Category Archives: FINANCE

Banks lose N1trn current account deposits in February

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By Babajide Komolafe

This was one of the highlights of the Depository Corporation survey for February 2017 recently published by the Central Bank of Nigeria (CBN). Among other things, the survey revealed that total demand (current account) deposit of banks fell by 10.75 per cent to N8.6 trillion in February from N9.636 trillion in January. Similarly, currency outside the banks declined month-on-month (m-o-m) by 1.16 per cent to N1.61 trillion. Consequently, Narrow money supply declined m-o-m by 9.36 per cent (and 11.35 per cent year-to-date, y-t -d) to N10.21 trillion.

According to the report, broad money supply, M2, moderated month-on-month by 4.34 per cent to N22.37 trillion following a 0.46 per cent increase in Net Domestic Assets (NDA) to N13.82 trillion and an 11.21 per cent decline in Net Foreign Assets (NFA) to N8.55 trillion.  The increase in NDA followed a 0.54 per cent  m-o-m increase in Net domestic credit to N26.77 trillion which more than offset a 0.62 per cent increase in other liabilities (net) to N12.95 trillion.

Continue reading Banks lose N1trn current account deposits in February

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Breaking: CBN Revalues Dollar Rate for Invisibles to N357, Orders Banks to Retail At N360

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According to a tweet from the CBN, and a statement from its spokesperson Isaac Okorafor, the CBN will sell forex to banks at N357/$1, while banks will sell to their customers at N360/$1 for invisibles (BTA, medicals, fees, etc).

All customers requesting forex for their personal and business travel allowances (PTA and BTA), tuition and medical fees, should buy at a rate not more than N360 to the dollar. “Banks are to post the new rates in their banking halls of their branches immediately,” he said.

This rate change only affects invisible transactions for retail users. The interbank rate, which trades at a band around the N307/$ mark still remains, however.

As a form of monitoring, Okorafor also mentioned that examiners will be sent out to ensure compliance and erring banks will be punished. This is coming on the back of complaints by Bureau de Change operators about the large profit margins that commercial banks are afforded by accessing FX at CBN rates.

This move by the CBN is expected to further push down the rates in the parallel market – where the exchange rate closed at about N390/$1 last week – especially if the CBN can maintain its interventions. This leads towards the exchange rate unification that Governor Emefiele hinted at in recent weeks. As at 20th February, the Naira was selling at about N522/$1 in the parallel market but has risen 38% within a month after the CBN pumped nearly $2.5 billion into the market.

#NAIRAMETRICS

Profiting from bear market – New Telegraph Nigerian Newspaper

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The current low prices of stocks occasioned by the downturn of the economy present bargain hunters investment opportunities. CHRIS UGWU writes

A bear market refers to a market-wide decline in stock prices of at least 15-20 per cent coupled with a pessimistic sentiment about the market. Clearly, these times are nothing to look forward to and fighting back can be dangerous. However, according to Investopedia, bear markets can provide great opportunities for investors.

“The trick is to know what you are looking for. Beaten up, battered, and underpriced: these are all descriptions of stocks during a bear market. Value investors such as Warren Buffett often view bear markets as buying opportunities because the valuations of good companies get hammered down along with the poor companies and sit at very attractive valuations. Buffett often builds up his position in some of his favorite stocks during lessthan- cheery times in the market because he knows that the market’s nature is to punish even good companies by more than they deserve,” said Investopedia.

Continue reading Profiting from bear market – New Telegraph Nigerian Newspaper

A New Perspective on the Active–Passive Investing Debate by Paul Smith CFA

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Here’s a fact that doesn’t get enough attention: By some counts, up to 86 percent of active funds underperform their benchmark, but by definition 100 percent of truly passive funds underperform theirs. Why is this? Because — unless they are taking some type of an active bet or have zero management and administration costs — they have to fall short of their benchmark.

As the debate over active versus passive investing continues, investors and regulators alike are overlooking a key point: Passive investing wouldn’t make anybody any money without active investing. Passive investors are essentially free riders, piggybacking off active managers at a fraction of the expense it takes to research investment positions. No one in the investment press focuses on this moral hazard or on whether or not this is fair to active investors, who effectively subsidize their passive brethren.

The media question the value of active management, but they never bother to acknowledge that without it passive investment wouldn’t exist, let alone thrive. Passive investors only make money if markets move, and active managers are responsible for those movements.

Continue reading A New Perspective on the Active–Passive Investing Debate by Paul Smith CFA

Ponzi scheme: Why Nigerians must be sceptical by CHRIS UGWU

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An average Nigerian investor, especially first-timers unaware of the workings of Ponzi schemes, has suffered considerably. CHRIS UGWU writes that investors should be sceptical of any investment that requires new investors to pay existing investors

Following the rising rate of illegal fund managers in Nigeria, the Securities and Exchange Commission (SEC) and other stakeholders have continued to raise the alarm over the activities of these outfits that have defrauded unsuspecting Nigerian of their hard earned money.

The line of trade of these illegal fund managers, which are known as Ponzi scheme in the developed market, is usually tinted with promises of high returns on investments.

Continue reading Ponzi scheme: Why Nigerians must be sceptical by CHRIS UGWU