Last Tuesday, BitPesa hosted the first Future of Finance Executive Forum in Lagos. On the night\u2019s panel, we had three industry experts discuss solutions and methods to help businesses beat the inevitable volatility, as well as the impact elections could have on the economy. The panel, which was moderated by Sukhi Srivastan, Head of Global Sales at BitPesa, included:<\/p>\r\n\r\n\r\n\r\n
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- Idakwo Shaibu<\/strong>, Trade Finance Specialist at Sahara Energy, responsible for trade finance practice (risk management) and consultancy, letters of credit, Standby LC’s and Guarantees, as well as settlements and remittances on cross border trade transactions, including treasury management, and corporate finance.<\/li>\r\n
- Adeoye Ojuroye<\/strong>, CFO at Providus Bank, with a combined 16 years financial services experience. Previously at PWC, managing several due diligence and \ufb01nance function effectiveness engagements both in Nigeria and the UK.<\/li>\r\n
- Michael Nderitu,<\/strong> Head of Treasury at BitPesa, with 13 years experience in volatile markets, ranging from equities and government securities. Before joining BitPesa, he led trading teams at Dyer and Blair Investment Bank, NIC Bank, Spire Commercial Bank, and Rafiki Microfinance Bank.
<\/li>\r\n<\/ul>\r\n\r\n\r\n\r\nThe keynote was given by Mr. Dayo Hamzat, CEO at ZedCrest Capital Group, new-age financial solutions powerhouse. \u00a0The company has a Securities Brokerage arm, Zedcap Partners, which is engaged in the broking of financial products in sub-Saharan Africa Over-the-counter OTC Fixed Income and currencies markets (FICC).<\/p>\r\n\r\n\r\n\r\n
Please note that any opinions expressed during this panel and on this blog post are solely personal and not from the business or company associated with that individual.<\/p>\r\n\r\n\r\n\r\n
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<\/figure>\r\n<\/div>\r\n\r\n\r\n\r\nMr. Idakwo opened the discussion by sharing his thoughts on the general trends that influence currency valuation and stability – oil prices, investor confidence from Foreign Direct Investment and market sentiment. The bulk of FX relies heavily on the revenues from crude oil sales, so as long as oil prices stay stable, central banks will be able to put FX into the market. As for market sentiment, he believes that it goes a long way for people who have the foreign currency and are willing to sell. Therefore, when there are elections, fear of what will happen with the government will drive the supply of the FX.<\/p>\r\n\r\n\r\n\r\n
Michael, BitPesa\u2019s Head of Treasury, added an interesting position — that hedge funds start to exit their positions 6 months to 1 year before the elections. As they start to sell off, they accumulate a lot of Naira and want to expatriate their funds, so then they are in competition with existing businesses.<\/p>\r\n\r\n\r\n\r\n
Do national elections have an impact on the currency valuation and FX pricing? Mr Deoye continued the discourse:<\/p>\r\n\r\n\r\n\r\n
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\u201cOut of the foreign investors, the FDI\u2019s are here for the long term since they have investments like factories. However, the portfolio investors are the ones that invest in shares and government securities. Since they operate in cash, they pull out any time and their activities are the ones that affect the Naira. When they see election uncertainty, they sell, so there\u2019s a lot of outflow and this affects value of the Naira. However, the general trend to remember is that post-election inflow does happen and things do eventually balance out.\u201d<\/p>\r\n<\/blockquote>\r\n\r\n\r\n\r\n
Digging deeper, Mr. Idakwo shared the potential solutions his company, Sahara Energy, explores to curb the losses suffered as a result of exposure and FX volatility.<\/p>\r\n\r\n\r\n\r\n
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\u201c2015-2016 was a very interesting time in the market for us. As a downstream operator, we do a lot of imports, so we had large ticket transactions where we needed to source FX. \u00a0We hadn’t expected oil prices to decrease, but it happened and we were left out in the cold. We took advantage of tools like forwards and OTC futures, hedging our FX exposure.<\/p>\r\n<\/blockquote>\r\n\r\n\r\n\r\n
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We also tried to source more locally and find products in Nigeria. We took a haircut but it was the best solution at that point in time. In the downstream space there are a lot of interventions, and we were not prioritized by the bank for FX. \u00a0At the end of the day it’s not a fair market because of costs, but you have to think about how to price your products when you have FX exposure.\u201d<\/p>\r\n<\/blockquote>\r\n\r\n\r\n\r\n
When asked if he thought the regular intervention mechanism of the Apex regulatory body can eventually lead to stabilization of the FX Market, Michael shared:<\/p>\r\n\r\n\r\n\r\n
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\u201cCentral Bank interventions are ever present in the form of fiscal policy and monetary policy. Sometimes the Central Bank can be controlling and doesn\u2019t want to let currency go, but if there are problems, there is no amount of policy that can postpone the problem. \u00a0At the end of the day, the market will always finds a fair place.\u201d<\/p>\r\n<\/blockquote>\r\n\r\n\r\n\r\n
The discussion moved to how the upcoming elections in Nigeria will impact the capital market. Idakwo concluded by putting himself in the shoes of a foreign investor with the battered confidence levels and the uncertainty.<\/p>\r\n\r\n\r\n\r\n
\u201cOf course I would hold my stocks. But by the time policies begin to kick, the market will resume it\u2019s more stable nature. Investors are also thinking about what\u2019s happening outside of Nigeria, globally: Trump, Brexit, US, China all have an impact on the oil market. \u00a0OPEC has an agreement that will affect 13.9% of Nigerian productions.\u201d<\/p>\r\n\r\n\r\n\r\n
Deoye emphasized the importance of the security of funds over the returns.<\/p>\r\n\r\n\r\n\r\n
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\u201c There has been drop in the capital markets because of the outflow, and other markets are starting to look more attractive. Apart from looking at the indices globally that can affect the oil prices, if we have the elections, there is still a possibility of extension, the FX rate we have today is an anchor, but how far do we want to push the anchor? Whether the government of today remains, the FX rate is being subsidized, and at some point is it going to break. I say look into 6 months in the future!\u201d<\/p>\r\n<\/blockquote>\r\n\r\n\r\n\r\n
In conclusion, Sukhi welcomed the audience to ask questions. One guest sought to know what BitPesa could when banks prioritize foreign currency for select industries and where SMEs are left out. Michael was on hand to share how our treasury solution works.<\/p>\r\n\r\n\r\n\r\n
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\u201cThis is what BFX specializes in! We don\u2019t operate the same with the liquidity so we can work with you, regardless of the size of your transaction or size of the company. We\u2019re here to learn more about your business and think of innovative, customized tools to mitigate FX risk. This way, you can make sure you continue to operate throughout the election cycle.\u201d<\/p>\r\n<\/blockquote>\r\n\r\n\r\n\r\n\r\n\r\n
The panelists were mostly cautiously optimistic and in agreement about the elections. The effects will be long lasting, and the market will bounce back quickly. Given our expertise in managing treasury, we can help you manage your risk and make sure you have the access to FX that can help you. Sign up today.<\/a> If you have any questions, chat us below, email us at sijibomi@bitpesa.co<\/a> or call us at +2347054281073. <\/p>\r\n","protected":false,"gt_translate_keys":[{"key":"rendered","format":"html"}]},"excerpt":{"rendered":"
Since the re-introduction of democracy in the Nigerian federation in 1999, elections have, to varying degrees, caused ripple effects on the economy, which often led to scarcity of foreign currency, primarily USD, in the parallel market. In May 2018, recent trends showed that investors had lost a total N729 billion due to election anxiety in […]<\/p>\n","protected":false,"gt_translate_keys":[{"key":"rendered","format":"html"}]},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[18],"tags":[],"class_list":["post-3426","post","type-post","status-publish","format-standard","hentry","category-event-recaps"],"acf":[],"gt_translate_keys":[{"key":"link","format":"url"}],"_links":{"self":[{"href":"https:\/\/azafinance.com\/wp-json\/wp\/v2\/posts\/3426","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/azafinance.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/azafinance.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/azafinance.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/azafinance.com\/wp-json\/wp\/v2\/comments?post=3426"}],"version-history":[{"count":0,"href":"https:\/\/azafinance.com\/wp-json\/wp\/v2\/posts\/3426\/revisions"}],"wp:attachment":[{"href":"https:\/\/azafinance.com\/wp-json\/wp\/v2\/media?parent=3426"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/azafinance.com\/wp-json\/wp\/v2\/categories?post=3426"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/azafinance.com\/wp-json\/wp\/v2\/tags?post=3426"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
- Adeoye Ojuroye<\/strong>, CFO at Providus Bank, with a combined 16 years financial services experience. Previously at PWC, managing several due diligence and \ufb01nance function effectiveness engagements both in Nigeria and the UK.<\/li>\r\n