The Central Bank of Nigeria (CBN) governor, Mr Godwin Emefiele, says maintaining stable exchange rate to avoid depreciation of the Naira is better than building foreign reserve buffers.
Emefiele told newsmen on Sunday that this was part of the outcome of the Nigerian delegation’s meetings with investors and institutions at the International Monetary Fund (IMF) and World Bank Group (WBG) Annual Meetings in Bali.
He said that all frontiers and developing markets have suffered not just depreciation, but had also lost reserves.
“We are very conscious of the need to build buffers but unfortunately I must say that we are in the period where it will be difficult to talk about building reserve buffers.
“We can only build reserve buffers if we want to hold on to the reserve and then allow the currency to go, and wherever it goes is something else.
“So it is a choice we have to make and at this time the choice for Nigeria is to maintain a stable exchange rate so that businesses can plan and we do not create problems in the banking system assets.”
According to him, like other emerging markets nations, Nigeria has also lost reserves but only marginally because it had managed to sustain stability in its foreign exchange market.
The CBN governor said that the IMF and the World Bank advised that nations should build country specific policies and fiscal and structural reforms that would boost economic growth.
Mrs Zainab Ahmed, Minister of Finance, said the World Bank’s Human Capital Development Index (HCI) ranking, which placed Nigeria low at 44 per cent on stunting, was disheartening and depressing.
She, however, said that the Federal Government saw the rating as a wake-up call.
“We admit that this pervasive action was due to long years of under-investment in human capital, which we have before now realised and for which we have been addressing.
“Apart from major policy actions, some decisive actions are being taken to address the situation.”
According to her, the delegation held meetings with the two rating agencies-Fitch and Moody’s and presented to them the summary and synopsis of the recent economic and financial developments in Nigeria.
She added that it was an opportunity for the rating agencies to be able to objectively evaluate Nigeria’s credit.
Ahmed said she also met the IMF Managing Director, Ms Christine Lagarde and discussed Nigeria’s economy in view of the 2019 general elections.
She assured Lagarde that the election year would not pose any threat to the nation’s economic prospects.
Mr Udoma Udo Udoma, Minister of Budget and National Planning, said that to improve HCI, the nation had improved budgetary allocation to health and education.
He said that allocation to education moved from N22.5 billion in 2015 to N102.9 billion in 2018.
He added that allocation to health was reviewed from N26.6 billion in 2015 to N86.49 billion in 2018.
He said also that N55.19 billion had been added to the health budget in 2018 through the National Health Act.
Shipping goods to Nigeria by sea from the United States can leave a big hole in your pocket.
Analysis on overseas cargo and freight costs by MoverDB, an online resource for international shipping, shows that the cost of shipping both 20-foot and 40-foot containers to Lagos ports from New York is the most expensive globally. The report covers the shipping costs from New York and Los Angeles to 47 port cities globally.
The high costs of shipping to Nigeria do not correlate with distance. For instance, shipping from New York to Nigeria is nearly double the cost of shipping to South Africa even though Nigeria is closer, by nautical miles, to New York compared to South Africa.
|Port city||20-foot container (from New York)||40-foot container (from New York)|
|Zayed (United Arab Emirates)||$1,723||$2,572|
|Buenos Aires (Argentina)||1993||2975|
|Cape Town (South Africa)||2542||3795|
|Auckland (New Zealand)||2645||3949|
|Jeddah (Saudi Arabia)||3086||4606|
|Apapa, Lagos (Nigeria)||4982||7436|
Much of the high costs of shipping to Nigeria is tied up in entrenched inefficiency at its local ports. For starters, Nigeria has very few functional ports even though its economy—Africa’s largest—continues to rely heavily on imports. The slow pace of inspections and offloading of shipping arrivals means that congestion and bottlenecks are nearly perpetual in Nigeria’s biggest port in Apapa, Lagos. The ports’ inefficiencies have for years enabled and incentivized corruption from official and unofficial middle men promising to clear goods for a “fee”.
Last year, in a bid to ease import and export flow, the government launched reforms at the ports. The government worked to clear the ports of local touts who extort bribes and also mandated that the Apapa port run 24-hour operations. Yet, despite a federal executive order, neither measure has been fully implemented, according to a regular user of the port.
While the shipping prices in MoverDB’s report are accurate as of early 2017, anecdotal evidence suggests the reality hasn’t changed much since the reforms were introduced. Indeed, inefficiencies at the ports remained primed to allow clearing agents continue to play a key role in processing goods for importers while likely in cahoots with local customs officers. ”You can try to clear your container yourself but the problem is that customs will frustrate you. You have to go through an agent.” says the regular user, who asked not to be named as he still has to work with officials at the port.
Source: Quartz Africa
The Federal Government of Nigeria has announced the issuance of a second tranche of N100 billion Sukuk Bond to finance road infrastructure across the country.
The approval for the second tranche followed the success and oversubscription of the first tranche, the Chief Executive Officer (CEO) of Metropolitan Skills, Ummahani Amin, said at a two-day training on Sukuk structurisation and management in Abuja.
The training was organised by the Metropolitan Skills Ltd. in partnership with the Ministry of Finance, and Standing Committee for Economic and Commercial Cooperation of the organisation of the Islamic Cooperation (COMCEC).
Recall that the Federal Government had in September 2017 issued the first N100 billion Sukuk Bond as part of capital raising for the construction of about 25 roads in the nation.
Amino said funds realised from the second tranche of the bond would also be channelled into the construction of roads across the six geo-political zones of the country.
He assured that just like the first tranche, this year’s tranche of N100 billion would be successful.
“We are doing the second tranche now because the first one was successful and over subscribed. N100 billion was involved in the first and the second is on the way.
“So we are looking at the same infrastructure, construction of roads across Nigeria and the six geopolitical zones. This has never happened in the history of Nigeria for infrastructure,” Amin said.
Source: The Ripples
The Naira on Thursday appreciated marginally against the dollar at the Investors’ Window (I & E), exchanging at N363. 57, stronger than N363.94 posted on Wednesday.
The daily market turnover stood at 392.9 million dollars.
The Nigerian currency closed at N306.40 to the dollar at the official CBN window.
At the parallel market, the Naira closed at N359 to the dollar, while the Pound Sterling and the Euro closed at N478.30 and N420.
Trading at the Bureau De Change(BDC) segment saw the Naira close at N360 to the dollar, while the Pound Sterling and the Euro closed at N478.30 and N420.
Meanwhile, in spite of the continuous intervention by the Central Bank of Nigeria (CBN) at the foreign exchange market and the increase in the price of oil at the international market, the manufacturing sector witnessed slow growth in the month of September.
The manufacturing sector continued to expand in September, though at a slower pace, the latest CBN Manufacturing Purchasing Managers’ Index (PMI) report, shows.
It showed that the September Manufacturing PMI eased to 56.2 from 57.1 in August, indicating expansion in the manufacturing sector for the 18th consecutive month.
The report noted that “a composite PMI above 50 points indicates that the manufacturing/non-manufacturing economy is generally expanding, 50 points indicates no change and below 50 points indicates that it is generally contracting.”
Sluggish expansion in Nigeria, Angola and South Africa – Africa’s three largest economies – is expected to dampen the growth prospects for Sub-Saharan Africa to 2.7 percent in 2018, according to the World Bank which has also warned of increasing public debt in the region.
The World Bank says it now expects Sub-Saharan Africa economies to grow by 2.7 percent in 2018, lower than the 3.1 percent it had projected for the subregion earlier in April.
The World Bank notes that Sub-Saharan African economies are still recovering from the s2015-2916 slowdown, but growth is still slower than expected.
“The slower pace of the recovery in Sub-Saharan Africa (0.4 percentage points lower than the April forecast) is explained by the sluggish expansion in the region’s three largest economies, Nigeria, Angola, and South Africa,” the World Bank said in the Africa Pulse published on Wednesday ahead of the Annual meetings of the International Monetary Fund (IMF) and World Bank scheduled to begin in Bali, Indonesia on Monday, October 8.
The estimated 2.7 percent average growth rate in the region is however, a slight increase from 2.3 percent recorded in 2017.
“The region’s economic recovery is in progress but at a slower pace than expected,” said Albert Zeufack, World Bank Chief Economist for Africa.
“To accelerate and sustain an inclusive growth momentum, policy makers must continue to focus on investments that foster human capital, reduce resource misallocation and boost productivity. Policymakers in the region must equip themselves to manage new risks arising from changes in the composition of capital flows and debt.”
According to the World Bank, Slow growth is partially a reflection of a less favorable external environment for the region.
Global trade and industrial activity lost momentum, as metals and agricultural prices fell due to concerns about trade tariffs and weakening demand prospects. While oil prices are likely to be on an upward trend into 2019, metals prices may remain subdued amid muted demand, particularly in China.
Also, Financial market pressures have intensified in some emerging markets and concern about their dollar-denominated debt has risen amid a stronger US dollar.
Besides, Lower oil production in Angola and Nigeria offset higher oil prices, and in South Africa, weak household consumption growth was compounded by a contraction in agriculture. Growth in the region – excluding Angola, Nigeria and South Africa – was steady.
The Bank further notes that Several oil exporters in Central Africa were helped by higher oil prices and an increase in oil production.
Economic activity remained solid in the fast-growing non-resource-rich countries, such as Côte d’Ivoire, Kenya, and Rwanda, supported by agricultural production and services on the production side, and household consumption and public investment on the demand side.
“Public debt remained high and continues to rise in some countries,” the World Bank further notes – amid heightened concerns that about 40 percent of low income countries in Sub-Saharan Africa region are already in debt distress or in high risk of debt crisis.
The IMF for instance worried that for low income countries, including Nigeria, governments have embarked on excessive borrowing to fund development, especially as incomes dwindled for commodity prices- and is now strongly advising on an aggressive tax mobilisation.
“Vulnerability to weaker currencies and rising interest rates associated with the changing composition of debt may put the region’s public debt sustainability further at risk,” the World Bank says in the latest report.
Other domestic risks include fiscal slippage, conflicts, and weather shocks. Consequently, policies and reforms are needed that can strengthen resilience to risks and raise medium-term potential growth.
This issue of Africa’s Pulse highlights sub-Saharan Africa’s lower labor productivity and potentials for improvement
“Reforms should include policies which encourage investments in non-resource sectors, generate jobs and improve the efficiency of firms and workers,” said Cesar Calderon, Lead Economist and Lead author of the report.