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Exchange rate depreciates further, edges toward N600/$1 at P2P market

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1650440703 839 Naira Vs Dollar

Tuesday, 19th April 2022: The exchange rate between the naira and the US dollar closed at N417/$1 at the Investors and Exporters (I&E) window, where forex is traded officially.

Naira recorded a marginal gain against the US dollar on Tuesday, after the long Easter holiday, appreciating by 0.12% to close at N417/$1, compared to N417.5/$1 recorded as of the close of trading activities last week Thursday.

However, a sum of $155.44 million exchanged hands on Tuesday, which is 20.81% lower than the $196.28 million traded in the previous trading session.

The exchange rate at the peer-to-peer market fell further to N591.1/$1 on Tuesday morning, representing the highest rate recorded since we started tracking the market. It also represents a 0.19% depreciation compared to N590/$1 recorded on Thursday, 14th April 2022.

In the same vein, the exchange rate at the parallel market closed at N589/$1, on Thursday, declining by 0.17% compared to N588/$1 traded last week Wednesday. This is according to information obtained from BDCs operating in Nigeria.

Meanwhile, Nigeria’s foreign reserve continue to improve on the back of bullish crude oil price. External reserve gained 0.02% on Thursday, 14th April 2022 to stand at $39.74 billion compared to $39.73 billion recorded as of the previous day. The Central Bank has continued to intervene in the official forex market from the external reserve in order to maintain the stability of the local currency.

Trading at the official NAFEX window

The exchange rate at the Investors and Exporters window closed at N417/$1 on Tuesday, 19th April 2022, representing a 0.12% appreciation compared to N417.5/$1 recorded in the previous trading session.

  • The opening indicative rate closed at N417.45/$1 on Tuesday, 19th April 2022, which is 5 kobo higher than the N417.4/$ recorded in the previous trading session.
  • An exchange rate of N444/$1 was the highest rate recorded during intra-day trading before it settled at N417/$1, while it sold for as low as N410/$1 during intra-day trading,
  • A total of $155.44 million was traded in FX at the official Investors and Exporters window on Tuesday.
  • According to the data from the FMDQ, forex turnover decreased by 20.81% from $196.28 million recorded last week Thursday to $155.44 million on Tuesday, 19th April 2022.

Crypto market update

The crypto market started on a positive note on Wednesday morning, 20th April 2022, gaining in market value by 0.1% to stand at $1.89 trillion.

Flagship crypto asset, bitcoin on the other hand dipped 0.05% to trade at $41,486.57 as of the time of writing this article.

Meanwhile, the second most capitalized crypto-asset gained 0.1% to trade at $3,105.45, while Solana dipped 0.43% to trade at $108.08, Terra declined by 0.39% to trade at $95.18, while Uniswap recorded a 0.63% decline to trade at $9.48.

Naijaonpoint reported that 79,710 traders worth $237.37 million, were liquidated as flagship cryptocurrency asset, Bitcoin fell below $40,000. However, bitcoin price has rallied back above $41,000.

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Why are poor Nigerians making more phone calls?

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Last week, the CEO of MTN, Nigeria’s largest telecommunications network told investors that as of April 25th this year, “approximately 60 million subscribers have submitted their NINs, representing about 85% of our subscriber base” who are allowed to make calls.

Yet the company posted voice revenue of N258 billion up from N244.6 billion same period last year and N209.4 billion in the immediate past quarter (2021 Q4). Airtel, the only other listed GSM company reported that it had 35.9 million subscribers out of a customer base of 44 million subscribers yet its revenue on voice calls rose to $268 million (N112.5 billion) between January and March this year compared to $246 million (N103.3 billion) in the immediate past quarter (October to December last year).

These sorts of numbers suggest against all odds, Nigerians are making more phone calls than ever before. Telcos have often pointed to data as an area of immense growth however, it is obvious voice remains a key aspect of their growth trajectory. So, what is driving these numbers?

According to MTN, Voice revenue growth “was enabled by our expanded customer acquisition touchpoints and rural telephony initiatives, as well as our enhanced customer value management (CVM) toolkit, which reduced the impact of the SIM registration and activation restrictions” suggesting low-end value customers underpinned this growth.

Here is Airtel’s explanation. “Voice revenue grew by 15.9%, driven by an increase in voice usage per customer of 20.8% which led to an ARPU increase of 20.7%. Customer base growth was affected by the NIN-SIM linkage regulations in Nigeria during the first half of the year but returned to growth, adding 4 million customers in the second half of the year, achieving net growth of 2.4 million customers over the full year. The number of regulatory approved outlets expanded to over 19,100 as of 31 March 2022.”

Airtel also went further to reveal its Voice minutes per customer reached 257 minutes per month, up by 9.8%, resulting in voice ARPU growth of 8.0%. MTN does not reveal voice per unit numbers.

So, why are poor people calling more? This could point to a number of factors based on our thesis. Telcos have mastered the art of price differentiation in recent years offering low-end users several benefits that encourage longer call minutes. By lowering prices, customers stay longer on the phone, revving up sales. This is the typical value play in aby market catering to poor people. Increase volumes by reducing price or increase volumes by maintaining price but shrinking package.

Another reason is the dominance of younger Nigerians as a percentage of the total population. As more young Nigerians get to the age of 16, they demand to own their own phones and sim cards ensuring voice revenue growth is sustained. Most of the youthful Nigerians are also in rural areas relying on telephone calls to contact family and facilitate commerce. Insecurity is also increasing the use of phone calls to communicate more than ever, we believe. Just as Covid-19 has aided data usage, more people also rely on telephone calls to reach family in distant locations across the country. While growth in calls cannot be compared to data, it remains a dominant revenue segment for telcos. Telcos know this and continue to invest hundreds of billions in building out their networks including expanding SIM card registrations and compliant with NIN.

They know how important voice is to their business, especially for the informal market without smartphones, relying on it to communicate evermore. Nigerians like to talk, and the telcos know this.

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UK Affirms Commitment to Regulate Stablecoins Following Terra Meltdown

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uk stablecoins

The British Treasury Department has affirmed its commitment to regulate stablecoins after the collapse of terrausd (UST) and terra (LUNA). “This will create the conditions for issuers and service providers to operate and grow in the U.K., whilst ensuring financial stability and high regulatory standards,” said an HM Treasury spokesperson.

HM Treasury, the U.K. Treasury Department, is moving forward with plans to regulate payment stablecoins despite a crypto market meltdown last week, The Telegraph reported Saturday.

The affirmation followed the collapse of Terra which saw algorithmic stablecoin terrausd (UST) lose its peg to the U.S. dollar and terra (LUNA) fall to near zero.

A HM Treasury spokesman said:

“This will create the conditions for issuers and service providers to operate and grow in the UK, whilst ensuring financial stability and high regulatory standards so that these new technologies can be used reliably and safely,” the spokesperson added.

Prince Charles delivered the Queen’s Speech last week, outlining the British government’s legislative agenda for the next parliamentary year. Two of the bills put forward specifically mention crypto assets.

The U.K. government unveiled a detailed plan in April to make the country a global crypto hub and “a hospitable place for crypto.” The plan includes establishing a dynamic regulatory framework for crypto, regulating stablecoins, and working with the Royal Mint to create a non-fungible token (NFT) to be issued by summer.

Rishi Sunak, the British chancellor of the exchequer, has said the plan will “ensure the UK financial services industry is always at the forefront of technology and innovation.”

However, the Treasury does not plan to include algorithmic stablecoins in the legislation, saying they do not guarantee stability. Terrausd (UST) is an example of an algorithmic stablecoin.

The HM Treasury spokesperson further detailed:

“We will continue to monitor the wider crypto asset market and stand ready to take further regulatory action if required,” the spokesperson included.

U.S. lawmakers also called for the urgent regulation of stablecoins last week following the fall of Terra. However, Treasury Secretary Janet Yellen believes that stablecoins are currently not a real threat to U.S. financial stability.

What do you think about the U.K. government’s commitment to regulate stablecoins? Let us know in the comments section below.

Image Credits: Shutterstock, Pixabay, Wiki Commons

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