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Why CBN Retained FirstBank as Sole Forex Dealer to BDCs

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  • Why CBN Retained FirstBank as Sole Forex Dealer to BDCs

It’s anybody’s guess how FirstBank Nigeria Limited was able to win the confidence of the Central Bank of Nigeria (CBN) which made the apex bank to retain the former as the major foreign exchange dealer to licenced Bureau de Change (BDC) operators in Nigeria.

The FBN Limited was able to achieve that laudable feat due to a combination of factors.

Checks revealed that the apex banks apparently miffed by failure to fully comply with the directive which requires commercial banks that act as agents of international money transfer operators to always sell foreign currency remittances to licensed BDC operators, had issued a circular last Wednesday where it relieved other banks of the role, and retained FirstBank Nigeria Limited as sole dealers to the BDCs.

The announcement by the CBN is coming on the heels of the FBN’s stable money transfer services as well as its strict compliance to CBN’s rules and directives on the sale of foreign exchange.

While all the affected banks are expected to sell their dollar inflows from remittances to Travelex, for onward sale to the BDCs.

How FBN Limited bested other banks

Investigation revealed that the Bank had consistently sold dollars to over 500 BDCs as directed by the CBN to improve dollar liquidity and strengthen the Naira in line with the new flexible foreign exchange policy.

The CBN took the decision because the returns on forex sales showed that the affected banks had not been active in selling the greenback to BDC operators since the directive was given in July.

Thus FBN Limited unlike other deposit money banks having proved its worth and mettle as a dependable ally to the apex bank became the standard bearer where others failed.

The FirstBank in a statement over the weekend described CBN’s pronouncement as a testament to the Bank’s strong financial base and its avowed support to the growth and development of a sustainable national economy.

The Bank’s Chief Financial Officer, Patrick Iyamabo, recently noted that the Bank will continue to strive to maintain its position as the safest and most respected banking franchise in the country.

He said:“We would continue to leverage our unique ability to grow and capitalize the institution – a testament to our solid track record. Our highest priority remains meeting the financing and banking needs of our customers, by providing world class services, knowledge and expertise to support them, even in very difficult times.”

The Bank said it remains committed to corporate governance principles and would continue to ensure that dollars sales to the BDCs continue in a seamless manner for ease of distribution to the end users.

While justifying the decision to remove the function of dollar remittance sales to BDCs from the other banks, the President of the Association of Bureau De Change of Nigeria (ABCON), Alhaji Aminu Gwadabe, said it was a big relief to the BDC operators.

Among other things, he said the move would help strengthen the naira and improve dollar liquidity in the market.

“It will ensure that more dollars are distributed to BDCs in uniform and transparent manner as some of the banks have not been selling funds from the international money transfer operators (IMTOs).

“If you check, since Travelex started selling to BDCs, speculation has reduced in the market and the naira is on the path of recovery. My advise to our members is to partner with the central bank on this project. I advice everybody to be patriotic, any member that goes against the rule would be punished,” Gwadabe said in a telephone chat.

Commenting on the suspension of his members, he said those affected would in the coming days ensure they renew licences for them to be reinstated in the market.

Travelex, a global foreign exchange company last week began weekly disbursements of US$15,000 (part of the country’s diaspora remittances) to each of the 3,000 registered Bureaux DeBDC) operators in the country.

 

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 Dips Below $62 in New York Though Banks Say Rally Can Extend

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Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

Oil retreated from an earlier rally with investment banks and traders predicting the market can go significantly higher in the months to come.

Futures in New York pared much of an earlier increase to $63 a barrel as the dollar climbed and equities slipped. Bank of America said prices could reach $70 at some point this year, while Socar Trading SA sees global benchmark Brent hitting $80 a barrel before the end of the year as the glut of inventories built up during the Covid-19 pandemic is drained by the summer.

The loss of oil output after the big freeze in the U.S. should help the market firm as much of the world emerges from lockdowns, according to Trafigura Group. Inventory data due later Tuesday from the American Petroleum Institute and more from the Energy Department on Wednesday will shed more light on how the Texas freeze disrupted U.S. oil supply last week.

Oil has surged this year after Saudi Arabia pledged to unilaterally cut 1 million barrels a day in February and March, with Goldman Sachs Group Inc. predicting the rally will accelerate as demand outpaces global supply. Russia and Riyadh, however, will next week once again head into an OPEC+ meeting with differing opinions about adding more crude to the market.

“The freeze in the U.S. has proved supportive as production was cut,” said Hans van Cleef, senior energy economist at ABN Amro. “We still expect that Russia will push for a significant rise in production,” which could soon weigh on prices, he said.

PRICES

  • West Texas Intermediate for April fell 27 cents to $61.43 a barrel at 9:20 a.m. New York time
  • Brent for April settlement fell 8 cents to $65.16

Brent’s prompt timespread firmed in a bullish backwardation structure to the widest in more than a year. The gap rose above $1 a barrel on Tuesday before easing to 87 cents. That compares with 25 cents at the start of the month.

JPMorgan Chase & Co. and oil trader Vitol Group shot down talk of a new oil supercycle, though they said a lack of supply response will keep prices for crude prices firm in the short term.

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Crude Oil

Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

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Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

Oil prices rose on Monday as the slow return of U.S. crude output cut by frigid conditions served as a reminder of the tight supply situation, just as demand recovers from the depths of the COVID-19 pandemic.

Brent crude was up $1.38, or 2.2%, at $64.29 per barrel. West Texas Intermediate gained $1.38, or 2.33%, to trade at $60.62 per barrel.

Abnormally cold weather in Texas and the Plains states forced the shutdown of up to 4 million barrels per day (bpd) of crude production along with 21 billion cubic feet of natural gas output, analysts estimated.

Shale oil producers in the region could take at least two weeks to restart the more than 2 million barrels per day (bpd) of crude output affected, sources said, as frozen pipes and power supply interruptions slow their recovery.

“With three-quarters of fracking crews standing down, the likelihood of a fast resumption is low,” ANZ Research said in a note.

For the first time since November, U.S. drilling companies cut the number of oil rigs operating due to the cold and snow enveloping Texas, New Mexico and other energy-producing centres.

OPEC+ oil producers are set to meet on March 4, with sources saying the group is likely to ease curbs on supply after April given a recovery in prices, although any increase in output will likely be modest given lingering uncertainty over the pandemic.

“Saudi Arabia is eager to pursue yet higher prices in order to cover its social break-even expenses at around $80 a barrel while Russia is strongly focused on unwinding current cuts and getting back to normal production,” said SEB chief commodity analyst Bjarne Schieldrop.

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Crude Oil

Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

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Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

Oil prices rose to $65.47 per barrel on Thursday as crude oil production dropped in the US due to frigid Texas weather.

The unusual weather has left millions in the dark and forced oil producers to shut down production. According to reports, at least the winter blast has claimed 24 lives.

Brent crude oil gained $2 to $65.47 on Thursday morning before pulling back to $64.62 per barrel around 11:00 am Nigerian time.

U.S. West Texas Intermediate (WTI) crude rose 2.3 percent to settle at $61.74 per barrel.

“This has just sent us to the next level,” said Bob Yawger, director of energy futures at Mizuho in New York. “Crude oil WTI will probably max out somewhere pretty close to $65.65, refinery utilization rate will probably slide to somewhere around 76%,” Yawger said.

However, the report that Saudi Arabia plans to increase production in the coming months weighed on crude oil as it can be seen in the chart below.

Prince Abdulaziz bin Salman, Saudi Arabian Energy Minister, warned that it was too early to declare victory against the COVID-19 virus and that oil producers must remain “extremely cautious”.

“We are in a much better place than we were a year ago, but I must warn, once again, against complacency. The uncertainty is very high, and we have to be extremely cautious,” he told an energy industry event.

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