**Faults Use of Bond Proceeds for Recurrent Expenditure
By Dipo Olowookere
A notable professor of Capital Market, Mr Uche Uwaleke, has wondered why the federal government would use proceeds of sovereign bonds for recurrent expenditure.
The lecturer of Economics at the Nasarawa State University described this as an anomaly, arguing that funds from the debt instruments should be tied to a project.
He noted that bond issuance should be used to generate funds to put projects in place that could trigger economic activities and not for paying salaries or running office needs and others.
Mr Uwaleke, therefore, advised the government to look into issuing infrastructure/revenue bonds for the sole purpose of financing projects in the country instead of the general-purpose bonds.
The economic expert was speaking at the Chartered Institute of Stockbrokers (CIS) 2020 economic review and 2021 economic outlook.
During his presentation, Mr Uwaleke highlighted how the government can explore the capital market to raise funds and finance the budget deficits.
The professor, while speaking on Financing the FGN’s N5 trillion Budget Deficit in 2021, also noted that, “Special Purpose Vehicles can be set-up to raise funds from the capital market via securities issued to investors, through securitizing receivables in infrastructure, real estate amongst others.”
He also said the government can raise funds to bridge the infrastructure deficit by selling some national assets like the Nigerian National Petroleum Corporation (NNPC) through the stock exchange.
According to him, “If the government can list at least 10 per cent of the NNPC on the stock exchange, it can generate about $5 billion revenue as proceeds to improve its revenue.”
Business Post reports that President Muhammadu Buhari in December 2020 signed the 2021 budget into law. The central government intends to spend N13.6 trillion in this fiscal year.
The 2021 budget, tagged the Budget of Economic Recovery and Resilience, was touted as the legacy of the Buhari-led administration in ensuring security, economic growth, and implementing health and emergency measures to counter the spread of the COVID-19 pandemic.
It was initially put at N13.1 trillion but the National Assembly increased by N506 billion, with the capital expenditure at N4.1 trillion and N5.6 trillion for recurrent expenditure, while the fiscal deficit was pegged at N5.2 trillion and debt service at N3.3 trillion.
Nigeria expects to produce 1.86 million barrels of crude oil per day to sell at an average price of $40 per barrel, with the exchange rate left at N379/$1 and the gross domestic product (GDP) at 3.00 per cent. On Monday, the price of crude oil jumped to $63 per barrel, indicating that the country is making an excess of $23 for each barrel of oil sold.
SEC Introduces Regulatory Incubation Program for Fintechs
By Modupe Gbadeyanka
A regulatory incubation (RI) program for financial technology (fintech) companies operating or seeking to operate in Nigeria has been introduced by the Securities and Exchange Commission (SEC).
A circular issued by SEC disclosed that this framework would be officially launched in the third quarter of 2021 and will operate by admitting identified Fintech business models and processes in cohorts for a one-year period.
Participation in the RI program will encompass an Initial Assessment Phase and the Regulatory Incubation Phase.
The categories to be admitted into each cohort will be determined based on submissions received through the Fintech Assessment Form and communicated ahead of each take-off date.
SEC explained that the scheme was designed to address the needs of new business models and processes that require regulatory authorisation to continue carrying out full or ancillary technology-driven capital market activities.
The RI Program has thus been conceived as an interim measure to aid the evolution of effective regulation which accommodates the innovation by fintechs without compromising market integrity and within limits that ensure investor protection.
It was disclosed that review of completed Fintech Assessment Forms will continue on an ongoing basis and those who consider that there is no specific regulation governing their business models or who require clarity on the appropriate regulatory regime for seeking the authorisation of the commission, are encouraged to complete the Fintech Assessment Form.
NGX Suspends Trading on GTBank Shares Ahead of Delisting
By Dipo Olowookere
In preparation for the eventual delisting of shares of Guaranty Trust Bank (GTBank) Plc from its trading platform, the Nigerian Exchange (NGX) Limited on Friday, June 18, 2021, placed the banking stock on a full suspension.
GTBank, a tier-one lender trading its equities on the exchange, intends to transform into a financial holding company (Holdco) so as to offer a wide range of services it is restricted to do.
Some years ago, the Central Bank of Nigeria (CBN) directed banks in the country to offload their subsidiaries not performing core lending services.
This was after many deposit money banks (DMBs) were delving into different business ventures, including insurance, stockbroking, asset management, amongst others.
For the CBN, which regulates the banking industry in Nigeria, most of these banks were losing focus and were not supporting businesses that need funds to grow and then stimulate the economy in the process.
To address this issue, the apex bank asked banks to sell off their non-banking assets and this forced many of them to offload their companies not offering core banking services.
However, there was an opening for banks to still delve into other sectors within the financial and capital markets and this was by operating as a Holdco.
A few of them towed this path, including FBN Holdings, Stanbic IBTC Holdings and FCMB Group.
Not wanting to be left out, GTBank is joining the party and to achieve this, it is delisting its banking arm, which is the popular GTBank from the stock exchange.
GTBank will now operate as a private company, while the new Holdco, Guaranty Trust Holding Company Plc, will now be a public company. The shares of this new firm will be listed on the NGX after the delisting of GTBank.
Last Friday, the stock exchange informed the investing community of the latest development, announcing the suspension of trading on GTBank shares.
In the circular sighted by Business Post, the NGX explained that the rationale behind placing GTBank stocks on full suspension is to “prevent trading in the shares of the bank” in preparation of its “eventual delisting”
Before trading on its stocks was suspended on Friday, GTBank closed at N28.55 on Thursday after appreciating by 50 kobo or 1.78 per cent.
DLM Capital Remains Best Structured Finance & Securitization Team in West Africa
A prominent developmental investment bank, DLM Capital Group, has emerged winner at the Capital Finance International (CFI) 2021 awards as the best-structured finance and securitization team in West Africa.
This award has been won consecutively in three years and affirms the group’s strong performance as a leading investment institution and asset manager.
CFI awards seek to identify the contributions of individuals and organizations that contribute significantly to the advancement of economies and truly add value for all stakeholders.
DLM Capital Group creates bespoke business solutions for alternative financing and harnessing funds for growth.
The group focuses on four key sectors — consumer credit, agriculture, microfinance, and education with a mandate to reduce poverty and improve living conditions for Africans while mobilizing resources for the continent’s economic and social development.
“In the past three years, our portfolio management team’s performance has remained consistent, and our clients have benefited immensely from exposure to our solutions, including the NMRC securitization deal and the DLM Primero BRT Securitization,” said Head of Corporate Communications and Marketing, DLM Capital Group, Ms Chinwendu Ohakpougwu.
“We are positioned to provide services to an expansive client base of retail, high net-worth and institutional customers.
“DLM Capital Group remains committed to constantly providing financial solutions that will enable our clients to make a difference, and we are honoured to be recognized once again as a reflection of the quality of support offered to our clients,” she added.
DLM has won recognition in West African capital markets, acting as a sole arranger to over 80 per cent of structured finance transactions in Nigeria — and all the securitization transactions. It provides deal structuring, advisory execution and capital raising services across the Nigerian capital market.
The institution recently launched an asset financing scheme and is preparing a venture into digital banking under its subsidiary, Sofri.
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