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Economy

Expert, Market Leader Differ on Rising Food Prices

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  • Expert, Market Leader Differ on Rising Food Prices

An economic strategist at the Manufacturers Association of Nigeria, Mr. Ambrose Oruche, has blamed the activities of market unions for the rising prices of food in the country.

But the President, Ikeja Shop Owners’ Association, Mr. John Okonkwo, disagrees with this view, saying the association does not fix prices.

Oruche told our correspondent in an interview that the unions fixed prices for their members, making it difficult for free market situation to rule.

He said, “The activities of market men and women unions push prices up because there is no competition.

“When people are unionised, they create an oligopoly where everybody must sell as the union dictates. So, government should find a way of breaking into that cabal and allow competition because competition brings down prices, but when you gang up, it leads to increase in prices.

“If you are passing through Ikeja railway, you will see heaps of oranges and watermelon that are getting bad and smelling. They could not be sold because the unions have insisted that they should not sell below a certain amount. If you go against the union, they will seize your wares.”

Responding, Okonkwo, said, “We have never discussed price fixing during our meetings, not to talk of implementing it.”

He maintained that price increase in the market was as a result of the increase in the rate of the dollar.

He said, “Nigeria has made the dollar a national currency and so whatever affects the dollar is bound to affect prices in the local market. The reason why prices of things are high is that the dollar rate has remained on the high side.

“Since Nigeria is not producing, the local people sell their goods and then use the money to buy imported goods. When they are selling their goods, they have to sell at a rate that will enable them to also buy the items that were imported with the American dollars.”

Apart from the increase in dollar rate, he said the hike in prices of fuel had resulted in high cost of transporting goods from the farms to the market.

In May 2016, the Federal Government increased the pump price of fuel from N97 to N145. This resulted in corresponding increase in transportation cost and equally led to rise in prices of food stuff.

For instance, a 10kg bag of Semovita, which previously sold for N1,700 now sells for N3,000, showing an increase of about 70 per cent.

In the same vein, a 75cl bottle of red palm oil has increased by over 500 per cent from N150 to N1,000; a sachet of indomie noodles has risen from N35 to N100, which is over 200 per cent increase.

The price of a bag of rice has moved from N8,000 to N23, 000; a bag of cement, hitherto selling for N1,000 now sells for N2,300.

Okonkwo said that price increased more in January and February than it did in December.

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.

Economy

Oil Firms Borrowed N130B From Banks in February – CBN

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Operators in the downstream, natural gas and crude oil refining sectors of the Nigerian oil and gas industry borrowed N130b from Nigerian banks in February amid the significant rise in global crude oil prices.

The debt owed by the oil and gas companies rose to N4.05tn in February from N3.92bn in January, according to the latest data obtained from the Central Bank of Nigeria on Monday.

Operators in the upstream and services subsectors owed banks N1.26tn in February, down from N1.27tn a month earlier.

The combined debt of N5.31tn owed by oil and gas operators as of February 2021 represents 25.29 percent of the N21tn loans advanced to the private sector by the banks, according to the sectoral analysis by the CBN of deposit money banks’ credit.

Oil and gas firms received the biggest share of the credit from the deposit money banks to the private sector.

The slump in oil prices in 2020 as a result of the coronavirus pandemic hit many oil and gas companies hard, forcing them to slash their capital budgets and suspend some projects.

A global credit rating agency, Moody’s Investors Service, said last month that the outlook for Nigeria’s banking system remains negative, reflecting expectations of rising asset risk and weakening government support capacity over the next 12 to 18 months.

“Nigerian banks’ loan quality will weaken in 2021 as coronavirus support measures implemented by the government and central bank last year, including the loan repayment holiday, are unwound,” said Peter Mushangwe, an analyst at Moody’s.

The rating agency estimated that between 40 percent and 45 percent of banking loans were restructured in 2020, easing pressure on borrowers following the outbreak of the pandemic.

Another global credit rating agency, Fitch Ratings, had noted in a December 8 report that Nigerian bank asset quality had historically fallen with oil prices, with the oil sector representing 28 percent of loans at the end of the first half of 2020.

It said the upstream and midstream segments (nearly seven percent of gross loans) had been particularly affected by low oil prices and production cuts.

“However, the sector has performed better than expected since the start of the crisis, limiting the rise in credit losses this year due to a combination of debt relief afforded to customers, a stabilisation in oil prices, the hedging of financial exposures and the widespread restructuring of loans to the sector following the 2015 crisis,” it said.

The rating agency predicted that Nigerian bank asset quality would weaken over the next 12 to 18 months.

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Fall in Economic Activities in Nigeria Created N485.51 Billion Fiscal Deficit in January -CBN

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The drop in economic activities in Africa’s largest economy Nigeria led to a N485.51 billion fiscal deficit in January, according to the latest data from the Central Bank of Nigeria (CBN).

In the monthly economic report released on Friday by the apex bank, the weak revenue performance in January 2021 was due to the decline in non-oil receipts following the lingering negative effects of COVID-19 pandemic on business activities and the resultant shortfall in tax revenues.

In part, the report read, “Federally collected revenue in January 2021 was N807.54bn.

“This was 4.6 per cent below the provisional budget benchmark and 12.8 per cent lower than the collection in the corresponding period of 2020.

“Oil and non-oil revenue constituted 45.4 per cent and 54.6 per cent of the total collection respectively. The modest rebound in crude oil prices in the preceding three months enhanced the contribution of oil revenue to total revenue, relative to the budget benchmark.

“Non-oil revenue sources underperformed, owing to the shortfalls in collections from VAT, corporate tax, and FGN independent revenue sources.

“Retained revenue of the Federal Government of Nigeria was lower-than-trend due to the lingering effects of the COVID-19 pandemic.”

“At N285.26bn, FGN’s retained revenue fell short of its programmed benchmark and collections in January 2020, by 41.3 per cent and 7.5 per cent respectively.

“In contrast, the provisional aggregate expenditure of the FGN rose from N717.6bn in December 2020 to N770.77bn in the reporting period, but remained 14.4 per cent below the monthly target of N900.88bn.

“Fiscal operations of the FGN in January 2021 resulted in a tentative overall deficit of N485.51bn.”

The report noted that Nigeria’s total public debt stood at N28.03 trillion as of the end-September 2020, with domestic and external debts accounting for 56.5 percent and 43.5 percent, respectively.

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NNPC Supplies 1.44 Billion Litres of Petrol in January 2021

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The Nigerian National Petroleum Corporation (NNPC) supplied a total of 1.44 billion litres of Premium Motor Spirit popularly known as petrol in January 2021.

The corporation disclosed in its latest Monthly Financial and Operations Report (MFOR) for the month of January.

NNPC said the 1.44 billion litres translate to 46.30 million litres per day.

Also, a total of 223.55Billion Cubic Feet (BCF) of natural gas was produced in the month of January 2021, translating to an average daily production of 7,220.22 Million Standard Cubic Feet per Day (mmscfd).

The 223.55BCF gas production figure also represents a 4.79% increase over output in December 2020.

Also, the daily average natural gas supply to gas power plants increased by 2.38 percent to 836mmscfd, equivalent to power generation of 3,415MW.

For the period of January 2020 to January 2021, a total of 2,973.01BCF of gas was produced representing an average daily production of 7,585.78 mmscfd during the period.

Period-to-date Production from Joint Ventures (JVs), Production Sharing Contracts (PSCs) and Nigerian Petroleum Development Company (NPDC) contributed about 65.20%, 19.97 percent and 14.83 percent respectively to the total national gas production.

Out of the total gas output in January 2021, a total of 149.24BCF of gas was commercialized consisting of 44.29BCF and 104.95BCF for the domestic and export markets respectively.

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