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FG Must Address ‘Pressure Points’ in Economy, FSDH Says

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  • FG Must Address ‘Pressure Points’ in Economy, FSDH Says

Following the conclusion of the presidential election, analysts at FSDH Merchant Bank Limited believe there are pressure points in the economy that the federal government must quickly address to stimulate broad-based and inclusive growth.

According to the Lagos-based financial institution, the Nigerian economy has not been expanding enough to lift its citizens out of poverty.

Owing to this, the bank in a report stressed the need for the economy to expand faster than it is at the moment.

Providing insights on the report, the Head of Research and Strategy at FSDH Merchant Bank Limited, Mr. Ayodele Akinwunmi, listed the economic pressure points to include weak disposable income in the country; high unemployment rate; weak infrastructure development in the economy that may not support the growth ambition of the federal government; economic depression in the real estate sector; fragile foreign exchange market and weak revenue generation for the federal government, which has led to large fiscal deficits.

Akinwunmi listed policy option to address the economic challenges to include the removal of all administrative delays in obtaining licences and approvals.

This, he stated includes titles to landed properties for building and agricultural purposes.

He urged the federal government to support the provision of long-term mortgage loans at concessionary terms for workers, in order to activate economic activities in the real estate sector in Nigeria

Furthermore, he recommended investment in data generation in the solid mineral sector.

“Government can sell the data to potential investors interested in the sector. This will reduce the risk inherent in this untapped sector of the Nigerian economy

“Urgent restructuring, deliberate and consistent investments in the nation’s educational system to enable it provide relevant trainings that are needed in the modern digital age.

“We observed critical skill gap in the nation’s educational system, particularly in the public schools at all levels. The sector can create more jobs for teachers and administrators and can also attract foreign investments and save foreign exchange earnings.

“There is the need for human capacity building in business management and leadership. This must not be left to business schools, which are only affordable to a few people

“Establishment of well-funded technical training centres in all local government areas in the country in conjunction with private sector operators,” he added.

In addition, Akinwunmi called for investment in infrastructure (through partnership with the private sector) that would reduce risks involved in agriculture and agro-allied industries.

He also advised the government to reduce import duties on imported manufactured cars. This, according to Akinwunmi, would help avoid high cost associated with brand new cars in the country so that Nigerians are not pushed to buy fairly used vehicles with their associated negative environmental impacts.

“While we understand the need for the government to use the import duties to encourage investments in the local auto industry, a graduated import duty policy for a few years, say five years, will be appropriate

“Investments in affordable public healthcare system to increase productivity of workers, reduce brain-drain and reduce foreign medical tourism with its associated drain on foreign exchange earnings

“Adjustment of the electricity tariff to reflect current costs in the economy and to enable the sector attracts investments and guarantee efficient metering system

“The removal of the ‘subsidy’ on the Premium Motor Spirit (PMS) to free up more resources to critical sectors of the Nigerian economy and to drive competition among the operators and attract investment in the sector,” he added.

According to him, the Central Bank of Nigeria (CBN) needs to maintain its tight monetary policy stance to ensure price stability.

In addition, he said the CBN may also consider the removal of its multiple exchange rate system.

Continuing, the FSDH report projected that February 2019 inflation rate would drop marginally to 11.31 per cent, from 11.37 per cent in January, even as it anticipated that inflation to remain in double digits.

“The external reserve dropped consistently in the month of February. However, we observed that the external reserves have been rising since the beginning of March largely driven by portfolio investment. The current position of external reserves continues to provide short-term stability for the value of the naira.

“Capital importation via Foreign Portfolio Investors (FPI) in the Investors’ and Exporters’ Foreign Exchange Window (I&E window) increased for the second consecutive month in February 2019. This provided support for the foreign exchange rate

“The medium-term stability in the foreign exchange market will depend on the country’s foreign exchange receipts from both crude oil and non-oil products. Appropriate policies, some of which we have mentioned above, to attract Foreign Direct Investment (FDIs) into Nigeria, will be necessary to guarantee medium-term to long-term stability in the foreign exchange market,” it added.

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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