CBN Directs Oil Companies to End FX Sale to NNPC
The Central Bank of Nigeria (CBN) yesterday directed all oil companies in the country, both international and domestic, to immediately stop the sale of foreign exchange (FX) to the Nigerian National Petroleum Corporation (NNPC). It said henceforth, oil companies should sell their FX to the CBN.
CBN Governor, Mr. Godwin Emefiele, gave the directive while briefing journalists at the end of an extraordinary Bankers’ Committee meeting in Lagos. Emefiele explained that the directive, which was aimed at shoring up FX supply in the country, was in line with the new policy on price modulation that the federal government announced last week.
The CBN governor stated, “All related oil companies are to sell FX to CBN and no longer NNPC. Whether you are in the oil service industry or oil production, upstream, midstream or downstream, all oil related companies must sell their FX to the CBN and no longer to the NNPC, for the purpose of funding the importation of petroleum products, given the new policy on price modulation.”
The federal government had last week deregulated petrol pricing, directing the Petroleum Products Pricing and Regulatory Agency (PPPRA) to modulate pricing in accordance with prevailing market dynamics and oil market developments. Subsequently, NNPC announced that its outlets would sell petrol at N125 from today, N18 reduction from the N143 it was previously sold.
Emefiele said the committee discussed the health and economic crisis caused by the novel Corona virus (COVID-19) pandemic, which resulted in escalating worldwide infections, deaths, disruption in global supply chains, travel restrictions, and turmoil in the international financial markets. He said it was resolved that the central bank and banks would collaborate at this critical time with one coherent strategy to provide confidence to customers, counter parties, the public and, most importantly, put Nigeria first.
According to him, the industry has learnt lessons from previous crises, including the 2008 global financial crisis and oil price slump of 2016. The experiences, he said, would be applied in dealing with the current crisis.
“The industry resolved that profit will not be the primary motive at this time. Rather, preserving confidence, financial stability and support for the economy will be the overriding objectives,” he said.
The CBN governor stressed that engagements would be held with correspondent banks, trade creditors, and trading partners regarding existing Letters of Credit (LCs) and trade commitments.
He explained, “We would be holding engagements with our correspondent banks and trading partners. In 2016, when we had same incident, we had same engagements with our trading partners and correspondent banks, who provide credit lines to customers through Nigerian banks.
“During those engagements at that time, we told everyone that those obligations would be met. We are saying at this time, there is no need to panic.
“We would be dimensioning the size of all those commitments and obligations. Just like we succeeded in 2016, once more I am saying they would be paid.
“The industry is committed to resolving these commitments in a comprehensive and orderly way. There will be transparent and open communication with all counterparties.”
Emefiele pointed out that in view of the significant disruption of the global supply chain, the Bankers’ Committee advised Nigerians and companies to prioritise their import needs and focus more on sourcing raw materials and inputs locally.
“Indeed, there is no choice, but to focus on sourcing your raw materials locally because with various lockdowns that are happening in different parts of the world, all countries are locking their borders, making it impossible for raw materials and inputs to leave their borders,” he stated. “Therefore, we do not have any choice, but to look inwards.”
He added, “The Bankers’ Committee noted the success of the CBN’s 43 items policy and encouraged it to strengthen it and other measures targeted at export promotion and/or import substitution to position Nigeria as a key global producer and build a self-sufficient economy.”
According to the CBN Governor, the committee discussed the financial system’s implication and operationalisation of the policy measures earlier announced by the CBN. He listed them to include additional moratorium of one year on CBN intervention; interest rate reduction on intervention facilities from nine per cent to five per cent; creation of N50 billion targeted credit facility for affected households and SMEs; and granting regulatory forbearance to banks to restructure terms of facilities in affected sectors.
Others include strengthening the apex bank’s loan-to-deposit ratio policy; activation of the N1.5 trillion InfraCo project for building critical infrastructure; additional N100 billion in healthcare loans to pharmaceutical companies, healthcare practitioners intending to expand/build capacity; and the N1 trillion in loans to boost local manufacturing and production across critical sectors.
He said the combination of the measures, which amounts to over N3.5 trillion in stimulus, was to ameliorate the pains arising from the COVID-19 health and economic crisis.
Emefiele added, “Given that this crisis is first and foremost a public health crisis, we are paying particular attention to our health industry.
“As aforementioned, global supply chains have been disrupted, including dominant drug supply channels from China and India. In fact, many countries have or are planning to ban export of drugs and medical supplies from their countries.
“Clearly, we have no choice but to produce these items locally. As a result, the Committee has identified a few key local pharmaceutical companies who shall be granted naira and FX funding facilities to support procurement of raw materials and equipment required to exponentially increase local drug production in Nigeria.
“These loans would be granted at single-digit interest rate and for long tenors, include granting the necessary moratorium.
“These include, but are not limited to, Emzor, Fidson, GSK, May & Baker, Unique Pharma, Swiss Pharma, Neimeth, Sagar, Orange Drugs, Dana Pharma, etc.”
He disclosed that in the course of the meeting, the Minister of Finance, Budget and National Planning, Zainab Ahmed, called in requesting that the Committee should pay special attention to the health sector, saying the fiscal authorities are willing to grant necessary incentives and waivers to encourage operators in the healthcare sector.
Emefiele also disclosed that this week, the central bank would convene a meeting with pharmaceutical companies to discuss ways to support them to immediately begin to expand their plants and machineries with a view to becoming self-sufficient.