Business News
Forex: Parallel market records lowest value since 2017
Naira has depreciated to its weakest level since February 2017 at the parallel market, which is also known as the black market.
The pressure on the foreign exchange market seems to have continued unabated as the Naira depreciated to its weakest since February 2017 at the parallel market, which is also known as the black market.
This happened after the Central Bank of Nigeria (CBN) suspended the sales of foreign exchange to the Bureau De Change (BDC) operators.
According to data obtained from AbokiFX. Com, the Naira traded at N415 against the dollar yesterday as against the N385 per dollar it was trading at in April 2019. Also, data from both AbokiFX.com and Bloomberg currency trader shows that the Naira traded at N388.6 per dollar at the official spot market. This is the highest it has traded in 24 years.
The pressure on the foreign exchange (forex) market is occasioned by the crash in crude oil prices as a result of the trade war between Saudi Arabia and Russia and global low demand. The low demand is caused by lockdown and restrictions on businesses and households due to the coronavirus pandemic.
[READ MORE: Naira under pressure, as crude oil hits $21 per barrel)
Following the huge drop in foreign exchange earnings due to low oil prices, the CBN devalued the exchange rate by over 4%, that is, from N365 per dollar to N380 per dollar.
However, crude oil has witnessed a further slump in prices globally, in addition to low demand and unsold cargoes of the product. This has necessitated calls by some analysts for a further devaluation of the local currency in order to give it the right value.
In a monitored report from Bloomberg, the Chief Executive Officer, Forward Marketing Communication Bureau De Change, Abubakar Mohammed, admitted that the suspension of sales of foreign exchange to BDCs helped in creating scarcity in the market. He said that speculators had been buying the dollars and keeping them, hoping to benefit when the prices get higher.
Also, an analyst with Afrinvest, Robert Omotunde, also explained that if the supply of forex to BDC operators was suspended, there would be a major scarcity as they account for about 30% of the foreign exchange transactions.
READ ALSO: CBN intervenes with $8.28 billion to defend Naira
The CBN, just last year, pumped over $12 billion into the foreign exchange market to sustain the value of the naira.
The external reserves are depleting to a level where if the trend continues, the CBN might not be able to sustain its intervention in the foreign exchange market.
Economy & Politics
Output cut: Nigeria leads in OPEC non-compliance with 50 unsold cargoes of crude
Nigeria and Iraq were reported not to have kept to their commitment to the huge production cut deal that had promised to reduce output by 9.7 million barrels of crude oil per day.
As opinions continue to differ on whether OPEC will extend its current oil output cut beyond June, available information has shown that not all members of the oil cartel complied fully with their agreed quotas for the month of May. This is despite the fact that the oil output by OPEC member countries reached its lowest in almost 20 years.
Available data from oilprice.com showed that OPEC members cut their output by 5.91 million barrels per day from the April level, producing 24.77 million barrels per day. This figure also showed a 4.48 million barrel per day of the agreed output cut, thereby representing a 74% compliance level.
Nigeria and Iraq were reported not to have kept to their commitment to the huge production cut deal that had promised to reduce output by 9.7 million barrels of crude oil per day.
Iraq was able to achieve just 38% compliance of its agreed output cut for the month of May, while Nigeria, which achieved a much lower compliance of the agreed output cut, recorded 19% compliance of what was agreed. Saudi Arabia showed the highest compliance, recording 96% of the agreed output cut.
Some have attributed the noncompliance of some members of OPEC to the agreed output cut, to the contractual obligations and commitment to buyers, given the short timeframe between when the agreement for the output cut was made and its implementation.
Meanwhile oil exports from Angola and Congo remained steady at high prices on Friday, while Nigerian oil fared lower amid huge inventory of unsold cargoes.
Nigeria continues to face some difficulty in the oil market, primarily due to sluggish demand from Europe; it has around 50 unsold cargoes of crude oil yet to be sold for the months of June and July.
Meanwhile, India has become one of the few buyers for the Nigerian oil. Indian oil firms bought about 5-6 million barrels of Nigerian crude oil last week and has bought about 2 million barrels as at Thursday this week.
Business News
President Muhammadu Buhari reshuffles NNPC’s board of directors
Note that the former board included the late Chief of Staff to the President, Abba Kyari as a member. Stakeholders have since expected the President to reconstitute a new board to take over.
President Muhammadu Buhari has approved the reconstitution of the board of the Nigerian National Petroleum Corporation (NNPC) after the expiration of the tenure of the current board.
The newly constituted board members are expected to serve for a tenure of three years, effective immediately. They will take over from the last board, whose 3-year tenure officially ended in 2019. Information about this development is contained in a State House press release that was published on the official twitter handle of the Nigerian Presidency on Saturday morning.
READ MORE: Construction of ICT Parks nudges Nigeria into digital transformation
STATE HOUSE PRESS RELEASE
PRESIDENT BUHARI RECONSTITUTES NNPC BOARD
President @MBuhari has approved the reconstitution of the Board of the Nigerian National Petroleum Corporation (@NNPCgroup), after the expiration of the term of the board members appointed in 2016.
— Presidency Nigeria (@NGRPresident) May 30, 2020
READ ALSO: CBN and NIPOST open pilot microfinance branches
The newly constituted NNPC board is made up of six members from each of the geo-political zones in the country. The members include the following individuals:
- Mallam Mohammed Lawal, representing the North West
- Dr Tajudeen Umar from North East
- Adamu Mahmood Attah from North Central
- Senator Magnus Abe from the South-South
- Dr Stephen Dike from the South East, and
- Chief Pius Akinyelure from the South West geo-political
READ MORE: Boko Haram: A protracted battle yet to be won?
Of the six members, three are returning members on the board – Chief Pius Akinyelure, Mallam Mohammed Lawal, and Dr Tajudeen Umar from North East.
Note that the constitution of the new board is considered a welcome development, as it balances the representation of the six geo-political zones on the board. The previous constitution of the board was faulted for not being “balanced”.
READ ALSO: Full text of President Muhammadu Buhari’s 58th Independence day broadcast
Note that the former board included the late Chief of Staff to the President, Abba Kyari as a member. Stakeholders have since expected the President to reconstitute a new board to take over.
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Around the World
Zoom’s market valuation hits $50 billion mark, thanks to COVID-19
Zoom’s share price now trades at an eye-watering 55 times estimated revenue compared with an average of 7 times for information technology stocks in the S&P 500, according to information obtained from Bloomberg.
Zoom Video Communications’ shares surged to record highs on Friday, as bullish runs in the last hours of trading helped the company to close with a market capitalization of more than $50 billion. The stock gained about 9.7% to jump to $179.48, thereby giving it a market value of $50.6 billion.
Note that this is the first time Zoom’s valuation is reaching this high level since it became a quoted company. The tech giant, which owns popular video conferencing software “Zoom”, has gained more than 160% this year. This is because investors are betting that the surge in Zoom users amid the COVID-19 pandemic, would eventually translate to long-lasting revenue growth.
READ ALSO: How VCs are encouraging terrible business practices by founders
Zoom’s share price now trades at an eye-watering 55 times estimated revenue compared with an average of 7 times for information technology stocks in the S&P 500, according to information obtained from Bloomberg.
Following the significant jump in the company’s valuation, the net worth of its founder and Chief Executive Officer, Eric Yuan, also rose significantly by more than $800 million on Friday. He now has a net worth of $9.3 billion, according to the Bloomberg Billionaires Index.
Meanwhile, in reaction to Zoom’s overnight success, Gennie Gebhart, a researcher with the Electronic Frontier Foundation, said she hoped Zoom would change course and offer protected video more widely. It should be recalled that some users of the app had raised security concerns back in April, as Nairametrics reported.
READ ALSO: Did Satoshi Nakamoto cause the panic sell-off in Bitcoin market
Meanwhile, Zoom has recruited Alex Stamos, a former chief security officer at Facebook, and other top security experts to help deal with the security issues which led to some top companies banning its use. While discussing efforts being made to deal with the security challenges, Stamos told Reuters:
“At the same time that Zoom is trying to improve security, they are also significantly upgrading their trust and safety. The CEO is looking at different arguments. The current plan is paid customers plus enterprise accounts where the company knows who they are.”
