With the continued slide in crude oil prices at the international market, which has translated to perennial decline in the foreign reserves, FBNQuest has said there are indications that the Central Bank of Nigeria (CBN) would opt for devaluation of the naira, sometime this year.
The same position is being held by Dunn Loren Merrifield, which noted that it did not rule the possibility of another devaluation of the naira this year, should the foreign reserves decline beyond acceptable levels, But it was quick to add that “devaluation presents more ‘negatives’ than ‘positives’ for Nigeria.”
According to FBNQuest, these indications emerged as a result of the scenario created in the light of the oil crisis, which will continue in the months ahead.
Even though, the investment banking outfit stated that the CBN had been applying administrative measures to manage forex demand and could intensify the measures, the apex bank would not allow the measures to negatively affect sensitive imports like the petroleum products.
“Our take is that the decline will continue in the months ahead unless there is an unexpected recovery in the oil price. The CBN could intensify its administrative measures but would be unlikely to risk steps which jeopardise sensitive imports such as petroleum products.
“Rather than take such steps, we suspect that the CBN/MPC will opt for a devaluation this year while maintaining a managed exchange-rate regime. This would make life a little easier for the FGN in the sense that it would highlight the direct connection between the slowdown in the economy and the external trigger for the devaluation (the collapse in the oil price),” it stated.
FBNQuest, however, added that “the devaluation would not dramatically increase forex supply, particularly if the adjustment was small (as we would expect). At best, it would bring a modest rise in non-oil export values and portfolio inflows, the drawdown of more domiciliary accounts and the re-entry of some unrecorded capital.”
The company quoted data from the CBN, which showed that official reserves declined by $910million in January on a 30-day moving average basis to $28.2billion. “The decline over 12 months has amounted to $6.1billion despite the CBN’s many administrative measures to contain forex demand and some FGN successes in plugging leakages. Reserves at end of January provided 6.3 months’ cover for annual merchandise imports and 4.6 months when services are included on the basis of CBN data running through to September 2015. This would represent adequate cover in less troubled times but not when the international price of crude oil has fallen by two thirds in just 18 months.
DLM , which made its position known in its Economic Outlook for 2016,expected that “the decline in oil prices will continue to exert pressure on the exchange rate due to the outflow of foreign funds as investors express concern on macro-economic stability due to weakening economic fundamentals.” This, according to the company, was “reflected in the steady decline in external reserves recorded in the previous year which resulted largely from a slowdown in portfolio and foreign direct inflows during the period.”
While noting that “Nigeria remains a largely import-dependent economy which in our view contributes to the high demand for foreign currency”, the company stated that it “will sustain pressure on the naira.”
The investment banking outfit, however, believed “initiatives that support increased domestic productivity and a lower reliance on imports would lower the pressure on the naira in the medium to long term.”
Also, DLM predicted that inflation rate will hover around the lower double digit range in 2016.
Making this prediction, the company noted that “though inflation rate remained within the single-digit band in 2015, we expect that inflationary pressures remain apparent and will subsist in the short-to-medium term with seasonal adjustments, food supply shocks and the risk of higher imported inflation being major concerns. “
DLM explained that it anticipated that the CBN will maintain its expansionary monetary policy stance in the current year.
“This”, according to the company, “is in line with our view that priority should be given to lower interest rate which would place the economy on a path of sustainable growth through provision of appropriately-priced long term financing to the real sector and employment creation.”
“We are not oblivious of the fact that a reduction in interest rate poses some degree of risk to headline inflation, exchange rate and the exit of ‘hot money’ in search of higher yields. However, we believe that the focus should be on long term gains rather than short term.”
COVID-19: CBN Injects N3.5 Trillion into the Economy
CBN Stimulates the Economy With N3.5 Trillion as COVID-19 Impact Thickens
The Central Bank of Nigeria on Tuesday said it has so far injected N3.5 trillion into the Nigerian economy following the outbreak of COVID-19 in Africa’s largest economy.
Godwin Emefiele, the Governor of the Central Bank of Nigeria, disclosed this on Tuesday after the nation’s monetary policy committee meeting.
So far, he said N216.87 billion was injected through the real sector funds; COVID-19 Targeted Credit Facility N73.69 billion; AGSMEIS N54.66 billion; pharmaceutical and healthcare support fund N44.47 billion; and creative industry financing initiative N2.93 billion.
Breaking down expenditure, under the real sector funds, he said 87 projects that comprises of 53 manufacturing, 21 agriculture and 13 services projects were funded.
While in the healthcare sector, 41 projects which include 16 pharmaceuticals and 25 hospitals and health care services were funded.
Under the Targeted Credit Facility, he explained that 120,074 applicants had received financial support for investment capital.
“The Agri-Business/Small and Medium Enterprise Investment Scheme (AGSMEIS) intervention has been extended to a total of 14,638 applicants, while 250 SME businesses, predominantly the youths, have benefited from the creative industry financing initiative,” he said.
In addition to these initiatives, he said, the CBN was set to contribute over N1.8 trillion of the total sum of N2.3 trillion needed for the Federal Government’s one-year Economic Sustainability Plan, through its various financing interventions using the channels of Participating Financial Institutions.
Meanwhile, the monetary policy committee lowered interest rate by 100 basis points to stimulate growth and broaden economic productivity. The benchmarkt intrest rate was lowered from 12.5 percent to 11.5 percent.
Labour to Begin Strike as FG Refuses to Back Down on Petrol Price, Electricity Tariffs
Labour to Embark on Industrial Action to Force FG to Reverse Increase in Petrol Price, Electricity Tariffs
The sudden increase in prices of fuel and electricity tariffs despite the negative impacts of COVID-19 on the Nigerian people has forced the Nigerian labour union once again to announce an industrial action to compel the Federal Government to emulate other economies easing COVID-19 impacts through various palliatives and measures.
Labour union on Tuesday set Monday for what it described as “unprecedented mass action” and “total strike” to get the government to reverse the hike in petrol pump price and the increased electricity tariffs.
At a meeting with members of the National Administrative Council, Presidents and General Secretaries, the Nigeria Labour Congress National Executive Council (NEC) agreed to embark on a total strike against what they described as anti-people policy.
While the ultimatum given to the federal government by Trade Union Congress (TUC) expired on Monday, TUC has extended it till Monday in line with NLC announced industrial action.
NLC President Ayuba Wabba, who read the communique of the meeting, said: “NEC resolved to reject in its entirety the issue of hike in electricity tariffs by almost 100 per cent as well as the fuel price increase in the name of full deregulation.
“This decision is premised on the fact that these twin decisions alongside other decisions of government including the increase of VAT by 7.5 per cent, numerous charges by commercial banks on depositors without any explanations will further impoverish Nigerian workers and citizens.
“Therefore, this increase, coming in the midst of the COVID-19 pandemic, is not only ill-timed but counter-productive.
“NEC also observed that the privatisation of the electricity sub-sector seven years down the line has not yielded any positive result. Whereas, the entire privatisation process, the entire sector was sold at about N400 billion, we are surprised that government within the last four years injected N1.5 trillion over and above the amount that accrued from this important asset.
“Therefore, NEC came to the conclusion that the entire privatisation process has failed and the electricity hike is actually a process of continuous exploitation of Nigerians.
“On the issue of the refineries and also the increase in the pump price of PMS, this particular issue had been on the table for more than three decades and the argument has not changed.
“Whether it is the name of full deregulation or subsidy removal, what is obvious is that it is fuel price hike and this has further eroded the gains of the N30,000 minimum wage because it has spiral effects which include the high cost of food and services and the reduction in the purchasing power of ordinary Nigerians.
“While demanding that our three refineries should be made to work optimally, NEC also concluded that government has business in doing business because the primary purpose of governance is about the security and welfare of the people and if in other countries, governments are maintaining refineries, and they are working optimally for the benefit of the people, Nigeria cannot be an exception.
“In the light of these, NEC decided to endorse the two-week ultimatum given to the Federal Government to reverse those obnoxious decisions and also pronounce that the action proposed by the Central Working Committee is hereby endorsed by the NEC that 28th of September should be the date that those decisions should be challenged by the Nigerian workers, our civil society allies and other labour centres.”
“We’ll meet. We don’t want anything that will cause more financial pain to workers.”
Speaking on the matter and the reason for industrial action, TUC’s President Quadri Olaleye and Secretary-General Comrade Musa-Lawal Ozigi, urged to Nigerians to get ready for the “unprecedented mass action”.
TUC said it resolved to work with the NLC and civil society allies because of the magnitude of the situation. Hence, it suspended the previously planned strike to join force with NLC and others.
“Consequent upon this, the ultimatum which should expire by midnight of today (yesterday) has been shifted to 28th September 2020 for effective and maximum effect.
“We want to use this opportunity to call on Nigerians, especially those in the informal sector, to bear with us while the industrial action lasts.
“There is no need for the pains we bear. It is a needless one. They ask us to tighten our belts while they loosen theirs. Services are not rendered yet we are compelled to pay estimated bills.
“You will recall that this government during its electioneering campaigns in 2014 told the world there is nothing like subsidy. We were told that they will build refineries. All that is history now.
“We run a mono-economy and any hike in fuel automatically will have an adverse effect on us, yet successive governments tow that path because they are not creative.
“As at today, about eight states are yet to commence the payment of new minimum wage and its consequential adjustment even though the President signed it into law on April 18, 2019. We have written letters to the governors and also engaged them in dialogue but all to no avail. Sometimes we wonder if these people have a conscience at all.
“The Congress hereby appeals to all Nigerians to get ready for the unprecedented mass action against corruption, obnoxious policies, rape and other violent offences, breach of the collective agreement, unemployment, etc.
“We also call on the USA, UK, Germany, Spain, etc to support our struggle by placing indefinite visa ban on our political leaders whose stock in trade is to loot and impoverish the masses and the country. We can no longer take it. Enough is enough!”
AfCFTA Must Be Backed by Legal Framework to Yield Desired Results -Lawan
For AfCFTA to Achieve Expected Results, it must be Backed With Legal Framework
Senate President, Ahmad Lawan, has said for the African Continental Free Trade Agreement (AfCFTA) to yield desired results, it must be backed by necessary legal frameworks, right policies and robust implementation.
The Senate President made the statement when the delegation from the African Continental Free Trade Area Secretariat led by Wamkele Keabetswe Mene visited him in Abuja.
Ahmad Lawan, who was represented by Prof Ajayi Boroffice, said Nigeria’s signed the AfCFTA agreement to benefit Africans and reduce the huge unemployment and underemployment facing the continent from South to West and East to North.
This high unemployment rate and underemployment rate, according to him, had led to the migration of some of Africa’s top brains and experts. He said the economies of African nations had been characterised by weak economic productivity, low efficiency and limited resources.
He described AfCFTA as “a step in the right direction for the growth of African economies, through limited restrictions, leading to the stimulation of trade, commerce, and industry”.
“In signing the AfCFTA, and depositing the instrument with the African Union Commission, our countries made a statement on the determination of our collective economic fate.
He, therefore, said the fate is now in our hands to deepen growth and development on the continent through requisite legal frameworks, right policies, and robust implementation.
“The initial momentum from the signing of the agreement needs to be continued, for a greater continental impact, to benefit Africans, both on the continent and outside it,” he said.
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