The majority of academics and financial professionals concur that macroeconomic indicators have continued to spiral, putting Nigeria’s economy at risk of worst-case stagflation.
With the alternative market’s N615/$ record low last week, the naira defied expectations that the foreign exchange market would be comparatively steady following political party primaries.
Following the recent hike in the benchmark interest rate to 13%, commercial lenders have likewise modified loan pricing. The rise in deposits was passed on by lenders to borrowers, raising the cost of borrowing as a result.
Unusually, the interest rate increase affected the financial market right away. For instance, data given by the Central Bank of Nigeria show that a six-month deposit rate climbed by about 14% to 5.68% in May. (CBN). Similar increases were seen in savings and other time deposits.
Prior to the monetary policy rate (MPR) increase, borrowing costs had risen. The unexpected, rapid increase in the price of diesel had begun to be factored into loan costs by lenders. For instance, the maximum loan rate increased from 26.61 percent in March to 27.79 percent in April, an increase of over 100 basis points.
The President of the Association of Bureaux De Change Operators of Nigeria (ABCON), Dr. Aminu Gwadabe, has warned that Nigerians, whose real incomes have been worsened by rising inflation and naira depreciation, are yet to experience the worst of hardship. Marketers have been alerted to a further increase in the retail price of diesel amid rising uncertainty, political risk, along with fear of a global recession.
In a statement he shared with the media over the weekend, Gwadabe claimed that the naira’s continuous depreciation and dwindling production have increased the danger of stagflation to alarming levels. He claimed that the general populace would suffer as a result of this.
Gwadabe asserted that Nigeria has a constrained fiscal space to navigate the probable crisis ahead in light of the World Bank’s lowering of global GDP to 2.9%, much lower than the 4.1% anticipated by the International Monetary Fund (IMF) in January.
Even at N614/$, he claimed, the naira faces intense FX demand, showing that the economy is still a long way from establishing currency market stability.
The difficulties, according to the ABCON CEO, are reducing household spending power.
“The persistent rise in food inflation is the main cause of inflation. From 18.37% in April to 19.5% in May, the average price level of the food basket increased by 1.13 %. Government measures that assist the sector and enhanced agricultural support can turn this around, he said.
Gwadabe also urged for increased domestic production and a vigorous expansion of non-oil revenue sources to break the risk of crude concentration in order to maintain the economy in the face of current difficulties. In order to increase dollar inflows and save the economy, he claimed that Nigeria’s sizable population and diaspora market could be investigated.
He claimed that adding 5,000 bureau de change (BDC) operators would increase the dollar receipt points and greatly strengthen the nation’s foreign exchange situation.
According to Gwadabe, BDC continues to be one of the methods used by countries all over the world to accept and manage remittances from diaspora, and Nigeria cannot be an exception.
He asserted that the BDCs are crucial to the nation’s economic development and that they have the ability to draw in the necessary funding to expand the economy while strengthening the FX market.
“Adding depth to the FX market and enhancing BDCs operations will result from making BDCs one of the routes through which over $20 billion in annual diaspora remittances enter the economy. Operators of Nigerian BDCs have also recognized the enormous prospects provided by remittances from the diaspora and wish to play a bigger role in luring more foreign capital into the economy. Remittances are proven to assist underprivileged recipients in meeting their fundamental necessities, according to Gwadabe.
He added that if properly implemented, the CBN’s Race to $200 billion in Foreign Exchange Repatriation (RT200 FX Programme) will improve the inflow of foreign currency. He urged for the strict implementation of the plan but defined it as a solution to obtaining consistent and sustainable FX inflow.
Gwadabe exhorted the CBN to liberalize the foreign exchange market and give supply-side policies more consideration.
Following the announcement of a scale-up funding opportunity at the Africa Social Impact Summit (ASIS) set for July 14 in Abuja, Africans operating impact-driven enterprises aimed at resolving significant African concerns have benefited.
The platform, which will provide 10 finalists the opportunity to present their ideas to a select group of investors with an interest in Africa, is in keeping with the summit’s objective of gathering concepts and ideas that can hasten the continent’s economic development.
The summit, which lasts for two days, brings together participants from Africa’s civil society, business community, and government to exchange concepts, lessons learned, plans, and workable solutions to achieve the Sustainable Development Goals (SDGs).
The summit intends to offer possibilities for impact investors to grow market-led solutions with the potential for long-term effect, with an emphasis on climate action, education, health, agriculture, circular economy, and women’s empowerment.
Etemore Glover, Projects Lead for Impact Investors Foundation, one of the implementing partners, broke down the deal room sessions by describing how the opportunity is targeted at companies that have proven they are capable of solving some of the continent’s problems in a way that benefits all.
A better framework for sustainable financing is one of the main outcomes expected from the summit, according to Olapeju Ibekwe, CEO of the Sterling One Foundation, the host organization, and the deal room offers a preview of how the framework would operate.
