According to local media reports, private oil marketing companies (OMCs) have now joined the Nigerian National Petroleum Corporation (NNPC) in the importation of petrol. This was based on information from the Petroleum Products Pricing Regulatory Agency (PPPRA) that permits had been given to several OMCs to start importing petrol alongside the NNPC. The General Manager, Corporate Services, PPPRA, Kimchi Apollo, revealed that the agency recently issued Quality Management (QMs) which empowers OMCs to import petroleum products.
Prior to this development, the NNPC has been the sole importer of petrol for over two years. The steep devaluation in the local currency in the wake of the 2015/16 oil price crash as well as an increase in crude prices that ensued thereafter led to a surge in the landing cost of petrol. The reluctance of the government to adjust the retail price of petrol to align with market realities made it unprofitable for OMCs to continue to import petroleum products.
As such, NNPC had to step in to continue to supply the market. This, however, came at a huge cost to the nation, as NNPC reported subsidy payments as “under-recoveries” being the excess of the landing cost of petrol over the price sold to OMCs. According to the Nigerian National Petroleum Corporation (NNPC), the federal government paid N752bn as petrol subsidy in 2019, equivalent to 62% of the amount spent on capital expenditure in the year (N1.2trn).
Although we believe the decision of the PPPRA to allow OMCs import petrol directly will improve the thin margins of players in the downstream sector, we note that the gains could be short-lived and eroded when oil prices trend higher, if the federal government maintains control over the retail price of petrol. Based on our pessimistic case, OMCs will hands off the importation of petrol if the rebound in oil prices pushes the landing cost of petrol to a discount of c.10% from the current retail cap of N125/litre.
We recall that on 18 March 2020, the Federal Government (FG) announced a reduction in the retail price of Premium Motor Spirit (PMS) to N125/litre from N145/litre, following the revision of its Ex-Coastal price to N99.44/litre (Previously; N117.6/litre) and Ex-Depot price to N113.28/litre (previously; N133.28/litre). This came on the heels of the global pandemic which led to an unprecedented decline in oil prices and by extension reduction in the landing cost of petrol. Subsequently, the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Malam Mele Kyari, noted that the country will no longer pay for under-recovery or subsidy on petrol, a move that we believe signals the liberalisation of the downstream sector. However, we are uncertain on the reaction of the government when the landing cost of petrol rises as oil prices recover in the international market.
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Central banks digital currencies pose a threat against the U.S dollar
In general, digital currencies could weaken the power of U.S. sanctions and the ability of the U.S. Treasury to watch illicit financial flows.
A new report by America’s biggest bank, JP Morgan Chase, said the U.S dollar is being faced with a major threat as many central banks’ digital currencies continue to gain traction.
Analysts, including Josh Younger, the head of U.S. interest-rate derivatives strategy and Michael Feroli, the chief U.S. economist, wrote in a report saying this:
“There is no country with more to lose from the disruptive potential of digital currency than the United States.
“This revolves primarily around U.S. dollar hegemony. Issuing the global reserve currency and the medium of exchange for international trade in commodities, goods, and services convey immense advantages.”
Aditi Kumar and Eric Rosenbach also recently penned an opinion piece for Foreign Affairs in which they noted that “Just recently, America’s arch-rival China became the first major economy to carry a real test of a national digital currency.”
In general, digital currencies could weaken the power of U.S. sanctions and the ability of the U.S. Treasury to watch illicit financial flows. A digital Chinese currency (yuan) combined with China’s developed electronic payment systems may give China more future influence than it ever bargained for.
What Nigerians should know about Digital currencies
A digital currency is a cash balance recorded electronically on a store value card or other physical devices, which could someday replace the physical notes of the naira, for instance.
Digital currencies can be decentralized, that is where the control over the cash supply can come from diverse sources. Digital currencies can also be centralized, where there is a midway point of control over cash supply, just like the way central banks work.
Although JP Morgan does not see the U.S dollar being overthrown as the world’s reserve currency anytime soon, experts warned that the U.S dollar dominance could weaken. This is because its processing trade settlement and the SWIFT system could make it more vulnerable.
The American bank continued by saying:
“Offering a cross-border payment solution built on top of a digital dollar would, particularly if designed to be minimally disruptive to the structure of the domestic financial system, be a very modest investment to protect a key means to project power in the global economy,
“For high-income countries and the U.S. in particular, digital currency is an exercise in geopolitical risk management.”
Federal Reserve Chairman Jerome Powell said months ago that the Federal Reserve was taking a critical view on the issues regarding a digital currency.
Dollar gains against major currencies
U.S dollar stood firm against major currencies on Monday as fears over rising tensions between America and China over Beijing’s plans to begin
The U.S dollar was up on Monday morning during London’s trading session after protests in Hong Kong yesterday escalated U.S-China tensions.
US dollar stood firm against major currencies on Monday as fears over rising tensions between America and China heightened.
The American Dollar Index that monitors the U.S dollar against a basket of other major currencies was slightly up 0.02% to 99.945 by 11.10 am Nigerian local time.
What it means: Nigerians hoping to meet a foreign exchange payment obligation, transactions via the dollar to countries like Europe, Japan, would have the need to pay fewer dollars to fulfill such transactions.
Meanwhile, the friendship between the Americans and Chinese has soured lately since the outbreak of the COVID-19 pandemic. US President Trump and President Jinping of China have traded words against each other issues surrounding COVID-19, including accusations of lack of transparency and cover-ups.
Consequently, the U.S. Commerce Department added 33 Chinese businesses to a blacklist on Friday, and some U.S. Senators proposed sanctions on those businesses.
“The biggest concern is the tension between the United States and China, things were already bad, and it is likely to get worse because of the Hong Kong security law. This supports risk-off trades, which is positive for the dollar and the yen,” Tekuya Kanda, the general manager of research at Gaitame.com Research Institute, told Reuters.
NNPC discloses basis for employment and managerial progression in the oil firm
NNPC disclosed that academic competence, application of federal character amongst others are part of key consideration in its recruitment process.
The Nigerian National Petroleum Corporation (NNPC) has explained the basis for employment as well as career progression in the state-owned oil firm, using a recent Graduate Trainee employment process and top management promotion exercise as an illustration.
This is coming against the backdrop of criticism in recent times over management appointments and postings, with claims of nepotism, favoritism, and lack of federal character.
In a press statement signed by NNPC’s Group General Manager Public Affairs, Dr. Kennie Obateru, the state NNPC disclosed that academic competence, and application of federal character, amongst others are part of key considerations in employment and managerial progression. The statement said in parts:
“Unblemished academic competence, logical thinking, ability to engage meaningfully in problem-solving in addition to the federal character are key to becoming an employee of the corporation.
“To progress in the Management cadre, professional competence, accountability, and transparency as well as ensuring national spread in top management positions are critical factors that are not negotiable.”
Explaining the parameters, Dr. Kennie Obateru stated that the basic academic requirement for newly employed Graduate Trainees in the corporation is a minimum of a Second-Class Upper Division or an Upper Credit for Higher National Diploma (HND) certificate holders. Alternatively, a candidate holding a Second Class Lower Division degree or an HND Lower Credit Diploma holder, must in addition have acquired a Master’s degree in a relevant field.
He pointed out that this was applicable in the last recruitment exercise where qualified applicants undertook a computer-based test conducted by a neutral national examination body, following which the best performers were further taken through a formal interview session to ensure their suitability.
Obateru stated that the end product of the rigorous exercise was the new set of employees who have shown a lot of promise since the beginning of the onboarding programme which started earlier this month; including engagements with the Group Managing Director of the NNPC, Mallam Mele Kyari, and some members of top management of the corporation.
PRESS RELEASE:@NNPCgroup Says Professional Competence, Transparency, Accountability, National Spread are Bases for Employment, Management Progression in Corporation
The Nigerian National Corporation (NNPC) has explained the parametres..
— NNPC Group (@NNPCgroup) May 24, 2020
The NNPC spokesperson said the fairness in the appointment of the new employees was such that many of the new employees expressed astonishment at securing employment in the National Oil Company without any godfather.
It should be recalled that 1,050 graduate trainees were recently recruited by NNPC and assumed duty virtually on Monday May 4, 2020 due to the lockdown caused by the COVID-19 pandemic.
Also, some top management appointments and postings were done in the first week of March this year.