The Nation Newspaper

Tag: Naira

  • Naira sinks further at N391 to dollar

    Naira sinks further at N391 to dollar

    The currency volatility in the unofficial market yesterday pushed the naira to dollar exchange rate to N391. Head Treasury at Ecobank Nigeria, Olakunle Ezun, who spoke to the correspondent, confirmed the naira rate to dollar. He said the local currency is facing a volcanic volatility against the greenback and the trend may likely persist.

    The naira had yesterday exchanged at N372 to dollar on Wednesday, an indication that it is losing an average of N20 per day as importers scramble for the greenback.

    President, Association of Bureau De Change of Nigeria (ABCON) Aminu Gwadabe said the importers are busy mopping up any dollar they can find because they are unsure of what will happen the next day.

    He said the Central Bank of Nigeria (CBN’s) decision not to sell dollar to the bureaux de change (BDC) operators has created the ongoing panic in the market. He said the CBN is even rationing dollar for manufacturers and others that legitimately need the greenback to fund their operations.

    Gwadabe said his group is discouraging BDCs from buying or selling at the current rate because it does not add value to the economy.

    “We have supported the government and will keep doing so. So, we have advised members of ABCON not to buy at current rates,” he said.

    “In my own view, the central bank should address the supply side of the market by allowing oil companies and banks to sell dollar to bureau de change operators as an immediate measure to reduce pressure on the naira,” Gwadabe.

    CBN Director of Communications, Ibrahim Mu’azu said the rate is speculative “Ask the BDCs the volume of dollar they have sold at this rate and you find out the truth. These rates are not realistic rates,” he said. He said the CBN has been meeting all legitimate demands for foreign exchange and will keep doing so in the interest of the economy. “It does not look like a price that is backed by demand,” he said.

    Tumbling global oil prices have battered Nigeria’s crude exporter, with foreign exchange reserves down to an 11-year low at $27.85 billion by February 11. Government is concerned that further depreciation will hurt poor Nigerians, but the bank’s refusal to revise the pegged exchange rate has widened a chasm between official rates and the parallel market.

  • Naira falls to N345 against dollar in parallel market

    Naira falls to N345 against dollar in parallel market

    The naira yesterday exchanged at N345 to the dollar in the parallel market. The exchange rate  volatility worsened thereby forcing the Central Bank of Nigeria (CBN) to devalue the official exchange rate to narrow the gap between it and the parallel market.

    The local currency eased 1.47 per cent from Friday’s close of 340 to the dollar, while the official rate remained at 197.50 to the dollar at the close of trading yesterday.

    Traders said the black market rate had slipped as Nigerians with school and medical bills to pay abroad anticipated the CBN would stop allocating currency for such payments. The bank has not denied or confirmed any such plans.

    Tumbling global oil prices have battered Nigeria’s crude exporter, with foreign exchange reserves down to an 11-year low at $27.85 billion by February 11.

    Nigeria’s government is concerned that further depreciation will hurt poor Nigerians, but the bank’s refusal to revise the pegged exchange rate has widened a chasm between official rates and the parallel market.

    “In my own view, the central bank should address the supply side of the market by allowing oil companies and banks to sell dollar to bureau de change operators as an immediate measure to reduce pressure on the naira,” said Aminu Gwadabe, head of the Association of Bureau de Change Operators of Nigeria.

    Managing Director, Financial Derivatives of Nigeria Limited, Bismark Rewane, said naira devaluation is the answer to Nigeria’s economic woes. The economist said there is a big difference between economic drama and reality adding that people denying the need for devaluation are same people that keep stealing from the people.

    He said those who want the naira not to be devalued should remember that it is all about  competitiveness adding that the local currency can also appreciate if things are done rightly.

    Rewane said that in the last 10 years, Western Union, Thomas Cook and others were bring dollars to the country. “The CBN said it sold $8 billion to bureaux de change (BDCs) in nearly two years but who are the owners of these BDCs? The issue is if you are a manufacturer and you get dollar at N197 from the CBN to import raw materials. There are two decisions to make.   Manufacture the goods and sell as if you bought the at N310 to dollar because of the wide gap between the official and parallel market rates, or open a Letter of Credit and refuse to import. Then roundtrip the money and make 50 per cent outright profit,” he said.

    He said devaluation will solve such problem because it will reduce the widening gap between the official and parallel market rates. He said many of the people asking government not to devalue the naira is because they want to abuse and steal the fund, pretending to be protecting the naira.

    “I can tell you, there are vested interests. They pretend to be protecting and defending the naira, but in reality, they are not. In 1987, the naira depreciated by 76 per cent and by 20 per cent in 2009. But when oil prices rose, did they allow the naira to appreciate?”

  • Naira devaluation will hurt the poor, says Oshiomhole

    Naira devaluation will hurt the poor, says Oshiomhole

    Debate on whether to devalue or not to devalue the naira became fiercer yesterday with Edo State Governor, Comrade Adams Oshiomhole joining the discussion.

    The Governor, who did not hide his disdain for a weaker naira, said a devaluation of the local currency at this time will make the poor poorer.

    Oshiomhole, who spoke at the maiden edition TheCable Colloquium with theme: The Naira on Trail: To Devalue or Not? said the rich, who constitute about five per cent of the population; portfolio investors and collaborative private sector operators canvassing for devaluation will benefit from the decision.

    He said devaluation of the naira at this time when Nigeria’s productive base is very low and the desire for foreign goods keep rising will be a big mistake.

    The Governor said previous devaluations never benefitted the poor and workers, whom he described as the best economists because of their prudent management of the N18, 000 minimum wage in the face of declining naira value against world currencies.

    But Managing Director, Financial Derivatives of Nigeria Limited, Bismark Rewane, said naira devaluation is the answer to Nigeria’s economic woes. The economist said there is a big difference between economic drama and reality adding that people denying the need for devaluation are same people that keep stealing from the people.

    He said those who want the policy to stay, same people want to steal the money. They have vested interest not to devalue, pretending to be protecting the naira adding that it is all about  competitiveness because the naira can also appreciate if we get things right.

    Rewane said that in the last 10 years, Western Union, Thomas Cook and others were bring dollars to the country. “The CBN said it sold $8 billion to bureaux de change (BDCs) in nearly two years but who are the owners of these BDCs? The issue is if you are a manufacturer and you get dollar at N197 from the CBN to import raw materials. There are two decisions to make.   Manufacture the goods and sell as if you bought the at N310 to dollar because of the wide gap between the official and parallel market rates, or open a Letter of Credit and refuse to import. Then roundtrip the money and make 50 per cent outright profit,” he said.

    Rewane said devaluation will solve such problem because it will reduce the widening gap between the official and parallel market rates. He said many of the people asking government not to devalue the naira is because they want to abuse and steal the fund, pretending to be protecting the naira.

    “I can tell you, there are vested interests. They pretend to be protecting and defending the naira, but in reality, they are not. In 1987, the naira depreciated by 76 per cent and by 20 per cent in 2009. But when oil prices rose, did they allow the naira to appreciate?”

    He said that after the drama of not devaluing the naira, the country will come back to reality.

    CBN director, Monetary Policy Department, Moses Tule, urged government to create enabling environment and framework that support Foreign Direct Investment (FDI). He said Nigeria is still not attractive destination for FDI and called for improved investment climate for the country.

    “Nigeria has the labour for industrial take-off. But consumption appetite of Nigerians which is tilted to foreign goods has taken the naira to court. We have elites that are ready to pick up all the foreign reserves to fund their consumption of foreign goods. We need to put our home in order because Nigeria remains a big economy,” he said.

    Tule said that late last year when the combined foreign reserves for the West Africa was $32 billion, Nigeria contributed $29 billion of the figure still the Naira has faced serious volatility because it is the one that supplies forex for the rest of the region.

    “Devaluation is sound economics if the fundamentals are right. Devaluation will come someday, when we have sound industrial growth,” he said.

    Deputy National President, Nigeria Labour Congress, Issa Aremu said the CBN has a mandate to safeguard value of the naira. He said the economy, not the naira that is on trial.

  • Naira exchanges at N318 to dollar in parallel market

    Naira exchanges at N318 to dollar in parallel market

    The naira volatility against the dollar continued yesterday with the local currency dropping to N318 against the greenback.

    The naira fell on the parallel market on strong demand for dollars from importers amid dwindling liquidity, while stock index climbed to 24,000 points for the first time in almost a month.

    The local currency had closed at N312 the previous day. At the official interbank window the naira was stable around 197.

    “We have demand coming from importers paying for their due obligations, while dollar supply has dried up,” President, Association of Bureau De Change Operators of Nigeria (ABCON), Aminu Gwadabe.

    He said the economy has been under pressure on the back of falling global oil price, with Nigeria’s foreign exchange reserves down to a more than 11-year low.

    CBN Governor, Godwin Emefiele has continued to insist on exchange rate stability and believes in defending the naira at all cost. For him, the apex bank is committed to safeguarding the value of the naira and has instituted various policies to achieve the objective.

    He said the devaluation advocates forget that the local currency owes its stability or otherwise on various factors, chief of which is the price of crude oil in the international market.

    Managing Director, Afrinvest West Africa Plc, Ike Chioke, said a strong positive correlation exists between the exchange rate and crude oil price.

    Nigeria’s crude oil – Bonny Light, which traded at $110.2 per barrel in January, last year, hitting $114.6 per barrel by June same year, is now trading below $35 per barrel.

    Chioke said Nigeria’s dependence on crude oil (currently 70 per cent of total foreign exchange earnings) makes economic growth susceptible to price shocks.

    The naira was devalued in November 2014 during the Monetary Policy Committee (MPC) meeting. The midpoint of the official window of the foreign exchange market was moved from N155/dollar to N168/dollar. The committee also widened the band around the midpoint by 200 basis points from plus or minus three per cent to plus or minus five per cent.

  • Forex policy to stabilise capital market – Financial experts

    Forex policy to stabilise capital market – Financial experts

    Some financial experts on Wednesday in Lagos said that the Federal Government’s foreign exchange policy not to devalue the naira would stabilise the nation’s capital market at the long run.

    They told the News Agency of Nigeria (NAN) that the decision had reduced activities of speculators and capital flight at the Nigerian Stock Exchange (NSE).

    They maintained that the forex policy stance had reduced activities of speculators in the form of portfolio investors in the market.

    Alhaji Rasheed Yusuuf, the Managing Director, Trust Yield Securities Ltd., said that the decision had reduced foreign investors’ participation in the market as well as curtailed speculative buying.

    Yusuuf said that the capital market lost huge sum in 2015 due to massive sell off by foreign investors and some high net worth individuals leading to drastic drop in the price of equities.

    He said that “the market is gradually stabilising because portfolio investors are not investing the way they used to in the past.

    “The kind of foreign investors we need now are the ones that can help us to develop our infrastructure deficit not speculators that will offload at anytime,’’ Yusuuf said.

    He said that government and regulators needed to reorganise the capital market to have more local investors that would support local industries to achieve economic growth.

    He attributed the nation’s economic challenge to wrong policies implemented in the past 10 years, noting that Nigerians should embrace locally made goods to create employment.

    Mr. Okechukwu Unegbu, former President, Chartered Institute of Bankers of Nigeria (CIBN), said the policy had affected the amount of foreign funds being invested in the market and economy.

    Unegbu said that foreign investors had developed “wait and see’’ attitude due to currency risk and external pressure to devalue the naira.

    He said that the market fundamentals were still very strong noting that investment in the capital market should be for long-term not on speculative buying.

    According to him, market regulators major assignment should be on ways to enhance local participation in the market.

    Unegbu said the Central Bank of Nigeria (CBN) should pursue the right policy and desist from regulatory rascality and policy somersault.

    He said the apex bank should consult widely before the pronouncement of any policy, noting that its restriction of dollar deposit into domiciliary accounts was a blunder.

    Another expert, who pleaded anonymity, called on the government not to succumb to devaluation pressure.

    He said that some foreign investors and high net worth individuals that repatriated their funds during the 2015 general elections were the ones canvassing for devaluation.

    The expert said that “if government devalues, these cartels will heat up the economy and drive inflation because they will have more Naira in their hands to throw around.”

  • Naira strengthens against dollar at parallel market

    Naira strengthens against dollar at parallel market

    The Naira on Monday slightly strengthened against the dollar at the parallel market, in spite of scarcity of the U.S. dollar.

    The Naira gained one point to exchange at N305 from N306 it exchanged previously.

    At the official market, the Nigerian currency closed at N197 to the dollar.

    Traders in the parallel market, however, noted that the naira had remained stable, exchanging between N305 and N306 to the dollar.

  • Expert cautions against naira devaluation

    Expert cautions against naira devaluation

    Dr. Biodun Adedipe, a management expert, has advised the Federal Government against devaluing the naira to forestall worsening the gap in resource distribution in the country.

    Adedipe, a chief consultant at B. Adedipe Associates Ltd., gave the advice at a Breakfast Meeting organised by the Nigerian-South Africa Chamber of Commerce on Thursday in Lagos.

    He spoke on: “The Nigerian Business Environment: Navigating the Rocky Road Ahead”.

    According to him, the call for devaluation is misplaced with focus on the U.S dollar as a tradable commodity rather than as a means of exchange.

    He said that the underlying problem lied with the goods and services being exchanged for the currency.

    According to him, devaluation of the naira will increase the cost of doing business and living in the country.

    Adedipe said that this was because the economy was still largely dependent on imported goods and equipment for its manufacturing sector.

    He said that the ripple effects of the devaluation would be transmitted to the consumers who would bear the cost of price differentials.

    He urged the government to stimulate economic growth through investment in infrastructures, alignment of fiscal and monetary policies as well as accountability.

    The expert said that more efficient infrastructure would stimulate lending from commercial banks to the real sector, thereby boosting industrialisation and economic growth.

    He urged all stakeholders to shun selfish attitudes and pay the price that would steer the country out of its current economic challenges.

  • CBN: no devaluation of naira

    CBN: no devaluation of naira

    There will be no devaluation of the naira, Central Bank of Nigeria (CBN) Governor Godwin Emefiele reiterated yesterday.

    He told reporters in Abuja after the Monetary Policy Committee (MPC) meeting that the apex bank is “already working on different scenarios. The models are being worked on and we will look at them as much as possible and we will continue to discuss at management levels and we will try as much as possible to continue to share our thoughts with the fiscal authorities with the view to harmonising the positions to ensure that notwithstanding the drop in crude prices, we are able to continue to run the government and continue to do business.”

    The MPC meets bimonthly to shape the country’s monetary policies.

    Yesterday’s meeting also urged the federal government to coordinate its borrowings with the CBN.

    It also retained all its earlier monetary tools to regulate interest rate.

    Emefiele, who announced that the country’s external reserves stand at $28bilion, said: “The Committee stressed the need for the fiscal authorities to compliment the Bank’s low interest rate policy orientation by properly coordinating its borrowing activities (and rates) with the CBN in order to push the common objective of stimulating banking system credit delivery at low interest rates to the key sectors of the Nigerian economy.

    “It noted that given the current economic reality of dwindling oil revenue and the rather unclear outlook for commodity prices, there would be need for a recalibration of the fiscal strategy to increasingly explore opportunities in non-oil tax revenue.”

    The Committee acknowledged the continuous liquidity surfeit in the system stemming partly from the recent growth-stimulating monetary policy measures and the tendency of the banks to invest excess reserves in government securities, rather than extend credit to the needed sectors of the economy.

    The Committee “urged the deposit money banks to improve lending to the real sector, as part of their patriotic obligations to the country and enjoined the management of the CBN to continue to explore ways of incentivising lending to employment- and growth-generating sectors, particularly the SMEs.”

    Emefiele said the CBN  ”cannot regulate interest rate, we cannot force them; all we can do is to put in place policies that will enable them to do what we want. We can continue to incentivise them also by putting in place policies that will encourage them to do this.

    “This is a free market; we cannot really compel them as is expected. Until banks decide to work with the CBN, those funds sitting in the CBN vault will not be made available to them.”

    While the objective of stabilising the financial system in the aftermath of the Treasury Single Account (TSA) withdrawals and J. P. Morgan delisting of Nigeria have been largely achieved, Emefiele stated that “the goal of increasing lending to key sectors of the economy is yet to be achieved”.

    The Committee voted to retain the Monetary Policy Rate (MPR), Cash Reserve Requirement (CRR), Liquidity Ratio (LR) and the asymmetric corridor of +2/-7 around the MPR. In summary, “the MPC voted to retain the CRR at 20.0 per cent; MPR at 11.0 per cent; Liquidity Ratio at 30 per cent; the asymmetric corridor at +200 basis points and -700 basis points.”

    Emefiele said Bureau De Change (BDC) market “is not a very important market. As far as we are concerned, it is insignificant in terms of volume which is about 5-10%, it is high time we all realized and agreed that government cannot continue to provide foreign exchange to support the need of that market.

  • S&P wants naira further devalued

    S&P wants naira further devalued

    •Interbank rates hit three-month high

    Ratings agency Standard & Poor’s (S&P), yesterday reinforced its call for the devaluation of the naira.

    I said this shouls happen at some stage in 2016 and in gradual adjustments, saying investors have seen a devaluation of the naira as long overdue after the economy was battered by the tumble in crude prices.

    Despite growing pressure, the government has kept the local currency at around N198 to the dollar on the official interbank market, while restricting access to dollars.

    “Their line has been to try to hold it as much as possible, and they are trying to continue that policy alongside the restrictions on imports as well,” said Ravi Bhatia, Director of Sovereign and International Public Finance at Standard & Poor’s.

    “But at some point, they are going to have to move, but I think they are going to try and do it incrementally and not in big jumps,” Bhatia said, adding he expected this to happen in one or two increments.

    Nigerian non-deliverable currency forwards, a derivative product used to hedge against future exchange rate moves, indicated markets expected the exchange rate at N265/dollar in six months time, and at N284 to the dollar in 12 months’ time.

    Brent crude accounts for about 95 per cent of foreign earnings. A devaluation would only go some way to improve the country’s situation, said Bhatia. “It will help a little, but the problems aren’t going to go away – there is no easy avenue for them really,” he said. He saw government talk of shifting to non-oil revenue as “overstated” and not easy to do. “Nigeria is going to face a very tough year in 2016.”

    Meanwhile, the overnight interbank lending rate rose sharply to five per cent, its highest since October, after the central bank drained naira liquidity through sales of (OMO) treasury bills, traders said.

    There was no official comment on the sudden rate rise, but higher rates could support the naira. The government, fighting intense pressure on the currency from the collapse in prices for Nigeria’s oil exports, has pegged the currency at around 198 per dollar on the official interbank market.

  • Naira firms up at parallel market

    Naira firms up at parallel market

    The naira yesterday made a sudden recovery in the parallel market, following the Central Bank of Nigeria’s (CBN’s) easing of forex policies. The naira appreciated to N295 against the dollar from N305 on Friday, after the apex bank lifted the ban on dollar transfers and allowed dollar deposits into domiciliary accounts.

    The local currency has remained stable in the official market, exchanging for N199 to a dollar.

    Association of Bureau De Change Operators of Nigeria (ABCON) President Aminu Gwadabe said the naira was exchanging at N291/293 against the dollar in the morning but closed later at N295.

    He said although the CBN did not supply dollar to the market, its relaxation of forex restrictions that allowed banks to accept dollar deposits and transfer foreign currency deposits has helped shore up the value of the naira.

    CBN Spokesman, Ibrahim Mu’azu, said the apex bank decided to reverse the policy because its finding shows that currency substitution by customers which made it enforce it in the first place has been tackled.

    He said bank customers were before now, converting naira to dollar, and depositing the proceeds with the hope that the dollar will continue to appreciate in both the parallel and official markets.

    But other market sources believe the lifting of the over six-month old dollar transfer ban, followed outcry from local and international stakeholders who insisted that a restriction on such transfers is not only killing businesses but has led to diversion of huge forex to neighbouring countries of Ghana, Togo and Cotonu.

    In wake of the policy implementation, Nigerian importers were diverting the payment for their imports to these neigbouring countries and the Port of Tema and Tokoradi Port in Ghana as well as the Port Autonome de Cotonou, in Benin Republic.

    The lifting of the CBN’s ban on dollar deposit transfer, is part of the gradual relax of its stringent foreign exchange (forex) policies triggered by sharp drop in crude oil prices and reduced inflow of petrodollars.

    It is also in response to International Monetary Fund (IMF) advice that the polices should be relaxed to avoid alienating Nigeria from its international trade partners.