Nigeria's Fund Industry Remain Resilient Amid COVID-19 cONCERNS.

Nigeria’s Fund Industry Remain Resilient Amid COVID-19 Concerns

COVID 19 has done some devastating damage to the economy, One industry in Nigeria that has remained resilient in spite of it all is the mutual fund industry. 

Published 3 hours ago on June 2, 2020By CSL Stockbrokers Nigeria’s Fund Industry Remain Resilient Amid COVID 19 Concerns

There is no doubt that COVID-19 has done some devastating damage to various parts of the Nigerian economy and indeed, the world economy. Price of oil fell so much such that, buyers were figuratively or literarily being begged to buy, stock markets became jittery, unemployment rate spiked, the need for social services skyrocketed, the list goes on and on.

One industry in Nigeria that has remained resilient in spite of it all, is the mutual fund industry.  The health and wellbeing of the asset management industry is usually measured or gauged with trends in inflow, outflows, and total Net Asset Value (NAV).

 

Using those metrics as a measure of the extent to which the Coronavirus impacted the industry, one can say that the mutual fund industry in Nigeria is alive and well, and is defying all the odds against a virulent virus that visited the world with vengeance. Before the advent of COVID-19, early in 2020, the total asset value of Nigeria’s mutual funds stood at N1.042 trillion (according to the December 27th 2019 edition of NAV Summary Report from the SEC). Fast forward to May 15th 2020, after COVID-19 took hold on the world economy, the total net asset value of mutual funds in Nigeria has increased to N1.31 trillion. This represents an increase of N270 billion or 26%

Fund Flows: Of the N270 billion increase in asset value, N260.5 billion came from increase in net flows while N9.5 billion came from investments returns. The fact that the industry saw a positive inflow of that magnitude in periods where people were almost at the verge of dipping hands into their savings and investments is indicative of how resilient the industry has been. Although the industry was shaken by the effects of the virus and the trends in the oil market between March and April, it regained its strength towards the end of April and has since maintained a positive trend.

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Flight to Safety: In what looked like flight to safety, much of the positive fund flows went to Bond Funds and Money Market Funds. While Money Market Funds recorded a year to date net positive flow of N97.5 billion, Bond Funds generated N110.4 billion in net inflows. This is the first time any fund category is generating more positive flows than the Money Market Fund category. The reason could be because yields on bond funds are slightly better than what is obtainable from money market funds. Eurobond funds, recorded N12 billion in positive net flows while Infrastructure fund category saw N27 billion come in.

(READ MORE: What you need to know as banks rebrand CBN intervention funds to woo borrowers)

Performance Indicators: In an apparent justification for the flight to safety, almost all funds under the equity fund category made losses except ACAP Canary Growth fund and PACAM Equity fund. In all, that category of funds has lost an estimated N1.2 billion within the period under review. On the other hand, only 6 out of the 21 Bond funds made losses as that category of funds gathered an estimated gain of N3.5 billion. Eurobond funds seem to be basking in the euphoria of Naira devaluation as they gain massively from what is lost from the value erosion in the Naira. The Eurobond category generated an estimated N9.8 billion from January to May 15th 2020. It does look like this category of fund may be a good hedge against Naira devaluation. Much of the gains however, came from Stanbic IBTC Dollar fund and United Capital Euro Bond fund.

Nigeria’s Fund Industry Remain Resilient Amid COVID 19 Concerns

Though there are pockets of gains by some funds, most of the categories made lose within the period under review, arising mostly from their increased exposure to the equity market.

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Elsewhere in the World: This trend does not seem to be peculiar to Nigeria. Recent news from Canada indicates that Canadian Pension Plans defied the COVID-19 menace and added $17 billion to increase the total net asset value to $409 billion, as at March 31st 2020. Like the Nigerian mutual fund story, $5.5 billion of the increase in Canada’s pension plans came from contributions or net flows while $12.1 billion was as a result of positive performance.

Future Expectations: The year 2020 is still too young and the world economy too volatile for credible prediction, one can therefore not say with great certainty if the yield driven funds like the Bond Funds and Money Market Funds will maintain the momentum in generating positive gains. In terms of generating positive net flows, it does look like that trend will continue till the end of the year when it becomes clearer what direction the world economy will be heading to following the devastating effects of COVID-19. Until then, we are watching.

 

This analysis is based solely on data obtained and obtainable from the Security and Exchange Commission, Nigeria

 

 

 

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BUSINESS NEWSDangote, MTN & GTbank hit a home run as Nigeria’s bourse continues bullish momentum

Nigeria’s bourse gained N47.9 billion in second trading day of June over share price appreciation in blue-chip companies.

Published 21 mins ago on June 2, 2020By Olumide Adesina Nigerian stock exchange, All share index, Nigerian bourse, Investors, Bulls gather momentum ASI up 0.48%, gained N55.3 billion, Dangote ,MTN & Gtbank hit a home run as Nigeria’s bourse continues bullish momentum

Investors at Nigeria’s bourse gained N47.9 billion in second trading day of June over share price appreciation in blue-chip companies. The market capitalization which opened the month at N13.168 trillion inched higher by 0.27 % to close at N13.241 trillion.

Also, the NSE All-Share Index rose by 67.28 points or 0.27% to close at 25,383.43 basis points compared with 25,316.15 points it closed yesterday.

 

Thus, Year-to-Date losses moderated to 5.43% Market activity closed strong compared to the previous trading session, as total volume and value improved by 49.18% and 128.03% to close at 377.88 million units and N6.05 billion respectively.

Nigerian Breweries was the most traded stock by volume at 50.4 million units, valued at N2.22 billion.

Market breadth finished flat with 20 gainers led by NEIMETH (+9.84%), while 18 stock declined, topped by UBN (-8.21%).

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Performance across sectors under review was mixed as two indices gained, two lost, while the oil and gas index remained unchanged. The Insurance index (+0.44 %) led gainers following price appreciation in CHIPLC (+8.33%) and AIICO (+3.77%).

The industrial (+0.20%) indices trailed due to buying interest in DANGCEMENT (+1.44%), while the Consumer Goods & Banking index shed -0.13 % and -0.09% on the back of price decline in UACN (-6.67%), UBN (-8.21%) and ACCESS BANK (-1.39%).

(READ MORE: Dangote, Cadbury, Flourmills regain bullish momentum on Nigerian Stock Exchange)

Top gainers 

SKYAVN up 9.52% to close at N2.07,GUARANTY up 2.24% to close at N25.1,NASCON up 1.80% to close at N11.3,DANGCEM up 1.44% to close at N141,MTNN up 0.43% to close at N116.5

investors, Bulls gain momentum, as stimulus package lifts global financial markets, Bulls boost global financial market, gold hits 7 years high, Dangote, Tier-1 banks lead the bulls to close Nigerian stock market green, Dangote ,MTN & Gtbank hit a home run as Nigeria’s bourse continues bullish momentum 

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Top losers 

UBN down 8.21% to close at N6.15,UACN down 6.67% to close at N8.4,MAYBAKER down 5.33% to close at N3.2,PZ down 3.64% to close at N5.3,WAPCO down 1.72% to close at N11.45

Outlook 

Blue chip kept the momentum has some stocks closed flat today, Nairametrics envisage cautious buying as market liquidity remains a bit thin.

 

 

CONTINUE READINGECONOMY & POLITICSThe economics of climate change

The Western economies were built by burning “dirty” fuel i.e. coal and later crude oil to generate power for industrial complexes and cars.

Published 25 mins ago on June 2, 2020By Kalu AjaThe economics of climate change

When I read “climate change” …I do not see polar ice caps melting and deserts growing. I see the economics of it.

To really do climate change, is to reduce or cap carbon emissions and boost the use of renewables such as solar and wind. These are good objectives, so why has a comprehensive climate change plan not been reached?

 

Simple, it is the economics

Let us look at reducing or capping emissions, what emits carbon? Factories and cars do, so to cap or reduce emissions is to cap or reduce growth in factories and to stop families driving cars. You are capping jobs and asking families not to drive. The reality is this, the Western economies were built by burning “dirty” fuel, i.e. coal and later, crude oil to generate power for industrial complexes and cars. Then the West moved to nuclear and cleaner sources of power, but this was after the Western economies had achieved a high and inclusive economic standard of living for their citizens. Owning a car in America was a rite of passage, still is.

The world’s two largest economies outside the Western World are China and India. In all measures, the citizens in these nations are not as rich as the middle class in Pennsylvania. How do you make poor people rich? You create opportunities. How do you create opportunities? You build economies that create jobs. Where do you find jobs? In factories and offices. What do those factories burn? Diesel, petrol, and of course, coal.

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In other words, for India to move her citizens from poverty to prosperity, she must generate enough power supply to factories and businesses in India who hire Indian workers and pay them a middle-class wage. It is really that simple. So, climate change summits always fail because the West wants a cap on carbon emission and the developing nations do not, at least until they are “developed”.

It is important we understand this cold hard reality. Climate change is good. I want a great climate for my kids, but my kids must eat first. Nigeria must not in the name of “climate change” sign away our rights to build coal-fired power plants in Kogi and Enugu…. No. (Japan is restarting coal plants)

(READ MORE:Why households that engage in subsistence agriculture are poor – Yemi Kale)

So, what should Nigeria do? Do we keep polluting and flaring gas?

The economics of climate change

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Nigeria must have a strategy, and I propose a simple strategy called, “Let Them Pay” LTP. If Nigeria has coal deposits, then let the West pay Nigeria not to build a coal Power Plant using that coal. They can pay Nigeria by investing in developmental credits to fund the building of a solar power plan, or even writing off Nigeria’s debts.

There is a precedence to this, the West pays the Armed Forces in Africa to fight terrorists, and they pay Police in North Africa to stop people smugglers crossing the Mediterranean.  Nigeria pays Niger Republic by supplying them power so that they do not build their dam on the River Niger to reduce water supply to Kainji Dam. China led Africa strategy on this with the Chinese President flying to Southern Africa from the COP 21 in Paris to discuss the developing world’s response with African leaders.

Nigeria should push that gas flaring be reduced by a massive investment by the Western nations via FDI to build LNG plants in the Niger Delta.

(READ MORE: UPDATED: Minister of Power sacks TCN MD, confirms appointment of Directors)

Nigeria should also tie the Climate Change narrative to terrorism by making the strong case that Boko Haram is feeding off the lack of jobs and opportunities caused in part by the drying of Lake Chad. This has reduced agric and trade and pushed many young boys to Boko Haram. Lake Chad has shrunk by 95% between 1963 to 1998, the UN Food and Agricultural Organization has called it an “Ecological Catastrophe”. Lake Chad provides water to almost 20million people, including frames, fishermen, and herders.

The economics of climate change

The solution to a drying Lake Chad is already there, a pipeline to take water from the Congo to Lake Chad, it’s bloody expensive – about $14.5b but allowing Boko Haram to exploit the lack of commerce from lake chad also is expensive.

Nigeria must tie this climate thing to economics

 

 

CONTINUE READINGBUSINESS NEWSSubsidy and PIB

Today, Oil prices are low, thus no need for the Federation to pay a part of your fuel bill, so no subsidy on imported PMS on retail price. 

Published 42 mins ago on June 2, 2020By Kalu AjaSubsidy and PIB

“There is no fuel subsidy anymore in Nigeria. It is zero subsidies forever. Going forward, there would be no resort to either fuel subsidy or under-recovery of any nature. NNPC will play in the petroleum marketplace, just like another marketer in the space,” – Mele Kyari, GMD NNPC, April 7th, 2020

Stepping back from the subsidy debate, it is important to clarify what the main issues in the debate are.

 

Is there a subsidy paid on imported PMS? Yes, Subsidy is pricing. Paying a subsidy on imported PMS means the Nigerian Federation (not just FGN) pays a part of your fuel cost. Removing subsidy means you the buyer pays all the fuel costs. Deregulation means that fuel “cost” is not decided by the FGN but by the seller. Today, May 2019, Oil prices are low, thus no need for the Federation to pay a part of your fuel bill, so no subsidy on imported PMS on retail price.

However, the NNPC GMD also said, “But we (NNPC) will be there for the country to sustain the security of supply at market price.” Translation? NNPC will keep importing PMS and there is no deregulation, the FGN will still fix “market prices”

What is subsidizing? The landing cost of petroleum products? Yes, but we are also subsidizing the infrastructural inefficiency of the government, e.g. demurrage arising from having limited offloading ports in Nigeria.

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(READ MORE: NNPC reduces fuel price to N108 per litre)

The subsidy is not the problem, there is nothing wrong with subsidies. A government subsidy should be a tax cut to the poor, the vulnerable, and the economically backward. However subsidizing fuel imports is simply subsidizing imported consumption, while creating jobs outside Nigeria. So, subside local refining not imported fuel. This creates another problem. The subsidized locally refined petrol can find its way to Cameroon, Benin Republic even Senegal.

Fuel subsidy, Nigeria's pump price, Subsidy and PIB

The only way to cut down the cost of paying subsidies is to reduce the cost of petroleum products, and the way to do so is to refine locally. To refine locally means that refining companies can buy crude oil forward contracts to feed their refineries. To open the crude buying process is to pass the PIB.

The PIB as originally drafted would allow a transparent and measurable process of ownership of the Nigerian petroleum assets. With the PIB regime, it is possible for a refinery to buy crude oil in advance, at a price it can negotiate with private crude supplies to feed its refinery stock. So long term, passing the PIB encourages local refineries. More local refineries will eradicate the need to import fuel and pay subsidy on “inefficiencies”.

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The original PIB drafts also proposed certain new directions as below:

PIB created a commercially viable National Oil Company, restructures the NNPC from a government-run entity into a private one that can raise private capital and not rely on FGN “cash calls”. By these, NNPC would sell 30% of its shares to the Nigerian public within 6 years. The Nigerian Gas Company would sell 49% of its shares to the Nigerian public.

(READ MORE: Crude oil prices drop, geopolitical tension deepens)

Created a new fiscal regime where royalties and taxes due are based on production, not terrain, and investment. Thus, Nigeria earns more when the International Oil Companies (IOCs) produces more.

Petrol Subsidy gulped over N11 trillion in 6 years - Senate Committee, Subsidy and PIB

It introduced Company Income Tax to the industry. IOCs will have to incorporate in Nigeria as a company and pay 30% CIT and 50% Nigerian Hydrocarbon Tax based on rents and royalties. Both must be paid; one tax cannot be set off against the other.

The PIB prohibition on flaring of natural gas beyond a “flare out date”. This is good for the environment and forces the IOCs to invest in Gas projects rather than burning it into the atmosphere.

PIB has a relinquishing provision where oil blocks not utilized are reverted to the FGN for reallotment. This will free up acreages tied up by the IOC.

The Production Sharing Contracts signed by Nigeria with the IOCs in 1993 was based on $20 a barrel. PIB allows Nigeria to review those terms and earn more.

Pass the PIB, this removes the need, in the long term, for the payment of subsidies

It is our problem, we can fix it.

 

 

 

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LATEST TRENDINGNigerian stock exchange, All share index, Nigerian bourse, Investors, Bulls gather momentum ASI up 0.48%, gained N55.3 billion, Dangote ,MTN & Gtbank hit a home run as Nigeria’s bourse continues bullish momentum

BUSINESS NEWS21 mins agoDangote, MTN & GTbank hit a home run as Nigeria’s bourse continues bullish momentumThe economics of climate change

ECONOMY & POLITICS25 mins agoThe economics of climate changeSubsidy and PIB

BUSINESS NEWS42 mins agoSubsidy and PIBADVERTISEMENT

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