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External reserves to fall below $30 billion, more forex restrictions expected

Analysts have predicted the foreign reserves to fall below $30 billion if some measures are not taken. 

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The travel restrictions and other measures being implemented around the world in order to curb the Coronavirus pandemic has led to the shutdown of the global economy.

The Sub-Saharan region in Africa is not immune from the economic shock caused by the coronavirus outbreak. The oil exporters from the sub-region have been seriously hit hard by the crash in crude oil prices which is compounded by drop in demand due to a series of lockdowns and restrictions being carried out globally.

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Renaissance Capital (Rencap), in its analysis, revised down the growth forecast for Sub-Sahara Africa from 3.5% to 1.3% which is occasioned by deteriorating external reserves and weakened currencies.

The crash in crude oil prices has made the already fragile Nigeria’s economy vulnerable to recession. This is because about 60% of the Federal Government’s revenue and 90% of their export revenue comes from oil.

[READ MORE: Why you should be worried about the latest drop in external reserves)

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Analysts have predicted the foreign reserve to fall below $30 billion if some measures are not taken.

FG battles 6 oil firms for failure to remit N20 trillion , ExxonMobil, Shell, Chevron delay $58.4 billion oil and gas investment in Nigeria, Crude Oil: Nigeria’s oil production slips for the third consecutive month , Tax reform, policy uncertainty to cause oil drop as foreign firms look outside Nigeria, Nigeria plans to support oil price with lower production cost per barrel, Oil price slumps further to $30 pb, as Nigeria grapples with high production cost, Reduction in PMS: A nod to the deregulation of the downstream sector?

Although oil may only account for 9% of GDP, it had generally been acknowledged as an important facilitator of economic activity.

As a reaction to the crash in crude oil prices, coupled with a sharp decline in the country’s foreign reserve, the Central Bank of Nigeria (CBN) on March 20, announced the collapse of the multiple exchange rate and the unification of the official rate, rate to BDC operators and the rate for importers and exporters (I&E) window.

The apex bank also devalued the naira at the I&E window to N380 per dollar from N365 per dollar. The bank’s rate has also been adjusted from N306 per dollar to N360 per dollar. However, the devaluation fell short of the fair value which should be N410 per dollar.

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Analysts from Rencap, however, are suggesting that the value of the Naira should be closer to N450 per dollar rather than N400 per dollar.

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Following a significant drop in the country’s foreign exchange earnings and huge import demand, the Naira will continue to come under pressure to depreciate further as Nigeria’s foreign reserves continue to decline rapidly. Going by the trend in 2014/2015, when the country was faced with the similar circumstance of the crash in oil prices, the external reserves is going to be declining by $1 billion monthly over the next 6 months.

At that rate, the external reserves, which was about $36.3 billion as at February, is expected to go below $30 billion by September.

However, the extent of the decline in foreign reserve depends on the success or otherwise of the import restriction policy, which was done in 2016. It is also expected that a decline in demand, as a result of the lockdown and weaker naira, is expected to adversely affect imports. From the report, there is a probability that the CBN, will impose forex restrictions in order to maintain the stability of the naira without depreciating.

Most economic and financial experts have always criticized the forex restriction policy of the CBN. They have advised that rather than restrict access to foreign exchange, the Federal Government should come up with the right policies and incentives to encourage investment and diversification thereby driving competition and productivity.

[READ ALSO: Nigeria’s External Reserves plunge to $40.3 billion as devaluation concerns brew)

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In a related development, the Rencap analysts are of the view that the devalued rate is expected to increase the Naira revenue of the government and mitigate the crash in oil prices.

They are also of the opinion that this is the best time to do away with fuel subsidy especially with the crash of oil prices. The forex rate adjustment for imported petrol at N360 per dollar shows that the market price of petrol should be N95 per litre. So this means that the government is making a surplus of N30 per litre.

Chike Olisah is a graduate of accountancy with over 15 years working experience in the financial service sector. He has worked in research and marketing departments of three top commercial banks. Chike is a senior member of the Nairametrics Editorial Team. You may contact him via his email- chike.olisah@nairametrics.com.

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Economy & Politics

Lagos to shut down Marine Beach bridge for emergency repairs

The closure will allow the Federal Ministry of Works to carry out emergency repairs on the bridge, in line with the government’s vision of providing a better transportation system in the state.

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Lagos to shut down Marine Beach bridge for emergency repairs

Lagos state government has announced that the Apapa Marine Beach bridge will be closed for five months, from Wednesday 27th May, to Wednesday 21st October, 2020.

The closure will allow the Federal Ministry of Works to carry out emergency repairs on the bridge, in line with the government’s vision of providing a better transportation system in the state.

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In a statement from the Lagos state Ministry of Transportation, the Commissioner, Dr. Frederic Oladeinde, noted that the repairs were long overdue, and necessary to ensure safety of Lagosians, given the number of motorists that use the route.

READ MORE: Nigerians knock Fashola over comments on “bad roads”  

The Commissioner noted that the repairs included bearing and expansion joint replacement and would be executed in two phases, taking one lane of the bridge at a time.

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The first phase will involve handling the lane inbound Apapa while the second phase will be designated to work on the lane that conveys vehicles outside the axis,” he said.

Alternative routes

Oladeinde noted that alternative routes around the bridge had been improved to make them motorable, and ease movements for road users.

READ ALSO: Osinbajo sets up committee on reopening of Nigerian economy, suspends loan deductions for states

To manage the construction period, the statement noted that Traffic Management Authorities would be hard at work to ameliorate the expected traffic issues and supervise other arrangements.

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“Motorists inwards Wharf road will be diverted to the other section of the bridge outwards Apapa, a contraflow of 200metres has been put in place for vehicles to realign with a proper direction inwards Ajegunle or Wharf road, Apapa, while Motorists descending to Total Gas under bridge will drive without any hindrance,” it read.

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The Commissioner called for the understanding and cooperation of motorists and road users during the period to ensure a smooth flow of plans.

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Economy & Politics

Fayemi set to activate digital economy with N5billion broadband infrastructure

Governor Fayemi plans to activate Ekiti state’s digital economy, this would help generate healthy competition within the ICT sector

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Fayemi set to activate digital economy with N5billion broadband infrastructure in Ekiti state

Ekiti state government has concluded plans to create a digital hub, with the laying of a 606-kilometer broadband infrastructure.

The project is expected to lift the state from 16% internet penetration to 90% and is estimated to be worth N5 billion, with the Federal Government contributing N1.1 billion of the total sum.

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This plan is part of the memorandum of Understanding (MoU) which the state Governor signed with O’odua Infraco Resources Limited, a consortium that develops high speed and efficient Fibre Optic Cable (FOC) Open Access Network (OAN) across the South-West region of Nigeria.

According to the Managing Director of O’odua Infraco Resources Limited, Mr Sammy Adigun, the project will be officially flagged off in October and completed within 14 months.

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(READ MORE: What Nigeria stands to gain from new National Broadband Plan)

This decision is a follow-up to the recent crash of Right of Way charges from N4,500 to N145 per meter for broadband infrastructure, and in line with one of the five pillars of Governor Kayode Fayemi’s development plan for Ekiti state.

The Governor noted that these decisions would help generate healthy competition within the ICT sector, thus activating Ekiti state’s digital economy and digital education.

Fayemi noted that the project execution, as well as the broadband policy in the state would be coordinated and supervised by a Digital Infrastructural Committee, made up of various relevant government institutions critical to the implementation of the project.

READ MORE: NCC, Infracos to boost broadband infrastructure with N265 billion 

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“For us the roadmap is first the fibre connectivity itself, the second is the adequate data center infrastructure, the third is the e-learning programme which will cover our educational institutions, then our safe city, our security programme will also be included.

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“With our geographical land information system (GIS), we would digitalize all our land records, and of course, commercial investment as well as digitalisation of our government assets and our health education initiative,” Fayemi explained.

 

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Economy & Politics

NCC reacts to claims that minister chased Diaspora Commission’s staff from office complex

The NCC denies claims of the video on social media, pointing out that the staffs of NIDCOM were not sent packing from the digital economy complex

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NCC orders immediate suspension of USSD charges by telcos, 5G Network to undergo 3 months trial before approval - NCC , NCC licenses 20 new Internet service providers amidst challenges , 150 million Nigerians risk being defrauded – NCC , NCC warns telcos against cyber fraudsters , NCC rolls out new regulations on drone use, NCC licenses 10 new VAS providers as it projects market to hit $500 million , NCC, Infracos set to develop broadband infrastructure with N265 billion raise , Telecommunications: Broadband penetration set to grow, Telecoms operators fined N2.9 billion over infractions , NCC reacts to claims that minister chased away diaspora commission staff from office complex

The Nigerian Communications Commission (NCC) has reacted to claims by the Chief Executive of Nigeria Diaspora Commission (NIDCOM), Abike Dabiri-Erewa, that her staff members were chased out of its premises by armed men on the orders of the Minister for Communication and Digital Economy, Isa Pantami.

The NCC, through a press statement on May 24, 2020 signed by its Director, Public Affairs, Dr. Henry Nkemadu, has said that nothing of such happened as it denied claims in a video making rounds on social media that the staff of NIDCOM were sent packing from the digital economy complex.

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According to the press statement from NCC:

Following the completion of the NCC building at Mbora, Abuja designated as NCC Annex and the acute shortage of accommodation space for the staff of the commission in the NCC head office at Maitama, Abuja, the Board of the commission directed the decongestion of the Head office building. Some of the departments of the NCC had started moving to the new office complex of 5 floors when discussions were held between the NCC and the Diaspora Commission to enable the Diaspora Commission also utilize any free offices within the complex.

“The fifth floor allocated to them had to be used to accommodate other departments from the NCC headquarters to ease the congestion. NCC’s offer to house the Nigeria Diaspora Commission was predicated on the long held position of the NCC that agencies of government will achieve more through strategic collaboration, partnership, synergy and sharing to the extent allowed by relevant laws.”

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(READ MORE: PenCom dissolves interim management committee for First Guarantee Pension, appoints new board)

NCC disclosed that it had secured approval for the commissioning of the office complex by President Buhari, and also the launching of 4 important projects of NCC, together with the renamed Ministry of Federal Ministry of Communication and Digital Economy.

It also stated that the offer to NIDCOM had not been withdrawn, but had only hit a bump arising from the preparation for the visit of President Buhari to launch the projects and inaugurate the complex. It said that the Board and Management of NCC took a decision to ensure that every activity in the building was in line with the Federal Government’s agenda.

Going further, the statement reads:

“Incidentally, after the offer of the office spaces to the Diaspora Commission, the Director General, Mrs. Abike Dabiri-Erewa had not visited the complex to take possession of any of the offices and also the commission had not started using any of these spaces as offices.

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‘’As is usual in ensuring security and accountability before, during and after presidential visits, the building had to be cleared to allow for only known and identifiable persons to have access within the complex. Therefore, the Honourable Minister of the Federal Ministry of Communications and Digital Economy Dr. Isa Ali Ibrahim Pantami could not have sent armed men to drive the staff of the Diaspora Commission out of the Communication Economy Complex.”

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The statement also pointed out that as at that time, only NCC staff were accredited to have access within the premises and that all properties belonging to NIDCOM were safely warehoused in some of the offices within the complex.

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