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Economy

External Reserves Climb to Five-Month High Ahead of MPC

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Forex Weekly Outlook March 6 - 10
  • External Reserves Climb to Five-Month High Ahead of MPC

Nigeria’s external reserves climbed to a five-month high amid rising foreign portfolio investments and stable global oil market.

The reserves rose from $42.309 billion in February to $43.507 billion in March, according to the data published by the Central Bank of Nigeria on its website. This is the highest external reserves since October 9, 2018.

The external reserves surged ahead of the 266th Monetary Policy Committee (MPC) meeting that is scheduled to commence on Tuesday.

Following the successful completion of the general elections, Nigeria’s Foreign portfolio investment jumped by 91 percent to N43.93 billion in February as foreign investors continued to take advantage of the fixed income market.

Foreign investors, however, withdrew N55 billion from the Nigerian Stock Exchange market despite current administration assurance. Suggesting that investors’ confidence in the stock market remained low as they await policy direction.

The MPC meeting will commence tomorrow to decide the appropriate policy rate for borrowers.

The committee left policy rate unchanged at 14 percent in the last policy meeting, while citing high inflation rate as one of the factors responsible for the decision and the need to lure foreign investors to the economy to further enhance foreign direct investment.

Still, experts think the lack of rate hike in the U.S. in 2019, the economic slowdown in China and weak growth in Europe Area would aid foreign direct investment in emerging economies like Nigeria, however, other domestic factors like policy uncertainty and security-related issues seem to be impacting capital inflows into the Nigerian economy.

Therefore, the MPC is likely to maintain the high interest of 14 percent at the 266th meeting tomorrow to sustain capital importation despite the need for lower borrowing cost.

The high borrowing cost is hurting the private sector and job creation in a period when the unemployment rate has risen to 23.1 percent.

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 long experience in the global financial market. Contact Samed on Twitter: @sameolukoya

Economy

Citigroup Sees $60 Per Barrel Crude Oil in the Next 12 Months

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Crude oil

Citigroup Says Crude Oil Will Reach $60 Per Barrel in a year

Despite the current economic downturn and the projected second phase of COVID-19, Citigroup, a New-York based financial service company, has said oil price could hit $60 per barrel in the next 12 months.

Citigroup disclosed this on Thursday during a virtual EMEA Media Summit titled – ‘Navigating the Future: What’s Next in a Post-COVID-19 World’.

“After a substantial underperformance in the last six months relative to several other commodities, crude will eventually bounce back to around $60 per barrel over the next 12 months,” Max Layton, European Head of Commodities Strategy, Citigroup said while giving a presentation on the outlook for commodities in the second half of 2020, and into 2021.

This means Brent crude oil would rise by at least 50 percent from the current level of $42 per barrel in the next 12 months.

“It’s going to be a function of the demand and supply but recently we have been seeing a spike in the demand for some of the commodities,” said Atiq Rehman, Head of EMEA Emerging Markets, Citigroup.

“A lot of these economies are heavily commodity-dependent, and perhaps, in the past have been guilty of not diversifying when they come under pressure. I think perhaps, this recent moves will push them to diversify away from simply commodities,” Grant Carson, Head of TRUK And Non-Presence Countries, Citigroup, stated citing Russian as one of the countries that have recorded success in diversifying away from crude oil.

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Economy

Oil Sustains $42 Price Level as OPEC Output Drops to Over Two-Decade Low

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Oil price

OPEC Oil Output Drops to Over Two-Decade Low in June

Crude oil sustained $42 per barrel price level following a recent survey conducted by Reuters that showed the Organisation for the Petroleum Exporting Countries (OPEC) managed to cut oil production to over two-decade low in the month of June.

According to the survey, OPEC’s 13 members pumped 22.62 million barrels per day in June, 1.92 million barrels per day below May’s revised figure. The lowest since May 1991.

OPEC and allies, together referred to as OPEC plus, had agreed to cut oil production by 9.7 million barrels per day in the month of April to rebalance the global oil market and prop up prices amid COVID-19 pandemic.

OPEC’s share of the 9.7 million barrels per day production cut was 6.084 million bpd but OPEC delivered 6.523 million bpd cut in the month of June despite the inconsistencies from Nigeria, Angola and Iraq.

In June, Saudi Arabia reduced production by 1.13 million barrels per day to 7.53 million bpd. While Kuwait and the United Arab Emirates met their quota but struggle to fulfill the extra cuts.

Nigeria, Iraq and Angola continue to struggle in the month of June. However, their performance improved compared to May as Nigeria attained 77 percent compliance level, up from 19 percent in May.

While Iraq and Angola achieved 70 percent and 80 percent compliance level, respectively. Nigeria and Iraq have pledged to cut more in July despite their economic challenges. Angola, however, said it would not be able to cut extra oil production until October.

Brent crude oil, against which Nigerian oil is measured, rose to $42.48 per barrel on Friday as at 2:58 pm Nigerian time.

UKOilDaily

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Economy

Nigeria Labour Congress Says No Fuel Increase Amid COVID-19 Pandemic

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No Fuel Increase During COVID-19 Pandemic, Says Nigeria Labour Congress

The Nigeria Labour Congress (NLC) on Thursday rejected the new fuel price announced by the Petroleum Products Price Regulatory Agency (PPPRA) on Wednesday.

In a statement issued by Ayuba Wabba, the President, NLC, the labour demanded instant reversal to the old price, saying the move will kill businesses and worsen the nation’s poverty level at a time when nations are looking to ease economic burden of their citizens and mitigate negative impacts of COVID-19.

The PPPRA had raised the value band of Premium Motor Spirit, commonly referred to as Petrol, to between N140.80 and N143.80 per litre on Wednesday because of the recent increase in crude oil prices.

Nigeria Labour Congress argued that “PPPRA contradicted itself when it said that the latest price increase described as an “advisory” was meant to regulate a product that government claims had been de-regulated.

“That this new hike in the pump price of petrol was announced without the approval of the board of the PPPRA and the oversight ministry speaks volume of the arbitrariness and public contempt in the operations of PPPRA. We find this deeply disturbing.

“It is also very embarrassing that the PPPRA boss, while trying to defend the indefensible, appeared to be out of sorts and ready to clutch at any available straws to sell his ice block merchandise to Eskimos.

“Apart from contradicting himself that PPPRA is still trying to regulate a deregulated product through ‘advisories’, the PPPRA went on to exert more nails on the coffin of his polemics when he argued that PPPRA was just like the Central Bank of Nigeria, CBN, and the National Insurance Commission, NAICOM, that would always act to protect the public interest.

“That was how far the niceties went. The rest of the statement by the PPPRA boss was about how PPPRA plans to protect investors and increase their profit.”

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