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Naira hits new low of N1,035.12/$ at official market



The Nigerian Naira experienced a significant decline on Wednesday, January 3rd, 2024, closing at N1,035.12 per dollar in the official market.

This is despite recent efforts by the Central Bank of Nigeria (CBN) to bolster the foreign exchange market through interventions.

The currency’s downward trend persists prompting concerns about its potential impact on the broader economy.

/ This latest depreciation marks the third time the Naira has breached the N1,000/$ threshold, highlighting a persistent trend of weakness.

The first instance occurred on Friday, December 8th, 2023, when the currency reached a historical low of N1,099.05 per dollar. This was followed by a brief reprieve before a second depreciation on Thursday, December 28th, 2023, closing at N1,043.09 per dollar.

These developments represent a significant turning point for the Naira.

The implications for businesses, both large and small, are also significant, with potential increases in production costs and challenges in maintaining profitability./

The domestic currency depreciated by 4.72 percent to close at N1,035.12 to a dollar at the close of business, data from the NAFEM where forex is officially traded, showed./

This represents an N46.66 loss or a 4.72 percent decline in the local currency compared to the N988.46 it closed on Tuesday./

The intraday high recorded was N1224/$1, while the intraday low was N700/$1, representing a wide spread of N524/$1./

According to data obtained from the official NAFEM window, forex turnover at the close of the trading was $85.68 million, representing a 457.08 percent increase compared to the previous day./

However, the naira depreciated marginally at the parallel forex market where forex is sold unofficially, the exchange rate depreciated by 0.41 percent, quoted at N1220/$1, while peer-to-peer traders quoted around N1224.30/$1.

This represents a notable depreciation of 4.72 percent compared to the previous closing, raising concerns about the currency’s trajectory just three days into the new year.

Money market

DMO to raise N450bn in April bond auction



The Debt Management Office (DMO) is seeking to raise N450 billion in its April bond auction billed to take place on April 15.

This is in line with the agency’s plan to raise up to N1.8 trillion through FGN bonds in the second quarter (Q2) of 2024.

The DMO is offering N150 billion for the new FGN APR 2029 five-year bond. It is offering N150 billion for the reopened FFBN FEB 2031 17-year bond and N150 billion for the FGN FEB 2034 10-year bond.

The auction will take place on April 15 and the settlement date is April 17, 2024.

FGN bonds are auctioned every month through the DMO, with the interest paid semi-annually. They are subject to a minimum subscription of N50,000,001 and in multiples of N1,000 thereafter.

FGN bonds are recognised as investment instruments for trustees under the Trustee Investment Act. They receive tax exemption benefits for pension funds because they’re considered government securities, as per the guidelines in the Company Income Tax Act (CITA) and the Personal Income Tax Act (PITA).

In Q1 2024, the DMO raised about N2.39 trillion through FGN bonds, with the largest issuance occurring in February.

In Q1 2024, the DMO raised about N2.39 trillion through FGN bonds, with the largest issuance occurring in February.

The DMO issued N418.2 billion of FGN bond in January, N1.49 trillion worth of FGN bonds in February 2024, with interest rates hitting 19 percent for the 10-year bonds. Then in March 2024, the DMO issued N475.7 billion at bumper interest rates, with rate hitting 20.45 percent on the 10-year bond.

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Money market

ABCON backs CBN’s prohibition of non export domiciliary account collateral for naira loans



The Central Bank of Nigeria (CBN’s) directive stopping the use of Non Export Domiciliary Account Collateral for naira loans will boost dollar liquidity, support reserves accretion and strengthen the financial services sector, President, Association of Bureaux De Change Operators of Nigeria (ABCON), Alhaji (Dr.) Aminu Gwadabe has said.

According to the CBN directive to banks, the use of foreign currency-denominated collaterals for Naira loans is now prohibited, except in cases where the collateral is in the form of Eurobonds issued by the Federal Government of Nigeria or guarantees provided by foreign banks, including Standby Letters of Credit.

In a statement on the apex bank policy and impact on the forex market, Gwadabe described the move as a welcome development, expected to put the excesses of big businesses and manufacturers putting unnecessary pressure on the forex market  in check.

He said, “ABCON members are bewildered that some companies and manufacturers with billions of dollar balances in their non-oil export domiciliary accounts  use it as collateral for naira loans and still source forex in the official window thereby depleting what is available for other operators.

“The stoppage of this unprofitable practice will not only add to the dollar liquidity in the market but also help in the accretion of foreign reserves buffers,” he added.

Gwadabe advised the apex bank to review foreign currency holding guidelines for non-oil export domiciliary accounts proceeds and entrench maximum of 48 hours with a minimum balance of $5k for individuals and $50 k for companies in holding positions as practiced in South Africa.

ABCON chief further advised the CBN not to approve forex requests by manufacturers and other business applicants with billions of dollars holdings in Non export oil proceeds domiciliary accounts at both the NAFEM and NAFEX window.

ABCON boss explained that unfortunately, the BDCs are most times seen as crude but remain an effective market control mechanism with the potent transmission mechanism tool in achieving the CBN’s mandate of price stability and liquidity in the markets.

“We therefore urge the CBN to continue to drive and expand its operations to ensure that the best results now achieved in the last 15 years is maintained and  also ensure exchange rate convergence, market calmness and confidence of the public and foreign investors,” he said.

ABCON leadership, he added, has also called for and advocated for the separation of ownership and operational structures of FMDQ Exchange. The move, he said would ensure more transparency and effectiveness in market operations and price control mechanisms.

Furthermore, ABCON boss urged the CBN to allow legislative decisions on the planned reforms in the BDCs sub-sector to boost foreign investors’ confidence and guarantees in the sectoral transformation.

“We also want to pledge our continuing support to CBN’s proactive and effective policies and meant to address volatility and headwinds in the forex market. As a self regulatory body, ABCON is currently engaging all stakeholders and players in the retail  end market to deepen, liberalise, democratise and centralise the retail end segments of the market for price discovery, market efficiency, transparency, accretion of buffers and healthy balance of payments,” Gwadabe said.

“We applaud the CBN management for the reconsideration and reinstatement of the BDC sub-sector as third leg of the forex market to put hoarding and speculation under check and we have seen faster results than expected,” he stated.

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Money market

CBN slashes exchange rate for Customs duties, provides relief to importers



Importers in Nigeria have received a welcome reprieve as the Central Bank of Nigeria (CBN) announced a further reduction in the exchange rate used for calculating Customs duties at the nation’s seaports.

According to information obtained from the official trade portal of the Nigeria Customs Service, the apex bank has slashed the Customs FX duty rate from N1,260.49 per dollar to N1,246.665 per dollar, effective as of Monday, April 8.

This adjustment signifies a 1.1 percent reduction in the exchange rate compared to the previous rate of N1,260.49 per dollar, which was in place as of Friday, April 5. Importers will now benefit from a decrease of N13.825 on each dollar required to clear goods at the port, providing them with much-needed relief amid challenging economic conditions.

The slash in exchange rate for paying import duty is coming on the back of continuous appreciation of the naira in the foreign exchange market with the naira trading at N1,251.05/$ at the Nigerian Autonomous Foreign Exchange Market (NAFEM) on April 5.

What this means is that importers opening Form M today Monday, April 8 for importation will have some measures of relief in terms of the money required to pay import duties compared to the importer who opened Form M on Friday, April 5.

Using the Form M exchange rate to calculate import duties is in line with the apex bank’s new directive that Customs should be using the rate on the date of submitting Form M for calculating import duties.

Meanwhile, there are expectations that the FX rate will witness further decline as the naira grows stronger even as the apex bank plans to sell $15.88 million to 1,588 eligible Bureau De Charge (BDC).

CBN also reviewed the exchange rate for BDC operators to N1,101 per dollar from N1,251/$1.

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