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SINKING NAIRA: Senate summons CBN Gov, Emefiele

By Babajide Komolafe, Henry Umoru, Joseph Erunke & Michael Eboh

The Naira appreciated yesterday to N302 per dollar in the parallel market, thus halting three days of sharp depreciation even as the price of Nigeria’s reference crude oil grade, Bonny Light, slid below the $30 per barrel mark, dropping to $29.47 per barrel.

Meanwhile, following the increasing depreciation of the Naira, the Senate, yesterday, summoned the Central Bank of Nigeria, CBN, Governor, Godwin Emefiele, to appear before it next week.

From N305 per dollar, Wednesday, the parallel market exchange rate dropped to N302 per dollar at the close of business yesterday, indicating N3 appreciation.

President, Association of Bureaux De Change Operators of Nigeria, ABCON, Alhaji Aminu Gwadabe, said that the appreciation was occasioned by drop in demand for foreign exchange and indications that CBN might review its decision to stop dollar sales to bureaux de change, BDCs.
The naira depreciated in the parallel market by N25 naira between Monday and Wednesday, following the announcement by CBN on Monday to stop sales of dollars to BDCs.

Mr Godwin Emefiele answering questions  during his screening by the Senate for  Central Bank Governorship in Abuja on Wednesday
File: Godwin Emefiele in the Senate Chambers.

Earnings dip
Also, the price of Nigeria’s reference crude oil grade, Bonny Light, slid below the $30 per barrel mark, dropping to $29.47 per barrel, according to data obtained, yesterday, from CBN.

This was even as the price of Brent crude, the benchmark crude oil grade, rose to $30.77 per barrel in the international market. Brent crude had dipped below $30 a barrel on Wednesday, for the first time in more than 10 years, a day after the U.S. benchmark took a similar fall.

Specifically, Brent traded as low as $29.96 a barrel before settling down 55 cents, or 1.8 percent, at $30.31 a barrel on ICE Futures Europe, the lowest settlement since April 2004.

Therefore, using an average crude oil production of 2.2 million barrels per day, as stated by CBN, it is expected that the total amount accruable to the Federal Government and oil companies in Nigeria on a daily basis would dip to $64.83 million, about N12.967 billion daily, using an average exchange rate of N200 to a dollar.

Job loss at BP, Shell, Chevron
Consequently, as a result of the continuous decline in the price of Nigeria’s Bonny Light and other crude oil grades, experts are predicting massive job cuts in the Nigerian and global oil and gas industry in the next couple of days.

Already, the world’s biggest oil companies are slashing jobs and discontinuing major investments, especially as the price of crude falls to new lows.

A report obtained from the Associated Press noted that companies that would be affected by the declining oil price would not only be the big oil producers, but the numerous companies that do business with them, such as drilling contractors and equipment suppliers.
Particularly, companies like BP, which had earlier in the week said it is cutting 4,000 jobs, had already commenced trimming down their operations to cope with the slump in oil, whose price had plummeted to its lowest level in 12 years and is not expected to recover significantly for months, possibly years.

The report had quoted Chevron as saying last year that it would eliminate 7,000 jobs, while Shell announced 6,500 layoffs.

Furthermore, some analysts are forecasting a drop near $10 a barrel, making companies to brace up for more trouble.

In particular, Michael Hewson, chief market analyst at CMC Markets, said: “Calling the bottom in a market is always dangerous, akin to catching a falling knife. But when the clamour for lower prices becomes a stampede, warning signs and alarm bells tend to start going off, which suggests that a more prudent approach might be advisable.”

The uncertainty, the report said, is making companies think twice before sinking money into new oil projects.

“On the North Sea, there is a standstill in the new project, which may create a hole in the pipeline of projects next year,” said Florent Maisonneuve, Managing Director and co-head of Oil & Gas at AlixPartners in Paris.

Subsequently, CBN had in its Economic Report for the Month of October 2015, put the average price of Nigeria’s reference crude, Bonny Light at $49.23 per barrel in October, indicating a 1.3 percent increase relative to the level in the preceding month.

The Nigerian National Petroleum Corporation, NNPC, on the other hand, had stated that of the 18.24 million barrels of crude oil lifted on the account of NNPC in October 2015, 12.07 million barrels and 6.17 million barrels were for domestic and export markets, respectively.

It said: “At an average oil price of $47.45 per barrel and exchange rate of N195.95 to a dollar, the domestic crude oil lifted by NNPC is valued at $572.998 million or a Naira equivalent of N112.279 billion for the period.

“The remaining crude oil lifted for export was valued at $305,856,048.03 at an average price of $49.58/barrel. The total value of crude oil lifted on the account of NNPC in October, 2015 was thus $878.854 million.ý”

Meanwhile, concerned by the increasing depreciation of the Naira, the Senate, yesterday, summoned the CBN Governor, Godwin Emefiele, to appear before it on Tuesday next week at 11a.m., to explain the continuous weakening of Naira against the Dollar.

The development was sequel to a Point of Order raised by the Leader of the Senate, Ali Ndume, APC, Borno South.

The Senate President, Bukola Saraki, who presided over the plenary where the issue was raised, having listened to Senator Ndume, subsequently directed Ndume to convey the Senate’s resolution to the CBN governor.


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