Business
Asia to reduce Dollar Dependency
TOKYO – Recent market volatility over expected U.S. monetary tightening has made Asia keenly aware of its reliance on the dollar, boosting efforts to use local currencies for trade and other transactions.On Tuesday, China and Singapore announced they would introduce direct trading between their currencies. Beijing also said it would allow Singapore-based investors to take yuan funds raised in the city-state and invest them in mainland securities markets.
Singapore follows in the footsteps of London – which gained so-called RQFII status last week – and Hong Kong. The move, designed to promote use of the yuan and broaden the investor base in China’s markets, builds on other measures taken recently that aim to reduce Asia’s dependence on the U.S. dollar.
Earlier this month China signed a 100 billion yuan ($16.4 billion) swap deal with Indonesia. It has existing pacts with Australia, South Korea and a number of European countries.
South Korea this month signed currency-swap agreements with Indonesia, Malaysia and the United Arab Emirates worth around $20 billion. Officials say they’re considering more such deals, in addition to existing pacts with China and Japan.
Swap agreements – in which central banks pledge to provide each other with currency, usually on a short-term basis – often are enacted during periods of financial turmoil, but more recently have taken on a greater role in trade and diplomacy.The arrangements are small compared to use of the dollar for international transactions, which accounted for foreign-exchange turnover of around $4.65 trillion a day, or 87% of the global total, according to triennial survey conducted by the Bank for International Settlements in April.
Still, the swap deals help insulate Asian currencies a bit from the whims of speculative investors, and make it more likely their movements will reflect trade needs or economic fundamentals.
For China, the latest deals are part of efforts to boost international use of the yuan and move closer to a fully convertible currency and an open capital account.
More broadly, the deals aim to boost bilateral trade and reduce associated costs by allowing central banks to buy currencies from each other, making it easier for commercial banks to get hold of foreign exchange.
But most pertinent, in light of this summer’s market turmoil, is their role in improving financial stability. A Korean official said last week that reduced dependence on the dollar would help the country better cope with market volatility caused by the greenback.The Chinese and Korean governments “want to avoid dollar concentration and diversify their portfolio structure. They will continue these efforts,” Bank of Tokyo-Mitsubishi UFJ strategist Takahiro Sekido said.
At a meeting in Brunei earlier this month, Chinese Premier Li Keqiang told East Asian leaders it was imperative to strengthen the region’s financial safety arrangements by bolstering foreign exchange reserves and signing currency-swap deals. He also said China would work with other countries to look at using local currencies in East Asia’s crisis fund, the Chiang Mai Initiative.
A recent paper co-authored by Asian Development Bank Chief Economist Changyong Rhee found that wider use of the Chinese yuan and Japanese yen in international transactions would help Asia deal with local crises and curb its dependence on the dollar, bolstering the region’s economic stability.
In an interview ahead of the paper’s publication this month, Mr. Rhee told The Wall Street Journal that the Chiang Mai Initiative should consider diversifying its portfolio out of dollars to include yen and eventually yuan. But that can’t happen overnight, so greater use of Asian currencies for bilateral swaps, trade settlement and bond issuance are a good intermediate goal, he said.
Beijing began liberalizing the yuan in 2009 but capital flows into and out of China are still restricted, making it difficult for central banks to hold large quantities of reserves in yuan. Some Chinese officials have suggested opening the country’s capital account by 2020, though economists warn that moving too fast could lead to destabilizing outflows.
Some economists say that even the Japanese yen may not make an appropriate reserve currency.
Charles Adams, a visiting professor at the Lee Kuan Yew School of Public Policy in Singapore and former International Monetary Fund official, says Japan would need to further increase the liquidity and openness of its financial markets and improve policy transparency for the yen to be an effective reserve currency.
“Since Japan is doing a big monetary experiment, I can’t imagine people would want to hold yen until it’s all over,” he said, referring to Prime Minister Shinzo Abe’s economic policy, which includes aggressive bond-buying by the Bank of Japan, fiscal stimulus and structural reforms.
Business
Audit Report Exposes ₦514bn Financial Infractions In NNPCL
The Office of the Auditor-General of the Federation has uncovered financial irregularities amounting to ₦514 billion in the 2021 operations of the Nigerian National Petroleum Company Limited (NNPC Ltd).
The revelations were contained in a comprehensive audit report highlighting non-compliance and internal control weaknesses within Ministries, Departments, and Agencies (MDAs) during the 2021 financial year.
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Breakdown of Infractions
The audit detailed four major financial discrepancies within NNPCL:
“Irregular Deductions: A total of ₦343.64 billion was deducted from domestic crude oil sales at source without proper documentation.
“Sinking Fund Deposits: ₦83.66 billion, categorized as miscellaneous income, was retained in a sinking fund account.
“Unauthorised Refinery Deductions: ₦82.95 billion was deducted from federation revenue purportedly for refinery rehabilitation.
“Unsubstantiated Payments: ₦3.75 billion was flagged for transactions related to petrol sales that lacked proper verification.
The Auditor-General’s report stated that these financial activities violated the 1999 Constitution and the Financial Regulations Act of 2009, underscoring significant lapses in compliance with statutory guidelines.
According to the report, NNPCL generated ₦484.73 billion from domestic crude oil sales in March and May 2021.
However, ₦343.64 billion was deducted for various purposes, including “Value Shortfall,” “Strategic Stock Holding Cost,” and “Pipeline Maintenance.”
The deductions were made unilaterally by NNPCL without adequate documentation or justification.
Additionally, the report flagged ₦50 billion of the net payable amount for May 2021 as unaccounted for, creating a significant gap in the federation’s revenue.
“Audit observed from the review of NNPC SAP payment record for March and May 2021 payments that the sum of ₦484.73bn was the gross amount generated for the sale of domestic crude for the months of March and May 2021.
“The sum of ₦343.64bn from the gross amount was unilaterally deducted from the gross domestic crude sales as NNPC Value shortfall, Strategic Stock Holding Cost, Crude Oil and Products Pipeline Losses, as well as the pipelines maintenance and management costs.
“The details of each of the cost components deducted were not provided for audit review. Hence, the reasons for the deductions could not be justified by the management.”
On the unremitted ₦50 billion from May 2021, the report noted: “In the month of May, the net payable that could have been remitted ought to have been ₦127.075bn, but only the sum of ₦77.075bn was remitted, leaving an unremitted balance of N50bn to the Federation Account, which has remained unaccounted for.”
The report attributed these anomalies to weaknesses in NNPCL’s internal control systems, warning of the risks they pose to public funds.
It read, “The above anomalies could be attributed to weaknesses in the internal control system at NNPC, now NNPC Ltd. This is a potential loss of Federation revenue, diversion of public funds, or misapplication or misappropriation of funds.”
Business
Opayemi Salutes Sanwo-Olu Over Successful Lagos Shopping Festival
The success of the maiden edition of the Lagos Shopping Festival (LSF), Africa’s first 72-hour non-stop commerce and entertainment event has been credited to the Governor of Lagos State, Babajide Sanwo-Olu.
This is the view of Managing Director/Chief Strategist of Chain Reactions Africa Ltd, Israel Jaiye Opayemi, one of the main organisers of the event.
According to Opayemi, though Chain Reactions Africa conceptualised the event, the festival could be rightly described as the Governor’s baby and owes its success to his leadership. “Firstly, the Lagos Shopping Festival could not have come to fruition if the Governor did not buy into our audacious plan when we first presented the idea to him during the Covid-19 pandemic in 2020. Secondly, it was the Governor’s exemplary leadership of the project as its Chief Marketing Officer which attracted the buy-in of key sponsors like Zenith Bank, Tolaram Group, First Bank Plc, and Guinness Nigeria Plc,” Opayemi revealed.
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While the duo of Zenith Bank and First Bank provided their bank on wheel platforms for buyers at the Lagos Shopping Festival, they also supported the Vendors with special Point of Sale Machines with which to process payments from buyers. The banks were also seen marketing their diverse banking products to guests within the shopping arena.
For Tolaram, it was a time to support the citizens and give back to society. Guests at the Lagos Shopping Festival were freely given some of the products of the group such as PowerOil, Indomie and Kellogg’s packaged into goodie bags and given out to prospective buyers at the shopping arena. The Children’s Arena was however activated by Indomie with the children entertained by Santa Claus within a well-equipped arena manned by the Indomie Brands team and the Lagos State Safety Marshalls. The children were daily treated to free Indomie meals daily and given various gifts to go home with.
On its part, Guinness Nigeria came through as the real life of the Nigerian party by organizing product sampling activation for the teeming guests at the festival using brands such as Singleton, Johnnie Walker, Ciroc, Don Royale and Captain Morgan to deliver pleasant experiences to guests aside from Guinness and Malta Guinness.
While unveiling the identity of the festival last month, Governor Babajide Sanwo-Olu had thanked the management of Zenith Bank Plc, Tolaram Africa Group, Guinness Nigeria Plc and First Bank of Nigeria for supporting the idea of a Lagos Shopping Festival, describing it as a value addition on the state’s tourism calendar and the overall efforts to grow the State’s GDP. The Governor further said, “I must specially acknowledge your pioneering sponsorship role. It is easy for a corporate sponsor to jump on the sponsorship band wagon of an already established festival and fund it. But you are supporting the maiden edition of this Lagos Shopping Festival with us. The competition is watching you now. Do not build this brand with us and yield the space for the competition to take over. I do hope you would all commit long term to this brilliant initiative.”
On his part, Girish Sharma, CEO Guinness Nigeria Plc, expressed enthusiasm for the initiative. “Lagos is the commercial heartbeat of Nigeria and Africa’s entertainment capital, and the Lagos Shopping Festival captures its essence. We see opportunities in this initiative because it is a creative fusion of commerce and entertainment. This partnership reflects our dedication to fostering economic opportunities and support the nation’s vibrant entertainment industry.”
A first-of-its-kind, the festival was a convergence of commerce and entertainment, bringing together buyers and sellers in the MSME ecosystem, and hordes of fun-seekers who were entertained with thrilling performances by A-list entertainers, including Adekunle Gold, Wande Coal, Teni, Young Jonn, BNXN, Ayo Maff, SB Live and EmmaOMG. The list also included some of Nigeria’s most sought after DJs such as DJ Neptune, DJ YK Mule, DJ Baddo while Gbenga Adeyinka the 1st and Larry J dished out rib-cracking comedy performances.
Held from 23rd to 25th Day of December 2024, at the iconic Mobolaji Johnson Arena, Onikan Stadium, Lagos, the Lagos Shopping Festival saw thousands of fans throng the main venue and select Lagos malls during the three-day period to bag the latest bargains from local and top global brands.
Business
Naira Depreciates In Parallel Market, Gains In Official FX Market
The Nigerian Naira experienced mixed movements in the foreign exchange markets on Monday, as it depreciated to N1,665 per dollar in the parallel market, down from N1,660 per dollar recorded over the weekend.
In contrast, the official exchange rate saw the Naira appreciate to N1,534.56 per dollar, improving slightly from N1,535 per dollar last Friday, according to data released by the Central Bank of Nigeria (CBN).
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This reflects a marginal gain of 44 kobo in the official Nigerian Foreign Exchange Market (NFEM).
As a result, the gap between the parallel market rate and the NFEM rate widened to N130.44 per dollar, compared to the N125 per dollar margin recorded over the weekend.