- Hope Rises as Reserves Rebound to $25.8b in New Year
With persistent and gradual gains in the last three months, the nation’s foreign exchange (forex) reserves ended 2016 at $25.78 billion, after gaining $420 million in seven days.
The resurging reserves’ profile is raising the hopes for calm forex market activities in 2017, if the trend subsists, as it would curtail panic and speculative demands, which affect the naira value.
The rise in the stock of forex reserves had defied mounting pressure from demand and series of interventions through special auctions by the regulator in the last three months.
The last time the reserves were at this level was in the middle of August 2016, with average growth of about 2.8 per cent from the end of October till date.
At $25.78 billion, the reserves recorded about $1 billion increase, or 4.2 per cent rise month-on-month, up from $24.77 billion at the end of November, as marginal rise in the international oil prices and production remained relatively stable.
However, at the same level too, it declined by 11.7 per cent from $29.13 billion as at December 2015, due to fallen price of crude oil, which depleted Nigeria’s forex earnings’ capacity and huge demand by importers.
A combination of exchange rate stability at the interbank market, slight improvement in capital importation and the country’s management of the foreign exchange policy through the Central Bank of Nigeria (CBN), have contributed to the assessed reserves’ accretion.
Six months ago, the CBN inaugurated the flexible exchange rate policy as a measure to contain the declining value of the naira, as well as attract forex inflow.
As part of the measure, it also introduced the Forwards Market, where people can buy forex for future use at the current rate.
CBN has so far contracted over $3.8 billion and redeemed the maturing ones, even as it sold about $1 billion at the market last week to clear a backlog of dollar obligations in selected sectors.
The apex bank had recently urged banks to submit their backlog of dollar demand from fuel importers, airlines, raw materials and machinery for manufacturing firms and agricultural chemicals for the special forex intervention.
In November, CBN said it offered real sector operators- manufacturers and other strategic actors in the economy, access to about 7,792 requests for foreign exchange valued at over $867 million through the inter-bank window.
A summary of the forex utilisation for October 2016 indicated that the raw materials sector received the highest allotment, getting access to foreign exchange valued at $355.7 million or 40.99 per cent of the total value of Forex utilisation for the month put at $867.8 million.
The forex reserves have also recorded an increase of $1.46 billion in the last two months, from a low of $23.9 billion in October to $25.36 billion presently.
In the same period in November, the reserves recorded an increase of $589 million, after weeks of consistent and gradual gains, despite demand pressure, bringing it to $24.49 billion, up from $23.91 billion. That was a 2.5 per cent rise.
It also closed up a two-month decline to $247 million, after losing $836 million between September ($24.74) and October ($23.91).
Ogun Records N13.3B Internally Generated Revenue Monthly in Q1 of 2021
Ogun State Government has recorded an average of N13.3billion monthly as Internally Generated Revenue (IGR) in the first quarter of 2021.
The government said it is also planning to raise its yearly Gross Domestic Product (GDP) rate from the current single digit by 25 percent.
The Commissioner for Finance, Dapo Okubadejo disclosed this to newsmen in Abeokuta ahead of the state’s investment summit tagged: ‘OgunIseya21: Becoming Africa’s Model Industrial and Logistics Hub’, slated for July 13th-14th, 2021.
Okubadejo who doubles as the State’s Chief Economic Adviser noted that the state’s IGR had experienced an upward movement after last year’s shortfall due to the Covid-19 pandemic and the attendant lockdown.
“We had a significant turnaround in the first quarter of this year. In fact, as of April, we have done almost N40bn in the Internally Generated Revenue. Our target this year is to exceed all the previous records we have set in IGR. That’s why we have put in place, all these transformation initiatives, friendly policies and also facilitate this investment summit to further showcase Ogun State as the preferred industrial destination,” he said.
The Finance Commissioner was supported in highlighting the investment potentials of the summit by his counterparts from the Ministries of Industry, Trade and Investment, Mrs. Kikelomo Longe; Works and Infrastructure, Ade Adesanya; Culture and Tourism, Toyin Taiwo; Budget and Planning, Olaolu Olabimtan and the Director-General, Public-Private Partnership, Dapo Oduwole.
Unemployment To Push More Nigerians Into Poverty – NESG
On Friday, The Nigerian Economic Summit Group said that many more Nigerians are expected to fall into the poverty trap amid rising unemployment in the country.
The NESG, a private sector-led think-tank, noted in its economic report for the first quarter of 2021 that the country’s economic growth in the period under review was relatively weak.
It said, “Nigeria’s economic growth trajectory is better described as jobless and less inclusive even in the heydays of high growth regime in the 2000s.
“While the Nigerian economy recovered from the recession in Q4 of 2020, the unemployment rate spiked to its highest level ever at 33.3 percent in the same quarter.
“With the COVID-19 crisis heightening the rate of joblessness, many Nigerians are expected to fall into the poverty trap, going forward.”
The group noted that the World Bank estimated an increase in the number of poor Nigerians to 90 million in 2020 from 83 million in 2019.
“This corresponds to a rise in headcount poverty ratio to 44.1 percent in 2020 from 40.1 percent in 2019. The rising levels of unemployment and poverty are reflected in the persistent insecurity and social vices, with attendant huge economic costs,” it said.
According to the report, huge dependence on proceeds from crude oil, leaving other revenue sources unexplored, indicates that Nigeria is not set to rein in debt accumulation in the short to medium term.
The NESG noted that public debt stock continued to trend upwards, with a jump from N7.6tn ($48.7bn) in 2012 to N32.9tn ($86.8bn) in 2020.
It said public debts grew by 20 percent between 2019 and 2020, adding, “This is partly due to the need for emergency funds to combat the global pandemic and alleviate its adverse economic impacts on households and businesses.”
According to the group, Nigeria needs more than an economic rebound, and there is a need to improve growth inclusiveness.
It said, “Nigeria has struggled to achieve inclusive growth for many decades. Since recovery from the 2016 recession, the economy has been on a fragile growth path until it slipped into another recession in 2020 due to the COVID-19 pandemic.
“This suggests that the country needs to attain high and sustainable economic growth to become strong and resilient.
“The relationship between economic growth and unemployment rate in Nigeria suggests that economic growth has not led to a reduction in the unemployment rate – jobless growth.”
The NESG said to reverse this recurring trend, there was an urgent need for collaborative efforts between the government and relevant stakeholders towards addressing the constraints to value chain development in high-growth and employment-elastic sectors, including manufacturing, construction, trade, education, health and professional services, with ICT and renewable energy sectors as growth enablers.
It noted that despite the re-opening of the land borders that the Nigerian government shut since October 2019, inflation reached a four-year high of 18.1 percent in April 2021.
“While we expect improved agricultural production in coming months to partially ease inflationary pressures, this positive impact could be suppressed by recurring key structural bottlenecks including insecurity in the food-producing regions, electricity tariff hike, fuel price increase and hike in transport and logistic costs,” it added.
IMF Queries FG Strategies On Fuel Subsidy, Unemployment, Inflation
The International Monetary Fund has raised the red flag over Nigeria’s resumption of petrol subsidy payments, describing it as injurious to the economy.
It also reiterated the importance of introducing a market-based fuel pricing mechanism and deployment of well-targeted social safety nets to cushion any adverse impact on the poor.
In a report produced after a virtual meeting with Nigerian authorities from June 1 to 8, the IMF also expressed concerns over the rising unemployment and inflation rates, even as it admitted that real Gross Domestic Product was recovering.
The IMF team, led by Jesmin Rahman, further hailed the Central Bank of Nigeria for its efforts at unifying the exchange rate by embracing needed reforms.
The Fund said: “Recent exchange rate measures are encouraging, and further reforms are needed to achieve a fully unified and market-clearing exchange rate.
“The resurfacing of fuel subsidies is concerning, particularly in the context of low revenue mobilisation.
“The Nigerian economy has started to gradually recover from the negative effects of the COVID-19 global pandemic. Following sharp output contractions in the second and third quarters, GDP growth turned positive in Q4 2020 and growth reached 0.5 percent (y/y) in Q1 2021, supported by agriculture and services sectors.
“Nevertheless, the employment level continues to fall dramatically and, together with other socio-economic indicators, is far below pre-pandemic levels. Inflation slightly decelerated in May but remained elevated at 17.9 percent, owing to high food price inflation. With the recovery in oil prices and remittance flows, the strong pressures on the balance of payments have somewhat abated, although imports are rebounding faster than exports and foreign investor appetite remains subdued resulting in continued FX shortage.
“The incipient recovery in economic activity is projected to take root and broaden among sectors, with GDP growth expected to reach 2.5 percent in 2021. Inflation is expected to remain elevated in 2021, but likely to decelerate in the second half of the year to reach about 15.5 percent, following the removal of border controls and the elimination of base effects from elevated food price levels.”
The IMF also recognised that tax revenue collections were gradually recovering but noted that with fuel subsidies resurfacing, additional spending for COVID-19 vaccines and to address security challenges, the fiscal deficit of the Consolidated Government is expected to remain elevated at 5.5 percent of GDP.
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