The Central Bank of Nigeria (CBN) has approved the proposed merger between Unity Bank Plc and Providus Bank Limited.

CBN’s spokesperson, Sidi Ali Hakama, disclosed this in a statement on Tuesday evening.

Hakama said this strategic move is designed to bolster the stability of Nigeria’s financial system and avert potential systemic risks.

“The merger is contingent upon the financial support from the CBN. The fund will be instrumental in addressing Unity Bank’s total obligations to the Central Bank and other stakeholders,” Hakama noted.

She added that the CBN’s action is in accordance with the provisions of Section 42 (2) of the CBN Act, 2007.

According to her, this arrangement is crucial for the financial health and operational stability of the post- merger organisation.

 Hakama also noted that no Nigerian bank currently faces a precarious situation comparable to that of Heritage Bank, which was recently liquidated.

 She added that the apex bank remains committed to safeguarding depositors’ interests and ensuring the smooth functioning of the banking sector through proactive measures and strategic interventions.

Bearish sentiment dominated the stock market on Tuesday, causing investors to lose N371 billion.

Specifically, the market capitalisation shed N371 billion or 0.67 per cent to close at N55.033 trillion, against N55.404 trillion recorded on Monday.

The All-Share Index, which opened at 97,582.41, declined by 0.67 per cent or 654 points to close at 96,928.52.

Selloffs in BUA Cement, Guaranty Trust Holding Company (GTCO), and Transnational Corporation (Transcorp) underpinned the market’s weak performance.

Consequently, the Year-To-Date (YTD) return decreased to 29.63 per cent.

Market breadth closed positive with 30 gainers and 25 losers on the floor of the Exchange.

On the gainers’ table, NASCON and Academy Plc led by 10 per cent each to close at N32.45 and N2.20 per share, respectively.

Also, BUA Cement led the losers’ table by 9.99 per cent to close at N128.90 per share.

Analysis of the market activities showed trade turnover settled higher relative to the previous session, with the value of transactions up by 8.32 per cent.

A total of 449.21 million shares valued at N6.74 billion were exchanged in 9,381 deals, in contrast to 324.02 million shares valued at N6.22 billion were exchanged in 9,738 deals posted in the previous session.

UBA led the activity chart in volume and value with 62.83 million shares traded in deals worth N1.34 billion.

The Nigerian Exchange Limited (NGX) is experiencing more pressure, as investors continue to face uncertainty about investing and trading in the country. This is a result of the global market decline.

This crisis has led to a N93bn loss in market capitalization which now stands at N55.40tn. The All-Share Index fell to 97,582.41 points, down 0.17 percent from the previous close of 97,741.86 points.

Meanwhile, current trading saw 9,738 transactions totaling N6.217bn, with 324.02m units of shares exchanged. The market breadth was negative, as 23 equities gained while 25 equities saw their prices drop.

On Monday, the domestic bourse saw a significant downturn, with investors losing N93 billion due to uncertainties from recent protests and looting. The NGX All-Share Index and Market Capitalization fell by 0.17% and N93 billion, respectively.

The banking sector was notably affected, with some branches shutting down due to vandalism fears.

Despite overall negative trends, some stocks like Fidelity Bank, FBN Holdings, and UBA appreciated. Among the top gainers were International Breweries, Presco Plc, and Sovereign Trust Insurance, each posting a 10 percent increase to close at N4.62, N485.10, and N0.55, respectively. Meanwhile, Chams Plc led the losers with a 10 percent decline to close at N1.98, followed by University Press Plc, which shed 9.92 percent to close at N2.18, and The Initiate Plc, down 8.26 percent to end at N2.

Experts have also expressed concerns over the detrimental effect on Foreign Direct Investments (FDIs) in Nigeria. Olatunde Amolegbe, CEO of Arthur Stevens Asset Management Limited, highlighted that Nigeria, though slower to react, will feel the global market impacts within 2-3 months due to its less integrated market.

“The NGX did close in the red Friday and Monday trading sessions although it did not see a crash on the same scale as global markets,” Amolegbe said.

He stressed the importance of cautious monetary policy by the Central Bank of Nigeria (CBN), which is unlikely to lower rates soon given the high inflation. He advised investors not to panic over global market events.

Mike Eze, CEO of Crane Securities Limited, compared the situation to the 2008/2009 financial crisis, suggesting the downturn might be short-lived and could attract foreign investors seeking safer havens.

READ ALSO: Naira appreciates by 0.6% against dollar at official market

Chiazor Victor, Head of Research and Investment at FSL Securities, called for strategies to prevent further escalation, similar to the business continuity measures during the COVID-19 pandemic. The combination of global stock crashes, domestic protests, and a windfall tax has raised investor concerns.

The global market turmoil was triggered by a U.S. jobs report indicating a hiring slowdown, raising fears of a recession due to high-interest rates. European indices and major Asian markets also suffered, with significant declines in tech stocks. Oil prices and cryptocurrencies saw notable losses, adding to the global financial strain.

Fitch Ratings, an American credit rating agency, has downgraded the National Long-Term Rating of Dangote Industries Limited (DIL) from ‘AA(nga)’ to ‘B+(nga)’, citing a notable deterioration in the conglomerate’s liquidity position.

The downgrade also affects the senior unsecured debt rating issued by Dangote Industries Funding Plc, which has been reduced from ‘AA(nga)’ to ‘B+(nga)’.

Dangote Industries downgrade from ‘AA(nga)’ to ‘B+(nga)’ indicates a significant reduction in creditworthiness. The ‘AA(nga)’ rating indicates a very strong capacity to meet financial commitments, while the ‘B+(nga)’ rating suggests a higher vulnerability to adverse business, financial, and economic conditions, though the company is still meeting its financial commitments.

Fitch, in its latest report published on Monday, also simultaneously placed the ratings on Rating Watch Negative (RWN).

“The downgrade reflects significant deterioration in the group’s liquidity position following lower than expected disposal proceeds, operational and financial underperformance compared to our prior expectations, also affected by local currency devaluation, and a lack of contracted backup funding to repay its significant debt facilities maturing on August 31, 2024. We view the lack of DIL’s audited accounts for 2023 as a corporate governance issue,” Fitch Ratings said.

“The RWN reflects uncertainty related to the group’s ability to refinance maturing debt. Lack of tangible steps to refinance or repay the maturing debt would lead to further downgrade while we do not expect a positive rating action until the company’s liquidity position improves substantially.”

It said Dangote Industries Limited faces immediate debt servicing requirements related to the syndicated loan raised to finance the construction of Dangote Oil Refining Company (DORC), adding that “further delays in meeting the funding requirements would significantly increase the likelihood of financial restructuring or default and lead to further rating downgrades.”

Fitch stated that the major currency devaluation in 2023 caused Dangote Industries to record a looming FX loss of NGN2.7 trillion in 2023 as the company faces a mismatch between USD-denominated debt and domestic revenues.

This devaluation is expected to continue at an accelerated pace in 2024, the international agency reported, stating, “The group has senior secured debt raised at subsidiary levels amounting to USD2.7 billion at the end of 2023, representing 49% of total group debt. The debt structure also includes on-demand shareholder loans from its ultimate parent, Greenview plc, amounting to USD 2.3 billion, representing 43% of the total debt. We view shareholder loans as subordinate debt. The company has also raised senior unsecured debt amounting to NGN350 billion with long-dated maturities in 2029 and 2032 to finance capex requirements.”

The Nigerian National Petroleum Corporation (NNPC) acquired a 7.25% stake in DORC’s project entity for USD 1.0 billion in 2021, with an option to purchase an additional 12.75% stake by 2024.

As the NNPC has not exercised this option, Fitch said Dangote Industries plans to divest this stake to meet its August 2024 loan maturity; however, Fitch said the timely divestment and meeting the imminent maturity are highly uncertain in its view.

According to Fitch, Dangote Industries’ cement production arm, Dangote Cement Plc (DCP), also faces challenges with softer retail demand and increased raw material costs, leading to reduced profitability.

“We expect DIL’s EBITDA margins in cement production to drop further in 2024 following softer retail demand for cement, particularly in the Nigerian market, as well as limited ability to pass on increased raw material cost to consumers.

“Dangote Cement Plc (DCP) is a DIL-controlled cement producer with factories spread across 10 African countries. Nigeria remains the major contributor to DCP’s consolidated revenues. In 2023, the group had a 52 million tonne per annum (Mta) capacity and sold 27.2 Mta through various operations in Africa. Revenues in local currency grew by 36% to NGN2.2 trillion in 2023 and EBITDA to NGN886 billion from NGN708 billion in 2022. Export sales of clinker to West African markets from Nigeria, stood at NGN12.3bn in 2023, with a 400% increase year-on year,”

Regarding Dangote Fertiliser (DFL), Fitch said the fertiliser utilisation rate is still low as the group operates below capacity due to inadequate gas supply, achieving only a 50% utilisation rate in 2023.

“Dangote Fertilizer (DFL) has a total production capacity of 2.8 million tons per annum (MTPA) of Urea and Ammonia. Chevron and NNPC have committed to supplying gas for 20 years at a rate of 200 million standard cubic feet per day (mscf/day). Although the project began its first phase of production in 2021, the average utilization rate improved but remains low at just 50% in 2023 (up from 32% in 2022).

“The utilisation rate was hindered by inadequate gas supply which in our view affects operational efficiency. The company anticipates further improvements in utilization once the ongoing pipeline repairs are completed in August 2024.”

CREDIT: GUARDIAN

The Naira on Monday appreciated at the official market, trading at N1,607.15 to the dollar.

Data from the official trading platform of the FMDQ Exchange, a platform that oversees the Nigerian Autonomous Foreign Exchange Market (NAFEM), showed that the Naira gained N9.93.

This represents a 0.61 per cent gain when compared to the previous trading date on Aug. 2 when it exchanged at N1,617.08 to a dollar.

However, the total daily turnover reduced to 77.09 million dollars on Monday, down from 131.55 million dollars recorded on Aug. 2.

Meanwhile, at the Investor’s and Exporter’s (I&E) window, the Naira traded between N1,620.50 and N1,570.00 against the dollar. 

The debate about the sulphur levels in Automotive Gas Oil, commonly known as diesel, from the Dangote Petroleum Refinery remains unresolved, according to The PUNCH.

During the weekend, online reports claimed that diesel from the $20 billion refinery had high sulphur content.

Despite these allegations, oil marketers noted that no drivers or industrial users had reported any issues with the Dangote diesel.

“We don’t want to be involved in the politics or claims and counter-claims about Dangote diesel, but what I going to tell you is that no transporter, motorist, or industrial consumer has complained about the diesel since we started distributing it,” the National President of the Independent Petroleum Marketers Association of Nigeria, Abubakar Maigandi, stated.

Read Also: Enugu aims to create $30 billion economy – Mbah

A senior representative of the Dangote Group stated that the recent claims about high sulphur levels in Dangote diesel originated from people determined to sabotage the refinery, labeling the claims as false.

The PUNCH recalls that Aliko Dangote, President of the Dangote Group, and some company officials had previously accused the Nigerian Midstream and Downstream Petroleum Authority of bringing contaminated fuel into Nigeria.

Additionally, Devakumar Edwin, Vice President of Oil and Gas at Dangote Industries Limited, accused international oil companies of attempting to undermine the refinery and criticized the NMDPRA for recklessly issuing licenses to marketers for importing substandard refined products into the country.