Page 9 - DMEA Week 25 2021
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DMEA COMMENTARY DMEA
CBN governor Godwin
Emefiele
Abuja ought to take action now. Mixed signals
Last week, the organisation voiced concern It is not yet clear how Nigeria intends to proceed
about the renewal of fuel subsidies in Nigeria, with respect to fuel price subsidies.
even though officials in Abuja claimed in March In March, NNPC spokesman Kennie Obat-
that they had put an end to them. Following eru indicated that the state had opted to return to
virtual meetings with Nigerian authorities, the subsidising petroleum product prices in order to
IMF reported in a statement that its team had preserve social stability. He explained that Abuja
“expressed its concern with the resurgence of fuel was keen “not to jeopardise ongoing engage-
subsidies.” ments with organised labour and other stake-
The fund asserted that fuel subsidies were holders on an acceptable framework that will not
not the only drag on Nigeria’s economy and expose the ordinary Nigerian to any hardship.”
urged the government to continue with efforts By contrast, Godwin Emefiele, the governor
to standardise its exchange rates. “The mission of the CBN, said recently that artificially low
recommended maintaining the momentum fuel prices would come to an end. He pointed
toward fully unifying all exchange rate windows to expectations of an increase in domestic
and establishing a market-clearing exchange petroleum product supplies following the com-
rate,” it said. missioning of the 650,000 barrel per day (bpd)
The IMF was referring to Nigeria’s decision Dangote refinery near Lagos, scheduled for next
to introduce multiple competing naira exchange year.
rates five years ago in order to prevent a major Meanwhile, Ian Simm, principal advisor at
devaluation of the currency. Since then, the consultancy IGM Energy, told Downstream
Central Bank of Nigeria (CBN) has allowed the MEA: “From urea production to feedstock for
official value to weaken in an attempt to bring it plastics manufacturers and the end of subsidies,
into line with the NAFEX rate. Reuters noted last Abuja appears to be putting numerous sizeable
week that the IMF had made its statement after eggs in the Dangote basket. While the refinery
the World Bank criticised the CBN’s actions. is nearing completion, any further delays or
According to the World Bank, the news agency disruption could prolong Nigeria’s woes and
said, the CBN’s management of the foreign the government is well-advised to push for-
exchange regime has limited access to forex, hin- ward with its programme to rehabilitate existing
dering confidence and appetite among investors. downstream infrastructure while encouraging
On a more positive note, the IMF has also the development of new facilities.”
acknowledged that Nigeria’s banking indus- In the meantime, the renewal of the subsi-
try remains well-capitalised, with the level of dies has continued to be a burden on Nigeria’s
non-performing loans (NPLs) contained. “Nev- economy. As the Daily Trust newspaper noted
ertheless, it remains to be seen what share of last week, the government spent NGN197.74bn
forborne loans may turn non-performing as the ($481mn) in the first quarter of this year to main-
impact of the pandemic abates,” the fund said in tain fuel prices at below-market levels. If crude
its statement. prices keep rising, the bill is sure to go up.
Week 25 24•June•2021 www. NEWSBASE .com P9
