A Week in Nigeria: 28 November

The central bank’s monetary policy committee held Nigeria’s main interest rate at 11.5%
  • The Nigerian naira fell to a low of 495 on the black market on Friday as dollar scarcity persisted, widening the gap with the central bank’s official rate. The naira has weakened on the black market as oil revenues declined and the central bank set policies to restrict access to the official window. That has funneled demand to the parallel market, which conducts less than 5% of trades. It hit a record low of 600 to the dollar on the futures market for five-year settlement on Friday, underlining the severity of a lack of liquidity on the spot market. Finance Minister Zainab Ahmed said the government was concerned about the widening gap between the exchange rate on the black market and the official rate, a situation caused by low revenues from oil, Nigeria’s main export. Central Bank Governor Godwin Emefiele on Tuesday responded to calls for further depreciation of the naira, which has weakened by 28% this year, by saying the black market rate should not be used to determine the naira’s value. “There is high demand and very low supply and the central bank has put in a process where there is queueing … we do hope that we will be able to get to an even level … so that the impact on the exchange rate will become moderated,” she said. At the start of the week, data showed Nigeria, which has Africa’s largest economy, slipped into its second recession in four years after gross domestic product contracted for the second consecutive quarter. Nigeria was last in recession in 2016, its first in a generation, and emerged the following year. But growth has been fragile and the pandemic has hit the economy hard, amid low oil prices. The continent’s top oil exporter relies on crude sales for 90% of foreign exchange earnings.
  • Nigeria’s economy is set to grow by roughly 2% in 2021, Emefiele said on Friday. He said he also expected double-digit inflation to “moderate” by the first half of 2021, and stood behind the bank’s foreign exchange policy, which he said was allowing a gradual liberalisation of the naira and was “in line with best practices in other countries”. He also said there was “no need to worry” about Nigeria’s foreign reserves. The naira has weakened by 28% this year, but analysts said Emefiele’s dismissal of the black-market rate raised doubts about Nigeria’s commitment to reforms and dented hopes for a shift towards a market-driven exchange rate.
  • Delays to Nigerian cocoa exports in the fourth quarter, after the introduction of new rules to crack down on shipments with incomplete paperwork, will worsen the country’s dollar shortage, the head of the cocoa association said, further pressuring the naira. Around 100,000 tonnes of cocoa have been caught up by the new system, Mufutau Abolarinwa said. The delay to shipments of Nigeria’s second biggest export could worsen dollar scarcity in the country. “October delivery is in default,” Abolarinwa said by phone. “But buyers are aware that the procurement is already at the ports.” Delays could affect the quality of the export, he added. Nigeria, the world’s fifth biggest cocoa grower. The central bank has been looking for ways to ensure that export proceeds are repatriated to boost dollar supply on official markets, thus choking the black market, where the naira trades at a 23% premium. Abolarinwa said the latest challenge has caused foreign buyers to become wary of Nigerian cocoa and that no new contracts have been issued. Cocoa exports were choked in October after protests against police brutality, coupled with curfews to quell unrest, drastically slowed shipments to the ports.
  • Emefiele, following the monetary policy committee’s final meeting of the year, said the bank was “cautiously optimistic” of positive growth in the fourth quarter of the year and expected the country to come out of the recession in the first quarter of 2021. The central bank held its benchmark lending rate at 11.5%, Emefiele said. Prior to the meeting, the last of 2020, the bank had cut the rate on two occasions this year — both by 100 basis points. The cuts were in May and then in September, when the rate was lowered to the current level. Emefiele said all 10 members of the monetary policy committee had voted to stick to the rate. “Members voted in line with the most pressing need towards reversing the recession and achieving medium-term macroeconomic stability,” he added.
  • An explosion hit pipelines at Shell and Eni oilfields in Nigeria’s Niger Delta, resulting in a leak, a community leader said. A Shell spokesman said the exploration company has shut in the pipeline and has reported interference on the line about one kilometre from Ikarama community in Bayelsa state. ENI declared force majeure (FM) on exports of Nigerian Brass River crude oil following pipeline explosions, a source with direct knowledge of the matter said. The source added that the FM letter was dated Nov. 22. Eni did not immediately comment. Shell said the facility has been shut down to curtail the impact and that a government-led joint team will investigate the cause of the interference. Community leader, Ben Warder, said a dynamite-like sound was heard from the site.
  • Nigeria is ready to reopen its land borders to trade for the first time in more than a year after closing them to try to stamp out smuggling, the finance minister told reporters after the weekly cabinet meeting. The finance minister said those involved had learned from the closure and worked together on joint border patrols. “We will be expecting that the borders will be reopened very soon,” she said, explaining that the president would determine the exact date. closed its land borders in late 2019 over concerns about illegal exports of price-controlled gasoline and illegal imports of food stocks such as rice and poultry, which it believed harmed local producers. Inflation, particularly for food, rose steadily after the border closure and hit a two-year high in October. Inflation rose to 14.23% in October, compared with 13.71% in September. A separate food-price index showed inflation at 17.38% last month, compared with 16.66% in September. Earlier this month, Nigeria ratified its membership of the African free-trade zone due to be launched in January, after initial reluctance to join the bloc for fear of exposing local industries to dumping by countries outside Africa.
  • Two judges in northern Nigeria on Thursday heard the first appeals against Islamic law blasphemy convictions that caused global outrage when a man was sentenced to death over a WhatsApp message and a 13-year-old received a 10-year jail term. The judges, at the appeals section of the secular high court in the city of Kano, said verdicts would be delivered at a later date. In August, a Kano sharia court sentenced Yahaya Aminu Sharif to death for allegedly sharing a blasphemous message on WhatsApp and Omar Farouq, accused of making blasphemous comments in an argument, received a prison sentence. The convictions were condemned by rights groups, the United Nations and the head of Poland’s Auschwitz Memorial who said he and others would volunteer to each serve a month of the boy’s prison sentence. They also sparked a debate about sharia’s compatibility with Nigeria’s secular constitution. Nigeria is roughly evenly split between a predominantly Muslim north and mainly Christian south. Sharia, or Islamic religious law is applied in 12 of Nigeria’s 36 states where sharia courts operate alongside secular ones. The charges prompted anger in Kano, the north’s commercial hub, and protesters burned down Sharif’s family home in March. Kola Alapinni, a defence lawyer representing the two defendants, said the convictions were incompatible with Nigeria’s constitution, which gives people the right to have freedom of expression. “Where any law conflicts with the constitution that law must bow to the constitution,” he told Reuters outside the court. Both sides can take their case to the federal court of appeal if they are unhappy with the state appeal court’s ruling.
  • And, finally, Nigeria will bar passengers who fail to follow the country’s COVID-19 protocol from flying for six months, said Dr Sani Aliyu, coordinator of Nigeria’s COVID-19 task force. Passengers returning to Nigeria are currently required to test for COVID-19 both before they board return flights and seven days after they arrive. They also must pay for the tests in advance. Aliyu said 60% of those who pre-paid for tests had failed to show up for them. “These passengers will not be allowed to travel for a period of six months,” Aliyu said. “We hope that we do not need to do this and people will comply with our protocol.” Task force chair Boss Mustapha said passengers had spent more than 220 million naira ($580,000) on tests that they did not take. Tests at accredited private labs cost roughly 50,000 naira ($130).

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Alexis Akwagyiram

Alexis Akwagyiram

Nigeria bureau chief for Reuters. Ghanaian family, British accent. Ex-BBC, before that newspapers.