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Nigeria’s central bank ends FX-denominated collateral for Naira loans

Published

1 month ago

April 9, 2024

Nigeria’s central bank has made it illegal for banking lenders to accept foreign currency as collateral when giving out naira loans. This is the latest step the country is taking to keep its currency stable and protect its banking system.

An official from the government said in a circular that bank customers using foreign cash as collateral for naira loans was “not allowed.” The central bank said only Eurobonds issued by the government or letters of credit issued by an overseas bank could be used as foreign currency collateral.

It told lenders that they had 90 days to pay off all loans backed with dollar-denominated collateral or face punishment. After falling against the dollar for the second time in less than a year in January, the naira has risen strongly on both the official and black markets.

The currency got stronger after the central bank raised interest rates in February and March and made it easier for people from other countries to bid at its fixed-income sales. Analysts say the bank now lets foreign buyers pre-fund their accounts and get naira at the mid-market exchange rate for bill auctions.

Lenders used to have trouble meeting the bids of foreign investors because they had to pay extra on settlement day if they took money from the central bank’s discount window to pay their bills.

Foreign cash shortages in the country have been a problem for the Central Bank of Nigeria (CBN) for a long time. It was decided in February that governments, commercial banks, merchant banks, other financial institutions (OFIs), or public officials cannot directly or indirectly own Bureaux de Change (BDCs).

Some effects have shown up because of the CBN’s many efforts. The apex bank says that overall external funds rose by $993 million to $34.11 billion on March 7, 2024. This is the highest amount in eight months.

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Nigeria’s inflation hits 28-year high of 33.69% in April

Published

18 hours ago

May 16, 2024

Ifeoluwa Dada

Nigeria’s consumer inflation reached a 28-year high of 33.69% in April, up from 33.20% in March, according to statistics agency figures released on Wednesday.

President Bola Tinubu’s administration has slashed petrol and energy subsidies and devalued the local naira currency twice.

To manage pricing pressures, the central bank has hiked interest rates twice this year, including the highest hike in almost 17 years. The central bank governor has stated that rates will remain high for as long as necessary to reduce inflation. The bank will host another rate-setting meeting next week.

When compared to the previous year, the inflation rate in April 2024 was 11.47 percentage points more than in April 2023, when it stood at 22.22 percent. This implies that the headline inflation rate has increased dramatically during the last year.

According to the National Bureau of Statistics, food and nonalcoholic beverages remained the largest contributor to inflation in April. Food inflation, which accounts for most of the inflation basket, rose to 40.53% yearly from 40.01% in March.

Price pressures have left millions of Nigerians facing the biggest cost-of-living crisis in decades, as they fight to satisfy their most basic necessities.

Tinubu has offered a 35% salary increase for state personnel to alleviate pressure on government workers. To assist disadvantaged households, his government has resumed a direct cash transfer program and provided at least 42,000 tons of grains such as corn and millet.

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Uganda discusses power line to South Sudan with China’s Sinohydro

Published

2 days ago

May 15, 2024

Ifeoluwa Dada

According to the president’s office, Uganda is in negotiations with Sinohydro Corporation Limited of China to build a $180 million power transmission line that would enable Uganda to export electricity to South Sudan, which is severely short on energy.

Ugandan President Yoweri Museveni received a group led by Vice President of Sinohydro Corporation Yang Yi Xin on Monday as part of the negotiations, according to a late-morning statement from Museveni’s office.

The project, according to the statement, will entail building a new substation and expanding two existing ones in addition to building a 138-kilometre high-voltage transmission line to provide power to South Sudan.

“We are very much willing to help develop this project with the required finance if needed,” Xin was quoted as telling the president.

The statement stated that Museveni endorsed Sinohydro’s proposal to carry out the project. Uganda and South Sudan inked a power sales deal in June of last year, enabling Uganda to sell electricity to South Sudan.

To enable Uganda to export electricity to South Sudan, the two nations inked a power sales deal in June of last year. The Chinese firm is completing a $1.5 billion, 600-megawatt hydropower project on the River Nile in Northern Uganda that is meant to be the source for electricity exports to South Sudan.