Markets

Africa Slump Not Grounds for ‘Excessive Pessimism,’ Lagarde Says

Published

8 years ago

February 17, 2017

Christine Lagarde, managing director of International Monetary Fund

Africa Slump Not Grounds for ‘Excessive Pessimism’

The student is halfway through her question to Christine Lagarde when the power cuts — a reminder of the obstacles facing Africa’s poorest nations.

The head of the International Monetary Fund doesn’t miss a beat.

“As you can see, building better infrastructure — roads, the Internet, electricity — is important,” she tells the university students who came to hear her speak in a sweltering classroom in Bangui, capital of the Central African Republic. Save for a few flickers, the rest of the event, also attended by President Faustin-Archange Touadera, proceeds in darkness.

Five years ago, sub-Saharan Africa was being hailed by Time magazine as the world’s “next economic powerhouse.” The growth of economies such as Kenya and Ethiopia fed the idea of ‘Africa Rising,’ the title of an IMF conference held in Mozambique in 2014, and raised hopes that the continent was beginning to succeed in fighting extreme poverty.

The outlook is much dimmer now. Growth in sub-Saharan Africa likely fell to its lowest level in more than two decades last year, according to the Washington-based fund. While it’s expected to pick up this year to 2.9 percent, that’s a far cry from the 6.6 percent pace the region averaged in the five years before the global financial crisis.

The slump in commodity prices has been the strongest headwind, sideswiping the region’s three biggest economies: Nigeria, South Africa and Angola. Other factors have played a role, such as drought in east and southern Africa and unrest in countries that had been on the rise, such as Ethiopia, where foreign investment has dropped after anti-government protests.

Civil War

Civil war has undermined development in countries such as South Sudan and Central African Republic. In Bangui, Lagarde and her staff traveled in armored convoys protected by United Nations troops alert for any further outbreaks of fighting between militias.

Still, Lagarde warns against writing Africa off. “We should guard against swinging from the strong optimism of recent years about sub-Saharan Africa’s prospects to excessive pessimism,” she said in an interview in Uganda’s capital, Kampala, on her way to meet with President Yoweri Museveni.

Lagarde stressed the importance of strong government institutions on her trip last month, which also took her to Uganda and Mauritius. She urged African countries to reduce inequality even as they strive for growth. And at a time when protectionist sentiment is sweeping the developed world, she argued that regional economic integration might help countries like landlocked Uganda, which is preparing to tap its oil reserves.

The region’s slowdown masks vasts differences in economic fortune, according to Lagarde, sensitive to the fact that her own institution has promoted the Africa Rising narrative. “We cannot really talk about sub-Saharan Africa as a single entity,” she said in the interview. “We have to talk about each and every country.”

Stopgap Measures

Adjustment has been slow in the hardest-hit nations, which have relied too much on stopgap measures such as monetary easing and falling into arrears on payments, according to the IMF. Instead, countries should let their currencies adjust to the shock and take steps to balance budgets, the fund says.

In the Central African Republic, where income per person is among the lowest in the world, even collecting taxes is a challenge. Tax revenue amounts to only slightly more than 7 percent of gross domestic product, compared with more than 25 percent in South Africa.

IMF staff have been advising the government on everything from collecting taxes to gathering and reporting economic statistics as part of a three-year $116 million concessional loan the fund committed last year.

Maintaining security will be crucial to recovery. At a Catholic church in the capital, more than a hundred refugees live in the courtyard in UN-issued tents. Most fled the area known as PK-5 amid fighting between Christian and Muslim militias.

“There’s peace, but people doubt it will last,” said Magloire Malissagba, coordinator of the refugee camp. “No one trusts the government to make things better.”

In such situations, the IMF’s role is closer to that of an emergency-ward doctor, said Lagarde. “We try to help them rebuild capacity, because generally, the capacity of the country has been destroyed.”

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Samed Olukoya

Is the CEO and Founder of Investors King Limited. He is a seasoned foreign exchange research analyst and a published author on Yahoo Finance, Business Insider, Nasdaq, Entrepreneur.com, Investorplace, and other prominent platforms. With over two decades of experience in global financial markets, Olukoya is well-recognized in the industry.

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Crude Oil

Brent, WTI Crude Prices Rise in Response to Expected Trump’s Policies

Published

12 hours ago

November 8, 2024

Iyanuoluwa Martins

Oil prices rose nearly 1 percent on Thursday as the market considered how US President-elect Donald Trump’s policies would affect supplies.

Brent crude oil futures settled up 71 cents, or 0.95 percent at $75.63 a barrel while the US West Texas Intermediate (WTI) crude rose 67 cents, or 0.93 percent to $72.36.

Prices gained support from expectations that Trump’s incoming administration may tighten sanctions on Iran and Venezuela.

On Wednesday, the election of former Republican President Trump initially triggered a sell-off that pushed oil down by more than $2 as the US dollar rallied.

A strong Dollar makes oil expensive and this typically leads to a drop in prices.

In his first term, Mr Trump put in place harsher sanctions on Iranian and Venezuelan oil, limiting supply and supporting oil prices.

However, his successor, Mr Joe Biden briefly rolled back the sanctions but he would later reinstate them.

Such a move would raise the cost of China’s imports, piling pressure on a refining sector grappling with weak fuel demand and tight margins.

However, China and Iran have built a trading system that uses mostly Chinese Yuan and a network of middlemen, avoiding the Dollar and exposure to US regulators, making sanctions enforcement tough.

However, analysts say that the US government has been reluctant to take steps that would remove supply from the global market as a result of the Russia-Ukraine war.

Also supporting prices, the US Federal Reserve cut interest rates by a quarter of a percentage point at the close of its policy meeting on Thursday.

The US Federal Reserve said it will continue assessing data to determine the pace and destination of interest rates as officials reset tight monetary policy to account for inflation that has slowed markedly in the past year and is nearing the US central bank’s 2 percent target.

Interest rate cuts typically boost economic activity and energy demand.

Support also came as some companies cut supply in the US due to Hurricane Rafael. According to the US Bureau of Safety and Environmental Enforcement (BSEE), over 22 percent equivalent to 391,214 barrels per day, of crude oil production was shut in response to the hurricane.

Petrol

Three Oil Companies Ask Court To Stop NMDPRA From Seizing Their Petrol Import Licences, Accuse Dangote Refinery of Monopoly

Published

1 day ago

November 7, 2024

Ugwoke Ogbodo

In response to Dangote Refinery N1 billion suit, three oil companies including Matrix Petroleum Services Limited, A.A. Rano Limited, and AYM Shafa Limited, have prayed the Federal High Court in Abuja to stop the Nigeria Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) from reviewing or withdrawing their import licenses.

The oil companies also urged the court not to block them from importing petrol in the interest of energy security and promotion of healthy competition in the Nigerian oil and gas sector.

Dangote Refinery had approached the court and filed and a N100 billion suit in damages against NMDPRA for allegedly continuing to issue import licenses to NNPCL, Matrix, and other companies for importing petroleum products such as Automotive Gas Oil (AGO) and Jet Fuel (Aviation Turbine Fuel), despite that the refinery is producing the products in quantity that meets Nigerians’ needs.

The refinery also dragged NNPCL, AYM Shafa Limited, A.A. Rano Limited, T. Time Petroleum Limited, 2015 Petroleum Limited, and Matrix Petroleum Services Limited in the suit.

Counsel to Dangote Refinery, Ogwu James Onoja SAN, in the originating summons, dated September 6, 2024, claimed that NMDPRA contravened Sections 317(8) and (9) of the Petroleum Industry Act (PIA) by issuing import licenses for petroleum products.

Onoja stated that such licenses should only be granted in cases of petroleum product shortages and not when Dangote Refinery is meeting the needs of the populace.

According to Onoja, NMDPRA has been discouraging local refiners such as Dangote Refinery by its actions.

Responding to the suit through their written address and counter-affidavit, dated November 5, 2024, and filed by Ahmed Raji SAN, the three oil companies said their businesses do not in any way hamper, disrupt, or harm Dangote Refinery’s operations.

The three defendants claimed the plaintiff allegedly sought to monopolise the petroleum industry in Nigeria, where it alone would control supply, distribution, and pricing.

In the defendants’ affidavit, deposed by Ali Ibrahim Abiodun, Acting Managing Director of AYM Shafa (with the consent and authority of Matrix, A.A. Rano, and AYM), it was stated that the defendants are qualified and capable of being licensed as importers of refined petroleum products under Section 317(9) of the PIA and that their licenses to import such products were lawfully issued by the appropriate authority, NMDPRA.

The deponent claimed that it typically takes an average of two months for Dangote Refinery to fulfill orders and that it rarely meets demand, with trucks waiting for months to be loaded at the refinery.

In contrast, he claimed it takes about three weeks to import petroleum products from offshore refineries.

The affidavit revealed that A.A. Rano’s oil depot in Lagos has a storage capacity of 55,000,000 liters and can load about 200 trucks per 24 hours.

The deponent stated that the company also owns 220 filling stations and another 85 affiliates and leased filling stations.

According to the deponent, AA Rano was one of the first to take delivery of AGO from Dangote Refinery, loading 20,000 MT of AGO on or about April 16, 2024, and has since purchased and loaded additional cargoes totaling approximately 190,000,000 liters.

Despite this patronage, the affidavit claimed that Dangote Refinery has continued to place obstacles that make it difficult for A.A. Rano to purchase products solely from the refinery.

The oil companies called on the court to dismiss the suit.

Meanwhile, the court adjourned the matter till January 20, 2025, for a status report.

Energy

Malaysia’s CNG Ban Sparks Debate in Nigeria as Tinubu Pushes for CNG Adoption

Published

1 day ago

November 7, 2024

Bassey Marshall

Nigerians on and off social media have expressed concern following a recent decision by the Malaysian government to phase out Compressed Natural Gas (CNG) vehicles by July 2025.

While the Nigerian government continues to urge citizens to use CNG as a cleaner, cheaper fuel alternative to petrol, Anthony Loke, Malaysian Transport Minister, questioned the safety of CNG.

Announcing the ban, the Malaysian Minister highlighted the risk associated with CNG vehicles, especially after tanks exceeded their 15-year safe usage limit.

Minister Loke announced the ban while speaking at a press conference on Wednesday, November 6.

The Malaysian Minister disclosed that the ban will affect over 44,000 vehicles in Malaysia, including private cars, taxis, buses, and industrial machinery.

According to Loke, “These NGV tanks have a safe usage lifespan of approximately 15 years, and if they are not replaced, they become unsafe to use and may fail at any time.”

Loke announced that the phase-out will be in stages with the first being the halting of CNG sales by the state oil and gas corporation, Petroliam Nasional Berhad (Petronas) at its stations starting July 1, 2025.

The latest development has sparked numerous reactions as Nigerians criticized the Tinubu government for adopting CNG amid Malaysia’s phase-out.

Reacting to the development, @Gozie_mu wrote, “Nigeria to embrace it because we are the world’s dumping site.”

Another user, @iniekott, wrote: “Meanwhile, Nigerian rulers are putting CNG forward as a safe alternative to petrol.

“Note the clear-headed and tangible provisions made by the Malaysian government to help citizens with the transition.”

“Malaysia introduced CNG in the 1990s; now they are stopping it in 2024, while Bola and his supporters are asking Nigerians to change to CNG. APC is taking you 34 years backwards, but some of you’re defending it,” a user, PaschalNwosu5 wrote.

#SmartAtuadi criticized the government’s carelessness saying, “Nigeria seems determined to promote CNG without considering the safety implications that Malaysia has raised.”

Many others called on the government and government officials to lead by example by converting their vehicles to CNG before urging Nigerians to do so.

#Oserume1 commented, “If CNG was a good idea, Tinubu would have converted his official luxury Cadillac Escalade from petrol to CNG!”

@ekenezion said, “The president refused to convert his Escalade to CNG.”

@buzuzu7 opined, “I will only embrace this if all ministers and the presidency lead by example. I can’t be your guinea pig.”

The Nigerian government had since reacted to the CNG ban in Malaysia.

The Special Adviser to President Bola Tinubu on Information and Strategy, Bayo Onanuga, in his statement said the planned phase-out by the Malaysian government speaks more to the safety of LPG and not the safety of CNG.