Finance

Oil Prices Slightly Decline as Global Economic Concerns Take Center Stage

Global oil prices declined slightly on Wednesday as concerns over the slowing global economy outweighed supply cuts by top crude oil exporters.

Published

3 months ago

July 5, 2023

Samed Olukoya

Global oil prices declined slightly on Wednesday as concerns over the slowing global economy outweighed supply cuts by top crude oil exporters.

Brent crude oil, against which Nigerian crude oil is priced, decreased by 18 cents or 0.24% to $76.07 per barrel while the U.S. West Texas Intermediate crude oil gained slightly by $1.44 or 2.06% to $70.23 per barrel.

While the recent supply cuts announced by Saudi Arabia, the world’s largest crude exporter, and Russia were intended to bolster oil prices, the market failed to sustain its positive response to the announcement.

Saudi Arabia had volunteered to cut output by 1 million barrels per day (bpd) in August while Russia and Algeria announced their readiness to cut export levels by 500,000 bpd and 20,000 bpd, respectively.

“These measures are designed to push oil prices higher, but currently they are being pulled down by macroeconomic anxiety,” PVM analyst Tamas Varga said of the price impact from the supply cuts.

“Some would argue that the latest decision to supply less oil to the market is actually bearish because it can be viewed as an admission that demand is struggling to grow at a healthy clip due to global economic headwinds.”

Varga further emphasized that some analysts argue that the decision to supply less oil to the market might actually be viewed as bearish, signaling that demand is struggling to grow due to global economic headwinds.

The decrease in oil prices has led to some downward revisions in oil price forecasts by major financial institutions. Morgan Stanley, for instance, recently predicted a market surplus in the first half of 2024, driven by expectations of non-OPEC supply outpacing demand growth next year.

This downward revision further accentuates the concerns surrounding oil prices and the delicate balance between supply and demand.

Meanwhile, services activity expanded at the slowest pace in five months in China, the world’s largest importer of the commodity. While in the eurozone witnessed its dominant services sector slipping into contractionary territory last month.

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Samed Olukoya

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.

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Loans

Nigerian Banks’ Borrowings from CBN Surge 835% in a Month, Raising Liquidity Concerns

Published

2 days ago

September 23, 2023

Investors King

The Nigerian banking sector has witnessed an unprecedented 835% surge in borrowings from the Central Bank of Nigeria (CBN) in the span of just one month, igniting concerns over the nation’s liquidity stability.

Data reveals that banks’ dependence on the CBN has reached new heights, with their borrowings skyrocketing from a relatively modest N323.97 billion in August to N3.03 trillion in September. This remarkable increase underscores a growing reliance on the CBN’s support in times of financial stress.

This surge in borrowing activity has primarily been attributed to the CBN’s stringent monetary policies aimed at curbing inflation and managing the demand for foreign exchange. These policies have, in turn, squeezed commercial banks, compelling them to tap into the CBN’s Standing Lending Facility (SLF) for immediate liquidity needs.

Despite the escalating dependence on CBN funds, the Monetary Policy Committee (MPC) of the apex bank insists that the Nigerian banking sector remains fundamentally robust. MPC member Adenikinju Festus highlighted key indicators, including Capital Adequacy Ratio (CAR) and Non-Performing Loan (NPL) ratios, which still align with prudential standards. Furthermore, liquidity ratios have improved, and returns on equity and assets have risen.

However, the banking industry’s persistently high operating costs are raising alarms. In comparison to international standards, Nigerian banks are grappling with substantially higher operating expenses, prompting concerns about their long-term sustainability.

In a parallel development, the CBN’s Development Finance Department has disbursed a total of N9.714 trillion to various sectors of the economy over the past three years, with manufacturing and industries receiving the largest share at 32.6%.

Other sectors, including energy, agriculture, services, micro, small, and medium enterprises (MSMEs), export, and health, have also benefited significantly from these disbursements.

While the CBN remains committed to fostering sustainable economic growth, the surging dependence of Nigerian banks on short-term borrowings from the central bank is casting shadows on the sector’s long-term stability.

As Nigeria grapples with these liquidity concerns, the financial industry and regulators face the challenging task of charting a course towards a more resilient and sustainable banking environment.

Banking Sector

Central Bank of Nigeria Postpones 293rd Monetary Policy Committee Meeting

Published

3 days ago

September 22, 2023

Investors King

The Central Bank of Nigeria (CBN) has announced the postponement of its 293rd Monetary Policy Committee (MPC) meeting, originally scheduled for September 25th and 26th, 2023.

Dr. Isa AbdulMumin, the bank’s Director of Corporate Communications, released a statement on Thursday confirming the decision.

In the statement, Dr. AbdulMumin stated, “The Monetary Policy Committee of the Central Bank of Nigeria has deferred its 293rd meeting, which was initially planned for Monday and Tuesday, September 25th and 26th, 2023, respectively. A new date will be communicated in due course. We regret any inconvenience this change may cause our stakeholders and the general public.”

While the CBN did not provide an official reason for the postponement, some industry experts suggest it may be related to the pending approvals for the newly appointed governor and deputy governors of the bank.

President Bola Tinubu recently nominated Yemi Cardoso as the potential head of the CBN. Additionally, Tinubu has endorsed the nominations of four new deputy governors for the apex bank, who are expected to serve for an initial term of five years, pending confirmation by the Senate.

The nominated deputy governors are Emem Usoro, Muhammad Abdullahi-Dattijo, Philip Ikeazor, and Bala Bello. However, the appointment of the CBN governor is contingent upon Senate confirmation, which is currently on a yearly recess.

The CBN assures stakeholders and the public that the rescheduled MPC meeting date will be communicated promptly as soon as it is confirmed.

Banking Sector

Currency in Circulation Surges by N1.7 Trillion Amidst Rising Cash Transactions

Published

3 days ago

September 22, 2023

Investors King

The currency in circulation in Nigeria has surged by N1.7 trillion, driven by a surge in cash transactions.

According to data obtained from the Central Bank of Nigeria (CBN), as of the end of August, the currency in circulation rose to N2.7 trillion.

This substantial increase in currency in circulation comes after a 235.03 percent dip to N982.1 billion as of the end of February 2023 from N3.29 trillion at the close of October 2022, primarily due to the naira redesign policy spearheaded by the CBN.

However, the currency in circulation began its steady ascent once the policy concluded. Cash that had been previously withdrawn from circulation to promote electronic payments was reintroduced into the economy, contributing to this significant boost.

The data obtained from the CBN reveals that a whopping N2.3 trillion was removed from circulation during this period.

The CBN defines currency in circulation as all legal tender currency in the hands of the general public and within the vaults of Deposit Money Banks, excluding the central bank’s vaults.

The CBN further elucidated its methodology, stating that it employed an “accounting/statistical/withdrawals & deposits approach” to calculate the currency in circulation in Nigeria. This approach meticulously tracks the movement of currency in circulation on a transaction-by-transaction basis.

Under this methodology, each withdrawal made by a Deposit Money Bank at one of CBN’s branches results in an increase in currency in circulation (CIC), while each deposit made by a DMB at one of CBN’s branches leads to a decrease in CIC.

This surge in currency in circulation reflects the evolving landscape of financial transactions in Nigeria and underscores the importance of flexible monetary policies in facilitating economic growth and stability.