The value of a country’s currency should, irrespective of whether it is operated on a fixed, floating or managed-float currency regime, depict the performance of the country’s economy and how long the country can maintain the exchange rate system.
The Central Bank of Nigeria (CBN) has adjusted the value of the Naira by as much as 15%, as it seeks a single exchange rate instead of the often criticized multiple exchange rate system exchanging at N380 to the dollar
The multiple exchange rates system, which had been criticized by the IMF, has kept the official rate at about N307 per dollar.
It uses this to supply cheap foreign exchange to government institutions and selected companies, including refined fuel importers.
The CBN now wants to merge the official rate, the rate for importers, exporters and foreign-exchange bureaus.
The strengthened concerns over a potential technical recession in Nigeria has forced the Central Bank of Nigeria to relinquish its stealth peg to truly allow the Naira to be determined by the natural forces of supply and demand.
This development simply added to the repeatedly depressed oil prices and declining oil production from weakened global economic outlook growth which noticeably soured sentiments towards the Nigerian economy.
The Coronavirus pandemic has hit China, Iran, Western Europe, and the U.S the hardest but falling oil prices and global economic stress has led to capital flowing out of emerging markets like Nigeria, in a flight to safety.
Nigeria’s currency peg is one of the most unsustainable. Foreign exchange has fallen by 20% since last June 2019 to $35.98 billion as of 21st March 2020.
In a recent chat with Nairametrics, analyst, Temitope Busari, CFA, said, “The bells of devaluation rang yet again and it really just marks the onslaught of a vicious cycle, the very same playbook in which decreasing external reserves, high debt levels, and huge funding deficits, force the country into an action that essentially makes the people poorer.
“Until the underlying issues are addressed, I believe the intrinsic value of the Naira cannot be placed. I read recently that an offshore investment bank valued the Naira somewhere around $/600 and I simply chuckled at the irony of it all; they will continue to throw such sentiments around to pave the path that allows them continually pick up Nigerian assets for cheap.
“The regimented approach to our FX markets does very little to help as with simple economics, allowing the currency to float along with the forces of demand and supply will allow it settle for what it’s truly worth.”
According to her, in as much as Nigeria continues to falter with the diversification of the economy away from oil, the nation would continue to relinquish control over her own currency.
“Free markets, robust trade surpluses, and large scale exports from the agricultural and mining sectors. Technology and other services are elements that could improve the country’s FX earning capabilities and as such, allow all to discover what our currency is worth.”
Although there may be concerns of inflation spiraling out of control as the Naira finds its true value in the short term, this could be the first true step for the nation to shield itself from external risks.
With the parallel and official markets potentially closing the gap as the Naira free floats, liquidity could increase as investors send their dollars to the official exchange.
As of now, the Naira trades around N380 to the Dollar and could depreciate further as a combination of low oil prices and ongoing fears over the domestic economy encourages investors to install another round of selling.
CardinalStone Research, in an email to Nairametrics, reported that “Policy responses are likely to provide a calming effect. We believe the soothing measures could help manufacturers cover important obligations and keep plants running to meet domestic demand without inordinately raising prices to account for the rising cost of raw materials.
“The measures to support pharmaceutical and healthcare companies are also positive, given the shutdown of countries across the globe, ongoing spread of the COVID-19 virus in Nigeria, and sustained panic buying of pharmaceutical products domestically.”
However, measures to boost liquidity and economic activities may cascade to some pressures on the naira, which has been well sold in the last two months (CBN intervention: February – $2.1billion; March – $1.8 billion).
(READ ALSO: Curbing COVID-19 through naira)
It stated, “These pressures, and continued moderation in oil prices, are likely to offset gains from the mild naira devaluation implemented by the CBN. In addition, even though the FX rates across the I&E and BDC markets are now priced closer to the long-run real effective exchange rate of N382/$, we believe our fair value estimate of c.N437.20/$ better captures the realities of sustained double-digit inflation and twin deficits across fiscal and current accounts.
“That said, the recent narrowing of FX spreads across the currency markets could imply CBN’s growing acceptance of the need to reprice the currency to reflect the state of fundamental variables in challenging periods.”
In all, not until a solid economic framework is being laid for a highly internal, productive Nigerian economy the value of the naira will continue to get worse and revolves in its vicious cycle laid by its history.
COVID-19 forces tenants to request moratoriums from property owners
Tenants demanding moratorium from landlords because of the effects of COVID-19.
The effect of the Coronavirus pandemic is telling on the Real Estate sector, as many occupants have requested moratoriums from property owners or managers.
In separate interviews by Nairametrics, some tenants said that they could no longer afford their rents, hence the need for moratoriums. If denied, a lot of them are ready to move to border towns of Lagos.
A moratorium is a legal authorization to debtors to postpone payment. The document can be obtained by tenants, to prevent the managers or owners of properties from taking legal actions against them.
A banker and resident of Oduduwa Crescent, Ikeja GRA, who simply identified as Kola, said that his landlord had informed him of a planned 25% increment in his rent from April 2020, a month before his rent was due, which he had agreed to.
Unfortunately, in May 2020, his employer (one of the Tier-1 banks) gave him the option of either accepting a 25% pay cut in May or resigning. Considering the fact that he had no side hustle, Kola chose the ‘lesser evil.’
“I took the decision because it pays me to allow a pay cut, than being out of job. At that point, I considered requesting a moratorium, as I have never owed rents before. I could afford to pay the rent, but I didn’t know how long i will be without a job, and paying the rent from my savings was not a wise decision for me.
“Expectedly, the property owner was not comfortable with my request, as he suggested that I relocate to a cheaper facility.”
In his own case, Richard, who was a manager in one of the hotels close to the Lekki toll gate, was not as lucky as Kola. His rent was due by May, same month his employer asked him to stay at home till further notice.
Efforts to plead with his landlord to buy more time fell on deaf ears, as the owner of the Surulere apartment was bent on collecting the rent.
He said, “I had no choice but to plead for three months to secure another apartment when it became obvious that my employer would not recall us anytime soon.
“Eventually, I decided to move from Surulere to Magboro where rents are cheaper, and property owners may be reasonable unlike their counterparts in Lagos.”
Kola and Richard are only two among hundreds of breadwinners that lost their sources of income or had pay cuts, especially during the lockdown. A lot of them, whose rents were due between April and July, are currently looking for cheaper residences amidst pressure from their landlords.
No doubt, apartments are cheaper in some border towns as Lagos Akute, OPIC (Wawa), Arepo, and Magboro, all in Ogun State.
For instance, while a self-contain apartment is obtainable between N120,000 to N150,000, a 2-bedroom flat goes between N250,000 to N300,000 per annum, and a 3-bedroom flat is rented between N350,000 to N400,000. In the city centre, such as Ikeja, Gbagada and Surulere or on the Island, the rents are astronomical.
The heat will be more
A Real Estate practitioner and also the Vice President, Lagos Chamber of Commerce and Industry (LCCI), Gbenga Ismail, explained that the impact of COVID-19 in real estate would be felt later, because of the tenancy/rent structure of the sector.
Unlike what is obtainable in other climes like United Kingdom (UK) and the United States of America, where rents are renewed on a monthly or quarterly basis, Nigeria may not feel the pressure now, as rents are paid in one or two years’ advance.
Ismail, in an interview with Channels TV said, “Most people that either lost their jobs, or had their salaries slashed, are likely to have paid their rents in advance before the virus, and that could still ease the tension for now, at least till the end of the year.
“Right now, what happened is that, by the lockdown period, you won’t feel anything; but by the third or fourth quarter of the year, you start feeling it; only then, would we see how it has affected Nigeria.
“By then, people won’t be able to pay rents or buy houses as planned. We are not sure of where the monetary issues are going now, and if lending will continue into the real estate sector. We are yet to see some of these things going on.
“Even in inventories, where developers have put houses out for rent, the concern is who is going to rent them? Before COVID-19, we wait 6 months before houses get rented or leased, but now it may not be less than 12 months. The immediate impact would soon start to reveal itself.”
More plead for moratorium
Ismail added that more tenants would likely plead for moratoriums, because their businesses may have been affected, and some might have lost their jobs.
“Those who have mortgages and are possibly in the risk areas of losing their jobs, will definitely have discussions with their lenders if that happens. I think the mortgage firms have to listen and think of how to help them, since the COVID situation is a force majeure – unexpected circumstance. People are being forced to make decisions they did not plan to make,” he added.
In all, the expert urged all stakeholders not to panic, as the phase will definitely pass, and the economy will gradually recover.
COVID-19 Update in Nigeria
On the 20th of September 2020, 97 new confirmed cases and 3 deaths were recorded in Nigeria.
The spread of novel Corona Virus Disease (COVID-19) in Nigeria continues to record increases as the latest statistics provided by the Nigeria Centre for Disease Control reveal Nigeria now has 57,242 confirmed cases.
On the 20th of September 2020, 97 new confirmed cases and 3 deaths were recorded in Nigeria, having carried out a total daily test of 2,609 samples across the country.
To date, 57,242 cases have been confirmed, 48,569 cases have been discharged and 1,098 deaths have been recorded in 36 states and the Federal Capital Territory. A total of 482,321 tests have been carried out as of September 20th, 2020 compared to 479,712 tests a day earlier.
COVID-19 Case Updates- 20th September 2020,
- Total Number of Cases – 57,242
- Total Number Discharged – 48,569
- Total Deaths – 1,098
- Total Tests Carried out – 482,321
According to the NCDC, the 97 new cases were reported from 12 states- Lagos (46), Kwara (12), Rivers (11), Adamawa (4), Niger (4), Ogun (4), Osun (4), Ekiti (3), Imo (3), Kaduna (3), Plateau (2), FCT (1).
Meanwhile, the latest numbers bring Lagos state total confirmed cases to 18,943, followed by Abuja (5,551), Oyo (3,231), Plateau (3,231), Edo (2,611), Kaduna (2,348), Rivers (2,243), Delta (1,799), Ogun (1,766), Kano (1,734), Ondo (1,597), Enugu (1,234), Ebonyi (1,038), Kwara (1,025), Abia (881), Katsina (848), Osun (817), Gombe (799), Borno (741), and Bauchi (689).
Imo State has recorded 562 cases, Benue (473), Nasarawa (448), Bayelsa (394), Jigawa (322), Ekiti (317), Akwa Ibom (288), Niger (254), Adamawa (234), Anambra (232), Sokoto (161), Taraba (95), Kebbi (93), Cross River (85), Zamfara (78), Yobe (75), while Kogi state has recorded 5 cases only.
Lock Down and Curfew
In a move to combat the spread of the pandemic disease, President Muhammadu Buhari directed the cessation of all movements in Lagos and the FCT for an initial period of 14 days, which took effect from 11 pm on Monday, 30th March 2020.
The movement restriction, which was extended by another two-weeks period, has been partially put on hold with some businesses commencing operations from May 4. On April 27th, 2020, Nigeria’s President, Muhammadu Buhari declared an overnight curfew from 8 pm to 6 am across the country, as part of new measures to contain the spread of the COVID-19. This comes along with the phased and gradual easing of lockdown measures in FCT, Lagos, and Ogun States, which took effect from Saturday, 2nd May 2020, at 9 am.
On Monday, 29th June 2020 the federal government extended the second phase of the eased lockdown by 4 weeks and approved interstate movement outside curfew hours with effect from July 1, 2020. Also, on Monday 27th July 2020, the federal government extended the second phase of eased lockdown by an additional one week.
On Thursday, 6th August 2020 the federal government through the secretary to the Government of the Federation (SGF) and Chairman of the Presidential Task Force (PTF) on COVID-19 announced the extension of the second phase of eased lockdown by another four (4) weeks.
Godwin Obaseki wins Edo State governorship election
Incumbent governor, Godwin Obaseki emerged winner in the Edo State gubernatorial election.
Independent National Electoral Commission(INEC) has declared Godwin Obaseki the winner of the Edo State gubernatorial election today.
Mr. Obaseki will return as the Governor of the state for a second term.
The results were declared by INEC on Sunday afternoon after the results were counted from all LGA’s on Saturday.
Obaseki had 307,955 votes, which was enough to be declared a clear winner over Ize-Iyamu’s 223,619 votes.
Obaseki took to his Twitter handle to thank the people of Edo State for their votes. He stated,
“Words fail me in saluting our teeming supporters who displayed immense courage in the face of threats, intimidation and brutalization. The collective will of Edo people made it possible for us to triumph over godfatherism. Congratulations to all Edo people. This is our victory!”
Words fail me in saluting our teeming supporters who displayed immense courage in the face of threats, intimidation and brutalization. The collective will of Edo people made it possible for us to triumph over godfatherism. Congratulations to all Edo people. This is our victory! pic.twitter.com/4X4Lfk3wMb
— Godwin Obaseki (GGO) (@GovernorObaseki) September 20, 2020