Although experts have clamoured for the devaluation of the naira in the light of the nation’s depleting foreign exchange reserves, the Central Bank of Nigeria’s Monetary Policy Committee may not do so during its first bi-monthly meeting for this year, it has been learnt.
Sources close to the CBN and members of the committee said the two-day meeting, which commences today (Monday), would only review policy measures taken so far in the past year, adding that key policy issues, especially as regards the need to devalue the naira, might be delayed till the March or May meeting.
It was further learnt that President Muhammadu Buhari’s stance of not devaluing the naira would influence the voting pattern of the 11-member MPC when issues that border on the exchange rate policy are considered.
The CBN has in the last one year adopted a number of administrative forex control measures to safeguard the naira in place of devaluation.
Although the naira has been pegged at between 197 and 199 at the interbank official market against the United States dollar, the local currency has fallen as low as 295 to the greenback at the parallel market.
The immediate past Governor of the CBN, Mallam Lamido Sanusi; Managing Director, Financial Derivatives Limited, Mr. Bismarck Rewane; and other local and foreign economists have called for the devaluation of the naira, insisting that the current forex control measures were counterproductive.
The forex control measures, which have to do with rationing the dollars, have hurt the economy amid slow growth.
But economists said although the way forward was for the MPC to adjust the exchange rate, they said this was unlikely considering the mood of the Federal Government.
“The mood of the Federal Government is that the rates will be kept unchanged. The Cash Reserve Ratio and the Monetary Policy Rate will be left unchanged, while the exchange rate will also be left unchanged,” the Managing Director, Cowry Asset Management Limited, Mr. Johnson CHukwu, said.
The Head, Research and Investment Advisory, Afrinvest West Africa Limited, Mr. Ayodeji Ebo, also predicted that the exchange rate, CRR and MPR would likely be left unchanged.
He, however, said the MPC might choose to adjust some of the forex control measures, saying, “The list of banned items may be reviewed considering the fact that the naira volatility became serious when those 41 items were banned from the official CBN window.”
Currency strategist at Ecobank Nigeria, Mr. Kunle Ezun, said it was unlikely that the MPC would take any major policy decision, adding that the committee might delay major decisions till future meetings within the year.
Analysts at FBN Quest Research in their economic note said, “The next meeting of the MPC takes place in Abuja on Monday and Tuesday. Judging by the intensity of the media commentary, we could be forgiven for thinking that its only decision is whether to adjust its exchange rate policy.
“The depletion of official reserves, the slide in the oil price and the intermittent global market turmoil emanating from China and elsewhere could make a good case for devaluation. We are not so sure. The preference of the CBN and the MPC is to deploy administrative measures.
“We would not be surprised by some new measures. In any event, the committee may well want to assess the impact of its recent steps before announcing a devaluation, or even introducing some new ones.”
Meanwhile, the Lagos Chamber of Commerce and Industry has asked the CBN to urgently articulate a comprehensive framework for the autonomous foreign exchange market.
According to the LCCI, the autonomous market is currently the major forex market and its scope needs to be clearly defined.
In a statement signed by the Director-General of the LCCI, Mr. Muda Yusuf, on Sunday, the chamber noted that the move would ensure a deeper forex market.
It added that sources of foreign exchange such as Diaspora remittances, export proceeds, forex sales by foreign investors and multinational companies as well as forex sales by donor agencies and other non-governmental organisations should be allowed to be freely traded in the autonomous market.
COVID-19 Vaccine: Crude Oil Extends Gain to $48 Per Barrel on Wednesday
Oil prices rose further on Wednesday as hope for an effective COVID-19 vaccine and the news that the United States of America’s President-elect, Joe Biden has begun transition to the White House bolstered crude oil demand.
Brent crude oil, a Nigerian type of oil, gained 1.63 percent or 78 cents to $48.64 per barrel at 11:50 am Nigerian time on Wednesday.
The United States West Texas Intermediate (WTI) crude oil rose by 1.36 percent or 61 cents to $45.52 per barrel.
OPEC Basket surged the most in terms of gain, adding 3.16 percent or $1.37 to $44.75 per barrel.
This was after AstraZeneca, Moderna and Pfizer-BioNTech announced the positive results of their trials.
Moderna and Pfizer had claimed over 90 percent effective rate in trials while AstraZeneca said its COVID-19 vaccine was 70 percent effective in trials but could hit 90 percent going forward.
“The possibility of having a vaccine next year increases the odds that we’re going to see demand return in the new year,” said Phil Flynn, senior analyst at Price Futures Group in Chicago.
Also, the decision of President-elect Joe Biden to bring Janet Yellen, the former Chair of Federal Reserve, back as a Treasury Secretary of the United States is fueling demand and strong confidence across global financial markets.
“President-elect Biden’s cabinet choices, particularly Janet Yellen’s Treasury Secretary position, are adding to upside momentum across a broad space of asset classes,” said Jim Ritterbusch of Ritterbusch and Associates.
Seyi Makinde Proposes N266.6 Billion Budget for Oyo State in 2021
The Executive Governor of Oyo State, Seyi Makinde, has presented the Oyo State Budget Proposal for the 2021 Fiscal Year to the Oyo State House of Assembly on Monday.
The proposed budget titled “Budget of Continued Consolidation” was said to be prepared with input from stakeholders in all seven geopolitical zones of Oyo state.
Governor Makinde disclosed this via his official Twitter handle @seyiamakinde.
According to the governor, the proposed recurrent expenditure stood at N136,262,990,009.41 while the proposed capital expenditure was N130,381,283,295.63. Bringing the total proposed budget to N266,6444,273,305.04.
The administration aimed to implement at least 70 percent of the proposed budget if approved.
He said “The total budgeted sum is ₦266,644,273,305.04. The Recurrent Expenditure is ₦136,262,990,009.41 while the Capital Expenditure is ₦130,381,283,295.63. We are again, aiming for at least 70% implementation of the budget.”
He added that “It was my honour to present the Oyo State Budget Proposal for the 2021 Fiscal Year to the Oyo State House of Assembly, today. This Budget of Continued Consolidation was prepared with input from stakeholders in all seven geopolitical zones of our state.”
World Bank Expects Nigeria’s Per Capita Income to Dip to 40 Years Low in 2020
The World Bank has raised concern about Nigeria’s rising debt service cost, saying it could incapacitate the nation from necessary infrastructure development and growth.
The multilateral financial institution said the nation’s per capita income could plunge to 40 years low in 2020.
According to Mr. Shubham Chaudhuri, Country Director for World Bank in Nigeria, the decline in global oil prices had impacted government finances, remittances from the diaspora and the balance of payments.
Chaudhuri, who spoke during the 26th Nigerian Economic Summit organised by the Nigerian Economic Summit Group and the Federal Government, said while the nation’s debt is between 20 to 30 percent, rising debt service remains the bane of its numerous financial issues and growth.
“Nigeria’s problem is that the debt service takes a big part of the government revenue,” he said.
He said, “Crisis like this is often what it takes to bring a nation together to have that consensus within the political, business, government, military, civil society to say, ‘We have to do something that departs from business as usual.’
“And for Nigeria, this is a critical juncture. With the contraction in GDP that could happen this year, Nigeria’s per capita income could be around what it was in 1980 – four decades ago.”
Nigeria’s per capita income stood at $847.40 in 1980, according to data from the World Bank. It rose to $3,222.69 in 2014 before falling to $2,229.9 in 2019.
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