Nigeria’s external reserves has so far depreciated by 15 per cent this year at its current value of $29.342 billion, compared with the $34.493 billion it was at the beginning of the year (January 5, 2015).
This, represents a decline by $5.151 billion so far this year. But industry sources told THISDAY that the actual value of the nation’s could be lower than the present value seen on the central bank’s website considering international obligations and bilateral agreements that had been entered by the country whose payments are from the reserves.
The drop in the forex reserves value has been largely attributed to the significant reduction in forex inflow into the country occasioned by the sustained low crude oil prices. Oil prices have been hovering around $37 per barrel in the past few weeks.
The development made the central bank to introduce several measures aimed at preserve the reserves and ensuring exchange rate stability.
For instance, the central bank during the year harmonised the foreign exchange market by closing the official window of the foreign exchange market in order to create transparency and minimise arbitrage opportunities in the foreign exchange market. This was then seen by a lot of commentators as a tacit devaluation of the nation’s currency. All demand for forex was then directed to the interbank market.
Furthermore, to deepen the market and enhance the efficacy of the demand management measures, the central bank gave specific directives on the effective monitoring and repatriation of both oil and non-oil export proceeds. In addition, the utilisation of export proceeds was restricted to eligible transactions only to minimise leakages. Also this year, the CBN officially stopped the sale of dollars for a list of 41 items as it also sought to reduce pressure on the naira as well as preserve the external reserves. However, it stressed that importers desirous of importing them could do so using their own funds without any recourse to the Nigerian forex market.
In response to these, commercial banks in the country recently banned the use of ATM cards abroad. The ban, which has the backing of the CBN, also stemmed from dwindling foreign reserves and banks’ inability to settle dollar transactions arising from the use of naira cards abroad.
A banking industry analyst, who pleaded to remain anonymous, said the situation in the country is not about the central bank, stressing the need for sacrifice on the part of Nigerians in order to rebuild the reserves and restructure the economy.
“It is easy for people to blame the CBN, but the truth is that this has gone beyond the central bank. I am not sure if any other person is there as the CBN governor, the person would have done better or different. Today, we need to move away from rent-seeking because it is hurting our economy. We need to begging to move from doing economics, to being patriotic because that I stge only way we can save this economy,” the industry expert advised.
But the CBN’s Director, Monetary Policy, Mr. Moses Tule, said the restrictions on the use of electronic payment cards abroad would likely to be lifted when reserves increase to between $50 billion and $200 billion, adding that all hands must be on deck to achieve the target. He said the new policy was a healthy development for the ailing economy in spite of the attendant inconvenience to cardholders.
According to Tule, foreign exchange under the condition Nigeria has found itself has become a seasonal commodity. “Seasonal in the sense that it depends on the movement of the price of oil; if oil prices are high then we build reserves, if oil prices are low then we have no reserves then we are in a crisis. But that should not be the case for an economy as big as Nigeria because we should by now have sufficiently diversified the economy to a point where developments in the oil market should no longer matter. Unfortunately, that has not been the case and that is why sometimes these kind of decisions have to be made.
“Our priorities as a nation for the allocation or use of foreign exchange is one, for the settlement of matured letters of credit that have been opened for importation; two, for the importation of petroleum products until such a time either when we have our refineries fully operational and we are not in a position to import fuel again to ensure that the wheels of economic development continue turning and running; and three, for the importation of raw materials,” he explained.
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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