Business News
IMF reveals CBN is ‘taking steps’ to float the Naira
Nigeria may need more than $3.4 billion from the IMF and bond buyers making it inevitable that the currency will be floated
The International Monetary Fund (IMF) announced it has approved Nigeria’s request for “emergency financial assistance” of $3.4 billion under its Rapid Financing Instrument (RFI). This is the first time in history that Nigeria will be obtaining a loan from the IMF.
Nigeria had approached the IMF over a month ago seeking financial assistance to help the current meet its balance of payment needs. The IMF also recently approved a loan of $ 1billion for Ghana to help fight the Covid-19 virus.
Economic Recession
The Nigerian Economy faces a double whammy from the falling crude oil prices and the Covid-19 pandemic. As a result, most analysts have predicted a slip back into recession and one that could top the 2016 recession that lasted for almost a year. This time, the fall in oil prices has had an immediate impact on government revenues while the COVID-19 pandemic has hit hard on the private sector due to the lockdowns.
The IMF recognizes this risk and has made it clear in some of its recent pronouncements. Earlier in the month, it projected that Nigeria was heading to a recession, its worst recession in three decades, as it expects the nation’s economy to recede by 3.4% in 2020. This realization has led to the approval of the $3.4 billion loans.
In a press release issued by the IMF, it explained that “the near-term economic impact of COVID-19 is expected to be severe, while already high downside risks have increased. Even before the COVID-19 outbreak, Nigeria’s economy was facing headwinds from rising external vulnerabilities and falling per capita GDP levels. The pandemic—along with the sharp fall in oil prices—has magnified the vulnerabilities, leading to a historic decline in growth and large financing needs” buttressing the urgent need for a loan for Nigeria.
The Deputy Managing Director and Acting Chair of the IMF, Mr. Mitsuhiro Furusawa, also issued the following statement:
“The COVID-19 outbreak—magnified by the sharp fall in international oil prices and reduced global demand for oil products—is severely impacting economic activity in Nigeria. These shocks have created large external and financing needs for 2020. Additional declines in oil prices and more protracted containment measures would seriously affect the real and financial sectors and strain the country’s financing.”
Financial Assitance with strings
However, what we found more interesting in the comment made by Mr. Farusawa was the inference that Nigeria was taking steps towards floating the currency (flexible exchange rate as they call it) and unifying the exchange rate.
“The authorities’ immediate actions to respond to the crisis are welcome. The short-term focus on fiscal accommodation would allow for higher health spending and help alleviate the impact of the crisis on households and businesses. Steps taken toward a more unified and flexible exchange rate are also important and unification of the exchange rate should be expedited.
This statement appears to confirm that there are moves by the central bank to float the naira and unify the exchange rate across all markets. This move is not a surprise considering that IMF loans typically attract strings such as hard policy reforms such as devaluation, floating currency, and removal of subsidies.
This is perhaps why Nigeria hasn’t obtained loans from the IMF in years allowing multiple governments to continue with economic policies that require less accountability and scrutiny but big on subsidies and capital controls. The institution is known for asking for strings when it comes to the aid of ailing countries.
Nairametrics research understands that the current IMF loan may not have come with strings considering the speed at which it was approved amidst the Covid-19 situation. However, Nigeria may need more than $3.4 billion from the IMF and bond buyers making it inevitable that the currency will be floated.
End of fixed exchange rate?
Recall, the CBN in March devalued (adjusted) the naira from N305/$1 to N360/$1 in the official market where the government converts forex from crude in exchange for Naira from the CBN.
It then moved the rate at which it sells forex in the Bureau De Change to N380/$1 from N360/$1. Since then, transaction volumes have crashed in the IFEX market where forex is traded as investors react to the Covid-19 lock-down.
The black market where the exchange rate is also sold crashed to as high as N460/$1 this week as dollar scarcity persisted in the market.
Corporate Press Releases
P2P crypto marketplace, Bitzlato (BZ) partners with Lemonade Finance to ease money transfers across Africa
The partnership will enable users on the BZ platform to buy and sell bitcoins and other cryptocurrencies on the marketplace at zero cost.
Bitzlato (BZ), the latest P2P Crypto Exchange to enter the African market, has added Lemonade.Finance, a borderless payment platform for Africa, as a payment method to its platform.
Lemonade Finance provides 100% digital payment experience for Africans to seamlessly participate in the global economy from anywhere in the world without any hassle or regardless of where they are from.
The partnership will enable users on the BZ platform to buy and sell bitcoins and other cryptocurrencies on the marketplace at zero cost.
Users in Nigeria will now be able to send Nigerian Naira (NGN) to MPESA at 0% transaction fee.
Speaking about this partnership, Ridwan Olarere, CEO, Lemonade Finance, said:
“We are excited to partner with such an innovative company like Bitzlato to connect more Africans through payment. Many Africans living on the continent face many difficulties when making payments as remittance companies charge high fees and are time-consuming. We are now providing our users with a cost-effective way of sending money to Ghana, Kenya, Uk and Europe.”
Commenting on the opportunities this provides to crypto traders on the BZ platform, Mike Lunov, CEO, BZ, said:
“This partnership will provide a much-needed gateway that enables the markets we serve to seamlessly interact with each other in a borderless and open environment. We seek to break the barriers that presently exist for cross border transfers and enable our users to generate value through the opportunities that accrue from cryptocurrencies trading. The innovation exhibited by the Lemonade platform, and the brilliance of its team assures users of top-notch, secure and reliable transfers going forward.”
According to BZ, during the first month, BZ will refund commissions in manual mode while using Lemonade Finance, but this will be automated at the end of this period.
Following this partnership, BZ is now looking to partner with merchants in the crypto space especially in Nigeria, Ghana, South Africa that have a steady flow of Nigerian Naira (NGN) to increase liquidity on the platform.
Take advantage of the new Lemonade Finance payment method on BZ, which offers zero transactional fees for money transfers from Nigeria into Kenya. Sign up on BZ and start trading crypto easily today.
Business News
Senate calls for the liberalization of cement policy to crash the price of the commodity
The Senate also tasked the FG on providing more industrial incentives to bring new players into the cement industry.
