The Association of Bureaux de Change Operators of Nigeria (ABCON), who disclosed this on Monday, applauded the decision of the Central Bank of Nigeria (CBN) led by Olayemi Cardoso to recall BDCs into the mainstream FX market, describing it as a major factor in ongoing exchange rate stability.

Dr. Aminu Gwadabe, ABCON’s president, was full of gratitude to the CBN and other related agencies for the recognition of BDCs as the third leg of the foreign exchange market and an effective exchange rate trans­mission mechanism in forex management. ­

He said,

“The reconsideration of the BDCs into the mainstream foreign exchange market has not only demystified illegal econom­ic behaviours such as hoarding, rent seeking, round tripping and FX holding position, but also led to the emergence of exchange rate convergence.”

Gwadabe said that the stability in the exchange rate has already started to have a positive impact on the prices of goods and services.

He noted that for instance the price for international school fees has dropped by 15 percent; cost of medical tourism reduced by 20 percent and prices of air fares for local and international trips dipped by 25 percent.

“The current developments in the foreign exchange market has started reining in inflation as prices of most necessities are becoming relatively lower in the market. In a more serious note, the positive impacts include also heightened confidence of the public in the local currency as it eliminates currency substitution behaviour which hitherto added pressure on our local currency”, he added.

Gwadabe said the success sto­ry is unending as naira traded at N1,255/$ on Saturday, even lower than N1,269.765 rates BDCs were advised to sell.

Describing the ongoing mar­ket development as revolutionary, Gwadabe said stable naira will attract more foreign portfolio in­flows to the economy.

He said the naira has appre­ciated from February low of N1,915/$ to N1,255/$, representing N660 gain, which is significant by all measures.

He said the gains of the CBN under Cardoso to recognise the power of BDCs in securing stable exchange rate cannot be overem­phasised.

He also said that previous practice where people took dol­lars from Nigeria to Dubai for hoarding has ceased.

Gwadabe said that today, fol­lowing the rapid recovery of the naira against the dollar, the pur­chase of dollars in Dubai is cheap­er than in Nigeria and therefore created business opportunities for dollar inflows rather than outflows to the economy.

Going forward, he said that prospects for forex earnings are promising, with foreign portfolio investments on the rise and over $1.5 billion inflows few days after the Monetary Policy Committee (MPC) raised interest rate by 200 basis points.

He said increases in foreign exchange inflows into the econo­my through the CBN’s monetary instruments is helping to boost foreign reserve accretion and gives the apex bank the necessary power to continue to defend the local currency.

“It is our view that the collab­oration between the BDCs, CBN, National Security Adviser, the Economic and Financial Crimes Commission (EFCC), as well as support from the Presidency helped in creating the opportu­nity for building the foundation of this achievement. Overall, the combination of these actions have induced an atmosphere of public calmness, confidence, hopes and liquidity in the mar­kets.

“We therefore call on the CBN to continue to calibrate the existing relationship between the BDCs and the apex bank to sus­tain the success story,” he advised.

On the recent reforms in the financial industry, the ABCON chief reiterated the resolve of ABCON to continually collabo­rate with the CBN in carrying all its members along in achieving a win-win situation.

He said this is expected to help in safeguarding investments, har­nessing skills of BDC operators and boosting employment within the financial services sector.

This is a lower hike compared to the 400 basis points at 22.75% in the previous month.

The decision announced by Yemi Cardoso, the CBN governor, propels the MPR to its highest point ever, reaffirming the CBN’s aggressive stance on monetary tightening in response to inflationary pressures.

Details later…

Yemi Cardoso, the governor of the CBN announced this after the first MPC meeting for the year in Abuja on Tuesday.

The Central Bank of Nigeria (CBN)’s Monetary Policy Committee (MPC) raised the Monetary Policy Rate (MPR) by four hundred basis points to 22.75 percent from 18.75 percent.

According to him, “All 12 members of the committee decided to further tighten monetary policy by raising the MPR by 400 basis points to 22.75 percent from 18.75 percent. Adjust the asymmetric corridor around the MPR to +100 to -700 from plus 100 to -300 basis points,”

The MPR has been 18.75 percent since the last MPC meeting between 24th and 25th July 2023. With inflation at 29.90 percent, he said the new MPR is part of moves to tackle the country’s inflation.

Cardoso who chairs the MPC also said the Cash Reserve Ratio (CRR) has been raised to forty-five percent while the liquidity ratio was left unchanged at thirty percent. The CBN chief also said over $26 billion has passed through the crypto app Binance Nigeria in the last four years.

The Central Bank Boss, also harps on development revolving round several financial instrument, most significantly cryptocurrency.

He noted that

“In the case of Binance, in the last one year, 26 billion dollars has passed through Binance Nigeria from sources and users who we cannot adequately identify,” he told reporters in his first MPC meeting since assuming office as the CBN governor.

Mr. Yemi Cardoso, however, exonerated himself and his team from the country’s economic woes.

He said “I laugh at that question but it’s not a laughing matter and I think it is very important for Nigerians to understand that the Central Bank Governor — I and my team — are not responsible for the woes that we have today; we are part of the solution,” the former Lagos State Commissioner for Economic Planning and Budget said while responding to a question on how the CBN intends to tackle the country’s biting economic hardship.

“We are determined to ensure that we work hard to get out of the mess that Nigeria is in. We assumed responsibility in a time of crisis of confidence; there was a crisis of confidence and you may all want to go to bed and wish that crisis of confidence was not there but it was, and we can’t turn back the clock.

“All we can do is do the difficult things to make a bad situation better and I do believe that the efforts that we are making are beginning to bring back confidence because to be frank, without confidence in your business, you are not going to get far”.

1. Olayemi Cardoso (chairman)
2. Muhammad Sani Abdullahi, CBN deputy governor;
3. Bala M. Bello, CBN deputy governor;
4. Emem Usoro, CBN deputy governor;
5. Philip Ikeazor, CBN deputy governor;
6. Lamido Yuguda, DG Securities and Exchange Commission.
7. Jafiya Lydia Shehu, Permanent Secretary, Ministry of Finance;
8. Murtala Sabo Sagagi, CBN director;
9. Aloysius Uche Ordu,
10. Aku Pullen Odukemelu,
11. Mustapha Akinwunmi and
12. Bamidele A.G. Amoo.

The Senate has confirmed Olayemi Cardoso, the governor of the Central Bank of Nigeria (CBN) and 11 others that were nominated by president Bola Ahmed Tinubu as members of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN).

This is following the consideration of a report by the Committee on Banking, Insurance and Other Financial Institutions.

The other 11 people that were confirmed are: Muhammad Sani Abdullahi, CBN deputy governor; Bala M. Bello, CBN deputy governor; Emem Usoro, CBN deputy governor; Philip Ikeazor, CBN deputy governor and Lamido Yuguda, DG Securities and Exchange Commission.

Others are:

Jafiya Lydia Shehu, Permanent Secretary, Ministry of Finance;  Murtala Sabo Sagagi, CBN director; Aloysius Uche Ordu, Aku Pullen Odukemelu, Mustapha Akinwunmi and Bamidele A.G. Amoo.

President Bola Ahmed Tinubu, in a letter addressed to the Senate President Godswill Akpabio, asked the Red Chamber to confirm the nominees.

President Bola Tinubu, had in a letter read on the floor of the Senate during plenary on Wednesday, February 14th sought the confirmation of the nominees, ahead of the MPC meeting next week. The request was then referred to the committee for action.

Tinubu said his action was in line with the provisions of Section 12 of the Central Bank of Nigeria (CBN) Act 2007.

The chairman of the Senate committee, Senator Adetokunbo Abiru (APC, Lagos), in his presentation, said the nominees possess the academic qualifications, technical knowledge and professional experience to be members of the Monetary Policy Committee of the Central Bank of Nigeria.

He said the panel did not receive any petition against their nominations, adding that the nominees were all cleared by the security agencies.

The MPC is the highest policy making committee of the apex bank with the mandate to: review economic and financial conditions in the economy; determine appropriate stance of policy in the short to medium term; review regularly, the CBN monetary policy framework and adopt changes when necessary.

Adetokunbo, chairman of the Committee, while presenting the report assured that the Chairman and members have the requisite knowledge and experience for the crucial task ahead of them.

The CBN Governor, Godwin Emefiele, stated this on Tuesday in Abuja while reading the communiqué issued at the end of the apex bank’s monetary policy committee’s 290th meeting (MPC).

He stated that the ABP has disbursed a total of N1.09 trillion since its inception in 2015.

According to him, the program has benefited 4.6 million smallholder farmers cultivating or raising 21 agricultural commodities so far.

President Muhammadu Buhari launched the ABP on November 17, 2015, to establish a link between anchor companies involved in processing and smallholder farmers (SHFs) of Nigeria.

It was intended to provide farm inputs (in kind and cash) to SHFs in order to boost key commodity production, stabilize input supply to agro-processors, and address Nigeria’s bad food balance of payments.

“Between January and February 2023, the bank disbursed N12.65 billion to three agricultural projects under the ABP,” Emefiele said.

“It brings the cumulative disbursement under the program to N1.09 trillion to more than 4.6 million smallholder farmers cultivating or rearing 21 agricultural commodities on an approved 6.02 million hectares of farmland.”

Emefiele stated that the apex bank also released N3.01 billion under the Nigerian Electricity Market Stabilization Facility (NEMSF-2) for capital and operational expenditures of electricity distribution companies (DisCos).

He stated that the facility was designed to help DisCos improve its liquidity and recover the legacy debt.

“This brings the total disbursement under the facility to N254.39 billion,” he added.

Emefiele said the CBN also released the sum of N23.70 billion under the N1 trillion real sector facility to eight new real sector projects in agriculture, manufacturing, and services.

“Cumulative disbursements under the real sector facility currently stands at N2.43 trillion disbursed to 462 projects across the country, comprising 257 manufacturing, 95 agriculture, 97 services, and 13 mining sector projects,” he said.

CBN announced that its 289th meeting would be held at its national headquarters in Abuja and presided over by the Governor who is currently under fire, Godwin Emefiele.

Diverse opinions on the potential outcomes of the rates after the MPC meeting on Tuesday have nonetheless been offered by financial professionals.

After the meeting, according to analysts and researchers at Cordros Securities, we “MPC to favor modest rate hikes in the short-term.”

In a report, they stated, “Elsewhere, the prospect of global central banks embarking on smaller interest rate hikes could also influence the MPC’s decision to toe the same line amid concerns about the domestic economy.

Thus, we expect the MPC to opt for smaller rate hikes in the short term, given the build-up of pressures in the local economy and as the risks of over-tightening come to the forefront of policy discussions. Consequently, we expect the committee to increase the MPR further by 50bps – 100bps and retain other policy parameters.”

According to the report, the committee remains faced with either maintaining its hiking cycle or keeping policy parameters unchanged.

It added, “Therefore, we expect the committee to assess the domestic and global economic environment in the context of developing key economic and financial indicators since its last policy meeting in November.

In our view, the MPC is likely to be concerned about the pressure on the domestic economy, given the slow growth recorded in Q3, 22022, more so that the manufacturing sector posted its first contraction since Q4, 2020.

“Moreover, inflationary pressures remain intact, although the slight ease in December will likely be welcomed among the committee members.”

Africa’s largest economy faces an economic inflationary crisis, the major reason the CBN decided on Tuesday to raise the interest rate to 13 percent from 11.5 percent, TechEconomy reported.

Before the Monetary Policy Committee decided to increase the interest rate, the CBN had announced in February stop the sale of foreign exchange to Deposit Money Banks by December this year.

Limited Access to Forex

Accessing the dollar for legitimate purposes has been a lingering crisis in Nigeria. Nigerians who are involved in international transactions, such as paying for education; and business owners, such as importers have little or no access.

The current situation compels Nigerians to approach the black market, making Naira slide to over N600 per dollar, thus, eroding the purchasing power of many Nigerians.

Data obtained from the Central Bank of Nigeria showed that Nigerians spent at least $220.86 million on foreign education between December 2021 and February 2022.

In a letter titled ‘important notice’, seen by TechEconomy, Access Bank says it will need a 30-day period to fulfill requests for school fees, upkeep, and rent payments.

Personal Travel Allowance (PTA) and Business Travel Allowance (BTA) requests, it said, will take 14 days.

In contrast, TechEconomy gathered several reports revealing that politicians with unrestricted access to dollars have been on spending sprees to fund the forthcoming elections.

In an interview monitored by TechEconomy on Classic FM, Peter Obi, Presidential aspirant of the Peoples Democratic Party (PDP) said “manufacturers are looking for dollars for spares, for inputs, for critical goods, but they can’t find it and we the politicians are sharing dollars.”

“Let me tell you, one of the measures of any country’s economic stability is the currency. It is an abomination that somebody serving in government is spending another country’s currency, and I say it any day, If I’m president today, no government official would spend dollars, you go to jail. we have a currency.”

Increasing Debt Crises

The Federal Government has been heavily criticized for borrowing without any feasible commensurate infrastructural output.

President Buhari had in April written to the House of Representatives, informing the parliament that the deficit in the 2022 Appropriation Act had risen by N965.42bn to N7.35tn.

“Borrowing is not bad, what matters is what you are doing with when you borrow, Obi said. “Nigeria must desist from borrowing for consumption.”

The Debt Management Office (DMO), projected that the total debt stock of Nigeria is likely to reach N45tn, after it revealed that the country’s total debt stock as of December 2021 was N39.55tn.

Domestic debt stands at N23.7 trillion as of December 2021 from N20.21 trillion recorded in the previous year.

According to Ikemesit Effiong, Head of Research, SBM Intelligence, government borrowing costs, external and domestic, are sure to rise, and capital-intensive and interest-rate-sensitive sectors such as manufacturing and oil and gas will see a net rise in operating costs.

“This factor may account for why the committee didn’t opt for a bigger price hike.”

Food Inflation

Although, many Nigerians believe the depreciating value of their local currency is responsible for food inflation. This also includes the high cost of transportation, lack of storage facilities, insecurity and other factors.

Security agencies in Nigeria are yet to find a lasting solution to the menace of insecurity across the country. Farmers and transporters are gripped with fear not to be attacked by bandits. This negatively affects the quantity of agricultural product at the market.

The emergence of unknown gunmen in the Southeast part of the country coupled with sit -at-home will all have effects on food inflation.

Recent SBM Intelligence analyses have shown that market prices increased from October to December. Then it experienced a dip in February before rising again between February and March.

Price increases in recent times are attributed to fuel scarcity, insecurity situation, poor electricity supply, etc. It is expected that 19.4 million Nigerians will face famine by August 2022

Food inflation is currently 15.63 percent in December 2021, according to NBS.

Inevitable Inflation

Analysts say the combination of these several factors will create an economic situation that will give rise to inflation and eventually pressure the CBN to increase interest rates.

“The CBN will hold at its next meeting in July, but that rates will hit 14% by the end of the year if inflation continues to accelerate. said Abdulazeez Kuranga, Senior Analyst at Lagos-based Cordros Capital Ltd.

“Inflationary pressure will be increasing given the election spending,” said Abdulazeez Kuranga, Senior Analyst at Lagos-based Cordros Capital Ltd.

“It is driving the demand for money in the domestic economy and causing inflationary pressure.”

Nigeria’s current inflation rate is 16.82 percent, according to the Consumer Price Index report, released in April 2022 by the National Bureau of Statistics (NBS).

On a month-on-month basis, inflation increased by 1.76% in April 2022, compared to 1.74% increase recorded in the previous month.