MARKET NEWS

On a weekly basis since the inauguration of Bola Ahmed Tinubu as the President of Nigeria, the Federal Government and the Central Bank of Nigeria (CBN) have intermittently made policy statements that spike rally in the stock market, prompt- ing investors’ interest in most quoted equities. Increased capitalisation Since then the NGX All-Share Index has climbed to 59,016.12 points as at June 19, 2023, from 58,163.55 points as of June 13, 2023, as investors have gained over N1 trillion during this period with the market capitalisation rising to N32.13 trillion from N31.67 trillion in the period un- der review. The biggest boost for investors is the CBN’s decision to float the naira, as it announced operational changes to the country’s foreign exchange market in pu- suant to President Bola Tinubu’s directive for a unified foreign exchange rate between official and parallel markets.

The Director of Financial Market in CBN, Angela Sere-Ojembi, in a statement, informed all authorised foreign exchange dealers and the general public about the immediate decision to collapse all segments of the market into an I&E window. Under the new window, applications for medicals, schools fees, basic travel allowance (BTA)/ personal travel allowance (PTA) as well as small and medium- scale enterprises (SMEs) would continue to be processed through deposit money banks (PMBs). By implication, the apex bank authorised buyers and sellers of foreign currency in the official foreign exchange market to feel free to quote any rate they find convenient to customers in the FX market, as against previous practice where it dictated the rates. Other changes include reintroduction of the ‘willing buyer, willing seller’ model at the I&E window, whose operations would be regulated by the extant circular No.FMD/DIR/CIR/GEN /08/007 dated April 21, 2017 that established it.

Under the new arrangement, all eligible transactions are permitted to access foreign exchange at the window. The operational rate for all government related transac- tions shall be the weighted aver- age rate of the preceding day’s executed transactions at the I&E window calculated to two deci- mal places. The latest move by the CBN follows President Bola Tinubu’s suspension of former CBN Gov- ernor, Godwin Emefiele, whose unorthodox monetary policies had become a stumbling block to investors and the economy. Floating the naira Floating the naira means that Nigeria has allowed market forces to determine the exchange rate of its currency.

Previously, the CBN dictated the rates. With the floating exchange rate, buy- ers and sellers in the official FX market can quote rates they find comfortable. President Tinubu in his inau- gural speech had said: “Monetary policy needs thorough house- cleaning. The Central Bank must work towards a unified exchange rate. This will direct funds away from arbitrage into meaningful investment in the plant, equip- ment and jobs that power the real economy. “Interest rates need to be re- duced to increase investment and consumer purchasing in ways that sustain the economy at a higher level. “Whatever merits it had in concept, the currency swap was too harshly applied by the CBN given the number of unbanked Nigerians. 

The policy shall be reviewed. In the meantime, my administration will treat both currencies as legal tender.” “We shall ensure that inves- tors and foreign businesses repatriate their hard earned dividends and profits home,” he added. Experts’ views Chief Executive Officer of APT Securities and Funds Lim- ited, Kasumu Garba Korfi, said the move to unify all segments of the forex market, collapsing all windows into one was a welcome development for the capital market. “The multiple foreign ex- change trading platform is one of the hindrances of foreign in- vestment flow into the market. “Remember before the impediment, foreign investors made up to between 50 per cent and 55 per cent of our total market trans- actions. But today, the foreign investors played less than 13 per cent. And the reason is that they cannot get foreign exchange to take out their money out of the country. “Now the unify foreign ex- change will give the freedom to buy according to the dictate of the market to take their money out so that it will encourage them when they exchange their dollars, they will get a better returns. 

“Therefore, we are expecting more inflow of foreign investors as they now have the in and out of their investments. If you look at it today, the market activities are running between N6 billion to N12 billion per day instead of N20 billion that was recorded in the past.” Executive Director, Centre for Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, also said: “The recent reforms in the CBN is good for the economy. All is about making the apex bank better. Abd it us also about ensur- ing a better policy framework in the CBN to better support the economy for more investment and growth of the economy.” 

He noted that the suspended CBN governor, Godwin Emefiele himself was an impediment to the right kind of policies. “His policies were obstructing the growth of the Capital market and the economy,” he added. Recall President Bola Tinubu suspended Emefiele.from office on Friday June 9, 2023. This was disclosed in a statement by Willie Bassey, Director of Information at the office of the Secretary to the Government of the Federation. 

The CBN governor’s suspen- sion is a sequel to the ongoing investigation of his office and the planned reforms in the econ- omy’s financial sector, the state- ment said. Mr Emefiele was directed to immediately hand over the af- fairs of his office to the Deputy Governor (Operations Director- ate), who will act as the Central Bank Governor pending the con- clusion of the investigation and the reforms. 

The suspended CBN gover- nor assumed office in 2014 after succeeding Lamido Sanusi, who was equally suspended from of- fice under controversial circum- stances by President Goodluck Jonathan few months before the expiration of his tenure. 

Last line Emefiele’s suspension paved the way for the appointment of an Information Technology sav- vy banker, Folashodun Shonubi, as acting CBN governor, whose policy thrust has contunued to renew hope in investors.