Nigeria’s vice president Yemi Osinbajo on Wednesday said Nigeria needs to review her foreign exchange policies, including further consideration for possible devaluation of the Naira.
Nigeria is one of the countries affected by the global oil glut that have reduced revenues of oil nations by 70 percent. Africa’s largest economy situation was further compounded by the refusal of President Muhammadu Buhari to make a realistic adjustment to the nation’s foreign exchange rate in order to accommodate the shortfall created by the oil glut.
“It’s clear that a strategy of demand management alone won’t take us far,” Osinbajo said at a conference in Lagos, on Wednesday. “We need to address the issue of supply. We think a review is necessary. But I can’t give a time.”
The federal government is discussing how to manage foreign exchange supplies with the central bank, which is in charge of the momentary policy, devaluation may feature in the talks with the bank, he said.
“There has to be a substantial re-evaluation of the foreign exchange policy especially with the view to increasing FX supply and capital importation,” he said, adding that he’s “confident” that measures can be put in place to “attract FX.”
International Monetary Fund and investors have called on the government to devalue the Naira to lessen the scarcity of the dollar and economic gridlock affecting both foreign and local businesses, but the government insists on the current pegged rate of 197-199 per dollar.
CBN Holds Monetary Policy Rate At 11.5%, Leaves Other Parameters Constant
In its continuous efforts to boost the country’s economy and as well, reduce inflation, the Central Bank of Nigeria (CBN) led Monetary Policy Committee (MPC) has retained the Monetary Policy Rate (MPR) at 11.5% with all other parameters unchanged.
Governor of the CBN, Godwin Emefiele, disclosed this while reading the communique of the first monetary policy committee meeting of the year on Tuesday.
The committee unanimously voted to retain the Cash Reserve Ratio at 27.5% and the liquidity ratio at 30 percent.
According to the MPC, the Nigerian economy is expected to continue its positive trajectory following the impressive growth recorded in the third quarter of 2021.
Monetary policy refers to any policy measure devised by the Central Bank to control the cost, availability and supply of credit.
According to the apex bank, the ultimate goals of monetary policy are basically to control inflation, maintain a healthy balance of payment position in order to safeguard the external value of national currency and promote adequate and sustainable level of economic growth and development. These goals are achieved by controlling money supply in order to enhance price stability (low and stable inflation) and economic growth.
Investors King reports that CBN undertakes monetary policy in order to maintain Nigeria’s external reserves to safeguard the international value of the legal currency, promote and maintain monetary stability and a sound and efficient financial system in Nigeria, act as banker and financial adviser to the Federal Government and act as lender of last resort to banks.
The legal backing for monetary policy by the Bank derives from the various statutes of the bank such as the Central Bank of Nigeria Act of 1958 as amended in CBN Decree No. 24 of 1991, CBN Decree 1993 (Amendment), CBN Decree No. 3 of 1997 (Amendment), CBN Decree No. 4 of 1997 (Amendment), CBN Decree No. 37 of 1998 (Amendment), CBN Decree No. 38 of 1998 (Amendment), CBN Decree 1999 (Amendment) and CBN Act of 2007 (Ammended).
COVID-19: IMF Rolls Out $50 Billion Trust Fund, Targets Low-income, Vulnerable Countries
The COVID-19 pandemic, no doubt, has had significant economic consequences, especially on low-income and less developed countries.
It is in view of this that the International Monetary Fund (IMF) proposed a $50 billion trust fund to help these low-income and vulnerable middle-income countries build resilience and ensure a sustainable recovery through a Resilience and Sustainability Trust (RST), Investors King has learnt.
The RST’s central objective is to provide affordable long-term financing to support countries as they tackle structural challenges.
According to the IMF, broad support from the membership and international partners will further aid in the approval of the RST by the IMF Executive Board before the upcoming Spring Meetings and for it to become fully operational before the end of the year.
Apart from the pandemic, climate change is another long-term challenge that threatens macroeconomic stability and growth in many countries through natural disasters and disruptions to industries, job markets, and trade flows, among others.
Hence, the RST support aims to address macro-critical longer-term structural challenges that entail significant macroeconomic risks to member countries’ resilience and sustainability, including climate change, pandemic preparedness, and digitalization.
The IMF and World Bank staff have worked closely to develop a coordination framework on RST operations on climate risks, building on earlier experience in supporting countries with structural reforms. Similar frameworks with relevant institutions are expected to be developed in the coming months in this and other reform areas.
Meanwhile, to qualify for the RST support, an eligible member would need a package of high-quality policy measures consistent with the RST’s purpose; a concurrent financing or non-financing IMF-supported program with appropriate macroeconomic policies to mitigate risks for borrowers and creditors; and sustainable debt and adequate capacity to repay the Fund.
The RST would be established under the IMF’s power to administer contributor resources, which allows for more flexible terms, notably on maturities, than the terms that apply to the IMF’s general resources.
Consistent with the longer-term nature of balance of payments risks the RST seeks to address, its loans would have much longer maturities than traditional IMF financing.
Specifically, 20-year maturity and a 10-year grace period has been proposed.
FG Suspends Removal of Fuel Subsidy Over Inflation Concerns
The Federal Government has suspended plans to remove fuel subsidy by the end of the first half of 2022 over heightened inflation, according to the Minister of Finance, Mrs. Zainab Ahmed.
The Minister made the statement at a meeting with President of the Senate, Sen. Ahmad Lawan, at the National Assembly on Monday.
She said the removal of fuel subsidy at any time this year could escalate inflationary pressure in the country.
“We discovered that practically, there is still heightened inflation and that the removal of subsidy would further worsen the situation and impose more difficulties on the citizenry,” Ahmed said at the meeting.
“Mr. President does not want to do that. What we are now doing is to continue with the ongoing discussions and consultations in terms of putting in place a number of measures.
“One of these include the roll-out of the refining capacities of the existing refineries and the new ones which would reduce the amount of products that would be imported into the country.
“We, therefore, need to return to the National Assembly to now amend the budget and make additional provision for subsidy from July 22 to whatever period that we agreed was suitable for the commencement of the total removal.”
Agusto&Co, a research, credit ratings and credit risk management firm, had projected the same thing in its economic outlook for 2022 sent to clients. The firm had argued that it was impossible for the current administration to remove fuel subsidy given its little political capital.
The firm said no, the FGN can not remove subsidy in full in 2022 because “this is a tough political decision that we believe is best made by a government with a large amount of political capital. Current government has ruled for seven years, has about a year left and has little political capital to expend.”
Augusto further stated that the federal government is not likely to boost infrastructure spending in 2022 “because the ability of government to invest in infrastructure will still be constrained by weak tax revenues and high operating expenses.”
Therefore, it said the government cannot fully fund Nigeria’s 17 trillion budget as its revenue is limited to ₦5 trillion and funding sources are constrained.
News3 weeks ago
Npower Payment: NASIMS Commence Npower Batch C October Payment, Removes November Payroll Status
Technology4 weeks ago
World Mobile, Altaeros Partner to Launch Aerostat Balloons to Connect the Unconnected in Africa
Cryptocurrency4 weeks ago
Shiba Inu Burn Update: 351.1 Million Shiba Inu Coin Destroyed In 24 Hours
News3 weeks ago
Npower Payment: Network Instability Affected 3-Month Payment to Trainees – NASIMS
Cryptocurrency2 weeks ago
Non-fungible Tokens: Sales of NFTs Hit $25 Billion in 2021
Appointments3 weeks ago
First Bank Appoints Three New Bosses
Cryptocurrency4 weeks ago
Fintech CEO: Regulators Finally See Urgency in Commonsense Rulebook for Crypto
Finance2 weeks ago
Visa Partners ConsenSys To Test Central Bank Digital Currencies With Cards, Wallets