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Inflation Jumps, Oil Prices Rise while Naira Stabilizes

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By Lukman Otunuga, Senior Research Analyst at FXTM,

In the face economic instability and uncertainty, Nigeria eased lockdown restrictions this month to jumpstart growth.

Inflation Jumps, Oil Prices Rise while Naira Stabilizes

The opening up of more sectors of the economy is a welcome development and may even boost consumption which accounts for a handsome chunk of gross domestic product (GDP). However, a rising number of coronavirus cases may sabotage the government’s efforts to reviving Africa’s largest economy. It is fair to say that the outlook for Nigeria remains clouded by the coronavirus chaos with the economy expected to shrink by 3.2% according to the World Bank. But the country is not alone as other emerging market and developed nations may suffer a similar fate.

Inflationary pressures made an unwelcome return this week as the pandemic disrupted farming activities, which hit food producers and consumers. With inflation jumping to 12.4% in May, questions are being raised on whether the Central Bank of Nigeria (CBN) will have enough room to cut interest rates further. On the bright side, foreign exchange reserves seem to be on a rise and could jump back to towards the $40 billion level if Oil prices can push higher. Rising reserves should provide enough ammunition for the CBN to defend the Naira against external and domestic risks.

Speaking of Oil, the commodity is on route to concluding the week roughly 10% higher despite the rising coronavirus cases in Beijing, parts of the United States and Japan. OPEC has given Nigeria and three other countries till Monday 22nd of June to submit a schedule of oil production cut compensation plan. It will be interesting to see how the country plans to compensate for the overproduction in April’s deal.

As the week slowly comes to an end and the Naira stabilizes around N453 to the Dollar on the parallel exchange, global sentiment will remain dictated by coronavirus developments and growth concerns.


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Ugo Onwuaso is an ICT enthusiast. He believes technology should be used for general good. He holds a Master of Public Administration (MPA) degree from the Lagos state University.

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E-Financial

Nigerian Manufacturing Sector Contracts for 5th Consecutive Month – CBN

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The Manufacturing Purchasing Managers’ Index (PMI) in September stood at 46.9 index points, indicating a contraction in the Nigerian manufacturing sector for the fifth month.

This was disclosed by the Central Bank of Nigeria (CBN) in its September PMI report released last week.

According to the report, four out of the 14 sub-sectors surveyed reported expansion (above the 50 per cent threshold) in September.

It listed the expansion order as electrical equipment; transportation equipment; cement and nonmetallic mineral products.

It said the remaining sub-sectors reported contractions in the following order: petroleum & coal products; primary metal; furniture & related products; printing & related support activities; food, beverage & tobacco products; textile, apparel, leather & footwear; chemical & pharmaceutical products; fabricated metal products and plastics & rubber products; while the paper product sub-sector was stable.

Production

At 47.3 points, the production level index for the manufacturing sector indicated contraction in September for the fifth consecutive month.

Of the 14 sub-sectors surveyed, five recorded increased production level, one reported same level of production, while eight recorded declines in production.

New Orders

At 46.4 points, the new orders index also contracted in September for the fifth consecutive month. Six sub-sectors reported expansion in new orders, while the remaining eight recorded contraction in the month.

Supplier Delivery Time

The manufacturing supplier delivery time index stood at 53.5 points in the month, indicating a faster supplier delivery time for the fifth time.

Six of the 14 sub-sectors recorded improved suppliers’ delivery time, five reported same level, while three recorded slower delivery time

Employment Level

The employment level index stood at 44.1 points, indicating contraction in employment level for the sixth consecutive month.

Of the 14 sub-sectors, two recorded growth in employment, three recorded same level of employment, while the remaining nine recorded lower employment level in the review month.

Raw material Inventories

The manufacturing sector inventories index also contracted for the sixth consecutive time in September to 43.0 points. Four of the 14 sub-sectors recorded growth in inventories, while the remaining 10 recorded lower raw material inventories.


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FG Sacked IST Members over Fraud- Ahmed

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Mrs Zainab Ahmed, minister of Finance Budget and National Planning, has said the Federal Government sacked some past members of the Investments and Securities Tribunal (IST) as they indulged in corruption.

FG Sacked IST Members over Fraud- Ahmed

Inaugurating the new members, the minister charged the new members to eschew corruption and be forthright.

Bar. Azi Amos Isaac was appointed as Chairman for a five year term and Bar. Nosa Smart Osemwengie, was re-appointed as member for a second term of four years.

“The problem with the tribunal has been infighting amongst members, lack of industrial harmony and series of complaints bordering on maladministration.

“This has been the bane of the tribunal and a source of embarrassment not only for the Ministry of Finance but for the government in general,” Ahmed said.

The new chairman, Azi, assured the finance minister that, “the teething issue of restiveness has been addressed since he assumed duty,” adding that, “The place is calm and the staff have become very supportive.”

Azi said since 2003, the tribunal has “given judgment in the value of assets worth over N844 billion and that from 2017 to date, they have given decisions in monetary value totalling over N28bn.

“It has not failed in its adjudicatory responsibility.

“It has carried out its assignment with candour and integrity and intends to improve on what has been on ground.”

 


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CBN Bans Customer-to-Customer Forex Transfer

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Central Bank of Nigeria (CBN) has banned transfer of foreign exchange (forex) from one customer to another.

CBN Bans Customer-to-Customer Forex Transfer

According to the apex bank, forex cash lodgements into domiciliary accounts can only be done by the account owners henceforth.

An internal memo available in the media space explains that the new guidelines are necessary to review the utilisation of inflows into customers domiciliary accounts.

The circular states: “Forex inflows cannot be credited to customers until the legitimacy of funds is established.

“They can have unfettered access by telegraphic transfers up to a limit of $40,000 monthly for payment of medical bills, school fees, subscription to professional bodies subject to existing CBN guidelines.

“Transfers from one customer to another is prohibited. Transfer within related companies is allowed subject to a limit of $50,000 per month.”

It recommended that proceeds from non-oil exports should be sold to banks, used for repayment of dollar term loans, and self-utilisation for trade transactions for LC, bills and Form A.

Also oil export proceeds from E&P companies are to be used to pay contractors and service providers employed by the oil companies in addition to the recommended uses for non-oil FX proceeds.

Offshore forex inflows from other Nigerian banks and internal account to forex transfers sourced from offshore inflows are to be used for trade transactions subject to eligibility for E-Form M.

“Upon confirmation of the legitimacy of the inflows, customers can have unfettered access, subject to a maximum of $50,000,” the document read.

“Utilisation for trade transactions subject to processing of eligible trade transactions using E-Form M. Payment for services must be backed with demand note from offshore beneficiary and other regulatory documents.

“Related party transfers are allowed to the maximum of the inflow received. The transfer request should be backed by a signed instruction from the account holder.” Payment of government fees and levies are also allowed to the maritime, oil and gas, aviation. government parastatals and export processing zones.

 


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