Nigeria central bank to auction dollars for fuel import – Reuters

LAGOS Dec 5 (Reuters) – Nigeria’s central bank has asked banks to submit bids for a “special currency auction” targeting fuel importers to meet demand for matured letters of credit, traders said on Monday.

Traders said the central bank sent a message to banks on Monday to submit backlog dollar demand from fuel importers by 1500 GMT for a special intervention.

 
 

Nigeria consumes 45 million litres of gasoline a day, or roughly 280,000 barrels, which would require the market to provide some $18 million a day. Importers cover about 30 percent of this, with the state oil firm covering the rest, which is a big strain on the market for dollars.

The West African nation has four refineries but decades of neglect mean it needs to import petroleum products. Fuel shortages often occur in Nigeria during festive periods such as Christmas and Muslim holidays.

Traders said the government wanted to ensure that fuel retailers had enough products, so it was channelling dollars to them and also to avoid shortages which in May crippled banking, airline and telecom services.

Nigeria is in its deepest recession in 25 years, worsened by falling crude output as militants attack pipelines in the Niger Delta, the heart of its production, and global prices remain low, choking off dollars needed to fund imports.

The dollar shortage has caused many companies to halt operations and lay off workers, compounding an economic crisis.

It was not clear at what rate the central bank would sell the dollars. In May, the government agreed a deal with oil firms in Nigeria to sell their dollars directly to fuel importers, to end months of scarcity partly caused by a currency shortages after it hiked fuel prices by 67 percent, using an exchange rate of 285 naira per dollar .

The naira, which has been stuck at around 305 per dollar on the official market for more than two months since the central bank in June abandoned its dollar peg of 197 against the currency, eased to 314.90 at 1115 GMT. It was quoted at 484 on the black market. (Reporting by Oludare Mayowa; Additional reporting by Chijioke Ohuocha; Editing by Larry King)

 

    Subsidy back, as oil price rally makes N145 petrol price unsustainable – Businessday


     

    Fuel subsidy is effectively back on the books of the Nigerian National Petroleum Corporation (NNPC) following the sharp rise in crude oil prices after the Organisation of Petroleum Exporting Countries (OPEC) agreed to cut production by 1.2 million barrels per day, on November 30. This effectively means that Nigeria’s current N145 per litre retail price template for petrol, set in May (eight months ago) is obsolete.

    “We suspect that the importers, or at least the NNPC, are taking the hit on their books as a result,” analysts at FBN Quest said in a December 2 note to BusinessDay. This is because, “the higher spot price clearly feeds into the costs of importers of petroleum products.”

    The price of Brent crude rose 6 percent to $53.53 per barrel as at midday on Friday, from $50.47 per barrel on Wednesday, when OPEC and Russia agreed to cut output to 32.5 million barrels daily, 34.7 percent of global oil demand.

    The landing cost of petrol in Nigeria is N122.03 per litre, while distribution costs take total cost to N140/$, according to data from the Petroleum Products Pricing Regulatory Agency (PPPRA). This template was reached in May, when oil prices traded at an average of $45 per barrel.

    But with crude prices rising by 17.7 percent to $53 per barrel from $45, the landing cost of petrol now exceeds the retail price of N145 per litre, calculations by independent analysts show.

    “The Federal Government has said several times that it is not incurring any subsidy costs. Yet the devaluation of the naira in June has added greatly to importers’ costs and pushed them above the N145/litre ceiling for premium motor spirit, set by the regulator,” FBN Quest analysts noted.

    The current price of N145 per litre is unrealistic and may be impossible to sustain, according to Dolapo Oni, head of research at Ecobank. “So as you celebrate OPEC’s decision and higher oil prices, set money aside for higher fuel prices,” Oni said via his twitter handle, Thursday.

    In a case where government refuses to review prices upward, as it has done in the past, the result will be no different, as it would mean a return to acute fuel shortages brought on by importers’ inability to sustain petrol imports and make profit, according to Muda Yusuf, the director-general of the Lagos Chamber of Commerce and Industry (LCCI).

    “If nothing is done in the immediate to review the cost template to accommodate higher oil prices; another fuel scarcity may be in the works,” Yusuf said by phone.

    Nigeria has been battered by falling oil prices and a cut in production due to militant attacks on oil pipelines. Oil is the source of 90 percent of dollar earnings.

    petrol-chat

    As foreign reserves plummeted, Nigeria became unable to meet the dollar requirements of fuel importers, which therefore resulted in the intense fuel scarcity witnessed in the months of March and April this year.
    Forced to intercede for businesses and households reeling from fuel scarcity and higher costs, the Petroleum Products Pricing Regulatory Agency (PPPRA) template in May, increased the approved retail price of petrol by about 62 percent to a band between N135 – N145 per litre from N87.

    But the price template has been due for review since July, following the naira devaluation in June and higher gas prices, according to Olaposi Williams, Chief Operating Officer (COO) for OVH Energy Marketing.

    “A further increase of  crude prices to $54 per barrel would take landing costs to new heights and petrol importers would suffer higher profit losses,” said Williams.

    The non-dynamic template, which failed to take into account rising oil and gas prices, as well as the naira dollar exchange rates volatility, has seen companies operating in the country’s downstream oil sector struggle with negative margins and has translated a burden of higher costs for Nigerians.

    “There are a lot of avoidable crises in Nigeria’s downstream sector, which seems to be in permanent crisis mode,” Victor Eromosele, CEO of ME Consulting and former CFO of NLNG said.“The PPPRA model is flawed as the N145 per litre arrived at in May was a crisis solution. We need a sustainable model which accommodates variable components such as the rise or fall in crude.”

    Only full deregulation of the downstream sector, where government no longer enforces a price ceiling, is the path to a sustainable model, according to Esili Eigbe, a director at Exotix Partners Ltd.

    “By allowing the invisible hand of the market play its role, the sector will attract more investors and it would engender competitive pricing. But if this doesn’t happen, then there will always be problems,” Eigbe said by phone.
    Nigeria is the largest oil producer in Africa, pumping some 1.6 million barrels a day of crude.

    However, it is forced to rely on imports to meet 70 percent of its domestic refined petroleum products demand, as state oil company, the NNPC’s four refineries produce at less than 20 percent of installed capacity of 450,000 bpd.
    Government’s meddling and short term fixes and interventions in the sector compound the downstream sector’s problems, stakeholders say.

    Thirty percent of foreign exchange demand in Nigeria is used for fuel imports, according to data from the Central Bank.

    The government meddling has led to the collapse of liquidity in the inter-bank foreign exchange market, shortage of aviation fuel, vital for linking Nigeria to the global economy and chaos in the downstream sector.

    LOLADE AKINMURELE

     

    Dealers raise concerns over new FX Bill – Businessday

    Dealers in Nigeria’s foreign exchange market have raised several concerns over a  foreign exchange Bill, which has just gone through second reading in the Senate.

    The bill sponsored by John Enoh, who is also chairman, Senate Committee on Finance, seeks to repeal the Foreign Exchange (Monitoring and Miscellaneous Provision) FEMM Act , Chapter F34, laws of the Federation of Nigeria, 2004, and enact the Foreign Exchange (Control and Monitoring) Bill to establish a Foreign Exchange Market in Nigeria, provide for the control, monitoring and supervision of transactions conducted in the Foreign Exchange Market.

    “It is interesting that there are two (2) Bills, the first one by the Nigerian Law Commission, merely seeking to amend the current Act, whilst this particular one is seeking to repeal the current Act. The latter is the most destructive, as it takes away s.9 of the current Act which allows buyer and seller to agree their rate,” said a dealer who has reviewed the new John Enoh sponsored Bill.

    The John Enoh Bill is different from another bill proposed by the Nigeria Law Reform Commission (NLRC), which seeks to amend the existing the FEMM Act but which has also controversially proposed a jail term for Nigerians holding foreign exchange beyond 30 days.  But dealers have noted that the John Enoh Bill is even more damaging to the foreign exchange market.

    “The John Enoh bill does away with the notion of “autonomous foreign exchange market” and uses the broader phrase “foreign exchange market”. It also defines transactions in the newly defined foreign exchange (FX) market as including the ‘public’, so this could be interpreted, if the need arises, to catch all FX market segments which were not hitherto caught, including the ‘parallel market’ (see sections 1, 18, 19 and 48)”.

    But like the NLRC Bill, the John Enoh Bill also seeks to take away the supervisory powers of the Minister of Finance over the foreign exchange market, which are currently enshrined in section 6(3) of the FEMM Act (see section 3).
    But of most concern to dealers in the foreign exchange market, is the fact that the John Enoh Bill seeks to introduce “the concept of basic exchange rates”. Section 4(1) provides: “The [CBN] may determine the basic exchange rate, rate of purchase and sale of foreign exchange and arbitrated exchange rate…in foreign exchange transactions, if it is necessary to do so for harmonious and orderly foreign exchange transactions in Nigeria.” Section 4(2) then goes on to provide: “Where the [CBN] determines the basic exchange rate, residents and non-residents shall perform transactions in conformity with such basic exchange rate”.

    Dealers say this provision is a clear and unambiguous move away from section 9 of the FEMM Act, which guarantees the rates in the market, shall be as “mutually agreed” between participants.

    “This new Bill threatens to shred apart the framework for semi liberalised market with the idea of “basic exchange rates”. The idea that the regulator “may determine the basic exchange rate, rate of purchase and sale of foreign exchange and arbitrated exchange rate, in foreign exchange transactions” and that, when so determined, “residents and non-residents shall perform transactions in conformity with such basic exchange rate” is a fundamental shift from the regime we currently run in this country” said another dealer.

    But the sponsor of the Bill, John Enoh, says that the 1995 FEMM Act is outdated and this Foreign Exchange bill is aimed at updating it.

    “lt is obvious from all indications, that the 1995 Act in its present form requires to be comprehensively reviewed to remove its out-dated provisions and to bring in new provisions to match up with new challenges in the regulation of the Foreign Exchange Market, in line with the requirements of Article 14 of the International Monetary Fund (’lMF’) Articles of Agreement, 2011,” the bill sponsor, Enoh said while presenting the bill.

    “This is exactly what the present Bill has done.”
    The proposed Foreign Exchange (Control and Monitoring) Bill seeks to establish a foreign exchange market; Provide for the regulation, monitoring and supervision of the transactions conducted in the market and for related matters; and also Contribute to the sound development of the National Economy by striving to facilitate foreign transactions.

    It also seeks to maintain an equilibrium of balance of International payments; Stabilise the value of currency by ensuring the liberalisation of foreign exchange transactions; Maintain an equilibrium of balance of international payments; and also Stabilise the value of currency by ensuring the liberalisation of foreign exchange transactions and of other foreign transactions by revitalising market functionality.

    The proposed Bill attempts to expand Section 1 of the existing Act to incorporate three new provisions to make for clarity and to empower the Central Bank of Nigeria (CBN) to administer, control and manage all dealings and transactions in relation to foreign exchange matters.

    The newly introduced clauses enable the CBN to determine the basic exchange rate of purchase and sale of foreign exchange.

    Section 6 of the Bill introduces New Subsections (2) (4) and (5) which require authorised dealers to render returns to the CBN on sources of foreign exchange in excess of USD 10,000 and utilisation of same; and also obtain prior approval of the CBN when seeking to import foreign currency notes.

    “The reason why the Bill should be amended is to resolve the acute foreign exchange shortage which has crippled Nigeria,” Enoh insists.

    Onyinye Nwachukwu & Owede Agbajileke

    Italy’s ‘No’ Poses Trouble for Eurozone – WSJ

    Populist win marks sobering start for what could be defining year for European Union

    BRUSSELS—Sunday’s referendum vote in Italy reinforced a widening split between the economics needed to sustain Europe’s common currency and the continent’s rising tide of populism.

    Italians resoundingly rejected constitutional changes aimed at streamlining lawmaking and boosting competitiveness, marking a sobering start to what could be a defining year ahead for the European Union.

    National elections are set for 2017 in three of the bloc’s founding members. Sunday’s vote makes it more likely that Italy, too, will have parliamentary polls next year. In all of these countries, mainstream parties have been losing ground to populist movements, many of them on the far right.

    The biggest winner from Sunday’s ballot in Italy was Beppe Grillo, a comedian-turned-politician, and his populist 5 Star Movement, which wants a nonbinding referendum on Italy’s membership in the euro, an end to EU-mandated government-spending limits and income guarantees for all citizens.

    Italy’s prime minister, Matteo Renzi, argued that his country needed to back the constitutional changes or be left behind. He said Italy needs to cut red tape and make it easier for companies to do business. After his defeat he said he would submit his resignation on Monday.

    “The antiestablishment feeling is stronger than the desire to reform,” said Stefano Stefanini, an adviser at lobbying and public-affairs firm Podesta Group and an aide to former Italian President Giorgio Napolitano. “There is a reluctance to change, an innate conservatism in Italy.”

    That is the paradox at the heart of European—and American—politics today: A resistance to change among voters is leading to increasingly antiestablishment choices at the ballot box.

    Whether or not the West’s populist movements manage to take power, they are already shaking the center. Parties of the mainstream center-left like Mr. Renzi’s are under siege. French President François Hollande said last week he wouldn’t seek re-election this year—a first in postwar French politics. His Socialist party is so unpopular it is unlikely to reach the final round of the elections.

    The mainstream right is also responding, often by tacking toward the nationalist rhetoric favored by the newcomers and sometimes shifting policies accordingly.

    Few economists doubt that Italy, the eurozone’s third-largest economy, needs deep overhauls. Without them, many question whether the country will be able to survive long-term using the same currency as powerhouse Germany.

    Since Italy joined the euro in 1999, gross domestic product has stagnated and government debt has swollen to 133% of annual economic output, the second-highest in the Europe after Greece.

    Repairing national economies is essential to cure the eurozone’s weaknesses. But it may not be sufficient. Many economists and officials say what is also needed is a closer union among the 19 states using the euro, with a greater sharing of economic and financial risks.

    Both parts have been made much harder by the surge of political populism and economic nationalism across Europe that helped drive Sunday’s outcome in Italy.

    All this piles more pressure on Germany and its leader Angela Merkel to try to hold together an increasingly fractious EU as the U.K. extricates itself from the bloc, following Britons’ vote to leave earlier this year.

    But Ms. Merkel herself faces a challenge from the far right, limiting her room for maneuver. Many Germans are angry about her decision last year to let in more than a million refugees, as well as about German subsidies for debt-ridden Greece.

    With Mr. Hollande on his way out—and the right-wing National Front mounting a strong challenge in France—the EU’s traditional Franco-German motor of EU progress also has seized up.

    Though his political career probably isn’t over, Mr. Renzi, the Italian premier, joins at least three other prominent politicians who have fallen victim this year to a backlash against political establishments: David Cameron, felled by the Brexit vote, Hillary Clinton, downed by Donald Trump’s victory, and Mr. Hollande.

    While Mr. Grillo has been critical in delivering the “no” vote, it doesn’t follow that he will win the next election. Mr. Renzi’s initiative was undone by a temporary coalition of the 5 Star Movement together with the nationalist Northern League and voters of the traditional right and far left.

    While voting in the same way on Sunday to deliver a blow to Mr. Renzi, their interests in a general election could diverge and they wouldn’t be likely to govern together, said Valerio de Molli, managing partner of The European House-Ambrosetti, a think tank in Milan.

    Yet even if Mr. Grillo and his fellow insurgents don’t get into government, they are changing politics in Europe.

    Write to Stephen Fidler at stephen.fidler@wsj.com

    2017 Will Be Good For Businesses, Experts Project – Leadership

    Having faced one of its most trying times, there is a rising optimism in the Nigerian business environment that the fortunes of the country would turn for the better in 2017.

    Analysts and business operators say with the various reforms in the country, the economy is expected to pick up from its current state of recession.

    In separate interviews with LEADERSHIP, the Nigerian business community said policies initiated by the federal government, a plan to further increase capital spending next year as well as the foreign exchange policy and various intervention initiatives, are expected to begin to yield fruits in 2017. 

    The president/chief executive officer of Dangote Group, Mr Aliko Dangote, recently predicted that Nigeria will be out of its present economic recession in 2017, noting that the huge private sector of the country is one of the positive points for the economy.

    “I personally believe we will be out of recession at about the first quarter of next year. Nigeria has what it takes, and the private sector is huge in Nigeria. The government should not focus on any business; what the government should focus on is tax collection.

    “Today in Nigeria, we have 60 per cent more arable land than China, yet most of what we consume we are importing. We must drastically change and diversify the economy; if not, we will be in trouble. We are the only African country that is not self-sufficient; we need to focus and move into agriculture,” he said.

    Likewise, the president, Lagos Chamber of Commerce and Industry (LCCI), Dr Nike Akande, predicted that Nigeria would surmount its economic woes and come out of the recession stronger in 2017, noting that Nigeria, as the giant of Africa, would not stay too long before bouncing back to its former pride of place in the world.

    While noting the decline in oil price, the weakening of the country’s currency and the associated challenges this scenario portends, she said “I strongly believe that we will bounce back from recession stronger in 2017. The economic recession was caused by our over-dependence on oil but now, we have taken the bull by its horns.

    “So many campaigns are going on and restructuring on diversification; with all these put in place, we are sure to come back to reckoning among the Commonwealth of Nations. The year 2017 is just a month away but by the end of it, things will be better, I am very optimistic.”

    Managing director of InvestData Ltd, Mr Ambrose Omordion, told LEADERSHIP yesterday that the country was facing its worst economic crisis, caused by low oil prices that have eroded both government reserves and spending, and shortage of the greenback in the system.

    “The good news is that Nigeria hopes to conclude the sale of $1billion Eurobond by the end of the first quarter of 2017 and will seek to make its foreign exchange market more flexible.

    “Also encouraging is the news that the federal government is planning a budget of more than N7 trillion next year to boost spending and help pull the economy out of its worst crisis.”

    Omordion noted that if all these are put in place, they will boost spending and make greater impact on the economy.

    On his part, an analyst at FXTM, Lukman Otunuga, noted that there was an increasing focus on agriculture, while infrastructure and investments in other non-oil sectors could provide positive results in the future.

    He said: “While things most times turn for the worst before improving, Nigeria has repeatedly displayed instances of resilience against the storm and will come out stronger with this structural transition, if successful, potentially exceeding all expectations.”

    In his own assessment, the managing director of Highcap Securities Ltd, Mr David Adnori, said that “by 2017, the Nigerian economy would have completed its inflationary adjustment. And if crude oil price and production increase, the certainty of coming out of recession in 2017 will be high.”

    There is also an increased hope for startups in the country as investments above $100 million is expected to flow into the country over the next five years.

    Maya Horgan-Famudu, a Nigerian and founder of Ingressive Ltd, which organised a technology tour for Silicon Valley companies in Lagos, last month, said the local technology start-ups ecosystem is going to experience a boom in 2017 as more USA companies are looking to Nigerian tech start-ups to invest in because of the market size and opportunities available in the country.

    “If you want to back technology in Africa, you look to Nigeria because the first billion dollar companies made by Africans, built by Africans, have happened in Nigeria. They have come from Nigerians because they have the most entrepreneurial ecosystems.  With over 182 million people, one of the fastest growing GDPs and there is a lot happening in Nigeria,” she said.

    Horgan-Famudu said the Silicon Valley investors are looking to diversify their tech investments on lower tech valuations with equal returns while serving as great mentors and bring in their capital to Nigeria top tech start-ups.

    “We would like to see investments of up to a $100 million over the next five years. We are looking at education, healthcare and financial technology start-ups” she added.

    Jill Moss, technical advisor, agency engagement at the United States Agency for International Development (USAID) noted that “there is huge demand from tech companies to learn and fund a large scale growth of African businesses. Come 2017, we are working to bring 500 big Silicon Valley ICT companies to Nigeria.

    “We are specifically targeting companies raising millions of dollars to invest. We want Nigerian tech start-ups that have traction but Silicon Valley companies can still influence the forward trajectories of the business. They are looking for fast growing startups that are still lower valuations” She said.

    To the managing director, Bank of Industry (BOI), Mr Waheed Olagunju, the right investment portfolio and diversification would get Nigeria out of recession in a short time.

    “What we need to do in the time of this recession is to diversify our economy and stop paying lip service to it.

    “We will need to look at the Mexico model and stop the over-reliance on crude oil as the mainstay of revenue for the country. We need other sectors as well. We need to encourage more investments because increased investment is one of the ways we can get out of recession.

    “When you invest, it increases production and the Gross Domestic Product (GDP) increases. We can only grow our economy by providing wide range of investment portfolios and also encourage manufacturing, which is a key to any economic development,’’ he said.

    On his part, Seun Faluyi, managing director, Offshore Dimensions Limited, remarked that the performance of the oil and gas sector in 2017 will be determined by a couple of factors, including the ongoing reforms being carried out by the minister of state for Petroleum resources, Dr Ibe Kachikwu, as well as the price of crude oil.

    He lamented that the industry is still awaiting the passage of the petroleum industry bill (PIB) almost two years after the inauguration of the 8th National Assembly.

    While applauding the government for embarking on reforms, he also expressed the view that translating the fiscal policies into laws will remain a hurdle for the executive, which is likely going to constitute delays in the implementation of whatever action plan is expected to be a follow-up to the policies.

    “We cannot talk about a better 2017 when we have refused to remove the obstacles that constitute hindrances in the industry,” he said.

    “Some of the laws guiding operations in the industry are obscure and there is the need to address them in order to advance the industry.”

    He asserted that he would rather adopt a wait-and-see attitude and noted that with the recent agreement by OPEC members to cut output, Nigeria will still need to ensure a safe environment to allow it meet its production quota to enjoy the fruits of the crude oil cartel’s deal.

    Government’s policies, programmes and actions will to a large extent determine where the industry heads to in 2017, he declared.

    Chairman, International Centre for Energy, Engr. Bunmi, said he expected the oil and gas industry to be more stable in 2017.

    He noted that with the level of discussions going on locally and at the global level, most of the challenges that characterised 2016 would be overcome in 2017.

    While commending the federal government for initiating a short and medium term roadmap for advancing the industry, he expressed the belief that the private sector will have to be motivated with incentives to buy into such policies.

    “Government must create the enabling environment to attract investment into the sector. The oil and gas is in need of huge investment to enable it play the pivotal role it is supposed to play in the diversification of the nation’s economy. We need gas to power our industry, generate electricity, for domestic use etc.; however, investors will not come into the sector except the conditions are conducive,” he said.

    Meanwhile, Dr Kachikwu has expressed optimism about OPEC’s decision to cut crude production, stating that the deal would obviously enhance the prospects of the oil and gas industry with the price of the commodity already surging after the announcement.

    A statement from the minister’s office, signed by the director of press, Ministry of Petroleum Resources, by Mr Idang Alibi, noted that Nigeria’s exemption from the output cut would affect the country positively.

    He said that a stable increase in oil price, which is one of the rewards of the deal, would most likely contribute positively to the stimulation of the economies of member countries, including Nigeria.

    On his part, the head, Agricultural Productivity, Enhancement, National Programme for Food Security and chairman, National Fertiliser Technical Committee, Prof Victor Chude, concurred with those who believe that 2017 would be good for businesses. He pointed at Nigeria’s huge market for agricultural inputs and the present government’s emphasis on increasing agricultural productivity.

    Speaking in an exclusive telephone interview with LEADERSHIP, Chude said: “Nigeria is a huge market for agricultural inputs, more so that the current government is emphasising increasing agricultural productivity.

    “The prospects are positive for investors and businessmen. Take fertiliser for example, fertiliser prospects are 3.5 million metric tonnes but, currently, what is being imported  and produced locally is between 600/800 metric tonnes. So there is a shortfall.”

    He also posited that the issue of seeds is another big area as the seeds currently produced are below the requirement.

    The fertiliser expert stated that other value chains in the agricultural sector reveal lots of investment opportunities.

    Chude emphasised that the prospect for investors and businesses in the nation’s agricultural sector is very high, but urged that local investors be encouraged to favourably compete with their foreign counterparts.

    “There is the prospect of Nigeria commencing rice exports between 2017 and 2018, there is a growing demand for investment in rice production. Rice needs lots of investment in 2017-2018. So prospect is very high and positive for investors,” he said.

    The professor, however, urged government to continue to encourage both foreign and local investors, and to help make forex available to indigenous investors to make them compete favourably with their foreign counterparts

    Also speaking, country manager, AFEX Commodities Exchange Ltd, Ayodeji Balogun, opined that investors coming in for long term investments stand to benefit immensely as the naira is currently undervalued.

    “If investors are coming in for the long term, it is the best time ever, because they will get good value for their investments, as the naira is undervalued. So when you bring in foreign exchange, you will get very good value for your money

    “But if you are coming in for the short term, you may lose until the naira redoubles and bounces back,” he said.

    Interbank rates to stabilise on CBN $1.5m sales to banks – Businessday

    By HOPE MOSES-ASHIKE
    Relative stability of the naira witnessed at the interbank spot market last week is expected to continue in the week as the Central Bank of Nigeria (CBN) continues its daily $1.5 million foreign exchange sales to banks.
     
    Foreign exchange sales to banks were crossed at a fixed rate of N304.5/$ from Monday to Friday while interbank market rate held steady at N305/$ from Monday Friday, save for Wednesday when interbank closed at N305.25/$, according to a report by Afrinvest Securities Limited.
     
    At the parallel market, however, the local unit continues to trade with significant spread (within a range of N170-N177) to the greenback as supply constraints and control measures drive rates higher. The naira closed week at N482/$ in the parallel market compared with N475/$ on Monday, depreciating 1.5 percent week-on-week.
     
    At the FMDQ OTC derivatives market, the value of FX futures opened contract closed the week at $3.8 billion higher than $3.6 billion in the previous week. The NGUS NOV 2017 contract, which replaced the 2016 equivalence improved from $89.50 million last week to $100.00 at the close of the week at a contract price of N262/$ as buyers take advantage of the attractive hedging opportunities presented by the instruments compared with contracts with higher prices. Meanwhile, the NGUSOCT 2017 contract currently presents the most attractive hedging opportunity at a contract price of N260/$.
     
    However, Nigeria external reserves rose 3.3 percent in the month of November from $23.9 billion to $24.7 billion.
     
    “We believe this is positive for the capacity of the CBN to sustain its daily dollar sales even as the recent output deal reached by OPEC members signals further improvement. However, unresolved crisis in the Niger Delta remains a drag to accretion,” Robert Omotunde, head, investment research, and his team of analysts at Afrinvest said.

    Euro Touches 20-Month Low as Renzi Concedes Referendum Defeat – Bloomberg

    • Italian premier says he will offer resignation on Monday
    • Shared currency pares losses after speech, yen erases gains

    The euro fell to the lowest level since March 2015 as Italian Prime Minister Matteo Renzi said he will resign after conceding defeat in the nation’s constitutional referendum.

    The single currency slid against all of its 16 major peers as exit polls showed about 59 percent of Italians had voted against Renzi’s plans to rein in the power of the Italian Senate. Still, the euro pared losses following the premier’s speech, while the yen erased an earlier advance against the dollar.

    “Markets tend to react much faster to changes of environment now,” said Yannick Naud, the head of fixed income at Banque Audi (Suisse) SA in Geneva. “There is now a possibility of the euro reaching parity to the dollar. Maybe not right away, but it is a possibility if there is certainty regarding new elections.”

    The euro slid 1 percent to $1.0560 as of 1:42 a.m. Rome time. It earlier fell 1.5 percent to $1.0506, the lowest since March 16, 2015.

    The result is the latest in a series of votes that have roiled financial markets in 2016, following Britain’s vote to leave the European Union in June and Donald Trump’s victory in last month’s U.S. presidential election. Still, with a “no” vote largely expected, the initial currency-market reaction is relatively muted compared to those events — the pound fell by more than 10 percent as it became clear that the U.K. had voted for Brexit, while the dollar fluctuated wildly in the hours following Trump’s win.While the referendum has raised concerns over Italy’s future in the euro-region, the nation’s political and legal system mean a “no” vote is unlikely to trigger a quick exit.

    “If the referendum is rejected, this is not the end of the world,” Fabio Fois, a London-based economist at Barclays Plc, said before the vote. “Bicameralism will remain, but what really matters is the government attitude to press ahead with reforms.”

    Why Italian Vote Unlikely to Mean Swift Euro Exit: QuickTake Q&A

    • A rejection of Renzi’s reform means Italy’s government bonds, which have been the euro zone’s worst performers in the past six months, may drop Monday. The bond market opens at 8 a.m. Rome time.
    • The yield premium demanded by investors for owning the nation’s 10-year bonds instead of benchmark German bunds surged on Nov. 28 to the most since June 2015. It pared that increase last week, while Italian stocks gained.
    • Before the vote, some investors said they saw the currency, rather than the nation’s bonds, as the best way to play the referendum, as the European Central Bank’s bond buying plan provides a source of support for the fixed-income securities.
    • The nation’s benchmark FTSE MIB Index of shares, which starts trading at 9 a.m. in Rome, has dropped about 20 percent this year, and may extend its decline on Monday.
    • While Renzi’s concession initially roiled other currencies, the fallout was limited. The yen erased a gained of as much as 0.6 percent against the dollar, while the Australian dollar and Mexican peso pared losses.

    FG Express Confidence on Emefiele, Says Economic team solid – Presidency – Financial Watch

    By Ezekiel Enejeta

     

    The call for sack of Central Bank of Nigeria (CBN) governor, Godwin Emefiele may have hit a brick wall on Sunday in Abuja as the presidency have expressed confidence on the configuration of Nigeria’s economic team.

    The CBN governor has been under intense pressure from economic experts and various groups since Nigeria’s economic recession started earlier this year.

    According to a report by the news agency of Nigeria, the Senior Special Assistant to the Vice President on Media and Publicity, Mr Laolu Akande made the disclosure in a bid to debunk the notion that Nigeria’s economic troubles is as a result of poor handling of the economy by Buhari’s economic team.

    He however blamed the dwindling economy on the activities of militants in the Niger Delta bombing and destroying oil installations in the region which have resulted in decline in crude oil production.

    The revelation by the media aide also have cleared the air on the entire economic team of Buhari, giving them a vote of confidence and urging them on to continue running Nigeria’s economy.

    Nigeria has been thrown into economic recession since July with the Naira losing its value against major world currencies after the CBN floated the local currency. This have also lead to inflation and high cost of goods in Nigeria with many losing jobs and businesses.

      Reserves rise by $318 million in one week, hit $24.8 billion – The Guardian

      The nation’s foreign exchange (forex) reserves have sustained an incremental record in the last five weeks, despite demand pressure, as it added $318 million in seven days.The increase, now bring the stock of reserves to $24.82 billion, up from $24.49 billion one week ago, representing about 1.3 per cent rise.

      The resurging reserves’ trend came despite $1.5 million daily dollar sales throughout in the last one week, according to analysts, which they said has broadly stabilized the interbank market.

      Meanwhile, forex sales to banks at the interbank market last week, oscillated between N304.5/$ and N305/$ until Friday, while at the parallel market however, the local unit continued to trade with significant spread.As at Friday, due to supply constraints the naira closed at N482/$ at the parallel market, compared to N475/$ at the beginning of the week, depreciating 1.5 per cent week-on-week.

      The reserves rose by 3.3 per cent in November to $24.7 billion, before adding about $182 million as at December 1, from $23.9 billion in October.

      “We believe this is positive for the capacity of the Central Bank of Nigeria to sustain its daily dollar sales, even as the recent output deal reached by oil cartel members signals further improvement.

      “However, unresolved crisis in the Niger-Delta remains a drag to accretion. We expect interbank market rate to remain largely stable in the coming week as the CBN continues its daily $1.5 million forex sales to banks,” analysts at Afrinvest Securities Limited said.

      The international price of crude oil has remained relatively stable in recent weeks, although the country’s production has been below expectation due to the activities of militants.

      However, the price stability, slight improvement in capital importation and the country’s management of the foreign exchange policy through the Central Bank of Nigeria have also contributed to the assessed reserves’ accretion.

      The National Bureau of Statistics (NBS), in its latest report, said the trade deficit is now N104.14 billion, from N484.23 billion in the previous quarter, as the rise in exports moved to $1.59 billion from $342.5 million.

      Earlier in November, African Development Bank delivered a $600 million facility, out of the $1 billion it pledged to Nigeria, which may have aided the reserves recovery.

      Recession: Manufacturers cut costs, adopt other survival strategies – Punch

      By Anna Okon

      As the Federal Government embarks on measures to take the country out of economic recession, manufacturers have also been considering strategies aimed at overcoming the situation.

      For most firms whose factory processes depend heavily on imported inputs, the escalating rate of the United States dollar against the naira has posed a huge challenge.

      Investigation by our correspondent, however, showed that they had to restructure and reposition themselves to cope with the situation.

      The Group Managing Director of Flour Mills, Mr. Paul Gbededo, told our correspondent that the firm, in anticipation of the situation, commenced a backward integration programme a few years ago to provide raw materials for its factory.

      One of such projects, according to him, is the Thai Farms where most of the grains needed for production in the mills come from.

      “We get most of our grains from there and when we need more, we buy from the local market,” he said.

      The President of the Manufacturers Association of Nigeria, Dr. Frank Jacobs, who urged manufacturers to look for ways of sourcing their raw materials locally to survive the high exchange rate, said at a forum in Lagos that local sourcing of raw materials among manufacturers had increased by about 25 per cent to 30 per cent.

      Also, in an attempt to reduce the huge import bill on wheat, Honeywell recently empowered local farmers with finance and hybrid seedling to grow crops, which they could sell back to the factory.

      For the Managing Director of Bennet Industries, Mr. Reginald Odiah, his strategy for survival is to visit popular Lagos electronics market, Alaba, buy up most of the substandard gadgets and reassemble them with some quality inputs for customers who want quality products.

      Odiah, whose firm produced some of the light fittings in the country, said he had to shut down his production line because of the influx of substandard products.

      “I cannot afford to keep full time workers; I only have people I call on whenever I have a job to do,” he told our correspondent.

      But the manufacturers have also examined other ways of surviving apart from cutting cost and sourcing raw materials locally.

      At a recent special forum and end of the year programme of the Chemicals and Pharmaceutical Sectoral Group of MAN, which was tagged ‘Survival strategy in a recessed economy – the case for chemical and pharmaceutical industry’, the stakeholders agreed that it was time to think out of the box.

      The Managing Director of Coleman Wires and Cables, Mr. George Onafowokan, who was a guest speaker at the event, outlined some of the strategies as cost control and waste elimination measures.

      Cutting cost, according to him, transcends wage bill to lifestyle. “For instance, we don’t have to change cars every year and this is a lifestyle change that has to start from the top management of industries,” he added.

      Another strategy, he said, was evaluating production synergies and processes.

      Onafowokan highlighted the need for power management, adding that instead of investing in one main power source such as a huge 5,000KVA generator, the power source could be segmented into five generators of 1,000KVA each, which would mean cutting costs on diesel since all the five generators would not work simultaneously.

      He said, “If you have multiple factories and you cannot run at full capacity because of raw materials and inventory shortfall, use a factory that gives you the greatest advantage.

      “In our case, our factory in Ibadan has more power than Lagos, where we have been without public power supply for the past one year. What we do is to produce more in Ibadan and feed other outlets.”

      For the chemical importers, the stakeholders discussed the possibility of convincing suppliers to move their production base from China to Nigeria.