The value of the naira slipped against the United States dollar at the three segments of the forex market last week due to increased demand for the greenback.

Specifically, at the parallel market, the naira declined by N1.50 to close at N161.50/$1 from the preceding Friday’s value of N160/$1.
Similarly, at the regulated bi-weekly forex market, the value of naira also dipped by 67 kobo to close at N150.72/$1 last Wednesday, compared with the N150.05/$1 it attained the preceding Wednesday. 

At the Wholesale Dutch Auction System (WDAS) held last Monday, the CBN offered a total of $200 million, while demand stood at $252.34 million. The regulator however reduced its supply to a total of $180 million, while demand stood at $262.96 million, at last Wednesday’s auction. In the same vein, the local currency dipped by 130 kobo to close at N157.60/$1 at the interbank market on Friday.  Auction at the WDAS would not hold today due to the national public holiday to commemorate the Eid-el-Kabir celebration for Muslims.
Dealers attributed the decline suffered by the local currency against the greenback, to the CBN’s latest move to review the exchange rate band.

Governor of the Central Bank of Nigeria (CBN), Mallam Sanusi Lamido Sanusi, said last Monday that the apex bank would review the exchange rate band of naira to the dollar from +/-3 per cent of N150/$1, to N155/N156.
Sanusi had said: “We’ll give it a few more days and see where it settles finally and then we’ve got to come out with a new transparent band. Both the midpoint and the band could change. The target exchange rate band would aim to maintain stability without putting your reserve position at risk.”

Interbank Rates Movement
The Nigerian interbank lending rates reduced last week due to the inflow of funds from the budgetary allocation. For instance, data made available by the Financial Market Dealers Association (FMDA) showed that whereas the Overnight funds reduced by 38 basis points to 16.67 per cent on Friday, compared with the 16.29 per cent it attained the preceding Friday, the 7-day tenor also lowered to 17 per cent on Friday, compared with the 18.83 per cent it stood the preceding Friday.

FSDH Securities Limited in their latest weekly report at the weekend also showed that cumulatively, there was a net total outflow of N104.80 billion from the system through the government securities and the forex market auctions last week. It also showed that there was no Treasury Bill (TB) primary market auction last week.

“At the Open Market Operation (OMO) transactions, there was a total inflow of about N3 billion into the system, while there was a withdrawal of about N37.21 billion from the system. This brought about a net outflow of N34.21 billion from this segment of the market. Repurchases (REPOs) transactions showed that there was a total inflow of about N23.50 billion, while the total outflow stood at N105.33 billion. This resulted in a net outflow of about N81.82 billion from the system. The REPOs were issued at a discount rate of 15 per cent,” the FSDH report added.

FAAC Disbursal
The Federation Accounts Allocation Committee (FAAC) finally shared N611 billion last week in order to allow states pay their workers before Sallah celebrations. THISDAY had reported that part of the compromise reached was that the controversial deductions from the federally-collected revenue by the Nigerian National Petroleum Corporation (NNPC) for fuel subsidy would be allowed for September, but no further deductions would be made henceforth until all outstanding issues were resolved.

Therefore, a total of N100 billion was withheld by the NNPC from the September allocation, according to the Minister of State for Finance, Alhaji Yerima Ngama, who had said all employees of both the federal and state governments would now be paid their salaries due to the development. According to him, the then delay in the payment of salaries for workers stemmed from the realisation that some states could not pay workers without the monthly allocations.

The Federal Government last week said that it had reviewed the oil price benchmark for the 2012 budget from $75 to $70 per barrel “after consulting with key stakeholders”. It had also said that the gross revenue for the month of September stood at N924.691 billion, or N45.168 billion lower than the N969.691 billion generated in August.

Cheque Truncation
The CBN last week unfolded plans to introduce a cheque truncation process. Cheque truncation is simply a process that involves stopping the physical movement of cheque and replacing the instrument with the image of the instrument and the corresponding data contained in Magnetic Ink Character Recognition (MICR) line. Unlike the more common form where a cheque is physically presented to the paying bank, a truncated cheque eliminates the cumbersome associated with physical presentation and saves time and processing costs.

According to a guideline titled: “Exposure Draft Guideline for Cheque Truncation in Nigeria,” on the policy, the deadline would be announced at an advanced date to enable banks undertake a formal certification test as well as to address their operational readiness.
It had insisted that when introduced, the truncation shall be mandatory for all banks. It had stated that under the cheque truncation regime, cheques shall clear on a T+1 (one day after transaction), such that customers would receive value in the morning of T+2.

The guideline had added: “The objectives of the cheque truncation guidelines are to provide for the regulation and management of cheque truncation in Nigeria with the view to reducing cost and days of clearing instruments; to articulate the rights and responsibilities of presenting and paying banks in the cheque truncation system; to provide for minimum technical and operational standards for cheque truncation.”

Credit to Private Sector
Banking sector credit to the private sector rose by 9.4 per cent to N10.899 trillion in August, compared with the N9.875 trillion it stood as at July, the CBN’s Economic Report for August 2011, released last week had shown.  The report had said that the growth reflected, wholly, the rise in the Deposit Money Banks’ (DMBs) claims on the sector. According to the report, at N9.991 trillion, aggregate banking system credit (net) to the domestic economy rose by 22.7 per cent, on month-on-month basis, in contrast to the decline of 8.6 per cent at the end of the preceding month.

“The development reflected, largely, the 50.2 and 9.4 per cent increase in net claims on the federal government and claims on the private sector, respectively. Over the level at end-December 2010, aggregate banking system credit (net) to the domestic economy, rose by 14.7 per cent, due largely to the 19.0 and 10.9 per cent increase in claims on federal government (net) and claims on the private sector, respectively,” it had added.

High Unemployment Rate
The Central Bank of Nigeria (CBN) last week decried the increasing spate of unemployment in the country. The apex bank had argued that for the country to achieve its economic potentials, there was need for entrepreneurial studies that would encourage the establishment of small scale industrialists.

The Assistant Director, Product Development Office, Development Finance Department of the CBN, Mr. Frank Amagwu, had said that the apex bank was committed to supporting small scale entrepreneurs in the country. He had stated that the rush for white-collar jobs was increasing the unemployment rate as young graduates preferred government jobs to establishing private ventures that would make them to be self-reliant.

“The need for entrepreneurial studies at this time in our national development cannot be over-emphasised especially at this time that unemployment is at its peak and most graduates are left without jobs nor skills in their hands to be gainfully employed. Our artisans are not with managerial skills to ensure the sustainability of their businesses,” he had stated.

He had however, expressed dismay that most people from the South East zones were yet to take advantage of the Entrepreneurial Development Centre located in Onitsha in Anambra and Enugu in Enugu states to grow their businesses.

International Investors
President Goodluck Jonathan last week urged international investors to seize the opportunity of an enabling environment to invest in Nigeria, declaring that “now is the time to invest here”. He had also said the administration was ready to deregulate the power sector, adding that government at various levels was increasingly looking to the Nigerian capital market to finance infrastructure projects.

The president had also said he was keen on attracting investments by creating incentives and providing an enabling environment for capital formation. Jonathan had insisted that the present administration was determined to foster an environment rich in opportunities for investment with the highest returns while bringing inclusive growth to ordinary Nigerians.

The President had added:  “We have also rolled out a master plan to convert the millions of acres of arable land in Nigeria to achieve sustainable food production for consumption and export. The agriculture potentials of this country are simply beyond measure.  This government has also undertaken to provide affordable housing for the majority of Nigerians.”

Electronic Payment Systems
The CBN last week called on Nigerians to embrace electronic payment systems in all forms of transactions, insisting that this will boost economic development and reduce financial risks. Sanusi, had said that the enhancement of the national payments system was crucial to the enthronement of good banking practices in the country. Sanusi said that the banking regulatory authority, had from the inception of the current reform efforts, emphasised the importance of effective, efficient and safe service delivery to the populace.

“Deliberate actions have been taken in recent times, as encapsulated in the strategic reform agenda for the Nigerian payments system, to focus attention towards electronic payments as a veritable option for efficient payments service towards the promotion of rapid financial inclusion and increased economic activities,” Sanusi had said.

Intervention Fund
The House of Representatives last week mandated its Committee on Banking and Currency to investigate the CBN and the Asset Management Corporation of Nigeria (AMCON) over Federal Government’s N1.4 trillion intervention funds. The House had also mandated the committee to examine the Banks and Other Financial Institutions Act (BOFIA) and AMCON, if they conformed to the 1999 Constitution as amended.

This resolution had emanated from a motion by Mr. Uzoma Nkem-Abonta (PDP-Abia), which was unanimously adopted. Nkem-Abonta had noted that in 2009, the CBN injected N620 billion of public funds to rescue private banks, N500 billion for private manufacturers, N200 billion for textile industry and N100 billion for the aviation sector.

He had said in 2011, in conjunction with the Nigeria Deposit Insurance Corporation (NDIC) and AMCON, it had also injected N679 billion to recapitalise same banks without approval.
“The Asset Management Corporation of Nigeria, a government agency, announced that it will inject another N821 billion to revive some ailing banks again,” he had said.

Source: ThisDay/Obinna Chima