My Blog

Category: Economy

  • Naira appreciates 4.31% at investors, exporters window

    On Friday, the Naira displayed a remarkable appreciation of 4.31% against the dollar at the Investors and Exporters window, reaching an exchange rate of N743.07. This significant gain was in contrast to the previous day’s rate of N776.50. The open indicative rate also closed favorably at N782.28 to the dollar on the same day.

    During the day’s trading, the spot exchange rate peaked at N799 to the dollar before ultimately settling at N743.07. Interestingly, the Naira was observed to have been sold as low as N475 to the dollar within the same trading session, indicating some fluctuations in the market.

    The Investors and Exporters window witnessed substantial activity, with a total of $121.08 million being traded on Friday.

    This volume of transactions reflects the ongoing dynamics in the foreign exchange market and the interests of investors and exporters in Nigeria’s currency market.

    The Naira’s gain at the Investors and Exporters window indicates some positive sentiment and demand for the local currency in recent trading activities.

    However, it is essential to keep an eye on market conditions and various economic factors that could influence future fluctuations in the exchange rate.

    As with any currency, the Naira’s value can be influenced by factors such as the country’s trade balance, foreign direct investments, foreign reserves, and government monetary policies.

    A stable and competitive exchange rate is crucial for the Nigerian economy to attract foreign investments, ensure price stability, and enhance international trade.

    Overall, market participants, investors, and policymakers will continue to closely monitor the Naira’s performance in the coming days to gauge the currency’s strength and stability in the face of economic challenges and global market trends.

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

    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.

  • Give Tinubu benefit of doubt, Uwaleke appeals to Nigerians

    Professor of Finance and the Capital Market at the Nasarawa State University, Uche Uwaleke, has called on Nigerians to give President Bola Ahmed Tinubu the benefit of the doubt.

    The President had in a nationwide broadcast on Monday in Abuja, reeled out a number of measures meant to cushion the effects of the removal of fuel subsidy.

    In his inauguration speech, the President said fuel subsidy was gone forever. According to him, his administration would rather channel the savings from the subsidy removal into other critical sectors of the economy.

    In his broadcast, the President said his administration has proposed the sum of N75 billion to fund enterprises at 9% interest per annum; N125 billion to energize MSME; release 200,000 Metric Tonnes of grains; 225,000 metric tonnes of fertilizer,  seedlings, and other inputs to farmers; and N50 billion each to cultivate 150,000 hectares of rice and maize.

    Also, the federal government will also make available N50 billion each to cultivate 100,000 hectares of wheat and cassava, N100 billion to acquire 3000 units of 20-seater CNG-fuelled buses and review the minimum wage.

    Uwaleke said: “The President’s address to the nation is quite soothing.

    “He spoke in clear terms and I think Nigerians should allow him the benefit of the doubt.”

    The first Professor of the Capital Market in Nigeria was however concerned that President Tinubu failed to tell Nigerians how the executive will also make sacrifices.

    “But it was short on how the three arms of government will share in the pains of the governed, especially with respect to affecting a significant cut in the cost of running government,” he asked.

  • Nigeria’s currency circulation hits N2.60trn in June

    Nigeria’s currency circulation hits N2.60trn in June

    Nigeria’s currency in circulation climbed to N2.60 trillion in June 2023.

    Currency in circulation is the amount of cash in paper notes or coins issued by the CBN to conduct transactions.

    According to the latest data from the Central Bank of Nigeria (CBN), the figure rose by 88 percent from N1.39 trillion in January to N2.60 trillion in June 2023.

    The amount of currency in circulation in Nigeria fluctuated in the first half of 2023. In January, it stood at N1.39 trillion and fell to N982,097 billion in February.

    However, currency circulation rose to N1.68 trillion in March. In April, May, and June, it increased to N2.48 trillion, N2.53 trillion, and N2.60 trillion, respectively.

    In October 2022, the CBN announced that it would be redesigning three of the existing banknotes: the N200, N500, and N1000 notes. The new notes were due to be circulated on December 15, 2022, while the old notes would remain legal tender until January 31, 2023.

    The apex bank said it decided to redesign the banknotes because of concerns about the management of currency in circulation, particularly those outside the banking system.

    The CBN said currency management has faced several challenges in recent years, including counterfeiting, the use of cash for illegal activities, and the hoarding of banknotes by members of the public.

    Crude oil prices may rise on demand increase

    Experts say the prices of crude may likely increase in days to come as demand outpaces supply following a cut by the Organization of Petroleum Exporting Countries (OPEC), particularly that of major producer Saudi Arabia.

    The International Energy Agency (IEA) and the Organization of the Petroleum Exporting Countries (OPEC) earlier projected oil demand to outpace supply this year, leading to overall inventory draws to the tune of 400,000 to 500,000 barrels per day (bpd), mostly accounted for by the second half of the year (2023).

    Reacting to the development, experts at JP Morgan believe that the disparity between demand and supply will lead to increased oil prices.

    “It appears that the voluntary cuts announced by eight OPEC countries in April plus the additional 1 million bpd of unilateral Saudi cuts that just started in July are having the desired effect, with sour barrels becoming scarcer.”

    JP Morgan also stated that a rise in driving and flying activities this summer has put a strain on supplies as refineries are struggling to cope, meanwhile, there was also a drop in Russian crude supplies in July 2023. When demand outweighs supply, prices will rise, and analysts expect that the recent rise in crude oil will extend even further.

    Earlier this month, Secretary General of the International Energy Forum (IEF), Joseph McMonigle, told CNBC that crude oil demand bounced back to pre-Covid levels quickly, but supply is having a tougher time catching up.

    “So, for the second half of this year, we are going to have serious problems with supply keeping up, and as a result, you are going to see prices respond to that.”

    If crude oil prices rise on the global market, it means two things for the Nigerian market:

    Increased oil revenues are needed as Nigeria plans to roll out intervention schemes to cushion the effect of the fuel subsidy removal on the country’s citizens. In a prior announcement, the government has made it known that among other plans; it is focused on mass transportation, and alternative energy sources like compressed natural gas as well as reducing the impact of transportation costs as intervention schemes.

    An increase in the cost of fuel will be unavoidable because the country has no refining capacity as citizens await the end of the current rehabilitation of the Port Harcourt, Warri and Kaduna refineries.

    So, as more fuel imports come into the country, facilitated by private companies, fuel pump prices could increase. This also means that Nigerians need to increase their earnings, to survive a possible fuel pump price hike in the future.

  • IMF lowers global growth forecast to 3% in 2023-24

    Global growth has been projected to fall from 3.5 percent in 2022 to 3.0 percent in 2023 and 2024, according to a latest International Monetary Fund (IMF) report.  

    The Bretton Woods Institute in its updated World Economic Outlook (WEO) for the month of July 2023, titled: “Near-Term Resilience, Persistent Challenges”, noted that despite resilience, the global economy remained weak.

    “Compared with projections in the April 2023 WEO, growth has been upgraded by 0.2 percentage points for 2023, with no change for 2024.

    “The forecast for 2023–24 remains well below the historical (2000–19) annual average of 3.8 percent.

    “It is also below the historical average across broad income groups, in overall Gross Domestic Product (GDP) as well as per capita GDP terms,” it said.

    While advanced economies continued to drive the decline in growth from 2022, especially with weaker manufacturing, the Fund noted that it was not the same in emerging markets and developing economies.

    According to the global financial institution, the growth outlook is expected to be broadly stable for 2023 and 2024, although with notable shifts across regions.

    “For emerging market and developing economies, growth is projected to be broadly stable at 4.0 per cent in 2023 and 4.1 per cent in 2024, with modest revisions of 0.1 percentage point for 2023 and –0.1 percentage points for 2024.”

    The report showed growth in Sub-Saharan Africa is projected to decline to 3.5 per cent in 2023 before picking up to 4.1 per cent in 2024.

    It revealed that economic growth in Nigeria in 2023 and 2024 is projected to gradually decline, in line with April WEO projections, reflecting security issues in the oil sector.

    According to the Fund, Nigeria’s economic growth is projected at 3.2 percent in 2023 and is expected to decline to 3.0 in 2024.

  • Another fuel price hike looms as Goldman Sachs projects crude price at $86

    Nigerians may be set for another Premium Motor Spirit (PMS) price increase as if the prediction by Goldman Sachs is anything to go by.

    Analysts say that because of the removal of fuel subsidy, the expected increase in the crude oil price to $86 per barrel will naturally shoot up the pump price of petrol in Nigeria.

    Anderson Okojie, a marketer, said the meaning of fuel subsidy removal is that petrol prices will increase or decrease if certain factors move in a certain direction.

    “So with the expected increase in the prices of crude oil, the same is expected to see petroleum products rise correspondingly”.

    Another set of analysts say the increase in the international price of crude oil ought not to affect the price of petrol in Nigeria since the country specifies direct sales.

    That is because the supply of petrol is to be refined for the Nigerian market, and so no increase in the market should affect petrol price since refined crude is not being sold.

    Joel Ogude, an exporter, said, there is a special arrangement for supply of crude oil for the refinery to be shipped to Nigeria. According to him, the major costs are freighting and landing costs among others.

    Goldman Sachs has predicted that oil prices are set to rise to $86 per barrel at year-end, from $80 now, as record-high oil demand and lowered supply will lead to a large market deficit.

    “We expect pretty sizable deficits in the second half with deficits of almost two million barrels per day in the third quarter as demand reaches an all-time high,” Daan Struyven, head of oil research at Goldman Sachs, told CNBC’s “Squawk Box Asia” program on Monday.

    For a record high this summer, supply is shrinking. The production and export cuts from OPEC+ and the slowdown in U.S. oil production growth will also play a part in large deficits in the third quarter this year.

    According to Goldman’s Struyven, “We expect U.S. crude supply growth to slow down pretty significantly to a sequential pace of just 200 barrels per day from here.”

    The total rig U.S. count fell to 669 last week, according to Baker Hughes data last Friday.

    So far this year, Baker Hughes has estimated a loss of more than 100 active drilling rigs. Last week’s count is also 406 fewer rigs than the rig count at the beginning of 2019, prior to the pandemic.

    Also last week, oilfield services giants Halliburton and Baker Hughes both signaled softer demand for drilling on the North American market.

    At the same time, there is already evidence of lower supply from OPEC+.

    Russian crude oil exports have shown signs of decline for a second consecutive week and are estimated to have sunk to a six- month low in the four weeks to July 16. Russia is preparing to cut 500,000 barrels per day (bpd) off its oil exports in August, and shipping plans so far suggest that Russia could deliver on at least part of its pledge to reduce oil exports next month.

    Saudi Arabia’s crude oil exports have also started to decline, to below 7 million barrels a day in May, for the first time in many months.

    Crude shipments out of the world’s top exporter could further decline as Saudi Arabia is now cutting its production by 1 million bpd in July and August.

  • MPC decision to be driven by inflation trends- Expert

    Ahead of its meeting this week, the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN), Professor of Capital Market at the Nasarawa State University, Keffi, Uche Uwaleke, has noted that the MPC decision would largely be driven by inflationary trends.

    Speaking with NIGERIAN ANCHOR Sunday in Abuja, Uwaleke said that exchange rate volatility naira float would be a key consideration of the Committee.

    At the last MPC meeting, the Monetary Policy Rate (MPR) was raised for the seventh consecutive time to 18.5 percent, the highest since the inception of the MPC.

    “The acting CBN governor, who will be chairing the meeting, has been part and parcel of the hawkish MPC stance for months now, and so another rates hike will not come as a surprise.

    “Be that as it may, the MPC should equally recognize that the removal of fuel subsidy has slowed down economic activities considerably with an attendant drop in productivity.

    “So, economic growth and jobs are already negatively impacted such that a further monetary policy tightening would only worsen the situation.

    “Cost of capital will further increase and access to credit by small businesses will become more difficult,” he said.

    He said that a further increase in the MPR was also likely to endanger the asset quality of banks through an increase in non-performing loans as Deposit Money Banks (DMBs) reprised their loans.

    “In this regard, the balance of risks dictates that the MPC should pause the policy rate hikes which have been on since May last year by maintaining a hold position on all policy parameters.

    “The MPC should recognize that much as its primary mandate is to maintain price stability, it equally has a responsibility to support output growth.

    “This is against the backdrop of the fact that many of the factors driving inflation in Nigeria, such as insecurity affecting food output and high energy costs, are outside the control of the CBN,” he said.

    Uwaleke urged the MPC to seize the opportunity of its forthcoming meeting to signal readiness to support output growth.

    “This can be done through policies geared towards fostering a low-interest rates environment while keeping an eye on inflation, using a mix of heterodox measures,” he said.

    A partner and Chief Economist at KPMG Nigeria Mr Yemi Kale, said the MPC would be tricky considering that economic growth has been fragile.  

    “At the same, inflation rates are high and rising, and with the recent subsidy and FX reforms, inflation is almost definitely going to rise higher and all happening at a time confidence in its ability to control inflation is weak,” he said.

    He said the inability of the CBN to control inflation had been largely due to the main drivers of inflation being structural and supply-based, which could not be controlled effectively with the money supply tools available to it.

    He added that the recent growth in money supply following the various reforms would likely worsen inflation.

    “Excess liquidity may also find its way into the FX market and put pressure on Naira, both at official and parallel markets.

    “The MPC will therefore have a difficult decision on how to pull inflation down without hurting economic growth further, which further tightening might cause.

    ”However, I expect that the CBN will be more concerned about inflation being its core responsibility and will tighten the MPR further but release the Cash Reserve Ratio (CRR) to support the economy,” he said.

  • Payment of N123bn to FAAC, in compliance with PIA -NNPCL

    The Nigerian National Petroleum Company Limited (NNPCL) said that the payment of an interim dividend of N123 billion to the Federation Account Allocation Committee (FAAC) for the month of June, was part of the requirements of the Petroleum Industry Act (PIA).   

    In a statement made available to journalists, NNPCL Chief Financial Officer, Mr Umar Ajiya, said the move was to consolidate its post Petroleum Industry Act (PIA) 2021 status as an income-generating company.

    He said, “This payment is in addition to compliance on payment of royalties and taxes.”

    A statement by Press and Public Relations, Office of the Accountant General of the Federation (OAGF) Mr Bawa Mokwa, on Thursday night stated that the sum of N907.054 billion was shared by FAAC among the three tiers of government.

    From the money shared, NNPCL contributed N81 billion as a monthly interim dividend and N42 billion as a 40 percent oil Production Sharing Contract (PSC) profit totaling N123 billion.

    Ajiya insisted that the latest development is a departure from previous years of sleaze and wastage.

    “This will set the track for future profitability and global best practices designed to build NNPCL into a world-class oil company in the ranks of Saudi Aramco, China Petroleum & Chemical Corp., Exxon Mobil Corp., and others.

    “The goal of Malam Mele Kyari, the Group Chief Executive Officer (GECO), NNPCL, is to set the nation’s oil company on the path of profitability and sustainable growth.

    “Since the transformation of the NNPC from a loss-making organization pre-PIA to a robust profit-making company post-PIA, the company under Kyari has pursued global governance best practices aimed at repositioning the company for greater growth.

    “The payment to FAAC clearly shows that the company under the leadership of Kyari is moving in a positive trajectory as enshrined in the PIA,” he said.

  • High food inflation, threat to global food security– W/Bank

    The World Bank has said that domestic food price inflation remains high around the world and it is threatening food security.

    In the Food Security Update report posted on its website, the Washington-based lender, stated that food price inflation data showed high inflation in most low-and middle-income countries, with inflation higher than 5 percent in 61.1 percent of low-income countries, 79.1 percent of lower-middle-income countries, and 70 percent of upper-middle-income countries, with many experiencing double-digit inflation.

    In addition, 78.9 percent of high-income countries are experiencing high food price inflation.

    The report stated that Africa, North America, Latin America, South Asia, Europe, and Central Asia, remain the most affected countries with food price inflation exceeding overall inflation in 79.8% of the 163 countries in real terms.

    “The agricultural and cereal price indices closed 4% and 12% lower, respectively, while export price indices closed at the same level as two weeks ago.  

    “The decline in the cereal price index was primarily driven by a sharp decline in maize prices which dropped by 21% compared to 2 weeks ago. Wheat prices also declined by 3% while rice prices increased by 1% over the same period.

    “On a year-on-year basis, maize and wheat prices are both about 19% lower while rice prices are 16% higher. Maize prices are 4% lower, whole wheat and rice prices are 1% and 3% higher, respectively, than in January 2021,” the report said.  

    Meanwhile, geopolitical tensions threaten the Black Sea Grain Initiative, including the collapse of the Nova Kakhovka dam and damage to the ammonia pipeline between Russia and Ukraine.

    The flooding and disruption of irrigation, along with the demand to reopen the pipeline, are increasing tensions and could lead to the termination of the agreement, ultimately reducing Black Sea exports and undermining Ukraine’s production incentives, which continues to aggravate the situation, the Bank noted.

  • FAAC: FG, States, LGs share N907.054bn revenue

    The Federation Account Allocation Committee (FAAC) has disbursed a total sum of N907.054 billion to the Federal, State, and Local Government Councils in the month of June 2023.

    This allocation was detailed in a communiqué issued after the FAAC meeting chaired by Dr. Oluwatoyin Madein, the Accountant General of the Federation.

    The distributable revenue of N907.054 billion comprised N301.501 billion in statutory revenue, N273.225 billion in Value Added Tax (VAT) revenue, N11.436 billion from Electronic Money Transfer Levy (EMTL) revenue, and N320.892 billion in Exchange Difference revenue.

    During June 2023, total deductions for cost of collection amounted to N73.235 billion, and total deductions for savings, transfers, and refunds stood at N979.078 billion. The Excess Crude Account (ECA) balance reported was $473,754.57.

    Out of the total allocation, the Federal Government received N345.564 billion, State Governments received N295.948 billion, and Local Government Councils received N218.064 billion.

    Additionally, a sum of N47.478 billion was disbursed to the relevant States as 13% derivation revenue.

    The gross statutory revenue for June 2023 reached N1,152.921 billion, surpassing the previous month’s N701.787 billion by N451.134 billion.

    The Federal Government received N146.710 billion, State Governments received N74.413 billion, and Local Government Councils received N57.370 billion from the N301.501 billion distributable statutory revenue.

    Furthermore, N23.008 billion was allocated to the relevant States as 13% derivation revenue.

    Regarding Value Added Tax (VAT), June 2023 recorded a gross revenue of N293.411 billion, marking a significant increase of N23.214 billion compared to May 2023.

    The Federal Government received N40.984 billion, State governments received N136.613 billion, and Local Government Councils received N95.629 billion from the N273.225 billion distributable VAT revenue.

    The N11.436 billion Electronic Money Transfer Levy (EMTL) was shared with the Federal Government receiving N1.715 billion, State Governments receiving N5.718 billion, and Local Government Councils receiving N4.003 billion.

    From the N320.892 billion Exchange Difference revenue, the Federal Government received N156.155 billion, State Governments received N79.204 billion, and Local Government Councils received N61.063 billion. Additionally, N24.470 billion was disbursed to the relevant States as 13 percent mineral revenue.

    The communiqué also highlighted significant increases in Companies Income Tax (CIT), Import and Excise Duties, VAT, and Oil and Gas Royalties. However, Petroleum Profit Tax (PPT) and Electronic Money Transfer Levy (EMTL) witnessed notable decreases during June 2023.