1. The federal government's domestic debt rose to 5.21 trillion naira ($34 billion) at the end of June, from 4.87 trillion naira as of March, according to statements on the website of the Abuja-based Debt Management Office. The amount is equivalent to 15.3 percent of 2011 gross domestic product based on National Bureau of Statistic estimates, said Gregory Kronsten, head of macroeconomic and fixed income research at FBN Capital Ltd. The eurozone's average debt as a percentage of GDP was 85.1 percent by the end of 2010, according to Eurostat. "It's still very, very low" compared to European peers, Kronsten said by phone from London today. "It's still pretty strong credit Nigeria, the strength is the external balance sheet and public indebtedness and reserves." Nigeria's foreign reserves increased 5.3 percent this month to $33.5 billion as of July 26. This is down from $37.6 billion a year ago, according to Central Bank of Nigeria data. Nigeria is rated B+ by Standard & Poor's and BB- with a "negative" outlook by Fitch Ratings. 2. Ngozi Okonjo-Iwealla Magic: Nigeria's dollar bond yields fell to a record as its debt stock is low compared with that of European peers and on expectations Ngozi Okonjo-Iweala, a managing director at the World Bank, will help spur policy changes to encourage investment when she returns to the Cabinet. The yield on the 6.75 percent Nigeria's Eurobonds due 2021 fell two basis points, or 0.02 percent to 5.87 percent, the lowest level since the debt was issued in January, as of 2:32 p.m. in London, according to data compiled by Bloomberg. The bonds' price gained 0.1 percent to 106.313 cents on the dollar. The $500 million of bonds are Nigeria's only international notes. As Nigeria's finance minister from 2003 to 2006, Okonjo- Iweala spearheaded talks that led the Paris Club group of creditors to write off $18 billion in Nigerian debt. At the World Bank since 2007, she had special oversight for work in Africa, eastern Europe, and central and South Asia. 3. Optimism on Goodluck Jonathan: President Goodluck Jonathan, who was returned to power in April elections, slashed almost 500 billion naira off a budget adopted two months earlier, taking the final spending plan to 4.5 trillion naira. Nigeria's Senate passed a bill last month creating a sovereign-wealth fund to help the country save more of its oil revenue and funnel money into projects. "There's a feeling this presidency might actually achieve something," said Kronsten. "There are quite high expectations of reforms" as Okonjo-Iweala leaves her World Bank post mid- August to become coordinating minister for the economy and minister of finance in Nigeria, the Washington-based lender said July 8. Above Data from Bloomberg 4. Naira Depreciates: The Organised Private Sector (OPS) has expressed concern that the depreciation of the Naira is having a negative impact on its businesses, Businessday Reports. The OPS says the depreciation of the Naira in the parallel market is raising cost of importing raw materials, production and narrowing profit margin since not all costs can be passed on to Nigeria's already over burdened consumer. Femi Deru, president of the Lagos Chamber of Commerce and Industry (LCCI) expressed concern over the naira's falling value in the official and parallel market. Deru, who was particularly disturbed by the widening gap between the official and parallel market rates, observed that such a wide gap will encourage speculative demand and round tripping of the dollar. "We appreciate the commitment of the Central Bank of Nigeria (CBN) to stabilising the rate, within a 5 percent band of N150 to a dollar. But the truth is that the parallel market has strong signalling effects in the economy." Deru Said. Analysts say if the gap between the official rate and parallel market rate of the dollar remains too wide, it could tempt some manufacturers to sell their foreign exchange for profit rather than use it buy raw materials – which is the purpose for which it is meant. According to BusinessDay, "the gap between the official and parallel market exchange rates was as high as N16 for the dollar and N31.71 for the British pound. Analysts say this huge profit on each dollar and pound is higher than the profit margin of most manufacturers on their manufactured items. And this profit comes without any production process, which makes it quite attractive to just round trip the dollar or pound instead of engaging in a long production process." The Central Bank says it will soon review upward the limit on banks' autonomous foreign exchange sales to bureaux de change (BDC). The apex bank indicated this in the communiqué issued at the end of the monetary policy committee (MPC) on Tuesday. It will be recalled that the apex bank last month limited the amount of autonomous foreign exchange each bank could sell to BDCs to $250,000 on banks'. The policy though occasioned the appreciation of the naira in the official and interbank market; it however triggered depreciation of the naira in the parallel market. This development widened the gap between the official and parallel market rates to N11.19 on Tuesday from N4.19 on June 24th when the limit was introduced. The widening gap however triggered round-tripping of foreign exchange from the interbank market to the parallel market. Daniel Elombah Publisher: www. Elombah.com (A Nigerian Perspective on World Affairs) +44-7958588018 "Africa's "briefcase bandits" run full-fledged criminal enterprises. Sani Abacha of Nigeria amassed $5 billion, and the Swiss Supreme Court in 2005 declared the Abacha family a "criminal enterprise". Omar al-Bashir of the Sudan has stashed away $7 billion while Hosni Mubarak is reputed to have piled a fortune of $40 billion. In comparison The net worth of 43 U.S. presidents from Washington to Obama amounts to $2.5 billion". - George Ayittey |
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