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New Currency Futures Rates point to possible weakening of Naira

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For the first time since April 2017, Naira Settled FX currency futures open interest surpassed the 4,000 contracts mark on May 28th, 2018, after a substantial volume of transactions took place on that date in anticipation of the usual price changes that accompany expiration. The latest futures to expire was NGUS MAY 30, 2018 which matured on May 30th.

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Until recently, trading volume had reduced drastically in the FX futures market between April and October 2017, only to pick up slowly thereafter. However, since April 25th, 2018, the market has been witnessing increased activity and momentum which hit its peak on May 28th.

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It will be recalled that the market hit its highest open interest ever on April 18th, 2017 with 4,187 contracts, since then, open interest has been hovering between 3,200 and 3,500 contracts.  But on May 28th, currency futures open interest spiked to 4,169 contracts of one million dollars each, the third highest ever.

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Understanding Open Interest

Open Interest is a measure of the total number of contracts that are still outstanding or in the hands of market participants at the end of each day. In most cases, open interest is used with reference to options futures or commodity trades. Open interest is not the same as volume.

Volume is a measure of the number of transactions that take place in a market on a particular day, but open interest measures the flow of money into the futures market. Open interest could act as a pointer or signal to where the futures market is headed.

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Increase in open interest, often, points to a bull market especially if accompanied by substantial trading volume while a falling open interest is usually taken to indicate a bear market.

The Nigerian Currency Futures, a non-deliverable instrument, was introduced by the Central Bank of Nigeria in June 2016 as one of the policy instruments to stabilize the Naira. To a large extent, there is an agreement among experts that it has done just that.

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The Naira has been relatively stable for some months now, thanks to various CBN interventions and the Naira settled currency futures market. The increase in open interest as noted in this article is an indication that the currency futures market is alive and well.

Currency Futures and Price Discovery

One of the functions of the futures market, everywhere, is that they help in price discovery.  Price discovery is the process of establishing the value of an asset (in this case, the Naira/Dollar Exchange Rate) based on interactions between buyers and sellers.

It is not very clear if the currency futures market in Nigeria plays that role as the prices are determined by the CBN or FMDQ OTC Securities Exchange, but it is expected that the pricing decisions by the CBN or FMDQ are based on available information.

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It has been the custom of the CBN/FMDQ to revise the prices of outstanding currency futures at each expiration or maturity date. And they do it very religiously and predictably. As expected, that was done on May 30, 2018th when NGUS MAY 30, 2018 matured/expired by increasing the prices of all the currency futures by N1.03 or 0.3%.

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For example, the NGUS JUN 27 2018 that traded at N360.79/$ before May 30th, now trades at N361.82/$ while the NGUS APR 24 2019 which was trading at N362.29/$ is now worth N363.32/$. The implication of the upward revaluation of the futures prices is that the Naira is expected to weaken against the Dollar by about 0.3% over the next month.

 

Patricia

Uchenna Ndimele is the President of Quantitative Financial Analytics Ltd. MutualfundsAfrica.com and mutualfundsnigeria.com (both Quantitative Financial Analytics company website) is a leader in supplying mutual fund information, analysis, and commentary on African mutual funds. We provide reliable fund data; and ratings information that will add value to fund managers, the media, individual investors and investment clubs.

2 Comments

2 Comments

  1. Abimbola Abayomi Olasehinde

    June 1, 2018 at 7:51 am

    The trafficking in nuclear materials are no longer limited to bogus materials as beryllium or caesium but included uranium and plutonium. Technologies pool proliferation of hidden store of caesium, strontium or cobalt that officials have stored. Nuclear materials are put in minivan or imported in unregulated container cargo shipping. Radioactive medical isotopes and spent nuclear fuels from Russia. This create scenarios that even anticipated are unfathomable in their scope. The supply of nuclear materials from countries are attractive and demanded by subnational and individuals and states. Political and social turmoil throughout the world market stealing of nuclear materials to amass power, exert influence or seek retribution. There is need for general consensus in national security community. Governments generally do not like to admit their security has been compromised because of nuclear threats. Trade in nuclear materials is with the initiative of meeting the buyer or end user specific needs. Tantalizing evidence is that sensitive nuclear materials are firmly in place in Russia. Enriched reactor grade to various end user countries in the Middle East and south Asia this can unsettling and serious possible weakness in Russia nuclear control system. Amateur and small time traders rather than large underworld organizations dominate the supply chain for nuclear materials. Current patterns of nuclear trade is prelude to serious episodes of export of fissile materials. Supply and demand sectors might have converged in ways proliferated political democratization and market based economies. A vast potential supermarket of nuclear wares are emerging. Always multiple and overlapping internal control in countries with guarded frontiers. Institutional and enterprises with nuclear complex was practically secure against break ins. Physical protection began to unravel with various government agencies and enterprise.

  2. Anodebenze

    June 1, 2018 at 4:06 pm

    More positive news,more positive new for Nigeria and for Mr Buhari the most besieged and belegued president or head of state in Nigeria.i was pushing for the present govt to aim for the happiness and joy,once the citizens have this factor,they will fight for their lives,happiness,but you cannot both or any,once you have this factor,you can developes your super-consciousness.once you have this information,you realizes your full potential as a person.But now I do not knows if it is late to saves this present govt.
    I was calling them unprintable name for them to act,as if you fails to act,more problems develop.e.g,diabetic,ulcer,tumour or cancer are in really sence an illusion.it is an incidental illness,if not treated soon or quickly,it will lead to death or more problem.Mr buhari wants to do his way,Godwin my best friend wants to do it their way.this is why the economy is not growing the way it should be.?.
    They made the economy worse than it was ?e.g.why not the cbn push the Nigerian bank and the money or forex market generates their income by creating a anew OMO detargent financial market system.The choice is them.

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Entertainment

FG hands over National Theatre to CBN, Bankers Committee, to create 1 million jobs

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CBN issues guidelines to Finance Institutions on establishment of Subsidiaries and SPVs, CBN injects $2.63 billion to defend naira in one month, CBN’s COVID-19 N50 billion targeted credit facility, CBN’s heterodox policies buoys credit growth

The Federal Government has announced the official hand over of the National Arts Theatre Complex at Iganmu Lagos, to the Central Bank of Nigeria (CBN) and the Banks under the aegis of the Bankers’ Committee, in order to commence the renovation of the facility.

This was contained in a tweet post by the Presidential Aide to President Muhammadu Buhari on New Media, Tolu Ogunlesi, on his official Twitter handle on Sunday, July 12, 2020.

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During the event which was attended by the Minister for Information and Culture, Lai Mohammed and the Lagos State Governor, Babajide Sanwo-Olu, the CBN Governor, Godwin Emefiele, said the bankers were targeting 1 million jobs from this project in the next 5 years.

In the tweet post, Tolu Ogunlesi said, ‘’The Nigerian Government on Sunday officially handed over the National Theatre complex in Lagos to Central Bank of Nigeria and Banks under the aegis of the Bankers’ Committee, to commence the renovation of the facility.’’

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Emefiele said the handover of the facility to the committee was timely, considering the external headwinds facing the country’s economy at the moment. He said that the renovation of the facility which would be completed in 18 months, would have transformed the facility into Nigeria’s Creative Industrial Centre.

According to the CBN boss, the National Arts Centre will be comparable to other world-class entertainment and convention centres in any part of the world. He said the activities in the centre which would include music, movies, fashion and ICT, could be a very important source of growth and reduce the dependence on revenues from crude oil.

He pointed out the creative industry has the potential to generate over $20 billion annually for Nigeria with its human capital resources and an enabling environment that would harness the creative talents of her youths.

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Emefiele said: “We must do more to encourage the innovative works of these young talented Nigerians as they can make significant contributions to the growth and development of our country.’’

“Secondly, given our growing population of close to 200m people, out of which 60 per cent are under the age of 35, it is imperative that we strive to create opportunities that will keep our youths engaged, as it would portend great dangers for the progress of our nation if we allow these talents go to waste”

Emefiele said that the Creative Industries Financing Initiative which was set up in December 2018 was to support startups and existing businesses as well as foster development of Nigeria Creative Industries Centre in 4 major cities in Nigeria. He said the bankers’ committee would support the creative industry with about N25 billion of initial funding.

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He said upon the completion of the renovation works at the theatre with the supporting facilities, the committee intends to set up similar creative industries centres in Kano, Port-Harcourt or Enugu.

He also said that the theatre would support skills acquisition and job creation for over 1 million Nigerians. These Nigerians will be empowered with funds at a single digit interest rate, high-level training using state of the art tools and networks that will enable them to turn their ideas into a reality.

He revealed that the supporting facilities like retail outlets, hotels, entertainment centres and an international conference centre would also help to reposition the centre as a viable location for high-level international meetings and conventions.

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Patricia
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Economy & Politics

FG disburses N349.5m in Conditional Cash transfer to poor households in Kaduna 

The disbursement was done under the federal government’s Conditional Cash Transfer.

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The Federal Government has successfully disbursed a total of N349.5 million to 34,946 poor and vulnerable households in Kaduna State, under the conditional cash transfer programme. 

According to the Head of Cash Transfer Unit in the State, Hajiya Hauwa Abdulrazaq, the disbursement lasted a period of 10 days, from July 1 to July 10.  

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Speaking in an interview with the News Agency of Nigeria (NAN) on Sunday, Abdulrazaq explained that the benefiting households were drawn from 9 local government areas in the state – 4,470 from Kajuru; 8,032 in Birnin Gwari; 1,963 in Kauru; 1,406 in Sanga, 4,380 in Lere2,021 in Kachia; 5,478 in Ikara; 2,784 in Chikun, and 4,412 in Kubau LGAs.  

She noted that the disbursement was done under the federal government’s Conditional Cash Transfer, a Households Uplifting Programme targeting poorest of the poor households in the country, and that each of the households received N10,000 each, being payment for the months of May and June at N5,000 per month. 

“The households uplifting programme is one of the national social investment programmes which implementation began in September 2016,” she said. 

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NAN reports that the programme began in 2017 in Kaduna state with about 10,000 beneficiaries, but expanded to 22,380 in April 2020.  

In May, a total of 12,566 new beneficiaries were added summing the figures to 34,956 beneficiaries in the state.   

The state government had also commenced the process of capturing poor and vulnerable households into the social register in the remaining 14 LGAs, from which beneficiaries of the cash transfer would be extracted in subsequent months.  

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Patricia
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Coronavirus

Evacuation: 247 Nigerians arrive home from Malaysia, Thailand 

The returnees were evacuated with a chartered Air Peace flight APK-7813.

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Evacuation: 247 Nigerians arrive home from Malaysia, Thailand 

The Federal Government of Nigeria has safely evacuated and returned home, two hundred and forty-seven Nigerians who were stranded in Malaysia and Thailand 

The returnees were evacuated with a chartered Air Peace flight APK-7813 which arrived the Nnamdi Azikiwe International Airport, Abuja at about 11p.m. on Saturday. 

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According to Mr Gabriel Odu, the Head of Media and Public Relations Unit of the Nigerians in Diaspora Commission (NiDCOM) who spoke to NAN, some of the returnees disembarked in Abuja, while the others proceeded to Murtala Muhammed International Airport, Lagos. 

READ ALSO: Nigerians willing to travel abroad will wait a bit longer – Aviation Ministry

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In line with the protocols announced by the Presidential Task Force on COVID-19, all of the returnees presented a negative COVID-19 test result before boarding the evacuation flight, and upon arriving Nigeria, are expected to proceed on a 14-day self-isolation 

Since four weeks ago, from the federal government, through the ministry of Foreign Affairs announced the resumption of evacuation flights, hundreds of stranded Nigerians have been returned home to their families from different countries including the United States of America, United Kingdom, Egypt, Malaysia and Thailand.  

READ ALSO: COVID-19 could impoverish additional 5 million Nigerians – World Bank  

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The returnees bear the cost of their flight tickets and are expected to self-isolate for four weeks, upon their return to Nigeria. Returnees who receive a clean bill of health after the isolation, are given their passports and allowed to go home.  

Patricia
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