The National Economic Council (NEC) yesterday approved the
new foreign exchange policy declared by Central Bank of Nigeria (CBN).
The apex bank has expressed optimism that after initial shocks, the naira will stabilise at the exchange rate of N250 per dollar.
The International Monetary Fund has also praised the decision by Nigeria to remove the currency peg of N197 to the dollar and to now allow the naira’s value to be decided by market forces.
The Council also disclosed that only five of the 36 states of the federation had so far completed the process of accessing the N90billion bond being offered by the federal government.
Speaking to State House Correspondents yesterday after the NEC meeting presided over by acting president, Yemi Osinbajo, Akwa Ibom State governor, Udom Emmanuel, also revealed that the country’s Excess Crude Account (ECA) stood at $2,261,249,976.96 by June 15, 2016.
LEADERSHIP recalls that the federal government had on Tuesday said it would grant a N90 billion loan to the 36 states of the federation. The loan, according to the federal government, will cover a period of one year and carry an interest rate of nine per cent.
However, the loan will be extended to the state governments after they meet 22 stringent conditions set out by the federal government under the fiscal sustainability plan.
When asked about the loan, Governor Emmanuel said: “ I wouldn’t want you to call it a bailout. I want to call it the exact name that it is.
“When you are talking about federal, state and local government, one thing is sure: we are all Nigerians. And if we also monitor what is happening in the global economy, you will see that there are organisational tool support programmes that we are bringing up to actually ease the impact of these global economic issues on Nigeria; it is not too much. The N90 billion and the federal support facility, they are one and the same thing.
“What the minister (of finance) explained was that the first tranche of N50 billion bond will be issued and the N40 billion will follow to make N90 billion. It is just to make this available; it is not compulsory; what is important is, can people have access to a lifeline? You see, what is happening today is not peculiar to Nigeria as a country. You know the impact of the fall in crude oil price that has actually gotten to oil producing countries like Nigeria. What we are looking at are the solutions. We must provide a lifeline for people to survive and to move on.”
He, however, declined to name the five states ready to access the bailout.
“As at today, this window just opened. We don’t know how many will decline at the end of it; so I think we cannot actually answer that question prematurely so that we give you the actual fact, but let me explain, as the minister did here the other time, there is a reconstruction going on.
“It doesn’t actually mean that states which will take this money do not have something accruable also from the federal government. Pending the time we reconcile our books, the federal government may have some balance to settle the state governments, but in the meantime while we are awaiting for those reconciliations to be concluded, can we open up the window so we can have access to liquidity and implement our 2016 budget. I think that is the whole ideal,” the governor explained.
On the forensic auditing of the ECA, he said the minister of finance, Mrs Kemi Adeosun, had reported that the work was ongoing.
NEC also received an update from the CBN on the flexible foreign exchange rate introduced, including market-driven exchange rate, single market structure through interbank/autonomous window and access to forex proceeds by non-oil exporters.
Governor Emmanuel also said that the Council was briefed on the Social Investment Programme by the special adviser to the president on Social Protection, Maryam Uwais, on the preparation, status of the planning, and responsibilities of the stakeholders towards the implementation of the programme.
According to him, “The programmes’ engagement with beneficiaries is already in progress and the role of the key players and partnership with states very critical to the success of the programme were pointed out.
“To ensure high level coordination, a National Social Safety Net Coordination Office has been set up in the Presidency, Office of the Vice President, to coordinate and ensure uniform reporting platform, Monitoring and Evaluation (M&E) as well as a suitable payment system (bank-led) for the cash transfers.
“Also a Community based Targeting Approach has been adopted in building up a National Social Register that will identify the poor and vulnerable population.”
CBN projects N250 per dollar
The CBN is “reasonably optimistic” that the naira will stabilise at around N250 to the US dollar after an initial period of weakness following a flotation on Monday, the bank’s governor said in a letter to President Muhammadu Buhari, according to a report by Reuters.
Nigeria’s central bank said on Wednesday that it would begin market-driven foreign currency trading next week, abandoning the peg of N197 naira per dollar that it had supported for 16 months.
Foreign investors and economists have called for months for currency devaluation as chronic foreign currency shortages choked economic growth and deterred investment.
The naira is expected to fall sharply when interbank trading begins on Monday, but the central bank said it did not have a target for the currency and the price would be “purely” market-driven. The naira was trading on the black market at around N370 to the dollar yesterday.
Giving the first indication of a target, CBN governor, Godwin Emefiele, said in a June 3 letter to Buhari – seen by Reuters – that the central bank hopes the naira will eventually trade at around N250 per dollar, a level the president has “approved”.
“I must assure Your Excellency that we are indeed reasonably optimistic that at some point the rate will settle around N250,” Emefiele says in the letter.
The letter, which briefs Buhari on the foreign exchange plan announced on Wednesday, says it could take three to four weeks to clear a $4 billion backlog of foreign exchange demand.
Buhari has for months said that he does not want the naira to be devalued, but backed a more flexible exchange rate policy when the central bank outlined its plans in May, without elaborating.
The presidency has not commented on the new regime, with Buhari’s spokesman declining to comment when Reuters called on Wednesday.
The central bank could not be immediately reached for comment.
Africa’s biggest economy, which contracted by 0.4 per cent in the first quarter, faces its worst crisis in decades after the decline in oil prices since 2014 and last year’s introduction of a currency peg, which prompted a large-scale capital flight.
With a likely sharp fall for the naira, Nigerian products will become relatively cheap and imports more expensive, which should stimulate the domestic economy but also lift inflation.
Buhari has previously raised concerns about the inflationary impact that a weaker currency will have on Nigeria’s poor.
Nigeria, Africa’s largest crude exporter, has resisted devaluing its currency for more than a year despite other major oil producers, including Russia, Kazakhstan and Angola, allowing currencies to fall after crude prices collapsed.
IMF lauds decision to remove forex peg
The International Monetary Fund yesterday said it welcomed the decision by Nigeria’s central bank to abandon its currency peg and adopt a flexible exchange rate policy, saying this was important to reduce fiscal and external imbalances.
IMF spokesman, Gerry Rice, told a weekly news briefing that the Fund wanted to see how effectively the naira exchange market functions once the new float system is put into effect next Monday.
Nigeria’s central bank governor said in a letter to President Muhammadu Buhari that the bank expects the naira to settle at around 250 to the dollar after it abandons the peg of 197 to the dollar it has supported for 16 months.
“I think the announcement yesterday to revise the guidelines for the operation of the Nigerian interbank foreign exchange market is an important and welcome step,” Rice told reporters.
“It will provide greater flexibility in that market, the foreign exchange market.”
Senior IMF officials, including managing director, Christine Lagarde, had urged Nigerian officials to allow the naira to fall to absorb some of the shock to the economy from a plunge in oil prices and revenues. IMF officials have said that Nigeria has not requested IMF’s financial assistance, but has been in consultation with the Fund on dealing with budget shortfalls.
“As we have said before, a significant macroeconomic adjustment that Nigeria urgently needs to eliminate existing imbalances and support the competitiveness of the economy is best achieved through a credible package of policies involving fiscal discipline, monetary tightening, a flexible exchange rate regime and structural reform,” Rice said. Allowing the exchange rate to better reflect market forces are an integral part of that,” it said.
Culled from Leadership
The apex bank has expressed optimism that after initial shocks, the naira will stabilise at the exchange rate of N250 per dollar.
The International Monetary Fund has also praised the decision by Nigeria to remove the currency peg of N197 to the dollar and to now allow the naira’s value to be decided by market forces.
The Council also disclosed that only five of the 36 states of the federation had so far completed the process of accessing the N90billion bond being offered by the federal government.
Speaking to State House Correspondents yesterday after the NEC meeting presided over by acting president, Yemi Osinbajo, Akwa Ibom State governor, Udom Emmanuel, also revealed that the country’s Excess Crude Account (ECA) stood at $2,261,249,976.96 by June 15, 2016.
LEADERSHIP recalls that the federal government had on Tuesday said it would grant a N90 billion loan to the 36 states of the federation. The loan, according to the federal government, will cover a period of one year and carry an interest rate of nine per cent.
However, the loan will be extended to the state governments after they meet 22 stringent conditions set out by the federal government under the fiscal sustainability plan.
When asked about the loan, Governor Emmanuel said: “ I wouldn’t want you to call it a bailout. I want to call it the exact name that it is.
“When you are talking about federal, state and local government, one thing is sure: we are all Nigerians. And if we also monitor what is happening in the global economy, you will see that there are organisational tool support programmes that we are bringing up to actually ease the impact of these global economic issues on Nigeria; it is not too much. The N90 billion and the federal support facility, they are one and the same thing.
“What the minister (of finance) explained was that the first tranche of N50 billion bond will be issued and the N40 billion will follow to make N90 billion. It is just to make this available; it is not compulsory; what is important is, can people have access to a lifeline? You see, what is happening today is not peculiar to Nigeria as a country. You know the impact of the fall in crude oil price that has actually gotten to oil producing countries like Nigeria. What we are looking at are the solutions. We must provide a lifeline for people to survive and to move on.”
He, however, declined to name the five states ready to access the bailout.
“As at today, this window just opened. We don’t know how many will decline at the end of it; so I think we cannot actually answer that question prematurely so that we give you the actual fact, but let me explain, as the minister did here the other time, there is a reconstruction going on.
“It doesn’t actually mean that states which will take this money do not have something accruable also from the federal government. Pending the time we reconcile our books, the federal government may have some balance to settle the state governments, but in the meantime while we are awaiting for those reconciliations to be concluded, can we open up the window so we can have access to liquidity and implement our 2016 budget. I think that is the whole ideal,” the governor explained.
On the forensic auditing of the ECA, he said the minister of finance, Mrs Kemi Adeosun, had reported that the work was ongoing.
NEC also received an update from the CBN on the flexible foreign exchange rate introduced, including market-driven exchange rate, single market structure through interbank/autonomous window and access to forex proceeds by non-oil exporters.
Governor Emmanuel also said that the Council was briefed on the Social Investment Programme by the special adviser to the president on Social Protection, Maryam Uwais, on the preparation, status of the planning, and responsibilities of the stakeholders towards the implementation of the programme.
According to him, “The programmes’ engagement with beneficiaries is already in progress and the role of the key players and partnership with states very critical to the success of the programme were pointed out.
“To ensure high level coordination, a National Social Safety Net Coordination Office has been set up in the Presidency, Office of the Vice President, to coordinate and ensure uniform reporting platform, Monitoring and Evaluation (M&E) as well as a suitable payment system (bank-led) for the cash transfers.
“Also a Community based Targeting Approach has been adopted in building up a National Social Register that will identify the poor and vulnerable population.”
CBN projects N250 per dollar
The CBN is “reasonably optimistic” that the naira will stabilise at around N250 to the US dollar after an initial period of weakness following a flotation on Monday, the bank’s governor said in a letter to President Muhammadu Buhari, according to a report by Reuters.
Nigeria’s central bank said on Wednesday that it would begin market-driven foreign currency trading next week, abandoning the peg of N197 naira per dollar that it had supported for 16 months.
Foreign investors and economists have called for months for currency devaluation as chronic foreign currency shortages choked economic growth and deterred investment.
The naira is expected to fall sharply when interbank trading begins on Monday, but the central bank said it did not have a target for the currency and the price would be “purely” market-driven. The naira was trading on the black market at around N370 to the dollar yesterday.
Giving the first indication of a target, CBN governor, Godwin Emefiele, said in a June 3 letter to Buhari – seen by Reuters – that the central bank hopes the naira will eventually trade at around N250 per dollar, a level the president has “approved”.
“I must assure Your Excellency that we are indeed reasonably optimistic that at some point the rate will settle around N250,” Emefiele says in the letter.
The letter, which briefs Buhari on the foreign exchange plan announced on Wednesday, says it could take three to four weeks to clear a $4 billion backlog of foreign exchange demand.
Buhari has for months said that he does not want the naira to be devalued, but backed a more flexible exchange rate policy when the central bank outlined its plans in May, without elaborating.
The presidency has not commented on the new regime, with Buhari’s spokesman declining to comment when Reuters called on Wednesday.
The central bank could not be immediately reached for comment.
Africa’s biggest economy, which contracted by 0.4 per cent in the first quarter, faces its worst crisis in decades after the decline in oil prices since 2014 and last year’s introduction of a currency peg, which prompted a large-scale capital flight.
With a likely sharp fall for the naira, Nigerian products will become relatively cheap and imports more expensive, which should stimulate the domestic economy but also lift inflation.
Buhari has previously raised concerns about the inflationary impact that a weaker currency will have on Nigeria’s poor.
Nigeria, Africa’s largest crude exporter, has resisted devaluing its currency for more than a year despite other major oil producers, including Russia, Kazakhstan and Angola, allowing currencies to fall after crude prices collapsed.
IMF lauds decision to remove forex peg
The International Monetary Fund yesterday said it welcomed the decision by Nigeria’s central bank to abandon its currency peg and adopt a flexible exchange rate policy, saying this was important to reduce fiscal and external imbalances.
IMF spokesman, Gerry Rice, told a weekly news briefing that the Fund wanted to see how effectively the naira exchange market functions once the new float system is put into effect next Monday.
Nigeria’s central bank governor said in a letter to President Muhammadu Buhari that the bank expects the naira to settle at around 250 to the dollar after it abandons the peg of 197 to the dollar it has supported for 16 months.
“I think the announcement yesterday to revise the guidelines for the operation of the Nigerian interbank foreign exchange market is an important and welcome step,” Rice told reporters.
“It will provide greater flexibility in that market, the foreign exchange market.”
Senior IMF officials, including managing director, Christine Lagarde, had urged Nigerian officials to allow the naira to fall to absorb some of the shock to the economy from a plunge in oil prices and revenues. IMF officials have said that Nigeria has not requested IMF’s financial assistance, but has been in consultation with the Fund on dealing with budget shortfalls.
“As we have said before, a significant macroeconomic adjustment that Nigeria urgently needs to eliminate existing imbalances and support the competitiveness of the economy is best achieved through a credible package of policies involving fiscal discipline, monetary tightening, a flexible exchange rate regime and structural reform,” Rice said. Allowing the exchange rate to better reflect market forces are an integral part of that,” it said.
Culled from Leadership
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