Nigeria Economic, Foreign Exchange & Market Update

The naira depreciated at both the parallel and official markets, closing the week at N157.50/$1 and N149.75/$1 respectively, representing N2 and N2.37 drops from the previous week’s figures of N155.50/$1 and N147.38/$1 respectively.

Nigeria Economic, Foreign Exchange & Market Update


The naira depreciated at both the parallel and official markets, closing the week at N157.50/$1 and N149.75/$1 respectively, representing N2 and N2.37 drops from the previous week’s figures of N155.50/$1 and N147.38/$1 respectively.

The CBN offered $400 million at its bi-weekly Wholesale Dutch Auction System (WDAS), selling a total of $382.9 million – a 4.24% reduction in the previous week’s sale of $411.35 million, indicating a drop in FOREX demand.  

In a related development, the CBN introduced a new FOREX bidding policy stipulating that bids for the dollar must now be made in single tranches per auction. This is in contrast to what pertained before, where bids could be made in up to 3 tranches.  


– FOREX customers may risk having to buy dollars at higher rates in instances where banks bid at rates higher than what the CBN is offering.

– However, the WDAS which has removed the autonomy of the CBN as sole FOREX supplier gives customers options in sourcing FOREX.

– FOREX dealers need to be more adept at tendering bids in order to retain customers.  


Wave of Reform: US vs. Nigeria


The primary banking regulators in the US; the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) has increased the number of banks that have issued so-called Memorandum of Understanding (MOU).



In essence, these banks have been placed on ‘probation’ following the results of the stress tests which were carried out on US banks earlier this year.

A total of 69 US banks have failed this year, up from 25 in 2008. In a related development, it was revealed that 9 banks bailed out by the Federal Reserve under the Troubled Asset Relief Program (TARP) earlier this year, paid out colossal bonuses amounting to $32.6 billion in 2008 – with 6 of the 9 having paid out more in bonuses than they earned as profit.  


– These regulatory developments in the US are similar to present initiatives by the Nigerian banking regulators towards reforming and strengthening the nation’s financial services sector.

– The stringent action being taken against US banks may very well materialise in the Nigerian banking sector, if results of audits reveal sub-optimal health in the nation’s banks.

– The tougher stance being taken by regulators comes on the heels of criticism on them for being too lenient on banks.

– From the regulators standpoint, getting tougher could prevent some struggling banks from failing particularly with borrowers defaulting on their payments and the US economy in recession.

– The MoU can also force financial institutions to take major steps like increase their capital or overhaul management.

– Such sanctions tend not to be publicly disclosed in order not to unnerve depositors and shareholders – MoU can however lead to sterner, public sanctions if a bank is seen as not doing enough to correct its problems.

– Some are of the opinion that banks are being forced to meet arbitrary standards that exceed what regulators normally require.  

IMF Endorses Economic and Banking Reform in Nigeria  

The International Monetary Fund (IMF) has indicated support for ongoing reforms particularly within the nation’s banking sector, but has stressed the need to develop a clear, consistent and credible macroeconomic policy framework to reduce uncertainty during the present economic crisis and beyond.  

In this vein, the IMF has indicated its willingness to provide aid to the nation to help alleviate the effects of the global financial crisis.  


– The IMF is known for its assistance to nations pursuing positive reform – a notable example being the recent approval of a $602 million facility to support the Ghanaian government’s efforts to tackle macroeconomic instability.

– A major attraction for the IMF in offering to support the nation is the visible effort being made to reform key sectors, notably initiatives presently being rolled out by the newly appointed CBN Governor.

– Also, the anticipated appointment of the new Director-General of the Securities and Exchange Commission (SEC) is strongly in line with reforming the nation’s beaten capital market.

– In addition, meaningful plans by the FG towards the realisation of Vision 2020 are increasingly coming to the fore – including infrastructural, educational and health reforms.  


The inter-bank market closed on a mixed note, with only the 7-Day NIBOR recording a rise, while both the 30-Day and 90-Day NIBOR declined marginally as shown below:    31-July  24-July Basis point change 7-Day  12.20%  12.50%  30  30-Day  14.70%  14.12%  (58)  90-Day  16.29%  16.00%  (29)     


– The growing interest in both corporate and public bonds may be partly responsible for the marginal tightening of liquidity at the inter-bank market.    


The stock market closed on a stronger note, with the All Share Index (ASI) recording 25,286.10 – a 5.7% rise from the previous week’s figure of 23,924.10.  

Market capitalisation, an indication of the aggregate value of quoted stocks, appreciated to close the week at N5, 796.5 billion, also recording a 5.7% rise from the previous week’s figure of N5, 484.17 billion.  

The top 5 gainers and losers are shown as follows:  

Top 5 Gainers Company Opening Price(N) Closing Price (N) Gain (N) % Gain  

BCC  37.80  47.90  10.10  27.00  

ASHAKA CEMENT  10.85  13.70  2.85  26.00  

ZENIITH BANK  12.12  14.60  2.48  20.00  

DANGOTE SUGAR  15.43  18.25  2.82  18.00  

GSK  15.41  17.83  2.42  16.00  

Top 5 Losers  Company Opening Price(N) Closing Price (N) Loss (N) % Loss  

UNIVERSITY PRESS  7.32  6.55  0.67  9.30  

UACN  39.40  36.01  3.39  8.60  NB  55.78  52.50  3.28  5.90  

AP  76.50  72.68  3.82  5.00  

G CAPPA  19.65  18.67  0.98  5.00    

Source: Punch Newspapers


– The recent decision by the CBN to reduce the Monetary Policy Rate (MPR) appears to be yielding positive results within the manufacturing industry – an indication corroborated by the lead commanded in the top gainers chart above.  



Crude oil closed the week on a positive note at $71.75 per barrel (pb), up 5.44% from the previous week’s closing price of $68.05 pb.

This welcome rise to the $70 pb range comes on the heels of a speculated increase in fuel demand. Crude oil reached an 8-month high of $73.35 per barrel in June this year  


– With sporadic speculations of increased fuel demand, we expect oil prices to stay within s the $60-$75 range for the rest of 2009.

Sources Nigeria Treasury Newsletter/Maket Update

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