Naira Sinks to N418/$, But Demand for Nigerian Crude Remains Strong

CBN licenses 11 international money transfer operators

Ejiofor Alike and Obinna Chima with agency report
With speculative pressure on the parallel market refusing to abate, the naira continued to head south in the market yesterday, where it fell to a record N418 to the dollar.

The situation was largely attributed to the suspension of eight banks from the forex market since last week Tuesday, due to their inability to return the Nigerian National Petroleum Corporation (NNPC)/Nigerian Liquefied Natural Gas (NLNG) Company dollar deposits to the Treasury Single Account (TSA) domiciled with the CBN.

The banks – First Bank of Nigeria (FirstBank) Limited, Diamond Bank Plc, Sterling Bank Plc, Skye Bank Plc, Fidelity Bank Plc, Keystone Bank Limited, First City Monument Bank (FCMB) Limited, and Heritage Bank Limited – were yet to remit a total of $1.804 billion NNPC/NLNG funds to the TSA as of yesterday.

Since their suspension, the naira has falen steadily due to strong demand for the greenback by customers of the eight banks banned from the official forex market.

It was gathered that a lot of them resorted to the parallel market for dollar purchases to meet pressing obligations, as they await the resolution of the matter between the banks and the CBN.
However, the spot rate of the naira on the interbank market closed at N318.14 to the dollar, marginally higher than the N318.83 at which it closed the previous day.

The performance of the naira on the interbank forex market was attributed to an intervention by the central bank, which sold around $1.5 million yesterday to support the currency.

Also, in furtherance of its efforts to liberalise the foreign exchange market, to ensure liquidity, and make FX readily available to low end users, the CBN yesterday disclosed that it has licensed 11 more International Money Transfer Operators (IMTOs) to operate in Nigeria.

The central bank, in a statement signed by its acting Director, Corporate Communications, Isaac Okorafor, said the move was in line with the existing guidelines on International Money Transfer Services in Nigeria (2014).

The newly registered IMTOs are Trans-fast Remittance LLC, Worldremit Limited, UAE Exchange Centre LLC, Wari Limited, Homesend S.C.R.L, Small World Financial Services Group Limited, Weblink International Limited, Cashpot Limited, DT&T Corporation Limited, FIEM Group LLC DBA PING Express, and CP Express Limited.
CBN also reiterated its commitment to providing an enabling environment for international money transfer services in Nigeria.

Crude Demand Still Strong
Meanwhile, the demand for Nigeria’s crude oil has remained strong, despite a spate of attacks on oil and gas facilities in the Niger Delta, including yesterday’s attack by an Urhoboland-based group, Niger Delta Greenland Justice Mandate in Delta State.

This is coming as Iraqi Prime Minister Haider al-Abadi stated that his country would support any decision by the Organisation of Petroleum Exporting Countries (OPEC) to cut production to ensure recovery of prices.

The latest militant attack is coming days after the most dreaded militant group in the oil-rich region, Niger Delta Avengers (NDA), said it had declared a ceasefire.

Nigeria’s oil production has slumped by around 700,000 barrels per day due to the destruction of oil and gas facilities by the Niger Delta Avengers, which had claimed responsibility for most attacks in the region.

However, the new militant group said it attacked the Ogor-Oteri pipeline, operated by Nigerian Petroleum Development Company (NPDC), a subsidiary of the Nigerian National Petroleum Corporation (NNPC) and Shoreline Natural Resources, which owns 45 per cent stake in Oil Mining Lease (OML) 30.

While the spokesman of NNPC, Mr. Garba Deen Muhammad said the attack was being investigated, the Niger Delta Greenland Justice Mandate said the attack actually took place at around 03:00 a.m. (0200 GMT) yesterday.

Despite the attacks, Reuters reported that Angolan and Nigerian crudes were offered at high levels, although potential buyers argued in favour of lower prices, citing weaker refining margins and higher freight costs.

While Shell’s Forcados and Bonny Light, ExxonMobil’s Qua Iboe and Agip’s Brass River crude grades remain under force majeure, other grades were said to have received strong offers.

For instance, Bonny Light was said to have been offered at dated Brent plus $2.80 per barrel, with oil marketing company, Sahara Group moving a cargo of Erha grade meant for end of September.
However, in an effort to prop up prices, Iraqi Prime Minister Haider al-Abadi yesterday told a news conference in Baghdad that Iraq would support a decision by OPEC to freeze oil output.

“We are with freezing production at the OPEC meeting,” he said, in the clearest indication yet about the position Iraq will support when the oil exporters’ group meets next month.
OPEC members are due to meet informally in Algeria on the sidelines of the International Energy Forum (IEF) on September 26-28.
Iraq, OPEC’s second-largest producer after Saudi Arabia, has previously sent contradictory signals about its position.

Oil Minister Jabar al-Luaibi last week said Iraq plans to play “a very active role” with other OPEC members to support prices while at the same time expanding its own output, which now stands at about 4.6 million barrels per day.
Iraq funds 95 per cent of its budget through oil sales and its economy is reeling under the double impact of lower crude prices and the cost of fighting the Islamic State, the terrorist group that overran swathes of its territory two years ago.