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Naira rebounds in parallel market

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The naira, which had fallen sharply in the parallel market, staged a major recovery thursday, as it appreciated to a band of N225 to N230 to a dollar, compared to N240 to the dollar at which it sold in the last few weeks.

Forex dealers attributed the naira’s gain to excess supply of the greenback in the market, even as it looked like a lot of speculators would lose their shirts.

It was gathered from a reliable source that commercial banks that presently have dollars in excess of $1 billion in their vaults have started taking desperate measures to mitigate currency risk.

In fact, the source, a bureau de change (BDC) operator, disclosed that banks have stopped accepting dollars because they have too much cash in their vaults.

According to the source, as a result of the development, banks have been rejecting dollar deposits into domiciliary accounts, but customers are allowed to withdraw cash from their accounts.

“The reason the banks have too much cash is due to speculation and money laundering. A lot of people have been speculating against the naira and amassed so much cash. Then there are those who have been amassing dollars obtained illicitly and want to launder the money,

“So bank vaults are awash with dollars, largely driven by speculation and money laundering. The banks made it very clear that they want to get rid of the dollars in the system, so if you want to withdraw you can, but you cannot pay in dollars into your domiciliary account,” the source explained.

Confirming the development, an official of the Central Bank of Nigeria (CBN) said the banks even offered the dollars to the central bank and sought its assistance to help them to wire the funds overseas, which the CBN rejected.

Following the rejection, the banks were left with no option than to stop accepting dollar deposits from customers, hence the sharp depreciation of the dollar to the naira in the informal forex market.

“By the time CBN refused to wire the cash abroad, the banks led by Stanbic IBTC stopped accepting cash from their customers. Stanbic IBTC sent an email two days ago to its customers that it would not accept dollar deposits for the time being and this was followed by ten other banks,” he divulged.

He said the situation was compounded by CBN’s insistence that BDCs obtain the Bank Verification Numbers (BVNs) of their customers before transacting any business with them.

“The central bank introduced this measure so that it can track the wire transfer BDCs carry out on behalf of their customers. That way, a money trail can be established to ensure that the funds being wired out are for legitimate transactions and not illicit transfers.

“Another option available to the CBN is to give BDCs prepaid debit cards in denominations of $1,000 instead of selling them cash so that these cards could be used for legitimate transactions that are traceable,” the official explained.

Also, an analyst at Ecobank Nigeria, Mr. Kunle Ezun, who spoke to THISDAY, attributed the naira’s surge to the directive by the central bank that all licensed BDCs in the country must provide the BVNs of their customers for all transactions.

“I have been watching the market in the past few days and since last week’s directive by the central bank for the inclusion of BVNs as one of the requirements for accessing the interbank market, the naira has been appreciating.

“As the enforcement of the BVN commences next week, I think we would see more transparency in that market. I have always said that what is driving the parallel market is speculation and that is what the CBN has always said.

“So once the BDCs start complying with the BVN requirement, we might see the naira appreciate further in the parallel market,” Ezun said in a phone chat with THISDAY last night.

The CBN about a fortnight ago also directed the BDCs to provide the BVN of all their directors before August 15, as failure may affect their continued participation in the forex market.

It also directed that information on all transactions by customers be included in the BDC returns to the CBN. It added that for corporate customers, the BVN of a director or an authorised signatory of the entity must be provided.

The CBN said the move was to ensure greater transparency in the transactions of licensed BDCs in the country.

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BUSINESS

Stock futures fall ahead of a big week of retail earnings

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Stock futures fell early on Monday after a week of steep losses that ended on a high note, and ahead of a big earnings week for retailers.

Futures tied to the Dow Jones Industrial Average slipped by 31 points, or 0.1%, while S&P 500 futures fell 0.47%. Nasdaq 100 futures were down 0.71%.

On Friday, the Dow rose 466.36 points, or 1.47%, while the S&P 500 climbed 2.39%. The Nasdaq Composite jumped 3.82% and posted its strongest one-day gain since November 2020. Still, all three averages posted losing weeks.

The gains came as investors went into relief rally mode to cap off a bad week for stocks in which the S&P 500 nearly descended into bear market territory.

It remains to be seen, however, how long the rally will last or how much further stocks have to fall before this year’s downtrend bottoms.

“Given the history of bear markets, coupled with the fact that the Fed has just begun its rate hike cycle and would like to see financial conditions continue to tighten so that demand pulls back further, this rally will most likely weaken,” said Quincy Krosby, chief equity strategist for LPL Financial.

Still, some investors and analysts say, whether or not the bottom is in, there are good buying opportunities at the market’s current lows.

“I’m not calling the bottom here, but there’s some opportunity here to dollar cost average,” said Sylvia Jablonski, CEO and chief investment officer at Defiance ETFs, told CNBC. “If you’re sitting on a bunch of cash, you’re locking in losses because of inflation. Investing in equities or asset classes that you believe in… it is the lesser evil. The selling fatigue will wane, the market will reset. It’s unlikely the Dow and the S&P are going to be in correction territory six months to a year from now.”

Retail earnings season kicks off this week with several big-box retailers set to report results for the first quarter, including Walmart, Target and Home Depot. Elsewhere, Deere is also on deck, along with a handful of technology companies.

Investors will also have their eye on retail sales data this week, which could give them insight into how retailers are managing inflation, which remains near 40-year highs.

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Nigeria issues new guidelines on cryptocurrencies 

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The Nigerian government has released new guidelines aimed at protecting investors in digital assets as trades in cryptocurrencies get boost in Africa’s most populous nation.

The rules issued by the Securities and Exchange Commission (SEC) offers more clarity on trading in cryptocurrencies, it was learnt.

The rules cover “issuance, offering platforms and custody of digital assets” for virtual technologies, according to a statement on its website.

This is coming amidst controversy over the acceptability of cryptocurrencies in Nigerian financial ecosystem.

Despite order by the Central Bank of Nigeria (CBN) to commercial banks to stop transactions in cryptocurrencies, Nigeria is said to account for the largest volume of cryptocurrency transactions outside the U.S., as data from Paxful, a Bitcoin marketplace reveals.

Experts however believe this would go a long way in boosting trading in cryptocurrencies which is gaining global traction.

The new rules cover the issuance of digital assets as securities, the registration of platforms and digital asset custodians, exchanges and virtual assets service providers.

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BUSINESS

Apple is no longer the world’s most valuable company

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Oil giant Saudi Aramco on Wednesday surpassed Apple as the world’s most valuable firm.

Aramco’s market valuation was just under $2.43 trillion on Wednesday, according to FactSet, which converted its market cap to dollars. Apple, which fell more than 5% during trading in the U.S. on Wednesday, is now worth $2.37 trillion.

Energy stocks and prices have been rising as investors sell off equities in several industries, including technology, on fears of a deteriorating economic environment. Apple has fallen nearly 20% since its $182.94 peak on Jan. 4.

The move is mostly symbolic, but it shows how markets are shifting as the global economy grapples with rising interest rates, inflation, and supply chain problems.

Aramco stock is up over 27% so far in 2022. In March, the oil giant reported that its full-year profit last year more than doubled due to soaring oil prices.

Apple passed Saudi Aramco to become the world’s most valuable publicly traded company in 2020.

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