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Banks Frustrating New Forex Measures, CBN Cries Out

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  • Banks Frustrating New Forex Measures, CBN Cries Out

The Central Bank of Nigeria (CBN) yesterday disclosed that it had received reports that some customers seeking to buy foreign exchange (forex) for business travel allowance (BTA), personal travel allowance (PTA), medical and school fees were being frustrated by some banks with the false claim that the CBN was not allocating enough forex for such invisible items.

It will be recalled that the CBN on Thursday informed the market that a lower exchange rate will be advised latest Mondaymorning.

Authoritative sources at the CBN have hinted that the bank is considering at least a N5 reduction for PTA/BTA and medical and school fees at both the bank and BDC segments.

Also, the CBN has issued stern warning to deposit money bank compelling them that it is only the prerogative of the customer to decide the mode of payment, either as dollar cash or card.

The bank has further warned that it prefers the mode of dispensing PTA/BTA through cash payment and has threatened to impose stiff sanction not only on the bank but also the CEO that failed to obey this directive.

This warning is coming based on information received by the CBN through its misery shoppers who complained that banks were turning back their customers. The apex bank further directed that any bank customer turned back at any branch nationwide should report such bank through its hot line.

It urged any customer that is not attended to within 24 hours for BTA/PTA or 48 hours for tuition and medical fees should call a dedicated number or send an email to the Consumer Protection Department of the CBN, with the name and branch of the non-cooperating bank.

Also yesterday, the Minister of Finance, Mrs. Kemi Adeosun assured that the newly-established wholesale development finance institution, Development Bank of Nigeria (DBN) would be free of any form of political interference.

The apex bank, which made the accusation against the banks in a statement by its acting Director, Corporate Communications, Mr. Isaac Okorafor, titled: “There is Adequate Forex for PTA, BTA, Tuition & Medical Fees,” said such claim by banks was totally untrue.

According to the CBN, all banks have more than enough stock of forex in their possession for the purpose of meeting genuine customers’ demand for BTA, PTA, tuition and medical fees. “Indeed, on a weekly basis, the CBN has been selling at least $80 million to banks for onward sale to their customers for these invisible items.

“Members of the public seeking to buy forex for the above-mentioned purposes are, therefore, advised to go to their banks and obtain their forex,” it added.

“Furthermore, no customer should accept to buy forex from any bank at more than the currently prescribed rate of N360/$1,” it added

The development in the market negatively impacted the performance of the Naira on the parallel market as it fell to N391 to the dollar yesterday, lower than the N384 to the dollar it was the previous day.

In continuation of its determination to sustain liquidity in the foreign exchange market, the CBN had on Thursday increased the amount of dollars to be sold to Bureau De Change (BDC) operators to $10,000 weekly, up from the $8,000 per week it was previously. This meant that the operators would be entitled to $5,000 per bid, at a new rate to be announced on Monday.

The CBN had on Monday directed all banks to immediately begin the sale of FX for BTA, PTA, tuition and medical fees to customers at not more than N360 per dollar. The CBN explained that it will sell to banks at N357 per dollar, adding that banks are expected to post the new rates in the banking halls of their branches immediately. Also, barely 24-hours after the policy was announced, the CBN lowered the rate at which dollar inflows from International Money Transfer Operators (IMTOs) are sold to BDC operators to N360/$1, from the N381/$1 it was previously. With this directive, the BDCs were expected to sell the greenback to retail end-users at not more than N362/$1, lower than the N400/$1 it used to be sold at this segment of the market.

Adeosun: DBN will be Free of Political Interference…

Meanwhile, the Minister of Finance has assured Nigerians that the newly-established wholesale development finance institution, Development Bank of Nigeria (DBN) would be free of any form of political interference.

She stated that DBN had been well structured to be run in a seamless professional manner devoid of any form of politics and shenanigans, noting that the bane of many government organisations with high failure rate was political interference.

Adeosun was responding to a question on what the new bank would be doing differently from other existing development finance institutions, when she introduced the management of the bank to journalists in Abuja.

The minister said apart from the DBN enjoying an atmosphere of non-political encumbrances, it also has the distinction of multilateral financing, adding the management and board also came through stringent recruitment process and will be controlled by the government.

She stated that Small and Medium Enterprises (SMEs) segment, which DBN is set to target accounts for about 50 per cent of Nigeria’s Gross Domestic Product (GDP), adding if cheaper funding window is provided, a quantum leap would be recorded in the economy.

According to her, DBN was of the legacies of the previous government, which the incumbent administration considered worthy to be sustained and therefore set out to fine tune the structure with a view to making it commence operations.

Speaking on how the bank will operate, its Managing Director, Mr. Tony Okpanachi said the bank would run a lean structure of 35 well-motivated personnel and would not be operating on any form of subsidies, adding that it would build its own funds.

Okpanachi stated that the DBN would operate on four areas of impact, among which is financial inclusion.

He noted that jobs would be created through the SMEs, adding that strong emphasis on women empowerment will be a major focus.

The CEO stated that a strong point of the bank would be lending to commercial and microfinance banks for on-lending to SMEs.

According to him, what had stifled SMEs was the absence of long term financing as well as high interest rates.

These areas, he stated, were what the DBN would bridge, stressing that a credit guarantee scheme would be in place for risk sharing, noting that the bank would be ready to share risks of up to 50 per cent.

Okpanachi disclosed that the bank was targeting 20,000 SMEs across the country in its first year of operations.

Meanwhile, the Ministry of Finance has provided clarifications on the reported fraud in YouWin.

The ministry said in a statement that the current administration inherited YouWin as an ongoing programme, which had made legally binding commitments of grants to 1,500 entrepreneurs.

“The administration decided that those commitments should be honoured. It was in that regard that a batch of awardees under YouWin 3 was submitted to the Minister of Finance, Mrs. Kemi Adeosun, for cash disbursement totaling N611,821,910 million.

“Allegations were received from an anonymous whistleblower, which provided documentary evidence of irregularities in 10 cases out of the batch,” statement issued by the Director, Information, Mr. Salisu Na’Inna Dambatta said

The minister, the statement added, immediately directed that an internal investigation be conducted to determine the veracity of the alleged fraud and report the findings to her for necessary action.

“The substance of the allegations was that an awardee was the child of a former director in the ministry and there were a number of cases where married couples each benefitted. This raised concerns about the integrity of the original selection process, which took place in 2014.

“The position of the ministry is that investigations are ongoing under the Presidential Initiative on Continues Audit (PICA) who will review each suspected case to determine whether any irregularity occurred. In the interim, disbursements of this batch have been suspended.

It is on record that the original YouWin programme midwife 3,900 enterprises within four years, and was just one of the multiple intervention programmes to create jobs at the time,” the statement added.

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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Gold

Gold Steadies After Initial Gains on Reports of Israel’s Strikes in Iran

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Gold, often viewed as a haven during times of geopolitical uncertainty, exhibited a characteristic surge in response to reports of Israel’s alleged strikes in Iran, only to stabilize later as tensions simmered.

The yellow metal’s initial rally came on the heels of escalating tensions in the Middle East, with concerns mounting over a potential wider conflict.

Spot gold soared as much as 1.6% in early trading as news circulated regarding Israel’s purported strikes on targets in Iran.

This surge, reaching a high of $2,400 a ton, reflected the nervousness pervading global markets amidst the saber-rattling between the two nations.

However, as the day progressed, media reports from both countries appeared to downplay the impact and severity of the alleged strikes, contributing to a moderation in gold’s gains.

Analysts noted that while the initial spike was fueled by fears of heightened conflict, subsequent assessments suggesting a less severe outcome helped calm investor nerves, leading to a stabilization in gold prices.

Traders had been bracing for a potential Israeli response following Iran’s missile and drone attack over the weekend, raising concerns about a retaliatory spiral between the two adversaries.

Reports of an explosion in Iran’s central city of Isfahan further added to the atmosphere of uncertainty, prompting flight suspensions and exacerbating market jitters.

In addition to geopolitical tensions, gold’s rally in recent months has been underpinned by other factors, including expectations of US interest rate cuts, sustained central bank buying, and robust consumer demand, particularly in China.

Despite the initial surge followed by stabilization, gold remains sensitive to developments in the Middle East and broader geopolitical dynamics.

Investors continue to monitor the situation closely for any signs of escalation or de-escalation, recognizing gold’s role as a traditional safe haven in times of uncertainty.

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Commodities

Global Cocoa Prices Surge to Record Levels, Processing Remains Steady

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Cocoa futures in New York have reached a historic pinnacle with the most-active contract hitting an all-time high of $11,578 a metric ton in early trading on Friday.

This surge comes amidst a backdrop of challenges in the cocoa industry, including supply chain disruptions, adverse weather conditions, and rising production costs.

Despite these hurdles, the pace of processing in chocolate factories has remained constant, providing a glimmer of hope for chocolate lovers worldwide.

Data released after market close on Thursday revealed that cocoa processing, known as “grinds,” was up in North America during the first quarter, appreciating by 4% compared to the same period last year.

Meanwhile, processing in Europe only saw a modest decline of about 2%, and Asia experienced a slight decrease.

These processing figures are particularly noteworthy given the current landscape of cocoa prices. Since the beginning of 2024, cocoa futures have more than doubled, reflecting the immense pressure on the cocoa market.

Yet, despite these soaring prices, chocolate manufacturers have managed to maintain their production levels, indicating resilience in the face of adversity.

The surge in cocoa prices can be attributed to a variety of factors, including supply shortages caused by adverse weather conditions in key cocoa-producing regions such as West Africa.

Also, rising demand for chocolate products, particularly premium and artisanal varieties, has contributed to the upward pressure on prices.

While the spike in cocoa prices presents challenges for chocolate manufacturers and consumers alike, industry experts remain cautiously optimistic about the resilience of the cocoa market.

Despite the record-breaking prices, the steady pace of cocoa processing suggests that chocolate lovers can still expect to indulge in their favorite treats, albeit at a higher cost.

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Crude Oil

Dangote Refinery Leverages Cheaper US Oil Imports to Boost Production

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The Dangote Petroleum Refinery is capitalizing on the availability of cheaper oil imports from the United States.

Recent reports indicate that the refinery with a capacity of 650,000 barrels per day has begun leveraging US-grade oil to power its operations in Nigeria.

According to insights from industry analysts, the refinery has commenced shipping various products, including jet fuel, gasoil, and naphtha, as it gradually ramps up its production capacity.

The utilization of US oil imports, particularly the WTI Midland grade, has provided Dangote Refinery with a cost-effective solution for its feedstock requirements.

Experts anticipate that the refinery’s gasoline-focused units, expected to come online in the summer months will further bolster its influence in the Atlantic Basin gasoline markets.

Alan Gelder, Vice President of Refining, Chemicals, and Oil Markets at Wood Mackenzie, noted that Dangote’s entry into the gasoline market is poised to reshape the West African gasoline supply dynamics.

Despite operating at approximately half its nameplate capacity, Dangote Refinery’s impact on regional fuel markets is already being felt. The refinery’s recent announcement of a reduction in diesel prices from N1,200/litre to N1,000/litre has generated excitement within Nigeria’s downstream oil sector.

This move is expected to positively affect various sectors of the economy and contribute to reducing the country’s high inflation rate.

Furthermore, the refinery’s utilization of US oil imports shows its commitment to exploring cost-effective solutions while striving to meet Nigeria’s domestic fuel demand. As the refinery continues to optimize its production processes, it is poised to play a pivotal role in Nigeria’s energy landscape and contribute to the country’s quest for self-sufficiency in refined petroleum products.

Moreover, the Nigerian government’s recent directive to compel oil producers to prioritize domestic refineries for crude supply aligns with Dangote Refinery’s objectives of reducing reliance on imported refined products.

With the flexibility to purchase crude using either the local currency or the US dollar, the refinery is well-positioned to capitalize on these policy reforms and further enhance its operational efficiency.

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