Petroleum sector deregulation: Naira depreciates by N14 to N334/$

 
 After two months of stability, the naira, yesterday, depreciated by N14 in the parallel market, in response to demand pressure occasioned by the deregulation of petroleum sector announced by the Federal Government, Wednesday. Buhari Buhari Meanwhile, shares of major petroleum products marketers recorded significant price appreciation on the Nigeria stock market in response to the announcement by the Federal Government. While announcing the deregulation of petroleum imports, Petroleum Products Pricing Regulatory Agency, PPPRA, said in order to meet the consumption demand of the country, importers will henceforth be permitted to source for their foreign exchange requirements from secondary sources.
This development, according to bureau de change operators, triggered a demand for dollars in the parallel market, leading to sharp depreciation of the naira. Hence, the parallel market exchange rate, which had been stable at N320 per dollar since end of February, rose to N334 per dollar at the close of business, yesterday. Confirming this development to Vanguard, President, Association of Bureau de Change Operators of Nigeria (ABCON), Alhaji Aminu Gwada, said the market today experienced increased demand due to the announcement that petrol importers should source dollars from secondary sources. The market has been stable all this while due to drastic reduction in import activities hence demand for dollars by importers reduced sharply. Those who had bought dollars when the rate was high and used it to import are having difficulty selling their goods, hence those who are still importing have reduced. But the announcement, yesterday, has changed the whole thing. More demand for petrol importation is expected in the market, meanwhile, there is no supply of dollar. Some people with dollar, especially those who bought when the exchange rate was high, feel the rate is too low for them to sell, hence they are withholding their dollars, waiting for the rate to go higher. Oil & gas shares gain 3.7% on stock market The shares of downstream oil marketing companies experienced significant price appreciation on the Nigeria Stock Exchange (NSE), yesterday, leading to a 3.7 percent increase in the Oil and Gas Index of the exchange. Trading results showed that the shares of Total Nigeria Plc, which led others in the oil and gas sector, appreciated by 6.11 per cent or N9.19 to close at N159.60 from N150.41, followed by Oando Plc, which rose by 5.03 per cent or N0.23 to close at N4.80 from N4.57 perc share. Forte Oil’s shares appreciated by five per cent or N10.50 to close at N220.50 from N210.00; Mobil Oil rose by 3.59 per cent or N5.57 to close at N160.66 from N155.09, while Conoil Plc inched up by 0.33 per cent or N0.06 to close at N18.16 from N18.10 per share. The price gains by the oil marketing firms facilitated the increase in market capitalisation of the NSE to rise by 0.91 percent or N80.7 billion to N8.9 trillion while the All Share Index (ASI) rose by 0.9 percent to close at 25,865.06 points In his reaction, Mr. Johnson Chukwu, Managing Director, Cowry Asset Management Limited, said the appreciation recorded by the companies was a reflection of the liberalisation of the sector, noting that major bottleneck in the sector has been removed. He noted that the abnormal profit in the sector would be removed in the next a couple of months as the market adjusts appropriately.  “The operators in the sector are likely to enjoy some reasonable level of profitability, because their volume will improve and they are no longer going to depend on government to give them allocations,” he said.