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Economy

ECA Drops to $71.8m in One Month

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Forex Weekly Outlook October 31-November 4
  • ECA Drops to $71.8m in One Month

Excess Crude Account (ECA) declined from $324.96 million to $71.81 million in one single month just as foreign reserves head south from $45 billion in June 2019 to $37.37 billion in February 2020.

A breakdown of the recent figures from the Federation Account Allocation Committee (FAAC) shows the ECA stood at $324.96 million as at the end of FAAC meeting on January 16, however, by February 19 the total amount in the ECA was put at $71.8 million. Indicating that $253.1 million has been depleted.

The Federal Government continues to struggle as weak revenue generation amid global uncertainty weighs on capital importation, especially with the ongoing coronavirus outbreak.

Brent crude oil, against which Nigerian crude oil is priced, declined from over $77 a barrel last year to $59 per barrel this month as the world’s largest importer of the commodity, China, battles a new type of coronavirus.

In an effort to sustain governance amid falling revenue, the government has started exhausting ECA account as oil revenue remains the powerhouse of the Nigerian economy despite billions spent on diversification program.

The Central Bank of Nigeria led Monetary Policy Committee (MPC) had warned that depletion of the ECA will leave the economy without fiscal buffers to cushion volatility during emergence.

In the last MPC meeting in January, Godwin Emefiele, Governor, CBN, said: “The MPC cautioned that public debt was rising faster than both domestic and external revenue, noting the need to tread cautiously in interpreting the debt to GDP ratio.

“The committee also noted the rising burden of debt services and urged the fiscal authorities to strongly consider building buffers by not sharing all the proceeds from the Federation Account at the monthly FAAC meetings to avert a macroeconomic downturn, in the event of an oil price shock.

“It urged government to gradually reduce reliance on oil receipts and focus on revenue diversification through reforms of the tax system.

“The committee also called on government to rationalise fiscal expenditure towards reducing the current excessively high cost of governance.”

However, with falling revenue, low capital importation and weak oil production, the Federal Government was forced to access the ECA as usual in order to sustain operations.

The International Monetary Fund (IMF) lowered Nigeria’s growth projection from 2.5 percent previously predicted to 2 percent, saying weak wage growth, slow recovery process and falling oil prices are some of the factors expected to hurt the nation in 2020.

The inflation rate rose to a 21-month high in January as border closure and lack of policy clarity bites. The MPC warned that the Open Market Operations policy of the apex bank could push consumer prices above the 12 percent if not checked, therefore, Cash Reserve Ratio was increased to curtail inflation.

Still, inflation rose from 11.98 percent in December to 12.13 percent in January, the highest in almost two years.

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

France, Nigeria to Build New Partnership

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France is currently aiming at building a new partnership with Nigeria, with the dispatching of its Minister in charge of Foreign Trade and Attractiveness, Franck Riester, to Nigeria.

Riester, who was expected at the time of filing this report on Monday, is scheduled to visit Nigeria from 12-14 April, 2021.

A statement from the French Embassy in Nigeria said: “Franck Riester is visiting Nigeria from 12 to 14 April, a visit that follows up on the priorities set by French President Emmanuel Macron during his official visit to Nigeria in July 2018 and his desire to build a new partnership between Africa and France.

“As the largest economy in Africa and the economic engine of West Africa, Nigeria is indeed a major partner for France, the first in sub-Saharan Africa with bilateral trade amounting to a total of 4.5 billion USD in 2019 (2.3 billion USD in 2020, due to the Covid-19 pandemic).”

It disclosed that the minister will have several official meetings in Abuja and Lagos, in order to underline the importance of the bilateral economic relationship and to prepare the summit on the financing of African economies in Paris on 18 May.

It revealed that the objective of the mission is also to further strengthen the links between the French and Nigerian private sectors, and “in this regard, the minister will have in-depth discussions with the main Nigerian economic actors to strengthen bilateral cooperation and investments, both in Nigeria and in France, particularly in the logistics sector”.

It said while in the country, the minister would meet with young Nigerian entrepreneurs in the cultural and creative industries sector, to discuss the major role of their country in African creativity and the development of the African entrepreneurial ecosystem, with the support of France.

It further said: “The minister will also open the ‘Choose Africa’ conference, a €3.5 billion initiative by President Emmanuel Macron dedicated to supporting the development of start-ups and SMEs in Africa to enable the continent to benefit fully from the opportunities of the digital revolution.”

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Economy

COVID-19: USAID to Provide $3m Grant, Technical Assistance to Combat Food Insecurity in Nigeria

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The United States Agency for International Development (USAID) is providing financial grant and technical assistance worth $3 million to combat food insecurity in Nigeria compounded by COVID-19 pandemic.

A statement by the agency on Monday said: “On April 12, 2021, the U.S. Agency for International Development (USAID) in Nigeria launched a COVID-19 Food Security Challenge that will provide $3 million in grant funding and technical assistance to youth-led and mid-stage companies working in food value chains in Nigeria.”

The statement lamented that Nigeria is experiencing food insecurity compounded by the COVID-19 global pandemic and its effects on the food value chain in the country.

It stated that the pandemic has disrupted the already fragile agricultural value chains, especially smallholder farmers’ ability to produce, process and distribute food, which has disrupted agricultural productivity and markets, and negatively impacted livelihoods, especially among vulnerable households, women and youth.

The USAID Mission Director, Anne Patterson, said: “We are launching the COVID-19 Food Security Challenge to help innovative Nigerians alleviate food insecurity.

“This assistance encourages private sector-led solutions to boost food production, processing and create market linkage along the agriculture value chain in a sustainable way across Nigeria.”

The statement revealed that in launching the challenge, USAID seeks commercially viable youth-led and mid-stage companies already working in food production, processing, and distribution, noting that successful applicants will present ideas that demonstrably help farmers and other stakeholders in the agricultural value chain increase, agricultural productivity and food security within the next six months.

According to the statement, the challenge will award 15 to 25 youth-led companies up to $75,000 each and award 10 to 15 mid-stage companies up to $150,000 each.

Winners will receive funding and technical assistance to rapidly expand their activities to mitigate the effect of COVID-19 on Nigeria’s food value chain and improve the resilience of vulnerable households to the negative impacts of the pandemic.

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Economy

FG Plans to Deliver Solar Energy to 25M Nigerians

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The Nigerian federal government has commenced its plan to deliver electricity through solar energy to Nigerians whose communities are off the national power grid.

Vice President Yemi Osinbajo, who spoke during an event to mark the programme in Jangefe, Roni Local Government Area of Jigawa State, restated the determination of the President Muhammadu Buhari administration to give more Nigerians access to cheap and environmentally friendly renewable power.

Osinbajo said the Solar Power Naija programme would continue across the six geopolitical zones in six states, namely, Edo, Lagos, Adamawa, Anambra, Kebbi and Plateau, in the first phase, and then move to the entire 36 states and the nation’s capital, thus, covering 25 million Nigerians at completion.

Jangefe community got 1,000 solar home system connections for its about 5,000 population, as part of a 100,000 scheme, with a local solar power company implementing aspects of the scheme.

According to Osinbajo, the president had emphasised that Nigeria could no longer rely solely on the grid if government is to electrify the whole country, which meant that an effective strategy had to be developed for decentralising power supply.

The Solar Power Naija programme, which is designed by the Rural Electrification Agency (REA), is an ambitious initiative that aims to create five million connections through a N140 billion financing programme that will support private developers to provide power for five million households, which means providing electricity for up to 25 million Nigerians.

The vice president disclosed that the programme was a Public Private Partnership (PPP) arrangement supported by concessionary lending via the Central Bank of Nigeria (CBN) and commercial banks. He emphasised that structures had been put in place to make the cost of the connections affordable for the target communities.

In addition to the concessionary lending rates, Osinbajo explained that the government had provided subsidies and rebates for private developers to the tune of over $200 million under the REA and World Bank Nigeria electrification programme.

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