CAPITALDIGEST DAILY NEWS, 24/7/2023

NNPCL MONOPOLY ENDS AS MARKETER’S FUEL VESSEL ARRIVES First batch of petrol, 27 million litres imported by an independent marketer has arrived in the country, putting an end to a downstream monopoly market once enjoyed by the Nigerian National Petroleum Company Limited. The vessel, ST Nnene earlier billed to arrive since last week, but was held down off Lome waters due to adverse weather, birthed at Ijegun-Egba on Wednesday following the official end to subsidies by President Bola Tinubu on May 29. ST Nnene, The PUNCH gathered, had cost Emadeb Energy’s Chief Executive Officer, Adebowale Olujimi, and its bank partners of $17m (about N13b) to hire. Five financial institutions- Polaris, First Bank, Union Bank, Access Bank and Fidelity bank had bankrolled the deal .This was as foreign exchange rose from N745 to one dollar three weeks ago, to N845 as of Tuesday, and crude price rising to $80 per barrel as of 1:45pm Nigerian time on Wednesday. Until now, state oil firm NNPCL had enjoyed a monopoly downstream market for years. The firm had singlehanded imported petrol consumed in-country, and had dictated prices. Since the end of subsidies which cost the country about N12tn, prices of petrol had risen from an average of between N180/N200 per litre, to N614 per litre as of Tuesday. While speaking at the ceremony, Olujimi said petrol importation was no longer sustainable. According to him, resuscitating local refining was the way to go. He said, “Petrol importation is not a sustainable way for a country to run. From what we saw yesterday when PMS price rose to over N600 per litre, it is an indication that the dynamics of the business is a tough one. It requires huge US dollars to bring in this. The way forward is for local refineries to be revived,” he said. Representing the Chief Executive Officer, the Nigerian Midstream and Downstream Petroleum Regulatory Authority, Farouk Ahmed, Sadiq Bashir, explained that the development was an important milestone since the downstream sector was deregulated. He said, “This is what we have been looking forward to. When we talk about deregulation, people think it’s all about increasing prices. No. Although prices would now be determined by market dynamics, deregulation also opens up the market for other players to come in. STRONG DOLLAR DECREASES ECONOMIC OUTPUT IN NIGERIA, OTHERS — IMF The International Monetary Fund has said a 10 per cent appreciation in the dollar, linked to global financial market forces, decreased economic output in emerging market economies including Nigeria by 1.9 per cent. It noted that this decline persisted for two and a half years. The IMF announced that the US dollar strengthened to a 20-year high in 2022, with major implications for the global economy. According to the IMF, a strong dollar meant that trade and financial channels in emerging market economies like Nigeria were affected. It said, “Their real trade volumes decline more sharply, with imports dropping twice as much as exports. Emerging market economies also tend to suffer disproportionately across other key metrics: worsening credit availability, diminished capital inflows, tighter monetary policy on impact, and bigger stock-market declines.” The Washington-based lender noted that US dollar appreciations impacted the current accounts of these countries. It explained that current accounts captured the change in saving-investment balances of countries. It stated, “As a share of Gross Domestic Product, current account balances (saving minus investment) increase in both emerging market economies and smaller advanced economies, because of a depressed investment rate (there is no clear systematic response for saving). However, the effect is larger and more persistent for emerging market economies.” NEW CBN RULES NECESSARY FOR BANKING SECTOR GROWTH The CBN recently introduced new guidelines in a circular to all commercial, merchant, non-interest and payment service banks, and financial holding companies, titled ‘Corporate Governance Guidelines’, which was signed by the Director, Financial Policy and Regulation Department, Chibuzo Efobi. In the guidelines, the CBN extended the tenure of the managing directors of banks to 12 years, prohibited having more than two members of an extended family on the board of a bank and stated that the acquisition of up to five per cent stake in a financial holding company would require the central bank’s approval. Commenting on this, Prof Olawale Ajai of the Lagos Business School, said though the CBN’s new guidelines seemed adhoc, they were timely. “Although the guidelines appear adhoc and piecemeal, they are fitting responses to challenges and developments in the industry. The fact that they are soft laws suggest that they do not represent the final position and are meant to side-step any contention of colourable attempt to override BOFIA 2020,” he said. He pointed out that one of the objectives of the banking consolidation of the CBN was to terminate what he described as “papa and mama” banks, or closely held family bank businesses. “It did not seek to and could not eliminate closely held controlling shareholding or groups, a natural possible outcome of market consolidation. Yet, BOFIA 2020 has provisions to minimise the corporate governance risks from such developments,” he stated. The professor, however, urged the regulator not to stifle or micromanage shareholders’ democracy and legitimate market capitalism. “It (regulator) must always have the latitude to check anticompetitive practices, monopolism, speculators and ‘dark wolves’ (operators with tainted funds or crass corporate raiders). “The new guidelines should allow for flexibility and exercise of legitimate liberal market capitalism in keeping with the rule of law. The CBN must avoid using power to pursue adhominem policies against specific individuals, however,” he stated. Speaking with our correspondent on the matter, the Chief Executive Officer, Enterprise Stockbrokers, Rotimi Fakayejo, said the extension of the tenure and restrictions on ownership of controlling stakes in FHCs were needed. NAIRA APPRECIATES, EXCHANGES FOR 793.70/$ The naira appreciated against the United States dollar on the Investor & Exporter forex window on Wednesday, closing at 793.70/$. The local currency had earlier traded at N825 a week earlier on the I&E window. According to figures obtained from the FMDQ, the trading, which commenced at 778.07/$ on Wednesday reached a high of 853/$ before closing at 793.70/$.The trading also recorded a turnover of $87.19m as of the end of trading. Some Bureau de Change operators who spoke to our correspondent said the dollar was bought and sold at N820 and N825 at the parallel market. The Central Bank of Nigeria, in recent weeks, directed Deposit Money Banks to remove the rate cap on the naira at the I&E window to allow for a free float of the national currency against the dollar and other global currencies. The banking regulator explained its new forex operation in its report on ‘Understanding the operational changes to the foreign exchange market’ By collapsing all segments in the FX market into the I&E window, it said this meant all eligible FX transactions in the market would only be done via the I&E window, as all other windows ceased to exist. “The I&E market functions by a willing buyer, willing seller system, where an entity with demand for FX seeks out another entity with FX to sell at an agreed price through an authorised dealer,” the CBN stated. On the concept of the willing buyer and willing seller model, it explained that the rates were mutually agreed by both parties. The CBN said PTA, BTA and other invisible transactions would continue to be accessed through the banks at the prevailing market rate. BANKS’ CREDIT TO ECONOMY RISES 11% TO N84TRN Banks’ net domestic credit to the economy has hit N84 trillion representing an 11 percent Month-on-Month, MoM, rise fromN75.49 trillion in May. The breakdown, according to the Money and Credit Statistics of the Central Bank of Nigeria, CBN, released yesterday, shows that the private sector took N52.8 trillion, showing about 17.9 percent rise from the N44.78 trillion it collected in May 2023. The statistics also show credit to the government rose by 1.6 percent to N31.2 trillion from N30.7 trillion during the period. On the other hand, the data also showed that currency-in-circulation (CIC) rose MoM by 4.0 percent to N2.6 trillion in June from N2.5 trillion in May. The rising trend was also reflected in currency outside bank which grew by 4.15 percent to N2.26 trillion from N2.17 trillion in May. Both CIC and currency outside banks have been on the rise since February 2023 when the Supreme Court ordered that the old N200, N500 and N1,000 will remain legal tender till December 31st, 2023. When CBN releases currency into circulation it is meant to be used and after a period of time, it returns to the CBN, thereby keeping the the volume of currency in circulation under the firm control of the CBN. When the apex bank was executing the Naira redesign, it succeeded in recovering about N1.9 trillion into its vaults, leaving about N900 billion CIC.