Nigeria to sell 195.96 bln naira in treasury bills next week – Reuters

LAGOS Jan 10 (Reuters) – Nigeria plans to sell 195.96 billion naira ($644.08 million) in short-dated treasury bills at an auction on Jan. 19, the central bank said on Tuesday.

The bank said it would sell 36.78 billion naira in three-month debt, 39.17 billion naira in six-month bills and 120 billion naira in one-year notes, using a Dutch auction system. Payment will be due the day after the auction. 

Nigeria issues treasury bills to fund its budget deficit, manage banking system liquidity and curb rising inflation. ($1 = 304.2500 naira) (Reporting by Chijioke Ohuocha, editing by Larry King)

 

BDCs task CBN, media on single market rate – Eagle Online

POSTED BY EMMANUEL ADIGWE

Alhaji Aminu Gwadabe, President, ABCON, made the call on Tuesday in an interactive session with newsmen in Lagos

The Association of Bureau De Change Operators of Nigeria has urged the Central Bank of Nigeria to harmonise the multiple exchange rates prevalent in the forex market to a single rate regime.

Alhaji Aminu Gwadabe, President, ABCON, made the call on Tuesday in an interactive session with newsmen in Lagos.
Gwadabe also appealed to newsmen to adopt a single foreign exchange rate system in their reportage, adding that quoting the rate at the parallel market was misleading as Nigerians could get better offer at the BDC window.

Gwadabe said: “We urge the regulators and the government to harmonise the multiple exchange rates that pervaded the 2016 fiscal year.
“We also use this medium to appeal to members of the print and electronic media to adopt a single foreign exchange market rate system in their reporting and completely disregard the rates in the parallel market.
“The parallel market rate is small in volume, cash base and not recognised by extant laws.”

The ABCON chief noted that Egypt and a few countries had developed the single exchange system, adding that it had helped them to reduce volatility and speculation in those markets. While recognising the daunting task in switching to a “complete and single determined market rate”, Gwadabe said that the task of identifying and blocking leakages rested on the CBN.

According to him, the foreign exchange market is volatile subject to the whims and caprices of speculators whose stock in trade is manipulation.
The financial expert explained that journalists had a critical role in ensuring that the dictatorships of speculators were met with the reportage of the true reality in the market.

Gwadabe reaffirmed the willingness of the association in working closely with the apex bank to ensure a greater flexibility and stability in the nation’s foreign exchange policy. He reiterated the association’s resolve to embark on a nationwide media campaign to educate the public on the roles, and activities of BDCs so as to provide a guide in dealing with only CBN licensed BDCs.

In order to make ABCONs operation more transparent, Gwadabe said that the association’s operation was undergoing automation with more than 2000 BDCs already captured.

Since the apex bank lifted its ban on BDCs in 2016, the association has been working closely with it to ensure the stability of the Naira. The association has also put a self-check on its members to ensure they do not operate above the guideline establishing them.

The association believes that working closely with the CBN, investor’s confidence will be restored to the market, which will translate to a bridging of the gap between the parallel and the official window.

W. Africa Crude-Nigerian cargoes slow to trade amid uncertainty – Reuters

LONDON Jan 10 (Reuters) – An excess of Nigerian crude oil weighed on differentials on Tuesday, while buyers were made more wary due to a threatened increase in hostilities by militants in the oil-producing Delta region.

 
 

* Medium and heavy crude oil grades were in high demand due to the strong pull from Asia. A still-narrow spread between Brent and Dubai crudes. DUB-EFS-1M

* Kuwait raised its official selling price to Asia, following increases from Iraq and Saudi Arabia, which compete with West Africa to supply crude to eastern refineries.

* Striking Nigerian oil workers closed the Oleh crude flow station in Warri, they said. The Nigeria Union of Petroleum and Natural Gas Workers (NUPENG) has called for a three-day strike at Chevron CVX.N and Exxon Mobil XOM.N fuel depots from Wednesday, which is expected to affect oil products.

* Shell subsidiary SPDC re-opened the Trans Niger Pipeline on Jan. 8, after closing it on Jan. 3 due to a fire. There was not yet a revised loading schedule for Bonny Light, which is exported via the pipeline.

NIGERIA

* A variety of Nigerian crudes were experiencing loading delays, including Qua Iboe, Erha, Usan and Bonny Light. The issues made them less attractive to potential buyers, traders said, and there were some 30 February-loading cargoes left.

* A threat from militants to resume hostilities has also raised concerns about further disruptions to supplies.

* Nevertheless, refiners in Canada and the United States showed some interest, with Monroe Energy, Irving Oil and Philadelphia Energy Solutions booking vessels to carry Nigerian oil west.

ANGOLA

* Firm buying interest, particularly from China’s Unipec, had helped whittle down Angolan cargoes, with roughly a handful of February-loading cargoes left for sale.

* Lighter grades were selling more slowly, but the full programme was on track to sell out before the March plan is issued early next week.

* China’s Unipec has purchased grades including Pazflor, Nemba, Saxi and Dalia from Sonangol, ExxonMobil and others in recent weeks.

* The sellers had cut differentials to dated Brent before the cargoes began to trade in earnest, so most deals were below the previous month’s levels.

TENDERS

* Part one of a tender from India’s IOC closed today, with another part closing Wednesday and an award expected Thursday.

* In recent tenders, it has taken a mix of Nigerian and Angolan crude. (Reporting by Libby George; Editing by Greg Mahlich)

 

Nigeria Traders to Start Exchange Rate in Black Market Fight – Bloomberg

  • BDC assocation will publish naira exchange rates each Monday
  • Dealers want to counter websites that post unregulated prices

Nigeria’s money-changers will introduce an exchange rate for the naira to help the central bank combat unregulated trading.

Licensed dealers, known as bureaux de change, or BDCs, will post an exchange rate each Monday on their website from Jan. 16 to “highlight positive rate development in the market” and counter domains such as abokifx.com, which publishes unofficial prices daily, Aminu Gwadabe, the head of the local BDC association, told reporters in Lagos. 

Trading in the black market boomed since 2014 after the central bank strengthened capital controls and began to manipulate the interbank exchange rate as oil, the country’s top export, plummeted. With foreign-exchange shortages mounting, Nigerian businesses have been forced to the black market, where each dollar trades for about 490 naira, compared with the official rate of 315. The BDCs will initially quote a rate of 399, Gwadabe said.While the naira has plummeted almost 40 percent since central bank Governor Godwin Emefiele in June ended a 15-month peg to the dollar, traders say it’s still being managed by the government. President Muhammadu Buhari, who meets Emefiele regularly, likened devaluation to “murder” last year.

“The federal government and the Central Bank of Nigeria have stood their ground for a very long time by not allowing the naira to float freely,” Gwadabe said.

Nigerian officials have already tried to rein in the black market. In November, intelligence agents threatened to arrest any BDC operator or street-trader buying or selling the naira at a rate weaker than 400 per dollar.

The measures will probably fail unless Nigeria loosens its grip on the official market, according to NKC African Economics.

“Their options are fairly limited, and allowing for more flexibility in the official exchange rate represents the best strategy to bring forex demand and supply forces closer to equilibrium, and as such, narrow the gap between the dual exchange rates,” Cobus de Hart, an analyst at Paarl, South Africa-based NKC said in a note to clients.

Goldman Sachs Sees China Using Fixing to Strengthen Currency – Bloomberg

  • Policy makers favor stronger yuan amid capital outflows
  • Offshore yuan posted record rally last week on short squeeze

China’s central bank has altered its yuan fixing mechanism since the U.S. presidential election in favor of a stronger currency as capital outflows mounted and President-elect Donald Trump threatens to adopt protectionist trade policies, according to Goldman Sachs Group Inc.

Before Nov. 8, broad dollar moves and the closing yuan price explained 90 percent of the next day’s yuan fix, validating the government’s publicly-announced methodology, strategists led by Robin Brooks wrote in a note Monday. The correlation has since fallen to 80 percent. The People’s Bank of China sets the fix daily and lets the yuan move 2 percent of either side.

The shift allows the central bank to let the yuan rise more than it used to when the dollar weakened and let it fall less in a broad U.S. currency rally, reversing the pattern before the election, Goldman Sachs’s model showed.

“China’s policy makers putting their best foot forward as they await the new administration, though it is also possible they are trying to slow capital outflows via stronger RMB fixing,” Brooks wrote, referring to the yuan by its official name, the renminbi. “In either case, some RMB weakness is likely being ‘stored up,” which will eventually materialize given the country’s weakening balance of payments, he said.

The offshore yuan posted a record gain last week as soaring funding costs squeezed short sellers. The rally came as a surprise to some investors as the central bank struggled to contain capital outflows. Goldman Sachs has recommended selling the yuan against the dollar via non-deliverable forwards as one of its top trades for 2017.

If verified, the shift in fixing would mark a reversal of policy makers’ tactics. The PBOC earned plaudits last year for adhering more closely to a new fixing method that takes into account global currency moves and the previous day’s yuan price. But the transparency and predictability have also limited the scope for the central bank to shore up the yuan and deter speculators. China’s foreign-exchange reserves fell for a sixth straight month in December, dropping $41.1 billion to a five-year low of $3.01 trillion, the PBOC said over the weekend.China has adopted measures to downplay the dollar’s role in defining the yuan’s value: This year, it expanded the number of currencies in a basket used to determine the yuan’s daily fixing. That reduced the dollar’s weighting to 22.4 percent — little more than twice the share for South Korea’s won.

  • The onshore yuan advanced 0.15% on Tuesday, while the offshore rate traded in Hong Kong fell 0.2% to 6.8919 a dollar as of 5:33 p.m. local time

UPDATE 1-Nigeria retail currency traders set FX rate before cenbank meeting – Reuters

(Adds details, quote, background)

By Oludare Mayowa

LAGOS Jan 10 (Reuters) – Nigeria’s bureau de change operators set their first ever reference exchange rate for the naira at 399 to the dollar on Tuesday, saying they wanted to help reduce the gap with the official interbank rate.

The government has been pressing retail operators to narrow what it says is a damaging gulf between the naira’s official rate – currently at 305 to the dollar – and the parallel rate – as weak as 490 in recent days.

Bureau de Change association president Aminu Gwadabe, who is due to meet central bank officials later on Tuesday, said his members had agreed to set a weekly reference rate to improve liquidity and help rebuild investors’ confidence on the economy.

“Once liquidity improves, the wide margin between the parallel and official market rates will be bridged,” Gwadabe told reporters.

He said the naira’s outlook was “promising” as crude prices have started to rise. Low prices have dried up the oil income that makes up 70 percent of government revenues, cutting the dollar supply and pushing Africa’s largest economy into recession.

Retail currency operators account for less than 5 percent of total foreign currency trading in Nigeria. But with liquidity poor on the official market due to low oil revenues and the central bank left as the main dollar supplier, the bureau de changes have done more business.

Gwadabe said the body was seeking approval from the central bank to access dollars from exporters and has recommended suspension for some of its members for failing to submit documents on forex purchases from money transfer agents.

The naira lost a third of its official value against the dollar in 2016. (Writing by Chijioke Ohuocha)

Recession: Indigenous oil companies sell off assets – Vanguard

By Sebastine Obasi

THE current economic recession in the country appears to have taken its toll on indigenous players in the nation’s oil and gas industry as some of them have been selling off their assets to pay back loans taken from banks. Their misfortune is compounded by the fact that some of the jobs gotten from the international oil companies, IOCs, have been put on hold, coupled with  their inability to source foreign exchange in order to import materials. Chief Executive Officer of an oil servicing company who prefers to be anonymous told Vanguard that the situation is excruciating for indigenous companies. He said, “The service companies are challenged. They service the exploration and production companies, E&Ps.

If the E&Ps are not working, what will they be servicing? How will they come to service? I have a contract service with Shell for one year to provide access for maintenance facilities for them, but we have not been called to provide any. No work is going on now. I borrowed money, acquired equipment, in fact I gave instruction that some of our assets can be sold to be able to pay our debts. I am a direct participant in that programme. “The minimum we were expecting is to do $500,000 service based on that particular called off contract.

Till date, they have not offered up to $80,000. Meanwhile our investment has been predicated on the fact that we are going to have $.5m services. International market price All the things we acquired, all the recruitments we did, all the trainings we sent people overseas to do (We sent people to Dubai, we certified them in scaffolding and security in the United Kingdom, preparing for this journey). We are going through excruciating moments. It is very bad.”

The CEO explained that the major challenge confronting independents in Nigeria are predicated on international market price. According to him, “Some of them can produce but they cannot evacuate. They have taken facilities from multi-national organizations to fund their operations and doing that is predicated on cash flow from sales. When sales are interrupted, the cash flow will decline. The multi-nationals will come for their money.

If you are to sell your assets to meet your financial obligations, remember you need to be a good corporate citizen to be able to attract fund tomorrow, it is critical.” Another player in the industry, who was an executive member of the Independent Petroleum Marketers Association of Nigeria, IPMAN, told Vanguard that in the last seven months, he has been forced to sell two off his assets worth millions of Naira to settle bank loans. He explained that the current recession has made life difficult for him as the exchange rate of N490 to a dollar means that he has limited access to foreign exchange to import petroleum products. “For over seven months now, business has been difficult. It is difficult to the extent that one is unable to import petroleum products due to scarcity of foreign exchange.

You are aware that a dollar exchanges for N490. We were told that the official rate is N315. I am yet to see anybody who gets it at that rate. Some of us are being put out of business. To be frank with you, I have sold two of my assets to offset bank loans. The situation is terrible, I must confess,” he said.

Read more at:Vanguard

Oil prices drop on concerns U.S. production is rising – Vanguard

By Sebastine Obasi, with Agency report

 

OIL prices dropped yesterday as signs of increasing United States production outweighed optimism that many other producers, including Russia, were sticking to a deal to cut supplies in a bid to bolster the market. Benchmark Brent crude slipped by 96 cents at $56.14 a barrel, while U.S. crude futures slipped by 88 cents as it traded at $53.11 per barrel. “We see the optimism surrounding the Organisation of Petroleum Exporting Countries, OPEC and non-OPEC production cuts being counterbalanced by fears of higher U.S. crude production as the higher rig count of last Friday still weighs,” said Hans van Cleef, Senior Energy Economist at Amsterdam, Netherlands – based ABN Amro Bank. A stronger U.S. dollar also weighed as the currency surged on expectations of faster U.S. interest rate hikes this year, making it more expensive to hold dollar-denominated commodities. Last week, U.S. energy companies added oil rigs for a 10th week in a row to 529, Baker Hughes data showed, extending a recovery in activity into an eighth month. Analysts at London, Barclays Bank, said they expected the U.S. rig count to rise to 850-875 by the end of the year, with spending on exploration and production set to increase 27 percent in North America.

This raised concerns that U.S. production is increasing and undermining efforts by OPEC and others to cut output. In Iraq, OPEC’s second-biggest producer, a record 3.51 million barrels per day (bpd) were exported from its port in Basra in December, officials said, although they added that the country would comply with its commitment to lower output by an average of 210,000 bpd from January.

Sources also said that Iraq’s State Oil Marketing Company (SOMO) had given three buyers in Asia and Europe full supply allocations for February. On the other hand, Russia, one of the world’s largest crude producers, appeared to be sticking to the agreement to cut. Russian energy market sources said the country’s output had fallen by 100,000 bpd in the first week of the month. However, analysts at Austria – based oil and gas independent research centre, JBC Energy were optimistic about a tighter oil market in 2017. “Concerns regarding the sincerity, depth and duration of announced production cuts notwithstanding, most analysts, including us, see tighter-than-previously-envisaged balances for 2017,” they said.

Read more at: Vanguard

NNPC deficit rises to N18.7bn over oil search in Bauchi, Rivers – Vanguard

By Michael Eboh

THE Nigerian National Petroleum Corporation, NNPC, yesterday, stated that its ongoing search for crude oil in the Benue Trough in Bauchi State and in Rivers State contributed significantly to the trading deficit of N18.72 billion it recorded in November 2016. In its Monthly Financial and Operations Report for November, released, yesterday, NNPC disclosed that despite a 19.2 per cent increase in its operating revenue to N187.75 billion in November, it still recorded a deficit of N18.72 billion that month.

The November figure also indicated 11.1 per cent rise in deficit in November, as it recorded 16.85 billion deficit in October. The Corporation explained that the increase in its deficit was as a result of 18.4 per cent rise in its operating expenditure hitting N206.5 billion in November as against N174.4 billion in October 2016.

Improved revenue generation It said, “The deficit in the month of November 2016 increased by N1.87 billion or 11.06 per cent due to upsurge in the group operating cost despite an improved revenue generation and enhanced cost control across the group. “In particular, Integrated Data Services Limited, IDSL, operating costs has increased as a result of the ongoing mobilisation activities in both Benue Trough seismic data project located in Bauchi and Party 05 in Elele, Rivers state. Also, the strike action by Bristow Helicopters workers delayed the planned lay-time of Okono Blend resulting to nil NPDC offshore export sales for the month.”

NNPC further stated that it recorded total export sale of $166.18 million in the month under review, an improvement of $60.44 million when compared with the amount recorded in October. According to the Report, crude oil export sales contributed $96.31 million, or 57.95 per cent of the dollar transactions compared with $21.40 million contribution in the previous month, while gas export amounted to $69.87 million in the month. Of the total export sales, the Report stated that $162.40 million export proceeds were received in the month under review, compared with $97.29 million recorded in October 2016, while it added that contribution from crude oil amounted to $96.31 million after adjusting for $2.50 million lifting deposit utilized earlier.

In addition, the Report noted that gas and other proceeds was $66.09 million, while the total receipt of $162.40 million was remitted to fund the JV cash call for the month of November 2016 to guarantee current and future production. The NNPC report stated: “The domestic crude oil and gas receipt during the month amounted to N 121.06 billion, consisting of N2.43 billion from Domestic Gas and the sum of N118.63 billion from Domestic Crude Oil. Of the N118.63 billion receipt from Crude Oil, the sum of N75.30 billion ($382.23 million) was transferred to Joint Venture Cash Call (JVCC) being a first line charge and to guarantee continuous flow of revenue stream to Federation Account.

“NNPC transferred the sum of N43.33 billion into Federation Account during the month under review from the net domestic crude oil receipt and N2.43 billion from Gas receipts. Also, the 28th installment of the refund to FG of N6.33 billion was remitted to Federation Account.”

Read more at: Vanguard

Naira to weaken further as forwards market declines – Punch

By Oyetunji Abioye with agency report

The naira is expected to weaken further in the forwards market despite measures implemented by the Federal Government to mitigate the situation.

 

According to a Bloomberg report, six-month contracts declined to their lowest level since September last week as crude oil advanced by 20 per cent after the Organisation of Petroleum Exporting Countries agreed to a production cut in November.

A drop in forwards would typically be a sign of growing confidence in a nation’s economy and currency, but not this time.

Even as oil prices advanced, Standard Chartered Plc and London-based Duet Asset Management said the country needed to devalue the naira and loosen capital controls.

With dollars becoming scarce and the economy on the brink of its first full-year recession since 1991, companies are being forced into the black market. There, each dollar costs N493, almost 60 per cent more than the official rate.

“Oil rise isn’t enough to eliminate the need for a change,” the Chief  Investment Officer of Duet, Mr. Ayodele Salami, who oversees around $450m of African stocks at the company, said.

He said Nigeria would not attract inflows until it weakened its currency.

The naira has plummeted by almost 40 per cent since the Central Bank of Nigeria Governor, Godwin Emefiele, ended a 15-month naira peg to the dollar.

President Muhammadu Buhari, who likened the devaluation to “murder” in the past, said in a speech on December 30 that he was still against floating the currency.

“Eventually, they’ll have to revert to a more flexible currency regime,” the London-based Head of Africa Strategy at Standard Chartered, Samir Gadio, said.

Gadio, who had predicted that the official exchange rate would be steady for the first half of this year, said, “But for the time being, there’s no indication from policymakers that this will happen.”

Forward contracts maturing in one month rose by 0.1 per cent to 318.75 per dollar as of 1:54pm in London, narrowing their spread over the official spot rate of 314.25 to N4.5 from N34 in October. Six-month contracts traded at 363.5, suggesting the naira would depreciate by 14 per cent in that time.

The naira closed flat at 493 against the dollar at the parallel market on Monday.

The local unit had fallen against the dollar at the parallel market on Friday to 493, from 490 on Thursday as increased dollar demand weighed on the market.

Forex traders said the local unit plummeted following an increased demand for the dollar and other hard currencies by parents seeking to pay school fees of wards studying overseas.

 “In the week ahead, we expect pressure on the naira to linger, especially at the parallel market, as unmet demand from the official market continues to stoke imbalances,” United Capital had said in a research note to clients last Tuesday.

Economic and financial experts have expressed divergent views over the outlook of the naira this year.

The naira beat analysts’ expectation and closed the year 2016 at 490 against the dollar at the parallel market.