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Naira Strengthens to N310 Against Dollar

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Naira

Foreign currency speculators, who launched an unprecedented attack against the naira in the last two weeks, got their fingers burnt on Tuesday when the nation’s currency staged a major recovery, rising to N310 to a dollar at the close of business, compared to N375 at which it sold on Monday.

The naira fell to an all-time low of about N400 to a dollar on the parallel market last week fuelling concerns that it would plummet further to N450-N500/$ this week.

But findings showed that the naira defied expectations, climbing to as high as N305 to the dollar at some parallel market points in Lagos on Tuesday afternoon, before settling at N310.

Forex dealers and currency analysts attributed the significant gain on the parallel market to excess supply of the greenback in the market, even as it looked like a lot of speculators lost the shirts on their back.

A reliable source that speculators who thought that by attacking the currency last week, coupled with misplaced concerns that the Central Bank of Nigeria (CBN) was going to stop the allocation of forex for school fees and medical bills abroad, this would compel the central bank and President Muhammadu Buhari to alter their stance against the devaluation of the currency.

But they were disappointed when Buhari, in Egypt at the weekend, adamantly ruled out the devaluation of the naira on the grounds that Nigeria does not have the competitive advantage to benefit from an official currency adjustment.

Reacting to the president’s stance, speculators who had been betting that the naira would depreciate further, started dumping the dollars with reckless abandon, effectively creating excess supply of the greenback in the parallel market.

Commenting on the situation in the secondary forex market, the chairman, Association of Bureau de Change Operators of Nigeria (ABCON), Alhaji Aminu Gwadabe, said: “The market is moving from perception to reality.”

Similarly, an analyst at Ecobank Nigeria, Mr. Kunle Ezun, predicted that the naira would edge higher in the coming days.

“We expect that the naira would appreciate further. We have always said that what happened last week was purely a speculative attack.

Some people felt that if they pushed the naira down to that level, they could force the CBN to devalue, so that when the naira is devalued and the gap widens further, they would now bring out the dollar cash to make a kill,” Ezun said.

He however urged the fiscal authorities to introduce policies that would help stimulate economic activities, saying that the fundamentals of the economy were still weak.

ABCON also aligned with the federal government’s decision not to further devalue the naira.

Gwadabe said this at a media briefing, pointing out that devaluing the naira would create more problems than it would solve.

He said that as a way of enhancing transparency in the BDC sub-sector, his association had decided to introduce a forex rate band weekly.

This rate band is expected to serve as a guide for all BDCs and the public on the prevailing exchange rate across the country, he added.

In addition, it will be operated in line with the regulated forex rate in the economy.

“This is to forestall exploitation of forex end users, and also to ensure that end users are informed to avoid falling victims of exploitation.

“The band will be announced via weekly press releases that will be circulated to the media for publication.

“ABCON will introduce a series of measures aimed at transforming the operations of BDCs in Nigeria to align with global best practices. These include: review and updating of BDC operational manual; introduction of live trading platforms; automation of all transactions and documentation requirements; and increased partnership with the CBN and other relevant agencies.

“Further, as part of its responsibility as a self regulatory organisation (SRO), and also in continuation of its aim to transform its members to compete within the global regulatory currency market, ABCON will seek the approval of relevant monetary and fiscal authorities as well as partnership for effective use of the nation’s external reserves to enhance domestic trade and foreign exchange management.”

“To this end, our website and internet platforms will be developed to position BDCs to serve as agents of Western Union and currency auctioneers.”

“We would also develop platforms that will allow our members to access sources of autonomous foreign exchange like govt agencies, embassies, IOCs and export proceeds, etc,” he explained.

He also urged the federal government to introduce policies that would diversify the economy to increase non-oil export earnings, and reduce imports.

This, according to him, would lead to increased foreign exchange inflow and a reduction in demand for foreign exchange.

In addition to policies that would diversify the economy, ABCON suggested that the CBN should review the policy of dollar importation into the economy for the purpose of defending the naira.

According to the association, the central bank should introduce a policy whereby the naira is used to intervene in the real sectors of the economy to boost productivity.

Furthermore, Gwadabe said as a way of reducing demand for dollars, the CBN should explore the option of promoting the use and acceptability of naira for transactions within the West African sub-region.

He added: “We observe that this is already happening at the level of informal trading activities within the sub-region, and it is our belief that this can be replicated at the level of formal economic activities.”

Meanwhile, the Chairman of Stanbic IBTC Holdings Plc, Mr. Atedo Peterside, has expressed concern over the uncertainty arising from the federal government’s foreign exchange policy, warning that it is threatening macroeconomic stability in the country and is unsustainable.

He stated this yesterday at the 2016 Standard Bank West Africa Investors’ Conference tagged, “Unlocking Nigeria’s Potential…Growth through Diversification”.

He said the federal government’s foreign exchange policy is the biggest uncertainty facing the country today following the lack of economic policy direction and the likely composition of Buhari’s economic team for much of the third and fourth quarters of last year.

According to him, “The argument at stake is not whether to devalue or not because there has already been an effective devaluation.

“The naira prices of various capital goods are now being ‘correctly’ priced purely on the basis of realistic expected replacement costs and so the economy is sliding towards an unpalatable scenario where the consumer suffers the ‘pains’ of devaluation (rising prices) without witnessing any of the expected ‘gains’ such as enhanced fiscal viability (in local currency terms at least) of the three tiers of government and increased competitiveness of Nigerian businesses.”

Peterside stressed that the much-craved economic diversification could only take place meaningfully if new capital investment activity takes place to take maximum advantage of increased domestic competitiveness.

“Sadly, most investors here – local and foreign – are currently caught up in a frenzied pursuit of the cheapest available dollars and the difference between losing this game and winning it can be as high as a mind-boggling 50 per cent on new transactions.

“The pursuit of scarce forex for today’s needs has understandably become the main game in town and this has exacerbated the pressures on Nigeria’s foreign exchange reserves and the naira via the one-way bet that is currently on against the naira, that is, everybody wants to take foreign exchange out and nobody really wants to bring it in,” he added.

He further stated that the excitement caused by the important development in Nigeria’s political landscape last year, where a change in government occurred at the federal level after a keenly contested election, has given way to some apprehension surrounding whether a populist government can take the necessary tough economic policy actions that are necessary to restore confidence and stimulate badly needed new investment activity.

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.

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Finance

Oil-producing States Receive N35bn Allocation as FG, States, LGs Share N699bn in December

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The sum of N699.824 billion was allocated to the three tiers of government in December, 2021, the Federation Accounts Allocation Committee (FAAC) says.

It further disclosed that the oil-producing states in the country received N35.297 billion as 13 percent derivation revenue.

A communiqué issued at a virtual meeting of FAAC for January 2022 revealed the above.

In its breakdown, the federal government got the sum of N279.457 billion, the state governments received N221.190 billion, and the local government councils were given N163.879 billion which amounted to N699.824 billion.

The North-east Development Commission (NEDC) also got an allocation of N5.796 billion.

According to the communique, the total distributable revenue of N699.824 billion is made up of distributable statutory revenue of N507.267 billion, distributable value-added tax (VAT) revenue of N187.409 billion, and exchange gain of N5.148 billion.

The FAAC recorded an increase of N5.080 billion in December as its gross revenue obtained from the value-added tax was N201.255 billion compared to the N196.175 recorded in November.

“The sum of N5.796 billion allocation to the North-east Development Commission (NEDC) and N8.050 billion cost of the collection were deducted from the N201.255 billion gross VAT revenue, resulting in the distributable VAT revenue of N187.409 billion.

“From the N187.409 billion VAT revenue available for distribution, the federal government received N28.111 billion, states got N93.705 billion, while the local government councils received N65.593 billion,” it stated.

The statement further showed records of an increase in companies’ income tax (CIT) and value-added tax (VAT), while petroleum profit tax (PPT) and oil and gas royalties clearly decreased. Also, it was recorded that import and excise duties decreased marginally.

It explained that the Federal government got N2.461 billion from the total exchange gain revenue of N5.148 billion; states received N1.248 billion; local government councils received N0.962 billion while N0.477 billion was shared to oil-producing states as 13 percent derivation revenue.

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Banking Sector

Fidelity Bank Enriches Customers, Holds Second Draw of GAIM 5 Promo

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Fidelity Bank

Leading African financial institution, Fidelity Bank PLC, has announced the second set of millionaires in its Get Alert in Millions Season 5 promo (GAIM 5) which held recently in Victoria Island, Lagos.  

The event was witnessed by representatives of regulatory organisations which include: Ms Oyinkan Kusamotu, Senior Legal Officer, Lagos State Lotteries & Gaming Authority; Mr Tanko Mohammed, Head, Monitoring & Enforcement, Lagos State Lotteries and Gaming Authority; Mrs Susie Onwuka, Head, Lagos Office, Federal Competition & Consumer Protection Commission (FCCPC) and Ms Chioma Amanoh, Lagos Office, National Lottery Regulatory Commission (NLRC).

Since the commencement of the fifth season of the promo in November 2021, the bank has enriched over 460 customers with various cash prizes. So far, 10 lucky customers have been rewarded with a million naira each. This month, Fidelity Bank has continued its tradition of rewarding loyal customers which has seen Ajoma Rachel, Stanley Sunday, Musbahu Kabiru, Usman Abdulkadir, John Uchechukwu, Oluwatayo Oladipupo, Esther Eloho, Sophia Sefera, Amarachi Sarah Anyacho, and Obi Chinelo emerge as the next set of millionaires in the promo.

Commenting on the event, Dr. Ken Okpara, Executive Director overseeing the Bank’s Lagos and Southwest Directorate, stated that, “As a bank that places our customers at the centre of everything we do, we are always looking for opportunities to help our customers grow. Two months ago, we kicked off the GAIM 5 promo to reward our customers and demonstrate our commitment to improving their lives and wellbeing. Today, we are excited at how happy we have made some of our most loyal customers. We remain committed to providing rewarding experiences and best-in-class services for our clients.”

Also speaking at the event, the Divisional Head, Product Development, Osita Ede stated that: We have earmarked the sum of N125million for total cash rewards this season which we would be giving out in weekly, monthly and grand draws till the campaign ends in July 2022. We encourage our customers to save up to increase their chance of winning and those yet to open an account to do so today. At the end of the campaign season, we want to celebrate customers who make savings second nature.

Fidelity Bank is a full-fledged commercial bank operating in Nigeria, with about 6million customers who are serviced across its 250 business offices and digital banking channels. The bank is known for exceptional customer service and digital innovation.

L-R: Tanko Mohammed, Head, Monitoring & Enforcement, Lagos State Lotteries and Gaming Authority; Osita Ede, Head, Product Development, Fidelity Bank Plc; Cynthia Ogbonna, Team Lead, Brand Management, Fidelity Bank Plc; Meksley Nwagboh, Divisional Head, Brand & Communications, Fidelity Bank Plc; and Susie Onwuka, Head, Lagos Office, Federal Competition & Consumer Protection Commission (FCCPC); at the second month draw of the Get Alert in Millions Season 5 (GAIM 5) Savings Promo held in Lagos on Thursday

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Loans

Loan Default: AMCON Takes Over IBEDC

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AMCON

Further to the judgment of the Federal High Court on the 8th of September 2021, the Asset Management Corporation of Nigeria (AMCON) has announced its takeover of the Ibadan Electricity Distribution Company (IBEDC).

This is following the electricity distribution company’s default in a loan servicing agree­ment executed with Polar­is Bank.

“AMCON has been ap­pointed receiver/manager over all the Assets of In­tegrated Energy Distribu­tion and Marketing Lim­ited as stipulated in the instruments executed in favour of AMCON by vir­tue of the Loan Purchase and Limited Servicing Agreement executed with Polaris Bank Limited dat­ed 30th November 2018 and a Notice of Appointment of the Receiver/Manager dated August 6th, 2021, which was duly stamped by the Commissioner for Stamp Duties”, a statement from AMCON reads.

AMCON further revealed that it has appointed Osayaba Giwa-Osagie to take over the entire undertakings on the IBEDC, including the assets, shares and interests in related companies and entities, and also monies kept in any of the 25 banks in Nigeria.

Investors King gathered that AMCON’s takeover might also not be unconnected to some crisis inside the power company, a development which has reportedly affected its ser­vice delivery to customers.

IBEDC’s Chief Operating Officer (COO), Engineer John Ayodele however allayed the fears of the IBEDC staff.

“I hereby wish to inform all staff that there is no cause for alarm. We are assured of job security which entails our position/duties in the company, being entitlements to our salaries and other benefits etc.”, he said.

Investors King recalls that the IBEDC, during a stakeholders’ meeting in May 2021 had disclosed that it secured N4.2billion from the Central Bank of Nigeria (CBN) to improve power supply to its numerous customers in Ogun State.

According to Ayodele, the facility would be channelled into building lines to improve power/electricity supply to the communities. He had also revealed that 80 percent of the money collected by IBEDC goes for other services, adding that the company has lost over N3billion in estimated billing.

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