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I&E FX Window May Stop Nigeria’s Demotion from MSCI Index

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Naira - Investors King
  • I&E FX Window May Stop Nigeria’s Demotion from MSCI Index

The newly introduced Investors’ and Exporters’ (I&E) foreign exchange window targeted at foreign portfolio investors could earn Nigeria reprieve from being demoted from the MSCI’s frontier markets index.

Nigeria’s currency peg between 2015 and 2016 led to the country’s delisting from two major indexes for emerging and frontier markets during the period.

U.S. investment bank, JP Morgan & Chase, in September 2015, first removed Nigeria from its Government Bond Index for Emerging Markets (GBI-EM), while Barclays announced its removal of Nigeria’s sovereign debt from its emerging markets local currency government bond benchmark, effective February 1, 2016.

According to a report by Reuters Tuesday, China, Argentina and Nigeria decisions loom for MSCI’s index review.

MSCI was slated to announce the results of its review Tuesday night. It was to hold conference calls with journalists at 2300 GMT and again at 0700 GMT Wednesday.

Nigeria is under review for possible demotion from the MSCI’s frontier markets index to “standalone” status.

This, according to the index provider, stems from “continuous deterioration of the market accessibility” after the introduction of restrictions on foreign currency trading in 2015.

Eleven Lagos-listed stocks on the Nigerian Stock Exchange (NSE) are currently on the MSCI Frontier Markets 100 index with a weighting of around seven per cent. That is the fourth largest after Kuwait, Argentina and Vietnam.

However, Nigeria might just escape a demotion from the MSCI frontier markets index due to the introduction of the I&E forex window by the Central Bank of Nigeria (CBN) last April, leading to a resurgence of investor confidence in the equities market.

“Investors are hoping the recent introduction of a new foreign exchange mechanism, aimed at international portfolio investors, will earn the country a reprieve. Nigeria’s index hit two-year highs last week,” the report added.

The CBN disclosed last week that cumulative transactions on the new I&E window had risen to $2.2 billion, from about $1 billion last month.

Also, CBN interventions in the I&E window have dwindled to below 30 per cent, enabling participants to freely trade currencies at a market determined rate.

Equities listed on the NSE rose to a new two-year high on Monday. The rally was lifted by gains in cement and banking shares.

The NSE-All share index climbed 0.96 per cent to cross 34,000 points on Monday, a level it last reached in May 2015.

Owing to the positive momentum on the Nigerian bourse, MSCI this month increased Nigeria’s weight on its frontier index to 7.9 per cent from 6.5 per cent, meaning that due to funds tracking, it would buy shares to replicate the new weight, analysts said.

MSCI was likely to open its emerging market benchmark to Chinese mainland-listed shares at its review Tuesday, but investors were also expecting news on other markets such as Argentina and Saudi Arabia.

MSCI had rejected China’s mainland-listed stocks – so-called A-shares – from inclusion on its main emerging markets index on three occasions, but they are expected to get the nod this time.

The index provider is also looking to include 169 A-shares in its $1.5 trillion emerging markets index and by default its $37 trillion All-Country World Index.

It trimmed the number of stocks from an original list of 448. The 169 stocks make up 5 per cent of all listed mainland China companies.
If successful, the stocks would officially join in a year’s time with a combined weighting of 0.5 per cent.

MSCI already includes some Chinese shares, but only those listed in Hong Kong or the U.S. They account for roughly 28 per cent of the EM index. The new A-shares would be on top of that.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Crude Oil

Oil Prices Continue to Slide: Drops Over 1% Amid Surging U.S. Stockpiles

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Crude Oil

Amidst growing concerns over surging U.S. stockpiles and indications of static output policies from major oil-producing nations, oil prices declined for a second consecutive day by 1% on Wednesday.

Brent crude oil, against which the Nigerian oil price is measured, shed 97 cents or 1.12% to $85.28 per barrel.

Similarly, U.S. West Texas Intermediate (WTI) crude slumped by 93 cents or a 1.14% fall to close at $80.69.

The recent downtrend in oil prices comes after they reached their highest level since October last week.

However, ongoing concerns regarding burgeoning U.S. crude inventories and uncertainties surrounding potential inaction by the OPEC+ group in their forthcoming technical meeting have exacerbated the downward momentum.

Market analysts attribute the decline to expectations of minimal adjustments to oil output policies by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known collectively as OPEC+, until a full ministerial meeting scheduled for June.

In addition to concerns about excess supply, the market’s attention is also focused on the impending release of official government data on U.S. crude inventories, scheduled for Wednesday at 10:30 a.m. EDT (1430 GMT).

Analysts are keenly observing OPEC members for any signals of deviation from their production quotas, suggesting further volatility may lie ahead in the oil market.

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Energy

Nigeria Targets $5bn Investments in Oil and Gas Sector, Says Government

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Crude Oil - Investors King

Nigeria is setting its sights on attracting $5 billion worth of investments in its oil and gas sector, according to statements made by government officials during an oil and gas sector retreat in Abuja.

During the retreat organized by the Federal Ministry of Petroleum Resources, Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, explained the importance of ramping up crude oil production and creating an environment conducive to attracting investments.

He highlighted the need to work closely with agencies like the Nigerian National Petroleum Company Limited (NNPCL) to achieve these goals.

Lokpobiri acknowledged the challenges posed by issues such as insecurity and pipeline vandalism but expressed confidence in the government’s ability to tackle them effectively.

He stressed the necessity of a globally competitive regulatory framework to encourage investment in the sector.

The minister’s remarks were echoed by Mele Kyari, the Group Chief Executive Officer of NNPCL, who spoke at the 2024 Strategic Women in Energy, Oil, and Gas Leadership Summit.

Kyari stressed the critical role of energy in driving economic growth and development and explained that Nigeria still faces challenges in providing stable electricity to its citizens.

Kyari outlined NNPCL’s vision for the future, which includes increasing crude oil production, expanding refining capacity, and growing the company’s retail network.

He highlighted the importance of leveraging Nigeria’s vast gas resources and optimizing dividend payouts to shareholders.

Overall, the government’s commitment to attracting $5 billion in investments reflects its determination to revitalize the oil and gas sector and drive economic growth in Nigeria.

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Commodities

Palm Oil Rebounds on Upbeat Malaysian Exports Amid Indonesian Supply Concerns

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Palm Oil - Investors King

Palm oil prices rebounded from a two-day decline on reports that Malaysian exports will be robust this month despite concerns over potential supply disruptions from Indonesia, the world’s largest palm oil exporter.

The market saw a significant surge as Malaysian export figures for the current month painted a promising picture.

Senior trader David Ng from IcebergX Sdn. in Kuala Lumpur attributed the morning’s gains to Malaysia’s strong export performance, with shipments climbing by a notable 14% during March 1-25 compared to the previous month.

Increased demand from key regions like Africa, India, and the Middle East contributed to this impressive growth, as reported by Intertek Testing Services.

However, amidst this positivity, investors are closely monitoring developments in Indonesia. The Indonesian government’s contemplation of revising its domestic market obligation policy, potentially linking it to production rather than exports, has stirred market concerns.

Edy Priyono, a deputy at the presidential staff office in Jakarta, indicated that this proposed shift aims to mitigate vulnerability to fluctuations in export demand.

Yet, it could potentially constrain supply availability from Indonesia in the future to stabilize domestic prices.

This uncertainty surrounding Indonesian policies has added a layer of complexity to palm oil market dynamics, prompting investors to react cautiously despite Malaysia’s promising export performance.

The prospect of Indonesian supply disruptions underscores the delicacy of global palm oil supply chains and their susceptibility to geopolitical and regulatory factors.

As the market navigates these developments, stakeholders remain attentive to both export data from Malaysia and policy shifts in Indonesia, recognizing their significant impact on palm oil prices and market stability.

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