The naira dropped against the United States dollar at the parallel market from 355 on Friday to 357 on Monday, foreign exchange traders said.
Analysts and traders linked the drop to the mounting fears among traders and investors over the flexible exchange rate policy proposed by the Central Bank of Nigeria.
They said the continued delay by the CBN in releasing the blueprint for the planned flexible exchange rate policy was fuelling hoarding and speculation in the forex market.
The CBN’s Monetary Policy Committee had two weeks ago announced plan to adopt a flexible exchange rate. The Governor, CBN, Mr. Godwin Emefiele, said the blueprint for the proposed policy would be released soon.
The delay has, however, caused the stock market to record huge losses after recording landmark gains following the announcement of the plan to adopt the policy.
“The market’s perception of the lack of clarity over the regulator’s plan on the exchange rate policy is fuelling hoarding and all manner of activities; this is why the naira dropped against the dollar at the parallel market today,” the National President, Association of Bureau De Change Operators, Alhaji Aminu Gwadabe, said.
Analysts had last week said the local currency would trade around 350 per dollar this week as uncertainty over the implementation of the CBN’s planned new flexible exchange rate policy persisted.
The local currency retreated to 350 to the dollar on the parallel market on Thursday from 360 the previous week.
The naira had weakened shortly after the CBN’s Monetary Policy Committee announced plans for new exchange rate policy two weeks ago, but strengthened when the details of the new policy were delayed, Reuters reported.
The Abuja Chamber of Commerce and Industry on Monday blamed the massive retrenchment in the banking sector on the implementation of the Treasury Single Account.
The chamber, while reacting to the gale of job losses in the banks in recent times, called on the Federal Government to come up with measures to assist the financial institutions rather than directing them to stop firing their workers.
The PUNCH had last week reported that Ecobank Nigeria sacked over 1,040 of its employees, while Diamond Bank Plc also retrenched over 200 members of its workforce.
In the same vein, FBN Holdings, the parent company of First Bank of Nigeria Limited, recently said it would prune the number of its employees by 1,000.
As a result of the development, the Minister of Labour and Productivity, Dr. Chris Ngige, had on Friday directed the banks to stop the retrenchment exercise.
The minister further directed that all the retrenchments done in the past four months should be put on hold pending the outcome of a proposed stakeholders’ summit for employers and employees of the banking, insurance and financial institutions scheduled for the first week of July.
“Following the high spate of petitions and complaints from stakeholders in the banking, insurance and financial institutions, I hereby direct the suspension of the ongoing retrenchment in the sector pending the outcome of the conciliatory meetings in the industry,” Ngige had said.
But the President, ACCI, Mr. Tony Ejinkeonye, told our correspondent that the implementation of the TSA had left the banks with severe liquidity problems, which had made them to reduce their workforce in a bid to survive.
He said, “The current retrenchment in the financial services sector as witnessed in some Nigerian Money Deposit Banks could be attributed to the adverse implication of the Single Treasury Account policy of the Federal Government.
“The implementation of Federal Government’s Treasury Single Account policy has left the banks with severe liquidity problem, causing the financial houses to cut their workforce so as to remain in business.
“We call on the Government at this time not to play politics with the job-cut crises in the banking sector, as full employment remains the topmost in the list of macroeconomic objectives of any government.
The Nigerian Society of Engineers (NSE) has said it would not take lightly any case of relegating to the background, standard engineering practices and norms, which result to competent results in the federal government’s ongoing restructuring of operations in the Nigerian National Petroleum Corporation (NNPC).
The NSE stated recently in Abuja that in the government’s attempts to reposition the NNPC into a fit-for-purpose national oil company, it must also make credible attempts to ensure that the corporation’s core business of engineering is protected and advanced further.
NSE’s President, Otis Anyaeji told journalists that the society was worried about the position of engineering and science in the ongoing restructuring of the NNPC, and was in this regard calling on the government’s attention to it.
“We are aware that the announced structural changes of NNPC into 30 companies is under review, as the foremost engineering body in this country, we would like to caution that adequate care should be exercised not to send a wrong message that competence in engineering, technology and science is not necessary for enhanced performance of the corporation,” said Anyaeji during a press briefing.
He noted that the reform appears to have taken the shape of subordinating engineers in the corporation to the leadership of other professionals, perhaps because of the pressure for positive commercial performance. He said: “We understand the immediate pressure for positive commercial performance which often gives rise to quick fixes and constant drive for short-term positive news headlines.”
He however noted that the NSE would like to request that a more strategic approach to the reform be adopted, to encourage the building of institutional capacities and competence of the NNPC as more of an engineering firm. “As a nation, we must take the bold step by placing the highest emphasis on the proper use of science and engineering professionals and the promotion of its study amongst the youths.
We have observed increased tendency to appoint administrators into various positions instead of engineers with proven business and leadership skills which is the industry best practice,” he stated. He said, NNPC being an engineering-based corporation needed to have a sole office for an engineer for design approval and process optimatisation.
According to him, the corporation’s disregard for such office translates to perpetual side-lining of Nigerian engineers and the government’s local content development efforts.
The global oil benchmark, Brent crude, rose as much as two per cent on Monday as Nigeria’s oil industry reeled from crippling attacks that have pushed output to its lowest level in more than 20 years.
The uptick in oil price is coming at a time Iran, which is engaged in a battle for market share in a bid to regain customers after years of curbed oil sales that crippled its economy, is ramping up its production and exports.
Output of Nigeria’s Bonny Light crude has fallen by an estimated 170,000 barrels per day following recent attacks on pipeline infrastructure, industry sources said on Monday. Total crude production has fallen by more than 500,000 bpd in a country that was once Africa’s biggest oil producer.
Supply outages from elsewhere, including Canada, Libya and Venezuela, are also forcing United States refiners to draw more from domestic crude stockpiles, according to Reuters.
“At this point, there is no sign that the Nigeria situation is getting any better, and it’s looking worse,” said Scott Shelton, energy broker with ICAP in Durham, North Carolina.
Any spare US refining capacity arising from optimum refinery runs during the summer might not be enough to balance the market without deeper stock drawdowns that would support crude prices more, he said.
Brent, against which Nigeria’s oil is priced, stood at $50.32 a barrel by 6:50pm on Monday, after reaching a session peak of $50.83, the highest since November.
On Friday alone, militants staged three attacks in Nigeria’s Niger Delta, promising to cut output to zero.
Meanwhile, more than 25 European and Asian-owned super tankers are shipping Iranian oil, data seen by Reuters shows, allowing the country to ramp up exports much faster than analysts had expected following the lifting of sanctions in January.
The odds are stacked against Nigeria as it looks to raise debt on the international markets for the first time in almost three years.
According to Bloomberg, Minister of Finance Kemi Adeosun is leading a team of officials that will meet bond investors at London’s five-star Corinthia Hotel on Tuesday at a time when Africa’s biggest economy is on the verge of a recession, oil production has fallen to about a three-decade low, and the budget deficit has swelled to a record. Yields on Nigeria’s existing dollar debt are almost twice as high as those for Kazakhstan and Colombia, two other developing-nation oil producers.
While they’re interested in plans to revive growth, investors said they will also demand to know when and how the central bank will end capital controls and a currency peg that have starved the country of dollars and slowed foreign investment to a trickle.
Tapping the offshore bond market this year is crucial for Nigeria to fund a budget of N6.1 trillion ($31 billion) meant to stimulate the economy, according to Rand Merchant Bank. “They will be under immense scrutiny,” an analyst at RMB, FirstRand Limited’s investment-banking unit, Nema Ramkhelawan-Bhana said from Johannesburg.
The Eurobond market, which Nigeria may try to tap for as much as $1 billion, is “an avenue of financing they’re in desperate need of. It’s going to be a tough week for the finance ministry,” she said. Nigeria has sold dollar bonds twice, the last time in mid-2013, when it raised $1 billion of five- and 10-year debt. Yields on its $500 million of securities maturing in July 2023 fell three basis points to 7.5 percent by 12:15 p.m. in London on Monday and have dropped 1.18 percentage points this year. Nigeria’s Eurobonds have gained 8.3 percent in 2016, compared with the average of 9.6 percent for high-yielding emerging-market sovereign dollar-debt tracked by Bloomberg.
Bond investors blame Nigeria’s rigid foreign-exchange regime for draining reserves, which have fallen to a more than 10-year low, and hindering the economy, according to Bank of America Merrill Lynch. The second-biggest U.S. bank by assets says Nigerian Eurobonds would rally more if the government allowed the naira to weaken.
Central Bank Governor Godwin Emefiele has fixed the naira at N197-N199 per dollar since March 2015, even as other oil exporters from Angola to Kazakhstan have let their currencies drop. Forward contracts suggest it will fall 39 percent to N277 in three months and to N324 in a year. The black-market rate has plummeted to around N355 as the central bank runs out of the foreign-currency that companies need to import raw materials and equipment. “Without some kind of exchange-rate reform, we doubt the market would look favorably upon a Eurobond,” a London-based economist at Exotix Partners LLP,Alan Cameron said.
“The government’s unwillingness to adjust is likely to be seen as a major turn-off for many investors, even if the headline debt ratios are low.”
The economy contracted for the first time since 2004 in the three months through March, and a recession is imminent, the central bank said on May 24.
“Feedback from our clients suggests that the removal of the naira peg would be a positive catalyst for the dollar bonds,” a London-based economist at Bank of America, Oyin Anubi, said in an e-mailed response to questions. “The dramatic slowdown in economic growth combined with uncertainty on foreign exchange and risks to oil production means that this is a difficult time to invest in Nigeria.”
Top 10 leading stockbroking firms facilitated trading of 6.594 billion shares worth N56.230 billion in May, accounting for 55.21 per cent of total value traded in the month.
Statistics obtained by THISDAY at the weekend showed that Rencap Securities (Nig) Limited led in value terms, trading N16.236 billion, representing 15.94 per cent. Stanbic IBTC Stockbrokers Limited followed with N9.443 billion, indicating 9.2 per cent, while EFCP Limited facilitated N6.092 billion or 5.9 per cent, while CSL Stockbrokers Limited accounted for N5.251 billion or 5.2 per cent. Cardinal Stone Securities Limited traded N4.335 billion, representing 4.2 per cent, just as Cordros Capital Limited traded N3.534 billion or 3.5 per cent.
Investment One Stockbrokers International Limited occupied the seventh position with N3.458 billion or 3.4 per cent. FBN Securities Limited facilitated N3.063 billion, while Securities African Financial Limited traded N2.819 billion. Morgan Capital Securities Limited accounted for 1.996 billion.
In volume terms, CSL Stockbrokers Limited led with 1.029 billion shares, followed by Rencap Securities with 975.859 million shares. Morgan Capital Securities Limited accounted for 760.171 million shares. EFCP Limited recorded 673.260 million shares, just as Stanbic IBTC Stockbrokers Limited traded 644.355 million shares. Cardinal Stone Securities Limited and Global Asset Management Limited accounted for 643.536 million and 609.871 million shares respectively. Cordros Capital Limited, FBN Securities Limited and Investment One Stockbrokers traded 439.963 million shares, 409.465 million shares and 408.220 million shares in that order.
The NSE had introduced the ranking of stock broking houses trading to stimulate competition in 2011. The exchange has also introduced similar initiatives ensure better performance of dealing members. The NSE launched the brokers oversight and supervision system also known as X-BOSS late last year in order to redefine and automate the level of compliance and market regulation experience between it and the dealing member firms.
The system will help automate the regulatory and oversight function of the NSE over its dealing members thus helping it to achieve regulatory efficiency as well as the exchange’s commitment to implementing global best practice, which will lead to improve transparency and drive operational excellence in the Nigerian capital market.
Head, Broker Dealer Regulation Department of NSE, Mr. Olufemi Shobanjo had said the X-Boss would bring about automation of key regulatory functions with notification capabilities such as monitoring of capital and liquidity; development of a central information repository of dealing members and approved persons; controlled access to information on dealing members based on access rights granted and enhanced regulation based on global best practice.
In continuation of its consultation with major stakeholders in the economy, the Central Bank of Nigeria (CBN) at the weekend met with members of the Nigeria Labour Congress (NLC). At the meeting, the Consumer Protection Department of the CBN disclosed that it had resolved over 6,000 complaints by bank customers, just as it had refunded N26.998 billion to customers whose accounts were illegally charged by their respective financial institutions as at April 2016.
Meanwhile, the NLC has commended the federal government for halting the recent lay-offs by some banks. The Vice President, NLC, Mr. Isa Aremu, who spoke at the CBN stakeholders engagement meeting in Lagos, applauded the federal government’s stance on job safety.
Aremu said: “Very importantly one critical discussion that came up is the issue of job lay-offs in the banks and we use this opportunity to commend the ministry of labor for intervening and asking the bank to stop the ongoing lay-offs in the sector. And we have also called on CBN to use moral suasion to encourage the commercial banks.” Continuing, Aremu while commenting on the naira devaluation debate said: “We have been together with CBN in terms of resisting the pressure to devalue the naira and we are happy that CBN under the leadership of Governor Godwin Emefiele has stood the ground to protect the naira. There were debates about the value of the naira and NLC has insisted that as a country that is import dependent, we don’t benefit anything from devaluation and above all, any devaluation would erode the purchasing power of workers.
We are happy that the CBN has kept to that fit in with the broad policy of the CBN as we’ll as the administration. We also needed clarification on what this flexible exchange rate means for us and he said the modalities are still worked out. But the bottom line is that it would not do prejudice to the value of the naira.” He added: “We find the program very useful especially in development financing. It is very refreshing to know that CBN is intervening in energy sector, agriculture, aviation, textile were all our members have their jobs. And what CBN is doing to think outside the box because if you leave everything to market forces, most of these sectors cannot draw the kind of lock and funding that they need.”
Furthermore, on the interest rates he said: “Also we also said that the next monetary policy meeting, they have to re look at this interest rate. The monetary policy rate is about 12 per cent with others in the double-digit. It is time for CBN to know that we cannot run the real sector of the economy when the cost of funds is very high.” Also speaking at the event, the acting Director of Communication at the CBN, Mr. Isaac Okoroafor, said: “We are here on the continuation of the CBN engagement with very key stakeholders. Today we have met organised labour, we have gathered the labor leaders and activists in Lagos. We have interacted with them on most of the programmes we are running and also on the policies we have undertaken this year.”
When asked to clarify the forex flexibility, he said the modalities have not been released, adding, “the governor has explained that we have to find a way of creating some flexibility around the foreign exchange management as it is today and the details would be realised in due course.”
On the recent retrenchment exercise by banks, he said: “The issue of job security across the country is a general issue, it is not about one industry and it is a about what our laws are saying, It is about our industry policy and what it is saying and it is in collaboration with both the ministry of labour and other stakeholders I think a solution would be found.”
The market capitalisation of admitted securities on the NASD Over-The-Counter market as at May 2016 stood at N415.62bn.
This was represented by 107.64 billion shares in issue out of which only 16.72 billion shares had been dematerialised (15.54 per cent).
The dematerialised volume of 16.72 billion shares represents an increase of 1.46 per cent on the previous level of 16.48 billion shares. The NASD OTC Securities Exchange currently trades on equities and bonds.
A total of 28 million shares worth N449.15m were traded in 728 deals in May 2016 (174 million units worth N424.41m traded in 346 deals in the preceding month). The volume traded dropped by 83.92 per cent while the value traded rose by 5.83 per cent as compared to the previous month.
The equities market was led by Industrial and General Insurance Plc and Friesland Campina WAMCO Nigeria Plc which accounted for 50.34 per cent and 35.95 per cent respectively of the volume and value traded.
The market recorded a negative monthly return on the index as reflected in the downward movement of the Unlisted Securities Index. The USI closed at 630.91 points as against 636.20 points representing a decrease of 0.83 per cent month-on-month.
The NASD OTC Securities Exchange grew in size and structure in the first quarter of 2016.
The volume and value traded on the market rose by 13 per cent and 52 per cent respectively. A total of 144.36 million shares worth N1.01bn were traded in 675 deals in Q1, 2016 (128.12 million units worth N665.33m traded in 150 deals in the preceding quarter 1, 2015).
The NASD Plc is the promoter of a trading network that eases secondary market trading of all securities of unquoted public companies primarily in Nigeria but with a focus on the West African region. Its intention is to stimulate growth by easing the capital raising process.
The market registered an average deal volume and value of 214 units and N1.50m respectively in 2016 Q1.
At the end of the quarter, the NASD OTC market had opened up 26 securities to trade as against 24 securities in the previous quarter.
Nem Insurance Plc said its gross premium rose by 10.8 per cent from N9.8bn in the 2014 financial period to N10.9 per cent in 2015.
Its Chairman, Chief Adewale Teluwo, disclosed this during the firm’s 46th annual general meeting in Lagos.
“Notwithstanding the state of the country’s economy in the reporting period, our company still recorded good performance,” he said.
The chairman also said the parent company achieved an increase of 9.5 per cent from N9.4bn in the preceding year to N10.3bn in the year under review.
Teluwo said even though rates crashed to an average of four per cent per annum, the group generated an investment income of N746.2m during the year under review while that of the preceding period was N607.8m, an increase of 22.8 per cent.
He said claims paid by the group during the reporting year amounted to N3.96bn, an increase of 34.6 per cent over that of the preceding period which was N2.9bn.
The chairman attributed the increase in claims to one huge claim of about N600m paid out by the parent company.
He added that an increase of 33.1 per cent was recorded by the parent company from N2.9bn in 2014 to N3.8bn in 2015.
Director-General, National Pension Commission,(PenCom), Mrs Chinelo Anohu-Amazu has revealed that Nigeria’s pension funds now stand at about N5.4 trillion with approximately seven million contributors.
Anohu –Amazu who spoke Anohu-Amazu said this while speaking on the Role of Regulators in Deepening Capital Market at the 2016 Business Day Capital Market Conference in Abuja added that the Nigeria had the capacity to generate more and her Commission is already trying to do this through micro pension.
The theme of the conference was,“ Deepening Nigeria’s Capital Market through Maximum Utilisation of Pension Funds.’’
The PenCom DG who added that pension fund was one of the single largest institutional investments in Nigeriaoperes ently however operators of the fund to derive ways of developing products that they invested in the country. She said that the challenges faced on investments of pension funds were arise from lack of creativity of the operators.
“The PFAs are constrained; they are unable to develop the products they invest which is why we have a preponderance of the pension funds in federal government securities, there are no alternatives “Part of the thing I want to throw out to operators in this room is to work towards developing alternatives and new products,’’ she said.
The Director-General said the regulators were doing their bit at ensuring that the PFAs were highly regulated.
She said several regulations had been done and what was left was to ensure the official issuance of those regulatory actions in the sector. “Our eyes are on two things; protecting the funds and making sure that its primary mandate as required by law, which is paying retirement benefit as and when due, is not tampered with.
“That mandate also extends to making sure that the value is not eroded, and it will be our joy that various institutions are deepened by the pension fund and the capital market is just one of those institution,” she added.
She said the issue of channeling the pension fund to the capital market was welcomed as long as the contributor was assured of the channel the fund was taken to and its safety.
She added that this could be achieved through efficient regulation and prudent management of the fund.
Also speaking at the event, the Managing Director, Nigeria Deposit Insurance Corporation,Alhaji Umaru Ibrahim, said one of the major challenges in the sector was the unwillingness of people to invest.
He said,“it is not only about raising the money but finding ways to invest it and we also have to be conscious of the returns and the risk involved in investment. The Principal, Bain and Company Nigeria,Mr Jude Uzonwanne said lack of competition at the PFAs was causing “an extreme conservatism in the sector’’.
According to Uzonwanne, regulators should not only face trend but be more effective by focusing on changes that will trigger competition among PFAs. He said mergers and acquisition should be encouraged as it would make CEOs to sit up and urged that family companies should be taken public to ensure sustainability.
