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FG Will Spend on Infrastructure to Exit Recession -Adeosun

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  • FG Will Spend on Infrastructure to Exit Recession -Adeosun

The Minister of Finance, Mrs. Kemi Adeosun has said the federal government plans to boost agricultural production and spend billions of dollars upgrading dilapidated infrastructure that will help drag Africa’s top oil producer out of recession this year.

Low oil prices plunged the West African nation into its worst economic crisis in 25 years with output, contracting by 1.5 per cent last year.

The situation was exacerbated by militant attacks on pipelines in the oil-rich Niger Delta and what business executives said have been poor policy decisions.

Adeosun told the Financial Times that she expected growth to pick up to 1 per cent this year on the back of improved crude prices and government spending on power and rail projects, with $6.9 billion earmarked for infrastructure projects.

The executive arm is also seeking approval from lawmakers to borrow nearly $6 billion from the Export-Import Bank of China to upgrade the rail network linking Lagos, the commercial capital, and Kano, the largest city in the north.

The International Monetary Fund (IMF) is forecasting growth of 0.8 per cent this year.

“We’re confident this will be a year of recovery. Modest, slow recovery, but we hope we will get out of negative growth by the second quarter,” Adeosun said.

“The question of how much growth there’ll be will be a function of a number of things — number one, sustained oil production and number two the impact of some of the polices we’ve pushed.”

Nigeria, Africa’s most populous nation with 180m people, produces less than 4,000MW and power shortages are seen as a critical constraint on businesses.

The government made similar pledges last year to invest in infrastructure to create jobs and drive growth, but spent less than a third of the N1.8 trillion ($5.9bn) budgeted for capital projects.

That was blamed on funding shortfalls and delays caused by the late passage of the budget.

Adeosun insisted this year will be different. “We haven’t taken a scattergun approach, we’re focusing on rail and we want to do it sensibly and sustainably,” she said.

Nigeria, which depends on petrodollars for 70 per cent of state revenues and 90 per cent of export earnings, is also grappling with a severe foreign exchange shortage and a fiscal deficit the IMF estimates will widen to 3.7 per cent of gross domestic product (GDP) this year.

The IMF has also raised concern over Nigeria’s “higher than historical” debt servicing costs, which doubled in 2016 to 66 per cent of revenue, as the government has borrowed to fund capital expenditure.

Adeosun said the government was committed to raising revenue by improving tax collection and cutting wasteful spending, saying it had culled 58,000 ghost workers on the state’s payroll last year.

“As a people and as a government, we’re chastened by what happened last year,” she said.

“We’ve messaged strongly to our people . . . that fiscal discipline has to be a permanent feature. We are going to continue with this reform programme.”

However, concerns over the health of President Muhammadu Buhari, 74, have raised additional questions about the government’s ability to implement its policies.

Buhari spent almost two months in London receiving medical treatment earlier this year for an undisclosed illness. He has not been seen outside the presidential villa since his return to Abuja, the capital, in early March and failed to chair a cabinet meeting on Wednesday — the third in a row he has missed.

But Adeosun said the pace of government had not slowed because of Buhari’s absence from cabinet meetings and other public events. “Nothing is being delayed,” she said.

But as Adeosun banked on stable oil prices and improved on earnings from tax to fund the country’s infrastructure projects, oil prices dropped yesterday to their lowest level since last November, with Brent breaking below $50, amid concerns of rising global supply and still high inventories.

At 11.22am EDT, WTI crude was trading down 2.82 per cent at $46.47, while Brent was down 2.62 per cent at $49.46 — with both WTI and Brent having effectively wiped out all the price gains since OPEC announced on 30 November 2016 the output freeze deal aimed at reducing oversupply and propping up prices.

On Wednesday, a day after the American Petroleum Institute (API) injected a bit of optimism among traders by reporting a crude oil inventory draw of 4.2 million barrels, the EIA once again poured cold water on the oil bulls by reporting a much smaller decline, of 900,000 barrels, against expectations for a decrease of 2.3 million barrels.

While U.S. crude oil inventories have declined in the past couple of weeks, stocks are still at 527.8 million barrels, near the upper limit of the average range for this time of year.

In addition, production from countries not signatories to the OPEC/Non-OPEC deal – most notably the U.S. – is on a continuous rise since that very same deal managed to lift oil prices and keep them steadier at above $50 for a few months.

“At some point, the market should recognise OPEC isn’t the most important player in the market any more. That is non-OPEC, and, above all, U.S. shale,” Commerzbank analyst Eugen Weinberg told Reuters.

Comments and speculation ahead of OPEC’s meeting on May 25 in Vienna would likely bring prices back to the $50s, according to Weinberg. “Still, the damage is there and I wouldn’t be surprised to see lower levels this summer after the meeting,” he noted.

OPEC is expected to decide at its meeting at the end of May whether to extend the production freeze deal, with inventories still not drawing down as fast as expected, and oil prices now basically at the same level at which the deal was announced.

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.

Finance

Insider Dealing: Paul Miyonmide Gbededo Adds Another 612,326 Shares of Flour Mills to His Stake

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Paul Miyonmide Gbededo, the Group Managing Director, Flour Mills of Nigeria Plc bought an additional 612,326 shares of the company.

The management stated this in a disclosure statement sent to the Nigerian Stock Exchange on Monday.

The managing director purchased the shares at N27.75 per share on November 20, 2020 at the Nigerian Stock Exchange in Lagos, Nigeria. Meaning, Gbededo has invested another N16,992,046.5 into the company.

This was in addition to the 3,284,867 shares valued at N91,642,269 and 4,200,852 shares worth N117.62 million purchased by Gbededo earlier in the month of November. Bringing his recent purchases to 8,098,045 million shares worth N226,254,315.5. See the details of the latest transaction below.

 

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FCMB Reports 16.4 Percent Increase in Profit After Tax in Q3 2020

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FCMB Group Plc, one of the leading financial institutions in Nigeria, reported a 16.4 percent increase in profit after tax for the third quarter of the year.

In the unaudited financial statements released through the Nigerian Stock Exchange (NSE), the lender’s profit before tax grew by 10.2 percent year-on-year to N4.8 billion while profit after tax increased by 16.4 percent to N4.2 billion.

FCBMB Group Plc expanded gross earnings by 4.8 percent to N48.3 billion during the period under review. Similarly, the bank’s net interest income rose by 30.03 percent year-on-year to N22.7 billion.

The strong performance continued across the board as net fee and commission income increased by 0.29 percent to N5.2 billion. Net trading income rose by 39.4 percent year-on-year to N1.82 billion.

Personnel expenses dropped by 7.9 percent to N6.9 billion during the quarter while general and administrative expenses declined by 7.52 percent year-on-year to N7.6 billion. Largely due to the COVID-19 lockdown.

Loans and advances to customers rose by 10.8 percent to N793.14 billion between December 2019 and September 2020. Total desposits from customers during the same period grew by 26.7 percent to N1.2 trillion.

The bank’s total assets increased by 22.12 percent to N2.04 trillion.

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Stanbic IBTC Obtains Approvals, License to Establish Life Insurance Subsidiary

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Stanbic IBTC Holdings Plc on Friday announced that it has obtained all required Regulatory Approvals and a license from the National Insurance Commission to establish a wholly-owned Life Insurance subsidiary, Stanbic IBTC Insurance Limited (SIIL).

In a statement signed by Chidi Okezi, Company Secretary, Stanbic IBTC and released on Friday, the bank said “The establishment of this new subsidiary essentially complements the bouquet of product offerings by Stanbic IBTC as it continues its goal of being the leading end-to-end financial solutions provider in Nigeria. In this regard, SIIL will aim to facilitate long term insurance for already financially included individuals and will seek to become the preferred Insurer in the Life Insurance Business.

“Stanbic IBTC Holdings PLC, a member of Standard Bank Group, is a full-service financial services group with a clear focus on three main business pillars – Corporate and Investment Banking, Personal and Business Banking and Wealth Management. The group’s largest shareholder is the Industrial and Commercial Bank of China (ICBC), the world’s largest bank, with a 20.1% shareholding. In addition, Standard Bank Group and ICBC share a strategic partnership that facilitates trade deals between Africa, China and select emerging markets. Standard Bank Group is the largest African financial institution by assets. It is rooted in Africa with strategic representation in 21 countries on the African continent.

“Standard Bank has been in operation for over 158 years and is focused on building first-class, on-the-ground financial services institutions in chosen countries in Africa; and connecting selected emerging markets to Africa by applying sector expertise, particularly in natural resources, power and infrastructure.”

 

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