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New redesigned Naira notes ‘ll help check inflation — CBN

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The Central Bank of Nigeria has assured that the introduction of the redesigned new Naira notes would help check the spiralling inflation in the country.

The Director, the Financial Markets Department of the Bank, Dr Angela Sere-Ejembi made this known when she led officials of the bank on a sensitization campaign in Makurdi markets on the redesigned Naira notes and the urgent need for traders and their customers to return the old notes to commercial banks.

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Represented by Mr. Demenongu Yanfa, a Deputy Director in the Bank, Dr Sere-Ejembi noted that since January 31, 2023, was the deadline for the withdrawal of the old 200, 500 and 1000 Naira notes there was the need for the people to take advantage of the remaining days to lodge their old notes in banks.

She said the redesigned new notes would also help the CBN properly monitor the volume of money in circulation in the country “and CBN will with the coming of the new notes also check the rising inflation in the country. So I advise each and everyone one of us to comply with the directive to return the old notes because there will be no extension of time.”

She also said as part of concerted efforts by the CBN to enable rural dwellers and those with limited access to formal financial services to exchange their old Naira notes, the apex bank would Monday 23, 2023 launch the Cash Swap Programme in partnership with Super Agents and Deposit Money Banks, DMBs.

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Giving an insight into the swap process, Dr. Sere-Ejembi explained that “the old N1000, N500, N200 notes can be exchanged for the newly redesigned notes and/or the existing lower denominations (N100, N50 and N20, etc) which remain legal tender.

“The agent shall exchange a maximum of N 10,000 per person. Amounts above N 10,000 may be treated as a cash-in deposit into wallets or bank accounts in line with the cashless policy; BVN, NIN, or Voter’s card details of the customers should be captured as much as possible.

“This service is also available to anybody without a bank account. Agents may, on request instantly open a wallet or account, leveraging the CBN Tiered Know Your Customer, KYC, Framework. This will ensure that this category of the populace are able to exchange or deposit their cash seamlessly without taking unnecessary risk or incurring undue cost.

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“Agents shall sensitize customers on opening wallets/ bank accounts and the various channels for conducting electronic transactions. The designated agents are eligible to collect the redesigned notes from DMBs in line with the Revised Cash Withdrawal Limit policy. Agents are also permitted to charge cashout fees for the cash swap transactions but prohibited from charging any further commissions to customers for this service.”

According to her “Agents shall render weekly returns to their designated banks regarding the cash swap transactions. DMBs shall in tum render same to the CBN on a weekly basis.”

She said, “Principals (Super Agents, MMOs, DMBs) shall be held accountable for their agent’s adherence to the above guidelines.

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“The Cash Swap agents will be readily identifiable in all local governments, particularly those in the rural areas and the CBN will continue to monitor implementation of the programme and provide further guidance as may be necessary.”

Dr Angela Sere-Ejembi disclosed that the new notes were designed with special security features and produced to last long thereby saving the country the money spent on reproducing new notes.

She advised the people to report to the CBN through a phone number provided on flyers, any bank that refuses to accept the old Naira notes before the January 31 deadline.

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External reserves fell by $64m in January

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External reserves fell by $63.62m in January, figures obtained from the Central Bank of Nigeria have revealed.

The CBN revealed in its data on movement of foreign reserves that the external reserves which ended December 30, 2022 at $37.08bn fell to $37.01bn at the end of January 30, 2023.

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Nigeria’s external reserves fell by $3.43bn in 2022 after dropping from $40.52bn as of the end of December 31, 2021.

Cordros Securities stated in its January report on ‘MPC to favour smaller rate hikes in the short term’ noted that local currency weakness remained intact.

It stated that, “Foreign investors remain on the sidelines given the lack of FX reforms, higher global interest rates and weak macroeconomic narrative.

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“In addition, CBN’s FX supply to the different FX market segments remains significantly below pre-pandemic levels. Meanwhile, the demand for the greenback remains high as market players continue to source for FX to fulfil and clear their outstanding obligations.

Consequently, since the last policy meeting, the local currency depreciated by 3.4 per cent to N461.25/$ at the official market as of 18 January 2023.

“However, given that the FX reserves remain within the CBN’s comfort level, we expect the Committee to highlight the need for the apex bank to maintain its periodic FX interventions and intensify its call to the fiscal authorities to amplify their efforts in ensuring higher crude oil production over the short-to-medium term.

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“Accordingly, the Committee will likely reiterate that the CBN should address the pressures on the local currency by boosting the FX supply for productive activities.”

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Naira under serious pressure, Fitch Ratings warns

Fitch, Withdrawals, Governors, CBN, notes, new naira, Banks
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Global credit rating firm, Fitch Ratings has warned that Nigeria’s currency, the Naira is under serious pressure

Fitch in a report said this may further raise the possibility of a material devaluation following the presidential election in February 2023.

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The exchange rate between the naira and the US dollar traded for an average of N745/$1 on Wednesday, 1st February 2023, representing a 0.80 percent appreciation when compared to N751/$1 recorded in the previous trading session.

Similarly, the exchange rate at the cryptocurrency P2P exchange appreciated on Wednesday, 1st February 2023 to a minimum of N745.5/$1, from N752/$1 recorded on Tuesday’s trading session.

Meanwhile, the exchange rate at the investors and exporters (I&E) window closed at N461.5/$1, the same rate as recorded in the previous trading session.

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Fitch Ratings in a report, explained that the inability to reliably source United States (US) dollars on the official FX market has itself contributed to lower foreign portfolio investor (FPI) inflows, which will continue to put further pressure on US dollar availability.

Nigeria’s already-high structural inflation has been aggravated by global commodity price spikes, supply constraints and a weak naira, according to a Fitch Ratings note.

Nigeria’s headline inflation rate printed at 21.34 per cent in December 2022 after a 13 basis points slowdown from the previous month, causing inflation to reach a 17-year high.

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Analysts noted that Nigeria’s falling external reserves levels have contributed to US dollar shortages in the official FX market, as evidenced by the rapid depreciation of the Nigeria naira in the parallel market to NGN738/USD on 31 December.

Since then, the exchange rate at the open market has worsened to N750 per United States dollar in the open market where it is freely traded to users, while it traded at N462 at Investors, Exporters FX Window.

According to Fitch, the parallel market rate is therefore trading at a large discount to the official exchange rate, raising the possibility of a devaluation following the change in administration that will follow the presidential election in February 2023.

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Monetary policymakers, particularly in emerging markets, are challenged with marked pressure on their respective local currencies due to rising global interest rates and risk-off sentiments. Global investors rank the FX convergence of the naira in 2023 as a major policy shift that could incentivize investment flows.

Fitch expects US dollar scarcity to continue weighing on economic activity in 2023, compounding the effect of high inflation and rising interest rates on borrowers’ repayment capacity, while negatively affecting banks’ trade finance business and FC liquidity.

According to market participants, the CBN has accumulated a backlog of foreign currency demand from importers, estimated at about USD3 billion.

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In addition, the International Monetary Fund, IMF, hinted that there is an additional USD1.7 billion outstanding to foreign portfolio investors (FPIs), bringing the total backlog to almost USD5 billion.

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NNPC Takes Over Addax Petroleum Assets

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The Nigerian National Petroleum Company (NNPC) Limited has taken over the assets of Addax Petroleum Development (Nigeria) Limited.

This is coming three months after the execution of the Addax Transfer, Settlement, and Exit Agreement (ATSEA) for the PSC Oil blocks, OMLs 123/124 & 126/137, operated by the company.

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NNPC Chief Corporate Communications Officer, Garba Deen Muhammad, in a statement on Tuesday, all closing obligations have been concluded and the Assets have been transferred to the Concessionaire, NNPC Limited.

“Consequently, NNPC has taken necessary steps to take over the assets and oversee a clean, amicable, and speedy exit for Addax Petroleum Ltd., operate the asset on interim basis as a first step and subsequently appoint a competent replacement PSC contractor while NNPC Limited continues to remain the Concessionaire of the assets in line with extant laws and regulations,” the statement partly read.

“Exit negotiations and formalities have been concluded and NNPC Ltd. in collaboration with the Office of the Attorney General of the Federation, NUPRC, NMDPRA, FIRS, EFCC, and the FCCPC have agreed on the clean and amicable exit for Addax by resolving all the PSC contractual issues, including litigations that culminated in the execution of a Transfer, Settlement, and Exit Agreement (TSEA) on the 1st of November 2022.”

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NNPC Ltd also announced the appointment of the Transition Team lead, Sagiru Jajere. NNPC Ltd said the much-needed investments will be deployed to the Assets while prudently conducting petroleum activities and creating value.

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