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Forex: Cocoa Processors Lose as Farmers Make Profit

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Cocoa

The President, Cocoa Processors Association of Nigeria, Mr. Dimeji Owofemi, has said that cocoa processors are recording huge losses on cocoa beans as a result of the Federal Government’s foreign exchange market restrictions.

In an exclusive interview with SUNDAY PUNCH, he said that the local price for the product was based on the value of naira to the dollar at the parallel market while operators were compelled to sell their export proceeds at N197 to the dollar as directed by the Central Bank of Nigeria.

In a bid to stabilise the foreign exchange market, the CBN, on February 19, had asked all authorised dealers in oil and non-oil exports to repatriate export proceeds into their domiciliary accounts.

The naira sold for N278 against the dollar at the parallel market on Thursday as against N197 at the CBN FOREX window.

It was gathered that the local price of one tonne of cocoa beans had increased by 20.6 per cent from N580,000 in 2014 to N700, 000 as of December 2015.

This, according to Owofemi, is due to the devalued currency and the awareness among farmers that export proceeds are received in dollars.

Owofemi opposed the reports that stated that capacity utilisation of cocoa processors had increased by 50 per cent, saying that operators were having a hard time procuring raw materials from farmers because they were competing with exporters of the raw beans.

Meanwhile, the President of the Cocoa Association of Nigeria, Mr. Sayina Riman, admitted in a telephone interview with our correspondent that the declining value of the naira was in favour of cocoa farmers because they were making huge profits.

He explained that this was due to the increase in the international market price of the product.

According to statistics from the International Cocoa Organisation, cocoa beans which sold for $2, 952.21 per metric tonne in December 2014 rose to $3,338.7 per metric tonne during the same period in 2015.

Riman said, “Given the fluctuation of the naira and the little increase in the international market price, cocoa prices seem to be better. For the local market price, as of December 2014, we were selling at N570,000 and N580,000, but in December 2015, it was between 680,000 and N700,000 per tonne. The exchange rate is in favour of cocoa farmers.”

In order to discourage the exportation of raw beans and encourage value addition to the cash crop, the CPAN president called on the government to impose taxes on exported raw beans.

He said, “We appreciate that cocoa powder importation has been banned. We cannot tell government to ban cocoa beans export, but it can impose taxes to discourage large amount of exportation and explore other means of generating money. We are saying value should be added to the commodity before exporting. This will generate quality employment and increase the capacity utilisation of industries.”

In terms of local processing of cocoa beans, the Managing Director, Tulip Cocoa Processing Limited, Simon Conway-Jarrett, said that local processors had been able to process about 180,000 tonnes of the beans in a year. But with the right economic conditions, revival of moribund companies and support of the government, he said they would be able to process more than the current production capacity of local farmers.

He advocated the revival of the Export Expansion Grant and the payment of the backlog of the EEG certificates.

Conway-Jarrett stressed that the Export Expansion Grant should be extended to the processed products and not exported cocoa beans.

In addition, Riman requested government’s partnership to continue the school feeding programme in which cocoa powder would be encouraged among children, saying that the product had inherent health benefits.

Punch

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Markets

Communities in Delta State Shut OML30 Operates by Heritage Energy Operational Services Ltd

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Oil

The OML30 operated by Heritage Energy Operational Services Limited in Delta State has been shut down by the host communities for failing to meet its obligations to the 112 host communities.

The host communities, led by its Management Committee/President Generals, had accused the company of gross indifference and failure in its obligations to the host communities despite several meetings and calls to ensure a peaceful resolution.

The station with a production capacity of 80,000 barrels per day and eight flow stations operates within the Ughelli area of Delta State.

The host communities specifically accused HEOSL of failure to pay the GMOU fund for the last two years despite mediation by the Delta State Government on May 18, 2020.

Also, the host communities accused HEOSL of ‘total stoppage of scholarship award and payment to host communities since 2016’.

The Chairman, Dr Harrison Oboghor and Secretary, Mr Ibuje Joseph that led the OML30 host communities explained to journalists on Monday that the host communities had resolved not to backpedal until all their demands were met.

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Crude Oil Recovers from 4 Percent Decline as Joe Biden Wins

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Oil Prices Recover from 4 Percent Decline as Joe Biden Wins

Crude oil prices rose with other financial markets on Monday following a 4 percent decline on Friday.

This was after Joe Biden, the former Vice-President and now the President-elect won the race to the White House.

Global benchmark oil, Brent crude oil, gained $1.06 or 2.7 percent to $40.51 per barrel on Monday while the U.S West Texas Intermediate crude oil gained $1.07 or 2.9 percent to $38.21 per barrel.

On Friday, Brent crude oil declined by 4 percent as global uncertainty surged amid unclear US election and a series of negative comments from President Trump. However, on Saturday when it became clear that Joe Biden has won, global financial markets rebounded in anticipation of additional stimulus given Biden’s position on economic growth and recovery.

Trading this morning has a risk-on flavor, reflecting increasing confidence that Joe Biden will occupy the White House, but the Republican Party will retain control of the Senate,” Michael McCarthy, chief market strategist at CMC Markets in Sydney.

“The outcome is ideal from a market point of view. Neither party controls the Congress, so both trade wars and higher taxes are largely off the agenda.”

The president-elect and his team are now working on mitigating the risk of COVID-19, grow the world’s largest economy by protecting small businesses and the middle class that is the backbone of the American economy.

There will be some repercussions further down the road,” said OCBC’s economist Howie Lee, raising the possibility of lockdowns in the United States under Biden.

“Either you’re crimping energy demand or consumption behavior.”

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Nigeria, Other OPEC Members Oil Revenue to Hit 18 Year Low in 2020

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oil-rig

Revenue of OPEC Members to Drop to 18 Year Low in 2020

The United States Energy Information Administration (EIA) has predicted that the oil revenue of members of the Organisation of the Petroleum Exporting Countries (OPEC) will decline to 18-year low in 2020.

EIA said their combined oil export revenue will plunge to its lowest level since 2002. It proceeded to put a value to the projection by saying members of the oil cartel would earn around $323 billion in net oil export in 2020.

If realised, this forecast revenue would be the lowest in 18 years. Lower crude oil prices and lower export volumes drive this expected decrease in export revenues,” it said.

The oil expert based its projection on weak global oil demand and low oil prices because of COVID-19.

It said this coupled with production cuts by OPEC members in recent months will impact net revenue of the cartel in 2020.

It said, “OPEC earned an estimated $595bn in net oil export revenues in 2019, less than half of the estimated record high of $1.2tn, which was earned in 2012.

“Continued declines in revenue in 2020 could be detrimental to member countries’ fiscal budgets, which rely heavily on revenues from oil sales to import goods, fund social programmes, and support public services.”

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