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NNPC Announces New Date to End Gas Flaring

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NNPC - Investors King
  • NNPC Announces New Date to End Gas Flaring

The country is expecting over $25bn worth of investments in the gas sector, the Nigerian National Petroleum Corporation announced on Wednesday.

It also stated that policies that would put an end to the flaring of gas had been developed by the corporation, adding that gas flaring in Nigeria had reduced significantly from 25 per cent to 10 per cent in the last decade.

The Group Managing Director, NNPC, Maikanti Baru, stated these in different panel sessions at the ongoing 50th Offshore Technology Conference in Houston, United States, according to a statement issued in Abuja by the national oil firm’s spokesperson, Ndu Ughamadu.

While speaking at a panel session on new oil and gas horizons and procurement in Sub-Saharan Africa, Baru stated that huge opportunities abound in Nigeria’s gas sector, with the country expecting over $25bn investments over the next 10 years.

He described the Nigerian petroleum industry as the largest and most vibrant in Sub-Saharan Africa, with a lot of potential, especially in the deep water, and untapped gas resources.

According to him, Nigeria offers unique opportunities for investment in exploration, refining, storage, transportation, power, distribution and marketing of petroleum products, adding that the nation’s gas reform is anchored on a strategic framework that is focused on maximum economic impact through gas.

Speaking on the theme, ‘Nigeria’s Gas Flare Commercialisation, Prospects and Opportunities’, Baru explained that in the last decade, gas flaring had significantly reduced in the country.

He said the multi-pronged approach taken by the NNPC would ensure a sustainable solution to the historical problem of gas flaring.

Baru said the three-point strategy to arrest gas flaring included ensuring the non-submission of Field Development Plans to the Department of Petroleum Resources without a viable and executable gas utilisation plan, a move aimed at ensuring that no new gas flare in current and future projects.

Others are a steady reduction of existing flares through a combination of targeted policy interventions in the gas master plan, and the re-invigoration of the flare penalty through the 2016 Nigeria Gas Flare Commercialisation Programme and through legislation, that is, ban on gas flaring via the recent Flare Gas (Prevention of Waste and Pollution) Regulations, 2018.

Baru stated that the development would not only see Nigeria dropping from being the second highest gas flaring nation in the world to seventh, but would also signify a major milestone in the country’s gas commercialisation prospects.

“Total flares have significantly reduced to current levels of about 800mmscfd, and in the next one to two years, we would have completely ensured zero routine flares from all the gas producers,” he was quoted as saying.

Baru added that the NNPC had embarked on an aggressive expansion of its gas infrastructure network in order to create access to the market.

“Today, we have completed and inaugurated almost 600 kilometres of new gas pipelines, thereby connecting all existing power plants to permanent gas supply pipelines. We are also currently completing the construction of the strategic 127-kilometre Obiafu-Obrikom-Oben gas pipeline, ‘OB 3’, connecting the eastern supply to the western demand centres,” he noted.

Baru stated that aside looping the Escravos-Lagos Pipeline System 2 gas pipeline projects to increase gas volume capacity to at least 2Bcf/day, the corporation recently signed the contract for the 614-kilometre Ajaokuta-Kaduna-Kano pipeline project, which on completion, would deliver gas to the ongoing power plants in the areas and revive the manufacturing industries in the northern part of the country.

He said there was evidence that the interventions undertaken by the corporation were working as gas supply to the domestic market was growing at an encouraging rate, having tripled from 500mmcf/d in 2010 to about 1,500mmcf/d currently.

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.

Economy

Goldman Sachs Urges Bold Rate Hike as Naira Weakens and Inflation Soars

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Central Bank of Nigeria (CBN)

As Nigeria grapples with soaring inflation and a faltering naira, Goldman Sachs is calling for a substantial increase in interest rates to stabilize the economy and restore investor confidence.

The global investment bank’s recommendation comes ahead of the Central Bank of Nigeria’s (CBN) key monetary policy decision, set to be announced on Tuesday.

Goldman Sachs economists, including Andrew Matheny, argue that incremental rate adjustments will not be sufficient to address the country’s deepening economic challenges.

“Another 50 or 100 basis points is certainly not going to move the needle in the eyes of an investor,” Matheny stated. “Nigeria needs a bold, decisive move to curb inflation and regain investor trust.”

The CBN, under the leadership of Governor Olayemi Cardoso, is anticipated to raise interest rates by 75 basis points to 27% in its upcoming meeting.

This would mark a continuation of the aggressive tightening campaign that began in May 2022, which has seen rates increase by 14.75 percentage points.

Despite this, inflation has remained stubbornly high, highlighting the need for more substantial measures.

The current economic landscape is marked by severe challenges. The naira’s depreciation has led to higher import costs, fueling inflation and eroding consumer purchasing power.

The CBN has attempted to ease the currency’s scarcity by selling dollars to local foreign exchange bureaus, but these efforts have yet to stabilize the naira significantly.

“Developments since the last meeting have definitely been hawkish,” noted Matheny. “The naira has weakened further, exacerbating inflationary pressures. The CBN’s policy needs to reflect this reality more aggressively.”

In response to the persistent inflation and naira weakness, analysts are urging the central bank to implement a more coherent strategy to manage the currency and inflation.

James Marshall of Promeritum Investment Management LLP suggested that the CBN should actively participate in the foreign exchange market to mitigate the naira’s volatility and restore market confidence.

“The central bank needs to be a more consistent and active participant in the forex market,” Marshall said. “A clear strategy to address the naira’s weakness is crucial for stabilizing the economy.”

The CBN’s decision will come as the country faces a critical period. With inflation expected to slow due to favorable comparisons with the previous year and new measures to reduce food costs, including a temporary import duty waiver on wheat and corn, there is hope that the economic situation may improve.

However, analysts anticipate that the CBN will need to implement one final rate hike to solidify inflation’s slowdown and restore positive real rates.

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Economy

Currency Drop Spurs Discount Dilemma in Cairo’s Markets

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Egyptian pound

Under Cairo’s scorching sun, the bustling streets reveal an unexpected twist in dramatic price drops on big-ticket items like cars and appliances.

Following March’s significant currency devaluation, prices for these goods have plunged, leaving consumers hesitant to make purchases amid hopes for even better deals.

Mohamed Yassin, a furniture store vendor, said “People just inquire about prices. They’re afraid to buy in case prices drop further.” This cautious consumer behavior is posing challenges for Egypt’s consumer-driven economy.

In March, Egyptian authorities devalued the pound by nearly 40% to stabilize an economy teetering on the edge. While such moves often lead to inflation spikes, Egypt’s case has been unusual.

Unlike other nations like Nigeria or Argentina, where costs soared post-devaluation, Egypt is witnessing falling prices for high-value items.

Previously inflated prices were driven by a black market in foreign currency, where importers secured dollars at exorbitant rates, passing costs onto consumers.

Now, with the pound stabilizing and foreign currency more accessible, retailers are struggling to sell inventory at pre-devaluation prices.

Despite price reductions, the overall consumer market remains sluggish. The automotive sector has seen a near 75% drop in sales compared to pre-crisis levels.

Major brands like Hyundai and Volkswagen have slashed prices by about a quarter, yet buyers remain cautious.

The economic strain is not limited to luxury items. Everyday expenses continue to rise, albeit more slowly, with anticipated hikes in electricity and fuel prices adding to the pressure.

Experts highlight a period of adjustment as both consumers and traders navigate the volatile exchange-rate environment. Mohamed Abu Basha, head of research at EFG Hermes, explains, “The market is taking time to absorb recent fluctuations.”

Meanwhile, businesses face declining sales, impacting their ability to manage operating costs. Yassin’s store has offered discounts of up to 50% yet remains quiet. “We’ve tried everything, but everyone is waiting,” he laments.

The devaluation has spurred a shift in economic dynamics. Inflation has eased, but the pace varies across sectors. Clothing and transportation costs are up, while food prices fluctuate.

With the phasing out of fuel subsidies and potential electricity price increases, Egyptians are bracing for further financial strain. The recent 300% rise in subsidized bread prices adds another layer of concern.

The situation underscores the balancing act between maintaining consumer confidence and attracting foreign investment.

Economists suggest potential stimulus measures, such as lowering interest rates or increasing public spending, to boost demand.

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Economy

MPC Meeting on July 22-23 to Tackle Inflation as Rates Set to Rise Again

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Interbank rate

The Monetary Policy Committee (MPC) is set to convene on July 22-23, 2024, amid soaring inflation and economic challenges in Nigeria.

Led by Olayemi Cardoso, the committee has already increased interest rates three times this year, raising them by 750 basis points to 26.25 percent.

Nigeria’s annual inflation rate climbed to 34.19 percent in June, driven by rising food prices. Despite these pressures, the Central Bank of Nigeria (CBN) projects that inflation will moderate to around 21.40 percent by year-end.

Market analysts expect a further rate hike as the committee seeks to rein in inflation. Nabila Mohammed from Chapel Hill Denham anticipates a 50–75 basis point increase.

Similarly, Coronation Research forecasts a potential rise of 50 to 100 basis points, given the recent uptick in inflation.

The food inflation rate reached 40.87 percent in June, exacerbated by security issues in key agricultural regions.

Essential commodities such as millet, garri, and yams have seen significant price hikes, impacting household budgets and savings.

As the MPC meets, the National Bureau of Statistics is set to release data on selected food prices for June, providing further insights into the inflationary trends affecting Nigerians.

The upcoming MPC meeting will be crucial in determining the trajectory of Nigeria’s monetary policy as the government grapples with economic instability.

The focus remains on balancing inflation control with economic growth to ensure stability in Africa’s largest economy.

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