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How Nigeria can defend Naira against FPI outflow – IMF

IMF calls on Nigerian government over Naira defense

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Central Bank of Nigeria, Foreign exchange market, Naira vs dollas, IMF, Foreign Reserves, External reserves, CBN, Why do we all love the dollar? 

The International Monetary Fund (IMF) Head, Emerging Economies Regional Studies Division, European Department, Anna Ilyina has called on the Nigerian Government to defend the country’s currency against the outflow of Foreign Portfolio Investment (FPI).

Ilyina made this call in Bali, Indonesia on Tuesday, October 9, 2018.

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According to Ilyina, outflow of foreign portfolio investment has been triggered by rising interest rate in the United States and other advanced countries.

While commenting on the impact of rising interest rate in Nigeria and other emerging economies, the IMF Head recommended flexible exchange rate and judicious use of the nation’s external reserves as the appropriate policy response to the monetary policy normalisation.

“In terms of policy responses, of course, a flexible exchange rate is the first line of defence.  Allowing the exchange rate to act as an external measure is healthy to adjust to the external environment. Of course, forex intervention might make sense in certain circumstances. But then, one has to consider the growth in fundamentals, the level of reserves and other policy tools that might be more appropriate in country-specific circumstances.

“Another thing that I want to mention is that given that we are still at the early stage of monetary policy normalisation in advanced economies. So, one can expect global external conditions and external balance conditions to remain challenging going forward.” – Ilyina

Ilyina lamented that Nigeria and other emerging market nations have come under pressure since April 2018. According to her, a combination of factors has basically affected emerging market since then.

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“It started with sharp appreciation in US dollar in the context of rising US interest rates and of course emerging markets are very sensitive to changes in external balancing.”

Speaking of Nigeria, Ilyina said there is one important driver that always affect the country’s economic condition which she said is oil. Ilyina added that Nigeria being an oil exporter is always very sensitive to changes in oil prices.

Nairametrics had reported that Naira has continued to remain stable in the foreign exchange (forex) market, despite the fact that the nation’s external reserves recorded the tenth weekly decline in the third week of September 2018 after its July high.

The reserves, which stood at $47.79 billion as at July 5, dropped to $45.23 billion as at September 13, the lowest level in more than five months.

Famuyiwa Damilare is a trained journalist. He holds a Higher National Diploma (HND) in Mass Communication at the prestigious Nigerian Institute of Journalism (NIJ). Damilare is an innovative and transformational leader with broad-based expertise in journalism and media practice at large. He has explored his proven ability in the areas of reporting, curating and generating contents, creatively establishing social media engagements, and mobile editing of videos. It is safe to say he’s a multimedia journalist.

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Business News

Dangote, BUA Cement drag Nigerian Stock market down, investors lose N154.28 billion

Investors lost N154.28 billion in value, as market capitalization dropped to N13.04 trillion at the Nigerian Stock market.

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Nigeria’s stock market finished the week on a poor note, extending its previous day’s loss. The ASI declined by -1.17% to 25,016.00 index points. Consequently, the Year to Date loss dipped to -6.88%. Also, investors lost N154.28 billion in value, as market capitalization dropped to N13.04 trillion.

In terms of activity levels, market activity mirrored the broad index as total volumes and values declined by -20.61% and -52.51% to 214.49 million units and 2.51 billion respectively. ZENITH BANK was the most traded stock by volume at 22.2 million units, while NB topped by value at N666 million.

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Market sentiment, measured by market breadth, was however positive with 22 gainers led by BOCGAS (10.00%), against 18 losers topped by CABDURY (-9.47%).

Across the major indexes we cover, four out of five indexes closed negative. The Industrial goods (-3.91%) index was the worst performer, due to BUACEM (-5.44%) and DANGCEMENT (-2.04%) price decline. The Consumer Goods (-1.23%) and Energy (-0.96%) indices followed, owing to sell-offs in CADBURY (-9.47%); NB (-4.55%); GUINNESS (-3.68%) and OANDO (-2.22%).

Also, the Banking (-0.28%) index lost points, as prices of GUARANTY (-2.45%) and FBNH(-1.82%) fell. The Insurance index was the lone gainer, up +0.06% on price appreciation in CHIPLC, CUSTODIAN & AIICO Insurance.

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Top gainers

BOCGAS up 10.00% to close at N4.4; SKYAVN up 9.64% to close at N2.73; NASCON up 1.77% to close at N11.5; CUSTODIAN up 3.42% to close at N6.05; and NEIMETH up 9.94% to close at N1.77.

Top losers

CADBURY down 9.47% to close at N7.65; BUACEMENT down 5.44% to close at N40; NB down 4.55% to close at N42; GUINNESS down 3.68% to close at N18.3; and DANGCEM down 2.04% to close at N139.

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Market dropped close to the N13 trillion market capitalization support level, as heavy selling was observed among blue-chip stocks. Nairametrics recommends caution as price swing momentum strengthens.

Patricia

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Business News

Buhari reappoints Danbatta as NCC Vice Chairman/CEO

With the reappointment, Danbatta will continue serving in the capacity of NCC Vice Chairman and CEO for another 5 years.

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President Muhammadu Buhari has approved the reappointment of of Prof. Umar Garba Danbatta as Executive Vice Chairman, and Chief Executive Officer of the Nigerian Communications Commission (NCC).

This means that Danbatta will continue serving in the capacity of NCC Vice Chairman and CEO for another 5 years.

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Personal assistant on New Media to President Muhammadu Buhari, Bashir Ahmad announced this via his twitter handle on Friday evening.

This reappointment was based on the recommendations of the Honourable Minister of Communications and Digital Economy, Dr Ali Ibrahim Pantami, and contained in a Press statement from the ministry.

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https://twitter.com/FMoCDENigeria/status/1268927885726924808/photo/1

While wishing him well in his second tenure, Pantami urged Professor Danbatta to consolidate on gains and achievements of his first term.

“The honourable minister directed him to significantly improve on the overall performance of the commission as well as ensure that adequate mechanisms are put in place to facilitate the implementation of all policies of the Federal Government through the ministry” the statement read.

The professor of Telecommunications engineering had lectured for about three decades before his previous appointments. At different times, he also served as a member of the Implementation Committee of the Northwest University Kano, as well as served as the Acting Vice-Chancellor of the Kano University of Science & Technology, Wudil.

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Just In: CBN debits banks another N459.7 billion for failure to meet CRR target

Sadly, this move, in addition to similar policies by the CBN, has left many banks cash-strapped and unable to pursue various profitable ventures.

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CBN

The Central Bank of Nigeria (CBN) has debited twenty-six banks, including merchant banks, to the tune of N459.7 billion for failure to meet their CRR (Cash Reserve Ratio) obligations. The fresh debit, which Nairametrics reliably gathered occurred yesterday, has left many stakeholders in the banking sector very upset.

The details: Among the banks that were most affected are United Bank for Africa Plc (N82.3 billion), First Bank of Nigeria Ltd (N59.3), Zenith Bank Plc (N50 billion), First City Monument Bank (FCMB) Limited (N45 billion), and Guaranty Trust Bank Plc (N40 billion). The rest of the affected banks can be seen in the table below.

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Note that the latest CRR debits are coming barely one month after a lot of banks were collectively debited to the tune of N1.4 trillion for the same reason in April. Between then and now, a lot of other minor CRR debits have occurred. Nairametrics understands that the apex bank now debits banks on a weekly basis.

Some backstory: During the CBN’s Monetary Policy Committee (MPC) meeting that was held last month, committee members voted to retain CRR rate at 27.5%. The rate was increased in January this year from 5% to its current level after the apex bank cited inflationary pressure concerns. What this means, therefore, is that Nigerian banks are required to keep 27.5% of their deposits as CRR with the Central Bank of Nigeria.

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But banks are silently upset: Sadly, this move, in addition to similar policies by the CBN, has left many banks cash-strapped and unable to pursue various profitable ventures. While reacting to the latest development, a banker who refused to be identified, said:

“What we’ve seen in recent times is that the CBN just indiscriminately debits banks, usually towards the stale-end of every week. They will look at your bank account and if your liquidity is plenty, they will debit you.

“You know the central bank also does what we call retail FX intervention, that is when they sell FX to corporates. Now, because they don’t want banks coming with huge demands, what they do is that a day before the FX sales, they debit the banks so that the naira you have available is small and you cannot put them under pressure because of your FX demands. That has really been the driver.

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“We understand that the central bank had set up a special CRR team that is supposed to monitor banks’ CRR once a month. But now, the team monitors banks’ CRR on a weekly basis. This is why the central bank is effectively debiting banks on a weekly basis. Some weeks ago, they debited some banks about N1.4 trillion. That was one of many. Between that time and now, there have been more debits that have happened. But the debits that are huge/significant are what is troubling the banks. There was a N300 billion that happened about two weeks ago. and then yesterday that was this N459.7 billion that was also debited.

“These are huge amounts that are leaving the banking sector. It’s a squeeze on the banks. A bank like First Bank, for instance, has about N1.4 trillion in CRR with the Central Bank. And there is Zenith Bank with equally as much as N1.5 trillion. These are monies that banks can potentially put in loans at 52% at 30%, or even put in money market instruments at maybe 10%. So, for a shareholder of these banks, this CRR debits are impairing the banks’ ability to increase their earnings because now are not able to use the funds that are legitimately theirs to create money for their shareholders. And the question is that under what framework is the Central Bank choosing to take people’s money?”

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Patricia
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