23 Sep

Daily Watch – Banking profits crash by 28%, Forcados to resume exports next week

  • The CBN borrowed ₦140.88 billion ($448 million) via short-dated Treasury bills at an auction on Wednesday, attracting lower yields across the board, except on the three-month debt that was flat, data from the regulator showed on Thursday. CBN sold ₦28.12 billion of the three-month paper at 14 percent, the same as at the last auction on September 14. It sold ₦23.68 billion of six-month debt at 17.27 percent against 17.77 percent previously. It sold ₦89.08 billion of one-year bills at 18.30 percent compared with 18.48 percent at the previous auction. Traders said yields on the local debt were expected to gradually trade lower after the CBN’s Monetary Policy Committee retained its benchmark interest rate at 14 percent at its last meeting on Tuesday. This comes as the naira hit a new record low of ₦436/$ on the black market on Thursday as dollar shortages on the official market persist, funnelling importers to the unofficial market. The currency ended at ₦305.50/$ on the official market, a level it has closed at for the past one month.
  • Exports of Nigeria’s Forcados crude stream oil are set to resume at the end of September for the first time since February with a loading programme issued for October, trade sources said on Thursday. The first cargo is expected to load on September 28, the sources said. October exports are expected to be around 230,000 barrels per day, a preliminary loading list showed. SPDC, the Nigerian Shell affiliate, operates the terminal and declared force majeure on exports on February 22 after a sub-sea pipeline was hit by the militant group, the Niger Delta Avengers.
  • Banking sector profit fell by 28.4 percent in the 2015 financial year, according to a new Afrinvest 2016 Banking Sector report, with foreign exchange volatility and a lower oil price named as the primary culprits. The report read, “The resilience of the Nigerian banking sector was put to the test as elevated risk concerns triggered a spike in NPL ratio and slowed the pace of credit expansion dramatically. Gross loans and advances dipped by 1.9 per cent in 2015 across our coverage universe compared to the 26.6 percent growth in 2014 as lower oil prices, FX volatility and liquidity concerns dampened risk appetite amidst a hazy economic road map.” The report further said that industry gross earnings moderated to 10.3 per cent in 2015 (compared to 14.6 percent in 2014) while banking liquidity, especially among Tier-2 banks, was pressured by the TSA implementation, which removed approximately ₦1.2 trillion from the banking system.
  • Nigeria’s electricity woes may worsen in the coming weeks as liquidity and gas supply issues are threatening the operation of its biggest power station, Egbin. CEO Dallas Peavey Jr. told the Punch that the plant’s owners might be forced to shut it down if these challenges remain unresolved. Egbin, located in Lagos, is owned by Kepco Energy Resource Limited in collaboration with its technical partner, Korea Electric Power Corporation. In Peavey’s words, “We are owed ₦86 billion and we, in turn, owe the gas suppliers approximately ₦30 billion. We are working on payment plans. We think if this is not addressed in the next couple of weeks, we are going to take the hard look at shutting down because we can’t afford running it any longer.”
  • Kwara civil servants employed after 1987 will soon be migrated into the Contributory Pension Scheme with about ₦145 million remitted monthly. According to the governor’s spokesman, Muyideen Oluwakorede, employees hired before 1987 will continue under the Defined Benefit Scheme (DBS). The state pays pensioners under the old scheme a monthly pension of about ₦443 million, it’s already “tentatively” estimated about ₦1.6 billion will be paid as its contribution into the CPS for all pension arrears. The plan had been on the cards for some time, but implementation was delayed by opposition from labour groups.