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Nigeria’s Forex Inflow Hits $15bn in First Quarter

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Forex Weekly Outlook August 15 - 19
  • Nigeria’s Forex Inflow Hits $15bn in First Quarter

The aggregate foreign exchange (forex) inflow into the Nigerian economy in the first quarter of 2017 has been estimated at US$15 billion.

This, however, represented a decline of 9.2 per cent below the level in the fourth quarter of 2016, but showed an increase of 1.4 per cent over the level at the end of the corresponding period of 2016.

The Central Bank of Nigeria (CBN) disclosed this in its first quarter 2017 economic report that was posted on its website.

It explained that the development was driven by the fall in receipts from both the central bank and autonomous sources. Oil sector receipts, which accounted for 15.9 per cent of the total, stood at US$2.38 billion, compared with US$1.97 billion and US$2.48 billion, recorded in the fourth quarter of 2016 and the corresponding period of 2016, respectively.

However, non-oil public sector inflow, at US$4.21 billion (28.1 per cent of the total), fell by 11.6 per cent, compared with the level at the end of the fourth quarter of 2016, but showed an increase of 188.4 per cent above the level at the end of the corresponding period of 2016. Also, autonomous inflow, which accounted for 56.1 per cent of the total, fell by 14.1 per cent, compared with the level in the fourth quarter of 2016.

The report indicated that the performance of the external sector in the first quarter of 2017, improved with an overall balance of payments surplus equivalent to 3.1 per cent of gross domestic product (GDP), compared with 0.6 per cent in the corresponding period of 2016.

This was influenced by improvements in the price of crude oil following the decision by the Organisationof Petroleum Exporting Countries (OPEC) to curtail supply. Consequently, provisional data showed that foreign exchange inflow and ouflow through the CBN in the first quarter of 2017 were US$6.60 billion and US$3.65 billion, respectively. This resulted in a net inflow of US$2.95 billion, in contrast to the net outflow of US$0.54 billion in the fourth quarter of 2016. Inflow declined by 1.9 per cent relative to the level at the end of the fourth quarter of 2016, but rose by 67.3 per cent relative to the level in the corresponding period of 2016.

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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Finance

ARISE IIP and Africa Finance Corporation Launch US$ 100M Capital Pool for African Entrepreneurs

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ARISE IIP, the pan-African developer and operator of world-class industrial parks, and Africa Finance Corporation (AFC), the leading infrastructure solutions provider in Africa, today announced the signing of a Memorandum of Understanding to establish a dedicated US $100 million capital pool for African entrepreneurs who are establishing operations within any of the Arise IIP Special Economic Zones (SEZ) in Africa. 

At the heart of this partnership is a shared vision to uplift African entrepreneurs by providing them with much needed financing and advisory services to catalyse growth.

AFC will also actively seek financing from Export Credit Agencies (ECAs), local and regional financial institutions to mobilise funding to support these companies.

This concerted effort underscores ARISE IIP and AFC’s commitment to fostering industrialisation, job creation and economic prosperity in Africa.

Under this partnership, AFC’s comprehensive suite of financial services will extend beyond financing to include financial advisory support for corporate finance, equipment financing and market entry including assisting with joint ventures and technical partnerships for sponsors that may require it, to ensure they are well-equipped to seize opportunities and thrive within the SEZs.

By tapping into AFC’s extensive network and expertise, ARISE IIP aims to cultivate a vibrant ecosystem that nurtures entrepreneurship and drives sustainable economic development across the continent.

Gagan Gupta, CEO of ARISE IIP said about this partnership: “ARISE IIP is about empowerment. By empowering our customers, and ensuring they have the robust financial support needed to meet their operational objectives, this collaboration with Africa Finance Corporation, our long-lasting partner, takes us one step closer to realising our vision of an industrialised and prosperous Africa.

Samaila Zubairu, President & CEO of AFC said: This partnership marks a significant milestone in our commitment to offer strategic financial advisory and corporate finance services to firms focused on value capture and import substitution projects in Africa. By collaborating with our investee company Arise IIP and African entrepreneurs in our Special Economic Zones, we aim to foster an ecosystem that will increase trade, create jobs, and drive economic advancement on the continent.

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Finance

United Capital Plc Reports Stellar Growth with 65% Profit Increase, Announces Dividends

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United Capital - Investors King

United Capital Plc (NGX: UCAP) has unveiled its unaudited financial results for the period ending June 30, 2024.

The company reported a 38% increase in gross earnings year-on-year to N15.15 billion. Profit before tax soared by 63% to N9.06 billion while profit after tax surged by 65% to N7.74 billion.

Total assets rose by 27% in the first half to N1.19 trillion, and shareholders’ funds increased by 33% to N120.34 billion.

These robust results have prompted United Capital to declare an interim dividend of N0.90 per 50 kobo ordinary share, alongside a generous bonus share offering of “2 for 1.”

Peter Ashade, Group CEO, expressed satisfaction with the strong financial outcomes, highlighting the company’s commitment to creating wealth and delivering superior value to shareholders.

“This marks a historic moment with our first-ever interim dividend and bonus share announcement, demonstrating our dedication to stakeholder value,” Ashade stated.

The company remains confident about sustaining its growth trajectory throughout 2024, bolstered by nearly N1.3 trillion in funds under management.

United Capital continues to prioritize activities that enhance and preserve value for stakeholders, maintaining its competitive edge and profitability.

With a focus on trusts, mutual funds, and professionally managed investments, the group is strategically positioned to achieve its growth objectives, ensuring sustainable returns for all involved.

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Banking Sector

Nigeria Plans 50% Windfall Tax on Banks’ Currency Profits

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Central Bank of Nigeria (CBN)

Nigerian President Bola Tinubu has announced a one-time 50% tax on windfall profits that banks reaped from currency gains following last year’s naira devaluation.

This decision was part of the government’s strategy to navigate the ongoing cost-of-living crisis.

The naira, which has depreciated by about 70% against the dollar since foreign exchange rules were relaxed in June 2023, allowed banks holding dollar assets to significantly boost their income.

However, the Central Bank of Nigeria had advised lenders to retain these profits as a buffer against potential future losses.

The proposed tax will apply to the 2023 financial year, with non-compliance resulting in hefty fines.

The move has already impacted the NGX Banking Index, which fell by 1.3% as of midday trading in Lagos. Notable declines were seen in FBN Holdings Plc and Zenith Bank Plc, dropping 3.2% and 2.5% respectively.

This initiative mirrors similar actions in Europe, where countries like Italy and Hungary have imposed taxes on banks to address what they view as excessive profits during periods of high inflation and interest rates.

European banks have criticized these measures, warning of potential impacts on economic growth due to constrained lending capabilities.

President Tinubu’s administration believes this tax will help manage Nigeria’s fiscal challenges while addressing social needs.

Lawmakers are expected to support the measure, alongside a proposal to increase government spending by 6.2 trillion naira ($3.8 billion).

While banks have benefited from currency revaluations, many customers, particularly manufacturers with dollar-denominated loans, faced significant losses as they struggled with the weaker naira.

The new tax policy highlights the government’s broader efforts to stabilize the economy and attract foreign investment, aiming to ensure a more equitable distribution of financial gains.

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