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VP Osinbajo Makes Case for Naira Devaluation

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The Federal government is tacitly prevailing on the Central Bank of Nigeria (CBN) to allow the national currency – Naira – to reflect market realities.

In the postulation of Vice President Yemi Osinbajo, the Niara exchange rate is artificially low, and this is deterring investors from bringing foreign exchange into the country, adding that the current practice, which places the official rate at N410, is not a realistic reflection of the nation’s economic fortunes.

Osinbajo spoke on Monday, during the opening of a two-day Mid-term Ministerial Performance Review retreat, held at the Presidential Villa, Abuja.

The Vice President stated that the dollar scarcity crisis can only be fixed when the market is made to reflect the real status of the economy, arguing that the current demand strategy of the CBN has kept the rate artificially low.

“Oil price at one point fell even below production costs; about $10 a barrel and then finally settled at about $45 a barrel during the second quarter of 2020. The official rate of the naira was devalued from N305 to the dollar, to N380 to the dollar. This was in the third quarter of 2020.

“We can’t get new dollars into the system, where the exchange rate is artificially low, and everyone knows by how much our reserves can grow. So, I’m convinced that we need to rethink the demand management strategy currently being adopted by the CBN, and that is just my view,” he said.

Besides, the African Development Bank (AfDB) also gave a bird’s-eye view on Nigeria’s economy, expressing displeasure over borrowings that are already in excess of $35.5 billion.

The development bank said the debt is rarely the problem in itself, but for its high debt-servicing ratio that is already stifling domestic investments needed to spur faster economic growth.

And to restore the economy on the path of sustainable growth, President of the Bank, Dr. Akinwumi Adesina, advised Nigeria to invest about $15 billion in infrastructure yearly, harness the non-oil potential, reactivate agriculture development initiatives of the last administration, and walk the rope of vaccine sufficiency via local production, among others.

President Muhammadu Buhari, however, said Nigeria remains committed to covering its infrastructural deficit, citing ongoing mega projects that are due for completion in 2023.

Adesina, who was a guest speaker at the Mid-Term Ministerial Performance Review Retreat, said Nigeria has a vulnerable economy that warrants a decisive review of its debt challenges.

Indeed, the VP’s call is coming several months after the Bretton Woods institutions and members of the Organised Private Sector (OPS) told the Federal government to get rid of the premium paid on the parallel currency market and clear a dollar backlog that has hurt policy credibility.

Both the International Monetary Fund (IMF) in its Article IV report and the World Bank have urged the government to provide a clearer and more predictable foreign exchange management system.

Though the CBN opted for a gradual weakening of the official rate of the naira in an apparent move to allow it to converge with the NAFEX rate, a market-determined rate for investors and exporters, the naira has continued to weaken as demand outweighs supply.

Demand for foreign exchange on the back of outstanding obligations has risen to about $2 billion as local producers appear to be running out of options for survival.

Nigeria has multiple exchange rates operating in parallel, a system put in place during a 2016 oil price crash because the government was seeking to avoid a large official devaluation of the naira.

As part of a six-monthly report on Nigeria’s economic development, the World Bank raised exchange rate management as the first of six policy areas where it was advising the authorities to take action within three to six months.

It said Nigeria should communicate an exchange rate management strategy that makes the NAFEX, which it described as the anchor, more flexible. This would boost Nigeria’s competitiveness while helping to reduce inflation, it said.

In his reaction, an economist and Chief Executive Officer, Centre for The Promotion of Private Enterprise (CPPE), Dr Muda Yusuf, noted that what the country is experiencing in the foreign exchange market is largely a consequence of the CBN policy choice of a fixed exchange rate regime and administrative allocation of forex.

According to him, the present policy regime has created a huge enterprise around foreign exchange in the form of round tripping, speculation, over invoicing, capital flight etc.

“The responses of the apex bank largely amounts to tackling the symptoms of a problem rather than dealing with the causative factors. The CBN does not seem to believe in or trust the market mechanism.  Yet market systems are time-tested as instruments of efficient resource allocation in leading economies around the world.  Of course, market failures are recognised in economics, and these are exceptions that can be identified and dealt with. Suppressing the market is like swimming against the tide.  It is a difficult battle to win.

“The NAFEX Window is a subsidised window. Managing a subsidy regime is typically a herculean task.  We have seen this happen with fertiliser subsidy, essential commodities subsidy and petrol subsidy. The story cannot be different with foreign exchange. The way out of this foreign exchange conundrum is for the CBN to allow the market to function.

“It is also imperative for the apex bank to de-emphasize demand management and focus on strategies to stimulate forex inflows.  A fixed exchange rate regime is a major disincentive to inflows and creates enormous pressure of demand for forex.  It is a contradiction in terms,” he added.

He urged the CBN to give the market a chance, stating that its current approach will continue to deepen distortions in the economy, perpetuate round tripping, fuel speculation, suppress forex supply and boost underground economy.

Professor of Economics, Olabisi Onabanjo University, Ago-Iwoye, Ogun State, Sheriffdeen Tella, said: “It is as if the VP is asking CBN to further devalue the naira to be close to the black market rate. It will be a dangerous action, as the economy will start going through another stress being an import dependent economy.

“Devaluation is to make our exports cheaper and attractive to importers from other countries. What do we have to sell that we also have control over its price? None. Hope the VP is not giving directive but just making suggestion.”

Vice president of Highcap Securities, David Adonri, said the only way out of the current currency crisis is to set up a single forex market where the apex bank, government and other bodies can buy and sell hard currency at the ruling market rate. “It’s only then that the true value of the naira will be established and the allocative efficiency of the forex market restored.”

Another economist, Paul Alaje, warned against further devaluation of the Naira, saying such a step will bring about an increase in huge national debt, making Nigeria’s debt position more discomforting.

“It will bring about high inflation, increased poverty. It will have negative implications for Nigerian businesses competing with those abroad. Poverty will increase. The effect of further devaluation is devastating.”

He argued that economists campaigning for further devaluation do not mean well for Nigeria.

While there could be germane reasons to devalue currencies, Alaje submitted that Nigeria is not in an economic situation to devalue, saying, “there are reasons for devaluation, which may sound good but the end thereof is failure. One of the reasons they have given for devaluation is that Nigeria could stop importation and start producing locally. The question is: where are the machines to produce locally? Where is the electricity to produce locally? Those who are promoting devaluation are those that can afford to live within the economy at whatever rate.”

He further stated that further devaluation may take the naira beyond the minimum wage bracket.

Former president, Association of National Accountants of Nigeria (ANAN), Dr. Sam Nzekwe, said no investor local or foreign would like to put his money in a place where he is not safe.

He said the naira, already, has been devalued and that is why virtually every item in the market is now very expensive, adding “because of the high exchange rate, manufacturers are even finding it difficult to import raw materials. What do you think will happen if we have to devalue the Naira further?”

Professor of Agric Economics, University of Calabar, Omo-Ogun Ajayi, said the government should drop the idea of devaluation to avoid massive insurrection that cannot be managed.

THE Debt Management Office (DMO) revealed recently that the country’s national debt stock hit N35.5 trillion at the end of June 2021. The new figure is 7.75 per cent higher than the N32.9 trillion recorded at the close of last year.

According to the Director-General of the DMO, Patience Oniha, the external debt accounted for N13.7 trillion or 38.7 per cent while approximately N21.8 trillion was sourced from the local market.

Of the total value, 83.07 per cent was held by the Federal Government, while the 36 states and the Federal Capital Territory (FCT) borrowings accounted for 16.93 per cent.

The percentage of FG’s share of the national debt had increased from 81.94 per cent as at December 2020.

Fiscal policy expert and Chairman of the Debt Management Roundtable (DMR), Taiwo Oyedele, had hinted at the possibility of a debt crisis if Nigeria maintains its skyrocketing debt service cost to revenue.

Adesina said the issue is not about debt-to-GDP ratio, as Nigeria’s debt-to-GDP ratio at 35 per cent is still moderate.

“The big issue is how to service the debt and what that means for resources for domestic investments needed to spur faster economic growth. The debt service to revenue ratio of Nigeria is high at 73 per cent.”

“Things will improve as oil prices recover, but the situation has revealed the vulnerability of Nigeria’s economy. To have economic resurgence, we need to fix the structure of the economy and address some fundamentals,” Adesina said.

He added that the devastating impact of the COVID-19 pandemic on the global economy, including Nigeria, cannot be overemphasised. As the virus burns fiercely, Nigeria’s economic growth rate declined to -1.8 per cent in 2020. This mirrors the pattern across Africa, as the continent posted a -2.1 per cent growth rate in GDP, its lowest in two decades.

However, the AfDB boss projected that the GDP growth rate for the continent will recover to 3.4 per cent this year, while Nigeria’s economic growth rate will rebound to 2.4 per cent in 2021, and reach 2.9 per cent by 2022.

“The recovery will depend on two critical issues: access to vaccines and tackling debt issues. Africa has only two per cent of its population vaccinated, compared to 54 per cent in the U.S and 75 per cent in Europe. So, while developed countries are receiving booster shots, African countries cannot get basic shots.

“Nigeria must build quality health care systems that will protect its population, today and well into the future. Nigeria must also build world-class local pharmaceutical industries, able to effectively tackle the production of therapeutic drugs and vaccines. Nigeria must revamp its local pharmaceutical industry and launch strategic investments for local vaccine manufacturing. Africa should not be begging for vaccines; Africa should be producing vaccines. The African Development Bank will invest $3 billion in support of local pharmaceutical industries in Africa, including in Nigeria.”

Adesina said further that Nigeria’s challenge is revenue concentration, as the oil sector accounts for 75.4 per cent of export revenue and 50 per cent of all government revenue.

Already, bureaucratic bottlenecks and multiple charges that are levied by diverse government agencies have been identified as major barriers against potential exporters and impediment to the non-oil revenue worth $250 billion a year.

He reckoned that the Africa Continental Free Trade Area (AfCFTA) presents a major opportunity for Nigeria, as consumer and business expenditures in Africa are projected to rise to $6.7 trillion by 2030.

Adesina advised that significant support should be directed toward boosting industrial manufacturing capacities, moving rapidly to the top of selected value chains, such as automobiles, computers and electronics, textile and garments, and food manufacturing, transport, and logistics.

“Much will depend on the ports of Nigeria. According to the sector operators, the cost of exporting 100 tons of cargo in Nigeria is $35,000, compared to $4,000 in Ghana. Today, the leading ports for West Africa are in Cote d’Ivoire, Ghana, Togo, and Benin Republic. All these countries have modernised their port management systems, leaving Nigeria far behind.

“Nigeria can learn from Morocco’s world-class Tangier-Med port. The port is unique in that it is an industrial port complex, and a platform that has over 1,100 companies. They collectively exported over € 8 billion worth of goods in 2020.
“Your Excellency, we should not be decongesting the ports in Nigeria, we should be transforming the ports. This must start with cleaning up administrative bottlenecks, most of which are unnecessary with multiple government agencies at the ports, high transaction costs or even plain extortions from illegal taxes, which do not go into the coffers of the government.

“Nigeria should rapidly modernise and transform its ports. Ports are not there for revenue generation. They are for facilitating business and exports, and stimulating industrial manufacturing, and competitiveness of local businesses and exports,” Adesina said.

Going forward, infrastructure is critical for unlocking the full potential of the economy. The AfDB president said Nigeria will need $15 billion a year for investment in infrastructure.

To achieve that, “Financial innovations should be prioritised as governments alone cannot afford these huge financial costs. The private sector should be given incentives to invest in infrastructure. The Federal Government’s N15 trillion Infrastructure Fund is a good idea, so is the initiative for tax credits for private sector investment in infrastructure. To be sustainable and more efficient, Public-Private Partnerships (PPPs) should be accelerated to finance major infrastructure across Nigeria.”

Also, Nigeria must boost food security, reduce the price of food, and ensure greater competitiveness of the agricultural sector.

“While I was Minister of Agriculture, we deployed a highly innovative mobile phone system to reach farmers with subsidised farm inputs, a programme called ‘Growth Enhancement Scheme’ and the e-wallet system. To be clear, this was the first time in the world that such a system was deployed to reach farmers with subsidised farm inputs via mobile phones. And it worked!

“It brought in transparency. It brought in accountability. It brought in all the major commercial banks. More importantly, it delivered impressive results and led to massive food production. It reached 15 million farmers with high quality seeds and fertilizers, right in their villages. Nigeria’s food production boomed and expanded by an additional 21 million metric tons. It is time to also take bold policy measures to drive the structural transformation of agriculture, with infrastructure and spatial economic policies.”

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We’ve Not Reduced Petrol Pump Price – NNPC

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The Nigerian National Petroleum Corporation (NNPC) Limited has declared that there is no plan to reduce the pump price of Premium Motor Spirit (PMS) aka petrol and Automotive Gas Oil (AGO) aka diesel.

The national oil company disclosed this through a statement on Wednesday by its Chief Corporate Communications Officer, Mr. Olufemi Soneye.

He said: “The NNPC Limited wishes to clarify rumours suggesting a price adjustment for Premium Motor Spirit (PMS) and Automotive Gas Oil (Diesel) at its retail stations nationwide.

“The company asserts that these reports are false and urges Nigerians to disregard them entirely.

“NNPC Ltd. reaffirms its commitment to sustaining the current sufficiency in petroleum products supply across all its retail stations in the country,” the statement added.

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Binance Executive Detained in Nigeria Escapes from Custody

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One of the two Binance executives detained in Nigeria for alleged tax evasion and other offences, Nadeem Anjarwalla, has escaped from lawful custody, according to PREMIUM TIMES report.

Our sources said Mr Anjarwalla, 38, escaped on Friday, 22 March, from the Abuja guest house where he and his colleague were detained after guards on duty led him to a nearby mosque for prayers in the spirit of the ongoing Ramadan fast.

The Briton, who also has Kenyan citizenship, is believed to have flown out of Abuja using a Middle East airliner.

It remains unclear how Mr Anjarwalla got on an international flight despite his British passport, with which he entered Nigeria, remaining in the custody of the Nigerian authorities.

Authorities are also said to be working to unravel his intended destination in a bid to get him back into custody.

An Immigration official said the Binance executive fled Nigeria on a Kenyan passport. He, however, said authorities were trying to determine how he obtained the passport, given that he had no other travel document (apart from the British passport) on him when he was taken into custody.

Another source said the two officials were held at a “comfortable guest house” and allowed many rights, including the use of telephones, a privilege Mr Anjarwalla is believed to have exploited to plot an escape.

When contacted Sunday night on the escape of the Binance executive from detention, the Head of Strategic Communication at the Office of the National Security Adviser, Zakari Mijinyawa, said he would enquire and revert. He has yet to do so as of the time of filing this report.

Mr Anjarwalla, Binance’s Africa regional manager, and Tigran Gambaryan, a US citizen overseeing financial crime compliance at the crypto exchange platform, were detained upon their arrival in Nigeria on 26 February 2024.

A criminal charge was filed against the two executives before a Magistrate Court in Abuja. On 28 February 2024, the court granted the Economic and Financial Crimes Commission (EFCC) an order to remand the duo for 14 days. The court also ordered Binance to provide the Nigerian government with the data/information of Nigerians trading on its platform.

Following Binance’s refusal to comply with the order, the court extended the remand of the officials for an additional 14 days to prevent them from tampering with evidence. The court then adjourned the case till 4 April 2024.

Also on 22 March, the Nigerian government approached the Federal High Court in Abuja and slammed another four-count charge on Binance Holdings Limited, Mr Anjarwalla and Mr Gambaryan, accusing them of offering services to subscribers on their platform while failing to register with the Federal Inland Revenue Service to pay all relevant taxes administered by the Service and in so doing, committed an offence, contrary to and punishable under Section 8 of the Value Added Tax Act of 1993 (as Amended).

The defendants were also accused of offering taxable services to subscribers on their trading platform while failing to issue invoices to those subscribers to determine and pay their value-added taxes and, in so doing, committed an offence contrary to and punishable under S.29 of the Value Added Tax Act of 1993 (as amended).

Count Three of the charges accused the three defendants of offering services to subscribers on their Binance trading platform for the buying and selling of cryptocurrencies and the remittance and transfer of those assets while failing to deduct the necessary Value Added Taxes arising from their operations and thereby committing an offence contrary to and punishable under Section 40 of the Federal Inland Revenue Service Establishment Act 2007 (as amended).

The last count of the charges wants the defendants punished for allegedly aiding and abetting subscribers on their Binance trading platform to unlawfully refuse to pay taxes or neglect to pay those taxes and, in so doing, committing an offence contrary to and punishable under the provisions of S.94 of the Companies Income Tax Act (as amended).

The Nigerian government had, in the past three months, been cracking down on suspected money launderers and terrorism financiers, some of whom it alleged are using the Binance platform for criminal activities

The Nigerian government said over $21.6 billion was traded by Nigerians whose identities were concealed by Binance.

Source: Premium Times

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Kidnapped Kaduna School Children Released Three Days to Expiration of Bandits’ Ultimatum

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The Kaduna State government has confirmed the unconditional release of the 287 school children and teachers who were abducted by bandits on March 7 from the LGEA Primary and Secondary Schools in Kuriga, Chikun Local Government Area.

The release of the hostages was announced through a statement on Sunday morning signed by Governor Uba Sani, which reads:

“I wish to announce that our Kuriga school children have been released.

“Our special appreciation goes to our dear President, Bola Ahmed Tinubu, for prioritising the safety and security of Nigerians and particularly ensuring that the abducted Kuriga school children are released unharmed.

“While the school children were in captivity, I spoke with Mr. President several times. He shared our pains, comforted us, and worked round the clock with us to ensure the safe return of the children.”

Sani who also expressed appreciation to the Nigerian Army and other security agencies for their professionalism in the successful rescue of the pupils, said they played a pivotal role in the whole episode.

“The Nigerian Army also deserves special commendation for showing that with courage, determination and commitment, criminal elements can be degraded and security restored in our communities.

“We also thank all Nigerians who prayed fervently for the safe return of the school children. This is indeed a day of joy. We give Almighty Allah all the glory.”

The rescue of the schoolchildren is coming three days to March 27 ultimatum the bandits had given the government for a N1 billion ransom to be paid for the captives to be freed, failing which they would all be killed.

There was also no mention of any ransom paid for the release of the victims by the government in the statement by Governor Sani.

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