Oil vs. Naira
by PATRICK ATUANYA
September 26, 2016 | 12:23 am| | | Start Conversation
Nigeria’s naira hit a new record low of N436 per dollar on the black market last week as dollar shortages on the official market persisted, meaning importers are still sourcing most of their hard currency needs from the unofficial black market.
Meanwhile dollar reserves fell to $24.83 billion by Sept. 19, down 3.4 percent from a month ago, to its lowest level in more than 11-years, as the central bank of Nigeria (CBN) sold dollars on the interbank market to help support the naira.
The naira and oil correlation is quite strong meaning the currency will probably not see any reprieve until oil production cuts from militant activity are restored.
Trading sources said last week that exports of Nigeria’s Forcados crude stream oil are set to resume at the end of September for the first time since February with a loading programme issued for October, trade sources said on Thursday.
The first cargo is expected to load on Sept. 28, while October exports are expected to be around 230,000 barrels per day, a preliminary loading list showed.
SPDC, a local affiliate of Shell, operates the terminal and declared force majeure on exports on Feb. 22 after a sub-sea pipeline was hit by militant group the Niger Delta Avengers.
Meanwhile loading plans have also scheduled 275,806 of Qua Iboe in October. Another shows nine shipments of Qua Iboe also planned in November, matching cargoes in the previous month.
Oil Minister Emmanuel Kachikwu said Sept. 19 that production has accelerated over the past several weeks amid a cease-fire with militants who had been attacking the nation’s energy infrastructure.
On the interbank FX Market the naira traded at an average of N310 per dollar as at 2.00 pm local time on Friday.
Some $8.5 million in deals were traded.
Trading volume on the FMDQ interbank FX market has dropped in recent weeks, which is threatening to undermine reform of the market.
Analysts say this may be due to non market driven price formation which may be putting off potential foreign portfolio investors (FPIs) and domestic FX market traders.
Questions about the CBNs ability and firepower to effectively intervene in the FX market may also be leading to a freezing up of trades.
Nigeria’s oil production plunged to 1.44 million barrels a day last month, matching a low set in May, data compiled by Bloomberg show.
Oil Minister Emmanuel Kachikwu said recently that daily output should rise to 1.8 million barrels next month and 2 million barrels by December, when most export terminals will have resumed operations.
FX traders will be watching those numbers keenly to determine where to price the currency, which for now is being pressured by fears of inadequate CBN dollar reserves.
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