Bloomberg survey says Nigeria unable to avert naira devaluation past 2021
A Bloomberg survey of 19 investors and analysts has shown that Nigeria’s dwindling reserves and lower oil prices will probably force the Nigerian central bank to devalue one of the world’s most stable currencies by next year.
Ten out of 19 respondents expect the naira to be weakened in 2021, while five predict a mark-down as early as the second half of this year. The remainder believe the central bank will keep a firm grip on the currency until 2022 or 2023.
The survey participants included money managers, analysts and economists based in Nigeria and abroad, according to Bloomberg.
Since June, Nigeria’s reserves have decreased by 17% to $37.5 billion, the lowest in more than two years.
The slide has accelerated since the coronavirus outbreak in China rocked global markets and sent Brent crude prices down to around $55 a barrel. Last week, reserves in Africa’s biggest oil producer fell by $350 million, the most on a weekly basis since October.
All but three of the respondents said reserves would have to hit $30 billion before the central bank considers letting the currency fall, which is in line with what Governor Godwin Emefiele told investors last year.
This MPC member is latest to express worry over Nigeria’s debt service costs
The Central Bank of Nigeria (CBN)-led Monetary Policy Committee (MPC) has raised concerns over Nigeria’s rising debt and debt service cost.
An MPC member, Okwu Nnanna, said in his personal note at the last MPC meeting in Abuja that debt service gulped N2.45 trillion in 2019, and that Nigeria’s rising debt remained unsustainable.
Nnanna joins a motley crew of economists and multilateral agencies including the International Monetary Fund (IMF) in raising concerns over Nigeria’s rising debt service costs which is set to rise further with the Federal government preparing to tap the foreign debt market for some $3 billion to fund the 2020 budget.
“At N2.45 trillion or 23.2 per cent of the total expenditure, the obligation is 14.5 per cent higher than the previous year and could be exacerbated if fiscal revenues and oil exports decline lower than the benchmarks,” Nnanna said.
He explained that with the debt-service-to-revenue ratio rising precipitously, the debt level is on the trajectory which is not sustainable given the slow pace of revenue generation and output growth.
Nnanna said public expenditure was constrained by weak tax administration and concomitant inadequate revenue buffers.
FAAC disbursements hit 4-month high of N716bn in January
The Federation Account Allocation Committee (FAAC) disbursement to the three tiers of government rose to a four-month high in January, meaning more cash for state governments.
FAAC rose 12.61 percent on a monthly basis to N716bn in January.
This is for revenue generated in December.
Under the FAAC arrangement, revenue generated from sales of crude oil, Value Added Tax (VAT), corporate tax etc. are shared among all three tiers of government based on a formula.
Most states in Nigeria depend on disbursements among the three-tier of government for at least 80 percent of their revenues, hence the increase in allocation in January, after FAAC fell to least 7-month low in December, will help fund their spending.
NLNG inks 10-year supply deal with Galp
Nigeria Liquefied Natural Gas (NLNG) has signed a deal with Galp Trading SA for the supply of one million tonnes of LNG per year, the African producer said in a statement on Wednesday.
The volumes will be supplied on a delivered ex-ship basis for 10 years from Trains 1, 2 and 3 of a six-train NLNG production facility on Bonny Island.
The transaction follows a similar deal with Italy’s Eni and France’s Total announced last month and a 0.5 million tonnes per year deal with commodity trader Vitol signed in December.
NLNG has been remarketing some volumes from its existing trains as some contracts approach expiry.
EIA lowers global oil demand on coronavirus impacts
The US Energy Information Administration (EIA) has forecast global oil market demand fundamentals to tighten this year, largely due to the impacts of the coronavirus outbreak in China. The EIA now forecasts total global liquids supply to average 101.97mn barrels per day (bpd) in 2020 from 102.37mn bpd previously. Total demand is now expected to average 101.74mn bpd (vs. 102.11mn previously). The EIA also cut its oil price forecast to US$61/b from US$65/b previously. According to the EIA, the impact of the related economic slowdown in China, will keep crude oil prices below US$60/b through H1-2020.