Nigeria’s forex reserves down 2.68 percent to $27.14b in April

Nigeria’s foreign exchange reserve account fell by 2.68 percent to $27.14 billion as of April 27 from a March, when they were 27.87 billion, Central Bank data exposed on Friday.

The reserves account also declined by 5.55 percent from $29.51 billion a year ago.

Lower oil prices and increasing demand for imported goods has depleted the foreign reserves of Africa’s largest economy, with the central bank adopting fixed exchange rate to protect further depletion of its reserves.

Earlier this month, Nigeria agreed to the frame work of a Naira-Yuan swap that will see the nation’s reserves diversified to include the Chinese renminbi

Nigerian petitions PayPal to allow users receive money in domestic accounts – Businessday

When Rukky Kofi finally landed herself an online job that would see her earning $1000 monthly, she must have been elated. But nothing prepared her for equal levels of disappointment when the time came to setup her work info.

I found out that the company makes payments only via PayPal and at the moment, Nigerians cannot receive payments with their PayPal accounts.

After many years of ignoring the country, PayPal finally came to Nigeria about 2 years ago, albeit with limitations that dampened the initital excitement — users could only send out payments, not receive. Nigeria has since grown to become PayPal’s second biggest market in Africa yet, the online payment company has seen no reason to open up payments channels into the country.

Rukky Kofi, like many other Nigerians who conduct business online, thinks this is unfair.

Nigeria is a country filled with a lot of poor people (by global standards) with very limited opportunities hence the need to seek opportunities to make a living online. A job that pays $1000 a month is enough to make you a happy Nigerian and this sort of job is not exactly easy to find in the country.

So she decided to do something about it. She put up a petition on Change.org. So far, the petition has 20 supporters (as of this publication) out of the 100 it needs to get PayPal’s attention. According to the Rukky:

The goal of this petition is to urge Paypal to re-access the situation. There’s a really vast market of Nigerians who will happily subscribe to Paypal’s services once we are able to receive payments and manage business accounts. At the moment, a lot of qualified, hard working Nigerians can’t make money online simply because they can’t receive payments via Paypal. These are individuals who have been offered project and job contracts that they can’t take advantage of because they can’t receive their pay using Nigerian Paypal accounts.

This is not the first time anyone will be petitioning PayPal from Nigeria. I remember just 2 years ago, a web design company actually petitioned PayPal to come to Nigeria. PayPal’s Nigeria entry followed barely a month after, either by coincidence or as a result of the petition. Hopefully due to the latter.

What do you think? Should PayPal allow Nigerians receive money with their accounts? Would you be open to signing the petition?

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Naira FOREX Rates April 27th 2016 – Parallel Market



NAIRA (N)

USD ($)

EURO (€)

GBP (£)

BUY/SELL

BUY/SELL

BUY/SELL

27/4/2016

319/322

359/363

448/453

26/4/2016

319/322

358/363

448/453

25/4/2016

319/322

358/363

448/453

22/4/2016

318/321

359/363

449/453

21/4/2016

319/322

360/365

445/450

 

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Naira FOREX Rates April 26th 2016 – Parallel Market



NAIRA (N)

USD ($)

EURO (€)

GBP (£)

BUY/SELL

BUY/SELL

BUY/SELL

26/4/2016

319/322

358/363

448/453

25/4/2016

319/322

358/363

448/453

22/4/2016

318/321

359/363

449/453

21/4/2016

319/322

360/365

445/450

20/4/2016

319/322

355/360

445/450

 

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Oil price notch-up, currency deal strengthen Naira value – Vanguard

By Emeka Anaeto, Economy Editor

The yet-to-be executed currency swap deal between Nigeria and China may have propped up the value of the Naira against US Dollar as the local currency closed at average of N318/ USD1 in the Bureau de Change, BDCs, while black market rates averaged N315/USD1 last weekend.

The rate closed at N323/ USD1 previous weekend.

Some black market dealers, though not particularly sure what was going on, told Vanguard that patronage had significantly gone down for some time now, while their suppliers were willing to reduce their offer rates.

But a market survey by Cowry Assets Management, a Lagos-based investment house, indicated that the development was connected to the planned currency swap deal between the Central Bank of Nigeria, CBN, and the Peoples Bank of China, PBOC.

They also indicated that “other factors that influence the Naira gains were the anticipated increase in dollar supply from international oil companies and the Central Bank of Nigeria, to meet the demands of major importers of Premium Motor Spirit, PMS.”

The exchange rate remained steady at the official window and the interbank spot markets with ruling rates of N197/USD and N199.10/USD respectively.

However, the interbank forwards market for most tenors show appreciation of the local currency.

The one month, three months, six months and 12 months tenor appreciated week-on-week by 0.32%, 1.46%, 3.10% and 1.35% to N200.93/USD, N204.17/USD, N209.09/USD and N221.14/USD respectively.

Some bank officials who spoke with Vanguard, attributed the appreciation to a major dampening of speculative deals rather than any shift in real demand or supply of the currency.

They said, however, that the Naira would have appreciated by far more margin than what was recorded last week but for some conflicting and incomplete information that came from government officials on the currency swap.

According to them, while the CBN governor, Godwin Emefiele, was quoted as saying the CBN was discussing with the PBOC on a currency swap and that an agreement had been reached with the Industrial and Commercial Bank of China to act as Nigeria’s agent or clearing bank when the swap transaction with the PBOC was concluded, a statement attributed to the Foreign Affairs Minister, Mr Geoffrey Onyeama, said the deal was not a swap, created some confusions.

The appreciation trend during the week showed that Naira had appreciated significantly from N323/ USD1 previous week to about N316/ USD1 by Tuesday, but retreated to N320/ USD1 the next day, apparently, following the conflicting information.

However, the comments by the Minister of Finance, Mrs. Kemi Adeosun, at the World Bank meeting in Washington, United States, that same day may have led to a rebound that brought the closing rate to below N315.

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Naira stable, treasury bills yield rise as CBN auctions N167.51bn debt – Businessday

The naira yesterday firmed against the dollar at the autonomous market by N1 to close at N318/$ compared with N319/$ the previous day.

It closed stable at N320 against the dollar at the parallel market and N197/$ at the Central Bank of Nigeria’s (CBN) clearing rates at the interbank foreign exchange market.

The naira is expected to stay unchanged on the parallel market and the official exchange next week, as the economy slows and demand for foreign exchange eases after President Muhammadu Buhari’s delayed signing of the 2016 budget.

“Some important decisions on investment and economic issues are being held back because of the continued delay in the implementation of the fiscal policy for this year,” one dealer told Reuters.

Yields on Nigerian short-dated treasury bills rose significantly at an auction on Wednesday, where the central bank sold a total of N167.51 billion ($841.76m) worth of debt with maturities ranging between three months and one year.

The central bank said it sold N36.78 billion of 3-month paper at 7.88 percent yield, about 1.78 percentage points higher than at the last auction on April 6.

A total of N35 billion worth of the 6-month treasury bill was sold at 8.99 percent against 8.69 percent at the previous auction, while N95.73 billion of the 1-year treasury bill was sold at 10.24 percent compared with 9.48 percent previously.

Investors demanded a total of N253.19 billion against 445.86 billion subscriptions at the last auction.

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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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Naira opens strong but closes lower against the dollar at the Parallel Market

April 18, 2016

The Naira ended the trading day lower against the dollar after a strong start ending at N322 to $1. The Naira opened stronger (trading at N317 to $1) on sentiments over the weekend that dollar supply would increase after details of the Nigeria/China currency swap agreement. However, oil prices crashed after OPEC failed to come to a consensus over the weekend on production freezes and that was enough to dampened the mood among currency traders.

The sentiment among traders continue to be that the aforementioned currency swap deal would strengthen the Naira upon implementation. Rates for the Pound Sterling and Euro apparently remain unchanged.

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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