Naira Continues Free Fall As Reserves Decline To $27.8bn

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The value of the naira continued to diminish at the parallel market as the local currency fell to a record low of N357 to the dollar yesterday, with demand for foreign exchange outweighing declining supply.

The value of the naira has so far, within the year, dropped by 34 per cent at the parallel market from N265 which it sold in January, although the value had remained stable at N197 to the dollar at the Central Bank of Nigeria end of the foreign exchange market.

The end of dollar sales to bureau de change (BDC) operators, a declining foreign exchange reserves and speculations that the CBN will halt dollar sales for school fees and medical tourism, as well as the

low price of crude oil at the global market have been the factors behind the declining value of the currency at the black market.

The external reserves of the country have continued to decline, dropping to $27.81billion by February 15, 2016. The price of crude oil had risen to $32.32 per barrel from around $28 per barrel after talks with Saudi and Russia to cut output.

Some retail currency operators have few dollars in their vault and depend on other members to fill orders when they have excess demand, fuelling the weakness in the currency, traders say.

Acting president of the Association of Bureau de Change Operators of Nigeria (ABCON), Aminu Gwadabe, noted that “most individuals who sell to us are no longer willing, but demand is piling up.”

Meanwhile, overnight lending rates of the Nigeria Interbank Offer Rates (NIBOR) rise to 4.0800 per cent yesterday from 3.9567 per cent which it had dropped to on Tuesday. Likewise, six months rates rose to 11.5007 per cent from 11.4530 per cent. One month and three months rates however dropped to 8.1289 and 9.8072 per cent yesterday from 8.2498 and 9.9500 per cent.

Discos To Senate: Suspension of tariffs has severe consequences

The Association of Nigerian Electricity Distributors (ANED) has responded to the Senate’s resolution directing a reversal of the recently increased electricity tariffs, saying such an action would not be without consequences.

In a statement signed yesterday by its executive director, Advocacy and Research, Barrister Sunday Oduntan, ANED stated that a market priced tariff is a fundamental requirement under the agreements signed between the distribution companies operating in the Nigerian Electricity Supply

Industry (NESI) and the Bureau for Public Enterprises (BPE), and thus, raises the concern for sanctity of contract.

The Senate on Tuesday passed a resolution directing the Nigeria Electricity Regulatory Commission (NERC) to suspend the recently implemented electricity tariff (MYTO-2015).

However, in the statement entitled “Electricity Tariffs: Truth and Consequences,” ANED maintained that the absence of a market-priced tariff creates the possibility of performance failure by the operators, adding that “such a failure will be at a price that the government can ill-afford in these times of dire economic challenges.”

The group stressed that suspending the implementation of the tariff will leave the country in continued darkness, with diminished and no future prospects of economic growth.

The statement further noted that, “A market-priced tariff is critical to address decades of under-investment; for instance, the five million metering gap, in the sector. World-wide, electricity reforms

have always been tied to increased investment, resulting in improved production efficiency. Such investment is predicated on access to capital which will be jeopardised in the absence of a market-priced tariff.

“The absence of a market-priced tariff will endanger the viability of the entire value-chain of distributors, generators, transmission and gas suppliers, resulting in the failure of the sector as the upstream operators will not receive required payment. Discos only receive 25 per cent of the revenues associated with the tariff,” it said.

The Discos further informed the Senate that the failure of the sector will result in, amongst other things, loss of employment and livelihood for approximately 50,000 Nigerians, indirect job losses from factory and other business closures, possibly, in the millions as well as a related outcome of discouraging further investments in the development of gas reserves and production for local consumption.

On the hand, the investors stated that expected performance improvement,

with appropriate investment, will lead to a reduction of tariffs in subsequent years, stressing that this is empirically supported.

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