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3,000 Electrical/Electronics Workers Lose Jobs in Seven Months

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Electricity
  • 3,000 Electrical/Electronics Workers Lose Jobs in Seven Months

Local manufacturers of electrical and electronics items, including cables, meters, light bulbs, fittings and accessories, have laid off more than 3,000 workers between March and September this year.

This is as they continue to grapple with low capacity utilisation arising from high cost of funds, competition from cheap and substandard imports and general non-conducive operational business environment.

Investigations by our correspondent revealed that in addition to the challenges, the continued inability of the manufacturers to access foreign exchange for the purchase of essential raw materials and machinery for production in the past 21 months has taken a heavy toll on the sector, leading to more factory closures and job losses.

For instance, a leader in the cable manufacturing industry, Coleman Wires, has laid off more than 50 per cent of its workforce within the period.

The Managing Director, Coleman Wires, Mr. George Onofowokan, told our correspondent, “I am the Chairman of the Electrical/Electronics Group of the Manufacturers Association of Nigeria and to say there have been over 3,000 job losses in that sector between March and now is putting it mildly.

“In our own firm, we have laid off more than 50 per cent of our staff members. The market is not moving up; inventory level and production are contracting. We invested N2.5bn in a factory last year; that factory today is not functioning at up to five per cent capacity because of lack of raw materials. Although we are still servicing the loan we took to set up the factory.

“What makes the situation in the cable industry more critical is the fact that 80 per cent of the raw materials we need for production are imported and there are no local alternatives, because the factories producing the local alternatives are not functioning. Even if one was to get local alternatives, the funds to buy them are not forthcoming from the banks.”

A former Chairman, Infrastructure Committee, MAN, and Managing Director, Bennett Industries Limited, Mr. Reginald Odiah, said his business of manufacturing and selling light bulbs and fittings had become so challenging that he had sacked all his employees and now relied on casual workers whom he only called when he had any job to do.

The industrialist, who has been operating in the sector for over 30 years, once had a flourishing business making electrical appliances and accessories. He was at a point the Chairman of the National Electricity Regulatory Commission’s Technical Committee on Operationalisation of Micro-Grid industrial Cluster Initiatives.

But he said things had got so tough that he had to give up his factory space because he could not afford to keep it going again, adding that the space was later acquired by a church.

Like Coleman Wires, the bulk of Bennett Industries’ raw materials is imported and the company faces the challenge of access to forex, but beyond that, Odiah said he had battled high cost of funding and low patronage from Nigerians for long, which had exposed his firm to unhealthy competition from cheap imported light bulbs and fittings.

“Manufacturing locally is very challenging. If I am borrowing now, I will borrow at an interest rate of 25 per cent for 360 days. When local manufacturers produce, taking all the costs into consideration, their products are seen as expensive. Even though the quality is better than the imported ones, people will choose to patronise the imported low quality ones,” he explained.

Another local meter manufacturer and the Managing Director, Mojec International Limited, Ms. Chantel Abdul, said she had been playing a waiting game with the banks to see if she could get forex to produce meters, which would be sold to electricity distribution companies.

While waiting, the firm has had to scale down on the number of her employees, because of the lack of activity in the factory.

Abdul said, “Before now, we had issues with patronage but since the campaign for local patronage started, the Discos have been patronising us. The issue now is that we are unable to produce enough meters to sell to them because a lot of our raw materials are imported.

“Although the CBN has prioritised the local manufacturing sector in terms of forex allocations, the quantity is very low compared to how much we really need.”

She added, “In addition to this is the lack of access to a single-digit interest financing to allow us produce and sell to the Discos for future payment arrangement. That is the kind of arrangement foreign suppliers are offering them, a situation where you can supply them the meters and they pay over a period of 34 months or more; but no bank is willing to give you a facility that lasts for that length of time.

“This endless wait for forex may force our customers to turn to foreign meter suppliers.”

During a presidential policy dialogue with Vice-President Yemi Osinbajo in August, the President, MAN, Dr. Frank Jacobs, disclosed that 50 more companies had shut down between March and September due to lack of raw materials.

According to Onofowokan, more than 1,000 manufacturing firms have shut down operations nationwide during that period.

As a way out of the problem, an analyst and the Director-General of the West African Institute for Financial and Economic Management, Prof. Akpan Ekpo, suggested that since the CBN had opened a special window of intervention for the manufacturers and it did not seem to be solving their problems, the apex bank should take responsibility for disbursing the funds to the sector instead of leaving it in the hands of the commercial banks.

He said, “There are CBN offices all over the country. The manufacturers can access the special funds directly from the CBN, and the apex bank can in turn monitor to see that the money is well utilised. This is a short-term approach. In the long term, Nigeria can start looking for ways of producing these raw materials locally, or where it can import them cheaply from.

“Since what we basically have is a supply problem, the manufacturers should endeavour to export what they produce instead of just manufacturing for sale in Nigeria. If they export, they can earn the forex they need for their operations instead of relying on the government for supply.”

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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Crude Oil

Oil Prices Inch Down Amid Dollar Strength and Interest Rate Concerns

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Crude oil prices declined on Monday as the U.S. dollar strengthened and concerns over potential interest rate hikes resurfaced.

Brent crude oil, against which Nigerian oil is priced, slipped marginally by 3 cents to settle at $85.21 per barrel following a modest 0.6% decline on Friday.

Similarly, U.S. West Texas Intermediate (WTI) crude oil saw a minimal decrease of 2 cents to close at $80.71 per barrel.

Market analysts pointed to the robust performance of the U.S. dollar, which gained ground after the release of positive Purchasing Managers’ Index (PMI) data on Friday.

Tony Sycamore, a markets analyst at IG in Sydney, noted, “The U.S. dollar has opened bid this morning and appears to have broken higher following better U.S. PMI data on Friday night and political concerns ahead of the French election.”

A stronger dollar typically makes dollar-denominated commodities like oil less attractive for holders of other currencies, putting downward pressure on prices.

Last week, however, both Brent and WTI crude contracts managed to gain approximately 3% each.

This was largely driven by increasing signs of demand recovery for oil products in the U.S., the world’s largest consumer of crude oil. Additionally, ongoing supply constraints enforced by OPEC+ further supported market sentiment.

According to ANZ analysts, U.S. crude inventories continued their decline while gasoline demand recorded a seventh consecutive weekly rise.

Moreover, jet fuel consumption has rebounded to levels last seen in 2019, indicating a robust recovery in travel-related fuel demand.

Speculative activity in the oil market has also been notable, with analysts from ING observing an increase in net-long positions in ICE Brent as traders adopt a more positive outlook heading into the summer months.

“We remain supportive towards the oil market with a deficit over the third quarter set to tighten the oil balance,” they stated.

Despite these bullish indicators, geopolitical tensions persisted, providing a floor for oil prices.

Escalating conflicts in the Middle East, including the Gaza crisis and increased drone attacks on Russian refineries by Ukrainian forces, continued to underpin market sentiment.

In South America, Ecuador’s state oil company Petroecuador declared force majeure on deliveries of Napo heavy crude for exports due to severe weather conditions.

Heavy rains led to the shutdown of a critical pipeline and oil wells, impacting production and exports.

Meanwhile, in the U.S., the number of operating oil rigs fell by three to 485 last week, marking the lowest count since January 2022, according to Baker Hughes’ weekly report.

Looking ahead, the interplay between the U.S. dollar’s strength, geopolitical developments, and economic indicators such as PMI data will likely dictate short-term oil price movements.

Investors and analysts remain vigilant for any shifts in these factors that could influence global oil market dynamics in the coming weeks.

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Gold

First Commercial Gold Transaction Nets Nigeria $5 Million in Foreign Reserves

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The Ministry of Solid Minerals Development has concluded its first commercial transaction under the National Gold Purchase Program (NGPP), bolstering the nation’s foreign reserves by $5 million.

Minister of Solid Minerals Development, Dele Alake, announced the successful sale of over 70 kilograms of gold, refined to meet the stringent London Bullion Market Association Good Delivery Standard.

Speaking at the presentation ceremony, Alake emphasized the economic significance of the transaction, stating that it injects approximately NGN 6 billion into the rural economy.

He lauded President Tinubu for his unwavering support for reforms in the solid minerals sector, highlighting the pivotal role of the NGPP in enhancing Nigeria’s foreign reserves and bolstering the value of the Naira.

“This transaction represents a strategic move to use the Nigerian Naira to acquire a liquid asset denominated in United States Dollars, demonstrating a viable strategy for fiscal and monetary stability,” Alake stated.

He further expressed confidence in the NGPP’s ability to contribute to Nigeria’s economic diversification agenda, fostering greater economic confidence and attracting foreign investment.

Executive Secretary of the Solid Minerals Development Fund, Fatima Shinkafi, explained that adherence to the London Bullion Market Good Delivery Standard ensures that Nigeria’s gold exports meet global trading requirements.

She emphasized that only gold bars meeting these standards are acceptable in the settlement of Loco London contracts, reinforcing Nigeria’s credibility in the global gold market.

President Tinubu, upon receiving a symbolic gold bar, commended the Ministry for achieving a crucial milestone in the nation’s economic diversification efforts.

He described the transaction as a concrete step towards realizing the objectives of the Renewed Hope Agenda, aimed at reducing economic dependence on oil and gas revenues.

Through initiatives like the NGPP, Nigeria aims to further enhance its gold reserves, promote economic stability, and create an environment conducive to sustainable economic growth.

The successful completion of the first commercial gold transaction marks a pivotal moment in Nigeria’s journey towards becoming a key player in the global gold market, driving economic prosperity and resilience.

The Ministry of Solid Minerals Development continues to advocate for supportive policies and regulatory frameworks that promote transparency, efficiency, and sustainability in the mining sector, laying the groundwork for future economic growth and development.

As Nigeria moves forward with its gold refining and export initiatives, stakeholders anticipate continued progress in diversifying revenue streams and strengthening the nation’s economic resilience on the global stage.

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Crude Oil

Oil Prices Slip as Japan’s Rising Inflation Signals Rate Hikes

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markets energies crude oil

Crude oil fell in early trading on Friday as concerns over sustained high interest rates in both Asia and the United States weighed on the outlook.

This trend is attributed to Japan’s increasing inflation, which is prompting expectations of imminent rate hikes by its central bank.

Brent crude edged declined by 11 cents to settle at $85.60 per barrel while the U.S. crude oil declined by 9 cents to $81.20 per barrel.

Recent data revealed that Japan’s core consumer prices rose by 2.5% in May compared to the same month last year. This increase marks a growth from the previous month, suggesting that the Bank of Japan is likely to raise interest rates in the upcoming months to curb inflation.

In the United States, data released on Thursday showed a decrease in the number of new unemployment claims for the week ending June 14, indicating continued strength in the job market.

This persistent robustness in employment raises the likelihood that the U.S. Federal Reserve will maintain higher interest rates for a longer period.

Higher interest rates typically have a dampening effect on economic activity, which can subsequently reduce oil demand.

The prospect of prolonged elevated interest rates in two major economies has therefore put downward pressure on crude oil prices.

Despite the downward trend, oil prices received some support from the latest figures from the Energy Information Administration (EIA).

The data showed a drawdown in U.S. crude inventories by 2.5 million barrels in the week ending June 14, bringing the total to 457.1 million barrels. This exceeded analysts’ expectations, who had predicted a 2.2 million-barrel reduction.

Also, gasoline inventories fell by 2.3 million barrels to 231.2 million barrels, contrary to forecasts that anticipated a 600,000-barrel increase.

“Gasoline finally came to life and posted its first strong report of the summer driving season,” remarked Bob Yawger, director of energy futures at Mizuho in New York, highlighting the surprising uptick in gasoline demand.

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