5 January 2016

Nigeria: IMF Boss Lagarde in Nigeria Over Naira Devaluation, Subsidy

Photo: IMF
Nigerian President Muhammadu Buhari, along with Vice President Yemi Osinbajo greeting IMF Managing Director Christine Lagarde

The managing director of the International Monetary Fund (IMF), Mrs Christine Lagarde, arrived in Nigeria yesterday to begin a four-day visit during which she will meet with President Muhammadu Buhari and his team, hoping to discuss economic issues concerning the nation, including devaluation of the naira and the vexed matter of oil subsidy .

Lagarde, who arrived at the presidential wing of the Nnamdi Azikiwe International Airport, was received by the minister of finance, Kemi Adeosun, and the Central Bank of Nigeria governor, Godwin Emefiele. She, however, refused to speak with journalists at the airport.

It is believed that the IMF boss' discussions with President Buhari will dwell mostly on addressing the challenges posed by low crude oil prices, including continuing the Fund's clamour for the devaluation of the Naira.

The IMF had in October called for a further devaluation of Naira and for the country to remove all import restric¬tions as part of strategies to further strengthen the coun¬try's economic adjustment programmes in line with the realities of the current global economy.

During her visit, the first by the IMF boss to any country this year, Lagarde will also hold discussions with the minister of finance, Kemi Adeosun and the CBN, Godwin Emefiele.

While in Abuja, Lagarde is also expected to meet with principal officers of the National Assembly, business leaders, prominent women and representatives of civil society.

A statement issued by the IMF said the visit to Nigeria would provide an opportunity to strengthen the Fund's partnership with the largest economy in sub-Saharan Africa.

The statement quoted Lagarde as saying she looked forward to productive meetings with President Buhari and his team as they tackle the country's daunting economic challenges which are not helped by the current crash in oil prices.

The statement further quoted the IMF boss as saying: "Nigeria is working hard to improve its business environment, promote opportunities for growth in the private sector, and strengthen social cohesion - all areas where the government has an important role to play.

"I look forward to productive meetings ... as they address important economic challenges, most importantly the impact of low oil prices."

The statement gave no other details, but the meeting suggests an acknowledgement of Buhari's efforts to revive Africa's largest economy.

But analysts who spoke with LEADERSHIP on phone advised President Buhari to look more inward for a way out of the nation's current economic troubles.

"I do not think the solution to our problem is without; it is within, and so I would like to advise the president to limit external borrowing as much as possible," said Sophia Okone, an ex-banker.

Jude Obiakor, an investor, also wants the president to limit borrowing from outside. But he added that, if the president must borrow, such borrowings must be tied to specific, long-term projects that will act as investment to the country.

Lagarde will also meet finance ministers from the six member countries of the Economic and Monetary Community of Central Africa (CEMAC).January 8.

"The country (Cameroun) and the entire CEMAC region are confronted with the twin shocks of the oil-price slump and a surge in disruptions related to security," Lagarde said.

Oil Price Rises As Saudi Arabia Cuts Ties With Iran

The price of oil rose yesterday following supply risks from the Middle East after Saudi Arabia cut diplomatic ties with Iran.

At about 12.30 GMT yesterday, US crude climbed 30 cents to $37.34 a barrel while Brent crude also increased by 59 cents to stand at $37.87 a barrel.

Tensions between major crude producer, Iran, and its Sunni Arab neighbours reached new heights yesterday as the world's biggest pumper of oil, Saudi Arabia, and Gulf allies cut or downgraded diplomatic ties with Tehran in a row over the execution of a Shiite cleric.

Angry exchanges following Saudi Arabia's execution of prominent Shiite cleric and activist, Sheikh Nimr al-Nimr, last Saturday erupted into a full-blown diplomatic crisis as Riyadh and its ally Bahrain, severed their relations with Tehran.

Reacting to the development, market strategist at IG Markets in Singapore, Bernard Aw, observed that oil started the new year on the mend, as markets reacted to fears that geopolitical tensions in the Middle East may threaten the supply of oil.

Aw, however, added that despite the rise, the persistent global crude oversupply would continue to weigh on prices over the longer term.

"Unless we see a convincing drop in oil output from these two nations, and the broader oil-producing community, the supply glut issue will persist, which means oil prices would remain under pressure for a longer period," he told AFP.

The Organisation of the Petroleum Exporting Countries (OPEC), whose 13 members include Saudi Arabia and Iran, decided against cutting output levels last month despite a plunge in oil prices, in a bid to maintain market share following competition from the US shale oil output.

Nigeria needs oil prices to rise higher than the present levels to be able to fund its budget which is benchmarked at $38 a barrel.

Independent Marketers defy FG on new pump price

Meanwhile investigations carried out by LEADERSHIP has revealed that petrol stations belonging mostly to independent oil marketers have failed to comply with the federal government's directive on new pump price.

The government had on January 1 approved new regulated pump price of N86.50 per litre of petrol for major and independent oil marketers, and N86 for retail stations belonging to the Nigerian National Petroleum Corporation (NNPC) as against the old price of N87.

However, reports from our correspondents in Abeokuta, Kaduna, Yola, Oshogbo, Lagos, Ado-Ekiti, Akure, Port Harcourt, Abeokuta, Jos, Minna and Jalingo revealed that while stations belonging to the NNPC and some major marketers, like MRS, Oando, Total and AA Rano, have adjusted their pumps to the new price, many belonging mostly to independent marketers have shunned the directive.

In Kaduna, a fuel attendant at an independent filling station, who did not want to be named, told our correspondent that "what we have is old stock and we cannot afford to sell at a loss; that is the instruction we were given by our oga."

In Akure where the product sold for between N97 and N130 a litre, operators told our reporter that they would not be able to sell at N86.50 per litre due to the non-availability of the product.

An operator who preferred anonymity told LEADERSHIP that it was unfair for government to ask them to sell petrol at N86.50 a litre because they source the product through other means at exorbitant costs.

Similarly, the manager of an independent filling station in Osogbo, Osun State, told our reporter they would comply with the new price regime after exhausting their existing stock.

Similarly in Adamawa, a manager of one of the independent filling stations who do not want his name in print said they were yet to revert to the new price regime as they are yet to receive a circular from the federal government to that effect.

Commenting on the issue, Adamawa State chairman of the Independent Petroleum Marketers Association of Nigeria (IPMAN), Abubakar Butu, told LEADERSHIP that the members had not received any circular from the federal government indicating the price review.

Petrol Sells For N130 per litre In Benin

Motorist in Benin City and its environs were yesterday subjected to harrowing experience after only filling stations defied federal government's directive on the new pump price for petrol.

Most stations continued to sell the product at the old regulated price of N87 per litre with a relatively long queue.

At an NNPC retail station at Upper Sakponba road, petrol was sold for N87 despite the federal government directive.

A fuel attendant told our correspondence, on condition of autonomy, that motorists should be thankful after all "others are selling for N145-N150 per litre, while others said they had old stock in supply and can't risk selling at government approved price."

Other independent marketers sold the product for between N115 and N150 per litre.

Marketers In Jos Insist On Selling Off Old Stock Before Compliance

Despite the reduction of the pump price of petrol from N87 to N86.50 by the government, in Jos, the Plateau State capital, fuel was yesterday sold for N87 per litre.

The only filling station selling the product at the new government approved price was the NNPC mega station at the state secretariat junction in Jos. Other stations which sold at N87.00 told our correspondent that they had to dispose their old stock.

One of the managers said: "the fuel they have in stock is old stock; they have not bought the fuel at the new price that will warrant them to sell at N86.50.

Few of the black market stations were seen selling the product at N100 while the NNPC station selling at N86.50 and other stations selling at N87 had very long queues.

Sell Above New Petrol Price, Lose Licence - FG

Marketers who sell above the newly approved pump price of petrol risk the withdrawal of their operational licences and forfeiture of all the benefits of participation in Petroleum Support Fund (PSF) Scheme, the federal government has warned.

Assistant general manager and head of operations of the Petroleum Products Pricing Regulatory Agency (PPPRA), Victor Shidok, gave the warning while monitoring of the level of compliance by filling stations in Abuja yesterday.

He said, "The law spelt out the penalty; any deviant may lose the benefits of participating in Petroleum Support Fund Scheme, because we may withdraw such people from participating. And since we are working in conjunction with the Department of Petroleum Resources (DPR), their licence may be withdrawn apart from other measures that we are likely going to take to ensure that Nigerians are not short-changed."

Shidok, who explained that the monitoring exercise was done in conjunction with the DPR, warned that government will not tolerate any deviation from the new directive.

He, however, noted that there is 100 per cent compliance in Abuja city centre, though he could not say whether the same was applicable in the outskirt towns.

He said: "We shall go up to the outskirts because that is where our concerns is. The challenge is likely to be in the outskirts. All those we have visited say they have received directives from their head offices. We are in touch with the leaderships of oil marketers in the country.

"This is a nationwide exercise; all our staffers are in the field across the country and this in conjunction with the DPR; they (DPR officials) are also out to do a similar exercise because whenever we have a change in the downstream (sector), all the regulatory agencies come out to ensure there is total compliance."

West African January crude exports to Asia edge off five-month high

West African crude oil exports to Asia in January are set to slide from a five-month high reached the previous month, but strong buying in India has kept them elevated, traders and shipping fixtures showed yesterday, Reuters reports

The total bookings of 1.81 million bpd stand nearly 8 per cent below the December levels, but are above both January 2015 and three of the past five months.

Indian refiners, led by state-run Indian Oil Corp. (IOC), booked a total of 20 cargoes to load in January - fewer than in December, but well above the usual level of African crudes they ship east.

"Indian refiners needed the sweet, with new capacity online," one trader said.

IOC's new 300,000 bpd refinery was expected to start full commercial operations in March, though it shipped the first consignment of products from the new unit in November 2015.

Strong fuel demand within India has also encouraged refiners to run at full steam. Private Indian refiner, Reliance, also booked West African grades, including Nigeria's Bonga and Cameroonian Lokele.

Steep declines in selling prices for Nigeria's crude have also helped keep its cargoes moving, despite a wide gap in the spread between Brent and Dubai crudes, DUB-EFS-1M, throughout December, when most January bookings are negotiated.

A wide gap makes Brent-linked crudes less attractive to Asian buyers, but Nigeria's official selling prices in January slid well past 10-year lows.

COUNTRY JANUARY BPD DECEMBER BPD '000s

CARGOES '000s CARGOES

CHINA 27 827 30 919

INDIA 20 613 24 735

INDONESIA 3 92 2 61

TAIWAN 4 123 4 123

JAPAN 0 0 0 0

KOREA 1 31 2 19

OTHERS 4 123 3 92

TOTAL 59 1,808 64 1,961

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