Economy
LCCI Explains Reason For Nigeria’s Economic Woes
By Dipo Olowookere
The Lagos Chamber of Commerce and Industry (LCCI) has stated why Nigeria is presently going through economic challenges, saying it is due to lack of investors’ confidence.
Director General of LCCI, Muda Lawal, said at the weekend in Lagos that the inability of the Federal Government to regain the confidence of investors, both local and foreign, has resulted in the uncertainty in foreign exchange market.
“Regrettably, the instability and inconsistency in the foreign exchange management policy have been complicating matters.
“The economy has a major structural defect of being heavily import-dependent. This cannot be fixed in the short term.
“Therefore, the shocks arising from the collapse of oil price and the corresponding depreciation in exchange rate of the naira were inevitable. But the policy responses could make a whole lot of difference in the profundity of the impacts of these shocks on the economy and the citizens,” Mr Lawal said.
According to him, historically, autonomous supply of foreign exchange had been higher than the Central Bank of Nigeria (CBN) supply, adding that, “This has virtually dried up because of the collapse of investors’ confidence. Of course, the plunge in crude oil price was a major causal factor. But perhaps the bigger issue is the unstable and inconsistent foreign exchange policy which has continued to create uncertainty in the forex market, thus deepening the liquidity problems.
“For an economy that is in fragile mode and for an economy that is highly exchange rate sensitive, policy actions and pronouncements that could impact the market should be done with utmost caution and care.
“This is imperative to avoid unintended consequences which may hurt the economy in very profound ways. Such is the recent suspension of nine banks from the forex market. These are shocks that the economy can ill afford at this time.
“It is right to penalize banks for proven infractions, but this should be done in a way to minimize collateral effects on investors and the larger economy, given the high sensitivity of the economy to developments in the foreign exchange market.
“This is even more so at a time when the economy is grappling with a major confidence issue in the forex market. There should be more creative and less disruptive ways of imposing such sanctions.
“Many innocent investors and citizens are already bearing the brunt of this action given the unprecedented hike in naira exchange rate.
“Ongoing forex transactions in the affected banks have been stalled with serious consequences for investors,” he emphasized.
Mr Lawal stated further that, “The second major policy development that could pose a risk to the stability and transparency of the foreign exchange market is the recent policy on sectoral allocation of foreign exchange.
“The CBN circular did not indicate any Code to properly define what would qualify as raw materials and machineries. The first concern will be that of definition. The result of this will be discretionary interpretation by the banks as what qualifies as raw materials and machineries.
“The second major concern is the potential crowding out of other sectors in the forex market. Sectors outside the manufacturing sector account for over 85 per cent of the country’s GDP and jobs in the economy. They all have varying import contents in their operations.
“Therefore, if a minimum of 60 per cent of all forex allocation goes to manufacturing for raw materials and machineries; what happens to other sectors? Currently petroleum products imports are priority and could take another 25 per cent of foreign exchange.
“This implies that the rest of the sectors would settle for the balance of 15 per cent. This is clearly not a sustainable framework.”
Such policy tools, he said, include import tariffs, taxation and other incentives.
He said further that, “Above all, there is need to upscale infrastructure investments very urgently. These are the more effective ways to fix the structural problems of the economy than monetary policy.
“What is key for monetary authorities is to ensure that financial markets are efficient and transparent; and to ensure that there is discipline among players.
“This is the time to seek quick wins. One of the quick wins is to review current trade policy measures in order to reduce the pressure of cost on investors and citizens. The exchange rate depreciation has an inherent structural correction effects on the economy.
“It naturally rewards inward looking initiatives and resource based enterprises. It is too much of a shock on the economy to combine high import duty regimes with a weak and rapidly depreciating currency.
“Conversion of import values at current exchange rates for purposes of computation of import duty and other port charges have escalated costs beyond measure and had paralyzed many businesses. Ensuring a balance between the interests of investors, producers, consumers and the welfare of citizens is a strategic imperative at this time.”
By Dipo Olowookere
The last trading session of the week on the floor of the Nigerian Exchange (NGX) Limited ended on a positive note, as it rallied by 0.08 per cent on Friday.
This was buoyed by strong investor sentiment due to renewed buying pressure, which left 35 stocks on the gainers’ chart, as 33 stocks ended on the losers’ log, indicating a positive market breadth index.
According to data, Eterna gained 10.00 per cent to close at N42.35, Union Dicon appreciated by 9.70 per cent to N16.40, John Holt grew by 9.25 per cent to N9.45, Tantalizers rose by 8.41 per cent to N4.64, and Fidson expanded by 7.27 per cent to N88.50.
Conversely, RT Briscoe lost 10.00 per cent to finish at N12.06, SCOA Nigeria retreated by 9.96 per cent to N34.35, ABC Transport receded by 9.96 per cent to N6.25, Mecure crashed by 9.96 per cent to N61.50, and Berger Paints declined by 9.93 per cent to N66.65.
Business Post observed that the industrial goods space appreciated by 1.20 per cent yesterday, while the energy index improved by 0.19 per cent.
However, the insurance counter fell by 0.61 per cent, the consumer goods segment shed 0.56 per cent, and the banking industry depreciated by 0.11 per cent.
The All-Share Index (ASI) was down by 161.00 points on Friday to 196,968.15 points from 196,807.15 points on Thursday, while the market capitalisation went down by N119 billion to N126.437 trillion from N126.318 trillion.
A total of 586.2 million units of shares worth N30.6 billion were transacted in 62,699 deals during the trading day versus the 634.0 million shares valued at N29.1 billion traded in 66,286 deals a day earlier, showing a jump in the trading value by 5.16 per cent, and a decline in the trading volume and number of deals by 7.54 per cent and 5.41 per cent, respectively.
The activity chart was led by First Holdco with 43.9 million units worth N2.3 billion, Access Holdings exchange 43.2 million units valued at N1.1 billion, Zenith Bank transacted 40.0 million units for N3.7 billion, GTCO sold 38.9 million units worth N4.6 billion, and Jaiz Bank traded 31.5 million units valued at N323.4 million.
By Adedapo Adesanya
The NASD Over-the-Counter (OTC) Securities Exchange went up by 0.22 per cent on Friday, March 6, as a result of the rise in the share prices of five securities on the platform.
During the session, the market capitalisation of the bourse added N5.60 billion to close at N2.519 trillion versus the preceding session’s N2.513 trillion, and the NASD Unlisted Security Index (NSI) appreciated by 9.35 points to 4,256.41 points from 4,256.41 points.
The five price gainers were led by 11 Plc, which gained N29.02 to close at N319.25 per unit versus Thursday’s closing value of N290.23 per unit, Central Securities Clearing System (CSCS) Plc appreciated by N1.19 to N81.35 per share from N80.16 per share, Nipco Plc increased by N1.00 to N285.00 per unit from N284.00 per unit, FrieslandCampina Wamco Nigeria Plc rose by 72 Kobo to N125.20 per share from N124.48 per share, and UBN Property Plc improved by 19 Kobo to N2.17 per unit from N1.98 per unit.
On the flip side, Okitipupa Plc lost N20.00 to settle at N230.00 per share compared with the previous day’s N250.00 per share, NASD Plc declined by N5.21 to N51.00 per unit from N56.21 per unit, and First Trust Mortgage Bank Plc declined by 21 Kobo to N1.90 per share from N2.11 per share.
The volume of securities traded by market participants went down by 10.6 per cent yesterday to 3.4 million units from 3.8 million units, and the value of securities dropped 85.3 per cent to close at N62.4 million versus N423.3 million, while the number of deals jumped 4.8 per cent to 44 deals from 42 deals.
CSCS Plc remained the most traded stock by value (year-to-date) with 37.2 million units valued at N2.3 billion, followed by Okitipupa Plc with 6.3 million units worth N1.1 billion, and MRS Oil Plc with 3.4 million units sold for N506.8 million.
Resourcery Plc was the most traded stock by volume (year-to-date) with 1.05 billion units traded for N408.7 million, followed by Geo-Fluids Plc with 123.1 million units transacted for N481.6 million, and CSCS Plc with 37.2 million units worth N2.3 billion.
By Adedapo Adesanya
For another week, the Naira closed without recording a gain against the United States Dollar at the Nigerian Autonomous Foreign Exchange Market (NAFEX), as FX demand pressure continues to mount.
On Friday, the country’s legal tender further depreciated against the greenback by N5.82 or 0.42 per cent to trade at N1,393.26/$1 compared with the preceding day’s N1,387.45/$1.
Also, the local currency tumbled against the Pound Sterling in the official market segment yesterday by N7.61 to close at N1,859.99/£1 versus Thursday’s closing price of N1,852.38/£1, and crashed against the Euro by N1.58 to settle at N1,611.49/€1, in contrast to the N1,609.86/€1 it was traded a day earlier.
In the same vein, the Naira declined against the Dollar at the GTBank forex desk by N12 during the session to quote at N1,410/$1 versus the previous session’s rate of N1,398/$1, and at the parallel market, it lost N10 to sell for N1,415/$1 compared with the preceding day’s N1,405/$1.
The domestic currency continued its decline despite $300 million in FX intervention sales to banks by the Central Bank of Nigeria (CBN), indicating that the rising demand for foreign payments is outpacing supply. However, worries have heightened as the Naira is entering a threshold that has not previously created panic.
In the international market, the US Dollar held broadly steady and saw its steepest weekly gain in more than a year as the escalating conflict in the Middle East drove demand for safe-haven assets. This creates pressure on other currencies.
This also affected the cryptocurrency market. As tensions escalated in the Middle East last week, investors moved quickly to the safety of the US Dollar, which strengthened as markets began pricing in higher energy prices and reignited inflation fears, potentially delaying Federal Reserve rate cuts.
Ethereum (ETH) dipped by 4.9 per cent to $1,975.54, Solana (SOL) depreciated by 4.8 per cent to $84.08, Bitcoin (BTC) lost 4.3 per cent to sell for $67,725.27, Cardano (ADA) slumped 4.2 per cent to $0.2527, and Litecoin (LTC) shrank by 3.4 per cent to $53.55.
Further, Dogecoin (DOGE) declined by 3.2 per cent to $0.0906, Binance Coin (BNB) slipped 2.9 per cent to $626.32, and Ripple (XRP) went down by 2.6 per cent to $1.36, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) closed flat at $1.00 each.
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