- FG Urged to Introduce Privatisation Policy to Deepen Capital Market
A former Governor of Anambra State, Mr. Peter Obi thursday called on the federal government to introduce a policy that will deepen the nation’s capital market through privatisation of assets.
Speaking at second annual Capital Market Summit of the Association of Owners of Stockbroking Houses of Nigeria (ASHON) in Lagos, Obi said it was wrong for the government to be giving funds to companies that have already been privatised.
According to him, going forward, government should put in place privatisation model that sets a limit and encourages the privatised firms to be listed in the capital and raise funds for their operations.
The former governor, who spoke on; ‘Financing Infrastructure Development and Industrialisation; the Capital Market Way’, noted that what we are doing is “privatising profit and sharing losses.
“We are the only country that privatise wrongly. I was in the UK when Margaret Thatcher decided to private British Airways London Electricity among others. It was a deliberate policy that you have to get investors. In our own case, what we did was to privatise profit and share losses. We should enact a policy that set limit and allow the privatised entities to be listed and raise funds from the market subsequently. Today we are borrowing from China to build airports. Go to South Africa, India, Turkey, they raise funds from the capital market to build infrastructure,” he said.
Continuing he said: “Today you sell an asset to Mr. Obi, tomorrow you say the asset cannot work and government will intervene and give him more money. I am saying get these assets and sell to the public. All the money you put into power assets, for instance, let them go to the capital market raise additional funds. When are quoted in the market their operations will become more open and efficient.”
Obi reiterated that the Nigerian economy is recession because we failed to save in the past.
“And our constitution says we cannot save. There is no constitution in the world that does encourage savings. We have what is called the federation account where all government revenues are paid and shared among the three tiers of government. There is no provision for savings. Sharing is what we have been doing all the while. And it is worst when you are getting your money from an extractive industry which is a diminishing asset. If there there have been savings since we started exploring oil, we would have been better. But forget about the past. It’s gone. So what can be done about tomorrow? We have to start saving now,” he stated.
Oil Prices Recover Slightly Amidst Demand Concerns in U.S. and China
Oil Prices Continue Slide as Market Skepticism Grows Over OPEC+ Cuts
Global oil markets witnessed a continued decline on Wednesday as investors assessed the impact of extended OPEC+ cuts against a backdrop of diminishing demand prospects in China.
Brent crude oil, the international benchmark for Nigerian crude oil, declined by 63 cents to $76.57 a barrel while U.S. WTI crude oil lost 58 cents to $71.74 a barrel.
Last week, the Organization of the Petroleum Exporting Countries and its allies, collectively known as OPEC+, agreed to maintain voluntary output cuts of approximately 2.2 million barrels per day through the first quarter of 2024.
Despite this effort to tighten supply, market sentiment remains unresponsive.
“The decision to further reduce output from January failed to stimulate the market, and the recent, seemingly coordinated, assurances from Saudi Arabia and Russia to extend the constraints beyond 1Q 2024 or even deepen the cuts if needed have also fallen to deaf ears,” noted PVM analyst Tamas Varga.
Adding to the unease, Saudi Arabia’s decision to cut its official selling price (OSP) for flagship Arab Light to Asia in January for the first time in seven months raises concerns about the struggling demand for oil.
Amid the market turmoil, concerns over China’s economic health cast a shadow, potentially limiting fuel demand in the world’s second-largest oil consumer.
Moody’s recent decision to lower China’s A1 rating outlook from stable to negative further contributes to the apprehension.
Analysts will closely watch China’s preliminary trade data, including crude oil import figures, set to be released on Thursday.
The outcome will provide insights into the trajectory of China’s refinery runs, with expectations leaning towards a decline in November.
Russian President Vladimir Putin’s diplomatic visit to the United Arab Emirates and Saudi Arabia has added an extra layer of complexity to the oil market dynamics.
Discussions centered around the cooperation between Russia, the UAE, and OPEC+ in major oil and gas projects, highlighting the intricate geopolitical factors influencing oil prices.
U.S. Crude Production Hits Another Record, Posing Challenges for OPEC
U.S. crude oil production reached a new record in September, surging by 224,000 barrels per day to 13.24 million barrels per day.
The U.S. Energy Information Administration reported a consecutive monthly increase, adding 342,000 barrels per day over the previous three months, marking an annualized growth rate of 11%.
The surge in domestic production has led to a buildup of crude inventories and a softening of prices, challenging OPEC⁺ efforts to stabilize the market.
Despite a decrease in the number of active drilling rigs over the past year, U.S. production continues to rise.
This growth is attributed to enhanced drilling efficiency, with producers focusing on promising sites and drilling longer horizontal well sections to maximize contact with oil-bearing rock.
While OPEC⁺ production cuts have stabilized prices at relatively high levels, U.S. producers are benefiting from this stability.
The current strategy seems to embrace non-OPEC non-shale (NONS) producers, similar to how North Sea producers did in the 1980s.
Saudi Arabia, along with its OPEC⁺ partners, is resuming its role as a swing producer, balancing the market by adjusting its output.
Despite OPEC’s inability to formally collaborate with U.S. shale producers due to antitrust laws, efforts are made to include other NONS producers like Brazil in the coordination system.
This outreach aligns with the historical pattern of embracing rival producers to maintain control over a significant share of global production.
In contrast, U.S. gas production hit a seasonal record high in September, reaching 3,126 billion cubic feet.
However, unlike crude, there are signs that gas production growth is slowing due to very low prices and the absence of a swing producer.
Gas production increased by only 1.8% in September 2023 compared to the same month the previous year.
While the gas market is in the process of rebalancing, excess inventories may persist, keeping prices low.
The impact of a strengthening El Niño in the central and eastern Pacific Ocean could further influence temperatures and reduce nationwide heating demand, impacting gas prices in the coming months.
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