"Nigeria\u2019s reform drive falters, threatens economy

" Nigeria\u2019s reform drive falters, threatens economy - Reuters \r\nAfter taking office in May,\u00a0 President \u00a0Tinubu\u2019s lightning-fast reform push sparked hope that his administration would be a business-friendly antidote to the mounting economic troubles facing\u00a0 Nigeria, Africa\u2019s biggest economy.\r\n\r\nFast forward to more than 100 days in office, and the key planks of his economic overhaul \u2013 unshackling the naira from its rigid regime and allowing fuel prices to rise \u2013 are coming loose.\r\nThe naira hit a record low of 1,000 to the dollar on the black market this week, widening the gap with the official rate, which stood at 785 on Thursday.\r\nPetrol pump prices, meanwhile, have not budged since July \u2013 despite a more than 30% rise in oil prices.\r\n\r\nSome now fear Tinubu will be unable to wean Nigeria off the costly policies that have hindered investment and throttled economic growth.\r\n\r\n\u201cMomentum just seems\u2026almost in reverse,\u201d said David Omojomolo, Africa economist at Capital Economics.\r\nPublic anger is swelling as inflation spirals higher, however, and Nigeria\u2019s two biggest workers\u2019 unions are planning an indefinite strike next week to protest over a cost-of-living crisis.\r\n\r\n\u201cSentiment towards Nigeria has continued to sour as the initial reform momentum under President Tinubu\u2019s administration has faded,\u201d said Tellimer analyst Patrick Curran.\r\n\r\n Dollar delay \r\n\r\nFor years, Nigeria has tightly controlled the official naira rate, even amid declines in the price of oil, sales of which bring in 90% of the country\u2019s foreign currency supply.\r\nBut providing dollars artificially lowly has led to a yawning gap between official and black market rates, leaving businesses and investors unable to access dollars. The central bank has also created import restrictions aimed at reducing dollar demand.\r\n\r\nTinubu\u2019s decision to weaken the official naira rate saw it briefly converge with the black market. Last week, he assured investors they could take money out, touting a \u201creliable, one-figure exchange rate of the naira.\u201d\r\nBut the gap has widened to nearly 30% this week, and four sources told Reuters it was virtually impossible to get dollars from the central bank on an ad hoc basis.\r\n\r\nOn Tuesday, the incoming central bank chief said that policymakers faced a nearly $7 billion backlog in foreign exchange demand; foreign airlines alone had $783 million in ticket sales trapped, the International Air Transport Association said.\r\nThis is one major factor keeping investors from putting money to work in Nigeria.\r\n\r\nAnother is negative real bond yields and the slow central bank response: 10-year local government bonds yield less than 15% while inflation is above 25%.\r\n\r\n\u201cWhat they have done so far is not enough to attract domestic debt holders or foreign investors into their domestic debt market,\u201d said Carlos de Sousa, portfolio manager at Vontobel Asset Management.\r\nThe tattered finances left by the previous administration have also been no help.\r\n \r\n\r\nIn August, the central bank published audited accounts for the first time since 2018, revealing that its $33 billion in FX reserves included a $19 billion commitment in derivatives \u2013 slashing the liquid amount of reserves.\r\n\r\nJPMorgan calculated net FX reserves stood at $3.7 billion as of the end of 2022, \u201csignificantly lower\u201d than prior estimates.\r\n\r\nThat news sent Nigeria\u2019s international bond tumbling.\r\n\r\n\u201cLower net FX reserves reduce the willingness to introduce a flexible exchange rate regime in the near term,\u201d said JPMorgan\u2019s Gbolahan S Taiwo.\r\n\r\nThe central bank has also kept other restrictions that businesses say make life tough, including a ban on using central bank foreign exchange to import 43 items.\r\n\r\n\u201cThe government may have intended to make it a free market, but the CBN isn\u2019t allowing it to be one,\u201d said a Nigerian private equity investor who did not want to be named.\r\n\r\nThe delay in scrapping fuel subsidies is exacerbating the dollar crunch. Last year, subsidies cost 2% of gross domestic product, according to Fitch.\r\n\r\nDespite being Africa\u2019s largest oil exporter, Nigeria imports nearly all its fuel as it does not refine nearly enough to meet the demand of its 200 million citizens. In recent years, it has swapped crude for fuel, depriving it again of a source of U.S. dollars.\r\n\r\nIt is still using oil cargoes to pay for fuel it imported previously, and a de-facto pump price limit set by state oil company NNPC LTD\u2019s sale price means it is again the sole petrol importer.\r\nTellimer said Nigeria\u2019s gasoline prices would need to rise 73% to align with global prices.\r\n\r\nAnalysts say Tinubu, elected with the narrowest margin since Nigeria returned to democracy in 1999 and facing inflation at nearly two-decade highs, lacks the social capital and mandate to push any harder.\r\n\r\n\u201cThere is the concern that when the going gets tough\u2026they will walk back on the reforms,\u201d Omojomolo said.\r\n\r\n "

"Nigeria\u2019s reform drive falters, threatens economy

OPEC is Playing The Long GameAMP

U.S. Introduces $250 Visa Integrity Fee, Raising Barriers For African ApplicantsAMP

Gates, Bezos-Backed Firm Secures Congo Deal to Boost U.S. Mineral AccessAMP