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Economy

Advantages of Mutual Funds

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Mutual funds are large pools of investor money entrusted to professional managers who try to achieve certain investment objectives. Mutual funds trace their history to the Massachusetts Investors Trust, which was founded in 1924.

“Passively” managed funds track a market index; “actively” managed funds follow the guidelines laid out in the fund’s prospectus, which spells out what the fund can and cannot invest in.

Mutual funds offer several key advantages. The biggest is instant diversity. No investor wants to risk putting all his eggs in one basket, and a Mutual fund, which may have billions of dollars under management, spreads its money — and thus its risk — around. If one investment hits a rough patch, it has less of an effect on the whole. This diversity can be achieved regardless of the fund’s purpose: even a narrowly focused sector fund that owns only companies in the pharmaceutical industry might own 200 drug companies — far more diversity than most individual investors could achieve on their own.

The second advantage of mutual funds is professional management. Mutual funds have managers, teams of analysts, access to the best informational resources and the time to crunch the numbers and carry out a strategy.  For people who know they need to invest but don’t want to learn the ins and outs of things like the earnings multiple and the balance sheet, mutual funds offer the opportunity to outsource all the investing decisions to the experts. For many investors, this expertise is well worth the fees mutual funds charge.

Third, mutual funds are easy. They are easy to invest in and to sell. Investment companies go to great lengths to provide information about their funds on their web sites and in printed materials, so it’s a snap to see what you really own and how the investment is doing.

Another key benefit to mutual funds is the low barrier to entry. You can open an account with a very modest sum and you can invest small sums easily and, in some cases, with few fees. You don’t need to wait until you’ve saved N1m to buy shares of your favourite stock — you can start today, and with as little as N10,000.

http://wealthmakersclub.net/advantages-of-mutual-funds/

Dipo Olowookere is a journalist based in Nigeria that has passion for reporting business news stories. At his leisure time, he watches football and supports 3SC of Ibadan. Mr Olowookere can be reached via dipo.olowookere@businesspost.ng

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Economy

New FX Policy Will Cut Cost Burden of Remitting Funds—CBN

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CBN MPR 12.5%

By Dipo Olowookere

The Central Bank of Nigeria (CBN) has explained the reason it came up with a new foreign exchange (FX) policy on diaspora remittances.

On Saturday, the apex bank, under the leadership of Mr Godwin Emefiele, announced a new forex promo tagged CBN Naira 4 Dollar Scheme, an incentive for senders and recipients of International Money Transfers.

The campaign, which will last for two months from March 8 to May 8, 2021, will enable “all recipients of diaspora remittances through CBN licensed IMTOs [to] be paid N5 for every $1 received as remittances inflow.”

After the circular was issued, the central bank explained the reason behind the policy, noting that it was to make it possible for Nigeria to tap into the booming remittances industry.

The apex bank said a forecast by PwC suggests that Nigeria’s remittance flows could reach $34.89 billion by 2023 and to meet this target, there must be channels put in place.

“This can only be accomplished if remittance infrastructure improves and if the right policies are put in place,” the central bank explained in a separate post.

It further said this new policy was also in line “with the global trend [as] Nigeria aspires to ensure that remittance flows and diaspora investments become a significant source of external financing.”

The apex bank expressed optimism that the rebate of N5 for every $1 of fund remitted to Nigeria “will help to make the process of sending remittance through formal bank channels cheaper and more convenient for Nigerians in the diaspora.”

It also noted that the “new FX policy will create an easier, more flexible, and more transparent, system of remittance administration, it will greatly enhance the benefits of diaspora remittances in supporting investments and growth in Nigeria.”

“[The] policy on the administration of remittance flows is aimed at increasing the transparency of remittance inflows, reducing rent-seeking activities, and providing Nigerians in the diaspora with cheaper and more convenient ways of sending remittances to Nigeria,” it added.

Concluding, the CBN said, “The use of reimbursements of remittance fees has been critical in supporting improved inflow of remittances to countries in South Asia and in improving their balance of payments position following the COVID-19 pandemic.”

Business Post reports that since the new policy was announced yesterday, some economists have suggested that the apex bank was in desperate need of Dollars.

In recent time, the price of crude oil, Nigeria’s main source of FX earnings, has been on the rise, trading close to $70 per barrel at the global market.

In the 2021 budget signed into law by President Muhammadu Buhari in December 2020, the crude oil benchmark price was $40 per barrel, implying that Nigeria is earning more than it projected.

However, instead of the nation’s external reserves to rise as a result of more FX inflows from oil sales, the account balance is shrinking. The FX reserves currently stand at $34.9 billion as against $35.1 billion on February 26, 2021.

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Economy

SEC Secures $400,000 for Nigerian Capital Market

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SEC new initiatives

By Adedapo Adesanya

A grant worth $400,000 has been granted to the Securities and Exchange Commission (SEC) by the African Development Bank Group (AfDB).

The financing package was approved to allow the apex capital market regulator in Nigeria to strengthen securities market regulation and broaden market instruments.

The funds will go towards strengthening the risk-based supervision framework, regulation of derivatives and green bonds, and build capacity for green finance.

The grant will be sourced from the Capital Markets Development Trust Fund, a multi-donor fund administered by the regional lender.

Speaking on the agreement at the virtual signing, Mr Lamido Yuguda, the Director-General of SEC, said, “This collaboration further underscores our mutual goal to grow our markets and create viable avenues for sustainable economic development for Nigeria and the region.”

The grant is aligned with the priorities of the bank’s country strategy for Nigeria, which envisages measures to stimulate capital market development to unlock financial resources for productive sector investments, infrastructure development and private sector growth.

On his part, Mr Lamin Barrow, Senior Director of the bank’s Nigeria Country Department, noted the urgency of the implementation of the project.

“At a time when countries are striving to build back better from the ravages of the COVID-19 pandemic, improvement of the enabling regulatory and supervision framework will boost domestic resource mobilisation efforts and leverage private sector contributions to achieve a greener, more environmentally sustainable and inclusive post-pandemic recovery,” Mr Barrow said.

Adding his input, Mr Oscar Onyema, the Chief Executive Officer of the Nigerian Stock Exchange (NSE), thanked both the AfDB and SEC “for this historic event and partnership, to build in-house capacity at SEC, the Nigerian Stock Exchange, issuers and investors in the sustainable finance space, which will help to meet climate finance commitments in Nigeria.”

The project is expected to support the implementation of the SEC’s Nigeria Capital Market Master Plan 2015-2025 and its vision to position Nigeria’s capital market as a competitive and attractive destination for portfolio investments.

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Economy

NASD Delists ARM Life Shares After Merger With Tangerine Life

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ARM Life Plc

By Dipo Olowookere

Shares of ARM Life Plc have been delisted from the trading platform of the NASD over-the-counter (OTC) Securities Exchange, Business Post has confirmed.

The company’s securities were removed from the unlisted securities market by the exchange on Monday, March 1, 2021, after the firm was acquired by Tangerine Life Insurance Limited.

In February 2020, both companies said they were exploring each other’s strengths to form an impressive new enterprise that will delight its customers with its quality products and commitment to their satisfaction.

Tangerine Life has a very strong presence in the corporate market segment of the underwriting industry, while ARM Life is a formidable force in the retail and annuity-based service space.

With the merger, it is expected that the new entity will take control of the underwriting industry in Nigeria and from the information gathered by this newspaper, Tangerine Life has already cemented itself as the fourth largest life insurer in Nigeria with the transaction, allowing it to offer insurance services to the youth and others.

With the deal completed and ARM Life shares delisted from NASD OTC Exchange, the new company will likely operate as a private entity.

Confirming the exit of ARM Life from its platform, the NASD disclosed that in a notice that, “Further to the appointment of Stanbic IBTC Stockbrokers Limited as the stockbrokers to the merger between Tangerine Life Insurance Limited and ARM Life Plc, we wish to inform you of the following:

“Following the full suspension placed on the shares of ARM Life Plc, the last trading date of ARM Life Plc on NASD OTC Securities Exchange was Thursday, February 11, 2021.

“Upon the completion of the merger between Tangerine and ARM life Plc, ARM Life Plc is delisted on the NASD OTC Securities Exchange on March 1, 2021, and would not be eligible to trade on its market.”

It was gathered that to make the deal go through, Tangerine Life had to acquire a 77.22 per cent equity stake in ARM Life and acquired a further 1.05 per cent equity stake through the subsequent mandatory take-over offer incompliance with the law and regulations, bringing its total shareholding in ARM Life to 78.27 per cent as at the date of the scheme document.

As consideration for the transfer, Tangerine Life will offer the other shareholders of ARM Life 70 kobo for every share held in the firm.

Shareholders also have the option to receive shares in Tangerine Life in the ratio of 8 shares in Tangerine Life for every 100 shares held in ARM Life.

Recall that the National Insurance Commission (NAICOM), which regulates the sector, stipulated an increase in minimum capital requirements for life insurance, general insurance, composite insurance and reinsurance companies with a two-step target timeline of December 31, 2020, and September 30, 2021.

Specifically, the life insurance license capital requirement was increased from N2 billion to N8 billion, while life insurers are expected to have a minimum capital of N4 billion by December 31, 2020, and N8 billion by September 30, 2021.

The recapitalisation in the Nigerian insurance industry is expected to impact the competitive landscape of the insurance industry.

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Economy

CBN Offers N5 per Dollar Incentive to Boost Diaspora Inflows

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naira and dollar

By Dipo Olowookere

As part of efforts to boost foreign exchange (FX) inflows through diaspora remittances, the Central Bank of Nigeria (CBN) is offering an extra N5 for every Dollar sent to recipients in the country.

The apex bank, in a circular issued on Saturday and signed by A.S Jibrin for the Director of Trade and Exchange Department, disclosed that this reward system will last for two months.

The notice said this initiative is under the CBN Naira 4 Dollar Scheme and was designed to sustain the encouraging increase in inflows of diaspora remittances into the country.

It further said the promo will commence on Monday, March 8 and end on Saturday, May 8, 2021, noting that commercial banks and International Money Transfer Operators (IMTOs) have been carried along.

“In an effort to sustain the encouraging increase in inflows of diaspora remittances into the country, the CBN hereby announces the introduction of the CBN Naira 4 Dollar Scheme, an incentive for senders and recipients of International Money Transfers.

“Accordingly, all recipients of diaspora remittances through CBN licensed IMTOs shall henceforth be paid N5 for every $1 received as remittances inflow.

“In light of this, the CBN shall, through commercial banks, pay to remittance recipients the incentive of N5 for every $1 remitted by the sender and collected by the designated beneficiary.

“This incentive is to be paid to recipients whether they choose to collect the Dollar as cash across the counter in a bank or transfer the same into their domiciliary account.

“In effect, a typical recipient of diaspora remittances will, at the point of collection, receive not only the Dollar sent from abroad but also the additional N5 per $1 received.

“Please note, having discussed with banks and IMTOs, the scheme takes effect from Monday, March 8, 2021, and ends on Saturday, May 8, 2021,” the circular stated.

Recall that in late 2020, the central bank allowed recipients to receive FX inflows in the currency of the sender’s country.

Before the policy was introduced, foreign inflows were converted to Naira and this made diaspora remittances unattractive, putting pressure on the local currency at the unregulated segment of the forex market.

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Economy

NASD OTC Market Capitalisation Returns to N500bn After 0.26% Rise

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NASD OTC Market Capitalisation

By Adedapo Adesanya

The market capitalisation of the NASD Over the Counter (OTC) Securities Exchange returned to the N500 billion region on Friday after it appreciated by 0.26 per cent.

This was buoyed by the price appreciation recorded by the shares of FrieslandCampina WAMCO Nigeria Plc, which are traded on the platform.

Business Post reports that the equity price of the milk maker at the unlisted securities market increased by N1.34 or 1.1 per cent to settle at N120.34 per unit in contrast to N119 per unit of the previous day.

As a result of this growth, the market capitalisation improved by N1.31 billion to N500.32 billion from N499.01 billion it ended on Thursday.

Also, the NASD Unlisted Security Index (NSI) rose by 1.83 points to close at 697.30 points in contrast to 695.47 points it finished a day earlier.

But despite the positive outcome recorded yesterday, the activity chart closed mixed with the volume of traded shares reducing by 93.6 per cent to 117,995 units from the previous day’s N1.9 million units.

Also, the number of deals executed by the market participants yesterday went down by 83.3 per cent to two deals from 12 deals on Thursday and they were all carried out on FrieslandCampina.

However, the value of stocks transacted by investors rose by 1,522.21 per cent to N14.2 million from the N875,347 achieved the preceding day.

At the close of business, UBN Property Plc maintained its position as the most traded stock by volume on a year-to-date basis with 15.5 million units valued at N16.8 billion. Central Securities Clearing Systems (CSCS) Plc followed in second place with 4.7 million units worth N74.6 million, while FrieslandCampina WAMCO Nigeria Plc held the third position with 2.8 million units worth N346.4 million.

In terms of the most active stock by value (year-to-date), FrieslandCampina retained its spot on top of the chart after trading 2.8 million units valued at N346.4 million. Niger Delta Exploration and Production (NDEP) Plc trailed for selling 612,249 securities valued at N198.1 million, while the third spot was occupied by CSCS Plc, which has traded 4.7 million units worth N74.6 million.

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Economy

Local Currency Slides Back to N411/$1 at I&E

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local currency nigeria

By Ahmed Rahma, Adedapo Adesanya

The Naira’s recent volatility continued as it closed the week losing N4.50 or 1.11 per cent on the Dollar to return to N411/$1 at the Investors and Exporters (I&E) window of the foreign exchange market on Friday, March 5.

At the preceding session, the local currency traded against the greenback at the market segment at N406.50/$1 and it was observed that the Naira was plunged into another depreciation by a significant increase in the demand for FX.

According to data from the FMDQ Securities Exchange, transactions worth $83.93 million were recorded at the session, $16.94 million or 25.3 per cent higher than the $66.99 million recorded on Thursday.

However, at the black market, the Naira maintained stability against the American currency to trade at N480/$1, but depreciated against the Pound Sterling and Euro.

Business Post reports that at the unregulated segment of the market, the Naira depreciated against the British currency by N3 to sell at N675/£1 in contrast to N672/£1 it traded the previous day and lost N2 against the Euro to trade at N582/€1 compared with N580/€1 of the previous day.

At the interbank segment of the market, the domestic currency still remained flat against the US Dollar at N379/$1 and at the Bureaux De Change (BDC) window, the value of the Nigerian currency against the American currency remained unchanged at N395/$1 on Friday.

Meanwhile, at the cryptocurrency market, only Bitcoin (BTC) closed in the positive territory as it gained 0.4 per cent to trade at N31,388,202.00.

The Ripple (XRP) depreciated by 1.5 per cent to trade at N293.99, the US Dollar Tether (USDT) lost 2.2 per cent to sell for N680, Ethereum (ETH) fell by 2.7 per cent to trade at N998,100.01; Dash (DASH) declined by 1.9 per cent to close at N136,000; Litecoin (LTC) decreased by 2.5 per cent to trade at N115,750; while the Tron (TRX) went down by 1.6 per cent to N31.98.

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