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.
Brent Crude Oil Breaks $80 Price Level Amid Supply Concerns
Oil markets climbed for a sixth day on Tuesday, reversing earlier losses, on fears over tight supply while surging prices of liquefied natural gas (LNG) and coal also lent support.
Brent crude futures gained $1.05, or 1.3%, to $80.58 a barrel at 0645 GMT, after reaching its highest since October 2018 at $80.75 earlier in the session. It surged 1.8% on Monday.
U.S. West Texas Intermediate (WTI) crude futures rose $1.06, or 1.4%, to $76.51 a barrel, the highest since July 6. It jumped 2% the previous day.
“Investors remained bullish as supply disruptions in the United States from hurricanes are continuing for longer than expected at a time when demand is picking up due to easing lockdown measures and the wider rollouts of COVID-19 vaccination,” said Chiyoki Chen, chief analyst at Sunward Trading.
Hurricanes Ida and Nicholas, which swept through the U.S. Gulf of Mexico in August and September, damaged platforms, pipelines and processing hubs, shutting most offshore production for weeks.
Also weighing on supply, top African oil exporters Nigeria and Angola will struggle to boost output to their quotas set by the Organization of the Petroleum Exporting Countries (OPEC) until at least next year as underinvestment and nagging maintenance problems continue to hobble output, sources at their respective oil firms warn.
Their battle mirrors that of several other members of the OPEC+ group who curbed production in the past year to support prices when COVID-19 hit demand, but are now failing to ramp up output to meet soaring global fuel needs as economies recover.
The supply issues are occurring as countries ease their COVID-19 movement restrictions, potentially boosting demand.
Japan, the world’s fifth-biggest oil user, plans to lift a coronavirus state of emergency in all regions on Thursday as the number of new cases falls and the strain on the medical system eases, Economy Minister Yasutoshi Nishimura said.
Analysts also say rising prices of spot liquefied natural gas (LNG) and coal may support higher oil prices.
“Oil demand could pick up by an additional 0.5 million barrels per day, or 0.5% of global oil supply, as high gas prices force a switch from gas to oil consumption,” Commonwealth Bank commodities analyst Vivek Dhar said in a note.
He added that energy prices could rally from here if the Northern Hemisphere winter proved colder than expected.
Gold Prices Rise as Soft Dollar Supports Safe-haven Appeal
Gold prices firmed on Monday, propped up by a subdued dollar and slight retreat in the U.S. Treasury yields, with investors gearing up for a week of speeches from U.S. Federal Reserve policymakers for cues on the central bank’s rate hike path.
Spot gold was up 0.5% at $1,759.06 per ounce, as of 0400 GMT, while U.S. gold futures were up 0.4% at $1,759.00.
While the dollar index softened, the benchmark 10-year Treasury yields eased after hitting their highest since early-July. A weaker dollar offered support to gold prices, making bullion cheaper for holders of other currencies.
“Gold is still looking slightly precarious where it is right now, and it’s probably bouncing off key technical level around $1,750,” IG Market analyst Kyle Rodda said.
“Gold remains an yield story and that yield story is very much tied back to the tapering story.”
A slew of Fed officials are due to speak this week including Chairman Jerome Powell, who will testify this week before Congress on the central bank’s policy response to the pandemic.
“There’ll be a lot of questions being put to Fed speakers about what the dot plots implied last week and weather there is higher risk of heightened inflation going forward and that rate hikes could be coming in the first half of 2022,” Rodda added.
A pair of Federal Reserve policymakers said on Friday they felt the U.S. economy is already in good enough shape for the central bank to begin to withdraw support for the economy.
Gold is often considered a hedge against higher inflation, but a Fed rate hike would increase the opportunity cost of holding gold, which pays no interest.
Investors also kept a close watch on developments in debt-laden property giant China Evergrande saga as the firm missed a payment on offshore bonds last week, with further payment due this week.
Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, increased 0.1% to 993.52 tonnes on Friday from 992.65 tonnes in the prior session.
Silver rose 0.9% to $22.61 per ounce.
Platinum climbed 1.3% to $994.91, while palladium gained 0.7% to $1,985.32.
Brent Crude Oil Near $80 Per Barrel Amid Supply Constraints
Oil prices rose for a fifth straight day on Monday with Brent heading for $80 amid supply concerns as parts of the world sees demand pick up with the easing of pandemic conditions.
Brent crude was up $1.14 or 1.5% at $79.23 a barrel by 0208 GMT, having risen a third consecutive week through Friday. U.S. Oil added $1.11 or 1.5% to $75.09, its highest since July, after rising for a fifth straight week last week.
“Supply tightness continues to draw on inventories across all regions,” ANZ Research said in a note.
Rising gas prices as also helping drive oil higher as the liquid becomes relatively cheaper for power generation, ANZ analysts said in the note.
Caught short by the demand rebound, members of the Organization of the Petroleum Exporting Countries and their allies, known as OPEC+, have had difficulty raising output as under-investment or maintenance delays persist from the pandemic.
China’s first public sale of state oil reserves has barely acted to cap gains as PetroChina and Hengli Petrochemical bought four cargoes totalling about 4.43 million barrels.
India’s oil imports hit a three-month peak in August, rebounding from nearly one-year lows reached in July, as refiners in the second-biggest importer of crude stocked up in anticipation of higher demand.
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Naira Exchange Rate Today, Tuesday, September 28, 2021
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