STL TRUSTEES CAPITAL MARKET & MONEY MARKET NEWS RECAP

While you were away!

JOINT TRUSTEES ON THE MUNICIPALITY WASTE MANAGEMENT CONTRACTORS LIMITED (MWMCL) MEDIUM TERM NOTE RELEASE STATEMENT AMIDST MARKET SPECULATIONS ON THE STATUS OF THE TRANSACTION

Amidst speculations in the capital market on the status of the Municipality Waste Management Contractors Limited (MWMCL) Medium-Term Notes Issuance, after the Issuer defaulted on payment of the Part Principal due 5^th March 2019, the Joint Trustees on the transaction on Thursday 28th March 2019 released a statement providing clarity on the status of the transaction whilst also confirming that all obligations (part principal repayment and coupon payment) due on the transaction as at March 5, 2019, have been duly remitted to Noteholders.

According to the Joint Trustees, the MWMCL Notes is a Private Instrument issued to finance the implementation of the reformed Lagos State Waste Management Framework Cleaner Lagos Initiative (CLI), established in pursuance to the Lagos State Environmental Protection and Management Law 2017.  The Instrument is backed by an Irrevocable Standing Payment Order (ISPO) issued by the Lagos State Government to support private sector involvement in municipal development in the State.

The Joint Trustees further explained that although the Noteholders experienced some delays in the remittance to them of the part principal repayments due on the Notes, the State’s unwavering regard for the sanctity of contracts has assured continued and timely funding of the duly established Sinking Fund Account to meet Noteholders’ obligations.

The Statement concluded with the Joint Trustees assuring Noteholders that “the MWMCL Issuance as envisaged from its inception still stands and effective mechanisms incorporated in the transaction and legal documentation are in place to safeguard investments till maturity”.

SEC AND CBN SET TO MODIFY RULES ON MARGIN LENDING

The Securities and Exchange Commission (SEC) is working in collaboration with the Central Bank of Nigeria (CBN) to change the guidelines on margin lending. The two regulators also intend to start issuing margin loans in accordance with the new rules they would set

The Acting Director of SEC, Ms. Mary Uduk, disclosed this in Lagos while speaking at the first quarter post-Capital Market Committee, (CMC) media briefing. She also disclosed that they intend to re-include banking shares in the margin list.

The Acting Director-General explained that the rules guiding margin lending had to change, especially after zero activity was recorded in the sector since the rules were created in 2010.

According to her,  “after the meltdown, in 2010, the SEC and CBN came together to come up with rules on margin loan but after the issuance of that rules, we found out that there was zero activity in respect of margin loan and that is why the market suggested that it appears the rules on margin loan is very stringent.

“In coming up with that rule, probably due to the experience of the past, we excluded banking shares from margin list. we found out from other jurisdictions that you can be given loans to buy banking shares, so, because of that, we started engaging CBN.”

A margin loan is a type of loan that allows you to borrow money to invest, by using your existing shares, managed funds and/or cash as security. It is a type of gearing, which is borrowing money to invest.

A margin loan uses existing shares, managed funds and cash as security. These existing assets are used to calculate your Loan to Value Ratio (LVR), which determines how much you can borrow.

Once your borrowing limit is established, you can use available funds to purchase further approved investments (shares, managed funds, etc). Your new and existing investments are combined to form your total portfolio.

Interest on a margin loan is calculated daily, but how it is paid will depend on the loan. Some margin loans allow interest to be paid in advance.

The Loan to Value Ratio (LVR), is the amount of your loan divided by the value of the shares or managed funds being used as security.

CBN FINALLY DROPS MPR RATE TO 13.50%

The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN), has officially cut the Monetary Policy Rate (MPR) by 50 Basis points to 13.50% from 14% while retaining CRR at 22.5%.

The CBN Governor, Godwin Emefiele, disclosed this during a press conference at the end of the two-day MPC meeting held on Tuesday 26^th March 2019 in Abuja. The cut is the first time the MPC will alter the MPR since July 2016.

Highlights of MPC meeting

• MPC cut down the MPR by 50 (0.5%) basis points to 13.50% from 14%.
• All other key parameters are held unchanged
• Asymmetric corridor of +200/-500 basis points around MPR was retained
• Retain the CRR at 22.5%; and
• Retain the Liquidity Ratio at 30%.
• MPR cuts aimed at strengthening the nation’s feeble economic growth
• In an attempt to justify the cut in MPC, Mr. Emefiele reiterated that the cut in the rates was to support the nation’s feeble economic growth at this time.

The CBN governor further highlighted the need to cut MPR to help reduce the unemployment rate and bolster the diversification agenda of the country’s economy.

The CBN governor added that uncertainties surrounding the global economies suggest increasing macroeconomic global vulnerability in the medium term.

According to the CBN governor, global economies were characterized by legacy headwinds from the second half of 2018. Mr. Emefiele noted the following episodes that characterized the global economy,

“The Continued Trade War Between U.S & China, Policy Uncertainties in Advanced Economies, Central Banks Persisting Uncertainties Surrounding Brexit Negotiations, Vulnerabilities In Major Financial Markets And Rising Public Debts In Some Emerging Economies And Developing Economies.”

Consequently, the MPC reiterated that global output was downgraded by the International monetary fund (IMF) from 3.5% in 2019, from 3.7% in 2018. Also, price development across developed economies continue to moderate in the review period alongside signals of weakening output growth.

In the light of these developments, Mr. Emefiele noted that,

“The U.S Federal Reserve, The Banks of England And European Central Bank (ECB) Retreated from The Earlier Stand Of Monetary Policy Normalization In Favour Of Monetary Policy Accommodation. This Led to Volatility in The Financial Market of The Advanced Economies, And The Balancing Of Portfolio Moved Capital From The Equity To The Bond Markets.”

Higher capital inflows expected

Mr. Emefiele in a communique read after the meeting, further stated the capital inflow will increase owing to volatilities in financial markets of major developed economies like the U.S.

DOLLAR EXCHANGE RATE REPORT 18^TH   MARCH TO 29^TH  MARCH  2019

This report is a compilation of the dollar exchange rate at the official and parallel market from 18^th March to 29^th March 2019.  The quoted parallel market prices are to serve as a guide to readers, as they represent the average price obtained daily from different black-market dealers in the Country.