10 Oct

Daily Watch – CBN issues new Islamic bond rules, FG gets $1.3 billion for Development Bank

  • Nigeria’s planned November oil loading programme shows the highest exports since January, plans compiled by Reuters showed on Friday, as major oil streams resume. Plans show 62 cargoes, with 1.88 million barrels per day (bpd) expected to load during the month, the highest level since militants bombed the pipeline that exports Forcados crude oil in February. Before the pipeline was hit, February and March exports were planned close to 2 million bpd, but nearly all the cargoes of Forcados were cancelled as the pipeline closed and operator Shell declared force majeure. From February until recently, export plans for a string of crude oil grades had been patchy and unreliable due to almost relentless militant attacks that took out pipelines and thus production in what is typically Africa’s largest oil exporter. While Qua Iboe, Nigeria’s largest export stream, and Forcados remain under force majeure, exports are again planned for both of them. The first cargo of Qua Iboe since July loaded earlier this week aboard the South Sea.
  • The FG has reached an agreement with the World Bank Group and other development partners for the release of $1.3 billion for the take-off of Development Bank of Nigeria. Finance minister, Kemi Adeosun, along with CBN Governor, Godwin Emefiele, made the fact known at a joint press briefing in Washington DC on Sunday. The briefing was to announce the achievements of the Nigerian delegates at the 2016 IMF/World Bank Annual General Meetings. Adeosun emphasised that creating the Development Bank of Nigeria was not a duplication of the duties of any other government finance organisation, especially the Bank of Industry because it was targeted at Small and Medium Enterprises. According to her, “The focus of DBN is SMEs and giving them low-cost loans. We have been able to crowd in money to the tune of 1.3 billion dollars from the World Bank, African Development Bank and the European Investment Bank.
  • The CBN has issued new guidelines for granting liquid asset status to Sukuk instruments issued by state governments. According to a policy document on its website, a Sukuk issuance by any state shall be backed by a law enacted by the relevant State House of Assembly, specifying that a sinking fund shall be established to be fully funded from the consolidated revenue fund account of the state. Also, the state government will enact a fiscal responsibility law, with provisions for public debt management, in order to enhance investor confidence. In addition, the state government will create a debt management department in order to ensure transparency and professional management of debt issues.
  • Nigerian pension funds have been selling equities and shifting to local bonds despite cheap valuations as illiquid currency markets limit foreign participation in the stock market. Nigeria, Africa’s biggest economy, is facing its worst recession in 25 years, brought on by low oil prices, which has seen foreign investors flee its financial markets, causing chronic dollar shortages and creating risk aversion among local funds. According to a fund manager at Pension Alliance Limited, investing in stocks had become unattractive because foreign investors, which used to dominate the Nigerian market, have stayed away amid concerns on how to repatriate funds. Corporate earnings have also been poor as firms struggled to source dollars to pay for imports. A fund industry source told Reuters that most Nigerian funds’ had probably made a return of around 10 percent so far this year, below inflation which is above 17 percent and less than an average return of 11.5 percent over the past five years. The Lagos stock index is down 2.2 percent in naira terms this year and has struggled to rise much above a 28,000 point resistance level. In dollar terms, it is trading near a 15-year low.
  • Travelex, a global foreign exchange dealer, on Friday resumed sale of dollars directly to travellers at N356 to a dollar. According to the News Agency of Nigeria, the firm’s office inside the Murtala Muhammed International Airport in Lagos was besieged by hundreds of travellers. It was gathered that some bureaux de change operators within the terminal were also selling from ₦470 to ₦472 to a dollar to travellers. Travelex, which recently got the approval of the Central Bank of Nigeria to sell dollars issued stringent conditions for the transaction. The requirements included the presentation of a valid international passport, a visa to a destination, BVN card, an airline boarding pass and a signed copy of the transaction. The firm also directed that cash would only be handed over to the traveller at the boarding gate after security and immigration checks. According to the firm, these conditions are to ensure that dollar is sold to only genuine travellers, and discourage racketeering.
  • The Nigerian Electricity Regulatory Commission has slammed a ₦6.2 million on the Benin and Port Harcourt Electricity Discos over their failure to comply with Forum Office rulings in complaints filed by their respective customers. The Commission, in Directive 153, imposed a ₦5.01 million sanction on BEDC for not complying with the decision of the Forum in complaints filed by three of its customers on estimated billings. PHEDC was sanctioned over its failure to comply with the Forum Office decision in a complaint from a customer over metering in May. The NERC Forum Office, set up in over 16 states, is made up of five members of the public and handles complaints that are unresolved at DisCo units.