STL TRUSTEES CAPITAL MARKET & MONEY MARKET NEWS RECAP

While you were away!

NSE SUFFERS ALL SHARE DECREASE ON THE LAST TRADING DAY IN JANUARY 2019

The Nigerian Stock Exchange fell sharply in the last trading session for the month of January, as the Exchange’s All Share decreased by 588 points or 1.89% to 30557 on Thursday, January 31 from 31145 in the previous trading session. Historically, the Nigeria Stock Market NSE reached an all-time high of 45092.83 in January of 2018 and a record low of 19785.03 in December of 2011

Top Gainers and Losers 

McNichols Plc rebounded after several days of losses. The stock was the best performing on the last trading day in January, appreciating by 10% to close at N 0.33. Sunu Assurances also gained 10% to close at N 0.22. Learn Africa rounded up the top three gainers for the day. The stock added 8.73% to close at N1.37.

On the flip side, Redstar Express was the worst performing stock of the day. The stock declined by 9.09% to close at N5. First Aluminum was next, dropping by 8.57% to close at N 0.32. Niger Insurance rounded up the top three losers for the day, shedding 8.33% to close at N 0.22

SEC SETS 7 YEARS TIMELINE TO REVIVE THE NIGERIAN COMMODITIES MARKET

The Securities Exchange Commission (SEC) has set a 7-year timeline to revive the commodities market in Nigeria, by bringing the Nigerian Commodity Exchange (NCX) to speed with other commodity exchanges around the globe. This restructuring, according to SEC, will be concluded in 2025.

This move by SEC is geared towards economic diversification agenda of the Nigerian Government to grow the country’s agricultural value chain. This restructuring will see the Nigerian Sovereign Investment Authority (NSIA) inject funds into the commodity market.

AFEX Commodities Exchange – a privately owned commodity exchange moved 46,160 metric tonnes (MT) of commodities (ginger, paddy rice, soya beans, and maize, etc) worth N6.3 billion between second quarter 2016 and fourth quarter, 2017, according to available data. This makes it the only viable commodity exchange in Nigeria.

Part of the restructuring plan includes injection of funds by the NSIA into NCX – which has been comatose for some years.

To also facilitate the plan, SEC has set up a special division – Commodities Division – as part of measures to strengthen regulatory capacity for the market. The NCX has been battling with a host of challenges, including lack of funding occasioned by government’s inaction, lack of enabling laws and proper understanding of the operations of the commodities exchange.

Recommendations by the Technical Committee on Enhancing the Commodities Trading Eco-system – set up to recommend solutions to the problems of NCX – suggest that the restructuring would be in four phases; with the first phase lasting for two years from 2018 to 2019

The first phase will focus on achieving food/input sufficiency, price discovery and market development with special attention on agricultural produce like maize, sorghum, soya beans, cassava, and rice. This phase will also involve engagement in public enlightenment and development of education roadmap by the SEC as well as encouraging investment in warehouses and storage facilities by both the Commission and private sector operators.

This phase will also involve organisation of farmers into cooperatives by the Central Bank of Nigeria (CBN), Federal Ministry of Agriculture and Rural Development (FMARD), and SEC to aggregate produce and encourage them to become members of the exchange among other relevant actions.

The second phase, which will last for another two years (2020 to 2021), will focus on the development of export-focused commodities in agriculture like cocoa, sesame, cotton and palm oil; and continuous de-risking of the agriculture value chain by the National Insurance Commission (NAICOM).

In the third phase (2022 to2023), exchanges would be expected to key into Customs Single Window System to ease the process of export.

Finally, during the fourth phase of the project (2024 to 2025), SEC and other stakeholders will ensure that there is a strong international presence in the commodities market, while tradeable commodities will be expanded to include solid minerals and energy.

FGN SAVINGS BOND OVERSUBSCRIBED BY 131% IN JANUARY 2019 AUCTION

The Debt Management Office (DMO), announced on Wednesday 30^th January 2019 that it has allotted the sum of N116.98 billion to 109 individuals whose bids were successful during the Federal Government’s first bonds auction for the year 2019.

The DMO also disclosed that although the initial value of the bonds was N150 billion, over N197 billion worth of subscriptions were received from investors; indicating 131% over-subscription rate.

Despite the over-subscription, the Debt Management Office said it acted “in accordance with its policy of keeping the Government’s borrowing costs at prudent levels” by choosing to allot a total of N116.98 billion.

Successful bids for the 12.75% FGN APR 2023, 13.53% FGN MAR 2025, and 13.98% FGN FEB 2028 were allotted at the Marginal Rates of 15.20%, 15.25% and 15.35%, respectively. However, the original coupon rates of 12.75% for the 12.75% FGN APR 2023, 13.53% for the 13.53% FGN MAR 2025 and 13.98% for the 13.98% FGN FEB 2028 were maintained.

CBN RETAINS MPR AT FIRST MPC MEETING FOR THE YEAR 2019

The Central Bank of |Nigeria (CBN) Monetary Policy Committee (MPC) held its first meeting of the year on the 21st and 22nd
of January 2019. The Committee voted to maintain the MPR at 14.00%, CRR at 22.5%
while also retaining the asymmetric corridor at +200bps & -500bps and liquidity rate
at 30%.

The Committee considered the divergent performance across most economies in 2018, which led to the moderated global output. The Committee further noted the rising global uncertainties due to the increasing financial market volatilities, trade tension between the US and China, slowdown in Chinese economy, amongst others.
On the back of increased downside risks, the IMF moderated its global growth projection to 3.5% from 3.7%.
In the domestic space, the Committee noted the improvement of some key economic indicators in 2018, which includes; the gradual improvement in output growth, Q3:2018’s GDP grew by 1.81% from 1.50% in Q2:2018; stability in exchange rate, supported by the continuous CBN interventions; and the moderation in inflation rate for most part of the year.
The heightened political uncertainties due to the upcoming elections may continue to weigh on  activities within the financial market. The decision to keep rates constant should therefore not have any major impact on the performance of the equities and fixed income markets.

Committee’s Considerations

• The Committee assessed both the global and domestic macroeconomic and financial environment in 2018. The Committee considered the key risks and outlook in the short to medium term.
• In the global economy, the Committee noted the heightened uncertainties in 2019, as a result of factors such as the increasing financial market volatilities, trade war between the US and its key allies, continued monetary policy normalization by the US, negotiations surrounding Brexit, and the slowdown in China.
• On the domestic front, the Committee commended the improved output growth as shown by the higher GDP growth of 1.81% in Q3:2018 from 1.5% in Q2:2018.
  The Committee highlighted the major drivers of growth to include the services and agriculture sectors but however mentioned that the herdsmen and farmers conflict, alongside flooding in some part of the countries moderated agricultural and livestock outputs. While growth in 2019 is expected to be driven by improved oil and non-oil sector receipts, the Committee, however, stated that the growth outlook remains fragile.
• The resurgence of inflationary pressure in the economy was of concern to the Committee, as the headline inflation rate inched up to 11.44% in December 2018 from 11.28% in November 2018. The Committee observed that the near-term risk to inflation remains the residual impact of flooding on agricultural output, insecurity in agriculture producing states and campaign related spending towards the 2019 general election.
• The Committee stated the improvement in credit to the private sector and the government in December 2018. The Committee noted the aggressive growth in credit to the private sector which has been a constraint to real sector growth and further expressed optimism for improved lending to MSMEs in the economy.
• In the case for tightening, which was more likely, the Committee noted that tightening will result in the reversal of gains achieved thus far and will drive banks to reprice assets, thus increasing the cost of credit and elevating credit risk in the economy. The Committee further noted that it may result in an increase in Non-Performing loans, and also dampen investments and the improvement noted in output growth.

 Key Decisions

• Maintain MPR at 14%
• Maintain CRR at 22.50%
• Retain liquidity ratio at 30%
• Retain asymmetric corridor at +200 and -500bps around the MPR.

DOLLAR EXCHANGE RATE REPORT 21^ST JANUARY TO 1^ST FEBRUARY  2019

This report is a compilation of the dollar exchange rate at the official and parallel market from 21^st January to 1^st February 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.