Economy
State Governments Borrow N900bn from Capital Market—SEC
By Ahmed Rahma
The Director-General of the Securities and Exchange Commission (SEC), Mr Lamido Yuguda, has disclosed that the state governments in Nigeria have borrowed not less than N900 billion from the capital market.
Mr Yuguda made this disclosure on Tuesday at a webinar organised by the Nigerian Stock Exchange (NSE) on ways sub-nationals can raise funds through the sale of state-owned enterprises.
The SEC chief, who was represented by the Executive Commissioner in charge of Legal and Enforcement, Mr Reginald Karawusa, disclosed that this amount was raised from the market through debt issuances since 1978.
Speaking on Privatisation in Nigeria and the Outlook for Subnational Economic Development, the theme for the event organised in partnership with the Nigeria Governors’ Forum (NGF) and the Nigerian Investment Promotion Council (NIPC), the DG said “a significant part of these funds were deployed to finance capital projects across the country.”
“However, the ability of states to continue to borrow in a sustainable manner has been severely impacted in recent times.
“With the huge infrastructure gap, decreased allocation from the federal purse owing to relatively low oil revenue and the depressed level of internally generated revenues, states are barely able to pay salaries after servicing their outstanding loan obligations,” he noted.
He added that, there is indeed no better time to discuss alternative funding sources at the sub-national level given adverse impacts brought about by the COVID-19 pandemic.
“The capital market’s primary role in any economy is to facilitate capital formation. By creating a system for allocation of capital, investors are able to price risk efficiently while issuers have the opportunity to raise funds to finance projects. In doing so, issuers may choose to raise equities or debts,” he mentioned.
The DG also stated that the federal and state governments have the capabilities to unlock enormous potentials through privatisation, which he said “is an avenue for governments to unlock economic potentials inherent in government-owned enterprises.”
“The focus on Nigeria’s journey on privatisation has largely been on the Federal Government. There have been several phases of privatisation exercises in the past with an emphasis on enterprises operating in different sectors of the economy including oil and gas, hospitality, mining etc,” Mr Yuguda added.
He also stated that, “Several enterprises are still owned and controlled by the government, both at the state and federal levels. A number of these entities have the capacities to generate cash flows and corporate profitability.
“However, owing to certain inefficiencies, these entities are underperforming and in some cases subtracting from value. Perhaps this is the time for state governments to revisit the privatisation value proposition. There are several benefits to privatisation.”
Mr Yuguda informed the participants that privatisation has numerous benefits as the proceeds from the sale of government interest in these enterprises would help augment budget shortfalls and can be applied towards funding critical infrastructure.
“Beyond the funds to be generated, governments will enjoy the cost of savings as there would be no further requirements to fund these entities post-privatisation.
“There are further benefits to be enjoyed through the taxes that would be paid in the future by those entities. As they undergo a strategic transformation and become positioned for profitability, these entities are able to create jobs and employ residents of their host states, facilitate infrastructure development and further positively impact the economy in other areas,” he concluded.
The CEO of the NSE, Mr Oscar Onyema, in his address, said privatisation occupies a critical position in economic globalisation and provides an avenue for raising the bar towards economic development.
“Given COVID-19, there is no better time to re-visit privatisation and cascade this to the subnational levels,” he added.
Also speaking, the Chairman of NGF, Mr Kayode Fayemi, said the state governments have been constrained to increase spending in a bid to mitigate the effects of the pandemic.
According to him, “containment is fairly in place but more needs to be done to ensure progress is not lost and that is where privatisation comes in.
“If the private sector takes over in critical sectors, state governments can focus on education and health among others”.
By Adedapo Adesanya
The NASD Over-the-Counter (OTC) Securities Exchange closed higher by 1.41 per cent on Friday, May 15, supported by four securities on the platform.
During the session, FrieslandCampina Wamco Plc added N14.24 to its share price to sell for N159.00 per unit, in contrast to the previous day’s N144.76 per unit.
Further, Central Securities and Clearing System (CSCS) Plc appreciated by N1.34 to N72.34 per share from N71.00 per share, Geo-Fluids Plc improved its price by 4 Kobo to N2.94 per unit from N2.90 per unit, and Industrial and General Insurance (IGI) Plc gained 1 Kobo to trade at 61 Kobo per share compared with Thursday’s closing price of 60 Kobo per share.
As a result, the NASD Unlisted Security Index (NSI) rose by 58.20 points to 4,188.41 points from 4,130.21 points, and the market capitalisation soared by N34.82 billion to N2.506 trillion from N2.471 trillion on Thursday.
During the session, the volume of trades went up by 180.8 per cent to 1.2 million units from 417,349 units, and the value of transactions increased by 29.8 per cent to N29.8 million from N23.2 million, while the number of deals fell by 22.6 per cent to 24 deals from 31 deals.
Great Nigeria Insurance (GNI) Plc ended the day as the most traded stock by value on a year-to-date basis with 3.4 billion units sold for N8.4 billion, followed by CSCS Plc with 60.8 million units exchanged for N4.1 billion, and Okitipupa Plc with 27.9 million units valued at N1.9 billion.
GNI Plc also closed the session as the most traded stock by volume on a year-to-date basis with 3.4 billion units worth N8.4 billion, followed by Resourcery Plc with 1.1 billion units transacted for N415.7 million, and Infrastructure Guarantee Credit Plc with 400 million units traded for N1.2 billion.
By Dipo Olowookere
The bears overpowered the Nigerian Exchange (NGX) Limited on Friday, sinking it further by 0.76 per cent when the closing gong was struck by 4 pm.
The nation’s flagship equity market was under selling pressure during the session, as investors booked profits after the shares witnessed price appreciation in the past trading sessions.
The energy sector was the most impacted, as it shed 4.43 per cent. The consumer goods index declined by 0.90 per cent, the banking counter decreased by 0.15 per cent, and the industrial goods sector lost 0.08 per cent, while the insurance counter gained 2.42 per cent, which was not enough to salvage the situation.
Consequently, the All-Share Index (ASI) contracted by 1,912.19 points to 250,330.92 points from 252,243.11 points, and the market capitalisation moderated by 1.225 trillion to N160.444 trillion from N161.669 trillion.
Zichis was the worst-performing stock for the session after it gave up 9.97 per cent to close at N29.43, FTN Cocoa slipped by 9.95 per cent to N8.96, The Initiates slumped by 9.90 per cent to N32.30, LivingTrust Mortgage Bank tumbled by 9.88 per cent to N3.83, and International Energy Insurance dropped 9.71 per cent to trade at N2.79.
The best-performing stock was ABC Transport, which grew by 10.00 per cent to N6.27. May and Baker also appreciated by 10.00 per cent to N47.30, SCOA Nigeria surged by 9.98 per cent to N33.05, Trans-Nationwide Express expanded by 9.97 per cent to N7.06, and DAAR Communications jumped 9.76 per cent to N2.25.
Yesterday, investors traded 1.1 billion shares worth N44.3 billion in 65,744 deals compared with the 1.0 billion shares valued at N41.6 billion transacted in 74,822 deals a day earlier. This indicated a dip in the number of deals by 12.13 per cent, and a rise in the trading volume and value by 10.00 per cent and 6.49 per cent, respectively.
Chams was the busiest equity for the day, with 328.5 million units sold for N1.1 billion. UBA traded 61.6 million units worth N2.7 billion, First Holdco transacted 58.7 million units valued at N4.2 billion, Secure Electronic Technology exchanged 51.9 million units worth N45.0 million, and Access Holdings traded 51.8 million units valued at N1.3 billion.
By Adedapo Adesanya
The last trading session of the week at the Nigerian Autonomous Foreign Exchange Market (NAFEX) ended on a negative note for the Naira on Friday, May 15, as it lost N15 Kobo or 0.1 per cent against the Dollar to trade at N1,371.04/$1 compared with the previous day’s N1,370.89/$1.
However, it further appreciated against the Pound Sterling in the same market segment yesterday by N20.77 to close at N1,830.61/£1 versus Thursday’s value of N1,851.38/£1, and gained N7.91 against the Euro to settle at N1,595.07/€1 versus N1,602.98/€1.
At the GTBank FX desk, the Naira lost N2 against the US Dollar during the session to sell at N1,383/$1 compared with the preceding session’s N1,381/$1, and at the black market, it remained unchanged at N1,385/$1.
The Naira is forecast to be broadly stable, supported by Dollar sales by the Central Bank of Nigeria (CBN) amid steady, higher oil receipts, with the market settling into a balance.
Policy direction is also expected to give the market some boost as the CBN said the new edition of the FX market guidelines will deepen liquidity, improve transparency and strengthen confidence in the country’s foreign exchange market.
According to the Governor of the CBN, Mr Yemi Cardoso, the update is due to changing global economic realities, domestic reforms and the need for a more coherent and forward-looking regulatory framework. According to him, the last edition of the FX manual was issued in 2018, making the latest review both timely and necessary.
Meanwhile, the cryptocurrency market plunged into the red zone as rising bond yields hit risk assets across markets, while traders are increasingly betting the Federal Reserve may need to raise rates again. Rising energy prices and resurging inflation could force central banks back into tightening mode.
Cardano (ADA) shrank by 4.4 per cent to $0.2557, Dogecoin (DOGE) slid by 3.7 per cent to $0.1104, Ripple (XRP) depreciated by 3.5 per cent to $1.41, Solana (SOL) crashed by 3.5 per cent to $87.81, and Binance Coin (BNB) slumped by 3.4 per cent to $659.64.
Further, Bitcoin (BTC) declined by 2.6 per cent to $78,547.49, Ethereum (ETH) lost 2.1 per cent to quote at $2,209.19, and TRON (TRX) tumbled by 0.7 per cent to $0.3509, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) traded flat at $1.00 each.
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