- Oil Prices Shed 4% Amid Rising US-China-Hong Kong Tension
Oil prices dipped on Wednesday as tension brew between the two world’s largest economies over Hong Kong.
The Republic of China had concluded plans to impose new national security law on Hong Kong to prevent “splittism, subversion, terrorism, any behaviour that gravely threatens national security and foreign interference” in the semi-autonomous nation.
A decision many Hong Kong citizens frown against and immediately took to the street to protest. The US secretary of state, Mike Pompeo, immediately warned that the US will start treating Hong Kong as China if the nation’s lawmakers go-ahead to enact such law.
“No reasonable person can assert today that Hong Kong maintains a high degree of autonomy from China, given facts on the ground,” Mr Pompeo said on Wednesday.
Pompeo further stated that Hong Kong is ‘no long autonomous’ from China. A declaration many people believed could mean the city will no longer enjoy special treatments from the world’s largest economy and may force the US to impose similar trade sanctions to China on the world’s financial hub.
The Brent crude oil, against which Nigerian oil price is measured, declined by 4 percent to $33.76 per barrel on Thursday during the Asian trading session.
“Traders are concerned that expected recovery in [energy] demand may be delayed if U.S.—China—Hong Kong political tension grows, and hence is weighing in on prices,” Manish Raj, chief financial officer at Velandera Energy, told MarketWatch. “This timing impact is seen in [the] futures curve, whereby near months have declined while outer month contracts are holding steady.”
Also, the uncertainty surrounding OPEC plus production cuts continue to impact oil outlook as traders doubted Russia commitment to the 9.7 million barrels per day production cuts agreement reached in April.
“The July target is in line with the current OPEC+ deal, which has a record-breaking combined production cut of 9.7 [million barrels per day] among participants,” said Robbie Fraser, senior commodity analyst at Schneider Electric.
“However, some in the group are likely to voice support for extending cuts beyond July—particularly if the market remains clearly oversupplied amid lackluster summer driving demand,” he said in a daily note.
“Russia’s comments would suggest such an extension is unlikely for now, but ultimately even the group’s most skeptical members may change their stance depending on price evolution and market fundamentals,” said Fraser. “OPEC’s formal meeting next month will be key in determining the tentative path forward.” OPEC and its allies plan to meet on June 10 via videoconference.
AfCFTA Must Be Backed by Legal Framework to Yield Desired Results -Lawan
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.
Inflation, Forex Scarcity Push Food Prices Up in August
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.
FG Reduces Expenditure on JV Oil Assets by 62%
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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