In 2012, when Nigeria was listed on JPMorgan emerging market Bond index, it was done based on a two way quote by the CBN and the then minister of finance, Okonjo Iweala, backing their decision on Nigeria growing economy of 7.4 percent annual GDP and 6.9 percent in 2011, substantiated with a blooming global oil price averaging between $90 to $100 a barrel as at the time, and Knowing fully well that cost of servicing foreign debts will reduce significantly and position she, Okonjo Iweala as the powerhouse of Africa largest economy on the international scene and the force behind the actualization of Nigeria dream to a more mainstream investment destination, they concluded it was the right thing to do without proper consideration for future consequences in the advent of global disaster like current drop in global energy prices and emerging market economic rout.
Here is the logic, Nigeria is a petrol-dollar economy, which means her economic growth is directly proportional to both petroleum (crude oil) and dollar strength. The former is regulated by global demand and supply while the latter is determined by the US economy, while Nigeria’s economy is being driven by non-oil sector (construction, telecoms, manufacturing and agriculture) mainly, it is normal to expect the economic team representing the nation to base their decisions on those sectors that are thriving and can be internally regulated even if it means not been listed as at the time but no, their decision was based on crude oil price.
In 2014, when oil price started falling after peaking at $105.64 in June, with fewer options left to curb the situation, Okonjo Iweala, the minister of finance took to the media, in her words “Nigeria should brace for tougher economic times ahead” insinuating she has no solution apart from her overzealous ambiguity to be at the realm of power and yet we were being chastised for not retaining her team in power.
The current Central Bank of Nigeria (CBN) administration came in without much time to curtail the situation, and with naira weakened to more than 200 per dollar for the first time, Godwin Emefiele, Chairman of Central Bank of Nigeria was forced to take a decisive decision which includes spending $380 million to stop the fall of the Naira, restricting 41 item’s importers from accessing FOREX official rate, overhauling foreign currency domicile accounts, restricting dollar withdrawal limit on locally issued credit cards and pegging naira to a fixed rate of 197 to a US dollar. Bear in mind that these might not be perfect economic measures as Nigeria is a heavy import-dependent economy but juxtaposing the danger of what would have happened without these measures with been delisted, an economist will agree it is an acceptable policy given the circumstances.
Here are the possible consequences if the CBN had succumbed to JPMorgan pressure and gone ahead with the devaluation using two-way forex market has suggested, naira value would be between 300 to 320 naira to a US dollar by now, inflation would have surged to double digit from 9.20 percent recorded in July, 2015. Cost of goods and services would jumped to a new height, followed by increase in unemployment as interest rate would have risen, making loan almost inaccessible for companies to finance capital projects. Overall, the decision would have created negative perceptions about Nigeria true economic growth (GDP), and subsequently, forced these same foreign investors backed by JPMorgan to safeguard their fund by withdrawing based on uncertainty and high risk after profiting from the decline.
UNGA 2021: The World has the Resources to End Hunger, African Development Bank Head tells UN Food Systems Summit
“The world has the resources to end hunger,” African Development Bank President Dr. Akinwumi A. Adesina said in a message on the first day of the United Nations Food Systems Summit.
Convened by UN Secretary General António Guterres, the event is billed by its organisers as “a historic opportunity to empower all people to leverage the power of food systems to drive our recovery from the COVID-19 pandemic and get us back on track to achieve all 17 Sustainable Development Goals (SDGs) by 2030.”
The summit brings together thousands of youths, food producers, members of civil society, researchers, the private sector, women and indigenous people, all of whom are participating both physically and virtually in the summit. It is taking place on the sidelines of the 76th UN General Assembly in New York.
In his opening address, Guterres said the participants represented “energy, ideas and the willingness to create new partnerships,” and was a time to celebrate the dignity of those who produce and create the world’s food.
Decrying the 246 million people in Africa who go to bed daily without food and the continent’s 59 million stunted children as “morally and socially unacceptable,” Adesina said that delivering food security for Africa at greater scale called for prioritising technologies, climate and financing.
“The $33 billion per year required to free the world of hunger, is just 0.12% of $27 trillion that the world has deployed as stimulus to address the Covid-19 pandemic. I am confident that zero hunger can be achieved in Africa by 2030,“ Adesina said.
The African Development Bank’s Feed Africa Strategy, through its Technologies for African Agricultural Transformation program – widely known as TAAT – has provided 11 million farmers across 29 African countries with proven agricultural technologies for food security. Food production has expanded by 12 million metric tons while saving $814 million worth of food imports.
“We are well on our way to achieving our target of reaching 40 million farmers with modern and climate-resilient technologies in the next five years,” the African Development Bank chief added.
At a meeting on food security in Africa organized by the Bank and the International Fund for Agricultural Development (IFAD) earlier this year, 19 African heads of state called for the establishment of a facility for financing food security and nutrition in Africa.
“The Facility for Financing Food Security and Nutrition in Africa should be capitalized with at least $ 1 billion per year,” Adesina said.
The welfare of the 70% of Africa’s population working in agriculture and agribusiness is a barometer of the state of the continent’s health. “If they aren’t doing well, then Africa isn’t doing well,” Rwandan president Paul Kagame said in a message at the official opening.
The many other heads of state and government who spoke on Thursday included, Prime Minister Mario Draghi of Italy, President Felix Antoine Tshisekedi of the Democratic Republic of Congo, Prime Minister Sheikh Hasina of Bangladesh and Prime Minister Jacinda Arden of New Zealand.
AfCFTA: Nigeria-South Africa Chamber Advocate Single Africa Passport, Free Visa
The Nigeria-South Africa Chamber of Commerce (NSACC) has called for a single Africa passport and a free visa to ensure the success of the Africa Continental Free Trade Area (AfCFTA) agreement.
Speaking on Thursday in Lagos during the chamber’s September Breakfast Forum, with the theme: `Perspectives on the Africa Continental Free Trade Area in Relation to Nigeria’, its President, Mr. Osayande Giwa-Osagie noted that AfCFTA would boost intra-African trade by 22 percent, adding that its implementation would impact positively on the Nigerian economy.
AfCFTA is a single continental market that adopts free flow of goods, services, and capital, supported by the free movement of persons across Africa.
Giwa-Osagie however said Nigeria must diversify its economy in order to harness the gains of the agreement.
“Current intra-African trade rated at 15 to 17 percent is low and the AfCFTA is expected to boost intra-African by 22 percent. Challenges to its implementation are lack of infrastructure, political instability and lack of economic diversification.
“This gives rise to the need for Nigeria to diversify its economy to harness the gains of the agreement. Given the importance of the free movement of people, there is a need for a free visa for Africa and a single Africa passport.
“While the implementation would help boost the Nigerian economy, the impact would be limited if there are no free movement of people,” he said.
Mr Jesuseun Fatoyinbo, Head, Trade and Transactional Services, Stanbic IBTC Bank, said the business community needed more clarification on tariff reduction or elimination under the agreement.
According to him, the little information available to corporate organisations with regards to tariffs may lead to holding back on investments.
“We have noted increased interests from global multinationals and other corporates in setting up facilities in Africa aimed at serving the continent and exporting abroad.
“So more transparency around tariff reductions both in terms of timelines and details of goods could prompt companies to act,” he said.
Fatoyinbo also called for more attention to the digitisation of trade processes across the continent. “Currently, trade in Africa is largely reliant on physical documentation and this is a major impediment. Policymakers need to prioritize regulatory amendments that allow for the digital signatures, a digital certificate of origin, digital bills of lading, and other documentation,” he added.
Nigeria Borrows $4 Billion Through Eurobonds as Order Book Peaked at $12.2 Billion
The Federal Government of Nigeria has raised a fresh $4 billion through Eurobonds, according to the latest statement from the Debt Management Office (DMO).
Nigeria had set out to raise $3 billion but investors oversubscription peaked at $12.2 billion, enabling the Federal Government to raise $1 billion more than the $3 billion it announced.
DMO said “This exceptional performance has been described as, “one of the biggest financial trades to come out of Africa in 2021” and “an excellent outcome”.
Bids were received from investors in Europe, America, Asia and several local investors. The statement noted that the quality of investors and the size of the Order Book demonstrated confidence in Nigeria.
The Eurobonds were issued in three tranches, details, namely seven years–,$1.25 billion at 6.125 per cent per annum; 12 years -$1.5 billion at 7.375 per cent per annum as well as 30 years -$1.25 billion at 8.25 per annum.
The DMO explained that the long tenors of the Eurobonds and the spread across different maturities are well aligned with Nigeria’s Debt Management Strategy, 2020 –2023.
The Eurobonds were issued as part of the New External Borrowing stipulated in the 2021 Appropriation Act. DMO noted that the $4 billion will help finance projects state in the 2021 budget.
Nigeria’s total debt stood at $87.239 billion as at March 31, 2021. However, with the $4 billion new borrowing, the nation’s debt is now $91.239 billion. A serious concern for most Nigerians given the nation’s weak foreign revenue generation and rising cost of servicing the debt.
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