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Economy

Nigeria’s External Reserves Fall by 15% to $29.342bn in 2015

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Nigeria 500 naira notes

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.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Economy

No Plan to Increase Fuel Price; Says FG

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NNPC - Investors King

The Federal Government has stated that it has no plan to increase fuel price during the yuletide period.

This assurance is coming amid the nationwide fuel scarcity which has pushed the price of petrol above N250 in many retail stations.

Investors King learnt that fuel is being held for N250 per litre in Abuja and several other cities across the country while black marketers are charging between N400 and N450 per litre.

The scarcity and the high price of fuel are however becoming unbearable for many Nigerians, especially those who have reasons to embark on business travel for the December festivals.

According to the National Public Relations Officer, Independent Petroleum Marketers Association of Nigeria (IPMAN), Chief Ukadike Chinedu, most of the association members, who owned the bulk of the filling stations across the country, were now subjected to purchasing PMS at about N220/litre, which was why many outlets currently dispensed at about N250/litre and above.

He noted that the cost of the commodity has been on the rise due to its unavailability and other concerns in the sector. 

He added that the price of fuel could be sold from N350/litre to N400/litre before the end of the year. 

Meanwhile, a number of senior officials at the NNPC had stated that the subsidy was becoming too burdensome on the national oil company, as this was another reason for the scarcity of PMS.

According to a source who is familiar with the development as reported by Punch News, “How can we continue to import 60 million litres of petrol daily and keep subsidising it, while millions of litres are either diverted or cannot be accounted for? The burden is too much, as you rightly captured in that story”. 

Investors King understands that NNPC is the sole importer of petroleum into the country and it pays billions of naira every month to subsidise the product to N147 per litre. 

Reuters News reported that in August 2022, NNPC paid more than $1 billion as fuel subsidy while the federal government earmarked N3.6 trillion as fuel subsidy in the 2023 budget proposal. 

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Economy

Fuel Scarcity: NNPC Declares 2billion Liters in Stock, Blames Scarcity on Road Construction

NNPC Claimed it as 2 billion litres of fuel despite scarcity

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Petrol - Investors King

The Nigerian National Petroleum Company (NNPC) has blamed the recent fuel scarcity on road construction around Apapa, noting that the corporation has about 2 billion litres of fuel in stock. 

According to a statement issued by NNPC Executive Vice President, Downstream, Mr Adeyemi Adetunji, the Nigeria National Petroleum Company has about 2 billion litres of fuel which can last the country conveniently for more than 30 days. 

The Executive Vice President further blamed the queues on the road construction around Apapa axis which has slowed down the movement of oil trucks to several parts of the country. 

“The recent queues in Lagos are largely due to ongoing road infrastructure projects around Apapa and access road challenges in Lagos” he said. 

He however noted that more filling stations should have Premium Motor Spirit (PMS) otherwise known as petrol with the ease in gridlock along the apapa axis. 

“The gridlock is easing out and NNPC Ltd has programmed vessels and trucks to unconstrained depots and massive load outs from depots to states are closely monitored,” he said.

Investors King gathered that several states including Abuja have been impacted by the supply chain difficulty caused by the construction around Apapa. 

The scarcity of fuel has therefore led to the hike in price. In most places across the country, fuel is sold as high as N250 per litre. Several fuel stations are already taking advantage of the situation coupled with the increase in the movement of people and goods owing to the December festivals.

Speaking further, Adeyemi noted that the situation will soon be back to normalcy as NNPC is taking measures to address the situation. 

“We want to reassure Nigerians that NNPC has sufficient products and we significantly increased product loading in selected depots and extended hours at strategic stations to ensure sufficiency nationwide.

“We are also working with industry stakeholders to ensure normalcy is returned as soon as possible,” he concluded. 

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Economy

Global Growth to Drop Below 2% in 2023, Says Citi

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GDP Growth- Investors King

Citigroup on Wednesday forecast global growth to slow to below 2% next year, echoing similar projections by major financial institutions such as Goldman Sachs, Barclays, and J.P. Morgan.

Strategists at the brokerage cited continued challenges from the COVID-19 pandemic and the Russia-Ukraine war — which skyrocketed inflation to decades-high levels and triggered aggressive policy tightening — as reasons behind the outlook.

“We see global performance as likely (being) plagued by ‘rolling’ country-level recessions through the year ahead,” said Citi strategists, led by Nathan Sheets.

While the Wall-Street investment bank expects the U.S. economy to grow 1.9% this year, it is seen more than halving to 0.7% in 2023.

It expects year-on-year U.S. inflation at 4.8% next year, with the U.S. Federal Reserve’s terminal rate seen between 5.25% and 5.5%.

Among other geographies, Citi sees the UK and euro area falling into recession by the end of this year, as both economies face the heat of energy constraints on supply and demand front, along with tighter monetary and fiscal policies.

For 2023, Citi projects UK and euro area to contract 1.5% and 0.4%, respectively.

In China, the brokerage expects the government to soften its zero-COVID policy, which is seen driving a 5.6% growth in gross domestic product next year.

Emerging markets, meanwhile, are seen growing 3.7%, with India’s 5.7% growth — slower than this year’s 6.7% prediction — seen leading among major economies.

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