- ABCON asks central bank to outsource weekly dollar sales to BDCs
- Oversupply, Nigeria’s ceasefire trigger fall in oil prices
Desirous of stimulating economic
activities in the country, the Central Bank of Nigeria (CBN) monday
directed commercial banks and other authorised dealers in the foreign
exchange (FX) market to ensure that they channel 60 per cent of total FX
purchases from all sources (interbank inclusive) to end users strictly
for the purpose of importation of raw materials, plant and machinery.
The central bank said it took the
decision following its review of returns on the disbursement of FX and
observed that a negligible proportion of FX sales were being channelled
towards the importation of raw materials for the manufacturing sector.
The CBN gave the directive in a circular
signed by its acting Director, Trade and Exchange Department, Mr. W.D.
Gotring. The letter dated August 22, 2016, was posted on the central
bank’s website.
It said: “Following the review of
returns on the disbursement of foreign exchange to end users, it has
been observed that a negligible proportion of foreign exchange sales are
being channelled towards the importation of raw materials for the
manufacturing sector.
“Against this background and in order to
address the observed imbalance, authorised dealers are hereby directed
to henceforth dedicate 60 per cent of total foreign exchange purchases
from all sources (interbank inclusive) to end users strictly for the
purpose of importation of raw materials, plant and machinery.
“The balance of 40 per cent should be
used to meet other trade obligations, visible and invisible
transactions. For the avoidance of doubt, authorised dealers are to
continue to publish weekly sales of FX to end users in the national
newspapers and to render statutory returns on same to the CBN promptly.
Please ensure compliance accordingly, until otherwise advised.”
The President of the Manufacturers
Association of Nigeria (MAN), Frank Jacobs, recently voiced concerns
that the FX scarcity and rising cost of funds had sent manufacturing
output plunging to below 20 per cent.
But with the directive, analysts said
yesterday that manufacturers would be able to get a substantial part of
their FX requirements met.
One market observer lauded the CBN for
the directive, adding: “The CBN with this directive has prioritised the
real sector so that industries can bring in their raw materials,
machines and equipment without having to wait for the banks for weeks
and months on end to smile their way.
“This means that the banks and
authorised dealers will be required to seek out and prioritise their
customers who need to bring in raw materials, plant and machinery for
production and not the other way round.
“This is bound to have a positive impact
on productivity in the manufacturing sector and hopefully will lead to a
drop in the prices of goods that they produce.”
In a related development, the President,
Association of Bureau De Change Operators of Nigeria (ABCON), Alhaji
Aminu Gwadabe, has said most banks were yet to comply with the CBN’s
directive that they sell $50,000 from diaspora remittances to bureau de
change (BDC) operators on a weekly basis.
In a statement yesterday, the ABCON boss
said only 10 per cent of BDCs from the Lagos market had accessed
dollars from banks since the CBN gave the directive nearly three weeks
ago.
The banks that have complied include
First Bank of Nigeria Limited, Ecobank Nigeria Plc, Fidelity Bank Plc,
United Bank for Africa Plc, Unity Bank Plc, Diamond Bank Plc, Zenith
Bank Plc and Stanbic IBTC Bank.
Gwadabe further disclosed that BDCs in
Port Harcourt, Kano, Abuja, Onitsha, Maiduguri, Benin and Enugu were yet
to buy dollars from banks.
He said the BDCs had been selling
dollars between N345 and N355 to dollar, far above the interbank rate,
because of the shortfall in supply.
The banks, he added, are supposed to sell to the BDCs on the same day within the week, but failed to do so.
“Instead of staggering the payment, the
banks should sell to the BDCs on the same week day, so that the impact
will be felt in the market.
“We also want the CBN to license new International Money Transfer Operators (IMTOs) to deepen the market.
“Our members across the country have
funded their accounts two weeks ago but the banks are not selling to
them. The BDCs that met the CBN’s policy guidelines on the disbursement
and were cleared by the banks have still not received a dime from the
banks,” he said.
Gwadabe called on the CBN to outsource
the dollar distribution role to an independent distributor since the
banks have failed in their assigned role.
“I think the banks are compromising the
policy and CBN’s directive on the matter. And like I said earlier, since
the banks are not co-operating, I expect the CBN to take that role from
them and assign it to a reputable independent distributor,” he said.
The CBN had directed authorised dealers
that are agents of approved IMTOs to sell foreign currency accruing from
inward money remittances to licensed BDCs.
The spot rate of the naira appreciated
on the interbank FX market to N308.73 to the dollar monday, as against
the N316.55 at which it closed last Friday.
The gains made by the naira on the
interbank market yesterday were attributed to dollar sales by the
central bank to some banks. Traders said the central bank selectively
sold dollars to commercial lenders just before the market closed.
The central bank remains the major
supplier of dollar in the market and has been selling the greenback
almost daily to boost liquidity as the naira continues to search for an
equilibrium price.
The CBN ditched its 16-month-old peg on
the naira last June and introduced a flexible exchange rate regime to
allow the currency to trade freely on the interbank market.
However, on the parallel market, the
naira closed at N396 to the dollar yesterday, slightly stronger than the
N396.55 to the dollar as of Friday last week.
Meanwhile, Nigeria’s search for an end
to its dollar shortage woes dimmed yesterday, when oil prices fell more
than two per cent from last week’s high, following expectations of more
crude shipments from Iraq and Nigeria, coupled with rising US oil rig
count and increased Chinese exports.
While Iraq’s plan to increase exports of
Kirkuk crude by 150,000 barrels per day this week from northern fields
weighed on prices, the weekend’s announcement by the Niger Delta
Avengers that it was ready for ceasefire and dialogue with the federal
government also raised expectations of oversupply in the international
market.
A prolonged ceasefire by the Avengers
will potentially lead to the recovery of over 700,000 barrels per day
that was shut in due to the attacks on oil facilities by the militant
group, thus adding to the oversupply in the market.
Minister of State for Petroleum, Dr. Ibe
Kachikwu, said recently that Nigeria would require an additional
900,000 barrels per day to achieve the 2016 production target.
A stronger dollar was also said to have
fuelled the price drop, as the currency rose yesterday against other
major currencies on increased expectations that the US Fed could raise
interest rates this year.
A stronger dollar makes oil, which is priced in dollars, more expensive for buyers using other currencies, reducing demand.
With the expectations of oversupply
weighing on the prices, the global benchmark, Brent crude yesterday was
down $1.34, or 2.6 per cent, at $49.54 a barrel, after hitting a
two-month high of $51.22 on Friday.
US West Texas Intermediate (WTI) crude’s
most active contract, October, fell $1.28, or 2.5 per cent to $48.32 a
barrel, after hitting a six-week high of $49.60 on Friday.
Reuters reported that China’s July
diesel and gasoline exports soared 181.8 per cent and 145.2 per cent
respectively, from the same month last year, putting pressure on refined
product margins.
Citing data from the oil service firm,
Baker Hughes, the Wall Street Journal also reported that the number of
rigs drilling for oil in the US has risen for eight straight weeks.
According to the data, US oil output has
fallen for more than a year after companies sharply cut spending on new
drilling, but higher oil prices in recent months have prompted some
companies to put new rigs to work.
US producers added 32 new rigs in
shale-oil regions in August, which could add 200,000 barrels a day of
new supply, according to an analyst at SEB Markets.
Oil rallied with few stops over the past
two weeks, going from a bear to bull market as it reversed a loss of
over 20 per cent in early August on speculation that Saudi Arabia and
the rest of the Organisation of Petroleum Exporting Countries (OPEC)
will agree to a production freeze with non-OPEC members.
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