Business
State Of The Economy
In addition to the analysis of the state of the Nigerian
economy in our Monday special Independence edition, this article attempts to
look at the same topic with particular emphasis on the value of the naira, rate
of inflation, foreign reserve and growth of the non-oil sector.
Value of the Naira
As is often the case with any country that operates a
mono-product economy, the state of the Nigerian economy has been dictated
largely by the prevailing international market price of crude oil (its chief
export commodity) and the people’s huge appetite for imported goods.
Frequent fluctuations in the price of petroleum has often
left the Central Bank of Nigeria (CBN) with very limited amounts of major
international currencies to offer for bidding at its biweekly Wholesale Dutch
Auction System (WDAS) foreign exchange market. And with the ever rising demand
pressure from companies and individuals wishing to repatriate earnings or pay
for foreign imports, there is usually recourse to unofficial sourcing of such
foreign currencies at a higher naira value.
In fact, there were times when the total dollar demand at
the official WDAS market averaged $450 million whereas the CBN could only offer
a little above $300 million per bidding session.
Faced with this untamed demand for forex and its negative
impact on the naira, the apex bank, at a time, began wondering what people did
with their currency purchases. Its governor, Lamido Sanusi, and his principal
officers were said to have requested strict compliance to the regulations
guiding forex utilization while also warning of appropriate sanctions against
any breaches. Banks were even required to avail the regulatory institution with
records of their forex transactions.
The CBN also tried to curb round tripping activities by
increasing the weekly forex sales by international oil firms to such other
approved windows like banks and bureaux de change. But all this seems to have
made little, if any difference, as the value of the local currency continues to
take a plunge.
Only a little margin exists between the naira’s depreciation
pattern and the path reportedly predicted some years ago by the International
Monetary Fund (IMF).
The IMF was said to have drawn up a projection of the
naira’s exchange rate after conducting an evaluation of Nigeria’s
macro-economic indices. According to the report, the international agency had
predicted an official exchange rate of N148.70 to the dollar for 2009, N149.90
for 2010, N155.10 for 2011, N166.10 for 2012, N177.70 for 2013, N189.90 for
2014 and N202.70 for 2015.
So far, it can be argued that the IMF’s predictions have not
manifested at the WDAS market. This is probably due to the CBN’s recent
increase of its forex rate target band from between N140.00 and N155.00 per
dollar to between N150.00 and N160.00.
Rather, the projections have been largely reflective of the situation in
the open market where the naira exchanged for an average of N153.48 to the
dollar in 2009, N156.30 in 2011 and fell to as low as N163.68 a few months ago.
The current official rate is N157.20 per dollar while it
sells for N168.35 at the parallel market.
Rate of Inflation
Related to the constant depreciation of the nation’s
currency is the rising rate of inflation.
Payment for imported commodities with foreign currencies
that were procured at high costs means that such items would need to be sold at
even higher naira prices in order for their merchants to make any profits.
In other words, since the CBN is always unable to meet the
foreign exchange demands of international businessmen, such merchants often
resort to sourcing their shortfalls from the costly unofficial market and
eventually spread these costs on the prices of their merchandise.
Again, the cost of raising business capital from banks in
Nigeria has remained high especially in the wake of the recent crisis that
rocked the banking sector.
To check this, the CBN alters its monetary policy rate (MPR)
and had, for the main part of last year, left it at 12 percent with a view to
achieving a single digit inflation rate. But the year still ended with a 10.3
per cent rate.
The partial removal of petrol subsidy which came into effect
early this year has also contributed in worsening the inflationary situation in
the country. President Goodluck Jonathan had, in his New Year address to the
nation, announced a complete withdrawal of the remaining N65.00 subsidy on the
litre price of petrol; saying that his government had rather approved a new
price of N141.00.
After nearly a week of nationwide mass protests that began
on January 9, organized by labour and civil society groups, the government was
forced to negotiate a 50 per cent withdrawal which established the current
price of N97.00 per litre.
The general increase in consumer prices which attended this
subsidy withdrawal was later to be exacerbated by the new electricity tariffs
recently introduced by the federal government.
The consumer price index (CPI) which is often used by the
National Bureau of Statistics (NBS) as the basis for computing the rate of
inflation has also indicated a 20 basis points increase from the 12.7 per cent
inflation rate recorded in May to a 12.9 figure in June.
The bureau attributed this partly to the new electricity
tariffs announced by the government.
“The CPI which measures inflation rose to 12.9 per cent
year-on-year in June 2012. The year-on-year change could be partly attributable
to persistent increase in the prices of some farm produce such as yam tubers as
well as the increase in the electricity tariff…”
The CBN which uses monetary policy instruments to control
inflation is apparently not panicked by the rising rate as it expects that such
sharp increases have been known to wear off with time.
According to the apex bank’s governor, Lamido Sanusi, while
speaking after a Monetary Policy Committee (MPC) meeting about three months
ago, “staff estimates indicate that inflation in the first two quarters of 2012
would range between 11.0 per cent and 14.5 per cent, and then moderate steadily
towards the single digit zone by late 2013. Real interest rates are therefore
likely to remain positive on a trend basis, even if the rate of inflation were
to rise briefly above the MPR in the second quarter.”
Analysts are, however, sceptical about Sanusi’s hope of
achieving a single-digit inflation rate. They see such happening only where the
government is able to maintain a fiscal restraint, ensure steady supply of
refined petroleum products, intensify its power sector reform efforts,
rehabilitate collapsed infrastructure and support local industries by reducing
the nation’s dependence on foreign goods import.
State of Foreign Reserve
Crude oil export is Nigeria’s main source of foreign
revenue. And like the value of the naira and the rate of inflation already
discussed above, the state Nigeria’s external reserve depends on a number of
variables, chief of which is the international price of petroleum.
Even with a favourable market price, internal and
international crises can also affect revenue accruing from a country’s export
earnings. In the case of Nigeria, especially during the period between 2007 and
2009 when youth militia groups ran roughshod over the creeks of the Niger
Delta, the country’s oil export was significantly reduced, leading to a drop in
its foreign currency earnings and, by extension, the external reserve which
fell below $28 billion.
In fact, the Niger Delta crisis had contributed to a global
shortage in crude oil supply, thereby forcing up the $65.00 market price to as
much as $100.00. But since Nigeria’s production fell below its OPEC approved
limit of two billion barrels per day (no thanks to militant youth), there was
hardly any way of officially exporting enough to take advantage of the global
price increase.
Nigeria’s foreign reserve did rise again in the aftermath of
the federal government’s amnesty programme for repentant militants. According
to available records, the account showed a reserve of $38.59 billion in August
2010 before the figure began to hover around a month-on-month average of $36.62
billion.
As at date, the country’s external reserve stands at $38.64
billion.
State of non-oil sector growth
The non-oil sector of the Nigerian economy has been
described as comprising those groups of economic activities which are not
directly linked to the petroleum and gas sector.
Examples of such activities would naturally include
agriculture, solid minerals, manufacturing, telecommunications, construction,
real estate, hotels and restaurants, transportation, tourism, entertainment and
business services.
According to NBS sources, agriculture makes the largest
contribution of 40 per cent to the nation’s gross domestic product (GDP). This
is against the 15 per cent contribution from petroleum even though its export
generates 95 per cent of the country’s foreign exchange earnings.
Telecommunications is another subsector that has contributed
immensely to the growth of the GDP.
“This sector continued to perform impressively and has
remained one of the major drivers of growth in the Nigerian economy, with its
contribution to the total GDP increasing continuously,” the bureau reported.
The statistics office had in another report early this year,
said that the Nigerian economy grew at a faster rate in the fourth quarter of
2011 because of a stronger performance in the non-oil sector, particularly
telecoms. Whereas the GDP grew by 7.68 per cent during the period, the non-oil
sector recorded a 9.07 per cent growth rate within the same period, largely
driven by improved activities in telecoms, building and construction, hotel and
restaurant and business services.
The telecoms subsector alone was reported to have recorded a
real GDP growth of 36.31 per cent in this period. And analysts believe that
even though this leap has not been witnessed in the other non-oil sector
activities, investors still have reason to remain optimistic about the consumer
potential in Nigeria.
Ibelema Jumbo
The daughter of late Nigerian banking executive, Herbert Wigwe has sold her father’s luxury yacht for $6.5 million which is the equivalent of N8.74 Billion following legal proceedings involving her, Otutochi Wigwe, and the company holding the vessel, Grosvenor Marine Ventures Limited.
This was contained in an online report obtained by The Tide Source in Port Harcourt recently.
The Source further clarified that $6. 5 Million dollars or N8.74 Billion was the asking price as at March this year but was unable to prove, if the said amount was exactly what the vessel went for.
The yacht, known as Chitochi, is a 2016 Custom Line 108 superyacht measuring approximately 33 metres (108 feet) in length. The transaction was handled by international yacht brokerage firm IYC, with its sales and charter consultant, Mark Elliott, overseeing the sale.
The disposal of the high-value vessel followed legal steps taken to address the corporate status of Grosvenor Marine Ventures Ltd., the company through which the yacht was held.
Otutochi Wigwe reportedly approached a court in the British Virgin Islands (BVI) to secure the restoration of the company to the corporate register, a move that enabled the necessary legal steps towards the sale of the vessel.
The proceedings were central to resolving the corporate issues affecting the company and facilitating the transaction, underscoring the legal complexities that may arise when valuable assets are held through corporate entities in foreign jurisdictions.
The sale is also significant in the context of estate administration, as luxury yachts require substantial financial commitments to maintain, even when they are no longer actively used by their owners or beneficiaries.
Such vessels typically attract considerable expenses, including crew salaries, insurance premiums, berthing charges, routine servicing and other maintenance costs, making their continued ownership a major financial responsibility.
Beyond the recurring expenses, luxury yachts are depreciating assets that may lose value over time. Their disposal can therefore form part of a strategy to preserve estate value, reduce liabilities and convert an expensive asset into liquid funds.
Wigwe, who was the former Group Chief Executive Officer of Access Holdings, died on February 9, 2024, in a helicopter crash in California, United States, alongside his wife, Chizoba; their son, Chizi; and former Nigerian Exchange Group chairman, Abimbola Ogunbanjo.
His death was widely mourned across Nigeria’s banking and business communities, where he was recognised for his contributions to the financial services industry, entrepreneurship and philanthropy.
Wigwe’s passing left behind an estate whose administration involves the management of assets and other financial interests, a process that can require legal and financial decisions to protect the interests of the estate and its beneficiaries.
The sale of Chitochi highlights the challenges associated with managing high-value assets held through corporate structures, particularly where the relevant companies and legal proceedings fall under different jurisdictions.
The $6.5 million transaction brings the yacht’s ownership chapter to a close while illustrating how legal procedures, financial considerations and estate management can intersect in the administration of the assets of a prominent business figure.
‘’We determined to get all our equipments and machinery functioning as we progress. For now we’ve about 105 workers, comprising daily paid harvesters and regular staffs. But aside these 105 staffs we also employ daily slashers who for now are about 100.
“During peak periods, hopefully on or before January 2026 we hope to increase our work force for maximum production”, the firm’s management Stated.
King Onunwor
Ariwera Ibibo-Howells, Yenagoa
Some traders at the Rumuwoji Market popularly known as Mile 1 Market have decried the continuous increase in the prices of food stuffs and other items in the ember season.
This was made known by the traders when The Tide visited the market recently.
The traders revealed varying changes in the prices of foodstuffs, with some commodities recording higher increase than others .
A trader Mrs Charity Obinna, at the market, said the price of yam remained the same last week and this week compared to the prices from last month to this month, adding that only a difference of about N100 to N200 was seen.
Another trader, Chukwuebuka Livinus who deals on garri, reported that the prices of some food commodities had been changing frequently.
According to him, the price of a bag of garri increased from N45,000 last week to N58,000 this week, representing an increase of N13,000.
Livinus described the increase as scary and called on the government to do something about it, especially as we get closer to the festive period.
A trader that deals on vegetables, Mrs Joy reported that a significant increase in the prices of pepper rose from N20,000 last week to N40,000 this week.
Similarly, the price of a bag of melon (egusi) increased from N420,000 toN490,000 this week.
In a separate report, Mrs Charity Obinna said that foodstuffs were generally cheaper last month than this month, with price differences ranging from N150 to N200 for some items.
Meanwhile, Giff Okoro reported a decrease in the price of tomatoes. According to her, a quantity of tomatoes that cost N45,000 last month now sells for N25,000, indicating a reduction of N20,000.
Another trader, Usman Ibrahim said the cost of transporting goods from the communities to urban areas where they are sold is one of the major reasons for high cost of goods.
He said transport cost has doubled due to the cost of petroleum products in Nigeria, adding the whole cost is part of the goods because “entrepreneurs must cover their cost and make their gains .
Ibrahim called on the government to help farmers and traders even with little capitals to expand and sustain their business.
Another trader, Mrs Choice Promise a fish retailer said a cartoon which sold at #35,000 last week now sells at #50,000 .
Promise complained that there is no gain or profit because the price has drastically increase and most people cannot afford to buy fish again.
“Mr. President’s Renewed Hope Agenda recognizes that economic ambition requires dependable infrastructure,” Tegbe said.
He added that investments in electricity infrastructure would strengthen the foundations for business expansion, employment and economic growth.
The Kankia substations comprise two 60 MVA, 132/33 kilovolt (kV) facilities designed to strengthen the transmission network serving Katsina State and neighbouring areas.
Tegbe said the infrastructure would improve the network’s ability to distribute available electricity, supporting commercial activities and household welfare.
He also urged residents to protect the facilities against vandalism and other activities that could disrupt electricity infrastructure, asking them to report suspicious activities to TCN or security agencies.
Katsina State Governor, Dikko Umaru Radda, described the project as a significant investment in the state’s electricity infrastructure.
Radda stated that improved electricity supply could support industrial development, economic growth and public service delivery.
He further commended the President, the Federal Ministry of Power and TCN for completing the project.
It would be noted that the latest projects come amid a broader government’s drive to address bottlenecks in Nigeria’s electricity transmission network, which has constrained the amount of electricity that can be delivered to distribution companies and end users.
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