Markets

Analysts Hail CBN’s Naira Defence as Rate for PTA, Others is Adjusted to N360/$

Published

8 years ago

March 28, 2017

Analysts Hail CBN’s Naira Defence as Rate for PTA, Others is Adjusted to N360/$

Financial market analysts have welcomed Monday’s decision by the Central Bank of Nigeria (CBN) to lower the naira exchange rate for retail invisibles such as business and personal travel allowances, school fees and medical fees to N360 to the dollar, from N375.

Describing the move as a show of strength by the central bank and its capacity to defend the naira, they however cautioned the bank to be conscious of its maturing obligations and potential risks in the global market, especially volatile crude oil prices.

Desirous of alleviating the pains of retail foreign exchange consumers, the CBN directed all banks to immediately begin the sale of FX for business and personal travel allowances, and tuition and medical fees to customers at not more than N360 to the dollar.

The CBN, in a note, explained that it would sell to commercial banks at N357 to the dollar, adding that banks were expected to post the new rates in the banking halls of their branches immediately.

In line with the new directive, the acting Director, Corporate Communications, CBN, Mr. Isaac Okorafor, said the bank would send examiners to commercial banks to ensure the new rates are implemented.

“Banks are prohibited from selling FX funds meant for invisibles to BDCs,” he added.

The CBN also intervened in the FX market with $185 million.

A breakdown showed that it offered $85 million to banks at the rate of N357/$1 for onward sale to retail end users at not more than N360/$1 for invisibles, while $100 million was sold to authorised dealers in the interbank window to meet the requests of wholesale customers.

Reacting to the directive on the sale of FX for retail invisibles, an analyst at Ecobank Nigeria Limited, Mr. Kunle Ezun, described it as a show of strength by the CBN.

“It also shows that they are winning the battle. I now think that when the CBN talked about creating an exchange rate convergence, it was actually referring to the rate for invisibles.

“So, what the CBN has done is to show its capacity to defend the naira. But we expect the CBN to now push through with liquidity,” he added in a phone interview.

Ezun, however, expressed reservations about how much support the CBN would be able to give the naira, saying: “When the external reserves begin to drop, it would raise a red flag.”

The chief executive of Financial Derivatives Limited, Mr. Bismarck Rewane, who also welcomed the revaluation of the rate for PTA and others, said maturing FX forwards should also be of concern to the CBN.

“We must remember that the FX forward contracts would start maturing as from tomorrow (Tuesday). Forward contracts are posted-dated cheques and when they start maturing is when we would start seeing the effects of the intervention on the reserves.

“I think if for anything, we should be using this opportunity to find a fair value for the naira because oil prices have come down and forward contracts are maturing,” Rewane said.

According to him, by adjusting the rate for such invisibles, “the CBN is just subsidising Nigerians”.

“This could lead to a crisis of false expectations. Rather than move the rate up, what I expected the CBN to do was to open up the market, remove all the restrictions and you will see that the currency will find its real value.

“So, first of all, it is a good move, but it is better to be cautiously optimistic rather than getting carried away,” Rewane stated.

The Chief Executive of Cowry Asset Management Limited, Mr. Johnson Chukwu, who also welcomed the adjustment of the naira for retail invisible, said it was a demonstration of the CBN’s capacity to defend the naira.

“I think before the CBN came out with this, it must have measured its capacity to support the naira. Luckily for the CBN, there is tight naira liquidity in the market and that does not encourage speculative activities.

“People do not have cash to buy dollars to hold anymore and that has supported the naira. The key thing is that as the CBN continues to pump dollar liquidity, it would force more people holding dollar positions to sell and that would definitely help the market.

“For now, a lot of people holding dollars are looking for ways to exit,” Chukwu said.

The naira traded at between N385 and N390 to the dollar at some parallel market points in Lagos on Monday.

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Samed Olukoya

Is the CEO and Founder of Investors King Limited. He is a seasoned foreign exchange research analyst and a published author on Yahoo Finance, Business Insider, Nasdaq, Entrepreneur.com, Investorplace, and other prominent platforms. With over two decades of experience in global financial markets, Olukoya is well-recognized in the industry.

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Energy

Lawmakers Demand Independent Marketers’ Access to Dangote Refinery Amid Fuel Scarcity Fears

Published

22 hours ago

September 27, 2024

Bassey Marshall

The House of Representatives has urged the President Tinubu-led government to end the reign of monopoly in the Nigerian oil sector and allow independent marketers to lift petrol directly from the Dangote Refinery.

The latest development follows concerns raised by Oboku Oforji, the member representing Yenagoa/Opokuma Federal Constituency, Bayelsa State.

Investors King gathered that while NNPCL was initially named as the sole off-taker of the refinery’s product, recent changes allowed Major Marketers access to PMS.

However, Oforji lamented the monopoly ravaging the country’s oil sector where only the NNPC and Major Marketers are allowed to lift petrol from the refinery.

According to Oforji, if the Federal Government fails to intervene, and stop the monopoly, Nigerians will continue to suffer the effects of fuel scarcity.

He warned that independent marketers have threatened to begin the importation of the product to sustain their business.

He said, “The House is worried that NNPCL and the major marketers are exclusive off-takers, which spells monopoly and is equivalent to greed. This is the same NNPCL that has failed to manage our crude and refineries for decades.

“If this monopoly is not nipped in the bud, the suffering of Nigerians caused by the scarcity of PMS will continue, and we all know the implications for the economy.

“No wonder the late MKO Abiola of blessed memory, in a viral video some years ago, lamented that the NNPCL lacks transparency and accountability.

“The House is disturbed that allowing the NNPCL and major marketers to lift Premium Motor Spirit from the refinery to the exclusion of independent marketers is not good enough.”

“IPMAN representatives have expressed fears that they may be forced to resort to fuel imports to sustain their businesses,” he added.

Oforji thanked Dangote Refinery for helping the country meet the increasing demand of petrol.

According to him, with the refinery, Nigeria’s Gross Domestic Product will experience a steady increase.

His words, “The House notes that by this achievement, Nigeria is driving towards energy self-sufficiency, cost and foreign exchange savings, meeting the increasing demand for fuels, and attracting foreign capital investment. The generation of foreign exchange through the export of finished products, conservation of foreign exchange, and significant value addition will contribute to an increase in Nigeria’s Gross Domestic Product.

“The House further notes that given the high demand by millions of Nigerians for PMS and the ordeal they go through to obtain it, NNPCL should allow independent marketers to lift the product from the Dangote refinery,” he added.

If the prevailing monopoly is not nipped in the bud, Oforji noted that the suffering of Nigerians caused by the scarcity of PMS will continue with disastrous consequences for the economy, and we all know the implications,” he noted.

Markets

BUA Foods Chairman Claims Company Offers Nigeria’s Cheapest Products Amid Market Scarcity

Published

1 day ago

September 27, 2024

Bassey Marshall

The Chairman of BUA Foods Plc, Abdul Samad Rabiu, has revealed that his company manufactures and sells the cheapest products in the Nigerian market.

Investors King reported that Abdul Rabiu recently announced plans to expand the pasta production unit of the company.

After signing an agreement with FAVA (Italy), one of the world’s leading pasta equipment manufacturing companies, BUA Foods renewed its planned expansion.

Rabiu announced the expansion in a statement signed on Wednesday by BUA Foods Director of Marketing and Corporate Communications, Adewunmi Desalu.

However, speaking at the 7th annual general meeting of the company held in Abuja on Thursday, Rabiu recounted how his firm maintained the price of flour at 50,000 Naira when it was sold for 70,000 Naira.

The businessman blamed manufacturers and distributors for the scarcity of food in the country.

He said, “BUA products are the cheapest in the market. And because we have other companies producing similar products, it is very difficult to price them low. For instance, a few months ago, the price of flour went as high as N70,000 per bag. We retained ours at N50,000 for quite some time to try and force other companies to also come down. But when they saw it was going to happen, they deliberately stopped production, and the prices kept going up.

“So when we were at N50,000, the distributors added N20,000 and were selling at N70,000 per bag. At one point, customers were making almost N20 million per truck of 75 tonnes of flour.

Yes, it happened. While we were there at N50,000, still puffing and praying for the prices to come down, some companies were not happy that we were keeping the prices low.

“That was why they suddenly stopped production to create scarcity. With that scarcity, the price kept going up. So that is part of the problem. When we saw that, we knew it did not make sense for us to continue selling at N50,000 when the market was at N70,000. Our production is substantial, but there are two other companies that are bigger than us.

However, we believe that by next year, we are going to be bigger than them.”

Commodities

Osun Government Tackles Gold Mining Company Over Alleged Tax Evasion

Published

2 days ago

September 26, 2024

Ugwoke Ogbodo

The Osun State Government has raised serious concerns about the operations of the Segilola Gold Project, managed by subsidiaries of Thor Explorations Ltd, a UK-based company listed on the Toronto Stock Exchange.

According to Prof. Lukman Jimoda, the Special Adviser to the Governor on Mining and Mineral Resources, the state’s investigation revealed various unethical business practices, including alleged tax evasion, use of proxies, and failure to comply with environmental rules and regulations.

The companies involved—such as SINIC Engineering, ATF Consulting, Monurent Nigeria, and others—are reportedly engaged in outsourcing employment and operations to undisclosed third parties without proper documentation or environmental compliance.

Prof. Jimoda highlighted that the federal constitution places environmental oversight under the concurrent list, allowing the state to assess companies’ operations for economic and environmental impacts.

He emphasised that the Segilola project, despite its significant production since 2019, has resisted complying with extant laws like the Personal Income Tax Act (PITA) and the Company Income Tax Act (CITA) which govern tax levies.

He also expressed concerns over pollution, including particulate emissions and possible acid drains from waste rocks, which pose serious environmental risks to the state.

The state government is therefore demanding the payment of accrued taxes and environmental development levies, as well as proper documentation for all involved parties.

The Special Adviser stressed that Osun has not received its due revenue from the Segilola project for over three years, despite its bankable gold production since 2019.

“The government is prepared to take necessary actions to ensure compliance and safeguard the state’s environmental and economic interests”, the Special Adviser noted.

Also speaking, the Financial Consultant to the Office of Mining and Mineral Resources, Dr. Wale Bolorunduro while presenting his report said the allegations against Thor Explorations Ltd and its subsidiaries mark a significant moment for Osun State, as the government seeks to reclaim its financial rights and ensure compliance with tax regulations.

Particularly troubling is the claim that Osun State’s interests in Tropical Mines Ltd were strategically diminished without due financial compensation, raising questions about the fairness of the company’s practices in Nigeria versus its compliance with international standards in the UK and Canada, where it is publicly listed,” Bolorunduro stated.

Governor Ademola Adeleke’s administration has emphasized the need for due payments to be made, while also ensuring that business operations continue smoothly. This balanced approach underscores the state’s willingness to foster investment, but not at the expense of its fiscal health or integrity.

Responding to the allegations that the Adeleke Dynasty is involved in the management of the Segilola Gold Project, Commissioner for Information and Public Enlightenment, Oluomo Kolapo Alimi denied the report, noting that those holding a stake or the other in the gold firm areas shortchanged the Osun state government.

Denying the allegations, the company noted that it has consistently demonstrated a commitment to being a law-abiding, transparent corporate entity, fulfilling all tax obligations and royalty payments in full and on time.

Segilola Country Manager, Austin Menegbo, said, “We maintain detailed records and have receipts for all royalty payments made to the Federal Government, as well as tax remittances to the State Government. These documents are readily available for verification.

“The claims of environmental and operational non-compliance are not true as we have sufficient evidence to prove that we have followed all necessary protocols for environmental assessments and regulatory filings, including environmental compliance monitoring and mitigation of potential environmental impacts. In addition, we are regularly audited by the Federal Ministry of Environment and the Ministry of Solid Minerals Development and to date, there has been no claim of pollution or environmental violations against the company.

“As one of Nigeria’s leading mining companies, we remain committed to contributing to the economic growth of the state and the country while adhering to the highest ethical and operational standards. We shall continue to maintain an open line of communication with relevant authorities to ensure that our operations are aligned with both federal and state laws.”