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Economy

Federal Government to End Crude Oil Discounts in July

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opec plus

NNPC to Put an End to Crude Oil Sales Discounts by July 2020

The Federal Government through the Nigerian National Petroleum Corporation (NNPC) has set a July deadline for the end of its oil sales discount.

Mallam Mele Kyari, the Managing Director, NNPC Group, disclosed this in an interview with Bloomberg TV on Wednesday.

He said the corporation was looking at June 30 or latest by July.

The Federal Government had lowered crude oil sales during the peak of COVID-19 to lure buyers following a significant drop in global demand for the commodity.

However, with crude oil now trading at about $40 a barrel and economies gradually reopening, the NNPC is now looking to normalise prices.

This is coming after Saudi Arabia, Russia and other top crude oil producers increased prices for next month.

Responding to a question, if the corporation would continue to offer discounts on crude even with prices gradually recovering, Kyari said: “Absolutely not, discount will go away, definitely within the shortest period of time. As you know, what we did in the last two months was to close that gap much shorter than what it was, and by the end of June or July we will see a situation where we can take out that discount because it’s no longer necessary.”

Speaking on the importance of OPEC and allies’ decision to retain and extend production cuts agreement, the Managing Director said the decision was to rebalance the global oil market, adding that they have already started seeing the sign of its workability.

“What this means is that this will give us the rebalancing of the market, we can see a rebound in prices with time so that we don’t have to produce oil and give out for free. And we have started seeing the sign that this works.

“We are pulling down the supply and getting a balance that will come to a situation where we can at least recover our costs and get some margin out of these businesses, which is a good thing to do,” he stated.

Kyari said the cartel and allies’ effort was to stabilise the oil market and sustain oil at around $42 and $45 per barrel in the near-term.

He said: “What we did to oil price was to bring some form of stability by the end of the year, probably we can see settling at $42 to $45 at the end of the year. And you can see the short term response as a result of the OPEC+ intervention and I don’t think that is completely sustainable save the production cuts are implemented in full by the end July.

“If that happens, we see sustenance of the current level of $42 to the Brent and potentially grow to a region of $42 to $45 by the end of the year. I don’t think we will see any sort of $30 oil in the near future if this situation is sustained.”

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.

Economy

AfCFTA Must Be Backed by Legal Framework to Yield Desired Results -Lawan

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For AfCFTA to Achieve Expected Results, it must be Backed With Legal Framework

Senate President, Ahmad Lawan, has said for the African Continental Free Trade Agreement (AfCFTA) to yield desired results, it must be backed by necessary legal frameworks, right policies and robust implementation.

The Senate President made the statement when the delegation from the African Continental Free Trade Area Secretariat led by Wamkele Keabetswe Mene visited him in Abuja.

Ahmad Lawan, who was represented by Prof Ajayi Boroffice, said Nigeria’s signed the AfCFTA agreement to benefit Africans and reduce the huge unemployment and underemployment facing the continent from South to West and East to North.

This high unemployment rate and underemployment rate, according to him, had led to the migration of some of Africa’s top brains and experts. He said the economies of African nations had been characterised by weak economic productivity, low efficiency and limited resources.

He described AfCFTA as “a step in the right direction for the growth of African economies, through limited restrictions, leading to the stimulation of trade, commerce, and industry”.

“In signing the AfCFTA, and depositing the instrument with the African Union Commission, our countries made a statement on the determination of our collective economic fate.

He, therefore, said the fate is now in our hands to deepen growth and development on the continent through requisite legal frameworks, right policies, and robust implementation.

The initial momentum from the signing of the agreement needs to be continued, for a greater continental impact, to benefit Africans, both on the continent and outside it,” he said.

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Economy

Inflation, Forex Scarcity Push Food Prices Up in August

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Inflation

Food Prices Rise in August Amid Surge in Inflation

Persistent increase in prices amid forex scarcity bolstered food prices in the month of August, according to the recent report from the National Bureau of Statistics (NBS).

In the report released on Tuesday, the bureau said the average price of 1kg of imported high-quality rice rose by 40.69 percent year-on-year in August.

On a monthly basis, this increased by 2.30 percent to N501.71 in August 2020, up from N490.44 in July 2020.

Nigeria’s consumer prices that measures prices of goods and services rose to 13.22 percent in August as forex scarcity amid economic uncertainties weighed on Africa’s largest economy.

The statistic office said the average price of 1kg of yam rose by 34.74 percent year-on-year and decreased on a monthly basis by -0.15 percent from N256.44 in July to N256.06 in August 2020.

Similarly, the price of 1kg of tomato expanded by 29.48 percent year-on-year while it decreased on a monthly basis by 4.65 percent from N301.01 posted in July 2020 to N289.86 in August 2020.

NBS stated that selected food price watch “reflected that the average price of one dozen of agric eggs medium size increased year-on-year by 3.70 per cent and month-on month by 1.02 per cent to N478.97 in August 2020 from N474.12 in July 2020 while the average price of piece of agric eggs medium size (price of one) increased year-on-year by 5.44 per cent and month-on month by 0.76 per cent to N42.78 in August 2020 from N42.45 in July 2020.

The report also noted that the recent flood caused by the sudden release of water from Kainji Hydro Power Dam in Niger State wreaked havoc on the N60 billion sugar investment project in the state.

According to Latif Busari, the Executive Secretary, National Sugar Development Council (NSDC), who spoke in Abuja, said the destruction was a huge setback for the flour mills industry and the entire nation as it would affect the 4,500 metric tons of sugarcane daily processing projected by the company and the one million tones of sugar production agreed with major sugar producers recently.

Busari, however, said the flood, which affected N60 billion investment, was not natural, but man-made from Kainji Dam.

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Economy

FG Reduces Expenditure on JV Oil Assets by 62%

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NNPC

NNPC Lowers Spending on JV Oil Assets as Demand Drops

In a bid to reduce expenditure following a plunge in revenue generation, the federal government has cut down on spending on oil and gas assets currently being developed through a joint venture with private companies.

Federal Government lowered its expenses by 61.83 percent in the month of July, according to the latest report from the Nigerian National Petroleum Corporation.

The report showed NNPC, which has an obligation to make cash call payment for the development of the assets, only made $94.84 million or N34.14 billion cash call in July, down from $248.48 million or N89.45 billion in June.

The joint venture is managed by both the NNPC and private firms in proportion to their equity holdings and receives produced crude oil the same ratio.

This was largely due to the plunge in NNPC’s export receipt from $378.42 million in June to $122.44 million during the month under review.

“Of the export receipts, $67.45m was remitted to the Federation Account while $54.98m was remitted to fund the JV cost recovery for the month of July 2020 to guarantee current and future production,” it added.

In addition to the dollar allocation of $54.98 million to the JV cash call account, the naira portion of N14.35bn ($39.86m) was transferred to the account from domestic crude oil receipts in July, according to the NNPC.

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