Economy
Algeria’s Foreign Reserves Decline by $30b
By Modupe Gbadeyanka
The International Monetary Fund (IMF) says Algeria continues to face important challenges posed by lower oil prices, leaving its foreign reserves falling by $30 billion to $113 billion.
From March 7 to 20, 2017, an IMF team led by Mr Jean-François Dauphin, visited Algiers to hold discussions for the 2017 Article IV consultation.
Discussions focused on the appropriate mix of policies to adjust to lower oil prices.
Mr Dauphin noted that Algeria’s overall economic activity was resilient, but growth in the non-hydrocarbon sector slowed under the effects of spending cuts and is estimated at 3.4 percent in 2016.
He said further that inflation increased from 4.8 percent in 2015 to 6.4 percent in 2016 and stood at 8.1 percent year-on-year in January 2017.
Also, he observed that unemployment increased to 10.5 percent in September 2016 and remains particularly high among the youth (26.7 percent) and women (20.1 percent).
But despite some fiscal consolidation in 2016, the fiscal and current account deficits remained large, and public debt increased.
“Efforts to adjust to the oil price shock are underway. The authorities achieved a notable reduction in the fiscal deficit in 2016 and have adopted an ambitious fiscal consolidation plan for 2017-19. They made progress improving the business environment and are working on a long-term strategy to reshape the country’s growth model to foster greater private sector activity and economic diversification. The central bank is adapting its monetary policy instruments to a tighter liquidity environment. This growing reform momentum is welcome.
“A key challenge at this juncture is choosing a policy mix that will help the economy adjust to the oil price shock in a way that is sustainable and the least costly in terms of growth and employment.
“Fiscal consolidation will need to be sustained as oil prices are expected to remain low and hydrocarbon reserves are exhaustible. At this stage, the consolidation should rely primarily on broadening the tax base, including through better tax enforcement and the rationalization of tax exemptions; containing current spending; gradually replacing costly energy subsidies, which mostly benefit the well-off, by direct support to the population most in need; and improving the efficiency of capital spending and reducing its cost. Investment in health, education, and well-targeted social safety nets should be preserved. These efforts should be supported by further strengthening the budget framework and closely monitoring growing fiscal risks.
“Too abrupt a fiscal deficit reduction, however, should be avoided to reduce the risk of a sharp slowdown in growth. In the mission’s view, given the relatively low level of public debt, Algeria could afford a somewhat more gradual fiscal consolidation than entailed in the current medium-term budget framework if it were to consider a broader range of financing options, including external borrowing and the sale of state assets,” Mr Dauphin said.
He said further that, “Th e mission strongly supports the authorities’ objective to decrease the economy’s dependence on hydrocarbons and unleash the potential of the private sector. This is not only needed to adjust to lower oil prices but also to ensure a sustainable source of job creation even beyond the horizon for proven oil and gas reserves. Achieving this goal will require wide-ranging structural reforms. Measures are needed to improve the business environment and access to finance, strengthen governance and transparency, make the labor market more effective, ensure that skills produced by the education system and sought by students match the needs of employers, foster greater female participation in the labor market, and further open the economy to foreign investment. The overall strategy should be designed and sequenced so that reforms reinforce each other and the burden of economic adjustment is shared equitably. Action should be timely as structural reforms take time to bear fruit.
“Exchange rate, monetary, and financial policies should support the adjustment. Further efforts to bring the dinar in line with fundamentals, combined with steps toward the elimination of the parallel foreign exchange market, would support fiscal and external adjustment. The Bank of Algeria is appropriately introducing open market operations, which should become its main monetary policy tool. The Bank of Algeria will need to stand ready to tighten monetary policy in light of growing inflationary pressures. Based on preliminary data, the banking sector as a whole remains adequately capitalized and profitable, but the oil price shock has increased liquidity, interest rate, and credit risks. It is therefore important to accelerate the transition to a risk-based supervisory framework, enhance the role of macro-prudential policy, strengthen the governance of public banks, and develop a crisis resolution framework.”
Mr Dauphin disclosed that during the visit, his team met with Finance Minister Hadji Baba Ammi; Industry and Mines Minister Abdessalem Bouchouareb; Acting Trade Minister and Housing and Urban Development Minister Abdelmadjid Tebboune; Education Minister Nouria Benghebrit; Labour, Employment, and Social Security Minister Mohamed El Ghazi and the Governor of the Bank of Algeria, Mohamed Loukal. The mission also held discussions with other senior government and central bank officials as well as with representatives of the economic and financial sectors and civil society.
By Adedapo Adesanya
The Governor of the Central Bank of Nigeria (CBN), Mr Yemi Cardoso, disclosed that Nigeria’s external reserves had risen to $52.5 billion, enough to finance about nine months of imports.
He disclosed this on Tuesday at the end of the 306th meeting of the Monetary Policy Committee (MPC) held in Abuja, where the Monetary Policy Committee (MPC) retained the benchmark interest rate at 26.50 per cent as well as the standing facilities corridor at +50/-450 basis points around the MPR.
Similarly, the Cash Reserve Requirement (CRR) was maintained at 45 per cent for Deposit Money Banks, 16 per cent for Merchant Banks, and 75 per cent for non-Treasury Single Account (TSA) public sector deposits.
Speaking on FX developments, the central banker said at the $52 billion level, the country’s external reserves were significantly above the internationally recommended threshold of three months of import cover.
On the Naira exchange rate, Mr Cardoso said the foreign exchange market had deepened and was now operating on a transparent willing-buyer, willing-seller basis.
He said the apex bank remained committed to maintaining a liquid and functional foreign exchange market, adding that daily market turnover sometimes exceeded $1 billion.
According to him, the long-term stability of the naira would depend on key economic fundamentals, including increased oil exports, foreign direct investment, and improved domestic productivity to reduce dependence on imports.
He also added that the MPC welcomed the federal government’s renewed commitment to stronger policy coordination, particularly collaboration between fiscal and monetary authorities, which he said had helped reduce the impact of the Middle East crisis on the Nigerian economy.
Mr Cardoso said members of the committee also commended efforts to improve crude oil production and urged relevant agencies to intensify reforms in other sectors, including solid minerals, to boost government revenue.
On the regulatory forbearance granted to banks during the COVID-19 period, he reiterated that this had been discontinued because it had served its purpose.
According to him, the policy had “outlived its time” and was no longer necessary in assessing the health of the banking sector.
“Forbearance, we felt, had outlived its time. Many of you will recall this is something that came as a result of COVID. And now we are in 2026; we did not see the reason why that should continue to form part of the analysis of the banking system,” he said.
Mr Cardoso explained that banks had begun recalibrating their portfolios following the end of the policy, leading to a temporary reduction in outstanding risk assets.
He, however, assured that the development was part of a transition towards a stronger and more sustainable credit environment.
“It reflects a transition to a more sustainable and better quality credit environment, which is what we all want. We don’t want unanticipated shocks that come in a boom-and-bust fashion,” he said.
By Adedapo Adesanya
The NASD Over-the-Counter (OTC) Securities Exchange extended its recent positive run by 1.17 per cent on Tuesday, July 21, triggered by appreciation seen in four bellwethers.
Leading the pack was FrieslandCampina Wamco Nigeria Plc, which added N12.00 to its value to close at N153.15 per share compared with the previous day’s N141.15 per share. NASD Plc appreciated by N1.90 to N36.00 per unit from N34.10 per unit, Food Concepts Plc improved by 23 Kobo to N2.48 per share from N2.25 per share, and Afriland Properties Plc grew by a marginal 1 Kobo to N15.01 per unit from N15.00 per unit.
As a result, the market capitalisation of the bourse increased by N30.40 billion to N2.637 trillion from Monday’s N2.606 trillion, and the NASD Security Index (NSI) gained 50.70 points to finish at 4,393.97 points, in contrast to the 4,343.27 points it ended a day earlier.
The unlisted securities exchange recorded a price loser yesterday, and it was Geo-Fluids Plc, which shed 1 Kobo to settle at N2.30 per share versus N2.31 per share.
During the trading day, the volume of securities traded by market participants on Tuesday dropped 99.4 per cent to 322,147 units from the previous day’s 52.6 million units, the value of securities dipped by 89.8 per cent to N19.4 million from the preceding session’s N191.2 million, and the number of deals contracted by 3.6 per cent to 27 deals from 28 deals.
Great Nigeria Insurance (GNI) Plc ended the day as the most traded stock by value on a year-to-date basis, with 3.4 billion units traded for N8.4 billion, followed by Infrastructure Credit Guarantee (Infracredit) Plc with 2.3 billion units transacted for N6.5 billion, and Central Securities Clearing System (CSCS) Plc with 75.4 million units exchanged for N5.3 billion.
GNI Plc also closed the day as the most traded stock by volume on a year-to-date basis, with 3.4 billion units worth N8.4 billion, followed by Infracredit Plc with 2.3 billion units valued at N6.5 billion, and Resourcery Plc with 1.1 billion units sold for N415.7 million.
By Adedapo Adesanya
The Naira gained N4.80 or 0.35 per cent against the US Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEX) on Tuesday, July 21, to trade at N1,375.31/$1, in contrast to the previous day’s N1,380.11/$1.
Also, the local currency appreciated against the Pound Sterling in the official market yesterday by N16.22 to quote at N1,857.35/£1 versus Monday’s closing price of N1,854.42/£1, and improved against the Euro by N8.17 to settle at N1,567.78/€1 compared with the previous day’s rate of N1,575.95/€1.
In the same vein, the Nigerian currency strengthened against the US Dollar by N1 at the GTBank FX counter during the session to exchange at N1,388/$1 compared with the preceding day’s rate of N1,389/$1, and maintained stability in the parallel market at N1,405/$1.
Data from the Central Bank of Nigeria (CBN) showed that interbank FX turnover increased sharply by more than 21 per cent to $322.644 million from $266.227 million the previous day.
Interbank FX deal count also climbed to 110, from 66, as banks bid for international payments on behalf of their corporate clients increased.
Latest data from the CBN revealed external reserves topped $52 billion due to sustained FX inflows across multiple sources, including hydrocarbon sales receipts. Gross external reserves surged to $52.024 billion from $51.942 billion.
Also, the central bank retained the Monetary Policy Rate (MPR), the country’s benchmark interest rate, at 26.5 per cent as it seeks to sustain the gradual decline in inflation while shielding the economy from growing global uncertainties.
In the crypto market, benchmarked tokens fell after traders took profit, following rallies driven by a semiconductor boon which has driven crypto all month while the Japanese yen sank to its weakest level in four decades.
Bitcoin (BTC) came in flat at $65,885.77, but Cardano (ADA) slumped by 3.1 per cent to $0.1706, Solana (SOL) dropped 1.8 per cent to sell at $77.12, Binance Coin (BNB) lost 1.5 per cent to trade at $567.38, Dogecoin (DOGE) declined by 1.1 per cent to $0.0723, Ethereum (ETH) depreciated by 0.9 per cent to $1,916.21, and Ripple (XRP) dipped by 0.3 per cent to $1.13, while TRON (TRX) gained 0.7 per cent to close at $0.3286, with the US Dollar Tether (USDT) and the US Dollar Coin (USDC) flat at $1.00 each.
