Money Market Reform Creates Arbitrage for Short-Term Investors – Bloomberg

  • Bond managers can earn extra half percentage point interest
  • Eurodollar futures trim risk in commercial paper trade

Money market reform has a silver lining for some investors.

Bond managers can earn more than half a percentage point of extra interest annualized by buying securities that money market funds are shunning now and by using derivatives to trim the risk, said Dan Dektar, chief investment officer at Amundi Smith Breeden LLC in Durham, North Carolina.

“This is one example of the things you can do in the money markets to improve returns,” Dektar said. The higher returns have “arisen due to safety-minded reform and not due to a deterioration in the soundness of the financial system,” he said. Amundi Smith Breeden manages around $10 billion of assets.

Rules that came into effect in October have dimmed demand for certain kinds of debt — in particular, short-term debt known as commercial paper, a near $1 trillion market of securities issued by companies including banks. The regulations are designed to make the funds safer after a major manager went under during the financial crisis.

Higher Yields

That lack of demand has driven yields higher on commercial paper maturing in six months, Dektar said. In recent weeks Amundi bought commercial paper issued by banks that yielded around 1.32 percent, for example, around the six-month Libor level and a more than seven-year high for the benchmark.

The Federal Reserve is raising rates — it hiked in December for the second time in a year, and the median forecast for voting members implies that the central bank will lift rates three more times next year. That risk can be hedged with Eurodollar futures, Dektar said.

An investor buying three-month commercial paper now earns about 1 percent, based on Libor rates. If the six-month yield is 1.32 percent, that implies that in the second three months of the note’s life, investors will receive an annualized rate of around 1.64 percent. Hedging out the risk of the second three months using Eurodollar futures costs 1.07 percent, meaning an investor can earn an annualized 0.57 percentage point for the second three months while taking relatively little interest-rate risk.“This is like buying Libor at 57 basis points over Libor,” Dektar said. “It illustrates how disjointed the market has become.” The scenario has occurred in previous years, though is usually associated with stress in the system, according to Dektar.

Credit Risk

There are risks to such a trade, as it means exposure to the underlying credit, according to Wells Fargo Securities LLC strategist Boris Rjavinski.

“You may be able to hedge the Libor component covering the life span of the commercial paper,” he said. “But what may happen is the credit spread of the entity issuing the paper widens, even if Libor doesn’t move. That creates a risk in the trade.”

In October, rules came into effect that require riskier money market funds to pass their paper losses on securities onto investors. Money market funds have historically allowed investors to buy and sell their shares at $1 apiece, which makes the funds seem safe and stable to customers. Under the new rule, if the funds are buying commercial paper and other non-government securities, they must record paper gains and losses daily on the securities they hold, and pass those gains or losses onto investors. That creates an incentive for investors in money market funds to gravitate to funds that buy only government debt.

    WEEKAHEAD-AFRICA-FX -Kenyan shilling seen steady, Nigeria’s naira could weaken – Reuters

    NAIROBI Dec 29 (Reuters) – Kenya’s shilling and Zambia’s kwacha are seen holding steady against the dollar in the next week to Thursday, while Nigeria’s naira will likely weaken, traders said.

     
     
     

    KENYA

    Kenya’s shilling is seen holding steady in the week to Thursday due to slow activity before weakening due to a resurgence in dollar demand.

    At 0800 GMT, commercial banks quoted the shilling at 102.30/50 to the dollar, compared with last Thursday’s close of 102.25/45.

    “We might not see too much play at the outset, because it is the beginning of the year. But (in) my view, the shilling … is going to be under pressure. I do not see anything meaningful that will cause the shilling to strengthen tremendously,” a trader at one commercial bank said.

    NIGERIA

    Nigeria’s naira is set to witness another round of decline against the dollar in the days ahead as an increase in dollar flows from Nigerians living abroad coming home for holidays fell short of expectations, traders said.

    The local currency was quoted at 490 to the dollar on Thursday from 495 against the dollar last week on the parallel market.

    In the official interbank window, the naira was quoted at 310.25 to the dollar on Thursday, but it was expected to close at around 305.5, the same level it has traded at since August.

    “We see the naira depreciating against the dollar by the time more businesses resume operations next week after the festive season as dollar liquidity remains thin in the market,” one currency dealer said.

    TANZANIA

    The Tanzanian shilling is seen trading in a tight range in the days ahead, helped by a slowdown in demand for greenbacks due to the year-end festive season.

    Commercial banks quoted the shilling at 2,173/2,183 to the dollar on Thursday compared with 2,178/2,182 a week ago.

    “The shilling is expected to remain range-bound next week. There usually isn’t much activity at this time of the year,” said a dealer at a commercial bank in Dar es Salaam.

    GHANA

    Ghana’s cedi is seen flat in the coming days amid an expected slowdown in market activity as the West African nation inaugurates a new president on Jan. 7.

    It was trading at 4.24 to the dollar at 1100 GMT on Thursday, up from 4.277 a week ago. The currency has been fairly steady in recent weeks and is likely to end 2016 down 11 percent compared with an 18 percent depreciation last year.

    “We are expecting to see some dormancy as markets reorganize after the holidays while offshore investors gauge the posture of the new president after the inauguration,” a currency trader at one of Accra’s leading commercial banks said.

    ZAMBIA

    The kwacha is expected to remain range-bound next week due to relatively subdued trading conditions at the beginning of the new year.

    At 1038 GMT, commercial banks quoted the currency of Africa’s No.2 copper producer at 9.8300 per dollar, from a close of 9.8000 a week ago, according to Thomson Reuters data.

    “The kwacha is likely to continue trading flat going into 2017, it seems to have found its place,” independent financial analyst Maambo Hamaundu said.

    UGANDA

    The Ugandan shilling is seen trading with a weakening tone, hurt by appetite for dollars from commercial banks.

    At 0955 GMT, commercial banks quoted the shilling at 3,610/3,620, weaker than last Thursday’s close of 3,562/3,572.

    A trader at a leading commercial bank said inflows from sources like charities and commodity exporters would remain tight with the tempo of activity in both sectors seen remaining slow until around mid January.

    The trader said the shilling would oscillate between 3,610-3,625 against the dollar in the coming days. (Reporting by George Obulutsa, Elias Biryabarema, Chris Mfula, Fumbuka Ng’wanakilala, Kwasi Kpodo, Oludare Mayowa; Compiled by Elias Biryabarema; Editing by Mark Potter)

     

    Nigeria sells $1 bln to help clear backlog in biggest dollar sale since June – Reuters

    By Oludare Mayowa

    LAGOS Dec 29 (Reuters) – Nigeria’s central bank sold about $1 billion on the forward market last week to clear a backlog of dollar obligations in selected sectors, traders said on Thursday, its largest special auction since a currency peg was removed in June.

     
     

    Outstanding dollar demand was about $4 billion before June, when the 16-month-old peg was removed. Efforts to cut dollar demand have been largely unsuccessful due to low oil prices.

    Crude sales account for about 90 percent of Nigeria’s foreign exchange earnings.

    Traders said the central bank told banks to prioritise airlines, manufacturing firms, petroleum products importers and agriculture sectors, the sectors worst hit by the dollar shortage, in the auction.

    “The central bank sold $1 billion at last week’s special forex auction and directed banks to issue fresh letters of credit to reflect the amount sold in favour of the affected sectors,” a senior currency trader told Reuters.

    Traders said the central bank sold 30-day and 60-day forwards at the auction.

    On Dec. 19, the central bank instructed commercial lenders to submit their backlog of dollar demand from fuel importers, airlines, raw materials and machinery for manufacturing firms and agricultural chemicals for the special forex intervention.

    Nigeria is in its first recession for 25 years, caused by the oil price drop which has cut the supply of dollars needed to fund imports. Attacks by militants on pipelines in the Niger Delta since January have cut crude output, further reducing dollar inflows.

    The dollar shortage in the OPEC member, whose crude sales make up two thirds of government revenue, has caused many companies to halt operations and lay off workers, compounding the economic crisis.

    Some foreign airlines have closed down or reduced their operations over an inability to repatriate the proceeds of their earnings due to the dollar shortage.

    An acute shortage of jet oil in the last few months – caused by the inability of importers to secure the dollars needed to buy the fuel – has led to many operators refuelling in neighbouring countries.

    Flight cancellations by local airlines have become commonplace as a result of the shortages.

    The naira was trading at about 305.25 to the dollar on the interbank market on Thursday and was quoted at 490 a dollar on the unofficial market. (Editing by Alexis Akwagyiram and Louise Ireland)

     

      Dollar Pares Gains After Weak Home-Sales Data – WSJ

      The WSJ Dollar Index had hit a 14-year-high earlier in quiet trading

       
       
       

      The dollar pared gains on Wednesday, retreating from a 14-year-high after weak home-sales data.

      The WSJ Dollar Index, which measures the U.S. currency against 16 others, rose 0.1% to 93.48. Earlier in the day, the index hit its highest level since 2002. Trading has been thin this week due to the holidays, likely exacerbating market moves.

      The National Association of Realtors’ gauge of pending home sales dropped in November, a sign of weakening momentum for the U.S. housing market heading into 2017.

      Still, other U.S. economic data this week was strong, with reports showing rising home prices and consumer confidence.

      The dollar has surged over the past two months, supported by President-elect Donald Trump’s policy proposals and the Federal Reserve’s more hawkish interest-rate outlook.

      The National Association of Realtors’ gauge of pending home sales dropped in November, a sign of weakening momentum for the U.S. housing market.ENLARGE
      The National Association of Realtors’ gauge of pending home sales dropped in November, a sign of weakening momentum for the U.S. housing market. PHOTO: CHARLIE NEIBERGALL/ASSOCIATED PRESS

      Sireen Harajli, an analyst at Mizuho Bank, expects the dollar rally to slow in the first quarter of 2017 as the U.S. legislative process begins to take shape.

      “The recent gains in yields and the U.S. dollar are largely based on expectation and are subject to the risk of a correction” if Mr. Trump’s administration fails to deliver its policy proposals, said Ms. Harajli in a research note.

      Meanwhile, the euro slid 0.5% against the dollar to $1.0408. The European Central Bank this week warned that Italian lender Monte dei Paschi di Siena has a far bigger hole in its balance sheet than previously calculated.

      Write to Chelsey Dulaney at Chelsey.Dulaney@wsj.com

      The top 5 decisions that shaped Nigeria’s economy in 2016 – Businessday

      By   LOLADE AKINMURELE

       

      The year 2016 will go down in history in three days as the period when recession hit the country, pushing many Nigerians down the poverty ladder. Several economic decisions taken or not taken by government had a direct impact on the lives of Nigerians within the period.

      Delay in the passage of the  2016 budget

      The 2016 budget was not signed into law until May 2 leading to a significant slowdown in business activities for most of the first half of 2016, at a time the economy was already showing signs that it was heading into a recession.
      “Nigeria virtually shot itself in the foot,” said Rafiq Raji, an economist and managing director of Macroafricaintel, an Africa-focused macro-investment consultancy firm.
      “This year’s budget was not passed until the second quarter of the year. With government as the dominant player in the economy, almost everything ground to a halt as a result of the delay,” Raji added.
      The delay in implementing the expansionary N6.06 trillion 2016 budget, fashioned to boost economic growth, compounded the economic lull in the country.

      Electricity tariff hike

      A plan to increase electricity tariff that has been on the drawing board even before President Buhari was sworn-in, came into effect in February, with electricity tariffs going up by an average of 45% across board. This had a significant impact on Nigerian households and businesses, especially since the increase did not lead to any significant increase in power supply across the country. In effect, households and businesses found themselves paying higher electricity bills, while still generating most of the power they use.  A Federal High Court in Lagos eventually quashed the tariff hike in July, but the National Electricity Regulation Commission (NERC) has appealed the ruling. Economists note that the increase in electricity tariff largely fed into the fast pace rise in prices of goods and services in the country.

      Fuel price hike

      President Buhari was forced to take one of its most difficult policy decisions on May 16, when the government adjusted fuel prices to conserve scarce dollars in the face of a decline in oil revenue- the largest source of foreign exchange earnings and government financing.
      The Minister of State for Petroleum Resources, Ibe Kachikwu, said that the Federal Government would have had to cough up N16.4 billion every month to offset the subsidy claims of oil marketers had it not taken the decision.
      The price adjustment saw the retail price of fuel jump 68 percent to N145 per litre from N86.50.

      “At root, the difficulty for Nigeria is that it exports too little oil per person, to offer a significant fuel subsidy,” according to Charles Robertson, chief economist at investment firm, Renaissance Capital.
      “Gulf countries export 25 times more oil per person and even they have removed the fuel subsidy,” Robertson added.
      But oil industry players have criticised the decision to hike fuel prices instead of removing subsidy, as fuel price hikes are always not enough incentive to drive investment into the downstream sector.

      Naira devaluation

      Faced with a sharp drop in crude oil revenues, the exit of foreign investors and the dry up of new dollar inflows into the country, which led to declining external reserves, Nigeria’s Central Bank was soon faced with a decision to draw down remaining reserves to defend the exchange rate, impose capital controls or accept a weaker exchange rate with the possibility of losing control of inflation.

      So on May 16  Godwin Emefiele, the Central Bank Governor, announced a policy shift from a hard peg to a currency float, effective June 20.
      June 20’s naira float saw the naira shed over 62 percent of its value, exchanging for N320 per US dollar from N197 pre-devaluation.
      In a clear signal that June 20’s big devaluation proved decisive in attracting foreign capital, the capital imported in June rose markedly and made up for record low inflows in April and May, to boost total capital importation in the second quarter of 2016 to $1.04 billion.
      The level of capital imported in June was $610.77 million, double the amount recorded in the months of April ($305 million) and May ($125 million).
      In its most recent report, the NBS noted that total value of dollar inflow into Nigeria in the third quarter (July to September 2016) rose to a year high of $1.8 billion, an increase of 74.84 percent, compared to the second quarter, but a 33.7 percent decline compared to the same period of 2015.
      Tajudeen Ibrahim, head of research at Chapel Hill Denham said the decision to float the naira was good but the results are yet to be seen, due to the lack of transparency in the foreign exchange market.
      “We were unable to keep our nerves to allow the naira float complete its cycle,” Ibrahim said. “Until there is a proper price formation, the positive results from the float will never come.”

      Interest rate hike

      Nigeria increased interest rates by 300 basis points in 2016.
      The Central Bank first raised rates in March by 100 basis points to 12 percent from 11 percent, before it raised rates again in July by 200 basis points to 14 percent from 12 percent.
      Across sub-Saharan Africa’s top ten economies, Nigeria was second only to Angola, as the country with the biggest hike in interest rates in 2016.
      Angola raised its rates by 500 basis points, while South Africa in third place- increased rates by 25 basis points.
      CBN governor, Emefiele said rates were raised so as to curb rising inflation and offer investors positive yields, all in a bid to attract dollar inflow into the severely battered economy.
      Slowing month-on-month inflation on the back of monetary tightening can give the CBN some belief in its stance; and while foreign inflows have outpaced outflows since July, the rate hike has been somewhat rewarding. Though the CBN’s decision to hike interest rates has been controversial. Kemi Adeosun, minister of finance, had preferred that the CBN lower interest rates to drive economic growth.

      Razia Khan, chief economist at Standard Chartered Bank, however thinks lower interest rates will do nothing for growth, as the country needs dollars and confidence in the naira.

      “Amid weak growth and a foreign exchange constrained environment, banks will be cautious about lending. Lower interest rates will achieve little,” Khan said. “The CBN had no choice but to tighten, in order to safeguard foreign exchange stability and send a clear and consistent message on policy direction to boost investor confidence.”

      The year 2016 is closing with inflation at an 11 year high of 18.5%, rising unemployment at 13.8% and the economy expected to contract by a minimum of 1.7%. This makes it easy to conclude that the major policy decisions made in the year have not delivered the expected positive outcomes in terms of reviving economic growth.

      Getting Nigeria out of recession – The Guardian

      By Bayo Ogunmupe

      With the decline in the price of oil and the subsequent decline in revenues accruable to the Federal Government, there have been strident calls for the Nigerian economy to be diversified. And both President Muhammadu Buhari and Vice President Yemi Osinbajo have agreed to take urgent steps to diversify the Nigerian economy. But these are mistaken views, because our economy is well diversified.

      According to the World Bank, in 2014, after the rebasing of the Nigerian economy, it was discovered that the economy was more diversified than previously documented. Although we can diversify further, diversification isn’t our priority. Our problem lies in oil and gas which accounted for 11 percent of our Gross Domestic Product (GDP); and this oil accounts for 90 percent of our foreign exchange income. Moreover, oil accounts for 80 percent of our yearly revenue.
         
      This means we have for too long relied too much on revenues from oil. We have neglected other sources of revenue. However, now that oil revenue has plunged to its lowest ever, Nigeria must of necessity sink deeper into recession. Let us, therefore, seek ways to pull Nigeria out of recession. One of our faults is pride or ignorance; a refusal to change in the face of imminent danger. We also hate to imitate good policies elsewhere. We are a federation but our leaders chose to run Nigeria as a unitary state which makes governance very expensive.
         
      To bail Nigeria out of recession, we must look for how they extricated themselves from recession elsewhere and imitate them. It is as simple as that. To foolishly persist in wrongdoing is to continue to wallow in poverty. For the second time in eight years, Greece came out of recession recently. With a bail out from the International Monetary Fund, Greece had to fulfill some harsh austerity measures. These measures included a cut in the salaries of public office holders, workers including civil servants and pensioners. That led to street protests and strikes by workers. These austerity measures led to the privatisation of airports, highways and government housing estates.
         
      Apart from the reduction of the staff strength, austerity also led to higher taxes and cuts in allowances. Subsequently, Greece got out of recession. Before we offer solutions rather than palliatives, let us examine our confused monetary policies. In the third quarter of 2014, the Central Bank monetary policy committee increased interest rate to 13 percent and stayed there till November 2015. Thereafter it was cut to 11 per cent. In March 2016, this rate was raised to 12 per cent and then in July, it was raised again to 14 per cent.
             
      However, between May 2015 and November 2016, inflation doubled from eight per cent to 17.7 per cent. This inconsistency in policy should stop. Since we have opted for a fixed exchange rate, we either have monetary autonomy or capital mobility. Thus, the first step is to float the naira continuously. Then we can negotiate foreign loans as standby facility in the event of a crash. That $30 billion Federal Government planned to borrow might have this policy somersault in my mind.
         
      Under these circumstances, the naira will depreciate as it had been doing. Going for loans elicits a range of policy options in a developing economy like Nigeria. We have to abide by the terms of our lenders. Continuing our current policy will result in high inflation, low investment and high unemployment. These short term pains are inevitable. We must pay the price in hunger for not saving for the rainy day. Such a new policy option will be followed by higher investment and a sustained period of low inflation with higher growth.
       
      However, to boost employment, we need the enthronement of a National Full Employment Plan with special funds to prosecute it. To make it a proper palliative, NAFEP loans should be collateral free, interest-free and used mainly for import substitution enterprises. In these dire circumstances, the Buhari administration must push forth aggressive initiatives. Recently, the African Development Bank approved $56 billion to scale up industrial development in Nigeria. In the medium term, industrialisation must be the catalyst of the job creation category of the Nigerian development effort. The government must support this effort with a favourable business environment, access to the capital market and competitive entrepreneurship.   

      In effect, Nigeria must ensure further cooperation with China. Cooperation with China provides the potential for substantial project financing at low interest rates. The efforts to accelerate the development of our infrastructure through Buhari’s state visit to China last April are commendable. A key project is the modernization of the Nigerian Railways. This has the potential of unifying fragmented markets and boosting national cohesion.
             
      Moreover, efforts to rehabilitate Boko Haram-ravaged North East and the proposed Export Processing Zones will attract Chinese investors bent on displacing Anglo-American dominance in Nigeria. In 2017, Buhari must protect fiscal sustainability at all costs, even as this might exacerbate external imbalances. Most importantly, Nigeria must execute structural reforms for sustained and inclusive growth.
           
      For clarity, for our leaders are hard of hearing, structural reforms mean the merging of states to reduce expenditure, reduction of staff strength of the civil services of the states and that of the civil service of the Federal Government. The National Youth Service Corps (NYSC) should be scrapped. It serves no useful purpose in a depression. We can no longer finance it. The refineries should be sold to leave the Nigerian government with a maximum equity of 30 per cent. Ever heard of a government-owned refinery in the United States? As the global economy continues to deteriorate, the time to accelerate policy responses is now.

       

      These currencies got crushed in 2016 – NBC-2

      By Ivana Kottasova

      LONDON (CNNMoney) — 2016 has been a roller coaster of a year, and currency markets are no exception.

      A few countries have fared well, but others have seen the value of their currencies fall dramatically.

      Here’s a list of the currencies that have been rocked hardest in 2016:

      Egyptian pound: -59%

      Egypt took the radical decision to let its currency float freely in November. The move was part of an attempt to ease its deep economic crisis and secure an emergency loan from the International Monetary Fund.

      The Egyptian pound immediately crashed 48% against the U.S. dollar. It has dropped even further since then, closing out the year 59% lower against the dollar.

      Nigeria naira: -37%

      Nigeria struggled with low oil prices for most of the year, a trend that put its currency under pressure.

      The country relies on oil for 70% of the government revenue. Its economy was also hit by frequent militant attacks, many of which targeted the oil industry.

      The naira is down more than 37% against the dollar in 2016.

      Turkish lira: -18%

      The Turkish lira plunged 6% in the immediate aftermath of a failed military coup in July. It continued to slide in the second half of the year as ratings agencies S&P and Moody’s downgraded its credit rating further into “junk” territory.

      Turkey has accumulated huge external debts over the past decade. The IMF and other observers have warned Ankara that its addiction to foreign money is unsustainable.

      The lira had shed 18% against the dollar by late December.

      Argentinian peso: -17%

      The currency of Argentina, the second largest economy in South America, also struggled in 2016.

      While key reforms have boosted hopes for a return to growth, the country’s economy contracted by 1.8% in 2016, while real wages fell and inflation reached nearly 40%, according to the IMF.

      The peso lost 17% against the dollar.

      British pound: -17%

      June’s vote to leave the European Union sent the British pound plunging. Investors are nervous about the impact Brexit will have on the economy and the pound has proven to be the primary victim: it’s down 17% against the dollar.

      In July, the pound was briefly the wost performing currency in the world. It dropped even further in October, crashing to a 31-year low of $1.22. On the day of the referendum, it traded at $1.50.

      Mexican peso: -17%

      The Mexican peso was hammered by Donald Trump’s presidential campaign and election victory. Trump’s anti-trade and anti-immigrant rhetoric helped push the currency 17% lower against the dollar in 2016.

      To help support the peso, the central bank raised interest rates in November.

      Venezuelan bolivar: Errr, who knows?

      Venezuela is suffering from an extreme economic crisis. Food shortages are common, and the country doesn’t have enough medicine to meet its needs. The IMF expects inflation to rise 1,660% next year.

      The bolivar collapsed 71% against the dollar in 2016, according to dolartoday.com, an unofficial website that monitors the exchange rate on the ground in Venezuela.

      Reserves rise by $860m, hit $25.4 billion – The Guardian

      By Chijioke Nelson

      CBN building

      CBN building

      The nation’s foreign exchange (forex) reserves have recorded an increase of $860 million after a four-week persistent and gradual gain despite pressure at both the interbank and parallel markets.The development now brings the stock of the reserves to $25.36 billion, up from $24.49 billion in the corresponding period of last month, representing about 3.5 per cent rise.

      Forex reserves are money or other assets held by a central bank or other monetary authority, which can be used to pay for a country’s liabilities. The reserves also include the various bank reserves deposited with the central bank by other banks.Countries use the forex reserves to support their own currency, while also helping them guarantee their exchange rate.

      Within the period, the Central Bank of Nigeria (CBN), the lender of last resort, said it offered real sector operators – manufacturers and other strategic actors in the economy, access to about 7,792 requests for foreign exchange valued at over $867 million through the inter-bank window.A summary of the forex utilisation for the month of October 2016 indicated that the raw materials sector received the highest allotment, getting access to foreign exchange valued at $355.7 million or 40.99 per cent of the total value of Forex utilisation for the month put at $867.8 million.

      By the resurgent reserves profile, a new hope is rising over the country’s ability to raise its forex defence strategy to enable it provide for the huge demand and support the ailing Naira value that has long eroded due to lack of forex.

      The forex reserves have also recorded an increase of $1.46 billion in the last two months, from a low of $23.9 billion in October to $25.36 billion presently.

      The new level represent a four-month record high since end of August 2016, after gaining a persistent daily average growth of about 2.8 per cent from the end of October till date.

      In the same period in November, the reserves recorded an increase of $589 million, after weeks of consistent and gradual gains, despite demand pressure, bringing it to $24.49 billion, up from $23.91 billion. That was a 2.5 per cent rise.

      It also closed up a two-month decline to $247 million, after losing $836 million between September ($24.74) and October ($23.91).The international price of crude oil has remained relatively stable in recent weeks, although the country’s production has been below expectation down to 1.6 million barrels daily due to the activities of militants.

      However, price stability – slight improvement in capital importation and the country’s management of the foreign exchange policy through the CBN has also contributed to the assessed reserves’ accretion.

      Besides, earlier in November, African Development Bank delivered $600 million facility, out of the $1 billion pledge to Nigeria, which may have aided the reserves recovery. In December, the same bank offered Nigeria a $250 million grant for youth initiative.

       

      Naira reverses gain, drops to 490/dollar – Punch

      By Oyetunji Abioye

      The naira fell against the United States dollar from 485 to 490 at the parallel market on Wednesday, reversing part of the gain it had recorded against the greenback last week.

       

      The local currency, which had fallen to 495/dollar last Thursday, recorded some gains and closed at 485/dollar on Friday.

      Since Friday when the Christmas holiday was announced, the naira closed at 485/dollar at the parallel market.

      On Tuesday, three days to the end of the year, the naira traded flat and was sold for 485 per dollar on the streets of Lagos and Abuja,

      Currency experts have predicted the naira will weaken against the greenback as the New Year approaches.

      Specifically, they said the naira might fall to 500/dollar this week.

      Last Monday and Tuesday, the naira traded flat at 490 after closing at 487/dollar the previous Friday.

      The naira has been under severe and continuous pressure as the scarcity of the US currency continues to create ripples in the financial markets and economy.

      The naira plunged to 470/dollar, down from 455/dollar on the back of dollar shortage at the official and parallel forex markets some weeks ago.

      The naira has, however, consistently closed around 305.5 a dollar level since August via the official window.

      A Director at Union Capital Markets, Mr. Egie Akpata, said it was really difficult to predict the direction of the naira currently because part of the currency market had shut down for the year.

      You can’t really predict the market now because part of the market has shut down for the year. Things will really take shape next week. Currently, it could swing anywhere.”

      Currency dealers said the consistent clampdown on black market operators by security agents had compounded the naira problem, putting more pressure on available dollars.

      The CBN had on June 20 lifted its 16-month-old naira peg, following overwhelming dollar demand from companies and calls for a free floating of the naira by industry experts.

      Experts, however, argued that the central bank had yet to fully allow the naira to float freely.

      The CBN has struggled to support the naira as the country’s external reserves continue to fall.

      Dollar shortages have caused many companies to halt operations and lay off workers, compounding an economic crisis exacerbated by the fall in global prices of oil, which accounts for over 70 per cent of Nigeria’s budget revenue.

      Meanwhile, the Bureau De Change operators are now getting $8,000 each per week against the usual $15,000 each per week.

      Economic and financial experts said unless the lingering dollar supply problem was abated, the volatility in the exchange rate and the consequent economic challenges might continue.

      However, the currencies of Uganda, Kenya and Zambia are seen trading sideways this week as most investors closed positions ahead of the end of the year, according to a Reuters report.

      African Markets – Factors to watch on Dec 29 – Reuters

      NAIROBI, Dec 29 (Reuters) - The following company announcements, scheduled economic
      indicators, debt and currency market moves and political events may affect African markets on
      Thursday.
          - - - - -
       EVENTS:
       *KENYA - The central bank auctions 91-day Treasury bills
       worth a total 4 billion shillings.
       
       GLOBAL MARKETS
       Asian shares slipped on Thursday after Wall Street suffered
       a mild setback after weeks of gains, while the dollar faded
       against the yen in typical year-end profit
       taking.                       
       
       WORLD OIL PRICES
       Oil prices fell in early trade in Asia on Thursday following
       a surprise build in U.S. crude stocks shown in data
       published by the American Petroleum Institute (API) late on
       Wednesday.                 
       
       EMERGING MARKETS
       For the top emerging markets news, double click on
                  
       
       AFRICA STOCKS
       For the latest news on African stocks, click on     
       
       SOUTH AFRICA MARKETS
       South Africa's rand strengthened on Wednesday to a two-week
       high, supported by firming demand for commodities in global
       markets.            
       
       KENYA MARKETS
       Kenya's shilling        was steady on Wednesday but could
       come under pressure this week due to increased importer
       dollar demand, traders said.            
       
       UGANDA CURRENCY
       The Ugandan shilling UGX= was weaker on Wednesday, undercut
       by a surge in demand by commercial banks moving to cover
       short dollar positions as the year moves to a
       close.            
       
       RWANDA LENDING RATE
       Rwanda's central bank on Wednesday lowered its repo rate
                    to 6.25 percent from 6.50 percent to help
       stimulate credit growth, Governor John Rwangombwa
       said.            
       
       GHANA ECONOMY
       Ghana's gross domestic product growth in the third quarter
       of 2016 GDP rose to 4.0 percent year-on-year, up from 3.6
       percent a year ago due to increased oil production, the
       statistics office said on Wednesday.            
       
       ANGOLA ECONOMY
       Angola will achieve its inflation and exchange rate targets
       in 2017, the southern African nation's central bank governor
       said on state radio on Wednesday.            
       
       IVORY COAST ELECTRICITY
       Ivory Coast will build two 350 megawatt (MW) charcoal power
       stations in the western cocoa town of San Pedro by 2021 to
       address growing national demand for electricity, the
       government said on Wednesday.            
       
       MOZAMBIQUE BOND
       The U.S. Securities and Exchange Commission is investigating
       the sale of $850 million in bonds issued by Mozambique by
       Credit Suisse, Russia's VTB Group and BNP Paribas, the Wall
       Street Journal reported on Wednesday.