AMCON Finally Sells Keystone Bank

The Asset Management Corporation of Nigeria (AMCON) on Monday announced Sigma Golf Nigeria Limited and Riverbank Investment Resources Limited (the Sigma Golf-Riverbank consortium) as the new investors that have acquired the entire issued and fully paid up ordinary shares of Keystone Bank Limited, formerly BankPHB Plc.

This followed the receipt of the necessary regulatory approvals from the Central Bank of Nigeria (CBN) and the Securities and Exchange Commission (SEC).
AMCON in a statement on Monday explained that the completion of the transaction was subject to the fulfilment of the conditions precedent as stated in the Share Sale and Purchase Agreement (SPA) executed between AMCON and the Sigma Golf-Riverbank consortium.

Nigeria's Inflation Declines To 17.78%

The cost of goods and services in Nigeria improved for the first time in over a year following a series of policy implemented by the Central Bank of Nigeria to manage consumer prices and moderate foreign exchange.

The consumer price index which measures inflation rate rose 17.78 percent, year-on-year, in February. This was 0.94 percent lower than 18.72 percent recorded in January, the National Bureau of Statistics reported on Tuesday.

However, on a monthly basis, the cost of goods and services surged by 1.49 percent in February, which was 0.48 percent more than 1.01 percent increase recorded in January.

Accordingly, price increases were recorded across all COICOP divisions but the major division responsible for accelerating the rate of increase were water, housing, electricity, gas and other fuel, education, food and alcoholic beverages, clothing and footwear and transportation services.

FG Reveals Nigerian Economic Plan Recovery

The Federal Government has released the Economic Recovery and Growth Plan (ERGP) which unveils a road map for Nigeria’s economic recovery, growth and sustainable development.

This was according to a statement issued on Tuesday by the Media Adviser to the Minister of Budget and National Planning, Akpandem James.

According to the statement, the development of the plan went through a rigorous process including wide consultation and robust engagements with stakeholders from a range of relevant fields.

They include: economic experts from the public and private sectors, academia, the Organised Private Sector, Civil Society groups, Organised Labour, sub-regional governments, International Development Partners (including the World Bank, International Monetary Fund and African Development Bank), the National Economic Council (NEC) and the National Assembly.

The statement hinted that the Plan has been approved by the Federal Executive Council, adding that its ceremonial presentation would take place when President Muhammadu Buhari returns from vacation.

Achieving Structural Economic Change

The statement read: “The core vision of the Plan is one of sustained inclusive growth. There is an urgent need as a nation to drive structural economic transformation with an emphasis on improving both public and private sector efficiency.

“The aim is to increase national productivity and achieve sustainable diversification of production, to significantly grow the economy and achieve maximum welfare for the citizens, beginning with food and energy security.

“The Plan envisages that by 2020, Nigeria would have made significant progress towards achieving structural economic change with a more diversified and inclusive economy. Overall, the Plan is expected to deliver on Five key broad outcomes namely: a stable macroeconomic environment, agricultural transformation and food security, sufficiency in energy (power and petroleum products), improved transportation infrastructure and industrialisation focusing on small and medium scale enterprises.

“Realising that the country’s economy would remain on a path of decline if nothing was immediately done to change the trajectory, the present administration, when it assumed office, embarked on strategic moves to halt the trend and redirect the course of the country’s economy and growth process.

A Knowledge-Based Economy

“The process started with the development of the Strategic Implementation Plan (SIP) for the 2016 Budget of Change as a short-term intervention. The ERGP, a Medium Term Plan for 2017 – 2020, builds on the SIP and has been developed for the purpose of restoring economic growth while leveraging the ingenuity and resilience of the Nigerian people.

“The Plan seeks to eliminate the bottlenecks that impede innovations and market based solutions, recognises the need to leverage Science, Technology and Innovation (STI) to build a knowledge-based economy, and is consistent with the aspirations of the UN’s Sustainable Development Goals (SDGs).

“The ERGP differs in several ways from previous strategies and plans as it:

is anchored on focused implementation which is at the core of the delivery strategy over the next four years;
outlines bold initiatives such as ramping up oil production to 2.5mbpd by 2020, privatising selected public enterprises/assets, and revamping local refineries to reduce petroleum product imports by 60 percent by 2018;
builds on existing sectoral plans such as the National Industrial Revolution Plan and the Nigeria Integrated Infrastructure Master-plan;
signals a changing relationship between the public and private sector based on close partnership.
utilises the value of the merger of budget and planning functions into one Ministry to create a better and stronger link between annual budgets and the ERGP; and
provides for strong coordination with the States to ensure that the Federal and sub-regional governments work towards the same goals.

Vision Of Inclusive Growth

“The thinking behind the development of the Plan was driven by several fundamental principles, including a focus on tackling constraints to growth; leveraging the power of the private sector and promoting national cohesion and social inclusion, as well as allowing markets to function.

“The Plan has three broad strategic objectives which are expected to help achieve the vision of inclusive growth: restoring growth, investing in the people, and building a globally competitive economy.

“The ERGP focuses on achieving macroeconomic stability and economic diversification by undertaking fiscal stimulus, ensuring monetary stability and improving the external balance of trade.

“The delivery mechanism has been identified as a major determining factor in the successful implementation of the Plan. The implementation strategy therefore focuses on prioritising the identified strategies, establishing a clear system of accountability for well-defined assignment of responsibilities, setting targets and developing detailed action plans, allocating resources to prioritised interventions, creating an enabling policy and regulatory environment, developing an effective monitoring and evaluation system to track progress, and using effective communication strategies”.

CBN Offers $367m For Forex Forwards

The Central Bank of Nigeria on Monday said it carried out another round of retail intervention in the interbank foreign exchange market by providing a total of $367,134,329.93 to meet the forward requests of customers.

A breakdown of the funds shows that the sum of $144,073,753.07 was for 45 days, while $223,060,576.86 was for 60 days.

A statement by the CBN’s Acting Director in charge of Corporate Communications, Isaac Okorafor, said the move was in line with the bank’s determination to ease the foreign exchange pressure on various sectors through forward sales under the new flexible forex regime to keep the market liquid.

Since the modification of the foreign exchange policy by the CBN, over $1bn had been made available to meet the needs of various users of foreign exchange.

During the first intervention in the forex market last week, the CBN offered $500m for sale to banks, but not all of them provided enough naira backing to pay fully for their respective bid amounts.

At the second intervention, a total of $221.3m was made available to 16 banks for forward sales to end-users of forex.

Okoroafor assured that the CBN would continue to make interventions based on qualified bids from the banks on the requests of their customers.

He reiterated that the CBN was more than ever ready to support the inter-bank market by ensuring liquidity and transparency to guarantee efficiency in the forex market.

Okorafor therefore urged all market participants to contribute their patriotic quota and assist in ensuring that the new measures put in place by the CBN guarantee the stability of the financial market as well as the growth and development of the economy to the benefit of all Nigerians.

Meanwhile, the interbank forex market traded $540,000 on Monday in early deals at N375 per dollar, near a record low exchange rate hit last November, Thomson Reuters data showed.

The local currency traded at a record low of 375.50 to the dollar last November on the official interbank market before it reversed the losses.

Traders said banks were selling dollars bought from international money transfer agents to retail customers at N375.

The interbank market traded a total of $3.77 million at multiple exchange rates on Monday, the data showed. It was quoted at 305.25 per dollar at 9:51 am.

In February, the central bank effectively devalued the naira for private individuals, offering to sell the currency at around half the premium charged on the black market, in a bid to narrow the spread on the unofficial market.

The currency was quoted at 465 on the black market, 1.5 per cent down from Friday’s close, as pressure was starting to pile up in that market segment despite a series of central bank intervention on the official market to boost liquidity.

CBN New Forex Policy Fails To Excite Foreign Investors

While the nation ’ s forex market has seen increased liquidity in recent days on the back of the Central Bank of Nigeria ’ s new policy action, foreign investors are not keen on bringing back capital into the country.

Industry experts, including the Chief Executive Officer , Financial Derivatives Company Limited , Bismarck Rewane , say the issue of investor confidence remains unaddressed

The CBN had on February 20 said it would provide direct funding to banks to meet the needs of Nigerians for personal and business travels , medical needs and school fees, effective immediately.

Although the weekly sale of forex to banks has helped to narrow the spread between the official and parallel exchange rates, pressure remains on the naira.

The naira, which posted some gains days after the CBN action , plunged to 475 per dollar at the parallel market on Friday from 450 on Thursday. It hit an all -time low of 520 to the dollar on February 20.

The Global Chief Economist , Renaissance Capital , Charles Robertson, described the increase in liquidity in the forex market as helpful, saying , “ Foreign investors want to know they can take profits on their investments when they bring money in.

“ But investors are deterred by multiple currency rates; so , the interbank rate too needs to align with the parallel rate , and this has not happened yet, ” he said in an emailed response to questions from our correspondent.

The interbank rate stood at N 305. 25 per dollar as of Friday, according to the CBN.

Robertson said investors might be slow to return , noting that in mid - 2016, some foreign investors put money into Nigeria when the currency was floated, but then found out that they were stuck again .

“ They will be more wary this time. This new policy has been a positive move , but does not yet compare to the greater reforms in Egypt that have reportedly attracted $13bn back into the Egyptian banking system , ” he said .

According to Rewane , the policy framework , the implementation and the process have to be consistent.

“ Until you actually free up the market and do all the things that are required , you will have exchange rate movement that is not predictable, ” he said.

He also described the CBN action as a move in the right direction “ but there is a lot of more work to be done . ”

“ The parallel market has actually started depreciating again . The more forward transactions they do , the less spot transactions they do , the weaker the naira is going to become . And that is what is happening already, ” he explained.

According to Rewane , there is a question of liquidity and a question of confidence , and liquidity does not address the question of confidence .

He said , “ You have to win the confidence of investors . Investors’ confidence is not won because you put some liquidity into the market for one week.

“ We have more work to do. We need to make the market transparent , allow the oil companies to sell into the market, allow the market move and don’ t control the price . ”

The President , Association of Bureau De Change of Nigeria , Mr . Aminu Gwadabe , said the fall of the naira to 475 per dollar was largely due to the increasing pressure on the transfer segment of the market.

“ Also , the slow take off of banks is an impediment to the exercise. Some banks give a 30-day waiting period to consummate school fees transfer. The market is also witnessing a stronger demand from our neighbouring countries, ” he added.

According to Gwadabe , the different applicable exchange rates and volumes by operators for the same product is also enhancing restriction to a single rate in the market.

“ If the CBN reviews the distribution channel and ensure that the BDCs serve the critical retail segment of the market and maintain intervention , the strength of the naira will continue in the days ahead , ” he said .

The Chief Executive Officer /Partner, National Finance, a US-based firm , Tor Langoy , stressed the need for proactive measures to entice capital into Nigeria.

“ There is serious lack of liquidity across sectors . Everybody requires capital . But we can only help a few . Capital is only going to start flowing again when you let go of the interference with the currency, ” he explained.

Citing the United Arab Emirates as one the countries that have successfully attracted capital , Langoy said , “ By introducing business- friendly policies, the entire world is now aware of the benefits of doing business in Dubai. There is no problem of repatriating your capital , and you don’ t have any forex issue; no capital controls.

“ These are major things for foreign investors. If a country is not able to fix those basic things, the capital goes somewhere else . The capital moves around the world , and Nigeria is just one out of 193 nations or investment destinations that are competing for the capital. ”

He said , why should anyone invest a dollar in Nigeria when they could happily invest in Dubai or in any other nations in Africa without currency issues and fiscal and monetary policies unconducive for investments?
“ The global capital markets are just waiting for a free float of the naira. The naira may depreciate .

But take the pain and get over it. If it’ s 1, 000/dollar; it doesn ’ t matter . Look at what happened to the Egyptian pound. It dropped 50 per cent but now money is coming back into the country . It is just like a few months of pain with decades of happiness, ” Langoy stated .

According to JPMorgan Chase & Co, until Nigeria devalues or makes a clear switch to a free -floating currency, the country will struggle to lure back foreign investors.

The Acting Head of Economic Research, Ecobank, Gaimin Nonyane, said the nation ’ s foreign reserves , which had been rising since November , remained inadequate to meet forex demand .

He said in a note, “ The CBN’ s ban on importers of 41 specified goods will prevent the naira from effectively clearing in the forex market.

“ We believe that the successful Eurobond issuance is a positive development for Nigeria , as the country seeks to source for forex to relieve pressure on the naira. ”

The Ecobank analyst said the forex injection should help to boost Nigeria ’ s forex reserves , and potentially allow the CBN to loosen its hold on the naira.

He added , “ However , the amount raised will not meet Nigeria ’ s estimated $5bn forex gap; this suggests that the operating environment will remain painful in the short term.

“As such, the naira will remain under pressure, exerting pressure on the CBN to devalue the currency further . We expect an official interbank market rate of close to N 360 - N 380 to a dollar in the coming months .”

Naira Gains On Parallel Market For Four Consecutive Days, Now N480/$

The Naira extends its gain against the US dollar on Thursday for the fourth consecutive day.

The local currency gained N21 from N501 it traded on Wednesday to close at N480 to a dollar. Bringing its total gain in a week to N40 after reaching all-time low of N520 on Monday.

On Monday, the CBN had announced a new forex policy actions to cater for categories previously excluded from the official forex rate and increase forex liquidity in the market.

The apex bank has since sold $370 million in an auction, forward contracts, and also appropriated a weekly $20 million to commercial banks at N375 to a dollar for school fees payment, medical bills and personal travel allowance.

According to the traders, the buy rate strengthened to N470 per dollar, from N490/$ it closed on Wednesday. This was after the CBN reportedly auctioned another $230 million through forward contracts on the interbank market.

Experts have said the continuous rise of the foreign reserves has strengthened CBN position but insisted sustainability is the key to economic recovery.

“The effectiveness of the new policy depend on sustenance, while sustenance depends on continuous foreign exchange generation through the sales of crude oil,” said Samed Olukoya, a foreign exchange research analyst at Investors King Limited. “Another attack on any of the pipelines could disrupt the whole policy and hinder the nation from a progressive economic recovery,” he added.

Naira Records Gain, Closes At 512/dollar On Tuesday

The naira recorded slight gain on Tuesday and closed at 512 against the United States dollar on the parallel market, a day after the Central Bank of Nigeria introduced a new foreign exchange policy action.

The CBN had on Monday announced its decision to begin sale of $1m weekly to each of the country’s 21 commercial banks at a rate of 375 naira to clear a backlog of demand for retail users and try to narrow the premium between the official and black market rates.

The decision was announced hours after the naira tumbled to 520/dollar on the parallel market as
scarcity of the greenback continued to weigh on the exchange rate

CBN Injects $371m Into Forex Market

About 24 hours after The Central Bank of Nigeria (CBN) announced fresh policy actions in the foreign exchange market, the bank has pumped $370.9 million into the forex market.

On Tuesday, the apex bank carried out wholesale interventions in the interbank forex market by trading a total of $370,810,810.79 to 23 banks “to meet the visible and invisible requests of customers”.

A source at the CBN said the qualified bids ranged from N315 to N360 per dollar, adding that seven banks received full allotments of their respective bids valued at $37,500,000 each.

“Other banks received allotments ranging from $46, 512.50 to $15,578,081.51,” the source added.

Isaac Okorafor, acting director, CBN corporate communications department, said the bank’s intermediation in the forex market was the first wholesale intervention aimed at easing the pressure of access to forex by Nigerians who intend to meet obligations that fall under visible and invisible needs categories.

He explained that the CBN offered $500,000,000.00 for sale to the banks, but not all of them provided enough naira backing to pay fully for their respective bid amounts.

On Monday, the CBN unveiled new policy actions to make forex readily available for personal and business travels, medicals and school fees.

As part of its new policy action, the CBN also directed all banks in the country to open forex retail outlets at major airports as soon as logistics permit them to do such.

In line with the new policy, the CBN also made spot sales of $6 million to four banks, and sold $35 million for the payment of school fees, medical bills and personal and business travel allowances.

Revenue Generation: FG May Revise Restriction On 41 Items

A boost in revenue gen­eration by the Nigeria Customs Service may be expected this year as indica­tion has emerged that the fed­eral government may revise the foreign exchange restric­tion placed on importation of 41 items into the country.



Customs had attributed the restriction among other factors to the reason it could not meet its revenue target in 2016.



Zonal Coordinator, Zone `A’ of NCS, Assistant Comptroller-General Monday Abueh, dis­closed that the Federal Govern­ment may reverse the foreign exchange restriction order.



Abueh disclosed this in Ibadan during his familiarisa­tion tour of Oyo/Osun Com­mands as part of his visits to Customs formations under his jurisdiction.



The Central Bank of Nige­ria (CBN) had on July, 2015, restricted 41 items, including vegetable oil, poultry products, cosmetics, plastic and rubber products, among others, from access to foreign exchange.



The apex bank said the coun­try had the capacity to produce those items locally.



Abueh said that when gov­ernment’s policies were rolled out, they were in the interest of the people, adding that Nige­ria could not be enriching oth­er countries by allowing some banned items into the country.

He therefore appealed to officers to be fully sensitised about implementing govern­ment’s policies anywhere they were posted to serve.

On the ban placed on the importation of rice anf vehi­cles through the land borders, Abueh urged officers to ensure non-passage of both items into the nation.

He said that smugglers might be trying to make Oyo and oth­er land borders their alternative routes since security at Idiroko and Seme has been fortified with serious surveillance.

The zonal coordinator who said that the Comptroller-General had redeployed offic­ers to land borders’ commands to ensure that nothing escaped through all the routes in the areas, called on the officers to learn excise operations to assist in cargo clearance.

 Abueh said his visit was meant to remind them about the Federal Government’s po­lices as well as the directive giv­en by the comptroller-general to ensure security and protec­tion of lives in the country.

“Officers should be mindful of their duties and responsibili­ties as you embark on your pri­mary assignment.

“If you are careless in your duties and if you are caught, you will be held responsible for your action,” he stated

CBN Releases $2.8bn To Manufacturers, Others In Two Months

The Central Bank of Nigeria on Thursday said it had disbursed the sum of $2.83bn worth of foreign exchange for the importation of various types of equipment in the real sector of the economy.

The amount was made available to the manufacturers to enable them source for raw materials and spare parts to boost production capacity.

The Acting Director, Corporate Communications Department, CBN, Mr Isaac Okoroafor, who confirmed the development said the amount was released in the last two months covering December 2016 and January 2017.

Okorafor explained that manufacturing, raw material, and agriculture among others got the highest amount, adding that this was done by the apex bank as part of its measures to create jobs, reduce the level of poverty and ensure inclusive growth in the economy.

Providing a breakdown of the forex allocation, he said $609m and $228m were released for raw materials in the months of December and January respectively, while manufacturing got $53m and $71m respectively during the same period.

Okorafor, said the apex bank would continue to play its role by easing the foreign exchange pressure on critical sectors of the economy.

He said, “The Central Bank of Nigeria has disbursed the sum of $2.83bn for utilisation in the critical sectors of the economy between December 2016 and January 2017.

“Manufacturing, raw material and agriculture among others topped these disbursements targeted at employment generating and wealth-creating sectors of the economy.”

Okorafor had last month explained that the CBN was committed to ensuring that manufacturers of goods for which Nigeria does not enjoy comparative advantage were able to get letters of credit to import the required materials for their businesses.

He had stated that since the CBN introduced restrictions on the sourcing of forex for 41 items from the inter-bank market, the restriction had indeed yielded positive results.

He urged manufacturers to take advantage of the policy, which he noted was part of efforts by the CBN to ensure that Nigeria reclaims its status as a major producer through backward integration.

This, according to him, would assist in conserving billions of foreign exchange spent on import bills annually.

Naira crashes to 516 as dollar scarcity widens

The naira appears to have entered a free fall mode with the local currency selling for 516 per United States dollar on the streets of Lagos on Thursday.

The naira plummeted at the parallel market from 510/dollar on Wednesday to 516/dollar on Thursday.

Currency dealers on the streets of Lagos Island sold the greenback at 516 and bought same for 513. In Egbeda, a major black market centre in Lagos, the naira was sold for 516 and bought at 510. At the Murtala Muhammed International Airport, Lagos, the dollar was bought on the parallel market for 516 and sold at 513.

On Wednesday, the local currency had closed at 507 against the greenback as acute dollar shortage continued to weigh on the currency market.

The local currency traded at 507/dollar on Monday and Tuesday on the black market.

Experts are divided over the outlook for the naira this year. However, some analysts have predicted that the local currency will take further beating against the dollar this year.

The Chief Executive Officer, Financial Derivatives Limited, Mr. Bismarck Rewane, said the local currency would hit 520/dollar this year on the parallel market and touch 350/dollar at the official market.

An economic expert, Mr. Henry Boyo, has predicted that the naira will hit 1000/dollar on the parallel market this year if the Central Bank of Nigeria fails to review its monetary policy framework.

According to him, the current monetary policy framework adopted by the CBN is skewed against the naira.

Other experts including the CEO of Afrinvest, a local research and investment advisory firm, Mr. Ike Chioke, says the naira will depreciate further against the dollar this year unless the CBN reforms the currency market.

Meanwhile, analysts have predicted that the naira will face fresh pressure on the parallel market next week with dollar supply falling short of demand by persons seeking currency to pay school fees abroad as the CBN continues to ration forex for businesses.

Demand for dollars has soared even though the external reserves have reached $29bn.

The naira continues to trade flat at the official interbank window at 305.5 to the dollar.

Traders said demand pressure was mounting on the black market but dollar supply had not significantly improved, suggesting further depreciation of the local currency might be coming, Reuters reported

World Bank Agrees To Give Nigeria $2.5bn Loan

The International Bank for Reconstruction and Development, popularly known as the World Bank has agreed to give Nigeria a $2.5bn loan

According to a tweet by Business Day Online, a Nigerian newspaper, the first tranche of $1.5bn is tied to a reform of Nigeria's Forex market.

Nigeria's Economy Recovering Fast - Presidency

The Presidency has said the nation’s economy which is currently in recession is currently on course for recovery and growth.

This was contained in the 23rd newsletter published by the Presidency Office of Digital Engagement, a copy of which was posted on the official website of the Presidency, @AsoRock.

The Presidency said there were 11 reasons to prove that the nation’s economy was gradually coming out of recession.

It said, “After two consecutive quarters of negative growth, the non-oil economy showed, in Q3 2016, a modest return to positive territory, at 0.03 per cent.

“This was partly due to the continued good performance of agriculture and the solid minerals, two sectors prioritised by the Federal Government.

“Agriculture grew by 4.54 per cent in the quarter under consideration of which growth in crop production at nearly 5 per cent was at its highest since the first quarter of 2014. Growth in the solid mineral sector averaged about 7 per cent.”

According to the document, the Anchor Borrowers Programme of the Central Bank of Nigeria substantially raised local rice production in 2016.

It explained that yields improved from two tonnes per hectare to as much as seven tonnes per hectare in some states.

It added that the Fertilizer Intervention Project which involves a partnership with Morocco, for the supply of phosphate is on course to significantly raise local production, and bring the retail price of fertilizer down by about 30 per cent.

The government said the newly established Development Bank of Nigeria was taking off, with initial funding of $1.3bn provided by the World Bank, German Development Bank, the African Development Bank and Agence Française de Development to provide medium and long-term loans to MSMEs.

It also disclosed that a new social housing programme tagged ‘Family Homes Fund’ is starting this year with a N100bn provision in the 2017 budget while the rest of the funding will come from the private sector.

“…Strategic Engagements with OPEC and in the Niger Delta have played an important part in raising our expected oil revenues. Already, Nigeria’s external reserves have grown by more than $4bn in the last three months.”

Nigeria To Generate $16.4 Billion From Asset Sales

Nigeria plans to generate as much as $16.4 billion through asset sales in the next four years to reduce the burden on the public budget, a Budget Ministry document showed.

The sales will help to tackle inefficiencies and stem “corruption in public enterprises,” according to the document obtained by Bloomberg, which outlines the West African nation’s plans for economic recovery from 2017 to 2020. President Muhammadu Buhari will introduce the proposal on an unspecified date this month. It didn’t name the assets it may sell.

Nigeria estimates its economy contracted 1.5 percent in 2016, partly because of a decline in the price and output of oil, the country’s biggest export and revenue generator. Buhari proposed a 20 percent increase in this year’s budget to stimulate the economy and help gross domestic product expand by an average of 4.7 percent annually over four years and reach 7 percent in 2020.

“They could look at reducing government stakes in oil joint ventures from around 55 percent to 40 percent or 45 percent — that alone can generate over $10 billion,” Pabina Yinkere, the Lagos-based head of research at Vetiva Capital Management Ltd., said by phone. “Non-oil assets like concession airports are a more difficult sale because they would involve a lot of transactions.”

The government targets oil production of 2.5 million barrels a day by 2020 to boost export earnings, it said in the document. Output declined to an almost three-decade low of 1.4 million barrels a day in August after militants in the Niger River delta region bombed pipelines to demand more benefits from the resource.

Dollar Extends First Weekly Gain Of Year Before Yellen Speaks

The dollar was extending gains that saw the first positive weekly performance of the year last week, as traders braced for two days of Capitol Hill testimony from Fed chair Janet Yellen.

Absent any significant economic data in the U.S. today, euro-dollar fell to its lowest since Jan. 19 as as Treasury yields and stocks both rose amid modest trading flows. Traders will parse Yellen’s remarks Tuesday and Wednesday to see if she tries to guide expectations for a rate hike at the Fed’s March meeting higher than the current ~32%. Traders are also anticipating inflation and retail sales data later this week to gauge the health of the economy.

 Traders say that while higher rates in the U.S. likely will underpin the dollar, there’s still some caution about building longs given the risk that President Trump may talk the currency down. With Treasury Secretary-nominee Mnuchin still awaiting confirmation, Trump has thus far been the primary administration voice on the currency.

Bloomberg dollar index was up ~0.3% after rising more than 0.6% last week, with the dollar gaining against all G-10 peers.

EUR/USD traded to a fresh low under 1.0600 as residual bids ahead of 1.0600 were filled; further bids are scattered down to 1.0580 though traders caution that there also stop-loss sell orders mixed in, potentially to make for choppy trading
EUR may find tech support at 1.0580 from the Jan. 16 low, a breach may open declines toward the January 11 low at 1.0454
USD/JPY has climbed back to above 114.00 after a shallow retreat from session high at 114.17 where offers capped
Pair is supported by rise in Treasury yields and also by U.S. stocks, which are up ~0.4% with the Dow Jones Industrial Average at a fresh record
Offers from Japanese exporters are layered above 114.20 and may slow USD gains, a trader said

Foreign Reserves Rise To $30.5B As CBN Targets $40B Before Year End

                                

Reserves rise to $30.5bn as Bank assures importers’ demand will be met through FX forwards

The strategy adopted by the Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele to rebuild the country’s foreign exchange reserves has been identified as one of the primary reasons the country’s Eurobond issue was oversubscribed by 780 per cent last week, THISDAY has learnt.

Investigations have shown that as of last week, Nigeria’s foreign reserves, which had hit $29.5 billion, climbed to $30.5 billion – the highest in more than 12 months – following the success of the Eurobond.

A CBN official, who accompanied Emefiele and others in the federal government delegation on the Eurobond road show to the United Kingdom and United States of America, informed THSDAY that the strategy adopted by the governor worked wonders in boosting investors’ confidence in the Nigerian economy and the country’s ability to meet its foreign obligations.

He also disclosed that with the single-mindedness exhibited by the CBN governor to rebuild FX reserves, he has set a target to grow reserves to $35 by the middle of 2017 and $40 billion by the end of the third quarter of this year.


The official, who preferred not to be named but is one of the architects of the central bank’s FX policy, held the view that contrary to the argument by several analysts that devaluing the currency and allowing a true float of the naira would attract foreign investors, it is actually the accretion of foreign reserves that would instill confidence in the economy.

“With a comfortable level of FX reserves, foreign investors will be assured that once they want to take their funds out, they can do so without hindrance.
“If you noticed, once reserves fell to as low as $21 billion, investors were not attracted to the Nigerian economy, irrespective of whether we devalued or whatever we did with the FX market.

“As long as they felt that you had insufficient reserves to meet your foreign obligations, they were not going to remain comfortable about investing in the Nigerian economy. They continued to exit the economy.

“For example, look at South Africa and Kenya which have floating exchange rates, yet they have found it difficult to attract investors. They continue to flee their economies in droves.

“However, since the International Monetary Fund (IMF) announced in November that it had approved a $12 billion standby facility for Egypt, the country has been attracting almost $300 million a month.

“What this means is that investors need to feel comfortable with your level of FX reserves and your ability to meet your obligations when they fall due.
“So instead of the CBN getting distracted by the debate over devaluation or no devaluation, it has focused on reserves accretion, which as you know help to attract investors during the Eurobond sale last week.

“Given what we know, the target by the CBN is to increase reserves to $35 billion by the middle of this year and $40 billion by the end of the third quarter,” he said.

The official said the accretion of FX reserves could be attributed to two factors – the improvement of oil prices following the agreement by OPEC and Russia to slash oil production by 1.2 million barrels per day, and the relative peace achieved in the Niger Delta.

“The oil price rally coupled with improved output from Nigeria have resulted in increased foreign earnings in recent months.

“If you recall, about a year ago, revenue from the sale of crude oil fell to less than $400 million a month, but now Nigeria is making between $600 million and $700 million, enabling the CBN to save more,” he explained.
He was quick to add, however, that whatever savings the central bank is making must be complemented by a comprehensive fiscal and industrial strategy by the ministries and agencies of government.

“A fiscal and industrial strategy is still required, because saving FX reserves alone will not give you the silver bullet,” he said.

The official also allayed concerns that the savings being made by CBN could delay payments of maturing trade obligations and in turn continue to exert pressure on the FX market.

He said: “The CBN remains committed to funding maturing trade obligations through FX forwards on the interbank market.
“Importers with eligible transactions have nothing to be concerned about, as the central bank will continue to support them through the forwards arrangement already in place on the interbank market.

“Also, confidence is growing that the speculative attacks on the naira in the parallel market would subside, because with the accretion of reserves, the CBN will have a schedule that would enable it to meet demand through FX forwards.”