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Economists, Manufacturers Criticise Dual Forex Rates

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  • Economists, Manufacturers Criticise Dual Forex Rates

Economists and manufacturers have joined the call for the abolition of the dual exchange rate policy currently being operated in Nigeria.

They say the present arrangement is a breeding ground for corruption and suggest floating of the naira so that everybody can buy the dollar at the same rate.

A professor of Economics at the University of Uyo, Leo Ukpong, advised against the practice of maintaining a dual forex exchange rate.

He said, “Dual exchange rate regime creates room for illegal profit-making by those who have access to buy at the lower (the CBN official rate) and turn around to sell at the high (parallel market) rate.

“This practice ends up increasing the cost of the FX to legitimate businesses that play by the rule; increases the cost of consumer goods to the larger population; causes the FX shortages due to hoarding; and distorts the true value of exchange rate.

“The CBN cannot design or implement any efficient or meaningful foreign exchange policy until we get rid of dual (or multiple) exchange rate regime.”

A Lagos-based leading manufacturer told our correspondent that the dual exchange rate was a very corrupt system that made millionaires out of a few Nigerians and impoverished many.

The manufacturer, who spoke on condition of anonymity, said the dual exchange rate regime was fraught with corruption.

“Since most people want to access forex at the official rate, there is usually a long queue that lasts for months, but you can avoid this by parting with a percentage of the money you want to access,” he said.

An economic strategist with the Manufacturers Association of Nigeria, Mr. Ambrose Oruche, supported the floating of the naira.

He said, “Allow naira to find its level. It will allow for more supply because there will be free entry and exit. More people will come into the market to trade. In the short run, there will be inflation but it will eventually ease off.

“All the efforts geared at protecting the naira can only have a short-term effect, it is not sustainable. The naira will still lose value in the long run while the cost of living for the ordinary man continues to go up.”

A former CBN governor and the Emir of Kano, Alhaji Muhammadu Sanusi, argued that no economy could thrive with dual/multiple forex rates.

A key operator in the manufacturing sector, Chief Eric Umeofia, accused the CBN of exploiting the dual forex regime to allocate forex to those he called cronies of the apex bank’s chiefs and importers of frozen fish while local manufacturers were forced to buy dollars at exorbitant black market rates.

He supported the claim with documents showing forex utilisation from one of the commercial banks.

A recent report by Bloomberg attributed the nation’s current woes to the dual forex regime, noting that it had refused to allow its currency to trade at its market value.

The report titled ‘A tale of two currencies: Egypt sets itself apart from Nigeria’, drew a comparison between Nigeria and Egypt, two countries that were in the same situation in early November, in search of dollars to revive their sinking economies as well as trying to curb rampant currency-trading on the black market.

According to the report, Egypt’s strategy was to ditch a currency peg, leaving its pound open to market forces.

It read in part, “Egypt is still short of dollars, but the situation is changing, and investors are gradually returning.

“Nigeria, in contrast, isn’t letting the naira trade at its market value, insisting that is the only way to protect the poor from a further surge in inflation, which is already at the highest level since 2005. Traders argue that this has left the currency overvalued and say they’ll avoid Nigerian local markets until it weakens.”

It added that Egypt’s strategy had caused the Egyptian pound to gain 16 per cent against the dollar even as the naira fell 40 per cent in value against the greenback.

The National Bureau of Statistics in its January report stated that the inflation rate had gone up to 18.72.

Currently, the prices of consumer goods, according to the Chairman, Ikeja Shop Owners’ Association, Mr. John Okonkwo, increase on a daily basis.

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 long experience in the global financial market.

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Fate of Bristow Pilots, Engineers To Be Decided on Thursday

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Bristow Helicopters

Pilots and Engineers of Bristow To Know Their Fate Next Week

Bristow pilots and engineers whose appointments were terminated would have to wait till next week to know their fate as the negotiation between the National Association of Aircraft Pilots and Engineers and the Federal Ministry Labour and Employment has been shifted to Thursday.

Capt. Yakubu Dukas, the National Vice President of National Association of Aircraft Pilots and Engineers, confirmed this on Friday.

On Tuesday, Bristow Helicopter announced it would sack 100 pilots and engineers, hinging its decision on plans to restructure the company’s finances amid the COVID-19 pandemic.

But on Wednesday, NAAPE issued two weeks ultimatum to the company, demanding for reversal of such action at a time families are struggling with COVID-19 crisis.

On Friday, the Nigeria Labour Congress also issued two weeks warning to the companies, demanding the affected staff be recalled or they will have to deal with a nationwide action from NLC.

He said, “Both parties are to return to status quo. We are to report back next week Thursday to continue the negotiation.

“If both of you are returning to the negotiation table, it would be something that is favourable. The members will be happy to move out of the picketing and continue their work.

“The meeting went well. We met with the Ministry of Labour to reverse the status quo. Whoever they made redundant is null and void and they would revert to status quo.

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Buhari Signs Bill to Make Registration of SMEs Affordable and Easier

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Buhari Signs New Bill to Make SMEs Registration Affordable

President Muhammadu Buhari on Friday signed a new bill to make the registration of Small and Medium Enterprises (SMEs) easier and affordable.

Femi Adesina, the Special Adviser to the President on Media and Publicity, disclosed this in a statement made available to media on Friday.

In the statement titled “After 30 years, President Buhari signs amended Companies and Allied Matters Bill,” the Senior Special Adviser said Buhari has signed the Companies and Allied Matters Bill, 2020 into law.

It read, “President Muhammadu Buhari Friday in Abuja assented to the Companies and Allied Matters Bill, 2020 recently passed by the National Assembly.

“The President’s action on this important piece of legislation, therefore, repealed and replaced the extant Companies and Allied Matters Act, 1990, introducing after 30 years, several corporate legal innovations geared toward enhancing ease of doing business in the country.

“Such innovations include: filing fee reductions and other reforms to make it easier and cheaper for small and medium-sized enterprises to register and reform their businesses in Nigeria;

“Allowing corporate promoters of companies to establish private companies with a single member or shareholder, and creating limited liability partnerships and limited partnerships to give investors and business people alternative forms of carrying out their business in an efficient and flexible way.”

“Innovating processes and procedures to ease the operations of companies, such as introducing Statements of Compliance; replacing ‘authorised share capital’ with minimum share capital to reduce costs of incorporating companies; and providing for electronic filing, electronic share transfers, e-meetings as well as remote general meetings for private companies in response to the disruptions to close contact physical meetings due to the COVID-19 pandemic;

“Requiring the disclosure of persons with significant control of companies in a register of beneficial owners to enhance corporate accountability and transparency; and

“Enhancing the minority shareholder protection and engagement; introducing enhanced business rescue reforms for insolvent companies; and permitting the merger of Incorporated Trustees for associations that share similar aims and objectives.

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Nigeria Railway Corporation Realises N3.1bn in 2019

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Railway Projects

NRC Generates N3.09 Billion in 2019

The Nigeria Railway Corporation (NRC) has said it realised N3.09 billion from railway services in 2019.

In a statement issued by the corporation, N1.5 billion of the total amount was generated from the Abuja-Kaduna rail service, according Fidet Okhiria, the Managing Director, NRC, who was quoted in the statement.

In the statement signed by Taiye Elebiyo-Edeni, the Media Assistant to the Minister of Transportation, the Abuja-Kaduna rail line realised N130 million per month in the year under the reveiw.

“The Abuja-Kaduna railway generated over N130m monthly as revenue,” Okhiria stated.

Okhiria explained that, that particular rail line has been able to breakeven, adding that the revenue from Abuja-Kaduna rail line was used to service other railway stations in the Northern region.

Maiduguri station, which is presently not functioning was named as one of the stations financed with the revenue realised from Abuja-Kaduna rail line.

“N90m was spent on running cost and payment of staff at the Maiduguri station, which could not operate for now due to insecurity in the state.”

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