DMO to Sell N105bn Bonds

MARKET INDICATOR

By Obinna Chima

The Debt Management Office (DMO) is expected to auction N15 billion, N40 billion and N50 billion of the FEB 2020, JAN 2026 and MAR 2036 bonds this Wednesday.

The bonds for auction are expected to clear at marginal rates of 12.8 per cent, 13.2 per cent and 13.6 per cent for the FEB 2020, JAN 2026 and MAR 2036 bonds respectively.

Analysts anticipate that the upcoming auction, in addition to a possible hike in monetary policy rate (MPR) at the next monetary policy committee (MPC) meeting (going by forward guidance of the CBN Governor), will likely define the dynamics of yields in the bonds market in the coming week.

Meanwhile, activities in the bonds market were largely bearish last week as average yield across benchmark bonds rose on all trading days of the week amidst sell-offs by investors.

Average yields across benchmark bonds rose 0.2 per cent last Tuesday to close the first trading day of the week at 12.9 per cent (12.7 per cent last Friday). Average yields across benchmark bonds rose to 13.1 per cent by mid-week with increased activities observed on the FGN JAN2026 and FGN MAR2036 bonds. The bearish sentiment was sustained last Thursday as average yields across benchmark bonds increased four basis points, eventually settling at 13.3 per cent last Friday, Up 0.6 per cent week-on-week.

Money Market

According to a report by Afrinvest West Africa Limited, the financial system liquidity opened the week at about N300.1 billion last Tuesday (being the first trading day of the week due to Monday’s public holiday). Open buy back (OBB) remained at the preceding week’s closing levels of 3.1 per cent while overnight rates declined 0.2 per cent to 3.5 per cent by the end of last Tuesday’s trading session. But the OBB and overnight settled at 3.6 per cent and 4.1 per cent on Friday, up 0.5 per cent and 0.4 per cent week-on-week.

In the treasury bills market, average rate started the week 0.1 per cent higher than the preceding week’s average closing rate of 8.2 per cent. There was treasury bills auction last Wednesday where N45.2 billion, N23.4 billion and N82 billion worth of the 91-days, 182-days and 364-days treasury bills were issued at stop rates of eight per cent, nine per cent and 11.1 per cent. However, average treasury bills rate eventually settled at 8.1 per cent, down 0.1 per cent week-on-week.

“In the week ahead, barring any unexpected mop-ups, we expect money market rates to move in tandem with market liquidity dynamics as dictated by the forex provisioning by banks and refunds by the CBN, as well as open market operations (OMO) maturities and auction  (about N32 billion expected to hit the system this Thursday),” the report added.

Forex Market

The exchange rates at all the segments of the foreign exchange market remained stable with no sharp rate movement observed. The official CBN rate remained at N197/$1. The naira appreciated to N320/$1 on Thursday at the BDC segment after trading at N321/$1 on Tuesday and Wednesday. The exchange rate at the parallel market was also fairly stable throughout the week as the naira exchanged at N323/$1 on all trading days save for Wednesday when it appreciated to N322/$1.

Whilst the foreign exchange market has remained stable for a number of weeks now, the demands for dollars stayed largely unmet by the central bank.

2016 Budget

President Muhammadu Buhari at the weekend signed into law the 2016 Budget of N6.06 trillion. The budget signed was N200 million short of the N6.08 the president presented to the National Assembly. According to him, the budget was intended to signpost a renewal of his government’s commitment to restoring the budget as a serious article of faith with the Nigerian people.

The president signed the budget in the presence of the Vice President Yemi Osinbajo, Senate President, Bukola Saraki and Speaker of the House of Representatives, Yakubu Dogara, among others. ‎While signing the budget, Buhari said it gave him a great pleasure  to sign the first full-year budget of this administration into law. He said he would be speaking in more details about the budget, its implementation and the over-all national economic and social policies of the government in his address on May 29th.

He thanked the leadership of the National Assembly, in particular, the Senate President and the Speaker of the House of Representatives, and indeed all members of the National Assembly for their cooperation in making the signing a reality.

He said: “This administration is committed to ensuring that henceforth the annual appropriation bill is presented to the National Assembly in time for the passage of the Act before the beginning of the fiscal year.”

Shareholders Approve Fidelity Bank’s N4.6bn Dividend Pay-out

Shareholders of Fidelity Bank Plc have approved the 16 kobo per ordinary share dividend payable to its shareholders for the financial year ended December 31, 2015.

Speaking at the financial institution’s annual general meeting (AGM) held in Lagos, the acting Managing Director/Chief Executive Officer, Fidelity Bank Plc, Alhaji Mohammed Balarabe said the 2015 full year results reflected the disciplined execution of the management’s medium term strategy and the resilience of evolving business models despite the extremely challenging business environment in 2015.

A glimpse of the financial results showed that its gross earnings for the period ended December 31, 2015 grew to N146.9 billion from the N136.1 billion recorded in 2014. Profit after tax for the period ended December 31, 2015 rose marginally to N13.9 billion as against N13.8 billion made in the comparable period of 2014.

Balarabe pointed out the financial year under review was challenging due to a number of factors, which he listed to include the difficult operating environment, the tight monetary stance of the Central Bank of Nigeria (CBN), implementation of the Treasury Single Account (TSA) and currency devaluation concerns which culminated in negative earnings headwinds in the banking industry.

Even with the prevalent economic conditions, he said the performance of the bank showed resilience to these challenges.

“We are able to achieve this through a sustained income stream built on qualitative services, innovative products and a clear understanding of the varying needs of our customers”, he explained. Earlier, the Chairman of the bank, Chief Christopher Ezeh in his opening remark noted the bank performed relatively well in spite of the economic whirlwind occasioned by the free fall in the global oil prices and attendant capital controls of the CBN.

Ezeh said the tough business environment reflected more on the fees and commission income of the bank which dropped by 20.8 per cent to N23.3 billion from N29.4 billion due to regulatory restrictions on foreign exchange transactions.

Net interest income increased by 24.7 per cent to N60.9 billion on account of loan re-pricing and balance sheet optimisation towards higher yield sectors of the economy.

He explained that the bank improved the earning capacity of its balance sheet even in the face of decline in fee income precipitated by a N10 billion reduction in its foreign exchange income.

“We continued to increase yields on earning assets faster than the growth in funding costs which improved our Net Interest Margin (NIM) to 6.9 per cent in 2015.”

This development, the Fidelity chairman was indicative of the bank’s continual focus on balance sheet optimisation, rebalancing of its loan portfolio in consonance with its medium term strategy and increased growth in retail deposit base.

On the bank’s outlook for the 2016 financial year, Balarabe noted that the bank will focus on redesigning its systems and processes to enhance service delivery, deepen its cost optimisation initiative to reduce operating expenses and cost-to-serve, while enhancing it over all risk monitoring capacities to ensure both internal and external risks are identified and mitigated before they crystallise.

“On the back of the evolving dynamics in the industry, we will continue to increase the adoption and migration of customers to our digital platforms and increase our retail banking market share through innovative products and services,” he explained.