- Oil Production to Boost Nigeria’s Economic Recovery by 0.8%
A significant increase in Nigeria’s crude oil production is expected to push economic recovery upward by 0.8 per cent this year, according to the International Monetary Fund (IMF) 2017 Article IV Consultation with Nigeria.
IMF in the report released yesterday, noted that with oil receipts dominating fiscal revenue and exports, the Nigerian economy was hit hard by low oil prices and falling production, adding that under unchanged policies, the outlook remains challenging.
According to the agency, growth would pick up only slightly to 0.8 per cent in 2017, mostly reflecting some recovery in oil production and a continuing strong performance in agriculture, but policy uncertainty, crowding out, and foreign exchange (FX) market distortions would be expected to drag activity.
Nigeria’s crude oil production reached two million barrels per day in January and February, but dropped to 1.6 million barrels per day in March, due to the Turnaround Maintenance at Bonga by Shell Nigeria Exploration and Production Company (SNEPCo).
SNEPCO has since completed the repair and crude oil production is expected to increase from April 2017.
In terms of strategy, IMF said: “Accommodative monetary policy would keep inflation in double digits. Financing constraints and banks’ risk aversion would crowd out private sector credit and increase the Federal Government’s already high debt service burden.
“A continued policy of prioritizing exchange rate stability would lead to an increasingly overvalued exchange rate, leading to a deterioration in the non-oil trade balance and gross reserves below adequate levels,” it added.
But the Fund commended efforts already made by the authorities to reduce vulnerabilities and enhance resilience, including fuel prices, raising the monetary policy rate, and allowing the exchange rate to depreciate.
It equally recognised the recent easing of some exchange restrictions and urged the authorities to remove others including the multiple currency practices, thus unifying the foreign exchange market and helping regain investor confidence.
Such policies, IMF continued, should be supported by tighter monetary policy and fiscal consolidation to anchor inflation expectations and to limit the risk of exchange rate overshooting, as well as structural reforms to improve competitiveness.
In the light of the persisting internal and external challenges, it emphasised that stronger macroeconomic policies are urgently needed to rebuild confidence and foster an economic recovery, and stressed the need for a front-loaded, revenue-based fiscal consolidation starting in this year.
This, it said, will reduce the Government’s interest payments-to-revenue ratio to sustainable levels.
The IMF also advised that priority be given to increasing non-oil revenue, including raising Value Added Tax (VAT), and excise rates, strengthening compliance, and closing loopholes, and exemptions. “Administering an independent fuel price-setting mechanism to eliminate fuel subsidies, strengthening public financial management, and developing a well-targeted social safety net would also support the adjustment,” it added.
Furthermore, states and local governments were advised to contain the fiscal deficit through improved transparency and monitoring, while external adjustment is necessary to protect foreign currency buffers and reduce vulnerabilities.
It noted that ambitious structural reforms are key to achieving a competitive, investment-driven economy that is less dependent on oil. “Priority should be given to improving infrastructure, enhancing the business environment, improving access to financing for small enterprises, and strengthening governance and anti-corruption efforts. Timely and effective implementation of these measures would promote sustainable and inclusive growth,” it added.
IMF concluded by calling for improvement in the quality and availability of economic statistics, and encouraged further efforts to compile subnational fiscal accounts.
Goldman Sachs Revised Down Brent Oil Forecast for Q3 2021
Goldman Sachs Group, an American multinational investment bank and financial services company, has revised down its Brent oil price projection for the third quarter (Q3) of 2021 by $5 from $80 per barrel previously predicted to $75 a barrel following the surge in Delta variant COVID-19.
The investment bank predicted that the surge in Delta variant COVID-19 cases will weigh on Brent oil price in Q3 2021 even with the expected increase in demand.
However, the bank projected a stronger second half of 2021, saying OPEC+ adopted slower production ramp-up will offset 1 million barrel per day demand hit from Delta.
Goldman said, “Our oil balances are slightly tighter in 2H21 than previously, with an assumed two-month 1 mb/d demand hit from Delta more than offset by OPEC+ slower production ramp-up.”
The leading investment banks now projected a deficit of 1.5 million barrels per day in the third quarter, down from 1.9 million barrels per day previously predicted.
Therefore, Brent crude oil is expected to average $80 per barrel in the fourth quarter, a $5 increase from the $75 initially predicted and the bank sees 1.7 million barrels per day in the fourth quarter.
“The oil market repricing to a higher equilibrium is far from over, with the bullish impulse shifting from the demand to the supply side,” the bank said.
Goldman added that even if vaccinations fail to curb hospitalisation rates, which could drive a longer slump to demand, the decline would be offset by lower OPEC+ and U.S. shale output given current prices.
“Oil prices may continue to gyrate wildly in the coming weeks, given the uncertainties around Delta variant and the slow velocity of supply developments relative to the recent demand gains,” it said.
Oil Extends Gains on Thursday on Expectations of Tighter Supplies
Oil prices rose about $1.50 a barrel on Thursday, extending gains made in the previous three sessions on expectations of tighter supplies through 2021 as economies recover from the coronavirus crisis.
Brent crude settled at $73.79 a barrel, up $1.56, or 2.2%, while U.S. West Texas Intermediate (WTI) settled at $71.91 a barrel, rising $1.61, or 2.3%.
“The death of demand was greatly exaggerated,” said Phil Flynn, senior analyst at Price Futures Group in Chicago. “Demand is not going away, so we’re back looking at a very tight market.”
Members of the Organization of the Petroleum Exporting Countries and other producers including Russia, collectively known as OPEC+, agreed this week on a deal to boost oil supply by 400,000 barrels per day from August to December to cool prices and meet growing demand.
But as demand was still set to outstrip supply in the second half of the year, Morgan Stanley forecast that global benchmark Brent will trade in the mid to high-$70s per barrel for the remainder of 2021.
“In the end, the global GDP (gross domestic product) recovery will likely remain on track, inventory data continues to be encouraging, our balances show tightness in H2 and we expect OPEC to remain cohesive,” it said.
Russia may start the process of banning gasoline exports next week if fuel prices on domestic exchanges stay at current levels, Energy Minister Nikolai Shulginov said, further signalling tighter oil supplies ahead.
Crude inventories in the United States, the world’s top oil consumer, rose unexpectedly by 2.1 million barrels last week to 439.7 million barrels, up for the first time since May, U.S. Energy Information Administration data showed.
Inventories at the Cushing, Oklahoma crude storage hub and delivery point for WTI, however, has plunged for six continuous weeks, and hit their lowest since January 2020 last week.
“Supplies fell further by 1.3 million barrels to the lowest level since early last year, theoretically offering support to the WTI curve,” said Jim Ritterbusch of Ritterbusch and Associates.
Gasoline and diesel demand, according to EIA figures, also jumped last week.
Barclays analysts also expected a faster-than-expected draw in global oil inventories to pre-pandemic levels, prompting the bank to raise its 2021 oil price forecast by $3 to $5 to average $69 a barrel.
RES4Africa, Enel Green Power and the European Investment Bank Encourage African Youth to Find Green Energy Solutions to Community Challenges
The second Micro-Grid Academy Young Talent of the Year Award today acknowledged energy innovation from across Africa that can accelerate the green transition and improve economic opportunities.
Backed by the RES4Africa Foundation, Enel Green Power and the European Investment Bank the yearly competition encourages young energy entrepreneurs from across the continent to develop projects that expand enegy access, enable greater use of renewable eneryg and accelerate sustainability.
Young finalists from across West, East and Southern Africa presented their innovative ideas to expert judges from the RES4Africa Foundation, Enel Green Power and the European Investment Bank.
The 2021 edition of the Micro-Grid Academy Young Talent of the Year Award has arrived to its final steps. Today, the eight young African innovators selected as finalists out of nearly 50 applicants presented to the international public their disruptive projects for the first time. The presentation took place during the event Public Competition for the MGA Young Talent of the Year 2021 finalists, and represents a preparatory step for the announcement of the three winners, that will be held the 28th of September in the framework of the Precop26.
The three entities strongly believe that renewables and innovation will be the response to the climate changes and energy deficit that Africa faces. In this deeply needed path towards its just energy transition, the continent can and must rely on one of its most precious resources : its youth. With this joint initiative, RES4Africa, Enel Green Power and the European Investment Bank put together their efforts to support those young people from all Africa countries who are committed and motivate to create a real change in their communities.
These are the finalists identified by the selection committee, who publicly presented their project ideas and among which there are the three future winners:
• Adekoyejo Ifeoluwapo Kuye, 26 years old from Nigeria, introduced a project focused on a sustainable cold chain for food;
• Alex Makalliwa, 31 from Kenya, presented his initiative of electrical tricycles for heavy loads in Nairobi;
• Benson Kibiti, 34 also from Kenya, performed an overview on an PV-powered trolley for heating up food and providing power;
• Lucas Filipe Tamele Junior, 24 from Mozambique, focused on waste management, biofertilizers and biogas;
• Matjaka Ketsi from Lesotho is 28, and presented an initiative aiming at building solar-powered Learning Centres for rural communities;
• Shedrack Charles Mkwepu is instead 26 and comes from Tanzania: he designed a system that allows farmers to control irrigation and other soil parametres from a mobile phone;
• Carol Ofafa, 32 from Kenya, proposed the installation of a PV system for health facilities;
• Kumbuso Joshua Nyoni, 34 from Zambia, envision an integrated Water-Food-Energy model for PV power and a water pumping system.
The webinar benefitted from the presence of Salvatore Bernabei, President of RES4Africa and Head of Enel Global Power Generation, as well as of Maria Shaw Barragan, Director of Lending in Africa, Caribbean, Pacific, Asia and Latin America, European Investment Bank. They introduced the objectives of the MGA Young Talent of the Year Award, while reflecting upon youth’s impact on the just energy transition.
Moreover, after the finalists’ presentation, a final feedback was provided, with closing remarks, by Roberto Vigotti, Secretary General at RES4Africa Foundation, Carmelo Cocuzza, Head of Corporates Unit, European Investment Bank, and Silvia Piana, Head of Regulatory Affairs Africa, Asia and Australia Area at Enel Green Power.
“The ability to generate innovation will be a fundamental driver to pave the way for a transformation that goes well beyond the dynamic of the Energy sector” commented Salvatore Bernabei “We are here give voice and visibility to young talents, innovators, entrepreneurs promoting the best innovative ideas to stimulate socio-economic progress from within and free the creativity of the younger generations in designing the Africa of tomorrow”.
“Increasing energy access and enabling more sustainable energy use is crucial to unlock opportunities for communities across Africa. The finalists in this year’s Micro-Grid Academy Young Talent Awards all demonstrate inspirational and innovative thinking that combined world-class energy expertise with unparalleled understanding of local energy needs and all deserve to win. The European Investment Bank is pleased to join RES4Africa and Enel Green Power to support talented young innovators and encourage them to become green energy leaders of the future.” said Maria Shaw-Barragan, European Investment Bank Director for Global Partners.
RES4Africa Foundation (Renewable Energy Solutions for Africa) envisions the sustainable transformation of Africa’s electricity systems to ensure reliable and affordable electricity access for all, enabling the continent to achieve its full, resilient, inclusive and sustainable development. The Foundation’s mission is to create favourable conditions for scaling up investments in clean energy technologies to accelerate the continent’s just energy transition and transformation.
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