Liquidity in Nigerian money market up 450 bln naira last week

Last week, there was a turnover of $1.29 billion in Investors' and Exporters' (I&E) window, which represents an increase from last week's $1.17 billion. 
Money market dealers expect that there will be an uptick in demand at this window this week, as corporates start to make dividend payments for the year 2017.
Overnight rates were depressed all through last week as the market was liquid most of the time. The interbank money market has been very liquid through the week as the Central Bank of Nigeria (CBN) has replaced their daily Open Market Operations (OMO) auctions with only one OMO auction on Thursday.
The money market closed 450 billion naira long on Friday with the month to date
Overnight rate below 5 percent. The market is expected to stay liquid up until Thursday when there will be an OMO auction and it will tighten further when banks are debited for the retail SMIS auction on Friday.
The results of the April 13th retail auction were released on Friday evening, the Credit for the unsold portion is expected later in the week.
There will be a bond primary auction this week with 30 billion naira of a new 5-year bond as well as 30 billion naira each of the 7 and 10-year bonds( 2025s and 2028s) on offer.
(C) Citibank Nigeria

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Nigerian money market at a glance this week- Citibank

Nigeria's overnight rates have been depressed all week with money market liquidity high. 

Overnight rates closed at 5.3 percent on Thursday. Investors bought down Treasury bills early in the week in response to liquidity and the lack of OMO auctions held up until Friday. 

However, this trend was reversed on Friday by an OMO auction which withdrew 750 billion naira from the market. 

The 30, 90, 180 and 364-day bills opened in the secondary market at 13.32 percent, 14.12 percent, 13.82 percent, and 13.22 percent respectively, and closed at 14.39 percent, 12.51 percent, 13.49 percent, and 13.22 percent. 

Investor interest on the 2027 and 2036 bonds pushed those yields lower during the week. 2020, 2021, 2022, 2027, 2036 and 2037 maturity bonds opened in the secondary market at 13.68 percent, 13.89 percent, 13.62 percent, 13.75 percent, 13.64 percent, and 13.54 percent and closed at 13.40 percent, 13.77 percent, 13.50 percent, 13.64 percent, 13.50 percent, and 13.56 percent. 

On Thursday, the central bank reduced its stop rate for the longer tenor OMO maturity from 14.40 to 14.30 percent. 

The market will be watching to see if this was a one-off event. If the central bank drops the stop rate further, rates will experience downward pressure across the curve. It was another stable trading week on the naira with the trading range remaining between 358 and 360.50. 

The CBN governor mentioned at the MPC outcome statement that external reserves have risen to $46.69 billlion, the highest level since May 2013. 

Monthly Turnover in the Investors and exporters FX window was $5.11bn, the second highest since the market liberalization policy of April 2017. We expect USD demand to increase this April as a result of dividend payments by corporates. We, however, do not expect pressure on the currency as the supply of USD remains strong.

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Nigeria's UAC plans 20 bln naira bond sale for real estate unit

Nigerian conglomerate UAC plans to raise 20 billion ($65.4 million) naira this year through a bond sale to refinance short-term borrowings at its real estate subsidiary, where losses have widened, group CEO Abdul Bello said on Thursday.
Bello said the company would restructure its real estate unit UPDC, which is suffering from a current oversupply in the market coupled with a drop in Nigerians’ purchasing power.
Nigeria has just emerged from its worst recession in a quarter of a century while consumers are struggling with double-digit inflation.
Bello told an analysts’ call that the harsh economic conditions were still affecting the housing market and that sales at UPDC fell 20 percent in 2017.
UPDC reported on Wednesday that its losses widened to 3.05 billion naira in 2017 from 1.23 billion the previous year. The group reported a pretax profit of 3.25 billion naira for 2017, but this was down 61 percent.
“We would use 2018 to refinance a short-term facility. We intend to have this business restructured,” Bello, who took over as chief executive this year, said. “We see long-term growth supported by a huge housing deficit.”
Nigeria, home to more than 180 million people, suffers from long-term a housing shortage. Few banks offer long-term mortgages as high interest rates make them unattractive for buyers while lenders worry about the default risk.
Officials have said Nigeria needs to build around 17 million houses annually to catch up with a fast-growing population which is set to more than double to 400 million in 2050, according to U.N. estimates. Nigeria will be then the third most populous nation after China and India.


UPDC cut its debt to 19.3 billion naira in 2017, down 15 percent from the previous year.

Shares in UAC, which has interests in foods, logistics and livestock feeds, rose 0.58 percent on Thursday to 17.30 naira while UPDC traded flat at 3 naira.

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As we draw the curtain on VAIDS …what next, asks United Capital

The deadline for the Voluntary Assets and Income Declaration Scheme (VAIDS) expired last week, 31st March 2018. Launched in July-2017, VAIDS targets increased tax compliance and revenue, by deepening tax penetration and granting taxpayers a time-limited opportunity to regularize their tax status without penalty. 
The importance of this scheme cannot be over-emphasized as Nigeria’s tax/GDP ratio stands as one of the lowest globally amid the need to shore-up non-oil revenue in the face of rising debt burden. Although the overall success of the scheme cannot be measured yet, media sources suggest that the Federal Internal Revenue Service (FIRS) has garnered over N2.0bn in eight months on VAIDS.
While the questions regarding the costs associated with generating these revenues are yet to be known, we await the next step from Ministry of Finance (MoF) following the expiration of the March-31st deadline. Earlier, the MoF had insisted it will "name-and-shame" defaulters that did not take advantage of the scheme. 

Recent indication, however, suggested authorities are considering an extension of the deadline, casting shadows on their next move. 

Overall, we encourage the government to consolidate efforts to deepen tax revenue by balancing the need to send the right signal to defaulters and addressing the technical challenges hampering compliance.

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Nigeria bank stocks fall as central bank holds benchmark rate at 14 pct

Nigeria’s banking index fell 2.4 percent on Wednesday shortly before the central bank’s first interest rate decision where the MPC decided to hold the benchmark rate at 14 percent as investors grew bearish on equities, traders said.
The drop in banking stocks led the main share index down 0.65 percent to its lowest level in almost three months.
The central bank Monetary Policy Committee (MPC) member unanimously decided to hold the MPR rate.

Most analysts polled had predicted that rates to be kept on hold with cuts due later this year.

The central bank canceled its January meeting due to an inability to form a quorum after several departures reduced it to just five out of 12 members.
Stocks fell for the second straight day on Wednesday as concerns that a trade dispute between the United States and China could create uncertainty for frontier market investors also weighed.
Most Nigerian quoted companies reported strong earnings for 2017 but traders said these had already been priced in.
“There’s some pessimism in the market and investor have priced in 2017 performance into last quarter’s rally,” one trader said.
“If Q1 numbers show strong results then optimism will come back.”
Nigeria’s stock market rose 16 percent in January buoyed by gains in the banking sector as local and foreign investors snapped shares. Profit taking has since eroded some of the gains and stocks are now up 6.8 percent so far.
Twenty-four stocks led the index down on Wednesday with mid-tier lenders FCMB, Skye Bank and Unity Bank falling more than 4 percent each. Unity Bank has said it was in talks to sell a minority stake to two foreign investors to help it recapitalise.

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