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Nigeria’s external reserves fall by $1.65bn in 6 months

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A fall in Nigeria’s foreign reserves by $1.6 billion to $32.97 billion has been observed since the country’s central bank’s recent efforts to unify foreign exchange rates.

In June, the central bank informed all authorised dealers and the general public of the following immediate changes to operations in the Nigerian Foreign Exchange Market: Abolishment of segmentation.

“All segments are now collapsed into the Investors and Exporters window. Applications for medicals, school fees, BTA/PTA, and SMEs would continue to be processed through deposit money banks. Re-introduction of the ‘Willing Buyer, Willing Seller’ model at the I&E Window. Operations in this window shall be guided by the existing circular on establishing the window,” the CBN had said in the June statement.

Foreign exchange reserves and the value of the naira have decreased since then. The nation had $34.62 billion in gross foreign exchange reserves as of June 15. However, the foreign exchange reserves fell to $32.97bn as of December 1, 2023, according to data from the CBN.

The Economist Intelligence Unit revealed in its most recent Africa Outlook report that Nigeria lacked sufficient foreign exchange reserves to support its policy of unifying its exchange rates.

It said, “In Nigeria, an unsupportive monetary policy implies that the naira will remain under pressure, while the central bank lacks the firepower to adequately supply the market or clear a backlog of foreign exchange orders, which will keep foreign investors unnerved. High inflation and a continued spread with the parallel market will destabilise the exchange rate regime and result in periodic devaluations.”

Additionally, JP Morgan recently calculated that Nigeria’s net foreign exchange reserves were $3.7 billion after taking into account larger-than-anticipated currency swaps and borrowing against reserves. Though the CBN may source foreign exchange at commercial and semi-commercial rates, it was noted that the low net foreign exchange reserves put pressure on the foreign exchange market.

Sources close to the government have hinted that as part of measures to ensure liquidity in the country’s forex market, the Nigerian government has begun engagement with persons hoarding the dollar, as well as organizations and those found to have looted the treasury, to make them “bring their monies to the mainstream market.”

The Nigerian government has sought to stabilize the country’s economy with two major policy actions: the removal of the fiscal bleeding in petrol subsidies and the unification of the exchange rate. The results have not been positive, with the further fall of its currency value and the sharp rise in the cost of living.

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Nigerian centra bank’s N1trn OMO bills oversubscribed

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The Central Bank of Nigeria (CBN) has issued N1.053 trillion (680 million dollars) in short-term instruments in the recently concluded sale of government securities.

The sale is a component of CBN’s liquidity management exercise, according to a statement released on Sunday night by Mrs. Hakama Sidi, Acting Director of the Corporate Communications Department.

The apex bank’s N500 billion offer at the Open Market Operations (OMO) auction was oversubscribed, according to Sidi. Foreign investors accounted for 79% of all bids, or 530 million dollars. The auction was the first since last week’s Monetary Policy Committee (MPC) meeting, which was followed by a virtual meeting with international portfolio investors.

Sidi claims that Olayemi Cardoso, the governor of the CBN, utilised the two sessions to establish a comprehensive plan aimed at reducing inflation, stabilising the currency rate, and boosting trust in the banking sector and the overall economy.

The apex bank now enjoys a high degree of confidence from investors, she added, and the management of the CBN was hopeful that its monetary policy initiatives were starting to have a good impact.

Cardoso, in the meantime, emphasised in the investor meeting the prospects for a steady rise in the CBN’s foreign exchange reserves. He gave them assurances about increased market liquidity and the quick resolution of the outstanding backlog of legitimate FX transactions.

“The CBN is committed to supporting price stability by taking the necessary measures to increase liquidity in the foreign exchange markets sustainably.

“Our focus is on building a fully functioning market that allows smooth entry and exit for investors,” he said.

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Partners ‘willing to walk away,’ US warns Tanzania over gas project delays

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Tanzania’s much-awaited, multimillion-dollar liquefied natural gas project is facing impending investor withdrawals from the United States, if delays caused by negotiating technicalities persist, the country has warned.

 

Companies like Exxon Mobil, who have been pushing the deal with Tanzanian authorities, have reached a point where they are now “willing to walk away,” US Deputy Assistant Secretary of State Joy Basu told journalists.

 

Basu, whose portfolio in the Joe Biden administration includes overseeing economic and regional affairs in Sub-Saharan Africa cautioned that “there is LNG in lots of places around the world now, and for Tanzania the window for this particular investment is closing fast. Such windows do not remain open forever.”

 

In meetings with Tanzanian government officials during the week to monitor the development of a US-Tanzania commercial dialogue that was initiated in October of last year, she stated that the project’s status was a top priority.

 

One of many international companies involved in the LNG project in southern Tanzania is Exxon Mobil, headquartered in Houston, Texas. The project’s estimated cost increased from $30 billion in 2014 to $42 billion by the previous year.

 

The project’s other partners include the state-owned Tanzania Petroleum Development Corporation, Exxon Mobil, Pavilion Energy (Singapore), Medco Energi (Indonesia), and Britain’s Shell and Norway’s Equinor, which have been designated as joint main operators.

 

She said that the project’s status was a major priority during meetings with Tanzanian government representatives this week to track the progress of a US-Tanzania commercial dialogue that was started in October of last year.

 

In order to expedite the development of its natural resources, the government intends to work with China’s Cnooc Ltd. to jointly explore for oil and gas in two offshore blocks that are owned by Tanzania Petroleum Development Corp., a state-owned company.

 

Since a downturn in 2020 when it 57.1 billion cubic feet of natural gas, a decline from 63.8 billion cubic feet the year before, the continent’s search for hydrocarbons has increased gradually as European countries look to diversify their energy sources and reduce their reliance on Russian gas.

 

Apart from the established main gas producing countries like Nigeria, Algeria, and Egypt, other African nations like Tanzania have been rising as potential players in the natural gas industry.

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