Economy
Exchange Rate Convergence Will Benefit Capital Market—Oyedele
By Adedapo Adesanya
The Fiscal Policy Partner and Africa Tax Leader at consultancy giant, PwC, Mr Taiwo Oyedele, has said the exchange rate convergence in Nigeria would translate to a significant rise in government debt in Naira terms by about N12 trillion to N90 trillion.
In a social media post, the tax expert said with the Naira now exchanging with the US Dollar market-determined rates across the market segments, a significant market distortion has been removed.
He added this would come with both positive and negative implications, noting that the country’s external debt at $42 billion, according to the Debt Management Office (DMO), will increase by the difference between the old and new rates.
He stated that this would also raise the nation’s debt-to-GDP ratio by about 5 per cent, with a corresponding increase in debt service cost with respect to foreign debt service.
Currently, Nigeria services debt with about 96 per cent of its earning, meaning for every N1 it earns, 96 Kobo is used to pay interest to its debtors.
He also noted that this would translate to an increase in government revenue in Naira terms resulting in a higher tax/revenue to GDP ratio.
However, “Corporate tax collection may, however, decline as many businesses crystallize forex losses due to the higher exchange rate,” he warned, adding that the collapse of the multiple rates regime, as instructed by multilateral lenders, could lead to a possible reduction in the budget deficit.
This will occur if the government’s forex revenue exceeds foreign currency obligations. On the flip side, an increase in budget deficit will arise.
For the average Nigerian, petrol prices will rise in the coming days as the pump price of petrol could inch closer to the current pump price of diesel, which is already deregulated.
He advised that there should be some cost savings as government discontinues the various fx interventions —Naira4Dollar and RT200 Rebate Scheme — which cost tens of billions of Naira, stressing that Nigeria must attract fx inflows, especially from portfolio investors, FDI and exporters proceeds.
“Impact on diaspora remittances would be marginal,” he predicted.
He also noted that the capital market would benefit as it is likely to appreciate further as foreign investors take position. The Nigerian stock market had appreciated on Monday and Tuesday but eased multi-year highs on Wednesday.
“There should be negligible impact on the general prices of goods and services as products already factored in parallel market rates to a large extent,” he added.
He tasked that while the move was positive, the Bola Tinubu administration needed to manage the dynamics to restore confidence.
“The backlog of forex demands needs to be addressed, and government should be ready to supply forex to stabilise the exchange rate in the short term.”
He further advised them to relax capital control and administrative bottlenecks, including unbanning the list of items prohibited for fx (and complementing with higher import duties).
He also advised the removal of the need for a certificate of capital importation to prevent the parallel market rate from simply moving further away from the official market rate.
“Stop the demand for certain taxes and levies in foreign currency, it creates unnecessary fx demand without adding to supply.
“The aggregate demand for fx across markets should reduce as a round-tripping incentive is removed, for instance, people who fake foreign travels just to get FX at discounted rates.
“Also, Nigeria’s sovereign credit rating should improve if this is complemented with the right fiscal and monetary policies, thereby attracting more fx inflows and lowering the cost of borrowing,” he added.
By Adedapo Adesanya
Four securities weakened the NASD Over-the-Counter (OTC) Securities Exchange by 1.95 per cent on Friday, erasing N41.17 billion from the bourse, which had its market capitalisation at N2.567 trillion compared with the previous session’s N2.618 trillion.
In the same vein, the NASD Unlisted Security Index (NSI) decreased at the close of business by 85.28 points to 4,277.07 points from 4,362.32 points.
The price decliners were led by 11 Plc, which gave up N20.50 to sell at N200.50 per share compared with the preceding day’s N221.00 per share, FrieslandCampina Wamco Nigeria Plc dropped N16.94 to close at N155.20 per unit versus Thursday’s closing price of N172.14 per unit, Central Securities Clearing System (CSCS) Plc went down by N2.11 to N84.68 per share from N86.79 per share, and Afriland Properties Plc lost 11 Kobo to end at N16.74 per unit, in contrast to the N16.85 per unit it closed a day earlier.
During the trading day, the value of transactions jumped by 172.1 per cent to N29.9 million from the preceding session’s N10.9 million, and the volume of trades soared by 136.5 per cent to 955,096 units from the previous 403,901 units, while the number of deals went down by 11.4 per cent to 31 deals from 35 deals.
Great Nigeria Insurance (GNI) Plc remained the most active stock by value on a year-to-date basis, with 3.4 billion units valued at N8.4 billion, followed by Infrastructure Credit Guarantee (Infracredit) Plc with 2.3 billion units worth N6.5 billion, and CSCS Plc with 68.6 million units sold for N4.7 billion.
GNI Plc also ended the session as the most traded stock by volume on a year-to-date basis, with 3.4 billion units exchanged for N8.4 billion, trailed by Infracredit Plc with 2.3 billion units traded for N6.5 billion, and Resourcery Plc with 1.1 billion units transacted for N415.7 million.
By Dipo Olowookere
The last trading session of this week on the floor of the Nigerian Exchange (NGX) Limited ended on a negative note, with a 0.66 per cent loss on Friday.
This was influenced by sustained selling pressure and cautious trading, which forced investors into profit-taking.
Data obtained by Business Post showed that the energy sector fell by 4.66 per cent, the insurance counter dipped by 2.23 per cent, the consumer goods index depreciated by 0.96 per cent, and the banking segment shed 0.28 per cent, while the industrial goods space remained unchanged.
At the close of business, the All-Share Index (ASI) of Nigeria’s stock exchange went down by 1,531.81 points to 232,049.02 points from 233,580.83 points, and the market capitalisation dropped N983 billion to settle at N148.905 trillion compared with Thursday’s N149.888 trillion.
Aradel was the worst-performing equity after it lost 10.00 per cent to close at N1,417.50. International Energy Insurance slipped by 9.95 per cent to N5.79, Trans-Nationwide Express depreciated by 9.89 per cent to N3.28, eTranzact crashed by 9.79 per cent to N14.75, and UPDC slumped by 9.72 per cent to N28.12.
The best-performing equity for the day was Universal Insurance, which gained 6.32 per cent to close at N1.01, McNichols grew by 5.52 per cent to N8.60, Linkage Assurance expanded by 4.67 per cent to N1.57, NGX Group appreciated by 4.35 per cent to N120.00, and Transcorp increased by 3.62 per cent to N41.50.
As look at the activity level indicated that investors traded 388.7 million stocks worth N18.4 billion in 44,631 deals compared with the 393.7 million stocks valued at N19.2 billion executed in 45,813 deals a day earlier, representing a decline in the trading volume, value, and number of deals by 1.27 per cent, 4.17 per cent, and 2.58 per cent, respectively.
By Adedapo Adesanya
The Naira recorded a loss of 82 Kobo or 0.06 per cent against the United States Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEX) on Friday, June 26, exchanging at N1,380.93/$1, in contrast to the previous day’s rate of N1,380.11/$1.
Equally, the domestic currency further weakened against the Pound Sterling in the official FX market yesterday by N6.06 to settle at N1,824.90/£1 versus the preceding session’s N1,818.84/£1, and lost N10.74 on the Euro to sell at N1,577 .58/€1 versus N1,566.84/€1.
At the GTBank forex counter, the Naira depreciated against the greenback during the session by N4 to close at N1,387/$1, in contrast to Thursday’s value of N1,383/$1, and at the parallel market, it was unchanged at N1,395/$1.
Interbank FX activity among financial institutions has fluctuated amid a sharp slowdown in forex market interventions by the Central Bank of Nigeria (CBN), as it allows demand and supply to move the market.
Also, a stronger greenback has generally put significant pressure on emerging-market currencies.
Nigeria has accessed the first tranche of a proposed $5 billion derivatives financing arrangement with First Abu Dhabi Bank PJSC, the largest lender in the United Arab Emirates (UAE).
The $5 billion facility, approved by the National Assembly earlier this year, is part of the federal government’s plan to diversify external financing sources and reduce borrowing costs. Structured as a Total Return Swap with First Abu Dhabi Bank, proceeds are earmarked for refinancing debt and supporting infrastructure financing.
If the proceeds are brought into the country through the official FX market, the transaction will increase the currency reserves or Dollar liquidity.
At the cryptocurrency market, Solana (SOL) grew by 2.2 per cent to $71.92, Cardano (ADA) gained 1.1 per cent to trade at $0.1474, Ripple (XRP) also appreciated by 1.1 per cent to $1.05, Dogecoin (DOGE) expanded by 0.9 per cent to $0.0755, and Ethereum (ETH) improved by 0.4 per cent to $1,578.84.
On the flip side, TRON (TRX) slid 0.6 per cent to $0.3203, Binance Coin (BNB) slumped by 0.3 per cent to $564.33, and Bitcoin fell by 0.2 per cent to $60,219.37, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) traded flat at $1.00 each.
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