Nigeria is close to securing a loan of $1.5 billion and another $1-1.5 billion for the Federal Government and states respectively. The fund is being sourced from the World Bank, this is according to information from Nigeria’s Minister of Finance Zainab Ahmed.
She said this in a Citi Bank Investor update call with the Federal Government of Nigeria and organized by Citi Bank. Nairametrics listened in on the call.
The update titled “Covid-19 Economic and Budgetary Update” had the following representing Nigeria on the panel;
- Mrs. Zainab S. Ahmed – Finance Minister
- Mr. Godwin Emefiele – CBN Governor
- Ms. Patience Oniha – DG DMO
- Mr. Ben Akabueze – DG Budget Office
- And a representative of the Hon. Minister of Health.
READ ALSO: IMF considering an “emergency” bailout for Nigeria
According to Mrs. Zainab Ahmed negotiations with the World Bank “is on course” for a $1.5 billion facility for the Federal Government and another $1-1.5 billion for State Governments.
According to Zainab “World Bank Negotiations is on course and we are looking at world bank going to the board on 6th of August for Nigeria’s approval. They have met largely all the conditions for the facility.
She also confirmed the amount Nigeria is looking to raise from the World Bank. “The amount we are raising in the first instance is $1.5 billion for FG and around September October we are hoping to close out on the facility meant for states and the amount is meant to be $1-1.5 billion.”
READ MORE: CBN to integrate non-interest window in its loans to SMEs, households
Nairametrics reported last week that the Government was planning to inject a bailout of N2.3 trillion into the economy which it hopes to source from three sources. This is part of the government efforts to combat the effects of Covid-19 on the economy. Firstly, it claims it will raise N500 billion from Special Accounts. Special Accounts are government accounts approved by the National Assembly where monies are accrued from tax deductions, oil proceeds, or any other source as provided in the law. Examples are the Ecological Funds, Education Trust Fund, Universal Basic Education Fund, etc.
Secondly, it proposes to raise about N1.1 trillion from what it termed “CBN Structured Lending” which suggests more intervention loans from the CBN. It could also include restructuring existing intervention loans by offering moratorium and lower interest rates which were also captured in the report.
Explore some of the advanced financial calculators on Nairametrics
The balance of N334 billion and N302.9 billion respectively will come from “external bilateral/multilateral sources – N334billion and other funding sources – N302.9bn.” These are basically loans and grants from monetary development institutions and rich donor countries.
The $3 billion facilities for both the states and FG is likely the balance funds required to complete the stimulus facility.
Related
Nigeria to receive first tranche of World Bank’s $3 billion loan soonFebruary 10, 2020In "Business News"
Ahmed explains why FG needs fresh $3 billion debt from World Bank October 17, 2019In "Business News"
FG goes tough on 35 States, to recover N614 billion bail-out fundAugust 22, 2019In "Business News"
Chike Olisah is a graduate of accountancy with over 15 years working experience in the financial service sector. He has worked in research and marketing departments of three top commercial banks. Chike is a senior member of the Nairametrics Editorial Team. You may contact him via his email- chike.olisah@nairametrics.com.
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Breaking: CBN Governor confirms exchange rate unification plans
He revealed the unification will also be around the NAFEX rate.
Published
2 hours agoon
June 23, 2020
The Governor of the Central Bank, Godwin Emefiele, has confirmed that the Central Bank will continue to pursue unification around its Nafex rate. The NAFEX rate is the forex window where Investors and Exporters transact dollars on market-determined prices.
The CBN Governor said this at an Investors Conference with the Federal Government of Nigeria by CitiBank. The conference which was held online was titled COVID-19. Economic and Budgetary Update. Nairametrics listened in on the Conference.
Nigeria was represented by the following government officials;
- Zainab S. Ahmed – Finance Minister
- Godwin Emefiele – CBN Governor
- Patience Oniha – DG DMO
- Ben Akabueze – DG Budget Office
- And a representative of the Hon. Minister of Health.
According to Godwin Emefiele, “We will continue to pursue unification around the NAFEX Market”. The CBN Governor also mentioned that as at December 2019 Nigeria saw a “relatively stable market because the NAFEX rate and rate that the Central Bank does transaction outside the NAFEX was close to themselves.” And that “at some point, the NAFEX rate me below the Central Bank rate”
Nairametrics was first to report last week that the government was considering a unification of the exchange rate and could unify the rate around the NAFEX (I&E) window rate or the official CBN rate of N360/$1. The latest comment from the CBN Governor suggests they might be unifying along the lines of NAFEX.
Mr. Emefiele also commented on the disparity between the parallel market and the NAFEX rate claiming it is a market for people who are “doing dealings that are not recognized by authorities”
According to Emefiele, ”The CBN has always maintained that the black market is not a good determinant of the value of the naira. You’ll find that people who are in a hurry and do not want to procure the kind of documentation required, will sometimes rush to those markets. But we have used the period of this pandemic to prove that anybody dealing in that market is dealing in an illegal business.”
He also claimed that the COVID-19 pandemic has buttressed claims from the bank that most of the pent-up demand was not realistic. He cited the impact of the global lockdown on flights as a clear example. “These airlines are not flying and sometimes you find dollars being sold through the BDC’s into that market just to be seen that we are doing everything possible to moderate the rate,” Emefiele said.
He continues that because “airlines are not flying, and people are not traveling so there should therefore not be any demand for forex exchange in that market”.
Insisting that the trades in the black market are counterintuitive he went further to accuse those trading in the black market as those dealing in corrupt practices. “It could only be those who are dealing in what is simply called corrupt practices that will be dealing in that market and we are not about to talk about unification of our exchange rate around people who are dealing illegally,” Emefiele added.
He also claimed anyone who was willing to deal in forex should utilize the “recognized” NAFEX market which is why “unification will have to be around the NAFEX”
The Federal Government disclosed plans to unify the exchange rate in order to generate more revenue and manage the rate in a sustainable manner. The IMF had previously pointed out that unifying the exchange rate will impact the economy more positively than the multiple exchange rates, which creates a lot of opportunities for arbitrage. The unification also curtails situations where public and private sector decisions are distorted as a result of uncertainties.
The CBN Governor also responded to questions about lack of liquidity in the NAFEX window which Nairametrics reports averages between $4-60 million daily. In response to how the backlogs will be alleviated, he said that “the external reserve still remains about 36 sic ($36 billion) and will imagine it is enough to make somebody do business in Nigeria.”
The CBN also attacked claims about higher dollar demands citing the shut down of manufacturing in the country as an example. “When somebody comes today to tell us they want to open fresh LC (Letter of Credit) we begin to wonder the motive behind that” he chided. The CBN Governor also claimed maturing obligations will be honored and that “we the CBN….stands ready to ensure that where there is shortage of FX in the market where the banks cannot find FX to meet those obligations we will come in to support the market and that we do from time to time.”
The CBN Governor also tried to calm fray nerves explaining that some of the dollar demands were also from foreign investors and some people who wanted to “front load” their dollar demands, that they do so in an “orderly fashion” and that they will be paid their money claiming Nigeria met all demand for those who were patient in 2016 when Nigeria was in a similar FX crisis.
Upshots: It is unclear what impact Mr. Emefiele’s remark will have on the market as most market analysts who spoke to Nairametrics on the condition of anonymity have a different view. They insist there is legitimate pent up demand of up to $5 billion as liquidity shortages continue to affect the NAFEX market. However, these claims have not been substantiated as there is no official record or data where demand is published.
This session was organized to help calm the nerves of foreign investors now awash with bailout dollars but worried about Nigeria’s faltering economy and its likely ability to trigger further devaluation. Mr. Emefiele did not confirm if another devaluation was in the offing.
CURRENCIES
Naira gains against the dollar at I&E window, forex liquidity up by 66%
Forex turnover rose to $63.44 million on Monday representing a 66.42% increase day on day.
Published
12 hours agoon
June 23, 2020
Forex turnover at the Investor and Exporters (I&E) window rose by 66.42% on Monday, June 22, 2020, providing a semblance of a boost to liquidity in the foreign exchange market. This is according to data from the FMDQOTC, an exchange where forex is traded by foreign investors and exporters.
According to the data tracked by Nairametrics, forex turnover rose from $38.12 million last week Friday to $63.44 million on Monday representing a 66.42% increase day on day. While the increase in percentage terms appears to be high, daily turnover of $63.44 million is still far from the over $200 million recorded in January 2020.
Although the liquidity in the foreign exchange market appears to have improved, the volatility and uncertainty of the market remain, particularly due to liquidity shortages across markets. Liquidity remains quite tight in the foreign exchange market with the average turnover in the I&E market significantly down to about $45.5 million in the month of May compared to $297.5 million that was recorded in January.
Several reports tracked by Nairametrics indicate the accumulated demand for forex in the market could be between $1.5 -$5 billion as supply shortages persist. Forex shortages have persisted since the crash in oil prices coincided with the worldwide lockdown due to COVID-19. The rise in demand and contrasting fall in supply has called for another round of devaluation which the CBN has insisted it has plans to implement. A devaluation last occurred in March. Speculators have thus patronized the parallel market otherwise known as the black market thereby widening the disparity between it and the I&E window.
READ MORE: Naira drops again at the black market as news of exchange rate unification stirs
Exchange rate
In related news, the exchange rate on the I&E window appreciated marginally on Monday, closing at N386 to a dollar, compared to the N386.50 to a dollar that was reported on Friday, June 19, representing a 50 kobo gain. The stability of the naira in the foreign exchange market continues today, as the local currency was marginally strengthened at the Investors and Exporters (I&E) window.
At the black market where forex is traded unofficially, the exchange rate remained stable at N455 to a dollar on Monday. This was the same exchange rate that was recorded on Friday.
Nigeria continues to maintain multiple exchange rates comprising of the CBN official rate, the BDC rates, and the I&E window. Nairametrics reported last week that the government is mulling unifying the multiple exchange rates in a bid to increase the amount available for state governments to share.
Nairametrics had reported that Nigeria’s external reserve dropped to $36.316 billion as of June 18, from $36.577 billion that was recorded on June 3. This represents a loss of $261 million in 15 days. The drop in external reserve puts further pressure on the foreign exchange market as it negatively impacts on CBN’s ability to intervene in the market.
CURRENCIES
U.S dollar gains ground, U.S. President Trump boosts investors’ Optimism
U.S. President Trump boosted investors’ optimism after he tweeted that the deal was “still intact.”
Published
13 hours agoon
June 23, 2020
The world’s safe-haven asset, gained some grounds as the U.S. Dollar Index that monitors the greenback against a bouquet of major global currencies was up 0.03% to 97.017 at 5.39 am Nigerian local time.
The U.S dollar showed some stability at London’s trading session after a previous surge when White House trade advisor Peter Navarro made some assuring statements concerning the Chinese-American trade pact.
READ ALSO: Again, U.S dollar slumps against major currencies, investors become optimistic about global demand
Currency traders and Investors rushed spontaneously to the U.S dollar after Navarro’s initial comments concerning the U.S.-China trade deal only to slowly retract most of it after the clarifications made by him.
Global investors and currency traders were taken on a roller-coaster ride at the previous trading session after White House trade advisor said that the deal was “over” on Monday, only to issue a clarification shortly afterward stating that his comments had “been taken wildly out of context.”
READ MORE: U.S dollar regains safe-haven status, China and India fire shots at each other
U.S. President Trump boosted investors’ optimism after he tweeted that the deal was “still intact.”
Daisuke Uno, the chief strategist at Sumitomo Mitsui Bank, told Reuters, “It’s not clear exactly what is over, but today’s market reaction suggests that after riding on optimism on the economy, markets are now ready to test the pessimistic side of the story,” referring to Navarro’s earlier comments.”
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