By John Omachonu
Subsidies on petrol, which has become a major preoccupation and lucrative business for the Nigeria National Petroleum Company Limited, (NNPCL) and Naira, through series of interventions by the Central Bank of Nigeria, (CBN), which have become major expenses incurred by the present government are snuffing lives out of Nigerians.
Most Nigerians are currently experiencing the worst side of life and living, with empty wallets, rising inflation, stagnant salaries for workers, bourgeoning unemployment market and poverty.
However, the unfortunate aspect is that the situation looks hopeless as the major political actors and economic managers pretend as if nothing unpleasant is happening to the citizens, particularly, the over 60 percent that are living below the poverty line.
With billions of dollars going for subsidizing petroleum products and the local currency, yet, without the desired results, some Nigerians are seeing the other side of life since the inequality gap is increasing on daily basis.
The country is currently in the middle of serious crisis that has continued to impact negatively on her foreign reserve earnings, stifled the value of its local currency, scared foreign investors and generally raised the cost of doing business typified by rising and scaring insecurity.
But, most Nigerians believe that the seemingly entanglement is self-inflicted, based on false ideological bent that defies any logic or reasoning, but, for which, pecuniary interests of the implementers have been the basis for the sustenance
“It is an entanglement or web of a vicious circle of poor ideological leaning, which is imposed on the generality of people, but, which is being sustained, possibly, falsely or blindly either for pecuniary interest and or the sense of identifying with our own, no matter the consequences, since some people are regarded as infallible,”, says an analyst who pleaded for anonymity.
Most Nigerians believe that rather than the billions going down the drain in the name of subsidies, focus should have been shifted to other desirable sectors, like education, health and agriculture that are more impactful on the lives of Nigerians, particularly, in an import dependent economy like Nigeria’s.
The country used to be the largest oil producer in Africa, pumping as high as some 2,0 million and even more on few occasions barrels a day of crude, but today, due to theft and vandalisation, for which no serious attempts have been made at solving them, is producing barely one million and sometimes below, per barrels a day.
The implication is that the country is forced to rely, fully on imports to meet its domestic refined petroleum products demand, which still remains a matter of conjecture, as the NNPC’s four redundant refineries, for which workers have been collecting salaries are yet to commence production despite billions of dollars being expended on them under the guise of turning them around (TAM) for production.
As it is today, a better chunk of percent of the foreign exchange demand in Nigeria is used for fuel imports, which is solely being handled by government’s bride, the Nigerian National Petroleum Company Limited, according to data from the CBN. Government’s meddling has continued to distort planning and expected liquidity in the inter-bank FX market, resulting in the rationing of FX for genuine users for medicals and education, among others.
Today, Foreign exchange requests and procurement from banks would take at least two month and would be rationed based on availability.
It is also responsible for the present chaos in the downstream sector.
Similarly, according to CBN report, the bank injected $7.6bn into the economy to stabilise the value of the naira in five months.
This was obtained in the banking regulator’s monthly economic reports on foreign exchange market developments.
According to the reports, the CBN intervened in the markets with $1.65bn, $1.39bn and $1.82bn in January, February and March, while the interventions were $1.56bn and $1.18bn in April and May, 2022, respectively.The report read, “Total foreign exchange sales to authorised dealers by the bank were $1.18bn, a decrease of 24.4 per cent, below $1.56bn in April.“A breakdown shows that foreign exchange sales at the Investors and Exporters and interbank/invisible windows decreased by 37.9 per cent and 0.7 per cent to $0.16bn apiece, below their respective levels in the preceding month.“Similarly, SMIS and matured swap contracts fell by 7.0 per cent and 71.4 per cent to $0.64bn and $0.10bn, respectively, compared to the amounts in April. However, foreign exchange sales at the Small and Medium Enterprises window rose by 8.4 per cent to $0.12bn in the review period.”
Interestingly, CBN still maintains its official, I&E exchange rate of N445.04 as at Monday December 5, 2022, on its website, amid existing multiplicity of exchange rates that have continued to make the market volatile and dysfunctional.
But at the parallel market, which appears to reflect the semblance of true value of naira, it’s still hovering between N750 and N790/$.
According to Bismark Rewane, chief executive of the Financial Derivatives Company, in the current edition of the Digest, “After what could be described as a dead cat bounce, with the Naira gaining 26.24% in one week, the Naira has plunged once again this time with vengeance (losing 15.4%) to the current level of N796/$ on the back of increased dollar demand.
This is despite the CBN’s initiatives to support the Naira, including the clamp down on Bureau De Change operators by the EFCC.
Meanwhile, the Naira is expected to remain weak as forex demand continues to outstrip supply. During the Christmas season normally, the Naira appreciates as visiting friends and relatives from the U.S. and Europe return to Nigeria. But, 2022 is an extraordinary year. So, what you see will be what you get.”
CBN had earlier in the year announced that it would stop the sale of foreign exchange to Deposit Money Banks by the end of 2022.
It had earlier stopped forex allocation to the Bureau de Change operators in 2021, which it accused of aggravating the crisis in the market with their sharp practices.
.Consequently, CBN governor launched its programme tagged ‘RT200 FX Programme’ to boost forex supply in the country through the non-oil sector in the next three to five years.He said after careful consideration of the available options and wide consultation with the banking community, the CBN launched the Bankers’ Committee “RT200 FX Programme“The RT200 FX Programme is a set of policies, plans and programmes for non-oil exports that will enable us to attain our lofty yet attainable goal of $200bn in FX repatriation, exclusively from non-oil exports, over the next three to five years,” he said.Emefiele said the programme’s five key anchors are value-adding exports facility; non-oil commodities expansion facility; non-oil FX rebate scheme; dedicated non-oil export terminal; and biannual non-oil export summit.
Interestingly, Emefiele, through a release from the bank’s corporate communications department on November, 2029, 2022, said a total of $4.987 billion was repatriated into the country by non-oil exporters in 2022, under the programme.
The programme was launched in February 2022 by CBN, in collaboration with the Bankers’ Committee.