South African rand strengthened, leading gains among major and emerging-market currencies, and stocks and bonds rallied after South African President Jacob Zuma backtracked on this decision to appoint a little-known former small-town mayor as finance minister.
The currency advanced as much as 6.5 percent, the most since October 2008, after Zuma late on Sunday reappointed Pravin Gordhan to oversee the National Treasury. Yields on benchmark bonds fell from seven-year highs.
The 73-year-old leader roiled South African assets and sparked outrage on Dec. 9, when he fired Nhlanhla Nene and replaced him with lawmaker David van Rooyen. Gordhan, 66, was finance minister from 2009 to May 2014, when he was replaced by Nene, who until then was his deputy. Gordhan steered the economy through the first recession in 17 years, while fending off pressure from labor unions to increase spending.
“The markets will welcome back Gordhan,” John Cairns, a currency strategist at FirstRand Ltd.’s Rand Merchant Bank in Johannesburg, said in an e-mailed note. “He is a known entity, is his own man and did well when in the post previously. But it is certainly unreasonable to expect all of last week’s losses to be reversed. A huge amount of uncertainty has been created in the past few days.”
The rand gained 5.3 percent to 15.0959 per dollar at 10:16 a.m. in Johannesburg on Monday after falling to as much as 16.0543 on Friday, an all-time low. Yields on rand-denominated bonds due December 2026 declined 106 basis points to 9.29 percent. Rates on the securities last week jumped the most on record, while the currency sank almost 10 percent against the greenback.
South Africa’s benchmark stock index rallied as much as 2.2 percent, before paring gains to trade 0.8 percent up at 48,433.16. The gauge posted its worst week in a year in the five days through Friday, sliding into a so-called correction. The FTSE/JSE Africa Banks Index jumped the most since September 2001, adding 14 percent with FirstRand Ltd., RMB Holdings Ltd. and Barclays Africa Group Ltd. leading advances.
On Sunday, Zuma said “after receiving many representations to reconsider my decision” that Van Rooyen will instead head the cooperative governance ministry, under which local governments fall. Gordhan will ensure “adherence to the set expenditure ceiling while maintaining a stable trajectory of our debt portfolio, as set out in the February 2015 budget,” Zuma said in a statement.
The appointment of Van Rooyen followed less than a week after Fitch Ratings Ltd. downgraded the country’s debt to BBB-, the lowest investment-grade level, and Standard and Poor’s lowered its outlook to negative, putting Africa’s most-industrialized nation on course for junk status.
“Markets should rally back very strongly but I would not expect a total retracement with a permanent loss of trust in leadership even if we are in a better place,” Peter Attard Montalto, a London-based senior economist and strategist at Nomura International Plc, said in a note. “Better levels will also give people an opportunity, and liquidity, to exit in a way that wasn’t possible in the second half of last week.”
Buhari Expresses Confidence in Banking Institutions to Tackle Economic Challenges
President Muhammadu Buhari has expressed his confidence in the West African Banking Association (WABA) to tackle economic challenges in the West African region.
The president expressed his trust while receiving a team from WABA, led by its President, Thierno Seydou Nourou Sy, at the State House in Abuja.
The president stated that the sub-region needs to come to an agreement on low access to financial services and recovery from the COVID-19 pandemic.
According to him, the association, founded in 1981, brings together over 250 commercial banks and 15 institutions from across West Africa, and for many centuries, African countries have traded with one another without a formalized and structured system. He, however, noted that over time, global trade had become more complex and organized.
The president expressed optimism that the launch of the African Continental Free Trade Area will mark a watershed moment in the way African countries do business.
“More importantly, we will turn the page in ensuring that we deepen and expand our industrial capabilities by making sure we export less of what we have been endowed with in the primary or raw form, and convert larger portions of these resources into finished materials.
“That will allow us to benefit from the revenue earned from the added value of exporting a finished product,” he said.
“Our ability to overcome the current phase of our development lies in our resolve to work jointly via our regional and sub-regional organizations where we can all reach a common understanding to fight against a common enemy.
“This is one of the reasons I am delighted with the strides ECOWAS has been making towards unanimity and forging alliances with a goal to resolve issues that confront the sub-region.
“I believe that this is also the approach that is being followed in the West African Bankers’ Association and the West African Monetary Union,’’ he added.
While commenting on WABA’s ongoing attempts to synchronize monetary and fiscal policy, the president pushed the organization to find common ground despite the particular macroeconomic challenges that each member-state faces.
He pledged that Nigeria would always be ready to support efforts that are geared towards improving the lives of all its citizens “as long as they do not place us at a disadvantage.”
The WABA President praised Nigeria’s leadership role in the African economy, while also praising President Buhari’s leadership.
“That’s why we are here for counsel and guidance for the financial sector in West Africa,” he said. He further urged the president to be an advocate for the greater inclusion of WABA in the ECOWAS structure.
NGX Sheds 0.13% on Monday to Extend its Decline
The Nigerian Exchange Limited (NGX) extended its decline on Monday as investors exchanged 263,338,835 shares worth N3.549 billion in 4,549 billion.
The market value of all listed equities decreased by N37 billion from N28.562 trillion it closed on Friday to N25.525 trillion while NGX shed 0.13% to close at 52,911.51 index points on Monday.
Jaiz Bank led the most traded stocks with 114007816 shares worth N101,752,697.03. Followed by GTCO’s 12,872,851 shares valued N302,842,620.75. See other details below.
|CONOIL||N 31.15||N 34.25||3.10||9.95 %|
|MRS||N 13.60||N 14.95||1.35||9.93 %|
|MCNICHOLS||N 2.13||N 2.34||0.21||9.86 %|
|ACADEMY||N 1.23||N 1.35||0.12||9.76 %|
|NPFMCRFBK||N 1.87||N 2.02||0.15||8.02 %|
|PRESCO||N 200.00||N 180.00||-20.00||-10.00 %|
|GSPECPLC||N 3.41||N 3.07||-0.34||-9.97 %|
|NEIMETH||N 1.76||N 1.59||-0.17||-9.66 %|
|UACN||N 14.40||N 13.20||-1.20||-8.33 %|
|NEM||N 4.39||N 4.05||-0.34||-7.74 %|
Nigeria Raises Interest Rate by 150 Basis Points to 13%
The Central Bank of Nigeria (CBN) led Monetary Policy Committee on Tuesday unanimously agreed to raise interest rates by 150 basis points from 11.5% to 13% to rein in escalating consumer prices.
The apex Governor, Godwin Emefiele disclosed this while speaking to the media on Tuesday, May 24th, 2022.
In 2020, the committee cut interest by 50 basis points to 11.5% in September 2020 to encourage borrowing and deepen new investment to stir growth and halt the plunge in economic productivity during the peak of COVID-19.
The nine-member committee voted unanimously to keep Monetary Policy Rate (MPR) at 13% and others as follow:
- The asymmetric corridor of +100/-700 basis points around the MPR was retained
- CRR was retained at 27.5%
- While Liquidity Ratio was also kept at 30%
The increase may not be unconnected to Nigeria’s high inflation rate of 16.82% in April. The committee is now projecting an aggressive increase in the inflation rate due to the forthcoming general election.
Emefiele said the MPC is suspicious “there might be an aggressive accretion of inflation”. Therefore, to prevent the looming inflation, he said the committee had to raise the interest rate by 150 basis points.
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