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Nigeria’s Forex Earnings Hit $24 Billion in Q3

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United States Dollar - Investors King Ltd
  • Nigeria’s Forex Earnings Hit $24 Billion in Third Quarter 2016

The federal government aggregate foreign exchange (forex) inflow as at the third quarter of 2016 moved up remarkably to $24 billion, a member of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN), Dr. Doyin Salami, has revealed.

This represents an increase by $8.67 billion when compared with the aggregate forex inflow into the economy of $15.33 billion recorded by the country in the second quarter of 2016, as indicated in the CBN’s economic report.

But Salami, who said this when he spoke on the outlook of the Nigerian economy in 2017, at the Redeemed Christian Church of God, King’s Court Parish, Victoria Island, Lagos, at the weekend, pointed out that the aforementioned amount of forex inflow recorded in the third quarter of last year was paltry, compared with an aggregate of $97 billion earned by the country in 2014.

“In 2014, Nigeria earned $97 billion from export revenue, $90 billion of that was oil. As of third quarter 2016, we were doing $24 billion. Now, even if you pro-rate it and add another $8 billion for the full year, that is just $32 billion and about a third of where we were in 2014.

“When you look at the numbers, foreign portfolio investment which was $16 billion in 2014, was down to less than $2 billion in 2016. So, the inflow of FX has reduced dramatically. On the supply side, inflows are down, but on the demand side, the pressure for forex is still high. That is one of the few challenges that this economy is facing,” Salami, who is a lecturer at the Lagos Business School (LBS), Pan-Atlantic University, explained.

He urged the federal government to restore confidence in the economy.

Salami, who stressed that the comments were his personal views and not that of the MPC added: “Nigeria in my view unwisely allowed herself to be exited from the JP Morgan Index. It was very unwise! Given that I sat in some of the meetings and listened to some of the comments, Nigeria really needs to understand that in the global market, it is whoever offers the best terms and best securities that gets it. My view is that currently, Nigeria’s policy stance is not aligned to attract capital flows. I don’t want to be sentimental.

“In terms of capital flows, if we can encourage confidence in Nigeria, in the policy making of the Nigerian government, then we would be able to attract capital flows. But if we cannot, we would continue this way. 2017 would be driven by the resource allocation mechanism to be adopted by the country. Nigeria has one of the best FX policy that was introduced in June last year, it is just that we haven’t implemented it yet.

“As a nation, how we come out of recession is as important as staying out of recession. If we come out of it in a manner that sends us back to it two years down the line, because what we did to come out of it was unsustainable, that would be too bad. If we come out of it in the right way, it is going to be gradual. So, for me I see growth around one and two per cent for 2017. My expectation for inflation in 2017 is going to be around 13 per cent. My hope is that the central bank would be a bit more consistent because last year, those of us responsible for monetary policy managed to speak from both sides of our mouths.”

Furthermore, he pointed out that because of the structure of the Nigerian economy, events in the global economy would always influence activities in the domestic market.

According to him, the international environment is no “longer set fair for Nigeria,” saying that part of it was our fault and partly because of the fact that things have changed.

“Donald Trump takes over as the U.S. President at the end of next week and in terms of his economics, it doesn’t portend the best of time for Nigeria. And this is in three dimensions. Firstly, taxes would reduce and US government spending is going to rise. How does that concern Nigeria? It does concern Nigeria because that means US deficit is likely to rise and US interest rates are likely to rise.

“So, on top of what we were expecting, we are also expecting further rise in US interest rates. If US interest rates rise and we are borrowing internationally, it would be costly. If US interest rates rises, the pressure of further foreign portfolio investments coming in here reduces, the pressure for outflows for Nigeria and other emerging economies increases. So, any which way you look at it is a bit of a problem. A stronger dollar is also not good for oil prices. That is because a stronger dollar makes it more expensive and demand to drop.

“As far as oil is concerned, we have seen a little rally recently and my expectation is that prices would move in a range between $45 and $60 per barrel. Honestly, $60 per barrel is rather on the high side. But three things are Nigeria’s challenges as far as oil is concerned: If the Niger Delta is not calm, the likelihood that we would get two million barrels per day of oil is not bright.

“So, we need a calm Delta. And my sense is that the government seems to be re-engaging. But there are two other challenges which are beyond our control. The first is the glut in the crude oil market may strengthen and shale. But we cannot continue to depend on the external environment to support Nigeria.”

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.

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Economy

Ogun Records N13.3B Internally Generated Revenue Monthly in Q1 of 2021

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Revenue - Investors King

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.

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Unemployment To Push More Nigerians Into Poverty – NESG

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Nigerian Economic Summit Group- Investors King

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.

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IMF Queries FG Strategies On Fuel Subsidy, Unemployment, Inflation

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IMF - Investors King

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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