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TINUBUNOMICS: Bank Stocks Gain ₦‎544.807 Billion In A Week

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Tinubu

Nigerian banking sector investors gained N544.807 billion as the stock market closed the trading week on a positive note, with the banking sector index emerging as the best-performing index.

The gains in the banking sector were driven by changes in Nigeria’s foreign exchange operational framework and the suspension of Central Bank Governor Godwin Emefiele, whose restrictive policies affected bank earnings.

President Bola Tinubu also announced a list of technocrats as special advisers for his economic team, further shaping investor sentiment.

Investors in Nigeria’s banking sector raked in a whopping N544.807 billion in gains from banks listed on the Nigerian Exchange Limited (NGX) as the local bourse closed the trading week positive.

The banking sector index gained 12.59% to emerge as the best-performing index at the close of trading.

Investors were reacting to the changes in Nigeria’s foreign exchange operational framework and President Bola Tinubu’s suspension of Central Bank Governor, Godwin Emefiele, who oversaw restrictive policies that cramped their earnings.

The president also announced a list of technocrats as special advisers for his economic team.

Market performance
Available statistics to Nairametrics showed that the NGX All-Share Index and Market Capitalization appreciated by 5.49% to close the week at 59,000.96 and N32.126 trillion respectively.

Similarly, all other indices finished higher except NGX Industrial Goods and NGX Growth which depreciated by 1.63% and 1.07% respectively while the NGX ASeM index closed flat.

Banking index
The banking index which measures the performance of the banks quoted on the floor of the Nigerian Exchange however appreciated by 12.59% or 66.21 basis points to close at 592.14 points from 525.93 points it closed the previous week.

Nairametrics analysed how the share prices of fourteen banks quoted on the floor of the Nigerian Exchange Group performed during the week. Notable among the banks are Zenith Bank Plc, Access Holdings Plc, FBNH Plc, UBA Plc, GTCO Plc, Stanbic IBTC Holdings Plc, and ETI Plc.

Others are Fidelity Bank Plc, Jaiz Bank Plc, Sterling Bank Plc, Union Bank Plc, Unity Bank Plc, Wema Bank Plc, and FCMB Group Plc.

Data obtained from the NGX showed that the stocks of the banks recorded a combined gain of N544.807 billion in market value during the week under review.

Note that aside from the shares of Union Bank Plc, whose share price closed flat, all other banks recorded an appreciation in market value following positive sentiment on the part of investors excited by the new reforms.

Further checks revealed that banks such as Zenith Bank, Stanbic IBTC, GTCO, Fidelity Bank, and ETI topped the list of gainers during the week.

These banks collectively recorded a gain of N373.810 billion in market capitalisation, accounting for about 68.61% of the combined gain of all the banks.

1. ETI – N51.379 billion
ETI Plc enjoyed a profitable week in its equity performances. The Bank recorded a gain of N51.379 billion in market capitalization during the week from N231.204 billion the previous week to close at N282.583 billion on Friday. Its share price grew to N15.40 per share from N12.60 it recorded the previous week, representing an increase of 22%.

ETI closed its last trading on Friday at N15.40 per share on the Nigerian Stock Exchange (NGX), recording a 1% gain over its previous closing price of N15.25. Ecobank began the year with a share price of N10.60 and has gained 45.3% on price valuation.

2.FBNH-N61.021 billion
FBNH recorded a gain of N61.021 billion in market value from N506.123 billion it opened the week’s trading to N567.145 at the end of trading on Friday, representing a growth of 12.06%.

The share price equally grew by 12.06% to close at N15.80 per share compared to 14.10 as of the previous week.

FBNH ended its trading session at the weekend at N15.80 per share, recording a 1.9% drop from its previous closing price of N16.10. The group began the year with a share price of N10.90 and has gained 45% on price valuation.

3. GTCO- N76.521 billion
GTCO Plc closed the week with a gain of N76.521 billion in market capitalization, from N824.073 billion the previous week to close at N900.594 billion, accounting for 9.28%.

The share price gained 9.28% to close at N30.60 per share from N28.00 recorded as of the previous week.

GTCO closed its last trading session at N30.60 per share recording a 3.9% drop from its previous closing price of N31.85. Guaranty Trust Holding began the year with a share price of N23.00 and recorded 33% on that price valuation.

4. Stanbic IBTC-N90.698 billion
Stanbic IBTC Plc also enjoyed a profitable week in its equity performance. The group recorded a growth in market capitalization of N90.698 billion to close at N673.763 billion at the close of the week’s trading, from N583.064 billion the previous week.

Stanbic IBTC’s share price appreciated by 15.55% to close the year at N52.00 per share from N45.00 recorded a week after.

Stanbic finished the last trading day of the week at N52.00 per share, posting a 3.7% drop from its previous closing price of N54.00. Stanbic IBTC began the year with a share price of N33.45 and has since achieved 55.5% on the price valuation.

5. Zenith Bank- N94.189 billion
Zenith Bank Plc closed the week with a gain of N94.189 billion in market value, from N879.101 billion the previous week to close at N973.291 billion on Friday.

The share price recorded a gain of 10.71% to close at N31.00 per share from N28.00 recorded as of the previous week.

Zenith Bank closed at N31.00 per share on the Nigerian Stock Exchange (NGX), recording a 3.3% drop from its previous closing price of N32.05. Zenith began the year with a share price of N24.00 and has since gained 29.2% on the price valuation.

Others include
Access Holdings- N43.431 billion
UBA- N39.329 billion
Fidelity Bank- N33.900 billion
Sterling Bank- N19.289 billion
Jaiz Bank-N14.161 billion
Wema Bank – N9.257 billion
FCMB – N8.119 billion
Unity Bank- N3.506
Union Bank – Flat

What financial analysts are saying
The former President of the Chartered Institute of Brokers (CIS) and the Managing Director of Arthur Steven Asset Management Limited, Mr Olatunde Amolegbe, said the main driver of the Nigerian Banks’ stock appreciation was the beginning of the cleanup programme by the president at the CBN.

He noted that market operators now expect that the reforms in the monetary and forex policy will lead to an inflow of foreign portfolio investment in the market.

“The changes at the CBN will lead to changes in the monetary and forex policies which is expected to increase foreign participation in the market.

“Recall that the previous policies of the CBN had hitherto led to a sharp drop in participation by foreign portfolio investors from 65% in 2015 to less than 10% in 2022. The new reform will lead to an increase in appetite by this class of investors in our market,” he said.

Tajudeen Ibrahim, Director of Research at investment firm Chapel Hill Denham, said:

“Banking index appreciation is a reflection of investor sentiment around a possible clean-up of the sector as indicated by the president.”

The Managing Director of APT Securities and Funds Limited, Mallam Garba Kurfi, noted that the international response to the decision to suspend the apex bank’s chief could have an impact on the domestic market.

He said the direction of the market reflects its response, adding that the action of the acting CBN Governor would also influence the markets going forward.

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Inflation To Fall In 2024 — CBN

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The Central Bank of Nigeria’s governor Yemi Cardoso expects headline inflation to fall to 21.4 per cent in 2024.

The apex bank’s governor disclosed this during his keynote speech at the launching of the Nigerian Economic Summit Group macroeconomic outlook report for 2024.

He said, “Inflationary pressures are expected to decline in 2024 due to the CBN’s inflation-targeting policy, which aims to rein in inflation to 21.4 per cent.”

According to him, the inflation targeting will help the government in its battle against inflation which hit 28.9 per cent in December. Lower rates will ultimately affect businesses, he alluded.

“The outlook for decreasing inflation in 2024 will have a profound impact on businesses, providing a more predictable cost environment and potentially leading to lower policy rates, stimulating investment, fueling growth, and creating job opportunities,” Cardoso said.

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Petrol Prices To Fall Over Refineries’ Take Off, Says Cardoso

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The pump prices of Premium Motor Spirit (PMS) petrol will moderate this year as government and private-owned refineries begin operation, Central Bank of Nigeria (CBN) Governor, Olayemi Cardoso has said.

He spoke on Wednesday, January 24, at the launch of the Nigerian Economic Summit Group (NESG) 2024 Macroeconomic Outlook Report in Lagos.

Cardoso said the expected stabilisation or reduction in fuel costs is poised to have far-reaching implications across various sectors, contributing significantly to overall economic efficiency and resilience.

While Dangote Refinery has already commenced production, the Port Harcourt Refinery is expected to begin production anytime from now.

Cardoso said the apex bank, the Ministry of Finance and the NNPCL have collaborated to ensure that all FX inflows are returned to the Central Bank to boost reserves accretion.

He described the naira, which exchanges around N1,370 to the dollar at the parallel market as undervalued.

“We believe that the naira is currently undervalued and, coupled with coordinated measures on the fiscal side, we will expedite genuine price discovery in the near term,” he said.

In summary of the NESG 2024 Macroeconomic Outlook Report in Lagos, the Chief Economist at NESG, Dr. Olusegun Omisakin, listed some economic outcomes of achieving a stable and appropriate pricing of the exchange rate in Nigeria.

The NESG report advised that stabilising the exchange rate through a functional and transparent foreign exchange market entails enhancing market liquidity through regular auctions, reducing administrative restrictions, and ensuring efficient allocation of FX reserves.

“Adopting a managed float system, regulating speculative activities, and encouraging foreign investments would bolster market confidence. Besides, access to FX needs to be realigned to facilitate international trade and transactions – as such, local access needs to be to the limit of the Naira equivalent. Reinforcing monetary policies for inflation control and export diversification would promote currency stability,” the report advised.

Cardoso acknowledged the challenges facing the economy and the resistance to proposed solutions by various stakeholders, assuring that the economy is now at a turning point, and the bold reforms being undertaken across different segments of the economy, while initially challenging, are ultimately directed towards addressing these challenges in a sustainable manner.

“I am confident that we are already witnessing positive outcomes, and these will undoubtedly become more apparent in the near future. The dedicated and relentless efforts being made are certain to bring about significant and positive changes for our economy.”

“Indeed, recent reports from international rating agencies such as Fitch, Moody’s, and commendations from multilateral banks like 3 Classified as Confidential the World Bank reflect this, with upgrades to Nigeria’s ratings from stable to positive. These reports acknowledge the possible reversal of the deterioration in the country’s fiscal and external position due to the authorities’ reform efforts,” Cardoso said.

“While noting the painful adjustments, they all identify a direction of travel that will unlock the much needed growth and development for our economy in the medium to long term.”

He said the rising costs of food prices and volatility in the forex market will soon be addressed.

On economic growth, he said the global economy is currently grappling with persistent challenges, including inflation and subdued growth prospects.

Despite Gross Domestic Product (GDP) growth outperforming expectations in 2023, it is projected to further moderate in 2024 due to tightened financial conditions, sluggish trade expansion, and reduced business and consumer confidence. The International Monetary Fund (IMF) anticipates a mild slowdown in global economic growth to 2.9 percent in 2024, down from the 3.0 percent growth observed in 2023, with Asia driving the majority of the projected global growth in 2024, similar to the previous year.

He said the projections for the nation’s economy paint an optimistic trajectory as the Federal Government of Nigeria anticipates real GDP growth of 3.76 percent in 2024, slightly surpassing the estimated 3.75 percent for 2023.

The optimism, he said, was underpinned by the implementation of key government reforms set to shape the economic landscape. Foremost among the factors contributing to this positive outlook is the expectation of improved crude oil prices and production, highlighting the crucial role the oil industry is expected to play in driving economic growth.

Cardoso said the positive outlook for Industry, Services, Agriculture, and Mining, Electricity, Gas & Water Supply sub-sectors reflects the potential effect of market-based reforms through private investment and SMEs-led growth that would contribute to business improvement and confidence.

“Government reforms in the mining and energy sub-sectors are expected to serve as a catalyst for growth and development. 3. While the potential for growth exists in 2024, each sector may encounter unique challenges and opportunities,” he said.

He said that inflationary pressures are expected to decline in 2024 due to the CBN’s inflation-targeting policy, which aims to rein in inflation to 21.4 percent.

This will be aided by improved agricultural productivity and the easing of global supply chain pressures, benefiting businesses by boosting consumer confidence and purchasing power.

He explained that the CBN’s adoption of the inflation-targeting framework involves clear communication, use of monetary policy instruments, and collaboration with fiscal authorities to achieve price stability, fostering market confidence and positively influencing consumer behaviour.

“The outlook for decreasing inflation in 2024 will have a profound impact on businesses, providing a more predictable cost environment and potentially leading to lowered policy rates, stimulating investment, fueling growth, and creating job opportunities,” he said.

Cardoso said the expected stability in the foreign exchange market for 2024 can be attributed to the reduction in petroleum product imports and the recent implementation of a market-determined exchange rate policy by the CBN.

“This reform is designed to streamline and unify multiple exchange rates, fostering transparency and reducing opportunities for arbitrage. The resulting consistent and stable exchange rate will not only boost investor confidence but also attract foreign investment, elevating Nigeria’s appeal to global investors,” he said.

Cardoso said the NESG’s Macroeconomic Outlook Report for 2024 emphasises the necessity of economic transformation under the central theme, “Economic Transformation Roadmap: Medium-Term Policy Priorities.”

“This theme underscores the requirement for a clearly outlined roadmap comprising distinct yet interconnected phases and essential policy recommendations. This resonates with me as we have just last week, launched a new 5-year Strategy for the Central Bank of Nigeria for the period 2024-2028 that provides a clear roadmap for achieving our mandates,” he said.

The NESG report explained that when exchange rates are stable, everyone is better off. Price stability supports economic growth and employment. It allows people to make more reliable plans for borrowing, saving, and expanding businesses.

“Decreased volatility of the exchange rate helps to support stability in inflation, which mainly affects low-income households because they have fewer resources to protect themselves. In the situation of price stability, it helps to maintain social cohesion and stability. History has shown that episodes of high inflation tend to be associated with social unrest,” the report.

According to the report, increased capital inflows will fortify the nation’s external reserves, establishing a robust defence against external shocks.

“This can only happen with the stability of the exchange rate. Capital inflows, comprising foreign investment, loans and remittances, elevate the reserve levels, bolstering Nigeria’s financial stability and economic resilience,” it said.

The NESG report advised that in addition to nominal enhancements in revenue, the country’s revenue-to-GDP ratio must reach a minimum threshold of 15 percent to substantiate the processes of economic growth and stabilisation.

“The country must significantly decrease its current public debt service-to revenue ratio, aiming for a reduction to less than 22 percent from the current high of 80.2 percent as of 2022. This reduction is crucial to create fiscal space, enabling the government to reallocate funds toward economic development and stability initiatives.

“A moderate fiscal deficit can be a useful tool for financing essential investments and stimulating economic activity. Hence, the optimal level of fiscal deficit that supports economic growth and stability in Nigeria requires a careful balance. A fiscal deficit of less than three per cent as stipulated in the FRA 2007 is considered appropriate for the economy,” it said.

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