Finance

LAST WEEK: Nigerian equities market continues bullish run, as SEC issues crypto regulation


The Nigerian equities market continued its bullish run for the fifth week in a row with a 4.25% rally in the week, following a 2.61% gain recorded in the previous week. The year-to-date performance of the Nigerian Stock market has rallied to 24.3% as of 13th May 2022, representing one of the best-performing markets in the world as of press time.

Meanwhile, the crypto market witnessed significant selloffs as the Luna token, terra traded as low as 1.6 cents before the blockchain was discontinued. Meanwhile, the Nigerian Securities and Exchange Commission has released regulations concerning digital assets and cryptocurrency transactions in the country.

These and many more happened during the week. Here is a compilation of notable happenings in the Nigeria macro-economic space, markets, regulators as well as other world economies.

MACROECONOMY

Exchange rate

  • The exchange rate at the official market depreciated during the week as Naira grew weaker to close at N419/$1 compared to N417/$1 recorded as of the previous week. A total of $732.85 million in FX value was traded in the review week, in contrast to the $359.36 million that exchanged hands in the previous week.
  • It is worth noting that the significant decline may be attributed to the two days holiday declared by the federal government in celebration of the Eid-El Fitr.
  • Similarly, at the black market, the naira closed at N591/$1 on Friday, 13th May 2022 compared to N590/$1 recorded in the previous week. Meanwhile, the exchange rate at the peer-to-peer market closed at N598.5 to a dollar, trading as high as N607 to a dollar during the week.

External reserve

  • Nigeria’s external reserve continue in its downtrend during the week as it dipped 0.8% to close at $39.04 billion as of Thursday, 12th May 2022 from $39.37 billion recorded in the same period the previous week.
  • The Nigerian reserve level continues to plunge considering the apex bank’s continual intervention in the official I&E window. The levels have remained low despite rising crude oil prices as Nigeria’s production capacity is below the OPEC quota.

Nigeria records N7.3 trillion fiscal deficit

  • The Federal Government of Nigeria (FGN) reported a record-breaking fiscal deficit of N7.3 trillion in 2021. The Federal government’s actual expenditure of N11.69 trillion vastly exceeded its 2021 generated revenues of N4.39 trillion.
  • This means that, for every N4 earned by the Federal government, it spent over N11. The fiscal imbalance in 2021 is the largest on record since 2012 to date.
  • Notably, N2.52 trillion was spent on capital expenditure in 2021, representing 21.3% of the total expenditure, N4.22 trillion was spent on Debt servicing comprising 36.1% of total expenditure.
  • Meanwhile, rising energy costs across the globe mean that the amounts spent on subsidies will be higher. The federal government estimates N4.0 trillion for petrol subsidy in 2022 compared to N1.57 trillion in 2021. You can read the article here

Nigeria’s household consumption expenditure rose to N108.4 trillion

  • The National Bureau of Statistics (NBS) released the Nigerian Gross Domestic Product (Expenditure and Income Approach), showing that Nigerians spent a sum of N108.47 trillion on household consumption in 2021.
  • The 2021 household expenditure represents an 11% increase compared to N97.72 trillion incurred in the previous year, and a slight increase above the N108.1 trillion spent in 2019.
  • In contrast to the nation’s nominal GDP for the review year, household consumption accounted for 62.5% of the country’s annual GDP. Similarly, consumption expenditure for non-profit organizations serving households increased by 11.4% to N964.9 billion compared to N865.8 billion recorded in 2020.

MARKETS

Equities market

  • The All-Share Index of the Nigerian stock market grew by 4.25% to stand at 53,098.46 index points. This is the fifth consecutive weekly gain recorded by the local bourse. In terms of the sub-indices, the NGX Premium Index recorded the highest gain with a 7.53% rally, followed by the NGX Lotus II and Growth Index with 7.14% and 7.09% gains respectively.
  • A total turnover of 1.816 billion shares worth N27.194 billion in 36,286 deals was traded during the week by investors on the floor of the Exchange, in contrast to a total of 1,598 billion shares valued at N19.603 billion that exchanged hands last week in 21,494 deals.
  • The Financial Services Industry led the activity chart in terms of traded volume with 904.86 million shares valued at N8.49 billion traded in 12,883 deals; thus contributing 49.82% and 31.25% to the total equity turnover volume and value respectively.

Fixed income market

  • The Debt Management Office (DMO) is set to auction FGN bonds on May 16, 2022 in three tranches aimed at raising a sum of N225 billion with a settlement date of 18th May 2022. According to the disclosure released by the DMO, the FGN March 2025 10-year re-opening has an interest rate of 13.53%.
  • Also, the other FGN bonds for the 10-year and 20-year re-opening bonds has 12.5% and 13% interest rates. The federal government aims to raise N75 billion from each of the three tranches.
  • Meanwhile, the S&P Sovereign bond index of the FMDQ gained 0.41% to 611.56 points on Thursday, 12th May 2022 from 609.22 points recorded as of the previous week. The overnight rate for money market also rose from 4.93% recorded in the previous week to close at 9.17% at the end of the review week.
  • The open buyback rate also increased to 8.67% compared to 4.75% recorded as of the previous week.

REGULATION

SEC regulations governing cryptocurrency, NFT, other digital assets transaction

  • The Securities and Exchange Commission (SEC) has released new rules for Digital Assets as part of its effort to regulate digital/virtual assets such as Bitcoins and NFTs.
  • Digital Asset Players will now include Digital Asset Offering Platforms (DAOPs), Digital Asset Custodians (DACs), Virtual Assets Service Providers (VASPs), and Digital Assets Exchange (DAX).
  • The Rules apply to all platforms that support the trading, exchange, and transfer of virtual assets; all issuers and sponsors of virtual/digital assets, including international and non-residential issuers and sponsors; and any operator that aggressively targets Nigerian investors.

CBN says investors should suffer from FOMO when considering investing in Africa

  • The Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, says investors should suffer from Fear of missing out (FOMO) when considering investing in Africa.
  • He claimed that Africa had seen several crises in the last two years, each with serious consequences for the continent’s economies.
  • He called on African governments, central banks, corporate leaders and investors to rally together and be bolder in “our ambitions and support our continental champions and institutions like AFC.”

FIRS requests companies to submit certificate of acceptance on QCE above N500,000

  • The Federal Inland Revenue Service (FIRS) has requested all companies that enjoyed capital allowances on Qualifying Capital Expenditure (QCE) of N500,000 and above between 2016 and 2021 years of assessment, to submit the Certificate(s) of Acceptance issued by the Industrial Inspectorate Division of the Federal Ministry of Industries, Trade and Investment.
  • According to the statement, the development would affect companies that enjoyed capital allowances on QCE of N500,000.00 and above between 2016 and 2021 years of assessment by October 31st.
  • In addition, the service highlighted that the allowance may be withdrawn for those that fail to comply.

JPMorgan stopped recommending Nigeria in its emerging market bond index

  • JPMorgan, an American multinational investment bank, has removed Nigeria from its list of emerging market sovereign recommendations that investors should be ‘overweight’ in.
  • However, Nigeria was removed from the bank’s “overweight” emerging market sovereign recommendations due to the country’s failure to take advantage of high oil prices, according to information from Reuters.
  • JPMorgan added that Emerging market sovereign debt is at the “mercy” of the Federal Reserve’s interest rate decisions.

CRYPTOCURRENCY

LUNA lost 99% of its value in one week

  • LUNA is the native currency of the Terra blockchain, a blockchain protocol that uses fiat-pegged stablecoins to power price-stable global payments systems. According to its white paper, Terra combines the price stability and wide adoption of fiat currencies with the censorship-resistance of Bitcoin (BTC) and offers fast and affordable settlements.
  • In the last seven days of trading, LUNA has lost its position as a top 10 cryptocurrency by market capitalization as it currently ranks #207 as of the time of this writing. Its token price traded $87.96 a week ago, to currently stand at $0.0002876 as of the time of this writing, which represents an approximately 99% decline in just seven days.
  • The shocking thing about LUNA is that it created an all-time high of $119.18 a little over a month ago and it has lost all of its since then, making it one of the fast declines in the cryptocurrency space as over $40 billion in market capitalization has been whipped off in less than five weeks.

UST stablecoin lost its peg to the U.S. dollar

  • The Terra blockchain native stablecoin, a programmable stablecoin called UST, has lost its 1:1 peg to the United States dollar as a result of the massive selloff we are seeing in the crypto market. The token now trades at 19 cents, down 81% from the $1 peg.
  • UST made headlines in 2022, when the Luna Foundation Guard (LFG) founder, Do Kwon, committed to backing the UST programmable stablecoin with a $10 billion worth of Bitcoin. He promised to buy $3 billion worth in the short term and the rest in the long term.
  • This saw the stablecoin becoming the third-largest by market capitalization, surpassing Binance’s stablecoin, BUSD. In fact, the token currently ranks #9 by market capitalization despite losing its peg.

Total liquidation hits $1.2 billion as Bitcoin trades below $27,000

  • Many have compared the decline in the market to what was seen in the 2008 market crash while others have likened this selloff to the Game of Thrones’ famous episode, the red wedding.
  • Bitcoin has fallen below a critical support zone, the $30,000 support zone, and with it, over 428,000 traders have lost a total of $1.22 billion in the last 24 hours as margin calls and loss of funds have become the order of the day.
  • The entire cryptocurrency market capitalization has fallen approximately 20% as it currently stands at $1.16 trillion as of the time of this writing, with strong indications that the market will soon lose its trillion-dollar status.

Emirates Airlines to accept Bitcoin as a payment option

  • Emirates Airlines, one of the United Arab Emirates (UAE) leading airlines, announced that it will adopt Bitcoin as a payment option for customers looking to fly with the airline, which ranks #5 among the top 20 airlines according to Airline Ratings.
  • The announcement was made by the company’s chief operating officer (COO), Adel Ahmed Al-Redha, who mentioned that Emirates Airlines, would soon accept “bitcoin as a payment option.” He also mentioned that the airline’s website will feature non-fungible token (NFT) collections.



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