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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

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diaspora remittances, Total credit to the economy rose to N19.54trillion – CBN Governor, CRR debits, P-AADS, #EndSARS: CBN says funds in frozen accounts may be linked to terrorist activities, Covid-19: Court closures impacted revenue generation for courts - Emefiele, P&ID dispute: UK Court orders $200 million guarantee to FG, Leaked letter by Poultry Farmers Association triggered CBN emergency approval to import maize, nImplications of CBN's latest devaluation and FX unification, current account deficit, IMF, COVID-19, CBN OMO ban could give stocks a much-needed boost , CBN’s N132.56 billion T-bills auction records oversubscription by 327% , Nigeria pays $1.09 billion to service external debt in 9 months , Implications of the new CBN stance on treasury bill sale to individuals, Digital technology and blockchain altering conventional banking models - Emefiele  , Increasing food prices might erase chances of CBN cutting interest rate   , Customer complaint against excess/unauthorized charges hits 1, 612 - CBN , CBN moves to reduce cassava derivatives import worth $600 million  , Invest in infrastructural development - CBN Governor admonishes investors , Credit to government declines, as Credit to private sector hits N25.8 trillion, CBN sets N10 billion minimum capital for Mortgage firms, CBN sets N10 billion minimum capital for Mortgage firms , Why you should be worried about the latest drop in external reserves, CBN, Alert: CBN issues N847.4 billion treasury bills for Q1 2020 , PMI: Nigeria’s manufacturing sector gains momentum in November, CBN warns high foreign credits could collapse Nigeria’s economy, predicts high poverty, MPC Member, BVN, Fitch, Foreign excchange (Forex), Overnight rates crash after CBN’s N1.4 trillion deduction, Nigeria’s foreign reserves hit $36.57 billion; Emefiele keeps his word on defending the naira, CBN to support maize farmers, projects 12.5 million metric tons in 18 months, BREAKING: CBN Upscales Greenwich Trust Limited, grants it's operational license for merchant banking, AGSMEIS: CBN expand beneficiaries to 14,638., CBN expands access to mortgage financing

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.

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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.

Stanbic 728 x 90

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.

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Nairametrics Research team tracks, collates, maintains and manages a rich database of macro-economic and micro-economic data from Nigeria and Africa. Our analysts share some of the data collated on Nairametrics, using formats such as docs, tables and charts etc. The team also publishes research based analysis as articles on a regular basis.

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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.

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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.”

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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.

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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.

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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.

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BUA Cement

The Nigerian Senate has called for the liberalization of Nigeria’s cement policy to boost production and subsequently crash the price of the commodity in the country.

This motion was raised by Senator Lola Ashiru at today’s senate plenary, the senator also tasked the Federal Government on providing more industrial incentives to bring new players into the cement industry, in addition to the liberalization of the cement policy in Nigeria.

Ashiru explained that to reduce the price of cement and in extension, other building materials in the country, the Federal Government needs to provide an enabling operating environment that will encourage new entrants in the country.

The Senate in conclusion called on the FG to provide more industrial incentives and protections such as concessionary loans and larger tax incentives to encourage new entrants and expand the national cement production infrastructure, as this boost in production will lead to a downward review of cement price in Nigeria.

What industry leaders are saying

Earlier this year the founder of BUA Group, Abdulsamad Rabiu, called for the liberalization of Nigeria’s cement policy to boost production and reduce the price of the commodity.

The billionaire philanthropist faulted the belief that Nigeria is self-sufficient in terms of cement production, noting that recent statistics and figures on Nigeria’s population and cement production do not support this status of sufficiency in cement production as stated by some individuals.

He attributed the high price of cement products in the country to the supply gap which exists in the country, as the few producers who currently operate in the country are unable able to meet the country’s huge and growing demand.

The Group Executive Director, Strategy, Portfolio Development and Capital Projects, Devakumar Edwin, explained that the demand and consumption of cement in the nation currently outstrips supply, and this can be pegged on the growth in the country’s population, and the strong appetite for real estate investment and construction in the country.

He revealed that a supply gap of about 40% exists in the country’s cement market and that all players in the industry are working hard to level production with the rising demand in the country.

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