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Nigerian interbank rate eases on cash refund on bills and forex – Reuters

By Oludare Mayowa

LAGOS, June 23 (Reuters) – Nigeria’s interbank rate eased to around eight percent on Friday from 15 percent last week after the central bank repaid 152.6 billion naira ($500.57 million) in matured debt and paid refunds to banks for their forex cash provisions.

Traders said they expect a further drop in the overnight rate to around five percent in the next few days if the government, as expected, releases its May budget allocations next week to its agencies.

“We are anticipating additional cash flow from budgetary allocations to government agencies,” one currency traders said.

Nigeria, which has Africa’s biggest economy, distributes revenue from its crude exports among its three tiers of government – federal, state and local. A portion of state and local government revenues passes through the banking system.

The country’s distributable revenues rose to 462.4 billion naira in May, up from 415.7 billion naira the previous month, due to higher proceeds from corporate taxes, a government statement said late on Thursday.

Traders said about 222 billion is expected to be credited to the banking system, which would help raise the volume of cash in the money market and help push down the cost of borrowing among commercial lenders.

The central bank issued 20 billion naira of 356-day treasury bills at 18.6 percent and 383 million naira of 167-day T-bills at 18 percent on Friday to reduce liquidity and curb speculation on the local currency.

Nigeria’s money market will resume trading on Wednesday after a two-day public holiday to mark Muslim festival of Eid-al-Fitr. ($1 = 304.85 naira) (Editing by Alexis Akwagyiram/Jermey Gaunt)

 

Nigeria’s investor and black market FX rates near convergence – Reuters

By Oludare Mayowa

LAGOS, June 23 (Reuters) – The rates at which Nigeria’s naira currency was traded in the investor foreign exchange window and black market on Friday came close to converging, traders said, as the central bank continued its bid to improve dollar liquidity in Africa’s biggest economy.

The OPEC member, which has at least six exchange rates, is grappling with a currency crisis caused by low oil prices, which created chronic dollar shortages. It wants to attract foreign investors and maintain a strong currency to ward off inflation.

The central bank created a new forex window in April to allow investors to trade the naira at market-determined rates in a move intended to improve dollar supply and attract foreign investors who fled Nigeria at the start of the currency crisis.

The naira was quoted at 368 to the dollar on the black market on Friday. In the investor window, the naira was quoted at 367.83 to the dollar at 1411 GMT.

“The convergence of rates, at least for a segment of the market, demonstrates the success of the central bank’s intervention, said Razia Khan, Africa chief economist at Standard Chartered Bank.

Khan said that by addressing the demand for dollars, the central bank had been able to reduce the extent to which the naira would have depreciated on the black market.

The local currency traded at about 520 to the dollar on the black market in February and at 400 in the forex window when it opened in April, before appreciating towards convergence in the past few months.

“The convergence … has provided the central bank another opportunity to put in place a sustainable reform of the market to enhance the value of the naira,” Aminu Gwadabe, president of the country’s Association of Bureaux De Change Operators, told Reuters.

Gwadabe said that the central bank has consistently been selling about $40,000 a week to each of its 3,250 members, improving dollar liquidity.

The bank last week said that the investor window had handled $2.2 billion of trade in the past seven weeks but had accounted for almost 30 percent of that trade itself as it worked to keep the window operating.

The central bank has sold more than $5 billion since it began its interventions in February, helping to restore confidence in the market.

(Editing by Alexis Akwagyiram and David Goodman)

 

Nigeria’s government revenues rise in May due to higher corporate tax proceeds – Reuters

ABUJA, June 22 (Reuters) – Nigeria’s distributable government revenues rose to 462.4 billion naira ($1.43 billion) in May from 415.7 billion naira in April due to higher proceeds from corporate taxes, a government statement said on Thursday.

Distributable revenue is government income that is shared at various levels of state including the federal government, state governments and local government councils.

The revenues were boosted by “significant increases in revenues from companies income tax,” said the statement issued by the accountant general.

But it said the rise was offset by a “slight drop in the average price of crude oil from $55.38 to $55.18 per barrel and a decrease in export volume by 1.023 million barrels, reduced oil revenue by $57.12 million”.

OPEC member Nigeria, which is in a recession largely caused by the fall in global crude prices since mid-2014 and attacks on energy facilities in its Niger Delta energy hub last year, relies on crude oil sales for two-thirds of its government revenue.

Attacks on energy facilities that cut oil production have halted since the start of the year with talks between the government and Delta community leaders to address the grievances of militants who want the oil hub to receive a greater share of the country’s energy wealth. ($1 = 324.1800 naira) (Reporting by Camillus Eboh in Abuja and Alexis Akwagyiram in Lagos; Editing by Lisa Shumaker)

 

CBN Warns against Abuse of the Naira – Thisday

Nume Ekeghe

The Central Bank of Nigeria (CBN) has urged members of the public to desist from ill handling of the nation’s currency, the naira.

The central bank stressed that the cost of maintaining the naira note was expensive, while also urging members of the informal sector to embrace the various e-payment options in the economy.

This call was made at the CBN’s ‘Promoting Financial Stability and Economic Development Fair,” in Lagos yesterday, which had a collective attendance of farmers, traders, SMEs and others from the informal sector.

The Assistant Director, Currency Operations Department, CBN, Mr. Benedict Maduagwu said thatthere are so many interventions by the CBN aimed at promoting the well-being and also in diversifying the economy.

“We have the Anchor Borrowers’ scheme which is a wonderful initiative. We also have the MSME intervention scheme of N220 billion which 60 percent is reserved for women. We also have the youth empowerment development program and we are also promoting cashless.

“The way currency is being handled, it is being abused and the cost is huge. As at 2005 to 2010, it was over N192 billion and as i speak it is more than that. So the effort in the cashless policy and also telling people on how to carry clean naira are all aimed at reduction of the huge cost in currency.”

He also added that this sensitisation fair would be a nationwide event, in order to enlighten members of the public on various reforms made by the central bank. This is expected to improve financial stability and economic development.

On his part, the Deputy Director, Trade and Exchange Department, Mr. Olu Vincent said: “This is a sensitisation to the public on what CBN has been doing federally over the past few years to stimulate the economy to produce a base for economic development since the volatility in the oil price market. This is to divert the economy from oil to non-oil export, which everyone is clamouring we should lay more emphasis on non-oil export.

“There have been various interventions that the central bank has put in place as part of the proactive measures of the bank in stimulating the growth of the economy. So what we doing basically this period is to sensitise the public about what the bank has been doing underground and also sensitise the public about their rights while relating with their banks.

“We are moving from oil to non-oil and the strength of the economy is actually in the agricultural sector and other SMEs.”

WEEKAHEAD-Nigerian naira is seen trading around the prevailing level

LUSAKA, June 22 (Reuters) – Zambia’s kwacha is likely to firm next week supported by companies converting hard currency to the local unit in order to pay salaries and other month-end obligations while the Ugandan shilling is expected to weaken following a rate cut.

ZAMBIA

At 0913 GMT, commercial banks quoted the currency of Africa’s second-largest copper producer at 9.2100 per dollar from 9.2000 per dollar a week ago.

“We are expecting to see a reasonable supply of the green currency for corporates’ month-end obligations,” BancABC, the local branch of Atlas Mara said in a note.

TANZANIA

The Tanzanian shilling is seen holding steady against the U.S. dollar in the days ahead, helped by increased inflows of hard currency from corporate sellers.

Commercial banks quoted the shilling at 2,232/2,242 to the dollar on Thursday, stronger than 2,234/2,244 a week ago.

“The shilling has been stable for some time now and we expect it to extend its stability over the coming week as corporates sell dollars to pay first half taxes,” said a trader at Commercial Bank of Africa Tanzania.

NIGERIA

Nigerian naira is seen trading around the prevailing level on both the black market and official interbank window as the central bank continue to inject more dollar liquidity to support the local currency.

The local currency was quoted flat at 365 to the dollar on the black market, trading at 305.85 per dollar on the official interbank window against 305.70 a dollar last week.

“The market seems to have reached a comfortable floor for now, except if the central bank decides to move the band, the naira will continue to trade at the prevailing level in the near term,” Aminu Gwadabe, head of currency retailer bureaus said.

Gwadabe said the central bank sold around $64.5 million to bureau de change operators on Tuesday and plans to sell another round of same amount on Thursday. This he said has kept the market liquid and provide some support for the naira.

GHANA

Ghana’s cedi could weaken marginally in the week ahead on increasing dollar demand by local businesses unless the central bank raises its interbank greenback sales, analysts said.

The unit was trading at 4.4200 per dollar by mid-morning on Thursday, compared with 4.4085 a week ago. “Demand pressures remain in the horizon and in the absence of any significant dollar inflows, the cedi could record further losses in the week ahead,” Joseph Biggles Amponsah, an analyst at Accra-based Dortis Research, said.

KENYA

The Kenyan shilling could weaken to dwindling inflows from charities and the agricultural sector amid increased demand from oil importers and multinational companies, traders said.

Commercial banks quoted the shilling at 103.55/75 per dollar, the same as last Thursday’s close.

“Supply side activity is still weak… any small ticket will push the dollar up,” said a trader from a commercial bank.

UGANDA

The Ugandan shilling is forecast to weaken as the central bank’s cutting of its benchmark rate by a percentage point to 10 percent undermines market confidence in the local currency.

Commercial banks quoted the shilling at 3,585/3,585, unchanged from last Thursday’s close.

“I think gradually we’ll see the shilling start to take a hit from the rate cut decision,” a trader at a leading commercial bank said. (Reporting by Chris Mfula, George Obulutsa, Oludare Mayowa, Kwasi Kpodo, John Ndiso and Elias Biryabarema; Compiled by Olwethu Boso; Editing by Pritha Sarkar)

 

Nigeria’s Half-Measures on Currency Are Only Half-Working – Bloomberg

A year after Nigeria scrapped a currency peg that sent foreign investors fleeing, it’s still battling to entice them back.

But trying to placate investors by introducing multiple exchange rates isn’t going to work, bond funds and Wall Street lenders including Citigroup Inc. say. To end the dollar shortage that has hamstrung West Africa’s biggest economy and oil producer, President Muhammadu Buhari and central bank Governor Godwin Emefiele will have to weaken the naira’s official rate again, or let it float.

Nigeria has long refused to let markets determine the price of its currency. Although it devalued in June 2016, it backtracked on a promise to fully liberalize the naira, which has traded in a narrow band since September. Alongside the tightly controlled official rate, the central bank this year introduced the so-called Nafex window, an alternative exchange rate for investors, while also selling dollars directly to companies and individuals at varying rates.

“It’s a complex currency regime and it’s daunting for international investors,” said Christian Diclementi, a money manager in New York at AllianceBernstein LP, which oversees $500 billion and is yet to return to Nigeria’s local-currency bond market after pulling out during the collapse in oil prices in 2014 to 2015. “If there was just a freely-floating rate, the market would be a lot more efficient. A simpler system would help.”

The Nafex window, where the naira has been allowed to drop to near its black-market rate, hasn’t been a failure. Dollar inflows are increasing and turnover has reached around $80 million a day, according to Bola Onadele, the head of FMDQ OTC Securities Exchange, the trading platform overseeing it. It’s attracted investors such as Cape Town-based Allan Gray Ltd. and helped fuel a world-beating 30 percent rally in Nigerian stocks in the past two months.

It’s a different story with global bond investors. While offshore holdings of Nigeria’s equities rose 15 percent in May to around $5 billion, they fell 4.4 percent to $5.5 billion for fixed income assets, according to Standard Bank Group Ltd.

The Nafex market is attracting investors specializing in Africa and frontier markets, but it won’t be the answer to Nigeria’s foreign-currency shortage as long as it’s shunned by the larger emerging-market bond funds, according to FBNQuest, the investment banking unit of Nigeria’s biggest lender by assets.

It’s “a bold experiment, but unlikely to succeed,” said Gregory Kronsten and Chinwe Egwim, analysts at Lagos-based FBNQuest. “We doubt that this new window will generate the autonomous inflows to allow the central bank to take a step back” from being the main seller of dollars. Emefiele will probably have to devalue the interbank rate to 370 per dollar by the end of the year, close to where the naira trades on the Nafex and black market, they said. The interbank rate was little changed at 324.75 per dollar on Tuesday.

But time is of the essence. The central bank’s foreign-exchange reserves fell in May for the first since October and a recovery in the economy this year from its first recession since the 1990s will boost demand for imports, heaping additional pressure on the currency, according to Standard Bank. Oil prices below $50 a barrel aren’t helping either.

For now, even average yields of 16 percent, the highest among major emerging economies after Egypt, aren’t enough to entice most bond investors.

“Many emerging-market countries, including Russia and Colombia, have liberalized their capital accounts and allowed their exchange rates to drop,” said Viktor Szabo, a London-based money manager at Aberdeen Asset Management Plc, which oversees $11 billion of emerging-market assets and is still wary of naira bonds. “We’re still waiting for a proper, market-clearing level in Nigeria. You can put whatever system you want behind it, but it’s ultimately a question of whether your currency is free and can absorb economic shocks.”

The central bank is planning to unify the different exchange rates, FMDQ’s Onadele said, without detailing when or how. Buhari’s administration remains reluctant to carry out an official devaluation, since it needs a strong rate to maintain a price cap on gasoline, the bulk of which Nigeria imports. The Nafex system may remain in place until the next election in February 2019, according to Renaissance Capital.

“The new market has helped to get some flows back, but it’s added more complexity and confusion,” said Nema Ramkhelawan-Bhana, an analyst in Johannesburg at Rand Merchant Bank, which changed its year-end naira forecast to 325 from 370, believing monetary authorities will resist a devaluation. “The vastly different naira rates are distorting asset prices. We’re holding out for them to be harmonized. But it won’t necessarily happen in the next year.”

CBN injects $195m into foreign exchange market – NAN

Following its 800 million dollars intervention in the inter-bank Foreign Exchange (FOREX) Market last week, the Central Bank of Nigeria (CBN), on Monday, injected 195 million dollars into the market to meet the requests of customers in the various segments of the market.

The acting Director, Corporate Communications, Isaac Okorafor , said in a statement in Abuja that the bank would soon introduce a new FOREX retail option.

Giving a breakdown of funds injected on Monday, he said the apex bank offered 100 million dollars to authourised dealers through interbank wholesale window, while it allocated 50 million dollars to Small and Medium Enterprises (SMEs) window.

Mr. Okorafor said the Invincibles segment was allocated 45 million dollars to meet the needs of those who applied for FOREX to settle Business/Personal Travel Allowances, school tuition and medicals.

The CBN spokesperson said the bank would continue to ensure adherence to its forex policy by insisting on transparency by stakeholders to guarantee stability in the market.

The CBN made two major interventions in the inter-bank Forex market last week, totaling 831.5 million dollars.

Since February 2017, the bank had boosted transactions at the Investors’ and Exporters’ segment of the market to the tune of 2.2 billion dollars.

Also last week, the CBN, in a bid to tackle inflation, unveiled plan to mop up N200.32 billion from the Nigerian banking system through special Open Market Operation (OMO) at the rate of 16 per cent per annum.

Meanwhile, the Naira had continued to maintain its stability in the FOREX market, exchanging at an average of N364 to a dollar at the parallel segment of the market on Monday.

Nigeria’s central bank sells $195 mln at forex market auction – Reuters

By Oludare Mayowa

LAGOS, June 19 (Reuters) – Nigeria’s central bank sold $195 million on the foreign exchange market on Monday as part of its effort to improve dollar liquidity and reduce pressure on the local currency, the naira, a bank spokesman said in a statement.

Nigeria is battling a currency crisis brought on by low oil prices, which has tipped its economy into recession and created chronic dollar shortages. It wants to attract foreign investors and at the same time maintain a strong currency to ward off inflation.

The central bank has been intervening on the official market in recent months to try to narrow the spread between rates on the official market and black market. It has sold over $5 billion since February.

In an emailed statement, the central bank said $100 million was released to authorized currency dealers and $50 million to small and medium-size enterprises. A further $45 million was provided for such items as medical fees, tuition fees and business travel.

The regulator, in notices to commercial lenders on Monday, said an auction would be held for spot and forward deals which would be settled within the next 60 days.

Last week, the bank said it would continue to intervene in the foreign exchange market to support the naira.

Nigeria has at least six different exchange rates including a retail rate set by licensed exchange bureaus, the official and black market rates and a window for investors where the naira can be traded at rates set freely between buyers and sellers.

The naira was quoted at 371.41 on the investors’ window >NAFEXD=FMDQ> on Monday.

The local currency traded at 368 on the black market >NGNFX=BDCN> and traded at around 305.80 to the dollar on the official window. (Additional reporting by Camillus Eboh in Abuja and Alexis Akwagyiram in Lagos, editing by Larry King)

 

Banks to resume dollar loans as naira appreciates – Today

Indications have emerged that Deposit Money Banks will soon start to raise dollar-denominated loans, especially Eurobonds, as the naira continues to appreciate.

It was learnt that banks were now favourably disposed to raising dollar loans following the creation of the Investor & Exporters FX window by the Central Bank of Nigeria and the subsequent appreciation of the naira.

Another reason the banks are considering Eurobonds, according to top banking sources, is because some of them are looking at refinancing their dollar loans, which will soon start falling due.

The top bank executive said, “Many banks have no choice than to raise dollar loans or Eurobonds partly to refinance their Eurobonds falling due, or to take advantage of the appreciation in the naira value to raise dollar funding.”

While Guaranty Trust Bank Plc’s $400m Eurobond is due in November, Fidelity Bank Plc’s $300m is due next May. Access Bank Plc has $350m of bonds due in July.

GTBank has said it has no plans to issue fresh Eurobonds, but Fidelity Bank and Access Bank have yet to decide.

Economic and financial experts agree that the banks will start to raise dollar-denominated loans.

Even so, more lenders will issue Eurobonds because they need dollars to offer loans in the United States currency or to repay debt, an analyst at Vetiva Capital Management Limited, Mr. Lekan Olabode, told Bloomberg, adding that more banks would issue Eurobonds, because they needed dollars to offer loans and to repay debt.

Already, Ecobank Transnational Incorporated has said it is planning to raise $400m five-year convertible bond this month to refinance debt and provide short-term bridge funding for non-performing loans at its Nigerian unit.

Experts believe more banks will raise dollar loans this year and next year.

Already, United Bank for Africa Plc has raised $500m in its first Eurobond sale.

It issued the bond on June 1. This followed an equivalent issue a week earlier by Zenith Bank Plc in a deal that was four times oversubscribed.

It is difficult to put a figure to what the expected dollar loans will be but analysts believe that as the I & E FX window continues to improve, more banks will take advantage to raise extra dollar loans.

The CBN on Thursday said its new currency window for investors had handled $2.2bn of trade in six weeks.

It also said it accounted for almost 30 per cent of the $2.2bn transactions, adding that this was meant to keep the window operating.

The CBN had about six weeks ago created the Investors & Exporters FX Window to attract foreign investors and at same time maintain a strong currency to ward off inflation.

Analysts have lauded the initiative as a step in the right direction.

However, some experts, including a former Governor of the CBN, Prof. Charles Soludo, said although the initiative, among others taken by the regulator in recent times, had moved the forex market forward by 10 steps, there was a need to take about 90 extra steps to get the economy to where it ought to be.

N261b forex, OMO auctions stabilise exchange rate – Guardian

A mix of $831.5 million foreign exchange (about N254 billion at N305.75/$) and Open Market Operation (OMO) auctions by the Central Bank of Nigeria (CBN) last week, reduced the quantity of naira in circulation and stabilised exchange rate across segments through the weekend.

It however, unsettled bankers as they jostled to grab every available naira in the money market to offset their obligations for participating in both auctions, leading to earlier spike in the lending rates among banks, before its moderation.

The first two days of the week were full of activities as the monetary authority offered $418 million and $13.5 million respectively, while on the other hand, it intervened through OMO, mopping up N5.3 billion and N2.1 billion in each day.

With other monetary policy actions in the week like the maturing bills and rollover at 16 per cent, it also mopped up N86.8 billion, keeping interbank lending rates at 15.2% and 15.7% for Open Buy Back and Overnight instruments respectively.

This was followed by N200 billion roll-over on Friday, in a 181-day special Treasury bill auction at 16 per cent, according to traders. Consequently, parallel market exchange rate remained stable at N367 per dollar throughout, while the recently inaugurated Investors and Exporters window traded near convergence with parallel market at N371 per dollar.

The Managing Director, Stanbic IBTC Bank, Dr. Demola Shogunle, while speaking at the 333rd meeting of the Bankers Committee, affirmed that Investors and Exporters window has recorded $2.3 billion transactions, with CBN contributing less than 30 per cent of the sum exchanged.

On the other hand, the Acting Director, Corporate Communications, CBN, Isaac Okorafor, assured that the interventions will continue to guarantee stability in the market and ensure availability to individuals and business concerns.

A poll of analysts by The Guardian, showed that investors’ confidence in the Nigerian market is high, and can be seen in the increase in the volume of transactions in the Investors’ & Exporters segment and activities in the stock market.

The Managing Director, Rand Merchant Bank Nigeria, Michael Larbie, also corroborated the claim of return of confidence, saying that the oversubscriptions in both UBA and Zenith banks’ Eurobond offerings are indications that international investors are betting seriously on the economy.

Analysts at Afrinvest Securities Limited also admitted that the foreign exchange market has continued to see improvements in liquidity and rates convergence since the launch of the NAFEX window, and sustained CBN interventions in the interbank market via Wholesale and Retail SMIS, which have buoyed confidence in the economy and financial markets.

“We expect the stability in the FX market to be sustained in the short to medium term as the CBN continues its intervention in the spot and forward markets as well as the improvement in the NAFEX window,” they said