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Currencies

5 big economic developments for today and what is moving the market

CBN’s MPR, the Suez Canal blockade, dividend announcement and more of the major news that made the headlines.

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Foreign investors demand for Nigerian stocks increases to N38.98 billion, Nigerians reveal why they pick their favourite banking stocks

Economic Indicators

CBN holds MPR at 11.5% for the 7th consecutive month

Last week was interesting for investors and stakeholders in the Nigerian economy as the CBN held the MPR rate at 11.5% and Cash Reserve Ratio was retained at 27.5% while the Liquidity Ratio was also kept at 30%. So, how is this important and what does this mean for the stakeholders in the business environment? It begins and ends with the MPR which is basically the interest rate at which the CBN sets as the basis to control the money supply in the economy.

How does this work in Nigeria? With the CBN setting the benchmark interest rate at 11.5% for the 7th straight month since September 2020. The bank has been on a mission to revive the economy since March 2020 when it became clear that the covid-19 virus was going to cause unprecedented damage to Nigeria’s economy.

The CBN embarked on what is called an expansionary monetary policy when it lowered the interest rate. By doing this they reduced the rate they lend to banks and this, in turn, reduced the interest banks charge when they lend to the real sector. The strategy is to boost economic activity by increasing money in circulation.

However, with inflation rates rising in Nigeria to 17.33% and food inflation over 20%, many were expecting the CBN to raise interest rates to mop up the excess liquidity in the system – this is known as contractionary monetary policy. The CBN has basically washed its hands of controlling Nigeria’s rising inflation, due to banditry and supply chain bottlenecks that are outside of their control. The apex´s bank statement in the last MPC meeting highlights this; ¨The rising inflation was due to the worsening security situation in many parts of the country, particularly, the food-producing areas, where farmers face frequent attacks by herdsmen and bandits in their farms.¨

If this is anything to go by, Nigeria’s inflation problem is not going away soon. With Nigeria’s unemployment rate at 33.3%, the CBN is less incentivized to raise the interest rate. Ladies and gentlemen, we are currently in stagflation.

Currencies

Is Naira4Dollar already a success?

When the CBN rolled out the Naira4Dollar initiative, the objective was clear. Nigeria badly needed diaspora remittances. The latest data by the CBN revealed that diaspora remittances in the first 9 months of 2020 have dropped by 26.8% from $17.5 billion in 2019 to $12.8 billion.

Nigerians have grown to appreciate diaspora remittances for the sheer size of the dollar liquidity it provides, and how it eases the pressure on the naira. With the dwindling revenue from oil and other alternative channels that remit dollars to the country such as cryptocurrency exchanges, the government needed to find creative ways to attract dollar inflow through the official channels. The Naira4Dollar simply means for every dollar received you get an additional N5 from the CBN. We covered what it means and how it works here.

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The news here is that Nairametrics reported that Nigerians in the diaspora had remitted $40 million in one week. It will be interesting to see the impact this will have on the period of this CBN promo. The policy is scheduled to end on the 8th of May, 2021.

Commodities

The Suez Canal and its effects on Oil prices

The 400 meter-long Ever Given cargo ship which got stuck in Suez Canal on Tuesday last week was finally refloated this morning. The market had been largely comfortable throughout the blockage with Brent crude settling at $64.57 on Friday. About 5% of the world’s crude oil transits the canal but oil prices have stayed stable. According to data from Leth Agencies, as of Sunday afternoon, there were 327 vessels awaiting transit due to the blockage. 28 out of the 327 vessels are crude oil tankers, 16 at the Suez and 12 at Port Said 95km North of the Suez Canal.

Although there is a reactionary movement on the oil prices since the refloating. It is not expected to have any significant impact on the market now. The US government had also made plans to intervene and provide support to the Egyptian officials with the White House Press Secretary Jen Psaki stating they saw some ´potential impacts in the energy market´ if the situation persisted.

Stanbic 728 x 90

It is expected that the traffic of ships affected by the blockage will take about one week to cross the canal and out of the Suez corridor. About 12% of global trade passes through the canal as it provides a shorter route from Asia to Europe rather than a two-week journey across Africa.

Stock Market

Dividends Announced in 2021

Investors in the equity market in Nigeria are mostly interested in dividends and after a market-beating performance for the NSE All-Share index when it ended the year with +50% YTD in 2020. Investors are now out for a good return on their investments and in Q1 2021 so far, a couple of companies are offering really attractive dividends. The companies include; Guaranty Trust bank, CAP Plc, Dangote Sugar, Zenith Bank, and United Capital all offering dividend yields above 8%. You can get more information on this here.

In other general news

Women winning in Nigeria

The month of March is international women’s month and some great women are making great strides in business while some companies are being more intentional about driving workplace gender equality and balance.

Shell Nigeria Exploration and Production Company (SNEPCO) has appointed Elohor Aiboni as its first female Managing Director. The company has been operating in Nigeria since 1937 and this appointment adds to the list of female executives leading flagship corporations in Nigeria.

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Kuda bank made the news last week by creating a job opening for only female interns in a bid to balance the gender gap in the company.

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Currencies

Exchange rate remains stable at NAFEX window as bitcoin drops below $50k

The exchange rate between Naira and Dollar closed at N410/$1 at the NAFEX window as bitcoin plunged below $50k.

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Thursday, 22nd April 2021: The exchange rate between the naira and the US dollar closed at N410/$1 in the Importers and Exporters window.

Naira remained stable on Thursday, at the Nigerian Autonomous Foreign Exchange (NAFEX) window, as the rate closed at N410 to a dollar, the same as recorded on Wednesday, 21st April 2021.

Meanwhile, the naira gained marginally in the parallel market to close at N485/$1 on Thursday. The rate appreciated by 0.21% compared to N486/$1 recorded a day before.

The price of the world’s most popular digital instrument dropped on Friday, 23rd April 2021, while Nigeria’s external reserve continues to record a decline.

READ: CBN Governor says Nigeria’s external reserves sufficient to cover 7-months import

Trading at the official NAFEX window

The naira remained stable against the US dollar at the Investors and Exporters window on Thursday to close at N410/$1, the same as recorded on Wednesday.

  • The opening indicative rate closed at N409.68 to a dollar on Thursday, 22nd April 2021. This is a 14 kobo depreciation, compared to N409.54/$1 recorded on Wednesday.
  • Also, an exchange rate of N436.4 to a dollar was the highest rate recorded during intra-day trading before it settled at N410/$1. It also sold for as low as N394/$1 during intra-day trading.
  • Forex turnover at the Investor and Exporters (I&E) window surged by 169.2% on Thursday, 22nd April 2021.
  • Data tracked by Nairametrics from FMDQ showed that forex turnover increased from $40.13 million recorded on Wednesday, 21st April 2021, to $108.04 million on Thursday.

READ: Naira gains at black market as external reserves increases by $620 million in 2 weeks

Cryptocurrency watch

The world’s most priced digital asset plunged 3.68% on Friday morning to trade at $49,710

  • It dipped below $50k, as of 4:20 am on Friday, 23rd April 2021 as sell-offs by investors put pressure on the most sought-after cryptocurrency in the world.
  • Bitcoin has experienced a massive drop over the past few weeks, having enjoyed a significant rise earlier in the year.
  • According to a report, the decline signals an imminent reversal from its initial gains witnessed in 2020 and earlier in 2021.
  • Historically, Bitcoin has not stayed down for very long, and it has been known to be quite volatile and swing quickly and unexpectedly. Hence, it is hoped that the digital instrument will spring back up, in coming trading sessions.

Crude oil price

The price of crude oil recorded positive growth in the early hours of Friday, 23rd April 2021.

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  • Brent Crude increased by 0.32% to trade at $65.61, indicating a growth of $0.21, compared to $65.83 recorded at the end of trade on Thursday
  • WTI Crude increased by 0.5% to trade at $65.61, while Natural Gas currently sells for an average of $2.752.
  • Meanwhile, Libya’s crude oil production has fallen significantly after a company said it would have to reduce output by 100,000 barrels per day.
  • Recall that, Nairametrics had reported that Libya’s National Corporation declared force majeure on exports from the port of Hariga due to lack of maintenance funds, consequently shutting down several fields and bringing the country’s production to less than 1 million barrels per day.

External reserve

Nigeria’s external reserve position, reduced by 0.09% on Wednesday 21st April 2021 to stand at $35.15 billion.

  • Data obtained from the Central Bank of Nigeria (CBN), revealed that Nigeria’s external reserve dipped from $35.218 billion recorded on 20th April 2021 to $35.15 billion on Wednesday, April 21, 2021.
  • This represents the third consecutive decline recorded in the week, having had 19 successive growths in Nigeria’s external reserve.
  • The growth recorded was attributed to increasing global oil prices and the movement by the Apex bank to improve dollar inflow into the county.

 

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Currencies

Exchange rate gains at NAFEX window despite decline in forex supply

Nigeria’s exchange rate appreciated against the US dollar on Wednesday to close at N410/$1.

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Forex, Nafex, parallel market, exchange rate, Naira, Dollar

Wednesday, 21st April 2021: The exchange rate between the naira and the US dollar closed at N410 to a dollar at the Importers and Exporters window, where forex is traded officially.

Nigeria’s exchange rate appreciated against the US dollar on Wednesday to close at N410/$1. This represents a 0.16% gain compared to N410.67/$1 recorded on Tuesday, 20th April 2021.

The naira remained stable at the parallel market, closing at N486/$1 on Wednesday, 21st April 2021 after it depreciated by 0.83% in the previous trading session.

Trading at the official NAFEX window

The naira appreciated against the US dollar at the Investors and Exporters window on Wednesday to close at N410/$1. This represents a 67 kobo gain when compared to N410.67/$1 recorded on Tuesday, 20th April 2021.

  • The opening indicative rate closed at N409.54 to a dollar on Wednesday. This is 4 kobo depreciation, compared to N409.5/$1 recorded on Tuesday.
  • Also, an exchange rate of N422 to a dollar was the highest rate recorded during intra-day trading before it settled at N410/$1. It also sold for as low as N394/$1 during intra-day trading.
  • Forex turnover at the Investor and Exporters (I&E) window dipped by 59.7% on Wednesday, 21st April 2021.
  • Data tracked by Nairametrics from FMDQ showed that forex turnover decreased from $99.49 million recorded on Tuesday, 20th April 2021, to $40.13 million on Wednesday.

READ: Naira gains at NAFEX window despite 26.2% drop in dollar supply

Cryptocurrency watch

Bitcoin dipped by 3.96% to close at $54,267.91 on Wednesday, 21st April 2021.

  • The world’s most sought-after digital asset lost $2,235.28 in Wednesday’s trading session as the total Cryptocurrency market capitalisation dipped by 2.98% to close at $1.97 trillion.
  • Since the directive by the CBN to place a ban on crypto transactions in the country earlier in the year, usage of Bitcoin’s peer-to-peer trading in Nigeria has surged by 27%.
  • Notably, in the past 85 days, Nigerians have moved about $103 million worth of Bitcoins on just Paxful and LocalBitcoins channels alone.

Crude oil price slumps

The price of Brent crude oil dipped by 1.88% to close at $65.32 on Wednesday, 21st April 2021.

  • The decline in the price of crude was attributed to concerns that surging COVID-19 cases in India will drive down fuel demand in the world’s third-biggest oil importer.
  • Meanwhile, data from the American Petroleum Institute revealed that U.S. crude oil stocks rose by 436,000 barrels in the week ended 16th April 2021.
  • However, Libya’s National Oil Corporation declared force majeure on exports from the port of Hariga due to lack of maintenance funds, consequently shutting down several fields and bringing the country’s production to less than 1 million barrels per day.
  • Brent Crude closed at $65.32 (-1.88%), WTI Crude closed at $61.17 indicating a 0.29% decline, while natural gas also grew by 0.26% to close at $2.699.

READ: Naira remains stable across forex market as dollar supply improves significantly by 430%

External reserve

Nigeria’s external reserve declined by 0.1% on Tuesday, 20th April 2021 to stand at $35.18 billion.

SSKOHN
  • According to data obtained from the Central Bank of Nigeria (CBN), Nigeria’s external reserve dipped further on Wednesday from $35.22 billion recorded as of 19th April 2021 to $35.18 billion on Tuesday.
  • The second consecutive decline comes on the back of 19 successive growth recorded in Nigeria’s external reserve position.
  • Meanwhile, the Central Bank of Nigeria has moved to improve dollar inflow into the country by assuring exporters that they will continue to have unrestrained access to their export proceeds.
  • Governor Emefiele however, tasked exporters on repatriation of their export proceeds to improve foreign exchange inflows into Nigeria.

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