STL Trustees Capital Market & Money Market News Recap

STL TRUSTEES CAPITAL MARKET & MONEY MARKET NEWS RECAP

While you were away!

The Securities and Exchange Commission (SEC) has announced that the Commission has carried out a minor reorganisation in order to be more efficient in the delivery of its services.

In a circular dated 16^th January, 2017 on the SEC website, the reorganisation was detailed as follows:

• Relocation of Inspectorate Division to the Commission’s Lagos Zonal Office (LZO).

1. To ensure a successful implementation of Risk Based Supervision Model and regulation of Systematically Important Financial Institutions in the capital market, the Commission has considered the need to have enhanced regulatory supervision of all registered Capital Market Operators (CMOs), which available record indicates that more than 90% of the operators are based in Lagos.  In line with this, the Inspectorate Division of the Commission’s Monitoring Department has been moved to Lagos Zonal office but some staff will be retained at the Head Office to handle some operators from the Northern Part of the country, This is aimed at ensuring that the CMOs maintain healthy financial situation and comply with Rules and Regulations guiding the conduct of their respective operations.

• Relocation of the Registration Division to the Lagos Zonal Office (LZO).

In a bid to reduce the huge financial burden being borne by the CMOs on filing of registration documents or attending registration meetings in Abuja, the Commission has decided to relocate the registration division from its Head Quarters to the Lagos Zonal Office. However a unit to cater for operators domiciled in the northern part of the country will reside at the Head office, Abuja.

• Merger of Fund Management Division (Investment Management Department) with the Inspectorate Division (Monitoring Department).

The Inspectorate and Fund management Divisions of the Commission perform similar functions of monitoring market operators. While the Fund Management Division monitors the activities of registered Fund Managers, the Inspectorate division supervises other categories of CMOs. To fully optimize the benefits of the Risk Based Supervisory Model, both divisions have been merged and would carry the assigned responsibilities under the Inspectorate Division of Lagos Zonal Office.

NBS REPORTS DROP IN NIGERIA’S FOREIGN INVESTMENT

The National Bureau of Statistics (NBS) has reported that Nigeria’s capital importation dropped by a whopping 46.8% to N$5.1 billion on a year on year basis.

In the report dated February 2017, data reveals that the total value of capital imported into the country declined by 15% to $1.548 billion dollars in the fourth quarter of 2016 compared to $1.8 billion dollars in the previous quarter. There was also a decline of 0.52% compared to the corresponding period in 2015. Q3 2016 saw the highest level of capital importation for the year at $1.8 billion dollars. Q1 2016 witnessed the lowest of level of capital importation at $0.710 million dollars.

Data also shows that in the year 2016, capital importation fell by 46.86%, from $9.64 billion in 2015 to $5.12 billion. This was the lowest value since the series started in 2007, according to the NBS. The figure reflects the numerous economic challenges that afflicted Nigeria in 2016, the bureau opines. The weakening of the naira may have had an impact: a weaker naira means more can be purchased with each dollar, and therefore investment projects

Despite the decline in foreign capital, both Foreign Direct Investment (FDI) and Foreign Portfolio Investment increased quarter on quarter in 2016. FDI had the most consistent increase with $170.84 million in Q1 2016 to $344.57 million in the fourth quarter of 2016. FPI moved from $271 million in Q1 2016 to $278 million in the last quarter of 2016. Q3 2016 saw a massive FPI inflow however at $920.32 million dollars

Telecoms, oil and gas as well as banking had the highest proportion of foreign capital imported into the country in Q4 2016. Nigeria imported the most foreign capital from the United Kingdom in Q4 2016, followed closely by the Netherlands and the United States.

Portfolio investment on shares had the largest proportion of capital inflow spending in the country in 2016. This was followed closely by banking, and oil and gas.

CBN TO PENALISE BANKS FOR BORROWING WITHOUT SECURITY IN LINE WITH THE AMENDMENT OF S4 BUSINESSS RULES AND GUIDELINES

The Central Bank of Nigeria (CBN) has announced the amendment of its S4 business rules and guidelines. The rules specify how banks can borrow cash from other banks or the CBN to cover their temporary shortfalls or meet their obligations.

According to the rules, any commercial bank that fails to comply with the new directives will be suspended from the CBN window for eight weeks.

The circular which was released on Wednesday 1^st February reads as follows:

“With reference to Section 10.1 of the S4 business rules and guidelines, which states among others that transaction with the CBN, any auction or two-way quote with the CBN must be settled. If it is in queue, it shall be given highest priority and when it fails to settle, the system shall generate an automatic Intra-day Liquidity Facility (ILF) backed by collateral to settle the transaction,” he wrote.

“Where there are no securities, the allotment shall be cancelled and the defaulter suspended from all auctions for eight weeks, effective from the date of default.

“The ILF shall be bought back or converted to Standing Lending Facility (SLF) by the participant by the close of business day, failing which it shall be automatically converted to SLF at the prevailing SLF rate plus 500 basis points.

“If any SLF is not purchased by the participant by the next business day, such participant shall not be eligible to access the CBN discount window until such outstanding obligation is settled in accordance with Section 27 of the Guidelines for the Conduct of Repurchase Transactions under the CBN Standing Facilities.

“Henceforth, all SLF must be bought back latest by 10am on the maturity date, failing which encumbered securities would be automatically rediscounted.”

With the new rules, CBN hopes to assess the quantum of liquidity in each bank and identify banks that are having liquidity challenges.

FEDERAL GOVERNMENT APPROVES REVIEWED NATIONAL TAX POLICY

The Federal Government has approved the proposed amendment to the National tax policy, which reflects an increase in Value Added Tax (VAT) for luxury items such as champagne. The reviewed policy which is also subject to the approval of the national assembly was disclosed by the Country’s Minister for Finance, Mrs. Kemi Adeosun, after the Federal Executive Council (FEC) meeting held on Wednesday 1^st February, 2017.

The Finance Minister stated that at its current rate of 5%, Nigeria has one of the lowest Value Added Tax regimes in the world. She added that the Tax contribution to GDP currently stands at about six percent, and the last amendment to the VAT was in 1994 by the regime of General Sani Abacha.

It is pertinent to add that previous suggestions for a blanket increase in VAT to 10% during the administration of President Goodluck Jonathan had led to uproar among the business community..

Other proposed reforms to the tax policy include a mandate for the Independent National Electoral Commission (INEC) to mandate political parties to articulate tax agenda during elections, a dedicated tax policy website, and the setting up of a tax policy implementation committee. The Joint Tax Board (JTB) will also be given be a role beyond its current advisory role.

DOLLAR EXCHANGE RATE REPORT 30^TH JANUARY TO 6^TH FEBRUARY, 2017

This report is a compilation of the dollar exchange rate at the official and parallel market from the 30^th of January to the 6^th of February, 2017.  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.