In a significant development for Nigeria’s currency exchange landscape, the Nigerian National Petroleum Company Limited (NNPCL) has reported an alarming surge in crude oil theft incidents across the Niger Delta region. The region, which has long been a hotspot for illegal oil activities, witnessed 149 such incidents in just one week, raising concerns about the security and economic implications of this growing problem.
Among the incidents highlighted by NNPCL, an oil bunkering site was uncovered in Osuobodo, situated between two ANTAN flow stations south of the Oguta naval base in Imo State. What sets these criminal activities apart is the sophistication with which they are being carried out. Criminals have resorted to using CCTV cameras installed on trees to monitor the movements of security operatives in the vicinity. Additionally, mortar launchers and defense systems have been strategically placed at various locations to ward off any potential threats.
The discovery of this illicit operation became possible following a military intervention that was prompted by intelligence gathered during air surveillance activities carried out by various entities, including Target Energy, Tantita Security Services, Operation Delta Safe, and the Military, back in August.
In an alarming twist, the Naira’s black market rate has surged to as high as ₦1,210 per US Dollar, despite the Central Bank of Nigeria (CBN) announcing the unification of all segments of the foreign exchange market. This decision by the CBN, conveyed through a circular on June 14, 2023, was aimed at collapsing all foreign exchange windows into the Investors and Exporters (I&E) window.
The statement from the CBN read: “Abolishment of segmentation. All segments are now collapsed into the Investors and Exporters (I&E) window. Applications for medicals, school fees, BTA/PTA, and SMEs would continue to be processed through deposit money banks.”
Furthermore, the CBN reintroduced the “Willing Buyer, Willing Seller” model at the I&E Window, emphasizing that operations within this framework would be governed by the existing circular established for the window on April 21, 2017. All eligible transactions would be allowed access to foreign exchange at this window.
The operational rate for government-related transactions will now be based on the weighted average rate of the previous day’s executed transactions at the I&E window, calculated to two decimal places.
Other key changes include the proscription of trading limits on oversold FX positions, with the allowance to hedge short positions with OTC futures. Limits on overbought positions have been set to zero.
The CBN has also reintroduced order-based two-way quotes with a bid-ask spread of N1, and all transactions will be cleared by a Central Counter Party (CCP). The Order Book has been reintroduced to ensure transparent order handling and seamless execution of trades, with operational hours from 9 a.m. to 4 p.m. Nigeria time.
This series of changes signifies a significant shift in Nigeria’s foreign exchange market, signaling a more flexible, market-driven exchange rate system. The free-floating exchange rate system now allows market forces to determine the Naira’s external value, with minimal intervention from the central bank.
These developments mark a pivotal moment for Nigeria’s economy, as the nation adapts to new exchange rate dynamics and contends with the growing challenge of crude oil theft in its oil-rich Niger Delta region.