Connect with us

Money market

FX turnover surges by 231.99%

Published

on

…As CBN raises N1.16 trillion from OMO bill auction

Nigeria’s foreign exchange market has seen the turnover on the Nigerian Autonomous Foreign Exchange Market (NAFEM) window surge by an astonishing 231.99 percent on May 24, 2024. This development coincides with the Central Bank of Nigeria (CBN) successfully raising N1.16 trillion through its Open Market Operation (OMO) bill auction on Friday, aimed at mopping up excess liquidity in the financial system.

Data obtained from FMDQ shows that the naira appreciated slightly against the dollar on the NAFEM window, closing at N1482.81/$1, reflecting a 0.19 percent increase from the previous day’s rate of N1485.66/$1.

This marginal appreciation comes after the naira snapped its four-day winning streak, depreciating by 1.55 percent to close at 1485.66/$1 on the official market on Thursday.

The surge in FX turnover to $556.25 million from the previous day’s $167.55 million represents a remarkable 231.99 percent increase, underscoring the heightened activity and investor participation in the market.

The dramatic increase in FX turnover is likely attributed to the CBN’s aggressive liquidity management strategy, which saw the apex bank raise a substantial N1.16 trillion from the OMO bill auction. This move forms part of the CBN’s efforts to control inflationary pressures and stabilize the naira amidst ongoing economic challenges.

On May 23, 2024, the naira experienced a slight depreciation of 1.55 percent, closing at N1485.66. However, the market responded positively to the CBN’s intervention, resulting in a modest appreciation of 0.19 percent the following day.

The significant increase in FX turnover suggests a surge in dollar supply, likely driven by the proceeds from the OMO auction, which bolstered investor confidence and market liquidity.

The surge in FX turnover comes barely three days after the 295th meeting of the Monetary Policy Committee/ (MPC) of the CBN. The CBN increased the monetary policy rate (MPR) by/ 150 basis points, to a new unprecedented 26.25 percent.

This is a lower hike compared to the 200 basis points at 24.75 percent after the previous meeting. The decision announced by the CBN governor, Yemi Cardoso, propels the MPR to its highest point ever, reaffirming the CBN’s aggressive stance on monetary tightening in response to inflationary pressures. The policy rate was raised to curb inflation and attract foreign investment, theoretically supporting the Naira.

Also, the CBN offered a total of N508.98 billion during the Nigerian treasury bill (NTB) auction held on May 22, 2024, with subscription levels significantly surpassing the initial offer, highlighting the continued appetite for fixed-income securities amidst a volatile economic landscape.

Despite the oversubscription of N1.5 trillion, only about N638.98 billion was allotted to the treasury bill investors. The heightened interest in treasury bills can be attributed to the recent increase in the MPR, which has made government securities more attractive to yield-seeking investors.

The substantial increase in FX turnover and the successful OMO auction are pivotal in the CBN’s broader strategy to maintain price stability and support economic growth.

By mopping up excess liquidity, the CBN aims to curb inflation, which has been a major concern for policymakers. The raised N1.16 trillion will help mitigate inflationary pressures by reducing the amount of money in circulation, thereby supporting the naira.

Moreover, the increased FX turnover indicates robust market activity and investor confidence, which are essential for a healthy foreign exchange market. This heightened activity is likely to have positive ripple effects on various sectors of the economy, particularly those dependent on foreign exchange for imports and other transactions.

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Money market

Naira depreciates by 0.17% against dollar at official market

Published

on

The Naira on Thursday slightly depreciated at the official market trading at N1,476.24 to the dollar.

Data from the official trading platform of the FMDQ Exchange, revealed that the Naira lost N2.58.

This represents a 0.17 percent loss when compared to the previous trading date on Tuesday when it traded at N1,473.66 to the dollar.

Also, the volume of currency traded reduced to $92.68 million on Thursday down from $385.91 million recorded on Tuesday.

Meanwhile, at the Investor’s and Exporter’s (I&E) window, the Naira traded between 1,500 and N1,400 against the dollar.

Continue Reading

Money market

GTCO issues Notice of Proposed Offering

Published

on

By Seun Ibiyemi

Guaranty Trust Holding Company Plc (GTCO PLC) has filed a preliminary “red herring” prospectus (Red Herring Prospectus) with the Securities and Exchange Commission (SEC) in connection with a proposed offering for subscription of ordinary shares of 50 kobo each in its share capital (the Ordinary Shares) to raise gross proceeds of up to N500 Billion (the Proposed Offering).

The number of Ordinary Shares to be offered and the price range for the Proposed Offering have not yet been determined.

According to the notice cited, the notice is issued in reliance on Rule 283 of the Rules & Regulations of the Securities & Exchange Commission, Nigeria. The notice read in part, “This notice does not constitute an offer to sell or the solicitation of an offer to buy any securities. Any offer, solicitation or offer to buy, or any sale of securities will be made only by a prospectus duly registered by the Securities and Exchange Commission, Nigeria (SEC) in accordance with the provisions of the Investments and Securities Act, No. 29, 2007 (the Act) and the rules and regulations of the SEC made pursuant to the Act (the SEC Rules).

Stating the purpose of the proposed offering, the notice further read that, “The net proceeds of the Proposed Offering will be used for (i) the growth and expansion of the GTCOPLC Group’s businesses. Such planned growth and expansion will be effected through investments in technology infrastructure to fortify existing operations, the establishment of new subsidiaries and selective acquisitions of non-banking businesses; and (ii) the recapitalisation of Guaranty Trust Bank Limited”.

Identifying the target investors, the notice read that, “The Proposed Offering is structured as an institutional offering targeted at eligible investors and a retail offering within Nigeria (the Nigerian Tranche) and a private placing to persons reasonably believed to be qualified institutional buyers outside Nigeria (the International Tranche)”. The Proposed Offering is anticipated to open by July, 2024.

The filing of the Red Herring Prospectus was undertaken with a concurrent filing of a preliminary universal shelf registration statement. The universal shelf registration will permit GTCOPLC to establish a multi-currency securities issuance programme (the Programme) to issue various types of securities, or any combination of such securities, in one or more offerings, from time to time, to raise proceeds in an aggregate amount of up to U.S.$750 million (or equivalent amount in Nigerian Naira) in the Nigerian/international capital markets during the validity period of the Programme.

The Proposed Offering is expected to be the first issuance under the Programme.

For a caveat, the notice read that, “This notice does not constitute an offer of securities for sale in the United States or to U.S. persons (“U.S. persons”), as such term is defined in Regulation S promulgated under the United States Securities Act of 1933, as amended, (the U.S. Securities Act). The Ordinary Shares being offered have not been, nor will be, registered under the U.S. Securities Act or any state securities laws, and may not be offered or sold in the United States or to U.S. persons absent registration or an applicable exemption from such registration requirements”.

Continue Reading

Money market

NDIC lists Heritage Bank’s head office, other assets for sale

Published

on

The Nigeria Deposit Insurance Corporation has listed the head office in Lagos and branches of failed Heritage Bank across the country for sale in its role as liquidator of the bank.

NDIC announced the sale of the bank properties numbering 48 and its chattel including vehicles, office equipment, plant, and machinery in another 62 locations across the country in an advertorial published on Thursday.

“The Nigeria Deposit Insurance Corporation in the exercise of its right as Liquidator of failed Deposit Money Banks hereby invites interested members of the general public to buy the assets (landed property and chattels) of defunct Heritage Banks through public competitive bidding,” part of the advertorial read.

The head office of the bank and its annex located at 143 Ahmadu Bello Way and 130 Ahmadu Bello Way, Victoria Island, Lagos was listed for sale (buildings, chattels, generator, and motor vehicle). Also listed for sale were six other branches in Lagos, four branches in Abuja, four in Rivers States, and the others spread across the country.

Interested parties are invited to come for an inspection and subsequently put in bids on the assets to be submitted to the NDIC office in Lagos.

Bids are expected to come in with 10 percent of the bid amount in Certified Bank Draft. Successful bidders will be required to pay the balance of the bid price within two weeks of notification.

Earlier, the corporation announced the commencement of the verification and payment of the depositors of the bank with N5m or less in their accounts. This category of customers makes up about 99 per cent of the bank customers.

The Managing Director of the NDIC, Bello Hassan, at a media briefing on the liquidation of Heritage Bank in Abuja last Wednesday, put the total depositors at Heritage Bank at 2.3 million.

Hassan noted that the total bank deposits at Heritage Bank stood at N650 billion  while its loan portfolio was about N700 billion.

In announcing the revocation of the licence of Heritage Bank, the apex bank in a statement signed by the Acting Director of Corporate Communication, Sidi Ali, said, “This action has become necessary due to the bank’s breach of Section 12 (1) of BOFIA, 2020. The board and management of the bank have not been able to improve the bank’s financial performance, a situation which constitutes a threat to financial stability.

“This follows a period during which the CBN engaged with the bank and prescribed various supervisory steps intended to stem the decline. Regrettably, the bank has continued to suffer and has no reasonable prospects of recovery, thereby, making the revocation of the licence the next necessary step.”

Stakeholders in the sector have gone on to express confidence in the decision of the CBN in the overall interest of the sector.

Continue Reading

Trending