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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.”

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.

Crude Oil

Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

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Oil

Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

Oil retreated from an earlier rally with investment banks and traders predicting the market can go significantly higher in the months to come.

Futures in New York pared much of an earlier increase to $63 a barrel as the dollar climbed and equities slipped. Bank of America said prices could reach $70 at some point this year, while Socar Trading SA sees global benchmark Brent hitting $80 a barrel before the end of the year as the glut of inventories built up during the Covid-19 pandemic is drained by the summer.

The loss of oil output after the big freeze in the U.S. should help the market firm as much of the world emerges from lockdowns, according to Trafigura Group. Inventory data due later Tuesday from the American Petroleum Institute and more from the Energy Department on Wednesday will shed more light on how the Texas freeze disrupted U.S. oil supply last week.

Oil has surged this year after Saudi Arabia pledged to unilaterally cut 1 million barrels a day in February and March, with Goldman Sachs Group Inc. predicting the rally will accelerate as demand outpaces global supply. Russia and Riyadh, however, will next week once again head into an OPEC+ meeting with differing opinions about adding more crude to the market.

“The freeze in the U.S. has proved supportive as production was cut,” said Hans van Cleef, senior energy economist at ABN Amro. “We still expect that Russia will push for a significant rise in production,” which could soon weigh on prices, he said.

PRICES

  • West Texas Intermediate for April fell 27 cents to $61.43 a barrel at 9:20 a.m. New York time
  • Brent for April settlement fell 8 cents to $65.16

Brent’s prompt timespread firmed in a bullish backwardation structure to the widest in more than a year. The gap rose above $1 a barrel on Tuesday before easing to 87 cents. That compares with 25 cents at the start of the month.

JPMorgan Chase & Co. and oil trader Vitol Group shot down talk of a new oil supercycle, though they said a lack of supply response will keep prices for crude prices firm in the short term.

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Crude Oil

Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

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Crude oil

Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

Oil prices rose on Monday as the slow return of U.S. crude output cut by frigid conditions served as a reminder of the tight supply situation, just as demand recovers from the depths of the COVID-19 pandemic.

Brent crude was up $1.38, or 2.2%, at $64.29 per barrel. West Texas Intermediate gained $1.38, or 2.33%, to trade at $60.62 per barrel.

Abnormally cold weather in Texas and the Plains states forced the shutdown of up to 4 million barrels per day (bpd) of crude production along with 21 billion cubic feet of natural gas output, analysts estimated.

Shale oil producers in the region could take at least two weeks to restart the more than 2 million barrels per day (bpd) of crude output affected, sources said, as frozen pipes and power supply interruptions slow their recovery.

“With three-quarters of fracking crews standing down, the likelihood of a fast resumption is low,” ANZ Research said in a note.

For the first time since November, U.S. drilling companies cut the number of oil rigs operating due to the cold and snow enveloping Texas, New Mexico and other energy-producing centres.

OPEC+ oil producers are set to meet on March 4, with sources saying the group is likely to ease curbs on supply after April given a recovery in prices, although any increase in output will likely be modest given lingering uncertainty over the pandemic.

“Saudi Arabia is eager to pursue yet higher prices in order to cover its social break-even expenses at around $80 a barrel while Russia is strongly focused on unwinding current cuts and getting back to normal production,” said SEB chief commodity analyst Bjarne Schieldrop.

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Crude Oil

Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

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oil

Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

Oil prices rose to $65.47 per barrel on Thursday as crude oil production dropped in the US due to frigid Texas weather.

The unusual weather has left millions in the dark and forced oil producers to shut down production. According to reports, at least the winter blast has claimed 24 lives.

Brent crude oil gained $2 to $65.47 on Thursday morning before pulling back to $64.62 per barrel around 11:00 am Nigerian time.

U.S. West Texas Intermediate (WTI) crude rose 2.3 percent to settle at $61.74 per barrel.

“This has just sent us to the next level,” said Bob Yawger, director of energy futures at Mizuho in New York. “Crude oil WTI will probably max out somewhere pretty close to $65.65, refinery utilization rate will probably slide to somewhere around 76%,” Yawger said.

However, the report that Saudi Arabia plans to increase production in the coming months weighed on crude oil as it can be seen in the chart below.

Prince Abdulaziz bin Salman, Saudi Arabian Energy Minister, warned that it was too early to declare victory against the COVID-19 virus and that oil producers must remain “extremely cautious”.

“We are in a much better place than we were a year ago, but I must warn, once again, against complacency. The uncertainty is very high, and we have to be extremely cautious,” he told an energy industry event.

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