Economy
Corporate Bond Market to Rebound as FGN Securities Yields Drop
The economic and financial market developments in the last few months in Nigeria point to a possible rebound of activities in the Corporate Bond Market (CBM) very soon.
The CBM had experienced a lull in activities in the last few years because of unfavourable economic and market conditions.
The recent events in Nigeria are changing the unfavourable conditions that have limited the growth of the CBM.
The recent drop in the yields on the Federal Government of Nigeria (FGN) securities, particularly the Nigerian Treasury Bills (NTB), creates an opportunity for the growth of activities in the CBM.
The improvement in the macroeconomic environment in Nigeria and the strategy of the Debt Management Office (DMO) to restructure the debt portfolio of the FGN were primary drivers of the drop in yield.
The need to curb the high inflation rate and maintain foreign exchange stability was responsible for the high NTB yields.
Consequently, there was a lull in activities in the CBM as companies could not compete with the high yields on the 364-day NTB.
Accordingly, most companies opted for Commercial Papers (CP) to raise short-term funds as bridge finance. The average yield on the 364-day NTB between January 2017 and November 2017 stood at 22.16% with the highest yield of 23.41% recorded in 19 April 2017. The high yields crowded out the corporate borrowers from the debt market.
According to data from FMDQ OTC Securities Exchange as at November 1, 2017, only two corporate bonds have so far been issued in 2017.
The two Corporate Bonds are: 17 percent Mixta Real Estate Plc January 2022 Bond and 18.25 percent Dufil September 2022 Bond.
In another development, a review of the latest Purchasing Managers’ Index (PMI) report that the Central Bank of Nigeria (CBN) published for the month of October 2017 shows that economic activities in the manufacturing and non-manufacturing sectors expanded further.
A PMI below the 50 points’ level suggests a decline in business activity while a PMI higher than the 50 points level suggests an expansion. When the PMI is at the 50 points’ level, it means that the degree of business activity in the economy is unchanged.
The Composite Manufacturing Index (CMI) expanded for the seventh consecutive month to stand at 55.0 points.
The Composite Non-Manufacturing Index (CNMI) also expanded for the sixth consecutive month to 55.3 points in October 2017 from 54.9 points in September 2017.
The increase in the PMI is also an indication of expected business expansion in the short-to-medium term which will require more financing.
The consensus forecasts for the Nigerian economy are that the Gross Domestic Product (GDP) will continue to grow. Although the GDP growth rates of the International Monetary Fund (IMF) for Nigeria from 2017 to 2020 are conservative, they are in the positive region.
Both FSDH Research and the Budget Office of the Federation believe the growth rates in the economy between 2017 and 2020 will remain strong, ranging from 2 percent to 7 percent. This means that more business investments will be undertaken.
Our analysis of the data released by the Nigerian Bureau of Statistics (NBS) on the Nigerian GDP (Expenditure and Income Approach) as at Q4, 2016 shows that consumption expenditure of households in Nigeria rose in 2016 compared with 2015.
The total consumption expenditure of households rose by 11.87 percent from N74.41trn in 2015 to N83.25trn in 2016.
FSDH Research expects the households’ consumption expenditure to continue to rise as the outlook for the Nigerian economy remains positive and consumer sentiments improve. The growth in the households’ consumption will also drive investments from firms to meet the growing demand.
FSDH Research believes that the capital requirement for these investments will exceed what companies can generate from internal cash flow. These companies will need external funding and with the expected drop in yields, corporate bond will be an attractive source of raising non-permanent long-term capital to meet the investment needs of firms.
By Adedapo Adesanya
The duo of MRS Oil and FrieslandCampina Wamco Nigeria Plc weakened the NASD Over-the-Counter (OTC) Securities Exchange by 0.68 per cent on Friday, June 5.
MRS Plc lost N19.00 during the session to sell at N171.00 per share compared with Thursday’s value of N190.00 per share, and FrieslandCampina Wamco Nigeria Plc depreciated by N8.70 to finish at N181.68 per unit compared with the preceding session’s N190.38 per unit.
As a result, the market capitalisation further lost N22.59 billion to close at N2.607 trillion versus the N2.630 trillion it ended a day earlier, and the NASD Unlisted Security Index (NSI) dropped 37.76 points to settle at 4,358.32 points, in contrast to the previous day’s 4,396.08 points.
The alternative stock market closed the last trading day of this week with a price gainer, Central Securities Clearing System (CSCS) Plc, which gained 6 Kobo to quote at N78.40 per share compared with the preceding session’s N78.34 per share. However, it could not prevent the market from going down at the close of business.
Yesterday, the volume of securities bought and sold by investors went down by 50.0 per cent to 140,345 units from the preceding day’s 280,714 units, the value of stocks decreased by 16.5 per cent to N17.9 million from the previous session’s N21.5 million, and the number of deals carried out by market participants fell by 35.7 per cent to 27 deals from the 42 deals recorded on Thursday.
When trading activities closed for the day, Great Nigeria Insurance (GNI) Plc remained the most active stock by value on a year-to-date basis, with 3.4 billion units exchanged for N8.4 billion, trailed by Infrastructure Credit Guarantee (Infracredit) Plc with 2.3 billion units sold for N6.5 billion, and CSCS Plc with 64.7 million units traded for N4.4 billion.
GNI Plc also ended the session as the most traded stock by volume on a year-to-date basis, with 3.4 billion units worth N8.4 billion, followed by Infracredit Plc with 2.3 billion units transacted for N6.5 billion, and Resourcery Plc with 1.1 billion units valued at N415.7 million.
By Dipo Olowookere
Renewed interest in financial stocks and others lifted the Nigerian Exchange (NGX) Limited by 0.15 per cent on Friday.
Customs Street closed higher yesterday despite the 1.37 per cent loss recorded by the consumer goods sector as a result of profit-taking.
This was offset by gains in the other key sectors of the local bourse, as the insurance counter chalked up 1,14 per cent. The banking space appreciated by 0.90 per cent, the industrial goods segment grew by 0.46 per cent, and the energy sector expanded by 0.01 per cent.
Consequently, the All-Share Index (ASI) went up by 366.00 points to 242,593.31 points from 242,227.31 points, and the market capitalisation gained N235 billion to close at N155.594 trillion compared with the previous day’s N155.359 trillion.
The trio of International Energy Insurance, Abbey Mortgage Bank, and DAAR Communications improved by 10.00 per cent each yesterday to N7.26, N9.35, and N1.98, respectively, while Zichis advanced by 9.39 per cent to N32.38, with Sovereign Trust Insurance up by 8.70 per cent to N2.50.
On the flip side, Academy Press lost 9.84 per cent to quote at N8.25, University Press depreciated by 9.73 per cent to N5.10, Africa Prudential dipped by 2.63 per cent to N12.95, Chams crumbled by 2.44 per cent to N4.00, and International Breweries slipped by 1.59 per cent to N12.35.
Business Post reports that the market breadth index was positive during the session after recording 37 appreciating equities and 14 depreciating equities, implying strong investor sentiment.
Abbey Mortgage Bank led the activity chart with a turnover of 164.1 million units worth N1.5 billion, Ellah Lakes sold 76.7 million units for N767.2 million, Access Holdings transacted 44.8 million units valued at N1.1 billion, Linkage Assurance exchanged 23.0 million units worth N41.2 million, and The Initiates traded 20.2 million units for N562.1 million.
At the close of trades, market participants transacted 608.5 million units worth N32.0 billion in 53,826 deals versus the 588.5 million units valued at N27.9 billion executed in 57,352 deals in the previous session. This showed that the number of deals eased by 6.15 per cent, the volume of transactions rose by 3.40 per cent, and the value of transactions soared by 14.70 per cent.
By Adedapo Adesanya
The Naira further depreciated against the United States Dollar by N3.46 or 0.25 per cent to N1,362.21/$1 from N1,358.75/$1 in the Nigerian Autonomous Foreign Exchange Market (NAFEX) on Friday, June 5.
However, it appreciated against the Pound Sterling in the same market window during the session by N4.47 to trade at N1,823.59/£1 compared with the previous day’s N1,828.06/£1, and gained N7.00 against the Euro to sell at N1,574.58/€1, in contrast to Thursday’s closing price of N1,581.58/€1.
For another trading session, the Nigerian Naira maintained stability against the Dollar in the parallel market and the GTBank forex counter on Friday at N1,375/$1 and N1,372/$1, respectively.
The Naira is expected to remain strong in the near term, backed by a rise in external reserves, which are nearing $50 billion, enhancing analysts’ confidence about its outlook in the second half of 2026.
Heightened global uncertainty has reduced the incentive for importers and corporates to demand FX, as cautious trade weighs on import needs. Analysts estimate a $40 billion net FX position for the year, a projection anchored in oil windfall gains.
As for the cryptocurrency market, prices remained depressed following a strong US jobs report that spurred markets to price in higher-for-longer interest rates, sending Treasury yields and the dollar up while hammering stocks, especially AI-related names. Crypto markets saw heavy leverage washouts with about $1.6 billion in positions liquidated over 24 hours.
Ethereum (ETH) gave up 4.9 per cent to trade at $1,584.68, Solana (SOL) fell by 3.3 per cent to $63.22, Bitcoin (BTC) crashed by 1.9 per cent to $61,333.23, Dogecoin (DOGE) slipped by 1.8 per cent to $0.0821, and Ripple (XRP) moderated by 1.8 per cent to $1.09.
Further, TRON (TRX) dropped 1.6 per cent to sell at $0.3197, Binance Coin (BNB) slumped by 1.0 per cent to $581.18, and Cardano (ADA) declined by 0.4 per cent to $0.1589, while the US Dollar Tether (USDT) gained 0.07 to sell at $0.9997, and US Dollar Coin (USDC) closed flat at $0.9998.
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