Tuesday, 30th March 2021, the naira depreciated marginally at the parallel market, closing at N486/$1, this represents a N1 drop when compared to the N485/$1 that was recorded on the previous trading day.
However, the exchange rate between the naira and the US Dollar closed at N409/$1 at the Investors and Exporters window.
The naira appreciated against the US Dollar on Tuesday, 30th March 2021 gaining for the third consecutive day at the NAFEX window to close at N409 to a dollar despite very low dollar supply.
This represents a 0.03% gain, when compared to N409.13/$1 recorded on Monday, 29th March 2021.
Trading at the official NAFEX window
The naira appreciated against the US Dollar at the Investors and Exporters window on Tuesday to close at N409/$1. This represents a 13 kobo gain when compared to N409.13/$1 recorded on Monday, 29th March 2021.
- The opening indicative rate closed at N409.07 to a dollar on Tuesday. This represents a 10 kobo gain when compared to the N409.17/$1 that was recorded on Monday.
- Also, an exchange rate of N411 to a dollar was the highest rate recorded during intra-day trading before it closed at N409/$1. It also sold for as low as N400/$1 during intra-day trading.
- Forex turnover at the Investor and Exporters (I&E) window rose by 55.4% on Tuesday, 30th March 2021.
- A cursory look at the data tracked by Nairametrics from FMDQ showed that forex turnover increased from $30.84 million recorded on Monday, March 29, 2021, to $47.93 million on Tuesday.
Bitcoin, the most priced and popular cryptocurrency in the world gained 2.11% on Tuesday evening to trade above $58, 847.28 as it once more heads towards the $60,000 mark.
- The Chief Executive Officer and founder of cryptocurrency exchange Kraken, Jesse Powell, said that one bitcoin will be worth a Lamborghini by the end of the year
- Ethereum also gained 2.18% to trade at $1,849.46 as of Tuesday night.
- Large firms including Mastercard, Paypal and BlackRock have started using some digital coins in recent months.
- The Chief Executive Officer of Paypal, Dan Schulman used bitcoin to pay for cowboy boots.
Oil prices decline
Oil prices dropped on Tuesday with the reopening of the Suez Canal after a week-long blockage, as the rising US dollar put further pressure on crude.
- Brent Crude as of Tuesday evening traded at $64.14 per barrel as Oil prices were also reacting to a potentially bearish signal about US demand after CDC Director Dr. Rochelle Walensky said on a news conference on Monday that the United States was headed to impending doom with the renewed rise of COVID-19 cases.
- The American Petroleum Institute (API) reported a build in crude oil inventories of 3.910 million barrels for the week ending March 26.
- With the Suez Canal crisis over, the focus has now shifted to the OPEC+ meeting on Thursday, which is expected to decide how much oil production the group will keep off the market in May.
- Brent crude dropped by 1.29% during intra-day trading on Tuesday while WTI Crude dropped by 0.36% during the same period.
- Brent ($64.14), WTI crude ($60.36), Bonny Light ($63.13), OPEC Basket ($62.86), and Natural Gas ($2.620).
External reserve increase continues for the 6th consecutive day
Nigeria’s external reserve increased by 0.26% on Monday 29th, March 2021 to stand at $34.76 billion.
- This represents the sixth consecutive day increase, gaining a total of $340 million from $34.42 billion recorded as of March 18, 2021, to $34.76 billion as of 29th March 2021.
- Nigeria’s reserve had lost about $890 million year-to-date before recording increases in the past six days, which indicates that the recent oil price rally is beginning to reflect in the country’s external reserve.
- It is important for Nigeria that the increase continues as it will help the Central Bank stabilise the exchange rate against other currencies and meet up with pent-up obligations due to the lockdown embarked on in 2020.
Power Minister explains why power outages have risen
The Minister cited a breakdown of some National Integrated Power Plants supplying electricity to the national grid as being behind the recent power outages.
The Minister of Power, Engr. Sale Mamman explained why power outages have increased in Nigeria citing a breakdown of some National Integrated Power Plants supplying electricity to the national grid.
The Minister disclosed this in a statement on Thursday morning, assuring Nigerians that the FG is working assiduously to restore the National grid to its previous historical levels and exceed that.
What the Minister is saying
- I sincerely regret the recent power outages across the Nation and the difficulties it has brought with it.
- The problem is caused by the breakdown of some National Integrated Power Plants supplying electricity to the national grid. The plants are namely, Sapele, Afam, Olonrunsogo, Omotosho, Ibom, Egbin, Alaoji and Ihovbor. The Jebba Power Plant was shut down for annual maintenance.
The Minister added that seven power plants are currently experiencing gas constraints including Geregu, Sepele, Omotosho, Gbarain, Omuku, Paras and Alaoji while Shiroro hydroelectric power plant has water management issues.
Fuel subsidy: To be or not to be?
The fuel subsidy removal extension has clearly disrupted months of expected fuel deregulation.
Reports emerged that the Nigerian Government may suspend plans to discontinue its subsidy payments as reports indicate that the FG plans to spend N720 billion for the next 6 months on petroleum subsidies.
A government source disclosed that “specifically, President Buhari has asked the Nigeria National Petroleum Corporation (NNPC) to suspend any idea on subsidy removal for five to six months so that a plan that does not harm ordinary Nigerians is evolved if the deregulation must go on.”
The news of subsidy extension may come as a surprise after Mele Kyari, Group Managing Director, NNPC just last month hinted that the Federal Government spends N120 billion a month on subsidies and may increase fuel pump price to between N211 – N238/litre soon to reflect market prices, as the NNPC may no longer carry the burden of the actual market price.
Also, in January 2021, the federal government insisted that it will go ahead with its policy on the removal of subsidy on petrol and electricity, with no provision made in the 2021 budget for their subsidy.
“We are not bringing back fuel subsidy. We didn’t make provision for fuel subsidy in the budget. The impact of what was done was reducing some of the cost components that were within the template. And also related to it, on matters of electricity subsidies, no provisions have been made for subsidy for fuel and no provisions have been made for subsidy for electricity,” Finance Minister, Zainab Ahmed disclosed.
Why then is the Federal Government extending something it has clearly stated to be a burden on its finances, even to the point of making no provision for it in the National Budget? David Hundeyin, Award-winning journalist and BusinessDay columnists says the deal to extend subsidy has setback any discussion on the deregulation of the sector.
On consequences of subsidy extension
“It has effectively postponed any talk of deregulation for at least another 6 months, which means the current hideous arrangement which distorts the market for the benefit of a tiny few will persist for at least that long,” Hundeyin said.
What the government needs to put in place before subsidy removal
The major reason subsidy removal is a touchy topic is the simple fact that Nigerians cannot afford the hike in PMS price that would accompany subsidy removal. Needless to say, that another hike in the price of PMS would further drive up food inflation rate (which is currently over 20%). When other consequences such as increased cost of transportation and increased cost of powering small businesses are considered in the light of prevailing economic realities, the hardship that a hike would inflict on ordinary Nigerians is not hard to imagine.
Removing fuel subsidy would require a long-term play of communication and serious policy direction which focuses mainly on increasing GDP per capita of citizens to handle the inevitable subsidy removal. Hundeyin also stresses the need for a clear communication strategy between the government and the masses.
“The most important thing is a clear communication strategy to educate Nigerians about the true state of their public finances and rid them of the notion that the fact of being an oil-producing country entitles Nigerians to cheap or subsidized fuel. Of course, this will require political will which currently is not there, so this is unlikely to happen,” he says.
The fuel subsidy removal extension has clearly disrupted months of expected fuel deregulation, especially since the NNPC had made it clear that it cannot afford to continue paying subsidy. However, removing fuel subsidy at a period of rising food inflation and unemployment would have proved a serious political and economic faux pax as most Nigerians are barely getting by.
The FG needs to do more in the areas of communication, creating and implementing economic policies that drive productivity and wealth creation with the ultimate aim of improving GDP per capita.
Nairametrics | Company Earnings
Access our Live Feed portal for the latest company earnings as they drop.
- BUA Cement Plc announces Board Meeting
- Infinity Trust Mortgage Bank Plc records a 60% increase in profit after tax in Q1 2021.
- Tantalizers Plc reports a loss after tax of N422.05 million in FY 2020.
- NASD Plc announces admission of newly demutualized NGX shares.
- Lotus Halal Fixed Income announces dividend of N20 per unit for Q1 2021.