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Exclusives

AfCFTA: We are well-positioned to make payments smooth for our customers – Ecobank Group CEO

Ade Ayeyemi, Group CEO of Ecobank Transnational Inc. discusses AfCFTA, border closure, COVID-19, amongst other salient issues.

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Ecobank Transnational's 32nd AGM

The Federal Government of Nigeria assured Nigerians that the country will emerge from recession by the first quarter of 2021. As a result, there are lots of expectations from Nigerians for the coming year.

The Group Chief Executive Officer, Ecobank Transnational Incorporated, Mr. Ade Ayeyemi, in this interview with Nairametrics, warned that nothing should be taken for granted despite the positive outlook.

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According to him, the government and the people still need to act in a way that is supportive of those growth expectations. Excepts:

What is your projection for Nigeria’s economy for the rest of the year and 2021?

The Nigerian economy will contract in 2020, which means the nation is in a recession because it has had two quarters of contraction. We think the economy will revamp in 2021 and that is the basis on which we are out planning activities for Nigeria.

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Nothing should be taken for granted, the government and the people still need to act in a way that is supportive of those growth expectations. So, we think that Nigeria will go back to growth in 2021.

The African Continental Free Trade Agreement (AfCFTA) will take off in January. What opportunities do you see for banks, and how is your bank being positioned to take advantage of the opportunities therein?

For the AfCFTA, we are one of the key supporters in trying to make sure that it sails through, which is done because it is something that is good for the continent and good for our customers.

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So, because of our Pan-African presence, we have been discussing with the governments and our customers to start to take another look at their businesses and understand that the market is bigger than what it used to be before. So, if your job in Aba is to manufacture bags for the Nigerian market, you now start thinking about how you can expand your manufacturing capacity to be able to export across West Africa and also other African countries, not just looking at Nigeria as a market alone.

And as you change your demand forecast, then you need to now improve your capacity to produce and that will mean importing new machinery, which will mean expanding your manufacturing base and being able to develop the market and hire people.

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The same for people in Aba manufacturing. It is also applicable to people producing sugar; they can now produce and send to other places. So, there is a whole range of clientele that we are working with that will enable that to happen.

We will then work with the likes of Afreximbank on ways to ensure people can now make payments in West Africa in a very smooth way because we are the platform that connects 33 countries today. It means that if you are in Nigeria and if the regulator allows you, which is what we do in other places by the way, if you want to send money from Ghana to The Gambia today, you can use Ecobank Rapid Transfer and the money goes there.

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READ: Ratification of AfCFTA will shape Nigeria’s international trade dynamics in 2021 – SB Morgen Report

It is only Nigeria, because of the exchange rate rules, that doesn’t allow that to happen instantly unless you are remitting out of a domiciliary account. So, the whole range of these, both at the institutional level, working with clients, repositioning our portfolio and making funding available to our customers, will enable us to deal with the AfCFTA in a way that creates good opportunity for Africans.

There is no need for Nigeria to import rubber from Malaysia when rubber is being exported by Côte d’Ivoire and the distance is not that long. It is better within the African space. So, there is a whole range of businesses that we are having conversations with –  the customers, the governments and the African Union, because of our pan-African presence.

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Don’t you think the issue of border closure will frustrate that?

It is our expectation that border closure will be temporary and my understanding is that it was put in place as a security measure. Nigeria has always played a key role in the continent, right from when it was the Organization of African Unity. Nigeria and Togo were the two countries that spearheaded the creation of ECOWAS, and we think that Nigeria understands its key role as an enabler of Africans coming together.

Can you take us through the numbers in your recently released nine months results?

Our 2020 nine months results for the period September ending, printed $91 million year-to-date profit before tax. That profit before tax of $91 million was as a result of specific one-off that we took. The first one was the question of the goodwill that we are holding in the book of the holding company, relating to the acquisition of Oceanic Bank that ETI did in 2011, which is almost nine years.

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The second factor that impacted our number is because in Zimbabwe, we incurred a monetary loss of $33 million, due to hyperinflation.

If you all remember, two years ago or so, the Zimbabwe dollar was one-to-one at the beginning of the year, it later went to about 16 to one; right now, it is about 81 to one US dollars. So when you convert those things, they required that we convert the books at the current rate and when you do that, you incur a net monetary loss.

We also, during the period, did take a one-off restructuring charge to reduce people both at the head office, to close some branches in Nigeria and also reduce people elsewhere. All of these one-off issues came to about $205 million. But the one that is most impactful to the number is the $159 million goodwill write-off.

Now, a goodwill write-off does not affect the capital of the firm, because before you arrive at the capital, you always deduct the tangibles from the equity. So, it is a non-cash item, it does not affect the capital of the firm.

What is the impact of the write-off of the goodwill on Ecobank Nigeria?

The write-off of the goodwill has no impact on Ecobank Nigeria because the goodwill is carried in the books of the holding company and not in the books of Ecobank Nigeria. As we continue to manage that asset, we expect Nigeria to recover from its recession and, in the future, for Nigeria to be doing much better than it is doing now.

But, if you look at the 2020 year inflation for Nigeria, it is not single-digit. The belief was that Nigeria would get to seven per cent, nine per cent and 10 per cent growth rate, that has always been factored into the long-term development plan of Nigeria.

With this first nine months results, what are you looking at in terms of projection for the rest of the year?

For the rest of the year, which is one quarter, the performance should be consistent without a goodwill write off. Which means that without a goodwill write-off, our number will be about $80 million for the quarter and therefore you should expect that range of number for the fourth quarter.

How did COVID-19 affect your operations here and out of the shores of Nigeria?

I think if you exclude Nigeria from our numbers, you will see all other countries and then there is the Zimbabwe issue that I have mentioned. But we actually picked up a lot of new businesses for all our countries. Our deposit increased significantly and it is there in the numbers that we published.

From our Francophone West Africa, we actually had more opportunities to respond to some of the needs of our clients, so that is pretty good. In Anglophone West Africa anchored out of Ghana, we were able to respond again to the needs of our clients where we have seen increases in our businesses and our performance. Remember, in all those countries, we are the leading banks. So, when there is run to safety, the deposit comes to us.

When a customer needs specific solutions, we get approached; when the government need solutions, we get approached in those countries. If you look at the central, eastern and southern Africa, and you take out the impact of $33 million net monetary loss, again we were able to do very good in those 18 countries that formed those clusters.

So, across board we are actually able to substitute the losses that we expected as a result of COVID-19, with other income streams that we were able to get and a large build-up of our deposit base. And the impact of our technology, which is the same across board, allows our customers irrespective of where they are domiciled to continue to operate.

Earlier, you talked about closing some branches in Nigeria. What informed that decision?

Yes, we closed 114 branches. We still have about 250 something branches remaining. So, having 250 branches is massive when you consider the branch network that the rest of our competitors have. That is the first thing.

The second is the idea of using agency network as a means of being able to distribute banking services to people. The third thing is the idea that digital platform is now going to continue to be the preferred method of delivering banking services to people as we go forward into the future.

Those are the things that informed our decision and some of these branches were not profitable. Some of them were weak and that was the basis on which we made the decision to close those branches and merge their activities with some other branches that exists in agreement with our regulator, the Central Bank of Nigeria.

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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Currencies

Why external reserves is falling despite a rise in oil prices

Increased oil prices seem not to have stopped the further slide in Nigeria’s foreign reserves.

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Nigeria’s external reserve declined from $36.3 billion as of January 29, 2021, to $34.998 billion as of March 1, 2021, losing about $1.4 billion in just a month.

The rapid drop in the country’s external reserve is occurring despite the increase of Brent crude to over $66 per barrel as of February 24, 2021 from about $51 per barrel that it closed with on January 4, 2021.

Some analysts had attributed a couple of likely reasons for this drop. This includes the CBN intervention in the forex market to stabilize the exchange rate, low foreign inflows into the country, some CBN forex policies which discourages foreign investors.

The President of the Association of Bureau De Change Operators of Nigeria (ABCON), Aminu Gwadebe, in his explanation of the trend said that the decline in Nigeria’s external reserve despite recent increase in oil prices was due to supply shocks and shortages of foreign exchange due to drop of forex inflow from various sources.

Gwadebe said, ‘’You know we have a lot of supply shocks and shortages even before the appreciation of the crude oil prices, we just came out of recession with less than even 0.1%. We know the prices of crude oil, the demand came down throughout the Covid-19 period, even now with the new variant. So the IMTOs inflow has reduced drastically, export proceeds have reduced drastically, the I & E window has also gone down drastically. You know you can appreciate what is happening at the I & E window, their trade transactions sometimes hover up to N420/$1.’’

On why increased oil prices have not stopped the further slide in the reserves, the ABCON President said, ‘’Completely all the sources coming have dried up, the oil prices dried up, IMTO window dried up. We are talking about a month, and these are contracts that have been closed for 3, 6 months delivery, we are just witnessing it. It will take time, it’s a very good buffer, no doubt we rely on it heavily for 90% of our foreign exchange supply. So if we have that improvement, it will give the CBN the muscle, the wherewithal to continue to support the local market. It will give CBN the muscle to make any speculation, check any hoarding.”

‘’Now that we have prospects in oil prices definitely that news, that coming in of new inflows will give the CBN the muscle to make any speculation, to checkmate hoarding, because they are in I & E window, they are in BDC window, they are in a lot of windows, so they can come up with liquidity. Definitely, it is going to. And we have seen the impact because the way it was going before this increase in crude oil prices, it was worrisome and if you look at it now it has remained stable, the highest it went is N480 for the parallel market and its always trending down. There is that stability just for that news, so you can imagine when we start receiving the liquid grill just imagine what it will become just like people have predicted and analyzed N430, N450/$1 is what we might be looking at by the end of the year,’’ he added.

On his part, a treasury and financial analyst, Odinaka Nwokonkwo, while giving reasons why it should be that way, pointed to CBN obligations. He said the apex bank paid Eurobond maturities in January or thereabout, and did FX swap with local and international counterparts which may have matured and needed to be paid down.

He said, ‘’There is a Eurobond maturity that CBN funded for, so that would also reduce the reserves, then another thing is when you look at, CBN has been intervening in the forex market. So on that space, you are seeing retail, you are seeing SME and invisibles intervention weekly. Retail is biweekly and SME and invisible about $100 million weekly. So sometimes CBN has bilateral transactions with international institutions and local banks where they take their FX and basically give them treasury bills, so that also is part of the reserves.

‘’So if some of those swaps have matured and CBN needs to pay down these bonds, they will also see a reduction. So it’s a combination of a lot of things. And also what is the volume of sales of the oil, are we really selling more, is the quantity we are selling is the same as what we are selling before. The demand might drop a little bit because some countries also have a second lockdown.’’

Nwokonkwo also believes that in the next quarter, there might see an accretion because some of those obligations may not be there.

While pointing out that the accretion rate is slower than the debit rate, he said the oil price at $65 is not a significant increase compared to CBN FX obligations.

These external reserve figures and swings point to two things: Nigeria seems to be overestimating the power of it oil to keep the country running and the enduring reality it needs to find other ways of earning foreign exchange.

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Exclusives

These are the top stockbrokers in Nigeria – February 2021

The top 10 stockbroking firms on the Nigeria Stock Exchange have traded stocks valued at N126.74 billion in the month of February 2021.

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The All-share Index of the Nigerian Stock Exchange (NSE) dipped by 6.16% in February 2021, a major drawback on the 5.32% gain recorded in the previous month to bring the year-to-date loss to 1.17%.

While they may not be Wolf of Wall Street, the top 10 stockbroking firms on the Nigeria Stock Exchange have been doing big businesses, and have traded stocks valued at N126.74 billion in the month of February 2021, accounting for 58.43% of the total value of shares traded.

This is contained in the Broker Performance Report for the month of February 2021.

A cursory look at the data shows that the February 2021 figure represents a 12.32% increase when compared to N112.84 billion recorded in January 2021 and 19.27% increase compared to N106.27 billion recorded in the corresponding period of 2020.

Stockbrokers by value

  • Stanbic IBTC Stockbrokers is top on the list with trades worth N24.28 billion, representing 11.19% of the total value of traded stocks in The Exchange. It is worth noting that Stanbic IBTC also maintained the top spot in the 2020 ranking and also in the previous month.
  • Absa Securities Nigeria Limited followed closely with trade-in stocks worth N23.64 billion, accounting for 10.9% of the total value. Absa Securities climbed by position from third recorded in January 2021.
  • Cardinalstone Securities Limited stands third on the list with trades on stocks worth N18.98 billion representing 8.75% of the total trades. A step down from the second position held in the previous month.
  • EFG Hermes Nigeria Limited followed with trades valued at N14.15 billion. This represents 6.52% of the total value of shares traded on the floor of The Exchange.
  • Rencap Securities (NIG) Limited with a total value of N9.88 billion traded in stocks, accounted for 4.56% of the total recorded in the month of February.
  • Others on the list include; Meristem Stockbroker (N9.25 billion), RMB Nigeria Stockbrokers (N8.89 billion), Apel Asset Limited (N6.26 billion), Imperial Asset Managers (N6.11 billion), and Cordros Securities Limited (N5.29 billion).

Notably, the top 5 firms in the month of January, did well to retain the top spot in the month under review.

Stockbrokers by volume of shares

  • Cardinalstone Securities Limited topped the list in terms of volume of shares traded in February 2021, having recorded trades in 2.02 billion units of shares, hereby accounting for 11.33% of the total shares traded.
  • Atlass Portfolios Limited followed closely with trades in 1.83 billion units of shares. This represents 10.24% of the total volume traded in the month under review.
  • Meristem Stockbrokers Limited traded in 1.24 billion units of shares to stand in the third position. This accounts for 6.93% of the total volume of shares trades in the Nigerian Stock Exchange in February 2021.
  • Morgan Capital Securities recorded total trades of 1.03 billion unit of shares, which represents 5.79% of the total trades.
  • Stanbic IBTC Stockbrokers traded in 859.62 million unit of shares in the month of February 2021, representing 4.77% of the total traded volume.
  • Others on the list include; Greenwich Trust (740.2 million), EFG Hermes (471.05 million), Rencap Securities (364.02 million), Apel Asset (344.13 million), and CSL Stockbrokers (300.49 million).

What you should know

  • The All-share index dipped by 6.16% to close at 39,799.89 index points as of 26th February 2021 from 42,412.66 points recorded in the previous month.
  • Of all the sub-indices captured by the Nigerian Stock Exchange, only two of them recorded positive growth in the month of February. NSE Growth index (+9.33%) and NSE Oil & Gas Index (+4.36%).
  • Meanwhile, the equities market capitalisation currently stands at N20.78 trillion as of 2nd March 2021, while the total bourse capitalisation stands at N38.15 trillion.

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