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Black market: Naira plummets to N1,410/$1 

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By Sodiq Adelakun

The Nigerian Naira hit a new record low on Thursday, reaching N1,410 per dollar on the parallel market, commonly known as the black market.

This represents a 3.29 percent decrease compared to the previous day’s closing rate of N1,365. The depreciation of the Naira is unprecedented and marks the lowest point in its history, highlighting the severity of the current economic challenges faced by Nigeria.

Market analysts attribute this recent decline to a consistent increase in the demand for dollars, which has been noticeable since the beginning of January. Several factors contribute to this heightened demand.

Firstly, businesses are actively seeking to restock goods or acquire raw materials, leading to a higher demand for foreign exchange.

Secondly, individuals pursuing overseas studies have also played a significant role in driving the demand for dollars. This trend is likely due to the need for tuition payments and other related educational expenses.

The continuous surge in demand for dollars has put significant pressure on the Naira, resulting in its record low value. This situation highlights the urgent need for the Nigerian government to address the economic challenges and implement measures to stabilize the currency.

The departure of diaspora Nigerians, particularly noticeable after the holiday season, has contributed to the increased demand for foreign currency. The departure of individuals from the US and other foreign countries has had a notable impact on the parallel market.

With schools abroad reopening, international students are actively restocking their foreign currency reserves to meet impending school fees and other financial obligations. Additionally, students are securing funds for holiday allowances.

The unprecedented depreciation marks the lowest point in the naira’s history against the US dollar, raising concerns about potential economic ramifications.

It was gathered that forex turnover/ dropped by 3.18 percent/ to $56.60/ as/ the Nigerian naira tumbled against the dollar marginally on Wednesday, January 24th, 2024, in both the official and black markets.

The domestic currency depreciated 0.41 percent to close at N882.24 to a dollar at the close of business, based on data from NAFEM where forex is officially traded.

This represents an N3.63 loss or a 0.41 percent decrease in the local currency compared to the N882.24 it closed at on the previous day.

The intraday high recorded was N1313/$1, while the intraday low was N700/$1, representing a wide spread of N613/$1.

According to data obtained from the official NAFEM window, forex turnover at the close of the trading was $56.60 million, representing a 3.18 percent decrease compared to the previous day.

Similarly, the naira depreciated at the parallel forex market where forex is sold unofficially, the exchange rate quoted at N1365/$1, representing a 0.37 percent decrease over what it closed the previous day, while peer-to-peer traders quoted around N1399.12/$1.

Recall that the Governor of the Central Bank of Nigeria, Yemi Cardoso, has stated that the naira is undervalued and that the bank will work towards real price discovery in the foreign exchange market by 2024.

He also promised to implement inflation-taming policies and collaborate with the Ministry of Finance to increase foreign exchange reserves. Cardoso noted that the anticipated resumption of operations in the country’s refineries will contribute to a reduction in pump prices of PMS, a major contributor to the CPI basket.

The inflation outlook is geared towards increasing economic growth and a more predictive cost environment, with inflation expected to decline in 2024 due to the CBN’s inflation-targeting policy.

The naira traded at N878.61 on the official market according to FX monitor yesterday but recorded N1360/$1 on the unofficial market.

On increasing the FX reserves, Mr Cardoso stated that the bank’s partnership with the Ministry of Finance and NNPC Ltd ensures all foreign exchange inflow is returned to the bank as it will result in the accretion of the country’s foreign reserve.

The Governor also noted that the anticipated resumption of operations in the three refineries across the country will contribute to a reduction in the pump prices of PMS which is a major contributor to the CPI basket.

He also noted that the inflation outlook is geared towards increasing economic growth and a more predictive cost environment.

He stated, “Inflationary pressures are expected to decline in 2024 due to the CBN’s inflation-targeting policy, which aims to rein in inflation to 21.4 percent.

“The outlook for decreasing inflation in 2024 will have a profound impact on businesses, providing a more predictable cost environment and potentially leading to lower policy rates, stimulating investment, fueling growth, and creating job opportunities,”

Money market

FG urges NIPSS members on creative solutions to national challenge

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The Minister of Budget and Economic Planning, Atiku Bagudu, has urged members of the National Institute for Policy and Strategic Studies (NIPSS), to devise creative solutions to Nigeria’s social and economic challenges.

Bagudu received  participants of the Senior Executive Course 46 of the institute in his office on Monday in Abuja.

According to him, some of the issues confronting Nigeria  as a nation might require out of the box solutions.

“The NIPSS was created in the wisdom of our forefathers, to train senior management personnel that can bring unusual solutions to problems confronting us,” he said.

He urged the participants to eschew self-interest and make decisions that can assist the nation to make better choices.

Bagudu  said that the national planning function of the ministry comes from the National Planning Commission.

He said that the digital economy is one area that the ministry was looking at for mass youth engagement and economic prosperity.

“Digital economy is an evolving process.which the country will have to leverage digital for overall growth and development.

“It is a new reality. Today trading platforms are closing shop and increasingly going digital.

“Nigeria needs to respond positively and reap benefits from the digital economy. But we have to make the space safe through effective regulation.

“Some countries have data protection laws which enable them to check and regulate excesses in the digital space,” he said.

The Minister commended the law enforcement agencies for promptly going after digital platforms like Binance, which was used to disrupt the foreign exchange market and to weaken the Naira.

He also commended the Governor of the Central Bank of Nigeria (CBN), Yemi Cardoso, for his various monetary policy decisions that restored confidence in the Nigerian economy.

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Money market

Cardoso to speaks at IMF meeting on FX reforms

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The Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso will speak on foreign exchange (FX) market reforms at the ongoing International Monetary Fund (IMF) Spring Meetings on Wednesday in Washington D.C.

The meetings of the Boards of Governors of the IMF and the World Bank Group (WBG) bring together central bankers, ministers of finance and development, parliamentarians, private sector executives, representatives from civil society organisations and academics to discuss issues of global concern, including the world economic outlook, poverty eradication, economic development, and aid effectiveness.

Also featured are seminars, regional briefings, press conferences, and many other events focused on the global economy, international development, and the world’s financial system

Cardoso assumed office as the Governor of the CBN in September 2023. Since then he has introduced some new FX policies and adjusted some existing ones to ensure the stability of the naira.

According to Cardoso, the exchange rate in Nigeria has increased/depreciated due to the simultaneous occurrence of two factors: a decline in the supply of US Dollars coinciding with a surge in the demand for US dollars.

He said in February 2023 that the foreign exchange market is currently facing increased demand pressures, causing a continuous decline in the value of the naira. Factors contributing to this situation include speculative forex demand, inadequate forex supply due to non-remittance of crude oil earnings to the CBN, increased capital outflows, and excess liquidity from fiscal activities.

To address exchange rate volatility, he said a comprehensive strategy has been initiated to enhance liquidity in the FX markets.

This includes unifying FX market segments, clearing outstanding FX obligations, introducing new operational mechanisms for BDCs, enforcing the Net Open Position limit, and adjusting the remunerable Standing Deposit Facility cap.

As part of measures to control inflation and stabilise the naira, the CBN last month raised its benchmark interest rate, known as the Monetary Policy Rate (MPR) by 200 basis points to 24.75 percent from 22.75 percent in February 2024.

In her second term message, Kristalina Georgieva, IMF managing director, who was recently reappointed by the executive board of the IMF, said, “I am deeply grateful for the trust and support of the Fund’s Executive Board, representing our 190 members, and honoured to continue to lead the IMF as managing director for a second five-year term.”

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Money market

PenCom recovers N12.45bn from erring employers

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The National Pension Commission (PenCom) said it has recovered N12.45 billion from employers that failed to contribute towards their employees retirement.

The recovery would indeed help in wealth creation for the workers, thereby securing them against old age poverty in retirement.

PenCom in its 4th quarter 2024 report, said it has maintained the services of Recovery Agents (RAs) for the recovery of unremitted pension contributions and penalties from defaulting employers.

It submitted that during the quarter, the sum of N319,468,587.45 comprising principal contributions N128,176,029.95 and penalties N191,292,557.50 was recovered from 32 defaulting employers.

It noted that meanwhile, the Commission Secretariat/Legal Advisory Services Department had been requested to take legal action against 4 defaulting employers.

The pension industry regulator maintained that from the commencement of the recovery exercise in June 2012 to 31 December 2023, a total sum of N25,447,085,186.71 comprising of principal contributions N12,929,415,445.52 and penalties N12,517,669,741.19 was recovered from defaulting employers.

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