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Nigeria’s Capital Market In 2015

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The Nigerian Capital
Market and its operators made efforts that would have resulted to being the best market in Africa, but for the many economic crises faced by the nation’s economy in 2015.
The capital market in retrospect was saddled with the innovations, the woes and gains which formed the basis of analysts’ judgement of how poor 2015 transaction faired.
This accounted for why the Chief Executive Officer (CEO) of Nigerian Stock Exchange, Mr Oscar Onyema urged retail investors to mitigate investment risks by diversifying portfolios across different asset classes.
Onyema also explained that the capital market was only reacting to the global economic and financial challenges within a well regulated market structure.
The experiences and qualifications of market operators and regulators had little answers to give to the foreign investors whose main concerns were their business gains, rather than the uncertainty.
This also accounted for the  flow or movement of more foreign investors out of the Nigerian capital market to other African markets, where they think the stakes are high.
Foreign outflows as at November  30, 2015 according to reports, amounted to N40.73 billion compared with N31.87 billion foreign portfolio managers invested in the same period.
The capital market remained unstable with naira exchanging for more than N230 per dollar through the better part of 2015, as the Central Bank of Nigeria’s (CBN) policies tried in vain to stabilise the naira against the dollar.
The financial market was generally stable for 2014 although noticeable  fluctuations were traced toward the end of the year. A number of policy instruments were deployed to achieve price and financial system stability in order to boost investor confidence and reduce concerns about declining foreign exchange reserves.
Some of the policy instruments deployed by CBN include, Monetary Policy Rate (MPR), Open Market Operations (OMO), Discount Window Operations, Cash Reserve Ratio (CRR) and Foreign Exchange Net Open Position (NOP) Limit.
Others are devaluation of Naira, limit on outside spending and  the excess control, checks and sledge hammer on bureau de change.
Analysts also attributed the major part of the problem to the 2015 election and change of leadership which brought serious uncertainty especially in the delay of the new president in appointing his ministers.
Investors found it difficult to predict what the economy would look like under the new administration, resulting to market watch instead of investments.
The Director General of securities and Exchange Commission (SEC), Mr Mounir Gwarzo expressed dissatisfaction with the capital market performance in 2015. He said he was unhappy the way the market was which he said was a true reflection of the nation’s economic situation.
Gwarzo said SEC is studying how government can use some fiscal policies to stabilise the market and encourage domestic investors to return to the market.
Market Statistics Of Cap /Index
The SEC DG’s feelings cannot be unconnected with the capital market performance at the end of 2015. Nigerian Stock Exchange records show that as at December 31st, 2015, the  All Share Index (ASI) droped by about 17.36 per cent to close negatively at 28,642.25 points, compared with the opening index of 34,657.15 points Also,market capitalisation  that opened trading for 2015 at N11.478 trillion, lost N1.63 trillion to close negatively on December 31 at N9.851 trillion.
Bond:
The FMDQ OTC Securities Exchange that promotes transaction in fixed income securities in Nigeria, listed N30 billion Fidelity Bank Bonds, N8 billion Nigeria Mortgage Refinance Company (NMRC) Bonds, N26.0 billion FC MB financing SPV Bonds on its platform.
Innovations
The Nigerian Stock Exchange led by Mr Oscar Onyema however  brought landmark innovations to the market during the period under review.
NSE ratified the recapitalisation, the e-dividend system and laid a foundation for de-mutualisation of the 55-year old NSE.
Approval was given for direct cash payment of the proceeds from the sale of securities into an investor’s nominated bank account.
This if well implemented would curb the excess of the stock brokers and reduce to the bearest minimum fraud in the system.
Implementation of the 10 years capital market master plan and inauguration.
SEC also commenced the revival of the National Investor Protection Fund as part of effort to boost investor confidence in the year under review. NIPF concluded a rigorous verification of investors’ claims against Mega Asset Managers Limited and recommended approval of appropriate compensation to the affected investors.
Generally, some financial experts had also expressed their opinions about the outgone year.
The Managing  Director, Flexus Solution Investment Limited, Mr Kounougna Henri said CBN should relax some of the monetary policies especially the limit put on spending and devaluation of naira which is not helping the performance of the local currency .
“When too much protocol is put on business policies, it scares investors and makes them move to alternative markets in other countries,” he said.
Chairman, Association of Issuing Houses of Nigeria (AIHN), Mr Victor Ogiemwonyi urged CBN to strive towards the reduction of the Monetary Policy Rate (MPR) to stimulate activities in the bond market.
He said that government’s borrowing rate in the capital market should drop to avoid crowding out of funds and to make the market attractive for private sector to raise funds.
To the Head, research and investment advisory at Meristem, Mr. Basheer Bashir, the current market situation provides attractive buying opportunities for discerning investors.
However, the uncertainty and instability that challenged the capital market in 2015 should not be the final judgement for the market which has the capacity to experience growth pending the ability of stakeholders in the Nigerian economy to relax the policies that have negatively affected the capital market and investors.

 

Lilian Peters

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Foreign Exchange Inflow Falls To $4.97bn

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Foreign exchange inflow into the economy fell by 59.8 per cent in April according to figures obtained from the Central Bank of Nigeria (CBN) monthly report on ‘Foreign exchange flows through the economy’.
Part of the report read, ‘Aggregate foreign exchange inflow into the economy declined sharply, reflecting tepid global economic recovery, which undermined foreign trade and capital flows across countries, despite the COVID-19 vaccination drive.
“Foreign exchange inflow through the economy dropped by 59.8 per cent to $4.97bn in April 2021.
“The decrease was attributed, largely, to a sharp decline in autonomous inflow, particularly invisible purchases and official non-oil receipts, which declined by 63.1 per cent and 75.2 per cent, to $2.95bn and $0.81bn, respectively, in April 2021.”
According to the report, a breakdown of activities showed that foreign exchange inflow through the CBN was $1.66bn in April 2021, a decrease of 55.8 per cent below the $3.76bn in March 2021.
It added that inflow through autonomous sources, at $3.31bn in April 2021, was 61.6 per cent below the level in March 2021.
The CBN also said that aggregate foreign exchange outflow through the economy fell by 13.7 per cent in April 2021.
Aggregate foreign exchange outflow through the economy fell by 13.7 per cent to $2.74bn, below the $3.18bn in the preceding month.
Outflow through the CBN declined by 10.4 per cent to $2.58bn, compared with the $2.88bn in the preceding month, due largely to the bank’s policy on foreign exchange market.
It added that outflow through autonomous sources, at $0.16bn, decreased by 46.0 per cent in April 2021, compared with March 2021.
Overall, it said, the country recorded a lower net inflow of $2.23bn in April 2021, compared with a net inflow of $9.19bn in the preceding month.

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NNPC Denies Funding 2019 Elections With Oil Traders’ Bribes

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The Nigerian National Petroleum Corporation (NNPC) has  reacted to an allegation that fees that trading firms paid agents to win oil contracts from the corporation might have raised funds for the country’s past two elections.
Nigeria’s past two general elections held in 2015 and 2019.
The contest for the presidential seat was mainly between ex-President Goodluck Jonathan and President Muhammadu Buhari in 2015, while it was between Buhari and former Vice-President Atiku Abubakar in 2019.
Buhari was declared winner in the two elections.
Citing lawsuits in London and New York, Bloomberg had reported last Friday that an ex-BP Plc oil trader alleged that cargo allocations by the NNPC could have contributed to preparations for general elections in 2019.
The report said a former Glencore Plc employee in July admitted paying a middleman $300,000 to secure a crude shipment from the NNPC, understanding the money would be spent on the nationwide election that took place four years earlier.
The NNPC, through its Direct Sale of Crude Oil and Direct Purchase of Petroleum Product scheme, awards contracts that allow companies, including international trading houses and indigenous firms, to lift crude oil in return for the delivery and supply of petroleum products. The contracts are usually for one year. 
The Group General Manager, Group Public Affairs Division, NNPC, Mr Garba-Deen Muhammad, has, however, refuted the allegation.
“[It’s] not true, and I think that is obvious if you read the story with an open mind,” he said via a text message to a national daily. 
Jonathan Zarembok, who left BP’s West Africa desk last year, was quoted as saying in the suit that he suspected that fees paid by the United Kingdom energy giant to obtain NNPC contracts would go toward the 2019 elections.
He filed an employment claim against BP, alleging that he was fired for raising concerns about the large sums being transferred to intermediaries to win business in Nigeria.
Zarembok was quoted as saying in a witness statement made public this month that emails sent in 2017 by a BP executive in Nigeria were a “clear red flag” and implied “there would be pressure to pay bribes”.
According to Bloomberg, the emails discussed how preparations for elections would get underway in 2018.
“We understand what that means,” the executive wrote.
He said the company then wired $900,000 in fees to a local agent after securing two oil cargoes from NNPC.
“BP is defending in full and denies all allegations made by the claimant,” Bloomberg quoted the company as saying in a statement.
It said BP declined further comment while Zarembok’s case at a London employment tribunal continues.
The report noted that similar details emerged two months ago, when Anthony Stimler, who left Glencore in 2019, pleaded guilty to corruption and money-laundering charges.
It said Stimler was notified in September 2014 that “Foreign Official 1” was asking all NNPC clients to pay an advance on each cargo “in connection with a then-upcoming political election,” according to US court filings.
He then had Glencore wire $300,000 to an intermediary company, which prosecutors said was used “to pay bribes to Nigerian officials.”
US prosecutors outlined how Stimler and others paid bribes worth millions of dollars in several countries, including to NNPC officials, between 2007 and 2018, according to the report.

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VAT War: PNG Backs Southern Govs -Says It’s Part Of Restructuring

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The Convener of Pro-Nigeria, Mr. Lai Omotola, has broken silence on the Value Added Tax (VAT) war currently going on between the Federal Inland Revenue Service (FIRS) and five southern states. 
The five southern states include Rivers, Lagos, Ogun, Ekiti, and Akwa-Ibom states.
From the time a Federal High Court in Portharcourt gave a ruling that state governments, and not the FIRS, have the constitutional power to collect VAT, the Rivers State and Lagos State had quickly passed bills authorising the states to collect VAT.
Reacting to the development, Omotola, in a statement, said that PNG was in full support of states collecting VAT.
“We in PNG support the development and the subsequent stand by Lagos State and Rivers State in creating a law to enable their states to collect VAT. Others who have joined in the bid are states like Ogun, Ekiti and Akwa-Ibom states.
“This is a welcome development because we feel that it is lawful and it is in sync with the intention of our founding fathers that every state should be collecting VAT.
 “It will also show fiscal restructuring towards economic development and at the end, Nigeria as a country will be better for it”, PNG posited.
The group also condemned the reception given by President Muhammadu Buhari to the former Minister of Aviation, Femi Fani-Kayode at the Presidential Villa following the defection of the latter to the ruling All Progressives Congress (APC), recently.
According to Omotola, the President should show reason why Nigeria should still believe in his fight against corruption and believe him as the upholder of basic morals on the account of his red carpet reception to Femi-FaniKayode at the Presidential Villa. 
“Our concern is that this same man is currently having a battle with the Nigerian state via the Economic and Financial Crimes Commission (EFCC) on corruption charges.
“Although the law states that one is innocent until proven guilty, it is morally unjust for a President to receive with a red carpet and stand beside a person against whom the EFCC has established a case, stating unequivocally that he had defrauded Nigeria; and the same matter is still in court; therefore, to now see him being honoured by the President has thrown hope for this country into the wind”, the statement added.

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