By Aduragbemi Omiyale
The ratings of three non-financial corporates in Nigeria have been downgraded by Moody’s Investors Service on the back of the weakening of the federal government’s credit profile.
The affected organisations are Seplat Energy Plc, Dangote Cement Plc, and IHS Holding Limited.
In a statement issued on Friday, the rating agency said it has also repositioned the national scale corporate family rating (CFR) of Dangote Cement to A3.ng from Aa3.ng to reflect the mapping of Global Scale Ratings to National Scale Ratings.
Moody’s noted that though the corporates have relatively prudent financial policies, adequate liquidity, moderate to low leverage and strong business profiles, they are still constrained by the foreign currency country ceiling because they are materially exposed to Nigeria’s economic, political, legal, fiscal and regulatory environment.
Seplat is less exposed to convertibility risk, given most of its revenue is paid in dollars. However, its export dollar oil revenue must be repatriated back into Nigeria within 90 days of receipt, after which Seplat can transfer these US dollar funds back into offshore bank accounts, the rating firm said.
It stated that to date, Seplat has had no restrictions imposed by the Central Bank of Nigeria (CBN), and the company targets 70 per cent of total cash balances in Dollars and 70 per cent of that in offshore accounts.
Seplat’s $650 million senior unsecured notes are due in 2026, and the company has a good liquidity profile supported by $305 million of cash on the balance sheet and full access to the $350 million undrawn revolving credit facility as of September 2022.
As for Dangote Cement, Moody’s said its high proportion of dollar debt in the capital structure exposes the company to currency convertibility risk.
It noted that while the cement firm continues to grow its dollar revenue through exports and repatriation of dollar cash flow from its other African operations, it still relies on the CBN for foreign exchange (FX), which remains restricted.
The company’s liquidity profile is adequate but is exposed to ongoing refinancing risks because of the large portion of short-term debt equal to N326 billion, representing 60 per cent of total debt as of June 30, 2022. It also benefits from strong cash flow generation, with cash balances of N194 billion as of June 30, 2022.
As for IHS, the renowned rating company said its downgrade also reflects exposure to currency convertibility risk, which over time will weaken the company’s liquidity position if it is unable, for a prolonged period, to upstream cash flow generated in Nigeria to the group level.
IHS earns around 67 per cent of its EBITDA from Nigeria, denominated in Naira, but its contracts are either dollar-linked or have Naira CPI pricing escalators that allow the company to pass through most of the cost inflation or currency depreciation it is exposed to.
“Nevertheless, the fact that revenues are invoiced in Naira exposes the company to Dollar shortages in the country and the resulting convertibility risk.
“IHS serves its dollar bonds through cash upstreamed to the group by its international operations, the largest one of which is in Nigeria,” it said.
Moody’s noted that during the six months to June 2022, IHS upstreamed $147 million of cash from Nigeria, in addition to regular upstreams from other operating companies.
It said liquidity remains good and is supported by a cash balance of around $500 million outside of Nigeria as well as a $270 million fully available liquidity facility, which Moody’s expects will provide the company with adequate liquidity for the next 2-3 years even in the case it was unable to upstream any cash flow from Nigeria over this timeframe.
Recall that last week, Moody’s downgraded Nigeria’s local currency country ceiling to B1 from Ba3 and the foreign currency country ceiling to B3 from B2.
Stock Market Down by 0.13% as Investors Offload MTN, Cadbury
By Dipo Olowookere
The winning streaks witnessed on the floor of the Nigerian Exchange (NGX) Limited lately was halted on Thursday as profit-taking in some blue-chip equities pulled down the stock market by 0.13 per cent.
Heavyweights like MTN Nigeria, GTCO, Cadbury Nigeria and FBN Holdings came under selling pressure yesterday, bringing down the exchange at the close of transactions despite the strong investor sentiment.
Business Post reports that the market breadth closed positive on Thursday as the bourse recorded 15 appreciating stocks and 10 depreciating equities led by Capital Hotel, which dropped 9.80 per cent to sell at N2.76. Honeywell Flour declined by 9.09 per cent to N2.20, Coronation Insurance decreased by 8.11 per cent to 34 Kobo, ABC Transport crashed by 7.41 per cent to 25 Kobo, and Cadbury Nigeria depleted by 4.46 per cent to N10.70.
However, the shares of Chams grew by 9.09 per cent during the session to 24 Kobo, RT Briscoe expanded by 7.69 per cent to 28 Kobo, PZ Cussons inflated by 5.50 per cent to N11.50, Livestock Feeds improved by 4.50 per cent to N1.16, and Ecobank increased by 2.86 per cent to N10.80.
Analysis of the sectorial performance showed that the energy index remained unchanged, the industrial goods and the banking counters closed higher by 1.11 per cent and 0.46 per cent apiece, while the insurance and the consumer goods sectors declined by 0.48 per cent and 0.06 per cent, respectively.
As a result, the All-Share Index (ASI) of the NGX slacked by 61.35 points to 48,365.14 points from 48,426.49 points, while the market capitalisation went down by N34 billion to N26.343 trillion from N26.377 trillion.
Yesterday, investors transacted 148.2 million shares worth N3.0 billion in 3,391 deals compared with the 146.2 million shares worth N3.4 billion traded in the midweek session in 2,810 deals, indicating a decline in the trading value by 11.77 per cent, an increase in the trading volume by 1.37 per cent, and a surge in the number of trades by 20.61 per cent.
The most attractive stock for the session was Ecobank, as it sold 23.4 million units and was trailed by FBN Holdings, which traded 25.8 million units. Transcorp exchanged 12.9 million units, Access Holdings transacted 9.6 million units, and Sterling Bank traded 9.2 million units.
House of Reps Tells CBN to Suspend New Cash Withdrawal Limits
By Modupe Gbadeyanka
The Governor of the Central Bank of Nigeria (CBN), Mr Godwin Emefiele, has been told to immediately suspend the new limits placed on the withdrawal of cash from over-the-counter (OTC), Automated Teller Machines (ATMs) and Point of Sales (POS).
On Tuesday, the central bank said from January 9, 2023, any cash withdrawal above N100,000 for individuals would attract a 5 per cent processing fee and a 10 per cent processing fee for withdrawals of more than N500,000 for corporate organisations.
This policy is already generating mixed reactions, with POS operators saying it would push them into the unemployment market because of the loss of jobs and the Nigeria Employers’ Consultative Association (NECA) saying stakeholders were not “extensively consulted” by the CBN before its announcement.
At the plenary on Thursday, a lawmaker, Mr Aliyu Magaji, who moved a motion of urgent public importance, warned that the new policy could spell doom for the economy as several people would lose their jobs, while traders, artisans and rural dwellers would suffer because of the cash limits.
His colleagues agreed with him and criticised the apex bank for the policy.
Though the Minority Leader, Mr Ndudi Elumelu, pointed out that the new cash withdrawal limits would check crimes as funds would now be tracked through the banking system, he emphasised that the timing was wrong.
The other legislators echoed this opinion and added that it would have serious consequences and adverse effects on businesses and Nigerians who have no access to the banking system.
As a result, they asked Mr Emefiele to roll back the policy, summoning him to appear before them on Thursday, December 15, 2022, to explain the policy and why it should not be rejected.
Incidentally, the day he is to appear next week is the same day the CBN plans to officially introduce the newly redesigned N200, N500, and N1,000 banknotes into circulation.
The Naira was redesigned by the apex bank to control the volume of cash in the financial system after it was discovered that more than 80 per cent of cash in circulation was not in the banks’ vaults.
New Cash Withdrawal Policy Was Without Extensive Consultation—NECA
By Modupe Gbadeyanka
The Nigeria Employers’ Consultative Association (NECA) has accused the Central Bank of Nigeria (CBN) of not consulting with stakeholders extensively before coming up with the new cash withdrawal policy expected to take effect from January 9, 2023.
In the new directive, the CBN said the maximum cash that can be withdrawn from banks is N100,000 per week for individuals and N500,000 for corporate organisations. Also, customers would not be able to withdraw more than N100,000 from the Point of Sale (PoS) machines and Automated Teller Machines (ATMs) and N20,000 per day. It further said the highest Naira note to be loaded in ATMs is N200.
However, withdrawals above the cash limits via over-the-counter, according to the directive of the apex bank, would attract 5 per cent for individuals and 10 per cent for companies.
Commenting on the new development, the Director-General of NECA, Mr Wale-Smatt Oyerinde, emphasised that the livelihood of many individuals and enterprise sustainability would be impacted.
“As usual with the CBN, the bank announced a new naira withdrawal policy without extensive consultation with organized businesses and those that will be directly impacted by the policy.
“This new policy is diversionary and a mere distraction from the critical issues that are affecting the nation,” Mr Oyerinde stated.
Speaking further, he said, “While it is desirable to get all bankable individuals and businesses into the banking system and promote the cashless policy of the CBN, the timing without adequate preparation and sensitization of the critical mass that drives the economy (the SMEs and MSMEs) could prove counter-productive and further drive many below the poverty line.
“This is another classical example of the inconsistencies and misalignments between the fiscal and monetary policies of the government.
“It is absurd to blatantly set traps of processing fees for individuals and businesses who desire to withdraw their hard-earned money from the bank for legitimate and genuine business transactions.
“It is also important to note that the banking infrastructure and mobile/digital facility to drive the cashless policy are not sufficiently developed. This is not only draconian but also inhuman.
“We urge the CBN and, indeed, the federal government to replicate the energy and promptness used in implementing this policy to address the issues of dwindling value of the Naira, rising inflation, oil theft, ballooning foreign debt, and get millions out of poverty realm.”
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