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COMMODITIES

China’s data disappoints, as oil prices fall

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China, the second-largest oil consumer globally, posted a slightly poor economic report which clouded the fuel demand outlook in the near term.

An earlier report by Caixin showed China’s manufacturing purchasing managers’ index (PMI) was 50.3 in July, lower than expected. On Saturday, manufacturing and nonmanufacturing PMIs came in at 50.4 and 53.3 respectively.

Business activity in the country has slowed due to higher raw material costs, equipment maintenance, recent floods, and the latest outbreak of COVID-19.

Asia’s biggest economy had been recovering at a rapid pace but if this recent slowdown deepens, the outlook will fall significantly. The outlook for crude demand is shaky, and that is unlikely to change until global vaccination rates improve.

Investors also looked forward to more oil production from the Organization of the Petroleum Exporting Countries and its allies (OPEC+).

Brent crude oil futures fell 1.05% at the time of writing this report and WTI crude oil futures fell 0.92%. According to reports, OPEC’s oil production rose to its highest level since April 2020 in July. Efforts to reduce production curbs will be further eased from August 1. Since then, Saudi Arabia has progressively ceased its voluntary supply cut.

There continues to be an increase in COVID-19 cases on a daily basis. A higher vaccination rate could however prevent the need for restrictive measures that caused fuel demand to plummet in 2020.

There will be no lockdown as the Delta variant of the virus fuels an outbreak of cases in mainly unvaccinated populations, but the situation is escalating, U.S. officials report.

The daily gasoline consumption of India, the third-biggest oil importer globally, exceeded pre-COVID-19 levels in July. While COVID-19 lockdowns were relaxed across the country, gas oil sales were low, indicating a sluggish industrial outlook.

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CURRENCIES

We have dollars – Nigerian banks tell customers

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Deposit money banks in the country have moved to implement the directive from the Central Bank of Nigeria (CBN) to set up teller points within their banking halls to attend to the forex needs of customers.

This is evidenced by several emails sent by the banks to their customers over the weekend.

Recall that in an unexpected move last week, Godwin Emefiele, the CBN governor announced the discontinuation of the sale of forex to Bureaux de Change operators in the country citing a slew of misdemeanours by the latter, which were jeopardizing the apex bank’s FX policy, as the reason behind the ban.

Emefiele had in the same breath, instructed banks to set up teller points within the banking halls to attend to the legitimate forex needs of customers.

An email from First City Monument Bank (FCMB) to customers read in part:

“We are pleased to inform you that the Central bank of Nigeria (CBN) has approved the resumption of sales of Personal or Business Travel Allowance (PTA/BTA).

To access this, simply visit any FCMB branch today with the following documents and make your request.

  • Duly completed form A
  • Valid international passport and visa
  • Return flight ticket

For more information, please contact your Relationship Manager.

Thank you for choosing FCMB.”

A similar email from Zenith bank read:

“Personal/Business Travel Allowance (PTA/BTA) available for sale at Zenith Bank Branches nationwide. Simply walk into any of our branches with your travel documents.”

The email from UBA stated that the bank had implemented dedicated teller points for FX transactions at all their branches nationwide, listing PTA/BTA, foreign school fees payment, receipt of money transfer (FX) in cash and access to other remittance services “with ease” as services available to customers.

From Guarantee Trust Bank and Stanbic IBTC, the notifying email was much lengthier with Stanbic Bank including a subtle caveat.

“…As part pf our commitment to continually serve our customers, we will ensure all customers’ requests are handled on a first served priority basis based on the availability of funds both in cash and electronically…”

Guaranty Trust Bank’s email had even more caveats. While listing the pre-qualifying documents for PTA/BTA, they noted:

“…PTA request is limited to a maximum of $4000 per quarter per applicant.”

In the same breath, the bank also listed, “A return ticket originating from Nigeria with a minimum travel time of 5 hours to your destination,” as one of the qualifying documents for accessing PTA/BTA from the bank.

It is interesting to note that flights to some African countries are completed well under 5 hours and this leaves one wondering about GT Bank customers needing forex to make such trips. On an Air Peace carrier, for instance, a trip from Lagos to Accra is estimated to take 1 hour. Lagos to Banjul (The Gambia) takes 4 hours 45 minutes, Lagos to Dakar (Senegal) takes 3 hours 30 minutes while Lagos to Freetown takes just 3 hours.

These notwithstanding, bankers who spoke to our source  (on condition of anonymity) confirmed that the banks are fully prepared to meet individual and business forex needs, stating that the CBN’s move in ending forex sale to BDCs was the right move.

“The banks are more than capable of rendering this service,” Kayode (name changed), a staff of one of the top tier banks told our source .

“The issue has always been that the BDCs had constituted themselves into a powerful cabal with far-reaching influence among Nigeria’s powerbrokers. This is why they were able to take over such a crucial banking function, but the days of their reign are over now. We are only hoping that Emefiele is not removed from office for this bold action,” he added.

When asked if the CBN had funded the banks with sufficient forex to meet customer requests, another bank staff told our analyst:

“All the branches of all the banks have been capacitated to disburse FX to customers. You can walk into any bank branch and change your naira to dollar up to the daily limit set by the bank.

“You can also receive FX directly into your domiciliary account, which unlike before, now takes only a few minutes to set up. What government wants is for monies received from abroad to be documented, which is why the CBN has asked that we route FX inflows through domiciliary accounts.”

When asked about the availability of forex for transactions such as overseas payments, he said:

“The bank will not give you forex to make overseas payments; you present the necessary paperwork to them and they debit your account and credit the organisation where you want to send the money to abroad.

“The CBN does not want individuals to start another round-tripping racket and this is why the regulator has put this rule in place. This is the procedure for making oversea payments like school fees, medical bills, and payment of suppliers for goods (or services) to be imported into the country.”

Our respondent also confirmed that the exchange rate would fall over the coming weeks as the panic and furore over the CBN/BDC debacle subsides and people start to see that the system has been rejigged in their favour. He advised individuals to open domiciliary accounts and save in forex if they can afford to.

In case you missed it

It was reported last week that the CBN governor instructed Deposit Money Banks (DMBs) to set up teller points in designated branches for the sale of foreign exchange to meet legitimate forex requests of their customers.

This came after the apex bank announced that it will discontinue the sale of dollars to the Bureau De Change (BDC) operators.
The directive was contained in a memo by the CBN to the deposit money banks and signed by the Director, Bank Supervision Department of the apex bank, on Thursday, July 28, 2021, in Abuja.

The CBN in the memo also asked the banks to publicize the locations of the designated branches and make necessary arrangements to sell forex to customers in cash and/or electronically.

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Cryptocurrency News

Nigeria transacts an estimated $39 million worth of Bitcoin in July

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The Nigerian interest in cryptocurrencies keeps increasing as July saw Bitcoin P2P transactions settle at approximately $39 million. This represents a 3% growth from last month’s transaction volume of $37.95 million.

In Nigeria, due to its foreign exchange crisis, many businesses and individuals turn to cryptocurrencies to help process payments faster than its already challenged traditional financial institutions. In the country, Bitcoin is used regularly, not necessarily as a form of asset class meant for long-term holding but as a means to carry out international currency transfers and Nigeria is leading the way in Africa.

In February 2021, the CBN banned financial institutions from honouring cryptocurrency-related transactions and services with immediate effect. The CBN has claimed that the decision was to protect Nigerian investors from the “volatility” and “Insecurity” of cryptocurrencies but many speculate that it was an attempt to stop the funding of certain groups which are hostile to it.

With Nigeria’s P2P volume at approximately $39 million in Bitcoin for July, which is up 3.00% from last month’s level of transaction of $37.95 million, it confirms that despite the ban on cryptocurrencies, the CBN’s decision has not stopped the use of Bitcoin and other cryptocurrencies in the country. This is possible because there are online platforms that are outside the control of the CBN and the Nigerian Government which are being used to trade Bitcoin in Nigeria.

This information does not give a full picture of the level of transactions recorded in the month of July as it only combines the transaction volume of 2 exchanges; Paxful and LocalBitcoins. Other popular exchanges like Binance and Remitano are not included.

This brings the total estimated volume of P2P Bitcoin transactions so far for the year to approximately $244.82 million.

What to expect

With Bitcoin trading above the $40,000 trading zone, the fear and greed index currently neutral and the recent banning of the sale of forex to BDC’s, the level of Bitcoin transaction is expected to go even higher in August.

Even with an outright ban on cryptocurrency-related transactions for financial institutions within the country, it has not stopped Nigeria from being the leading pioneer for cryptocurrency-related transactions on the continent. Cryptocurrency traders have now moved to P2P (Peer-to-Peer) trading, which is the first method of trading cryptocurrencies for cash.

Although the government intends to launch its own CBDC (Central Bank Digital Currency) called the e-Naira by October, this may have little effect in deterring Nigerians from using cryptocurrencies as the ease and convenience is second to none.

Bitcoin is trading $41,300, down 0.10% for the day, as of the time of writing this report.

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