Dear Subscriber,
In spite of social distancing regional banks to expand
In spite of the insistence of social distancing by the NCDC, the Central Bank of Nigeria is directing all banks with regional licences to expand their operations to an additional adjoining geo-political zone. This will bring the total number of zones of their operation to three. The aim is to promote financial inclusion and the spread of regional banking services to the rural areas. Ironically, it is coming at a time of increased virtual banking and e-commerce. The value of e-payment transactions system-wide has increased by 47% from N8.1trn in April to N11.9trn in May, compared to a mere 9% increase during the corresponding period of 2019. Meanwhile, the volume of cash and cheque transactions is likely to continue declining in Q3.
Exchange rate unification and its impact on you
The convergence of the exchange rates towards the I & E rate of N386/$ has started, as the CBN raised its official rate to N380/$ from N360/$. This means that only bids above N380/$ will be considered for forex allocation. The convergence of all forex rates towards the I & E rate is aimed at stopping multiple exchange rate practices and endearing Nigeria towards international investors and multilateral agencies.
A depreciation in the currency means that imports will be more expensive and exports more competitive. However, coupled with the existing strains to disposable income, it will be a double whammy for the already cash-strapped consumer. To manufacturers, this increases their import bill and cost of production.
PMS price spikes by 18% to N143 per litre
The Petroleum Product Pricing Regulatory Agency (PPRA) announced an increase in the pump price of petrol (PMS) by about 18% to N143.80 per litre as a result of higher crude oil prices. The price of PMS was earlier slashed to N121 per litre, when oil prices fell sharply. The effect of this is that the average Nigerian car owner or transporter would spend more on PMS and may be forced to adjust his spending pattern, with less demand for non-essentials and luxury goods.
In this edition of the FDC monthly publication, the FDC Think-Tank analyzes these issues and their implications on businesses and the economy at large.
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