iwaeda:


Broom symbolises witchcraft; witchcraft stands for death. So APC is killer itself.

The Petroleum and Natural Gas Senior Staff Association of Nigeria, PENGASSAN, has said the decision to float the nation’s currency is the major cause of the hardship, mass suffering, and other economic woes confronting the country, describing it as the worst economic decision-taking by the government.

President of PENGASSAN, Engineer Felix Osifo, in a chat with Vanguard, said people are already projecting that one Dollar will be exchanged for N4,000 before the end of the year because currency speculators are having a free day, contending that no country anywhere in the world floats its currency 100 percent in US Dollars.

According to him, “The removal of the fuel subsidy came with mixed feelings. As of then, our greatest concern was that it was done hastily. We were challenged by the fact that there was no plan in place to cushion the effects of its removal. One of the sectors impacted is the transportation sector. Before going into such a venture, it is right to proliferate everywhere with buses so that the Nigerian masses and students can use such buses for free.


“It would have reduced the high cost of transportation suffered by the people. Today, we can see where we are as a country. The reason why we are facing this difficulty is really not because the fuel subsidy was removed, it is mainly because of the exchange rate. In the last three years, we have shouted that the greatest policy that would affect us greatly if not well-managed is the exchange rate.

“When the exchange rate was N450, if crude oil price was around $75 to a barrel, the landing cost of PMS would have been about N350. That is half of where we find ourselves today and it could have also been better. We are challenged today because that exchange rate keeps increasing over time


“As we speak, everywhere is in chaos. The country is really going south and everywhere, it has been a problem. No country in the world floats its currency 100 percent in US Dollars. That is the worst economic decision-making. Today, we do not earn 100 percent and we have floated our currency. If it is left to supply and demand, speculators will come in. If not for the run around the Economic and Financial Crimes Commission, EFCC, operatives are also doing, which is also not sustainable, we could have got to N2,000. A lot of people are already projecting N4,000 before the end of the year. Currency speculators should not be allowed a free day.


“When a nation floats its currency, it is looking at the parallel or the black market, which has no fundamentals. When somebody has $5,000,000, he decides how much to sell it when another person is there to buy. The CBN or the official rate should not be chasing the parallel market. Those in the parallel market can do whatever they want, but the official rate should be maintained at a single rate. Another thing we can do is increase the supply side. Nigeria is an oil-dependent country.

“Over 90 percent of our foreign exchange earnings is from crude. We must curtail the issue of crude oil theft. We must create incentives for the International Oil Companies, IOCs, to increase their production for the indigenous producers to increase their production and stimulate more production. This is the quickest way for us to earn petrol dollars. When this comes in, it will shore up the supply and we will be able to meet the demand. Speculators cannot be eliminated, they will still be there.

“We should look at those critical items that we are importing for the manufacturing industry – spare parts, raw materials. We should look at all of them and reduce their duties.

Look at what the Customs is collecting for you to clear spare parts or any goods.


“They have adjusted their exchange rate to about N1, 600 and that would impede business. Food prices are expensive. People keep asking how it is related to the exchange rate; the question there is that the exchange rate is what is also affecting Automotive Gas Oil, AGO, popularly called Diesel. Before now, AGO was around N260. Last year it was around N700 to N800 naira. As we speak, AGO per litre is somewhere around N1,400.

“So, the woman that goes to Maiduguri market to buy tomatoes and bring them to Port Harcourt market or Lagos is going to ply the road with a vehicle which will be fuelled by AGO. That same woman, the house she lives in, the landlord increases the rent. She also has children in school and the school management would also increase the fee because the cost of running the school is high and teachers are demanding for more salaries.

Customs are meant to facilitate trade, they are not revenue collectors. If the target is for customs to collect N2 trillion, it will hinder the manufacturing sector and businesses. However, if the target is to facilitate businesses, they will still bring in revenue which may not be much but taxes can be made from the businesses.”

jmoore:
Tinubu decided to practicalize HUNGER GAMES on Nigerians.

Human rights lawyer Femi Falana (SAN) is urging thePresident Bola tinubu-led government to review its fuel subsidy removal policy, due to allegations that the country is still paying for the subsidy.

Falana made the remarks in a signed statement titled “Fuel subsidy again?” that he released to newsmen on Sunday.

He stressed that it’s high time the federal government reviewed the fuel subsidy removal rather than urging Nigerians to continue to endure the hardship.


The statement reads, “President Bola Tinubu had on his inauguration declared an end to the subsidy era, triggering a hike in the prices of petroleum across the country.

“But in recent times, the World Bank and the Chief Executive Officer and Managing Director of Pinnacle Oil and Gas Limited Mr. Robert Dickerman claimed that the Federal Government is still paying subsidy for the product.

“Curiously, the Nigerian National Petroleum Corporation Limited has not deemed it fit to deny the serious allegation that fuel subsidy has been restored. Since there is no provision for fuel subsidy in the 2023 and 2024 Appropriation Acts the federal government should, without any further delay, confirm or deny the serious allegation and end the opacity surrounding the importation of fuel from foreign countries.

“It would be recalled that after the Muhammadu Buhari administration announced that it had removed subsidy on petrol, it turned around to spend N11 trillion on the so-called “under-recovery” within a period of 8 years.

“Therefore, instead of urging Nigerians to continue to endure the hardship caused by the removal of subsidies on petrol, the Bola Tinubu administration. If the federal government is spending as much as N1 trillion on fuel subsidy per month, it is high time the policy was reviewed in the interest of the Nigerian people.”

iwaeda:



Ebi npa won oooo.

Bevista:
Fairly bold move by CBN.
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The interest rate was too low compared to inflation resulting in a negative yield on bonds. Government cannot be borrowing at such a low rate while causing huge inflation on the masses. It encourages financial rascality.
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The negative yield was partly why many investors preferred to preserve their funds in USD resulting in the significant depreciation of the naira.
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Let's hope the fiscal side (Wale Edun & Co) begin to act responsibly.

CBN governor Yemi Cardoso disclosed the decision of the meeting, the first since his announcement as the apex bank governor.

He said the move was in a bit to tame the stubborn inflation that had not responded much to the previous marginal increase.

The CBN governor said the committee raised the MPR by 400 basis points to 22.75 percent, and adjusted the asymmetric corridor at +100 and -700 basis points from +100 basis points and -300 basis points around the MPR.

He said the committee also increased the cash reserve ratio (CRR) from 32.5 percent to 45 percent, while retaining the liquidity rate at 30 percent.

On inflation, he said the rate of change in prices of goods and services rose to 29.9 percent in January 2024, from 28.92 percent in December 2023

He attributed the hike in inflation to rising costs of energy, high fiscal deficits and insecurity.

AGAINST the backdrop of sustained pressure in the foreign exchange market and high cost of production, the Manufacturers Association of Nigeria, MAN has indicated that inventory of unsold goods is escalating to levels now threatening the existence of companies operating in the production sector of the economy with attendant job losses.

Financial Vanguard’s findings show that as of the weekend the foreign exchange market had recorded over 254 per cent plunge in the value of the naira since flotation of the currency by the Central Bank of Nigeria (CBN) in June 2023.

Recall that the naira traded for N471 per dollar in the official I&E market on June 13, 2023 before the floatation of the currency, but exchanged for N1,665.50 to a dollar as at February 23, 2024 on the Nigerian Foreign Exchange Market (NAFEM), indicating a depreciation of more than 253.6 per cent over the eight-month period. The forex crisis is also stoking inflation, and coupled with high energy costs, purchasing power has continued plummet, stifling demand for goods.

Stockpiled warehouses
Speaking on the impact of this development on the manufacturing sector, Director General, MAN, Segun Ajayi-Kadir, said: “There are reports that across the board, many warehouses and plants of many manufacturing firms are stockpiled with unsold goods manufactured last year. “The development is as a result of the devastating effects of the exchange rate crisis, inflation, fake and sub-standard goods, smuggling and other macro-economics challenges.

“These had put many manufacturers in a great dilemma in the current year as they are applying brakes on production by watching keenly events in the country to know if there would be improvement in sales in order to create space for fresh production for the year.” Ajayi-Kadir warned that manufacturers may be forced to halt making new products, leading to workforce down-sizing, since production lines are becoming inactive. “The continued naira depreciation against the dollar, and the general forex volatility were forcing manufacturers to have a rethink. No genuine manufacturer could operate successfully and make profit under the current scenario, whereby the naira has been falling sharply more than expected in the country,” he stated.

Highlighting challenges in accessing foreign exchange (forex), Ajayi-Kadir disclosed that manufacturers primarily obtain forex through Bureaux De Change (BDCs), noting that banks typically offer less than 20 per cent of the required amount. No respite yet There seems to be no respite in sight as the International Monetary Fund (IMF) has warned that the exchange rate of the Naira may further depreciate by about 35 per cent this year, adding that this could lead to inflation rate peaking at 44 per cent.

“Given the absence of local production and the recent liberalization of commodity imports, the exchange rate would likely depreciate further – by an estimated 35 per cent in 2024 – and contribute to a further sharp rise in inflation, peaking at 44 per cent, before monetary policy is eventually tightened sharply,” IMF stated in its February 2024 Post-Financing Assessment and Staff Report.

Financial Vanguard reports that manufacturing companies have been adopting diverse responses to the situation. A good number of them have been investing in backward integration for sourcing raw materials locally instead of imports that strangulate their finances due to the high exchange rate and scarcity of foreign currency. But some of the manufacturers are scaling down their operations while many have actually suspended operations.

Companies’ woes Against the backdrop of the forex crisis, Nigerian Breweries (NB) Plc recently issued a new price review notification to all its customers in the West Zone. In the notice to its consumers, NB said: “This is to inform you that we are constrained to review the prices of some of our stock keeping units (SKUs) with effect from Monday 19th February, 2024. This review has become necessary because of continued rising input costs and the need to mitigate the impact.”

SKU is a unique identifier used to track inventory within a business. Nigerian Breweries produces major alcoholic beverages like Star Lager, Gulder, Legend Extra Stout, Heineken, Goldberg, Life, and Star Radler amongst others. It also produces non-alcoholic drinks like Maltina, Amstel Malta, Fayrouz, Climax Energy drink, and Malta Gold. In a related development, in December 2023, Procter & Gamble (P&G) said it was leaving Nigeria, after just opening its diaper production line worth $300 million in Lagos in 2017. Other global conglomerates that have announced their exit from the country in the recent past include GSK Plc, Bayer AG and Sanofi SA.

Also last year, Unilever Plc cut some of the products manufactured in Nigeria, while Nestle SA has posted losses from its operations. The main reason for the exodus of these conglomerates is scarcity of dollars that they need to repatriate their earnings, with CBN still struggling to clear a backlog of demand for dollars companies require to pay debts and import raw materials.

This is in addition to a near complete absence of reliable electricity supply and congestion at the nation’s ports.

Way forward
On short-term measures to alleviate challenges faced by manufacturers, Ajayi-Kadir recommended freezing the rates at which the import of raw materials, spares, and machines is calculated. According to him, this would provide stability for manufacturers, shielding them from the impact of fluctuating currency values and fostering a more predictable business environment.

He also proposed that the government open new credit sources with rates not exceeding 5 per cent, providing quick wins to alleviate pressure on the manufacturing sector. “Additionally, the government should remove the price verification porter because it’s causing companies to shut down, they are not able to import those raw materials.

“The government should also open new windows for us to source our credit at rates that are not lower and that are not higher than 5 percent. “These are very quick wins that the government can do that can lower the pressure that is upon the manufacturing sector,” he said.

The MAN DG also emphasized the importance of promoting domestic production. “Historically, we have not prioritized our domestic economy or encouraged local production. Without local production, we cannot control the exchange rate or achieve a positive rate. Our reliance on imports leads to continuous pressure on the Naira to pursue the Dollar, resulting in an unfavorable exchange rate,” he stated.

MSMEs further threatened
On his part, Dr Femi Egbesola, President, Association of Small Business Owners of Nigeria (ASBON), blames the forex crisis on unrealistic and inconsistent fiscal and monetary policies. “So many policies of the government this past time have done more damage than good to the forex market. To get a different result, something must just be done differently,” he said. On what the forex crisis portends for small businesses, Eg-besola stated: “Existence of more micro and small businesses are further threatened. Many more businesses are closing down or are in an ailing situation.

“This results to more job losses, loss of revenue to government because dead businesses can’t pay taxes and levies, discourages foreign investment and local investors, increases crime and insecurity, for jobless ones will look for other means of survival, mostly illegal means, owners of businesses are now abandoning their unproductive and unprofitable businesses to relocate overseas, higher inflation rate and more.” He advised that small businesses need to be more creative and innovative now more than ever before. “Business owners need to begin to diversify to foods and daily need products. More attention should be on exportable products that can earn forex.

“SMEs should adopt the use of technology now more than ever before. Technology adoption will significantly reduce business cost. SMEs need to invest in online marketing and advertising of their products and services. This breaks borders and opens bigger markets. “SMEs should begin to take advantage of the African Free Continental Free Trade Area (AfCFTA) opportunities to sell their products and services to other African countries without the statutory levies and taxes. This will lead to increase in sales and eventually push up productivity and profitability,” he added.

Managed naira float
In his comment, Dr Muda Yusuf, CEO, Centre for the Promotion of Private Enterprise (CPPE), said: “The depreciation of the naira exchange rate is an inevitable outcome of the current economic reforms. The primary objective is to correct the distortions in the foreign exchange market which had lingered for some time. Admittedly, the economic, social and political costs are quite high. “The main anchor of the reform is the unification of the exchange rate, between the official and parallel markets. The challenge has been that our foreign reserves are not robust enough to make the process less painful.

The economy is still grappling with a major forex liquidity crisis.” Yusuf added that the implications of the current crisis for investors and citizens are multifaceted. “They include: intense inflationary pressures; escalating production and operating costs across all sectors of the economy; erosion of profit margins as businesses could not significantly transfer increased costs to consumers. “Businesses that have foreign exchange exposure are under severe pressure; businesses with foreign shareholders are struggling to deliver value to their offshore shareholders because of the erosion of domestic currency value; and planning has become difficult for many investors because of the current volatilities.”

He said that the current policy reforms are expected to ensure stability in the short to medium term, adding however that the reform architecture needs to be periodically reviewed in the light of the high social costs and market imperfections. “The trade policy window should be explored to mitigate the current escalating prices and production costs. The recent upward review of the exchange rate benchmark for the import duty computation should be reviewed. Trade costs should generally be moderated to give succour to businesses and citizens. “Complete and total floatation of the currency should be avoided in the light of glaring market imperfections. CBN should commit to the option of a managed float. The policy choice of complete floating of the naira requires a rethink in the light of the current inflationary outcomes, volatility and mark.