize in Nigeria.

    READ: Why Ethereum is becoming more attractive than Bitcoin

    What fixed income opportunities are available?

    Last week the DMO (Debt Management Office) announced an offer for subscription of the May 2021 Federal Government Savings Bond to investors.

    The Debt Management Office (DMO), on behalf of the Federal Government has announced the offer for subscription of the May 2021 Federal Government Savings Bond to investors.

    This disclosure is contained in a circular issued by the DMO on May 3, 2021, and can be seen on its website noting that there are 2-year and 3-year savings bonds. The breakdown of the bonds shows that the 2-year FGN savings bond will be due on May 12, 2023, at 7.753% per annum and the 3-year FGN Savings Bond which will be due on May 12, 2024, at 8.753% per annum.

    The offer has an opening date of May 3, with a closing date of May 7. Although this window is closed. Portfolio diversification is critical for any investor and bonds are one of the safest asset classes.

    READ: Nigerian stocks that outperformed Bitcoin, Ethereum and Cardano in April

    Should volatility in Crypto shock anybody?

    Over the weekend, another incredible market volatility transpired with the Dogecoin going down about 21.34% for the day on Sunday. Elon Musk´s appearance on SNL seems to have had a negative effect on the crypto asset’s price.

    Ethereum at the time of writing this report is currently trading at an all-time high of $4,053, up by 2.72% in 24 hours. There are many investment opportunities in cryptocurrencies but because of the tremendous market volatility, it is important for investors to invest with caution. The rule of thumb is not to invest more than you are willing to lose.

    READ: Why Ethereum transaction fees are often expensive

    Stock market bounce?

    The Nigerian Stock Exchange made a bullish recovery on Friday. Its year-to-date stands at -2.66%. There is still a lot of upside for Nigerian stocks which remain relatively cheap compared to other emerging markets. In a Twitter Spaces conversation with Ugodre Obi-Chukwu, analysts stated that the true value of the Nigerian economy is not reflected in the NGX. ¨Out of the 166 listed companies, only about 30 are tradeable,¨ according to one analyst.

    In a period where there should be a lot of capital allocation to emerging markets like Nigeria, a major deterrence to this is our FX situation. Investors have issues getting their money out of the Nigerian economy.

    Another Corruption case

    It was reported that the FG will probe the suspended MD of Nigerian Ports Authority, Hadiza Bala-Usman for the alleged non-remittance of over N165 billion operating surplus to the Consolidated Revenue Fund by the NPA management.

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