Small Exchange: Nigeria refinancing debt, Wells Fargo’s forex investigation and Singapore’s forex ambitions

Peter Terlato 31 October 2017

foreign money Africa large

Nigeria scaling down debt-service costs, Wells Fargo's problems continue and Singapore's forex plan unfolds.

IMF says Nigeria's debt re-balancing poses risks to forex rate

The International Monetary Fund (IMF) has warned that Nigeria's strategy to expand foreign borrowings and scale down debt-service costs could be detrimental to the country's foreign exchange rate.

Bloomberg reports that the Nigerian government intends to issue US$5.5 billion in dollar-denominated securities by the close of 2017, primarily to refinance domestic debt.

"Such a shift would, however, make the economy more vulnerable to exchange-rate depreciation," IMF Africa director Abebe Selassie said.

"High levels of public debt can be quite harmful. The debt-servicing cost can be a major source of drain of resources that could otherwise be used."

The IMF released its Sub-Saharan Africa Regional Economic Outlook this week, which reveals the median level of government debt in sub-Saharan Africa rose from about 34% of GDP in 2013 to 48% in 2016 and is poised to exceed 50% this year. In Nigeria, levels have risen from 22% in 2016 to almost 62% in 2017.

Growth in the region is anticipated to reach 2.6% in 2017, double 2016's figures. With a good harvest and a recovery in oil production, Nigeria is expected to contribute more than half of this additional growth.

Wells Fargo subjected to forex investigation

The Wall Street Journal is reporting that United States' federal prosecutors have subpoenaed documents and information in relation to foreign-exchange trading at financial services institution Wells Fargo.

The investigation reportedly focuses on one specific trade and a subsequent dispute that followed with one of the bank's clients, Restaurant Brands International Inc, which owns Burger King, Tim Horton and Popeye's.

"Wells Fargo learned of an issue associated with a foreign exchange transaction for a single client. The matter was reviewed, the client was promptly notified regarding the issue and Wells Fargo leadership took steps to hold accountable the individuals who were involved,” Wells Fargo spokesperson Elise Wilkinson told Reuters.

A little over a week ago, the American international bank allegedly fired four foreign exchange bankers.

In July, Wells Fargo admitted it sold auto insurance to hundreds of thousands of its customers who didn't need or want coverage, leading to missed payments and repossessions. US$80 million was paid in compensation.

Singapore focuses on becoming leading finance sector in Asia

Singapore has plans to raise its global status as a wealth management and international foreign exchange hub.

The Monetary Authority of Singapore just released its Roadmap for a Leading Global Financial Centre in Asia.

The South-east Asian nation plans to create 4,000 new financial services and technology jobs and achieve real growth of 4.3% and productivity of 2.4% each year in this sector, a faster pace than the overall economy.

Singapore aims to be the global forex price discovery and liquidity centre in the Asian time zone. Currently, the country is the third largest FX centre globally. The Monetary Authority hopes to encourage forex players to ensconce their matching and pricing engines in Singapore to boost transaction liquidity and efficiency.

Each week Small Exchange sums up currency news from around the globe and looks into how it impacts exchange rates and options.

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