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Naira continues to weaken on parallel market, reaches 1,245/$1



…Plummets by 80% to become Africa’s worst-performing currency

By Sodiq Adelakun

On the parallel market, the naira was trading at 1,245 per dollar in early Wednesday trading, while the one-month non-deliverable forwards market had it listed at 1,002.50 naira on Tuesday.

In the latest update from Nigeria’s currency markets, the naira remains entrenched at low levels against the US dollar on the black market due to the Central Bank of Nigeria’s (CBN) struggle to meet the demand for the greenback from both corporations and individuals.

CBN Governor Olayemi Cardoso has previously announced a commitment to let market forces determine exchange rates, while also emphasising the need for clear and consistent regulations to govern market activities.

Despite these intentions, the significant gap between the official and black-market rates continues to widen, with traders showing a strong preference for the higher rates available on the black market.

The already precarious situation is exacerbated by the country’s faltering foreign exchange liquidity, leading to volatility that mirrors the more flexible trading conditions of the unofficial parallel market.

The naira, which has depreciated by approximately 80 percent, now holds the unfortunate title of Africa’s worst-performing currency.

Tuesday’s trading data revealed a concerning 18.90 percent drop in Nigeria’s FX market turnover, with the volume of dollar transactions in the official market falling to $111.76 million from the $137.82 million recorded on Monday.

The scarcity of foreign exchange typically results in the devaluation of the naira, as the reduced supply of dollars causes their value to rise relative to the local currency. This dynamic contributes to increased import costs and adds inflationary pressures to the economy.Contrary to expectations from many experts that the parallel market would shrink following the naira’s devaluation, it appears to remain robust.

The former acting head of the CBN, Folashodun Shonubi, has pointed to the avoidance of traditional banking channels by diaspora remittances as a contributing factor to the scant foreign exchange inflows through official avenues.

As Nigeria grapples with these economic challenges, the disparity between the official and black-market rates continues to signify deeper issues within the country’s foreign exchange system.

He emphasised that remittances from the diaspora actually provide a portion of the funding for the illegal markets.

“We therefore need to be well-informed about a great deal of what is happening there. The sentiment game is off the table.

“We typically follow the literature if we don’t understand the dynamics, even though it might not be the best fit for us.

“We are aware that money has arrived through those remittances, even though it isn’t reflected in the official system. They must be traveling somewhere, then. And the problem with the black market, unofficial market, parallel market, or whatever term you want to use, is that because it is unregulated, it turns into a convenient location for criminal activity,” he added.

Since the low oil prices prior to the pandemic, Africa’s most populated country has experienced severe FX shortages, which has forced foreign investors to sell their local assets and repatriate their profits in dollars.

The FG inability to clear a backlog of dollar demand estimated at about $7 billion hurt the country’s market integrity in getting the much-needed FX support from foreign partners.

The scarcity of dollars eventually makes the naira weaker because more people want to use the few available dollars, which raises the dollar’s value as the local currency. Furthermore, given Nigeria’s dismal economic performance, the naira is probably going to face more challenges in the upcoming year.

Nigeria’s modest growth rates, which were 2.5 percent in the second quarter and 2.3 percent in the first, were expected to continue until 2024, according to PricewaterhouseCoopers.

Yemi Cardoso, in his recent statement, pointed out that the IMF’s forecast for 2024, with a mere 3 percent prediction, is not much better.

He also stated that Nigeria’s oil export revenue is expected to decline in the upcoming year.

The CBN chief further predicts that the country’s oil earnings will decrease due to the OPEC limit of 1.78 million barrels per day. The recent decrease in oil output in Nigeria can be attributed to production stoppages, crude oil theft, and divestment from large oil companies.

Additionally, the weak dollar index, trading close to its lowest level since July, has not benefited the naira, while major currencies have gained support as European central banks maintain a less dovish stance.

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Money market

Naira depreciates by 0.17% against dollar at official market



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.

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Money market

GTCO issues Notice of Proposed Offering



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”.

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Money market

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



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.

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