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Nigeria Week Ahead – Current Account Balance, Naira & NFP in Focus

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By Lukman Otunuga

The next few days could be eventful for Africa’s largest economy despite the quiet domestic economic calendar.

At home, all eyes will be on the current account balance for the final quarter of 2021. During the third quarter of 2021, the country records a current account surplus of $3.7 billion.

It is worth keeping in mind that the current account is part of the balance of payments. This is a key indicator that tracks trade in goods, trade in services, income, and current transfers.

A positive current account means the nation earns more than it spends. A negative account means it spends more than it earns. Outside of Nigeria, this will be another busy week for global markets with ongoing geopolitical tensions, key economic data from major economies, and speeches from policymakers keeping investors occupied.

Over the weekend, the tired Naira weakened to N587 against the dollar with fears mounting over the local currency extending losses. Many fundamental factors have contributed to the instability of the Naira with dollar scarcity being one the biggest culprits.

Some are predicting the Naira to weaken as low as 700 amid sub-optimal crude production, crude oil theft, and low export of goods. Such a negative development will pose have consequences on Nigeria’s fragile economic recovery and moderating inflationary pressures.

In other news, reports reveal that the Central Bank of Nigeria spent $13.1 billion in 11 years to settle Nigeria’s foreign debt obligations. The federal government’s borrowing spree and debt servicing are part of the many negative themes threatening Nigeria’s economy.

According to reports from the Debt Management Office (DMO), Nigeria’s total public debt rose to N39.55 trillion as of December 2021. Excessive government debt levels can impact economic stability and pose ramifications for the strength of the currency in trade.

Focusing on the week ahead, there could be action across equity, commodity and stock markets due to the various fundamental themes influencing risk sentiment.

Oil prices are under pressure due to concerns about demand in China, while gold seems to be waiting for a fresh fundamental spark. One of the major risk events may be the US jobs report on Friday which is estimated to print a headline figure of 450k. The unemployment rate is forecasted to tick lower to 3.7% – its lowest since the pandemic. A weak report could temper rate hike expectations, resulting in a weaker dollar.

Lukman Otunuga is the Senior Research Analyst at FXTM

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Economy

Sterling Bank Assures Shareholders More Value With New Structure

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By Aduragbemi Omiyale

Recently, shareholders of Sterling Bank Plc authorised the board of the company to transform its organizational structure into a holding firm to be known as Sterling Financial Holdings Company.

A holding company or Holdco is a company set up for the purpose of making and managing, for its own account, equity investment in two or more companies, being its subsidiaries, engaged in the provision of financial services, one of which must be a bank.

The Chief Executive of Sterling Bank, Mr Abubakar Suleiman, said with the new arrangement, shareholders would have value for their money as the company would have the opportunity to increase its income streams because of its involvement in new ventures.

He disclosed that the advantages of the newly formed holding company include value creation to maximise earnings through new businesses, agility to optimise for opportunities and adapt to a rapidly changing market, maximise current and future talent potential with opportunities within the group and subsidiaries to nurture and engage its wealth of young and innovative talent.

According to him, the holding company also affords Sterling another opportunity to leverage its successful HEART strategy, which has seen the bank make consolidated investments in the Health, Education, Agriculture, Renewable Energy and Transportation sectors, growing the company’s year-on-year profits to record highs despite strong economic headwinds.

With the adoption of a Holdco structure, Sterling now possesses the latitude to make inroads into other sectors within financial services, such as pensions, asset management, payment services, real estate, and different verticals, along with the current banking licenses held by the commercial and non-interest banking subsidiaries, Sterling Bank and The Alternative Bank.

In recent times, the bank has doubled down on digitisation with specialised products through the development and introduction of Specta, OneBank, I-invest, Gazelle and Omni X to fulfil the market’s needs for innovative retail and commercial banking solutions.

On his part, the Chairman of Sterling Bank, Mr Asue Ighodalo, said, “Following the implementation of the scheme, shareholders will exchange their shares in the Bank for shares in HoldCo in the same proportion as their current holdings in the Bank, which will be a regulated entity for CBN purposes.”

He added that the scheme would provide several benefits to the shareholders of the bank, some of which include facilitating diversification into other permissible business lines, thereby promoting growth and enhancing shareholder value and facilitating a consolidated financial strength of the group, which will improve access and ability to raise capital.

It was gathered that upon the final ratification by the regulators, the commercial banking subsidiary of the holding company, Sterling Bank; will continue to operate with its current name as a limited liability company, with shares transferred from the publicly traded company transferred to the newly formed Sterling Financial Holdings Company.

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Economy

Friesland Extends NASD OTC Securities Growth by 0.98%

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Friesland shares

By Adedapo Adesanya

FrieslandCampina WAMCO Nigeria Plc extended the bulls’ presence at the NASD Over-the-Counter (OTC) Securities Exchange by 0.98 per cent on Tuesday, September 27.

This expanded the market capitalisation of the bourse by N9.38 billion to N963.94 billion from N954.56 billion and jerked the NASD Unlisted Securities Index (NSI) up by 3.19 basis points to end the day at 762.12 points as against the 765.31 points it recorded in the previous session.

FrieslandCampina WAMCO Nigeria Plc appreciated yesterday by N4.90 to sell at N78.00 per unit compared to the N73.10 per unit it was transacted a day earlier.

Despite the growth posted yesterday by the NASD OTC securities, there was a price loser and it was Niger Delta Exploration and Production (NDEP) Plc, which declined by N1.00 to settle at N199.00 per share compared with Monday’s value of N198.00 per share.

During the session, there was a rise in the volume of securities traded by 408.8 per cent to 189,296 units from the 37,205 units transacted by market participants in the preceding session.

In the same pattern, there was a rise in the value of shares traded by 129.1 per cent to N6.2 million from the N2.7 million recorded on Monday.

These transactions were completed in 18 deals, the same amount of deals carried out in the previous trading session.

At the close of trades, AG Mortgage Bank Plc was the most traded stock by volume (year-to-date) with the sale of 2.3 billion units valued at N1.2 billion, Central Securities Clearing System (CSCS) Plc stood in second place with 687.6 million units worth N14.3 billion, and Mixta Real Estate Plc was in third place with 178.1 million units worth N313.4 million.

The most traded stock by value on a year-to-date basis was CSCS Plc with the sale of 687.6 million units worth N14.3 billion, VFD Group Plc was in second place with 27.7 million units valued at N7.4 billion, as FrieslandCampina WAMCO Nigeria Plc was in third place with 14.3 million units valued at N1.7 billion.

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Economy

Naira Appreciates at P2P, Falls at I&E, Stable at Black Market

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Naira devaluation

By Adedapo Adesanya

The value of the Naira appreciated against the United States currency in the Peer-to-Peer (P2P) segment of the foreign exchange market on Tuesday by N2 to close at N740/$1 compared with the previous day’s value of N742/$1.

However, it depreciated against the American Dollar at the Investors and Exporters (I&E) window of the FX market yesterday by 33 Kobo or 0.08 per cent to trade at N436.33/$1 in contrast to Monday’s value of N436.00/$1.

Data from the FMDQ Securities Exchange disclosed that the value of forex transactions recorded at the spot market yesterday went up by 27.31 per cent or $21.33 million to $99.43 million from the $78.10 million reported a day earlier.

In the interbank segment of the market, the Naira closed flat against the Pound Sterling at N463.96/£1 and against the Euro, it also remained unchanged at N416.15/€1 on Tuesday.

In the same vein, the exchange rate of the local currency paired with the greenback closed flat at the parallel market yesterday at N722/$1.

Meanwhile, the digital currency market was bearish yesterday, with Bitcoin (BTC) falling below the $20,000 mark again after it managed to rise above that level a day earlier.

On Tuesday, its value went down by 6.5 per cent to close at $18,765.50 as Ripple (XRP) recorded a 10.1 per cent slump to trade at $0.4282.

Ethereum (ETH) saw its value go down by 6.9 per cent to sell at $1,284.29, Solana (SOL) recorded a 6.5 per cent slide to quote at $32.44, Cardano (ADA) recorded a 5.6 per cent decline to settle at $0.4312, Binance Coin (BNB) shed 5.1 per cent to sell for $270.03, Litecoin (LTC) went down by 5.0 per cent to trade at $52.07, and Dogecoin (DOGE) saw a 4.5 per cent slump to trade $0.0594.

But Binance USD and the US Dollar Tether (USDT) closed flat at $1.00.a

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