In an apparent breach of the CBN’s independence, President Muhammadu Buhari has directed the Central Bank of Nigeria (CBN) to stop providing Foreign Exchange (FOREX) for the importation of food into the country.
In a statement issued on Tuesday by presidential spokesman, Garba Shehu, the president disclosed that the directive was given to ensure the steady improvement in agricultural production and attainment of full food security.
President @MBuhari Tuesday in Daura, Katsina State, disclosed that he has directed the Central Bank of Nigeria to stop providing foreign exchange for importation of food into the country, with the steady improvement in agricultural production, & attainment of full food security. pic.twitter.com/2mwWlH0bpH
— Garba Shehu (@GarShehu) August 13, 2019
The details: The President announced the new directive given to the Central Bank while hosting governors under the All Progressive Congress (APC) to Eid-el-Kabir lunch on Tuesday at his hometown in Daura, Katsina State.
According to the President, foreign reserves would be conserved and utilized strictly for diversification of the economy, to discourage dependence on foreign food import bills.
“The foreign reserve will be conserved and utilized strictly for diversification of the economy, and not for encouraging more dependence on foreign food import bills,” President Buhari was quoted as saying.
The President further went on to say that the CBN must not release any ‘cent’ to import food into the country while reiterating that his administration had achieved food security and physical security.
Initiative to feed the nation: Similarly, the President stated that while some states in the country had taken advantage of the policy of the Federal Government on agriculture with huge returns already being generated, the big picture is to feed the nation.
“Some states like Kebbi, Ogun, Lagos, Jigawa, Ebonyi and Kano had already taken advantage of the Federal Government’s policy on agriculture with huge returns in rice farming, more states should plug into the ongoing revolution to feed the nation.”
Speaking further, the President disclosed that young Nigerians and graduates alike had started exploring agri-business and entrepreneurship, with many enjoying good returns on their investments.
[READ ALSO: Milk: NECA urges CBN to suspend Forex restriction]
Recent Development: In recent weeks, the CBN has been premeditating the move to add to the 43 items restricted for FOREX in Nigeria. To drive home the point, the CBN, in a recent circular disclosed the bank was set to restrict FOREX for the importation of milk and other dairy products.
According to the CBN Governor, Godwin Emefiele, Nigeria spends between $1.2 billion to $1.5 billion annually on importation of milk and other dairy products.
While the CBN has through various statements reiterated its stand on the policy, industry analysts have called for a review of the policy in order not to complicate certain economic realities.
The decision according to the CBN is targeted at ensuring FOREX savings, job creation and investments in the local production of milk.
What this means: One of Nigeria’s foreign exchange windows is the Investors’ and Exporters’ windows (I&E FX Window), where investors transact foreign currencies for investing purposes. In this market, foreign currencies are usually pegged as the CBN is equally a participant.
- By restricting FOREX for food, it means food importers will have to source for FOREX through the parallel market or other means.
- Buying from the parallel market or other sources come at a high cost, and this may trigger the general price level and prices of food items will jack up.
- Restricting FOREX for food importation is indeed a welcome development, however, the presidency needs to cautiously approach this, as the policy may nosedive the economy into stagflation (a condition of slow economic growth and relatively high unemployment, accompanied by rising prices).
[READ FURTHER: Investors to get CBN’s loans as milk initiative takes-off]
Lagos to open churches, mosques from June 19, limits gatherings to 40% capacity
Religious bodies to open at a maximum of 40% of their capacity and we’ll be working with them as being expected by the Lagos State Safety Commission.
Lagos State government says religious gatherings would be allowed to reopen on June 21, 2020. This was disclosed by the State Governor, Babajide Sanwo-Olu on Thursday during a press briefing at Government House, Marina.
According to the Governor, mosques are to reopen from June 19 while churches are to begin services from June 21 and only Friday and Sunday services should be held for now, as other regular services, including night vigils, must be put on hold.
He said, “There will now be restricted openings of religious houses based on compliance that we have seen and reviewed with the Safety Commission.
“From 14 days time, precisely on the 19th of June for our Muslim worshippers and from the 21st of June for our Christian worshippers, we will be allowing all of our religious bodies to open at a maximum of 40% of their capacity and we’ll be working with them as being expected by the Lagos State Safety Commission.
“But we know that these places of worship have different sizes but even if your 40% capacity is really so large, you cannot have beyond 500 worshippers at once, and keeping that maximum 40% capacity is really important.
“We will be encouraging people to have more than one service and ensure that they keep their premises clean, disinfect before another round of worship can take place.
“We will also be advising that there should only be mandatory Fridays and Sunday services. All other night vigils and services must be put on hold for now until we review our current situation.
Sanwo-Olu added that the state will also be advising that persons below the age of 15 because of how well they walk around should be excused from the places of worship and citizens that are above the age of 65 should not be allowed into these places of worship.
FG may lift ban on interstate movement on June 21
Interstate movement may resume on June 21.
The Federal Government may lift the ban placed on interstate movements on June 21, 2020.
This was disclosed by special adviser to President Muhammadu Buhari on new media, Bashir Ahmad on Thursday via his Twitter handle.
He stated, “Interstate movement may resume on June 21, the National Coordinator of the Presidential Task Force on COVID-19, Dr Dani Aliyu, gave the hint recently, as domestic flights expected to resume on June 21.”
Interstate movement may resume on June 21, the National Coordinator of the Presidential Task Force on COVID-19, Dr. Sani Aliyu, gave the hint recently, as domestic flights expected to also resume on June 21.
— Bashir Ahmad (@BashirAhmaad) June 4, 2020
Meanwhile, the FG last Monday, June 1, 2020, announced a cautious advance into the second phase of the national response to COVID-19. As part of the measure in the new phase, the FG has announced the full reopening of the financial sector.
This was announced by the national coordinator of the presidential task force on COVID-19, Dr Aliyu Sani. He said that the banks will now be allowed to operate at normal working hours five days a week as against the restricted time of 2 or 3 pm that was announced during the first phase of the easing of lockdown.
The Presidential Task Force also gave the green light to hotels to reopen but must do so based on the guidelines rolled out by the National Centre for Disease Control (NCDC). They are to maintain non-pharmaceuticals intervention. However, gyms, cinemas, parks, nightclubs and bars are to still remain closed until further evaluation.
The restaurants, other than those in hotels must remain closed to eat-ins but are allowed to prioritize and continue to practice the takeaway measure that has been in place since the first phase.
The conundrum in the retail pricing of PMS
Considering the landing cost of petrol is largely influenced by the prices of crude oil in the international market, we think prospects of continued recovery in crude oil prices is likely to put upward pressure on the cost of importing petrol.
The decision of the Petroleum Products Pricing Regulatory Agency (PPPRA) to reduce the pump price of Premium Motor Spirit (PMS), also known as petrol, to N121.50 per litre from N123.50 per litre has been met with stiff resistance from oil marketing companies (OMCs). The Independent Petroleum Marketers Association of Nigeria (IPMAN) have also stated that it impossible for its members to sell petrol at the new price floor of N121.5 per litre.
We recall that on 18 March 2020, the Federal Government (FG) reduced the retail price of Premium Motor Spirit (PMS) by c.14% to N125/litre from N145/litre, following the global pandemic which led to an unprecedented decline in oil prices and by extension a reduction in the landing cost of petrol. Subsequently, the FG announced a further reduction to N123.50 which took effect on April 1, 2020. Earlier this month, the FG directed a reduction in the pump price of Premium Motor Spirit (PMS) for the third time to N121.50 per litre. We note that the adjustments in the retail price is in line with the directive from PPPRA on a monthly review of the pump price, depending on prevailing market realities.
In our view, considering the landing cost of petrol is largely influenced by the prices of crude oil in the international market, we think prospects of continued recovery in crude oil prices is likely to put upward pressure on the cost of importing petrol. With the gradual relaxation of lockdown measures by countries who are starting to reopen their economies alongside the historic production cuts of OPEC+ which took effect last month (a 9.7mb/d oil production cut for May and June), we think the risks to oil prices are tilted to the upside in the near term.
Since hitting a two-decade low of US$19.33 on 21 April when the retail price of petrol was pegged at N123.50, brent crude prices have gained c.105% to close at US$39.54 on 3 June. Against this backdrop, we expect that the retail price of petrol should rather be adjusted upwards to reflect current market realities. The current situation appears no different from historical trends where the FG becomes reluctant to effect an upward adjustment in the retail price of petrol during periods of rising crude prices. This has often resulted in the renewed payments of the age-long fuel subsidy. We also think oil marketing companies (OMCs) who have only recently begun to import petrol alongside the Nigerian National Petroleum Corporation (NNPC) due to more favourable pricing could halt importation once again if domestic retail prices become unfavourable.
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