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Naira Comes Under Pressure, Reserves Drop to $47.75bn



  • Naira Comes Under Pressure, Reserves Drop to $47.75bn

The naira has come under pressure against the United States’ dollar in recent days, falling to 366 to the greenback on the parallel market.

The pressure followed the decline in the nation’s foreign exchange reserves for the first time in eight months.

The media reported on May 17 that the external reserves slipped to $47.793bn on May 14 from $47.865bn on Thursday, May 10, according to data from the Central Bank of Nigeria.

The reserves, which fell further to $47.784bn on May 16, rose to $47.799bn on May 18, but dropped to $47.754bn on May 21, the latest CBN data showed. The reserves figures had not been updated as of the time of filing this report on Tuesday.

“Naira depreciates to a seven-month low of N366/$ on speculative demand. Naira weakness could stoke imported inflation,” analysts at Financial Derivatives Company Limited, headed by Bismarck Rewane, a foremost economist, said in their latest economic bulletin.

Ecobank Capital, in its Middle Africa Market Weekly Update, said depreciation pressures on the naira could emerge with rising risk-averse sentiment on emerging and frontier markets.

“The exchange rate depreciated slightly at the Investors & Exporters window at N361.6/$ and depreciated a bit more at the parallel market at N366/$. Turnover at the IE window rose 13.2 per cent from the prior week to $1.1bn,” they added.

The Chief Executive Officer, Cowry Assets Management Limited, Mr. Johnson Chukwu, said, “Clearly, we have seen some pressure, and it is partly occasioned by the reversal of capital flow. I think what is happening is that foreign portfolio investors are not reinvesting their matured instruments; rather they are converting to dollar to take it out.

“The drop in the reserves is coming from the outflow. The level of inflow is less than the current level of outflow. Once you see currency on the currency, it will manifest in the reserves. This is what we are seeing now that the reserves have seen two weeks of consecutive decline, which was the first in a very long time.”

He said the pressure would continue in the short- to medium-term because “it was also partly associated with the heightened political uncertainty principally coming from the challenges that the ruling party had with their congresses.”

“Until after elections, I do not imagine that the concerns of foreign portfolio investors would have been assuaged,” Chukwu added.

Reuters reported last Thursday that the naira was seen under pressure as portfolio investors continued to exit local treasuries due to lower yields.

It said trade was thin by midday last Thursday as most wanted to buy the dollar, with little supply, adding that the naira last traded at 362.50 for investors on Wednesday, last week.

Yields on Nigeria’s treasuries have fallen to around 12 per cent from as high as 18 per cent a year ago after the government repaid maturing bills rather than roll them over as it has done in the past. The outflow by investors has also been worsened by interest rate rises in the United States.

“A rise in the FX rate might compensate for the drop in yields and that could attract investors back again,” one trader said of the naira.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and, with over a decade experience in the global financial markets.

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Central Bank to Promote Zero Balance Account Opening to Drive Financial Inclusion



Central Bank

Banks Now Accept Zero Balance Account Opening to Deepen Financial Inclusion

In an effort to boost financial inclusion in the country, the Central Bank of Nigeria has said it would start promoting zero balance account opening to encourage and lure the unbanked into the banking system.

The apex bank disclosed this in its report titled ‘Monetary, credit, foreign trade and exchange policy guidelines for fiscal years 2020/2021’.

The report read in part, “As part of its effort towards promoting greater financial inclusion in the country, the bank shall continue to encourage banks to intensify deposit mobilisation during the 2020/2021 fiscal years.

“Accordingly, banks shall allow zero balances for opening new bank accounts and simplify their account opening processes, while adhering to Know-Your-Customer requirements.

“Banks are also encouraged to develop new products that would provide greater access to credit.”

The apex bank said the Shared Agency Network Expansion Facility, launched to deepen provision of financial services in under-served and unserved locations and drive financial inclusion through agent banking, would continue in the 2020/2021 fiscal years.

Banks, mobile money operators and super-agents would also continue to render returns in the prescribed formats and frequency to the CBN.

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Investors Oversubscribed for FGN Bonds by N205.87 Billion in October




FG October Bonds Oversubscribed by N205.87 Billion

The Debt Management Office (DMO) has said investors oversubscribed for the Federal Government’s October bonds by N205.87 billion.

The DMO stated this after concluding the monthly FGN bonds auction on Wednesday.

Two instruments of 12.5 per cent FGN March 2035 re-opening 15-year bond and 9.8 per cent FGN July 2045 re-opening 25-year bond were auctioned.

The two bonds of N15bn each with a total auction figure of N30bn received a subscription of N235.87bn.

The 15-year tenor and 25-year tenor bonds received 99 and 67 bids but recorded 21 and 26 successful bids respectively.

The amounts allotted for each of the bids were N20bn and N25bn respectively.

According to the DMO, successful bids for the 15-year tenor bond and 25-year tenor bonds were allotted at the marginal rates of 4.97 per cent and six per cent respectively.

However, it added, the original coupon rates of 12.5 per cent for the 12.5 per cent FGN March 2035 bond and the 9.8 per cent for the 9.8 per cent FGN July 2045 bonds would be maintained.

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Lafarge Africa Sustains Growth in Third Quarter, Reports N53.3bn Revenue



Lafarge Africa

Lafarge Africa Grows Revenue by 31.4 Percent to N53.3bn Revenue in Q3 2020

Lafarge Africa Plc, a cement manufacturer headquartered in Lagos, sustained its strong growth in the third quarter (Q3) ended September 30, 2020.

In the company’s financial results released on the Nigerian Stock Exchange on Friday, the cement manufacturer’s revenue rose by 31.4 percent from N45.172 billion posted in the third quarter of 2019 to N59.337 billion in the third quarter of 2020.

Similarly, operating profit grew by 7.2 percent from N7.746 billion in the corresponding quarter to N8.302 billion in the quarter under review. This strong performance continues across the board as net income expanded by 2.8 percent to N4.867 billion, up from N4.734 billion posted in the third quarter of 2019.

Lafarge earnings per share rose by 2.8 percent to 30 kobo in the third quarter, again up from the 29 kobo posted in the same period of 2019.

On the outlook for the company going forward, the company said:

 Market demand is expected to remain strong in Q4.
 Naira devaluation and inflation remain a concern in Q4.
 The implementation of our “HEALTH, COST & CASH” initiatives would continue to deliver
improvement in our performance.
 We will maintain a healthy balance sheet.

Speaking on the company’s performance, Khaled El Dokani, CEO, Lafarge Africa Plc, said “Our robust results for the first 9 months reflect the strong recovery of the demand in Q3 and the successful implementation of our “HEALTH, COST & CASH” initiatives. Both have delivered considerable improvement in recurring EBIT, net income and free cash flow, despite the impact of the COVID-19 pandemic and Naira devaluation, particularly in Q3.

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