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Recapitalisation : Shareholders Laud NAICOM’s Cancellation

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insurance
  • Recapitalisation: Shareholders Laud NAICOM’s Cancellation

Shareholders on Monday commended the National Insurance Commission (NAICOM) over the cancellation of the Tier Based Solvency Capital recapitalisation.

The shareholders under the aegis of the Independent Shareholders Association of Nigeria (ISAN) said the cancellation of the recapitalisation bid by NAICOM was a welcome development and a sign of respect for the rule of law.

Mr Moses Igbrude, ISAN Publicity Secretary, told the News Agency of Nigeria (NAN) in Lagos that it was a welcome development that the regulator toed the path of law.

NAN reports that NAICOM on Nov. 23 announced the cancellation of the Tier Based Solvency Capital policy for the underwriting sector with immediate effect.

The commission gave this notice in a circular to all insurance companies on ‘Withdrawal of circular on Tier Based Solvency Capital policy for insurance companies in Nigeria,’ signed by the Director, NAICOM, Mr Agboola Pius, on Friday.

It will be recalled that recently, NAICOM announced a raise in the minimum capital base for life, non-life and composite insurance companies seeking licences to underwrite all risks in Nigeria.

The companies required from N2 billion, N3 billion and N5 billion to N6 billion, N9 billion and N15 billon, respectively under the tier-based minimum solvency capital structure.

It later announced an Oct. 1, 2018 deadline, which was not accepted by stakeholders, pushing them to take a legal action against the commission.

Igbrude said the shareholders were not against insurance recapitalisation but rather not comfortable with the short period of time NAICOM gave them for the exercise.

He said the shareholders were worried by the way and manner NAICOM changed the recapitalisation deadline from January 2019 to October 2018.

“The way they suddenly brought the day backward from January 2019 to October 2018 raised our suspicious to whether some cabal in the sector wants to corner insurance business through such a sudden and drastic action,” Igbrude said.

He said shareholders appreciated NAICOM’s efforts and eagerness to strengthen the operators’ capital base.

Igbrude urged the regulator to carry all stakeholders along through proper engagement and enlightenment to ensure mutual understanding for the benefit of the industry in particular and the economy in general.

“I sincerely advise the insurance companies to make hay while the sun shines because this opportunity will not last so long.

“All the insurance companies concerned should do their best to recapitalise as soon as possible to various categories they want to operate within the sector,” Igbrude stated.

However, Mr Sola Oni, a chartered stockbroker and Chief Executive Officer, Sofunix Investment and Communications, said illiquidity nurtured by customers’ apathy had made life difficult for insurance companies.

Oni said multinational companies in the oil and gas prefered offshore underwriters to carry their risk as against local ones who were defaulting steadily in settlement of claims and finding it difficult to mobilise premium.

“The court action which prompted NAICOM to suspend its tier-based solvency policy shall eventually be on the front burner.

“There is no quick fix that can provide financial succor for our ailing insurance firms outside the wall of outright recapitalisation or through mergers and acquisition in the final analysis.

“The earlier they accept the hard reality, the better,” Oni said.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Crude Oil

Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

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Oil

Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

Oil retreated from an earlier rally with investment banks and traders predicting the market can go significantly higher in the months to come.

Futures in New York pared much of an earlier increase to $63 a barrel as the dollar climbed and equities slipped. Bank of America said prices could reach $70 at some point this year, while Socar Trading SA sees global benchmark Brent hitting $80 a barrel before the end of the year as the glut of inventories built up during the Covid-19 pandemic is drained by the summer.

The loss of oil output after the big freeze in the U.S. should help the market firm as much of the world emerges from lockdowns, according to Trafigura Group. Inventory data due later Tuesday from the American Petroleum Institute and more from the Energy Department on Wednesday will shed more light on how the Texas freeze disrupted U.S. oil supply last week.

Oil has surged this year after Saudi Arabia pledged to unilaterally cut 1 million barrels a day in February and March, with Goldman Sachs Group Inc. predicting the rally will accelerate as demand outpaces global supply. Russia and Riyadh, however, will next week once again head into an OPEC+ meeting with differing opinions about adding more crude to the market.

“The freeze in the U.S. has proved supportive as production was cut,” said Hans van Cleef, senior energy economist at ABN Amro. “We still expect that Russia will push for a significant rise in production,” which could soon weigh on prices, he said.

PRICES

  • West Texas Intermediate for April fell 27 cents to $61.43 a barrel at 9:20 a.m. New York time
  • Brent for April settlement fell 8 cents to $65.16

Brent’s prompt timespread firmed in a bullish backwardation structure to the widest in more than a year. The gap rose above $1 a barrel on Tuesday before easing to 87 cents. That compares with 25 cents at the start of the month.

JPMorgan Chase & Co. and oil trader Vitol Group shot down talk of a new oil supercycle, though they said a lack of supply response will keep prices for crude prices firm in the short term.

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Crude Oil

Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

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Crude oil

Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

Oil prices rose on Monday as the slow return of U.S. crude output cut by frigid conditions served as a reminder of the tight supply situation, just as demand recovers from the depths of the COVID-19 pandemic.

Brent crude was up $1.38, or 2.2%, at $64.29 per barrel. West Texas Intermediate gained $1.38, or 2.33%, to trade at $60.62 per barrel.

Abnormally cold weather in Texas and the Plains states forced the shutdown of up to 4 million barrels per day (bpd) of crude production along with 21 billion cubic feet of natural gas output, analysts estimated.

Shale oil producers in the region could take at least two weeks to restart the more than 2 million barrels per day (bpd) of crude output affected, sources said, as frozen pipes and power supply interruptions slow their recovery.

“With three-quarters of fracking crews standing down, the likelihood of a fast resumption is low,” ANZ Research said in a note.

For the first time since November, U.S. drilling companies cut the number of oil rigs operating due to the cold and snow enveloping Texas, New Mexico and other energy-producing centres.

OPEC+ oil producers are set to meet on March 4, with sources saying the group is likely to ease curbs on supply after April given a recovery in prices, although any increase in output will likely be modest given lingering uncertainty over the pandemic.

“Saudi Arabia is eager to pursue yet higher prices in order to cover its social break-even expenses at around $80 a barrel while Russia is strongly focused on unwinding current cuts and getting back to normal production,” said SEB chief commodity analyst Bjarne Schieldrop.

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Crude Oil

Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

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oil

Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

Oil prices rose to $65.47 per barrel on Thursday as crude oil production dropped in the US due to frigid Texas weather.

The unusual weather has left millions in the dark and forced oil producers to shut down production. According to reports, at least the winter blast has claimed 24 lives.

Brent crude oil gained $2 to $65.47 on Thursday morning before pulling back to $64.62 per barrel around 11:00 am Nigerian time.

U.S. West Texas Intermediate (WTI) crude rose 2.3 percent to settle at $61.74 per barrel.

“This has just sent us to the next level,” said Bob Yawger, director of energy futures at Mizuho in New York. “Crude oil WTI will probably max out somewhere pretty close to $65.65, refinery utilization rate will probably slide to somewhere around 76%,” Yawger said.

However, the report that Saudi Arabia plans to increase production in the coming months weighed on crude oil as it can be seen in the chart below.

Prince Abdulaziz bin Salman, Saudi Arabian Energy Minister, warned that it was too early to declare victory against the COVID-19 virus and that oil producers must remain “extremely cautious”.

“We are in a much better place than we were a year ago, but I must warn, once again, against complacency. The uncertainty is very high, and we have to be extremely cautious,” he told an energy industry event.

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