31 Jul

Daily Watch – CBN closes debut yuan auction, Beverage makers commit to Lagos waterways cleanup

  • OPEC oil output has risen this month to a 2018 high as Gulf members pumped more after a deal to ease supply curbs and the Congo Republic joined the group, a Reuters survey found, although losses from Iran and Libya limited the increase. The cartel has pumped 32.64 million barrels per day in July, the survey on Monday found, up 70,000 bpd from June’s revised level. In June, OPEC, Russia and other non-members agreed to return to 100 per cent compliance with oil output cuts that began in January 2017, after months of Venezuelan underproduction and elsewhere pushed adherence above 160 percent. Supply in Nigeria, often curbed by unplanned outages, rose by 50,000 bpd. Shell’s Nigerian venture lifted force majeure on Bonny Light crude exports. Nigeria and Libya were exempt from the original supply-cutting deal. OPEC’s collective adherence with supply targets has slipped to 111 per cent in July from a revised 116 per cent in June, the survey found, meaning it is still cutting more than agreed.
  • The CBN sold yuan at a range of ₦49-51 at its first auction of the Chinese currency last week, traders said on Monday. The auction, which is part of an attempt to encourage the use of an alternative trading currency, particularly given the high level of imports from China, sold the yuan for immediate value and for 15-day settlement, traders said. Some lenders got as much as 60 per cent of the volume they applied for, while one bank got just 5 per cent. They said the volume sold was based on the price quoted for the yuan at the auction. In May, the lender signed a three-year currency swap deal with the People’s Bank of China to facilitate trade between the two countries and boost its reserves.
  • The Food and Beverage Recycling Alliance, a coalition comprising of the Nigerian Bottling Company, Nestle Nigeria, the Seven-Up Bottling Company and Nigerian Breweries, has signed a three-year partnership with the Lagos State Ministry of Transportation to rid the state’s waterways of plastic and packaging waste. The programme will focus on the evacuation for recycling of packaging waste collected from the four main inland waterway corridors – the Five-Cowrie Creek to Lekki; Marina through Elegbata and Osborne to Oworonshoki, the waterways from Apapa through Kirikiri, Mile 2, Festac to Oke-Afa, and the Ikorodu Axis, which covers Ipakodo, Ibeshe, Baiyeku, Ijede and Badore. The FBRA will provide funding for equipment, gears and personnel training while the state government will be responsible for structural civil works, managing execution, personnel, waste sorting centres and enforcement.
  • FBN Holdings says its profit margin increased by 13.7 per cent y-o-y for HY 2018, “despite high inflationary environment”. In the group’s unaudited results, which were largely positive for the period under review, profit after tax rose to ₦33.5 billion, up from ₦29.5 billion recorded in HY 2017. As a group, gross earnings stood at ₦293.3 billion, up 1.6% y-o-y, compared to ₦288.8 billion in HY 2017. The group’s commercial banking operations accounted for the largest contribution to gross earnings and profit before tax at 90.2 per cent and 84.0 per cent respectively.
  • Sequel to the new NAICOM capitalisation requirement for Nigerian insurance companies released last week, FBN Insurance Group has announced plans to be a Tier 1 Company. Managing Director Val Ojumah said FBNInsurance Limited and FBN General Insurance Limited have the financial wherewithal to operate in the Tier 1 category. He further added that the newly introduced Risk Based Supervision system will send a clear message to investors and remove the negative impression about most insurance companies been fringe players.
  • The United Capital Nigerian Eurobond Fund returned 0.5 per cent in June to bring its YTD performance to 3.79 per cent. This represents an annualised return of 7.58 per cent, better than the return of the benchmark Libor rate. The fund which came to life in 2017 is worth $5.21 million or ₦1.6 billion as at 30 June and is an open-ended mutual fund that invests in dollar-denominated Eurobonds floated by the FG and top-tier corporates. The United Capital performance closely tracks its Nigerian fund peers. The FBN Eurobond USD Institutional Fund returned 3.02 per cent (annualised 6.02 percent) while its sister fund, the FBN Eurobond USD Retail Fund returned 1.76 per cent (annualised 3.42 percent) in the same period.