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Economy

CBN, banks sell $9.9bn as naira collapses to N1,670/$

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By Mario Deepromoter

The value of foreign exchange turnover via the Nigerian Autonomous Foreign Exchange Market increased to N15.74tn ($9.90bn) in August 2024, an FMDQ report has stated.

This came as the Central Bank of Nigeria revealed that foreign inflow into the country increased to $585m in the same month.

Also, at the official market on Tuesday, the value of the naira dropped to N1,658 against the United States dollar from the N1,659 it sold on Monday while black market sellers sold at the rate of N1,670.

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The CBN said the impressive turnover via the Nigerian Autonomous Foreign Exchange Market represents a significant month-on-month increase of 33.88 per cent, equating to an additional N2.51tn from July 2024’s turnover of N13.23tn ($7.39bn). value of foreign exchange turnover via the Nigerian Autonomous Foreign Exchange Market increased to N15.74tn ($9.90bn) in August 2024, an FMDQ report has stated.

This came as the Central Bank of Nigeria revealed that foreign inflow into the country increased to $585m in the same month.

Also, at the official market on Tuesday, the value of the naira dropped by N1 to N1658 against the United States dollar from the N1,659 it sold on Monday while black market sellers sold at the rate of N1,700.

The CBN said the impressive turnover via the Nigerian Autonomous Foreign Exchange Market represents a significant month-on-month increase of 33.88 per cent, equating to an additional N2.51tn from July 2024’s turnover of N13.23tn ($7.39bn).

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This surge reflects heightened trading activity and investor engagement in the foreign exchange market.

Commercial banks, CBN, and international oil firms are the major sellers of forex at NAFEM.

According to the financial markets monthly report for August published by the FMDQ and obtained by our correspondent on Tuesday, the increase in turnover was driven by the increase in T.bills, OMO Bills, and FGN Bonds transactions, while transactions in other bonds recorded a MoM decrease of 18.43per cent (N10bn).

Despite this increase, the naira experienced continued depreciation, contributing to increased exchange rate volatility.

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The report read, “Spot FX market turnover was $9.90bn (N15.74tn) in August 2024, representing a 33.88 per cent ($2.51bn) MoM increase from the turnover recorded in July 2024 ($7.39bn).”

It also stated that total secondary market turnover on FMDQ Exchange was N40.43tn, which represents a MoM increase of 31.97 per cent (N9.79) and a YoY increase of 128.57 per cent ( 22.74tn) from July 2024 and August 2023 figures, respectively.”

The FMDQ added that foreign Exchange and Money Market transactions dominated secondary market activity, jointly accounting for 69.98 per cent of the total secondary market turnover in August 2024.

In August, the naira traded within a range of 1,543.84 to N1,617.08, indicating heightened fluctuations compared to the previous month’s range of 1,500.32 to N1,621.12.

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It said the average spot exchange rate rose by 1.68 per cent (N26.24) to close at N1,586.56, compared to N1,560.32 in July.

“In the FX Market, the Naira depreciated against the US Dollar, with the spot exchange rate increasing by 1.68 per cent ($/N26.24) to close at an average of $/ N1,586.56 in August 2024 from $/N1,560.32 recorded in July 2024.

“Further, exchange rate volatility increased in August 2024 as the Naira traded within an exchange rate range of $/N1,543.84 – $/N1,617.08 compared to $/N1,500.32 – $/N1,621.12 recorded in July 2024.”

This increased volatility underscores the challenges facing the Naira amidst ongoing economic pressures, including inflation and shifts in global market dynamics.

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Last month, the Central Bank of Nigeria auctioned $876.26m to end users through 26 commercial banks in its latest effort to strengthen the ailing Naira.

This policy led to a temporary appreciation of the Naira against the US Dollar, with the exchange rate adjusting to N1,596.52/$ from N1,601/$.

The auction sold about $876.26m, aimed at alleviating rising demand pressures in the forex market and promoting price discovery.

The sales report highlighted that businesses in the manufacturing sector benefited significantly from the auction, securing dollars for importing spare parts, industrial raw materials, plain paper, pharmaceutical products, and equipment for breweries.

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At the official market on Tuesday, the value of the naira dropped by N1 to N1658 against the United States dollar from the N1,659 it sold on Monday while black market sellers sold at the rate of N1,700.

Meanwhile, the CBN Governor, Olayemi Cardoso, has stated that the value of naira against international currencies cannot increase if the fundamentals of forex expenses are not addressed.

Cardoso, speaking at a press briefing at the end of the 297th Monetary Policy Committee meeting, revealed that Nigeria’s external reserves have increased yet again, reaching $39.07bn as of September 19, 2024.

He said since the strategy of the apex bank is to unlock as many diversified sources as possible into the foreign exchange section, it is not enough and can never replace the fundamentals.

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He said, “The external reserve stood at US$39.07bn as at 19th September 2024 an increase of 17.4 per cent compared with US$33.28bn in the corresponding period of 2023. This represents 8 months of import cover for goods and services and 13 months of imports of goods only.”

“As of August, inflow from remittances was $585m and this is a big deal as it is 130 per cent for the corresponding period last year. These figures didn’t drop from the ceiling but our deliberate and calculated effort. We recognised that certain things were not happening. We liberalised the IMTOs and encouraged them to open accounts in naira and we are normally dealing with them regularly and this has incredibly paid off.

“But on the naira, I must tell you that since the strategy of the central bank is to unlock as many diversified sources. it is not enough and can never replace the fundamentals.”

The central bank governor further explained that as long as the country operates on a monolithic economy, achieving a strong exchange rate “that we all so desire” would continue to be hampered.

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“Non-oil exports must also increase. Having an exchange rate that we all so desire will continue to be hampered. We need to diversify our economy to boost the naira. We may like to think or dream it can, but it can’t. Until the fundamentals are fixed and in place, you will continue to sub-optimise,”

“Oil production has got to be ramped up to the level that will carry the economy. I think we are all ongoing witnesses to the efforts that are being made in that sector. It has to happen. I spoke about the sad situation that we as Nigerians face today whereby we are a monolithic economy.

“We need to diversify our economy. There is so much that a central bank can do. Without the fundamentals in the right position, we will continue to sub- optimiser,” Cardoso added.

The CBN governor said Nigerians must find ways to achieve import substitution.

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“It can not just be about import and we must be able to calibrate accordingly our taste for foreign goods,” Cardoso said.

“These are all things that will determine essentially where we settle in respect to our foreign exchange rate.”

He said the central bank is determined to play its part in ensuring that the market operates efficiently while warning that the apex bank is ready to penalise “those who play the market”.

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Economy

FG reaffirms support for NNPC Limited’s 100,000 barrels per day production

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The Honourable Minister of State for Petroleum Resources (Oil), Senator Heineken Lokpobiri, has reaffirmed the Federal Government of Nigeria’s commitment to supporting the NNPC Limited/FIRST Exploration; Petroleum Development Company Limited (FIRST E&P) Joint Venture (JV) in achieving its ambitious target of producing 100,000 barrels of oil per day (BOPD).

The Minister made this declaration during a comprehensive engagement with the JV, which included a tour of its offshore drilling and production facilities in the Niger-Delta.

The two-day visit was designed to provide the Honourable Minister firsthand insight into the JV’s operations and underscore its contributions to Nigeria’s energy security and transition goals.

Head, Joint Venture Investment Management, NNPC Upstream Investment Management Service(NUIMS), Mr. Olanrewaju Igandan; Minister of State, Petroleum Resources(Oil), Senator Heineken Lokpobiri; Managing Director, FIRST E&P Development Company Limited, Ademola Adeyemi-Bero and Managing Director, First Marine and Engineering Services Ltd, Joseph Penawou during the tour of Ogu Base logistics in Yenagoa Bayelsa State

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The visit commenced with a tour of the Abigail-Joseph, the JV’s Floating Production Storage and Offloading (FPSO) vessel, followed by inspections of the Anyala OML 83 and Madu OML 85 Conductor Supported Platforms (CSPs) on Tuesday, November 19, 2024. The Minister’s itinerary also included a visit to the JV’s Ogu Logistics Base and a Host Community Stakeholders Engagement meeting in Yenagoa, Bayelsa State.

Describing his tour as quite strategic to Nigeria, the Minister disclosed that by meeting this ambitious 100,000 BOPD target, the JV would be helping the Federal Government achieve its production goal of 2.5 million BOPD by 2025. The Minister also praised FIRST E&P for its role in Nigeria’s recent achievement of 1.8 million BOPD and highlighted the strategic significance of the company’s operations to national growth.

During an engagement held with the Minister, FIRST E& P’s Managing Director, Ademola Adeyemi-Bero, reaffirmed the company’s commitment to supporting the Federal Government in achieving its target by maximising production, optimising efficiency, and contributing to Nigeria’s energy security through the NNPCL/FIRST E&P JV partnership. “For a nation like Nigeria, where oil and gas remain critical drivers of socio-economic growth, ensuring a sustainable energy supply is essential for industrialization, economic diversification, and improving the quality of life for millions. At FIRST E&P, our vision is strongly aligned with the national priorities for production. With a steady output of 56,000 BOPD, we are focused on achieving our medium-term target of surpassing 100,000 BOPD”, stated Adeyemi-Bero.

Bala Wunti, the Chief Upstream Investment Officer of NNPC Upstream Investment Management Services (NUIMS), represented by Olanrewaju Igandan, Head of Joint Venture Investment Management at NUIMS, applauded FIRST E&P and its partners for their remarkable achievements over the past decade. He highlighted that since achieving first oil in 2020, the partnership has produced over 50 million barrels of oil, significantly contributing to national revenue through royalties, taxes, and host community development initiatives.

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While commending the JV, the Bayelsa State Governor, Douye Diri represented by Chief of Staff, Dr. Peter Akpe, called for greater collaboration between the Federal Government, oil companies, and state authorities to boost production.

Speaking during the Host Community Stakeholders Engagement meeting, Chairman, KEFFESO Host Communities Development Trust (KHCDT), Amadabo of Moko-ama, Sangana Kingdom, His Royal Highness Moses Theophilus, commended the management of the JV for their invaluable support to the host communities through various initiatives in the areas of education, health care, and human capital development.

Lokpobiri commended the JVs host communities for creating a peaceful and supportive environment that has enabled the company to operate smoothly without disruptions. He urged the communities to continue their collaboration with the company, emphasizing that their support is crucial for increasing production and achieving the ambitious targets set. Reassuring stakeholders, he reaffirmed the Federal Government’s commitment to enhancing Nigeria’s investment climate and ensuring the nation remains globally competitive in the oil and gas sector.

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Economy

FG services foreign debt with $3.5bn

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The Federal Government spent $3.58 billion servicing its foreign debt in the first nine months of 2024, representing a 39.77 per cent increase from the $2.56bn spent during the same period in 2023.

This is according to data from the Central Bank of Nigeria on international payment statistics.

The significant rise in external debt service payments shows the mounting pressure on Nigeria’s fiscal balance amid ongoing economic challenges.

Data from CBN’s international payment statistics reveal that the highest monthly debt servicing payment in 2024 occurred in May, amounting to $854.37m.

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In comparison, the highest monthly expenditure in 2023 was $641.70m, recorded in July. The sharp contrast in May’s figures between the two years ($854.37m in 2024 versus $221.05m in 2023) highlights the rising cost of debt obligations, as Nigeria battles massive devaluation of the naira.

The CBN showed significant month-on-month changes in debt servicing costs, with some months recording sharp increases compared to the previous year. A breakdown of the data revealed varied trends across the nine months.

In January 2024, debt servicing costs surged by 398.89 per cent, rising to $560.52m from $112.35m in January 2023. February, however, saw a slight decline of 1.84 per cent, with payments reducing from $288.54m in 2023 to $283.22m in 2024.

March recorded a 31.04 per cent drop in payments, falling to $276.17m from $400.47m in the same period last year. April saw a significant rise of 131.77 per cent, with $215.20m paid in 2024 compared to $92.85m in 2023.

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The highest debt servicing payment occurred in May 2024, when $854.37m was spent, reflecting a 286.52 per cent increase compared to $221.05m in May 2023. June, on the other hand, saw a 6.51 per cent decline, with $50.82m paid in 2024, down from $54.36m in 2023.

July 2024 recorded a 15.48 per cent reduction, with payments dropping to $542.50m from $641.70m in July 2023. In August, there was another decline of 9.69 per cent, as $279.95m was paid compared to $309.96m in 2023. However, September 2024 saw a 17.49 per cent increase, with payments rising to $515.81m from $439.06m in the same month last year.

The data raises concerns about the growing pressure of Nigeria’s foreign debt obligations, with rising global interest rates and exchange rate fluctuations contributing to higher costs.

The global credit ratings agency, Fitch, recently projected Nigeria’s external debt servicing will rise to $5.2bn next year.

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This is despite the current administration’s insistence on focusing more on domestic borrowings from the capital market.

It also estimated that approximately 30 per cent of Nigeria’s external reserves are constituted by foreign exchange bank swaps.

Regarding external debt, the agency said external financing obligation

The Federal Government spent $3.58 billion servicing its foreign debt in the first nine months of 2024, representing a 39.77 per cent increase from the $2.56bn spent during the same period in 2023.

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This is according to data from the Central Bank of Nigeria on international payment statistics.

The significant rise in external debt service payments shows the mounting pressure on Nigeria’s fiscal balance amid ongoing economic challenges.

Data from CBN’s international payment statistics reveal that the highest monthly debt servicing payment in 2024 occurred in May, amounting to $854.37m.

In comparison, the highest monthly expenditure in 2023 was $641.70m, recorded in July. The sharp contrast in May’s figures between the two years ($854.37m in 2024 versus $221.05m in 2023) highlights the rising cost of debt obligations, as Nigeria battles massive devaluation of the naira.

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The CBN showed significant month-on-month changes in debt servicing costs, with some months recording sharp increases compared to the previous year. A breakdown of the data revealed varied trends across the nine months.

In January 2024, debt servicing costs surged by 398.89 per cent, rising to $560.52m from $112.35m in January 2023. February, however, saw a slight decline of 1.84 per cent, with payments reducing from $288.54m in 2023 to $283.22m in 2024.

March recorded a 31.04 per cent drop in payments, falling to $276.17m from $400.47m in the same period last year. April saw a significant rise of 131.77 per cent, with $215.20m paid in 2024 compared to $92.85m in 2023.

The highest debt servicing payment occurred in May 2024, when $854.37m was spent, reflecting a 286.52 per cent increase compared to $221.05m in May 2023. June, on the other hand, saw a 6.51 per cent decline, with $50.82m paid in 2024, down from $54.36m in 2023.

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July 2024 recorded a 15.48 per cent reduction, with payments dropping to $542.50m from $641.70m in July 2023. In August, there was another decline of 9.69 per cent, as $279.95m was paid compared to $309.96m in 2023. However, September 2024 saw a 17.49 per cent increase, with payments rising to $515.81m from $439.06m in the same month last year.

The data raises concerns about the growing pressure of Nigeria’s foreign debt obligations, with rising global interest rates and exchange rate fluctuations contributing to higher costs.

The global credit ratings agency, Fitch, recently projected Nigeria’s external debt servicing will rise to $5.2bn next year.

This is despite the current administration’s insistence on focusing more on domestic borrowings from the capital market.

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It also estimated that approximately 30 per cent of Nigeria’s external reserves are constituted by foreign exchange bank swaps.

Regarding external debt, the agency said external financing obligations through a combination of multilateral lending, syndicated loans, and potentially commercial borrowing will raise the servicing from $4.8bn in 2024 to $5.2bn in 2025.

The anticipated servicing includes $2.9bn of amortisations, including a $1.1bn Eurobond repayment due in November.

The Small and Medium Enterprises Development Agency and economists have stated that the rise in Nigeria’s public debt might create macroeconomic challenges, especially if the debt service burden continues to grow.

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The Chief Executive Officer of the Centre for the Promotion of Public Enterprises, Dr Muda Yusuf, explained that the situation could lead to a vicious circle, warning that “we don’t end up in a debt trap.”

He said, “I think there is a need for us to be very conscious of and watch the rate of growth of our public debt. Because it could create macro-economic challenges especially if the burden of debt service continues to grow.”

He maintained that there is a need for the government to reduce the exposure to foreign debts because the number has grown so due to the exchange rate.s through a combination of multilateral lending, syndicated loans, and potentially commercial borrowing will raise the servicing from $4.8bn in 2024 to $5.2bn in 2025.

The anticipated servicing includes $2.9bn of amortisations, including a $1.1bn Eurobond repayment due in November.

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The Small and Medium Enterprises Development Agency and economists have stated that the rise in Nigeria’s public debt might create macroeconomic challenges, especially if the debt service burden continues to grow.

The Chief Executive Officer of the Centre for the Promotion of Public Enterprises, Dr Muda Yusuf, explained that the situation could lead to a vicious circle, warning that “we don’t end up in a debt trap.”

He said, “I think there is a need for us to be very conscious of and watch the rate of growth of our public debt. Because it could create macro-economic challenges especially if the burden of debt service continues to grow.”

He maintained that there is a need for the government to reduce the exposure to foreign debts because the number has grown so due to the exchange rate.

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Economy

Oil imports drop by $1.52bn in Q2/24 – says CBN

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Nigeria’s oil importation dropped to $2.79bn from $4.31bn in Q2 of 2024. This amounts to $1.52bn decline or a 35 per cent decline.

This development was contained in the Central Bank of Nigeria’s quarterly economic report for the second quarter of 2024 released recently.

This reduction highlights shifting dynamics in the nation’s oil and gas sector amid ongoing structural and economic adjustments following the removal of fuel subsidies under the administration of President Bola Tinubu.

The report also noted that the overall value of merchandise imports contracted, falling by 20.59 per cent to $8.64bn from $10.88bn recorded in Q1 2024.

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The sharp decline in oil imports contributed significantly to this trend, the report noted.

The report reads: “Merchandise import decreased in Q2 2024, following the decline in the import of petroleum products. Merchandise imports decreased by 20.59 per cent to $8.64bn, from $10.88bn in Q12024.

“Analysis by composition indicated that oil imports decreased to $2.79bn, from $4.31bn in the preceding quarter.

“Non-oil imports also declined to $5.85bn, from $6.57bn in the previous quarter. A breakdown of total import showed that non-oil imports accounted for 67.72 per cent, while oil imports constituted the balance.”

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