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Will the Central Bank of Nigeria Pull the Rate Cut Trigger?

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By Lukman Otunuga, Senior Research Analyst at FXTM,

As the coronavirus outbreak creates shockwaves across the globe, central banks and governments are enforcing emergency measures to defend their respective economies.

It was only last week that the Central Bank of Nigeria (CBN) technically devalued the Naira at the Investors and Exporters (I&E) windows of the nation’s foreign exchange markets. While this move may attract foreign exchange investors due to the convergence of the multiple exchange rates, it may end up stoking inflationary pressures and complicating the implementation of the 2020 budget which predicted N305 per dollar. The CBN also announced a reduction of interest rates in all its intervention facilities from nine per cent to five per cent per annum for one year while pledging to inject over N1 trillion across critical sectors of the economy. With the CBN going all in out in shielding the Nigerian economy from the coronavirus outbreak, speculation is rising over the bank cutting benchmark interest rates from 13.5% in March.

 

Risk appetite returns as Fed goes limitless…but for how long?

As monetary policy bazookas prove ineffective against the coronavirus-induced market chaos, central banks are taking unprecedented steps in defending their respective economies against the pandemic.

Over the last 24 hours, the Federal Reserve dropped an atomic monetary bomb by announcing an open ended unlimited quantitative easing program in an effort to promote stability across financial markets.  Although the initial reaction was somewhat mixed with shares on Wall Street closing in the red overnight, investors seem to be taking heart from the Fed’s limitless pledge, as Asian stocks roar back to life this morning and US futures jump. However, this positive market mood is unlikely to last given how the Senate once again failed to move ahead with a $2 trillion US coronavirus stimulus package at the start of the week.

If the global economy is a tin bucket filled with water, the coronavirus outbreak has drilled multiple holes into it and monetary policy bazookas are unable to stop the water from leaking away. While fiscal policies could plug some of the holes, the solution may have to be a new bucket which in this instance is a cure to the coronavirus.

 

More Pound pain as UK enters lockdown?

Sterling could be set for more weakness after Prime Minister Boris Johnson ordered a three-week lockdown to reduce the spread of the coronavirus. With “non-essential” shops and services being ordered to shut as part of the strict new measures, consumption could be hit, stimulating fears over the United Kingdom entering a recession. The latest flash manufacturing and services PMI data for March will be released later this morning. The Pound may end up offering a muted response to the data as investors focus on the three-week national lockdown and what it means for the economy.

Focusing on the technical outlook, a picture is worth a thousand words and this remains true for GBPUSD which is trading at levels not seen since 1985. Consolidation at the lows points to further downside with the first key level of interest at 1.1400. A breakdown below this level could open the flood gates towards 1.1300 and lower.

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Commodity spotlight – Gold

Everyone has wanted a shiny piece of Gold over the last 24 hours, after the Fed took unprecedented measures to defend the US economy from the coronavirus outbreak.

The precious metal has appreciated over 2.7% since the start of the week and has the potential to extend gains on Dollar weakness. A sense of unease over the coronavirus developments and fears around a global recession should support appetite for gold moving forward. Looking at the technical picture, the precious metal has extended gains this morning with prices trading around $1575 as of writing. An intraday breakout above $1580 could swing open the doors towards $1600.

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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

CBN Investigates 55 Companies over Forex Infractions

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Amidst sustained pressures on Nigeria’s official foreign exchange resources, the Central Bank of Nigeria (CBN), has opened investigations into foreign exchange transactions of 55 companies and individuals.

The apex bank linked them to foreign exchange deals outside the official Investors & Exporters (I&E) window.

CBN Investigates 55 Companies over Forex Infractions

Mr. Godwin Emefiele, CBN governor

The I&E window was created by the CBN as the legitimate platform for buying and selling of foreign currencies.

Some of the major corporate organisations in the list include Stallion Nigeria Limited, a conglomerate involved in several sectors of the Nigerian economy.

The list also includes Nigeria’s leading electronic payment company, Interswitch Nigeria Limited, as well as a leading global shipping line, CMA CGM Nigeria Shipping Limited.

Other big names in the list include Petro-Afrique Energy Services Limited, Steel Force Far East Limited, Auto Petroleum Company Limited, Cavendish Mechanicals Limited, Aquashield Oil & Marine Limited, Haitch & Elf Integrated Services Limited, Fenog Nigeria Limited, and Promasidor Nigeria Limited.


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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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