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Nigeria’s Oil Exports Face Fresh Setbacks

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  • Nigeria’s Oil Exports Face Fresh Setbacks

While the nation has seen some improvement in its crude oil output, the fresh threat of production rise from the United States and Libya looks set to dampen Nigeria’s export of the commodity.

The nation’s oil output, which was drastically reduced by militant attacks last year, recovered to an average of 1.64 million barrels per day last month from 1.5 million bpd in December, according to data compiled by Bloomberg.

But production and exports of Nigeria’s popular crude grade, Forcados, continued to be shut in due to a sabotage-related spill on the subsea Forcados pipeline.

Industry analysts have said the decision by the Organisation of Petroleum Exporting Countries to cut output by over 1.2 million bpd, coupled with another 600,000 bpd cut by a group of non-OPEC countries, will tighten oil supply and result in higher crude oil prices.

Analysts from Ecobank forecast oil prices to average $48.74 this year and range between $38 and $63. Global benchmark, Brent crude, traded around $56 on Friday.

The Head of Energy Research, Ecobank Group, Mr. Dolapo Oni, said these higher oil prices could potentially make it attractive for US oil exports to reach markets as far as Asia.

He said, “Already, a few traders such as Trafigura and oil producer BP’s trading arm are arranging cargoes to Asia; we suspect that as oil prices stabilise in the higher 50s, we could see more of these sort of trades.

“This could potentially create a challenge for Nigerian crude grades, resulting in a similar cut in prices across grades such as had to be done in 2016.”

Oni stated that while Nigeria managed to export an average of 200,000 bpd to the US in 2016 due to decline in shale production, resurgence in shale production as oil prices rise and stay above $50 could see the country’s exports to the US also shrink.

“Another challenge is also the rise in Libyan oil output, which could potentially challenge Nigeria’s cargoes in Europe,” he said.

He noted that Libya was also exempted from the OPEC cut like Nigeria and “is looking to ramp up production from 685,000 bpd currently to over one million bpd by the end of 2017, most of which will be targeted at refineries in Europe, which find Nigerian crude equally attractive or comparable.

“This could potentially put pressure on the official selling prices of Nigerian crude grades, and create extended overhangs of crude cargoes and revenue cycles, etc.,” Oni said.

The country’s oil differentials fell to their lowest in more than a year in January as surplus cargoes struggled to find outlets in a market oversupplied with light crude oil, according to Reuters.

Sellers slashed premiums for Qua Iboe to as low as 50 cents per barrel versus dated Brent, with traded values expected below that.

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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Economy

World Bank Calls on Nigeria to Impose Special Taxes on Alcohol and Tobacco

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The World Bank Group has made a call to the Federal Government of Nigeria, urging the government to impose special taxes on alcohol, cigarettes and beverages that are highly sweetened in order to improve primary healthcare conditions in the country.

Shubham Chaudhuri, who is the Country Director for Nigeria in the World Bank Group, said that an improvement in healthcare in Nigeria will come by taxing the things that are “killing us.” He said that the economic rationale for the action is quite strong if lives are to be saved and a healthier Nigeria achieved.

Chaudhuri made the call on Friday, at a special National Council on Health meeting which was organized by the Federal Ministry of Health in Abuja. Chaudhuri stated that placing special taxes on tobacco, sweetened beverages and alcohol would reduce the health risks which come with their consumption and expand the fiscal space for universal health coverage after COVID 19.

The country director also said that investing in stronger health systems for all would make significant contributions to the fight against inequality and the rising poverty situation in the country. He went on to add that increasing health tax would provide an extra advantage of reducing healthcare cost in the future, by hindering the growth of the diseases which are caused by tobacco, alcohol and sugar-sweetened beverages.

The representative of the WHO in Nigeria, Dr Walter Mulombo said that he could confirm the large health needs of Nigerians, as well as the efforts being made to meet those needs. He said this was based on the fact that he had been to over half of Nigeria’s states in less than two years of being in the country.

Mulombo then noted that although the coronavirus exposed weaknesses in the global economy (not excluding health), it could be considered as a unique opportunity for a thorough examination of existing resources and mechanisms to prepare for a more resilient future.

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Nigeria’s VAT Revenue Falls to N500 Billion in Q3 2021, Manufacturing Sector in the Lead

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In the third quarter of 2021, Nigeria generated a total sum of N500.49 billion as value-added tax which represents a 2.3% decline when compared to the N512.25 billion recorded in the second quarter of the year.

This is as seen in the VAT report which was recently released by the National Bureau of Statistics (NBS). The report revealed that the manufacturing sector was in the lead as it remitted a total of N91.2 billion, representing about 30% of the total local non-import value added taxes in that period.

In spite of the quarter-on-quarter decline of VAT collections in the reviewed period, it grew by a further 17.8% when compared to N424.7 billion generated in the same period of the previous year. The report also shows that an amount of N1.5 trillion has been generated from value added taxes from January 2021 to September 2021.

That is 40.2% higher than the N1.08 trillion recorded in the same period of 2020, and 72.3% higher than what was recorded in the same period of 2019.

To break it down, the Value Added Tax collected in the first, second and third quarter of 2021 was recorded at N496.39 billion, N512.25 billion and N500.49 billion respectively. It is higher than the corresponding figures of 2020, which sat at N324.58 billion, N327.20 billion and N424.71 billion for the first, second and third quarters respectively.

In the third quarter of 2021, the Manufacturing activity accounted for the largest share of total revenue collected across sectors, with a huge 30.87% (N91.2 billion) coming from that sector. The Information & Communication sector came in second with 20.05% (N53.9 billion) contributed, while the Mining & Quarrying sector came in third with 9.62% (N28.4 billion).

Nigeria has continued to ramp up its efforts to increase revenue from non-oil sectors by increasing its tax collection rates, which has recorded largely significant growth since the federal government increased the VAT rate from 5% to 7.5% in the 2019 Finance Act, which was signed and made effective in 2020.

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Nigeria’s Economy to Close 2021 at 2.5% Growth Rate

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The Lagos Chamber of Commerce and Industry (LCCI) has predicted that the Nigerian economy will close its growth rate for the year at 2.5%.

This was said by the President of the LCCI, Toki Mabogunje at the 133rd Annual General Meeting (AGM) of the chamber in Lagos on Thursday, as reported by the News Agency of Nigeria.

The LCCI leader advised that Nigeria’s monetary and fiscal aspects of the economy should encourage policies that enhance growth and build confidence which would invigorate private capital flows to the economy to achieve the growth. She also encouraged a medium-term recovery plan which is anchored on local productivity, attracting private investment, developing physical and soft infrastructure, and ease of business.

Mabogunje disclosed that Nigeria’s inflation would be maintained at its double digit level within the short to medium term, due to food supply shocks, foreign exchange illiquidity, higher energy cost, social unrest in the Northern region, possible removal of fuel subsidy, and insecurity. She stated that these structural factors will keep on mounting pressure on domestic consumer prices.

She also added that in spite of the non-oil economy’s growth by 5.4%, insecurity problems in some areas of the country may lead to shrinking in production and a disruption of the supply chain. She states that the important drivers of the non-oil sector growth were finance and insurance holding 23.2%, transport and storage 20.6%, trade carrying 11.9% and telecommunications 10.9%.

Others include manufacturing, construction, real estate and agriculture with 4.3%, 4.1%, 2.3% and 1.2% respectively throughout the year.

Speaking on the decision of the Central Bank of Nigeria’s Monetary Policy Committee’s decision to retain policy parameters, she mentioned that although the apex bank has been keen to extend credit to the real economy as a way of supporting it, it is a fact that the provision of credit recently has proven ineffective in improving output growth and stabilizing consumer prices.

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