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Nigeria Needs N15.3tn for Aviation Infrastructure – Experts

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  • Nigeria Needs N15.3tn for Aviation Infrastructure – Experts

Aviation experts have said that the country needs $50bn (N15.3bn) to close infrastructure gap in the industry and position the industry as Sub-Saharan Africa hub in the next 30 years.

The experts, who spoke on Tuesday at the Nigeria Travels Mart colloquium on ‘Vision 2050: How to fast track Nigeria’s aviation’, said that to close the current infrastructure gap and reach the desired optimal investment, the country must aggressively increase core infrastructure stock from its estimated 35 to 40 per cent contribution of the Gross Domestic Product to 70 per cent by 2043.

The Chief Executive Officer of RTC Advisory Services Limited, Mr. Opeyemi Agbaje, said spending on infrastructure had been poor and that the target investment requirement was approximately $2.9tn over next 30 years.

According to him, sectoral targets and investment needs for a 30-year period will be $800bn for the transportation sector comprising $350 for road infrastructure; $75bn for rail; $50bn for aviation; $50bn for maritime; and $275bn for urban transportation.

These, he said, should be funded by Foreign Direct Investment with the support of the Federal Government through the provision of a stable macroeconomic environment; forward-looking and proactive policy; a clear and compelling vision for the industry shared by all stakeholders, including government and the private sector.

“The whole of infrastructure, not just for aviation or transportation, must come from the FDI, not borrowing as the Federal Government prefers,” he said.

A former Director-General of the Nigerian Civil Aviation Authority, Dr. Harold Demuren, said that despite the current challenges, the future of aviation in the country was bright and would be driven by a projected increase in population from over 180 million currently to about 399 million by 2050.

He however stated that the government should improve on the ease of doing business in the industry and the provision of infrastructure.

“We need to look critically at infrastructure, especially the land and air side. State of the art terminals will not ensure safety. We need to continue to ensure safety regulations without political intervention,” he said.

He added that the government should consider establishing a national carrier to be able to harness the industry’s potential.

“If we had developed a national carrier, we will not be where we are today. The government must learn to support the industry. All over the world, the government is the biggest supporter of airlines,” he said.

The Chief Executive Officer of Kitari Consult Limited, an aviation consulting firm, Mr. Ali Magashi, said many airports in the country were in a state of disrepair, while basic infrastructure such as adequate runway capacities and terminal facilities were often lacking at major airports.

Magashi, who is also the Chairman of Aso Savings and Loans Plc, said that reforming the Nigerian aviation sector would depend on the implementation of various critical factors by all relevant stakeholders, particularly the government.

According to him, a national carrier will serve as a panacea for fast tracking the growth of aviation in the country.

He said a national carrier airline would serve as the country’s brand to the world and bring the world into the country as well as take the country to the world.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Economy

Goldman Sachs Urges Bold Rate Hike as Naira Weakens and Inflation Soars

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Central Bank of Nigeria (CBN)

As Nigeria grapples with soaring inflation and a faltering naira, Goldman Sachs is calling for a substantial increase in interest rates to stabilize the economy and restore investor confidence.

The global investment bank’s recommendation comes ahead of the Central Bank of Nigeria’s (CBN) key monetary policy decision, set to be announced on Tuesday.

Goldman Sachs economists, including Andrew Matheny, argue that incremental rate adjustments will not be sufficient to address the country’s deepening economic challenges.

“Another 50 or 100 basis points is certainly not going to move the needle in the eyes of an investor,” Matheny stated. “Nigeria needs a bold, decisive move to curb inflation and regain investor trust.”

The CBN, under the leadership of Governor Olayemi Cardoso, is anticipated to raise interest rates by 75 basis points to 27% in its upcoming meeting.

This would mark a continuation of the aggressive tightening campaign that began in May 2022, which has seen rates increase by 14.75 percentage points.

Despite this, inflation has remained stubbornly high, highlighting the need for more substantial measures.

The current economic landscape is marked by severe challenges. The naira’s depreciation has led to higher import costs, fueling inflation and eroding consumer purchasing power.

The CBN has attempted to ease the currency’s scarcity by selling dollars to local foreign exchange bureaus, but these efforts have yet to stabilize the naira significantly.

“Developments since the last meeting have definitely been hawkish,” noted Matheny. “The naira has weakened further, exacerbating inflationary pressures. The CBN’s policy needs to reflect this reality more aggressively.”

In response to the persistent inflation and naira weakness, analysts are urging the central bank to implement a more coherent strategy to manage the currency and inflation.

James Marshall of Promeritum Investment Management LLP suggested that the CBN should actively participate in the foreign exchange market to mitigate the naira’s volatility and restore market confidence.

“The central bank needs to be a more consistent and active participant in the forex market,” Marshall said. “A clear strategy to address the naira’s weakness is crucial for stabilizing the economy.”

The CBN’s decision will come as the country faces a critical period. With inflation expected to slow due to favorable comparisons with the previous year and new measures to reduce food costs, including a temporary import duty waiver on wheat and corn, there is hope that the economic situation may improve.

However, analysts anticipate that the CBN will need to implement one final rate hike to solidify inflation’s slowdown and restore positive real rates.

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Currency Drop Spurs Discount Dilemma in Cairo’s Markets

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Egyptian pound

Under Cairo’s scorching sun, the bustling streets reveal an unexpected twist in dramatic price drops on big-ticket items like cars and appliances.

Following March’s significant currency devaluation, prices for these goods have plunged, leaving consumers hesitant to make purchases amid hopes for even better deals.

Mohamed Yassin, a furniture store vendor, said “People just inquire about prices. They’re afraid to buy in case prices drop further.” This cautious consumer behavior is posing challenges for Egypt’s consumer-driven economy.

In March, Egyptian authorities devalued the pound by nearly 40% to stabilize an economy teetering on the edge. While such moves often lead to inflation spikes, Egypt’s case has been unusual.

Unlike other nations like Nigeria or Argentina, where costs soared post-devaluation, Egypt is witnessing falling prices for high-value items.

Previously inflated prices were driven by a black market in foreign currency, where importers secured dollars at exorbitant rates, passing costs onto consumers.

Now, with the pound stabilizing and foreign currency more accessible, retailers are struggling to sell inventory at pre-devaluation prices.

Despite price reductions, the overall consumer market remains sluggish. The automotive sector has seen a near 75% drop in sales compared to pre-crisis levels.

Major brands like Hyundai and Volkswagen have slashed prices by about a quarter, yet buyers remain cautious.

The economic strain is not limited to luxury items. Everyday expenses continue to rise, albeit more slowly, with anticipated hikes in electricity and fuel prices adding to the pressure.

Experts highlight a period of adjustment as both consumers and traders navigate the volatile exchange-rate environment. Mohamed Abu Basha, head of research at EFG Hermes, explains, “The market is taking time to absorb recent fluctuations.”

Meanwhile, businesses face declining sales, impacting their ability to manage operating costs. Yassin’s store has offered discounts of up to 50% yet remains quiet. “We’ve tried everything, but everyone is waiting,” he laments.

The devaluation has spurred a shift in economic dynamics. Inflation has eased, but the pace varies across sectors. Clothing and transportation costs are up, while food prices fluctuate.

With the phasing out of fuel subsidies and potential electricity price increases, Egyptians are bracing for further financial strain. The recent 300% rise in subsidized bread prices adds another layer of concern.

The situation underscores the balancing act between maintaining consumer confidence and attracting foreign investment.

Economists suggest potential stimulus measures, such as lowering interest rates or increasing public spending, to boost demand.

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Economy

MPC Meeting on July 22-23 to Tackle Inflation as Rates Set to Rise Again

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Interbank rate

The Monetary Policy Committee (MPC) is set to convene on July 22-23, 2024, amid soaring inflation and economic challenges in Nigeria.

Led by Olayemi Cardoso, the committee has already increased interest rates three times this year, raising them by 750 basis points to 26.25 percent.

Nigeria’s annual inflation rate climbed to 34.19 percent in June, driven by rising food prices. Despite these pressures, the Central Bank of Nigeria (CBN) projects that inflation will moderate to around 21.40 percent by year-end.

Market analysts expect a further rate hike as the committee seeks to rein in inflation. Nabila Mohammed from Chapel Hill Denham anticipates a 50–75 basis point increase.

Similarly, Coronation Research forecasts a potential rise of 50 to 100 basis points, given the recent uptick in inflation.

The food inflation rate reached 40.87 percent in June, exacerbated by security issues in key agricultural regions.

Essential commodities such as millet, garri, and yams have seen significant price hikes, impacting household budgets and savings.

As the MPC meets, the National Bureau of Statistics is set to release data on selected food prices for June, providing further insights into the inflationary trends affecting Nigerians.

The upcoming MPC meeting will be crucial in determining the trajectory of Nigeria’s monetary policy as the government grapples with economic instability.

The focus remains on balancing inflation control with economic growth to ensure stability in Africa’s largest economy.

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