Ringgit was among the weaker major Asian currencies in 2017
China’s economic slowdown will weigh on Malaysian trade: BMI
Malaysia’s ringgit, one of Asia’s worst-performing currencies over the past year, has further to fall, according to BMI Research.
One reason is because it is affected by the yuan, which is going to remain under downward pressure, BMI said in a Jan. 4 note. There will also likely be a narrowing of real interest-rate differentials between the U.S. and Malaysia, with the latter probably staying on hold this year while the Federal Reserve increases rates by a total of 50 basis points. Further weakness in the global bond market would also put the ringgit under pressure given that around 40 percent of Malaysian bonds are held by foreigners.BMI has lowered its forecast for the ringgit. It expects it to average 4.50 per U.S. dollar this year and 4.40 in 2018, from 4.00 and 3.88 previously. The currency, which fell 4.3 percent against the greenback last year and 18.5 percent in 2015, hasn’t posted an annual gain since 2012.
“The Chinese economy remains mired in a medium-term slowdown as the structural weaknesses such as overcapacity in the industrial sector and dominance of inefficient state-owned enterprises persist,” the note said. “Given that China is Malaysia’s largest export partner, we believe that Malaysia’s export-driven economy remains exposed and is likely to be negatively impacted.”
The ringgit is, however, likely to claw back some losses over the longer term, supported by the rising price of commodities such as oil and improving terms of trade, which will be positive for domestic savings and investment, BMI said. Malaysia’s relatively positive fiscal position relative to the U.S. should also keep inflationary pressure subdued, it said.
The risks to BMI’s view are to the downside. If the Fed increases rates faster than expected it could lead to higher outflows from Malaysia and put the ringgit under greater pressure. Donald Trump’s presidency also raises the likelihood of a global trade slowdown, while Malaysia’s export sector would suffer if additional protectionist measures are imposed, it said.
Digital currency reaches $1,140.64, exceeding mark set in 2013
Currency, capital curbs fuel gains in China, India, Venezuela
Bitcoin hit an all-time high Wednesday, according to Bloomberg data, thanks to continued adoption in China and other parts of the world where traditional currencies are tightly controlled.
The digital currency, which just turned eight years old, reached $1,140.64, which was higher than the $1,137 it hit in November of 2013. In December, bitcoin also surpassed its previous all-time high in total market capitalization, which now exceeds $16.1 billion.
The latest increase was driven by capital or currency restrictions in countries ranging from China to India and Venezuela, where people purchased bitcoin to protect their savings, as well as increased adoption by investors. The digital currency beat every other currency, stock index and commodity contract as an investment last year.
“Unlike the exponential adoption that propelled the price of Bitcoin in 2013, the current ascent was driven by a more gradual adoption over the last three years, mostly in China and other countries that have capital or currency restrictions,” Gil Luria, an analyst at Wedbush Securities, said in an e-mail.
Global restrictions on sovereign currencies are playing a major role in driving increased bitcoin demand. The Chinese government, for example, made it more difficult for people to move the nation’s currency and spend it overseas, leading to trapped liquidity. That’s made bitcoin, which isn’t controlled by any government or central bank, more attractive.
India and Venezuela banned their largest-circulating bank bills in a bid to make it harder to pay bribes and buy contraband in cash. Governments all over the world are boosting reporting rules for assets abroad and allocating more resources to figuring out how and where illegal cash moves around. It’s part of efforts to combat terrorism financing and corruption following graft scandals from Europe to Brazil. That’s boosting demand from people who want to receive and send cash without all the oversight.
And isolationist policies by some governments to restrict remittances are pushing consumers into bitcoin as well. U.S. President-elect Donald Trump said during his campaign that he’d limit or halt remittances to Mexico until the Latin American nation agrees to pay for a border wall between the two countries.
Finally, the explosion of bitcoin supply growth is slowing, with so-called miners getting fewer electronic coins in exchange for letting the network use their computing power. The payment to owners of the computers that verify bitcoin transactions and record them in a public ledger known as the blockchain fell by half in the middle of last year.
“It shows that more and more people are confident in the currency,” Marco
Streng, chief executive officer of Genesis Mining, a bitcoin mining company, said in an e-mail. “They see the benefit of bitcoin and other cryptocurrencies. This will inevitably accelerate the growth of the whole economy.”
By ’Femi Asu with agency report
The sale of Nigerian crude oil is being hampered by loading delays as demand for the commodity has yet to gain momentum.
Spot buying demand was all but absent, with those holding Nigerian cargoes targeting tender buyers in India, according to Reuters.
Loading delays plagued ExxonMobil’s production after workers in Nigeria staged industrial action late last year.
February loadings were impacted by the delays, and stood at 1.58 million barrels per day. Four planned cargoes of Akpo were condensate not included in the total.
Spot deals were limited in the first full trading day of 2017, while the crude oil futures contracts, on which West African oil is priced, were notably volatile.
Several pending tenders tied up some seller interest, with Indian firms, Indian Oil Corporation and Bharat Petroleum Corporation Limited, running buying tenders.
The IOC and BPCL were said to have issued tenders to buy crude oil expected to close later this week. Approved grades included both Nigerian and Angolan crudes.
Traders said that Socar had won a tender to supply Indonesia’s Pertamina with crude oil, possibly Qua Iboe, Nigeria’s largest crude oil grade, which had been in floating storage, but confirmation was not immediately available.
Another trader said that Pertamina could be taking smaller-than-planned shipments due to berth maintenance in March.
Traders expect Saudi Arabia to raise its official selling prices to Asia, which could help West African grades compete for buyers in the region.
Traders said there was a limited amount of oil left available after buying concluded quietly over the holidays.
The premium of Brent crude to Dubai crude futures fell to $1.90 per barrel, less than half the level of the same time last year and close to the 2016 low of $1.79.
A smaller gap makes oil priced versus Brent more attractive to the Asian buyers on which Angola depends.
Angola was expected to cut around 80,000 bpd of production from the beginning of this month as part of a pact between members of the Organisation of Petroleum Exporting Countries and producers outside the cartel to shore up oil prices.
Just under two dozen cargoes from the February programme were still looking for buyers, although analysts said heavy crude oil producers such as Angola could benefit most from the OPEC production cuts.
Oil prices should average around $55 per barrel in 2017 for West Texas Intermediate, which should be enough for many slimmed-down Alberta producers to operate profitably, according to the latest forecast from financial advisory firm Deloitte.
“It’s significantly better than what the average was through last year, which is bringing some optimism into the sector,” said Andrew Botterill with Deloitte’s resource evaluation and advisory group.
“Obviously, it isn’t at a level that’s going to allow all producers to produce all of their inventory,” Botterill added, according to the CBC News.
“But it certainly is better than we’ve seen for some time. And with reductions in operating costs that companies have realised in the last year or two, there are more plays that are going to be economic.”
The OPEC agreement to limit production is one factor at play, but that alone isn’t likely to increase prices substantially anytime soon, according to Deloitte’s outlook.
“It’s going to take some time for people to really see how many barrels are going to leave the system with the OPEC cuts,” Botterill said.
“And, of course, there is still a little bit of a concern on whether that’s going to get through all of the oversupply that’s in the system.”
Natural gas prices were poor in first half of 2016 but strengthened in the last half of the year. Recent cold weather suggests they may stay strong into early 2017, Botterill said.
Still, he noted, the cost of bringing on more natural gas production in both Canada and the US remains “quite cheap,” so a sudden and sustained price spike is unlikely.
“It’s tough to see how we’re going to get very high, elevated prices,” he said.
Deloitte expects Henry Hub prices to average around $3.25 per thousand cubic feet in 2017, which Botterill said is “significantly stronger” than a year ago.
Overall, he said, the outlook for the oil and gas sector is improving.
“There’s a lot of opportunity in the sector now, and there’s some optimism in producers, and I think we’re going to see a much better 2017 than … last year.”
By Oyetunji Abioye
The naira may decline further against the United States dollar to 520 from the current 490/dollar within the year, according to some economic analysts including the Chief Executive Officer of the Financial Derivatives Company Limited, Mr. Bismarck Rewane.
In a bulletin containing the FDC’s economic outlook for 2017 released on Wednesday, Rewane predicted that the naira would trade at N350/dollar at the Interbank Foreign Exchange Market and depreciate to N520/$ at the parallel market.
He also forecast that inflation would slow down this year to between 15 per cent and 17 per cent, after spiking towards 20 per cent.
The expert, however, noted that things might get worse if the Federal Government failed to overhaul the forex market, reduce benchmark interest rate, introduce supplementary budget, and engage the Niger Delta militants to restore oil production to two million barrels per day.
Rewane said, “2016 was a year like no other. Five most unlikely events occurred including the coincidental death of George Michael on Christmas Day and the naira testing N500/dollar in the parallel market. The average Nigerian had nothing to cheer and felt it was a year in which he was economically raped, no thanks to a recession and a flawed forex market.
“2017 is looking slightly better with projections of positive growth of 1.2 per cent. This will happen only upon three conditions: Engagement in the Niger Delta to bring production back up to 2mbpd; reduction in interest rates and an increased supplementary budget; and an overhaul of the forex market to ensure transparency, liquidity and price efficiency.”
Speaking in the same vein, an economic analyst at Afrinvest, a Nigeria-based research and investment advisory firm, Mr. Wale Olusi, said the planned interest rate increases by the United States Federal Reserve Bank would lead to a stronger dollar.
He, therefore, said that unless the Central Bank of Nigeria reviewed its forex policy thrust, the naira might suffer further deprecation against the greenback owing to increased pressure on the local unit.
Olusi said, “The US Federal Reserve Bank has made known its intention to increase interest rate. We see a stronger dollar coming from a higher interest rate environment. If the CBN continues with its exchange rate policy thrust and the Presidency keeps fighting devaluation, we see the naira declining further above 500 to something near 520 this year.”
The Afrinvest expert, however, said the country had some indicators moving in its favour this year, adding that there was the need to take advantage of the situation.
“We see oil price and production output going up this year. This is good for the country and we need to take the advantage,” he added.
Economic and currency experts have expressed divergent views over the outlook of the naira this year.
While some said the naira would experience further decline at the parallel market this year, others said the volatility noticed in the exchange rate last year would not continue this year.
A currency analyst at Ecobank Nigeria, Mr. Kunle Ezun, said the naira would continue to depreciate at the parallel market while the CBN would keep managing the official rate around 305/dollar.
He said, “We will continue to see reasonable volatility of the naira during the first half of this year. The fundamental issues underlying the volatility of the naira have not been addressed.
“It will depreciate further but there has been a resistance around 500/dollar. The CBN seems to have come to the end of monetary policy because it is the issue of liquidity.”
By Rasheed Bisiriyu and Anna Okon
As car dealers and Customs clearing agents continue to mount pressure on the Federal Government to reverse the ban on the importation of vehicles through land borders, the government has said that there is no going back on the order.
There are also indications that the enforcement of the ban will lead to a hike in the prices of vehicles, including new ones whose dealers are reportedly using the land borders to avoid paying the right import tariffs.
The Federal Government had on December 5, 2016, announced the ban on the importation of used and new vehicles through the land borders with effect from January 1, 2017.
The spokesperson for the Nigeria Customs Service, Mr. Wale Adeniyi, told one of our correspondents in a telephone interview on Wednesday that the order would neither be reversed nor the deadline extended, adding that only vehicles whose clearance and documentation process had commenced before January 1 would be allowed to come into Nigeria.
He spoke against the backdrop of reports that some cars that could not make it into the country before Tuesday, the first day of the implementation of the ban, were trapped at the Seme border.
“If the importers had already started the documentation process before January 1, the vehicles will be allowed to come in even if they are still at the Seme border. But fresh orders cannot be entertained and the deadline will not be extended to accommodate people who brought in their cars after the deadline,” he said.
Adeniyi said that any vehicle that had crossed from the Benin Republic into Nigeria and whose importer had started the process of documentation was not affected by the ban.
It was, however, learnt that about 50 vehicles that came into Seme on Friday, December 29, 2016, were still at the border as of Wednesday as their owners were unable to make payment to the bank.
The spokesman for the Seme Command of the NCS, Mr. Selechang Taupyen, said a few vehicles were escorted into the country at the tail end of the last working day of last year (Friday) and that the owners could not make payment before the ban took effect.
He added that for such vehicles, clarifications would have to be obtained from the head office of the Customs before they could be cleared.
The Chairman, Association of Nigeria Licensed Customs Agents, Mr. Bisiriyu Fanu, said that importers made last minute efforts to clear their cars before the January 1 deadline.
The association called on the government to extend the deadline by three months to allow people whose cars were already sea-borne to clear them.
Some car dealers in Lagos also urged the Federal Government to rescind the ban on the importation of vehicles through land borders to aid inclusive economic growth and crime reduction.
BY Okechukwu Nnodim, Abuja
Sahara Energy, Oando Plc and 37 other companies are among the successful bidders for the 2017/2018 crude oil term contracts of the Nigerian National Petroleum Corporation, which were announced in Abuja on Thursday.
According to the Group General Manager, Crude Oil Marketing Division, NNPC, Mr. Mele Kyari, the contracts will run for one year from January 1, 2017 for consecutive 12 circles of crude oil allocations.
The list consists of 39 winners made up of 18 indigenous companies, 11 international traders, five foreign refineries, three national oil companies and two NNPC trading arms.
The corporation said all the contracts were for 32,000 barrels per day except that of Duke Oil Limited, an oil trading arm of the NNPC, which would be for 90,000 barrels per day.
Some of the local firms on the list are MRS Oil and Gas, A.A. Rano, Bono, Masters Energy, Eterna Oil and Gas, Cassiva Energy, Hyde Energy, Brittania-U, Northwest Petroleum and Shoreline Limited. The international oil traders are Trafigura, ENOC Trading, BP Trading, Total Trading, Heritage Oil and Glencore, among others.
For the government-to-government category, the shortlisted companies are the India Oil Company, Sinopec of China and Saccoil of South Africa, while the two NNPC subsidiaries on the list are Duke Oil and Carlson Hyson.
In total, 224 bids were submitted by companies seeking to purchase and lift Nigerian crude oil grades for the period 2017/2018.
During the bid opening in November 2016, the Group Managing Director of the corporation, Dr. Maikanti Baru, had assured the public that the NNPC would ensure due process, transparency and fairness in the selection process.
“We will ensure transparency and fairness in the process. There is nothing that is hidden just as you have seen today,” Baru had said.
By ’Femi Asu
Against the backdrop of the rise in the landing costs of petroleum products, fuel marketers are anticipating an increase in the pump price of Premium Motor Spirit, popularly known as petrol.
The expectation of a price hike was triggered by the recent upturn in global crude oil prices that had forced several countries, including Mexico and the United Kingdom, to increase the pump prices of petroleum products.
The Federal Government had on May 11, 2016 announced a new price band of N135 to N145 per litre for petrol in what was described as a partial deregulation of the downstream sector.
Industry sources told our correspondent on Wednesday that the increased landing cost had further hampered the marketers’ ability to import products amid persistent foreign exchange scarcity.
A source, who is an executive in a Lagos-based marketing company, said the landing cost of petrol had risen above N200 per litre, as crude oil price neared the $60 per barrel mark.
He said, “Even the NNPC cannot import; they are using the offshore processing agreement with foreign refineries to bring in products. They cannot import at this level to come and sell at N131 to the marketers.
“The OPA is not as if you are buying at the current rate; there is an agreement between the refineries to get these products at a price less than what would have been the landing cost.”
He noted that the government failed to heed calls for a full deregulation when oil price was trading below $40 per barrel last year.
The source added, “Government has two options: It is either they increase the price and face the wrath of Nigerians, or they continue to absorb the subsidy and allow the NNPC to be the sole marketer again.
“Most marketers are expecting that any time soon, there could be price changes; even some of them are not too keen to sell what they have.”
Asked if the government was talking to the marketers about price review, he said, “As far as the PPPRA is concerned, it is one issue that they won’t want to discuss with any marketer. If you raise it, nobody wants to respond.”
A top official of the Petroleum Products Pricing Regulatory Agency noted that almost all the marketers were getting petrol from the NNPC.
The approval was given by President Muhammadu Buhari as part of the fiscal policy measures of the Federal Government for the country.
The Minister of Finance, Mrs. Kemi Adeosun, while communicating the approval through a circular obtained by our correspondent in Abuja on Wednesday, said the move was in line with the provisions of the Economic Community of West African States’ Common External Tariff.
The ECOWAS CET, which will cover the 2017 to 2019 fiscal periods, is composed of three categories made up of an Import Adjustment Tax list of 173 tariff lines, a national list consisting of 91 items and an import prohibition list, which is applicable to certain goods originating from non-ECOWAS member states.
It read in part, “This is to confirm that His Excellency, Mr. President, has approved the 2016 fiscal policy measures made up of the supplementary protection measures for implementation together with the ECOWAS CET 2015-2019 with effect from 17th of October, 2016.
“Consequently, all transactions prior to the effective date of this circular shall be subjected to the tariff rates applicable before the coming into effect of this 2016 fiscal policy measures.”
An analysis of the import adjustment tax list, which contains 173 items, shows that the Federal Government has given approval for the reduction of 26 of them, while it left the tariffs on 144 items unchanged.
However, the tariffs on three items contained in the import adjustment tax list were reviewed upwards.
For the national list consisting of 91 products, the circular stipulated that a downward review was approved for 89 items in order to encourage development in the real sector of the economy.
The items in the national list whose import duties were reduced from 10 per cent to five per cent are milk and cream; tea; fats of sheep or goat; malt extract; tomatoes prepared or preserved by vinegar; under natured ethyl alcohol for medical, pharmaceutical or scientific purpose; petroleum oils and oils obtained from bitumen minerals other than crude.
Others are hypochlorites; synthetic organic colouring matter; grease for treatment of textile materials; prepared glues and adhesives; activated carbon; picking preparations for metal surfaces; organic composite solvents and thinners; mixes alkylbenzenes; and industrial monocarboxylic fatty acids.
In the same vein, the government also approved a reduction from 10 per cent to five per cent for tubes, pipes, hoses, sheets, foil, tape, polyethylene, paper and paper board, yarn, synthetic staple fibres, semi-finished products of iron or non-alloy steel, stranded wire ropes, and completely knocked down or unassembled for the assembly industry.
For items such as automatic circuit breakers, switches, lamp-holders, electrical apparatus for switching or protecting electrical circuits, the Federal Government gave an approval for the reduction of their import duties from 20 per cent to 10 per cent.
For machineries and equipment used in sectors such as agriculture, cement, hospitality, power, iron and steel, solid minerals, textile and aviation, the government, according to the circular, approved a zero import duty.
Before the approval, the import duties for machineries and equipment used in these sector were put at five per cent.
The circular also reinforced the ban placed on the importation of some items.
Some of them are refined vegetable oil, cocoa butter, spaghetti/noodles, fruit juice in retail packs, bagged cement, soaps and detergent, mosquito repellent coils, corrugated paper and paper boards, telephone recharge cards and vouchers, carpets and rugs, all types of footwear, bags and suitcases, and used motor vehicles above 15 years from year of manufacture.
The government also banned the importation of live or dead birds, waters, liquid dietary supplements and medicament such as paracetamol tablets and syrup, chloroquine tablets and syrup, among others.