Economy
$2.5b Currency Swap: CBN Appoints Four Lenders as Settlement Banks
By Dipo Olowookere
Four banks have been appointed by the Central Bank of Nigeria (CBN) as settlement banks for the $2.5 billion currency swap deal signed between Nigeria and China last Friday in Beijing.
According to a report by ThisDay, the four financial institutions appointed by the apex bank are First Bank of Nigeria Limited, Stanbic IBTC, Standard Chartered Bank (SCB) and Zenith Bank Plc.
Last Friday, the CBN, on behalf of Nigeria, sealed the much-awaited $2.5 billion bilateral currency swap agreement with the People’s Bank of China (PBoC).
The settlement banks are expected to handle the trade obligations that would enable an importer in Nigeria, after filling the required documentation, to easily exchange the Naira for the Renminbi (RMB) instead of resorting to third currencies such as the US Dollar, while the reverse will be the case for importers in China that trade with Nigerian businesses.
Quoting a source at the CBN privy to the deal, ThisDay said while two of the banks will begin work immediately, the two others will have to upgrade their statuses in China.
Standard Chartered Bank and Stanbic IBTC already have operational offices in China, while Zenith Bank and First Bank have representative offices in Beijing.
“While SCB already has a presence in China through its Standard Chartered Bank (China) Limited, Stanbic has been trading in the country through its affiliate, the Investment and Commercial Bank China (ICBC).
“However, FBN and Zenith Bank were also appointed because they already have representative offices in China.
“So, while SCB and Stanbic can start immediately, it would take FBN and Zenith Bank some time to join the settlement arrangement because they would have to convert their representative offices to operational offices.
“This whole swap agreement would kick off likely before June because we have to operationalise the settlement arrangement with the relevant institutions,” the source quoted in the report said.
It was gathered that these banks, to be responsible for settling the trade transactions between importers and exporters from both countries, will likely take off just before next month.
The source explained further that the currency swap by the two central bank governors was partly facilitated by the improving economic environment in Nigeria.
“As you know, negotiations have been on-going for two years, so yes to some extent, the improvement in foreign reserves and government revenues, drop in the inflation rate, and the uptick in economic activities, played a role in getting the swap with the PCoB.
“But this was not the only reason factored into the negotiations, as there were other bilateral reasons which I am not at liberty to disclose,” she said.
When asked about the impact on the country’s external reserves, the source pointed out that China is Nigeria’s largest trading partner, accounting for about 35 percent of trade.
However, the National Bureau of Statistics’ (NBS) Fourth Quarter (Q4) 2017 Foreign Trade Statistics put China’s trade with Nigeria at 22 percent, making it a major trading partner. The total value of trade in Q4 2017 was put at N465.13 billion.
According to the CBN source, the currency swap will play a role in reserves management as pressure from Nigerian importers seeking to source dollars will now dissipate.
“Of course, this will help in terms of management of our reserves. What this means is that pressure on Nigerian importers seeking to source dollars to import goods from China will completely dissipate,” she explained.
Yesterday, the CBN, through its spokesman, Mr Isaac Okorafor, said in a statement on Thursday that among other benefits, the agreement is expected to provide Naira liquidity to Chinese businesses and provide RMB liquidity to Nigerian businesses respectively, thereby improving the speed, convenience and volume of transactions between the two countries.
Also, the currency swap is aimed at providing adequate local currency liquidity to Nigerian and Chinese industrialists and other businesses thereby reducing the difficulties encountered in the search for third currencies.
Furthermore, the deal will make it easier for most Nigerian manufacturers, especially small and medium enterprises (SMEs) and cottage industries in manufacturing and export businesses to import raw materials, spare -parts and simple machinery to undertake their businesses by taking advantage of available RMB liquidity from Nigerian banks without being exposed to the difficulties of seeking other scare foreign currencies.
The deal, which is purely an exchange of currencies, will also make it easier for Chinese manufacturers seeking to buy raw materials from Nigeria to obtain enough Naira from banks in China to pay for their imports from Nigeria.
The CBN said this will protect Nigerian business people from the harsh effects of third currency fluctuations.
By Adedapo Adesanya
Food Concepts Plc neutralized the gains recorded by three securities, returning the NASD Over-the-Counter (OTC) Securities Exchange into the negative territory with a 0.27 per cent loss on Thursday, December 4.
Yesterday, the share price of the parent company of Chicken Republic and PieXpress declined by 34 Kobo to sell at N3.15 per unit compared with the previous day’s N3.49 per unit.
This shrank the market capitalisation of the OTC bourse by N5.72 billion to N2.136 billion from N2.142 trillion and weakened the NASD Unlisted Security Index (NSI) by 9.57 points to 3,571.53 points from 3,581.10 points.
Business Post reports that Central Securities Clearing System (CSCS) Plc went down by 50 Kobo to N38.50 per share from N38.00 per share, FrieslandCampina Wamco Nigeria Plc gained 29 Kobo to sell at N55.79 per unit versus N55.50 per unit, and Geo-Fluids Plc added 5 Kobo to close at N4.60 per share compared with Wednesday’s closing price of N4.55 per share.
Trading data indicated that the volume of securities recorded at the session surged by 6,885.3 per cent to 4.3 million units from the 61,570 units posted a day earlier, the value of securities increased by 10,301.7 per cent to N947.2 million from N3.3 million, and the number of deals went up by 146.7 per cent to 37 deals from the 15 deals achieved in the previous trading session.
At the close of business, Infrastructure Credit Guarantee Company (InfraCredit) Plc was the most traded stock by value on a year-to-date basis with the sale of 5.8 billion units for N16.4 billion, trailed by Okitipupa Plc with 170.4 million units worth N8.0 billion, and Air Liquide Plc with 507.5 million units valued at N4.2 billion.
InfraCredit Plc also finished the session as the most traded stock by volume on a year-to-date basis with 5.8 billion units transacted for N16.4 billion, followed by Industrial and General Insurance (IGI) Plc with 1.2 billion units sold for N420.2 million, and Impresit Bakolori Plc with 536.9 million units traded for N524.9 million.
By Dipo Olowookere
The upward trend witnessed at the Nigerian Exchange (NGX) Limited in recent sessions continued on Thursday as it further improved by 0.10 per cent.
This was despite investor sentiment turning bearish after the local equity market ended with 23 price gainers and 28 price gainers, indicating a negative market breadth index.
UAC Nigeria gained 10.00 per cent to finish at N88.00, Morison Industries appreciated by 9.94 per cent to N3.54, Ecobank rose by 8.53 per cent to N36.90, and Coronation Insurance grew by 8.47 per cent to N2.56.
On the flip side, Ellah Lakes depreciated by 10.00 per cent to N13.14, Eunisell Nigeria also shed 10.00 per cent to finish at N72.90, Transcorp Hotels slipped by 9.95 per cent to N157.50, Omatek shrank by 9.23 per cent to N1.18, and Guinea Insurance dipped by 8.46 per cent to N1.19.
Yesterday, the All-Share Index (ASI) went up by 152.28 points to 145,476.15 points from 145,323.87 points and the market capitalisation chalked up N97 billion to finish at N92.726 trillion compared with the previous day’s N92.629 trillion.
Customs Street was bubbling with activities on Thursday, though the trading volume and value slightly went down, according to data.
A total of 1.9 billion stocks worth N19.2 billion exchanged hands in 23,369 deals during the session versus the N2.3 billion valued at N21.0 billion traded in 21,513 deals a day earlier.
This showed that the number of deals increased by 8.63 per cent, the volume of transactions depleted by 17.39 per cent, and the value of trades decreased by 8.57 per cent.
For another trading day, eTranzact led the activity chart with 1.6 billion units sold for N6.4 billion, Fidelity Bank traded 31.0 million units worth N589.3 million, GTCO exchanged 28.3 million units valued at N2.5 billion, Zenith Bank transacted 27.1 million units for N1.6 billion, and Ecobank traded 21.9 million units worth N744.3 million.
By Adedapo Adesanya
The Naira marginally depreciated against the United States Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEM) on Thursday, December 4 amid renewed forex pressure associated with December.
At the official market yesterday, the Nigerian currency lost 0.01 per cent or 18 Kobo against the Dollar to close at N1,447.83/$1 compared with the previous day’s N1,447.65/$1.
It was not a different scenario with the local currency in the same market segment against the Pound Sterling as it further shed N15.43 to sell for N1,930.97/£1 versus Wednesday’s closing price of N1,925.08/£1 and declined against the Euro by 20 Kobo to finish at N1,688.74/€1 compared with the preceding session’s N1,688.54/€1.
Similarly, the Nigerian Naira lost N5 against the greenback in the black market to quote at N1,465/$1 compared with the previous day’s value of N1,460/$1 but closed flat against the Dollar at the GTBank FX counter at N1,453/$1.
Fluctuations in trading range is expected to continue during the festive season as traders expect the Nigerian currency to be stable, supported by intervention s by to the Central Bank of Nigeria (CBN)in the face of steady dollar demand.
Support is also expected in coming weeks as seasonal activities, particularly the stylised “Detty December” festivities, will see inflows that will give the Naira a boost after it depreciated mildly last month, according to a new report.
“As the festive Detty December season intensifies, inbound travel, tourism spending, and diaspora inflows are expected to provide moderate support for FX liquidity,” analysts at the research unit of FMDA said in its latest monthly report for November.
Traders cited by Reuters expect that the Naira will trade within a band of N1,443-N1,450 next week, buoyed by improved FX interventions by the apex bank.
Meanwhile, the crypto market was down as the US Federal Reserve’s preferred inflation gauge, core PCE, likely rose in September—moving in the wrong direction. However, volatility indices show no signs of major turbulence.
If the actual figure matches estimates, it would mark 55 straight months of inflation above the US central bank’s 2 per cent target. The sticky inflation would strengthen the hawkish policymakers, who are in favour of slower rate cuts.
Ripple (XRP) depreciated by 4.5 per cent to $2.08, Solana (SOL) went down by 3.8 per cent to $138.11, Litecoin (LTC) shrank by 3.1 per cent to $83.23, Dogecoin (DOGE) slid by 2.5 per cent to $0.1463, Cardano (ADA) declined by 2.1 per cent to $0.4368, Bitcoin (BTC) fell by 0.9 per cent to $91,975.45, Binance Coin (BNB) crumbled by 0.9 per cent to $899.41, and Ethereum (ETH) dropped by 0.7 per cent to $3,156.44, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) closed flat at $1.00 apiece.
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