- Pound Gains After Solid Manufacturing Growth
The British pound climbed against the US dollar after a data showed manufacturing sector grew faster than projected in July.
The U.K. manufacturing activities expanded 55.1 in July from 54.2 recorded in June, the IHS Markit report showed. This is higher than analysts’ forecast of 54.5.
Experts have attributed the solid gain to surge in export orders due to the weak pound sterling. This is the highest advance in export orders in 7 years.
“Although the exchange rate remains a key driver of export growth, manufacturers also benefited from stronger economic growth in key markets in the euro area, North America and Asia-Pacific regions,” said Rob Dobson, a director at Markit.
The pickup in foreign demand indicates global recovery is gaining traction and signs that investment in is picking up. Especially in the euro-area.
“Continued expansion is also still filtering through to the labour market, with the latest round of manufacturing job creation among the best seen over the past three years,” Dobson added.
The pound rose to a 10 month high against the US dollar after the report was published.
Naira Exchange Rates Today, Thursday, July 29, 2021
Naira continues its decline across the board as forex scarcity persists following the Central Bank of Nigeria’s decision to cut off the bureau de change forex section.
The Naira exchanged against the United States Dollar at N525 on Thursday at the black market. Against the British Pound and the Euro, the local currency exchanged at N710 and N600, respectively.
The Central Bank of Nigeria had accused Bureau de Change operators of engaging in money laundering and illicit flows with criminal-minded individuals that operate mainly at the unregulated black market section of forex.
Operators at the bureau de change section of forex had been accused of being the main source of forex for speculators and hoarders that manipulate forex rates at the unregulated black market, this the CBN plans to curb by cutting its weekly forex supply to BDCs but focus on servicing the economy through the banks.
Naira Black Market Exchange Rates
Morning * Midday** Evening *** Final Rates
Bureau De Change Naira Rates
Central Bank of Nigeria’s Official Naira Rates
|7/28/2021||SOUTH AFRICAN RAND||27.6161||27.6498||27.6836|
N.B: These tables are updated three times a day.
CBN Orders Deposit Money Banks To Sell FX To Customers
The Central Bank of Nigeria, CBN, has ordered Deposit Money Banks, DMBs to sell foreign exchange (FX) to customers.
CBN disclosed this in a letter to all banks reminding them to set up teller points at designated branches across the country to fulfill legitimate FX requests by customers.
The regulator, on Tuesday, has announced the discontinuity of forex supplies to the Bureau de Change Operators, BDCs in the country over their continuous abuse of the privilege.
The letter, signed by Haruna Mustafa Director, Banking Supervision Department, stated: “Further to the Monetary Policy Committee (MPC. briefing of July 27, 2021, al Deposit Money Banks (DMBs are hereby reminded to set up teller pots at designated branches across the country to fulfil legitimate FX requests for Personal Travel Allowance (PTA Business Travel Allowance (BTA, tuition fees, medical payments SMEs transactions amongst others.
“In this regard, DMBs are also required to adequately publicize the locations of the designated branches and make necessary arrangements to sell FX to customers in cash and/or electronically in compliance with extant regulations.
“DMBs are strongly advised to ensure that no customer is turned back or refused FX provided that documentation and all other requirements are satisfied. Equally undue delays, rationing and/or diversion of FX is strongly discouraged whilst DMBs are required to establish electronic application and alert systems to update customers on the status of their FX requests.
“As communicated during the briefing, a toll-free line has been set up at the CBN for bank customers to escalate unresolved complaints related to their FX requests.
“The CBN will continue to closely monitor banks’ conduct and compliance with this directive in order to ensure an efficient FX market for all legitimate users.
“Please note that any breach of the directive will be severely sanctioned.”
Economists Urged CBN To Reappraise Forex Policy And Eliminate Arbitrage
The decision of the Central Bank of Nigeria (CBN) to suspend dollar sales to the Bureau de change operators has “disrupted one of the juiciest gravy trains in the Nigerian economic racket,” according to the a renowed economist, Bismack Rewane and his team.
In its economic note, Rewane and his team at the Financial Deravatives Company believed that though BDCs are licensed by the CBN, the point had been reached where the program was no longer tenable and surely not sustainable.
“A country whose total exports and receipts were approximately $59.8bn, was spending $5bn to subsidize supposed Nigerian tourists during a covid year.
“In other words, spending more on tourism rather than debt servicing. Therefore, the structure of the forex market needed sanitization,” the team of economists led by Rewane at the FDC said in the note.
The team, however, disagreed with the CBN on its decision to divert dollar meant for the BDCs to banks, saying such an amount to “handing over the yam barns to goats to secure.”
They said such interim solution of substituting BDCs with banks is hardly going to achieve much.
“The question that arises is what is the optimal solution? Administrative controls or market pricing? The interim solution of substituting BDCs with banks is hardly going to achieve much.
“You are virtually handing over the yam barns to goats to secure. In the end, there will be no yams nor goats.
“One of the options is to simultaneously allow banks to retail dollars as they have done in the past and make BDCs engage in retailing same but at a buy rate different from today’s subsidized rate, i.e buy dollars from the CBN at the parallel market rate less a N10 premium.
“For example, if the parallel market rate is N500/$, the purchase rate from the CBN will be N490/$. If the BDCs sell at N550/$, the CBN increases its rate for BDCs to N540/$.
“That will be the same retail rate at the banks. This eliminates the arbitrage corridor and abuse. It will certainly reduce the demand for dollars and it must coincide with an increase in dollar supply from the CBN.
“This way, the naira will appreciate towards the ever-elusive fair value or the REER (Real Effective Exchange Rate), which today is anywhere between N470 and N490/$,” FDC team stated.
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