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Unlocking Opportunities in Nigeria’s Gold Market

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Gold
  • Unlocking Opportunities in Nigeria’s Gold Market

As the federal and state governments continue to seek ways to diversify their revenues, experts believe that opportunities in the gold value chain should be unlocked, writes Nume Ekeghe

Gold remains one of the world’s most coveted commodities, based on its rarity and malleability. In 2001, the precious commodity’s average price was $US 271 and by 2017 it had jumped to almost $US 1,257.

Countries with largest estimated reserves are Australia, South Africa, and Russia. Currently, China is the world’s leading producer of gold, followed by Australia and Russia.

Also, Nigeria isn’t lacking of gold. Actually, the country has a thriving underground gold economy that if regulated, could unlock the as the gold market Centre of Africa. Despite the mostly informal structure of the gold market, Nigeria has one of the largest economies, the largest population in Africa, and is a top contender for the largest emerging market for luxury goods in Africa.

The lustre and luxury items visualised at the mention of gold is part of a long value chain that Nigeria does not participate in. Maru gold (gold from Maru Zamfara) is identified on sight by gold merchants in the gold souks of Dubai. Mumbai, Valenza and Arezzo Gold districts feel the groan of the Nigerian Foreign currency crunch when their Nigerian customers spend less.

Cotonou smuggling paths continue to thrive and create an undocumented supply of gold to Dubai and Asia.
But the emergence of the Nigerian gold purchase scheme and the development plan for an internationally certified gold refinery in Nigeria creates an opportunity for an intervention in a critical sector that would promote economic growth and reduce unemployment. According to experts, harnessing opportunities in the gold sector would boost Nigeria’s Gross Domestic Product (GDP) and promote non-oil exports.

Therefore, to sustain this development, Nigeria would need to reconsider its view on gold – the issues and ownership of gold as a commodity mined, recycled, and imported as a financial instrument, scientific product and as a potential instrument for economic warfare make it a matter of national security and importance.

Furthermore, experts stressed that developing the gold value chain would drive innovation, stimulate the economy, and generate income for government coffers.

Also, they pointed out that Nigeria could become a gold economy irrespective of whether it mines gold or not. India, UAE, Singapore, Italy, Switzerland, Turkey and London are renowned world gold markets without the classification of gold mining countries.

West African Value Chain

While world gold mine production has been declining, West African gold production has been growing. In 2011, West Africa became the hub of African gold mining when the total production of gold from West Africa overtook South Africa’s gold production. Out of the 15 ECOWAS countries, Cape Verde, Benin and Togo are the only countries without notable gold reserves. However, Benin and Togo are notable for gold trade.

All other ECOWAS countries have either significant documented gold reserves, internationally listed gold mining companies or significant footprint of artisanal gold mining. The recently released World Bank 2018 figures now have Ghana as the leading producer of gold in Africa. West Africa is becoming synonymous for gold.

At a June 2019 stakeholders’ session in Lagos between the private sector and the Governor, Central Bank of Nigeria (CBN), Godwin Emefiele, Aliko Dangote iterated that activities of smuggling from the Benin Republic route is killing manufacturing in Nigeria and that it would be difficult for a country to survive with Benin Republic as a neighbour.

A recent World Bank report on smuggling showed that about N1.45 trillion worth of goods is smuggled into Nigeria annually through Benin Republic. With Benin and Togo having 0% royalty on gold, neighbouring countries will find it almost impossible to prevent major royalty revenue leakages and counteract gold smuggling.

Dangote’s warning coupled with Ghana’s new status echoes the major premise for the solution towards the development of the gold value chain in West Africa – issues of different trade and monetary policies across the ECOWAS region must consistently support the development of the gold sector.

A report by Reuters titled: ‘Gold worth billions smuggled out of Africa,’ had revealed that most of the gold traded out was not recorded in the exports of African states.

Backed with confirmation from several trade economists that large amounts of gold are leaving Africa with no taxes being paid to the states that produce them, evidence points to this being a higher concern in countries and areas with large artisanal mining.

Although artisanal mining organisation and formalisation is part of the process needed towards regulating and developing the gold economy of the region, fiscal trade and monetary policy harmonisation are vital for the development of a gold market in West Africa.

Ghana, which has become Africa’s biggest gold producer, shares borders with Togo, one of the top gold exporting countries of Africa with abysmal records of production.

It is true that Ghana wears the cap for gold production, Cote D’Ivoire is the present favourite destination for gold mining investment and Nigeria pulls the strings for trade volumes, but as far as developing the gold value chain, no West African country can succeed on its own as it would take a regional effort to build a sustainable gold economy and make West Africa a gold market.

According to the Managing Director of Kain Smith Trade & Co Limited, Mrs. Nere Teriba, the Nigerian narrative on gold is advancing from “gold exploration and mining to gold market and economy.”

She said the planned Gold West Africa conference was focused on developing the gold value chain in the region towards establishing West Africa as a gold market centre.

The development of the gold value chain in Nigeria has strong dependencies on gold, trade and monetary policies across ECOWAS and the geographical region of Sub-Saharan Africa, she added.

“Economic and sustainable solutions towards artisanal gold mining, trading, refining and creating gold products and markets can only be achieved when public and private stakeholders in the gold sector of West Africa jointly create the eco-system for the gold economy to thrive above ground,” she added.

The co-host, of the conference, Mr. Kolade Apata, said: “For the folks who are fortunate enough to attend the conference, they will quickly realise the investment opportunities available with the launch of the Gold Refinery. For example, Nigeria could easily become the jewellery and gold trading hub in West Africa.”

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.

Finance

Central Bank to Promote Zero Balance Account Opening to Drive Financial Inclusion

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Central Bank

Banks Now Accept Zero Balance Account Opening to Deepen Financial Inclusion

In an effort to boost financial inclusion in the country, the Central Bank of Nigeria has said it would start promoting zero balance account opening to encourage and lure the unbanked into the banking system.

The apex bank disclosed this in its report titled ‘Monetary, credit, foreign trade and exchange policy guidelines for fiscal years 2020/2021’.

The report read in part, “As part of its effort towards promoting greater financial inclusion in the country, the bank shall continue to encourage banks to intensify deposit mobilisation during the 2020/2021 fiscal years.

“Accordingly, banks shall allow zero balances for opening new bank accounts and simplify their account opening processes, while adhering to Know-Your-Customer requirements.

“Banks are also encouraged to develop new products that would provide greater access to credit.”

The apex bank said the Shared Agency Network Expansion Facility, launched to deepen provision of financial services in under-served and unserved locations and drive financial inclusion through agent banking, would continue in the 2020/2021 fiscal years.

Banks, mobile money operators and super-agents would also continue to render returns in the prescribed formats and frequency to the CBN.

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Finance

Investors Oversubscribed for FGN Bonds by N205.87 Billion in October

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bonds

FG October Bonds Oversubscribed by N205.87 Billion

The Debt Management Office (DMO) has said investors oversubscribed for the Federal Government’s October bonds by N205.87 billion.

The DMO stated this after concluding the monthly FGN bonds auction on Wednesday.

Two instruments of 12.5 per cent FGN March 2035 re-opening 15-year bond and 9.8 per cent FGN July 2045 re-opening 25-year bond were auctioned.

The two bonds of N15bn each with a total auction figure of N30bn received a subscription of N235.87bn.

The 15-year tenor and 25-year tenor bonds received 99 and 67 bids but recorded 21 and 26 successful bids respectively.

The amounts allotted for each of the bids were N20bn and N25bn respectively.

According to the DMO, successful bids for the 15-year tenor bond and 25-year tenor bonds were allotted at the marginal rates of 4.97 per cent and six per cent respectively.

However, it added, the original coupon rates of 12.5 per cent for the 12.5 per cent FGN March 2035 bond and the 9.8 per cent for the 9.8 per cent FGN July 2045 bonds would be maintained.

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Finance

Lafarge Africa Sustains Growth in Third Quarter, Reports N53.3bn Revenue

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Lafarge Africa

Lafarge Africa Grows Revenue by 31.4 Percent to N53.3bn Revenue in Q3 2020

Lafarge Africa Plc, a cement manufacturer headquartered in Lagos, sustained its strong growth in the third quarter (Q3) ended September 30, 2020.

In the company’s financial results released on the Nigerian Stock Exchange on Friday, the cement manufacturer’s revenue rose by 31.4 percent from N45.172 billion posted in the third quarter of 2019 to N59.337 billion in the third quarter of 2020.

Similarly, operating profit grew by 7.2 percent from N7.746 billion in the corresponding quarter to N8.302 billion in the quarter under review. This strong performance continues across the board as net income expanded by 2.8 percent to N4.867 billion, up from N4.734 billion posted in the third quarter of 2019.

Lafarge earnings per share rose by 2.8 percent to 30 kobo in the third quarter, again up from the 29 kobo posted in the same period of 2019.

On the outlook for the company going forward, the company said:

 Market demand is expected to remain strong in Q4.
 Naira devaluation and inflation remain a concern in Q4.
 The implementation of our “HEALTH, COST & CASH” initiatives would continue to deliver
improvement in our performance.
 We will maintain a healthy balance sheet.

Speaking on the company’s performance, Khaled El Dokani, CEO, Lafarge Africa Plc, said “Our robust results for the first 9 months reflect the strong recovery of the demand in Q3 and the successful implementation of our “HEALTH, COST & CASH” initiatives. Both have delivered considerable improvement in recurring EBIT, net income and free cash flow, despite the impact of the COVID-19 pandemic and Naira devaluation, particularly in Q3.

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