Markets

Expected $6.4bn Inflow Raises Optimism about Naira’s Appreciation

Published

7 years ago

April 8, 2017

Expected $6.4bn Inflow Raises Optimism about Naira’s Appreciation

The anticipated $6.4 billion inflow to Nigeria from different sources in the next few weeks is expected to boost Dollar liquidity and help strengthen the Naira against the United States currency.

The $6.4 billion inflow is expected to come from three sources.

A breakdown of the aforementioned amount showed that a total of $4.5 billion is expected into the country following the directive by President Muhammadu Buhari to the Ministries of Finance, Budget and Planning, as well as the Central Bank of Nigeria (CBN) to address outstanding issues in securing the loan from the Peoples’ Republic of China.

There is also the balance of the $1 billion African Development Bank (ADB) loan. Of this amount, $600 million had been drawn, leaving a balance of $400 million, which is a potential booster to Nigeria’s forex reserves when it flows into the country.

In addition to this, another $500 million is being expected from the Global Medium Term Note Programme which was issued recently and attached to the $1 billion earlier offered and over-subscribed.

The Chinese loan, which is meant for the procurement of strategic machinery needed to boost agricultural development in the country, has a repayment period of 20 years with five-year moratorium and an interest rate of one per cent per annum.

Analysts believe that the receipt of these loans will boost the armoury of the CBN in bolstering the value of the naira.

They also opine that even without the loan, a combination of oil receipts with price stabilising at between $49 – $55 per barrel, as well as the improved production occasioned by the relative peace in the Niger Delta, would give the CBN some fighting power and enhanced its ability to supply the market with liquidity.

One of the global rating agencies, Moody’s Investors Service also held similar view, saying that Nigeria would easily achieve its target of foreign borrowing in 2017 as improved oil output helps the economy to recover from last year’s contraction, the first since 1991.

“The international financial institutions are ready to support Nigeria,” a vice president and senior analytical adviser for Africa at the ratings company, Aurelien Mali, told Bloomberg.

“As long as its project-based lending, the funding will be available from lenders such as the African Development Bank, and the budget support from the World Bank will come on top of that.”

The federal government had proposed a record N7.3 trillion budget for this year to boost infrastructure investment and help its economy recover from a contraction of 1.5 per cent in 2016, the first such slump in 25 years.

The economy was weighed down by a drop in the price and output of oil, its biggest export, which led to a shortage of dollars.

The government has also been negotiating $1.25 billion in budget support from the World Bank and expects to get the remaining $400 million of a $1 billion credit facility from the African Development Bank, Mali said. It can raise the rest from bilateral and multilateral partners and also from lenders through commercial loans and or even a sukuk bond, he said.

Meanwhile, another global rating agency, Fitch has stated that the regulatory stress test results on Nigerian banks conducted recently highlighted disparities in capital strength across the Nigerian banking sector, with large banks collectively much more resilient to stresses than small ones.

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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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Crude Oil

Oil Prices Surge as Hurricane Threat Looms Over U.S. Gulf Coast

Published

8 hours ago

September 9, 2024

Investors King

Oil jumped in Asian trading on Monday as a potential hurricane system approached the U.S. Gulf Coast, and as markets recovered from a selloff following weaker-than-expected U.S. jobs data on Friday.

West Texas Intermediate crude oil rose 72 cents, or 1.06%, to $68.39 a barrel while Brent crude oil was up 71 cents, or 1%, at $71.77 a barrel.

Prices had gained as much as $1 during early Asian trading before pulling back.

Analysts said the bounce was in part a reaction to a potential hurricane in the U.S. Gulf Coast.

A weather system in the southwestern Gulf of Mexico is forecast to become a hurricane before it reaches the northwestern U.S. Gulf Coast, the U.S. National Hurricane Center said on Sunday.

The U.S. Gulf Coast accounts for some 60% of U.S. refining capacity.

“Sentiment recovered somewhat from last week’s selloff,” said independent market analyst Tina Teng.

At the Friday close, Brent had dropped 10% on the week to the lowest level since December 2021, while WTI fell 8% to its lowest close since June 2023 on weak jobs data in the U.S.

A highly anticipated U.S. government jobs report showed nonfarm payrolls increased less than market watchers had expected in August, rising by 142,000, and the July figure was downwardly revised to an increase of 89,000, which was the smallest gain since an outright decline in December 2020.

A decline in the jobless rate points to the Federal Reserve cutting interest rates by just 25 basis points this month rather than a half-point rate cut, analysts said.

Lower interest rates typically increase oil demand by spurring economic growth and making oil cheaper for holders of non-dollar currencies.

But weak demand continued to cap price gains.

The weakness in China is driven by economic slowdown and inventory destocking, Jeff Currie, chief strategy officer of energy pathways at U.S. investment giant Carlyle Group, told the APPEC energy conference in Singapore on Monday.

Refining margins in Asia have slipped to their lowest seasonal levels since 2020 on weak demand from the two largest economies.

Fuel oil exports to the U.S. Gulf Coast fell to the lowest level since January 2019 last month on weaker refining margins.

Crude Oil

Oil Prices Rebound on OPEC+ Output Delay Talks and U.S. Inventory Drop

Published

4 days ago

September 5, 2024

Samed Olukoya

Oil prices made a modest recovery on Thursday on the expectations that OPEC+ may delay planned production increases and the drop in U.S. crude inventories.

Brent crude oil, against which Nigerian oil is priced, rose by 66 cents, or 0.9% to $73.36 per barrel while U.S. West Texas Intermediate (WTI) crude appreciated by 64 cents or 0.9% to $69.84 per barrel.

The rebound in oil prices was a result of the American Petroleum Institute (API) report that revealed that the U.S. crude oil inventories had fallen by a surprising 7.431 million barrels last week, against analysts 1 million barrel decline projection.

The decline signals better than projected demand for the commodity in the United States of America and offers some relief for traders on global demand.

John Evans, an analyst at PVM Oil Associates, attributed the rebound in crude oil prices to the API report.

He said, “There is a pause of breath and light reprieve for oil prices.”

Also, discussions within the Organization of the Petroleum Exporting Countries (OPEC) and its allies, collectively known as OPEC+, are fueling speculation about a potential delay in planned output increases.

The group was initially expected to increase production by 180,000 a day in October 2024.

However, concerns over softening demand in China and potential developments in Libya’s oil production have prompted the group to reconsider its strategy.

Despite the recent rebound, analysts caution that lingering uncertainties around global oil demand may continue to weigh on prices in the near term.

Energy

Power Generation Surges to 5,313 MW, But Distribution Issues Persist

Published

5 days ago

September 4, 2024

Samed Olukoya

Nigeria’s power generation continues to get better under the leadership of President Bola Ahmed Tinubu.

According to the latest statement released by Bolaji Tunji, the media aide to the Minister of Power, Adebayo Adelabu, power generation surged to a three-year high of 5,313 megawatts (MW).

“The national grid on Monday hit a record high of 5,313MW, a record high in the last three years,” the statement disclosed.

Reacting to this, the Minister of Power, Adebayo Adelabu, called on power distribution companies to take more energy to prevent grid collapse as the grid’s frequency drops when power is produced and not picked by the Discos.

He added that efforts would be made to encourage industries to purchase bulk energy.

However, a top official of one of the Discos was quoted as saying that the power companies were finding it difficult to pick the extra energy produced by generation companies because they were not happy with the tariff on other bands apart from Band A.

“As it is now, we are operating at a loss. Yes, they supply more power but this problem could be solved with improved tariff for the other bands and more meter penetration to recover the cost,” the Disco official, who pleaded not to be named due to lack of authorisation to speak on the matter, said.

On Saturday, the ministry said power generation that peaked at 5,170MW was ramped down by 1,400MW due to Discos’ energy rejection.