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UK strikes trade deal with New Zealand – but it may add nothing to GDP

New Zealand

UK strikes trade deal with New Zealand – but it may add nothing to GDP

Britain has struck a trade deal with New Zealand, a key ally, as ministers hope to stem the country’s reliance on China – but the agreement is expected to add no value to the UK’s gross domestic product.

Despite the Department for International Trade heralding the deal as a “groundbreaking” achievement that was a “vital part” of Boris Johnson’s commitment to levelling up, the prime minister has been accused of selling out British farmers.

Tariffs as high as 10% are set to be removed on a range of UK goods, including clothes, buses, ships and bulldozers. The price of New Zealand-produced sauvignon blanc, manuka honey and kiwifruit should dip after 16 months of talks.

Trade between the UK and New Zealand is now worth £2.3bn a year, and the government said that would rise as the deal would make it easier for smaller businesses to break into the New Zealand market – as well as remove barriers for advanced tech and services companies.

It follows the recent trade agreement struck with Japan and the deal struck in principle with Australia. The focus on the region is part of Johnson’s 10-year plan to tilt the UK’s foreign policy focus towards the Indo-Pacific, strengthening the alliance and position of democratic countries in the region to make them more competitive against China.

New Zealand is heavily reliant on China for trade, with more than 30% of its exports going to Chinese markets. The country has come under fire in the past for adopting slightly gentler rhetoric on China than some of its allies – a stance critics have claimed is as a result of trade dependency. Foreign minister Nanaia Mahuta has previously urged exporters to diversify and reduce their vulnerability to geopolitical shocks like the trade war Australia is experiencing.

New Zealand opposition leader Judith Collins told the Guardian this month that by not providing free trade agreements, the US and UK were “leaving the door open” to Chinese dominance in the indo-Pacific region.

Ardern said that Covid-19 had taught the country that “we must have as many options for our world-class products to ensure certainty for our primary producers, our economy and our people”.

The deal may boost New Zealand’s GDP by $970m or around 0.3%. However, last year’s analysis by the UK government found that its effect on Britain’s GDP would probably have “limited effect … in the long run” – being between a positive growth of 0.01% or negative growth of -0.01%.

Boris Johnson said: “This is great trade deal for the United Kingdom, cementing our long friendship with New Zealand and furthering our ties with the Indo-Pacific. It will benefit businesses and consumers across the country, cutting costs for exporters and opening up access for our workers.”

New Zealand prime minister Jacinda Ardern said: “It’s one of our best deals ever and secured at a crucial time in our Covid recovery.”

“This deal will cut costs for exporters immediately, creates opportunities for New Zealand businesses to grow and diversify their trade, while boosting the economy as we recover from Covid-19.”

Minette Batters, the National Farmers Union president, said it would open the country’s doors to “significant extra volumes of imported food – whether or not produced to our own high standards – while securing almost nothing in return for UK farmers”.

She added: “We should all be worried that there could be a huge downside to these deals, especially for sectors such as dairy, red meat and horticulture. The government is now asking British farmers to go toe to toe with some of the most export-oriented farmers in the world, without the serious, long-term and properly funded investment in UK agriculture that can enable us to do so.

“It’s incredibly worrying that we’ve heard next to nothing from government about how it will work with farming to achieve this.”

Labour’s shadow international trade secretary, Emily Thornberry, echoed the criticism and said the deal would generate just £112m in additional exports for UK firms compared with pre-pandemic levels. Referring to the price tag of a new national flagship, she claimed the total value for businesses from the agreement would be “less than half the cost of Boris Johnson’s new yacht”.

Thornberry said: “It is a deal whose only major winners are the mega-corporations who run New Zealand’s meat and dairy farms, all at the expense of British farmers who are already struggling to compete. But for British jobs, growth and exports, this deal is yet another massive failure.”

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CBN gives fresh guidelines on dormant accounts, unclaimed balances in banks

The Central Bank of Nigeria, CBN, has directed all banks and other financial institutions in the country to transfer all dormant accounts and unclaimed balances and other financial assets to its dedicated account.

The apex bank disclosed this on Friday in a guideline on the management of dormant accounts, unclaimed balances signed by its acting director of the Financial Policy and Banking Regulation Department, John Onojah.

According to the circular, all dormant accounts and unclaimed balances with banks for at least ten years will be warehoused in a dedicated account known as the Unclaimed Balances Trust Fund (UBTF) Pool Account”.

Accordingly, CBN said the funds from Dormant Accounts, unclaimed balances may be invested in Nigerian Treasury Bills (NTBs) and other government securities.

However, the new Guideline which is a review of the Guideline issued in October 2015 exempted dormant accounts, and unclaimed balances under litigation and investigation.

“CBN shall treat unclaimed balances (dormant accounts and financial assets) as follows:

“Open and maintain the ‘UBTF Pool Account’; Maintain records of the beneficiaries of the unclaimed balances warehoused in the UBTF Pool Account;

“Invest the funds in Nigerian treasury bills (NTBs) and other securities as may be approved by the ‘Unclaimed Balances Management Committee’;

“Refund the principal and interest (if any) on the invested funds to the beneficiaries not later than ten (10) working days from the date of receipt of the request and where it is imperative to extend the timeline, a notice of extension shall be communicated to the requesting FI stating reasons for the extension,” it said.

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CBN’s decisive actions has strengthen the economy- Cardoso

The Central Bank of Nigeria (CBN) said in Abuja on Friday that its monetary policies and actions have stimulated growth and stability of the nation’s economy.

 

CBN Governor, Mr. Olayemi Cardoso, said this during an engagement with Senate Committee on Banking, Insurance and other Financial Institutions.

Cardoso said that given the positive indicators, Nigerian were in for better days.

He said: “The spread between official and BDC rates has narrowed significantly from N162.62 in January to N47.22 in June indicating successful price discovery, increased market efficiency and reduced arbitrage opportunities.

“The stock of external reserves increased to 36.89 billion dollars as of July 16, compared with 33.22 billion dollars as at end-Dec 2023, driven largely by receipts from crude oil related taxes and third-party receipts.

“In first quarter 2024, we maintained a current account surplus and saw improvements in our trade balance.

According to him, the nation’s external reserves level as at end of June can finance over 11 months of importation of goods and services or 14 months of goods only.

Cardoso said this was significantly higher than the prescribed international benchmark of 3.0 months, indicating a strong buffer against external shocks.

He said that the banking sector remained robust and diverse, comprising 26 commercial banks, six merchant banks and four non-interest banks.

“Key indicators such as capital adequacy, liquidity, and non-performing loan ratios all showed impressive improvements, underscoring the sector’s growing stability and resilience.

“The equity market has shown impressive performance, with the All-Share Index rising by 33.81 per cent and market capitalisation expanding by 38.33 per cent from Dec 2023 to June 2024, reflecting growing investors’ confidence,” he said.

Cardoso said that while CBN was encouraged by these positive trends, it remained vigilant and committed to implementing policies that support sustainable growth in the financial markets, while maintaining overall economic stability.

He also assured  members of the committee that required measures and strategies had been mapped out to confront emerging challenges.

“To combat inflation, we have implemented a comprehensive set of monetary policy measures.

“These include raising the policy rate by 750 basis points to 26.25 per cent, increasing cash reserve ratios, normalising open market operations as our primary liquidity management tool.

“And adopting Inflation Targeting as our new monetary policy framework,” he said.

Cardoso said in the area of banking supervision, CBN had taken decisive actions to ensure the safety, soundness, and resilience of the banking industry.

He said that key measures included intervention in three banks, revocation of Heritage Bank’s license, increasing minimum capital requirements, and enhancing AML/CFT supervision.

“We also introduced new frameworks for Cash Reserve Requirements and cybersecurity and prohibited the use of foreign currency collaterals for local currency loans,” he said.

Cardoso said that CBN was in the process of reviewing micro and macro prudential guidelines to reinforce the resilience of financial institutions to withstand tightened conditions, thereeby creating a secure and attractive investment climate.

“We have signaled our plans to re-capitalise deposit money banks in Nigeria to improve capital inadequacy and their capacity to grow the economy.

“Our ultimate goal is to create a more stable, resilient, and efficient financial system that can better serve the Nigerian economy, while adhering to international best practices,” he said.

Earlier, Chairman of the Committee, Sen. Adetokunbo Abiru, said the purpose of the interaction was to update the committee on efforts, activities, objectives and plans of the CBN with respect to monetary policy.

 

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Nigeria’s external reserves surge to $35.77bn – CBN

Nigeria’s external reserves increased to $35.77 billion on Thursday up from the $33.09 Billion at the end of 2023.

This is according to Thursday’s data from the Central Bank of Nigeria on the country’s external reserves movement.

The figure represents a $2.68 billion increase in the country’s external reserves in the past six months.

Further data showed that Nigeria’s foreign reserve crossed the $35.05bn on July 8 to the $35.77 mark on Thursday.

Meanwhile, according to the recently released economic outlook by CBN, titled ‘Macroeconomic Outlook: Price Discovery for Economic Stabilisation’, the apex bank had projected a decline in the country’s external reserves in 2024.

The CBN based its assumption on continued payments of outstanding foreign exchange forward obligations, matured foreign exchange swaps, and debt service.

The apex bank, however, said, “the expected improvement in crude oil earnings, together with recent reforms in the foreign exchange market and energy sector, however, would cushion the drop in external reserves.”

The outlook also projected a marginal increase to $19.42 billion from $19.17 billion in 2023 for diaspora remittances.

“The external reserves, which stood at $33.09bn in 2023 could reduce slightly in 2024.

“This is on the assumption of continued payments of outstanding foreign exchange forward obligations, matured foreign exchange swaps, and debt service,” it said.

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