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Official Exchange Rate Is Redundant, Soludo Tells CBN |The Republican News

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Former Central Bank Governor, Prof. Charles Soludo

Oyetunji Abioye

A former Governor of the Central Bank of Nigeria, Prof. Charles Soludo, says the apex bank’s official exchange rate of N306 to the dollar has become redundant, describing it as an instrument for rent seekers and arbitrary allocation of scarce foreign exchange in the country.

As a result, he said the CBN must achieve a unified market-determined exchange rate by eliminating the current multiple exchange rates as a matter of urgency.

Soludo spoke in a keynote address at the eight annual Pan-Africa Investor Conference organised by Renaissance Capital, an international investment bank, in Lagos on Wednesday.

He said, “The general price level has already adjusted because that’s the primary price indicator in the market. The prices that people hear, i.e. the exchange rate that people talk about is the parallel market rate. Anybody who says it is irrelevant is not discussing Nigeria as an economy. The official one is like the time when you had the price control regime.

“Even those who had accessed forex at the official rate, when they are fixing their prices, they are fixing their prices in comparison with the imported ones, which are taking signals from the parallel market rate. So the general price level has adjusted there. The official exchange rate is redundant; it is just for rent and for arbitrary allocations.”

Soludo also advised the CBN to dump its current import substitution policy and adopt an export-oriented industrial strategy if it hoped to take Nigeria out of its present economic woes.

According to him, the country is implementing import substitution is a crude way and it must remove the ban placed on importers of some 41 items from accessing dollars at the official interbank foreign exchange window.

The former CBN governor said, “Every regime comes to ban and the next unbans it. That is not the way to protect an economy. If you have a market-determined exchange rate regime and you do not want certain items, you put tariffs. The exchange rate plus the tariffs will make, for instance, the imported tomatoes uneconomical.

“That is where you deal with it on a sustainable basis. There is a need to think of a life beyond crude oil. We need not just import substitution; we need infrastructure and export-oriented industrialisation strategy. We cannot do that with this kind of crude inward look.”

According to Soludo, China has over one billion population and has become a successful country through export-oriented industrialisation, adding, “China was not doing import substitution.”

“That’s why they have built trillions of dollars in foreign reserves with weak currency that makes import into their country expensive and makes exporting very rewarding,” he added.

The former CBN governor said many companies that needed some of the 41 items had folded up and that thousands of jobs had been lost.

“Yet there is a better, sound, transparent and sustainable way of achieving what you intend to achieve. To create prosperity for all and lift millions out of the job market, we need industrialisation; we need to be exporting. We must fix the infrastructure,” he added.

Soludo also said that Nigeria’s public finance was broken because the country’s total expenditure was in excess of its total revenue.

He said, “In a regime where you have the total recurrent expenditure in excess of your total revenue, there is an issue. You know people talk about recurrent expenditure being 70 per cent of the budget; they are including the debt. As a percentage of your total revenue, you recurrent expenditure is a hundred and something per cent, which means as it is today, part of our borrowing is actually to finance recurrent expenditure.” (Punchng.com)

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World Bank Blames Nigeria’s Forex Crisis On Fixed Exchange Rate

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Currency notes

Everest Amaefule, Abuja

The World Bank has blamed Nigeria’s enduring foreign exchange instability on the fixed exchange regime in the official forex market.

In a publication on African economies titled: ‘Africa’s Pulse,’ the World Bank singled out Nigeria and Angola as two countries that had yet to experience stability in the forex market despite rebound in the prices of commodities being exported.

The report stated, “The rebound in commodity prices and improved growth prospects in some countries have helped stabilise commodity exporters’ currencies.

“However, with the Nigerian naira and Angolan kwanza remaining fixed against the US dollar, the imbalance in the foreign exchange market remains substantial in both countries.”

The report also mentioned Nigeria as one of the countries in the region where there were substantial risks in the banking sector due to a number of factors, including non-performing loans and policy uncertainties.

The World Bank said, “Banking sector vulnerabilities remain elevated in the region, including in Angola, CEMAC countries, the Democratic Republic of Congo and Nigeria. Foreign exchange restrictions, policy uncertainty and weak growth have affected the soundness of the banking sector.

“Non-performing loans have increased, and profitability and capital buffers have decreased. Several proactive measures have been introduced to contain risks to financial stability, including through increased provisioning and by intensifying monitoring and supervision of banks.”

On inflation, the report stated that although inflation remained very high in the region, it had started to ease but singled out Nigeria and Angola as two countries where inflation was rising as a result of the depreciation of currencies in the parallel exchange market.

The report added, “Inflation in the region is gradually decelerating from its high level in 2016 but remains elevated. Although a process of disinflation has started in Angola and Nigeria, inflation in both countries remains high, driven by a highly depreciated parallel market rate.

“Inflation eased in metals exporters, because of greater currency stability and lower food prices due to improved weather conditions.”

The National Bureau of Statistics, however, reported that inflation in the country had continued to increase until it reached a peak in January.

According to the NBS, the inflation rate reduced from 18.72 percent in January to 17.78 percent in February. By March, it further went down to 17.26 per cent. The inflationary figure for April has yet to be released by the bureau.   (Punchng.com)

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Dollar To Fall Further As Hoarders Count Losses, CBN Plans For More Intervention

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…Naira firms at 375/$1

From Uche Usim, Abuja

Barring unforseen circumstances, the United States dollar is set to crash further this week as the Central Bank of Nigeria (CBN) plans yet another round of interventions in the interbank market.
This is as the naira has continued to do extremely well in the black market, firming at N375/$1 in most Bureaux De Changes in Abuja.
Daily Sun findings reveal that most forex hoarders who hitherto calculated that the apex bank’s interventions were not sustainable have continued to record heavy losses with the latest interventions in February.
A source at popular black market spot at Sheraton Hotels, Abuja who craved anonymity said: ‘some rich men have started bringing their dollars for us to sell because the value has been going down. Some of them claimed they bought dollars at N380. Another said he bought at N400 and so if they don’t sell now, they’ll lose seriously. So they’re bringing the dollars out because the value is dropping”, he said.
However, there were indications at the weekend that the apex bank planned to pump in more foreign exchange into the interbank space to meet the demands of genuine wholesale and retail customers as well as strengthen the value of the naira against other international currencies.
The planned move by the CBN, sources say, will further firm up the naira against other currencies as the exchange rates of the greenback and the United Kingdom Pound Sterling continue to move southwards.
Investigations revealed that the US dollar, Euro and the Pound, exchanged at the parallel market over the weekend at the rates of N375, N405 and N475, respectively, with the hope that the figures will further nosedive this week.
Speaking at the weekend, the Acting Director, Corporate Communications Department, CBN, Isaac Okorafor, confirmed the plan to inject more foreign exchange into the forex market in the weeks ahead.
According to him, the move underscores the commitment of the CBN to sustain the tempo of liquidity in the interbank market in the interest of different categories of genuine end-users.  (The Sun)

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Naira Weakens To N490/$ At Parallel Market |The Republican News

 Our Reporter 

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The Naira yesterday weakened to N490 to a dollar at the parallel market after appreciating to N485 to a dollar during the Christmas break.

The News Agency of Nigeria (NAN) reports that the Naira lost five points, representing a depreciation of 1.03 per cent, while the Pound Sterling and the Euro closed at N590 and 502, respectively.

At the Bureau De Change (BDC) Window, the Naira traded at N399 to a dollar, CBN controlled rate, while the Pound Sterling and the Euro closed at N602 and N510, respectively.

The Naira traded at N305.25 to a dollar at the official interbank market.

Traders at the market said that the scarcity of forex was still exerting pressures on the Naira.

Meanwhile, Alhaji Aminu Gwadabe, President, Association of Bureau De Change Operators of Nigeria (ABCON) said the pressure on the Naira was disturbing and dangerous to investment, output and employment.

Gwadabe called for harmony between the fiscal and monetary policies in addressing the woes of the Naira.

“There is the need for concerted collaboration among both the fiscal, monetary policy makers and the operators in the economy to address this monster facing the economy.

“I must confess that I am disturbed and worried,’’ Gwadabe said.  (Punchng.com)

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We Have No Forex To Import Aviation Fuel, Say Marketers |The Republican News

                          ’Femi Asu

The scarcity of aviation fuel in Nigeria may be far from being over as oil marketers have said they do not have enough foreign exchange to import the product.

The Executive Secretary, Major Oil Marketers Association of Nigeria, Mr. Obafemi Olawore, in an exclusive interview with our correspondent, said, “As long as we don’t have forex, it becomes difficult for us to import. Give us forex and we will be able to bring more.”

He said the government could not bridge the supply gap for aviation or Jet A1 as done for petrol because of the shortage of forex.

“Government doesn’t have enough. If they give forex to petrol and to aviation fuel, it will affect other sectors. Now, it is even affecting the aviation sector. So, we are saying the government should try and manage it well so that we will have some forex to bring in aviation fuel.”

The MOMAN executive secretary said the arrangement with international oil companies for the provision of forex was for the importation of petrol.

This month, the CBN has asked banks to submit bids for a “special currency auction,” targeting fuel importers to meet demand for matured letters of credit.

The Executive Secretary, Depot and Petroleum Products Marketers Association, Mr. Olufemi Adewole, said the central bank was making effort to provide marketers with forex.

He, however, said the rate at which marketers were getting the funds was quite exorbitant and that was why the price of aviation fuel was high.

“If there is adequate provision of foreign exchange at a reasonable rate that can bring down the price of fuel, then the landing cost will also drop,” he said.

The marketers are also asking the Federal Government to pay them the foreign exchange differentials for the petrol imports they have made.

Olawore said said, “We will be glad if all our outstanding foreign exchange differentials and interests are all paid immediately.

“That will also help us to go to the market to look for forex.”

On May 11, the government announced a new petrol price band of N135 to N145 per litre, which signalled the end of fuel subsidy.

Prior to the increase from N87 per litre, the nation had suffered a prolonged and severe petrol scarcity as marketers complained that they could not access forex to import.

The new price band was based on an exchange rate of N285 against the dollar, reflecting the depreciation of the naira on the black market, where the currency was trading around 320 to the dollar.

The Central Bank of Nigeria on June 20 floated the naira as it abandoned its 16-month-old peg at 197 to the dollar, effectively devaluing the local currency.

In spite of the liberalisation of petroleum products and government intervention to ease marketers’ access to forex, the Nigerian National Petroleum Corporation remains the major importer of fuel, especially the Premium Motor Spirit, popularly known as petrol.

Olawore said when the naira moved from 197 to 285 to a dollar, there was a differential, adding, “When it moved from 285 to 305, there was a differential. Now we are forced to go to the black market, there is a differential.”

He said the price band of N135-145 for petrol covered up to N285/dollar.

“But who gets it at N285? Even the government could not sell to you at 285,” he said.

Fuel shortages often occur in the country during festive periods such as Christmas and Muslim holidays. But there has been no scarcity of petrol this Yuletide.

Commenting on this, Olawore said, “First, the NNPC has imported much. The second reason is that demand has fallen drastically. Demand has fallen nationwide; people that were filling their tanks are no longer doing so.

“So, every marketer is suffering from low demand and because of that the quantity in the market is enough for now.”

He attributed the decline in demand to the recent price hike, saying, “Not many people can afford it.”

On the forex differentials, Adewole said, “We concluded transactions on the PPPRA imports at the rate of N197/dollar. Naira was devalued and it became what it is today. We have Letters of Credit that have matured and that we have not liquidated.

“And because government paid us at the rate of N197/dollar, we are saying that whether the naira is devalued or not, that is the rate at which we must get dollars to liquidate those LCs because that was the basis of their calculation and payment to us.”

He said the payments for the transactions from December 30, 2014 to September 2015 were delayed.

“The government was supposed to pay within 45 days, but this was not done. The naira was devalued and the government has to bear the difference because we submitted our papers but it did not pay. If it had paid as and when due, we might have liquidated all the LCs because the naira component of the products, which we sold is with us in our banks.

“We only need that of the government to add to it and pay the suppliers. So, that foreign exposure to foreign banks through our local banks is still there and we are asking government to give us dollar at N197.

He said the delay in the payment of the outstanding forex differentials was hampering importation “because a lot of marketers’ funds are tied down.” (Punchng.com)

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FOREX: Naira May Hit N500/Dollar Next Week |The Republican News

                                                                                       Naira notes

 

Oyetunji Abioye with agency report

The naira is seen depreciating further and may hit the 500 mark to the United States dollar at the parallel market next week as the greenback scarcity persists and the Central Bank of Nigeria cuts supply to foreign exchange operators.

The local currency was trading around N495 to the dollar on the black market on Thursday, compared to 485 per dollar last week due to dollar shortages, traders said.

The naira was quoted at 310.5 to the dollar on the official interbank window on Thursday by commercial lenders.

“There is an acute shortage of dollars in the market because of supply being slashed by half to Bureau de Change operators from international money transfer agents, pushing the naira down,” one trader said.

The BDC operators are now getting $8,000 each per week from Travelex against the usual $15,000 each per week.

The naira had tumbled against the dollar to 490 on Monday from 487 last Friday, as acute shortage of the greenback continued to batter the economy and the country’s foreign exchange markets.

Before falling to 487 last Friday, the local currency had consecutively closed flat at 485 for four days in the previous week.

The severe shortage of the dollar has put the naira under persistent pressure at both the official and parallel forex markets.

The global crash in the prices of crude oil, Nigeria’s main forex earner, has brought untold hardships on Nigerians.

Economic and financial experts said unless the lingering dollar supply problem abated, the volatility in the exchange rate and the consequent economic challenges might continue.

“The challenge with the forex market is still the supply issue; price (exchange rate) is determined by the interplay of demand and supply,” a currency analyst at Ecobank Nigeria, Mr. Kunle Ezun, had said.

Economic and financial experts expect the naira to weaken further against the dollar as the Christmas holiday begins this week.

They also argued that the crackdown on the parallel market forex traders and the persistent scarcity of the greenback would make further weakening of the local currency inevitable.

A few weeks ago, the naira closed flat at 470 against the greenback over a period of over a week.

The naira had plunged to 470, down from 455 on the back of a fresh dollar shortage at the official and parallel forex markets.

Dollar shortages have caused many companies to halt operations and lay off workers, compounding an economic crisis exacerbated by the fall in global prices of oil, which accounts for over 70 per cent of Nigeria’s budget revenue.

The CBN has struggled to support the naira as the country’s external reserves continue to fall.

Meanwhile, the currencies of Uganda, Kenya and Zambia are seen trading sideways in the week to next Thursday as most investors closed positions ahead of the end of the year, according to Reuters. (Punchng.com)

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