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Operators Eye $600m Local Content Fund

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  • Operators Eye $600m Local Content Fund

With the Nigerian Content Development and Monitoring Board set to ease access to the $600m Nigerian Content Development Fund, industry operators have expressed interest in the fund.

The Chairman, Petroleum Technology Association of Nigeria, Mr. Bank-Anthony Okoroafor, told our correspondent that many members of the association had applied for the fund, but the modalities had been the challenge.

He spoke on Wednesday on the sidelines of the 6th Practical Nigerian Content Conference in Abuja.

He said, “I think what the board is trying to do is to make it easier to access. None of our members has really been able to access it because of the too many hurdles. But now, the new board is coming up with clear guidelines for accessing the fund.”

Okoroafor, who noted that it was difficult to borrow money from the banks because of the high interest rates, said, “If you have any fund whose interest rate is lower, and if you make it easy for people to access, a lot of people will be interested. But what matters is the conditionality attached to it.

“Whoever wants to access the fund, the people managing it must find out whether what the fund will be used for is in line with the objectives of the fund, which include building capacity and adding to your facilities.”

The Executive Secretary, NCDMB, Mr. Simbi Wabote, also said at the conference on Wednesday that the board was working to close skills, infrastructure and assets ownership gaps in the oil and gas industry.

The NCDF, which is funded from the one per cent deducted from the value of all upstream contracts, is underpinned by Section 104 of the Nigerian Oil and Gas Industry Content Development Act.

The fund was designed to provide partial guarantees and 50 per cent interest rebate to service companies that obtain facilities from commercial banks for asset acquisition and projects execution.

The Act provides that the funds be used for the development of capacity in the oil and gas industry.

The NCDMB executive director said, “Any time you assemble a gathering and you talk about the Nigerian Content Development Fund, everybody wants to know what will become of the fund. What this current board will assure you is that within the shortest time possible, we will come out with a clear blueprint on how that fund will be utilised to promote local content development in our industry.

“We will no longer have a situation where people continue to wonder what is happening to that fund, if it has been put into political use or into local content development. One thing I can assure you is that very soon, a transparent process of accessing that fund will be made known to all stakeholders.”

Noting that the fund had grown over the years, Wabote said six Nigerian companies had tapped it for capacity development.

He said, “I must say that it is not directly giving money to those six Nigerian contractors; it is about guaranteeing some of the loans that they got from the banks because we are not a funding institution.

“Not much has been expended from that fund for capacity development. Part of the strategy of this new board is to come out with a very transparent process through which genuine Nigerian contractors involved in the oil and gas sector will have access to the fund.

“While the people who are contributing worry about the fund they have contributed, there are a lot of Nigerian companies that are not making their contributions as enshrined in the Act. This board will look at strategies to make them comply with the provisions of the Act.”

The NOGICD Act seeks to develop Nigerian content across the oil and gas value chain – upstream, midstream and downstream sectors, according to Wabote.

He said, “There is an opportunity for demand-driven investments across the oil and gas industry value chain. Today, a lot of people ask me, why is Nigerian content not also focusing on the downstream and midstream activities? My response is simple: with the new board and the council, our focus will go beyond the operators in the upstream sector; our activities are all-encompassing as enshrined in the Act.”

The NCDMB boss said one of the interventions the board had put in place to attract investments and stimulate domiciliation of manufacturing activities was the Equipment, Components Manufacturing Initiative.

He said the ECMI was developed to promote the local manufacturing of equipment, components, spare parts and other accessories for the Nigerian oil and gas industry.

He said, “So far, we have issued 1,430 certificates as of October 31, 2016. This translates to investment commitment valued to about $2bn as of today. The board ensures that the commitments are complied with before reviewing or issuing certificates to companies.

“Some other initiatives that the board has put in place to stimulate domiciliation of manufacturing and other value-adding activities include the establishment of the oil and gas park that will serve as the manufacturing hub for equipment and the provision of funding support for local manufacturers of the LPG cylinders.”

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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Economy

Nigeria Aims for N2 Trillion Annual Revenue from Marine and Blue Economy by 2027

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NIMASA

Nigeria has set an ambitious target of generating N2 trillion in annual revenue from this sector by the year 2027.

The revelation came from the Minister of Marine and Blue Economy, Adegboyega Oyetola, during an ongoing ministerial briefing in Abuja on Tuesday.

Outlined within a comprehensive strategy, the plan involves a three-pronged approach to significantly increase revenue generation and operational efficiency within the marine sector.

Oyetola highlighted the imperative of automating revenue collection processes to eradicate bottlenecks and enhance transparency and accountability.

By deploying revenue assurance technologies, the aim is to ensure accurate billing aligned with established contracts and services rendered, thereby preventing revenue leakage.

The ministry plans to commission revenue enhancement studies targeting various departments and agencies to identify avenues for maximizing the use of existing assets.

This includes leveraging concessions to the private sector and fostering public-private partnerships to ensure efficient utilization of national assets.

Recognizing the vast potential of the blue economy, Nigeria intends to embark on investment promotion campaigns aimed at both domestic and international investors.

This strategy seeks to unlock new revenue streams within the marine sector, paving the way for sustainable economic growth.

Minister Oyetola emphasized the importance of harnessing Nigeria’s marine and blue economy, noting its significant role in driving economic diversification and reducing dependency on traditional sectors.

He underscored the government’s commitment to fostering an enabling environment for investment and innovation within the sector.

The ambitious revenue target reflects Nigeria’s determination to tap into its vast marine resources, which have long been underutilized.

With strategic planning and concerted efforts, the country aims to position itself as a key player in the global blue economy, unlocking opportunities for sustainable development and prosperity.

As Nigeria charts its course towards achieving this ambitious goal, stakeholders across government, industry, and civil society will play a pivotal role in driving forward the necessary reforms and initiatives to realize the full potential of the marine and blue economy.

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Investor Optimism Dwindles One Year After Tinubu’s Reforms

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Bola Tinubu

One year into President Bola Tinubu’s administration, the initial investor enthusiasm over his ambitious economic reforms is fading.

Despite significant changes aimed at revitalizing Nigeria’s economy, persistent challenges such as currency volatility and high inflation are dampening investor confidence.

Upon assuming office in late May 2023, Tinubu enacted a series of reforms intended to attract foreign investment and boost dollar liquidity.

These included eliminating costly fuel subsidies, appointing ex-Citibank executive Olayemi Cardoso as the new central bank governor, and overhauling the country’s exchange-rate policies, which effectively devalued the naira.

While these steps initially sparked optimism and increased dollar inflows, the momentum has since waned.

Kevin Daly, a portfolio manager at London-based Abrdn Investments Ltd., highlighted the need for further stability in Nigeria’s foreign exchange market before considering additional investments in local currency bonds.

“We are likely to add to local currency bonds once FX volatility declines, but the timing of that remains up in the air,” Daly remarked.

He emphasized that the central bank cannot be the sole provider of FX liquidity for the market, calling for more foreign portfolio flows and a degree of de-dollarization.

Data from Tellimer Ltd. reveals that investor inflows into Nigeria’s foreign-exchange market fell by nearly 20% in April, averaging $200 million daily, and dropped further to $180 million in the first three weeks of May.

Since June, the naira has depreciated by almost 67% against the dollar. Additionally, the reintroduction of fuel subsidies, following public backlash over rising living costs, has further complicated the economic landscape.

Inflation remains a significant hurdle, with rates soaring to approximately 33.7%, far outpacing the central bank’s policy rate of 26.25%.

This has deterred investors like Ayo Salami, chief investment officer at Emerging Markets Investment Management Ltd., from venturing into local currency bonds, deeming them unattractive under current conditions.

Another critical issue is the repatriation of funds. While Nigeria offers higher equity valuations and yields compared to some emerging and frontier markets, peers like South Africa, Egypt, Kenya, Turkey, and Pakistan present lower repatriation risks, more credible policy frameworks, and advanced policy corrections.

Ladi Balogun, CEO of Lagos-based FCMB Group, underscored the importance of consistent and clear policy direction to restore investor confidence.

“I think as long as we can be consistent and clear about policy direction, when it comes to monetary policy and the like, then I think you will see confidence return, then you will see liquidity return,” Balogun stated. “That is when you will see international investors come back.”

As Nigeria navigates these economic challenges, the road to restoring and sustaining investor confidence remains complex and fraught with hurdles. The coming months will be crucial in determining whether Tinubu’s administration can achieve the stability and growth it seeks.

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IMF Boosts China’s 2024 Growth Forecast to 5% Amid Strong Start

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The International Monetary Fund (IMF) has raised its forecast for China’s economic growth in 2024 to 5%, up from its earlier estimate of 4.6%.

This adjustment reflects a robust expansion at the start of the year and additional government support aimed at stabilizing and invigorating the economy.

The IMF’s latest projection aligns with China’s target growth rate of around 5% for the year.

The upward revision comes on the heels of a better-than-expected 5.3% growth in the first quarter, indicating a strong recovery trajectory despite ongoing challenges in the housing market, which continues to dampen domestic demand.

Gita Gopinath, the IMF’s First Deputy Managing Director, highlighted the dual forces driving this positive outlook.

“We certainly are seeing that consumption is recovering, but it has some ways to go,” Gopinath noted in a recent interview with Bloomberg News.

“The strength we’re seeing in public investment remains. Private investment is still weak, mainly because of the weakness in the property sector.”

The IMF’s statement emphasized the need for Beijing to enhance monetary and fiscal support, particularly addressing the protracted housing crisis.

Gopinath underscored the urgency of protecting buyers of pre-sold unfinished homes and accelerating the completion of these projects to stabilize the sector.

Earlier this month, Chinese authorities unveiled new measures to support the real estate market.

These include easing down-payment requirements for buyers and injecting 300 billion yuan ($42 billion) of central bank funding to assist local governments in purchasing excess inventory from developers. However, Gopinath argued that these steps should be expanded.

“Fiscal policy should prioritize providing one-off central government financial support for the real estate sector,” she stated, adding that the current low inflation environment offers room for further monetary easing.

Beyond the domestic landscape, the IMF is also monitoring the implications of international trade tensions. Gopinath expressed concerns over the rising number of trade restrictions globally, noting that about 3,000 new trade barriers were introduced in 2023 alone, triple the number in 2019.

These developments are contributing to an emerging trend of geopolitical fragmentation in global trade.

“There has been an increase in more restrictive trade policies across countries,” Gopinath said. “Trade across countries that are more geopolitically aligned is holding up better than trade across countries that are less geopolitically aligned.”

The IMF’s revised forecast underscores a cautiously optimistic outlook for China’s economy.

While strong public investment and government support are driving growth, the ongoing weaknesses in the property sector and global trade tensions present challenges that need to be carefully navigated.

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