CAPITALDIGEST DAILY NEWS, 12/08/2024

FUEL IMPORTS GULP N2TN MONTHLY – FG

President Bola Tinubu has disclosed that the country spends N2tn monthly to import petrol and diesel. Tinubu stated this during his recent nationwide broadcast to Nigerians. According to the President, despite Nigeria’s abundant oil and gas resources, his administration met a country that was dependent only on oil, neglecting its gas resources while subsidising the cost of fuel. Tinubu removed fuel subsidies on his first day in office, and this led to an increase in the pump price of petrol from about N200 per litre in May 2023 to about N700 at the moment. As a result, the President noted that his administration had invested in Compressed Natural Gas to change the narrative. “Fellow Nigerians, we are a country blessed with both oil and gas resources, but we met a country that had been dependent solely on oil-based petrol, neglecting its gas resources to power the economy. We were also using our hard-earned foreign exchange to pay for and subsidise its use. “To address this, we immediately launched our Compressed Natural Gas Initiative, to power our transportation economy and bring costs down. This will save over N2tn a month, be used to import PMS and AGO and free up our resources for more investment in healthcare and education,” Tinubu stated. He reiterated that his administration would be distributing one million kits of extremely low or no cost to commercial vehicle owners transporting people and goods and who currently consume 80 per cent of the imported petrol and diesel. “We have started the distribution of conversion kits and the setting up of conversion centres across the country in conjunction with the private sector. We believe that this CNG initiative will reduce transportation costs by approximately 60 per cent and help to curb inflation,” Tinubu disclosed.

NET FX FLOWS INCREASE BY 55% TO $25.4 BILLION IN SIX MONTHS – CBN

The Central Bank of Nigeria has revealed that the net foreign exchange flows into the country increased to $25.4bn in the first six months of 2024, marking a 55 per cent increase from the figure recorded year-over-year. It stated that the evident progress is a result of its policy measures. This new development comes against the backdrop of its $876m auction to 26 banks to resolve unmet FX demands. A statement from the apex bank on Thursday noted that this growth has been fueled by a rise in capital importation, which reached $6bn in June 2024, and record inflows from diaspora remittances through formal channels. The statement read, “The CBN’s policy objectives are yielding tangible results and bolstering market confidence. Net foreign exchange flows rose to $25.4bn between January and June, marking a 55 per cent year-over-year increase. “This growth has been driven by a rise in capital importation, which reached $6bn in June 2024, and record inflows from diaspora remittances through formal channels.” The CBN further noted that over $305m of foreign exchange has been sold to authorized dealers in the last three weeks through a two-way quote system, which has been deployed over the past few months to enhance liquidity in the interbank market. According to the statement, the CBN offered $876m to meet bids submitted by customers during an auction concluded on Wednesday, August 7, 2024. This was done through the Retail Dutch Auction System, which is designed to facilitate FX sales to end users directly, promoting a more transparent market, reducing information asymmetry, and aiding in price discovery.

FG TO SELL $500M DOLLAR-DENOMINATED BONDS

The Federal Government of Nigeria has introduced its Series I Domestic USD Bond, aiming to raise a minimum of $500m from both local and international investors. According to the auction circular obtained by The PUNCH on Wednesday, the government aims to double its initial offer, targeting $1bn in subscriptions through this bond auction. However, this auction comes at a time when five of Nigeria’s Eurobonds were ranked among the worst performers in a Bloomberg index of emerging and frontier sovereign debt. Recall that the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, had earlier affirmed that it would issue $500m domestic foreign currency-denominated bonds in August. Edun said the government needs to attract savings from Nigerians held abroad. “We are using the Nigerian financial system, the Securities and Exchange Commission, the banking system, the investment bankers to issue $500m in the first instance that will be available and will attract foreign currency held by Nigerians abroad and anybody else who buys into the macroeconomic reform efforts of President Bola Tinubu,” he said in an interview. The circular stated that the bond programme has a total size of up to $2.0bn, which can be upsized depending on the issuer’s discretion. The bond has a five-year tenor, offering a medium-term investment opportunity for investors looking for stable returns. It was also stated that the bond’s coupon rate is benchmarked to comparable FGN Eurobonds yields, ensuring competitive returns that align with international market standards. Interest payments will be made semi-annually, providing regular income streams to investors and enhancing the bond’s appeal. The bond offers bullet repayment at maturity in US dollars, ensuring full repayment of the principal amount at the end of the five-year term.

EQUITY MARKET SUSTAINS RECOVERY WITH N577BN GAIN

The Nigerian Exchange extended its recovery, gaining N577bn on Thursday, driven by buying interest in Unilever Nigeria, Vitafoam Nigeria, and MTN Nigeria Communications. The All Share Index appreciated by 1.05 per cent, settling at 98,118.30 points from the previous close of 97,098.98 points, as the year-to-date gain rose to 32.09 per cent, the month-to-date gain to 0.38 per cent, and the week-to-date gain to 0.41 per cent. Market capitalisation closed at N55.709tn. Unilever Nigeria, Vitafoam Nigeria, and MTN Nigeria Communications led the gainers, each rising by 10 per cent to close at N18.70, N19.25, and N198, respectively. Investors traded 791.78 million shares in 9,059 deals, valued at N15.126bn. The volume of stocks traded declined by five per cent, turnover was up by eight per cent, and the number of deals dipped by seven per cent. The market breadth closed positive as 33 equities gained while 19 equities declined in share prices. Access Holdings recorded the highest trading volume with 116 million shares, followed by Guaranty Trust Holding with 110 million shares and Abbey Mortgage Bank with 50.7 million shares. On Wednesday, the Nigerian equity market gained N97bn after two days of consecutive losses. The recovery was driven by the appreciation recorded by Red Star Express, Oando, RT Briscoe, and 24 other stocks. The All Share Index appreciated by 0.20 per cent, closing at 97,098.98 points, up from the previous close of 96,928.52 points. Globally, markets also saw a broad recovery after a sharp decline earlier in the week.

NAIRA CLOSES 1,596/$ AS FOREX INFLOWS HIT $25BN

The Central Bank of Nigeria has revealed that the net foreign exchange flows into the country increased to $25.4bn in the first six months of 2024, marking a 55 per cent increase from the figure recorded year-over-year. It said the evident progress is a result of its policy measures, as the naira closed at the rate of N1,596 against the United States dollar on Thursday, maintaining the same rate as it closed on Wednesday. CBN’s revelation on foreign exchange flows came against the backdrop of the apex bank’s $876m auction to 26 banks to resolve unmet FX demands. A statement from the apex bank on Thursday noted that this growth had been fueled by a rise in capital importation, which reached $6bn in June 2024, and record inflows from diaspora remittances through formal channels. The statement read, “The CBN’s policy objectives are yielding tangible results and bolstering market confidence. Net foreign exchange flows rose to $25.4bn between January and June, marking a 55 per cent year-over-year increase. “This growth has been driven by a rise in capital importation, which reached $6bn in June 2024, and record inflows from diaspora remittances through formal channels.” The CBN further noted that over $305m of foreign exchange has been sold to authorized dealers in the last three weeks through a two-way quote system, which has been deployed over the past few months to enhance liquidity in the interbank market. According to the statement, the CBN offered $876m  to meet bids submitted by customers during an auction concluded on Wednesday, August 7, 2024. This was done through the Retail Dutch Auction System, which is designed to facilitate FX sales to end users directly, promoting a more transparent market, reducing information asymmetry, and aiding in price discovery.