MPC Postponement, Blessing In Disguise – Uwaleke

The postponement of the MPC meeting for the second consecutive time could be a blessing in disguise, Professor Uche Uwaleke said. The Central Bank of Nigeria had on Monday announced the indefinite postponement of the Monetary Policy Committee meeting. The meeting, early scheduled for Monday and Tuesday, November 20 and 21, has again been postponed for the second time since Dr. Olayemi Cardoso became the governor of the apex court in September. The CBN’s Director of Corporate Communications, Dr Isa Abdulmumin, who gave this hint in a text message, confirmed that “MPC is not holding”. However, in a chat with NIGERIAN ANCHOR, Uwaleke, who is a Professor of the Capital Market at the Nasarawa State University Keffi, noted that had the MPC had held in September, it most likely would have jerked up the MPR thereby further increasing the cost of doing business and reducing access to credit. “This would have been the outcome of the meeting against the backdrop of the pressure by the IMF for an MPR hike to reduce money supply which would not have had any significant impact on the rising inflation,” he said.

Crude Export Earnings Hit N5.6trn In Q2 Amid Naira Float

There was a major improvement in export earnings in the second quarter of 2023, as a result of the floating of the naira which ensured earnings from crude oil exports swells. Crude oil receipts rose 8.5 per cent to N5.6 trillion. This represents 79.6 per cent of total exports. “The improvement in export earnings was mainly spurred by crude oil receipts which rose 8.5 per cent quarter-on-quarter (q/q) to N5.6 trillion (about 79.6 per cent of total exports) though production level was unimpressive as per national Bureau for Statistics (NBS) data (down 19.2 per cent q/q to 1.22mbpd). “Noteworthy, we suspect that the improvement in oil receipt was also impacted by exchange rate revaluation gain given that the Central Bank of Nigeria (CBN) switched from a hard-pegged exchange rate regime to a managed float in June 2023, causing the official conversion rate of oil proceeds to rise from N461/$ to over N650/$. Hence, nullifying the effect of lower crude oil price in the second quarter ($78.13/bbl.) relative to the first quarter ($81.11/bbl.).”, said analysts at Afrinvest. Data from NBS showed that the value of Nigeria’s total trade (imports and exports combined) improved over the preceding quarter (up 5.8 per cent) but trailed the level attained in the corresponding period of 2022 by 7.6% to settle at N12.7 trillion. For the third consecutive quarter, Nigeria recorded a positive trade balance amounting to N1.3 trillion in the second quarter, aided by the faster growth in export earnings (up 8.1 per cent q/q to N7.0 trillion) as against import expenses (up 3.0 per cent q/q to N5.7 trillion). Similarly, non-crude oil and non-oil exports also grew 6.8 per cent and 5.6 per cent q/q to N1.4 trillion and N688.7 billion respectively. “We attribute these gains to the recovery in the broader economy from the negative knock-on effect of pre-election jitters and poor implementation of the naira redesign policy in the first quarter (GDP expanded 2.5 per cent vs. 2.3 per cent in the first quarter)”, said Afrinvest. It is important to highlight that Agricultural goods remain Nigeria’s largest source of non-oil export earnings (4.0 per cent of export share), while Manufacturing, Raw material goods, and Solid mineral goods trailed with 3.0 per cent, 2.1 per cent, and 0.5 per cent, respectively. Cashew nuts (shelled and unshelled), sesame seeds, and cocoa beans combined accounted for 65.7 per cent of the total N278.4 billion Agric exports in the period – an indication that cash crop exports could be a major source of non-oil foreign exchange (forex) earnings for Nigeria if adequate investment is made on procuring modern farming equipment and insecurity is wholistically checked. In terms of trade performance with other regions, the previous quarter’s trend was sustained as Nigeria booked a surplus with three of its five trading regions – America (N178.5 billion), Europe (N1.2 trillion), and Africa (N510.5 billion) – while a deficit was recorded in trade with Asia (N584.5 billion) and Oceania (N98 billion). In terms of destination, the Netherlands (11.2 per cent), the US (10.2 per cent), and Indonesia (7.8 per cent) were the top export hubs by share while China (22.2 per cent), the US (16.1 per cent) and Belgium (8.0 per cent) topped imports origin.

Crude production plunges to 1.22mbpd in Q2 2023 -Report

Hope for increased crude oil production deemed with second quarter figures plunging to 1.22 million barrel per day (mbpd), Nigeria’s statistics bureau, has said. The decrease is coming in spite of the restoration of fragile peace in the Nigeria Delta region; the second quarter of 2023 recorded an average daily oil production of 1.22 million barrels per day (mbpd). This according to the Nigerian Bureau of Statistics (NBS) was much lower than the daily average production of 1.43mbpd recorded in the same quarter of 2022 by 0.22mbpd and lower than the first quarter of 2023 production volume of 1.51 mbpd by 0.29mbpd. The real growth of the oil sector was 13.43 per cent (year-on-year) in the second quarter of 2023, indicating a decrease of 1.66 per cent points relative to the rate recorded in the corresponding quarter of 2022 (-11.77 per cent). Growth also decreased by 9.22 per cent points when compared to the first quarter of 2023 which was –4.21 per cent. On a quarter-on-quarter basis, the oil sector recorded a growth rate of -14.12 per cent in the second quarter of 2023 and contributed 5.34 per cent to the total real Gross Domestic Product (GDP) in the second quarter of 2023, down from the figure recorded in the corresponding period of 2022 and down from the preceding quarter, where it contributed 6.33 per cent and 6.21 per cent respectively. The statistics bureau further said the non-oil sector grew by 3.58 per cent in real terms during the reference quarter (Q2 2023). This rate was lower by 1.19 per cent points compared to the rate recorded in the same quarter of 2022 and 0.81 per cent.

Tinubunomics: An Elaboration of Economist Niran Olayinka’s Analysis

I will first and foremost like to commend our dear brother Mr. Niran Olayinka for penning on page 18 of today’s ThisDay Newspaper, this simply but beautifully written analytical article on President Tinubu’s recently deployed or unveiled economic reform policies. The beauty of the article is its easily accessible language that was devoid of the typical technical arrogance and complexity one usually encounters with seasoned economists of his caliber. His analysis, while being technically sound, adopts a language that is accessible to the “common man”. Contextualized in a church sermon and the well-known story of David and Goliath, the article sets the tone that everyone was welcomed aboard. The analogy of David being mocked by his own brothers is also apt. The most virulent critics of President Tinubu’s policies on social media sadly have been his own kindreds, the Yoruba. Of course, being the cosmopolitan people that we are, we Yorubas do not believe in circling the wagon or being shy to criticize our own, but as is customary with us, some of the Yoruba critics of Tinubu have gone beyond objective analysis and have laced their criticisms with venom, envy and bad belle. Mr. Niran Olayinka’s analysis on the issue of subsidy removal as has been universally acknowledged is long overdue and a no-brainer. Anytime the government places it’s finger and in the case of the oil subsidy scam, the government placed its two feet on the supply-demand-price equilibrium. What results is the mafia-style rent collection behavior and insane corruption that have plundered our commonwealth for decades. With the subsidy removed, we have seen the interplay and moderating power of the market on human behavior, on Nigerian driving habits and our consumption pattern. We have seen drastic drop in our national average petrol (PMS) consumption due to behavioral change but more so, credited to the removal of the incentive to profiteer from oil smuggle across our borders. Our country can no longer serve as the Santa Claus doling out petrol freebies to our neighbors in West Africa. The perennial long queues for PMS have abated and the economy-crushing traffic jams on our urban landscape have reduced. I was shocked that it took me just over two hours to travel from Ibadan to the airport on a recent visit. However, in order for the nation to derive the full- and long-term benefits of the oil subsidy removal policy, government must make as its highest priority, the resuscitation and expansion of our crude oil refining capacity, driven largely by the private sector. We hope the newly created ministry of Marine and Blue Economy signifies a commitment to tapping into all the benefits (up and downstream) of the marine economy including our off-shore oil potentials. On student loan, while it is a welcomed policy to reduce the obscene over-dependence of our tertiary institutions on federal allocation for their sustenance, we will not get to the promised land without major structural reform in our entire education system and specifically our higher education sector. The wasteful misalignment between the products of our higher institutions; be it its graduates or its research output or lack thereof, and the critical areas of needs in our economy must be corrected immediately. Our universities are not churning out the right quantity and right quality of university graduates needed to drive a dynamic 21st century digital economy. Simply put our tertiary institutions are producing square pegs for an economy’s round holes. Many of our professors are still recycling lectures from the dinosaurian age and are therefore impacting the obsolete knowledge to our youngsters thereby causing immeasurable damage to our economy. Furthermore, while Mr. Olayinka drew examples from the US and the UK student loan schemes, we must not gloss over what an intractable and monumental national financial crisis the student loan scheme has become for those countries, especially the US. We need to investigate the crisis in the US student loan scheme for lessons to be learned to guide the deployment and implementation of our nascent program. Millions of Americans have student loan debt, amassing to more than $1.6 trillion by the end of last year, according to the Federal Reserve Bank of New York. The burden of these loans has disproportionately fallen on the shoulders of students from the lower strata of the economy. It’s no use burdening a young Nigerian with a loan of 2 million Naira on a degree that guarantees only a spot in the unemployment market. On forex policy, that is not my forte. However, we have to find the safe middle ground between the corruption-ridden insanity of the round tripping behavior that the CBN forex policy encouraged in which the rich were making billions of Naira from simply converting forex received from the CBN to black market trading, and a free-floating forex market. No sane economy nor a responsible government can afford to leave total control of its currency to the vagaries of an imperfect market where speculative and predatory behavior are rampart. While Mr. Niran Olayinka highlighted the increase in revenue inflow into the different tiers of government as a result of the devaluation of the Naira, it would not translate into better living condition for the populace until we have full local government autonomy. We must rescue our local government administrator from the thieving and predatory fingers of the monarchical governors at the state level who have usurped the citizens’ right to elect the people who have the most direct impact on their welfare, the local government administration. But would rather prefer to impose their hand selected cronies to manage local government allocations as their fiefdoms.  Once we have assured the autonomy of the local given government, we the people must then take the next critical storm to hold them accountable for the judicious use of our commonwealth. We also must elect the best of us to serve at the local government level. That is a challenge the Ijesha Development Council (IDC) and other communities across the country must make

Oil marketers mull N750/litre fuel price amid forex crisis

*Stop importation of products In the wake of a deepening forex crisis, oil marketers have signaled a potential surge in the cost of Premium Motor Spirit (PMS), commonly known as petrol, projecting prices between N680/litre and N720/litre in the near future. The escalation hinges on the prevailing exchange rate, which oscillates between N910 and N950 for a US dollar in the parallel market. Market insiders have also disclosed that the scarcity of foreign exchange has prompted prospective PMS importers to shelve their plans temporarily. This revelation emerges shortly after the local currency surpassed the N900/dollar benchmark, with the naira trading at over 945/dollar in the parallel market on Friday. The forex dilemma has significantly impacted the availability of foreign exchange through the Central Bank of Nigeria’s (CBN) Importers and Exporters official window, which offers a more favorable exchange rate of approximately $740/litre. However, the window remains insufficiently liquid to accommodate the $25 million to $30 million required for PMS imports by dealers. As a result, the shortage has forced dealers who were initially eager to import petrol to suspend their plans. Leaders of notable organizations such as the Major Oil Marketers Association of Nigeria, Independent Petroleum Marketers Association of Nigeria, and Petroleum Products Retail Outlets Owners Association of Nigeria have underscored the need for Federal Government intervention to address the mounting crisis. Chief Chinedu Ukadike, the National Public Relations Officer of the Independent Petroleum Marketers Association of Nigeria, highlighted that petrol prices now closely follow forex fluctuations, thus foreshadowing an impending price hike. Ukadike pointed out that the demand and supply of forex significantly impact petrol costs, and this situation extends beyond petroleum products, affecting other import-dependent industries as well. He indicated that with the dollar’s upward trajectory to N910 to N940, and potentially nearing N1,000, consumers should anticipate a PMS prices of about N750/litre. Ukadike emphasized that since many importers, including oil marketers, rely on the parallel market for dollar sourcing, the price increase is a direct result of dollar strength. While the Nigerian National Petroleum Company Limited remains the primary petrol importer in the country, independent importer Emadeb recently entered the market. However, Ukadike noted that the depreciation of the naira creates challenges for importers when trying to recover funds from sales conducted in the local currency. He projected that once NNPC adjusts its petrol prices, other marketers are likely to follow suit. The nation’s growing forex predicament continues to cast uncertainty on fuel prices and availability.