Senator Iroegbu in Abuja
The Nigerian troops deployed in Operation Lafiya Dole have rescued 53 more people from Boko Haram captivity, killed two terrorists and arrested another one.

The Director of Army Public Relations (DAPR), Col. Sani Usman, in a statement yesterday, said the troops of 114 Task Force Battalion of 28 Task Force Brigade, embarked on aggressive patrol to dominate and secure the road linking Izge and Bitta. During the operation, the patrol came across 43 persons that escaped from one of the Boko Haram terrorists hideout in Madube.

Usman said the escapees comprised of 10 men, 14 women and 19 children.
According to him, the freed hostages are currently being screened and profiled at the Battalion Headquarters (DHQ).
Similarly, he said, troops from 115 Task Force Battalion of the same Brigade, in conjunction with some vigilante groups, also carried out patrols to Pegana, Joma, Wambiyar, Dille, Pumpum, Zah, Miya and Pugula communities and cleared them of Boko Haram terrorists.

The Army spokesman also said that some elements of the Nigerian Security and Civil Defence Corps (NSCDC), on Monday, arrested and handed over a suspected Boko Haram terrorist, named Garba Thlama Mussa to the unit.
He said the suspect is currently being interrogated and would be handed over to Joint Intelligence Committee.
Usman further stated that the troops of 117 Battalion also carried out patrol within Mubi North and Mubi South to ensure general security of the areas.

The same unit, he noted, also provided security to Adamawa State boundaries adjustment committee during their visit to Kwaja village in Mubi Local Government Area of Adamawa State.
In the same vein, the DAPR said the troops of 143 Battalion also carried out patrol in Bebel, Fattude, Teddei, Hyambula and Sukur.
“We are pleased to state that the troops in that axis are in high spirit determined to continue doing the nation proud.

“The story is the same in 22 Brigade area of operations as troops from 3 Battalion also conducted foot and mobile patrols towards Diema, Tatakura and Kala villages in which they had contact with Boko Haram terrorists and killed two of them and recovered some dangerous weapons,” he stated.

Similarly, he said, troops from 22 Brigade Garrison in conjunction with a detachment of Nigeria Custom Services personnel conducted patrol along Dikwa-Mafa-Maiduguri road to keep it safe.

Usman also assured that the security situation kept improving in the North-east especially in the liberated and cleared areas, other security and para-military agencies have started redeploying back to their locations.
He stated: “It was to this end that the Nigerian Immigration Service has also deployed its personnel in Dikwa. The 21 personnel were received and briefed at the Headquarters 22 Brigade Garrison.

“The team is undergoing training on mines and Improvised Explosive Devices (IEDs) awareness and ground signs before they commence work.

In a related development, the troops of 22 Brigade Garrison, intercepted 14 Internally Displaced Persons (IDPs) which include three men, three women, six male children and two female children coming to Dikwa from Chingowa village. The IDPs were screened by the troops and the Civilian JTF at the area and then handed over to Dikwa IDP Coordinator for further screening, registration and rehabilitation.”

Sadly, Usman said, an administrative patrol was ambushed from 12 kilometres to Gwoza. Unfortunately three soldiers and 13 other civilians were wounded.
“All of the wounded have been evacuated to 21 Brigade Medical Reception Station. They are all in stable condition and responding to treatment,” he assured.

Davidson Iriekpen
President Muhammadu Buhari has appealed the ruling of Justice Adeniyi Ademola of the Federal High Court in Abuja who on May 26, 2016 dismissed his preliminary objection in a suit filed by an Abuja-based legal practitioner, Mr. Nnamdi Nwokocha-Ahaaiwe.

Nwokocha-Ahaaiwe had alleged that Buhari was unqualified to aspire to the Office of the President of the Federal Republic of Nigeria because he did not sit for the Cambridge West African School Certificate WASC) in 1961 as he claimed.

When the suit came up on May 26, Buhari in his preliminary objection challenged the mode of service of the originating summons on him, insisting that he ought to have been served at an address in Kaduna instead of by substituted means at the national secretariat of the All Progressives Congress (APC) in Abuja.

However, Justice Ademola, in his ruling, had held that it was incompetent and upheld the service of the originating court processes on Buhari.
The judge held that the service of the court’s processes on the president through the secretariat of the APC was proper.

The court was satisfied that if it was served on a senior officer of the APC at the national headquarters, it would be brought to Buhari’s attention.
Dissatisfied with  this ruling, Buhari through his legal team filed a notice of appeal at the Court of Appeal, Abuja Judicial Division on seven grounds of appeal.

The president’s legal team, which endorsed the notice of appeal, is led by Chief Wole Olanipekun (SAN).
Others are Mr. Lateef O. Fagbemi (SAN), Chief Akin Olujinmi (SAN), Oluwarotimi O. Akeredolu (SAN), Kola Awodein (SAN), Prof. Taiwo Osipitan (SAN), Charles Edosomwan (SAN), Emeka Ngige (SAN), Femi Atoyebi (SAN), Femi Falana (SAN), Funke Aboyade (SAN), H.O. Afolabi (SAN), Muiz Banire (SAN), and 10 other counsel.

When contacted on the phone, the plaintiff, Nwokocha-Ahaaiwe said the president has the constitutional right of appeal and was within his rights to exercise it particularly since he had not yet submitted a defence to the substantive action and had filed nothing in defence of the merits of the case.

Meanwhile, the Principal Registrar of the Federal High Court, Abuja, Mr. Jane Egbo, has issued a summons to the parties to appear before her on Monday, June 13, 2016 to settle the records of the president’s appeal.
Also, a check at the Registry of the Federal High Court, Abuja confirmed that the plaintiff has filed an application to amend his originating summons to include prayers for the nullification of the election of Buhari, as he was not qualified ab initio to contest the election having contravened the Electoral Act and committed perjury in claiming to have had a WASC when he never even sat for the examination.

The plaintiff also wants to add prayers for the court to order the Independent National Electoral Commission (INEC) to withdraw the certificate of return issued to Buhari and issue a fresh one to Dr. Goodluck Jonathan who came second in the 2015 presidential election.

The plaintiff’s motion on notice for amendment of his originating summons has been served on all the defendants and will come up for hearing on Thursday, June 16, 2016.

•Governors BoT, N’Assembly caucus to meet over stand-off
•PDP sufferring from its past sins, says APC
Onyebuchi Ezigbo in Abuja
Confusion continued to reign within the ranks of the leadership of the Peoples Democratic Party (PDP) as the National Caretaker Committee (NCC) on Tuesday described the storming of the national secretariat of the party by the ousted National Chairman, Senator Ali Modu Sheriff as lawless and detestable.

While responding to the come-back bid staged on Monday by the embattled former chairman, Sheriff, the spokesman of the PDP NCC, Prince Dayo Adeyeye said there was evidence of a possible role of the federal government in present crisis as can be seen through the level of security provided for Sheriff by a team of SSS men when he stormed the national secretariat yesterday.

“The All Progressives Congress (APC) has contracted Sheriff and his cohorts to scuttle the chances of the PDP in the Edo governorship elections. We have credible intelligence that Sheriff had a meeting last Sunday night with an APC governor from the North-west, where it was organised that he would be given full security and financial support to exacerbate the crisis in the PDP with the objective of preventing the PDP from presenting a candidate for the Edo State governorship elections, or in the very least, prevent the PDP from offering a serious challenge to APC whose electoral fortunes has continued to nose-dive,” he said.

Speaking at a press conference in Abuja, Adeyeye said it had alerted the police of an impending invasion of the party’s premises but was surprised how Sheriff and the other renegades were allowed to gain entry into the secretariat, where they later proceeded to address a press conference.
He said the party was still trying to understand the role of the police in the entire saga, adding that “it is curious that the police made no arrest of the thugs who openly brandished various dangerous weapons in and around the premises of the secretariat in full glare of the police.

Adeyeye accused the former National Chairman of the PDP, Senator Sheriff, former National Secretary, Prof Olawale Oladipo and former National Auditor, Alhaji Fatai Adeyanju of mobilising three lorry loads of thugs and bandits to invade the national secretariat.

“When rumors of the planned invasion filtered out on Sunday, we took steps to alert the police to secure the building and to protect the lives and properties of members. Up to a point, the police discharged their responsibilities satisfactory however, later on without any justification whatsoever, Ali Modu Sheriff and the other renegades were allowed to gain entry into the secretariat, where they later proceeded to address a press conference.

Adeyeye assured the party faithful that the party had taken steps to ensure that Sheriff and his cohorts do not loot the property of the party, adding that staff of the party have been instructed on what to do in this regard.

He said contrary to Sheriff ‘s claim that he has a court order to back his come-back bid, there was no such order.
Adeyeye said Sheriff and his cohorts have continued to shop around to buy any court order at any price, but that so far they have not succeeded, “thanks to the vigilance and integrity of the judiciary.”
Speaking further, Adeyeye said Sheriff was appointed and not elected by the National Executive Committee (NEC) of the party to complete the tenure of Alhaji Adamu Mauzu.

According to Adeyeye, the appointment of Sheriff was not ratified by any national convention, adding that constitutionally, he has no other mandate which can extend beyond May 21, 2016.
“The tenure of Mu’azu legally would have ended on the February 14, 2016. Sheriff was given an extension of months by the NEC of our party to organize a National Convention,” he said.

Regarding the claim by Sheriff that he and some NWC members met and postponed the Port Harcourt convention, Adeyeye maintained that only the national convention itself can order a cancellation or postponement of the event once it has been fixed and not any individual.

“The national convention is the supreme organ of the party under Article 3302) of the PDP constitution. In the exercise of its power under Article all officers of 33(5) (b) & (e) of the constitution, the national convention removal of the party and set up a caretaker committee to plan and organise a national convention within 90 days the national convention of PDP can only be called by NEC and once that is done, its convention can cancel and postpone its proceedings. No individual or other organ of the party can postpone or cancel the national convention.

“The national convention therefore took place legally and constitutionally. The former deputy national chairman, Chief Uche Secondus acted for the former national chairman who was absent in accordance with the provisions of Article 35(3) (b) of the PDP constitution. The Federal High Court in suit NO FHC/ PH/CS/524/2016 has endorsed the decisions of the national convention held in Port Harcourt on 21/05/16.

“The order of the Federal High Court presided over by Justice A.M Liman is still subsisting and has not elapsed contrary to the insinuation of Sheriff. The order ill subsist until the determination of the motion of notice. The motion on notice will come up for hearing on Thursday. Only three of the members of the defunct national officers are still parading themselves but constitutionally they cannot form a quorum for any legitimate business of the party. Under Article 29(4) of the PDP constitution as amended the quorum of the NWC is two- third of the membership drawn from at least two- thirds of the zones in the country.

“It is therefore very clear that three people cannot make up the NWC. We also wonder who Sheriff would be chairman over when he is already rejected by 99.99 per cent of the party The entire stakeholders of the party, including governors, National Assembly members, Board of Trustees (BoT) members and others were at the party secretariat last week to usher in members of the National Caretaker Committee (NCC). Immediate past members of the National Working Committee (NWC), except the trio of Sheriff, Oladipo and Adeyanju were also on hand to hand over to the NCC.

“The NCC is not distracted by the activities of the fifth columnists in the party. We remain very focused on the assignment and the mandate given to us at the national convention held in Port Harcourt,” he said.
Following yesterday forceful take over of the secretariat of the PDP, the governors elected on the platform of the party, Board of Trustees (BoT) and National Assembly caucus have convened a meeting today (Wednesday) to address the latest development in the party.

Other people expected at the meeting taking place at the Ondo Governor Lodge, Abuja, are former governors of the party and former principals of National Assembly.

The planned meeting of the PDP national caucus came just as the spokesman of the NCC, Adeyeye said yesterday that as far as the party was concerned, Sheriff is in the past in the leadership of the party.
In a statement issued yesterday by the Director General of the PDP Governors’ Forum, Osaro Onaiwu, explained that though Sheriff was not invited to the caucus meeting, the purpose of the meeting is to find a lasting solution to the crisis bedevelling the party.
On his part, Makarfi dismissed the report of support for the leadership of Sheriff, describing it as false and fraudulent.

Speaking with journalists in Abuja who sought his position on such report, Makarfi said he never granted any press interview nor made any statement to that effect.
“That’s very fraudulent. I saw him at the convention of course, but I haven’t sat privately with Sheriff in the last three months, or anybody representing him not to talk of me making such a statement.

“I haven’t granted any press statement. If that is the case, how can it be that the only statement I would make is to apologise to him and express support for him? There is no basis for that, absolutely no basis for that. This is what we are trying to get rid from PDP and all the so-called court orders, judgment being bandied about aren’t really true.
Responding to the allegations that it was working in cahoot with Sheriff to cause crisis in the opposition party, APC described it as baseless and laughable.

The party said the PDP is suffering from its sins of the past.
The APC National Secretary, Mai Mala Buni, the party said instead of joining issues with the baseless and laughable allegations, the it would rather face issues that will bring about all-inclusive development in the country.

“However, it should be put on record that the PDP forced on them whatever crisis it is troubled with today due to its politics of imposition and other undemocratic practices which the APC abhors. The PDP should put its house in order rather than playing to the gallery and blaming others but themselves for their sins which has come to hunt them.
“Also, it is evident that the PDP has chosen to employ diversionary tactics because of its inability to produce credible candidates for the forthcoming elections in Edo and Ondo States.”

Computer software giant, Microsoft Corporation, said on Tuesday it would acquire business-oriented social networking service, LinkedIn Corporation, for $26.2 billion.

It said that the move was to seek new growth opportunities for its business productivity tools.
Microsoft, once the world’s No. 1 software giant for personal computers (PCs), is a multinational technology company, with headquarters in Richmond, Washington.

Under a definitive agreement, Microsoft will buy LinkedIn, based in Mountain View, California, for $196 per share in cash and the transaction is expected to close this year.

Microsoft’s Chief Executive Officer Satya Nadella said: “The deal is to bring together the world’s leading professional cloud with the world’s leading professional network.”
The deal is the biggest since he assumed the position in early 2014.

Microsoft, which has moved its Office application suite from a set of personal computer productivity tools to a cloud service known as Office 365 and now has 1.2 billion users, finds a connection with LinkedIn.

It runs an online network connecting more than 400 million professionals worldwide.
“We are in pursuit of a common mission centred on empowering people and organisations,” Nadella explained in an email to employees.

“Along with the new growth in our Office 365 commercial and Dynamics businesses, this deal is key to our bold ambition to reinvent productivity and business processes.

“Microsoft Dynamics offers businesses an integrated productivity solution,” Nadella said.
Nadella said that when people found jobs, “build skills, sell, market and get work done, they need a connected professional world which brings together a professional’s information in LinkedIn’s public network”.

On LinkedIn’s growth and strength, Microsoft listed a number of parameters registered in the past year, including 19 per cent growth year-over-year to more than 433 million members worldwide.

It would also have nine per cent growth to more than 105 million unique visiting members per month, 49 per cent growth to 60 per cent mobile usage and 34 per cent growth to more than 45 billion quarterly member-page views.

Also included in the parameter is 101 per cent growth to more than seven million active job listings.

Ernest Chinwo in Rivers State
The Independent National Electoral Commission (INEC) has said it was ready to conclude the rerun elections in Rivers State if the political parties would guarantee peace.

Speaking at a consultative meeting with critical stakeholders at the Police Officers’ Mess, Port Harcourt, yesterday, Rivers State Resident Electoral Commissioner (REC), Mr. Aniedi Ikoiwak, said although the date for the conclusion of the legislative rerun election had not been fixed, INEC was prepared and ready to conduct the exercise, provided all the stakeholders in the state were willing to cooperate with and support the electoral body.

The INEC recently issued a statement that all outstanding elections across the country would be concluded before the end of July. The commission had suspended elections in eight local government areas of Rivers State citing violence as reason.

Giving a breakdown of the registered voters for the election, Ikoiwak said Rivers West senatorial district had 215,281 registered voters in 73 wards and 656 polling units, while Rivers East senatorial district has 240,103 registered voters in 63 wards and 433 polling units. Rivers South-east senatorial district, he said, has 491,690 registered voters in 75 wards and 889 polling units.
He said INEC had 820,971 and 563,942 registered voters for the House of Representatives and state House of Assembly rerun elections, respectively.

He said the commission would conduct the suspended rerun election only on if the leaders and supporters of the 28 registered political parties contesting the election were ready to eschew violence.
He said the essence of the stakeholders’ meeting was to rub minds on how the noticeable pitfalls and violence that marred the suspended exercise could be avoided and ensure a free and fair exercise.

His words: “Today, we are gathered to see how we can conclude the legislative rerun election in Rivers State. We want to find out among ourselves whether or not there is a need to conduct the election.

“If we are not prepared, it will be a mere waste of human resources, money, time and energy to continue to hold elections that would be inconclusive. We must agree that we must conclude the rerun election.
“The only way to avoid inconclusive elections in Nigeria and in Rivers State is for the politicians to allow INEC to conduct elections, being the only body recognised by the constitution to do so.

“Let us (INEC) be allowed to conduct elections so that when the blame comes, INEC will be willing to accept it.”
Ikoiwak, who appealed to the leaders of the political parties present at the meeting to take stock of the violence that marred the March 19 exercise, however said no date had been fixed yet for the conclusion of the rerun election.
“We at INEC are ready for the election but it will be determined by the stakeholders if you really want it. Between now and the end of July, we will have the election concluded as directed by the INEC Headquarters.

“If we have the election now, don’t let us have a repeat of what happened on March 19, 2016 when people moved out of Rivers State due to fear of violence. It was only those who I will call die-hards that stayed to participate in the election then,” he said.

In their responses, the three major political parties in the state; the All Progressives Congress (APC), the Peoples Democratic Party (PDP) and Labour Party (LP), blamed each other for the violence that marred the elections.
Rivers APC chairman, Dr. Davies Ikanya, absolved his members of any complicity in the electoral violence but, in a veiled reference to PDP, added that beneficiaries of the violent acts must be punished.
He raged: “We cannot continue to allow people who benefitted from violent elections to continue to occupy offices and we think there will be a stop to electoral violence.

“People who perpetrated violence must be punished. APC is ready for the election but there has to be adequate security and punishment for those who perpetrate electoral violence.
“INEC upheld election results that were declared at gunpoint. People are still killing because INEC allowed them to occupy offices. When you don’t allow those who kill to occupy positions, killing will no longer be lucrative and it will stop.”

However, chairman of the Labour Party in the state, Mr. Prince Favour, accused his APC counterpart of being miserly with the truth as he said members of both PDP and APC were involved in the electoral violence in the state.

“No party should exonerate itself from the political violence in Rivers State. Both the two big political parties, PDP and APC, are culpable. APC should stop throwing blames and absolving itself of any complicity.
“In my own area, we know APC members who are causing violence. APC of today is the PDP of yesterday. The same tactics they used before are what they are using today,” he said.

Also speaking, the PDP candidate for the rerun election in Rivers West Senatorial District, Senator George Sekibo, sympathised with the Rivers REC on the burdens associated with conducting fresh elections.
He absolved PDP of any complicity in the violence and killings witnessed during the last inconclusive exercise, declaring that nobody can point to any PDP member as the perpetrator.

He said the issue of violence would not be resolved until the truth was told about its causes, urging INEC to appoint non-partisan people as its ad-hoc staff for the conclusion of the yet-to-be scheduled rerun election.
Sekibo urged INEC to apply “Solomonic wisdom” and ignore the call by the APC chairman that all the declared results of the March 19 rerun election should be cancelled.

“REC, please use all your wisdom to manage the election. If INEC is ready for the election, we will come out. The onus rests on INEC to fix the date. Whatever we are told to do, we will do within the dictates of the law,” he said.

  • Says balance now with CBN, DPR to revalue oil blocks assigned to NPDC
• EIA: Nigeria may add surplus oil in 2017
• FG will ensure lasting peace in N’Delta, says Kachikwu

Ejiofor Alike in Lagos, Chineme Okafor in Abuja and Emmanuel Addeh in Yenagoa with agency report

The Nigerian National Petroleum Corporation (NNPC) on Tuesday finally provided clarification on how part of the $12.9 billion dividends it received from the Nigeria Liquefied Natural Gas (NLNG) Company Ltd over an eight-year period on behalf of the federation was spent.

The corporation also said the balance of the dividend has been moved to the Central Bank of Nigeria (CBN), adding that it was no longer housing the money in line with the federal government’s directive on the Treasury Single Account (TSA).

NNPC stated in Abuja when the Nigeria Extractive Industries Transparency Initiative (NEITI) convened a stakeholders’ dialogue on the 2013 audit report of activities in Nigeria’s oil and gas industry, that it took and ploughed back part of the dividends to the new trains that were built by the NLNG.

It equally listed BrassLNG and OlokolaLNG projects, as well as other gas projects it did not mention, as beneficiaries of the dividend payouts.
BrassLNG and OlokolaLNG projects have not taken off as no final investment decision (FID) has been taken on either of the projects by their shareholders.

NNPC explained that the reinvestment in NLNG was part of its equity contribution to the cost of expanding the company’s trains. NLNG currently has six trains producing 22 million tonnes per annum (MTPA) of LNG.
Construction of a seventh train to complement the existing six-train structure is however expected and this will increase its total production capacity to 30MTPA.

NEITI had in the 2013 audit report it released last month, stated that while NLNG paid dividends meant for the federation to NNPC, the corporation never remitted same to the government over an eight0year period. It said the total dividends since 2005 amounted to $12.9 billion.

But responding to this on the sidelines of the meeting, NNPC’s Group General Manager, Debt Management, Mr. Godwin Okonkwo told journalists that the corporation had not committed any illegality in the management of the funds.
He said: “Before now, the position was that NLNG belongs to the federal government and NNPC was an arm of the federal government. NLNG dividends are there and if there was any kobo that went out of it, it was done with the approval of the federal government.

“No kobo leaves NLNG dividends without appropriate approval. Part of the spending for NLNG dividends was the development of NLNG trains, BrassLNG and OlokolaLNG and it is not right for anybody to say the money is now missing.”
He further stated: “And with the current regime who says NLNG belongs to the federation, the balance of NLNG money has been moved over to the CBN. The money is not with the NNPC.
“Any amount removed from the funds was done with appropriate approval; like funding of the trains for NLNG, the Brass and Olokola LNG projects and other gas-related projects.

“The balance of that we transferred to the TSA with the CBN. Nothing leaves there without appropriate approval. NNPC is not a disorganised place where people do things anyhow.”
Okonkwo who also made efforts to justify the transfer of oil blocks to the Nigerian Petroleum Development Company (NPDC), a transaction the NEITI flagged off as not following due process, explained that the objective for the assignment was well intended.

He said the Department of Petroleum Resources (DPR) has however taken up the asset assignment and would now evaluate its appropriate value to determine if the federation was owed monies as suggested by the NEITI and other audit reports.

“NPDC is being reorganised into asset management teams to ensure that it starts afresh to operate better than its peers in the industry and begins to make money, not only for NNPC, but to put NNPC in the position to declare dividends payable to the federation.

“The objective of the assignment was well intended. The DPR is evaluating what should be paid to the federation as the appropriate value for the assigned blocks,” he added.
He also admitted that the NPDC had made mistakes in the past with some of its operations, but that those mistakes were being corrected by the present leadership of the NNPC.

In another development, the International Energy Agency (IEA) has said that unplanned crude oil production outages by Organisation of Petroleum Exporting Countries (OPEC), particularly Nigeria and Libya, as well as non-OPEC countries, coupled with robust demand from emerging economies, have contributed to balancing the oil market in 2016.
In its Oil Market Report (OMR) for June released yesterday, IEA, a Paris-based energy advisor for over 26 industrialised countries, however added that the present equilibrium in the oil market will tilt into surplus if Nigeria resolves the security issues in the Niger Delta and ramps up production in 2017.

The report said outages in OPEC and non-OPEC countries cut global oil supply by nearly 800,000 barrels per day in May.
According to the agency, at the present global output of 95.4 million barrels per day, production stood 590,000 bpd below a year earlier – the first significant drop since early 2013.
This development stemmed from spending cuts by producing companies and outages, which reduced non-OPEC production by 1.3 million bpd from a year earlier.

According to the agency, having fallen by 900,000 bpd in 2016, non-OPEC supply growth is expected to rise by 200,000 bpd in 2017, lifting output to 57 million bpd.

The report added that non-OPEC supply growth is expected to return in 2017 at a modest 200,000 barrels per day, after declining by 900,000 bpd in 2016.
“The only other substantial increase from OPEC in 2017 could be from Nigeria, should security issues in the Niger Delta be resolved,” said the report.

“At halfway in 2016, the oil market looks to be balancing; but we must not forget that there are large volumes of shut-in production, mainly in Nigeria and Libya that could return to the market and the strong start for oil demand growth seen this year might not be maintained,” the agency said.

“We must stress that this is our first look at 2017 and the huge number of moving parts will see us amend our numbers accordingly. However … the direction of travel seems to be clear,” the IEA added.
“Iran has clearly emerged as OPEC’s fastest source of supply growth this year, with an anticipated annual gain of nearly 700,000 bpd,” IEA said.

IEA predicted that the demand growth in 2017 is likely to reach 1.3 million barrels per day, stressing that the most of the anticipated demand growth this year and in 2017 is expected to come from nations that are not part of the Organisation for Economic Cooperation and Development (OECD).

“Global oil demand growth in the first quarter of 2016 has been revised upwards to 1.6 million bpd and for 2016 growth will now be 1.3 million bpd. In 2017 we will see the same rate of growth and global demand will reach 97.4 million bpd. Non-OECD nations will provide most of the expected gains in both years.

“The growth rate is slightly above the previous trend, mostly due to relatively low crude oil prices. Commercial inventories in the OECD increased from March levels by 14.4 million barrels to stand at 3,065 million barrels by end-April, an impressive 222 million barrels above one year earlier.

“As the US driving season kicks off, OECD gasoline stocks stand above average levels and last year in absolute and days of forward demand terms. There is a similar picture in China,’ the report added.
Meanwhile, the Federal Government yesterday assured the people of the Niger Delta that it would ensure that the ongoing efforts aimed at addressing the crisis in the region would last.

The government noted that the issue of insecurity in the region was being handled with all the seriousness it deserves, stressing that the measures were not cosmetic but intended to achieve enduring peace and stability in the area.
A statement by the Chief Press Secretary to Governor Seriake Dickson, Mr. Daniel Iworiso-Markson, quoted the Minister of State for Petroleum Resources and Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Dr. Ibe Kachikwu, as making the commitment during a visit to the governor.
Iworiso-Markson said that the minister was accompanied on the visit to the governor by the Special Adviser to the President and Coordinator of the Presidential Amnesty Programme, Gen. Paul Boroh (rtd).

According to the statement, Kachikwu said the federal government was committed to “a financially-driven and economically motivated pattern” of resolving security concerns and development in Bayelsa and the entire region.
The minister appealed to the Niger Delta agitators to embrace dialogue for the common good of all stakeholders, noting that oil as a God-given resource was endowed in the region to unify the people of the country.

Also speaking, Boroh described the ongoing peace initiative as all-encompassing, adding that it was designed to engage all stakeholders, including fishermen in the creeks in terms of information gathering and dissemination towards achieving “a seamless and peaceful Niger Delta”.

Dickson, Iworiso-Markson said, commended the federal government for its approach in building consensus towards proffering lasting solutions to ending insecurity in the Niger Delta.
He stated that the there were “no military wars to be fought in any community in the Niger Delta with armoured tanks and bullets but that of development, peace and prosperity”.

“But there are wars to be fought nevertheless. Those wars are wars of development, peace and stability and prosperity. Wars to conquer and reverse the degradation that has been done to our environment,” Dickson was quoted as saying.
While noting that the challenges call for collaborative efforts, Dickson who called on the multinational oil companies to establish their corporate offices in Bayelsa State, said the move would assist in boosting the local economy through the payment of appropriate taxes and levies.

He lent his voice to the call on the Niger Delta agitators, community leaders and other stakeholders to embrace peace across the region, stressing that the people have a responsibility to ensure that the current peace initiatives succeed.

 • CBN may adopt single window, devalue naira
• FG to secure N90bn loan for states

Obinna Chima in Lagos and James Emejo in Abuja
Three weeks after he announced the introduction of a flexible exchange rate regime, the Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, will today finally unveil the much-anticipated guidelines paving the way for the new forex regime, THISDAY exclusively learnt on Tuesday.

This is just as the Minister of Finance, Mrs Kemi Adeosun, disclosed that the federal government has resolved to facilitate a N90 billion loan for  the 36 states of the federation to enable them meet their obligations, but cautioned that it should not be deemed a bailout for the states but a facility with stringent conditions attached to it.

A top CBN official, who confirmed yesterday that Emefiele would brief the press today on the flexible exchange regime however did not provide further details on what the guidelines would entail.

He said the CBN was now adequately prepared and has the firepower to support the new flexible forex regime, adding: “Once it is announced, we expect to see stability in the forex market and some appreciation in the parallel market that will reduce the gap between the official and informal forex market rates.”

Another source with the central bank however revealed that he expects the central bank governor, having held wide consultations with stakeholders in the financial markets on the new structure for the forex market, to announce a single window, not a two-tier forex exchange regime with a special intervention window for critical transactions as announced by the governor after last month’s meeting of the Monetary Policy Committee (MPC).

The source added that he expects Emefiele to also announce a devaluation of the naira to an adjustable rate that will be determined by a two-way quote system.
“The naira will be devalued tomorrow (today) and will be market-driven going forward by a two-way quote system,” the source revealed.

The CBN has been hamstrung by dwindling oil earnings, brought on by low oil prices and the violent activities of militants in the Niger Delta. Both had combined to reduce the country’s monthly oil revenue from an all-time high of $3.2 billion about two years ago to about $500,000 in April.

Experiencing great difficulties funding the nation’s imports as a result of scarce foreign exchange, a situation that put increasing pressure on the naira, the CBN for over a year pegged the naira at N197-N199 to the dollar and imposed currency curbs on certain items.

Its obstinacy was worsened by President Muhammadu Buhari’s ill-advised opposition to the devaluation of the naira.
But as the economy contracted and plunged into a recession, foreign investors fled the economy and inflation spiralled, the central bank was forced to rethink its forex policy in order to open up the forex market while conserving forex reserves.

The dollar currently trades at N365 on the parallel market.
At the last MPC meeting held last month, members agreed to hold all policy rates constant and introduce greater flexibility in managing the forex rate. As a result of this, a lot of investors were cautiously optimistic and indeed excited.

Emefiele had said the central bank resolved to introduce greater flexibility in the foreign exchange market, but would retain a small window for critical transactions for prospective investors.
Since the announcement, the central bank has been consulting with stakeholders in the economy on the new forex policy.

N90bn Loan for States

Meanwhile, the minister of finance yesterday disclosed that the federal government had resolved to facilitate a N90 billon loan for the 36 states of the federation, but cautioned that it was not a bailout but a facility with stringent conditions attached to it.

“It’s actually a loan that is going to be repaid. It’s not a bailout,” she told journalists at a news briefing, shortly after a meeting with state commissioners of finance in Abuja.

The credit facility followed the approval of state governors to implement a comprehensive 22-point Fiscal Sustainability Plan (FSP) to among other things make critical reforms, cut wasteful spending, eliminate ghost workers on the payrolls of their respective states, as well as pay salaries electronically to workers’ individual accounts.
The minister explained that the loan would be raised from the private sector through the issuance of bonds which have been guaranteed by the federal government.

She said: “That is the only way we can get the rates down. The federal government is guaranteeing the bonds and they are being issued in the normal manner that bonds are issued.”

According to her, the sum of N50 billion would be secured in the first three months and shared among the participating states which include all the 36 states, while another N40 billion would be activated for another nine months.

Adeosun said: “The idea is to tide states over for a year so that they can balance their portfolios which on average is about N1.3 billion for the states for the first three months and then N1.1 billion for the next nine months.
“It’s a loan and it’s going to be fully repaid because it’s been secured with future dividends, revenues and any amount that the federal government may owe the states.”

Asked whether allocations from states’ share from the monthly Federation Accounts Allocation Committee (FAAC) would be affected as a result of the proposed credit arrangement, the minister said: “We are not suspending allocation from the Federation Account as it will still be there.
“For now, we need to support the states and they have agreed to that and the lenders are ready to make an advance to them to help them through the period.”

On the conditions attached to the loan, she said: “When you want to borrow money, the lenders set the conditions and these conditions are very stringent conditions and they are 22 of them and the states have signed up to them.
“The governors unanimously approved the plan, the commissioners approved the plan and it’s going to involve a lot of work in some places.

“They have to clean up their ghost workers, they have to set up efficiency unit, they have to reduce their recurrent expenditure, they have to publish their accounts – there are a lot of tough conditions.

“So the governors and commissioners recognise that these reforms are necessary if they want states to be fiscally sustainable.”
Adeosun further stated that under the new dispensation in fiscal sustainability among the tiers of government, every state must now strive to be economically viable by embarking on public-private sector partnerships to unleash their potentials.

She said: “Every state must be viable. We cannot have a situation where states are so dependent on the Federation Account for their revenues and once Federation Account is down they cannot survive.”

According to her, “We have to make sure that within each state, whatever local advantage they have is exploited.
“So if there is no private sector to collect taxes from, maybe there are agricultural produce which can be developed and the states can use that to generate revenue.

“What we are saying is that every single state is a centre of prosperity, every state should go and look inwards and work to generate its own IGR and have the discipline to ensure that they can pay salaries, clear out wastage, so that as the economy improves, we can actually improve to grow with the future.

“The objective of the fiscal sustainability plan is to achieve it in an 18-month period and that is the condition for the loan and it’s not a bailout.”

Responding on behalf of the state commissioners, the Jigawa State Commissioner for Finance Umaru Namadi expressed gratitude to the federal government, assuring it that the states would abide by the conditions of the loan.

.Fayose swears in replacement

By Olakiitan Victor in Ado Ekiti

Following controversy trailing his sudden resignation from Ayodele Fayose’s cabinet, former Commissioner for Works in Ekiti State , Mr Kayode Oso, on Wednesday clarified that he resigned honourably on
health ground.

Oso denied the allegation making the rounds that he ran away to stave off arrest by Economic and Financial Crimes Commission (EFCC) , describing the allegations as the handiwork of the enemies of Fayose’s government.

Oso spoke in Ado Ekiti on Wednesday during the swearing-in of Mrs Theresa Funmilayo Ogun, ex-special assistant on Widows Matters, as the new Commissioner for Works and Transport by Governor Fayose.

Shortly after Oso’s resignation a couple of months ago, there were insinuations that he ran away to prevent his arrest by EFCC while it was also rumoured that governor had a frosty relationship with
Fayose over the awards of N57 billion flyover and N23 billion Erekesan Market projects.

Further details later

•  Corporation, others owe NIMASA $3.78bn

Omololu Ogunmade in Abuja

The Senate wednesday constituted an ad hoc committee to probe the allegation by the National Extractive Industries and Transparency Initiative (NEITI) that Nigerian National Petroleum Corporation (NNPC) failed to remit over N1 trillion to the federation account in 2013.

The move was a spontaneous reaction to the submission by the Executive Secretary of NEITI, Mr. Waziri Adio, before the National Assemblyduring yesterday’s plenary. Adio had been summoned by the Senate last week to appear before it yesterday and brief it on the allegation of non-remittance of over N1 trillion to the federation account by NNPC.
Adio had in his submission, said the audit of the 2013 oil and gas report showed that the country made $58.07 billion out of 800.3 million barrels of crude oil adding that out of this sum, the total outstanding revenue from NNPC stood at $3.787 and another N358.287 billion.

According to him, the total losses to the federation as a result of offshore processing arrangement (OPA) crude oil swap, crude oil theft, among others, stood variously at $5.96 billion and another N20.4 billion adding that the total under-assessment and under payment by companies due to contested pricing methodology was $599.8 million in 2013.
Furthermore, he said the income of $58.07 billion realised in 2013 implied a decline of eight per cent when compared to $62.99 billion generated in 2012.

Also said the decrease in 2013 was largely due to a drop in the sales revenue from crude oil and gas which he attributed to a reduction in production and lifting volume caused by the divestment of the federation equity in some oil mining licence (OMLs) notably a Shell Petroleum Development Company (SPDC) joint venture (JV) calls from which NNPC lifted crude oil on behalf of NPDC instead of the federation.

He also attributed the decline to deferred production and crude oil losses and destruction of production facilities and pipeline oil breakages as well as crude theft. He added that there was a reduction of 25 per cent from $24.580 million in gas flared penalty in 2012 to $18.475 million in 2013.

The NEITI boss said payment was not made for four OMLS in NAOC JV assigned in December 2012 neither was the deed of assignment containing the value paid. He also disclosed that whereas eight OMLS assigned to NPDC from Shell JV between 2010 and 2011 was valued at $1.8 billion only $100 million was paid into the federation account while NPDC allegedly sat on the remaining sum of $1.7 billion.

Adio further told the senators that whereas between 2005 and 2013, Nigeria Liquefied and Natural Gas (NLNG) paid $12.9 billion dollars to NNPC, the corporation only acknowledged the payment but failed to remit the money to the federation account.

After the Senate President, Bukola debated the submission of Adio, Saraki constituted a nine-man committee with the following terms of reference: re-examination of financial processes, fiscal audit of NEITI, financial loss and leakages to the government, among others.

He said: “Based on the fact that the issues we talked about cut across a lot of the different standing committees, and in view of the enormity involved, the general opinion is that we will set up an ad-hoc committee with the responsibility of addressing them; with the terms of reference to reexamine the financial processes and the fiscal audit report of NEITI; the financial loss and leakages to government and all its ramifications; remedial measures and sanctions where necessary, and of course, more importantly any relevant legislative action that would be required to block all forms of leakages.”

Members of the committee are Senators Tayo Alasoadura; Bassey Akpan; Senator Andy Uba; John Enoh; Jibrin Barau; Chukwuka Utazi; Kabir Marafa; Solomon Adeola and Bukar Mustapha. The committee was given four weeks to report back to the Senate.

Meanwhile, the House of Representatives Committee on Maritime Safety, Education and Administration yesterday heard that the Nigerian Maritime Administration and Safety Agency (NIMASA) is being owed $3.78 billion dollars by the Nigerian National Petroleum Corporation (NNPC) and other government agencies.

The debts are default on sundry charges and levies owed to NIMASA over a 10 year period.
The other debtor agencies include the Pipeline Products Marketing Company (PPMC and the National Petroleum Investment Management Services (NAPIMS).

NNPC and PPMC owe $3billion while NAPIMS owes $780 billion.
The Director General of NIMASA, Mr. Dakuku Peterside, in his presentation to the committee noted that the defaults on the three per cent levy on gross freight earning on incoming and outbound cargo are due to double billing, disclaimed and disputed bills and actual debt.

He said no debts were supposed to have incurred on the two percent surcharge contract sum on cabotage operating vessel.

“The debt under the ship-to-ship (STS) is a deliberate attempt by companies not to pay non- remittance by international oil companies to the agency,” he said.

Over 5,300 companies have defaulted on the STS charge, he disclosed.
Dakuku however did not provide the total figure owed to NIMASA by government and private organisations.
The Minister of Transport, Mr. Rotimi Amaechi lamented that NIMASA has acquired a bad image under the last administration.

Amaechi, who was represented by the Permanent Secretary of the Ministry, Mr. S. Zakari added that the current administration therefore decided to carry out full investigations into the activities of the agency.
“Mr. Chairman, the negative image of the Agency consequent upon its actions, the present administration was disturbed that appropriate necessary measures were put in place to amongst others verify the petitions and allegations of unwholesome reckless management of financial and human resources in the agency,” he said.
“Furthermore, and arising from investigations which are ongoing, a number of the agency’s top management and senior staff are either facing trial or are being investigated by relevant agencies. it is also noteworthy that Mr. President has since approved performance audit of the whole maritime agencies. This will holistically address most of these issues and help to block most of the leakages,” Amaechi added.

Paul Obi in Abuja

In a move to confront some banks which recently retrenched about 3,000 workers, the Nigerian Labour Congress (NLC) wednesday issued a 14-day ultimatum to six banks to reinstate sacked workers or face shut down of their headquarters and branches across the country.

The letter of ultimatum was issued to Fidelity Bank, Diamond Bank, First City Monument Bank, First Bank, Eco Bank and Skye Bank.

At the last count, the six banks had sacked nearly 3,000 workers citing economic recession and dwindling returns as the reason for mass sacking of their staff.

But a statement, signed by the NLC Deputy General Secretary, Mr. Chris Uyot, on behalf of the President, Ayuba Wabba, said the inability of the banks to address the crisis with the National Union of Banks, Insurance and Financial Institutions Employees prompted the NLC to take the current stand of shutting down the banks.

Uyot said: “I have been directed to notify you that we have been informed by our affiliate union, the National Union of Banks, Insurance and Financial Institutions Employees that your bank has arbitrarily sacked a large number of workers contrary to laid down procedures and the country’s extant labour laws.
“In addition, you have also resisted unionisation of workers in your bank despite spirited efforts by the union to amicably engage you in the process.

“By this letter, we are giving your bank 14 days ultimatum commencing from today to immediately recall all workers sacked and allow unionisation of workers in the bank or face industrial action, which may include closure of your banks and all its outlets nationwide.

“While hoping our request meets your kind consideration, please, accept our goodwill and best regards.”

• Says Buhari’s government is characterised by ethnic divisions, economic illiteracy

Chiemelie Ezeobi

Following the raid by the Economic and Financial Crimes Commission (EFCC) on the Ikoyi, Lagos, residence of former Minister of State for Defence, Senator Musiliu Obanikoro, last Tuesday, the former minister has dismissed the allegations of his involvement in the $2.1 billion arms deal, adding that they were based solely on rumours.

Obanikoro who had earlier responded to the raid by the commission, during which his cars and valuables were carted away by the agency, through his media aide Jonathan Eze, however decided to address the incident himself.

In a series of posts on his Facebook page yesterday, he said the raid by the EFCC was based purely on rumours of his supposed involvement in the $2.1 billion arms deal and the National Security Adviser’s imprest account.
He said: “Suggestions of an EFCC investigation have dwelt solely in the realm of rumour, over which I have sued several media organisations.

“The rumour before was that of the $2.7 billion (sic) arms issue, now they say it is NSA imprest account. Let them make the documents public.

“EFCC has never officially made public any investigation of my record in government at any time before this illegal invasion of my house.”

While stressing that the rumours of a plan to extradite him from the United States were lies, he however said he would welcome an extradition process, as it would expose government’s shenanigans.

“Rumours of extradition are also lies. False allegations cannot stand up to any decent legal inquiry in a civilised system such as in the US.

“The allegations are lies, not backed by fact or evidence but a burning desire to obliterate the opposition and keep Nigerians distracted.

“The illegal invasion of my house and @realFFK (Femi Fani Kayode) and several others in detention, gives me no confidence in government’s willingness to do justice,” Obanikoro stated.

He added: “I welcome an extradition process as it will expose the shenanigans going on with their fraudulently fictitious fight against ‘corruption’.

“Since EFCC opted to make this a media trial/circus, let them make public any document linking me or any of my children to any financial scam.”
“I cannot submit myself to such a glaring witch hunt, injustice and charade; but I will fight it legally with God and a clear conscience on my side.”

Condemning the raid on his home during the Ramadam fast, he said: “To put one’s family and dependents through such trauma of illegal invasion, in this holy month of Ramadan is an unfair reward for service.

“I put close to two decades into public service, in opposition and in government, all with an unblemished record and a clear conscience.

“The aim of government is to distract the people from their woes. Such tactics have been tried before, in Nigeria and elsewhere, they failed.

“If hounding Peoples Democratic Party (PDP) members will solve Nigeria’s economic woes then we welcome it. This is a rather woeful attempt to distract from those woes.

“If the harassment of PDP members will help government to deliver good governance, many of us would submit ourselves willingly to martyrdom.

“But unfortunately, harassing PDP leaders is not in any way equal to the delivery of good governance, no matter who applauds such illegality.

“The illegal invasion without EFCC invitation, notice of investigation or a court order is also a mockery of the intelligence of Nigerians.

“The illegal invasion and raid is a mockery of justice, an expression of disdain towards the judicial system and a terribly bad precedence
“Such invasion and raid of my house without prior invitation from EFCC to me or any court order towards this, signals a return to despotism.

“Furthermore, no court ordered a raid on my house or seizure of my belongings. Any such move is illegal and will be fought against legally.

“Let me reiterate clearly; I have never received any invitation from EFCC over any issue up till date. This invasion therefore is premature.

“In 16 years of democracy, we thought we had conquered despotism for good in Nigeria but in one year, this government has brought it back.

“The invasion and raid of my residence yesterday (Tuesday) by agents of the state is a sad throwback to a tyrannical past that is better forgotten.”

While addressing Nigerians, he said: “Nigerians must remain steadfast in condemning the nepotism like ethnic divisions and economic illiteracy that have characterised this government.
“Pursuing Obanikoro, hounding (Alison) Madueke, detaining FFK and (Sambo) Dasuki will not distract the people from the failure of government to deliver on its own promises.

“This is a government determined to outdo the abysmal and ignominious economic records of December 31, 1983 to August 27, 1985 that ended in shame.

“This is a government that promotes ethnic divisions, distracts from issues, political persecution and official gangsterism from high places.

“I also remain unshaken in my belief that truth will prevail over falsehood, as ever before, no matter how exciting the falsehood may sound.

“I remain confident in my ultimate vindication and urge EFCC to make public any investigation so far conducted without any invitation to me.

“I commit myself, my family, my allies, and my friends into the hands of the Almighty God to whom all of us will give account one day.”

• FEC approves new debt management strategy FG rolls out conditions for states to draw down N90bn loan

Tobi Soniyi in Abuja

Faced with a shortfall in oil revenue, the federal government will in the next three years seek external loans to finance its programmes and diversify the economy.

The Minister of Finance, Mrs Kemi Adeosun, disclosed this to State House correspondents wednesday at the end of the Federal Executive Council (FEC) meeting at which acting President Yemi Osinbajo presided.

According to her, government opted for external borrowing to allow Nigerian banks have more resources to stimulate growth in the private sectors.

At the briefing, Adeosun was accompanied by the Minister of Information, Alhaji Lai Mohammed, and the Minister of State for Budget and National Planning, Zainab Ahmed.

According to her, the new policy is part of the debt management strategy for the years 2016 to 2018 as approved by FEC wednesday.

She said: “Today, I presented a memo to the FEC which was approved for the debt management strategy for the years 2016 to 2018.

“Nigeria started producing a debt management strategy in the year 2013 and a three-year debt management programme and the previous ones had expired in December 2015 and there was a need for a new one.

“There was a need for a new one for two reasons: one was that the previous one had expired, but two, given the current economic challenges and then the desire of this government to reflate and diversify the economy.”
She said that there was a need for a new debt strategy, in order to align it with the Medium Term Expenditure Framework (MTEF).

The MTEF prepared by the Ministry of Budget and National Planning, she said, assumed that the domestic debt would reduce from one per cent of GDP to 0.7 per cent by 2018.

Adeosun added: “And the reasons for this is that the government recognises that for the next three years to really stimulate this economy and to provide the infrastructure that we need, we would need to be borrowing.

“We need to borrow at the most cost effective rate and under the most cost effective and beneficial terms.
“And also, the government recognises that there is a need to stimulate the private sector, for the private sector to really grow, banks must lend to the private sector. So we don’t want government borrowing crowding out the private sector.

“Government has taken a strategic decision that where possible we would borrow more externally. That is external debt in dollars or in any other currency because the interest rates are cheaper, the tenures are longer and there is more room for local banks to lend to the private sector especially SMEs. So the strategy was approved by FEC after much debate.”

Adeosun said the new debt management strategy was approved by FEC after council suggested that new guidelines be adopted to make sure loans taken benefitted Nigerians.

She said that FEC also suggested that non-oil exports be given a boost.
According to her, FEC also mandated the removal of bottlenecks working against such exports.
She said: “We are moving more of our debt to dollars. We need to focus more on exports, especially non-oil exports and the discussion was held around how to make exporting easier.

“There was a lot of discussions around reforms that we would need in the Nigerian Customs Service and other ministries to make it easier to export Nigerian goods, agricultural produce and solid minerals that there is demand for at the moment.

“Some of the bottlenecks that exist at the Customs and those under quarantine need to be removed. If we do this, that would create foreign exchange earnings so that these borrowings which are in dollars when they need to be repaid we would have dollar revenues to repay them.”

> Adeosun said that FEC also mandated her ministry to re-negotiate some multilateral loans with agencies like the World Bank, African Development Bank (AfDB) and others by past administrations, which were not favourable to Nigeria.

“Ministers have raised concern that some of the previous agreements that the Nigerian government entered into were not optimal and cabinet agreed that these were not grants but loans and therefore Nigeria should be confident enough to renegotiate with some of these multilateral agencies to make sure that those loans we take either from the World Bank or AfDB are on terms that are advantageous to Nigerians.

“FEC unanimously supported us and mandated the Ministry of Finance which is the main negotiator, that henceforth such loans will need to be structured so that they benefit Nigerians.

“We also agreed that there will be new instruments in the domestic market, particularly bonds, infrastructure bonds and inflation-linked bonds to deepen the domestic market and create greater opportunity in the domestic market,” she clarified.

She said that the strategy would govern how the government manages borrowings for the next three years.
“They agreed that it is cheaper to borrow externally but we must manage the risk involved,” she stated.

Also speaking, the Minister of State for Budget and National Planning said the new debt strategy was necessary in order to move away from short-term borrowing to longer-term borrowing and to move government borrowing away from the domestic market as much as possible to cheaper external loans.

She said: “The purpose is that the local financial system will have more resources to lend to the real sector, the productive sector.

“The MTEF has a plan to reduce the level of debt from what it is in 2016 to 25 per cent in the next three years and that is what this plan is really conforming to,” she stated.

In a related development, the federal government has released the 22 conditions the 36 states of the federation must fulfill before being eligible to draw from the N90 billion loan to be raised on their behalf by the federal government.

Speaking on the loan to be raised in two tranches of N50 billion and 40 billion bonds on Tuesday, Adeosun said the loan would help the states to meet their obligations, but should not be deemed a bailout, as it would be repaid in full from their monthly allocations.
The conditions for accessing the loan, which are posted on the Facebook page of the Special Adviser to the President on Political Matters, Mr. Femi Ojodu were:

•Publish audited annual financial statements within nine months of a financial year end.

•Introduction and compliance with the International Public Sector Accounting Standards (IPSAS). Publish state budget online annually.

•Publish budget implementation performance report online quarterly.

•Develop standard IPSAS-compliant software to be offered to states for use by state and local governments.

•Set realistic and achievable targets to improve independently-generated revenue (from all revenue-generating activities of the state in addition to tax collections) and ratio of capital to recurrent expenditure.

•Implementation of targets – implement a centralised Treasury Single Account (TSA) in each state.

•Quarterly financial reconciliation meetings between federal and state governments to cover VAT, PAYE remittances, refunds on government projects, Paris Club and other accounts.

•Share the database of companies within each state with the Federal Inland Revenue Service (FIRS). The objective is to improve VAT and PAYE collection.

•Introduce a system to allow for the immediate issue of VAT/WHT (withholding tax) certificates on payment of
invoices.

•Review all revenue-related laws and update of obsolete rates/tariffs.

•Set limits on personnel expenditure as a share of total budgeted expenditure.

•Biometric capture of all states’ civil servants will be carried out to eliminate payroll fraud.

•Establishment of Efficiency Units. Federal government online price guide to be made available for use by states.

•Introduce a system of continuous audit (internal audit).

•Create a fixed asset and liability register.

•Consider privatisation or concession of suitable state-owned enterprises to improve efficiency and management.

•Establish a Capital Development Fund to ring-fence capital receipts and adopt accounting policies to ensure that capital receipts are strictly applied to capital projects.

•Domestication of the Fiscal Responsibility Act (FRA).

•Attainment and maintenance of a credit rating by each state of the federation.

•Federal government to encourage states to access funds from the capital markets for bankable projects through issuance of fast-track municipal bond guidelines to support smaller issuances and shorter tenures.

•Full compliance with the FRA and reporting obligations, including:

•No commercial bank loans to be undertaken by states;

•Routine submission of updated debt profile report to the DMO.

• Releases guidelines on NIFEX, forex primary dealership, Naira-settled OTC FX Futures market Trading under new rules to begin Monday, OTC market June 27

Goddy Egene, Obinna Chima in Lagos and James Emejo in Abuja

In what has been hailed as a bold move by market analysts in Lagos, London and Johannesburg, the Central Bank of Nigeria (CBN) wednesday unveiled the new guidelines for the Nigeria Interbank Foreign Exchange (NIFEX) Market, allowing the exchange rate of the naira to be determined by the market forces of demand and supply, although the central bank would step in whenever appropriate.

Paring the losses it made since Friday last week, the Nigerian Stock Exchange All-Share Index (NSE-ASI) rose by 3.17 per cent yesterday to close at 27,891.96, up from 27,034.05 the previous day, while market capitalisation added N279 billion to close higher at N9.579 trillion.

The new guidelines came after weeks of consultations with stakeholders including the banks on the need for a more flexible forex market, to among other things, reduce pressure on the local currency and attract foreign investors.

Speaking to journalists at a press briefing in Abuja, CBN Governor, Mr. Godwin Emefiele, said the central bank had resolved to henceforth deal with FX Primary Dealers (FXPDs) under the new arrangement.

He also said the existing ban of 41 items from accessing forex from the official window would remain in place.
He said part of the objectives of the new framework, which included the introduction of the naira-settled Over-the-Counter (OTC) FX Futures trading, was to discourage people from front-loading or hoarding forex due to uncertainty.
He also assured the markets that the backlog of matured letters of credit would be cleared.

Confirming THISDAY’s exclusive report yesterday that the CBN would not create a “special” window for critical transactions, Emefiele said the new forex framework would allow the market to operate as a single market structure through the interbank/autonomous window, while the exchange rate would be purely market-driven using the Thomson-Reuters Order Matching System as well as the Conversational Dealing Book.

He said the CBN would however participate in the market through periodic interventions to either buy or sell forex as the need arises.

He said to improve the dynamics of the market, the central bank would further introduce FX Primary Dealers (FXPD), who would be registered by the CBN, to deal directly with the Bank for large trade sizes on a two-way quote basis.
The governor said the primary dealers would operate with other dealers in the interbank market, among other obligations that would be stipulated in the Foreign Exchange Primary Dealers (FXPD) guidelines.

However, he said selected FX Primary Dealers would be notified by Friday, June 17, 2016 on the new guidelines while all other non-primary dealers would remain valid and eligible to participate in the market.

He said interbank trading under the new guidelines would begin on Monday, June 20, 2016, while tenors and rates for the naira-settled OTC FX Futures would be announced on June 27, 2016.

According to Emefiele, “The big point here is that we’ve decided that the CBN will deal primarily with what we call the foreign exchange primary dealers. We will have non-primary dealers and primary dealers.

“The guidelines for the qualification for being a foreign exchange primary dealer would be on our website.
“There are a number of qualifications, either the size of the bank, or the size of forex transactions it had done before, the level of liquidity, the extent to which those banks have complied with CBN guidelines, regulations in the past and their level of preparedness in terms of being able to provide all the soft and hardware that is needed to operate in a very transparent manner that can handshake with the Thompson Reuters and FMDQ software – these will be the basis.”

He said: “But from what we see, we do not think there’ll be more than a maximum of eight or 10 primary dealers. What that means is that you have what we can call Grade A dealers and you have the Grade B dealers.
“But being a Grade A dealer doesn’t confer on you any special preference other than the fact that the size of trade that the CBN is willing to deal with you would be larger than the trade for those who are going to be dealing as non-primary dealers.

“And forex dealers themselves right now and even the banks understand what we mean by the size of trade, talking about an open transparent, two-way quote system, where I can close or they can close on themselves, or me on them, and their capacity to deliver anytime within the trading period is very important here.
“So that’s why we are trying to segment them in two parts.”

Emefiele said based on what the central bank had published, the level of trades as a primary dealer would be set at a minimum of $10 million.

“So what that means is not about talking about the standard trades of those days when a dealer said it’s about $100,000 and you say, I close on you for $100,000.

“Now, we are talking about a minimum of $10 million and to do that, you have to have strong capacity, you must have prepared yourselves, you have to be ready to play with the highest level of professionalism and transparency and nobody is going to take any nonsense from you if you decide to breach the regulations or guidelines.

“And that’s the reason I said we will expect those who are going to deal here to be people who can deliver on their words. They must be people who understand the implications for whatever decisions they take regarding the size, talking of the volume and the exchange rate they decide to quote.

“It’s intended to ensure that we don’t have speculators, we don’t have rent seekers who just want to come into the market, particularly the primary market to just come and start auctioning and staking on prices against each other for what I can call private benefits,” he clarified.

On steps being taken by the CBN to narrow the gap between the official and parallel market rates, the central bank governor said: “As long as there’s one window, whatever comes out at the end of the day as the marginal rate, that rate will be the rate that will be recognised officially by the world as the rate of the naira.

“I do not expect that any other rate will be recognised in the market. But I think it’s important for me to provide a little clarification on a few issues burning in the hearts of people. And the first is what we call the OTC FX futures.

“The FX futures market is an innovation which we have introduced to moderate volatility in the foreign exchange market. It’s a situation where it makes it easy for you as a businessman to plan your business and the rate at which you want to do your business.”

He said the new flexible forex regime would also discourage speculative attacks on the naira.

According to him, “You do not have to fear that because of what is happening to crude oil prices today, that you are afraid that you may not be able to source your dollars in the next two, three, seven or nine months, and for that reason you begin to take precautionary decisions by front-loading on your foreign exchange.
“Under the new regime, you can decide that I have pegged the price of foreign exchange or I have pegged the price of my product based on an exchange rate of X and you lock yourself on to a future rate with our primary dealers or even with the non-primary dealers.

“When you lock yourself to a rate of let’s say N200 or you decide to lock yourself to a rate of say N230 or N280, as the case maybe, all you need to do is go back and do your business once you’ve locked yourself to a futures transaction through futures deal.

“So if in the next three months, if the rate you agreed at locking up your futures deal was say N260, and the market is doing say, N270 at that time, that N10 gap, the Central Bank of Nigeria will bridge the naira equivalent of that N10 gap such that you are not seen to be losing money by waiting for the next two to three months to procure your foreign exchange.”

Emefiele added that what the OTC FX futures market would do for Nigeria is that it would shift forex demand from the spot market to the time when forex is really needed, adding that demand for forex on the spot market had led to the demand pressure in the market and speculative attacks against the naira.

“Indeed, we would be engaging more and more both with the banks and primary and non-primary forex dealers about how this would work because we are determined to ensure that this works and I am very optimistic that it would work,” he said.

On the matured letters of credit, he said the current level of Nigeria’s foreign reserves should offer hope to investors.

“I know a couple of people, particularly those who have matured letters of credit, who would want to buy their foreign exchange and would demand to know what would happen to the matured transactions? The important thing is that the backlog of transactions will be taken to the market for the clearance.

“And let me say this, the CBN has foreign reserve of close to about $26.5 billion-$26.7 billion; this is certainly substantially higher than the level of any demand that is in the market.

“We are making efforts with respect to the supply of forex in the market and we are also optimistic that the steps that we have taken today will help to further deepen the market and also get foreign exchange into the market.
“We are very hopeful that this will work and we are saying independently, the CBN is working to even ensure that we improve the level of supply into the market, so the demand would be met.

“There’s no need for everybody to rush at the same time into the market: indeed, you may find yourself losing money when you rush into the market and take some emergency decisions that will hurt you, hurt your profits, hurt your balance sheet and ultimately, if you are taking a bank loan, hurt your interest charges on your bank loans. So we need to be very careful.

“And that’s the reason we’ve starting the OTC FX futures market, so that you can take it easy. If you are not too sure, go to the futures, commit yourself to a rate and you’ll find a deal – all the banks will provide you with a FX futures rate whether from one to nine months and with that, you are able to go about your business without losing sleep.

“We’ve committed ourselves to the level of guarantees to say, it’s like a bet if the rate that you get eventually at the time of your futures maturing is higher than the deal date, as we will pay you the difference.
“But if the rate on that day is lower than the deal date rate, you’ll pay us the naira equivalent,” the governor explained.

Revised Guidelines for NIFEX Market

Following Emefiele’s briefing, the CBN yesterday posted the revised guidelines for the operation of the NIFEX market on its website, stating that the CBN shall operate a single market structure through the autonomous/interbank market, i.e. the interbank forex market with the CBN participating in the market through interventions directly in the interbank market or through dynamic “Secondary Market Intervention Mechanisms”.

Furthermore, it stated that in order to promote the global competitiveness of the market, the interbank FX market would be supported by the introduction of additional risk management products offered by the CBN and authorised dealers to further deepen the market, boost liquidity and promote financial security in the market.

“Additionally, to further improve the dynamics of the market, the CBN shall introduce FX Primary Dealers (FXPDs). These shall be registered authorised dealers designated to deal with the CBN on large trade sizes on a two-way quote basis, amongst other obligations as stated in the FXPD Guidelines.

“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.

“Authorised dealers shall buy and sell FX among themselves on a two-way quote basis via the FMDQ Thomson Reuters FX Trading Systems (TRFXT- Conversational Dealing), or any other system approved by the CBN.

“Authorised dealers may offer one-way quotes (bid or offer) on all products and on request to other authorised participants via the FMDQ Thomson Reuters FX Trading System (FMDQ TRFXT – Order Book System), or any other system approved by the CBN.

“The maximum spread between the bid and offer rates in the interbank market shall be determined by FMDQ OTC Securities Exchange (FMDQ) via its market organisation activities with the Financial Market Dealers Association (FMDA).
“Proceeds of foreign investment inflows and international money transfers shall be purchased by authorised dealers at the interbank rate,” it added.

However, to further deepen the FX market, in addition to the already approved hedging products referenced in the CBN “Guidelines for FX Derivatives and Modalities for CBN FX Forwards”, the new circular stated that authorised dealers are now permitted to offer naira-settled non-deliverable over-the-counter (OTC) FX Futures.

It explained that OTC FX Futures’ transactions shall be non-standardised with fixed tenors and bespoke maturity dates, adding that the OTC FX Futures sold by authorised dealers to end-users must be backed by trade transactions (visible and invisible) or evidenced investments.

“FMDQ will provide the appropriate benchmarks for the valuation and settlement of the OTC FX Futures and other FX derivatives. FX OTC Futures and Forwards will count as part of the FX positions of authorised dealers.

“To promote market liquidity, authorised dealers may apply FX spot transactions to hedge Outright Forwards, OTC FX Futures and FX Options, etc.

“Settlement amounts on OTC FX Futures may be externalised for Foreign Portfolio Investors (FPIs) with Certificates of Capital Importation. Such settlement amounts shall be evidenced by an FMDQ OTC FX Futures Settlement Advice,” the guidelines stipulated.

CBN further referenced its earlier Circular Ref: TED/FEM/FPC/GEN/01/001 dated 12th January 2015, authorised dealers, (FXPDs and non-FXPDs), a review in the daily foreign currency trading positions of banks has been made with a new limit of +0.5%/-10% of their shareholders’ funds unimpaired by losses as Foreign Currency Trading Position Limits to support their obligations as liquidity providers at the close of each business day.

“Where an authorised dealer requires a higher position limit to accommodate a customer trade, the authorised dealer shall contact the Director, Financial Markets Department.

“Where the request is assessed as valid, the director shall communicate immediate approval by text or email to the authorised dealer. Thereafter, the authorised dealer must, with 24 hours, write to the Director, Financial Markets Department who will thereafter communicate an approval in writing.

“The Director, FMD shall exercise discretion on the duration of the temporary position limit depending on the estimated defeasance period of the transaction size.

“Returns on the purchases and sales of FX shall be rendered daily to the CBN by authorised dealers. Interbank funds shall NOT be sold to Bureaux-de-Change,” it stated.

According to the CBN, participation in the FX market by the CBN shall be via: the Interbank FX Market or Secondary Market Intervention Sales (SMIS).

Guidelines for Primary Dealership in Forex Products

In a separate circular on the guidelines for primary dealership in foreign exchange products, the central bank explained that the FXPDs system is one whereby interested authorised dealers are accorded access to transact FX products directly with the CBN.

The main objectives for the establishment of primary dealership in FX products, the CBN explained are: to achieve exchange rate management policy objectives; to improve the effectiveness of CBN FX market intervention activities; and to enhance market liquidity.

In addition, it stated that the FXPDs shall be evaluated on the following qualitative criteria: strong FX trading capacity (qualified and experienced; FX dealers, strong sales teams, and wide distribution networks); deployment of all FMDQ1 Thomson Reuters FX Trading Systems or any other systems approved by the CBN; dealing room standards and a dealing room supported by independent market risk management, back-offices and effective disaster recovery plan, among others.

The FXPDs are expected to have a minimum shareholders fund unimpaired by losses of at least N200 billion; minimum of N400 billion in total foreign currency assets; and minimum liquidity ratio of 40 per cent.

“FXPDs shall have a maximum limit of +0.5%/- 10% of their shareholders’ funds unimpaired by losses as Foreign Currency Trading Position Limits. Where an FXPD requires a higher position limit to accommodate a customer trade, the FXPD shall contact the Director, Financial Markets Department.

“Where the request is assessed as valid, the director shall communicate immediate approval by text or email to the FXPD. Thereafter, the FXPD must, with 24 hours, write to the Director, Financial Markets Department who will thereafter communicate an approval in writing.

“The Director, FMD shall exercise discretion on the duration of the temporary position limit depending.
“FXPDs must have a robust business continuity plan and be able to interface with the CBN from an alternate location (Contingency Dealing Room) in the case of a disaster.

“FXPDs’ disaster recovery capabilities, as reflected in their business continuity plans and are routinely tested, should ensure continuous participation in CBN’s FX trading operations (including trading, clearing and settling) in the event of a wide-scale disruption in the FXPD’s primary place of business.

“The CBN expects FXPDs to maintain a robust compliance programme, including procedures to identify and mitigate legal, regulatory, financial, and reputational risks. Such programme should include compliance officers dedicated to the business lines relevant to the FXPD functions.

“The CBN will not designate as FXPD, any authorised dealer that is, or recently (within the last year) has been subject to financial market- related litigation or regulatory action or investigation that the CBN determines material or otherwise relevant to the potential FXPD.

“In making such determination, the CBN will consider, among other things, whether and how any such matters have been resolved or addressed and the authorised dealer’s history of such matters.

“In addition, with regard to registered FXPDs, the CBN may limit access to any or all operations, and may suspend or terminate the FXPD status of an authorised dealer, at anytime deems necessary, if it becomes the subject of, or is involved with, regulatory or legal proceedings that, in the judgment of the CBN, unfavourably impacts the FXPD relationship.

“FXPDs shall maintain such accounting and other records of their respective activities in the interbank FX markets as set forth by the CBN and other relevant regulatory authorities from time to time and render returns of trades executed with the CBN to the Bank.

“All FXPDs shall submit a weekly report of FX transactions undertaken by them in the format advised by the CBN. FXPDs shall advise CBN the authorised dealers for which they do not have PSR lines for and state the reasons why.
“FXPDs shall treat all non-public information received from the CBN and, in particular, information relating to transactions and outstanding positions with the highest degree of confidentiality. FXPDs shall not share this confidential information with any third party unless required to do so by applicable law or a court order,” the guidelines for FXPDs stipulated.

How CBN Naira-Settled OTC FX Futures Will Work

In addition, providing clarification on how the CBN Naira-settled OTC FX Futures would work, the central bank explained that the proposal of the OTC FX Futures are Non-Deliverable Forwards (i.e. a contract where parties agree to an exchange rate for a predetermined date in the future, without the obligation to deliver the underlying US dollar (notional amount) on the maturity date, i.e. the settlement date).

On maturity date, it will be assumed that both parties would have transacted at the spot FX market rate. The party that would have suffered a loss with the spot FX rate will be paid a settlement amount in naira, according to a document on the central bank’s website.

The CBN stated that it would kick off the market by acting as the seller of OTC FX Futures contracts for defined tenors, i.e. 1-month, 2-month, 3-month, 6-month, 9-month, 12-month, 18-month and 24-month.

The dollar/naira OTC FX Futures contracts will provide the CBN the opportunity to kick-start the liquidity of risk management products available to end-users in the FMDQ OTC markets.

According to the central bank, the contracts would assist the CBN to manage the volatility in the spot FX market thereby promoting stability and entrenching confidence in the FX market.
Furthermore, it explained that all OTC FX Futures contracts would be trade-backed, adding that visible, invisible and investments qualify for OTC FX Futures.

FMDQ will act as the ‘OTC FX Futures Exchange’ and its appointed agent, the Nigeria Inter-Bank Settlement System PLC (NIBSS) will clear the interbank OTC FX Futures, i.e. collect initial and variation margins and settle the party to compensate on the maturity date.

“The introduction of the OTC FX Futures market will encourage end-users to spread out their demand for spot FX deals as they are now able to lock down the exchange rates for future FX requirements. This has the potential to eradicate the constant frontloading of FX requirements and minimise the disequilibrium in the spot FX market.

“End-users will make better judgements as to the timing of accessing the spot FX market. The availability of the OTC FX Futures will improve the business planning practice of end-users and FX sellers, as the future exchange rate is guaranteed through the OTC FX Futures.

“An end-user (buyer of USD) may consider it wiser to delay the purchase of its USD requirement in the spot FX market if the spot FX rate is higher than the OTC FX Futures rate of a particular tenor. The end-user will borrow USD or obtain trade finance and simultaneously hedge its exchange rate exposure with an attractive OTC FX Futures sold by the CBN.

“At maturity of the OTC FX Futures contract, the end-user will access the spot FX market. The OTC FX Futures will be used to attract significant capital flows to the Nigerian fixed income and equity markets as returns can now be enhanced as FX exposures are hedged. Foreign Portfolio Investors (FPIs) will be able to use the OTC FX Futures for capital protection.

“The envisaged increase of supply of US Dollars due to the OTC FX Futures offered by the CBN in the spot FX market will cause the spot FX rate to moderate.

“OTC FX Futures which are non-deliverable are ideal for FPIs and even Foreign Direct Investors (FDIs). OTC FX Futures can be used when the investor wants to hedge the exchange rate risk without interest in buying outright forwards which will necessitate liquidation of its investment to pay for outright forwards.

“Banks will increase the liquidity in the OTC FX Futures market (by selling OTC FX Futures) if $/N Spot FX rate starts dropping. This may cause the Spot FX rate to drop further,” it added.

Equities Rise, Naira Remains Stable

Reacting to the adoption of a floating exchange rate regime yesterday, the Nigerian Stock Exchange All-Share Index (NSE-ASI) rose by 3.17 per cent to close at 27,891.96, up from 27,034.05 the previous day, while market capitalisation added N279 billion to close higher at N9.579 trillion.
Similarly, the volume of trading soared by 244 per cent from 170,686 million shares valued at N2.424 billion the previous day to 588.437 million shares worth N3.477 billion yesterday.

The market had recorded losses for three consecutive days starting from last Friday before the rebound yesterday. Some market analysts attributed yesterday’s rally to the central bank’s announcement on the details of the new forex guidelines.

In the parallel market, on the other hand, the rate of the naira remained stable selling at N370 to a dollar yesterday, same value at which it sold on Tuesday.

Analysts Welcome New Forex Policy

Speaking on the new NIFEX policy, the Managing Director/Chief Executive, Cowry Asset Management Limited, Mr. Johnson Chukwu, expressed satisfaction with it, saying that a flexible exchange rate would provide opportunity for inflows from other sources other than crude oil sales.

According to him, the decision to allow foreign remittances to be converted at the interbank rate as well as inflows from foreign investment would help to address the disincentive that operators and other players in those areas had witnessed in the last couple of months, forcing inflows from those sources to dry up.

“So I expect that in the medium-to-long term, but not immediately, we should begin to see improvement in inflows from other sources. I want to believe the federal government would back this up with other fiscal policies, particularly as it relates to investments and in an area like infrastructure by making the infrastructure sector attractive for private sector investments.

“That would now help drive inflows. But what the central bank has done was most expected. I think clearly, in the medium term, it would help open up the economy and help stabilise the exchange rate,” Chukwu said.
The Head of Research at SCM Capital Limited (formerly Sterling Capital), Mr. Sewa Wusu, described the decision by the central bank as a positive and good move for the economy, adding: “Although it was delayed, it is better now than never.”

“We have seen the impact of that delay on the market and by extension the economy. All the same, the adoption of flexibility around the interbank market is a policy that would help bridge the gap that had existed in the forex market in the past, particularly the gap between the official and parallel markets. We expect that gap to fizzle out.
“Now, what has been adopted is more or less a floating exchange rate, which entails that we would see the interplay of demand and supply. That would by extension determine the true value of exchange rate in the country.

“What that means is that businesses would be able to plan with respect to their forex requirements and that is very critical. It would also help reduce the volatility we have seen in the market over a long period of time.

“Also, the introduction of the futures market is a positive one. It would allow for demand to be met and apart from that, you can also hedge in your transactions. So that would help for proper business planning,” he said.
However, Wusu expressed concern over forex supply in the market considering the weak value of the country’s external reserves.

In a note to THISDAY, London-based Economist at Exotix Partners LLP, Alan Cameron, said judging from the statement, the CBN would keep the bulk of its intervention for the NDF market (forward market) while futures would also be introduced, with FMDQ acting as the platform.

“Overall, this looks like quite a bold step towards liberalisation – and certainly better than many investors’ expectations (and our own), who have seen many false dawns before.

“The key feature here is that the multiple tiers/layers have been removed – the sub-text of this decision that the president (Muhammadu Buhari) has finally recognised that multiple tiers lead to arbitrage, and arbitrage creates opportunity for fraud.

“Reading a bit deeper into things, we are also tempted to conclude that this is a sign of Buhari handing the reins of the economy (back) over to his ministers,” he added.

NEW FOREX POLICY AT A GLANCE

· Exchange rate to be determined by market forces
· Market to operate a single window through the interbank market
· CBN will intervene when appropriate
· Ban on 41 items to remain
· CBN to appoint primary forex dealers by Friday to deal on large transactions
· Primary forex dealers to have a minimum shareholding of N200bn
· CBN to offer long-tenured forex forwards
· Backlog of matured letters of credit to be cleared
· Naira-settled Over-the-Counter (OTC) Forex futures market to be introduced
· Tenors and rates for OTC FX Futures market to be announced on June 27
· Non-oil exports allowed unfettered access to export proceeds through interbank market
· Banks’ foreign currency trading positions to be reviewed​

An Address by Godwin I. Emefiele, Governor, Central Bank of Nigeria At the Unveiling of the Framework for Re-introduction of Managed Float Exchange Rate System 15th June 2016

Good afternoon ladies and gentlemen and welcome to the Central Bank of Nigeria (CBN). The Management of the Bank has called this Press Conference in response to one of the commitments contained in the Communiqué of the Monetary Policy Committee (MPC) of 24th May 2016. Having consulted widely and prepared carefully, the committee of Governors of the CBN is delighted to unveil to all stakeholders and the general public, the broad framework and guidelines of the Flexible Exchange Rate at the Inter-bank Market, which we alluded to at the end of that MPC Meeting. Before I proceed into the details of this new policy, please permit me to provide you with a brief context.

2. We all know by now that Nigeria has been dealing with the effects of three significant and simultaneous global shocks, which began around the third quarter of 2014. These include:
• The over 70 percent drop in the price of crude oil, which contributes the largest share of our Foreign Exchange Reserves;
• Global growth slowdown and geopolitical tensions along critical trading routes in the world; and
• Normalization of Monetary Policy by the United States’ Federal Reserve.
3. In view of these headwinds, the CBN witnessed a significant decline in our Foreign Exchange Reserves from about US$42.8 billion in January 2014 to about US$26.7 billion as of 10th June 2016. In terms of inflows, the Bank’s foreign exchange earnings have fallen from as high as US$3.2 billion monthly sometime in 2013 to current levels of below a billion dollars per month.

4. Despite these outcomes, the demand for foreign exchange has risen significantly. For example, in 2005 when we had oil prices at about US$50 per barrel for an extended period of time, our average import bill was N148.3 billion per month. In stark contrast, our average import bill for 2015 stood at about N917.6 billion per month. Unfortunately, the interplay between reduced FX Supply highlighted above and rising FX demand accounted for a substantial drain on our foreign exchange reserves.

5. In order to avoid further depletion of the reserves, the CBN took a number of countervailing policy actions, anchored on the prioritization of the most critical needs for foreign exchange as well as maintaining stability in the exchange rate. Having allowed two adjustments from August 2014 to February 2015, which resulted in movement of the currency from N155/US$1 to N197/US$1, we decided to manage the Naira-Dollar Exchange Rate at about N197/US$1 over the last 16 months, and then provide the available but highly limited foreign exchange to meet the following needs:
• Matured Letters of Credit from Commercial Banks
• Importation of Raw Materials, Plants, and Equipment,
• Importation of Petroleum Products, and
• Payments for School Fees, BTA, PTA, and related expenses

6. Over these intervening period, we are happy to note that these policies have yielded some positive developments. In particular, we have managed to stabilize the exchange rate since February 2015, thereby creating certainty for both household and business decisions, and also underpinning the economic growth we recorded in 2015. We have largely eliminated speculators and rent-seekers from the Foreign Exchange Market. Our Reserves, despite having fallen, is still robust and is able to cover about 5 months of Nigeria’s imports as against the international benchmark of 3 months. Furthermore, the domestic production of goods restricted from the FX market has picked up considerably nationwide, thereby creating more jobs for many more Nigerians.

7. Despite these positive outcomes, the Central Bank of Nigeria has always maintained that it would continue to monitor situations on the ground and ensure that the Bank’s policies reflect these facts and developments rather than the sentiments of any groups or sectors. It is in light of this principle that we now believe that the time is right to restore the automatic adjustment mechanism of the exchange rate with the re-introduction of a flexible inter-bank exchange rate market. The workings of this market will be consistent with the Bank’s objectives of enhancing efficiency and facilitating a liquid and transparent Foreign Exchange Market.

8. Although the detailed framework and operational guidelines of the market will be released to the public immediately after this Press Briefing, permit me to highlight its key aspects:

a. The market shall operate as a single market structure through the inter-bank/autonomous window;
b. The Exchange Rate would be purely market-driven using the Thomson-Reuters Order Matching System as well as the Conversational Dealing Book;
c. The CBN would participate in the Market through periodic interventions to either buy or sell FX as the need arises;

d. To improve the dynamics of the market, we will introduce FX Primary Dealers (FXPD) who would be registered by the CBN to deal directly with the Bank for large trade sizes on a two-way quotes basis;
e. These Primary Dealers shall operate with other dealers in the Inter-bank market, amongst other obligations that will be stipulated in the Foreign Exchange Primary Dealers (FXPD) Guidelines, which would also be released immediately after this Press Briefing;

f. There shall be no predetermined spread on FX spot transactions executed through the CBN intervention with Primary Dealers, while all FX Spot purchased by Authorized Dealers are transferable in the inter-bank FX Market;
g. The Forty-One (41) items classified as “Not Valid for Foreign Exchange” as detailed in a previous CBN Circular shall remain inadmissible in the Nigerian FX market;

h. To enhance liquidity in the market, the CBN may also offer long-tenored FX Forwards of 6 to 12 months or any tenor to Authorized Dealers;

i. Sale of FX Forwards by Authorized Dealers to end-users must be trade-backed, with no predetermined spreads;

j. The CBN shall introduce non-deliverable over-the-counter (OTC) Naira-settled Futures, with daily rates on the CBN-approved FMDQ Trading and Reporting System. This is an entirely new product in the Nigerian Foreign Exchange Market, which would help moderate volatility in the exchange rate by moving non-urgent FX demand from the Spot to the Futures market;

k. The OTC FX Futures shall be in non-standardized amounts and different fixed tenors, which may be sold on any dates thereby ensuring bespoke maturity dates;

l. Proceeds of Foreign Investment Inflows and International Money Transfers shall be purchased by Authorized Dealers at the Daily Inter-Bank Rate; and

m. Non-oil exporters are now allowed unfettered access to their FX proceeds, which shall be sold in the Inter-bank market.

9. In terms of timelines, the Management of the Central Bank has agreed as follows:

a. The detailed operational guidelines for the Flexible Foreign Exchange Market will be released immediately after this Press Briefing;

b. The guidelines for the selection and operations of FX Primary Dealers would also be released immediately after this Press Briefing;

c. Selected FX Primary Dealers would be notified by Friday 17th June 2016. All other non-Primary Dealers would remain valid and eligible to participate in the market;

d. Inter-bank trading under the new guidelines will begin on Monday 20th June 2016; and
e. The tenors and rates for the OTC Naira-settled FX Futures will be announced on Monday 27th June 2016.

10. In closing, let me note that the Central Bank is strongly determined to make this market as transparent, liquid, and efficient as possible. Therefore, we would neither tolerate unscrupulous behaviour nor hesitate to bring serious sanctions on offenders. The CBN expects all authorized dealers particularly to display the highest level of professionalism. We expect them to understand the spirit and letter of this transition to a market based system. The CBN will not allow the system to be undermined by speculators and rent-seekers. Permit me to emphasize that any attempt to breach any aspect of this new framework will be heavily sanctioned by the CBN and this may indeed result in the suspension or withdrawal of the FX dealing license of an offending Authorized dealer.

11. I therefore urge market participants to assist us in ensuring that this new system enables the CBN to pursue its mandate in a more effective and efficient manner, which guarantees preservation of our scarce commonwealth, stability of our financial system, and growth of our economy to the benefit of all Nigerians.

Thank you all for listening.

 Revised Guidelines for The Operation Of The Nigerian Inter-Bank Foreign Exchange Market

1.0 Introduction

In line with the objectives of enhancing efficiency and facilitating a liquid and transparent, Foreign Exchange (FX) market, the Central Bank of Nigeria (CBN) hereby releases the revised guidelines on the operations of the Nigerian Inter-Bank FX market towards the liberalisation of the market.

2.0 Guidelines

The CBN shall operate a single market structure through the autonomous/inter-bank market i.e. the Inter-Bank Foreign Exchange Market with the CBN participating in the FX market through interventions (i.e. CBN Interventions) directly in the inter-bank market or through dynamic “Secondary Market Intervention Mechanisms”.
Furthermore, to promote the global competitiveness of the market, the inter-bank FX market will be supported by the introduction of additional risk management products offered by the CBN and Authorised Dealers to further deepen the FX market, boost liquidity and promote financial security in the market.

Additionally, to further improve the dynamics of the market, the CBN shall introduce FX Primary Dealers (FXPDs). These shall be registered Authorised Dealers designated to deal with the CBN on large trade sizes on a two-way quote basis. amongst other obligations as stated in the FXPD Guidelines – (Guidelines for Primary Dealership in FX Products). The FXPDs shall operate with other Authorised Dealers (non-FXPDs) in the Inter-bank market.

2.1 Inter-bank Foreign Exchange Market

2.1.1 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.

2.1.2 Authorised Dealers shall buy and sell FX among themselves on a two-way quote basis via the FMDQ Thomson Reuters FX Trading Systems (TRFXT-Conversational Dealing), or any other system approved by the CBN.

2.1.3 Authorised Dealers may offer one-way quotes (bid or offer) on all products and on request to other Authorised participants via the FMDQ Thomson Reuters FX Trading System (FMDQ TRFXT – Order Book System), or any other system approved by the CBN.

2.1.4 The maximum spread between the bid and offer rates in the inter-bank market shall be determined by FMDQ OTC Securities Exchange (FMDQ) via its market organisation activities with the Financial Market Dealers Association (FMDA).

2.1.5 Proceeds of Foreign Investment Inflows and International Money Transfers shall be purchased by Authorised Dealers at the inter-bank rate.

2.2 Hedging Products

2.2.1 To further deepen the FX market, in addition to the already approved hedging products referenced in the CBN “Guidelines for FX Derivatives and Modalities for CBN FX Forwards”, Authorised Dealers are now permitted to offer Naira-settled non-deliverable over-the-counter (OTC) FX Futures.

2.2.2 OTC FX Futures’ transactions shall be non-standardised with fixed tenors and bespoke maturity dates.
2.2.3 OTC FX Futures sold by Authorised Dealers to end-users must be backed by trade transactions (visible and invisible) or evidenced investments.

2.2.4 FMDQ will provide the appropriate benchmarks for the valuation and settlement of the OTC FX Futures and other FX derivatives.

2.2.5 FX OTC Futures and Forwards will count as part of the FX positions of Authorised Dealers.
2.2.6 To promote market liquidity, Authorised Dealers may apply FX Spot transactions to hedge Outright Forwards, OTC FX Futures and FX Options etc.

2.2.7 Settlement amounts on OTC FX Futures may be externalised for Foreign Portfolio Investors (FPIs) with Certificates of Capital Importation. Such settlement amounts shall be evidenced by an FMDQ OTC FX Futures Settlement Advice.

2.2.8 Furthermore, FMDQ will be developing detailed registration and operational regulation on FX Options and will drive, with the market, the development of other risk management products and attendant guidelines.

2.3 Foreign Currency Trading Position

2.3.1 Further to the CBN Circular Ref: TED/FEM/FPC/GEN/01/001 dated 12th January 2015, Authorised Dealers, (FXPDs and non-FXPDs) are hereby notified of a review in the daily Foreign Currency Trading Positions of banks.
Consequently, Authorised Dealers shall have maximum limits of +0.5%/-10% of their Shareholders’ Funds unimpaired by losses as Foreign Currency Trading Position Limits to support their obligations as liquidity providers at the close of each business day.

2.3.2 Where an Authorised Dealer requires a higher position limit to accommodate a customer trade, the Authorised Dealer shall contact the Director, Financial Markets Department. Where the request is assessed as valid, the Director shall communicate immediate approval by text or email to the Authorised Dealer. Thereafter, the Authorised Dealer must, with 24 hours, write to the Director, Financial Markets Department who will thereafter communicate an approval in writing. The Director, FMD shall exercise discretion on the duration of the temporary position limit depending on the estimated defeasance period of the transaction size.

2.3.3 Returns on the purchases and sales of FX shall be rendered daily to the CBN by Authorised Dealers.
2.3.4 Inter-bank funds shall NOT be sold to Bureaux-de-Change.

2.3.5 The forty-one (41) items classified as “Not Valid for Foreign Exchange” as detailed in the CBN Circular Ref: TED/FEM/FPC/GEN/01/010, remain inadmissible in the Nigerian FX market.

2.3.6 Applicable exchange rate for the purpose of import duty payments shall be the daily inter-bank FX closing rate as published on the CBN website.

2.4 CBN Interventions

2.4.1 Participation in the FX market by the CBN shall be via:

i. The Inter-Bank FX Market

ii. Secondary Market Intervention Sales (SMIS)
2.4.2 Intervention Through the Inter-Bank FX Market

i. The CBN reserves the right to intervene in the inter-bank market to either buy or sell FX Spot upon the receipt of valid two-way quotes on the standard amount as defined from time to time in the FXPD Guidelines.
ii. CBN may also intervene in the inter-bank market by placing orders for non-standard amounts in the FMDQ TRFXT – Order Book System., or any other system as approved by the CBN.

iii. There shall be no predetermined spread on FX Spot transactions executed through CBN intervention with the FXPDs.
iv. The CBN reserves the right to intervene in the inter-bank market to either buy or sell FX Forwards upon the receipt of valid two-way quotes on the standard amount as defined from time to time in the FXPD Guidelines.
v. To enhance liquidity, CBN shall also offer non-deliverable OTC FX Futures (bid or offer) daily on the FMDQ OTC FX Futures Trading & Reporting System.

vi. The OTC FX Futures shall be in non-standardised amounts and different fixed tenors which may be sold on any date thereby giving bespoke maturity dates.
vii. FXPDs may purchase OTC FX Futures for their own accounts or sell to other Authorised Dealers and end-users.
viii. There shall be no maximum spread on the sale of the Forwards and OTC FX Futures purchased from CBN by FXPDs to Authorised Dealers and end-users.

2.4.3 Secondary Market Intervention Sales (SMIS)

i. The CBN may, at its discretion, intervene in the FX market through the sale of FX to Authorised Dealers (wholesale) or to end-users through Authorised Dealers (retail) via a multiple-price book building process using the FMDQ-Thomson Reuters FX Auction Systems, or any other system approved by the CBN. All SMIS bids shall be submitted to the CBN through the FXPDs.
• SMIS – Wholesale:

o All FX Spot purchased by Authorised Dealers are transferable in the inter-bank FX market.

o CBN may offer long-tenored FX Forwards of 6 – 12 months or any tenor to Authorised Dealers.

o Sale of FX Forwards by Authorised Dealers to end-users must be trade-backed. There shall be no predetermined spread.

o FX Forwards purchased by Authorised Dealers are transferable in the inter-bank FX market.
• SMIS – Retail:

o All FX Spot purchased by Authorised Dealers for end-users shall be for eligible transactions only upon the provision of appropriate documentation.

o FX Spot sold to any particular end-user shall not exceed 1% of the overall available funds on offer at each SMIS session.

o CBN may offer FX Forwards to end-users through Authorised Dealers and may limit the amount sold to an individual end-user

o All FX Forwards sales to end-users must be trade-backed.
o There shall be no maximum spread on the sale of FX Forwards by Authorised Dealers to end-users.

3.0 Execution and Reporting
2.5 To ensure effective monitoring of the FX market, all Authorised Dealers and end-users are required to trade only on FMDQ-advised FX Trading System(s). All transactions not executed on the Trading Systems shall be voice reported on the Trading Systems.

2.6 All FX transactions by Authorised Dealers are to be reported to FMDQ via the FMDQ-advised FX Reporting System. CBN will be granted access to this system.

4.0 Sanctions

Authorised Dealers are enjoined to comply with the provisions of these Guidelines, failing which appropriate sanctions shall be imposed, including suspension of the FXPD, Authorised Representatives of the Authorised Dealer, suspension of Authorised Dealer from the FX market and/or withdrawal of the Authorised Dealership Licence.
For the avoidance of doubt, all Authorised Dealers are to refer policy issues in respect of which they are in doubt to the Director, Financial Markets Department, Central Bank of Nigeria for clarification.

5.0. Primacy of the Guidelines

These Guidelines supersede:

i. Circular Ref: TED/FEM/FPC/GEN/01/020 dates October 28, 2014 titled “Guidelines on the Operation of CBN Interventions in the Inter-Bank Market through the Two-Way Quote System”.
ii. All other prior Circulars and Guidelines on the subject matter.

Please be guided.

Guidelines for Primary Dealership in Foreign Exchange Products

1.0 Introduction

In line with the Central Bank of Nigeria’s (CBN’s) mandate to foster depth, stability and liquidity in the Nigerian Foreign Exchange (FX) market, CBN has the responsibility to enhance the transparency, efficiency and effectiveness of the market. One of such efforts is to deepen the inter-bank FX market by establishing an institutional framework for Primary Dealership in FX products. A vibrant Primary Dealership system will not only deepen the inter-bank FX market, but will also enhance liquidity management.

The Foreign Exchange Primary Dealers (FXPDs) system is one whereby interested Authorized Dealers are accorded access to transact FX products directly with the CBN. The main objectives for the establishment of Primary Dealership in FX products are:

i. To achieve exchange rate management policy objectives

ii. To improve the effectiveness of CBN FX market intervention activities

iii. To enhance market liquidity

These Guidelines set the requirements, responsibilities and minimum standards for FXPDs. Each FXPD must continuously meet the Standards set out in the Guidelines and such other Standards, Rules and Regulation as may be prescribed by the CBN from time to time. The CBN hereby emphasizes that the nature of its relationship with the FXPDs is primarily a counterparty relationship.

Based on the foregoing, market stakeholders are reminded that the designation of an entity as an FXPD by the CBN shall in no way constitute a public endorsement of the superior financial soundness of that entity over non-FXPDs by the CBN, nor should such designation be viewed as a replacement for prudent counterparty risk management and due diligence.

2.0 Appointment of FX Primary Dealers

The CBN shall evaluate and approve the application of an Authorized Dealer as an FXPD based on meeting at least 2 of the following 3 Quantitative Criteria as of 31st May 2016:

2.1 Minimum Shareholders Fund Unimpaired by losses of at least 200.00 billion;

2.2 Minimum of N400.00 billion in Total Foreign Currency Assets; and

2.3 Minimum Liquidity Ratio of 40 percent.

In addition, FXPDs shall be evaluated on the following Qualitative Criteria:

2.4 Strong FX trading capacity (qualified and experienced FX dealers, strong sales teams, and wide distribution networks).

2.5 Deployment of all FMDQ Thomson Reuters FX Trading Systems or any other Systems approved by the CBN.
2.6 Dealing Room Standards and a Dealing Room supported by independent market risk management, back-offices and effective disaster recovery plan.

2.7 Active participation in the inter-bank FX market as evidenced by the FMDQ OTC Markets – Dealing Member (Banks) Turnover Ranking.

2.8 Adequate computerisation of its FX trading, reporting and settlement processes, with complete systems installation capacity to accommodate:

2.8.1 FMDQ Thomson Reuters FX Trading Systems (Trading, Auction, Relationship Trading and Surveillance Systems).
2.8.2 Communications equipment (including voice logging devices) for maintaining interface with other FXPDs, non-FXPDs, customers and the CBN.

2.8.3 Any other System approved by the CBN.
CBN reserves the right to review these qualifying criteria for the appointment of an FXPD at any time.

3.0 Expression of Interest (EOI)

3.1 Authorized Dealers intending to be FXPDs shall each submit an EOI letter to the Financial Markets Department of the CBN.

3.2 An application for FXPD Registration shall be accompanied by a letter of undertaking to discharge its FXPD responsibilities diligently and abide by the guidelines, rules and regulations of FX Primary Dealership, code of conduct, and all other post-registration requirements that may be required by the Bank from time to time.

3.3 FXPD Registration shall be valid for a period of one (1) year and renewal is subject to meeting the necessary criteria as determined from the annual CBN FXPD Registration Evaluation exercise.

3.4 Registered FXPDs shall not be required to represent an EOI at renewal. However, interested non-FXPDs who meet the necessary requirements and wish to become FXPDs shall submit an EOI and letter of undertaking during the annual evaluation period.

4.0 Responsibilities of the FXPD

On an ongoing basis, the CBN shall expect FXPDs to act as professional counterparties and market participants in their overall conduct and support of market efficiency and liquidity. Key FXPD responsibilities shall include:
4.1 Provision of two-way quotes for advised standard amounts and bid-ask spreads on FX Spot, Forwards, FX Swaps and Naira-settled OTC FX Futures to the CBN as follows:
Product Standard Size ($’mm)
Spot 10.0
Forwards 5.0
FX Swaps 5.0
OTC FX Futures 5.0

The applicable bid-ask spreads shall be agreed between the CBN and FXPDs periodically.

4.2 Active participation in CBN’s interventions in the foreign exchange market.

4.3 Provision of two-way quotes to other FXPDs thereby facilitating price discovery and developing liquidity in the FX market. The standard amounts and spreads of quotes between FXPDs will be as agreed between FMDQ and FMDA . FXPDs will quote to non-FXPDs on a two-way quote basis on the standard amounts and bid-offer spreads agreed by all Authorized Dealers.

4.4 Provision of market information and analysis helpful in the formulation and implementation of foreign exchange policy to the CBN Director, Financial Markets Department.

4.5 FXPDs shall be required to resell a minimum of 70% of any uptake from the CBN in the inter-bank market on the day of purchase.

5.0 FXPD Market Operations

5.1 FXPDs shall be expected to perform their duties during agreed market trading hours, currently 9am to 2pm.

5.2 FXPDs shall not be compelled to trade with the CBN, FXPDs and non-FXPDs outside of the trading hours. Any trades done outside of the trading hours have to be agreed bilaterally, and recorded on the FMDQ Thomson Reuters FX Trading Systems or any other Systems approved by the CBN.

5.3 All Transactions, both during and off trading, must be conducted on the FMDQ Thomson Reuters FX Trading Systems or any other Systems approved by the CBN.

6.0 FXPDs’ Performance Evaluation

6.1 In its evaluation of FXPDs’ performance, the CBN shall assess the quality of the FXPDs’ participation, and the quality of the market information they provide to the CBN.

6.2 The CBN shall expect the FXPDs to participate in the market on a daily basis or such period as the CBN may require. FXPDs that record low volumes of FX transactions with the CBN during the evaluation period, that repeatedly provide bids and offers that are not reasonably competitive, or that fail to provide useful market information and commentary, shall be deemed not to have met the expectations of the CBN. Furthermore, while the main responsibilities of the FXPD shall be to foster liquidity of FX from purchases, the CBN may trade on their offers. FXPDs that constantly give uncompetitive quotes risk the CBN trading on their offers. In such circumstances, the CBN may limit an FXPD’s participation in any or all operations, approved products and may suspend or terminate the Authorized Dealer’s status as an FXPD if it continues to fail to meet these aforementioned expectations.
6.3 Consequently, FXPDs’ performance evaluation shall be carried out on a points-based system, which shall be communicated in due course.

6.4 The CBN shall also conduct half-yearly evaluations which shall be disseminated to FXPDs strictly as feedback on their performance.

7.0 Risk Management Standards

7.1 Market

7.1.1 FXPDs shall have a maximum limit of +0.5%/-10% of their Shareholders’ Funds unimpaired by losses as Foreign Currency Trading Position Limits. Where an FXPD requires a higher position limit to accommodate a customer trade, the FXPD shall contact the Director, Financial Markets Department. Where the request is assessed as valid, the Director shall communicate immediate approval by text or email to the FXPD. Thereafter, the FXPD must, with 24 hours, write to the Director, Financial Markets Department who will thereafter communicate an approval in writing. The Director, FMD shall exercise discretion on the duration of the temporary position limit depending on the estimated defeasance period of the transaction size. The CBN reserves the right to amend these limits from time to time as its discretion.

7.2 Operational

7.2.1 FXPDs must have a robust business continuity plan and be able to interface with the CBN from an alternate location (Contingency Dealing Room) in the case of a disaster. FXPDs’ disaster recovery capabilities, as reflected in their business continuity plans and are routinely tested, should ensure continuous participation in CBN’s FX trading operations (including trading, clearing and settling) in the event of a wide-scale disruption in the FXPD’s primary place of business.

7.2.2 The CBN expects FXPDs to maintain a robust compliance programme, including procedures to identify and mitigate legal, regulatory, financial, and reputational risks. Such program should include compliance officers dedicated to the business lines relevant to the FXPD functions.

7.2.3 The CBN will not designate as FXPD, any Authorized Dealer that is, or recently (within the last year) has been subject to financial market-related litigation or regulatory action or investigation that the CBN determines material or otherwise relevant to the potential FXPD. In making such determination, the CBN will consider, among other things, whether and how any such matters have been resolved or addressed and the Authorized Dealer’s history of such matters. In addition, with regard to registered FXPDs, the CBN may limit access to any or all operations, and may suspend or terminate the FXPD status of an Authorized Dealer, at anytime deems necessary, if it becomes the subject of, or is involved with, regulatory or legal proceedings that, in the judgment of the CBN, unfavourably impacts the FXPD relationship.

8.0 Reporting Obligations

8.1 FXPDs shall maintain such accounting and other records of their respective activities in the inter-bank FX markets as set forth by the CBN and other relevant regulatory authorities from time to time and render returns of trades executed with the CBN to the Bank.

8.2 All FXPDs shall submit a weekly report of FX transactions undertaken by them in the format advised by the CBN.

8.3 FXPDs shall advise CBN the Authorized Dealers for which they do not have PSR lines for and state the reasons why

9.0 Confidentiality
FXPDs shall treat all non-public information received from the CBN and, in particular, information relating to transactions and outstanding positions with the highest degree of confidentiality. FXPDs shall not share this confidential information with any third party unless required to do so by applicable law or a court order.

10.0 Sanctions for Non-Compliance
The CBN may take action against any FXPD that fails to comply with the standards set forth in these Guidelines. Such action will vary depending upon the type of non-compliance, but may range, for instance, from fines, suspension from any or all FX operations for a period of time to termination as an FXPD.

11.0 Resignation of an FXPD
An Authorized Dealer may resign from its status as an FXPD upon provision of thirty (30) days’ written notice of resignation to the CBN, specifying the effective date of the resignation, provided that the proposed effective date shall not fall within six (6) months of the start of its term as an FXPD.
Any Authorized Dealer that resigns from its registration as an FXPD shall be eligible to reapply only during the next annual CBN FXPD Registration Evaluation exercise and such application shall be treated as fresh.

12.0 Amendments to the Framework
The CBN may amend these Guidelines from time to time.

How The CBN Naira-Settled OTC FX Futures Market will Work
The proposed Naira-settled OTC FX Futures are Non-Deliverable Forwards. (i.e. a contract where parties agree to an exchange rate for a predetermined date in the future, without the obligation to deliver the underlying US Dollar (notional amount) on the maturity date i.e. the settlement date). On the maturity date, it will be assumed that both parties would have transacted at the Spot FX market rate. The party that would have suffered a loss with the Spot FX rate will be paid a settlement amount in Naira. This ensures that both parties enjoy the rate that had been guaranteed to each other through the OTC FX Futures.

Settlement Amount = (Difference between the Agreed Rate and Spot Rate on the Maturity Date) x Notional Contract Sum

The Spot FX Rate will be the FMDQ Spot FX Rate Benchmark – Nigerian Inter-Bank Foreign Exchange Fixing (NIFEX ) which is an independent fixing of the inter-bank FX market. The OTC FX Futures contract is an effective exchange rate management tool supported by a transparent price driven two-way quote (2WQ) market. The CBN will kick off the market by acting as the seller of OTC FX Futures contracts for defined tenors i.e. 1M, 2M, 3M, 6M, 9M, 12M, 18M and 24M. The USD/NGN OTC FX Futures contracts will provide the CBN the opportunity to kick-start the liquidity of risk management products available to end-users in the FMDQ OTC Markets. The contracts will assist the CBN in managing the volatility in the Spot FX market thereby promoting stability and entrenching confidence in the FX market.

All OTC FX Futures contracts will be trade-backed. Visible, invisible and investments qualify for OTC FX Futures.

Naira-settled OTC FX Futures Contracts Trade Flow
FMDQ will act as the ‘OTC FX Futures Exchange’ and its appointed agent, the Nigeria Inter-Bank Settlement System PLC (NIBSS) will clear the inter-bank OTC FX Futures i.e. collect initial and variation margins and settle the party to compensate on the maturity date.

Benefits of the Naira-settled OTC FX Futures

• The introduction of the OTC FX Futures market will encourage end-users to spread out their demand for Spot FX deals as they are now able to lock down the exchange rates for future FX requirements. This has the potential to eradicate the constant frontloading of FX requirements and minimize the disequilibrium in the Spot FX market. End-users will make better judgement as to the timing of accessing the Spot FX market.

• The availability of the OTC FX Futures will improve the business planning practice of end-users and FX sellers, as the future exchange rate is guaranteed through the OTC FX Futures.

• An end-user (buyer of USD) may consider it wiser to delay the purchase of its USD requirement in the Spot FX market if the Spot FX rate is higher than the OTC FX Futures rate of a particular tenor. The end-user will borrow USD or obtain trade finance and simultaneously hedge its exchange rate exposure with an attractive OTC FX Futures sold by the CBN. At maturity of the OTC FX Futures contract, the end-user will access the Spot FX market.

• The OTC FX Futures will be used to attract significant capital flows to the Nigerian fixed income and equity markets as returns can now be enhanced as FX exposures are hedged. Foreign Portfolio Investors (FPIs) will be able to use the OTC FX Futures for capital protection.

• The envisaged increase of supply of US Dollars due to the OTC FX Futures offered by the CBN in the Spot FX market will cause the Spot FX rate to moderate.

• OTC FX Futures which are non-deliverable are ideal for FPIs and even Foreign Direct Investors (FDIs). OTC FX Futures can be used when the investor wants to hedge the exchange rate risk without interest in buying outright Forwards which will necessitate liquidation of its investment to pay for outright Forwards.

• Banks will increase the liquidity in the OTC FX Futures market (by selling OTC FX Futures) if $/ Spot FX rate starts dropping. This may cause the Spot FX rate to drop further.

Settlement Analysis for Naira-settled OTC FX Futures Contracts

Day 1: June 15, 2016 – Bank A buys a 3-month OTC FX Futures contract from the CBN on the FMDQ OTC FX Futures Trading & Reporting System with the following details:

• Buyer: Bank A
• Seller: CBN
• Notional amount: $1,000,000.00
• OTC FX Futures Rate: $/N260.00
• Benchmark: NIFEX
• Maturity Date: September 14, 2016
• Initial Margin: 5% (payable by both parties)
• Maintenance Margin: 60% of initial margin
• Settlement Currency: Naira
The OTC FX Futures contract will be valued on a daily basis against the NIFEX to determine payment of variation margin amount.

Maturity Day: September 14, 2016 – NIFEX is $/N270.00
It is assumed that Bank A would have transacted (bought USD in the Spot FX market) at $/N270.00 which is higher than the OTC FX Futures contract rate of $/N260.00.
The Clearing House, NIBSS, will pay Bank A 10,000,000.00 (i.e. 10.00 [270.00-260.00] per USD) thereby bringing Bank A’s effective rate to $/N260.00 (270.00 assumed paid in buying USD less 10.00 received on the OTC FX Futures) which is the OTC FX Futures rate.
CBN is assumed to have transacted (sold USD in the Spot FX market) at $/N270.00 which is higher than the OTC FX Futures contract rate of $/260.00.
The Clearing House, NIBSS, will take 10,000,000.00 (i.e. 10.00 per USD) from the Margin Account of the CBN thereby bringing CBN’s effective rate to $/N260.00 (270.00 assumed received in selling USD less 10.00 paid out on the OTC FX Futures) which is the OTC FX Futures rate.
Both parties end up with $/N260.00 as the effective rate. This is the rate they guaranteed each other.
If NIFEX had been $/N250.00 on maturity date, Bank A would pay CBN N10.00 per USD.

Sokoto State Government has approved the construction of three major roads in Sokoto metropolis at the cost of over N1.5 billion.

Alhaji Mohammadu Mannir, the state’s Commissioner for Local Government and Community Development, stated this when he addressed journalists at the end of the State Executive Council meeting in Sokoto.

He said the state government found it necessary to approve the construction of the roads in order to reduce congestion and enhance socio-economic activities in the state.

“The Council has approved the reconstruction of the 3.5 kilometers Old Airport road at the cost of N325 million.

“Similarly, the government is spending the sum of N117 million on the construction of 3.4 kilometers NNPC Mega station to Dange road with completion period of four months.

“In the same vein, the Council also approved the reconstruction of 800 meters of Western bye-pass from Keystone Bank Junction on Abdullahi Fodio road at the cost of N109 million with completion period of four months,” he stated.

Also speaking, the state Commissioner of Information, Jeli Abdulkadir Abubakar, said government was spending N365 million to dualise Sultan Ibrahim Dasuki road and N55 million on the rehabilitation of Katsina Road with completion period of six months and four months respectively.

“Council approved N623 million for the purchase of 172 transformers to enhance power supply in the state. The transformers would be allocated to new and existing settlements to boost power supply,” he added.

According to him, government would ensure steady power supply to promote small scale industries.