The Central Bank of Nigeria raised the benchmark interest rate by 150 basis points to 13% to tackle Nigerian inflation, which reached 16.82% in April 2022 as a result of rising gasoline and food prices.
Following the CBN’s recent rate hike, the value of 10 Nigerian bank stocks fell at the close of trade as investors’ appetite for fixed income assets grew.
These and many more happened during the week. Here is a compilation of notable happenings in the Nigeria macro-economic space, markets, regulators as well as other world economies.
MACROECONOMY
Exchange rate
The exchange rate at the official market recorded a marginal depreciation during the week, falling by 0.11% to close at N419.5/$1 on Friday from N419.02/$1 recorded in the previous week. A total of $435.94 million was traded in the Investors and Exporters window, which is lower than the $623.27 million that exchanged hands in the previous week.
Similarly, at the black market, naira closed at N610/$1 on Friday, 27th May 2022 compared to N605/$1 recorded in the previous week. This is the lowest level on record that the naira has hit against the US dollar.
Also, the exchange rate at the peer-to-peer market closed at N608.99/$1, representing a fall compared to N604/$1 recorded as of the previous week.
External reserve
Nigeria’s external reserve continue in its downtrend as it lost $224.18 million during the week, representing a 0.01% decline from $38.79 billion to stand at $38.57 billion as of Thursday, 26th May 2022.
The Nigerian reserve level continue to plunge considering the apex bank’s continual intervention in the official I&E window. The levels have remained low despite rising crude oil prices as Nigeria’s production capacity is below the OPEC quota.
Nigeria generated N532.5 billion Company Income Tax revenue in Q1 2022
The Federal Inland Revenue Service (FIRS) on behalf of the federal government of Nigeria generated a sum of N532.48 billion from Company Income Tax (CIT) in the first quarter of 2022, an increase of 35.6% compared to Q1 2021.
Specifically, company income tax revenue increased by 35.6% in Q1 2022 compared to N392.65 billion generated in the corresponding period of 2021. On a quarter-on-quarter comparison, company income tax revenue increased by 53.1% compared to N347.81 billion recorded in Q4 2021
A breakdown of the report shows that Nigeria generated a total of N209.13 billion from local companies, which is 19.2% lower than the N259.85 billion generated in the previous quarter. However, it is 37.3% higher than the N152.33 billion recorded in Q1 2021.
REGULATOR
Naira has lost 70% of its value since Godwin Emefiele became the CBN Governor
- Since the Governor of the central bank, Godwin Emefiele took office in March 2014 to date, the Naira official rate compared to the US Dollar has depreciated from N164 to N419 (or 61% weaker)
- In the parallel market, the situation is even worse, whereby the Naira has weakened from $1/N180 to $1/605. This is a 70.5% depreciation of the Naira in 8 years.
- This rapid depreciation over a span of 8 years has occurred despite numerous forex policies by the CBN, albeit policies have been skewed towards capital controls and demand-side management
MPC: CBN mute on cryptocurrency despite SEC regulation of digital assets
- The Central Bank of Nigeria has remained mute on cryptocurrency despite Nigeria’s Securities and Exchange Commission issuing cryptocurrency regulations.
- The CBN’s silence at the Monetary Policy Meeting (MPC) meeting on the subject means that cryptocurrency remains a prohibited transaction for banks, with penalties imposed by the apex bank.
- Market players and cryptocurrency enthusiasts who were anticipating the apex bank’s response to the SEC law were met with deafening quiet, indicating that the CBN’s attitude has not altered.
Nigeria’s Central Bank raises monetary policy rate to 13%, blames high inflation
- The Monetary Policy Committee of the Central Bank of Nigeria has voted unanimously to raise the benchmark interest rate to 13% after two years of expansionary monetary policy.
- This was disclosed by the Governor of the CBN, Godwin Emefiele, while reading the communique of the third monetary policy committee meeting of the year, on Tuesday 24th May 2022.
- The rate which had been at 11.5% since September 2020, in a bid to spur recovery from the recession recorded due to the covid-19 has now been raised by the apex bank after the inflation rate rose above 16%.
CBN’s May 2022 treasury bills auction records 47% oversubscription after the bank raises interest rates
- The Central Bank of Nigeria’s (CBN) Treasury Bills for a 1-year tenor worth N143.88 billion, which was auctioned on Wednesday, 25th of May 2022, accumulated a total subscription of N210.82 billion, representing 147% of the intended capital raise.
- According to the result of the auction, the stop rate for the 364-day T-bills was 6.49%, which is higher than the 4.7% marginal rate recorded in the previous auction.
- The apex bank recorded a total subscription of N236.97 billion for the three tranches of T-bills auctioned as against the N153.03 billion intended offer. This represents a 155% subscription rate, while the final aggregate allotment was N173.48 billion.
CBN set criteria for Other Financial Institutions’ enrolment in the Credit Risk Management System
- The Central Bank of Nigeria has stated that Other Financial Institutions (OFIs) must meet certain requirements set by the apex bank to be enrolled in the Credit Risk Management System (CRMS).
- This was disclosed by Mr Chibuzo Efobi, Director, Financial Policy and Regulation Department in a circular posted on the CBN’s website on Tuesday titled: “Re: Enrolment of Other Financial Institutions (OFIs) on the Credit Risk Management System (CRMS).”
- All OFIs were reminded by the apex bank to ensure that their customers’ accounts followed the 10-digit Nigeria Uniform Bank Account Number (NUBAN) format.
MARKETS
Tsunami: Bank stocks fall amidst interest rate hike
- Following the recent rate hike by the Central Bank of Nigeria, 10 Nigerian Bank stocks depreciated in value at the close of trading as investors’ craving for fixed income securities widen.
- With the hike in MPR by 150 basis points to 13%, analysts believe that the prognosis for the Nigerian stock market will be lukewarm with sideways movement inequities, on a bearish bias outlook.
- Investigations by Nairametrics showed that the 10 banks lost about N96.325 billion in a day.
CRYPTOCURRENCY
Uniswap hits $1 trillion in trading volume
- Uniswap, the world’s biggest Decentralized exchange (DEX) with a market capitalization of $4 billion as of the time of this writing, has now processed a total trading volume of $1 trillion since launching on Ethereum in late 2018.
- Although this comes from a relatively small user base, it, however, indicates that there is a lot of potential growth to come. According to data from Uniswap Labs, which are major contributors to the development of the protocol and ecosystem, the DEX’s number of cumulative addresses hit around 3.9 million this month after just over three years.
JPMorgan: Cryptocurrencies are now a ‘preferred alternative asset’
- Banking giant JPMorgan with Asset Under Management (AUM) of $3.11 trillion, has maintained its February 2022 stance, that flagship cryptocurrency asset, Bitcoin, has a fair price at $38,000, which, under current market conditions, is 28% higher than its current level of around $29,500, according to a note the bank issued to clients on Wednesday.
- The note, written by bank strategist Nikolaos Panigirtzoglou, who was the lead author of that document, stated, “The past month’s crypto market correction looks more like capitulation relative to last January/February and going forward we see upside for Bitcoin and crypto markets more generally.”
Terra 2.0 gets community approval
- “Terra 2.0,” a so-called revival plan for the Terra blockchain ecosystem has been approved with plans moving forward, after the conclusion of Wednesday’s vote among network validators, which saw 65% approval rate. A ‘snapshot’ of the Terra blockchain is expected to take place this week ahead of the launch.
- This comes after a bank run on the Terra blockchain, saw $50 billion in market capitalization whipped off between Terra’s native token, LUNA and its programmable stablecoin, terraUSD (UST), earlier this month. of Terra 2.0.
- A snapshot is a recording of the state of a blockchain at a specific point in time. It will allow Terra to send the newly issued LUNA tokens to holders of the old LUNA. This would, in theory, allow old holders to regain some of their lost investment value while incentivizing usage of the new blockchain.