Nigeria News

Nigeria: External Reserves Hit U.S.$42 Billion As Oil Price Rally Continues

eNigeria’s foreign exchange reserves, which has been upbeat due to the appreciation in crude oil prices at the international market closed at $42.027 billion as at October 17, data obtained from the Central Bank of Nigeria (CBN) showed at the weekend.

The current value of the reserves derived mainly from proceeds of crude oil sales, is its highest in the last two years. The forex reserves stood at $41.662 billion as at Tuesday.

Managing Director/Chief Executive Officer, Financial Derivatives Company Limited, Mr. Bismarck Rewane, stated that this level of the forex reserves could finance over 10 months of import.

According to Rewane, favourable oil prices and stable oil production of an average of 2.2 million barrels per day have helped boost growth in reserves level.

“We expect the trend to continue as long as the oil market activities remain buoyant. Global oil prices are strengthening slowly, with Brent crude at $114.92 per barrel, after falling to as low as $109.32 per barrel in the first few days in October. OPEC basket traded at $110.7 per barrel and the West Texas Intermediate at $92.09 per barrel as at 15th October.

“Nonetheless, there are speculations that the euro-zone crisis and the slowdown in Asia may dampen oil demand which OPEC has forecasted to be 88.74 million barrels per day in 2012. Also, OPEC’s announcement of its commitment to maintain high output levels amid planned increase in US supplies may soften oil prices,” Rewane argued in a report.

Forex Transactions

The central bank offered a total of $330 million at its bi-weekly auction, compared with the $270 million recorded the preceding week. But the naira fell slightly by one kobo to close at N155.76 to a dollar last Wednesday, from N155.75 to a dollar the preceding week. Similarly, the local currency shed 9 kobo at the interbank as it closed at N157.46 to a dollar last Thursday, from N157.37 to a dollar the preceding Friday. However, the naira was however stable at the parallel market at N159 to a dollar.

NIBOR Movement

The Nigerian Interbank Offered Rates (NIBOR) dropped last week due to inflow of liquidity into the system. Data from the Financial Market Dealers Association (FMDA) showed that just as the overnight tenor fell to 10.37 per cent on Friday, from 11.46 per cent the preceding Friday, the 7-day tenor also declined to 11.04 per cent on Friday, from 12.25 per cent the preceding Friday. In the same vein, while the 30-day tenor rose dropped to 12.33 per cent, from 13.67 per cent the preceding Friday, the 60-day tenor also fell to 13.79 per cent from 14.04 per cent the preceding.

Inflation Rate

The Composite Consumer Price Index (CPI), which gauges the level of inflation in the country eased to 11.3 per cent in September from 11.7 per cent in August, according to data released last week. But the drop in inflation was not reflective of the marginal rise in prices of food items as a result of the flood, which ravaged many parts of the country in the period under review. The relative stability of the naira within the period as well as crop harvesting exercises, which began late July and early August, helped to mitigate the severity of the impact on food price hike, the National Bureau of Statistics (NBS) said last Wednesday.

According to its latest CPI figures, the 3.4 per cent moderation in headline inflation was also made possible by the relative slow rise in “core” index which fell to 13.1 per cent year-on-year in the period under review from 14.7 per cent the previous month.

Diamond Bank

Diamond Bank Plc last week said it was in talks to acquire a European bank so as to tap into direct investment and trade flows from Europe into Nigeria. Group Managing Director/Chief Executive Officer, Diamond Bank, Mr. Alex Otti, who disclosed this however declined to disclose the name of the European bank.

He said Diamond had received an approval in principle from the Central Bank of Nigeria (CBN) for the acquisition, saying that the bank does not need to raise additional capital to complete the deal.

“We are not looking at buying a high street bank. It’s going to be a specialised bank that will complement our services,” he said.

U.S.$400m World Bank Loan

The Federal Government through the Ministry of Water Resources is to access a $400 million loan from the World Bank, in its effort to revitalise the ailing and dilapidated infrastructure in the water sector and map out a way forward in improving water utility. Senior water and sanitation specialist of the World Bank, Alexander Danilenko, at a workshop, said the forum was a baseline process to support the ministry in its drive in water transformation and supply.

He had added that the programme would be a continuous one and would be carried on technically by Nigerian experts. Danilenko said it would be a national ownership project owned solely by Nigeria, and expressed hope that the project would be carried on effectively by the monitoring and evaluation unit of the ministry.

Contributory Pension

The National Pension Commission (PenCom) last week confirmed that 5.28 million Nigerians have so far registered under the Contributory Pension Scheme (CPS) as at September 2012. The figure as at December 31, 2011 was 4.92 million. These according to the commission have collectively pooled as much as N2.94 trillion at the last count.

The Director-General of PenCom, Mr. Muhammad Ahmad, had also disclosed plans by the commission to introduce four types of funds, such that pension contributors could determine the instruments in which accumulated retirement savings should be invested.

“We are introducing four types of funds. Fund one is basically what is called an aggressive fund for young contributors. Such people can afford to have part of their contributions invested in equities, etc.

“Fund two is a mutual fund, good for workers up to 50 years and close to retirement. It is the type that we currently have. Fund three is for retirees and the fund could only invested in fixed income instruments like bonds. Fund four is an ethical fund including Sharia fund where contributor chooses from specialised instrument in which retirement savings could be invested,” he had explained.

Poverty Rate

The National Coordinator, National Poverty Eradication Programme, Mukhtar Abubakar Tafawa Balewa, last week said the target globally was for poverty rate to reduce by 15 per cent by 2015.

Balewa had said the prediction was the fallout of a recently updated projection from the World Bank.

He had said: “As the transformation agenda of this administration gets underway and with improvements in our Gross Domestic Products (GDP) the expansion of our domestic productivity, we shall achieve significant success in our fights against the scourge of poverty.

2013 Budget

The two chambers of the National Assembly in a unanimous resolution last week, passed the 2013 budget for a second reading. In the Senate, its President, Senator David Mark, had said the bill for the Act authorising the issue from the Consolidated Revenue Fund of the Federation the total sum of N4.924 trillion, of which, N380.020 billion was for statutory transfer, N591.764 billion only is for Debt Service; N2. 412 trillion, is for recurrent expenditure, while N1. 540 trillion is for capital expenditure. Similarly, the House of Representatives last week also concluded debates on the general principles of the N4.924 trillion 2013 Appropriation Bill.

States’ Borrowings

Senate Committee on Local and Foreign Debts last week, asked the Debt Management Office (DMO) to ensure the enforcement of a debt ceiling for state government’s bond issues in order to curtail excessive borrowings.

The committee’s Chairman, Ehigie Edobor Uzamere, expressed concern during its oversight visit to the DMO. However, Director-General, DMO, Mr. Abraham Nwankwo, assured the committee that measures had already been put in place to check excessive borrowing from the capital market.

He had said: “No state will be allowed to borrow if its total debt service outlet on a monthly basis is above 40 per cent of its FAAC allocation for the past 12 months. This is bearing in mind the fact that every state should have Internally Generated Revenue, IGR and so should not depend fully on FAAC. There is no state in Nigeria that should not be viable without oil.”

FGN Bonds

The DMO last week sold N75 billion worth of bonds due to mature in 2017, 2019 and 2022. The tenor for the debt instruments issued ranged from 5-, 7- and 10-year expected to mature in 2017, 2019 and 2022 respectively as yields climbed by 71 basis points. A breakdown of October 2012 FGN bond auction had shown that the debt office sold N15 billion in 5-year bond at 13.68 percent, compared with 12.93 percent last month, and N30 billion respectively in the 7-year and 10-year bond at 13.74 percent and 13.50 percent, respectively. The 7-year bond was issued at 12.90 percent previously, while the debt office issued the 10-year note at 15.90 percent at the August auction, the last time it was issued.

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