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Economy

Investments in Nigerian Startups Under Threat as Softbank May Cut Funding

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Softbank Vision fund

By Adedapo Adesanya

Nigerian startups may face a drop in investment as one of the key investing partners in the world, Softbank, has announced that it may cut its startup investments this year by more than 50 per cent.

This was disclosed by the chief executive, Mr Masayoshi Son, at the company’s earnings call on Thursday.

As per TechCrunch, the move is the latest high-profile investor to become vocally cautious about opportunities in the private markets amid a global slowdown.

According to its numbers, the Japanese conglomerate reported a loss of about $29 billion on investments at its Vision Fund 1 and Vision Fund 2 for the year ending March 31.

“It depends on our LTV levels and investment opportunities, and we strike balance, but I will say compared to last year, the number of new investments will be half or could be as small as a quarter,” said Mr Son.

This will have a ripple effect on Nigeria’s growing investment field, meaning it may reduce the number of investments that will enter the country which had the highest percentage of startups destinations in the African country.

Business Post had reported that Nigeria had the highest share of the $4.7 billion that came into the African continent in 2021.

Softbank was one of those key investors last year with investments in companies like OPay, Andela, among others.

This will further impact the projected increase in investments expected this year. In 2021, investments were twice as much as the total volume that was raised by African startups in 2020 just as there was also a 25 per cent increase in the total number of deals last year compared to the number of deals that were announced in 2020.

SoftBank joins a list of a number of investors including Tiger Global, Coatue and Dragoneer that have slowed down the pace of their investments as well as the amount of capital they are putting into startups this year.

Adedapo Adesanya is a journalist, polymath, and connoisseur of everything art. When he is not writing, he has his nose buried in one of the many books or articles he has bookmarked or simply listening to good music with a bottle of beer or wine. He supports the greatest club in the world, Manchester United F.C.

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Economy

JUST IN: CBN Raises Benchmark Interest Rate to 13%

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killing interest rate

By Dipo Olowookere

For the first time in two years, the Monetary Policy Rate (MPR) has been raised by the Central Bank of Nigeria (CBN) to 13.0 per cent from 11.5 per cent.

Mr Godwin Emefiele, the Governor of the CBN, who announced this development on Tuesday in Abuja, explained that the decision to increase the benchmark interest rate was taken at the Monetary Policy Committee (MPC) meeting held yesterday and today.

While addressing financial reporters this afternoon, Mr Emefiele said members of the committee were unanimous with the decision to hike the rates as it was the best thing to do after holding them for about two years.

However, the other parameters were left unchanged by members at the gathering as the Asymmetric corridor remained around the MPR at +100/-700bps, the Cash Reserve Ratio (CRR) at 27.5 per cent and the Liquidity Ratio (LR) at 30.0 per cent.

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Economy

Nigeria’s GDP Grows by 3.11% in Q1, What Next?

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GDP

By Lukman Otunuga

There are two ways one could interpret Nigeria’s latest Gross Domestic Product (GDP) figure of 3.11% in Q1 of 2022.

The optimists will say the country’s economy grew for the sixth consecutive quarter in Q1 while pessimists may highlight how economic growth slowed for the third consecutive quarter.

Either way, Nigeria’s economy continues to display resilience against external and domestic risks. With the improvement in the non-oil sector driving growth, this may brighten the growth outlook. But could these be signs of Nigeria breaking away from the chains of oil reliance to derive growth from sustainable sources? It may be too early to come to any meaningful conclusion. However, the report is encouraging and illustrates progress made by the country in reclaiming stability post-Covid-19.

With economic conditions somewhat improving, the Central Bank of Nigeria (CBN) is unlikely to raise interest rates this week. Given how Africa’s largest economy has been able to maintain growth in the past six quarters on the back of loose monetary policies by the CBN, a rate hike could disrupt Nigeria’s economic recovery.

As the global war against inflation rages on, central banks are stepping up.

However, the CBN is likely to remain on the sidelines for now. Nevertheless, inflation is still a cause for concern with consumer prices accelerating for the third straight month to 16.82% in April 2022.

With the general elections around the corner, pre-election spending could translate to rising price pressures. On top of this, the widening policy divergence between the Federal Reserve and the CBN could punish the Naira.

It’s worth keeping in mind that the dollar remains heavily supported by aggressive Fed rate hike bets and is likely to remain strong for the rest of 2022. A powerful dollar is bad news for emerging market currencies including the Naira which continues to depreciate in both the official and unofficial markets.

Lukman Otunuga is the Senior Research Analyst at FXTM

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Economy

NGX All Share Index Weakens Further by 0.13%

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All-Share Index

By Dipo Olowookere

The bearish sentiment on the floor of the Nigerian Exchange (NGX) Limited continued on Monday as the bourse further depreciated by 0.13 per cent.

Sustained profit-taking especially in the industrial goods sector contributed to the decline suffered during the session as the All Share Index (ASI) slumped by 68.45 points to close at 52,911.51 points compared with the previous session’s 52,979.96 points.

As for the market capitalisation, it depreciated by N37 billion amid sell-offs in 24 stocks to settle at N28.525 trillion as against last Friday’s closing value of N28.562 trillion.

On the first trading day of this week, the insurance sector depleted by 2.32 per cent, the industrial goods sector fell by 0.09 per cent, while the energy, banking and consumer goods counters increased by 0.28 per cent, 0.10 per cent and 0.05 per cent respectively.

Presco led the losers’ chart yesterday with a price decline of 10.00 per cent to trade at N180.00, Global Spectrum Energy Services lost 9.97 per cent to finish at N3.07, Neimeth fell by 9.66 per cent to N1.59, UAC Nigeria depreciated by 8.33 per cent to N13.20, while NEM Insurance retreated by 7.74 per cent to N4.05.

The gainers’ log had 22 members on Monday, with Conoil leading after its value improved by 9.95 per cent to N34.25. MRS Oil gained 9.93 per cent to quote at N14.95, McNichols appreciated by 9.86 per cent to N2.34, Academy Press increased its price by 9.76 per cent to N1.35, while NPF Microfinance Bank expanded by 8.02 per cent to N2.02.

On the activity chart, a total of 263.3 million stocks worth N3.6 billion exchanged hands in 4,856 deals during the session compared with 436.6 million stocks worth N3.2 billion bought and sold in 4,716 deals in the preceding session. This implied that the volume of trades depreciated by 39.68 per cent, while the value of trades and the number of deals increased by 10.15 per cent and 2.97 per cent respectively.

Jaiz Bank closed the day as the most active stock with the sale of 114.0 million units valued at N101.8 million, GTCO transacted 12.9 million shares for N302.8 million, Transcorp exchanged 12.8 million stocks worth N16.7 million, Access Holdings traded 11.7 million equities valued at N115.7 million, while Zenith Bank sold 8.6 million shares for N207.0 million.

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