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Manufacturers Spend N226bn Monthly on Gas

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File photo of an employee of German car manufacturer Mercedes Benz working on the interior of a GLA model at their production line at the factory in Rastatt
  • Manufacturers Spend N226bn Monthly on Gas

About 2,000 manufacturers using gas to power their operations spend an average of N200bn a month on power generation, investigation by our correspondent has shown.

The reason, according to manufacturers, is their continued payment for gas in dollars instead of the local currency.

Each of the manufacturers currently using gas spends an average of N113m on gas every month, a figure that is brought about by the high exchange rate.

While the global price of gas goes for $2.50, manufacturers in Nigeria pay $8 for one standard cubic metre of gas.

“An operator who spent N15m a month on gas when the dollar exchanged for N150 currently spends N45m at the current exchange rate of N450/dollar,” the Director-General, Nigerian Textile Manufacturers Association, Hamman Kwajafa, said.

The Chairman, Gas Users Group of the Manufacturers Association of Nigeria, Dr. Michael Adebayo, said manufacturers had been paying over N100m for gas since the regime of buying gas in dollars started two years ago.

“Some people spend as much as N127m a month; others spend as much as N150m a month,” he said.

The manufacturers listed the reversal of the policy on gas as one of the major catalysts that would make the sector rebound this year.

Adebayo said the government needed to remove manufacturers from the category of commercial consumers of gas and put them under strategic industrial sector category.

He said, “Globally, manufacturers are put under strategic industrial sector among gas consumers. We generate employment. We use the gas; we do not sell the gas. People that are selling gas are the ones that are supposed to be on the commercial category, not the people who are using the gas to produce goods for export.

“It is terrible; nobody can budget. We cannot even increase the price of what we are selling because people are not even buying.”

Adebayo suggested an amendment to the Gas Subsidy Gazette of 2008 that put manufacturers in the category of commercial consumers.

A major player in the oil and gas sector and Managing Director of Falcon Petroleum Limited, Prof. Joseph Ezigbo, told our correspondent that gas was benchmarked in dollars because of government policy and the cost of gas flaring.

He said, “It is very expensive to bring gas out of the ground. In the past, our gas was cheap because it was a by-product of oil; so, the gas was already paid for along with the payment for oil.

“But now, we are billing for gas exclusively and the cost of producing just gas alone is higher. So, comparatively, if you put gas and diesel side by side, the gas is still cheaper.”

He added, “The government took a deliberate action to fix the price of gas so that people will not sell differently.

“But there is a proliferation of willing-buyer-willing-seller situation where people are buying not within the ambit of the Nigerian Gas Company, the gas company that controls the price. Under such situation, the gas can vary from $10 to as much as $15.”

But the President, MAN, Dr. Frank Jacobs, told our correspondent that if the electricity generating companies were allowed to buy gas at $2.40, there was no reason for manufacturers to buy at $8.

He said the association had complained to President Muhammadu Buhari as well as the Senate President and Speaker of the House of Representatives.

“It is our hope that this year, something will be done about it because manufacturing is supposed to be a priority sector and should be given some concession. Besides, gas is not imported, it is an indigenous product and there is no justification for denominating it in dollars.

“We have made this position known to the government and we are hoping that they will do something about it.

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

African Economy Set for Steady Growth: 4% Projected for 2025

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Nigerian Breweries - Investors King

Experts are forecasting a robust growth trajectory of 4% for the continent in 2025.

This optimistic projection was highlighted during the ongoing Afreximbank annual meetings, incorporating the Africaribbean Trade and Investment Forum, held recently in Nassau, The Bahamas.

Yemi Kale, Group Chief Economist and Managing Director of Research and International Cooperation at Afreximbank, presented the 2024 African Trade Report and Economic Outlook, saying the African Continental Free Trade Area (AfCFTA) is significant in driving economic integration and growth.

The projected growth rate of 4% for 2025 reflects a steady recovery path for Africa, building on the expected 3.5% growth anticipated for 2024.

This positive outlook comes at a crucial time when African economies are navigating challenges posed by global economic dynamics, including inflationary pressures and supply chain disruptions.

Kale underscored the resilience of intra-African trade, which expanded by 3.2% in 2023 despite a 6.3% overall contraction in Africa’s trade volumes.

This resilience is a testament to the AfCFTA’s potential to bolster regional trade ties and reduce dependency on external markets.

The Afreximbank report also delved into macroeconomic environments, trade patterns, and sovereign debt sustainability dynamics, providing policymakers and business leaders with actionable insights to navigate complexities in global markets effectively.

Nomusa Dube-Ncube, Premier of Kwazulu-Natal, highlighted Africa’s modest share of global GDP and manufacturing output, emphasizing the untapped potential within intra-African trade.

She noted that while Africa currently accounts for only 3% of world trade, intra-regional trade is steadily increasing, indicating a growing economic ecosystem within the continent.

Pamela Coke-Hamilton, Executive Director of the International Trade Centre (ITC), echoed the sentiment, advocating for enhanced trade between Africa and the Caribbean.

The ITC projects trade in goods and services between these regions to reach $1 billion by 2028, underscoring the mutually beneficial opportunities for economic expansion.

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Nigeria Sees 95% Surge in Food Imports Despite Emergency on Food Production

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Zambian economy

Nigeria’s food import bill has surged to a five-year high in the first quarter of 2024, despite the federal government declaring a state of emergency on food production.

Data from the National Bureau of Statistics (NBS) reveals a 95.28 percent increase in food imports to N920.54 billion from January to March, compared to N471.39 billion in the same period last year.

This alarming rise comes amid soaring food inflation, which hit a record 40.5 percent in April, reflecting a 15.92 percent year-on-year increase.

The sharp inflation has left many Nigerians struggling to afford a balanced diet, exacerbating the food security crisis in Africa’s most populous nation.

In March, President Bola Ahmed Tinubu emphasized the government’s commitment to self-sufficiency in food production, stating that Nigeria would not rely on imports to stabilize prices.

“We will not allow the importation of food but rather turn the lack in the country into abundance,” Tinubu declared. However, the latest import figures suggest that this goal remains elusive.

The NBS Foreign Trade Statistics report highlights that the value of food imports via maritime, air, and land routes surged 29.4 percent from N711.4 billion in the fourth quarter of 2023.

Major agricultural goods imported included durum wheat from Canada and Lithuania, valued at N130.26 billion and N98.63 billion, respectively. Frozen blue whitings from the Netherlands accounted for N16.67 billion.

Wheat imports alone constituted N519.75 billion of the total food import bill. The average cost of wheat imports, a significant driver of the food import value, increased by 33 percent compared to the previous quarter’s value of N391.01 billion.

The rising importation of wheat reflects its popularity among Nigerian consumers amid skyrocketing prices of close substitutes like garri and rice.

Overall, Nigeria’s total imports for Q1 2024 amounted to N12.64 trillion, representing a 39.65 percent increase from N9.05 trillion in Q4 2023 and a 95.53 percent rise from N6.47 trillion in Q1 2023. Food imports accounted for 7.3 percent of total imports during the period under review.

The bulk of Nigeria’s imports came from Asia, China, Europe, America, and Africa. Mineral fuels topped the import category with N4.44 trillion, representing 35.09 percent of total imports.

Machinery and transport equipment followed with N3.17 trillion, contributing 25.08 percent, and chemicals and related products at N1.79 trillion, making up 14.13 percent of total imports.

Despite the federal government’s initiatives to boost local food production and reduce dependency on imports, the latest data underscores the persistent challenges facing Nigeria’s agricultural sector.

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Ethiopia Boosts Spending by 21%, Eyes IMF Program for Economic Relief

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Northern Ethiopia - Investors King

Ethiopia has announced a 21% increase in its 2025 budget, marking the first budget since defaulting on a Eurobond payment and committing to economic reform discussions with the International Monetary Fund (IMF).

The nation’s Finance Minister, Ahmed Shide, revealed the new budget details to lawmakers on Tuesday, outlining plans to spend 971.2 billion birr ($16.9 billion) in the fiscal year starting July 2024.

The increased budget reflects Ethiopia’s commitment to addressing its economic challenges head-on. Despite the heightened expenditure, the fiscal deficit is projected to remain stable at 2.1% of gross domestic product (GDP), unchanged from the current fiscal year.

Financing the Deficit

Minister Shide outlined a plan to cover the 358.5 billion-birr deficit through a combination of local and foreign borrowing.

The domestic borrowing component will be managed via government treasury bills and medium-term bonds. Shide emphasized that until substantial external donor support is secured, Ethiopia will continue to rely heavily on its domestic markets to finance budget deficits.

“While the government has secured some external financing from the World Bank and the European Union, negotiating an IMF program will be crucial to alleviate pressure on local banks and secure overall debt relief,” said Giulia Filocca, a senior analyst at Standard & Poor’s for sovereign and international public finance ratings.

IMF Program and Economic Reforms

An agreement with the IMF is seen as a pivotal step for Ethiopia. The nation failed to remit a $33 million coupon payment for its $1 billion bond in December 2023, leading to agreements with some creditors, including the Paris Club, to suspend debt repayments.

In exchange, Ethiopia is expected to reach a staff-level agreement with the IMF, which will likely include economic reforms such as devaluing the birr currency.

“Our expectation is that an IMF program will be signed this year, but the timeline remains unclear due to ongoing political developments and challenges over foreign-exchange reforms,” added Filocca.

Budget Highlights

The new budget includes 451.3 billion birr for recurrent spending, 283.2 billion birr for capital expenditure, and 236.7 billion birr allocated for regional subsidies.

The government projects income of 612.7 billion birr, with tax revenue expected to contribute 502 billion birr and non-tax income 61.6 billion birr. Sector budget support is anticipated to bring in 7.3 billion birr, with aid and grants expected to add 41.8 billion birr.

Economic Outlook

Ethiopia’s economy is forecasted to expand by 8.4% in the coming fiscal year, up from an expected 7.9% growth rate in the current period. The budget increase is designed to support this growth trajectory by enhancing public investment and stimulating economic activity.

“Our partnership with the IMF and other international financial institutions will be key to ensuring Ethiopia’s economic resilience and sustainable growth,” Minister Shide concluded. “We are committed to implementing the necessary reforms to secure a brighter economic future for our country.”

As Ethiopia navigates its economic challenges, the government’s proactive approach to increasing spending and engaging with the IMF reflects a strategic effort to restore fiscal stability and drive long-term economic development.

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