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$2.5bn Currency Swap’ll Boost Reserves — Experts

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  • $2.5bn Currency Swap’ll Boost Reserves — Experts

As the Central Bank of Nigeria begins the implementation of the $2.5bm currency swap agreement, financial experts have said that the deal would rapidly boost Nigeria’s foreign reserves position within the next few weeks.

The analysts said this during separate telephone interviews with our correspondent on Friday.

Those that spoke are the Head, Banking and Finance Department, Nasarawa State University, Keffi, Prof Uche Uwaleke; a former Managing Director of Unity Bank Plc, Mr Rislanudeen Mohammed; and a former Director-General, Abuja Chamber of Commerce and Industry, Dr Chijioke Ekechukwu.

The CBN on Friday commenced its intervention in the sale of foreign exchange in Chinese Yuan under the agreement.

The implementation signalled the consummation of the Bilateral Currency Swap Agreement signed with the People’s Bank of China on April 27, 2018.

Uwaleke said the transaction, valued at Remnibi 16 billion, or the equivalent of about $2.5bn, would provide adequate local currency liquidity to Nigerian and Chinese industrialists and others.

This, he noted, would help to reduce the difficulties encountered in the search for third currencies in the execution of business transactions between Nigerian and Chinese industrialists.

Among other benefits, Uwaleke, a professor of finance, said the agreement would improve the speed, convenience and volume of transactions between the two countries

He said, “With Chinese exports accounting for about 80 per cent of the total bilateral trade volume, it has been argued in some quarters that Nigeria does not stand to reap any commensurate benefit from the deal given the large trade imbalance in favour of China.

“Nonetheless, it is pertinent to observe that asymmetric trade in favour of China can be tackled within the framework of the agreement. It is safe to conclude that the swap arrangement is being established in the context of the rapidly growing bilateral trade between China and Nigeria. Therefore, the currency swap would boost trade between China and Nigeria.

“It is also expected to bolster Nigeria’s foreign exchange reserves at a time weak export revenues, occasioned by the drastic fall in oil price, have put the country’s foreign reserves under intense pressure.”

When asked if the agreement could help in strengthening the naira, he said the pressure from Nigeria traders on demand for dollars would reduce, thus improving the value of the naira.

Uwaleke said, “The currency swap deal is also expected to strengthen the naira since Nigerian traders, who import mainly from China, can now conclude their transactions in the yuan instead of the dollar.

“And from China’s point of view, the currency swap will increase the demand for the yuan as it marches toward establishing its currency as a reserve currency in the future.”

Without doubt, a currency swap deal with China, as the experiences of other countries have proved, is a win-win situation, according to him.

“It is not for nothing that many developed and developing countries are queuing up to sign currency swap agreements with China – the second biggest economy in the world,” he added.

Mohammed said the implementation of the agreement would minimise foreign exchange denominated risks for Nigeria.

He stated, “In the context of minimising concentration risk of having our foreign exchange denominated in the United States dollar alone, this is a positive development. Secondly, in view of our huge imports from China, this agreement will help in reducing the time as well as transaction costs by eliminating third-party currency deals.

“Reduced transaction costs will make goods imported from China cheaper to both importers and ultimately Nigerian consumer.

“This may negatively impact on our diversification efforts by making Chinese imports cheaper. However, there is no impact on the economy as far as the balance sheet of the central bank is concerned.”

Also, Ekechukwu said the agreement would help to reduce the exchange rates between both countries.

He said, “It is an agreement to exchange currency between two foreign countries or parties. The agreement involves swapping principal and interest payments on a loan made in one currency for principal and interest payments of equal value in another currency.

“In the case of Nigerian and Chinese currency swap agreement, it is a win-win situation for the two countries as it will foster seamless business relationships between them.

“The exchange rate volatility will be reduced with this agreement, especially at the point of repayment. Country or sovereign risk will also be mitigated by this agreement.”

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial market.

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Economy

Nigeria’s Main Refineries Record N406.62bn Loss in Two Years

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modular refinery

Port Harcourt, Kaduna, Warri Refinery posts N406.62bn Deficit in Two Years

Nigeria’s three main refineries recorded N406.62 billion loss in two years, according to the audited financial statements from the Nigerian National Petroleum Corporation (NNPC).

The three refineries located in Port Harcourt, Kaduna and Warri have a combined installed capacity of 445,000 barrels per day, however, the refineries have continued to function below the installed capacity.

The audited report showed the Kaduna refinery posted N64.34 billion loss in 2018, better than the N111.89 billion loss reported in 2017.

While Warri refinery filed N44.44 billion loss for 2018, also better than the N81.60 billion loss posted in 2017.

Port Harcourt refinery reported N45.59 billion loss in 2018, down from N55.76 billion loss posted in 2017.

The Nigerian government has spent billions of US dollars in maintaining and trying to improve the dilapidated refineries over the years. However, because of the inability of the three refineries to meet daily petrol demands of the Nigerian people, the Federal Government resulted to importation that has eroded the nation’s foreign reserves.

A recent report from the NNPC showed that Nigeria spent N2.37 trillion on petrol importation between May 2019 and May 2020 despite the nation struggling with falling foreign reserves due to low oil prices.

The weak foreign reserves has disrupted the nation’s economic outlook and weighed on the Nigerian Naira. The Naira has been devalued by 15 percent this year and was recently adjusted from N360 per US dollar exchange rate to N380/US$ for importers and investors to ease pressure on the nation’s foreign reserves.

Last week, at a summit organised by Seplat, Mallam Mele Kyari, the Group Managing Director, NNPC, said the three refineries were all idle despite the money being spent on them.

In Nigeria today, we are importing practically every petroleum product that we consume in this country.

“We are working to make sure that we are able to fix our refineries,” Kyari stated.

All hopes are now on Dangote’s refinery.

Aliko Dangote, Africa’s richest man and the world’s richest black man, is presently constructing a 650,000 barrels per day refinery.

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Osinbajo Says FG Plans to Create 5 Million Jobs

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FG to Create 5m Jobs from Strategic Investments in Manufacturing, Agriculture

Vice President, Prof. Yemi Osinbajo, has said the Federal Government plans to create at least 5 million jobs in the next few years.

Osinbajo, who spoke at the Virtual Presidential Policy Dialogue Session organised by the Lagos Chamber of Commerce and Industry (LCCI), said the Buhari-led administration is focused on job creation.

He, therefore, stated that this would be achieved with strategic investments in key sectors like the manufacturing and agriculture sectors.

The Vice President said, “We are to create jobs and boost our national housing programme. We would be intentional in the support of manufacturers in using our local raw materials. We are seriously engaging the use of cement in building our roads, as it will be cheaper for us and more durable.

“We are targeting electrification of five million households with solar power, and we are supporting SMEs, especially in the pharmaceuticals to enhance the production of personal protective equipment.”

Mrs. Toki Mabogunje, the President of LCCI, who also spoke at the event, expressed concerns over the failure of the Nigerian Customs Service to adhere to the Executive Order which forbids Customs checkpoints around the ports and within given geographical delimitations in the country.

She also noted the slow pace of reforms in the oil and gas sector, one of the nation’s main sectors. According to her, the oil and gas sector was another cause for worry, saying up till now the PIB passed has not been signed by President Muhammadu Buhari.

According to her, “Closure of the land borders has enormous implications for cross border economic activities around the country. The indications are now that the closure is indefinite. While we share the concern of government on issues of security and smuggling, we believe that the indefinite closure of land borders is not the solution to the problem.

“We are excited about the signing of the AFCTA. But we need to get ourselves ready for the pressure of competition inherent in the continental economic integration agenda. A number of commitments were made about the creation of an environment that would enable the private sector to be competition ready. But not much has happened in this regard so far.

“We are aware of the efforts of government to fix our infrastructure, including roads and railways, but funding has remained a major challenge. We would like to see a new funding model with much bigger focus on private sector capital within a Public Private Partnership [PPP] framework for infrastructure development in the country.

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Fuel Scarcity: NUPENG to Commence Strike on Monday

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Lagosians Should Brace for Fuel Scarcity as NUPENG Embarks on Strike

Nigerians should brace for fuel scarcity as the national leadership of the Nigeria Union of Petroleum and Natural Gas (NUPENG) directed all petroleum tanker drivers to withdraw their services from Lagos State starting from Monday, 10 August 2020.

In a statement released by NUPENG on Friday, the union said the directive followed the failure of various authorities in Lagos State to address three major issues that had impacted the operations of petroleum tanker drivers in the state for several months.

The statement signed by the National President, Williams Akporeha and the General Secretary, Olawale Afolabi, NUPENG and titled title ‘NUPENG leadership directs withdrawal of services by petroleum tanker drivers in Lagos State with effect from Monday, August 10, 2020,’ noted that members of the union are frustrated and pained by the barrage of challenges faced while carrying out their activities in Lagos State.

NUPENG said, “The entire rank and file members of the union are deeply pained, frustrated and agonised by the barrage of these challenges being consistently faced by petroleum tanker drivers in Lagos State and are left with no other option but to direct the withdrawal of their services in Lagos State until the Lagos State Government and other relevant stakeholders address these critical challenges.

“It is sad and disheartening to note here that we had made several appeals and reports to the Lagos State Government and the Presidential Task Force for the decongestion of Apapa on these challenges but all to no avail.

NUPENG listed the major challenges faced by petroleum tanker drivers in Lagos State as extortion and harassment by various security agents and, area boys’ (miscreants).

This menace must stop and the leadership of these security operatives in Lagos State must go all out to call their men to order with immediate effect.

The Union added that it is sad that the security agents who were expected to ensure the free flow of traffic and protection of road users were the same people using their uniforms and arms to intimidate, harass and extort money from petroleum drivers in Lagos State.

Therefore, it said it had embarked on an indefinite strike to force the Lagos State Government to address the situation.

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