Markets

Banks Frustrating New Forex Measures, CBN Cries Out

Published

7 years ago

April 1, 2017

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.

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Samed Olukoya

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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Energy

Egypt Increases Fuel Prices by 15% Amid IMF Deal

Published

2 days ago

July 25, 2024

Samed Olukoya

Egypt has raised fuel prices by up to 15% as the country looks to cut state subsidies as part of a new agreement with the International Monetary Fund (IMF).

The oil ministry announced increases across a variety of fuel products, including gasoline, diesel, and kerosene.

However, fuel oil used for electricity and food-related industries will remain unaffected to protect essential services.

This decision comes after a pricing committee’s quarterly review, reflecting Egypt’s commitment to align with its financial obligations under the IMF pact.

Egypt is in the midst of recalibrating its economy following a massive $57 billion bailout, orchestrated with the IMF and the United Arab Emirates.

The IMF, which has expanded its support to $8 billion, emphasizes the need for Egypt to replace untargeted fuel subsidies with more focused social spending.

This is seen as a crucial component of a sustainable fiscal strategy aimed at stabilizing the nation’s finances.

Effective immediately, the cost of diesel will increase to 11.5 Egyptian pounds per liter from 10.

Gasoline prices have also risen, with 95, 92, and 80-octane types now costing 15, 13.75, and 12.25 pounds per liter, respectively.

Despite the hikes, Egypt’s fuel prices remain among the lowest globally, trailing only behind nations like Iran and Libya.

The latest increase follows recent adjustments to the price of subsidized bread, another key staple for Egyptians, underscoring the government’s resolve to navigate its economic crisis through tough reforms.

While the rise in fuel costs is expected to impact millions, analysts suggest the inflationary effects might be moderate.

EFG Hermes noted that the gradual removal of subsidies and a potential hike in power tariffs could have a relatively limited impact on overall consumer prices.

They predict that the deceleration in inflation will persist throughout the year.

Egypt’s efforts to manage inflation have shown progress, with headline inflation slowing for the fourth consecutive month in June.

This trend offers a glimmer of hope for the government as it strives to balance economic stability with social welfare.

The IMF and Egyptian officials are scheduled to meet on July 29 for a third review of the loan program. Approval from the IMF board could unlock an additional $820 million tranche, further supporting Egypt’s economic restructuring.

Crude Oil

Oil Prices Rise on U.S. Inventory Draws Despite Global Demand Worries

Published

2 days ago

July 24, 2024

Samed Olukoya

Oil prices gained on Wednesday following the reduction in U.S. crude and fuel inventories.

However, the market remains cautious due to ongoing concerns about weak global demand.

Brent crude oil, against which Nigerian crude oil is priced, increased by 66 cents, or 0.81% to $81.67 a barrel. Similarly, U.S. West Texas Intermediate crude climbed 78 cents, or 1.01%, to $77.74 per barrel.

The U.S. Energy Information Administration (EIA) reported a substantial decline in crude inventories by 3.7 million barrels last week, surpassing analysts’ expectations of a 1.6-million-barrel draw.

Gasoline stocks also fell by 5.6 million barrels, while distillate stockpiles decreased by 2.8 million barrels, contradicting predictions of a 250,000-barrel increase.

Phil Flynn, an analyst at Price Futures Group, described the EIA report as “very bullish,” indicating a potential for future crude draws as demand appears to outpace supply.

Despite these positive inventory trends, the market is still wary of global demand weaknesses. Concerns stem from a lackluster summer driving season in the U.S., which is expected to result in lower second-quarter earnings for refiners.

Also, economic challenges in China, the world’s largest crude importer, and declining oil deliveries to India, the third-largest importer, contribute to the apprehension about global demand.

Wildfires in Canada have further complicated the supply landscape, forcing some producers to cut back on production.

Imperial Oil, for instance, has reduced non-essential staff at its Kearl oil sands site as a precautionary measure.

While prices snapped a three-session losing streak due to the inventory draws and supply risks, the market remains under pressure.

Factors such as ceasefire talks between Israel and Hamas, and China’s economic slowdown, continue to weigh heavily on traders’ minds.

In recent sessions, WTI had fallen 7%, with Brent down nearly 5%, reflecting the volatility and uncertainty gripping the market.

As the industry navigates these complex dynamics, analysts and investors alike are closely monitoring developments that could further impact oil prices.

Commodities

Economic Strain Halts Nigeria’s Cocoa Industry: From 15 Factories to 5

Published

2 days ago

July 24, 2024

Samed Olukoya

Once a bustling sector, Nigeria’s cocoa processing industry has hit a distressing low with operational factories dwindling from 15 to just five.

The cocoa industry, once a vibrant part of Nigeria’s economy, is now struggling to maintain even a fraction of its previous capacity.

The five remaining factories, operating at a combined utilization of merely 20,000 metric tons annually, now run at only 8% of their installed capacity.

This stark reduction from a robust 250,000 metric tons reflects the sector’s profound troubles.

Felix Oladunjoye, chairman of the Cocoa Processors Association of Nigeria (COPAN), voiced his concerns in a recent briefing, calling for an emergency declaration in the sector.

“The challenges are monumental. We need at least five times the working capital we had last year just to secure essential inputs,” Oladunjoye said.

Rising costs, especially in energy, alongside a cumbersome regulatory environment, have compounded the sector’s woes.

Farmers, who previously sold their cocoa beans to processors, now prefer to sell to merchants who offer higher prices.

This shift has further strained the remaining processors, who struggle to compete and maintain operations under the harsh economic conditions.

Also, multiple layers of taxation and high energy costs have rendered processing increasingly unviable.

Adding to the industry’s plight are new export regulations proposed by the National Agency for Food and Drug Administration and Control (NAFDAC).

Oladunjoye criticized these regulations as duplicative and detrimental, predicting they would lead to higher costs and penalties for exporters.

“These regulations will only worsen our situation, leading to more shutdowns and job losses,” he warned.

The cocoa processing sector is not only suffering from internal economic challenges but also from a tough external environment.

Nigerian processors are finding it difficult to compete with their counterparts in Ghana and Ivory Coast, who benefit from lower production costs and more favorable export conditions.

Despite Nigeria’s potential as a top cocoa producer, with a global ranking of the fourth-largest supplier in the 2021/2022 season, the industry is struggling to capitalize on its opportunities.

The decline in processing capacity and the industry’s current state of distress highlight the urgent need for policy interventions and financial support.

The government’s export drive initiatives, aimed at boosting the sector, seem to be falling short. With the industry facing over N500 billion in tied-up investments and debts, the call for a focused rescue plan has never been more urgent.

The cocoa sector remains a significant part of Nigeria’s economy, but without substantial support and reforms, it risks falling further into disrepair.