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Nigeria’s Gas Export Remains High Amid Domestic Shortage

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  • Nigeria’s Gas Export Remains High Amid Domestic Shortage

As the country continues to suffer gas shortage for power plants and household cooking, industry stakeholders have raised concerns about the continued export of over 70 per cent of commercialised natural gas.

The nation’s natural gas is exported mostly through the Nigeria LNG plant, West African Gas Pipeline, Escravos Gas-To-Liquids plant.

Last year, following the resurgence of militant attacks on oil and gas facilities in the Niger Delta, the supply of gas to the domestic market fell by 19.2 per cent to 307.2 billion cubic feet, according to the latest data from the Nigerian National Petroleum Corporation.

But the volume of gas exported, only fell by 8.1 per cent to 1.14 trillion cubic feet, and was about 79 per cent of the nation’s gas that was commercialised last year.

In March, a total of 101.07 Bcf of gas was exported while 34.38 Bcf was supplied to the nation’s power sector, industries and households.

Only about 59.87 per cent of the total gas produced that month was commercialised while the balance of 40.13 per cent was either re-injected, used as upstream fuel gas or flared.

Nigeria has the world’s ninth largest proven gas reserves at 187Tcf, but many of its power plants lack adequate gas supply and cooking gas consumption in the country is one of the lowest in the world.

The Chief Executive officer, GasInvest Limited, Mr. David Ige, said, “Currently, the domestic gas market is experiencing severe shortages, which is forecast to last a few more years into the future. This creates a major energy security challenge for the nation.”

He said a disproportionate focus on the LNG export might lead to a situation similar to what “we have in crude oil today where we remain a major exporter of crude oil and suffer shortages of products, which are then imported.”

According to the former Group Executive Director, Gas and Power, Nigerian National Petroleum Corporation, Nigeria exports about 3500 million cubic feet per day of gas in LNG and utilises less than 2000mmcf/d domestically.

Ige said, “The shortage in the domestic market is about 1000mmcf/d relative to known demand from power sector and industries. This gap between domestic demand and supply is forecast to grow to 2000mmcf/d within the next four or five years.

“If the imbalance between export LNG and domestic utilisation is not addressed, we create a gas sector that is export-oriented and a domestic market that suffers huge energy crisis.”

He suggested that focus should be in addressing the imbalance between domestic and export and in ensuring that “whatever export commitment is made does not in any way compromise the long-run energy security of the country.

According to him, no amount of revenues from export will mitigate the impact of the Gross Domestic Product loss arising from lack of adequate gas supply for electricity and industries.

In April, Australia, one of the world’s biggest liquefied natural gas exporters, said it would introduce export control restrictions to tackle an acute domestic gas shortage that was pushing up prices and threatening electricity supply and industries.

Under a new “gas security mechanism” due to enter into force on July 1, the government will be able to restrict exports when it believes there is not a secure supply of gas available to domestic users.

“In the long run, Nigeria is better off using its gas as a source of energy for its economy rather than as a source of income from international gas sales,” the President, Nigerian Association of Energy Economics, Prof. Wumi Iledare, said.

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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South Africa’s Inflation Rate Holds Steady in May

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South Africa's economy - Investors King

South Africa’s inflation rate remained unchanged in May, increasing the likelihood that the central bank will maintain current borrowing costs.

According to a statement released by Statistics South Africa on Wednesday, consumer prices rose by 5.2% year-on-year, the same rate as in April.

The consistent inflation rate is expected to influence the decision of the six-member monetary policy committee (MPC), which is set to meet in mid-July. The current benchmark rate stands at 8.25%, a 15-year high, and has been held steady for six consecutive meetings.

Central Bank Governor Lesetja Kganyago has repeatedly emphasized the need for inflation to fall firmly within the 3% to 6% target range before considering any reduction in borrowing costs.

“We will continue to deliver on our mandate, irrespective of how our post-election politics plays out,” Kganyago stated earlier this month in Soweto. “The only impact is what kind of policies any coalition will propose. If the policies are not sustainable, we might not have investment.”

While money markets are assigning a slim chance of a 25-basis point rate cut in July, they are fully pricing in a reduction by November.

Bloomberg Africa economist Yvonne Mhango anticipates the rate-cutting cycle to begin in the fourth quarter, supported by a sharp drop in gasoline prices in June and a rally in the rand.

The rand has appreciated more than 3% since Friday, following the ANC’s agreement to a power-sharing deal with business-friendly opposition parties and the re-election of President Cyril Ramaphosa.

In May, the annual inflation rates for four of the twelve product groups remained stable, including food and non-alcoholic beverages.

However, transport, alcoholic beverages and tobacco, and recreation and culture saw higher rates. Food prices increased by 4.3% in May, slightly down from 4.4% in April, while transport costs rose by 6.3%, up from 5.7% and marking the highest rate for this category since October 2023.

The central bank’s cautious stance on monetary policy reflects its ongoing concerns about inflation.

Governor Kganyago has consistently voiced worries that the inflation rate is not decreasing as quickly as desired. The MPC’s upcoming decision will hinge on sustained inflationary pressures and the need to balance economic stability with fostering growth.

As South Africa navigates its economic challenges, the steady inflation rate in May provides a measure of predictability for policymakers and investors alike.

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Ghana Reports Strong 4.7% GDP Growth in First Quarter of 2024

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Ghana’s economy showed impressive growth in the first quarter of 2024 with the Gross Domestic Product (GDP) expanding by 4.7% compared to the same period last year, according to Government Statistician Samuel Kobina Annim.

This represents an increase from the 3.8% growth recorded in the previous quarter and should provide a much-needed boost to the ruling New Patriotic Party (NPP) as the nation approaches the presidential elections scheduled for December 7.

The positive economic data comes amidst a challenging backdrop of fiscal consolidation efforts under a $3 billion International Monetary Fund (IMF) rescue program.

The government has been working to control debt through reduced spending and restructuring nearly all of its $44 billion debt.

This includes ongoing negotiations with private creditors to reorganize $13 billion worth of bonds.

The latest GDP figures are seen as a vindication of the NPP’s economic policies, which have been under fire from the main opposition party, the National Democratic Congress (NDC).

The opposition has criticized the government’s handling of the economy, particularly its fiscal policies and the terms of the IMF program, arguing that they have imposed undue hardship on ordinary Ghanaians.

However, the 4.7% growth rate suggests that the measures taken to stabilize the economy are beginning to yield positive results.

Analysts believe that the stronger-than-expected economic performance will bolster the NPP’s position as the country gears up for the presidential elections.

“The growth we are seeing is a testament to the resilience of the Ghanaian economy and the effectiveness of the government’s policies,” Annim stated at a press briefing in Accra. “Despite the constraints imposed by the debt restructuring and IMF program, we are seeing significant progress.”

The IMF program, which is designed to restore macroeconomic stability, has necessitated tough fiscal adjustments.

These include cutting government expenditure and implementing structural reforms aimed at boosting economic efficiency and growth.

The government’s commitment to these reforms has been crucial in securing the confidence of international lenders and investors.

In addition to the IMF support, the government has also been focused on diversifying the economy, reducing its reliance on commodities, and fostering sectors such as manufacturing, services, and technology.

These efforts have contributed to the robust growth figures reported for the first quarter.

Economic growth in Ghana has been uneven in recent years, with periods of rapid expansion often followed by slowdowns.

The current administration has emphasized sustainable and inclusive growth, seeking to ensure that the benefits of economic progress are widely shared across all segments of the population.

The next few months will be critical as the government continues its efforts to stabilize the economy while preparing for the upcoming elections.

The positive GDP growth figures provide a strong foundation, but challenges remain, including managing inflation, creating jobs, and ensuring the stability of the financial sector.

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World Bank Commits Over $15 Billion to Support Nigeria’s Economic Reforms

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The World Bank has pledged over $15 billion in technical advisory and financial support to help the country achieve sustainable economic prosperity.

This commitment, announced in a feature article titled “Turning The Corner: Nigeria’s Ongoing Path of Economic Reforms,” underscores the international lender’s confidence in Nigeria’s recent bold reforms aimed at stabilizing and growing its economy.

The World Bank’s support will be channeled into key sectors such as reliable power and clean energy, girls’ education and women’s economic empowerment, climate adaptation and resilience, water and sanitation, and governance reforms.

The bank lauded Nigeria’s government for its courageous steps in implementing much-needed reforms, highlighting the unification of multiple official exchange rates, which has led to a market-determined official rate, and the phasing out of the costly gasoline subsidy.

“These reforms are crucial for Nigeria’s long-term economic health,” the World Bank stated. “The supply of foreign exchange has improved, benefiting businesses and consumers, while the gap between official and parallel market exchange rates has narrowed, enhancing transparency and curbing corrupt practices.”

The removal of the gasoline subsidy, which had cost the country over 8.6 trillion naira (US$22.2 billion) from 2019 to 2022, was particularly noted for its potential to redirect fiscal resources toward more impactful public investments.

The World Bank pointed out that the subsidy primarily benefited wealthier consumers and fostered black market activities, rather than aiding the poor.

The bank’s article emphasized that Nigeria is at a turning point, with macro-fiscal reforms expected to channel more resources into sectors critical for improving citizens’ lives.

The World Bank’s support is designed to sustain these reforms and expand social protection for the poor and vulnerable, aiming to put the economy back on a sustainable growth path.

In addition to this substantial support, the World Bank recently approved a $2.25 billion loan to Nigeria at a one percent interest rate to finance further fiscal reforms.

This includes $1.5 billion for the Nigeria Reforms for Economic Stabilization to Enable Transformation (RESET) Development Policy Financing, and $750 million for the NG Accelerating Resource Mobilization Reforms Programme-for-Results (ARMOR).

“The future can be bright, and Nigeria can rise and serve as an example for the region on how macro-fiscal and governance reforms, along with continued investments in public goods, can accelerate growth and improve the lives of its citizens,” the World Bank concluded.

With this robust backing from the World Bank, Nigeria is well-positioned to tackle its economic challenges and embark on a path to sustained prosperity and development.

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