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Stoppage of FX Transactions on Naira Cards May Hit Banks’ Profit

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naira cards - Investors King
  • Stoppage of FX Transactions on Naira Cards May Hit Banks’ Profit

The decision by a number of commercial banks to stopped their naira cards from dispensing dollars via ATMs to customers in foreign countries as well as the use of naira debit or credit cards for online transactions priced in foreign currencies, will impact negatively on the financial institution’s profitability.

It is also expected to affect their non-interest income this quarter, and may be more severe on banks with significant contribution to their gross earnings from E-business in the first half of the year.

Presently, Skye Bank Plc, Guaranty Trust Bank Plc (GTBank), Standard Chartered Bank, and Stanbic IBTC Bank have already stopped the withdrawal of foreign currencies from the ATMs by their customers who travel abroad. The banks also advised customers seeking to do FX transactions to open domiciliary accounts.

The banks cited dollar scarcity and volatility in the foreign exchange market as reasons. This development followed the directive by the Central Bank of Nigeria (CBN), which mandated all banks with the exception of FBN Holdings, to sell their dollar inflows from remittances to Travelex, for onward sale to the BDCs.

“We see this impacting on banks profitability. E-business Income segment is basically card related businesses, transactional income, exchange rate gains and other related services.

“Banks make money from this segment when customers use their debit or credit cards for online transactions, money transfer to beneficiaries or for withdrawals in either local or foreign currency,” analysts at Lagos-based CSL Stockbrokers Limited stated.

In the first half of 2016, there were significant increases in E-business income of most banks. While some of this income was attributable to a rise in volume of card transactions, it was believed that a significant portion was as a result of the spread made on foreign currency transactions.

With commission on turnover (COT) basically eliminated, banks had relied partly on their E-business segments to drive up non-interest revenue this year.

“We see this new directive impacting banks non-interest income in the fourth quarter, especially for banks with significant contribution to gross earnings from E-business in the first half of the year,” CSL Stockbrokers Limited stated in a note yesterday.

When contacted on the development, the Director, Banking and Payment System at the CBN, Mr. Dipo Fatokun, said it was not a CBN directive.

“Maybe it is due to forex scarcity or it is part of the bank’ risk management strategy,” Fatokun said via a phone chat.

 

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Crude Oil

Oil Prices Continue to Slide: Drops Over 1% Amid Surging U.S. Stockpiles

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Crude Oil

Amidst growing concerns over surging U.S. stockpiles and indications of static output policies from major oil-producing nations, oil prices declined for a second consecutive day by 1% on Wednesday.

Brent crude oil, against which the Nigerian oil price is measured, shed 97 cents or 1.12% to $85.28 per barrel.

Similarly, U.S. West Texas Intermediate (WTI) crude slumped by 93 cents or a 1.14% fall to close at $80.69.

The recent downtrend in oil prices comes after they reached their highest level since October last week.

However, ongoing concerns regarding burgeoning U.S. crude inventories and uncertainties surrounding potential inaction by the OPEC+ group in their forthcoming technical meeting have exacerbated the downward momentum.

Market analysts attribute the decline to expectations of minimal adjustments to oil output policies by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known collectively as OPEC+, until a full ministerial meeting scheduled for June.

In addition to concerns about excess supply, the market’s attention is also focused on the impending release of official government data on U.S. crude inventories, scheduled for Wednesday at 10:30 a.m. EDT (1430 GMT).

Analysts are keenly observing OPEC members for any signals of deviation from their production quotas, suggesting further volatility may lie ahead in the oil market.

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Energy

Nigeria Targets $5bn Investments in Oil and Gas Sector, Says Government

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Crude Oil - Investors King

Nigeria is setting its sights on attracting $5 billion worth of investments in its oil and gas sector, according to statements made by government officials during an oil and gas sector retreat in Abuja.

During the retreat organized by the Federal Ministry of Petroleum Resources, Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, explained the importance of ramping up crude oil production and creating an environment conducive to attracting investments.

He highlighted the need to work closely with agencies like the Nigerian National Petroleum Company Limited (NNPCL) to achieve these goals.

Lokpobiri acknowledged the challenges posed by issues such as insecurity and pipeline vandalism but expressed confidence in the government’s ability to tackle them effectively.

He stressed the necessity of a globally competitive regulatory framework to encourage investment in the sector.

The minister’s remarks were echoed by Mele Kyari, the Group Chief Executive Officer of NNPCL, who spoke at the 2024 Strategic Women in Energy, Oil, and Gas Leadership Summit.

Kyari stressed the critical role of energy in driving economic growth and development and explained that Nigeria still faces challenges in providing stable electricity to its citizens.

Kyari outlined NNPCL’s vision for the future, which includes increasing crude oil production, expanding refining capacity, and growing the company’s retail network.

He highlighted the importance of leveraging Nigeria’s vast gas resources and optimizing dividend payouts to shareholders.

Overall, the government’s commitment to attracting $5 billion in investments reflects its determination to revitalize the oil and gas sector and drive economic growth in Nigeria.

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Commodities

Palm Oil Rebounds on Upbeat Malaysian Exports Amid Indonesian Supply Concerns

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Palm Oil - Investors King

Palm oil prices rebounded from a two-day decline on reports that Malaysian exports will be robust this month despite concerns over potential supply disruptions from Indonesia, the world’s largest palm oil exporter.

The market saw a significant surge as Malaysian export figures for the current month painted a promising picture.

Senior trader David Ng from IcebergX Sdn. in Kuala Lumpur attributed the morning’s gains to Malaysia’s strong export performance, with shipments climbing by a notable 14% during March 1-25 compared to the previous month.

Increased demand from key regions like Africa, India, and the Middle East contributed to this impressive growth, as reported by Intertek Testing Services.

However, amidst this positivity, investors are closely monitoring developments in Indonesia. The Indonesian government’s contemplation of revising its domestic market obligation policy, potentially linking it to production rather than exports, has stirred market concerns.

Edy Priyono, a deputy at the presidential staff office in Jakarta, indicated that this proposed shift aims to mitigate vulnerability to fluctuations in export demand.

Yet, it could potentially constrain supply availability from Indonesia in the future to stabilize domestic prices.

This uncertainty surrounding Indonesian policies has added a layer of complexity to palm oil market dynamics, prompting investors to react cautiously despite Malaysia’s promising export performance.

The prospect of Indonesian supply disruptions underscores the delicacy of global palm oil supply chains and their susceptibility to geopolitical and regulatory factors.

As the market navigates these developments, stakeholders remain attentive to both export data from Malaysia and policy shifts in Indonesia, recognizing their significant impact on palm oil prices and market stability.

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