Stocks Surge As CBN Releases New Forex Rules The Nigeria stock market, yesterday, gained N294 billion in reaction to the decision of the Central Bank of Nigeria, CBN, to allow market forces determine the Naira exchange rate in a new single structured foreign exchange market. CBN Governor, Godwin Emefiele, yesterday, announced the introduction of a new foreign exchange policy, termed the “automatic adjustment mechanism of the exchange rate” in a flexible foreign exchange regime. The new regime is aimed at boosting supply of foreign exchange and reducing the pressure on the Naira.buhari-Naira CBN had been under pressure to devalue the Naira for over a year now, which had been resisted by monetary and fiscal authorities, claiming that past devaluations did not benefit the economy, being import dependent. Instead, the apex bank had adopted a controlled market with pre-determined supply and exchange rate. Announcing the major policy shift, Emefiele said: “The Central Bank of Nigeria has always maintained that it would continue to monitor situations on ground and ensure that the bank’s policies reflect these facts and developments rather than the sentiments of any groups or sectors. “It is in the light of this principle that we now believe that the time is right to restore the automatic adjustment mechanism of the exchange rate with the re-introduction of a flexible inter-bank exchange rate market. “The workings of this market will be consistent with the bank’s objectives of enhancing efficiency and facilitating a liquid and transparent foreign exchange market.” Highlights of the flexible regime The new regime would operate as a single market structure through the inter-bank/autonomous window. The exchange rate would be purely market-driven, using the Thomson-Reuters Order Matching System as well as the Conversational Dealing Book; The CBN would participate in the market through periodic interventions to either buy or sell foreign exchange as the need arises; To improve the dynamics of the market, the apex bank will introduce Foreign Exchange Primary Dealers (FXPD), who would be registered with the CBN to deal directly with the apex bank for large trade sizes on a two-way quotes basis; These primary dealers shall operate with other dealers in the inter-bank market, among other obligations that will be stipulated in the Foreign Exchange Primary Dealers (FXPD) guidelines; There will be no predetermined spread on foreign exchange spot transactions executed through the CBN intervention with primary dealers, while all foreign exchange spot purchased by the authorized dealers are transferable in the inter-bank foreign exchange market; The 41 items classified as “Not Valid for Foreign Exchange” as detailed in a previous CBN circular shall remain inadmissible in the Nigerian foreign exchange market; To enhance liquidity in the market, the CBN may also offer long-tenored foreign exchange Forwards Contract of six to 12 months or any tenor to authorized dealers; Sale of foreign exchange Forwards Contract by authorized dealers to end-users must be trade-backed, with no predetermined spreads; CBN shall introduce non-deliverable over-the-counter (OTC) naira-settled Futures, with daily rates on the CBN-approved FMDQ Trading and Reporting System. This is an entirely new product in the Nigerian foreign exchange market, which would help moderate volatility in the exchange rate by moving non-urgent foreign exchange demand from the Spot to the Futures market; The OTC FX Futures shall be in non-standardized amounts and different fixed tenors, which may be sold on any date, thereby ensuring bespoke maturity dates; Proceeds of foreign investment inflows and international money transfers shall be purchased by authorized dealers at the daily inter-bank rate; and Non-oil exporters are now allowed unfettered access to their foreign exchange proceeds, which shall be sold in the inter-bank market. Emefiele said the primary dealers would be about eight or 10 banks with the capacity to go to the market with as much as $10 million. Timelines Selected foreign exchange primary dealers would be notified by Friday, June 17, 2016. All other non-primary dealers would remain valid and eligible to participate in the market; Inter-bank trading under the new guidelines will begin on Monday, June 20, 2016; and The tenors and rates for the OTC naira-settled FX Futures will be announced on Monday, June 27, 2016. Why CBN introduced new policy Emefiele said CBN had to take the measures as the nation “witnessed a significant decline in our foreign exchange reserves from about US$42.8 billion in January 2014 to about US$26.7 billion as of June 10, 2016. “In terms of inflows, the bank’s foreign exchange earnings have fallen from about US$3.2 billion monthly to current levels of below a billion dollars per month.” He blamed the poor foreign exchange receipts on the over 70 per cent drop in the price of crude oil, which contributes the largest share of our foreign exchange reserves; Global growth slowdown and geopolitical tensions along critical trading routes in the world; and normalization of monetary policy by the United States’ Federal Reserve. According to Emefiele, “the interplay between reduced foreign exchange supply and rising demand accounted for a substantial reduction in our foreign exchange reserves.” He, however, stated that “our reserves, despite having fallen, is still robust and is able to cover about five months of Nigeria’s imports as against the international benchmark of three months.” He said his team at the CBN would ensure transparency in the new foreign exchange market regime and that there would be no place for speculators. His words: “Let me note that the Central Bank is strongly determined to make this market as transparent, liquid, and efficient as possible. Therefore, we would neither tolerate unscrupulous behaviour nor hesitate to bring serious sanctions on offenders. “The CBN expects all authorized dealers, particularly, to display the highest level of professionalism. We expect them to understand the spirit and letter of this transition to a market based system. The CBN will not allow the system to be undermined by speculators and rent-seekers. “Permit me to emphasize that any attempt to breach any aspect of this new framework will be heavily sanctioned by the CBN and this may, indeed, result in the suspension or withdrawal of the foreign exchange dealing licence of an offending authorized dealer.” Implications of the new policy Most questions from the public, yesterday, focused on what the role of the CBN would be in determining the exchange rate and what the rate will be like under the new regime. Emefiele said the price will be known when the market opens officially on Monday. He also said the supply side would be market determined, while the apex bank would intervene with supply from time to time to influence market trends in the desired direction. Emefiele’s pronouncements also indicated that the end of the black market is near as buying and selling of foreign exchange is now open to anyone at any bank or with authorized dealers at a price that is market determined. Consequently, black market rates would drop if the CBN announces a float as individuals, investors and businesses, who had refused to import their dollars into Nigeria, can now supply their forex at a price they believe is market determined. The drop in exchange rate may take some time at the worst but the market will be flooded with liquidity in due course. But analysts anticipate some volatility in exchange rate in the short run as the market takes shape and tracks how liquid the market will be. However, the spread rate between the interbank market and the parallel market is expected to narrow in a short while. CBN is also expected to relax the controls currently in place such as limits to withdrawals of dollars from domiciliary accounts or spending limits when abroad as Emefiele stated that exporters were immediately granted unfettered access to use their foreign exchange in their domiciliary accounts. Stock market reacts positively, gains N294bn Values of shares on the Nigerian Stock Exchange, NSE, rose sharply by N294 billion as investors reacted positively to details of the new foreign exchange regime announced by the CBN. “Nigerian equities rebounded from a three-day losing streak to close at its highest point in June 2016 as the CBN announced a new foreign exchange policy guideline with improved flexibility,” said Afrinvest Plc, a Lagos-based investment and research firm. In its review of activities in the stock market, yesterday, the company stated: ”The market initially opened on a high note as investors anticipated the CBN’s guideline but dipped at mid-day before closing bullish subsequent to the press briefing of the CBN Governor. “The benchmark All Shares Index (ASI) surged 3.2 per cent to close at 27,891.96 points, bringing MTD return to 0.8 per cent and paring YTD losses to -2.6 per cent. Market capitalization added N294.6 billion to N9.6 trillion while market activity was equally strong with volume and value traded advancing 244.7 per cent and 43.4 percent to 588.4 million units and N3.5 billion, respectively. “All sector indices closed positive, yesterday, in line with the strong appetite witnessed across board. The Banking Index led advancers with a 4.0 per cent appreciation consequent on buy sentiment on Tier-1 lenders —Guaranty Trust Bank, GTBank (+7.8 per cent), Zenith Bank (+5.4 per cent ) and UBA (+6.5 per cent ) — while the Industrial Goods index (+2.8 per cent) followed at a distance with Dangote Cement (+5.0 per cent), the major mover of the index. “The Consumer Goods index gained 2.4 per cent as investors positioned in blue-chip brewers— Nigerian Breweries (+4.5 per cent) and Guinness (+5.0 per cent ). The Oil & Gas index rallied 1.1 per cent on the back of renewed appetite towards Oando (+5.0 per cent) while the Insurance Index recorded the smallest gain (+0.6 per cent ); NEM Insurance (+9.5 per cent ) and AIICO Insurance (+3.9 per cent) drove the index.” Naira stable at N369/$ in parallel market However, the naira remained stable at N369 per dollar at the parallel market as operators adopted a “wait and see” attitude in anticipation of the impact of the new foreign exchange regime. Morgan Stanley isolates Nigeria Meanwhile, just as Emefiele was announcing the new foreign exchange regime, which came close to what foreign investors and international financial community have been clamouring for, Morgan Stanley Capital Index, MSCI, United State’s based multinational investment banker, and a leading provider of global equity indexes, announced that the MSCI Nigeria Index may be removed from the MSCI Frontier Markets Index and reclassified as a stand-alone market due to capital mobility issues. Due to the urgent nature of this investability issue in the MSCI Nigeria Index, MSCI will announce its decision on the proposal to remove the MSCI Nigeria Index from the MSCI Frontier Markets Index by the end of September 2016. It was not clear if the MSCI executives were informed of the latest development in Nigeria before their decision. As at last year, a leading global investment bank, JP Morgan, had suspended Nigeria from its market index due to the foreign exchange regime it felt was anti-market. MSCI was to follow on the same action earlier this year but moderated actions until yesterday. Financial institutions, economists react On the heels of the release of the long-awaited flexible foreign exchange policy, some financial institutions and economists have expressed satisfaction with the policy, saying it would eliminate uncertainty and boost inflow of foreign exchange from foreign investors and exporters. “The immediate effect is that uncertainty will disappear,” said Mr. Bismarck Rewane, Managing Director/Chief Executive, Financial Derivatives Limited. According to him, “the policy is good, the situation is now much better. But people have to first understand it.” According to Mr. Wale Abe, former Executive Secretary, Financial Market Dealers Quote (FMDQ), “the implication is that the exchange rate will now be market determined. It means no more foreign exchange subsidy for anybody, and this will lead to efficient allocation of foreign exchange.” A former CBN Director, who spoke on condition of anonymity, also commended the new policy, saying: “It is a good policy. I hope it will be effectively implemented as specified. The immediate impact is that it would encourage inflow of autonomous foreign exchange, reduce sharp practices by exporters as they now have unfettered access to the interbank market.” Financial analysts at Greenwich Trust Limited, a Lagos-based investment house, stated: “CBN has taken another step in enhancing its dovish stance on monetary policy in order to increase capital flows and drive economic growth. By adopting the free float and including currency forwards and futures, the CBN has introduced a deep and flexible market structure. “We recall that the main reason behind Nigeria’s expulsion from the J.P. Morgan Emerging Markets Bond Index was the lack of a liquid, two-way FX market. We anticipate a significant rally in both equity and fixed income markets as investors take positions in fundamentally sound companies trading at depressed prices. We expect the Naira to appreciate in the BDC market for the rest of this week. “We also expect the CBN to adjust the Net Open Position for Deposit Money Banks (DMBs) to ensure banks have sufficient liquidity to participate in the market. “In the short-term, despite Emefiele’s caution, we foresee a depreciation when the inter-bank market opens on Monday as investors flood in to exercise pent up demand. “However, we see an appreciation in the long term as forex supply improves and market participants take advantage of an efficient, broader and deeper market via trades in derivatives (forward and future contracts). “The success of this bold monetary policy decision will be hinged on the fiscal authority’s ability to negotiate a cease-fire with the Niger Delta militant groups to enable optimal crude production and the resultant accretion in forex revenues.” According to Mustapha Suberu, Research analyst at Eczellon Capital Limited, a Lagos-based investment banking firm, the market would react positively in the days ahead. He said: “The news is positive for the capital market. The equity and bonds market will likely trade higher in the coming days and week as the market expects re-entry of foreign portfolio investors, that had hitherto left due to currency restrictions.” Speaking in the same vein, Mr. Johnson Chukwu, Managing Director/CEO, Cowry Asset Management Limited, said the news was cheery to the market, saying the rally witnessed in the market, yesterday, was a result of the clarity on the forex guidelines. He stated that the FX policy would partly contribute in boosting the attractiveness of the market in the medium term. “For now, domestic investors are positioning in anticipation of foreign investors, who had deserted the market, would come back. That is why you see the rebound in the market,” Chukwu said. Also, in their daily market update, Cowry Asset Management Limited applauded the new Fx policy, saying the policy was complementary to the positive developments in the external sectors – the increase in crude oil prices. These policies are bound to reduce uncertainty in the markets and could help in reducing pressure on the foreign exchange reserve. Analysts at Cowry observed that by allowing market forces to determine the exchange rate and adopting single market structure for foreign exchange supply to the market, the capital market will henceforth be attractive to investors as their earlier fears of foreign exchange illiquid/scarcity and likely devaluation would have been mitigated. According to them, “the introduction of derivatives such as customised forward contracts should help investors further hedge against foreign exchange volatility while simultaneously being a major step towards developing this important alternative asset market. “Furthermore, forex primary dealers will be registered to deal directly with the CBN for large ticket transactions which could favour large manufacturers as well as foreign direct investors. “The removal of controls on non-oil exporters’ proceeds and the allowed participation of non-oil exporters i S

The Nigeria stock market, yesterday, gained N294 billion in reaction to the decision of the Central Bank of Nigeria, CBN, to allow market forces determine the Naira exchange rate in a new single structured foreign exchange market. CBN Governor, Godwin Emefiele, yesterday, announced the introduction of a new foreign exchange policy, termed the “automatic adjustment mechanism of the exchange rate” in a flexible foreign exchange regime. The new regime is aimed at boosting supply of foreign exchange and reducing the pressure on the Naira.buhari-Naira CBN had been under pressure to devalue the Naira for over a year now, which had been resisted by monetary and fiscal authorities, claiming that past devaluations did not benefit the economy, being import dependent. Instead, the apex bank had adopted a controlled market with pre-determined supply and exchange rate. Announcing the major policy shift, Emefiele said: “The Central Bank of Nigeria has always maintained that it would continue to monitor situations on ground and ensure that the bank’s policies reflect these facts and developments rather than the sentiments of any groups or sectors. “It is in the light of this principle that we now believe that the time is right to restore the automatic adjustment mechanism of the exchange rate with the re-introduction of a flexible inter-bank exchange rate market. “The workings of this market will be consistent with the bank’s objectives of enhancing efficiency and facilitating a liquid and transparent foreign exchange market.” Highlights of the flexible regime The new regime would operate as a single market structure through the inter-bank/autonomous window. The exchange rate would be purely market-driven, using the Thomson-Reuters Order Matching System as well as the Conversational Dealing Book; The CBN would participate in the market through periodic interventions to either buy or sell foreign exchange as the need arises; To improve the dynamics of the market, the apex bank will introduce Foreign Exchange Primary Dealers (FXPD), who would be registered with the CBN to deal directly with the apex bank for large trade sizes on a two-way quotes basis; These primary dealers shall operate with other dealers in the inter-bank market, among other obligations that will be stipulated in the Foreign Exchange Primary Dealers (FXPD) guidelines; There will be no predetermined spread on foreign exchange spot transactions executed through the CBN intervention with primary dealers, while all foreign exchange spot purchased by the authorized dealers are transferable in the inter-bank foreign exchange market; The 41 items classified as “Not Valid for Foreign Exchange” as detailed in a previous CBN circular shall remain inadmissible in the Nigerian foreign exchange market; To enhance liquidity in the market, the CBN may also offer long-tenored foreign exchange Forwards Contract of six to 12 months or any tenor to authorized dealers; Sale of foreign exchange Forwards Contract by authorized dealers to end-users must be trade-backed, with no predetermined spreads; CBN shall introduce non-deliverable over-the-counter (OTC) naira-settled Futures, with daily rates on the CBN-approved FMDQ Trading and Reporting System. This is an entirely new product in the Nigerian foreign exchange market, which would help moderate volatility in the exchange rate by moving non-urgent foreign exchange demand from the Spot to the Futures market; The OTC FX Futures shall be in non-standardized amounts and different fixed tenors, which may be sold on any date, thereby ensuring bespoke maturity dates; Proceeds of foreign investment inflows and international money transfers shall be purchased by authorized dealers at the daily inter-bank rate; and Non-oil exporters are now allowed unfettered access to their foreign exchange proceeds, which shall be sold in the inter-bank market. Emefiele said the primary dealers would be about eight or 10 banks with the capacity to go to the market with as much as $10 million. Timelines Selected foreign exchange primary dealers would be notified by Friday, June 17, 2016. All other non-primary dealers would remain valid and eligible to participate in the market; Inter-bank trading under the new guidelines will begin on Monday, June 20, 2016; and The tenors and rates for the OTC naira-settled FX Futures will be announced on Monday, June 27, 2016. Why CBN introduced new policy Emefiele said CBN had to take the measures as the nation “witnessed a significant decline in our foreign exchange reserves from about US$42.8 billion in January 2014 to about US$26.7 billion as of June 10, 2016. “In terms of inflows, the bank’s foreign exchange earnings have fallen from about US$3.2 billion monthly to current levels of below a billion dollars per month.” He blamed the poor foreign exchange receipts on the over 70 per cent drop in the price of crude oil, which contributes the largest share of our foreign exchange reserves; Global growth slowdown and geopolitical tensions along critical trading routes in the world; and normalization of monetary policy by the United States’ Federal Reserve. According to Emefiele, “the interplay between reduced foreign exchange supply and rising demand accounted for a substantial reduction in our foreign exchange reserves.” He, however, stated that “our reserves, despite having fallen, is still robust and is able to cover about five months of Nigeria’s imports as against the international benchmark of three months.” He said his team at the CBN would ensure transparency in the new foreign exchange market regime and that there would be no place for speculators. His words: “Let me note that the Central Bank is strongly determined to make this market as transparent, liquid, and efficient as possible. Therefore, we would neither tolerate unscrupulous behaviour nor hesitate to bring serious sanctions on offenders. “The CBN expects all authorized dealers, particularly, to display the highest level of professionalism. We expect them to understand the spirit and letter of this transition to a market based system. The CBN will not allow the system to be undermined by speculators and rent-seekers. “Permit me to emphasize that any attempt to breach any aspect of this new framework will be heavily sanctioned by the CBN and this may, indeed, result in the suspension or withdrawal of the foreign exchange dealing licence of an offending authorized dealer.” Implications of the new policy Most questions from the public, yesterday, focused on what the role of the CBN would be in determining the exchange rate and what the rate will be like under the new regime. Emefiele said the price will be known when the market opens officially on Monday. He also said the supply side would be market determined, while the apex bank would intervene with supply from time to time to influence market trends in the desired direction. Emefiele’s pronouncements also indicated that the end of the black market is near as buying and selling of foreign exchange is now open to anyone at any bank or with authorized dealers at a price that is market determined. Consequently, black market rates would drop if the CBN announces a float as individuals, investors and businesses, who had refused to import their dollars into Nigeria, can now supply their forex at a price they believe is market determined. The drop in exchange rate may take some time at the worst but the market will be flooded with liquidity in due course. But analysts anticipate some volatility in exchange rate in the short run as the market takes shape and tracks how liquid the market will be. However, the spread rate between the interbank market and the parallel market is expected to narrow in a short while. CBN is also expected to relax the controls currently in place such as limits to withdrawals of dollars from domiciliary accounts or spending limits when abroad as Emefiele stated that exporters were immediately granted unfettered access to use their foreign exchange in their domiciliary accounts. Stock market reacts positively, gains N294bn Values of shares on the Nigerian Stock Exchange, NSE, rose sharply by N294 billion as investors reacted positively to details of the new foreign exchange regime announced by the CBN. “Nigerian equities rebounded from a three-day losing streak to close at its highest point in June 2016 as the CBN announced a new foreign exchange policy guideline with improved flexibility,” said Afrinvest Plc, a Lagos-based investment and research firm. In its review of activities in the stock market, yesterday, the company stated: ”The market initially opened on a high note as investors anticipated the CBN’s guideline but dipped at mid-day before closing bullish subsequent to the press briefing of the CBN Governor. “The benchmark All Shares Index (ASI) surged 3.2 per cent to close at 27,891.96 points, bringing MTD return to 0.8 per cent and paring YTD losses to -2.6 per cent. Market capitalization added N294.6 billion to N9.6 trillion while market activity was equally strong with volume and value traded advancing 244.7 per cent and 43.4 percent to 588.4 million units and N3.5 billion, respectively. “All sector indices closed positive, yesterday, in line with the strong appetite witnessed across board. The Banking Index led advancers with a 4.0 per cent appreciation consequent on buy sentiment on Tier-1 lenders —Guaranty Trust Bank, GTBank (+7.8 per cent), Zenith Bank (+5.4 per cent ) and UBA (+6.5 per cent ) — while the Industrial Goods index (+2.8 per cent) followed at a distance with Dangote Cement (+5.0 per cent), the major mover of the index. “The Consumer Goods index gained 2.4 per cent as investors positioned in blue-chip brewers— Nigerian Breweries (+4.5 per cent) and Guinness (+5.0 per cent ). The Oil & Gas index rallied 1.1 per cent on the back of renewed appetite towards Oando (+5.0 per cent) while the Insurance Index recorded the smallest gain (+0.6 per cent ); NEM Insurance (+9.5 per cent ) and AIICO Insurance (+3.9 per cent) drove the index.” Naira stable at N369/$ in parallel market However, the naira remained stable at N369 per dollar at the parallel market as operators adopted a “wait and see” attitude in anticipation of the impact of the new foreign exchange regime. Morgan Stanley isolates Nigeria Meanwhile, just as Emefiele was announcing the new foreign exchange regime, which came close to what foreign investors and international financial community have been clamouring for, Morgan Stanley Capital Index, MSCI, United State’s based multinational investment banker, and a leading provider of global equity indexes, announced that the MSCI Nigeria Index may be removed from the MSCI Frontier Markets Index and reclassified as a stand-alone market due to capital mobility issues. Due to the urgent nature of this investability issue in the MSCI Nigeria Index, MSCI will announce its decision on the proposal to remove the MSCI Nigeria Index from the MSCI Frontier Markets Index by the end of September 2016. It was not clear if the MSCI executives were informed of the latest development in Nigeria before their decision. As at last year, a leading global investment bank, JP Morgan, had suspended Nigeria from its market index due to the foreign exchange regime it felt was anti-market. MSCI was to follow on the same action earlier this year but moderated actions until yesterday. Financial institutions, economists react On the heels of the release of the long-awaited flexible foreign exchange policy, some financial institutions and economists have expressed satisfaction with the policy, saying it would eliminate uncertainty and boost inflow of foreign exchange from foreign investors and exporters. “The immediate effect is that uncertainty will disappear,” said Mr. Bismarck Rewane, Managing Director/Chief Executive, Financial Derivatives Limited. According to him, “the policy is good, the situation is now much better. But people have to first understand it.” According to Mr. Wale Abe, former Executive Secretary, Financial Market Dealers Quote (FMDQ), “the implication is that the exchange rate will now be market determined. It means no more foreign exchange subsidy for anybody, and this will lead to efficient allocation of foreign exchange.” A former CBN Director, who spoke on condition of anonymity, also commended the new policy, saying: “It is a good policy. I hope it will be effectively implemented as specified. The immediate impact is that it would encourage inflow of autonomous foreign exchange, reduce sharp practices by exporters as they now have unfettered access to the interbank market.” Financial analysts at Greenwich Trust Limited, a Lagos-based investment house, stated: “CBN has taken another step in enhancing its dovish stance on monetary policy in order to increase capital flows and drive economic growth. By adopting the free float and including currency forwards and futures, the CBN has introduced a deep and flexible market structure. “We recall that the main reason behind Nigeria’s expulsion from the J.P. Morgan Emerging Markets Bond Index was the lack of a liquid, two-way FX market. We anticipate a significant rally in both equity and fixed income markets as investors take positions in fundamentally sound companies trading at depressed prices. We expect the Naira to appreciate in the BDC market for the rest of this week. “We also expect the CBN to adjust the Net Open Position for Deposit Money Banks (DMBs) to ensure banks have sufficient liquidity to participate in the market. “In the short-term, despite Emefiele’s caution, we foresee a depreciation when the inter-bank market opens on Monday as investors flood in to exercise pent up demand. “However, we see an appreciation in the long term as forex supply improves and market participants take advantage of an efficient, broader and deeper market via trades in derivatives (forward and future contracts). “The success of this bold monetary policy decision will be hinged on the fiscal authority’s ability to negotiate a cease-fire with the Niger Delta militant groups to enable optimal crude production and the resultant accretion in forex revenues.” According to Mustapha Suberu, Research analyst at Eczellon Capital Limited, a Lagos-based investment banking firm, the market would react positively in the days ahead. He said: “The news is positive for the capital market. The equity and bonds market will likely trade higher in the coming days and week as the market expects re-entry of foreign portfolio investors, that had hitherto left due to currency restrictions.” Speaking in the same vein, Mr. Johnson Chukwu, Managing Director/CEO, Cowry Asset Management Limited, said the news was cheery to the market, saying the rally witnessed in the market, yesterday, was a result of the clarity on the forex guidelines. He stated that the FX policy would partly contribute in boosting the attractiveness of the market in the medium term. “For now, domestic investors are positioning in anticipation of foreign investors, who had deserted the market, would come back. That is why you see the rebound in the market,” Chukwu said. Also, in their daily market update, Cowry Asset Management Limited applauded the new Fx policy, saying the policy was complementary to the positive developments in the external sectors – the increase in crude oil prices. These policies are bound to reduce uncertainty in the markets and could help in reducing pressure on the foreign exchange reserve. Analysts at Cowry observed that by allowing market forces to determine the exchange rate and adopting single market structure for foreign exchange supply to the market, the capital market will henceforth be attractive to investors as their earlier fears of foreign exchange illiquid/scarcity and likely devaluation would have been mitigated. According to them, “the introduction of derivatives such as customised forward contracts should help investors further hedge against foreign exchange volatility while simultaneously being a major step towards developing this important alternative asset market. “Furthermore, forex primary dealers will be registered to deal directly with the CBN for large ticket transactions which could favour large manufacturers as well as foreign direct investors. “The removal of controls on non-oil exporters’ proceeds and the allowed participation of non-oil exporters in the interbank market should indirectly help spur activity of outbound transactions, thereby increasing economic output.” Source: Vanguard.

Why Biko's Black Consciousness Philosophy Resonates With Youth Today

Peter Gabriel’s song characterising the influence of Steve Biko is as apt today as it was in the 1980s: You can blow out a candle but you can’t blow out a fire. Once the flames begin to catch the wind will blow it higher. The 38th anniversary of Biko’s death this month comes in the wake of high-pitched invocation in South Africa of the Black Consciousness philosophy he espoused. Interestingly, the philosophy appears to have gained traction largely among the country’s black youth born after the end of apartheid in 1994. The appeal of Black Consciousness among the so-called “born-frees” is reminiscent of the way it influenced the generation that took part in the liberation struggle. Is this a coincidence of history or a confluence of historical verities? Black Consciousness is a transcendence that connects generations, which in Frantz Fanon’s watchwords in The Wretched of the Earth: Each generation must, out of relative obscurity, discover its mission, fulfil it or betray it.

Born-frees and struggle generation Political scientist Robert Mattes describes South Africa’s freedom struggle generation as that which, through the Soweto uprisings, brought to “an abrupt end in 1976, white confidence and African quiescence”. This is the generation of those who turned 16 between 1976 and 1996. It experienced the wrath of apartheid. The first inclusive vote in 1994 marked the end of, according to Mattes, “a long trauma of protest, struggle and violence”. As Mattes further explains, the born-frees refer to those who, starting in 1997: … move through the ages of 16, 17 and 18 and enter the political arena with little if any first-hand experience of the trauma that came before. Some characterise born-frees as who were born in 1994 and voted for the first time in the 2014 general elections. This discussion subscribes to the latter characterisation. The born-frees are not a homogenous generation. There are who that are at the universities. Others, because of their socioeconomic circumstances, loiter in the streets. The political generation’s theorists are unanimous in their assertions that the born-frees are different from the struggle generation in many ways. As Mattes explains, the born frees are “more modern, with higher levels of education”, urbanised and “cosmopolitan in their outlook” than the struggle generation. A significant part of the struggle generation’s activism was inspired by Biko’s Black Consciousness philosophy from the late 1960s. The philosophy spawned radicalism characterised by confrontation with the apartheid machinery. The epochal June 16, 1976 students uprisings are a case in point. The students' revolt breathed new life into the moribund struggle for liberation. Crowds pay tribute to anti-Apartheid hero Steve Biko as former President Nelson Mandela unveils a statue of him in 1997. Reuters But why are the born frees increasingly attracted to Biko’s Black Consciousness philosophy in post-apartheid South Africa? Why are they being radicalised when they should be enjoying the fruits of democracy brought by the struggles of the previous generations? Long-lasting legacy of influence To understand the reason for the growing attraction to Biko’s views and their continued relevance, we should ask: did black people attain, in Biko’s words, their “envisioned self which is a free self” in 1994 and “rid themselves of the shackles that bind them to perpetual servitude”? The born frees increasingly think not – especially those in the lowest strata of society, unable to afford a tertiary education, facing a bleak future and feeling alienated. They question the very concept of freedom and being born free as an oxymoron. These concepts have failed to instil a sense of pride in their blackness. Officialdom’s response is to spew statistics that seemingly prove performance by the state, largely in dispensing the largesse. In many ways this trivialises the complexity of the post-apartheid society, following many years of apartheid colonialism. Various instances of making blacks feel inferior challenge the state performance narrative as, in the words of critical theorist Donaldo Macedo, “the pedagogy of big lies”. Theologian Ndikho Mtshiselwa argues that the fundamentals of the apartheid colonial social order are still in place, with the democratic regime unwittingly administering them, instead of changing or providing leadership in their destruction. This is the irony of South Africa’s transition from apartheid colonialism, which gave the colonial matrices of power the space to, in decoloniality scholar Sabelo Ndlovu-Gatsheni’s words: … continue to exist in the minds, lives, language, dreams, imaginations and epistemologies of modern subjects. As long as this situation exists, Biko’s philosophy of black pride continues to be relevant. As Biko said: It seeks to infuse the black community with a new-found pride in themselves, their efforts, their value systems, their culture, their religion and their outlook to life. A student beats the statue of Cecil John Rhodes with a belt as it is removed from the University of Cape Town in April 9. Reuters/Mike Hutchings TPX Two decades into South Africa’s democracy, the rise of largely born-free movements such as #RhodesMustFall and Open Stellenbosch, which transcend party-political affiliations, expose the limitations of the transitional arrangements from which the post-apartheid state was constructed. In ways reminiscent of Biko’s Black Consciousness movement, these challenge the colonial matrices of power which eluded the making of the post-apartheid state. The matrices foster institutional racism based on Hegelianism - a body of thought that characterises the cognitive faculty of Africans as, in Senegalese philosopher Souleymane Diagne’s words in The Meaning of Timbuktu, the “other reason and philosophical spirit” is bereft of the “capacity to think and live by a consistent system of sound principles”. This is what students at the universities of Cape Town and Stellenbosch are fighting against. Their struggle seeks to restore and assert black pride – the essence of Biko’s philosophy of Black Consciousness. The same spirit exists at the University of the Witwatersrand, where Western epistemology is increasingly being challenged in the debate on curricula transformation. The born-frees are grappling with the question of the meaning of freedom in post-apartheid South Africa. They seek an antidote to their reality wherein blackness continues to be mocked and marginalised. Their reality is one in which language policy is overtly used to limit the number of black students at historically white universities. They also have to contend with situations whereby white students enjoy privileged status under the guise of dual language instruction to perpetuate the falsehood of separate but equal. This much is evident in the accounts of 32 students at the University of Stellenbosch in the online documentary #Luister.“Luister” is Afrikaans for listen.

Why Weight Loss Won't Stick

Losing weight should be viewed as a drastic life change, akin to getting divorced or having a child, says author of the 'Biggest Loser' research Armando Gonzalez. Photo: Stocksy When Anne Miranda goes shopping for new clothes, she has to remind herself not to reach for a size 16. Now a slim size 6 (Australian size 10), Miranda said she still sees herself "as a fat person" despite losing 34 kilograms three years ago. Adjusting to her new figure has been difficult at times, she said. So has keeping off the weight.

"It was like Christmas every morning, putting on clothes and having them fit or even be too big," she said of the period following her drop in weight. "I don't want to go back to where I was." This week, Miranda, 57, travelled from her California home to Sacramento to listen to local therapist Armando Gonzalez give a talk about the psychological impact of drastic weight loss. Gonzalez, who offers weight-loss counselling under the name Dr. Mondo, spoke after the release of new research about NBC reality show "The Biggest Loser" in May revealing that the majority of contestants who shed serious pounds during the program gained most or all of it back after returning home. A New York Times article on the finding has caused outcry among viewers, leaving many weight loss hopefuls to wonder if they're fighting a losing battle. Gonzalez was not part of the recent study, but he conducted his own research on "Biggest Loser" contestants while writing his graduate dissertation in 2009. He conducted interviews with "Biggest Loser" participants and found that about 50 percent of people kept the weight off, while the other 50 percent gain it back. While the new study focuses on the physiological factors that follow drastic weight loss and make maintenance difficult, such as sluggish metabolisms and low levels of leptin (a hormone that makes people feel full), Gonzalez's dissertation and his work since have revolved around the psychological struggles of people who experience the "yo-yo effect" of weight cycling. A report this week from the American Medical Association found that 38 percent of American adults were obese as of 2014, up from 34 percent in 2006. "Of course we're struggling to maintain our weight, because we're only treating a symptom of this experience," Gonzalez said. "Teaching someone how to eat and teaching them how to exercise, the calories in/calories out equation, don't get me wrong - that matters. ... But in order to keep the weight off for good, you've got to get to the root of your struggle with food." The current weight-loss conversation in America is too much about self-control and not enough about motivation, he said. While someone might be able to train themselves to cut out junk food to reach an end goal, those habits won't stick once that goal is achieved unless they make a real change to the way they view that particular vice, he said. Gonzalez speaks often about his own weight-loss journey and how he has historically turned to food in times of stress and loneliness. After years of being the "funny fat guy," he became determined to get in shape but constantly battled weight fluctuation. He gained and lost 34 to 45 kilograms more than a half a dozen times during the course of a decade, he said, before getting to the mental root of his problem. "It's not just because I like cheeseburgers," he said. "There's a deeper relationship that I have cultivated over time with that food, and understanding that is going to be the key to making different choices, and the key to me finding self-care in new areas separate from food." In addition to his private therapy practice, Gonzalez offers a self-designed online program called Roadmap to Weight Loss, which breaks the weight loss process down into eight stages. The program's eight modules guide clients through each step of weight loss, from finding an "anchor for change" or motivation to get healthy, to "rewriting your story" or coming to terms with a new identity after the weight drops. Gonzalez said bringing psychological support to organisations that help people lose weight is one of his main goals going forward. Too often, he said, trainers know how to help clients shed kilograms but are not equipped to prepare them emotionally for what happens next. Losing weight should be viewed as a drastic life change, akin to getting divorced or having a child, Gonzalez said. He found in his "Biggest Loser" interviews that people who lose large amounts of weight in a short period experience a lot of stress around their new identities. They might start receiving attention from potential romantic interests or be treated differently by their partners or even strangers on the street, he said. All of those changes, if not handled with care, can cause people to revert to their old habits as a way of coping. "We have confetti and streamers, like on 'The Biggest Loser,' come down from the ceiling when you lose weight and we think, OK, great, see you later," he said. "But the reality is there's more than meets the eye from that transition. And there's a problem with us not viewing weight loss as a life transition."

Nigerians Await Return Of Buhari Today

President Muhammadu Buhari is expected back to Nigeria today from London after a 10-day trip for medical treatment.

According to the Presidency, Buhari would during the vacation in the United Kingdom, see an Ear, Nose and Throat specialist for a persistent ear infection, which elapsed yesterday, Wednesday. An insider hinted Punch that arrangements had been put in place to receive the President, who is due back in the country on Thursday. “He is expected back on Thursday (today). We are in touch with him. As of today (Wednesday), we have not been told that there is any change in arrangement,” the source said.

Makarfi, Sheriff Supporters Invade Wadata Plaza

Supporters of Senator Ahmed Makarfi and Senator Ali Modu Sheriff, yesterday, stormed the national secretariat of Peoples Democratic Party, PDP, in solidarity with their candidates, who are both laying claims to the leadership of the party. While the national convention of PDP sacked Senator Sheriff as chairman of the party and appointed a seven-man committee, headed by Senator Ahmed Makarfi, Sheriff has insisted that he remains the authentic chairman of the party. Photos of the National Headquarters of the PDP Sealed up at the Wadata Plaza, Wide Zone 5, Abuja. Photos by Abayomi Adeshida 22/05/2016File: National Headquarters of the PDP Sealed up at the Wadata Plaza, Wide Zone 5, Abuja. Photos by Abayomi Adeshida 22/05/2016 In a dramatic

fashion, he forcibly took over the secretariat of the party, Monday, which had been under the leadership of Senator Ahmed Makarfi, who took over the affairs of the party about two weeks ago. Meanwhile, there appears to be no end to the leadership crisis buffeting the party, as the leader of a group called PDP Youths Rescue Group, Aderemi Olusegun, yesterday, declared himself the new Acting National Chairman of the party. Speaking at the entrance to the PDP secretariat, while the protesters held sway, Mr. Aderemi said he was taking over because the elders of the party have failed. Aderemi said: “In view of all that have been happening in this party, I, hereby, declare myself as Acting Chairman of PDP.” It would be recalled that the PDP youths had issued a seven-day ultimatum to leaders of the party to resolve the crisis over the leadership or they would take over. Protesters take turns On the protests, supporters of Senator Makarfi arrived at the party’s secretariat as early as 8:27a.m., defying the early morning rain, to demonstrate their support for him. They came with placards bearing inscriptions such as “Ali Modu Sheriff is an agent of APC,” “Ali Modu Sheriff, please, go back to your APC,” “We will never allow Sheriff to destroy our great party,” “It’s not by force to lead, we don’t want you,” amongst others. The National President of PDP National Rebirth Group, Mr. Edele Franklyne, who led the supporters, said Sheriff was alien to PDP and should not be allowed to ‘destroy’ it. As the protest was unfolding, Professor Wale Oladipo, who was Secretary of the party under the dissolved NWC, drove to the gate of the party. Though some of the protesters attempted to stop him from driving in, policemen weighed-in to allow him in. Shortly after the pro-Makarfi protesters departed, another set of protesters, this time in favour of Senator Ali Modu Sheriff, arrived and barricaded the entrance to the secretariat. The protesters, who also came with banners and placards with inscriptions such as “Ali Modu Sheriff carry go,” “PDP governors respect court orders,” “Nyesom Wike stop causing KATA KATA in PDP,” held sway at the secretariat for a while. The leader of the new group of protesters, who gave his name simply as Solomon, said the battle for the leadership of the party was not only to save PDP, but to save the entire country. However, shortly after they left, the pro-Makarfi group re-organised, returned to the Wadata Plaza secretariat, protesting. Similarly, another group of protesters in favour of Makarfi again arrived by 11:56a.m. with leaves in their hands, singing, dancing and chanting: “Sheriff must go.” At about 5:27p.m., supporters of Sheriff returned, broke the gate and entered the presmises. Oladipo, Adeyanju escape mob action As the protests unfolded, former PDP National Secretary, Professor Wale Oladipo, and National Auditor, Adewole Adeyanju, who had earlier been allowed to enter the secretariat by the protesters, were smuggled out of the secretariat. Some protesters had suggested that the two former members of the party’s National Working Committee be dealt with for collaborating with Sheriff to destroy the party, while others pleaded that they should be allowed to go on the condition that they would not come close to the secretariat in future. Finally, some security men attached to the secretariat resorted to begging the youths to allow Oladipo and Adeyanju to leave peacefully, and eventually smuggled them out. Source: Vanguard.

Stocks Surge As CBN Releases New Forex Rules The Nigeria stock market, yesterday, gained N294 billion in reaction to the decision of the Central Bank of Nigeria, CBN, to allow market forces determine the Naira exchange rate in a new single structured foreign exchange market. CBN Governor, Godwin Emefiele, yesterday, announced the introduction of a new foreign exchange policy, termed the “automatic adjustment mechanism of the exchange rate” in a flexible foreign exchange regime. The new regime is aimed at boosting supply of foreign exchange and reducing the pressure on the Naira.buhari-Naira CBN had been under pressure to devalue the Naira for over a year now, which had been resisted by monetary and fiscal authorities, claiming that past devaluations did not benefit the economy, being import dependent. Instead, the apex bank had adopted a controlled market with pre-determined supply and exchange rate. Announcing the major policy shift, Emefiele said: “The Central Bank of Nigeria has always maintained that it would continue to monitor situations on ground and ensure that the bank’s policies reflect these facts and developments rather than the sentiments of any groups or sectors. “It is in the light of this principle that we now believe that the time is right to restore the automatic adjustment mechanism of the exchange rate with the re-introduction of a flexible inter-bank exchange rate market. “The workings of this market will be consistent with the bank’s objectives of enhancing efficiency and facilitating a liquid and transparent foreign exchange market.” Highlights of the flexible regime The new regime would operate as a single market structure through the inter-bank/autonomous window. The exchange rate would be purely market-driven, using the Thomson-Reuters Order Matching System as well as the Conversational Dealing Book; The CBN would participate in the market through periodic interventions to either buy or sell foreign exchange as the need arises; To improve the dynamics of the market, the apex bank will introduce Foreign Exchange Primary Dealers (FXPD), who would be registered with the CBN to deal directly with the apex bank for large trade sizes on a two-way quotes basis; These primary dealers shall operate with other dealers in the inter-bank market, among other obligations that will be stipulated in the Foreign Exchange Primary Dealers (FXPD) guidelines; There will be no predetermined spread on foreign exchange spot transactions executed through the CBN intervention with primary dealers, while all foreign exchange spot purchased by the authorized dealers are transferable in the inter-bank foreign exchange market; The 41 items classified as “Not Valid for Foreign Exchange” as detailed in a previous CBN circular shall remain inadmissible in the Nigerian foreign exchange market; To enhance liquidity in the market, the CBN may also offer long-tenored foreign exchange Forwards Contract of six to 12 months or any tenor to authorized dealers; Sale of foreign exchange Forwards Contract by authorized dealers to end-users must be trade-backed, with no predetermined spreads; CBN shall introduce non-deliverable over-the-counter (OTC) naira-settled Futures, with daily rates on the CBN-approved FMDQ Trading and Reporting System. This is an entirely new product in the Nigerian foreign exchange market, which would help moderate volatility in the exchange rate by moving non-urgent foreign exchange demand from the Spot to the Futures market; The OTC FX Futures shall be in non-standardized amounts and different fixed tenors, which may be sold on any date, thereby ensuring bespoke maturity dates; Proceeds of foreign investment inflows and international money transfers shall be purchased by authorized dealers at the daily inter-bank rate; and Non-oil exporters are now allowed unfettered access to their foreign exchange proceeds, which shall be sold in the inter-bank market. Emefiele said the primary dealers would be about eight or 10 banks with the capacity to go to the market with as much as $10 million. Timelines Selected foreign exchange primary dealers would be notified by Friday, June 17, 2016. All other non-primary dealers would remain valid and eligible to participate in the market; Inter-bank trading under the new guidelines will begin on Monday, June 20, 2016; and The tenors and rates for the OTC naira-settled FX Futures will be announced on Monday, June 27, 2016. Why CBN introduced new policy Emefiele said CBN had to take the measures as the nation “witnessed a significant decline in our foreign exchange reserves from about US$42.8 billion in January 2014 to about US$26.7 billion as of June 10, 2016. “In terms of inflows, the bank’s foreign exchange earnings have fallen from about US$3.2 billion monthly to current levels of below a billion dollars per month.” He blamed the poor foreign exchange receipts on the over 70 per cent drop in the price of crude oil, which contributes the largest share of our foreign exchange reserves; Global growth slowdown and geopolitical tensions along critical trading routes in the world; and normalization of monetary policy by the United States’ Federal Reserve. According to Emefiele, “the interplay between reduced foreign exchange supply and rising demand accounted for a substantial reduction in our foreign exchange reserves.” He, however, stated that “our reserves, despite having fallen, is still robust and is able to cover about five months of Nigeria’s imports as against the international benchmark of three months.” He said his team at the CBN would ensure transparency in the new foreign exchange market regime and that there would be no place for speculators. His words: “Let me note that the Central Bank is strongly determined to make this market as transparent, liquid, and efficient as possible. Therefore, we would neither tolerate unscrupulous behaviour nor hesitate to bring serious sanctions on offenders. “The CBN expects all authorized dealers, particularly, to display the highest level of professionalism. We expect them to understand the spirit and letter of this transition to a market based system. The CBN will not allow the system to be undermined by speculators and rent-seekers. “Permit me to emphasize that any attempt to breach any aspect of this new framework will be heavily sanctioned by the CBN and this may, indeed, result in the suspension or withdrawal of the foreign exchange dealing licence of an offending authorized dealer.” Implications of the new policy Most questions from the public, yesterday, focused on what the role of the CBN would be in determining the exchange rate and what the rate will be like under the new regime. Emefiele said the price will be known when the market opens officially on Monday. He also said the supply side would be market determined, while the apex bank would intervene with supply from time to time to influence market trends in the desired direction. Emefiele’s pronouncements also indicated that the end of the black market is near as buying and selling of foreign exchange is now open to anyone at any bank or with authorized dealers at a price that is market determined. Consequently, black market rates would drop if the CBN announces a float as individuals, investors and businesses, who had refused to import their dollars into Nigeria, can now supply their forex at a price they believe is market determined. The drop in exchange rate may take some time at the worst but the market will be flooded with liquidity in due course. But analysts anticipate some volatility in exchange rate in the short run as the market takes shape and tracks how liquid the market will be. However, the spread rate between the interbank market and the parallel market is expected to narrow in a short while. CBN is also expected to relax the controls currently in place such as limits to withdrawals of dollars from domiciliary accounts or spending limits when abroad as Emefiele stated that exporters were immediately granted unfettered access to use their foreign exchange in their domiciliary accounts. Stock market reacts positively, gains N294bn Values of shares on the Nigerian Stock Exchange, NSE, rose sharply by N294 billion as investors reacted positively to details of the new foreign exchange regime announced by the CBN. “Nigerian equities rebounded from a three-day losing streak to close at its highest point in June 2016 as the CBN announced a new foreign exchange policy guideline with improved flexibility,” said Afrinvest Plc, a Lagos-based investment and research firm. In its review of activities in the stock market, yesterday, the company stated: ”The market initially opened on a high note as investors anticipated the CBN’s guideline but dipped at mid-day before closing bullish subsequent to the press briefing of the CBN Governor. “The benchmark All Shares Index (ASI) surged 3.2 per cent to close at 27,891.96 points, bringing MTD return to 0.8 per cent and paring YTD losses to -2.6 per cent. Market capitalization added N294.6 billion to N9.6 trillion while market activity was equally strong with volume and value traded advancing 244.7 per cent and 43.4 percent to 588.4 million units and N3.5 billion, respectively. “All sector indices closed positive, yesterday, in line with the strong appetite witnessed across board. The Banking Index led advancers with a 4.0 per cent appreciation consequent on buy sentiment on Tier-1 lenders —Guaranty Trust Bank, GTBank (+7.8 per cent), Zenith Bank (+5.4 per cent ) and UBA (+6.5 per cent ) — while the Industrial Goods index (+2.8 per cent) followed at a distance with Dangote Cement (+5.0 per cent), the major mover of the index. “The Consumer Goods index gained 2.4 per cent as investors positioned in blue-chip brewers— Nigerian Breweries (+4.5 per cent) and Guinness (+5.0 per cent ). The Oil & Gas index rallied 1.1 per cent on the back of renewed appetite towards Oando (+5.0 per cent) while the Insurance Index recorded the smallest gain (+0.6 per cent ); NEM Insurance (+9.5 per cent ) and AIICO Insurance (+3.9 per cent) drove the index.” Naira stable at N369/$ in parallel market However, the naira remained stable at N369 per dollar at the parallel market as operators adopted a “wait and see” attitude in anticipation of the impact of the new foreign exchange regime. Morgan Stanley isolates Nigeria Meanwhile, just as Emefiele was announcing the new foreign exchange regime, which came close to what foreign investors and international financial community have been clamouring for, Morgan Stanley Capital Index, MSCI, United State’s based multinational investment banker, and a leading provider of global equity indexes, announced that the MSCI Nigeria Index may be removed from the MSCI Frontier Markets Index and reclassified as a stand-alone market due to capital mobility issues. Due to the urgent nature of this investability issue in the MSCI Nigeria Index, MSCI will announce its decision on the proposal to remove the MSCI Nigeria Index from the MSCI Frontier Markets Index by the end of September 2016. It was not clear if the MSCI executives were informed of the latest development in Nigeria before their decision. As at last year, a leading global investment bank, JP Morgan, had suspended Nigeria from its market index due to the foreign exchange regime it felt was anti-market. MSCI was to follow on the same action earlier this year but moderated actions until yesterday. Financial institutions, economists react On the heels of the release of the long-awaited flexible foreign exchange policy, some financial institutions and economists have expressed satisfaction with the policy, saying it would eliminate uncertainty and boost inflow of foreign exchange from foreign investors and exporters. “The immediate effect is that uncertainty will disappear,” said Mr. Bismarck Rewane, Managing Director/Chief Executive, Financial Derivatives Limited. According to him, “the policy is good, the situation is now much better. But people have to first understand it.” According to Mr. Wale Abe, former Executive Secretary, Financial Market Dealers Quote (FMDQ), “the implication is that the exchange rate will now be market determined. It means no more foreign exchange subsidy for anybody, and this will lead to efficient allocation of foreign exchange.” A former CBN Director, who spoke on condition of anonymity, also commended the new policy, saying: “It is a good policy. I hope it will be effectively implemented as specified. The immediate impact is that it would encourage inflow of autonomous foreign exchange, reduce sharp practices by exporters as they now have unfettered access to the interbank market.” Financial analysts at Greenwich Trust Limited, a Lagos-based investment house, stated: “CBN has taken another step in enhancing its dovish stance on monetary policy in order to increase capital flows and drive economic growth. By adopting the free float and including currency forwards and futures, the CBN has introduced a deep and flexible market structure. “We recall that the main reason behind Nigeria’s expulsion from the J.P. Morgan Emerging Markets Bond Index was the lack of a liquid, two-way FX market. We anticipate a significant rally in both equity and fixed income markets as investors take positions in fundamentally sound companies trading at depressed prices. We expect the Naira to appreciate in the BDC market for the rest of this week. “We also expect the CBN to adjust the Net Open Position for Deposit Money Banks (DMBs) to ensure banks have sufficient liquidity to participate in the market. “In the short-term, despite Emefiele’s caution, we foresee a depreciation when the inter-bank market opens on Monday as investors flood in to exercise pent up demand. “However, we see an appreciation in the long term as forex supply improves and market participants take advantage of an efficient, broader and deeper market via trades in derivatives (forward and future contracts). “The success of this bold monetary policy decision will be hinged on the fiscal authority’s ability to negotiate a cease-fire with the Niger Delta militant groups to enable optimal crude production and the resultant accretion in forex revenues.” According to Mustapha Suberu, Research analyst at Eczellon Capital Limited, a Lagos-based investment banking firm, the market would react positively in the days ahead. He said: “The news is positive for the capital market. The equity and bonds market will likely trade higher in the coming days and week as the market expects re-entry of foreign portfolio investors, that had hitherto left due to currency restrictions.” Speaking in the same

Stocks Surge As CBN Releases New Forex Rules The Nigeria stock market, yesterday, gained N294 billion in reaction to the decision of the Central Bank of Nigeria, CBN, to allow market forces determine the Naira exchange rate in a new single structured foreign exchange market. CBN Governor, Godwin Emefiele, yesterday, announced the introduction of a new foreign exchange policy, termed the “automatic adjustment mechanism of the exchange rate” in a

flexible foreign exchange regime. The new regime is aimed at boosting supply of foreign exchange and reducing the pressure on the Naira.buhari-Naira CBN had been under pressure to devalue the Naira for over a year now, which had been resisted by monetary and fiscal authorities, claiming that past devaluations did not benefit the economy, being import dependent. Instead, the apex bank had adopted a controlled market with pre-determined supply and exchange rate. Announcing the major policy shift, Emefiele said: “The Central Bank of Nigeria has always maintained that it would continue to monitor situations on ground and ensure that the bank’s policies reflect these facts and developments rather than the sentiments of any groups or sectors. “It is in the light of this principle that we now believe that the time is right to restore the automatic adjustment mechanism of the exchange rate with the re-introduction of a flexible inter-bank exchange rate market. “The workings of this market will be consistent with the bank’s objectives of enhancing efficiency and facilitating a liquid and transparent foreign exchange market.” Highlights of the flexible regime The new regime would operate as a single market structure through the inter-bank/autonomous window. The exchange rate would be purely market-driven, using the Thomson-Reuters Order Matching System as well as the Conversational Dealing Book; The CBN would participate in the market through periodic interventions to either buy or sell foreign exchange as the need arises; To improve the dynamics of the market, the apex bank will introduce Foreign Exchange Primary Dealers (FXPD), who would be registered with the CBN to deal directly with the apex bank for large trade sizes on a two-way quotes basis; These primary dealers shall operate with other dealers in the inter-bank market, among other obligations that will be stipulated in the Foreign Exchange Primary Dealers (FXPD) guidelines; There will be no predetermined spread on foreign exchange spot transactions executed through the CBN intervention with primary dealers, while all foreign exchange spot purchased by the authorized dealers are transferable in the inter-bank foreign exchange market; The 41 items classified as “Not Valid for Foreign Exchange” as detailed in a previous CBN circular shall remain inadmissible in the Nigerian foreign exchange market; To enhance liquidity in the market, the CBN may also offer long-tenored foreign exchange Forwards Contract of six to 12 months or any tenor to authorized dealers; Sale of foreign exchange Forwards Contract by authorized dealers to end-users must be trade-backed, with no predetermined spreads; CBN shall introduce non-deliverable over-the-counter (OTC) naira-settled Futures, with daily rates on the CBN-approved FMDQ Trading and Reporting System. This is an entirely new product in the Nigerian foreign exchange market, which would help moderate volatility in the exchange rate by moving non-urgent foreign exchange demand from the Spot to the Futures market; The OTC FX Futures shall be in non-standardized amounts and different fixed tenors, which may be sold on any date, thereby ensuring bespoke maturity dates; Proceeds of foreign investment inflows and international money transfers shall be purchased by authorized dealers at the daily inter-bank rate; and Non-oil exporters are now allowed unfettered access to their foreign exchange proceeds, which shall be sold in the inter-bank market. Emefiele said the primary dealers would be about eight or 10 banks with the capacity to go to the market with as much as $10 million. Timelines Selected foreign exchange primary dealers would be notified by Friday, June 17, 2016. All other non-primary dealers would remain valid and eligible to participate in the market; Inter-bank trading under the new guidelines will begin on Monday, June 20, 2016; and The tenors and rates for the OTC naira-settled FX Futures will be announced on Monday, June 27, 2016. Why CBN introduced new policy Emefiele said CBN had to take the measures as the nation “witnessed a significant decline in our foreign exchange reserves from about US$42.8 billion in January 2014 to about US$26.7 billion as of June 10, 2016. “In terms of inflows, the bank’s foreign exchange earnings have fallen from about US$3.2 billion monthly to current levels of below a billion dollars per month.” He blamed the poor foreign exchange receipts on the over 70 per cent drop in the price of crude oil, which contributes the largest share of our foreign exchange reserves; Global growth slowdown and geopolitical tensions along critical trading routes in the world; and normalization of monetary policy by the United States’ Federal Reserve. According to Emefiele, “the interplay between reduced foreign exchange supply and rising demand accounted for a substantial reduction in our foreign exchange reserves.” He, however, stated that “our reserves, despite having fallen, is still robust and is able to cover about five months of Nigeria’s imports as against the international benchmark of three months.” He said his team at the CBN would ensure transparency in the new foreign exchange market regime and that there would be no place for speculators. His words: “Let me note that the Central Bank is strongly determined to make this market as transparent, liquid, and efficient as possible. Therefore, we would neither tolerate unscrupulous behaviour nor hesitate to bring serious sanctions on offenders. “The CBN expects all authorized dealers, particularly, to display the highest level of professionalism. We expect them to understand the spirit and letter of this transition to a market based system. The CBN will not allow the system to be undermined by speculators and rent-seekers. “Permit me to emphasize that any attempt to breach any aspect of this new framework will be heavily sanctioned by the CBN and this may, indeed, result in the suspension or withdrawal of the foreign exchange dealing licence of an offending authorized dealer.” Implications of the new policy Most questions from the public, yesterday, focused on what the role of the CBN would be in determining the exchange rate and what the rate will be like under the new regime. Emefiele said the price will be known when the market opens officially on Monday. He also said the supply side would be market determined, while the apex bank would intervene with supply from time to time to influence market trends in the desired direction. Emefiele’s pronouncements also indicated that the end of the black market is near as buying and selling of foreign exchange is now open to anyone at any bank or with authorized dealers at a price that is market determined. Consequently, black market rates would drop if the CBN announces a float as individuals, investors and businesses, who had refused to import their dollars into Nigeria, can now supply their forex at a price they believe is market determined. The drop in exchange rate may take some time at the worst but the market will be flooded with liquidity in due course. But analysts anticipate some volatility in exchange rate in the short run as the market takes shape and tracks how liquid the market will be. However, the spread rate between the interbank market and the parallel market is expected to narrow in a short while. CBN is also expected to relax the controls currently in place such as limits to withdrawals of dollars from domiciliary accounts or spending limits when abroad as Emefiele stated that exporters were immediately granted unfettered access to use their foreign exchange in their domiciliary accounts. Stock market reacts positively, gains N294bn Values of shares on the Nigerian Stock Exchange, NSE, rose sharply by N294 billion as investors reacted positively to details of the new foreign exchange regime announced by the CBN. “Nigerian equities rebounded from a three-day losing streak to close at its highest point in June 2016 as the CBN announced a new foreign exchange policy guideline with improved flexibility,” said Afrinvest Plc, a Lagos-based investment and research firm. In its review of activities in the stock market, yesterday, the company stated: ”The market initially opened on a high note as investors anticipated the CBN’s guideline but dipped at mid-day before closing bullish subsequent to the press briefing of the CBN Governor. “The benchmark All Shares Index (ASI) surged 3.2 per cent to close at 27,891.96 points, bringing MTD return to 0.8 per cent and paring YTD losses to -2.6 per cent. Market capitalization added N294.6 billion to N9.6 trillion while market activity was equally strong with volume and value traded advancing 244.7 per cent and 43.4 percent to 588.4 million units and N3.5 billion, respectively. “All sector indices closed positive, yesterday, in line with the strong appetite witnessed across board. The Banking Index led advancers with a 4.0 per cent appreciation consequent on buy sentiment on Tier-1 lenders —Guaranty Trust Bank, GTBank (+7.8 per cent), Zenith Bank (+5.4 per cent ) and UBA (+6.5 per cent ) — while the Industrial Goods index (+2.8 per cent) followed at a distance with Dangote Cement (+5.0 per cent), the major mover of the index. “The Consumer Goods index gained 2.4 per cent as investors positioned in blue-chip brewers— Nigerian Breweries (+4.5 per cent) and Guinness (+5.0 per cent ). The Oil & Gas index rallied 1.1 per cent on the back of renewed appetite towards Oando (+5.0 per cent) while the Insurance Index recorded the smallest gain (+0.6 per cent ); NEM Insurance (+9.5 per cent ) and AIICO Insurance (+3.9 per cent) drove the index.” Naira stable at N369/$ in parallel market However, the naira remained stable at N369 per dollar at the parallel market as operators adopted a “wait and see” attitude in anticipation of the impact of the new foreign exchange regime. Morgan Stanley isolates Nigeria Meanwhile, just as Emefiele was announcing the new foreign exchange regime, which came close to what foreign investors and international financial community have been clamouring for, Morgan Stanley Capital Index, MSCI, United State’s based multinational investment banker, and a leading provider of global equity indexes, announced that the MSCI Nigeria Index may be removed from the MSCI Frontier Markets Index and reclassified as a stand-alone market due to capital mobility issues. Due to the urgent nature of this investability issue in the MSCI Nigeria Index, MSCI will announce its decision on the proposal to remove the MSCI Nigeria Index from the MSCI Frontier Markets Index by the end of September 2016. It was not clear if the MSCI executives were informed of the latest development in Nigeria before their decision. As at last year, a leading global investment bank, JP Morgan, had suspended Nigeria from its market index due to the foreign exchange regime it felt was anti-market. MSCI was to follow on the same action earlier this year but moderated actions until yesterday. Financial institutions, economists react On the heels of the release of the long-awaited flexible foreign exchange policy, some financial institutions and economists have expressed satisfaction with the policy, saying it would eliminate uncertainty and boost inflow of foreign exchange from foreign investors and exporters. “The immediate effect is that uncertainty will disappear,” said Mr. Bismarck Rewane, Managing Director/Chief Executive, Financial Derivatives Limited. According to him, “the policy is good, the situation is now much better. But people have to first understand it.” According to Mr. Wale Abe, former Executive Secretary, Financial Market Dealers Quote (FMDQ), “the implication is that the exchange rate will now be market determined. It means no more foreign exchange subsidy for anybody, and this will lead to efficient allocation of foreign exchange.” A former CBN Director, who spoke on condition of anonymity, also commended the new policy, saying: “It is a good policy. I hope it will be effectively implemented as specified. The immediate impact is that it would encourage inflow of autonomous foreign exchange, reduce sharp practices by exporters as they now have unfettered access to the interbank market.” Financial analysts at Greenwich Trust Limited, a Lagos-based investment house, stated: “CBN has taken another step in enhancing its dovish stance on monetary policy in order to increase capital flows and drive economic growth. By adopting the free float and including currency forwards and futures, the CBN has introduced a deep and flexible market structure. “We recall that the main reason behind Nigeria’s expulsion from the J.P. Morgan Emerging Markets Bond Index was the lack of a liquid, two-way FX market. We anticipate a significant rally in both equity and fixed income markets as investors take positions in fundamentally sound companies trading at depressed prices. We expect the Naira to appreciate in the BDC market for the rest of this week. “We also expect the CBN to adjust the Net Open Position for Deposit Money Banks (DMBs) to ensure banks have sufficient liquidity to participate in the market. “In the short-term, despite Emefiele’s caution, we foresee a depreciation when the inter-bank market opens on Monday as investors flood in to exercise pent up demand. “However, we see an appreciation in the long term as forex supply improves and market participants take advantage of an efficient, broader and deeper market via trades in derivatives (forward and future contracts). “The success of this bold monetary policy decision will be hinged on the fiscal authority’s ability to negotiate a cease-fire with the Niger Delta militant groups to enable optimal crude production and the resultant accretion in forex revenues.” According to Mustapha Suberu, Research analyst at Eczellon Capital Limited, a Lagos-based investment banking firm, the market would react positively in the days ahead. He said: “The news is positive for the capital market. The equity and bonds market will likely trade higher in the coming days and week as the market expects re-entry of foreign portfolio investors, that had hitherto left due to currency restrictions.” Speaking in the same vein, Mr. Johnson Chukwu, Managing Director/CEO, Cowry Asset Management Limited, said the news was cheery to the market, saying the rally witnessed in the market, yesterday, was a result of the clarity on the forex guidelines. He stated that the FX policy would partly contribute in boosting the attractiveness of the market in the medium term. “For now, domestic investors are positioning in anticipation of foreign investors, who had deserted the market, would come back. That is why you see the rebound in the market,” Chukwu said. Also, in their daily market update, Cowry Asset Management Limited applauded the new Fx policy, saying the policy was complementary to the positive developments in the external sectors – the increase in crude oil prices. These policies are bound to reduce uncertainty in the markets and could help in reducing pressure on the foreign exchange reserve. Analysts at Cowry observed that by allowing market forces to determine the exchange rate and adopting single market structure for foreign exchange supply to the market, the capital market will henceforth be attractive to investors as their earlier fears of foreign exchange illiquid/scarcity and likely devaluation would have been mitigated. According to them, “the introduction of derivatives such as customised forward contracts should help investors further hedge against foreign exchange volatility while simultaneously being a major step towards developing this important alternative asset market. “Furthermore, forex primary dealers will be registered to deal directly with the CBN for large ticket transactions which could favour large manufacturers as well as foreign direct investors. “The removal of controls on non-oil exporters’ proceeds and the allowed participation of non-oil exporters in the interbank market should indirectly help spur activity of outbound transactions, thereby increasing economic output.” Source: Vanguard.

Nigeria Doesn’t Know Volume Of Crude Oil It Produces, Says NEITI

Nigeria does not know the quantity of crude oil it produces at the moment, Nigeria Extractive Industry Transparency Initiative, NEITI, has said. The revelation came as the Senate,yesterday set up a nine-member ad-hoc committee to probe the 2013 audit report of the federal government agency. The NEITI Executive Secretary,Waziri Adio, who disclosed this when he appeared before the Senate in plenary to explain brief it on the 2013 NEITI audit report, said the country was yet to know its oil and gas production capacity. The Senate decision to investigate the report came after Adio took over two hours to explain what he knew about it. Speaking, Adio, while regretting the level of mismanagement of resources in the oil and gas sector of the nation’s economy over the years, insisted that the country has no specific record of its quantity of oil produced over the years. crude-oil-pipe-702x336-436x336 He said the NEITI 2013 Industry audit reports showed that revenue in the oil and gas industry were not fully remitted to the Federation Account, adding that the danger posed to the economy due to the misappropriation of these funds were much. Senate President, Bukola Saraki, who presided over the session, said the issues raised by the NEITI boss was grave and must be looked into. Following this, he set up the committee, cutting across nine different standing committees, as he remarked that in view of the enormity of the money involved, the general opinion was that an ad hoc committee be set up to probe the report. He said the terms of reference of the committee, led by the Chairman, Senate Committee on Petroleum Resources ( Downstream ) Senator Jibrin Barau, would be to re-examine the financial processes and the fiscal audit report of NEITI. The Senate President also said the committee would look into the financial loss and leakages to government in all its ramifications, the remedial measures and come up with sanctions where necessary. He noted that the committee would determine any relevant legislative action that would be required to block all forms of leakages. The nine-member ad-hoc committee has as chairman, Senator Tayo Alasoadura, who is the chairman, Senate Committee on Petroleum Resources ( Upstream). Others are Senators Bassey Akpan, who is the Chairman, Senate Committee on Gas, Senator Andy Uba, Chairman, Public Accounts Committee, and Senator John Enoh, Chairman, Committee on Finance. The rest are Senators Chukwuka Utazi, Chairman of the Senate Committee on Anti-Corruption.Kabir Marafa, Chairman of the Senate Committee on Population and National Identity, Solomon Adeola and Bukar Mustapha Adio had alleged that some huge amount of monies, which were in three tranches, were either withheld, lost or underpaid for different reasons. He said: “The first is in the category of the unremitted funds, which amounted to $3.8 bn and N358m; the second category is the category of losses due to inefficient practices and theft totalling $5.9bn and N20bn,”he said. Source: Vangurd. Nigeria does not know the quantity of crude oil it produces at the moment, Nigeria Extractive Industry Transparency Initiative, NEITI, has said. The revelation came as the Senate,yesterday set up a nine-member ad-hoc committee to probe the 2013 audit report of the federal government agency. The NEITI Executive Secretary,Waziri Adio, who disclosed this when he appeared before the Senate in plenary to explain brief it on the 2013 NEITI audit report, said the country was yet to know its oil and gas production capacity. The Senate decision to investigate the report came after Adio took over two hours to explain what he knew about it. Speaking, Adio, while regretting the level of mismanagement of resources in the oil and gas sector of the nation’s economy over the years, insisted that the country has no specific record of its quantity of oil produced over the years. crude-oil-pipe-702x336-436x336 He said the NEITI 2013 Industry audit reports showed that revenue in the oil and gas industry were not fully remitted to the Federation Account, adding that the danger posed to the economy due to the misappropriation of these funds were much. Senate President, Bukola Saraki, who presided over the session, said the issues raised by the NEITI boss was grave and must be looked into. Following this, he set up the committee, cutting across nine different standing committees, as he remarked that in view of the enormity of the money involved, the general opinion was that an ad hoc committee be set up to probe the report. He said the terms of reference of the committee, led by the Chairman, Senate Committee on Petroleum Resources ( Downstream ) Senator Jibrin Barau, would be to re-examine the financial processes and the fiscal audit report of NEITI. The Senate President also said the committee would look into the financial loss and leakages to government in all its ramifications, the remedial measures and come up with sanctions where necessary. He noted that the committee would determine any relevant legislative action that would be required to block all forms of leakages. The nine-member ad-hoc committee has as chairman, Senator Tayo Alasoadura, who is the chairman, Senate Committee on Petroleum Resources ( Upstream). Others are Senators Bassey Akpan, who is the Chairman, Senate Committee on Gas, Senator Andy Uba, Chairman, Public Accounts Committee, and Senator John Enoh, Chairman, Committee on Finance. The rest are Senators Chukwuka Utazi, Chairman of the Senate Committee on Anti-Corruption.Kabir Marafa, Chairman of the Senate Committee on Population and National Identity, Solomon Adeola and Bukar Mustapha Adio had alleged that some huge amount of monies, which were in three tranches, were either withheld, lost or underpaid for different reasons. He said: “The first is in the category of the unremitted funds, which amounted to $3.8 bn and N358m; the second category is the category of losses due to inefficient practices and theft totalling $5.9bn and N20bn,”he said. Source: Vangurd.