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Market Indicators And FGN Bonds Drop

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On speculation that foreign investors’ exist as a result of alleged easing of US Federal Reserve’s Stimulus Package among others, the twin market performance indicators on the Nigerian Stock Exchange (NSE), the all share index and the market capitalisation last week finished on the red as both lost well over 5 per cent respectively.
In specific terms, the all share index otherwise called the composite index closed at 36,4644.39 basic points from an opening of 37,249.93 basis points while the market capitalisation of listed equities finished at N11.71 trillion from an opening value of N11.97 trillion.
The first trading day on the Nigerian bourse during the week under review finished on a negative note having recorded 0.44 percent lost. The bears’ hold on the market continued the next day as the market dipped further by 0.16 percent.
The bulls took over on Wednesday as the market garnered 0.30 percent on the strength of highly capitalised stocks.
The bears took over the market on Thursday as the market depreciated by 0.46 percent while on Friday it recorded a further plunge of 1.35 percent.
A total of 1.63billion units of shares worth N21.68billion were exchanged by investors in 30,952 transactions. The week’s activity chart was led by the financial service sector having recorded a turnover of 1.10 billion units of shares valued at N10.55 billion traded in 16,479 deals which represents 67.67 percent, 48.67 percent and 53.24 percent of the overall traded volume, value and deals respectively.
The conglomerate sector emerged second on the activity chart with a turnover volume of 141.20 million units of shares valued at N412.13 million in 1,046 deals contributing 8.6 percent, 1.90 percent and 3.38 percent of the total equity turnover volume, value and deals in that order.
The Consumer Goods Sector came third with a recoded turnover volume of 141.02 million units of shares at the cost of N8.10 billion traded in 6,365 transactions.
According to the NSE weekly report transactions in the shares of Zenith Bank Plc, Sterling Bank Plc and Transactional Corporation of Nigeria Plc accounted for 419.40 million units of shares worth N3.542 billion in 3,173 trades contributing 25.72 percent, 76.34 percent and 10.25 percent to the overall equity market turnover volume, value and deals respectively.
A total of 32 stocks appreciated in their prices during the week under review while 49 stocks depreciated in their prices and 112 share prices remained unchanged.
Meanwhile, major equity markets around the globe were upbeats as their indices gained marginally. The NASDAQ, S $ P500 and Dow Jones rose by 1.26 percent, 1.02 percent and 0.78 percent respectively during the review week.
In Europe, the German Dax, FTSE100 and France CAC 40 increased by 0.66 percent, 0.78 percent and 1.20 percent respectively.
Nikkei 225 rose by 4.57 percent while Hangbeng and BSE Sensex, all in the Asia Pacific region increased by 2.4 percent and 0.57 percent in that order.
Those on the downside were Brazilian Bovespa which reduced by 2.62 percent while Russia’s RTS Index dropped by 0.68 percent.
The Federal Government of Nigeria (FGN) bonds to be issued during the third quarter of 2013 will range between N140 billion and N250 billion according to Debt Management office (DMO) calendar.
In comparism with a range of N200 billion to N280 billion issued during the corresponding period in 2012, the range was on the downside though the actual bond issued was N210 billion.
The DMO stated that, in the next quarter, the 5-year and 20-year bonds would be reopened even as a new 3-year bond would be issued.
The Treasury bill calendar revealed that a total of N751 billion worth of bills across all maturities are to be issued during the third quarter of this year meanwhile the actual amount of treasury bills issued during the third quarter of 2012 was N1.538 billion.
According to market analysts, the drop in the amount of FGN bonds to be issued reflects government’s plan to reduce domestic borrowing.
The over the counter bond market last week saw more sell off than bargain hunting as the 20-year, 10 percent FGN July 2030 instrument dipping by N0.69 while yield rose to 13.29 percent from 13.69 percent. The 10-year 7 percent FGN October 2019 paper depreciated by N0.54 even as yield surged from 13.01 percent to 13.18 percent. The 5-year 4 percent FGN April 2015 bond tanked by N0.07 having yield rose from 13.41 percent to 13.56 percent.
On the flipside the 7-year 9.25 percent FGN September 2014 debt paper gained N0.01 even as the yield declined from 13.39 percent to 13.44 percent.

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N25.7trn Debt: Experts Oppose IMF’s Call For Tax Hike

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Finance experts have disagreed with the International Monetary Fund’s latest recommendation to the Federal Government to raise its tax rate in order to meet Nigeria’s huge amount spent on debt servicing and developmental projects.
The Federal Government spends an average of N2tn annually servicing its debt obligation to local and foreign creditors.
About $3 trillion is reportedly needed in the next 30 years to address the country’s infrastructure deficit.
But the IMF last Wednesday called for an effective debt management strategy that would ensure that the amount borrowed posed limited risk and the funds deployed for developmental purposes.
The global body said that with Nigeria having one of the lowest tax revenue in the world, it would be challenging to service its debt obligations without broadening the fiscal space.
The nation’s total public debt rose by N3.32 trillion in one year to N25.7 trillion as at the end of June 2019, the Debt Management Office said last Tuesday.
The Federal Government owed N20.42 trillion as of June 30, 2019 while the 36 states and the Federal Capital Territory had a total debt portfolio of N5.28 trillion.
Shedding more light on how the Federal Government could boost revenue, Cathy said the priority was how to increase non-oil tax revenue.
She said this was vital based on the fact that the country’s interest payments as a share of tax were very high.
She added: “On Nigeria, the priority is a comprehensive reform to increase non-oil tax and there are a number of reasons this will contribute to creating space for important spending in infrastructure and human development spending.
“For Nigeria, this is very important for a number of reasons. One, because right now, interests payment as share of tax are very high around a third of overall and two-thirds for the Federal Government.”
Responding, a Professor of Economics at the Olabisi Onabanjo University, Ago Iwoye, Sheriffdeen Tella, said the advice to raise tax had to be analysed to determine whether the IMF was asking Nigeria to increase tax or widen the tax net to accommodate those that are not currently captured.
He said: “If they are advising that we should keep increasing tax, that will not be proper. The economy of Nigeria is currently weak and tax is a function of the income of the people. Increasing tax will be putting too much pressure on income.
“We should rather talk of reschedule the existing loan to enable us to have a longer time to pay or pay less. In addition to this, we need to widen the tax net.”
On his part, the Director General of the Lagos Chamber of Commerce and Industry, Mr Muda Yusuf, pointed out that economic growth through reforms would happen if there was greater commitment to creating an enabling environment for investors.
He said the tax paying segment of the economy had been victim of regulatory and policy shocks in recent years.
”Monetary policy is tight enough in my view. Calling for more tightening will be overkill. Lending rates are high and government borrowing continues to have a crowding out effect on the private sector. We need to push back on portfolio flows as the pillar for stabilising the forex market. I subscribe to the demand for the rationalisation of the multiple forex windows and rates, he said.”
A former President, Association of National Accountants of Nigeria, Dr Sam Nzekwe, noted that many Nigerian businessmen were not paying taxes except workers, whose taxes were being deducted from their salary.
He said: “They should be proactive, go to the people and widen the tax net, they should bring those who are not paying tax into the tax net.”
The Chief Executive Officer, Enterprise Stockbrokers, Mr Rotimi Fakayejo, said the advice given by the IMF to Nigeria was not progressive because it would impair productivity of businesses.

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No Immediate Plan To Remove Fuel Subsidy – Minister

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The Minister of State for Petroleum, Mr Timipre Silva, has assured Nigerians that the Federal Government has no immediate plan to remove fuel subsidy.
Silva disclosed this while fielding questions from legislators at a joint session of the National Assembly Committees overseeing the oil sector, yesterday.
He said: “This government is not about to remove subsidy because it is difficult; we believe as a government that our people are going through a lot.
“We cannot as a responsible government hip another issue of petroleum price hike or removal of subsidy on Nigerians.
“It is not on the cards at all, we are just looking at how we can manage it.
Silver said that the official daily consumption rate of petrol in Nigeria does not reflect the actual consumption rate.
He maintained that the government does not believe that Nigerians consume over 60 million litres of fuel daily.
According to him, there is a lot of smuggling and lots of our neighbours are taking advantage of the cheaper price in Nigeria.
He added that Nigeria was subsidising for almost half of Africa which was very difficult to manage.
The minister also said that the government was working to close up such leakages and when achieved, the cost of subsidy would be bearable.

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FG To Establish Oil And Gas Parks In A’Ibom, Bayelsa

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The Federal Government has approved the establishment of oil and gas parks in Akwa Ibom and Bayelsa States.
Minister of State for Petroleum Resources, Timipre Sylva, disclosed this while briefing State House correspondents after the Federal Executive Council (FEC) meeting presided over by President Muhammadu Buhari at the Presidential Villa, last Wednesday.
He said the parks, which would cost over N3 billion, were for the production of oil and gas tools.
“Today, in council, the Ministry of Petroleum Resources presented two memos for the establishment of oil and gas parks.
“ Council approved the oil and gas council, one for Akwa Ibom and the other in Bayelsa.
“The oil and gas parks are to support the development and manufacture of oil and gas tools; as some of you know, in some countries, the service sector of the oil industry is sometimes even bigger than the oil industry itself.
“Unfortunately, in Nigeria, that sector has not grown so much; this administration is really committed to developing the service sector and that is why the oil and gas parks are being built,’’ he said.
Sylva said that the parks would create up to 1000 additional jobs as well as improve the security of the Niger Delta.
On her part, the Minister of State for Transportation, Gbemisola Saraki, said that FEC also approved the purchase and installation of 300 buoys on the River Niger for the inland waterways.
She said that the approval, which was in the tune of N581 million was a repeat procurement because the first one was done in 2017/2018.
Saraki said that the first approval was from Baru to Onitsha while the latest was from Onitsha to Lokoja.
“It is large; this much more; this is 300 bouys; that was 200 bouys; it is to ensure that our waterways are navigable for all the vessels to go through.
“It was important Council appreciated the importance of safety of lives and property.
“It is going to be a six-month contract that will generate approximately between 100 and 120 direct new jobs and various indirect jobs because you know these buoys float.
“They have to actually cast and have concrete base that they sit on top of; so that is the aspect that is going to generate the new direct employment.
“Obviously, it opens up the area; it is part of the programme of the President to have the infrastructure system in Nigeria improved and strengthened because that is how to generate wealth for everybody,’’ she said.

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