Economy
Fitch Lauds Rise in Foreign Portfolio Investment Inflows to Nigeria
By Adedapo Adesanya
Fitch Ratings has revised the Outlook on Nigeria’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to Positive from Stable and affirmed the IDR at ‘B-‘.
In its latest rating released last Friday, the global agency pointed out that the positive outlook partly reflected reforms over the last year to support the restoration of macroeconomic stability and enhance policy coherence and credibility.
According to Fitch, “Nigeria’s rating is supported by its large economy, developed and liquid domestic debt market, and large oil and gas reserves. It is constrained by weak governance indicators relative to peers, high hydrocarbon dependence, limited crude oil production capacity, weak net FX reserves, high inflation, ongoing security challenges, and structurally low, albeit improving, non-oil revenue.”
It noted that in Nigeria, exchange rate and monetary policy frameworks have been adjusted, fuel subsidies reduced, coordination between the Ministry of Finance and the Central Bank of Nigeria (CBN) improved; CBN’s financing of the government scaled back, with administrative efficiency measures being taken to raise the currently low government revenue, as well as oil production.
“The reforms have reduced distortions stemming from previous unconventional monetary and exchange rate policies, resulting in the return of sizeable inflows to the official foreign exchange (FX) market. Nevertheless, we see significant short-term challenges, notably, inflation is high and the FX market has yet to stabilise, and the durability of the commitment to reform is to be tested.
“The CBN has stepped up efforts to reform the monetary and exchange rate framework following last year’s unification of the multiple exchange rate windows, and the large differential between the official and parallel market rates has collapsed. Average daily FX turnover at the official FX window has risen sharply from 2H23, and there has been clearance of $4.5 billion of the backlog of unpaid FX forwards (the validity of the outstanding $2.2 billion is being assessed by CBN), and weekly sales of FC to bureaux de changes (BDCs) have resumed (having been suspended since 2021).
“Greater formalisation of FX activity and monetary policy tightening has contributed to a significant rise in foreign portfolio investment inflows, and a fast appreciation of the naira at the official FX window, following the 71 per cent post-liberalisation depreciation between June 2023 and mid-March 2024, although the exchange rate remains volatile. However, Fitch views continued lack of clarity in the size of net FX reserves as a constraint on the sovereign’s credit profile,” it stated.
Fitch anticipated further increases in the CBN monetary policy rate in the second half of 2024, following the 600 basis points hike to 24.75 per cent since February 2024, alongside tightening of reserve requirements and, “strengthening of monetary policy transmission, after the recent resumption of open market operations at rates closely aligned to the MPR.”
“We project inflation, which rose to 33.2 per cent year-on-year in March due partly to exchange rate pass-through and rising food prices, to average 26.3 per cent in 2024 and 18.2 per cent in 2025, still well above our projected ‘B’ median of 4.5 per cent.
“Fitch forecasts the budget deficit to widen 0.3 percentage points (pp) in 2024 to 4.5 per cent of GDP (but 0.5pp lower than we projected at our last review). This is due to improving non-oil revenue and partial fuel subsidy removal being offset by underperformance in oil profits from Nigerian National Petroleum Corporation Limited (despite a potential improvement in oil production) and higher payments for debt servicing, personnel and capex.
“We project a two pp rise in general government (GG) revenue/GDP from 2023 to 2025 to 9.6 per cent, helped by increased mobilisation of non-oil tax revenue, to narrow the budget deficit to 4.1 per cent in 2025. Nevertheless, the GG revenue/GDP ratio would remain one of the lowest of Fitch-rated sovereigns. The government has sharply reduced recourse to its CBN ‘Ways and Means’ overdraft this year, and banks’ healthy foreign currency (FC) liquidity and strong demand for government securities support domestic financing capacity.
“We expect oil refining capacity to increase in 2024-2025 as the Dangote plant ramps up, with an eventual 0.65 mbpd capacity. This will reduce transportation costs and lower refined oil imports, which should ease FX demand. We anticipate an increase in crude oil production (including condensates) in 2024-2025, averaging 1.75 mbpd, from 1.58 mbpd in 2023, helped by improved onshore surveillance, but this is still well below the 2019 level, reflecting underinvestment in the sector and production outages,” it added.
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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