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Buy Naira Assets, Says Exotix Partners, Standard Bank Group

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Naira Assets

Global investors are encouraged to buy naira assets barely two months after the Central Bank of Nigeria introduced forex flexibility policy.

Most of the investors that fled during capital controls and fixed exchange rate have been told by Exotix Partners LLP and Standard Bank Group Ltd. to start buying naira assets again, according to a Bloomberg report.

“The cheap naira is attracting foreign investors,” said Lutz Roehmeyer, a money manager at Landesbank Berlin Investment, which oversees about $12 billion of assets. “At 325 per dollar, the naira is too weak” and Landesbank anticipates a rebound,” he said. Roehmeyer’s funds have since doubled its holdings of naira debt to $9.2 million this month.

While firms like Landesbank, Exotix Partners and Standard Bank Group are saying the naira has fallen enough, others are saying the local currency will weaken to 400 by year-end and around 515 by the first half of 2017.

“Restoring oil output would help assuage our concerns,” said Brett Rowley, a managing director at Los Angeles-based TCW Group Inc., which oversees $185 billion of assets. “The combination of cheaper naira and higher yields on naira paper are tempting, but we remain comfortable on the sidelines.”

The naira which rose 3.6 percent to 318 against the US dollar on Tuesday after falling to a record 350.25 on Aug. 19, has been constantly propped up by the central bank to aid its value against the dollar. A method investors said they are not convinced allow the naira to truly floats.

“You can’t really call it a normally-functioning exchange rate yet,” said Andrew Howell, a New York-based frontier-markets analyst at Citigroup Inc., the world’s biggest foreign-exchange trader. “The exchange rate is closer to fair value in the eyes of most investors, but there still aren’t many inflows.”

But Stephen Bailey-Smith, a senior economist at Copenhagen-based Denmark’s Global Evolution Fonds A/S, which manages $3.2 billion of assets, said bond investors are closer to jumping in now than they were a year ago, but they had even been more confident if they were able to mitigate the risk of further depreciation by buying the naira-settled futures introduced in June.

Nigerian local currency bonds have gained 11.5 percent this quarter, while the yield on benchmark government notes due in January 2026 has climbed 226 to 15.08 percent.

“If you can get a yield above 20 percent and hedge the FX risk, it’s not a bad trade at all. The futures market is intended to help you do that, but it’s difficult to buy them,” says Bailey-Smith. “We haven’t come back in to the local market yet, but we’re looking at it closely.”

Nigerian currency is starting to reap from its record low as the “worst-performing currency” among more than 150 this year, after losing about 38 percent of its value against the greenback since the central bank abandoned its fixed rate.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Markets

Communities in Delta State Shut OML30 Operates by Heritage Energy Operational Services Ltd

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Oil

The OML30 operated by Heritage Energy Operational Services Limited in Delta State has been shut down by the host communities for failing to meet its obligations to the 112 host communities.

The host communities, led by its Management Committee/President Generals, had accused the company of gross indifference and failure in its obligations to the host communities despite several meetings and calls to ensure a peaceful resolution.

The station with a production capacity of 80,000 barrels per day and eight flow stations operates within the Ughelli area of Delta State.

The host communities specifically accused HEOSL of failure to pay the GMOU fund for the last two years despite mediation by the Delta State Government on May 18, 2020.

Also, the host communities accused HEOSL of ‘total stoppage of scholarship award and payment to host communities since 2016’.

The Chairman, Dr Harrison Oboghor and Secretary, Mr Ibuje Joseph that led the OML30 host communities explained to journalists on Monday that the host communities had resolved not to backpedal until all their demands were met.

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Crude Oil Recovers from 4 Percent Decline as Joe Biden Wins

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Oil Prices Recover from 4 Percent Decline as Joe Biden Wins

Crude oil prices rose with other financial markets on Monday following a 4 percent decline on Friday.

This was after Joe Biden, the former Vice-President and now the President-elect won the race to the White House.

Global benchmark oil, Brent crude oil, gained $1.06 or 2.7 percent to $40.51 per barrel on Monday while the U.S West Texas Intermediate crude oil gained $1.07 or 2.9 percent to $38.21 per barrel.

On Friday, Brent crude oil declined by 4 percent as global uncertainty surged amid unclear US election and a series of negative comments from President Trump. However, on Saturday when it became clear that Joe Biden has won, global financial markets rebounded in anticipation of additional stimulus given Biden’s position on economic growth and recovery.

Trading this morning has a risk-on flavor, reflecting increasing confidence that Joe Biden will occupy the White House, but the Republican Party will retain control of the Senate,” Michael McCarthy, chief market strategist at CMC Markets in Sydney.

“The outcome is ideal from a market point of view. Neither party controls the Congress, so both trade wars and higher taxes are largely off the agenda.”

The president-elect and his team are now working on mitigating the risk of COVID-19, grow the world’s largest economy by protecting small businesses and the middle class that is the backbone of the American economy.

There will be some repercussions further down the road,” said OCBC’s economist Howie Lee, raising the possibility of lockdowns in the United States under Biden.

“Either you’re crimping energy demand or consumption behavior.”

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Nigeria, Other OPEC Members Oil Revenue to Hit 18 Year Low in 2020

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Revenue of OPEC Members to Drop to 18 Year Low in 2020

The United States Energy Information Administration (EIA) has predicted that the oil revenue of members of the Organisation of the Petroleum Exporting Countries (OPEC) will decline to 18-year low in 2020.

EIA said their combined oil export revenue will plunge to its lowest level since 2002. It proceeded to put a value to the projection by saying members of the oil cartel would earn around $323 billion in net oil export in 2020.

If realised, this forecast revenue would be the lowest in 18 years. Lower crude oil prices and lower export volumes drive this expected decrease in export revenues,” it said.

The oil expert based its projection on weak global oil demand and low oil prices because of COVID-19.

It said this coupled with production cuts by OPEC members in recent months will impact net revenue of the cartel in 2020.

It said, “OPEC earned an estimated $595bn in net oil export revenues in 2019, less than half of the estimated record high of $1.2tn, which was earned in 2012.

“Continued declines in revenue in 2020 could be detrimental to member countries’ fiscal budgets, which rely heavily on revenues from oil sales to import goods, fund social programmes, and support public services.”

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