By Dipo Olowookere
Discussions are ongoing with the Central Bank of Nigeria (CBN) for the introduction of between 5-year and 10-year Naira futures contract, Bloomberg is reporting.
In 2017, the apex bank began the sale of foreign-currency futures contracts on the FMDQ Securities Exchange Plc with a maximum duration of 13 months.
This was mainly to lessen pressure on the Naira by spreading Dollar purchases over a period time, enabling investors to hedge against fluctuations in the Naira, while also offering forwards that were introduced in 2011.
Quoting the CEO of FMDQ, Mr Bola Onadele, in an interview in Lagos, it was said that the introduction of the FX futures was being considered so as to ease pressure on the local currency and boost investor confidence as the price of the crude oil, especially the Brent, which Nigeria’s crude is categorized, has been trading below the budget benchmark of $60 per barrel lately.
The domestic currency has been under pressure recently as a result of unclear economic direction of the present administration of President Muhammadu Buhari, which has caused outflows of foreign exchange from the country as well as fears of a possible devaluation of the Naira.
According to Mr Onadele, market dealers and the FMDQ are “engaging the central bank to extend the curve of the FX futures because it will create stability for capital inflows into Nigeria,” adding that, “We wish for 5- to 10-year futures.”
If the longer futures are introduced, it would help cushion against foreign-exchange risks and attract longer-term funding to the nation.
“The best way to guard against exchange-rate volatility is to purchase futures contracts,” Mr Onadele said, stressing that, “Longer-tenor futures will help to drive capital into Nigeria. It also provides opportunities for Nigerians in diaspora to bring their money home.”
Continui9ng, the FMDQ chief said, “The availability of this FX futures product reduces, if not eliminates, the need to hoard FX and front-load on FX requirements.”
He expressed optimism that, “Foreign-portfolio investors tracking value will buy the futures, so will foreign direct investors and long-term borrowers in foreign currency.”
Nigeria operates a system of multiple exchange rates in a bid to control demand for Dollars. The system, criticized by the International Monetary Fund (IMF), has kept the official rate at about N305 per Dollar at the interbank segment, N358/$ at the Investors and Exporters (I&E) segment and N360 to a Dollar at the parallel market.
NGX All-Share Index Outperforms Inflation Over Three Years
The 3-year trailing performance of the All-Share Index (ASI) of the Nigerian Exchange (NGX) Limited surpasses the average inflation during the same period.
The annual inflation measured by the Consumer Price Index (CPI) released in September by the National Bureau of Statistics (NBS) was 20.52 per cent in August 2022.
Meanwhile, the NGX ASI, a market capitalisation weighted index of all companies listed on the NGX’s platform, had a year-to-date performance of 15.68 per cent during the same period. This could be misleading about the market performance until you view it through a longer-term lens.
British Economist, Benjamin Graham, made a quote popularly used by Warren Buffett, the Fund Manager of Berkshire Hathaway Inc and widely regarded as the best living investor: “Markets are a voting machine in the short term, and a weighing machine in the long run.” On a 3-year trailing basis, the NGX ASI has outperformed the CPI average in the same period, ensuring that investors with a longer-term hold on their investments remain in the positive region.
Analysis of data of closing prices gathered from the NGX’s website showed that the index has a 3-year moving average of 22.97 per cent, compared to an inflation average of 15.72 per cent.
The year 2022 has been a slow year for global stocks due to volatility resulting from the hiking of interest rates by central banks in the United States and Europe amidst inflationary pressures.
The NGX ASI’s 15.62% YTD return is a significant positive performance compared to the US S&P 500, which has plunged by 22.46% or the FTSE 100, which has declined by 7.68%, according to Google Finance. The local bourse has exhibited resilience and insulated investors from negative return on investment over three years.
Laolu Martins Was Minority Shareholder of Bukka Hut—Management
By Modupe Gbadeyanka
The management of an online restaurant in Nigeria, Bukka Hut, has clarified that one of its late directors, Mr Laolu Martins, was a minority shareholder in the company.
On Wednesday, it was reported that the deceased breathed his last in Lagos. He was said to have co-founded the firm with Mr Rasheed Jaiyeola, who is the Chief Executive Officer.
The deceased was reportedly invited to join the firm by Mr Jaiyeola, who jointly owns majority shares of the company with his wife and sister.
Mr Jaiyeola and Mr Martins were co-owners of the Nigerian International Securities Limited (NISL) before the former resigned from his position as director to focus on Bukka Hut in 2016.
According to the statement from the organisation, Mr Jaiyeola established Bukka Hut but only invited the deceased and two others to invest in the eatery when it was established.
“To clarify, Rasheed Jaiyeola is the founder/CEO of Bukka Hut, a proudly Nigerian brand he built from inception in August 2011 from one outlet to 24 outlets comprising of restaurants, lounges and suya and grill spots, and a learning facility, BH Academy, as at today. He jointly owns the majority shares of the company with his wife and sister.
“Bukka Hut is not a one-man business as there are two other shareholders/directors, but they are not involved in the daily management of the business.
“Rasheed and the late Olaolu Martins were co-owners of Nigerian International Securities Lid (NISL), and naturally, Laolu was one of the three people he invited to invest in Bukka Hut when he founded it in 2011; Rasheed resigned from NISL as a director in 2016 to focus solely on building Bukka Hut while Olaolu remained the MD/CEO of NISL and its related businesses,” the statement explained.
Mr Martins was reported to have died from suicide, but fresh information revealed that he slumped at Lenox Mall after a cardiac arrest and was taken to a hospital in Lekki, where he passed on.
Usman Laments Nigeria, Saudi Arabia Trade Volume of $5m
By Aduragbemi Omiyale
The president of the newly-establishment Nigeria-Saudi Arabia Chamber of Commerce, Industry, Mines and Agriculture, Mr Ibrahim Usman, has lamented the low trade volume between both countries despite their historical relationship.
Mr Usman expressed this frustration when he visited the Minister of Information and Culture, Mr Lai Mohammed, at his office in Abuja.
He said at the moment, the trade volume between Nigeria and Saudi Arabia is about $5 million, promising to deepen the relations between the two countries.
“And whereas many Saudi investors are looking out for profitable investment windows in friendly countries like Nigeria, our businesses have been unable to capitalise on such opportunities due to lack of an organised, reliable, safe and very secure private sector platform like a chamber of commerce,” he said.
Mr Usman said a 60-member inter-ministerial delegation from Saudi Arabia will be in Nigeria next week for the second session of the Nigeria-Saudi Arabia Joint Commission, which will further create opportunities for the chamber to set up trade missions.
On his part, Mr Mohammed praised his guest for his effort to establish the organisation after over 10 years of trial, saying he has proven himself as a man of vision and deep conviction.
“Clearly from your presentation, it’s clear that the major objective is to change the narrative and ensure that the relations between Saudi Arabia and Nigeria should not be seen just from the narrow prism of Hajj and Umrah pilgrimage, but from the prism of two very important nations of the world creating a bridge through better cooperation for the two countries and their citizens,” the Minister said.
Mr Mohammed described the chamber as a clearing house for proposals from business people from the two countries in order to open new vistas for trade opportunities.
He said the absence of such a chamber has led to the decline in the volume of trade and also bred trust deficit between business people from the two countries.
“The absence of this vehicle has led to loss of businesses between the two countries and it has also aggravated the trust deficit between them,” he said.
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