Business
Forex: Speculation, Round-tripping, Account For Naira’s Continuous Fall
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Chief Executive Officer, Confederated Facilitators Limited (CFL) Group of companies, Lai Omotola has opined that the soaring dollar to naira rate, with adverse effects on Nigeria’s economy is not being driven by market forces but by wealthy elite businessmen whom he tagged, ‘market cabals’
He bared his mind at a media parley organised by his company in commemoration of its 25th anniversary.
According to him, “I have never seen elite business people whose only business they do is to speculate on their currency. That’s the only business they do. All of them, in everything they are doing, the underlying factor is that they are speculating.
“And this is how they do it. They may have a manufacturing plant, no doubt about it. For instance, the manufacturing plant needs $10 million, so they need to buy dollars. But the truth of the matter is that nobody is investigating if their actual need is $10 million or if they need something lesser than what they say they need.
“So, most likely, they only needed $1 million, but they will collect $10 million. They will send the $1 million to their supplier, convert the remaining $9 million to Naira, and go and sell it to the black marketers. Now, when you have a gap of over N300 in the exchange rate and you are selling $9 million, you are making N270 million without having a staff or investing anywhere, but just taking dollars in and out.”
“That business is sweeter than cocaine, which is why all of them are locked into it, and that is why Naira today is moving towards N1,200 for a dollar. When this present government was floating the Naira, it was to make the difference between the Naira at the official market and the parallel market not to exceed N2. That’s the meaning of floating. But this government has forgotten that when you float the Naira, there is no dollar in the Central Bank of Nigeria, CBN, to back that Naira.
“And it’s a matter of demand and supply. Anything in life, if today more people are looking for a particular substance than what is available, the price of the substance would go up. It is fundamental economics. If fewer people are looking for it, the value will depreciate. That’s the issue of demand and supply. So when you now allow the Naira to float, when you don’t have enough dollars, guess those with the dollar. It’s with the market cabals, ”he said.
He added, “Nigeria’s economy is not powered by market forces. There is nothing called market forces in Nigeria’s economy. Nigeria’s economy is powered by market Cabals. Regulating the currency has moved from the hands of the CBN to the hands of the Market Cabals. Let me tell you how they operate. For instance, they know that Nigeria requires $100 million to have that floating that will keep the difference between the official rate and parallel market at N2.
“And the cabals are the ones that have the $100 million. So they will only release $50 million into the economy. Now, when you release $50 million, demand for the dollar will become much higher, and the supply will become lower, thereby influencing and increasing the price of the dollar to Naira. CBN cannot intervene because there is no dollar.
“So the market cabals always have dollars with them. And they work in circles. They have dollars with them, they are the ones supplying dollars to the market, and they make a hell of a profit from the circles. So which business can be better than that?”
He said in other nations, the need for dollars is only for raw materials, school fees payment, or other productive things. But in Nigeria, two things contribute to the need for dollars; corruption, which is bribery, and speculations.
He noted that productive need for the dollar is not up to 40 per cent, “and that is where the challenge is. How do you fight against this kind of behavioural pattern?
“So our business elites that have funded politicians to win an election that are doing this type of not too-tidy business are the ones that have held our Naira in captivity. And as long as they are in charge, it will be difficult for the Naira to gain strength against the dollar.
“The worst part of it is that if the government goes today, pump $20 billion into the economy, 80 per cent of that money will end up in their hands, and they will continue to use it in an unproductive means because they want that dollar to Naira gap to continue to exist.”
Following the marginal reduction of the pump prices of premium motor spirit (PMS) by the Dangote Petroleum Refinery and the Nigerian National Petrol Company Limited (NNPC Ltd), civil society groups have reacted by calling for further downward review.
Recall that the Dangote Petroleum Refinery had announced a partnership with MRS Oil and Gas to offer petrol at N935 per litre at retail outlets, while it reviewed the ex-depot price from N970 to N899.50 per litre.
The move, saw state oil major, the Nigeria National Petroleum Company peg its retail prices at N965/litre.
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However, the civil society groups are of the opinion that the price reduction, fall short of expectations.
According to the Chairman, Centre for Accountability and Open Leadership, Debo Adeniran, the reduced price of N935/litre was still expensive and unsatisfactory.
He pointed out that petrol was just one of the products coming out of crude and that both government and private business could still give out free petrol to citizens while making huge profits from the other products.
In his words, “Well, we believe that if NNPC and the private sector actually give out PMS for free, they will still not run their business at a loss, because the other derivatives of petroleum products can still serve them, and can still make them to break even. So, even at that N900 and something, it’s still expensive.
“Dangote has kind of mooted the idea that it could drop to as low as N650. And if he has mulled this, then it means that it is the state, it is the NNPC that will have been the clog in the wheel of such progress. And you know also that we expected that fuel prices, especially PMS prices, will drop below N200 when Dangote was expected to come on stream.
“So, it’s unfortunate that we are still talking about over N900 and they want us to jump up and rejoice for that. That is not satisfactory. They should just let us see the breakdown of their production cost and why it’s still there. I mean, there are countries like Libya under Gaddafi that gave out PMS for free and they didn’t run anything at any loss. So, I believe that it can still go further down.”
On his part, the Executive Director of the Civil Society Legislative Advocacy Centre, Ibrahim Rafsanjani, commended the reduction of fuel prices by the NNPC and Dangote, but said the government could still reduce the price.
“Dangote’s own is about N899 or something like that. Well first and foremost, we are happy that there is a little reduction in the prices. But also based on analysis and based on facts and evidences, we believe that it is possible for the Nigerian government to further reduce the prices.
“Because if a private company can reduce the price and it still makes profit, we wonder why government-owned enterprises cannot really pity its citizens,” he said.
The Central Bank of Nigeria (CBN) has announced a significant growth in the country’s economy, with a 3.46% increase in gross domestic product (GDP) in the third quarter of 2024.
This marks the third consecutive quarter of expansion, up from 3.19% in Q2 2024 and 2.54% in Q3 2023.
According to the newly published Q3 economic report, Nigeria’s GDP output rose to ₦20.115 trillion, reflecting a notable improvement from ₦18.285 trillion in the previous quarter.
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The CBN attributed this growth primarily to the performance of the non-oil sector, which grew by 3.37% compared to 2.80% in Q2 2024.
The report highlighted transportation, crop production, and other sub-sectors such as financial & insurance services, information & communication, trade, and real estate as major contributors to the expansion.
The non-oil sector accounted for 3.18 percentage points of the total growth rate.
“The expansion of the non-oil sector was driven by the performance of the financial & insurance, information & communication, crop production, trade, transportation & storage, and real estate sub-sectors,” the report stated.
Despite the economic growth, challenges persist. Inflation, particularly in food prices, remains a significant concern, standing at 39.93% as of November 2024.
Rising food and energy costs have also impacted transportation expenses, with intercity bus fares increasing by 20.23% year-on-year to ₦7,117.17 in July 2024, according to the National Bureau of Statistics.
Furthermore, the cost of petroleum, now exceeding ₦1,000 per litre, has driven up logistics and transportation expenses, adding pressure to households and businesses alike.
The CBN acknowledged these challenges, noting that the growth was achieved despite headwinds such as high inflation and rising operational costs.
Enhanced security measures in the Niger Delta have boosted domestic crude oil production, while restrictive monetary policies have helped moderate inflation in some areas.
“The growth recorded in the country is a result of continued efforts to improve the business environment, streamline cumbersome business processes, and deepen the quality of business infrastructure,” the CBN noted.
However, the report comes amid concerns over businesses exiting Nigeria due to persistent economic challenges.
Asharami Synergy, a leading downstream energy solutions provider, has demonstrated its commitment to community development and education by donating essential furniture to Gaskiya Junior School in Ijora, Lagos, Nigeria.
Biztellers reports that the social responsibility initiative was executed in collaboration with Sahara Group Foundation – the social impact vehicle of global energy conglomerate, Sahara Group.
It was gathered that the initiative is part of Asharami Synergy’s ongoing efforts to support education in communities.
The donation includes classroom desks and chairs for the JSS1 classes.
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CEO of Asharami Synergy, Nomnso Dike, said the project will create a more comfortable and functional learning environment and enhance student performance.
“We are delighted at the opportunity to support the attainment of Sustainable Development Goal (SDG) 4, which focuses on ensuring inclusive and equitable quality education. It has been a privilege to collaborate with the management and students of Gaskiya Junior School to deliver this project, and we look forward to future opportunities to enhance academic performance in this historic institution,” Dike said.
According to him, Asharami Synergy’s education-focused social impact initiatives have benefitted over 10,000 individuals. They focus on building capacity and providing the resources necessary to help students learn and grow sustainably.
“Education is the foundation of a brighter future, and at Asharami Synergy, we believe that every child deserves a learning environment that inspires and empowers them” he noted, adding, “This donation is not just about providing furniture; it’s a reminder to the students that their dreams are valid, and we are committed to helping them achieve their goals.”
Vice Principal Academic of Gaskiya Junior School, Sola Oladokun, commended Asharami Synergy for the donation, noting that it would inspire students to perform better with “increased concentration and fewer distractions”.
“These desks and chairs are a game-changer for our students. It’s heartwarming to see their excitement, and as teachers, we are equally thrilled because this will make teaching and learning more effective. We are incredibly grateful to Asharami Synergy and Sahara Group Foundation for this thoughtful intervention,” she added.
Two representatives of the students, Akin Moses and Chukwudi Gift, at the event said the donation would increase their “desire to dream bigger and concentrate better during lessons”.
Also speaking at the commissioning, COO at Asharami Synergy, Adekanmi Adesola, said, “What started as an opportunity to support the communities that host our operations has now come full circle. This donation directly impacts the lives of these students, and we are proud to bring smiles to the faces of the students and teachers.”
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