Banks, oil firms decry forex pressure, low prices, urge subsidy removal

oil-industrysubsidyCrude export earnings crash

FINANCIAL institutions in the country may be facing uncertainties following the recent Central Bank of Nigeria (CBN) policy on foreign exchange as well as the dwindling crude oil prices at the international market.

Besides, oil and gas companies appear to be at their most challenging period in the last five years, as the interest rate restriction worsens the effects of the plunging oil price on their operations.

This development comes as Nigeria’s export earnings from crude oil in 2014 has dropped from the $89 billion (about N19 trillion) it recorded in 2013 to $77 billion (about N16 trillion), according to the latest statistical bulletin of the Organisation of Petroleum Exporting Countries (OPEC).

The country therefore, may have lost over N3 trillion from crude oil export earning as a result of the uncertainty of crude oil prices at the international market.

The chief executives of banks and oil firms in Nigeria, who spoke at the Nigerian Stock Exchange (NSE)\Bloomberg Chief Executive Officer(CEO) roundtable in Lagos yesterday, enjoined the CBN to take a drastic action to loosen the forex market and urgently clear the backlog that is currently sweeping operators off their feet.

The Group Managing Director and CEO, Zenith Bank, Peter Amangbo, said the falling oil prices is a major challenge to the economy due to overdependence on oil revenue, while the banking sector is presently facing critical challenge of Foreign Exchange (Forex) availablity to fund the economy.

He also urged the new government to create a conducive environment for businesses to thrive.

The Managing Director, First Bank of Nigeria, Plc, Bisi Onasanya, corroborated Peter, noting that where an economy largely depend on oil revenue and oil prices is on the decline, the economy will suffer and all economic indices have showed that Nigerian economy is contracting.

He disclosed that the volume of deposit has slowed down because the states are finding it difficult to meet their overheads and owing salaries while other critical sectors are battling for survival.

The Executive Director of UBA, Femi Olaokun, said the new goverment should act fast and define it policy direction, noting that the political crisis has bedeviled the nation’s economy for long.

Olaokun said government should diversify the economy in other to broaden the economy base and provide fiscal support in a short-run to aid operations.

The CEO, NSE, Oscar Oyeama, said the effect of sliding oil prices has already started manifesting on the exchange rate and it will definitely impact on the nation’s development this year.

He however assured that the NSE remains a viable platform for capital formation and will continue in its efforts to sustain economic growth.

The oil industry chieftains at the forum believed that. Nigeria needs to review its crude oil production mechanism for it to have significant share of the international market amid the emerging shale technology.

In the local economy, they emphasised the need for removal of fuel subsidy, considering its impact on the national purse.

The Managing Director, Seplat Petroleum, Austin Avuru, who gave an insight into the background of Organisation of Petroeum Exporting Countries (OPEC) intervention in oil prices said its recent decesion tells more that the key issue is not about supply but cost of production.

He therefore said it was high time Nigeria looked into cost of producing crude.
The Chief Executive Officer, Oando Gas and Power, Bolaji Oshunsanya, said deregulation was the best thing for nation at the moment, urging government to put up palliative measures before the pronouncement.

He said: “We don’t have choice as a nation than to deregulate. It is obvious that Nigeria can no longer sustain the huge amount of money spent on subsidy, but government needs to put up palliative measures upfront so as to make it workable.”

A Senior Oil Industry Analyst, Bloomberg, Phillip Chladeck, said Nigerians believe that as a nation that very rich in resources they should not pay high prices for petrol.

The OPEC report, which was released yesterday by the oil cartel, showed that the country’s crude oil export earnings had earlier dropped from $95 billion it recorded in 2012 to $89 billion.

At the global level, the value of OPEC members’ petroleum exports fell below $1 trillion in 2014 for the first time since 2010, showing the impact of last year’s slump in oil prices on the producer group.

Exports from the OPEC countries fell in value to $964.6 billion last year from $1.10 trillion in 2013.

This OPEC report corroborated the Central Bank of Nigeria (CBN)’s latest economic report, which stated that the Federal Government earned N735.07 billion revenue in the month of April 2015, which was lower than the monthly budget estimate by 9.8 per cent.

The decline in estimated federally-collected revenue (gross) relative to the monthly budget estimate was also attributable, largely, to the shortfall in receipts from oil revenue during the review month.

It attributed the fall in oil receipts relative to the level in the preceding month to the decline in revenue from crude oil and gas exports, occasioned by the drop in the prices of crude oil in the international market.

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