The United Kingdom Export Finance Agency pre-approved status for the naira as a medium of exchange will enhance the financial position of small and medium enterprises, a financial expert has said.
The Head of Banking and Finance Department, Nasarawa State University Keffi, Prof. Uche Uwaleke, expressed the view in an interview with newsmen in Abuja on Monday.
Uwaleke said that with such development, the naira had joined other 62 pre-approved currencies directly accepted for trade by the UK Government.
The UK Export Finance Agency (UKEF) recently stated that it had concluded plans to include the naira in its list of “pre-approved currencies”.
The granting of a ”pre-approved currency” status by UKEF gives exporters from the UK the opportunity to offer their overseas customers UKEF-backed finance in local currency of the importers.
”It will enhance the financial position of small and medium enterprises as foreign exchange risk associated with international trade is minimised thus eliminating a major source of uncertainty over debt servicing cost of credit facilities.
”Therefore, business enterprises are in a stronger position to negotiate better terms with their banks in Nigeria and avoid variable debt service costs linked to fluctuations in exchange rate,” Uwaleke said.
According to him, the bank in Nigeria will receive a guarantee for full repayment of the loan, it will help to improve the quality of risk assets of Nigerian banks and enhance financial systems stability.
Uwaleke said that the expected increase in Foreign Direct Investments could bring about transfer of technology to small businesses in Nigeria.
”The UKEF flexible financing solutions have been described as the “next best thing to concessionary financing” due to their relatively cheap and flexible nature which is particularly healthy for small business enterprises,” he said.
Uwaleke said that the UKEF pre-approved status for the naira had the potential for strengthening economic ties between Nigeria and Britain.
He said that with the deal, it meant that import bills from the UK could be settled in naira rather than the British pound.
”This deal makes it possible for the importer to access a loan from a bank in Nigeria of at least 85 per cent of the contract sum for a maximum period of two years.He said that under the arrangement, “the Nigerian bank is guaranteed repayment by the UKEF in case the importer defaults.”
According to him, while applauding this UKEF privileged status for the Naira, it is important to note that the British credit agency has not been without knocks especially as it relates to its aggressive export drive.
He said that for instance, Amnesty International has lampooned the agency for lack of transparency and severally accused it of human rights abuses.
Uwaleke, however, said that the Federal Government out to be cautious in embracing the deal, especially as UKEF had been accused of human rights violation issues.
He said Amnesty International report of 2013, entitled ”A history of Neglect: UK Export Finance and Human Rights”, highlighted the concern.
Uwaleke noted that the report stated that UKEF’s “eagerness to help secure new overseas contracts for British companies often comes at the expense of human rights”
He said against such backdrop, the Federal Government should be mindful of these controversies, including the likely impact of the deal on Nigeria’s rising public debt.
Uwaleke said the Federal Government should be concerned since UKEF would coordinate the advance of loans to businesses and entrepreneurs for the purchase of goods made in Britain,
He advised the government to put in place mechanisms to ensure that the loans were essentially for infrastructure-related projects, especially in sectors, such as power, water and transport.
He said that the government should also firm up measures already in place to guard against dumping as this development would ease the importation of goods from the UK.
”In this new deal, the interest of Britain should go beyond export promotion to helping Nigeria, a dependable ally, create the enabling environment for a private sector-led inclusive growth.
”Indeed, the strategy of ”pre-approved currencies” by the UKEF is a clear case of ”thinking outside the box”- a major lesson for Nigeria’s sole export credit agency, the Nigerian Export-Import Bank,” Uwaleke said.
15.5% MPR Increase’ll Control Inflation – CBN
The Central Bank of Nigeria
(CBN) says its Monetary Policy Committee’s decision to increase Monetary Policy Rate (MPR) is to control rising inflation.
CBN’s Director, Monetary Policy Department, Hassan Mahmoud, stated this, midweek, at a post-MPC briefing tagged “Unveiling Facts behind the Figures’’.
Recall that the MPC, in its 287th meeting on Tuesday, had increased the MPR by 150 basis points, from 14 per cent to 15.5 per cent.
The MPR is the baseline interest rate in an economy on which other interest rates within that economy are built on.
CBN Governor, Godwin Emefiele, had explained that the decision was informed by persistent rise in inflation rate and fragile economic growth.
Mahmud had explained further that the MPC got to a point where stringent measures have to be taken to control inflation.
He said the committee took cognisance of global and local economic issues in arriving at its policy decisions.
“We raised the MPR because it is necessary to do so. The quantity of money in the system was too much for the economy to absorb”, he said.
He continued that monetary policy tools were meant to deal with short term risks, adding that the idea was to make the cost of funds expensive to drive down inflation.
According to Mahmud, the stimuluses that governments across the world provided for their citizens during COVID-19 increased the ability of people to spend, thereby, creating challenges with global supply.
“A lot of households and small businesses were injected with stimuluses; the U.S did two trillion dollars, Nigeria did about five trillion Naira, these increased the ability of people to spend.
“But the supply side could not meet up with the demand because that volume of injection was far more than the regular intake for those economies, this made prices to go up,’’ he said.
He also blamed the Russian-Ukraine war, as well as the resurgence of COVID-19 in China as responsible for rise in global inflationary trend.
“That region accounts for more than 50 per cent of global commodity supply and 38 per cent of global oil and gas supply.
“The war resulted to some shortages which made prices to go up. Then the COVID-19 lockdown in China. The country is the largest importer of commodities across the globe,’’ he said.
Speaking on the various economic intervention initiatives by the apex bank and the prospect of recouping the funds, the Director, Development Finance Department, Dr Yusuf Yila, said about nine trillion Naira had been invested in the various development finance interventions.
He, however, said all the monies would be recovered.
According to Yila, N9.3 trillion has been invested in various development finance interventions, out of which N3.7 trillion has been repaid.
“Most of the loans are still under moratorium, especially those in manufacturing. Manufacturing forms the largest part of our portfolio, about 31 per cent,’’ he said.
He said one of the best-performing interventions was the Commercial Agriculture Credit Scheme, where out of the N800 billion that was lent out, about N700 billion had been repaid.
Yila said that through the flagship agriculture intervention scheme, the Anchor Borrowers Programme, one trillion Naira had been lent out to smallholder farmers, while about N400 billion has so far been recovered.
According to him, the department will restrict intervention to critical sectors like the SMEs and the electricity sector for now.
Speaking on the depreciation of the Naira, the Director, Trade and Exchange Department, Mrs Ozoemena Nnaji, said the apex bank was taking steps to firm up the currency.
Nnaji said that demand for foreign exchange outstripped supply currency, adding that the CBN was doing a lot to mop up supply.
“One of the steps is the Naira for dollar remittance drive, which has resulted to a huge increase in diaspora remittances.
“There is also the RT200 bringing in forex. Repatriation has gone up from 20 million dollars in the first quarter to about 600 million dollars in the second quarter.
“In this third quarter we are looking at more than one billion dollars of repatriated inflows,’’ she said.
FG Probes IOCs’ Oil Exploration, Production
The Federal Government, has commenced a probe of the exploration and production activities of international and local oil companies as part of measures to address the massive oil theft in Nigeria.
It announced this through its Nigerian Upstream Petroleum Regulatory Commission (NUPRC), saying it would do the needful to challenge the narrative and halt further degeneration by ensuring transparency in hydrocarbon accounting.
“One of the steps, in line with its (NUPRC) technical and regulatory powers, is to probe into the operational and commercial activities of exploration and production companies operating within the country,” the commission’s Chief Executive, Gbenga Komolafe, stated in a statement he personally signed.
He noted that this was “to ascertain the level of compliance with the terms and conditions in their (oil firms’) operational contracts, and the challenges impeding expected deliveries.
“The Commission will particularly be interested in the mode of operation of the companies in relation to the approvals as per their operational licences, the level of conformity with the technical provisions and production terms, their level of investments to enhance capacity utilisation, and the challenges they are facing, especially those contributing to the current unacceptable situation.
“Beginning from Wednesday, September 28, the Commission will be engaging all the exploration and production companies individually to get to the root of the current situation as it believes strongly that there might be more fundamental issues in the industry affecting expected output and deliveries beyond the much touted issue of crude theft”.
Komolafe said already, invitations had been extended to all the operators for engagement during which they would be expected to present their work programme performances, acreage status and divestment plans (if any).
They would also present their field development plan, implementation status, upstream investment in the last five years, exploration activities including geophysical acquisition/processing/reprocessing, leads and prospects maturation plans; and exploratory wells drilled in the last five years.
NUPRC further stated that during the engagements, the companies would be required to present their reserve status, life index, current reserves replacement ratio and reserves growth strategy.
MWUN Threatens Service Withdrawal Over Dilapidated Quays
The Maritime Workers Union of Nigeria (MWUN) has threatened to withdraw their services from the nation’s seaport if the issues of dilapidated quays are not addressed urgently.
This is coming barely weeks after the Minister of Transportation, Muazu Sambo, inspected the dilapidated portion of the Tin Can Island quay apron in company of some heads of maritime agencies.
Addressing journalists at a joint press conference organised by MWUN and the Nigerian Association of Road Transport Owners (NARTO), the President-General of MWUN, Adewale Adeyanju, said the dilapidated state of the quay walls was putting the lives of workers at the affected terminals at risk.
He called on the Nigerian Ports Authority (NPA) to ensure that necessary measures were put in place to fix the dilapidated infrastructure, saying the union could no longer allow the situation to deteriorate further before protesting.
“It is unfortunate that this kind of thing is happening. If you go to Port Harcourt or Warri port, we are having the same problem.
So, we are using this medium to appeal to the management of NPA to make sure that all the terminal operators do the right thing.
“They can sanction those who refuse to make their terminals safe for the workers. Otherwise, we might withdraw the services of our members as a result of that. The lives of the workers are no longer safe and injury to one is injury to all”, he said.
Adeyanju stated further that the collaboration between MWUN and NARTO would also ensure improved welfare for truck drivers and reduce cases of extortion along the port access roads.
He also said the collaboration would ensure free flow of traffic to ease cargo and vehicular movement in and out of the ports.
According to him, the partnership would not involve collection of toll along the port access roads as both parties had resolved to key into the electronic call-up system project of NPA.
“The essence of this collaboration is to support a good programme birthed by NPA – ETO. We are also going to work with other stakeholders in the port so that we can have free flow of traffic on the road.
“I am also using this opportunity to send a signal to our members that we should not go against the Memorandum of Understanding because it is binding on both parties.
“We must also ensure discipline and eschew thuggery and extortion along the port access roads”, he stated.
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