31 Mar

The week ahead – On a bright note, PIB and forex inspire a dance

The NNPC Group Managing Director, Maikanti Baru, has said the corporation has split the Petroleum Industry Bill into four for easy passage into law. Baru said this on Tuesday while speaking at the Department of State Services’ Executive Intelligence Management Course in Abuja. He said the split was done on the direction of Minister of State for Petroleum Resources, Ibe Kachikwu, and the President. The action is expected to allow the National Assembly deliver on the promise of “speedy passage”.

The Federal Executive Council has set up a committee to resolve outstanding issues between the executive and legislative arms of the government, the Minister of Information, Lai Mohammed said on Wednesday. The Senate had on Tuesday suspended the confirmation of 27 Resident Electoral Commissioners nominated by the Presidency. The upper chamber, also on Tuesday, summoned the chairman of the presidential committee on anti-corruption, Itse Sagay, for describing the senate’s refusal to confirm the re-nomination of Magu as substantive chairman of the EFCC as “childish and irresponsible”. The Senate had previously turned back the Comptroller-General of the Nigeria Customs Service, Hameed Ali, an appointee of the President, for not appearing in the agency’s uniform.

The CBN set a new naira exchange rate on Monday for consumers with certain foreign expenses and stepped up dollar sales on the official market to narrow the spread with the black market. Analysts doubted whether the moves would draw investors back to the suffering economy. Nigeria has at least five exchange rates — the official one, the black market, a rate for Muslim pilgrims going to Saudi Arabia, a retail rate set by licensed exchange bureaux, and a rate for foreign travel, school and medical fees. It was the last rate that was changed — to ₦360 to the dollar, a four percent rise since the last rate was set. The regulator auctioned $1.5 million and offered $100 million on the forward market to boost liquidity. However, it sold naira on the spot market at 306.30, 21 percent weaker than the black market. The CBN also barred lenders from reselling foreign currency to retail exchange bureaux to curb speculation.

According to multiple media reports, security operatives dispersed a gang of herdsmen who attempted to rob travellers on Agadama-Bomadi Road in Ughelli North Local Government Area of Delta State on March 28. This comes as residents of Abraka in Ethiope East Local Government Area, also in Delta State said they were under siege by rampaging Fulani herdsmen. Persons alleged to be Fulani herdsmen attacked and killed an inmate at the Benue Prisons Service on March 27 in Jato-Aka Farm Centre while another three persons were feared dead and six injured in a similar attack on Emuhu community in Ika South local council of Delta State at the weekend.

Suggestions

  • This is a good development from the petroleum ministry. With the proposed oil bid round in the near future, it is important the PIB be passed as it will give a direction for players to bring investment into the sector. It is also important to note that the NNPC has a dedicated team, headed by a general manager, working from the National Assembly. This shows its dedication to managing the relationship between the NNPC and the National Assembly. This is good for coordination and stakeholder engagement/management. We shall keep tabs on progress in that space.
  • The Senate is justifiably indignant about what seems to be the Executive taking elected Nigerian representatives on a joy ride. It reasonably exercised its power to refuse Mr. Magu’s confirmation based on two unflattering submissions by a security agency under the supervisory provenance of the executive. The Constitution empowers both legislative houses to summon and investigate any person, authority, ministry or government department that is empowered to execute its laws as it did in Hameed Ali’s case. However, setting aside the passionate but uninformed comments by Prof. Sagay, the professor is right. The Senate does not have the power to summon him or any private citizen not acting in capacities as specifically provided by the Constitution. However, the Presidency has racked up so many infractions on matters of elementary democratic decorum that it may be fitting at this point to wonder if the federal executive considers the import of some of its actions and the legacy it is unwittingly bequeathing to future Nigerian administrations.
  • It appears that the CBN has finally taken a decision regarding the exchange rate – there will be no free float. Buoyed by $30 billion worth of foreign reserves, the regulator stated that it would sell forex to banks at $/₦357, and allow banks to sell to their customers at $/₦360 for invisibles (PTA, BTA, medicals, fees, etc.), thus making a spread of ₦3 per dollar. In the short term the CBN has remedied two legs of the problem – volatility and liquidity. The other major issue of multiple exchange rates remains, and so does opportunity for round tripping. There is no silver bullet that can solve Nigeria’s FX challenges, only a bunch of hard choices. Perhaps the hardest choice of all is the one Nigeria must eventually consider – deregulation.
  • In 2011, Col Dangiwa Umar, a former governor of Kaduna, said the next big security threat that Nigeria would face after Boko Haram is the Fulani Herdsmen. Six years later, his words have come true, and the Pastoral Conflict threatens the very foundations of Nigeria’s peace and security. The Pastoral Conflict has been made worse by President Buhari’s seeming indifference to the situation, and the absence of any interest in resolving the situation. Many communities in Nigeria are beginning to think of ways and means to protect themselves and we foresee a further escalation of the crisis.