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나이지리아 주나이지리아 대한민국대사 2023/07/10
WEEKLY ECONOMIC TRENDS
Friday, 23/06/2023
Energy Resource & Infrastructure Trends
Electricity Supply Drops as DisCos Rake in N247bn in Q1 (Daily Trust Newspaper, June 22, 2023)
• Electricity supply across the country in the first quarter of 2023 dropped to 5,852 Gigawatt hours (Gwh), a report by the National Bureau of Statistics has disclosed. The report titled, ‘Nigeria Electricity Report: Energy Billed, Revenue Generated and Customers by DisCos Q1 2023’ showed that energy supply dropped by 1.74 per cent from 5,956 (Gwh), when compared to the same period in 2022 but increased (5,611 Gwh) when compared to the fourth quarter of 2022.
• Similarly, it stated that DisCos generated revenue of N247.3bn during the period, which increased from N232.3bn generated in Q4 2022. “On a year-on-year basis, revenue generated in the reference period rose by 20.81 per cent from N204.7bn recorded in Q1 2022.”
• A breakdown shows that Ikeja Disco (IEDC) had the highest revenue generation with N49.7bn followed by Eko Disco (EEDC) with N41.7bn and Abuja (AEDC) DisCo N38.1bn. Others include; Benin (BEDC) N20.1bn, Enugu (EEDC) 18.9bn, Ibadan (IBEDC) 25.5bn, Jos (JEDC) N8.8bn, Kaduna (KDEDC) N7.7bn, Kano (KEDC) N14.9bn, Port Harcourt (PEDC) N19.6bn and Yola (YEDC) N4.9bn. The report added that the total customer numbers in Q1 2023 stood at 11.2m from 11m in Q4 2022, showing an increase of 1.89 per cent.
Nigeria’s grid-connected electricity customers hit 11.27 million (The Guardian Newspaper, June 22, 2023)
• Electricity consumers connected to the grid network in Nigeria have increased to 11.27 million, the National Bureau of Statistics (NBS) said yesterday. NBS, in a report, said that the number of consumers moved from 11.06 million in the fourth quarter of 2022 to 11.27 million in the first quarter of 2023, recording a 1.89 per cent increase. The report corroborated an earlier figure released by the Nigerian Electricity Regulatory Commission (NERC).
• The report leveraged energy billed, revenue generated and numbers of metered and unmetered customers by DisCos to arrive at the conclusion. On a year-on-year basis, the number of customers in the first quarter of 2023 rose by 5.99 per cent from 10.63 million reported in the first quarter of 2022. Similarly, metered customers stood at 5.31 million in the first quarter of 2023, indicating a growth of 3.61 per cent from 5.13 million recorded in the preceding quarter.
• On a year-on-year basis, the figure grew by 10.86 per cent from the figure reported in the first quarter of 2022, which was 4.79 million. Quarterly, the proportion of metered customers increased from 46.3 per cent in Q4 ’22 to 47.1 per cent in Q1 ’23, a percentage point difference of 0.9. The report however stated that the estimated customers during the quarter were 5.96 million in the first quarter of 2023, higher by 0.40 per cent from 5.93 million in the first quarter of 2022. On a year-on-year basis, estimated customers increased by 1.99 per cent in the first quarter of 2023 from 5.84 million in Q1 2022.
• The report shows that the electricity supply was 5,852 (Gwh) in Q1 2023 from 5,611 (Gwh) in the previous quarter. On a year-on-year basis, electricity supply declined by 1.74 per cent compared to 5,956 (Gwh) reported in first quarter of 2022. “Revenue collected by the DISCOS during the period was N247.33 billion from N232.32 billion in the fourth quarter of 2022. On a year-on-year basis, revenue generated in the reference period rose by 20.81 per cent from N204.74 billion recorded in the first quarter of 2022,” the report noted.
FG grants six companies license to import petroleum products (The Guardian Newspaper, June 20, 2023)
• The Federal Government of Nigeria (FGN) have approved the issuance of licenses to six new companies to import petroleum products into the country. The Managing Director of Nigeria Mainstream and Downstream Petroleum Regulatory Authority (NMDRA), Farouk Ahmed, informed State House correspondents about this at the Presidential Villa in Abuja. Ahmed stated that apart from the newly-approved six firms, several companies applied for permit to import petroleum into Nigeria in due course.
• He also seized the opportunity to dismiss insinuation that the Nigerian National Petroleum Company Limited (NNPCL) had given approval to Dangote refinery to import petroleum. Ahmed while addressing State House correspondents said that the NNPCL has no powers to give such approval. The NMDRA MD further noted that there are several companies that applied for fuel importation permit. According to him, anyone can apply for importation to get access to the port as the authority is open to all those interested in importing.
• “There are six companies who said they want to import fuel in July. Of course, all the others may import in December in November or anytime,” Ahmed stated. “However, those who expressed interest to bring in fuel in July there were six of them as of this morning. “The beauty of it is that there are interests which means that they have been able to have access to foreign exchange in order to import. “Now, as we go along, of course, we will be briefing you on the progress or the achievements so far. “The important thing is that the NNPC has 30 days fuel sufficiency, so we do not anticipate any gap in supply or in distribution,” he said.
• Recall that the House of Representatives last week rejected the motion to suspend the license allegedly granted to Dangote Refinery as the sole importer of Petroleum Motor Spirit (PMS) also known as petrol. A federal lawmaker (Gali Tijjani) had called for the suspension of the license for a review to accommodate all the petroleum marketers. The House of Reps, however, moved against the motion as shown in a video posted on Channels Television Twitter handle. Meanwhile, the NNPCL had last Tuesday denied claims that it already gave a license to the Dangote refinery owner, Alhaji Aliko Dangote to import petrol pending the completion of his refinery.
• NNPCL stated that it is not within its jurisdiction to grant a license or permit for fuel import. According to the report published in a national daily, the writer alleged that the imported fuel would be discharged at the Dangote barge and pumped into tanks to be sold at a market-dictated price to marketers while work progresses at the refinery. But reacting to the report, the NNPCL spokesperson, Onyi Sunday allegedly described the report as misleading and said that the company was not a regulatory organization. The immediate past president, Muhammadu Buhari on May 22 commissioned the Dangote Oil Refinery to immediately commence operations.
FG summons oil marketers, set to close equalisation fund (The Punch Newspaper, June 19, 2023)
• Following the deregulation of the downstream petroleum industry, the Federal Government has begun the process of closing down the Petroleum Equalization Fund, The PUNCH has learnt. The move, it was gathered, was in line with the provisions of the Petroleum Industry Act 2021. The PUNCH gathered the meeting held in Abuja between officials of the Nigerian Midstream and Downstream Petroleum Regulatory Authority and oil marketers on Wednesday deliberated on the closure of the fund. The officials and marketers discussed the reconciliation of the PEF accounts and plans to close it in the next one month.
• “The meeting was a consultation with the NMDPRA on implementation of the PIA, clarifications of various issues, applying for licences, quality issues and closure of the Petroleum Equalization Fund,” a former Chairman of Major Oil Marketers Association of Nigeria, Tunji Oyebanji, told The PUNCH in a telephone interview. “Some people owe PEF and it also owes some people. There is a need for reconciliation to close out the account,” Oyebanji explained. Formed in 2021, NMDPRA encompasses a merger of three defunct regulatory agencies: Petroleum Products Pricing Regulatory Agency, Petroleum Equalization Fund {Management} Board, and the Midstream and Downstream Divisions of the Department of Petroleum Resources.
• The National Controller of Operations, Independent Petroleum Marketers Association of Nigeria, Mike Osatuyi, also told The PUNCH that the Fund currently owes its members about N80bn. “We do not owe the Fund because before you lift products, you would have made deposits. But the Fund owes us N80bn which would be paid before the closure. The money piled up over some time but it has stopped piling up. The role played by the Fund has ended upon the full deregulation of the downstream sector as stated in the PIA,” Osatuyi said. He confirmed that IPMAN was also invited to reconcile its account with the Fund.
• “No need for the Fund again since we have deregulated. We don’t know when the money they owe us would be paid but it would be paid before the accounts are eventually closed. The process has started and our members have been invited,” he added. PEF was set up by Decree 9 of 1975 (as amended by Decree Number 32 of 1989 now chapter 352 of the Laws of the Federation). Its main function was to ensure price uniformity of petroleum products via the reimbursement of marketers for losses they incurred in trucking products from depots to their filling stations anywhere in Nigeria.
• A source in the Depots and Petroleum Products Marketers Association of Nigeria also confirmed that its members were invited for the reconciliation meeting. “We already know the closing of the Fund would happen, and they have told us that it has even closed. We are now at the stage where our members and other depot owners are being invited to reconcile the account. They informed us that the account would be closed in the next 20 days, starting from yesterday (Wednesday) when the meeting was held,” the source told The PUNCH.
Benin Port: Bidders Inspect Project Site to Assess Condition of Support Facilities (Thisday Newspaper, June 19, 2023)
• In line with efforts by the Edo State Government to fast-track the development of the Benin Port, bidders for the project have visited and inspected the confluence of the Benin River and Osse River, to assess the site conditions and available facilities to support the port. During the visit, the Project Director, Benin Port, Dr. Joe Aigboduwa, who led representatives of the host communities and the Edo State Government officials to the site, said the visit by the bidders was in response to the issued Request for Proposals (RFP) and in continuation of the certified Federal Government procurement process.
• He said, “In response to the issued Request for Proposals (RFP) and in continuation of the federal government approved procurement process under Public-Private Partnership, the internationally pre-qualified bidders for the Benin Port Project have conducted site visits to the project location.” According to him, “The 2-day exercise entailed a visit by boat to the foreshores of the site at the confluence of Benin River and Osse River on Tuesday 13th June 2023, and a visit by road to the proposed Benin Port dual carriageway Access Road, through Ekehuan Road on Wednesday 14th June 2023. “The visit afforded bidders the opportunity of physical assessment of the site conditions and the available facilities. They expressed satisfaction with what we have on the ground.”
• He noted: “The team comprises the Bidders, the Transaction Advisers (CPCS Transcom, Canada), representatives of the host communities, and Edo State Government officials. Aigboduwa said, “Bids are due for submission in Abuja by 30th June 2023, following which there would be an evaluation exercise by the Ministerial Project Delivery Team (PDT) under the Chairmanship of the Nigerian Ports Authority (NPA). Other members of the PDT include the Federal Ministry of Transportation, Federal Ministry of Finance, Federal Ministry of Justice, Infrastructure Concession Regulatory Commission (ICRC), Bureau of Public Enterprise (BPE), the Transaction Advisers, and Edo State Government.
• He said, “The Benin Port Project is designed to be a unique agro-based Port in Nigeria that encompasses a complete smart Port Community Complex for industrial processing and export of agricultural produce and other goods, with independent clean and renewable energy installations. “The container and multipurpose terminals of the port would also have RoRo facilities to enable direct importation of vehicles for the thriving automobile industry in Edo State, among others. This legacy project of His Excellency Governor Godwin Obaseki is expected to create massive employment and business opportunities in transforming the economy of Edo State and Nigeria.”
Households under pressure as new electricity tariff due July 1 (The Guardian Newspaper, June 19, 2023)
• Nigerians may need to brace up for tougher times as electricity tariff is set to increase by over 40 per cent in the coming days, a development which may eventually end all forms of energy subsidy in the country. With a monthly subsidy of about N50 billion still in the electricity sector owing to revenue shortfall, the tariff hike due from July 1, may be another acid test for the President Bola Ahmed Tinubu administration’s market reform.
• The administration has already removed subsidies on Premium Motor Spirit (PMS) and floated the naira, decisions that have complicated the price-setting of the Nigerian Electricity Regulatory Commission (NERC) 2022 Multi-Year Tariff Order (MYTO). Although the power sector players have been unable to meet the threshold of supplying at least 5,000 megawatts a year after signing contracts with NERC, NERC’s current Service Based Tariff (SBT) was benchmarked on an exchange rate of N441/$ and inflation of 16.97 per cent.
• Going by the NERC’s orders, in 2015, the average tariff across distribution companies (DisCos) and classes of end-users was N25 kilowatt, in order of 198/2020, which came into effect on September 1, 2020. The average tariff went to N60 per kilowatt; in the MYTO for 2022, the average tariff was N64 across classes of customers. The foreign exchange rate used in determining the 2015 tariff was N198.97/$, N383.80/$ was used in 2020, while N441.78/$ was used in 2022. The inflation used in the 2015 MYTO was 8.3 per cent, 12 per cent was used in 2020 and 16.97 per cent in 2022. Currently, the inflation rate is 22.41 per cent and some experts have projected that it would hit 30 per cent by the end of June given the floating of the naira and subsidy removal on PMS.
• Coming as the metering gap remained at over seven million, gas prices, losses and actual generation capacity are other elements in determining the tariff. While NERC’s projected tariff for July 2023 was expected to remove subsidy and increase the previously frozen tariff band D and E, increasing the bands from N54.59/kilowatt to N62.16 for band D and N48.37/kilowatt to N61.16 on average with an average increase across the bands moving to N67/kilowatt, the prevailing floating of the naira and spike in inflation is projected to move the new average tariff to about N88/kilowatt for the sector to recover the cost.
• Most stakeholders told The Guardian that while the increase is unavoidable due to the changes in the parameters, households and small businesses, which should power the economy, may head for serious problems with energy costs alone rising to over 70 per cent as purchasing power remains a challenge in the face of unemployment and poverty. At the time of filing this report, available electricity on the grid stood at 3,057.7MW from 17 power plants. The average load intake of all the DisCos in the last four months averaged 3,000MW, a development that follows the persistent push to make the DisCos meet up with 100 per cent of their remittance orders.
• With the question of affordability emerging as a major consideration as the grid remains unreliable, forcing it to make losses, stakeholders have expressed fear that Nigerian Electricity Supply Market may face tougher times managing outlook due to apathy that may come from consumers who are losing hope in the system and resorting to alternative energy. Energy expert, Prof Wunmi Iledare, said the restructuring of the forex market creates worries as it appears as a devaluation of the naira, adding that he’s not comfortable blaming subsidy removal and paying the right tariff for decoupling Nigeria’s economy from forex instability. According to him, people must support the government in its effort to stop the dollarisation of its economy even if electricity tariff and petroleum products prices rise to a not-too-comfortable market-clearing price.
• Iledare, however, questioned the current energy pricing in the country, adding that the PMS pricing which stayed after the NNPC announcement is anticompetitive based on the dominant firm market structure. “Price hike cannot just depend on forex in the electricity market. Market fundamentals are key to rate determination in a decreasing cost industry producing essential commodities, like power,” Iledare noted. Energy lawyer, Madaki Ameh, said the never-ending upward reviews of power tariffs have become some sort of blackmail on electricity consumers and should be addressed through the Consumer Protection Council or an organized body of electricity consumers.
• “Indexing the cost of electricity on the dollar is a huge mistake because most of the inputs for electricity supply are local. The DisCos are also holding Nigerians to ransom by failing to increase the supply base, thereby spreading the tariffs across a broader spectrum of consumers to reduce the unit cost of electricity,” Ameh said. He insisted that as long as there remain many unmetered consumers and many others not connected to the grid at all, the few consumers on the grid would continue to be subjected to unjust tariffs, which are not reflective of the quality of service delivered. Ameh hoped that the signing into law of the new Electricity Act would mark “the beginning of light at the end of the long tunnel of inefficient and epileptic power supply in Nigeria.”
• President of Nigeria Consumer Protection Network, Kunle Olubiyo stated that while the last major review of electricity tariff was benchmarked at $1/N400, the floating of Naira and harmonisation of the exchange rate put the exchange rate at about N750/$. “It will affect the tariff template and result in an upward review of electricity tariff. “As important as this may be, two things are quite imperative to help in achieving a win-win for the demand and supply side of the coin. Moving forward, governments through relevant regulatory institutions should liberalize end users’ customers ‘access to effective metering and mass metering to help in drastically closing the ever-increasing huge metering gaps,” Olubiyo said.
• He asked the government to look into gas pricing and align it with domestic gas obligations. “Gas to power generation plants/ thermal plants should be allowed to access gas which should be traded in local currency,” Olubiyo said. Electricity Market Analyst, Lanre Elatuyi said the new tariff rate would have an impact on the tariff, stressing that the “naira devaluation is a big challenge to companies with dollar loans to pay,” a development, which he said, would affect the power generators who have dollar loans repayment obligations.
• “They will need more naira today to buy a dollar. They need to manage their exposure to foreign exchange risk. Even operators of hydro plants pay their concession fees in dollars. So, wholesale electricity price will be adjusted upward and this will get to the end users’ tariffs too,” Elatuyi said. Executive Director at PowerUp Initiatives For Electricity Rights (PowerUp Nigeria) Adetayo Adegbemle said while increasing tariff appears normal due to the prevailing situation, there is a need to review the whole process and encourage basing the electricity tariff against the naira going forward.
• “We have seen changes in the review yardstick before, and this could be an opportunity to review our tariff process,” he stated. Former President of the Chartered Institute of Bankers of Nigeria (CIBN) and professor of Economics at Babcock University, Segun Ajibola, said there is still a disconnect between the cost of electricity and the value exchange. “Nigerians are still struggling to keep pace with the cost of energy for business and household use. If the electricity tariff goes up as envisaged, the question remains if there will be value for the quantum of electricity so paid for.
• “The truth remains that if electricity supply is constant, of the right quantity and quality, the envisaged upward review in the tariff will be gladly absorbed by the populace,” he said. Ajibola disclosed that the positive multiplier effects of a regular power supply in a country like Nigeria would more than compensate for the anticipated increase in electricity tariff when the increase is compared with the cost of alternative sources of energy to SMES, other businesses and households.
• He noted that in the long run, the costs of some of the public infrastructures to the populace are expected to in the short run rise to the peak, then flatten and decline subsequently. “I believe the short-run pains of the higher cost of hitherto subsidized public infrastructures will turn to long-run joy for the generality of Nigerians with improved quality of management and accountability in our government-owned suppliers of those services.
• “The move to open up the production and supply of those items and services such as fuel, electricity and transportation is designed, I believe, to promote economic efficiency and accountability in making the products and services available for the generality of Nigerians. And if the current efforts at driving such public sector accountability are sustained, which I believe the new administration has the wherewithal to do, then Nigeria is on the march towards greater greatness,” Ajibola said.
Other Economic Trends
FG may open Seme border (The Punch Newspaper, June 22, 2023)
• Freight forwarders operating at Seme Border have written to the Federal Government demanding the opening of the border for vehicle importation. The Director of Road Transport, Federal Ministry of Transportation, Ibrahim Musa, disclosed this at Seme during a meeting between officials of Nigeria and Benin organised by the Economic Community of West African States.
• He explained that freight forwarders appealed to the former Minister of State for Transportation during his last visit to the border, asking for the reactivation of the border. He said a memo prepared and sent to the Federal Government based on the request was approved by the Federal Executive Council. The director said FEC had promised to leave the approval on reopening the border to the new government to act on.
• He said, “I was here with the former Minister of State for Transportation and the freight forwarders pleaded that the border should be reactivated for free movement of goods and services. The minister made us prepare a memo to that effect. It was considered and sent to the government.”
• Also speaking at the event, the Customs Area Controller in charge of Seme Command, Dera Nnadi, said the service had noticed a reduction in its revenue since the importation of vehicles was banned from the land borders. He said, “The Honorable Minister of Transportation, the immediate past one, responding to some of our requests and from the stakeholders, promised to take them to the Federal Executive Council; one of them is how to fully open this border.”
FG Pledges More Dollar Supply to Stabilise Naira (Daily Trust Newspaper, June 22, 2023)
• The federal government has disclosed that it may inject some foreign exchange into the economy to shore up the value of the naira while market forces stabilise. The Special Adviser to the President on Special Duties, Communication and Strategy, Mr Dele Alake stated this on Wednesday while speaking with reporters in Paris. Alake is part of President Bola Ahmed Tinubu’s team attending the new global financial pact summit in Paris, France to facilitate foreign direct investment into Nigeria. Alake’s comment is coming on the heels of the recent exchange rate unification which saw the Naira experiencing a significant surge against the US dollar at the black market. On Wednesday, June 21, 2023, the naira traded at an average exchange rate of N758/$1, marking a remarkable increase of 2.82% compared to the previous day’s trading session where the dollar was valued at N780/$1.
• This is as a total of $788 million has so f been recorded as cumulative turnover in the official Investor & Exporter Window, a week after the unification of the exchange rate was announced. Although the presidential spokesman was not specific about the nature of the dollar injection, he said: “Don’t forget that Mr. President has taken some very bold steps in the area of economy, in the area of social engineering in the last few weeks, and particularly with reference to the unification of the multiple exchange rates, which has caused very positive multiplier effect.
• “However, in the short term, we have noticed and expected that there will be a slight spike in the demand and then that would affect the value of the naira viz-viz the dollar. So, apart from the immediate, short and long-term positive effects of that unification policy, there could be a need for an injection of direct foreign exchange into the economy to shore up the value of the naira while market forces stabilise. And in the short run or medium term, there is going to be when the effects of this policy begin to mature.”
• He said the president’s policies in the last three weeks had encouraged foreign nations and investors to become more interested in the affairs of Nigeria, shoring up the country’s economy. The special adviser also said heads of state and international financial institutions had indicated interest to meet with the president to consider areas of cooperation with the new positive development in Nigeria. Alake expressed optimism that a lot of international investors that exited Nigeria because of restrictive currency policies would return with the new economic measures being put in place as the nation needed a comprehensive and robust direct foreign investment into the country.
How the Naira has fared
• Since its launch a week ago, the naira-to-dollar exchange rate has fluctuated, plunging 29% to N664/$1 on the first day. Before ending the week marginally stronger at N664/$1, it dropped further to N702/$1. The I&E Window shut down on Monday at N770.3/$1 then reopened on Tuesday, June 20, at N756.6, continuing the volatility that had been dealt with ever since the unification process began.
• For the first time since 2018 when it was approximately N363/$1, the official currency rate also reached parity with the black-market rate. Additionally, N790/$1 was reported as the highest daily rate transacted at the I&E Window on Monday, June 19, 2023. While the FMDQ publishes the turnover of forex traded daily, it is not totally representative of the actual amount of forex bought and sold in general. However, it provides a proxy for the level of liquidity in the I&E Window.
States external debt rises to N3tn (The Punch Newspaper, June 21, 2023)
• The external debt burden of the 36 states and the Federal Capital Territory may rise by as high as over 40 per cent following the recent floating of the naira by the Central Bank of Nigeria. On Tuesday, June 13, a day before the CBN changed its foreign exchange policy, the total external debt stock of states was $4.46bn (N2.09tn at N471/dollar) as of the end of December 2022, according to the Debt Management Office data.
• By Friday, the debt stock, while retaining its dollar value of $4.46bn had grown to N2.96tn at N663.04/dollar. This means the states will need revenue in local currency to pay their foreign obligations. On Wednesday June 14, 2023, the CBN directed Deposit Money Banks to remove the rate cap on the naira at the official Investors and Exporters’ Window of the foreign exchange market, to enable its free float against the dollar and other global currencies.
• It said, “The Central Bank of Nigeria wishes to inform all authorised dealers and the general public of the following immediate changes to operations in the Nigerian Foreign Exchange Market: Abolishment of segmentation. All segments are now collapsed into the Investors and Exporters window.” This led to an immediate decline in the value of the naira. The local currency fell from its 471/$ to 664.04/$ at the Investors & Exporters FX window, according to data from the FMDQ Exchange.
• Meanwhile, the naira has continued to rise and fall on the Investors & Exporters’ window since last week. Analysts and economists are divided on whether the naira will appreciate or depreciate further at the Investors & Exporters window in coming months. However, the prevailing exchange rate means the external debts of states like Lagos ($1.25bn) have grown (in naira terms) from N588.78bn to N828.84bn; Kaduna ($573.74m) from N270.23bn to N380.42bn; Edo ($261.15m) from N123bn to N173.16bn; Cross River ($209.53m) from N98.69bn to N138.92bn; Bauchi ($165.78m) from N78.08bn to N109.92bn.
• The external debt profile of Abia ($94.28m) has grown from N44.41bn to N62.51bn; Adamawa ($104.61m) from N49.27bn to N69.36bn; Akwa Ibom ($44.85m) from N21.12bn to N29.74bn; Anambra ($103.82m) from N48.90bn to N68.84bn; Bayelsa ($60.39m) from N28.45bn to N40.04bn; Benue ($29.94m) from N14.10bn to N19.85bn; Borno ($18.10m) from N8.53bn to N12bn; Delta (59.87m) from N28.19bn to N39.69bn.
• Ebonyi ($58.57m) from N27.59bn to N38.84bn; Ekiti ($105.59m) from N49.73bn to N70.01bn; Enugu ($120.86m) from N56.92bn to N80.13bn; Gombe ($32.48m) from N15.29bn to N21.54bn; Imo ($51.09m) from N24.07bn to N33.88bn; Jigawa ($26.99m) N12.71bn to N17.89bn; Kano ($100.67m) from N47.41bn to N66.75bn; Katsina ($53.92m) from N25.39bn to N35.75bn; Kebbi ($40.93m) from N19.28bn to N27.14bn.
• In Kogi ($52.79m), external debt profile spiked from N24.87bn to N35.01bn; Kwara ($44.87m) from N21.13bn to N29.75bn; Nassarawa ($52.99m) from N24.96bbn to N35.14bn; Niger ($69.23m) from N32.61bn to N45.90bn; Ogun ($136.26m) from N64.18bn to N90.35bn; Ondo from ($90.68m) from N42.71bn to N60.13bn; Osun ($91.78m) from N43.23bn to N60.85bn; Oyo ($72.24m) from N34.02bn to N47.89bn; Plateau ($32.39bn) from N15.26bn to N21.48bn; Rivers ($87.13m) from N41.04bn to N57.77bn.
• Despite boasting relatively smaller external debt profiles, states like Sokoto ($36.56m) has recorded debt growth from N17.22bn to N24.24bn; Taraba ($46.47m) from N21.89bn to N30.81bn; Yobe ($22.51m) from N10.60bn to N14.93bn; Zamfara ($28.86m) from N13.59bn to N19.14bn; FCT ($24.36m) from N11.47bn to N16.15bn. While it is still early days, and the naira is on a free fall (it closed trading at N770.38/$ at the end of trading on the investor and exporter window on Monday, 19 June 2023), many analysts expect the naira to eventually stabilise around N600/dollar.
• According to JP Morgan, the naira will appreciate to N600/dollar in the coming months. It said, “While it will take a few days for USD/NGN spot to settle, we fully expect an initial overshoot towards the parallel market rate of -750 or higher, after which, we expect USD/NGN to settle in the high 600s over [the] coming months.” The unification of the naira exchange rate is expected to further increase the overall debt burden on states, with many already struggling with revenue shortages. States like Abia, Benue, Plateau, Taraba, Zamafara, Cross River, and Rivers that are allegedly owing workers salary backlogs will likely feel this increase in their debt burden more.
• However, the effect of the increase in their debt burden might be cushioned by an increase in their revenue allocation from the Federal Government. Almost all the states in the country are dependent on the Federal Government for revenue. According to a The PUNCH report, the 36 states of the federation generated N5.30tn as internally generated revenue from 2016 to 2020 but got N10.19tn from the Federation Accounts Allocation Committee. JP Morgan in its recent statement noted, “Of course, a weaker exchange rate means the government would receive higher naira revenues from oil and gas exports.”
Naira devaluation pushes Nigeria’s export to N42tn (The Punch Newspaper, June 21, 2023)
• The value of Nigeria’s export may rise to at least N41.99tn per year following the Central Bank of Nigeria float of the naira. The apex bank had last Wednesday directed Deposit Money Banks to remove the rate cap on the naira at the official Investors and Exporters’ Window of the foreign exchange market, to bridge the gap between the official and parallel market rates of the naira. It said, “The Central Bank of Nigeria wishes to inform all authorised dealers and the general public of the following immediate changes to operations in the Nigerian Foreign Exchange Market: Abolishment of segmentation. All segments are now collapsed into the Investors and Exporters window.”
• Following the move, the naira fell from its 471/dollar to 664.04/dollar and closed the week later at N663.04/dollar. The weakening of the naira against the dollar means exporters, especially the Federal Government, will make more revenue (in naira terms) from exports’ dollar proceeds. According to the International Trade Center, Nigeria’s total export in 2022 was $63.34bn. At N448.55/dollar (the central price of the dollar as of December 30, 2022, on the CBN’s website), its naira equivalent was N28.41tn. But now (using Friday’s rate of N663.04/dollar), its naira equivalent would translate to N41.99tn.
• If Nigeria exports the same quantity it did in 2022, it will make about N41.99tn. And with the government’s plan to ramp up oil production, which is a major component of the country’s export, Nigeria’s export value is expected to increase. Data from the multilateral agency, which has a joint mandate with the World Trade Organisation and the United Nations, which gets its data from the National Bureau of Statistics and the United Nations COMTRADE, showed that Nigeria made N25.78tn ($57.47bn) from its largest exported commodity, oil and mineral fuel. This was despite a slump in oil production due to pipeline vandalism and crude oil theft.
• A recent report by The PUNCH estimated that between January and July 2022, Nigeria’s oil production slumped by 28 million barrels. In January, the Group Chief Executive Officer, Nigerian National Petroleum Company Limited, Mele Kyari, stated that the country could achieve 2.2mb/d of crude oil production in 2023. The CBN’s move came after President Bola Tinubu made a call for the unification of exchange rates during his May 29 inauguration speech. He said, “The central bank must work towards a unified exchange rate.
• They should direct the fund from arbitrage to meaningful investment.” The latest CBN move is expected to increase the government’s revenue, which has been on a free fall for a while. In a statement supporting the policy, JP Morgan, said, “Of course, a weaker exchange rate means the government would receive higher naira revenues from oil and gas exports. According to the Director-General of the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture, Olusola Obadimu, exporters will now be getting the real value of their exported commodity due to the unification of exchange rates.
FG implements 7.5% VAT on diesel, Nigerians kick (The Punch Newspaper, June 20, 2023)
• The Federal Government, on Monday, confirmed that it had commenced the implementation of the payment of 7.5 per cent Value Added Tax on Automotive Gas Oil, popularly called diesel. Officials of the Nigeria Customs Service and Federal Inland Revenue Service confirmed this in Abuja, stressing that AGO was not exempted from the payment of VAT based on the VAT Modification Order 2021.
• The development was, however, condemned by Nigerians, who pointed out that citizens were still trying to adjust to the hike in the pump price of Premium Motor Spirit, popularly called petrol, not knowing that plans had been perfected to further raise payments for diesel. When asked by our correspondent if the NCS was now collecting 7.5 per cent VAT on the imports of AGO, the spokesperson for the service, Abdullahi Maiwada, replied, “Yes.”
• He continued, “If you ask me whether Customs collect 7.5 per cent VAT on AGO, I will tell you yes and I’ll give you the reasons. There’s what we call VAT Modification Order 2021, which exempts petroleum products of Harmonised System Codes. “But the HS Codes for Petroleum products that are exempted from paying VAT are those in the region of 2709.00.00.00 – 2710.19.12.00. The HS Codes are what we use to classify commodities. But AGO is classified under HS Code 2710.19.21.00, which is not exempted from the payment of VAT. Now, this is based on the VAT Modification Order 2021.”
• An official of the FIRS, Tobi Wojuola, also confirmed the development, stressing that it was the position of the VAT Modification Order. Another user, Angry Non-Nigerian, said, “When Tinubu said ‘widen the tax net, you people thought he was joking. The only thing that man knows is tax, tax and tax. As Lagosians.” One Oyo said, “The Citizens will be the main IGR for this government. There is no single move to cut the cost of government from the Senate to the House to other departments. “They went to education first by trying to add tuition fees, now 7.5 per cent VAT on PMS. Everything directly to the common man.”
External reserves shed $438m as Naira appreciates to N663.04/$ (Vanguard Newspaper, June 19, 2023)
• The external reserves fell by $438 million in the first two weeks of June to $34.66 billion, maintaining the downward trend from last month. Data from the Central Bank of Nigeria, CBN, showed that the reserves stood at $34.66 billion on June 14, down by $438 million or 1.5 per cent from $35.094 billion on May 30. Consequently, the reserves had recorded a year-to-date decline of 6.5 per cent or $2.43 billion from $37.08 billion on December 31st, 2022. Meanwhile, the naira on Friday appreciated by 5.7 per cent to N663.04 per dollar in the Investors & Exporters, I&E window, regaining some of the losses it suffered on Wednesday and Thursday.
• The naira had depreciated on Wednesday by 40.8 per cent to N664.01 per dollar following new forex market measures announced by the CBN including elimination of multiple exchange rates and the re-introduction of willing buyer, willing seller model for exchange rate determination in the I&E window. The downward trend continued on Thursday with further depreciation by 5.7 per cent to N702.19 per dollar. Meanwhile analysts at Cowry Assets Management Limited and FBNQuest Securities Limited have projected that the forex market will remain volatile in the coming weeks.
• Analysts at Cowry Assets said: “In our opinion, we expect to see the foreign exchange market remain volatile in the near term as we begin to see market participants position themselves to determine the fair exchange price levels and, in the medium to long term, ascertain the true value of the naira against the dollar in the market. Analysts at FBNQuest also said: “Looking ahead, the forex market is expected to remain highly volatile in the near term as market participants actively seek to determine price levels.” They however noted that the new CBN measures could help reduce the downward pressure on the external reserves.
CBN Lifts Restriction On Domiciliary Accounts, Allows $10k Daily Withdrawals (Daily Trust Newspaper, June 18, 2023)
• The Central Bank of Nigeria (CBN) has said cash deposits into domiciliary accounts will no longer be restricted. The apex bank said this in guidance to Deposit Money Banks (DMBs) after a meeting with the bankers’ committee on Sunday. The guidance includes allowing all visible and invisible transactions to be eligible for the Investors’ and Exporters’ window, granting unrestricted access to funds in ordinary domiciliary accounts, and permitting cash deposits not exceeding $10,000 per day or its equivalent via telegraphic transfer. According to the CBN, the policy changes aim to promote transparency, liquidity, and price discovery in the FX market in order to improve FX supply, discourage speculation, enhance customer confidence and ensure overall stability in the FX market.
• “All visible and invisible transactions (medicals, school fees, BTA/PTA, airline, and other remittances) are eligible for the investors’ and exporters’ (I&E) window.” “DMBs shall ensure expeditious processing of all eligible invisible transactions on behalf of their customers using the applicable rate at the I&E window. Ordinary domiciliary account holders shall have unfettered and unrestricted access to funds in their accounts. Domiciliary account holders are permitted to utilise cash deposits not exceeding $10,000 per day or its equivalent via telegraphic transfer.
• “DMBs shall provide returns to the CBN including the purpose for such transactions. Cash deposits into domiciliary accounts will not be restricted, subject to DMBs conducting proper KYC (know your customer), due diligence, and adhering to the spirit and letter of extant anti-money laundering/ combating the financing of terrorism laws and other relevant rules and regulations. “The CBN will prioritise orderly settlement of any committed FX forward transactions as they fall due in order to further boost market confidence.” The CBN said it remains committed to ensuring a stable and efficient FX market that meets the needs of all legitimate users.
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| 이전글 | 나이지리아 주간 경제 뉴스(6월 5주차, ENG) | 2023-07-10 |
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| 다음글 | 나이지리아 주간 경제 뉴스(6월 3주차, ENG) | 2023-07-10 |
