Border Closure Boosts Naira at Parallel Market – TheNigerialawyer

The close of the country’s land borders to its neighbours has
kept the value of the naira strong at the parallel market, a new
report has shown.

The Managing Director and Chief Executive Officer, Financial
Derivatives Company Limited, Mr. Bismarck Rewane, stated this in a
report titled: “A Pound of Flesh,” which he presented at the Lagos
Business School’s monthly executive breakfast session, a copy of
which was obtained by THISDAY at the weekend.

President Muhammadu Buhari had in August ordered the country’s
land borders shut down as part of the government’s efforts to curb
smuggling and other illegal activities.

The exercise, code-named Exercise Swift Response, is being
coordinated by the Office of the National Security Adviser (NSA),
the Nigeria Customs Service (NCS), the Nigeria Immigration Service
(NIS), the Nigeria Police Force and the Army.

However, THISDAY findings showed that the naira/dollar exchange
rate, which was hovering between N362 and N361 to a dollar on the
parallel market, prior to the federal government’s action, has been
stable at N360 to a dollar.

“Border closure is keeping the parallel market value strong,”
Rewane stated in the report.

He, however, anticipated that the demand for the greenback would
increase this month, due to inventory build-up ahead of the
yuletide.

This, according to him, would mount pressure on external
reserves, adding that volatility in oil prices could have a
negative impact on external reserves as well and could weigh on the
Central Bank of Nigeria’s forex intervention.

“Nigeria’s trade balance would be determined largely by trends
in its import bill. Trade surplus will narrow sharply to $18.6
billion in 2019, driven by a faster pace of increase in import
bill.

“A wider trade balance surplus expected in 2020 as import bill
declines to $43.8 billion,” he added.

In his review of activities in October 2019, Rewane, who is a
member of Presidential Economic Advisory Council, stated that last
month witnessed strange floods, new taxes, more tariffs and issues
around the closed borders.

He disclosed that the government had introduced multiple
taxations to address the revenue shortfalls. This, he noted, was
disrupting consumer behaviour and disposable income.

He noted the president’s recent assents to the new Deep Offshore
Act, Nigeria’s upward movement to 131st in Ease of Doing Business
Index, CBN’s ban of corporates and individuals from OMO
activities.

The economist disclosed that the country’s total external debt
is now at $27.16 billion.

He highlighted slow economic growth, low level of investment as
well as high inflation as some of the challenges facing the
economy.

“There has been plethora of taxes in the last two months and
consumers’ disposable income is squeezed and strapped. Income per
capita is falling, now at $2,300,” he stated.

Commenting on states’ internally generated revenue (IGR), he
pointed out that five states generate more revenue than all others
combined.

According to him, two oil producing states – Rivers and Delta –
have high revenue, but high unemployment rates. He stated that the
high revenue of the two states have not translated into economic
prosperity for their citizens.

In his review of activities in the oil and gas sector, Rewane
stated that the number of operational rigs was up 13.33 per cent,
to 17 in September. This, he said indicated investment in
exploration and points to a likely increase in oil production,
which is currently 1.86 million barrels per day.

Oil is now trading at $62.92 per barrel, with year-to-date gain
of 16.95 per cent. Geopolitical tensions have done little to
sustain price gains.

The president recently signed the Deep Offshore and Inland Basin
Production Sharing Contract (PSC) Amendment Bill into law. The law
seeks to review the sharing formula to accrue more benefits to the
federal government.

He said: “The biggest and one of the most historic legislations
to be signed into law (Signed within six months).

“The Act is expected to increase Nigeria’s share of earnings
earned from oil wells offshore the country. The PSC amendment bill
in addition to multiple taxes, tariffs and levies will stifle
investments.

“The introduction of royalty rates in the Bill could make new
projects become unviable. The eight-year review cycle of the PSCs
will lead to heightened uncertainties and could further erode
investor’s confidence.”