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PIB Faces Uncertain Future as Elections Draw Near

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  • PIB Faces Uncertain Future as Elections Draw Near

Against the backdrop of the refusal of President Muhammadu Buhari to assent to the Petroleum Industry Governance Bill and as electioneering intensifies ahead of the 2019 elections, industry experts have expressed doubt about the Petroleum Industry Bill becoming law in the current administration.

A key obstacle to the growth of the nation’s oil and gas industry has been widely described as the regulatory uncertainty caused by the delay in the passage of the PIB.

The bill, which seeks to change the organisational structure and fiscal terms governing the industry, suffered setbacks in the 6th and 7th National Assembly.

To fast-track its passage into law, the current National Assembly decided to split the bill into four parts – the PIGB, Petroleum Industry Administration Bill, Petroleum Industry Fiscal Bill and Petroleum Host Community Bill.

After its passage by both the Senate and the House of Representatives, the PIGB was transmitted to the President for assent in July to enable it to become law but it emerged last week that Buhari declined to accent to the bill.

The Senior Special Assistant to the President on National Assembly Matters (Senate), Ita Enang, identified the provision of the PIGB permitting the Petroleum Regulatory Commission to retain as much as 10 per cent of the revenue generated as one of the reasons Buhari declined assent to the bill.

A petroleum expert, Mr Bala Zakka, in a telephone interview with our correspondent, said, “As far as the oil and gas industry is concerned, there is every reason to say that the inability of Nigeria to pass the PIB into an Act is an indication and demonstration of lack of seriousness. There is a justification to conclude also that Nigeria does not know the benefits that will accrue to the country by passing the PIB.”

Bala, who noted that he did not support the splitting of the PIB into four parts, said he was not surprised that the President didn’t assent to the PIGB.

He said, “If we want a good job done on the entire PIB, then this 8th National Assembly cannot meet up. As you can see, only the PIGB has been passed to the President for assent. There are three other bills and the fiscal regime bill and the host community bill are even more contentious. So, if you have those three bills waiting, that means they have only done 25 per cent.

“And most of the National Assembly members are fighting for their political survival in their respective constituencies, and we are already in the heat of the campaigns before the elections. So, there is likelihood that nothing will be achieved. It is very clear that the PIB will outlive the 8th National Assembly.”

A former President of the International Association for Energy Economics, Prof. Wumi Iledare, is of the view that the other three bills are anchored on the PIGB.

He said, “The National Assembly can go back and rework the rejected bill by the President into the administration bill. In that case, the administration bill then becomes the governance and administration bill. That is a possibility. However, the political environment is even toxic because the entire National Assembly is now fragmented. In my opinion, to be able to override the President’s position because now, it is about the APC and the PDP.”

The Chairman, PENGASSAN and NUPENG National PIB Committee, Mr Chika Onuegbu, said recently that the country had lost some $235bn of investments due to its inability to legislate on the proposed reforms in its oil and gas industry.

He said over $15bn yearly investments were withheld or diverted by investors to other countries because of the uncertainty as investors did not know which rules would guide their investments.

According to him, $120bn could have been earned in six years, from 2010 to 2016, had the reforms proposal (PIB) been passed into law in 2009.

Some industry experts have said the President’s rejection of the PIGB poses a significant setback to the oil and gas industry reforms.

The reform efforts, which date back to April 2000 when the government of President Olusegun Obasanjo set up the Oil and Gas Reform Implementation Committee, have suffered serious setbacks.

Onuegbu, in a telephone interview with our correspondent, said, “We must remember that the National Assembly members are politicians; the President is a politician. Politics is about dialogue; so whenever things that ordinarily should be resolved by dialogue are not being done so by politicians, then it calls for concern.

“I think that there is still an opportunity for the National Assembly and the President to close ranks and ensure that we have a PIGB, and that others are passed into law. Now, I don’t know what is going to be the fate of the Host Communities Bill, which the people of the Niger Delta are looking forward to; I don’t know what is going to be the fate of the Fiscal and Administration Bills?

“I want to be optimistic that the PIB will be passed because it is in the interest of the country; the PIB has become a huge project. So, if we cannot get it right this time and pass it into law, it means that we will be talking about reform for 20 years. While we are talking about reform, the new energy transition is staring us in the face. So, I think, as a country, we should come together and move the oil and gas industry forward.”

Another expert said, “The option available is for the National Assembly to overrule the President. This would require a two-third majority of members present and voting in both houses of the National Assembly. In view of the current political climate, this does not seem likely.”

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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Nigeria’s Growth Forecast Lowered to 3% for 2025, Higher than Most Emerging Markets

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IMF global - Investors King

The International Monetary Fund (IMF) has projected a 3% growth rate for Nigeria in 2025, slightly down from the 3.1% forecasted for 2024.

Despite this slight decline, Nigeria’s projected growth remains higher than that of many emerging markets as detailed in the IMF’s latest World Economic Outlook released on Tuesday.

In comparison, South Africa’s economy is expected to grow by 1.2% in 2025, up from 0.9% this year. Brazil’s growth is projected at 2.4% from 2.1% in 2024, and Mexico’s growth forecast stands at 1.6% for 2025, down from 2.2% in 2024.

However, India is anticipated to see a robust growth of 6.5% in 2025, although this is slightly lower than the 7% forecast for 2024.

The IMF’s projections come as Nigeria undertakes significant monetary reforms. The Central Bank of Nigeria has been working on clearing the foreign exchange backlog, and the federal government recently removed petrol subsidies.

These reforms aim to stabilize the economy, but the country continues to grapple with high inflation and increasing poverty levels, which pose challenges to sustained economic growth.

Sub-Saharan Africa as a whole is expected to see an improvement in growth, with projections of 4.1% in 2025, up from 3.7% in 2024. This regional outlook indicates a modest recovery as economies adjust to global economic conditions.

The IMF report underscores the need for cautious monetary policy. It recommends that central banks in emerging markets avoid easing their monetary stances too early to manage inflation risks and sustain economic growth.

In cases where inflation risks have materialized, central banks are advised to remain open to further tightening of monetary policy.

“Central banks should refrain from easing too early and should be prepared for further tightening if necessary,” the report stated. “Where inflation data encouragingly signal a durable return to price stability, monetary policy easing should proceed gradually to allow for necessary fiscal consolidation.”

The IMF also highlighted the importance of avoiding fiscal slippages, noting that fiscal policies may need to be significantly tighter than previously anticipated in some countries to ensure economic stability.

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Nigeria’s Inflation Rises to 34.19% in June Amid Rising Costs

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Food Inflation - Investors King

Nigeria’s headline inflation rate surged to 34.19% in June 2024, a significant increase from the 33.95% recorded in May.

This rise highlights the continuing pressures on the nation’s economy as the cost of living continues to climb.

On a year-on-year basis, the June 2024 inflation rate was 11.40 percentage points higher than the 22.79% recorded in June 2023.

This substantial increase shows the persistent challenges faced by consumers and businesses alike in coping with escalating prices.

The month-on-month inflation rate for June 2024 was 2.31%, slightly up from 2.14% in May 2024. This indicates that the pace at which prices are rising continues to accelerate, compounding the economic strain on households and enterprises.

A closer examination of the divisional contributions to the inflation index reveals that food and non-alcoholic beverages were the primary drivers, contributing 17.71% to the year-on-year increase.

Housing, water, electricity, gas, and other fuels followed, adding 5.72% to the inflationary pressures.

Other significant contributors included clothing and footwear (2.62%), transport (2.23%), and furnishings, household equipment, and maintenance (1.72%).

Sectors such as education, health, and miscellaneous goods and services also played notable roles, contributing 1.35%, 1.03%, and 0.57% respectively.

The rural and urban inflation rates also exhibited marked increases. Urban inflation reached 36.55% in June 2024, a rise of 12.23 percentage points from the 24.33% recorded in June 2023.

On a month-on-month basis, urban inflation was 2.46% in June, slightly higher than the 2.35% in May 2024. The twelve-month average for urban inflation stood at 32.08%, up 9.70 percentage points from June 2023’s 22.38%.

Rural inflation was similarly impacted, with a year-on-year rate of 32.09% in June 2024, an increase of 10.71 percentage points from June 2023’s 21.37%.

The month-on-month rural inflation rate rose to 2.17% in June, up from 1.94% in May 2024. The twelve-month average for rural inflation reached 28.15%, compared to 20.76% in June 2023.

The rising inflation rates pose significant challenges for the Central Bank of Nigeria (CBN) as it grapples with balancing monetary policy to rein in inflation while supporting economic growth.

The ongoing pressures from high food prices and energy costs necessitate urgent policy interventions to stabilize the economy and protect the purchasing power of Nigerians.

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Inflation to Climb Again in June, but at a Reduced Pace, Predicts Meristem

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Nigeria's Inflation Rate - Investors King

As Nigeria awaits the release of the National Bureau of Statistics’ report on June 2024 inflation, economic analysts project that while inflation will continue its upward trajectory, the pace of increase will moderate.

This comes after inflation rose to a 28-year high of 33.95% in May, up from 33.69% in April.

Meristem, a leading financial services company, has forecasted that June’s headline inflation will rise to 34.01%, a slight increase from May’s figure.

The firm attributes this persistent inflationary pressure to ongoing structural challenges in agriculture, high transportation costs, and the continuous depreciation of the naira.

Experts have highlighted several factors contributing to the inflationary trend. Insecurity in food-producing regions and high transportation costs have disrupted supply chains, while the depreciation of the naira has increased importation costs.

In May, food inflation grew at a slower pace, reaching 40.66%, but challenges in the agricultural sector, such as the infestation of tomato leaves, have led to higher prices for staples like tomatoes and yams.

Meristem predicts that food inflation will persist in June, driven by these lingering challenges. Increased demand during the Eid-el-Kabir celebration and rising importation costs are also expected to keep food prices elevated.

Core inflation, which excludes volatile items like food and energy, was at 27.04% in May. Meristem projects it to rise to 27.30% in June.

The firm notes that higher transportation costs and the depreciation of the naira will continue to push core inflation up.

However, they also anticipate a month-on-month moderation in the core index due to a relatively stable naira exchange rate during June, compared to a more significant depreciation in May.

Cowry Assets Management Limited has projected an even higher headline inflation figure of 34.25% for June, citing similar concerns.

The firm notes that over the past year, food prices in Nigeria have soared due to supply chain disruptions, currency depreciation, and climate change impacts on agriculture.

This has made basic staples increasingly unaffordable for many Nigerians, stretching household budgets.

As inflation continues to rise, analysts believe the Central Bank of Nigeria (CBN) will likely hike the benchmark lending rate again.

The CBN’s Monetary Policy Committee (MPC) has raised the Monetary Policy Rate (MPR) by 650 basis points this year, bringing it to 26.25% as of May 2024.

At a recent BusinessDay CEO Forum, CBN Governor Dr. Olayemi Cardoso emphasized the MPC’s commitment to tackling inflation, stating that while the country needs growth, controlling inflation is paramount.

“The MPC is not oblivious to the fact that the country does need growth. If these hikes hadn’t been done at the time, the naira would have almost tipped over, so it helped to stabilize the naira. Interest rates are not set by the CBN governor but by the MPC committee composed of independent-minded people. These are people not given to emotion but to data. The MPC clarified that the major issue is taming inflation, and they would do what is necessary to tame it,” Cardoso said.

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