By Babajide Komolafe, Henry Umoru, Joseph Erunke & Michael Eboh
The Naira appreciated yesterday to N302 per dollar in the parallel market, thus halting three days of sharp depreciation even as the price of Nigeria’s reference crude oil grade, Bonny Light, slid below the $30 per barrel mark, dropping to $29.47 per barrel.
Meanwhile, following the increasing depreciation of the Naira, the Senate, yesterday, summoned the Central Bank of Nigeria, CBN, Governor, Godwin Emefiele, to appear before it next week.
From N305 per dollar, Wednesday, the parallel market exchange rate dropped to N302 per dollar at the close of business yesterday, indicating N3 appreciation.
President, Association of Bureaux De Change Operators of Nigeria, ABCON, Alhaji Aminu Gwadabe, said that the appreciation was occasioned by drop in demand for foreign exchange and indications that CBN might review its decision to stop dollar sales to bureaux de change, BDCs.
The naira depreciated in the parallel market by N25 naira between Monday and Wednesday, following the announcement by CBN on Monday to stop sales of dollars to BDCs.
Earnings dip
Also, the price of Nigeria’s reference crude oil grade, Bonny Light, slid below the $30 per barrel mark, dropping to $29.47 per barrel, according to data obtained, yesterday, from CBN.
This was even as the price of Brent crude, the benchmark crude oil grade, rose to $30.77 per barrel in the international market. Brent crude had dipped below $30 a barrel on Wednesday, for the first time in more than 10 years, a day after the U.S. benchmark took a similar fall.
Specifically, Brent traded as low as $29.96 a barrel before settling down 55 cents, or 1.8 percent, at $30.31 a barrel on ICE Futures Europe, the lowest settlement since April 2004.
Therefore, using an average crude oil production of 2.2 million barrels per day, as stated by CBN, it is expected that the total amount accruable to the Federal Government and oil companies in Nigeria on a daily basis would dip to $64.83 million, about N12.967 billion daily, using an average exchange rate of N200 to a dollar.
Job loss at BP, Shell, Chevron
Consequently, as a result of the continuous decline in the price of Nigeria’s Bonny Light and other crude oil grades, experts are predicting massive job cuts in the Nigerian and global oil and gas industry in the next couple of days.
Already, the world’s biggest oil companies are slashing jobs and discontinuing major investments, especially as the price of crude falls to new lows.
A report obtained from the Associated Press noted that companies that would be affected by the declining oil price would not only be the big oil producers, but the numerous companies that do business with them, such as drilling contractors and equipment suppliers.
Particularly, companies like BP, which had earlier in the week said it is cutting 4,000 jobs, had already commenced trimming down their operations to cope with the slump in oil, whose price had plummeted to its lowest level in 12 years and is not expected to recover significantly for months, possibly years.
The report had quoted Chevron as saying last year that it would eliminate 7,000 jobs, while Shell announced 6,500 layoffs.
Furthermore, some analysts are forecasting a drop near $10 a barrel, making companies to brace up for more trouble.
In particular, Michael Hewson, chief market analyst at CMC Markets, said: “Calling the bottom in a market is always dangerous, akin to catching a falling knife. But when the clamour for lower prices becomes a stampede, warning signs and alarm bells tend to start going off, which suggests that a more prudent approach might be advisable.”
The uncertainty, the report said, is making companies think twice before sinking money into new oil projects.
“On the North Sea, there is a standstill in the new project, which may create a hole in the pipeline of projects next year,” said Florent Maisonneuve, Managing Director and co-head of Oil & Gas at AlixPartners in Paris.
Subsequently, CBN had in its Economic Report for the Month of October 2015, put the average price of Nigeria’s reference crude, Bonny Light at $49.23 per barrel in October, indicating a 1.3 percent increase relative to the level in the preceding month.
The Nigerian National Petroleum Corporation, NNPC, on the other hand, had stated that of the 18.24 million barrels of crude oil lifted on the account of NNPC in October 2015, 12.07 million barrels and 6.17 million barrels were for domestic and export markets, respectively.
It said: “At an average oil price of $47.45 per barrel and exchange rate of N195.95 to a dollar, the domestic crude oil lifted by NNPC is valued at $572.998 million or a Naira equivalent of N112.279 billion for the period.
“The remaining crude oil lifted for export was valued at $305,856,048.03 at an average price of $49.58/barrel. The total value of crude oil lifted on the account of NNPC in October, 2015 was thus $878.854 million.ý”
Meanwhile, concerned by the increasing depreciation of the Naira, the Senate, yesterday, summoned the CBN Governor, Godwin Emefiele, to appear before it on Tuesday next week at 11a.m., to explain the continuous weakening of Naira against the Dollar.
The development was sequel to a Point of Order raised by the Leader of the Senate, Ali Ndume, APC, Borno South.
The Senate President, Bukola Saraki, who presided over the plenary where the issue was raised, having listened to Senator Ndume, subsequently directed Ndume to convey the Senate’s resolution to the CBN governor.


http://www.vanguardngr.com/2016/01/depreciation-of-naira-senate-summons-emefiele/


Lalasticlala

If they dare remove Emefiele Naira will further depreciate to 500 to 1dollar.
The problem is not him but PMB.
The way PMB is running the economy, investors are scared away.
Pretending to be fighting corruption but opening other leakages.

Why is the man looking like 'chinko'?

In summary

The currency had sunk to a record low of 300 per dollar at the parallel market on Tuesday, a day after the Central Bank of Nigeria stopped dollar sales to Bureau De Change operators.

The exchange rate of the naira to the greenback stood at 199.45 at the official interbank market on Wednesday,

The market is dry. It is very difficult for the BDCs to get dollars now. Banks are not selling; oil companies are not allowed to sell to us; exporters are not allowed to sell to us.

With pressure on foreign reserves and oil prices at $30 per barrel, devaluation is now unavoidable. The issue will be the quantum and methodology,”

The CBN had on Monday said it would no longer provide foreign exchange to the BDC operators, adding that with the continued depletion of the foreign reserves, such funding was no longer sustainable.


The CBN Governor, Mr. Godwin Emefiele, had said that between July 2014 and January this year, the country’s external reserves had suffered a great pressure from speculative attacks, round-tripping and front-loading activities by actors in the foreign exchange market.

These, he noted, had led to a decline in the reserves from $37.3bn in June 2014 to $28bn currently.

Hope some people know what the parallel market is.

Dangote said 500 naira to 1 dollar.

Gradually,

We are getting there.

This man clueless like person way appoint him.

PMB please comot this man, he is the weak link in your economy team

exactly wot u get when d head is sick... buhari has got little or no idea as regards to managing d nation economy.... as such d CBN leadership can not do otherwise ... naira wil hit 500 soon.

Our economy is in shambles. Buhari is not only a dullard but a clueless dullard.

The President should also be invited to tell them why we've not seen N1 to $1 as he promised (lied) in his campaign manifestos. Am not a financial expert, but I can assure you that by making that comment, Buhari and APC initiated a third world war that World Bank and IMF cannot reconcile easily between the Dollar and the Naira . Imagine how that comment would've sounded in Obama's ear

But Buhari said that He will make 1 dollar=1 Naira.

The second bubu declared that he would make N1=$1 l knew he would be an economic disaster

Less than one year to his tenure I was proven right

How can we be going down daily and some people are still praising this govt. I import some of my wares and for sometime now I can't break even because the clients are not ready to shoulder the extra add on

Wow buhari is archiving 305 to a dollar... we making progress I believe it'll still get to 700 to a dollar... free advice run from nigeria as for me India loading

THAT DUDE SHOULD BE SACK ASAP.

WE HAD AN INTELLECT AS CBN GOVERNOR (SANUSI) BUT THE CLUELESS DUDE HAD TO TERMINATE HIS TENURE BRINGING IN THIS MOFO

Hmmmm...

Blaming the CBN Governor for the fate of the Naira is like blaming the management of Chevron for sacking 7,000 employees and reporting a 40% reduction in earnings - all due to record low oil prices. The sad truth is that certain economic events will always follow certain market realities.
---
Our senators need to understand the interwoven nature of economic variables. The currency of every major oil exporting country is depreciating like hell. Even heavyweights like Saudi Arabia, Canada, Russia, Norway, etc with huge FX Reserves (in excess of $500bn) are suffering currency devaluation. Is it an import-dependent Nigeria with Reserves of $28bn that will not suffer currency devaluation? Is it the CBN Governor that authorized that our small dollars be shared to politicians? Is it CBN that said we should not invest in infrastructure to support local manufacturing? Is CBN responsible for our craze for foreign goods?
---
My only grouse with the CBN Governor is that he should converge the prices at the parallel and official market by officially devaluing the Naira. The current divergence (~N100) is providing banks with arbitrage opportunities for exploiting their customers. An official exchange rate in the region of N240 - N260 might be appropriate for now.
---
What Nigeria needs right now are real & clear Import Substitution policies/programs to reverse our craze for foreign goods. This will reduce the demand for dollars and consequently reduce the pressure on the Naira. That is not the job of Monetary authorities but that of Fiscal authorities. They should be summoning Kemi and Enelamah (the guy in charge of Trade & industries).

I think the problem of the economy has nothing to do with the leadership, but I believed it was as a result of the the drop in the prices of oil coupled with our lack of productivity. We as a nation must learn to patronize the made in Nigeria products. That is the only way we can go out of this problem.

I am a Wailer, however, I know deep within me it is not the fault of either PMB or Emefiele but our glut for foreign made products that can be obtained locally.
I also feel that government should take the responsibility of showing the example of what it means to patronize locally made goods. But I do not see that happening now with the level of greed and vanity among our political office holders I do not see that coming to pass in the nearest future. So I think we should all brace up for very rough times.


God Bless Nigeria.
God Bless me

Keep summoning. You never see something. It's going to #500 per $1 on or before 30/06/2016.

Bevista:
Blaming the CBN Governor is like blaming the management of Chevron for sacking 7,000 employees and reporting a 40% reduction in earnings - all due to record low oil prices.
---
Our senators need to understand the interwoven nature of economic variables. The currency of every major oil exporting country is depreciating like hell. Even heavyweights like Saudi Arabia, Canada, Russia, Norway, etc with huge FX Reserves (in excess of $500bn) are suffering currency devaluation.
---
My only grouse with the CBN Governor is that he should converge the prices at the parallel and official market by officially devaluing the Naira. The current over N100 divergence is providing banks with arbitrage opportunities for exploiting their customers. An exchange rate in the region of N240 - N260 might be appropriate for now.
---
What Nigeria needs right now are real & clear Import Substitution policies to reverse our craze for foreign goods. This will reduce the pressure on the Naira. That is not the job of Monetary authorities but that of Fiscal authorities. They should be summoning Kemi and the guy in charge of Trade & Investments.

kai my guy you're enlightened. your detection of the responsibilities of the monetary and fiscal authorities gave you away..You must be an economist.

Bevista:
Blaming the CBN Governor is like blaming the management of Chevron for sacking 7,000 employees and reporting a 40% reduction in earnings - all due to record low oil prices.
---
Our senators need to understand the interwoven nature of economic variables. The currency of every major oil exporting country is depreciating like hell. Even heavyweights like Saudi Arabia, Canada, Russia, Norway, etc with huge FX Reserves (in excess of $500bn) are suffering currency devaluation.
---
My only grouse with the CBN Governor is that he should converge the prices at the parallel and official market by officially devaluing the Naira. The current over N100 divergence is providing banks with arbitrage opportunities for exploiting their customers. An exchange rate in the region of N240 - N260 might be appropriate for now.
---
What Nigeria needs right now are real & clear Import Substitution policies to reverse our craze for foreign goods. This will reduce the pressure on the Naira. That is not the job of Monetary authorities but that of Fiscal authorities. They should be summoning Kemi and the guy in charge of Trade & Investments.

This is very smart reasoning, but you see the implication of directly devaluing the Naira will create an increase in inflation and high cost of goods and services. From the ''Body Language'' of Mr President, he seems to enjoy a socialist kind of economy which is one of the high points of his campaign promises. Going by this, the devaluation may not be approved by the president. The continual drop in the value of the naira will also mean that our foreign reserves will be depleted in time.
So what then is the way out, to me it will start with a sincere approach to a new policy aimed at first reducing cost of running government with a honest example and not a propaganda and selfish approach as we are currently seeing.
For example, I heard that couple of BMWs will be purchased by the presidency this year as highlighted in the 2016 Appropriation Bill sent to the National Assembly. I see no reason why locally made vehicles like Innoson and others should not be used instead.
This is why I am saying that it will start with a honest example by the presidency to turn around events in the nation.

saintopus:
This is very smart reasoning, but you see the implication of directly devaluing the Naira will create an increase in inflation and high cost of goods and services. From the ''Body Language'' of Mr President, he seems to enjoy a socialist kind of economy which is one of the high points of his campaign promises. Going by this, the devaluation may not be approved by the president. The continual drop in the value of the naira will also mean that our foreign reserves will be depleted in time....

You see, the Body Language of the president is completely irrelevant when market forces are at play. He needs to stop having a DEFINITIVE position on what the exchange rate should be. There are so many variables and moving pieces outside his control.
---
On inflation, what do you think is going to happen when 70% of the market sources dollars at N300 to import? Are those importers not going to pass on the interest rate differential to consumers by virtue of price increase? Sooner or latter, HEADLINE inflation will increase. They may try to subdue CORE inflation for a while due to the steady nature of price of PMS.
---
Devaluing the Naira will naturally curb demand and create a new equilibrium. The key will be choosing an appropriate price where supply can clear demand. That way, the bank will not have to worry about depleting Reserves. But yes, I agree, Core inflation will shoot up.

Unfortunately, Kemi Adeosun is sitting duck like an America F-35 jet

its simple to explain...nigeria doesnt have enough external reserves.....

what we dont want to understand is,when interacting with the world,you need dollars...our naira is worthless internaionaly without buying dollars...

you can not buy a car in england with nairas....you need dollars or pounds...that is were our extern reserves comes in play..but we are depleting the extern reserves rapidly....

your nairas are worthless internationaly!!!........this is not cbn`s fauhlt....this is our fauhlt,we the people that love international goods,and hate local goods....

jimikata:
Why is the man looking like 'chinko'?

na chinko government him dey now.

buzquet:
This man clueless like person way appoint him.

PMB please comot this man, he is the weak link in your economy team

abeg keep quiet there...when he was there with the person that appointed him was the naira depreciating like this? Don't make yourself a zombie...

What is there to explain? We import everything from fuel to food, from Champaign to hankerchief and from cotton bud to matches, Meanwhile Oil our main (if not our only) foreign exchange earner, Crude oil, is selling just above $30. Where do you want Emefiele to get dollars to support the Naira from? As long as oil is on a free fall, Naira will follow. You do not need to be an economist to know this.

this central bank governor inherited cluelessness from his former boss. sack him now and appoint someone in the class of soludo. since they are all from the same region, no one will cry of marginalisation.



my 2 cents

kk

Jesus

It seems that Buhari's promise of $1 = #1 was also affected with the 'change'..