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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.

Economy

Stop Maize, Soybean Export to Reduce Scarcity – NIAL

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Farm input

Stop Maize, Soybean Export to Reduce Scarcity – NIAL

The Nigerian Institute of Animal Science on Tuesday called on the Federal Government to halt the continued export of maize and soybean to reduce the scarcity of the commodities as well curb their price hike in Nigeria.

Registrar and Chief Executive Officer, NIAL, Prof. Eustance Iyayi, told journalists in Abuja that the poultry sector was currently hit by the severe scarcity of maize and soybean.

This, he said, was due to the continued export of the commodities, the COVID-19 pandemic, which had disorganised the international supply chain, lingering insecurity in the North-East, farmers/herders conflict and flooding in some parts of the country.

“Maize and soybean are being exported and this has exacerbated the situation leading to local scarcity and price escalation of the commodities in poultry production,” Iyayi stated.

He added, “The increasing prices of the essential commodities has resulted in the increase in price of finished feeds by about 75 per cent.

“This has led to the closure of small and medium sized poultry farms thereby threatening about 10 million jobs as a result of this scarcity.

“To set the poultry industry from total collapse, the institute urges the government to immediately halt the exportation of soybean and maize and grant import permit to importers at the official foreign exchange rate.”

Iyayi said there was shortage of soybean in Nigeria and other countries, stressing that the little amount being produced across the country should not be exported.

He said the current maize yield of about one to two tonnes per hectare being produced in Nigeria would not be enough to sustain the country.

The NIAL helmsman stated that the country should be producing between seven and 10 tonnes per hectare in order to meet the requirements for humans and animals.

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Economy

Petrol Landing Cost Jumps to N186, Oil Hits $64

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stakeholders

Petrol Landing Cost Jumps to N186, Oil Hits $64

Against the backdrop of the rising price of oil prices, the landing cost of Premium Motor Spirit (petrol) imported into Nigeria has increased to N186.33 per litre.

Investors King had exclusively reported on February 9 that the landing cost of PMS rose to about N180 per litre on February 5 from N158.53 per litre on January 7.

Crude oil price accounts for a large chunk of the final cost of petrol, and the deregulation of petrol price by the Federal Government last year means that the pump price of the product will reflect changes in the international oil market.

Going by the petrol pricing template of the Petroleum Products Pricing Regulatory Agency, the landing cost of petrol rose to N186.33 per litre on February 16, with the pump price of the product expected to be N209.33 per litre.

The international oil benchmark, Brent crude, closed at $63.96 per barrel on February 16, up from $59.34 per barrel on February 5.

The rising price of crude oil pushed the cost of petrol quoted on Platts to $560.75 per metric tonne (N163.08 per litre, using N390/$1) on February 16 from $543.25 per metric tonne (N157.99 per litre) on February 5.

Other cost elements that make up the landing cost include freight (N10.29), lightering expenses (N4.57), insurance cost (N0.25), Nigerian Ports Authority charge (N2.38), Nigerian Maritime Administration and Safety Agency charge (N0.23), jetty throughput charge (N1.61), storage charge (N2.58), and financing (N1.33).

The freight cost increased to $35.41 per MT (N10.29 per litre) last Wednesday from $30.04 per MT (N8.74 per litre) on February 5.

The pump price is the sum of the landing cost, wholesale margin and the distribution margins. The wholesale margin is N4.03 while the distribution margins comprise transporters allowance (N3.89), retailer (N6.19), bridging fund (N7.51), marine transport average (N0.15), and admin charge (N1.23).

Apart from the changes in global crude oil prices, the exchange rate of naira to the dollar also affects the cost of imported petrol.

The cost of petrol would be higher if the 410/$1 rate at which the naira closed on Monday at the Investors’ and Exporters’ Foreign Exchange Window was used. The naira closed at 480/$1 at the parallel market.

The Nigerian National Petroleum Corporation, which has been the sole importer of petrol into the country in recent years, is still being relied upon by marketers for the supply of the product despite the deregulation of the downstream petroleum sector.

Oil marketers said recently that they were ready to resume importation of petrol if the foreign exchange was made available to them at a competitive rate.

“The discussion we should be having today is how best to maximise the benefits of the removal of price controls and subsidies while minimising the adverse effects of this action on our citizens,” the Chairman, Major Oil Marketers Association of Nigeria, Mr Adetunji Oyebanji, said at a virtual press briefing.

Brent crude, against which Nigeria’s oil is priced, rose by $1.67 to $64.58 per barrel as of 6:08pm Nigerian time on Monday.

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Economy

FG to Lift 100 Million People Out of Poverty With Gas Expansion Project

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Gas Plant

FG to Lift 100 Million People Out of Poverty With Gas Expansion Project

The Federal Government has said about 100 million Nigerians will be lifted out of poverty through the National Gas Expansion Programme (NGEP).

The Minister of State for Petroleum Resources, Chief Timipre Sylva, disclosed this on Monday during the inauguration of the NGEP in Ado Ekiti, Southwest.

Sylva said the project was “a practical demonstration of President Muhammadu Buhari’s commitment to lift 100 million Nigerians out of poverty by using gas value chain as catalyst for social and economic development in Nigeria”.

The minister said, “The programme has its main objective to reinforce and expand gas supply as well as stimulate demand in Nigeria through effective and efficient mobilisation and utilisation of all available assets, resources and infrastructure in the country.

“The programme is geared towards the implementation of Mr President June 12, 2019 promise to take hundred million Nigerians out of poverty within the current decade by ensuring that locally produced, available, accessible and affordable fuel is sufficiently supplied across the country”.

Sylva added that Nigeria was richly endowed with mineral resources, specifically, hydrocarbons, crude oil and natural gas with proven gas reserves of over 200 trillion cubic feet of natural gas, which he said had presented the country with opportunity to use gas as a catalyst for social economy renaissance.

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