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$2.3bn NNPC funds: CBN Bars 9 Banks From Forex Market

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The Central Bank of Nigeria on Tuesday wielded the big stick as it barred nine Deposit Money Banks from the nation’s foreign exchange market for failing to remit the sum of $2.334bn belonging to the Nigerian National Petroleum Corporation to the Treasury Single Account.

President Muhammad Buhari had last September ordered all the DMBs in the country to remit all Federal Government funds to the TSA.

The banks are: First Bank of Nigeria Limited ($469m); Diamond Bank Plc ($287m); Sterling Bank Plc ($269m); Skye Bank Plc ($221m); Fidelity Bank ($209m); United Bank for Africa ($530m); Keystone Bank ($139); First City Monument Bank (FCMB) $125m; and Heritage Bank ($85m).

Officials of the CBN officials told our correspondent that the sanction would remain until the DMBs could remit the funds to the CBN.

The officials further said the further disciplinary actions awaited the errant banks after remitting the funds in full to the Federal Government’s coffers.

As of time of filing this report, it was learnt that some bank executives were meeting with the CBN Governor, Mr. Godwin Emefiele, over the development.

However, the Head, Corporate Communications, UBA, Mr. Charles Aigbe, said the bank was not among the banks sanctioned by the CBN.

In a statement issued on Tuesday, Aigbe said, “Our attention has been drawn to report of the ban of UBA from the foreign exchange market by the CBN over the non-remittance of the NNPC/NLNG dollar deposits.

“We wish to state very categorically that UBA has completely remitted all the NNPC/NLNG dollar deposits. We thank all our numerous customers, business partners and other. stakeholders who have reached out to us on account of this report.”

The spokespersons for First Bank, Mr. Babatunde Lasaki, said the lender would issue a statement on the development.

But as of the time of filing this report, he had yet to do so.

Spokesperson for FCMC, Mr. Diran Olojo, in a terse response, said, “We are working with the CBN on an amicable resolution. This is really a function of the dire macroeconomic situation and illiquidity in the FX markets, rather than concealment or wilful non-compliance by banks.”

Spokesperson for Diamond Bank, Mr. Mike Omeife, did not respond to telephone calls and text messages seeking their reaction on the development.

The Skye Bank spokesperson, Mr. Ndumechi Ezurike, could not be reached for comments.

Spokespersons for Fidelity Bank, Sterling Bank and Heritage Bank could not comment immediately.

However, sources in the banks said their managements were working with the CBN to resolve the matter.

It was learnt that Fidelity Bank had been following a payment plan agreed with the CBN on the funds.

Following the President’s directive on the TSA last September, majority of the banks had complied by remitting all the Federal Government funds including that of the NNPC to the TSA.

However, the CBN reportedly fined First Bank, UBA and Skye Bank for failing some billions of naira to the Federal Government coffers in line with the TSA directive.

Further investigations by our correspondent revealed that following the presidential directive on the TSA, most of the DMBs remitted all naira-denominated funds in their possession including that of the NLNG/NNPC to the CBN.

However, the dollar components of the NLNG/NNPC funds in the banking system, estimated at about $5bn, could not be remitted immediately due to scarcity of forex in the country.

However, the banks reached an agreement with the CBN to start remitting the funds on monthly basis.

The monthly payment plan submitted by the banks to the CBN, it was learnt, was being followed by the some banks while other defaulted.

Following the compliance of some of the banks to the payment plan, the dollar component of the NLNG/NNPC funds was reduced to $2.3bn.

The failure of some banks to comply with the payment plans and the dire need for the CBN to shore up the nation’s fast-depleting external reserves, it was learnt, forced the regulator to adopt a measure.

This, findings revealed, forced the CBN to bar the banks from the forex market.

A top bank executive close to the development, who spoke under the condition of anonymity, said, “We need to admit we have a national problem. The NLNG deposit in the banking system was about $5bn. The banks have been paying and what is remaining now is just about $2bn. The banks have submitted a payment plan and they are following it. The banks have the naira equivalent of the outstanding amount. The challenge is that they cannot get dollar to buy to settle the money.”

Some top bankers said the approach the CBN was adopting was capable of compounding the problem.

“This could affect the banks image and their ability to get foreign investors; we need to admit we have a national problem and seek for ways to resolve it,” one of the bankers said.

The NLNG was paying dividends from the investment of the government in the company (NLNG) to the NNPC.

The dividends had accumulated to about $5bn; the

NNPC was investing this dividend payment in a dedicated account as fixed deposits with commercial banks.

It was learnt that when the Federal Government raised the issue that the dividends should have been paid into the Federation Account, the CBN governor invited the CEOs of all the banks that had the funds to Abuja for a reconciliation of the amount in each bank with the records of the CBN/NNPC, and agreed to a repayment time table of the funds with the banks

As of the time the TSA Implementation commenced in September 2015 some of the banks had paid back over 50 per cent of the funds based on the repayment timetable

This repayment by the banks was the bailout of $2.1bn (N414bn) that was shared by the FGN and state governments in July/August 2015.

When the TSA commenced, the banks reported these funds as part of government deposits they had but it was not remitted like other TSA funds because of the remittance timetable that had been agreed with the CBN.

The NNPC invited banks earlier this year to submit a revised repayment plan for the balance of the funds offers.

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.

Crude Oil

Oil Posts 2% Gain for the Week Despite India Virus Surge

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Oil prices steadied on Friday and were set for a weekly gain against the backdrop of optimism over a global economic recovery, though the COVID-19 crisis in India capped prices.

Brent crude futures settled 0.28% higher at $68.28 per barrel and U.S. West Texas Intermediate (WTI) crude advanced 0.29% to $64.90 per barrel.

Both Brent and WTI are on track for second consecutive weekly gains as easing restrictions on movement in the United States and Europe, recovering factory operations and coronavirus vaccinations pave the way for a revival in fuel demand.

In China, data showed export growth accelerated unexpectedly in April while a private survey pointed to strong expansion in service sector activity.

However, crude imports by the world’s biggest buyer fell 0.2% in April from a year earlier to 40.36 million tonnes, or 9.82 million barrels per day (bpd), the lowest since December.

In the United States, the world’s largest oil consumer, jobless claims have dropped, signalling the labour market recovery has entered a new phase as the economy recovers.

The recovery in oil demand, however, has been uneven as surging COVID-19 cases in India reduce fuel consumption in the world’s third-largest oil importer and consumer.

“Brent came within a whisker of breaking past $70 a barrel this week but failed at the final hurdle as demand uncertainty dragged on prices,” said Stephen Brennock at oil brokerage PVM.

The resurgence of COVID-19 in countries such as India, Japan and Thailand is hindering gasoline demand recovery, energy consultancy FGE said in a client note, though some of the lost demand has been offset by countries such as China, where recent Labour Day holiday travel surpassed 2019 levels.

“Gasoline demand in the U.S. and parts of Europe is faring relatively well,” FGE said.

“Further out, we could see demand pick up as lockdowns are eased and pent-up demand is released during the summer driving season.”

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Commodities

Lagos Commodities and Futures Exchange to Commence Gold Trading

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With the admission of Dukia Gold’s diversified financial instruments backed by gold as the underlying asset, Lagos Commodities and Futures Exchange is set to commence gold trading.

According to Dukia Gold, the instruments will be in form of exchange-traded notes, commercial papers and other gold-backed securities, adding that it will enable the company to deepen the commodities market in Nigeria, increase capacity, generate foreign exchange for the Nigerian government to better diversify foreign reserves and create jobs across the metal production value chain.

Tunde Fagbemi, the Chairman, Dukia Gold, disclosed this while addressing journalists at Pre-Listing Media Interactive Session in Lagos on Thursday.

He said, “We are proud to be the first gold company whose products would be listed on the Lagos Futures and Commodities Exchange. The listing shall enable us facilitate our infrastructure development, expand capacity and create fungible products.

“This has potential to shore up Nigeria’s foreign reserve and create an alternative window for preservation of pension funds. A gold-backed security is a hedge against inflation and convenient preservation of capital.”

“As a global player, we comply with the practices and procedures of London Bullion Market Association and many other international bodies. Our refinery will also have multiplier effects on the development of rural areas anywhere it is located,” he added.

Mr Olusegun Akanji, the Divisional Head, Strategy and Business Solutions, Heritage Bank, said the lender had created a buying centre for verification of quality and quantity of gold and reference price to ensure price discovery in line with the global standard.

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Crude Oil

Oil Nears $70 as Easing Western Lockdowns Boost Summer Demand Outlook

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Crude oil

Oil prices rose for a third day on Wednesday as easing of lockdowns in the United States and parts of Europe heralded a boost in fuel demand in summer season and offset concerns about the rise of COVID-19 infections in India and Japan.

Brent crude rose 93 cents, or 1.4%, to $69.81 a barrel at 1008 GMT. U.S. West Texas Intermediate (WTI) crude rose 85 cents, or 1.3%, to $66.54 a barrel.

Both contracts hit the highest level since mid-March in intra-day trade.

“A return to $70 oil is edging closer to becoming reality,” said Stephen Brennock of oil broker PVM.

“The jump in oil prices came amid expectations of strong demand as western economies reopen. Indeed, anticipation of a pick-up in fuel and energy usage in the United States and Europe over the summer months is running high,” he said.

Crude prices were also supported by a large fall in U.S. inventories.

The American Petroleum Institute (API) industry group reported crude stockpiles fell by 7.7 million barrels in the week ended April 30, according to two market sources. That was more than triple the drawdown expected by analysts polled by Reuters. Gasoline stockpiles fell by 5.3 million barrels.

Traders are awaiting data from the U.S. Energy Information Administration due at 10:30 a.m. EDT (1430 GMT) on Wednesday to see if official data shows such a large fall.

“If confirmed by the EIA, that would mark the largest weekly fall in the official data since late January,” Commonwealth Bank analyst Vivek Dhar said in a note.

The rise in oil prices to nearly two-month highs has been supported by COVID-19 vaccine rollouts in the United States and Europe.

Euro zone business activity accelerated last month as the bloc’s dominant services industry shrugged off renewed lockdowns and returned to growth.

“The partial lifting of mobility restrictions, the expectation that tourism will return in the near future, and the lure of the psychologically important $70 mark are all likely to have contributed to the price rise,” Commerzbank analyst Eugen Weinberg said.

This has offset a drop in fuel demand in India, the world’s third-largest oil consumer, which is battling a surge in COVID-19 infections.

“However, if we were to eventually see a national lockdown imposed, this would likely hit sentiment,” ING Economics analysts said of the situation in India.

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