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TSA Inflows Cover Government’s Borrowings, CBN Tells Sanusi

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  • TSA Inflows Cover Government’s Borrowings, CBN Tells Sanusi

Central Bank of Nigeria (CBN) yesterday debunked its former Governor and now Emir of Kano, Muhammadu Sanusi’s II claim last week that the Federal Government, under the President Muhammadu Buhari’s administration had overdrawn on its account with the apex Bank to the tune of N4.7 trillion.

Supporting its defence with data, the CBN, also the banker to the government, insisted that government still had a net balance of over N1.19 trillion in its Treasury Single Account (TSA) and declared Sanusi’s claims as “totally false and wholly fabricated.”

TSA is a financial policy introduced by the federal government in 2012, to consolidate all inflows from the country’s ministries, departments and agencies (MDAs) by way of deposit into commercial banks, traceable into a single account at the CBN.

Quoting Section 38.2 of the CBN Act 2007, Sanusi had maintained that the Central Bank, a lender of last resort, had exceeded its lending limit to the government, a development he noted had weakened the credit worthiness of the country by the international community.

Speaking at a policy monitoring dialogue hosted by Savannah Centre for Diplomacy, Democracy and Development, at in Abuja last week, Sanusi said the CBN’s lending to the government since Buhari came in had spiked from about N1.5 trillion to over N4.5 trillion.

Sanusi also said: “The CBN-FGN relationship is no longer independent. In fact, one could argue their relationship has become unhealthy. CBN claims on the FGN now top N4.7 trillion equal to almost 50% of the FGN’s total domestic debt. This is a clear violation of the Central Bank Act of 2007 (Section 38.2), which caps advances to the FGN at 5% of last year’s revenues. Has CBN become the government’s lender of last or first resort?”

In his opinion, no one was willing to lend to the Nigerian government, noting, “If the Senate approved, I want to see who will lend you $30billion when you have five exchange rates.”

But in defence of its transaction with the government, in a statement made available to The Guardian in Lagos, the CBN said: “Contrary to his claims, the Federal Government’s Treasury Single Account (TSA) balance with the CBN as of 2nd December 2016 was N2.66 trillion (credit). In line with practices that even Emir Sanusi presided over, the FG has overdrawn another account at the CBN by about N1.47 trillion (debit) as of 2nd December 2016.

“In effect, therefore, the net balance of the FG at the CBN is over N1.19 trillion (credit), as shown in Table.

Despite the Emir’s seeming knowledge of these situations, the CBN wondered how “could Sanusi have reached the conclusion that the CBN’s claims on the FG are over N4.7 trillion? Where did he get this number?”

But Sanusi had argued that “the problem of the current government is not having the right policies to fix the current economic woes,” adding that the country is enmeshed in heavy debts, as out of every N1 Nigeria makes, 40 kobo goes to debt and 60 kobo is left for salaries, health, education, power, infrastructure.

He had argued that oil revenue is merely a working capital that cannot make the country rich, noting that while Nigeria produces one barrel for 80 Nigerians; Saudi Arabia produces one for three Saudis.

Besides, he noted that in every economic growth is driven by “consumption, investment and net export”, adding that “our exports cannot grow, without regulatory certainty or an increase in the price of oil.”

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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Crude oil

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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