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Despite Osinbajo’s Directive, Petrol Marketers Yet to be Paid $2bn Subsidy Claims

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Petrol - Investors King
  • Despite Osinbajo’s Directive, Petrol Marketers Yet to be Paid $2bn Subsidy Claims

Petroleum products marketers and depot owners have said that despite the directive by Acting President Yemi Osinbajo to the Ministry of Finance to pay the marketers their outstanding subsidy claims, which they estimated at about $2 billion, none of them was paid as at close of work on Friday.

Earlier in the week, Osinbajo summoned a meeting of the Major Oil Marketers Association of Nigeria (MOMAN) and the Depot and Petroleum Products Marketers Association (DAPPMA) on May 22, which had the Minister of Finance, Mrs. Kemi Adeosun; Minister of State for Petroleum Resources, Dr. Ibe Kachikwu; and the Central Bank Governor, Mr. Godwin Emefiele, in attendance.

It was gathered that at the end of the meeting, the Acting President was said to have directed the Finance Ministry to pay the marketers all verified claims so that they could resume importation of petrol.

However, a presidential source last night said there was no formal order in the real sense of it. The source who did not want to be named said the marketers would be paid in no distant time, explaining that the current delay is as a result of shortage of funds.

The Executive Secretary of DAPPMA, Mr. Femi Adewole, also confirmed that Osinbajo had given approval for the marketers to be paid all verified claims.

He, however, raised the alarm that despite the directive by the Acting President, the marketers had not yet been paid.

He pointed out that the delays in the payment of the marketers’ claims could precipitate crisis in the downstream sector as the banks have not backed down on their threats to seize tank farms over the unpaid loans borrowed by the marketers to fund importation during the subsidy regime.

“The Acting President has issued approval for the marketers to be paid. It is the Ministry of Finance that is telling us stories. As at the close of work on Friday, I spoke with the marketers but none of them has received any payment. But the Acting President has given the necessary approval,” Adewole explained.

On the speculations that the marketers would shut down their depots on July 1 (yesterday) in protest against the unpaid bills, Adewole said it was not a matter of going on strike as no bank is currently giving the marketers credit to import products.

He said unless the government paid the outstanding claims, marketers could not go back to the banks to request for credit for importation.

“The banks are not giving us money and are still threatening to seize our tank farms for failing to pay the debts. So, it is not an issue of going on strike or not going on strike because we can’t go to bank to ask for money now,” he added.

The failure of the federal government to pay the marketers their subsidy claims and matured Letters of Credit (LCs), estimated by the marketers at about $2 billion, had eroded their capacity to import petrol, thus imposing the burden of importation of the product on only the NNPC.

The huge debts, which grew as a result of rising cost of forex and the interest charged by the banks that funded the importation of the cargoes, had since forced foreign banks such as the Citi Bank of New York, BNP Paribas and others, which provided the LCs for the importation, to stop opening lines of credits for petrol marketers.

When contacted the Director (Information), Ministry of Finance, Mr. Salisu Na’Inna Dambatta, on the issue yesterday, he said he had no information on the subject-matter.

Dambatta accused our correspondent of being unfair to him by asking to be furnished with information on such a matter on a Saturday evening.

His words: “Mr. Francis, you are being unfair to me. How do you expect me to call the minister at about 6:40 pm on a Saturday? I know what you want to do: you have written your story and decided to call by this time so that you will say the ministry refused to react.”

Efforts to explain to him that the request for the ministry’s response was sequel to the claim by oil marketers yesterday that the Acting President’s directive on payment of their claims had not been carried out by the ministry were futile.

Dambatta, however, expressed his regrets, but insisted there was no way he could reach the minister on a Saturday evening.

Meanwhile, NNPC on Saturday said it intends to maintain a steady supply of petroleum products across Nigeria despite renewed call on the federal government by oil marketers to pay outstanding financial subsidies owed them, or the country risks a fresh round of petroleum products scarcity.

Group General Manager, Public Affairs of NNPC, Mr. Ndu Ughamadu, described the complaints and position of the marketers as unfortunate.

Ughamadu, however, explained that the NNPC had in the past intervened in getting the Central Bank of Nigeria (CBN) to establish a special foreign exchange window to enable the marketers to continue to import and distribute petroleum products, adding that as a market participant, the NNPC is owed subsidy claims but it would not stop to import and distribute products.

Insisting that the corporation as the sole importer of petrol in the country at the moment would appreciate supports from all stakeholders, he thus called on oil marketers to continue to show commitments to stability of products supplies in the country.

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 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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