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Stock Market Struggles for Recovery Amid N3.4tn Loss

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  • Stock Market Struggles for Recovery Amid N3.4tn Loss

The nation’s stock market is struggling to rebound as efforts to lure back investors received a boost following the creation of a new foreign-exchange window by the Central Bank of Nigeria.

The stock market, said to be one of best performing frontier markets globally until 2013, has been in the doldrums for the past two years as investor confidence continued to sag.

Many investors who were spooked by the low liquidity levels and currency curbs in the country have yet to return to the market.

Capital market analysts say not a few local investors have exited the stock market in favour of less volatile fixed-income instruments such as government’s Treasury bills with high yields.

The market capitalisation of listed equities on the Nigerian Stock Exchange closed at N8.913tn on Friday, up from N8.716tn last week.

The NSE market capitalisation, which hit a peak of N12.135tn on April 2, 2015, fell to N9.25tn at the end of last year.

Foreign transactions on the NSE plunged to N518bn last year from as high as N1.54tn in 2014, when oil prices peaked at $115 per barrel.

The nation’s currency crisis occasioned by the sharp drop in oil prices since mid-2014 led to equities sell-offs by foreign and local investors.

The value of trading on the NSE dropped by 22.3 per cent to N74.1bn in February from N95.32bn in January, according to the latest Domestic and FPI Report.

Domestic transactions decreased by 22.88 per cent from N51.31bn recorded in January to N39.57bn in February; foreign transactions also decreased by 21.52 per cent from N44.01bn to N34.54bn.

The Chief Executive Officer, Cowry Asset Management Limited, Mr. Johnson Chukwu, said two factors would lead to the stability of the equities market.

He said, “One is the local policy environment. Today, we have yields on the Federal Government’s treasury bills of three to four-day maturity at about 18.9 per cent. So that yield is higher than any dividend yield you expect.

“So, with a yield in fixed income of about 18.9 per cent, local investors will prefer fixed income instruments to equities.”

He said foreign portfolio investors would also prefer fixed-income instruments to equities instrument.

Chukwu said, “But beyond that, foreign portfolio investors need to invest in a market where there is dollar liquidity and then the market is transparent in the pricing of foreign currencies. Both do not currently exist in the Nigerian economy.

He said those factors plus the elevated yield on fixed-income instruments had served as disincentives for investors to invest in equities.

“Until those factors are addressed, we are not going to see a bullish run in or any consistent rally in the equities market,” Chukwu added.

On April 21, the Central Bank of Nigeria established a forex widow for investors and exporters to boost liquidity in the forex market and ensure timely execution and settlement for eligible transactions.

The Acting Managing Director, Afrinvest Securities Limited, Mr. Ayodeji Ebo, said, “It all boils down to investors’ confidence, which is key. If you look at the way the equities market is structured, the participation of foreign portfolio investors cannot be ignored.

“If the new window is effectively implemented, it will help boost confidence because foreign investors are more interested in liquidity and they easily exit the market.”

According to him, a lot of foreign investors’ funds are still trapped in Nigeria waiting for when they will get dollars at the appropriate rate.

“This has dampened the foreign investors’ confidence significantly such that they are not bringing in more; they try as much as possible to take out,” he said.

He said on the domestic front, the direction of the economy had not been very clear although the government was doing a lot to ensure that.

Ebo said, “So, in times of uncertainty, people don’t spend; and once they don’t spend, it will affect the results of quoted companies and participation will also reduce. So, it is more of restoring confidence.”

The Board Chairman, Nigerian Economic Summit Group, Mr. Kyari Bukar, “It is the lack of clarity on the foreign exchange policy that is making them (foreign investors) to stay on the sidelines.

“If they see that clarity, they will begin to bring in their money. With the foreign portfolio investors, there has to be absolute clarity in the sense that they can easily come in and go out at a market-determined rate rather than a rate that someone sets and could change overnight.”

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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Naira

Exchange Rate: Dollar to Naira Today, Friday 3 December 2021

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nigerian currency - Investors King

The Nigerian Naira remained under pressure across the board despite efforts by the Central Bank of Nigeria (CBN) to prop up the value of the local currency against its global counterparts.

Backed by Nigeria’s foreign reserves, Naira plunged from N306 against the United States Dollar to N414 at the official forex window during the peak of COVID-19 when crude oil dropped to $15 a barrel and eroded Nigeria’s foreign exchange earnings.

Since then, Africa’s largest economy has instituted various forex policies to support the Naira, deepen economic productivity and generally grow activity across key sectors. However, the lack of a stable foreign exchange market has impeded capital importation needed to prop up Naira value as foreign investors continue to stay off the Nigerian market according to the World Bank.

Naira to Dollar Exchange Rate Official Fx Window (FMDQ)

On Thursday, December 2, 2021, the Nigerian Naira opened at N413.94 against the United States Dollar at the Official Forex Window managed by the FMDQ Group.

The local currency sheds 0.06 percent to a greenback by the close of business on Thursday, closing at N414.80 to a United States Dollar.

Analysing the forex spot market, Naira rose to as high as N404 against the American Dollar during the trading house of Thursday before plunging to N444. Trading activity dropped on Thursday as investors traded $139.69 million US dollars, in contrast to $223.8 million transacted on Wednesday.

Naira Black Market Exchange Rates

At the unregulated forex market, the Naira exchanged hoarders and speculators are exchanging the Naira at N558 to United States Dollar.

This was in spite of the CBN efforts at shutting down activity at that section of the forex market given its damages to the nation’s forex market and the fact that Nigerians were almost adopting the black market rate as the official rate.

Experts, including the Vice President, Yemi Osinbajo have blamed the Central Bank of Nigeria for existing of the black market. According to the Vice President, as long as the forex arbitrage exists due to the numerous forex rates, speculators, hoarders and other forex traders will continue to sustain the unregulated black market.

Central Bank of Nigeria’s Official Naira Rates

The CBN quoted rates are the rates the apex bank sells various currencies to Deposit Money Banks (DMBs) in Nigeria. The DMBs are however expected to add between N1 to N2 on each rate to cover costs when selling to customers.

Nigerian Naira (NGX) to Bitcoin (BTC)

Bitcoin, the world’s most dominant cryptocurrency, lost 0.13 percent against the Naira to N23.299 million or $56,833 in the last 24 hours.

Against Ethereum (ether), the second most capitalised cryptocurrency, the Naira gained 0.15 percent to N1.874 million.

GTBank Naira Exchange Rates

As of December 2, 2021, GTBank exchanged the Naira to the US Dollar at N480. While the Euro, the Canadian Dollar and the Great Britain Pound were traded at N549, N366 and N649, respectively since August 20, 2021. See other Naira exchange rates below.

Currency Rate Date
USD ₦ 480 02/12/2021
EUR ₦ 549 20/08/2021
CAD ₦ 366 20/08/2021
GBP ₦ 649 16/08/2021

Access Bank Naira Exchange Rates

Currency Rate Date
USD ₦ 450 17/11/2021
EUR ₦ 531 31/08/2021
GBP ₦ 621 27/08/2021
CAD ₦ 357 18/08/2021
ZAR ₦ 31 18/08/2021
INR ₦ 6 18/08/2021
TRY ₦ 52 18/08/2021
AUD ₦ 299 01/05/2021
RUB ₦ 7.10 01/05/2021
SGD ₦ 268 01/05/2021
AED ₦ 109 26/11/2020
XOF ₦ 800 15/08/2020

Sterling Bank Naira Exchange Rates

Currency Rate Date
USD ₦ 480 18/11/2021
GBP ₦ 619 18/11/2021
EUR ₦ 534 13/09/2021
CAD ₦ 344 20/08/2021

Union Bank Naira Exchange Rates

Currency Rate Date
USD ₦ 414 18/11/2021
EUR ₦ 484 13/10/2021
GBP ₦ 569.3 13/10/2021
CAD ₦ 316 01/05/2021

UBA Naira Exchange Rates

Currency Rate Date
USD ₦ 465 18/11/2021
EUR ₦ 566 31/08/2021
GBP ₦ 622 23/07/2021
CAD ₦ 316 01/05/2021
AED ₦ 119 08/08/2020
INR ₦ 6.06 03/08/2020

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Naira

Naira Sees Stability at Official Window

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Naira - Investors King

The Naira has this week witnessed a steady, unchanged value against the naira as it closed at N415.07 against the dollar on Wednesday (for the fourth straight day), according to the Investors and Exporters window where the Nigerian currency is traded officially.

As mentioned in a previous article, the Naira appears to have found a resting place for its value heading into the festive period. Even though the Naira is now stable, the value may still be too negative for the Nigerian economy, as food prices and prices for other goods keep going on the rise.

The FMDQ group through its website gives updates concerning the currency’s daily trading (opening and closing prices). It also gives updates on the Spot rate and Forward rate; the prices at which the currency trades for transactions throughout that day as well as future transactions which were agreed on that day.

The Spot rate maintained its usual highest value of N404 per dollar, but its lowest value fell as far as N457.02 per dollar. This is considerably lower than the N444 per dollar which it usually attains.

The Forward rate has however seen changes in value, dropping to a high of only N445.97 per dollar, maintaining its lowest price of N457 per dollar.

The FMDQ group also reports the total turnover of the currency in a day, i.e. the total amount of the currency that was traded throughout that day. On Wednesday, it was revealed that the total amount of the dollar that was traded sat at $223.8 million at the close of the day. This is higher than the $152 million which was recorded the previous day.

At the parallel market (which is not recognized by the Central Bank of Nigeria), the Naira was sold at a price of N558 per dollar as it looks to maintain the recovery which it made after hitting an all time low of N575 per dollar in September.

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Naira

Naira Stabilizes at N415/$1 at Official Fx Window

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Naira - Investors King

The Nigerian currency has continued its trend of closing at N415 per dollar, after it settled to close at that price (which it has closed at consistently since Friday) on Tuesday. This is according to data gathered from the Investors and Exporters window where the Naira is traded officially.

It seems to appear that the Naira has found its resting place at this price, considering the number of days at which it has closed at that particular price. It is now left to see how this currency will trade closer to the festive period.

However, this ‘stability’ cannot be held as a permanent thing, because for this price to be the new normal, it may have to be maintained over a longer period of time. The Central Bank of Nigeria should be making moves to bring the value of the naira back up again, to make things better for Nigerians and Nigeria especially as we approach the Christmas period.

The FMDQ group’s updates of the Spot and Forward exchange rates showed slight changes here and there, with nothing too heavy. The Spot rate did not see any changes from Monday, as it maintained the high of N405 per dollar and a low of N465.97 per dollar.

The Forward rate however witnessed a jump, with Tuesday’s high jumping back to N411 per dollar from N452 per dollar where it sat on Monday. The lowest of the Forward rate further fell to N457 per dollar from the N453 per dollar where it was on Monday.

Those who would benefit the most from Tuesday’s trading round are those who agreed on future deals at prices between N411 and N415 per dollar.

The daily turnover recorded by the FMDQ group on Tuesday sat at $152.98 million, more than $100 million less than the $256 million which Monday recorded.

On Tuesday, the parallel market saw the Naira trade at N565 per dollar. The Central Bank has however stated that it does not reckon with the parallel market.

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