9 Years After, CBN Removes Restriction To FX On 43 Items

The Central Bank of Nigeria says it has removes restriction to foreign exchange placed on forty-three in 2015. According to a statement signed by Director, Corporate Communications, Isa AbdulMumin, importers of those items are now free to access the FX market to purchase foreign exchange. Former CBN Governor, Godwin Emefiele had in 2015, placed a restriction on 43 items that cannot access forex at the FX market. According to Emefiele, at the time, it was part of effort to encourage local production. “Importers of all the 43 items previously restricted by the 2015 Circular referenced TED/FEM/FPC/GEN/01/010 and its addendums are now allowed to purchase foreign exchange in the Nigerian Foreign Exchange Market,” the Apex Bank said. The regulator added that it will continue to promote orderliness and professional conduct by all participants in the Nigerian Foreign Exchange Market to ensure market forces determine exchange rates on a Willing Buyer – Willing Seller principle. “The CBN reiterates that the prevailing Foreign Exchange (FX) rates should be referenced from platforms such as the CBN website, FMDQ, and other recognised or appointed trading systems to promote price discovery, transparency, and credibility in the FX rates. “As part of its responsibility to ensure price stability, the CBN will boost liquidity in the Nigerian Foreign Exchange Market by interventions from time to time. As market liquidity improves, these CBN interventions will gradually decrease. “The CBN is committed to accelerating efforts to clear the FX backlog with existing participants and will continue dialogue with stakeholders to address the issue. “The CBN has set as one of its goals the attainment of a single FX market. Consultation is ongoing with market participants to achieve this goal. Participants and the general public are to be guided by the above,” it further said.

Diminishing Naira Will Push Inflation To 18-Year High Of 27.67% – Rewane

Chief executive Officer of Financial Derivatives Company Limited, Bismarck Rewane has projected that inflation is set to rise to 27.57 per cent due to a weak naira. This is the ninth consecutive rise in inflation rates.Analysts say it would represent the highest figure ever reached since September 2005.“Nigeria’s headline inflation is expected to increase again in September, rising to 27.57 per cent from 25.80 per cent in August. “Price increases were most notable in the food basket, predominantly commodities with high import content such as flour, semovita, noodles, and sugar. “With prices rising, fingers are pointing towards the exchange rate as the major inflation culprit. The naira crossed the psychological threshold of N1,000/$ in the parallel market, pushing up imported inflation despite the relative stability in global food prices. The Food and Agricultural Organisation of the United Nations (FAO) food price index was relatively flat at 121.5 points (pts) in September.”, said Rewane. Apart from the weak naira, drivers of inflation includes higher logistics costs and money supply growth (36 per cent year-on-year (y-o-y), saying the price of diesel, the major fuel used by trucks for logistics and distribution purposes, surged to a record high of N1,030/litre during the period. “Notably, month-on-month inflation, which is a more current measure of price movement, is expected to decline marginally to 2.78 per cent from 3.18 per cent in August, largely due to the harvest season impact. This suggests that inflation is likely to reach an inflection point and could begin to taper in the first quarter of 2024.

Equity market sheds N64bn

Trading activities on the floor of Nigerian Exchange (NGX) Tuesday returned to a negative trend, declining by N64 billion. Market capitalisation of listed equities declined by 0.17 per cent to N36.801 trillion from N36.865 trillion reported the previous day. The NGX All Share Index also depreciated by 116.71 basis points to 66984.62 points from 67101.33 points traded the previous day. An analysis of the investment indicated that Ncnichols led gainers table in percentage terms, gaining 10 per cent to close at N0.66 per share, Capital Hotel followed with a gain of 9.83 per cent to close N3.02 per unit, Chams Plc added 9.38 per cent to close at N1.40 per unit, ABC Transport added 8.82 per cent to close at N0.74, Oando Plc appreciated by 7.61 per cent to close at N9.90 per share. On the contrary, JohnHolt topped losers chart dropping by 10 per cent to close at N1.44 per unit, Presco Plc trailed with a loss of 9.54 per cent to close at N182.00, Daar Communication dipped by 8.70 per cent to close at N0.21 per unit, Deep Capital declined by 7.41 per cent to close at N0.25 per share, Jaiz Bank fell by 6.25 per cent to close at N1.50 per share. Volume of transactions increased by 11.24 million, representing a drop of 4.18 per cent as investors traded 257.423 million shares valued at N7.799 billion in 6498 deals against 268.663 million shares worth N3.463 billion in 6911 deals. Fidelity Bank led market activities with 53.396 million shares valued at N442.890 million, AccessCorp followed with 31.088 million shares cost N490.503 million, United Bank for Africa exchanged 26.772 million shares cost N459.677 million, Oando Plc traded 13.564 million shares worth N133.363 million while Zenith 11.266 million shares cost N358.983 million.

IMF Downgrades Nigeria’s Economic Growth By 2.9%

The International Monetary Fund (IMF) has downgraded Nigeria’s economic growth by 2.9 per cent for 2023. In July, the Fund had projected a 3.2 per cent growth for Nigeria in 2023. The lender however warned that the growth would be impacted by security issues in the oil sector. In its October World Economic Outlook with the themed, ‘Navigating Global Divergences,’ posted on its website Tuesday, the IMF said, “Growth in Nigeria is projected to decline from 3.3 per cent in 2022 to 2.9 per cent in 2023 and 3.1 per cent in 2024, with negative effects of high inflation on consumption taking hold. “The forecast for 2023 is revised downward by 0.3 percentage point, reflecting weaker oil and gas production than expected, partially as a result of maintenance work.” The International lender, while commenting on its new prediction for the country, said: “ For the sub-Saharan African region, growth is expected to decline to 3.3 per cent in 2023 due to worsening weather shocks, the global slowdown, and domestic supply issues, the IMF said.  However, growth would pick up by 2024 to 4.0 per cent in 2024, which is still below the region’s historical average of 4.8 per cent. It also stated that global economic growth was projected to slow from 3.5 per cent in 2022 to 3.0 per cent in 2023 and 2.9 per cent in 2024, well below the historical (2000–19) average of 3.8 per cent, the IMF declared. “Advanced economies are expected to slow from 2.6 per cent in 2022 to 1.5 per cent in 2023 and 1.4 per cent in 2024 as policy tightening starts to bite. Emerging market and developing economies are projected to have a modest decline in growth from 4.1 per cent in 2022 to 4.0 per cent in both 2023 and 2024″, the IMF said. The global financial institute stated that global inflation is expected to decelerate to 6.9 per cent in 2023 and 5.8 per cent in 2024 from the present 8.7 per cent in 2022.  

CBN Earns N912bn Income From W&Ms Loans To FG

The Central Bank of Nigeria (CBN) has earned a total of N912.32 billion from interest payments in the first quarter of 2023 on the Ways and Means (W&Ms) advances to the Federal Government, according to the Budget Office report. This substantial figure was reported in the first quarter’s 2023 Budget Implementation Report, released by the Budget Office of the Federation. The interest payment amount marks a substantial increase of 161.47 percent when compared to the N348.92 billion spent during the same quarter in 2022. Nigeria had initially allocated N1.2 trillion to service the CBN Ways and Means Advances in this year’s budget, translating to approximately N300 billion per quarter. However, the government had already expended about 76.03 percent of its budgeted amount for interest payments on these loans during the first quarter. Ways and Means Advances serve as a loan facility extended by the Central Bank to support the government during periods of temporary budget deficits, subject to legal limits. According to Section 38 of the CBN Act, 2007, the central bank can provide temporary advances to the federal government to address temporary budget shortfalls at interest rates set by the bank. The Act stipulates that the total outstanding advances should not exceed five percent of the previous year’s actual revenue of the Federal Government. Furthermore, all advances must be repaid as soon as possible, and in any case, no later than the end of the Federal Government’s financial year in which they were granted. Failure to repay these advances by year-end would limit the central bank’s ability to grant further advances in subsequent years unless outstanding advances are settled.

Nigeria’s Q2 Capital Importation Decreases By 32.9% – NBS

In the second quarter of 2023, total capital importation into Nigeria stood at $1,030.21 billion, lower than $1,535.35 billion recorded in the second quarter, indicating a decrease of 32.90 per cent, the National Bureau of Statistics (NBS), has said. The bureau noted in its Nigeria Capital Importation Q2 2023, when compared to the preceding quarter, capital importation fell by 9.04 per cent from $1,132.65 billion in Q1 2023. The statistics agency stated that Other Investment ranked top accounting for 81.28 per cent ($837.34 million) of total capital importation in Q2 2023, followed by Portfolio Investment with 10.37 per cent ($106.85 million) and Foreign Direct Investment (FDI) with 8.35 per cent ($86.03 million). “The production sector recorded the highest inflow with $605.04 million, representing 58.73 per cent of total capital imported in Q2 2023, followed by the banking sector, valued at $194.58 million (18.89%), and Shares with $68.63 million (6.66%). “Capital importation during the reference period originated largely from the United States with $271.92 million, accounting for 26.39 per cent, followed by Singapore and the Republic of South Africa with $177.44 million (17.22%) and $136.95 million (13.29%) respectively. “Lagos state remained the top destination in Q2 2023 with $778.06 million, accounting for 75.52 per cent of total capital, followed by Abuja (FCT), with $194.28 million (18.86%). “First Bank of Nigeria Limited received the highest capital into Nigeria in Q2 2023 with $323.13 million (18.23%), followed by Citibank Nigeria Limited with $187.77 million (12.23%) and Rand Merchant Bank with $126.03 (6.47%), the bureau said.  

Analysts Forecast Increased Pressures On Economy As Naira Depreciates By 23%

With the naira losing 23 per cent value in the third quarter of 2023, plummeting from N770/$1 at the end of the second quarter to over N1000/$1 by the end of the third quarter at the parallel market, analysts expect further pressure on the currency in the fourth quarter of 2023. Meanwhile, the official exchange rate at the end of the third quarter was N755.27/$1, a noticeable drop from N769.25/$1 at the end of the second quarter. The widening gap between the official and unofficial rates reflects the persistent scarcity of foreign exchange in the country, as well as the divergent policies of the CBN and the market forces. The Central Bank of Nigeria (CBN) has blamed the forex backlog estimated at between $6 billion to $10 billion as the major reason for the currency depreciation. At the recent Senate confirmation of the CBN governor, Yemi Cardoso stated that he intends to establish the exact unsettled obligations and find ways to “take care of it” confirming that progress will not be made without clearing the backlog. He said it would be naive to think that the CBN will be able to make progress if it don’t handle that side of the foreign exchange. “But definitely, the immediate priority will be to verify the authenticity and extent of the unsettled obligation and once we do that, we need to look for a way to take care of it. The naira’s weakness has had negative impacts on the Nigerian economy, as it has increased the cost of imports, fuelled inflation, eroding purchasing power, and discouraged investment. According to the Head of Macro Strategy at FIM Partners UK Ltd, Charlie Robertson, the CBN may have to devalue the official rate again to align it with the market reality and conserve its dwindling external reserves, which fell from $34.1 billion at the end of June to $33.2 billion at the end of September. He noted that further devaluation might be avoided if the apex bank is able to meet its obligations to clear forex backlogs, adding that achieving this might require the government tap new loans from friendly countries. Stears Africa FX Monitor, a data and intelligence company, also has predicted a continued naira volatility. The company highlighted fiscal policies, external trade, and global market trends, including inflation rates, interest rates, policy events, and geopolitical factors as key factors affecting the naira’s performance. Fadekemi Abiru, Head of Insights at Stears, expressed concerns about the naira volatility. “The continued unpredictability of the naira underscores the importance of timely and informed decision-making for businesses and investors in Nigeria,” she said. The CBN had removed trading restrictions on the official market in June which drove the naira to a record low of N750 to the Dollar on the official market, down from the previous N477 to the dollar it traded for. This was the first time since 2016 that the naira had recorded a big fall on the official market before the CBN introduced a managed exchange rate in 2017.

TAJBank Records Highest Tier-1 Capital, Pre-Tax Profit

TAJBank Limited, a Nigeria’s non-interest bank has recorded the highest Tier-1 capital in the non-interest banking sub-sector in the first half of 2023. This is according to a statement by TAJBank’s Chief Executive Officer (CEO), Mr Hamid Joda. Joda said that the audited financial statements of the bank also reflected an increase in its Profit Before Tax (PBT) to N6.019 billion, which is the highest in the banking sub-sector and surpassed analysts’ projections. TAJBank also made history early this year when it listed the first tranche of N100 billion Sukuk Bond on the Nigerian Exchange Limited (NGX) after the successful issuance. Joda said that a further analysis of the latest audited financial statements showed that its total assets rose from N212.021 billion in December 2022 to N335.017 billion at the end of June 2023. He said that the figures indicated a 58 per cent increase. “Its gross earnings increased by 67 per cent from N136.149 billion at the end of December 2022 to N227.031 billion as of the end of June. “Other highlights of the bank’s financial scorecard in first half of 2023 reflected that the financing also significantly increased by 62 per cent from N78.235 billion recorded as of December 2022 to N126.725 billion by June. “The deposits base surged to N251.250 billion from N161.958 billion as of December 2022; while its total equity grew by 88 per cent from N19.135 billion in December 2022 to N36.706 billion as of June,’” he said. Joda, attributed TAJBank’s enviable feat to the increasingly proactive strategies being adopted by the management to respond to emerging trends in non-interest banking and deployment of the right resources. “What I can say about TAJBank’s latest scorecard is that we have demonstrated that hard work pays. “As we have maintained over the past three years, our interest is in our customers and we are pursuing this goal with all resources available to us to tell the whole world that TAJBank is the way to go in non-interest banking. “To demonstrate our commitment to this customer-friendly corporate slogan, we are investing in world-class technologies and digital payment solutions in our services nationwide,” he said. “In pursuit of non-interest financial inclusion drive, we have also opened five branches this year and plan to open more in other states in the next few months”, he said. TAJBank’s bank’s Executive Director, Mr Sherif Idi, said that the successes were made possible by the bank’s shareholders and customers. “Our thanks go to our growing customers and shareholders whose belief in our vision and capacity to drive TAJBank to the leading edge of market competition has taken us this far. “Let me assure them that TAJBank’s management and staff will continue to do its best to serve them better and protect their interests, which we value so much in all areas of operations,” he said.

Senate Confirms Olayemi Cardoso As CBN Governor

In a significant development, the Senate has officially confirmed the appointment of Dr. Olayemi Cardoso as the Governor of the Central Bank of Nigeria (CBN). This confirmation comes after thorough screening and evaluation on Tuesday, during which Cardoso’s qualifications and suitability for the role were thoroughly examined. Dr. Cardoso’s confirmation also marks the approval of four nominees for the positions of Deputy Governors at the CBN. These appointments collectively signify a crucial step in shaping the direction of the apex bank’s operations over the next five years. It’s worth noting that Dr. Cardoso had assumed the role of Acting CBN Governor last week, pending his formal screening and subsequent confirmation by the Senate. This confirmation solidifies his position as the head of the CBN and underscores his mandate to lead the nation’s central banking institution. In addition to the CBN appointments, the Senate has set a date for the screening of two additional ministerial nominees, a move proposed by President Bola Tinubu. Dr. Jamila Ibrahim and Ayodele Olawande have been appointed as the Minister of Youths and Minister of State for Youths, respectively, by Tinubu during the National Assembly’s break. Their upcoming screening which will take place on Tuesday, October 3, 2023, will further reshape the composition of the federal cabinet.

Crude Export Earnings Hit N5.6trn In Q2 Amid Naira Float

There was a major improvement in export earnings in the second quarter of 2023, as a result of the floating of the naira which ensured earnings from crude oil exports swells. Crude oil receipts rose 8.5 per cent to N5.6 trillion. This represents 79.6 per cent of total exports. “The improvement in export earnings was mainly spurred by crude oil receipts which rose 8.5 per cent quarter-on-quarter (q/q) to N5.6 trillion (about 79.6 per cent of total exports) though production level was unimpressive as per national Bureau for Statistics (NBS) data (down 19.2 per cent q/q to 1.22mbpd). “Noteworthy, we suspect that the improvement in oil receipt was also impacted by exchange rate revaluation gain given that the Central Bank of Nigeria (CBN) switched from a hard-pegged exchange rate regime to a managed float in June 2023, causing the official conversion rate of oil proceeds to rise from N461/$ to over N650/$. Hence, nullifying the effect of lower crude oil price in the second quarter ($78.13/bbl.) relative to the first quarter ($81.11/bbl.).”, said analysts at Afrinvest. Data from NBS showed that the value of Nigeria’s total trade (imports and exports combined) improved over the preceding quarter (up 5.8 per cent) but trailed the level attained in the corresponding period of 2022 by 7.6% to settle at N12.7 trillion. For the third consecutive quarter, Nigeria recorded a positive trade balance amounting to N1.3 trillion in the second quarter, aided by the faster growth in export earnings (up 8.1 per cent q/q to N7.0 trillion) as against import expenses (up 3.0 per cent q/q to N5.7 trillion). Similarly, non-crude oil and non-oil exports also grew 6.8 per cent and 5.6 per cent q/q to N1.4 trillion and N688.7 billion respectively. “We attribute these gains to the recovery in the broader economy from the negative knock-on effect of pre-election jitters and poor implementation of the naira redesign policy in the first quarter (GDP expanded 2.5 per cent vs. 2.3 per cent in the first quarter)”, said Afrinvest. It is important to highlight that Agricultural goods remain Nigeria’s largest source of non-oil export earnings (4.0 per cent of export share), while Manufacturing, Raw material goods, and Solid mineral goods trailed with 3.0 per cent, 2.1 per cent, and 0.5 per cent, respectively. Cashew nuts (shelled and unshelled), sesame seeds, and cocoa beans combined accounted for 65.7 per cent of the total N278.4 billion Agric exports in the period – an indication that cash crop exports could be a major source of non-oil foreign exchange (forex) earnings for Nigeria if adequate investment is made on procuring modern farming equipment and insecurity is wholistically checked. In terms of trade performance with other regions, the previous quarter’s trend was sustained as Nigeria booked a surplus with three of its five trading regions – America (N178.5 billion), Europe (N1.2 trillion), and Africa (N510.5 billion) – while a deficit was recorded in trade with Asia (N584.5 billion) and Oceania (N98 billion). In terms of destination, the Netherlands (11.2 per cent), the US (10.2 per cent), and Indonesia (7.8 per cent) were the top export hubs by share while China (22.2 per cent), the US (16.1 per cent) and Belgium (8.0 per cent) topped imports origin.