CBN Injects Fresh $210m Into Forex Market

In continuation of its intervention in the interbank segment of the foreign exchange (forex) market, the Central Bank of Nigeria (CBN) wednesday made available another $210 million in the market to meet the requests of customers.

A breakdown of the figures made available by the Bank indicated that the CBN offered the sum of $100 million to authorised dealers in the wholesale segment of the market, just as it allocated the sum of $55 million each to the small and medium scale enterprises (SMEs) segment and the invisibles segment to meet needs tuition fees, medical payments and Basic Travel Allowance (BTA), among others.

Confirming the intervention, a statement quoted the CBN Acting Director in charge of the Corporate Communications Department (CCD), Isaac Okorafor, said the continued intervention by the Bank was in line with the Governor’s commitment to ensure liquidity in the market as well as reduce pressure on the naira.

Okorafor said the CBN was pleased with the current market situation brought about by policies it had put in place to check forex speculatiors, round trippers and rent-seekers.

According to him, these policies had helped to stabilise the exchange rate in addition to the establishment of the Investors-Exporters window, which had increased fx supply with over $20 billion inflow since its inception.

According to him, the Bank would not relent in its effort to manage the country’s forex with a view to reducing its import bills and checking any haemorhage of its foreign reserves.

The CBN, in its last intervention last Tuesday had intervened to the tune of $210 million to cater for requests in the various segments of the forex market.

Meanwhile, the naira continued its stability on the forex market, exchanging at an average of N360/$1 in the BDC segment yesterday.

We Can No Longer Import, Sell Fuel At N145/Litre — Marketers

Reports are rife that private oil marketers are calling for government intervention to enable them to access foreign exchange at a special rate for the importation of Premium Motor Spirit (petrol).

Private marketers who stopped fuel importation last year due to shortage of foreign exchange and increase in crude prices, said had made the current forex rates makes it unprofitable to import petrol and sell same at N145 per litre.

The Punch reports that “The National Operations Controller, Independent Petroleum Marketers Association of Nigeria, Mr. Mike Osatuyi, said, “The problem is that the importation (of petrol) is being handled almost 100 per cent by the Nigerian National Petroleum Corporation as private importers have backed out because the increase in crude price has made the landing cost enter subsidy.

“When the crude price hit $59 per barrel, we could not sell petrol again at N145 per litre if we were importing on our own. It is only the government (NNPC) that is importing and can warehouse the subsidy.

“Right now, the landing cost of the PMS is N154. If you are importing at N305 to the dollar, by the time you add bank charges, it comes to N307 to the dollar. If you apply that to the current crude price, the landing cost is N154-N155. By the time you add all the margins, the pump price is about N160-N167.

“Before private importers can resume importation, the exchange rate to a dollar must be N250 and we can sell at the price of N145 per litre.

“Landing cost of the PMS today has increased. By the time we land the product based on the international crude oil prices, petrol should be selling for between N165 and N170 per litre. But government is saying we should sell at N145. So, if there is no subsidy, we have to depend on the NNPC to give us the product,” he said.

CBN Instills $195m Into Forex Market

The Central Bank of Nigeria (CBN) on Monday injected another 195 million dollars into the various segments of the inter-bank Foreign Exchange (Forex) Market ahead of Monetary Policy Committee’s (MPC) decision.

Mr Isaac Okorafor, the Bank’s Acting Director in charge of Corporate Communications, said this in a statement in Abuja.

According to Okorafor, the bank offered 100 million dollars of the sum to the wholesale interventions while 50 million dollars was offered to the Small and Medium Enterprises (SME).

He said the invisible segment, comprising Business/Personal Travel Allowances, tuition and medical fees, received 45 million dollars.

According to Okorafor, the apex bank has continued to intervene in the inter-bank sector, to ensure adequate liquidity in the market.

He said,“ the CBN Management is quite pleased with the performance of the naira against other major currencies around the world, particularly now that the forex rates at both the inter-bank and BDC segments neared convergence.

He expressed optimism that the Bank’s intervention had put a check on the activities of speculators.

He also underscored the determination of the CBN in sustaining stability in the forex market through monitoring of authorised dealers, to reduce sharp practices.

Meanwhile, the naira maintained its steady rate against major currencies around the globe, exchanging for N363 to the dollar in the BDC segment of the market on Monday.

CBN Injects Another $190m into Forex Market

Relentless in its push to achieve convergence of rates in the interbank and Bureau de Change segments of the foreign exchange market, the Central Bank of Nigeria (CBN) on Monday, June 5, 2017, injected another sum of $190 million into the inter-bank market.
At Monday’s trading, the Bank offered the sum of $100,000,000 as wholesale interventions and allocated the sum of $50,000,000 to the Small and Medium Enterprises (SMEs) forex window. Customers requiring forex for Business/Personal Travel Allowances, tuition and medical fees, among others, got $40 million.

Confirming the figures, the Acting Director, Corporate Communications at the CBN, Isaac Okorafor, said the Bank was pleased at the performance of the naira, which had made tremendous gain against the dollar in recent times.
According to him, the forex rates at both the inter-bank and BDC segments, had almost converged, prompting even greater optimism that the value of the naira will continue to spike.

Okorafor observed that by ensuring transparency in the market as well as fairness to end-users, the CBN had further exposed speculators and checkmated them. He therefore urged all dealers, particularly licensed BDCs, to continue to play by the rule, adding that the CBN would not hesitate to wield the big stick against any erring bank or dealer.
The naira continued to maintain its strong stand against major currencies around the globe, exchanging for $364/$1 in the BDC segment of the market on Monday, June 5, 2017.

Meanwhile, the CBN, also on Monday, issued a circular aimed at further developing the foreign exchange market and improving its structure.
According to Okorafor, the new circular, among other provisions, allows authorized dealers to sell their excess foreign currency trading positions to other authorized dealers without seeking prior approval from the CBN.

VON

Volatile FOREX Stalls Takeoff Of Vehicle Assembly Plant In Akwa Ibom ―Ex-commissioner

The former Commissioner for Industry and Investment in Akwa Ibom, Mr Emmanuel Enoidem, says unstable FOREX has stalled the takeoff of vehicle assembly plant in the state.

Enoidem said this on Tuesday in Uyo while speaking with the News Agency of Nigeria (NAN) on the achievements of Gov Udom Emmanuel in the past two years.

The governor had in July 2015 laid the foundation for the construction of vehicle assembly plant in Itu Local Government Area of the state.

The automobile assembly plant was undertaken by the state government in partnership with an Israeli company, MIMSHAC Merkavim Transportation Technologies.

The project had the components of manpower development, building of a training school and the manufacturing of luxury buses, utility vehicles, ambulances and fire trucks in the state.

But almost two years after the foundation stone laying ceremony, nothing is happening at the site and the place is overgrown with weeds.

Enoidem, who was the industry commissioner at the conception of the project, said that it was impossible for foreign partners to come given the unpredictable state of foreign exchange in Nigeria.

“At the time we went to Israel and met with the vehicle manufacturers, exchange rate was about N200 a dollar but this jumped shortly to N400.

“There is no foreign investor that will come to Nigeria because of volatile exchange rate.

“We went to Romania to bring manufacturer of Low Energy Display (LED) electric bulbs, the investors had to stay back because of foreign exchange instability,” Enoidem said.

The former commissioner however said that in spite of the challenge of foreign exchange, the state governor had not derailed from his electioneering promises.

“Gov Udom Emmanuel is on track with his five point-agenda of job creation, poverty eradication, infrastructure consolidation, industrialisation and political inclusiveness.

“He is building road infrastructure in places like Ini and Ikono local government areas that were not touched. Other places are Ika, Etinan, Onna, Oruk-Anam and Oron.

“The governor is determined that Akwa Ibom must be industrialised. Today, the biggest syringe producing factory in Africa with production capacity of 350 million units annually is coming to Akwa Ibom.

CBN To Boost Dollar Sales to Support Economy

The Central Bank will increase dollar sales to support the economy and bolster the naira after leaving its key interest rate at a record high level.

“Interventions will be more vigorous and intense,” Governor Godwin Emefiele told reporters in the capital, Abuja, after announcing the Monetary Policy Committee’s decision to keep the benchmark rate at 14 percent. “Loosening monetary policy would exacerbate inflationary pressure” and reverse the naira’s gains on the parallel market, he said.

The central bank has kept borrowing costs at record high since July to prop up the naira that came under pressure after prices and output of oil, Nigeria’s biggest export, crashed in mid-2014, leading to dollar shortages and pushing the inflation rate to the highest level in more than 11 years. The decline in the crude production crippled West Africa’s largest economy, which shrank 1.6 percent in 2016, the first full-year contraction in a quarter of a century.

The naira has stabilized at about 380 per dollar for portfolio investors and on the black market, while the interbank rate is about 315. While the regulator removed a 197-199 naira per dollar peg in June, it continued intervening with sales of the greenback and blocked importers of certain products from accessing foreign currency on the official market.

The central bank “will not determine” the level at which it wants the naira’s various exchange rates to converge, Emefiele said. “We would prefer a convergence that goes significantly southward rather than northward.”

Falling Reserves

Nigeria’s foreign-exchange reserves have declined by 1 percent since reaching an almost two-year high of $31 billion on May 4. The central bank has sold more than $4 billion foreign currency since late February through the spot and forward markets. Dwindling oil revenues has put the regulator under pressure to shore up its reserves, Emefiele said.

Dollar Scarcity to Persist Till 2018

Foreign currency shortages will remain a persistent feature of the Nigerian economy till 2018. This is the submission of Moody’s Investor Service, a global rating agency.

This is despite the Central Bank of Nigeria’s efforts to alleviate the situation.

Moody’s said “In recent quarters, dollar rationing, currency devaluation and foreign currency borrowing by governments have stemmed the fall in foreign exchange reserves in Angola and Nigeria.

“But this has been to the detriment of the non-oil economy, price stability and government balance sheets. Moody’s expects these challenges to continue in 2017 but alleviate in 2018,” the agency said…

“Dollar shortages make it difficult to pay suppliers of imported goods and equipment, meet dollar debt payments or to repatriate funds outside of the respective countries.

“The associated local currency weakness increases the cost of servicing unhedged foreign currency debt obligations, reduces repatriated profits in foreign currency and lowers operating margins, as companies are not able to pass on high import costs to the consumer”, adds Mr Bate. Non-financial corporates with dollar revenues such as commodity operators and corporates with dollar-linked contracts are insulated from these risks”.

Investors Start Taking Notice of Nigeria’s Latest Naira Plan

Foreign investors are warming to the foreign-exchange window that Nigeria opened last week to ease a severe shortage of dollars, according to the head of the trading platform overseeing it.

The naira’s depreciation in the window to almost the same level as the black-market rate means the new market is already “nearing equilibrium,” according to Bola Onadele, the chief executive officer of Lagos-based FMDQ OTC Securities Exchange. The central bank is ready to supply dollars to bond and stock investors, even for trades of as much as $100 million, he said.

“There’s already been interest from portfolio investors because they can see that the new window will have buyers and sellers determining the rate,” Onadele said in an emailed response to questions on May 1. “The banks are talking to portfolio investors. Volumes will build up.”

The so-called Investors’ and Exporters’ FX Window, which started on April 24, is the central bank’s latest attempt to lure back investors who fled in the past two years, exacerbating a crisis that caused Nigeria’s economy to shrink in 2016 for the first time in a quarter century. The idea is that by creating a market for some types of investment transactions, policy makers can satisfy calls to float the currency without risking an inflationary spiral that may come from a formal devaluation.

READ MORE: What Investors Need to Know About Nigeria’s Exchange Window

The naira opened on Monday at 380.31 per dollar in the window. That’s about 17 percent weaker than the interbank rate of 315 and close to the rate of 391 on the black-market, which many Nigerian businesses were forced to utilize as hard-currency supplies through official channels dried up. Eligible transactions in the window include those for loan repayments, interest payments, capital repatriation and remittances.

While Nigeria devalued the naira on the interbank market last June, it stopped short of allowing a free float and intervened to prop up the exchange rate. Investors, concerned that the currency was overvalued, have stayed on the sidelines: Nigerian stocks declined 33 percent in dollar terms in the past year, the worst performance globally, according to data compiled by Bloomberg.

Onadele, a former chief trader at Citigroup Inc.’s Nigerian unit who criticized the central bank last October for leaning on dealers not to let the currency fall, said this time around Governor Godwin Emefiele was relaxed about the weaker rate.

Multiple Rates

“The governor isn’t calling up, worrying about the rate,” Onadele said. “The central bank is ready to sell into this window, via the commercial banks. Any foreign portfolio investor that wants to leave Nigeria will get its money. If a foreign portfolio investor wants $100 million tomorrow, its bank should present the trade to the central bank. As long as the investor’s satisfied paying the rate, it will be done.”

Bond and stock investors should disregard the other exchange rates that now exist in Nigeria, with the central bank charging businesses different prices for foreign-exchange depending on their needs.

“Foreign portfolio investors should ignore the multiple exchange rates,” he said. “This new window is the relevant one that applies to them. The way the central has matched sources of inflows and applications appears unorthodox, but it has ensured a smooth take off.”

Bloomberg

CBN Mops Up Liquidity to Support Naira

Nigeria sold 107.64 billion naira ($353 million) in treasury bills on Friday in a move to soak up excess liquidity from the banking system and curb pressure on the currency, traders said.

The central bank sold 54.42 billion naira in the 167-day open market operations (OMO) treasury bills at 18 percent and 55.22 billion naira paper at 18.5 percent, traders said.

But the effect of the sale was countered by additional liquidity from the repayment of matured bonds forcing overnight lending rate down to 5 percent on Friday from 30 percent at the start of the week.

Traders said banking system liquidity was 246 billion naira in credit on Friday, up from 206.96 billion naira in deficit a week ago. The money markets were also expecting the monthly government budget disbursement next week.

On the forex market, the naira eased on the black market to 390 per dollar and held steady on the official market at 305.85.

($1 = 304.85 naira)

Reuters

Banks Benefit as Dollars Start to Flow

An increase in dollar sales by Nigeria’s central bank is giving the country’s lenders reason to cheer.

“We see an improvement in the number of letters of credit, bills being settled and remittances being allowed,’’ Segun Ajibola, president of the Chartered Institute of Bankers of Nigeria, said in an interview in Lagos, the nation’s commercial hub, on April 21. “Ordinarily, a margin will always be left behind for banks, so it will be right to say at the end of the day it will be an increase in revenue to banks.’’

The Central Bank of Nigeria increased sales of the U.S. currency to banks in late February to try and curb foreign-exchange shortages that contributed to the first annual contraction in the country’s economy in two decades and limited trading by the country’s lenders. Transactions in the currency market rose by a half to $9.72 billion in March compared to the previous month, according to Lagos-based FMDQ OTC Securities Exchange, the nation’s foreign-exchange trading platform.

Nigerian banking stocks rallied the most since Jan. 9 on Monday after it emerged that Governor Godwin Emefiele will let the market determine the naira’s rate in a new foreign-exchange window for portfolio investors in a further bid to revive the economy and address the dollar deficit. While he would tolerate the naira weakening in the window, the central bank probably won’t devalue the naira’s official rate, according to a person who attended meetings with the policy maker over the past two weeks.

The country’s lenders, especially small- and medium-sized banks, have been hard hit by the economy’s woes as companies scaled back output and workers lost their jobs. Non-performing loans as a percentage of gross loans worsened to 14 percent at the end of December from 11.7 percent at the end of June, the central bank said earlier this month.

Banks are now expecting a reduction in non-performing loans and an improvement in profitability following an increase in the oil price and dollar flows in the country, the institute’s Ajibola said.

Bloomberg

CBN Releases $380m in 2 days, Naira Gains

The Central Bank of Nigeria, CBN has pumped a total $380million within two days into the Foreign Exchange Market. And the effect: a further strengthening of the Naira.

The first tranche of $280m was released on Tuesday, On Wednesday, the bank offered additional $100 million to authorised dealers to meet the 7 to 15-day forwards requests of customers.

The acting Director, Corporate Communications Department, CBN, Mr Isaac Okorafor in a statement on Wednesday disclosed that the banks and authorised dealers were only able to pick up $68.51 million, out of the $100 million offered.

Okorafor attributed the inability of the authorised dealers to fully subscribe to the CBN to a surfeit of forex in the system, which may lead to further appreciation of the naira.

According to him, the trend monitored by the Bank indicated that deposit money banks were now able to meet the forex demands of their customers within the time frame stipulated by the CBN.

He said that the CBN will on Thursday, continue its sale of 20,000 dollars to Bureaux de Change (BDCs) for onward sale to small-end users.

Okorafor said feedback on the Bank’s forex new window for Small and Medium Enterprises (SMEs) in the country revealed that majority of small importers were heading for a major boost in their activities.

This he said was responsible for the current appreciation of the Naira, stressing that the Naira will continue to gain strength with the relentless efforts of the CBN to to supply the market with forex.

The spokesman also reiterated the determination of the CBN to continue to intervene in the various sectors of the interbank forex market in order to guarantee access to all categories of customers requiring forex for legitimate obligations.

The News Agency of Nigeria reports that the Naira on Wednesday closed at N390 at the parallel market and N306 to a dollar at the interbank market on Wednesday.

Meanwhile the World Bank has applauded the strategy of the CBN to increase sales of foreign exchange to the interbank market, Bureau de Change as well as other segments.

It however, stressed the need for the CBN to ease restrictions on access to foreign exchange, which continues to hinder rigorous economic recovery in the country.

NAN