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Economy

External Reserves Stand at $30.6bn

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Forex Weekly Outlook October 31-November 4
  • External Reserves Stand at $30.6bn

Despite all the dollars pumped into the foreign exchange (FX) market by the Central Bank of Nigeria (CBN) since February 20 when it announced its new FX policy measures, the country’s external reserves have remained relatively robust.

The reserves, derived primarily from crude oil earnings, increased from $29.282 billion as of February 20 to $30.586 billion as of April 19, according to data posted on the CBN’s website.

Similarly, initiatives taken by the central bank to commence sectoral FX interventions may have started yielding results, as the naira in the past few weeks also strengthened against other currencies and the greenback.
The naira rose to N380 to the dollar last week, from N410 in the preceding week.

Owing to the CBN’s foray into the market, operators of small and medium enterprises are beginning to heave a sigh of relief, as they have been granted special consideration for $20,000 each quarter to import essential and eligible raw materials and finished goods critical to their operations.

When contacted for comments on this development, the Bank’s spokesman, Isaac Okorafor, stated that the CBN has put in place measures to ease the difficulties encountered by small businesses.

He noted that while the Manufacturers Association of Nigeria (MAN) had acknowledged that the previous 60 per cent FX allocation had helped to raise capacity utilisation, they still canvassed for more dollars to be made available for real sector players in the small to medium scale category.

According to Okorafor, the CBN examined this request and found out that this category of industries was being crowded out of the FX market and therefore took steps to address their challenges.

On how this has affected the naira exchange rate, he said genuine SMEs no longer have to patronise or source FX from unofficial sources, thus reducing pressure on either Bureau de Change (BDC) or parallel market segments of the market.

For the umpteenth time, he urged all participants in the market to corporate with the CBN and abide by the regulatory guidelines in order to ensure hitch-free operations.

However, the central bank at the weekend said it received complaints from operators of small and medium businesses eligible for accessing FX from its new window that they were being frustrated by commercial banks.

To this end, Okorafor encouraged SMEs that had been denied access to FX to present evidence to the CBN. He stressed that the central bank would not fail to sanction any bank or even its chief executive that violates the rules on FX for SMEs.

“It has become necessary that we bring to your notice the complaints from customers, especially those who operate in the SME segment of the market that banks are frustrating their efforts at getting FX.

“You would recall that recently we introduced a window to give FX to SMEs, which incidentally are the engine of growth in our economy, for them to be able to obtain a small amount of FX. However we have received complaints that banks are frustrating them.

“We have reviewed all these complaints and found out that they do not have evidence. So we want to use this opportunity to appeal to customers of banks and the SMEs to give us concrete evidence against these banks so that we can hold them responsible by way of sanctions,” he added.

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

Nigeria, Morocco sign MOUs on Hydrocarbons, Others

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moroccan-king-mohammed

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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Economy

Dangote Fertiliser Plant to Commence Shipment of Urea in March 2021

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Dangote to Sells Petrol in Naira, Plans to Commence Urea Shipment in March 2021

The Governor of the Central Bank of Nigeria, Mr. Godwin Emefiele, has said Dangote Fertiliser Plant will commence shipment of Urea in March 2021.

The CBN governor disclosed this during an inspection tour of the sites of Dangote Refinery, Petrochemicals Complex Fertiliser Plant and Subsea Gas Pipeline at Ibeju Lekki, Lagos on Saturday.

Emefiele further stated that Dangote Refinery would sell refined petroleum products in Naira when it starts production.

This he said would save the country from spending 41 percent of the nation’s foreign exchange on importation of petroleum products yearly.

Based on agreement and discussions with the Nigerian National Petroleum Corporation and the oil companies, the Dangote Refinery can buy its crude in naira, refine it, and produce it for Nigerians’ use in naira,” Mr Emefiele said.

That is the element where foreign exchange is saved for the country becomes very clear. We are also very optimistic that by refining this product here in Nigeria, all those costs associated with either demurrage from import, costs associated with freight will be totally eliminated.

Emefiele explained that this will make the price of Nigeria’s petroleum products affordable and cheaper in naira.

If we are lucky that what the refinery produces is more than we need locally you will see Nigerian businessmen buying small vessels to take them to our West African neighbours to sell to them in naira.

“This will increase our volume in naira and help to push it into the Economic Community of West African States as a currency,” Mr Emefiele said.

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Economy

UK Budget 2021: Will Sunak’s Budget Run Into Unintended Consequences?

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UK EConomy contracts

Rishi Sunak’s Budget will encourage higher earners to consider their “international financial options” and will drive businesses away from the UK, warns the CEO of one of the world’s largest independent financial advisory and fintech organizations.

The warning from Nigel Green, chief executive and founder of deVere Group, comes as the Chancellor delivered his 2021 Budget in the House of Commons, his second since he took on the role.

Mr Green says: “The Chancellor has got an extraordinarily difficult hand to play as he tries to stem the economic damage caused by the pandemic, support jobs and businesses and, crucially, rebuild the public finances.

“Whilst Mr Sunak is being hailed a hero for the continued and unprecedented levels of support, it should also be remembered that he is – in a stealth move – dragging more people firmly into the tax net.

“He is raising taxes under the radar.

“Yes, there is no income tax rise. However, he is freezing personal tax thresholds, meaning as incomes rise and thresholds don’t, he is able to raise money by fiscal drag.”

Earlier this week, the deVere CEO noted: “Those most impacted by this stealth move will be looking at the financial planning options available to them, including international options, in order to grow and protect their wealth.”

Rishi Sunak also confirmed that corporation tax will increase to 25% from 2023, up from the current level of 19%.

Of this tax hike, Mr Green goes on to say: “Lower corporation tax helps job and wealth-creating business to survive and thrive. It also helps attract business to move and invest in the country.

“Instead of increasing taxes, Mr Sunak should have relentlessly focussed on growth and stimulus policies for businesses.  This would have been of greater help to firms, the economy, jobs and, ultimately, the Treasury’s coffers.”

He adds: “Again, this corporation tax hike is likely to serve as a prompt for businesses to consider their overseas financial options.”

The deVere CEO concludes: “The Chancellor had to perform a tough juggling act.  But stealthily dragging more people into the tax net and raising corporation tax might have negative, unintended consequences for the Treasury’s bottom line.”

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