08 Aug

Daily Watch – CBN may tweak MPR over #Elections2019, Zenith & Diamond expect late credit splurge

  • The CBN may increase the MPR if inflationary pressures do not abate, Deputy Governor, Joseph Nnanna, has told Bloomberg. Nnanna said although the MPC wants to keep the major determinant of interest rate positive, the anticipation of increased spending ahead of the 2019 elections could slant some members’ votes toward a rate hike. At the end of its July meeting in Abuja, members of the MPC voted to retain the MPR at 14 percent for the 10th consecutive time. The CBN deputy governor said the committee has witnessed a “shift” such that three out of 10 members voted for higher rates at the July meeting.
  • Demand for Nigerian crude cargoes picked up this week according to Reuters, after weeks of sluggish trading, but sellers have been forced to cut their prices in order to get barrels moving, as an overhang persists and physical markets elsewhere are also showing weakness, traders said. A number of Nigerian grades have struggled to find buyers, as holders of physical cargoes have been reluctant to risk putting additional pressure on a market that has already had to absorb an overhang of August-loading cargoes as trading in September crude gets underway. August-loading Forcados was heard to be offered at a premium of $1.55-1.65 to dated Brent, while September barrels were quoted at $1.65-1.75, traders told the news service. Bonny Light was quoted at $1.45-1.55 above dated Brent for August delivery and at $1.65-1.75 for September, while Qua Iboe was quoted at $1.60-1.70.
  • The NSE on Monday announced the suspension on trading in the shares of oil marketing firm Conoil. The suspension was disclosed in a circular signed by Godstime Iwenekhai, head of the bourse’s listings regulation department. The move, the circular said, was due to Conoil’s failure to submit its audited financial statements as required by the rules governing the market. This is not the first time Conoil will submit its financial statements behind schedule; its FY 2017 statement was submitted in May this year. It is yet to file its Q1 and H1 2018 reports.
  • Zenith Bank expects to grow its loan book by 2.5 percent this year as a recovering economy and a drive to win business with manufacturers helps to offset a decline in credit in the first half, it said on Tuesday. Loans fell 6.3 percent in the six months to the end of June following a 4.6 per cent decline last year, Zenith said on a call with analysts. The bank said weak economic growth affected lending last year. However, as the economy improves it expects loans to grow, especially as the CBN introduces liquidity to the banking sector targeting credit to manufacturers. Zenith added its retail banking business was also growing. It posted a half-year pretax profit of ₦107.36 billion ($352 million), up from ₦92.18 billion in the same period last year. Its shares dropped 0.84 percent to ₦23.75, tracking a fall in the wider stock market, which was down 0.4 percent.
  • Data from the Independent System Operator shows that Nigeria lost 4,379MW of power due to gas shortage and poor distribution network. According to ISO data, the drop in load demand by DisCos – about 2,551MW – affected some GenCos as they shut down their turbines and generation capacity. Sixteen GenCos turned down 35 turbines to avoid high frequency which could lead to total system collapse. Nine GenCos, like Alaoji NIPP, Omotosho and Odukpani NIPP, couldn’t generate 1,826MW due to gas shortage. Among the companies affected by the load drop was Shiroro hydro GenCo which cut down 365MW; Geregu Gas didn’t generate 345MW, while Azura Edo lost 311MW. In addition, Omoku lost 20MW, Trans-Amadi 28MW while Geregu National Integrated Power Project lost 31MW. On Friday, Afam VI, a major power plant, could not generate 490MW due to the non-availability of gas.
  • Diamond Bank expects to conclude the sale of its British unit before the end of the year and is going through a change of ownership, its CEO said on Tuesday. The mid-tier lender struck a deal with British industrialist Sanjeev Gupta earlier this year after selling its West African subsidiaries last year. In May, Diamond Bank posted a 2017 loss, its first time in the red in six years after selling assets to conserve capital and to focus on its home market. Its half-year 2018 pretax profit declined 69 percent to ₦2.92 billion, hurting its shares, which fell a further 1.60 percent on Tuesday. Diamond Bank said it expected loan growth to return, growing five percent this year after credit declined in the first half by 3.6 percent.