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CBN blows $2.04 billion to defend the Naira in May as Reserves deplete

In its continued intervention in the foreign exchange market, the Central Bank of Nigeria (CBN) injected a cumulative sum of $2.04 billion to further sustain the improved liquidity and relative stability in the market.

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CBN, Key lending rate, CBN to boost creative industry with N22 billion , CBN increases LDR to 65%, sets December deadline, External reserves drop by $3.2 billion in Q3’19 , Banks' loans to Oil and Gas, Power, other sectors drop by N411.8 billion 

In its continued intervention in the foreign exchange market, the Central Bank of Nigeria (CBN) injected a cumulative sum of $2.04 billion to further sustain the improved liquidity and relative stability in the market.

According to the latest CBN’s monthly economic report covering the month of May 2019, Nigeria’s apex bank sold the whopping sum of $2.04 billion to authorised dealers in May, compared to $2.43 billion supplied in the previous month. This indicates a decline of 16.1%.

Key Numbers: A breakdown of the Central Bank’s intervention in the foreign exchange (FX) market in the month of May 2019 reveals that Interbank sales fell by 10% to $0.09 billion, to the level in the preceding month.

  • Currency sales to the Bureau De Change (BDC) rose by 6.3% and estimated at US$1.05 billion.
  • Swaps transactions remained unchanged from the previous month and it was estimated at $0.01 billion.
  • The average exchange rate of the naira to the US-dollar, at the inter-bank segment, was N306.95/US$, representing an appreciation of 0.003%
  • The average exchange rate at the BDC segment, at N360.00/US$, depreciated by 0.3% relative to the level at the end of the preceding month.
  • At the “Investors” and “Exporters” (I&E) window, the average exchange rate of the naira vis-à-vis the US dollar, was ₦360.74/US$ indicating that naira appreciated by 0.01%.

The Central Banks of Nigeria Governor, Godwin Emefiele

[Also Read: CBN blows $36 billion defending the naira in 2018]

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Numbers Explained: The lower sales of FX in the month of May was as a result of less demand for FX at the inter-bank segment, a 6.3% decline. The reason for the decline may be as a result of low demand for forex at the interbank level, possibly due to the delays, policy, and other bureaucratic issues.

Unlike the interbank segment, demand for FX surged at the BDC segment. This means that the Central Bank had to increase its supply of forex to ease pressure on the Nigerian Naira. This reflected in the depreciation of the exchange rate on this segment, signifying a surge in the demand for FX for the month under review.

On the other hand, the fragility of Nigeria’s exchange rate system was further established as the Central Bank increased the supply of forex to the all-important I&E window where foreign investors trade. Accordingly, the naira exchange rate appreciated by 0.01% in the I&E segment in the month, indicating strong stability in the segments likely occasioned by an oversupply of FX by the Central Bank.

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[Also Read: CBN Governor blows hot regarding 41 banned items]

Meanwhile, Reserves Depleted by $48 million: While the CBN is bent on continuing its intervention in the FX market, burning through the reserves means the apex bank is sacrificing FX savings for naira stability.

Analysis of data obtained from the Central Bank of Nigeria shows that in the last month, despite an increase in forex receipts, external reserves depleted by US$48.3 million. This shows that the Central Bank’s intervention is gradually eating up Nigeria’s external reserves. Here are highlights of Nigeria’s reserves in May 2019

  • The gross external reserves stood at US$44.85 billion, at end May 2019, indicating an increase of 0.9% above the US$44.47 billion recorded at end-April 2019
  • A breakdown of the external reserves by ownership showed that the share of Federation reserves was US$0.004 billion (0.01%)
  • Federal Government reserves were estimated at US$7.37 billion (16.4%)
  • Central Bank’s reserves stood at US$37.47 billion (83.6%) of the total
  • The increase was mainly due to rising receipts from foreign exchange purchases, receipts from oil-related taxes, receipts from joint venture companies (JVC cash call funding) and receipts from third parties
  • The external reserves position could cover 6.5 months of import cover for goods and services, and 10.4 months for goods only, using the import figure for the first quarter, 2019.

The Upshots: Despite the recent report that the Central Bank is heading towards floating the naira in order to allow market dynamics dictate the price of the naira exchange rate, the apex bank’s Governor, Mr Gowin Emefiele, the bank is committed to continuing its intervention policy in the FX market to stabilise the naira.

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While the intervention will keep the naira stable, for now, analysts are of the opinion that it is only a matter of time before the CBN will float the naira in the face of rising tension in the middle east, and on-going trade war capable of crashing oil prices which is Nigeria’s main source of FOREX earnings.

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[Also Read: CBN reacts to exchange rate policy change, says Naira not “floated”]

Samuel is an Analyst with over 5 years experience. Connect with him via his twitter handle

1 Comment

1 Comment

  1. Jason

    June 30, 2019 at 4:48 pm

    Why use the term ‘blow’ when the currency was simply being exchanged for Naira? The term gives the impression that $2 Billion evaporated into thin air when in fact it still exists in the treasury as Naira.

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Corporate Press Releases

Nairametrics partners Intelligence Interactive Ltd, to provide daily reports on NSE listed companies

Nairametrics has partnered with Intelligence Interactive Ltd in an effort to provide readers with daily automated intelligence reports on NSE listed companies.

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Nairametrics, Nigeria’s leading financial advocacy company, in a bid to provide cutting edge financial and non-financial intelligence report to its readers, has partnered leading digital insights, analytics, and content design platform, Intelligence Interactive Ltd.

What better way is there to start your professional day as a business owner, C-level executive or an investor, than to get the latest digitals insights on your industry and competition on a daily basis – insights that brings to the fore competitive threats that your brand can watch out for and take advantage of.

Imagine being able to get real-time insights on what customers and the media are saying about your industry and competition, and what your competitors are saying about themselves.

You could spot Threats like:

  • Customer negative sentiment trend(s) across the industry that would pique your interest.
  • New product(s) launched by competition that may be a threat to your brand.
  • Newly signed partnership agreements that could impact your market.
  • New hires in your area of dominance that could disrupt your industry.
  • New campaign launches that could change the value proposition on existing products – such as moving it closer to values you offer.
  • Market entrant(s) into new territories and what this means for you.
  • New mergers and acquisitions that could strengthen a competition.

 You could also spot these Opportunities:

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  • Consumer complaints that you can solve with a new product.
  • Competition’s product(s) failures that you can learn from.
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All these loaded high profile information at the price of a newspaper – N500 per report (N25,000 monthly for 50 reports, twice daily: Morning and Evening).

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Speaking about the partnership, the Managing Director of Nairametrics, Mr. Christopher Pemu, said,

”Our goal at Nairametrics is to be the trusted financial advisor/platform to business owners, C-level executives and investors, by providing them with all the information needed (Financial and non-Financial) to help them make better decisions for their business growth. We have done this successfully in the last 10 years and have become Nigeria’s number one financial advisory website.

“The growth and use of social and digital media globally and in Nigeria has accelerated the speed of information dissemination rapidly. Brands and organizations that will survive in this age, needs to listen to what is being said in real- time; process the information using artificial intelligence, analytics, and various algorithms; and bring out meaningful insights for users, which they can use in an instant or in their day to day business decision making.

“As we know it today, a single tweet can ruin or make a brand. Hence, the need to help brands stay on-top of this trends and conversations, providing the needed insight twice daily to aid quick decision making for growth and profitability.

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“The recent #EndSARS online protest has shown that the digital customers’ voice is now so powerful that it can no longer be ignored, as the coalition of customer voices online can lead to the downfall of a business or a whole industry in an instant. So, every business owner or C-level executive in Nigeria needs to constantly monitor the pulse of their industry and make quick decisions by the day, to enable the business maneuver various competitive challenges in the industry.

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“Even as an investor, you can see trends, social conversations, and sentiments around your brands of interest clearly. This new intelligence added to all your other information sources will help you make better short term and long term bets on brands, nothing is hidden to you any longer – whether it is customer complaints, competitor’s moves, product fails, etc.

“Now added to all the reports you get from us, you have this industry/competitive intelligence digital insights report, making our work of providing you with all round intelligence for decision making complete and world-class.

“It should normally cost about $1000-$5000 monthly for you to get this type of reports, but with innovation, we have painstakingly searched for the most important information you need (removing all the noise), and put it in this daily report – making it accessible to many brands, while simultaneously reducing the cost by over 90%, so that you can get the report for as low as N500 per report (N25,000 payable monthly).”

Click HERE to subscribe now.

Further more, he emphasized that “due to the quota limits that we have currently, we will only grant access to just 100-500 brands at this time on a ‘first-come-first-serve basis’. Portal for registration is already open and will be closed on the 23rd of November 2020, whether our quota is fully subscribed or not, and if our quota gets full before the 23rd of November 2020 (23 days from now), the payment portal will automatically stop taking orders.

“If you are really passionate about your business growth, continuity, and sustainability during and after this pandemic – when wallet share of customers is not growing, and the balloon market share effect kicks in ( when a brand’s market share increases, another competitor’s market share might reduce), then you know that every information you are able to get about your industry and competition is very key to your survival. A single insight on what your competition might be up to can just be what you need to defend and grow your brand. If you snooze in the fast paced digital world, you will lose out.

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“Great news is we have made it affordable, so that all brands of different sizes can benefit. If in the whole year, you get just 1 insight that gets your brand and business above the competition or saves your business from going under/making the wrong business and investment decision; then, it is worth subscribing to at just the cost of a meal – N1, 000 daily for two reports (N25,000 payable monthly).

“The reports cover all the industries on the Nigerian Stock Exchange – Banking, Insurance, Consumer goods, Construction and real estate, Conglomerates, Healthcare, Industrial goods, Natural resources, Oil and Gas, Professional, Other services, and Agriculture. It also gives insights on all the Stock Market brands.

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“All you have to do is fill in the industry you are interested, subscribe, and you start getting your reports on all the brands in that industry. If you are a banker or you run a bank-like service – Microfinance, Loans, etc., you can subscribe to the Banking industry report and get daily automated industry/competitive intelligence report on Zenith bank, Gtbank, Union bank, Fidelity bank, Access bank, Providus bank, Sterling bank, UBA, FCMB, and Heritage bank amongst others.

“The ICT sector also has listed and non-listed brands like Paystack, Andela, Flutterwave, Interswitch, and many more, while Professional service includes insights on brands like KPMG Nigeria, DELLOITTE Nigeria, PWC, Ernst and Young (EY). So, if you are an accountant, the professional service is for you and if you are into any form of Information or Communications Technology, then go for information on brands like Mtn, Airtel, e-Transact, Ntel, Globacom, Paystack, and Andela. If you are into other services like Aviation or Hospitality, it will do you good to SUBSCRIBE NOW to your report under the Other services industry.

“If you are like many businesses still using Google alerts to monitor your brand and competition, now is the time to step up, because social media insights is where the conversation happens now. Google alerts doesn’t cover that, meaning you will be missing out on almost 80% of the conversation.”

You can step up now by SUBSCRIBING NOW

Speaking to the Country Representative of Intelligence Interactive Ltd, Mr. Temiloluwa Sobowale, a Digital and Marketing Analytics Professional with over 12 years industry experience. He said,

“Nairametrics is committed to being ahead of the curve and at per with global news houses in providing the needed information to executives, investors, and business owners for quick decision making and growth.

“Adding automated digital insights industry reports to their service offerings, shows a commitment to leveraging cutting edge technology in assisting its readers to achieve the highest possible height in business, investing, professional, and individual lives. We must commend their efforts in pulling this through. Many leading brands in Nigeria already use this tool for insight at the enterprise level and is gradually becoming the preferred digital insight tool for Nigerian brands.

“The key competitive advantage of the  tool and  why it is  better suited for the Nigerian market more than any other digital insights is because of its heavy localization to the Nigerian market (training the algorithm to understand our nuances and also being able to properly categorize sentiment of conversations in English, Igbo, Hausa, and Yoruba. It’s the most suited sentiment analytics tool for the space), while also providing local technical support to boost localization and getting the needed help from the global technical team.

“You really need to thank the team at Nairametrics, because this is bringing insights needed for business growth in this digital age, hitherto, only available for Enterprise brands, and at huge prices to smaller businesses, making it available for all to have access at an affordable daily price of N1000 (N25,000 payable monthly).

“If you are serious about business growth, sustainability, and profitability in the digital age, you need to seize the opportunity to register before Nairametrics’ subscription quota gets filled up on or before the 23rd of November 2020.”

The quota will not be increased, SO NOW IS THE BEST TIME TO SUBSCRIBE HERE.

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Macro-Economic News

Consumers overall confidence index dipped by 25.0% Y-o-Y- CBN

According to the latest Consumer Expectations Survey Report for Q3, 2020, consumers’ overall confidence index dipped to -21.2 points.

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The consumers’ overall confidence index dipped to -21.2 points as at the third quarters of 2020(Q3,2020), down by 25.0%, from 3.8 points it recorded in the corresponding period last year. This is according to the latest Consumer Expectations Survey Report for Q3, 2020

What this means: The slip in outlook indicates that consumers were pessimistic in their outlook for Q3 2020. Respondents attributed this unfavourable outlook to declining economic conditions, family financial situation and declining family income.

The consumers were however optimistic in their outlook for the next quarter and next 12 months with indices of 10.1 and 30.5 points, respectively. This positive outlook could be attributed to the expected increase in net household income, an anticipated improvement in Nigeria’s economic conditions and expectations to save a bit and/or have plenty over savings in the next quarter and the next 12 months

Why this matter: The pandemic negatively impacted consumers’ income and businesses. Hence, the CBN wanted to gauge the impact of this pandemic on their confidence and outlook, both in the past and going forward, through their quarterly survey.

Other Key Highlights:

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  • The unemployment index for the next 12 months remained positive at 35.4 points in Q3 2020, indicating that consumers generally expect the unemployment rate to rise in the next one year.
  • With indices of 20.8 and 5.3 points, consumers expect the borrowing rate to rise and anticipate the naira to appreciate in the next 12 months.
  • Overall buying intention index in the next twelve months stood at 29.7 index points, indicating that most consumers do not intend to buy big-ticket items in the next 12 months. The buying intention indices for consumer durables, motor vehicles and house & lot were below 50 points, which shows that respondents have no plans to make these purchases in the next twelve months.

What you should know

The Overall consumer confidence index is computed as the average of the three indices, namely: Economic Condition, Family Financial Situation and Family Income.

a. Economic Condition refers to the perception of the respondent regarding the general economic condition of the country.
b. Family Financial Situation refers to the level of savings, investments, other assets including cash at hand and outstanding debts.
c. Family Income includes primary income and receipts from other sources received by all family members as participants in any economic activity or as recipients of transfers, pensions, grants, and the like

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Energy

Power: Nigeria records transmission peak of 5,459.50MW – TCN

TCN has announced that it hit a peak transmission of 5,459.50MW on the 28th, October 2020.

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Discos, TCN suspends KEDCO, TCN suspend Kano Electricity Distribution Company, Kano Electricity Distribution Company, Transmission Company of Nigeria, Market Operator in Nigeria's power sector

The Transmission Company of Nigeria (TCN) announced that it hit a peak transmission of 5,459.50MW on the 28th, October 2020.

This was disclosed on Thursday in a statement by Ms Ndidi Mbah, General Manager, Public Affairs, TCN.

She said Nigeria hit the milestone on October 28th and surpassed the earlier record of 5,420.30MW achieved on August 18.

What you should know

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Nairametrics reported that the Minister of Power, Engineer Sale Mamman, disclosed that Nigeria’s installed grid power generation capacity has grown from 8,000MW to 13,000MW under the leadership of President Muhammadu Buhari.

The new peak surpasses the 5,420.30MW achieved on Aug. 18 by 39.20MW,” Ms Mbah said.

The Acting Managing Director, Mr Sule Ahmed Abdulaziz, commended all the players in the power sector value chain for the feat.

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He attributed the gradual but steady improvement in the quantum of power delivery to collaboration by the sector players, as well as, the unbridled effort by the Federal Government – through the Ministry of Power – in setting the right environment for seamless operations.

The Acting Managing Director said the company will continue workings towards improved power transmission across the nation.

Nairametrics reported in August that the Federal Government of Nigeria revealed that the Siemens $2 billion power deal, under the Presidential Power Initiative (PPI) will save the nation over $1 billion annually.

Structure of the PPI funding:

  • 85% from a consortium of banks guaranteed by the German government through credit insurance firm, Euler Hermes.
  • 15% of the FG’s counterpart funding.
  • 2–3 years moratorium.
  • 10–12 years repayment at concessionary interest rates.

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