Economy
FX Inflows into Nigeria Still Below Pre-COVID Levels as Outflows Rise
By Tunde Abidoye
Nigeria is still battling with foreign exchange (FX) inflows despite efforts by the Central Bank of Nigeria (CBN) to boost liquidity in the space.
In its latest Quarterly Statistical Bulletin for the fourth quarter of 2020, the apex bank said the total FX inflows into the Nigerian economy in the period declined by 6.4 per cent quarter-on-quarter and 42 per cent year-on-year to $24.8 billion.
Although aggregate inflows have increased since they bottomed out to a 3-year low at the height of the pandemic, they have not recovered to pre-COVID levels.
FX inflows through the CBN increased 17.1 per cent quarter-on-quarter to $8.2 billion (or 33 per cent of total inflows), thanks to a 48 per cent quarter-on-quarter rise in non-oil receipts to $6.8 billion.
A $2.0 billion category titled others including FGN loans underpinned the increase in non-oil receipts. On a net basis, the CBN’s swap arrangements grew 117 per cent quarter-on-quarter to $792 million.
In contrast, oil receipts fell 44 per cent quarter-on-quarter to $1.3 billion due to i) Nigeria’s adherence to its OPEC oil production quota, which resulted in a decline of 0.1 million barrels per day and, ii) a decrease in NNPC’s share of oil and gas exports.
Autonomous sources (other than the CBN) contributed $16.6 billion in forex inflows or 67 per cent of overall inflows. It was supported by a 10 per cent increase in over-the-counter (OTC) purchases (under invisible transactions), which included capital imports, home remittances, and other OTC purchases which we reckon are mostly linked to bonds.
A further breakdown of OTC purchases showed that capital imports and home remittances shrunk by 25 per cent quarter-on-quarter and 52 per cent quarter-on-quarter respectively.
The drop in capital imports can be attributed to Foreign Portfolio Investors (FPIs’) waning appetite after a worsening of FX liquidity, induced by a sell-off in oil prices as the pandemic worsened. Remittances also suffered a blow from the weak economic growth and employment levels in migrant-hosting countries.
Drawing from a different data series, we note that workers remittances in the balance of payments accounts which provides a more holistic view of remittances also slumped by 31 per cent quarter-on-quarter to $4 billion in Q4 ’20 and 28 per cent year-on-year to $17 billion in FY ’20.
In an effort to boost remittances, the CBN in December 2020 said beneficiaries could take their remittances from licensed International Money Transfer Operators (IMTOs) in US dollars. It also increased the number of authorized IMTOs.
In March 2021, the bank followed this up by launching its Naira 4 Dollar Scheme. Under the scheme, diaspora remittance recipients are rewarded with an extra N5 for every dollar wired through official routes.
FX outflows through the economy increased by 24.1 per cent quarter-on-quarter to $9.2 billion. About 97 per cent of total outflows were routed through the CBN.
The strong increase in forex outflows reflects a rise in CBN FX interventions at multiple intervention windows, notably the restart of FX sales to bureaux de change operators and at the investors and exporters (I&E) window in August ’20 after a five-month hiatus.
Despite the increase in outflows during the quarter, FX outflows remain below pre-pandemic levels, due largely to the CBN’s import compression strategies.
FBNQuest Researchs’ conversations with FPIs and domestic investors indicate that greater FX liberalisation (including further adjustments to the FX rate) and the loosening of FX controls such as the CBN’s 42-item FX restriction list are prerequisites to open the tap of portfolio flows.
Tunde Abidoye is the Head of Equity Research at FBNQuest. Additional information by Business Post
By Adedapo Adesanya
The NASD Over-the-Counter (OTC) Securities Exchange closed higher by 1.41 per cent on Friday, May 15, supported by four securities on the platform.
During the session, FrieslandCampina Wamco Plc added N14.24 to its share price to sell for N159.00 per unit, in contrast to the previous day’s N144.76 per unit.
Further, Central Securities and Clearing System (CSCS) Plc appreciated by N1.34 to N72.34 per share from N71.00 per share, Geo-Fluids Plc improved its price by 4 Kobo to N2.94 per unit from N2.90 per unit, and Industrial and General Insurance (IGI) Plc gained 1 Kobo to trade at 61 Kobo per share compared with Thursday’s closing price of 60 Kobo per share.
As a result, the NASD Unlisted Security Index (NSI) rose by 58.20 points to 4,188.41 points from 4,130.21 points, and the market capitalisation soared by N34.82 billion to N2.506 trillion from N2.471 trillion on Thursday.
During the session, the volume of trades went up by 180.8 per cent to 1.2 million units from 417,349 units, and the value of transactions increased by 29.8 per cent to N29.8 million from N23.2 million, while the number of deals fell by 22.6 per cent to 24 deals from 31 deals.
Great Nigeria Insurance (GNI) Plc ended the day as the most traded stock by value on a year-to-date basis with 3.4 billion units sold for N8.4 billion, followed by CSCS Plc with 60.8 million units exchanged for N4.1 billion, and Okitipupa Plc with 27.9 million units valued at N1.9 billion.
GNI Plc also closed the session as the most traded stock by volume on a year-to-date basis with 3.4 billion units worth N8.4 billion, followed by Resourcery Plc with 1.1 billion units transacted for N415.7 million, and Infrastructure Guarantee Credit Plc with 400 million units traded for N1.2 billion.
By Dipo Olowookere
The bears overpowered the Nigerian Exchange (NGX) Limited on Friday, sinking it further by 0.76 per cent when the closing gong was struck by 4 pm.
The nation’s flagship equity market was under selling pressure during the session, as investors booked profits after the shares witnessed price appreciation in the past trading sessions.
The energy sector was the most impacted, as it shed 4.43 per cent. The consumer goods index declined by 0.90 per cent, the banking counter decreased by 0.15 per cent, and the industrial goods sector lost 0.08 per cent, while the insurance counter gained 2.42 per cent, which was not enough to salvage the situation.
Consequently, the All-Share Index (ASI) contracted by 1,912.19 points to 250,330.92 points from 252,243.11 points, and the market capitalisation moderated by 1.225 trillion to N160.444 trillion from N161.669 trillion.
Zichis was the worst-performing stock for the session after it gave up 9.97 per cent to close at N29.43, FTN Cocoa slipped by 9.95 per cent to N8.96, The Initiates slumped by 9.90 per cent to N32.30, LivingTrust Mortgage Bank tumbled by 9.88 per cent to N3.83, and International Energy Insurance dropped 9.71 per cent to trade at N2.79.
The best-performing stock was ABC Transport, which grew by 10.00 per cent to N6.27. May and Baker also appreciated by 10.00 per cent to N47.30, SCOA Nigeria surged by 9.98 per cent to N33.05, Trans-Nationwide Express expanded by 9.97 per cent to N7.06, and DAAR Communications jumped 9.76 per cent to N2.25.
Yesterday, investors traded 1.1 billion shares worth N44.3 billion in 65,744 deals compared with the 1.0 billion shares valued at N41.6 billion transacted in 74,822 deals a day earlier. This indicated a dip in the number of deals by 12.13 per cent, and a rise in the trading volume and value by 10.00 per cent and 6.49 per cent, respectively.
Chams was the busiest equity for the day, with 328.5 million units sold for N1.1 billion. UBA traded 61.6 million units worth N2.7 billion, First Holdco transacted 58.7 million units valued at N4.2 billion, Secure Electronic Technology exchanged 51.9 million units worth N45.0 million, and Access Holdings traded 51.8 million units valued at N1.3 billion.
By Adedapo Adesanya
The last trading session of the week at the Nigerian Autonomous Foreign Exchange Market (NAFEX) ended on a negative note for the Naira on Friday, May 15, as it lost N15 Kobo or 0.1 per cent against the Dollar to trade at N1,371.04/$1 compared with the previous day’s N1,370.89/$1.
However, it further appreciated against the Pound Sterling in the same market segment yesterday by N20.77 to close at N1,830.61/£1 versus Thursday’s value of N1,851.38/£1, and gained N7.91 against the Euro to settle at N1,595.07/€1 versus N1,602.98/€1.
At the GTBank FX desk, the Naira lost N2 against the US Dollar during the session to sell at N1,383/$1 compared with the preceding session’s N1,381/$1, and at the black market, it remained unchanged at N1,385/$1.
The Naira is forecast to be broadly stable, supported by Dollar sales by the Central Bank of Nigeria (CBN) amid steady, higher oil receipts, with the market settling into a balance.
Policy direction is also expected to give the market some boost as the CBN said the new edition of the FX market guidelines will deepen liquidity, improve transparency and strengthen confidence in the country’s foreign exchange market.
According to the Governor of the CBN, Mr Yemi Cardoso, the update is due to changing global economic realities, domestic reforms and the need for a more coherent and forward-looking regulatory framework. According to him, the last edition of the FX manual was issued in 2018, making the latest review both timely and necessary.
Meanwhile, the cryptocurrency market plunged into the red zone as rising bond yields hit risk assets across markets, while traders are increasingly betting the Federal Reserve may need to raise rates again. Rising energy prices and resurging inflation could force central banks back into tightening mode.
Cardano (ADA) shrank by 4.4 per cent to $0.2557, Dogecoin (DOGE) slid by 3.7 per cent to $0.1104, Ripple (XRP) depreciated by 3.5 per cent to $1.41, Solana (SOL) crashed by 3.5 per cent to $87.81, and Binance Coin (BNB) slumped by 3.4 per cent to $659.64.
Further, Bitcoin (BTC) declined by 2.6 per cent to $78,547.49, Ethereum (ETH) lost 2.1 per cent to quote at $2,209.19, and TRON (TRX) tumbled by 0.7 per cent to $0.3509, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) traded flat at $1.00 each.
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