Crude oil prices rose after the Federal Reserve announced it plans to keep United States interest rates near a record low through 2014 and a report showed durable goods orders in the world’s biggest crude-consuming country increased.
Crude oil for March delivery rose $1.29, or 1.3 per cent, to $100.69 a barrel at 10:26 a.m. on the New York Mercantile Exchange. Prices touched $101.39, the highest level since January 19. Futures are up 15 per cent in the past year.
Brent oil for March settlement climbed $1.53, or 1.4 per cent, to $111.34 a barrel on the ICE Futures Europe exchange in London.
Futures advanced above $100 a barrel as Fed Chairman Ben S. Bernanke said on Wednesday that policy makers are considering more bond purchases to boost growth after extending the pledge to maintain interest rates. Bookings for goods meant to last at least three years climbed three per cent in December, data from the Commerce Department showed.
“Between Bernanke and the durable goods orders, people are starting to feel a little bullish about the economy,” said Michael Lynch, president of Strategic Energy and Economic Research in Winchester, Massachusetts. “The durable goods number points to increasing economic growth and fuel demand.”
The Federal Open Market Committee had previously said the benchmark rate would stay low through mid-2013. Fed officials also lowered their projections for economic expansion and inflation for this year and next.
Oil in New York has traded in a $6.34 range for the past month with futures staying between $97.40 and $103.74.
“Earlier this week we wanted to test the bottom-end of the range,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut.
“After Bernanke made his statement on Wednesday, the shorts got cold feet. Now we’re back in the middle of the range and are looking for a catalyst to launch another assault at the upper end.”
U.S. durable goods orders were forecast to climb two per cent last month, based on the median of estimates by 78 economists surveyed by Bloomberg News. Another report showed jobless claims increased last week. New home sales last month probably rose to the highest level in a year, another report may show.
The index of U.S. leading indicators rose in December for a third month, indicating the economy will keep growing in early 2012. The Conference Board’s gauge of the outlook for the next three to six months increased 0.4 per cent after climbing 0.2 per cent in November, the New York-based group said.
The median forecast of 44 economists surveyed by Bloomberg News called for a gain of 0.7 per cent.
“Negative economic sentiment in the U.S. has receded,” McGillian said.
Talks on a debt swap to avert a Greek default resumed, as international policy makers argue over the mounting cost of the rescue. European finance ministers have insisted bondholders take bigger losses on their Greek debt.
Oil prices have shifted over the last two years on the latest developments in the European debt crisis and the projected impact it would have on energy demand. The crisis that began in Greece has spread to Ireland, Portugal, Italy and Spain and threatens economic growth in the region.
Lawmakers Want CBN To Halt Naira Devaluation
The House of Representatives has asked the Central Bank of Nigeria (CBN), to urgently put in place a policy to check further devaluation of the naira to the United States dollar and other international legal tenders.
The House decried that while the Nigerian currency was losing value, others in Africa were appreciating.
At the plenary on Wednesday, the House unanimously adopted a motion moved by the Deputy Chairman of the Committee on Pensions, Mr Bamidele Salam, which warned the CBN of the implications of further devaluing the naira.
The motion was titled, ‘Matter of urgent public importance on the need for the Central Bank of Nigeria to urgently put in place monetary policies to stop the free fall of the naira against the dollar and other international legal tenders’.
Salam recalled that the CBN governor, Godwin Emefiele, while addressing the Bankers’ Committee at a summit on the economy in Lagos earlier in February, informed the committee about the naira devaluation against the dollar.
The lawmaker also quoted Emefiele as saying at the summit that the official exchange rate stood at N410 to the dollar.
“That is 7.6 per cent weaker than the rate of N379 published on the central bank’s website,” Salam noted.
According to the lawmaker, while the value of the naira relative to the dollar had declined by nine per cent in the last six months, the South African rand and Ghanaian cedi had appreciated by 11.4 per cent and one per cent, respectively.
Salam also recalled that the CBN adopted multiple exchange rates in 2020, in a bid to avoid an outright devaluation.
He noted that the official rate used as a basis for budget preparation and other official transactions differed from a closely controlled exchange rate for investors and exporters known as the Nigerian Autonomous Foreign Exchange Rate Fixing Methodology.
He stressed that the naira had traded in a tight range between N400 and N410, while the NAFEX rate was different from the parallel market, considered illegal by the CBN, where the naira closed at 502.
Salam said, “The House is concerned that devaluation is likely to cause inflation because imports will be more expensive any imported goods or raw material will increase in price; aggregate demand increases, causing demand-pull inflation. Firms/exporters have less incentive to cut costs because they can rely on the devaluation to improve competitiveness.
”The concern is that the long-term devaluation may lead to lower productivity because of the decline in incentives.
”The House is further concerned that devaluation of the naira makes it more difficult for Nigerian youths especially in the IT sector, whose businesses are online and must necessarily transact businesses in the US dollars.
“It also reduces real wages. In a period of low wage growth, a devaluation that causes rising import prices will make consumers feel worse off “.
Four West African Countries To Buy Nigeria’s Unutilised Electricity
Four West African countries, Niger, Togo, Benin and Burkina Faso, are collaborating to buy the unutilised power produced in Nigeria.
The Chairman of the Executive Board of the West African Power Pool (WAPP), Sule Abdulaziz, disclosed this at the WAPP meeting on the North core project in Abuja, on Wednesday.
Abdulaziz, who is also the acting Managing Director of the Transmission Company of Nigeria (TCN), said the four countries were collaborating to make the power purchase from Nigeria through the North core Power Transmission Line currently being built.
He explained, “The power we will be selling is the power that is not needed in Nigeria.
“The electricity generators that are going to supply power to this transmission line are going to generate that power specifically for this project. So, it is unutilised power”.
He said Nigeria was expecting new generators to participate in the energy export for the 875km 330KV Northcore transmission line from Nigeria through Niger, Togo, Benin to Burkina Faso.
Abdulaziz said, “In addition, there are some communities that are under the line route, about 611 of them, which will be getting power so that there won’t be just a transmission line passing without impact”.
The WAPP chairman noted that the project, funded by World Bank, French Development Council and the African Development Bank, had recorded progress, adding that the energy ministers would be addressing security issues for the project at another meeting in Abuja.
He said, “Nigeria has the greatest advantage among these countries because the electricity is going to be exported from Nigerian Gencos (generation companies).
“So, from that, the revenue is going to be enhanced and a lot of people will be employed in Nigeria”.
The Secretary-General, WAPP, Siengui Appolinaire-Ki, said the cost of the project was about $570 million, adding that part of the investment in each country would be funded by that particular nation.
According to him, the countries in the partnership, including Nigeria, are also being supported by donors.
He said the funding agreement was ready as partner countries were awaiting the disbursements.
Appolinaire-Ki, however, said the donor agencies had said they needed a Power Purchase Agreement between the buying and the selling countries to be executed before releasing the fund.
Reps Probe N275bn Agric Loans Under Yar’Adua, Jonathan, Buhari
The House of Representatives has resolved to investigate the disbursement of loans and credit facilities by the Federal Government in the agriculture sector since 2009.
The period under review covers the administrations of the late Umaru Yar’Adua, Goodluck Jonathan as well as the present President, Muhammadu Buhari.
The resolution was sequel to the unanimous adoption of a motion moved by Hon. Chike Okafor at the plenary last Wednesday, titled ‘Need to investigate disbursements of all agricultural loans/credit facilities to farmers from 2009 to date to enhance national food security’.
Okafor said, from 2009 to date, the Federal Government had approved the disbursement of funds to farmers in various schemes to the tune of over N275billion, ranging from Commercial Agricultural Credit Scheme to the Nigeria Incentive-Based Risk Sharing System for Agricultural Lending, to help farmers improve agricultural production and guarantee food security in Nigeria.
The lawmaker also noted that apart from increasing food supply, the schemes were to grant agricultural loans to large and small-scale commercial farmers to lower the prices of agricultural produce, generate employment and increase foreign exchange earnings.
He said, “The House is aware that since the approval, most farmers have not been able to access the loans due to stringent requirements being demanded by banks from prospective borrowers and the alleged siphoning of over N105billion meant for farmers by management of NIRSAL.
“The House is concerned that food production has not attained the expected level, despite the approval of over N275billion facilities to farmers.
“The House is worried that the projected diversification of the economy from oil production to agricultural production and increase in agricultural output, food supply and promoting low food inflation will not be achieved if farmers are unable to access loans meant to increase agricultural production”.
Adopting the motion, the House resolved to mandate the Committee on Banking and Currency to “investigate disbursements and compliance of all agricultural loans/credit facilities to farmers from 2009 to date to enhance national food security in the country”.
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