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CBN report shows Nigeria’s oil revenue declined by N62 billion in May

The latest economic report released by the [@cenbank] has revealed that Nigeria’s oil revenue declined by N62.2 billion in May 2019. According to the [@cenbank] report, the gross revenue made from oil sales in May 2019 was estimated at N410.18 billion, up from N472.38 billion recorded in the previous month. This means Nigeria’s total oil revenue drops by 15% in one month.

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Crude Oil worker, OPEC, oil prices, Bulls hit back to support US crude oil amid panic sell- offs in global equity markets, Nigeria’s local oil players smashed by low crude oil prices

The latest economic report released by the Central Bank of Nigeria (CBN) has revealed that Nigeria’s oil revenue declined by N62.2 billion in May 2019. According to the CBN report, the gross revenue realised from oil sales in May 2019 was estimated at N410.18 billion, up from N472.38 billion recorded in the previous month. This means Nigeria’s total oil revenue dropped by 15% in one month.

While explaining the reasons for the decline in Nigeria’s oil revenue in the monthly economic report, Central Bank stated that the decline was attributed to shut-ins and short-downs at some NNPC terminals due to pipeline leakages and maintenance activities.

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[Also Read: Shell recorded a $260.57 million loss due to vandalism]

Revenue drops across sectors: Basically, Nigeria’s revenue source is categorised into oil and non-oil sectors. Over the last one year (between May 2018 – May 2019), the total Federally-collected revenue dropped by 11.4% or N95.2 billion. Basically, the total revenue collected in May 2018 was N829 billion. The figure dropped to N733.8 billion in May 2019.

Further analysis of the CBN report shows that oil revenue dropped by 11% or N21.2 billion within the year, while non-oil revenue dips at a high N74 billion or 18% in the last one year.

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According to the Central Bank’s report, Non-oil revenue was estimated at N323.64 billion or 44.1% of the total revenue. This is below the provisional monthly budget estimate of N466.91 billion by 30.7%. It, however, exceeded the preceding month’s receipt of N322.93 billion.

The Central Bank stated that the lower non-oil revenue relative to the provisional monthly budget was due to the shortfalls in receipts from all the non-oil revenue components, except Customs and Excise Duties.

Oil price gained: The average spot price of Nigeria’s reference crude oil, the
Bonny Light (37° API) rose to US$73.70 per barrel in the review period. According to the Central Bank, the rise in crude oil price was due, largely, to the growing tensions across the MiddleEast, which threatened crude oil supply.

Crude Oil prices

The Bank also stated that the escalating trade war between the U.S. and China, supply losses from Venezuela, Libya and Iran, as well as, compliance with supply-cut pact by most OPEC member countries have enabled oil prices to gain momentum to be told at a higher price. Despite the rise in oil prices, Nigeria’s revenue has suffered a blow.

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[Also Read: Oil Prices may rebound as China and U.S. agree to restart trade talks]

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A decline in revenue allocation: Following the reduction in revenue generated from oil in the month of May, the revenue allocated to the three tiers of governments also inched down. According to the Central Bank’s report, the total allocation to the three tiers of government in May 2019 amounted to N594.62 billion. This was below the provisional monthly budget estimate of N923.39 billion by 36.4% and below the preceding month’s allocation of N602.41 billion, by 1.3%.

The Central Bank provided details of the breakdown of allocation as follows:

  • Out of the total N667.29 billion retained revenue in the Federation Account, the sums of N92.63 billion, N48.76 billion and N24.73 billion were transferred to the VAT Pool Account, the Federal Government Independent revenue and Others, respectively.
  • the Federal Government received N239.65 billion, while the state and local governments received N121.56 billion and N93.71 billion, respectively. The balance of N46.26 billion was shared among the oil-producing states as 13% Derivation Fund.
  • Similarly, from the N92.63 billion transferred to the VAT Pool Account, the Federal Government received N13.89 billion, while the state and local governments received N46.31 billion and N32.42 billion, respectively.
  • In addition, the sum of N0.81 billion was distributed in the month as exchange gain with the Federal, state and local governments receiving N0.39 billion, N0.19 billion and N0.14 billion, respectively, while the 13% Derivation Fund received N0.10 billion.

Oil production on the low: While revenue has dropped, the number of barrels produced and exported have also declined in the past month.

  • Nigeria’s crude oil production (condensates and natural gas liquids) was 1.82 million barrels (mb) per day or 56.4 million barrels (mb) in the review month. This represented a decline of 0.01 mbd or 5.2%, compared to 1.92 mbd or 57.6 million barrels (mb) produced in the preceding month.
  • Also, Crude oil export was 1.37 mbd or 42.5 mb, representing a decline of 6.8%,
    compared with 1.47 mbd or 44.1 mb recorded in the preceding month.

Debt stock may rise: As the total federally-collected revenue dips, with estimation showing that figures are below the monthly budgets, this may open another window of borrowing for the country’s already huge debts stock.

The Central Banks rightly stated that Nigeria’s oil revenue in May 2019 was largely below the monthly budget of N640.21 billion, which means that budget implementation has suffered yet another deficit of N230.03 billion.

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On the sideline, States government may face another uphill task as the declining oil revenue is already depleting statutory allocation to the states government.

[Also Read: The crowding out effects of rising States’ debts: Why Nigerians should worry]

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Lagos State Government orders building owners to conduct structural stability tests

There will also be stricter enforcement of regulations and safety precautions to ensure that building owners and developers across Lagos metropolis comply with it, she reiterated.

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Lagos state govt orders building owners to conduct a structural stability test

In response to the partial collapse of a 3-storey building at Alagomegi-Yaba on Monday, the Lagos State Government has ordered owners of buildings in the state to immediately carry out structural stability tests on their properties. This is expedient, given the onset of the rainy seasons, and the presence of statistics to show that many buildings collapse during the season.

In a series of tweets that were posted last night on the Lagos State Government’s official Twitter handle, the state’s Building Control Agency (LASBCA), disclosed that the affected building at 6, Olonode Street, Alagomeji-Yaba, Lagos, collapsed in the early hours of Monday due to the heavy rainfall in the area over the night.

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The General Manager of the agency, Engr. Biola Kosegbe, noted that the collapsed building had earlier been marked for demolition. In other words, all occupants of the building were evacuated by the Agency before the incident, thereby averting a disaster.

(READ MORE:Lagos increases health workers’ allowances, commissions local production of face masks)

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Kosegbe went on to explain that statistics from previous years show that there is a higher incidence of building collapse during the rainy season, hence the need for building owners to ascertain the level of structural stability of their properties to avert collapse. She added that the Lagos State Government would not hesitate to remove illegal or distressed buildings, or any other structure that is not in conformity with the State’s building laws and standards.

There will also be stricter enforcement of regulations and safety precautions to ensure that building owners and developers across Lagos metropolis comply with it, she reiterated.

Why it matters

This type of pro-active government regulation will help prevent future catastrophes that could occur in the events of building collapse. Incidents of building collapses are not alien to Lagos, a city-state with more than 20 million estimated population, a significant number of whom live in squalid conditions due to extreme poverty and housing deficits.

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Just In: Nigeria received $5.85 billion capital inflows in Q1 2020 –NBS

Nigeria received $5.85 billion capital importation (inflows) in the first quarter (Q1) of 2020, compared to $8.51 billion in Q1 2019.

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Foreign Reserves Rise by $295m in One month

Nigeria received $5.85 billion capital importation (inflows) in the first quarter (Q1) of 2020, as against $8.51 billion in Q1 2019. This is according to the latest capital importation report released by the National Bureau of Statistics (NBS).

According to the NBS, the $5.85 billion worth of capital importation in Q1 2020 represents an increase of 53.97% when compared to how much was received in Q4 2019.

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However, when compared to the corresponding first quarter period of 2019, the figure indicates a 31.19% decline.

Capital Inflow by type

Portfolio investment ($4.31 billion) accounted for 73.61% of the total capital importation, followed by other investments ($1.33 billion), which accounted for 22.73%, and Foreign Direct Investment ($214.3 million), which accounted for 3.66% of total capital importation.

More details shortly…

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Naira set for recovery as ABCON issues guideline to members on forex sales resumption

It is obvious that the CBN has come to realize that BDC operators can be the difference between naira recovery and depreciation during volatile times.

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COVID-19 could save naira from depreciating further, Many odds against the naira, Naira forwards and parallel market crash puts pressure on official exchange rate, Naira appreciates to N386.94 to $1 at investor and exporters window. , Naira set for recovery as ABCON issues guideline to members for forex sales resumption

The Central Bank of Nigeria (CBN) and the Association of Bureau De Change Operators of Nigeria (ABCON) have finalized arrangements for the resumption of forex sales to Bureau De Change operators (BDCs).

Following this finalisation, the more than 5,000 BDCs spread across the country are now expected to help curb the downward spiral of the naira, thereby checking the activities of foreign currency speculators.

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Recall that the naira has recently been facing major challenges, no thanks to the COVID-19 pandemic. Unfortunately, currency speculators took advantage of the situation by making spurious demand for dollars with the hopes of making good returns from the rising gaps between official and parallel market rates.

Meanwhile, Governor Godwin Emefiele of the CBN and ABCON President, Aminu Gwadabe, have repeatedly spoken against the illicit business of currency speculators and the dangers they pose to the economy and naira’s stability. They have also warned the speculators about the looming danger for their trade if they refuse to retrace their steps; they Could incur losses estimated at over N10 billion in the next few months, especially now that the CBN is enabling BDCs’ full return to the forex market after nearly six weeks of inactivity.

(READ MORE: Devaluation’s drum beats louder)

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Governor Emefiele had also appealed to industrialists who patronize the parallel market to stop such practices in the interest of the economy and for the sustainability of their businesses. Failure to do this might result in them incurring the same huge losses as currency speculators.

Naira hits N570 to $1 at forwards market, pressure on the naira climbs up, Naira set for recovery as ABCON issues guideline to members for forex sales resumption   

Both Emefiele and Gwadabe have extensive experience in the market, enough to predict what follows after every major crisis. During the 2016 currency crisis, the market got a major relief after the BDCs began getting dollar allocations from the CBN. That same scenario will soon play out as the BDCs countdown to resumption.

In the meantime, it is obvious that the CBN has come to realize that BDC operators can be the difference between naira recovery and depreciation during volatile times. This is especially true now that the local currency has come under intense pressure, driven mainly by speculative demand for the dollar.

Note that the BDCs are essentially operators who help to get dollars across to the end-users, no matter where they are. The BDC operators have, for decades, proven their relevance in stabilizing the naira. While commenting on the recent moves by the apex bank to resume dollar sales to the BDCs, Gwadabe said:

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The CBN’s planned lifting of moratorium on dollar sales to BDCs, reopening of the airports for air travels as well as global ease on restriction of movement are positive indications that dollar flows to the economy will soon improve.

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The naira has been exchanging at N461 to a dollar at the parallel market but will be upbeat once dollar sales to BDCs commence. The return of over 5,000 BDCs to the forex market will add great strength to the Naira and lead to major capital losses for forex speculators. It happened in 2016 and it will happen again in 2020. The return of the BDCs will immediately boost naira’s recovery and put the enemies of the economy to shame. We are committed to the CBN’s exchange rate stability and will take all necessary steps within set rules and regulations to keep the naira stable.”

(READ MORE: Naira depreciates at I&E window, forex turnover up by over 117%)

Naira crashes further at the parallel market due to dollar scarcity, lowest since 2017, Naira drops to N454, foreign investors and importers struggle for dollars, Naira set for recovery as ABCON issues guideline to members for forex sales resumption

Moving on, the CBN said it has taken steps to address the risks facing the naira. Asides other positive developments in the global economy (including oil price recovery thanks to OPEC+ output cuts and IMF’s $3.4 billion emergency funding to Nigeria), the CBN believes its measures will enable a rapid recovery for the local currency. Emefiele explained:

CBN has also officially reviewed the naira exchange rate to N380 to a dollar. Aside devaluing the naira, the apex bank also adopted a unified exchange rate, and pushed the official rate of the naira to N376 to dollar for International Money Transfer Operators rate to banks; N377 to dollar for banks’ dollar sale to CBN and pegged CBN’s dollar sales to banks at N378, all aimed at attracting Foreign Portfolio Investment and strengthening the local currency. The BDC operators are expected to buy dollar from the CBN at N378 per dollar.”

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For Gwadabe, the naira rate review and the CBN’s assurance to foreign investors on the easy repatriation of their funds from Nigeria, are positive indicators for naira’s continued recovery.

(READ MORE: Why the naira is falling)

He also noted that ABCON is reopening guidelines to all its members nationwide included on-boarding of the queuing crowd ticketing management application, known as ABCON 360°QSM portal, by all members. So far, over 80 percent of members registered nationwide.

He also disclosed that they updated all regulatory obligations during the lockdown, such as fumigation of members’ offices/markets, and distribution of second phase of face mask nationwide to our members. They also made provision for wash hand basins and sanitizers at distributions centres, even as members will explore school fees, mortgage, and subscription payments as part of their allowable scope post-COVID-19.

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