Imminent Shortage Of Forex Threatens Yuletide Season

• Chinese Yuan won’t displace US dollar in global trade – Chukwu
• NRC begins talks with Total, Oando over rail cargo freight
• Shippers’ Council invites Turkish Embassy, Shipping firms over arms shipment

By Kenneth Jukpor & Iwakun Oyeniyi

There is a strong indication that importers will experience shortage of forex for imports during the forthcoming Yuletide, a development that could create some bottlenecks in buying of goods and services.

Following the Central Bank of Nigeria’s (CBN) injection of $545 million in the foreign exchange, FX, market to commercial banks, the Managing Director of Cowry Assets Management, Mr. Johnson Chukwu has stated that the funds would be insufficient and as such constitute a measure of threat to purchasing power.

According to the finance expert, the nation was moving into a season of boom for imports as merchants have started accumulating forex to enable them carry out massive imports for the yuletide celebrations.

Chukwu, who was speaking during an exclusive chat with MMS Plus said, “At a period like this where merchants are stocking for imports for the yuletide season, no amount of FX would be sufficient because they would continue to make demands. However, during lean periods that amount would be sufficient. When you consider that we are moving into the Christmas season, merchants are preparing to do so much buying hence the need to stock forex and any amount put out would be used up”.

Meanwhile he commended the CBN for its directive for commercial banks to open teller points for retail foreign exchange transactions, and electronic display boards in all their branches, noting that every serious bank should be able to meet the four-week period, which runs till October 13.

“I don’t think the implementation of the CBN’s forex policies would be a problem. It is not rocket science and there should be no complexities in executing them. The banks just need ample time to create the structure but most of the banks already have robust banking application softwares and implementation of the forex guidelines using these applications shouldn’t be a problem. I don’t see this as a major challenge to any serious bank”, Johnson Chukwu said.

On Monday last week, the apex bank had directed all deposit banks and authorized FX dealers to open a teller points for retail FX transactions, including buying and selling funds for basic transport allowance, BTA, as well as small and medium enterprises, SME, in all locations.

CBN Director, Banking Supervision, Ahmad Abdullahi, said regulatory sanctions to be meted out to erring DMBs include, but not limited to being barred from all future CBN foreign exchange interventions.

Meanwhile, CBN’s spokesperson, Isaac Okorafor, said a breakdown of the Bank’s latest FOREX intervention, showed the retail Secondary Market Intervention Sales, SMIS, receiving the largest intervention of $285 million.

Other components of the intervention include $100 million for wholesale SMIS, $90 million for Small and Medium Enterprises, SMEs window, and $70 million for ‘invisibles’ such as Basic Travel Allowances, BTA, tuition fees and medical payments.

The directive is to allow for easy access to foreign exchange by bank customers and other users.

Johnson Chukwu also allayed fears that the Chinese yuan was set to displace the US dollar following the International Monetary Fund’s (IMF) acceptance of the Chinese Yuan into its foreign reserve basket.

He posited that trading in international commodities like crude oil, gold and other precious metals and other commodities the US dollar would still remain the preferred currency because the Chinese yuan isn’t a free floating currency and wasn’t fully subject to market forces.

“The US dollar is still more of a free floating currency when compared to the Chinese yuan and the US still remains the largest economy in the world. Beyond the yuan and dollar as international currencies we still have the euro, Japanese yen and the British pound. I think the best we could see is for the US dollar and the Chinese yuan to be the prominent reserve currencies but I think that with what we are seeing in Europe, the euro could also be a strong reserve currency given ability of the European economies to recover from the crisis they had years back.  The fact that those economies have started growing as an economic bloc, if they sustain the common currency concept in Europe, I believe that we are going to have the euro as one of the contenders in serving as the global reserve currency.” He said.

In another development, the Nigerian Railway Corporation (NRC) has started talks with notable oil marketers in order to put to effective use the tank wagons acquired in 2012 and other facilities of the corporation.

This is believed to be one of the products of the relentless agitations and efforts by the Federal Government and stakeholders to decongest the Nigerian ports by keeping trucks off the roads and ensuring seamless transportation of goods and services as the Lagos District of the NRC has announced talks with Total Oil and Oando oil and gas companies.

The Lagos Railway District Manager (RDM), Engr. Jerry Oche while speaking with MMS Plus in Lagos, explained that the tank wagons are meant for liquid products which include petroleum products. He further stated that they were not abandoned as the general public insinuates but the corporation had begun serious discussions with major oil marketers in order to boost the revenue and improve the railway services.

According to Oche, “there are seven districts in the corporation and we use diesel and our purchase is central. So we have been using those tank wagons to move our own diesels. But for us to use them effectively, we need oil marketers to patronize us and most of them have their own trucks that do it for them. We have given them proposals for us to at least assist them in moving it from wharf to other zones like Kano so that their trucks can move it from NRC stations to the marketers’ various stations.”

He also stated that Oando which had been using the older wagons because they had a Memorandum of Understanding MoU with them sometimes in the past is also in talks to use the new tank wagons.

“We have been in discussion with Total and so many others. Even last week, Oando came for discussion on the use of these tank wagons. There are so many technicalities involved and that’s why we have not been using them for these major oil marketers but we have been using them by ourselves.” He said

When quizzed further, Mr. Oche explained that the Lagos district of NRC has been running an effective and consistent freight services over the years with patronage from notable firms which include: Inland Container Nigeria Limited (ICNL); Dangote Group of Companies; Flour Mills; Oando; Connect Railway Services; Eddie International, among many others.

The District Manager was confident that with a new patronage by oil marketers, NRC will take so many of the trucks off the roads and reduce the  carnages on the roads as well as make the trucks last longer.

“In fact we cannot meet the demand for our services especially in terms of freight in Lagos. I just had meetings with some people yesterday. They have 12,500 metric tons of fertilizers that they want to move from Lagos to Maiduguri and I told them that I can only move 1,600 metric tons in a month because of my capacity. So you can imagine how many months it will take me to move 12,500 if I move only 1,600 every month. We are only trying to mop up more wagons from other districts to see how we can meet up with their demands and they are not even the only ones” He said

Oche said the Lagos district is also running an interventionist freight services aside the passengers train at the Apapa port due to challenges posed by the ongoing road construction.

“We are working on the goods shed; we are still moving containers and other freights services to Ijoku from Apapa. As we speak now, we have a lot of clients, waiting for us to move for them. In fact, we are doing a scheduling, in that you need to book ahead before we can move your containers for you because of our capacity. This we have started since about two months ago.” He said.

Meanwhile, the Nigerian Shippers’ Council (NSC) has concluded plans to hold meetings with the multinational shipping companies and the officials of Turkey Embassy over the massive shipment of illegal arms from Turkey to Nigeria in recent times.

The meeting scheduled to hold next week seeks to make shipping lines exercise some level caution in shipment of imports into the country. Already, NSC and the Nigeria Customs Service (NCS) had held discussions on how to manage the influx of dangerous and prohibited goods into the country.

 

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