Nigeria’s external reserves diminished to $25.860 billion as at August 12, 2016, following the settlement of matured obligation by the Central Bank of Nigeria (CBN).
The latest external reserves position revealed by the CBN showed that the reserves derived mostly from the proceeds of crude oil sales fell by 1.9 per cent or N514 million in the last one month, compared with the $26.374 billion it was as at July 12, 2016.
Following the lifting of the peg on the naira on June 20, the central bank conducted a Special Secondary Market Intervention Sales (SMIS) to clear the backlog of $4.02 billion pent-up demand for forex.
According to the CBN, it sold $532 million on the spot market and $3.487billion in the forwards market. A breakdown of the $3.487 billion forward sales by the central bank had shown that $697 billion was for one month (1M), $1.22 billion for two months (2M) and $1.57 billion for three months (3M). Also last month, the central bank settled one-month forward contracts of $697 million.
The naira, which closed at N317.34 to the dollar on the interbank forex market on Monday has been under pressure in the forex market as complaints of scarcity of the greenback persist.
The central bank ditched its 16-month old peg on the naira in June and introduced a flexible exchange rate regime to allow the currency to trade freely on the interbank market.
But as a result of forex scarcity in the system which had resulted to the strong volatility observed in the forex market, the banking sector intervened last week in its bid to achieve exchange rate stability.
Oil prices rose on Monday to their highest in nearly a month as speculation intensified about potential producer action to support prices in an oversupplied market. Brent crude was up $1.19, or 2.5 per cent, at $48.16 per barrel. The international benchmark futures are up about 13 per cent above the last close in July.
Crude oil prices recorded nearly 20 per cent climb in April to about $46 per barrel. OPEC crude-oil production surged by 484,000 barrels to 33.217 million a day in April, according to a Bloomberg survey.
The external reserves were expected to decline further due to the settlement of large swap positions between the banks and the CBN.
The federal government last week said it had saved about N1.4 trillion that would have been paid as subsidy to oil marketers as a result of the successful deregulation of the downstream oil and gas sector a few months ago.
Vice-President, Prof. Yemi Osibanjo who disclosed this while speaking at the Lagos Chamber of Commerce and Industry 2016 Presidential Policy Dialogue Session also said the Nigerian economy remained resilient despite the huge challenges and downside potentials.
According to the vice president, refineries in the country were expected to resume operation in full capacity before the end of 2017,having set a medium to long term strategy in motion to overhaul and sort them out.
“Of course, the medium to long term plan is to sort out the refineries; it is important for us to deal with refineries because as many of us have well known, one of the largest foreign exchange cost for us is the importation of petroleum products and at the moment, most of our refineries are operating at sub-optimum and what we are able to refine is negligible compared to what is required on daily basis.
“The recent introduction of flexible exchange rate regime, which was meant to ease pressure on external reserves, is of course one issue I am sure many will still want to comment on. But I think that the immediate effect of the devaluation and depreciation of the naira and some of the consequences which include inflation is to be expected and I believe that as we see the implementation of that policy and clearer focus on a truly flexible exchange rate, we will be able to see the actual benefit of of this policy. I believe that the foreign exchange market will stabilise; confidence will be restored and there will be an increase in the supply of foreign exchange, especially due to inward investments,” he added.
Communities in Delta State Shut OML30 Operates by Heritage Energy Operational Services Ltd
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.
Crude Oil Recovers from 4 Percent Decline as Joe Biden Wins
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.”
Nigeria, Other OPEC Members Oil Revenue to Hit 18 Year Low in 2020
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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