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Non-oil Export Sector Loses N581bn in Two Years

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  • Non-oil Export Sector Loses N581bn in Two Years

The non-oil export sector may have lost over $1.9bn between 2014 and 2016. This is approximately N580.72bn, using the exchange rate of N305/dollar.

According to data from the National Bureau of Statistics, the export from the sector in 2013 August was $3.4bn. But at the end of 2015, it had dropped to $1.6bn and operators in the sector blamed government’s foreign exchange policies and lack of incentives for the drop.

Aside from the Executive Secretary of the Organised Private Exporters Association, Mr. Jaiyeola Olarewaju, who said that non-oil export declined because of the disruption in the implementation of Export Expansion Grant, incentives to exporters, non-oil exporters also blamed the Central Bank of Nigeria’s 2015 export proceeds repatriation policy for the decline.

The CBN in February 2015 ordered exporters to pay their dollar earnings into the domiciliary accounts of their various banks.

Non-exporters started protesting against the implementation of the policy when they were made to exchange their dollars for naira at the official exchange rate of N197/dollar instead of the parallel market rate of N237.

The National President, Federation of Agricultural Commodity Association of Nigeria, Mr. Victor Iyama, lamented the hardship that the policy caused exporters, noting that it drove some of them underground.

The downward twist in non-oil export earnings continued throughout 2015 as indicated by data from the CBN and in 2016, earnings fell to $1.096bn.

The Director-General, Lagos Chamber of Commerce and Industry, Mr. Muda Yusuf, called for a review of the policy, saying that it was a disincentive to the sector.

He maintained that in an economy with a weakened currency as in the case of Nigeria, exporters were supposed to benefit but restricting access to their proceeds would only drive them away from the sector.

Some of the exporters who spoke to our correspondent said that the policy was further compounding issues in the Nigerian environment, which was not conducive for business.

“Exporters face numerous challenges, especially with power, which leads to increase in cost of production. Forex policy has equally added to the problem because we are not allowed unrestricted access to our earnings.

“Currently, we are being forced to sell our proceeds at the official exchange rate of N315/dollar while in the open market, the dollar exchanges for up to N400,” a cashew processor, Mr. Banand Balodi, told our correspondent.

Another exporter, Mr. Wale Ogundeji, said he avoided the domiciliary account arrangement and instead, sold his produce at the open market outside Nigeria, using his agents.

“My agents sell and send the money to me. I can go to the parallel market and exchange it at the prevailing market rate,” he told our correspondent.

Yusuf said that that the policy was encouraging corruption among banks that would collect the dollars from exporters for N305 per dollar and then turn around to sell it for N350 to vendors.

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

Manufacturing Firms Borrowed N570bn from Banks in 2020 – CBN

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Steel Manufacture At Evraz Plc West-Siberian Metallurgical Plant

Manufacturing firms borrowed a total of N570bn from Nigerian banks last year amid the economic fallout of the COVID-19 pandemic.

Banks’ credit to the manufacturing sector rose to N3.19tn as of December 2020 from N2.62tn at the end of 2019, according to the sectoral analysis of banks’ credit by the Central Bank of Nigeria.

The sector received the second biggest share of the credit from the banks after the oil and gas sector, which got N5.18tn as of December.

“The manufacturing sector, which is the engine of sustainable growth, is still struggling with the debilitating impact of the pandemic and is yet to recuperate,” the Director-General, Manufacturers Association of Nigeria, Mr Segun Ajayi-Kadir, said in January.

MAN, in a January report, revealed that most manufacturers said commercial banks’ lending rates were discouraging productivity in the sector.

The report said 71 per cent of Chief Executive Officers interviewed “disagreed that the rate at which commercial banks lend to manufacturers encourages productivity in the sector.”

It said the cost of borrowing in the country remained at double digits even amidst the reforms meant to culminate in lower rates to engender the country’s economic recovery process.

The report said, “Special single digit loans offered by development banks are still hard to leverage as conditionalities to assess the loans through commercial banks are often overwhelming and laden with additional charges that will eventually make the interest rate double digit.

“Seven per cent of respondents were, however, of the opinion that the rate at which commercial banks lend to manufacturers encourages productivity in the sector while the remaining 22 per cent were not sure of the impact of the rate of lending on productivity in the manufacturing sector.”

The report showed that 64 per cent of respondent disagreed that the size of commercial bank loan to manufacturing sector had encouraged manufacturing productivity.

It said the very high presence of the government in the money market, particularly through the sale of treasury bills, had been crowding out the private sector from the market.

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Economy

Nigeria Earns Extra N318.4 Billion as Crude Oil Hits $67/Barrel

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FG Generates Additional Income of N318.4 Billion as Crude Oil Hits $67/Barrel

The Federal Government earned an additional N318.36 billion in February following the surge in crude oil price above $60 per barrel.

Brent crude oil, against which Nigerian oil is priced, average $60 throughout the month of February.

In March, it rose to $67 per barrel.

According to the Minister of Finance, Budget and National Planning, Zainab Ahmed, Nigeria’s crude oil price was retained at $40 per barrel for 2021.

However, she said the nation is presently producing below its 2.5 million barrel per day capacity at 1.7mbpd. This, she said includes 300,000bpd condensates.

“Although Nigeria’s total production capacity is 2.5mbpd, current crude production is about 1.7mbpd, including about 300,000bpd of condensates, which indicates compliance with OPEC quota,” the finance minister stated.

Going by the number, Nigeria is producing 1.4mbpd of crude oil without condensates, but with an additional $20 revenue when compared to the $40 per barrel benchmark for the year. It means the Federal Government realised an additional income of N318.360 billion or $20 X 1.4mbpd X 30days in the month of February.

Crude oil jumped to $68.54 per barrel on Friday following OPEC+’s decision to role-over production cuts.

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Economy

Nigeria, Morocco sign MOUs on Hydrocarbons, Others

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The Federal Government and the Kingdom of Morocco have signed five strategic Memoranda of Understanding that will foster Nigerian-Morocco bilateral collaboration and promote the development of hydrocarbons, agriculture, and commerce in both countries.

The Minister of State for Petroleum Resources, Chief Timipre Sylva, led the Nigerian delegation to the agreement signing ceremony on Tuesday at Marrakech, Morocco, while the Chief Executive Officer of OCP Africa, Mr Anouar Jamali, signed for the Kingdom of Morocco, according to a statement by the Nigerian Content Development and Monitoring Board.

Under the agreement between OCP, NSIA and the Nigerian National Petroleum Corporation, Nigeria will import phosphate from the Kingdom of Morocco and use it to produce blended fertiliser for the local market and export.

The statement said Nigeria would also produce ammonia and export to Morocco.

“As part of the project, the Nigerian Government plans to establish an ammonia plant at Akwa Ibom State,” it said.

The Executive Secretary of NCDMB, Mr Simbi Wabote, and the Group Managing Director of NNPC, Mallam Mele Kyari, were part of the delegation and they confirmed that their organisations would take equity in the ammonia plant when the Final Investment Decision would be taken, the statement said.

Sylva said the project would broaden economic opportunities for the two nations and improve the wellbeing of the people.

He added that the project would also positively impact agriculture, stimulate the growth of gas-based industries and lead to massive job creation.

He said the President, Major General Muhammadu Buhari (retd.), had mandated the Ministry of Petroleum Resources and it agencies and other government agencies to give maximum support for the project.

“He mandated me to ensure that at least the first phase of this project is commissioned before the expiration of his second term in office in 2023,” he added.

According to the statement, the MOUs were for the support of the second phase of the Presidential Fertiliser Initiative; Shareholders Agreement for the creation of the joint venture company to develop the multipurpose industrial platform and MOU for equity investment by the NNPC in the joint venture and support of the gas.

Other agreements are term sheet for gas sales and aggregation agreement and MOU for land acquisition and administrative facilitation to the establishment of the multipurpose industrial platform for gas sales and aggregation agreement.

The NCDMB boss described the bilateral agreement as significant to the Nigerian economy as it would accelerate Nigeria’s gas monetisation programme through establishment of the ammonia plant in the country.

The agreement would also improve Nigeria’s per capita fertiliser application through importation of phosphate derivatives from Morocco, he added.

Wabote challenged the relevant parties to focus on accelerating the FID, assuring them that the NCDMB would take equity investment for long-term sustainability of the project.

He canvassed for the setting up of a project management oversight structure to ensure project requirements and timelines are met.

“There is also need to determine manpower needs for construction and operations phase of the project and develop training programmes that will create the workforce pool from Nigeria and Morocco and design collaboration framework between research centres in Nigeria and Morocco to develop technology solutions for maintaining the ISBL and OSBL units of the Ammonia complex,” he said.

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