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Oil Falls as Iranian Minister Calls Freeze Proposal `Ridiculous’

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Oil tumbled after the Iranian Oil Minister said that an agreement by Saudi Arabia and Russia last week for oil producers to freeze output was “ridiculous.”

Crude fell 4.6 percent in New York. The proposal to cap output at January levels puts “unrealistic demands” on Iran, Bijan Namdar Zanganeh said Tuesday, according to the ministry’s news agency Shana. Saudi Arabia and Russia, the world’s two biggest crude producers, agreed to the freeze on condition other major producers, notably Iran and Iraq, follow suit. Saudi Arabia isn’t cutting output, the kingdom’s oil minister, Ali al-Naimi, said at the IHS CERAWeek oil conference in Houston.

“Zanganeh and Naimi have managed to deflate traders’ expectations that there would be an agreement to cut production anytime soon,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “There’s a lot of hard bargaining and additional economic pain that’s going to have to occur before an agreement is reached.”

Oil is down about 14 percent this year on speculation a global glut will persist amid the outlook for increased exports from Iran and brimming U.S. stockpiles. Iran will add more output capacity than any other member of the Organization of Petroleum Exporting Countries over the next six years as it seeks to regain lost market share after the removal of sanctions, according to the International Energy Agency.

West Texas Intermediate for April delivery slipped $1.52 to close at $31.87 a barrel on the New York Mercantile Exchange. It was the biggest decline Feb. 9. The March contract rose $1.84 to expire at $31.48 Monday, the highest for front-month prices since Feb. 4.

Futures extended losses after the settlement when the American Petroleum Institute was said to report U.S. crude supplies rose 7.1 million barrels last week. WTI traded at $31.24 at 4:38 p.m.

Brent for April settlement dropped $1.42, or 4.1 percent, to $33.27 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude closed at a $1.40 premium to WTI.

The six worst performers on the S&P 500 Tuesday were energy companies. The S&P 500 Oil & Gas Exploration and Production Index fell 4.4 percent.

“Not many countries are going to deliver” even if they promise supply curbs, al-Naimi said. An accord last week to freeze the oil production of Saudi Arabia, Russia, Qatar and Venezuela at January levels is “not like cutting production, that’s not going to happen.”

Instead, high-cost producers will have to “lower costs, borrow or liquidate” to cope with the slump in oil prices, al-Naimi said, adding that he doesn’t know when the current rout will end. This is a “more efficient” way for the market to rebalance than cuts by low-cost producers like Saudi Arabia, which would only delay the “inevitable reckoning” needed for supply and demand to realign, he said.

Questionable Agreement

“It’s hard enough getting two people to agree, much less a large number of competing countries,” said Michael Corcelli, chief investment officer of hedge fund Alexander Alternative Capital LLC in Miami. “Any deal that can be agreed to would be questionable because of the lack of trust.”

Oil has slumped more than 50 percent since Saudi Arabia led OPEC’s decision in November 2014 to maintain output and defend market share against higher-cost U.S. shale producers. The resilience of the shale sector and increase in Russian production to post-Soviet highs helped expand the global glut.

“U.S. shale output is going to decline,” said Sarah Emerson, managing director of ESAI Energy Inc., a consulting company in Wakefield, Massachusetts. “Everyone seems to think it will happen tomorrow, but it takes time. It has already started and later this year production will be considerably lower.”

Ample Inventories

Global oil stockpiles will keep accumulating into 2017 as supply continues to exceed demand, capping any price recovery, the IEA said in its medium-term report on Monday.

U.S. inventories probably expanded 3.25 million barrels from the highest level in more than eight decades, according to a Bloomberg survey before government data on Wednesday. Supplies of gasoline and distillate fuel, a category that includes diesel and heating oil, fell, the analysts said.

March gasoline futures fell 3.4 percent to close at 96.63 cents a gallon. Diesel dropped 3.1 percent to $1.0221, the lowest settlement since Feb. 11.

Bloomberg

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

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Remittances To Africa Projected to Drop By 5.4% in 2021: UNECA

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According to a new report from United Nations Economic Commission for Africa (UNECA), remittances to Africa are projected to drop by 5.4 percent to $41 billion in 2021 from $44 billion last year.

The report notes that the bleak situation has been compounded by the high cost of sending money to Africa from abroad, as the cost of remittances to Africa remains the highest in the world at 8.9 percent.

Remittances are an essential part of economic activity in low and middle-income countries (LMIC), including Africa. Due to the economic crisis induced by the COVID-19 pandemic and shutdown, global remittances are projected to decline sharply by about 20 percent in 2020. For Africa, remittances are projected to drop by 5.4 percent to $41 billion in 2021 from $44 billion last year, according to a new report by the United Nations Economic Commission for Africa (UNECA) projects remittances.

The report, titled “African regional review of the implementation of the Global Compact for Safe, Orderly and Regular Migration”, notes that the projected fall is mainly due to a fall in the wages and employment of migrant workers, who tend to be more vulnerable to loss of employment and wages amid the pandemic.

The report adds that the bleak situation has been compounded by the high cost of sending money to Africa from abroad as the cost of remittances to Africa remains the highest in the world at 8.9 percent.

“A migrant sending $200 to his/her family in Africa pays an estimated nine percent of the value of the transaction, indicating that the continent is still far from achieving the three percent target set out in Sustainable Development Goal 10,” the report stated.

This signals huge deficits in millions of African households depending on their friends and relatives abroad for a financial lifeline, thus threatening a perpetuation of macroeconomic imbalances on the continent.

The Addis Ababa Action Agenda of the Third International Conference on Financing for Development and Sustainable Development Goal indicator 10(c) provides that countries should, by 2030, reduce to less than three percent the transaction costs of migrant remittances and eliminate remittance corridors with costs higher than five percent.

In response, some African countries have taken action to lower the costs of remittance transfers by offering diaspora bonds to investors and relaxing foreign exchange controls to allow for electronic and mobile money transfers at reduced costs.

“It should be noted, in that regard, that the use of digital money transfer platforms reduces transfer fees in Africa by an average of 7 percent,” says the report.

“Private financial institutions also offer incentives to encourage members of diaspora communities to use their services, including low transaction fees for remittances, and facilitate diaspora-initiated projects, especially in the real estate sector. These measures all promote the financial inclusion of migrants and their families.”

The report recommends that member States support migrants and their families through adopting laws and regulations to facilitate the sending and receiving of remittances, including by fostering competition among banks and other remittance handling agencies to establish low-cost transfer mechanisms.

In addition, the report recommends that African countries make every effort to reduce the transfer costs associated with remittance payments by making more extensive use of digital transfer solutions, such as MPESA, and by streamlining the regulatory constraints associated with international money transfers.

Finally, the report concludes that the African States should also engage with destination countries to identify ways to enhance the provision of basic services to migrants in those countries as remittances are a primary source of national income for at least 25 African countries, all of which have large diaspora populations.

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Nigeria’s Inflation Rate Declines to 17.01 Percent in August 2021

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Prices moderated further in Africa’s largest economy, Nigeria, in the month of August despite rising costs and growing economic uncertainties.

Consumer Price Index (CPI), which measures inflation rate, grew by 17.01 percent year-on-year in August 2021, representing a 0.37 percent decrease when compared to the 17.38 percent recorded in the month of July 2021.

On a monthly basis, inflation rate increased by 1.02 percent in August 2021, slightly higher by 0.09 percent than the 0.93 percent filed in July, the National Buruea of Statistics (NBS) stated in its latest report.

Prices of goods and services continued to drop on paper in recent months even as costs are hitting record highs across most sectors in Nigeria.

Naira has plunged to a record-low against the United States Dollar and other global currencies following the Central Bank of Nigeria’s decision to halt sale of forex to Bureau De Change Operators in an effort to curb illicit financial flows and forex supplies to the black market.

Naira plunged to N560 per United States Dollar at the black on Wednesday to set a new record low against the greenback and subsequently dragged on cost of import goods and profit of import dependent businesses.

Food Index also rose at a slower pace in August 2021 even with Nigerians complaining of over 50 percent increase in the price of food items. Food composite index rose by 20.30 percent in August, at a slower pace when compared to 21.03 percent recorded in the month of July 2021.

The rise in food index were caused by increases in prices of Bread and cereals, Milk, cheese and egg, Oils and fats, Potatoes, yam and other tuber, Food product n.e.c, Meat and Coffee, tea and cocoa, according to the NBS report.

On a monthly basis, the food sub-index grew by 1.06 percent in August 2021, representing an increase of 0.20 percent from 0.86 percent filed in the month of July 2021.

Looking at a more stable food index guage, the twelve-month period ending August 2021 over the previous twelve-month average, food index increased by 0.34 percent from 20.16 percent achieved in July 2021 to 20.50 percent in August 2021.

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Glo to Reconstruct 64km Ota-Idiroko Road Using Tax Credit Scheme – Fashola

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Mobile telecommunications giant, Globacom, has offered to reconstruct the 64 km Ota-Idiroko road in 2022, using Federal Government’s Tax Credit Scheme.

The Minister of Works and Housing, Mr. Babatunde Fashola, announced this on Wednesday during an inspection tour of the ongoing reconstruction of the Lagos-Ibadan Expressway.

“From Ota to Idiroko, we don’t have a contract there, but Chief Mike Adenuga of Globacom has offered to construct that road using the tax credit system.

“So, that has also started, they are doing the design, and hopefully, by sometime early next year, they should mobilize to site. The real reconstruction is going to happen if we have a deal with Glo,” Fashola said.

He said that FERMA would carry out rehabilitation works on the Ota-Idiroko road between October and December.

“But between now and December, FERMA has gone to take measurements there and they will move there from the end of September if the Ogun State Government does two things.

“Clear all the squatters, traders, and the settlers on the road and help us manage traffic and the governor as at last night has committed to doing that for us,” the minister said.

He said efforts were on to bring in Flour Mills of Nigeria Plc and Unilever to reconstruct the Badagry link to the Lagos-Ota-Abeokuta road under the Tax Credit Scheme of the Federal Government.

The minister said that the Lagos-Ota-Abeokuta road had become a problematic road due to years of neglect by previous administrations, as such the highway required a huge investment.

He commended Gov. Dapo Abiodun for his passion for fixing roads in Ogun State, adding that the reconstruction of the failed portions of the Lagos-Ota-Abeokuta road would be completed by December at the cost of N13. 4 billion.

The minister added that the project would be handled by the Federal Road Maintenance Agency (FERMA).

He called on federal lawmakers representing Lagos and Ogun States to ensure increased budgetary allocation for the roads to ensure their speedy completion to ease the hardship on road users.

“When people say Fashola is looking away, I am not looking away, I just can’t find the money,” he said.

He also called for support of citizens for parliamentarians to ensure more borrowing for infrastructure upgrades because the future depends on development strides today.

Also speaking during the inspection tour, Gov. Dapo Abiodun of Ogun said that the project became necessary because Ogun is the industrial hub of the nation that needed good roads for interconnectivity to boost commerce.

He said: “We have given the commitment that we will relocate traders, we will control and manage traffic, whatever that it is we need to do, we will ensure that we begin to bring succor and needed relief to our people.

“The state of that road today is pitiable. I went on that road myself and I felt bad for our citizens.”

Abiodun said the state government was ready to borrow to reconstruct the Lagos-Ota-Abeokuta Road should there be a delay in the Sukuk funding for the highway.

“If this Sukuk bond would not happen immediately, the state government is willing to go and borrow against that promise so that we can mobilize the contractor,” he said.

He thanked Fashola for the efforts to reconstruct roads in the state and pledged the support of the state government in fixing the highways.

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