The exchange rate between the dollar and naira is trading between N380 and N420, depending on who is selling and the mode of transfer.
In Nigeria, there are two types of forex you can buy: inflowed dollars and cash dollars. Inflowed dollars refer to forex transferred from one bank domiciliary account to another domiciliary account.
It could also be dollars flowing from a bank account in the US or Europe to a local or foreign bank account in Nigeria. In return, naira is paid to the seller’s account here in Nigeria.
Cash dollars are forex bought from bureau de change operators, black market dealers or anyone who has dollars in cash wishing to sell in exchange for naira. Transfers are therefore made using cash, thus the name “cash dollars”.
According to information from traders, pent up demand for inflow dollars is estimated at anywhere from $800 million to $1.2 billion. Some of the demand is driven by companies looking to pay for their supplies, move revenues to their global offices, repatriate dividend to shareholders or hedge against future cost.
Unfortunately, the COVID-19 pandemic and the crash in oil prices have all but extinguished supply of dollars from the IFEX market (official market for trading forex).
In an investor email note seen by Nairametrics, the CBN has not sold forex since March 20, 2020 leaving export proceeds as the only source of forex. Unfortunately, supply here is thin and hardly available.
Even when available, it is often quoted at off market prices and as high as N420/$1. In the IFEX window where forex is traded officially, traders reportedly quoted “between N387.50 and N390.00/$ for the USD/NGN pair” on Wednesday, despite the dollar scarcity.
“The IEFX market opened and closed at N387.60 and N386.63 with the highest transaction rate recorded at N401.57/$. Total volume traded for the day was $30.42mn,” as contained in the note to investors.
On exchange rate for “inflow dollars”: Several market reports seen by Nairametrics indicate that “Inflow dollars” trade at prices between N410 and N450 in the parallel market where they are traded over the counter.
Over the counter means they are not traded in the official IFEX market. Traders also opine that the volatility and disparity in price is because no one is really sure who owns dollars to sell or naira to exchange, thus price swings are wild.
It is no longer news that the Nigerian economy could contract by as much as 8% in 2020, no thanks to the increasing cases of coronavirus cases and the fall in oil prices. The economy is being caught in cross-hairs.
What it means: If the scarcity continues, the Nigerian real sector may come to a halt, creating more problems for the ailing economy. Also, more corporate organisations would suffer major setbacks in importation of their inventories.
Most Nigerian corporates rely on this inflow or wired forex to pay for inventory orders, factory inputs, dividends, technical and professional fees, computer equipment, and intangible assets, among others.
The development is causing problems for businesses across sectors, all of which are struggling to get the dollars they need for imports.
The adverse effect is that the scarcity would cause the prices of commodities to skyrocket, putting pressure on local currencies. This dollar squeeze is frustrating investors, increasing costs, and delaying projects. It may hamper future investment in the country.
Nairametrics Founder, Ugo “Ugodre” Obi-Chukwu, explained that the effect is that companies will have to “source for local substitutes, which can increase the cost of production and delivery timelines” for products. On the naira rate against the US dollar in the parallel market, he added that, “the parallel market depends on whether it is cash exchange or inflow exchange” affecting the price that will be paid.
Managing Partner, GBC Professional Services, Chartered Accountant, Gbenga Badejo, agreed with Obi-Chukwu when he observed that a lot of people hoard dollars not because they want to use them at the moment, but for speculative reasons.
According to him, two days after the CBN adjusted the exchange rate, several people hoarded the currency only to sell at N400 from N365. That is a lot of money.
He said, “CBN has the responsibility to control the market and avoid a situation where people put unnecessary pressure on the naira. People hoarding the currency can’t do anything with what they buy, if money is with them it does not make any sense.”
On the effect that the scarcity of inflow dollars would have on the real sector, he told Nairametrics that CBN should ensure that the economy is not shut despite the lockdown. “Petrodollar is not coming; foreign reserve will be depleted and we must not allow the real sector to suffer any scarcity. The Apex bank should ensure banks meet the demands of manufacturers in that regard,” Badejo added.
Skills Africa needs for sustainable development
Over a billion people with 5 official working languages – Arabic, English, French, Portuguese and Swahili , will again celebrate Africa Day this year.
From Addis Ababa to Durban, Lagos to Cairo, from the Sahara Dessert to the Nile River, over a billion people with 5 official working languages – Arabic, English, French, Portuguese and Swahili – will again celebrate Africa Day this year.
A day to remember, reminisce and celebrate successes recorded against the struggles for independence, freedom from apartheid and colonization. Although, with the new normal brought about by Coronavirus, the 2020 celebrations would be quite unlike previous years.
The Africa Union (Formerly OAU) has recorded good milestones in terms of political independence and self-governance. So now is a good time for Africa to reflect on our independence.
On reading the objectives of the Africa Union (AU), words like independence, territorial integrity, human rights, security, cooperation are splattered across the pages. Significantly, none of the AU objectives seeks economic autonomy for Africa or her member states. This is a fundamental flaw which speaks directly to Africa’s issue of having a large population without the requisite skills for growth.
Our education is largely dependent on the western curriculum and narrative. There is hardly any major infrastructure, industrial or development project in Africa with 100% African content in manpower, materials or capital.
It is now well established and more evident that political independence without economic independence is like a car without an engine. Economic empowerment is the nucleus of national development. No fewer than 14 West African countries currently use CFA Franc, with some having used the currency for at least 75 years. This goes beyond nameplate as the Bank of France holds half of those countries’ currency reserves. This is effectively cutting their growth capacity by 50%.
8 of those 14 countries will relinquish the CFA franc for the new ECOWAS currency, ECO (to be launched in July 2020). However, there is no indication that the affected African leaders would ask France for compensation for the years of economic sabotage to their countries. The introduction of the ECO was to bring a ray of hope, but we hope the real difference would not just be in the colour of the currency. This is because the ECO will not be autonomous but would be pegged against the Euro.
France is not alone in the economic sabotage of Africa, they are in the good company of the United Kingdom, the US and Belgium, to mention a few. However, are these foreign countries to blame? Africa got her independence, but African leaders refuse to be independent and the dependent mentality is also enshrined in the AU objectives.
One of the AU objectives states “to work with relevant international partners in the eradication of preventable diseases and the promotion of good health on the continent.” The statement looks good superficially, but it is enlaced with aid orientation, the lack of drive for self-reliance, and a beggarly mindset.
Let us educate Africa to pursue the development of its people, with core skills that are necessary to deliver the quality of the progress and growth that Africans desire. African construction companies should make African infrastructure and 100% African content should be the target in automobile engineering, healthcare, information technology,
Necessity is said to be the mother of invention. The need for Africans to lead Africa out of poverty, tyranny and underdevelopment is a matter of great importance, far beyond just necessity. Every African must desire to get skilled, and not just education, as we currently have it. We must have the competence to develop our agriculture system, mine Africa’s natural resources and add value by processing them locally.
Africa Day would only be truly worthy of celebration when African people and countries are skilled enough to accomplish our dreams of self-reliance and economic independence.
Article written by Olatunde Akintola. Olatunde is a Fellow of the Institute of Chartered Accountant of Nigeria and alumni of Manchester Business School. He writes from Lagos.
Tiktok’s In-App revenue surges amid lockdown
ByteDance Ltd’s brainchild, TikTok, together with Douyin ranking tops globally on mobile apps with the highest revenue generated for the month of April.
The meme-making business has proven to be worth all the fuss, with TikTok, as well as its Chinese twin app, Douyin, ranking tops globally on mobile apps with the highest revenue generated for the month of April.
Sensor Tower, notes that just in the first quarter of this year, ByteDance Ltd’s brainchild, TikTok, together with Douyin which caters to the Chinese market, generated 315 million downloads globally, from the 187 million it had just a year earlier.
The ranking, which was based on their in-app purchases, reveal a tenfold increase, as the companies garnered a whopping $78 million in revenue. The Chinese market is said to have contributed 86.6% of Douyin’s revenue, followed by the U.S market which contributed 8.2%.
This places them ahead of older names like Netflix & YouTube. As opposed to using subscriptions like these established brands, TikTok and Douyin allow users to purchase virtual currency to spend on their favorite content creators.
(READ MORE: Does YouTube stand a chance against TikTok?)
While ByteDance is exploring the world of online commerce, it continues to rely on advertising as its primary income source. However, Emarketer projects that more than 75 million US social network users will make at least one purchase from a social channel in the year 2020.
Sanwo-Olu to virtually inaugurate projects as he presents scorecard of first year in office
Some of the projects to be commissioned will be done virtually, while a few will be done on-site.
Lagos state governor, Babajide Sanwo-Olu, will virtually inaugurate housing, education, and road projects on May 29, as part of activities to mark his first year in office.
According to a report by NAN, the projects are part of the government’s efforts to renew infrastructure in critical sectors and to make the commercial centre a smart city.
Some of the projects to be commissioned will be done virtually, while a few will be done on-site.
Lagos state Commissioner for Information and Strategy, Mr Gbenga Omotoso, listed some of the projects in an official statement. He said:
”In the education sector, Sanwo-Olu will conduct virtual inauguration of completed classroom blocks in Maya Secondary School, Ikorodu; Eva Adelaja Junior School, Bariga; and Saviour Primary School, Ifako-Ijaiye, among others.
“Virtual inauguration of completed works such as the Concrete Jetty in Baiyeku, Ikorodu, Aradagun-Ajido- Epeme Road in Badagry, and the Maryland Signalisation project also form part of the itinerary to commemorate the anniversary.”
Omotoso also stated that the Governor would inaugurate the 360-unit Lagos Homes in Ikorodu, and then visit Igbogbo Baiyeku IIB Estate, Lekki, and the Courtland Villas on Femi Okunnu Estate during the week.
Plans for celebrating Children’s Day
In a related development, Governor Sanwo-Olu will deliver an address on Wednesday May 27 to mark the children’s day celebration, and the 53rd anniversary of Lagos state.
Omotoso, however, noted that all celebrations would be kept on the low in reflection of the current challenges and realities of the COVID-19 pandemic.
Presenting one-year scorecards
The activities for the week are expected to begin with press briefings at J.J.T Park in Alausa on May 27, where members of the State Executive Council will present their scorecards in line with the six pillars of the state’s T.H.E.M.E.S Agenda.
According to the information commissioner, there will be two sessions of press briefings daily from May 27 to June 3, as the Governor considers it expedient to render a stewardship account of the last one year.
“Three special publications highlighting the achievements of the Babajide Sanwo-Olu administration and testimonies of beneficiaries of various initiatives of the government are slated for presentation to the public by the governor and his Deputy, Dr Obafemi Hamzat,” he added.