Foreign currency speculators, who launched an unprecedented attack against the naira in the last two weeks, got their fingers burnt on Tuesday when the nation’s currency staged a major recovery, rising to N310 to a dollar at the close of business, compared to N375 at which it sold on Monday.
The naira fell to an all-time low of about N400 to a dollar on the parallel market last week fuelling concerns that it would plummet further to N450-N500/$ this week.
But findings showed that the naira defied expectations, climbing to as high as N305 to the dollar at some parallel market points in Lagos on Tuesday afternoon, before settling at N310.
Forex dealers and currency analysts attributed the significant gain on the parallel market to excess supply of the greenback in the market, even as it looked like a lot of speculators lost the shirts on their back.
A reliable source that speculators who thought that by attacking the currency last week, coupled with misplaced concerns that the Central Bank of Nigeria (CBN) was going to stop the allocation of forex for school fees and medical bills abroad, this would compel the central bank and President Muhammadu Buhari to alter their stance against the devaluation of the currency.
But they were disappointed when Buhari, in Egypt at the weekend, adamantly ruled out the devaluation of the naira on the grounds that Nigeria does not have the competitive advantage to benefit from an official currency adjustment.
Reacting to the president’s stance, speculators who had been betting that the naira would depreciate further, started dumping the dollars with reckless abandon, effectively creating excess supply of the greenback in the parallel market.
Commenting on the situation in the secondary forex market, the chairman, Association of Bureau de Change Operators of Nigeria (ABCON), Alhaji Aminu Gwadabe, said: “The market is moving from perception to reality.”
Similarly, an analyst at Ecobank Nigeria, Mr. Kunle Ezun, predicted that the naira would edge higher in the coming days.
“We expect that the naira would appreciate further. We have always said that what happened last week was purely a speculative attack.
Some people felt that if they pushed the naira down to that level, they could force the CBN to devalue, so that when the naira is devalued and the gap widens further, they would now bring out the dollar cash to make a kill,” Ezun said.
He however urged the fiscal authorities to introduce policies that would help stimulate economic activities, saying that the fundamentals of the economy were still weak.
ABCON also aligned with the federal government’s decision not to further devalue the naira.
Gwadabe said this at a media briefing, pointing out that devaluing the naira would create more problems than it would solve.
He said that as a way of enhancing transparency in the BDC sub-sector, his association had decided to introduce a forex rate band weekly.
This rate band is expected to serve as a guide for all BDCs and the public on the prevailing exchange rate across the country, he added.
In addition, it will be operated in line with the regulated forex rate in the economy.
“This is to forestall exploitation of forex end users, and also to ensure that end users are informed to avoid falling victims of exploitation.
“The band will be announced via weekly press releases that will be circulated to the media for publication.
“ABCON will introduce a series of measures aimed at transforming the operations of BDCs in Nigeria to align with global best practices. These include: review and updating of BDC operational manual; introduction of live trading platforms; automation of all transactions and documentation requirements; and increased partnership with the CBN and other relevant agencies.
“Further, as part of its responsibility as a self regulatory organisation (SRO), and also in continuation of its aim to transform its members to compete within the global regulatory currency market, ABCON will seek the approval of relevant monetary and fiscal authorities as well as partnership for effective use of the nation’s external reserves to enhance domestic trade and foreign exchange management.”
“To this end, our website and internet platforms will be developed to position BDCs to serve as agents of Western Union and currency auctioneers.”
“We would also develop platforms that will allow our members to access sources of autonomous foreign exchange like govt agencies, embassies, IOCs and export proceeds, etc,” he explained.
He also urged the federal government to introduce policies that would diversify the economy to increase non-oil export earnings, and reduce imports.
This, according to him, would lead to increased foreign exchange inflow and a reduction in demand for foreign exchange.
In addition to policies that would diversify the economy, ABCON suggested that the CBN should review the policy of dollar importation into the economy for the purpose of defending the naira.
According to the association, the central bank should introduce a policy whereby the naira is used to intervene in the real sectors of the economy to boost productivity.
Furthermore, Gwadabe said as a way of reducing demand for dollars, the CBN should explore the option of promoting the use and acceptability of naira for transactions within the West African sub-region.
He added: “We observe that this is already happening at the level of informal trading activities within the sub-region, and it is our belief that this can be replicated at the level of formal economic activities.”
Meanwhile, the Chairman of Stanbic IBTC Holdings Plc, Mr. Atedo Peterside, has expressed concern over the uncertainty arising from the federal government’s foreign exchange policy, warning that it is threatening macroeconomic stability in the country and is unsustainable.
He stated this yesterday at the 2016 Standard Bank West Africa Investors’ Conference tagged, “Unlocking Nigeria’s Potential…Growth through Diversification”.
He said the federal government’s foreign exchange policy is the biggest uncertainty facing the country today following the lack of economic policy direction and the likely composition of Buhari’s economic team for much of the third and fourth quarters of last year.
According to him, “The argument at stake is not whether to devalue or not because there has already been an effective devaluation.
“The naira prices of various capital goods are now being ‘correctly’ priced purely on the basis of realistic expected replacement costs and so the economy is sliding towards an unpalatable scenario where the consumer suffers the ‘pains’ of devaluation (rising prices) without witnessing any of the expected ‘gains’ such as enhanced fiscal viability (in local currency terms at least) of the three tiers of government and increased competitiveness of Nigerian businesses.”
Peterside stressed that the much-craved economic diversification could only take place meaningfully if new capital investment activity takes place to take maximum advantage of increased domestic competitiveness.
“Sadly, most investors here – local and foreign – are currently caught up in a frenzied pursuit of the cheapest available dollars and the difference between losing this game and winning it can be as high as a mind-boggling 50 per cent on new transactions.
“The pursuit of scarce forex for today’s needs has understandably become the main game in town and this has exacerbated the pressures on Nigeria’s foreign exchange reserves and the naira via the one-way bet that is currently on against the naira, that is, everybody wants to take foreign exchange out and nobody really wants to bring it in,” he added.
He further stated that the excitement caused by the important development in Nigeria’s political landscape last year, where a change in government occurred at the federal level after a keenly contested election, has given way to some apprehension surrounding whether a populist government can take the necessary tough economic policy actions that are necessary to restore confidence and stimulate badly needed new investment activity.
Faceoff as Humanitarian Minister Writes Finance Minister on N206bn Budget Padding
N206 billion inserted into the ministry of Humanitarian Affairs, Disaster Management, and Social Development
The Minister of Humanitarian Affairs, Disaster Management, and Social Development, Sadiya Umar Farouq has written to the Minister of Finance seeking clarification on the N206 billion inserted into the ministry 2023 budget.
It would be recalled that some ministries and government agencies alleged the insertion of some projects amounting to N423.8bn in their respective budget proposals without their knowledge.
Representatives of the MDAs had told the National Assembly that they can not explain what the sums are meant for or the details of the projects tied to the funds since they were not part of their proposals sent to the finance ministry for the 2023 fiscal year.
According to the Minister of Defence, Maj. Gen. Bashir Magashi (retd), about N11 billion was inserted into the ministry’s budget. He told a Senate Committee during budget defence sessions.
Similarly, the Minister of Health also alleged the same thing accusing officials of the Ministry of Finance of padding.
The Executive Secretary of NUC, Professor Abubakar Rashid, also told the joint Senate and House Committee on Tertiary Education and TETfund during budget defence that N12 billion was inserted by the Ministry of Finance into the agency budget.
“In NUC’s budget, we have a problem. We had additional money given to us that we didn’t request, but I later went to the Ministry of Finance to find out because our budget was always hovering around N3 billion” he said.
Sources from the ministry of humanitarian affairs disclosed that the letter written by the minister seeking clarification is necessary owing to the negative public perception it could give the ministry and the minister in particular.
The sources added that the minister’s husband who is a governorship candidate in Bauchi state might also be affected by the negative media perception.
“We are disturbed and the minister is not leaving anything to chance. We want a quick clarification of the inserted figure in our ministry’s 2023 budget proposal,” the source said.
EFCC, ICPC to Track Large Withdrawals as CBN Launches New Notes
Godwin Emefiele has said the central bank will engage the service of both EFCC and ICPC to monitor large withdrawals from banks.
Indications have emerged that both the Economic and Financial Crime Commission (EFCC) and the Independent Corrupt Practices & Other Related Offences Commission (ICPC) will collaborate with commercial banks to track large withdrawals as the CBN launches new naira notes.
Investors King reported yesterday that President Muhammadu Buhari has unveiled the new naira notes ahead of their circulation.
While briefing the press after the launch, the central bank governor, Godwin Emefiele noted that the apex bank will engage the service of both EFCC and ICPC to monitor large withdrawals from banks.
Emefiele disclosed that the amount of money that can be withdrawn from the counter would be reduced drastically.
He added that bulk withdrawals would require several procedures and security checks to track use.
“We will restrict the volume of cash that people can withdraw over the counter. If you need to draw large volumes of cash, you will fill out uncountable forms; we will take your data, whether it’s your BVN or NIN so that our law enforcement agencies like EFCC and ICPC can follow you and be sure that you are taking that money for a good purpose,” he said.
The CBN governor however refuted that the policy is aimed at anyone. There has been speculation that the currency redesign was targeted at some politicians especially those in the opposition.
“There is no need for anybody to think this program is targeted at anyone. Like you heard the President, he said, this discussion to redesign and reissue currency started early in the year,” he stated.
It could be recalled that the central bank announced its intention to redesign N200, N500, and N1000 in October 2022.
While making the announcement, the CBN governor noted that the policy is aimed to address the excesses of currency circulation, counterfeiting and terrorism.
Emefiele said there was significant hoarding of naira notes by members of the public, with statistics showing that over 80 percent of the currency in circulation was outside the vaults of the commercial banks.
CBN Disburses N41.02 Billion to 4.6 Million Smallholder Farmers in October
The central bank disbursed N41.02 billion to several smallholder farmers under the Anchor Borrowers’ Programme (ABP)
The Central Bank of Nigeria (CBN) has said it disbursed N41.02 billion to several smallholder farmers under the Anchor Borrowers’ Programme (ABP) across the country in the month of October.
This was stated in the bank’s communique no. 145 of the monetary policy committee minute published on Tuesday.
The apex bank has now disbursed a combined N1.067 trillion to 4.6 million smallholder farmers cultivating 21 commodities across the country.
In the same month, the central bank also provided a N0.30 million grant to large-scale agricultural projects under the Commercial Agriculture Credit Scheme (CACS). Consequently, the total disbursement under the Scheme for agro-production and agro-processing stands at N745.31 billion for 680 projects.
Explaining the significance of the disbursement to the bank’s ongoing policy, the apex bank said it would help boost the non-oil export sector and deepen the nation’s foreign reserves.
In addition, the bank released the sum of N48.30 billion under the N1.0 trillion Real Sector Facility to seven (7) new real sector projects in agriculture, manufacturing, and services. Cumulative disbursement under this Facility currently stands at N2.15 trillion to 437 projects across the country, comprising projects in manufacturing (240), agriculture (91), services (93) and mining sector (13).
Furthermore, under the 100 for 100 Policy on Production and Productivity (PPP), the bank disbursed the sum of N20.78 billion to nine (9) projects in healthcare, manufacturing, and services.
The cumulative disbursement under the Facility, therefore, amounted to N114.17 billion in 71 projects. Moreover, the Bank disbursed N4.00 billion under the Intervention Facility for the National Gas Expansion Programme (IFNGEP) to promote the adoption of compressed natural gas (CNG) for transportation and liquefied petroleum gas (LPG) for cooking.
Meanwhile, the CBN-led monetary policy committee raised the interest rate by another 100 basis points from 15.5% to 16.5%. Therefore, the apex bank has risen interest rates by 500 basis points in 2022 alone.
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