Stabilizing the Naira

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The acting central bank governor Folashodun Shonubi, after meeting the President, said yesterday that the Bank is embarking on new measures to stabilize the Naira. He specifically warned speculators, so they don’t lose their monies.

All eyes on him in the coming days and week.

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Markets

• On Monday, the benchmark NGX All-Share Index (ASI) pared 114.88 (-0.18%) points to close at 65,210.49, representing a week loss of 0.19%, 4-week gain of 3.6%, and an overall year-to-date gain of 27.24%. Eterna share price declined 9.9%, followed by Sunu Assurances Nigeria (-9.57%), University Press (-9.24%) and FTN Cocoa Processors (-8.44%).

• Oil prices dipped on Monday as concerns about China's faltering economic recovery and a stronger dollar took the momentum out of seven weeks of gains on tight supply. U.S. West Texas Intermediate crude again slid more than more than US $1 a barrel to the day's low before returning to US $82.42 a barrel, down 76 cents. Brent crude futures were down 67 cents at US $86.46.

• Naira was mix in both the I & E window and on the streets. At the I & E window, Naira depreciated slightly by 0.61%, closing at N744.41 against the US dollar. However, on the streets, it appreciated by 0.53% reaching N935 a dollar.

• U.S. natural gas futures rose on Monday as hotter-than-normal weather kept cooling demand high, with consumption set to rise further into next week. Supply was also seen dropping to 108.6 billion cubic feet per day (bcfd) from 109.2 bcfd in the previous week. Front-month gas futures for September delivery on the New York Mercantile Exchange were up 2.6 cents, or about 1%, to US $2.80 per million British thermal units (mmBtu)

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National Headlines

• Stabilizing the Naira – The acting governor of the Central Bank of Nigeria (CBN), after meeting with the President says they will embark on measures to stabilize the Naira. He warned speculators that the Bank will take measures over the next few days which he did not spell out that he expects will improve the position of the Naira on the streets. As of Monday, the rate at the I&E window stood at N744.41/$ and the street market rate stood at N935/$, this shows a gap of 25.6% or N190.59.

• Fuel imports fell – Fuel imports into Nigeria fell to 106,000 barrels per day (bpd) in July 2023, from the 205,200 barrels per day recorded in May 2023, a near 50% decline in fuel imports. It follows the removal of fuel subsidy by the government on May 29^th . Since then, transports costs have increased by as much as 100% in some instances and raised food prices. The data is provided by S&P global commodity insights. It is consistent with the data from the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) that fuel consumption in Nigeria dropped to 46.38 million litres per day following the removal of the subsidy. Meanwhile, fuel prices are expected to rise further following volatility and the weakening of the Naira. The expectation is that fuel price will reach N700 per litre in the coming weeks based on a Naira to US $ of N900.

Global Headlines

• Argentina is just like Nigeria – Argentina’s central bank devalued its currency, the peso, by 18% and hiked its benchmark interest rate by a whopping 21 percentage points to 118% on Monday following a shock primary election win by far-right libertarian Javier Milei. The moves were a bid by the government to calm markets in the wake of the Argentinian congressman’s surprise victory, which gave him the largest share of votes in the country’s presidential primary election at roughly 30%, far exceeding forecasts. Argentina had been maintaining an unsustainable exchange rate regime before the devaluation.

This Week

• Today Tuesday 15^th August 2023, the Second quarter GDP growth of Japan is expected to be released. Also, the UK Unemployment rate is expected to be published.

• On Wednesday, 17^th August 2023, the U.K Inflation figure for July will be released.