CBN

CBN to limit intervention in the I&E FX window…

by with No Comment Businessfinance

Emerging data about Nigeria’s Foreign exchange inflows into the Investors and Exporters (I&E) forex window indicate that the Central Bank (CBN) is keeping its word to reduce its intervention in the dynamics of the market.

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Inflows into the market dropped to six months low following significant decline by 99.3 percent in interventions by the Central Bank of Nigeria (CBN), which hitherto was a dominant player in the market.

Godwin Emefiele, the CBN governor, said at the last Monetary Policy Committee (MPC) meeting briefing that since January the CBN had not intervened in the I&E window.

The market has always operated within a band of around N409 to the dollar. At some point, it attained N412 and N413, and began to move, and that it is how it is supposed to move, he said. “The CBN job is to moderate the market in line with where we think exchange rate should be,” Emefiele had said.

Data from the FMDQ captured in a report by FSDH Research show that total foreign exchange inflow into the window decreased by 39.48 percent to $565.9 million in February 2021, compared to $935.2 million in September 2020.

The inflows comprised of Foreign Direct Investment (FDI), which fell to $7.5 million in February 2021 from $30.8 million in September 2020; Foreign Portfolio Investment (FPI) $17.9 million in February 2021 ($36.8m in September 2020), other corporate $9.3 million in February 2021 ($22.4m in September 2020), and the CBN $2.9 million in February 2021 ($434.5m in September 2020).

Others include inflows from exporters, which dropped to $175.7 million in February 2021 from ($206.8m in September 2020), individuals $2.5 million in February 2021 from ($29.4m in September 2020), and non-bank corporate, which declined from $350.1 million September 2020, to $175.5 million in February 2021.

Inflows from the CBN fell by 99.3 percent from $434.5 million in September 2020 to $2.9 million in February 2021.

Despite the positive GDP growth in the fourth quarter of 2020, inflows from FDI and FPI remain low in the first two months of 2021.

This suggests low investors’ confidence amid uncertainty relating to foreign exchange management and insecurity concerns, analysts at FSDH said.

Despite rising crude oil prices, Nigeria’s External Reserves have lost 5.7 percent of its value from January 25 to March 17, 2021, according to the report.

Challenged oil inflows due to OPEC’s cuts, weaker foreign investment inflows, high demand for foreign currency to finance imports and other needs and possible clearance of FX backlogs are factors that continue to weaken External Reserves.

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ports revenue

N538bn ports revenue shows private sector can generate more for govt

by with No Comment Business

N538bn ports revenue shows private sector can generate more for govt

The Nigerian government is in dire need of money, and while it remains uncomfortable with letting the private sector run its business interests, evidence points to the need to let go.

READ ALSO: Foreign VCs dominate in Nigeria As local investors…

Allowing private capital to stimulate the economy as seen in recent developments from concessioned ports can generate more money for the government than it can do on its own.

Last week, the Bureau of Public Enterprise (BPE) said that private sector fiscal contribution to the port and the Federal Government increased to over N538 billion within 11 years of port concession from 2006 to 2017.

These were monies collected from commencement fees, lease fees, throughput fees, tax payments by the concessionaires as well as revenue put into infrastructure development, and investment on equipment.

A breakdown of the revenue shows that the Federal Government collected N5.68 billion as commencement fees, N196.48 billion as lease fees, N61.45 billion as throughput fees, N67.77 billion as tax payment while the private entities investment in infrastructure and equipment stood at N66.6 billion and N139.9 billion, respectively.

Jonathan Nicol, president of the Shippers Association of Lagos State, reiterated the need for the private sector to take the lead in various sectors of the economy.

He called on the government to take advantage of private sector financing in building infrastructure, especially at this time when the financial capability of the government is dwindling due to unstable prices of crude oil, Nigeria’s mainstay.

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Nigerian exports

Businesses to lose over N55bn as ports halt exports

by with No Comment BusinessNews

Nigeria is desperate for foreign exchange, yet businesses that should be contributing towards earning dollars, in particular, will be losing at least N55 billion ($142m) within the two weeks the country’s seaports in Lagos will not be allowing exports trucks.

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While the country’s non-oil exports for 2020 stood at N1.43 trillion, it averaged N27.5 billion on a weekly basis; in a year trade was significantly down, according to data from the National Bureau of Statistics (NBS). For two weeks, it comes to N55 billion.

However, trade is expected to recover this year as economies recover from the COVID-19 pandemic and N55 billion is at best a conservative estimate that is likely far from what the economy, and in particular, businesses would lose.

In 2019, when trade was better, non-oil exports had a value of N2.51 trillion and if trade this year, as the global economy is gradually rebounding, is as good as 2019, then the losses over the two-week period could even be starting at N96.8 billion ($251m).

“It was abrupt,” said Ibukunoluwa Akinrinde, technical anchor of the NESG Trade, Investment and Competitiveness Policy Commission. “If prior to now, the NPA for reasons best known to it, did not sound the alarm it wanted to halt exports.”

One month to that time, the NPA should have created awareness, with a date it was going to embark on this action, he explained, saying, “Arbitrariness of decisions is part of what affects investors’ confidence.”

Arbitrariness like this see businesses getting their fingers burnt. Those prepared for exports such as through the Sea Link Project could do short cargo movement within two weeks to arrive the destination. Those required for use within a month after which they may no longer be in conditions suitable for what they are needed will now get hurt, leading to colossal losses.

Suspension of export trucks by the ports authority, apart from the value of export goods now stranded, would also see exporters incurring demurrage and detention fees.

Those who had dispatched trucks laden with goods would have to pay the cost of those trucks staying put till delivery can be done at the cargo exports terminals.

To have the shipments returned till the NPA gets its acts right would also mean paying for the goods to be returned to wherever they may have come from in Nigeria.

Anyway it is seen, businesses are bound to lose, and big too.

“In export, once you sign an agreement with the buyer abroad and it takes you two weeks or months to access the port and there is rejection, it becomes double tragedy,” John Isemede, a consultant on Export Value Chain to United Nations Industrial Development Organisation (UNIDO), told BusinessDay. “This is because those goods still have to be brought back to Nigeria. It is like collecting a corpse from the mortuary.”

This indicates yet another casualty of this decision as previously highlighted by BusinessDay. The sanctity of contracts will be broken by many exporters, not of their own doing, but because the port administrators decided to truncate their sources of livelihoods on the back of poor planning.

From different parts of Nigeria, trucks carrying products in export containers are on their way to the Lagos ports. Those who have paid for goods to be transported on those trucks will now have to bear additional costs and shipping lines are expected to charge the export demurrage and detention fees, respectively.

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Export Trade

Ecobank Reiterates Its Commitment As “The Partner Of Choice For Export Trade”

by with No Comment BusinessNews

Ecobank has reiterated that it remains the partner of choice in Africa for export trade because of its unique positioning, wide network, pan African payment switch, settlement capabilities, award winning digital products and strategic focus.

READ ALSO: Nigeria’s 2021 Oil Market Playbook: Eyeballing Opportunities and Mitigating Threats

Kola Adeleke, Executive Director, Corporate Banking, Ecobank Nigeria made this assertion while speaking on African Continental Free Trade Area (AfCFTA) strategy, opportunities, challenges in export and trade at Ecobank/Nigerian Export Import Bank (NEXIM) webinar for exporters on Thursday.

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He maintained that the pan African bank has structures in place to enable exporters exploit the opportunities in The African Continental Free Trade Area (AfCFTA).

According to him, “Our unique positioning in 33 African countries enables us leverage our extensive network to reduce the number of financial partners and relationships in executing trade.

We own the switch connecting countries where we operate across Africa. This centralized switch enables easy integration. We possess knowledge of the local markets in which we operate resulting in unparallel financial advisory. 

We offer real-time settlement across Africa and our customers enjoy instant transfers across 33 African countries.

Ecobank has a reputation for developing innovative products as the bank has won us several international, regional and local awards and we aspire to be the gateway to pan-African payments and trade.”

Mr Adeleke reaffirmed that Nigeria is poised to gain from the investment and trade opportunities that the AfCFTA will inevitably bring because of its market size, supply chain infrastructure and an abundant supply of professionals/skilled players in various industries.

He emphasized that businesses must strategically position themselves, endeavour to understand the dynamics of the ratification to be able to maximize the benefit and opportunities.

Adeleke, who regretted that export potentials in Nigeria is largely untapped due to focus on oil revenues, reiterated that real sector credit opportunities to utilizing the AfCFTA includes Export development financing, trade finance, Export development financing and SME financing.

In his presentation on Export Trade Insurance, Bashar Garba Illo, Acting Head, Export Credit Insurance, NEXIM, said the Export Credit Insurance (ECI) is designed to protect exporters in Nigeria against the risk of Non-Payment for goods and services exported on credit terms with a cover against Political Risk, stressing that the objective of ECI is to indemnify both Internal and External exporting customers from losses incurred from any payment default that could arise from political events in the export destination country by providing cover up to 80% of the value of receivables, subject to the Risk Asset Acceptance Criteria (RAAC) outlined for Political Risk. He explained that the Bank’s mandate is to support non-oil export sector of Manufacturing, Agro-processing, Solid Mineral and Services.

Also at the session was Chijioke Uzoukwu, Head of Trade, Ecobank Nigeria, who listed  the Ecobank products and services on offer to support Export Trade as comprising letters of credit, bonds, guarantees as well as bills for collections avalization. He said  “the Bank also provides loans for business such as import loans, export loans and supply chain finance. In the trade service, we support customers from initiation to execution in the areas of documentation and compliance, working with regulatory bodies and other stakeholders. We also offer trade advisory solution like market information across Africa, trade specialist support and after sales services. We have an electronic e-trade platform which provides an electronic frontend where the customers can initiate transactions and instruction from the comfort of their home and it will be delivered to the Bank. We also have various collection channels to optimize collections for business like in-branch products, Mobile App, POS, Web/ Online collection platforms, Ecobank Pay, Omniplus and Omni lite. The Omni plus has the capability to allow you to make bulk payments and also view your accounts with other banks in a single platform.”