- Interbank Rate Rises on Cash Outflow
The Nigerian Interbank Offered Rates (NIBOR) closed at an average of 11.5 per cent on Friday, up from the seven per cent it was the preceding Friday as payments for bond and treasury bills purchases drained liquidity from the money market.
The Debt Management Office last week raised N214.95 billion from local currency bonds at its first auction this year, with payment for the bonds due last Friday.
According to Reuters, traders said the lending rate jumped on Friday as some banks scrambled for cash to pay for bonds and treasury bills.
Meanwhile, activities in the money market last week remained dictated by system liquidity. The week opened with improved system liquidity of N256.7 billion, indicating a N91 billion increase as against previous Friday. During the week, the CBN sold N208.9 billion worth of open market operations (OMO) instruments and N268.9 billion of treasury bills. The Treasury bills market experienced mixed sentiment during the week as average yield rose on two out of five sessions. The week started with sell-offs across short to medium term instruments as investors positioned for the OMO auction (143-day and 297-day instruments issued at 18.0% and 18.6% marginal rates) announced by the CBN.
“In the week ahead, there are no maturing securities and we expect money market rates to trade in double digits barring any major inflow into the system, while activities in the treasury bills market trade mildly bullish,” analysts at Afrinvest Africa Limited stated.
Forex Market Review
Activities in the foreign exchange (forex) market last week remained besieged by liquidity crunch in all segments of the market. At the Interbank, the CBN continued daily dollar interventions in order to meet some dollar demands and also contain intra-day interbank rate movement on all days during the week.
Accordingly, interbank rate hovered within a tight band of N305.25/$ and N305.5/$ at market close during the week. On the other hand, rates at the parallel market experienced some volatility as the naira recorded marginal gains against the dollar – appreciating to N495/$ – as the CBN resumed sales of the greenback to BDCs at the start of the week before depreciating to N498/$1 on Friday.
At the futures market, the value of open FX Futures contract at the end of the week rose to $3.9 billion from $3.8 billion last week.
However, the first monetary policy committee (MPC) meeting for 2017 will holding this week and analysts anticipate that the operations of the FX market and its impact on foreign funds inflow into the Nigerian market will be a talking point at the meeting.
“However, we do not think a major shift in the management of the foreign exchange market will be announced at the end of the meeting. Also, the approval of the Medium Term and Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP) with exchange rate projection of N305.00/US$1.00 suggests that the controls in the FX market will persist in the short-term. Thus, we expect rate at the official market to remain at similar level in the week ahead whilst the parallel market remains pressured,” Afrinvest added.
Bond Market Review
Activities in the local bonds market was largely bearish as investors sold–off on a range of instruments in preparation for the Bond auction held mid-week and in response to result of the auction which showed the auctioned instruments were issued at higher yields. Thus, average yield across benchmark bonds rose on all trading sessions save for Monday (down 52bps) and Friday (down 4bps). The week started on a bullish note as yields closed 52bps lower on average but sentiment turned bullish in subsequent sessions with yields closing the week at 16.5% on average, representing a 22bps increase week-on-week.
Similar to the preceding week, the performance of Nigerian Corporate Eurobonds, sentiment was bullish as yields fell across a range of instruments save for the ACCESS 2021 and ACCESS 2017 (which inched higher by 0.2% apiece week-on-week) as well as FIRST BANK 2021 (up 4bps week-on-week).
Coincidentally, the FIRST BANK 2021 commands the highest year-to-date price return (+3.9%), due to strong buying interest earlier in the year, while ACCESS 2021 and ACCESS 2017 have recorded the worst performance with year-to-date losses of 0.2% apiece.
The Governor, Central Bank of Nigeria, Mr. Godwin Emefiele last week debunked the insinuations in some quarters that policies of the government were meant to few the few in the society. He explained that the monetary policy stance of the central bank was always designed to serve the best interest of majority of Nigerians. Emefiele also noted that the “policies were put in place to help Nigeria pull through the hard time.”
He observed that the country found itself in the present situation due to lack of appropriate commitment to economic diversification, especially when the earnings from oil were as high as $140 per barrel, just as he noted that earnings of the government had risen to height of $3.2 billion and fell to about 500m per month recently. According to the governor, there was also a time when the crude oil price stabilised at $105 per barrel over a period of five years.
“What did we do with the huge accretion to the reserves then?” he queried in a statement yesterday.
Emefiele therefore, counseled the critics of the CBN and government policies that “priority will be given to Nigerian masses by managing the limited resources to provide for industrial raw materials, plants and equipment and agricultural inputs in order to create employment and generate wealth.”
The Bureaux De Change (BDCs) licenced by the CBN are not part of parallel market operators, the Association of Bureaux De Change Operators of Nigeria (ABCON) declared last week. ABCON President, Aminu Gwadabe, in a statement, distanced his members from the activities of parallel market operators, which have constituted major setback to naira’s stability. He insisted that CBN-licenced BDCs are not parallel market operators as misconstrued by a large section of the public and even top government officials. Gwadabe disclosed that CBN-licenced BDCs, which are 3,147 operators at present, are key partners of the CBN in ensuring the stability and competiveness of the naira against world currencies, including the dollar.
He said licensed operators had been given up to December 31 by the CBN to renew their annual licensing fee of N250,000, are registered with the Corporate Affairs Commission (CAC) and with each operator meeting the mandatory N35 million capital base stipulated by the apex bank.
Gwadabe disclosed that the Finance Minster, Mrs. Kemi Adeosun severally accused the BDC parallel market operators of contributing to the continuous depreciation of the naira, but insisted the licensed BDCs do not fall within the category being described by the minister because they operate based on set guidelines.
The ABCON chief said the licensed BDCs, not only have their operational offices, they file reports with the Federal Inland Revenue Services (FIRS) and belong to ABCON, which is recognised by the apex bank as the umbrella body for licensed BDCs.
Gwadabe said the licensed BDCs are committed to naira’s stability at both official and parallel markets, and have consistently partnered with the CBN to achieve this objective.
Bitcoins, Virtual Currencies
The central bank last week warned commercial banks, other financial institutions under its regulation as well as Nigerians against transacting business in anyway with the use of virtual currencies (VCs). Some types of VCs include Bitcoins, litecoin, darkcoin and peercoin. The central bank also advised banks to ensure that existing customers that are virtual currency exchangers, have effective Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) controls that would enable them comply with customer identification, verification and transaction monitoring requirements.
“Where banks or other financial institutions are not satisfied with the controls put in place by VC exchangers/customers, the relationship should be discontinued immediately; and any suspicious transactions by these customers should immediately be reported to the Nigerian Financial Intelligence Unit (NFIU),” it added.
The CBN noted that the emergence of VCs had attracted investments in payments infrastruture that provides new methods for transmitting value over the internet. Transactions in VCs are largely untraceable and annonymous making them susceptible to abuse by criminals, especially in money laundering and financing of terrorism, the central bank stated.
Federal Government Clears $120m Debt to Gas Companies Amid Nigeria’s Power Crisis
Amidst Nigeria’s persistent power crisis, the Federal Government has taken a pivotal step forward by clearing a significant portion of its debt to gas companies.
A sum of $120 million has been paid out of the country’s $1.3 billion indebtedness to gas suppliers, offering a glimmer of hope for improved energy stability across the nation.
The Minister of Power, Chief Adebayo Adelabu, underscored the critical role of gas in power generation and highlighted how the mounting debts had severely hampered gas supply to electricity-generating companies, exacerbating the country’s electricity shortfall.
Nigeria heavily relies on thermal power plants fueled by gas for over 70% of its electricity needs, making the timely settlement of gas debts paramount for enhancing power generation capacity and addressing the nation’s energy deficit.
Addressing delegates at the 7th Nigeria International Energy Summit in Abuja, the Director of the Decade of Gas Secretariat, Ed Ubong, expressed optimism about the government’s progress in offsetting its financial obligations to gas producers.
He emphasized the importance of aligning gas and power sectors to foster sustainable energy solutions.
As Nigeria grapples with the multifaceted challenges plaguing its energy landscape, the government’s commitment to settling outstanding gas debts marks a pivotal stride towards revitalizing the country’s power infrastructure and ensuring reliable electricity access for its citizens.
Nigeria Insurance Corporation Reimburses Depositors of 179 Closed Microfinance and Four Mortgage Banks
The Nigeria Insurance Corporation (NDIC) has announced the successful reimbursement of depositors affected by the closure of 179 microfinance banks and four mortgage banks across the country.
The reassuring news came during the 45th Kaduna International Trade Fair, where NDIC’s Managing Director, Dr. Bello Hassan, explained the corporation’s unwavering commitment to safeguarding depositors’ funds amidst financial uncertainties.
Dr. Hassan, represented by Hauwa Gambo, the NDIC’s Deputy Director of Communication, highlighted the corporation’s proactive measures in protecting the interests of depositors.
The introduction of the Single Customer View framework has expedited the process of reimbursing depositors of liquidated banks, ensuring swift and transparent transactions.
The corporation’s collaboration with the judiciary has yielded positive results, facilitating the speedy prosecution of failed insured banks and resolving long-standing cases of bank liquidations like Fortune and Triumph Banks.
This concerted effort has significantly enhanced the debt recovery rate, enabling NDIC to declare full liquidation dividends to uninsured depositors of over 20 deposit money banks.
Furthermore, NDIC has embraced digital remote payment strategies, streamlining electronic funds transfers to verified depositors’ alternate bank accounts.
The introduction of the ‘Deposit Tracer’ initiative in partnership with mobile operators aims to address apathy among depositors with small balances, providing accessible avenues for claiming funds trapped in closed banks.
The initiatives underscore NDIC’s proactive stance in safeguarding depositors’ interests and ensuring financial stability in Nigeria’s banking sector.
85.51 Million Nigerian Bank Customers Face Withdrawal Freeze Over NIN, BVN Deadline
As the March 1 deadline looms, an estimated 85.51 million Nigerian bank customers are facing the possibility of frozen accounts due to their failure to link their National Identification Numbers (NINs) and/or Bank Verification Numbers (BVNs) to their accounts.
Recent findings reveal the potential scale of the impending banking crisis.
Data from the Nigeria Inter-Bank Settlement System (NIBSS) indicates that Nigeria had approximately 146 million active individual bank customers as of December 2022.
However, by January 26, 2024, only 60.49 million BVNs were recorded on the NIBSS portal, leaving a significant portion unlinked.
Meanwhile, about 104 million NINs had been issued by December 2023, highlighting the disparity between NIN issuance and BVN linkage.
The Central Bank of Nigeria (CBN) had earlier issued directives to banks, mandating them to restrict transactions on accounts lacking linked NINs and BVNs, with effect from March 1, 2024.
Any accounts found non-compliant risk being designated as ‘Post no Debit,’ rendering them unable to process further transactions.
Responding to the impending crisis, the Director-General of the National Identification Management Commission (NIMC), Abisoye Coker-Odusote, emphasized the need for the revalidation of Front-End Partners (FEPs) to ensure the integrity of the identity database.
She underscored the importance of NIN registration and urged collaboration with various stakeholders to expedite the process.
The Executive Vice Chairman/CEO of the Nigerian Communications Commission (NCC), Dr. Aminu Maida, reiterated the significance of linking NINs to SIM cards to enhance national security.
Telecom subscribers were urged to comply with the NIN-SIM linkage directive to avoid service disruptions.
Meanwhile, financial service providers like Opay have issued reminders of the impending restrictions, urging customers to comply with the linkage requirements.
Amidst concerns, some customers contemplate transferring funds to compliant accounts to avoid potential financial setbacks.
As the deadline approaches, stakeholders are intensifying efforts to mitigate the impact of the impending banking crisis on millions of Nigerians.
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