Finance

THIS WEEK: Nigeria’s capital inflow down, foreign trade up in Q1 2022


This week turned out to be quite an active one in the macroeconomic space. Nigeria’s external reserve continued in its downtrend, capital inflow fell to $1.57 billion in Q1 2022

However, Nigeria’s foreign trade rose to N13 trillion in the first quarter of 2022, increasing by 11.1% from N11.7 trillion recorded in the previous quarter and 65.4% higher than the N7.86 trillion recorded in Q1 2021.

Here is a compilation of this week’s notable happenings in the Nigeria macro-economic space, markets, regulators as well as other world economies.

MACROECONOMY

Exchange rate 

  • The exchange rate at the official market recorded a marginal depreciation during the week, falling by 0.06% to close at N419.75/$1 on Friday from N419.5/$1 recorded in the previous week. A total of $1.34 billion was traded in the Investors and Exporters window, which is significantly higher than the $535.94 million that exchanged hands in the previous week. 
  • Similarly at the black market, naira closed at N606/$1 on Friday, 3rd June 2022 compared to N610/$1 recorded in the previous week. This represents a 0.7% appreciation compared to the previous week. 
  • Also, the exchange rate at the peer-to-peer market closed at N604.48/$1, representing a 0.7% appreciation compared to N608.99/$1 recorded as of the previous week.  

External reserve 

  • Nigeria’s external reserve continued in its downtrend as it lost $94.69 million during the week, representing a 0.02% decline from $38.57 billion to stand at $38.48 billion as of Thursday, 3rd June 2022. 
  • The Nigerian reserve level continues to plunge considering the apex bank’s continual intervention in the official I&E window. The levels have remained low despite rising crude oil prices as Nigeria’s production capacity is below the OPEC quota. 

Nigeria’s capital inflow fell to $1.57 billion in Q1 2022 

  • The National Bureau of Statistics (NBS) released the capital importation report for the first quarter of 2022, which showed that Nigeria attracted a total of $1.57 billion in capital inflows in Q1 2022, falling by 28.1% compared to $2.19 billion recorded in the previous quarter.  
  • Compared to the corresponding period of 2021, Nigeria’s capital importation declined by 17.46% from $1.91 billion received in Q1 2021. 
  • The largest amount of capital importation by type was received through Portfolio Investment, which accounted for 60.87% ($957.58 million). This was followed by Other Investment with 29.28% ($460.59 million) and Foreign Direct Investment (FDI) accounted for 9.85% ($154.97 million) of total capital imported in Q1 2022. 

Nigeria’s foreign trade rose to N13 trillion in Q1 2022 

  • Nigeria’s foreign trade rose to N13 trillion in the first quarter of 2022, increasing by 11.1% from N11.7 trillion recorded in the previous quarter and 65.4% higher than the N7.86 trillion recorded in Q1 2021. 
  • According to the report by the NBS, the improvement in Nigeria’s merchandise trade was due to increases in crude oil export receipts in the quarter under review. Specifically, Nigeria’s crude oil earnings rose by 31.66% quarter-on-quarter to N5.62 trillion in Q1 2022. 
  • Consequently, total export earnings improved by 23.13% from N5.77 trillion recorded in Q4 2021 to N7.1 trillion in Q1 2022, as against a 0.67% decline in import bill to N5.9 trillion in the same quarter. This resulted in a N1.19 trillion positive trade balance, the first since Q2 2021. 

REGULATORS

CBN issues final guidelines on Bank Neutral Cash Hubs 

  • The Central Bank of Nigeria (CBN), has issued the final draft of guidelines for setting up Bank Neutral Cash Hubs (BNCHs). This is according to a recently released circular by the Central Bank of Nigeria.  
  • Nairametrics reported when the CBN released an EXPOSURE DRAFT for comments and observations after which the apex bank released the final draft.  
  • Bank Neutral Cash Hubs (BNCH) seeks to reduce costs and improve operational efficiency in Nigeria’s cash management value chain. 

CBN raised the online transfer limit to N25 million and N250million for individuals and companies respectively

  • CBN raises the limit for ‘Highly Secured Online Funds Transfer from 100 million to N250 million for Companies and from 10 – 25 million for individuals.  
  • This is according to a recently released circular by the Central Bank of Nigeria, signed by Musa I. Jimoh, Director, Payments System Management Department.  
  • This reversion would take effect on the operations of the NIBSS Instant Payments System and other Electronic Payment Options with Similar Features in Nigeria.  

Nigerian banks Non-Performing Loans ratio jump to 5.3% in April 2022  

  • The Non-Performing Loans (NPL) ratio of commercial banks in Nigeria jumped to 5.3%  in April 2022 from 4.84 % held in  February 2022. This is according to data from the Central Bank of Nigeria.  
  • The NPL ratio calculates the percentage of bank loans that are either not being serviced effectively or have gone bad entirely. Hence, Apex bank has started that more work needs to be done to reduce NPLs below its prudential limit of 5.0%. 
  • Meanwhile, the Capital Adequacy Ratio, which evaluates a bank’s balance sheet soundness, moderated increased to 14.6% in April 2022 from 14.5% in December 2021. This also shows that CAR is above its prudential limit.  

CBN distributed N1.01 trillion to farmers under the Anchor Borrowers’ Programme (ABP) in May 2022

  • Under the Anchor Borrowers’ Programme (ABP), the Central Bank of Nigeria has distributed a total of N1.01 trillion to over 4.2 million smallholder farmers farming 21 commodities across the country as of May 2022.  
  • The Bank added that Between April and May 2022, the Bank released the sum of N57.91 billion under the Anchor Borrowers’ Programme (ABP) to 185,972 new projects 

MARKETS

Equities 

The Nigerian stock market closed on a bearish note during the week as the all-share index declined by 2.18% from 54,085.3 basis points recorded as of the previous week to close at 52,908.24 basis points on Friday, 3rd May 2022. 

The selloffs recorded in the shares of Conoil, Wema Bank, and Presco weighed on the market as the company stocks dipped by 15.04%, 12.33%, and 10% respectively. 

In the week under review, a total turnover of 28.74 billion shares worth N209.1 billion in 23,688 deals was traded by investors on the floor of the Exchange, in contrast to a total of 1.84 billion shares valued at N27.29 billion that exchanged hands last week in 27,273 deals. 


CRYPTOCURRENCY

Play-and-Earn platform, Kryptomon, raises $10 million despite market turbulence

  • Play-and-Earn platform Kryptomon, a metaverse gaming platform that is described as a living NFT-powered gaming project that combines the unique features of Pokemon, Tamagotchi, and CryptoKitties, has raised $10 million in a private funding round.
  • The funding round was led by NFX with additional backing from PLAYSTUDIOS, Griffin Gaming Partners, Tal Ventures and Vikram Pandit, former CEO of Citigroup.
  • According to the announcement, the funds raised will be used to propel the development of Kryptomon’s living-NFT game, the first-ever in the NFT gaming industry that integrates real-world gaming with Metaverse capabilities.

Kanye West’s Yeezus files for NFT trademarks

  • One of the world’s most renowned rap artists, Kanye West, has filed for 17 trademark applications for his Yeezus brand, which indicates a possible move into the NFT space by the artist who has 75 Grammy nominations and has won the award 24 times.
  • However, the applications, dated May 27, come months after West criticized non-fungible tokens in a now-deleted Instagram post in February.
  • The applications, accessible through the US Patent and Trademark Office, mention “blockchain-based non-fungible collectibles, assets, currencies and tokens” and “online retail store services featuring downloadable movies, videos, television, music, entertainment, digital art.”

Bitcoin miners now selling their holdings as bearish market persists

  • It looks like the bearish market is hitting all sectors of the cryptocurrency space, including those that are charged with the responsibility of validating transactions and maintaining the network integrity of the Bitcoin network.
  • Data from Compass Mining reveals that Bitcoin miners are selling off their mined tokens as the tumbling price of bitcoin erases profit margins for these miners.
  • This comes at a time when capital markets are becoming less friendly with major indexes officially entering a bear market, having lost 20% or more this year.

Japan passes stablecoin bill focused on investor protection

  • Northeast Asian country, Japan, becomes one of the first major economies to introduce a legal framework surrounding stablecoins.
  • This comes at a time when there have been pertinent questions asked about the backings of many of the existing stablecoins, as a result of the fall out of the Terra blockchain’s programmable stablecoin, UST, that lost its peg to the U.S. dollar.
  • Japanese lawmakers passed a bill that clarified the legal status of stablecoins, defining them essentially as digital money. According to the new law, stablecoins must be linked to the yen or another legal tender and guarantee holders the right to redeem them at face value.



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