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Rising Hope for Higher Crude Oil Production

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Reports from Reuters within the week indicated that Mobil Producing Nigeria Unlimited (MPN), a unit of ExxonMobil, will resume shipment of Qua Iboe crude, Nigeria’s largest grade of crude oil in October, three months after the company declared a force majeure on the exports of the grade.

Accordingly, ExxonMobil is offering an October-loading cargo of Qua Iboe crude oil, the first offer since it declared the force majeure. The report however stated that it was not clear if the pipeline through which the crude grade passes had been repaired, or if the company expected it to be back on stream in time to load crude in October.

Notwithstanding, the report noted that the cargo had been offered for October 8 to 16 loading at a premium of $1.80 per barrel to dated Brent. If this sails through, Nigeria could perhaps be on the path to recovery in terms of production and sales volumes.

Before Mobil declared the force majeure, the last ship to reportedly load crude at the Qua Iboe terminal was the Ottoman Nobility on July 9. One of the three other ships scheduled to load the crude had been near the terminal since July 12.
A vessel loads one million barrel of the grade every three to four days, and exports of 250,000 barrels per day aboard eight vessels were scheduled for July when Mobil observed a leak caused by what it described as a “system anomaly” during a routine check of its loading facility on July 14, 2016.

When MPN took this decision, the cause of the leak was not clear, but it came just days after a militant group, the Niger Delta Avengers (NDA), claimed to have bombed the company’s 48-inch Qua Iboe crude oil export pipeline on July 11.
24 hours after the claim by the militants, the company’s spokesperson, Todd Spitler, however debunked the claim, saying, “there was no attack on our facilities.”

And while ExxonMobil said at the time it declared the force majeure that the export terminal was operating, traders reportedly said the company did not release a revised loading schedule for the crude exports. The new development however suggests that Nigeria was ramping up its production.

Is Stability Returning in Nigeria’s Oil Fields?

In March, Nigeria lost its longstanding position as Africa’s top oil producer to Angola when its oil production dropped to 1.677 million barrels per day (mbpd). Compared to Angola’s 1.782mbpd production then, the country was behind Angola by about 105,000bpd of production volumes.

Nigeria’s trailing Angola was primarily occasioned by resumed militancy in her oil-bearing Delta region in February. From when militant groups resumed bombing oil installations in the region, the country’s production began to slide away from the 2016 budget target of 2.2mbpd.

Six months after, the OPEC in its Monthly Oil Market Report (MOMR) for September, which was released last Monday, indicated that Nigeria’s oil output had taken a further dip to 1.468mbpd in August from 1.52mbpd recorded in the previous month.

OPEC, which nevertheless, based its report on direct communication with the country, also stated that Angola saw its oil output rise to 1.775mbpd in August from 1.767mbpd the previous month.

The cartel also said Libya’s production dropped to 292,000bpd from 313,000bpd, while Venezuela produced 2.104mbpd, down from 2.117mbpd, Ecuador, 542,000bpd from 549,000bpd it previously recorded, while Iraq saw its production dropped by 2,000 barrels to 4.354mbpd.

The MOMR equally stated that Saudi Arabia, the biggest producer in the group, recorded the biggest increase in August as it produced 10.605mbpd, up from 10.577mbpd in the previous month and Iran which has just come out of a global embargo, continued to increase output in a bid to snap up more market share with 3.653mbpd, up from 3.631mbpd.

Coming with the unstable oil prices in the global market, the situation appears quite difficult for Nigeria. This is even more with OPEC’s forecast of an oversupply into 2017.

Hopes of Stability Still Guarded

About 90 per cent of Nigeria’s foreign earning comes from oil and gas produced in the Niger Delta but the situation in the region has not improved even with the federal government’s attempt at dialogue with militants.

It is also a fact that for Nigeria to improve her foreign exchange earnings and work out ways to get out of her current economic recession, the Niger Delta region will have to be considered as an important factor.

The region’s light crude oil is sought after by refineries in the US and Europe. Aside this, Nigeria also holds the world’s seventh largest proven gas reserves and supplies up to 10 per cent of global liquefied natural gas, if production shuts-in continue on the scale it is now, the country will produce less as well as have less foreign exchange to balance its trade and perhaps get out of recession.

In addition, terrorism in the Middle East makes Niger Delta an alternative supply source for countries like China and India whose economies have good demands for oil. A restive Niger Delta will however cut whatever gains the country stands to make from such conditions.

Fuelled by agitation for resource control and environmental pollution, the Niger Delta unrest has continued to impact heavily on Nigeria’s oil production. The region has continued to ask for increased control of its oil resources, and adequate compensation for the oil spillage in the area.

Its militants have also indicated the willingness to dialogue with the government, which some weeks back said it had secured their commitment to a ceasefire on vandalism of oil installation and production disruption; the situation has however, remained unchanged going by a recent bombing of an oil pipeline and OPEC’s August production report.

Although the government has not said anything new about its planned dialogue with the militants, it would however appear like the plan has encountered some hitches, thus leading to the bombing of the Afiesere-Iwhrenene major delivery line to UPS/UQCC, operated by Nigeria Petroleum Development Company (NDPC) and Shorelines Petroleum in Ughelli North Local Government Area of Delta State by the Niger Delta Greenland Justice Mandate (NDGJM), one of the many militant groups in the early hours of Tuesday.

The attack, which was reportedly confirmed by a leader of the group, Aldo Agbalaja, was almost at the same time the foremost Niger Delta Avengers (NDA) which ceased its bombing of oil facilities last month to dialogue with the government, accused the country’s military of harassing old men, women and innocent youths in the region under the guise of hunting for militants. This therefore raises suspicion that the dialogue may not have started.

Unfavourable Market

According to OPEC, Nigeria in July recorded the biggest increase in oil output from her field. That was however not enough to bring her back to Africa’s top producer.

It said that while OPEC’s collective crude oil production in August was 33.24mbpd, a decrease of 23,000bpd, Nigeria and Libya contributed immensely to the drop.

“Crude oil output increased mainly from Saudi Arabia and Iran, while Nigeria and Libya showed the largest drop,” the MOMR said.
It also said that Africa’s oil supply is projected to average 2.12mbpd in 2016, representing a decline of 20,000bpd year-on-year, with increases however expected from Congo by 50,000

bpd to average 320,000bpd, and Ghana’s production start-up in the Tweneboa, Enyenra, Ntomme project, as well as a production ramp-up in the country’s Jubilee field in the second half of the year.

OPEC also raised its forecast of oil supplies from non-member countries in 2017. It said new fields were expected to come online especially from US shale drillers who have proved more resilient than expected to cheap crude.

It added that demand for its crude will average 32.48mbpd in 2017, down by 530,000bpd from the previous forecast. These forecasts, however, do not look favourable to Nigeria.

With oil prices still under pressure at an average of $47 per barrel, and renewed oversupply concerns, Nigeria now appears to have to contend with two tough challenges – dealing with instability in price and her production levels. The combined effect of these pose serious threats to forex earnings and naira exchange rate stability.

As stated by PricewaterhouseCoopers (PwC) in 2016 edition of its ‘Africa Oil and Gas Review’ published in August, Nigeria is not only affected by the decline in the oil price, but also by the reduced production due to the severe security issues onshore and increased piracy incidents.

PwC further said that: “This is adding an additional layer of complication, causing hesitation among oil majors to invest further. Consequently, many are considering postponing additional investment.”

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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African Economy Set for Steady Growth: 4% Projected for 2025

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Experts are forecasting a robust growth trajectory of 4% for the continent in 2025.

This optimistic projection was highlighted during the ongoing Afreximbank annual meetings, incorporating the Africaribbean Trade and Investment Forum, held recently in Nassau, The Bahamas.

Yemi Kale, Group Chief Economist and Managing Director of Research and International Cooperation at Afreximbank, presented the 2024 African Trade Report and Economic Outlook, saying the African Continental Free Trade Area (AfCFTA) is significant in driving economic integration and growth.

The projected growth rate of 4% for 2025 reflects a steady recovery path for Africa, building on the expected 3.5% growth anticipated for 2024.

This positive outlook comes at a crucial time when African economies are navigating challenges posed by global economic dynamics, including inflationary pressures and supply chain disruptions.

Kale underscored the resilience of intra-African trade, which expanded by 3.2% in 2023 despite a 6.3% overall contraction in Africa’s trade volumes.

This resilience is a testament to the AfCFTA’s potential to bolster regional trade ties and reduce dependency on external markets.

The Afreximbank report also delved into macroeconomic environments, trade patterns, and sovereign debt sustainability dynamics, providing policymakers and business leaders with actionable insights to navigate complexities in global markets effectively.

Nomusa Dube-Ncube, Premier of Kwazulu-Natal, highlighted Africa’s modest share of global GDP and manufacturing output, emphasizing the untapped potential within intra-African trade.

She noted that while Africa currently accounts for only 3% of world trade, intra-regional trade is steadily increasing, indicating a growing economic ecosystem within the continent.

Pamela Coke-Hamilton, Executive Director of the International Trade Centre (ITC), echoed the sentiment, advocating for enhanced trade between Africa and the Caribbean.

The ITC projects trade in goods and services between these regions to reach $1 billion by 2028, underscoring the mutually beneficial opportunities for economic expansion.

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Nigeria Sees 95% Surge in Food Imports Despite Emergency on Food Production

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Nigeria’s food import bill has surged to a five-year high in the first quarter of 2024, despite the federal government declaring a state of emergency on food production.

Data from the National Bureau of Statistics (NBS) reveals a 95.28 percent increase in food imports to N920.54 billion from January to March, compared to N471.39 billion in the same period last year.

This alarming rise comes amid soaring food inflation, which hit a record 40.5 percent in April, reflecting a 15.92 percent year-on-year increase.

The sharp inflation has left many Nigerians struggling to afford a balanced diet, exacerbating the food security crisis in Africa’s most populous nation.

In March, President Bola Ahmed Tinubu emphasized the government’s commitment to self-sufficiency in food production, stating that Nigeria would not rely on imports to stabilize prices.

“We will not allow the importation of food but rather turn the lack in the country into abundance,” Tinubu declared. However, the latest import figures suggest that this goal remains elusive.

The NBS Foreign Trade Statistics report highlights that the value of food imports via maritime, air, and land routes surged 29.4 percent from N711.4 billion in the fourth quarter of 2023.

Major agricultural goods imported included durum wheat from Canada and Lithuania, valued at N130.26 billion and N98.63 billion, respectively. Frozen blue whitings from the Netherlands accounted for N16.67 billion.

Wheat imports alone constituted N519.75 billion of the total food import bill. The average cost of wheat imports, a significant driver of the food import value, increased by 33 percent compared to the previous quarter’s value of N391.01 billion.

The rising importation of wheat reflects its popularity among Nigerian consumers amid skyrocketing prices of close substitutes like garri and rice.

Overall, Nigeria’s total imports for Q1 2024 amounted to N12.64 trillion, representing a 39.65 percent increase from N9.05 trillion in Q4 2023 and a 95.53 percent rise from N6.47 trillion in Q1 2023. Food imports accounted for 7.3 percent of total imports during the period under review.

The bulk of Nigeria’s imports came from Asia, China, Europe, America, and Africa. Mineral fuels topped the import category with N4.44 trillion, representing 35.09 percent of total imports.

Machinery and transport equipment followed with N3.17 trillion, contributing 25.08 percent, and chemicals and related products at N1.79 trillion, making up 14.13 percent of total imports.

Despite the federal government’s initiatives to boost local food production and reduce dependency on imports, the latest data underscores the persistent challenges facing Nigeria’s agricultural sector.

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Ethiopia Boosts Spending by 21%, Eyes IMF Program for Economic Relief

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Ethiopia has announced a 21% increase in its 2025 budget, marking the first budget since defaulting on a Eurobond payment and committing to economic reform discussions with the International Monetary Fund (IMF).

The nation’s Finance Minister, Ahmed Shide, revealed the new budget details to lawmakers on Tuesday, outlining plans to spend 971.2 billion birr ($16.9 billion) in the fiscal year starting July 2024.

The increased budget reflects Ethiopia’s commitment to addressing its economic challenges head-on. Despite the heightened expenditure, the fiscal deficit is projected to remain stable at 2.1% of gross domestic product (GDP), unchanged from the current fiscal year.

Financing the Deficit

Minister Shide outlined a plan to cover the 358.5 billion-birr deficit through a combination of local and foreign borrowing.

The domestic borrowing component will be managed via government treasury bills and medium-term bonds. Shide emphasized that until substantial external donor support is secured, Ethiopia will continue to rely heavily on its domestic markets to finance budget deficits.

“While the government has secured some external financing from the World Bank and the European Union, negotiating an IMF program will be crucial to alleviate pressure on local banks and secure overall debt relief,” said Giulia Filocca, a senior analyst at Standard & Poor’s for sovereign and international public finance ratings.

IMF Program and Economic Reforms

An agreement with the IMF is seen as a pivotal step for Ethiopia. The nation failed to remit a $33 million coupon payment for its $1 billion bond in December 2023, leading to agreements with some creditors, including the Paris Club, to suspend debt repayments.

In exchange, Ethiopia is expected to reach a staff-level agreement with the IMF, which will likely include economic reforms such as devaluing the birr currency.

“Our expectation is that an IMF program will be signed this year, but the timeline remains unclear due to ongoing political developments and challenges over foreign-exchange reforms,” added Filocca.

Budget Highlights

The new budget includes 451.3 billion birr for recurrent spending, 283.2 billion birr for capital expenditure, and 236.7 billion birr allocated for regional subsidies.

The government projects income of 612.7 billion birr, with tax revenue expected to contribute 502 billion birr and non-tax income 61.6 billion birr. Sector budget support is anticipated to bring in 7.3 billion birr, with aid and grants expected to add 41.8 billion birr.

Economic Outlook

Ethiopia’s economy is forecasted to expand by 8.4% in the coming fiscal year, up from an expected 7.9% growth rate in the current period. The budget increase is designed to support this growth trajectory by enhancing public investment and stimulating economic activity.

“Our partnership with the IMF and other international financial institutions will be key to ensuring Ethiopia’s economic resilience and sustainable growth,” Minister Shide concluded. “We are committed to implementing the necessary reforms to secure a brighter economic future for our country.”

As Ethiopia navigates its economic challenges, the government’s proactive approach to increasing spending and engaging with the IMF reflects a strategic effort to restore fiscal stability and drive long-term economic development.

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