THIS WEEK: US FED’s hawkish stance threatens the Naira as crypto market continues downward trend

This week, the United States Federal Reserve raised its target interest rate by 75 basis points (0.75%) leading experts to believe that the Naira would depreciate further.

Also, the entire cryptocurrency market capitalization falls below the $1 trillion mark as the market selloff intensifies with Bitcoin falling below the $25,000 support zone, a price point not traded since December 2020.

Here is a compilation of this week’s notable happenings in the Nigeria macro-economic space, markets, regulators as well as in other world economies.

MACROECONOMY

Exchange rate

• The exchange rate at the official market depreciated marginally during the week, falling by 0.01% to close at N421.33/$1 on Friday from N421.25/$1 recorded in the previous week. A total of $376.1 million in FX value was traded in the Investors and Exporters window between Tuesday and Thursday compared to $503.78 million that was traded in the previous week.
• Similarly, at the black market, the naira closed at N607/$1 on Friday, 17th June 2022 compared to N608/$1 recorded in the previous week. This represents a marginal appreciation of the local currency against the USD.
• On the other hand, the exchange rate at the peer-to-peer market closed at N607/$1, representing a 0.27% depreciation compared to N605.35/$1 recorded as of the previous week.

External reserve

• Nigeria’s external reserve continued in its upward trend during the week following the $39.9 million gain in the previous week. The external reserve level improved by $148.43 million in the week under review to stand at $38.66 billion as of Thursday, 16th June 2022.
• The Nigerian reserve level had plunged considerably, due to the apex bank’s continual intervention in the official I&E window. However, sustained crude oil price elevation has resulted in an uptick in the nation’s foreign reserve, which will be beneficial in defending the local currency.

Nigeria’s inflation rate surged to 11-month high at 17.71% in May 2022

• The consumer price index, which measures the rate of inflation rose by 17.71% year-on-year in May 2022, which is 0.89% points higher than the 16.82% recorded in the previous month (April 2022). On a month-on-month basis, the headline index increased by 1.78% in May 2022, compared to the 1.76% increase recorded in the previous month.
• Similarly, the urban inflation rate increased to 18.24% (year-on-year); this is a 0.27% decline compared to 18.51% recorded in May 2021. On the other hand, the rural inflation rate increased to 17.21% in May 2022 (year-on-year) basis; this is a 0.15% decline compared to 17.36% recorded in the corresponding month of 2021.
• The food index rose by 19.5% year-on-year in May 2022, representing a 1.13% points uptick compared to 18.37% recorded in the previous month and 2.78% decline compared to the corresponding period of 2021 (22.28%).
• The “All items less farm produce” or Core inflation, which excludes the prices of volatile agricultural produce stood at 14.9% in May 2022 on a year-on-year basis, up by 0.72% points compared to 14.18% recorded in April 2022 and 1.75% points higher than the 13.15% recorded in May 2021.

Equities

• The Nigerian stock market closed the week on a bearish note as the All-share index shed 2.29% to stand at 51,778.1 basis points from 53,201.38 points recorded as of the previous week. This brings the year-to-date gain to 21.21%, while the market on a month-to-date basis has dipped by 2.29%.
• The decline in the stock prices of Livestock Feeds, Int’l Breweries, Cutix Plc, and Meyer Plc pulled the market downwards during the week.
• A total turnover of 940.89 million shares worth N11.49 billion in 20,077 deals was traded this week by investors on the floor of the Exchange, in contrast to a total of 1.831 billion shares valued at N19.494 billion that exchanged hands last week in 21,723 deals.
• The market opened for four trading days this week as the Federal Government of Nigeria declared Monday 13th June 2022 (Democracy Day) as a public holiday to commemorate the 2022 Democracy Day celebration.

REGULATORS

US Federal Reserve hikes benchmark interest rate by 0.75 percentage point

• The United States Federal Reserve raised its target interest rate by three-quarters of a percentage point to combat a disruptive rise in inflation, while also forecasting a weakening economy and growing unemployment in the months ahead.
• This was disclosed via a press release titled ”Federal Reserve issues FOMC statement”. The rate hike is the biggest by the Federal Reserve since 1994, and it came after recent data indicated little headway in the country’s inflation fight.
• Officials from the United States’ central bank hinted at a speedier path of borrowing cost hikes ahead, aligning monetary policy more closely with a swift shift in financial market estimates of what it will take to bring price pressures under control this week.

AMCON gulped N125.9 billion from Nigerian banks in Q1 2022

• Nairametrics reported during the week that the Asset Management Corporation of Nigeria (AMCON) has received a sum of N125.9 billion from twelve commercial banks listed on the Nigerian stock market as part of the Sector Resolution Funds in the first quarter of 2022.
• According to the report from the financials of the listed banks, AMCON bank charges increased by 29.5% from N97.18 billion paid in the corresponding period of 2021 to N125.9 billion in the review quarter.
• The twelve banks are Access, GCMB, Fidelity, FBN, GTCo, Stanbic IBTC, Sterling, UBA, Union, Unity, Wema, and Zenith Bank. The increase in AMCON charge is attributed to the impressive rise in the total assets of the banks. Notably, in the first quarter of 2022, the aggregate total assets of the banks stood at N61.23 trillion, representing 5.29% increase compared to the beginning of the year.

US Federal Reserve says rate hike is not meant to induce recession

• After intensifying interest rate hikes, Federal Reserve Chairman, Jerome Powell indicated on Wednesday that the central bank hopes to prevent a recession.
• The Fed’s interest rate hike on Wednesday was the most in a single meeting since 1994. The target range for short-term borrowing costs is currently 1.50% to 1.75%.
• Powell said the Fed’s goal is to depress the rapid pace of inflation closer to its 2% target, all while preserving a “strong” labour market.
• “We’re not trying to induce a recession now, let’s be clear about that,” Powell told reporters after the policy-setting Federal Open Market Committee raised short-term rates by 0.75%.

Latest US Interest Rate hike ‘will lead to Naira devaluation’ – Experts

• The US FED’s hawkish stance to stamp out rising inflation is likely going to cause some trouble for emerging markets like Nigeria.
• The US Federal Reserve hiked its benchmark interest rate by three-quarters of a percentage point this week. The rate hikes mean a stronger dollar against most of the world’s currencies including Nigeria.
• As a result, a stronger US dollar, backed by higher US interest rates, tends to reduce emerging market currency values at a time when many emerging markets (EM) economies are already struggling and their currencies have already fallen against the greenback.

Nigeria’s central bank to launch non-oil export optimisation framework

• The Central Bank of Nigeria has announced that it has established a comprehensive Non-Oil Export Optimisation framework, which would be unveiled on June 16 at its first non-oil export summit.
• Mr Osita Nwanisobi, Director, CBN Corporate Communications Department, disclosed this in a statement seen by the News Agency of Nigeria.
• The seminar, which is organized by the apex bank in partnership with the Bankers’ Committee as part of the Race to 200 Billion Dollars in Foreign Exchange (FX) Repatriation (RT200) program, he said, would focus on the present economic situation.

RT200 FX programme: CBN appeals for a dedicated route for exporters

• Dr. Godwin Emefiele, Governor of the Central Bank of Nigeria (CBN), has urged operators in the non-oil export industry to provide a dedicated route for exporters.
• On Thursday in Lagos, Emefiele made the call during the CBN’s first conference on RT200 non-oil exports, which had the topic “Setting the Roadmap Toward Achieving RT200 and Non-Oil Exports for Development.”
• Babajide Sanwo-Olu, the Governor of Lagos State, praised Emefiele for organizing the forum to promote non-oil exports in Nigeria. He stated that the Lekki Ports would be open to all Nigerians before the end of the year.

Three Nigeria banks fined N13.5 million for default filings of financial statement for 2021/2022

• The Nigerian Exchange Limited (NGX) has fined three banks N13.5 million for failure to file their financial statements after the regulatory due date.
• Investigation by Nairametrics showed that the companies were sanctioned during the current financial year 2022 for their inability to meet the regulatory requirements ranging between FY’2021 and the first quarter of 2022.
• The companies include Union Bank Plc, Unity Bank Plc and First Bank Holdings Plc. Further checks revealed that First Bank Holding Plc led with N8.1 million of the fines while Unity Bank Plc followed with a fine of N4.2 million and Union Bank Plc trailed with N1.2 million.

CRYPTOCURRENCY

CEL loses over 50% as Celsius pauses withdrawals

• CEL, the native token of the Celsius platform, a crypto lending service company, has crashed by over 50% in the last 24 hours as the company announced early Monday it would pause withdrawals, citing “extreme market conditions.”
• The company announced it would also pause its swap and transfer products, according to a blog post. It did not provide a timeline for resuming withdrawals.

Crypto market cap loses trillion-dollar status

• The entire cryptocurrency market capitalization falls below the $1 trillion mark as the market selloff intensifies with Bitcoin falling below the $25,000 support zone, a price point not traded since December 2020.
• Bitcoin’s fall under $25,000 during the Asian trading session is amid weakness in the macroeconomic environment and systemic risk from within the crypto market. The asset has slid for nearly twelve straight weeks, falling from nearly $49,000 in March 2022 to under $25,000.
• The market showed some signs of bottoming out in mid-May, after the Terra blockchain debacle, but worrying U.S. inflation data released last week did little to cushion falling sentiment. The consumer price index (CPI), the most widely tracked benchmark for inflation, rose 8.6% on a year-over-year basis in May, topping expectations that it would decline to 8.2% from April’s 8.3%.

Over $100 million exits US crypto funds in anticipation of potential rate hikes

• Institutional investors have now offloaded a total of $101.5 million worth of digital asset products last week, which looks to be in anticipation of hawkish monetary policy from the U.S. Federal Reserve according to CoinShares.
• The reasoning behind this is due to the U.S. inflation rates, which hit 8.6% year-on-year at the end of May, marking a return to levels not seen since 1981. As a result, the market is anticipating that the Feds will take considerable action to control inflation, with some traders pricing in three more 0.5% rate hikes by October and others also expecting a 0.75% hike.
• According to the latest edition of CoinShares’ weekly Digital Asset Fund Flows report, the outflows between June 6 and June 10 were primarily led by investors from the Americas at $98 million, while Europe accounted for just $2 million.

Why Elon is the target of a $258 billion lawsuit

• Elon Musk, who was once a Bitcoin enthusiast as his company, Tesla, owns Bitcoin and keeps it on his balance sheet, is now the subject of a class-action lawsuit, along with his companies SpaceX and Tesla Inc. They are all being sued for an astonishing $258 billion in damages for being, “engaged in a crypto pyramid scheme” involving the leading meme coin in the cryptocurrency market, Dogecoin.
• The damages sought are more than 34 times Dogecoin’s current market cap of $7.5 billion and nearly three times its ATH market cap of $88.68 billion in mid-2021. The amount sought is also more than Elon’s net worth by a little over $42 billion as at the time of this writing.
• The lawsuit was filed in the New York District Court by an attorney at Evan Spencer Law on Thursday and the lawsuit alleges that the world’s richest man, “used his pedestal as World’s Richest man to operate and manipulate the Dogecoin Pyramid Scheme for profit, exposure, and amusement.”

72 of the Top 100 Cryptos by Market Capitalization Have Fallen 90% Or More

• According to price data from CoinGecko, compiled by CoinGoLive, the current bear market has seen a whopping 72 out of top-100 tokens by market capitalization fall more than 90% from their respective all-time highs, which most of them hit last year.
• The data shows that the larger capitalized tokens are faring better than most. Among the top ten cryptocurrencies by market cap, nine have dipped less than 90% during the current market downturn. Bitcoin (BTC), the largest crypto, is down 70.3% from its November high of $69,000. Second place is Ether (ETH) which is down 78% from its high of $4,878.
• Others in the top ten include Binance Coin (BNB), Cardano (ADA), Solana (SOL), and Polkadot (DOT) which are down between 68% and 88%, (excluding the three stablecoins USDT, USDC and BUSD). Ripple (XRP) is the exception, tracking a fall of 90.56% from its ATH.

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