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Economy & Politics

@Doubleeph explains why Aliko Dangote is bad for Nigeria

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In one of the most scathing articles you can read online , an analyst and frequent contributor to Nairametrics, Feyi Fawehinmi unloaded on Aliko Dangote, the richest man in Africa.

In the opinion editorial which was featured on QZ.Com he explained reasons why he believes the billionaire may be exerting an unhealthy influence on the government, the economy and at large, the lives of average Nigerians.

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In effect, he opines that despite all the hype around him, Dangote is bad for Nigeria.

Here are some of his key taking points;

  • Dangote has made more than 90% of his wealth from the cement industry. He currently has a 65% market share meaning that in effect, he decides what the price of cement in Nigeria is.
  • The gross margin on Dangote’s cement was as high as 70% a few years ago and has slowly come down to just under 50% in 2016.
  • While average cement profit margins around the world was 17.2% in 2015, Dangote reported a 42.3% margin, almost 3 times more than the global average.
  • In 2013, Dangote cement had the highest net profit margin among the world’s top 15 cement producers (52%). The next most profitable producer had only a 17.8% margin.
  • Despite these statistics, the monopoly is set to continue. Dangote has 90-year mining licenses for materials like limestone even though its cement plants have a 50-year life span. So, he can afford to mine limestone for the rest of his life without paying a single kobo extra to the FG.
  • For those who are usually swept away by the ‘keep-Nigerian-money-in-Nigeria’ anthem Dangote sings, you’d be surprised that the FG is not making so much of a public gain from Dangote’s activities.
  • Between 2010 and 2015 when Dangote cement earned around 1 trillion naira in profits, it paid only 12 billion naira in taxes, just a 1.2% tax rate.
  • This is due to “Pioneer Status”, a Nigerian arrangement that is supposed to encourage investment in industries which the Nigerian government deemed in need of support.
  • How Dangote’s three cement plants can claim pioneer status 10 times in 11 years within the same industry is baffling.
  • All in all, what Dangote has contributed to Nigeria through his cement factories are a lack of innovation, very few jobs, little addition to government revenue. And billions of dollars into the Dangote coffers.

Basically, in his opinion Dangote is bad for Nigeria.

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Business News

UPDATED: Nigeria received $5.85 billion capital inflows in Q1 2020 –NBS

Nigeria received $5.85 billion capital importation (inflows) in the first quarter (Q1) of 2020, compared to $8.51 billion in Q1 2019.

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Foreign Reserves Rise by $295m in One month

Nigeria received $5.85 billion capital importation (inflows) in the first quarter (Q1) of 2020, as against $8.51 billion in Q1 2019. This is according to the latest capital importation report released by the National Bureau of Statistics (NBS).

According to the NBS, the $5.85 billion worth of capital importation in Q1 2020 represents an increase of 53.97% when compared to how much was received in Q4 2019.

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However, when compared to the corresponding first quarter period of 2019, the figure indicates a 31.19% decline.

Capital Inflow by type

In the first quarter of 2020, the largest amount of capital importation was received through portfolio investment, which accounted for 73.61% ($4.31 billion) of the total capital importation.

Under the portfolio category, investment in money market instruments remains the largest recipient of capital inflows with a total of $3.44 billion, followed by $639.72 million in equity, while investment in bonds stood at $231.22 million.

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Foreign Direct Investment (FDI): FDI constituted only 3.66% ($214.25 million) to the total capital inflows. A decline of 16.72% compared to $257.25 million received in Q4 2019 and 13.39% reduction compared to the corresponding quarter of 2019.

FDI is an investment in the form of a controlling ownership in a business in one country by an entity based in another country.

Other Investments: other investments, which was broken down into four categories contributed 22.73% ($1.33 billion) to the total capital importation in the first quarter of 2020. The inflows through other investments reduced by 19.92% when compared to $1.66 billion received in Q4 2019.

Investment through trade credits in the first quarter of 2020 was $50,000, Loans ($559.79 million), Currency deposits ($820,000) while other claims scooped the highest share of $769.99 million.

 

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Capital inflows by Sectors

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A further look into the report shows that the banking sector received the largest portion of capital importation as it constituted 51.08% ($2.99 billion) to the total capital inflows, followed by Financing, which received $1.33 billion (22.77%) in Q1 2020.

Shares followed with $817.38 billion (13.96%), Production $273.97 billion (4.68%) while Telecoms received $157.48 billion (2.69%).

Capital inflows by origin

The United Kingdom remains the biggest source of capital investment in Nigeria. In Q1 2020, investment from the U.K amounted to $2.91 billion, up from $1.19 billion received in Q4 2019 and decline compared to $4.48 billion in Q1 2019.

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The top five countries that accounted for the biggest capital inflows in Nigeria within the quarter include U.K ($2.91 billion), South Africa ($692.63 million), UAE ($532.89 million), Netherlands (441.79 million), and U.S ($389.1 million).

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Business News

Naira set for recovery as ABCON issues guideline to members on forex sales resumption

It is obvious that the CBN has come to realize that BDC operators can be the difference between naira recovery and depreciation during volatile times.

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COVID-19 could save naira from depreciating further, Many odds against the naira, Naira forwards and parallel market crash puts pressure on official exchange rate, Naira appreciates to N386.94 to $1 at investor and exporters window. , Naira set for recovery as ABCON issues guideline to members for forex sales resumption

The Central Bank of Nigeria (CBN) and the Association of Bureau De Change Operators of Nigeria (ABCON) have finalized arrangements for the resumption of forex sales to Bureau De Change operators (BDCs).

Following this finalisation, the more than 5,000 BDCs spread across the country are now expected to help curb the downward spiral of the naira, thereby checking the activities of foreign currency speculators.

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Recall that the naira has recently been facing major challenges, no thanks to the COVID-19 pandemic. Unfortunately, currency speculators took advantage of the situation by making spurious demand for dollars with the hopes of making good returns from the rising gaps between official and parallel market rates.

Meanwhile, Governor Godwin Emefiele of the CBN and ABCON President, Aminu Gwadabe, have repeatedly spoken against the illicit business of currency speculators and the dangers they pose to the economy and naira’s stability. They have also warned the speculators about the looming danger for their trade if they refuse to retrace their steps; they Could incur losses estimated at over N10 billion in the next few months, especially now that the CBN is enabling BDCs’ full return to the forex market after nearly six weeks of inactivity.

(READ MORE: Devaluation’s drum beats louder)

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Governor Emefiele had also appealed to industrialists who patronize the parallel market to stop such practices in the interest of the economy and for the sustainability of their businesses. Failure to do this might result in them incurring the same huge losses as currency speculators.

Naira hits N570 to $1 at forwards market, pressure on the naira climbs up, Naira set for recovery as ABCON issues guideline to members for forex sales resumption   

Both Emefiele and Gwadabe have extensive experience in the market, enough to predict what follows after every major crisis. During the 2016 currency crisis, the market got a major relief after the BDCs began getting dollar allocations from the CBN. That same scenario will soon play out as the BDCs countdown to resumption.

In the meantime, it is obvious that the CBN has come to realize that BDC operators can be the difference between naira recovery and depreciation during volatile times. This is especially true now that the local currency has come under intense pressure, driven mainly by speculative demand for the dollar.

READ ALSO: CBN ends forex for fertilizer importation, raises concern over banks sharp practice

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Note that the BDCs are essentially operators who help to get dollars across to the end-users, no matter where they are. The BDC operators have, for decades, proven their relevance in stabilizing the naira. While commenting on the recent moves by the apex bank to resume dollar sales to the BDCs, Gwadabe said:

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The CBN’s planned lifting of moratorium on dollar sales to BDCs, reopening of the airports for air travels as well as global ease on restriction of movement are positive indications that dollar flows to the economy will soon improve.

The naira has been exchanging at N461 to a dollar at the parallel market but will be upbeat once dollar sales to BDCs commence. The return of over 5,000 BDCs to the forex market will add great strength to the Naira and lead to major capital losses for forex speculators. It happened in 2016 and it will happen again in 2020. The return of the BDCs will immediately boost naira’s recovery and put the enemies of the economy to shame. We are committed to the CBN’s exchange rate stability and will take all necessary steps within set rules and regulations to keep the naira stable.”

(READ MORE: Naira depreciates at I&E window, forex turnover up by over 117%)

Naira crashes further at the parallel market due to dollar scarcity, lowest since 2017, Naira drops to N454, foreign investors and importers struggle for dollars, Naira set for recovery as ABCON issues guideline to members for forex sales resumption

Moving on, the CBN said it has taken steps to address the risks facing the naira. Asides other positive developments in the global economy (including oil price recovery thanks to OPEC+ output cuts and IMF’s $3.4 billion emergency funding to Nigeria), the CBN believes its measures will enable a rapid recovery for the local currency. Emefiele explained:

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CBN has also officially reviewed the naira exchange rate to N380 to a dollar. Aside devaluing the naira, the apex bank also adopted a unified exchange rate, and pushed the official rate of the naira to N376 to dollar for International Money Transfer Operators rate to banks; N377 to dollar for banks’ dollar sale to CBN and pegged CBN’s dollar sales to banks at N378, all aimed at attracting Foreign Portfolio Investment and strengthening the local currency. The BDC operators are expected to buy dollar from the CBN at N378 per dollar.”

For Gwadabe, the naira rate review and the CBN’s assurance to foreign investors on the easy repatriation of their funds from Nigeria, are positive indicators for naira’s continued recovery.

(READ MORE: Why the naira is falling)

He also noted that ABCON is reopening guidelines to all its members nationwide included on-boarding of the queuing crowd ticketing management application, known as ABCON 360°QSM portal, by all members. So far, over 80 percent of members registered nationwide.

He also disclosed that they updated all regulatory obligations during the lockdown, such as fumigation of members’ offices/markets, and distribution of second phase of face mask nationwide to our members. They also made provision for wash hand basins and sanitizers at distributions centres, even as members will explore school fees, mortgage, and subscription payments as part of their allowable scope post-COVID-19.

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Economy & Politics

Africa day 2020: Buhari urges economic groups, CSOs and private sectors to drive peace for economic development

President Muhammadu Buhari has urged economic groups, CSOs and private sectors in Africa to strengthen collaborative efforts of the AU.

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COVID-19: President imposes lockdown on three states, Africa day 2020: Buhari urges economic groups, CSOs and private sectors to drive peace for economic development

As Nigeria continues to battle the rising insecurity fuelled by the COVID-19 pandemic, President Muhammadu Buhari has urged regional economic groups, civil society organisations and the private sector in Africa to strengthen collaborative efforts among member-countries of the African Union.

He added that stakeholders must take full ownership of the theme of this year’s celebration to  ‘silence the guns’, and allow for economic development in the continent.

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”Peace, security, unity, and harmony are prerequisites for development in Africa,” Buhari said, stressing the need for all economic groups to work together to achieve the peace required for economic growth.

This was part of the President’s message to African leaders to mark the celebration of the ”Africa Day 2020,” by the African Union Commission and the World Health Organization (WHO).

(READ MORE:Post Covid19: Global Leaders at UBA Africa Day Conversations Seek Economic Recovery)

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He noted that the selected theme for the year 2020, ”Silencing the Guns in the context of the COVID-19” provides a ray of hope in the seemingly bleak situation caused by the pandemic across the globe.

He stressed the need for African leaders to ensure that every effort is made to ensure the success of silencing the guns in the continent, emphasizing the need to sensitize Africans about the inseparable connection between peace and development.

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About the Africa Day

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Africa Day is observed annually on 25 May, in commemoration of the founding of the Organization of African Unity (OAU), which was founded on 25 May 1963 in Addis Ababa, Ethiopia and is now known as the African Union.

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