22 Nov

Daily Watch – CBN backtracks on forex law reform, Lekki Port prowling for financiers

  • Nigeria’s economic slump deepened in the third quarter as oil production continued to fall and factory output was hit by a dollar shortage. GDP contracted 2.2 percent in the three months through September from a year earlier, after shrinking 2.1 percent in the second quarter, the NBS said in an e-mailed statement Monday. The economy expanded a non-seasonally adjusted 9 percent from the second quarter, the statistics office said. Crude production fell for the fourth consecutive quarter to 1.63 million barrels per day, from 1.69 million barrels in the three months through June, the new figures show. The oil industry contracted by 22 percent from a year earlier. The non-oil sector, which includes manufacturing, banking and agriculture, expanded 0.03 percent. Factory output contracted 4.4 percent, the third consecutive quarter of decline and construction shrank 6.1 percent, the fifth straight quarterly contraction. Nigeria’s economy can expand by 2.5 percent next year, rebounding from a recession entered in the second quarter, as long it can keep oil output at 2.2 million barrels per day, a senior Moody’s analyst said. Aurelien Mali, Moody’s senior analytical adviser for Africa, told Reuters that he expects a contraction from a year earlier, and said the fourth quarter could be close to flat.
  • The Naira on Monday gained 50 kobo to exchange at ₦305.00 to a dollar at the interbank market. The Nigerian currency had closed at ₦305.50 for most of the last week at the interbank market. However, naira remained stable on the parallel market, closing at ₦465 to a dollar, while pound sterling and euro exchanged at ₦565 and ₦490, respectively. Trading at the BDC window saw the naira closing at ₦390 to a dollar, CBN controlled rate, while pound sterling and euro traded at ₦562 and ₦500 respectively. Currency traders say an uneasy calm had prevailed at the market due to its raid by officials of the DSS in some parts of the country.
  • The CBN says it has no plans to amend the Foreign Exchange Act to provide for the imprisonment of anyone who holds foreign currencies, particularly US dollars, for more than 30 days. In a statement, the regulator said it “has nothing to do with such,” bank spokesman, Isaac Okorafor quoted as saying that “the CBN, in line with its mandate, was committed to safeguarding the international value of the country’s legal tender currency.” He denied knowledge of the proposed clause recommending a jail term for as long as two years or a fine of 20 percent of the amount for any holder of foreign exchange in cash. According to him, “to the best of my knowledge, the CBN has not proposed any bill seeking to arrest and jail persons holding foreign exchange for more than 30 days.” He also said the CBN was not planning to confiscate funds in domiciliary accounts of individuals, saying any such claim was false. This comes as the Senate has rejected the review of the law, calling it “disruptive and counterproductive,” and saying the law threatens to “undermine many of the reform efforts already underway in the legislature and by government ministries, intended to boost investor confidence” in a statement.
  • About 400MW of electricity is set to be added to the national grid as Total Exploration and Production Upstream in Nigeria commences gas supply to Alaoji power plant. This development will significantly improve power supply around Aba, the industrial hub of the south-east of Nigeria and give a tonic to industrialisation, manufacturing, small and medium scale enterprises while creating employment for Nigerians. The exact volume of gas being supplied to Alaoji power plant cannot be immediately ascertained, as the officials are not forthcoming on the matter. However, expectations are that the company would supply a total of 100 million standard cubic feet, which translates to 400MW per day from its Northern Option Pipeline (NOPL) located in OML 58 to Alaoji power plant. This is in a bid to strengthen the country’s low power supply. Nigeria currently generates about 3,000MW of electricity but the country is said to have the capacity of 10,000MW if all its power plants are fully supplied with gas. The Vision 2020 projection projects that the country should have at least 40,000MW of power but a shortage of gas and vandalisation of pipelines by Niger Delta militants have put paid to this. The delivery date is coming two months behind schedule, as it was initially expected to be delivered at the end of July 2016.
  • Tolaram Group, the developer of the $1.6 billion Lekki Deep Seaport, says it is finalising discussions with the lenders backing the port project to have access to 100 percent of the fund needed to execute it. The port project is jointly financed by a consortium of six banks – the African Development Bank, the European Investment Bank, Standard Chartered Bank, RMB, Africa Finance Corporation and Standard Bank. “Due diligence exercise is near completion, meaning that we are now finalising discussion with the lenders to close down 100 percent financial resources with the lenders, backing the project. “We have also received notice to proceed with the engineering, procurement and construction contract and hopefully, by early next year, we would get the 100 percent financial help for the project,” Stephen Heukelom, Port Manager of Lekki Port, said during the visit of the Senate Committee on Marine Transport to the port site. Heukelom said Tolaram Group has presently received $900 million worth of Expressions of Interest from the six banks and an additional sum of $350 million from the African Development Bank and the European Investment Bank, to drive preliminary work on the port site.