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NAIRA-YUAN-CURRENCY-SWAP

Expert lauds NNPCL strategy to strengthen currency

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Abuja, Aug. 20, 2023: An economic expert, Dr Chijioke Ekechukwu, has lauded the emergency three billion dollars crude oil repayment loan secured by the National Petroleum Company Ltd. (NNPC Ltd) from Afreximbank to stabilise exchange rate.

Ekechukwu said this on Sunday in Abuja that the loan came as a matter of expediency to save the continuous free fall of the naira in the shortest run.

The economist said there was no other measure or monetary/fiscal policy decision that would have been able to save the depreciation of the naira in such a short period of time.

“It is, therefore, a very necessary intervention while working out other medium to long-term remedial solutions to the Naira fall.

“The intervention is inevitable because that’s the only way we can wriggle out of the economic embarrassment we find ourselves now as a result of the very high exchange rate,” he said.

However, he advised the three tiers of government to desist from extravagant cost of governance.

According to him, all is not economically well, so we need to adjust our expenditure pattern and total cost of governance.

The naira float had seen the currency plunge from below N500 per dollar on the official exchange windows to a record low of about N900 naira.

Petrol now sells at N617 from the first increment of N540 per litre since May 29, when President Bola Tinubu announced that fuel subsidy was gone.

NNPC Ltd. and Afreximbank had recently signed a commitment letter and term sheet for an emergency three billion dollars crude oil repayment loan.

The deal, according to NNPC Ltd., will provide immediate disbursement to enable the NNPC Ltd to support the Federal Government in its ongoing fiscal and monetary policy reforms aimed at stabilising the exchange rate market.

It will cushion the effect of fuel price jump and scarcity of forex, associated with the free float of the naira.

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Currency swap will benefit all – CBN

The Central Bank of Nigeria (CBN) has expressed concern over the challenges being experienced by the citizens in getting cash from their bank accounts and other alternative channels.

The  Director, Corporate Communications Department in the bank, Mr Osita Nwanisobi stated this during the CBN Special Day at the ongoing 44th Kaduna International Trade Fair, on Saturday in Kaduna.

Represented by Mohammed Abbah, Director, Capacity Development in the bank, Nwanisobi said the advantages of the currency redesign were overwhelmingly enormous and would benefit the economy in the long run.

“Indeed, there have been reports of occasional transaction failures, we wish to assure you that the Nigerian payment system infrastructure is robust enough to handle the surging transaction volumes across all channels.

“We, therefore, urge Nigerians to embrace alternative payment channels, such as eNaira and internet banking as we embrace the cashless policy,” he said.

Nwanisobi said the policy was not targeted at anyone or any group of persons rather aimed at strengthening Nigeria’s macroeconomic fundamentals and better our socio-economic conditions.

He said the aim of the currency redesign was to make the country’s monetary policy more efficacious which resulted to relatively stable exchange rate.

The Director said the policy also aimed at combating banditry and ransom-taking while increasing financial inclusion by reducing the number of the unbanked population in the country.

According to him, the CBN is focus on stimulating productivity in the manufacturing sector, strengthening domestic industries, transforming agricultural output to ensure self-sufficiency and shield local economy from harm.

He said the apex bank in collaboration with the Nigerian Inter-Bank Settlement System (NIBSS) recently unveiled the National Domestic Card Scheme, the first in Africa.

The initiative, he said, would lower operating cost incurred by banks through huge charges for foreign card schemes while reducing foreign exchange commitments associated with operating such cards.

According to him, the apex Bank has released funds to support various initiatives such as the Anchor Borrowers’ Programme (ABP), the Commercial Agriculture Credit Scheme (CACS), and the Tertiary Institutions Entrepreneurship Scheme (TIES) between 2015 till date.

“Similarly, the bank has supported the Micro, Small and Medium Enterprises (MSMEs) sector, the Agribusiness/Small and Medium Enterprise Investment Scheme(AgSMEIS) and Micro, Small, and Medium Enterprise Development Fund (MSMEDF).

 “Under the Export Development Fund (EDF) and Export Facilitation Initiative (EFI), the CBN has funded several projects for non-oil export commodity value-addition and production in excess of N11 billion and N3 billion, respectively”.

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African blocs discuss challenges to realising single currency territories

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Africa’s main regional economic blocs say monetary unions will raise the value of trade and shield them from fluctuating exchange rates and are pushing to establish single currency territories.

Gathering in Nairobi under the African Union, representatives from various member states of regional economic blocs (RECs) said exchange rates should be considered a barrier to trade and addressed with urgency.

Some of the RECs such as the East African Community have identified a monetary union and a single currency as one way of boosting integration and eliminating the exchange shortfalls that routinely befall traders across the borders.

Kenya’s Industry, Trade and Investment Cabinet Secretary Moses Kuria told the meeting that seven in 10 African economies face serious challenges related to foreign exchange, but blamed part of the problem on procrastination.

 “We have debunked the myths about Africa being a continent of darkness, centre of disease, and it is now time to debunk the myth that there is no hurry in Africa,” CS Kuria said.

 “Other regions and continents have caught up and are interested in Africa, but Africa is still dragging its feet. The only way to do this is to establish linkages and bridges within Africa.”

In integration, some blocs have made progress. The EAC, for example, allows citizens to travel across borders using national IDs, even though some member states have not implemented this. The EAC has further constructed and launched 12 one-stop border posts, easing the movement of people and goods.

The elephant in the room, however, has been the monetary union. In the EAC, Kenya and Tanzania are still battling over hosting rights of the East African Monetary Institute, the presumptive regional central bank.

At this week’s Nairobi meeting, AU Commission chairperson Moussa Faki said that as Africa has the world’s largest free trade area — 1.2 billion-person market — it must create an environment where its own resources fuel trade and prosperity.

“The economic prospects for Africa look promising, Africa is coming out as resilient and is bound to transform the three major sectors of economic activities into a much more sustainable economic model; the extraction of raw materials, the manufacturing sector and the service industry,” he said.

EAC Secretary-General, Dr Peter Mathuki, said the bloc is working hard to remove non-tariff barriers to regional trade.

“They have now dropped from almost 250 last year to four, and we shall work to see how to remove the remaining ones to ease trade between countries,” he said.

“We will look into how to improve this so that intra-Africa trade can rise to at least 50 percent. Transporting goods from East Africa to Central Africa takes approximately two months, yet Central Africa is so near. We will engage in discussions on infrastructure to allow faster and easier movement of goods from one country to another,” he added.

The single currency dream will, however, take a while to achieve.

The blocs must address inflation rates, forex reserves to cover at least four months’ imports and fiscal deficits averaging 3.5 percent and avoiding borrowing more than 50 percent of their respective GDPs.

The East African

NAIRA-YUAN-CURRENCY-SWAP

South Africa backs African currency

South Africa is in full support of establishing a single African currency backed by the continental central bank and monetary institute.

According to International Relations and Cooperation Minister Naledi Pandor, the establishment of the African Union’s (AU) African Central Bank (ACB), African Investment Bank (AIB) and the African Monetary Institute (AMI) are considered critical to facilitate a single currency and boost the intra-Africa trade.

“In every available continental platform, South Africa has consistently reaffirmed her commitment to continuing to support the continental integration in line with the provisions of the Abuja Treaty of 1991 which seeks to assist the AU member states to overcome trade barriers that impede the flow of goods, services and capital,” Pandor said

This emerged in Pandor’s response to a written parliamentary question from EFF MP Thembi Portia Msane.

Pandor said the “operationalisation” of the African Continental Free Trade Area Agreement (AfCFTA) and the start of trading on 1 January 2021 are viewed as catalysts for long-term continental “prosperity and integration”.

“It is against this background that the establishment of the African Union Financial Institutions (AUFIs) comprising the ACB, the AIB and the AMI are considered as critical to facilitate the creation of a single currency and boost the intra-Africa trade.

“These institutions form a key component of the flagship projects of Agenda 2063,” she said.

Furthermore, Pandor said South Africa utilises its participation at AU statutory meetings to call for the establishment of the AUFIs and the subsequent realisation of a single currency.

“It is for this reason that during the 12th Extraordinary session of the AU Assembly in July 2019 in Niamey, Niger, South Africa supported the launch of the operational instruments of the AfCFTA, which included amongst others the digital payment system. The launch of the AfCFTA instruments is a remarkable achievement following the entry into force of the AfCFTA,” she said.

Pandor also said the August 2021 Southern African Development Community (SADC) summit reaffirmed the bloc’s position to create a SADC central bank and monetary union.

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Expert advises Nigeria, others to implement single currency

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An Economist, Prof. Akpan Ekpo, has called on West African countries to fast track the launch of a single currency that would boost trade and economic growth in the region.
Ekpo , a former Director General of the West African Institute for Financial and Economic Management (WAIFEM), said on Sunday in Lagos that what the region needed for the take-off was only “a political will”.
He added that once the currency was launched, economies would find its place and other players would follow.
The experts reaction came on the background of the new road map agreed upon by the heads of state of the Economic Community of West African States (ECOWAS) to launch the Eco single currency in 2027.
Recalled that the planned currency which ought to have begun in 2020, was derailed by the Coronavirus pandemic; member states have also been unable to meet the convergence criteria for the launch.
The criteria include inflation, debt-to-GDP ratio, budget deficits and their financing, reserves and exchange rate stability.
According to Ekpo, if they wait for all the countries to meet to the criteria, there will never be a single currency because countries met it at different times and most times not all of the important criteria.
Ekpo said, “There is what is called `point convergence’, if you let two or three countries who are big in the region like Nigeria, Ghana, Senegal and Cote d’lvoire to jump-start it, if they have the `political will’ to do so, it will solve the problem.
“Look at Nigeria’s inflation rate; it’s almost 18 per cent now, food inflation 20 per cent. So, the problem is, do they have the political will to do that?
“For instance, the Francophone countries CFA are tied to the Euro and all of them almost meet the criteria, if they disentangle their money from Euro, they will have high inflation rate for example.
“I am happy that Nigeria is not rushing into it because if they convert now, Nigeria will bear the burden for all other countries,’’ he said.