25 Aug

Daily Watch – CBN gears up for Islamic banking, FG stamp duty party not yet uhuru

  • Nigeria raised ₦56.05 billion ($178.50 million) at a bond auction on Wednesday, less than half the amount on offer as domestic pension funds and insurance firms cut demand due to low yields, traders said on Thursday. The DMO put ₦135 billion worth of bonds maturing in 2021, 2027 and 2037, on offer. However, investors shunned the auction to take positions on the relative liquid secondary market. The DMO paid 16.80 percent for the 2021 and 2027 bonds and 16.90 percent for the 2037 debt. Investors demanded yields as high as 17 percent, auction results showed.
  • The total amount of stamp duty collected on deposits in bank accounts across the Deposit Money Banks has yielded ₦13 billion for the FG, according to a Punch investigation. The paper quotes the CBN as saying that in the first 12 months of application of the duty (January to December 2016), Nigerian banks remitted ₦3 billion into the Stamp Duty Treasury Single Account. However, payments to the account have improved significantly as about ₦10 billion in remittances have been recorded during the first seven months of 2017. Although the monies collected this year through the stamp duty represents a significant improvement on 2016, it is a far cry from the ₦2.5 trillion which authorities estimate the government could generate through the deduction of ₦50 on deposits in bank accounts worth at least ₦1000.
  • A NEITI report says the NNPC completed a refund of ₦450 billion to the Federation Account in April 2017 and has been shared among states and local government councils. It is unclear if the money is the full amount of refunds being expected from the NNPC; the industry watchdog in a Policy Brief released in March calculated the unremitted payments by the Corporation and its subsidiary, the NPDC to the Federation Account at ₦316.074 billion and $21.778 billion respectively. NEITI said the refunds were for funds meant to accrue between September 2011 and April 2017 and noted that portions of domestic crude oil had been withheld as far back as November 2004. NEITI said the disbursements of these refunds started in September 2014 with ₦10 billion, adding that disbursements in subsequent months were for ₦6.330 billion, which continued for 31 consecutive months until April 2017. A total of ₦243.758 billion was refunded to states and local governments, while the FG received refund payments totalling ₦206.242 billion.
  • The CBN said on Thursday it is setting up two financial instruments to provide liquidity support to its non-interest paying lenders. It is a push by Nigeria, home to the largest Muslim population in sub-Saharan Africa, to establish itself as the African hub for Islamic finance, which follows religious principles such as bans on interest and gambling. The regulator has been working to set regulatory ground rules for such things as Islamic bonds (Sukuk) and insurance (takaful) to try to emulate the success of the industry in Malaysia. Islamic banking is currently offered by the Islamic window of Sterling Bank, Stanbic IBTC, a unit of South Africa’s Standard Bank, and Jaiz Bank, a full-fledged Islamic lender which has operated since 2012. Nigeria launched a ₦100 billion ($318 million) debut sovereign Sukuk in the local market in June to help develop alternative funding sources for government and to establish a benchmark curve for corporates to follow.
  • GT Bank traded the largest volume on the Lagos bourse on Thursday in deals worth ₦2.89 billion ($9.2 million) as foreign funds exchanged shares in off-market deals following strong half-year results, traders said. Guaranty Trust Bank traded 71 million units in mostly cross-deals at an average price of ₦40.80 between some offshore funds and local investors, traders said. A broker said foreign funds viewed the bank favourably as one of the most profitable and some were taking positions in it. Last week the top tier lender posted an 18 percent rise in half-year pretax profit to ₦101.10 billion, the highest profit level so far announced by any lender in the country. Shares in GT Bank rose 0.25 percent to close at ₦40.60, valuing the lender at ₦1.19 trillion. The stock is up 65.2 percent so far this year, adding to 36 percent gains last year.