In bid to control dollar supply, Bankers’ Committee orders oil firms to sell FX to CBN alone

In a bid aimed at tightening regulatory controls in the Foreign Exchange (Forex) market and rein in dollar supply, the Bankers Committee has issued a directive to foreign and local oil and gas companies to stop selling petrodollar to the Nigerian National Petroleum Corporation (NNPC) and instead sell same to the Central Bank of Nigeria (CBN) henceforth.

The committee, a body of Deposit Money Bank (DMB) Chief Executive Officers and the CBN top management, has similarly come up with a lending and forex funding arrangement for ten key pharmaceutical companies to stimulate local drug manufacturing, a measure targeted at containing COVID-19 spread.

“Given that this crisis is first and foremost a public health crisis. We are paying particular attention to our health industry. As aforementioned, global supply chains have been disrupted including dominant drug supply channels from China and India. In fact, many countries have or are planning to ban export of drugs and medical supplies from their countries. Clearly, we have no choice but to produce these items locally.

“Thus the Committee has identified a few key local pharmaceutical companies who shall be granted Naira and FX funding facilities to support procurement of raw materials and equipment required to exponentially increase local drug production in Nigeria. These include but are not limited to Emzor, Fidson, GSK. May & Baker, Unique Pharma, Swiss Pharma, Neimeth, Sagar, Orange Drugs, Dana Pharma,” Godwin Emefiele, the central bank governor disclosed in Lagos Friday.

In a circular distributed at a conference held to examine the effects of the pandemic on the banking sector and the economy, Emefiele said “the committee further discussed the financial system’s implication and operationalisation of the policy measures earlier announced by the CBN including… improving FX supply to the CBN by directing all oil companies (International and domestic) and all related companies (oil service) to sell FX to CBN and no longer NNPC; Activation of the N1.5 trillion InfraCo Project for building critical infrastructure; additional N100 billion in healthcare loans to pharmaceutical companies, healthcare practitioners intending to expand/build capacity.”

The central bank governor further observed that “whether you are in the oil service industry or oil production – upstream, midstream or downstream, all oil related companies must sell their foreign exchange (forex) to the CBN and no longer to the NNPC, for the purpose of funding the importation of petroleum products, given the new policy on price modulation.”

The committee is set to synergise with correspondent banks, trading partners and trade creditors to work out the modalities of Letters of Credit (LC) towards building confidence in the banking system and the economy alike.

““It was resolved that the CBN and banking industry will collaborate at this critical moment with one coherent strategy to provide confidence to the customers, counterparties, the public and most importantly, put Nigeria first. “The industry has learnt lessons from previous crisis including the 2008 global financial crisis and oil price slump of 2016 which will be applicable and position and industry to better deal with this crisis. “The industry resolved that profit will not be the primary motive at this time. Rather, preserving confidence, financial stability and support for the economy will be the overriding objectives. “Engagements will be held with correspondent banks, trade creditors, trading partners regarding existing LC and trade commitments. The industry is committed to resolving these commitments in a comprehensive and orderly way. There will be transparent and open communication with all counterparties,” Mr Emefiele said.