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External Reserves Shed $1bn in Five Weeks

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CBN-headquarters-Investors King

The country’s external reserves have been depleted by $1bn in the last five weeks, latest statistics from the Central Bank of Nigeria have showed.

This follows the CBN’s almost daily intervention at the interbank/official foreign exchange market in recent weeks, as chronic dollar shortage continues to weigh on the economy.

In its efforts to defend the naira and prevent it from falling further at the official interbank market, the central bank has been selling dollars at the interbank market more frequently.

The naira had fallen to an all-time low of 365.25 to the dollar at the interbank market on August 18 before making a gradual recovery. On Friday, the local currency closed at 310.64 against the greenback.

At the parallel market, the naira, which has been under persistent pressure, closed at 424 to the dollar on Friday.

The external reserves fell by 2.86 per cent to $25.45bn on August 29, 2016, up from the $26.2bn it recorded at the end of July.

Year-on-year, the reserves have fallen by 18.9 per cent.

The reserves had fallen by 0.4 per cent at the end of July, down from the $26.34bn recorded on June 29.

The foreign exchange reserves stood at $26.42bn on May 28, down by 9.2 per cent year-on-year.

The CBN had on June 20 lifted its 16-month-old currency controls and auctioned about $4bn on the spot and futures market to clear a backlog of dollar demand, to help boost interbank market trading.

The global plunge in oil prices has caused the reserves to be depleting very fast. The development had forced the CBN to introduce foreign exchange controls, which were abandoned in June.

The CBN’s Monetary Policy Committee announced plans to adopt a flexible exchange rate policy after the external reserves fell to $26.56bn on May 23.

The external reserves have so far lost over $2bn this year.

The nation recorded a balance of payments deficit of 1.4 per cent in its Gross Domestic Product at the end of 2015 owing largely to its first current account deficit (three per cent of the GDP) in over a decade.

The nation’s external reserves reduced by $6.7bn within a period of 21 months, the Minister of Budget and National Planning, Senator Udo Udoma, said on March 23.

However, the foreign exchange reserves increased by $595m to hit a one-month high of $26.196bn, the CBN data showed on Monday.

It had stood at $25.6bn as of August 24, down from $26.21bn on July 28, the CBN data showed.

The reserves declined from $26bn on August 4, 2016 to $25.97bn on August 5 as the CBN stepped up dollar sales to boost liquidity at the interbank market and support the ailing naira.

The central bank has been selling dollars regularly at the interbank market to prop up the naira since it floated it on June 20.

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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Finance

Government Revenue Surges to N2.07trn in January 2024, FAAC Discloses

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FAAC

The Federal Accounts Allocation Committee (FAAC) has revealed a significant surge in government revenue to N2.07 trillion in January 2024.

This substantial increase reflects the buoyancy of Nigeria’s economic activities despite various challenges faced by the nation.

According to FAAC’s communiqué issued after its monthly meeting in Abuja, the N2.07 trillion revenue was distributed to meet the financial needs of the federal, state, and local governments.

N1.15 trillion out of the total revenue was disbursed to the various tiers of government, indicating a robust financial inflow.

The breakdown of the revenue distribution showcased that the Federal Government received N407.267 billion, state governments obtained N379.407 billion while N278.041 billion was disbursed to local governments.

Also, N85.101 billion, equivalent to 13% of mineral revenue, was allocated to the states as derivation revenue.

FAAC also highlighted that the revenue composition included N463.1 billion from distributable statutory revenue, N391.8 billion from distributable Value Added Tax (VAT) revenue, N15.9 billion from Electronic Money Transfer Levy revenue, and N279.03 billion from exchange difference revenue.

Despite the impressive revenue figures, FAAC noted a decrease in VAT collection by N71.7 billion compared to the previous month.

This decrease suggests fluctuations in consumer spending and economic activities, which could be influenced by various factors such as policy changes, economic conditions, and consumer sentiment.

Furthermore, FAAC reported increases in revenue from Companies Income Tax, Import Duty, Petroleum Profit Tax, and Oil and Gas Royalties.

However, revenue from Value Added Tax, Export Duty, Electronic Money Transfer Levy, and CET Levies experienced declines during the period.

FAAC’s disclosure of the January 2024 revenue underscores the importance of prudent financial management and effective allocation of resources to drive sustainable economic growth and development in Nigeria.

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Finance

Private Sector Credit Hits Record High of N76.94 Trillion in January 2024 – CBN Report

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Private employers

Private sector credit in Nigeria reached a record N76.94 trillion in January 2024, according to the latest report from the Central Bank of Nigeria (CBN).

This represents a 85.2% year-on-year increase from N41.54 trillion reported in January 2023.

The CBN’s Money and Credit Statistics report unveiled that credit to the private sector experienced a substantial month-on-month surge of 23.06%, or N14.42 trillion, from N62.52 trillion in December 2023.

This surge occurred amid the implementation of the CBN’s policy to unify the naira exchange rate.

Analysts attribute the reported N76.94 trillion credit to the private sector to the recent depreciation of the naira against foreign currencies.

The naira closed at N1,356.88 per dollar in January 2024, representing a 50.87% decline or N457.49 against the dollar compared to December 2023.

This depreciation compelled banks to extend credit to major corporations to meet the CBN’s mandated Loan-to-Deposit Ratio (LDR) threshold.

The CBN’s decision to resume the enforcement of the LDR policy, effective July 31, 2023, further propelled banks to increase lending to customers, stimulating the real sector of the economy.

With the CRR mechanism updated, banks with an LDR below the prescribed level faced a 50% lending shortfall penalty.

Experts suggest that the significant increase in private sector credit underscores the growing need for businesses to secure funds amidst economic uncertainties and exchange rate volatility.

It also signifies banks’ efforts to comply with regulatory requirements and support economic growth initiatives.

As Nigeria navigates its economic landscape, stakeholders anticipate further developments in credit dynamics and monetary policies to sustain financial stability and stimulate economic expansion.

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Loans

Senate Initiates Probe into N30tn Ways and Means Loans under Buhari Administration

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Muhammadu Buhari

The Nigerian Senate has embarked on a comprehensive investigation into the disbursement and utilization of the N30 trillion Ways and Means loans obtained by the Central Bank of Nigeria (CBN) during the administration of former President Muhammadu Buhari.

The Ways and Means facility allows the CBN to provide financial support to the government to cover budget shortfalls.

The decision to probe the massive loans comes amid concerns about the transparency and accountability surrounding the utilization of these funds, particularly as the country grapples with economic challenges, food crises, rising inflation, and worsening insecurity.

The Senate’s investigation aims to shed light on how the substantial overdrafts from the CBN were acquired and expended under the leadership of former President Buhari.

There is growing apprehension that the indiscriminate spending of the overdrafts, particularly during Godwin Emefiele’s tenure as CBN governor, may have contributed significantly to the current economic predicament facing the nation.

The probe will delve into the details of the N30 trillion overdrafts, with a specific focus on examining the purpose for which the funds were allocated and how they were utilized.

Also, the Senate will scrutinize the N10 trillion disbursed under the Anchor Borrowers Scheme, as well as the utilization of $2.4 billion out of the $7 billion earmarked for forex transactions.

The initiative underscores the Senate’s commitment to ensuring transparency, fiscal responsibility, and prudent financial management in the country’s economic affairs.

It is anticipated that the probe will unearth vital insights into the financial transactions of the past administration, enabling corrective measures to be taken to address any mismanagement or discrepancies discovered.

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