I often wonder why, when China devalue her currency, the almighty USA cries “BLUE MURDER.” And even threaten “TRADE WARS.” Or perhaps why the Japanese currency is twice as worse compared to the US Dollar vs. the Nigerian Naira. Yet the Japanese are smiling and the almighty USA doesn’t seem to like that smile.
But when Nigerian currency devalues, only Nigerians cry.
The answer, Nigeria has a different economic pattern and economic activities compared to China and Japan.
You cannot have a “Mono Economy” that’s totally dependent on crude export for external revenues and imports almost everything else for her citizen use.
Any economy in this category will definitely be hurt by Exchange Rate differentials – Yes! Foreign Exchange Rate fluctuates like wild FIRE!
But what do you make of a society that’ll travel from Lagos to Paris just to get Ice Cream. Make it trend on Social Media and sing a hit song about such useless expedition. You think you’ll not have to pay for such madness?
The exchange rate differentials will definitely come for your head and your economy too!
I don’t even want to argue about how you can have a complete meal in Nigeria for 500 Naira or $1 while a coffee at Starbucks cost $6.
To me, this comparison/argument is not worth the conversation because it only makes clever comparison without profering solutions.
THIS IS WHAT I THINK!
Nigeria is not a rich country. You can argue about this all you want! But before you write your response to my assertions, I’ll like you to pounder on the following;
Assuming Nigeria extracts 2,400,000 barrels of crude oil per day at $60pb. Now multiply the dollar figure and share it amongst 200 million people to see what that amounts to per person per day – then you’ll understand how poor we are as a country.
The above analysis doesn’t consider the cost of exploration and other biz/logistics expenses or what accountants call OPEX.
Yet you’ll see that we don’t even earn $1.5 per person per day. How poor can a country be?
Remind me again. What’s the yardstick that measures the extremely poor? $1 I think, is that correct?
Nigeria must move from being a 100% oil exporting country and begin to create value in other sectors.
We get it wrong when we keep calling for Foreign Direct Investment (FDI).
Nobody will bring FDI into a country where civil servants are openly asking for pasentage share of the FDI, blatantly asking for kickbacks and even asking for stake in prospective businesses.
We need more than a call for FDI, We need a people that are engaged in economic activities that creates value – I’m talking about Economic Values that’ll directly benefit Nigerians and also attract foreign customers.
Discussing the solutions I’m considering will require a bigger space. Maybe I’ll talk about the other options Nigeria can utilize in subsequent epistles!
Borno State Governor, Babagana Umara Zulum is saddened by the killing of 11 security personnel made up of eight policemen and three civilian JTF members ambushed on their way to Baga as security backup in reconstruction efforts.
The governor was in Baga from Thursday to Friday in part to supervise efforts to return residents as part of strategies that aim to cut Boko Haram’s long use of the commercial town as main transit for undertaking major fishing trade and tax administration from which the insurgents fund their murderous activities. Baga, Borno’s largest fishing community in the shores of the Lake Chad with water ways to neighboring countries is considered strategic to Boko Haram’s operation.
Zulum’s spokesman, Malam Isa Gusau, in a statement issued Saturday, said two convoys, one belonging to the Governor and another for a committee on Baga reconstruction had safely plied the Maiduguri-Baga route previous days before the third convoy of security men was ambushed on Friday morning even after precautionary steps had been taken to ensure safe trips.
“Governor Babagana Umara Zulum is saddened by this unfortunate carnage. He shares the grief of families of these 11 priceless heroes to whom Borno shall remain grateful. The governor prays for the repose of their souls and urges all stakeholders to remain committed to ongoing peace building efforts. Zulum is of the opinion that we must continue to keep hope alive even in the face of tribulations, and believe that with sustained efforts and prayers, Borno will eventually regain peace. The situation facing us is a tough one but we must choose between doing something which gives us some hope and doing nothing which will leave us more vulnerable to Boko Haram’s ultimate wish to takeover Borno and bring it under their sovereign brutal administration” the statement said.
Zulum attends Baga’s first juma’at prayers in nearly two years
Meanwhile, Governor Zulum while in Baga attended juma’at prayers held for the first time in nearly two years.
Baga town was displaced by the Boko Haram insurgents 21 months ago, with most of the residents taking refuge in Monguno and Maiduguri.
In the Governor’s convoy were the Senator representing Northern Borno, Abubakar Kyari, house of reps members representing Marte, Monguno, Nganzai, Mohammed Tahir Monguno and that of Mobbar, Kukawa, Guzamala, Abadam federal constituencies, Bukar Gana Kareto. Speaker of Borno State House of Assembly, Abdulkarim Lawan, Chairman of Baga resettlement committee and the Commissioner for Justice, Barr. Kaka Shehu Lawan were on the trip and some top government officials.
While taking tour of the construction work going on in Baga, Governor Zulum commended the resettlement committee for the quality and speed of work.
Zulum had on August 31, 2020 inaugurated a resstlmeent committee, which was mandated to commence immediate reconstruction and rehabilitation work in Baga.
The Nigerian economy has grossly underperformed courtesy of the COVID19 pandemic and the slump in crude oil price and demand. There are contradiction, uncertainties, evidence and eminence of economic recession hovering over us.
A look at her enormous resource endowment showed that Nigeria is the 6th largest gas reserves and the 8th largest crude oil reserves in the world. It is endowed in commercial quantities with about 37 solid mineral types and has a population of over 200 million people. Yet economic performance has been rather weak and does not reflect these endowments, even before the advent of COVID19 and the current shock on global crude oil price. Compared her with the emerging Asian countries, notably, Thailand, Malaysia, China, India and Indonesia that were far behind Nigeria in terms of GDP per capita in 1970, these countries have transformed their economies and are not only miles ahead of Nigeria, but are also major players on the global economic arena.
Successive governments in Nigeria have since independence in 1960, pursued the goal of structural changes without much success. The growth dynamics have been propelled by the existence and exploitation of natural resources and primary products. Initially, the agricultural sector, driven by the demand for food and cash crops production was at the centre of the growth process, contributing 54.7 per cent to the GDP during the 1960s.
However, the second decade of independence saw the emergence of the oil industry as the main driver of growth. Since then, the economy has mainly gyrated with the boom burst cycles of the oil industry.
With a National budget (government income and expenditure) outlay that is dependent on oil revenues has more or less dictated the pace of economic growth and development.
Looking back, it is clear that the economy has not actually performed to its full potential particularly in the face of its rising population. In general, economic growth and population growth rates are very close that the margin cannot induce the required structural transformation and economic diversification.
Furthermore, Nigeria’s poor economic performance, particularly in the last Sixty years, is better illustrated when compared with China. For instance in the 1970s, while Nigeria had a GDP per capita of US$233.35 and was ranked 88th in the world, China was ranked 114th with a GDP per capita of US$111.82. Today, China is almost occupying an enviable number one position as productive, performing and developed economy in the world.
The major factors accounting for the relative decline of the Nigeria’s economic fortunes are easily identifiable as political instability, lack of focused and visionary leadership, economic mismanagement and corruption.
Prolonged period of military rule for example stifled economic and social progress, particularly in the three decades of 1970s to 1990s. During these years, resources were plundered, social values were debased, and unemployment rose astronomically with concomitant increase in crime rate.
Living standards fell so low, to the extent that some of the best brains with the requisite skills to drive the developmental process left in droves to other nations, and are now making substantial contributions to the economic success of their host countries.
However, since 1999, the country returned to the path of civil democratic governance and has sustained uninterrupted democratic rule for a period of 22 years. This in itself is a great achievement and gives reason for hope in a country that has was burdened with almost three decades of military rule and dictatorship. It has provided an opportunity to arrest the decline of the past and provide the launch pad for the take-off into an era of sustainable and all-round economic development.
However, in this regards also the successive civilian administrations since 1999 have committed to tackling the daunting challenges but with little and abysmal results to show. What we have is economic growth risen substantially, with annual average of 7.4 per cent, but the growth has not been inclusive, broad-based, jobless growth and devoid of transformational development.
The implication of this trend is that economic growth in Nigeria has not resulted in the desired structural changes that would make manufacturing industry the engine of growth, create employment, promote technological development and take millions out-off poverty. Available data has put the national poverty level at 74.4 per cent. Similarly, there has been rising unemployment with the current level put at 30.7 per cent by the National Bureau of Statistics (NBS, 2020).Furthermore, the country lags behind her peers in most human development indicators.
What must be done for a post COVID19 Nigeria economy stability? An understanding of Nigeria’s economic aspirations today has remained that of altering the structure of production and consumption patterns, diversifying the economic base and reducing dependence on oil. Secondly, the government must aim of putting the economy on a part of sustainable, all-inclusive and non-inflationary growth with the 2.3 trillion stimulus package in the kitting and avoiding the wastage of that is critical.
Thirdly, a policy link through research and development is a boost to the manufacturing sector is the key to a revamp and industrialize economy (industrial sector comprises the manufacturing, mining, agriculture and electricity generation, oil and gas), implication of this is that while rapid growth in output, as measured by the real Gross Domestic Product (GDP), is important, the transformation of the various sectors (education, entertainment, media, banking and finance) of the economy are even more vital with the manufacturing leading the way.
As well as manufacturing sub-sector that is made up of large, medium and small enterprises, as well as cottage and hand-craft unit. This is consistent with the growth aspirations of most developing countries, as the structure of the economy is expected to change as growth progresses.
By: Adefolarin A. Olamilekan, Political Economist and Development Researcher. Email:email@example.com, 08073814436-Abuja.
President Muhammadu Buhari has warn the Central Bank of Nigeria from giving any foreign exchange to importers of food or fertilizer into Nigeria.
The statement which was issued by Malam Garba Shehu, the Senior Special Assistant to the President on Media and Publicity reads:
“As the Federal Government rolls out the Economic Sustainability Plan and sets goal for National Food Security, President Muhammadu Buhari on Thursday ordered the Central Bank of Nigeria ”not to issue a kobo” of the country’s reserves for the importation of food items and fertilizer.
At a meeting of the National Food Security Council at the State House, Abuja, President Buhari restated his earlier verbal directive to the apex bank, saying he will pass it down in writing that ”nobody importing food should be given money.”
Emphasizing the need to boost local agriculture, the President said:
”From only three operating in the country, we have 33 fertilizer blending plants now working. We will not pay a kobo of our foreign reserves to import fertilizer. We will empower local producers.”
Furthermore, President Buhari also directed that blenders of fertilizer should convey products directly to State governments so as to skip the cartel of transporters undermining the efforts to successfully deliver the products to users at reasonable costs.
The President advised private businesses bent on food importation to source their foreign exchange independently, saying ”use your money to compete with our farmers”, instead of using foreign reserves to bring in compromised food items to divest the efforts of our farmers.
”We have a lot of able-bodied young people willing to work and agriculture is the answer. We have a lot to do to support our farmers,” President Buhari said.
The meeting, chaired by the President with other key members of the Council in attendance, was briefed on the food security situation prevailing in the country.
Notably, the Vice Chairman of the council and Governor of Kebbi State, Atiku Bagudu, the Chief of Staff to the President, Prof. Ibrahim Gambari and a Governor from each of the six geo-political zones – Jigawa, Plateau, Taraba, Ebonyi, Lagos and Kebbi, made presentations.
The Minister of Finance, Budget and National Planning, Dr Zainab Ahmed, outlined measures introduced by the administration to tackle the unprecedented challenges from the COVID-19 pandemic on the nation as contained in the Nigerian Economic Sustainability Plan (NESP).
Among others, the Minister highlighted that the government will facilitate the cultivation of 20,000 to 100,000 hectares of new farmland in every State and support off-take of agro-processing to create millions of direct and indirect job opportunities.
She also listed the creation of 774,000 direct jobs for a minimum of 1,000 young Nigerians in each local government, the construction of 300,000 homes every year to give a boost to jobs through the construction industry, as well as the connection of 25 million new users of electricity with the installation of Solar Home System (SHS) targeting 5 million households.”
The Presidential spokesman, Garba Shehu further states that:
“Dr Ahmed also briefed on the joint investment with the World Bank to provide intervention fund to States to improve health infrastructure.
She said to ease existing financial hardships among the people, the government is also coming up with low-interest loans for mechanics, tailors, artisans, petty traders and other informal business operators.
The Minister added that the Federal Government will equally provide support to Micro, Small and Medium Enterprises (MSMEs) to help them keep their employees and boost local manufacturing.
Dr Ahmed explained that from the recently approved N2.3 trillion stimulus recommended by the NESP, there will be expansion of broadband connectivity to boost job opportunities in the digital economy, a planned expansion of the National Social Investment Programmes including increase in the number of beneficiaries such as the cash transfer beneficiaries, N-Power Volunteers, the Market Moni and Trader Moni schemes.”
“In his presentation, the Minister of Agriculture, Alhaji Sabo Nanono told the Council that the nation expects a bumper harvest of food items despite floods in the north and drought in the south.
He quoted the latest market surveys to show that the recent hike in the price of commodities is being reversed.
On his part, Mr Boss Mustapha, the Secretary to the Government of the Federation and Chairman of the Presidential Task Force on COVID-19, reported the negative impact of the pandemic on the lives and livelihood of citizens, while the Comptroller-General of Customs, Col Hameed Ali (Rtd) expressed the hope of an early reopening of the partially closed borders given the progress made with neighbouring States in joint border patrols – one of the key conditions by Nigeria for reopening of the borders.” He concluded.
The spokesman of the Speaker House of Representatives, Femi Gbajabiamila, Mr Lanre Lasisi, the Special Adviser on Media and Publicity to the Speaker, House of Representatives, Federal Republic of Nigeria. In a statement issued early today said.
“The Nigeria-Ghana Business Council and the Nigeria Union of Traders Association Ghana (NUTAG) have commended the Speaker of the House of Representatives, Rep. Femi Gbajabiamila over his intervention in the trade disputes with the government of Ghana.
Members of the Nigeria-Ghana Business Council said through their President, Omoba Bambo Ademiluyi, that Gbajabiamila’s visit to Ghana has made positive impact and paved the way for an amicable resolution to the trade dispute.
In a letter of appreciation and commendation dated September 5 and addressed to the Speaker, Mr Ademiluyi said: “It is on record that your trip brought about the highest involvement of both governments in this dispute that has been on since 2007.
“Your proposals and presentations have given rise to two very vital solutions to the problem: 1. The review of the GIPC Act demanding $1,000,000 deposit for foreign investors in Ghana as it concerns Nigerians. 2. The promotion of the Nigeria-Ghana Business Council backed by legislation to superintend on trade and business issues between the two countries.”
He said the formation of the business council as proposed by the Speaker was a welcome development.
“Our objectives and activities align with the proposal which is being introduced to superintend trade issues of the two countries.
“It is, therefore, our wish to express support for the formation of this council and request that we work with your team to see to a successful emergence of a government-backed Business Council.”
On their part, members of NUTAG said in another letter addressed to the Speaker dated September 6 that Gbajabiamila’s visit and engagement with the Ghanaian authorities were timely and a right step in the right direction.”
The spokesman further said:
“In the letter, signed by the association’s President, Chief Chukwuemeka Nnaji, the Nigerian traders urged the Speaker not to despair in ensuring that resolutions reached during the interface are implemented by all concerned parties.
The traders noted that Gbajabiamila’s intervention was a testimony that President Muhammadu Buhari and the government of Nigeria have the interest of Nigerians at home and abroad at heart.
The letter reads in part: “Your Excellency, please, allow me to seize this opportunity to thank you from the bottom of my heart on behalf of the Nigerian Union of Traders Association of Ghana (NUTAG), for your kind, responsible and timely intervention to quell the much travails we have been experiencing at the hands of Ghanaian authorities and our Ghanaian counterpart, Ghana Union of Traders Association (GUTA).
“Sir, the leadership of NUTAG and all Nigerian traders in Ghana, as well as other Nigerians living in Ghana, deeply appreciate your recent visit to Ghana in order to try and resolve the lingering trade impasse between Ghana and Nigeria; in unison, we hail this as the right step in the right direction.
“The move at once displays that the Government of the Federal Republic of Nigeria led by His Excellency, President Muhammad Buhari has all Nigerian citizens very close at heart, both at home and abroad.
“We are indeed very grateful to you and the entire team who embarked on this journey, and we are optimistic that an end to our travails in Ghana is at hand.”
“The president of the trade union, however, stated that a lot of Nigerian traders in Ghana are finding things difficult as their means of livelihood have been shut down.
The traders appealed to the Nigerian Government to engage with the Ghanaian Government to reopen the said shops pending an enduring solution the impasse.” He concluded.
The Senior Special Assistant to the President on Media & Publicity, Malam Garba Shehu, has today in a statement said:
“President Muhammadu Buhari has appealed to ECOWAS leaders not to elongate their tenure in office beyond constitutional limits. Making the call while presenting Nigeria’s General Statement at the 57th Ordinary Session of the ECOWAS Heads of State and Government in Niamey, Niger Republic on Monday, the President urged his colleagues to respect constitutional provisions and ensure free and fair elections.
According to him, it is “important that as leaders of our individual Member-States of ECOWAS, we need to adhere to the constitutional provisions of our countries, particularly on term limits. This is one area that generates crisis and political tension in our sub-region.
“As it is, the challenges facing the sub-region are enormous; from socio-economic matters to security issues, the ECOWAS sub-region cannot therefore afford another political crisis, in the guise of tenure elongation. I urge us all to resist the temptation of seeking to perpetuate ourselves in power beyond the constitutional provisions.
“I commend those in our midst that have resisted such temptations, for they will be deemed exceptional role models in their respective countries and the sub-region as a whole.
“Related to this call for restraint is the need to guarantee free, fair and credible elections. This must be the bedrock for democracy to be sustained in our sub-region, just as the need for adherence to the rule of law.”
On the political situation in Mali, President Buhari said it is of serious concern to ECOWAS, and commended President Mahamadou Issoufou of Niger Republic and out-going Chair of the ECOWAS Authority of Heads of State and Government and the Leadership of the ECOWAS Commission, as well as the Chief Mediator, former Nigerian President Goodluck Jonathan, “for effectively demonstrating commitment in handling the political situation in that country.”
He declared that “Nigeria remains resolutely committed to ECOWAS decision for a civilian-led Transition Government not exceeding 12 months. This is important because of the circumstances surrounding Mali where violent non-state actors and other negative tendencies reside and who can take advantage of the unstable political situation to overrun the country, thereby plunging it into greater danger that will affect the political stability of the whole sub-region.
“While Nigeria understands the current political realities in Mali, the sub-region’s commitment to the Protocol on Democracy and Good Governance, must never be compromised.
“An early return to democratic governance which is transparent and civilian-led, will commend itself for Nigeria’s support for progressive relaxation of sanctions against Mali.”
On security, the Nigerian leader noted that, “Terrorism continues to be the greatest security threat in our sub-region, complicating other national security challenges. As a sub-region, we need to collaborate more by working hand in hand with each other, to combat the root causes of the different security-related manifestations in our countries.”
He said, “Nigeria is concerned with the rapidity at which terrorist groups in the Sahel and West Africa are working together against all of us,” adding that, “We must urgently review these ugly developments to guarantee the safety and survival of our sub-region.”
“Our national security apparatus and the relevant Units of ECOWAS must urgently be seized with these unfolding events across our sub-region and act decisively on the emergence of early warning signs,” he said.
Dwelling on the long-standing single currency issue for the sub-region, the President said, “Nigeria remains committed to the implementation of the action plan towards the actualization of the monetary union and single currency programme of ECOWAS,” and called on “Member States to show support to the resolution of the Heads of State and Government of the ECOWAS on this matter.”
Cognisant of the “likelihood that many ECOWAS member states may not meet the convergence criteria over the next few years due to the impact of COVID-19 on our economies and which as a consequence, will affect the take-off date of the single currency,” he said “Notwithstanding this envisaged delay, we must remain collectively focused and resolute in working to achieve the objectives of the ECOWAS monetary union as a project for the sub-region.”
Insisting that “the premature adoption of the “ECO” has unnecessarily heightened disaffection and mistrust among members of the emerging monetary union,” President Buhari encouraged “UEMOA (French acronym for the West African Economic and Monetary Union) to return to the roadmap on the common currency in the sub-region.”
He also urged all stakeholders to “bear in mind that those economic convergence criteria must be based on sound and sustainable macroeconomic fundamentals.”
Noting that some key unresolved issues still remained such as delinking the CFA franc of the UEMOA from the Euro; whether the UEMOA countries join as a bloc or individual countries; design of the exchange rate mechanism; Stabilization Fund; policy harmonization and exit strategy and reserve pooling among others, the Nigerian President called on his colleagues to provide “African solutions to African problems.”
According to him, “Foreign interference and so-called advice may not be in our best sub-regional interest,” as he stressed the “need for UEMOA to return to the agreed roadmap of the ECOWAS Single Currency by complying with the established framework under the roadmap and cooperate with other member countries in achieving the objectives of the programme.”
Observing that the Summit was holding “under a very complex health pandemic, whose impact on the global health and economy has so far been devastating,” President Buhari said “like the rest of the world, our sub-region is witnessing economic downturn with negative growth that is headed towards deep recession and the outlook continues to be uncertain.”
He, therefore, charged his colleagues on the “need to continue to work in concert with each other on several fronts to ease the negative effects of the pandemic,” adding that, “We need to demonstrate our collective resolve to harness the opportunities that come with COVID-19, despite its overwhelming negative impact on lives and livelihoods.”
The Nigerian President, who is the ECOWAS Champion charged with mobilising and coordinating the efforts against the pandemic, admitted that the “outlook for our sub-region with COVID-19 hovering over us is gloomy indeed.”
He, however, expressed confidence that “where there are challenges, opportunities are also available to be seized upon through greater collaboration with each other.”
“We must pool our resources together in unity to save our generation and generations to come from multiple challenges, including COVID-19 and related health issues.
“We need to redouble our efforts in preparing our national economies to withstand impending shocks against prospective multi-sector challenges that await us in the sub-region,” he declared.
Acknowledging that it is no easy task, President Buhari appealed to fellow leaders to “embrace our collective vision for the future with greater determination and innovative thinking and creativity.”
President Muhammadu Buhari will depart Abuja Monday for Niamey, Niger Republic to participate in the Fifty-Seventh Ordinary Session of the ECOWAS Authority of Heads of State and Government. The one-day summit will deliberate on the Special Report on COVID-19 to be presented by President Buhari who was appointed the ECOWAS Champion on the Fight against COVID-19 during the Extraordinary Virtual Summit of ECOWAS on April 23, 2020. As a Champion, the Nigerian leader was expected to coordinate the sub-regional response against the pandemic. In furtherance of that objective, under the supervision of the Champion, Nigerian Ministers of Health, Aviation and Finance were appointed Chairpersons of the Ministerial Coordination Committees on Health; Transport, Logistics and Trade; and Finance respectively. The Summit will also receive a Special Report on the ECOWAS Single Currency Programme to be presented by President Julius Maada Bio of Sierra Leone and Chair of the Authority of Heads of State and Government of the West African Monetary Zone (WAMZ), and President Alassane Ouattara, who is Chair of the West African Economic Monetary Union (WAEMU/UEMOA). The President of the ECOWAS Commission, Jean Claude Kassi Brou will present to the West African leaders, the 2020 Interim Report on activities of the sub-regional body including ECOWAS Vision 2050. The alarming rise in incidents of terrorism, insurgency, armed banditry and piracy will also come under focus, while the disruption of the democratic process by the military in Mali, will receive further attention. Similarly, in Burkina Faso, Cote d’Ivoire, Ghana, Guinea and Niger where parliamentary and presidential elections are scheduled for this year, the imperative to strengthen democracy in the sub-region by respecting constitutional provisions, rule of law and outcomes of free and fair polls, will be emphasised. President Buhari, who will be accompanied to the Summit by ministers and other top government officials, will return to Abuja after the meeting.
The statement was made available yesterday by Malam Garba Shehu, the Senior Special Assistant to the President on Media & Publicity.
It is no longer news that the pandemic Covid19 effect is beyond health crises. The global economy is once again confronted with another crisis. Like the 2008/2009 economic meltdown, that almost eroded the world economic system, the pandemic is also threatening to bellowed efforts earlier made to protect the global economic.
Nigeria, like many other countries, needed to braze up for the challenges. Currently, the entire word economic system, predicated on capitalism is struggling to avert another economic crisis and global financial turmoil similar to that of 2008.
What we are seeing this day’s is a multitude of different approaches to withstand economic crunch, living government around the world coming to terms with the unprecedented impact of the pandemic on economic conditions that have beset their nation. Regulators have been challenged, reforms is expected and options to explored, as well as austerity measures are introduces by government to create more effective framework in which citizens are taken care of and to also gain trust and confidence in each country’s economy. For instance, in Nigeria the naira had come under intense pressure in recent months during the coronavirus pandemic and the undercurrent slump in global oil prices.
Nigeria as OPEC member relies on crude oil sales for 90 percent of its foreign exchange earnings and 70 percent of government revenue, making it particularly vulnerable to global shocks.
The Central Bank of Nigeria has made moves to strengthen the naira currency to boost domestic manufacturing and lift the economy out of what could spell into recession. The Central Bank has ‘technically devalued’ the naira to exchange to the dollar at N380.The apex bank took this decision after all interventions in the market, such as imposing sanctions on errant operators and use of moral suasion to curb illegal forex operations did not sustain the exchange rate of N360 failed.
But market forces analysts has argued that the measures do not go far enough and foreign investment would only return to Africa’s most populous nation once the market determines the currency’s true value. The naira has lost value against the US dollar, as Nigeria saw revenues from international oil sales dwindle because of the worldwide slump in crude prices. Price shock on primary commodities and stalled investment has also led to a shortage of foreign currency, making it harder for local businesses to source enough dollars to pay for imported raw materials and machinery. It has also caused a yawning gulf between the official rate and that on the illegal but tolerated, black market. Before then, the CBN had maintained the exchange rate at about N360 for more than three years.
The Breaking news of the Central Bank of Nigeria officially devaluation of naira to exchange to the dollar at N381/$ broke on the Importer & Exporter window. The data obtained on FMDQ OTC Securities Exchange on the CBN official website, showed a 5.54% rate at the Secondary Market Intervention Sales (SMIS) – a window where importers access foreign currencies – from N360/$1 to N380/$1 with an instruction to bidders to comply accordingly. While, economy watcher, especially those in the school of thought and supporter of harmonization of multiple-exchange rate regime, believe the apex bank was moving towards ending the multiple-rate regime cycle.
On the other hand, those in favour of market forces determinant, view the latest adjustment has unclear and that the Central Bank of Nigeria (CBN) bowed to pressure. We may have state here that the country’s fiscal state faces tougher times as the monetary policies as not fare well either. To this end adjustment of the exchange rate at the busiest window is coming three months after the local currency was similarly devalued by 24.6 per cent, a decision that has worsened the inflationary pressure and interest rate. The naira traded at N385 on the official market and N455/$1 at the parallel market and this not static.
The harmonization, however, is a subject of debate among famous and infamous market operators, as well as and leading economists in all ramification made up the market forces determinant supporters and the harmonization pundits. For instance, the market forces determinist have raised the alarm that it’s “implementation would fuel speculation and worsen the fortune of the naira”. But the harmonization pundits counter this by asserting that “rate unification” would provide the “level playing field” required for inclusive growth. They accused the market forces determinist of round tripling “the market has always asked for the elimination of parallel and discriminatory prices”. They give kudos to the CBN for methodically pursuing “streamlined market and escape the usual blame and opprobrium, of market forces determinant that’s long believe in perfect market should be checkmate”.
Furthermore, the harmonization pundits strongly “ hold high the CBN action has to safe guard the weaker and less subsidized naira for the immediate and near future, a reality which supports the general weakness of the economy”, as in the face of several buffers such as COVID-19 and general economic slowdown.
It also hinge on the indication of CBN recent move to eliminate multiple rate regime as “a move will give the naira some stability in the immediate term. But warn that the CBN should be wary of the activity of currency speculators who are the foot soldiers of market forces determinants.
In contrary to the harmonization pundit’s argument, the market forces determinist said rate “unification and devaluation are rooted in the corrupt practices and market manipulation that have brought the naira to its knees”. They are of the view, that what is needed right now is detailed “structural audit of the management of the market, and this is more important than rate harmonization”.
Accordingly, the naira is challenged by external/moral factors than it is by market forces. “The problems of the naira are not market triggered; they are manipulated” The market forces ask the critical questions: “Where is the pressure on the naira coming from? Who is buying up the dollars? Who has what? What are the sources of the money individuals hold? How legitimate are the sources? What is responsible for the high buyback in the few months when the economy has been on hold? They queried the CBN action as not convincing enough as measures to manage the challenges unless we clean up the books. “They also advised that the way out is to “conduct a census on both local and foreign currencies.
There is a need for physical audit of the currency in circulation. As this will helps you to know the distribution. Also, this will further help us to establish what the local currency is pursuing for dollars are genuine. If the currencies were coming from legitimate business activities, there would be no serious distortion as we have”. They added more, “we have also come to a stage when a lifestyle audit is necessary.
We should audit the lifestyle of individuals with a huge volume of currencies, to be sure of where the distortion is coming from. India, as large as its population is, conducts a currency census every seven years”.
Moreso to further their position against elimination of multiple rate regimes, the market forces in their usual characteristic have peg the current economy environment as “Precarious situation” and expressed concern about whether the policy was sustainable. They differ by asking “how far can the CBN go in making dollars readily available to industries and importers?” They call on the CBN to further “liberalise the FX market to allow for other inflows of forex. They cap this with a warning that if the current supply source dries up, we may be back to zero,” To them the latest devaluation from a harmonization angle, would certainly trigger a higher inflation rate”. The new rate they puts between N400 and N410/$1, is below market expectation in their view.
Likewise the market forces determinist accused the CBN thus “a situation where the central bank is the sole supplier of forex is not healthy. For them “It is creating an air of uncertainty for investors. They blame the CBN for artificially funding the market to punish speculators and hoarders.”Of particular concern was the use of foreign reserves to shore up the naira” that is their lamentation.
They went at length to accuse the CBN of using up in six weeks what we ought to use for six months. This in their opinion is not sustainable,” they urge the CBN “to move towards a market-driven”.
Nigeria’s President Muhammadu Buhari has stated he does not want the market to determine the value of the naira and argued devaluation would “kill” the currency. Also there are concern over how the rate unification would address currency profiteering and black market dealing – the twin troubles dictating the historical woes of the naira since the implementation of the Structural Adjustment Programme (SAP) in the 1980s.
However, the CBN had said it was working with the fiscal authorities to properly ease the impact of the coronavirus and ensure a sound and stable financial system.
The Bank’s strategy must be dynamic, so that the naira does not spiral. There are fears that the continuous devaluation of the naira would worsen the living standards of Nigerians through a high rate of inflation and unbearable interest rates. So, what is driving the demand for foreign currencies? To buy what? In June 2015, the CBN prohibited 41 items, including tooth picks and luxury jets, from the official forex window. The apex bank argument has been to maintain the monetary policy to “rejuvenated domestic production”, providing “an opportunity to change the economy’s structure, resuscitate local manufacturing” and create jobs. Any move to strengthen the naira was “a positive development”.
Some manufacturers, especially the small-scale firms and those affected by the ban of the 41 items, source their dollars from the bureaus de change and the black market,” Since mid-February, 2020 the CBN has been pumping dollars into the market to strengthen the naira and bridge the gap between official and black market rates. Official data show some $2.5 billion have been sold to end users, causing the local currency and still rising and huge demand. Monetary policy in recent months has been aimed at encouraging local production of what has previously been imported at huge cost. Financial analysts, industry operators and the International Monetary Fund, however, said the apex bank needed to go further and harmonise all of Nigeria’s forex market rates.
There is the boom and crisis sickness of the market forces that would not let it win the trusted of it opposition, and the harmonization rate is not a misplacement, however it suspicion on the part of market force supporter ready to hijack, muscles out and denial market to thrive the “invincible hand” derive from demand and supply phenomenon.
In a logical conclusion, both of them are product of neoliberal capitalist economy. One represents the currency opportunist speculator at the mercy of the Nigerian state institution with licence, the other is the miser manipulator of currency, looking out for loophole in apex bank monetary policy to maximize profit and gains.
By: Adefolarin A. Olamilekan Political Economist and Development Researcher. Email: firstname.lastname@example.org, 08073814436-Abuja.
The shopping giant and South African Company, Shoprite Holdings Limited, says it will auction off its outlets in Nigeria.
The megastore company with presence in most Nigerian cities hinged this decision on the coronavirus pandemic which has disrupted major businesses globally.
This is coming about 15 years after it opened its first store in Lagos in December 2005.
In an “Operational and Voluntary Trading Update (52 Weeks Ended 28 June 2020)” released on Monday, the company said it has been approached by “various potential investors”.
The update partly read, “Despite difficult circumstances, in a year incorporating the COVID-19 lockdown and accompanying regulations governing trade, transport and operations, the Group increased total sale of merchandise for the 52 weeks to 28 June 2020 (including the impact of hyperinflation in the prior year) by 6.4% to approximately R156.9 billion. Like-for-like growth for
the year was 4.4%.
“Following approaches from various potential investors, and in line with our re-evaluation of the Group’s operating model in Nigeria, the Board has decided to initiate a formal process to consider the potential sale of all, or a majority stake, in Retail Supermarkets Nigeria Limited, a subsidiary of Shoprite International Limited.
“As such, Retail Supermarkets Nigeria Limited may be classified as a discontinued operation when Shoprite reports its results for the year. Any further updates will be provided to the market at the appropriate time.”
The company, which provides jobs for more than 2,000 Nigerians, has over 25 stores across eight states of the Federation including the Federal Capital Territory, Abuja.
The Office of The Vice President Said We Have Put Together A Stimulus Package of N2.3 Trillion. In a statement the Vice President was quoted to have said: “How we are converting COVID-19 Pandemic to opportunity to reset the economy.
Laolu Akande, the Senior Special Assistant to the President on Media and Publicity, Office of the Vice President, issued the statement yesterday, which reads:
In spite of the despair that came with the COVID-19 pandemic and its attendant consequences, Nigeria decided to seize the opportunity to reset the economy amidst worldwide economic challenges, according to Vice President Yemi Osinbajo, SAN.
Prof. Osinbajo stated this in Abuja on Tuesday at a Webinar organised by the Commonwealth Enterprise and Investment Council, CWEIC, with its focus on Nigeria.
According to the Vice President, “it seemed the sun was beginning to shine quite brightly after the years of recession and its immediate aftermath. Then came COVID-19 possibly the worst economic crisis the world has seen. For us in Nigeria, it was a perfect storm for oil prices, Russia and Saudi Arabia choosing that very moment for a price war. Then the inevitable lockdowns resulting in closure of businesses, our huge informal economy all but crashed and Government revenues fell too by over 40%.
“But the silver linings were perhaps bolder in the dark clouds.
The President decided that we could seize the opportunity to reset our economy in a way that may have been impossible had there not been a worldwide economic crash.
“I was asked to chair an inter-ministerial team to develop our Economic Sustainability Plan. A plan which we hope will, in the next 12 months or so, avoid a deep and prolonged recession by supporting businesses and households, but perhaps more importantly, addressing long-term structural vulnerabilities
“Taking into account our economic size and fiscal limitations, we have put together a stimulus package of N2.3trillion, which is just over 1.5% of national income. If other factors like the price of oil and length of the COVID-19 pandemic do not worsen further, these interventions should ameliorate the situation with a mild recession expected of minus 0.59%.”
Other speakers at the international webinar include Lord Marland of Odstock, the Chairman of the CWEIC, Sir Lynton Crosby, Chief Executive Officer C|T Group and the Industry, Trade & Investment Minister, Otunba Adeniyi Adebayo.
REMARKS BY HIS EXCELLENCY, PROF. YEMI OSINBAJO, SAN, GCON, VICE PRESIDENT OF THE FEDERAL REPUBLIC OF NIGERIA AT THE COMMONWEALTH ENTERPRISE AND INVESTMENT COUNCIL FOCUS ON NIGERIA WEBINAR ON THE 14TH OF JULY, 2020
Thank you for that kind introduction. I am pleased to be participating in this special session focused on Nigeria. There is never a good time for a pandemic, but there can be a terribly wrong time.
That’s how it seemed three months ago as COVID – 19 began to ravage. January 2020, oil prices approached $70 a barrel for the first time since the crash of 2015/2016 which saw prices crash to sub $30 a barrel, Q3 2019 growth was 2.55%, modest but clearly on the upward trajectory, 3% growth was well in sight.
Our Economic Recovery and Growth Plan was beginning to make sense. Work was on-going in major rail, road and bridge projects along the main national trade corridors. The Engineering, Procurement and Construction (EPC) arrangements on our Liquefied Natural Gas (LNG) Train 7 which will unlock an additional 30% more LNG output had commenced.
It seemed the sun was beginning to shine quite brightly after the years of recession and its immediate aftermath. Then came COVID-19, possibly the worst economic crisis the world has seen. For us in Nigeria, it was a perfect storm for oil prices, Russia and Saudi Arabia choosing that very moment for a price war. Then the inevitable lockdowns resulting in closure of businesses, our huge informal economy all but crashed and Government revenues fell too by over 40%.
But the silver linings were perhaps bolder in the dark clouds. The President decided that we could seize the opportunity to reset our economy in a way that may have been impossible had there not been a worldwide economic crash.
I was asked to chair an inter-ministerial team to develop our Economic Sustainability Plan. A plan which we hope will in the next 12 months or so, avoid a deep and prolonged recession by supporting businesses and households, but perhaps more importantly, addressing long-term structural vulnerabilities.
Taking into account our economic size and fiscal limitations, we have put together a stimulus package of N2.3trillion, which is just over 1.5% of national income. If other factors like the price of oil and length of the COVID-19 pandemic do not worsen further, these interventions should ameliorate the situation with a mild recession expected of minus 0.59%.
We have taken the opportunity to remove petrol subsidies and to insist that power distribution companies must engage with customers to ensure that new tariffs are based only on improved power supply. We are talking of service reflective tariffs.
The Central Bank of Nigeria is also committing to moving to a unified exchange rate, to improve certainty in trade and investment. In addition to using fiscal and monetary measures to stimulate the economy, our main objectives are to retain and create jobs, to assist vulnerable people, support businesses and undertake infrastructural investments. I am happy to see from the research that jobs, retaining jobs and creating more opportunities tops Nigerians’ priorities when it comes to what they believe the COVID-19 response should be like.
Some key interventions include: Jobs for Food which is an agricultural programme aimed at expanding the acreage under cultivation across the country, to create, we hope, hundreds of thousands of jobs and we also intend to guarantee uptake processors, aggregators and to some extent, by government.
We also have a Jobs through Homes programme which is a programme to provide jobs and increase our national housing stock, at the same time by a massive social housing programme where we intend to engage young professionals and artisans who are involved at the moment, in small businesses, building and using local products such as cements, doors, tiles, windows and paint.
We also have a Solar Homes Systems Programme where we intend to engage private solar power companies who will be able to access cheap loans to provide modular solar-powered units to about 5 million households which will roughly translate to serve 25 million people in rural or under-served areas. At the moment, we have about 40million homes without power. So, we expect that this will be a major dent in that deficit.
The scale required means we will be encouraging suppliers to establish production facilities in the country. We expect to be able to attract solar companies to establish manufacturing and assembly plants in Nigeria.
Supporting small businesses is also a priority and I am sure the Minister of Industry, Trade and Investment will talk more about it.
We are also looking at the Future of Jobs programme in technology taking into account the ‘new normalʼ, our creative and significant youth population and the need to prepare our economy to be an outsourcing hub, providing services across the whole gamut of possible technology engagements, including animation, software engineering and data analysis.
These are areas where we have invested considerably already and we intend to do a bit more and we hope that some of the efforts we put into the response will address these areas even more pointedly.
To be sure, improving health outcomes is very much part of the package. To meet the immediate challenge, we have dug deep to find resources to respond to the pandemic. We have more built isolation centres and laboratories, incentivizing medical personnel, buying test kits and personal protective equipment, as well as several other medical equipment.
We have increased the number of modular laboratories that can handle COVID-19 samples from 5 at the onset of the pandemic to 39 today.
The crisis has also revealed significantly, the vulnerability of our health sector. So, as part of the Economic Sustainability Plan, we are also looking at the universal health coverage, about improving the work we are doing in universal health insurance with a view to universal health coverage by a combination of public finance and mandatory social insurance.
While we are bullish on promoting local production, we remain committed to engaging with our traditional trading partners. This is in recognition of the potential contribution of trade to growth.
The African Continental Free Trade Area (AfCFTA) is pertinent in this regard, but so certainly is also trade with our Commonwealth partners, including the United Kingdom. This was indeed evident from Nigeria’s participation in the UK-Africa Investment Forum held earlier this year. It is particularly noteworthy that intra-Commonwealth trade is projected to rise from an estimated $1trillion this year to $2.75trillion by 2030 and we intend to be a major part of this growth.
It is not news of course that the COVID-19 pandemic has distorted international trade with disruption of global value chains, export bans, and protectionist policies. On our part, Nigeria remains committed to the multilateral trade system but we will ensure that our economy is not subjected to unfair trade practices.
Ultimately, we see Nigeria as ‘Africa’s Gateway Economy’. As the continent’s most populous nation and its largest economy, we think that we can leverage our geographical location, which is right in the middle of far-flung Commonwealth countries, we are poised to catalyze intra-Commonwealth trade. Our investments in fast-growing sectors and infrastructure, power, rail, roads and several other areas especially technology where we think we can benefit from other Commonwealth countries.
Once again, I thank the Commonwealth Enterprise and Investment Council for convening this important discussion especially now, when we certainly see a greater need for socio-economic engagements with our Commonwealth partners and we are set and ready to continue these engagements and we look forward to not just what this particular session will bring but to all our future cooperation.