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Inflation to Maintain Downward Streak in April, Say Analysts - THISDAY

MAY 14, 2017

By Kunle  Aderinokun

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With the expected Tuesday’s release of numbers for April consumer price index (CPI) by the National Bureau of Statistics in view, economic analysts and market watchers have released their projections for the index, which gauges inflation. Essentially, they expect to see a continuation of the downward trajectory in the index, which began in February when it plunged to 17.78 per cent (year-on-year) from 18.72 per cent in January and subsequently dropped to 17.26 per cent in March. NBS had attributed the decline for the two consecutive months to the effects of stabilising prices in already high food and non-food prices as well as favourable base effects over 2016 prices.

While The Economic Intelligence Group of Access Bank Plc forecast that the CPI would drop further to 17.05 per cent in April from  the 17.26 per cent level it stood in March, analysts at FSDH Research  has estimated that the CPI would be 17.11 per cent when NBS released the figures on Tuesday. Also, the CEO, Nigeria Competitiveness Council of Nigeria (NCCN), Matthias Chika Mordi, who is also CEO, Accender Strategies,  estimated a CPI of  16.75 per cent for the month in preview  with a 25 basis points error of margin, based on macroeconomic indicators and Q1 surveys.

 

According to the Access Bank analysts, “As usual, our methodology adopts an autoregressive analysis of past prices, while it recognizes all the assumptions used by the National Bureau of Statistics (NBS) in its computation of monthly composite consumer price index (CCPI).”

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The analysts noted that the group’s inflation forecast was driven chiefly by anticipated downward movement in the food and core sub-indexes. Besides, they identified price movements for major commodity groups in the food basket which makes up over half of the CPI basket remained muted in April. “Based on an independent survey, vegetable oils, rice, and flour trended downwards, while the price of garri, potatoes and noodles were stable.”

Similarly, they stated that, “Core inflation, which excludes the prices of volatile agricultural produce, is expected to extend its downward trend in April. This partially reflects the effects of currency appreciation in the parallel market. Month-on-month, the naira appreciated by 8.32 per cent as the Central Bank maintained the tempo of interventions in the forex market.”

On probable market impact of the projected further inflation decline, The Economic Intelligence Group noted that, “With short-term secondary market T-bill yields currently around 16 per cent – 19 per cent, the downtick in inflation may prompt investors to take positions in short term securities and divest from equities.

They also said, “Despite the easing inflation, we expect the apex bank to maintain rates in an attempt to anchor the downward inflation trend. In the March Monetary Policy Committee (MPC) statement, the CBN governor made it clear that loosening the policy rate will worsen price pressures, while tightening of rates would be detrimental to already-weak economic growth.”

As for the FSDH analysts, they said, “Although we noticed increases in the prices of food and non-food classification for the fourth consecutive month, the base effect in the CCPI in April 2016 will be responsible for the drop in the inflation rate.”

According to them, “The Naira gained by 0.16 per cent at the inter-bank market to close at US$/N305.85 while it lost 0.25 per cent at the parallel market to close at US$/N396 at the end of April. The fall in the international prices of food helped to counter the effect of the depreciation in the value of the Naira at the parallel market.

“The appreciation of the Naira in the inter-bank market and the drop in the prices of food at the international market led to a moderation in the prices of consumer goods in Nigeria. The prices of food items that FSDH Research monitored in April 2017 moved in varying directions. The prices of tomatoes, garri, sweet potatoes, beans, Irish potatoes and yam were up by 56.78 per cent, 8.47 per cent, 6.94 per cent, 6.08 per cent, 5.64 per cent and 3.33 per cent respectively.

“Meanwhile, the prices of onions, vegetable oil, palm oil, rice, meat and fish were down by 27.11 per cent, 7.78 per cent, 6.67 per cent, 2.48 per cent, 2.22 per cent and 1.33 per cent respectively. The movement in the prices of food items during the month resulted in 2 per cent increase in our Food and Non-Alcoholic Index to 234.34 points.

“We also noticed increase in the prices of Housing, Water, Electricity, Gas & Other Fuels divisions between March 2017 and April 2017. Our model indicates that the general price movements in the consumer goods and services in April 2017 would increase the Composite Consumer Price Index (CCPI) to 226.01 points, representing a month-on-month increase of 1.48 per cent.

“We estimate that the increase in the CCPI in April will produce an inflation rate of 17.11 per cent lower than the 17.26 per cent recorded in March 2017.”

In their view, analysts at Eczellon Capital expect the April 2017 inflation rate (year-on-year) “to ease slightly given the marginal drop in the prices of some food and non-food items and CBN’s intervention in the Forex market.”

“Consequently, the Apex Bank had introduced an Investors and Exporters Window (IEW) poised to boost liquidity in the FX market and ensure timely execution and settlement of eligible transactions for manufacturers and related constituents. Prior to CBN’s intervention, the cost of accessing the FX was extremely high as it was mirrored in the prices of items. “Conversely, participants in the FX market are now accessing the FX via the CBN’s IEW at a relatively affordable price and without exhausting same. By implication, the IEW has led to the reduction in cost of production and has translated to the marginal decline in the prices of items. Additionally, the recent manufacturing PMI for April 2017 indicates that the manufacturing sector had advanced at 51.1 index points showing expansion in the manufacturing sector after three months of contraction, though the non-manufacturing sector dragged sluggishly at 49.5 relative to 47.1 index points. Subsequently, the improvements in these sectors spur us to believe that the costs of items in the market are retracting gradually,” the analysts explained. 

Furthermore, the Eczellon Capital analysts added, “the historical behaviour of Nigeria’s inflation rate over the past three months had shown a downward trajectory of 0.94 per cent point and 0.52 per cent point for February and March apiece. For that reason, we foresee the CPI plunging further in April 2017.”

Also, in his projection, Chief Executive Officer, The CFG Advisory Ltd, Adetilewa Adebajo, is hopeful of a continuity in the downward trend in CPI “provided the CBN continues with its policies aimed at improving forex liquidity, Naira/$ rate appreciates further, and fiscal stimulus is maintained.” 

“We can therefore estimate a further downward trajectory in consumer price index, however, by smaller percentage points relative to the first two months, due to relative stability in prices of some food items and falling demand for other items. 

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“Month-to-Month inflation still on the rise. There appears to be the need to monitor CPI for the next few months to fully ascertain the downward trend in inflation,” Adebajo pointed out.

“Month-to-Month inflation still on the rise. There appears to be the need to monitor CPI for the next few months to fully ascertain the downward trend in inflation,” Adebajo pointed out.

BRIEFS

Domestic Flight

 Domestic flight operations declined by 67 per cent in the first quarter of 2017, compared to the same period in 2016, the Nigerian Civil Aviation Authority said. NCAA’s Consumer Protection Department, in a document on Monday, disclosed that 10,366 flights operated in the first quarter of 2017 compared to 15,434 flights operated in 2016 by the same eight domestic airlines. The domestic airlines, the agency said, are Aero Contractors, Arik Air, Air Peace, Azman Air, Dana Air, First Nation, Med-View, and Overland.

 

Gas supply

 Nigerian National Petroleum Corporation and its partners evolved a scheme to grow gas supply for domestic consumption by 285 per cent. NNPC said this in a statement by its Group General Manager, Group Public Affairs Division, Ndu Ughamadu, in Abuja on Wednesday. Ughamadu said the gas growth was expected to rise from three billion standard cubic feet per day (scf/d) to five billion standard cubic feet per day (scf/d) by 2020. NNPC said the federal government had directed it to aggressively pursue gas development to aid the country’s economic development.

 

BoI

 The Bank of Industry introduced zero-interest loans for members of the National Youth Service Corps under its Graduate Entrepreneurship Fund programme. BOI said the zero per cent interest, from 9% previously charged, was part of measures to encourage entrepreneurship and aid business growth. According to BOI, the GEF scheme, being implemented in partnership with the NYSC, is currently on the second edition and has recorded over N262.9 million disbursements to 177 successful candidates. The bank said the zero per cent interest charge took effect from May 1.

 

Capital Market 

Securities and Exchange Commission set aside N5 billion as seed capital for the take-off of the proposed Nigerian Capital Market Development Fund. The commission warned that it would henceforth prosecute investors who use false identity for share subscription. The apex capital market authority also indicated that its shares dematerialisation programme had run its full course, achieving a 100 per cent dematerialisation of shares with over 2.2 million investors mandating their accounts for e-dividend.

 

Leasing industry

Leasing firms in the country braved the odds and generated N1.26 trillion in 2016. The industry recorded 14 per cent growth in outstanding lease volume from N1.1 trillion in 2015. Consequently, experts believed the Nigerian leasing industry had remained vibrant and continued to provide succour to many organisations across all sectors of the economy, despite the current economic difficulties. Stakeholders said leasing was still attractive to new investors with massive diversification by existing players in the industry.

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NAFEX: The Nigerian Autonomous Foreign Exchange Rate Fixing Methodology - FMDQ

APRIL 24, 2017

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1. INTRODUCTION

This document provides a summary of the methodology that FMDQ OTC Securities Exchange (“FMDQ”) applies to establish NAFEX - the Nigerian Autonomous Foreign Exchange Rate Fixing.

2. BACKGROUND FMDQ

This is an over-the-counter (“OTC”) securities exchange with a mission to empower the financial markets to be innovative and credible, in support of the Nigerian economy. This mission is achieved by providing the secondary market with a world-class market governance and development service to the benefit of market participants and in support of the objectives of the financial services regulators.

Consequently, FMDQ is committed to developing and publishing independent and transparent benchmarks which are reasonably designed to be reflective of the market at the time of the fix and promote transparency in the OTC markets. FMDQ Fixings meet the requirements of domestic regulations as well as the International Organisation of Securities Commissions (“IOSCO”) Principles for Financial Benchmarks on governance, quality of the methodology and accountability mechanisms.

NAFEX is the FMDQ benchmark rate for Foreign Exchange (“FX”) spot operations in the Investors’ & Exporters’ FX Window (hereinafter referred to as the “Window”). NAFEX is designed and generated independently and objectively and also published every business day at a specific time.

2.1. Uses of NAFEX

An FX fixing is an essential component of the Nigerian financial system. Its importance to the financial industry and other non-financial sectors arises from the impact of a country’s exchange rate on almost all sectors of the economy.

NAFEX will benefit the Nigerian economy in general and the financial industry in particular in a number of ways, including:

▪ Serving as a fixing for the settlement of FX derivatives

▪ Promoting transparency and awareness of USD/NGN rates

▪ Enabling foreign and local investors benefit from a market-driven independent reference rate

▪ Increasing forward contracts usage towards a reduction of investments in currency principals and foreign currency line utilisation

▪ Developing hedge products and derivatives, thus improving the standard of the Nigerian FX market

▪ Providing growth and income potentials for market players through the trading of hedging products ▪ Serving as a benchmark for portfolio valuations, conversions, performance measurement and audits.

2.2. Key Considerations

2.2.1. Benchmark Administrator FMDQ is the benchmark administrator for NAFEX and thus has primary responsibility for all aspects of the benchmark determination process. This process includes the development, determination, dissemination, operation and governance of NAFEX.

2.2.2. Active Market

FMDQ recognises that to enable the publication of a meaningful benchmark, a market in the currency pair represented by the benchmark must genuinely exist and that market must be active. However, the economic realities will dictate the relative meaning of what ‘active’ means, as market liquidity can vary significantly at particular times of the day. FMDQ applies the IOSCO Principles for Financial Benchmarks 7 & 8 – “Data Sufficiency” & “Hierarchy of Data Inputs” in determining thresholds for an “active market.”

2.2.3. Data Sourcing

FMDQ may use transactional data entered into on an arm’s length basis between buyers and sellers in the market, where that data is available and reflects sufficient liquidity. In a market where liquidity levels are low, the benchmark may be based predominantly or exclusively on contributed quotes.

2.2.4. Governance and Transparency

FMDQ is subject to a corporate risk framework which is based on three (3) lines of risk management:

i. Business procedures and controls are designed to promote consistency throughout the process

ii. The application of independent governance, reporting and risk management. The Board of Directors and relevant Board Committees are responsible for oversight of FMDQ Fixings, including reviewing and advising on the policies and methodologies by which FMDQ calculates, administers and publishes the Fixing.

iii. FMDQ Fixings are discussed and adopted by an Oversight Committee i.e. the Market Review Committee, consisting of members of the FMDQ Management Team who perform the required due diligence on the proprietary Fixings. Furthermore, in line with the IOSCO Principles for Financial Benchmarks, FMDQ shall publish submitted quotes received from contributing banks with the eliminated quotes identified.

2.2.5. Exercise of Expert Judgment

FMDQ may exercise discretion on the use of data in determining a Fixing. The calculation of a Fixing includes a validation process whereby, among other steps, FMDQ reviews data and fixes rates under certain pre-determined tolerance checks. When applying tolerance checks, FMDQ has the discretion (subject to internal policies and procedures) to include or reject certain data from the calculation of the Fixing.

Based on FMDQ’s experience in interpreting market data, FMDQ shall apply expert judgment when necessary with the intent of ensuring the quality and integrity of the benchmark rate. Consequently, FMDQ has put in place internal guidelines and quality control procedures that govern the application of “Expert Judgment” and are intended to provide consistency and oversight to the process.

3. FIXING DYNAMICS

3.1. Fixing Methodology - NAFEX Spot Rate NAFEX Spot rates shall be determined as detailed below and contributing banks shall be expected to submit only ‘professional spot quotes’. Where a contributing bank submits an unprofessional quote, such a quote will automatically be disqualified from the NAFEX computation. Contributing banks shall quote single rates for transaction sizes of $5,000,000.00 and above or as advised by FMDQ, at the time of the poll.

3.1.1. NAFEX is a polled rate based on the submissions of ten (10) contributing banks and calculated using a trimmed arithmetic mean. Upon receipt of quotes, the individual contributing banks’ submission is ranked in descending order. The lowest and highest two (2) quotes are eliminated from the ranked rates leaving only the middle six (6) rates. The arithmetic mean of the remaining rates are then calculated to two (2) decimal places and disseminated as the NAFEX Spot Rate.

3.1.2. NAFEX shall be published daily by 12:00noon. 3.1.3. Where FMDQ receives fewer than the required number of submissions by the time NAFEX is due for publication, the reduced submissions methodology detailed below shall apply: i. NAFEX will be published provided that two (2) or more quotes are obtained on a daily basis ii. The calculation methodology shall remain the same irrespective of the number of submissions received. 

3.13 If data remains insufficient by 12:00 noon, FMDQ shall activate the NAFEX Contingency plan as detailed below.

3.2. Contingency Plan

3.2.1. In instances where there are quotes below the documented threshold, the previous day’s NAFEX shall be maintained and published as the current NAFEX.

3.2.2. In circumstances of a force majeure event, leading to the unavailability of quotes in the market, the previous day’s NAFEX will be maintained and published as the current NAFEX.

3.2.3. Any republished rates from the previous business day shall be identified as such on the FMDQ1 eMarkets Portal.

3.2.4. After five (5) consecutive business days of republishing the previous day’s NAFEX (in this case, the NAFEX of 5 business days prior), an FMDQ Market Review Committee meeting shall be convened in a special session to devise a strategy for the appropriate determination of future NAFEX during the extreme market condition, towards preserving the continuity of the NAFEX publication.

4. PUBLICATION NAFEX

Spot Rate is available in three (3) packages – Real-time, 24-hour Delayed and Historical:

▪ Live Fix: Available at 12:00 noon daily via the FMDQ e-Markets Portal

▪ Delayed (24 hours): Published via the FMDQ website2

▪ Historical: Available via the FMDQ e-Markets Portal

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Pound Sterling Always Rallies in April - but this Year will be Different Warn Analysts - PSL

APRIL 09, 2017
  • Written by Will Peters

Historically, the British Pound tends to rally in April.

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For the last 12 years without fail, GBP has rallied against the USD with an average monthly gain of 2.2%.

The currency has also done well against the Euro.

The observation has many in the analytical industry understandablyconfident that this April will be no different and that we should therefore expect the UK currency to rise.

But the reasons for this outperformance in April is yet to find any plausible theories and analyst David Bloom at HSBC says he is reluctant to rely upon it and modelling the Pound’s potential direction over coming weeks.

Indeed, Bloom rightly points out that the UK is a very different place in April 2017 than it was in previous Aprils. “The vote for Brexit was a game-changer,” says Bloom.

Bloom does not know why Sterling is favoured by April, but history alone is no reason to suggest this is a set-in-stone rule.

Oliver Harvey at Deutsche Bank says a potential reason for Sterling’s historical outperformance in April relates to dividends.

“After annual reporting in the first quarter, April is often the month when dividends fall due. With over two thirds of FTSE 100 earnings made abroad, cash must be repatriated to pay them,” says Harvey.

Harvey does warn that the divergence between high dividends payments and the declining profitability of UK-listed firms might mean this April’s payouts are limited when compared to previous instances.

The analyst notes that for years now UK corporates have been handing out cash to shareholders at the expense of reinvestment which must at some point be rectified.

As such Deutsche Bank reckon there are many years of underinvestment to catch up with and firms are tipped to hold onto cash which in turn could see less demand for Sterling on global foreign exchange markets.

Added to this, Harvey also notes an increasingly smaller proportion of dividends are being paid back in GBP.

“The share of Sterling dividends is likely to fall further as companies seek to reduce the currency exposure of payouts,” says Harvey. “In short, while the weather is unlikely to improve, sterling's strong April performance may be less of a factor than in the past.”

 

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Sell the Pound on Rallies

HSBC have made a tactical recommendation to clients that they consider selling the British Pound on any rallies in anticipation of an intensification of political risk, the structural headwind of the current account deficit and possible signs of softness in the economic cycle.

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HSBC have previously recommended that GBP-USD is to be sold at 1.2540 - very close to the 1.2450 seen at the time of writing.

“Those not already engaged in GBP may be tempted to wait for better levels to sell, somewhere in the 1.2700-1.2850 region where it last topped out,” says Bloom.

The tactical call to sell the Pound on strength contrasts to the view held at Barclays that the Pound is a buy against the Euro.

We do note the duration of the Barclays call is however shorter in duration.

Economics to Weigh Against Sterling

Looking at the fundamental reasons to engage against Sterling, HSBC eye the mid-March boost given to the currency by the Bank of England which surprised markets by hinting that the next move on interest rates would be to raise them.

One member of the Bank’s decision-making committee - Kristin Forbes - actually voted for a rise at the March meeting.

But, HSBC believe the boost given to GBP from the hawkish shift in rate expectations is vulnerable to a reversal.

“The dissenting vote of Forbes at the last MPC meeting came against a run of upside activity data surprises in January and February,” says Bloom.

Those have now petered out in March with the activity surprise index tracking sideways with leading indicator data turning softer and suggesting a slowdown in economic activity over coming months.

While the upside surprise in inflation data gave an extra boost Sterling  bulls HSBC argue this sentiment is misplaced.

“The rise in inflation is a dovish signal under current circumstances because of the squeeze it poses on real spending power. Wages growth is stuck; inflation is not,” says Bloom.

HSBC think the extra 18bp of tightening the market has added to its expectations for December 2018 are likely to reverse as the data and Bank of England rhetoric delivers a push back.

“This will be significant for GBP/USD as the currency has traded as a cyclical currency so far in 2017, tracking the daily vagaries of the interest rate differential between the UK and US. Once the political risk of an early Brexit negotiation standoff and the structural headwind from the current account deficit are added, we could have all three drivers pointing to GBP weakness,” says Bloom.

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Some Bearish Forecasts for the Pound

HSBC forecast the Pound to Dollar exchange rate to be at 1.15 by mid-2017 ahead of a fall to 1.12 by the end of September and 1.10 by year-end.

The EUR/GBP exchange rate is forecast at 0.91 by mid-2017, 0.96 by September and 1.00 by the end of 2017.

From a Pound to Euro exchange rate perspective this equates to 1.0981, 1.0416 and, well, 1.0.

These are certainly amongst the more bearish forecasts in the analyst community out there and aligns closely to the views held at bears Deutsche Bank.

It might be no wonder then that two major Sterling bears are not buying the idea that the Pound will follow historical precedent and rise this April.

At the time of writing the Pound to Euro exchange rate is quoted at 1.1705.

The Pound to Dollar exchange rate is quoted at 1.2480.

Sterling caught its first tailwind of the week against the dollar thanks to data showing the fastest growth in three months for a sector of the U.K. economy that matters most.

Services growth unexpectedly accelerated in March which for now helped to allay worries of Brexit putting a brake on the economy.

Upside for the Pound could prove limited ahead of more big ticket U.K. numbers in the days ahead on trade, due Friday, and next week when inflation and unemployment print on Tuesday and Wednesday, respectively.

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NAIRA WARS: THE CENTRAL BANK STRIKES BACK - abokiFX

FEBRUARY 25, 2017

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The Central Bank has found new muscle with the introduction of its new FX policy. The policy will see all banks receive a total of $20m weekly, to sell to the public at N375 /$1 thereby reducing the pressure on the parallel market.

CBN suffered the humiliation of not being able to respond to the dire demand for dollars in the country since late 2016 forcing the naira to spiral out of control.

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CBN introduced IMTOs and empowered them to distribute $15,000 per week which was later slashed to $8,000 per week per BDC. AbokiFX field agents confirmed that the $8,000 dollars a week they receive barely last 60 minutes.

abokiFX observed that the Central Bank, who had been pushed to the wall since the start of 2017  decided to fight back aggressively on all fronts by using a combination of spots, forwards, price discounts and media announcements by selling $41m spot rates, $600m forwards contracts at rates below the parallel market and announcing a new FX policy.

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abokiFX believes with a restored reserve approaching the $30bn threshold with further prospects of future growth, there is enough muscle to fight off any speculative demand in the market and ensure moderate liquidity is sustained on a weekly basis through multiple channels.

CBN has also called for back up from the banks to join the fight to strengthen the naira by instructing the banks to be located in BDC territories such as inside the airports, to provide liquidity penetration to customers. AbokiFX sees some conflict of interest occurring here initially but might be mitigated in the long run.

abokiFX research team will monitor closely what the impact of the new FX policy will have on the rates and liquidity volume in the peak seasons, as that would be the real test of the return of the Naira.

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HIGH TRAFFIC BUT LOW CURRENCY VOLUMES - abokiFX Research

FEBRUARY 24, 2017

TODAY'S MARKET OBSERVATION

abokiFX Research   24/02/2017

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  • Market in chaos as rate fluctuation confuses traders.
  • A lot of customers trying to sell but traders not buying at high rates anymore.
  • Traders and customers weeping from loss in exchange rate.
  • Traders are not able to sell existing stock at low rates as the loss would be catastophic.
  • Traders willing to buy are buying limited volumes at discounted rates.
  • Volume traded per individual is low compared to standard trading days.
  • Customers trooping in to sell their stock are not impressed witht the rates. While some deal, others do not. The observed deals are light.
  • The weekend could not have come at a better time for some traders as they try to grasp the reality of the CBN's New FX Policy.

Market observations compiled by abokiFX Research Team.

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PANIC OVERWHELMS THE PARALLEL MARKET AS TRADERS BEAR HEAVY LOSSES - abokiFX

FEBRUARY 24, 2017

Parallel market traders are turning customers away as they refuse to buy any foreign currency.

Those willing to buy off customers are offering low rates for the dollar and refusing to take on any large volume.

Traders are also reluctant to sell at low prices but those that have panicked are willing to offload low volumes as well at $460.

abokiFX  field agents believe that customers who usually source forex from the parallel market are now heading to the banks to take advantage of the reduced rates from the CBN.

abokiFX field agents have confirmed that RATES ARE UNSTABLE AT THE MOMENT AND ADVICE THAT TRADES SHOULD BE DONE OUT OF NECESSITY RATHER THAN PANIC.

FEBRUARY 2017 FOREIGN RESERVES IN USD - AbokiFX CHART

FEBRUARY 18, 2017

BY ABOKIFX RESEARCH

  • FOREIGN RESERVE RECOVERY NOT YET IMPACTING THE EXCHANGE RATE OF THE NAIRA AS NAIRA SPIRALS OUT OF CONTROL. 
  • ABOKIFX RESEARCH TEAM BELIEVES THERE IS A POSSIBLITY THE CENTRAL BANK COULD DEFEND THE NAIRA ONCE A FOREIGN RESERVE THRESHOLD IS REACHED.
  • CRUDE OIL PRODUCTION VOLUME IS AT 2 MILLION BARRELS A DAY WITH OIL PRICE STEADILY ABOVE $50 A BARREL. THIS EXPLAINS THE FAST RECOVERY OF THE RESERVE.
  • abokiFX RESEARCH TEAM WILL WATCH FOR EARLY SIGNS OF CBN INTERVENTION IN THE FX MARKET AS THE CHART SHOWS WE COULD BE HEADING BACK IN THAT DIRECTION. HOW SOON THOUGH, WOULD DEPEND ON A RESERVE THRESHOLD GOOD ENOUGH TO TRIGGER AN INTERVENTION.. 

 

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Expert urges CBN to reduce MPR – The Guardian

FEBRUARY 01, 2017

Dr Samuel Nzekwe, finance expert, has urged the Central Bank of Nigeria to reduce the Monetary Policy Rate currently at 13 per cent in order to boost the economy.

Nzekwe, former President, Association of National Accountants of Nigeria (ANAN), told the News Agency of Nigeria (NAN) on Sunday in Ota, Ogun, that the higher MPR had eroded the purchasing power of most Nigerians.

NAN reports that the Monetary Policy Committee of CBN had at its two-day meeting in Abuja on Tuesday retained the MPR at 13 per cent.

According to him, the interest rate charged by the commercial banks was too high, making businesses difficult to do in the country.

“The Federal Government needs to create enabling environment by providing lower interest rate and address critical infrastructure deficiency for industries to thrive’’, the ex-ANAN boss said.

According to him, Nigeria is experiencing cost push inflation, the result of higher cost of production of goods and services.

Nzekwe said devaluation of the nation’s currency was a major factor that affected the high cost of production.

“Goods and services are available but people have no money to buy them because the recession made people to be worse off’’, he said.

He, therefore, advised the CBN to reduce interest rate so that investors could access cheap loans, reduced cost of production and create more employment.

This, he said, would boost the Gross Domestic Product and eradicate poverty level in the country.

Sterling stumbles to first three-day fall of year – Reuters

JANUARY 30, 2017

By Jemima Kelly and Marc Jones | LONDON

Britain’s pound weakened on Monday, marking its first three-day fall against the dollar this year and putting it on the back foot ahead of Thursday’s first Bank of England meeting of 2017.

“Super Thursday” will see the central bank, which cut interest rates to a record low of 0.25 percent after the June referendum on EU membership, present its quarterly inflation report along with its decision on monetary policy.

Inflation has accelerated as sterling has shed 12 percent since the Brexit vote on a trade-weighted basis. This has led to market talk that the BoE may take a more hawkish tilt and even signal that it is moving closer to raising rates from their current record low of 0.25 percent.

A Reuters poll last week, however, found most economists expect the BoE to leave its rates and other stimulus measures unchanged at least until 2019. Even though it is likely to raise its growth forecasts, uncertainty over soon-to-start Brexit negotiations mean it will likely remain cautious.]

“(Bank of England Governor Mark) Carney will probably reiterate his line that there are limits to tolerance of above-target inflation,” said BNP Paribas currency strategist Sam Lynton-Brown.

“If that rhetoric occurs at the same time of potential upward revisions to growth forecasts and maybe even inflation forecasts, that will prompt the market to increase its pricing for the probability of a Bank of England rate hike by the end of this year.”

Sterling slipped off a five-week high of $1.2674 at the end of last week, and by 1545 GMT on Monday had fallen another 0.2 percent on the day to $1.2525, as worries over a travel plan implemented by U.S. President Donald Trump drove a risk-off mode across markets.

Against a broadly weaker euro, the pound inched up 0.1 percent to 85.13 pence, close to a four-week high.

Crédit Agricole FX Strategist Manuel Oliveri forecast sterling would struggle following a recent mini-rally, with Brexit uncertainty to remain the main driver and data also likely to weaken.

“We don’t think the (BoE) inflation report will be a big shock,” he said. “It may sound a bit more hawkish but it still remains cautious.”

“A lot more is needed to push the needle” for the bank to start considering a move in interest rates, he added.

The pound has fallen roughly 19 percent against the dollar since June’s Brexit vote, but for the last few months it has been in a relatively restrained range of between $1.20 and $1.28 and 84 pence and 88 pence per euro.

(Editing by Richard Lough)

FOREX-U.S. travel ban row halts dollar recovery – Reuters

JANUARY 28, 2017

* Yen moves higher after row over U.S. immigration order

* Moves put focus back on risks of Trump’s protectionism

* Weaker-than-expected U.S. GDP halted dollar gains on Friday

* Monetary policy in focus as BOJ, Fed and BoE meet this week (Adds German inflation data, updates prices)

By Patrick Graham

LONDON, Jan 30 The dollar dipped on Monday as investors sought the traditional security of the Japanese yen after new U.S. immigration curbs put the spotlight back on President Donald Trump’s protectionist bent and the risks it poses for the economy.

The dollar had begun to climb at the end of last week after its worst month in five, as expectations of higher inflation and tax cuts to spur growth under the new president pushed U.S. government bond yields higher.

That was halted by a combination of weaker-than-expected U.S. economic growth data on Friday and the uproar that followed Trump’s order restricting entry to the United States for travelers from seven Muslim-majority nations.

“Concerns on protectionism appear to be rising after President Trump’s executive order to restrict immigration,” said Adam Cole, head of G10 FX strategy with RBC in London.

After an Asian session becalmed by Chinese New Year holidays, the yen rose 0.4 percent to 114.58 yen per dollar in morning trade in Europe. The greenback was flat at $1.0695 per euro and marginally higher at $1.2537 against sterling.

The euro drew some support from a rise in European government bond yields to their highest in a year after regional data showed solid rises in annual German inflation. That came at the start of a week dominated by central bank meetings in the United States, Japan and Britain.

The bond market, however, also suggested euro investors were pricing in more risk from France’s presidential election in April after the selection of a more radical leftist candidate by the French Socialists at the weekend.

A stronger dollar was one of 2017’s big calls for many investment banks and asset managers at the end of last year but that faith has been undermined by worries about how U.S. trade and diplomacy will pan out under Trump’s presidency.

At the top of the list are concerns that the new administration may actively pursue a weaker dollar as part of efforts to change its trading relationship with China and others.

“The weak U.S. GDP is doing the dollar no favours. But it also takes courage to keep buying the dollar, considering what Trump has said about the kind of a currency policy he could pursue,” said Daisuke Karakama, market economist at Mizuho Bank in Tokyo.

For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets (Additional reporting by Shinichi Saoshiro in Tokyo; Editing by Gareth Jones)

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