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 Dipo Olowookere
The presence of the bulls further strengthened the Nigerian Exchange (NGX) Limited on Tuesday, as the performance indices further gained 0.19 per cent.
The nation’s stock market survived profit-taking witnessed in the banking sector during the session, which crashed its index by 0.02 per cent.
This loss was offset by the gains recorded by the other sectors, with the insurance segment chalking up 0.49 per cent. The consumer goods space appreciated by 0.47 per cent, the industrial goods counter expanded by 0.04 per cent, and the energy sector rose by 0.03 per cent.
At the close of business, the All-Share Index (ASI) was elevated by 475.60 points to 246,659.56 points from 246,183.96 points, and the market capitalisation improved by N307 billion to N159.119 trillion from N158.812 trillion.
The market breadth index was positive yesterday after the bourse finished with 34 price gainers and 22 price losers, implying strong investor sentiment.
UPDC REIT grew by 9.86 per cent to N11.70, Thomas Wyatt advanced by 9.73 per cent to N3.72, Ikeja Hotel climbed 9.53 per cent to N46.55, The Initiates went up by 9.52 per cent to N33.95, and Neimeth increased by 9.47 per cent to N9.25.
Conversely, Mecure depreciated by 9.95 per cent to N76.95, Haldane McCall dropped 9.86 per cent to trade at N3.29, CMFC declined by 9.85 per cent to N3.02, Trans-Nationwide Express lost 9.68 per cent to close at N2.80, and Academy Press shrank by 9.38 per cent to N5.80.
The activity level was mixed during the session, as investors traded 932.5 million equities worth N49.3 billion in 50,059 deals versus the 851.6 million equities valued at N49.6 billion transacted in 56,873 deals a day earlier.
This showed that the trading volume soared by 9.50 per cent, the trading value moderated by 0.61 per cent, and the number of deals retreated by 11.98 per cent.
The busiest equity for the day was Access Holdings, which sold 336.6 million units for N8.7 billion. FCMB exchanged 88.8 million units worth N1.0 billion, First Holdco transacted 72.7 million units valued at N7.7 billion, Zenith Bank traded 37.4 million units for N4.4 billion, and UBA transacted 32.1 million units worth N1.5 billion.
By Aduragbemi Omiyale
Thirty-one companies on Tuesday emerged as winners of the 2025 licensing round of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).
The energy firms competed to take control of 50 oil and gas blocks put on offer by the Nigerian government.
They were among the 143 companies that submitted 200 bids for the oil facilities drawn from diverse terrains, including the Niger Delta Onshore, Niger Delta Shallow Water, Niger Delta Deep Offshore, Benin Basin Onshore, Anambra Basin Onshore, Chad Basin Onshore and Benue Trough.
Business Post gathered that investors, however, were only interested in 37 out of the 50 oil blocks put up for sale by the NUPRC. This is the first time in Nigeria’s energy history that frontier basins would attract such a level of investor interest.
The organisations that won the bids include SSonic Petroleum Limited (PPL 2A29), CFP Pipeline and Flowlines (2A30), Dutchford E&P Limited (2A32), Attabanson Global Company Limited (2A33 and PPL 901), Rosem Energy Limited (2A38), Pivot-GIS Limited (2A39), Network E&P (2A40), Asharami (2A41), LexOil (2A42), BVOF (2A43), GupscoEnergy Limited (2A44 and 2A51), Saratoga (2A45), Volante (2A46), Concept-Reel Petroleum Services Limited (2A47 and 2A55), Clinton Oil Field (2A48 and 2A62) and Nuway Oaklane Limited (2A49).
Others are Ramec (2A50), Italia (2A53), Blueridge E&P (2A54), Up Energies Limited (2A56), AYM Shafa (2A57), Blackrock Holdings Limited (2A58), Funtay Integrated Business Limited (2A59), Riparian Development and Production Limited (2A60), Nikstallis (2A61 and PPL 900), Stardeep Petroleum (PPL 2010), Dakoda & U Limited (PPL308 and PPL 800), Southborne Oil and Gas Limited (PPL 902), Lanaka Petroleum (PPL 903) HighbanResources Limited (PPL 700), Eyre Energy Limited (PPL 801).
By Adedapo Adesanya
Oil prices rose roughly 2 per cent on Tuesday as investors reacted to mounting concerns that escalating hostilities between the United States and Iran and threats by Yemen’s Houthis to blockade Saudi Arabia could disrupt global energy supplies.
Brent futures rose $1.79 or 2.0 per cent to $91.01 a barrel, while the US West Texas Intermediate (WTI) crude gained $1.68 or 2.0 per cent to settle at $84.91 per barrel.
US forces bombed targets in the south and west of Iran while Iran targeted American sites in Bahrain, Kuwait and Jordan and at least one tanker was hit in the Strait of Hormuz.
Supply concerns resurfaced with the Strait essentially closed again and tanker traffic at multi-month lows, to the level from before the ceasefire between the US and Iran, which appears to be over at the moment.
Prices could go much higher if the renewed conflict drags on for a few more months, as the world has now drained a lot of the buffers that had kept oil surges in check between March and May.
Drained strategic and commercial inventories in many key oil-consuming economies, including the US, are setting the stage for further oil price rallies during the busiest oil demand season.
The just-declared Houthi blockade on Saudi maritime shipping has already begun to witness ill-effects, as reports emerge of two oil tankers having made U-turns while initially en route toward the Suez Canal. It was reported that their crews received threats from Houthi militants in Yemen.
The two oil tankers, which loaded Saudi crude for China and India, made U-turns in the Red Sea and headed toward the Suez following the warning from the militia.
Meanwhile, Kuwait’s power and desalination plants caught fire for a second straight day as US and Iran traded strikes for a tenth day.
As Russia’s war with Ukraine expands beyond Ukraine’s borders, the Caspian Pipeline Consortium (CPC) has stopped receiving oil from Kazakhstan after suspending loadings on Monday due to attacks on oil tankers at its Black Sea terminal.
1 Comment