Business
Ukraine’s Currency in Free Fall
LONDON – Ukraine’s currency slumped to its lowest level in roughly five years Wednesday, adding to pressure on President Viktor Yanukovych as he navigates between Russia and the West.
The U.S. dollar was quoted above 9.00 against the hryvnia for the first time since February 2009, according to traders, with Ukraine’s national currency going from its recent steady decline into free fall. The exchange rate is widely viewed in Ukraine as a bellwether of economic stability, and the National Bank of Ukraine has for years tightly managed the hryvnia slightly above 8 to the dollar.
Mr. Yanukovych is under pressure from more than two months of street protests against his decision to halt an integration pact with the European Union, instead sealing a $15 billion bailout from Russia. But he is now also facing a financial squeeze after he dismissed his government last week, and the Kremlin said it would pause its bailout until new ministers are appointed.
Analysts said the National Bank appeared to be managing the hryvnia lower. “They are stepping away from the peg. They know they can’t hold it as the Russian money isn’t there. They are trying to conserve reserves,” said Timothy Ash, an analyst at Standard Bank.
U.S. and European Union officials say they are putting together a financial bailout to tempt Mr. Yanukovych to strike a compromise with his opponents and forge a technocrat government that could push through economic overhauls. But prospects for a resolution look dim, as the opposition is demanding that more of the president’s powers be transferred to the cabinet before they agree to take government roles.
Mr. Yanukovych is holding talks in Kiev with EU foreign-policy chief Catherine Ashton, and will meet Assistant U.S. Secretary of State Victoria Nuland tomorrow. He then flies to Russia for talks with President Vladimir Putin. Moscow sent $3 billion to Ukraine late last year, but held up a further $2 billion installment last week.
Ukraine’s acting prime minister, Serhiy Arbuzov, moved to deflect blame for the sliding hryvnia Wednesday. “Political instability is pressing on the currency market. There is strain despite the fact there’s no fundamental economic basis for it,” Mr. Arbuzov told a government meeting Wednesday. “There are no fundamental causes for concern. I again call on everyone to settle the conflict as quickly as possible.”
The hryvnia has been under selling pressure for weeks amid antigovernment protests that have turned violent at times. The currency’s decline has accelerated in recent days. Trading on Wednesday was illiquid with prices quoted erratically and with large variations, traders said, underscoring just how nervous the market had become.
“The National Bank of Ukraine seems to have finally abandoned its four-year hryvnia to dollar peg and will be moving further toward greater foreign-exchange flexibility,” said Vladimir Osakovskiy and Vadim Khramov, analysts at Bank of America BAC -0.73% Merrill Lynch.
As a result, the bank is forecasting the dollar will rise to as high as 10 against the hryvnia by the end of 2014.
“Before the protests the National Bank was coping with downside pressure on the hryvnia by squeezing money-market liquidity and carrying out FX interventions. Given the political uncertainty, pressure on the FX market increased partly due to households’ demand for foreign currencies. And the central bank is not willing to increase the amount of interventions,” said Alexei Pogorelov, economist at Credit Suisse CSGN.VX +0.15% in Moscow.
Analysts suspect the central bank would struggle to keep a lid on an aggressive hryvnia selloff. According to central-bank data, Ukraine had $20.4 billion in international reserves on Jan. 1, a relatively small amount. In December, it spent $942 million of reserves defending the currency.
The hryvnia’s fall could be exacerbated if households lose faith and shift out of the currency, as they did in 2008.
Nervousness spread as gasoline prices continued edging upward Wednesday on the back of the hryvnia’s weakness, increasing the squeeze on Ukrainians.
“The price has gone up by 10-15 kopecks today, and I have no idea what happens next,” said Artur Badenkin, sales manager at a Kiev gas station.
– WALLSTREET JOURNAL
The Shell Petroleum Development Company of Nigeria Limited (SPDC JV) – Operator of the NNPC Limited, SPDC, TotalEnergies and Nigerian Agip Oil Company Joint Venture – has, announced the donation of US$1 million to support efforts to provide relief to over half a million people displaced in flood impacted communities of Borno State.
Managing Director, SPDC, and Country Chair, Shell Companies in Nigeria, Osagie Okunbor, said, “The donation will go into the procurement and distribution of relief materials and medical supplies for displaced residents who are now in urgent need of critical aid.”
He added that a Non-Governmental Organisation (NGO), local to the region with understanding of working with displaced people, will manage the distribution of the materials in collaboration with the Borno State Emergency Management Agency.
ALSO READ: Sustainability: Dangote Eyes Planting 10,000 Mangrove Trees In Nigeria
According to Okunbor, the SPDC JV intervention was in response to the alert issued in September by the National Emergency Management Agency (NEMA), following the significant rise in water levels caused by the overflowing of the Alau Dam, and the calls for support by Borno State Governor, Babagana Umara Zulum.
“We consider providing this support to be of necessity to demonstrate our commitment to our society and the duty of care to our people. It expresses our deep concern for the victims of the devastating floods in Borno State,” Okunbor said.
He noted that the SPDC Joint Venture’s gesture is a continuation of similar assistance given over the years to the region that is recovering from recent conflicts.
Chief Upstream Operating Officer of the NNPC Upstream Investment Management Services (NUIMS), Bala Wunti, in a statement, added, “The urgency in providing this relief is important given the region’s existing vulnerabilities, with people recently barely recovering from conflict-induced displacement. The flooding has severely disrupted socio-economic activities, with women and children being disproportionately affected and we are glad that the joint venture is able to provide succour at this time.”
Wunti said, “As a responsible corporate organization, NNPC is glad to support the SPDC Joint Venture in this essential activity. Our thoughts are with those affected and with the government agencies working tirelessly to provide relief. We pledge to support ongoing efforts through immediate humanitarian aid and long-term partnerships for sustainable recovery.”
Investors on the Nigerian Exchange Limited (NGX) saw a boost of N217 billion added to their portfolios on Thursday, with the All-Share Index rising by 0.37% to close at 96,924.86 points.
This increase also lifted market capitalization to N58.73 trillion, driving the year-to-date return to 29.62%.
The insurance, consumer goods, oil and gas, and industrial goods sectors saw gains, increasing by 1.84%, 0.01%, 1.77%, and 0.02%, respectively, while the banking sector experienced a slight decline of 0.38%.
READ MORE: Why LCCI Considers DIL A Pillar Of Strength For Nigeria’s Industrial Growth
A total of 33 stocks advanced, with top gainers including Conoil, Aradel, Eunisell, John Holt, and Thomas Wyatt. Meanwhile, Tantalizer, NGX Group, and Wema Bank were among the 17 decliners.
Trading activity surged with a 744.54% increase in volume and 16.48% increase in value, as 744.54 million shares worth N16.48 billion were traded across 9,700 deals. Consolidated Hallmark led in volume with 124.8 million shares, followed by Japaul Gold and EllahLakes. FBN Holdings, which recently opened its N150 billion rights issue, also featured prominently on the volume chart.
This robust trading activity highlights renewed investor confidence and growing momentum in Nigeria’s capital market.
Nigeria would soon have her own definition of free market, albeit by judicial interpretation, so long as the petroleum sector is concerned.
This follows the legal tussle on the legality of importation of refined products into Nigeria, on the heels of the deregulation of that sector.
Biztellers reports that three oil marketers, AYM Shafa Limited, A. A. Rano Limited, and Matrix Petroleum Services Limited, have approached the Federal High Court in Abuja, praying for a dismissal of a suit filed by the Dangote Petroleum Refinery and Petrochemicals (DPRP) to stop them from importing refined petroleum products.
The marketers, in response to an originating summon filed by the DPRP, filed a joint counter affidavit marked: FHC/ABJ/CS/1324/2024, and dated November 5, 2024.
They maintained that granting the application of the DPRP would spell doom for Nigeria’s oil sector.
ALSO READ: Deregulation, Not License For Off-spec Products Blending – Dangote Refinery
Their legal and economic argument assert that any form of monopoly for Nigeria’s oil sector is a recipe for disaster.
Recall that the DPRP in its originating summon dated September 6, 2024, had sued the Nigeria Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) and the Nigeria National Petroleum Corporation Limited (NNPC Ltd), AYM Shafa Limited, A. A. Rano Limited, T. Time Petroleum Limited, 2015 Petroleum Limited, and Matrix Petroleum Services Limited as 1st to 7th defendants respectively.
Specifically, the DPRP prayed the court to declare that the NMDPRA was in violation of Sections 317(8) and (9) of the Petroleum Industry Act (PIA) by issuing licenses for the importation of petroleum products.
It asserted that such licenses should only be issued in circumstances where there is a petroleum product shortfall.
Consequently, the DPRP urged the court to declare that the NMDPRA was in violation of its statutory responsibilities under the PIA for not encouraging local refineries, the DPRP inclusive.
As a result, Shafa, A. A. Rano, and Matrix Petroleum, countered that the DPRP does not produce adequate petroleum products for the daily consumption of Nigerians.
According to their affidavit, the plaintiff had not placed anything before the court to prove the contrary.
They argued that they are well qualified and entitled to be issued an import licence by the NMDPRA to import petroleum products in Nigeria within the meaning of Section 317(9) of the PIA.
They also noted that they are fully qualified for the issuance of the import licences issued to them by the 1st defendant, as they duly met all the legal requirements for the issuance of such import licences, before the same were issued to them.
They categorically stated that, “The import licences lawfully and validly issued to the defendants did not in any way whatsoever, cripple the plaintiff’s business or its refinery.
“The import licenses issued to the defendants by the 1st defendant are in line with the provisions of the Petroleum Industry Act, 2021, the Federal Competition and Consumer Protection Act, 2018, and other relevant laws.”
They insisted that giving the DPRP the power of monopoly in Nigeria’s petroleum industry as it sought in the instant suit, would kill competitive pricing of petroleum products in the country.
They cautioned that such an act would further deteriorate the country’s critically ailing economy.
They also added that it would “unleash untold hardship on Nigerians, all of which constitute a recipe for disaster in the polity”.
The marketers explained that if Nigeria puts all her energy eggs in one basket by stopping the importation of petroleum products and allowing the plaintiff to be the sole producer and supplier of petroleum products in Nigeria, with liberty to determine the prices at which it supplies the products, the prices of petroleum products will continue to rise and energy security will elude Nigeria.
In addition, they pointed out that should the DPRP break down being a monopolized sector, Nigeria would be plunged into a-difficult-to-manage energy crisis.
“That in the event of any breakdown in or obstruction to the production chain of the plaintiff which stops it from producing, Nigeria will be thrown into energy crises because it does not have the reserves that would last it for at least 30 days that it would need to order, pay for, freight and import refined products into tanks in Nigeria.
“That amidst the glaring absence of any credible and demonstrable proof that the plaintiff refines and supplies adequate petroleum products for the daily use/consumption of Nigerians, is a recipe for disaster in Nigeria’s energy sector,” they wrote.
They further told the court that granting the reliefs sought by the plaintiff was a design to leave Nigeria and Nigerians at the mercy of the plaintiff with respect to the availability and cost of purchasing petroleum products in the country.
The presiding judge, Justice Inyang Ekwo fixed January 20, 2025, for a report of settlement or service.
VP Shettima Preaches More Community-Oriented Leadership, Legacy-Building
Olukoyede Charges Students On Good Role Models
Iyabo Ojo Pledges Support For Mohbad’s Widow Amid Ongoing Investigation
Texas: FBI Nabs Nigerian LGA Chairman For Multi-Million-Dollar Online Fraud
Police Inspector Killed, Two Chinese Nationals Abducted In C/River Quarry Attack
Bolt Driver Apologises After Altercation With Abia Lawmaker
OSSG Raises Alarm Over Murder Plot By APC Chieftain
NCC, SMEDAN, NAICOM, SEC, Others Set for SUPERNEWS SMEs Conf June 13
Sahara’s Tonye Cole resigns from GPHCDA
Oando opens ultra-modern petrol station in Lagos
Niger Delta Avengers: President Buhari Reads riot Act …considers the carrot and stick option
