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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, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Economy

Nigeria’s N3.3tn Power Sector Rescue Package Unveiled

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President Bola Tinubu has given the green light for a comprehensive N3.3 trillion rescue package.

This ambitious initiative seeks to tackle the country’s mounting power sector debts, which have long hindered the efficiency and reliability of electricity supply across the nation.

The unveiling of this rescue package represents a pivotal moment in Nigeria’s quest for a sustainable energy future. With power outages being a recurring nightmare for both businesses and households, the need for decisive action has never been more urgent.

At the heart of the rescue package are measures aimed at settling the staggering debts accumulated within the power sector. President Tinubu has approved a phased approach to debt repayment, encompassing cash injections and promissory notes.

This strategic allocation of funds aims to provide immediate relief to power-generating companies (Gencos) and gas suppliers, while also ensuring long-term financial stability within the sector.

Chief Adebayo Adelabu, the Minister of Power, revealed details of the rescue package at the 8th Africa Energy Marketplace held in Abuja.

Speaking at the event themed, “Towards Nigeria’s Sustainable Energy Future,” Adelabu emphasized the government’s commitment to eliminating bottlenecks and fostering policy coherence within the power sector.

One of the key highlights of the rescue package is the allocation of funds from the Gas Stabilisation Fund to settle outstanding debts owed to gas suppliers.

This critical step not only addresses the immediate liquidity concerns of gas companies but also paves the way for enhanced cooperation between gas suppliers and power generators.

Furthermore, the rescue package includes provisions for addressing the legacy debts owed to power-generating companies.

By utilizing future royalties and income streams from the gas sub-sector, the government aims to provide a sustainable solution that incentivizes investment in power generation capacity.

The announcement of the N3.3 trillion rescue package comes amidst ongoing efforts to revitalize Nigeria’s power sector.

Recent initiatives, including tariff adjustments and regulatory reforms, underscore the government’s determination to overcome longstanding challenges and enhance the sector’s effectiveness.

However, challenges persist, as highlighted by Barth Nnaji, a former Minister of Power, who emphasized the need for a robust transmission network to support increased power generation.

Nnaji’s advocacy for a super grid underscores the importance of infrastructure development in ensuring the reliability and stability of Nigeria’s power supply.

In light of these developments, stakeholders have welcomed the unveiling of the N3.3 trillion rescue package as a decisive step towards transforming Nigeria’s power sector.

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Nigeria’s Inflation Climbs to 28-Year High at 33.69% in April

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Nigeria's Inflation Rate - Investors King

Nigeria is grappling with soaring inflation as data from the statistics agency revealed that the country’s headline inflation surged to a new 28-year high in April.

The consumer price index, which measures the inflation rate, rose to 33.69% year-on-year, up from 33.20% in March.

This surge in inflation comes amid a series of economic challenges, including subsidy cuts on petrol and electricity and twice devaluing the local naira currency by the administration of President Bola Tinubu.

The sharp rise in inflation has been a pressing concern for policymakers, leading the central bank to take measures to address the growing price pressures.

The central bank has raised interest rates twice this year, including its largest hike in around 17 years, in an attempt to contain inflationary pressures.

Governor of the Central Bank of Nigeria has indicated that interest rates will remain high for as long as necessary to bring down inflation.

The bank is set to hold another rate-setting meeting next week to review its policy stance.

A report by the National Bureau of Statistics highlighted that the food and non-alcoholic beverages category continued to be the biggest contributor to inflation in April.

Food inflation, which accounts for the bulk of the inflation basket, rose to 40.53% in annual terms, up from 40.01% in March.

In response to the economic challenges posed by soaring inflation, President Tinubu’s administration has announced a salary hike of up to 35% for civil servants to ease the pressure on government workers.

Also, to support vulnerable households, the government has restarted a direct cash transfer program and distributed at least 42,000 tons of grains such as corn and millet.

The rising inflation rate presents significant challenges for Nigeria’s economy, impacting the purchasing power of consumers and adding strains to household budgets.

As the government continues to grapple with inflationary pressures, policymakers are faced with the task of implementing measures to stabilize prices and mitigate the adverse effects on the economy and livelihoods of citizens.

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FG Acknowledges Labour’s Protest, Assures Continued Dialogue

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Power - Investors King

The Federal Government through the Ministry of Power has acknowledged the organised Labour request for a reduction in electric tariff.

The Nigeria Labour Congress (NLC) and Trade Union Congress (TUC) had picketed offices of the National Electricity Regulatory Commission (NERC) and Distribution Companies nationwide over the hike in electricity tariff.

The unions had described the upward review, demanding outright cancellation.

Addressing State House correspondents after the Federal Executive Council (FEC) meeting on Tuesday, Minister of Power, Adebayo Adelabu, said labour had the right to protest.

“We cannot stop them from organizing peaceful protest or laying down their demands. Let me make that clear. President Bola Tinubu’s administration is also a listening government.”

“We have heard their demands, we’re going to look at it, we’ll make further engagements and I believe we’re going to reach a peaceful resolution with the labor because no government can succeed without the cooperation, collaboration and partnership with the Labour unions. So we welcome the peaceful protest and I’m happy that it was not a violent protest. They’ve made their positions known and government has taken in their demands and we’re looking at it.

“But one thing that I want to state here is from the statistics of those affected by the hike in tariff, the people on the road yesterday, who embarked on the peaceful protests, more than 95% of them are not affected by the increase in the tariff of electricity. They still enjoy almost 70% government subsidy in the tariff they pay because the average costs of generating, transmitting and distributing electricity is not less than N180 today.

“A lot of them are paying below N60 so they still enjoy government’s subsidy. So when they say we should reverse the recently increased tariff, sincerely it’s not affecting them. That’s one position.

“My appeal again is that they should please not derail or distract our transformation plan for the industry. We have a clearly documented reform roadmap to take us to our desired destination, where we’re going to have reliable, functional, cost-effective and affordable electricity in Nigeria. It cannot be achieved overnight because this is a decay of almost 60 years, which we are trying to correct.”

He said there was the need for sacrifice from everybody, “from the government’s side, from the people’s side, from the private sector side. So we must bear this sacrifice for us to have a permanent gain”.

“I don’t want us to go back to the situation we were in February and March, where we had very low generation. We all felt the impact of this whereby electricity supply was very low and every household, every company, every institution, felt it. From the little reform that we’ve embarked upon since the beginning of April, we have seen the impact that electricity has improved and it can only get better.”

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