- Banks not under pressure over recapitalization – Cardoso
On Tuesday, the local bourse maintained its bullish trend, with the all-share index edging up by 0.11 percent to close at 98,285.33 points.
This positive movement occurred despite a mixed market activity, with significant investor interest in the banking and consumer goods sectors.
The Central Bank of Nigeria’s Monetary Policy Committee on Tuesday increased the policy rate to 26.25 percent in May, which did not deter the upward trend.
The MPC’s decision to further tighten its monetary policy was driven by its near-term inflation outlook, acknowledging the persistently elevated inflation risks and the necessity to consolidate the gains from previous rate hikes.
Meanwhile, the MPC kept other parameters unchanged: the asymmetric corridor around the MPR at +100bps/-300bps, the Cash Reserve Requirement (CRR) for Deposit Money Banks (DMBs) at 45.0 percent, and the liquidity ratio at 30.0 percent.
However, the market capitalisation rose by 0.11 percent to reach N55.59 trillion, and equity investors saw gains amounting to N60.92 billion from the day’s trading.
The market’s year-to-date (YTD) return now stands at 31.44 percent. Despite the positive outing, trading activity on Tuesday showed a downturn.
The total traded volume decreased sharply by 45.05 percent to 222.89 million units, and the total traded value fell by 23.02 percent to N5.15 billion. Additionally, the number of trades dropped by 14.35 percent, with a total of 7,228 transactions.
Sectoral performance was mixed: two out of five sectors closed in the green, two remained unchanged, and one declined. The consumer goods and banking sectors saw gains of 0.79 percent and 0.16 percent respectively, while the insurance sector lagged with a loss of 0.38 percent.
The industrial and oil & gas sectors remained flat. In terms of individual stock performance, notable gainers included BERGER (9.96%), NESTLE (9.76%), SOVRENINS (8.11%), ROYALEX (7.14%), and TANTALIZER (6.38%). Conversely, INTENEGINS (9.70%), DEAPCAP (8.33%), UPDC (7.69%), WAPIC (7.25%), and STERLINGNG (6.25%) faced significant price declines. GTCO was the most traded stock by both volume and value, with 40.64 million units traded in 332 deals, valued at N1.62 billion.
In the money market on Tuesday, funding rates edged up as most banks continued their quest for liquidity to meet their funding obligations. Consequently, the Overnight NIBOR saw a significant uptick of 8 percentage points to reach 30.96 percent. Similarly, the 1-month, 3-month, and 6-month NIBOR rates experienced upward movements to 24.50 percent, 24.83 percent, and 26.04 percent, respectively.
Key money market rates, like the open repo rate (OPR) and overnight lending rate (OVN), saw modest shifts to 31.47 percent and 32.07 percent as demands for funds increased amidst system illiquidity.
In the Nigerian Interbank Treasury Bills Yield (NITTY) space, rates across most tenor buckets moved downwards, with decreases of 71bps, 34bps, and 38 percentage points for the 1-month, 3-month, and 6-month tenors. However, the 12-month NITTY climbed by 5 percentage points.
Moreover, the secondary market for Nigerian Treasury Bills was moderately active and bullish, with predominant buy sentiments across the curve causing a basis point decrease in the average T-bills yield to 20.92 percent.
Moving on to the bond market, secondary market activity for Federal Government of Nigeria (FGN) Bonds remained subdued even as investors divested from the MAR-25 and JAN-26, resulting in their yields rising by 2bps and 1bp respectively.
Nonetheless, the average secondary market yield remained unchanged from yesterday’s close of 18.69 percent. In the sovereign Eurobonds market, a mild negative sentiment prevailed, particularly in the FEB-30, NOV-47, and MAR-29 maturity, leading to a marginal point increase in the average yield to 9.75 percent.
In the foreign exchange market, the naira demonstrated strength against the dollar, gaining by 0.23 percent to close at N1, 465.68 per dollar in the official market. The parallel market witnessed a 0.48 percent appreciation day-on-day, closing at an average of N1466 per dollar.
Banks not under pressure over recapitalization – Cardoso
Meanwhile, the Governor of the CBN, Yemi Cardoso said there is no pressure on deposit money banks in the country with regards to the recapitalization program initiated by it as the banks have two years to comply.
While addressing journalists on Tuesday at the close of the 295th monetary policy committee meeting in Abuja, he insisted that the Nigerian banking system is sound and resilient.
“It’s our responsibility to ensure it remains sound, safe, and fit for purpose,” Cardoso said.
He reiterated that the recapitalization of banks in Nigeria is geared towards making them stronger and more robust to withstand shocks and support the $1 trillion economy envisaged by the Federal Government.
“We are not putting any of the banks under pressure in terms of recapitalization,” he stated.
The CBN Governor expressed optimism that Nigeria’s inflation rate will decelerate given the Bank’s efforts to curb inflation, which resulted in the month-on-month moderation of rates across all measures of inflation.
He emphasized the need for transparency and confidence in the Nigerian Foreign Exchange market; saying investors have renewed interest in the Nigerian foreign exchange market following recent CBN reforms.
“Approval of 14 new International Money Transfer Operators by CBN is expected to create more competition in the sector and lower transaction costs, as well as to attract more remittances before the end of 2024,” he added.
Cardoso said that the CBN is not against Fintechs and has not revoked the license of any fintech organization. However, he stressed the need to strengthen regulation in the sector to check against leakages.
