NIGERIA: Naira Drops Marginally on Strong Dollar Demand

 Naira notesThe naira depreciated slightly against the United States dollar across various segments of the foreign exchange market last week due to strong corporate demand for the greenback.

Data from the Financial Market Dealers Association (FMDA) showed that the local currency dipped at the interbank market, the Wholesale Dutch Auction System (WDAS), the Bureau de Change (BDC) and parallel market segment as firms moved to cover import bills and other forex obligations.

Specifically, at the interbank market, the naira dipped by 66 kobo to close at N159.37 to a dollar on Friday, compared with the N158.71 to a dollar it stood the preceding Friday. Also while at the Bureau de Change (BDC) segment, the naira slipped by 30 kobo to close at N160 to a dollar on Friday, from N1159.70 to a dollar the preceding Friday, the naira also dropped by 50 kobo, from N160 to a dollar the preceding Friday, to N160.50 to a dollar on Friday.

However, at the WDAS, the Central Bank of Nigeria (CBN) offered a total of $650 million to dealers last week, lower than the $400 million supplied to the market the preceding week. As stated earlier, the increase in the amount of the greenback could not save the naira as it also slipped marginally by one kobo to close at N155.75 to a dollar.

“Over the short term, the naira will likely continue to trade on the interbank market within the CBN’s three per cent band either side of N155/$1,” analysts at Ecobank Nigeria said.

The Nigerian Interbank Offered Rates (NIBOR) decreased slightly to an average of 11.14 per cent on Friday, as against the 11.38 per cent it achieved the preceding Friday.

Treasury bills worth N325 billion matured last week. This included bills from both the Primary Market Auction (PMA) and Open Market Operation (OMO). The FMDA revealed that while OMO bills worth N208.386 billion matured last week, a total of N117 billion treasury bills of 91-day tenor, 182-day tenor and 364-tenor respectively, matured at the PMA.

Consequently, while the Call tenor dropped to 10.25 per cent on Friday, from 10.58 per cent the preceding Friday, the 7-day tenor also lowered to 10.67 per cent, from 10.87 per cent the preceding Friday. Similarly, just as the 30-day tenor reduced to 10.92 per cent on Friday, from 11.12 per cent the preceding Friday, the 60-day tenor also lowered to 11.17 per cent, from 11.42 per cent the preceding Friday. Also, the 90-day, 180-day and 365-day tenor closed at 11.42 per cent, 11.62 per cent and 11.92 per cent respectively.

FG Supports Private Sector

The Director-General of the Debt Management Office (DMO), Dr. Abraham Nwankwo, last week declared that the federal government had assisted private sector operators to raise long-term funds from the bond market contrary to insinuation that government’s borrowing was crowding out the private sector.

Nwankwo also said that rather than accuse the federal government of crowding out the private sector, government should be commended for reviving the bond market, which had been dormant for many years.

According to him, the debt market had become more attractive for both private and public sector to access funds.
Nwankwo said   the current civilian dispensation revived the bond market that was abandoned by the military regime and made it possible for private companies to access long term funds.

“There was no market for long term funds. The market was abandoned during the military era, so there was no market.  It was the civilian government that developed the market and has made it attractive for borrowing long term funds,” he said.

Crude Oil Production
A report last week warned that if Nigeria’s crude oil production remains at its current level due to insufficient investments in the upstream sector, the amount of barrels available for exports will shrink, thus putting further pressure on the budget as well as economic growth.

Renaissance Capital Limited (RenCap), in the report, noted that as a “mature producer” of conventional oil, Nigeria seems to be facing similar challenges other oil producing countries such as Indonesia and Venezuela were facing. It pointed out that the biggest challenge for Nigeria currently is from the biggest energy consumer, which it identified as the United States, “where the shale revolution is transforming the global energy value chain.”

The report warned: “Such developments put traditional producers at risk and create the urgency to bring new technologies and capital to revive stagnating production.”

Banks' Reporting Policies
The Managing Director, Chief Executive, Nigeria Deposit Insurance Corporation (NDIC), Alhaji Umaru Ibrahim last week disclosed that the corporation is strategising to address emerging issues such as new disclosures, reporting policies and challenges of future performance of the banking system. He said the corporation could not afford to fail or slip back to the era leading to the financial crisis, having been able to restore relative stability in the system.

Umaru noted that said issues bordering on sustainable banking, financial inclusion, new disclosures and reporting policies as well as enhancement of the payment system and development of the capital market needed to be keenly appraised because of their attendant consequence to depositor protection, supervision and regulation.

AMCON’s Bond Refinancing Plan
Moody’s Investors Service, an international ratings agency last week said that plans by the Asset Management Corporation of Nigeria (AMCON) to retire about a third of its N5.7 trillion zero coupon bonds and refinance the rest by 2014 will boost the country’s creditworthiness. The move would eliminate government’s indirect exposure to private creditors, Moody’s said.

AMCON had issued a 3-year tenored zero coupon bonds with a principal amount of N3.9 trillion and a face value of N5.7 trillion, which had enabled it to fulfill its mandate of acquiring Eligible Bank Assets (EBA) and also in recapitalising the banking system. This had helped to restore the financial system.
Moody’s added: “We view this as a credit-positive development for the government of Nigeria.” Moody’s rating for Nigeria is Ba3, three levels below investment grade.

Faulty ATMs
The House of Representatives last week ordered for investigation into allegations of wrongful withholding of customers’ monies through malfunctioning Automated Teller Machines (ATM) in the country.
The investigation followed a petition presented by the Chairman, House Committee on Justice, Hon. Ali Ahmad (PDP, Kwara) on the issue.

Ahmad had said a situation where customers passed through harrowing experiences because of malfunctioning ATMs could pose a threat to the country’s transition to a cashless economy.

According to him, even when customers lay formal complaint about their account being debited when the ATMs failed to dispense cash, the banks have failed to respond promptly.

The House, Ahmad said, decided to intervene on the issue to curb further manipulation of the system by the banks. A petitioner had written to the House asking the lawmakers to intervene and prevent the banks from treating such complaints with levity.

Access Bank's Credit Rating
Standard & Poor’s Rating Services (S&P) last week upgraded Access Bank’s long-term credit rating to ‘BB-‘from ‘B+’ with a stable outlook. Similarly, the bank’s long term Nigeria national scale rating was upgraded to ‘ngAA-‘ from ‘ngA’, attesting to its continued adherence to global best practices, sound corporate governance and best-in-class risk management framework. ‘

The development was impressive given Access Bank’s stability, which insulated it from the gale of rating downgrade witnessed by some of the world’s largest banks last year. That was the second consecutive upgrade the bank has received in two years and attests to its resilience and its importance to the Nigerian financial system and economy. The rating review further affirmed Access Bank’s position amongst Nigeria Tier 1 banks as the bank is no longer excluded from rating nomenclature that characterises the exclusive league. Correspondingly, the upgrade was an acknowledgement of the bank’s successful integration of Intercontinental Bank and its reduction of risk related to foreign currency lending.

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