Only one thing can prevent Nigeria’s currency (the naira) from being devalued by the second half of 2020, and that is a radical increase in crude prices. This is according to Ike Chioke, the Managing Director of Afrinvest West Africa Limited.
Chioke reportedly made the prediction over the weekend, while speaking during an event marking the launch of Afrinvest’s Economic and Financial Markets 2020 Outlook.
Afrinvest’s Head of Research, Abiodun Keripe, was of the same opinion as Chioke. He gave reasons to support the predicted devaluation, citing Nigeria’s current account, which has weakened over a period of three consecutive quarters. He also mentioned the slower pace with which foreign capital has recently been flowing into the country.
“We have seen weakness in our current account basically. For the first time since 2015, we have seen 3 quarters of consecutive weakness in the current account balance, which is a sort of precursor to what you would expect around exchange rate stability.
“Also, with the slow accretion in terms of capital inflows into the economy doesn’t tell a good story for Nigeria and the economy.
“Looking forward to the rest of the year, there is a potential risk for us to see in increasing pressure around the currency and this is because of the negative current account balances we have sustained in the first three quarters of 2019 which is worrisome. We would probably begin to face this pressure towards the second half of 2020.”
It should be noted that Afrinvest’s prediction aligns with similar 2020 outlooks that have been given by others. As we reported, experts at the 2020 Nairametrics Economic Outlook Hangout argued that the Nigerian might have no choice but to devalue the naira in 2020.
We also reported EFG Hermes’ prediction that the CBN might have to devalue the naira between 5-10% in 2020.
Bear in mind that these are all speculations, even as it remains to be seen what the Nigerian Government actually plans to do as far as devaluation is concerned. In the meantime, the Central Bank of Nigeria decided to increase the Cash Reserve Ratio by 500 basis points during its first monetary policy committee meeting for the year which held last Friday.
President Buhari, Osibanjo to take Covid-19 vaccine on Saturday
President Buhari and his Vice, Yemi Osinbajo will receive shots of AstraZeneca/Oxford COVID-19 vaccines on Saturday.
The Federal Government has announced that President Muhammadu Buhari and Vice-President Yemi Osinbajo, will receive shots of AstraZeneca/Oxford COVID-19 vaccines on Saturday to demonstrate vaccine safety to the public.
This follows the country’s receipt of the first batch of about 4 million doses of the AstraZeneca Covid-19 vaccine under the COVAX initiative and the planned launch of the national vaccination campaign.
This disclosure was made by the Executive Director of National Primary Health Care Development Agency (NPHCDA), Dr Faisal Shuaib, at the second edition of the State House briefing in Abuja on Thursday, which is focused on Nigeria’s response to the Covid-19 pandemic and the country’s national vaccination strategy.
He said that the exercise will boost the confidence of Nigerians to receive the about 4 million doses of AstraZeneca/Oxford Covid-19 vaccine that arrived in the country 2 days ago.
Shuaib said, “The next step in the vaccination programme given that we’ve now received the vaccines is a launch that will be taking place at the National Hospital tomorrow. The time scheduled for that launch is 10 am. The launch will be conducted by the Chairman of the Presidential Task Force on COVID-19, (Boss Mustapha).
“The plan is to vaccinate the frontline health workers that work in the treatment centre of the National Hospital, those will be the first people just like we’ve communicated that frontline health workers will be the first people to take the vaccines.
“Launch of National vaccination campaign will take place at the National Hospital Abuja, Friday, March 5, 2021, with Frontline health workers.
On Saturday, the plan is to vaccinate Mr President, Mr Vice-President and strategic leaders, to demonstrate vaccine safety to the public.
Again, we are hopeful that when Nigerians see leaders like Mr President and Mr Vice-President take the vaccines; it will increase their confidence around the safety of the vaccines.
“As you are well aware that even before the vaccines arrived in Nigeria, there is a lot of hesitancy. It is a global phenomenon. Vaccine hesitancy is similar no matter where you are, you have to provide the right information and to those people who have questions, we cannot dismiss their cynicism.’’
The NPHCDA boss also said that state governments must certain requirements and obligations before the Covid-19 vaccines will be released to them.
He said, ‘’States have requirements and obligations to fulfil before the Covid vaccines will be released to them. They have to demonstrate they have taken steps to ensure proper storage, security, etc.’’
What you should know
- It can be recalled that the much-awaited AstraZeneca/Oxford vaccine arrived at Nnamdi Azikiwe International Airport Abuja around noon on Tuesday, March 2, 2021, onboard an Emirates airline.
- The receipt of the 3.92 million doses of the vaccine is the first batch from the over 16 million doses allocated to Nigeria through the COVAX initiative, aimed at vaccinating about 20% of the population.
CEO @NphcdaNG: Launch of National vaccination campaign will take place at the National Hospital, Abuja, Fri March 5, 2021, with Frontline health workers
On Saturday the plan is to Vaccinate Mr. President & the VP and strategic leaders, to demonstrate vaccine safety to the public
— Presidency Nigeria (@NGRPresident) March 4, 2021
PIB and the commercialisation of NNPC
A commercialized NNPC with more committed employees would mean better accountability and transparency in its operations.
The Nigerian government is seeking efficient ways of positioning the country on its path to recovery and the petroleum industry which contributes about 90% of its exchange earnings would undoubtedly be critical on this journey.
The long-awaited Petroleum Industry Bill (PIB) which seeks to regulate the entire Nigerian Petroleum Industry and repeal a host of existing legislation is paramount in transforming the industry and introducing more efficiency particularly in its government-owned parastatals. The PIB has gained more traction in the current administration and is now awaiting deliberations by legislators.
A key highlight of the PIB is commercializing the State-run behemoth, Nigerian National Petroleum Corporation (NNPC). This move would see the NNPC incorporated as a Limited Liability Company and be known as NNPC Limited. This company would conduct its affairs on a commercial basis without resorting to using government funds.
While this might seem like a bold move by the government, it still should not come off as a surprise…
Owing to the fall in crude oil prices from over $100/barrel to below $50/barrel levels in 2020, Nigeria’s exciting story with crude oil slowed down but has picked up in recent months. The country’s heavy dependence on the volatile crude oil market and its ineptitude in diversifying during its “oil-rich” days have now thrown its growth story in jeopardy. The once 3rd-fastest growing economy with foreign reserves in excess of $40bn now wallows in rising inflation complemented and a weakened currency.
Why do we need to commercialize NNPC?
A core theme with a number of government-owned parastatals is the plague of inefficiency and obscurity in the way they are run. To give an idea of the NNPC’s lack of transparency, the corporation only published the group’s audited financial statements for the first time in its 43 years of operation in 2020. It’ll be right to commend this administration is pushing for transparency but you can go on to imagine what went on during those opaque years of operation.
As expected, the results were not impressive. The corporation reported a recurring loss, albeit 70% lower in 2019. The significant reduction in losses may prove the government’s will in improving the operations of the NNPC, however, comments on the report noted that “material uncertainty exists that may cast significant doubt on the Group and Corporation’s ability to continue as a going concern.”
Moving down to the State-owned refineries with a combined capacity of 445,000 bpd, capacity utilization well below 20%, and recurring annual losses in excess of ₦150bn, we can agree that the condition of these refineries is utterly worrisome. Despite the government’s annual budget for Turn Around Maintenance of these refineries, they have now been shut down with plans to undergo a Build, Operate, and Transfer (BOT) model.
Chief among the NNPC’s problems is corruption. A number of investigative reports have explained how subsidy payments, domestic crude allocation, revenue retention practices, and oil-for-product swap agreements are smeared with corruption. The Senate has initiated countless probes and new management seeking transparency has been introduced by the President, however, it just seems like the rot has eaten too deep into the system.
What does commercializing NNPC mean for the country?
The government-managed NNPC has proved to be inefficient and riddled with corruption. A commercialized NNPC with more committed employees would mean better accountability and transparency in its operations. The possible introduction of more shareholders would strengthen the amount of funding available to the NNPC and further shift the burden of being the sole-financier away from the government.
Exploring an NNPC IPO
An Initial Public Offering (IPO) would see the NNPC’s shares traded on Stock Exchanges and position the corporation to raise much more funding, build trust and endear to the international community. While this might seem like a daunting task, Nigeria can perhaps take a cue from Saudi Arabia whose National Oil corporation; Saudi Aramco began raising capital for its IPO in December 2019.
The Saudi Crown Prince; Muhammad bin Salman (MBS) announced a valuation of $2trn enticing the world’s largest investment banks, appointed a new set of leaders on the board of the corporation, and executed a highly engaging local marketing strategy. Although the valuation figure was brought down to $1.5 – $1.7 trillion by financial advisors, Saudi Aramco successfully achieved its IPO raising nearly $26 billion for 1.5% of Aramco’s value.
NNPC’s fundamentals might not support an IPO currently as investors might be wary of the high level of risks involved but we can’t deny the immense opportunities an IPO would present not just for NNPC’s transparency and performance but Nigeria’s economic reform.
The recurring performance of the corporation with several corruption allegations, inefficiency, and unclarity is indeed worrisome. It is time to have the NNPC turn over a new leaf and operate on a commercial basis. This would afford the government the ability to deploy funds into other segments of the economy and have the NNPC focus on being a commercially viable entity.
Nairametrics | Company Earnings
- FY 2020: Africa Prudential posts N1.45 billion Profit After Tax.
Africa Prudential Plc released its […]
- Custodian Investment Plc posts N12.69 billion profit in FY 2020.
- 2020 FY Results: Nestle posts N39.2 billion, as earnings per share prints N49.47
Nestle Nigeria Plc released its audited […]
- 2020 FY: WEMA Bank posts N5.06 billion profit after tax as earnings per share prints at N13.1.
Wema Bank Plc released […]
- 2020 FY: Zenith Bank post N230.6 billion profit after tax
Zenith Bank Plc released its […]