31 Jan

Daily Watch – Zik becomes Washington, SEC extends CM recapitalisation deadline

  • The Nigerian naira fell against the US dollar to ₦500 on the black market as the country’s dollar scarcity worsens, according to abokiFX.com, which collates prices from traders in Lagos each day. The currency’s unofficial rate is now 38 percent weaker than the CBN’s level of ₦309 per dollar. Th is is despite several attempts by CBN governor, Godwin Emefiele, and the government to stem the rout after a devaluation in June. This comes as Nigeria’s external reserves which fell to a low of $23.9 billion on October 19, 2016, has been projected to increase to $30 billion in March this year, by analysts in the financial services sector. Nigeria’s foreign reserves stood at $28.9 billion as at Tuesday, January 24, 2017, driven by surging oil prices and relative stability in the Niger Delta. The country’s reserves recorded the highest level in the last three years on May 2, 2013, rising to $48.9 billion when the price of crude oil was $103.03 per barrel. Godwin Emefiele had said rising oil prices have seen foreign exchange reserve inflows through the CBN rise by well over 82 percent, helping push the external reserves to a current high of $28.9 billion. Analysts observe that the consistent rise external reserves will help boost investor confidence and the chances of Nigeria’s success in the planned US$1 billion Eurobond issue in March. While acknowledging the positive increase in foreign reserves, analysts are concerned that there is a huge backlog of foreign exchange demand yet to be cleared.
  • The Nigerian Civil Aviation Authority said on Monday said foreign and domestic airlines operating in the country sold tickets worth over ₦330 billion between January and October 2016. The Director-General, NCAA, Captain Muhtar Usman, said this at a meeting with stakeholders to review the past year and plan for the current year, adding that the airlines sold tickets worth over ₦385 billion between January and December 2015. According to him, 42,000 passengers on the average passed through Nigerian airports daily and 597 daily flights were recorded during the period under review. He, however, said that the data for the last quarter of 2016 was still being collated and authenticated. Usman also said 18 firms applied for Air Operators Certificates last year. “There are several new applicants for Air Operators Certificate. The authority is already processing 18 applications, while nine are at the level of intent,” he said. He added that the economic recession, the paucity of foreign exchange, an inability of foreign carriers to repatriate funds and scarcity of aviation fuel were some of the challenges that confronted the sector in 2016, but that beyond the problems, the country’s air transport industry retained its attractiveness with increase in the number of Bilateral Air Services Agreements. He said there was an increase in BASA with other countries, from 88 to 90 by December 2016, the newest countries being the Seychelles and Bahamas. Usman said some countries such as the United Arab Emirates, the Netherlands, Turkey, Brazil, Qatar and Cote d’Ivoire had requested for additional frequencies into Nigeria.
  • The price of Nigeria’s Bonny Light crude oil was the second highest in December among members of the Organisation of the Petroleum Exporting Counties (OPEC), rising from $42.20 in November to $53.91 per barrel. This means the country gained about $11.71 per barrel in December. Nigeria, therefore, may have added $22 million to its foreign exchange earnings when multiplied by current production of 1.9 million barrels per day in December. The gain also boosts Nigeria’s capacity to fund its ₦7.3 trillion 2017 budget, and if the gains continue, may reduce the dependence on external borrowings to fund the budget and other development projects. The World Bank expects oil prices to average $55/barrel in 2017, an increase of 29 percent above the 2016 average price. Also, Global crude oil balances are expected to tighten through 2018, the United States Energy Information Administration (EIA) said last week in a statement. Analysis from the OPEC reference basket revealed Abu Dhabi’s Murban crude oil as the only blend ahead of Bonny Light at the international market in December. Giving a full year analysis of the price movement, OPEC said the light sweet crude from West and North Africa’s Basket components, Saharan Blend, Es Sider, Girassol, Bonny Light and Gabon’s Rabi, gained $8.53, or 19.1 percent, to $53.10 during the month under review. Speaking on rebalancing the oil market, the Secretary-Generals of OPEC, Muhammad Barkindo, said it is essential that all producers, both OPEC and non-OPEC, take coordinated action to return stability to the market. Meanwhile, the World Bank said in its Commodity Markets Outlook for 2017 released last Wednesday, that the increase largely reflects partial compliance with the recent agreement between OPEC and non-OPEC producers.
  • SEC has granted an extension of the deadline for market operators to comply with the minimum capital requirement by three months, from the initial December 31, 2016. This means that operators have until March 31st to increase their capital base. The extension followed a plea by stockbrokers, who had requested additional six months to enable them to comply successfully. The fact that the market regulator keeps pushing forward the deadline is indicative of the extent of illiquidity in the market, which is characterised by the economic meltdown and dwindling purchasing power of consumers, thereby making stock investments unattractive. SEC, Nigeria’s apex capital market regulator had, last year, granted an extended window of 15 months to December 30, 2016, from the initial September 30, 2015, deadline to capital market operators that failed to meet the initial recapitalisation deadline to comply with the new minimum capital requirements for their functions. The Commission had in December 2013, announced major increases in minimum capital requirements for capital market functions under a new minimum capital structure that was initially scheduled to take off by January 1, 2015. It, however, extended the deadline to September 30, 2015.