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Pound Has No Respite in Sight With U.K. Economy

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Uk Economy

Pound traders who held on during this year’s pasting have little to look forward to next week.

After falling to the lowest level in 5 1/2 years against the dollar on Friday, the U.K.’s currency may struggle to catch a break next week as reports are forecast to show inflation remained close to zero, wage growth slowed and retail sales dropped in the nation.

Sterling also weakened versus the euro, declining for an eighth consecutive week, its longest slide since 1999, as signs of weakness in the domestic economy and global shocks from China took the shine off Britain’s currency.

The Bank of England kept interest rates unchanged at a record low on Jan. 14, citing a weakening outlook for growth and inflation. The 10-year break-even rate, which acts as a gauge of the bond market’s outlook for U.K. price growth, dropped to its lowest level since 2009 following a slump in oil prices to the least in 12 years.

Commerzbank AG cut its forecasts for the pound Friday to $1.46 at year-end and $1.50 at the end of 2017, compared with earlier predictions of $1.52 and $1.53, respectively.

“The fall in oil prices and the decline in the pound simply has to be reflected in the forecasts,” said Esther Reichelt, a Frankfurt-based strategist at the German bank. “It’s nothing the Bank of England can ignore and recent data are rather disappointing. The headwinds to the British economy have definitely increased.”

Rates Outlook

The pound fell 1.6 percent in the week to $1.4289 at 5:12 p.m. London time Friday, after touching $1.4279, the least since May 2010. Sterling weakened 2 percent to 76.83 pence per euro.

The U.K. currency was undercut by banks pushing out their expectations for when the BOE will raise interest rates. The prospect of an entrenchment of record-low rates and a possible British exit from the European Union has added to the risks stacking up against the pound, which has seen banks across Europe slashing their forecasts. BOE Governor Mark Carney is scheduled to speak on Jan. 19.

The annual inflation rate will rise to 0.2 percent in December from 0.1 percent the previous month, according to the medium forecast of economists surveyed by Bloomberg. Weekly earnings will slow in the three months through November, while retail sales are forecast to have contracted last month, surveys show.

“We expect retail sales to come in weaker than expected, but importantly there is also the dynamics of earnings to be looked at,” said Roberto Mialich, a senior foreign-exchange strategist at UniCredit SpA in Milan. The market expects wage growth to decline “so clearly the near-term future for sterling will worsen and remain weak,” he said.

U.K. government bonds advanced this week. The 10-year benchmark yield fell 11 basis points, or 0.11 percentage point, to 1.66 percent. It touched 1.63 percent on Friday, the lowest since April. The 2 percent gilt due in September 2025 rose 0.96, or 9.60 pounds per 1,000-pound face amount, to 102.995.

Bloomberg

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

FG Spends N10 Trillion on Petrol Subsidy in 14 Years – NNPC

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NNPC Says FG Has Spent N10 Trillion on Petrol Subsidy in the Last 14 years

The Nigerian National Petroleum Corporation said the Federal Government spent a total sum of N10 trillion on petrol subsidy between 2006 and 2020.

This was disclosed on Saturday by Mele Kyari, the Group Managing Director, NNPC, during an interview on Liberty FM, Kaduna.

According to the NNPC boss, the federal government removed petrol subsidy because of the fraud perpetrated by some cabals in the oil industry.

He said the beneficiaries of petrol subsidies were marketers who smuggled federal government subsidised product into neighbouring countries for bigger gains.

The NNPC boss said these marketers made more profits by producing fake documents to collect subsidy for fuel they never imported or sold.

He said, “The crude oil is a global commodity and its price is not hidden. Everyone can calculate and know how much the cost of every final product from the crude at international market is.

“Since the inception of the country, the government has been paying subsidy on petrol to make it cheaper for Nigerians to buy below the cost price.

“This subsidy is designed to assist the masses of Nigeria; that is the intention, but in reality, the masses are not the beneficiaries. First, the masses are not the owners of the exotic cars buying fuel, owning the filling stations and doing the oil business.

“This subsidy that the government has been paying over the years is the root of all the atrocities and fraud committed in this country.

“If you look at it from 2006 till 2020, we have spent over N10tn on fuel subsidy. Apart from that, there is also subsidy on foreign currencies. Everybody knows how much is dollar in the market, but government is also subsidising it. So, this and the fuel subsidy within this period is around N14tn to N15tn.

“What was happening with the subsidy is that, some marketers were smuggling fuel to other neighbouring countries because it was cheaper in Nigeria due to the subsidy.

“Another one is those who use fake documents and bring to government to collect subsidy for fuel they never imported and the previous government was paying them.

“So, it was not the masses of Nigeria that were enjoying this subsidy except some cabals, who are rich and powerful.”

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Economy

Nigeria’s Oil Sales Revenue Plunges by 75 Percent

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Oil Sales Revenue Declined by 75 Percent to $55.29 Million

Nigeria’s oil revenue plunged by 74.89 percent in July, according to the latest report from the Nigerian National Petroleum Corporation (NNPC).

Oil sales revenue declined to $55.29 million in the month under review, down from $219.58 million recorded in June and $120.50 million in May.

The record fall in global oil prices and demand due to COVID-19 plunged Nigeria’s crude oil sales from $336.65 million posted in January to $281.14 million in February, $184.59 million in March and $148.86 million in April.

This was after Brent Crude oil, against which Nigerian crude oil is priced, plunged to as low as $15.98 per barrel in April, down from $70 per barrel it was sold in January.

Oil and gas constitute 50 percent of the Nigerian government revenues and over 90 percent of export earnings despite accounting for just about 10 percent of the nation’s GDP.

A total export sale of $84.63m was recorded in July 2020, decreasing by 66.95 per cent compared to last month. Crude oil export sales contributed $55.29m (65.34 per cent) of the dollar transactions compared with $219.58m contribution in the previous month,” the NNPC said in its latest monthly report.

NNPC said gas exported in the month stood at $29.33 million.

July 2019 to July 2020 crude oil and gas transactions indicated that crude oil and gas worth $3.91bn was exported,” it added.

According to the report, the federation crude oil and gas lifting are broadly classified into equity export and domestic, and are lifted and marketed by the NNPC while the proceeds remitted into the Federation Account.

It said, “Equity export receipts, after adjusting for joint venture cash calls, are paid directly into Federation Account domiciled in the Central Bank of Nigeria.”

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Rivers State Partners Shell Nigeria on Assa North Gas Project

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Oil downturn

Rivers State, Shell Nigeria Partner on Assa North Gas Project

Rivers State and the Shell Petroleum Development Company of Nigeria Limited (SPDC) have partnered to build SPDC’s Assa North Gas project, with a capacity of 300 million standard cubic feet of gas per day.

According to the people familiar with the project, it has the potential to be one of the largest domestic gas projects in Nigeria when completed.

Mr. Eloka Tasie-Amadi, the State Commissioner for Chieftaincy and Community Affairs, who spoke at the inauguration event, urged the comrade Orikoha Ekwueme-led newly elected officials of the Cluster Development Board to use the opportunity of leadership to make positive impacts that will improve living standards in their communities.

The state government is always available to support you. Always speak with your people, including the Community Trust Committees (which were also newly inaugurated). Adequate communication will ensure the buy-in of all your stakeholders.

“Leadership is more of sacrifice; not an opportunity for personal benefit”, he said.

Also, speaking was Mr Igo Weli, the General Manager External Relations, SPDC, said, “The Global Memorandum of Understanding (GMoU), that you signed today, sets the framework for a long-term partnership between SPDC JV and the Egi/Igburu Cluster. The GMoU runs on the principle of community-led development. Today, SPDC JV commits to providing funding to help you realise your community development aspirations.

Represented at the ceremony by SPDC External Relations Manager for Projects and Opportunities, Dr Banji Adekoya, he asked the CDB to “be prudent and implement projects and programmes that will deliver maximum benefits to the Egi/Igburu communities. Note that government, SPDC JV, and the communities that you represent will hold you accountable for the judicious utilisation of the development funds.”

“With the inauguration, SPDC reiterates the company’s commitment to the Assa North Gas Project and to making it an exemplary one, particularly in Nigeria’s quest for energy sufficiency, for power generation and industrialisation,” he said.

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