The naira on Friday, slipped 0.3 per cent to N156.7 per dollar on the interbank market, and for the week, depreciated 0.4 per cent despite. This ensued despite dollar inflows from the Diaspora.
The currency’s position was also aggravated by the Central Bank of Nigeria’s (CBN’s) suspension of foreign-exchange auctions, which curbed demand for the dollar.
The apex bank, which sells dollars to keep the naira within a three per cent band around N155 per dollar, ended twice- weekly auctions on December 19 and resumes today. “The closure of foreign-currency auctions for the second week has reduced dollar supply, relative to demand from companies reopening for business,” Sewa Wusu, currency analyst at Lagos-based Sterling Capital Ltd., said told Bloomberg.
The previous week, the naira had strengthened, reaching the highest in more than two months, as citizens living abroad returned for the holiday period, increasing the supply of dollars.
“Many Nigerians in the Diaspora have come home with dollars, which has increased the supply,” Pabina Yinkere, head of research at Vetiva Capital Management told Bloomberg. Remittances to sub-Saharan African countries from citizens abroad are forecast to increase 6.3 per cent to $24 billion, the World Bank said in June. Nigeria, Kenya, Sudan, Senegal and South Africa are the largest recipients of remittances in sub- Saharan Africa, with about 69 per cent of the funds in 2010 from migrants in the United States and Western Europe, according to the bank.
Central Bank policy makers left their benchmark interest rate unchanged at 12 per cent last year to control inflation and stabilise the naira. The inflation rate rose for the second consecutive month in November to 12.3 per cent from 11.7 per cent, the National Bureau of Statistics (NBS) said.
T-Bills
Yields are rising on Tanzania’s and Nigeria’s Treasury bills, although demand continues strong, according data posted on the website of the Central Bank of Tanzania and CBN. The average yield-to-maturity for Tanzania was 13.43 per cent on the 364-days bills, 12.86 per cent on the 182-days paper, 11.76 per cent on 91-days and 7.25 per cent on 35 days.
For Nigeria, it is 12.5 per cent on the 364-days bills, 11.75 per cent on the 182-days paper, 11.6 per cent on 91-days. The main investors in government securities in both markets are Pension Funds and commercial banks who took more than 60 per cent of the market, followed by insurance funds and a few micro-finance institutions. Treasury bills are issued regularly as part of monetary control measures to help lenders manage their liquidity.
Reserves target
The Federal Government has missed the $50 billion target it set for the foreign reserves by December 31. The reserves closed the year at $44.2 billion based on figure obtained from the CBN website on December 24, $5.8 billion below the estimate.
However, analysts have predicted that the Nigeria foreign reserve is expected to hit $47 billion by March next year. Managing Director, Financial Derivatives Company Limited, Bismark Rewane, said such accretion would strengthen naira’s stability.
The reserves were $44.3 billion as at December 20, from a low of $33.09 billion January 4, this year. The global oil prices continue to fluctuate as risks of supply disruptions in the Middle East increase and global economic outlook weakens further. Bonny Light declined to as low as $111.4 per barrel in October and as at December 19 traded at $112.6 per barrel.
Currency unification
The central banks of West and Central Africa are considering merging their currencies to boost trade within the region, Lucas Abaga Nchama, governor of the Bank of Central African States, has said.
According to Bloomberg reports, the West African and Central African CFA francs are separate currencies that are both pegged to the euro. Merging them would boost trade and help fight money laundering, Nchama said.
The franc zone covers 14 African countries, Benin, Burkina Faso, Cameroon, Central African Republic, Chad, Congo Republic, Equatorial Guinea, Gabon, Guinea-Bissau, Ivory Coast, Mali, Niger, Senegal and Togo.
Six other West African nations, namely Nigeria, Ghana, Sierra Leone, Gambia, Guinea and Liberia — plan to enact a common currency, known as the Eco, by January 2015, 12 years behind an initial target, Temitope Oshikoya, chief executive officer, West African Monetary Institute, said.
Finance Houses
Reform package that would drive the finance houses sub-sector of the economy will be unfolded this month by the CBN. An insider at the Finance Houses Association of Nigeria (FHAN) who spoke in confidence, said the apex bank would also be releasing timeline for compliance to regulatory issues raised in the guideline.
The source also hinted that the Board of Directors of the CBN is also expected to approve an enhanced capital base for the subsector to strengthen its operational capabilities.
The Nation findings showed that the apex bank’s board would release a new prudential guidelines for the subsector that also includes raising the capital base from the current N20 million to about N1 billion. This, he said, would bring stability to the troubled sector. The source said other policy issues such as the appointment of Managing Directors form part of the ongoing reforms in the subsector.
SWF
Governors’ opposition against the Sovereign Wealth Fund (SWF) will affect the amount of money needed for investment but there is high chances of reaching a compromise, FBN Capital, a research firm has said.
The Nigerian Sovereign Investment Authority is due to start its investment programme in March, but the agency will not have sizeable funds to invest until the state governors drop their opposition to the scheme. The legality of the SWF is still being challenged by different state governments across the country.
It said higher budget threshold would reduce the transfers to the SWF, adding that given the porous nature of the account and the many obstacles to its expansion, there are legitimate concerns about the defences against an external shock and therefore called for sufficient buffers to be built.
The $1 billion SWF was set up in May last year to invest savings made from the difference between budgeted oil prices and actual market prices. Nigeria on crude exports account for more than 90 per cent of foreign income and about 80 per cent of government revenue, making it vulnerable to swings in prices.
Bank subsidiaries
Nigerian banks with subsidiaries may rethink their continued operation in Ghana and Zambia as deadline for their recapitalisation in the counties ended last year. The Nation’s findings showed that not much has been achieved in terms of complying with the recapitalisation order by local banks in these countries.
Specifically, Ghana and Zambia central banks had raised their minimum capital requirement for banks, saying that the measure would help mobilise additional resources for their economies and enable banks participate effectively in their national economic growth as well as provide more funds for flow of credit.
In the case of Ghana, whose financial market had been undergoing some restructuring since the discovery of oil in the country, the Bank of Ghana has directed all banks to recapitalise to the tune of GH¢60 million ($31.7 million) by the end of 2012, from the $5.28 million it used to be.
Exchange rate
The exchange rate was relatively stable in the past one year, with the naira maintaining moderate appreciation and depreciation at intervals.
The naira-dollar rates stability was largely as a result of increased supply of foreign exchange through autonomous sources to the interbank segment. Also, the CBN intervened in the market to dampen demand pressure and increased the net open position of commercial banks in part to curtail speculative foreign exchange demand. To achieve this, the regulator adjusted the mid-point exchange rate band from N150 plus or minus three per cent to N155 plus or minus three per cent within the year.
Managing Director, Blue Wall Bureau De Change (BDC) said that despite occasional upsurges in foreign exchange demand due to interventions by the CBN and the increased supplies from autonomous sources, the exchange rate never exceeded a two per cent appreciation or depreciation margin. He said the year has seen some of the CBN policies on forex reflect on the dollar-naira parity at both the local and international market.
CIBN
The Chartered Institute of Bankers of Nigeria (CIBN) has reiterated the need for certified bankers in the country to work in other African countries. In a statement, the institute said a communique at the end of its Annual General Meeting (AGM) called for an inter-country recognition and acceptance of qualifications and certificates of member countries. This, it said, will encourage and promote mobility of labour as well as skills among banks in the continent.
It stressed the need for the Alliance of African Institute of Bankers (AAIOB) member institutions to participate actively in the establishment, programmes and activities of the Global Banking Education Standards Board (GBESB), which is expected to be launched at the World Conference of Banking Institutes (WCBI) scheduled to hold in Nairobi, Kenya in June, this year.
Bank to bank report
Guaranty Trust Bank Plc has re-affirmed its commitment to the safety of stakeholder funds as it prepares for the financial year. In a statement, the bank said it has installed several new technologies and introduced a number of internal procedures that enable it check frauds on customers’ accounts.
The bank’s Managing Director Segun Agbaje said the lender is committed to ensuring that its customers are protected from the rising incidence of online and other forms of electronic fraud being experienced within the industry.
Ghana’s economic growth is set to beat the African average for a sixth year in 2013, risks boosting imports and fuelling further weakness in the region’s third-worst performing currency, Standard Bank Group Limited and Ecobank Transnational Incorporated (ETI) have said.
The cedi, which has declined 14 per cent against the United States currency last year, may slump to 2.15 a dollar over the next 12 months, according to Ecobank’s head of economic research, Angus Downie. Samir Gadio, emerging-markets strategist at Standard Bank, sees the Ghanaian unit at 1.95 a dollar by the end of 2013. It weakened 0.3 per cent to 1.9065 a dollar according to data compiled by Bloomberg.
