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Analysts Comment on Nigeria’s Ban on Cow Skin (Ponmo), Sterling Bank Holdco Structure, and Taj Bank’s Sukuk Bond

Sep 21, 2022   •   by TheAnalyst, Proshare Research   •   Source: Proshare   •   eye-icon 218 views

Being an Analys Note issued by Proshare Research on September 21st, 2022

 

Nigeria’s Proposed Ban on Cow Skin (Ponmo); Analysts Weigh in on Merits

Nigeria is currently proposing a ban on the consumption of cow skin popularly known as ponmo. The two major reasons for the proposal are that cow skin provides no nutritional value and that the ban would improve Nigeria’s leather industry. The good part of this proposal is that the Nigerian Leather industry could be revived and expanded as it could generate higher foreign exchange from exports and increase the number of leather products in the domestic market.

 

The other side of the decision is that it would deprive Nigerians of the alternative to meat given that it serves as the cheapest alternative given the high inflationary environment (August headline inflation rate was 20.54%). Generally, beef, fish, and eggs have seen rapid increases in their prices over the last eight months of 2022.

 

G20 Countries Fall Short of Renewable Energy Targets

According to research by climate and renewable energy advocacy groups, the majority of the world's 20 largest economies, known as the G20, lack ambitious renewable energy objectives and fail to meet their climate obligations. Eleven of the largest economies got a C or worse on a renewable energy report card, which assessed their plans to reach net zero and their targets for producing and using renewable energy. This is especially unfortunate because they account for about 80% of the world's energy-related emissions, which places a heavy burden on them to reduce emissions and exert substantial influence over how quickly the world decarbonizes. Despite this poor performance, a number of researchers have noted that it is still an improvement over 2018 when only six G20 nations had official plans to reduce emissions by the year 2050. Analysts are concerned because the poor performance could severely harm the global effort to combat climate change and result in the worsening of global warming.

 

Ghana’s Economy Grew 4.8% in Q2 2022 Despite Economic Difficulties

The Ghanaian economy defied its high inflation rate to record a +4.8% gross domestic product (GDP) growth in Q2 2022. After severe economic headwinds, the Ministry of Finance lowered its growth outlook to +3.7%. Analysts have therefore chalked up the better-than-expected growth to higher exports responding to the -64.45% decline of the Cedi. Observers note that Information and communication outperformed all other sectors last quarter (it grew by +12.4%). Meanwhile, Agriculture (+4.6%), Mining and quarrying (+4.4%), as well as the Education sub-sectors (+13.2%) registered notable performancesWith inflation rising in August to 39.9% (a 21-year high) analysts believe that the Ghanaian economy may suffer a major contraction in the event of a global economic recession. 

 

Shareholders Approve Holdco Structure for Sterling Bank

Sterling Bank shareholders have voted in favour of the adoption of a non-operating holding company (Holdco) structureowning shares in both its commercial banking operation and a newly incorporated subsidiary. Alternative Bank Limited will operate as a Non-Interest Banking (NIB) business.  The Holdco will be listed as a public company to replace Sterling Bank Plc on the Nigerian Exchange Limited (NGX) while the sterling bank will be delisted from the NGX’s Daily official list. Shareholders are expected to exchange their shares in the bank for shares in Holdco in the same proportion as their current holdings in the Bank. Analysts observed that the recent buying interest from Sterling Bank directors was in anticipation of the Holdco structure. However, some selloffs are expected as investors react to the new Holdco structure (see chart 1 below).

 

Chart 1: Share Price Movement for Sterling Bank from August 22, 2022 – September 20, 2022 

 

Airtel Leads in Internet Speed in Nigeria 

Available data from Speedtest Intelligencanalysed the internet speed performance of four mobile service providers across 10 countries in sub-Saharan Africa, showing that Airtel delivered a faster median download and upload speeds in Nigeria in Q2 2022. Head-to-head performance between Airtel and MTN in Nigeria puts Airtel ahead in the country, both in terms of median download and upload speed In Q2 2022, Airtel Nigeria recorded a median download speed of 30.35 Mbps and a median upload speed of 10.28 Mbps, both of which topped those of MTN which had 26.30 Mbps download and 9.13 Mbps upload. Analysts expect the median download speed and upload speed of MTN to outrun Airtel following the rolling out of the 5G network. 

 

Taj Bank Issues N10bn Sukuk Bond 

Under its 100 million Sukuk issuance programme, Taj bank has announced the commencement of its N10 bn 15% Series 1 Sukuk bond. The offering will run from Tuesday, September 20, 2022, to September 28, 2022, with an offer price of N1000 per unit subject to a minimum of 100 units and multiples of 50 units thereafter. The trust Sukuk Certificate that will be issued to investors carries a perpetual tenor that is callable after a minimum period of 5 years. The proceeds from the offer will be used to increase the bank’s capital base with the profit earned shared in a ratio of 75% for Taj bank and 25% for Trust Sukuk-holders. The bank has successfully raised funds through the Sukuk bond in previous years and currently has a credit rating of ‘Bbb’ from Agusto & Co which indicate a stable outlook. Analysts expect investors to be geared toward the current issuance considering the impressive financials as the bank’s gross profit rose from N297m in 2020 to N1.63bn in 2021

 

NASDAQ to Custody Bitcoin and Ethereum to Institutional Investors

NASDAQ said it will be launching a digital asset services business that would begin with custody of crypto tokens for institutional investors and is dedicating a group to digital assets. The former executive at the Gemini digital exchange- Ira Auerbach, will be in charge of the new digital asset business, which will first offer custodial services for Bitcoin and Ethereum. According to wall street, digital asset custody might pave the way for future crypto trading services. Analysts noted that NASDAQ has applied to the New York Department of Financial Services to become a custodian of digital assets, which would undoubtedly put NASDAQ in competition with institutional crypto service providers. 

 

The cryptocurrency market nudged further lower, with a consistent decline from technical resistance. The price of Bitcoin experienced a downside retracement from the fifth wave of depreciating value from the US$19,402.03 24hr high to US$18,861.25, losing -2.22%. Similarly, major coins followed suit, except XRP, which consolidated for a gain at the US$0.4027 level (see table 1 below).

 

Table 1: MARKET MOVERS 


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