The Central Bank of Nigeria (CBN) has debunked the reports, mostly by online media, that it had stopped the sale of dollars for foreign school fees.
The apex bank, however, explained that it would henceforth prioritise sales to sectors that are more productive in generating employment and adding value to the Nigerian economy.
Banks’ managing directors had last Friday revealed that payment of foreign school fees alone gulped 15 per cent of the total foreign exchange supply, far more than the amount that goes to the importation of raw materials.
A source at the Central Bank told LEADERSHIP yesterday that some of the journalists who covered the Bankers’ Committee Meeting last Friday had misconstrued what the banks’ chiefs had said to mean a stoppage to the sale of foreign exchange for the payment of school fees.
He assured that the apex bank had no immediate intention of banning the sale of foreign exchange to those schooling abroad, but stressed that the top priority was to ensure that forex went to those that would add value to the local economy.
Frivolous demand for foreign exchange had depleted the naira’s value to new lows.
The external reserves continued to decline, reaching almost a 12-year low as it crossed the $29 billion mark to a 30-day moving average of $28.931 billion as at Friday January 7, 2016. This brings the total decline of the reserves from the beginning of December 2015 to 3.17 per cent decline.
The reserves which was at $29.880 billion as at December 1, 2015 had dropped by 2.7 per cent within the month to $29.069 the last day of last year before a further shed of $138.668 million dollars between December 31, 2015 and January 7, 2016.
Having hovered around $30 billion since September last year, the reserves began a steady decline in December, coming down to $29 billion which it maintained throughout the month before it hit $28 on January 4, 2016 – the latest figure given by the CBN.
The external reserves had depreciated by 14.1 per cent last year, having fallen from $34.46 billion by December 31, 2014 to $29.069 billion by December 31, 2015, according to figures given by the CBN on its website, covering barely four months of imports.
A source within the CBN explained that the decline was due to the fact that the level of inflow accrued into the reserves was slower than the level of outflow during the 30-day period.
According to Olubunmi Asaolu of FBN Quest Research, the dropping level of the reserves may be a result of falling oil prices at the international market.
Chief executive of Cowry Assets, Johnson Chukwu, explained that the drop in the foreign reserve may not be unconnected with the negotiation of letters of credit established for the importation of PMS, which were funded from the N413billion allocated to the payment of petrol subsidy in the recently approved supplementary budget.
Chukwu noted that “if the reserve falls below a certain threshold, the country may not be able to meet its foreign currency obligations. This could trigger loss of confidence by the country’s trade partners who may insist on cash collateral/cover before establishing letters of credit for Nigeria’s importers.”
Because of the pressure from so many frivolous buyers of dollars, the exchange rate of the dollar to naira crashed to N320 to the dollar at the weekend. Analysts say the sustained pressure in the exchange market is to blackmail the central banks towards rescinding its position not to devalue the naira.
Also toeing Nigeria’s line of reasoning, China’s central bank chief has blamed foreign speculators in part for volatility in the yuan and said there is no basis for further depreciation, according to an interview in Caixin magazine.
The Chinese economy grew 6.9 per cent in 2015 — the slowest rate since 1990 — and capital has been flowing out of the country due to worries over flagging growth, causing the currency to weaken.
“International speculative forces have recently focused on shorting China,” People’s Bank of China governor Zhou Xiaochuan said, according to a transcript of the interview posted on the bank’s website Saturday.
“They are eager to manufacture public opinion to try to force an outcome as soon as possible,” he said, but did not identify those involved.
OPEC members in talks to end oil glut – Kachikwu
Minister of State for Petroleum Resources, Dr Ibe Kachikwu, has said that there is increased conversation between members of the Organisation of Petroleum Exporting Countries (OPEC) towards ending the current over-supply of crude at the international market, with a view to raising the prices of the commodity which has fallen to record low levels.
Kachikwu told Reuters in Abuja that the mood inside the oil cartel is shifting from mistrust to a growing consensus that a decision must be reached on how to end the global oil price fall.
Oil prices have slumped by more than 70 per cent to below $30 a barrel, as OPEC, led by top producer Saudi Arabia, seek to drive higher-cost producers out of the market by refusing to cut production despite a supply glut.
The price crash has impacted seriously on some economies that depend heavily on oil sales for income, such as Nigeria and Venezuela. Even Saudi Arabia is shoring up its resources to withstand the painful revenue drop.
Kachikwu told Reuters: “There’s increased conversation going on. I think when we met in December … they (OPEC members) were hardly talking to one another. Everyone was protecting their own positional logic.
“Now I think you have cross-logic … they are looking at what are the deficiencies, what is the optimum,” he said.
Struggling oil producers have made repeated calls for an emergency OPEC meeting; however, he expressed doubt whether a consensus would have been reached if the meeting had held.
“We haven’t been sure that if we held those (emergency) meetings that we could actually walk away with some consensus,” he said.
“A lot of barrels are tumbling out of the market from non-OPEC members, so the Saudi philosophy is obviously working. But it’s not influencing the price higher, which means that whether we like it or not, some barrels are coming in from members and non-members to cover whatever is dropping out.”
Kachikwu further told Reuters that he would meet his Qatari and Saudi counterparts next week to discuss the situation.
“Have we got to the point where we can say there is a definite strategy? In terms of production reduction or freezing, no, I don’t think we have got there. But there is a lot of energy.
“As you get closer to the statutory OPEC meeting dates, you are going to see a lot more people get active in those conversations and try to find solutions,” he added.
Meanwhile, the International Energy Agency (IEA) said in January that oil markets could be oversupplied by as much as 1.5 million barrels per day in the first half of 2016, and warned that prices could decline further as Iran’s emergence from economic sanctions brings more crude to the market.
OPEC has declined to trim output without help from non-members, which so far have refused to participate. Russia, the world’s biggest oil producer has floated the idea of a cut without saying whether it would participate.
In an attempt to find a compromise, Venezuela’s oil minister recently proposed a freeze on new production to place a cap on the growing glut while not requiring countries to surrender market share.
Petrol sells above N86.50/litre nationwide – NBS
A data released yesterday by the National Bureau of Statistics (NBS) has revealed that, on the average, petrol is sold above the official price of N86.50 across all states of the federation in the month of January, 2016.
The data, known as Premium Motor Spirit (petrol) Price Watch which details the monthly average prices of a litre of petrol, showed Lagos State with the lowest average price of N91.06 for a litre of petrol, followed by Zamfara State at N91.59.
The disclosure highlights the fact that no state complied with the federal government’s directive which approved the N86.50 and N86 respectively for a litre of petrol for oil marketers and the Nigerian National Petroleum Corporation (NNPC) effective January 1, 2016.
The data showed the average selling price of a litre of petrol in Abuja as N99. 60, while it sold for N129.33 on the average in Abia State.
Residents of Ebonyi State paid the highest price of N133.14 for a litre of petrol in the period under review, the NBS data showed.
In the South Western states of Ogun and Ondo states with close proximity to Lagos, the point of petrol import entry, the product was sold for N92.46 and N120.08 respectively.
In oil-rich Rivers and Bayelsa states, petrol sold for N102.50 and N96.13 respectively, the data further showed while it sold for N96.78, N120.67 and N110.50 in the Northern states of Sokoto, Taraba and Yobe states respectively.
NNPC in talks with oil majors to repay debt, invest in refineries
Nigerian National Petroleum Corporation (NNPC) is in talks with oil majors and banks to raise capital for new drilling and to repay up to $4 billion in debt that has accumulated over years of mismanagement, minister of state for petroleum, Dr Emmanuel Ibe Kachikwu, has said.
Kachikwu, who spoke with Reuters, said he wanted to increase output to up to 2.5 million barrels per day by the end of 2016. Currently, Nigeria pumps 2.3 million bpd.
President Muhammadu Buhari has made reforming the oil sector a priority as a slump in oil prices hammers the economy.
He fired the NNPC board and appointed Kachikwu to overhaul a company whose opaque structures have allowed corruption and oil theft to flourish.
Nigeria’s oil and gas output has been relatively stagnant as big offshore projects have been held up by much-delayed government funding and uncertainty over fiscal terms.
Nigeria produces oil with foreign and local firms through production-sharing contracts and joint ventures (JVs) but investments have been held up because NNPC has been unable to pay its part: bills have been piling up since 2012.
Kachikwu said debt as of November stood at $3.5-$4 billion, which NNPC wanted to cut through deals such as a $1.2 billion multi-year drilling financing signed with Chevron in September.
“The target is that over 2017, we’ll begin to look at zero,” he said in an interview, referring to debt and the goal of ending the need for JVs to depend on NNPC cash.
NNPC was in talks with oil majors such as Italy’s Eni and oil traders Vitol and Gunvor, seeking partnerships to revamp assets such as refineries after decades of neglect. Cash-strapped for years, it reported a loss of 267.14 billion naira ($1.3 billion) for 2015.
“My ideal would be to bring in third party capital, do a joint investment and management of the refineries and work out a pay-out process over 5 to 6 years basically on lifting of some portion of the finished products,” Kachikwu said.
He added that the government would also advertise concessions for pipelines and depots next month.
NNPC was also looking into revamping joint ventures with local firms to boost productivity but this would depend on the Petroleum Industry Bill (PIB), a project to revamp the sector held up in parliament for years.
Kachikwu said NNPC was in talks with the Senate to speed up the process by splitting the PIB into three parts covering governance, taxation and business items such as oil block licensing.
NNPC would also restructure strategic alliance agreements held by Atlantic Energy to raise funds for oil blocks sold by Royal Dutch Shell.
The controversial deals were signed under the previous oil minister Diezani Alison-Madueke, who was briefly arrested in London last year on suspicion of corruption.
Former central bank governor Lamido Sanusi alleged that Atlantic’s deals were one route through which tens of billions of dollars in oil revenues were diverted from state finances.
Kachikwu said NNPC expected to conclude a deal within two months for a new partner to pay up to $1.3 billion to take over the Atlantic agreements. The blocks were originally sold to indigenous oil companies by Shell.
“I’m saying to Atlantic, sorry, you’re out because there’s been a breach,” he said. “Whoever comes in has to give a sign-in fee almost equivalent to what I’ve lost … we’ll have a massive increase in volume out of those fields, we’re going to have 150,000 to 200,000 bpd from the current 40,000 to 50,000 bpd.”