Economy

EFCC raids speculators as naira drops to 1,520/$

Published

10 months ago

May 16, 2024

Operatives of the Economic Financial Crimes Commission, on Tuesday, expanded its clampdown on Bureau De Change operators, arresting traders in Abuja, Lagos, Kano and Port Harcourt.

This came as the naira weakened further against the United States dollar at both the official and parallel foreign exchange markets.

The recent raids followed renewed efforts by the Federal Government to tackle the naira’s recent fall against the greenback.

The activities of currency speculators in the forex markets and the digital cryptocurrency space have reportedly increased pressure on the naira, with the government accusing crypto traders of speculating against the national currency.

Last week, some BDC operators were arrested in Abuja for allegedly speculating against the naira.

Despite resistance by some BDC operators, law enforcement officials have continued to conduct regular raids on unauthorised currency traders in the Federal Capital Territory.

Currency operators, who spoke to one of our correspondents, confirmed that the latest sting operations occurred at various times during the day in Lagos, Kano Port Harcourt and Abuja on Monday.

Malam Yahu, a trader at the popular Wuse Zone 4 market, said currency traders at Lagos, Port Harcourt and Kano confirmed sting operation by EFCC operatives, a development that disrupted market activities.

He said the fear also trickled down to the Abuja market as traders decided to reduce trading for fear of being arrested.

Yahu also said the naira was bought and sold for N1,520/$ and 1,540/$.

He said, “The naira is now N1,540 and we are buying at N1,520. But the issue now is that the EFCC guys scattered the market in Lagos, Port Harcourt and Kano today. As a result of the development, the traders in Abuja were very cautious about trading.

“So in Abuja today, people are afraid because we don’t know when they will come too and nobody wants to be arrested. It is also part of the reason for the high rate.

“Traders are also afraid of buying at a high price because they are cautious that the dollar may crash at any time. Our brothers in Lagos and Port Harcourt are complaining about the arrests.

Another trader, Abubakar Taura, confirmed the same rates and the arrests by security agents.

“Yes, we heard today that EFCC operatives have started arresting people in other states,” he said.

The President, the Association of Bureau De Change Operators, Aminu Gwadabe, confirmed the raid, saying however that the EFCC operatives primarily focused on street traders.

He confirmed that some registered BDC operators were affected in the raid.

“Yes, the EFCC operatives raided street traders although some of our members were also affected. The government is trying to deal with illegal practices. We believe the currency will appreciate with time,” he said.

At the parallel market, the naira closed at N1,540 per dollar.

This represents 4.05 per cent or N60/$1 depreciation compared to the N1,480 quoted on Monday on the black market.

The renewed naira depreciation after the gains in April 2024 was attributed to a shortage of dollars occasioned by the repatriation of funds by foreign portfolio investors.

Similarly, official FX trading at the Nigerian Autonomous Foreign Exchange Market witnessed a depreciation in the value of the local currency by 3.04 per cent as the dollar was quoted at N1,520 on Tuesday, weaker than N1,478 quoted on Monday.

This is the lowest in over six weeks and the first time the official rate will close above N1500/$1 since March 19, 2024.

The intra-day high also plummeted to N1,568/$1 from N1,515 recorded on Monday pointing to an even weaker exchange rate at some point during the day, according to data from FMDQ, where currencies are traded officially.

The intra-day low was N1,350 on Tuesday from N1,301 recorded on Monday.

The intra-day high represents the highest price at which the dollar traded against the naira on the official market during a single day of trading. The exchange rate typically fluctuates throughout the day

The amount of dollars supplied by willing buyers and willing sellers also decreased by 40.8 per cent or $88m to $128.76m from $217.64m on Monday.

The naira had extended its appreciation from mid-March till mid-April, before the recent decline. The naira however closed flat against the dollar in April, appreciating only by about 0.04 per cent in the official market.

The temporary stability occurred after the CBN interventions aimed at curbing speculation on the naira.

Some of the measures taken by the CBN included the prohibition of Foreign Currency Collaterals for Naira Loans and the directives to the International Money Transfer Operators to align their exchange rates with prevailing market rates at the official foreign exchange market.

In February 2023, the Yemi Cardoso-led CBN implemented the first interest rate hike, raising the MPR by 400 basis points to 22.75 per cent. This was followed by an additional increase in March, raising the MPR by 200 basis points to 24.75 per cent. The hikes in interest rates coincided with a strengthening of the naira, which appreciated to as high as N1,150/$1.

Commenting on the latest development, an economist at the Nigerian Economist Summit Group, Faith Iyoha, said the naira was still experiencing volatility due to the absence of fundamental FX liquidity policies.

Faith, who spoke in a telephone interview on Tuesday, said the sufficient condition for strengthening the naira must be an increase in FX liquidity which according to her is only possible through exports and foreign capital inflow, both of which the country currently lacks.

She added that although the apex bank had made some changes, there was still a need for an improved macroeconomic space.

She said, “The exchange rate has been largely volatile over time and there are fundamental reasons why it has been like that.

“It is important to give credence to the reforms that CBN has put in place and other regulatory approaches but while these are necessary approaches, they are not sufficient to strengthen the naira.

“The sufficient condition for strengthening the naira must be an increase in FX liquidity which is only through exports and foreign capital inflow.

“From the export angle, while we have crude oil, the production has been largely below 2m barrels and that means an instability in inflow.”

She added, “We still have to improve non-oil exports as well. In terms of capital importation, we have seen the exit of portfolio investors due to large instability and there is no clarity in the market. There is instability in the sense that we are not certain about the policies that are going to come up in the next few months especially when we talk about taxes and levies.

“So you see that the cybersecurity levy has been suspended, such policies give investors a sense of instability and uncertainty and in that way, they exit the market. So it is important to state that for the naira to gain stability, we must improve FX inflow, especially through trade.

“We must create macroeconomic stability that incentivises the inflow of foreign capital and if it doesn’t happen, there is no way we can sustain the strength that the naira gained based on reforms by the CBN.”

MAN, LCCI react

Meanwhile, members of the Organised Private Sector have reacted to the development.

The President of the Manufacturers Association of Nigeria, Francis Meshioye, said the continuous fluctuation of the exchange rate had made it difficult for manufacturers to construct and stick to a fairly predictable business model.

He further stated that manufacturers would inevitably be forced to review prices to reflect the prevailing exchange rate to remain in business.

Meshioye said, “All the plans we have made recently have to be reviewed, which is not good, not only for the economy but the unpredictability of our business model. Our business model is a floating one.

“It is not good for the economy because the international business community relies on the business model that you presented, and we have to continue to review our business model.

“Take for instance, some of our members have had to change prices because of the fluctuations. Manufacturers will continue to do business based on the current costs and the replacement costs of their products. You don’t want to sell a product and be out of stock because you are unable to replace it.”

On his part, the President of the Lagos Chamber of Commerce and Industry, Gabriel Idahosa blamed the shortfall in dollar supply for the recent depreciation of the naira.

Idahosa predicted that fluctuations in the exchange rate would continue as it is a natural consequence of floating the local currency.

He, however, cautioned that if the depreciation was allowed to persist, price hikes would once again become commonplace in the marketplace.

He said, “The market is struggling to stabilise that is why we are seeing this level of volatility. The CBN is managing a very difficult situation because we don’t have established trade flows from our non-oil exports.

Asked if manufacturers have implemented price hikes if the depreciation continues, Idahosa said, “Yes, of course. It will happen. We are hoping that the exchange rate does not get to that precipice of N1,800 or N1,900.”

Meanwhile, the National President of the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture, Dele Kelvin Oye, also expressed concerns over the significant depreciation of the naira, noting that it poses multiple challenges for the country.

Oye, in a statement, expressed worry over the impact of the currency depreciation on import costs and inflation, reiterating the need for the government to stabilise the naira by potentially pegging and defending it.

He said, “The significant depreciation of the naira, now at 1500 to the dollar, poses multiple challenges for Nigeria. The weakening currency increases import costs, affecting prices of everything from food to electronics, thereby fueling inflation and reducing the purchasing power of Nigerians, especially those on fixed incomes. Higher import costs also escalate production expenses in sectors reliant on foreign materials, impacting overall business operations.

“Government and business foreign debt servicing costs rise as more naira is needed per dollar, straining financial resources and potentially reducing public service funding. While a weaker Naira might attract foreign investment by making assets cheaper, it could also deter investors seeking stability.”

He further stated, “On a positive note, a devalued naira enhances the competitiveness of non-oil exports like agriculture and manufacturing on the global market. However, this benefit is contingent on the country’s ability to efficiently increase production.

The NACCIMA president advised that “Given these complexities, the government must stabilise the Naira by potentially pegging and defending it, rather than leaving it to market forces, a strategy even economically stronger nations like Qatar and Saudi Arabia employ.”

Foreign portfolio outflows

Meanwhile, foreign outflows of investment on the Nigerian Exchange Limited hit N119.81bn in the first quarter of 2023.

This was revealed in the latest domestic and foreign portfolio investment report released by the NGX recently.

During the quarter under review, foreign outflow on the local bourse increased month on month, from N37.33bn in January to N40.88bn in February and N41.60bn in March.

On a year-on-year comparison, foreign outflow worsened by 236 per cent from N35.59bn at the end of March 2023 to N119.81bn in March 2024.

In contrast, foreign inflow at the end of March stood at N93.37bn, driven by a 111.23 per cent increase between February and March 2024 to N52.66bn from N24.93bn.

The monthly report was collated from trading figures from market operators on their Domestic and Foreign Portfolio Investment flows.

According to the report, foreign capital inflow into the market has consistently increased since the beginning of the year, from N15.78bn in January to N24.93bn in February and N52.66bn in March, bringing the year-to-date inflow to about N93.37bn, which is about 415.29 per cent higher than N18.12bn inflows recorded for the same period in 2023.

Total foreign transactions on the exchange stood at N213.18bn at the end of the quarter.

Credit: PUNCH

Economy

Nigeria’s economy experiencing growth as GDP grows 3.84% in Q4

Published

20 hours ago

February 26, 2025

Kayode Sanni-Arewa

Nigeria’s strategy to reduce its dependence on oil is proving effective, with the non-oil sector contributing 95.40 percent to the gross domestic product (GDP) in real terms in the fourth quarter of 2024.

The oil sector, however, only accounted for a scant 4.60 percent during this period.

The National Bureau of Statistics (NBS) had previously communicated its plans to rebase the GDP but has since reverted to the traditional approach.

Although there was no explanation from the statistics house on why it failed to rebase the GDP, speculations are that it stepped back because of the backlash it received from the rebased CPI figures it released just last week.

Analysts say the inability to release rebased GDP figures is a significant concern, noting that rebased figures are essential for providing an accurate and up-to-date picture of the economy.

They say that without rebasing, the GDP figures may not accurately reflect the current structure and size of the Nigerian economy, particularly given the rapid changes in sectors like technology and services.

The reform measures introduced by the present administration brought with them intense hardship on the populace. With high inflation draining the purchasing power of the citizens, many businesses have either shut down or found their way out of the country, throwing many into the unemployment market.

According to the report released yesterday, the gross domestic product (GDP) in real terms grew by 3.84 per cent in the fourth quarter (Q4) of 2024 on a year-on-year basis, which is 0.38 percentage points higher than the rate recorded in Q4 2023, which was 3.46 per cent.

The report shows that the year 2024 ended with an overall annual GDP growth rate of 3.40 per cent. This is higher than the projections by agencies like the International Monetary Fund (IMF), which had earlier projected that the country’s GDP would grow by 3.2 per cent in 2024.

The NBS reports that the services sector remains the major driver of the economy, growing by 5.37 per cent and contributing 57.38 per cent to the aggregate GDP. On a quarter-on-quarter basis, the real GDP grew by 10.99 per cent in Q4 2024, reflecting a higher production level than in Q3 2024.

The estimated economic activity in real terms for Q4 2024 stood at ₦22,610,393.45 million, which is higher than the rates recorded in Q3 2024 and Q4 2023, which stood at ₦20,115,766.93 million and ₦21,773,263.25 million, respectively.

In nominal terms, aggregate GDP stood at ₦78,374,120.95 million in Q4 of 2024, indicating a year-on-year nominal growth rate of 18.91 per cent.
This is higher than the value of ₦65,908,258.59 million in Q4 2023 and ₦71,131,091.07 million in the preceding quarter.

The NBS reports that the economic performance of the non-oil sector in Q4 2024 is attributed to the growth recorded in some economic activities, including rail transport and pipelines, metal ores, financial institutions, road transport, quarrying and other minerals, and insurance.

An analysis of the report shows that the major contributing economic activities in real terms in the quarter under review are crop production (23.42 per cent), trade (15.11 per cent), telecommunication (14.40 per cent), real estate (5.88 per cent), financial institutions (5.76 per cent), and crude petroleum (4.60 per cent).

The agricultural sector grew by 1.76 per cent, while the industry grew by 2.00 per cent, showing a decline compared to the rate recorded in Q4 2023 at 2.10 per cent and 3.86 per cent.

The report shows that agriculture contributed 25.59 per cent, industry 17.03 per cent, and services 57.38 per cent. Agriculture and industry’s contributions were less than their contributions in Q4 of 2023 by 0.53 per cent and 0.31 percentage points. The services sector had the highest contribution to the GDP in Q4 2024, surpassing its contribution in the corresponding quarter of 2023 by 0.83 percentage points.

The annual contributions of the economic sectors show that agriculture contributed 24.64 per cent in 2024, which is lower compared to its contribution of 25.18 per cent in 2023. Similarly, the industry sector’s annual contribution was 18.47 per cent, which is also lower than the figure recorded for 2023, which was 18.65 per cent.

However, the services sector’s contribution for 2024 was 56.89 per cent, exceeding the 56.18 per cent recorded for 2023.

Further disaggregation of the economic activities into oil and non-oil sectors shows that oil GDP grew by 1.48 per cent in Q4 2024, which is a decline compared to 12.11 per cent recorded in Q4 2023 and the previous quarter of Q3 2024, which stood at 5.17 per cent.

The annual oil GDP for 2024 grew by 5.54 per cent, which is 7.75 per cent higher than the annual GDP recorded for 2023 (-2.22 per cent), while the annual contribution of oil stood at 5.51 per cent in 2024, higher than its contribution in Q4 2023, which was 5.40 per cent.

The report also shows that the fourth quarter of 2024 recorded an average daily oil production of 1.54 million barrels per day (mbpd), lower than the daily average production of 1.56 mbpd recorded in the same quarter of 2023 by 0.03 mbpd.

On the contrary, the fourth quarter of 2024 production volume was higher than that of the third quarter of 2024 (1.47 mbpd) by 0.06 mbpd.

Reacting to the GDP report, Professor Godwin Oyedokun of Lead City University, Ibadan, said the GDP growth is a moderately positive sign, but the lack of rebased figures raises concerns.

He said, “The Nigerian government needs to address the challenges of data collection and rebasing, as well as focus on inclusive growth and economic diversification. This lack of current data makes it harder to properly create effective economic policy.”

Economy

CBN targets single-digit inflation in three years

Published

6 days ago

February 21, 2025

Kayode Sanni-Arewa

The Central Bank of Nigeria (CBN) has set its sights on reducing inflation to a single digit in the medium to long term, following the recent rebasing of the Consumer Price Index (CPI) and subsequent decline in inflation to 24.48 per cent.

CBN Governor, Dr Olayemi Cardoso, who spoke yesterday at a press briefing after the first Monetary Policy Committee (MPC) meeting of 2025, reiterated the apex bank’s commitment to orthodox monetary policies, noting that the positive outcomes so far indicate that inflation is trending downward.

He said that after two days of deliberation, the MPC decided to maintain all key monetary policy parameters, including the Monetary Policy Rate (MPR) at 27.50 per cent, the asymmetric corridor around the MPR at +500/-100 basis points, the Cash Reserve Ratio (CRR) at 50.00 per cent for Deposit Money Banks and 16.00 per cent for Merchant Banks, and the Liquidity Ratio at 30.00 per cent.

Clarifying the impact of the rebased CPI, Cardoso explained that the lower inflation figure should not be misinterpreted.

He underlined the need to analyse more data before drawing comparisons, noting that the CBN is currently assessing the figures and will provide further guidance in due course.

Despite the complexities, he pointed out that inflation is gradually declining, supported by the recent stability and appreciation of the foreign exchange rate, with the differential between the official and parallel markets now less than one percent.

He stressed the critical importance of collaboration between monetary and fiscal authorities in sustaining recent economic improvements.

He cited the recent Monetary Policy Forum as an example, where stakeholders from the organised private sector, Bureau de Change operators, and government representatives, including the Minister of Finance, participated.

Cardoso noted that both sides are committed to deepening their dialogue and holding regular meetings to address key economic issues proactively.

Addressing concerns about the impact of elevated borrowing costs on economic growth, the CBN Governor assured that the apex bank’s primary objective is to stabilize the foreign exchange and financial markets.

He expressed confidence that such stability would attract increased foreign investments, stimulating the much-needed economic growth.

He also highlighted the competitiveness of the Nigerian currency, which has spurred growing interest from international investors.

Cardoso said that improved oil production, reaching 1.54 million barrels per day by the end of January 2025, would strengthen Nigeria’s current account position and positively impact external reserves. Despite prevailing macroeconomic challenges, the MPC observed that the banking sector remains resilient. However, the Committee urged the CBN to maintain vigilant oversight, particularly in light of ongoing banking system recapitalisation, ensuring that only quality capital is injected.

The MPC noted several factors expected to positively influence price dynamics in the near to medium term, including the stabilisation of the foreign exchange market, the moderation of Premium Motor Spirit (PMS) prices, and the federal government’s efforts to improve security in food-producing areas.

The Committee emphasised the need for continued collaboration between monetary and fiscal authorities to maintain and build upon these gains.

Additionally, the MPC acknowledged improvements in the external sector, with the convergence of exchange rates between the Nigeria Foreign Exchange Market (NFEM) and Bureau de Change (BDC) operators.

The Committee commended CBN’s recent measures, such as the Electronic Foreign Exchange Matching System and the Nigeria Foreign Exchange Code, aimed at enhancing transparency and credibility in the forex market.

The MPC expressed confidence that recent monetary and fiscal policy measures would attract increased foreign direct investment, portfolio inflows, and diaspora remittances as investor confidence grows.

The Committee also assured of its commitment to sustaining these measures to anchor inflation expectations, ease exchange rate pressures, deepen financial inclusion, and enhance the effectiveness of monetary policy transmission mechanisms.

Economy

There’s no law in Nigeria prohibiting importation of PMS-Govt regulator

Published

7 days ago

February 20, 2025

Kayode Sanni-Arewa

The Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), on Wednesday, stated that no law prohibits Nigerian National Petroleum Company Limited (NNPCL) from importing when necessary.

The NMDPRA, while saying that all the petroleum products imported to the country this year are of standard quality, clarified that the NNPCL has not imported the Premium Motor Spirit (PMS) petrol this year.

The Executive Director, Distribution System, Storage and Retailing Infrastructure, Ogbugo Ukoha, who made this disclosure in a press briefing in Abuja, noted that local refineries met 50 per cent national consumption requirement while the shortfall is imported by Oil Marketing Companies (OMCs).

He explained that the contribution of local refineries has been less than a 60 per cent shortfall in January and February 2025.

He however specifically noted that none of the OMCs that owned refineries have imported petroleum products this year.

In his words, “So, just for clarity, what I am saying is that the contribution of local refining towards the sufficiency was less than 60 per cent in January and less than 50 percent in February 2025.

He added that “the shortfall is sourced by way of importation. Even though none of the OMCs that owned refineries have imported this year PMS.”

On quality, he said the NMDPRA always insists that all petroleum products meet the specifications of the Standard Organization of Nigeria (SON) and the Petroleum Industry Act (PIA) 2021.

According to him, the Authority does not permit the distribution of products that fall short of quality standards.

“You must meet those specifications, otherwise we will not let those products be distributed,” he said.

He announced that the NMDPRA has banned trucks carrying over 60,000 litres of hydrocarbon products from loading effectively from 1st March 2025.

Similarly, a statement by the NNPC spokesman, Femi Soneye, on Tuesday, while reacting to a report on the alleged importation of 200million litres, noted that while NNPC Limited has not imported PMS in 2025, “it is important to clarify that there is no law prohibiting NNPC Limited from importing when necessary”.

He added in the statement that “As a company primarily responsible for ensuring energy security in Nigeria if there were any PMS supply insufficiency in the future, NNPC Limited has the right and responsibility to intervene by importing to bridge the gap.”