CONTENTS.

1. CURRENCY.

2. NIGERIA’S ECONOMIC SHIFT.

3. FINANCES.

CURRENCY

The Nigerian Naira’s Rollercoaster Ride in H1 2024.

The Nigerian Naira’s Rollercoaster Ride in H1 2024

Steep Climb and Bumpy Descent

The first half of 2024 was a period of significant volatility for the Nigerian naira. January saw a sharp rise from N907.11/$1 in December 2023 to over N1,348.62/$1, reflecting depreciation due to economic challenges. February continued the trend, reaching a peak of N1,655.50/$1 – the highest point in H1. March brought some recovery with a gradual decline to N1,309.39/$1 by month’s end.

April’s Ups and Downs, June’s Relative Calm

April offered initial stability, but the exchange rate began to climb again, closing at N1,419.11/$1. May continued the pattern with fluctuations between N1,354 and N1,533 before ending at N1,485.99/$1. June, however, provided some respite. The exchange rate hovered between N1,473 and N1,520, closing at N1,505.30/$1 – a 1.3% depreciation for the month, but a sign of relative stability compared to earlier volatility.

CBN’s Measures and Market Response

The Central Bank of Nigeria (CBN) implemented various reforms in H1 2024 to improve FX supply and manage demand. These included:

• Unification of the foreign exchange market
• Multiple circulars and policy actions to liberalize the market
• Revised International Money Transfer Operations (IMTOs) to prioritize Naira payouts
• Stricter regulations on FX purchases through Bureaus de Change (BDCs)
• Crackdown on excessive FX speculation by banks
• New guidelines for international oil & gas companies’ FX inflows

Despite these efforts, the 40% depreciation in H1 suggests some market skepticism about their effectiveness. Nairametrics reported the NAFEM window might record its lowest FX turnover in five months due to dollar illiquidity.

Challenges and a Glimmer of Hope

The FX market’s downturn persists despite CBN reforms. Naira depreciation and reduced FX turnover highlight the liquidity challenges facing the Nigerian economy. The CBN’s decision to raise the Monetary Policy Rate (MPR) by 750 basis points between January and May aimed to combat inflation and attract foreign investors. While fixed-income markets have seen higher yields, FX liquidity remains a major issue due to high demand and low supply.

On a positive note, Nigeria’s foreign reserves reached a three-month high of $34.07 billion in June 2024, potentially due to reduced CBN intervention and increased oil exports.

Conclusion

The first half of 2024 presented a picture of a volatile Nigerian exchange rate. While the CBN’s efforts to stabilize the market are ongoing, the success of these measures remains to be seen. Only time will tell if the recent relative stability in June signifies a turning point or a temporary pause in the ongoing currency fluctuations

NIGERIA,s ECONOMIC SHIFT.

30% Increase in Nigeria’s Food and Beverage Imports in Q1.

 The first-quarter foreign trade report by the National Bureau of Statistics (NBS) reveals a significant increase in Nigeria’s food and beverage import bill, rising by 30% to N1.59 trillion. This surge marks a notable escalation compared to the same period in 2023, with a staggering 115% increase in food and beverage imports.

Breakdown of Food and Beverage Import Categories

 The National Bureau of Statistics (NBS) report offers a detailed breakdown that illustrates primary food and beverage imports totalling N726 billion for the quarter, indicating a substantial increase from the previous quarter. Within this category, imports for household consumption and industries play a pivotal role, reflecting a growing demand for essential commodities.

Primary Food Imports: This category encompasses food items for both household consumption (N186.6 billion) and industrial use (N540.1 billion). Both segments witnessed increases compared to the previous quarter and the corresponding period in 2023.

Processed Food and Beverage Imports: This category saw a year-on-year increase of 137%, reaching N865 billion in Q1 2024. Similar to primary imports, this segment is further divided between household consumption (N358.27 billion) and industries (N507.2 billion), both experiencing significant growth.

 Impact of Weak Naira on Import Activities

The 30% increase in the value of food and beverage imports is primarily attributed to the substantial depreciation of the naira during the quarter. Despite this surge in value, analysis reveals a decline in the dollar value of imports, indicating potential challenges in sustaining import volumes amidst currency fluctuations. When compared using the exchange rate on March 31st of each year, the dollar value of imports declined:

– Q1 2023: $1.6 billion

– Q4 2023: $1.34 billion

– Q1 2024: $1.21 billion

This indicates a potential decrease in the actual volume of imported food and beverages despite the rising import bill in naira terms.

Implications for Proposed Food Importation Policy

Amidst discussions of opening borders to food imports, particularly rice, the depreciation of the naira raises concerns about the policy’s effectiveness. Imported foods, especially rice, might become more expensive due to the weakened currency and supply deficit exacerbated by global factors like India’s rice export embargo

FINANCES.

How to Manage Your Finances Effectively Amidst Rising Living Costs

 In the face of rising expenses and the soaring cost of living, it’s crucial to adopt smart financial strategies to safeguard your financial well-being. Here are some tips to help you navigate through these challenging times:

 Cut Luxury Expenses: Now is not the time to splurge on luxury items. Avoid trying to keep up with extravagant trends and instead focus on prioritizing essential expenditures. By cutting down on luxury expenses, you can free up more funds for necessities.

Draft and Adhere to a Strict Budget: A well-planned budget is essential for managing your finances effectively. Make sure to create a detailed budget outlining your income and expenses, and stick to it diligently. With a robust budget in place, you can avoid unnecessary spending and stay on track financially.

Consider DIY Alternatives: Embrace the do-it-yourself (DIY) mindset to save money on various expenses. Whether it’s preparing meals at home instead of dining out or finding DIY solutions for everyday needs, exploring alternative options can help reduce costs significantly.

Plan Your Trips Wisely: With transportation costs on the rise, it’s important to plan your trips carefully to minimize expenses. Avoid unnecessary travel and opt for virtual meetings whenever possible to save on transportation costs. Additionally, plan your trips home strategically to optimize savings on travel expenses.

 Invest to Grow Your Money: Investing is a powerful tool for building wealth over time. Consider exploring investment opportunities such as stocks, bonds, or real estate to grow your money and secure your financial future. By making smart investment decisions, you can generate passive income and achieve long-term financial goals.

Contact us today for more insight into financial advisory, investment and loans.

SOURCES: centrumfinanceltd, Nerdwallet, The Balance, istock images, Arise news, Nariametrics, Channels,  Punch.

DISCLAIMER

This publication is produced by Centrum Finance Company Limited solely for the information of users who are expected to make their own investment decisions without undue reliance on any information or opinions contained herein. The opinions contained in the report should not be interpreted as an offer to sell, or a solicitation of any offer to buy any investment. Whilst every care has been taken in preparing this document, no responsibility or liability is accepted by any member of the Company for actions taken because of the information provided in this publication.