Analysts at CSL Stockbrokers Limited, have advised the federal government to end the fuel subsidy, which currently makes up a significant proportion of Nigeria’s import bill. They reasoned that removal of the subbing will help reduce demand for dollars and reduce pressure in the foreign exchange market.
Besides’ they argued that ending the fuel subsidy regime would save the government about N1.2 trillion in expenditure in 2016, the analysts also revealed. The naira has been under pressure in the past few weeks as low crude oil prices continue to hit Nigeria’s external reserves. Presently, the nation’s currency goes for about N270/$1 on the parallel market.
However, a report by the Lagos-based investment and research firm obtained by THISDAY, also pointed out that beyond the short-term, ending the fuel subsidy regime would be positive for the currency, saying that it would likely stimulate refining of domestically- produced oil, which may then substitute imports of petroleum.
“Experience of other emerging markets suggests that removal of fuel subsidies positively impacts the balance of payments. This said, our pre-existing base case is that some currency depreciation will be necessary on a six to nine month time horizon to keep the economy stable and the external accounts on a sustainable footing,” the report stated.
Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, had stated that the federal government would begin a gradual withdrawal of the fuel subsidy in 2016. The comment came months after President Muhammadu Buhari ruled out the need for removal. Kachikwu, citing a shortage of funds, had said the subsidy put at over N1 trillion ($5billion) in 2015 was no longer sustainable.
Crude oil (Brent) which has been hovering around $37.3/bbl, is already below the pessimistic oil price benchmark of $38/bbl assumed in the 2016 budget.
Nigeria’s long-standing fuel subsidies were partially removed in 2012 and consequently, the pump price of petrol was increased to N97 per litre from N65 per litre. This was reduced to N87 per litre earlier this year due to the drastic fall in oil prices but is expected to revert to N97 per litre following subsidy removal during 2016, with full removal due in 2017. The country has however witnessed severe fuel shortages for most of this year. Despite measures by the Nigerian National Petroleum Corporation (NNPC) to ensure adequate petroleum supply nationwide, long queues have persisted in petrol stations across major cities with the result that petrol has been selling for significantly higher than the N87 per litre. The scarcity of petrol has largely been blamed on delayed payment of subsidy claims.
To this end, CSL Stockbrokers argued that the removal of the subsidy was a critical free-market reform, adding that it would be beneficial to the economy and to government finances, “though it will almost certainly put pressure on consumers and small businesses.”
“Apart from augmenting government revenues, the removal of the subsidy removes disincentives to refine petroleum product, and may improve the balance of payments through import substitution. It is widely acknowledged that the subsidy system was open to abuse and that only a relatively small number benefited from it as petroleum has always sold for higher than the pump price in most other states outside Lagos.
“We, however, believe there still remains some political risk in implementing the change. The subsidy on petroleum is widely seen as a form of social security in a country where health and social security provision is limited. Its partial removal provoked negative reactions and street demonstrations in 2012.
“The cost of the subsidy is put at over N1trillion in 2015, in comparison with the N5 trillion budget for 2015 (20% of the 2015 budget). Removing the subsidy should save the government about N1.2trillion in expenditure in 2016. However, it should be noted that, as we state above, it is widely believed that the main beneficiaries of the fuel subsidy were a relatively small number of intermediaries, so eliminating their profits benefits the majority. Therefore, perhaps the most positive impact of this reform will be to introduce clarity into the complicated world of petroleum pricing, and advance this government’s pro- market reform agenda.,” it added.
Furthermore, they argued that the stock market may react positively to subsidy removal, adding that investors would be in favour of the move, with the view that it will curb leakages and enable the government re-allocate the funds possibly to infrastructure development.
“However, removal of subsidies is likely to put more pressure on the hard- pressed consumer, and therefore on consumer product companies and even food manufacturers. To the extent that subsidy removal will lead to increases in infrastructure spending, we expect subsidy removal to benefit cement manufacturers,” they added.
Ibom MRO to Bring in Forex to Nigeria
Akwa Ibom State to open a cutting-edge smart terminal building at the Victor Attah International Airport
The governor of Akwa Ibom State, Governor Udom Emmanuel, has announced that the state is close to opening a cutting-edge smart terminal building at the Victor Attah International Airport and that this will generate foreign exchange for Nigeria.
This comes on the heels of praise from his Edo State counterpart, Gov. Godwin Obaseki, who attended the Tuesday reception in Uyo for two additional A320-200 Airbus aircraft that the state’s Ibom Air fleet had leased from a European company.
Speaking at the event, the governor of Akwa Ibom said that while there were already efforts underway to persuade the government to lease the MRO, the MRO is an investment because it was built with naira, despite its current depreciation, and will therefore generate income.
The Akwa Ibom governor said “Our terminal building is world-class in Africa, our MRO is world-class. If you find one today in the entire Gulf of Guinea, tell me I’ll disassemble this one and build another.
“Look at our MRO; what you see here can accommodate two 747 aircraft as well as eight CRJ aircraft, which we are flying for servicing at the same time.”
“This is the only MRO in this part of the world today, and these facilities are not built with local currency, but we are building this MRO with naira that has no value.”
“I invest in areas where we can see a return on our money. Right now without blinking an eye, I can make over $ 30 million with this MRO if we decide to sell but we are not selling, we will make a foreign exchange from this investment.
“Airbus is on us to come and lease our MRO for all their regional flights, but we are not selling.
“We are going to open up this place ( MRO facility) from January next year for commercial activities and we are going to earn in dollars.”
He thanked Ibom Air’s Board of Directors, Management, and Staff for making him proud, emphasising that “they have done very well.”
Gov. Obaseki, who spoke at the event, stated that Akwa Ibom has become the country’s flagship state for its efforts to invest in and make significant strides in the aviation sector.
Obaseki described Akwa Ibom as the country’s flagship state for its efforts to invest in and expand the aviation sector. “Ibom Air is always completely booked.” Let me thank you on behalf of Nigerians,’’ Obaseki said.
In his remarks, the Managing Director of Ibom Airlines., Mr Mfon Udom announced plans to begin regional flights in 2023.
Udom said the new addition to the fleet of Ibom Air would expand its carrying capacity and boost employment opportunities in the state by 40 per cent.
“With this new capacity coming on board, we are delighted to inform our passengers that we have increased our offerings, providing more frequencies for their convenience.
“The Uyo-Lagos and Uyo-Abuja routes now have three frequencies each every weekday, while our Lagos-Abuja passengers will have seven frequencies to choose from both ways, every weekday,’’ he said.
Lagos State Boosts Food Supply With Mass Sale of Rice and Cooking Oil
LAISA has commenced the massive sale of rice and soya bean vegetable oils ahead of the December festival
Lagos state government through the Lagos State Agricultural Inputs Supply Authority (LAISA) has commenced the massive sale of rice and soya bean vegetable oils ahead of the December festival.
The sale which is taking place at different locations in the state is already attracting massive buyers.
According to the General Manager of LAISA, Mr Bolaji Balogun, places where potential buyers can get the products include New Farm Service Oko-Oba Centre, and Gengeto Bus stop, Abeokuta Road, Lagos.
While speaking to the press, Balogun disclosed that available products include 50kg of rice and 1-3 litres of soya vegetable oil all sold at affordable prices.
The GM added that the food sale event was a response to the yearnings of Lagosians who demanded affordable rice and cooking oil for the yuletide festival.
He noted that several people came to LAISA stand for the request at the just concluded Lagos Trade Fair.
Investors King understands that the Lagos State Agricultural Inputs Supply Authority (LAISA) was established with the mandate to boost food supply in the state and also provide the necessary support such as farm tools to farmers.
” As a responsible agency of government, LAISA will continue to provide customers/farmers with high quality and healthy food supply at affordable prices as and when available. We also intend to continue to support and encourage farmers on the best farming practice as well,” Balogun noted.
Meanwhile, the Federal Government has replied to a statement credited to the International Monetary Fund (IMF) that Nigeria will face food crisis in 2023.
The Federal Ministry of Agriculture and Rural Development opposed the position of the global financial institution stating that Nigerians should not panic nor worry about the projection.
The ministry added that several measures had been put in place to forestall any scarcity of food in Nigeria.
It added that the government had approved a five-year tax break as an incentive to encourage private investments in the agricultural sector and increased food production, processing and marketing.
U.S 2024 Elections: Donald Trump Declares For President
Former President of the United States, Donald Trump has once again showcased interest to seek the oval office after he failed re-election in 2020.
Former President of the United States, Donald Trump has once again showcased interest to seek the oval office after he failed re-election in 2020. Trump will be expected to tussle the Republic ticket with other potential nominees.
At his private beach on Tuesday night, Trump said “In order to make America great and glorious again, I am tonight announcing my candidacy for president of the United States”.
Trump’s ambition might however not be “Uhuru” as his party, the Republican failed to perform as expected in the midterm election. Although the Republican has been projected to win the majority seats in the house, the party, however, lost the senate including key states.
In addition, the former US president will likely face stiff opposition from his party as potential co-contestants include his former Vice President Mike Pence and the Governor of Florida Ron DeSantis, who won a resounding reelection victory on November 8.
Unfazed by the opposition and confident in his large following, Trump said “This is not a task for a politician or a conventional candidate. This is a task for a great movement.”
Investors King could recall that in 2020, Donald Trump lost to Joe Biden (Democrat).
After his exit from office, there have been a number of investigations into his conduct before, during and after his first term as president which could ultimately result in his disqualification.
He is also investigated for inciting violence which led to the drastic attack on the Capitol building on January 6, 2021.
Meanwhile, analysts and observers are divided on Trump’s potential comeback.
The mid-term election result shows that voters rejected candidates who backed Trump’s baseless claims of election fraud in 2020, and many of his high-profile picks for office struggled or lost out in the race.
It could be recalled that Donald Trump alleged manipulation in the 2020 presidential election which produced President Joe Biden. Trump claimed he was rigged out and tried to establish a conspiracy to back up his claim.
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