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 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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