160912F_Naira-notesThe naira appreciated against the United States dollar on Friday as a result of an increase in dollar supply at the Central Bank of Nigeria’s (CBN’s) regulated Wholesale Dutch Auction System (WDAS).

Also, dealers said the traditional month-end sale of the greenback by some multinational oil companies also strengthened the nation’s currency.

At the WDAS, the central bank offered a total of $700 million last week, as against the $600 million that it supplied the preceding week. The naira climbed marginally by one kobo to close at N155.75 to a dollar, from N155.76 to a dollar previously.

Nonetheless, from this Wednesday, the WDAS will no longer exist, following its suspension and the re-introduction of the Retail Dutch Auction System (RDAS) by the central bank. At the RDAS, the minimum bid by authorised dealers would be $100,000.00, and just like the WDAS, auction at the newly introduced RDAS would be held every Monday and Wednesday.

However, the naira appreciated significantly at the interbank market where it gained N1.23 to close at N159.97 to a dollar on Friday, compared to the N161.20 to a dollar it stood the preceding Friday.

Similarly, at the Bureaux De Change (BDC) and parallel markets, the nation’s currency appreciated respectively by 50 kobo to close at N162/$1 and N162.50/$1.
Some dealers also argued that the clampdown on perceived illegal forex sales by BDCs on Friday strengthened the naira at that segment of the market.

The central bank at the weekend withdrew the operating licences of 20 BDC operators and requested the Economic and Financial Crimes Commission (EFCC) to investigate them for money laundering.

The affected firms were FBN BDC, Amity Global BDC Limited, Haruna Rahaman BDC Limited, Majia BDC Limited, Ahali BDC Limited, Lawabash BDC Limited, Bin Dahuud BDC Limited and Garin Gabas BDC. Others include D and D BDC Limited, Daytrader BDC Limited, Fatahul BDC Limited, Global Payment BDC Limited, Startime BDC Limited, Planet Ventures BDC Limited, Fadima BDC Limited, Optimum BDC Limited, Secon BDC Limited, Asabana BDC Limited, Maiksal BDC Limited, and Alim BDC Limited.

According to the CBN, the affected BDCs did not render returns on utilisation of the forex purchased and also failed to provide documentary evidence that their purchases were utilised for eligible transactions.

The alleged offence was against the provisions of the Money Laundering (Prohibitions) Act 2011 (as amended), the Terrorism (Prevention) Act 2011 (as amended), the CBN Anti-money Laundering/ Combating the Financing of Terrorism Regulations, 2013, the CBN Foreign Exchange Manual and the extant Guidelines for Operators of BDCs in Nigerian and the AML/CFT regulations 2013.

The CBN Governor, Mallam Sanusi Lamido Sanusi, stated that the illegal activity of the BDC operators was partly responsible for the volatility observed in the BDC and parallel segments of the forex market as well as the wide variation in prices.

“If someone is in money laundering, his demand for dollars is completely inelastic. He can do N180/$1, he can pay N200/$1, he can pay N250/$1 and he is not going to stop. I am saying this because these are every day challenges we deal with in monetary policy,” he had said.
NIBOR

The Nigerian Interbank Offered Rates (NIBOR) reduced to an average 15.07 per cent last Friday, as against the 16.27 per cent it attained the preceding Friday.

The development was influenced by the injection of funds from matured treasury bills into the system. In fact, a report by Cowry Asset Management Limited showed that maturing treasury bills worth N225.52 billion via Primary Market Auction (PMA) and Open Market Operations (OMO) (viz: 91-day bills worth N31.84 billion; 182-day bills worth N59.08 billion; 364-day bills worth N13.05 billion; and183-daybills worth N100.82) helped shore up system liquidity to more than offset withdrawals in treasury bills worth N188.74 billion (viz: 91-day bills worth N31.84 billion; another 91-day bills worth N64.04 billion; 182-day bills worth N33.78 billion; and 364-day bills worth N59.08 billion).

Therefore, the FMDA data showed that while the Overnight tenor dropped to 14.17 per cent on Friday, from 15.67 per cent the preceding Friday, the 7-day tenor lowered to 14.50 per cent, from 15.71 per cent the preceding Friday. In the same vein, just as the 30-day tenor fell to 14.87 per cent on Friday, from 16.04 per cent the preceding Friday, the 60-day tenor closed at 15.12 per cent.

Also, the 90-day, 180-day and 365-day tenors closed respectively at 15.37 per cent, 15.58 per cent and 15.79 per cent respectively.
“Hence, barring any auctions via OMO, we expect interbank rates to mellow for all tenor buckets,” Cowry Assets Management added.
Bond Market

A report by Afrinvest showed that average yields on FGN bonds moderated 19 basis points to close at 13.2 per cent week-on-week. The 7-year 9.25 per cent FGN JAN 2014 bond price declined by N0.55 (from 96.03 to 96.58) signaling investor’s preference for the shorter end of the curve.
MPC

For the 12th consecutive time since 2011, the CBN last week resolved to leave the monetary policy rate (MPR), otherwise known as interest rate unchanged at 12 per cent with the symmetric corridor of 200 basis points around the MPR.

The CBN also decided to uphold the 50 per cent cash reserve requirement (CRR) on public funds as well as 12 per cent for private sector deposits in deposit money banks. Addressing journalists after the two-day meeting of the Monetary Policy Committee (MPC) in Abuja, Sanusi cited the potential risks occasioned by pressure from the fiscal activities of the government in the latter part of the year and in the run up to the 2015 elections. Sanusi, who read the committee’s communiqué, said it decided by a vote of 11 members to hold the MPR at 12 per cent while one member voted to reduce it by 50 basis points.

He said 11 members also favoured the retention the symmetric corridor of 200 basis points around the MPR, while one member voted for an asymmetric corridor of 200 basis points above the MPR and 400 basis points below the MPR.

CDL

Sanusi also revealed that the CBN had uncovered massive fraud and misrepresentation of accounts by the Consolidated Discount Limited (CDL), which he said was under investigation. Sanusi assured Nigerians that the central bank would pay all unsecured depositors with CDL during the week.

He said: “No non-bank depositor is going to lose any money in Consolidated Discount House.”
On the crisis rocking some discount houses, the CBN governor said: “There are no major issues in discount houses. We have taken a comprehensive review of the discount houses and as you know, the CBN revoked the licence of Express Discount House a few weeks ago which led to a run on the discount houses.

“On reviewing the houses, we discovered that Kakawa Discount House and Associated Discount House are in good form and the shareholders are solidly behind them. And we discovered that in the case of Consolidated Discount House, what appeared to be a massive fraud and misrepresentation of accounts.”

Oil Sector

The MPC also expressed worry about the worsening performance of the oil sector due largely to the reported incidence of growing crude oil theft and significant revenue leakages in the oil sector. He urged government to step up efforts aimed at curtailing the malfeasance in the oil sector and adopt best practices in establishing strong controls, independent oversight and transparency in the official oil sector.

He said the naira exchange rate remained stable at the WDAS segment of the foreign exchange market, noting that the stability of the exchange rate reflected the commitment of the bank to supporting the currency at a time of massive depreciation in the currencies of emerging and frontier countries.

 

Information from This Day was used in this report.

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