17 Feb

Daily Watch – Guinness locked in mammoth legal fight, Bayelsa & BoI float ₦2bn MSME fund

  • The CBN sold ₦202.44 billion ($665 million) worth of treasury bills at an auction on Wednesday at yields lower than the inflation rate, the bank said on Thursday. The amount raised was more than ₦142.43 billion it had initially proposed, but it increased its offer due to the volume of demand by investors. The bank raised ₦140 billion in the 1-year treasury bill at 18.44 percent, shy of the 18.72 percent inflation rate for January and compared with 18.54 percent similar note fetched at the previous auction on Feb. 2. It issued ₦30 billion of the 6-month bill at 17.15 percent, lower than 17.24 percent at previous auction and a total of ₦32.44 billion of 3-month paper was sold at 13.69 percent against 13.79 percent previously. Subscription stood at ₦415.05 billion compared with ₦602.17 billion at the previous auction. The regulator issues treasury bills twice in a month to finance the budget deficit, help manage commercial lenders liquidity and curb rising inflation. Earlier the debt office said it had raised ₦160 billion ($525 million) in local currency bonds at its second debt auction this year at yields lower than the inflation rate. The CBN also announced on Thursday that it disbursed $2.83 billion to critical sectors of the economy in December and January, in an attempt to kickstart a struggling economy and alleviate a foreign currency drought. Nigeria’s dollar reserves have risen 8.39 percent since the beginning of the year, mirroring a rise in global oil prices, but remain far from a peak of $64 billion in August 2008. The naira hit a new low on the black market on Wednesday.
  • The Asset Management Corporation of Nigeria on Wednesday told federal lawmakers that it would quit Arik Air after six months. Making the disclosure while appearing before the Senate Committee on Banks, Insurance and Other Financial Institutions, AMCON’s Managing Director, Ahmed Kuru, said its takeover arrangement of the airline would last for six months. He said the federal government had to move into Arik because it would have been unfortunate if the airline had folded up. Kuru said in its testimony that Arik squandered its goodwill and several efforts made by the bad debt regulator to save it or forestall its takeover which eventually occurred last Thursday. Arik’s many failures according to Kuru include a failure to comply with terms of the restructuring of its debt twice; a failure to provide a three-year record of remittances to the Federal Aviation Authority of Nigeria, the diversion of a ₦21.38 billion Bank of Industry loan obtained for the airline by AMCON, as well as well as its refusal to co-operate with the AMCON monitoring manager, among others.
  • Global rating agency, Fitch Ratings, has downgraded the rating of four Nigerian banks from “stable” to “negative.” The banks are First Bank of Nigeria Limited, Guaranty Trust Bank Plc, Zenith Bank Plc and Diamond Bank Plc. The lender also said it had affirmed the Long-Term Issuer Default Ratings of 10 financial institutions in Nigeria. In a statement issued from its London office on Wednesday, the rating agency said, “Fitch Ratings has revised the outlook on four Nigerian banks to negative from stable and affirmed the Long-Term Issuer Default Ratings of 10 banks and financial institutions.” According to Fitch, the affected institutions whose IDR’s were affirmed are United Bank for Africa Plc Access Bank Plc, Fidelity Bank Plc, Union Bank Plc, First City Monument Bank Limited, Wema Bank Plc. The National Ratings of Stanbic IBTC Bank Plc, as well as its bank holding company, Stanbic IBTC Holdings Plc are also affirmed. Fitch said the IDRs of all the banks except Stanbic IBTC were driven by Fitch’s assessment of their standalone creditworthiness as captured in their Viability Ratings. The IDRs are all in the ‘B’ range, indicating highly speculative fundamental credit quality, and factor in the banks’ weakened credit profiles due to challenging macroeconomic conditions and market volatility.
  • The Bank of Industry and the Bayelsa state government have unveiled a ₦2 billion Micro Small and Medium Enterprise matching development fund to support entrepreneurs in Bayelsa as part of efforts to encourage value-addition to the nation’s natural resource endowments. The development finance institution highlighted the need to drive MSMEs especially in agriculture, considering the sector’s potential to achieve industrialisation and support federal government’s efforts to diversify the economy. Acting BoI boss, Waheed Olagunju, said the fund ‎would only be given to people after undertaking a rigorous capacity building programme organised by the Pan African University in partnership with the Entrepreneurship Institute in Bayelsa and entrepreneurship development centres in the state.
  • Pharma-Deko has asked the Federal High Court in Lagos to commence the winding up of Guinness Nigeria over an alleged ₦175,669,317.99 debt. The claimant, in its suit marked, FHC/L/CP/69/2017, filed before Justice Hadizat Rabiu-Shagari, is praying the court to appoint an official receiver, who will act as a provisional liquidator of Guinness Nigeria. Its lawyer, Williams Akinjide (SAN), said the winding-up petition filed by her client against Guinness was pursuant to the Provision of the Companies and Allied Matters Act Cap. C20, Laws of the Federation of Nigeria, 2004. Guinness, through its lawyer, Babatunde Fagbohunlu (SAN), had filed a preliminary objection challenging the jurisdiction of the Federal High Court to entertain the case. On Thursday, Justice Rabiu-Shagari adjourned a hearing on Guinness’s objection till March 28, 2017. In the affidavit it filed in support of its winding-up petition against Guinness, Pharma-Deko claimed that the debt stemmed from an alleged breach of contract by Guinness. Both parties had gone through an arbitration proceeding where the ₦175.6 million was awarded on July 1, 2016, according to court papers. Pharma-Deko said Guinness participated fully in the proceedings, adding that Guinness was contractually indebted to it. The deponent stated further that all efforts since July 1, 2016, to get the contractual debt paid had been ignored/refused by the Guinness Nigeria, despite writing and forwarding several demand notices in pursuant to statutory laws.