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Monetary Policy’ll Keep Economic Variables Neutral in 2019 – Sigma

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  • Monetary Policy’ll Keep Economic Variables Neutral in 2019 – Sigma

To keep economic variables in a neutral state, monetary policy will be needed to deliver an economic policy that will respond to the developing external environment in 2019, according a report by Sigma Pensions.

The Chief Investment Officer, Sigma Pension, Mr Pabina Yinkere, stated this in a report on ‘Nigeria 2019 Outlook: Election downtime, tight monetary policy, drive subdued growth outlook’.

He stated, “The Nigerian economy faces another round of oil-induced pressure over 2019. However, focus is likely to be on the elections and less on economics. In a bid to keep economic variables in a neutral state, monetary policy will shoulder the burden of delivering an economic policy response to the developing external environment and will tilt towards a contractionary stance.

“We think fiscal policy response will likely be delayed until much later in the year, whichever way the elections go. Given likely foreign reservation towards naira assets in general, our investment strategy prioritises a focus on assets with high correlation to interest rates over most of 2019.”

After a period of strength, it stated that the rapid sell-off in crude oil in November and December 2018 amid a testy political climate was driving a cautious outlook regarding Nigeria’s macroeconomic environment in 2019.

“In our view, the investment landscape for the year will be shaped by relatively lower oil prices, the pace of monetary policy normalisation in developed markets; and the 2019 general elections in February.

For much of 2018, it added, Nigeria’s financial markets struggled under the weight of heightened political risk ahead of the 2019 polls.

Also, it added, a fresh concern over crude oil prices in a less accommodative global financial environment presented headwinds to the domestic investment landscape.

“In 2019, we note that Nigeria’s large dependence on crude oil for foreign exchange reserves and fiscal revenues, positions it poorly in a soft crude oil price environment, which we envisage over the year.

“The implications of a less supportive current account balance for key economic variables are central in our thoughts around the macroeconomy, policy responses and asset price movements.”

According to the report, there will be a less supportive oil price and external environment over 2019.

He stated, “The central point from our review of the global macroeconomic environment is that in contrast to 2018 when stronger oil prices underpinned a favourable external balance for Nigeria, the reverse is likely to be the case in 2019.

“We adopt a pessimistic view on oil amid a growing supply-demand imbalance reflecting a mix of rising US Shale oil production and subdued global economic growth and its implications for oil consumption.

“Accordingly, we think any OPEC rebalancing will struggle to clear a building over-supply picture and expect the benchmark Brent crude oil prices to average between $55-60/bbl (2018 average: $71.7/bbl). Given the large role of oil in Nigeria’s exports, our cynicism about oil prices feed through to a weaker view on the current account balance in 2019.

On the global front, he said, “We think US monetary policy will continue on the path of normalisation and envisage further rise in US bond yields curbing the quantum of foreign portfolio inflows to emerging/frontier markets.

“Overall, the balance of payments is likely to present headwinds to Nigeria’s economic performance in 2019 and in particular the exchange rate.”

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.

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Electricity Consumers Get 611,231 Meters Under MAP Scheme

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Electricity Consumers Get 611,231 Meters Under MAP Scheme

A total of 611,231 meters have been deployed as at January 31, 2021 under the Meter Asset Provider initiative since its full operation despite the COVID-19 pandemic and other extraneous factors, the Nigerian Electricity Regulatory Commission has said.

NERC disclosed this in a consultation paper on the review of the MAP Regulations.

The proposed review of the MAP scheme is coming nearly four months after the Federal Government launched a new initiative called National Mass Metering Programme aimed at distributing six million meters to consumers free of charge.

“The existence of a huge metering gap and the need to ensure successful implementation of the MYTO 2020 Service-Based Tariff resulted in the approval of the NMMP, a policy of the Federal Government anchored on the provision of long-term low interest financing to the Discos,” NERC said.

The commission had in March 2018 approved the MAP Regulations with the aim of fast-tracking the closure of the metering gap in the sector through the engagement of third-party investors (called meter asset providers) for the financing, procurement, supply, installation and maintenance of meters.

It set a target of providing meters to all customers within three years, and directed the Discos and the approved MAPs to commence the rollout of meters not later than May 1, 2019.

But in February 2020, NERC said several constraints, including changes in fiscal policy and the limited availability of long-term funding, had led to limited success in meter rollout.

NERC, in the consultation paper, highlighted three proposed options for metering implementation going forward.

The first option is to allow the implementation of both the NMMP and MAP metering frameworks to run concurrently; the second is to continue with the current MAP framework with meters procured under the NMMP supplied only through MAPs (by being off-takers from the local manufacturers/assemblers).

The third option is to wind down the MAP framework and allow the Discos to procure meters directly from local manufacturers/assemblers (or as procured by the World Bank), and enter into new contracts for the installation and maintenance of such meters.

“Customers who choose not to wait to receive meters based on the deployment schedule of the NMMP shall continue to have the option of making upfront payments for meters which will be installed within a maximum period of 10 working days,” NERC said.

The regulator said such customers would be refunded by the Discos through energy credits, adding that there would be no option for meter acquisition through the payment of a monthly meter service charge.

“Where meters have already been deployed under the meter service charge option, Discos shall make one-off repayment to affected customers and associated MAPs. Such meters shall be recognised in the rate base of the Discos,” it added.

NERC urged stakeholders to provide comments, objections, and representations on the proposed amendments within 21 days of the publication of the consultation paper.

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Nigeria’s Economy Moving in Right Direction but Slow – Amina Mohammed

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Nigeria’s Economy Moving in Right Direction but Slow – Amina Mohammed

Nigeria is moving in the right direction economically but its movement is not fast, the United Nations stated on Thursday.

Deputy Secretary-General of the United Nations, Amina Mohammed, said this during a meeting at the headquarters of the Federal Ministry of Industry, Trade and Investment in Abuja.

She said the challenges in Nigeria were huge, its population large but described the country’s economy as great with lots of opportunities.

The UN scribe stated that after traveling by train and through various roads in the Northern parts of Nigeria, she discovered that the roads were motorable, although there were ongoing repairs on some of them.

Mohammed said, “This is a country that is diverse in nature, ethnicity, religious backgrounds and opportunities. But these are its strengths, not weaknesses.

“And I think the narrative for Nigeria has to change to one that is very much the reality.”

Speaking on her trips across parts of Nigeria, she said, “What I saw along the way is really a country that is growing, that is moving in the right direction economically. Is it fast enough? No. Is it in the right direction? Yes it is.

“And the challenges still remain with security, our social cohesion and social contract between government and the people. But I know that people are working on these issues.”

She said the UN recognised the reforms in Nigeria and other nations, adding that the common global agenda was the Sustainable Development Goals.

Mohammad commended Nigeria’s quick response to the COVID-19 pandemic, as she expressed hope that the arrival of vaccines would be the beginning of the end of COVID-19.

On his part, the Minister of Industry, Trade and Investment, Adeniyi Adebayo, told his guest that the Federal Government was working hard to make Nigeria the entrepreneurial hub of Africa.

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N10.7tn Spent on Fuel Subsidy in 10 Years – MOMAN

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N10.7tn Spent on Fuel Subsidy in 10 Years – MOMAN

Nigeria spent a total of N10.7tn on fuel subsidy in the last 10 years, the Chairman, Major Oil Marketers Association of Nigeria, Mr Adetunji Oyebanji, has said.

Oyebanji, who was the guest speaker at the 18th Aret Adams Lecture on Thursday, said N750bn was spent on subsidy in 2019.

He highlighted the need for a transition to a market-driven environment through policy-backed legislative and commercial frameworks, enabling the sustainability of the downstream petroleum sector.

“Total deregulation is more than just the removal of price subsidies; it is aimed at improving business operations, increasing the investments in the oil and gas sector value chain, resulting in the growth in the nation’s downstream petroleum sector as a whole,” he said.

The managing director of 11 Plc (formerly Mobil Oil Nigeria Plc) said steps had been taken, “but larger and faster leaps are now required.”

According to him, deregulation requires the creation of a competitive market environment, and will guarantee the supply of products at commercial and market prices.

“It requires unrestricted and profitable investments in infrastructure, earning reasonable returns to investors. It requires a strong regulator to enable transparency and fair competition among players, and not to regulate prices,” Oyebanji said.

He noted that MOMAN had recently called for a national debate by stakeholders to share pragmatic and realistic initiatives to ease the impact of the subsidy removal on society – especially on the most vulnerable.

He said, “A shift from crude oil production to crude oil full value realisation through deliberate investment in domestic refining and refined products distribution, creates the opportunity to transform the dynamics of the downstream sector from one of ‘net importer’ to one of ‘net exporter’, spurring the growth of the Nigerian economy.

“Effective reforms and regulations are key drivers for the growth within the refining sector. Non-functional refineries cost Nigeria over $13bn in 2019. If the NNPC refineries were operating at optimal capacity, Nigeria would have imported only 40 per cent of what it consumed in 2019.”

Full deregulation of the downstream sector remains the most glaring boost to potential investors in this space, according to Oyebanji.

He said, “As crude oil prices will fluctuate depending on the prevailing exchange rates, it will be astute to trade in naira to avoid inevitable price swings.

“There needs to be a balance between ensuring the sustainable growth of the crude oil value chain (upstream through downstream) and providing value for the Nigerian consumer and the Nigerian economy.”

He said the philosophy should be for the government to put the legislative and commercial framework in place and let the market develop by itself.

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