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High Port Charges: Nigerian Importers Divert Cargoes to Neighbouring Countries

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Importers in Nigeria are now diverting cargoes to neighbouring countries to avoid undue restrictions at the country’s ports and high custom duties, a report has disclosed.

The Chief Executive Officer of the Financial Derivatives Company Limited (FDC), Mr. Bismarck Rewane, disclosed this in his monthly economic news and views for September presented at Lagos Business School recently. This, he attributed to higher customs duties, bottlenecks and forex shortages, adding that smuggling activities are expected to increase.

Clearly, this may jeopardise the federal government’s efforts to boost non-oil revenue following the fall in crude oil prices.

Nigeria is officially in an economic recession.

The National Council of Managing Directors of Licensed Customs Agents (NCMDLCA), recently identified lengthy and cumbersome documentation process on export, multiplicity of regulatory/security agencies, high and duplicated terminal/ shipping company charges and process and lack of export infrastructures as major obstacles that affect export process from Nigerian ports.

In a letter to the Executive Director of the Nigerian Export Promotion Council (NEPC) and copied President Muhammadu Buhari, the Nigerian Ports Authority (NPA) and the Nigerian Shippers Council (NSC), NCMDLCA had called on the federal government to take urgent steps to remove the obstacles before it is too late.

The letter signed by its National President, Lucky Amiwero alleged that: “ The federal government agencies duplicate the process of quality inspection with that of the appointed federal government pre-shipment inspection on export. This constitutes serious bottleneck due to lengthy and cumbersome process, procedure and cost, which resulted in attendant delays and high costs that prompted the movement of our product to our neighbouring West African Ports.”

On the duplication of charges by shipping companies, the customs agents said: “The Nigerian Shipping companies in line with the contract of carriage, handle import container that are loaded back to the country of origin as empty container without any charge due to the level of export activities that is still very low in the country. The shipping lines Terminal Delivery Charges (TDC) is a charge that is not tied to service, as such charge is duplicated in the charges of terminal operators. Their charges do not represent any service to exporters in Nigeria in any form.”

Continuing, Rewane in the report pointed out that ships awaiting berth decreased to 41 from 45 last month, adding that ships awaiting berth are expected to decline further.

According to the report, weakness in macroeconomic condition in the country has translated to profitability decline by most quoted companies. He said earnings and profitability fell short of expectations as investor confidence worsened.

For the banking industry, the report pointed out that 74.6 per cent of industry revenues in their recently released half-year results amounted to N1.21 trillion concentrated in tier I banks.

“Industry’s profitability is slowed by high loan loss charge offs and rising operating costs. Impairment charge continues to record high credit losses of N218.9 billion for first half of 2016, from N41.3 billion as at first half of 2014. Size matters as tier II banks struggles to grow profit before tax. Tier II profit before tax as at the first half of 2016 was N50.3 billion, as against the N59.2 billion recorded in the first half of 2014,” it added.

CBN is conducting stress tests as well as routine examinations on banks in the light of growing non-performing loans (NPLs) and deteriorating asset quality due to naira weakness.

This, the FDC boss said raises apprehension on the state of Nigerian banks as the last released financial stability report was for December 2015.

“The economy has found its bottom and the only way is up. But the pace of recovery is dependent on pace of policy response,” it added.

According to the report, the top four fastest growing sectors accounted for only six per cent of new jobs as at the first quarter of this year, adding that sector activity does not mean job creation and employment. It pointed out that growth does not translate into increased consumption and income.

In its review of the real estate sector, it showed that Lekki has the highest vacancy rate at 65 per cent, adding that affordable rents are six to 10 per cent above asking rents of $780psqm in Victoria Island.

Residential index rose by 6.8 per cent quarter-on-quarter as commercial index remained flat at 148. Prime office rent drop by six per cent to $810 per sqm per annum.

“Nigeria in recession increases vacancy rates further. Carrying cost of properties is excruciating as landlords reduce rental payment to annually. Previously, they used to collect two to three years payment. Pedigree of tenants remains important. Replacement cost far in excess of market value,” it stated.

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.

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Markets Today – Rollercoaster Ride, Fed, Earnings, Ukraine, Oil, Gold, Bitcoin

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By Craig Erlam, Senior Market Analyst, UK & EMEA, OANDA

It’s been a rollercoaster start to what was always going to be a massive week in the markets and there’s little reason to expect that to change in the coming days.

The turnaround on Monday was incredible. From eye-watering losses to ending the day in the green; it’s not often you see that kind of action. Investors will no doubt be relieved but that could prove to be short-lived. US futures are back in negative territory ahead of the open – albeit to a much lesser degree at the moment – and even at the close on Monday, the Nasdaq was more than 13% off its highs.

The next couple of days will be huge. So much could hang on the communication from the Fed tomorrow and whether they strike the right balance between taking inflation seriously and not raising rates too aggressively. It’s a tightrope situation but if the central bank can find the right balance, more may be tempted by these levels.

It’s not just on the Fed, of course. On Monday, it was geopolitics that appeared to tip investors over the edge. The reaction looked over the top but that is indicative of the level of underlying anxiety in the markets at the moment. And if things don’t improve this week, we may see more episodes like that.

Which brings us to earnings season and a week in which numerous companies release fourth-quarter results, including a number of big tech names. A disappointing start to the season hasn’t helped to lift the mood but that could change this week. If not, the January blues could turn into something far more unsettling.

Fundamentals remain bullish for oil

Oil got caught up in the sell-everything panic at the start of the week, sliding more than 3% at one stage before recovering a little. There wasn’t much sense behind the move, but the fact that the dollar was strengthening and crude was already seeing profit-taking after peaking just shy of $90, probably contributed to it.

The market remains fundamentally bullish and conflict with Russia does nothing to alleviate supply-side pressures. If anything, the risks are tilted in the other direction, not that I think it will come to that. Nor does the market at this point, it seems.

Still, it was only likely to be a matter of time until oil bulls poured back in and prices are up again today. The correction from the peak was less than 5% so that may be a little premature, but then the market is very tight so perhaps not.

Conditions remain favourable for gold

Gold continues to be well supported at the start of the week, following some turbulent trading conditions and dollar strength. It continued to hold over the last couple of sessions around $1,830 and has pushed higher with $1,850 now in its sights.

The yellow metal is pulling back a little today, off a few dollars, but it remains in a good position. There still appears to be momentum behind the rally which could continue to take it higher. A move through yesterday’s lows could see that slip but at this point in time, conditions continue to look favourable. Of course, the Fed tomorrow could have a huge role to play in whether that continues to be the case which may explain the consolidation in recent days.

A strong recovery for bitcoin

Bitcoin rebounded strongly on Monday, alongside other risk assets that had also been pummelled earlier in the day. It’s trading a little lower today but that won’t be a major concern at this stage as broader risk appetite is holding up so far. Whether that is sustainable will determine how bitcoin responds and that may depend on the Fed tomorrow.

Bitcoin found support at $33,000 on Monday which isn’t far from a hugely important support zone around $30,000. If risk appetite takes a turn for the worse again, we could see that come under severe pressure. If the price can hold above here in the short term, it could be a very positive sign.

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Markets Today – Russia/Ukraine, Fed, Earnings, PMIs, Oil, Gold, Bitcoin

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U.S Dollar - Investors King

By Craig Erlam, Senior Market Analyst, UK & EMEA, OANDA

Another woeful start to trading on Monday, as heightened geopolitical risk compounds investor anxiety and drags on risk assets.

It could be a make or break week for the markets, with the Fed meeting on Wednesday, big tech earnings, and ongoing tensions on the Ukraine/Russia border. That may sound a bit over the top given how deep a correction we’ve already seen, particularly in the Nasdaq, but it could get much worse before it gets better.

Wednesday is going to be massive. The Fed needs to strike the right balance between taking inflation seriously and not wanting to cause further unnecessary turmoil in the markets. Not an easy balancing act when four hikes are already priced in, alongside balance sheet reduction, and some are arguing it’s not enough.

That’s a lot of pressure for a meeting that’s not really live but investors will be hanging on every single word. It won’t take much for the Fed to add to the anxiety but if they manage to strike the right chord, it could help settle the markets and draw investors back in.

And then there’s earnings. Netflix got things off to a rotten start for big tech but there’ll be plenty of opportunities to turn that around this week. The Nasdaq has fallen more than 16% from its highs and sits very close to bear market territory. Will investors be tempted back in at these levels if the other big tech names deliver?

Whatever happens, it promises to be a really interesting week in the markets and one that could go terribly wrong or be the turning point. Perhaps that’s oversimplifying things but when fear is in control as it seems to be now, it creates these kinds of extremes.

Weak PMIs as omicron weighs

The PMIs we’ve seen today won’t exactly be helping the mood but we should take them with a pinch of salt given the impact that omicron will have had. The services sector was hit particularly hard, especially in the US, but again that’s to be expected under the circumstance. While the data won’t have helped to lift the mood, it won’t change the outlook for interest rates either. There was cause for optimism in some of the UK service’s forward-looking components which bodes well for the coming months, even as households and businesses are hampered by higher energy costs and taxes.

Oil lower but fundamentals remain bullish

Oil prices are lower at the start of the week as we continue to see some profit-taking alongside another hit to risk appetite. It’s been a remarkable rally and there’s nothing to suggest that prices are peaking. It’s just come a long way in a short period of time but the fundamentals continue to look bullish.

Despite it already trading at very elevated levels, I wouldn’t be surprised if any corrective moves are relatively shallow. There’s still a big issue on the supply side, with OPEC+ unable to even come close to monthly addition targets and it’s happening at a time of strong demand.

Not to mention the fact that tensions are seriously heightened between Russia and the West and an invasion of Ukraine is becoming an increasing possibility. When energy markets are already so tight, the additional risk premium should continue to support prices.

Gold pares earlier gains

Gold got off to a decent start this week as it continued to do well in risk-averse trade, but it has since given those back to trade marginally lower on the day. Whether its performance recently is a safe haven move, inflation hedge, or a combination of the two, it’s certainly been supportive for the yellow metal. And now it’s found strong support around $1,830 where it had been seeing plenty of resistance in recent weeks before breaking higher.

That could be a bullish confirmation signal and there still appears to be a healthy amount of momentum, even as the dollar is performing well. The next big test for gold is $1,850, where it struggled on Thursday before profit-taking kicked in.

A major test of support coming for bitcoin

Another miserable day for bitcoin which is continuing to slide after surpassing the 50% mark a little over two months after hitting record highs. It’s in freefall once more and really suffering in these risk-averse markets.

We’ve seen this before though, extreme moves work both ways and while the market has matured over the years, it is still a highly speculative, high-risk asset class. And high-risk assets are being pummelled.

But bitcoin now has a real test on its hands. The psychological blow of losing $40,000 is nothing compared to what happens if $30,000 falls. This is a major level of technical support that held throughout 2021, despite numerous tests early in the year and then throughout the summer. If this falls, it could get very messy.

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Concerns Over Interest Rates Hike and Stronger US Dollar Weighed on Oil Prices

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Crude Oil - Investors King

Oil prices dropped on the back of growing concerns over the possibility of the US Federal Reserve raising interest rates and the surge in dollar value against global counterparts.

Brent crude oil, against which Nigerian crude oil is measured, fell by $3.69 from $88.86 a barrel it peaked earlier today to $85.17 per barrel when the New York market opened. The US West Texas Intermediate crude oil shed $3.91 to $81.9 per barrel, down from $85.81 it opened during the Asian trading session.

The decline in oil prices was after the US dollar jumped to a two-week high on Monday against its global counterparts, largely due to the tension between Russia and the West over Ukraine and the likelihood of the Fed raising interest rates this week.

Francesco Pesole, a strategist at ING Bank, said the increase in dollar value could stall if the Fed signalled a preference for balance sheet reduction against the widely expected interest rate as means to tighten policy.

“If markets see the Fed willing to let balance sheet reduction do the heavy lifting, that may force a scaleback in forecasts for the number of rate hikes,” he said.

“The dollar will find more support from actual rate hike expectations than expectations of draining liquidity out of the market.”

Carsten Fritsch, an analyst at Commerzbank, explained that the crisis in both Ukraine and the Middle East “justify a risk premium on the oil price because the countries involved – Russia and the UAE – are important members of OPEC+”.

Tension in the United Arab Emirates rose on Monday following an interception of two Houthi ballistic missiles targeting the Gulf country after a deadly attack a week earlier.

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