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Expert warns increased 2024 budget size will make inflation rate projection unrealistic

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A financial expert, Dr Uche Uwaleke says an increase in the size of the 2024 budget by the National Assembly will render the inflation rate projection of 21.4 percent for 2024 unrealistic.

Uwaleke, the Director, Institute of Capital Market Studies at the Nasarawa State University, Keffi, said this in an interview with journalists on Sunday in Abuja.

He said that such a move would have adverse implications for inflation and interest rates environment in 2024.

Recall that the National Assembly approved a 2024 Appropriation Bill of N28.7 trillion, effecting an increase of N1.2 trillion on the N27.5 trillion proposed by President Bola Tinubu.

“I had expected the National Assembly to effect amendments within the original N27.5 trillion submitted by the executive arm of government.

“The increase by N1.2 trillion was largely on account of the upward adjustment in the exchange rate from N750 to N800 to the dollar.

“A sustainable basis for any increase ought to have been an increase in the forecast for non oil revenues,” he said.

According to Uwaleke, overall, the 2024 budget hold a lot of promise for the economy if well implemented.

He said that a major snag, however, stems from the likely distortionary impact of the new fx regime.

“A naira float in the face of weak supply and strong demand with its attendant forex market volatility introduces uncertainty in budget implementation.

“It is most likely, the exchange rate will be the major cause of wide budget variances in the 2024 budget on account of Nigerian Autonomous Foreign Exchange Market (NAFEM) operations.

“This is particularly so in respect of the dollar-denominated component of the budget, much of which can be found in the over three trillion Naira proposed defence spending as well as in recurrent debt expenditure.

“A volatile and high exchange rate will increase the cost of servicing external debt and further widen the budget deficit,” he said.

Recall that the Senate approved the 2024 budget during a special session on Saturday.

According to the report submitted by the Appropriation Committee, aggregate expenditure has been pegged at N28.77 trillion and statutory transfers at N1.74 trillion.

Recurrent expenditure was pegged at N8.76 trillion, capital expenditure at N9.99 trillion and Gross Domestic Product (GDP) at 3.88 per cent.

Tinubu, on November 29, presented a total of N27.5 trillio  budget to a joint session of the National Assembly.

The president pegged the budget deficit at N9.18 trillion.

He said that the N9.18 trillion deficit was lower than the N13.78 trillion deficit recorded in 2023, which represents 6.11 per cent of GDP.

He said that the deficit would be financed by new borrowings totalling N7.83 trillion, N298.49 billion from privatisation proceeds and N1.05 trillion drawdown on multilateral and bilateral loans secured for specific development projects.

Money market

LCCI advocates discipline, export to sustain Naira appreciation

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LCCI advocates discipline, export to sustain Naira appreciationThe Lagos Chamber of Commerce and Industry (LCCI) has emphasised the importance of maintaining discipline in the foreign exchange market to sustain the steady appreciation of the Naira.

The President and Chairman of the Council of LCCI, Mr Gabriel Idahosa, made the call in an interview with newsmen on Wednesday in Lagos.

Idahosa praised the efforts of the Central Bank of Nigeria in imposing discipline, attributing the recent Naira appreciation to curbing speculative activities.

“On the monetary side, the CBN is doing it. The primary efforts should continue to impose discipline in the foreign currency market.

“The abuses in the foreign currency market were prevalent and most of the fall in the value of the Naira in the last six months is not because there was any sudden calamity in the Nigerian economy.

“It was primarily because of very reckless speculations, that people were just speculating in the dollar, they had nothing to export, nothing to import, they were just buying the dollar for speculative reasons.

“And once the Central Bank started to impose discipline in the foreign currency market, we saw the value of the Naira rising very quickly by stopping speculation,” he said.

According to him, the strategies of the Central Bank, now, are designed to achieve a sustained discipline in the foreign currency market.

Idahosa highlighted the need to continue reducing the number of Bureau de Change operators, stressing that many operated without contributing to international trade.

He applauded the Central Bank’s move to enforce documentation and identification of buyers and sellers at BDCs, aiming to deter reckless speculation and curb illicit financial flows.

On the fiscal side, Idahosa urged President Bola Tinubu to prioritise a nationwide export drive, citing it as the key to bolstering the Naira and providing essential foreign exchange.

He emphasised the importance of fostering a culture of export among Nigerians across all scales of enterprise to reduce reliance on imports and strengthen the country’s economic resilience.

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Foreign reserves decline to $32.29bn

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The foreign reserve has depleted to $32.29 billion, which is a six-year low in the Central Bank’s course to save the naira.

This is the lowest level the reserves have been since September 25, 2017, when it was $32.28 billion.

The country’s foreign reserves declined by 6.2 percent, losing $2.6 billion since March 18, when the naira started its rebound from record-low levels against the dollar to $32.29 billion as of Monday, based on the latest available data from the CBN.

At the beginning of the month, the reserve was at $33.57 billion, then further dipped to $32.6 billion by April 12.

This comes as the CBN has attempted to save the naira through various interventions such as raising interest rates to 24.75 percent and managing foreign exchange trades.

It stepped up its intervention in the FX market with sales at both the official market and to BDC operators who sell dollars on the streets.

The apex bank, which sells $10,000 to each BDC every week, mandated them to only sell at a spread of 1.5 percent, which comes to N1,117 per US dollar.

The rate sold by the BDCs has set a defacto floor for the naira in the black market since the apex bank resumed sales to them in February.

Also, last month the CBN said it had cleared a backlog of $7 billion since the beginning of the year. That was built over the years as the central bank pegged its currency against the dollar, leading to a scarcity of foreign currency that deterred foreign portfolio investment. However, it’s unclear how much dollar debt the CBN retains on its books.

Akpan Ekpo, a professor of economics and public policy, said the CBN’s managed float system in which it is trying to ensure supply and curtail demand is not sustainable in the long term.

He said the CBN needs to be careful with how it depletes the foreign reserves as its main source is oil revenue.

“We need to manufacture non-oil goods and services, export them, and get foreign exchange and not depend on oil income,” he said.

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Money market

CBN expresses commitment to harnessing digital technologies

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The Central Bank of Nigeria says it is committed to harnessing the power of digital technologies to enhance financial inclusion.

CBN Governor, Mr Yemi Cardoso said this on Tuesday in Abuja, during a strategic institutions tour by participants of Senior Executive Course 46 of the National Institute of Policy and Strategic Studies (NIPSS).

Cardoso, who was represented by Dr Bala Bello, Deputy Governor, Corporate Services, said that digital technologies would also boost productivity and create an enabling environment for innovation and entrepreneurship to thrive.

According to him, the apex bank has already deployed robust digital technologies in driving most of its processes towards achieving optimal performance.

He said that NIPSS, as a foremost national policy think-tank, had made invaluable contributions to the socio-political and macroeconomic development of Nigeria.

“We are, therefore, not surprised at the apt and relevant choice of your research theme.

“The CBN and NIPSS have had a long-standing and robust working relationship since the establishment of the institute. This has culminated into positive mutual benefits for the two institutions.

“The CBN, on the one hand, has provided infrastructural support to the institute through construction of an auditorium and a hostel, in addition to the provision of technical support.

“On the other hand, NIPSS has supported the technical capacity of the CBN through the training of some personnel both at senior executive course level and intermediate course cadre,” he said.

The Director-General of NIPSS, Prof. Ayo Omotayo, said that the study visiting would be representing the institute in getting information from operators of the apex bank on the relevance of digital technology to developing jobs for Nigerian youths.

According to Omotayo, a lot of progress has been made globally in using digital systems to run the economy.

“The more of our activities that we can put in digital format, the more we get the opportunity of providing employment access to a whole lot of the 120 million active Nigerians.

“We at NIPSS always knock at the frontiers of knowledge, checking what is going to happen in the immediate future.

“We are working towards a system where we believe that almost every service can be delivered digitally,” he said.

The Acting Director, Monetary Policy Department of the CBN, Dr Lafi Bala Keffi, commended the NIPSS study group for its interest in the apex bank.

She urged the participants to explore the time-tested culture of NIPSS, which is to diagnose national, profer practical solutions and recommend ways of making such solutions realisable.

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