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Naira plummets to N1,600/$1 amid economic challenges in Nigeria

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By Sodiq Adelakun

In a continued economic downturn, the Nigerian naira has taken a significant hit, plunging below the N1,600 mark against the US dollar on Thursday.

The persistent decline has raised concerns over the effectiveness of the Central Bank of Nigeria’s strategies to stabilise the currency.

Despite President Bola Tinubu’s administration’s efforts to control the devaluation, the naira’s value has been on a steady decline, with the situation worsening since the decision to float the currency.

Aboki Forex reported the latest drop to N1,600 to $1, underscoring the challenges faced by the government in curbing the currency’s rapid depreciation.

The naira’s fall has been a trend, with a notable dip in September when it hit a record low of N1,000 to the dollar in the parallel market.

 This drop brought to light the critical state of President Tinubu’s economic policies and their inability to manage the national currency effectively, especially in the face of soaring inflation rates.

The Association of Nigerian Licensed Customs Agents (ANLCA) voiced their concerns in July, indicating that the floating of the naira had adversely affected vehicle importation, impacting the nation’s ports.

On January 31, the currency experienced another fall, recorded at N1,520.123 to a dollar, as per Naira Rates. This followed a depreciation to N1,482.75 per dollar in the official foreign exchange market on January 30, marking a significant N38 drop within a span of 24 hours.

The ongoing depreciation of the naira continues to be a significant worry for Nigeria’s economy, with stakeholders looking for robust solutions to stem the tide and restore confidence in the nation’s financial stability.

The fall made it the first time after the COVID-19 period that the official exchange rate will be higher than the parallel market exchange rate, which traded at N1,470 per dollar from N1,425 on January 29.

The monetary policy of Mr Tinubu’s government played a huge role in the further downward slide of the naira after he floated the currency.

Tinubu’s economic policy scrapping fuel subsidy and collapsing multiple foreign exchange windows into the single Importer and Exporter, or I&E window, drastically depreciated the naira’s value by 98 per cent, a report by the Price Water Coopers stated.

The top global business advisory audit firm said in its report ‘Nigeria’s Economic Outlook: Seven Trends That Will Shape Nigerian Economy in 2024’ that Mr Tinubu implemented policies that had the domino effect of devaluing the naira by nearly 100 per cent but appealed to foreign investors as the move was projected to improve the economy in 2024.

Since September 26, the Nigerian naira has experienced an unprecedented decline, reaching a historical low of N1000 against the U.S. dollar. This has resulted in a 17 percent decrease in the currency’s value.

The continuous depreciation of the naira is causing concern and shedding light on the challenges associated with President Bola Tinubu’s fiscal policies.

Despite the significant consequences, such as inflation and reduced purchasing power, Tinubu’s administration has implemented what they refer to as strategic measures.

These include the removal of petrol subsidies, which faced resistance and skepticism but aimed to alleviate the government’s financial burden and promote a more market-driven economy.

Additionally, the decision to adopt a clean float foreign exchange management system was made.

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Sterling Bank, SMEDAN partner on data platform, Databanc

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Sterling Bank and the Small and Medium Enterprises Development Agency of Nigeria have launched a platform called Databanc that provides data on businesses in Nigeria and N5bn worth of single-digit loan programmes.

A statement from the bank said that Databank provides insights which will be utilised by SMEDAN to deliver its mandate on policy formulation and a unique identification for small businesses and their promoters.

Speaking at the launch of the platform, the Executive Director of Commercial and Institutional Banking at Sterling Bank, Tunde Adeola, described the platform and fund as evidence of Sterling Bank’s commitment towards growing the real sector of the nation’s economy.

Adeola said, “We are delighted to bolster the backbone of our economy with SMEDAN. This initial fund of N5bn marks just the beginning of what has been and will continue to be a mainstay of our approach to funding businesses to grow at scale, and become the preferred financial partner for businesses, no matter their scale.”

He added that over 20,000 SMEs had enrolled on the Databanc platform, with over 80 beneficiaries of the single-digit loan programme and further disbursements ongoing.

He encouraged all MSMEs in the country to enrol on the platform.

SMEDAN’s Director-General, Mr Charles Odii, represented by the Director of Agribusiness Development and Access to Finance, Levi Anyikwa, highlighted the programme’s alignment with SMEDAN’s mission to democratise credit access for nano and micro-enterprises.

Anyikwa affirmed that access to finance remained a significant hurdle for SMEs, and restated SMEDAN’s commitment to removing that barrier.

The Head of SME Digital Products at Sterling Bank, Bolanle Tyson, emphasised Sterling Bank’s strategic focus on critical sectors encapsulated in the HEART of Sterling forward strategy: Health, Education, Agriculture, Renewable Energy, and Transportation.

She said, “We are leveraging data to empower SMEs like never before. Our commitment to SMEs is steadfast. We recognise their pivotal role in driving Nigeria’s GDP and employment. This partnership with SMEDAN underscores our shared dedication to their success.”

The latest study from Visa, the SME Megatrends report showed that SMEs in Nigeria remained heavily underserved and underbanked with a considerable amount of SMEs relying on personal loans and informal credit, as they face obstacles and requirements that make it difficult to secure loans from banks and other formal lending institutions.

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Public debt hits N101trn, as FG eyes new $4.4bn fresh loans

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The Federal Government has borrowed a total of $4.95bn in loans from the World Bank in the past 12  months, pushing the total public debt to N101tn/ amidst worries about the increasing costs of servicing external debt.

The nation’s public debt was put at approximately N97tn as of December 2023, according to the Debt Management Office data.

This came as the government still expects fresh loan approval worth $4.4bn from the international lender and the Africa Development Bank over the next one year.

An analysis by our correspondent showed that the bank approved funding for six projects including $750m for power sector financing, $500m for women empowerment, $700m for girl child education, $750m for renewable energy solutions, $750m on resource mobilisation reforms and $1.5bn for economic stabilisation reforms.

Findings showed that on June 9, 2023,/ the World Bank board approved a loan of $750m to boost Nigeria’s power sector. The bank said the loan would serve as additional financing for the power sector recovery performance-based operation.

It also announced the approval of a loan of $500m on June 27, 2023 to help Nigeria drive women’s empowerment. This was the second loan approved by the bank under the current administration. It provided a scale-up financing for the Nigeria for Women Programme.

In September 2023, the World Bank approved a loan of $700m to bolster educational opportunities and empowerment for adolescent girls in Nigeria. The loan was to support the ongoing ‘Adolescent Girls Initiative for Learning and Empowerment project. It aimed to encourage secondary education accessibility for girls residing in specific target states within Nigeria.

While $750m was authorised on December 14, 2023, for the Distributed Access through/ Renewable Energy Scale-up project in Nigeria, the project aims to provide over 17.5 million Nigerians with better access to electricity via distributed renewable energy solutions and tackle the electricity access deficit.

The latest was a sum of $2.25bn comprising $1.5bn for reforms on Economic Stabilisation to Enable Transformation Development Policy Financing Programme. It is meant to increase fiscal oil revenues to 2.7 per cent by 2025, boost non-oil fiscal revenues, expand social safety nets to assist 67 million vulnerable Nigerians and raise the import value of previously banned products. $750m was also apportioned to enhance non-oil revenues and protect oil and gas revenue.

Meanwhile, the government is expecting about $4.4bn in new loans from the World Bank and the AfDB. The government is pursuing a $500m loan to address the need for better connectivity in rural road infrastructure and agricultural marketing, a $750m loan if it reintroduces previously suspended telecom tax and other fiscal measures, and a $500m to address the challenges faced by Internally Displaced Persons nationwide. The government is also expecting about $2.7bn economic and budget support loan from the African Development Bank.

The AfDB President, Akinwumi Adesina, in an interview with journalists in March said its Board of Directors approved $134m for Nigeria to implement an emergency food production plan, while talks are also ongoing for a $1.7bn economic and budget support loan as well as the launch of a $1bn agro-industrial processes in 28 states.

The World Bank, a prominent international financial institution dedicated to reducing global poverty, provides loans and grants to developing countries for a wide range of projects, including infrastructure development, education, healthcare, and environmental sustainability.

However, for many Nigerians, long years of infrastructure decay and increased unemployment have triggered an increased feeling of bitterness whenever they hear the government’s intention to borrow with past borrowings is not justifiable.

Nigeria has been a top recipient of fresh loans from multilateral lenders, borrowing $2.7bn in 2023 from about $2.9bn released to the country in 2022.

Last week, the Bretton Woods Institution said its technical advisory and financing to support economic growth in Nigeria currently stands at over US$15bn affirming data from the external debt stock report of the Debt Management Office shows that Nigeria owes the World Bank a total of $15.45bn as of December 31, 2023.

President Bola Tinubu had expressed his resolute commitment to breaking the vicious cycle of overreliance on borrowing for public spending, and the resulting burden of debt servicing it places on the management of Nigeria’s limited government revenue. However, the president may not have matched his words with actions as they have sought to obtain credit facilities from both domestic and external lenders.

The soaring costs of servicing foreign debt have significant implications for Nigeria’s economy. The increased debt burden could potentially divert resources away from critical sectors such as healthcare, education, and infrastructure, exacerbating socio-economic challenges.

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NPA clears air over $27.29bn Escravos Deep Seaport project 

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By Seun Ibiyemi

The Nigerian Ports Authority (NPA) has shed more light on why the $27.29billion Escravos Deep seaport project, which is being promoted by a Nigerian firm, Mercury Maritime Concession Company in collaboration with EDIB International of Hong Kong, has stalled.

Responding to enquiries on the delay of the project via his X (formerly Twitter) handle, the Managing Director, NPA, Mr Mohammed Bello-Koko revealed that the proposal submitted by the promoters of the Escravos Deep Seaport project has not provided the Authority with the necessary information to advise further.

According to Bello-Koko, “First, Mercury Maritime Concession Company Ltd (MMCC) submitted a proposal and wants the Nigerian Ports Authority (NPA) to approve its request as the ONLY deep seaport-free zone in the eastern zone of the country for decades to come.

”Meanwhile, the Authority has received many proposals for developing deep seaports, including Ibom, Burutu, Bakassi, Bonny, and Port of Benin, which are currently at different stages of review. Nonetheless, we carefully outlined the requirements for this project.

“The initial phase involves acquiring land. The availability and suitability of the site are essential for the successful development of the port. This process is yet to be accomplished. Although the classic position is for the Authority to acquire the land and grant a concession on it to the private party, recent concessions granted by the government allowed private parties to acquire the land, hold it for an agreed term, and, after recovering the cost, transfer it to the Authority. Examples are the Lekki & Badagry deep seaports.

“To undertake this project, the site for the port must be identified, and environmental impact assessments and scientific studies must be conducted to confirm suitability.

“Additionally, we must adhere to the PPP process as per the applicable law, which entails submitting the OBC and FBC, obtaining a Certificate of Compliance from the Infrastructure Concession Regulatory Commission (ICRC), and seeking final approval from the FEC.

“Therefore, we highlighted the need to submit a business and investment proposal with a financial model that demonstrates the project’s recovery period and forms the basis for adopting the PPP framework.

“Again, it is crucial to emphasize that the port is just one aspect of the overall development of the Industrial Park. This development encompasses petrochemicals and various manufacturing facilities.

“The required approvals for these aspects are not within NPA’s jurisdiction. They would follow the process under the ICRC Act

“In a nutshell, the proposal hasn’t provided the Authority with the necessary information to advise further.

“The Federal Ministry of Marine and Blue Economy has expressed significant interest in this project and has equally requested additional details. The Minister, Gboyega Oyetola and the Authority are especially keen on working with proponents to develop one deep seaport in the eastern region, at the barest minimum.”

Recall that an approval was granted for a deep sea port in Escravos (Gbaramatu Island/Omadino) Warri South via a Joint venture partnership/PPP in 2019. The project which is expected to be located on a 31,000hectares of land in Delta state, will encompass a Deep sea port, Crude oil refinery, Gas Complex, Independent Power Plant, Airport and a Nature Park.

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