0:02

Bloomberg Audio Studios, podcasts,

0:05

radio news.

0:09

These are very pricey

0:11

and like let's last say, it

0:14

is all easy for us.

0:17

You might guess something of ten today,

0:20

tomorrow you get it for two.

0:24

Just keep hoping it to

0:26

be better one day.

0:29

As we were just hearing from these

0:31

Nigerians, times have been difficult

0:35

and the prime suspect seems

0:37

to be the naira. Over

0:39

the past few years, the naira has

0:41

experienced multiple downsides,

0:44

but most recently some upside too.

0:48

What is still down though, is Nigerian's

0:50

spending power. They are yet

0:53

to reap the benefits of the naira's

0:55

recent rebound. So

0:57

how can you go from being a weak

1:00

currency to the best in the world

1:02

and then losing ground again?

1:05

And what does a stronger currency mean

1:07

for the economy of one of Africa's

1:10

biggest markets. This is

1:12

what we are going to talk about this week

1:14

with my colleague and Legos Bureau

1:17

chief Anthony ose Brown. I'm

1:20

Jennifer Sabasanja and this is the

1:22

Next Africa Podcast, bringing

1:25

you one story each week from

1:27

the continent driving the future of

1:29

global growth with the context only

1:31

Bloomberg can provide.

1:37

Thank you so much for joining us. Anthony,

1:40

you're very busy and it's an honor

1:42

to have you step away from watching

1:44

what is going on in Nigeria and mainly

1:47

what is going on with the naira. It's

1:49

been a whirlwind, roller coaster day

1:52

after day for you and all of

1:54

the team. Let's just rewind back

1:56

though to May of twenty twenty three when

1:58

Bulletin Abu, who's the current President of Nigeria

2:01

came to power. Bolatinubu

2:05

has one Nigeria's presidential election.

2:08

So victory that will placed him at the helm

2:10

of Africa's biggest economy.

2:14

Can he fix the economy given his mandate?

2:19

Should we start there when we're thinking about the

2:21

naira and the roller coaster that has

2:23

been the past year. What's your take?

2:26

I think that's a good point to start because

2:28

before that point, the naira was

2:31

pegged against the dollar. President

2:34

to nob got inaugurated twenty nineth

2:36

May and one of the first things

2:38

he said during his inaugration

2:41

was that the way the monitory policy

2:43

has been managed before then wasn't

2:45

right and he was going to

2:48

make sure reforms are made. And

2:51

within a week, the former Central

2:53

Bank of Nova sat and someone

2:55

was appointed in acting capacity

2:58

and steps were immediately

3:00

taken to remove the peg,

3:03

the nyira's peg against the dollar. And

3:05

since then, as we said, it's been a roller

3:07

coaster right for the currency.

3:09

And Anthony, maybe you can talk us through the

3:11

first few months President Tuenibu

3:14

was announcing new policy after

3:16

new policy. Are these reforms

3:19

actually working in favor of

3:21

the naira.

3:22

We could say it's waking.

3:25

They reduced the different shop between the

3:27

parallel market rate and the

3:29

official market rate.

3:31

That has light little worked.

3:32

From about seventy percent the French ship between

3:35

the official rate and the parallel market rate, it.

3:37

Has dropped to almost nail.

3:39

In fact, we have had seen situations

3:42

where the parallel market rate is

3:45

weaker or is stronger

3:47

than the official market rate, so that

3:49

multiple rates or the rate to the friend ship

3:51

between the official market rate and the parallel market

3:54

rate no longer exists

3:56

practically in the market, and that means

3:59

more people are willing to bring in dollars

4:01

through the official market than through

4:03

the power market. And that has

4:05

also led to improved liquidity

4:07

in the official market. So we

4:09

could say in that sense it has worked.

4:12

The naira is weaker, but somewhere around

4:14

much we saw it actually appreciated strongly

4:17

and became the world's best performing currency,

4:19

moved up almost I think thirty to forty

4:21

percent before I say, losing ground

4:23

in apriy again.

4:25

And how has this and some of the other reforms

4:28

t Nubu has put in place actually

4:30

had an impact on the economy in Nigeria.

4:33

Yeah, it's been a bit devastating

4:36

for a lot of people on our people

4:38

on the streets. The sharp devaluation

4:41

and the currency, along with the partial

4:43

remover of subsidy, has led

4:45

to a spike in inflation, which

4:47

was already rising even before the devaluation

4:49

of the currency. So inflation

4:52

is currently at nearly a three decade

4:54

high and keeps rising as

4:57

almost at ten three seven percent

4:59

of the about as of match food

5:02

inflation is higher at forty percent.

5:04

And that's huge because if

5:06

you consider them, most Nigerians spend more

5:09

than half of their incommon food. That

5:11

means they sharp rise and food prices

5:14

has forced most of them to prioritize

5:16

food expenses above other

5:19

necessary expense like medical care

5:21

and education.

5:23

For people who are not local to the region,

5:25

to Nigeria, what does that look

5:28

like if you're going to the grocery store. How

5:31

is that translating Well.

5:32

Most Nigerians shop in the open market.

5:35

One practical example is Nigeria's

5:38

popular jelove rice.

5:39

We love jela rice.

5:41

Yeah yeah.

5:42

So as at match, the price of

5:44

rice, the main ingredients for gelo of rice

5:46

jumped up by one hundred and fifty percent.

5:48

That's almost nearly three times the normal price.

5:51

So a lot of people may no longer be able

5:53

to eat youell of rise on the daily basis

5:55

because the price has jumped up significantly

5:58

and can no longer afford it.

6:00

I bet that, Anthony. If you were to ask the ordinary

6:02

Nigerian versus maybe a market

6:04

participant, whether Tinubu's

6:07

reforms are actually working, they

6:09

may have strikingly different answers.

6:12

So on the streets, everybody thinks is

6:14

failing. There's been some trends

6:16

on x where people have

6:18

been trended in tenubumas go. That's

6:21

because they feel he's costing a

6:23

lot of suffering for people.

6:25

So yeah, So there's a huge differential between

6:27

how investors and foreign

6:30

portfolio investors and analysts

6:32

look at the economy and the way ordinary

6:34

people on the streets look at the economy. For ordinary

6:37

people on the streets. They are not seeing any benefits

6:39

in what the government is doing. But for

6:41

the analyst, what Tenubu is doing is writing

6:44

and he's taking the steps

6:46

in the right direction.

6:48

And what about businesses, Anthony, is

6:50

this a more stable environment for the private

6:52

sector?

6:53

Yeah, for the private sector for

6:56

the long term. Most of them see the

6:59

likely positive outcomes of the current

7:01

reforms, but currently most of

7:03

them are suffering. Most of them have run into

7:05

heavy losses basically because of

7:07

the huge devaluation and the currency

7:10

or the nearly seventy percent evaluation

7:12

and currency has plunged most of

7:14

them into losses. That's because most

7:16

of them had foreign currency obligations.

7:20

Most of them are struggling to survive.

7:22

But most of them are positive in the sense

7:25

that if they survive the current

7:27

reforms and they are sustained,

7:30

then they think in the long run naturally will

7:32

be a better place to operate in. But in

7:34

the short term, they are seeing a sharp erosion

7:37

of people's purchasing power. They are

7:39

seeing a sharp erosion

7:41

of the groups that they've been having the

7:44

last.

7:44

Few years in Nigeria.

7:45

Most of them will have to recapitalize and

7:47

so they are calling on equity from their

7:50

parents, companies and from shareholders

7:53

to be able to recapitalize and survive the

7:55

difficult period. On

7:57

the positive side, most of them are able to

7:59

meet their all our obligations currently

8:02

from the market, which was in the situation

8:04

before.

8:04

Now stay

8:09

with us after the break, we'll discuss

8:11

how the nyro's crisis and

8:14

the president's reforms are affecting the

8:16

informal sector and what Nigeria

8:19

could do to boost its economy.

8:25

Welcome back, So Anthony,

8:28

tell us how's the naira and

8:30

also Tinubuo reforms affecting the informal

8:33

sector which is a significant portion

8:35

of the economy and also

8:37

small businesses.

8:39

I think the Agency put Nigeria's

8:41

informal sector at almost ninety

8:44

percent or more of the economy, so this

8:47

for them is a huge deal. But one of

8:49

the biggest areas Tess factored

8:51

them is in the working capital. So

8:53

suddenly they realize that they need more money

8:56

to buy the goods that they used to buy.

8:58

So Anthony, what's your sons, When

9:01

will growth actually pick up and

9:03

where will it pick up? Is it the oil

9:05

sector for Nigeria or are

9:07

there other sectors that the country is

9:09

looking to.

9:10

The oil sector is the low hangering

9:13

fruit. Current production crude production

9:15

is around one point two three million barrass

9:17

a day, but Nigeria's potential

9:19

capacity to produce crude

9:22

is somewhere around one point eight to

9:24

two point six million barrass per day.

9:27

So if Nigeria were able

9:29

to tap into its available

9:32

capacity, it could actually increase

9:34

oil production and were between forty

9:37

to fifty percent in the next

9:39

few months. That has been

9:41

difficult because of oil theft, old

9:44

assets that are difficult to

9:47

push up, and then a lot of

9:49

bureaucratic challenges. But oil

9:52

is one of the easiest areas

9:54

that Nigeria quick is a add

9:56

growth push grout. Then

9:59

there's also the on aiir sector, reforms

10:01

around taxation and those

10:03

areas are areas and nairaku boost

10:06

revenues and anthony.

10:08

Just to wrap up, I'm not going to ask you

10:10

to protect where the naira is going to

10:12

go next. I don't think that would be fair, but

10:14

maybe you can give us some insight into

10:17

what to look for in terms of what

10:20

might drive the next price action

10:22

of the naira. There must be something

10:25

that you're waiting out for.

10:28

It's a bit difficult to say.

10:31

In the short term, the government is suspecting

10:33

some influ so

10:36

the government has relied so far on

10:38

portfolio inflows to drive

10:40

liquidit in the foreignes chain market. That

10:43

seems to be running out, so

10:46

the government is now has

10:48

to look beyond that to get

10:51

some influs in immediately.

10:53

They're expecting a billion dollars from the

10:56

Afrasing Bank out of a three

10:58

pint three billion dollars that today asked

11:00

for, they've already gotten two twenty two billion.

11:02

There's a World Bank loan that they're expecting.

11:05

There's two point two billion dollars maybe

11:07

in June, and then I

11:09

think maybe another one billion dollars from

11:11

Africa Development Bank. If

11:14

all these moneys come in between

11:16

now and June, maybe they will help support

11:18

the nyra and we could

11:20

see some strengthening soon.

11:24

But if they don't come, then the naira

11:26

will be in trouble. Beyond that, the

11:28

other support for the naira could

11:30

be in increased oil production. Then

11:33

that will bring in more dollars to support

11:35

the currency. That's more sustainable

11:37

in the long run than the borrowings

11:40

that the government is expecting because those

11:42

borrowings also means additional interest

11:44

suspenses, which will eat away

11:46

at liquiditing the long run. Again, the

11:49

last and most sustainable one

11:51

would have been to go to the MF to take a

11:53

huge loan. So analysts estimate

11:56

that Nagua could get up to twenty billion dollars

11:58

if it's proved the MF. But the

12:00

Nigerian government actually sees

12:04

the IMF at of an anatma something

12:07

that they will never discuss or something that they

12:09

would never want to consider.

12:10

That and

12:14

our thanks to Anthony Os Brown,

12:16

there are Nigeria Bureau Chief speaking

12:19

with us giving us his insights

12:21

in Legos. This

12:23

program was produced by Leone

12:26

Wadrago with the help of emmele

12:28

Ou. You can hear more

12:30

stories like this one on the Next Africa

12:33

podcast, available every week

12:35

wherever you usually get your podcast.

12:39

I'm Jennifer Zabastaja. Thank

12:41

you for listening.