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How Nigeria can defend Naira against FPI outflow – IMF

IMF calls on Nigerian government over Naira defense

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Central Bank of Nigeria, Foreign exchange market, Naira vs dollas, IMF, Foreign Reserves, External reserves, CBN, Why do we all love the dollar? 

The International Monetary Fund (IMF) Head, Emerging Economies Regional Studies Division, European Department, Anna Ilyina has called on the Nigerian Government to defend the country’s currency against the outflow of Foreign Portfolio Investment (FPI).

Ilyina made this call in Bali, Indonesia on Tuesday, October 9, 2018.

According to Ilyina, outflow of foreign portfolio investment has been triggered by rising interest rate in the United States and other advanced countries.

While commenting on the impact of rising interest rate in Nigeria and other emerging economies, the IMF Head recommended flexible exchange rate and judicious use of the nation’s external reserves as the appropriate policy response to the monetary policy normalisation.

“In terms of policy responses, of course, a flexible exchange rate is the first line of defence.  Allowing the exchange rate to act as an external measure is healthy to adjust to the external environment. Of course, forex intervention might make sense in certain circumstances. But then, one has to consider the growth in fundamentals, the level of reserves and other policy tools that might be more appropriate in country-specific circumstances.

“Another thing that I want to mention is that given that we are still at the early stage of monetary policy normalisation in advanced economies. So, one can expect global external conditions and external balance conditions to remain challenging going forward.” – Ilyina

Ilyina lamented that Nigeria and other emerging market nations have come under pressure since April 2018. According to her, a combination of factors has basically affected emerging market since then.

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“It started with sharp appreciation in US dollar in the context of rising US interest rates and of course emerging markets are very sensitive to changes in external balancing.”

Speaking of Nigeria, Ilyina said there is one important driver that always affect the country’s economic condition which she said is oil. Ilyina added that Nigeria being an oil exporter is always very sensitive to changes in oil prices.

Nairametrics had reported that Naira has continued to remain stable in the foreign exchange (forex) market, despite the fact that the nation’s external reserves recorded the tenth weekly decline in the third week of September 2018 after its July high.

The reserves, which stood at $47.79 billion as at July 5, dropped to $45.23 billion as at September 13, the lowest level in more than five months.

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Famuyiwa Damilare is a trained journalist. He holds a Higher National Diploma (HND) in Mass Communication at the prestigious Nigerian Institute of Journalism (NIJ). Damilare is an innovative and transformational leader with broad-based expertise in journalism and media practice at large. He has explored his proven ability in the areas of reporting, curating and generating contents, creatively establishing social media engagements, and mobile editing of videos. It is safe to say he’s a multimedia journalist.

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Coronavirus

COVID-19: NCDC issues travel advisory for the yuletide season

The NCDC has issued a public health advisory to the general public as they prepare for the festive season.

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NCDC warns Nigerians against use of chloroquine for COVID-19

The Nigeria Centre for Disease Control (NCDC) has issued a public health advisory to all members of the public to exercise caution as they celebrate the upcoming festivities – Christmas and New year.

The Commission said that it is fully aware that the yuletide season affords a number of people an opportunity to celebrate with their families and friends and as well for people to travel to visit their loved ones or attend events, but cautioned that everyone has to make necessary adjustments in social interactions in line with the reality of the pandemic to limit the spread of Covid-19.

According to the commission, “Since the first confirmed case of COVID-19 in Nigeria, just over 67,000 Covid-19 cases have been reported with just over 1,000 deaths. Most of the confirmed cases and deaths have been in urban/semi-urban cities and towns and the risk of spread remains.

“The Covid-19 virus does not spread on its own, it spreads when people move around. This means that by traveling across countries and cities, there is a higher risk of transmission, especially to rural areas where the existing health infrastructure is already weak.”

(READ MORE: Covid-19: Africa prepared for possible second wave – Africa CDC)

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Key highlights of the advisory

  • Limit all non-essential domestic and international travels.
  • As an alternative to traveling, you could still remain socially connected with friends and loved ones using mobile or video conferencing technology.
  • Hold virtual services and prayer sessions to limit the mass congregation.
  • Observe appropriate social distancing protocols and personal hygiene in all public places and events, washing of hands frequently with soap and water or using a hand sanitizer when hands are not visibly dirty and running water is not readily available.

Why this matters

The number of confirmed COVID-19 cases has continued to rise across several countries globally. Nigeria is not an exception, with the recent spike recorded in the number of confirmed cases in some major cities.

In the first wave of infections, the economy was paralyzed with lockdowns that lasted for months, and the country cannot afford a second wave which could be more catastrophic.

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Coronavirus

COVID-19: Nigeria, Ghana and Cote d’Ivoire contribute 68.3% of confirmed cases in West Africa

Latest data published by the ECOWAS CDC show Nigeria, Ghana and Cote d’ Ivoire topping the number of confirmed cases.

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The latest COVID-19 daily update report as of November 29th 2020 released by the ECOWAS Centre for Surveillance and Disease Control indicates there are 205,368 confirmed cases in West Africa.

From the new number, Nigeria, Ghana and Cote d’Ivoire top the list with a total of 140,291 confirmed cases, representing 68.3% whilst the other 12 member countries of the Economic Community of West African States (ECOWAS) contributed 31.7%

According to the report, Nigeria has 67,412 confirmed cases (32.8%), Ghana 51,569 (25.1%) and Cote d’Ivoire 21,310 (10.4%).

Nigeria has a recovery rate of 93.5 % which places her on the 8th position, Ghana 97.8 % (2nd position) and Cote d’Ivoire 98.3 % (1st position).

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On CFR (case fatality rate), Nigeria occupies 10th position with 1.74%, Ghana 13th position with 0.63% and Cote d’Ivoire 0.61%, 14th position.

On active cases, Nigeria occupies 8th position with 4.7%, Ghana 12th position with 1.5% and Cote d’Ivoire 13th position with 1.1%.

What you should know

  • As at November 29, 2020, worldwide, there are 62,736,160 confirmed cases, 1,459,243 deaths and CFR of 2.3%
  • In Africa, there are 2,163,389 confirmed cases, 51,708 deaths and CFR of 2.4%
  • In West Africa, there are 205,368 confirmed cases, 2,861 deaths and CFR of 1.41% active cases 8,585)4.3%), recovery rate of 94.3%
  • On recovery rate, Cote d’Ivoire tops the list with 98.3%, followed by Ghana 97.8%, Senegal 97.0% with the least coming from Mali with 67.8%.
  • As regards the death rate (CFR), Liberia tops the list with 5.29%, followed by Niger 5.12% and Mali 3.41% while Guinea is the least with 0.58%.
  • As regards the death rate (CFR), Liberia tops the list with 5.2%, followed by Niger 4.62% and Gambia 3.29% while Guinea is the least with 0.58%.
  • Mali has more active COVID-19 cases with 29.0%, followed by Sierra Leone 20.8% and Niger 15.8% with Gambia contributing the least with 0.5%.

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Hospitality & Travel

34.5% decline in aviation jet fuel daily sufficiency, a worry for airline companies

Decline in daily aviation fuel sufficiency worry airlines as air passengers are expected to increase in the festive season.

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Airline operators will pay $3,500 per passenger if they break protocols – PTF COVID-19, Global Air passenger slump to persists til 2023- Moody’s 2023- Moody’s

The 34.5% decline in the daily sufficiency of aviation jet fuel may constitute a worry for airline companies in the country.

Considering that there is usually more people traveling due to the traditional Christmas and New Year festivities, resulting in increased flight patronage, the current total stock level appears to be low.

The observation is according to the daily petroleum products days sufficiency (total stock level data) compiled by the Petroleum Products Pricing Regulatory Agency (PPPRA).

In line with the data available on the PPPRA website,

  • The current total stock level of Aviation Turbine Kerosene (ATK), also known as aviation jet fuel or Jet-A1, stands at 89.04 million litres.
  • Eleven days earlier, the total stock level was 135.83 million litres – indicating a 34.5% decline.
  • Before now and since the start of the 2020, total stock level has been relatively unstable, with the recent highest total stock level of 187.40 million litres recorded on the 2nd of October 2020 – indicating about 60 days sufficiency; and the lowest 54.96 million litres was recorded on the 17th of July – about 18 days sufficiency.
  • As at the time the latest report was released, 27th November 2020, the total ATK stock was land-based stock.
  • Checks indicate there has been no receipt of ATK from the 19th of November, after the last receipt of 5.56 million litres on the 18th of November.

What they are saying

Speaking to Nairametrics regarding the decline, the MD/CEO of Jushad Oil and Gas Ltd, Mr. Bosun Paseda, submitted that the decline is due to the continuous increase in the exchange rate.

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He said, “The exchange rate is very high and unstable. You will discover that importers do not have access to the CBN rate and have to make recourse to the parallel market. The landing cost is currently higher than the rate we sell at the airport. That’s why marketers do not want to bring the product.

“Scarcity is likely to set in, but the reason there is no scarcity yet is because people are not really flying. If it stays the same, then scarcity may set in, when travel increases.”

Responding to the question on whether the decline in stock has affected the price of the product, Mr Paseda noted that it has not really affected the price of the product as consumption is currently low.

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What you should know

Nairametrics recently reported that oil markets yearned for airlines to resume operations following several months of not operating due to the Covid-19 pandemic travel restrictions.

  • Aside from the loss of revenues to airline companies, the call was necessary considering that Jet fuel demand averages about 8 million barrels per day worldwide – indicating that oil companies were also not recording enough revenues.
  • As a result of the pandemic, the International Energy Agency expects demand for Jet fuel and Kerosene to fall by 2.1 million bpd on average in 2020. This has, however, improved following lifting of travel restrictions in many countries.

Now that flights have resumed operations, it appears airline companies in the country may be in line to face another hurdle before the year runs out. The likelihood of facing this hurdle is highly contingent on receipt of ATK used in powering flights and increased travels. If things remain the same in terms of daily sufficiency of ATK needed to power their flights, scarcity may set in.

  • Remember that the lowest ATK of 54.96 million litres – about 18 days sufficiency, recorded on the 17th of July, was during travel restrictions. The decline in that period didn’t create concerns and it picked up days later.

What this means

  • With the national average daily consumption of ATK three million litres, this depicts that current total stock level of 89.04 million litres will only sustain for about 30 days, all things being equal.
  • Even though it appears this stock level is good, the steady decline in the stock level as illustrated in the graph above raises immediate concerns.
  • Also, one may conclude that receipt of ATK has stalled in recent days, having received only a total of 12.68 million litres in the last two weeks, since 12th November. This observation appears to denote that should the product receipt trend continue, scarcity may occur in the near future.

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