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This Investment Firm Believes The Dollar Is Worth N370

Will they get their wish?

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Nairametrics| The announcement last week of a new forex policy by the Central Bank of Nigeria (CBN), coupled with the injection of over $600 million during the week,has crashed parallel market rates from as high as N525 to about N450.

We reported last week that the CBN plans to narrow this margin to as low ad 10% and could pave the way for a float. This narrative seems to be gaining traction with some analysts and surprisingly they now opined that the Naira is valued below N400.

For example in a report released by Renaissance Capital (Rencap) Limited, it reasoned that despite the current combination of crude oil price increase, improved crude oil production and the new forex policy stimulating the country’s external reserves to new highs and reducing the gap between official rates and parallel market rates, a full float would earn the country much-needed FDI.

“We think N450-500/$ would attract investors even without $20 billion of cheap International Monetary Fund (IMF)-led financing. One of our Real Effective Exchange Rate (REER) models – the 22-year model which corresponds to a period when oil averaged $55/bl – implies fair value for the naira at N370/$, which via inflation should become N400/$ by end-2017.”

“At the parallel rate of NGN500/$, Nigeria has the cheapest currency in Africa, and even at NGN450/$ it would still rival Egypt at EGP15.8/$1 (the third cheapest in Africa). Given this, a full float of the currency would likely attract billions of dollars to Nigeria, similar to how Egypt has attracted $9 billion since its float in November.

“The vast majority of Nigerian and foreign potential investors ignored Nigeria in 2016 due to exchange rate difficulties, but rising oil prices and production (double the 0.9mbpd 2016 lows) suggest some opportunities may emerge in 2017.”

It remains to be seen if the CBN is using the new forex policy as a means of gearing up for an actual full float of the Naira or if this is just another case of temporary CBN intervention. Whichever it is though, what most analysts agree on is that the reduced gap between the official and parallel market rates bodes well for the Nigerian economy.

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Chacha Wabara-Ogbobine is a Legal practitioner with over 9years post call experience. A research Consultant, professional writer and a blogger at heart,owner of four thriving websites with well over 10years of experience. Totally in love with keeping fit and coaching weight loss enthusiasts. I love my quiet time, being with my kids, watching TV series for hours on end.

1 Comment

1 Comment

  1. Josiah Ilori

    February 27, 2017 at 10:22 pm

    Barring international politics, naira should not have been adversely devalued the way it is now! Barely two decades ago, the naira was at par with the dollar! I agree there are issues which bordered on the relegation of the naira to the extent that its value is the second lowest in Africa! Of course, political issues play marginal role in ruining the position of naira, but nevertheless, Nigerians love for foreign commodities have played a major role toward destroying the currency. Lack of interest by individuals and corporate interests have played prominent role in ruining the economy! Corruption, nepotism and tribalism have their own roles in destroying the economy. First and foremost, Nigerians must learn to respect what they have in form of resources, Develop these resources maximally and promote it effectively. Your interest in promoting foreign goods over and above your own will ultimately lead to disaster to your own economy. Let us harness what we have and project it to the outside world as the best we have and the world at large will accept it. A practical example is our refineries which have been underutilized for years. These refineries, if properly managed, should make available to the nation, finished crude oil instead of importing them from the advanced countries. As a matter fact, the foreign exchange to be realised from the import should be phenomenal. Let us appreciate what is ours; develop it, and market it to the outside world. The assurance of enhancing our forex is guaranteed. Let the Central Bank of Nigeria stands to its responsibility by making adequate announcements to the public, with particular reference to the commercial banks. Intermittent announcements may confused the financial institutions by misinterpreting the good intentions of the Central Bank Conclusively, all hands must be on the deck in order to enhance the exchange rate disparity between the U.S. dollar and the naira. The government alone can not do it, Both the private and public sectors must work hand in hand together in order to bring restitution to the economy.

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Financial Services

Nigerian fintech companies raised $600 million in five years – McKinsey Report 

McKinsey report has revealed that Nigeria’s fintech companies have raised over $600 million in funding in the last six years.

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fintechs, commercial banks, Events in FinTech industry in 2019, Nigeria's fintech industry 2020: The growth frontier of the new decade

In a space of five years, Nigeria’s fintech companies have raised over $600 million in funding, attracting 25($122 million) of the $491.6 million raised by African tech startups in 2019 alone – second only to Kenya, which attracted $149 million.  The period under review is 2014- 2019. 

This information is contained in a recently published report by McKinsey titled Harnessing Nigeria’s Fintech Potential.” The report highlighted the combination of youthful demographic, increasing smartphone penetration, and concerted efforts to driving financial inclusion as factors that interplay to produce conducive and thriving enabler or platform for the fintech firms in Nigeria. 

The report outlined some of the feedback against fintech companies ranging from poor user experience, underwhelming value-added from using some of the financial products, low returns on savings, and limited access to investment opportunities. 

The report also showed that Nigerian fintech companies are primarily focused on payments and consumer lendinghaving allotted an aggregate of 39% on payments to consumers, SMEs, and corporate FSP, and an additional 25% to consumer lending. The breakdown is depicted below. 

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Source: McKinsey report, 2020. 

On the driving factors behind the increasing choice of payment and consumer lending as an area of concentration by fintech companies, a part of the report read thus; 

The factors driving growth in each of these segments vary. Payment-focused solutions have surged over the past two years, spurred in part, by the central bank’s financial inclusion drive and favorable regulatory policies, including revised Know Your Customer (KYC) requirements for lower-tier accounts and incentives, to accelerate development of agent networks across the country. PagaOPayCellulant, and Interswitch’s QuickTeller compete with mobile banking applications and bank unstructured supplementary service data (USSD) channels to send and receive transactions and bill payments. 

Fintech activity in lending is picking up, thanks to the fact that fintechs are able to leverage payment data to determine lending risk more easily, and utilize smartphones as a distribution channel. For example, fintech startups such as Carbon and Renmoney have successfully leveraged alternative credit-scoring algorithms, to provide instant, unsecured, short-term loans to individuals. A few fintechs, such as Migo, have also stepped up to offer unsecured working-capital loans to SMEs with minimal documentation. Banking fintech solutions have been fast followers here, with leading banks launching digital lending platforms like Quick Credit by GTBank and Quickbucks by Access Bank. 

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In general, access, convenience, and trust have all played key roles in the increasing use of fintech products. For example, in the last six months, 54% of consumers have reported increased usage of their fintech products 

Why this matters 

In line with the National Financial Inclusion goals of 2020, and owing to the fact that despite the remarkable progress recorded by traditional banking institutions, the vast majority of consumers are underserved.  Hence, the issue of accessibility especially in remote areas, affordability, and user experience have been a front-burner issue. 

The aforementioned issues have created an opening that fintechs have been quick to take advantage of, providing enhanced propositions across the value chain, to address major points in affordable payments, quick loans, and flexible savings and investments among others. 

Conclusion 

Fintech accounted for only 1.25of retail banking revenues in 2019, signaling a room for development. Despite recording a growth of fintech investments in Nigeria to the tune of approximately $460 million in 2019, majority of these investments were from external investors. This was only a small fraction (1.27%) of the $36 billion invested in fintech globally. 

The report opined that full optimization of fintech companies in Nigeria can stimulate economic activity, by creating a multiplier effect, and can drive progress towards development goals. Economic impact will primarily come from expanding revenue pools and attracting foreign direct investment to the country. The sector can unlock a plethora of economic benefits by driving increased fintech productivity, capital, and labour hours through digitization of financial services.  

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Business

PenCom recovers N17.51billion from defaulting employers, imposes penalties

N17.51 billion was recovered by PenCom from employers who refused to remit pensions from workers’salaries

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Nigeria’s Pension Asset increased by N228 billion in October, PFAs increase investment in infrastructure to N40.52 billion   

The National Pension Commission has recovered N17.51 billion from employers that refused to remit deducted monthly pensions from their workers’ salaries to their Retirement Savings Accounts with the respective Pension Fund Administrators.

This was disclosed by the Commission in its 2020 second quarter report which was released on Friday.

Out of the N17.51 billion, the principal contribution was N8.89 billion, while the penalty imposed on the employers was N8.63 billion.

The report read, “Following the issuance of demand notices to some defaulting employers whose outstanding pension contribution liabilities had been established by the recovery agents, 16 of the affected employers remitted the sum of N261.33 million representing principal contribution of N152.79million and penalty of N108.54million during the quarter. This brought the total recoveries made from inception as at June 30, 2020 to N17.51billion.”

According to the report, one batch of NSITF lump sum payment application totalling N225,442.72 was however received on behalf of five NSITF members during the quarter.

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It said the application was processed and five members’ contributions were transferred to their bank accounts.

Consequently, it added, the cumulative sum of N2.94billion had been paid into the bank accounts of 36,551 NSITF contributors as lump sum/one off payment from inception to June 30.

For the quarter ended June 30, the commission said it processed monthly pension payments totalling N62.25million in respect of 3,629 NSITF pensioners.

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As of June 30, it said the total pension payment to NSITF pensioners amounted to N4.73billion.

The commission added that it reviewed the request for the payment of attributable income to eligible NSITF members and granted a “no objection” for payment of N2.92billion to 165,954 eligible NSITF members whose NSITF contributions were refunded to their RSAs or bank accounts as of December 2018.

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Coronavirus

COVID-19 Update in Nigeria

On the 26th of September 2020, 136 new confirmed cases and 3 deaths were recorded in Nigeria

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The spread of novel Corona Virus Disease (COVID-19) in Nigeria continues to record increases as the latest statistics provided by the Nigeria Centre for Disease Control reveal Nigeria now has 58,198 confirmed cases.

On the 26th of September 2020, 136 new confirmed cases and 3 deaths were recorded in Nigeria, having carried out a total daily test of 7,968 samples across the country.

To date, 58,198 cases have been confirmed, 49,722 cases have been discharged and 1,106 deaths have been recorded in 36 states and the Federal Capital Territory. A total of 502,545  tests have been carried out as of September 26th, 2020 compared to 494,577 tests a day earlier.

COVID-19 Case Updates- 26th September 2020,

  • Total Number of Cases – 58,198
  • Total Number Discharged – 49,722
  • Total Deaths – 1,106
  • Total Tests Carried out – 502,545

According to the NCDC, the 136 new cases were reported from 16 states- Lagos (41), Ogun (27), Rivers (19), Abia (10), Oyo (6), Plateau (6), Bauchi (5), Ondo (5), Ekiti (4), Kaduna (4), Edo (3), Ebonyi (2), Bayelsa (1), Delta (1), Osun (1), Yobe (1).

Meanwhile, the latest numbers bring Lagos state total confirmed cases to 19,215, followed by Abuja (5,644), Plateau (3,379), Oyo (3,254), Edo (2,623), Kaduna (2,393), Rivers (2,324), Delta (1,802), Ogun (1,823), Kano (1,737), Ondo (1,625), Enugu (1,289), Ebonyi (1,040), Kwara (1,028), Abia (891), Gombe (864). Katsina (848), Osun (827),  Borno (741), and Bauchi (697).

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Imo State has recorded 566 cases, Benue (481), Nasarawa (449), Bayelsa (398),  Jigawa (325), Ekiti (321), Akwa Ibom (288), Niger (259), Adamawa (237), Anambra (234), Sokoto (162), Taraba (95), Kebbi (93), Cross River (87), Zamfara (78), Yobe (76), while Kogi state has recorded 5 cases only.

READ ALSO: COVID-19: Western diplomats warn of disease explosion, poor handling by government

Lock Down and Curfew

In a move to combat the spread of the pandemic disease, President Muhammadu Buhari directed the cessation of all movements in Lagos and the FCT for an initial period of 14 days, which took effect from 11 pm on Monday, 30th March 2020.

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The movement restriction, which was extended by another two-weeks period, has been partially put on hold with some businesses commencing operations from May 4. On April 27th, 2020, Nigeria’s President, Muhammadu Buhari declared an overnight curfew from 8 pm to 6 am across the country, as part of new measures to contain the spread of the COVID-19. This comes along with the phased and gradual easing of lockdown measures in FCT, Lagos, and Ogun States, which took effect from Saturday, 2nd May 2020, at 9 am.

On Monday, 29th June 2020 the federal government extended the second phase of the eased lockdown by 4 weeks and approved interstate movement outside curfew hours with effect from July 1, 2020. Also, on Monday 27th July 2020, the federal government extended the second phase of eased lockdown by an additional one week.

On Thursday, 6th August 2020 the federal government through the secretary to the Government of the Federation (SGF) and Chairman of the Presidential Task Force (PTF) on COVID-19 announced the extension of the second phase of eased lockdown by another four (4) weeks.

READ ALSO: Bill Gates says Trump’s WHO funding suspension is dangerous

 

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