Cryptocurrencies
Subsidy Removal, Naira Appreciation And 3 Other Bombshells From Last Week
Subsidy out, Transport allowance in, Libya overtakes Nigeria as Africa’s largest producer, Major coins ATH and P2P crackdown, Naira to Dollar exchange rate reversion, Much ado about US Infrastructure bill and Inflation.
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Subsidy out, transport allowance in
The Nigerian government through the Minister of Finance has come out to say that for next year, the government has not fully budgeted for subsidy as it seeks to exit the scheme which has depleted the country’s resources midway through the year.
When questioned on how Government would react to NLC’s opposition to the resulting rise in fuel prices, Zainab Ahmed said the government were going to:
- Replace petrol-aided vehicles with compressed natural gas vehicles; and
- Provide transport allowance to the “right people” by transferring directly to their bank accounts so they can survive the effects of rising fuel prices.
Remember one of the use-cases for the e-Naira is to facilitate welfare payments to citizens. Perhaps it’s time to make its much-awaited debut.
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Libya overtakes Nigeria as Africa’s largest producer
Geologically, Libya has always had the potential to be the largest African oil producer for years. The Northern African nation has the largest oil reserves in Africa and is among the top ten in the world. But war and conflicts have kept the country from producing at its optimal capacity.
militancy in the region declining and Nigeria’s production faltering – Libya has taken first place as Africa’s top oil producer based on direct communications to OPEC.
Nigeria, Libya and Angola change batons for the position of top African oil producer but Nigeria dominates most of the time.
In recent months, Nigeria has produced lower than their OPEC quota which should worry the federal government as the country’s budget next year will be majorly funded by her oil earnings. With the subsidy regime about to end, Nigeria can finally enjoy oil revenue as oil prices are still forecasted to remain north of $80 for the coming year.
However, the country has to fix its production issues. 1.23 million barrels a day is very poor given that Nigeria has the capacity to produce over 2 million barrels a day according to Nigeria’s Petroleum Minister.
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Major coins ATH and P2P crackdown
As the cryptocurrency market hit the 3 trillion dollar market cap, Nigerian monetary authorities channelled their “Inner-China” as the Central Bank of Nigeria reportedly ordered the closure of accounts that engaged in cryptocurrency trading.
So while Bitcoin and Ethereum made their all-time highs, the Nigerian crypto trading community suffered an all-time low as fear of the government closing down on their trading transactions gets real. Data from Binance shows the crypto exchange has 11 million customers from Nigeria.
The truth is the multi-utility functions of Bitcoin poses a threat to the financial system of Nigeria. Bitcoin cannot be used as a payment option (legal tender) and cryptocurrencies pose a risk for some investors (consumer protection).
However, there has to be a middle ground on where the government can allow cryptocurrency exist in a manner that does not affect the financial ecosystem.
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Is the Naira and Dollar exchange rate reverting to mean?
It feels like a long time ago where there were fears the dollar would be sold for N600. Speculators, currency hoarders and Naira to dollar converters cum currency traders all prepared for Naira to keep depreciating to the dollar. It appears the CBN’s elimination of Aboki FX and proper forex management is showing dividends as Naira has appreciated to the dollar in the last couple of weeks.
Black market prices are beginning to revert and with banks increasing international spending limits, the forex demands of Nigerians are being met, albeit slowly.
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Much ado about US Infrastructure bill and Inflation
Margaret Thatcher once said, “You and I travel by road, economists travel by infrastructure.”
Although the importance of infrastructure in an economy cannot be overemphasized, there seems to be a debate over the impact of the
Infrastructure Bill pushed by US President. Some argue that the infrastructure bill will increase inflation but President Joe Biden believes it will reverse inflation as supply chain issues would be addressed in the United States.
It’s a coin toss of a situation as a 1.2 trillion dollar bill would add to the existing Quantitative Easing money already pumped into the economy, fueling money supply worries. But much-needed infrastructure would encourage America to “Build Back Better” after the damaging effects of the COVID-19 pandemic.
The American policymakers have to weigh the short term and long term effect of this bill and how it would affect the American citizens in both timeframes.
However, the overarching issue is the midterm elections approaching. Politics seem to influence policies and the government’s desperation to reduce the 6.2% inflation rate announced last week might motivate the House to push the infrastructure bill
