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Reps Grill Adeosun, Udoma on Forex Crisis, Rising Inflation

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  • Reps Grill Adeosun, Udoma on Forex Crisis, Rising Inflation

Members of the House of Representatives, on Monday, grilled the Minister of Finance, Mrs. Kemi Adeosun, and the Minister of Budget and National Planning, Senator Udoma Udo Udoma, on the free fall of the naira against the US dollar and the rising inflation in the country.

Lawmakers said the economy remained bleak and had not shown signs that the measures, the Federal Government claimed it had introduced to lead the country out of recession, were picking up.

Adeosun and Udoma had appeared before the House Joint Committees on Finance, Appropriation and Aid/Loans/Debt Management at the National Assembly in Abuja to defend projections in the 2017-2019 Medium Term Expenditure Framework and Fiscal Strategy Paper.

The 2017 budget of N7.29tn, which is already before the National Assembly, was worked out by the government based purely on the projections contained in the MTEF.

The budget, by the provisions of the Fiscal Responsibility Act, 2007, cannot be approved by the legislature until it has first debated and passed the MTEF.

When the ministers appeared before the committees, lawmakers raised several issues, including the “clear and huge disparity” between the official rate of the naira and the street or parallel market value.

For example, while the government’s pairing of the local currency against the USD for the 2017 budget is N305/USD, the street rate is “almost N500/USD.”

Lawmakers also noted that while inflation had already hit “18 per cent,” the government projected that inflation would be 15 per cent in 2017.

The Lead Chairman, Mr. Babangida Ibrahim, stated, “There is something that is fundamentally wrong with these projections and the huge gaps that we are seeing.

“There are even differences in the MTEF document you submitted to us at the National Assembly and the 2017 budget, which Mr. President laid before the National Assembly.

“There has to be a position where all of us can be on the same page in the efforts to rescue this economy out of recession.”

In addition, members demanded details on the government’s plan to borrow N2.32tn to finance the deficit in the budget, including the repayment conditions.

They also noted another “inconsistency” in the drop in revenues to be generated by the Nigeria Customs Service from N862bn in 2016 to N717bn this year when government said it was focusing more on non-oil revenue sources.

Among lawmakers, who grilled the ministers, were the Chairman, Committee on Banking/Currency, Mr. Chukwudi Jones-Onyereri; Chairman, Committee on Aid/Loans, Mr. Adeyinka Ajayi; Deputy Chairman, Committee on Appropriation, Mr. Chris Azubuogu; and Mrs. Aisha Dukku.

In her response, particularly on the crash of the naira, Adeosun blamed it on the greed of market speculators.

She claimed that there was deliberate buying and stocking of dollars to cause panic, when in the real sense, the naira should not have crashed more than N305.

She added that the factors responsible for the naira’s fate were “irrational and emotional” reactions, resulting in unnecessary hike.

“There is nothing to justify what is happening; this difference between the official and the black market rates has no fundamentals to support it.

“In reality, the naira should not be affected more than the N305,” the finance minister stated.

She expressed optimism that the exchange rate hike would crash, while those responsible for the stockpiling of the dollar would lick their wounds.

On his part, Udoma tried to douse tension and explained that the government projected that the inflation rate would be 15 per cent because the current 18 per cent rise was not realistic.

He attributed the present rising trend to “panic” in the system, fuelled by the forex crisis.

The minister argued that during the year, the exchange rate would stabilise in the region projected by the government (N305), which would in turn cut down inflation and keep it at 15 per cent.

“Our target is 15 per cent because that is what we believe it will be.

“The exchange rate is what is causing it now, but we will soon attain stability and inflation will be down naturally at the 15 per cent,” he told lawmakers.

Udoma did not, however, specify how exactly the government would stabilise the market aside from promising that everything was being done to achieve it.

The budget and planning minister also defended the slash in Customs’ revenues from N862bn to N717bn.

He explained that in 2016, the projection could not be met due to the unhealthy state of the economy.

Udoma informed lawmakers that the government felt it was wise to cut down to N717bn, which was considered more realistic to generate in 2017.

“We looked at the performance of the economy and we looked at what was realistic.

“Even the World Bank constantly reviews its figures and projections on Nigeria,” he added.

He believed that there were “positive sides” like the expected royalties from some operations in the oil sector, including the $1.5bn expected from stepping-in rights.

The minister also told House members that early licensing would rake in about $926m, while marginal oil licences would generate over $100m.

The Director-General of the Debt Management Office, Mr. Abraham Nwankwo, admitted that the government would indeed borrow N2.32tn to finance the deficit in the budget.

When asked to specify how the money to be borrowed would be spent, Nwankwo replied that it would be spent in the manner “spelt out by the government in the budget.”

He also claimed that the loan had a “friendly” repayment plan of up to 25 years with a moratorium of between 10 and 15 years.

Incidentally, both arms of the National Assembly have yet to consider President Muhammadu Buhari’s request to borrow $29.96bn.

The Senate had rejected the request on November 1, 2016, while the House has not tabled it since the request was laid before the National Assembly in October 2016.

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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Crude Oil

Oil Prices Continue to Slide: Drops Over 1% Amid Surging U.S. Stockpiles

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Amidst growing concerns over surging U.S. stockpiles and indications of static output policies from major oil-producing nations, oil prices declined for a second consecutive day by 1% on Wednesday.

Brent crude oil, against which the Nigerian oil price is measured, shed 97 cents or 1.12% to $85.28 per barrel.

Similarly, U.S. West Texas Intermediate (WTI) crude slumped by 93 cents or a 1.14% fall to close at $80.69.

The recent downtrend in oil prices comes after they reached their highest level since October last week.

However, ongoing concerns regarding burgeoning U.S. crude inventories and uncertainties surrounding potential inaction by the OPEC+ group in their forthcoming technical meeting have exacerbated the downward momentum.

Market analysts attribute the decline to expectations of minimal adjustments to oil output policies by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known collectively as OPEC+, until a full ministerial meeting scheduled for June.

In addition to concerns about excess supply, the market’s attention is also focused on the impending release of official government data on U.S. crude inventories, scheduled for Wednesday at 10:30 a.m. EDT (1430 GMT).

Analysts are keenly observing OPEC members for any signals of deviation from their production quotas, suggesting further volatility may lie ahead in the oil market.

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Energy

Nigeria Targets $5bn Investments in Oil and Gas Sector, Says Government

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Crude Oil - Investors King

Nigeria is setting its sights on attracting $5 billion worth of investments in its oil and gas sector, according to statements made by government officials during an oil and gas sector retreat in Abuja.

During the retreat organized by the Federal Ministry of Petroleum Resources, Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, explained the importance of ramping up crude oil production and creating an environment conducive to attracting investments.

He highlighted the need to work closely with agencies like the Nigerian National Petroleum Company Limited (NNPCL) to achieve these goals.

Lokpobiri acknowledged the challenges posed by issues such as insecurity and pipeline vandalism but expressed confidence in the government’s ability to tackle them effectively.

He stressed the necessity of a globally competitive regulatory framework to encourage investment in the sector.

The minister’s remarks were echoed by Mele Kyari, the Group Chief Executive Officer of NNPCL, who spoke at the 2024 Strategic Women in Energy, Oil, and Gas Leadership Summit.

Kyari stressed the critical role of energy in driving economic growth and development and explained that Nigeria still faces challenges in providing stable electricity to its citizens.

Kyari outlined NNPCL’s vision for the future, which includes increasing crude oil production, expanding refining capacity, and growing the company’s retail network.

He highlighted the importance of leveraging Nigeria’s vast gas resources and optimizing dividend payouts to shareholders.

Overall, the government’s commitment to attracting $5 billion in investments reflects its determination to revitalize the oil and gas sector and drive economic growth in Nigeria.

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Commodities

Palm Oil Rebounds on Upbeat Malaysian Exports Amid Indonesian Supply Concerns

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Palm Oil - Investors King

Palm oil prices rebounded from a two-day decline on reports that Malaysian exports will be robust this month despite concerns over potential supply disruptions from Indonesia, the world’s largest palm oil exporter.

The market saw a significant surge as Malaysian export figures for the current month painted a promising picture.

Senior trader David Ng from IcebergX Sdn. in Kuala Lumpur attributed the morning’s gains to Malaysia’s strong export performance, with shipments climbing by a notable 14% during March 1-25 compared to the previous month.

Increased demand from key regions like Africa, India, and the Middle East contributed to this impressive growth, as reported by Intertek Testing Services.

However, amidst this positivity, investors are closely monitoring developments in Indonesia. The Indonesian government’s contemplation of revising its domestic market obligation policy, potentially linking it to production rather than exports, has stirred market concerns.

Edy Priyono, a deputy at the presidential staff office in Jakarta, indicated that this proposed shift aims to mitigate vulnerability to fluctuations in export demand.

Yet, it could potentially constrain supply availability from Indonesia in the future to stabilize domestic prices.

This uncertainty surrounding Indonesian policies has added a layer of complexity to palm oil market dynamics, prompting investors to react cautiously despite Malaysia’s promising export performance.

The prospect of Indonesian supply disruptions underscores the delicacy of global palm oil supply chains and their susceptibility to geopolitical and regulatory factors.

As the market navigates these developments, stakeholders remain attentive to both export data from Malaysia and policy shifts in Indonesia, recognizing their significant impact on palm oil prices and market stability.

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