Economy
Foreign Investors Boost Foreign Exchange Supply
By FSDH Research
The foreign exchange supply into the Nigerian economy received a major boost in the second quarter of 2017 (Q2, 2017) from foreign investors.
According to the data on Nigerian Capital Importation that the National Bureau of Statistics (NBS) released for Q2, 2017, the total capital imported into the country increased to $1.79 billion in Q2, 2017 from $908 million in Q1, 2017.
The capital importation figure in Q2, 2017 represents a growth of 97.34 percent over the figure reported in Q1, 2017 and a growth of 71.98 percent over the $1.04 billion recorded in Q2, 2016.
Cumulatively, a total of $2.70 billion capital was imported into the country in the first half of 2017 (HY1, 2017), representing a growth of 54 percent over the $1.75 billion imported in the corresponding period of 2016.
Looking at the developments in the HY1, 2017 and based on historical trend, our forecast shows that capital importation for the full year 2017 (FY 2017) should increase to $5.82 billion, representing a growth of 11.35 percent over the capital of $5.22 billion imported into the country in 2016.
Although our forecast represents the second lowest figure since 2010, it signifies an improvement in the foreign investors’ perception about the short-to-medium term outlook of the Nigerian economy.
A further analysis of the total capital imported into the Nigerian economy in Q2, 2017 shows that the highest figure occurred in May 2017 ($616.5 million); followed by June ($612.6 million) and April ($563.3 million).
Foreign Portfolio Investment (FPI) was the main driver of the growth in capital importation in Q2, 2017. FPI represented 42.99 percent of capital importation at $771 million; Foreign Direct Investment (FDI) contributed 15.31 percent ($274 million); while Other Investments (Trade Credits, Loans, Currency Deposits, and Other Claims) contributed 41.70 percent ($747 million).
The breakdown of the capital importation by instrument shows that equity investment accounted for the highest portion of both FPI and FDI in Q2 2017. Equity investment accounted for 79.7 percent and 99.9 percent of the FPI and FDI, respectively.
Other sectors that attracted foreign capital in Q2, 2017 are oil and gas, servicing and production/manufacturing.
The initiative of the Central Bank of Nigeria (CBN) to create the Investors’ and Exporters’ Foreign Exchange Window (I&E Window) boosted foreign investors’ confidence in the Nigerian economy and helped to attract foreign capital.
We observed that the monthly average external reserves increased to $30 billion in March 2017, and has not dropped below that level. A combination of an increase in foreign investments in Nigeria, and improvement in crude oil production and price have had positive impact on the country’s external reserves.
Consequently, the CBN has been able to increase the supply of foreign exchange in the various foreign exchange markets, leading to foreign exchange rate stability and appreciation. The equity market has also received a major lift, with the Nigerian Stock Exchange All Share Index (NSE ASI) recording the best Year-to-Date (YTD) performance in three years. In another development, the Consumer Price Index (CPI) report that the NBS released on August 28, 2017 shows that inflation rate (Year-on-Year) dropped marginally to 16.05 percent in July 2017, from 16.10% in June 2017.
This is the sixth consecutive month of decline in the inflation rate in 2017. There was also a further deceleration in the rate of increase in the Month-on-Month inflation rate in July 2017, compared with the rate in June 2017.
The month-on-month change in the Consumer Price Index (CPI) stood at 1.21 percent in July 2017, lower than 1.58 percent recorded in June 2017.
Our forecast shows that the inflation rate will remain in the range of 15.5 percent – 16.2% for the remainder of 2017.
With better policy initiatives and implementation, we believe the Nigerian economy can attract more foreign capital up to the levels attained in the year 2013.
By Dipo Olowookere
Investors at the Nigerian Exchange (NGX) Limited have continued to show excitement for the full-year earnings of companies on the exchange so far.
On Friday, Customs Street further appreciated by 1.01 per cent as more organization released their financial statements for the 2025 fiscal year.
During the session, traders continued their selective trading strategy, with the energy sector going up by 2.47 per cent at the close of business despite profit-taking in the banking counter, which saw its index down by 0.11 per cent.
Yesterday, the insurance space grew by 2.16 per cent, the industrial goods segment expanded by 1.70 per cent, and the consumer goods industry jumped by 0.42 per cent.
Consequently, the All-Share Index (ASI) increased by 1,722.13 points to 171,727.49 points from 170,005.36 points, and the market capitalisation soared by N1.106 trillion to N110.235 trillion from the N109.129 trillion it ended on Thursday.
Business Post reports that there were 59 appreciating stocks and 19 depreciating stocks on Friday, representing a positive market breadth index and strong investor sentiment.
The trio of Omatek, Deap Capital, and NAHCO gained 10.00 per cent each to sell for N2.64, N6.82, and N136.40 apiece, as Zichis and Austin Laz appreciated by 9.98 per cent each to close at N6.72 and N5.40, respectively.
Conversely, The Initiates depreciated by 9.74 per cent to N19.45, DAAR Communications slumped by 7.32 per cent to N1.90, United Capital crashed by 6.55 per cent to N18.55, Coronation Insurance lost 5.71 per cent to quote at N3.30, and First Holdco shrank by 5.53 per cent to N47.00.
The activity chart showed an improvement in the activity level, with the trading volume, value, and number of deals up by 33.77 per cent, 93.27 per cent, and 10.63 per cent, respectively.
This was because traders transacted 953.8 million shares worth N43.1 billion in 51,005 deals compared with the 713.0 million shares valued at N22.3 billion traded in 46,104 deals a day earlier.
Fidelity Bank was the most active with 92.4 million units sold for N1.8 billion, Chams transacted 69.2 million units valued at N310.9 million, Deap Capital exchanged 59.1 million units worth N382.7 million, Access Holdings traded 57.2 million units valued at N1.3 billion, and Tantalizers transacted 48.6 million units worth N228.2 million.
By Adedapo Adesanya
The value of the Naira contracted against the United States Dollar on Friday by 13 Kobo or 0.01 per cent to N1,366.19/$1 in the Nigerian Autonomous Foreign Exchange Market (NAFEX) from the previous day’s value of N1,366.06/$1.
According to data from the Central Bank of Nigeria (CBN), the Nigerian currency also depreciated against the Pound Sterling in the same market window yesterday by N2.37 to N1,857.75/£1 from the N1,855.38/£1 it was traded on Thursday, and further depleted against the Euro by 57 Kobo to close at N1,612.52/€1 versus the preceding session’s N1,611.95/€1.
In the same vein, the exchange rate for international transactions on the GTBank Naira card showed that the Naira lost N8 on the greenback yesterday to N1,383/$1 from the previous day’s N1,375/$1 and at the black market, the Nigerian currency maintained stability against the Dollar at N1,450/$1.
FX analysts anticipate this trend to persist, primarily influenced by increasing external reserves, renewed inflows of foreign portfolio investments, and a reduction in speculative demand.
In the short term, stability in the FX market is expected to continue, supported by policy interventions and improving market confidence.
Nigeria’s foreign reserves experienced an upward trajectory, increasing by $632.38 million within the week to $46.91 billion from $46.27 billion in the previous week.
The Dollar appreciation this week appears to be largely technical, serving as a correction to the substantial losses experienced from mid- to late January.
Meanwhile, the cryptocurrency market slightly appreciated, with Bitcoin (BTC) climbing near $68,000, up nearly 5 per cent since hitting $60,000 late on Thursday after investor confidence in crypto’s utility as a store of value, inflation hedge, and digital currency faltered.
The sell-off extended beyond crypto, with silver plunging 15 per cent and gold sliding more than 2 per cent. US stocks also fell.
The latest recoup saw the price of BTC up by 4.7 per cent to $67,978.96, as Ethereum (ETH) appreciated by 6.3 per cent to $2,021.10, and Ripple (XRP) surged by 9.5 per cent to $1.42.
In addition, Solana (SOL) grew by 7.3 per cent to $85.22, Cardano (ADA) added 6.1 per cent to trade at $0.2683, Dogecoin (DOGE) expanded by 5.4 per cent to $0.0958, Litecoin (LTC) rose by 5.2 per cent to $53.50, and Binance Coin (BNB) jumped by 2.3 per cent to $637.79, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) traded flat at $1.00 each.
By Adedapo Adesanya
Oil prices settled higher on Friday as traders worried that this week’s talks between the US and Iran had failed to reduce the risk of a military conflict between the two countries.
Brent crude futures traded at $68.05 a barrel after going up by 50 cents or 0.74 per cent, and the US West Texas Intermediate (WTI) crude futures finished at $63.55 a barrel due to the addition of 26 cents or 0.41 per cent.
Iran and the US held negotiations in Muscat, the capital of Oman, on Friday to overcome sharp differences over Iran’s nuclear programme.
It was reported that the talks had ended with Iran’s foreign minister saying negotiators will return to their capitals for consultations and the talks will continue.
Regardless, the meeting kept investors anxious about geopolitical risk, as Iran wanted to stick to nuclear issues while the US wanted to discuss Iran’s ballistic missiles and support for armed groups in the region.
Any escalation of tension between the two nations could disrupt oil flows, since about a fifth of the world’s total consumption passes through the Strait of Hormuz between Oman and Iran.
Saudi Arabia, the United Arab Emirates, Kuwait and Iraq export most of their crude via the strait, as does Iran, which is a member of the Organisation of the Petroleum Exporting Countries (OPEC).
According to Reuters, Iran objected to the presence of any US Central Command (CENTCOM) or other regional military officials, saying that would jeopardise the process.
The current confrontation was sparked by more than two weeks of unrest in Iran that saw authorities launch a deadly crackdown that killed thousands of civilians and shocked the world. As reports of the deaths trickled out of Iran, US President Donald Trump threatened to strike Iran if any of the tens of thousands of protesters arrested were executed.
Meanwhile, Kazakhstan’s planned oil exports could fall by as much as 35 per cent this month via its main route through Russia, as the country’s top oil company, Tengiz oilfield, slowly recovers from fires at power facilities in January.
ING analysts have pointed out Iran’s neighbour, Iraq, and a disagreement with the US as another bullish factor for oil prices. It seems Iraqi politicians favour Mr Nouri al-Maliki as the country’s next Prime Minister, but the US thinks Mr al-Maliki is too close to Iran. President Trump has already threatened the oil producer with consequences if he emerges as PM.
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