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Emefiele Meets President Buhari, Hinted on Revisiting Naira Withdrawal Limit

The House of Representatives has invited the CBN governor to brief the house about the new policy. 

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The CBN Governor, Godwin Emefiele, stated yesterday that the apex bank would consider reviewing the new weekly cash withdrawal limits of N100,000 and N500,000 for individuals and corporate bank customers, while also clarifying that the new policy which will take effect from January 2023 is not targetted at any individual. 

Investors King had earlier reported that the House of Representatives has invited the CBN governor to brief the house about the new policy. 

During the plenary session yesterday, several lawmakers positioned that the new withdrawal policy is capable to hurt the economy, especially some Nigerians who still rely on cash transactions. 

Similarly, the Association of Mobile Money Operators of Nigerians argued that the policy is capable to get them out of business.

While speaking to journalists after a close-door meeting with President Buhari, Emefiele assured that the apex bank would not be rigid on the policy as it was not meant to hurt anybody but to strengthen the nation’s economy.

In addition, the CBN governor added that more than N1 trillion worth of old notes had been deposited to various commercial banks across the county by bank customers while adding that the CBN has distributed the new N200, N500, and N1,000 notes to banks for disbursement to their customers, ahead of the December 15, earlier scheduled for circulation of the new notes. 

It could be recalled that the Central Bank of Nigeria disclosed that naira redesign will help to address some prevailing fiscal issues which include excessive circulation of naira notes, counterfeiting, and terrorism. 

Emefiele explained that countries that have embraced digitization have gone cashless. He revealed that the president was happy with the policy 

“President Buhari was happy and said, we should carry on with our work, no need to fear, no need to bother about anybody,” he said. 

He said that the new policy of the apex bank was for the good and development of the Nigerian economy, adding, “We can only continue to appeal to Nigerians to please see this policy the way we have presented it”. 

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Finance

Oil Prices Slide as Russia Boosts Exports Amidst Ukraine Tensions

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Crude oil - Investors King

Amidst escalating tensions in Ukraine, global oil prices took a downward turn as Russia announced plans to increase its oil exports through Western ports.

The prospect of heightened supply from Russia, coupled with concerns over weakening demand in sectors like jet fuel and cautious trading ahead of the Federal Reserve’s interest rate decision, contributed to the slide in oil prices.

The Brent crude oil, against which Nigerian oil is priced, slipped by 15 cents to $86.74 a barrel while U.S. West Texas Intermediate (WTI) prices fell by 13 cents to $82.03.

Both benchmarks had reached four-month highs in the previous session, driven by lower crude exports from Saudi Arabia and Iraq, as well as indications of stronger demand and economic growth in China and the U.S.

Analysts noted that concerns regarding Russian oil supply had intensified following attacks on the country’s oil infrastructure by Ukrainian forces.

JP Morgan analysts predicted that these attacks could reduce Russian crude runs by up to 300 thousand barrels per day, leading to increased crude oil exports.

However, uncertainty loomed over how U.S. interest rates would evolve ahead of the Federal Reserve meeting.

“The market may be in consolidation mode awaiting signals on rate cuts from this week’s FOMC meeting,” remarked Suvro Sarkar, lead of DBS Bank’s energy sector team.

Furthermore, analysts expressed caution regarding demand growth in the jet fuel sector, despite expectations of peak summer travel.

Global economic uncertainties and geopolitical tensions continued to weigh on market sentiment, prompting investors to adopt a more cautious stance towards oil prices in the near term.

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Decent Trade Surplus Recorded in FY2023 – Coronation Economic Note

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The latest report from the National Bureau of Statistics (NBS) in its series on foreign trade in goods shows the total value of trade grew by +128.6% y/y to N26.8trn in Q4 ’23 vs +53.2% y/y in Q3 ‘23.

The total export value increased by 22.7% q/q to N12.7trn compared with N10.4trn recorded in Q3 ‘24. This can be partly attributed to c.20% depreciation of NGN/USD recorded in Q4 ‘23.

For FY2023, total exports increased by 34.2% y/y to N35.96trn. The import value increased by 56.04% q/q to N14.1bn from N9.0trn in Q3 ‘23. We note that imports were affected by the weaker naira following the fx liberalization policy.

For FY2023, imports increased by 40.4% to N35.92trn. Total trade as a percentage of nominal GDP (2023) stood at 30.4% in 2023, compared with 26.3% in 2022. In FY2023, Nigeria recorded a surplus of +N44.8bn.

According to the NBS report, the top six import sources were China N6.6trn (19.5%), India N2.8trn (N8.5%), USA N2.2trn (6.6%), Netherlands N1.8trn (5.3%), Brazil N810bn (2.4%), and the UK N688bn (2.0%). These countries collectively accounted for 44.4% of total imports in 2023. Imports from ECOWAS stood at N168bn, representing 19% of total imports within Africa.

Manufactured goods accounted for the largest share of imports, 51.2% and its import value grew significantly by 66.9%y/y. Following closely, petroleum oil products accounted for 33.42% of imports, and grew by 18.8%y/y. Raw materials accounted for 8.4%. Conversely, solid minerals registered a modest share of 0.53%. Agricultural goods followed suit with a 6.35% share, experiencing a notable growth in value of 22.3% y/y.

Regarding exports, the top six export destinations include Netherlands with exports valued at N4.5trn (12.6%), Spain N3.3trn (N9.4%), India N3.0trn (8.4%), the United States N2.6trn (7.3%), France N2.3trn (6.5%), and the Economic Community of West African States (ECOWAS) N2.2trn (6.2%). These destinations collectively accounted for 50.4% of total exports in 2023.

Crude oil accounted for 80.6% of total exports in 2023, its export value grew by 37.4% y/y to N29trn vs +46.4%y/y recorded in 2022. Based on a separate data from the NURPC, average crude oil production (condensates inclusive) in 2023 was 1.47mbpd compared with 1.38mbpd in 2022.

This is lower than the OPEC production quota for Nigeria which was 1.7mbpd.

Non-oil exports grew by 22.2% y/y to N6.9trn and accounted for 19.4% of total exports. Superior quality cocoa beans, cut flowers, sesamum seeds, soybeans, natural cocoa butter, soya beans, crude groundnut oil, frozen shrimps and prawns, shelled cashew nuts, crude palm kernel oil, and ginger among others were featured as top export commodities in 2023.

Nigeria exported goods worth N2.2trn to ECOWAS, compared with N1.7trn in 2022. This represented 60.2% of total exports within Africa. The most adopted port for exports in Q4 ’23 was the Apapa Port. Goods worth N11.9trn exited the country through this port which accounted for 94.4% of total exports. Other ports widely used include Tin can Island N(386.8bn), and Port Harcourt (N241.3bn)

GLOBAL FOCUS/REGIONAL TRADE

According to data from the World Trade Organization (WTO), merchandise trade declined by -8.2% y/y to US11.8trn in Q3 ‘23 compared with USD12.9trn recorded in the corresponding period of Q3 ‘22.

Meanwhile, on a q/q basis, total merchandise trade declined marginally by -1.4%. The decline can be partly attributed to weakened global demand as well as shifts in its composition toward domestic services, the effects of a stronger USD and rising trade barriers.

The Black Sea grain deal was terminated by Russia in July ’23, leading to rising food prices in import-dependent countries. However, Ukraine discovered a new corridor (the Danube River) to export its grains. As at end ’23, Ukraine had exported over 5.6 million metric tons of grain and other products through this corridor.

As at end-February ’24, the price of wheat moderated by -8.5% m/m to close at USD576.3/MT. The price of wheat recorded a downward trend m/m.

This was largely due to increased Russian exports, competitive pricing in the Black Sea region, abundant global stocks, diminishing international demand, and the prospect of another massive Russian crop.

Maize prices also moderated by -4.8% m/m to close at USD189.1/MT. Meanwhile, Cocoa prices increased by +34.1% m/m due to a decline in the supply prospects on the back of poor harvests in West Africa.

The El Niño weather phenomenon has been causing drier weather in Ghana and Ivory Coast, which are the world’s two biggest producers of cocoa beans.

Turning to China, despite the challenges posed by the property sector, trade exports increased by 0.9% q/q to USD861.6bn in Q3 ’23 compared with USD853.6bn recorded in Q2 ’23.

Notably, China’s PMI increased marginally to 50.9 in February ’24 from 50.8 in January ’24. We expect a loosening or a hold stance in the near term as China continues to seek ways to bolster its economy amid the downturn in its property sector.

In Africa, total merchandise trade declined by -3.3% q/q to USD312.6bn in Q3 ’23, compared with USD323.3bn in Q2 ’23. It is worth noting that the region recorded a trade deficit of -USD23.1bn in Q3 ’23. It is worth highlighting that resource rich economies like South Africa recorded a trade surplus in Q3 ’23.

Meanwhile, non- resource rich economies like Kenya and Egypt recorded trade deficits in Q3 ’23. The United Nations Conference on Trade and Development disclosed that, in 2019, intra-African trade accounted for less than 15% of total exports among African countries.

This suggests that there are potential benefits from increased regional trade. Overall, we expect the country’s external position to remain vulnerable to fluctuations in global oil price and weak domestic oil production.

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CBN’s Proposed Capital Hike Threatens Stability, Ernst and Young Report Warns

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Central Bank of Nigeria (CBN)

A storm is brewing in Nigeria’s banking sector as the Central Bank of Nigeria’s (CBN) proposed capital hike threatens to destabilize the industry, according to a recent report by Ernst and Young.

The report, titled “Navigating the Horizon: Charting the Course for Banks amid Plans for Recapitalisation,” paints a grim picture of the potential fallout from such a move.

Ernst and Young’s analysis suggests that if the CBN increases the minimum capital base for commercial banks by 15-fold, from the current N25 billion, only seven out of the existing 24 Deposit Money Banks may survive the upheaval.

This revelation underscores the magnitude of the challenge facing the banking sector and raises concerns about the stability of the financial system.

The proposed capital hike comes in the wake of the CBN’s efforts to bolster banks’ capacity to support Nigeria’s ambitious goal of becoming a $1 trillion economy by 2026.

However, the report highlights the significant hurdles that lie ahead, particularly for smaller banks that may struggle to meet the new requirements.

The last major banking reform in 2004 saw a similar increase in the capital base, resulting in massive mergers and acquisitions that reduced the number of banks from 89 to 25.

Now, nearly two decades later, history seems poised to repeat itself, with the potential for widespread consolidation and restructuring in the industry.

Industry experts have expressed mixed reactions to the proposed capital hike. While some welcome the move as necessary for ensuring financial stability and supporting economic growth, others caution against the potential negative impact on smaller banks and urge the CBN to consider alternative strategies.

As the debate intensifies, all eyes are on the CBN to see how it will navigate the delicate balance between regulatory requirements and industry resilience in the face of mounting challenges.

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