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TSA: $21.3m Trapped in Heritage Bank, NPA Tells Reps

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  • TSA: $21.3m Trapped in Heritage Bank, NPA Tells Reps

About $21.3m of Federal Government’s funds held for the Nigerian Ports Authority by Heritage Bank had been trapped in the vault of the lender since 2016, the NPA told the House of Representatives in Abuja on Wednesday.

The Managing Director, NPA, Hadiza Usman, who made the disclosure, said efforts to get the bank to remit the money into the Treasury Single Account had so far met a brick wall.

She appeared before an ad hoc committee of the House investigating compliance with the TSA policy by government agencies.

The committee is chaired by a member of the All Progressives Congress from Kano State, Mr. Danburam Abubakar-Nuhu.

The NPA boss stated that a series of interventions by the Central Bank of Nigeria to retrieve the money had failed.

According to Usman, Heritage Bank’s reason for not remitting the money is that “if such a huge withdrawal is allowed, it will have stress on the bank.”

“We wrote the CBN a number of letters and they promised to provide a guarantee. Up till date, they have not given us the guarantee,” she stated.

The MD further informed the committee that another sum of €6m kept by First City Monument Bank for the NPA was suddenly seized by the Economic and Financial Crimes Commission.

Usman said the bank was operating the account for the NPA on its cargo tracking services operations before the seizure by the EFCC.

“The EFCC suddenly moved the €6m from FCMB to their own account; they just unilaterally swept the money,” she added.

When the committee asked why the anti-graft agency seized the money, the NPA MD replied that no clear reasons were given.

However, she said it might be connected to investigations being conducted by the EFCC, but which the NPA did not have the details of.

The committee subsequently summoned the Acting Chairman of the EFCC, Mr. Ibrahim Magu, to appear before it to explain why the money was confiscated.

Usman, who also answered questions on the relationship between the NPA and Intels, said the parties resolved their differences after Intels agreed to comply with the TSA policy.

She stated that effective from November 1, this year, Intels had started remitting all revenues collected on behalf of the NPA into the TSA.

However, she disclosed that Intels had not remitted an outstanding revenue of over $130m, which it collected for 10 months prior to November 1, 2017.

“They collected $13m monthly and for over 10 months, out which NPA gets 30 per cent,” she informed the committee.

Usman also admitted before the committee that the NPA owed Intels up to $700m for services the firm had rendered.

However, she explained that by the TSA policy, Intels must first remit all money outstanding against it into the TSA, while the NPA would later reimburse the firm.

Meanwhile, SystemSpecs, which provides the Remita platform for operating the TSA, told the committee that so far, it had not been directed to capture foreign transactions done by government agencies.

The Managing Director, SystemSpecs, Mr. John Obaro, while responding to a question by Abubakar-Nuhu, said, “As of today, we are not aware that the accountant-general gave a directive for the activation of the foreign component of the TSA.

“It’s only the local component that is done on our platform. What we are aware of is that in February this year, there was a circular that the MDAs will be notified when it (capturing of foreign transactions) will be done.”

The committee commended SystemSpecs for its innovations, but warned against abuses that could defeat the aim of the TSA.

The committee grilled officials of the United Bank for Africa Plc over the Nigerian National Petroleum Corporation’s $80m, which it had held since 2005.

The bank claimed that the money was a guarantee for a court case filed by a client of the NNPC overseas.

When asked whether it paid interest on the money, UBA said it paid full interest.

The bank was said to have paid 2.2 per cent interest annually till 2007 when it suddenly reduced it to 0.5 per cent.

When the committee sought to know why the percentage was cut to 0.5, UBA blamed it on “market forces.”

But, not satisfied with the explanations, the committee summoned the NNPC to produce all the documents relating to the account.

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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CBN’s Monetary Policy Raises Concerns Over Nigeria’s Q2 Growth

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Central Bank of Nigeria (CBN)

Nigeria’s economic outlook for the second quarter of 2024 is clouded with uncertainty as economists and analysts express concerns over the impact of the Central Bank of Nigeria’s (CBN) aggressive monetary policy.

Following a series of interest rate hikes aimed at curbing inflation, there are growing fears that these measures could stifle economic growth in Africa’s most populous nation.

The National Bureau of Statistics (NBS) reported that Nigeria’s Gross Domestic Product (GDP) grew by 2.98 percent in real terms in the first quarter of 2024, up from 2.3 percent in the same period of 2023.

However, this growth represents a slowdown from the 3.46 percent recorded in the fourth quarter of 2023.

The outlook for the second quarter is less optimistic with predictions of slower growth due to the CBN’s tightening measures.

“The year-on-year growth makes sense given that in the first quarter of last year, we were affected by the uncertainty about currency replacement, fuel queues, and elections,” said Ayo Teriba, CEO of Economist Associates.

“However, the tightening measures by the CBN that started in February are likely to take their toll in Q2 and subsequent quarters.”

Last week, the CBN raised its monetary policy rate by 150 basis points to 26.25 percent, marking the third consecutive hike.

This brings the total increase since February to 750 basis points, a move designed to combat inflation and defend the naira.

Analysts at FBN Quest warned that these rate hikes could slow economic growth and reduce consumer spending.

“Ultimately, the impact on the general economy could be a potential slowdown in economic growth, with consumer spending suppressed, and a decrease in business investments,” FBN Quest stated in a recent note.

The NBS report also highlighted that the services sector was the primary driver of GDP growth in the first quarter, recording a 4.32 percent increase and contributing 58.04 percent to the aggregate GDP.

The agriculture sector grew by 0.18 percent, a modest improvement from the -0.90 percent recorded in Q1 2023.

Meanwhile, the industry sector grew by 2.19 percent, up from 0.31 percent in the first quarter of 2023.

Ikemesit Effiong, head of research and partner at SBM Intelligence, noted that services have significant exposure to monetary policy effects.

“Since growth was largely powered by services, I would expect some slow growth in Q2. But I don’t think the slowdown might be actually significant. It might just be around 2.4-2.5 percent.”

Analysts at Comercio Partners observed that the GDP growth rate has been slower yet steady, hovering around three percent from 2021 to 2023.

However, they warned that the CBN’s rate hikes could have a deleterious effect on growth.

“The central bank had hiked the MPR by a hefty 600 basis points to 24.75 percent to curb inflation in March. Despite these efforts, inflation has been stubbornly high, hitting a record 33.69 percent in April, eroding consumer purchasing power. The increased interest rate has also raised the cost of borrowing for real sectors, stifling economic growth,” Comercio Partners noted.

President Bola Tinubu’s recent economic reforms, including the removal of a costly petrol subsidy and the lifting of currency controls, have exacerbated inflationary pressures, further complicating the economic landscape.

The naira has suffered a near 30 percent devaluation this year, following a 40 percent devaluation last June. Rising inflation has weakened consumer purchasing power, while businesses grapple with higher operating costs.

Muda Yusuf, CEO of the Centre for Promotion of Private Enterprises, highlighted the importance of oil output in sustaining growth.

“We might see positive growth in Q2 if the improvement in oil production is sustained and the CBN is able to reduce volatility in the forex market because it is affecting confidence and fueling speculation,” he said.

Joseph Nnanna, Chief Economist at the Development Bank of Nigeria, cautioned that the latest rate hike could impede real sector growth and hinder GDP growth this year.

“The 150bps rate hike is pernicious to the real economy as households and MSMEs will feel the impact immediately,” Nnanna said.

“However, the rate hike has a signalling effect on the fiscal authorities. They need to improve fiscal discipline and prioritize spending to improve growth.”

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Bank of Ghana Set to Maintain Interest Rate at 29% Amidst Inflation Concerns

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The Bank of Ghana is anticipated to keep its benchmark interest rate steady at 29% to curb soaring inflation and stabilize the nation’s currency, the cedi.

This decision comes as Governor Ernest Addison prepares to announce the monetary policy committee’s (MPC) verdict later today in Accra.

According to a survey conducted by Bloomberg, most economists expect the MPC to maintain the current rate in an effort to control inflation, which has averaged around 25%, and to support the struggling cedi.

The Ghanaian currency has depreciated by approximately 10% against the US dollar since the MPC’s last decision to keep borrowing costs unchanged in March, marking it as the worst-performing currency globally over this period.

“I expect the Bank of Ghana to keep the policy rate on hold in May in order to bolster the cedi and prevent higher import prices from keeping inflation at the currently elevated level,” stated Mark Bohlund, a senior credit research analyst at REDD Intelligence.

The cedi’s decline has been significantly impacted by a sharp drop in cocoa earnings, with revenue from cocoa exports falling by 49% to $599 million in the first four months of this year.

Ghana, the world’s second-largest producer of cocoa, has faced adverse weather conditions, disease, and a fertilizer shortage, all contributing to decreased output.

In an effort to manage its economic challenges, Ghana is reorganizing most of its $42.2 billion debt as part of conditions for a $3 billion program from the International Monetary Fund (IMF).

Last Thursday, the nation received a draft agreement to restructure debts with its official creditors, a necessary step to secure a $360 million disbursement from the IMF expected by the end of June.

Economists like Bohlund and Courage Boti, of Accra-based GCB Capital Ltd., suggest that the MPC might be in a position to consider cutting rates at its July meeting.

They anticipate that the currency could start to recover with the forthcoming IMF disbursement, and the favorable base effects could lead to a sharp slowdown in inflation.

“The more appropriate time to look at a rate cut will probably be July, by which time the currency pressures would have eased and its full impact assessed,” said Boti.

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Agricultural Sector’s Contribution to GDP Decreases in Q1 2024

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Nigeria’s agricultural sector declined in its contribution to the Gross Domestic Product (GDP), according to recent data released by the National Bureau of Statistics (NBS).

The sector, which encompasses crop production, livestock, forestry, and fishing, experienced a decrease in its nominal growth rate compared to the same period in 2023.

The data reveals that the agricultural sector grew by 0.77% year-on-year in nominal terms in Q1 2024, a decrease of 4.47% points from the corresponding quarter of the previous year.

This decline is significant, especially when compared to the growth rate of 14.94% recorded in the preceding quarter, showcasing a downturn of 14.17% points.

Crop production emerged as the primary driver of the sector, constituting 87.98% of the overall nominal value of the sector in Q1 2024.

However, despite its dominance, the sector’s contribution to nominal GDP stood at 17.22%, reflecting a decrease from the rates recorded in both the first quarter and fourth quarter of 2023, which were 19.63% and 24.65%, respectively.

In real terms, the agricultural sector experienced a modest growth rate of 0.18% year-on-year in Q1 2024, indicating an increase of 1.08% points from the same period in 2023.

Nevertheless, this growth rate represents a decline of 1.92% points from the preceding quarter, which recorded a growth rate of 2.10%. On a quarter-on-quarter basis, the sector’s growth rate stood at -32.25% in the first quarter of 2024.

Despite these challenges, the agricultural sector remains a vital component of Nigeria’s economy, contributing significantly to employment, food security, and overall economic development.

As the nation navigates through economic fluctuations, policymakers and stakeholders may need to explore strategies to revitalize and strengthen the agricultural sector to ensure its sustained growth and resilience in the face of future uncertainties.

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