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CBN Should Eliminate Factors Working Against Naira- Otunuga

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The painful combination of declining oil prices and an appreciating Dollar has punished the Nigerian economy with the Naira being left under immense pressure, said Lukman Otunuga, a research analyst at FXTM.

Speaking to Nigeria CommunicationsWeek on factors working against naira in the forex market, Otunuga, a keen follower of macroeconomic events, with a strong professional and academic background in finance and well versed in the various factors affecting the currency and commodity markets, said that concerns over slowing domestic growth continue to weigh on sentiment, while an appreciating Dollar, which although is not the legal tender in Nigeria, seems to be the driving force which has haunted investor attraction towards the Naira.

He said that Nigeria as the largest economy in Africa with a growing population and an abundance of natural resources, possess potentials to become the central hub for the African forex markets.

“It must be understood that Nigeria is an import nation so an appreciating Dollar may weigh heavily on businesses which in turn pass the increased costs to citizens. If the fall in oil prices persists and the Fed raise US rates, then the Naira could be left vulnerable to further losses.

Why Naira Is Not Recognised On Global Forex Trading (Market)
“The major question is not whether the Naira is recognized, but when it will be a currency that displays as much popularity as the USD or GBP. As of now the Naira was pegged at N200 to the Dollar with expectations mounting that the Central Bank of Nigeria may implement a flexible rate of N285. While this may be the case, the ‘black market’ exchange displays a different picture with the Naira rate against the Dollar at $350. It should be kept in mind that the nation needs to work on a solid foundation before the Naira potential stabilizes and gains investor appetite. Once stability is achieved the local currency may appreciate as buyers are encouraged to invest in the hopes of a further appreciation in prices.

How to Help Naira Appreciate
“The Central Bank of Nigeria could have raised interest rates to bolster the value of the Naira while at the same time curbing inflation. Although an interest rate hike could have been the first logical step the Central Bank of Nigeria could have taken, this was forgone in the recent central bank meeting. While the major method discussed to help the Naira appreciate has been focused on diversification, this is not a method which could happen over-night. Agriculture, manufacturing and technology could be the key areas Nigeria could focus on, while agriculture has already displayed signs of diversification, the next steps could be the harmonization of the industry to embrace modern technology and yield results. Nigeria has fertile soils, so why not fortify agriculture? The foundation needed to elevate the productivity of farmers could be education as most may be using old methods to cultivate the land. When education is correct, then the sector could support exports and bridge the gap.

Harnessing Mining, Agric Sectors to Boost Exports
“The mining sector could produce gains for Nigeria if the infrastructure and foundations are worked upon. Although government revenues have diminished from the falling oil prices, the little revenues left could be invested towards mining and agriculture as a method of steering away from being heavily oil export dependent. If Nigeria attains the ability to export to other nations, then when talks of a Naira devaluation arise this could also benefit the nation further with export competitiveness boosting economic growth.

Distinguishing Factors Between Nigeria and Other Emerging Markets
“Although the decline in commodity prices has punished emerging markets including Nigeria, this nation does have some noticeable differences when compared to other markets. For instance, there are still concerns over China slowing growth but they are diversifying, aggressively investing in other economies and transitioning to being a service led economy. Focusing back on Nigeria, although the days of triple digits’ oil prices have long gone, the nation should focus on setting the right foundation for an extended period of low oil prices. Rather than importing the refined oil that is produced, why not work on the correct infrastructure to refine the oil and export the refined version?

Nigerian Stock Exchange Has Appreciated for Few Days Now
“A sense of relief dispersed across the Nigerian markets during trading last week following the growing expectations and subsequent announcement that the Central Bank of Nigeria would implement a flexi rate policy. The renewed risk appetite encouraged bullish investors to pile into riskier assets and this consequently send the Nigerian Stock Exchange higher. With hopes that the CBN has come back to reality as inflation spirals out of control, there are speculations that the central bank could take action in the future. While fears linger that the Nigerian economy could be heading towards a recession, the renewed optimism of a potential flexi rate policy has offered a foundation for the stock markets to temporarily rally. Investor confidence has received a welcome boost but stocks could be set to decline further in the future as fears of inflation and rising unemployment weigh on sentiment.

Investors Pulling Out of Nigeria (United Airlines, For Instance)
“The whole world is concerned that Nigeria’s economy is on the brink right now. Although, key interest rates were unexpectedly maintained at 12%, it is becoming quite clear that the extended declines in oil prices have left the CBN under immerse pressure to take action. Sentiment has also taken a hit from the rapidly declining government revenues, while diminishing oil production from renewed militancy has left nation on edge. So, anxiety lingers across the board and there could be a possibility that the delayed 2016 budget, which was only approved in May, could have exacerbated this unfavorable situation further. Therefore, investors would want to be cut napping when the economy crumbles in default. Most of them will come back when the situation stabilizes. Nigeria is still the biggest investors’ destination in Africa.

Situation of Nigerian Banks
“Transparency could be the first step towards saving the banks of Nigeria. Nothing should be hidden from the apex bank or investors because the moment people feel something is not right, it could raise alarms and will cause panic among the mass. Unfortunately, the banking system is shrouded in secrecy which may leave most investors anxious. For example, market participants are still awaiting further clarity about the $6 billion loan from China with most confused about what the loan will be used for. The government needs to communicate their actions better to the people because when there is transparency from the top, it trickles down to other areas.

The Effectiveness of Technology in Promoting Online Forex Trading
“Technology is instrumental in the drive for smart, efficient and proficient forex trading. This constant push to offer the best service and trading experience is driving innovation, leading to the creation of advanced trading platforms and increased execution speeds. At FXTM we have invested in our own Research & Development team to ensure that we offer cutting-edge and client-centric solutions, such as the ForexTime App, which launched in November last year, and provides real-time currency rates, insightful market analysis, and financial news on-the-go. Technological developments are also leading to the creation of new forex products and the growth of a lively online trading community, a key example being the increasingly popular social trading and copy trading programs. In response to this trend, earlier this year we launched FXTM Invest, our highly accurate and reliable copy trading program.

 


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Nigeria CommunicationsWeek believes that technology makes life more exciting and helps improve the lives of people around Nigeria and indeed the world. So since 2007, we have devoted our energy to independent reportage of technology and how they affect lives.

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E-Financial

Lagos State Appoints MoneyMaster as Payment Partner for “Ounje Eko” Programme

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“Ounje Eko”, the food price discount initiative of the Lagos State Government, has appointed leading payment service bank, MoneyMaster Payment Service Bank Limited (MMPSB), as its collaborator in the bid to ensure ease of payments at the market.

MoneyMaster is one of the Central Bank of Nigeria-licensed Payment Service Banks (PSBs) to promote financial inclusion across Nigeria.

Under the partnership, MMPSB will apply its cutting-edge payment solution to engender easy payment and reconciliation in order to make   the experiences of Lagosians who will be getting their food supplies from the markets pleasurable. Its payment solution is also all-encompassing and ensures real time value to payment destinations.

The mobile bank was appointed as the collection and payment partner for “Ounje Eko” Food Markets programme which is a government initiative serving the five divisions of Lagos State. Consequent on this, MoneyMaster Payment Service Bank will collect payments in 57 LCDAs in the state.

The partnership gives credence to the quality of payment solutions that MoneyMaster is reputed for in its services to its growing business clientele in private and public sectors.

 


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CBN, EFCC Probe Banks, Firms over Alleged Forex Racketeering

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Central Bank of Nigeria (CBN), is investigating irregular foreign exchange transactions and forward contracts valued at approximately $2.4 billion.

CBN, EFCC Probe Banks, Firms over Alleged Forex Racketeering

The  inquiry follows an extensive audit by Deloitte, which scrutinized $7 billion in dollar debts accumulated under the bank’s previous leadership.

In the aftermath of the 294th Monetary Policy Committee meeting in Abuja, Yemi Cardoso, governor of CBN,  disclosed to journalists that the investigation, supported by the Economic and Financial Crimes Commission, among other security bodies, aims to clarify the legitimacy of these FX allocations identified as problematic by the audit.

“It was determined that a number of these transactions did not qualify…they were outright illegal. The law enforcement agencies are now looking into those transactions that as far as we are concerned, are not valid to be paid,” Cardoso detailed, emphasizing the unlawful nature of these forex deals.

The crux of the investigation lies in the audit findings that a significant portion of the scrutinized transactions lacked proper documentation and, in many instances, were deemed outright illegal.

However, the unfolding investigation has raised concerns within the organized private sector, with some entities contemplating legal action against commercial banks for unresolved forex bids.

Despite these tensions, Governor Cardoso reassures that the foreign exchange market remains open and transparent, inviting stakeholders to address their forex needs through the official channels.

Furthermore, Cardoso clarified the distribution of fertilizers to farmers as a one-off measure and not indicative of a shift back to direct interventions by the CBN, underscoring a commitment to strategic, regulatory governance rather than direct market involvement.

 

 

 

 

 

 

 

 


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CBN Urges Banks to Expedite Action on Recapitalisation

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Central Bank of Nigeria (CBN) has directed deposit money banks in the country to expedite action to increase their capital base from the current ₦25bn.

CBN Urges Banks to Expedite Action on Recapitalisation

Olayemi Cardoso, governor of CBN

Olayemi Cardoso, governor of CBN, stated this during the apex bank’s 294th meeting of the Monetary Policy Committee (MPC) on Tuesday in Abuja, when the MPC hiked the interest rate by 22.75% to 24.75%.

The apex bank chief said the MPC examined developments in the banking sector and expressed satisfaction that the industry remained stable. The committee, however, said to guard against risk, commercial banks in the country should accelerate their recapitalisation efforts.

Cardoso said, “The MPC also reviewed developments in the banking system and noted that the industry remains safe, sound, and stable. The committee thus called on the bank to sustain its surveillance and ensure compliance of banks with existing regulatory and macro-potential guidelines.

“The MPC also enjoined the banks to expedite actions on the recapitalisation of banks to strengthen the system against potential risks in an increasingly globalised world.”

 

 

 

 


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