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Reps Grill Adeosun, Udoma on Forex Crisis, Rising Inflation



  • 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.

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



Solar energy - Investors King

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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