Business
NAFEM Records Soaring Dollar Supply As Banks Sell $440m
In a noteworthy development, the official foreign exchange market experienced a remarkable surge in dollar supply, skyrocketing by an impressive 180.59 percent to reach $440.13 million on Friday.
The week concluded with the naira standing at N1435.53/$ after navigating through a turbulent economic landscape.
Data from FMDQ Security Exchange unveiled a substantial uptick in forex turnover, recording $440.13 million on Friday, a substantial rise from the previous day’s $156.86 million.
Noteworthy contributors to this surge include not just commercial banks but also the Central Bank of Nigeria, oil firms, and multinationals participating in dollar sales at NAFEM.
This surge in liquidity can be attributed to strategic moves by the Central Bank of Nigeria aimed at steadying the foreign exchange rate.
The naira experienced a week of fluctuations, reaching an intraday high of N1526/$ and a low of N838.96/$ before ultimately settling at N1435.53/$ on Friday.
In the parallel market, Friday witnessed the naira closing at N1,420/$, underscoring a consistent demand for the U.S. dollar in this segment of the financial landscape.
Last week, the central bank issued new circulars and guidelines with the aim of boosting liquidity and reducing the gap between the parallel and official rates in the foreign exchange market.
In a significant move, the CBN directed banks to modify their foreign exchange exposures, expressing concern about the increasing trend of banks holding substantial foreign currency positions in its circular titled, “Harmonisation of Reporting Requirements on Foreign Currency Exposures of Banks.”
It said, “The Central Bank of Nigeria has noted with concern the growth in foreign currency exposures of banks through their Net Open Position (NOP).
“This has created an incentive for banks to hold excess long foreign currency positions, which exposes banks to foreign exchange and other risks.”
The Central Bank of Nigeria (CBN) has issued a mandate stipulating that banks’ Net Open Position (NOP) should not surpass 20 percent short or remain at 0 percent long in relation to the bank’s shareholders’ funds moving forward.
Those banks that have exceeded this limit are required to rectify their positions by the deadline of February 1, 2024, as per the directive from the CBN.
A high-ranking bank executive, speaking anonymously to The PUNCH, revealed that the recently introduced circular is anticipated to compel banks to sell approximately $5 billion.
The banker said “Just as some Nigerians prefer to keep their money in dollars because the naira is not a good store of value, banks also hold excess dollar liquidity to make gains. They do their own at the institutional level.
“What the CBN is saying with this new circular is that you cannot hold excess dollar liquidity again. Any foreign exchange you are holding must be committed to something, a transaction, or an obligation you can prove. Banks have made a lot of revaluation gains.
“Some banks, I believe, got approval under the last administration to hold more dollars than the requirement. The idea is that if banks sell all these excess dollars, there will be liquidity and the exchange rate will stabilise. Foreign investors will come in.”
Shell Nigeria Exploration and Production Company Ltd (SNEPCo) has taken a major step towards empowering Nigerian contractors with the launch of a $3-billion Contract Finance Facility in partnership with nine leading Nigerian banks.
A company statement has it that the facility is designed to provide credit support for local contractors executing projects for SNEPCo operations and will be available in both Naira and US Dollars.
The participating banks are First Bank, Guaranty Trust Bank, Zenith Bank, Access Bank, United Bank for Africa, Stanbic IBTC, Standard Chartered Bank, First City Monument Bank and Fidelity Bank, it added.
Speaking at the signing of the Memorandum of Understanding (MoU) in Lagos, the SNEPCo Managing Director, Ronald Adams said, “the initiative reflects the spirit of the Nigerian Oil and Gas Industry Content Development Act, which is aimed at in-country value retention. Our partner banks offer capital and discipline. SNEPCo brings contracts and domiciliation of payments that de-risk lending. On their part, the contractors provide performance. Each is accountable to others, and the mutual accountability gives the arrangement its strength.”
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Also, at the signing ceremony, the Vice President Finance, Shell Nigeria, C. J. Akwaeze, said the scheme reflects Shell’s commitment to the growth of oil and gas operations in Nigeria.
The chairman of indigenous oil and gas contractor group PETAN, Wole Ogunsanya, represented by Dr Joan Faluyi, lauded the scheme as a “gateway to unlocking contractor financing issues which will also drive efficiency in contract execution.”
Representatives of the banks commended SNEPCo for the opportunity to partner on an initiative aimed at empowering contractors and assured the company of their continued support and cooperation.
Nigerian companies have continued to play key roles in supporting SNEPCo’s operation and project execution. Early this year, 43 wholly Nigerian companies took part in the turnaround maintenance exercise at the Bonga Floating Production and Offloading (FPSO) vessel out of the total of 53 companies involved.
The Contract Finance Facility is expected to further boost the capacity of Nigerian companies to deliver even more value in the operations of Nigeria’s premier deepwater producer.
The national oil company of the Republic of Congo, the Société Nationale des Pétroles du Congo (SNPC) and Dangote Petroleum Refinery & Petrochemicals (DPRP) are discussing a strategic partnership aimed at strengthening the Republic of the Congo’s supply of refined petroleum products.
The parties also have on the agenda, advancing regional energy cooperation and industrial integration across Africa, Biztellers can report.
SNPC Managing Director, Maixent Raoul Ominga, who led a delegation from his country on a visit to the DPRP, described the facility as a strategic asset for Africa and expressed the national oil company’s interest in developing a long-term partnership with Dangote.
“We have visited this remarkable refinery, which represents a major industrial achievement for Africa. The Republic of the Congo has refining capacity and we are keen to explore strategic cooperation that will help strengthen the supply of refined petroleum products while creating value for both organisations,” Ominga said.
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Discussions between both organisations, he said, focused on opportunities for collaboration in refining, petroleum products supply, energy security, industrial development, and knowledge sharing.
He praised the Dangote Group for demonstrating that Africa can successfully finance, build and operate world class industrial infrastructure, describing the refinery as an important milestone in the continent’s industrial transformation.
Ominga also commended the Group’s investments in the Republic of the Congo, particularly in the cement sector, noting that they have strengthened local industrial capacity, expanded production and improved access to construction materials.
On his part, President and Chief Executive of Dangote Industries Limited (DIL), Aliko Dangote, reaffirmed the Group’s commitment to Africa’s industrialisation through value addition, regional partnerships and investment across the continent.
“We are for Africa, not just Nigeria. Tell us what you need, and we will see how we can work together,” Dangote said.
He noted that the refinery has established a new benchmark for fuel quality in Africa by producing petroleum products that meet the highest international specifications, while improving access to cleaner fuels and reducing the continent’s dependence on imported refined products.
In the same vein, the Vice President, Oil and Gas, DIL, Devakumar Edwin, outlined the Group’s long term expansion strategy, which will increase its total refining capacity to 2.1 million barrels per day, comprising 1.4 million barrels per day in Nigeria and a planned 700,000 barrels per day refining complex in Kenya to serve East African markets.
He also disclosed plans by the Group to invest an additional US$46 billion between 2026 and 2028 across its refining, cement and fertiliser businesses as part of its drive to accelerate industrialisation across Africa.
The engagement underscores the shared commitment of SNPC and the DPRP to deepen African energy cooperation, strengthen regional value chains and promote greater self sufficiency in refined petroleum products as the continent advances towards enhanced energy security and increased intra African trade.
Also present at the meeting were Group Executive Director, Commercial, Oil and Gas, DIL, Fatima Aliko Dangote; Adviser to the President of the Republic of the Congo, Peggy Ndongo and advisers to the SNPC Managing Director, Aymar Ebiou and Norbert Mabiala.
As part of efforts to protect Nigeria’s oil revenues and energy infrastructure, the Nigerian Navy recently recovered approximately 22,870 litres of suspected illegally refined Automotive Gas Oil (AGO) in Rivers State.
It was gathered that the value of the seized petroleum product is put at about N39 Million.
The seizure, carried out under Operation Delta Sentinel, is part of an ongoing security intervention designed to disrupt illicit petroleum supply chains which the Navy says continue to undermine government earnings and legitimate operators in the oil and gas sector.
According to the Navy, personnel of Nigerian Navy Ship (NNS) SOROH acted on intelligence reports and intercepted a wooden boat transporting 36 sacks of suspected illegally refined diesel in the Orashi Forest area of Okolomade Community, Abua/Odual Local Government Area of Rivers State.
In a media statement, Director of Information, Nigerian Navy, Captain Abiodun Folorunsho, revealed that further aerial surveillance and ground searches uncovered an additional 45 sacks of the product concealed under vegetation and inside ponds, bringing the total recovery to 81 sacks containing about 22,870 litres of AGO.
Navy Captain Forunsho stated that the operation highlights the growing use of intelligence and surveillance technology by security agencies to tackle crude oil theft and illegal refining activities, which industry stakeholders say contribute significantly to production losses, environmental degradation and reduced government revenue.
According to him, disrupting the logistics networks supporting illegal refining operations is critical to improving transparency in the petroleum value chain and safeguarding investments in Nigeria’s oil-producing region.
“The recovered products and the wooden boat used for transportation were handled in line with established anti-crude oil theft procedures.
Meanwhile, the Chief of Naval Staff, Vice Admiral Idi Abbas, reaffirmed the commitment of the service to sustain intelligence-driven operations aimed at dismantling criminal networks involved in oil theft and protecting the nation’s strategic economic assets.
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