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Coronation Merchant Bank experts project 2.8% growth in GDP for 2023

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By Philemon Adedeji

Experts at Coronation Merchant Bank have projected 2.8 per  cent increase in Gross Domestic Product (GDP) for 2023,  attributing it to slow policy implementations and capital expenses due to laser focus on the general elections and transition between administration in the first half of the year.

The Chief Economist and Head, Economic Research/Intelligence, Coronation Merchant Bank, Chinwe Egwim in her presentation stated that the GDP growth is projected to be driven mainly by the non-oil sector.

According to her, “The services, agriculture and manufacturing sectors are likely to remain key growth drivers, supported by financial interventions by the CBN. Furthermore, the effective implementation of the 2022 Finance Act and the Strategic Revenue Growth Initiatives should contribute to the growth drive through increased non-oil revenues.

“We also considered stable oil prices above USD80/barrel. However, we expect domestic crude oil production to remain below pre-COVID-19 levels, due to existing challenges within the sector.

“We have also taken into consideration, relatively weak consumption patterns on the back of high inflation and its impact on service-oriented sectors, the impact of foreign exchange depreciation and increased borrowing costs on business activities.”

She noted that there would be increased foreign exchange demand due to the need for safe-haven currency (USD) on the back of security concerns. We expect weak portfolio investment inflow on the back of negative real returns (yields vs inflation) and the political risks surrounding the 2023 general elections.

“We considered the absence of Nigeria from the ICM in the near term which does not bode well for external reserves.

“Accordingly, we expect that the existing demand patterns in the parallel market will continue. In our base case scenario, we see the fx rate at the NAFEX/I&E window at N505/ USD by end-2023.

“We considered: stable growth in non-oil exports boosted by the RT 200 fx program, continuous injections by the CBN (avg. seven per cent of total inflows on a m/m basis), halt to fuel subsidy payments by end-H1 2023.”

She stated that analysts at Coronation Merchant Bank expected inflation to moderate in 2023, partly attributed to positive base effects and the Monetary Policy Committee’s (MPC) current stance on the policy rate.

She noted that the persistent supply shocks on the back of the on-going Russia-Ukraine crisis as well as structural issues impacting the cost of doing business such as insecurity and other logistical challenges would likely keep inflation elevated.

“Other factors include, base effects, depreciation of the naira in the parallel market and an uptick in the price of PMS, due to the potential subsidy removal which would impact the cost of transport and possible demand-pull inflation triggered by increased fiscal stimulus.

“In our base case scenario, we see inflation at 18.3per cent y/y for end-2023,” she added.

Speaking at the leading financial institution’s Economic Review and Outlook themed: “baton handoff economic headwinds and risk resilience in Lagos recently,” she noted

Also speaking at the event, the MD/CEO, Coronation Merchant Bank, Mr. Banjo Adegbohungbe in his opening speech said imminent transition is the overall theme of 2023 as Nigeria is currently having transitions in so many spheres happening at once.

According to him, “And not just that this transition is happening at the domestic environment, we also have the domestic impact of a lot of events that are occurring across the globe at the same time.

“For example, the recent downgrades of Nigeria’s risk ratings highlight various concerns around critical challenges that are filled the spotlight on our direction post transition in 2023.

“While there are significant headwinds in 2023, we believe that the potential also exists to tap into new opportunities.

“At the end of the day, the focus is simple and that is to enable you navigate the headwinds and achieve your respective strategic objectives by identifying those new opportunities.”

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Investors close week with N52bn profit

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Investors in the Nigerian equities market ended the week with a N52 billion gain on Friday.

This followed an increase in the share price of Guinness, etranzact, and Unity bank amongst others on the trading floor today.

After five hours of trading at the capital market, the equity capitalisation increased to N56.527 trillion from N56.474 trillion posted by the bourse on Thursday.

Similarly, the All-Share Index (ASI) increased to 99,925.29 from 99,221.14 recorded the previous trading day.

The market breadth was positive as 31 stocks advanced, 17 declined, while 74 others remained unchanged in 7,302 deals.

Guinness, etranzact, and Unity Bank led other gainers with 9.95 percent, 9.89 percent and 9.84 percent growth in share price to close at N60.25, N5.00, and N1.34 from the previous N54.80, N4.55, and N1.22 per share.

On the flip side, Academy, CWG, and Prestige led other price decliners as they shed 9.85 percent, 9.40 percent, and 5.56 percent each to close at N1.83, N0.55, and N0.51 from the initial N2.03, N5.85, and N0.54 per share.

On the volume index, Sterlingng led trading with 42.259 million shares valued at N1.75 billion in 94 deals followed by Zenith bank which traded 28.033 million shares in 482 deals worth N1.008 billion.

Fidelity bank traded 25.104 million shares valued at N2.48 billion in 192 deals.

On the value index Zenith bank recorded the highest value for the day trading stocks worth N1.008 billion in 482 deals followed by GTCO which traded equities worth N635 million in 313 deals.

Seplat traded stocks worth N438 million in 72 deals.

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Recapitalisation: Wema Bank gets regulatory approvals for N40bn rights issue

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Wema Bank says it has successfully concluded the first tranche of its recapitalisation exercise having secured all relevant regulatory approvals for the allotment of its N40 billion rights issue.

Its Managing Director, Mr Moruf Oseni, disclosed this in a statement made available on Friday in Lagos.

Oseni said as a forward-thinking and pioneering bank, the financial institution in December 2023 launched N40 billion rights issue which had been approved by the Central Bank of Nigeria (CBN) and the Securities and Exchange Commission (SEC).

CBN in March, launched a recapitalisation programme requiring commercial banks to raise fresh capital.

This is in alignment with the minimum requirement for their respective banking licenses within a 24-month timeline spanning April 1 to March 31, 2026.

The goal of recapitalisation is to simultaneously boost the Nigerian economy and strengthen its financial services industry.

Oseni said: “With this remarkable development, Wema Bank has now successfully raised the first tranche of its plan in the minimum requirement laid down by the CBN.

“The bank’s resolve in retaining its commercial banking license with National authorisation and the N40 billion rights issue is a step in that direction.

“Our move to commence our capital raise programme very early demonstrates our push for excellence, and with a strong emphasis on our digital play, we are set to amass more successes in the coming months,” he said.

The managing director expressed satisfaction with the vote of confidence given by the bank’s shareholders during its first rights issue exercise, noting that its shares were fully subscribed.

Oseni stated that the bank also obtained the approval of its shareholders at its 2023 annual general meeting to raise an additional N150 billion to meet the capitalisation threshold set by the CBN.

He hinted that the process was expected to be completed within 12-18 months.

Oseni said: “We are committed to providing optimum returns for every stakeholder and the successful conclusion of this N40 billion rights issue is a bold step in the right direction.

“In addition to the upward trend in the bank’s financial performance and the success recorded so far in its recapitalisation exercise, Wema Bank’s corporate rating was recently upgraded to BBB+ by Pan African credit rating agency, Agusto and Co.

“The bank was also retained at BBB by international rating agency, Fitch.”

According to him, over the medium to long term, Wema Bank is positioned to not only dominate the digital banking space but also the Nigerian financial services industry at large as it translates its industry leadership to significant market share.

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Ecobank to raise $600m debt in the next one year

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Ecobank Transnational Incorpora ted (ETI) will raise $600 million through senior secured debts and tier-2 debts over the next year.

This was one of the resolutions from the group’s Annual General Meeting which took place in Lome, Togo on June 6, 2024.

In the notice containing the AGM resolutions, it was contained

“The General Meeting hereby authorises the board of directors to raise within a period of one year from the date of this meeting up to Six Hundred Million United States Dollars (US$600,000,000) in senior-ranked debt, Tier 2-qualifying subordinated debt or a combination of these forms of instruments as the board of directors may deem appropriate.”

Senior ranked debts are a type of debt that has priority over other debts in terms of claims on the assets of the issuer. This means that senior-ranked debt holders are paid before other creditors, such as subordinated debt holders.

Tier 2-qualifying subordinated debt is a type of subordinated debt that qualifies as Tier 2 capital under banking regulations.

It ranks below senior debt but above equity in the event of liquidation, meaning it is riskier than senior-ranked debt but less risky than equity.  An example of tier-2 debts is the $350 million Tier-2 Sustainability Notes listed by ETI on the London Stock Exchange in 2021.

Recall that in April 2024, Ecobank Transnational successfully repaid a $500 million Eurobond which matured on April 18, 2024. The Eurobond, issued in April 2019, was listed on the London Stock Exchange with a coupon rate of 9.5 percent.  This was the group’s inaugural Eurobond, however, its subsidiary, Ecobank Nigeria issued a dollar-denominated bond in 2014.

In 2014, Ecobank Nigeria issued its first ever dollar-denominated bond, a $200 million bond which was listed on the Irish Stock Exchange. The bank received advisory services from the African Export-Import Bank (Afrexim).

And there was an oversubscription on the bond offering.

Then in June 2021, Ecobank Transnational issued $350 million Tier 2 Sustainability Notes, which were listed on the London Stock Exchange. According to the group, these notes were oversubscribed by over 3.6 times, reaching a subscription of $1.3 billion.  The notes which mature in June 2031, will pay an annual interest rate of 8.750% between June 2021 and June 2026. However, from June 2026, the interest rate will change to a new rate called “Reset Interest Rate”.  It was noted in the group’s “Sustainable Finance Framework” that proceeds from the sustainable financing instruments such as the sustainability notes would be used to finance and/or refinance, in whole or in part, green and/or social projects.

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