21 Feb

Daily Watch – Naira shivers at new FX policy, Nigerian Breweries needs a drink

  • The naira hit a fresh low of ₦520/$ on the black market on Monday, as retail currency traders tried to digest a new CBN decision to sell dollars to retail users through commercial lenders, one retail trader told Reuters. The regulator plans to sell $1 million weekly to each of the country’s 21 commercial lenders at a rate of ₦375 to clear a backlog of demand for retail users and try to narrow the premium between the official and black market rates, traders said on Monday. On Friday, the naira was quoted at ₦516/$ on the black market. On the official market, the naira was quoted at ₦305.50/$. Retail currency users buy dollars from licensed bureaux de change (BDC). However, due to the central bank’s inability to meet dollar demand, BDCs have tended to source dollars from private sources and resell at a much higher margin, fuelling the black market.
  • The Senate on Monday said $850 billion supposedly earned between 1996 and 2014 from crude oil export was yet to be repatriated to the country by the Joint Venture oil companies. The development, it noted, was in total contravention of Nigeria’s Pre-shipment Inspection of Export Act and Article 26 of Export Policy Guidelines and procedures for crude oil, gas and non-oil goods. Also, the upper legislative chamber heard testimony from a senior official at the Federal Ministry of Trade and Investment that Nigeria has been exporting oil and non-oil products without documentation since June 2015. As a result, the country has lost over ₦23.6 billion being expected proceeds of the export within the period. These revelations were made during an investigative public hearing organized by the Senate Joint Committees on Finance, Trade and Investment; Gas, Petroleum Upstream; Banking, Insurance and other Financial Institutions; Judiciary, Human Rights and Legal Matters, as well as Customs, Excise and Tariff, on the “Need to Investigate Pre-Shipment Inspection of Export Activities in Nigeria.” The public hearing was held courtesy of a motion by Senator Abubakar Yusuf (APC, Taraba Central), in July 2016, where he alleged that there has been a gross violation of the Inspection of Export act by some institutions of government.
  • Nigerian Breweries on Monday announced its audited results for the year ended December 31, 2016, showing a 25 percent decline in profit after tax, reflecting the challenging operating environment. Although the leading brewer posted revenue growth of 6.7 percent, a combination of rising inflation and impact of the naira’s devaluation drove down its bottom-line. Specifically, the company recorded a revenue of ₦313.743 billion in 2016, up from ₦293.9 billion in 2015. The cost of sale rose from ₦149.73 billion to ₦178.218 billion. Marketing and distribution expenses also rose from ₦58.45 billion to ₦61.312 billion. While the company brought down administrative expenses, finance cost increased by 66 percent from ₦8.217 billion to ₦13.645 billion. However, this increase was primarily driven by net foreign exchange loss of about ₦7.552 billion, compared to ₦752 million in 2015. Following the huge forex loss, Nigerian Breweries Plc ended the year with profit before tax of ₦39.675 billion, down from ₦54.514 billion in 2015 and profit after tax of ₦28.416 billion as against ₦38.05 billion in 2015.
  • The Enugu State Board of Internal Revenue on Monday sealed 36 branches of eight commercial banks allegedly indebted to the state government to the tune one billion naira. The News Agency of Nigeria reports that the exercise, which started by 6 am, was carried out at 23 locations of the affected banks across the Coal City. Addressing newsmen after the exercise, the Enugu BIR Chairman, Emeka Odo, said that the board sealed the banks due to their failure to remit about monies owed the state government. Odo said that the board had on Feb. 6, obtained an ex parte order from the state high court to distrain the affected banks. He said that the debts were part of the withholding taxes they were supposed to remit to the state government which dated back to 2007. The affected financial institutions are Access Bank, Stanbic IBTC Bank, Skye Bank, Union Bank and Unity Bank. The other banks are; Heritage Bank, Keystone Bank and Sterling Bank. Odo said that the eight banks had combined branch network of 36 branches in urban Enugu as well as the neighbouring towns of Agbani and Ituku Ozalla.
  • About €300 million (₦97.5 billion) has been set aside by a German investment group, CUBE Commodities Company, to finance small-scale industrialists in Nigeria. The group’s CEO, Dean Nguyen, made the announcement in Abuja during a meeting with members of the National Association of Small-Scale Industrialists. He said the partnership with NASSI was born out of the conviction that industrialisation was key to economic development and poverty reduction. The partnership, according to him, will enable the group to provide the fund at a low-interest rate for industrial development, technology transfer and market development for NASSI members’ products in Europe and Asia.