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Nigeria may seek more funds from World Bank to battle erosion

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Minister of Environment Mallam Ibrahim Jubril has hinted that Nigeria may seek more funding NEWMAP project. He also disclosed that 12 new states would be added to the programm, while the Federal Government was about concluding discussions with the World Bank for additional financing.

What is the NEWMAP project  about ?

The Nigeria Erosion and Watershed Management Project (NEWMAP) is a collaborative effort between  the Federal Ministry of Environment in concert with the World Bank and its partner agencies have designed the Nigeria to address  gully erosion in the south east as well as land degradation in the North.

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Initial funding was for seven states namely Abia, Anambra, Cross River, Ebonyi, Edo, Enugu and Imo. The Project has further scaled out to twelve states in Nigeria including: Delta, Oyo, Sokoto, Gombe, Plateau, Kogi, Kano, Akwa Ibom, Borno, Nasarrawa, Katsina and Niger states.

Why this is major

Erosion leads to loss of lives, lands and properties in the Country. This also has a negative effect on the economic well being of those living in the affected areas. Land degradation in the North leads to migration to other parts of the country and pressure on land.  This in turn leads to conflict between host communities and migrants. Crisis again leads to loss of life and property. Various communities in the country have had clashes with Fulani herdsmen.

About the World Bank

The World Bank is an international finance institution that provides loans to countries for capital programs. The bank was created in 1944 at the Bretton Woods conference alongside the International Monetary Fund (IMF).

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The World Bank Group comprises five constituent institutions: the International Bank for Reconstruction and Development (IBRD), the International Development Association (IDA), the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA), and the International Centre for Settlement of Investment Disputes (ICSID).

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Onome Ohwovoriole has a degree in Economics and Statistics from the University of Benin and prior to joining Nairametrics in December 2016 as Lead Analyst had stints in Publishing, Automobile Services, Entertainment and Leadership Training. He covers companies in the Nigerian corporate space, especially those listed on the Nigerian Stock Exchange (NSE). He also has a keen interest in new frontiers like Cryptocurrencies and Fintech. In his spare time, he loves to read books on finance, fiction as well as keep up with happenings in the world of international diplomacy. You can contact him via [email protected]

Commodities

Brent crude records minor gain as growing concerns over COVID-19 limit upside

Brent crude is the leading global benchmark for Atlantic basin crude oils.

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Brent crude drops to $25, oil demand drops by about 10% of world’s consumption, Brent Crude Oil hits $26, as Nigeria's Sweet Crude demand falls, Oil price pushes up before OPEC meeting, Asian equity markets mixed, NIGERIA OIL: Darker days ahead as Brent falls below production cost, Brent crude drops, as oil traders focus on OPEC+ meeting

Brent crude gained about 0.68%, to trade at $43.08 a barrel by 5.01 am local time, after a 4.3% gain recorded in the previous week.

The implied volatility for Brent crude price has plunged to the lowest levels triggered by prices collapsing at the end of Q1 2020 as many oil traders shifted their attention to tightening oil output due to the agreement with the Organization of the Petroleum Exporting Countries (OPEC) and its allies.

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Quick fact: Brent crude is the leading global benchmark for Atlantic basin crude oils. The international benchmark is used to set the price of crude oil for about two-thirds of the world’s traded crude oil, including Nigeria’s crude (Bonny Light, Brass River, Qua Iboe, etc.).

Stephen Innes, Chief Global Market Strategist at AxiCorp, in a note to Nairametrics, explained in detail the positive macros affecting oil prices. He said:

“Positive macro inflection points – most recently, the rebound in US employment – continue to support oil despite the disquieting trajectory in the US coronavirus cases.

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“OPEC production, which is at the lowest level since 1991 has also been helping, both with sentiment and the fundamentals for oil.

“And while the rebalancing of supply and demand still seems to be occurring more quickly than expected, risks remain. OPEC’s planned July 15 meeting may address the possibility of once again extending the most extensive phase of the OPEC+ production cut agreement.”

Amid rising numbers of COVID-19 cases in major cities of the world’s largest economy and consumer of crude oil, a Reuters tally showed that in the first four days of July alone, 15 states in America reported upward movement in the number of new COVID-19 infections, with events over the holiday possibly triggering another upsurge.

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Companies

NSITF board to investigate suspended MD and others over financial misconduct

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FG moves to scrap hazard allowances earned by State Governors

The board of directors of the Nigerian Social Insurance Trust Fund (NSITF) has revealed that it will investigate the activities of the suspended Managing Director, 3 Executive Directors, and 8 other senior management staff over financial breaches and gross misconduct.

This was disclosed by the Chairman of the board of NSITF, Mr. Austin Enajemo-Isire, in a statement in Enugu on Sunday July 5, 2020.

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Enajemo-Isire said that the Managing Director and other top management staff of the organization would have the opportunity to clear themselves of any wrongdoing with the probe panel which was being set up.

While reacting to claims that the suspension did not follow due process as President Muhammadu Buhari did not approve it, Enajemo-Isire said that the approval for the suspension of the affected staff had been conveyed to the Labour Minister in a correspondence referenced SGF. 47/511/T/99 of June 30, 2020.

According to the Chairman, “The minister has conveyed this approval and directives to me for necessary action in terms of setting up a board-driven investigative panel.

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“This is to give the affected officers the opportunity to clear themselves of the financial and procurement breaches and acts of gross misconduct and other infractions that gave rise to their prima facie indictment.

“It is in this light that I have decided to call a virtual meeting of the management board on Tuesday, July 7, 2020, to consider the modalities for our action.”

He, therefore, appealed to staffers of NSITF and their social partners to keep calm and exercise restraint.

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A few days ago, Nairametrics reported the suspension of the Managing Director and some senior management staff over corruption allegations. However, the management in its reaction debunked that claim and said that the President did not approve their suspension but that rather, it was the sole decision of the Labour Minister, Chris Ngige, who they said was overreaching himself.

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Currencies

Analysts predict outlook for naira as forex unification plans gain momentum

The exchange rate could strengthen this week based on a positive set of assumptions.

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Naira unification may lead to losses for black market speculators   

The exchange rate between the naira and dollar may move in the positive for Nigeria’s local currency, according to views of a cross section of traders and analysts interviewed by Nairametrics.

Last week, Nairametrics reported that the Central Bank of Nigeria (CBN) had increased the bid price for FX at its Secondary Market Intervention Sales (SMIS) window by 5.6% to trade at N380 to $1. This was in line with the apex bank’s plans to unify the exchange rate towards the NAFEX rate.

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As traders mulled the implication of the latest move by the CBN, the naira depreciated against the dollar at the parallel market to trade at N461.00 to $1, while gaining against the US dollar to trade at N386 to $1 at the I&E window. However, the exchange rate could strengthen this week based on a positive set of assumptions.

A treasury dealer at Nigeria’s biggest bank by assets told Nairametrics about the Central Bank’s continual intervention in the currency spot market and outlook for the naira. He said:

“The CBN will sustain its interventions in various windows with injection of $100million to Invisibles and Small and Medium-scale Enterprises (SMEs) segment at ₦384 to a dollar. Also, the CBN will inject c.$250million through the Retail SMIS on Friday.

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“With the increase in base rate at last week’s Retail Auction to $/₦380 from the $/₦365, I expect similar revision of the official rate from $/₦361 to IEFX level in line with rate unification exercise which would boost Naira revenue from crude oil sale and qualify the CBN to draw-down from the IMF/World bank loan.

“The paucity of funds that IEFX window has experienced since the start of the Q2 will persist this week. Though, I expect the CBN to come up with plans to clear the backlogs of FX demands estimated at c. $5bn for offshores investors just like it did in 2016. Nevertheless, I expect Naira to trade at sub $/₦400 levels throughout the week.

“With this move in unifying the exchange rate system, it is also expected that the present converging of the rates estimated at N387 to $1 (I &E Window) will boost revenues for the federal government which could see a gain of N20 on every US dollar earning in oil.”

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Whilst the debate rages on about what the true value of the naira is, several factors are at play. The CBN Governor had alluded to the fact that the lull in business activities suggested that forex demand should be low, thus calling into question the pent-up demand being highlighted by several market analysts.

The Central Bank governor suggested that the black-market rates being reported were likely not representative of what the real demand was, but rather driven by speculative forces.

Michael Nwakalor, Macroeconomist at CardinalStone Research, in a phone chat interview with Nairametrics expressed optimism on the naira appreciating at the black market this week. He said:

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“Amid purported pressure from multilateral organizations for a unified exchange rate, the naira has noticeably weakened at both the NAFEX and parallel markets in recent weeks, with reports of a devaluation at the SMIS window from N360/$ to N380/$.

“We expect a possible unification to converge towards the NAFEX rate of N385/$ and if supported by increased FX supply and clear body language by the CBN, we may also see a steep recovery in the parallel market towards that rate. In the absence of this, we expect a characteristically quiet week in the FX market.”

Conversely, market analysts believe that the reluctance of the CBN to fund liquidity shortages at the I&E window is the reason why the black market has depreciated to about N461/$1. They claim legitimate transactions have already taken place in the parallel market, especially for businesses that have obligations to meet but cannot access forex from official windows.

Thelma Ugonna Ohiri-Anyanwu, CFA, a leading financial expert in a Nigerian tier-1 bank, was also optimistic about the naira stabilizing this week. She said:

“With the CBN devaluing the currency by 5.3% from N360 to N380 at its latest currency auction, this saw the market close at about N389 to a dollar. This I believe is in a bid at unifying the rate at the various windows.

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“In the coming week, with little or no significant activities to stimulate the market and no fundamental change, the naira will be relatively stable.

“The I&E window will likely trade around N388-389/$ levels. While the parallel market at N460 to 461/$ levels.”

CBN’s foreign reserves fell slightly during the week as FX outflows outpaced inflows. Data from Nigeria’s central bank showed that its foreign reserves stood at about $36.2billion.

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