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Bank Of America Analysis Of Naira’s Value After Free Float
The Bank of America’s insights on the value of the naira and its potential growth amidst foreign exchange reforms and efforts to curb oil theft in Nigeria and the impact on oil production, current account surpluses, and the country’s economy is in the front burner.
The Bank of America (BoA) has recently shared its analysis, indicating that the value of the naira is projected to settle at N680 to the dollar by the year-end. This assessment signifies a significant shift from an overvalued status to an undervalued state for the currency. The transition is attributed to the Nigerian government’s recent foreign exchange reform. Additionally, BoA speculates on President Bola Ahmed Tinubu’s potential course of action, aiming to address the prevalent issue of oil theft that has been plaguing the nation.
Predicted USDNGN Fair Value And Future Outlook
As per Bank of America analysts, the projected fair value for the USDNGN rate is now 680 per USD, an increase from the previous estimation of 580. However, it is anticipated that the actual trading value will surpass this level, reaching around 700 by the end of the year. Subsequently, in early 2024, the rate is expected to stabilize between 650 and 680. BoA emphasizes that the transition period necessitates time to synchronize rates and unlock further USD inflows into the formal market. Once the dust settles, the analysts anticipate a stronger and appreciating value for the naira.
Potential Impacts Of Oil Theft Curbing Efforts On Crude Production
Bank of America highlights the significance of President Tinubu’s potential actions in combating oil theft as a crucial step forward. The suggested approach involves implementing reforms within the security sector and involving host communities situated near oil pipelines. If successfully executed, this strategy could lead to a substantial increase in Nigeria’s crude oil production. The Bank of America predicts that production levels may rise to 1.6 million barrels per day (bpd) within a span of 12 to 18 months, surpassing the current output of 1.2 million bpd. However, these estimates are subject to OPEC limitations.
Prospects For Enhanced Oil Production And Economic Growth
Bank of America expresses optimism regarding the feasibility of increasing crude oil production to 1.6 million bpd within the next 12 months, representing a significant structural improvement compared to the current levels. Taking into account condensates, the total oil production in Nigeria could reach 1.8 million bpd within two years, a level comparable to pre-pandemic figures. It is important to note that Nigeria heavily relies on hydrocarbons, which contribute to approximately 90 percent of its exports, at least half of fiscal revenues, and around 6 percent of the country’s GDP.
Potential Benefits Of Increased Oil Revenues And Non-Oil Revenue Focus
The Bank of America suggests that higher oil revenues, combined with intensified efforts to generate non-oil revenue, could help alleviate the burden of high debt service. By diversifying income sources and reducing dependency on hydrocarbons, Nigeria can strengthen its economic stability and resilience.
This comprehensive analysis offers insights into the Bank of America’s observations on the value of the naira, the potential impact of curbing oil theft, and the prospects for increased crude oil production in Nigeria. By addressing the challenges and leveraging the nation’s resources, Nigeria can work towards a more robust and sustainable economy.
Achieving Current Account Surpluses And Economic Stability
Bank of America highlights the potential for consistent current account surpluses over the medium term through higher oil exports and a liberalized import regime. The projected increase of $12 billion in oil exports and a $10 billion rise in non-oil imports could significantly contribute to achieving this goal. By maintaining this positive momentum, Nigeria can strive towards economic stability and reduce its reliance on volatile external factors.
Strengthening Security Sector And Involving Host Communities
To effectively combat oil theft, Bank of America suggests that President Tinubu should focus on implementing reforms within the security sector. Strengthening security measures along oil pipelines and ensuring the involvement of host communities in the protection of these vital assets can help deter criminal activities and safeguard Nigeria’s valuable oil resources. This concerted effort has the potential to restore confidence in the sector and attract further investments.
Impact On Crude Oil Production And National Revenue
The projected increase in crude oil production from 1.2 million bpd to 1.6 million bpd, and potentially even 1.8 million bpd when considering condensates, holds significant implications for Nigeria’s national revenue. Higher production levels directly translate into increased oil revenues, enabling the government to invest in critical sectors such as infrastructure, healthcare, education, and social welfare programs. Moreover, with enhanced revenue streams, Nigeria can reduce its debt service burden and allocate resources towards economic diversification initiatives.
Diversifying Revenue Sources And Economic Resilience
While Nigeria heavily relies on hydrocarbons, there is a growing recognition of the need to diversify revenue sources to enhance economic resilience. Bank of America emphasizes the importance of intensifying efforts to generate non-oil revenue, which can be achieved through various means such as taxation reforms, encouraging private sector growth, and promoting sectors like agriculture, manufacturing, and tourism. By broadening the revenue base, Nigeria can reduce its vulnerability to fluctuations in global oil prices and create a more balanced and sustainable economy.
Unlocking Economic Potential And Seizing Opportunities
Nigeria possesses immense economic potential, from its abundant natural resources to its youthful population. Realizing this potential requires a strategic and concerted effort to address key challenges and seize opportunities. By implementing effective economic reforms, promoting investment-friendly policies, and fostering a business-friendly environment, Nigeria can attract both domestic and foreign investments, which will serve as catalysts for sustainable economic growth and development.
Bank of America’s analysis sheds light on the undervaluation of the naira following the government’s foreign exchange reform. It also emphasizes the importance of curbing oil theft and the potential for increased crude oil production in Nigeria. By leveraging these opportunities, strengthening the security sector, diversifying revenue sources, and fostering a conducive business environment, Nigeria can unlock its economic potential, achieve sustainable growth, and enhance its position on the global stage.
As Nigeria navigates the challenges and opportunities that lie ahead, it is essential for policymakers, businesses, and stakeholders to collaborate and work towards a shared vision of a prosperous and resilient nation.
Through strategic planning, targeted investments, and effective implementation of policies, Nigeria can pave the way for a brighter future and ensure the well-being of its citizens for generations to come.
Nigerian carrier, Air Peace, has clarified why its Benin to Abuja flight P47171 was delayed in the air on Friday.
In a statement issued by the Head of Corporate Communications, Ejike Ndiulo, Air Peace Airline on Saturday stated that during the aircraft’s descent into Abuja, the flight encountered turbulence as a result of adverse weather conditions, including thunderstorms.
The statement further stressed that in line with global aviation safety standards, “our crew activated appropriate safety protocols and held in a holding pattern until weather conditions improved.”
Social media users complained on Saturday that the aircraft hung in the air longer than necessary before landing.
Elanza news understands that when an aircraft is held in a holding pattern, this means the plane was instructed to fly a specific course around a designated point while waiting for permission from the control tower to proceed with its planned route, approach, or landing.
This is often due to factors like traffic congestion at the given airport, weather delays, or other operational issues that could result in an incident or accident if the aircraft had landed against instructions.
In simpler terms, a holding pattern is a temporary waiting area for an aircraft in the air, allowing it to remain airborne while awaiting further instructions for landing.
The statement further stated, “We are pleased to confirm that the aircraft landed safely and the passengers disembarked normally. Air Peace is unwavering in its commitment to ensuring the highest standards of safety across all our operations.”
IMF to FG: Enhance transparency in oil sector, contain borrowing
The International Monetary Fund (IMF) has advised Nigeria to enhance transparency in the oil sector to ensure that the subsidy removal savings are transferred to the government’s budget.
Abebe Selassie, the director of the African department at the IMF, gave the advice on Friday while presenting the findings of the Regional Economic Outlook for Sub-Saharan Africa report at the IMF and World Bank spring meetings in Washington, DC, the United States.
Selassie was responding to questions on the federal government’s reforms and Nigeria’s debt profile, which currently sits at N142.3 trillion as at September 2024.
Speaking to journalists, the director said the fund has been very impressed by the reforms Nigeria has undertaken to address microeconomic imbalances in the country.
The director said the subsidy was taking “a very large” share of the limited tax revenues, which was not effectively used to help the most vulnerable people.
“So it’s been really good to see the government taking these head on, and also beginning to roll out the third component of the reforms that we’ve been advocating for, [that] government has been pursuing, which is to expand social protection to target generalised subsidies to help the most vulnerable,” he said.
“This has all been very good to see, but more can be done, particularly on the latter front: expanding social protection and also enhancing a lot more transparency in the oil sector, so that the removal of subsidies does translate into flow of revenue into government budget.
“So, there’s still a bit more work to do in these areas.”
Selassie disclosed that the IMF had a mission in Nigeria, where discussions with the authorities focused on issues related to the nation’s macroeconomic conditions.
Still, the director advised the federal government to consider reforms in other areas to engender more private sector investment, and also how more resources can be “adopted” to help Nigeria generate the revenues needed to build more schools, universities, and infrastructure.
“So there’s a comprehensive set of reforms that Nigeria can pursue that would help engender more growth and help diversify the economy away from reliance on oil,”
“And this diversification is all the more important given what we’re seeing happening to commodity prices.”
Selassie acknowledged that while the government is undertaking reforms, there will be a financing need.
He urged the authorities to adopt “a judicious and agile” way of dealing with the financing challenges the country faces.
The IMF official said Nigeria’s financing gap “can only be filled” by permanent sources such as revenue mobilisation in the long run.
“But in the interim, carefully looking at all of the options the country has to borrow in a contained way, will be part of that solution,” he said.
“And I think the government has been going about this prudently and cautiously so far, and we’re encouraged by that.”
In January, the Debt Management Office(DMO) said the total domestic debt was N73.4 trillion ($45.8 billion) while the total external debt was N68.8 trillion ($43 billion).
The debt body said the increase was primarily due to rising domestic borrowing and the impact of exchange rate depreciation on external debt when converted to naira terms.
The Federal Government is set to launch the National Agribusiness Policy Mechanism (NAPM) to strengthen agricultural productivity, stabilise food prices, and drive economic growth.
The NAPM is part of broader initiatives aimed at transforming the country’s agricultural sector through data-driven policies and public-private partnerships.
Speaking on Friday in Abuja during a meeting of the Presidential Food Systems Coordinating Unit (PFSCU) Steering Committee at the Presidential Villa, Abuja, Vice President Kashim Shettima said the initiative will align agricultural efforts across all government tiers through real-time data analytics.
“The Green Imperative Project (GIP) is an idea whose time has come. It has been in the incubation period for several years, and now it is coming to fruition; we have to get it right.
“We have had many interventions in this country in the past. We must make this work, and it’s the states that will drive the process,” the Vice President said.
Signed between Nigeria and Brazil on March 17, 2025, the Green Imperative Project (GIP) is a $1.1 billion initiative aimed to modernise 774 mid-sized Nigerian farms with Brazilian agricultural technologies, creating jobs and boosting productivity across the nation.
VP Shettima further said President Bola Tinubu has approved ₦15 billion for the National Emergency Management Agency (NEMA) to prepare for floods as the rainy season kicks in.
“This is one of the first proactive decisions by the government to prepare for the flooding season,” the Vice President noted.
Earlier, the Technical Assistant to the President on Agriculture and Executive Secretary of PFSCU, Marion Moon, explained that NAPM aims to address challenges of high food inflation and agricultural yields that lag 60 per cent behind global averages.
She revealed that the pilot survey for NAPM has been completed across 13 states, with a full launch planned for June 2025.
The NAPM, supported by data analytics partnerships and a digital platform under development, is designed to tackle food inflation, inefficient subsidies, and outdated farming practices, to give the country a unified framework to optimise public spending and drive sustainable rural development.
Those present at the meeting included Governors of Jigawa State, Umar Namadi, and Ekiti State, Biodun Oyebanji; Deputy Governors of Borno State, Umar Kadafur, and Ebonyi State, Patricia Onyemaechi Obila.
Others are Minister of Agriculture and Food Security, Senator Abubakar Kyari; Minister of State for Agriculture and Food Security, Aliyu Abdullahi; Permanent Secretary of the Federal Ministry of Finance; heads of agriculture and manufacturing private sector players, and international development partners.