Naira Appreciates Slightly At Parallel Market

The naira on Friday appreciated slightly against the dollar at the parallel market end of the foreign exchange market.

The News Agency of Nigeria reports that the naira traded at N321.5 to the dollar on Friday afternoon, from the previous N322 on Thursday.

The currency, however, maintained its old rate against the pound sterling and the Euro at that segment of the market.

It is being traded at N450 and N359 to the pound sterling and the Euro respectively on Friday.

Meanwhile, the naira has continued to exchange at N197 to the dollar at the official market of the CBN.

Some traders said transactions at the parallel market were still low as participants remained cautious.

Naira Remains At N322 Against The Dollar

The Naira on Wednesday maintained its exchange rate at N322 to a dollar.

It also remained firm against the two other major currencies, the pound sterling which exchanged at N448 and the euro which sold for N355.

The official interbank rate remains at N197 for the dollar.

Some traders at the parallel market told the News Agency of Nigeria (NAN) in Lagos that the high exchange rate was discouraging to customers.
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They complained that the market had remained dull due to low patronage.

Meanwhile, the apex bank, in its last Monetary Policy Committee (MPC) meeting, said that excess liquidity in the banking system was contributing to the current pressure in the foreign exchange market.

The bank said that the pressure was impacting negatively on consumer prices.

Signs Of Recovery As Foreign Reserves Rise For Four Days Straight

The Central Bank of Nigeria (CBN) has recorded fresh rise of foreign reserves for four days consecutively – for only the second time since President Muhammadu Buhari took office.

As at March 22, 2016, the foreign reserves had experienced a rise of $34.7 million in four days, rising from $27,853,597,008 on March 16 to $27,888,285,805 by March 21.

By February 22, the reserves had a rise of $13 million while finding its way out of 11-year low positions.

The first consecutive rise started on Thursday February 24, from $27.804 billion to $27.823 billion as at February 29, surging gradually through the days in-between.

The rise has been attributed to a gradual recovery in oil prices and strict restrictions of capital flow.

After rising by $350 million in August 2015, the foreign reserves have not experienced any of such huge leaps in 6 months, with a meagre rise of $32 million in February 2016.

Major restrictions have been put in place to curb excessive outflow of Nigeria’s foreign exchange, following fears that the reserves may be down to zero in 10 months.

Speaking at TheCable devaluation debate, Adams Oshiomhole, governor of Edo state, had said the nation’s forex outflows vastly outweighed inflow.

“As we speak, I understand that our forex inflow is under $1 billion,” he had said.

“If you’re earning less than one billion, and your outflow remains at more than $4 billion, obviously, all other things being equal, I imagine that in one year, our foreign reserves would be zero.”

The position of the CBN and the federal government on forex has been fiercely criticized by many, who consider capital control as counter-productive.

However, the recent rise of reserves and the passage of the 2016 budget may well vindicate the CBN and the Muhammadu Buhari-led federal government.

Naira Appreciates But Stocks Fall, After CBN Policy Shift

The Nigerian naira appreciated on Wednesday, while stocks plunged on the Nigerian stock exchange (NSE) following the outcome of the Central Bank of Nigeria (CBN) monetary policy committee meeting.

The naira strengthened slightly at the parallel market to trade at 321 to the dollar, N1 stronger than its position yesterday.

“We now buy the naira at 318, so we sell between 320 and 321 as against 322 and 323 we sold yesterday,” a trader told TheCable in Abuja.

The movement of the stock exchange was however negative, with the market shedding over N97 billion to end the day at N8,853,022,855,897.26.

Mobil, Total, Dangote cement, Guinness and Seplat petroleum lost N7.54, N7.49, N4, N3.07 and N2 per share, respectively.

On Tuesday, the CBN decided to cut monetary policy rate, reversing its earlier policy to allow liquidity in the Nigerian economy.

The CBN MPC decided to “raise MPR by 100 basis points from 11.00 per cent to 12.00 per cent; Raise CRR by 250 basis points from 20.00 to 22.50 per cent; retain Liquidity Ratio at 30.00 per cent; and Narrow the asymmetric corridor from +200 and -700 basis points to +200 and -500 basis points”.

The bank has been criticised for making a reversal on its initial policy to keep MPR at 11 percent, but some analysts say the move was in anticipation of more liquidity from budget 2016.

Lagos Records N5bn FDI In Three Months

Lagos State government has recorded over N5billion foreign direct investment (FDI) in the first quarter of 2016, Dr. Yakub Olajide Bashorun, Permanent Secretary, Office of Overseas Affairs and Investment has said.

Dr. Bashorun made this disclosure at the weekend during a one-day sensitisation of MDAs on mandate of Office of Overseas Affairs & Investment in Lagos.

Speaking on the investment profile of Lagos, the erstwhile Permanent Secretary in the Ministry of Agriculture and Co-operatives, said: “The investment projection for the state is very high. In the first quarter for instance, we have done about N5billion worth of investment into Lagos, creating hundreds of jobs for Lagosians.

“That is over 50 per cent of what has come in to the country this year alone. So you can imagine what will still be done with this kind of sensitisation workshop with everybody on the same page, whether in agriculture, in power, in transportation, health, medical tourism, ICT, education, entertainment and tourism sectors. So these are areas that are huge.”

Continuing, he said: “We will continue to monitor with aftercare because it is not only enough to ensure that investment comes to Lagos we want to also ensure that investment is thriving. If they are doing very well how can they do even better? Can they open more branches? If they are not doing well is that something went wrong along the way? Is it in terms of implementation of agreement? There has to be somebody who is working out the interest of everybody and that is what we’re doing.”

Office of Overseas Affairs & Investment, otherwise known as Lagos Global is a new parastatal was established in last May at the inception of the Governor Akinwunmi Ambode administration.

While explaining the core mandate of the agency, Prof. Ademola Abass, Special Adviser, Office of Overseas Affairs and Investment, in a presentation titled: ‘Promoting FDI in Lagos: Yesterday, Today and Tomorrow,’ said: “We’re in the investment arm of the Lagos state government. Since the creation of this office, I can tell you they are in hundreds and if the trend continues with what we have seen I will be talking in terms of thousands. But again, make no mistake, not all proposals will come to fruition. And you do not know the one which will come to fruition before you have dealt with it. So we have hundred proposals may it is going to be about five or six that would give you the traction that you need. And you may have just one proposal after over two months that would be a very major proposal. So you cannot really calibrate it but the important thing is that it is huge.”

The former university don, who spoke on plans by the state government to turnaround the fortunes of the state said: “Lagos needs a lot of infrastructural development, especially with our transportation. For a city of 22 million people you cannot rely on a mono transport system. One of the things we’re trying to do in Lagos is to take the ferry service a lot more serious than we have always done. So we’re looking into investment in the transportation area. This has become inevitable because the oil revenue has been nose-diving. We’re trying to look into and develop our agricultural resources. In terms of health we want to make sure we develop our hospital infrastructural to be able to stop our people from going to spend millions on medical tourism. We want to invest on energy. Lagos today is need of about 4, 000 megawatts to function but we have just around 1, 000 mega watts. So we have less than one quarter. So these are the key sectors we’re interested in Lagos state.”

On measures to encourage investment drive, Prof. Abass said: “There are many incentives. We have tax holidays for people. Obviously we’re also trying to cut down the time it takes to set up. We going recognising pioneer status and the government is also looking at using land as equity for those who may require land. Lagos has unique advantages.

“We have a population of almost 22million. We’re not just giving them benefits but we’re asking our investors to look at our unique advantages that Lagos actually offers them. In terms of population, it’s 22million, almost 5million of which is in the middle class. That is a huge purchasing power for whatever investment you have in Lagos state. And you’re talking about a Lagos state that is today the fifth largest economy in Africa, talking about $135billion GDP, which is 42 countries in Africa as a whole. So it’s not just giving investors benefits but we also helping them to take advantage when you come to Lagos state.”

Agbakoba Calls For Revaluation Of Naira

Former President of the Nigerian Bar Association (NBA) and human rights activist, Dr. Olisa Agbakoba, has called on the federal government to revalue the naira and encourage massive public spending.

He argued that revaluing the naira would make the nation’s currency stronger, adding that the Central Bank of Nigeria (CBN) has no business trying to shore up the currency with the dollar.

Agbakoba said: “I think the argument should not be devaluation, but it should be revaluing the naira which actually needs to be revalued”.

The former NBA president, who disclosed this at a media briefing in Lagos, said the creation of an official forex window by the CBN was a very big error. He expressed displeasure over President Muhammadu Buhari’s statement that if Nigerians want to send their children abroad for schooling, they have to provide the means because the government is not ready to support such course.

He added: “We can all play in the forex market officially. The problem is that we have only less than $32 billion in reserves. So there is so much pressure and it is falling. The CBN Governor is worried. “The other thing is that when there is a recession, you will have to pump money into the economy. You need to have a massive public spending.

“Government needs massive borrowing. The presidents economy advisers should know how to deploy the funds, if we should have massive public borrowing because our debt ratio is very good, then we will have enough money to deal with our public construction programme.

“I think the CBN needs to be broken up, the proper function of the CBN is monetary policy management (the exchange, interest and lending rates). For a country in dire need of spending I think our lending should not be in double-digits.”

MAN President Urges Industrialists To #BuyNaija As Forex Stays Scarce

Mr Frank Jacobs, the President, Manufacturers Association of Nigeria (MAN), on Monday advised industrialists to look inwards in view of the current scarcity of foreign exchange.

Jacobs gave the advice in an interview with the News Agency of Nigeria (NAN) in Lagos.

“We are beginning to look inwards owing to the cumbersome nature in accessing foreign exchange to buy raw materials.

“The backward integration creates room for improved efficiency and a cost saving measures for businesses,’’ he said.

The MAN president said that this approach would create jobs for many teaming youths and improve business margins for domestic producers.

“The model has the tendency to reduce the cost of transportation for manufacturers and makes commodities more competitive in the market.

“This will create room for more people taking into manufacturing as a substitute for importation and raise the nation’s gross domestic product in the long run,’’ Jacobs said.

Nigeria’s Foreign Reserves In Steady Increase

It is good news again from the Central Bank of Nigeria (CBN) with the rise of foreign reserves for four days consecutively – the first of such since President Muhammadu Buhari took office.

The reserves, which rose by $13 million on Tuesday February 22, have continued to blossom its way out of the 11-year low positions. The consecutive rise started on Thursday February 24, from $27.804 billion to $27.823 billion as at February 29, surging gradually through the days in-between.

The rise has been attributed to a gradual recovery in oil prices and strict restrictions of capital flow. The consecutive rise makes for the sixth daily rise in foreign exchange reserves in the last six months.

After rising by $350 million in August 2015, the foreign reserves have not experienced any of such huge leaps in 6 months, with a meagre rise of $32 million in February 2016.

Major restrictions have been put in place to curb excessive outflow of Nigeria’s foreign exchange, following fears that the reserves may be down to zero in 10 months.

The measures taken to avert the foretold crisis include; ban on CBN forex sales for the 41 items and halting sales of forex to bureau de change operators. The position of the CBN and the federal government on forex has been fiercely criticized by many, who consider capital control as counter-productive.

The Cable

Manufacturing, The FX Situation And The Nigerian Economy By Abdulsamad Rabiu

The Nigerian Dream, if there ever were such a notion, is facing its greatest challenge in recent times. With a less than a one-year-old government in place, faced with the enormous task to ensure a fair economic and social justice system which caters to all and a more equitable distribution of wealth and resources whilst combating corruption.

The huge drop in crude prices, dwindling FX reserves, continued import dependence, increased national and state debt, among others, have led to a state of economic anarchy. Despite these economic headwinds, I believe the Nigerian people and government have been presented with a unique opportunity for us to re-evaluate ourselves – from our consumption habits to rent seeking behavior in line with current realities. Things may seem harsh at the moment but nothing good comes easy. Led by a determined President Muhammadu Buhari, eliminating corruption, reducing wastage and checking leakages in the system at the government level has become a front burner issue. As a private sector investor, the current situation, whilst it presents huge challenges also comes with equally huge opportunities.

There are key areas looking for investment in agriculture, manufacturing and infrastructural development which I predict will be the key drivers of Nigeria’s revival. Arguments have been put for and against the notion of devaluing the currency but is that really the issue? Does devaluing the currency without first creating the necessary conditions to stimulate local production suit our import dependent country at this time?

Ultimately, private investors have to make a genuine, concerted effort to support the government’s effort, build capacity to develop local industries and give back to this economy rather than just looking for ways to exploit the system to the detriment of the many. These actions are not only crippling the economy but are also unpatriotic.

I am however hopeful because our government is conscious of the fact that Nigerians are expecting a lot. They are ready, willing and in a position to help realise our potential. We have the human capital, land, natural resources, so it is just the will that we need. With good leadership, everything else will fall into place. We also have a president who is very anxious to ensure Nigerians get value for money without corruption and with the highest level of integrity. That one person makes all the difference. I am quite hopeful, confident, and optimistic that things definitely will improve for this country. We deserve that.

The Foreign Exchange Dragon…

It is disheartening to know that despite all the money that accrued to the government during the oil boom in recent years, we find ourselves yet again in this position.

To be quite frank, the current forex situation is bad. Even the Manufacturers Association of Nigeria (MAN) and other organised private sector operators have raised the alarm over the unfavourable forex situation. There are lots of issues, from regulatory to rent-seeking behavior, that need to be dealt with decisively. Whilst the federal government is doing everything to protect the Naira, there are Nigerians – corporates and individuals alike who are grossly undermining the government’s position – sometimes with the aid of regulators – knowingly or unknowingly. On the one hand, the Central Bank of Nigeria (CBN) claims to be safeguarding the currency in line with the federal government’s resolve to protect the naira but on the other hand, the lack of a transparent exchange rate policy and inequitable distribution of foreign exchange to all players in key sectors meant to boost local production only worsens an already bad situation.

Whilst some manufacturers are experiencing extreme difficulty sourcing foreign exchange for legitimate business operations within Nigeria, others are getting forex to set up operations in other countries. For instance, last year we opened our ultra-modern Obu Cement factory which is by far the most technologically advanced in the country at the moment and are already in the process of doubling our total production capacity across all our cement plants in Nigeria. We have so far expended money raised from our offshore sources to the tune of over USD300million for CCNN expansion and our second line at Obu with little or no allocation forthcoming from the central bank.

It is rather ironic that a similar competitor in the same industry, who incidentally is the market leader, is allocated huge amounts of Nigeria’s hard earned and scarce forex from the official market for its operations in Congo. I do not know if there is an official policy to that effect but I was baffled, as were numerous Nigerians, to learn through a publication of forex allocation returns by First Bank of Nigeria Limited in THISDAY Newspaper of Tuesday, February 16, 2016 (page 11) of that allocation, whilst other operators in the same industry have received far less or nothing at all during the same period for verifiable and viable investments within Nigeria.

It begs the question, “Were other plants by that operator across Africa built with Nigeria’s money?” How has that impacted the country’s economy in return? If this is true, then it needs to be checked, as we cannot have a situation where Nigerian industries are being shut down, workers are losing jobs daily and resources badly needed to develop our economy are being taken out of the country to grow other economies to the detriment of ours. If this transaction was done using “Form A” like the publication suggested, then it is just money that has gone out from the country, which can be rerouted into the country for larger profits.

More alarming is the fact that over 50 per cent of Nigeria’s forex allocations through the banks are going to less than 50 companies going by the figures published by the banks on forex allocations. Are manufacturers expected to continue developing local industries when some regulators are unwittingly encouraging anti-competition activities by giving an unfair advantage to a single operator or are key institutions now in the firm grip of a cabal made up of a few who can strong-arm the central bank and federal government to do their bidding because they have become “too powerful?”

I understand that President Buhari directed, through the CBN, that the returns of forex allocations be published periodically despite significant pushback from vested interests. We now know he means well. Without doubt, there are many persons and corporate entities who are aware of the goings-on in the Nigerian forex market but are afraid to speak out because of the perception that those involved are too powerful but if no one brings these issues to the fore, there is absolutely no way we can progress.

From recently released data, the disparities and inequalities in allocation have only become too obvious. Does the CBN have different criteria for operators in the same industries or are we seeking to firmly entrench an Orwellian system in the country? Maybe they need to explain this to Nigerians. The system needs fixing and corporatised money laundering activities under a legal umbrella of any sort must be checked or else it would lead to grave systemic issues for the economy.

I have heard some analysts say Nigeria may be faced with a “Zimbabwe situation” sooner than later but there is no basis for comparison. The differences are very clear – Nigeria still has the capacity to earn foreign exchange from non-crude exports. There are still private investors like BUA Group who are willing to invest within Nigeria and boost local capacity and industry. It may take a while to get there but with the programmes being put in place by the current government coupled with proposed investments in infrastructure, we will surmount these challenges.

The silver lining is the opportunity presented to start looking at other areas to grow the economy and stimulate national development. The government also needs to urgently step up its communication with all stakeholders on its projects and plans for the economy. It has never been a question of to devalue or not to devalue but on what basis a devaluation may occur. If we do not put our house in order and set up a framework and policies to enable the common man feel the positive effects of a devaluation programme, then we may be in for another ‘SAP’.

Recently, I was asked where I saw the BUA Group in the light of the current economic situation. My answer was simple; “We are confident in the current government’s ability to turn things around and we will continue to invest in Nigeria.”

Our business strategy has been hugely successful despite the difficulties in the operating environment. Over the past thee years, we have gradually divested from business areas that were largely dependent on foreign exchange and importation of raw materials in favour of businesses that we could source at least 90% of the raw materials needed for production locally whether in infrastructure, manufacturing or the agribusiness and foods sectors.

We are fully concentrating on our core businesses including agriculture, mining and manufacturing that are less forex dependent, require mostly locally sourced raw materials and have potential for export and have made huge investments in other areas including sugar and cement totalling over $1.5bilion within the past three years alone. As for new businesses, we are looking to open an integrated steel complex as well as explore opportunities in petrochemicals. We however remain confident that we are well poised to take advantages of new opportunities that may arise in the current business climate.

I also wish to use this opportunity to call on well-meaning Nigerian individuals and corporate citizens to come together and join hands in protecting what we’ve got and making this country better. Nobody will do that for us – not the international financial organisations and not the rent seekers looking for opportunities to milk the country of her resources. Together, we can succeed and change our nation’s fortunes so that future generations will have a country to be proud of – one in which a Nigerian dream can finally be realized.

God bless the Federal Republic of Nigeria.

Abdulsamad is the CEO of Bua Group.

This article first appeared here.

Naira Falls To N345/$1 In The Parallel Market

The  Naira yesterday suffered its biggest daily depreciation against the  dollar  as the exchange rate rose to N345 per dollar in the parallel market.

This represents N20 depreciation when compared with the closing exchange rate of N325 per dollar in the market on Friday.

But the naira was relatively stable at the  official interbank foreign exchange market as the interbank rate stood at N197.47 per dollar at the close of business yesterday.

The naira also depreciated by N45 against the British Pounds Sterling as the parallel market exchange rate rose to N485 per pounds yesterday from N340 on Friday.

Bureaux De Change sources who confirmed this development to Vanguard attributed the sharp depreciation to increasing scarcity of the dollar and Pound sterling in the market.

According to an Abuja based BDC operator who spoke on condition of anonymity, “The market is experiencing huge demand for dollars but there is no supply. Even those who have dollars are not willing to sell. The way things are going, the rate might touch N350 per dollar before it stabilises”.

This development widened the gap between the interbank rate   and the parallel market rate to N147.53 per dollar from N127.53 per dollar last week. The naira has been on steady decline since Tuesday January 12th 2016, when the Central Bank of Nigeria (CBN) stopped weekly dollar sale to BDCs. Prior to this action, the naira traded at N265 per dollar in the parallel market.

Consequently the naira has depreciated by N80 in the parallel market since the CBN took the action. The steady depreciation was also aggravated by inability of the CBN to meet foreign exchange demand.

Vanguard investigations reveal that the parallel market is been bedevilled with demand for foreign exchange from importers of the 41 items excluded from the official market by CBN last year as well as importers of items not excluded from the official market.

This was corroborated by an official of Lagos Chamber of Commerce and Industry, Dr Vincent Nwanem.  Speaking at TheCable Colloquium last week, he said, “For now the high exchange rate is not an issue for manufacturers. No, the major issue now is access. Even the goods that are not listed in the 41 items, our members cannot even fund dollars to fund them.”

Naira falls to N345/$ in parallel market