The Nation Newspaper

Tag: Foreign exchange

  • Foreign exchange reserves record $34.49b

    Foreign exchange reserves record $34.49b

     •Loses  $2.3b in one month    

    The Central Bank of  Nigeria (CBN) yesterday pegged the nation’s foreign exchange reserves at $34.49 billion (N5.74 trillion) as at Jan. 5.

    The News Agency of Nigeria (NAN) reports that the CBN posted the foreign exchange reserves data on its website.

    According to the bank, the figure represents an increase of $20 million  (N3.36 billion) from the $34.47 billion  (N5.79 trillion) recorded on Dec. 31, last year.

    The bank said the $34.49 billion (N5.74 trillion) represented the ‘gross’ amount while $33.52 billion  (N5.63 trillion) was ‘liquid’ and $975 million (N163.8 billion) ‘blocked’.

    NAN reports that the Federal Government had through fiscal policies made attempts since 2013 to shore up the foreign reserves to $50 billion (N9.05 trillion).

    The CBN had in 2014 relied heavily on external reserves to support the Naira which came under pressure following falling international prices of crude oil.

    Crude oil prices at the international market have continued to rally between $55 and $60 per barrel since December, last year.

    According to the CBN, the continuous pressure on the foreign exchange market was also attributable to the rise in the internal demand for the dollar.

    The CBN Governor, Mr Godwin Emefiele, had earlier said the country had spent huge assets from the foreign reserves in ensuring that the official exchange rate was maintained at its previous value of N155 to a dollar.

    In spite of government’s efforts to shore up the naira, the CBN devalued it to N168 to a dollar in November, last year.

    Meanwhile, CBN data showed that official reserves decreased by $2.3 billion in December to $34.5 billion.

    Analysts at FBN Capital attributed the latest fall to the result of the sharp decline in foreign exchange inflows from the oil industry and the related exit of some offshore portfolio investors.

    “The end of the holiday season may have applied the brake to import demand but the more significant development has been the halving of the oil price over the past six months.

    The CBN feels that foreign exchange demand is in part speculative and has therefore issued a number of circulars. On December 17, it ruled that authorised dealers must have flat foreign exchange positions at the close of each trading day rather than the previous one per cent of shareholders’ funds.

    Head, African Markets at FBN Capital, Olubunmi Ashaolu said the CBN has mandated banks’ customers had to utilise foreign exchange bought on the interbank/autonomous markets within 48 hours, failing which they had to surrender it to the CBN.

    He said: “We suspect that these circulars will, over time, prove to be porous. Our greater concern is the further depletion of offshore holdings of Nigerian securities in the face of pressure on the oil price and hence on the naira exchange rate.

    “Clearly the CBN cannot continue to draw down reserves at the rate of more than $2billion per month for long. Since the oil price is not expected to rebound quickly and since the CBN is unlikely to adopt a floating exchange rate regime, we should prepare for additional administrative measures,” he said.

  • Foreign reserves to hit $41b by month-end

    Foreign reserves to hit $41b by month-end

    Foreign exchange reserve which stood at $39.4 billion in August 7 is expected to hit $41 billion by the end of this month, Managing Director, Financial Derivatives Company (FDC) Limited, Bismarck Rewane has said.

    In the FDC Breakfast Meeting at the Lagos Business School, he said the slow replenishment of the reserves will continue until they reach $41 billion by month-end. Analyses of the reserves based on data from the Central Bank of Nigeria showed that the reserves have risen by over $2.2 billion in the last six weeks. The reserves which were at $37.2 billion on June 24 rose to $3.84 billion on July 17.

    Rewane said average oil prices of Nigerian crude remained above $104 per barrel while the positive impact on oil revenue will be felt in October. US import of Nigerian crude is down to less than two per cent, of total Nigerian exports, compared to seven per cent in 2011. Dwindling Nigerian shipments to the U.S. imply that disruptions to Nigeria’s oil supplies are unlikely to trigger oil price rallies. Nigeria imports about 50 per cent of its refined products from the US.

    He said oil revenues forecast in second quarter is $12 billion as against first quarter revenue of approximately $11 billion adding that accruals from oil form major part of the reserves. The reserves will cover 8.2 months of import cover

    Analyzing financial sector credit, he said the average opening credit position of the banking system was N358.75 billion in July, about 0.66 per cent lower than June figure. Inflation crept up by 0.2 per cent to 8.2 per cent, the fourth consecutive monthly increase.

    He said the Monetary Policy Committee (MPC) left the monetary policy instruments and stance unchanged in July even as the naira appreciated at the interbank market to N161.85/ dollar but depreciated at the parallel market to N168/ dollar.

    Also, banking earnings were flat and lower than first quarter because of the cumulative impact of the Cash Reserve Ratio (CRR) hike. Also, average corporate earnings for lenders declined by 1.53 per cent in second quarter and stock prices decreased by 3.16 per cent year-to-date.

  • Foreign exchange reserves cross $38b mark

    Foreign exchange reserves cross $38b mark

    Foreign exchange reserves have gone up $1.1 billion in 19 days. The reserves rose marginally to $37.26 billion on June 26 and were at $37 billion on June 20, according to Central Bank of Nigeria (CBN) figures.

    Before the upbeat, the reserves had maintained a steady decline  after closing last year at $42.85 billion. The year-end figure represented a decrease of $0.98 billion or 2.23 per cent against  $43.83 billion at end- December 2012. The reserves dropped to $38.79 billion as at March 12.

    Analysts said the reserves declined as imports of fuel and foods soared.

    But the CBN said the decrease  was driven largely by the increased funding of the foreign exchange market in the face of intense pressure on the naira and the need to maintain stability. The CBN said the pressure on external reserves was deemed to be consistent with the seasonal annual payment of dividends to foreign investors.

  • Foreign exchange inflows drop to $3.2b

    Foreign exchange inflows drop to $3.2b

    The Federation Account Allocation Committee (FAAC) vote between January and last month was N3.3 trillion, analysts at Standard Chartered Bank (SCB) have said.

    The figure represented an increase of 13.74 per cent against that of the same period in 2011.

    Regional Head of Research, Africa at SCB, Razia Khan said in an emailed report titled: ‘Nigeria – The political cycle and policy’ that the FAAC hike may be seen as further evidence that Nigeria’s political cycle is starting to have more of an influence. She also ruled out possibilities of carrying out Gross Domestic Product (GDP) rebasing before 2014, a process that will enhance the economy.

    She said despite the success of Nigeria’s recent Eurobond issuance and a reduced domestic issuance calendar for third quarter, concerns persist over the broader fiscal backdrop.

    “Even improved budget implementation is a source of concern. Commentators are unsure if this reflects more efficient spending, or pressure to spend more. In first quarter of 2013, government revenue was reportedly 12.6 per cent lower, while spending rose 15 per cent,” she said.

    Khan explained that increased military spending following the state of emergency in the Northeast should be met by a contingency reserve adding that further escalation may put pressure on spending plans.

    She said Nigeria’s $284 billion GDP is expected to be rebased by early 2014, a process that will lead to about 40 per cent upward revision in the country’s national income.

    The GDP is the market value of all final goods and services produced within a country, calculated using product, income and expenditure approaches. The real GDP is one that is adjusted for inflation while nominal GDP is the value of goods and services based on current market prices.

    Khan said in the near-term, Nigeria economy faces some risk which may lead to growth slipping to six per cent. She said although rebasing of the GDP will support the much needed growth and provide analysts with more accurate sectoral shares, it will not happen until 2014.

    Khan also expressed concerns about Nigeria’s political cycle and spending pressures. “There is a risk that elections, due in 2015, are brought forward, allowing for any legal disputes to election results to be settled ahead of a May 2015 transition. If this is the case, spending may rise meaningfully ahead of party primaries which would be held in early half year 2014,” she said.

    She said weaker oil output relative to ambitious budget targets risks fiscal deterioration, with Nigeria dipping into its oil savings. With only modest spending increases envisaged in 2013, a budget deficit of 2.17 per cent was initially forecast.

    However, oil production, reportedly averaging 2.1 to 2.2 million barrels per day (mbpd), has fallen short of the 2.53 mbpd assumed in the 2013 budget. In June, output may have hit a low of 1.9mbpd. This, she insisted, has necessitated more frequent augmentation of revenue from Excess Crude Account (ECA).

    “Dipping into oil savings to finance spending may result in a narrower budget deficit for 2013. Despite the success of Nigeria’s recent Eurobond and a reduced domestic issuance calendar for third quarter 2013, concerns persist over the broader fiscal backdrop,” she said.

    Khan explained that given anticipated pressure on future inflation, forecast of a 100 basis points (bps) rate hike in first quarter of 2014, followed by hikes of 50bps each in third quarter and fourth quarter 2014, with the interest rate raised to 14 per cent by end of 2014 is a possibility.

    Nigerias plans to change its GDP base year to 2008 from 1990, thereby boosting its nominal GDP. By carrying out the exercise, Nigeria will be emulating Malaysia and South Africa which rebased their GDPs from 2000 to 2005 each and Ghana from 1993 to 2006.

    The Gross National Product (GNP) measures the value of goods and services produced by a country’s citizens regardless of their location while Gross National Income (GNI) is GDP plus income receipts minus income payments from the rest of the world.