Business
Currency crisis looms as fiscal buffers dwindle
LAGOS – The continued dwindling of the fiscal buffers- foreign reserves, excess crude account, (ECA) against the backdrop of rising and stable oil prices at the international market is responsible for the strengthening expectation that the nation’s currency, the naira, will dramatically lose value, Business Day investigations have shown.
Also, the current gap of over N13 between the official and parallel market rate which is creating arbitrage opportunity for forex dealers and lose fiscal stance of the federal government among others, is increasing dealers appetite for hedging through the growing desire to switch from Naira to foreign currency denominated deposits. The implication, they argue, is that naira will witness more depreciation.
Razia Khan, analyst with the standard chartered bank, London said, “It is correct that fiscal policy plays a key role in shaping expectations. Monetary policy has done pretty much what it can to restore FX stability. But expectations regarding the sustainability of a stable FX rate are heavily influenced by fiscal policy.
By running down its external and fiscal buffers, the ECA, Nigeria proves itself to be especially susceptible to oil price volatility. In the event of an oil price (or oil output) shock, the perception is that Nigeria will not be able to defend its FX rate. Markets are forward looking, hence the pressure on the currency now. Monetary policy will continue to try to restore stability – but it can only do so much.”
Analysts and monetary policy committee members are of the opinion that this portends danger for the economy as the Central Bank of Nigeria is getting closer to the limit of its monetary policy, stressing that the projected 6-9 percentage inflation rate can only be achieved with stable currency.
A currency crisis is a sudden devaluation of a currency which often ends in a speculative attack in the foreign exchange market. A currency crisis may result from chronic balance-of-payments deficits or from market speculation about the ability of a government to back its currency.
Although most of the analysts who spoke with BusinessDay did not see devaluation as the viable option in view of the import dependent nature of our economy, they wonder why Nigeria with a $30bn current account surplus and with oil prices at $100 per barrel is not seeing an accretion in its foreign reserves.
Besides, they say that considering the rate at which ECA is being depleted, we may wake up next year to discover that nothing is left in the account.
Another concern is the fact that no one seems to be in charge or accountable for management of oil income and questioned the relevance of the economic management team.
“That is why you have all the noise of accusation and denial with regards to what has accrued to the NNPC that is not remitted to the nation’s coffers,” says one close currency watcher
“Somehow, somebody will have to make sense of the oil production and revenue numbers. We are all going to pay a huge price for negligence as CBN can not continue to defend the naira as its balance sheet has very little wiggle room, he told BusinessDay.
Bismark Rewane in recent LBS breakfast meeting for February said that weaker naira will impair earnings of banks and also increases risk of default on dollar-denominated loans.”
Doyin Salami, in his contributions at the last MPC meeting said “From the perspective of economics theory, a persistent surplus on our current account, resulting from high oil price, should see the Naira strengthen. However, the failure to build reserves has resulted in strengthening expectation of that the Naira will lose value. This expectation has been manifested in a continuing switch from Naira to foreign currency denominated deposits –a trend I had previously described as “retail hedging.”
Unless the Fiscal side shows significant improvement imminently, the options for monetary policy may become glaringly inconsistent with the objectives and policy direction for the economy in Nigeria. For monetary policy, the challenge of managing the internal and external value of the Naira is a core element of its mandate. Achieving inflation rate of 6 ‐9 per cent in 2014 requires a stable currency.”
Salami further observed that the model articulated, in various documents, for the growth and development of the larger economy in Nigeria is predicated on Import substitution and for CBN to achieve price stability, “import substitution requires a stable, even strong currency.”
He said that given the data and information laid before the committee members “the immediate and emerging build up of banking system liquidity, it is clear that there is a need to respond to the pressure on the currency and forestall the build-up of further pressure. However, it is increasingly clear that we are approaching the limits for using the cost of credit as a management tool without inflicting damage on the growth and development aspirations of the economy.”
Sarah Alade, deputy governor and member of the MPC said, “Already, available data suggest that Gross Foreign Direct Investment (FDI) and portfolio inflows decreased significantly in the last quarter of 2013. Given that monetary policy is approaching its limit, there is need to allow for more flexibility in the exchange rate”
Suleiman Barau, another member of MPC said that the current crisis was “aggravated by activities of politicians who may have been forced to recourse to the use of foreign currencies to avoid charges associated with Naira cash withdrawals. The aggravated demand for foreign exchange (for transfers/Letter of Credit valid) that we have seen in 2013 is largely in the area of invisibles which has increased by 23.8% from 24% ($13.3b) to 48.2% ($26.1b) during corresponding period in 2012.”
Kingsley Moghalu, deputy governor and also a member of the committee said, “The role of fiscal factors in the current difficulties, marked by a severe decline in the Excess Crude Account over the past year, thus leaving the country dangerously vulnerable to external shocks as a result of the lack of fiscal savings. There is no indication that this situation will change in the near to medium term.”
– BUSINESS DAY
The Dangote Petroleum Refinery and Petrochemicals is of the view that deregulation should not be used as a justification for the importation of off-spec petroleum products or the undermining of Nigeria’s national interests.
This was contained in a statement on Tuesday by Dangote’s Group Chief Branding and Communications Officer, Anthony Chiejina.
The counsel came in response to remarks by Chief Executive Officer of Pinnacle Oil and Gas Limited, Robert Dickerman, on the importation and blending of petroleum products, which he framed within the context of a “deregulated commodity market.”
However, the Dangote Petroleum Refinery is of the view that his argument for a deregulated market could not obscure the serious implications of his actions, which, it claimed, not only threatened the integrity of Nigeria’s energy sector but also endangered the welfare of its citizens.
While reiterating support for deregulation and industrialisation, the Dangote Refinery emphasised that the support must be grounded in a commitment to the sustainable growth of Nigeria’s economy, while shielding the people from exploitation.
The refinery made it clear that the health and safety of Nigerians should never be compromised in the pursuit of profit.
According to the statement, “The Dangote Petroleum Refinery and Petrochemicals Company has long been an advocate for deregulation and industrialisation in Nigeria, but our support is rooted in a commitment to the sustainable growth of the country’s economy and the protection of its people from any exploitation. Unlike Dickerman’s view, deregulation should not be a licence for the importation and distribution of off-spec products or the subversion of national interests.”
The company also noted that, as an American, Dickerman should be well aware of how his own country protects its industries. It pointed to several recent examples from the United States to underline the point.
For instance, U.S. President Joe Biden recently opposed the sale of U.S. Steel to Japan’s Nippon Steel, stressing the importance of maintaining strong American steel companies supported by American workers — an example of protectionism that prioritises national economic interests over short-term profit.
Similarly, the U.S. has taken action to restrict the use of Chinese-made cranes in its ports, citing national security concerns. The U.S. has also imposed a 100% tariff on electric vehicles and a 50% duty on medical equipment imported from China, further demonstrating its commitment to safeguarding domestic industries.
The U.S. has also ramped up efforts to boost its own production of computer chips and medical supplies, driven by national security concerns and the need for economic self-sufficiency. Furthermore, during his presidency, George W. Bush used anti-dumping laws to impose tariffs on a range of Chinese goods that were considered to be unfairly priced.
“It is therefore perplexing that Dickerman, with all his experience in the U.S. market, would advocate for the importation and blending of petroleum products to Nigeria under the claim of deregulation and a free market. The fact is that he had deceitfully approached us and pleaded that we extend the pipeline from our refinery to Pinnacle’s tank farms for the purpose of blending our high-quality products with their imported products and selling them to Nigerians. We categorically rejected his request to extend our pipeline to their tank farms for such devious purposes because it would be a betrayal of the Nigerian people’s trust. The health and safety of Nigerians cannot—and should not—be compromised for profit,” the statement added.
The company also raised concerns over Pinnacle Oil’s decision to lease its tank farms to a company without any retail outlets in Nigeria, questioning the strategic intent behind such actions, particularly given that the farms are located just 500 metres from Dangote’s refinery.
It expressed its vigilance regarding the coordinated efforts to undermine the Dangote Refinery, drawing parallels to the fate of refineries in Port Harcourt, Kaduna, and Warri.
Consequently, the Dangote Petroleum Refinery called on the government, patriotic Nigerians, and local businesses to remain steadfast in defending the country’s sovereignty and economic independence.
“The choice we face is between fostering industrialisation or allowing Nigeria to remain a dumping ground for inferior products while exporting jobs. For nearly three decades, cartels and their collaborators have sabotaged efforts to develop Nigeria’s refining capacity, keeping the country dependent on imported products. The time has come to end this cycle of exploitation and ensure that Nigeria’s energy sector works for the benefit of its people,” it added.
Reiterating belief that a strong, self-sufficient energy sector is vital for Nigeria’s economic growth, the Dangote Refinery affirmed that it will continue to advocate for policies and practices that protect both industries and the well-being of all Nigerians.
The company also expressed its support for healthy competition that drives innovation and quality, and looked forward to the upcoming commissioning of the four state-owned refineries, as promised by the NNPC Ltd.
“At Dangote Petroleum Refinery, we are committed to ensuring that Nigeria becomes self-reliant in petroleum production, and we welcome competition that drives innovation and quality. However, we will never allow the continued importation and blending of petroleum products, nor the deliberate destruction of our national economy. We believe that a strong, self-sufficient energy sector is vital to Nigeria’s economic growth, and we will continue to advocate for policies and practices that protect our industries and the well-being of all Nigerians.
“We eagerly anticipate the coming on stream of the Kaduna, Warri, and Port Harcourt refineries before the end of this year, as promised by the Group Chief Executive Officer (GCEO) of NNPCL, Mele Kyari. This milestone will not only end all baseless rumours of monopoly but also position Nigeria as a refining hub for petroleum products in Africa,” it concluded.
Chevron Nigeria Limited (CNL), operator of the joint venture between the Nigerian National Petroleum Company Limited (NNPC Ltd) and CNL, has expressed commitment to providing a seamless and inclusive experience for all applicants participating in the selection tests for its available job opportunities.
According to the General Manager, Policy, Government and Public Affairs, at CNL, Olusoga Oduselu, the company strategically achieves this by leveraging reputable organizations and technology.
Biztellers reports that the CNL retained Dragnet Solutions Limited (DSL), a provider of online assessment services with relevant expertise, to administer aptitude tests to candidates for its available job opportunities.
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Olusoga explained that the online assessments allow candidates to participate from various locations to save time and promote inclusivity for candidates who are constrained to participate in physical assessments.
He maintained that this strategy “provides equal opportunities for all candidates, including those with disabilities.”
According to Oduselu, the CNL was aware of some complaints of challenges by some candidates during their scheduled test period. To address these challenges, CNL engaged with DSL and deployed repeat tests for those who complained of technical hitches during the tests and those who could not participate in their scheduled tests.
“All isolated cases of system glitches have been addressed by our consultant, and the transparent, all-inclusive recruitment process continues. The applicants and our various stakeholders have commended this act of goodwill,” he stated.
The CNL’s recruitment process, including assessment, is transparent and fair and provides equal opportunity for all qualified candidates to compete for available job opportunities.
He added that the CNL assures its stakeholders that its recruitment process uses appropriate technology and complies with applicable laws and regulatory requirements.
Nigerian comedian and popular skit maker, Chibuike Josh Alfred, known by his stage name Josh2Funny, has shed light on the profitability of the content-creating industry.
In a recent interview with Echo Room, Josh2Funny highlighted the impressive financial potential that content creators can achieve, noting that it is possible for them to comfortably afford multiple luxury cars, including up to four Lamborghini vehicles.
Speaking candidly, Josh2Funny emphasised that content creation has become an extremely lucrative field due to the constant demand for fresh and engaging material. “If you want to buy four Lamborghini from content creation, you can buy it,” he said.
His remarks underscore the significant revenue opportunities available in the digital content landscape.
Josh2Funny explained that the continuous consumption of online content is what drives its profitability. “What do you think we are doing in the content-creating industry? Are we joking? You all are with your phones, when you’re in the bathroom, when you’re [using the restroom], you’re consuming our stuff. It’s like pure water,” he stated.
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The comedian further elaborated that businesses or industries that deliver products consumed on a daily basis often see the most substantial financial returns. Content creation, with its high rate of daily consumption by audiences worldwide, aligns perfectly with this model.
“People are out there, consuming our content every time,” he said, reinforcing the idea that the reach and influence of content creators have never been more extensive.
Josh2Funny’s insights reveal why the content-creating industry has become a lucrative career path for many in Nigeria and around the world. With the continuous growth of social media platforms and the public’s insatiable appetite for entertainment and relatable content, creators are finding new and innovative ways to monetize their craft.
This shift not only highlights the potential for significant financial gain but also showcases the evolving landscape of digital media, where influencers, comedians, and skit makers can turn creativity into a sustainable and highly rewarding business.
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