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Brexit Bulletin: May Drops Single Market Hint



  • May Drops Single Market Hint

Theresa May has had a torrid start to 2017. On Sunday she made a bid to take back control, signaling that regaining control of immigration and lawmaking are her key priorities in upcoming Brexit talks, even if that costs Britain membership of the single market.

The prime minister told Sky News on Sunday that leaving the European Union will be about “getting the right relationship, not about keeping bits of membership.”

“We are leaving. We are coming out. We are not going to be a member of the EU any longer, so the question is what is the right relationship for the U.K. to have with the European Union when we are outside,” she said.

“We will be able to have control of our borders, control of our laws, but we still want the best possible deal for U.K. companies to be able to trade in and within the EU and European companies to operate and trade in the U.K.”

A report released on Monday by the think tank Civitas outlined how U.K. exporters could be compensated if May can’t strike a free trade deal. It suggested that by levying £13 billion ($15.9 billion) of tariffs on European products, the government could craft an £8.8 billion package of support based on research credits, cash for disadvantaged regions and cheaper energy bills.

May also used the interview to deny the government’s plan to exit the EU is “muddled,” saying she’ll unveil details of her strategy in the coming weeks.

In a bid to broaden her country’s political agenda beyond Brexit by promoting domestic issues, May will on Monday unveil a plan to “transform” attitudes about mental health. Meanwhile, Foreign Secretary Boris Johnson is in New York to meet advisers to President-elect Donald Trump, who tweeted over the weekend that he will meet May in the Spring.

Weekend Wrap

Trade Secretary Liam Fox has identified 50 nations as potential markets as he urges businesses to take advantage of export opportunities, the Press Associated reported. Donor Andrew Cook warned the Conservative Party it will get no more money from him if May withdraws from the single market, according to The Times. Canadian trade expert Jason Langrish told the Observer that Britain risks a “catastrophic Brexit” because a trade deal could take a decade to strike.

Ivan Rogers, who quit last week as ambassador to the EU, told former Prime Minister David Cameron before Christmas that May was botching Brexit, the Sunday Times said. The Mail on Sunday reported that Trump is considering naming Brexit-supporter Professor Ted Malloch as his envoy to Brussels. The Telegraph says takeovers and investment deals in the British tech sector rose by 40% to a new high last year despite the Brexit vote. The Daily Express reported the U.K. wants a share of the 42,000 bottles of wine owned by the EU.

Test for Shoppers

British consumers, who helped the economy emerge largely unscathed from the Brexit vote, now face their next big health check.

Last week Next offered a grim outlook for 2017 following a downbeat holiday selling season. Now Marks & Spencer, department-store chain Debenhams, grocer J Sainsbury and other retailers are poised to provide business updates.

Their updates should reveal clues about any changes to household spending patterns, and whether the economy will continue weathering the U.K.’s decision to leave the EU, according to Bloomberg’s Jill Ward and Sam Chambers. A sharp upswing in inflation in expected this year. That, and uncertainty over the economic outlook could test how willing households are to keep on splurging.

Brexit Bullets

  • Almost half of companies see more risk than opportunity in 2017, says manufacturers organization
  • FTI consulting poll of 161 executives finds 51 percent predicting Brexit will benefit their businesses
  • German Vice Chancellor Sigmar Gabriel tells Der Speigel that an EU breakup is no longer inconceivable
  • Merkel to deliver first key speech of 2017 on Monday about future of Europe
  • 75 percent of continental academics in U.K. “more likely to consider leaving” after Brexit, says poll

On the Markets

The pound fell against the dollar and euro in Asian trading after May’s hints about the single market.

By contrast, the FTSE 100 last week logged its fifth successive weekly gain, the longest winning streak since before last year’s referendum.

According to Chris Hughes of Bloomberg Gadfly, such gains may explain why foreign takeovers of British companies have been surprisingly few given the fall in sterling.

Investors moved quickly to price in the benefits weaker sterling would give U.K.-listed companies, such as Arm Holdings, that derive a large portion of their revenue from overseas. Companies drawing at least 75 percent of their revenue from outside the U.K. are up about 22 percent since the referendum. That cancels out the pound’s 16 percent fall against the dollar in the same period.

According to Chris Hughes of Bloomberg Gadfly, such gains may explain why foreign takeovers of British companies have been surprisingly few given the fall in sterling.

Investors moved quickly to price in the benefits weaker sterling would give U.K.-listed companies, such as Arm Holdings, that derive a large portion of their revenue from overseas. Companies drawing at least 75 percent of their revenue from outside the U.K. are up about 22 percent since the referendum. That cancels out the pound’s 16 percent fall against the dollar in the same period.

And Finally…

Chastened by how the economy proved more resilient in the wake of the referendum than they anticipated, economists at HSBC and Morgan Stanley are hedging their bets slightly this year.

While both are still predicting slowdowns, each last week outlined scenarios in which the economy again tops expectations.

For that to happen in Morgan Stanley’s eyes there would need to be a “Goldilocks Brexit” in which the U.K. and EU enjoy what the bank’s analysts called a “gentle” split, resulting in better inflation and unemployment pictures than they now project.

Over at HSBC, economist Liz Martins still thinks Brexit will be “disruptive, peppered with uncertainty and detrimental to growth.” But she added that negotiations could go smoothly, allowing the breakup to be extended over time with London-based banks perhaps allowed continued access to the bloc for a while. That might encourage businesses to keep investing and sterling to gain by enough to cool inflation and prompt consumers to spend, she said.


CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and, with over a decade experience in the global financial markets.

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Africa Renewable Energy Fund II Secures €125 Million First Close With SEFA and CTF Investments



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The Africa Renewable Energy Fund II has achieved its first close at €125 million, following a joint investment of €17.5 million from The Sustainable Energy Fund for Africa and the Climate Technology Fund through the African Development Bank.

AREF II, a successor to the original Fund, is a 10-year closed-ended renewable energy Private Equity Fund with a $300 million target capitalization. The Africa Renewable Energy Fund II, managed by Berkeley Energy, invests in early-stage renewable energy projects, thereby not only de-risking the most uncertain phase of power projects, but also promoting increased green baseload in Africa’s generation mix.

The Sustainable Energy Fund for Africa and the Climate Technology Fund will each contribute roughly €8.7 million to mobilize private-sector investment into Africa’s renewable energy sector. The Sustainable Energy Fund for Africa will also contribute financing to the AREF II Project Support Facility, which funds technical assistance and early-stage project support to improve bankability.

Other investors include the U.K’s CDC Group, Italy’s CDP, the Netherlands Development Finance Company (FMO) and SwedFund.

“We are proud to be associated with Berkeley Energy and other like-minded investors, and look forward to AREF’s continued success and leadership in promoting sustainable power development on the continent,” said Dr. Kevin Kariuki, the African Development Bank’s Vice President for Power, Energy, Climate and Green Growth.

In 2012, the African Development Bank selected Berkeley Energy, a seasoned fund manager of clean energy projects in global emerging markets to set up AREF. AREF II has a sharper strategic focus than its predecessor on “green baseload” projects that will deliver firm and dispatchable power to African power systems through hydro, solar, wind and battery storage technologies.

Luka Buljan, Berkeley Energy’s Managing Director, said: “We are very excited to have reached this milestone with strong support from our backers. The catalytic tranche from the Sustainable Energy Fund for Africa and the Climate Technology Fund will assist in mobilising private institutional investors up to full fund size of €300 million. We now look forward to concluding the fundraising and delivering projects that will provide clean, reliable and affordable energy across African markets.”

“AREF is intertwined with the Sustainable Energy Fund for Africa’s history and success, and we have worked closely over the last decade to create precedents in difficult markets and challenging technologies. We look forward to continued collaboration to accelerate the energy transition in Africa,” said Joao Duarte Cunha, Manager for Renewable Energy Initiatives at the African Development Bank and Coordinator of the Sustainable Energy Fund for Africa.

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Crude Oil

FG Earned $34.22B From Crude Oil and Gas in 2019 – NEITI



Crude oil - Investors King

The Nigeria Extractive Industries Transparency Initiative (NEITI) on Thursday released its 2019 oil and gas industry audit report, which shows that Nigeria earned N34.22 billion from the oil and gas industry in 2019.

The audit, conducted by Adeshile Adedeji & Co. (Chartered Accountants), an indigenous accounting and auditing firm, reconciled payments from 98 entities. They include 88 oil and gas companies, nine government agencies and the Nigerian Liquefied Natural Gas (NLNG).

The 2019 figure is an increase of 4.88 percent over the $32.63billion revenue realised from the sector in 2018. A breakdown of the earnings showed that payments by companies accounted for $18.90billion, while flows from federation sales of crude oil and gas accounted for $15.32billion.

The report further showed that 10 years (2010-2019) aggregate financial flows from the oil and gas sector to government amounted to $418.544billion, with the highest revenue flow of $68.442 recorded in 2011, while the lowest revenue flow of $17.055 was recorded in 2016.

According to NEITI, the total crude oil production in 2019 was 735.244mmbbls, representing an increase of 4.87 percent over the 701.101mmbbls recorded in 2018. Production sharing contracts (PSCs) contributed the highest volumes of 312.042mmbbls followed by Joint Venture (JV) and Sole Risk (SR) which recorded 310,284mmbbls and 89.824mmbbls respectively. Others are Marginal Fields (MFs) and Service Contracts (SCs) which accounted for 21,762mmbbls and 1,330mmbbls respectively.

The report also showed that total crude oil lifted in 2019 was 735.661mmbbls, indicating a 4.93 percent increase to the 701.090 mmbbls recorded in 2018, with companies lifting 469.010mmbbls, while 266.650mmbbls was lifted by the Nigeria National Petroleum Corporation (NNPC) on behalf of the federation.

Analysis of crude oil lifted by NNPC showed that 159.411mmbbls was for export, while 107.239mmbbls was for domestic refining. 97 percent of the volumes for domestic refining (104.475mmbbls) was utilised for the Direct Sale Direct Purchase (DSDP) programme while the remaining 3 percent (2.764mmbbls) was delivered to the refineries.

NEITI reported that the value of the 2019 domestic crude oil earnings was N2.722 trillion. Of this figure, N518.074billion was deducted for Petroleum Motor Spirit (PMS) under-recovery by the NNPC.

This figure was N213.074billon above the approved sum of N305billion for under-recovery in 2019. Similarly, the sum of N126.664billion was incurred by the Corporation as costs for pipeline repairs and maintenances which showed a difference of N96.378billion from the approved sum of N30.287billion for that purpose.

The report also pointed out that N31.844billion was also deducted for crude and product losses due to theft.

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Crude Oil

Oil Prices Drop on Stronger U.S Dollar



Crude oil - Investors King

The strong U.S Dollar pressured global crude oil prices on Thursday despite the big drop in U.S crude oil inventories.

The Brent crude oil, against which Nigerian oil is priced, dropped by 74 cents or 1 percent to settle at $73.65 a barrel at 4.03 am Nigerian time on Thursday.

The U.S West Texas Intermediate crude oil depreciated by 69 cents or 1 percent to $71.46 a barrel after reaching its highest since October 2018 on Wednesday.

Energy markets became so fixated over a robust summer travel season and Iran nuclear deal talks that they somewhat got blindsided by the Fed’s hawkish surprise,” said Edward Moya, senior market analyst at OANDA.

The Fed was expected to be on hold and punt this meeting, but they sent a clear message they are ready to start talking about tapering and that means the dollar is ripe for a rebound which should be a headwind for all commodities.

The U.S. dollar boasted its strongest single day gain in 15 months after the Federal Reserve signaled it might raise interest rates at a much faster pace than assumed.

A firmer greenback makes oil priced in dollars more expensive in other currencies, potentially weighing on demand.

Still, oil price losses were limited as data from the Energy Information Administration showed that U.S. crude oil stockpiles dropped sharply last week as refineries boosted operations to their highest since January 2020, signaling continued improvement in demand.

Also boosting prices, refinery throughput in China, the world’s second largest oil consumer, rose 4.4% in May from the same month a year ago to a record high.

This pullback in oil prices should be temporary as the fundamentals on both the supply and demand side should easily be able to compensate for a rebounding dollar,” Moya said.


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