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FG Laments Poor R&D Expenditure, Floats $50m Research Fund

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the Sovereign Wealth Funds (SWFs)

The federal government through the Nigerian Content Development Monitoring Board (NCDMB), yesterday floated a $50 million Nigerian Content Research and Development Fund (NCRDF) to boost innovation in the country.

The government noted that the 0.2 per cent currently devoted to Research and Development (R&D) in the was very negligible, noting that developed nations such as the United States, China, Japan, Germany, and South Korea spend between 2.5 to 4 per cent of their annual Gross Domestic Production (GDP) on research.

It also noted that even developing nations such as India, Malaysia and Brazil spend between 0.7 per cent and 1.2 per cent, whereas Nigeria continues to lag well behind by deploying only about 0.2 per cent of its GDP.

Speaking at the second NCDMB Research and Development Fair and Conference in Yenagoa, Bayelsa state, the Minister of State, Petroleum Resources, Chief Timipre Sylva, explained that underfunding of R&D was reflecting on Nigeria’s overdependence on foreign goods and services.

The event also witnessed the formal launch of the NCDMB 10-year R&D roadmap, anchored on eight success pillars, namely: funding, infrastructure, capability, commercial framework, co-llaboration, governance, legal framework and enforcement.

Represented by the Permanent Secretary at the ministry, Dr. Nasir Gwarzo, Sylva argued that the situation remained unsustainable if the country was serious about building a national technological capability that will drive economic growth.

“To put certain realities into context, there is a need to do a comparative analysis. Currently, developed nations such as the USA, China, Japan, Germany, and South Korea spend between 2.5 to 4 per cent of their annual Gross Domestic Production (GDP) on R&D, while developing nations like India, Malaysia, Brazil spend between 0.7 per cent to 1.2 per cent. Nigeria lags well behind by spending only about 0.2 per cent of its GDP on Research & Development,” he stated.

Sylva added that it was important to clear the misconception that funding of research was the sole responsibility of national governments, arguing that rather, big spenders on research and development globally come from the private sector.

“In 2019, private sector practitioners in the ICT hardware and electronic equipment sector, pharmaceutical & biotechnology sector, automobiles and components sector cumulatively spent $528bn on R&D, representing 22 per cent of the $2.3 trillion global R&D spend. In India, the private sector contributed 38.1 per cent of the country’s R&D spend.

“Still on funding and in line with our commitment to provide leadership, I am pleased to officially announce the creation of the Nigerian Content Research and Development Fund with an initial seed capital of $50 million,” he announced.

He explained that the fund was designed for application in the establishment of research centres of excellence, funding support for research commercialisation, funding support for basic and applied research as well as the endowment of professorial chair.

The minister noted that though clearly insufficient, it signified the premium the present administration places on growing the nation’s research and development capabilities. He encouraged the private sector to replicate the global practice by complementing the NCRDF and actively support the government’s drive in upscaling its national research architecture

According to him, with the Petroleum Industry Act (PIA), a governance framework for the industry with clear delineation of roles between regulation and profit-centric business units has now been established.

Members of the newly-constituted NCRDC included Dr. John Erinne, Mr. Ijuwe Albert ,Mr. Rosario Osobase , Dr. Noel Biodun Saliu, Alhaji Aliyu Adamu and Dr. Tandama Abu and will be headed by the Executive Secretary, NCDMB, Mr Simbi Wabote.

Sylva also commissioned the NCDMB Technology Incubation and Innovation Centre, which will provide the platform for idea generation, incubation and acceleration of innovative ideas to the marketplace.

Wabote in his comments, stressed that an analysis of global practices of R&D revealed that the combined spend of just five countries makes up 63.5 or cent of the entire global spend and also account for over 50 per cent of the global GDP.

“Africa, on the other hand, accounted for less than one per cent of the global R&D spend while its GDP is only 3 per cent of the global GDP. You will agree with me that there is a nexus between the spend on research and development and economic prosperity,” he argued.

He stressed that the authors of the Nigerian Oil and Gas Industry Content Development Act (NOGICD) of 2010 recognised the importance of research and development and included key provisions in the Act.

He stated that the board commenced the implementation of the 10-year strategic roadmap in 2018, which seeks to increase the level of Nigerian content in the oil and gas industry to 70 per cent by the year 2027.

The ES described R&D as the core of the industrial revolutions the world has witnessed over the ages, saying that it was important that countries deploy means of nurturing home-grown solutions as a means of wealth creation and growth.

In his contribution, the Group Managing Director, Nigerian National Petroleum Corporation (NNPC), Mallam Mele Kyari, disclosed that the corporation was happy to incorporate R&D into its processes, adding that as a technology-based industry, the NNPC had revved up research efforts to make it suitable for the future.

The Director, Department of Petroleum Resources (DPR), Mr. Sarki Auwalu, in his comments, noted that the oil and gas industry must begin to see the world with new eyes which also presents an array of opportunities for learning and knowledge sharing.

He added that it was critical for the global oil and gas industry to remain efficient and innovative in responding to the emergence of cheaper renewables to sustain the relevance of hydrocarbon resources to the global energy mix.

“Therefore, research and collaboration from all stakeholders is crucial to remain competitive and to meet safe, clean and sustainable energy demands of the future,” he said.

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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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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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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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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