Nigeria raises 150.6 bln naira in T-bills at higher returns – Reuters

LAGOS May 5 (Reuters) – Yields on Nigerian short-dated treasury bills rose marginally at an auction on Wednesday where the central bank sold a total of 150.6 billion naira worth of debt with maturities ranging between three months and one year.

The central bank said it sold 45.17 billion naira of 3-month paper at 7.99 percent yield, compared with 7.88 percent at the last auction on April 20.

A total of 23.43 billion naira worth of the 6-month treasury bill was sold at 9 percent against 8.99 percent at the previous auction, while 82 billion naira of the 1-year treasury bill was sold at 11.05 percent compared with 10.24 percent previously.

Investors demanded a total of 261.52 billion naira against 253.19 billion subscription at the last auction.

CBN Records N123bn Operating Surplus – Thisday

By Obinna Chima

The Central Bank of Nigeria’s (CBN) Consolidated and Separate Financial Statements for the year ended 2015 released on Wednesday showed that its net income for the year was N108.530 billion, while its Group net income was N123.074 billion.

The results stated that in line with the provision of the Fiscal Responsibility Act, 20 per cent (N21.706 billion) of the net income of the bank will be credited to its retained earnings while the balance being 80 per cent (N86.824 billion) will be paid to the federal government.

It stated that the preparation of the consolidated and separate financial statements was in conformity with International Financial Reporting Standard (IFRS), which required the use of certain critical accounting estimates and judgements. This, according to the central bank also required management to exercise its judgement in the process of applying IFRS accounting policies.

The results revealed that the Group Operating Income increased by N287.65 billion or 64.6 per cent to N732.51 billion from N444.86 billion in 2014. Also, the Group Operating Expenses rose by N185.72 billion or 42.8 per cent to N618.86 billion from N433.14 billion.

The increase in operating income was as a result of a 93 per cent increase in net interest income, which rose to N132.2 billion in the year under review, from N38.45 billion in 2014.

In the year under review, the central bank recorded N657.16 billion as interests and similar income, representing 132 per cent when compared with N434.77 billion earned in 2014. Conversely, it paid N434.96 billion as interest and similar expense.

Most of the interest earned by the apex bank came from the Asset Management Corporation of Nigeria’s (AMCON) Notes, through which it generated N363.31 million. This was higher than the N323.95 million generated in 2014.

However, most of the interests paid by the central bank were as a result of instruments it issued, which resulted to interest expense of N420.96 billion in 2015, up from N373.58 billion in 2014.

Furthermore, the results showed that foreign exchange revaluation gains represented foreign exchange differences arising on the translation of debt instruments denominated in foreign currencies that are included in external reserves. Foreign exchange revaluation rose from N261.19 billion in 2014 to N565.88 billion in 2015.

Nonetheless, the financial statement revealed that the Nigeria Security Printing and Minting Company (NSPM) recorded a loss of N345 million in 2015. This represented a 94 per cent decline when compared with the N5.5 billion loss incurred in 2014. The company’s revenue rose by N5.31 billion or 29.6 per cent to N23.2 billion from N17.89 billion.

The CBN holds 100 per cent of the share capital in Nigeria Incentive-Based Risk-Sharing System for Agricultural Lending Plc (NIRSAL). The subsidiary was set up by the CBN to spark agricultural industrialization process through increased production and processing of the greater part of the farm produce/output in the country to boost economic earnings across the value chain.

The Bank also holds 99.99 per cent of the share capital in Nigerian Electricity Supply Industry Stabilization Strategy Limited (NESI). The subsidiary is involved in the promotion long term sustainability and efficiency of the Nigeria Electricity Supply Industry through the initiation and encouragement of programmes and the creation of mechanisms and processes fundamental to the growth and bankability of the Nigerian Electricity Supply Industry.

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Nigeria collects $13.6b in TSA – Accountant General

The Accountant-Generalof the Federation (AGF), Mr Ahmed Idris has reveal that the Federal Government of Nigeria and collated over N2.7 Trillion in its Treasury Single Account (TSA).

This comes after President Muhammadu Buhari in a bid to increase accountability and reduce corruption, ordered the merger of all state accounts into one account at the Central Bank.

A statement released by the deputy director of the OAGF, Kene. N. Offie, on Thursday, April 21, also quoted the Accountant-General of the Federation, Ahmed Idris, saying “there is a standing instruction from Mr. President for workers to be paid on or before 24 or 25 of every month.”

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Nigeria Economics Loses to Politics as Buhari Takes Naira Stand – Bloomberg

History is repeating itself in Nigeria, where the more President Muhammadu Buhari is urged to devalue the naira, the more he digs in his heels. Investors are beginning to surmise that politics — rather than economics — will determine the currency’s immediate future.

Even as growth slows, inflation rises and foreign investors flee Africa’s biggest oil producer, analysts in a Bloomberg survey are backing away from estimates a devaluation will take place before the third quarter. Buhari, 73, has made it clear that he, not the central bank, has the final say on currency policy — and that he is against taking that step, just as he was during his first stint in power in the 1980s. The former general is loath to be seen by voters as capitulating to foreign investors and the International Monetary Fund, both vocal critics of his stance, according to New York-based Teneo Intelligence.

“Changing his position would make him seem like a spineless leader,” said Manji Cheto, an analyst at Teneo, a global advisory firm, who predicts there won’t be a change of currency policy until at least the second half of this year. “Buhari is seen as the man who will stand up to foreigners. He ran a campaign as a strongman, someone who would put Nigerian interests ahead of foreign ones.”

Central bank Governor Godwin Emefiele has pegged the naira’s official rate at 197-199 against the dollar since March 2015. Buhari has backed that policy since he became president in May, confounding analysts who thought he would have caved in by now and let the naira fall, as other oil exporters from Russia to Kazakhstan and Colombia have done with their currencies. Foreign-exchange trading restrictions and import curbs have led to shortages of goods from gasoline to milk and sent the naira plunging to 320 on the black market.

Buhari and Emefiele, who meet at least weekly, say that the naira is fairly valued on the official market and that letting it drop would only harm poor Nigerians by pushing up prices. That’s already happening, with inflation accelerating to an almost four-year high of 12.8 percent in March as manufacturers struggled to pay for imports. Growth slumped to 2.8 percent last year, the slowest pace in 17 years. It will slow further to 2.3 percent in 2016, according to the IMF, which called for a “speedy unwinding” of the currency controls to help revive the economy.

It’s not the first time Buhari, who said in February a devaluation would “murder” the naira, has resisted the IMF. When he last ruled Nigeria from 1983 to 1985, a time when, like today, oil prices had just crashed, he ignored advice to depreciate the currency and refused financial assistance from the Washington-based lender.

After Buhari was ousted in a coup amid a worsening financial crisis, his successor Ibrahim Babangida started an IMF-led structural adjustment program, which included a devaluation. It was the first of many that saw the currency’s value drop from roughly parity with the dollar to today’s rate of near 200. Politicians still say the IMF program failed the country.

“I’ve lived through several rounds of naira devaluation and I have seen very little benefit to the Nigerian economy and people,” Nasir el-Rufai, the 56-year-old governor of Kaduna, a northern state of about 7 million people and a senior figure in Buhari’s All Progressives Congress party, said in an interview in Lagos. “I supported each of them as a solution to the challenges we faced at the time. I regret that support because I have seen very clearly it brought nothing to Nigeria.”

‘Already Devalued’

For investors, such thinking makes little economic sense. Many businesses are already trading at the black-market rate since the central bank’s policies are choking off dollars in the official market, according to Exotix Partners LLP, a London-based investment bank focusing on frontier markets. PZ Cussons Plc, the Manchester, U.K.-based soap maker, said last week its Nigerian unit is forced to pay a 50-70 percent premium on the official rate to source foreign exchange.

Foreign investors are avoiding the country until there’s a devaluation. Nigeria’s local bonds are the only ones to have made losses this year among 31 emerging markets tracked by Bloomberg. Nigerian average yields have risen 202 basis points to 12.71 percent since the end of 2015, whereas Russia’s have fallen 29 basis points to 9.26 percent and Colombia’s 27 basis points to 7.77 percent.

Buhari “just doesn’t get it,” Kato Mukuru, the London-based head of equity research at Exotix Partners LLP, said in an interview. “When he was last in power in the ’80s he was also told to devalue the currency. He refused until he was sent out in a coup. Clearly he didn’t do the same economics as I did. There comes a point where you need to understand that the whole country has already devalued.”

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President Buhari’s China Visit: What we know so far

A lot have been made of President Buhari’s trip to China. Politicians from both major parties have either praised the achievements of the president while his opponents are focusing their criticisms on the weakness of the deal. We will dissect both of those at a later date but let’s separate fact from fiction and highlight what we know so far.

  1. $2 billion from China to finance the deficit in the 2016 budget – This is one of the more controversial deal alleged agreed too although lots of debate whether it’s been signed or merely just verbally agreed to. It’s no secret that the yet to be signed 2016 Budget includes a deficit given the lower price of oil. This is one option to help plug the gap. Another option being discussed by the Federal Government is an increase nationwide to Value Added Tax (VAT) as well as increased enforcement to revenue collection but I digressed
  1. Naira – Yuan Currency swap agreement – We’ve discussed this in an earlier post. But basically, according to several news sources including THISDAY, “The new agreement would see Nigeria-China trade, which account for over 70 percent of imports into Nigeria, concluded in Yuan. Until now, over 90 percent of international trade between Nigeria and the world is done in dollars, and in the process putting so much pressure on the naira.”
  1. Agricultural Demonstration Farms across the country – One of the Nigerian President’s goal is to make Nigeria self-sufficient in food production. The Chinese President has offered $15m in agricultural assistance to Nigeria for the establishment of 50 Agricultural Demonstration Farms across the country. All necessary details are yet to be revealed
  1. Vocational/Technical Training & Scholarships – China and Nigeria agreed to increase military and civil service exchanges as part of a greater capacity-building commitment. China has offered to raise its scholarship awards to Nigerian students from about 100 to 700 yearly. 1,000 other Nigerians are to be given vocational and technical training by China yearly
  1. Other Agreements (Without a lot of detail)
  • Framework Agreement Between the Federal Ministry of Trade and Investment of the Federal Republic of Nigeria and the National Development and Reform Commission of the Peoples Republic of China
  • Memorandum of Understanding on Aviation Cooperation between the Ministry of Transportation (Aviation) of the Federal Republic of Nigeria and the Ministry of Commerce of the Peoples Republic of China
  • Memorandum of Understanding between the Federal Republic of Nigeria and the Government of the Peoples Republic of China on Scientific and Technological Cooperation
  1. $6.0bn infrastructure Loan Agreement – The Breakdown
  • North South Power Company Limited and Sinohydro Corporation Limited signed an agreement valued at $478,657,941.28 for the construction of 300 Mega Watts solar power in Shiriro, Niger State
  • Granite and Marble Nigeria Limited and Shanghai Shibang signed an agreement valued at $55 million for the construction and equipping of granite mining plant in Nigeria
  • $1 billion is to be invested in the development of a greenfield expressway for Abuja-Ibadan-Lagos under an agreement reached by the Infrastructure Bank and Sinohydro Corporation Limited
  • $250 million deal to develop an ultra-modern 27-storey high rise complex and a $2.5 billion agreement for the development of the Lagos Metro Rail Transit Red Line project.
  • $1 billion for the establishment of a Hi-tech industrial park in Ogun-Guangdong Free Trade Zone in Igbesa, Ogun State
  • Ogun-Guangdong Free Trade Zone and CNG (Nigeria) Investment Limited also signed an agreement valued at $200 million for the construction of two 500MT/day float gas facilities.
  • An agreement valued at $363 million for the establishment of a comprehensive farm and downstream industrial park in Kogi state was also announced at the Nigeria-China business forum.
  • $500 million project for the provision of television broadcast equipment and a $25 million facility for production of pre-paid smart meters between Mojec International Limited and Microstar Company Limited – Currently Under Negotiations

As more details come out, they will be shared on here. Also we will continue with the post mortem of the part of the deal of most interest to Nigerians, the currency swap agreement with the pros and cons.

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Nigeria, China currency swap forces USD rate down: Bureau de Change association

LAGOS, April 17 (Xinhua) — Nigeria’s plan to increase the availability of renminbi (Yuan) has already favored the Naira against the U.S. dollar, a top official with the Association of Bureau De Change Operators of Nigeria said Sunday.

Aminu Gwadabe, President of the Association disclosed this to reporters in Abuja, saying since the announcement, the Naira had appreciated by 10 naira against the dollar.

The Industrial and Commercial Bank of China Ltd and the Central Bank of Nigeria signed a deal on Yuan transactions, as a way to resuscitate the current currency slump in Nigeria.

The deal meant the Yuan will flow freely around Nigerian banks and will even be included in the country’s foreign exchange reserves.

Since 2014 when Yuan was recognized as a likely global reserve currency, Ghana, South Africa and Zimbabwe have integrated the currency into their financial markets.

Gwadabe said the dollar was now changing for 310 as against the former rate of 320 and predicted that once the policy is in force, the price of dollar will continue to fall.

He told reporters that this new policy will help the informal payment sector.

“You know more than 50 percent of foreign businesses in Nigeria is with China and before now, Nigerians doing business in China have to change their money to dollar, then from dollar to Yuan,” he added.

“You can all testify to the number of made in China things in the country. So if small and large businesses can convert straight to Yuan, it’s better,” he told reporters.

He urged the CBN to monitor the development closely for effective implementation of the policy.

Source: Xinhua

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IMF Seeks an End to Nigeria Budget Impasse, presses on Currency Devalution

April 15, 2016
– By NairaFX
IMF Managing Director, Christine Lagarde, who speaking at the opening press briefing of the fund at the 2016 Spring Meetings of the IMF-World Bank in Washington D.C., has asked that the Nigerian Federal Government look for assistance from international institutions that have the capacity to aid the Nigerian economy overcome its challenges.

“Our recommendation is that, first, Nigeria seek help from the international institutions that can best help. Second is that Nigeria is open-minded about using flexibility of the exchange rate in order to absorb some of the shocks; we believe that it’s more efficient than using a list of forex items that are barred from being imported into the country.
“And third, we believe that it’s really important that budget be completely decided and approved,” Lagarde said.
The IMF as well as many other global economist have warned that the currency policy of the current administration is unsustainable. Some have also recommended a two tier Forex market system although critics of that decry the opportunities for corruption to rise as a result of said two tier system.
Lagarde continued to encourage Nigeria and Nigerians to seek economic diversification in the long run as near total dependence on oil revenue is dangerous for economy.
Lagarde said, “The low price of oil is general but low price of oil as far as Nigeria is concerned is a critical issue. Sixty per cent of your exports and 80 per cent of your revenue or the other way round is actually oil dependent.
“So when there is a massive decline in the price of oil, those two also take a similar beating; it has a major impact on the country.”
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Nigeria: Agriculture Now Contributes Over 24 Percent to GDP – Central Bank

Agriculture’s contribution to Nigeria’s Gross Domestic Product (GDP) rose marginally from 23.86 per cent in the fourth quarter of 2014 to 24.18 percent, the Central Bank of Nigeria (CBN) has said.
The CBN Governor, Mr. Godwin Emefiele, stated this during the Nigerian agricultural finance conference with the theme: “Catalyzing the diversification of Nigerian economy through effective agricultural finance.”
The CBN governor said the sector was larger than manufacturing and oil sectors combined, adding that it grew from 6.28 per cent to 9.50 in the same year.
The CBN governor, represented by the CBN Deputy Governor, Corporate Services (CBN), Mr. Adebayo Adelabu, also indicated that over 70 per cent of informal sector jobs created in the economy were related to rural agriculture.
He noted that the CBN’s pro-agricultural policies were geared towards reducing the over N630 annual import bills on foodstuffs and deepening agriculture contribution to GDP and reduce the unemployment rate of 9.9 percent.