- 60% Forex Allocation to Manufacturers, a Hoax
Manufacturers Association of Nigeria, MAN, described yesterday, Central Bank of Nigeria’s approval of 60 percent foreign exchange allocation to manufacturers to bring in their raw materials, plants and machinery, as a hoax.
Recall that more than two months ago, the apex directed commercial banks and other authorised dealers in the foreign exchange (FX) market to ensure that they channel 60 per cent of total FX purchases from all sources (interbank inclusive) to manufacturers strictly for the purpose of importation of raw materials, plant and machinery.
In a follow – up on the directive, the President of MAN, Dr Frank Jacobs, said: “As far as I am concerned, it hasn’t worked. Our members have not benefited from it. “I came close to calling it a hoax in the sense that it was something they dangled on our face without substance,” he said.
Earlier, CBN said it took the decision following its review of returns on the disbursement of FX and observed that a negligible proportion of FX sales were being channelled towards the importation of raw materials for the manufacturing sector.
Foreign exchange purchases
The CBN gave the directive in a circular signed by its acting Director, Trade and Exchange Department, Mr. W.D. Gotring. The letter dated August 22, 2016, was posted on the central bank’s website.
It said: “Following the review of returns on the disbursement of foreign exchange to end users, it has been observed that a negligible proportion of foreign exchange sales are being channelled towards the importation of raw materials for the manufacturing sector.
“Against this background and in order to address the observed imbalance, authorised dealers are hereby directed to henceforth dedicate 60 per cent of total foreign exchange purchases from all sources (interbank inclusive) to end users strictly for the purpose of importation of raw materials, plant and machinery.“The balance of 40 per cent should be used to meet other trade obligations, visible and invisible transactions. For the avoidance of doubt, authorised dealers are to continue to publish weekly sales of FX to end users in the national newspapers and to render statutory returns on same to the CBN promptly. Please ensure compliance accordingly, until otherwise advised.”
Also, recall that when the directive was announced by the apex bank, it received a lot of applause from investors in the economy, especially those operating in the manufacturing sector.
“The CBN with this directive has prioritised the real sector so that industries can bring in their raw materials, machines and equipment without having to wait for the banks for weeks and months on end to smile their way.
“This means that the banks and authorised dealers will be required to seek out and prioritise their customers who need to bring in raw materials, plant and machinery for production and not the other way round. “This is bound to have a positive impact on productivity in the manufacturing sector and hopefully will lead to a drop in the prices of goods that they produce,” said an operator.
LCCI differs: But the Lagos Chamber of Commerce and Industry, LCCI, faulted the allocation of 60 per cent foreign exchange to the manufacturing sector.
In a position statement signed by its Director-General, Mr. Muda Yusuf, described the directive as one of the policy inconsistencies of the government making it difficult to regain the confidence of investors.
Said LCCI:”Another policy development that could pose a risk to the stability and transparency of the foreign exchange market is the recent policy on sectoral allocation of foreign exchange. The CBN circular did not indicate any Harmonised System, HS Code to properly define what would qualify as raw materials and machinery.
“The first concern will be that of definition. The result of this will be discretionary interpretation by the banks as what qualifies as raw materials and machinery. The second major concern is the potential crowding out of other sectors in the forex market. Sectors outside the manufacturing account for over 85 per cent of the country’s GDP and jobs in the economy.
They all have varying import contents in their operations.”
It stated that the major challenge facing the Nigerian economy at this time was the inability to regain the confidence of investors, both local and foreign.
“Regrettably, the instability and inconsistency in the foreign exchange management policy have been complicating matters.
“The economy has a major structural defect of being heavily import-dependent. This cannot be fixed in the short term. Therefore, the shocks arising from the collapse of oil price and the corresponding depreciation in the naira exchange rate were inevitable. But the policy responses could make a whole lot of difference in the profundity of the impact of these shocks on the economy and the citizens.”
Coronavirus – Angola: Confronting the COVID-19 Pandemic and the Oil Price Shock
The COVID-19 pandemic and the shock from the falling price of oil have put severe pressure on Angola since the country’s second review under the Extended Fund Facility (EFF) in December 2019.
Only months after the conclusion of the second review in December 2019, the COVID-19 pandemic reached Angola, ushering in economic and health crises. The decline in oil prices further strained the economy, which is heavily reliant on oil exports. The economic downturn and social distancing to contain the spread of the virus have been damaging, especially given the large informal sector.
A swift response to the crisis
The Angolan authorities adopted timely measures to tackle the challenges arising from the COVID-19 shock. Measures to protect public health included quarantine, social distancing, closing of borders with limited exceptions, closures of schools, restaurants, and public events, and limited transportation. The government recently approved a prudent supplementary budget for 2020 using a conservative oil reference price. It has also introduced a comprehensive set of fiscal and monetary measures to support economic activities.
On relief to help vulnerable people:
• Tax exemptions of value-added tax (VAT) and customs duties on goods imported under humanitarian aid and donations.
• VAT tax credit for imported capital goods and raw materials for producing essential consumption goods.
• Interest-free, deferred payment option for social security contributions.
• Regulation of prices for a list of medical goods.
On government spending:
• Freeze of 30 percent of purchases on nonessential goods and services.
• Reduction in the number of ministries from 28 to 21.
• Suspension of selected, nonessential capital expenditures.
• Decrease in travel and real estate investments.
• Additional liquidity support to banks and a liquidity line to buy government securities from nonfinancial corporations.
• A credit-stimulus program.
• Temporary suspension for debt service payments.
• Requirement for banks to provide credit to importers of essential goods.
A proactive external debt management
The government needs to safeguard its ability to continue to service its debt on schedule, even under the current trying circumstances. The government has therefore availed itself of the G20 Debt Service Suspension Initiative. They have also secured selected debt reprofiling operations with some of their large creditors.
Financial support from the IMF
On September 16, 2020, the IMF’s Executive Board approved the third review under the EFF and additional financial support to Angola to help mitigate the impact of the crises. Accordingly, the IMF has provided $1 billion to Angola, bringing its total expected financial support to about $4.5 billion under the three-year program. The authorities are strengthening their public financial management to improve accountability for the funds received from the IMF and debt relief from creditors.
The path to recovery
It is important for Angola to continue to stabilize the economy, control inflation, keep the reform momentum, and safeguard financial stability. It is also crucial to persevere with structural reforms, such as privatization, improvement in governance in state-owned enterprises, and strengthened legal frameworks. These reforms will help improve the business environment and pave the way for foreign direct investment and growth-enhancing economic diversification.
Republic of Korea Contributes Rice and Cash to Assist Ugandans threatened by locusts
The United Nations World Food Programme (WFP) today welcomed 5,000 metric tons of rice and US$300,000 in cash from the Republic of Korea to provide much-needed relief assistance to 781,000 people including refugees and Ugandans threatened by locusts.
“WFP is extremely grateful for the continued generosity of the Republic of Korea since 2018 and its appreciation of the immense humanitarian needs in Uganda, which were suddenly made even more complicated by COVID-19,” said WFP Officer in Charge Ryan Anderson.
”This contribution of 5,000 metric tons of rice found us at a crossroads when we were considering whether to make deeper ration cuts for refugees because of a shortage of funding, even as we have evidence that they already face high food insecurity,” he added.
Combined with other contributions, the rice may allow WFP to maintain rations for 1.26 million refugees at the current 70 percent of a full ration for a while. Valued at US$4.3 million, it will also meet cereal needs of 614,000 refugees in seven settlements towards the end of the year.
The additional US$300,000 in cash will enable WFP to meet the relief needs of 167,000 people in the northeastern region of Karamoja, which is the most food-insecure region in the country and is threatened by a combination of malnutrition among its residents, locusts, floods and animal diseases.
“The Republic of Korea is committed to supporting vulnerable groups of people in Uganda, especially refugees fleeing conflict and nationals faced by chronic food shortages and malnutrition,” said Ambassador Ha Byung-Kyoo.
“We also are very pleased to continue making contributions of rice, which we have heard is appreciated by the refugees and contributes to much needed dietary diversity,” he added.
WFP was forced to reduce rations for refugees in April to 70 percent of a full ration because of funding shortages. The economic pressures that COVID-19 has brought on donor capitals has further complicated funding to feed refugees. WFP is putting in place safety measures in 13 refugee settlements to prevent the spread of COVID-19 during food and cash distributions.
The Republic of Korea has contributed rice to WFP in Uganda annually since 2018 in support of 1.43 million refugees – the highest number of refugees hosted by any country in Africa.
The US$300,000 contribution will also contribute to supporting WFP assistance in Karamoja. Even though families in the region were able to harvest some crops in August, despite repeated sightings of locusts between February and July, the very presence of the pests in the region threatens both agriculture and vegetation needed for animals. Relief food helps to cushion families as the government and UN partners work to control the impact of locusts.
UAE May Reverse Visa Restriction on Nigerians Today Amid Airlines Ban
Nigerian Government Pressures UAE to Revisit Visa Restrictions
Barring any last-minute hitches, the United Arab Emirates (UAE), will today, review the visa restriction placed on Nigerian travellers, following the ban of Emirates Airlines from the most populous black nation.
Sources at the company’s his office in Lagos confirmed that the issue was being reviewed, and the “right” diplomatic approach taken.
This came as aviation stakeholders commended the Federal Government for going “tough and playing tit-for-tat with countries that would not accept Nigerian travellers into their domains.”
The Federal Government, following pressure from some quarters, banned Emirates Airlines from Lagos and Abuja airports, effective today, over refusal to grant fresh visa applications submitted by Nigerians.
The government earlier banned European carriers, with the exception of British Airways, over travel restrictions.
Emirates officials said: “We have met with the Nigerian government on this issue, and we assured them that we will resolve it. We are presently working on it.”
“I hope this issue will be resolved before Monday. One thing I will assure you is that the issue will be resolved earlier than expected,” a manager said.
The Chief Executive Officer of Finchglow Travels, Bankole Bernard, said assurances had been given on the matter.
He noted that Nigeria was third-biggest market to Emirates, adding that the UAE would do everything to sustain their operations.
“UAE should have resolved this matter long ago. The ban means that they will lose the market, and they know the implication.
A market lost is never easily regained. Right now, we are certain that the ban will only affect Monday flights, and hoping that things will be normal by Tuesday,” he added.
The Minister of Aviation, Hadi Sirika, at the weekend, via his twitter handle, announced the suspension of Emirates Airlines from Nigeria, saying the ban would take effect from today.
Emirates Airlines’ situation was reviewed, and they are consequently included in the list of those not approved, with effect from Monday, September 21, 2020,” he said.
The President Muhammadu Buhari administration had in August warned that Nigeria would activate the principle of reciprocity in granting permission to airlines to resume operations in the country as it reopens its airspace.
It said the decision was informed by the embargoing on flights from Nigeria by some nations.
Air France, KLM, Lufthansa, Etihad Airways, Angolan TAG, Air Namibia and Royal Air Maroc were not approved to operate flights into the country.
Aviation stakeholder, Julius Akintunde, said the measures were in the best interest of the economy.
Also speaking, Secretary-General of the Aviation Safety Round Table Initiative (ASRTI), Group Capt. John Ojikutu (rtd), urged that the reciprocity should be done with caution in order for the Nigerian market not to be undermined by neighbours.
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