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CBN Orders Banks to Give Loans to Agric, Manufacturers at 9%

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  • CBN Orders Banks to Give Loans to Agric, Manufacturers at 9%

The Central Bank of Nigeria (CBN) will be refunding Cash Reserve Ratio (CRR) to banks that fund projects in agriculture and manufacturing sectors, its Director of Banking Supervision, Abdullahi Ahmad, has said.

Speaking yesterday at the end of the Bankers’ Committee meeting in Lagos, Ahmad said the outlook for the economy in 2018 is much better than 2017. The CRR is a portion of banks’ deposits kept with the CBN.

He said the CBN has been very supportive to banks adding that banks should be able to lend to companies that are doing new capital expenditures and expansions to factories using some of their Cash Reserve Ratio (CRR) at nine per cent. These, he added, are not short term loans but long term loans of seven year loans, two year moratorium on principal.

“It would probably be the first time in the history of this country where manufacturers would be able to take fixed interest rate loans for seven years which means they would be able to plan. The volatility that they fear for all kinds of risks would be taken out and I think these are very laudable steps in improving and growing the economy,” Ahmad said.

For him, the idea is to have job creating activities in the economy and also to bring interest rate down. Although agric and manufacturing are the initial sectors that are being considered, later on or now, a bank can apply if there is a job creating sector that bank is operating in, it may be considered.

“We can refund the CRR of a bank that has engaged in lending in a new project or an existing one in the agriculture or manufacturing sector as a way of utilising the CRR. So, anytime a bank lends to manufacturing or agric at the rate the CBN has prescribed, it would have its CRR refunded up to the amount it has lend. The guidelines are coming up any moment from now and once they do it take off,” he said.

Also speaking, Executive Director, Finance at First City Monument Bank (FCMB) Mrs. Yemisi Edun, said the CRR that is taken from banks would be positively deployed to grow the real sector as well as the agriculture sector in the economy. “This is very positive for the economy and also positive for banks because we would be able to access these funds and earn on it. And because it would be coming at single digit rate, it would be positive for the economy,” she said.

“For now, it would be channeled to agricultural sector and manufacturing but it for growth expansions enhance creation of jobs. the focus it ensure the economy grow now that we have achieved stability we need to now see a positive trend of growth and that is what we are committed to do at this time,” she said.

“We have seen stability in the exchange rate being sustained, Gross Domestic Product (GDP) growth higher than 2017 and although there are capital reversals in our capital market, it is a little bit bearish but the fact is that capital outflow in the Nigerian economy is far less compared to many emerging economies is a sign there is high confidence in the Nigeria economy,” Ahmad said.

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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Crude Oil

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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