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Risk Appetite Flickers to Life on Vaccine Hopes, Nigeria Inflation in Focus

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By Lukman Otunuga, Senior Research Analyst at FXTM,

 

Investors across the globe have been injected with a renewed dose of confidence towards risk as governments relax lockdown measures and first human trial results raise hopes for a coronavirus vaccine.

The mood across financial markets is quite encouraging and this positive vibe should support global stocks and emerging markets in the week ahead. However, questions should be raised over the return in risk sentiment given how US-China trade tensions have made an unwelcome return. Concerns remain elevated over slowing global growth despite countries easing lockdown measures while fears mount around a second wave of coronavirus infections.

In Nigeria, the All-Share Index (ASI) also rose by 0.29% to close at 23,941.75 points on Monday and could mirror similar gains on Tuesday amid the positive vibe. While global equity bulls may be in the driving seat for now, bears are lurking in the corner waiting for another opportunity to pounce.

Nigeria Inflation in focus but major risk event remains GDP report

Repeated signs of rising inflationary pressures in Nigeria have squashed hopes over the central bank of Nigeria (CBN) cutting interest rates to stimulate economic growth.

The annual inflation rate in Africa’s largest economy rose for the seventh straight month to 12.26% in March amid border closures and the new VAT tax rate. Given the Naira’s weakness over the past few weeks amid severely depressed oil prices, inflation is forecast to hit 12.9% in April. Such a figure may place the CBN in a tight spot, especially if first quarter GDP figures scheduled for release next week confirm that Nigeria experienced an economic contraction last quarter.

King Dollar to maintain grip on iron throne

The mighty Dollar should reign supreme this week despite the semblance of stability enveloping financial markets.

Although investors are clearly hopeful over economies re-opening after an extended lockdown period, global macroeconomic conditions remain depressing while renewed trade tensions are bound to hit sentiment. As risk aversion makes a return and market players rush towards safety, one of the first destinations is likely to be the Dollar.

Another day, same old story for Pound

The path ahead for the British Pound is filled with many obstacles and dead ends as fears over a no-deal Brexit return to the scene.

One can’t help but feel a familiar sense of déjà vu as the UK government prepares for its final round of talks scheduled in June to try and avert a no-deal Brexit outcome.  To rub salt into the wound, economic data from the United Kingdom remains discouraging with the number of people claiming unemployment benefits soaring to 2.097 million in April.

With the fundamentals not in favour of the Pound, it may be only a matter of time till the technical paint a similar picture. The GBPUSD is under pressure on the daily charts and may trend lower if prices break below 1.2200. Sustained weakness below this level could open the doors towards 1.2000.

 

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Euro eyes 1.10 but upside capped by fundamentals

Where the Euro concludes this week will be heavily influenced by the pending Purchasing Managers Index data scheduled for release over the coming days.

A disappointing set of economic data may put an end to the current rally with 1.1000 acting as a ceiling. Looking at the technical picture, the EURUSD remains a wide range on the daily charts with support at 1.0770 and resistance 1.1000. Expect the currency pair to find comfort within these levels until a decisive breakout is achieved.

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Commodity spotlight – Gold

Gold should remain in fashion despite stock markets rising and economies easing lockdown measures.

The precious metal remains supported by global growth fears, lower interest rates across the globe and fears around a second wave of coronavirus outbreak. Gold is trading at levels not seen in more than 7 years above $1430 and has gained over 14% year-to-date. A solid daily close above $1430 may pave the way back towards $1765 and $1770. Alternatively, sustained weakness below $1720 could open the doors back towards $1700.

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Ugo Onwuaso is an ICT enthusiast. He believes technology should be used for general good. He holds a Master of Public Administration (MPA) degree from the Lagos state University.

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E-Financial

Jaiz Bank Posts N2.4bn Profit

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Jaiz Bank Plc, Nigeria’s premier non-interest (Islamic) bank has released its 2019 audited results for the period ended December 31st, 2019, declaring a Profit After Tax (PAT) of N2.4 billion.

The figure, according to a statement from the bank, represents a remarkable leap of 193% from N834.4m realized in the corresponding period of 2018.

In the report submitted to the Nigerian Stock Exchange (NSE), the bank declared a 135% growth in Profit Before Tax (PBT) for the period under review from N879.7m as at December 31st 2018 to N2.1bn as at December 31st 2019.

Key extracts of the report showed that Gross Income grew by 80% to N13.5bn as at December 31st 2019 from N7.5bn in the previous year, while the Bank’s Total Assets also grew by 54% to N167.27bn from N108.46bn.

Attesting to the increasing public interest in Islamic finance products, the earning per share of the Bank surged up to 8.30 kobo per share as against 2.83 kobo per share in 2018, signifying an increase of 193%.

Commenting on the impressive performance, Hassan Usman, Managing Director/Chief Executive, said: “the major driving force was the deliberate efforts to satisfy our customers, which was evident in the significant growth in the deposit base and risk asset portfolio.”

During the year under review, the Bank deepened its support for the MSME sector with targeted intervention to meet diverse needs of small-scale bourgeoning entrepreneurs.

The Bank also invested more on IT infrastructures, improved its E-banking channels that made it easier for customers who prefer to bank on the move than through the mundane visitations to banking halls.


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NAICOM Extends Insurance Firms Recapitalization

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The National Insurance Commission (NAICOM) has split the industry recapitalization process into two, extending the recapitalization deadline to September, 2021.

The segmentation was contained in a circular issued by the commission Wednesday, June 3 with title “Segmentation of minimum paid up share capital requirement for insurance companies in Nigerian,” referenced: NAICOM/DPR/CIR/25-04/2020, signed by the Director Policy &Regulation, Mr. Pius Agboola, for the Commissioner for Insurance, Mr Sunday Thomas.

According to the circular, insurance companies in the first phase are required to pay 50 per cent of their minimum paid up capital by 31st December 2020 and the remaining 50 per cent in the second phase by 30th September 2021.

Reinsurance firms are also expected in the first phase to pay 60% of their minimum paid up capital and 40 per cent in the second phase.

The circular states, “the incidences of COVID-19 pandemic has made it difficult to proceed with the 31st December, 2020 recapitalization deadline. A review of the recapitalization deadline therefore became imperative in order to mitigate likely negative consequences of the pandemic on the exercise

“The Commission hereby extend and segment the recapitalization process into two phases as follows: 50 per cent minimum paid up capital for insurance and 60 per cent for reinsurance shall be met by 31st December, 2020; insurance companies are required to fully comply with the approved minimum paid up share capital not later than 30th September, 2021.”

The commission also urged insurers to comply fully with the required minimum paid up capital at the end of the recapitalization exercise on 30th September, 2021.

“Any insurance company that fails to satisfy the required minimum paid up capital by the end of 31st December, 2020 may be restricted on the scope of businesses they will transact” NAICOM warns.

It would be recalled that the commission had issued circulars referenced NAICOM/DPR/CIR/25/2019 dated May 20, 2019 which introduced the new capital requirement for insurance companies in Nigeria and NAICOM/DPR/CIR/25-03/2019 dated December 30, 2019 which extended the deadline for recapitalization.


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Uzoma Dozie’s Sparkle Gets Banking License, Launches Services

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Sparkle, a digital ecosystem providing financial, lifestyle and business support services to Nigerians across the globe, has launched services after being granted a banking license by the Central Bank of Nigeria (CBN).

Uzoma Dozie’s Sparkle Gets Banking License, Launches Services

Uzoma Dozie

Sparkle offers comprehensive support for individuals, including flexible payments, savings and analytics to provide greater freedom, flexibility and control over finances and lifestyle once and for all.

Powered by data and technology, Sparkle is launching a mobile app – available for iOS and Android – giving customers full and free access to one account that offers multiple services and different wallets.

Sparkle’s users will be provided with visibility over spending patterns, with a detailed breakdown of payments by category.

Tools such as Sparkle Stash, a savings tool aimed towards specific goals, are included.

Users will also have the ability to split payments and bills, make utilities and bill payments, as well as send and receive money in the Sparkle network and with other local banks. Customers will also have access to Indy – a 24/7 financial buddy and customer services chatbot.

Sparkle has been founded by tech investor and financial inclusion advocate Uzoma Dozie, the former chief executive officer of Diamond Bank.

Dozie, commented: “Sparkle will be transformational for Nigerians across the globe and I am hugely excited to be launching it today. Sparkle is redefining Nigerian commerce by merging financial services with a seamless lifestyle solution. We are removing barriers using technology and data, driving inclusion at scale. In doing so, we are empowering Nigerians to fulfil their potential, democratizing access to valuable solutions for both business and personal needs.”

Sparkle is partnering with VISA, Microsoft and PwC Nigeria to achieve its vision of redefining Nigerian commerce. The partnerships will provide industry leading expertise in APIs, cloud computing, data science, machine learning, tax and financial advisory services for the benefit of Sparkle’s customers. The services offered by Sparkle are all licensed by the CBN.

The launch of Sparkle comes at a time when most of Nigeria’s population (79%) have mobile connectivity, with 39% having access to mobile broadband connections1.

This young and growing population – currently over 195 million people2 – are also digital natives, with social networks forming part of everyday life.

The impact of Covid-19 continues to be felt across Nigeria, accelerating the transition to more digitally enabled lifestyles. As such, there is a real opportunity for digital-only propositions like Sparkle to meet Nigeria’s needs, for individuals and small businesses to remain connected and thrive, both now and in the future.

Dozie continued: “We are working with global partners to unleash freedom, flexibility and transparency in Nigeria. We are helping to drive forward the growth of Nigeria’s budding entrepreneurs and individuals. Join us to make history as we enter the future of commerce and look towards this exciting phase of growth.”

Sparkle has recently joined Women’s World Banking, working to ensure greater financial inclusion for women, their families and communities in emerging markets, where Dozie was previously a Board member.

Sparkle has also joined Open Banking Nigeria, collaborating with Nigeria’s financial services industry to transform and advocate open banking in Nigeria, and to lead the way in Africa too.

Sparkle was founded on the values of trust, transparency, freedom, inclusivity, simplicity and personalization.

 

 


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