VenturesNow

Ethiopia’s birr falls 30% as central bank starts currency float

Published

3 months ago

July 29, 2024

Ethiopia’s central bank on Monday floated the country’s currency, the birr, in an attempt to resolve the long-delayed debt restructuring deal.

The largest lender in the nation, Commercial Bank of Ethiopia, said that the value of the birr fell by 30% versus the US dollar to 74.73 per dollar. On Friday, the exchange rate was 57.48 birr to the US dollar.

Late last year, the country in the Horn of Africa—which has been dealing with extreme inflation and ongoing shortages of foreign currency—became the third economy on the continent to default on its public debt in as many years.

It has been in discussions with the International Monetary Fund (IMF) to create a new credit program, as the last one that was agreed upon in 2019 and sponsored by the fund was cancelled because of fighting in Tigray’s northern province.

Statements on the float from the central bank stated that “banks are henceforth allowed to buy and sell foreign currencies from/to their clients and among themselves at freely negotiated rates” and that it will only be making “limited interventions” in the FX markets going ahead.

Prime Minister Abiy Ahmed first unveiled the measures late on Sunday.

In a video posted online, Governor Mamo Mihretu of the central bank said that Ethiopia would receive $10.7 billion in external finance assistance from the World Bank, IMF, and other creditors as part of the reforms.

“The IMF and World Bank are both providing exceptional and front-loaded funding support that will be among their highest such allocations in the African continent,” he said.
Importers, who had been relying on the black market to secure dollars, expressed relief at the central bank’s move.

“Now I don’t need to go to the black market to buy or sell dollars. It is now a market-based foreign exchange regime, so (we) will buy or sell based on the legal channels,” said a businessman in Addis Ababa, the capital, who wished to remain anonymous.

The IMF did not immediately provide a statement. Monday saw a slight decline in Ethiopia’s primary $1 billion government bond, which had recently rallied to its highest point since early 2022.

The transition to a foreign exchange rate set by the market was welcomed by the US.

“Market-based FX is a difficult, but necessary step for Ethiopia to address macroeconomic distortions,” the United States embassy in Addis Ababa posted on social media platform X.

The civil conflict in Tigray halted progress in Ethiopia’s request for a debt restructure under the Group of 20’s Common Framework procedure in early 2021. Ethiopia is the second most populous country in Africa.

A new IMF reform program is reportedly tied to the economic reforms the administration has already disclosed, including the adoption of an interest rate-based monetary policy earlier this month, according to analysts.

Related Topics:Currency float Ethiopia Featured

Click to comment

VenturesNow

Dangote insists refinery has 500 million litres of petrol to meet Nigeria’s needs

Published

14 hours ago

October 30, 2024

Ifeoluwa Dada

Aliko Dangote, the chairman of Nigeria’s Dangote oil refinery, has claimed a 500 million litre gasoline stockpile, refuting claims by some oil marketers that they had to augment Dangote’s supplies with imports to address fuel shortages.

Africa’s wealthiest man claimed to be a guest of the Nigerian President, Bola Tinubu, along with the finance minister, the head of the state-owned NNPC, and oil regulators at a meeting in Abuja on Tuesday.

The goal was to reconsider a policy mandating that NNPC sell crude oil to the Dangote refinery in local naira currency in an attempt to relieve pressure on foreign exchange and assist the massive refinery in obtaining enough crude to meet its 650,000-barrel-per-day capacity.

After the discussion, Dangote explained that he should not be held responsible for fuel shortages in Africa’s top oil-producing nation because his company does not deal in the retail sale of petrol.

He added that it costs him money to keep fuel in storage tanks.

“I expect the NNPC and marketers to stop importing. They should come and collect; we have everything they need,” said Dangote.
Two weeks ago, local fuel traders began increasing imports, claiming that the Dangote refinery was unable to meet domestic demand, exacerbating fuel shortages.

In September, the Dangote Oil Refinery in Lagos started processing petroleum to produce 25 million litres per day. The objective is to progressively boost output to 35 million litres per day, which Dangote thinks will be enough to satisfy regional demand. However, the industry regulator stated at an oil conference in Lagos on Monday that Nigeria uses 45 to 50 million litres of petrol every day.

President Tinubu advised stakeholders to concentrate on providing enough petrol for domestic consumption to lessen reliance on imports, according to a government spokesperson’s statement.

In order to settle the naira pricing of oil and refined goods, he also instructed them to use Afreximbank, the financial adviser for the naira crude sale plan.

The refinery was forced to rely on costly imports after Dangote filed a complaint alleging that oil majors were preventing it from accessing locally produced oil by selling it above market value or claiming it was unavailable. Previously, Dangote had to purchase crude on the international market.

The plan to sell crude in naira will continue, according to Wale Edun, Minister of Finance and Coordinating Minister of the Economy, and the government would not meddle in setting the oil industry’s exchange rate.

VenturesNow

Ghana considers imports from Nigeria’s Dangote oil refinery

Published

1 day ago

October 29, 2024

Ifeoluwa Dada

The head of Ghana’s oil regulator stated on Monday that once Nigeria’s Dangote Oil Refinery was fully operational, Ghana might purchase petroleum products from the facility, reducing the need for more costly exports from Europe.

Mustapha Abdul-Hamid, the chairman of Ghana’s National Petroleum Authority, stated at the OTL Africa Downstream oil conference in Lagos that this might result in the elimination of $400 million in petroleum imports from Europe each month.

“If the refinery reaches 650,000 bpd a day capacity, all that volume cannot be consumed by Nigeria alone, so instead of us importing as we do right now from Rotterdam, it will be much easier for us to import from Nigeria and I believe that will bring down our prices,” Hamid said.

The Nigerian billionaire Aliko Dangote constructed the Dangote Oil refinery, which is anticipated to run close to capacity by the end of the year and maybe reach full capacity in the first quarter of 2025, according to analysts.

Hamid claimed that by eliminating freight expenses, buying from Nigeria instead of Europe would result in lower prices for other goods and services. He predicted that African nations would eventually settle on a single currency, which would reduce demand for US dollars.

In the second quarter of 2024, Ghana’s GDP rose 6.9% year over year, primarily due to the robust growth of the extractive industry, which increased demand for petroleum.