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CBN Mops up Liquidity to Support Naira

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  • CBN Mops up Liquidity to Support Naira

The Central Bank of Nigeria sold N107.64bn ($353m) in Treasury bills on Friday in a move to soak up excess liquidity from the banking system and curb pressure on the naira.

The CBN sold N54.42bn in the 167-day Open Market Operations Treasury bills at 18 per cent and N55.22bn paper at 18.5 per cent, traders said.

But the effect of the sale was countered by additional liquidity from the repayment of matured bonds forcing overnight lending rate down to five per cent on Friday from 30 per cent at the start of the week.

Traders said banking system liquidity was N246bn in credit on Friday, up from N206.96bn in deficit a week ago. The money markets were also expecting the monthly government budget disbursement next week.

On the forex market, the naira eased on the black market to 390 per dollar and held steady on the official market at 305.85.

The naira had depreciated to 390/dollar on Thursday, down from 388/dollar on Wednesday.

The local unit has been hovering between 385/dollar and 390/dollar in the last one week.

Currency and financial experts have said the local currency may not appreciate above 380/dollar despite the spate of dollar sale by the central bank.

The naira had on Tuesday weakened by 18.3 per cent to 374.25 at the “Investors and Exporters FX Window’’, a new foreign exchange window introduced by the Central Bank of Nigeria to attract foreign portfolio investors into the country and boost liquidity in the forex market.

The local unit depreciated against the United States dollar to 374.25, compared to 305.90/dollar quoted on the spot interbank market, data on the FMDQ OTC Securities Exchange showed.

The CBN has said it will allow investors to trade the currency at market determined rates.

The CBN earlier established the new forex widow for investors and exporters and tagged it “Investors and Exporters FX Window”.

A circular issued by the CBN said the purpose of the window was to boost liquidity in the forex market and ensure timely execution and settlement for eligible transactions.

The circular, signed by the bank’s Director, Financial Markets, Dr. Alvan Ikoku, listed eligible transactions under the new window to include invisible transactions such as loan repayments, loan interest payments, dividends/income remittances, capital repatriation, management service fees and consultancy fees.

Also on the eligible list were software subscription fees, technology transfer agreements, personal home remittances and any such other eligible transactions including ‘miscellaneous payments’ as detailed under the Memorandum 15 of the CBN Foreign Exchange Manual.

Currency analysts and economic experts have, however, doubted the window funds will attract foreign portfolio investors.

They argued that as long as the country maintained multiple exchange rates, the new initiative by the CBN might not yield the expected result.

According to analysts, Nigeria currently has five exchange rates, namely: the official rate, the black market, a rate for Muslim pilgrims going for Hajji, a retail rate set by Bureau De Change Operators and a rate for foreign school fees.

“The move … is unlikely to … attract sizeable inflows until there is harmonisation between the different markets,” the Africa Chief Economist at Standard Chartered Bank, Razia Khan, said.

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.

Banking Sector

Ecobank Partners NiDCOM to Mobilise Nigerians Abroad for National Development

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In a bid to fulfill it’s objectives and mandate, the Pan African Bank has promised to support Nigerians living and working abroad through it’s partnership with NiDCOM.

The Managing Director, Ecobank Nigeria, Patrick Akinwuntan has stated that the bank is privileged to work closely with the Nigerians in Diaspora Commission, (NiDCOM) and will continue to pursue one of its key mandates of helping to enhance the economic development and integration of Africa through its support to Nigerians living and working abroad.

Speaking at the maiden edition of the Diaspora Quarterly Lecture Series with Ecobank as the sole banking partner which took place on Saturday, 8th May 2021, he noted that Ecobank remains a critical bridge for Nigerians abroad, as it has made huge investments in the necessary platforms to enable them connect with home seamlessly. The event held online and had over 2000 participants from across all the continents in attendance.

“Nigerians in the diaspora play a major role in nation building, their contribution goes a long way to catalyse economic development. For us at Ecobank, we are a pan-African institution positioned to foster the economic growth and integration of our continent, so we are particularly pleased to work closely with the Nigerians in Diaspora Commission (NiDCOM), ably led by the Chairman/CEO, Hon Abike Dabiri-Erewa”.

“We are committed to ensuring that every Nigerian living abroad is able to remit home seamlessly and affordably, access viable investment opportunities and as the financial institution of choice for Nigerians abroad, we have deployed the necessary resources to actualise this.” He stated.

The Minister of Interior, Ogbeni Rauf Aregbesola, who was also present, reiterated the readiness of the government to collaborate with Nigerians in the diaspora, highlighting the new processes put in place to facilitate passport issuance, noting that all backlog of passport applications would be cleared by the end of May 2021.

Also speaking, the Hon. Minister of State, Foreign Affairs Amb. Zubairu Dada said harnessing the human capital and material resources of Nigerians in the diaspora towards the socio-economic, cultural, and political development of Nigeria can no longer be ignored. He pointed out that the Nigerian diaspora community is well educated, resourceful, skilled, and exposed to global best practices.

The NiDCOM Chairman/CEO, Hon. Abike Dabiri- Erewa explained that the Diaspora Quarterly Lecture Series is projected to be a major aspect of national discourse, where Nigerians abroad can be kept abreast of the government’s policies, programmes and projects.

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Increase in Price Boosts Revenue of Dangote Sugar by 41.5 Percent in Q1 2021

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Dangote Sugar - Investors King

Revenue of Dangote Sugar Refinery Plc rose by 41.5 percent to N67.394 billion in the first quarter (Q1) of 2021 from N47.643 billion recorded in the same quarter of 2020.

According to the leading sugar manufacturer, the increase in revenue was a result of the increase in the price of sugar in the first quarter. The company claimed price adjustment was necessary to mitigate the negative effect of inflation and depreciation on the company.

Volumes only rose by 5.7 percent during the quarter despite a 41.5 percent increase in revenue, meaning the increase in price was the main sales catalyst.

In the company’s unaudited financial statements, gross profit grew from N12.721 billion in Q1 2020 to N18.044 billion in Q1 2021.

Similarly, operating profit stood at N15.884 billion, up from N10.747 billion posted in Q1 2020.

Finance cost more than double from N1.353 billion in Q1 2020 to N3.412 billion in Q1 2021.

Dangote Sugar’s profit before tax rose from N9.509 billion recorded in the corresponding quarter to N11.949 billion in the quarter under review.

The company paid N3.646 billion in income tax, slightly higher than N3.137 paid in the same quarter of 2020.

Profit for the period grew from N6.372 billion in Q1 2020 to N8.302 billion in Q1 2021.

Commenting on the company’s performance, Dangote Sugar said “EBITDA increased by 34.7% to N17.02 billion (2020: N12.64 billion) on account of increased earnings. Group profit after taxation for the period increased by 30.3% to N8.30 billion (2020: N6.37 billion) reflecting management’s unrelenting drive to deliver consistent shareholder value.”

On price increase, the company hinged it on series of devaluation carried out in 2020 by the Central Bank of Nigeria (CBN), escalating inflation, port congestion and rising in price of global sugar. Dangote Sugar said its imported raw sugar from Brazil under Federal Government’s backward integration plan.

We have continued to witness high cost of raw materials, energy costs and other input costs due to rising inflation and FX rate fluctuation. Further cost escalation is anticipated in the year as inflationary pressure mounts,” the company said.

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FBN Holdings Suffers 39 Percent Drop in Profit to N15.6 Billion in Q1 2021

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FBN Holdings - Investors King

FBN Holdings Plc profit after tax declined by 39 percent from N23.140 billion recorded in the first quarter (Q1) of 2020 to N15.6 billion in the first quarter of 2021.

In the leading financial institution’s unaudited financial statements released through the Nigerian Exchange Limited, gross earnings declined by 14.5 percent to N137 billion in the period under review, down from N160 billion filed in the previous quarter.

Similarly, net interest income declined from N60.253 billion achieved in Q1 2020 to N52.793 billion.

Net interest income after impairment charge for losses also dipped from N50.547 billion in Q1 2020 to N39.619 billion in Q1 20201. While net fee and commission income rose from N20.773 billion in Q1 2020 to N28.427 billion in Q1 2021.

Profit before tax declined by 34 percent to N18.906 billion in the quarter under review, down from N28.680 billion posted in the corresponding quarter of 2020.

FBN Holdings paid N3.285 billion in income tax in the first quarter of 2020.

Therefore, profit for the period stood at N15.621 billion. While Net Assets contracted from N765.2 billion to N764.8 billion.

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