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Manufacturers Back Finance Minister’s Call For Interest Rate Cut

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The Minister of Finance, Mrs. Kemi Adeosun, has called on the Central Bank of Nigeria to lower interest rate so that the government can borrow domestically to boost the economy without increasing debt servicing costs.

While reacting to the minister’s call, the President, Manufacturers Association of Nigeria, Dr. Frank Jacobs, said that a cut in interest rate would be the best thing to happen to the economy.

“He said, “It will be the best thing that has ever happened to the economy, particularly the manufacturing sector.

“It is what we have been agitating for since and if the interest rate is brought down, it will be the best decision in the current economic dispensation.”

The government is also planning an “immediate large injection of funds” through asset sales, advance payments for licence renewals and infrastructure concessions, the Minister of Budget and Economic Planning, Senator Udo Udoma, said.

Adeosun said she was working with the Debt Management Office, Nigeria Sovereign Investment Authority and the pension industry to issue an infrastructure bond to raise money for road and housing projects.

She urged the central bank to reconsider its July interest rate increase, which it implemented to help support the naira and attract foreign investment.

The central bank is due to announce its next rate decision today (Tuesday) after the conclusion of its Monetary Policy Committee meeting, with some economists predicting that it will keep the key interest rate at 14 per cent, while others maintain that a cut is inevitable.

Adeosun told CNBC Africa, “We need lower interest rates, because when we are borrowing and interest rates go up, it increases our cost of debt service and it reduces the amount of money that is available to spend on capital projects.

“The attempt was to manage inflation and the trade-off for the economy right now is what is a bigger problem: Is it growth or inflation? For me it is growth. I would rather seek growth. We can manage inflation. I think for us, at the moment in the Nigerian economy, growth is the most important thing.”

Udoma told a business conference that the government planned asset sales to inject more funds into the economy but gave no details. The government has spent almost N800bn on capital expenditures since the budget was approved in May, officials told Reuters.

The minister also said the government had almost finished preparing a bill for the National Assembly to approve emergency powers for President Muhammadu Buhari to improve the business climate.

Adeosun said some adjustment was needed to narrow the spread between the official and black market currency rates, which is running at 25 per cent since the central bank floated the naira.

“We still need to make some necessary adjustments to ensure that the spread is narrow, so that we have true price discovery,” she said.

Meanwhile, the Finance minister said the country had received commitments to its planned $1bn Eurobond from international investors, which it aims to issue before the end of the year, but insisted that pricing would be key.

The government is currently seeking advisers and book runners and is currently accepting proposals from international and local banks for the bond sale, according to Bloomberg.

“We already have quite strong indications and indeed we had some commitments. Even though we weren’t doing a deal, we already have commitments to our bond offer; so, we are very confident that it is just a question of pricing,” Adeosun said.

The minister also said the regulators had approved plans to enable the investment of as much as $20bn of pension funds in the development of infrastructure.

The Securities and Exchange Commission and the National Pension Commission have approved “a new instrument that will allow pension funds to invest in infrastructure bonds,” Adeosun said at a meeting of business leaders in Abuja on Monday.

“That’s what will drive, for example, our social housing and our roads programme outside the budget,” she added.

Renowned economist and Chief Executive Officer, Financial Derivatives Limited, Mr. Bismarck Rewane, said in a telephone interview with one of our correspondents that he and other experts had before now stressed the need to reduce the interest rate.

He said, “There is no other way but to reduce the interest rate. During recession, Britain brought down interest rate; and in the US during the recession, what did they do? They brought down interest rate as well. So, we need to bring down the interest rate.”

The Director-General, West African Institute for Financial and Economic Management, Prof. Akpan Ekpo, who lent his voice to the call for a cut in interest rate, said, “That is the only way to fast-track the recovery of the economy. The interest rate must be reduced to close to single digit, if not single digit, in order to stimulate the real sector. Now, it is an average of 25 per cent and that is too high.

“The real sector is dead now; when you are in a recession and the real sector is dead, then the recession will last for long.”

Ekpo said the Monetary Policy Rate, which is the benchmark interest rate, should be reduced to 10 per cent from the current 14 per cent so that the lending rate would be around 13 to 14 per cent.

The Monetary Policy Committee of the CBN had at the end of its meeting in July raised the MPR to 14 per cent from 12 per cent.

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

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Energy

Refining Sector Accounts For 3% of Global Emission – ARDA

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The African Refiners and Distributors Association (ARDA) has revealed that the refining sector only accounts for 3% of the global energy sector emission. 

Oil and Refining Research Analyst, Maryro Mendez, stated this at the second Refining and Specifications Virtual Workshop organised by the ARDA and monitored by Investors King.

According to Mendez, “the refining sector accounts for only three percent of the global energy sector emissions. While refineries’ contribution to global energy sector emissions is low, the opportunities for reducing them are significant.

“Refineries globally have started thinking about measuring, monitoring and reducing carbon emissions and environmental sustainability has to be a priority for refiners and Africa is no exception.”

According to her, because fuel combustion accounts for 80% of refinery carbon emissions, fuel source and energy optimization would provide the greatest chance to minimize emissions.

“The challenge is not technical but is commercial with facilities requiring sufficient incentive and capital to invest without impacting on their competitive position”, she added.

The association further revealed that Nigeria and other African countries would need to minimize sulphur levels while noting that upgrading their existing refineries would require at least $15.7 billion.

Anibor Kragha, ARDA’s Executive Secretary stated that adopting a standardized specification will prevent the importation of fuels that do not match AFRI specifications into Africa.

“New process units required are to improve key fuel specifications, especially Naptha Hydrotreater (NHdT), Diesel Hydro-desulph. (DHDS), Benzene Extraction, Sulphur, and Hydrogen Plants.

“Another key focus area is for African countries, especially those sharing common fuel supply chains to develop an integrated policy covering both fuel quality and vehicle exhaust emissions.

“This is to achieve the ultimate objective of clean air in our African cities. Without this integrated and coordinated policy, the objective of clean air will not be realized whether by imports or local production,” he said.

The idea for an African refinery association was conceived in the late 1970s, and the first sub-Saharan African initiative – the Association of Refiners and Distributors of Oil Products (ARDIP) – was launched in September 1980, led by the SIR refinery in Cote D’Ivoire, with counterpart refineries in Senegal, Sierra Leone, Liberia, Ghana, and Gabon.

Mr Joel Dervain, the then Managing Director of SIR, re-activated the campaign for an association to promote technical and commercial best practices among African refiners and their stakeholders in 2006. The African Refiners Association (ARDA) was then created on March 23, 2006 in Cape Town, South Africa, with the help of his colleagues at SONARA, SAR, TOR, SOGARA, and NATREF.

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African Energy Chamber to Host Energy Transition Forum at The 2022 Energy Week  

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African Energy Chamber (AEC) says it will host the Energy Transition Forum, in partnership with public and private sector organisations, government representatives, energy stakeholders and investors in October. 

In a statement made available to Investors King AEC stated that “The Energy Transition Forum will address critical issues such as the lack of adequate funding, the diversification of the energy mix, workforce development, and regulatory reforms necessary to enable Africa to expand its energy sector to address energy security, affordability, access, and sustainability matters”.

“With some 600 million people across the continent living in energy poverty and over 900 million without access to clean cooking, Africa needs to exploit all of its vast natural resources in order to make energy poverty history by 2030. In this respect, stakeholders across the continent are opting for an integrated approach to developing energy resources whereby every resource is utilized in order to kickstart economic growth and electrification. With over 125.3 billion barrels of crude oil, 620 trillion cubic feet of gas, and nearly 16.4 billion short tons of coal, the continent is well-positioned to drive economic growth,” it added. 

Executive Chairman of the AEC, NJ Ayuk, said: “With nearly 66 per cent of the world’s population living without electricity access based in Africa, the continent needs to ramp up the production of all its energy resources including gas, oil, wind and solar to ensure energy poverty is history by 2030. The AEC is honored to host the Energy Transition Forum at AEW 2022 where an African narrative of a just and inclusive energy transition that is fit for Africa will be developed. We will go from Cape to Cairo with a well-defined African message. Africans and the energy sector have a rare chance to define the narrative and we must.” 

The Energy Transition Forum is bringing together investors, regulatory authorities and energy market players to discuss the role of gas in Africa’s energy future and energy transition. The challenges of limited investments in gas exploration, production, and infrastructure development in gas-rich countries such as Nigeria, Algeria, Egypt, Niger, and Mozambique will also be addressed.

According to the AEC, climate change continues to impact Africa, leading to an increasing number of African countries such as Nigeria, Namibia, Morocco, South Africa, Uganda, and Kenya introducing policy reforms and initiatives to scale up renewable energy penetration in Africa. 

Investors King gathered that Nigeria has vowed to achieve climate neutrality by 2060 by increasing the share of natural gas and renewables in its energy mix while Namibia aims to make the development of hydrogen central to its energy policy. At the same time, South Africa has introduced its Hydrogen Society Roadmap to fast-forward the development of local content and hydrogen infrastructure whilst Morocco’s Law 13-09 and Egypt’s net metering scheme aims to expand distributed renewables development.

The chamber added that the AEW 2022, under the theme – “Exploring and Investing in Africa’s Energy Future while Driving an Enabling Environment” will feature high-level meetings and panel discussions where government ministers, investors, academia, and energy market stakeholders will discuss how Africa can attract funding to boost exploration, production and infrastructure development to ensure secure supply while remaining a climate champion. 

The African Energy Week is scheduled to take place from 18th – 21st October 2022 in South Africa at Africa’s premier event for the oil and gas sector.

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Siemens Announces Plan to Transit From Fossil to Sustainable Energy

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Siemens

Technology giant, Siemens Energy has announced a transit from fossil to sustainable energy through a management restructuring and shares evaluation.

This comes after the company launched a voluntary cash tender offer to acquire all outstanding shares in Siemens Gamesa Renewable Energy, or approximately 32.9 percent of Siemens Gamesa’s share capital which it does not already own.

Chairman of the Supervisory Board of Siemens Energy AG, Joe Kaeser, said: “The full integration of SGRE is an important milestone for Siemens Energy’s positioning as a driver of the energy transition from fossil to sustainable energy solutions.

“This will benefit customers, employees, shareholders, and ultimately society. It is critical that the deteriorating situation at SGRE is being stopped as soon as possible, and the value-creating repositioning starts quickly. The Supervisory Board strongly supports the Executive Boards plans for the integration of SGRE”.

According to a statement from the company, starting from October, the former gas and power segment will be divided into three business areas.

The largest of the new business areas, with sales of around 9 billion euros (9.6 billion dollars), is gas services. This included the gas and large steam turbine business and associated services.

It is followed by grid technologies with sales of 5.8 billion euros in the areas of power transmission and energy storage. The smallest business area is the transformation of the industry with sales of 3.9 billion euros.

Here, the focus was on reducing energy consumption and carbon dioxide emissions in industrial processes from hydrogen to automation and industrial steam turbines to compressors. Logistics, IT and procurement divisions were to be bundled together.

The removal of some levels of management at Siemens Energy was expected to bring faster decision-making processes. Where there were previously up to 11 levels in the firm’s hierarchy, there would be a maximum of six in the future. This would eliminate around 30 per cent of the previous management positions, Siemens Energy said. The employees affected would be given other tasks within the business, according to the statement.

Siemens Energy claims that after full integration, the combined group could see cost synergies of up to EUR 300 million within three years, owing to lower supply chain and logistics costs, aligned project execution, joint and integrated R&D efforts, and cost savings through an optimized administrative setup.

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