By Omodele Adigun
The cash crunch starring Nigerians in the face has been blamed on the decline in vault cash as currency-in-circulation fell to N1.685 trillion.
This is contained in the Economic Report for the Second Quarter of the year just released by the Central Bank of Nigeria (CBN). The apex bank noted that there was a seven per cent drop in currency-in-circulation to N1.685 trillion during the second quarter. a period from April to June. This was blamed on the decline in vault cash as the preceding quarter showed only 2.5 per cent slide.
As for the ability of the nation’s lenders to support the real sector of the economy, the report says there is an uptick in lending to the private sector.
It states: “Banking system’s credit to the private sector, quarter-on-quarter, grew by 13.5 per cent to N21.425 trillion, compared with the growth of 0.9 per cent and 1.3 per cent at the end of June 2016 and at the end of the corresponding period of 2015 respectively. The development was due to the growth in claims on the core private sector. Over the level at the end of December 2015, banking system’s credit to the private sector grew by 14.5 per cent, compared with the growth of 0.9 per cent and 4.3 per cent recorded at the end of the preceding quarter and the corresponding period of 2015, respectively.
“Banks’ credit to the domestic economy, rose by 11.2 per cent to N20.406.4 trillion, compared with 0.9 per cent at the end of the preceding quarter. “
Another highlights of the report is the rise in budget deficit. The apex bank states that retained revenue by the Federal Government was N677.88 billion, while total expenditure stood at N1.769 trillion, resulting in an estimated deficit of N1.091trillion. This was close to 100 per cent jump on the quarterly budget deficit of N555.49 billion.
As for the revenue profile of the government during the period, it was adjudged to be about N1.16trillion, which was 51.3 per cent and 8.6 per cent lower than the quarterly budget estimate and the preceding quarter’s receipts, respectively.
“At N537.19 billion or 46.3 per cent of the total, gross oil receipt was lower than both the provisional quarterly budget and the receipts in the preceding quarter. The development was attributed to the continued fall in receipts from crude oil/gas exports arising from persistent low price of crude oil and incidences of shut-ins and shut-downs at some NNPC terminals, owing to pipeline vandalism. Non-oil receipts, at N621.86 billion or 53.7 per cent of the total, was above the level in the preceding quarter by 3.2 per cent, but was significantly lower than the proportionate quarterly budget,” the report adds.
The apex bank explains that the Federal Government expenditure for the second quarter was above the provisional quarterly budget estimate and the level at the end of the preceding quarter by 12.8 and 58.1 per cent, respectively.
“The development relative to the proportionate quarterly budget estimate was attributed, mainly, to the rise in both recurrent and capital expenditure. A breakdown of the total expenditure showed that the recurrent component accounted for 72.6 per cent, while capital and statutory transfers constituted 19.8 per cent and 7.6 per cent, repectively.
As for foreign exchange inflow and outflow, CBN states that they amounted to US$5.89 billion and US$6.09 billion, respectively, resulting in a net outflow of US$0.20 billion. Foreign exchange sales by the CBN to the authorized dealers amounted to US$4.31 billion.
Foreign investors pep up forex market with $327m
The foreign exchange (forex) market bubbled with hope yesterday as $327 million worth of trades were sealed by foreign investors who swooped on FGN bonds.
The transaction included a single $270 million deal at N345 per dollar by the offshore investors buying local currency bonds, Bola Onadele, the managing director of FMDQ OTC Securities Exchange, said in an interview with foreign news service. Other transactions were carried out from N314.50 to N317.34 per dollar.
Average trading is around $50 million on normal days. It might reach $100 million on days the central bank intervenes in the currency market.
Traders also said the central bank sold an undisclosed amount of dollars, close to the end of the market session, to help prop up the naira. The currency closed at N305.50 yesterday, around the level where it’s closed for the past week.
The surge came after the central bank said on Friday that it would offer N212.85 billion in treasury bills maturing between 91 days and one year on Wednesday. The bank has been selling short-dated open market bills at yields as high as 18 per cent in an effort to attract offshore funds, most of whom fled Nigeria’s bond and equity markets during a financial crisis that began when oil prices plunged.
The crisis ultimately led the central bank to let the naira’s value float in June. From its controlled rate of 197 naira to the dollar, the currency plunged to as much as 309 to the dollar on the interbank market and 412 to the dollar on the black market.
The coming of the foreign investors would excite the manufacturers who are still struggling to get forex. According to Mr. Frank Jacobs, the president of the Manufacturers Association of Nigeria (MAN), many of his members can only access the hard currency for importing equipment and raw materials on the black market.
“I don’t think there are any more dollars in the system since the devaluation. Not much has happened so far,” Jacobs told a foreign news medium yesterday.
Commenting on the CBN’s decision of last week to make banks allocate at least 60 per cent of the foreign exchange they sell to manufacturers and importers of raw materials, Jacobs described it as excellent.
He was also confident that Federal Government would relax the ban on importers of the 41 items from accessing forex from banks. He has met Vice President Yemi Osinbajo and spoke to Emefiele last week to persuade them to reduce a list of 41 prohibited items that was announced in June 2015. The bans have shut factories and cut thousands of jobs, Jacobs said.
His words: “We are making progress. I’m very hopeful that before the end of the year they’ll say something about the 41 items. Around 60 of our factories have closed in the last year. And we’re blaming it on the list of 41 items and the high cost of foreign-exchange.”
The 41 items include “essential raw materials” that factories can only buy from abroad, Jacobs said. “Our members affected by the ban are going to the parallel currency market. It’s the only place they can buy dollars from.”
Jacobs said Nigeria’s manufacturers were further hampered by power cuts. They’ve got worse in the past year, he said, despite President Muhammadu Buhari’s pledge to double electricity generation by 2019.
“Power output today is a far cry from what we had in 2014,” Jacobs said. “It’s dropped significantly,” he said.