CAPITALDIGEST DAILY NEWS, 08/5/2023

NIGERIA’S AVERAGE CRUDE OIL PRODUCTION CLIMBS 15% IN 2023 Despite its perennial underproduction in the last two years, Nigeria has been able to ramp up its crude oil output compared to its budget benchmark from an average of about 60 per cent to 75 per cent between H2, 2022 and Q1, 2023, data released by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has revealed. THISDAY analysis of production data showed that with a projection of 1.88 million barrels per day crude oil production in the 2022 federal budget, Nigeria under-produced to the tune of over 277 million barrels of the commodity between January and December 2022, leaving average production at 60 per cent. But with the renewed zeal to tackle oil theft and assets vandalism in the Niger Delta, the country managed has now managed to drill 115 million barrels of the commodity in the first quarter of 2023, raising the average to 75 per cent, a rise of about 15 per cent. Although an improvement on last year’s drilling, Nigeria has struggled to produce 39 million barrels, 36 .5 million barrels and 39.3 million barrels in the first three months between January and March this year. However, when condensate, which is excluded from the Organisation of Petroleum Exporting Countries (OPEC) computation is added, the country’s total production for the period jumped to 136.6 million barrels in the first three months of 2023. But when benchmarked against the OPEC quota of 1.8 million, the production percentage decreased, with Nigeria only able to produce about 70 per cent of its OPEC quota in Q1, 2023. It is however a significant improvement on the estimated 60 per cent it drilled in most part of 2022 when production fell to a record low. Most of the oil came from improvements in production from Forcados, which produced 6.8 million barrels, 6.9 million barrels and 5.7 million barrels respectively for the first three months of the year. But in 2022, the situation was worse, with Nigeria’s crude oil production when put side by side its expected output of 1.88 million barrels per day in 2022, being short by a whopping 283 million barrels, amounting to roughly $24.55 billion, a THISDAY reported earlier. This figure was arrived at when an estimated conservative price of $85 per barrel for which the commodity sold in the year under review, is multiplied by the 283 million barrels deficit recorded during the period. CBN TO AUDIT E-PAYMENT SYSTEM, WATCHLISTS 572 BANK CUSTOMERS The Central Bank of Nigeria, CBN, yesterday, said it will soon audit the nation’s payment system in order to cope with future growth in electronic banking transactions. The audit follows the challenges and widespread transaction failure experienced by bank customers due to the spike in the number of e-payment transactions during the naira redesign programme. Meanwhile, the apex has placed an e-payment ban on the Biometric Verification Number, BVN, of 572 bank customers for fraud related issues. Deputy Director, Payment System Department, CBN, Adewuyi Adeyemi disclosed this at the 34th CBN seminar for finance correspondents and business editors in Calabar, Cross Rivers State.He said: “In the last four years we have had a spike in transactions twice. First time was during COVID and January this year, during the currency redesign. Actually there are advantages and disadvantages to that spike in volume. “During the COVID, we had Payment System Vision, PSV 2020, where we were trying to drive e-payment adoption across many sectors of the economy. COVID actually pushed the bar because our target for e-payment transactions was actually exceeded. “The same thing happened this year. I can say we were actually not ready for the spike in volume we experienced during the naira redesign. That is one of the reasons why we decided internally that this year we should actually conduct an infrastructure audit based on the principle of Financial Market Infrastructure which is an international standard. “We have done it before. It was part of the PSV 2020. We did it in 2018. So we know how to do it. We are not doing it as CBN. We are actually hiring a foreign consultant to do it to ensure there is no bias. “The audit will give us an opportunity to benchmark our maturity level against international standards. That way we will be able to identify gaps in our infrastructure that we need to close if you really want to be there.” Meanwhile, Adeyemi also disclosed that CBN has placed an e-payment ban on the BVN of 572 bank customers due to fraud related issues. FOREX: TURNOVER IN I&E FALLS 46% TO $1.4BN The volume of dollars traded (turnover) in the Investors and Exporters (I&E) window of the foreign exchange market fell by 46 per cent, month-on-month (MoM) to $1.4 billion in April 2023 from $2.6 billion in March. This sharply contradicts the sharp increase recorded in March when the I&E turnover rose by 52.9 per cent from $1.7 billion in February. Vanguard analysis of monthly transactions in the window as published by FMDQ showed that turnover stood at $2.22 billion in January and fell by 22 per cent to $1.7 billion in February. Weekly analysis of transactions in April showed that turnover stood at $411.73 million in the first week of April and fell by 28 per cent to $293.25 million in the second week. In the third week of April, turnover rose by 27 percent to $375.02 and down by 14 percent to $320.47 million in the fourth week. Meanwhile, the naira appreciated by 50 kobo to N463 per dollar in the I&E window on April 28th from N463.5 per dollar traded on April 3rd, 2023. Similarly, the naira appreciated by N7 in the parallel market during the review period. Vanguard gathered from black market traders that the exchange rate for the market fell to N740 per dollar on April 28th from N747 per dollar on April 3rd, 2023.The decline in the I&E turnover in April may not be unconnected with the declining trend in the nation’s external reserves which persisted during the month.Data from the CBN showed that the external reserves fell by $246 million to $35.251 billion on April 28th from $35.497 billion at the end of March. Consequently the external reserve has fallen by 4.9 per cent or $1.83 billion since the end of 2022 when it stood at $37.083 billion. Against this background analysts projected depreciation of the naira in the coming months citing the depletion of the nation’s foreign reserve coupled with the CBN hike in inflation rate to 17.5 percent in January. According to analysts at Financial Derivatives Company, FDC said: “The constant depletion of the external reserves is a result of the CBN’s increased supply of forex to support the naira. IMF CAUTIONS AS ENAIRA TRANSACTIONS HIT N1.4M The Managing Director of the International Monetary Fund, Kristalina Georgieva, has cautioned about the unforeseeable “consequences” that could be brought about by the retail central bank digital currencies. Georgieva expressed her concern about retail CBDCs in a May 1 interview at the Milken Institute’s 2023 Global Conference. According to the IMF boss, the IMF considers retail CBDCs to have far more room for error than wholesale CBDCs. She said, “We think that wholesale CBDCs can be put in place with fairly little space for undesirable surprises, whereas retail CBDCs completely transform the financial system in a way that we don’t quite know what consequences it could bring.” According to a report by Cointelegraph, retail CBDCs are state-backed virtual currencies issued by central banks for use by consumers and businesses while wholesale CBDCs are similarly central bank-issued but are designed to allow financial institutions to carry reserve deposits with a central bank. The IMF MD noted that the organization was collaborating with about 50 countries to ensure best practices are adopted, which she expects to have a huge influence on banks and economies in the future. Earlier, the IMF had announced that it would publish a CBDC handbook to help central banks with CBDC design and implementation, a decision resulting from the unprecedented levels of interest from nations around the world. The eNaira introduction on October 25, 2021, made Nigeria one of the first countries in the world to develop a central bank digital currency, that is available to the public. Africa’s most populous nation joined the Bahamas and the Central Bank of the Eastern Caribbean on the coveted list. During the launch, the Governor, Central Bank of Nigeria, Godwin Emefiele, stated that the eNaira was presented after four years of research by the apex bank. The CBN defines the eNaira as a digital currency denominated in naira that serves as a medium of exchange and a store of value. The CBN governor claimed that 33 banks were successfully integrated into the eNaira network, with the apex bank minting N500m for the currency’s inauguration. NGX GROUP BLAMES 2023 POLLS, NAIRA SCARCITY FOR REVENUE DROP The Nigerian Exchange Group has said that the last general election and the Naira redesign policy of the Central Bank of Nigeria impacted its top-line revenue negatively, resulting in a 20.5 per cent decline to ₦1.33bn in the first quarter of 2023 compared to Q1 2022 revenue which was ₦1.67bn. This was disclosed in its unaudited results for the first quarter ended March 31 2023. The group said that it recorded “a 14.2 per cent year-on-year decline in gross earnings to ₦1.56bn (Q1 2022: ₦1.82bn), driven by a 20.5 per cent dip in revenue following a period of high economic and socio-political uncertainty. On the other hand, other income grew by 57.7 per cent, offsetting the drop in revenue. “The group’s top-line revenue fell by 20.5 per cent driven primarily by reduced business transactions and consumer spending that resulted from the recently concluded general election and the CBN’s attempt to phase out Nigeria’s old higher denomination of banknotes.” Transaction fees, which accounted for 51.5 per cent of revenue, dropped by 30.6 per cent YoY to ₦685.9 m (Q1 2022: ₦988.1 m) due to reduced business activities. Treasury investment income (31.1per cent of revenue) also dropped to ₦414.7 m in Q1 2023 (Q1 2022: ₦520.5 m), primarily driven by relatively lower yields on the Group’s treasury investment portfolio owing to the unfavourable market conditions and uncertainties during the general election period. However, the Group recorded a 44.6per cent listing fees growth to ₦179.2 m in Q1 2023 from ₦123.9 m in Q1 2022. Growth in listing fees was driven by increased demand for listing services by domestic firms. Also, rental income (2.7per cent of revenue) earned from NGX Real Estate, lease of office floor spaces, recorded a 32.2per cent increase to ₦36.0 m in Q1 2023 from ₦27.2 m recorded in Q1 2022. Other fees representing rent of trading floor, annual charges from brokers, dealing licenses, and membership fell by 1.2per cent to ₦16.5 m in Q1 2023 (Q1 2022: ₦16.9 m).