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U.S. to press Nigeria on foreign exchange rate flexibility

29 March 2016 Comments (0) Africa, Business, Latest Updates from Reuters

WASHINGTON (Reuters) – The United States said on Monday it would press Nigeria in talks this week to adopt a more flexible foreign exchange rate to boost growth and investment in Africa’s largest economy.

U.S. Assistant Secretary of State for Africa, Linda Thomas-Greenfield, told an audience at the U.S. Institute of Peace that Nigeria should ensure that the value of the naira currency versus the U.S. dollar was “more realistic.”

“While most people complain about the possibility of there being a devaluation, people are already operating on a devalued currency, and the only people who are not, are people who are doing it officially,” Thomas-Greenfield said.

“Our recommendation is, and we will have discussions about it … that they should look at the exchange rate and try to make the exchange rate more realistic to what the value of the naira is to the dollar,” she added.

She spoke before talks in Washington to be launched by Secretary of State John Kerry on Wednesday and which will focus on Nigeria’s economy, security and development.

Nigeria faces its worst economic crisis in decades as the falling price of oil has slashed revenues, prompting the central bank to peg the currency and introduce curbs to protect foreign exchange reserves, which have fallen to an 11-year low.

Some members of Nigeria’s central bank monetary policy committee have said the naira should be devalued.

Thomas-Greenfield said the parallel currency market in Nigeria was “alive and well,” warning that a rigid exchange rate, capital controls and import bans could undermine President Muhammadu Buhari’s efforts to expand economic growth and fight corruption. Buhari has rejected the idea of devaluing the naira.

“Capital controls that limit access to foreign exchange rewards insiders and undermines the stated goals of Nigeria to increase domestic production because both Nigerian and expat investors alike tell us many businesses are unable to obtain the capital to purchase badly needed intermediate goods,” she said.

The naira trades some 40 percent below the official rate on the black market versus the dollar. The central bank last year pegged the exchange rate to curb speculative demand for the dollar and conserve foreign exchange reserves after it restricted access to hard currency for imports of certain items, frustrating businesses.

The International Monetary Fund called on Nigeria to lift the curbs and let the naira reflect market forces more closely, as the restrictions have significantly affected the private sector.

 

 

(Reporting by Lesley Wroughton; Editing by Tom Brown and Peter Cooney)

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Exxon Mobil in talks to buy into Eni’s giant Mozambique gas field

25 March 2016 Comments (0) Africa, Business, Latest Updates from Reuters

MILAN/LONDON (Reuters) – Exxon Mobil is in talks to buy a stake of around 15 percent in Italian oil major Eni’s giant Area 4 gas field in Mozambique, two sources familiar with the matter said. Exxon is seen as a front-runner to buy into Eni’s gas development and this would be the U.S. firm’s first big acquisition since the oil price collapse. Area 4, in which Eni holds a 50 percent operating stake, is located in Mozambique’s Rovuma Basin, where gas in place amounts to some 85 trillion cubic feet — one of the richest gas discoveries of recent times.It will feed a series of onshore LNG export plants, mainly supplying Asian markets. ENI said previously it aimed to sell around 15 percent of the field.

Two sources said Exxon was in talks to buy a stake of that size, one of whom said Eni was also negotiating with other firms. “I am upbeat a deal will be reached fairly soon,” the second source said. A banking source familiar with the matter said Exxon was interested in buying Eni’s whole 50 percent stake, while a fourth source said Exxon was looking at unspecified stakes in all Eni holdings up for sale, also including assets in Egypt and elsewhere in Africa. Exxon and Eni declined to comment. Eni, a front-runner among the majors in finding reserves, said earlier this month it would sell 7 billion euros of assets to 2019, most from farming down prize acreage. But it aims to hang on to operatorship of the fields. “The disposals will be mainly through the dilution of our stakes in recent and material discoveries,” CEO Claudio Descalzi said earlier this month, picking out Mozambique and Egypt as prime candidates. Descalzi said the group was not far from disposal in Mozambique, where it was holding talks with “a lot of interested parties”. Sales talks have got bogged down in recent years after crashing oil and gas prices drove a wedge between buyers’ and sellers’ price expectations, industry sources have said. Eni has been in talks with several buyers including China’s Huadian Corp, sources have said. The huge productive capacity of Eni’s Mozambique acreage attracted peak valuations two years ago, when Eni sold 20 percent to China’s CNPC for $4.2 billion, amid strong competition for reserves.

 

(Reporting by Oleg Vukmanovic and Stephen Jewkes in Milan, Ron Bousso and Freya Berry in London, Terry Wade in Houston; editing by John Stonestreet)

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South Africa assets soften, investors risk-wary ahead of long weekend

25 March 2016 Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – South African assets ended a shortened trading week on the backfoot on Thursday, with expectations of higher U.S. interest rates hurting the rand and investors taking no chances before the four-day Easter weekend.

In equities, shares in mobile networks operator MTN blazed the downhill trail, sliding over 10 percent as they traded ex-dividend and on the emergence of new complications in its efforts to cut the size of a hefty fine it faces in Nigeria.

Nigeria’s parliament has launched a probe into whether the telecoms regulator can reduce a fine slapped on MTN for missing a deadline to disconnect unregistered SIM card users, a lawmaker said on Thursday.

The move might complicate efforts by Africa’s biggest cell phone operator to reduce the fine, which had originally amounted to $5.2 billion and was cut by Nigeria’s telecoms regulator to $3.9 billion in December.

Overall, investor appetite for South African assets was dimmed by the prospect of getting caught out ahead of a four-day holiday weekend.

“People don’t want to go into the long weekend holding the rand. There is risk aversion all round but South Africa, including equities, has been hit quite badly,” said Bart Stemmet, an analyst at NKC African Economics.

The benchmark Top-40 index slipped 0.57 percent to 46,349.01 while the wider All-share index declined 0.47 percent to 52,323.78. It was the third straight session that South African stocks ended in the red.

Trade volumes were thinner than usual with around 211 million shares changing hands.

At 1520 GMT, the rand traded at 15.5650 per dollar dollar, 1.33 percent weaker from Wednesday’s New York close of 15.3600. Government bonds were mixed, with the yield for the benchmark instrument due in 2026 flat at 9.37 percent.

 

(Reporting by Ed Stoddard and Olivia Kumwenda-Mtambo; Editing by Tom Heneghan)

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Egypt bank CEOs purged as central bank sets 9-year term limit

24 March 2016 Comments (0) Business, Latest Updates from Reuters, Middle East

CAIRO (Reuters) – Egypt’s central bank put a time limit on the tenures of CEOs of commercial lenders on Thursday, launching a purge of several top executives that puts it on a likely collision course with the country’s banking sector.

To help modernise the sector and “inject new blood”, chief executives of public and private banks as well as the heads of foreign banks operating in Egypt would have to step down after nine years, the central bank said in a statement.

The decision is the latest surprise by Tarek Amer, a central bank governor who has moved aggressively to bring dollars into a banking system starved of foreign currency and slow the rapid fall of the Egyptian pound on the black market.

The black market rate hovered at just below 10 Egyptian pounds to the dollar on Thursday compared with the official rate of 8.78 pounds per dollar.

Amer surprised markets in recent weeks by removing dollar deposit and withdrawal caps, devaluing the currency by 13 percent in a single day, declaring a more flexible exchange rate and injecting hundreds of millions of dollars despite critically low reserves.

The decision to cap CEO terms caused consternation among bankers who described it as an unexpected overreach into the private sector’s affairs.

“It’s going to have very bad consequences,” one senior finance official, who asked to be unnamed, said.

The rule will force eight top executives to resign their positions, a senior banking official told Reuters. They include Commercial International Bank’s Hisham Ezz al-Arab and Arab African International Bank’s Hassan Abdalla.

Shares in CIB were down 1.7 percent at 1126 GMT.

There was no immediate comments from the country’s leading banks on the measure, which drew criticism from Hany Tawik, head of Egypt Private Equity Association, a group that represents business community interests.

“This is interference in an essential right of the general assembly to appoint someone that is best suited for them. It’s my right as a shareholder to choose the head of the bank,” he said.

Others such as Angus Blair, the chief operating officer of Pharos Holding, said the move was positive.

“I like the new rule for bank CEOs since it should foster younger talent and help improve institutionalisation.”

The central bank’s foreign reserves have tumbled to $16.5 billion in February from around $36 billion before the 2011 uprising that ousted long-time leader Hosni Mubarak.

His fall from power and the political unrest that followed drove away tourists and foreign investors that were key sources of foreign currency.

Around 40 public and private sector banks operate in Egypt.

Both consecutive and non-consecutive CEO terms will count towards the nine-year limit, the central bank said.

 

(Reporting by Ehab Farouk; Additional reporting by Mostafa Hashem; Writing by Eric Knecht; Editing by Tom Heneghan)

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IMF to resume Malawi loan programme

24 March 2016 Comments (0) Africa, Business, Latest Updates from Reuters

LILONGWE (Reuters) – The International Monetary Fund will resume Malawi’s $150 million extended facility programme which was suspended last year after a scandal involving abuse of state money, the country’s finance minister said on Thursday.

“The IMF has given us a green-light to the resumption of the programme which allows them to disburse about $30 million of the remainder of the total $150 million,” Goodall Gondwe told Reuters.

“The advice we get from the IMF is very important because they provide a very valuable yardstick of how we can manage our economy and we will continue doing well especially on public finance management so that we are not off track again.”

The IMF had suspended the programme following a scandal in which senior government officials siphoned millions of dollars from state coffers. Other international donors, led by Malawi’s former colonial ruler, Britain, also halted direct aid to the southern African nation over the scandal.

IMF Mission Chief Oral Williams said in a statement on Wednesday that Malawi had demonstrated a concerted effort to put the programme back on track, including improvements in public financial management.

Malawi has struggled to grow its economy due to declining export earnings from tobacco and in the absence of aid, which had previously accounted for 40 percent of its budget.

The IMF said it expects Malawi’s economy to grow by 3 to 4 percent this year after expanding by 3 percent in 2015.

But growth may be weather-dependent the Fund said, after an El Nino weather pattern triggered drought and heatwaves, threatening the staple maize and other crops.

 

(Reporting by Mabvuto Banda; Editing by Catherine Evans)

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Egypt’s GASC says seeks wheat for April 25-May 5 shipment

24 March 2016 Comments (0) Business, Latest Updates from Reuters, Middle East

ABU DHABI (Reuters) – Egypt’s General Authority for Supply Commodities (GASC) set a tender on Wednesday to buy an unspecified amount of wheat from global suppliers for shipment from April 25-May 5.

Mamdouh Abdel Fattah, vice chairman of GASC, said the authority is seeking to buy cargoes of soft and/or milling wheat from the United States, Canada, Australia, France, Germany, Poland, Argentina, Russia, Kazakhstan, Ukraine and Romania.

Tenders should reach GASC by noon local time (1000 GMT) on Thursday. The results should come out after 3:30 p.m. local time on the same day. Wheat bids should be free-on-board, with a separate freight offer.

In its most recent tender on March 16, GASC bought 240,000 tonnes of wheat from France, Romania and Ukraine for April 15-24 shipment.

GASC is seeking to buy 55,000-to-60,000-tonne cargoes of the following:

U.S. North Pacific soft white wheat;

U.S. soft red winter wheat;

Russian milling wheat;

Ukrainian milling wheat, and

Australian standard white wheat.

 

GASC is also seeking 60,000-tonne cargoes of the following:

Canadian soft wheat;

French milling wheat;

German milling wheat;

Argentine bread wheat;

Polish milling wheat;

Kazakh milling wheat, and

Romanian milling wheat.

 

(Reporting by Maha El Dahan in Abu Dhabi, writing by Michael Hirtzer in Chicago; Editing by Chris Reese and Marguerita Choy)

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Egypt supply minister says close to wiping out graft in wheat sector

23 March 2016 Comments (0) Business, Latest Updates from Reuters, Middle East

CAIRO (Reuters) – Egypt’s supply minister said the world’s top wheat buyer is close to eradicating graft in its strategic sector, defending the country’s management of the system against criticisms that it is vulnerable to corruption.

He said authorities distribute 6 billion loaves of bread to citizens each month and that a smart card system rolled out in 2014 had virtually ended graft in the system.

Officials, traders and bakers who spoke to Reuters for a March 15 story on the wheat sector said reforms, including the smart card system, had failed and ended up fuelling more corruption.

Challenging the Reuters story, Supply Minister Khaled Hanafi repeated his assertions that the system has saved millions of dollars in bread subsidies, reducing imports, and ended shortages that once prompted long queues outside bakeries across the country.

“We have a system now that counts every single loaf of bread consumed,” he said in an interview.

A Reuters spokeswoman said the news agency stood by its story.

Wheat has become a key issue in recent months because the stability of Egypt’s supply chain has been threatened by an agricultural quarantine official’s zero-tolerance policy on ergot, a common fungus.

The policy caused a mass boycott of state wheat tenders. The quarantine official was removed from his position.

In 2014, President Abdel Fattah al-Sisi’s government rolled out a system of smart cards designed to stop unscrupulous bakeries selling government-subsidised flour on the black market.

Corruption had been close to eliminated, Hanafi said in the interview, because the smart card system is effective and allows the ministry to monitor flows of bread.

The stakes are high for Sisi, who has promised to end graft, including irregularities in the wheat industry. Wheat shortages have sparked riots in the past. When Egyptians revolted against autocrat Hosni Mubarak in 2011 one of their most potent chants was “Bread, freedom and social justice.”

The bread subsidy programme, which feeds tens of millions of poor Egyptians, is central to avoiding unrest.

Under the smart card programme, each family is provided with a plastic card enabling it to buy five small flat loaves of bread per family member a day.

Internal statistics produced by the Ministry of Supply and reviewed by Reuters suggest the problems with the smart card system were considerable.

Hanafi says the system is almost foolproof and that his ministry has kept corruption to a minimum, in contrast to the past, when he says 50 percent of Egypt’s flour supply was stolen.

“We are serving 80 million Egyptians. And we are serving 6 billion loaves of bread per month,” Hanafi said.”Any fraction, any tiny small fraction in absolute figures, could be relatively large. But as a percent it is nothing. It is less than even the normal level of error that exists.”

 

(By Michael Georgy. Editing by Simon Robinson, Veronica Brown and Dale Hudson)

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Algeria’s Sonatrach awards $100 mil pipe deal to foreign firms

23 March 2016 Comments (0) Business, Latest Updates from Reuters, Middle East

ALGIERS (Reuters) – Algeria’s state energy firm Sonatrach has awarded a $100 million contract to supply oil and gas drilling tubes to five foreign firms as part of its drive to increase production, a document seen by Reuters on Tuesday showed.

The companies named in the Sonatrach document are Germany’s CCC Machinery, Dutch firm Van Leeuwen, Vallourec Tubes France, Kurvers Piping France, and High Sealed&Coupled from China.

OPEC member Algeria, which has been hurt by a 70 percent fall in oil prices since mid-2014, is campaigning for more foreign investment to increase oil and gas production to sustain exports and meet growing local demand.

But recent bidding rounds have failed to attract much interest from foreign oil producers.

Sonatrach also said on Tuesday it had made a new oil find with Thailand’s PTTEP and China’s CNOOC following successful drilling in the Hassi Bir Rekaiz area in Algeria.

“This represents 20,000 barrels per day,” a Sonatrach source told Reuters.

Sonatrach holds a 51 percent stake in the project, with the other two companies owning 24.5 percent each.

The state energy company is focusing on developing areas around existing fields and hiking production at its mature fields. It will also invest $3.2 billion over four years to increase pipeline capacity as natural gas output rises from new and existing fields.

 

(By Lamine Chikhi. Editing by Patrick Markey and Susan Thomas)

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Nigeria central bank raises benchmark interest rate in surprise move

22 March 2016 Comments (0) Africa, Business, Latest Updates from Reuters

ABUJA (Reuters) – Nigeria’s central bank unexpectedly raised the benchmark interest rate to 12 percent from 11 percent on Tuesday, changing gears to curb galloping inflation after cutting the rate only four months ago.

The bank also raised the cash reserve ratio (CRR) for commercial banks to 22.5 percent from 20 percent and it held the liquidity ratio at 30 percent, Governor Godwin Emefiele said.

Emefiele said after a meeting of its monetary policy committee that the central bank would keep the naira foreign exchange rate stable despite a sharp fall of the currency on the parallel market due to shortages of dollars.

Africa’s biggest economy is going through its worst economic crisis in years due to a slump in crude prices. Oil exports account for around 70 percent of national income.

Emefiele attributed the rate hike to the state of the economy and rising annual inflation, which hit 11.4 percent in February, a three-and-a-half year high and well above the central bank’s target band of 6 to 9 percent.

“The committee noted that excess liquidity in the banking system was contributing to the current pressure in the foreign exchange market with a strong path through to consumer prices,” he told reporters.

But some analysts saw the tightening of monetary policies as a signal that the bank would devalue the naira eventually. The currency has fallen some 40 percent on the parallel market as import firms struggle to get dollars from official channels.

“This definitely reflects a departure from policy in recent months and we interpret this as a leading indicator for a possible naira devaluation later down the line,” said Cobus de Hart, analyst at NKC African Economics.

“This may signal that the central bank is starting to lean towards tightening policy in anticipation of higher inflation following a devaluation,” he said.

 

WEAK INVESTOR CONFIDENCE

Eighteen of 20 analysts polled by Reuters had expected the central bank to hold interest rates steady at 11 percent.

Alan Cameron, an economist at brokerage Exotix, said the central bank had raised the benchmark rate as the previous loosening of monetary policy had not given a fillip to the economy.

“I think there is a realisation the liquidity they have been injecting wasn’t turning into overall lending in the economy because the confidence is not very high, so it made sense to withdraw that.”

Emefiele also called for swift approval of the 2016 budget, which on Tuesday was put on the agenda of the upper house of parliament for debate.

 

(By Camillus Eboh. Reporting by Ulf Laessing, Alexis Akwagyiram, Chijioke Ohuoha and Oludare Mayowa; Writing by Alexis Akwagyiram and Ulf Laessing; Editing by Gareth Jones)

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Libya joins Iran in snubbing oil freeze

22 March 2016 Comments (0) Business, Latest Updates from Reuters, Middle East

LONDON (Reuters) – Libya does not plan to attend an April 17 meeting of oil producers about freezing supply to support prices, a Libyan OPEC delegate said on Tuesday, joining fellow OPEC member Iran in snubbing the initiative.

The absence of the two OPEC members would limit the impact of any freeze by producers from the Organization of the Petroleum Exporting Countries along with Russia, even though Libya’s output has been curtailed for many months by unrest and the chance of it increasing production swiftly is low.

“We are not going,” the Libyan delegate said, referring to the meeting in Doha next month. “Clearly, they have to allow us to go back to our production when the security situation in the country improves.”

Libya has made its wish to return to pre-conflict oil production rates clear since four countries reached a preliminary deal on freezing output in February.

Other producers understand this, the delegate said. “They appreciate the situation we are in.”

Qatar, which has been organising the meeting, has invited all 13 OPEC members and major outside producers. The talks are expected to widen February’s initial output freeze deal by Qatar, Venezuela and Saudi Arabia, plus non-OPEC Russia.

The initiative has supported a rally in oil prices, which were about $41 a barrel on Tuesday, up from a 12-year low near $27 in January, despite doubts over whether the deal is enough to tackle excess supply in the market.

Iran has yet to say whether it will attend the meeting. But Iranian officials have made clear Tehran will not freeze output as it wants to raise exports following the lifting of Western sanctions in January.

The potential volume Libya and Iran could add to the market is significant. But conflict in Libya has slowed output to around 400,000 barrels per day since 2014, a fraction of the 1.6 million bpd it pumped before the 2011 civil war.

Iran produced about 2.9 million bpd in January and officials are talking about adding a further 500,000 bpd to exports. So far though, Iran has sold only modest volumes to Europe after sanctions were removed.

 

(By Alex Lawler. Editing by David Clarke)

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