13 Dec

Daily Watch – Forex bill gets 2017 public hearing, Lloyd’s threaten Nigerian airline blacklist

  • A bill proposed by Nigeria’s Senate which seeks to give the CBN legal powers to set exchange rates, effectively rolling back the nation’s six-month-old free float will be put to a public hearing next year, according to its sponsor, John Enoh. The bill is meant to repeal the existing foreign-exchange legislation, under which market rates are “mutually agreed” between counterparties, and allow the CBN to decide those rates. The draft has been through two readings in the upper house. If passed, the legislation will give the central bank freedom to defend the naira, which has tumbled 37 percent against the dollar since the CBN Governor, Godwin Emefiele, abandoned its peg in June. According to analysts, the central bank is still intervening to stop it weakening, with foreign-currency reserves dropping to an 11-year low in October. The black-market exchange rate has collapsed to a record 485 as dollar shortages mount in the country. The proposed law is separate from a draft amendment to existing legislation published last month by the Nigerian Law Reform Commission, an independent body. It proposed jailing people holding dollars in cash for more than 30 days and restricting capital outflows. The naira weakened for a second day on Monday, depreciating 0.3 percent against the dollar to 317.13, the lowest since October on a closing basis.
  • The price of oil rose by as much as 6.5 percent on Monday to an 18-month high after OPEC and some of its rivals reached their first deal since 2001 to jointly reduce output to try to tackle global oversupply and boost prices. Brent crude futures were up $1.81, or 3.3 percent, at $56.14 per barrel by 1545 GMT, having hit a session peak of $57.89, the highest since July 2015. The price is 50 percent higher than at this time last year, marking the largest year-on-year rise on any given day since September 2011. After nearly a year of wrangling, OPEC agreed on Nov. 30 to cut output by 1.2 million bpd for six months from January 1, with top exporter Saudi Arabia cutting around 486,000 bpd to curb the oversupply that has dogged markets for two years. On Saturday, producers from outside OPEC, led by Russia, agreed to reduce output by 558,000 bpd, short of the target of 600,000 bpd but still the largest contribution by non-OPEC ever.
  • The 2016 Q3 Vessel Categorisation Report indicated that about 235 vessels operating in the oil and gas industry were built in the country. The Executive Secretary, Nigerian Content Development and Monitoring Board (NCDMB), Simbi Wabote, told the News Agency of Nigeria that the development was a marked improvement on 2010 numbers. According to him, 2,258 vessels are currently operating in Nigerian oil and gas industry and that 848 of the vessels were Nigerian-owned, 37.56 percent of the industry total. He said that over 90 percent of the expenditure of maritime segment of the oil and gas industry was lost to foreign economies in 2010. Wabote said that many indigenous ship owners were motivated by these policies to construct quite new vessels, judging from the growth of indigenous- owned marine vessels in the oil and gas industry since 2010. It is well short of its forecasts, however, the Board had set a target to place at least 60 percent of marine assets operations in the hands of Nigerians by 2015.
  • The Airline Operators of Nigeria has appealed to the FG to urgently intervene in making foreign exchange available to its members following the threat by Lloyd’s of London to blacklist the country. AON chairman, Nogie Meggisson, made the appeal in a statement issued on Monday in Lagos. Lloyd, the world’s leading insurance market, had issued a warning to Nigerian airline operators that it may be forced to blacklist the country in the face of the continued failure of some operators to pay their premiums regularly. The company’s representatives, who were in Nigeria recently, noted that the Nigerian market was a high-risk market with the volume of business modestly small and airline brokers not paying their premiums. Lloyd warned that in view of the fact that airlines brokers in Nigeria had in recent times failed to pay their premiums, it may have no other choice than to blacklist the country. Meggisson said the development may have far-reaching consequences for the aviation industry and the country. He said the airlines claimed they had naira but could not pay premiums because of foreign exchange constraints. According to him, Lloyd’s market accounts for about 92 percent of reinsurance of airlines globally and “Virtually 100 per cent of the aircraft being operated in Nigeria are re-insured in Lloyd’s market.”
  • Max Air says it has concluded arrangement to resume its scheduled flights from Kano to Jeddah, Saudi Arabia’s capital. Spokesman of the airline, Ibrahim Dahiru, said that the scheduled flights would be effective from December 30. “Max Air Ltd has completed the necessary arrangements to resume its schedule flights from Kano to Jeddah in Saudi Arabia in the next two weeks,” Dahiru said. According to him, the airline would operate on Mondays and Thursdays. Dahiru said the airline would deploy 737-800 for the two scheduled flights, and added that the aircraft would return to Kano with returning passengers on Tuesdays and Fridays respectively.