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Why We Banned Cryptocurrencies – Nigeria’s Central Bank

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The Central Bank of Nigeria (CBN) has explained why it banned the use of cryptocurrencies in the country.

According to the apex bank, transactions in cryptocurrencies are largely speculative, volatile and must be discouraged.

The statement, by Osita Nwanisobi, Acting Director of Communications, read that the nature of cryptocurrencies creates a perverse incentive that allows for speculation and volatility

The explanation is coming on the heels of widespread reactions to the CBN’s directive prohibiting cryptocurrency transactions by Deposit Money Banks (DMBs).

“Evidence now suggests that some cryptocurrencies have become more widely used as speculative assets rather than as means of payment, thus explaining the significant volatility and variability in their prices.

“Because the total number of Bitcoins that would ever be issued is fixed (only 21 million will ever be created), new issuances are predetermined at a gradually decelerating pace.

“This limited supply has created a perverse incentive that encourages users to stockpile them in the hope that their prices rise.

“ … the price of ether, one of the largest cryptocurrencies in the world, fell from 320 dollars to 0.10 dollars in June 2017. The price of Bitcoins has also suffered similar volatilities,’’ he said.

Unlike Fiat Money which is accompanied by full faith and comfort of a country or Central Bank, cryptocurrencies do not have any intrinsic value and do not generate returns by themselves.

When one buys a stock, say of a conglomerate in the Nigeria Stock Exchange, its price reflects the activity and production of that conglomerate and the value people place on their goods and services.

This price may rise as the conglomerate produces better goods or services and probably gains greater market share.

In contrast, cryptocurrencies do not have fundamentals and would never have fundamentals. Investors only buy in the hope that its use and acceptability will rise, thereby pushing up its demand and price.

“But since new versions of cryptocurrencies come on stream with new mathematical models, an infinite supply may someday crash the price to zero,’’ Osita warned.

He, however, assured that the CBN’s actions are not meant to discourage technology-driven payment systems but to boost it.

“Nigeria remains an investment destination of choice for international financial technology companies because of CBN’s policies that have created an enabling investment environment in the payments system,’’ Osita said.

He added that innovations in Nigeria’s payment system are catalysed by CBN-driven regulatory reforms.

The recent regulatory directive became necessary to protect the financial system and the generality of Nigerians from the risks inherent in crypto assets transactions.

“The risks have escalated in recent times, with dire consequences for the integrity of the financial system and financial stability,’’ he said.

He emphasised that cryptocurrencies were largely speculative, anonymous and untuntraceable.

“They are increasingly being used for money laundering, terrorism financing and other criminal activities. Small retail and unsophisticated investors also face high probability of loss due to the high volatility of the investments in recent times.

In light of these realities and analyses, the CBN has no comfort in cryptocurrencies at this time.

The bank will continue to do all within its regulatory powers to educate Nigerians to desist from the use of cryptocurrencies and protect the financial system from activities of fraudsters and speculators.

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West Africa Business News

Nestlé Nigeria Posts N39.35Bln Profit in 2020

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Nestlé Nigeria Plc has reported revenue of N287.08 billion for the 2020 financial year.

The company’s audited result released on the Nigerian Stock Exchange showed that the revenue was higher by 1.1 per cent in contrast with N284.04 billion recorded in 2019 comparative period.

Gross profit for the year stood at N 119.21 billion compared with N128.15 billion achieved in the corresponding period of 2019.

Also, the company posted profit after tax of N39.25 billion during the review period against N45.68 billion in 2019.

The board in addition to N25 per share interim dividend already paid in December 2020, proposed an additional dividend of N 35.50 per share making for a total dividend of N60.50 for 2020.

The proposed dividend would be submitted for approval at the company’s Annual General Meeting on June 22.

Commenting on the results, Mr Wassim Elhusseini, Managing Director and CEO of Nestlé Nigeria, said that the company strengthened market leadership across its categories.

“Amidst a very challenging business environment in 2020, we strengthened market leadership across our categories. Thanks to our high performing team, we successfully continued to provide our consumers with high-quality affordable foods and beverages to enjoy every day.

“In line with our purpose of unlocking the power of food to enhance quality of life for everyone today and for generations to come, we broadened our portfolio in 2020 to help our consumers fulfil their nutrition needs.

“Our latest innovation is the new GOLDEN MORN Multi-Cereal, fortified with iron and other vitamins and minerals,” Elhusseini said.

Speaking on future outlook, he said that the company would remain committed to supply of high-quality nutritious foods and beverages to consumers.

“Going into 2021 – which portends to be another challenging year – we will continue to focus on keeping our people safe, continued supply of high-quality nutritious foods and beverages to consumers as well as caring for our communities and the planet.

“We will also keep supporting our business partners as we strengthen our operations to adapt to the rapidly changing reality,” he said.

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Okonjo-Iweala Resumes as WTO DG

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Nigeria’s former minister of Finance Dr. Ngozi Okonjo-Iweala, on Monday, started work as the new Director-General of the World Trade Organisation (WTO).

“Welcome to Dr Ngozi Okonjo-Iweala @NOIweala on her first day as WTO Director-General!” the WTO tweeted today.

She immediately swung into action upon arrival at Geneva as she takes the floor at a WTO meeting for the first time as Director-General at the General Council.

Okonjo-Iweala, 66, who is the first woman and first African to run the WTO, has said that addressing the health and economic consequences of the pandemic would be a key priority.

There are concerns in Washington and other capitals about China’s trade policies and how well equipped the WTO is to deal with them.

Resuming at her office in the WTO’s headquarters in Geneva, Switzerland, Nigeria’s ex-Coordinating Minister of the Economy, appeared in her country’s traditional attire sewn from an African wax fabric material.

The dressing wouldn’t be complete without her signature headtie (called Gèlè in Yoruba, kwalliyar kai in Hausa and ihe mkpuchi isi in Igbo) which led to the #BeLikeNgozi headgear challenge back home in Nigeria to honour her appointment.

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All Eyes on Ghana as African Gold Rises Like the Phoenix

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Ghana has become the toast of exploration firms in the continent and is now Africa’s largest gold producer. It churned out 80.5 tonnes in 2008. To prove her worthiness of the title, Ghana has 23 large-scale mining companies producing gold, diamonds, bauxite and manganese.

There are over 300 registered small scale mining groups and 90 mine support service companies. So, apart from earning revenue for Ghana directly, it also ensures many people earn a stable living along the value chain.

Gold production in becoming an important export earner in West Africa.

This is true for countries like Ghana, Burkina Faso and Mali as these nations are expected to increase their export quota by 2.7% in 2021 to 8 Moz (million ounces) and grow to 8.4 Moz (million ounces) by 2024 – a 1.6% compound annual growth rate (CAGR).

After strong growth in 2019, West Africa’s gold production was badly hit by the COVID-19 pandemic in 2020, owing to the temporary suspension of mines such as Fekola in Mali.

The pandemic had a significant impact on African operations, mainly during the early part of the second quarter of 2020, when, at one point, the region’s gold mines were on hold with no production due to COVID-19 lockdowns according to Global Data, a leading data and analytics company.

And Ghana is expected to lead the growth, where the production is expected to reach 3.9moz (million ounces) in 2024 from a forecasted 3.6 Moz in 2021. West Africa’s second largest economy is looking more money in her coffers in 2021.

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