Inflation MPC

Inflation widens negative real return on investment

Nigeria’s March inflation widens negative real return on investment

Fixed-income investors seeking high-yielding securities in the light of the prevailing developments in the markets were not disappointed in the last auction on Wednesday, as rates on the 364-day Federal Government short-term Treasury bills (T-bills) rose to 9 percent from 1.5 percent at the beginning of the year.

READ ALSO: Inflation rate hits 18.17%

But with Nigeria’s 18.17 percent inflation rate in March, the highest in four years, the real return on the Federal Government less risky short-term debt instrument depreciated further when compared with March 2020, when the inflation rate stood at 12.26 percent.

While inflation-adjusted return on the shorter 91-day and 182-day bills were -9.77 percent and -8.48 percent, respectively, in April last year, the real return on the bills dropped further to -16.17 percent and -14.67 percent in the comparable month of 2021, thanks to Nigeria record-high 18.17 percent inflation rate.

The trend was the same for the longer 364-day bill. From a -6.96 percent real return on investment last year, the bill gave investors -9.17 percent in the same period of this year.

As the interest rate is trying to play catch up, inflation is moving upward too, Yinka Ademuwagun, research analyst, FMCGs, United Capital plc, said.

“The real return is still clearly negative because inflation is rising faster. If inflation was still at, say, the 11 percent that reported before the border closure last year, then we would have been fine,” Ademuwagun said.

However, the recent uptick in the yields on the short-term government instrument is helping to comfort investors against the rate at which the high inflation rate is impacting their returns.

“While the rising inflation has broadened negative real return, it is comforting to know that yield on fixed income instruments is also on the rise, which will bridge this gap,” Ayodeji Ebo, head, retail investment, Chapel Hill Denham, said.

After hitting a four-year low of near-zero percent in 2020, yields on the Federal Government risk-free treasury bills climbed to more than 16 month-high, as compiled from Nigerian Treasury bills primary market auction Results for April 14, 2021.

While investors bid at a rate as high as 8 percent for the 91-day bill, 9 percent and 13 percent for the 182-day and 364-day bills, respectively, the Central Bank of Nigeria (CBN) settled at 2 percent, 3.5 percent and 9 percent, respectively. The stop rates for the 91-day and 182-day bills remained sticky for the fourth consecutive auction, but the 364-day bill increased by 100 basis points compared to the 8 percent reported in the previous auction.

Market analysts link the increase in the stop rates to the hike in CBN’s Open Market Operation (OMO) rates some weeks ago. Investors are bidding at higher rates and the Debt Management Office (DMO) also needs to raise the cut-off rate to fill some of the orders, an analyst noted.

Weeks after the CBN shocked the market with a 10.10 percent stop rate for the 362-day OMO bill, the highest levels seen in almost a year, fixed-income investors demanded higher rates for T-bills.

Analysis of the T-bills auction result for April 14, 2021, shows that the CBN raised a total of N153.38 billion from the 91-day, 184-day and 384-day bills, N83.82 billion more than the initial N69.56 billion the apex bank offered to raise in this week’s auction.

Investors were less interested in the shorter 91-day and 182-day bills as they attracted a lower interest rate but were willing to subscribe to the longer 364-day bill, which rose by 100bps to 9 percent interest rate.

While the 364-day with a much higher interest rate was oversubscribed by N168.45 billion, the shorter 182-day was oversubscribed by N9.44 billion but the 92-day bill was undersubscribed by N50 million.

The CBN planned to raise N15.92 billion for the shorter 91-day bill, investors were willing to subscribe with N15.87 million. The apex bank was eventually able to allot N12.46 billion, N3.46 billion more than its initial offer.

Investors were willing to bid with N13.94 billion for the CBN N4.50 billion offered for the 182-day bill. The apex bank was able to raise N8.80 billion, N4.3 billion more than its initial offer.

While the CBN offered to raise N49.14 billion through the longer 364-day Treasury bill, investors said they were willing to invest N217.59 billion. The apex bank later raised N132.12 billion, N83 billion more than its initial offer.

Though the recent uptick in T-bills rate to more than one year-high is good news for fixed income investors whose real return appreciated to -9.17 percent in April from -9.33 percent in March, the expected high inflation rate remains a challenge.

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Food inflation

Inflation rate hits 18.17%

Nigeria’s consumer price index, which measures the rate of increase in the price of goods and services, increased to 18.17 percent in March from 17.33 in February, according to an inflation report released by the National Bureau of Statistics on Thursday.

Food prices are surging on the back of lingering security challenges, festive induced demand and an acute dollar squeeze

READ ALSO: FG begins full commercialization of Federal Mortgage Bank

This implies that Nigerians spent more on purchasing goods and services in the month of March, compared to February.

The March figure is the highest since January 2017 when it climbed 18.72 percent.

“Nineteen straight months of rising inflation rate and momentum is not even slowing. Looks like we are going to break the 2017 record in Q2,” Omotola Abimbola, assistant vice president at Chapel Hill Nigeria tweeted on Thursday.

The NBS data also showed Nigeria’s food inflation is now at the highest in over 12 years. Food inflation increased by 1.16 percent, year on year, from 21.79 percent in February to 22.95 percent in March.

The rise in the food index was caused by increases in prices of bread and cereals, potatoes, yam and other tubers, meat, vegetable, fish, oils and fats and fruits.

The “All items less farm produce” or Core inflation, which excludes the prices of volatile agricultural produce rose to 12.67percent in March 2021, up by 0.29percent when compared with 12.38percent recorded in February 2021.

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mortgage house

FG begins full commercialization of Federal Mortgage Bank

As part of ongoing reform in the Housing sector, the federal government (FG) has commenced a process that would see the repositioning of its owned Mortgage Bank (FMBN) as a profitable entity.

READ ALSO: End current monetary rascality, Obaseki replies FG

Alex Okoh, director-general, Bureau of Public Enterprises (BPE), said efforts to reposition the bank are for optimum performance and to bridge the country’s huge housing deficit estimated at 22 million as at 2019.

Consequently, the BPE on Wednesday inaugurated an 8- member committee for the Full commercialisation and recapitalisation of the Bank.

The Joint Technical Committee (JTC) which has 60 days to conclude set task comprises four members each from the Bureau of Public Enterprises (BPE) and the Federal Mortgage Bank of Nigeria (FMBN).

The Committee is expected to among others things; conduct a diagnostic review of the Bank’s existing institutional framework, organisational structures and operational modality.

The committee would review and harmonise all existing policies, law and regulations governing mortgage banking in Nigeria in order to identify areas that would facilitate the implementation of full commercialization and recapitalization of the FMBN.

The Committee is also expected to harmonise and synchronize all the reform processes of the FMBN with the ongoing reform of the Housing sector; develop strategies on how to reform FMBN that would enable it to raise funds from the money and/or capital markets without government guarantees.

It would further undertake a review of the legal, institutional and operational frameworks of mortgage banking in a few African counties and other emerging economies with a view to learning from their key success factors (KSFs) that can be replicated.

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Inflation MPC

FDC Analysts Predict March Inflation To Hit 17.8%

The upward surge in inflation may not decline anytime soon as indications show that Nigeria’s economy may witness a 0.47 percent jump in headline inflation to bring it to 17.8 per cent, analysts have projected.

READ ALSO: Organization commends SMEDAN DG over rural healthcare intervention

The February data from the National Bureau of Statistics (NBS) put the inflation rate at 17.33 per cent and with the static economic condition, the rate is expected to inch up.

The analysts’ projection comes on the heel of higher prices of goods and services that has left the citizens impoverished in addition to higher food prices that have left many malnourished. The high price of food items since the beginning has not dropped and worsened by the insecurity situation that has kept farmers away from their farms.

Following this projection, the Financial Derivatives Company (FDC) in its Economic Monthly Publication for April 13, said the increase in inflation will be the 19th consecutive monthly increase and a 48-month high.

With the increase in food and core sub-indices in March, food inflation is projected to go up to 22.3 per cent while the core sub-index could climb to 12.6 per cent. a development which the FDC said could make life unbearable for the average consumers.

The current situation, they said could push the Central Bank of Nigeria (CBN) to reconsider its tightening cycle to curb the inflationary cycle

Analysts supported the views with the fact that monetary conditions and monetary policy move in opposite directions to keep the price level under control and when monetary conditions are loose, the CBN adopts a tight monetary policy stance to ensure price stability and vice versa.

“With inflation spiralling and currently double, the upper band of the CBN’s inflation target (9%), a likely increase in interest rates is not only imminent but almost inevitable”, the report noted.

They noted that the exchange rate pressures, government’s growing propensity for borrowings, among others, have proven to be major inflation drivers and all indications show that the end is not in sight.
https://insidebusiness.ng/163171/harder-times-as-fdc-analysts-predict-march-inflation-to-hit-17-8/

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SMEDAN

Organization commends SMEDAN DG over rural healthcare intervention

A health promotion service organization, Klytical Allied Ltd has commended the Director-General, Small and Medium Enterprises Development Agency of Nigeria (SMEDAN), Dr. Dikko Radda for his humanitarian intervention in rural healthcare.

READ ALSO: UBA BUSINESS SERIES TO EQUIP SMES WITH PERFORMANCE MANAGEMENT STRATEGIES

The Director General was applauded for his interest in and sponsoring of a health outreach in Charanchi and Dutsin Ma local government areas of Katsina State during which about 2759 villages received medical attention, medications and referral on various diseases.

A team of experts from Klytical Allied Ltd led by Dr. Vincent Okpara were at SMEDAN headquarters in Abuja on Wednesday to make a visual presentation of the outreach and award of honour to Dr. Radda.

Okpara said the outreach done in three phases comprised of health talk in preparation for the outreach; distribution of medications and referral for further medical attention.

Making a presentation of the outreach, Dr.Ifeyinwa Ani – Osheku, said perennial diseases and ailments prevalent among people of the area include high blood pressure, diabetes, cancer, stroke, low back pain, arthritis,respiratory tract, urinary tract problems, cataract and glaucoma were attended to by the team of experts and 25 health volunteers.

The organisation called on persons in public offices to emulate the kind gesture of the SMEDAN director general.

Responding, Dr. Radda said he was impressed by the level of commitment of a team of medical experts from Klytical Allied Ltd to the outreach project.

He said “I sincerely thank the organisation for providing the outreach. The approach to the outreach was a success story. You have done it beyond my expectation . What I saw and heard from people is quite encouraging.

“I will like you to do more of this sacrifice to the nation. It is a fact that there is deficiency in healthcare delivery. Government alone cannot shoulder the responsibility. We need organisations like yours to bridge the infrastructural deficit in medicine and healthcare sector.

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Akinkugbe_Business-Series

UBA BUSINESS SERIES TO EQUIP SMES WITH PERFORMANCE MANAGEMENT STRATEGIES

UBA BUSINESS SERIES TO EQUIP SMES WITH PERFORMANCE MANAGEMENT STRATEGIES FOR ORGANISATIONAL GROWTH

READ ALSO: Federal Government Denies Printing N60bn To Share In March

As part of its commitment to support the growth and sustainability of Micro, Small and Medium-scale Enterprises (MSME) in the continent, Pan African financial Institution, United Bank for Africa (UBA) Plc, is set to organise the next edition of its UBA Business Series.

The UBA Business Series which is a monthly event, is an MSME Workshop as well as a capacity building initiative of the bank where business leaders and professionals share well-researched insights on best practices for running successful businesses, especially in the face of the difficult operating environment that dominates the African business landscape.

Through this initiative,  UBA has been assisting with essential tips to help businesses re-examine their models and strategies and ensure that they stay afloat and remain thriving.

The topic for the next edition of the series  is ‘ Managing Performance for Business Growth,’  and it will be held on Wednesday, April 14, 2021 via Microsoft Teams.

At this session, the Managing Director, Secure ID Limited, Mrs Kofo Akinkugbe, will be sharing useful tips and insights on the key strategies of performance management to boost business growth.

Akinkugbe is the founder of SecureID Nigeria, a MasterCard, VISA and Verve certified Smartcard Personalization Bureau and Digital Technology company.

She currently serves as the Managing Director/CEO, Secure Card Manufacturing, – a Smartcard manufacturing plant producing high security identity cards and documents for the Banking, Telecoms and Public sectors across Africa and beyond.

The capacity building event is a virtual session which is open to all – including business owners and leaders – and will be held on Wednesday, April 14 th, 2021, at 2pm WAT. Interested participants can register via  http://bit.ly/UBASMEWorkshopMarch2021

UBA’s Head, SME Banking, Sampson Aneke said of Akinkugbe,  ‘with her vast experience garnered over the years from various sectors,  she  will help business owners understand how performance management strategies can be effectively implemented to ensure business growth’.

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Obaseki

Edo plans to train 15,000 software engineers, programmers

At least 15,000 software engineers and programmers will be trained over the next few years in Edo State, Governor Godwin Obaseki said on Monday.

READ ALSO: Bitcoin Market Cap Hit $1trn, Above Apple, Amazon

The governor also promised to continue to pursue policies and programmes to enhance digital transformation for businesses in the state with a view to increasing their competitive advantage, improving performance and boosting growth.

Obaseki, who boasted that Edo State was ready for digital transformation in e-commerce, reassured that his administration remains committed to creating enabling environment for investors to succeed.

He gave the assurance when he received Leo Stan Ekeh, founder and chairman, Zinox Group, who was on a courtesy visit at the government house in Benin City.

“What are the critical factors required for successful digital transformation, which leads to things like e-commerce? First is electricity. You recall that we did a deal with Azura Power; we did another deal with a Chinese company. We are building electricity infrastructure and thinking about closed networks in other parts of the state,” Obaseki said.

“The second critical factor is people; training the people to think technology and use technology to do the things they need to do.

Read Also: Edo Assembly approves 15 special advisers for Obaseki

“The goal of this administration is to train nothing less than 15,000 software engineers and programmers over the next few years,” he said.

He, however, lamented the disruptions caused by COVID-19 pandemic, saying over 150,000 jobs were created in the state in three years as against minimum of 200,000 jobs earlier promised during electioneering in 2016.

According to him, these jobs were not going to come from the government but enterprises and business activities undertaken by the citizens.

Earlier, Ekeh commended the governor for creating a structure where various businesses can thrive.

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Bitcoin

Bitcoin Market Cap Hit $1trn, Above Apple, Amazon

Bitcoin market capitalisation has notched the $1 trillion mark putting it ahead of Apple and Amazon.

READ ALSO: Counting on in-store transactions, Burger King berths in Nigeria

Data from cryptocurrency trading simulator, Crypto Parrot indicates that it took bitcoin just 12 years to hit the current capitalisation, the least time frame than four leading traditional assets.

Among the overviewed assets, Microsoft (MSFT) took almost half a century at 44 years to hit the $1 trillion valuations, representing 3.6 times more time than bitcoin. Apple (AAPL) required 42 years to hit the milestone, meaning bitcoin hit the mark 3.5 times faster than the electronics giant.

Elsewhere, it took Amazon (AMZN) 24 years to hit the $1 trillion in market capitalization representing double the period than bitcoin. Lastly, bitcoin took at least 1.75 times faster to hit the $1 trillion market cap when compared to Google’s (GOOG) 21 years.

The report explores the nature of growth between bitcoin and the highlighted mainstream assets over the past year.

“Based on bitcoin’s recent market cap rate growth, the asset will potentially surpass the highlighted traditional assets’ value at some point in the future. Although the technology stocks have soared from last year, none has been able to outperform bitcoin”, noted Crypto Parrot

Furthermore, as bitcoin adoption becomes more mainstream, it can amass a higher market cap than the traditional assets, according to the report “

“If bitcoin sustains the growth coupled with increased institutional adoption that will lower volatility, the market cap might surpass some mainstream assets. The achievement is possible considering the bitcoin market cap has exceeded other formidable players like Tesla.”

The adoption of bitcoin by institutions spells good fortunes for the asset in the future.

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Burger King

Counting on in-store transactions, Burger King berths in Nigeria

Burger King, an American quick-service restaurant (QSR) chain, has finally entered Nigeria with eye on the volume of in-store transactions that Africa’s most populous country offers.

READ ALSO: Oil Price Gains For 5th Consecutive Month

The QSR chain will open its first stores in the country by the third quarter of 2021. One of the assumptions supporting Burger King’s aggressive entry into Nigeria is that at least 20 percent of Nigeria’s population is middle class. This is about 40 million people out of Nigeria’s 200 million-strong population. This compensates for the possible lack of repeat unique customers.

“We are proud to bring this iconic brand to Nigeria, and believe that our Nigerian guests will love Burger King flame-grilled sandwiches and other famous Burger King menu items, that guests can have their way,” says Antoine Zammarieh, managing director from Allied Food and Confectionery Services Limited, and who was managing director at Eko Hotels for 10 years, at the launch in Lagos, Tuesday.

In late 2000, QSR businesses started moving forward with the brands such as Mr Biggs. People familiar with the industry say that unfortunately Mr Biggs did not follow the rules and failed, but is in a revival mode.

KFC, an international restaurant brand followed, then Chicken Republic, Dominoes, Coldstone and some South African brands of QSR too. Some of the South African brands did not succeed and left.

Nevertheless, the QSR business has become one of the hottest businesses in Nigeria. It employs many and contributes to the country’s gross domestic product. The growing QSR industry offers Nigerians more options.

Zammarieh has lived in Nigeria for 38 years, and says there has been an evolution in the lifestyle of Nigerians. In today’s Nigeria, the husband and wife are working; unlike in the past when being a stay-at-home wife was common.

In fact, as the children grow up they are also quick to join the labour force. This means there is little time available to cook at home. Quick service restaurants fill this gap. This was not the case in the past because many women were stay-at-home wives, which is no longer sustainable.

“The Nigerian market is the number one in Africa with 210 million people of which 60 percent is youth. You cannot say this is not a good market for this kind of business,” Zammarieh states in an exclusive interview. “How to adapt your business to the market is the most important thing.”

Adaptation here means that flavours and menus have to fit local pellets. For Nigeria, adaption also means meeting up the demands of a market where there is a huge infrastructure deficit. It is not a plug-and-play kind of market. Plug and play meaning there is electric power, water and sewage systems that work. This is a foresight many new entrants into the market miss. This can lead to massive failures.

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Crude Oil

Oil Price Gains For 5th Consecutive Month

The average global crude oil prices have continued to rise for the 5th consecutive month, the Organisation of the Petroleum Exporting Countries said on Tuesday.

READ ALSO: Finance Minister, Reps Meet Over Doctors’ Strike Next Week

OPEC attributed the continued rise in international oil prices to the supportive oil market fundamentals deployed by the group to stem the earlier plunge in crude oil costs.

It disclosed this in the ‘Highlights of the OPEC Monthly Oil Market Report’ released on Tuesday and obtained by our correspondent in Abuja.

Commenting on crude oil price movements, the organisation said, “Spot crude prices rose for the fifth consecutive month in March on the back of continuing supportive oil market fundamentals.

“The OPEC Reference Basket increased $3.51 or 5.7 percent m-o-m (month-on-month) to average $64.56/barrel, the highest on monthly terms since January 2020.”

It added, “In the first three months of 2021, the ORB was up by $8.82, or 17.2 percent to average $60.22/barrel. Crude oil futures prices were higher in March extending previous monthly gains.”

OPEC stated that the ICE Brent front-month rose by $3.42 in March, or 5.5 percent, to average $65.70/barrel, and NYMEX WTI increased by $3.30, or 5.6 per cent, to average $62.36/barrel.

It noted that consequently, the Brent WTI spread widened to $3.34/barrel on a monthly average.

Brent, against which Nigeria’s crude oil is priced, rose by $0.63 to $63.91 per barrel as of 9:50pm Nigerian time on Tuesday.

Meanwhile, OPEC has increased its oil demand outlook for 2021 just as the bloc and its allies plan to unleash more crude supplies over the next few months, according to S&P Global Platts.

In its closely watched monthly oil market report released April 13, OPEC raised its demand forecast by 190,000 barrels per day from its March estimate, expecting consumption to average 96.46 million bpd this year, citing economic stimulus programmes and a further easing of COVID-19 lockdown measures.

Year on year, global oil demand was projected to grow 5.95 million bpd in 2021, compared with the 5.89 million bpd forecast in March.

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