…As CBN injects $100m into interbank forex market
By Amechi Ogbonna, and Uche Usim, Abuja
The Federal Government yesterday expressed optimism that the Nigeria economy would exit recession and grow by 2.19 percent this year.
Speaking on the unveiling of the New Economic Recovery and Growth Plan 2017-2020, the Media Adviser to the Budget and Planning Minister, James Akpanden, stated that Gross Domestic Product (GDP) was expected to grow an average of 4.62 percent a year until 2020, and would hit 7 percent in 2020.
Part of the government’s plan to exit recession, according to the minister’s spokesman, include selling some key public assets in addition to a raise in taxes on luxury goods.
Nigeria widely regarded as sub-Saharan Africa’s biggest economy entered its first recession in a quarter of a century in 2016, following prolonged low oil and commodity prices that reduced government revenues, weakened that naira created a galloping inflation.
The government released the much-awaited draft of measures to reform the economy and diversify it away from over-reliance on oil which was part of the conditions given by nternational lenders including the World Bank and the African Development Bank (AfDB) for any meaningful support to the distressed economy
The plan aims to ramp up oil production to 2.5 million barrels per day and for Nigeria to become a net exporter of refined petroleum products by 2020.
Already Production in February was 1.65 million barrels per day, according to a Reuters survey of OPEC crude oil output. The country is currently reliant on imports of fuel, with limited domestic refining capacity.
The goal of the document is to increase export earnings and government revenues by an additional N800 billion ($2.63 billion) a year.
Under the plan, the government also expects to earn N35 billion ($115 million) from the sale of some national assets, including oil joint ventures, and reducing stakes in other oil and non-oil assets.
The central bank will aim to achieve a market-determined exchange rate regime, the plan said, as pressure mounts to let the naira currency float freely. That has been one of the World Bank’s requirements before it will grant a loan of at least $1 billion to Nigeria.
Inflation is seen at 15.74 percent in 2017 and 12.42 percent next year. In January it hit 18.7 percent, its highest level in more than 11 years.
The government said it would review and possibly remove the ban on accessing foreign exchange for 41 goods and services.
Nigeria hopes to improve tax collection to raise N350 billion per annum, in part by boosting a luxury goods tax to 15 percent in 2018 from its current rate of 5 percent. The goal is to increase the overall tax to GDP ratio to 15 percent from 6 percent between 2017 and 2020.
In the agriculture sector, Nigeria wants self-sufficiency in rice by 2018 and in wheat by 2019 or 2020, and hopes to be a net exporter of rice, cashew nuts, groundnuts, cassava and vegetable oil by 2020, according to the plan.
Meanwhile, for the second time this week, the Central Bank of Nigeria (CBN) has released additional $100 million into the interbank foreign exchange market as part of efforts to address its liquidity challenges.
The apex bank’s Acting Director, Corporate Communications, Isaac Okorafor, confirmed this to newsmen in Abuja, adding that the move was to fund commercial banks with enough forex to cater for the request of customers for personal travelling allowance (PTA), basic travelling allowance (BTA), medicals and tuition fees.
This fresh injection by the apex bank brings the amount so far pumped into the interbank forex market within the last two weeks to $1,138m for both forwards and invisibles.
Commending the move, market analysts observe that it will further create problems for currency speculators who are yet to recover from the sudden appreciation of the Naira. According to the former economic adviser to the President and Minister, National Planning Commission, Professor Ode Ojowu, “It appears this time around, the CBN has decided to become smarter than the market manipulators, by putting on its cap of authority to look beneath the market forces”
It will be recalled that the CBN, in February 2017, changed its forex rule supply to guarantee supply to both small and the big end-users. The policy has restored stability and bolstered market confidence which has ultimately boosted the value of the Naira.
Analysts have also commended the efforts of the CBN in ensuring the continuous appreciation of the naira. This they attributed to good policy and effective communication strategy, which has witnessed increased dollar supply to the market.