Weekly Roundup: Exchange rate falls across markets as Nigeria’s economy is projected for further growth

The Nigeria equities market closed bullish in the week as the benchmark index, ASI rallied 2% to 48,459.65, reaching a level not seen in over 13 years. Similarly, on the macro level, Nigeria’s external reserve continued with an uptrend in the review week following the sustained bullish run in the crude oil market, gradually edging towards the $40 billion threshold.

On the other hand, demand pressure pulled Naira downwards against the US dollar at the official Investors and Exporters (I&E) window. Exchange rate depreciated by 0.2% to close the week at N418.33 to a dollar.

These and many more happened during the week, hence, Nairametrics compiled a list of notable events across macroeconomy, equities market, regulators, and the crypto market that made the headlines during the week.

Naira falls at official and P2P market

Naira depreciated by 0.2% during the week to close at N418.33/$1 compared to N417.5/$1 recorded as of the end of the previous week. It surged as high as N419.5/$1 during the week before settling at N418.33.

Meanwhile, there is an improvement in the volume of FX traded at the market, with over $600 million in forex value exchanging hands during the week as against the $581.41 million traded in the past week.

Also, Naira surpassed the N591 to a dollar threshold during the week at the Peer-to-Peer market, before ending the week at N590, with potential for further hike, considering the movement seen in the official market during the week.

The black market recorded some uptrend as naira appreciated to close the week at N586/$1 on the back of reduced FX demand in the market.

  • IMF projects 3.4% economic growth for Nigeria

The International Monetary Fund gave Nigeria an upward review of its economic growth forecast for 2022 while expecting that the global output would decline due to the consequences of the crisis in Ukraine.

The Washington based lender reduced the expected global output in 2022 to 3.6% in April down from 4.4% expected in January. These projections are worrisome since global output grew by 6.1% in 2021, a year hunted by the effects of the pandemic.

Nigeria, on the other hand, had an upward review of its economic growth projections. The International Monetary Fund (IMF) has projected the Nigerian economy to grow by 3.4% in 2022, up from 2.7% earlier projected.

  • IMF warns Nigeria of a “doom loop” 

The Washington based lender, International Monetary Fund, has concerns about a potential “doom loop” for Nigeria and other emerging economies.

Nigeria’s bank credit to the government surged to N14.9 trillion as of February 2022, an uptick from the N14.2 recorded in January 2022.

The Bank added that “The sovereign-bank nexus could lead to a self-reinforcing adverse feedback loop that ultimately could force the government into default. There is a name for that, too—the “doom loop.” It happened in Russia in 1998 and in Argentina in 2001-02.”

  • Emefiele explains reason for fixed exchange rate

Godwin Emefiele, the Governor of the Central Bank of Nigeria (CBN) revealed why the apex bank is unable to freely float the currency despite pressure from the World Bank and the International Monetary Fund (IMF).

Emefiele, who emphasized that various countries have different issues and must find solutions to solve those challenges, stated that the CBN will continue to educate the IMF and World Bank about Nigeria’s unique circumstances and how to handle them to advance the economy.

Emefiele defended the apex bank’s managed-float exchange rate system, stressing that it was adopted to address the peculiar challenges the country faces.

The CBN Governor said, “Both the IMF and World Bank are our prime development banks, and we have received support from them at different times in resolving some of our economic challenges, particularly bothering on finance.

He added “Nigeria’s situation is very peculiar and that is why we have continued to engage the IMF and World Bank to show understanding of our local problems. And they are indeed showing understanding.

  • World Bank blames CBN FX policy rising food inflation 

The World Bank has warned that import restrictions and the Central Bank of Nigeria’s foreign exchange policies are the main drivers of food inflation in Nigeria.

The Nigerian central bank has enacted regulations barring specific commodities from using the Investors and Exporters (I&E) window to obtain FX at the official rate. Nonetheless, the Washington-based lender believes that policies aimed at fixing the currency rate and enforcing trade restrictions have contributed to Nigeria’s worrying inflation.

According to the World Bank, the CBN’s forex policy keeps the Naira strong during the I&E window. However, the black market value of the Naria remains low.

  • The NGX is Trading at a Price Point Not Seen in 13 Years

The Nigerian Exchange Group’s All Share Index is currently trading at 48,223.86 basis points. Interestingly, the Nigerian exchange has not traded this level since September 2008, over 13 years ago.

The Nigerian stock exchange has seen a significant growth especially in 2020, where it recorded over 50% growth in ASI. In 2021, the exchange ended the year marginally bullish by 5.89%, despite strong appeal for U.S. dominated stocks. However, its performance in 2021 is relatively small, compared to the parabolic performance in 2020.

So far, in 2022, the ASI Year-to-Date (YtD) performance is bullish by 12.89%, with the Nigerian market being one of the top performing emerging markets in Africa. This is because in YtD performance, the NGX is doing better than its peers like the Ghana Exchange which is down 3.32% YtD, the Johannesburg Stock Exchange which is down 1.1% YtD and Nairobi Securities Exchange, which is also down 6.4% YtD.

  • UST Flips BUSD to become the Third Most Valuable Stablecoin

UST, the Terra blockchain’s native programmable stablecoin, has flipped the Binance Chain native stablecoin, the BUSD, to become the third most valuable stablecoin with a market capitalization of approximately $17.5 billion.

TerraUSD (UST) is known to be a decentralized and algorithmic stablecoin of the Terra blockchain. It touts to be a scalable, yield-bearing coin that is value-pegged to the United States Dollar. It was launched in September 2020 and its minting mechanism requires a user to burn a reserve asset such as LUNA to mint an equivalent amount of UST.

According to statistics from CoinMarketCap, UST’s total market capitalization has gained approximately 14.5% over the past 30 days, from $15.31 billion to currently stand at $17.5 billion at the time of writing.

  • Beanstalk lost $182 Million to Exploit

Beanstalk, a credit-focused stablecoin protocol built on the Ethereum blockchain, was exploited Sunday morning for all of its collateral from a security breach caused by two sinister governance proposals and a flash loan attack. This exploit saw the protocol lose about $182 million in various cryptocurrencies according to blockchain security firm PeckShield.

The issue started when the protocol was seeded by suspicious governance proposals, BIP-18 and BIP-19, issued on the 16th of April by the exploiter, who asked for the protocol to donate funds to Ukraine. Unaware to the protocol, those proposals had a malicious rider attached to them which ultimately created the sinkhole of funds from the protocol according to smart contract auditor BlockSec.

The exploiter took out a $1 billion flash loan from the AAVE (AAVE) protocol denominated in DAI (DAI), USD Coin (USDC), and Tether (USDT) stablecoins. The attacker then used the funds to accumulate enough assets to take over 67% of the protocol’s governance and approve their own proposals.

Flash loans must be executed and repaid within a single block and usually calls on several smart contracts at once to complete. Flash loans have been used in the past to perform hacks or security exploits of other protocols.

  • Moonbirds records $292 Million trades in Just 4 Days of Launch

A new Ethereum-based Non-Fungible Token (NFT) project, Moonbirds, is soaring to the top of the NFT trading volume charts after generating approximately $292 million worth of sales in just four days after its launch.

Moonbirds is an NFT set that consist of 10,000 computer-generated pixel owl avatar NFTs in total, which were all promptly sold out on April 16 for a mint price of 2.5 Ether (ETH) per NFT, or $7,625 at current prices.

According to data from CryptoSlam, the project has generated more than $291.8 million worth of secondary sales (figure also includes mint sales). The figure places the project as the top-selling NFT collection over the seven-day metrics and third over the past 24 hours, as of the time of this writing, according to DappRadar.

  • Netflix Wipes 4 Years of Gain, down by 70% ATH

Netflix’s share price is having its worst day in approximately 18 years as its share price is down over 38% during the week. Since hitting an All-Time High (ATH) of $700.99 on the 17th of November 2021, just a little over 5 months ago, the share price has been on a down trend, that has seen it lose value of over 68.66%. The decline represents a wipe off of 4 years of gains made since January 2018.

As previously reported by Nairametrics, the reason for this parabolic decline in its share price is as a result of the company announcing it lost approximately 200,000 subscribers in the first quarter of 2022. Netflix has not lost subscribers in a quarter in over a decade.

The company blamed the decline on stiffer competition, inability to expand in some territories due to technological limitations and account sharing. It also blamed inflation and the war in Ukraine as part of the reasons for the loss of its subscribers.

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