Nigeria’s Finance Minister Says Oil Savings Drained By State Governors

 

Nigeria’s finance minister, Dr Ngozi Okonjo-Iweala, says while some of the money in the country’s excess crude savings was legitimately used to offset revenue shortfalls arising from quantity shocks and to narrow the fiscal deficit, significant portions of it were shared to Governors, against her ministry’s advise.

Nigeria, Africa’s biggest oil producer, is grappling with financial difficulties owing to a 30 percent fall in the price of oil since June, which has added pressure on the government’s already depleted savings from the days of high oil prices.

The Excess Crude Account (ECA) had around $9 billion in December 2012, but it has since fallen to around $4 billion, most which happened during a period of record high oil prices, when oil savings are supposed to accrue.

Okonjo-Iweala told capital market stakeholders in Abuja, that a significant portion of the billions of dollars drained from the Excess Crude Account over the past two years was distributed to governors instead of being saved for a rainy day.

The central bank devalued the naira by 8 percent on Tuesday because it was running out of foreign exchange reserves with which to defend the currency. Nigeria’s oil revenues are the source of around 80 percent of government spending and are distributed each month to the three tiers of government: federal, state and local.

Nigeria naira down 1.7 pct on OPEC decision not to cut output

 

Nigeria's naira fell 1.7 percent in early Friday trade to 177.25 against the dollar as markets reacted negatively to a decision of the OPEC oil exporting group not to cut crude output, dealers said.

Saudi Arabia blocked calls on Thursday from poorer members of OPEC, including Nigeria, to cut output, sending oil prices plunging.

Nigeria's currency touched a record low against the dollar on Wednesday, a day after the central bank devalued it by 8 percent in a bid to halt a slide in its foreign reserves -- 95 percent of which derive from oil sales.

Falling world oil prices and a retreat from emerging markets have put pressure on the currencies of several oil exporters, including Angola, whose kwanza is also in retreat.

The falling oil price has created expectations of further declines which would put further strain on the central bank's currency reserves, weighing on the naira.

Naira falls 0.22 percent on low dollar flow

The naira fell 0.22 percent to 177.40 against the dollar on Thursday, trading lower than central bank’s target band of 5 percent plus of minus 168, as dollar flow was not enough to meet demand, dealers said.

The naira has been volatile and under pressure since the central bank announced a devaluation on Tuesday, although Wednesday’s trading saw it rise on a surge in dollar supply.

SEC unveils 10-year capital market master plan

The Securities and Exchange Commission, SEC, has unveiled its 10-year capital market master plan, which is aimed at ensuring the growth of the Nigeria capital market.

Speaking at the 4th capital market committee retreat in Abuja, the Director General, SEC, Ms Aruma Oteh, said that the master plan which is meant to cover the 10year period from 2015-2025, is aimed at increasing the depth of the capital market and increasing foreign investment, adding that the plan will ensure diversifying source of fund for the country.

Reeling out the plans for the capital market and how it will impact on the economy, Oteh, said the capital market is being reform to meet world class standard and create enabling environment for diversification of investment to the capital market, while the plan will guide the running of the capital market and be more accessed by all Nigerians.

Presenting the non-interest capital market plan, chairman of the committee, Hajara Adeola, said the master plan will build capacity of stakeholders, while ensuring mass entry into capital market.

Finance Minister backs austerity measures

The Minister of Finance and the coordinator of the Nigerian economy, Dr Ngozi Okonjo-Iweala, says the ongoing reforms in the country as part of the austerity measures are necessary to put the economy back on track, following the fallen price of crude all and the recent devaluation of the naira by the Central bank of Nigeria.

Speaking at the annual capital market committee retreat ongoing in Abuja, which heralded the launch of the capital market 10-year master plan, Dr Okonjo-Iweala, said good policies are needed to revive the economy.

She added that the Federal government is not relenting in its effort in ensuring stability and growth in the economy.

 

Oil Prices in Freefall as OPEC Fails to Agree Output Cut

Oil prices fell to their lowest level in over five years Thursday as the cartel that produces one third of the world’s output failed to agree on measures to tackle the current glut.

In what had been billed as their most important meeting in decades, ministers from the Organization of Petroleum Exporting Countries agreed to keep their self-imposed output ceiling at 30 million barrels a day, but promised each other they would cheat less on their agreed quotas.

Such promises have rarely held in the past, and the markets reacted by driving the price of the benchmark crude futures contract down nearly 8% to below $69. Oil hasn’t been that cheap since August 2009. Prices have now fallen by over 30% since the summer, and by 13% in November alone.

Thursday’s decision effectively sets the level of OPEC output for the whole of the first half of next year, news agencies quoted Abdalla El-Badri, OPEC’s Secretary-General, as saying. If that’s true, then any reduction in world output will likely be driven by marginal fields in the U.S.

The decision is a victory for Saudi Arabia, which can better afford to play a long game with U.S. producers than its poorer colleagues in OPEC, such as Venezuela and Iran.

Economic effect of a devaluation of the currency

The Nigerian Naira which over the years have been heavily battered, was for the second time devalued yesterday by the Central Bank of Nigeria after its Monetary Policy Committee meeting, by N13.

This sees the Naira exchanging for N168 to the US dollar. However, financial analysts had long expected this process, after so much pressure no thanks to the continuous fall in the prices of crude oil.

But let's look at the effect of this exercise:

1. Exports cheaper. A devaluation of the exchange rate will make exports more competitive and appear cheaper to foreigners. This will increase demand for exports

2. Imports more expensive. A devaluation means imports will become more expensive. This will reduce demand for imports.

3. Increased AD. A devaluation could cause higher economic growth. Part of AD is (X-M) therefore higher exports and lower imports should increase AD (assuming demand is relatively elastic). Higher AD is likely to cause higher Real GDP and inflation.

4. Inflation is likely to occur because:

    *Imports are more expensive causing cost push inflation.
    *AD is increasing causing demand pull inflation
    *With exports becoming cheaper manufacturers may have less incentive to cut costs and become more efficient. Therefore over time, costs may increase.

5. Improvement in the current account. With exports more competitive and imports more expensive, we should see higher exports and lower imports, which will reduce the current account deficit.

Nigeria Stock Exchange to offer derivatives by 2016

 

The Nigerian Stock Exchange says it plans to start allowing trading by 2016 of derivatives such as futures and options in interest rates, currencies and equity indexes.

The exchange, one of the main entry points for foreign funds looking to tap Africa's fast-growing economies, now only offers shares, bonds and exchange-traded funds.

Chief Executive Officer Oscar Onyema said the exchange's surveys showed there was "encouraging" demand for derivatives, which help investors to manage the amount of risk they take on.

He said the bourse was changing its ownership structure from a mutual company of 240 members in order to add shareholders and prepare for a possible initial public offering (IPO).

The process, known as demutualisation, will help the exchange improve its governance through opening up its ownership and could lead to new fundraising to support expansion.

Nigeria’s central bank sells dollars at 162.5 naira, breaches its band

 

Nigeria's central bank auctioned dollars at 162.50 naira at its official forex window, outside its preferred band of 150-160 and ahead of a key interest rate decision on Tuesday.

It the second time in a row it has auctioned the currency outside a band it burst out of in May.

It auctioned the greenback at 158.41 to the dollar at its previous session.

The naira, which is down 9 percent this year, hit a record low at the interbank window on Monday on concerns that a slide in global oil prices could undermine the central bank's efforts to keep defending the currency.

FG moves 5,000MW target to January 2015

The Federal Government has moved its target to generate 5,000 megawatts of electricity to January 2015.

The Minister of Power, Prof. Chinedu Nebo, said the inauguration of Gbarian Power Plant, Alaoji Power Plant and Omoku Power Plant would not exceed January 2015 and promised the plants would be provided with enough gas for the generation of 5,000MW.

Government had earlier this year announced plans to generate 5,000MW power before the end of the year.

Nebo,  noted that plans to accomplish the target remained unchanged.

FEC okays N9bn for cooking stoves •N61bn engineering contract too

THE Federal Executive ‎Council (FEC) on Wednesday approved the award of contract for the procurement of 750,000 units of clean cooking stove and 18,000 wonder bags under the National Clean Cooking Scheme.

This is part of the plan by government to provide about 20million stoves over five years to be distributed free of charge to poor rural women in order to discourage the use of fossil fuel as well as prevent accompanying health hazards.

Vice President Namadi Sambo presided over the meeting which also approved the award of N60.8billion contract for the provision of engineering infrastructure to Kyami District, Zone C, Abuja.

The supervising Minister of Information, Mr. Nurudeen Mohammed, who briefed State House correspondents after the meeting, said that the Council ratified President Goodluck Jonathan's‎ anticipatory approval for the scheme which he explained, is an aggressive drive to engender clean cooking culture amongst the poor rural women, reduce and possibly eliminate cooking with solid fossil which is detrimental to health.

He also observed that the use of the stove will reduce incessant felling of trees which exposes the country to ecological problems.

On the wonder bag, he said it is a non-electric slow cooker invented by Sarah Collins, ‎a South African eco-entrepreneur, who came up with the idea six years ago during a power cut, cooking her dinner by surrounding the pan with cushions.

The minister observed that scientists believe that each wonder bag can prevent the emission of half a ton of carbon dioxide a year and save a poor family a tenth of their income by cutting fuel costs.

Nigeria overnight lending rate doubles to 20 pct after CBN action

 

Trading on Nigeria's intern bank market almost doubled on Wednesday, after trading resumed a day after the central bank hiked the cash reserve ratio (CRR) for commercial banks to hold deposits from individuals and businesses.

Dealers said commercial lenders were scrambling for cash in anticipation of the central bank enforcing the CRR on Wednesday, so interbank rates rose sharply from 10.25 percent the previous day.

Initially, the overnight market was not giving quotes on Wednesday because they were waiting for information from the central bank on when the CRR will be debited.

Shell investigates source of leak of oil pipeline in Nigeria

 

Nigeria’s oil exports were disrupted after Shell’s local unit shut a pipeline that carries a key grade after it discovered a leak on Saturday.

The pipeline carries one of Nigeria’s main export grades, Bonny Light. About six cargoes of the crude are exported each month, or around 180,000-200,000 barrels per day.

A Shell spokeswoman in London said that force majeure had not been declared on the grade, adding that the 24-inch pipeline has been shut since Oct. 18 last year for repair and integrity checks.

A report by a national conference convened by President Goodluck Jonathan in March, said the country was losing an estimated $35 million (22 million pounds) a day to oil theft.

MTN, FirstBank, Dangote Group Make Top 100 Nigerian Companies List

 

The federal government has unveiled the names of firms that made the top 100 companies in Nigeria for the 2014 fiscal period.

The Chief Executive Officer, Financial Reporting Council of Nigeria and Chairman of the selection committee, Mr. Jim Obaze, said some of the companies that made the list are MTN Nigeria, First Bank of Nigeria Plc, Nigerian Breweries Plc, Dangote Group, Chevron and Nigerian Flour Mills Plc.

Others are Mamuda Industries, Eko Supreme, Indorama Eleme Petrochemical Ltd, Elizade, APN Terminal, UAC Plc, Bolawole Enterprises, Wemco Metal Products, Dolphin Foods and Chi-Group.

A source in the Ministry of Trade and Industry also revealed that Zenith Bank Plc, Shell and ExxonMobil, among others, made the top 100 Nigerian companies list.

Nigeria devalues Naira as oil prices drop

The Central Bank of Nigeria, CBN, has announced a new official naira-to-dollar exchange rate, forcing down the Nigerian currency by 13 naira, as the country struggles to reshape its fiscal policies in response to dwindling oil price.

The bank devalued the naira at its monetary policy committee, MPC, meeting on Tuesday in Abuja, where it also reviewed Nigeria’s monetary policy rate from 12 per cent to 13 per cent.

The monetary policy rate highlights lending rate for the country’s economy. The naira will now exchange officially at N168 to a dollar, and no longer N155.

The CBN said the decision to lower the value of naira against the dollar is to strengthen the currency.

External reserves fall to $37.1bn

 

A new report from the Central Bank of Nigeria has shown that the nation’s external reserves have fallen to $37.1bn.

The report, posted on the central bank’s website, showed that the reserves depleted by $2bn within one month. Specifically, the foreign reserves depleted from $39.1bn as of October 21 to $37.1bn on November 21, 2014.

The external reserves have been falling fast again, no thanks to the falling oil price and high demand for dollars from portfolio investors.

It had fallen by $1.6bn within three weeks, dropping from $39.5bn on October 14 to $37.9bn as of November 7, 2014.

The CBN has been selling huge amount of dollars to prop up the value of the naira.

Shell shuts Nigeria pipeline carrying Bonny Light crude

 

Nigeria’s oil exports were disrupted after Shell’s local unit shut a pipeline that carries a key grade after it discovered a leak on Saturday, the company said on Monday.

The pipeline carries one of Nigeria’s main export grades, Bonny Light . About six cargoes of the crude are exported each month, or around 180,000-200,000 barrels per day.

A Shell spokeswoman in London said that force majeure had not been declared on the grade.

The 24-inch pipeline has been shut since Oct. 18 last year for repair and integrity checks, the spokesman added.

Nigeria’s oil industry suffers from rampant oil theft. A report by a national conference convened by President Goodluck Jonathan in March, said the country was losing an estimated $35 million (22 million pounds) a day to oil theft.