Naira Freefall: FG To Receive $10bn Forex Inflow – Finance Minister

The fortunes of the naira may soon be reversed with the Finance Minister, Wale Edun assuring that about $10 billion naira is expected to flow into the economy in a matter of week Edun made this known during a panel session at the ongoing Nigeria Economic Summit Group (NESG) question and answer session concerning stabilizing the foreign exchange market and enshrining liquidity in the market. Since the unification of the foreign exchange market in June, the naira’s value has slumped by over 100 per cent on the parallel market. The current CBN management has introduced a slew of measures to provide liquidity but the chasm between the rate on the I&E window and parallel market continues to widen. The minister said, “in addition, from the supply of foreign exchange through NNPC, increased production, reduced expenditure, from transactions such as forward sales, from our discussions with sovereign wealth funds, that are ready to invest and provide advanced alongside that investment, there is a line of sight of $10 billion worth of foreign exchange in the relatively near future in weeks rather months.” The Minister further said President Tinubu has signed two executive orders geared towards ensuring liquidity in the forex market. He said, “Mr. President announced that he had taken measures to ease illiquidity in the forex market which we know is very problematic at this time.” “The market is illiquid; it’s not functioning properly because there is no supply and there are various reasons for that. The solution that the President has put on the table is that he has signed an executive order that effectively allows under forbearance all the cash that is in the domestic economy to legally come into the formal money supply” “Along with that, there is another executive order that allows domestic issuance of foreign currency instruments so that they will have the incentive to provide that foreign exchange from whatever source.”

IMF Advocates Fiscal Adjustments As Solution African Countries’ Debts 

The International Monetary Fund (IMF) has urged African governments to re-anchor fiscal policy through a credible medium-term strategy to avoid a debt crisis. According to the Fund in its report ‘How to Avoid a Debt Crisis in Sub-Saharan Africa’, it stated that to avoid a debt crisis, African countries seek to achieve key debt targets. The Bretton Woods Institute said the average debt ratio in the region has almost doubled in 10 years adding that the average debt ratio to gross domestic product (GDP) has increased to 60 percent as of 2022, which is a 30 percent rise compared to the figures of 2013. According to the Fund, this is what makes debt repayment costlier. “In most sub-Saharan African countries, fiscal policy focuses excessively on short-term goals and is not guided by a clear medium-term strategy. This lack of anchoring has resulted in frequent breaches of fiscal rules and ever-increasing public debt levels. “A more strategic approach to fiscal policy would be preferable by setting explicit debt targets that integrate key policy trade-offs between debt sustainability and development objectives, rather than focusing narrowly on short-term fiscal deficits. “The paper suggests a novel approach to estimating country-specific medium-term debt anchors, which ensures that debt service costs remain manageable. “The region’s ratio of interest payments to revenue, a key metric to assess debt servicing capacity and predict the risk of a fiscal crisis, has more than doubled since the early 2010s and is now close to four times the ratio in advanced economies,” the IMF said. In the report, the IMF said more than half of the low-income countries on the continent are at high risk or already in debt distress as at the end of last year. The multilateral also said mobilising more domestic revenue through the elimination of tax exemptions or digitalising filing and payment systems is key to avoiding a debt crisis as well. “Sub-Saharan African countries tend to rely excessively on expenditure cuts to reduce their fiscal deficits. “Although this may be warranted in some circumstances, revenue measures, like eliminating tax exemptions or digitalizing filing and payment systems, should play a greater role.” The IMF noted that mobilising domestic revenue is less detrimental to growth in countries where initial tax levels are low, whereas the cost associated with reducing expenditures is particularly high given Africa’s large development needs.

Diversify Export Earnings, Increase FDIs To Address Fx Liquidity Challenge -Uwaleke

Professor of Finance and Capital Market, Uche Uwaleke, has said that except the Federal Government diversify its export base and increased foreign direct investments (FDIs), the liquidity challenge in the forex market would persist. Uwaleke, who gave the advice Monday in Abuja, added that the country’s weak economic indices would make it difficult for the government to implement the naira float.  In a bid to address the widening exchange rate gap, the federal government resorted to a managed float of the naira on the I&E Window. However, this policy has failed to halt the fall of the naira.  The exchange rate for a dollar to naira at the official window is N751.1 as of Monday, 11 September 2023, according to the data published by CBN. While at the parallel market, the naira exchanged for N925 to a dollar in Lagos. Experts have said that with a larger part of Nigeria’s revenue still coming from oil, it would not be easy for the government to address supply side constraints in the FX due to the country’s inability to meet it’s OPEC quota. “The only sustainable solution to deal with the liquidity challenge in the forex market is to have multiple streams of forex comprising export proceeds and foreign investments. “Nigeria’s economy is not ready for a complete float of the naira due to weak economic fundamentals. “Regrettably, over 90% of forex inflows still come from crude oil sales. A diversified export base is required to check volatility in a forex market where the exchange rate is determined by market forces. This is still lacking in Nigeria. “On the demand side, I support the idea of curbing dangerous currency speculation by making the trading in forex outside the Banks and BDCs illegal. By doing so, the CBN can be in a position to monitor activities in the forex market,” he said. 

NNPC secures $3bn loan from AFRIEXIM Bank to boost FX market, bolster naira

In a significant move, the Nigerian National Petroleum Corporation Limited (NNPCL) has entered into a substantial crude repayment loan agreement amounting to $3 billion with the esteemed AFRIEXIM Bank. This financial endeavor is set to play a pivotal role in the stabilization of the foreign exchange market and the support of the Nigerian currency, the naira. The NNPC Ltd., in collaboration with AfriEXIM bank, has formalized their commitment through the signing of a letter of commitment and a Termsheet for a crucial $3 billion crude oil repayment loan. This momentous event unfolded at the headquarters of the bank, situated in Cairo, Egypt. The loan’s provisions encompass immediate disbursement, thereby empowering NNPC Ltd. with the resources necessary to provide substantial backing to the Federal Government’s ongoing fiscal and monetary policy reforms. These reforms are meticulously crafted to achieve a fundamental goal: the stabilization of the exchange rate market. By securing this substantial loan, NNPC Ltd. has taken a substantial step towards reinforcing the Nigerian economy. A statement from the company on Wednesday read: “The NNPC Ltd. and AfriEXIM bank have jointly signed a commitment letter and Termsheet for an emergency $3 billion crude oil repayment loan. “The signing, which took place today at the bank’s headquarters in Cairo, Egypt, will provide some immediate disbursement that will enable the NNPC Ltd. to support the Federal Government in its ongoing fiscal and monetary policy reforms aimed at stabilizing the exchange rate market.”

Nigeria’s economy resilient despite hard reforms –Report

Cape Economic Research and Consulting, an economic think-tank group, has projected that Nigeria’s economic outlook for the third quarter of 2023 maintains its resilience, albeit with a moderated tone, driven by substantial policy reforms. In its Economic Newsletter for August, which was shared with NIGERIAN ANCHOR on Saturday, the think-tank emphasized that the effects of subsidy removal and the recent exchange rate policy adjustment are gradually permeating the economy, resulting in elevated inflationary pressures and anticipated dampening of aggregate demand. The report underscores the lasting impact of subsidy removal and exchange rate unification until households and businesses fully adapt to the new economic landscape. The implementation of essential support measures is anticipated to bolster the economy’s resilience. Consequently, the report predicts that output growth will remain positive during the third quarter of 2023. CAPE observed that the heightened cost of production, fueled by significant increases in input costs, including wages, has led to a slowdown in production. As the government prepares to roll out relief measures to mitigate the repercussions of recent policies on the economically disadvantaged, aggregate demand and output are projected to respond favorably. The report anticipates a further increase in inflation for August 2023. Projections indicate that headline food and core inflation could rise to 23.51%, 26.41%, and 21.34% respectively. The main drivers of this forecast are food prices, exchange rates, and short-term assets, contributing 5.94%, 1.96%, and 0.44% respectively. CAPE also highlights the macroeconomic implications of persistent negative interest rates, including low savings and investment, the emergence of parallel markets with higher interest rates, inefficient resource allocation, and suboptimal investment efficiency. Additionally, these rates constrain the government’s capacity to raise resources through bond issuance. The newsletter sheds light on the tightening stance adopted by numerous central banks in both advanced and emerging economies throughout 2022 and the first half of 2023. While this approach has led to price moderation in some economies, core inflation remains relatively persistent. However, these measures have brought about output moderation and financial stability, accompanied by an elevated risk of potential financial crises.

Don’t disrupt economy, OPSN urges FG, labour unions

The Organised Private Sector of Nigeria (OPSN) has called on the Federal Government and labour unions to work assiduously to avert disruption of socio-economic activities. Mr Segun Ajayi-Kadir, Head, Secretariat, OPSN, gave the advice in a statement in Lagos. The OPSN comprises five business membership organisations, namely: the Manufacturers Association of Nigeria, and the Nigerian Association of Chambers of Commerce, Industries, Mines and Agriculture. Others are the Nigeria Employers Consultative Association; the Nigerian Association of Small and Medium Enterprises and the Nigerian Association of Small-Scale Industrialists. Ajayi-Kadir noted that the OPSN had followed keenly, the developments following the recent call by the Nigeria Labour Congress and the Trade Union Congress of Nigeria for a nationwide peaceful protest. The protest is scheduled for August 2, 2023, as consultations between the Federal Government and labour unions have not yielded positive results. He urged the government to employ its best endeavours to reengage the leadership of the unions and find an amicable ground to avert the imminent disruption in business activities. “We opine that adequate consideration should be given to the dire state of the economy and the possible unintended social unrest that may result from the protests. “We call on our members to be circumspective in their business operations, as we await the outcome of ongoing consultations between government and unions,” he said.

Tinubu, CBN, and Nigeria’s economy

The resurgence of the Gestapo era last witnessed during General Sani Abacha’s jackboot regime is gradually staging a comeback in our democratic dispensation. Nigeria witnessed the abrasive invasion of the National Assembly by the Nigerian secret police, the Department of State Security Service (DSS), under former President Muhammadu Buhari. The President though was not in the saddle at the time, was away on medical treatment abroad. His Vice President, who acted as the President, Professor Yemi Osinbajo held sway. The Vice President didn’t blink an eyelid sacking the Director General of the agency, Lawal Daura, for the assault, and desecration of the symbol of democracy. The vice president considered the incident a misnomer that should not be allowed to fester. The northern political elite never forgave Osinbajo for that singular action. Their oligarchical chauvinism made sure Osinbajo never acted in presidential capacity till the regime timed out. Power was no longer transmitted to him even when the president was on official or medical trips. July 25, 2023, reenacted the ugly DNA of the DSS. The agency had arraigned Godwin Emefiele, the suspended governor of the Central Bank of Nigeria, in a high court in Lagos, accused of illegal possession of firearms and ammunition by the Federal Government. Recall that the DSS in November/December 2022 had declared Godwin Emefiele wanted for terrorism sponsorship. The hide and seek game came to a temporary halt after the DSS withdrew their operatives from the security details of the governor, making him vulnerable, but the former Chief of Defence Staff, General Lucky Irabor, provided him a succour, replacing his security details with military personnel. We all know it was just a temporary reprieve as those who wanted their pound of flesh of Emefiele were waiting. About a week ago, a court of competent jurisdiction ruled and ordered the DSS to either arraign Emefiele or release him from their detention. Emefiele until his arraignment has been incarcerated for 36 days. The agency, a few hours after the court order, announced that Godwin Emefiele has been charged to court. However, on the day of arraignment, the DSS threw decency to the winds, engaging a sister agency in supremacy. It was not only deplorable, but condemnable. The judge had ruled and committed Godwin Emefiele to bail of N20m and one surety with landed property within the jurisdiction of the court. The judge also ordered that Emefiele be kept in the custody of the Correctional Service pending when the accused will perfect his bail. The DSS opposed that, claiming to have been directed by ‘orders from the above’ to take Emefiele back into custody. Correctional Service personnel were disallowed from carrying out the court order, as the squadron leader of the Correctional operatives was forcefully rough-handled. It took the directive of the Comptroller General of the Service who ordered his operatives to stand down and leave the court premises to bring a semblance of sanity after securing Emefiele.  The charges against Emefiele are purely civil which does not warrant the show of force and shame exhibited by the DSS. Many non-state actors have been seen brazenly brandishing sophisticated weapons, but none has been seen treated as Emefiele. This is not defending Godwin Emefiele for whatever allegation brought against him, but the treatment meted out to a public officer of his stature, who has meritoriously served his country is unbefitting. Is Godwin Emefiele’s sins more than a pistol and 123 rounds of ammunition found in his house? Are these exhibits enough to make him a terrorist or a sponsor of terrorism? Godwin Emefiele may have erred while doing his tenure at the CBN, but the treatment being meted out to him does not justify the weight of the allegation. It is also obvious that some politicians have sworn not to forgive Emefiele and are bent on destroying him. From the bestial behavior of the DSS operatives, it was obvious that Emefiele had been marked for destruction for daring to redesign the Naira at the onset of the 2022/23 political campaigns. President Bola Tinubu while campaigning had cried foul, accusing the suspended CBN governor of targeting him for failure with the redesign. He never hid his disdain for Emefiele’s actions. Peradventure Godwin Emefiele had not dabbled into politics, would President Tinubu have felt that way? But the President on every occasion labeled the CBN as a mess under the suspended governor. He alleged Emefiele had perpetrated arbitrage and rent-seeking. It was therefore obvious; he would not work with Emefiele. Godwin Emefiele too may have probably resigned, knowing that the political class, particularly President Tinubu, viewed his Naira redesign policy as a vendetta against his frustrated political ambition, thus it is now their time to take their pound of flesh. He should have resigned immediately when President Tinubu won the election. Whether his resignation would have been honoured or not is another debate altogether. The political class should have exercised restraint considering the economic implication of what Emefiele symbolises, the CBN. How would the international investing community see us – disobedient to court rules? A CBN governor humiliated because of petty political miscalculation or skirmish? Yet, we are a nation hungrily looking for investors. The economy is on its knees, the Naira is battered, and insecurity is devouring us. Emefiele’s intransigence is inconsequential to the barrage of challenges facing the nation. President Tinubu who is acclaimed to possess a large political heart of forgiveness should thread softly about Godwin Emefiele. He promised renewed hope, and to rule Nigeria with the rule of law. The Incident at the Lagos High court was barbaric, anti-rule of law, and despotic. President Tinubu’s golden silence while the drama lasted is suspect, belying his promise. His silence affirms the saying going around now: ‘Baba so pe’, meaning Baba said so. The economy is troubled, citizens are agonised by his economic reforms. Assuaging and giving Nigerians comfort should be his paramount desire, not missteps of an individual. The show of shame by the DSS operatives, witnessed globally,