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IMF pressures Nigeria to fast track exchange rate unification 

IMF expressed special interest in getting Nigeria to follow through with the unification of the multiple exchange rates

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IMF discloses immediate priority , Reduce funding oil subsidy - IMF to Nigeria , IMF: 40% of African countries can't pay back their debts , Nigeria among countries that pushed Global debt to $188 trillion - IMF , Coronavirus: World Bank, IMF to support Nigeria and other member countries affected, IMF, World Bank to hold meetings via conference call over Coronavirus epidemic, IMF advises banks to suspend dividend payment

As a fallout of the economic crisis caused by the coronavirus outbreak, the International Monetary Fund (IMF), on Tuesday, April 28, 2020, approved the sum of $3.4 billion, as emergency financial support for Nigeria. 

The financial support, which is under its Rapid Financing Instrument (RFI) programme, is to help mitigate the impact of the coronavirus pandemic on the Nigerian economyespecially with plugging the revenue gaps. 

As part of the highlights of the IMF statement, the Deputy Managing Director/Acting Chair of the Bretton Woods Institution, Mitsuhiro Furusawa, expressed special interest in getting Nigeria to follow through with the unification of the multiple exchange rates. 

In his words, the IMF Chief said, ‘’Steps taken towards a more unified and flexible exchange rate are also important and unification of the exchange rate should be expedited. 

While approving the $3.4 billion loan for Nigeria, the IMF is still pressuring Nigeria to fast track the unification of various exchange rates that are currently applicable in Nigeria. 

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The global lender has been very consistent with its opposition to the usage of multiple exchange rates because it believes that it creates a lot of distortion in prices, hurts businesses, and encourages corruption as it is susceptible to manipulation. The unified exchange rate will encourage transparency and help attract more Foreign Direct Investment (FDI). 

The single exchange rate has been identified as a very effective tool for resource allocation. 

The Central Bank of Nigeria (CBN), on its part, pointed out that it operates multiple windows, rather than multiple exchange rates. 

However, as a fallout of the crash in crude oil prices globally and the gradual depletion of the country’s external reserve, the CBN moved towards the unification of the exchange rate, when it adjusted the official rate from N305 per dollar to N360 per dollarand adjusted the rate for Bureau de Change operators from N360 per dollar to N380 per dollar.  

The investors and exporters window was also adjusted from N366 per dollar to about N380 per dollar. 

The IMF had earlier acknowledged that the country is already working towards that direction through the Economic Recovery and Growth Plan (ERGP).  

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It pointed out that unifying the exchange rate will impact the economy more positively than the multiple exchange rates, which create a lot of opportunities for arbitrage. Also, it avoids situations where public and private sector decisions are distorted due to uncertainties. 

Chike Olisah is a graduate of accountancy with over 15 years working experience in the financial service sector. He has worked in research and marketing departments of three top commercial banks. Chike is a senior member of the Nairametrics Editorial Team. You may contact him via his email- [email protected]

1 Comment

1 Comment

  1. Mohic

    April 30, 2020 at 2:48 pm

    Thanks for this crucial update 👍🏽

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Energy

NNPC opens bid for repairs of pipelines and depots on a finance and operate basis

The project is expected to be operated on a public-private partnership basis.

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Pipeline Vandalism: Stakeholder collaboration, critical to tame menace - Kyari, Nigeria explains when it will fully comply with OPEC+ output cut

The Nigerian National Petroleum Corporation (NNPC) declared open on Tuesday, August 11, bids by interested private investors to repair the pipelines and depots that are serving the refineries.

These pipelines, built almost 4 decades ago, are very critical in the successful movement of crude oil to the country’s 3 refinery complexes located in Port Harcourt, Kaduna and Warri, and the subsequent movement of the finished petroleum products to the consumers.

The pipelines, which according to NNPC are in dire need of comprehensive repairs, have experienced years of incessant theft and vandalism as well as ageing.

This project is expected to be operated on a public-private partnership basis as the bidders are expected to finance and execute the project, then operate for an agreed number of years before transferring back to the NNPC. In other words, the bidders for the extensive repairs of these pipelines would have to finance them independently and operate for a defined period in order to recover their investment costs with throughput tariffs.

It must be noted that this model is similar to the one that had been in place by the state oil giant for the refineries. The NNPC had also announced plans to get private investors to invest in the repair of the 3 refineries on a repair and operate basis, as they do not want to be involved in the management of these refineries.

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The NNPC Group Managing Director, Mele Kyari, had said that the ultimate plan for these refineries was to allow it to run on the LNG model, where the shareholders would be free to decide on the fate of these refineries going forward.

The refineries, which have only run sporadically, were shut down by NNPC earlier this year while awaiting repairs and upgrade. These 2 projects are expected to be handled separately according to information made available on Tuesday.

In addition, the new pipelines would need intrusion detection systems, as well as deep burial, to stop theft or vandalism. The deadline for the submission of these bids is due by September 18.

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Economy & Politics

WTO Job: Okonjo-Iweala reveals how to resolve the rift between US and China

Mrs Iweala revealed how she hopes to resolve the rift between the United States of America and China.

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WTO, Okonjo-Iweala joins South Africa's presidential economic advisory council as nation struggles with recession

As the jostle for the top job at the World Trade Organization (WTO) becomes more intense, the Nigerian candidate, Ngozi Okonjo-Iweala, has disclosed some of her plans for the institution. The former Nigerian Finance Minister recently had an exclusive interview with CNBC Africa.

Speaking during the interview, Mrs Iweala revealed how she hopes to resolve the rift between the United States of America and China, the 2 biggest economies in the world, especially as regards trade issues. She also noted that part of her vision is to build a trade institution where there is greater trust among its members. She also stressed that the WTO, at this critical time, is needed to ensure that trade and global markets remain open.

READ MORE: Gold price up as COVID-19 cases rise, U.S-China tensions heighten 

On healing the rift between the US and China, Okonjo-Iweala admitted that it is going to be challenging and not be easy. She said:

Well this is not going to be easy, if it was easy, it could have been done a long time since. So it would be very challenging but it is not an impossible job. It is very clear that both the US and China have been helped and benefitted from the multilateral trading system in the past. Hundreds of millions have been lifted out of poverty. They have experienced shared prosperity in the economies and their countries.’

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The Nigerian candidate pointed out that it is important to remind the US and China of this shared prosperity. She then disclosed that she would listen to both countries to find out what really are the issues causing distrust among them. She said that she will not want to be involved in the larger political problems, but will rather separate the trade issues and focus on them and build this trust.

READ MORE: Dangote fertilizer plant to begin production this year

Going further on how to settle their rift, Okonjo-Iweala said, “You need to begin to find areas where there can be confidence-building and trade. Building trust is not talking about it, you have to have areas where both can work together and agree and we have a golden opportunity in the fisheries subsidies negotiations that are going on now because the US is a party to it, China is a party, the EU, all other members.’’

“It is a multilateral negotiation, so if they can sit around the table with others to negotiate this and have a successful outcome, that is one thing that will be shared in common between the 2. So that will begin to build confidence. Then reaching out both in the US and in China to talk to the policymakers, go where the decisions are made, talk to congress also in the US and begin to show the benefits of the system again.’’

READ ALSO: FG inks $3.9 billion deal with Chinese firm for construction projects 

She also said they will look at reasons why they need to work together because their rift may be causing negative externalities for other members. She is of the opinion that exposing all of these, working with them, and listening carefully will begin to build confidence.

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She believes that while achieving this will be difficult, focusing seriously on trade issues can create room for a breakthrough.

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Coronavirus

US hands over 200 ventilators to Nigeria

The US Ambassador to Nigeria said USAID and  Nigeria will work very closely over the next couple of weeks.

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US hands over 200 ventilators to Nigeria

The United States of America, on Tuesday, August 11th, handed over some 200 ventilators to the Federal Government of Nigeria. This was disclosed by the Federal Ministry of Health via its Twitter handle, following the handover ceremony in Abuja.

The US Ambassador to Nigeria, Ambassador Mary Beth Leonard, at the handover event, explained that the ventilators are compact & portable & can be easily mobilized to reach those patients with the most severe symptoms of COVID-19.

Speaking during the handover ceremony, the Ambassador said, “Their arrival fulfills the commitment discussed between US and President Muhammadu Buhari earlier this year. Our support includes; training on the use & maintenance of this equipment, ensuring that the ventilators can address other respiratory illnesses in the years beyond.”

According to her, the United States Agency for International Development (USAID) and  Nigeria will work very closely and energetically over the next couple of weeks, with the Presidential Taskforce on COVID-19, to bring these ventilators across each of Nigeria’s states & the Federal Capital Territory.

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“The United States has been pivotal in supporting Nigeria’s membership in the ‘Every Breath Counts’ Coalition. Nigeria is now one of 2 countries in Africa to have an “oxygen roadmap” that seeks to fight against pneumonia, hypoxemia, & now COVID-19,” she stated. She then added that as the U.S. Ambassador to Nigeria, she remains proud of the strong friendship between the two countries.

The Backstory: Last April, Nairametrics had reported when the Minister of Information, Lai Mohammed, said that “President Donald Trump assured that the United States stands in solidarity with Nigeria in this difficult time and promised to send ventilators to support the country in its fight against the pandemic.”

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