Business
Why Naira Is On A Free Fall Against US$
The local currency, the Naira fell to 1005/$ over the weekend in the black market, across major cities in Nigeria, including Lagos, Calabar, Port Harcourt, Kaduna, Kano and Abuja.
And this is in spite of several efforts by the Nigerian Government to control the Foreign Exchange (Forex) Market.
Recall the that Central Bank of Nigeria (CBN), not long ago moved through a memorandum to control the forex market by directing Bureau De Change (BDC) to align rates with what obtained in the Investor & Exporter forex window.
According to the circular number TED/FEM/PUB/FBC/001/007 dated August 17, 2023, titled, ‘Operational mechanism for Bureau De Change operations in Nigeria’, all BDCs and the general public should align buying and selling to the I&E Window.
It read, “The spread on buying and selling by BDC operators shall be within an allowable limit of -2.5 per cent to +2.5 per cent of the Nigerian exchange market window weighted average rate of the previous day.
“Mandatory rendition by BDC operators of the statutory periodic reports (daily, weekly, monthly, quarterly and yearly), on the financial institution forex rendition system which has been upgraded to meet operators’ requirements.”
Biztellers gathered that the CBN has not made good its promise to settle the huge debts to Deposit Money Banks (DMB), which has contributed in putting pressure on demand, by increasing scarcity of forex.
Probably the current leadership changes at the apex bank might have been impacting the situation, as the former acting Governor, Folashodun Shonubi, had on September 6, 2023, assured that the apex bank had concluded negotiation on dollar debts with commercial banks, which offered hopes that all forex backlogs would be cleared “within one to two weeks”.
Despite Shonubi’s position that DMBs had been of much assistance to the apex bank in clearing the major part of its overdue forex forward contracts at maturity, the promise of redemption has not been made good.
This is despite public knowledge that that both parties (regulator and operators) had reached an agreement for reimburse to the DMBs.
Shonubi had volunteered thus, at a public gathering in Lagos, “In response to questions about the backlogs, the banks have been working with the CBN on various structures to clear them. So, what happens is that at maturity, they make the foreign exchange available to those that need it.
“We are discussing with them so we can structure their own. So, we are working towards clearing them in the next one or two weeks. It is something we have been discussing for a while.”
This has continued to mount pressure on the forex situation across the country with DMBs and BDCs yielding to the forces of demand and supply.
The DMBs it was gathered are responding by ‘ducking’ forex demands or at best laying them in abeyance, but the BDCs are focused on buying and selling, which has seen the exchange rates skyrocket.
Feelers from the Abuja based BDC operators, indicate that during the weekend, high demand pushed the Naira to 1,000/$.
A BDD Operator who spoke to Biztellers from Abuja, Izama Otedo, blamed it on scarcity of the US$.
He said, “We are only selling as we buy. We always put little gain. And no one can sell what he doesn’t have.”
He revealed that over the weekend the rate of exchange oscillated between 980/$ to 1005/$ in the Abuja metropolis.
In the same vein, a BDC Operator at the Ikeja Airport, Lagos, Kazeem Oredugba, pointed out that it had become more difficult for forex dealers to source ‘the commodity’, which is affecting the sell-on price.
He told Biztellers, “We are finding it difficult to source the US$ and other foreign currencies. If we don’t see it to buy, we cannot sell. And if you see it we can only buy at any rate knowing what we are going to sell-on at a mark-up.”
Reminded about the directive from the CBN, Oredugba quipped, “If the CBN is issuing a directive, let them back it up with supply of the forex. Nigerians are looking for ways to keep lives and businesses going, and we are meeting their needs by serving as the link between those buying and those selling. No authority can decree that,” he pointed out.
What this portends is that the forex market remains volatile and inflation would likely continue unabated while government struggles to come up with solutions.
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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