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At $33bn, External Reserves Hit 31-month High, Oil Rebounds to Five-month High

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  • At $33bn, External Reserves Hit 31-month High, Oil Rebounds to Five-month High

Nigeria’s foreign exchange reserves have risen to a 31-month high of $33 billion, the Central Bank of Nigeria (CBN) disclosed Thursday.

It was also positive news for Nigeria from the oil markets where crude prices touched a five-month high, with Brent, the benchmark crude, up one per cent at $55.72 a barrel, after a session high of $55.99, its highest since April 13.

CBN spokesman, Mr. Isaac Okoroafor, spoke on the rise in foreign reserves on the sidelines of a seminar for finance correspondents and business editors in Awka, Anambra State Thursday.

The accretion in reserves, derived mainly from the proceeds of crude oil earnings, represents an increase by $7 billion, compared with the $26 billion at the end of the year.

The Nigerian economy, which recently exited from a debilitating recession, with data from the National Bureau of Statistics (NBS) showing that the economy expanded by 0.55 per cent in the second quarter (Q2) of 2017, was driven mainly by the performance of the oil and three other sectors.

In the second quarter, the oil sector grew significantly by 17.04 percentage points from -15.40 per cent recorded in Q1 2017 to 1.64 per cent, reflecting the relative peace in the Niger Delta, increased oil output from the region and increase in oil prices.

In the foreign exchanges market, however, the naira closed at N360.5 to the dollar on the NAFEX window Thursday, but fell to N367 to the dollar on the parallel market.

The CBN on Monday had intervened with $250 million in the interbank forex market.

Okorafor said with the sustained interventions, the central bank has been able to push forex demand away from the parallel market into the formal regulated market.

According to him, CBN had taken measures to check the activities of speculators and shield the currency from attacks, while also maintaining the value of the naira.

Okorafor maintained that authorised dealers had enough funds to meet the forex needs of customers and urged all to adhere to the extant guidelines on the sale of forex in the Nigerian forex market.

He advised those in genuine need of forex to continue to approach their respective banks for purchase, adding that the CBN remained optimistic that the Nigerian currency will fare strongly against other convertible currencies.

On the convergence target of the Bank, he said the goal would be attained if all stakeholders played by the rules.

On the international oil markets, crude oil prices rose Thursday, with the global benchmark crude, Brent, touching a five-month high, a day the International Energy Agency (IEA) predicated that the oil market would continue to tighten as fuel demand increases.

Brent crude was up one per cent at $55.72 a barrel, after a session high of $55.99, its highest since April 13, while the U.S. West Texas Intermediate was up 1.7 per cent at $50.14 per barrel, its first time to cross the $50 mark since August.
WTI touched $50.50, its highest since May 25, and surpassed its 200-day moving average.

Reuters reported that Brent has climbed more than $10 a barrel in three months and is close to where it began this year.

On Wednesday, the IEA raised its estimate of 2017 world oil demand growth to 1.6 million barrels per day (bpd) from 1.5 million bpd.

The agency said a global oil glut was shrinking thanks to strong European and U.S. demand, as well as production declines in OPEC and non-OPEC countries.

Global oil demand grew “very strongly” year-on-year in the second quarter this year, which prompted the IEA to revise up its growth estimate to 1.6 million bpd for this year.

This is the second consecutive month in which the agency has lifted its demand growth forecast, after it revised up the growth estimate to 1.5 million bpd in August.

Although Hurricanes Harvey and Irma were expected to slow U.S. oil demand growth in the third quarter this year, “OECD demand growth continues to be stronger than expected, particularly in Europe and the U.S.,” the IEA said.

Also supporting oil prices was the fact that OPEC production dropped in August for the first time in five months, following production disruptions in Libya and other OPEC members producing less crude.

OPEC members bound by the pact achieved an 82 per cent compliance rate in August, higher than the 75 per cent in July.

IEA noted that year-to-date, compliance within OPEC stands at 86 per cent.

OPEC and other producers including Russia had agreed to reduce crude output to support prices.

This week’s gains have come despite data showing a big build up in U.S. crude inventories after Hurricane Harvey.

Data from the Energy Information Administration showed a build up in U.S. crude inventories last week of 5.9 million barrels, exceeding expectations.

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.

Economy

COVID-19 Vaccine: Crude Oil Extends Gain to $48 Per Barrel on Wednesday

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Oil prices rose further on Wednesday as hope for an effective COVID-19 vaccine and the news that the United States of America’s President-elect, Joe Biden has begun transition to the White House bolstered crude oil demand.

Brent crude oil, a Nigerian type of oil, gained 1.63 percent or 78 cents to $48.64 per barrel at 11:50 am Nigerian time on Wednesday.

The United States West Texas Intermediate (WTI) crude oil rose by 1.36 percent or 61 cents to $45.52 per barrel.

OPEC Basket surged the most in terms of gain, adding 3.16 percent or $1.37 to $44.75 per barrel.

This was after AstraZeneca, Moderna and Pfizer-BioNTech announced the positive results of their trials.

Moderna and Pfizer had claimed over 90 percent effective rate in trials while AstraZeneca said its COVID-19 vaccine was 70 percent effective in trials but could hit 90 percent going forward.

The possibility of having a vaccine next year increases the odds that we’re going to see demand return in the new year,” said Phil Flynn, senior analyst at Price Futures Group in Chicago.

Also, the decision of President-elect Joe Biden to bring Janet Yellen, the former Chair of Federal Reserve, back as a Treasury Secretary of the United States is fueling demand and strong confidence across global financial markets.

President-elect Biden’s cabinet choices, particularly Janet Yellen’s Treasury Secretary position, are adding to upside momentum across a broad space of asset classes,” said Jim Ritterbusch of Ritterbusch and Associates.

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Economy

Seyi Makinde Proposes N266.6 Billion Budget for Oyo State in 2021

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The Executive Governor of Oyo State, Seyi Makinde, has presented the Oyo State Budget Proposal for the 2021 Fiscal Year to the Oyo State House of Assembly on Monday.

The proposed budget titled “Budget of Continued Consolidation” was said to be prepared with input from stakeholders in all seven geopolitical zones of Oyo state.

Governor Makinde disclosed this via his official Twitter handle @seyiamakinde.

According to the governor, the proposed recurrent expenditure stood at N136,262,990,009.41 while the proposed capital expenditure was N130,381,283,295.63. Bringing the total proposed budget to N266,6444,273,305.04.

The administration aimed to implement at least 70 percent of the proposed budget if approved.

He said “The total budgeted sum is ₦266,644,273,305.04. The Recurrent Expenditure is ₦136,262,990,009.41 while the Capital Expenditure is ₦130,381,283,295.63. We are again, aiming for at least 70% implementation of the budget.”

He added that “It was my honour to present the Oyo State Budget Proposal for the 2021 Fiscal Year to the Oyo State House of Assembly, today. This Budget of Continued Consolidation was prepared with input from stakeholders in all seven geopolitical zones of our state.”

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Economy

World Bank Expects Nigeria’s Per Capita Income to Dip to 40 Years Low in 2020

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The World Bank has raised concern about Nigeria’s rising debt service cost, saying it could incapacitate the nation from necessary infrastructure development and growth.

The multilateral financial institution said the nation’s per capita income could plunge to 40 years low in 2020.

According to Mr. Shubham Chaudhuri, Country Director for World Bank in Nigeria, the decline in global oil prices had impacted government finances, remittances from the diaspora and the balance of payments.

Chaudhuri, who spoke during the 26th Nigerian Economic Summit organised by the Nigerian Economic Summit Group and the Federal Government, said while the nation’s debt is between 20 to 30 percent, rising debt service remains the bane of its numerous financial issues and growth.

Nigeria’s problem is that the debt service takes a big part of the government revenue,” he said.

He said, “Crisis like this is often what it takes to bring a nation together to have that consensus within the political, business, government, military, civil society to say, ‘We have to do something that departs from business as usual.’

“And for Nigeria, this is a critical juncture. With the contraction in GDP that could happen this year, Nigeria’s per capita income could be around what it was in 1980 – four decades ago.”

Nigeria’s per capita income stood at $847.40 in 1980, according to data from the World Bank. It rose to $3,222.69 in 2014 before falling to $2,229.9 in 2019.

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