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Nigeria Proposes Jail Time, Fines as It Tries to Bolster Naira – Bloomberg

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  • Nigeria Proposes Jail Time, Fines as It Tries to Bolster Naira

Nigeria plans to give the central bank more power to control capital flows and prevent foreign-exchange being taken out the country, including jail times and fines for offenders as authorities battle against a shortage of dollars.

Authorities should be able to jail for as long as two years anybody holding dollars in cash for more than 30 days, or fine them 20 percent of the amount, according to a draft amendment to Nigeria’s Foreign-Exchange Act.

The proposals were published on the website of the Nigerian Law Reform Commission, which reviews legislation, this week. Regulators should also be able to prevent money being repatriated “in accordance with the terms and conditions as may be prescribed by the central bank from time to time,” the draft said.

The existing law is “narrow in scope” and “prohibits the seizure, forfeiture or expropriation of imported money by the government without providing for exceptions,” according to the document. The amendments are necessary “for effective monitoring and control, and to ensure probity in foreign-exchange transactions in Nigeria.”

Nigeria has increased capital controls since oil prices started crashing in the second half of 2014, reducing government revenue and export earnings.

Central Bank of Nigeria Governor Godwin Emefiele pegged the naira for 15 months until June this year, a move analysts blamed for causing investors to flee the country, the economy to contract in the first half of the year and the inflation rate to rise to an 11-year high.

The latest move will further worry foreign investors, according to Lagos-based SBM Intelligence. Last week, the intelligence service threatened to arrest black-market money-traders if they exchanged the naira at a rate weaker than 400 per dollar, compared with the existing street-rate of around 460. The currency’s official exchange rate, which analysts say the central bank is still manipulating, is 315 against the greenback.

“The CBN wants to take its regulatory onus to frightening proportions,” analysts at SBM said in an e-mailed note Friday in response to the new draft law. “The move smacks of desperation and can only result in negative investor perception and capital flight.”

The central bank’s spokesman, Isaac Okorafor, didn’t answer calls to his mobile phone or immediately respond to a text message seeking comment.

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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Crude Oil

Oil Prices Drop Sharply, Marking Steepest Weekly Decline in Three Months

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Crude Oil - Investors King

Amidst concerns over weak U.S. jobs data and the potential timing of a Federal Reserve interest rate cut, oil prices record its sharpest weekly decline in three months.

Brent crude oil, against which Nigerian oil is priced, settled 71 cents lower to close at $82.96 a barrel.

Similarly, U.S. West Texas Intermediate crude oil fell 84 cents, or 1.06% to end the week at $78.11 a barrel.

The primary driver behind this decline was investor apprehension regarding the impact of sustained borrowing costs on the U.S. economy, the world’s foremost oil consumer. These concerns were amplified after the Federal Reserve opted to maintain interest rates at their current levels this week.

Throughout the week, Brent experienced a decline of over 7%, while WTI dropped by 6.8%.

The slowdown in U.S. job growth, revealed in April’s data, coupled with a cooling annual wage gain, intensified expectations among traders for a potential interest rate cut by the U.S. central bank.

Tim Snyder, an economist at Matador Economics, noted that while the economy is experiencing a slight deceleration, the data presents a pathway for the Fed to enact at least one rate cut this year.

The Fed’s decision to keep rates unchanged this week, despite acknowledging elevated inflation levels, has prompted a reassessment of the anticipated timing for potential rate cuts, according to Giovanni Staunovo, an analyst at UBS.

Higher interest rates typically exert downward pressure on economic activity and can dampen oil demand.

Also, U.S. energy companies reduced the number of oil and natural gas rigs for the second consecutive week, reaching the lowest count since January 2022, as reported by Baker Hughes.

The oil and gas rig count fell by eight to 605, with the number of oil rigs dropping by seven to 499, the most significant weekly decline since November 2023.

Meanwhile, geopolitical tensions surrounding the Israel-Hamas conflict have somewhat eased as discussions for a temporary ceasefire progress with international mediators.

Looking ahead, the next meeting of OPEC+ oil producers is scheduled for June 1, where the group may consider extending voluntary oil output cuts beyond June if global oil demand fails to pick up.

In light of these developments, money managers reduced their net long U.S. crude futures and options positions in the week leading up to April 30, according to the U.S. Commodity Futures Trading Commission (CFTC).

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Crude Oil

Oil Prices Rebound After Three Days of Losses

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Crude oil - Investors King

After enduring a three-day decline, oil prices recovered on Thursday, offering a glimmer of hope to investors amid a volatile market landscape.

The rebound was fueled by a combination of factors ranging from geopolitical developments to supply concerns.

Brent crude oil, against which Nigeria oil is priced, surged by 79 cents, or 0.95% to $84.23 a barrel while U.S. West Texas Intermediate (WTI) crude climbed 69 cents, or 0.87% to $79.69 per barrel.

This turnaround came on the heels of a significant downturn that had pushed prices to their lowest levels since mid-March.

The recent slump in oil prices was primarily attributed to a confluence of factors, including the U.S. Federal Reserve’s decision to maintain interest rates and concerns surrounding stubborn inflation, which could potentially dampen economic growth and limit oil demand.

Also, unexpected data from the Energy Information Administration (EIA) revealing a substantial increase in U.S. crude inventories added further pressure on oil prices.

“The updated inventory statistics were probably the most salient price driver over the course of yesterday’s trading session,” said Tamas Varga, an analyst at PVM.

Crude inventories surged by 7.3 million barrels to 460.9 million barrels, significantly exceeding analysts’ expectations and casting a shadow over market sentiment.

However, the tide began to turn as ceasefire talks between Israel and Hamas gained traction, offering a glimmer of hope for stability in the volatile Middle East region.

The prospect of a ceasefire agreement, spearheaded by Egypt, injected optimism into the market, offsetting concerns surrounding geopolitical tensions.

“As the impact of the U.S. crude stock build and the Fed signaling higher-for-longer rates is close to being fully baked in, attention will turn towards the outcome of the Gaza talks,” noted Vandana Hari, founder of Vanda Insights.

The potential for a resolution in the Israel-Hamas conflict provided a ray of hope, contributing to the positive momentum in oil markets.

Despite the optimism surrounding ceasefire talks, tensions in the Middle East remain palpable, with Israeli Prime Minister Benjamin Netanyahu reiterating plans for a military offensive in the southern Gaza city of Rafah.

The precarious geopolitical climate continues to underpin volatility in oil markets, reminding investors of the inherent risks associated with the commodity.

In addition to geopolitical developments, speculation regarding U.S. government buying for strategic reserves added further support to oil prices.

With the U.S. expressing intentions to replenish the Strategic Petroleum Reserve (SPR) at prices below $79 a barrel, market participants closely monitored price movements, anticipating potential intervention to stabilize prices.

“The oil market was supported by speculation that if WTI falls below $79, the U.S. will move to build up its strategic reserves,” highlighted Hiroyuki Kikukawa, president of NS Trading, owned by Nissan Securities.

As oil markets navigate a complex web of geopolitical uncertainties and supply dynamics, the recent rebound underscores the resilience of the commodity in the face of adversity.

While challenges persist, the renewed optimism offers a ray of hope for stability and growth in the oil sector, providing investors with a semblance of confidence amidst a volatile landscape.

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Gold

Gold Soars as Fed Signals Patience

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Gold emerged as a star performer as the Federal Reserve adopted a more patient stance, sending the precious metal soaring to new heights.

Amidst a backdrop of uncertainty, gold’s ascent mirrored investors’ appetite for safe-haven assets and reflected their interpretation of the central bank’s cautious approach.

Following the Fed’s decision to maintain interest rates at their current levels, gold prices surged toward $2,330 an ounce in early Asian trade, building on a 1.5% gain from the previous session – the most significant one-day increase since mid-April.

The dovish tone struck by Fed Chair Jerome Powell during the announcement provided the impetus for gold’s rally, as he downplayed the prospects of imminent rate hikes while underscoring the need for further evidence of cooling inflation before considering adjustments to borrowing costs.

This tempered outlook from the Fed, which emphasized patience and data dependence, bolstered gold’s appeal as a hedge against inflation and economic uncertainty.

Investors interpreted the central bank’s stance as a signal of continued support for accommodative monetary policies, providing a tailwind for the precious metal.

Simultaneously, the Japanese yen surged more than 3% against the dollar, sparking speculation of intervention by Japanese authorities to support the currency.

This move further weakened the dollar, enhancing the attractiveness of gold to investors seeking refuge from currency volatility.

Gold’s ascent in recent months has been underpinned by a confluence of factors, including robust central bank purchases, strong demand from Asian markets – particularly China – and geopolitical tensions ranging from conflicts in Ukraine to instability in the Middle East.

These dynamics have propelled gold’s price upwards by approximately 13% this year, culminating in a record high last month.

At 9:07 a.m. in Singapore, spot gold was up 0.3% to $2,326.03 an ounce, with silver also experiencing gains as it rose towards $27 an ounce.

The Bloomberg Dollar Spot Index concurrently fell by 0.3%, further underscoring the inverse relationship between the dollar’s strength and gold’s allure.

However, amidst the fervor surrounding gold’s surge, palladium found itself trading below platinum after dipping below its sister metal for the first time since February.

The erosion of palladium’s long-standing premium was attributed to a pessimistic outlook for demand in gasoline-powered cars, highlighting the nuanced dynamics within the precious metals market.

As gold continues its upward trajectory, investors remain attuned to evolving macroeconomic indicators and central bank policy shifts, navigating a landscape defined by uncertainty and volatility.

In this environment, the allure of gold as a safe-haven asset is likely to endure, providing solace to investors seeking stability amidst turbulent times.

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