- CBN Wants 15% Interest on $8.1bn MTN Refunds
The Central Bank of Nigeria has asked the court not to grant an injunction that will stop the MTN Group from transferring the disputed $8.1bn back to the country, and wants the company to pay 15 per cent annualised interest on the sum until judgment is given, and 10 per cent from then until the whole amount is paid.
The CBN made this argument in documents filed with the Federal High Court in Lagos in the past week and seen by Bloomberg News on Thursday.
The apex bank alleged in late August that MTN and four of its lenders, Standard Chartered, Citigroup, Stanbic IBTC Plc and Diamond Bank Plc, illegally repatriated the money from Nigeria.
MTN sought an injunction in early September to buy itself time and fight the claim in its biggest market, which wiped as much as 36 per cent off its market value.
The transfers “may have been premeditated and contrived as a scam to make and maximise profits, defraud the Federal Republic of Nigeria and to enjoy unlimited foreign exchange income perpetually from a single investment without complying with the foreign exchange laws and regulations of Nigeria,” the central bank said in the documents.
The court filings suggested that the regulator was not prepared to back down over its allegations, despite the CBN Governor, Godwin Emefiele, saying last week that the dispute would be resolved soon and that “everyone will be happy.”
The apex bank had promised that the two sides were in talks that could lead to an “equitable resolution.”
MTN’s shares fell for the first time in five days on Thursday, declining by 2.5 per cent to 87.30 rand. That extended their fall since the central bank made its accusations to 19 per cent. Yields on $750m of bonds due 2024 climbed 13 basis points on Thursday to 6.85 per cent.
MTN is separately facing a claim from the office of the Attorney General of the Federation that it needs to pay about $2bn in back taxes, which the company also disputes.
The Chief Financial Officer, MTN Group, Ralph Mupita, said in an interview that the two issues might cause it to scrap a planned listing of its Nigerian unit in Lagos.
The CBN alleged that MTN used improperly issued certificates to transfer funds out of Nigeria after the telecoms giant converted shareholder loans in its local unit to preference shares in 2007. MTN denies the allegations.
The monetary authority said MTN’s banks had failed to verify that the telecoms group had met all the country’s foreign exchange regulations.
As such, the CBN imposed a total of N5.87bn on the four banks for allegedly remitting dividends with irregular Certificates of Capital Importation on behalf of MTN Nigeria between 2007 and 2015.
Oil Prices Recover Slightly Amidst Demand Concerns in U.S. and China
Oil Prices Continue Slide as Market Skepticism Grows Over OPEC+ Cuts
Global oil markets witnessed a continued decline on Wednesday as investors assessed the impact of extended OPEC+ cuts against a backdrop of diminishing demand prospects in China.
Brent crude oil, the international benchmark for Nigerian crude oil, declined by 63 cents to $76.57 a barrel while U.S. WTI crude oil lost 58 cents to $71.74 a barrel.
Last week, the Organization of the Petroleum Exporting Countries and its allies, collectively known as OPEC+, agreed to maintain voluntary output cuts of approximately 2.2 million barrels per day through the first quarter of 2024.
Despite this effort to tighten supply, market sentiment remains unresponsive.
“The decision to further reduce output from January failed to stimulate the market, and the recent, seemingly coordinated, assurances from Saudi Arabia and Russia to extend the constraints beyond 1Q 2024 or even deepen the cuts if needed have also fallen to deaf ears,” noted PVM analyst Tamas Varga.
Adding to the unease, Saudi Arabia’s decision to cut its official selling price (OSP) for flagship Arab Light to Asia in January for the first time in seven months raises concerns about the struggling demand for oil.
Amid the market turmoil, concerns over China’s economic health cast a shadow, potentially limiting fuel demand in the world’s second-largest oil consumer.
Moody’s recent decision to lower China’s A1 rating outlook from stable to negative further contributes to the apprehension.
Analysts will closely watch China’s preliminary trade data, including crude oil import figures, set to be released on Thursday.
The outcome will provide insights into the trajectory of China’s refinery runs, with expectations leaning towards a decline in November.
Russian President Vladimir Putin’s diplomatic visit to the United Arab Emirates and Saudi Arabia has added an extra layer of complexity to the oil market dynamics.
Discussions centered around the cooperation between Russia, the UAE, and OPEC+ in major oil and gas projects, highlighting the intricate geopolitical factors influencing oil prices.
U.S. Crude Production Hits Another Record, Posing Challenges for OPEC
U.S. crude oil production reached a new record in September, surging by 224,000 barrels per day to 13.24 million barrels per day.
The U.S. Energy Information Administration reported a consecutive monthly increase, adding 342,000 barrels per day over the previous three months, marking an annualized growth rate of 11%.
The surge in domestic production has led to a buildup of crude inventories and a softening of prices, challenging OPEC⁺ efforts to stabilize the market.
Despite a decrease in the number of active drilling rigs over the past year, U.S. production continues to rise.
This growth is attributed to enhanced drilling efficiency, with producers focusing on promising sites and drilling longer horizontal well sections to maximize contact with oil-bearing rock.
While OPEC⁺ production cuts have stabilized prices at relatively high levels, U.S. producers are benefiting from this stability.
The current strategy seems to embrace non-OPEC non-shale (NONS) producers, similar to how North Sea producers did in the 1980s.
Saudi Arabia, along with its OPEC⁺ partners, is resuming its role as a swing producer, balancing the market by adjusting its output.
Despite OPEC’s inability to formally collaborate with U.S. shale producers due to antitrust laws, efforts are made to include other NONS producers like Brazil in the coordination system.
This outreach aligns with the historical pattern of embracing rival producers to maintain control over a significant share of global production.
In contrast, U.S. gas production hit a seasonal record high in September, reaching 3,126 billion cubic feet.
However, unlike crude, there are signs that gas production growth is slowing due to very low prices and the absence of a swing producer.
Gas production increased by only 1.8% in September 2023 compared to the same month the previous year.
While the gas market is in the process of rebalancing, excess inventories may persist, keeping prices low.
The impact of a strengthening El Niño in the central and eastern Pacific Ocean could further influence temperatures and reduce nationwide heating demand, impacting gas prices in the coming months.
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