E-Financial
Naira softens against Dollar on parallel markets
By Lukman Otunuga, Research Analyst at FXTM
The Naira eased slightly against the Dollar on the parallel markets as geopolitical concerns weighed on emerging market currencies.
Reports of Nigeria’s foreign exchange reserve falling by $2.1 billion in 30 days compounded downside pressures with the Naira trading around 360 against the Dollar. An appreciating Dollar, prospects of higher US interest rates, jitters ahead of the 2019 general elections and geopolitical tensions across the world present downside risks to the Naira. With the economic calendar in Nigeria relatively light for the rest of the trading week, the local currency is likely to be influenced by external forces.
Risk sentiment wanes on geopolitical concerns
Asian stock markets tumbled this morning following a lacklustre session on Wall Street overnight that saw the Dow Jones fall more than 100 points.
The incredible rally in Chinese equities yesterday clearly failed to jumpstart risk sentiment as geopolitical tensions weighed heavily on investor confidence. Global equity bulls seem to be entangled in a gruelling battle with ongoing US-China trade disputes, global growth concerns, geopolitical tensions and prospects of higher US interest rates. With the various geopolitical risk factors bubbling violently in the cauldron, all the ingredients for a market-shaking selloff across global stocks seem to be in place. All good things must come to an end and this could be the story for the bullish global equity markets.
Dollar gains on safe-haven demand
The Dollar remains a popular destination for safe-haven flows amid the mounting geopolitical tensions across the world.
Uncertainty over Brexit negotiations, the standoff over Italy’s budget and US-Saudi tensions have sent investors rushing to the Dollar. With the Greenback also supported by optimism over the US economy and prospects of higher US interest rates, the fundamental outlook points to further upside. In regards to the technical picture, the Dollar Index is bullish on the daily charts with prices trading near a two-week high above 96.10. A solid weekly close above 96.00 has the potential to trigger a move towards 96.20 and 96.48.
Commodity spotlight – Gold
Gold bulls hit the ground running this morning as geopolitical concerns promoted risk aversion and accelerated the flight to safety.
The yellow metal has scope to shine with intensity this week as the risk-off mood sends investors rushing to any form of safety. However, with the Dollar also benefiting from safe-haven flows there could be fierce competition between the two. Gold seems to be winning the battle of the safe-havens this morning with prices trading around $1,231 as of writing. A solid breakout and daily close above the $1,233.50 resistance level is likely to inject Gold bulls with enough inspiration to challenge $1,245.
Currency spotlight – GBPUSD
Brexit-related uncertainty remains the primary culprit behind Sterling’s weakness.
The clock is ticking with under six months left until the official Brexit deadline and the Irish border issue remains an unsolved puzzle. Investor attraction towards the Pound is likely to diminish as investors evaluate the possibility of a no-deal Brexit scenario. The GBPUSD is under pressure on the daily charts with a breakdown below 1.3000 opening a path towards 1.2930.
E-Financial
Lagos State Appoints MoneyMaster as Payment Partner for “Ounje Eko” Programme
“Ounje Eko”, the food price discount initiative of the Lagos State Government, has appointed leading payment service bank, MoneyMaster Payment Service Bank Limited (MMPSB), as its collaborator in the bid to ensure ease of payments at the market.
MoneyMaster is one of the Central Bank of Nigeria-licensed Payment Service Banks (PSBs) to promote financial inclusion across Nigeria.
Under the partnership, MMPSB will apply its cutting-edge payment solution to engender easy payment and reconciliation in order to make the experiences of Lagosians who will be getting their food supplies from the markets pleasurable. Its payment solution is also all-encompassing and ensures real time value to payment destinations.
The mobile bank was appointed as the collection and payment partner for “Ounje Eko” Food Markets programme which is a government initiative serving the five divisions of Lagos State. Consequent on this, MoneyMaster Payment Service Bank will collect payments in 57 LCDAs in the state.
The partnership gives credence to the quality of payment solutions that MoneyMaster is reputed for in its services to its growing business clientele in private and public sectors.
E-Financial
CBN, EFCC Probe Banks, Firms over Alleged Forex Racketeering
Central Bank of Nigeria (CBN), is investigating irregular foreign exchange transactions and forward contracts valued at approximately $2.4 billion.
The inquiry follows an extensive audit by Deloitte, which scrutinized $7 billion in dollar debts accumulated under the bank’s previous leadership.
In the aftermath of the 294th Monetary Policy Committee meeting in Abuja, Yemi Cardoso, governor of CBN, disclosed to journalists that the investigation, supported by the Economic and Financial Crimes Commission, among other security bodies, aims to clarify the legitimacy of these FX allocations identified as problematic by the audit.
“It was determined that a number of these transactions did not qualify…they were outright illegal. The law enforcement agencies are now looking into those transactions that as far as we are concerned, are not valid to be paid,” Cardoso detailed, emphasizing the unlawful nature of these forex deals.
The crux of the investigation lies in the audit findings that a significant portion of the scrutinized transactions lacked proper documentation and, in many instances, were deemed outright illegal.
However, the unfolding investigation has raised concerns within the organized private sector, with some entities contemplating legal action against commercial banks for unresolved forex bids.
Despite these tensions, Governor Cardoso reassures that the foreign exchange market remains open and transparent, inviting stakeholders to address their forex needs through the official channels.
Furthermore, Cardoso clarified the distribution of fertilizers to farmers as a one-off measure and not indicative of a shift back to direct interventions by the CBN, underscoring a commitment to strategic, regulatory governance rather than direct market involvement.
E-Financial
CBN Urges Banks to Expedite Action on Recapitalisation
Central Bank of Nigeria (CBN) has directed deposit money banks in the country to expedite action to increase their capital base from the current ₦25bn.
Olayemi Cardoso, governor of CBN, stated this during the apex bank’s 294th meeting of the Monetary Policy Committee (MPC) on Tuesday in Abuja, when the MPC hiked the interest rate by 22.75% to 24.75%.
The apex bank chief said the MPC examined developments in the banking sector and expressed satisfaction that the industry remained stable. The committee, however, said to guard against risk, commercial banks in the country should accelerate their recapitalisation efforts.
Cardoso said, “The MPC also reviewed developments in the banking system and noted that the industry remains safe, sound, and stable. The committee thus called on the bank to sustain its surveillance and ensure compliance of banks with existing regulatory and macro-potential guidelines.
“The MPC also enjoined the banks to expedite actions on the recapitalisation of banks to strengthen the system against potential risks in an increasingly globalised world.”
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