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Nigeria Must Eliminate Multiple Exchange Rates – Soludo

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Chukwuma Soludo
  • Nigeria Must Eliminate Multiple Exchange Rates

A former Governor of the Central Bank of Nigeria, Prof. Chukwuma Soludo, on Monday highlighted steps the Federal Government needed to return the country out of the biting economic challenges and get back on the path of growth.

Soludo said policymakers must get the country out of the current multiple exchange rates’ regime and reduce the wide spread between the official and parallel market exchange rates of the naira to a maximum of three to five per cent.

The currency currently has about five exchange rates, according to analysts.

The former Governor of the Central Bank of Nigeria, who was the Chairman of the Economic Discourse organised by the Institute of Chartered Accountants of Nigeria, spoke in Lagos while fielding questions from journalists shortly after the event.

He pointed out that policymakers were expected to be taking bold steps that would navigate the country away from crude oil dependency to a non-oil economy on the long run.

Soludo commended steps taken by the CBN in the last few weeks to restructure the foreign exchange market, but stressed that there was still a long way to go to get the economic back on track.

The former CBN governor stated, “With regards to exchange rate, I can see quite some changes in the last few weeks. I think some steps are beginning to be taken, but it is still quite a long way to go to get to a stable and predictable level that eliminates the premium among the multiplicity of exchange rates.

“Nigeria must get out of multiple exchange rates and we must eliminate the premium, get it back on track at a competitive exchange rate regime. The uncertainty that is created by that is so enormous; and with the oil price rising and with the increase in oil earnings, this is the time to take bold steps and do the needful.”

On how policymakers can eliminate the multiple exchange rates and close the gap, Soludo said it was simple because the nation had done it before.

He said, “On bold steps, the template is not too far. We have done it before and it is just going back to it. If it (the template) is not broken, why mend it? Get back and eliminate the multiple exchange rate regime, eliminate the premium, or at least significantly reduce it to not more than between three to maximum of five per cent premium between the parallel and official exchange rates.

“On what it takes to do it, that is basically known. Get the public finance okay; I can tell you that with the momentum of what is going on in the rest of the world, by the end of this year, we should actually be having stocks of reserves in the range of about $50bn or $60bn.”

According to Soludo, getting the country out of the current economic recession is no big deal as bringing it back to growth.

He said in spite of government policies, the country would come out of the current recession.

He stated, “And getting Nigeria structured and reengineered towards non-oil economy, that again will require a lot more serious work. The recession is not the issue. We will get out of it in spite of government policy.

“I think this is a time Nigeria should actually be making hard decisions to transit away from an oil revenue economy. And that’s the serious work.”

Earlier, the ICAN President, Mr. Titus Soetan, had said that years of neglect and mismanagement had brought the country to its present parlous state.

Highlighting the purpose of the ICAN Economic Discourse, he said, “We took a stance that the challenges confronting us needed to be identified and articulated so that short, medium and long-term solutions could be found for them.

“This is what we sought out to do by inviting experts in various fields to this discourse. We need to hear from people who have the knowledge and expertise and who can share their wealth of experience on how to move on economically as a nation in view of the urgent need to reinvent the economic wheel of the Nigerian economy.”

The Managing Director, Financial Derivatives Company Limited, Mr. Bismarck Rewane, who was the guest speaker at the event, stated that the nation’s Gross Domestic Product would expand this year by 2.19 per cent and it would go through a stage of 4.62 per cent before getting to seven per cent by 2020.”

He, however, noted that this would be based on the assumptions that Nigeria would remain an exporter of oil, produce 2.5 million barrels of oil per day, and create six million jobs within the period.

“It also means we will increase the overall tax to GDP ratio, which is about five per cent now, to about 15 per cent, and the tax policy will be more efficient and the revenue will increase to about N350bn annually,” Rewane added.

The panellists at the event were the Managing Director of Economics Associates, Dr. Ayo Teriba; Director-General, Lagos Chamber of Commerce and Industries, Mr. Muda Yusuf; a former Deputy Governor, CBN, Dr. Obadiah Mailafia; and Partner, PwC, Mr. Taiwo Oyedele.

Teriba, in his submission, noted that the Economic Recovery and Growth Plan of the Federal Government was triggered by the shocks occasioned by the recession and worsening of the inflation record.

He said, “Nigeria’s economic crises broke out in the course of 2016. We also had foreign exchange crisis, which broke out also in 2016. Perhaps, we should have separated the crisis response from the plan. Crisis response calls for urgency. Mid last year, the currency was devalued. So, we needed the crisis response, we don’t have the luxury.

“In economic policy, there are lags. Lags are well understood. After recognising there is a response lags, what should now be fashioned is the response. There is an action lag. When you have a recession and devaluation, you want to do your best to shorten the lags. Yusuf emphasised the need for the Federal Government to anchor its growth plans on the private sector, emphasising the role of private investments in economic growth.

Mailafia also stressed the importance of a conducive business environment to attracting foreign investors into the country in order to enhance growth.

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

Nigeria-South Africa Trade Hits $2.9bn

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Shipowners

The volume of trade between Nigeria and South Africa hit $2.9 billion last year with expectation of it rising further with the African Continental Free Trade Area (AfCFTA) agreement.

Nigeria’s Consul General, Malik Abdul, in a statement noted that Nigeria accounts for 64 per cent of South Africa’s trade in West Africa and is one of his country’s top three sources of crude oil.

He further added that in 2020, South Africa imported R35 billion ($2.48 billion) worth of goods, predominantly crude oil from Nigeria and exported R6 billion ($425milion) to Nigeria.

He stated: “South Africa is currently among the top 10 per cent of investors in Nigeria, globally and Nigeria is South Africa’s 10th biggest export market in Africa and thirty-second globally. Nigeria accounts for 64 per cent of South Africa’s trade with West Africa and is one of South Africa’s top three sources of crude oil.

“Also, Nigeria in 2020 was South Africa’s top import market in Africa and sixth globally, after China, Germany, USA, India and Saudi Arabia. Over the past year, South Africa imported $2.48 billion worth of goods predominantly crude oil from Nigeria and exported $425 million worth to Nigeria.”

Also, the consulate said his embassy issued a total of 10,341 passports to Nigerian citizens in South Africa between March 2020 and May 2021.

The consul general further said the Mission had 404 unclaimed passports, and advised all those whose passports were processed and pending from August 2020 to come for collection.

Abdul added that the consulate was working to clear all COVID-19 lockdown backlog of applications, urging members of the public to exercise patience while the mission was resolving the backlogs.

On the re-introduction of administrative fees and charges for lost passports, Abdul said that the step was taken to harmonise and standardise consular services following approval from the Ministry of Foreign Affairs, Abuja.

The Mission had increased the fees for lost passports from R1,500 to R2,000, and admin charges of R120 for data capturing.

“On this issue, the Mission could not unilaterally impose any charges without headquarters’ approval or consent.

“The admin fees of R120 pertains to all services rendered by the two Missions,” he said.
According to the Nigerian envoy, the decision was taken to remove disparities in all consular services, noting that visa fees have also been harmonised.

On penalty for lost passports, Abdul disclosed that 484 Nigerian passports were reported missing at the mission between August 2020 and May 2021 with request for re-issue.

Abdul said it was discovered that there were criminal undertones and immigration rules infractions associated with the ‘so-called’ lost passport declarations.

“In line with practice in other Missions, there was a need to impose fines to deter people from engaging in such infractions.

“At such an astronomical rate of loss declarations, the option will be to refer such losses to Nigeria for processing.

“This will save the booklet for genuine requests of re-issue and thereby reducing the backlog and pressure on the Mission,” the envoy said.

Abdul disclosed that the consulate had received a directive to embargo processing of lost passports pending further instructions from the headquarters.

The consul general then accused some Nigerian groups in South Africa of, “peddling lies and outright falsehoods” against the Mission and his person.

“These disgruntled elements have gone ahead to incite fellow Nigerians with intent to sabotage the Mission.

“Moreover, a lie and falsehoods often repeated amounts to a propaganda which can be misinterpreted by the gullible and undiscerning as truth,” he said.

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Economy

NNPC Engages Gas Producers to Improve Power Supply

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Electricity - Investors King

The Nigerian National Petroleum Corporation (NNPC) has started engaging gas producers across the country in an effort to boost gas supply to power generation companies (Gencos) and subsequently improve electricity supply.

Mr. Yusuf Usman, the Chief Operating Officer, Gas and Power, NNPC, disclosed this in Lagos during his tour of Egbin Power Plc facility on Monday.

Usman, who responded to concerns raised by the Chairman of Egbin Power Plc, Mr. Temitope Shonubi, said the company’s concern on gas supply and transmission restrictions had been noted, adding that the corporation would support it to ensure constant power supply.

I have listened to all the concerns you raised. An area of concern to me is when you talked about the gas constraints. We are going to support you to make sure that the power supply is steady. We are having a session with gas suppliers in this regard.

“I am aware that works are ongoing in this regard to ensure that all the power we generate is safely evacuated,” Usman said.

Usman, however, said he was impressed by the level of progress being recorded by Egbin, noting that the effort of the company’s management to effect turnaround maintenance at the company through overhaul of the entire system, was commendable.

Usman added: “The visit has been an eye opener for me. We have seen turbines that have been running for over 40 years. We have seen efforts being made by Egbin management to effect a turnaround at the plant through overhaul of the entire system.

“We have also seen the support you have been given to the youths through employment and capacity development opportunities.”

Shonubi, in his remarks, said Egbin Power was planning to increase power generation by 1,900 megawatt.

Shonubi said: “Egbin has 1,320MW capacity. As at the time we took over, the plant was generating 300MW which is abysmal 22 per cent. As at today, our generation capacity has surged and we do 89 per cent.

“We have reached the highest peak of 970MW and we are working hard to ensure sustainability of this feat.

“The 970MW we hit is the highest recorded this year and based on our core value of sustainability, we are working round the clock to make sure that we sustain the gains, which we have made.”

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Economy

Nigeria’s Inflation Rate Moderates to 17.93 Percent in May

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consumer price index - Investors King

Inflation in Africa’s largest economy, Nigeria, moderated from 18.12 percent year-on-year in April to 17.93 percent year-on-year in May, according to the latest report from the National Bureau of Statistics (NBS).

On a monthly basis, headline inflation grew by 1.01 percent in May. Representing an increase of 0.04 percent when compared to 0.97 percent filed in April.

Core inflation, which excludes the prices of volatile agricultural
produce stood at 13.15 percent in May 2021, up by 0.41 percent when compared with 12.74 percent recorded in April 2021.

On month-on-month basis, the core sub-index increased by 1.24 percent in May 2021. This was up by 0.25 percent when compared with 0.99 percent recorded in April 2021.

The highest increases were recorded in prices of Pharmaceutical products, Garments, Shoes and other footwear, Hairdressing salons and personal grooming establishments, Furniture and furnishing, Carpet and other floor covering, Motor cars, Hospital services, Fuels and lubricants for personal transport equipments, Cleaning, repair and hire of clothing, Other services in respect of personal transport equipments, Gas, Household textile and Non durable household goods.

The average 12-month annual rate of change of the index was 11.50 percent for the twelve-month period ending May 2021; this is 0.25 percent points higher than 11.25 percent recorded in April 2021.

Food index rose by 22.28 percent in the month of May 2021, up by 0.06 percent points from 0.99 percent recorded in April 2021.

The average annual rate of change of the Food sub-index for the twelve-month period ending May 2021 over the previous twelve-month average was 19.18 percent, 0.60 percent points from the average annual rate of change recorded in April 2021 (18.58) percent.

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