Nigeria Said to Plan London Bond Talks as Naira Move Looms – Bloomberg

Nigerian officials are meeting bond investors in London next week, according to a person familiar with the matter, as the government considers tapping international debt markets for the first time in three years to help finance its record budget deficit.

Finance Minister Kemi Adeosun will head the meetings on June 7, which have been arranged by Standard Chartered Plc, according to the person, who asked not to be identified because he’s not authorized to comment publicly. Abraham Nwankwo, head of Nigeria’s Debt Management Office, Dami Adesanya, an adviser at the finance ministry, and a representative of the central bank will be part of the Nigerian delegation, according to the person.

The talks will probably focus on Nigeria’s currency controls and its policy of pegging the naira against the dollar, according to Standard Life Investments Ltd., which manages around $1.3 billion of fixed-income assets in emerging markets. The curbs have exasperated investors, who say the currency is overvalued, and caused investment into Africa’s largest economy to shrivel. President Muhammadu Buhari and central bank Governor Godwin Emefiele hinted in the past two weeks that they will shift their stance and allow more flexibility.

“A lot of Nigeria’s problems today can be traced back to the pegged exchange rate,” Mark Baker, a money manager at Standard Life, which has recently bought Nigerian Eurobonds in anticipation of a devaluation, said by phone from London. “The current policy mix is clearly unsustainable, given what’s happened with oil prices and the impact on the fiscal position. A weaker currency is obviously needed to help boost fiscal revenues.”

The government said earlier this year that it plans to raise about $5 billion of external debt in 2016 to help fund a 6.1 trillion naira ($31 billion) budget that’s meant to stimulate its contracting economy. Adeosun said in April that Nigeria was considering a debut yuan-denominated bond as it may be cheaper than dollar-debt.

Nigeria last issued a Eurobond in mid-2013. Yields on its $500 million of securities maturing in July 2023 rose 16 basis points to 7.57 percent by 12:25 p.m. in London. Through yesterday, the bonds had returned 11 percent this year, compared with an 8.6 percent average gain for high-yielding emerging-market sovereign debt tracked by Bloomberg.

Oil Revenue

Nigeria has been battered by falls in the price of oil, which accounted for two-thirds of government revenue and 90 percent of export earnings in 2014. Growth was negative in the first quarter for the first time since 2004 and a recession is imminent, the central bank said last week.

The Abuja-based bank has pegged the naira at 197-199 per dollar since March 2015. Buhari has backed that policy since he came to power two months’ later.

The currency has plummeted to around 350 on the black market as dollar shortages worsen, while forwards contracts suggest it will fall to 286 in three months.

Buhari to CBN: No Objection to Flexible Exchange Rate – Thisday

  • Nigeria’s Foreign Trade Declines to N2.72tn from N3.51tn

Bolaji Adebiyi, with agency report, James Emejo in Abuja, David-Chyddy Eleke in Awka

Faced with an economy nearing recession and inflation at the highest in almost six years, President Muhammadu Buhari has backed down on his refusal to allow the naira to weaken.

The President, according to Bloomberg, has given the Central Bank of Nigeria the go-ahead to introduce a more flexible exchange-rate system even as he remains against a devaluation of the naira.

The foreign news agency quoted the President’s Senior Special Assistant on Media and Publicity, Garba Shehu, “The president is opposed to devaluing the naira, he has said so repeatedly…but he has given them (CBN) the leeway to introduce what he has called ‘flexibility in managing the currency’s value.”
The President had said in his Democracy Day speech on Sunday that he supported a stable currency, though he would keep “a close look at how recent measures affect the naira and the economy.”

Buhari’s media aide’s comments, which came days after the Central Bank of Nigeria said it planned to introduce a more flexible exchange-rate regime, cleared traders guess on whether the President supported the bank’s plan.

Bloomberg quoted a money manager at Aberdeen Asset Management Plc, which sold all its Nigerian government debt in response to currency controls, Kevin Daly, as saying, “The authorities are acknowledging they need to do something. “They realize this policy is doomed. The question now is how you implement it and how you save face.”

Nigeria has held the naira at 197-199 per dollar since March 2015, even as other oil exporters from Russia to Colombia and Malaysia let their currencies drop amid the slump in crude prices since mid-2014. Foreign reserves dwindled as the central bank of Africa’s largest oil producer defended the peg, while foreign investors, fearing a devaluation, sold Nigerian stocks and bonds.

Three-month non-deliverable naira forwards have weakened about 35 naira to 283 per dollar since the central bank announced its change of direction, suggesting traders anticipate the currency may trade near that level in the event of a devaluation.

The Central Bank Governor, Godwin Emefiele, had said on May 24 that policy makers were considering a two-tier currency system, with the naira trading nearer a market-related level in the interbank market while the central bank would continue to allocate dollars to strategic industries at a fixed rate, adding that the new system would be implemented shortly.

The Head of Research at Sterling Capital Markets Limited, Sewa Wusu, has, however, criticised Buhari’s positions as contradictory. “How do you say you don’t believe in devaluation if that is what will create a fair price or bring about a market-determined rate?” Wusu told Bloomberg by phone from Lagos. “The government should come out clearly and say what it wants,” he said.

Nigeria’s Foreign Trade Declines in First Quarter

Nigeria’s total merchandise trade continued its downward trajectory, falling to N2.72 trillion in the first quarter of the year (Q1 2016), representing a 22.6 per cent decline or N793.5 billion compared to N3.51 trillion in the previous quarter. Foreign trade was recorded at N4.02 trillion in Q3 2014.

According to the Foreign Trade Statistics for First Quarter, which was released by the National Bureau of Statistics (NBS) yesterday, falling exports as well as sharp decline in imports caused a negative trade balance within the period.
It said the steep decline in exports brought the country’s trade balance down to a negative value of -N184.1 billion, or N548.7 billion less than what obtained in the preceding quarter.

According to the NBS, the country’s crude oil component of total trade decreased by N716.7 billion or 46.6 per cent against the level recorded in Q4 2015.

The value of exports totalled N1.26 trillion in Q1, representing a decrease of N671.1 billion or 34.6 per cent over the N2.07 trillion recorded in the preceding quarter.
Year-on-year, exports dropped by N1.39 trillion or 52.3 per cent against the export value recorded in the corresponding quarter of 2015.

The country’s export trade was still dominated by crude oil exports, which accounted for 64.7 per cent or about N821.9 billion of total domestic exports.
According to the statistical agency, quarter-on-quarter exports fell 34.6 per cent and 52.3 per cent year-on-year while imports dropped 7.8 per cent and 15.8 per cent.

On the other hand, import trade stood at N1.45 trillion, representing 7.8 per cent drop from the N1.57 trillion recorded in the previous quarter and a further decrease of 273.7 billion or 15.8 per cent year-on-year.
India, Spain and the Netherlands are Nigeria’s major trade partners respectively in Q1 while China, India and the USA constituted major sources of the country’s imports.

Meanwhile, the federal government has said it hopes to achieve the 3.7 per cent projected general growth outlook for the African continent through enhancing global competitiveness of locally made products.
The Minister of Industry Trade and Investment, Dr. Okechukwu Enelama, said this at the one-day sensitisation workshop yesterday.

Enelama who was represented by a director in the ministry, Adesola Olusola, said the 25 per cent subsidy on standardisation was targeted at ensuring that the economy is diversified through the export of globally competitive finished products as set by the Standards Organisation of Nigeria (SON).

“The decision of SON to embark on the 25 per cent subsidy programme is particularly auspicious given the current concerns on the need to make Nigerian products competitive in the domestic and export markets, a veritable strategy for the federal government to achieve the diversification of the national income base.

“At the heart of this effort are the twin issues of standard and quality of our locally manufactured goods and services, inadequate attention to them over the years has been a major challenge to their competitiveness and the country’s ability to achieve the projected 3.7 per cent growth outlook for the African continent in 2016,” he said.

Enelama called on manufacturers to freely and voluntarily key into the project and urged Nigerians to generously patronise certified made-in-Nigeria products to further empower the people economically and create jobs.
On their parts, some indigenous manufacturers lauded the SON for enhancing the minimum standard of Nigerian products through effective monitoring.

Head Marketing, Research and Development of Chikason Industries, Mr. Amechi Chukwu, said making local products attain global standards would enhance the employment generation of indigenous industries.
Chukwu who said the company currently had no fewer than 2,449 employees in Nigeria alone, urged the Federal Government to ease the cost of doing business in the country.

Also speaking, Mr. Jude Ike, Head, Marketing of Tummy Tummy Foods Industries, said the 25 per cent subsidy on standardisation if implemented would go a long way to help entrepreneurs stay in business.
Ike who described the attitude of Nigerians to consuming quality local goods as satisfactory, bemoaned the high cost of production especially due to poor supply.

He said the Tummy Tummy brand remained committed to minimum industrial standards as set by SON and urged the Federal Government to ease the access to forex to enable local firms procure standard raw materials that were sourced abroad.
Earlier in his speech, the Acting Director General of SON, Mr. Paul Angya, said the organisation would continue to protect Nigerian consumers from fake and substandard products.
Angya said the subsidy scheme was aimed at enhancing the viability Nigeria-made products and enable firms conform to standards.

Declaring the event open, Gov Willie Obiano called for the building of a standard test laboratory in Anambra as it had a thriving industrial sector.
Obiano who was represented by the Secretary to the State Government, Prof. Solo Chukwulobelu, lauded the SON for its pro-activeness and promised to continue collaborating with the agency.

 

Gulf OPEC members seek joint action on oil output – Reuters

* Iran says too early to join any pact

* Supply outages across the world support oil price

* Venezuela warns of more downside when outages ease (Releads with source saying Gulf OPEC members seek joint action)

By Rania El Gamal and Shadia Nasralla

VIENNA, June 1 (Reuters) – Gulf OPEC members including Saudi Arabia are looking to revive the idea of coordinated oil-output action by major producers when the group meets on Thursday, a senior OPEC source said, but Iran signalled the country was not ready for any such pact.

“The Gulf Cooperation Council is looking for coordinated action at the meeting,” the source said, referring to a group combining OPEC’s biggest producer Saudi Arabia and its Gulf allies Qatar, Kuwait and the United Arab Emirates.

Saudi Arabia effectively scuppered plans for a global production freeze – aimed at stabilising oil markets – in April. It said then that it would join the deal, which would also have involved non-OPEC Russia, only if Iran agreed to freeze output.

Tehran has been the main stumbling block for the Organization of the Petroleum Exporting Countries to agree on output policy over the past year as the country boosted supplies despite calls from other members for a production freeze.

Tehran argued it should be allowed to raise production to levels seen before the imposition of now-ended Western sanctions over Iran’s nuclear programme.

On Wednesday, Iran said its position had not changed and even though its exports were rising quickly it was too early for Tehran to join such a pact – meaning it would need an exemption, which Saudi Arabia has repeatedly resisted.

“Iran supports OPEC’s efforts to bring stability to the market with fair and logical prices, but it will not commit to any output freeze,” Iran’s representative to OPEC, Mehdi Asali, was quoted as saying by Iranian oil ministry news agency SHANA.

“The issue of output rationing can be discussed after the market stabilises,” Asali said.

A source familiar with Iranian thinking said Tehran was not willing to discuss a freeze as Iran had not yet reached pre-sanctions output levels.

At its previous meeting in December 2015, OPEC failed to set any production policy including a formal output ceiling, effectively allowing its 13 members to pump at will in an already oversupplied market.

As a result, prices crashed to $27 per barrel in January, their lowest in over a decade, but have since recovered to around $50 due to global supply outages.

Those include declining production from U.S. shale producers badly hit by low prices but also forest fires in Canada, militant attacks on pipelines in OPEC member Nigeria and declining output in Venezuela, also a member of the group.

MISSING BARRELS

On Wednesday, Venezuelan energy minister Eulogio Del Pino warned that supply outages have propped up prices in recent months but the global oil glut might build up again when missing barrels return.

“More than 3 million barrels are out of the market. When those circumstances are removed from the market, what’s going to happen?” Del Pino told reporters in Vienna ahead of Thursday’s OPEC meeting.

Del Pino was a key architect of the proposal to freeze oil output earlier this year.

“If you see the decline in the non-OPEC and all the situation that happened in several countries, production has been maintained the same in the last three or four months,” Del Pino said.

“So de facto we have freeze conditions,” he said.

OPEC and non-OPEC producers including Russia had travelled to the Qatari capital of Doha to rubber-stamp the deal, which was previously supported by Saudi Arabia’s then-minister for oil, Ali al-Naimi.

Since then Riyadh has changed ministers, appointing Khalid al-Falih as the head of a new, enlarged energy ministry.

Falih was the first OPEC minister to arrive in Vienna this week, signalling he is taking the organisation seriously despite fears among fellow members that Riyadh is no longer keen to have OPEC as an output-setting organisation.

Kuwait’s acting oil minister Anas al-Saleh said on Tuesday he favoured maintaining dialogue between OPEC and non-OPEC members to help achieve balance in the market.