Crude oil Brent price closed the month dropping to $25 per barrel recording its largest monthly drop in decades. Nigeria’s Bonny Light performed worse, falling to as low as $21 as the country grapples with unsold crude oil cargoes.
The oil price crash is piling pressure on a number of pegged currencies in energy-exporting emerging countries, such as Nigeria, with a currency that has already fallen to historical lows in forward and spot currency markets. The COVID-19 pandemic and the oil price battle between Saudi Arabia and Russia have turned to a bitter pill for developing countries like Nigeria hitting their revenues and threatening a recession.
Against this fallout, oil-exporting countries with a fixed currency rate to the U.S. dollar are back in focus as investors forecast a currency rout in the coming months. Central banks of emerging markets have largely dumped the idea of a currency peg instead of preferring to allow devaluation to be channeled through currency exchange rates, enabling them to preserve their foreign currencies holdings. Countries like Egypt, Angola, Uzbekistan, and Venezuela have all recently weakened their grip on currencies. For those who prefer to peg their currencies, it is important to have a strong-firepower to defend currency peg levels.
Nigeria depends on crude oil earnings for about 90% of its foreign exchange but the country’s FX reserves plunged by more than $1.6 billion to $36.38 billion in March 2020. With foreign reserves plunging almost 20%, Goldman Sachs estimated that Nigeria needed a currency almost 40% weaker if Brent prices stay at $30 a barrel.
In addition, foreign investors held about $8 billion of Nigerian debt, JPMorgan Chase estimates. If some of these investors withdraw their funds in the coming weeks, Nigeria’s foreign reserve levels could fall below $30 billion psychological floor, a level many suggest could trigger another round of devaluation.
The CBN recently said the market fundamentals did not support a devaluation of the naira but the currency markets are showing signs of the naira has been depreciated. Nigerian non-deliverable currency forwards raced higher last week with the one-year contract showing a dollar-naira rate of 515 to the dollar.
The CBN issued a stern warning earlier this week to local currency players to stop speculating the naira exchange rate. Also, it made dollar infusions locally, estimated at about $500 million to help tame naira depreciation.
Meanwhile, in the OI Futures Market, Oil prices were mixed in the morning of the Asian trading session, with Brent crude down 1.82% to $25.87 per barrel. U.S. crude futures, on the other hand, gained 0.34% to $20.55 per barrel.
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.
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.
Good Job from the Men and Women of the Transmission Company of Nigeria and everyone within the Power Sector.
— Engr. Sale Mamman (@EngrSMamman) October 29, 2020
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
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.
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.
CBN grants Mortgage Refinancing Companies approval to refinance Non-member banks
The CBN has expanded access to mortgage financing by removing restrictions on refinancing mortgages earlier imposed.
The Central Bank of Nigeria (CBN), has granted approval to Mortgage Refinancing Companies (MRC), to re-finance non-member banks.
This is contained in a circular referenced FPR/DIR/GEN/CIR/07/056 and signed by Ibrahim Tukur, the Director of Financial Policy and Regulation Department, CBN.
The circular improved on the earlier provisions contained in section 126.96.36.199 which states that “A mortgage refinance company (MRC) shall not, without the prior approval of the CBN, extend total outstanding credit to any single borrower, which is equal to or more than twenty times the value of the borrower’s shares with the MRC or 25 percent of its shareholders’ funds unimpaired by losses.”
What this means
Based on the provisions contained in the latest circular, MRCs are now free and legally permitted to refinance the qualifying mortgages of banks and all other non-members ( that do not hold equity), subject to meeting all other relevant requirements specified in the framework.
In a nutshell, the restriction on non-member mortgage lenders from refinancing their mortgages with MRCs has been removed.
Why this matters
Prior to the provisions contained in the latest circular, CBN had expressed fears that provisions of section 188.8.131.52 negatively impacts the mortgages sub-sector, as it constrains the MRCS from refinancing the mortgages of non-shareholder banks. Therefore, the new order will help to remove the restrictions already highlighted.
In lieu of this, the latest circular stated that the provision of section 7.3.1 5 is hereby revised to “the MRC shall not, without prior approval of the CBN, extend total outstanding credit to any single borrower, which is equal to or more than 25 percent of its shareholders’ funds unimpaired by losses,” the circular reads.
Nascon Allied Industries Plc: Increase in sale of goods boosts revenues
Nascon Allied Industries Plc recorded a boost from an increase in the sale of goods revenue-generating unit
Nascon Allied Industries Plc recorded a boost from an increase in the sale of goods revenue-generating units, as total revenues increased slightly. The company reported revenues of N21.87 billion in 2020 (9months) – 4.01% increase compared to N21.03 billion in the corresponding period of 2019.
What you should know
Key highlights from 2020 (9months) results
- Revenues increased by 4.01% from N21.03 billion to N21.87 billion YoY.
- Revenues from sale of edible, refined, bulk grade salt; seasoning and vegetable oil, increased to N21.87 billion, +22.53% YoY.
- Other income increased to N12.81 million, +27.43% YoY.
- No revenue was recorded for freight income on the deliveries of salt and seasoning income-generating unit.
- Gross profit increased to N8.96 billion, +74.56% YoY.
- Operating profit increased to N3.64 billion +18.60% YoY.
- Pre-tax profits increased to N3.47 billion, +16.63% YoY.
- Post-tax profits increased to N2.29 billion, +13.27% YoY.
- Earnings Per Share increased to 115 kobo, +12.75% YoY
- Total assets increased to N44.36 billion, +45.79% YoY.
- Total liabilities increased to N32.04 billion, +67.21% YoY.
- Total equity increased to N12.32 billion, +9.35% YoY.
Nascon Allied Industries Plc recorded a boost from increase in sale of goods revenue-generating unit, but no revenue was recorded for its freight income on the deliveries of salt and seasoning revenue generating-unit.
Though companies have generally recorded decreased revenues in the last three quarters, mostly due to COVID-19; Nascon Allied Industries Plc was able to increase its total revenues and pre-tax profits in the period under consideration.