• Buhari back from China, awaits V.P’s briefing on budget
• Experts laud China deal
The Central Bank of Nigeria (CBN) Governor, Mr. Godwin Emefiele, has indicated plans by the apex bank to raise interest rates in the country, following the recent spike in inflationary trends.
Emefiele revealed this in Washington after attending the International Monetary and Financial Control (IMFC) of the International Monetary Fund at the ongoing Spring Meeting of the IMF/World Bank meetings.
This year’s meeting has the theme: ‘Global Challenges, Global Solution’ and is attempting to provide solution to global economic crisis fueled by falling commodities prices.
According to Emefiele, another raise in interest rates has become inevitable because it does not make economic sense to hold down interest rates in the regime of rising inflationary trends.
Meanwhile, President Muhammadu Buhari, who returned to Abuja from his working visit to China, yesterday, is awaiting briefing from Vice President, Yemi Osinbajo, before signing into law the 2016 budget.
A Presidency source said, yesterday, that the President is expected to receive full briefing from the Vice President, who handled discussions on the budget, before a final decision to sign it into law is taken.
The source, who pleaded anonymity, said: “The President just arrived this morning (yesterday), and he has to receive briefing from the Vice President, who handled budget matters, before a decision is taken.”
The Presidency and the National Assembly have been at loggerheads over passage of 2016 budget, following allegation by the Presidency that the lawmakers tinkered with the original bill.
Economic experts, yesterday, expressed satisfaction over gains of the recent visit to China by Buhari.
The Chief Executive Officer (CEO) of the Economic Associates (EA), Dr. Ayo Teriba, described the bilateral economic agreements between the two countries as commendable, saying it would alter mode of payments in favour of the naira and Chinese yuan.
Former director, Center for Social and Economic Research, Ahmadu Bello University (ABU), Dr. Sanusi Abubakar, spoke in a similar vein, saying it is a step that ought to have been taken by the country long before now.
A professor of Economics at the Bayero University Kano, Dr. Murtala Sagagi, said it would increase the value of the naira, but cautioned that the country “cannot escape the influence of dollars” on its economy.
The Central Bank of Nigeria on Saturday said it suspended charter flight agreement with VistaJet, a Swiss charter airline in Nigeria and other countries, in 2015 following President Muhammadu Buhari’s administration resolve to cut costs.
CBN Governor, Mr. Godwin Emefiele
It said since last year, the CBN Governor, Mr. Godwin Emefiele, had stopped flying VistaJet’s Bombardier luxury private jets.
SATURDAY PUNCH had reported how Emefiele and Minister of State for Petroleum Resources, Mr. Ibe Kachikwu, had at various times flown VistaJet’s upscale private jets and flown in it to the burial of Emefiele’s mother in Delta State.
The immediate past Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, had been severely criticised during the past administration for chartering Vistajet’s private jets for several months, and accumulating huge sums of bills that could almost reach half of the amount a private jet is sold.
Kachikwu on Saturday also said he cancelled the about N600m monthly contract which the Nigerian National Petroleum Corporation had with VistaJet.
The NNPC stated that Kachikwu terminated the contract with VistaJet when he assumed office.
Although Kachikwu through the NNPC admitted to using Vistajet’s private jets, he said the bill was being paid by the International Oil Companies under their joint venture agreement with the NNPC.
The CBN, in a statement by its Acting Director, Corporate Communications, Mr. Isaac Okoroafor, on Saturday said, “However in 2015, in response to the economic downturn and the cost-cutting stance of the Federal Government, Mr. Emefiele ordered the stoppage of the use of chartered flights by the central bank. Since then, neither Mr. Emefiele nor any of the deputy governors had used the services of private chartered flights and the CBN has not paid a kobo for private jet services.”
It added, “The CBN has, for several years in the past, used private and official chartered flights in making urgent travels to meet needs in remote, not-easily- accessible locations or in cases where timing might be critical to matters of urgent national importance.
“This practice was in place long before the assumption of office of the current Governor, Mr Godwin Emefiele. In fact it is on record that the past two CBN Governors actively used chartered private jet services to meet urgent national assignments.
“Indeed, in recognition of this critical need in its smooth operations, the CBN had in the 1990s acquired a dedicated jet for this purpose and for urgent currency movement. This was, however, taken over by the military administration when there was a more urgent need for it at the State House.
“Thereafter, the CBN occasionally used the chartered services of private operators and those of the Presidential Fleet when available, both of which were paid for.”
NNPC on Saturday also said the cancellation was due to the fact that Nigeria spends $3m every month as a result of the contract.
It said, “Since the grounding of the NNPC-owned private jet which has been handed over to the Presidential fleet as scrap, Kachikwu has resisted every pressure to procure and maintain another private jet for the NNPC.
“And even though it is a standard practice in the oil and gas industry, the minister has refused to retain the services of any private jet company.
“What Kachikwu has done in fact was to cancel an existing contract with VistaJet which he found on assumption of office and which was costing the country $3m every month. By this, Kachikwu has saved the country expenditure that would have run into hundreds of millions of United States dollars.”
The statement added that the minister had insisted that since the Federal Government, through the NNPC, contributed 60 per cent in the Joint Venture agreements it entered into with international oil companies, then the corporation was entitled to all facilities that were available as part of the operations of the JV agreements.
Edo State Governor, Mr. Adams Oshiomhole, has condemned calls for the sacking of the Governor of Central Bank of Nigeria, Godwin Emefiele, describing those behind the calls as “Facebook manipulators and palm wine drinkers.”
Oshiomhole
The governor explained that the people spearheading the agitation were people “who have been feeding fat on our common patrimony and manipulating the exchange rate, moving money across borders and taking advantage of electronic money transfer”.
Oshiomhole spoke with journalists on Wednesday evening in Abuja during a visit to the National Universities Commission to obtain license for the second newly established Edo State University, located in his village, Iyamho.
He advised proponents of the calls to stop wasting their time because President Muhammadu Buhari would not be deceived.
He added the hiring and firing of CBN governor might not be a political decision because institutions must be respected.
Oshiomhole said, “If a CBN governor is doing fine, the hiring and firing is not a matter that should be discussed by Facebook manipulators and by the time you unmasked the people behind it, they are palm wine drinkers.
“President Buhari is not going to be fooled by people who want to have a regime where government is just an onlooker and allow the naira to become worthless and people are making money from speculations; so, those guys are wasting their time.
“We have a new Federal Government that has won election on the basis on a mantra of change and there are all kinds of people who have made a lot of money from the economy without contributing anything by just playing on exchange rates.”
The governor explained there were many challenges in running the economy, especially when there is limited inflow of forex.
“And you do not want to trigger a process that will lead to endless devaluation that ultimately will reduce Nigerian naira to Zimbabwe dollar,” he added.
Apparently disturbed by the slump of Naira against the major currencies in the foreign exchange market, a former member of House of Representatives, Bamidele Faparusi, has called for the immediate removal of the Central Bank Governor, Godwin Emefiele.
CBN Governor, Mr. Godwin Emefiele
He hinged his call for Emefiele’s sack on what he described as “poor management of the country’s forex and the fluctuation of the Naira on daily basis since he (Emefiele) assumed office during Goodluck Jonathan’s administration.
Faparusi , who represented Ekiti South Federal Constituency 2 between 2011 and 2015, said it was quite disturbing that a dollar is now being exchanged for N310 in the parallel market , when the official rate is N198, due to inconsistency of the CBN’s forex policy under Emefiele.
Speaking in a chat with reporters in Ado Ekiti on Monday, the All Progressives Congress (APC) chieftain expressed dismay that alleged poor handling of the economy under Emefiele’s watch has led to the collapse of many businesses.
Faparusi said he expected the CBN governor, being the head of the country’s currency regulatory body to have acted fast and come up with a standard and sustainable exchange rate, to forestall inflation and unpredictable currency valuation system.
He wondered why the CBN governor has not been able to manage the activities of those he described as ‘black marketers’ stalling government’s efforts at stabilizing the forex policy, thereby causing unwarranted devaluation of naira.
Faparusi said: “Many businesses have been crippled because of the poor handling of the economy under Mr. Emefiele. He has no reason to remain on that seat. He has been running the economy in a trial and error form. None of his policies had lasted for two weeks.”
The Naira appreciated yesterday to N302 per dollar in the parallel market, thus halting three days of sharp depreciation even as the price of Nigeria’s reference crude oil grade, Bonny Light, slid below the $30 per barrel mark, dropping to $29.47 per barrel.
CBN Governor, Mr. Godwin Emefiele
Meanwhile, following the increasing depreciation of the Naira, the Senate, yesterday, summoned the Central Bank of Nigeria, CBN, Governor, Godwin Emefiele, to appear before it next week.
From N305 per dollar, Wednesday, the parallel market exchange rate dropped to N302 per dollar at the close of business yesterday, indicating N3 appreciation.
President, Association of Bureaux De Change Operators of Nigeria, ABCON, Alhaji Aminu Gwadabe, said that the appreciation was occasioned by drop in demand for foreign exchange and indications that CBN might review its decision to stop dollar sales to bureaux de change, BDCs.
The naira depreciated in the parallel market by N25 naira between Monday and Wednesday, following the announcement by CBN on Monday to stop sales of dollars to BDCs.
Earnings dip
Also, the price of Nigeria’s reference crude oil grade, Bonny Light, slid below the $30 per barrel mark, dropping to $29.47 per barrel, according to data obtained, yesterday, from CBN.
This was even as the price of Brent crude, the benchmark crude oil grade, rose to $30.77 per barrel in the international market. Brent crude had dipped below $30 a barrel on Wednesday, for the first time in more than 10 years, a day after the U.S. benchmark took a similar fall.
Specifically, Brent traded as low as $29.96 a barrel before settling down 55 cents, or 1.8 percent, at $30.31 a barrel on ICE Futures Europe, the lowest settlement since April 2004.
Therefore, using an average crude oil production of 2.2 million barrels per day, as stated by CBN, it is expected that the total amount accruable to the Federal Government and oil companies in Nigeria on a daily basis would dip to $64.83 million, about N12.967 billion daily, using an average exchange rate of N200 to a dollar.
Job loss at BP, Shell, Chevron
Consequently, as a result of the continuous decline in the price of Nigeria’s Bonny Light and other crude oil grades, experts are predicting massive job cuts in the Nigerian and global oil and gas industry in the next couple of days.
Already, the world’s biggest oil companies are slashing jobs and discontinuing major investments, especially as the price of crude falls to new lows.
A report obtained from the Associated Press noted that companies that would be affected by the declining oil price would not only be the big oil producers, but the numerous companies that do business with them, such as drilling contractors and equipment suppliers.
Particularly, companies like BP, which had earlier in the week said it is cutting 4,000 jobs, had already commenced trimming down their operations to cope with the slump in oil, whose price had plummeted to its lowest level in 12 years and is not expected to recover significantly for months, possibly years.
The report had quoted Chevron as saying last year that it would eliminate 7,000 jobs, while Shell announced 6,500 layoffs.
Furthermore, some analysts are forecasting a drop near $10 a barrel, making companies to brace up for more trouble.
In particular, Michael Hewson, chief market analyst at CMC Markets, said: “Calling the bottom in a market is always dangerous, akin to catching a falling knife. But when the clamour for lower prices becomes a stampede, warning signs and alarm bells tend to start going off, which suggests that a more prudent approach might be advisable.”
The uncertainty, the report said, is making companies think twice before sinking money into new oil projects.
“On the North Sea, there is a standstill in the new project, which may create a hole in the pipeline of projects next year,” said Florent Maisonneuve, Managing Director and co-head of Oil & Gas at AlixPartners in Paris.
Subsequently, CBN had in its Economic Report for the Month of October 2015, put the average price of Nigeria’s reference crude, Bonny Light at $49.23 per barrel in October, indicating a 1.3 percent increase relative to the level in the preceding month.
The Nigerian National Petroleum Corporation, NNPC, on the other hand, had stated that of the 18.24 million barrels of crude oil lifted on the account of NNPC in October 2015, 12.07 million barrels and 6.17 million barrels were for domestic and export markets, respectively.
It said: “At an average oil price of $47.45 per barrel and exchange rate of N195.95 to a dollar, the domestic crude oil lifted by NNPC is valued at $572.998 million or a Naira equivalent of N112.279 billion for the period.
“The remaining crude oil lifted for export was valued at $305,856,048.03 at an average price of $49.58/barrel. The total value of crude oil lifted on the account of NNPC in October, 2015 was thus $878.854 million.ý”
Meanwhile, concerned by the increasing depreciation of the Naira, the Senate, yesterday, summoned the CBN Governor, Godwin Emefiele, to appear before it on Tuesday next week at 11a.m., to explain the continuous weakening of Naira against the Dollar.
The development was sequel to a Point of Order raised by the Leader of the Senate, Ali Ndume, APC, Borno South.
The Senate President, Bukola Saraki, who presided over the plenary where the issue was raised, having listened to Senator Ndume, subsequently directed Ndume to convey the Senate’s resolution to the CBN governor.
PAYMENT of subsidy on fuel importation and Foreign Exchange (FOREX) differentials on bank loans granted to marketers by the Federal Government are to end soon.
CBN Governor, Mr. Godwin Emefiele
The Central Bank of Nigeria (CBN) Governor, Mr. Godwin Emefiele, said the government was doing everything to ensure that the Nigerian National Petroleum Corporation (NNPC) become sole importer of petroleum products.
Members of the Major Oil Marketers Association of Nigeria (MOMAN) have been on a running battle with the Federal Government over subsidy claims running into several millions of dollars.
But Emefiele said President Muhammadu Buhari has directed the NNPC to cut down on importation by reactivating the four refineries and ensuring they function at installed capacities.
Speaking in an interview with Financial Times of London, the CBN chief said: “The President came on board and said that we will work very hard to reduce importation of petroleum products by ensuring that our refineries work. Our refineries are working now.
“The Warri and Port Harcourt refineries have started producing. They have not obtained the optimal capacity but they will. The Kaduna refinery will start working this month.
“Now, there are other actions that the Presidency is putting in place to ensure that we reduce importation of petroleum products where the NNPC will solely, almost solely be responsible for procuring refined petroleum.
”Those who are importing petroleum products will only just need to go to the NNPC and pick up petroleum products.
“So, in that area, I would say that we are already moving in the direction of reducing the import of petroleum products. And we will achieve it.”
On the efforts being made by the President to recoup stolen oil revenues believed to have been deposited in foreign banks, Emefiele said the issue was still being looked at, assuring that “as the Central Bank, we will also assist in drilling them once we get to that stage, and we will be happy to have that money back because it will improve our reserves”.
Central Bank of Nigeria (CBN) Governor Godwin Emefiele yesterday promised a gradual reduction in interest rates, signalling a shift from the monetary policy of his predecessor, Sanusi Lamido Sanusi.
Godwin Emefiele
This will be the first time in two years that the CBN will be aiming to reduce the interest rates to single digit. The rates have remained at 12 per cent since 2011.
Speaking at a news conference at the CBN, Abuja Headquarters, Emefiele said.
“There is no doubt that reducing interest rates and maintaining exchange rates are very daunting twin goals,” adding, “however, the central bank will work assiduously to ensure that these goals are mutually achieved.”
But, analysts warned that reducing interest rates too quickly could hurt the naira and stoke inflation.
Emefiele said: “High interest rates create a perverse incentive for commercial banks to simply buy virtually risk-free government bonds rather than lend to the real sector.
To enhance financial access and reduce borrower cost of credit, the CBN, he said, “would pursue policies targeted at making Nigeria’s Treasury Bill (T-Bill) rates more comparable with other emerging markets and by extension, pursue a reduction in both deposit and lending rates.”
A reduction in deposit rates he said “would encourage investment attitudes in savers, a reduction in lending rates would make credit cheaper for potential investors.”
The CBN, he said, would also begin to include the “unemployment rates as one of the key variables considered for its monetary policy decisions, but in the interim, will continue to maintain a monetary policy stance, reflecting the liquidity conditions in the economy as well as the potential fiscal expansion in the run-up to the 2015 general elections.”
Emefiele said all charges on deposits have been stopped with immediate effect, adding that this is to ensure that the CBN has more cash under its control.
This decision Emefiele said, was taken because “we have become aware of complaints by customers particularly regarding the charges being imposed for cash deposits. This has resulted in customers devising various means to avoid the charges through opening of multiplicity of accounts and other disingenuous behaviour all aimed at undermining the objective of this policy.”
On Exchange Rate Policy under his tenure, Emefiele said: “The bank will continue to focus on maintaining exchange rate stability and preserve the value of the domestic currency.
“The will sustain the managed float regime in the management of the exchange rate, as this will allow the bank to intervene when necessary to offset pressures on the exchange rate and to support this strategy, we will strive to build-up and maintain a healthy external reserves position and ensure external balance.”
He reiterated that “Charges on withdrawals, in view of their eventual elimination, remain sustained at the current 3 per cent for individual transactions exceeding N500,000 and 5 per cent for corporate transactions exceeding N3 million. Currently, these fees go entirely to the commercial banks. However, going forward, the Central Bank shall determine what percentage of these fees on excess drawings that will be redeemed by the bank while the rest shall be remitted to the CBN.”
The core of his vision, he said, would be “to effectively manage potential threats to financial stability, and create a strong governance regime that is conducive for financial intermediation, innovative finance and inclusiveness.”
This vision, he noted, would be anchored on two main pillars which are: “managing factors that create liquidity shocks and zero tolerance on practices that undermine the health of financial institutions.”
To achieve these goals, the CBN, he said would work with the relevant stakeholders to aggressively shore up reserves. “We hope to engage the fiscal and political authorities, as well as other stakeholders to improve our policy buffers, which will further create space for the Bank to implement monetary policy using its limited instruments.
The CBN’s new agenda for development finance, Emefiele said would be hinged on the core principle “that the CBN will act as a financial catalyst by targeting predetermined sectors that can create jobs on a mass scale and significantly reduce our import bills.”
Some of the bank’s developmental functions, he said “will include credit allocations and direct interventions in key sectors of the economy such as Power, Agriculture, MSME, Oil & Gas, and Health. While playing an active developmental role, the CBN will not only operate within the law and its mandate but will also be transparent about what it believes as strategic and appropriate interventions.” – The Nation
