Interbank trades record $76.8m at N283 per dollar

Brokers on the floor of Nigerian Stock Exchange in Lagos.

Brokers on the floor of Nigerian Stock Exchange in Lagos.

• Fitch downgrades Nigeria’s forex rating
• NSE indices sustain rising profile
Cenral Bank of Nigeria (CBN) for the fourth consecutive day participated at the inter-bank foreign exchange market with dollar auction to ease shortages as demand begins to return, while transactions closed at N283 per dollar.

Specifically, the naira traded within the range of N282-N284 to the dollar at the inter-bank market yesterday, the position it has mostly hovered around since the take-off of the flexible exchange rate policy, while the parallel market has stabilised at N330-N335 to the dollar.

With the development, the local unit lost N1 to the dollar compared with yesterday’s close of N282 to the dollar, which also marked the first straight gain for the Naira.

Already, one of the market analysts said the Naira could stabilise next week on increased dollar liquidity from month-end greenback sales by oil companies.
“As we approach month-end, we expect the multinational oil companies to begin their month-end dollar sales to generate some naira. This should provide supply of dollars to the market in the coming days,” local unit of Citibank in Nigeria said in a note.

Meanwhile, Fitch Ratings has downgraded Nigeria’s long-term foreign currency Issuer Default Rating (IDR) to ‘B+’ from ‘BB-’ and the long-term local currency IDR to ‘BB-’ from ‘BB’, but its outlook remained stable.

Also, the ratings on Nigeria’s senior unsecured foreign-currency bonds have been downgraded to ‘B+’ from ‘BB-’, with the country ceiling being revised down to ‘B+’ from ‘BB-’ and the short-term foreign currency IDR affirmed at ‘B’.

According to the rating agency, the downgrade of Nigeria’s IDRs reflected its fiscal and external vulnerability, which worsened due to a sharp fall in oil revenue and fiscal and monetary adjustments that were slow and insufficient to mitigate the impact of low global oil prices.

“Renewed insurgency in the Niger Delta in the first half of the year has lowered oil production, magnifying pressures on export revenues and limiting the inflow of hard currency,” the agency said.

In another development, equity transactions on the Nigerian Stock Exchange (NSE) sustained rising profile yesterday, as more highly capitalised stocks appreciated in price and investors’ wealth surges significantly by 7.4 per cent in four trading days.

Yesterday, 37 stocks appreciated in price, led by Nestle with N23 to close at N855 per share. Total followed with N15 to close at N195 per share. Dangote Cement garnered N9.71 to close at N203.96 per share.

Nigerian Breweries rose by N5.69 to close at N149.49 per share while Guinness also increased by N5.31 to close at N111.76 per share.However, 12 stocks constituted the losers ‘chart, as Cap emerged the highest price losers’, shedding N1.44 to close at N34.68 per share. International Breweries trailed with a loss of 13 kobo to close at N19.86 per share.

The volume of shares traded closed lower with an exchange of 450.52 million shares valued at N5.71 billion transacted in 6,360 deals against a total of 541.87 million shares worth N7.93 billion which were achieved in 5,727 deals recorded on Wednesday.

Fitch forecasts Nigeria’s general government fiscal deficit to grow to 4.2 per cent in 2016, after averaging 1.5 per cent from 2011 to 2015, before beginning to narrow in 2017.

“The government has adopted a fiscal adjustment strategy centred on raising non-oil revenue and has made some progress in raising tax revenue by improving revenue collection and improving the control over revenue raised by government departments and state-owned enterprises”, it added.

“Despite expected increases in non-oil revenue, the agency expects overall general government revenue to drop to just 5.5 per cent of the Gross Domestic Product (GDP) from an average of 12 per cent from 2011 to 2015.

“On the expenditure side, Nigeria has also cut fuel subsidies and adopted a number of public financial management reforms that have contained the growth of current expenditure, including the move to a Treasury Single Account and the implementation of information systems that have reduced the number of ghost workers.

“However, the fall in general government revenue represents a risk to the country’s debt profile. Fitch estimates general government debt/revenue will rise to 259 per cent in 2016 from 181 per cent in 2015, higher than the 223 per cent median for ‘B’ rated peers. At end-2015, only 19 per cent of central government debt was denominated in foreign currency.

Nevertheless, depreciation of the naira will increase the debt and debt service burden. A weak policy response to falling external revenues has led to an increase in external vulnerabilities, slower GDP growth and a widening of the current account deficit,” it added.

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