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Oil firms boost naira with $546m supply, as cost of funds stabilises

By Babajide Komolafe
The naira appreciated significantly in the interbank market and was relatively stable in the official market courtesy of $546 million foreign exchange sold by oil firms, including the Nigeria National Petroleum Corporation (NNPC) last week.

Also, in spite of the increase in the Monetary Policy Rate (MPR) as well as other measures to tighten money supply announced by the Central Bank of Nigeria (CBN) on Tuesday, interbank interest rate remained stable throughout the week.

Exchange rate
The naira started the with mixed fortunes, depreciating by 10 kobo at the first official auction on Monday, but appreciated by 19.5 kobo in the interbank foreign exchange market. The official exchange rate rose to N150.4 from N150.30 per dollar while the interbank exchange rate fell to N152.52 from N152.715 per dollar the previous week.

On Tuesday, buoyed by foreign exchange sales by oil firms, the naira appreciated further by 30 in the interbank market as the interbank exchange rate fell to N152.2. But on Wednesday, while the naira gained nine (9) kobo at the official market, with the official exchange rate falling to N150.31, it depreciated by 17.25 kobo with the interbank rate rising to N152.37 per dollar.

On Thursday, the naira appreciated by 42.25 kobo, and on Friday by another 5.75 kobo, hence the interbank rate fell and closed at N151.8925 per cent.

Cumulatively, the naira appreciated by 82.5 kobo at the interbank market while it depreciated marginally by one kobo at the official market.

The foreign exchange sales by the oil firms impacted foreign exchange demand at the official auction on Monday, as demand fell marginally 2.3 per cent to $297.936 million from $304.967 million the previous Wednesday.

Interest rate
In spite of 25 basis points increase in the monetary policy rate (MPR) on Tuesday, Interbank interest rate were relatively stable throughout the week, with marginal movement across the tenors.

Interest rate for Call, 7-Days, 30-Days lending closed at 5.37, 7.123, 10.667 per cent, up from 4.9583, 6.4583 and 9.625 per cent. Investigation revealed that the muted response of interbank interest rate to the MPR hike was due to fresh inflow of N80 billion from the liquidation of Sovereign Debt Notes to oil marketers and government personal funds. Interest rate is however expected to rise this week due to the end of month activities, little or no inflow and outflow through foreign exchange and treasury bills purchases.

Public debt rise by 36% to $35bn
Nigeria’s public debt shot up by 36.8 per cent to $35.3 per cent in 2010, even as the Debt Management Office assures that the nation’s debt position is healthy. Director-General Debt Management Office, Dr. Abraham Nwankwo disclosed this on Thursday  in Kaduna,  at a retreat organised for finance correspondents. He said that the nation’s total debt stock as at end of 2010 stood at $4.7 billion for external debt and N4.5 trillion for domestic debt.

This translates to a total debt stock of $35.3 billion for the year, which indicates 36.8 per cent increase when compared with the $25.8 billion total debt stock for 2009. Further analysis indicate that the external debt stock rose by 29 per cent  to $4.7 billion from $3.94 billion, while the domestic debt stock rose by 40 per cent to 4.5 trillion from N3.2 trillion. Nwankwo  however assured that the nation’s debt position is healthy as the debt-to-gross domestic product (GDP) ratio is 19 per cent far below the threshold of 40 per cent recommended for developing countries like Nigeria.
CBN raises benchmark rate to 6.5%
The Central Bank of Nigeria (CBN) held its first Monetary Policy Committee (MPC) meeting of the year, and following reiew of development in the economy, it tightened money supply by raising the Monetary Policy Rate (MPR), its benchmark interest rate.

The apex bank also raise the Cash Reserve Requirement (CRR) of banks, which is  portion of deposits that banks must keep as cash with it,  to 2.0.  It also increased  the Liquidity Ratio of banks, which is the portion of banks’deposit that they must keep in liquid assets, to 30 per cent from 20 per cent. The increase in the liquidity ratio is however effective March 1st 2011.

Explaining the rationale for these decisions, the MPC in a communiqué issued at the end of the meeting said, “The Committee noted that the risk of inflation is on the upward side as a result of the liquidity injections from the likely increase in government spending in the run up to the April 2011 elections, and AMCON purchases, as well as rising global energy and food prices and the expected pass-through to the domestic economy.

It noted that the existing subsidy regime on petroleum products is not sustainable in view of government’s current finances. In view of these factors, the Committee noted, that inflation remains a major concern that cannot be ignored in the short- to medium- the Committee noted, that inflation remains a major concern that cannot be ignored in the short- to medium-term.”

StanChart introduces Naira Visa Debit Card
Standard Chartered Bank Nigeria Limited in keeping with its commitment to bring world class banking service driven by convenience to its customers has introduced a new card product – The Naira Visa Debit card. The product will be issued to all customers who maintain Naira savings or current accounts with the Bank. The card can be used globally at any ATM machine or merchant outlets/POS terminals where the Visa logo is displayed to make cash withdrawals and payments. Holders of the card can access Naira while in Nigeria and foreign currency when outside the country from over 29 million outlets worldwide (including over 1 million ATMs on the Visa Network).

Skye Bank introduces first MasterCard Verve
Skye Bank Plc has launched into the Nigerian financial market the first naira denominated Mastercard Verve which can be used to make payments across multiple channels like the Automated Teller Machines, Point of Sales terminals, internet, telephones, among others.

The bank said in a statement that the naira denominated Mastercard Verve is globally accepted as a means of payment at over 24 million merchant locations and over one million ATMs worldwide in more than 220 countries.

According to the bank, the Mastercard Verve is a product designed to allow cross-border transactions while taking into consideration the pre-approved Personal Travel Allowance (PTA) and Business Travel Allowance (BTA) limits, noting that the card is linked to a naira operated account which can be either  savings or current account.  On the category of people the card is most suitable for, the statement said the card is targeted at individuals who demand quality and prompt and consistent  service in addition to offering financial security to those who travel.

More winners emerge in FirstBank Golden promo
Customers of First Bank of Nigeria Plc, totalling more than 200 emerged winners in the FirstBank Golden Anniversary promotion held in Abuja, Thursday.

The draw which took place in Abuja and witnessed by a large number of staff and customers, was the sixth in the series of 12 draws.
Various prizes won at the event included cash, refrigerators and generating sets.

The Golden promo is coming on the heels of the recently concluded Big Splash promotion that saw 12 customers from the six geo-political regions of the Bank drive home 12 brand new Toyota Corolla cars; 9 customers each from the market-facing Directorates of the Bank won 3 star and 6 consolation prizes ranging from a brand new Toyota Prado Jeep (2009 A/T model), a KIA Sportage SUV, a HONDA City car, and 6 brand new HONDA Motorcycles.Ashiat Odewale, Business Development Manager, Wuse, who represented the management of the Bank at the event said that “FirstBank is committed to ensuring improved quality of lives for its customers, adding that the Bank would continue to leverage its expertise in financial services to better the lives of its customers.


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