Anytime we hear about foreign reserves, we just learn about the movement in the reserves, whether upwards or downwards. Most people do not understand the composition of a country’s foreign reserves and just assume it is made up of hard cash stored somewhere.
According to the Central Bank of Nigeria, foreign reserves are assets held on reserve by a monetary authority in foreign currencies. These reserves are used to back up liabilities and influence monetary policies. They include foreign banknotes, deposits, bonds, treasury bills, and other government securities.
The International Monetary Fund (IMF) states that international reserves are those external assets that are readily available to and are controlled by a country’s monetary authorities. They comprise foreign currencies, other assets denominated in foreign currencies, gold reserves, special drawing rights (SDRs) and IMF reserve positions.
Why does a country have foreign reserves?
These reserves may be used for direct financing of international payments imbalances or for indirect regulation of the magnitude of such imbalances via intervention in foreign exchange markets in order to affect the exchange rate of the country’s currency.
In essence, foreign reserves give the government the confidence and resilience to withstand shocks if a country’s currency crashes or devalues.
What are Nigeria’s external reserves composed of?
The CBN Act of 2007 provides that the apex bank shall maintain a reserve of external assets consisting of all or any of the following:
- Old coin or bullion;
- Balance at banks outside Nigeria where the currency is freely convertible and in such currency, notes, coins, money at call, and any bill of exchange bearing at least two valid and authorized signatures and having maturity not exceeding ninety days; exclusive of days of grace;
- Treasury bills (with a maturity period not exceeding one year) issued by the government of any country outside Nigeria whose currency is freely convertible;
- Securities of, or guarantees by, a government of any country outside Nigeria whose currency is freely convertible, provided such securities shall mature in a period not exceeding ten years from the date of acquisition and are of such investment grade as may be determined by the Board from time to time;
- Securities of, or guarantees by international financial institutions if such securities are expressed in currency freely convertible, in the form of investment-grade assets as may be determined by the Board and maturity of the securities shall not exceed five years;
- Nigeria’s Gold Tranche in the International Monetary Fund (IMF);
- Allocation of Special Drawing Rights (SDR) made to Nigeria by the IMF; and
- Investment by way of loans or debenture in an investment bank or development financial institutions within or outside Nigeria for a maximum period of five years.
The conditions for such investment are that:
- The amount invested should not more than 5% of the total reserves;
- The reserve level at the time should be able to sustain twenty-four months of import; and
- The loan or debenture is in foreign currency.
Nigeria’s external reserves as of the time of publishing this article stood at $34.673 billion.
Chinese Loans: Clauses are international standard terms – Amaechi
The probes into Nigeria’s use of foreign loans could negatively affect how foreign lenders perceive the country.
Nigeria’s Minister of Transport, Rotimi Amaechi, said the clauses contained in Nigeria’s Chinese loans for infrastructural development are standard international commitment clauses. In other words, such are regular, applicable clauses whenever a country goes into a trade agreement with another country.
The Minister revealed this while on Channels Television’s evening political talk show, Politics Today.
I have said that these are standard clauses in international commercial agreements. We have been keeping to our repayment plans and we will repay our loans. pic.twitter.com/XGnakdgQsq
— Chibuike.R. Amaechi (@ChibuikeAmaechi) August 5, 2020
Back story: The Nigerian Senate called a hearing last week, asking the Minister to explain the clauses on Chinese-funded infrastructure projects in Nigeria. Instead, the Minister argued that the probe into Nigeria’s use of foreign loans to finance infrastructure projects could negatively affect how foreign lenders perceive the country and also impact further financing for future projects.
Later during his recent Channels TV interview, the Minister said Nigeria is not Madagascar or Sri Lanka and has been keeping up with payment plans for the loan. “ No country has complained about Nigeria’s loan obligations,” Amaechi said.
Although he acknowledged Nigeria has debt over revenue problems, he made it clear that “that does not mean we have at any point in time refused to pay our loans.”
Amaechi then claimed that only a criminally-minded person would have issues with the loan terms. “Only those who don’t want to repay are worried about the clauses. If we repay our loans we won’t get arbitration,” he said.
The Minister also disclosed that the Ministry of Finance has repaid up to $98 million of the loans, adding, “those are standard international commitment clauses” and that no loan can be taken by the government without the approval of the National assembly.
NDDC reveals more lists of contracts awarded to federal legislators
The Commission said it released the list to expose committee chairmen in the National Assembly.
The Niger Delta Development Commission (NDDC) said there is another list of emergency contracts that were awarded to National Assembly members in 2017 and 2019. This list was not submitted to National Assembly following the recent probe of the NDDC.
This disclosure was made in a press statement by the NDDC earlier today which was signed by the commission’s Director for Corporate Affairs, Charles Odili. According to the statement, the initial list that was submitted by the Minister for Niger Delta Affairs, Senator Godswill Akpabio, was actually compiled by the former management of the commission in 2018, not the minister himself.
The statement by the NDDC went further to note that the Interim Management Committee of the Commission stands by the list which came from the files already in the possession of the forensic auditors.
“The Interim Management Committee (IMC) of the Commission stands by the list, which came from files already in the possession of the forensic auditors. It is not an Akpabio list but the NDDC’s list. The list is part of the volume of 8,000 documents already handed over to the forensic auditors,” the statement said in parts.
In the meantime, the NDDC has urged prominent indigenes of the Niger Delta, whose names appeared on that list, not to panic, because the NDDC is aware that their names were used to secure contracts. The ongoing forensic audit would help to unearth those behind those contracts, the NDDC said in the statement.
Furthermore, the commission disclosed that it released the list to expose committee chairmen in the National Assembly who used fronts to collect contracts from the NDDC, some of which were never executed. Interestingly, the list did not include the unique case of 250 contracts that were signed for and collected in one day by one person, ostensibly for members of the National Assembly.
While assuring that the forensic audit exercise is on course, the NDDC noted that the commission had positioned 185 media support specialists to identify the sites of every project captured in its books for verification by the forensic auditors.
The NDDC then enjoined members of the public not to be distracted or swayed by a lot of misinformation and falsehood that are being orchestrated by mischief makers, even as more of such will be expected by those opposed to the IMC.
It can be recalled that Akpabio, while appearing before the members of the house of representatives ad-hoc committee probing the N40 billion corruption allegation against the IMC of NDDC, said that most of the contracts that are being awarded at the commission were given to members of the national assembly.
Not that likely, the Speaker of the House of Representatives, Femi Gbajabiamila, asked the minister to provide within 48 hours, the names of the legislators that benefitted from such contracts with full details or face legal action.
Senator Akpabio, in response to the ultimatum, sent an official letter to the Speaker, providing the names of the national assembly members that benefitted from such contracts.
FG reveals amount spent on school feeding program during lockdown, denies spending N13.5bn monthly
The FG said it had only spent about N523.3 million on the programme during the lockdown.
The Federal Government has denied some media reports that it spent the sum of N13.5 billion monthly on the homegrown school feeding program across the 36 states of the federation and Abuja during the lockdown period when school children were at home.
The FG said it had only spent about N523.3 million on the school feeding program during the lockdown.
The disclosure was made by the Minister of Humanitarian Affairs, Disaster Management and Social Development, Sadiya Farouq, during the daily briefing of the Presidential Task Force (PTF) on Covid-19, on Monday, August 3, in Abuja.
The minister said that there had been a lot of rumours and speculations about one of the key government interventions, the Home Grown School Feeding Programme.
She explained that the programme was modified and implemented in three states following a March 29th Presidential directive, while also stating that it was done in consultation with stakeholders.
The minister said, “It is critical at this juncture to provide details that will help puncture the tissue of lies being peddled in the public space. The provision of ‘Take Home Rations’, under the modified Home Grown School Feeding programme, was not a sole initiative of the MHADMSD.
“The ministry, in obeying the Presidential directive, went into consultations with state governments through the state Governor’s Forum, following which it was resolved that ‘take-home rations’, remained the most viable option for feeding children during the lockdown. So, it was a joint resolution of the ministry and the state governments to give out take-home rations.
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“The stakeholders also resolved that we would start with the FCT, Lagos and Ogun states, as pilot cases.”
Going further, she revealed that each take home ration was valued at N4,200 and that the figure was arrived at after proper consultation.
The minister said that the figure was generated from data provided by the National Bureau of Statistics (NBS) and the Central bank of Nigeria (CBN).
She said, “According to statistics from the NBS and CBN, a typical household in Nigeria has 5 to 6 members in its household, with 3 to 4 dependents. So, each household is assumed to have three children.
“Based on the original design of the Home Grown School Feeding programme, long before it was domiciled in the ministry, every child on the programme receives a meal a day. The meal costs N70 per child.
“When you take 20 school days per month, it means a child eats food worth N1,400 per month. Three children would then eat food worth N4,200 per month and that was how we arrived at the cost of the ‘take-home ration.”
The Minister said that it was agreed that the federal government would provide the funding, while the various state governments would handle the implementation. She said that in order to ensure a transparent process, the government had to partner with the World Food Programme (WFP) as technical partners.
She also said that her ministry invited government agencies like the EFCC, CCB, ICPC, DSS and some NGOs to monitor the process, just as TrackaNG also monitoring and giving daily updates, thereby validating the programme.
Giving a further breakdown she disclosed that in the FCT, 29,609 households were impacted, 37,589 households in Lagos and 60,391 in Ogun, making a total of 124,589 households that benefited from the programme between May 14, and July 6.
She said, if 124,589 households received take-home rations valued at N4,200, the amount would be N523,273,800.
A media report had suggested that the Federal Government claimed it was spending the sum of N679 million daily or N13.5 billion on the school feeding program across the country even during the lockdown period when school children were at home.