ABUJA, Federal Republic of Nigeria. The Central Bank of Nigeria (CBN) disappointed financial markets by ignoring calls to devalue the currency, while keeping its benchmark interest unchanged to help support an economy hit by plummeting oil prices.
The CBN’s Monetary Policy Committee (MPC) held the policy rate at 11 per cent after lowering it from a record 13 per cent in November, Governor Godwin Emefiele told reporters yesterday in Abuja.
Emefiele has come under pressure to devalue the naira and ease foreign- currency controls that are hurting businesses and worsening the outlook for growth.
He has favoured lowering interest rates instead to ease liquidity in the economy.
“The current episode of lower oil prices is expected to remain over a very long period,” the governor said. “Consequently, it is imperative to brace up for a longer period of low government revenues from oil sources, which will necessitate hard and uncomfortable choices.”
Commenting on the devaluation of the Naira and the fall in the price of crude oil, the CBN governor disclosed: “We are already working on different scenarios; the models are being worked on and we will look at them as much as possible and we will continue to discuss at management levels and try as much as possible to continue to share our thoughts with the fiscal authorities with a view to harmonizing the positions to ensure that, notwithstanding the drop in crude prices, we are able to continue to run the government and continue to do business.”
According to him, there was the need for the fiscal authorities to complement the Bank’s low interest rate policy orientation by properly coordinating its borrowing activities (and rates) with the Bank in order to push the common objective of stimulating banking system credit delivery at low interest rates to the key sectors of the Nigerian economy.
He noted that given the current economic reality of dwindling oil revenue and the rather unclear outlook for commodity prices, there was the need “for a recalibration of the fiscal strategy to increasingly explore opportunities in non-oil tax revenue.”
The CBN governor then revealed that members of the Committee voted to retain the Monetary Policy Rate (MPR), Cash Reserve Requirement (CRR), Liquidity Ratio (LR) and the asymmetric corridor of +2/-7 around the MPR.
“The MPC voted to retain the CRR at 20.0 per cent, MPR at 11.0 per cent, Liquidity Ratio at 30 per cent, the asymmetric corridor at +200 basis points and -700 basis points,” he announced.
The Bureau De Change (BDC) market, Emefiele said, “is not a very important market as far as we are concerned. It is insignificant in terms of volume – which is about 5-10%; it is high time we all realize and agree that government cannot continue to provide foreign exchange to support the needs of that market. The Central Bank will continue to work with them because they continue to remain licensed under the CBN; we will try to see how we will assist them to deepen activities in that market and then they can source forex, just like we suggested, from the autonomous market.”
Emefiele added that “the imperative for consistently sound and coordinated macroeconomic policy has become inevitable. Consequently, the Bank is fine-tuning the framework for foreign exchange management with a view to ensuring a more effective and liquid foreign exchange market, taking into account Nigeria’s strategic development priorities; with the policies being designed within an environment of regularly ensuring consistency with monetary and fiscal policies.”
He also said the CBN is “very conscious of this and, like we said earlier, we are in an era where the low crude prices will remain for a long time. It’s not going to like in 2008 where it was just transient at eight months; so far we have seen this one for 14 months; there is no light yet at the end of the tunnel. We will continue to be alive to our responsibilities to ensure that both fiscal and monetary authorities ensure that we provide for all the needs of Nigerians, but again I would like to appeal that, yes, some of these actions and policies maybe painful, (but) they’re taken in the interest of country.”
The CBN governor warned that the current episode of lower oil prices could remain over a very long period. Consequently, Nigerians should brace up for a longer period of low government revenues from oil sources “which would necessitate hard and uncomfortable choices as the economy transits to more sustainable sources of revenue, consistent with the economic realities and strategic objectives of the country.
“In the circumstance, certain tradeoffs must be envisaged and duly accommodated,” he said.
Speaking on the stamp duty initiative, the governor explained that at this time when revenue from oil appears to be a big challenge, “we do not have any choice but to continue to support the government and fiscal authorities to seek other ways to boost non-oil revenues revenue.”
According to him, stamp duty is one option.
“The numbers are there in the budget about what we expect to generate from stamp duties in 2016,” he said. “We will try as much as possible, working with the banks, to ensure that all transactions are captured in a way that will ensure that every transaction that is carried out gets debited N50.
“We have not dimensioned it yet; in due course Nigerians will begin to know what this will translate into. It will be designed to help the activities of government to improve its revenue.”
LEADERSHIP reports that the apex bank has fixed the naira at N197 to N199 per dollar. However, the currency was trading at about N305 on the black market yesterday.
“They’re living in denial,” Tosin Osunkoya, head of trading at Rand Merchant Bank Nigeria Ltd., said in an interview on CNBC Africa, predicting that the currency will weaken to N315 to N320 per dollar on the parallel market. “Something has to give. People were expecting some measure of devaluation.”
Inflation accelerated to a three-year high of 9.6 per cent in December, and has been above the central bank’s target of six per cent to nine per cent since May 2015.
President Muhammadu Buhari, who took office last year, has backed the central bank’s restrictive foreign currency policy.
“I doubt if the central bank has the political capital to devalue,” Lanre Buluro, head of research at Primera Africa Securities Ltd. said by phone from Lagos. “By the decision not to devalue, the gap between the official and black-market exchange rate will continue to widen. People who have legitimate demand for dollars will not be getting it.”
Oil rises above $30 on hopes of supply glut deal
Oil prices rose further above $30 a barrel yesterday on hopes that the Organisation of Petroleum Exporting Countries (OPEC) and non-OPEC producers may reach a deal to tackle one of the biggest supply gluts in decades.
This comes as Nigeria added its voice to countries calling for an emergency meeting of OPEC to discuss steps to possibly reduce production and prop up prices.
Kachikwu while speaking in Davos said, “There’s a lot of energy around, obviously some of that is a panic reaction. Do we just sit back and watch, or do we put more efforts in talking to countries like Russia, to try to get some consensus of what we need to be doing?”
However, as Nigeria and Iran disagreed over the idea of an emergency OPEC meeting, the organisation’s secretary general, Abdullah al-Badri, has stepped in, urging the need for non-OPEC members to help clear oil stocks overhang.
OPEC is making renewed calls for rival producers to cut supply alongside its members. This is as Russia, seen as key to any deal, has so far refused to cooperate, according to Reuters report.
Meanwhile, Iraq’s oil minister, who had previously opposed Nigeria’s call for an OPEC emergency meeting, said yesterday he saw some flexibility for a deal between OPEC and non-OPEC, as Brent crude rose 17 cents to $30.67 a barrel, while US crude was up seven cents at $30.41.
FAAC: FG States, LGs share N387.7bn for December
The Federation Accounts Allocation Committee (FAAC) yesterday allocated a total sum of N387.7bn to the three tiers of government
The allocation, which is for the month of December 2015, represents an increase of N17.88bn over the N369.8bn distributed for November.
Addressing journalists in Abuja shortly after the meeting, the permanent secretary, Mr Mahmoud Isa-Dutse, said the amount was distributed from four sources.
They are statutory allocation – N315.01bn, VAT- N62.07bn, exchange gain – N4.35bn and N6.33bn refund made by the Nigeria National Petroleum Corporation for debt owed the federation account.
From the statutory allocation, Isa-Dutse said the federal government, after deducting the cost of collection, received the sum of N147.56bn, states – N74.84bn, and local government – N57.7bn.
He said the sum of N27.7bn was allocated to the oil producing states based on the 13 per cent derivation principle.
From VAT revenue, he said that after deducting the cost of collection, the federal government got N8.93bn, representing 15 per cent; states got N29.79bn or 50 per cent, and local governments, N20.85bn, representing 35 per cent.
The permanent secretary, who stood in for the finance minister, Mrs Kemi Adeosun ,said, “The gross statutory revenue of N315.01bn received for the month of August was higher than the N297.45bn received in the previous month by N17.56bn.
“Shut-down of production for repairs, production shortfall due to technical hitches at different terminals throughout the month impacted negatively on crude oil and gas revenue.
“Also, there was revenue loss of $143.96m as a result of reduction in federation export sales and a drop in the average price of crude oil from $49.58 in October to $43.40 in November 2015.”
He put the balance in the Excess Crude Account at $2.258bn, noting that the amount remained unchanged from previous month.
Crude Oil Swap: Absence of govt agencies stall probe
An investigation by the House of Representatives Adhoc Committee into the crude oil-for-refined-products-exchange agreement by the Nigerian National Petroleum Corporation (NNPC) with local and foreign oil companies was yesterday stalled for the second time.
Some agencies of government critical to the ongoing investigation failed to appear before the committee at the resumed hearing yesterday. The same thing happened on Thursday last week.
Officials of two oil trading companies, namely Aiteo Nigeria Ltd and Ontario Nigeria Ltd, however showed up yesterday after being threatened with possible arrest.
LEADERSHIP recalls that at the last sitting of the committee on Thursday, the chief executives of the two oil companies were summoned by the committee after they failed to honour an earlier invitation.
But despite the oil companies’ presence, officials of the Nigerian Customs Service (NCS), Petroleum Products Pricing and Regulatory Agency (PPPRA) as well as the Federal Inland Revenue Service (FIRS) were absent at the hearing, thereby forcing the committee to adjourn till today.
Chairman of the adhoc committee, Hon. Zakari Mohammed, however blamed the absence of the three agencies, whom he described as very critical to the investigation, on communication gap.
A visibly angry Mohammed was seen making frantic telephone calls to the listed agencies only to be told that there was no communication to them by the committee that the hearing was holding yesterday.
Mohammed, while apologising to the representatives of trading companies that showed up, blamed the mix-up on the change in the secretariat staff of the committee.
He said the clerk of the adhoc committee that was supposed to have communicated with the affected agencies travelled while her interim replacement was unaware of the status of correspondences of the committee.
FG to recover $750m Abacha Loot Soon, £6.9m from Ibori – AGF
The attorney general of the federation (AGF) and minister of justice, Abubakar Malami (SAN), has said that the federal government will soon recover an additional $750million kept in foreign banks by the former head of state, the late Gen Sani Abacha.
Malami, who disclosed this during an interactive session with the House Committee on Justice yesterday, added that the federal government is also planning to recover £6.9 million stolen by former Delta State governor, James Ibori.
The AGF said: “In respect of the recovery of looted assets, the Ministry of Justice will engage in a policy of using Mutual Legal Assistance Agreements or other bilateral and multilateral instruments to seek cooperation with other jurisdictions to ensure the repatriation of illicitly-acquired assets in foreign jurisdictions.
“The collaboration will also involve the engagement of foreign-based lawyers to attend to matters on behalf of the federal government. Low-hanging fruits being targeted in this initiative include $750million Abaca loot as well as the £6.9 million of the Ibori loot. On the long run, the ministry will be in a position to coordinate the recovery of billions of dollars in foreign jurisdictions, based on current estimations.”
Malami further disclosed that the country owes N75 billion in judgment debts.
“The ministry has however proposed the sum of N16billion to meet a portion of the outstanding sum in 2016, out of which the Budget Office has proposed an extremely low sum of N709, 155, 140.00 which does not meet even one per cent of the outstanding judgment debts,” Malami added.
Credit: Leadership (Nigeria)
