Economy
CBN Gov attributes Naira weakness to Nigerians’ appetite for Dollar, foreign goods
***Frankly tells Nigerians, the bank has no magic wand to halt Naira free fall
***’Ways and Means’ is over for good, says Cardoso
The Central Bank of Nigeria (CBN) Governor Olayemi Cardoso has attributed the weakness of the Naira to the insatiable appetite of Nigerians for the Dollar and foreign exchange.
Cardoso who gave the admonition during an interactive session with the Senate Committees on Finance, Appropriations, Banking, Insurance and other Financial Institutions, said without moderation of demands on USD, the CBN has no magic wand to stop the free fall of the Naira
He has therefore urged Nigerians, especially the elite, to reduce their appetite for dollar, consumption and usage of foreign goods and patronage of foreign schools and hospitals.
He however informed members of the committee that series of measures have been put in place by the apex bank recently, are yielding results with inflow of about $1billion into the economy.
He also indicated that the Nigerian foreign exchange market is currently facing increased demand pressures, causing a continuous decline in the value of the naira.
He told his host that apex financial institution in the country had no magic wand to hurriedly get the naira stabilised.
He said, “The Nigerian foreign exchange market is currently facing increased demand pressures, causing a continuous decline in the value of the naira.
“Factors contributing to this situation include speculative forex demand, inadequate forex supply increased capital outflows, and excess liquidity.
“To address exchange rate volatility, a comprehensive strategy has been initiated to enhance liquidity in the FX markets.
“This includes unifying FX market segments, clearing outstanding FX obligations, introducing new operational mechanisms for BDCs and IMTOs, enforcing the Net Open Position limit, Open Market Operations and adjusting the remunerable Standing Deposit Facility cap among others.
“The measures, aimed at ensuring a more market-oriented mechanism for exchange rate determination, will boost foreign exchange inflows, stabilize the exchange rate, and minimize its pass-through to domestic inflation.
“Indeed, they have already started yielding early results with significant interest from Foreign Portfolio Investors (FPIs) that have already begun to supply the much-needed foreign exchange to the economy.
“For example, upwards of $1 billion in the last few days came in to subscribe to the Nigeria Treasury Bill auction of 1 trillion Naira which saw an oversubscription earlier this week.
“Our measures aimed at improving USD supply into the Nigerian economy, has significant potential in taming the volatility of the exchange rates. However, for these measures to be sustainable, we must as a country, moderate our demand for FX.
“It is also clear that the task of stabilizing the exchange rate, while an official mandate of the CBN, would necessitate efforts beyond the Bank itself. It will also include actions by corporates and individuals to reduce our frequent demand for the dollar for business and personal needs”.
On Inflation rate , the apex bank governor assured Nigerians that it will reduce to 21.4% in 2024.
He said, “Inflationary pressures are expected to decline in 2024 due to the CBN’s inflation-targeting policy, aiming to rein in inflation to 21.4 percent at the medium term, aided by improved agricultural productivity and easing global supply chain pressures,”he said .
He attributed the current food crisis in the country to insecurity, and natural causes.
Cardoso said, “The upward trend of food inflation is primarily due to supply shocks caused by insecurity, climate-induced factors such as flood and rainfall shortage.
“In some cases, inefficient, subsistent and seasonal farming practices as well as importation bottle necks that have impacted the prices of imported food items are also critical factors.
“Anecdotal evidence indicates that recent exchange rate volatility has fuelled more foreign demands for agricultural products, especially, from neighboring countries.
“While this presents an opportunity to expand and boost agricultural output, hence creating jobs in the sector, supply constraint exacerbated demand, instigating more inflationary pressures.
“Given this backdrop, the emergency committee on food security set up by the President has been taking a number of measures and we see an end in sight to the persistent rise on food inflation.
“On our side at the CBN, we have responded with significant monetary policy tightening to reign in inflationary pressure.
“Empirical analysis has established that money supply is one of the factors fueling the current inflationary pressure.
“For instance, an analysis of the trend of the money supply spanning over nine months shows that M3 increased from N52.01 trillion in January 2023 to N68.25 trillion in November 2023 representing N16.24 trillion or 31.22 percent increase over the period.
“Increase in Net Foreign Asset (NFA) following the harmonization of exchange rates and the N3.22 trillion ways and means advances were the major factors driving the increase in money supply.”
Cardoso told the senators that the apex bank had decided to discontinue the ways and means regime.
He said, “I am pleased to note the Fiscal Authorities efforts in discontinuing ways and means advances.
“This is also in compliance with section (38) of the CBN Act (2007), the Bank is no longer at liberty to grant further ways and means advances to the Federal Government until the outstanding balance as of December 31, 2023, is fully settled.
“The Bank must strictly adhere to the law limiting advances under ways and means to 5 percent of the previous year’s revenue.
“We have also halted quasi-fiscal measures of over 10 trillion naira by the Central Bank of Nigeria under the guise of development finance interventions which hitherto contributed to flooding excess Naira and raising prices to the levels of Inflation we are grappling with today.
“The CBN’s adoption of inflation-targeting framework involves clear communication and collaboration with fiscal authorities to achieve price stability, potentially leading to lowered policy rates, stimulating investment, and creating job opportunities.
“Our MPC meeting on the 26th and 27th of February is also expected to review the situation and take further decisions on these important issues.”
Aside the CBN Governor, top government functionaries like the Ministers of Finance, Wale Edun, Budget and National Planning, Senator Atiku Bagudu, Agriculture and Food Security , Senator Abubakar Kyari, also made presentations based on questions asked by the Senators on the State of Economy.
The Minister of Finance, who is also the Coordinating Minister of the Economy, said the Federal Government was committed to end the current pains of Nigerians through a social security strategy.
Edun said, “In terms of the social protection that is uppermost at this moment and we have the social protection measures through direct payments.
“Direct payments properly done biometrically can lead to reduction in poverty.
“it is proven empirically worldwide, that is why that is an issue that is being look at now. It is our commitment to as soon as possible, resume the social investment programme and the safety net particularly at this time.
“So in a short term the commitment is to face the pains of Nigerians and to do everything that can be done to ease those pains and of course on the foreign exchange side to bring about stability.
“On Expenditure, we are looking at ensuring government expenditure is carefully spent.
“Even the President has reduced his own expenditure and so for the Medium Term let us be assured that the monetary and the fiscal policies which are being implemented are going to increase production, increase funding for the government will play its own role.
“Difficult reforms take time for the benefits to come through and our duty is to ensure in a short term we minimize he pains to the poor and the most vulnerables. ”
Minister of Agriculture and Food Security , Senator Abubakar Kyari, on his part said there is the challenge of Affordability of food, and availability in some cases.
“we have been challenged quite sometimes over COVID which had impact on Agriculture and all other sector, at the same time if you remember the flooding of 2021, and also the Naira redesign of 2022 ,2023 at the point of harvest.
“In 2022 government came up with the policy of redesigning of Naira and that really impacted on the availability of cash. In 2023 early when farmers were just preparing for planting in 2023 they had no cash anywhere.
“Access to capital for farmers is very key, in addition an exiting Government did not plan to do wet season cultivation for 2023, I don’t think there was any impact or any intervention against the 2023 cultivation and that also impacted on the quantum of harvest in 2023.
Senator Sani Musa who chairs the Senate Committee on Finance, in series of posers fired at the Ministers and CBN Governor, queried the $3.3billion collected as loan to rescue Naira , since expected positive effects are not being felt , months after .
But the Chairman of Committee on Banking, Insurance and other Financial Institutions, Senator Adetokunbo Abiru in his remarks, told the CBN governor to ensure proper synergy between Monetary and Fiscal Policies .
He specifically, urged the CBN governor to make available to the committee, audited account of the apex bank and its Budget .
The Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun has disclosed that Federal Government has taken bold steps towards reducing the N7.3 trillion Ways and Means it inherited with the
payment of the sum of N4.8 trillion.
He stated this on Tuesday in Abuja during the Ministerial Press Briefing on the achievements of his Ministry in the one year administration of the President as activities marking the celebration continues
He indicated that another N2.5 trillion will be paid in the second quarter of 2024
According to him, due to improved fiscal discipline, the Government has largely financed debt service obligations. including foreign debt service, without resort to Ways and Means Account
Such payments he added included outstanding commitments/shareholding to multilateral development banks
(MDBs) and international organizations, including over US$200m to Islamic Development Bank.
Wale Edun stated that on the National Single Window, the Federal Government launched the NSW, a technology platform for trade facilitation and import administration with the potential of annual economic benefit of US$2.7 billion.
He added that, the Presidential Fiscal Policy and Tax Reforms Committee (PFPTRC) is in the process of tax Harmonization and streamlining of tax collection processes which he said has come up with strategies for broadening tax net as well advanced in the single-digit tax system to reduce the number of taxes in the country,
Briefing on the Oil Revenue Increases, the Minister noted that Oil revenue of N1,1 trillion was achieved in the first quarter of 2024, as against N460 billion in the same period of the preceding year (2023),
Edun maintained that the oil revenue flowed from an impressive increase in oil production, which recorded 1.7mbpd in the first quarter of this year, up from 1.3mbpd in June 2023.
The Minister indicated that Federal Government revenues from GOEs also substantially
increased (Q1’2024 ₦835.7B vs ₦154.3B Q1’2023).
The impressive revenue record of the period under consideration was made possible by the introduction of technology-driven strategy systems to automatically deduct revenue due toFGN.
Similarly, he said the FGN has earned more FX income under the new revenue model.
“Specifically, the Nigeria Customs Service recorded unprecedented increases in the first quarter 87% Increase in 2023 revenue mobilization, as well as a 122% revenue increase in Q1 2024 compared to Q1 2023
In addition, he said that the Federal Inland Revenue recorded a 107% achievement of 2023 target and a 56% revenue improvement in Q1 2024 compared to Q1 2023.
Under the Fiscal Policies & Financial Management Edun said, the administration launched the Incentives Monitoring & Evaluation Platform (IMEP) to prevent the misuse of tax incentives by blocking and limiting access to those who do not qualify for the incentives.
“We also strengthened the implementation of fiscal policies around the Import Duty Tax Incentive to boost key economic sectors and deliver more sustainable socio-economic impacts.
He disclosed that the FGN, via the Debt Management Office (“DMO”), raised ₦4.8 trillion from domestic capital markets to repay outstanding obligations to the Central Bank of Nigeria as it
works towards bringing the Ways and Means balance within legal limits and progressed to the final approval stages of a $2.25 billion single-digit interest loan from the World Bank for a 40-year-term with 10 years moratorium at 1% interest rate.
On Domestic USD Bond Issuance, the Minister revealed that the President has issued an executive order for local issuance of foreign-denominated securities. In a move that will showcase the resilience of Nigerian capital markets, the issuance of the first domestic foreign currency debt instrument is being processed by the capital marketfirms.
These bonds will be mainly marketed to both Nigerian and non-Nigerian investors with foreign exchange balances abroad* he said.
FDIs, MoF, under the leadership of Mr. President, he said, has actively engaged with a broad range of international investors from the Middle East, Europe and India to showcase the reformed economic policies of the FGN.
*It is anticipated that well advanced discussions with investors from the Middle East will yield positive results in the near term* Edun affirmed
He said that Infrastructure/Housing Finance Fund (MOFI) is partnering with Government Agencies and the private sector to boost investment in infrastructure, housing,
and to provide 25-year low interest rate mortgages.
“It is anticipated that long term funding from institutional investors will be mobilized via capital market funding”, he noted
While briefing on Improved Credit Rating, the Minister stated that over the last 12 months, two international credit rating agencies have reviewed Nigeria’s credit rating from ‘stable’ to ‘positive’ outlook.
Wale Edun, who was accompanied to the media briefing by the Permanent Secretary Federal Ministry of Finance Mrs Lydia Shehu Jafiya and the Permanent Secretary Special Duties, Federal Ministry of Finance, Mr Okokon Ekanem Udo,
Heads of Agencies under his supervision as well as Directors of the Ministry explained to the media on the issue of Coordination of Fiscal and Monetary Policies, that through the issuance of government debt securities by the DMO at higher interest rates, MoF has supported monetary policy authorities in attracting the inflow of foreign exchange from FPIs; and in stabilizing the exchange rate of the Naira.
New Monetary and Fiscal Coordination Committee was established.
He stated that on Financing of Major Infrastructure Projects,
MoF has provided from internal finances critical initial funding to kick-start major infrastructure projects such as the Lagos-Calabar Coastal Road.
In his closing remarks, the Honourable Minister of Information and National Orientation Mohammed Idris stated that the detailed presentation by the Honourable Minister of Finance and Co-ordinating Minister of the Economy Mr Wale Edun on the state of the Economy in year review has shown the commitment of the President Bola Ahmed Tinubu-led Administration in its avowed determination to ensure the general improvement in the lives of Nigerians and as such deserves our commendation.
He assured that Government will continue to formulate and implement policies, initiatives, programmes and projects that will impact positively on the lives of the citizenry in line with its Renewed Hope Agenda.
To ensure full implementation of President Bola Ahmed Tinubu’s 8-Point Agenda which is aimed at boosting economic growth and development to attract foreign investors and expertise into the country, Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun has urged Heads of Agencies and Parastatals under his Ministry to work together.
Speaking during a quarterly performance review briefing with Heads of Agencies and Parastatals in Abuja, the Minister emphasized the importance of synergy and effective implementation to achieve the goals outlined in the President’s blueprint.
Director of Information and Public Relations, Mohammed Manga in a statement quoted the minister to have described the gathering as very crucial benchmark where they can brain storm on where they need to get to and how they intend to get there
He highlighted the progress made so far under the present Administration and encouraged the Agencies and Parastatals within his jurisdiction to continue working together so as to drive economic growth and prosperity for all Nigerians.
He indicated that the meeting would also serve as a benchmark towards the implementation of the performance bond signed by Mr. President, which is aimed at reviewing the achievements made in the last one year, address challenges and chart a way forward for improved performance of the Ministry.
“We have all signed performance bonds. We all know the plan and blueprint, which are the eight point agenda of Mr. President. It has been categorised as a house. “The pillars are the fundamentals that you need for the Economy and society to thrive that is, security, rule of law, and at the very top is the roof, that is, the outcomes: food security and other measures of a good standard.
“Our collective efforts and shared commitment is not only pivotal in ensuring the efficient and effective management of the nation’s economy, but should also go a long way in facilitating the realization of the agenda of Mr. President*, he said
Edun explained further that the
call to action was imperative, especially as it is expected to galvanize the agencies to work collaboratively and efficiently towards achieving the objectives of the 8-point agenda.
The Minister pointed out that by working together, the Agencies can help create a conducive environment for economic growth, attract investors, and make opportunities available for Nigerians to thrive.
“President Bola Ahmed Tinubu led-Administration has helped stabilize the exchange rate and is working towards lower interest rates that would invite the bases for additional investments in the nation.
“It is, therefore, incumbent upon us to pursue the achievements of our deliverables with diligence and determination by establishing clear targets, timelines, and consequences for non- compliance with our respective Agencies/Parastatals.
“We can help to create a framework that incenticizes excellence and service delivery as well as build the needed synergy and partnership that can facilitate the implementation of the transformative economic policies of this administration.” Edun said
The Minister expressed optimism that with the calibre of persons heading the Agencies under his stewardship, the Ministry is sure to deliver on its mandate in compliance with the Renewed Hope Agenda of the present administration.
Earlier in her welcome address, the Permanent Secretary, Federal Ministry of Finance, Mrs. Lydia Shehu Jafiya, stated that the
engagement would provide a unique platform for robust discussions, especially in the area of implementation of the transformative policies of the present administration, which she said, aims at improving the nation’s economy, promoting job creation, and poverty reduction as well as a safety environment that will attract investments into the country.
She assured that the Ministry will continue to provide an enabling environment for the full implementation of the policies, programmes and projects of the Federal Government, in line with its mandate.
Also speaking, the Ministry’s Permanent Secretary, Special Duties, Mr. Okokon Ekenam Udo advised the Agencies to collectively align their efforts with the fiscal goals set by the Federal Government with a view to ensuring the realization of its policy objective.
He therefore called on them to bring in their wealth of experience to bear in making sure that the Agencies deliver on their respective mandates in accordance with the policy thrust of the present administration.
***Says, APC ABRACADABRA Propaganda can not solve the problem
The National Secretary of the Coalition of United Political Parties (CUPP) High Chief Peter Ameh has bemoaned the downturn in the investment climate occasioned by insecurity that is causing apprehension among foreign investors who are now leaving Nigeria in droves to other African countries.
Ameh spoke against the backdrop of the News that Microsoft is closing its office in Nigeria which he said is very disturbing.
The organization announced that they will close their Ikoyi office this week.
Ameh quoted the Managing Divecter of Okomu Oli Palm Pic, Graham Holter, who said it is absurd that they pay over N12 billion in taxes to government annually and still are left to fend and seek security for equipment and personnel themselves.
“What kind of Investment-friendly environment are you providing?”
Ameh lamented that situation is devastating and there is no end in sight.
“70% of crisis the country is facing today is the result of insecurity. Government must take the bull by the horn to address it now before it’s too late but those in Government will rather prefer to be harassing Journalists and opposition parties/leaders.
‘Without effective Security Measures for the country we are in danger of losing Foreign Direct Investments (FDI) and at risk of losing the investors confidence in our economy.
“Security, good roads and train services will remain essential to ensure that we are able to protect our country from being abandoned by investors.”
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