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Dollar supply: What Nigerians expect from the CBN

CBN has been rationing forex to protect the naira amid the fall in crude oil prices and deadly COVID-19 that has reduced the country’s foreign earnings. 

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black market, Having so much naira wealth does not guarantee you getting dollars

It is important for the Central Bank of Nigeria (CBN) to ensure it keeps to its promise of boosting the nation’s Forex supply, manufacturers and experts have demanded.

Ola Oladele, CFA, in a telephone  with Nairametrics, explained that the apex bank should keep its word, as the persistent downtrend in the currency black market persists. She said:

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“The depreciation of the naira in the parallel market is because of low supply of FX from official sources and less optimistic outlook on the economy due to falling oil prices.

“The Bureau De Change operators haven’t received supply from official sources since our borders were closed and the crash in oil prices has made natural sellers of FX more cautious.

“We hope that the recent statements by the regulator will restore confidence and subsequently, supply to the market.”

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READ ALSO: AfDB’s Akinwumi Adesina hits back, denies allegations against him

Meanwhile, manufacturers are also experiencing tough times getting dollars to fulfill their forex obligations, even when having so much naira to trade with, according to Bloomberg News.

CBN has been rationing forex to protect the naira amid the fall in crude oil prices and deadly COVID-19 pandemic that has reduced the country’s foreign earnings.

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Dollar scarcity and a weakening naira are already adding to inflation in a country that imports all major products used by pharmaceutical firms.

“Manufacturers can’t open letters of credit as dwindling oil receipts and the lack of intervention by the central bank pushed international banks to withdraw credit relationships with local lenders,” said Fidelis Ayebae, the Chief Executive Officer of Fidson Healthcare Nigeria Plc.

“You now have a situation where nobody is holding letters of credit, no manufacturer is getting anything from their suppliers abroad because even the ones that we owe, we are not able to pay,” said Ayebae, who also heads the 180-member pharmaceutical group of Nigeria’s manufacturers’ association. “Some companies may shut 45 days from now if they are not able to import.”

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(READ MORE: CBN’s MPC unlikely to cut rates, as Nigeria’s foreign reserves hit $36.16 billion)

Having so much naira wealth does not guarantee you getting dollars

The administrative costs of the pharmaceutical company gained at least 22% due to the current headwinds and it may be forced to close operations from July, if the scarcity of dollar persists.

While the drug maker, according to Bloomberg news, got N2.5 billion from the central bank’s COVID-19 intervention fund, he has only secured $80,000.

“I need dollar equivalent of N2.5 billion. If I get $5 million today, I will be an incredibly happy man,” he added.

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(READ MORE: Naira appreciates at the I&E window, as CBN Governor promises more liquidity)

However, recently, CBN started the weekly dollar sales of $100 million for small businesses and individuals in genuine need of foreign exchange.

Still, CBN Governor, Godwin Emefiele some days ago insisted that there were no shortage of dollars, and sales would resume to bureaux de change when the COVID-19 induced lockdown had eased sufficiently.

Patricia

Olumide Adesina a French-born Nigerian, an Investment Professional at Nairametrics Financial Advocates, owners of Nairametrics.com. He is a Certified Investment Trader, with more than a decade working expertise in Investment Trading. A member of the Chartered Financial Analyst Society. Financial Market; Yale University, Behavioral Finance; Duke University. You can follow Olumide on twitter @tokunboadesina or email [email protected]

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Commodities

Nigerian crude grades yet to rally because of U.S Shale

Bonny light sold for $43.33, far below the price Nigeria sold its crude months ago.

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U.S Shale, Naira under pressure, as crude oil hits $25 per barrel, Oil Price: A dead cat bounce in the making?, Bears tear Crude oil futures into shreds as Brent slumps more than 20%

Crude oil prices for lighter Nigerian grades have not experienced the rally its category is presently having, despite significant draws on stockpiles in Europe, as cheaper substitutes like U.S Shale continue to be more attractive to importers, according to a report released by Reuters.

Bonny light, according to oilprice.com, sold for $43.33, far below the price Nigeria sold its crude months ago, at a discounted rate to attract buyers. However, consistent Indian buying continued to buoy Nigerian differentials, especially for some medium grades.

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READ MORE: Investors gain N15.58 billion amidst sell-offs in Nigerian bank stocks 

Quick fact: Brent crude is the leading global benchmark for Atlantic basin crude oils. The international benchmark is used to set the price of crude oil of about of two-thirds of the world’s traded crude oil, including Nigeria’s crude.
Africa’s largest producer of crude oil and gas, Nigeria, gets most of its oil from the Niger Delta area, and its relatively classified under two specification based on its lightness and gravity, the heavier grade with a specification of, 20–25 gravity. The lighter grade with a specification of 36 gravity and both Nigerian grade types are low in sulfur and paraffinic.

Examples of Nigerian grades include Bonny light, Brass River and Qua Iboe.

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Recall that three months ago the price of Bonny Light, one of Nigeria’s crude grades, had dropped to about $12–$13 a barrel because the major market for Nigerian Crude, had experienced economic depression triggered by the COVID-19 pandemic.

READ MORE: Nigeria’s crude export could suffer because of ExxonMobil

Also, it went so bad that even with lower oil prices, long-haul buyers from Asia did not want Nigerian oil cargoes because of shipping costs to pay and no real need for the oil barrels since demand has plunged.

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Company Results

NSIA records total comprehensive income of N36.15 billion in 2019

The NSIA recorded an increase in total assets to N649.84 billion at the end of the financial year.

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NSIA records total comprehensive income of N36.15 billion in 2019

The Executive Director, Nigeria Sovereign Investment Authority (NSIA), Stella Ojekwe-Onyejeli, announced in a virtual briefing to newsmen on Friday that the NSIA recorded a Total Comprehensive Income (TCI) of N36.1 5 billion in 2019.

She revealed that the 2019 income was less than the TCI for 2018, which was N44.34 billion. However, the NSIA recorded an increase in total assets to N649.84 billion at the end of the financial year, as opposed to that of 2018 which closed at N617.70 billion.

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Ms Ojekwe-Onyejeli said that TCI income for 2019 included foreign exchange gains at N1.26 billion compared to N18.05 billion in 2018, noting that the gain in forex was due to changes in Nigeria’s official exchange rate from N305 to a dollar to N325.

READ MORE: IMF expects Nigeria’s GDP to shrink by 5.4% in 2020

As of year-end 2019, NSIA’s core capital remained at 1.5 billion dollars.” She said. “The Authority continues to manage 3rd party funds on behalf of some government institutions. We currently manage funds for the Debt Management Office (DMO) and the Ministry of Finance.

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“For DMO, the current value of Assets under Management (AuM) is 124.03 million dollars. For 2018, this fund stood at 122.60 million dollars in AuM.

“For the Nigeria Stabilisation Fund, managed on behalf of the Ministry of Finance, the Fund Balance was N33.365 billion. As of 2018, this balance increased to N20.814 billion.”

“However, the National Economic Council voted for an additional capital contribution of 250 million dollars in 2019, which was received on April 8,” she explained.

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READ ALSO: NSIA completes payment of $417 million to NBET Plc

She added that the group’s strategy to invest in diversified products across the yield curve provided returns and that the Stabilisation Fund (SF), which had been fully invested by the end of 2019, returned 5.81%, outperforming its benchmark by 381 basis points.

She also stated that the Future Generations Fund (FGF), deployed by the NSIA across multiple global equities, hedge funds and other diversifiers, returned 6.45% at the end of 2019, outperforming its benchmark of 6.43%.

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“As of year-end 2019, we had deployed over 90 percent of the capital in the Future Generations Fund,” she said.

Patricia
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Stock Market

Royal Rumble at first trading week of Q3 2020, ASI down 1.99% WoW

Trading in the top three equities accounted for 275.099 million shares worth N2.818 billion in 3,497 deals.

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Nigerian Stock Exchange

The Nigerian stock market ended the week on a bearish note, as the All Share Index (ASI) and Market Capitalization both depreciated by 1.99% to close the week at 24,336.12 and N12.695 trillion respectively.

A total turnover of 961.833 million shares worth N9.181 billion in 20,058 deals were traded this week by investors on the floor of the Exchange, in contrast to a total of 739.375 million shares valued at N8.563 billion that exchanged hands last week in 17,248 deals.

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The Financial Services industry (measured by volume) led the activity chart, with 618.714 million shares valued at N4.338 billion traded in 9,669 deals, thus contributing 64.33% and 47.25% to the total equity turnover volume and value respectively.

READ MORE: Nigerian stock market on a flawless bullish run, crude oil boost triggers rally

The Consumer Goods industry followed with 91.119 million shares worth N2.227 billion in 3,703 deals. In the third place was the Conglomerates industry, with a turnover of 60.640 million shares worth N62.779 million in 556 deals.

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Trading in the top three equities namely FBN Holdings Plc, Guaranty Trust Bank Plc, and United Bank for Africa Plc (measured by volume) accounted for 275.099 million shares worth N2.818 billion in 3,497 deals, contributing 28.60% and 30.69% to the total equity turnover volume and value respectively.

13 equities appreciated in price during the week, lower than 18 equities in the previous week. 59 equities depreciated in price, higher than 43 equities in the previous week, while 91 equities remained unchanged, lower than 102 equities recorded in the previous week.

READ ALSO: 5 Consumer stocks you should consider for your portfolio 

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Top gainers

OKOMU OIL PALM PLC. up 20.94% to close at N77.40

ROYAL EXCHANGE PLC. up 13.04% to close at N0.26

PRESTIGE ASSURANCE PLC up 10.64% to close at N0.52

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NEIMETH INTERNATIONAL PHARMACEUTICALS PLC up 9.49% to close at N1.50

ACADEMY PRESS PLC. Up 0.30 0.02 to close at 6.67% N0.32

VITAFOAM NIG PLC. up 5.30 0.29 to close at 5.47% N5.59

REGENCY ASSURANCE PLC up 5.00% to close at N0.21

NESTLE NIGERIA PLC. up 4.73% to close at N1256.80

WAPIC INSURANCE PLC up 3.13% to close at N0.33

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NEM INSURANCE PLC up 2.50% to close at N2.05

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Top Losers

NIGERIAN AVIATION HANDLING COMPANY Plc. down 24.24% to close at N2.00

LEARN AFRICA Plc. down 21.48% to close at 1.06

UNILEVER NIGERIA Plc. down 18.82% to close at N13.80

GLAXO SMITHKLINE CONSUMER NIG. PLC. down to close at N4.95

UNION BANK NIG. Plc. down 15.08% 6.30 -0.95 -to close at N5.35

NASCON ALLIED INDUSTRIES PLC down 13.79% to close at N10.00

AIICO INSURANCE PLC. down 13.13% to close at N0.86

JAPAUL OIL & MARITIME SERVICES PLC down 12.00% to close at N0.22

STERLING BANK PLC. down 10.85% to close at N1.15

ARDOVA PLC down 10.73% to close at N11.65

Patricia
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