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Will the Central Bank of Nigeria Cut Interest Rates in November?

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By Lukman Otunuga, senior research analyst at FXTM,

Rising inflationary pressures in Nigeria will certainly complicate the Central Bank of Nigeria’s efforts to cut interest rates to stimulate growth.

The nation’s annual inflation edged up to 11.24% in September 2019, its highest level in three months after falling to a three-and-a-half-year low of 11.02% in August.  Given how the CBN governor has already made it clear that inflation must hit single digits before a rate cut could be considered, it remains uncertain whether the central bank will cut interest rates before year end.

A rate cut could inject the Nigerian economy with a welcome boost, as it stimulates consumption which accounts for roughly 80% of GDP. But However, cutting the MPR when the inflation rate is at 11.22 percent risks further overheating prices. Like other economies, Nigeria may be exposed to the impacts of a global slowdown but its economy is very different from the US’ which is currently experiencing anemic price inflation. This may be why the Central Bank of Nigeria decided to prioritize reducing inflation to single digits and said it is in no hurry to reduce its key rate.

In the absence of cutting interest rates, the CBN has raised the country’s loan to deposit ratio for banks to 65% from 60%. Making sure money is in circulation instead of being tied up in government bonds sounds like a logical way to keep the economy on the road to recovery. However, it remains to be seen whether this will be enough to promote growth.

Trade hopes lift risk mood; Brexit drama continues

There is a mood of optimism and hope across financial markets on Tuesday morning thanks to upbeat comments from President Donald Trump regarding the progress of trade talks with China.

Given how the President said China has signaled that negotiations over the initial trade deal are moving in the right direction, expectations remain elevated over both sides signing an agreement at a meeting in Chile next week. This positive sentiment is supporting Asian stocks during early trading and is likely to trickle down to European markets later this morning. While the encouraging mood across financial markets will remain stimulated by trade optimism, risk aversion could still make an abrupt return should talks drag on or turn sour.

Pound volatility expected as Brexit drama continues

The past few days have been volatile for the British Pound due to ongoing uncertainty and constant drama revolving around Brexit.

Sterling seems to be catching its breath early this morning as MP’s prepare to vote on Boris Johnson’s Withdrawal Agreement Bill later this afternoon. If the deal hits a brick wall, the ball then gets hurled back to Brussels as we await confirmation of the Government’s Brexit extension request. Should MPs back the Prime Ministers deal, a programme of motion will take place shortly after, followed by a debate on amendments of the bill on Wednesday. Regardless of what happens today, the British Pound is set to remain volatile.

 With regards to the technical picture, GBPUSD has broken above the bearish channel on the weekly timeframe. A solid daily close above 1.30 should inspire a move towards 1.3160 in the medium term. Should 1.30 prove to be a stubborn resistance level, I see Sterling declining back towards the 1.2700 support.

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Dollar Index poised for further declines?

There has not been much action in the Dollar Index (DXY) since the start of the week with prices trading around 97.76 as of writing.

The heavy selloff witnessed last week has placed bears in a position of power. The DXY is under pressure on the daily charts with prices trading under the 200 Simple Moving Average. Sustained weakness below the 97.50 level should encourage a decline back towards 97.00 in the short to medium term.

Commodity spotlight – Gold

Gold is likely to remain on standby in the absence of a fresh directional catalyst.

The precious metal is waiting for the next big theme or market-moving event that will influence global sentiment and risk appetite. Until something fresh is brought into the picture, Gold is positioned to trade within a modest range in the short to medium term.

Looking at the technicals, all eyes will remain on the psychological $1500 level. Sustained weakness below this point should inspire a decline towards $1470. Alternatively, a solid breakout above $1500 will most likely open the doors towards $1515 and $1525, respectively.

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Ugo Onwuaso is an ICT enthusiast. He believes technology should be used for general good. He holds a Master of Public Administration (MPA) degree from the Lagos state University.

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E-Financial

FG Makes u-Turn on Bank Account Re-Registration

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Federal government on Friday apologised for asking all account holders in financial institutions in the country to re-register their personal details.

FG makes u-Turn on Bank Account Re-Registration

Recall that the federal government had on Thursday ‎ordered that all persons holding accounts across financial institutions and insurance firms should complete and submit self-certification forms to their respective financial institutions.

The notice issued by the government to that effect read, ‎“This is to notify the general public that all account holders in Financial Institutions (Banks, Insurance Companies, etc.) are required to obtain, complete, and submit Self – Certification Forms to their respective Financial Institutions.

“Persons holding accounts in different financial institutions are required to complete and submit the form to each one of the institutions. The forms are required by the relevant financial institutions to carry out due diligence procedures, in line with the Income Tax Regulations 2019.‎”

The directive raised eyebrows, as account holders already possessed Bank Verification Numbers.

Following widespread condemnation that trailed the directive, the Federal Government backtracked on Friday, saying the fresh guidelin‎e was not for all Nigerians.

The government attributed the development to misinformation.

The clarification issued by the government on Friday read, ‎“We apologise for the misleading tweets (now deleted) that went up yesterday, regarding the completion of self-certification forms by Reportable Persons. The message contained in the notice does not apply to everybody. ‎FIRS will clarify Nigerians on the objectives of the directive.”

Also on Friday, FIRS, in a statement posted on Twitter, explained that the guidelines were only for non-residents, as well as people paying tax in more than one country.

Parts of the FIRS statement read, “The Self Certification Form is basically to be administered on Reportable Persons, holding accounts in Financial institutions, that are regarded as “Reportable Financial Institutions” under the CRS.

“Reportable persons are often non-residents and other persons, who have residence for tax purposes in more than one jurisdiction or country.”

“The information that indicates an account holder is a resident for tax purposes in more than one jurisdiction, is expected to be available to Financial Institutions during account opening processes, for the KYC and AML purpose.”


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Stanbic IBTC Bank Disowns Lagos ATM Fraudster

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Stanbic IBTC Bank PLC has disowned Tope Olajide, 22-year-old fraudster arraigned for theft of customers deposits.

Stanbic IBTC Bank Disowns Lagos ATM Fraudster

The Bank said this in a statement on Wednesday.

The statement said: “The attention of the management of Stanbic IBTC Bank PLC has been drawn to news currently circulating in the media, about the alleged arraignment of staff of the Bank on charges bordering on the theft of customers deposits.

“The Bank would like to clarify that the defendant, a 22-year-old Tope Olajide, IS NOT, and was at no point in time an employee of Stanbic IBTC Bank PLC.

“The alleged culprit was apprehended around 7:30 am, on Thursday, 27 August 2020, by security operatives after he was exposed by CCTV footage using ATM cards he had allegedly stolen and converted, to make withdrawals from the accounts tied to the stolen ATMs.

“The CCTV footage also showed the alleged culprit pretending to assist customers at ATMs whilst also attempting to fraudulently dispossess the customers of their ATMs.

“He was subsequently arraigned before an Ikeja Magistrate Court on Monday, 14 September, for stealing the debit cards of two customers and using them to unlawfully withdraw the sum of N427,000.

“The Bank would also like to implore members of the public to be security conscious when conducting transactions at ATMs. Customers are advised to report any suspicious actions around them to security operatives who are usually stationed around the Bank’s ATMs, when carrying out transactions at any of our ATM locations.

“As an organisation, we hold dear the values of integrity, and we will continue to prioritise the safety of our customers effectively.”


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Buhari Okays Establishment of CBN-Led Infraco

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President Muhammadu  Buhari has approved the establishment of an   Infrastructure Company (Infraco) to be driven by the Central Bank of Nigeria (CBN) in partnership with the African Finance Corporation (AFC) and the Nigerian Sovereign Investment Authority (NSIA).

Buhari Okays Establishment of CBN-Led Infraco

Mr. Godwin Emefiele, CBN governor

This is coming  on the heels of the foreign reserves’ slump to $36 billion following a cocktail of monetary policy interventions by the apex bank to cushion the scathing effects of the COVID-19 pandemic on the economy.

Mr Godwin Emefiele, CBN governor, made these disclosures in Abuja at the annual conference of the Chartered Institute of Bankers of Nigeria (CIBN) with the theme: Facilitating a Sustainable Future: The role of Banking and Finance.

According to him, Infraco would enable the use of private and public capital to support infrastructure investment that will have a multiplier effect on growth across critical sectors.

“This entity would also be able to raise funds from the capital markets and mobilise long term finance to address some of our infrastructure needs, while providing reasonable returns to investors. “We believe this well-structured fund can act as a catalyst for growth in the medium and the long run. The support of the banking community will be important in achieving this objective.

“A well-built infrastructure system, comprising hard infrastructure such as roads and ports, and soft infrastructure such as broadband penetration, can have a multiplier effect on growth by enabling the expansion of business activities in the country”, he explained.

On foreign reserves, Emefiele attributed its crash to the decline in foreign exchange earnings and subsequent adjustments in the value of the naira to the dollar.


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