A Week in Nigeria: 4 July

Nigeria’s central bank has in recent weeks said it will move to unify the country’s multiple exchange rates
  • In a move to weaken the naira as the regulator seeks to unify its multiple exchange rates, Nigeria’s central bank asked lenders to bid for forex at an auction 5% above its official rate of 360. It comes a weeks after the regulator again said it will work towards the gradual unification of exchange rates across all forex windows — a move that has been strongly encouraged by the World Bank. The bank has for several years operated a multiple rate regime which it has used to mask pressure on the naira and absorb the impact of lower oil prices. But dollar shortages have plagued the economy after an oil price crash slashed government revenues and weakened its naira currency, funnelling demand to the black market where the naira is trading much weaker at 450 per dollar. The central bank, Nigeria’s main supplier of dollars, depreciated the forex rate for retail interventions to 380 to the dollar from a previous rate of 360, traders said late on Friday afternoon, quoting a message from the regulator to lenders. The bank wants to unify rates to conserve its dwindling foreign exchange reserves which lost $8.5 billion to sit at about $36 billion in May due to an increase in imports from last year and demand from investors exiting Treasury bills. With the rate move, the central bank has moved its retail auction for importers and individuals closer to the over-the-counter spot market widely quoted by investors and where the naira was quoted at 387.50 to the dollar on Friday.
  • Nigeria allowed interstate travel outside curfew hours from Wednesday, 1 July, lifting a ban that had been in place for several weeks. The move was announced at the start of the week by the COVID-19 presidential taskforce as authorities continue to relax novel coronavirus restrictions despite mounting cases and deaths. Students due to graduate this year will also be able to go back to school to prepare for exams, though other children are still barred from attending, said Boss Mustapha, who chairs the taskforce. Officials are trying to strike a “delicate balance” between protecting people’s livelihoods and their health, he said. Authorities have imposed a 10pm to 4am curfew and ordered people to wear masks in public places to curb the spread of the virus. Gatherings are limited to 20 people. “We have observed with growing concern the non-compliances with these measures designed to prevent transmission,” Mustapha told reporters in the capital, Abuja. “We run the risk of erasing the gains made in the last three months,” he said.
  • In a separate announcement, the government said domestic flights will resume from 8 July. The airports for the capital Abuja and Lagos will open on 8 July, while a handful of others are set to open 11 July and the rest on 15 July, the government said on its official Twitter account. No date was given for the resumption of international flights. Nigeria had confirmed more than 25,000 coronavirus cases and around 600 deaths, with little sign of the outbreak slowing. Officials have expressed their concern that the outbreak in the West African country might become much worse. Yet the government is keenly aware of the economic toll of the virus, which has crushed the price of oil, on which Nigeria depends.
  • Still on the subject of relaxing restrictions, Kano - the commercial powerhouse of the north - ended its novel coronavirus lockdown on Thursday, the local ministry of health said, months after an outbreak of what was originally called a “mysterious disease” killed hundreds of citizens. In April and early May, roughly 500 people died in the state, a government probe found, saying the deaths were likely due to coronavirus. Local authorities did not acknowledge the outbreak at the time. Kano’s health ministry on its official Twitter account did not provide details of the state lockdown ending except to say civil servants would return to work from Monday, 6 July.
  • The debt office said Nigeria’s total public debt rose to 28.62 trillion naira ($79.5 billion) as of March, up 15% from a year earlier. Africa’s largest economy has been racking up debt to fund infrastructure projects and boost a sluggish economy now projected to fall into recession following the oil price crash and the global impact of the coronavirus pandemic. Total public debt stood at 24.94 trillion naira in the first quarter of 2019. Nigeria had a series of debt issues lined up this year before the collapse in oil prices, the country’s main export, forcing the government to shelve foreign commercial borrowing. The government is now tapping domestic markets and concessionary loans to help fund its 2020 budget deficit which has been worsened by the lower oil prices that slashed revenues and weakened the naira currency. But debt servicing costs have risen. The government spent 609.13 billion naira ($1.69 billion) to service domestic debt in the first quarter of 2020, the DMO said in a statement.
  • Nigeria has changed the way marginal oilfields are allocated to avoid legal problems that bedevilled a previous bidding round, the director of the Department of Petroleum Resources (DPR) said. One change he mentioned is that the regulator will from now on only engage with “credible” investors. Nigeria in early June launched its first bidding round for marginal fields — smaller blocks typically developed by domestic companies — in nearly 20 years. It hopes the round will boost oil output and bring in much needed revenues. The DPR, the petroleum regulator, has said none of the fields being awarded faced legal issues, but courts have blocked two fields that were revoked in April from being included in any new licensing round. Sources have said other legal challenges were expected from those holding 11 licences revoked in April. The DPR’s director, Auwalu Sarki, said the previous round was “fraught with litigations and other challenges,” which hampered the development of some of the oilfields, but added authorities had learned from previous mistakes. “This time around, our awardees will be credible investors with technical and financial capability,” Sarki said while addressing the Africa Marginal Oilfield and Independent Producers Webinar Conference. “There is also the Post-General Award Conditions. This deals with transfer of interest post award. It means awardees cannot transfer more than 49% interest to another party post-award.” He said the conditions also allow the petroleum minister to withdraw the interest of a party that fails to meet its obligations in terms of joint awardees.



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Alexis Akwagyiram

Alexis Akwagyiram

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