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Nigeria stocks near 8-month high on investor interest after FX float

21 June 2016 Comments (0) Africa, Business, Latest Updates from Reuters

LAGOS (Reuters) – Nigerian stocks ended near an 8-month high on Tuesday as investors renewed interest in shares after the central bank floated the naira to lift currency curbs viewed as harming investment and helping cause the economy to contract.

The main share index rose 2.27 percent to 29,422 points, a level last seen on October 2015.

Investors snapped up shares across banks, and consumer goods, hoping that a “freely” traded interbank forex market will help foreign buyers return to stocks after Nigeria ended an currency peg, which caused them to flee.

 

(Reporting by Chijioke Ohuocha)

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South Africa’s Amplats warns H1 profit to fall at least 20%

21 June 2016 Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – Anglo American Platinum (Amplats) expects its half-year profit to fall by at least 20 percent due to weaker metal prices, the South African miner said on Tuesday.

Platinum prices have been hurt by growth concerns in China and oversupply worries which have forced firms to abandon projects and sell mines.

Amplats, which produces around 40 percent of the world’s platinum group metals, said it would make a further announcement once it had determined a likely range for its headline earnings per share.

Headline EPS, which strips out certain one-off items, is the main profit measure in South Africa.

Shares in Amplats were little changed at 379.09 rand, largely in line with the blue-chip JSE Top-40 index.

Amplats, a unit of global mining group Anglo American, is focusing on newer and more mechanised mines and removing unprofitable ounces following a record five-month strike in 2014.

Amplats, along with rivals Impala Platinum and Lonmin, is due to start wage talks with unions at the end of June, when the current deal expires.

The National Union of Mineworkers will demand pay increases of 20 percent per year for the next two years while demands from the larger Association of Mineworkers and Construction Union are not yet known.

 

(Reporting by Tiisetso Motsoeneng; editing by Jason Neely)

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Kenya’s NIC Bank appointed to assess assets of closed Imperial Bank

21 June 2016 Comments (0) Africa, Business, Latest Updates from Reuters

NAIROBI (Reuters) – Kenya’s NIC Bank has been appointed as a consultant to assess the assets and liabilities of Imperial Bank, which was put into receivership in October after fraud was uncovered, the central bank said on Tuesday.

The appointment of NIC Bank, a mid-tier bank, would ensure customers receive more of their deposits after the closed bank’s shareholders failed to support a proposal for swiftly reopening Imperial, the central bank said in a statement.

Three small or medium-sized banks in Kenya have been closed in less than a year, unnerving investors. The central bank has said financial issues were specific to the banks concerned and did not pose a systemic risk to the economy of the East African nation, which is a regional financial centre.

Earlier this year, the central bank said clients with deposits of up to 1 million shillings ($9,886.31) would receive funds in full, while those with larger deposits would have to wait for investigations to end to determine the fate of their funds.

NIC, appointed by state receiver Kenya Deposit Insurance Corporation (KDIC), would oversee disbursement of a maximum of 1.5 million shillings to remaining depositors once a court rules, likely on July 4, to lift the suspension of payments.

More deposit payments could be made after that following the completion of due diligence by NIC, which would assume a portion of the remaining deposits and other assets and liabilities, including a majority of Imperial’s staff and branches.

Central Bank of Kenya Governor Patrick Njoroge told a news conference that NIC was not acquiring Imperial Bank, and also said a moratorium on new bank licences remained in place.

 

($1 = 101.1500 Kenyan shillings)

 

(Reporting by George Obulutsa; Writing by Edmund Blair; Editing by Louise Heavens)

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Nigerian naira tumbles 30 percent after peg removed

20 June 2016 Comments (0) Africa, Business, Latest Updates from Reuters

By Chijioke Ohuocha and Oludare Mayowa

LAGOS (Reuters) – Nigeria’s naira slumped 30 percent against the dollar on Monday after the central bank removed its currency peg in an effort to alleviate the chronic foreign currency shortages choking growth in Africa’s biggest economy.

The central bank sold $530 million for 280 naira per dollar at a special auction and later sold a further $86.5 million directly on the interbank market at 281 to 285 naira, traders said.

Monday’s rate was notably weaker than the 197 peg the central bank had maintained for 16 months before abandoning it last week in a bid to alleviate chronic forex shortages and stop the economy from sliding into recession.

The naira had traded just twice by midday, before the central bank held its special auction to clear a backlog of hard currency orders. Less than $1 million had changed hands, prompting an extension of the trading day to 5 p.m. (1600 GMT), dealers said.

Black market currency dealers were quoting the naira at 325 to 345 naira to the dollar, up to 10 percent stronger than on Friday, on expectations more hard currency liquidity on the interbank market would reduce demand on the street.

The central bank has said it may inject foreign exchange into the interbank market to increase liquidity and reduce a backlog of $4 billion backlog of demand, which could take four weeks to clear.

“We suspect that the best way to talk about the new exchange rate regime is still as a managed float, but a managed float that is responsive to market forces,” Citi analysts said in a note. “The new structure does provide a platform for the CBN (central bank) to easily step further away from the market.”

Non-deliverable forwards – contracts used to bet on future exchange rate moves – priced the naira at 302 per dollar in one month’s time. They initially weakened to a record 310 to the dollar.

The two-month contract < NGN2MNDFOR=> saw the naira at 313 per dollar in August. One year down the line < NGN1YNDFOR=> the naira was priced at 355.

Nigeria’s central bank is “reasonably optimistic” the naira will settle around 250 to the dollar after an initial period of weakness following a flotation, the bank’s governor said in a June 3 letter to President Muhammadu Buhari [L8N19836T].

ECONOMIC DOWNTURN

Foreign investors and economists had called for a naira devaluation for months as the shortages of foreign exchange undermined economic growth and led to widespread capital flight.

The central bank said last week it would abandon the peg in a “managed float”. The median forecast from 10 analysts surveyed by Reuters had suggested the naira might trade on Monday at as much as 300 naira per dollar.

Nigeria’s economy, which contracted by 0.4 percent in the first quarter, faces its worst crisis in decades as a result of the decline in oil prices since 2014 and last year’s introduction of the currency peg.

With the naira expected to fall sharply, Nigerian products will become relatively cheap and imports more expensive. That should stimulate the domestic economy, but it is also likely to light a fire under already rising inflation.

“The new system should reduce the shortage of FX in the economy and – in the long run – reduce strains in the balance of payments by discouraging imports and boosting export competitiveness,” said John Ashbourne of Capital Economics.

“But the new system certainly does not mark the end of Nigeria’s economic problems.”

The OPEC oil exporter had resisted devaluing the naira for more than a year, while other major oil producers, including Russia, Kazakhstan and Angola, allowed their currencies to fall after crude prices collapsed.

(Additional reporting by Oludare Mayowa, Ulf Laessing, Karin Strohecker, Sujata Rao and Joe Brock; Writing by Joe Brock and Ulf Laessing; Editing by Larry King)

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BP approves investment in Egypt gas field 15 months after discovery

20 June 2016 Comments (0) Business, Latest Updates from Reuters, Middle East

LONDON (Reuters) – British oil major BP has approved investment in the first phase of developing the large Atoll gas field offshore Egypt, only 15 months after it first announced its discovery.

BP, which declined to give an investment figure for the project, said the field was on track to deliver its first gas in the first half of 2018, set to pump 300 million cubic feet a day of gas to the Egyptian market.

BP decided in November to fast-track the development of Atoll, estimated to contain 1.5 trillion cubic feet of gas and 31 million barrels of condensates.

The company is in a tight race with other oil and gas explorers in the region to develop the Mediterranean’s huge untapped fossil fuel reserves.

Italy’s ENI discovered the Mediterranean’s largest gas field, Zohr, last year and plans to bring the field on stream by the end of 2017.

BP’s decision to invest in the Atoll field is one of only a handful of go-aheads the oil major is expected to give this year as it seeks to save cash amid weak oil prices.

 

(Reporting by Karolin Schaps)

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Egypt’s Al Ahly Bank raises depositor rates after central bank hike

20 June 2016 Comments (0) Business, Latest Updates from Reuters, Middle East

CAIRO (Reuters) – Egyptian Bank Al Ahly raised interest rates for account holders, an official at the bank said on Monday, becoming the first state-owned commercial lender to react to last week’s increase in benchmark borrowing costs.

Al Ahly – National Bank of Egypt’s retail banking arm – raised rates on deposits by 0.75 percent and on saving accounts by 1 percent, the official told Reuters.

Two of Al Ahly’s main competitors, Banque Misr and Commercial International Bank, are also expected to review depositor rates on Monday, officials at both banks said.

On Thursday, the central bank raised benchmark rates by 100 basis points to their highest levels in years, accelerating efforts to rein in surging inflation and ease downward pressure on the Egyptian pound.

 

 

(Reporting by Ehab Farouk; Writing by Amina Ismail; editing by John Stonestreet)

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IMF welcomes Nigeria’s decision to end currency peg

17 June 2016 Comments (0) Africa, Business, Latest Updates from Reuters

WASHINGTON (Reuters) – The International Monetary Fund said on Thursday it welcomed the decision by Nigeria’s central bank to abandon its currency peg and adopt a flexible exchange rate policy, saying this was important to reduce fiscal and external imbalances.

IMF spokesman Gerry Rice told a weekly news briefing the Fund wanted to see how effectively the naira exchange market functions once the new float system is put into effect next Monday.

Nigeria’s central bank governor said in a letter to President Muhammadu Buhari the bank expects the naira to settle at around 250 to the dollar after it abandons the peg of 197 to the dollar it has supported for 16 months.

“I think the announcement yesterday to revise the guidelines for the operation of the Nigerian interbank foreign exchange market is an important and welcome step,” Rice told reporters. “It will provide greater flexibility in that market, the foreign exchange market.”

Senior IMF officials, including Managing Director Christine Lagarde, have urged Nigerian officials to allow the naira to fall to absorb some of the shock to the economy from a plunge in oil prices and revenues. OPEC member Nigeria is a major oil producer. IMF officials have said that Nigeria has not requested IMF financial assistance, but has been in consultation with the Fund on dealing with budget shortfalls.

“As we have said before, a significant macroeconomic adjustment that Nigeria urgently needs to eliminate existing imbalances and support the competitiveness of the economy is best achieved through a credible package of policies involving fiscal discipline, monetary tightening, a flexible exchange rate regime and structural reform,” Rice said. “Allowing the exchange rate to better reflect market forces is an integral part of that.”

 

(Reporting by David Lawder; Editing by James Dalgleish)

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Tunisia’s dinar hits record lows over tourism, economic data

16 June 2016 Comments (0) Africa, Business, Latest Updates from Reuters

TUNIS (Reuters) – Tunisia’s dinar currency has fallen to record lows versus the euro and the U.S. dollar this week as weaker exports, lower investment and a plunge in tourism revenues have eroded the country’s foreign reserves.

The dinar traded at 2.47 against the euro and 2.13 against the dollar on Wednesday and on Thursday was at 2.43 versus the euro and 2.16 against the dollar, according to central bank figures.

The government was expected to announce new measures on Monday aimed at stabilizing the currency. The North African state’s tourism industry has been shattered by two major Islamist militant attacks on foreign visitors last year.

“The record drop in the value of the dinar is caused by lower exports and a lack of investment that have lowered foreign exchange reserves,” central bank director Chedli Ayari told reporters in parliament on Wednesday.

He said the central bank would not interfere to halt the slide in the dinar because “the level of reserves is still average… and reflects the reality of the Tunisian economy.”

Exports fell 2.6 percent during the first five months of the year while foreign direct investment dropped 5 percent to $268 million in the same period compared to a year earlier, according to government statistics.

Tourism, which comprises 8 percent of GDP and is a key source of foreign revenue, has been struggling.

Islamic State gunmen attacked the Tunis Bardo museum and a Sousse beach hotel packed with tourists within a 3-month period last year, prompting many tour operators to suspend visits to the North African country.

Tunisia’s government is currently trying to push through reforms and some austerity measures to curb its deficit, among the measures demanded by international lenders such as the International Monetary Fund and the World Bank.

Government spokesman Khaled Chaouket said officials would next week announce measures meant to arrest the fall of the dinar including commerce ministry initiatives. Some analysts expect these to include restrictions on luxury imports.

The weakened dinar may boost smaller local exporters by making their products cheaper abroad, but could also make debt service payments tighter and widen the deficit if the government does not act, said local financial risk expert Mourad Hattab.

“The dinar has never been at these levels against the dollar and the euro,” he said. “But there is a tendency for the financial authorities not to interfere because it is part of the reforms the IMF is demanding.”

 

(Reporting by Tarek Amara; Writing by Patrick Markey; Editing by Mark Heinrich)

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European stocks, oil slide as growth fears add to Brexit pressure

16 June 2016 Comments (0) Business, Europe, Latest Updates from Reuters

LONDON (Reuters) – European shares hit a four-month low on Thursday as banks dropped sharply, while oil prices headed for a sixth session of losses after the Bank of Japan refrained from further stimulus and the U.S. central bank struck a cautious note.

U.S. stock index futures were down around 0.4 percent, indicating a lower Wall Street open.

Sterling hit a two-month low against the euro, underscoring worries that Britain, the world’s fifth-largest economy, will vote to quit the European Union on June 23.

According to an Ipsos MORI survey, British support for Brexit hit 53 percent, the highest for the “Leave” campaign recorded by the pollster in more than three years.

A vote to end Britain’s 43-year-old EU membership would spook investors, undermining decades of European integration and placing a question mark over the future of the United Kingdom and its $2.9 trillion economy.

Concerns over Brexit, in combination with dimmed expectations on global growth, have driven investors towards safe-haven assets such as German bunds and gold, and out of oil and stocks.

Euro zone banking stocks dipped to near four-year lows, with Deutsche Bank, down 2.8 percent, and Credit Suisse touching record lows.

“The global economic and political outlook is dark,” said Chirantan Barua, an analyst with Bernstein. “Brexit is fuelling uncertainty and will have ripple effects across Europe. With so much uncertainty, why would you buy a bank stock now?”

Brent crude prices, which last week hit their highest this year, have fallen every day since June 8, dropping more than 8 percent in all.

Germany’s 10-year bond yield fell to a record low as fading expectations of U.S. rate hikes this year provided further fuel to a global bond market rally.

Spot gold climbed 1.4 percent, close to a two-year high.

Earlier in the day Asian markets were firmly in “risk-off” mode, with the yen surging to a 20-month high against the dollar and the Nikkei down more than 3 percent. Hong Kong’s Hang Seng index fell 2 percent.

Benchmark equity indices across Europe followed suit with Italy’s FTSE MIB down 1.6 percent. The pan-European FTSEurofirst 300 fell 0.7 percent.

Shares of UBS and Credit Suisse fell 1.3 percent and 2.8 percent respectively after the Swiss National bank said both banks were likely to need to raise an extra 10 billion Swiss francs to meet new leverage requirements.

 

 

(By Vikram Subhedar Additional reporting by Atul Prakash in London and Aaron Sheldrick in Tokyo; Editing by Keith Weir and John Stonestreet)

 

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Nigeria to abandon naira peg in favour of open market trading

16 June 2016 Comments (0) Africa, Business, Latest Updates from Reuters

ABUJA (Reuters) – Nigeria’s central bank said on Wednesday it would begin “purely” market-driven foreign currency trading next week, abandoning its 16-month peg and setting the stage for the naira to fall sharply.

Nigeria’s central bank previously pegged the naira at 197 to the U.S. dollar but the currency trades at about half that on the black market as slump in oil revenues has hammered public finances and foreign currency reserves. The new trading rules begin on Monday, Central Bank Governor Godwin Emefiele said.

The change of tack is a “managed float” and puts Nigeria in line with most central banks, including the Bank of England, a senior central bank official told Reuters. Nigeria’s central bank has no target for the naira, he said.

The latest interbank level will be posted on the central bank’s website daily from Monday, the official said, adding: “The old rate of 197 does not exist anymore.”

Following the announcement, three economists estimated the fair value of the naira between 280 and 300 against the dollar, although the black market rate is around 370.

Nigeria, Africa’s largest crude exporter, has resisted devaluing its currency for more than a year despite other major oil producers, including Russia, Kazakhstan and Angola, allowing currences to fall amid lower crude prices.

The central bank will still be able to inject dollars into the market, giving it some control over the exchange rate within the limit of its foreign reserves which fell to $26.7 billion in June, from $42.8 billion in January 2014.

Emefiele hopes opening up trading will ease severe U.S. dollar shortages caused by a slump in oil revenue.

With a likely sharp fall for the naira, Nigerian products will become relatively cheap and imports more expensive, which should stimulate the domestic economy but also lift inflation.

“To improve the dynamics of the market, we will introduce foreign exchange primary dealers who would be registered by the CBN (central bank) to deal directly with the bank for large trade sizes on a two-way quote basis,” Emefiele told reporters.

Nigeria’s stock market gained 3 percent following the announcement.

“This is a major about-turn. The central bank has traditionally favoured a managed rate and preferred a strong currency to contain inflation,” said Gregory Kronsten, head of macroeconomic and fixed income research at FBN Capital in Lagos.

“It seems the CBN is eager the market captures forex from remittances (international money orders) as well as FDI (Foreign Direct Investment),” he said.

 

PRIMARY DEALERS

The central bank said eight to 10 primary dealers would supply the interbank market with dollars, handling minimum volumes of $10 million.

The primary dealers will be allowed to sell back 70 percent of any dollars bought from the central bank on the day of purchase. Sales must be backed by a specific customer order to avoid currency speculation, the central bank said.

Nigeria’s currency dealers will meet on Thursday to discuss new forex guidelines, two bankers.

Retail currency operators will not be able to buy from the interbank market, meaning dollars will remain in scarce supply for private individuals and small businesses.

Emefiele also said the central bank would open a foreign exchange futures market to ease demand on spot trading, reduce volatility and give businesses the opportunity to hedge risks.

Africa’s biggest economy, which contracted by 0.4 percent in the first quarter, faces its worst crisis in decades after the decline in oil prices and last year’s introduction of a currency peg that prompted a large-scale capital flight.

Nigeria’s cabinet agreed on Wednesday to borrow more abroad in foreign currency to lower lending costs and raise funds to support its ailing economy.

“Over the long run, a weaker currency will help Nigeria’s economy by encouraging import substitution and attracting foreign investors, who have shunned the country for fear of a devaluation,” Capital Economics’ John Ashbourne said.

“But the move will be painful over the short term. Higher import prices will add to inflation … This will probably force the authorities to tighten monetary policy.”

 

(By Ulf Laessing and Joe Brock Additional reporting by Alexis Akwagyiram, Chijioke Ohuocha, Sujata Rao and Camillus Eboh; Writing by Joe Brock and Ulf Laessing; Editing by Richard Balmforth)

 

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