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Dangote Speaks About Investing in Edo State

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Aliko Dangote - Investors King
  • Dangote Speaks About Investing in Edo State

CNBC Africa’s Onyi Sunday caught up with Africa’s richest man, Aliko Dangote, President of the Dangote Group, at the just concluded Edo Investment Summit in Benin City and discussed what this summit means for the State.

I think the summit went very well even though they had a short period of time inviting people and also arranging it’s a situation where they want to show that the public sector is ready to partner and do business with the private sector. You can see that the hall was filled to the brim and they invited a lot of people and majority of them really paid attention to the conference, and these are big investors. They are taking people who have $500 million and above and I think this will open up the state to job creation and it will enlighten people of the opportunities Edo State has. They are here ready to do business and I think the state has a lot of advantages in terms of agriculture and agro-allied industries which I think is their own oil. If they can really focus on that and harness it they will be able to do something great.

In your speech at the event, you spoke about the need for better collaboration between the public and private sectors. How important is this and what has been the situation been from your perspective?

The relationship has been okay to a certain extent. There are a couple of different people in government. Some are pro business and others are anti-business. The ones that are against business have never really taken a good look to see the opportunity for government, because there are taxes. People in business pay taxes. Even if they have a 3-5 year tax holiday, by the time that you start paying taxes, you end up seeing that the government makes more money than the owners of the business, including the reserves of the company. We have that case in our sugar business. The government takes more money, when you take the VAT and everything into account, the government takes 42 per cent and we take 48 per cent.

It is a win-win situation. Apart from that, you’ll create a lot of jobs because it isn’t the duty of the government to create jobs. The government is meant to facilitate and make sure there’s an enabling environment. We the private sector are the ones that will actually take the risks. We risk our money, risk our resources, borrow more money from the banks and now go on a trajectory. If it fails we’re on our own. If it succeeds, then government comes in and shares the profits. However, the main thing isn’t only about money or profit making. Of course you have to make money, but the most important thing for us today as a nation is how do we create jobs.

Based on my own estimations Nigeria should be creating something like about 5 million jobs every year for us to become prosperous. The only way we can create this high number of jobs is to go and concentrate on agriculture. In my speech I said, “how many barrels of oil do you need to make up for one tonne palm oil.” A tonne of palm oil can actually buy almost 8 barrels of oil and 8 barrels of oil is more difficult to get than palmoil because we have the land, we have the water, our climate is excellent, so that’s what going on.

What do you think of the calls for restructuring and how significant are investment summits like this one to states and their development?

When you look at things as they exist today, majority of the people who call for restructuring don’t understand what restructuring is all about. And majority of the states in Nigeria are not viable. You have to run government like a business. You cannot continue to just keep running government in deficit when most states are not able to pay salaries. We have an income of N3 billion and then you have salaries and other expenses without even projects. So it means that even if you ignore capital projects and take care of only recurrent, you will always be N1 billion short.

If you run this for 5-10 years, where in the hell are you going to get the money to pay off that debt which you are creating? To do well, states don’t need to wait for restructuring. A state like Edo should move on and concentrate on agriculture, bring prosperity to your people better than oil can. With oil you don’t get the revenue, but with agriculture, the prosperity starts from the state and then it spreads to the rest of the country. This is what I think they should do. Edo can mobilise and the governor is capable. He is one of the best governors that we have in Nigeria.

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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Oil Prices Surge in Asian Trading on OPEC+ Meeting Expectations

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Oil prices surged during Asian trading hours on Wednesday amid mounting expectations that major oil-producing nations will uphold output cuts at an impending meeting of the Organization of the Petroleum Exporting Countries and its allies, collectively known as OPEC+.

Brent crude oil, against which Nigerian oil is priced, gained 18 cents, or 0.2% to $84.40 per barrel while the U.S. West Texas Intermediate (WTI) rose by 28 cents, or 0.3%, to $80.11.

The anticipation gripping traders and analysts alike centers on OPEC+ sustaining voluntary production cuts, which currently total about 2.2 million barrels per day.

Sugandha Sachdeva, founder of Delhi-based research firm SS WealthStreet, underscored the significance of this move, asserting that it would be perceived as a concerted effort to stabilize prices and rebalance the global oil market.

Sachdeva further elaborated on the factors bolstering oil prices, noting, “The onset of the summer driving season in the U.S. spurs a seasonal uptick in consumption and typically aids a positive momentum in crude oil prices.”

As the Memorial Day holiday heralds the commencement of the peak demand season in the United States, the world’s foremost oil consumer, the decision to maintain production cuts is poised to lend support to prices as consumption surges.

Daniel Hynes, senior commodity strategist at ANZ Bank, remarked on the robust holiday travel activity witnessed in the U.S., both on roads and in the air.

However, amidst the optimism surrounding the OPEC+ meeting, concerns over heightened tensions in the Gaza Strip added a geopolitical dimension to market dynamics.

Israeli tank advancements into the heart of the Rafah section fueled apprehensions about a potential escalation of conflict in the broader Middle East, a region critical to global oil supply.

Market participants also awaited the release of U.S. crude inventory data from the American Petroleum Institute later in the day, with preliminary expectations suggesting a decline of approximately 1.9 million barrels for the previous week.

Additionally, investor attention was drawn to forthcoming U.S. inflation data, set to influence expectations regarding Federal Reserve interest rate decisions and, consequently, impact oil prices.

The U.S. core Personal Consumption Expenditures Price Index report for April, scheduled for release on Friday, is projected to hold steady on a monthly basis.

Against this backdrop of anticipation and geopolitical tensions, the oil market navigates a landscape shaped by supply dynamics, demand prospects, and macroeconomic indicators, all of which converge to define the trajectory of oil prices in the coming days.

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Oil Revenue Decline Spurs South Sudan to Seek $250 Million IMF Assistance

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South Sudan is seeking $250 million in financing from the International Monetary Fund (IMF) to address its ongoing balance of payment challenges and stimulate economic growth.

The request comes in response to a significant decline in oil revenue, a crucial source of the nation’s income, following damage to a key pipeline.

The pipeline, which transports two-thirds of South Sudan’s crude oil, sustained damage in February.

Repairs have been delayed due to conflicts in neighboring Sudan, where the conduit passes through areas controlled by the army and the paramilitary Rapid Support Forces.

Also, a blockade on the Red Sea has further hampered oil exports, exacerbating the economic strain.

Bank of South Sudan Governor James Alic Garang, speaking at the African Development Bank’s annual meetings in Nairobi, emphasized the urgency of securing alternative financial support.

“We are facing severe challenges with our oil exports, which constitute about 90% of our revenue,” Garang said. “The impact on our economy is profound, reducing the volume of oil available for international markets and decreasing the hard currency inflow essential for meeting our obligations.”

Since 2020, South Sudan has received three rapid credit facilities from the IMF. These measures led to the initiation of a program monitoring with board involvement last year.

The first two reviews of this program were completed this month, with a third scheduled for November. After this, the government will seek the full quota of approximately $250 million.

Governor Garang highlighted that meeting the IMF’s policy requirements is crucial for securing the funds.

“We have already delivered an audit of the central bank’s financial statements for 2021,” he noted. “However, there are still areas where we need to intensify our efforts. With the IMF, there is no free lunch. We’re working very hard to meet those policy requirements.”

Efforts to increase non-oil revenue have been made, but they fall short of the country’s needs. The decline in oil production has significantly affected foreign exchange reserves, which can now only cover about two months of imports, compared to the IMF’s threshold of 3.5 months.

In addition to seeking IMF assistance, South Sudan is in discussions with Qatar for a resolution following a $1 billion court award to the Qatar National Bank over a defaulted loan. “We are negotiating to pay part of it, but we’ll still need to settle this debt,” Garang stated.

The $250 million from the IMF is expected to address several critical areas, including economic growth, inflation control, and the distribution of resources across the country.

It will also support essential sectors such as education and health, providing much-needed relief as South Sudan navigates through these economic challenges.

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Oil Prices Steady Ahead of Crucial OPEC+ Meeting on Output Cuts

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Oil prices stabilized in Asian trading on Monday as markets turned their attention to an upcoming OPEC+ meeting, where producers are expected to discuss maintaining voluntary output cuts for the remainder of the year.

This critical meeting, scheduled for June 2, will be held online following a brief postponement, OPEC announced last Friday.

The Brent crude oil, against which Nigerian crude oil is priced, stood at $82.36 a barrel, while the U.S. West Texas Intermediate (WTI) crude oil rose by 28 cents to $78 per barrel.

The stabilization in prices comes after a week of declines with Brent ending last week about 2% lower and WTI losing nearly 3%.

This downturn was influenced by minutes from the Federal Reserve’s recent meeting, revealing that some officials are open to further tightening interest rates if deemed necessary to control persistent inflation.

Market activity is expected to be relatively subdued on Monday due to public holidays in the United States and the United Kingdom.

However, anticipation is building around the OPEC+ meeting, where producers will deliberate on extending the current voluntary output cuts of 2.2 million barrels per day into the second half of the year. Sources within OPEC+ suggest that an extension is likely.

Sugandha Sachdeva, founder of Delhi-based research firm SS WealthStreet, expressed confidence in the potential extension, stating, “Oil futures are expected to maintain today’s gains due to expectations of the cuts being extended.”

She also highlighted the influence of upcoming U.S. Producer Price Index (PPI) data on market movements, which will shape the Federal Reserve’s approach to potential rate adjustments.

Combined with an additional 3.66 million barrels per day of production cuts valid through the end of the year, these measures account for nearly 6% of global oil demand.

OPEC remains optimistic about continued growth in oil demand, forecasting an increase of 2.25 million barrels per day for the year, while the International Energy Agency (IEA) anticipates slower growth of 1.2 million barrels per day.

Analysts at ANZ noted that they will be closely monitoring gasoline usage as the Northern Hemisphere enters summer, a peak season for driving holidays.

They commented, “While U.S. holiday trips are expected to hit a post-COVID high, improved fuel efficiency and EVs could see oil demand remain soft,” but added that this could be offset by rising air travel.

This week’s market dynamics will also be influenced by the U.S. personal consumption expenditures (PCE) index, due to be released on May 31.

The PCE index is regarded as the Federal Reserve’s preferred measure of inflation, and its findings could provide further indications of the central bank’s interest rate policies.

In a related development, Goldman Sachs has revised its forecast for 2030 oil demand upwards to 108.5 million barrels per day from the previous 106 million barrels per day.

The investment bank also projects peak oil demand to occur by 2034 at 110 million barrels per day, followed by a prolonged plateau until 2040.

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