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FXTM Analysis: Time to Focus On OPEC Now That France is ‘Out of Sight’

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FXTM Vice President of Market Research, Jameel Ahmad comments on the upcoming OPEC meeting.

Investors have arrived in full force to exploit the opportunity to sell the Euro at its highest level since November 2016, with the EURUSD now appearing at risk to dropping back below 1.09 after briefly climbing above 1.10 when the markets opened for the week following confirmation of Macron becoming the new President of France.

While the lifeline of the Euro relief rally appears to be short-lived, I would go as far as to say that the Euro is heavily oversold at these levels and this is not linked to the headlines that Europe has defeated populism.

Although political headlines are still overshadowing economic news when it comes to the global market theme of 2017, there is an improved economic sentiment around Europe that has been building recently as a result of significantly improved data.

Perhaps the reason for the heavy selling pressure on the Euro at present is due to expectations that the European Central Bank (ECB) will leave monetary policy accommodative, despite the stronger data being seen around Europe.

Time to shift focus to upcoming OPEC meeting?
Now that the French election is out of the way, investors should highlight May 25 in their calendar, because this is when the next OPEC meeting is scheduled in Vienna. Traders should expect and be prepared for shifts in volatility in both directions when it comes to the price of Oil, as the markets speculate over what the outcome of the meeting could possibly be.

I expect for producing nations to publicly talk up the prospects of an extension to the current production cut agreement made late in 2016, but this doesn’t impact the underlying factor that the real fight OPEC has to deal with is a battle with US Shale production.

There has been an obvious correlation that inventories from Shale production in the US have improved in recent months, which is surely going to be weighing heavily in the minds of all the Oil ministers from both OPEC and non-members when they sit at the table in a couple of weeks.

As always investors should prepare for the unexpected when it comes to OPEC meetings with recent history in mind that there have been unexpected surprises from past meetings. With that in mind there are at least two possible risk scenarios that investors should consider in the lead up to the May 25 event:

While the organisation is currently committed to reducing output, that agreement expires next month. With the markets believing that the current collaboration will need to be extended, there is a risk that the markets will be caught off-guard with a decision to delay it, in order to prevent further US Shale production from reaching the landscape.

Should OPEC and Non-OPEC agree to an increase in production for the second half of the year, a volume war could be on the cards with this providing sellers with heavy encouragement to begin pricing in the resumption of heavy selling momentum and a possible return to the historic lows for Oil.

The other risk scenario that investors would be mindful to factor into consideration is that there is an agreement to throw in the towel and submit to extending not only the duration of the current agreement, but also cutting further output.

Although this would be seen as OPEC declaring Shale victorious in the production war and would also further weaken the credibility of oil producers who, until just a few years ago, were in full control of global oil production, it would most probably achieve a stronger rebound in the price of Oil.

Basically what this could come down to is whether OPEC and Non-OPEC members are willing to lose face by accepting defeat to Shale in return for a further boost in revenue, or are they committed to prolonging their participation in this ongoing production war with Shale?

GBPUSD not ready to touch 1.30 yet?
The Pound is trading in a very narrow range against the Dollar at the beginning of the week as the spotlight shines on the French election result, and it looks like the British Pound is shying away from touching 1.30 for the first time since September 2016.

While the Pound benefitted from some impressive PMI results last week, it is possible that investors will shift their attention to the Bank of England (BoE) and the likelihood of inflation risks being highlighted when the latest inflation report is delivered this Thursday.

 

 

 


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E-Financial

Extradition Papers Completed for Anjarwalla, Fugitive Binance Executive- INTERPOL Africa

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Garba Umar, vice president, Nigerian Central Bureau (NCB) of the International Criminal Police Organization (INTERPOL) for Africa confirmed on Tuesday that the extradition papers for Nadeem Anjarwalla , escaped Nigeria Binance executive have been finalized.

Extradition Papers Completed for Anjarwalla, Fugitive Binance Executive- INTERPOL Africa

Nadeem Anjarwalla

Umar made the announcement during a television appearance on the Nigerian news program Sunrise Daily.

“We are now doing everything possible to ensure the country complies with INTERPOL’s rules of international police cooperation by initiating the extradition process to bring him back to face justice in Nigeria,” Umar said.

Anjarwalla was originally detained by Nigerian authorities alongside fellow Binance executive Tigran Gambaryan in late February and arrested on charges of money laundering and tax evasion. He fled shortly thereafter before reportedly being found and detained by Kenyan officials just over a week ago.

Questions have swirled over the legitimacy of Anjarwalla’s and Gambaryan’s capture, with media reports suggesting that the country’s officials demanded personal information from the crypto exchange’s top users.

The duo, who were reportedly invited to the country by its government, are due back in an Abuja court for a hearing later this month.

Meanwhile, Binance claimed it was “collaborating” with the Nigerian government on its employees’ safe return.

“Binance respectfully requests that Tigran Gambaryan, who has no decision-making power in the company, is not held responsible while current discussions are ongoing between Binance and Nigerian government officials,” a recent statement from the company said.

Anjarwalla and Gambrayan aren’t the only higher-ups at the crypto exchange facing prison time.

On Tuesday, Changpeng ‘CZ’ Zhao, Binance founder and former CEO was sentenced to four months in U.S. prison after a recent jury trial found him liable for fraud related to the crash of algorithmic stablecoins Terra and Luna.

“I will do my time, conclude this phase and focus on the next chapter of my life (education),” the Binance founder said in a Tuesday X post. “I will remain a passive investor (and holder) in crypto. Our industry has entered a new phase. Compliance is super important.”

In addition to jail time, CZ will be fined $50 million, and Binance will pay $4.3 billion in penalties.

Whether or not Anjarwalla will be extradited or the crypto exchange will be able to win its reputation back amidst the push for regulatory compliance is yet unclear.

 


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PAPSS Set for Expansion To Boost Intra-Africa Payments

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The Pan African Payment and Settlement System (PAPSS) which was launched to make cross-border transactions seamless, is set to capture more markets in Africa.

The plan was disclosed last week by the Chief Executive Officer of PAPSS, Mr. Mike Ogbalu, during a stakeholders’ forum held in Lagos.

Ogbolu, who was represented, said Fintech across the continent of Africa can operate more seamlessly and widely with the assistance of PAPSS.

According to him, “Currently, there are numerous impediments and challenges facing intra-African trade payments. Banks must navigate sometimes conflicting local, multi-country and multiregional regulations to enable the seamless movement of funds on behalf of their diverse customers across the continent. Operational inefficiencies and onerous compliance requirements are time-consuming impediments.”

In his opening remarks, Mr. Patrick Akinwunta, Ex Ecobank Group Managing Director & Regional Executive at Ecobank Nigeria, said banks, their customers and anyone or business involved in financial transactions across the continent of Africa stand to benefit massively from the PAPSS system.

“The essence of PAPSS is to help in cross-border financial settlement with ease, speed and precision. It is a practical process of instant delivery and a major aggregator that brings everybody together. We all need a connecting point; and PAPSS is the big umbrella.

As a centralized Financial Market Infrastructure that enables the efficient flow of money securely across African borders, minimizing risk and contributing to financial integration across the regions, PAPSS works in collaboration with Africa’s central banks to provide a payment and settlement service to which commercial banks and licensed payment service providers across the region can connect as ‘Participants’.

In his presentation, Mr. Osita Ugwu, Chief Technology Officer at PAPSS, disclosed that 60 banks have already gone live on PAPSS platform, while another 60 are doing integration.

According to him, “By year end, we are expecting 23 banks to be integrated. As of today, 60 banks are doing integration and another 60 banks are going live.

Since its launch by the African Union and the Afreximbank in 2022, several commercial banks have been onboarded on its system.

PAPSS is a pan-African payment system facilitating instant cross-border payments in local African currencies. It is a centralised platform that connects central banks, commercial banks, and other financial institutions across the continent.

The platform was launched in January 2022 by the African Export-Import Bank (Afreximbank) and the African Union (AU). At launch, it was sold as a system that could reduce the cost and time of cross-border payments in Africa and boost intra-African trade. It has partnered with over 25 commercial banks since its launch and helps accelerate payment processing as a real-time gross settlement system.

The system also boosts security compared to the current correspondent banking system, as it operates on a centralised platform governed by the AU and Afreximbank.

At the event, PAPSS introduced a new settlement model called the Commercial Bank Settlement Model (CBSM), which allows commercial banks to open and fund their settlement accounts at Afreximbank and manage their liquidity as per their banking requirements.


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FCMB Group Records 186% Profit Growth, Proposes 50k Dividend

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For the year ended December 31, 2023, FCMB Group Plc grew deposits, loans, assets under management, revenue and earnings and improved its environmental, social, and corporate governance scorecard. The Group recorded a profit before tax of ₦104.4 billion, a 186% year-on-year (YoY) increase compared to ₦36.6 billion in 2022 and earnings growth across its business segments: Banking Group 212.6%, Consumer Finance 67.3%, Investment Management 40%, and Investment Banking 89.7%.

FCMB Group, which proposed a dividend of 50 kobo per share for its shareholders, contributed to food security and import substitution in Nigeria by increasing lending to the agricultural sector by 38.4% from N147.4 billion in 2022 to N204.3 billion in 2023. In addition, the Bank supported over 300,000 smallholder farmers, 56% of whom were women in agriculture, in rural communities to support the sector. Over $280 million of funding from DFI’s and donor agencies was raised during the year to support the attainment of sustainable development goals in critical sectors of the economy.

Leveraging its core banking business, the Group facilitated over $700 million and $100 million in export and remittance flows into Nigeria, respectively, as at December 2023.

In safeguarding the environment, it switched six additional branches of its retail and commercial banking subsidiary (First City Monument Bank Limited) from grid/diesel generators to solar power last year, taking the number of branches running on renewable energy to 160, which represents 78% of total branches.

In addition, the Bank secured funding of up to N13 billion from local development finance institutions for on-lending to customers requiring solar energy solutions to further support its commitment to driving renewable energy.

FCMB’s customer base grew by 15.6% YoY from 10.9 million to 12.5 million for the period ended December 2023, whilst users of its mobile app that offers lending, wealth and payment solutions grew by 31% YoY to 3.4 million. Similarly, the Bank’s agency banking network grew to over 164,000 agents. With an enlarged customer base, an expanded distribution platform, and the use of artificial intelligence to automate and optimise loan underwriting processes, the Group successfully disbursed over 1.5 million loans worth N100.8 billion to individuals, N14.4 billion to micro-enterprises and N177.9 billion to SMEs during the period.

Commenting on the results, the Group Chief Executive of FCMB Group Plc, Mr Ladi Balogun, said: “We continue to leverage our unique Group structure to build a technology-driven ecosystem that is fostering inclusive and sustainable growth in the communities we serve.

“This strategy is enabling us to deliver robust performance in spite of the challenging domestic and global environment. Barring unforeseen circumstances, we believe this trend will be sustained and accompanied by improving efficiencies arising from greater scale and ongoing digitisation”.

The results across market fundamentals also showed gross revenue of N516.4 billion for the period ended December 2023, an 82.5% growth from N283 billion for the same period the prior year. Net interest income grew by 44.8% from N122 billion in 2022 to N176.6 billion in 2023. Customer confidence in FCMB remained strong, as deposits rose by 58.5% YoY from N1.94 trillion to N3.08 trillion, just as loans and advances grew by 54% from N1.20 trillion to N1.84 trillion. The Group’s total assets increased by 48.3% from N2.98 trillion to N4.42 trillion at the end of December 2023.

FCMB Group’s Assets Under Management increased by 29.6% last year from N783.7 billion to N1.02 trillion. The value of investment banking transactions consummated by the Group rose to N945.3 billion for the period ended December 2023, compared to N857.1 billion in the same period the prior year.

FCMB Group, a financial services holding company headquartered in Lagos, Nigeria, and listed on the Nigerian Exchange Group (NGX), has strategic interests in companies serving over 12.5 million customers across five key platforms: banking, consumer finance, investment management, investment banking, and financial technology. The Group and its subsidiaries are building an ecosystem that promotes inclusive and sustainable growth in their communities, primarily in Africa, its diaspora, and the United Kingdom, by connecting people, capital, and markets.


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