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N820bn Oil Revenue Under Threat as Exports Drop

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Silhouette of oil platform in sea against moody sky at sunset

The proposed oil revenue in the 2016 budget presented by President Muhammadu Buhari to the National Assembly about three weeks ago is facing a setback as the nation’s crude exports begin to fall amid further slide in global oil prices.

Industry analysts also say crude oil production in the country will continue its decline this year, meaning lower revenue for the government.

Nigeria, Africa’s top oil producer, relies on crude oil for most of its export earnings and government revenue.

Buhari had in the 2016 to 2018 Medium Term Expenditure Framework and Fiscal Strategy Paper sent to the National Assembly for this year’s budget said oil-related revenues were expected to contribute N820bn.

But the total exports of Nigerian crude oil are expected to slide in February after reaching a three-month high in January, Reuters reported, citing a compilation of loading programmes.

The export programme for Brass River crude, which was under force majeure, had not yet been issued as of Friday, leaving just 56 cargos for a total of 53 million barrels planned for February loading.

While a Brass River programme is expected once the force majeure is lifted, it will not enable February exports to reach the 61.7 million barrels initially planned for January.

The Atlantic Basin was said to be still oversupplied with oil and there were at least a dozen January loading Nigerian cargos looking for outlets.

The country’s output declined by 50,000 barrels per day in December due to disruptions to exports from the Brass River and Bonny production streams, a Reuters survey found out.

The President projected crude oil production of 2.2 million bpd and a benchmark price of $38 per barrel for this year’s budget, down from 2.2782 million bpd in 2015 budget.

The Head, Energy Research, Ecobank Capital, Mr. Dolapo Oni, who noted that the country’s oil production declined significantly last year, said, “Our production is really having issues, and I think it might be worse in 2016. Our production is likely to reduce this year.

“There are not as many fields likely to come on stream this year. Most companies just want to focus on their existing production. So, it is possible we won’t see as much new production come on stream to reverse the trend of decline in major fields we have. That might make production go down.”

He predicted that he nation’s oil production might fall to 1.9 million bpd on the average this year, compared to 2.2 million bpd and 2.1 million bpd in 2014 and 2015, respectively.

“This is worrisome for the government revenue because the budget is benchmarked on 2.2 million bpd production,” Oni said.

The global benchmark Brent crude on Wednesday dropped below $35 per barrel for the first time since July 2004 amid the ongoing row between key producers, Iran and Saudi Arabia, and after a sharp rise in United States’ gasoline inventories.

With the further slide on Wednesday, Brent was more than $3 per barrel lower than Nigeria’s proposed crude oil benchmark price for this year’s budget.

Brent fell to $34.52 per barrel from $36.42 per barrel the previous day amid growing global supply glut of crude.

The supply glut in the world oil market, which is said to be oversupplied to the tune of two million bpd, is expected to be exacerbated by the full return of Iran to the market after the expected lifting of Western sanctions.

There have been calls in some quarters for a downward review of the $38 per barrel oil benchmark price.

The Chairman, Trade Union Congress of Nigeria, Rivers State Chapter, Mr. Chika Onuegbu, said, “More worrisome is that some analysts, including the International Monetary Fund, have projected that crude oil will fall to $20 per barrel in 2016. Also, Goldman Sachs insists that the fall in crude oil price will be sustained and oil price will fall to $20 per barrel.

“Anyone who is a keen observer of the events that are shaping the crude oil price will recognise that we are in for a sustained low crude oil price regime. Accordingly, it is doubtful if the budgeted oil revenue of N820bn will be realised in 2016. If the budgeted oil revenue is not realised, this will negatively impact on the 2016 budget performance.

“It is, therefore, important that the government begins to make contingency arrangements should crude oil price fall below the benchmark price, or better still, review the benchmark oil price downwards.”

Punch

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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Livestock Feeds Appoints Adegboyega Adedeji as Substantive Managing Director

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Adegboyega Adedeji is the Substantive Managing Director

Livestock Feeds Plc on Monday announced it has appointed Mr. Adegboyega Adedeji as the company’s substantive Managing Director, effective from 2nd October 2020.

In a statement released on the Nigerian Stock Exchange (NSE), the company said Mr. Adedeji was the Acting Managing Director of the Company before he was appointed as the Managing Director.

It added that Mr. Adedeji was “formerly the General Manager, Sales and Operations responsible for all sales activities and the strategic development of the Company’s markets, along with new products portfolio generation and development.”

He graduated from the famous Obafemi Awolowo University, Ile-Ife in 1996 and had his MBA from the University of Roehampton, UK in 2018.

He worked with Grand Cereals Limited as Regional Sales Manager before becoming their procurement manager. He moved to UACN Plc in 2007 as the Training Services Manager, a position held till September 2009 before he was transferred to UAC Restaurant.

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COVID-19 to Plunge Global Consumer Spending by 8.6 % in 2020

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Global Consumer Spending to Drop by 8.6 Percent in 2020

The coronavirus pandemic has changed almost every aspect of people’s daily lives, and consumer spending is no exception. The uncertainty of the COVID-19 crisis caused considerable changes in consumer habits, forcing them to cut down their budgets and prioritize spending.

According to data presented by Stock Apps, the coronavirus outbreak is expected to cut global consumer spending to $44.3trn in 2020, an 8.6% plunge year-over-year.

$4.2trn Drop in Spending Amid COVID-19 Crisis

Falling consumer spending has significant effects on overall Gross domestic product (GDP) growth, considering it accounts for almost 70% of GDP.

Before the COVID-19 crisis, global consumer spending has witnessed steady growth for five years in a row, revealed Statista, IMF, United Nations, World Bank, and Eurostat data. In 2015, it amounted to over $41.5trn. Over the next twelve months, this figure rose to $42.5trn and continued growing. Statistics show that in 2019, consumers worldwide spent a total of $48.5trn, the highest amount in a decade.

However, the coronavirus crisis triggered a sharp fall in 2020, with global consumer spending expected to plunge by $4.2trn year-over-year. Nevertheless, statistics show the following years are set to witness a recovery, with consumer spending growing by 20% to $53.5bn in 2022.

Statista data also revealed that Switzerland represents the leading country globally, with over $40,000 in consumer spending per capita in 2020. Luxembourg ranked second with around $5,000 less than that. Iceland, Denmark, and Norway follow, with $34,300, $25,800, and $25,600, respectively.

60% of Consumers Changed their Shopping Behaviour

The McKinsey&Company survey showed consumers became increasingly cautious with their spending in 2020. Even after countries lifted lockdowns, many consumers still see their incomes fall, forcing them to reduce budgets and change shopping habits.

Statistics show that increased time spent indoors led to significant growth in consumer spending on groceries, household, and home entertainment. Brazil, South Africa, and India lead in this category, with up to 30% consumer spending growth. Major consumer markets like the United States, United Kingdom, Germany, and China witnessed around 15% grocery shopping growth in the first half of the year.

However, with consumers being mindful of their spending and turning to less expensive products, 2020 has witnessed a plunge in clothes and accessories, outside entertainment, services, travel, and transportation spending. Respondents in all countries said they cut down spending in these categories between 20% and 50%.

The McKinsey survey also revealed the COVID-19 outbreak triggered a significant change in the shopping mindset. More than 60% of consumers globally have tried a different brand or shopped at another retailer during the crisis, mostly for convenience, value, and quality.

In China and the United States, over 75% of consumers reported trying a new shopping method, and 60% plan to stick with it post-crisis. The United Kingdom and Germany follow with 71% and 54% of consumers who practiced new shopping behavior. In Japan, where lockdowns weren’t imposed, only 33% of consumers changed their shopping mindset.

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Survival Fund: Buhari Commences Disbursement of N75 Billion Support Fund

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President Muhammadu Buhari

FG to Commence Disbursement of N75 Billion Survival Fund to MSMEs

The Federal Government to commence the disbursement of N75 billion COVID-19 support fund to successful Micro, Small and Medium Enterprises (MSMEs) that applied for financial support under the National MSME Survival Fund this week.

On September 10, 2020, the Federal Government announced the introduction of two financial support schemes to support around 1.7 million small businesses with N75 billion.

According to Tola Adekunle, the Special Assistant to the President on MSMEs, Office of the Vice President, who doubles as Project Coordinator, Survival Funds Scheme, payment disbursement to some of the beneficiaries of the schemes would commence this week.

He said, “Presently we are doing it in batches of 12 states to be able to monitor the scheme and as we speak now 12 states are ready. We are hoping that by the end of this week, we will be able to pay 12 states.

“We are starting with the artisans and it is 4,500 persons per state, plus 4,500 for transporters, bringing it to about 9,000 for each state. Right now, we have about 54,000 from 12 states.”

Asked by journalists when those on payroll support would start receiving payments, he said “By the end of this month.

“We want to ensure that the staff start getting their salaries and same for the second and third month.

Adekunle explained that payroll support which was introduced under the survival fund to help businesses that employed between 10 to 50 people, will ensure 10 of the 50 employees are paid between N30,000 to N50,000 depending on their salaries. Payment, he said would commence by the ending of this month.

He said, “We now pay 10 of those people from among the 50 employees and we pay them between N30,000 and N50,000.

“But the minimum we pay is three staffs for three months to support their businesses and to ensure that we are helping businesses to augment their salaries.”

He, however, said the program ended on October 15 but states that were yet to meet their quotas were demanding extension. A demand he said was valid given that only less than 20 states have met their quotas.

In my own opinion, it is valid but the decision lies in the hands of the committee and the project coordinator so I have to convince them based on data analysis,” he said.

Speaking on the total number of applicants for the payroll support, Adekunle said, “As at the day it closed, we had about 432,000 businesses that had applied. However, we have shortlisted less than 70,000 businesses that qualify and meet the requirements.”

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