Forex interventions give false hope on naira, says IMF – Newstrends
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Forex interventions give false hope on naira, says IMF

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REGULAR foreign exchange (forex) interventions in Nigeria and other emerging economies create false sense of security and hope on the local currency, the International Monetary Fund (IMF), has warned.

Nigeria, which operates a flexible exchange rate regime, spends about $16 billion annually to defend the naira.

A large part of the forex interventions are auctions at the inter-bank spot, sale of dollar for invisibles; Small and Medium Enterprises (SMEs); Bureaux De Change (BDC); Investors and Exporters (I&E) Forex window and Forwards.

In a joint report released at the weekend by IMF Director, Monetary and Capital Markets Department, Tobias Adrian; Director of the Fund’s Research Department; Gita Gopinath and Director of the Strategy, Policy and Review Department Ceyla Pazarbasioglu, the trio said that while flexible exchange rates can act as a useful shock absorber in the face of capital flow volatility, they do not always offer sufficient insulation.

They said the impact of the interventions is worse when access to global capital markets is interrupted or market depth is limited.

The report quoted Fund as saying “Persistent interventions might feed a (false) sense of security about future exchange rate developments that leads firms or households to take on more foreign currency debt, thus increasing balance sheet vulnerabilities.”

The IMF team said that in a continuous effort to help countries manage volatile cross-border capital flows, it has taken a major step toward a new analytical macroeconomic framework that can guide appropriate policy responses.

IMF analysis suggests that there is no “one-size-fits-all” response to capital flow volatility, nor is it a case of “anything goes” or that all policies are equally effective.

“Optimal policies depend on the nature of shocks and country characteristics. For instance, the appropriate policy response in a country with less developed financial markets and large foreign currency debts may differ from that of a country that does not have foreign currency mismatches on their balance sheets, or those that can rely on more sophisticated (deep and liquid) markets.”

“Generally, in countries with flexible exchange rates, deep markets, and continuous market access, full exchange rate adjustment to shocks remains appropriate.

“However, when a country has certain vulnerabilities, such as shallow markets, dollarization, or poorly anchored inflation expectations, while flexible exchange rates continue to provide significant benefits, other tools can play a useful role as well.

“In particular, macro-prudential measures, foreign exchange intervention, and capital flow management measures can enhance monetary policy autonomy so monetary policy can adequately focus on containing inflation and promoting stable economic growth. The same tools—including precautionary capital flow management measures on capital inflows, applied before shocks hit—can also help lower financial stability risks.”

For them, the work reflects evolving thinking on macroeconomic policy and will feed into the upcoming review of the IMF’s Institutional View on the Liberalization and Management of Capital Flows, which currently guides the Fund’s advice and assessments of members’ policies.

According to the Fund, international capital flows provide significant benefits for economic development but can also generate or amplify shocks. This dilemma has long posed challenges for policymakers in many open economies.

It said that many policymakers reach for a mix of policy tools to complement interest rate policy when dealing with capital flows. These tools include macro-prudential measures, foreign exchange intervention, and capital flow management measures.

Such diverse approaches were also used during the COVID-19 crisis, with significant differences in responses between countries. However, despite the widespread use of the various tools, to date, there has been no clear conceptual framework to guide the integrated usage of these tools.

The new framework represents a significant advance in thinking about when various tools should and should not be used and how these tools can work together to achieve better outcomes.

-The Nation

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Fuel scarcity: We buy petrol from third party at inflated rate, says IPMAN

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Fuel scarcity: We buy petrol from third party at inflated rate, says IPMAN

The Independent Petroleum Marketers Association of Nigeria (IPMAN) has demanded 50 per cent petrol allocation from the Nigerian National Petroleum Company (NNPC) Limited as a condition to reduce prices and queues in filling stations.

IPMAN National Vice-President, Hammed Fasola, stated this, saying members were buying fuel at inflated rate from the third party.

Speaking with NAN on this issue, Fasola said the fuel scarcity was due to low allocation.

He said if IPMAN members received petrol directly from NNPC, the price per litre would be more affordable for Nigerians, and help reduce the queues at filling stations.

He said IPMAN members were selling petrol at higher prices because they purchased the product at inflated rates from third parties.

The vice-president said the association has submitted its stance on petrol allocation to the NNPC, requesting that it be increased to 50 percent, as it was in the past.

“It is not that we don’t get at all, we are getting a little, and when you compare our number in this sector; our members own 80 percent of the filling stations. In the past, it was not like this,” Fasola said.

“We had a share of 50 percent but recently, things have changed, and we are trying to talk to the authorities, especially the NNPC that they have to correct that abnormality.

“We are still trying to address the issue. This is why the independent marketers are selling at a higher price, which is not good for our image.”

Fasola said its members were being forced to buy petrol from private depot owners, which they find unacceptable.

“We go there sometimes, and they will sell at N720 per litre, and in their own stations, they are selling N620 or N650 per litre; you can see the disparity and the public will not understand,” he said.

“This is why we are trying to educate the people that we are not shrewd business people who want to milk Nigerians.

“Some filling stations have closed for business because they can’t cope – this is the situation we found ourselves in; until the government corrects it and everybody is on the same level.”

He appealed to the NNPC to rectify the allocation issues so that IPMAN members can obtain fuel directly and fairly, benefiting both the marketers and the public.

On the purported increase in petrol price, Fasola dismissed it as “fake news,” stating that the association has not received any official information regarding such a change.

On July 8, queues for petrol resurfaced across filling stations in Lagos and the federal capital territory (FCT).

Speaking on the situation, Clement Isong, executive secretary at Major Energies Marketers Association of Nigeria (MEMAN), said the delay in loading petroleum products at depots was a contributory factor to the situation.

On its part, NNPC said the petrol queues in the FCT were caused by the disruption of ship-to-ship (STS) transfer of petrol between mother vessels and daughter vessels.

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We’re committed to Tinubu’s Pi-CNG initiative, says Cedric Masters Group

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We’re committed to Tinubu’s Pi-CNG initiative, says Cedric Masters Group

Cedric Masters Group says it is committed to achieving the mandate of President Bola Ahmed Tinubu towards the conversion of internal combustion engine (ICE) vehicles to Compressed Natural Gas (CNG) considered cheaper and cleaner to run.

Amselm Ilekuba, Chairman and chief executive of the group who disclosed this also said Cedric Masters Group is lucky to be among the first promoters of the Pi-CNG initiative of President Tinubu.

He said apart from creating huge employment for Nigerians with other positive spin-off effects and businesses, he would in collaboration with his technical team transfer the CNG conversion skill acquired at the CNG Centre in Texas, Houston.

This, he pointed out, was one of the core areas that would generate massive jobs for the people.

The Cedric Masters Group boss made this commitment when he received Joseph Osanipin, director-general of the National Automotive Design and Development Council (NADDC), and his team during a facility tour of the upcoming local automobile assembler located along the Lekki-Ajah Expressway, Lagos.

The NADDC DG accompanied by Sani Musa, the director of policy and planning and other staff of the agency, on Monday this week embarked on a tour of some auto assembly plants in the South-West.

Cedric Masters Group is a conglomerate that is also into automobile and component parts.

The company manufactures component parts from its facility in the South-East while for proximity and business expansion purposes, it is setting up its assembly plant in Lagos.

Cedric Autos got the assembly licence with a clear mandate from the NADDC to start rolling out locally assembled vehicles from the plant within 18 months.

Ilekuba expressed delight over the visit by the auto assembly regulatory agency, adding that the physical construction of the plant, the cable laying were in progress.

He said, “I am happy that they have come today to see how far we have gone with the physical construction, the cable laying; the equipment and every other facility has started coming. What we are waiting for now is the installation of all the equipment by our foreign partners.”

The full set of state-of-the-art automobile assembly equipment to be installed comprises automatic assembly line, post floor plate car lift with Solemoid unlock, scissor lift, four post flour plate car lift for 4-wheel alignment, semi automatic tyre changer, wheel balancer, air conditioning handling system and screw air compressor complete set-split type.

Others are movable manual hydraulic jack, foldable shop crane, transmission jack, hand hydraulic table truck, mobile pneumatic oil filling machine, paint spray booth, rear axle distribution rack, cargo lift, component of rain test (water nozzle and booster pump) and forklift.

Meanwhile, Cedric Masters said it started its staff recruitment and training in the past months with payment in preparation for a official roll-out of the brand to Nigerians very soon.

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Lanre Shittu assembly plant for trucks, pickups excites NADDC DG

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Lanre Shittu assembly plant for trucks, pickups excites NADDC DG

Director General of National Automotive Design And Development Council, Mr. Joseph Osanipin, has expressed satisfaction with the state of Lanre Shittu auto assembly plant and the volume of work being carried out there.

He specifically commended the company for focusing on the assembling of commercial vehicles, especially trucks and pickups as well as the compressed natural gas (CNG)-powered vehicles.

The DG spoke after inspecting the LSM auto assembly plant in Lagos and was taken through the process of putting the JAC truck components together as well as conversion of LSM pickups to run on CNG.

Osanipin said, “I’m very impressed with what I saw here. Lanre Shittu Motors has picked where its strength is – the pickups and trucks.

“I’m also impressed about their human capital development. We have seen the training facility and capacity. We also saw the spare parts. It means they are ready to support their vehicles with sufficient parts when the need arises.

“I have seen capacity and ability to meet the demand of the market. What we have seen here, I’m not too surprised because Lanre Shittu Motors has been there over the years.”

About 95 per cent of the workers engaged at both truck and pickup sections of the plant are Nigerians.

The DG spoke on the readiness of industry for the CNG-powered vehicles, saying, “From my assessment of what the LSM is doing, it means the assemblers are ready for the CNG vehicle initiative.”

He urged Nigerians to embrace the initiative, noting that it is cost-effective.

“Again, looking at the safety measures being put in place here at LSM, it shows we are ready for CNG. The next set of conversion to be done here will be the trucks,” he said.

Managing Director of Lanre Shittu Motors, Mr. Taiwo Shittu, said the company had delivered some CNG-powered mass transit buses for airport shuttle.

He disclosed that LSM could do six units daily, adding that the firm saw the huge business in the CNG-powered vehicles shortly after the removal of fuel subsidy by the Federal Government and went straight into it.

He said, “We know from our knowledge of automobile – this is our 43 years in the industry – that once the fuel subsidy is removed, the next option is the CNG. So we went straight into CNG vehicles.

“As we speak, we are converting our vehicles to run on CNG. We have our CNG conversion kits on the ground. We have mass transit buses already at the airports for shuttle, assembled here in Nigeria.

“Another set of CNG mass transit buses have arrived at the seaport and being cleared. This will be for commercial operation. And it will reduce operation cost by twenty-five per cent.

Shittu said LSM placed premium on after-sale support, with over N2 billion worth of spare parts in its store.

“For any vehicle or auto brand to survive in Nigeria, after-sale support is very important.

“We have been sole distributor in Nigeria for many brands including MAN and JAC. Having passed through this stage, we understand that no vehicle brand can make any headway in the country without adequate parts.

“A lot of made-in-Nigeria vehicles failed in the past because the handlers did not realise that without sufficient spare parts, they cannot survive” he said.

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