Nigerian Stock Exchange
Nigerian Stock Exchange

This is a challenging time for banking stocks in the Nigerian Stock Exchange as lead indicator fell by 1.86 per cent in August 2015. Banking stocks practically plunged after President Muhammadu Buhari’s directive on the establishment and operation of Treasury Single Account and disappointing earnings for the half year ended June 30, 2015.

In a circular dated August 7, with reference number HCSF/428/S.1/120, the Head of Service of the Federation, Danladi Kifasi, said all payments must be made to Accountant General (Federal Sub-Treasury), Account No. 3000002095.

From early August, cautious trading occasioned by uncertainties surrounding the policy direction of the new government has weighed on the stocks.

Analysts still doubt the possibility of the stock market rerouting north as there are not much positive news capable of driving the trend.

For instance, the All Share Index which opened the month at 30,247.83 points, closed on Monday at 29,684. 84 points, while market capitalisation depreciated N159 billion to close at N10.2 trillion, from the opening figure of N10.367 trillion on August 3, 2015, the first trading day of the month.

The banking index, which dropped most closed at 308.11 points, shedding 2.68 per cent.


Unity Bank Plc dropped highest value, depreciating 29.5 per cent to close at N1.41 per share, from N2.00, followed by Union Bank Plc with 19.0 per cent to close at N6.30 per share, from N7.50 at the beginning of the month.

Diamond Bank Plc fell by 66 kobo or 17.2 per cent to close at N3.18 per share, while First City Monument Bank Plc declined 31 kobo or 11.5 per cent to close at N2.39 per share.

Other laggards are Zenith Bank Plc, Sterling Bank Plc, Wema Bank Plc, Fidelity Bank Plc, Guaranty Trust Bank Plc, Eco Bank Plc, United Bank for Africa Plc and Stanbic IBTC Bank Plc.

Reacting to the negative performance of the banking stocks in the review period, the Managing Director of Lambert Securities Limited, Mr. David Adonri, said majority of the banks lost value because of the investors’ reaction to the single treasury account.

He said, “A lot of investors reacted to the single treasury account and that was why the management of few banks came to us and said they didn’t rely much on public funds.”

Also, research analysts at GTI Securities Limited, an investment firm, advised investors to trade with caution, saying that a good number of stocks still trade at attractive positions. “We strongly believe that whosoever will take medium to long term position in the market now is not only hedging on advantages of discounted value but also expected capital appreciation as soon as the market reverses trend.”

Bankers had pressurized the former government of Goodluck Jonathan, which had initiated the policy in December 2014, to soft pedal on the implementation which was originally scheduled for February 2015, on the reasons of a likely negative impact on the economy.

It was learnt that the implementation would adversely affect liquidity in the banking system and end up putting pressure on interest rates and availability of credit to the economy.

Another research firm, Afrinvest Group, said, “Whilst the directive issued came as the first official statement by the Presidency on the TSA, the Nigerian National Petroleum Corporation, NNPC, had earlier began withdrawing its funds from banks for retirement into CBN.

“This had an impact on liquidity level in the banking system, resulting in a surge in money market rates during the period as banks scrambled for funds to cover their liquidity positions.

“With the TSA implementation now extended to all federal MDAs, the Nigerian banking industry, on an aggregate basis, would be affected in terms of deposits and funding cost structure.”

In relation to this FBN Capital, an investment arm of FirstBank of Nigeria Plc, stated in its money market reports last weekend that the NNPC withdrew about N400 billion from the banks last month pushing Open Buy Back, OBB, and overnight interest rates to a record high of 50 per cent. It, however, stated that this pressure was corrected when FACC inflow came to the banks within the same period.

By Pita Ochai


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