…Naira stable at N385
By Amechi Ogbonna
The Federal Government’s hope of building a robust foreign reserve brightened early yesterday as crude oil surged to $52 per barrel after Saudi Arabia and Russia, the world’s top two oil producers, agreed to extend output cuts for another nine months to March 2018 to help producing nations stabilise prices.
Saudi Energy Minister, Khalid al-Falih, and his Russian counterpart, Alexander Novak, said in a statement that they would “do whatever it takes” to reduce the inventory overhang.
“There has been a marked reduction to the inventories, but we’re not where we want to be in reaching the five-year average. We’ve come to the conclusion that the agreement needs to be extended,” Falih told a news conference in Beijing alongside Novak.
The Organisation of the Petroleum Exporting Countries (OPEC) meets in Vienna on May 25 to consider whether to extend output cuts agreed in December 2016 between OPEC and 11 non-member countries, including Russia.
Benchmark Brent oil prices rose above $52.23 per barrel as the market had previously expected the cuts to be extended by as little as six months.
With a nine-month extension now, the minimum expectation for the OPEC meeting, the group has a lot of work to do to persuade its members and some non-OPEC producers to back the move.
OPEC member, Iraq, whose production is growing fast, has said it would support renewing the deal only for six months.
Non-OPEC member, Kazakhstan, said on Monday it would struggle to join any new deal on the old terms, as its own output was set to jump.
Oman said it fully supports the idea of a nine-month extension as OPEC seeks to reduce global oil inventories to their five-year average.
Stockpiles are hovering near record highs, partly because of rising production in the United States, which is not part of the existing deal.
Meanwhile, the naira remained stable at the parallel market on Monday, despite a continuous fall in the country’s foreign exchange reserves. Foreign exchange reserves, which witnessed a boost in 2017 due to the rise in crude oil prices, has been on a free-fall for five consecutive days.
CBN figures available on Monday, the reserves stood at $30,911,121,646, falling from $30,988,403,724, only five days earlier.
Despite the fall, the naira has consistently traded around N386 to the greenback at the parallel market, while the British pound and euro also traded at N495 and N420 respectively.
Speaking on the activities ahead for the Nigerian naira, Jameel Ahmad, FXTM vice-president of market research, said the local currency will be affected by OPEC decisions and GDP numbers later this week.
“It’s going to be a busy period for the Nigerian naira, with the OPEC meeting just two weeks away and important economic releases scheduled for next week,” Ahmad said.
“The latest inflation data is scheduled for release on Tuesday, where participants will be hoping that inflation readings have now reached the ‘higher level’ after the cost of living has increased in recent times following the prolonged depression in the naira.
“The main event, however, will most probably be the GDP release scheduled for the end of the week.”