The Lagos Chamber of Commerce and Industry has faulted the allocation of 60 per cent foreign exchange to the manufacturing sector, describing it as one of the policy inconsistencies of the government making it difficult to regain the confidence of investors.
The LCCI stated this in a statement on Sunday, which was signed by its Director-General, Mr. Muda Yusuf.
It said, “Another policy development that could pose a risk to the stability and transparency of the foreign exchange market is the recent policy on sectoral allocation of foreign exchange. The CBN circular did not indicate any HS Code to properly define what would qualify as raw materials and machinery.
He added, “Therefore, if a minimum of 60 per cent of all forex allocation goes to manufacturing for raw materials and machinery; what happens to other sectors? Currently, petroleum products imports are priority and could take another 25 per cent of foreign exchange. This implies that the rest of the sectors would settle for the balance of 15 per cent. This is clearly not a sustainable framework.”
It stated that the major challenge facing the Nigerian economy at this time was the inability to regain the confidence of investors, both local and foreign.
“Regrettably, the instability and inconsistency in the foreign exchange management policy have been complicating matters.
“The economy has a major structural defect of being heavily import-dependent. This cannot be fixed in the short term. Therefore, the shocks arising from the collapse of oil price and the corresponding depreciation in the naira exchange rate were inevitable. But the policy responses could make a whole lot of difference in the profundity of the impact of these shocks on the economy and the citizens.”
OPEC+ Delegates Seek Steady Oil Production Levels as Committee of Ministers Meet Next Week
With the recent hike in the prices of oil at the international markets, the delegates of the Organisation of Petroleum Exporting Countries (OPEC) have canvassed for a steady oil production output.
This is coming a few days before the Joint Ministerial Monitoring Committee of the organisation would meet to deliberate on the demand and supply chain of crude oil in the global space.
The meeting of the Advisory Committee of Ministers is said to hold online as top OPEC officials continue to push for unchanged oil production levels.
Investors King reports that there has been an uncertain recovery in global demand for oil as international oil prices had climbed in the past two weeks.
It was gathered that Saudi Arabia and its partners are planning to hold a review of output levels on February 1, 2023 after agreeing significant cutbacks late last year to keep world crude markets in balance.
While awaiting clarity on the recovery in consumption in China and the impact of sanctions on Russian supply, the delegates said they expected the Ministers not it tamper with the output.
The Opec+ is embracing conservative stance even China, the biggest oil importer in the world battles devastating effects of COVID-19 pandemic.
Also, Opec+ is expecting the full impact of European Union sanctions on member-country Russia over its invasion of Ukraine.
Analysts at Eurasia Group have said, in a report, that there are possibilities of Opec+ maintaining the status quo beyond next week’s meeting.
According to the report, prices of oil have stabilised while there are significant levels of uncertainty surrounding both supply and demand.
It was gathered that feedback from the top OPEC hierarchy would go a long way in forming the decision to hold steady or not.
The Secretary-General of petroleum exporting countries, Haitham Al-Ghais has expressed hope on the global economy as the nascent rebound in China is tempered by weakness in advanced economies.
For Saudi Energy Minister, Prince Abdulaziz bin Salman, Opec+ would be proactive and preemptive to keep markets in equilibrium.
The head of commodity strategy at RBC Capital Markets LLC, Helima Croft, said there were pointers that Saudi Arabia wants to adopt the policy of preemption and keep production constraints in place until there are clear indications that there is sufficient demand for additional supply.
Analysts at Goldman Sachs Group Inc. and Energy Aspects Ltd. revealed that Opec+ will only start to reverse its supply curbs, which were formally about 2 million barrels a day, and increase production in the second half of the year.
At this period, accelerating demand would have tightened the market.
Meanwhile, the 23-nation alliance is scheduled to meet at OPEC’s Vienna headquarters in early June to review production levels for other months in the year.
Oil Gains Marginally on Possible Demand Recovery in China
Oil prices inched slightly higher on Wednesday as optimism for a demand recovery in China and expectations that major producers will maintain current output policy offset global recession worries.
Brent crude oil, against which Nigerian oil is priced, appreciated by 17 cents, or 0.2%, to $86.30 per barrel after falling by 2.3% on Tuesday. U.S. West Texas Intermediate (WTI) crude climbed 7 cents, or 0.1%, to $80.20, after a 1.8% drop on Tuesday.
“Expectations that China’s fuel demand will recover in the second half of the year are growing and are likely to support market sentiment,” said Hiroyuki Kikukawa, general manager of research at Nissan Securities.
Analysts from the Bank of America Securities said the reopening of the Chinese economy after years of tough COVID restrictions could unleash a large wave of pent-up demand over the next 18 months.
On the supply side, volumes should remain steady for the medium term as the Organization of the Petroleum Exporting Countries (OPEC) and its allies, a group known as OPEC+, is expected to keep its output policy unchanged.
An OPEC+ panel is likely to endorse the producer group’s current oil output policy when it meets next week, five OPEC+ sources said on Tuesday, as hopes for higher Chinese demand are balanced by worries over inflation and the global economy.
OPEC+ in October decided to trim output by 2 million barrels per day from November through 2023 on a weaker economic outlook.
However, gains in oil prices were capped by a bigger-than-expected build in U.S. oil inventories that was reported after the market settled on Tuesday.
U.S. crude stocks rose by about 3.4 million barrels in the week ended Jan. 20, according to market sources citing American Petroleum Institute figures. That was triple the forecast for an about 1 million build in a preliminary Reuters poll on Monday.
Nissan’s Kikukawa, however, expects the build “to be temporary as the supply disruptions from a cold snap in the United States a few weeks ago would only impact data in the next couple of weeks”.
Official data from the U.S. Energy Information Administration will be released later on Wednesday.
Kikukawa expects WTI to trade in a range between $75 and $85 a barrel in the coming weeks.
Markets are also watching out for interest rate decisions from central banks for more trading cues.
“It seems that the absence of hawkish Fed comments from the current blackout period has removed a key overhang for risk sentiments for now, providing some renewed traction back into growth,” Yeap Jun Rong, market analyst at IG, said in a note.
Investors are waiting to see if the U.S. Federal Reserve will “react to recent downside surprise in inflation and growth” when it meets next week, the analyst added.
Fuel Scarcity: IPMAN Decries 50% Reduction of Product Supply Since July 2022
The Independent Petroleum Marketers Association of Nigeria, IPMAN has faulted the oil sector’s incapability to cater for the full fuel supply order of oil marketers nationwide.
Investors King learnt that the volume of products supplied to marketers dropped by 50 percent since July, 2022 which has worsened the fuel scarcity situation.
The Deputy National President of IPMAN, Zahra Mustapha, during a Television interview stressed that there is confusion in the nation’s oil sector.
Mustapha, who said the fuel subsidy issue is complex, explained that the federal government is overwhelmed by the burden of fuel subsidy which is not sustainable.
“The fact of the matter is that we are in a very complex situation because the burden of subsidy that the government is carrying is no more sustainable and the volume that the NNPC for now, being the sole importer of the petroleum product, PMS, has been hit hard, because of that the supply that we receive as the marketers at the loading point is being reduced by over 50 per cent.
“It doesn’t seem that they (NNPC) are bringing in more, if they are, we will be getting the volume we usually get before. Since July/August last year the volume we receive now is not up to 40 or 50 percent of what we usually get. As of today, the volume we are getting is not enough,” he said.
Mustapha stated that the situation has been reported to the oil sector regulatory bodies and the oil marketers are expecting their actions.
He further lamented the high supply cost and transportation which makes them sell it at a much higher rate to the consumers.
“We are supposed to get this product at N148 but we are buying at N22o and it keeps increasing. 240 in Lagos, 235 in Warri, 240 in Port Harcourt, in Calabar it is as high as N250 per litre for marketers, and you buy and transport yourself to where your retail outlet is. We cannot buy the product between 220 to 240 naira, transport it for about N50, which is already N300, then expect the marketer to sell to the public for N200 or N190. It is not realisable.
“There are a lot of confusions in the industry, which the government must come in and address these confusions so that the common man can get the product for the approved price,” said Mustapha.
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