Category: Economy

{Abuja – The U.S. Secretary of State, John Kerry, says that his country will do everything in its power to help Nigeria diversify from single to multiple resources dominated economy. This is contained in statement from the information Unit, U.S. Department of State, on Thursday in Abuja. Kerry held a meeting with the workers and families of U.S. Embassy in Abuja on Wednesday, where he made the statement. }

Kerry commended President Muhammadu Buhari’s commitment to moving the country forward by dealing with corruption, economic challenges and the challenge of Boko Haram. The secretary noted with concern that Nigeria was a single-resource dominated economy. According to him, the reduction in the global price of oil, which is a major driver of Nigerian economy, is a huge challenge to it.

“We are making enormous progress in pushing back against Boko Haram, and I came here now to reaffirm the promise of the United States to stand by Nigeria, to help Nigeria. “We will win this battle against Boko Haram, I promise you. And we will also do everything in our power to help to adjust the economy to a change.

“No country should be single-resource dominated in its economy, and the lesson is you have got to diversify,” he said. Kerry said that unlike most country he visited which had transitioned, “Nigeria is a country yet to fully transition.’’

He told the workers that they were really part of a critical moment of transformation, and it’s a wonderful thing to be able to work in an embassy. Kerry said they were working in a place where U.S. policies were geared to try to help accelerate that transformation and shape that transformation. He commended the efforts of more than 500 local workers at the embassy whom he said had helped to change lives. The U.S. secretary of state lauded them for making a choice to better the lots of people by choosing to work at the embassy.

He said that they could also make a difference in the life of people, a country and help the planet to be a better, safer, more prosperous place.

{Nine Nigerian banks have been suspended from foreign currency trading for not paying money owed to the government, a central bank source has told the BBC.
The banks are said to be withholding a total of $2.1bn (£1.6bn) belonging to the state-owned oil company.}

Last year, President Muhammadu Buhari ordered the merger of all state accounts into one single account at the central bank to reduce corruption.

It is nearly a year since the deadline to transfer the money expired.

The banks affected are: Diamond Bank, Fidelity Bank, First Bank, First City Monument Bank, Heritage Bank, Keystone Bank, Skye Bank, Sterling Bank and United Bank for Africa.

{{Low oil price}}

The BBC’s Naziru Mikailu in the capital, Abuja, says most commercial banks, especially smaller ones, have suffered as a result of the policy, as government agencies stopped depositing their money with them.

Bank customers, especially those who import and export goods, will be affected by the ban as it means they will not be able to access their foreign currency accounts.

The foreign currency trade ban is likely to have a major impact on the banks involved as it is believed some of them do not have the funds to hand over, a source at the Central Bank of Nigeria told the BBC.

An official at one of the affected banks told the Reuters news agency the non-payment reflected the “dire macroeconomic situation”, rather than deliberate non-compliance.

Nigeria has suffered severe economic problems because of the relatively low price of oil, which provides most of the country’s foreign currency earnings.

The ban will be lifted individually as each bank transfers the money it owes. Each institution is also likely to face a further fine.

The forex trading ban was triggered after the Nigerian National Petroleum Corporation (NNPC) complained to President Buhari about the missing money, an NNPC spokesman told the BBC.

Last year, President Buhari estimated government officials had stolen about $150bn in the previous decade.

In the past it was easy for fraud to take place as the government did not know how many bank accounts each ministry held.

{ABUJA— THE Governor of Central Bank of Nigeria, CBN, Mr. Godwin Emefiele, yesterday, painted a gloomy picture of the economy during a closed-door meeting with senators.

Vanguard gathered that the CBN governor told the senators that it was frightening that the nation was experiencing economic stagnation and inflation at the same time, explaining that ordinarily, both were not supposed to happen simultaneously.}

A source said he expressed concern that the economy was gloomy, stagnant and worsening as a result. According to the source, Emefiele, who noted that the economy was biting on all, with almost all activities crippled, said indices that would have made the economy grow were not in place at the moment.

He was also said to have made reference to the renewed bombing of pipelines by Niger Delta Avengers as one of the factors pulling down the economy.

The CBN governor was said to have Iinked these occurrences, especially with respect to the over 70 per cent decline in oil prices from about S116 per barrel in June 2014 to about $30 per barrel earlier in the year.

FG may not be able to pay workers’ salaries Vanguard further gathered that the CBN governor told the lawmakers that if the present situation in the country continued, the Federal Government might not be able to pay salaries of its workers with effect from October this year.

He also said Nigerians would be forced to pay general taxes which would not exclude petroleum products. Emefiele, who was with the senators for an hour, was said to have presented a comprehensive account of the economy in the last one year which, according to him, had been characterised by external shocks, including sharp decline in commodity prices, geo-political tensions along important global trading routes and tightening monetary policy in the United States.

Senate backs CBN’s policies The Senate was, however, said to have expressed sympathy with the CBN governor because of the depth of the economic problems which, it noted, had global influence, and threw its weight behind new policies introduced by the CBN to turn the economy around.

It backed the monetary policies of the CBN, noting that at the end of the day, such policies would help to increase local production, create jobs in the country, safeguard the nation’s commonwealth as well as expand economic opportunities and growth in Nigeria.

The Senate in a statement after the executive session, however, stressed the need for all to put hands together to seek long term solutions to the nation’s underlying problem of non-diversification of foreign exchange earning and revenues, rather than pointing fingers or apportioning blames.

{{The statement read: }}

“After the presentation, many distinguished senators asked a host of pertinent questions and raised issues concerning the banking system, the slippage in economic growth for the first quarter of 2016, the gradual rise in inflation, fall in foreign exchange reserves, and policy coordination between the fiscal and monetary authorities.

“Following an exhaustive response by both the governor and his team, the Senate acknowledged that these are, indeed, difficult times all over the world and not just in Nigeria. “The Senate also acknowledged the pains that many people may be facing at this time, especially in the light of increases in price of electricity and fuels.

But having carefully considered the policies of the CBN, the Senate would Iike to commend and support these policies because they are mostly geared towards increasing local production, creating jobs here in Nigeria, safeguarding our commonweaith, and expanding economic opportunities and growth in Nigeria.

“It is critical that we all put hands together to seek long term solutions to our underlying problem of non-diversification of foreign exchange earning and revenues, rather than pointing fingers or apportioning blames.

“The Senate believes strongly in the resilience of the Nigerian economy and the ingenuity of the Nigerian people and as such, we are confident that we will all puII through these difficulties and come out as a much better, equitable, and prosperous nation.”

{{ Finance Minister to appear today }}

Briefing journalists after the meeting, Deputy Chairman, Senate Committee on Media and Public Affairs, Senator Ben Murray-Bruce, said the Minister of Finance, Kemi Adeosun, would today appear before the Senate to brief it on the state of the economy and issues relating to the implementation of 2016 budget.

Asked why the meeting with the CBN governor was held behind closed doors, Senator Bruce explained that it became imperative to hold the meeting in an exclusive manner because some economic matters could be explosive, if held in the open.

{A lot has been going on in Europe beyond the much-debated Brexit. On June 7, the European Parliament adopted a report that calls on G7 countries not to support production of Genetically Modified (GM) crops in Africa.}

A lot has been going on in Europe beyond the much-debated Brexit. On June 7, the European Parliament adopted a report that calls on G7 countries not to support production of Genetically Modified (GM) crops in Africa.

The report, presented by Mara Heubuch, a Member of European Parliament from Germany, also does not support large-scale farming for Africa.

Sadly, the decision was passed by a majority. This has raised questions about Europe’s understanding of Africa’s food security and poverty and efforts to address the challenges.

Food production has fallen behind population, which is projected to rise from 1.2 billion to 2.4 billion by 2050. Due to climate change, Sub-Saharan Africa is host to pests that cannot be overcome with pesticides. So, major food crops such as sweet potatoes, cassava, bananas, maize, rice and sorghum are threatened. There are more extreme weather conditions like droughts and floods, which hurt agricultural production.

To mitigate the challenges African governments have invested in biotechnology research to safeguard food crops and there are promising results.

There is no scientific evidence to prove GM crops are dangerous to human health or the environment.

Neither UN Food and Agriculture Organisation nor World Health Organisation has raised any safety concerns about GM technology. So, why will the EU not support GM/biotech crops in Africa?

Africa is striving to mechanise agriculture and abandon the hand hoe.Tractors are also used for large-scale agricultural production.

Where in Europe today does a man and woman toil with hand hoes to sustain their family on hardly a hectare? Yet, this is the common picture in poverty stricken Africa. If the EU is against large-scale farming for Africa, should we trust it as an ally in our struggle to boost agricultural productivity?

{benefits fuelled by low oil price, fail to reach poorest Somalis dependent on public transport.}

Mogadishu, Somalia – Drivers in the morning rush hour in Mogadishu jostle for space to fill their tanks in one of the newly opened petrol stations in the city. An attendant shouts at the drivers, directing them: “Come forward a bit, a bit more. Stop.” These scenes are new to the city and its residents.

The filling station is in the K4 area in the heart of the city and it has witnessed a big increase in the number of vehicles passing through its gates since it reduced its prices.

Drivers for a long time complained of high prices at the pumps and avoided filling up as much as possible. Now they have received a respite.

Prices have dropped in line with the slump in the price of oil in the global market. Since December, consumers say, the price for a litre of petrol in the Somali capital has dropped by at least 30 percent.

“The price has changed. I used to pay $5 for five litres but now I pay $3.50. That is very good news for us drivers as it means we save money that we can use for other things. I hope the price of oil continues to fall,” Zakariye Abdiqadir, a driver at Somoil station told Al Jazeera, as he waited for his turn to fill up.

“I never used to fill my tank because it was very expensive. Now coming here is not too bad on our wallets,” Abdiqadir added.

At least half a dozen petrol stations have opened in the city, which is recovering from more than two decades of civil war, that ended three years ago.

Recovery from war

Following the collapse of the country’s central government under long-term ruler Siad Barre, in 1991 the energy sector was completely destroyed and drivers depended on vendors who sold expensive petrol from jerry cans by the side of the road. These vendors are slowly disappearing from the streets of the seaside capital and petrol stations are taking their place.

But it is not just drivers benefiting from the global collapse in oil prices. Petrol station owners have witnessed a rise in sales, not just of petrol but also other goods.

“A year ago when this station opened a litre of petrol was $1.20. Now it is $0.70,” said Abdihafid Ali, a Somoil petrol station manager. “Our customer numbers have increased as the prices decreased. More drivers are having their cars washed here or have the oil changed.”

As employees washed cars behind him, The station manager told Al Jazeera that: “Sales of everything have gone up because drivers have more money to spend.”

Price of oil determines most things on the markets of Mogadishu, something that is not lost on the city’s drivers.

“Even the water we drink in Mogadishu is affected by the price of oil. The water we drink was purified using electricity which came from diesel generators,” Abdiqadir said, holding a one litre bottle of chilled water.

No changes for public transport rates

But the petrol price drop and the good times have not reached everyone in this city of more than one million people.

Most people use public service vehicles to go about their daily life. Yet, fares have remained the same. In the Wadajir district of the city, dozens of commuters rush to take the quickly-filling minibuses at the Medina bus station.

The commuters are not happy at what they see as a rip-off by drivers and bus owners. “I’m paying the same fare as I used to pay before the change in the petrol price,” said Abdisalam Sheikh, a university student as he boarded the bus.

“When you ask them why they are not changing the price, they either say the price will change soon or they will say it is not their vehicle, they are just employees,” Sheikh told Al Jazeera.

“There is not much we can do. We cannot walk to university or to work. So we just pay and hope they lower their fares one day,” he added.

Adil Abdiqadir Hassan was rushing to get to work and sat a few seats away from Sheikh on the minibus. Hassan said he thinks the fares need to reflect the change in the price of petrol.

“Before, when the price of petrol went up they were quick to raise our fares, but when it goes down they are not keen on lowering the fares. To them it is all about maximising their profits,” Hassan said.

But owners of transport vehicles in the city say they have good reason not to reduce the fares.

One minibus driver, Abdirahim Ma’alin, explained that “before when the price of petrol was high there were not many buses. But now there are too many buses which means fewer commuters to take so there is less profit and that’s why the price is the same.”

But as oil-producing countries feel the pinch from the drop in oil prices, in Somalia people for the most part are enjoying the benefits.

“We paid a lot of money for petrol for a very long time. I hope the price continues to fall as the low price of oil is good for our lives and development of our country,” Abdiqadir, the driver at the petrol station, said.

{The UK’s decision to end its relationship with the European Union is not so much an earthquake, just for Britain, but a tsunami for the whole world. }

The development in UK has some, if not fundamental, impact on Nigeria, according to some analysts. In the immediate, the Nigerian Stock Exchange, NSE, All Share Index was 30,649.66, down by -1.36% on Friday. Market capitalization closed at N10.5 trillion, down from N10.67 trillion.

It is not clear if it was BREXIT fallout or just profit taking on the back of 4-straight day bull run. In the interbank foreign exchange market, the exchange rate was largely stable at N281.14/ USD1.0 yesterday as against the pre-BREXIT Thursday closing price of N282/USD1.0, showing an appreciation while British Pound went down marginally to N386.3 as against N385 previous day.

However, Naira appreciated against both US Dollar and British Pound moving to N338, up from N342 to the US Dollar and N460, up from N480 against British Pound. The BREXIT, happening within the first week of Nigeria’s floatation of its currency market, may not give a clear impact as many other factors came into play, including market adjustments. Central Bank of Nigeria, CBN, has battled to sustain the supply situation in the market so as to maintain market and exchange rate stability, a development which has kept the Naira value to US Dollar at about N281.75, almost same level as the day before BREXIT decision.

The situation in Nigeria’s market in relation to BREXIT could better be appreciated when compared with what happened elsewhere. U.S. stock futures had plummeted yesterday morning, caught up in a global sell-off, that saw Dow futures down more than 700 points. European stock markets cratered, while stocks in Japan nosedived nearly 8.0%, oil price dropped and global bond yields were also in the red.

The British pound sterling had already taken a battering, falling to its lowest level for 31 years. Reacting to the BREXIT implication to Nigerian economy analysts at Greenwich Trust, a Lagos based investment house, said ‘’as one of the British Commonwealth countries and the second largest trading partner of Britain in Africa, Nigeria will feel the effect of Britain’s exit from the European membership via several channels: ‘’As a bilateral trade partner, other benefits that accrue such as grants to non-profits, technical· assistance and partnerships with other development agencies will be scaled back as their developmental projects in Nigeria will halt pending the time the UK experiences some form of stability. ‘’UK and Euro based Holding/Parent companies may postpone investment plans on subsidiaries· due to devaluations in their respective currencies.

‘’Trade between Nigeria and EU members that relied on the UK’s existing network will likely decline’’. On the business opportunity in the BREXIT development, Greenwich said ‘’the currency (British Pound) is at a 31 year low due to what we believe is short term panic.· The UK economy remains robust and resilient with a GDP (gross domestic products) of over US$2.8 trillion and is the largest recipient of FDI (foreign direct investment) in the EU’’. They added that ‘’investments in the UK may begin to look much more attractive· considering the exceptionally weak sterling levels that might be seen, representing something of a once in a life time opportunity to purchase UK assets’’.

However, some analysts at Nairametrics, a Lagos based financial and economic analytics house, are seeing some consequencies in the horizon even though on the economic front the short-term perspective appears less consequential. “In the short-term, being Nigeria’s former imperial rulers, the UK has been one of Nigeria’s traditional trading partners, and because of a shared language, has remained a destination of choice for most Nigerians”, they stated.

“Our elite are deeply ingrained in the UK, and have bought into that country very deeply. With a population of 201,184 according to the 2011 Census, the UK is home to one of the largest concentrations of Nigerians outside Nigeria. Issuance of visas to Nigerians may take a hit as immigration was one of the key issues in the Brexit vote. “However, in reality, the UK is not Nigeria’s biggest trading partner, even in Europe. As a destination for Nigerian exports, the UK at $5.21 billion comes fourth behind Spain ($9.7 billion), the Netherlands ($5.59 billion) and France ($5.48 billion). “As a source for Nigerian imports, the UK at $2.28 billion, comes third behind the Netherlands ($3.4 billion) and Belgium ($2.59 billion).

“These realities, and the UK’s diminished status, have to be taken into account in the renegotiation of trade agreements that are sure to come. Nigeria must look to increase her ties with the bigger market that is the EU, while taking into account the cultural ties, especially the monies spent by Nigerians in British schools”.

According to the Senate Committee on Tertiary Institution and Tertiary Education Trust Fund, Nigeria currently spends over $2 billion annually as capital flight on education abroad, with the UK chalking up the lion share of those education dollars as 66 per cent of Nigerian foreign students attend universities in the UK, according to Euromonitor International. Nigerians received a total of $3.7 billion from relatives residing in the UK in remittances in 2015 according to the Global Knowledge Partnership on Migration and Development, second only to the United States.

Also, a contracting UK economy will have a deep impact on aid programmes to Nigeria, especially DFID interventions, which have been a burning political issue in the UK. Politically, Nairametrics stated, “Westminster has always been a strong supporter of Abuja. This will not change. However, the strength of that support will wane.

This will give some impetus to separatist movements within Nigeria. “For a start, the Indigenous People of Biafra, far and away the loudest separatist movement in Nigeria today, has a very large diaspora support in the UK. “Should the political effects of the Brexit happen and the UK eventually disintegrate, IPOB, and its supporters will only get louder in their demands for a similar referendum here, and England, the only part of the UK that may maintain an interest in meddling in Nigerian affairs will no longer be in a position to offer unconditional support to Abuja. “The case for self-determination would have been made stronger, and Nigeria may end up having to conduct referendums of its own, with uncertain results.”

{Nigeria will allow the embattled naira to trade freely in a move to control the currency crisis in Africa’s most populous nation.}

The new system will come into effect on 20 June and is expected to lead to a significant devaluation of the naira.

Being a major oil exporter, Africa’s biggest economy has taken a hit from the fall in commodity prices.

The fixed currency rate had created a vast black market for US dollars and squeezed the country’s economy.

Nigeria’s central bank had long been expected to to allow the naira to be more flexible and trade at a market-driven rate.

The naira is fixed at 197 to the US dollar, but the black market rate has soared to 370 in recent months.

The currency fix was introduced in February 2015 to stop the naira from falling when lower oil prices sparked trouble for Nigeria’s economy.

But a prolonged period of holding a currency at an artificial level often has a disruptive effect as foreign companies become reluctant to import goods when they are paid at distorted levels.

For months, Nigeria has been in the grips of a severe foreign currency shortage. As oil prices plummeted, so did the country’s foreign currency earnings, meaning there was less cash to pay for imports.

Unlike other major petroleum producers, such as Russia, Nigeria refused to devalue its currency. The country’s president wanted Nigerian businesses to make what they could not import and to diversify the economy away from the oil industry.

But that policy led to widespread shortages of raw materials, machine parts and supermarket products.

The new exchange rate will be welcomed by businesses that were forced onto the black market to pay for their imports. On occasions they were paying almost double the official rate for dollars.

Foreign investors may also be tempted back as they will get more value for their money.

But the new exchange rate is likely to push up already high inflation. And that will hurt tens of millions of Nigerians who live in abject poverty.

{{Recession worries}}

In May, Nigeria’s central bank governor had warned a recession was “imminent”.

A lower value of the naira will make domestic products cheaper and competing imports more expensive, which is hoped to help the struggling economy.

Companies have suffered from the crisis, being forced onto the black market to pay for imports of goods and equipment.

The expected devaluation is thought to also bring back investor confidence as foreign companies had found it increasingly difficult to do business in Nigeria.

A number of foreign airlines recently stopped flying to Nigeria after they were unable to repatriate up to $600m (£417m) in ticket sales, according to the International Air Transport Association (IATA).