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Naira Devaluation Reduces Nigeria’s Trade Deficit by 44%

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The devaluation of the naira slashed Nigeria’s trade deficit by 44 per cent to N196.5bn in June, from N351.3bn in March, the National Bureau of Statistics said on Tuesday.

The bureau said the value of exports increased by 63 per cent to N1.9tn in the quarter.

“The improvement in export value is largely due to the depreciation in the value of the naira,” the NBS said in a statement.

  The nation’s total value of trade increased to N3.94tn in the second quarter, up from N2.7tn, it said

The NBS, in the merchandise trade statistics for the second quarter of this year, said the country recorded a 49 per cent increase in trade from N2.65tn in the first quarter to N3.94tn.

The bureau in the report stated that the increase in trade was as a result of a rise of N725.6bn in the value of exports against what was recorded in the preceding quarter.

It said as a result of the improvement in the second quarter trade, the country’s negative trade balance had now reduced by N154.8bn to N196.5bn.

The report stated, “The total value of Nigeria’s merchandise trade in Q2, 2016 was N3.94tn. This was 49 per cent more than the value of N2.64tn recorded in the preceding quarter.

“This development arose from a rise of N725.6bn or 63.3 per cent in the value of exports (largely due to the exchange rate gains), combined with a rise of N570.8bn or 38.1 per cent in the value of imports against the levels recorded in the preceding quarter.

“The current trade position brought the country’s negative trade balance to  N196.5bn during the period under review. This shows a N154.8bn reduction in the country’s trade deficit over the previous quarter.”

In terms of the structure of Nigeria’s trade, the report stated that the country’s import stood at N2.06tn at the end of the second quarter, representing an increase of 38.1 per cent from the value N1.9tn recorded in the preceding quarter.

As with exports, it said the increase in import value could be traced to a decline in the value of the naira.

It said capital goods and parts, with N663.6bn or 32.1 per cent, accounted for the highest chunk of the country’s imports.

This was followed by industrial supplies with N421.2bn or 20.4 per cent, and transport equipment and parts with N356.1bn or 17.2 per cent.

It said the import trade by direction showed that the country imported goods mostly from China, the Netherlands, the United States, India and the United Kingdom.

Trade with these countries accounted for N493.5bn or 23.9 per cent; N285.7bn or 13.8 per cent; N199bn or 9.6 per cent; N124.9bn or six per cent; and N119.3bn or 5.8 per cent, respectively, of the total value of goods imported during the quarter.

For export, the report put the value of the trade at N1.87tn in the second quarter, indicating an increase of N725.6bn or 63.3 per cent over the value recorded in the preceding quarter.

“The improvement in export value is largely due to the depreciation in the value of the naira,” it added.

The structure of the export trade, the report added, was still dominated by crude oil exports, which contributed N1.49tn or 79.7 per cent to the value of total domestic export trade in 2016.

“Whenever there is a devaluation of the currency it encourages exporters because they get more naira for the goods sold at the international market or priced in dollar,” an analyst at Lagos-based Financial Derivatives Company, Opeyemi Oguntade, told Reuters.

“For the country and the exporter, the thing to consider is if the benefit of the devaluation is high enough to outweigh the cost of rising inflation,” he added.

Nigeria’s leading export markets include India, the US, Spain and the Netherlands.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Economy

FG to Partly Fund Six Rail Projects Connecting All Regions

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FG to Partly Fund Six Rail Projects Connecting All Regions

The Federal Government will pay a total sum of N71 billion to partly fund six rail projects connecting all regions of the country.

In the report obtained from the Federal Ministry of Finance, Budget and National Planning, the six rail projects marked for development this year are Lagos-Kano rail line (ongoing), Calabar-Lagos (ongoing), and Ajaokuta-Itakpe-Aladja (Warri).

Others are the Port Harcourt-Maiduguri railway, the new Kano-Katsina-Jibiya-Maradi line in Niger Republic and the Abuja-Itakpe and Aladja-Warri Port and refinery/Warri new harbour.

The Buhari administration will also spend N15.1 billion on the development of safety and security of critical projects, airport certification, runway construction, terminal building, among others in the aviation sector in 2021.

Last week, Rotimi Amaechi, Minister of Transportation, said the Lagos-Kano line would be connected from the Ibadan end of the Lagos-Ibadan railway and would cost $5.3 billion.

We are waiting for the Chinese government and bank to approve the $5.3bn to construct the Ibadan-Kano. What was approved a year ago was the contract,” the minister said.

He added, “The moment I announced that the Federal Government had awarded a contract of $5.3bn to CCECC (China Civil Engineering and Construction Corporation) to construct Ibadan-Kano, people assumed the money had come in; no.

“We have not got the money, which is a year after we applied for the loan. We have almost finished the one of Lagos-Ibadan. If we don’t get the loan now, we can’t commence.”

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Economy

FG Launches E-ticketing Platform to Deepen Train Usage and Convenience

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FG Launches E-ticketing Platform to Deepen Train Usage and Convenience

In a bid to improve the usage and enhance the convenience of train transport in Nigeria, the Federal Government on Thursday announced the launching of the Electronic Ticketing platform for the Kaduna-Abuja rail services.

The N900 million E-ticketing platform was introduced by the Minister of Transportation, Chibuike R. Amaechi, and the Nigerian Railway Corporation.

Amaechi said the new platform would improve efficiency, promote accountability, reduce leakage and enhance economic growth, as well as save time.

The E-ticketing platform was a Public-Private Partnership project done in conjunction with Secure ID Solutions, who provide and would manage the system for 10 years in an effort to recoup its investment before the Nigerian Railway Corporation take charge.

Kofo Akinkugbe, the Chief Executive Officer, Secure ID Solutions, said as the new E-platform issued 25,000 tickets after a successful pilot test on Thursday.

Potential Travelers can book via three ways:

1. Mobile app
2. Website
3. POS or Cash at the station

A validator would be used to scan the ticket barcode to ascertain its authenticity before boarding.

Amaechi further announced that self-service ticket vending machines at various train stations would be introduced soon.

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Economy

Nigeria’s Excess Crude Account (ECA) Balance Now $72.4 Million

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Zainab Ahmed Finance Minister

Nigeria’s Excess Crude Account (ECA) Balance Now $72.4 Million

The Minister of Finance, Budget and National Planning, Zainab Ahmed, on Thursday said Nigeria’s Excess Crude Account (ECA) stood at $72,411,197.80 as of January 20th, 2021.

The minister disclosed this at the first National Economic Council (NEC) meeting of the year presided over by Yemi Osinbajo, Vice President and had in attendance State Governors, Federal Capital Territory Minister, Central Bank Governor and other senior government officials.

Ahmed said “Excess Crude Account (ECA), balance as at 20th January, 2021, $72,411,197.80; Stabilization Account, balance as at 19th January, 2021, N28,800,711,295.37; Natural Resources Development Fund Account, balance as at 19th January 2021, N95, 830,729,470.82.”

The minister also said President Muhammadu Buhari has approved N6.45 billion for the setting up of gas plants in 39 locations nationwide in an effort to increase COVID-19 treatment.

What is Excess Crude Account (ECA)

Excess Crude Account (ECA) is an account used to save the disparity in the market price of crude oil and budgeted price of crude oil as stipulated in the Federal Government Appropriation Bill.

Key Takeaways of Excess Crude Account (ECA)

  • Excess Crude Account (ECA) was established in 2004 by the Federal Government to stabilize Nigeria’s economy and smooth out the effect of crude oil fluctuation on Africa’s largest economy.
  • The ECA rose to its highest of $20 billion in November 2008 during the global oil boom when prices were above $100 per barrel.
  • Controversy, allegations of corruption, and uncertain performance have trailed the ECA since creation.
  • The balance plunged from $20 billion in 2008 to $72.4 million in January 2021.

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