MONDAY 14/5/2021 – OIL PRICE: EXPERTS DISMISS GAINS AS SUBSIDY NEARS N200BNAfter the international crude oil benchmark, Brent advanced above $70 as the PUNCH reported earlier in the month, industry experts see meagre benefits as subsidy payments gulp revenues. The Federal Account Allocation Committee report for May, value shortfall, representing the amount the NNPC paid for subsidy, showed that the March receipts amounted to N111.97bn, while February’s totalled N60.40bn. According to the FAAC reports for January, February and March, the total amount spent on subsidy for the first three months of 2021 stands at N197.74bn. The Nigerian Governors Forum during its May 19 meeting suggested that the Federal Government end subsidy payments and peg the pump price of PMS at N380 per litre. The governors reacted following the non-remittance of the NNPC into the April FAAC payments as most states required federal allocations to meet their expenses such as payment of salaries and building infrastructure. Experts say with payment of subsidy on petrol imports, gain in oil price means little to the nation. Abuja-based financial planner and economic expert, Kalu Aja, said, “If Nigeria is importing Premium Motor Spirit and still paying subsidy, then there is no seismic shift.” “Nigeria needs oil at $130 to meet the deficit. In the short term, however, more dollar cash flow is expected and with depreciated Naira, it will reduce short term deficit.” Aja said that current subsidy payments were politically motivated and not for economic benefits. He said, “The administration believes cheaper petrol is a ‘dividend of democracy’. However, the NNPC may take fuel prices up a notch if oil prices remain elevated.” On the effects rising oil prices could have on the economy, he said, “The slope of the fossil fuel economy is trending downwards. The Gross Domestic Product is comprised mostly of services and agriculture. “Services are suffering under a scarcity of USD and infrastructural deficit, while agriculture is suffering under insurgency. Apapa ports are also inefficient. “Crude oil prices are income, GDP needs investment and consumption to rise, inflation has reduced real wages and killed off consumption.”TUESDAY 15/6/2021 – NAIRA TUMBLES BY 51.95% DESPITE CBN’S DEFENCE MEASURESThe value of the naira to the dollar fell from 196.99 in December 2015 to 410 in April 2021, reflecting a 51.95 per cent decline despite the various foreign exchange policies introduced by the Central Bank of Nigeria to strengthen the currency. According to a monthly document obtained from the CBN’s website, the value of naira at the inter-bank forex market stood at N196.99 as of December 2015. The PUNCH had reported last month that the CBN officially adopted the NAFEX exchange rate of N410.25/$1 as its official exchange rate, devaluing the naira from N379/$. n a move to achieve exchange rate stability and preserve the country’s forex reserves, the CBN in 2015 reviewed downwards the spending limit on the usage of naira-denominated debit cards for transactions abroad. In a circular issued in April 2015 signed by the then Director of Trade and Exchange, Olakanmi Gbadamosi, the bank said the limit had been reduced from $150,000 to $50,000 per person annually, while daily cash withdrawals per person was pegged at $300.After six months of implementing the policy, the value of naira in the official window remained stable at 197/$, but fell from 210/$ to 258/$ at the parallel market. In June 2015, the CBN announced that it was stopping the supply of forex to 41 items that could be easily produced in Nigeria, a development that brought about the forex exclusion policy. The implication of the policy is that importers of items on the forex restriction list would not be able to get forex directly from the windows created by the apex bank to bring the products into the country. A circular issued by CBN said, “The implementation of this policy will conserve foreign reserves as well as facilitate the resurrection of domestic industries and improve employment generation.” However, after about a year of implementation, the value of naira plummeted at both markets, falling from 197/$ to 232/$ and 218/$ to 351/$ at the official and parallel markets respectively. In 2017, the exchange rate at the official window fell to the N300/$1 threshold, ranging between N305 to N306 to a dollar.WEDNESDAY 16/6/2021 – NG CLEARING LIMITED GETS SEC’S APPROVAL TO OPERATEThe Securities and Exchange Commission (SEC) has granted NG Clearing Limited (NG Clearing) registration to perform the function of a central counterparty (CCP) with effect from June 7, 2021. This registration now permits NG Clearing to clear and settle exchange traded derivative products – making NG Clearing the first CCP in Nigeria. Speaking on the issuance of the licence, the Chairman of NG Clearing, Mr. Oscar Onyema, said: “NG Clearing will deliver an unparalleled CCP experience for the Nigerian financial and capital marketsand will optimize the deployment of its resources to achieve long-term value creation for its stakeholders using a state-of-the-art risk management framework, which complies with global best practices for mitigating settlement risk.” He added that the company’s main role is to improve the soundness and safety of the Nigerian financial market by delivering best-in-class post-trade services that manage counterparty credit risk and reduce systemic risk byinterposing itself as a guarantor to both parties in a transaction, thus ensuring the successful execution of derivatives and other trades from various trade points in Nigeria. Also commenting, the Managing Director of NG Clearing, Mr. Tapas Das said: “NG Clearing shall be playing a key role in the financial market ecosystem in the region, upholding stability and safety of the marketplace, through efficient and timely settlement of derivative trades. The aim is to strengthen the country’s investment environment through solutions that systematically reduce risks, enhance operating efficiency, and minimize costs for all market participants, thereby serving as a catalyst to national development.” According to Das, the company has sufficient financial resources, including settlement guarantee fund, to cover participants’ risk exposures. He noted that members will have access to a wide range of financial reports that equip them with extensive knowledge and enable them make informed decisions, as well as access to NG Clearing’s bespoke clearing and settlement software application which will support the clearing and settlement of derivative instruments across various asset classes i.e., futures and options contracts on indices, equity shares, commodities, currency, rates etc.THURSDAY 17/6/2021 – NAIRA WEAKENS TO 4-YEAR LOWNigeria’s currency weakened to a four-year low in the parallel market despite the efforts by the Central Bank of Nigeria, CBN, to make banks sell more dollars to customers failed to bridge the widening gap between the official and street rates.According to a Bloomberg’s report, citing abokifx.com, a website that collates foreign exchange market information parallel market dealers were offering the naira at N502 per dollar yesterday, up from N500 last week, the weakest since February 2017. The rate widens the spread between the official and the parallel market rate to 22 per cent, when compared with the spot rate of N411.13 a dollar as at yesterday afternoon. The report further noted that Nigeria, has devalued its currency thrice since March last year as lower oil income, which accounts for about 90 per cent of dollar earnings put pressure on external reserves. “Some people are switching their naira savings into dollars fearing further devaluation”, the report noted. Quoting CBN’s spokesman, Osita Nwanisobi, Bloomberg noted that the regulator met with banks’ Chief Executives last week over the issue with the lenders agreeing to increase dollar supply and operate special accounts to meet the requirements of businesses and travellers. The Central Bank aims to use lenders to make more foreign currency available to buyers, at around the official rate of between N410 to N412 to the dollar to reduce pressure on the streets where rates are crashing from excess demand.FRIDAY 18/6/2021 – EXCHANGE-TRADED FUND MARKET CAP HITS N20.32BN –NGXThe market capitalisation of exchange-traded funds listed on Nigerian Exchange Limited rose to N20.32bn in the first quarter of 2021. The NGX said the trade volumes rose by 3,064 per cent from nearly 0.2 million units in Q1 2020 to 5.3 million units recorded in Q1 2021. According to the NGX quarterly report for Q1 2021, the Nigerian Exchange Traded Products and ETF market witnessed a sterling performance since the rise of the COVID-19 pandemic in early 2020, resulting in market capitalisation of the 12 listed securities rising to N20.32bn. The report showed that the market turnover (value traded) jumped by 4,556 per cent between Q1 2020 and Q1 2021 even as five of the listed securities were the most active during the period under review. NewGold ETF took the lead in both value and volume traded in the ETF space as it traded 3.47 million units valued at N29.63bn. Vetiva Griffin 30 was next, trading 814,372 units worth N13.94m; Lotus Halal transacted 746,400 units worth N9.95m; Meristem Value ETF sold 163,09 units valued at N2.90m, while Vetiva Banking ETF traded 56,116 units valued at N232,397. The NGX said over 5.25 million units were traded and valued at N29.66bn in the period under review.It said foreign participation dominated the ETF market as 92 per cent of foreign investors’ outclassed domestic investors (eight per cent).