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Nigeria Government Hints at Asset sales to Lift Economy Out of Recession

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Nigeria’s finance minister hinted on Monday that the country’s government might opt for asset sales next year to boost the public coffers as the economy struggles.

“Looking at 2017, how we fund the 2017 budget, I think we have started to work on that and look at a mixed strategy of debt and asset realizations,” Kemi Adeosun told CNBC Africa.

Nigeria’s gross domestic product (GDP) is set to shrink for the first time on an annual basis in 21 years in 2016, as the oil-reliant economy struggles with weak crude prices and a collapse in its currency.

Some people, such as Nigerian billionaire Aliko Dangote, have already suggested the state sell off some of assets in order to boost public finances.
“I think the real challenge for us is now for us to have the political will in terms of selling some assets,” Dangote, who is said to be Africa’s richest man, told CNBC Africa on Friday.

“I think it’s an easier route than the IMF (International Monetary Fund) or the World Bank to borrow money, because what you need to do is actually to beef up the reserves,” he added.

Dangote suggested the government should sell off stakes in some of its joint ventures with the private sector in an open tender process. He said that Africa Finance Corporation — a development finance institution established in 2007 — would fetch close to $800 million. Policymakers should also look to sell 100 percent of the country’s stake in Nigeria LNG, a natural resources firm, Dangote said.

Nigeria’s credit rating was downgraded to B from B+ by S&P Global Ratings on Friday. The international ratings agency forecast the Nigerian economy would shrink by 1 percent this year.

“Nigeria’s economy has weakened more than we expected owing to a marked contraction in oil production, a restrictive foreign exchange regime and delayed fiscal stimulus,” S&P said in a report on the downgrade.

Real GDP fell by 2.06 percent between April and June, year-on-year, having shrunk by 0.36 percent in the first quarter.

Fiscal stimulus could also come from the government’s plans for much-needed infrastructure plans for the country, particularly on road improvement.

“The infrastructure deficit is such that government on its own cannot close it and so we have consistently said that we will look for opportunities to partner with the private sector … and we will have user fees to actually pay for them, particularly in the area of roads where it is very clear that the deficit is huge,” Adeosun told CNBC Africa.

—With contribution from CNBC Africa and CNBC’s Matt Clinch.

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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Oil Prices Dip Amidst Middle East Tensions, Market Reaction Limited

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Oil prices fell on Monday as market participants reevaluated their risk premiums in the wake of Iran’s weekend attack on Israel, which the Israeli government said caused limited damage.

Brent crude oil, against which Nigerian oil is priced,  dipped by 50 cents, or 0.5%, to $89.95 a barrel while West Texas Intermediate (WTI) oil fell by 52 cents, or 0.6%, to $85.14 a barrel.

The attack, involving over 300 missiles and drones, marked the first assault on Israel from another country in more than three decades. It heightened concerns over a potential broader regional conflict impacting oil traffic through the Middle East.

However, Israel’s Iron Dome defense system intercepted many of the missiles, and the attack resulted in only modest damage and no reported loss of life.

Warren Patterson, head of commodities strategy at ING, noted that the market had largely priced in the potential attack in the days leading up to it. The limited damage and the absence of casualties suggest that Israel’s response may be more measured, which could help stabilize the oil market.

Iran, a major oil producer within OPEC, currently produces over 3 million barrels per day (bpd) of crude oil. The potential risks include stricter enforcement of oil sanctions and the possibility of Israeli targeting of Iran’s energy infrastructure, according to ING.

Nevertheless, OPEC possesses over 5 million bpd of spare production capacity, which could help mitigate any supply disruptions.

Analysts from ANZ Research and Citi Research have suggested that further significant impact on oil prices would require a material disruption to supply, such as constraints on shipping in the Strait of Hormuz. So far, the Israel-Hamas conflict has not had a notable effect on oil supply.

The market remains watchful of Israel’s response to the attack, which could influence the future trajectory of oil prices and broader geopolitical tensions in the region.

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Nigeria’s Crude Oil Production Falls for Second Consecutive Month, OPEC Reports

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Nigeria’s crude oil production declined for the second consecutive month in March, according to the latest report from the Organization of Petroleum Exporting Countries (OPEC).

Data obtained from OPEC’s Monthly Oil Market Report for April 2024 reveals that Nigeria’s crude oil production depreciated from 1.322 million barrels per day (mbpd) in February to 1.231 mbpd in March.

This decline underscores the challenges faced by Africa’s largest oil-producing nation in maintaining consistent output levels.

Despite efforts to stabilize production, Nigeria has struggled to curb the impact of oil theft and pipeline vandalism, which continue to plague the industry.

The theft and sabotage of oil infrastructure have resulted in significant disruptions, contributing to the decline in crude oil production observed in recent months.

The Nigerian National Petroleum Company Limited (NNPCL) recently disclosed alarming statistics regarding oil theft incidents in the country.

According to reports, the NNPCL recorded 155 oil theft incidents within a single week, these incidents included illegal pipeline connections, refinery operations, vessel infractions, and oil spills, among others.

The persistent menace of oil theft poses a considerable threat to Nigeria’s economy and its position as a key player in the global oil market.

The illicit activities not only lead to revenue losses for the government but also disrupt the operations of oil companies and undermine investor confidence in the sector.

In response to the escalating problem, the Nigerian government has intensified efforts to combat oil theft and vandalism.

However, addressing these challenges requires a multi-faceted approach, including enhanced security measures, regulatory reforms, and community engagement initiatives.

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Oil Prices Edge Higher Amidst Fear of Middle East Conflict

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Amidst growing apprehensions of a potential conflict in the Middle East, oil prices have inched higher as investors anticipate a strike from Iran.

The specter of a showdown between Iran or its proxies and Israel has sent tremors across the oil market as traders brace for possible supply disruptions in the region.

Brent crude oil climbed above the $90 price level following a 1.1% gain on Wednesday while West Texas Intermediate (WTI) hovered near $86.

The anticipation of a strike, believed to be imminent by the United States and its allies, has cast a shadow over market sentiment. Such an escalation would follow Iran’s recent threat to retaliate against Israel for an attack on a diplomatic compound in Syria.

The trajectory of oil prices this year has been heavily influenced by geopolitical tensions and supply dynamics. Geopolitical unrest, coupled with ongoing OPEC+ supply cuts, has propelled oil prices nearly 18% higher since the beginning of the year.

However, this upward momentum is tempered by concerns such as swelling US crude stockpiles, now at their highest since July, and the impact of a hot US inflation print on Federal Reserve rate-cut expectations.

Despite the bullish sentiment prevailing among many of the world’s top traders and Wall Street banks, with some envisioning a return to $100 for the global benchmark, caution lingers.

Macquarie Group has cautioned that Brent could enter a bear market in the second half of the year if geopolitical events fail to materialize into actual supply disruptions.

“The current geopolitical environment continues to provide support to oil prices,” remarked Warren Patterson, head of commodities strategy for ING Groep NV in Singapore. However, he added, “further upside is limited without a fresh catalyst or further escalation in the Middle East.”

The rhetoric from Iran’s Supreme Leader, Ayatollah Ali Khamenei, reaffirming a vow to retaliate against Israel, has only heightened tensions in the region.

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