The global crude oil market seems not to have recovered from the fears of another supply glut as West Texas Intermediate (WTI) fell below $60 on Tuesday.
Brent crude, the international benchmark of crude oil, traded at $62; a safe place for Nigeria, whose Bonny Light oil is priced the same as Brent crude.
In the last eight days, Brent crude oil lost $5 from the $67.68 it traded at on Monday, February 5.
The Organisation of Petroleum Exporting Countries (OPEC) had to reach an agreement with non-member countries to reduce crude supply to the market to salvage the market.
The 2018 budget is not threatened by the current trading price of Brent crude, as the crude oil benchmark in the proposed budget is $45.
Rising crude oil prices had increased the landing cost of petrol meaning that falling prices would reduce the loss absorbed by the Nigerian National Petroleum Corporation NNPC).
Speaking at the just concluded West African International Petroleum Exhibition and Conference (WAIPEC) hosted in Lagos, Austin Avuru, chief executive officer of Seplat Petroleum Development Company Plc, said $80 was not a good place for oil investments.
He said when crude oil approaches $80, $90 and $100, it encourages operators to take on massive investments in unconventional sources of energy, which create glut in the oil market and crash the price.
“I was telling somebody that I am praying that it doesn’t get to $80 per barrel because it will draw us out. We are safe at $60. But by real balancing what I am referring to is the fact that when the prices get to certain threshold, certain forms of unconventional become attractive and over a period of time, it crashes the price,” he had said.
CBN: 41 items still banned under Nigeria-China currency swap deal
The Central Bank of Nigeria (CBN) says the Nigeria-China currency swap deal will not cover the importation of the 41 items already blacklisted from the official foreign exchange.
Isaac Okorafor, acting director, corporate communications, at the bank, made this known in an interview with NAN on Sunday.
He said this will ensure the currency deal does not stifle local companies and make Nigeria a dumping ground for Chinese goods.
In 2015, the bank said it would not provide forex for the importation of 41 items to ensure efficient utilization of forex and encourage local production.
The CBN recently signed a bilateral currency swap agreement with the People’s Republic of China worth N720 billion.
Some of the items banned were rice, cement, poultry, tinned fish, furniture, toothpicks, kitchen utensils, tableware, textiles, clothes, tomato pastes, soap and cosmetics.
“We are going to focus on exports to China. Also, remember that we already export cassava products to China as well as leather, hides and skin to China amongst others.
“So this deal will open further the export market to China. Also, I want Nigerians to know that the items that will come in are not necessarily finished goods, so the issue of Nigeria becoming a dumping ground for China does not arise.
“This is because the 41 items that had initially been banned from the Nigerian foreign exchange market will still not qualify under the deal.
“The exchange of currencies between the Nigerian Central Bank and the Chinese Central Bank will make it easier for our entrepreneurs to have direct access to foreign exchange in Renminbi.
“Before now, when importing necessary machinery or merchandise from China, you first exchange Naira for the dollar before changing it again to Renminbi and this puts pressure on the Naira.
“Now what it means is that a large portion of the demand for dollars in Nigeria has been lifted off the back of the Naira and put directly on the Chinese Renminbi.
“And so it is a positive development as it will enhance the value of the Naira and reduce our dependence on the dollar for imports.”
The CBN spokesman said the two central banks are still working on the exchange rates between the Naira and Renminbi.
According to him, Nigerian entrepreneurs will be able to access Renminbi through money deposit banks, using similar rules for the dollar but a clearing bank would be appointed for the transaction.
He said one of requirements for the appointment was that the bank must have a branch in China, which some Nigerian banks already have.
“Chinese investors are interested in setting up shop here. And that is because if they produce here, it will be better for them.
“The cost of transportation, shipping, and all that, will be eliminated. We have a good environment, so a good number of them are interested in setting up production lines here.
“Also, when they do that, they are not going to employ only Chinese workers. A greater portion of the job opportunities in these plants will be filled up by Nigerians. So for us, it’s a good deal.”
Good news for Nigerian businesses as CBN signs $2.5bn swap deal with China
Nigerians doing business with China will no longer have to worry too much about sourcing for dollars.
This is a highlight of the execution of a bilateral currency swap agreement between the Central Bank of Nigeria (CBN) and the Peoples Bank of China (PBoC) on Friday.
In the agreement signed by Godwin Emefiele, the CBN governor, and Yi Gang, PBoC governor, the currency swap deal is valued at Renminbi (RMB) 16 billion (about $2.5bn).
The deal, which has taken two years of negotiation, will provide the Chinese and Nigerian currencies directly to industrialists and other businesses from both countries.
This will reduce the difficulties encountered in the search for third currencies, according to Isaac Okorafor, the CBN spokesman, in a statement shared with TheCable.
“Among other benefits, this agreement will provide naira liquidity to Chinese businesses and provide RMB liquidity to Nigerian businesses respectively, thereby improving the speed, convenience and volume of transactions between the two countries,” he said.
“It will also assist both countries in their foreign exchange reserves management, enhance financial stability and promotebroader economic cooperation between the two countries.”
He said it will be easier for most Nigerian manufacturers, especially SMEs and cottage industries in manufacturing and export businesses, to import raw materials, spare-parts and simple machinery to undertake their businesses by taking advantage of available RMB liquidity from Nigerian banks without being exposed to the difficulties of seeking other scare foreign currencies.
Okorafor added: “The deal, which is purely an exchange of currencies, will also make it easier for Chinese manufacturers seeking to buy raw materials from Nigeria to obtain enough naira from banks in China to pay for their imports from Nigeria. Indeed, the deal will protect Nigerian business people from the harsh effects of third currency fluctuations.”
Nigeria is the third African country to have such an agreement in place with China.
Four banks pay N493.2m as fines in two years
Four commercial banks paid N493.27 million as fines in two years for going against the Banks and Other Financial Institutions Act.
NAN reports that the affected banks are: United Bank for Africa, First City Monument Bank Group, Access Bank and Guaranty Trust Bank.
A breakdown of the figure as contained in the banks’ annual reports showed that UBA paid the highest fine of N162.64 million for various contraventions during the period under review.
The bank paid N75 million in the 2017 financial year for various contraventions having paid N87. 64 million in 2016.
Access Bank comes next, paying N133.48 million in all, broken down to N78 million in 2017 and N55.48 million in 2016.
The FCMB Group paid a total of N117. 02 million, N28.26 million in 2017, and N88.76 million in 2016.
Similarly, GTBank paid N80.13 million, which include N18.08 million in 2017 and N62.05 million in 2016.
Moses Igbrude, general secretary, Independent Shareholders Association of Nigeria (ISAN), said payment of penalties as a way of enforcing compliance with rules and regulations was disadvantageous to shareholders.
Igbrude said it was the duty and responsibility of the managements of the banks to comply with all the rules to avoid paying fines or penalties by employing compliance officers.
According to him, the compliance officers should be trained and equipped on how to monitor and supervise to ensure adherence to all rules to avoid payment of huge fines to the regulators.
“Where such officers fail in their duties, they should be made to pay such fines or penalties from their salaries.”
Igbrude said the CBN and other regulators “should not be seen as money mongers or using it as a major source of revenue to the detriment of shareholders.
“We shareholders will continue to engage management of banks on best ways to minimise or eliminate this challenge of compliance to rules and regulations.”
Herbert Wigwe, the group managing director, Access Bank, had told shareholders at their annual general meeting that the bulk of the contravention was in respect of the bank verification number registration.
Similarly, Kennedy Uzoka, GMD, UBA, said the bank would do everything possible to avoid unnecessary fines in the course of doing business.
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