Naira Strengthens on Dollar Inflow from the Diaspora

07 Jan 2013

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Naira notes

Obinna Chima
The naira appreciated against the dollar at both the interbank and parallel segments of the forex market last week due to inflow of the greenback from Nigerians living abroad who came to celebrate the Yuletide

At the interbank market, data made available by the Financial Market Dealers Association (FMDA) showed that the local currency jumped by 60 kobo to close at N156.40 to a dollar on Friday, compared to the N157 to a dollar it attained the preceding Friday.

Also, the value of the naira monitored by THISDAY at various parallel market points in Lagos last week, showed that it went for N157.50 to a dollar last week, representing an improvement by 50 kobo, over the N158 to a dollar it was the preceding week.

However, there was no forex auction at the Wholesale Dutch Auction System (WDAS), otherwise known as the official market as the market was closed on December 19. because of the holidays. It is expected to resume forex auction today.

The World Bank recently projected that Nigerian workers worldwide were expected to remit N3.27 trillion ($21 billion) back home in 2012, almost a 100 per cent increase above N1.65 trillion ($10.6 billion) recorded in 2011. Nigeria was ranked fifth among the top recipients of remittances last year.

The World Bank report had stated that the top recipients of officially recorded remittances for 2012 were India ($70 billion), China ($66 billion), the Philippines and Mexico ($24 billion each), and Nigeria ($21 billion).

NIBOR Movement
The Nigerian Interbank Offered Rates (NIBOR) increased marginally to an average of 13.38 per cent on Friday, as against an average of 13.10 per cent it attained the preceding week as volume of inflow marched the outflow.
While there was outflow to purchase of fixed income instruments due to the Open Market Operations (OMO) held last week, inflow from of the greenback during the yuletide season supported market liquidity.

Consequently, while the overnight tenor (Call) increased slightly to 11.12 per cent on Friday, from 10.71 per cent the preceding Friday, the 7-day tenor also leapt to 11.87 per cent on Friday, from 11.50 per cent. Similarly, just as the 30-day tenor advanced to 13.37 per cent on Friday, from 13.17 per cent, the 60-day tenor also climbed marginally to 13.83 per cent on Friday, from 13.62 per cent.
Also, the 90-day tenor closed at 14.17 per cent, the 180-day tenor at 14.58 per cent and the 365-tenor at 14.75 per cent.

Treasury Bills

The CBN said some time this month, it would auction a total of N331.296 billion in 91-day, 182-day and one-year treasury bills. According to the central bank’s provisional calendar, the sale of the fixed income instrument for this year would commence next Monday.

It revealed that while a total of N166.407 billion bills would be sold next Monday, the regulator would also offer a total of N164.899 bills on January 24. A breakdown of the amount to be offered next Monday showed that the CBN would offer N35.159 billion in 91-day bills, N50.403 billion in 182-day bills and N80.845 billion in one-year bill. Similarly, on January 24, while the apex bank would sell N34.889 billion in 91-day bills, N50 billion in 182-day bills and N80 billion in one-year bills.

Open Market Operations

In line with its restrictive monetary policy, the CBN last week sold securities worth N140.339 billion, through its open market operation (OMO). In all, the CBN offered a total of N120 billion securities which was oversubscribed.

Specifically, the apex bank offered N50 billion for 120-day tenor instruments and N70 billion for 127-day instruments. The instruments are expected to mature on May 2, 2013 and May 9, 2013 respectively. While the subscription for the 120-day tenor was N114.856 billion, the apex bank only sold a total of N50.275 billion. In the same vein, while the subscription for the 127-day tenor was N155.314 billion, total sale stood at N90.064 billion. The stop rates were 13.2990 per cent and 13.340 per cent respectively.

World Bank Loans

The Federal Government has borrowed a total of $4.4 billion in external loans in the past seven years. Of this amount, which was approved by the World Bank, only $1.8 billion has been disbursed while the balance continues to attract a service charge. The revelation was made last week as the House of Representatives endorsed the Federal Government's 2013-2015 External Borrowing Plan. A report on the investigation conducted by the House of Representatives Committee on Aids, Loans and Debt Management on the 2013-2015 External Borrowing Plan had placed a ceiling on external borrowing at $7.3 billion as opposed to the over $9 billion proposed by the Federal Government.

Data on Africa

The World Bank last week decried the quality and relevance of data from Nigeria and other African countries, which it described as largely obsolete. The bank’s Director, Department of Economic Policy and Poverty Reduction Programmes, Africa, Mr. Marcelo Giugale, expressed concern that a lot of money had been invested in improving statistics in a lot of countries on the continent, explaining that most of that money came as donations from well-meaning rich countries. He said a report tagged, “Partnership in Statistics for Development in the 21st Century”, had revealed that between 2009 and 2011, Africa received $700 million to build capacity for data collection. He stressed that communication technology is what would revolutionise African statistics.

Giugale added: “First, we don't really know how big (or small) many African economies are. In about half of them, the system of “national accounts” dates back to the 1960s (1968, to be precise); in the other half, it is from 1993.”

Global Economy

The CBN last week expressed dismay over the seeming pessimism by some Nigerians over the future economic prospects of the country. Director, Communications, CBN, Mr. Ugochukwu Okoroafor, said there was the need to work together in other to actualise the goal of making the country one of the top 20 economies in the world by 2020. Okoroafor was reacting to the recent report by the United States National Intelligence Council (NIC), which indicated that Nigeria could join a few other countries including China that would be instrumental in shaping the world’s economy by the year 2030.

He said: “I think Nigerians don't take themselves as seriously as the rest of the work sees us. We all need to come together and see what we have here and work. The world sees us as a major power; I think that we don't fully appreciate the power that we have.”

UBA Ratings

The United Bank for Africa (UBA) Plc last week said it had been given impressive ratings by two leading rating agencies- Global Credit Rating Company (GCR) and Fitch Ratings (Fitch). The bank had said that the ratings attested to the group's strong liquidity, solid risk management and robust balance sheet.

It explained: “GCR assigned UBA a long term national rating of AA- and a long term international rating of B+, both with stable outlook. The agency also affirmed the first two issuances of the group's N400 billion Medium Term Debt Capital Raising Programme.”

Tags: Business, Nigeria, Featured, Naira, Dollar Inflow

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