23 Nov

Daily Watch – MPC keeps rates unchanged, Skye Bank wants to lose some weight

  • The CBN on Tuesday opted to retain all monetary policy instruments, despite new NBS figures on Monday which showed the country slipping further into a recession. The Monetary Policy Rate, which sets the lending rate for banks and businesses for a period, was left at 14 percent, while the Cash Reserve Ratio, the specified minimum fraction of customers’ total deposits commercial banks could hold as reserves either in cash or deposits with the regulator was retained at 22.5 percent. Governor Godwin Emefiele said at the end of the two-day MPC meeting that the liquidity ratio was left by the MPC at 30 percent, with the symmetric window kept at +200 and -500 basis points around the MPR. The NBS’ Q3 GDP report showed the economy further contracting by 2.24 percent year-on-year, following a 2.06% slump in Q2. Inflation stood at a record 18.3 percent in October 2016, up from 17.9 percent in September.
  • The Senate has summoned Ibe Kachikwu to clarify details of oil and gas infrastructure agreements worth $80 billion with Chinese companies and a $15 billion deal with India. Kachikwu was in China in June for a roadshow aimed at raising investment. Nigeria’s state oil company said memorandums of understanding (MoUs) worth over $80 billion – to be spent on investments in energy infrastructure – were signed with Chinese companies. On a trip to India last month, Kachikwu said a $15 billion cash-for-oil pact with that country was likely to be signed by the end of this year. The Senate passed a motion on “the need for a detailed explanation” of the deals and said Kachikwu would appear before a committee on petroleum upstream, gas and foreign affairs at a date to be arranged.
  • FMDQ OTC Securities Exchange has finalised the admission of ₦7.96 billion Sterling Investment Management SPV bond. The ₦7.96 billion represents series 1, 7-year at a 16.50 percent fixed rate unsecured bond under the company’s ₦65 billion debt issuance programme. Speaking at the listing on Monday, the Executive Director, Sterling Bank, Abubakar Suleiman, the sponsor of the bond, said that the bank last accessed the bond market in 2011 and commended investors for the confidence placed in the institution by participating in the offer in spite the current volatility in the Nigerian financial market. He also acknowledged FMDQ’s contribution to the growth of the Nigerian Debt Capital Market by facilitating active secondary market trading. FMDQ’s Vice-President & Divisional Head, Marketing and Business Development, Tumi Sekoni, congratulated the issuer for the successful offer and said the listing would contribute to the growth of the Nigerian corporate bond market and as well renew confidence in the DCM.
  • Skye Bank may sell some or all of its local and foreign subsidiaries as part of a review aimed at streamlining operations and boosting its capital adequacy, its CFO said. The CBN shored up Skye in July with a more than ₦100 billion ($329 million) capital injection, after sacking its top management for failing to meet minimum capital requirements. It then appointed a new management team. Skye’s CFO Pius Olaoye said on Tuesday that the bank would sell subsidiaries if the pricing was right and has appointed advisers to help find buyers. Skye, which holds an international bank license, has three subsidiaries in West Africa and 10 non-bank subsidiaries. “We’re looking at the various outlets that we have and some of those foreign subsidiaries are part of it. If we get good offers we will consider selling them off,” Olaoye told Reuters. “If we get good offers then we’ll go ahead and spin off all of them, if not it will be selective.” Skye’s problems started after it used short-term funds to acquire local lender Mainstreet Bank in 2014 and failed to raise fresh funds. It was in talks with shareholders and new investors last year to raise ₦30 billion but had to suspend the plans due to weak capital markets and the exit of foreign investors as the slide in oil prices hit Nigeria’s economy and currency. Skye shares have been hammered due to the capital failures, plunging 68 percent this year to hit a nominal value of ₦0.50, after sliding 41 percent last year.
  • The FG and Dangote Group signed a contract for the construction of a 42.5km Obajana-Kabba Road in Kogi State. The Permanent Secretary at the Power, Works and Housing ministry, Magaji Abdullahi Gusau, signed on behalf of the FG, while an executive director at Dangote, Joseph Makoju signed on behalf of the Group. The rigid pavement highway would be built by the AG Dangote construction company at the cost of ₦11.5 billion but it comes with a tax concession which makes the effective contract price, ₦5.2 billion. The ₦6.2 billion difference will be deemed as part of the firm’s CSR portfolio. AG Dangote’s MD, Ashif Juma said the contract duration was 24 months but the company planned to complete it in 16 months.
  • Guinness Nigeria has boosted production in Nigeria with the commissioning of a £12 million spirits production line in its Benin plant. The spirits production line will make Guinness the first of its kind to be established by the beverage company. The spirit line was commissioned by the Edo State governor,  Godwin Obaseki, who expressed his age-long personal relationship with the company and commended its board members while charging companies operating in Nigeria to make use of the current economic recession to embark on backwards integration and expand their business offerings.