Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: These are very pricey and like let's last say, it
Speaker 2: is all easy for us.
Speaker 1: You might guess something of ten today, tomorrow you get
Speaker 1: it for two.
Speaker 3: Just keep hoping it to be better one day.
Speaker 2: As we were just hearing from these Nigerians, times have
Speaker 2: been difficult and the prime suspect seems to be the naira.
Speaker 2: Over the past few years, the naira has experienced multiple downsides,
Speaker 2: but most recently some upside too. What is still down though,
Speaker 2: is Nigerian's spending power. They are yet to reap the
Speaker 2: benefits of the naira's recent rebound. So how can you
Speaker 2: go from being a weak currency to the best in
Speaker 2: the world and then losing ground again? And what does
Speaker 2: a stronger currency mean for the economy of one of
Speaker 2: Africa's biggest markets. This is what we are going to
Speaker 2: talk about this week with my colleague and Legos Bureau
Speaker 2: chief Anthony ose Brown. I'm Jennifer Sabasanja and this is
Speaker 2: the Next Africa Podcast, bringing you one story each week
Speaker 2: from the continent driving the future of global growth with
Speaker 2: the context only Bloomberg can provide. Thank you so much
Speaker 2: for joining us. Anthony, you're very busy and it's an
Speaker 2: honor to have you step away from watching what is
Speaker 2: going on in Nigeria and mainly what is going on
Speaker 2: with the naira. It's been a whirlwind, roller coaster day
Speaker 2: after day for you and all of the team. Let's
Speaker 2: just rewind back though to May of twenty twenty three
Speaker 2: when Bulletin Abu, who's the current President of Nigeria came
Speaker 2: to power. Bolatinubu has one Nigeria's presidential election.
Speaker 1: So victory that will placed him at the helm of
Speaker 1: Africa's biggest economy.
Speaker 2: Can he fix the economy given his mandate? Should we
Speaker 2: start there when we're thinking about the naira and the
Speaker 2: roller coaster that has been the past year. What's your take?
Speaker 1: I think that's a good point to start because before
Speaker 1: that point, the naira was pegged against the dollar. President
Speaker 1: to nob got inaugurated twenty nineth May and one of
Speaker 1: the first things he said during his inaugration was that
Speaker 1: the way the monitory policy has been managed before then
Speaker 1: wasn't right and he was going to make sure reforms
Speaker 1: are made. And within a week, the former Central Bank
Speaker 1: of Nova sat and someone was appointed in acting capacity
Speaker 1: and steps were immediately taken to remove the peg, the
Speaker 1: nyira's peg against the dollar. And since then, as we said,
Speaker 1: it's been a roller coaster right for the currency.
Speaker 2: And Anthony, maybe you can talk us through the first
Speaker 2: few months President Tuenibu was announcing new policy after new policy.
Speaker 2: Are these reforms actually working in favor of the naira.
Speaker 3: We could say it's waking.
Speaker 1: They reduced the different shop between the parallel market rate
Speaker 1: and the official market rate.
Speaker 3: That has light little worked.
Speaker 1: From about seventy percent the French ship between the official
Speaker 1: rate and the parallel market rate, it.
Speaker 3: Has dropped to almost nail.
Speaker 1: In fact, we have had seen situations where the parallel
Speaker 1: market rate is weaker or is stronger than the official
Speaker 1: market rate, so that multiple rates or the rate to
Speaker 1: the friend ship between the official market rate and the
Speaker 1: parallel market rate no longer exists practically in the market,
Speaker 1: and that means more people are willing to bring in
Speaker 1: dollars through the official market than through the power market.
Speaker 1: And that has also led to improved liquidity in the
Speaker 1: official market. So we could say in that sense it
Speaker 1: has worked. The naira is weaker, but somewhere around much
Speaker 1: we saw it actually appreciated strongly and became the world's
Speaker 1: best performing currency, moved up almost I think thirty to
Speaker 1: forty percent before I say, losing ground in apriy again.
Speaker 2: And how has this and some of the other reforms
Speaker 2: t Nubu has put in place actually had an impact
Speaker 2: on the economy in Nigeria.
Speaker 1: Yeah, it's been a bit devastating for a lot of
Speaker 1: people on our people on the streets. The sharp devaluation
Speaker 1: and the currency, along with the partial remover of subsidy,
Speaker 1: has led to a spike in inflation, which was already
Speaker 1: rising even before the devaluation of the currency. So inflation
Speaker 1: is currently at nearly a three decade high and keeps
Speaker 1: rising as almost at ten three seven percent of the
Speaker 1: about as of match food inflation is higher at forty percent.
Speaker 1: And that's huge because if you consider them, most Nigerians
Speaker 1: spend more than half of their incommon food. That means
Speaker 1: they sharp rise and food prices has forced most of
Speaker 1: them to prioritize food expenses above other necessary expense like
Speaker 1: medical care and education.
Speaker 2: For people who are not local to the region, to Nigeria,
Speaker 2: what does that look like if you're going to the
Speaker 2: grocery store. How is that translating Well.
Speaker 1: Most Nigerians shop in the open market. One practical example
Speaker 1: is Nigeria's popular jelove rice.
Speaker 2: We love jela rice.
Speaker 3: Yeah yeah.
Speaker 1: So as at match, the price of rice, the main
Speaker 1: ingredients for gelo of rice jumped up by one hundred
Speaker 1: and fifty percent. That's almost nearly three times the normal price.
Speaker 1: So a lot of people may no longer be able
Speaker 1: to eat youell of rise on the daily basis because
Speaker 1: the price has jumped up significantly and can no longer
Speaker 1: afford it.
Speaker 2: I bet that, Anthony. If you were to ask the
Speaker 2: ordinary Nigerian versus maybe a market participant, whether Tinubu's reforms
Speaker 2: are actually working, they may have strikingly different answers.
Speaker 1: So on the streets, everybody thinks is failing. There's been
Speaker 1: some trends on x where people have been trended in
Speaker 1: tenubumas go. That's because they feel he's costing a lot
Speaker 1: of suffering for people. So yeah, So there's a huge
Speaker 1: differential between how investors and foreign portfolio investors and analysts
Speaker 1: look at the economy and the way ordinary people on
Speaker 1: the streets look at the economy. For ordinary people on
Speaker 1: the streets. They are not seeing any benefits in what
Speaker 1: the government is doing. But for the analyst, what Tenubu
Speaker 1: is doing is writing and he's taking the steps in
Speaker 1: the right direction.
Speaker 2: And what about businesses, Anthony, is this a more stable
Speaker 2: environment for the private sector?
Speaker 1: Yeah, for the private sector for the long term. Most
Speaker 1: of them see the likely positive outcomes of the current reforms,
Speaker 1: but currently most of them are suffering. Most of them
Speaker 1: have run into heavy losses basically because of the huge
Speaker 1: devaluation and the currency or the nearly seventy percent evaluation
Speaker 1: and currency has plunged most of them into losses. That's
Speaker 1: because most of them had foreign currency obligations. Most of
Speaker 1: them are struggling to survive. But most of them are
Speaker 1: positive in the sense that if they survive the current
Speaker 1: reforms and they are sustained, then they think in the
Speaker 1: long run naturally will be a better place to operate in.
Speaker 1: But in the short term, they are seeing a sharp
Speaker 1: erosion of people's purchasing power. They are seeing a sharp
Speaker 1: erosion of the groups that they've been having the last.
Speaker 3: Few years in Nigeria.
Speaker 1: Most of them will have to recapitalize and so they
Speaker 1: are calling on equity from their parents, companies and from
Speaker 1: shareholders to be able to recapitalize and survive the difficult period.
Speaker 1: On the positive side, most of them are able to
Speaker 1: meet their all our obligations currently from the market, which
Speaker 1: was in the situation before.
Speaker 2: Now stay with us after the break, we'll discuss how
Speaker 2: the nyro's crisis and the president's reforms are affecting the
Speaker 2: informal sector and what Nigeria could do to boost its economy.
Speaker 2: Welcome back, So Anthony, tell us how's the naira and
Speaker 2: also Tinubuo reforms affecting the informal sector which is a
Speaker 2: significant portion of the economy and also small businesses.
Speaker 1: I think the Agency put Nigeria's informal sector at almost
Speaker 1: ninety percent or more of the economy, so this for
Speaker 1: them is a huge deal. But one of the biggest
Speaker 1: areas Tess factored them is in the working capital. So
Speaker 1: suddenly they realize that they need more money to buy
Speaker 1: the goods that they used to buy.
Speaker 2: So Anthony, what's your sons, When will growth actually pick
Speaker 2: up and where will it pick up? Is it the
Speaker 2: oil sector for Nigeria or are there other sectors that
Speaker 2: the country is looking to.
Speaker 1: The oil sector is the low hangering fruit. Current production
Speaker 1: crude production is around one point two three million barrass
Speaker 1: a day, but Nigeria's potential capacity to produce crude is
Speaker 1: somewhere around one point eight to two point six million
Speaker 1: barrass per day. So if Nigeria were able to tap
Speaker 1: into its available capacity, it could actually increase oil production
Speaker 1: and were between forty to fifty percent in the next
Speaker 1: few months. That has been difficult because of oil theft,
Speaker 1: old assets that are difficult to push up, and then
Speaker 1: a lot of bureaucratic challenges. But oil is one of
Speaker 1: the easiest areas that Nigeria quick is a add growth
Speaker 1: push grout. Then there's also the on aiir sector, reforms
Speaker 1: around taxation and those areas are areas and nairaku boost
Speaker 1: revenues and anthony.
Speaker 2: Just to wrap up, I'm not going to ask you
Speaker 2: to protect where the naira is going to go next.
Speaker 2: I don't think that would be fair, but maybe you
Speaker 2: can give us some insight into what to look for
Speaker 2: in terms of what might drive the next price action
Speaker 2: of the naira. There must be something that you're waiting
Speaker 2: out for.
Speaker 1: It's a bit difficult to say. In the short term,
Speaker 1: the government is suspecting some influ so the government has
Speaker 1: relied so far on portfolio inflows to drive liquidit in
Speaker 1: the foreignes chain market. That seems to be running out,
Speaker 1: so the government is now has to look beyond that
Speaker 1: to get some influs in immediately. They're expecting a billion
Speaker 1: dollars from the Afrasing Bank out of a three pint
Speaker 1: three billion dollars that today asked for, they've already gotten
Speaker 1: two twenty two billion. There's a World Bank loan that
Speaker 1: they're expecting. There's two point two billion dollars maybe in June,
Speaker 1: and then I think maybe another one billion dollars from
Speaker 1: Africa Development Bank. If all these moneys come in between
Speaker 1: now and June, maybe they will help support the nyra
Speaker 1: and we could see some strengthening soon. But if they
Speaker 1: don't come, then the naira will be in trouble. Beyond that,
Speaker 1: the other support for the naira could be in increased
Speaker 1: oil production. Then that will bring in more dollars to
Speaker 1: support the currency. That's more sustainable in the long run
Speaker 1: than the borrowings that the government is expecting because those
Speaker 1: borrowings also means additional interest suspenses, which will eat away
Speaker 1: at liquiditing the long run. Again, the last and most
Speaker 1: sustainable one would have been to go to the MF
Speaker 1: to take a huge loan. So analysts estimate that Nagua
Speaker 1: could get up to twenty billion dollars if it's proved
Speaker 1: the MF. But the Nigerian government actually sees the IMF
Speaker 1: at of an anatma something that they will never discuss
Speaker 1: or something that they would never want to consider.
Speaker 2: That and our thanks to Anthony Os Brown, there are
Speaker 2: Nigeria Bureau Chief speaking with us giving us his insights
Speaker 2: in Legos. This program was produced by Leone Wadrago with
Speaker 2: the help of emmele Ou. You can hear more stories
Speaker 2: like this one on the Next Africa podcast, available every
Speaker 2: week wherever you usually get your podcast. I'm Jennifer Zabastaja.
Speaker 2: Thank you for listening.