E-Financial
Market sentiment influenced by trade developments; Nigerian inflation rebounds in April
By Lukman Otunuga, FXTM Research Analyst,
It is coincidental how Nigeria’s inflation rate accelerated in April, only a month after the central bank unexpectedly reduced interest rates for the first time in more than three years.
With the impacts of the rate cut in March having a delayed effect and unlikely to be reflected any time soon, the 13.7% rise in inflation was based around rising food prices. Should inflation return with a vengeance in the coming months, businesses and consumers may feel the heat – ultimately impacting economic growth. All in all, it remains too early to come to any meaningful conclusion over whether inflation is set to rise, given how this has been the first increase in three months.
The next major risk event for the Nigerian economy will be the GDP report for Q1 which should offer critical insight into the health of the nation during the first quarter of 2019. A figure that exceeds the 2.1% year-over-year expectations should boost confidence over the health of the Nigerian economy.
Markets influenced by ongoing trade tensions
Investor sentiment has swung back and forth this week due to the persistent uncertainty and ever-changing jigsaw puzzle that is being mapped out around global trade developments.
Stock markets were mostly mixed on Thursday amid the contrasting signals that are being delivered to investors in regards to US-China trade tensions. While there is hope on one side of the table that there will be a handshake between the US and Chinese authorities at the G20 next month to smoothen the recent escalation, this is being met with news that the US government will ban Huawei’s access to the US markets over national security concerns.
The conflicting signals over trade are likely to simply spark more uncertainty and confusion in the market, and investors will continue to scatter and reassess their appetite towards taking on risk as a result.
Market sentiment is poised to remain fragile over the next month in the lead-up to the meeting between Presidents Trump and Xi Jinping at the G20 summit late June. Will the world’s two largest economies ever find a middle ground on trade or a tension destined to intensify further throughout the year? This is a question nobody has the answer for. And this is why investors are nervous, especially following the spectacular swerve that has occurred over the past two weeks.
Whatever the outcome of the hotly anticipated Xi-Trump meeting, it will certainly have a lasting impact on market sentiment for the second half of the year.
Euro unable to hang on to gains
Investors who were looking for a quick opportunity to push the Euro higher were given the thumbs up yesterday following reports that President Trump could delay auto tariffs by six months.
However, the Euro’s upside gains are limited with prices trading around the 1.12 level against the Dollar as of writing. Even though the first estimates on the Eurozone and Germany’s Q1 GDP prints met market expectations, the continent’s growth outlook is expected to remain challenged by external factors in the form of trade tensions.
With the outlook for the Euro fundamentally bearish amid growth concerns and the European Central Bank (ECB) adopting a cautious stance, the EURUSD is positioned for further downside. A solid weekly close below the 1.120 level is likely to signal a move towards 1.113 and 1.100, respectively.
Commodity spotlight – Gold
Disappointing economic data from the United States and China added to the negative mood yesterday, which in turn was a welcome development for safe-haven assets.
Gold bulls remain supported by trade uncertainty and concerns over slowing economic growth and this continues to be reflected in the metal’s valuation. Prices have the potential to test the psychological $1300 level again in the coming days as market caution accelerates the flight to safety.
Focusing on the technical picture, the precious metal is bullish on the daily charts. A solid weekly close above $1300 should invite a move higher towards $1310 and $1324, respectively. With the catalysts that can significantly reverse the ongoing flight-to-safety in the near term being limited, Gold bulls remain in the driver’s seat.
Renaissance Capital Africa (Rencap) has named Zenith Bank Plc its top conviction pick among Nigerian banks, ahead of GTCO and AccessCorp, in a fresh research report highlighting the lender’s robust balance sheet and dividend potential despite sector headwinds.
Zenith Bank
The comprehensive review of the Nigerian banking industry notes that Zenith’s current market valuation lags its improving fundamentals, even as the NGX Banking Index posts strong gains recently.
Rencap upgraded Zenith from HOLD to BUY, lifting its target price by 96 per cent based on a lower risk-free rate from falling government bond yields, refined beta estimates, and expectations of cleaner assets post-forybearance resolutions.
Balance Sheet Strength Drives Outlook
Analysts project challenges to earnings growth from anticipated Central Bank of Nigeria (CBN) rate cuts but foresee higher dividend payouts from resolved forbearance and single obligor loan (SOL) exposures alongside rising cash profits.
“Although we expect banks to face challenges in growing earnings… the balance sheet clean-up… will support higher dividend payouts relative to prior years,” the report states, ranking Zenith first, followed by GTCO and AccessCorp.
Key positives include loan write-offs that bolstered asset quality, enabling sustainable growth amid financial system reforms.
Dividend Recovery in Focus
Sector profitability from 2023-2024 was inflated by unrealised foreign exchange gains, which regulations barred from cash dividends, capping payouts despite headline profits.
Zenith historically led payout ratios in 2021-2022 via strong cash generation and capital discipline; Rencap expects a rebound as pressures ease, attracting income-focused investors.
Tier-1 Leadership Reinforced
Zenith Bank recently topped Nigeria’s tier-1 capital rankings for the 16th straight year, per The Banker magazine (Financial Times), affirming its resilience and positioning for long-term value creation.
CBN
- Access Bank Plc
- Fidelity Bank Plc
- First Bank of Nigeria Ltd
- Guaranty Trust Bank (GTBank)
- United Bank for Africa (UBA)
- Zenith Bank Plc
- FCMB (First City Monument Bank) – currently pushing to raise additional capital to secure its international licence.
- Wema Bank
- Standard Chartered Bank (Nigeria)
- Citibank Nigeria
- Stanbic IBTC Bank
- Sterling Bank
- Globus Bank
- Premium Trust Bank
The Securities and Exchange Commission (SEC) has revised the minimum capital applicable to all categories of regulated capital market entities after 10 years.
The minimum capital review, according to the SEC, is informed by the need to strengthen market resilience, enhance investor protection, align capital adequacy with the evolving risk profile of market activities, and ensure that regulated entities possess sufficient financial capacity to discharge their obligations in a sustainable manner.
“The revised Minimum Capital framework seeks to: enhance the financial soundness and operational resilience of market operators; align capital requirements with the scope, complexity, and risk exposure of regulated activities; promote market stability and systemic risk mitigation; and support innovation and orderly development of new market segments, including digital assets and commodities markets,” SEC said in a January 16 circular to market operators.
The SEC circular was sent to all entities regulated by the Commission, including but not limited to core and non-core capital market operators; market infrastructure institutions; capital market consultants; financial technology (FinTech) operators; Virtual Asset Service Providers (VASPs); and Commodity market intermediaries.
All affected entities are required to comply with the revised Minimum Capital Requirements on or before June 30, 2027, the circular said.
“Entities that fail to meet the prescribed requirements within the stipulated timeline shall be subject to appropriate regulatory sanctions, including suspension or withdrawal of registration, as may be determined by the Commission,” SEC said.
Tier-1 Portfolio Managers (Full Scope) involved in the management of Collective Investment Schemes (CIS) and Alternative Investment Funds (Private Equity, Venture Capital, Infrastructure Funds etc) above N20 billion Net Asset Value (NAV), or discretionary and Non-Discretionary Private Portfolio Management Services above N20 billion Assets under Management (AuM), or exposure to foreign instruments up to 40 percent of the NAV are now required to have a minimum capital of N5 billion as against N150 million.
“Any Fund and Portfolio Manager with NAV/AuM of more than N100billion should have a minimum of 10 percent of the NAV/AuM as capital,” SEC added.
For the Tier-2 fund/portfolio managers (Limited Scope) who are in the business of management of Collective Investment Schemes with limited pooled fund creation of not more than 10 times the required capital (N20 billion) on Net Asset Value (NAV), or discretionary and non-discretionary private portfolio management services of not more than N20 billion, or those exposure to foreign instruments of not more than 20 percent of the NAV, now require N2 billion as minimum capital as against low of N150 million.
Likewise, broker-dealers whose services include: client execution, proprietary trading, margin/securities lending and advisory services no longer require N300 million minimum capital to operate but N2 billion.
The SEC said the minimum capital review from 2015 low is in line with its mandate under the Investments and Securities Act 2025 to regulate and develop the Nigerian capital market.
Also, Tier 1 issuing houses who do non-interest finance services, advisory & arrangement services but no underwriting now require N2 billion as against N200 million; while Tier 2 –issuing houses with underwriting and offers a ‘one-stop-shop’ for issuers, provides underwriting services, and renders advisory and product development services require N7 billion minimum capital for this business as against N200 million.
Also, the minimum capital requirement for brokers (client execution only) has been jacked up from N200 million to N600 million, while that of dealers (proprietary trading only) has been moved from N100 million to N1 billion.
Broker-Dealers’ (client execution, proprietary trading, margin/securities lending and advisory services) has been raised from N300 million to N2 billion, while Sub-Brokers’ (Digital) from N10million to N100million; Sub-Broker (Corporate) has been increased from N10million to N50 million. Also, sub-brokers’ (Individual) now need N10 million minimum capital for the business as against N2 million while inter-dealer brokers require N2 billion as against N50 million.
Zenith Bank Top Nigerian Bank Pick Ahead of GTCO, AccessCorp
Here Are Nigerian Banks That Have Secured Their Licences
ICPC Charges Ozekhome with Forgery, Corruption Over London Property
MTN CEO Toriola Hails Nigeria’s Telecom Transformation at MIPAD
SEC Hikes Minimum Capital Requirements for Market Operators After a Decade
Banks quietly move to enforce new ₦50 transfer levy from Jan. 1
FIRS says NIN, CAC Numbers to Serve as Tax IDs from 2026
FIRS Declares NIN, CAC Numbers as Tax IDs from 2026
US Begins Partial Visa Ban on Nigerians January 1
Galaxy Backbone Tops FG’s Website Performance Ranking
E-Financial2 days agoSEC Hikes Minimum Capital Requirements for Market Operators After a Decade
Telecom2 days agoVodacom Crowned Africa’s Top Employer 3rd Year Running on Innovation, Ethical AI
Telecom2 days agoStudy Shows Blocks in Telegram are Pushing the Underground Out
News2 days agoNGX Unveils Net-Zero Plan for Greener Capital Market
News2 days agoNigeria Off EU High-Risk Money Laundering List in Major Financial Win
Telecom2 days agoGalaxy Backbone Marks Two Decades of Powering Nigeria’s Digital Evolution
Telecom2 days agoGalaxy Backbone Marks 20 Years, Tops FG Website Scorecard
Telecom59 minutes agoMTN CEO Toriola Hails Nigeria’s Telecom Transformation at MIPAD