By Obinna Chima
The gradual build-up of Nigeria’s external reserves may be punctured by the depreciation suffered by the naira against the dollar observed in the past few days.
Nigeria’s forex reserves stood at $37.700 billion as at June 4, data from the Central Bank of Nigeria’s (CBN) website showed at the weekend.
The forex reserves had maintained an upward trend throughout last month as it gained a total of $961million to $37.668 billion as at May 31, as against the $36.707 billion it was on May 2, THISDAY findings also showed.
According to dealers, the strong demand for greenback, especially at the interbank market, may compel the CBN to continue to intervene at the segment of the forex market, with a view to calming down the market.
This, they argued could see the banking sector regulator tampering with the reserves once more, to support the local currency.
Meanwhile, at the two sessions of the bi-weekly forex auction held last week, CBN offered a total $600 million. The naira dipped at all segments of the forex market. At the Wholesale Dutch Auction (WDAS), the naira fell by 9 kobo to close at N155.84 to a dollar, compared with the preceding Wednesday’s value of N155.75 to a dollar.
In the same vein, at the parallel market, the local currency slumped by N2.20 kobo to close at N164 to a dollar on Friday, compared with the preceding Friday’s value of N161.80 to a dollar. At the interbank market, it slipped by N2.15 kobo to close at N162.75 to a dollar, as against the preceding Friday’s value of N160.60 to a dollar.
But the Managing Director/Chief Executive Officer, Financial Derivatives Company Limited, Mr. Bismarck Rewane, pointed out that while the naira had fallen against the dollar, it had been appreciating against other international currencies, saying there was no need to fret.
Rewane explained: “If you look at the naira, on May 4, while it was N159/$1, N259 to a pound and N211 to an euro, as at June 6 (yesterday), the naira closed at N164/$1(parallel market value), N255 to a pound and N206 to an euro. So, overall, the naira has been appreciating against other currencies.”
Money Market Activities
The latest FSDH Securities Limited weekly report showed that the money market was tight last week as a result of the withdrawals of about N231.39 billon from the system via the government securities market and forex auction by the CBN. Consequently, interbank rates closed higher to last week.
“Available data showed that 7-day Nigerian Interbank Offered Rates (NIBOR) closed the week at 15.25 per cent a 50 basis point increase from the previous week’s figure of 14.75 per cent, while the 90-day NIBOR closed the week at 16.29 per cent, a 54 basis point increase from the previous week’s figure of 15.75 per cent.
“At the Open Market Operations (OMOs) and Repurchase (REPOs) transactions held during the week, there was a total inflow of about N12 billion into the system, while there was a withdrawal of about N228.37 billion from the system. This brought about a net outflow of N216.37 billion from this segment of the market. The transactions were traded at a discount rate range of 13 per cent-15 per cent,” it added.
Sovereign Wealth Fund
In line with its plans to launch the Sovereign Wealth Fund (SWF) in the second quarter, the Federal Government will announce its management team this week, THISDAY had reported.
When asked to reveal the identities of the team members, the Coordinating Minister of the Economy and Finance Minister, Dr. Ngozi Okonjo-Iweala, had said: “You know the selection process was very competitive but I cannot divulge the names of the management team. It will not be nice for me to do that before the names are officially announced.”
An official of the Ministry of Finance had told THISDAY that nearly all the members of the management team are Nigerians. The government had recruited the chief executive officer, chief investment officer and the chief risk officer through a selection process conducted by KPMG.
The CBN had engaged the services of a management consulting firm to review the operating template for finance companies in Nigeria so as to develop a road map for the reform and transformation of the sub-sector.
To this end, the President, Finance Houses Association of Nigeria (FHAN), Mr. Samuel Durojaiye, last week advised members of the association to support the apex bank’s efforts to strengthen the regulatory environment of the sector. He also urged members to ensure that they render all statutory returns and reports regularly, as well as to ensure that they renew their operating licenses annually. Durojaiye had disclosed that the consulting firm had presented a preliminary report to the apex bank, which detailed the direction of their assignment.
Loans Guarantee to Farmers
The CBN last week restated its resolve to guarantee 75 per cent loans provided by Deposit Money Banks to farmers in the 36 States of the federation and the Federal Capital Territory (FCT) as part of efforts to transform the agricultural sector. The loan guarantee was being packaged under the Nigerian Incentive-Based Risk Sharing in Agricultural Lending (NIRSAL) - a public private established by the CBN, the Bankers’ Committee and the Federal Ministry of Agriculture and Rural Development.
Head of NIRSAL Project Implementation Office under the Development Finance Department, CBN, Mr. Jude Uzonwanne, had stated the guarantee would be issued by the NIRSAL to the farmers in the states and FCT through commercial banks and other financial institutions.
The Federal Government last week unveiled plans for a $100 million Diaspora bond as part of a fresh $500 million bond that would be issued sometime next year. The government had early last year issued $500 million Eurobond to investors, which was over-subscribed. Also, the government had assured stakeholders that it was still working on the modalities for the forbearance for stockbrokers, in respect of margin loans, as part of efforts to enable the stock market fully recover, following its near collapse in 2008.
The Coordinating Minister of the Economy and Finance Minister, Dr. Ngozi Okonjo-Iweala, had explained: “We are working on a Diaspora bond with a large and generous definition of Diaspora, to make sure we succeed. We will work on it, it will take some time, because it takes a little more work, by next year, we will be able to do something. We are working closely with the World Bank.
FG to Review VAT
The Federal Government last week disclosed plans to review the current Value Added Tax (VAT) laws in the country, as a step towards boosting industrialisation in the country and to encourage local manufacturers. Minister of State for Finance, Dr. Yerima Ngama, had said that government was not unaware of some of the challenges being faced by companies in the country.
“We are going to look into the area of taxes and review all the Value Added Tax (VAT) laws in the interest of everybody in the country,” he had promised.
He had also said the government also had a lot of incentives for industrialists who want to really bring development to the sector. He had pointed out that “over 70,000 hectares of arable land is available for those who will seize the opportunity to cultivate wheat in the country because of Nigeria’s high dependency on imported wheat flour”, and urged the company to continue trying the local spices in their products.