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Nigeria Struggles to Boost Oil Output – Bloomberg

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  • Nigeria Struggles to Boost Oil Output; Good For OPEC

Nigeria’s progress in curbing militant attacks hasn’t much boosted its oil output. While that’s bad news for a country mired in its worst economic slump in 25 years, it’s making life easier for fellow OPEC members.

Africa’s largest economy was pumping about 1.5 million barrels a day late last month, 30 percent below what it was hoping to achieve and only a modest recovery from an almost 30-year low of 1.4 million in August. While peace efforts have curbed the frequency of attacks in the oil-rich Niger River delta, the Forcados export terminal, the country’s third largest, remains closed and shipments are down at many others.

If these disruptions persist they could have an unintended consequence: helping the Organization of Petroleum Exporting Countries boost oil prices.

“Bringing the Forcados loading terminal back into action is key for Nigeria’s exports,” said Charles Swabey, an oil and gas analyst at BMI Research, in an e-mail. If the government follows through on the peace process, then Nigeria could become “a drag” on OPEC’s push to rebalance the market, he said, “and will likely slow the process down.”

When OPEC and 11 other producers forged an accord in December to reduce their production to eliminate a global oversupply, conflict-prone Nigeria and Libya were exempt. So a significant production increase from either nation would make it harder for the group to fulfill its pledge to reduce output by almost 4 percent.

Amid signs that U.S. output is recovering and prices stalled in the mid $50s, the group can ill afford to have its own members diluting its historic deal. Global benchmark Brent was trading $54.80 a barrel, down 0.5 percent, as of 6:37 a.m. London time on Wednesday.

Peace Dividend

Since the start of negotiations in November with militants — most of whom call themselves the Niger Delta Avengers — Nigeria’s Minister of State for Petroleum Emmanuel Kachikwu has repeatedly said there would be a peace dividend in terms of improved oil-production. In November, the minister was targeting output of 2.2 million barrels by the end of 2016.

In reality, many of the country’s largest export terminals are experiencing disruptions. Kachikwu predicted that Forcados, which shut down in February, would restart in June, then September, then October. There’s currently ”no update” on when the facility can resume operations, said Precious Okolobo, a Lagos-based spokesman for operator Royal Dutch Shell Plc.

Qua Iboe, the nation’s largest crude stream, is still operating at reduced capacity as permanent repairs are completed to damage on its pipeline inflicted in July, Exxon Mobil Corp. said Jan. 31.

About 500,000 barrels a day of production is currently offline because of militancy, Manji Cheto, senior vice president for West Africa at New York-based Teneo Intelligence, said in an e-mail. While the nation’s output recovered to an average of 1.64 million barrels last month from 1.5 million in December, that’s still well below the 2015 average of 1.99 million barrels a day, according to data compiled by Bloomberg.

Amnesty Program

Even before the resurgence of militant activity, Nigeria was struggling as a result of low oil prices. For President Muhammadu Buhari, “a peace deal is critical to his government’s ability to steer the economy out of recession and improve his political capital ahead of the 2019 elections,” said Amaka Anku, an analyst at Eurasia Group.

His administration’s 2017 budget proposed restoring financing for the Presidential Amnesty Program, which pays former militants an allowance, to its pre-2016 level of about $215 million from $66 million budgeted last year, she said. This allowance, started by President Umaru Yar’Adua in 2009 and expanded by President Goodluck Jonathan in 2011, was credited with maintaining a relative peace in the delta before it was cut.

Oando Plc, a Nigerian energy company that lost 20 percent of its production due to attacks last year, is optimistic about Buhari’s measures.

“The government is already engaging the Niger delta inhabitants towards creating an enabling environment for us to drive our production back up,” Group Chief Executive Officer Wale Tinubu said in an interview. “I know for a fact we’re going to get an improvement.”

The Niger Delta Avengers, which claimed most of the attacks last year, threatened last month to widen its campaign after becoming frustrated with government talks.

No Contact

“I am not sure we’re on that path where one can confidently say there’s clear indication of dialogue,” said Ledum Mitee, a lawyer and minority-rights activist directly involved in the peace talks. After community leaders met the president in November, there’s been no further contact, he said by phone from Port Harcourt.

“In spite of this, we have been meeting and trying to appeal to the grassroots that the peace should be maintained,” but the situation could worsen if the militants think they’re not being taken seriously, he said.

Laolu Akande, a spokesman for Vice President Osinbajo, who is leading the peace initiative, didn’t respond to calls and an e-mail seeking comment.

Oil output for the year will likely average 1.7 million barrels a day, aided by new offshore fields coming online in the second half of 2017, according to Eurasia Group’s Anku. She expects a short-lived deal with militants and a return of sustained attacks in 2018.

“I see the federal government engaging the region more constructively,” Dolapo Oni, Lagos-based head of Ecobank Energy Research, said by e-mail. A recent visit by the Nigerian Vice President Yemi Osinbajo to delta is a start “however, attacks will likely continue until we strike the right tone.”

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

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Nigeria’s Non-oil Revenue Now N1.15 Trillion – Minister of Finance

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Mrs. Zainab Ahmed, the Minister of Finance, Budget and National Planning, has said that Nigeria’s non-oil revenue is now N1.15 trillion, representing 15.7 percent above the country’s target. This, she claimed, was a result of the federal government’s efforts at diversifying the nation’s economy.

Mrs. Ahmed disclosed this at the Institute of Directors (IoD) 2021 Annual Directors Conference which was held on Wednesday in Abuja.

According to the News Agency of Nigeria (NAN) the event with the theme: “Creating the Future: Deepening the Corporate Governance Practice through Multi-Sectoral and Multi-Generational Collaborations,” was meant to discuss economic development.

Mrs Ahmed added that the recent development was in line with President’s commitment to further diversifying the Nigerian economy which is heavily dependent on oil. She observed that Nigeria was showing resilience in recovery from recession from coronavirus (COVID-19) pandemic which intensely affected global economies.

The minister said the federal government alongside the private sector had implemented a wide range of monetary measures to stimulate economic recovery, growth and development, job creation and improved standards of living.

She also explained that the government was doing everything to improve and diversify Nigeria’s revenue generation.

Nigeria was quickly able to exit recession and is on her way to path of sustainable growth and we are intensifying efforts to grow and diversify our revenue sources to grow revenue from the current 8 per cent.”

“Our non-oil revenues have grown to N1.15 trillion, representing 15.7 per cent above set target. We are working on the 2021 finance bill and it’s nearing completion. Also, the recent approval of the medium-term national development plan is an important milestone of Buhari’s commitment to delivering sustainable growth and we require strong support and monitoring during implementation,” she said.

Mrs Ahmed reinforced the government’s decision to do something about infrastructure and reduce the cost of production for businesses in the country.

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Intra-Regional Trade Potential a Key Focus in New Report

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A new focus report, produced by Oxford Business Group (OBG) in partnership with the African Economic Zones Organisation (AEZO), shines a spotlight on the continent’s rapidly developing industrial sector, which is poised to become a key driver of broader economic growth as regional integration increases.

Titled ”Economic Zones in Africa – Focus Report”, the report was launched at the AEZO’s 6th Annual Meeting II, which took place on November 25 at the African Continental Free Trade Area (AfCFTA) Secretariat office in Ghana, with participants also able to attend remotely. The meeting was held under the banner “Connecting African Special Economic Zones (SEZs) to Global Value Chains at the era of the AfCFTA” and explored a range of topical issues relating to SEZs, from their potential to boost trade to the impact of Covid-19 on the continent’s supply chains.

The focus report examines the wealth of benefits that the AfCFTA is expected to deliver to both Africa’s economic zones and the businesses located in them, which range from greater market access to a reduction in trade barriers and lower production costs.

The disruption that the pandemic brought to supply chains and the opportunities emerging from the health crisis for businesses to become part of nascent regional value chains across a more closely connected continent are a key focus.

The report also charts the digital transformation taking place in many of Africa’s economic zones, as businesses make the move away from traditional segments to high-tech processes and digital services, adding value to their offerings in the process.

In addition, it provides in-depth analysis of the drive evident among many SEZs to put environmental, social and governance principles and sustainable business practices at the heart of their strategies, at a time when ethical investment and alignment with the UN Sustainable Development Goals are high on the global agenda.

The report includes in-depth case studies and viewpoints by representatives from key industry players namely: Tanger Med; Polaris Parks; Lagos Free Zones; Ghana Free Zones Authority; Misurata Free Zone; and Sebore Farms.

It also includes a contribution from Ahmed Bennis, Secretary General, AEZO, in which he highlights the role that SEZs are playing in the continent’s industrial transformation and the importance of supporting their development.

“Economic zones can play a game-changing role in Africa’s diversification and inclusion by providing end-to-end solutions and services that support industrial upgrades and increase countries’ attractiveness for investment,” he said. “With the implementation of AfCFTA and the post-Covid-19 recovery that the world is beginning to experience, we believe that real investment opportunities exist in Africa at this moment, which can translate into job creation and social and economic development. Africa has resources that need to be developed and economic zones can play a key role in this.”

Bernardo Bruzzone, OBG’s Regional Editor for Africa, added that while African economic zones had experienced production problems during the pandemic due to global supply chain disruptions, ongoing remedial action, including new infrastructure and human capital development, would help provide resilience against future external shocks.

“Africa’s real GDP growth is forecast to reach 3.4% in 2021, with an increase in intra-regional trade and improved connectivity among the facilitators of economic recovery,” Bruzzone said. “Looking ahead, we see economic zones as having a key role to play in helping the AfCFTA achieve its potential through the development of new strategies that will lead to a more diverse, higher-value range of exports.”

The study forms part of a series of tailored reports that OBG is currently producing with its partners, alongside other highly relevant, go-to research tools, including a range of country-specific Growth and Recovery Outlook articles and interviews.

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Lagos Budget N1.4 Trillion for 2022, Budget Surpasses Five Other Southwest States Combined

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Lagos state government has proposed N1.388 trillion budget for the year 2022. The proposed budget was presented to the House of Assembly on Wednesday.

While presenting the proposed budget, Governor Babajide Sanwo-Olu said the State would be spending N325 billion on vital infrastructure projects in key sectors to energise and expand the growth of the State’s economy.

The key areas of growth identified by the Governor include Works and Infrastructure, Waterfront Infrastructure Development, Agriculture, Transportation, Energy and Mineral Resources, Tourism, Entertainment and Creative Industry, Commerce and Industry, Wealth Creation and Employment.

The proposed budget, christened “Budget of Consolidation”, will be the last full-year fiscal plan of the State before the next general election.

About N823.4 billion, representing 59 per cent of the 2022 budget, is earmarked for capital expenditure. Recurrent expenditure, representing 41 per cent, is N565 billion, which includes personnel cost, overhead and debt services.

Of the total proposed expenditure, N1.135 trillion would accrue from Internally Generated Revenues (IGRs) and federal transfers, while deficit financing of N253 billion would be sourced from external and domestic loans, and bonds projected to be within the State’s fiscal sustainability parameters.

The State would be earmarking an aggregate of N137.64 billion, representing 9.92 per cent of the 2022 budget, for the funding of green investment in Environment, Social Protection, Housing and Community Amenities.

This financial proposal is presented with a sense of duty and absolute commitment to the transformation of Lagos to a preferred global destination for residence, commerce, and investment. The budget projects to see a continuing but gradual recovery to growth in economic activity as the global economy cautiously recovers from the impact of the Coronavirus pandemic,” the governor said while presenting the budget to the house.

Meanwhile, the 1.388 trillion budgeted for 2022 is higher than the budget of the five other southwest states combined. For 2022, Ekiti State’s budget is 100.7 billion, Osun 129.7 billion, Ondo 191billion, Oyo 294 billion. Ogun’s budget for 2022 is not yet finalised, but going by their 2021 budget of 339 billion, the combined budget of the five South-West states then amount to 1.053 trillion. With this, Lagos state budget is higher than the five states budget with a difference of 335 billion.

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