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CBN Set to Settle $270.6m FX Futures Contract This Week

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  • CBN Set to Settle $270.6m FX Futures Contract This Week

The Central Bank of Nigeria (CBN) is expected to settle OTC FX Futures contract to the tune of $270.6 million on the interbank market this Wednesday.

The transaction to be settled on the FMDQ OTC Securities Exchange would be the fourth futures contract to mature since the introduction of the flexible FX regime.

But analysts anticipate that the central bank would open a new futures contract expected to mature October 2017.

Afrinvest West Africa Limited, which disclosed this explained: “In the week ahead, the central bank will be settling US$270.6 million in open futures contracts maturing 26th October 2016. We expect the apex bank to open a new October 2017 futures contract with a total value of $1.0bn to replace the maturing instrument.

“However, we believe rate at the parallel market will be pressured in the weeks ahead on the back of the apex bank’s decision to maintain status-quo on the suspension of 19 banks from dollar sale to BDCs, suspension of naira debit cards for FX transactions and Travelex’s inability to meet the rising foreign currency demand from BDC operators,” Afrinvest stated.

In an effort to meet part of the pent up demand for foreign exchange by critical sectors of the economy, the central bank last week allocated $314 million to Nigerian banks for onward sale to their customers through Special Secondary Market Intervention Retail Sales (SMIS).

According to a CBN source, the intervention, which was a sixty-day forwards sale, was aimed specifically at meeting the FX payment of matured obligations for the importation of agriculture and industrial raw materials, machineries and equipment as well as spare parts and ticket sale remittances for airlines.

He said in order to ensure that these sectors continue to enjoy the support of the banking system in sourcing raw materials and machinery the chief executives of deposit money banks (DMBs) signed undertakings to open new letters of credit (LCs) equivalent to the amount of forwards receive for each of the sectors.

“Therefore, this round of sales was meant to meet both matured obligations and finance new trade LCs,” the senior CBN official had said.

At the close of the intervention, he said the CBN received valid application (that is those that met the criteria stipulated in the circular for the auction) amounting to $814,208,535.82. Of this amount, it intervened with the sum of $313,916,711.09.

A sectoral breakdown showed that total demand from the agriculture sector stood at $31,941,640.73, of which 61.73 per cent, or $19,718,153.67 was met by the CBN.

Total demand by airlines was $216,738,717.57, of which 31.91 per cent, or $69,164,224.83 was met; demand for machinery stood at $167,638,045.08, of which 65.09 per cent, or $109,117,686.71 was met; and demand for raw materials of $397,890,132.44, of which 29.13 per cent, or $115,916,711.09 was met.

In fulfilment of its pledge to fund forward sales under the flexible FX regime, the CBN also guaranteed letters of credit (LCs) for importers to ship in required goods.

A statement from the acting Director, Corporate Communications Department, CBN, Mr. Isaac Okorafor had explained that the move by the CBN to settle the 60-day forward sales would further ease pressure on the naira and improve market liquidity.

The naira closed at N455 to the dollar on the parallel market on Friday. However, on the interbank FX market, the spot rate of the naira closed at N455 to the dollar on Friday.

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.

Finance

Stanbic IBTC Obtains Approvals, License to Establish Life Insurance Subsidiary

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Stanbic IBTC Holdings Plc on Friday announced that it has obtained all required Regulatory Approvals and a license from the National Insurance Commission to establish a wholly-owned Life Insurance subsidiary, Stanbic IBTC Insurance Limited (SIIL).

In a statement signed by Chidi Okezi, Company Secretary, Stanbic IBTC and released on Friday, the bank said “The establishment of this new subsidiary essentially complements the bouquet of product offerings by Stanbic IBTC as it continues its goal of being the leading end-to-end financial solutions provider in Nigeria. In this regard, SIIL will aim to facilitate long term insurance for already financially included individuals and will seek to become the preferred Insurer in the Life Insurance Business.

“Stanbic IBTC Holdings PLC, a member of Standard Bank Group, is a full-service financial services group with a clear focus on three main business pillars – Corporate and Investment Banking, Personal and Business Banking and Wealth Management. The group’s largest shareholder is the Industrial and Commercial Bank of China (ICBC), the world’s largest bank, with a 20.1% shareholding. In addition, Standard Bank Group and ICBC share a strategic partnership that facilitates trade deals between Africa, China and select emerging markets. Standard Bank Group is the largest African financial institution by assets. It is rooted in Africa with strategic representation in 21 countries on the African continent.

“Standard Bank has been in operation for over 158 years and is focused on building first-class, on-the-ground financial services institutions in chosen countries in Africa; and connecting selected emerging markets to Africa by applying sector expertise, particularly in natural resources, power and infrastructure.”

 

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World Bank to Discuss New $1.5 Billion Loan Request From Nigeria

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Zainab Ahmed

The Finance Minister, Budget and National Planning, Mrs. Zainab Ahmed, on Friday said the Federal Government has met all the conditions for a fresh loan of $1.5 billion from the World Bank.

The minister disclosed this on Bloomberg TV.

She said the multilateral financial institution is in the final stage of approving the loan. The minister explained that the loan will be discussed in the bank’s next meeting and possibly be approved in the same meeting.

In June, the Senate approved the borrowing plans but the World Bank pushed back demanding Nigeria fulfill the conditions attached to the $3.4 billion loan received from the International Monetary Fund (IMF) in May.

Some of the conditions were to increase revenue generation by upping VAT, the introduction of tariff reflective electricity bill, the removal of subsidy and the unification of the nation’s foreign exchange.

Most of which the Federal Government has done despite protests from most Nigerians who called the new policies anti-people given their current situation.

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Nigeria Realises Over N400 Billion from Company Income Tax in the Third Quarter of 2020

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The Federal Government realised N416.01 billion from Company Income Tax (CIT) in the third quarter of the year, according to the latest report from the National Bureau of Statistics (NBS).

This was 3.48 percent higher than the N402.03 billion generated in the second quarter of the year and represents a decline of 20.13 percent year-on-year from N520.89 billion realised in the third quarter of 2019.

A breakdown of the report showed the professional services sector including the telecoms generated the highest amount of CIT at N55.52 billion during the quarter, while the manufacturing sector followed with N42.03 billion.

The banking and financial institutions realised N24.05 billion while the mining generated the least and closely followed by Textile and Garment Industry and Local Government Councils with N120.93 million, N167.51 million and N321.72 million generated, respectively.

The report added that out of the total amount realised during the quarter under review, a sum of N244.70 billion was generated as CIT locally. The federal government collected N70.34 billion as foreign CIT payment and the remain N100.97 billion was received as CIT from other payments.

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