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Crude Oil Prices Fall on Rising Interest Rates

Global oil prices scaled back on Wednesday following European Central Bank’s (ECB) pledge to raise interest rates even further to rein in inflation.

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Crude Oil - Investors King

Global oil prices scaled back on Wednesday following European Central Bank’s (ECB) pledge to raise interest rates even further to rein in inflation.

Brent crude oil, the international benchmark for Nigerian oil, declined by 34 cents, or 0.36% to $92.83 barrel as of 1:13 pm Nigerian time. U.S. West Texas Intermediate crude shed 32 cents or 0.37% to $86.99 a barrel.

Philip Lane, the Chief Economist, ECB, said higher energy prices remain a “dominant driving force of inflation” in the eurozone by making imports more expensive.

“It is crystal clear that the appropriate monetary policy for the euro area should continue to take into account that the energy shock remains a dominant driving force of inflation,” he told an ECB meeting with bank representatives.

In the U.S, the Labour Department reported on Tuesday that the inflation rate rose by 8.3% year-on-year in the month of August, indicating that inflation pressures remain strong despite efforts to halt escalation and contain rising prices in the world’s largest economy.

Persistent increase in inflation rates in developed economies coupled with China’s tough COVID-19 restrictions is expected to impact demand and subsequently drag on oil outlook.

Data from China, the world’s largest importer of the commodity, shows tourism revenue declined 22.8% to 28.68 billion yuan ($4.14 billion). Also, trips made by tourists fell 16.7% from a year earlier to 73.4 million trips. Another indication of slowing economic growth.

“We believe travel for family gatherings, tourism and retail sales will be severely hit in coming months including the National Day Golden Week holiday from Oct. 1 to Oct. 7,” said Japanese brokerage and investment bank Nomura.

“The worsening tourism data may prompt more cuts of GDP growth forecasts on the Street,” Nomura wrote in a note on Tuesday.

Fed officials are set to meet next Tuesday and Wednesday to discuss the new inflation rate way above its 2% target.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

Banking Sector

CBN Extends Letter of Credit Issuance Timeline Amid Forex Crisis

Move Aims to Address FX Scarcity Challenges and Enhance Customer Service

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Central Bank of Nigeria (CBN)

The Central Bank of Nigeria (CBN) has announced an extension of the timeline for issuing letters of credit from 24 hours to five working days, according to the newly approved 2023 service charter.

This adjustment comes as the country grapples with foreign exchange scarcity, impacting local and international trade.

The 2020 service charter initially stipulated a 24-hour timeline for the issuance and management of letters of credit, but the updated charter now reflects a timeline extension to five working days.

Also, the CBN has prolonged the timeline for the registration of Form M and NXP from 24 hours to two working days.

The move follows the CBN’s unification of all forex market segments in June 2023, aimed at promoting liquidity and stability.

However, this measure appears to have led to increased market instability, with the naira losing nearly a fifth of its value.

Reports indicate that foreign suppliers are now rejecting letters of credit from Nigerian businesses, affecting the importation of goods and services.

Letters of credit are crucial for the payment of visible goods imports, wherein a bank commits in writing to pay the exporter a specified sum within a defined timeframe upon receipt of proper documentation from the customer.

The extended timelines for letters of credit, Forms M, and NXP in the service charter are seen as measures to manage cash flow and instill confidence in the process amidst the ongoing forex crisis.

CBN Governor Yemi Cardoso stressed the commitment to responsive and citizen-friendly governance through efficient, responsible, and transparent service delivery in the revised service charter.

The move is part of the CBN’s effort to comply with the Business Facilitation Act 2022 and enhance ease of doing business in Nigeria.

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Banking Sector

Unity Bank MD Advocates Policy Actions to Stem Gender-Based Violence in Nigeria

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The Managing Director of Unity Bank Plc, Mrs. Tomi Somefun has called for comprehensive policy actions that will dismantle the structures that enable gender-based violence in Nigeria.

At the Ebony Life Cinema, the venue of the film screening in Lagos, Unity Bank supported the BECKMA movie premiere by ARDA Development Commuications Inc. which was held to highlight issues of Gender-Based violence and driving positive change in society.

Making the call, Somefun stated that the Bank committed to partnering with the movie premiere and putting the power of the brand behind BECKMA as the event brings sustainability and gender equality to the front burner.

Represented by Unity Bank’s Group Head of Compliance, Mrs. Patricia Ahunanya, Somefun noted that “9 percent of women aged 15 to 49 had suffered sexual assault at least once in their lifetime and 31% had experienced physical violence,” citing a recent study by UNDP in Nigeria.

Speaking further, Somefun said “Gender-based violence is not just a women’s issue, but a societal ill that demands our collective attention. It is high time for us to step forward and advocate for comprehensive policy actions that will dismantle the structures allowing such atrocities to persist”.

She added, “I urge policymakers to enact stringent laws against gender-based violence, ensuring swift and severe consequences for perpetrators. Our homes and various organisations must also be a catalyst for change, inspiring others to follow suit.”

While commending the ARDA Development Communications Inc. for their initiatives to promote gender equality and empowerment in line with SDG5, Somefun assured of the Bank’s commitment to sustainable initiatives and further collaborative initiatives and advocacy programmes for the elimination of gender-based violence.

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Banking Sector

Nigeria’s NIBSS Directs Banks to Disconnect Non-Deposit Financial Institutions from NIP System

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Central Bank headquarters

Banks in Nigeria have received a directive from the Nigeria Inter-Bank Settlement System (NIBSS) to disconnect Switches, Payment Solution Service Providers (PSSPs), and Super Agents from the NIBSS Instant Payment Outwards System.

The circular, dated December 5, 2023, highlighted that including these non-deposit-taking financial institutions as beneficiaries on the NIP funds transfer channels violates the Central Bank of Nigeria (CBN) guideline on electronic payments.

The NIBSS emphasized that while Switches, PSSPs, and Super Agents might process outward transfers as inflows to banks, their licenses do not permit them to hold customers’ funds.

The circular referred to the CBN’s guidelines on electronic payment of salaries, pensions, suppliers, and taxes, dated February 2014, as the basis for this regulatory stance.

The directive also pointed to a circular dated May 11, 2018, titled “Permissible Services and Products of PSSP Operation in Nigeria,” reinforcing the need for compliance.

As a result, banks were urged to delist all Switches, PSSPs, and Super Agents from the NIP Outward Transfer channels while allowing their participation in inward transfers.

In Nigeria’s payment ecosystem, operators are required to obtain licenses such as Switching and Processing, Mobile Money Operations, Payment Solution Services, or Regulatory Sandbox from the CBN.

Only Mobile Money Operators (MMOs) have the authority to hold customer funds, according to the CBN’s regulatory framework.

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