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Nigeria: Experts predicts Further Naira Depreciation As External Reserves Fall.

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The depreciation of the naira in the parallel market and the Investors and Exporters (I&E) window last week is expected to persist this week, even as the nation’s external reserves maintained its downward trend falling by $955 million in the first ten days of October.



Last week the naira depreciated by N1 in the parallel market where the exchange rate rose to N360 per dollar on Friday from N359 per dollar the previous week. In the I&E window, the indicative exchange rate crossed the N364 per dollar mark for the first time this year, rising to N364.12 per dollar on Friday from N363.42 per dollar the previous week.

On the other hand, data by the Central Bank of Nigeria (CBN) showed that the external reserves declined to $43.35 billion on Wednesday, October 10, from $44.305 at the end of September, translating to $955 million in the first day of the month.

The reserves have been declining steadily since July 5, when it peaked at $47.798 billion. Since then the reserves have declined by $4.448 billion or by 9.3 percent. The steady decline in reserves is driven by increased dollar sales by the CBN to meet increased demand prompted by foreign portfolio investors exiting the nation’s debt market.

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Last week, the CBN sustained its weekly injection of $210 million into the interbank foreign exchange market, allocating $100 million to the wholesale segment, $55 million to the SME window and $55 million for invisibles.

Analysts at Lagos based Cowry Assets Management Limited, projected further naira depreciation of the naira in most segments of the foreign exchange market this week due to persistent demand for dollar by foreign portfolio investors. They said: “This week, we expect further depreciation in the exchange rate in most market segments, especially at the I&E FX window as foreign portfolio investors’ demand for the greenback persist.”

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N494 billion inflow to moderate cost of funds

Meanwhile cost of funds is expected to further moderate downwards in the interbank money market this week in response N494.76 billion inflow from maturing treasury bills.

Last week, cost of funds dropped marginally in response to inflow of N277.07 billion inflow from matured treasury bills (TBs) which mitigated the impact of N244.1 billion mopped out of the market by the CBN through secondary market (or Open Market Operation, OMO) TBs.

Naira down to N360.3/$ in parallel market

According to FMDQ, interest rate on Collateralised lending (Open Buy Back, OBB) dropped by 169 basis points (bpts) to 19.17 percent on Friday from 20.86 percent the previous week. Also, interest rate on Overnight lending dropped by 230 bpts to 19.75 percent last week from 22.05 percent the previous week.

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Ghanaian government boost Agric sector lending with GHC400m provision.

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The Ghanaian Government has set aside GH¢400 million, with an additional funding of $14.0 million from the Africa Development Bank, towards the establishment and operationalisation of the Ghana Incentive Base Risk Sharing System for Agricultural Lending (GIRSAL) next year.

This system would to help manage the risks and stimulate private sector lending to the agricultural sector by providing guarantees to promote commercial bank lending.



Mr Ken Ofori-Atta, Minister of Finance, announced this when he presented the 2019 Budget Statement and Economic Policy of the Government to Parliament, The Budget is on the theme: ‘A Stronger Economy for Jobs and Prosperity’.

He said the Government would launch the livestock model of Planting for Food and Jobs dubbed: “Rearing for Food and Jobs” (RFJ) with the objective of increasing the production of selected livestock, especially poultry.

The Government, he said, believed that the country could leverage the PFJ and RFJ programmes and other efforts in agriculture to reduce the large food imports.

He said following a year of implementation of the PFJs Programme, the agricultural sector witnessed a growth rate of 8.4 per cent in 2017 and this was after almost a decade of erratic sector performance with an average growth rate of 3.4 per cent.

Mr Ofori-Atta said on account of this massive success, the Government implemented an expanded version of the PFJ in 2018, with more ambitious targets.

He said compared with a target of 500,000 farmers, a total of 577,000 farmers were supplied with subsidised fertilisers and seeds for the 2018 cropping season. ‘We expect another highly successful year and in 2019, we plan to expand the programme to cover a million farmers.’

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The Minister said as a country, ‘we spend over $2 billion every year importing food, for example, we import over a billion dollars of rice, $ 320 million of sugar, and $374 million of poultry.’

He said most of these the country could produce here in Ghana; creating jobs and saving foreign exchange.

It was, therefore, a key goal of the Government, he said, to replace a significant fraction of these imports with domestic production in the medium-term.

He said in the case of rice, the strategy was to increase volumes through increased yields of rice by expanding production areas in irrigated schemes, valleys and low lands around the country.

Mr Ofori-Atta said this strategy would be underpinned by making available to farmers, improved and certified seeds, subsidised fertilizers, enhanced access to mechanised harvesters to reduce post-harvest losses due to traditional labour-intensive threshing, and encourage private sector investment in milling facilities.

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‘This will ensure that the quality of locally processed rice will be at par with imported rice,’ he added.

In the case of poultry, the Minister said about 70 per cent of the cost of production was from feed, which in turn was primarily determined by the cost and availability of maize and soya bean.

He said in order to bring down the cost of feed and make poultry production competitive, the Ministry of Food and Agriculture was working on a programme to sustainably boost soybean production through the provision of improved and certified seeds, subsidised fertilisers and harvest equipment to reduce field losses.

The Minister said adequate good storage for agricultural produce was a challenge that the country must address to avoid a situation, where the increased agricultural production arising from the support to farmers would end up going to waste.

‘In 2019, Government expects to increase its warehouse storage capacity by around 80,000 metric tonnes,’ he said.

On World Cocoa prices, he said the prices remained low after declining by about a third in the 2017/2018 season.

However, despite the significant decline, the Government maintained the producer price at GH¢7,600.00 per tonne to ensure that farmers did not suffer loss of income and purchased 904,000 metric tonnes of cocoa in the 2017/18 season.

He said Ghana needed to add value to its Cocoa output and Ghana, adding that, together with Cote d’Ivoire, they produced about 60 per cent of the world’s Cocoa.

‘But we earn only $6 billion of the world Cocoa value chain earnings of $125 billion—just about five per cent,’ he pointed out.

Through the Ghana-Cote d’Ivoire Cocoa Initiative, the Government, he said, was working on several fronts to increase the value they gained from Cocoa.

They include: Vigorously promoting both domestic and international cocoa consumption; and initiatives for market expansion for exports of cocoa products to Asia; and provision of incentives to the private sector to set up cocoa processing factories.



The Minister said the Government, had also as part of its strategy, to revamp the agricultural sector by placing focus on the tree crop subsector.

‘Cabinet has approved the formation of a Tree Crop Development Authority (GTCDA) to regulate and create a favourable environment for the growth and development of that sector,’ he said.

The Authority will initially regulate the cashew, sheanut butter, oil palm and the rubber crop sub-sectors, with other tree crops being added as and when necessary.

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South Africa Rand stables against embattled pound

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The rand was relatively stable on Friday morning, and headed for its best week against the beleaguered pound in about nine weeks.



The fallout from the failure of the UK’s Brexit plan is on traders’ radars, overshadowing the controversial and divisive land reform debate, which has previously hurt the rand.

“May has seen her plans for ‘Shmexit’ torn apart: that is what one could dub a Brexit that is literally leaving the EU, but which in no way regains sovereignty in key areas, and which might be impossible to ever change further unilaterally,” UK-based Rabobank International analyst Michael Every said in a note.

“Indeed, we have seen a swathe of key ministerial resignations, and suggestions there are enough MPs’ votes in hand to trigger a leadership election as soon as next week.”

The pound tanked against a host of currencies on the news, but has since stabilised at lower levels as markets await further developments.

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The rand has benefited from the ensuing market volatility, settling a hefty 3% stronger against the pound on Thursday night. Local bonds have benefited, too.

The local currency has fared better against the dollar so far this week, strengthening the case for a big cut in fuel prices in December.

According to AA, the petrol price is likely to be cut by R1.54 a litre, diesel by 92c and illuminating paraffin 85c.

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The expected drop in fuel prices comes as oil prices fall: Brent crude is about 10% lower in November, according to Iress data.

At 10.12am, the rand was 0.2% softer against the dollar at R14.2075, 0.32% weaker against the euro at R16.12 and 0.36% softer against the pound at R18.1858. The euro was 0.14% stronger to $1.1346.

The yield on the benchmark R186 bond slipped to 9.145% in early trade, from 9.17% at its last settlement.

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