Experts predict further gain as naira hits 445/dollar

Oyetunji Abioye
the naira rose to 445 against the United States dollar at the parallel market on Sunday, one week after the Central Bank of Nigeria introduced a new policy measure aimed at boosting foreign exchange supply in the market.
The local currency, which had tumbled to 520/dollar last Monday, closed at 450 on Friday.
The CBN had last Monday commenced the implementation of the reformed forex policy with a promise to sell $1m weekly to each of the 21 commercial banks in the country.
Following the announcement of the new forex policy measure by the CBN on Monday, the naira commenced a gradual reversal of its previous losses, closing at 512/dollar on Tuesday.
It recorded further gain on Wednesday and Thursday, closing at 505/dollar and 495/dollar, respectively.
Foreign exchange traders said the CBN had intervened on the official market in recent days.
Economic and financial experts told our correspondent on Sunday that the naira would record further gain this week but not as big as last week’s.
“There is always a restriction point beyond which the exchange cannot cross except there is a huge forex inflow to breach that ceiling,” a currency analyst at Ecobank Nigeria, Mr. Kunle Ezun, said.
“The naira will gain further but it won’t be like last week’s own.”
The Managing Director, Financial Derivatives Company Limited, Mr. Bismarck Rewane, commended the CBN for the policy reform and wondered why the regulator had delayed such measure for months.
Rewane said, “With less than $600m supply into the spot market, the naira has gained 13 per cent of its value to N460/$ on Friday. Can you imagine what would have happened if the spot market was adequately funded in a transparent manner for nine months ago, rather than the opaque forward transactions.
“Maybe we could have had a soft landing rather than a race to the bottom. This move by the CBN is a good one in the right direction provided the dollar supply is sustained.
“We expect the CBN to commit itself to a regular and predictable supply of dollars to the forex spot market in March. There will be a rapid convergence of rates and a gradual end to multiple exchange rates and forex abuse.”
The Managing Director of Cowry Asset Management Limited, Mr. Johnson Chukwu, also believe the naira will rise further this week.
Chukwu said, “Confidence is beginning to return to the market. The naira will gain further but there may be resistance around N400/dollar because the CBN sells to BDCs currency at 381/dollar.
“The CBN needs to watch and sustain this intervention for weeks. They need to work with the fiscal authority to get the $2.3bn loan from World Bank and China released on time.”
Chukwu, Ezun and other experts advised the CBN to re-admit the banned 41 items into its official forex window.
According to them, there is the need to discourage end-users from going to the parallel market to source for forex.

CBN PLANS N310BN TREASURY BILLS AUCTION NEXT WEEK

The Central Bank of Nigeria is planning to sell N310.22bn ($984.83m) of short-dated Treasury bills at an auction on March 1. The CBN said on Tuesday it was planning to raise N26.14bn in three-month debt, N62bn in six-month bills and N222.08bn in one-year notes, using a Dutch auction system. Payment will be due the day after the auction. The CBN issues Treasury bills twice a month to finance the budget deficit, help manage commercial lenders’ liquidity and curb rising inflation. The country’s inflation had climbed to 18.72 per cent in January, its 12th straight monthly rise. The trend was worsened by dollar shortages, which had crippled the country’s import-dependent economy and triggered the first recession in 25 years. The Federal Government is also facing funding challenges due to the low price of oil. It expects the budget deficit to widen to N2.36tn this year as it tries to spend its way of out of the recession. More than half of the deficit will be funded through local borrowing, the government has said. The Federal Government is planning to raise $300m via Diaspora Bond in March, the Minister of Finance, Mrs. Kemi Adeosun, has said. She said, “On the Diaspora Bond, we are keen for that to take off. We are doing the Eurobond at the moment. The Eurobond is for January and as soon as that is completed, the next one is the Diaspora Bond. We are very excited that the National Assembly has approved the Diaspora Bond. We believe Nigerians abroad want to support development in Nigeria. We are hoping that the Diaspora Bond will be rolled out by March.”

FOREX: CBN PROVIDES $370.8M FOR 23 BANKS

The Central Bank of Nigeria on Tuesday carried out a wholesale intervention in the interbank foreign exchange market with the release of $370.8m to 23 Deposit Money Banks. The amount, which was confirmed in a statement by the Acting Director, Corporate Communications, CBN, Isaac Okoroafor, was to meet the requests of customers. Okoroafor said the move was sequel to the apex bank’s promise to ease the difficulties encountered by Nigerians in obtaining funds for foreign exchange transactions. He stated that while seven banks received full allotments of their respective bids ranging from $315 to $360 valued at $37.5m each, other received allotments ranging from $46,512.50 to $15,578,081.51. Okorafor said the CBN’s intermediation in the forex market was the first wholesale intervention aimed at easing the pressure of access to forex on Nigerians who intend to meet obligations that fall under visible and invisible needs categories. He further explained that the CBN offered $500m for sale to the banks, but not all of them provided enough naira backing to pay fully for their respective bid amounts. While expressing optimism that the wholesale intervention would substantially eease the foreign exchange pressure on visible and invisible needs of customers, Okorafor gave an assurance that the CBN would continue to make interventions based on qualified bids from the banks on the requests of their customers. He reiterated that the CBN was more than ever ready to support the inter-bank market by ensuring liquidity and transparency to guarantee efficiency in the forex market. Okorafor urged all market participants to contribute their patriotic quota and assist in ensuring that the new measures put in place by the CBN guaranteed the stability of the financial market as well as the growth and development of the economy to the benefit of all Nigerians. The CBN had on Monday modified its foreign exchange policy with the reduction of the tenor of its forward sales from the current maximum cycle of 180 days to 60 days from the date of transaction. It said the decision was part of efforts to further increase the availability of foreign exchange to all end-users. In a bid to ease the burden of travellers and ensure that transactions are settled at much more competitive exchange rates, the CBN directed all the banks to open forex retail outlets at major airports as soon as logistics would permit.

GOVT’S LOCAL DEBT HITS N10.8TN, OWES FOREIGN CREDITORS $11.5BN

As of September 30, 2016, the Federal Government’s indebtedness to local creditors stood at N10.8tn, while external debt was $11.5bn. The Minister of State for Budget and National Planning, Zaynab Ahmed, disclosed this at the presentation of the budget implementation and performance monitoring report for the third quarter of 2016, which was held at the old Banquet Hall of the Presidential Villa, Abuja on Tuesday. Ahmed said the N10.8tn domestic debt component represented an increase of N238.89bn or 2.25 per cent over the second quarter figure. She added that the third quarter debt figure was also N2.23tn (25.93 per cent) above the N8.6tn recorded in the same period of 2015. The minister said, “The external debts, which were mostly low interest funds from multilateral financial institutions, stood at $11.58bn, representing an increase of $320.70m (or 2.85 pper cent) from external debt stock in the second quarter of 2016 and an increase of $965.24m (or 9.09 per cent) over the $10.617bn documented in the third quarter of 2015. The increase in the external debt stock in the third quarter of 2016 was due largely to the rise in non-Paris Club bilateral debts’ drawdown.” Ahmed also said the Federal Government spent N1.1trn on debt servicing between January and September 2016. While N1.044tn was expended on local debt servicing, N50.22bn was spent on external debt. According to the minister, the amount spent on the servicing of both debt components was more than what was proposed in the budget. She also disclosed that government revenues dropped by 60 per cent on account of the uncertainties in the global oil market that were further compounded by crude oil theft, illegal bunkering and militancy in the Niger Delta region. The minister explained that net oil receipt dropped by 66.6 per cent to N201.37bn in the third quarter of 2016 as against N603.53bn in same period of 2015.

FG SEEKS $2.3BN LOANS FROM W/BANK, CHINA, SAYS NO NEED FOR IMF LOAN

The Federal Government is seeking to borrow at least $1bn from the World Bank and another $1.3bn from China’s Export-Import Bank, the Minister of Finance, Mrs. Kemi Adeosun, has said. Officials said the country was planning to finalise its proposal to the World Bank this month. Adeosun told CNBC on Tuesday that the Federal Government was hoping to sign in the next few months a loan worth $1.3bn from China’s Export-Import Bank to fund railway projects. The minister, however, said there was no need to apply for an International Monetary Fund programme as the Federal Government was pursuing its own economic reform plan, Reuters reported quoting CNBC. Sharp falls in the price of crude oil, which have made the naira to tumble following the steep fall in foreign exchange revenue, have plunged the economy into its first recession in 25 years. This has prompted suggestions that the country may need the IMF funding to cover a growing budget deficit. Adeosun told CNBC in the interview, “For us, the IMF is really a lender of last resort when you have balance of payments problem. Nigeria doesn’t have balance of payments problems per se; it has a fiscal problem. We are already doing as much reform as any IMF programme would impose on Nigeria. Nigerians want to take responsibility for their future. We must have our home-grown, home-designed programme of reform.” The minister stated that non-oil revenues were improving while the government was fine-tuning an economic reform plan needed to support an application for a loan of at least $1bn from the World Bank. It is also seeking further funds from the African Development Bank. The country needs to plug a gap in its record N7.3tn ($23.17bn) 2017 budget proposal, which contains a number of measures aimed at stimulating the economy. The government had initially promised to submit an economic plan to the World Bank by the end of December but did not do so, sources told Reuters last month. The Federal Government will also present its economic proposal to the African Development Bank to help release a second loan tranche worth $400m to support the budget, officials have said. Adeosun also said one or two banks had yet to remit the Federal Government’s revenues to the Treasury Single Account with the Central Bank of Nigeria. The Federal Government had in 2015 introduced the TSA policy as part of an anti-corruption drive, draining the banking system of liquidity.

OPEC TO MEET ONE-THIRD OF RISE IN GLOBAL OIL DEMAND

With Non-members of the Organisation of the Petroleum Exporting Countries, OPEC, poised to grow again, OPEC will need to increase oil output by just 2.2 million barrels per day (b/d) to meet global incremental oil demand of about 5.5 million b/d over the 2017 and 2022 period. According to the latest Global Energy Weekly from Bank of America Merrill Lynch (BofAML) about one-third of global oil supply growth will come from OPEC in 2017 down to 2022. While OPEC countries have the resources to grow production, OPEC revenue would likely be higher if no additional investments are made compared to scenarios where increased OPEC production leads to lower prices.  For this reason OPEC oil output growth is likely to be limited over the next five years. According of BofAML, Saudi Arabia, UAE, Iraq and Iran are the only countries able to increase their output meaningfully in the medium term, while others such as Algeria, Nigeria or Venezuela would need massive investments to reverse current trends and boost output. “Saudi Arabia would likely be better off maintaining steady production and allowing prices to rise to maximize their long-term oil revenue,” the report said. The report also noted that over a 15-year period, Saudi total oil revenues at $50/bbl and 18mn b/d of production would equate to $4.90 trillion. Meanwhile, a combination of $65/bbl and 12 million b/d production would bring in $4.30 trillion. Yet, given production costs of $10-to-$20/bbl, it simply would not pay off for Saudi to aggressively invest in domestic oil productive capacity, even if assuming a zero discount rate on incremental future revenues.

NNPC RECORDS $2.45BN CRUDE OIL EXPORT SALE IN ONE YEAR

he Nigerian National Petroleum Corporation (NNPC) has said that $2.4 billion export sale was recorded in 12 months of 2016. The corporation’s monthly Financial and Operations Report for the month of December 2016 just released indicated a 13.4 per cent rise in oil and gas sales for December 2016 as against the previous month. The report also indicated a total export sale of $195.4 million for crude oil and gas in the month of December 2016 as against the sum of $166.18 million recorded in the previous month. “This is $20.22 million higher than the preceding month’s performance. Crude oil export sales contributed $100.37 million (or 51.36 percent) of the dollar transactions compared with $96.31million contribution in the previous month”, the report stated. According to the report, only 18 cases of vandalized points on downstream pipelines were recorded in December 2016 as against 43 in the previous month. The drop in the cases of pipeline sabotage, according to the report, was due to sustained engagement with stakeholders by the Federal Government and the Corporation. The report also indicated that the total export proceeds of $175.04 million in December 2016 was remitted to fund the JV cash call for the month to guarantee current and future production. In the downstream, a total of 1,392,154,486 litres of white products were distributed and sold by the Pipelines and Products Marketing Company (PPMC) in December 2016 compared to 1,248,831,982 litres in November 2016. According to the report, of the total volume of 12.67 billion litres of white products distributed, petrol accounted for 88.07 percent. The report also showed that about 9,493,640 barrels of crude oil were processed under the Direct-Sales-Direct-Purchase (DSDP) scheme