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  • CBN scraps RDAS, devalues naira again

    CBN scraps RDAS, devalues naira again

    The Central Bank of Nigeria (CBN), has closed the Retail Dutch Auction System (RDAS) foreign exchange windows because of undesirable practices by those it called economic agents.

    By scrapping the RDAS, a key part of its currency-management system, the CBN has effectively devalued the naira for the second time in three months.

    A statement from the CBN yesterday signed by Ibrahim Mu’azu, Director, Corporate Communications Department of the CBN, said by this decision, “henceforth, all demand for foreign exchange should be channeled to the Interbank Foreign Exchange Market.”

    The apex bank in the statement had noted that “with the sharp decline in global oil prices and the resultant fall in the country’s foreign exchange earnings, the bank has observed a widening margin between the rates in the interbank and the RDAS window, thus engendering undesirable practices including round-tripping, speculative demand, rent-seeking, spurious demand, and inefficient use of scarce foreign exchange resources by economic agents.”

    This the CBN said “has continued to put pressure on the nation’s foreign exchange reserves with no visible economic benefits to the productive sector of the economy and the general public” as a result it had to wield this big stick to protect the Naira.

    The statement further said that “it has become imperative that appropriate actions be taken to avert the emergence of a multiple exchange rate regime and preserve the country’s foreign exchange reserves.”

    He said the managed float exchange rate regime, which the CBN had adopted following the liberalisation of the foreign exchange market, has for the most part been successful in ensuring exchange rate stability in line with its mandate, but giving the infractions committed by the so called economic agents, the CBN, he said, had no choice but to take this decision with effect from yesterday.

    However, stakeholders in the financial sector have since reacted to the policy shift. For instance, the Head, Macro Research Africa at Standard Chartered Bank, Razia Khan said the policy is “positive news, and should help create more transparency in the Nigerian market.”

    Khan warned that with oil prices currently at levels where foreign exchange reserves will be difficult to replenish, the CBN’s appetite for continued support of the interbank foreign exchange rate will be closely monitored.

    “With Nigerian foreign exchange reserves under pressure as a result of weaker oil prices, markets had anticipated eventual unification of Nigeria’s different exchange rates. Following the announcement in February that presidential and parliamentary elections would be postponed to March 28, Nigerian markets were subject to greater volatility,” she said in a note released yesterday.

    Khan said that with foreign reserves under pressure, and amid growing concern that a wide RDAS-interbank spread would encourage ‘round-tripping’, the CBN will now stop RDAS auctions, therby effectively discontinuing its foreign exchange subsidy for certain categories of demand.

    But the President, Association of Bureau De Change Operators of Nigeria (ABCON), Alhaji Aminu Gbadabe said the policy is ill-timed. He told The Nation that the policy will push rate at the interbank to N250 to dollar and that will increase the already existing panic in the sector. “It is not the right time to cancel RDAS now that there is panicking in the forex market,” he said.

  • Naira crisis: CBN stops banks from dollar resale

    Naira crisis: CBN stops banks from dollar resale

    The Central Bank of Nigeria (CBN) has stopped banks from reselling dollars bought at the Retail Dutch Auction System (RDAS) to other lenders.

    It is all to stop the scare forex from being used for purposes other than what the funds are meant for.

    Besides, the move, it was leant, is aimed at curbing currency speculation and strengthening the naira against the greenback.

    The naira on Friday gained 0.6 per cent to N204.30 per dollar but has lost five per cent over the past eight days, the most weekly basis since December 2008.

    The policy shift, experts said, is also expected to ensure that banks do not violate the Letters of Credit (LCs) by diverting the RDAS funds obtained via customers’ LCs to unauthorised purposes.

    The RDAS or official foreign exchange (forex) window allows banks and other authorised dealers to place forex bids on behalf of individual clients who qualify to buy forex at the official auction.

    Unlike the Wholesale Dutch Auction System (WDAS) scrapped in September 2013 over widespread abuse, the RDAS allows the CBN to monitor more accurately various sources of forex demand and any potential duplication of demand in the system to address speculation in the market, which has put naira under pressure.

    The naira has been under pressure in recent months as crude oil prices continue to fall. Last November’s eight per cent devaluation of the currency over falling Brent crude oil prices has not brought any stability. The CBN is, therefore, adopting a pragmatic approach to exchange rate and reserve management to protect the naira as weaker oil prices persist.

    CBN spokesman Ibrahim Muazu told Reuters the apex bank sold dollars in a special intervention on Friday and that it will continue such sales on a “need basis” to satisfy demand in the interbank market and curb speculative attacks, which he blamed for the naira’s weakness.

    Muazu said that the bank was not planning to devalue the currency again, but was studying dollar demand closely.

    “Our target is to stabilise the market in the interest of investors and the economy. We will do everything to ensure that we meet demand,” Muazu said.

    “It’s not likely we would raise the band on the naira any time soon. We are looking deep into the areas of demand. If speculators are not there then the situation would return to normal,” he said.

    The naira has crashed through the psychologically important level of 200 to the dollar last week in a rout triggered by weak oil prices and escalating tension over the postponement of a presidential election.

    The CBN tightened policy in November while simultaneously devaluing the official RDAS rate to more realistic levels (at the time). Access to foreign exchange through the RDAS window was also limited to safeguard foreign exchange reserves.

    Besides, the apex bank a fortnight ago, sold $30,000 to each of more than 2,500 bureau de change operators. The fund is an addition to the weekly sales to operators. The move is aimed at increasing dollar liquidity in the system said and bringing stability to the naira.

    Despite these measures, the naira has slumped 17 per cent against the dollar in the past three months, the most among 24 African countries.

  • CBN sells $350m to halt naira’s fall

    CBN sells $350m to halt naira’s fall

    The Central Bank of Nigeria (CBN) intervened Friday with about $350 million foreign exchange sale to dealers at its official exchange rate, halting the naira’s slide to a record low.

    The regulator sold foreign-exchange at a rate of N198.50 per dollar, weaker than its target band of N159.60 to N176.40, spokesman Ibrahim Mu’azu told Bloomberg.

    Two large sales were done at N198.50 to the dollar, totaling $40.8 million, Thomson Reuters data showed. Trading on Nigeria’s foreign exchange market was delayed until after 10 a.m. to allow dealers to submit demand for dollars to the apex bank.

    President, Financial Markets Dealers Association said the aim is to pump a maximum amount of liquidity into the market and reduce dollar demand.

    Analysts estimate that Nigerian assets have plummeted with a 50 per cent decline in oil prices since June that has curbed government revenue and export earnings for the country. The selloff deepened last week, pushing the nation’s currency to a record low, after elections scheduled for Saturday were postponed by six weeks.

    The CBN sells dollars to banks on Mondays and Wednesdays at a rate of five per cent above or below N168 per dollar.

    “It is part of CBN measures to defend the naira. The aim is to increase dollar supply to the level that it will be able to suppress dollar demand and minimize the level of depreciation of the naira,” Mu’azu said.

    The naira gained 0.6 per cent to 204.30 per dollar, reversing an earlier decline. The naira has lost five percent over the past eight days, the most on a weekly basis since December 2008.

    “When the election was delayed, confidence was sapped. It’s mostly foreign investors that are selling. No sector is safe from the selloff and shares may fall even further before elections because of the high political risk,” Seun Olanipekun, an analyst at Investment One Financial Services Ltd., said.

    “I just don’t see any investors going long naira onshore assets,” Samir Gadio, head of African strategy at Standard Chartered Plc, said by phone from London. “We are hardly seeing any trading in the interbank market.”

    Price swings in the naira jumped to a six-year high this week after Standard & Poor’s said on Feb. 10 that the country’s BB- credit rating, already three steps below investment grade, may be cut.

    Trading in the naira was temporarily halted by dealers on Wednesday as increased volatility put banks at risk of giving wrong prices, according to Kunle Ezun, an analyst at Ecobank Transnational Inc. in Lagos.

  • Investors’ losses climb to N2.27tr as equities lose N801b in 5 days

    Investors’ losses climb to N2.27tr as equities lose N801b in 5 days

    Nigerian equities lost N801 billion in five successive trading sessions last week, raising aggregate loss for investors so far this year to N2.27 trillion. It was a traumatic week for investors as a combination of negative reactions to postponement of the general elections and negative credit rating report worsened the tough macroeconomic outlook that had been orchestrated by the global decline in crude oil price and resultant depreciation in Nigerian currency.

    Assurances by the Presidency on peaceful political transition and the Central Bank of Nigeria (CBN) on the readiness of monetary and fiscal authorities to do everything possible to support the economy failed to lift investors’ mood. The Nigerian stock market recorded average day-on-day loss of 1.25 per cent, representing a loss of about N117 billion, on Friday, immediately after the CBN Governor, Mr. Godwin Emefiele, met with the capital market community at the Nigerian Stock Exchange (NSE).

    All value-based indices at the NSE indicated widespread declines in share prices, which saw the market dropping below its two-year low and most equities trading below their lowest values. However, the market showed a little upbeat on Friday with more gainers, although there were still nearly two losers for every gainer and losses mostly outweighed gains.

    Aggregate market value of all quoted equities on the NSE closed weekend at N9.204 trillion as against its opening value of N10.005 trillion for the week. Market capitalization of quoted equities had opened this year at N11.477 trillion.

    The All Share Index (ASI), a value-based index that tracks prices of all quoted companies and doubles as country index for Nigeria, slipped to 27,585.26 points at the weekend as against its opening index of 29,985.08 points for the week. It had started the year at 34,657.15 points.

    With average daily decline of 1.25 per cent on Friday and a week-on-week average loss of 8.0 per cent, average year-to-date return at the Nigerian stock market opens today at -20.41 per cent. This implies that an average investor has lost at least more than 20 per cent of the value of his investment so far this year. This relates to a well-balanced portfolio with the cross-sectoral cushions to absorb higher losses from some sectors.

    As investors were grappling with the increased anxiety generated by the postponement of the general elections, which were scheduled to start on February 14, to March 28, Standard & Poor’s Rating Services (S & P) exacerbated Nigeria’s risk profile by Nigeria’s sovereign credit rating on negative watch. It was the second damaging extraneous influence on the Nigerian financial markets after JP Morgan placed Nigeria on “index watch negative” due to what the global financial company described as lack of liquidity induced by regulatory policies of the CBN. Nigeria was admitted to the JPMorgan Government Bond Index-Emerging Markets Indices (JP Morgan GBI-EM Index) on October 1, 2012. Nigeria was the second African country after South Africa to be included in the widely followed index.

    The largely negative trading pattern at the stock market this year worsened the portfolio performance of investors in Nigerian market, who had been at the top-end of the global decline last year. Nigerian equities ranked among the worst-performing stocks globally in 2014 with average full-year decline of 16.14 per cent. Aggregate market value of all quoted equities closed 2014 at N11.477 trillion as against its opening value of N13.226 trillion for the year, indicating a loss of N1.75 trillion during the year.

    The performance of the Nigerian stock market last week contrasted sharply with the generally positive performance of the global equities markets. Key global indices showed growths across the emerging and advanced markets. Brazil’s average index, Bovespa, rose by 3.1 per cent. Russia’s RTS index climbed by 10.5 per cent. India’s Sensex index rose by 1.3 per cent China’s Shangai index and South Africa’s ASI rose by 4.2 per cent and 1.8 per cent respectively.

    In Europe, United Kingdom’s FTSE 100 index indicated average growth of 0.5 per cent. France’s CAC 40 index also rose by 1.9 per cent while Germany’s DAX index climbed by 1.3 per cent.

    Also, Japan’s average index, the Nikkei index, rose by 1.9 per cent while Hong Kong’s Hang Seng index inched up by 0.01 per cent. The United States’ benchmark S&P 500 recorded a gain of 1.6 per cent as investors responded positively to improving macro fundamentals.

    Afrinvest Securities Limited, a leading broker and dealer on the Nigerian stock market, noted that the decision of the INEC to shift the 2015 general elections by six weeks to March 28 and April 11 set off a domino effect in the Nigerian economy and the financial market, destabilizing macroeconomic variables.

    Afrinvest Securities stated that the placement of the Nigerian sovereign credit rating on negative watch might be a precursor to downgrade of the credit rating from its current BB-.

    According to analysts, yields on Federal Government bond had risen in response to the negative watch, with average yields closing at 16.5 per cent. All the three government instruments on auction by the Debt Management Office (DMO), Federal Government’s bond issuance agency, last Wednesday were not fully allotted as investors sought higher premiums to compensate for risk.

    “Our prognosis for the economy in the run-up to the election is of crystallizing risk as we expect further capital market volatility and sustained pressure on the Naira. We forecast a 50 basis points increase in inflation in January 2015 to 8.5 per cent whilst we note that a further re-adjustment of the mid-point of the Naira exchange rate to reflect a fairer value is inevitable. This would be necessary to calm uncertainties in the financial market regarding policy direction, reduce the incentive for round tripping and more importantly, stem the tide of the decline in foreign exchange reserves,” Afrinvest Securities stated on the outlook for the financial markets.

    Exotix Partners LLP, a global finance and investment firm with offices in major global financial centres and significant imprints in Africa, last week downgraded its positive view on Nigerian sovereign Eurobond. Exotix coordinates its global operations through five major offices in London, New York, Lagos, Dubai and Nairobi.

    In a report signed by Stuart Culverhouse, Exotix’s global head of research, said the downgrade was due to the uncertainties around Nigeria’s general elections and the decline in macroeconomic outlook.

    “What has changed? Oil prices have been lower than expected-and could remain low for longer, which in our view is creating a hole in the balance of payments which needs addressing. Yet crucially the postponement of the presidential election to 28 March announced at the weekend (February 7) is only going to create policy-and political uncertainty and delay the necessary policy response for much longer than we had anticipated. We could be waiting until May/June. Nigeria cannot afford to wait that long,” Exotix stated.

    According to the firm, the Naira outlook remains negative with expectation that there could be further devaluation, the scale of which is mounting by the day.

    It noted that the prospects for the widely-anticipated, post-election devaluation become more complicated with the postponed election and this may not happen now until the May Monetary Policy Committee (MPC) meeting rather than the March meeting at which it had expected to see further moves.

    “A first-stage devaluation of the official parity to N190-195 looks likely to us, and more could follow later in the year subject to external and domestic conditions. We expect a year-end Naira rate of N220-230, by which time the (expected) policy response should help to stabilise the position. But a lot can happen in the meantime and risks to the naira look skewed to the downside,” Exotix stated.

  • BDCs: $76.3m special fund fails to lift naira

    The naira ended at a record closing low against the dollar on Friday despite Central Bank of Nigeria (CBN’s) $76.32 million special intervention to Bureau De Change (BDC) operators.

    The naira, which opened at N193.60, strengthened to N185.80 to dollar after the intervention but it quickly fell back to close at 193.90.

    Stakeholders accused currency users of holding on to cheap dollars bought at the almost-daily CBN interventions, dealers said. The calculation is that the naira would continue to weaken as falling oil prices hurt the economy.

    The CBN had on Friday sold $30,000 to each of the 2,544 BDC operators in a special move to strengthen the naira. The $76.32 million is an addition to the weekly sales to the operators.

    The move, the apex bank said,  is aimed at increasing dollar liquidity in the system and freeing the naira from pressure. A dollar was selling at N209 in the parallel market operated by BDC agents while the interbank market rate closed at N186.60 on thin trades.

    The CBN  is trying to narrow the gap at which the naira, hard hit by the drop in oil prices, trades on the interbank market through its regular interventions and is also trying to curb speculation.

    The naira has come under pressure, losing about 4.5 per cent of its value against the dollar this year, because of declining crude prices, which fell by almost half in 2014.

    Nigeria relies on crude exports for 95 per cent of its foreign exchange and 70 per cent of government income.

    Governor Godwin Emefiele said last week that the CBN may halt the sale of dollars to companies importing the types of goods that are already locally manufactured.

    He has consistently said that government will continue to intervene to keep the exchange rate stable because of the dire consequences of doing otherwise. Speaking at a meeting with stakeholders in Lagos, he said that the apex bank is committed to achieving exchange rate stability. He said that allowing the local currency to find its level will not be in the interest of the economy and the larger population.

  • N18.2b loan won’t solve gas problems

    N18.2b loan won’t solve gas problems

    The N18.261billion  okayed for five electricity firms under the Nigerian electricity Stabilisation Facility (NESP) will not address the fundamental problems besetting the energy sector, stakeholders have said.

    The President, Petroleum and Technology Association of Nigeria (PETAN), Emeka Ene, said the decision of the Central Bank of Nigeria (CBN) to provide two distribution firms and three hydro-power generation firms with the fund, was a good step in the right direction, adding that gas is the critical issue facing the industry.

    He said the loan would only deal with the legacy issues and debts of the firms, as against helping to close the infrastructural gap in the sector.

    He said: “The fund is a good start in the industry, because it would help the beneficiaries to address the legacy issues occasioned by the sale of the assets of the power holding company of Nigeria (PHCN). However, the fundamental problem in the industry, which is gas, is still there. Gas can only be a thing of the past when government grants incentives to upstream and downstream sector to provide gas for the power generation companies. The marginal and independent oil producers need incentives to deal with infrastructural bottlenecks in the  area of accessing and piping gas to the power firms.”

    Ene said the government should be thinking of how to provide more loans to the power firms.

    Also, a Professor of Energy Economics with the University of Ibadan, Adeola Akinnisiju, said the problems in the industry are overwhelming and that the loans may not do much for the sector.

    The CBN Governor, Godwin Emiefele announced a loan of N18.216billion to five power firms. They are Eko Electricity Distribution Company Plc, N5.164billion; Ibadan Electricity Distribution Company N11.367billîon; Jebba Hydro Electricity PLC  N816.831billion; Kainji Hydro Electric N234.82million, and Shiroro Hydro Electricity PLC N678.650.

  • Involve OPS in N220b MSMEs fund’s administration, says chamber

    Involve OPS in N220b MSMEs fund’s administration, says chamber

    Access to the N220 billion Micro, Small and  Medium Enterprises (MSMEs) intervention fund by the Central Bank of Nigeria (CBN) remains a challenge for members of the Organised Private Sector (OPS).

    To ensure access to the fund, OPS members should be brought into its administration, the Director-General, Enugu Chamber of Commerce, Industry, Mines and Agriculture (ECCIMA), Mr. Emeka Okereke, has said.

    He told The Nation  that if OPS members were involved in the administration of the fund, some of the factors responsible for members’ lack of access to the fund would be addressed. “Some of our members don’t package their feasibility studies very well; they lack the capacity to do their feasibility,” he said, insisting: “OPS should be brought into the administration of the fund.”

    Reminded that the Bank of Industry (BoI) had earlier signed an agreement Business Development Service Providers (BDSPs) to help Small and Medium Enterprises (SMEs) package their loan requests, develop bankable business plans and proposals for to facilitate their access to finance, Mr. Okereke said most of the MSMEs don’t have the financial resources to hire experts or professionals to their feasibility studies.

    Describing the N220billion MSMEs fund as ‘a laudable objective capable of reinvigorating the sector’ the ECCIMA chief pointed out that most MSMEs lack good management structure and accounting system to make them attractive to financial institutions for any form of assistance.

    Noting that the N220billion MSMEs intervention fund is not charity, he said OPS members must possess all the basic criteria for accessing the fund, including a bankable proposal.

    Okereke pointed out that since the fund is a developmental thing, OPS members should be involved in its administration. According to him, this would allow a chamber like ECCIMA vouch for the integrity of its members wishing to access the fund. This, he said, would go a long way in reducing incidents of loan default, as the OPS would be engaged in setting eligibility criteria for assessing the loans.

  • BDCs to get $76.3m from CBN on Friday

    BDCs to get $76.3m from CBN on Friday

    The Central Bank of Nigeria (CBN) plans to sell $30,000 to each  of the 2,544 bureau de change operators on Friday, it was learnt yesterday.

    The $76.32 million is an addition to the weekly sales to the operators.

    The move, the apex bank said,  is aimed at increasing dollar liquidity in the system and freeing the naira from pressure.

    A dollar was selling at N209 in the parallel market operated by bureau de change agents on Tuesday. The interbank market rate hit N190.08 on thin trades.

    The bank is trying to narrow the gap at which the naira, hard hit by the drop in oil prices, trades on the interbank market through its regular interventions and is also trying to curb speculation.

    Interested BDC operators are to fund their accounts latest today to accommodate the special intervention.

    Meanwhile, the apex bank has also instituted  a N300 billion Real Sector Support Facility (RSSF) to enable it unlock the potential of the real sector to engender output growth, value added productivity and job creation.

    A report by the CB N released yesterday, said the facility will be used to support large enterprises for start-ups and expansion financing needs of N500 million up to a maximum of N10 billion. The real sector activities targeted by the facility are

  • Bank PHB shareholders seek N58b compensation from CBN, Keystone Bank

    Some shareholders of the defunct Bank PHB Plc have sued the Central Bank of Nigeria (CBN) at the Federal High Court in Lagos over the alleged illegal transfer of their shares to Keystone Bank without compensation.

    The plaintiffs are demanding N38.6billion from the defendants being “fair compensation” to them for the value of their investment in Bank PHB Plc.

    They also want N20billion as damages for the loss of their investments’ value in Bank PHB.

    The plaintiffs are praying for an order setting aside the alleged unlawful nationalisation, compulsory acquisition and expropriation of their investments in Bank PHB.

    Keystone Bank, Attorney-General of the Federation, Nigeria Deposit Insurance Corporation (NDIC) and the Asset Management Corporation of Nigeria (AMCON) are other defendants in the action.

    The plaintiffs said NDIC on August 5, 2011, wrote the Managing Director of Bank PHB, informing him that the bank’s assets and liabilities had been transfered to Keystone Bank.

    According to the plaintiff, the letter entitled: “Re: Exercise of intervention powers by the NDIC” purports to vest Bank PHB’s assets and liabilities, including the plaintiffs’ investments, in Keystone Bank.

    They said NDIC did so without any form of adequate compensation being paid to the shareholders.

    The plaintiffs are praying the court to declare that the action amounted to unlawful compulsory acquisition of their investments and is, therefore, unconstitutional, arbitrary, null and void.

    They also want the court to hold that the purported nationalisation of their investments without being paid compensation is unlawful and contravenes Section 44 of the 1999 Constitution.

    Nine of the shareholders sued for themselves and on behalf of others whose names were on the register of members as at October 2, 2009.

    They are – Benedicta Oyiana, Ifeyinwa Oyiana, Chioma Oyiana, Okoli Dumebi, Felix Oyiana, Pius Okonji, Obiageli Okonji, Austin Ndiwa and Allwell Brown.

    The defendants, however, filed preliminary objections to the suit, urging the court to strike it out for lack of jurisdiction.

    Arguing the objection on Thursday, CBN’s lawyer, Mr. Kola Awodein, said the plaintiffs did not the file the action properly.

    “We are saying that their claim is contentious, so they should come by writ of summons, not originating summons.

    “It’s not sentiment. It’s about the law. If you’re coming before the court, you must come properly. I urge your Lordship to strike out the matter,” he said.

  • CBN approves chairman, vice for Unity Bank

    CBN approves chairman, vice for Unity Bank

    The Central Bank of Nigeria has approved the appointment of Mr Thomas A. Etuh and Alhaji Aminu Babangida as Chairman and Vice Chairman of the Board of Directors of Unity Bank Plc.

    A statement from Unity last night, said this approval was contained in a letter to the Bank dated January 23, 2015 and signed by the Director of Banking Supervision, Mrs Tokunbo Martins.

    It noted that “their appointments followed the resignation of the former Chairman, Alhaji Lamis Shehu Dikko from the Board in December 2014 to pursue his political aspirations.”

    Unity Bank said Mr Etuh, who was appointed pioneer Vice Chairman of the Board of Directors, on April 22, 2014 has varied experience, gained from over two decades of contribution to the public and private sectors of the economy, especially the agric sector of the economy.

    The new Vice Chairman Alhaji Aminu Babangida, is the son of former military Head of State, General Ibrahim Babangida, an Entrepreneur and a co-founder/CEO of Phoenix Energy, Abuja. He was appointed to the Board of Unity Bank Plc in 2011.

    He has held chairmanship and membership positions in a number of board committees, including Credit Committee, Audit Committee, Information Technology & Strategy Committee, among others.