The Nigerian government and the International Monetary Fund (IMF) disagreed on the need to devalue the Nigerian currency even as the nation grapples with the ripple effects of recession amid increasing need to ensure macroeconomic stability.
The IMF said in its Article IV report on Monday that the government disagreed with its proposal to mark down the Naira, which it said is 18 per cent overvalued. shocked
Allowing further depreciation would add to rising inflation, the government argued.
IMF on Monday said its latest assessment of the exchange rate revealed that the external position is substantially weaker than what is consistent with fundamentals and desirable policy settings, while gross reserves levels, projected to remain the same in the medium term, are significantly below the IMF’s metric.
In the midst of what the IMF described as “untransparent” foreign exchange policy environment, Nigeria’s exports, the lender added, remain “highly undiversified”.
Nigeria devalued the naira last year to close the gap with unofficial rates amid efforts to grapple with the impact of the coronavirus pandemic which affected global demand for oil and crashed prices.
But the government’s new position contrasts with the views of analysts who have called for a “more liberal” exchange rate.
The IMF said a clear exchange rate policy is needed to instill near-term confidence and bring long-term gains. It expressed worry about the current system, adding that its multiple windows and untransparent rules of FX allocation create uncertainties for the private sector.
The unification of various rates into one market-clearing rate is needed to establish policy credibility and a decisive break from the highly interventionist regime, it said. It would also eliminate existing Multiple Currency Practices, because an appropriately valued exchange rate would foster domestic industrialization more effectively than through a system of FX rationing where winners are chosen and protected and relative prices do not move.
“A clear exchange rate policy would also help attract larger capital inflows, including foreign direct investments, which have significantly dropped in recent years,” it said.
Exchange rate flexibility may have short-term negative impacts, particularly on inflation, which should be mitigated, the IMF said Monday. However, it estimates that a 10 percent devaluation could push the inflation rate up by up to 2.5 percentage points, but the impact could be less if the parallel market rate is already reflected in the prices of imported goods.
The IMF said experience from other countries that have undergone exchange rate adjustment generally shows less pass-through and often a more transient impact on inflation, and some targeted support is likely needed to minimize the impact on the poor.
The corporate sector and possibly the banking sector could also face significant impact given that a third of banking sector loans are denominated in FX, it said, but strict and pro-active enforcement of existing prudential measures to limit FX loans to only those with FX earnings would limit the impact.
Although the IMF calls for a multi-step approach, in the immediate, it advised the government to eliminate the parallel market premium, remove and prevent further build-up of the FX backlog, and increase non-CBN participation in the I&E market window.
To prevent excessive overshooting, the lender said the government should be prepared to increase interest rates if needed, because higher interest rates will also be needed if inflation accelerates.
In the near-term, it advised that all exchange rates be collapsed into one well-functioning market exchange rate with the CBN conducting FX auctions through a pre-announced schedule following the immediate steps. The step, it added, should be accompanied by gradual removal of import restrictions and export repatriation requirements and the phasing out of CFMs.
In the medium-term, the IMF advised that the CBN should step back from its role of main FX intermediator in the country, limiting interventions to smoothing market volatility and allowing banks to freely determine FX buy-sell rates.
But the IMF in its report said the Nigerian authorities disagreed with its policy proposal.
It reported that the government argued that the major burden of macroeconomic adjustment does not need to be borne by the exchange rate, as current pressures are not related to the exchange rate per se but rather reflective of global developments.
The government said that investors exited most emerging markets at the onset of the pandemic and will only return when the public health crisis has waned, and global economic activity has picked up.
The government emphasized that Nigeria’s stable exchange rate has contributed significantly to price stability, one of the most enduring objectives of macroeconomic policy. Depreciating the currency could worsen economic concerns like inflation, it said.
The apex bank devalued the official rate of the Nigerian currency twice last year by about 24 per cent.
Investors and analysts opined that the naira may devalue by as much as 10% in 2021, according to a Bloomberg survey.
The naira settled at 398.50 to the greenback on the investors’ and exporters’ window Monday evening, up from N397.50. In the parallel market, however, it settled at N480.
Bandits: We Receive Weapons From SSS Agents, Also We Share Income
The bandits also said some police officers have been a part of the conspiracy that has fueled insecurity across Nigeria.
Armed bandits terrorising different parts of Nigeria have disclosed that they have been receiving arms and ammunition from operatives of the State Security Service and often split ransom payments received at gunpoint.
The criminals told Deutsche Welle in a recent report that they “borrow weapons” from the state agents and then go to work to share ill-gotten gains together.
The bandits also said some police officers have been a part of the conspiracy that has fueled insecurity across Nigeria which President Muhammadu Buhari has been accused of being too lazy to address.
A spokesman for the SSS did not return a request seeking comments from Peoples Gazette about whether or not the secret police was aware of a possible alliance between its officers and armed bandits wreaking havoc across the country.
The report surfaced amidst widespread claims that Nigerian security forces are fueling insecurity for financial benefits. In 2018, Theophilus Danjuma, a former chief of army staff, said the Nigerian military and other state agents were actively supplying weapons to violent criminals waging a war against minority rural settlers in Nigeria’s north-central.
The Buhari administration denied the allegation, but several indications have emerged repeatedly since then that appeared to show that the government was not as concerned about the raging crisis.
Last week, Mr Buhari warned Governor Samuel Ortom of Benue, where armed militia elements have killed thousands and razed hundreds of villages since Mr Buhari assumed power in 2015, to either accept the controversial ruga policy or continue to endure violence with his people.
Last month, Mr Buhari also stood Isa Pantami, one of his cabinet ministers who was recently exposed as a hardline jihadist and lover of Osama Bin Laden, Al-Qaeda and other groups and persons long associated with terrorism.
Nigeria’s daily petrol consumption hits record high of 93m litres
Nigeria’s daily petrol consumption hits record high of 93m litres
Nigeria’s daily consumption of Premium Motor Spirit (PMS) popularly called petrol was at an unsustainable level at 93 million litres a day in April 2021 from an average of 61 million litres consumed in the previous months. This translates to a daily spend of N7.10 billion on subsidy.
Petrol consumption in West Africa is estimated at 120.80 million litres daily and at 93 million litres daily consumption, this means that Nigeria alone accounts for 77 percent of petrol consumption, even though it has 52 percent of West Africa’s population and accounts for 65 percent of the sub-region’s gross domestic product (GDP).
Major depots including Nigerian Pipelines and Storage Company Ltd (NPSC) in Ejigbo, Mosimi, Emadeb Energy’s depot, Matrix Energy’s depot, AYM Shafa’s depot, Aiteo’s depot among others lifted a total of 43.90 million litres, accounting for 47 percent of Nigeria’s daily evacuation. Smaller depots around the country make up for the difference.
How Suspended NPA MD, Hadiza Bala Ceded Intels Terminals To Dangote
Suspended Nigeria Ports Authority Manager, Hadiza Bala, was involved in a clandestine ploy to shortchange a company in favour of Africa’s richest, Aliko Dangote, documents obtained have revealed.
Last year, some coastline terminals formerly operated by Integrated Logistics Services’ (INTELs) in Onne ports complex, Rivers state, were confiscated and subsequently awarded to Dangote through a proxy company, International Container Terminal Services (ICTS) Nigeria limited.
Onne Port Complex is the one of the largest Oil and Gas Free Zone in Africa, where major industry players from the exploration up to the completion phases operate.
The complex has two major terminals namely the Federal Ocean Terminal (FOT) and Federal Lighter Terminal (FLT).
For over a decade, INTELs Nigeria, partly owned by former Vice president, Atiku Abubakar, operated some berths at the Federal Ocean Terminal (FOT) of the complex, providing logistics services until 2020.
The three berths of FOT numbered 9, 10 and were taken over by the NPA in a controversial manner, which many thought was a move by President Muhammadu Buhari-led administration move to witch-hunt Abubakar, his opponent in the 2019 election and break the company’s monopoly
The NPA, in September 2020, issued a notice, announcing that the service operation handled by the Integrated Logistics Services (Intels) Nigeria had been terminated.
It went on to further state that all Service Boats Owners and Operators are to do transactions directly in each of the Port Complex of the Nigerian Ports Authority.
Meanwhile, a memo released to the press, seen by Business Kobo showed that Usman had transferred the berths confiscated from INTELs to ICTSI, a proxy company traced to Dangote, five months earlier.
The leaked memo, dated May 13, was signed by Yusuf Ahmed, NPA’s Director of Lands & Asset Admin on behalf Usman
“Please refer to the lease of land and berths 9, 10 and 11 granted to you at FOT Onne and find attached herewith the draft Lease Agreement for a review of its possible contents before the final copy is produced for execution,” the letter addressed to the managing director of ICTSI read.
Ahmed urged the company to send their comments for consideration
“A registered surveyor will be appointed to produce the survey plan of the property to incorporation in the Lease Agreement and you will be required to see the surveyors fees,” it further read.
This was not Usman’s first time dealing with Dangote as money transfers between the duo dates back to 2015.
A Nigerian newspaper, Peoples Gazette, had previously reported how Dangote transferred N200 million to a bank account run by Usman during the build up of the 2015 general election.
The transactions were sent in two tranches from two different bank accounts of the Africa’s richest man to Ms. Bala Usman’s account with Access Bank, the newspaper reported.
“Ms. Bala Usman received the first N100 million transfer on February 6, 2015; while the second N100 million came through three days later on February 9. The transfers carried ambiguous descriptions that made it difficult to conclude their purpose.”
Ms Bala was recently instructed to step aside for an independent investigation into a series of allegations of impropriety.
Nigeria’s transport minister, Rotimi Amaechi, also alleged that the yearly remittance of operating surpluses by the regulatory body from 2016 to 2020 was short of the amount due for actual remittance — a claim, which according to him, should be investigated.
While details of some of other allegations against Usman remain unclear, sources said acts of favouritism were part.
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