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Expected $6.4bn Inflow Raises Optimism about Naira’s Appreciation

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  • Expected $6.4bn Inflow Raises Optimism about Naira’s Appreciation

The anticipated $6.4 billion inflow to Nigeria from different sources in the next few weeks is expected to boost Dollar liquidity and help strengthen the Naira against the United States currency.

The $6.4 billion inflow is expected to come from three sources.

A breakdown of the aforementioned amount showed that a total of $4.5 billion is expected into the country following the directive by President Muhammadu Buhari to the Ministries of Finance, Budget and Planning, as well as the Central Bank of Nigeria (CBN) to address outstanding issues in securing the loan from the Peoples’ Republic of China.

There is also the balance of the $1 billion African Development Bank (ADB) loan. Of this amount, $600 million had been drawn, leaving a balance of $400 million, which is a potential booster to Nigeria’s forex reserves when it flows into the country.

In addition to this, another $500 million is being expected from the Global Medium Term Note Programme which was issued recently and attached to the $1 billion earlier offered and over-subscribed.

The Chinese loan, which is meant for the procurement of strategic machinery needed to boost agricultural development in the country, has a repayment period of 20 years with five-year moratorium and an interest rate of one per cent per annum.

Analysts believe that the receipt of these loans will boost the armoury of the CBN in bolstering the value of the naira.

They also opine that even without the loan, a combination of oil receipts with price stabilising at between $49 – $55 per barrel, as well as the improved production occasioned by the relative peace in the Niger Delta, would give the CBN some fighting power and enhanced its ability to supply the market with liquidity.

One of the global rating agencies, Moody’s Investors Service also held similar view, saying that Nigeria would easily achieve its target of foreign borrowing in 2017 as improved oil output helps the economy to recover from last year’s contraction, the first since 1991.

“The international financial institutions are ready to support Nigeria,” a vice president and senior analytical adviser for Africa at the ratings company, Aurelien Mali, told Bloomberg.

“As long as its project-based lending, the funding will be available from lenders such as the African Development Bank, and the budget support from the World Bank will come on top of that.”

The federal government had proposed a record N7.3 trillion budget for this year to boost infrastructure investment and help its economy recover from a contraction of 1.5 per cent in 2016, the first such slump in 25 years.

The economy was weighed down by a drop in the price and output of oil, its biggest export, which led to a shortage of dollars.

The government has also been negotiating $1.25 billion in budget support from the World Bank and expects to get the remaining $400 million of a $1 billion credit facility from the African Development Bank, Mali said. It can raise the rest from bilateral and multilateral partners and also from lenders through commercial loans and or even a sukuk bond, he said.

Meanwhile, another global rating agency, Fitch has stated that the regulatory stress test results on Nigerian banks conducted recently highlighted disparities in capital strength across the Nigerian banking sector, with large banks collectively much more resilient to stresses than small ones.

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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Communities in Delta State Shut OML30 Operates by Heritage Energy Operational Services Ltd

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The OML30 operated by Heritage Energy Operational Services Limited in Delta State has been shut down by the host communities for failing to meet its obligations to the 112 host communities.

The host communities, led by its Management Committee/President Generals, had accused the company of gross indifference and failure in its obligations to the host communities despite several meetings and calls to ensure a peaceful resolution.

The station with a production capacity of 80,000 barrels per day and eight flow stations operates within the Ughelli area of Delta State.

The host communities specifically accused HEOSL of failure to pay the GMOU fund for the last two years despite mediation by the Delta State Government on May 18, 2020.

Also, the host communities accused HEOSL of ‘total stoppage of scholarship award and payment to host communities since 2016’.

The Chairman, Dr Harrison Oboghor and Secretary, Mr Ibuje Joseph that led the OML30 host communities explained to journalists on Monday that the host communities had resolved not to backpedal until all their demands were met.

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Crude Oil Recovers from 4 Percent Decline as Joe Biden Wins

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Oil Prices Recover from 4 Percent Decline as Joe Biden Wins

Crude oil prices rose with other financial markets on Monday following a 4 percent decline on Friday.

This was after Joe Biden, the former Vice-President and now the President-elect won the race to the White House.

Global benchmark oil, Brent crude oil, gained $1.06 or 2.7 percent to $40.51 per barrel on Monday while the U.S West Texas Intermediate crude oil gained $1.07 or 2.9 percent to $38.21 per barrel.

On Friday, Brent crude oil declined by 4 percent as global uncertainty surged amid unclear US election and a series of negative comments from President Trump. However, on Saturday when it became clear that Joe Biden has won, global financial markets rebounded in anticipation of additional stimulus given Biden’s position on economic growth and recovery.

Trading this morning has a risk-on flavor, reflecting increasing confidence that Joe Biden will occupy the White House, but the Republican Party will retain control of the Senate,” Michael McCarthy, chief market strategist at CMC Markets in Sydney.

“The outcome is ideal from a market point of view. Neither party controls the Congress, so both trade wars and higher taxes are largely off the agenda.”

The president-elect and his team are now working on mitigating the risk of COVID-19, grow the world’s largest economy by protecting small businesses and the middle class that is the backbone of the American economy.

There will be some repercussions further down the road,” said OCBC’s economist Howie Lee, raising the possibility of lockdowns in the United States under Biden.

“Either you’re crimping energy demand or consumption behavior.”

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Nigeria, Other OPEC Members Oil Revenue to Hit 18 Year Low in 2020

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Revenue of OPEC Members to Drop to 18 Year Low in 2020

The United States Energy Information Administration (EIA) has predicted that the oil revenue of members of the Organisation of the Petroleum Exporting Countries (OPEC) will decline to 18-year low in 2020.

EIA said their combined oil export revenue will plunge to its lowest level since 2002. It proceeded to put a value to the projection by saying members of the oil cartel would earn around $323 billion in net oil export in 2020.

If realised, this forecast revenue would be the lowest in 18 years. Lower crude oil prices and lower export volumes drive this expected decrease in export revenues,” it said.

The oil expert based its projection on weak global oil demand and low oil prices because of COVID-19.

It said this coupled with production cuts by OPEC members in recent months will impact net revenue of the cartel in 2020.

It said, “OPEC earned an estimated $595bn in net oil export revenues in 2019, less than half of the estimated record high of $1.2tn, which was earned in 2012.

“Continued declines in revenue in 2020 could be detrimental to member countries’ fiscal budgets, which rely heavily on revenues from oil sales to import goods, fund social programmes, and support public services.”

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