The Nation Newspaper

Tag: Currency

  • ‘Single currency exchange good for Nigeria’

    ‘Single currency exchange good for Nigeria’

    The single currency exchange agreements among ECOWAS countries will boost Nigeria’s economy, the former chairman, Nigeria Economic Summit Group (NESG), Sam Ohuabunwa has said.

    Speaking with The Nation in Lagos, Ohuabunwa said the country stands to be a major beneficiary because a lot of trade that are going on within the ECOWAS countries is driven by Nigeria.

    “Because Nigeria is a dominance economy in the region so if you put the currencies in the basket the weight of the Nigerian currency would be higher,” he stated.

    “Nigeria is the industrial hub and therefore if we have a single currency it will promote trade and Nigeria will be the major beneficiary and certainly would discourage all forms of practices that would not promote the nation’s economy,” he stressed.

    Ohuabunwa said that with the single exchange it would not only be easier to measure trade but also to record trade, saying the country would be better for it.

  • Currency in-circulation drops to N1.6tr, says CBN

    Currency in-circulation drops to N1.6tr, says CBN

    The Economic Report of the Central Bank of Nigeria (CBN) for January has shown that there is N1.61 trillion currency-in-circulation in the month.

    The report, released on Monday, showed a drop by 7.6 per cent, in contrast to the increase of 13.9 per cent at the end of the preceding month.

    According to the CBN, the development reflected the 3.4 per cent decline in currency outside bank and that total deposits at the apex bank amounted to N6.6 trillion, indicating a decline of 15.0 per cent below the level at the end of the preceding month.

    The development, the apex bank added, reflected, largely, the fall in Federal Government and banks’ deposits. According to the CBN, reserve money (RM) fell by 8.2 per cent to N5.4 trillion, at the end of the review month, reflecting the trends in currency-in-circulation.

    Available data showed relative stability in money market indicators as the level of liquidity in the market influenced key indicators during the review month.

    The CBN continued the use of Open Market Operations (OMO) to pursue its monetary policy objective even as key policy rates were retained such as Monetary Policy Rate at 13 per cent with plus or minus 200 basis points corridor, private sector Cash Reserve Ratio (CRR) at 20 per cent, public sector CRR at 75 per cent and Liquidity Ratio (LR) at 30 per cent.

    However, in the foreign exchange market, the bank reviewed the net foreign currency trading position limit of banks from 0.1 per cent to 0.5 per cent in an attempt to increase liquidity in the market.

    It also placed restriction on sale of Retail Dutch Auction System (RDAS) and interbank funds to Bureau De Change (BDC) and other authorised dealers.

    He said government’s Federally-collected revenue (gross) in January this year was estimated at N710.78 billion, showing increase of 4.6 and 4.3 per cent above the receipts in the preceding month and the corresponding period of last year, respectively.

    At N486.44 billion, oil receipts (gross), which constituted 68.4 per cent of the total revenue, was higher than the receipts in the preceding month.

    Provisional data indicated that the total value of money market assets outstanding in January 2015 stood at N7.7 trillion, showing an increase of 1.5 per cent, compared with the increase of 10.2 per cent at the end of the preceding month.  The development was attributed to the 2.2 and 12.8 per cent increase in Federal Government of Nigeria Bonds and Bankers Acceptance, respectively.

  • Ecobank insulated from Nigeria’s currency risks, says CEO

    Ecobank insulated from Nigeria’s currency risks, says CEO

    Ecobank’s Group CEO,  Albert Essien has said the  current economic and currency headwinds in Nigeria has not affected his company, immensely.

    “So far so good, Nigeria is our biggest operation. Our business has not encountered downside risks despite crude oil price fall,” he told CNBC Africa.

    Essien said investors needed to make long-term investments decisions as this was not an in and out thing. “Investors need to prepare properly so as to understand the local environment; investors also need to have a focus as what one wants to do. I think Africa offers great opportunities, the continent offers good returns, and though there are challenges, they are surmountable,” he said, adding that the region was anticipating much investment from the Middle East, especially through financing infrastructure development and equity.

    He said his group had covered much ground in attracting talent and diversifying the business in Nigeria, adding that the company was now big on transaction services.

    Essien, expected to step down as soon as his tenure ends, said his group was expecting to announce a successor in June.

    He said whatever risks are identified are best viewed holistically rather than in isolation. “New market entrants will need to develop a clear risk appetite and weigh the opportunity against the cost of risk mitigation, which can be expensive,” Essien said.

    He said the setting up of a risk review board would help ensure the right level and scope of ongoing risk monitoring.

    He also urged investors to be prepared to engage with African countries on a long-term basis and avoid abrupt changes in investment focus because of perceived instability in certain markets.

     

    Essien encouraged managing risks associated with doing business in Africa, including fiscal and monetary policy issues such as foreign exchange restrictions, transparency and compliance, political instability and corruption and resource and infrastructure challenges.

    He also offered executives overseeing market entry strategy in Africa six key considerations that they would have to contend with. He said these, were: understanding the local business culture; assessing which markets represent the best balance of risk and reward; finding and vetting appropriate local partners; understanding local market regulations; local environmental factors; and levels of technological development.

  • ‘Why ECOWAS needs single currency’

    Economists and stakehold-ers in the global economy have highlighted the benefits of ECOWAS having a single currency by 2020.

    An economist at the Banque de France, Gilles Dufrénot, said in an online agency report: ‘Inter- Reseaux’ that the ECOWAS countries are on the way to establishing a single currency by 2020. Nigeria, he said, is poised to play a major role in this process.

    He explained that the “currency map” of West Africa comprises several different exchange regimes. “There is a monetary union, made up of the eight countries of the franc zone, whose currency is tied to the euro ; and a set of non-convertible national currencies whose exchange rates in relation to the dollar or the euro are fixed administratively to a greater or lesser degree,” he said.

    He explained that since different exchange regimes coexist in a small area does not back trade between countries due to the high transaction costs involved (for example, fees for currency conversion and the insurance costs incurred by importers and exporters to cover exchange risks).

    Also, for currencies not pegged to an international currency, the problems linked to the credibility of their exchange policies and the uncertainties linked to volatile exchange rates discourage stable foreign capital and investment over the medium and long term.

    He said the idea of introducing a single currency within ECOWAS is based on several historical observations. First, monetary unions tend to foster regional trade as long as they attain a critical mass. Second, regional trade is what drives economic growth, rather than transactions in the context of North/South specialisation. The reason for this is that regional trade most often involves the exchange of similar products, avoiding the pitfall of national industries evicted by imports.

    Lastly, the global economy is likely to take shape around currency poles in coming years. It will be important for African countries to have their own poles, alongside international currency poles (the dollar, the euro and the yen). The timetable for implementing a single currency in ECOWAS is outlined as follows.

    First, the countries that are not members of the franc zone will set up their own monetary zone called the West African Monetary Zone (WAMZ) in 2014, adopting a common currency, the West African Currency Unit.

     

  • Bank of England names London Chinese currency clearing hub

    The Bank of England has appointed one of China’s “big four” banks as the Chinese currency clearing bank in London.

    The China Construction Bank will be the London renminbi clearing house.

    The appointment is part of a plan to make London a hub for Chinese currency dealing.

    Standard Life chair Sir Gerry Grimstone said renminbi trading is the most important issue facing the City of London at the moment.

    In March, the Bank of England signed a memorandum of understanding with the People’s Bank of China setting out the deal.

    The banks have said they want to encourage the cross-border use of renminbi, or yuan, to rebalance the global economy.

    Bank of England governor Mark Carney said the appointment was an “important milestone”, because the Chinese bank would “play a valuable role in facilitating greater use of the RMB (renminbi) for trade, investment and other economic activities in the UK”.

    Mr Grimstone, who chairs financial services trade body The CityUK and Standard Life, helped broker the memorandum.

    He said the deal could help to secure City jobs for decades.

    “We’re moving down a track very rapidly where London is going to become … the offshore centre for trading renminbi,” he told the British Broadcasting Corporation (BBC).

    Two-thirds of Chinese currency traded outside of China is already done in London, he added.

    On Tuesday, Prime Minister David Cameron announced that trade deals worth more than £14billion had been signed during a state visit by Chinese premier, Li Keqiang.

    Mr Li said the yuan clearing house deal “will further consolidate and promote London’s status as an international financial hub” and help “promote trade and investment liberalisation and facilitation”.

    During Mr Li’s visit, the London Stock Exchange (LSE) said that it had signed agreements with two of China’s biggest banks to develop UK renminbi trading.

    The LSE deal with the Bank of China will see the two firms design clearing and financing processes for financial products.

  • Fidelity Bank’s foreign currency exposure hits 27per cent

    Fidelity Bank’s foreign currency exposure hits 27per cent

    Fidelity Bank’s exposure to foreign currency lending rose to 27 per cent last year, from one per cent in 2012, a report by Renaissance Capital (RenCap), an investment and research firm, has shown.

    The firm said Fidelity achieved the growth after deploying its foreign currency liabilities as the pressure on funding costs persisted.

    The bank’s 2013 result showed that it reported the lowest Net Interest Margin (NIM) in Nigerian banking universe, reaching a 10-year low of four per cent. It said Fidelity’s NIM squeeze started in 2011, when the lender increasingly focused on corporate lending and was subsequently faced with a tightening monetary policy environment.

    RenCap said Fidelity’s management acknowledges the current challenges and its initial focus will be on reducing the funding costs by continuous downward re-pricing of costly term deposits, which is under way and increasing the proportion of staff in market-facing roles while also rewarding them appropriately. It also plans to increase branch footprint (e-branches mainly) to increase market reach.

    “Overall, there will be significantly more focus on driving e-banking products for customer mobilisation and service and an merger and acquisition deal could happen for the right target and price,” it said.

    On the asset side, Fidelity is positioning itself to be a Small and Medium Enterprise-focused bank, and, coupled with its payroll lending retail book, management expects combined exposure to rise to 50 per cent over the medium term (2017), from 28 per cent in 2013.

    RenCap said management has also been re-pricing the existing loan book and plans to periodically review all concessions and lending rates.

    The research form advises the lender to improve the quality of reporting and investor communication. “We have made slight changes to our forecasts, largely along the lines of modestly higher NIMs and loan growth, the impact of which was offset by higher cost of risk over the forecast period. We expect the stronger growth in SME lending to keep Fidelity’s cost of risk elevated, at two per cent, against our previous forecast of one per cent over the next few years,” it said.

  • Currency in circulation drops to N1.47tr

    Currency in circulation drops to N1.47tr

    The volume of currency in circulation rose by 3.4 per cent to N1.47 trillion at the end of the third quarter, the Central Bank of Nigeria (CBN) has said.

    In a report obtained by The Nation the apex bank said the increase is in contrast to the decline of 5.5 and 1.1 per cent at the end of the preceding quarter and corresponding period of last year.

    It said the development, relative to the preceding quarter was attributed, largely, to the 3.5 per cent increase in currency outside the banks.

    It explained that the value of Commercial Paper (CP) held by the banks rose by 94.1 per cent to N29.1 billion by September, compared with N15 billion at the end of the preceding quarter.

    The development was due to the increase in holding of CP by the banks during the review period adding that the CP constituted 0.44 per cent of the total value of money market assets outstanding, compared with 0.23 per cent at the end of the preceding quarter.

    “The value of BAs held by DMBs increased by 53.2 per cent to N24.5 billion at the end of the review quarter, compared with the increase of 58.1 per cent at the end of the preceding quarter. The development reflected increase in investments in BAs by the banks. Consequently, BAs accounted for 0.37 per cent of the total value of money market assets outstanding at the end of the review quarter, computed with 0.24 per cent at the end of the preceding quarter,” it said.

    Also, bills of various maturities, ranging from 55 to 227 days, were used for liquidity management during the review period. Total sales amounted to N750.98 billion, while total subscription was N1,512.42 billion, compared with N2.7 trillion and N4.2 trillion allotted and subscribed to in the preceding quarter.

    The bid rates ranged from 11.50 to 14 per cent, while the stop rates ranged from 12 to 13.20 per cent, compared with 11.500 to 13.299 per cent in the preceding quarter. Matured bills worth N1.5 trillion were repaid during the period, resulting in a net injection of N778.40 billion.

    According to the report, the primary market segment, treasury bills of 91-, 182- and 364-day tenors, amounting to N739.37 billion, N1.8 trillion and N739.37 billion, were offered, subscribed to and allotted, in the third quarter of 2013, compared with the respective sums of N1 trillion , N1.7 trillion and N1 trillion in the preceding quarter.

     

  • Currency in circulation drops to N1.4tr, says CBN

    Currency in circulation drops to N1.4tr, says CBN

    The volume of currency-in-circulation dropped to N1.44 trillion in August, representing a drop of about one per cent against the July figure, according to the Central Bank of Nigeria’s (CBN) Economy report released at the weekend.

    The report said the development relative to the preceding month, reflected the fall in currency outside banks and vault cash, respectively. It added that the total deposits at the apex bank amounted to N6.5 trillion, indicating an increase of 7.5 per cent above the level as at the end of the preceding month.

    The development reflected, largely, the increase in commercial banks’ and Federal Government’s deposits, which more than offset the fall in private sector deposits.

    It said the introduction of the 50 per cent Cash Reserve Requirement (CRR) on all public sector deposits in August, precipitated volatilities in most financial market indicators, stating that there was a reduction in the level of liquidity in the system due to the sterilisation of N896.43 billion and the delay in the release of fiscal allocation, which did not impact on the banking system liquidity until August 26, 2013.

    It said the government’s bonds and treasury bills were issued at the primary market on behalf of the Debt Management Office (DMO) for the fiscal operations of the Federal Government, adding that the provisional data indicated that the total value of money market assets outstanding as at end of August 2013, was N6.5 trillion, indicating a decline of 0.1 per cent, in contrast with the increase of 0.3 per cent at the end of the preceding month.

    This development was attributed largely, to the 4.4 per cent and 9.4 per cent decrease in Bankers Acceptances and Commercial Paper, respectively. “The value of Commercial Paper (CP) held by the commercial banks at end-August stood at N16.59 billion, indicating a decline of 9.4 per cent, compared with the value of N18.30 billion at the end of the preceding month,” the report said.

    It attributed the development to the 18.6 per cent decline in investment in CP by the merchant banks during the review period, “thus CP constituted 0.25 per cent of the total value of money market assets outstanding, at the end of the review period, compared with 0.28 per cent at the end of the preceding month.”

    The report said government bonds of three and 20-year tenors were offered in the market during the review month. The total amount offered, subscribed to and allotted stood at N70 billion, N152.42 billion and N70 billion, respectively, it said, adding that the bid rates on the two tranches ranged from nine per cent to 15.69 per cent and the marginal rates were 13.05 per cent and 13.49 per cent for the three-and 20–year tenors, respectively.

    Also, the CBN report said the 20-year bond was re-opened with time to maturity of 16 years 11 months, while the three-year bond was a new issue. In the preceding month, the five- and 20-year tenors were re-opened at marginal rates of 13.45 per cent and 13.79 per cent. The amount offered, subscribed to, and allotted was N55 billion, N135.93 billion and N55 billion, respectively.

    The report indicated that total assets of the discount houses stood at N231.73 billion at the end of August, showing a decline of 9.2 per cent below the level at end of July, 2013. The report explained that the development was accounted for, largely, by the 18.9 per cent and 1.4 per cent decline in claims on the federal and state governments, respectively.

    Correspondingly, the decline in total liabilities was attributed, largely, to the 18.9 per cent and 28.2 per cent fall in other amount owed to commercial banks and other liabilities, respectively. Discount houses investment in Federal Government securities of less than 91-day maturity decreased by 60 per cent to N29.55 billion and accounted for 17.0 per cent of their total deposit liabilities. Thus, investment in Federal Government securities was 43 percentage points below the prescribed minimum level of 60 per cent, the report added.

     

  • Man arrested with fake N1m currency

    •Fake notes flood Anambra

    •Suspects on the run

    A man, Stephen Okolie Chukwu, has been arrested with N1 million in fake N1,000 notes in Ebonyi State.

    Police spokesman Sylvester Igbo said the suspect, who hails from Umuegbe Amaifeke in Orlu Local Government Area of Imo State, was arrested at a Bureau de Change in Abakaliki, the state capital, where he went to change the money into United States (US) dollars.

    He said: “Through a tip off, operatives from the Ebonyi State Police Command arrested Stephen Okolie Chukwu when he went to Alhaji Ibrahim Lawal’s bureau de change to change N1million of N1000 denomination into US dollars.

    “On close examination of the notes, Lawal suspected that the notes were fake and deceived the suspect to a bank where the money was confirmed to be fake by the bank.”

    The suspect, who allegedly confessed to the crime, said he bought the notes from Ugo, who is based in Oguta in Imo State, at the rate of N150, 000.

    He also admitted that he had engaged in the illicit business in the past but on a smaller scale.

    In Anambra State, some men, suspected to be merchants of fake naira notes, narrowly escaped being lynched in Uga community.

    An eyewitness, Camilus Nnadozie, said the men posed as buyers and bought three bags of fertlisers from his wife at Oye Uga.

    Nnadozie said: “These men went around to five other traders, mostly sales girls, before one of them raised the alarm but they escaped before traders mobilised.

    “The whistle blower sold N4,500 recharge cards and was given N5,000 but there was difficulty in getting the balance which they asked her to keep.

    “This aroused her curiosity and she looked at the money they gave her and noticed it was fake.

    “I think these people are members of a syndicate because I have heard they operate in Onitsha and Umunze.”

    Police spokesman Emeka Chukwuemeka could not be reached for comments.

     

  • CBN: currency in circulation drops to N1.45t

    CBN: currency in circulation drops to N1.45t

    Currency in circulation fell by 10.7 per cent in January to N1.45 trillion, according to an Economic Report by the Central Bank of Nigeria (CBN).

    This figure contrasts with an increase of 4.2 per cent in December, last year, showing an a 11.2 per cent decline in currency outside banks. Total deposits at the CBN amounted to N6.7 trillion, mainly due to the fall in the Federal Government and commercial banks’ deposits.

    The report showed that Treasury Bills (TB) worth N888.3 billion matured for repayment in January while total amount offered, subscribed to and allotted amounted to N1.4 trillion, N2.9 trillion,  and N1.7 trillion.

    The amount offered, subscribed to and allotted for December were N800 billion, N952.9 billion and N650.3 billion while bid rates ranged between 11.7 to 14.0 per cent; stop rates were between 12 to 13.34 per cent.

    Also, reserve money (RM) fell by 8.5 per cent to N3.2 per cent, reflecting the trends in commercial banks’ deposits with the CBN.

    The report also showed that the money market experienced liquidity ease, as most financial market indicators trended downward. High subscription for T-bills was sustained due to increased foreign portfolio investor interest and improved market liquidity.

    It also indicated that the value of money market assets outstanding at end-January was N6.2 trillion, depicting an increase of 0.54 per cent, compared with the increase of 20.99 per cent in December.

    Available data indicated mixed developments in the banks’ deposit and lending rates during the month. With the exception of the average savings and 1-month deposit rates, which rose by 0.03 and 0.28 percentage point to 1.69 and 8.43 per cent, respectively, all other deposit rates fell from a range of 5.16 to 11.88 per cent to between 5.14 to 11.67 per cent.

    At 7.66 per cent, the average term deposit rate fell by 1.33 percentage point below the level in the preceding month. Similarly, the average maximum lending rate fell by 0.07 percentage point to 24.54 per cent. However, the average prime lending rate rose by 0.03 percentage point to 16.57 per cent.

    With the headline inflation rate at nine per cent, most rates, with the exception of the lending and the average interbank call rates were negative in real terms. The value of commercial paper (CP) held by the commercial banks in January stood at N1.05 billion, same as in the preceding month. Therefore, commercial paper constituted 0.02 per cent of the total value of money market assets outstanding. The value of bankers’ acceptances (BAs) declined by 12.40 per cent to N8.64 billion, compared with the decline of 12.17 per cent in the preceding month.

    The development, the apex bank said, reflected the fall in investments by deposit money banks and discount houses. Nigerian Treasury Bills (NTBs) of various maturities were auctioned to mop-up excess liquidity from the banking system in line with the tight monetary policy stance of the apex bank.