By Chizoba Ogbeche
Abuja
There are strong indications that heads may soon roll in the Central Bank of Nigeria over the directive to International Oil Companies (IOC) to sell forex to only six importers of petroleum products from the consolidated IOCs’ forex pool, put together by the Nigeria National Petroleum Corporation (NNPC).
In a letter signed by SA/Head, Financial Markets Department of the CBN, E.U. Ukeje, to the IOCs, obtained by our correspondent, the apex bank directed the IOCs to note that: “You are only permitted to sell your FX to the designated PMS importers by the NNPC or to the CBN at the ruling exchange interbank rate.”
Blueprint further gathered that the ‘designated importers’ FX should be sold to by the CBN directive are; Conoil Plc, Mobil Plc, MRS Oil Nig, Oando Plc, Northwest Petroleum and Total Nig Plc.
Curiously, the underhand directive contradicts the apex bank’s Revised Guidelines for the Operation of the Nigerian Inter-Bank Foreign Exchange Market, June 2016.
Section 2.1 of the guidelines states that: “Participants in the inter-bank FX market shall include Authorised Dealers, Authorised Buyers, Oil Companies, Oil Service Companies, Exporters, End-users and any other entity the CBN may designate from time to time.”
Also, Section 2.4.2 iii of the guidelines states: “There shall be no predetermined spread on FX Spot transactions executed through CBN intervention with the PXPDs.”
A source familiar with the directive, expressed the fear that it could be counter-productive as the “favoured oil companies cannot handle all the petroleum needs of the country,” stressing that “it was undermining the whole essence of accountability and transparency of the FX process.
“It will be imperative for the NNPC and CBN to explain how they settled on the six oil majors to the exclusion of other independent marketers who make up the bulk chain of petroleum imports and distribution in the country.”
The source, who spoke on condition of anonymity, further stated that: “The authorities are arm twisting the IOCs, imagine asking them to contribute $400million every month while the CBN decides who gets it. Something fishy is going on concerning this FX matter.
“Besides, this talk about diversification does not hold water when almost all forex is directed to just six fuel importers. Is it only petroleum marketers that need forex? What happens to those in the manufacturing and industrial sector? “If the federal government is indeed serious on this matter of diversification, it should rescind this directive and allow a level playing field to really grow the economy,” the source further stressed.
It was further gathered that the main worry is that of market reaction with the existing directive, insisting that naira cannot appreciate with what is on ground knowing that the IOCs contribute the largest to the FX market after CBN.
“The NNPC and CBN seem to run in opposite direction to that of President Buhari. If not, how can one explain the existing situation when they know that the IOCs contribute the second largest to the FX market? Once they make forex available to the market, it strengthens the naira against the dollar and it gives balance to the economy.
Now you pool all their FX and sell to only six oil majors, while Bureaux De Change are left to source from where?
“So, you begin to have an appreciation of why the president is bothered about this free floating of the naira. As long as the NNPC and CBN cherry pick, the naira will keep bouncing around. The remedy is allowed the IOCs to access the open market as contained in the revised guidelines and not all these restrictions.
“This directive of not allowing a level playing field makes a mockery of President Buhari’s transparency drive and can ultimately put the naira under pressure since there is no level playing field,” our source further explained.
The whole backroom dealings, he claimed, started with a letter from the Minister of State for Petroleum, Dr. Ibe Kachikwu, who asked IOCs to contribute $400 million monthly to a common pool to be dedicated solely for the importation of petroleum products.
In the letter to the IOCs obtained by our correspondent, Kachikwu wrote: “At the heart of the liberalisation is the need to reflect realities of foreign exchange pricing outside the CBN, to ensure supply continuity. Therefore, it is imperative that all sources of foreign exchange are explored to enable the importation of petroleum products.
“As such, our expectation is for the IOCs to support this initiative by allocation into a general source pool, approximately $400 million monthly for the importation of petroleum products. NNPC will act as moderator of the foreign exchange pool and determine the eventual disbursement of these funds.”
