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Solid Minerals Sector Yields Only N2bn in 2016

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Kayode Fayemi
  • Solid Minerals Sector Yields Only N2bn in 2016

Agriculture, mines and steel present the quickest means of diversifying Nigeria’s mono-economy, according to experts. Running with this idea, the Federal Government has emphasised mines and steel at every possible juncture. Despite this emphasis, the sector has only boosted the Federation Account by N2bn in 2016.

The minerals and mines sector has contributed N2bn to the Federation Account in 2016, according to information obtained from the Ministry of Mines and Steel Development.

Compared to the role expected of the sector in a diversified economy, the revenue made from the sector for sharing by the three tiers of government is negligible.

The Federal Government had never hidden the fact that it looks up to the solid minerals sector and agriculture for the much needed diversification of the economy, given the significant reduction in the earnings from the main base of the nation’s economy, oil.

In realisation of the nation’s need for diversification, the Muhammadu Buhari-led government has continued to emphasis the reed to exploit the solid minerals sector in order to increase the earning capacity of the country.

The government signified its interest in the solid minerals sector in the articulation of the 2016 budget. It increased the capital budget of the sector seven times, from N1bn in 2015 to N7bn in 2017.

While other ministries, departments and agencies may be writhing in unreleased capital budget for the year; that of the Ministry of Mines and Steel Development has been fully released; even with five months left to the end of the 2016 budget implementing year.

Experts therefore say it is disappointing that despite the emphasis, the mines and steel sector has contributed only N2bn to the Federation Account within the year.

However, given what had been the lot and performance of the sector in the previous year, some stakeholders believe the N2bn contributed by the sector to the federation account indicates a bright future for the industry.

Given that the sector contribuýted N700m to the federation account in 2015, N2bn represents almost 200 per cent improvement on the contribution of the solid minerals sector to the coffers of the nation.

President of the Miners Association of Nigeria, Alhaji Sani Shehu, said although the government did not do much to increase revenue drive in the sector, the N2bn contributed to the coffers of the government represented a significant increase.

He expressed confidence that the sector would do much better in the years ahead, beginning from 2017.

Shehu said, “When you compare N2bn to the N700m contributed by the sector in 2015, it is a significant improvement. There is high possibility that the sector would surpass the N3.5bn revenue which the government has projected for 2017.

“Do not forget that the revenues we get now are mainly from quarries and cement. The core mining activities have not started yielding revenues. So, there is the likelihood that the sector would now be yielding much more to the government beginning from 2017.”

For the Minister of Mines and Steel Development, Dr. Kayode Fayemi, the most significant thing is that the right foundation is being laid to ensure increased productivity of the sector in the years ahead.

This, he said, included the articulation of the road map for the reform of the mining sector; the inauguration of the Mining Strategic Team; and the resolution of the legal tussle between the Federal Government and an Indian firm over the contentious concession of Ajaokuta Steel Mill.

To increase the participation of the state governments, even with the stipulation of the 1999 Constitution that mining is on the exclusive list, the Federal Government has sought innovative means to avoid constitutional breach.

Fayemi said, “In order to encourage beneficial participation of state governments in the mining sector, we have got approval for the implementation of the constitutionally guaranteed 13 per cent derivation for mineral revenue for states, similar to the derivation that oil-producing states currently enjoy from the federation accounts.

“While in principle, we cannot give states licences as separate legal entities, companies in which the states have an ownership interest can bid for and receive licences. We are also working closely to build the capacity of state governments in structuring Special Purpose Vehicles to participate in mining in their jurisdictions, without undermining private sector.”

On securing the finance required to lift up the sector, Fayemi had said, “We sought for N30bn intervention fund from the Federal Government, partly to focus on exploration, formalisation of artisanal miners, and providing access to funding for genuine miners. For the first time since 2004, we got approval for this amount by securing access to the revolving mining sector component of the Natural Resources Development Fund.

“We are working with the Nigerian Sovereign Investment Authority, the Nigerian Stock Exchange and others to assemble a $600m investment fund for the sector which we hope to conclude and operationalise by the second quarter of 2017.

“We have secured support from the World Bank for $150m for the Mineral Sector Support for Economic Diversification programme, a critical component of which is to provide technical assistance for the restructuring and operation of the Mining Investment Fund, which will make finance available to the ASM operators through development finance, micro-finance and leasing institutions.”

He added that the fund would help to bring back on stream previously abandoned proven mining projects such as tin ore, iron ore, coal, gold and lead-zinc.

So, will the mining sector begin to make significant contribution to the coffers of the nation? Will the nation make the much sought transition from a mineral-rich state to a mining destination?

Stakeholders believe that incremental revenues are possible but they add that the best this administration can do is to lay the necessary foundation blocks for eventual growth because the transition will take a little more time than anxious citizens are willing to allow.

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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South Africa’s Inflation Rate Holds Steady in May

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South Africa's economy - Investors King

South Africa’s inflation rate remained unchanged in May, increasing the likelihood that the central bank will maintain current borrowing costs.

According to a statement released by Statistics South Africa on Wednesday, consumer prices rose by 5.2% year-on-year, the same rate as in April.

The consistent inflation rate is expected to influence the decision of the six-member monetary policy committee (MPC), which is set to meet in mid-July. The current benchmark rate stands at 8.25%, a 15-year high, and has been held steady for six consecutive meetings.

Central Bank Governor Lesetja Kganyago has repeatedly emphasized the need for inflation to fall firmly within the 3% to 6% target range before considering any reduction in borrowing costs.

“We will continue to deliver on our mandate, irrespective of how our post-election politics plays out,” Kganyago stated earlier this month in Soweto. “The only impact is what kind of policies any coalition will propose. If the policies are not sustainable, we might not have investment.”

While money markets are assigning a slim chance of a 25-basis point rate cut in July, they are fully pricing in a reduction by November.

Bloomberg Africa economist Yvonne Mhango anticipates the rate-cutting cycle to begin in the fourth quarter, supported by a sharp drop in gasoline prices in June and a rally in the rand.

The rand has appreciated more than 3% since Friday, following the ANC’s agreement to a power-sharing deal with business-friendly opposition parties and the re-election of President Cyril Ramaphosa.

In May, the annual inflation rates for four of the twelve product groups remained stable, including food and non-alcoholic beverages.

However, transport, alcoholic beverages and tobacco, and recreation and culture saw higher rates. Food prices increased by 4.3% in May, slightly down from 4.4% in April, while transport costs rose by 6.3%, up from 5.7% and marking the highest rate for this category since October 2023.

The central bank’s cautious stance on monetary policy reflects its ongoing concerns about inflation.

Governor Kganyago has consistently voiced worries that the inflation rate is not decreasing as quickly as desired. The MPC’s upcoming decision will hinge on sustained inflationary pressures and the need to balance economic stability with fostering growth.

As South Africa navigates its economic challenges, the steady inflation rate in May provides a measure of predictability for policymakers and investors alike.

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Ghana Reports Strong 4.7% GDP Growth in First Quarter of 2024

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Ghana one cedi - Investors King

Ghana’s economy showed impressive growth in the first quarter of 2024 with the Gross Domestic Product (GDP) expanding by 4.7% compared to the same period last year, according to Government Statistician Samuel Kobina Annim.

This represents an increase from the 3.8% growth recorded in the previous quarter and should provide a much-needed boost to the ruling New Patriotic Party (NPP) as the nation approaches the presidential elections scheduled for December 7.

The positive economic data comes amidst a challenging backdrop of fiscal consolidation efforts under a $3 billion International Monetary Fund (IMF) rescue program.

The government has been working to control debt through reduced spending and restructuring nearly all of its $44 billion debt.

This includes ongoing negotiations with private creditors to reorganize $13 billion worth of bonds.

The latest GDP figures are seen as a vindication of the NPP’s economic policies, which have been under fire from the main opposition party, the National Democratic Congress (NDC).

The opposition has criticized the government’s handling of the economy, particularly its fiscal policies and the terms of the IMF program, arguing that they have imposed undue hardship on ordinary Ghanaians.

However, the 4.7% growth rate suggests that the measures taken to stabilize the economy are beginning to yield positive results.

Analysts believe that the stronger-than-expected economic performance will bolster the NPP’s position as the country gears up for the presidential elections.

“The growth we are seeing is a testament to the resilience of the Ghanaian economy and the effectiveness of the government’s policies,” Annim stated at a press briefing in Accra. “Despite the constraints imposed by the debt restructuring and IMF program, we are seeing significant progress.”

The IMF program, which is designed to restore macroeconomic stability, has necessitated tough fiscal adjustments.

These include cutting government expenditure and implementing structural reforms aimed at boosting economic efficiency and growth.

The government’s commitment to these reforms has been crucial in securing the confidence of international lenders and investors.

In addition to the IMF support, the government has also been focused on diversifying the economy, reducing its reliance on commodities, and fostering sectors such as manufacturing, services, and technology.

These efforts have contributed to the robust growth figures reported for the first quarter.

Economic growth in Ghana has been uneven in recent years, with periods of rapid expansion often followed by slowdowns.

The current administration has emphasized sustainable and inclusive growth, seeking to ensure that the benefits of economic progress are widely shared across all segments of the population.

The next few months will be critical as the government continues its efforts to stabilize the economy while preparing for the upcoming elections.

The positive GDP growth figures provide a strong foundation, but challenges remain, including managing inflation, creating jobs, and ensuring the stability of the financial sector.

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World Bank Commits Over $15 Billion to Support Nigeria’s Economic Reforms

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world bank - Investors King

The World Bank has pledged over $15 billion in technical advisory and financial support to help the country achieve sustainable economic prosperity.

This commitment, announced in a feature article titled “Turning The Corner: Nigeria’s Ongoing Path of Economic Reforms,” underscores the international lender’s confidence in Nigeria’s recent bold reforms aimed at stabilizing and growing its economy.

The World Bank’s support will be channeled into key sectors such as reliable power and clean energy, girls’ education and women’s economic empowerment, climate adaptation and resilience, water and sanitation, and governance reforms.

The bank lauded Nigeria’s government for its courageous steps in implementing much-needed reforms, highlighting the unification of multiple official exchange rates, which has led to a market-determined official rate, and the phasing out of the costly gasoline subsidy.

“These reforms are crucial for Nigeria’s long-term economic health,” the World Bank stated. “The supply of foreign exchange has improved, benefiting businesses and consumers, while the gap between official and parallel market exchange rates has narrowed, enhancing transparency and curbing corrupt practices.”

The removal of the gasoline subsidy, which had cost the country over 8.6 trillion naira (US$22.2 billion) from 2019 to 2022, was particularly noted for its potential to redirect fiscal resources toward more impactful public investments.

The World Bank pointed out that the subsidy primarily benefited wealthier consumers and fostered black market activities, rather than aiding the poor.

The bank’s article emphasized that Nigeria is at a turning point, with macro-fiscal reforms expected to channel more resources into sectors critical for improving citizens’ lives.

The World Bank’s support is designed to sustain these reforms and expand social protection for the poor and vulnerable, aiming to put the economy back on a sustainable growth path.

In addition to this substantial support, the World Bank recently approved a $2.25 billion loan to Nigeria at a one percent interest rate to finance further fiscal reforms.

This includes $1.5 billion for the Nigeria Reforms for Economic Stabilization to Enable Transformation (RESET) Development Policy Financing, and $750 million for the NG Accelerating Resource Mobilization Reforms Programme-for-Results (ARMOR).

“The future can be bright, and Nigeria can rise and serve as an example for the region on how macro-fiscal and governance reforms, along with continued investments in public goods, can accelerate growth and improve the lives of its citizens,” the World Bank concluded.

With this robust backing from the World Bank, Nigeria is well-positioned to tackle its economic challenges and embark on a path to sustained prosperity and development.

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