- Analysts Upbeat about New FX Window for Exporters, Investors
The special foreign exchange (FX) window for investors, exporters and end-users that was recently created by the Central Bank of Nigeria (CBN) as well as the new index – the Nigerian Autonomous Foreign Exchange Fixing (NAFEX) – is expected to engender liquidity in the market, analysts at Ecobank Nigeria have stated.
They also noted that the NAFEX would engender flexibility and transparency in the pricing of naira-settled OTC FX Futures and other derivatives in the market.
But, a report by the Ecobank team predicted that this might push up the strike price of naira-settled OTC FX Futures to around N360-N375 to a dollar, thereby mirroring the current price for invisible transactions.
In the immediate, they anticipated that FX supply to the market is expected to rise, possibly by around 75 per cent, even as they projected that portfolio investors and exporters would likely re-enter the market.
This in turn is expected to improve liquidity and strengthen the naira.
“Overall, the impact of the circular would largely depend on how much flexibility, transparency and liquidity the CBN is willing to inject to support FX spot market. As such, the CBN might need to intervene more in the interbank FX spot market and other segments of the market,” they added.
The Central Bank of Nigeria issued the new FX circular on 21 April to announce a special window for investors, exporters and End-users in the foreign exchange market. While the new FX circular aimed to boost liquidity in the FX market and ensure timely execution and settlement of transactions, it introduced a new financial market fixing: NAFEX, for settlement of FX derivatives.
The new regulation was aimed to accommodate all FX obligations by increasing the number of permitted FX transactions to include: loan repayments, loan interest payments, dividend/ income remittances, capital repatriation and any other eligible invisibles transactions including miscellaneous payments, among others.
The market participants are portfolio investors, exporters, authorised dealers and other parties with foreign currency to exchange to naira.
Importantly, the introduction of the NAFEX) has replaced the Nigerian Inter-bank Foreign Fixing (NIFEX), which hitherto was used as index for pricing Naira-settled OTC FX Futures, with significant implications for the operations, methodology and pricing of new Naira-settled OTC FX Futures transactions.
“The decision to close all outstanding Naira-settled OTC FX Futures contracts of April 2017 to March 2018 Maturities as at 18 April 2017 might open another window of uncertainties that will affect market confidence, stability and integrity of Naira-settled OTC FX Futures pricing.
“In the immediate, FX supply to the market is expected to rise, possibly by around 75 per cent as portfolio Investors and Exporters (who hitherto are not disposed to the official market due to pricing) re-enter the market, which in turn will improve liquidity and strengthen the naira,” Ecobank analysts added.
SEC To Ban Unregistered CMOs From Operating By Month End
The Securities and Exchange Commission (SEC) says it will stop operations of Capital Market Operators (CMOs) that are yet to renew their registration on May 31, 2021.
This was contained in a circular signed by the management of SEC in Abuja on Monday.
On March 23, SEC had informed the general public and CMOs on the reintroduction of the periodic renewal of registration by operators.
The commission noted that the reintroduction of the registration renewal was due to the need to have a reliable data bank of all the CMOs registered and active in the country’s capital market.
“To provide updated information on operators in the Nigerian Capital Market for reference and other official purposes by local and foreign investors, other regulatory agencies and the general public, to increasingly reduce incidences of unethical practices by CMOs such as may affect investors’ confidence and impact negatively on the Nigerian Capital Market and to strengthen supervision and monitoring of CMOs by the Commission,” SEC explained.
According to the circular, the commission said CMOs yet to renew their registration at the expiration of late filing on May 31, would not be eligible to operate in the capital market.
It explained that CMOs were required to have completed the renewal process on or before April 30, however, the commission said late filing for renewal of registration would only be entertained from May 1 to May 31.
SEC also said that asides from barring the CMOs who failed to comply accordingly, their names would be published on its website and national dailies.
It added that names of eligible CMOs would be communicated to the relevant securities exchanges and trade associations.
A Threat to Revenue As Nigeria’s Largest Importer of Crude, India slash Imports By $39.5B
Nigeria’s revenue earning capacity has come under threat following the reduction of importation of crude oil by India.
India, Nigeria’s largest crude oil importer, reduced crude oil imports by $39.5bn in April, compared to the same time the previous year, data from India’s Petroleum Planning & Analysis Cell showed.
According to the Indian High Commission in Nigeria, India’s crude oil imports from Nigeria in 2020 amounted to $10.03bn.
This represented 17 percent of Nigeria’s total crude exports for the year according to the Nigerian National Petroleum Corporation, as quoted by OilPrice.com.
As Nigeria’s largest importer of crude oil, lockdowns in India’s major cities from the COVID-19 surge in April had ripple effects on Nigeria’s oil sales.
The NNPC was prompted to drop the official standard price of its main export streams, Bonny Light, Brass River, Erha, and Qua Iboe, by 61-62 cents per barrel below its April 2021 prices. They traded at $0.9, $0.8, $0.65, $0.97 per barrel respectively, below dated Brent, the international benchmark, as Oilprice.com showed.
India had been buying the not-too-light and not-too-heavy Nigerian crudes that suited its refiners.
Reuters reported that the Indian Oil Corporation’s owned refineries were operating at 95 percent capacity in April, down from 100 percent at the same time the previous month.
An official at the IOC was quoted as saying, “If cases continue to rise and curbs are intensified, we may see cuts in refinery runs and lower demand after a month.” Hundreds of seafarers risked being stuck at sea beyond the expiry of their contracts, a large independent crude ship owner reportedly told Bloomberg.
India reportedly bought more American and Canadian oil at the expense of Africa and the Middle East, reducing purchases from members of the Organisation of the Petroleum Exporting Countries to around 2.86 million barrels per day.
This squeezed the group’s share of imports to 72 percent from around 80 percent previously, as India’s refiners were diversifying purchases to boost margins, according to Reuters.
India also plans to increase local crude oil production and reduce import expenses as its population swells, according to Bloomberg.
A deregulation plan by the Narendra Modi-led government to boost national production to 40 million tonnes of crude oil by 2023/2024, an increase of almost eight million tonnes, had already been initiated.
According to Business Today, an Indian paper, the country currently imports 82 percent of its oil needs, which amounted to $87bn in 2019.
Invest Africa and DLA Piper Partner to Support ESG Best Practice in African Renewable Energy Projects
The global law firm, DLA Piper, has partnered with Invest Africa, the leading trade and investment platform for African markets, to support the development of ESG best practice in African renewable energy projects.
Clear Environmental, Social and Governance (ESG) targets and measurements have become an increasingly important part of fundraising as investors seek to align their portfolios with sustainable growth. For a continent boasting ample natural resources, this presents a significant opportunity for Africa’s green energy sector. However, renewable does not always equal sustainable and developing and articulating ESG metrics can pose a significant challenge to projects as they prepare investment rounds.
The project will assemble experts from the worlds of impact investment, development finance and law. Across a series of online meetings, participants will discuss strategies to improve ESG practices in African renewable projects from both a fundraising and operational perspective.
Amongst those speaking in the inaugural session on Thursday 13th May are Cathy Oxby, Chief Commercial Officer, Africa Greenco, Dr. Valeria Biurrun-Zaumm, Senior Investment Manager, DEG, Orli Arav, Managing Director – Facility For Energy Inclusion (FEI) – Lion’s Head Global Partners, Beatrice Nyabira, Partner, DLA Piper Africa, Kenya (IKM Advocates) and Natasha Luther-Jones, Partner, Global Co-Chair of Energy and Natural Resources, International Co-Head, Sustainability and ESG, DLA Piper.
Veronica Bolton-Smith, COO of Invest Africa said, “Africa is particularly vulnerable to the impact of climate change despite contributing very little to global emissions. As the price of renewables fall, they will form an ever more important part of Africa’s electrification. In this context, it is essential that projects be given the tools to apply best practice in ESG not only from an environmental perspective but also in terms of good governance, fair working conditions and contribution to social inclusion. I look forward to working closely with DLA Piper on this important topic.”
Natasha Luther-Jones, Global Co-Chair Energy and Natural Resources and International Co-Head Sustainability and ESG at DLA Piper also commented, “Climate change is one of the biggest challenges companies, and people, face today and when we look at its reduction – whether that be in how we power our devices, what we eat or how we dress, where we live or how we work – all roads come back to the need to increase the amount of accessible, and affordable, clean energy. However, renewable energy companies are not automatically sustainable as sustainability is a focus on all ESG factors, not just environmental. We know the need for renewable energy is only going to continue to rise, and therefore so will the number and size of renewable energy companies. The additional challenge is to make sure they are truly sustainable organisations and that’s what we’re excited about discussing during the webinar.”
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