• FX Window Records $1.11bn Transactions in One Week

The level of activities on the Investors and Exporters (I&E) foreign exchange (FX) window strengthened to $1.110 billion in just one week, compared with the $759.2 billion recorded the preceding week.

However, the indicative exchange rate for the I & E window, known as the Nigerian Autonomous Foreign Exchange (NAFEX), which gained on the first two trading days, to N359.91/$1 and N359.83/$1, closed the week at N360.41 to the dollar. This represented an appreciation by 16 kobo, compared with the N360.25 to the dollar it closed on this segment of the market, the preceding week.

Also, the naira strengthened against the dollar at the interbank market (NIFEX), the Bureau De Change and parallel market segments to N361/$ and N364/$ respectively.

These were amid injections by the CBN worth $210 million into the foreign exchange market of which$100 million was allocated to Wholesale (SMIS),$55 million was allocated to small and medium scale enterprises and $55 million was sold for invisibles.

Meanwhile, dated forward contracts at the interbank OTC segment appreciated amid sustained increase in the foreign exchange reserves – the 1-month, 2-month, 3-month and 6-month contracts appreciated week-on-week by 0.24 per cent, 0.34 per cent, 0.42per cent and 1.25 per cent to close at N365.05/$, N370.16/$, N375.62/$ and N392.33/$ respectively.

“This week, we retain our favourable outlook for the exchange rate amid sustained stability in global crude oil prices which should result in further build-up in foreign reserves as well as CBN’s continued intervention in the various segments of the interbank foreign exchange market,” analysts at Cowry Assets Management Limited stated.

Following the success of the $3 billion Eurobond issue by the federal government last month, coupled with higher oil prices and production, the Central Bank of Nigeria (CBN) Governor, Mr. Godwin Emefiele, last week disclosed that the country’s external reserves have hit a four-year high of $38.2 billion.

With the rate of accretion, the reserves are expected to meet the central bank’s projection of $40 billion by the end of 2017.

Emefiele said: “In January 2014, Nigeria’s reserves were about $40 billion and by October 2016, it had dropped to $23 billion, all because of the haemorrhaging of foreign exchange.

“But I am happy that today, we are beginning to sing positive songs and our story is looking good at this time. We have seen reserves move up from the $23 billion to $38.2 billion.”
He stressed the need for the country to focus on job creation to cater for Nigeria’s rising population and create job opportunities for Nigerian youths.

He also emphasised on the need for private sector support, saying government alone cannot create jobs.

FX Restriction on 41 Items

The CBN at the weekend said the restriction of access to FX on the 41 items about two years ago has had a positive impact on the economy.

The Acting Director, Corporate Communications Department of the Bank, Mr. Isaac Okorafor stated this at the CBN Fair, a sensitisation programme, held at the Cultural Centre in Calabar, Cross-River State.

Okorafor said the implementation of the policy has created employment and helped to conserve the hitherto depleting nation’s foreign reserve, therefore buoying up the economy. Okorafor, who was represented by Mr. Chukwudum Nzelu said the restriction of access to FX placed on the 41 items made Nigerians to start looking inward for the production of goods and products that the country has comparative advantage to be produced locally.

The CBN spokesman explained in a statement that the successful implementation of the 41 items policy gave birth to the other initiatives such as the Anchor Borrowers’ Programme (ABP) which has caused a revolution in the production of rice across the country.

Continuing, he said the production of rice under the ABP was not only to ensure food security, but to create jobs along the value chain of rice production. He added that with improved seedlings and farming techniques under the Anchor Borrowers’ Programme, rice production which stood at 3.5 tons per hectares has jumped to 7 tons per hectare.

Okorafor urged the participants to also key-in into the Accelerated Agricultural Development Scheme (AADS) which was targeted at youths between the ages of 18 to 35 years.

The AADS when fully operational, is expected to employ at least 10 thousand jobs per state, across the 36 States of the Federations including the FCT. The essence of this initiative, according to him, was to reduce drastically youth unemployment.

Earlier in his welcome remarks, the Branch Controller, CBN Calabar Branch, Dr. Graham Kalio said that the CBN fair was an interactive forum aimed at bridging the information gap that might exist concerning the policies, programmes and activities of the apex Bank.

The fair was attended by farmers, SMEs, persons from government ministries, departments and agencies (MDAs) and others who were genuinely interested in taking advantage of the CBN polies and programmes.

Interbank Naira Market

In the week under review, the interbank lending rates moderated on the back of boost in financial system liquidity.

Specifically, treasury bills worth N32.23 billion matured via open market operations while FAAC disbursements worth N532.8 billion were made.

Hence, the Nigerian Interbank Offered Rate (NIBOR) for overnight funds, 1-month, 3-month and 6-month tenor buckets fell week to seven per cent (from 31.29%), 17.68 per cent (from 19.17%), 18.58 per cent (from 20.18%) and 19.94 per cent(from 22.46%) respectively. Also, the NITTY fell for all maturities tracked following renewed sell pressure: yields on the 1-month, 3-month, 6-month and 12-month maturities declined to 14.86 per cent(from 16.75%), 15.37 per cent (from 15.98%), 16.05per cent (from 18.98%) and 15.94 per cent (from 17.79%) respectively.

“This week, treasury bills worth N138.56 billion will mature, hence, in addition to recent FAAC inflows, we expect boost in financial system liquidity with resultant stability in interbank lending rates,” Cowry Assets Management analysts stated further.

Bond Market

Against the backdrop of boost in financial system liquidity, local OTC bond prices appreciated (and yields decreased) across the maturities tracked following renewed bargain hunting activity.

Specifically, the 20-year, 10.00% FGN July 2030 bond, the 10-year, 16.39% FGN JAN 2022 paper, the 7-year, 16.00% FGN JUN 2019 paper and the 5-year, 14.50% FGN JUL 2021 paper increased by N1.29, N0.50, N0.09 and N1.32 respectively while their corresponding yields declined to 14.51% (from 14.66%), 14.36% (from 14.52%), 14.98% (from 15.05%) and 14.56% (from 15.05%).

Similarly, FGN Eurobonds prices tanked across the maturities amid sustained profit taking activity on the London Stock Exchange.

Specifically, the 10-year bonds, 6.75% JAN 28, 2021 and 6.38% JUL 12, 2023 shed N0.30 and N0.21 respectively (corresponding yields increased to 4.66% and 5.29% from 4.57% and 5.26% respectively) while the 5-year, 5.13% JUL 12, 2018 bond lost N0.10 (yield rose to 3.46% from 3.35%).

This week, the CBN on behalf of the Debt Management Office will auction FGN bonds worth N100 billion, viz: 5-year 14.50% FGN JUL 2021 paper worth N50 billion and 10-year, 16.29% FGN MAR 2027 bond worth N50 billion.

Also, Cowry Assets Management Limited anticipates their marginal rates to trek south-wards from their previous stop rates of 14.79 per cent and 14.80 per cent respectively in line with declining inflationary trend.

“At the OTC market, we anticipate bargain hunting with resultant price increase amid expectation of boost in liquidity,” they added.

FAAC

The various states of the federation will now be part of the reconciliation team of the Nigerian National Petroleum Corporation (NNPC) revenue for the federation account to avoid discrepancies .

The Chairman, Commissioners of Finance Forum and Adamawa State Commissioner for Finance, Mallam Mahmoud Yunusa, who disclosed this last week, said the NNPC owned up to the shortfall in its account which culminated in the call-off of the Federation Account Allocation Committee (FAAC) meeting penultimate week.

Yunusa, who spoke at the end of the FAAC meeting in Abuja said: “They agreed there was shortfall in the earlier account given to us, but no fraud was intended. So going forward, we would be fully involved in the account.

“In the reconciliation that took place, some state governors were involved, a committee was raised by the National Economic Council (NEC).”

Meanwhile, the three tiers of government shared for November the sum of N532.758 billion.
The Permanent Secretary of the Federal Ministry of Finance, Dr. Mahmoud Isa Dutse, who chaired the session in place of Minister of Finance, Mrs. Kemi Adeosun, told the media that the sum N443.045 billion was statutory.

Under this tranche, the federal government got N205.700 billion, state governments got N104.334 billion, local governments received N80.437 billion, N40.847 billion was shared as 13 per cent derivation proceeds to went to the oil producing states, while N11.726 was set aside as cost of collection to revenue generating agencies and Federal Inland Revenue Services (FIRS) refund.