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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

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Crude Oil

NNPCL CEO Optimistic as Nigeria’s Oil Production Edges Closer to 1.7mbpd

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Crude Oil

Mele Kyari, the Group Chief Executive Officer of the Nigerian National Petroleum Company Limited (NNPCL), has expressed optimism as the nation’s oil production approaches 1.7 million barrels per day (mbpd).

Kyari’s positive outlook comes amidst ongoing efforts to address security challenges and enhance infrastructure crucial for oil production and distribution.

Speaking at a stakeholders’ engagement between the Nigerian Association of Petroleum Explorationists (NAPE) and NNPCL in Lagos, Kyari highlighted the significance of combating insecurity in the oil and gas sector to facilitate increased production.

Kyari said there is a need for substantial improvements in infrastructure to support oil production.

He noted that Nigeria’s crude oil production has been hampered by pipeline vandalism, prompting alternative transportation methods like barging and trucking of petroleum products, which incur additional costs and logistical challenges.

Despite these challenges, Kyari revealed that Nigeria’s oil production is steadily rising, presently approaching 1.7mbpd.

He attributed this progress to ongoing efforts to combat pipeline vandalism and enhance infrastructure resilience.

Kyari stressed the importance of taking control of critical infrastructure to ensure uninterrupted oil production and distribution.

One of the key projects highlighted by Kyari is the Ajaokuta-Kaduna-Kano (AKK) gas pipeline, which plays a crucial role in enhancing gas supply infrastructure.

He noted that completing the final phase of the AKK pipeline, particularly the 2.7 km river crossing, would facilitate the flow of gas from the eastern to the western regions of Nigeria, supporting industrial growth and energy security.

Addressing industry stakeholders, including NAPE representatives, Kyari reiterated the importance of collaboration in advancing Nigeria’s oil and gas sector.

He emphasized the need for technical training, data availability, and policy incentives to drive innovation and growth in the industry.

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Commodities

Nigeria to Achieve Fuel Independence Next Month, Says Dangote Refinery

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Dangote Refinery

Aliko Dangote, the Chairman of the Dangote Group and Africa’s wealthiest individual has announced that Nigeria is poised to attain fuel independence by next month.

Dangote made this assertion during his participation as a panelist at the Africa CEO Forum Annual Summit held in Kigali.

The announcement comes as a result of the Dangote Refinery’s ambitious plan, which aims to eliminate the need for Nigeria to import premium motor spirit (PMS), commonly known as petrol, within the next four to five weeks.

According to Dangote, the refinery already operational in supplying diesel and aviation fuel within Nigeria, possesses the capacity to fulfill the diesel and petrol requirements of West Africa and cater to the aviation fuel demands of the entire African continent.

Dangote expressed unwavering confidence in the refinery’s capabilities, stating, “Right now, Nigeria has no cause to import anything apart from gasoline and by sometime in June, within the next four or five weeks, Nigeria shouldn’t import anything like gasoline; not one drop of a litre.”

He said the refinery is committed to ensuring self-sufficiency in the continent’s energy needs, highlighting its capacity to significantly reduce or eliminate the need for fuel imports.

The Dangote Refinery’s accomplishment marks a pivotal moment in Nigeria’s quest for energy independence. With the refinery’s robust infrastructure and advanced technology, Nigeria is poised to become a net exporter of refined petroleum products, bolstering its economic stability and reducing its reliance on foreign imports.

Dangote’s remarks underscored the transformative potential of the refinery, not only for Nigeria but for the entire African continent.

He emphasized the refinery’s role in fostering regional energy security, asserting, “We have enough gasoline to give to at least the entire West Africa, diesel to give to West Africa and Central Africa. We have enough aviation fuel to give to the entire continent and also export some to Brazil and Mexico.”

Dangote further outlined the refinery’s broader vision for Africa’s economic advancement and detailed plans to expand its production capacity and diversify its product range.

He highlighted initiatives aimed at promoting self-sufficiency across various sectors, including agriculture and manufacturing, with the ultimate goal of reducing Africa’s dependence on imports and creating sustainable economic growth.

Dangote’s vision for a self-reliant Africa resonates with his long-standing commitment to investing in the continent’s development.

He concluded his remarks by reiterating the refinery’s mission to transform Africa’s energy landscape and drive socio-economic progress across the region.

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Crude Oil

Oil Prices Surge Amidst Political Turmoil: Brent Tops $84

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Oil prices - Investors King

The global oil market witnessed a significant surge in prices as political upheaval rocked two of the world’s largest crude producers, Iran and Saudi Arabia.

Brent crude oil, against which Nigerian oil is priced, rose above $84 a barrel while West Texas Intermediate (WTI) oil climbed over the $80 threshold.

The sudden spike in oil prices followed a tragic incident in Iran, where President Ebrahim Raisi and Foreign Minister Hossein Amirabdollahian lost their lives in a helicopter crash.

Simultaneously, apprehensions over the health of Saudi Arabia’s king added to the geopolitical tensions gripping the oil market.

Saudi Arabia stands as the leading producer within the Organization of the Petroleum Exporting Countries (OPEC), while Iran ranks as the third-largest.

Despite these significant developments, there are no immediate indications of disruptions to oil supply from either nation.

Iranian Supreme Leader Ayatollah Ali Khamenei reassured that the country’s affairs would continue without interruption in the aftermath of the tragic event.

However, the geopolitical landscape remains fraught with additional concerns, amplifying market volatility.

In Ukraine, drone attacks persist on Russian refining facilities, exacerbating tensions between the two nations.

Moreover, a China-bound oil tanker fell victim to a Houthi missile strike in the Red Sea, further fueling anxiety over supply disruptions.

Warren Patterson, head of commodities strategy for ING Groep NV in Singapore, remarked on the market’s reaction to geopolitical events, noting a certain desensitization due to ample spare production capacity within OPEC.

He emphasized the need for clarity from OPEC+ regarding output policies to potentially break the current price range.

While global benchmark Brent has experienced a 9% increase year-to-date, largely driven by OPEC+ supply cuts, prices had cooled off since mid-April amidst easing geopolitical tensions.

Attention now turns to the upcoming OPEC+ meeting scheduled for June 1, with market observers anticipating a continuation of existing production curbs.

Despite the surge in oil prices, there’s a growing sense of bearishness among hedge funds, evidenced by the reduction of net long positions on Brent for a second consecutive week.

This sentiment extends to bets on rising gasoline prices ahead of the US summer driving season, indicating a cautious outlook among investors.

As the oil market grapples with geopolitical uncertainties and supply dynamics, stakeholders await further developments and policy decisions from key players to navigate the evolving landscape effectively.

The coming weeks are poised to be critical in determining the trajectory of oil prices amidst a backdrop of geopolitical turmoil and market volatility.

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