Business News
Naira under pressure as Nigeria records poor export earnings
The naira is expected to be under intense pressure from the dollar starting next week, no thanks to Nigeria’s poor export earnings due the COVID-19 pandemic.
The naira is expected to be under intense pressure from the dollar starting next week, no thanks to Nigeria’s poor export earnings due the COVID-19 pandemic.
This is coming as Nigeria’s commercial banks struggle to meet dollar demands by importers who are seeking to meet past due obligations.
Already, the naira has been depreciating across the official and parallel markets since mid-March, following a crude price slump. As Nairametrics reported, the Central Bank of Nigeria devalued the naira and suspended foreign exchange sales to Nigeria’s retail currency traders.
Earlier this past Thursday, the naira dropped to N387.30 per dollar and then declined further to N387.70 on Friday at the official currency spot market.
On the black market, however, the naira was quoted at about N415 per dollar, having fallen more than the spot market rate.
(READ MORE: Naira slumps further against US Dollar at ₦412/$1)
Foreign exchange inflows into Africa’s largest economy plunged after crude oil prices fell drastically, even as the COVID-19 pandemic continues to exacerbate an already tight currency market.
Recall that the drop in crude oil prices and Nigeria’s dwindling foreign exchange reserves had led to experts’ predictions that it was only a matter of time before the CBN decide to devalue the naira.
In addition, America’s biggest bank, JP Morgan Chase, had reported that it expects a 10% devaluation of the naira to N400 per dollar by the end of the end of Q2 2020.
The first quarter of 2020 have witnessed a generally bearish trend in global financial markets, starting with China which, unfortunately, was the first epicenter of COVID-19 pandemic.
(READ MORE: COVID-19 could save naira from depreciating further)
With China being a major trade partner to Nigeria, it was not surprising how the initial Coronavirus crisis and resultant lockdown in China had diffused through the Nigerian economy.
Nigeria exports a significant volume of its crude oil output to China. And crude oil sales account for about half of Nigeria’s revenue and 90% of its export earnings.
Nigeria’s foreign reserves have depleted to $35.8 billion as of late March 2020, all due to all the upheavals in the global economy.
The country has now resorted to selling its crude at an unusually low discount starting from April, all in an effort to undercut its rivals and survive.
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.”
Adetayo Fatima
April 4, 2020 at 12:20 pm
Good to know
Oluolub
April 4, 2020 at 12:35 pm
Before this time the enemies of Naira if anyone who cares has been watching news on Naira devaluation have been speculating Naira devaluation to the extent that CBN governor has to speak. They have not given up and the pandemic helped them now. I say to them when Naira becomes 1000 naira to a dollar they will rest. The poor is the hardest hit. Good luck for their greed.
peter
April 21, 2020 at 5:18 am
i never comment but oluolub was just too stupid to ignore.
are you suggesting that a “cabal” in nigeria controls global oil prices to which nigeria contributes 2.5% of the supply?
you are utterly paranoid and delusional.