HOW NIGERIA NAIRA TRADED 0.2 PER CENT HIGH

April 3, 2013 6:55 am , Leave a Comment ,

The Nigeria naira has went up the most in more than a week against the dollar on speculation that the Central Bank of Nigeria would continue to support the currency by dipping into its rising foreign reserves.
This has started raising investor’s hope against the backdrop of naira weaken further against dollar.

The currency advanced as much as 0.2 per cent, before trading 0.1 per cent stronger at N158.4 per dollar in Lagos, the biggest gain on a closing basis since March 22, according to data compiled by Bloomberg.

Nigeria’s foreign-currency reserves have advanced 38 per cent to $48.5bn in the year through March 20. The Governor, CBN, Mr. Lamido Sanusi, pointed out that the CBN had enough to defend the naira, saying, “We have enough reserves to keep the naira where we want.”

Economist at Renaissance Capital, Johannesburg, Mrs Yvonne Mhango, said, “We believe the sizable arsenal of foreign-exchange reserves that the CBN has built up over the past 15 months as well as firm monetary policy will help keep the exchange rate in the target range of N150 to N160 per dollar in 2013.”

Sanusi said he wanted to keep the benchmark interest rate unchanged at a record high even as more policy makers argue for cuts amid calls from the government and businesses to lower borrowing costs.

Three Monetary Policy Committee members voted for a reduction on March 19, compared with two in January.

Yields on the government’s local-currency bonds due June 2019 dropped 24 basis points, or 0.24 percentage point, to 10.96 per cent, according to March 28 prices compiled by the Financial Markets Dealers Association. Nigerian markets were closed for holidays on March 29 and April 1.

Borrowing costs on Nigeria’s $500m of Eurobonds due January 2021 declined three basis points, or 0.03 percentage point, to 4.326 per cent on Tuesday. Ghana’s cedi rose 0.6 per cent to 1.9275 per dollar in Accra.

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WHY EGYPT’S CENTRAL BANK SUSPEND REPO OPERATION

April 2, 2013 9:23 pm , Leave a Comment ,

The plans by Egypt’s central bank to reintroduce deposit operations as a way to absorb excess liquidity said on monday and it will start on tuesday, in a monetary tightening move that economists said could help fight inflation and support a weakening currency.

The central bank later announced it had offered to take 14 billion Egyptian pounds ($2.06bn) worth of seven-day deposits at a fixed interest rate of 10.25 per cent at an auction on tuesday

The bank also said that repo operations would be “suspended unless conditions warrant otherwise”.

Hit by political unrest that has hammered the economy, the Egyptian pound has lost nine per cent of its value against the dollar since late December when the central bank brought in a new system of dollar auctions that allowed the currency to weaken.

Every one had expected this to happen because of the political instanbility in the country. Many Egyptian economist forecast further falling of Egyptian pounds.
The pound is trading weaker still on the black market.

The central bank raised interest rates on March 21 in an effort to stem the pound’s decline and curb inflation. It lifted both its main rates by 50 basis points, taking the overnight deposit rate to 9.75 per cent and the overnight lending rate to 10.75 per cent.

The inflation in the Egyptian economy is not unconnected with the political crises that lingered on . As a result of this crises ,attention was shifted from the production of consumer goods to the importation of armunitions to fight the war.

“They are starting to tighten monetary policy,” said Mona Mansour, chief regional economist at CI Capital in Cairo. “Mainly it is to fight inflation.”

Mohamed Abu Basha, economist at EFG-Hermes, added: “This is liquidity management because lately there has been excess liquidity in the Egyptian pound because of dollarization.”

The central bank said on Sunday that Egypt’s M2 money supply rose by 15.4 per cent in the year to the end of February.

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WHAT GOES WRONG WITH FOREIGN DIRECT INVESTMENT IN NIGERIA

April 2, 2013 6:46 am , Leave a Comment ,

The foreign direct investment in nigeria is on the increase since 2012.
It was $6.8bn,representing an increase of $17.24 per cent.

Analysts at Financial Derivatives Company Limited, in a report made available on Friday, however, said the increase in the country’s FDI notwithstanding, it remained below par as a result of the Nigeria’s vulnerability to commodity price movements, insecurity and over-dependence on the oil and gas sector.

Attention can’t just be shifted from oil sector in nigeria. Everybody want quick money in nigeria and their attention have shifted to oil sector. They do not care about the economic implications of their actions.

The analysts noted that the FDI in Nigeria would have been significantly better without the security challenges in some parts of the country.

The report started, “In addition, the uncertainties surrounding the Nigerian macroeconomic environment have contributed to the slow growth in foreign investment inflows in recent years. However, Nigeria’s improved macroeconomic outlook for 2013 and the persistent drive for fiscal discipline are good signs and a motivation for foreign investments inflows despite the security challenges.

“Nigeria’s market size, commitment towards infrastructure development, and the potential for a stable macroeconomic policy in 2013 are positive indicators for foreign investors and can improve FDI inflows to Nigeria significantly.”

According to the report, the country stands a good chance of increased FDI given the 2013 budget position and the government’s drive towards infrastructure development.

It added, “We estimate that 40 per cent of the total funds inflow to the power sector will to be through FDI in 2013. Also, the recent success of the Petroleum Industry Bill at the Senate is a positive move for the final passage of the bill and the oil sector, though it is unlikely that the implementation will be seen in 2013.

“Sectors with major FDI inflows over the years have been the oil and gas, manufacturing, infrastructure development, services and consumer goods sectors. We expect that the FDI inflows into the sectors will be sustained. Furthermore, the emerging opportunities in hospitality, tourism, shopping mall development and restaurants cannot be ignored as major grounds for FDI.”

The report noted that the continuous development and introduction of additional reforms in the agricultural sector were likely to attract significant foreign investments.

“Reforms such as zero duty on imported plant and machineries, and similar incentives can help improve domestic production, establish new investments and reduce the country’s unemployment rate,” it added.

Posted in: Nigeria Stock Market, NSE , Tagged: , ,

WHY ANALYST THINK THAT REDUCTION OF BENCHMARK LENDING IS A MUST FOR ECONOMIC GROWTH

March 19, 2013 6:54 pm , Leave a Comment ,

 

The central bank of Nigeria monetary policy committee have been told by financial analysts to review the Benchmark lending rate and other rates at its meeting in Abuja, saying that there would be adverse effects if the CBN continued to maintain its currently high monetary stance.

The managing Director, financial Derivatives company Limited, Mr. Bismack Rewane, said that the high interest rate environment had slowed down business activities and frustrated economic growth. Since a high interest rate will make borrowing difficult to access that will result in lack of financial suitability environment for business activities to flourish, this will definitely bring along poor economic growth.

He also said, “It is with much delight that Nigerians welcome this period of declining inflationary pressures and believe that the MPC will succumb and bring down the monetary policy rate at this meeting.

Reports from the meeting confirm that the choices of MPC would be limited in its current conservative stance; it is expected that a marginal cut in the benchmark of interest rate by about100 basis points will be attainable.  Mr Rewane added that “Naira will fall under serious pressure if the CBN continued to keep the rate at 12 percent”.

According to the chief Executive Officer, Fatrax Securities Limited, Dr. Wale Ositelu, “CBN should consider reducing interest rate to stimulate Medium-to-long -term economic growth. He said one will expect CBN to reduce its benchmark lending rate now”. It’s easy to agree with what most analysts have complained about in terms what may result from high interest rate. History has proven it that only low interest rate could drive the economy to high performance by way of boosting business and investment activities.  As stated above If the CBN maintains the current monetary stance, the possible impacts of these measures on the money market and on the fixed income securities may result to a situation that may drive a lot of business to foreclosure, it is worst enough that lending from banks had become difficult, high interest rate will make thing worse where most business may be unable to meet their obligations, pay salaries, pay taxes where possible and have enough funds to run their business because profit margin will be very small.

The managing Director of Sotice Investment company limited, Mr. Adebayo Toluwase, said the reduction in money supply through an increase in bank cash reserve ration without a correspondence reduction in the benchmark interest rate had an adverse effect on the economic activities and his view could be supported by the current economy situation in Nigeria. The country’s economic and business conditions continue to move ahead in a sorry-state, escalating unemployment crisis profit margin may continue to decline and consumer demand and spending will be negatively affected.

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TRADING ON THE NIGERIA STOCK EXCHANGE CLOSED ON A NEGATIVE NOTE

March 17, 2013 5:58 pm , Leave a Comment ,

Trading on the Nigerian stock exchange (NSE), closed on Friday on a depressed note as the Market capitalization declined further by #83 trillion. The market capitalization opened at #10.63 trillion, it lost 0.78 percent to close at #10.54 trillion. In the same way, All-Share index lost 256.94 points to close at 32,950.80 against the 33,207.02 posted on Thursday.
Dangote cement was among the top losers, Dangote cement which is in the building and industry sector lead the down marker, it dropped by #1.50 to close at #41.50 per share for the day.  Cadbury followed same down day direction with a loss of #1.12 to close at #33.59 per share,  Access bank also lost 0.99# to close at #10.20 per share, Ashaka cement and Julius Berger lost 0.99# each to close at #23.00 and #53.00 per share respectively.

NSE Analyst believed that the sell off was due to profit taking by the investors, they believed that the recent surge of the market to a record high since the beginning of the year put investors in position where they are able to take money of the table.
Other market movers are the northern Nigeria flour mill who led the market gainers with #1.17 to close at #24.60, UAC property also gained #1.10 to close at #16 per share and Nestle Nigeria plc, the cement company of northern Nigeria were equally on the market uptrend move also they both went up #1 each to close at #84.3 and #12.99 respectively, on the other side Nigeria breweries gained 0.80# to close at #6.27 billion.

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What to expect from Nigeria banking sector in terms of earning reports.

March 16, 2013 4:29 pm , Leave a Comment ,

Experts think that the sudden increase in lending is most likely to boost bank earnings in Nigeria this year 2013. Although there are reports that bad loans are eating into capital reserves the fact that most banks are able to lend money is a good sign to the economy. Most of the bad loans are reported to be concentrated in very profitable sectors of Nigeria economy, one the sectors that has a significant amount of bad loans is the oil industry. The credit rating agency Standard and Poor’s (S&P) said on Friday that Nigeria banks started making profit again in 2012 considering the amount of from the write off on bad assets accumulated during the 2009 financial crisis that almost sent nine of the banks in Nigeria out of business. S&P reported that lenders fixed their Balance sheets by selling bad loans to state-owned banks”, a system of shifting the risk to the government, the feedback from S&P that  Nigeria is starting to make money again could be seen as a positive view that the economy is growing.

The special directive at Central Bank of Nigeria(CBN) who was known to  usually directing the areas  the commercial banks could lend money to has lost that direction or changes may have been made because Banks in Nigeria are now directing most of their lending to the oil sector and the foreign currency; this has been a disadvantage to all other sectors that may need funding for their businesses this could result to an unbalanced treatment of most business sectors in the Nigeria, it will set up a stage where some will be able to create a monopoly system.

The financial rating director of the S&P (Samira Mensah) gave a statement that he thinks banks earnings will keep rising for the year 2013 due to the fact that a lot of government owned securities that are yielding high returns at the moment must have steamed from high level of net interest margin. From the report by S&p, Nigeria banks are expected to see return on equity to be around 18 percent this year from about 15 percent in 2012; The is not calculated to be connected with the 30 percent rise in loan books which was up from 12 percent growth last year. S&P also said the Tier 1 capital ratios are expected to fall by 15 percent from last year’s 20 percent, and that these were still adequate but there were risks posed by loans being too concentrated in the oil sector and foreign currency. The banks in Nigeria are expected to release their earning result and analyst expect them to show earning growth that may further boost their shares.  Currently the number from the Nigeria Stock Exchange shows that The local stock index of which banks contribute 60 percent of its total capitalization has risen up to about 18.3 percent already in 2013. The Mid-tier; Diamond bank said it expect full-year 2012 profit to hit 30 billion naira after its nine month result was released where it posted 23.2billion naira profit compare to the 2011 earnings reports which posted 16.3 billion naira loss.

The fact that the value of naira kept falling against the US dollar on low interest from foreign investors in bonds must be as a result of lower yield interested rate. If oil prices could be sustained and the central bank of Nigeria can take the monetary stabilization policy more seriously, it should improve the external value of naira which will increase the country rating and the banks respectively and maybe banks will be able to see value in lending to other sectors besides the oil and the foreign currency sectors.

Posted in: Nigeria Stock Market, NSE , Tagged: , , ,

NIGERIA FG RELEASES #400bn FOR CAPITAL PROJECT IN 2013 BUDGET

March 15, 2013 3:22 pm , Leave a Comment ,

nigeria_gov_seal

With the released of #400bn, it is believed that the federal government has started the implementation of 2013 budget which President Goodluck Jonathan signed into law on February 26. While signing the budget, the president admits that an amendment bill would be sent to the National Assembly to address grey areas in the one passed the legislature. The Reduction in personnel cost, reallocation of capital expenditure by lawmakers and reallocation of the budgets for the subsidy reinvestment and empowerment program were all identified as grey areas that need amendment. In the mean time, the national assembly is waiting for the amendment bill to be sent in form of supplementary budget.

The Minister of Finance, Dr. Ngozi Okonjo-Iweala who spoke through her Senior Special Assistant Mr. Paul Nwabuikwu, said that the decision to release the #400bn was to give impetus to the execution of project captured in the budget. She said #120bn had been set aside to cater for two important initiatives. They include #75bn for the repayment of bond and #45bn for the repayment of workers in power holding company of Nigeria. According to the minister, the #75bn set aside for the repayment of bond is in line with the new debt management of the federal republic of Nigeria. The measure she said will help to reduce the stock and flow of debt in proactive manner.
During the presentation of the 2013 budget that took place last week, Okonjo-Iweala said that the Government remain focus on critical economic and social sectors driven by private sector activities. She also said that in order to achieve this; the amount #479bn was allocated to key areas which include power, works, transportation, aviation, gas pipelines, the federal capital territory, human capital development (education and health) gets #705bn and agriculture/ water resources gets #175bn.
She said while they notice infrastructural deficit in Nigeria to have been part of the reasons preventing Nigeria economic growth; they intend to priorities infrastructural investment in the budget and leverage additional external financing for infrastructure investment in the country.
She added that the annual borrowing to finance deficit budget had been reduced from #852bn in 2011, to #744bn in 2012 and #577bn in 2013 this look like they have a working system that has been proven to reduce the deficit since the numbers above from 2011 to 2013 has shown good decrease borrowing. Okonjo-Iweala included in her message that, “We are also making concerted efforts to defray the debts of our foreign missions. In this context, we have made a provision of N13bn in the 2013 budget to help clear the accumulated debts as at the cut-off date of June 2012, the 2013 budget makes provision for an aggregate expenditure of N4.987tn, representing an increase of 6.2 per cent over the N4.697tn appropriated for 2012”.

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NIGERIA STOCK EXCHANGE WILL INTRODUCE ISSUERS’ PORTAL

March 15, 2013 2:57 pm , Leave a Comment ,

nse

The plans to introduce Issuers portal in the Nigerian capital market has
been announced by the Nigerian stock exchange. The statement which was released
by the NSE on Thursday, states that the Portal would be known as X-Issuer, and
it is one of the new initiatives of the NSE to boost trading activities at the
Exchange. From the statement; it was revealed that the portal would be
inaugurated in two weeks, in anticipation that it will allow online information
submission to enhanced interaction between NSE and the listed companies.

The head of NSE listing regulation, Mrs. Josephine Igbinosun explained
that the X-Issuer is a secure online portal through which the Issuers would submit
financial and other information to the market from the comfort of their
offices. She said that the portal will promote transparency and accountability
and would equally expedite the discharge of issuers’ post-listing and
obligations relating to structure and continuous disclosure.

Furthermore, the leakages of price sensitive information would be
eliminated by the X-Issuers because of the minimal time between submission by
the Issuer and release to the market. Data capturing, form submission,
validation and other ancillary services such as submission notification
mechanisms and tracking of submitted information are parts of the benefit the
portal will offer, she stressed. The X-issuer will also enhanced data comparising
by local and international investors and analysts, giving issuers greater
visibility in the market.

Posted in: Nigeria, Nigeria Stock Market, NSE , Tagged: ,

NIGERIA HOUSE OF REPS QUERY CBN AND OTHERS OVER MISSING #7.935 MILLION

March 14, 2013 1:57 pm , Leave a Comment ,

nigeria house of rep

The Nigeria House of Representative yesterday queried the CBN,Federal Inland Revenue (firs) and Nigeria Customs Service (NCS) over discrepancies in the remittance of #7.935 billion generated by the Nigerian Customs service to the Federation Account in 2007.
The Chairman, House Committee on Public Account, Solomon Adeola Olamilekan, issued the query during an investigation hearing. The Committee further Queried the five month delay in the remittance of the sum of #14.210 billion import duties collected and lodge into CBN branch in Port Harcourt by the Customs Area Command same year. The revenue which was collected in August 2006 was not paid into the Federation Account until January 2007.
Olamilekan went further to say that the Audit record of the Federation Account at the Nigerian Customs Service clearly revealed that the total amount generated and remitted by the (NCS) was. #233.430 billion, while the total amount received by FAAC from NCS was #241.366 billion, resulting in a difference of #7.935 billion. To him,this means that the actual revenue generated and remitted by NCS was far below the amount presented by FAAC for sharing.
Olamilekan gave directives to the acting chairman of the FIRS, Alhaji Mashi, Deputy Governor of CBN (operations), Tunde Lemo, AGF, Jonah Otula, to work with the sub-committee headed by Pally Iriase to reconcile the differences and report to the House on Wednesday.
CBN is expected to address other querries like the #124.673 million allegedly deducted from Federation Account,but the details on how the money was disbursed was not made available for Audit examination. The CBN will also explain the state Contractual obligation Account in which the Sum of #210 million were paid in March and April 2007 respectively as a Contractual Obligation by the order of the Governor of. Anambra State.
The chairman of the committee further disclosed that at the office of Accountant-General of the Federation it was observed from the component statement of 2007 that Joint Venture Cash Calls (JVC) totaling #549 billion of Excess Crude Sales,out of the Sum of #1.168 trillion and petroleum product subsidy of the Sum of #236.641 billion were deducted from proceeds of Crude oil Sales. He said that this deduction were made before the Net revenue were paid into the Federation Account against the provisions of section 162(1) of the 1999 constitution of the Federal Republic of Nigeria which requires such money to be paid directly into the Federation Account.

By Busali Godwin

Posted in: Nigeria, Nigeria Stock Market , Tagged: , ,

NAIRA DEPRECIATE AS CBN’s TREASURY BILLS PAYOUTS BOOST DOLLAR DEMAND:

March 14, 2013 1:10 pm , Leave a Comment ,
500 and 1000 naira bills (Nigerian currency)

500 and 1000 naira bills (Nigerian currency)

The Nigeria’s naira depreciated for the third successive time in four days. This happened as the Central Bank Of Nigeria paid out Maturing Treasury Bills, which boost the Supply of Money and free up Local Currency for Buyers to Seek Dollars.

The nigeria naira declined 0.1 percent to #157.85 per dollar as of 2:50pm tuesday in nigeria commercial capital, Lagos,Paring a Weekly gain to 0.1 percent,  according to data compiled by ‘Bloomberg’.

The Central Bank Of Nigeria settled Maturing Bills, which amount to #263.93 billion ($1.7bn) monday,The Financial Dealers Association said on its Website. The institution sells Bills to help manage money supply within the market.

SEWA WUSU,analyst at the Lagos-Based Sterlin Capital Limited said that
the maturities boosted money supply as they hit the market,giving dealers more enablement to seek dollars.
The Benchmark interest rate was held at a record high of 12 percent by regulator for eight  time on January 21, to curb inflation and stabilise the naira. The Statistical Bureau said on February 18, that the nation’s rate had falling to 9 percent in January, from 12 percent in December.

According to the Data Compiled on FMDA Website, Yield on Nigeria’s $500 million of EuroBonds due January 2021 fall 20 basis-points to 4.08 percent while the Yield on the country’s 16.39 percent domestic Bonds due 2022 rose by 24 basis points to 11.1 percent.

By Busali   Godwin

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