Economic uncertainty amidst weak fundamentals continues to drag on Nigeria’s foreign reserves and ability to support its huge dollar-dependent economy. The total value of Nigerian foreign reserves depreciated by $21.695 million in the first six days of 2022, according to the latest data published by the Central Bank of Nigeria.
A breakdown of the numbers revealed that foreign reserves stood at $40.521 billion as of December 31, 2021 before declining to $40.499 billion on January 6, 2022, in spite of rising oil prices. In the last one month, the reserves have dropped over $1 billion when compared to the $41.155 billion attained on December 1, 2021.
Still, the external reserves is on target to hit $42 billion in the first six months of 2022, a CBN target announced by Godwin Emefiele, the Governor of the apex at the France-Nigeria Security and Economic Summit, in Paris, France in November 2021.
According to him, the increase will be on the back of rising crude oil prices and the Eurobond the country planned to issue in 2022.
He said “Nigeria’s external reserves are expected to surpass US$42 billion by mid-2022. This is due to the sustained increase in crude oil price, the impact of Eurobond Issuance, and the stable exchange rate condition.”
“Nigeria’s FX reserves has increased to over US$40bn from about US$33.4bn in March 2020 due to inflows from the IMF, Eurobond proceeds, and complemented by CBN’s astute management of the foreign exchange market,” the governor said.
However, experts have blamed Nigeria’s inability to grow its external reserves on the weak manufacturing sector and overly dependent on importation for most of its consumption, leading to high forex demand and a double-digit inflation rate. Over 90 percent of Nigeria’s foreign revenue comes from crude oil sales with little to zero from the manufacturing sector.
Still, Nigeria has struggled to up its oil production, build a viable crude oil refinery and reduce the cost of production to really take advantage of its only viable source of foreign revenue.
Removal of Petrol Subsidy: Conclusion Will be Drawn in June– NEC
Following insinuations that the subsidy on petrol will be removed after the first half of the year 2022, the National Economic Council (NEC) has stated that a decision is yet to be made on fuel subsidy removal.
It noted that deliberations are still ongoing on the matter and a conclusion will be drawn in June when the provision for its payment in the 2022 budget will be over.
After the NEC meeting presided over by the Vice President, Prof. Yemi Osinbajo on Thursday at the Presidential Villa in Abuja, the Governor of Edo State, Godwin Obaseki spoke with journalists.
Governor Obaseki explained that NEC has been discussing the fuel subsidy matter for over a year.
He hinted that a committee has been set up to look into the matter, adding that last year almost N2 trillion was spent on fuel subsidy.
“There was an ad hoc committee set up by NEC and headed by Gov. Nasir El-Rufai that included members of the executive arm of government and worked on recommendations as to what we should do about the cost of Premium Motor Spirit (PMS) locally.
“Because as you realise, as it has been told to us, the cost of PMS in Nigeria today is about N162 for a litre whereas every other country surrounding Nigeria is selling the product at more than 100 per cent of the cost in Nigeria.
“The country, as at last year, spent almost N2 trillion subsidising petroleum products. That is money that could have gone into building roads; money that could have gone into healthcare and education.
“When NEC looked at some of the analyses last year, it realised that less than one-third of the states of the country consumed two-third of the subsidy.
“So, for NEC, the argument has been put out; should we continue this regime of spending money that we do not have to subsidise the living standard of mostly those who have vehicles. NEC hasn’t come up with any decision yet. I think recommendations have also been made to the President. That is what I am aware of has transpired so far,” he said.
Also speaking, Nasarawa State Governor, Abdullahi Sule noted that the governors did not make any presentation on the issue since a conclusion has not been reached.
In his words, “We didn’t make any presentations on this because there has not been a decision. But in reality, all of us Nigerians know that there is now the Petroleum Industry Act.
“NNPC is now a limited liability company, so it will run differently. If the Minister of Finance provides for six months, you probably can understand part of the reason for provision of six months before NNPC fully takes off and at that moment, that’s when decisions will be made.
“But I want to make the correction that it is not governors who are making recommendations. It is actually a NEC committee, which comprises all the other people that are looking at this and no decision has been made and probably by the time a decision will be made, the Petroleum Industry Act has fully taken charge, and it will not require any recommendation from anybody.”
COVID-19 to Erode More than $12.5 Trillion from Global Economy – IMF
The International Monetary Fund (IMF) on Thursday has predicted that COVID-19 will erode more than $12.5 trillion previously estimated from the global economy through 2024.
Kristalina Georgieva, the Managing Director, IMF, disclosed this while speaking at an event hosted by the Financial Times. She explained that among things hindering economic recovery or “throwing cold water on the recovery everywhere”, were supply chain disruptions, inflation and tighter monetary policy.
Looking at the surge in oil prices over the high demands outweighing the low supply from the OPEC+ nations; flight disruptions due to the peaking number of reported Omicron variant cases and inflations of global commodities, the initial estimate of global revenue loss valued at $12.5 trillion is said to rise.
Georgieva also noted that the huge gaps in COVID-19 vaccination rates, the overall widening divergence between rich and poor caused by the pandemic, along with learning losses and increased gender impacts, would cause more protests, tensions and insecurity.
The IMF boss’s statement had been confirmed by the international lender’s Chief Economist, Gita Gopinath in December 2021. According to Gopinath, IMF had projected that a more severe COVID variant, such as Omicron, could cost the world’s economy $5.3 trillion. This was in addition to the then projected loss of $12.5 trillion.
Speaking at an event organised by the World Health Organization (WHO) in December. Gopinath described the Omicron variant as “an obvious hit to recoveries everywhere in the world.”
“Our projections are that that would add another loss of around $5.3 trillion to the global economy. So that is in addition to the current projected $12.5 trillion lost.
“We are now in the phase where countries around the world just don’t have the space to keep monetary policy very loose, to kind of keep interest rates extremely low. We are seeing inflationary pressures building up around the world,” she said.
“And so think of a situation where you could have this pandemic last longer, you have longer supply disruptions that are putting inflationary pressures, and then we have the real risk of something we have avoided so far, which is stagflationary concerns,” Gopinath added.
Removal of Petrol Subsidy: NGF to Dialogue With Labour Unions Over Strike Threat
The Nigeria Governors’ Forum (NGF) under the chairmanship of Dr Kayode Fayemi has said it will meet with the Nigerian Labour Congress (NLC) and the Trade Union Congress(TUC) to discuss the removal of petrol subsidy.
The announcement of the minister of finance, Zainab Ahmed in November, 2021 that fuel subsidy will be removed in 2022 has birthed reactions from citizens and organised labour unions are threatening to embark on strike.
The federal government, however, promised that N5000 will be given monthly to poor Nigerians as a transportation grant while the subsidy is removed but the decision did not go down well with the unions, hence the strike threat.
Addressing newsmen after the forum meeting, the NGF chairman and governor of Ekiti State, Kayode Fayemi stated that the 36 states governors discussed major national issues, of which the removal of petrol subsidy was one.
Fayemi noted that on the fuel subsidy, the forum has decided to dialogue with the leadership of the labour unions with the aim of drawing a conclusion that will not affect the people and the Nigerian economy.
In his words, “we discussed the issue around petroleum subsidy and concluded to engage the leadership of the Nigerian Labour Congress (NLC) and the Trade Union Congress.
“We will engage them on how best to address this issue without causing any disaffection but with a view to salvaging the Nigerian economy for the Nigerian people at the end of the day.
“So, we shall be engaging the NLC as sub-national leaders and with a view to ensuring that the outcome of our engagement will also be fed into the national discourse.”
Fayemi further said that the recommendation of the National Economic Council (NEC) that the price of petrol should be N302 per litre, was not the decision of the governors forum but the responsibility of the federal government.
He hinted that the governors got a presentation from the Presidential Enabling Business Environment Council (PEBEC) on business growth and ease.
“The presentation elaborated on the need to step up the reforms towards improving the investments and business climate at the sub-national level,” Fayemi said.
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