BY BAMIDELE FAMOOFO
The Federal Government through the Debt Management Office has declared plans to raise a sum of N150billion from the Bond market in March.
The auction date for the deal is March 21 while settlement extends by two days. Investors who are willing to subscribe for the first tranche of 10- year re-opening bond is expected to get a 12.5 percent return on investment interest while those bidding for the 20-year re-opening debt instrument will attract 13.0 percent interest. Interest is payable semi-annually
“For Re-openings of previously issued bonds, (where the coupon is already set), successful bidders will pay a price corresponding to the yield-to-maturity bid that clears the volume being auctioned, plus any accrued interest on the instrument,” DMO disclosed.
According to the DMO, investors are expected to bid at N1, 000 per unit subject to a minimum subscription of N50, 001,000 and in multiples of N1, 000 thereafter.
Primary Dealer Market Makers (PDMMs) to the Offer are 13 banks which include among others, Access Bank Plc; First Bank of Nigeria Ltd; Standard Chartered Bank Nigeria Ltd; Citibank Nigeria Ltd; First City Monument Bank Plc; United Bank for Africa Plc; Coronation Merchant Bank Ltd; and FSDH Merchant Bank Ltd. Others are Zenith Bank Plc; Ecobank Nigeria Ltd; Guaranty Trust Bank Plc; FBNQuest Merchant Bank Ltd and Stanbic IBTC Bank Plc.
Nigeria’s total public debt as at December 31, 2020 was about N32.92 trillion. The figures include the Debt Stock of the Federal and State Governments, as well as, the Federal Capital Territory.
The DMO has argued that the level of borrowing by the largest economy in Africa has declined since 2017 but the success was reversed with the advent of the Covid-19. “It will be recalled that after Nigeria exited recession in 2017, the level of new borrowing at the Federal Level as shown in the Annual Appropriation Acts, had been declining as part of the Government’s measures to moderate the rate of Growth in the Public Debt Stock in order to ensure debt sustainability. New Borrowing to part finance Budget Deficits had declined steadily from N2.36 trillion in 2017 to: N2.01 trillion in 2018, N1.61 trillion in 2019 and N1.59 trillion in the first 2020 Appropriation Act. This trend was reversed in 2020 due to the economic and social impact of the COVID-19 Pandemic as New Borrowing in the revised 2020 Appropriation Act was N4.20 trillion. Many countries including the advanced countries also increased their level of borrowing as a result of COVID-19.”
The DMO further stated: “It should be noted though, that apart from the new domestic borrowing of N2.3 trillion, the other new borrowings were concessional loans from the International Monetary Fund (USD3.34 Billion) and other multilateral and bilateral lenders. This incremental borrowing to part-finance the 2020 Budget and the additional issuance of Promissory Notes to settle some arrears of the Federal Government of Nigeria, contributed to the increase in Public Debt Stock. New domestic borrowings by State Governments also contributed to the growth in the Public Debt Stock.”
Total public debt to gross domestic product as at December 31, 2020 was 21.61 percent which is within Nigeria’s new Limit of 40 percent. “The various initiatives of Government to increase revenues such as the Strategic Revenue Growth Initiative and the Finance Act, 2020, should help shore up Government’s revenue and reduce the Debt Service to Revenue Ratio,” DMO noted.
Nestle records strong earnings amid competition
Nestle Nigeria Plc, a leading food company in Nigeria grew its revenue by 22.6 percent year on year (y/y) at the end of the 2021 financial year amid the increasingly competitive business environment.
The Food segment of the business which recorded a growth of 21.3 percent emerged a major contributor to gross revenue at 59.2 percent. Beverages contributed 40.8 percent to revenue having increased by 24.4 percent in the review period.
“We believe the c. 5.0 percent increase in Maggi retail prices drove the growth in the Food segment. In the Beverages segment, we imagine the expansion was supported by higher sale volumes, as our channel checks revealed that product prices in this segment remained broadly unchanged. However, the effects of inflationary pressures on costs dampened profitability, which dragged margins. Consequently, EPS grew mildly by 2.1% y/y to N50.51 in 2021FY,” Stock Analysts at Cordros Research explained.
Projecting into 2020, it is expected that volume-led growth will support topline. “For 2022E, we expect volume increases across the company’s product portfolio to support top-line expansion. As such, we forecast 11.7% y/y revenue growth in 2022E. Over the medium term (2023-2026E), we model average annual revenue growth of 10.9%, reflecting expected sub-inflation price increases. We model a 150bps decline in the 2022E gross margin, reflecting cost pressures from the high domestic inflationary environment and currency weakness. We expect operating expenses to grow by 11.7% y/y, though we think operating costs will remain in check and expect the OPEX-to-sales ratio to remain stable at 17.0%.”
Meanwhile, EBITDA margins are tipped to decline by 229bps to 22.8 percent following the expected drag on margins. It is also forecasted that EPS will increase by 7.5 percent y/y to N56.21 in 2022E (+2.1% y/y in 2021FY). “Further out, we forecast an EPS CAGR of 14.7% in 2023-2026E. Our EPS forecast tracks below Bloomberg’s consensus estimate of N60.50 in 2022E,” Analysts disclosed.
Cordros believes NESTLE’s valuation is stretched at the current market price as the market has already priced in growth catalysts. “However, given the resilient earnings delivered by the company over the years, we think investors may continue to price the stock at a premium to its fair value. On our estimates, NESTLE trades at a 2022E P/E and EV/EBITDA of 24.1x and 13.1x, a discount to its 5-year average of 25.6x and 14.5x, respectively.”
………………………………………………………………………………………………………
Merchandise trade grew in Q4’21 with a steady rise in exports and imports trade
BAMIDELE FAMOOFO
The Balance of Trade improved in the fourth quarter though it remains negative as total trade in Q4, 2021 stood at 11.79 percent higher when compared to the value recorded in Q3, 2021 and rose by 74.71 percent compared to the value recorded in the corresponding quarter of 2020.
Annual comparison shows that total trade was 57.60 percent higher in 2021 than the value recorded in 2020.
The foreign trade statistics released by the National Bureau of Statistics (NBS) on Thursday showed that value of total imports in Q4, 2021 increased by 11.33 percent compared to the value recorded in Q3, 2021 and by 69.41 percent against the same quarter in 2020 while total imports was 64.11 percent higher in 2021 than the value recorded in 2020.
According to the report, the value of agricultural imports grew by 38.35 percent in Q4, 2021 compared to the value recorded in Q3, 2021 and it also increased by 118.51 percent than the value recorded in the corresponding quarter of 2020. Annual growth shows that the value of agricultural imports was 71.76 percent higher in 2021 than the value recorded in 2020.
The value of raw material imports grew marginally by 3.80 percent in Q4, 2021 when compared to the value in Q3, 2021 but was 35.03 percent higher compared to the value in Q4, 2020. The annual comparison reveals that the value of raw material imports was 37.90 percent higher than the value recorded in 2020.
The value of Solid minerals imports was 0.42 percent lower in Q4, 2021 than the value in Q3, 2021 but increased by 69.73 percent than the value recorded in Q4, 2020 while the value of solid mineral imports was 54.12 percent higher in 2021 than the value recorded in 2020.
The value of Energy goods imports was 507.38 percent in Q4, 2021 higher than in Q3, 2021 and 124.10 percent higher than the value recorded in Q4, 2020 while the value of energy goods imports was 86.19 percent higher in 2021 than the value recorded in 2020.
The value of total exports in Q4, 2021 increased by 12.27 percent when compared to the value recorded in Q3, 2021; it also rose by 80.52 percent compared to the value Q4, 2020. Annual values of total export were 50.99 percent higher in 2021 than recorded in 2020.
The value of agricultural goods exports in Q4. 2021 grew by 67.12 percent compared to Q3 2021 and by137.93 percent compared to Q4 2020. Annual comparison shows that the value of agricultural exports was 57.02 percent higher in 2021 than the value recorded in 2020. The value of raw material goods exports in Q4, 2021 was 65.06 percent higher than the value the recorded in Q3, 2021. The value recorded in Q4 2021 increased by 429.85 percent when compared to its value in Q4 2020. In addition, the value of raw material goods exports was 325.54 percent higher in 2021 than the value recorded in 2020.
Meanwhile, the value of Solid minerals exports in Q4 2021 decreased by 25.95 percent compared to the value recorded in Q3, 2021 but increased by 201.41 percent against the corresponding quarter in 2020. The annual comparison of the value of solid mineral exports in 2021 was 320.27 percent higher than the value recorded in 2020.
The value of exports of Energy goods in Q4, 2021 rose by 7.17 percent compared to its value in Q3 2021. This also increased by 308.04 percent compared to the value recorded in Q4, 2020. In 2021, the value of energy goods exports was 376.52 percent higher than the value recorded in 2020.
