Markets

Industrialisation and Entrepreneurial Revolution

Published

7 years ago

March 23, 2017

Industrialisation and Entrepreneurial Revolution

IN 2009, the United Nations Industrial Development organisation (UNIDO) announced plans to conduct investor surveys In 22 African countries. A key goal of the survey in the case of Nigeria is to facilitate the creation of a Nigerian Industrial master plan. The programme will also evaluate the impact of policy on government efforts to promote rapid SME development. UNIDO officials in Nigeria claimed the survey would be of significant assistance to the private sector as well, helping expand operations and set performance benchmarks.

At the same time, the manufacturing Association of Nigeria came out with a report identifying 37 companies that had closed down across the country over a space of just two weeks. The report once again confirms the bitter state of affairs of the Nigerian economy, where closures are a frequent and constant refrain. A complete account of contemporary Nigerian industry is in fact impossible without a mention of the de- industrialisation that continues to plague it. This is another core feature of the great ‘Nigeria paradox’ of acute economic backwardness despite abundant natural and human resources.

The collapse of world oil markets in the early 1980s drastically reduced Nigeria’s foreign exchange reserves and practically stalled economic growth. The cumulative effect of years of incoherent policies further upset the country’s fragile international and domestic fiscal conditions, causing massive inflation, unemployment and poverty. Nigeria’s standing as middle – income country was scuttled, and by the 1990s, it was confirmed as one of the poorest in the world, an even more demeaning fall in average living standards accompanied the loss of natural fortunes.

The economic downslide proved especially harsh on the manufacturing sector, partly at least due to the over-dependence on oil exports that thwarted economic diversification. With local sourcing of raw material confined to all but a few industries, capacity utilization plunged dramatically in import – dependent operations. Nigerian manufacturing is predominantly about isolated assembly line functions with very limited or no backward connections to the economy. These and other factors combined to bring the total GDP contribution from manufacturing down from a little over 9 percent in 1981 to 6 percent by the end of last century.

Import dependence

Industrial decline has also, partly at least, been fed by unrealistic dependence on imports, often with shocking results, For instance, Textile imports have shot up to a staggering N4.3 billion annually to keep up with burgeoning demand. Sadly, the number of textile industries in local operation fell from 140 in the 1970s to less than ten presently. More importantly, existing units operate at less than 50 percent capacity due to equipment and technical shortfalls. The over- dependence on imported goods, however, is by no means limited to textiles. Nigeria imports everything from machinery, chemicals, transport equipment, manufactured goods to live animals. Many in Nigeria consider it a shame that the government abandoned agriculture in favour of oil in the early 1980s. What is even more shameful is the fact that this formerly agrarian nation is now critically dependent on food imports. Nigeria imported $ 600 million worth of rice in 2008 alone, with local food production amounting to only a fraction of overall demand.

Nigeria’s chronic dependence on imports is a result of many decades of misdirected policies that swamped local industry and wiped out diverse avenues of employment and wealth creation. Infrastructure deficits have been the largest hurdle to industrial expansion.

What Nigeria effectively needs are policies fostering rapid business development across sectors: In other words, an enterprise revolution that accelerates sustainable growth while simultaneously helping to alleviate poverty and improve living standard of. It also requires a radical rethink on the country’s import policies, in a manner that focuses on improving productivity and employment through development of locally relevant enterprises, import curbs can prove hugely beneficial for Nigeria, provided they are judiciously executed to promote industrial and small- business resurgence in prospective sector.

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Samed Olukoya

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Crude Oil

Dangote Mega Refinery in Nigeria Seeks Millions of Barrels of US Crude Amid Output Challenges

Published

3 days ago

May 16, 2024

Samed Olukoya

The Dangote Mega Refinery, situated near Lagos, Nigeria, is embarking on an ambitious plan to procure millions of barrels of US crude over the next year.

The refinery, established by Aliko Dangote, Africa’s wealthiest individual, has issued a term tender for the purchase of 2 million barrels a month of West Texas Intermediate Midland crude for a duration of 12 months, commencing in July.

This development revealed through a document obtained by Bloomberg, represents a shift in strategy for the refinery, which has opted for US oil imports due to constraints in the availability and reliability of Nigerian crude.

Elitsa Georgieva, Executive Director at Citac, an energy consultancy specializing in the African downstream sector, emphasized the allure of US crude for Dangote’s refinery.

Georgieva highlighted the challenges associated with sourcing Nigerian crude, including insufficient supply, unreliability, and sometimes unavailability.

In contrast, US WTI offers reliability, availability, and competitive pricing, making it an attractive option for Dangote.

Nigeria’s struggles to meet its OPEC+ quota and sustain its crude production capacity have been ongoing for at least a year.

Despite an estimated production capacity of 2.6 million barrels a day, the country only managed to pump about 1.45 million barrels a day of crude and liquids in April.

Factors contributing to this decline include crude theft, aging oil pipelines, low investment, and divestments by oil majors operating in Nigeria.

To address the challenge of local supply for the Dangote refinery, Nigeria’s upstream regulators have proposed new draft rules compelling oil producers to prioritize selling crude to domestic refineries.

This regulatory move aims to ensure sufficient local supply to support the operations of the 650,000 barrel-a-day Dangote refinery.

Operating at about half capacity presently, the Dangote refinery has capitalized on the opportunity to secure cheaper US oil imports to fulfill up to a third of its feedstock requirements.

Since the beginning of the year, the refinery has been receiving monthly shipments of about 2 million barrels of WTI Midland from the United States.

Crude Oil

Oil Prices Hold Steady as U.S. Demand Signals Strengthening

Published

3 days ago

May 16, 2024

Samed Olukoya

Oil prices maintained a steady stance in the global market as signals of strengthening demand in the United States provided support amidst ongoing geopolitical tensions.

Brent crude oil, against which Nigerian oil is priced, holds at $82.79 per barrel, a marginal increase of 4 cents or 0.05%.

Similarly, U.S. West Texas Intermediate (WTI) crude saw a slight uptick of 4 cents to $78.67 per barrel.

The stability in oil prices came in the wake of favorable data indicating a potential surge in demand from the U.S. market.

An analysis by MUFG analysts Ehsan Khoman and Soojin Kim pointed to a broader risk-on sentiment spurred by signs of receding inflationary pressures in the U.S., suggesting the possibility of a more accommodative monetary policy by the Federal Reserve.

This prospect could alleviate the strength of the dollar and render oil more affordable for holders of other currencies, consequently bolstering demand.

Despite a brief dip on Wednesday, when Brent crude touched an intra-day low of $81.05 per barrel, the commodity rebounded, indicating underlying market resilience.

This bounce-back was attributed to a notable decline in U.S. crude oil inventories, gasoline, and distillates.

The Energy Information Administration (EIA) reported a reduction of 2.5 million barrels in crude inventories to 457 million barrels for the week ending May 10, surpassing analysts’ consensus forecast of 543,000 barrels.

John Evans, an analyst at PVM, underscored the significance of increased refinery activity, which contributed to the decline in inventories and hinted at heightened demand.

This development sparked a turnaround in price dynamics, with earlier losses being nullified by a surge in buying activity that wiped out all declines.

Moreover, U.S. consumer price data for April revealed a less-than-expected increase, aligning with market expectations of a potential interest rate cut by the Federal Reserve in September.

The prospect of monetary easing further buoyed market sentiment, contributing to the stability of oil prices.

However, amidst these market dynamics, geopolitical tensions persisted in the Middle East, particularly between Israel and Palestinian factions. Israeli military operations in Gaza remained ongoing, with ceasefire negotiations reaching a stalemate mediated by Qatar and Egypt.

The situation underscored the potential for geopolitical flare-ups to impact oil market sentiment.

Crude Oil

Shell’s Bonga Field Hits Record High Production of 138,000 Barrels per Day in 2023

Published

3 days ago

May 16, 2024

Samed Olukoya

Shell Nigeria Exploration and Production Company Limited (SNEPCo) has achieved a significant milestone as its Bonga field, Nigeria’s first deep-water development, hit a record high production of 138,000 barrels per day in 2023.

This represents a substantial increase when compared to 101,000 barrels per day produced in the previous year.

The improvement in production is attributed to various factors, including the drilling of new wells, reservoir optimization, enhanced facility management, and overall asset management strategies.

Elohor Aiboni, Managing Director of SNEPCo, expressed pride in Bonga’s performance, stating that the increased production underscores the commitment of the company’s staff and its continuous efforts to enhance production processes and maintenance.

Aiboni also acknowledged the support of the Nigerian National Petroleum Company Limited and SNEPCo’s co-venture partners, including TotalEnergies Nigeria Limited, Nigerian Agip Exploration, and Esso Exploration and Production Nigeria Limited.

The Bonga field, which commenced production in November 2005, operates through the Bonga Floating Production Storage and Offloading (FPSO) vessel, with a capacity of 225,000 barrels per day.

Located 120 kilometers offshore, the FPSO has been a key contributor to Nigeria’s oil production since its inception.

Last year, the Bonga FPSO reached a significant milestone by exporting its 1-billionth barrel of oil, further cementing its position as a vital asset in Nigeria’s oil and gas sector.