Day: February 14, 2018

ECONOMIC UPDATE: Proactive or Defensive CBN?

In the month of January, daily average turnover at the Investors and Exporters Window (IEW) touched an all-time high of $274million, 35% higher MoM with a total of ~$6.1 billion sold. Notably, although the CBN has been a net buyer in the market since August 2017, (~$569 million average net purchase from August – December 2017), the apex bank mopped up sizable dollar flows in the month of January – net purchase of $1.3 billion.

Basically, supply in the IEW has consistently outpaced demand, providing the CBN with scope to shore up its external reserves. As at 31st January 2018, the apex bank reserves grew by +5% MoM to $40.7 billion. In our view, the CBN is taking pre-emptive measures for any expected outflows stemming from global monetary policy normalisation and domestic political risk. However, this observation begs the question on why the excess supply has yet to force a noteworthy appreciation in the naira, especially when the CBN accounted for ~22% of transactions in the window. Is the CBN trading off between an appreciation in the value of the naira for currency stability over 2018?

Further analysis into trading activities in the market reveal increased dollar inflows as client sales to the I&E Window jumped 27% to $2.3billion while member (dealing banks) purchases declined 19% to $848 million – indicating increased FX liquidity in the window. The CBN also increased sales across other segments of the market in a bid to close market spread. Precisely, the apex bank increased its sales to Wholesale, retail SMEs and invisibles’ market by 25% to $1 billion.

Over the rest of the year, we do not see any shock to the currency as our analysis reveal the expected monthly oil and non-oil inflow as well as the current build-up of the country’s reserve puts the apex bank in a better position to defend the naira. Underpinning our view is a scenario analysis carried out on the potential impact of a capital flight from the fixed income market as we believe foreign investors will remain attracted to the equity market. We look at maturing bills for the rest of the year and assume foreign investors hold back from rolling over their maturing bills because of expectations of lower return and election risk.

Furthermore, on the basis that foreign investors hold 30-50% maturing instruments, we overlay the expected outflow with our expectations on oil and non-inflow for the rest of the year. For us, despite the higher outflow in May 2018 due to the maturing bond worth N302 billion ($838 million) – the current build up in reserve ($40 billion) as well as the move by CBN to take up the excess FX supply at the I & E window takes out thought of a depreciation in the currency.

 

VIEW FULL REPORT HERE

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Valentine for three…

If I wanted that life, I could easily be a ‘baba for the girls’. Easy on the eyes, good job, great personality, many ladies have referred to me as the possible answer to their prayers. But I am all about one girl. Cynthia has been with me since before I was me. I have fond memories of her traveling to visit me in the one room I shared with three other guys while I served my country. She was the one who ironed the shirt I wore on the first day at my first job. She sent me the link advertising my current power job. When I could finally afford a place of my own, she was the one who chose the two bedrooms flat in Thomas estate where I currently reside.  The decoration screams her name, but I will have it no other way.

Another good thing about Cynthia is her simplicity and prudence. While I would like to take her on a short vacation somewhere for Valentine, she would never agree. Her reason- why spend so much on a 24-hour event when we could do much more with the money. Smart girl, my Cynthia. So, our Valentine routine is simple; a day in, just the two of us, no outing, no dates, no friends or family- just us. And it is always super cool. Until about 5 pm when my landlord and his family members return home from their offices and schools. Then everything scatters.

You see, my landlord is a polygamist,  two wives and seven children and they make the loudest noise you can imagine just going about their day. Unfortunately for me, their kitchen is just behind my bedroom window, so I am usually able to catch all the action live. If the wives are not arguing over whose turn it is to make landlord’s dinner, one child will be accusing another of stealing his drink in the fridge while another set of children are fighting over what television station to watch. On some days, I do not mind the noise, I try to mentally tune them off and enjoy the comfort of my house but not on Valentine’s day.

Three years ago, the eldest son came to borrow my spanner while Cynthia and I were watching our Valentine movie. Let’s just say he ended up watching the whole movie with us and even stayed to share his opinion of the story. Two years ago, Cynthia was trying out the ayamase recipe she just discovered for our special Valentine lunch, baba landlord’s junior wife perceived the aroma while she was picking clothes from our shared laundry line and decided to stop by to ask about the source of the aroma. We eventually shared our Valentine lunch with her.

The most annoying of all Valentine fiascos was last year’s episode. I had planned to propose to Cynthia on Valentine’s day last year. I had a selection of carefully hand-picked songs. Songs that had meant something to us at different points of our journey together. The way I envisioned it, the songs would tell a story and eventually lead to the perfect moment. Alas, Baba landlord and his family won’t allow me be great. They chose that hour of the day to have a ‘don’t forget the lyrics’  contest. The jeers and cheers from the other children as each child had his/her turn were so loud Cynthia and I could hardly hear each other, not to talk of the soft music I was playing. When I increased the volume in an attempt to drown out their noise, she decided the sound collision could not be healthy and proceeded to turn off my music player since we could control that sound. The ring immediately felt heavier in my pocket as I saw my proposal plans scatter. I eventually had to plan an entirely different proposal, this time, not situated in my home.

This year, as we look forward to our wedding, I want nothing more than to give my babe the Valentine she has always wanted- intimate, void of disturbances, focused on just us but I cannot dare hope. My landlord’s children cannot be trusted. I wonder how we will cope when we marry, all this noise and interference cannot be good for a young marriage.

As always, Cynthia saved the day. She sent me a link she had found online. It said I could fire my landlord with just 1.2 million. We knew the opportunity was for us and jumped on it.  It’s ok whatever stunt the landlord’s family pulls this year, we can’t be bothered much- we are looking forward to our happy intimate life in a house that will eventually be 100% our own.

 

Nothing says I love you like offering her peace of mind in a home that is completely yours. Make your babe happy, fire your landlord with just 1.2 million and start the rewarding journey of living in your own home.  How does it work? Find out here.

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