Category Archives: Nigeria

Nigeria set for two aggressive interest rate hikes in Q1 – Reuters poll

By Vuyani Ndaba
February 23, 20245:37 PM GMT+1Updated 20 hours ago

JOHANNESBURG, Feb 23 (Reuters) – Nigeria is set for two aggressive interest rate hikes within a little over a month to subdue inflation and boost the naira after a couple of missed monetary policy meetings, a Reuters poll found on Friday.
A survey taken in the past week suggests that Nigeria’s monetary policy rate will be hiked 225 basis points to 21.00% on Feb. 27, in Governor Olayemi Cardoso’s first monetary policy meeting since he took office a couple of months ago.

There was no clear majority in the sample of 15 analysts, with one expecting a 50 bps hike to 19.25% and one a 1,000 bps increase to 28.75%.
That sets the stage for Cardoso to possibly act aggressively, though some doubt authorities have the appetite.
“We expect significant policy tightening and the announcement of de facto system-wide tightening measures,” wrote Razia Khan at Standard Chartered.
“We think both steps are needed to attract greater foreign portfolio investment and anchor inflation expectations,” she added.

A 175 bps jump to 22.75% is expected in March.
Consumer inflation in Africa’s biggest economy quickened for the 13th straight month in January to 29.90%, raising the cost of living to unbearable levels for many in the continent’s most populous nation.
The Central Bank of Nigeria (CBN) has not had a policy meeting since July, putting it out of kilter with the rest of the continent’s key central banks that hold meetings almost every second month.

“Reassuringly, the CBN has announced that it will hold its first two MPC meetings of the year in quick succession, on February 27 and March 26,” wrote analysts at Barclays.
“This suggests to us that it is aware it is well behind the policy curve, and will need to deliver at least two strong doses of policy tightening.”
The naira fell to its weakest level at 1,680.5 per dollar on Wednesday in the official spot market amidst a chronic shortage of the U.S. currency.

David Omojomolo, Africa economist at Capital Economics, wrote that the latest devaluation may be enough to put the balance of payments on a stable footing, though as things stand the currency has continued to weaken on the parallel market.
A poll last month suggested economic growth in Nigeria would be 3.0% this year and 3.7% next.
“Nigeria needs to take a leaf out of Kenya or Zambia’s book – and ‘tighten’ monetary policy with rate hikes,” said Charlie Robertson, head of macro strategy at FIM Partners.
Stabilising the naira is probably the most pro-growth move the CBN could make, so interest rate hikes would benefit Nigeria more than harm it, he added.

Reporting by Vuyani Ndaba; Editing by Jan Harvey

Source: Reuters, 23rd February 2024


Africa’s largest economy is battling a currency crisis and a crumbling economy

PUBLISHED: Wed, 21 Feb 2024 08:13:09 GMT
Elliot Smith

With inflation nearing 30% and its currency hitting an all-time low, Nigeria is facing one of its worst economic crises in years.
The latest data from the National Bureau of Statistics on Thursday showed that the headline consumer price index (CPI) rose to 29.9% year-on-year in January, its highest level since 1996.
The surging cost of living and economic hardship sparked protests across the country over the weekend.

With annual inflation nearing 30% and a currency in freefall, Nigeria is facing one of its worst economic crises in years, provoking nationwide outrage and protests.

The Nigerian naira hit a new all-time low against the U.S. dollar on both the official and parallel foreign exchange markets on Monday, sliding to almost 1,600 against the greenback on the official market from around 900 at the start of the year.

President Bola Tinubu announced Tuesday that the federal government plans to raise at least $10 billion to boost foreign exchange liquidity and stabilize the naira, according to multiple local media reports.

The currency is down around 70% since May 2023 when Tinubu took office, inheriting a struggling economy and promising a raft of reforms aimed at steadying the ship.

In a bid to fix the beleaguered economy and attract international investment, Tinubu unified Nigeria’s multiple exchange rates and enabled market forces to set the exchange rate, sending the currency plunging. In January, the market regulator also changed how it calculates the currency’s closing rate, resulting in another de facto devaluation.

Years of foreign exchange controls have also generated enormous pent-up demand for U.S. dollars at a time when overseas investment and crude oil exports have declined.

“The weakened exchange rate should increase imported inflation, which will exacerbate price pressures in Nigeria,” Pieter Scribante, senior political economist at Oxford Economics, said in a note Friday.

The country is Africa’s largest economy and has a population of more than 210 million people, but relies heavily on imports to meet the needs of its rapidly growing population.

“Shrinking disposable incomes and worsening cost-of-living pressures should remain concerns throughout 2024, further stifling consumer spending and private sector growth,” Scribante added.

Inflation, meanwhile, continues to soar, with the headline consumer price index hitting 29.9% year-on-year in January, its highest level since 1996. The increase is being driven by a persistent rise in food prices which jumped by 35.4% last month compared to the year before.

The surging cost of living and economic hardship prompted protests across the country over the weekend. The plummeting currency has added to the negative impact of government reforms such as the removal of gas subsidies, which tripled gas prices.

President Tinubu said in late July that the government had already saved more than 1 trillion naira ($666.4 million) from removing the subsidies, which it will redirect into infrastructure investment.

Alongside soaring inflation and a plunging currency, Nigeria is also battling record levels of government debt, high unemployment, power shortages and declining oil production — its main export. These economic pressures are compounded by violence and insecurity in many rural areas.

“Excess market liquidity, exchange rate pressures, and food and fuel shortages threaten price stability, while inflation risks rising out of the government’s control,” Oxford Economics’ Scribante added.

“Robust import demand could force the Central Bank of Nigeria (CBN) to reimpose import bans and FX restrictions to lessen the burden on the balance of payments. This could exacerbate domestic product shortages and increase inflation further.”

Inflation is expected to peak at nearly 33% year-on-year in the second quarter of 2024, according to Oxford Economics, and could stay higher for longer given the plethora of economic risks ahead.

“Furthermore, rising inflation and increased hawkishness by the CBN indicate that the policy rate could be raised this quarter,” Scribante said. The policy rate currently sits at 18.75%.

“We expect a combined 200 bps in rate hikes at the next two MPC meetings, scheduled for end-February and end-March this year; however, we think that more hikes are needed to stem rising inflation,” Scribante added.

Jason Tuvey, deputy chief emerging markets economist at Capital Economics, sees the CBN opting for a bigger interest rate bazooka when policymakers meet on Feb. 26 and 27.

“The meeting will be a key test of whether the policy shift under President Tinubu is truly regaining some momentum,” Tuvey said in a note Thursday.

“We expect that the MPC will try to restore some of its inflation-fighting credibility by delivering a large interest rate of 400bp, to 22.75%.”


Nigeria’s new Dangote refinery to export first fuel cargoes

A view of the newly-commissioned Dangote Petroleum refinery is pictured in Ibeju-Lekki, Lagos, Nigeria May 22, 2023. REUTERS/Temilade Adelaja/File Photo Purchase Licensing Rights

LONDON/BRUSSELS, Feb 14 (Reuters) – Nigeria’s Dangote oil refinery has issued tenders to sell two fuel cargoes for export, the first from the newly commissioned refinery, trading sources with knowledge of the matter told Reuters.
The refinery, Africa’s largest with a nameplate capacity of 650,000 barrels per day, was built on a peninsula on the outskirts of the commercial capital Lagos by the continent’s richest man Aliko Dangote.
Nigeria has for years relied on expensive imports for nearly all the fuel it consumes but the $20 billion refinery is set to turn it into a net exporter of fuel to other West African countries, in a huge potential shift of power and profit dynamics in the industry.
Sources told Reuters last week that the refinery was preparing to deliver its first fuel cargoes to the domestic market within weeks.
The two fuels on offer are typical products of running light sweet crude through a crude distillation unit (CDU) in a refinery without further upgrading capacity. It is expected to take months for upgrading units to be brought online, experts have said.
The refiner began buying crude in December last year and Nigeria’s state-owned oil firm NNPC Ltd has been the main supplier. Dangote has also purchased some U.S. oil and is expected to receive 2 million barrels of U.S. WTI Midland in early March, according to LSEG and Kpler ship tracking.
Reporting by Ahmad Ghaddar and Robert Harvey in London, Julia Payne in Brussels. Additional reporting by MacDonald Dzirutwe in Lagos and Arathy Somasekhar Editing by Mark Potter, Kirsten Donovan

Source: Reuters, 14th February 2024


What is ECOWAS and why have 3 coup-hit nations quit the West Africa bloc?

Nigeria’s President, Bola Ahmed Tinubu, center first row, poses for a group   –  Copyright © africanews  Gbemiga Olamikan/Copyright 2023 The AP.  All rights reserved

Several months of tension between three coup-hit countries in West Africa and the regional bloc known as ECOWAS (Economic Community of West Africa) boiled over when the nations announced their immediate withdrawal from the bloc and accused it of a lack of support and “inhumane” coup-related sanctions.

In their joint statement on Sunday, the juntas of Niger, Mali and Burkina Faso said that instead of helping their countries fight the security threats facing them, ECOWAS imposed “illegitimate, inhumane and irresponsible” sanctions when they staged the coups “to take their destiny into their own hands.”

It’s the first time in the bloc’s nearly 50 years of existence that its members are withdrawing in such a manner. Analysts say it’s an unprecedented blow to the group and a further threat to the region’s stability.

How important is ECOWAS?

The 15-nation regional bloc Economic Community of West African States was established in 1975 with one goal: “To promote co-operation and integration … to raise the living standards of its peoples and to maintain and enhance economic stability. “It has since grown to become the region’s top political authority, often collaborating with states to solve domestic challenges on various fronts from politics to economy and security.

Under the current leadership of Nigeria, West Africa’s economic powerhouse, ECOWAS is needed more than ever with the region’s stability being threatened by rampant coups and security crises. It operates “in a world … where you need to be strong in one bloc and united in solidarity,” said Babacar Ndiaye, senior fellow with the Senegal-based Timbuktu Institute for Peace Studies.

The problem, though, Is that some believe ECOWAS Is fast losing goodwill and support from many West Africans who see it as failing to represent their interests in a region where citizens have complained of not benefitting from rich natural resources in their countries.

“When you see citizens pushing back and seeing ECOWAS as the leaders club or leaders who support each other at the detriment of citizens, it doesn’t work well,” said Oge Onubogu, director of the Africa Program at the U.S.-based Wilson Center think tank.

What is the process of withdrawal from the bloc?

The ECOWAS treaty provides that its member states who wish to quit the bloc shall give its leadership a one-year written notice, at the end of which “such a state shall cease to be a member of the community.”

The treaty says that during that year, the state planning to quit shall “nevertheless observe the provisions” and its obligations under the agreement. However, ECOWAS said it was yet to be notified about the three countries’ decision to quit and that they “remain important members” of the body for now.

Analysts say ECOWAS will likely seek a continued dialogue with the juntas on how best to ensure the region’s stability while the three nations’ military leaders focus on seeking new partnerships.

How significant is such a withdrawal?

One thing is clear. Relations between ECOWAS and the three countries have deteriorated because of the bloc’s choice of sanctions as a key tool to reverse the coups there.

The Alliance of Sahel States that the juntas created in November were also seen by observers as an attempt to legitimize their military governments, seek security collaborations and become increasingly independent of ECOWAS.

But withdrawing from the 49-year-old bloc in such a manner is unprecedented and seen as a “major change in the sub-region,” said Ndiaye with the Timbuktu Institute for Peace Studies.

“It is the most challenging issue facing the subregion since its inception,” said Ndiaye. “All the work they have put into building a collective security mechanism is based on the protocols that posit that democracy, good governance and the rule of law will be the basis for peace and security.”

Russia, prolonged military rule and other possible fallouts

ECOWAS has led efforts to return civilian rule to the coup-hit countries, pressuring the juntas with sanctions and rejecting lengthy transitional timetables.

The worry has been that there is little evidence to show the juntas are committed to holding democratic elections within those timelines. With Sunday’s announcement, analysts say the non-allegiance to ECOWAS may delay the return of democracy in the three countries and motivate coups in others.

“If they are no longer part of the ECOWAS bloc, they don’t have to abide by previous transitional timelines promulgated as a means of easing sanctions against them,” said Ryan Cummings, director of Africa-focused security consulting company Signal Risk.

Cummings says the withdrawal might result in a new opportunity for Russia to expand its presence and interests in Africa.

The once-friendly relations between the three countries and developed nations in the West and Europe had already turned sour after the coups. Russia meanwhile has been more welcoming and continues to play into anti-French sentiment by framing itself to African nations as a country that never colonized the continent.

The Russian mercenary group Wagner has been present in Mali, where it is partnering with the army in battling armed rebels. In Burkina Faso, state media reported last week that Russian soldiers arrived to “strengthen military and strategic cooperation” between the two countries. Both Russian and Nigerien senior officials have also recently hosted each other.

“These countries have in recent months reinforced and entrenched partnerships with Russia from national security to the economy,” said Cummings with Signal Risk.

How much support they could get from Russia remains to be seen. In African countries where Wagner has been present, security crises there have persisted while the mercenary group has been accused of various rights violations.

Source: AfricaNews, 29th January 2024


U.S. Secretary of state says Nigeria is “essential” to global future

President Bola Tinubu receives US Secretary of State, Antony Blinklen during his visit to Nigeria’s presidential Villa Abuja on Tuesday. Credit: State House.

Yusuf Tuggar tweeted Anthony Blinken’s visit focused enhancing trade relations and deepening democracy in West Africa.

Nigerian president Bola Tinubu held discussions with the US secretary of state ahead of a press conference.

The US top diplomat said Nigeria had an essential part to play in how Africa could shape the global future.

“Nigeria as Africa’s largest country, largest economy, largest democracy, is essential to that effort [Editor’s note: referring to the role Africa has in shaping the future globally].”

“We are doing a lot of work together already to drive in a positive direction. We’re we’re we’re driving climate action. As partners in the Global Methane Coalition, we’re pushing for permanent representation for African voices in the U.N. Security Council, in other international organizations.”

“The United States is committed to strengthening genuine partnerships on the continent, to work to solve shared challenges, and also to deliver on the promise and the fundamental aspirations of our peoples,” Blinken said.

His trip is part of President Biden’s attempt to tout the USA as Africa’s key economic and security ally.

Nigeria is Blinken’s third stop on his tour of African nations, following Cape Verde and Ivory Coast. He will travel next to Angola.

Source: AfricaNews, 24th January 2024