- CBN to Sell $500m FX Forwards to Meet Manufacturers’ Pent-up Demand
Desirous of ensuring that manufacturers get the required foreign exchange (FX) for the importation of critical raw materials as well as meeting the pent-up demand for the greenback, the Central Bank of Nigeria (CBN) will tomorrow sell $500 million through FX forwards to banks, for onward sales to their customers.
The move, which is also aimed at boosting economic activities in the country, would cater to some of the FX demand of manufacturers that want to import plants and machinery, raw materials and agriculture equipment.
A top official of the CBN, who disclosed this yesterday, said banks were notified last week and given till noon today to send the list of FX requests from their customers in the manufacturing sector.
“The FX forwards are specifically targeted at the manufacturing sector,” the source said in a telephone chat.
In fulfillment of its pledge to continue to support critical sectors of the economy, the CBN about a fortnight ago allocated $314 million to banks to sell to their customers in the manufacturing, aviation and some other critical sectors of the economy through Special Secondary Market Intervention Retail Sales (SMIS).
The central bank also last week settled $270.6 million in notional value of the matured October 26, 2016 futures instrument.
In line with the trend since the introduction of the OTC FX futures, the central bank issued a new 12-month tenor instrument (October 25, 2017) worth $1 billion at N258.50/US$1.00 to replace the maturing instrument.
Commenting on the availability of FX to manufacturers yesterday, the Chairman of Sosaco Nigeria Limited, the makers of the popular Gino tomato paste brand, Mr. Francis Ogboro told THISDAY that there was a significant improvement in dollar supply in the country, pointing at the recent policies by the CBN.
Ogboro, who noted that although the FX situation was still far from what manufacturers in the country would want, he admitted that the situation had improved considerably from what obtained a few months ago.
“We are encouraged by the recent improvement in FX supply. It has improved from the stagnant situation that used to be the case in the past. One of my companies just succeeded in procuring FX from the 90-day auction and that took a lot of pressure off our operation and has helped us to keep our machines running and our people employed.
“The CBN policy, which mandates the allocation of 60 per cent of available FX to manufacturers, I believe, has helped to improve the situation.
“While we ask for more efforts to be made by the CBN and the federal government, we want to state that we are happy with the improvement we have noticed so far,” he said.
Also, the Group Managing Director of Flour Mills of Nigeria Plc, Mr. Paul Gbadebo, while stating that the intervention by the CBN on its directive to banks to give 60 per cent of FX allocations to manufacturers had not really come to fruition, he added: “However, in the last one week, the CBN has been making interventions which although have been helpful, have not covered much. It has not even taken care of our backlog of Letters of Credit (LCs).
“We are however just hopeful. CBN has done two interventions in the last one week which has helped but if it can continue, then we may begin to climb out of the huge deficit and try to make a head way.”
On its part, the Manufacturers Association of Nigeria (MAN) yesterday blamed the commercial banks for the poor allocation of FX to its members.
The President of MAN, Dr. Jacobs Udemba, said that banks were not cooperating with the CBN to ensure that it achieves its objective.
The CBN, last August, directed commercial banks and other authorised dealers in the FX market to ensure that they channelled 60 per cent of the total FX purchases from all sources (interbank inclusive) to end users strictly for the importation of raw materials, plants and machinery.
The central bank had said it took the decision following its review of returns on the disbursement of FX and observed that a negligible proportion of FX sales were being channelled towards the importation of raw materials for the manufacturing sector.
But the MAN president said that banks had not been adhering to the directive, adding that as a result of this, some of its members have remained frustrated.
“The fact is that FX is scarce and there is not enough to go round. The central bank has shown commendable commitment to ensuring manufacturers get FX for their business activities and the recent policy of the Bank which mandates that 60 per cent of the total FX should be allocated to the manufacturers is clear evidence of the commitment of the CBN to local manufacturers.
“But the money deposit banks don’t seem to be cooperating to make the policy achieve its goal.
“The CBN came up with this well-intentioned policy that mandates that 60 per cent of available foreign exchange be given to manufacturers but the banks are not cooperating. They are not implementing this policy.
“The CBN also recently set aside $300 million for the agriculture, manufacturing and the aviation sectors. This also goes to show the commitment of the central bank.
“But for all these to work and lead to the attainment of intended objective, the money banks must cooperate,” Udemba maintained.
Communities in Delta State Shut OML30 Operates by Heritage Energy Operational Services Ltd
The OML30 operated by Heritage Energy Operational Services Limited in Delta State has been shut down by the host communities for failing to meet its obligations to the 112 host communities.
The host communities, led by its Management Committee/President Generals, had accused the company of gross indifference and failure in its obligations to the host communities despite several meetings and calls to ensure a peaceful resolution.
The station with a production capacity of 80,000 barrels per day and eight flow stations operates within the Ughelli area of Delta State.
The host communities specifically accused HEOSL of failure to pay the GMOU fund for the last two years despite mediation by the Delta State Government on May 18, 2020.
Also, the host communities accused HEOSL of ‘total stoppage of scholarship award and payment to host communities since 2016’.
The Chairman, Dr Harrison Oboghor and Secretary, Mr Ibuje Joseph that led the OML30 host communities explained to journalists on Monday that the host communities had resolved not to backpedal until all their demands were met.
Crude Oil Recovers from 4 Percent Decline as Joe Biden Wins
Oil Prices Recover from 4 Percent Decline as Joe Biden Wins
Crude oil prices rose with other financial markets on Monday following a 4 percent decline on Friday.
This was after Joe Biden, the former Vice-President and now the President-elect won the race to the White House.
Global benchmark oil, Brent crude oil, gained $1.06 or 2.7 percent to $40.51 per barrel on Monday while the U.S West Texas Intermediate crude oil gained $1.07 or 2.9 percent to $38.21 per barrel.
On Friday, Brent crude oil declined by 4 percent as global uncertainty surged amid unclear US election and a series of negative comments from President Trump. However, on Saturday when it became clear that Joe Biden has won, global financial markets rebounded in anticipation of additional stimulus given Biden’s position on economic growth and recovery.
“Trading this morning has a risk-on flavor, reflecting increasing confidence that Joe Biden will occupy the White House, but the Republican Party will retain control of the Senate,” Michael McCarthy, chief market strategist at CMC Markets in Sydney.
“The outcome is ideal from a market point of view. Neither party controls the Congress, so both trade wars and higher taxes are largely off the agenda.”
The president-elect and his team are now working on mitigating the risk of COVID-19, grow the world’s largest economy by protecting small businesses and the middle class that is the backbone of the American economy.
“There will be some repercussions further down the road,” said OCBC’s economist Howie Lee, raising the possibility of lockdowns in the United States under Biden.
“Either you’re crimping energy demand or consumption behavior.”
Nigeria, Other OPEC Members Oil Revenue to Hit 18 Year Low in 2020
Revenue of OPEC Members to Drop to 18 Year Low in 2020
The United States Energy Information Administration (EIA) has predicted that the oil revenue of members of the Organisation of the Petroleum Exporting Countries (OPEC) will decline to 18-year low in 2020.
EIA said their combined oil export revenue will plunge to its lowest level since 2002. It proceeded to put a value to the projection by saying members of the oil cartel would earn around $323 billion in net oil export in 2020.
“If realised, this forecast revenue would be the lowest in 18 years. Lower crude oil prices and lower export volumes drive this expected decrease in export revenues,” it said.
The oil expert based its projection on weak global oil demand and low oil prices because of COVID-19.
It said this coupled with production cuts by OPEC members in recent months will impact net revenue of the cartel in 2020.
It said, “OPEC earned an estimated $595bn in net oil export revenues in 2019, less than half of the estimated record high of $1.2tn, which was earned in 2012.
“Continued declines in revenue in 2020 could be detrimental to member countries’ fiscal budgets, which rely heavily on revenues from oil sales to import goods, fund social programmes, and support public services.”
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