Connect with us

Economy

Official Exchange Rate Redundant, Soludo Tells CBN

Published

on

Chukwuma Soludo
  • Official Exchange Rate Redundant, Soludo Tells CBN

A former Governor of the Central Bank of Nigeria, Prof. Charles Soludo, says the apex bank’s official exchange rate of N306 to the dollar has become redundant, describing it as an instrument for rent seekers and arbitrary allocation of scarce foreign exchange in the country.

As a result, he said the CBN must achieve a unified market-determined exchange rate by eliminating the current multiple exchange rates as a matter of urgency.

Soludo spoke in a keynote address at the eight annual Pan-Africa Investor Conference organised by Renaissance Capital, an international investment bank, in Lagos on Wednesday.

He said, “The general price level has already adjusted because that’s the primary price indicator in the market. The prices that people hear, i.e. the exchange rate that people talk about is the parallel market rate. Anybody who says it is irrelevant is not discussing Nigeria as an economy. The official one is like the time when you had the price control regime.

“Even those who had accessed forex at the official rate, when they are fixing their prices, they are fixing their prices in comparison with the imported ones, which are taking signals from the parallel market rate. So the general price level has adjusted there. The official exchange rate is redundant; it is just for rent and for arbitrary allocations.”

Soludo also advised the CBN to dump its current import substitution policy and adopt an export-oriented industrial strategy if it hoped to take Nigeria out of its present economic woes.

According to him, the country is implementing import substitution is a crude way and it must remove the ban placed on importers of some 41 items from accessing dollars at the official interbank foreign exchange window.

The former CBN governor said, “Every regime comes to ban and the next unbans it. That is not the way to protect an economy. If you have a market-determined exchange rate regime and you do not want certain items, you put tariffs. The exchange rate plus the tariffs will make, for instance, the imported tomatoes uneconomical.

“That is where you deal with it on a sustainable basis. There is a need to think of a life beyond crude oil. We need not just import substitution; we need infrastructure and export-oriented industrialisation strategy. We cannot do that with this kind of crude inward look.”

According to Soludo, China has over one billion population and has become a successful country through export-oriented industrialisation, adding, “China was not doing import substitution.”

“That’s why they have built trillions of dollars in foreign reserves with weak currency that makes import into their country expensive and makes exporting very rewarding,” he added.

The former CBN governor said many companies that needed some of the 41 items had folded up and that thousands of jobs had been lost.

“Yet there is a better, sound, transparent and sustainable way of achieving what you intend to achieve. To create prosperity for all and lift millions out of the job market, we need industrialisation; we need to be exporting. We must fix the infrastructure,” he added.

Soludo also said that Nigeria’s public finance was broken because the country’s total expenditure was in excess of its total revenue.

He said, “In a regime where you have the total recurrent expenditure in excess of your total revenue, there is an issue. You know people talk about recurrent expenditure being 70 per cent of the budget; they are including the debt. As a percentage of your total revenue, you recurrent expenditure is a hundred and something per cent, which means as it is today, part of our borrowing is actually to finance recurrent expenditure.”

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

COVID-19 Vaccine: Crude Oil Extends Gain to $48 Per Barrel on Wednesday

Published

on

oil 1

Oil prices rose further on Wednesday as hope for an effective COVID-19 vaccine and the news that the United States of America’s President-elect, Joe Biden has begun transition to the White House bolstered crude oil demand.

Brent crude oil, a Nigerian type of oil, gained 1.63 percent or 78 cents to $48.64 per barrel at 11:50 am Nigerian time on Wednesday.

The United States West Texas Intermediate (WTI) crude oil rose by 1.36 percent or 61 cents to $45.52 per barrel.

OPEC Basket surged the most in terms of gain, adding 3.16 percent or $1.37 to $44.75 per barrel.

This was after AstraZeneca, Moderna and Pfizer-BioNTech announced the positive results of their trials.

Moderna and Pfizer had claimed over 90 percent effective rate in trials while AstraZeneca said its COVID-19 vaccine was 70 percent effective in trials but could hit 90 percent going forward.

The possibility of having a vaccine next year increases the odds that we’re going to see demand return in the new year,” said Phil Flynn, senior analyst at Price Futures Group in Chicago.

Also, the decision of President-elect Joe Biden to bring Janet Yellen, the former Chair of Federal Reserve, back as a Treasury Secretary of the United States is fueling demand and strong confidence across global financial markets.

President-elect Biden’s cabinet choices, particularly Janet Yellen’s Treasury Secretary position, are adding to upside momentum across a broad space of asset classes,” said Jim Ritterbusch of Ritterbusch and Associates.

Continue Reading

Economy

Seyi Makinde Proposes N266.6 Billion Budget for Oyo State in 2021

Published

on

The Executive Governor of Oyo State, Seyi Makinde, has presented the Oyo State Budget Proposal for the 2021 Fiscal Year to the Oyo State House of Assembly on Monday.

The proposed budget titled “Budget of Continued Consolidation” was said to be prepared with input from stakeholders in all seven geopolitical zones of Oyo state.

Governor Makinde disclosed this via his official Twitter handle @seyiamakinde.

According to the governor, the proposed recurrent expenditure stood at N136,262,990,009.41 while the proposed capital expenditure was N130,381,283,295.63. Bringing the total proposed budget to N266,6444,273,305.04.

The administration aimed to implement at least 70 percent of the proposed budget if approved.

He said “The total budgeted sum is ₦266,644,273,305.04. The Recurrent Expenditure is ₦136,262,990,009.41 while the Capital Expenditure is ₦130,381,283,295.63. We are again, aiming for at least 70% implementation of the budget.”

He added that “It was my honour to present the Oyo State Budget Proposal for the 2021 Fiscal Year to the Oyo State House of Assembly, today. This Budget of Continued Consolidation was prepared with input from stakeholders in all seven geopolitical zones of our state.”

Continue Reading

Economy

World Bank Expects Nigeria’s Per Capita Income to Dip to 40 Years Low in 2020

Published

on

world bank

The World Bank has raised concern about Nigeria’s rising debt service cost, saying it could incapacitate the nation from necessary infrastructure development and growth.

The multilateral financial institution said the nation’s per capita income could plunge to 40 years low in 2020.

According to Mr. Shubham Chaudhuri, Country Director for World Bank in Nigeria, the decline in global oil prices had impacted government finances, remittances from the diaspora and the balance of payments.

Chaudhuri, who spoke during the 26th Nigerian Economic Summit organised by the Nigerian Economic Summit Group and the Federal Government, said while the nation’s debt is between 20 to 30 percent, rising debt service remains the bane of its numerous financial issues and growth.

Nigeria’s problem is that the debt service takes a big part of the government revenue,” he said.

He said, “Crisis like this is often what it takes to bring a nation together to have that consensus within the political, business, government, military, civil society to say, ‘We have to do something that departs from business as usual.’

“And for Nigeria, this is a critical juncture. With the contraction in GDP that could happen this year, Nigeria’s per capita income could be around what it was in 1980 – four decades ago.”

Nigeria’s per capita income stood at $847.40 in 1980, according to data from the World Bank. It rose to $3,222.69 in 2014 before falling to $2,229.9 in 2019.

Continue Reading

Trending