Showing posts with label Economy. Show all posts
Showing posts with label Economy. Show all posts

Thursday, February 13, 2025

Video - Nigeria’s GDP per capita falls to U.S. $835



Nigeria’s GDP per capita has dropped to 835 U.S. dollars, a significant decline from its 2023 range of 1,597–2,460 dollars, according to the International Monetary Fund. The sharp decrease reflects the impact of inflation, a weakening naira, and widening fiscal deficits on the country's economy.

Thursday, February 6, 2025

President Tinubu increases 2025 budget to $36.4 billion

Nigeria's President Bola Tinubu has increased the size of the 2025 budget to 54.2 trillion naira ($36.4 billion) from 49 trillion naira, he said in a letter to the Senate published on Wednesday.

The president said the increase was due to additional revenue from the government's revenue collecting agencies, such as the tax authority, customs and other agencies.

He added that extra revenue from Federal Inland Revenue Service (FIRS) was 1.4 trillion naira while Nigeria Customs Service fetched 1.2 trillion naira and other agencies got 1.8 trillion naira.

In December, the government said the 2025 spending plan included a budget deficit of 3.89% of gross domestic product, approximately 13.0 trillion naira.

Monday, February 3, 2025

Dangote’s decisions projected to reduce the cost of living in Nigeria











The refinery, on Saturday, disclosed to Nigerians that it had decided to reduce its petrol price from N950 to N890 per liter.

“In a bold move to drive economic relief for Nigerians, Dangote Petroleum Refinery has reduced the ex-depot price of Premium Motor Spirit, commonly known as petrol, from N950 to N890 per liter, effective from Saturday,” the Group’s Chief Branding and Communications Officer, Anthony Chiejina, stated.

“This price adjustment is in response to favorable developments in the global energy sector and a significant decline in international crude oil prices.

Dangote refinery’s decision reflects its commitment to aligning with market realities and ensuring that consumers benefit from changes in international crude oil prices,” he added.

This as expected has sent shockwaves across the oil market, which currently averages around N970 to N990 as PMS price.

A report by the Punch newspaper highlights this fact, having spoken to some mjaor players in the country’s oil sector.

Marketers told the aforementioned outlet that the Dangote refinery's abrupt price cut was likely brought on by recent warnings that specific marketers were planning on importing PMS if the foreign product remained lower than the ex-depot pricing of locally refined goods.

In response, the Dangote refinery moved to proffer competitive rates.

This, according to marketers could present some challenges as well as opportunities.


IPMAN's opinion on Danagote's price cut

“For instance, maybe a marketer purchased some product on Friday. I am sure the marketer would not have sold it before the new reduction happened.

That is the negative aspect of it. But, we have to abide by it. We have to live with it. That is the beauty of deregulation,” the Vice President of the Independent Petroleum Marketers Association of Nigeria, Hammed Fashola, stated;

“So, we have to be careful when we purchase our product. Where we purchase it from and the price we are getting it. And we must have adequate information on what is going on. So that we will not be losing money every day,” he added.

He also noted that when prices fall, the only alternative for a marketer is to lower the price to liquidate old stockpiles, or they will be left with no buyers.

“When this happens, the only option a marketer has is to bring down the price. Because if you don’t do that, the competition will set in.

Some marketers in your neighborhood might be lucky to get their product tomorrow at N890. So, if you have a N950 product with you, within two to three days, you will not have an option but to bring it down.

That is the situation marketers are facing now, but we have to cope with it. It is the marketer who bears the losses,” he stated.

“I am happy it is happening this way. We believe that how can imported PMS be cheaper than Dangote’s PMS that is refined here locally? We know crude is being purchased here in naira, not in dollars; though we know that it is going to be in the official exchange rate, but we won’t be looking for dollars. The issue of transportation will not be there and some other charges too,” he added.


How Dangote could affect cost of living

Additionally, the National President of the Petroleum Products Retail Outlet Owners Association in Nigeria, relayed that this sort of move could improve the overall quality of life in Nigeria.

“The reduction in PMS ex-depot price is expected to have a far-reaching impact on the lives of Nigerian citizens.

With a decrease in the cost of petrol, the prices of goods and services are likely to decrease, leading to a reduction in the overall cost of living.

This, in turn, will provide relief to households, who will have more disposable income to allocate towards other essential needs,” he said.

“The reduction in PMS price will also have a positive impact on the economy. A decrease in transportation costs will lead to increased economic activity, as businesses will be able to transport goods and services more efficiently and at a lower cost.

Additionally, the reduction in PMS price will lead to an increase in demand for goods and services, which will have a positive impact on economic growth and development,” he added.

By Chinedu Okafor, Business Insider Africa

Friday, January 31, 2025

Nigeria Needs Much Higher Power Prices, President's Adviser Says

Nigeria’s power prices need to rise by about two thirds for many customers to reflect the cost of supplying it and an increase can be expected within months, President Bola Tinubu’s special adviser on energy said.

Higher electricity tariffs, which need to be balanced by subsidies for less-affluent consumers, are required to fund the maintenance needed to improve reliability and to attract private investors into power generation and transmission, said the adviser, Olu Verheijen.

“One of the key challenges we’re looking to resolve over the next few months is transitioning to a cost-efficient but cost-reflective tariff,” Verheijen said in an interview in Dar es Salaam, Tanzania, this week. This is needed “so the sector generates revenue required to attract private capital, while also protecting the poor and vulnerable,” she said.

Tinubu has already taken a number of steps to ease the burden on state finances and encourage private investment since taking office in May 2023, including removing subsidies on motor fuel. Power prices were already tripled for some customers last year.

While Nigeria, a nation of about 237 million people, has an electricity access rate of around 62%, an erratic grid supply limits productivity and disrupts daily life.

The move to raise tariffs comes amid mounting pressure from Nigeria’s debt-burdened electricity distribution companies for tariffs to be cost-reflective so they can improve their finances.

The country privatized generation and distribution in 2013, yet prices set by the government’s Nigeria Electricity Regulatory Commission don’t cover the suppliers’ costs. Government subsidies cover some of the difference, but profitability is hard to achieve.

Verheijen was in Tanzania attending a World Bank-backed conference where Nigeria presented a $32 billion plan to boost electricity connections by 2030. Private investors are expected to contribute $15.5 billion and the rest will come from public sources, including the World Bank and African Development Bank.

Nigeria’s power industry needs significant investment to achieve its development aims, Verheijen said. Of the country’s 14 gigawatts of installed power, only 8 gigawatts can be transmitted around the country and just four or five gigawatts can be directly delived to homes and businesses, she said.

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Siemens AG is working with the government on a $2.3 billion project to improve transmission and distribution, while more than 7 million Nigerians in rural areas have been given access to power via decentralized renewable projects.

“Your energy policies have to be closely linked with your own ambition for your country,” Verheijen said.“ Our own ambition is to be a $1 trillion economy in five years and to move to an upper-middle income country in 25 years.”

Nigeria’s gross domestic product is currently just under $200 billion, according to the International Monetary Fund.

By Antony Sguazzin, Bloomberg

Thursday, January 23, 2025

Nigeria needs to double economic growth within a year or two, finance minister says

Nigeria needs to double economic growth within the next year or two from an annualized rate of 3.5% in the third quarter to lift its population out of poverty, its finance minister told Reuters on Thursday at the World Economic Forum's annual meeting.

Finance Minister and Coordinating Minister for the Economy Wale Edun said Nigeria was on the path to growth after a year of tough economic reforms that sent inflation soaring, but should open the door for more investment.

Edun said he had been meeting in Davos this week with business leaders in the areas of consumer goods, food and beverages, financial services and infrastructure to promote investments, he said in a Thursday interview.

"It's a steady trickle now. What we want is a stream and at the end of the day a flood of investment," he said.

Nigeria has been trying to encourage private investment rather than rely on borrowing to create jobs, as the government searches for a solution to sluggish growth, double-digit inflation and a heavy debt burden.

President Bola Tinubu has vowed to expand the economy by at least 6% a year, create jobs and unify the exchange rate, while also tackling rampant insecurity.

Tinubu scrapped a popular but costly petrol subsidy and lifted foreign exchange trading restrictions. That contributed to consumer inflation, but Edun expressed confidence that Nigerians would soon be past their cost of living crisis.

Central Bank Governor Olayemi Cardoso on Thursday said he expected the economy to expand by 4.17% this year, driven by ongoing reforms and stabilising inflation.

By Chijioke Ohuocha, Reuters

UN seeks $910 million for humanitarian crisis in Nigeria

The United Nations will this week appeal for $910 million to help tackle a humanitarian crisis in northeastern Nigeria, which has been in the grip of an Islamist insurgency since 2009 and was hit by flooding last year, documents showed on Wednesday.

The UN documents seen by Reuters showed that 7.8 million people need help in the three northeastern states of Adamawa, Borno and Yobe, and the UN aims to help 3.6 million of them.

At $910 million, it is the most expensive humanitarian crisis in West and Central Africa, ahead of Chad, Mali, Burkina Faso, Niger, the documents showed.

Nigeria is also grappling with a cost of living crisis that has seen inflation accelerate to its highest level in nearly three decades, propelled by skyrocketing food prices.

The UN has previously said Nigeria's northeast risks becoming a forgotten crisis as the humanitarian focus has shifted to crises elsewhere such as Ukraine, Gaza and Sudan.

A joint report by the government and UN in November said Nigeria faces one of its worst hunger crises with more than 30 million people expected to be food-insecure this year.

President Bola Tinubu's economic reforms, including scrapping a fuel subsidy and foreign exchange controls, have been blamed for worsening Nigeria's economic troubles. He says the reforms will put the economy on a stronger path to growth.

By Ope Adetayo, Reuters

Nigeria's new BRICS partner status sparks economic optimism, debate

Nigerian authorities said this week that the nation’s new partnership status with the BRICS bloc could unlock critical opportunities in trade, investment and agriculture.

Nigerian President Bola Tinubu’s special adviser told Lagos-based Channels Television that the partnership, which became official Friday, is pivotal to promoting trade, investment, food security, infrastructure development and energy security.

The adviser, Daniel Bwala, said the pact enables Nigeria to forge deeper strategic relationships with BRICS members beyond traditional bilateral partnerships.

BRICS — an acronym for the founding members of Brazil, Russia, India and China, with South Africa added a year later — is a political and economic bloc. BRICS introduced the "partner country” category in October. Partner nations are a step below full membership.

Economist Emeka Okengwu praised the arrangement.

"Look at the members of BRICS and the economies that they bring to the table. Brazil is probably the biggest producer of livestock and its products globally, then to aircraft, aviation and renewable energy,” Okengwu said. “Look at Russia, India, China and South Africa, Egypt and Ethiopia. These are big populations.

If you put them together, they probably bring 10 times the value of whatever Europe and America can give to you," he said.

In total, the 10 BRICS member states make up 40% of the global economy and 55% of the global population.

In a statement, Nigeria’s Foreign Affairs Ministry said that the country’s participation in BRICS reflects its commitment to leveraging global economic opportunities to advance national development goals.

Last December, Nigeria intensified efforts to join not only BRICS but also the G20 organization of the world’s major economies and the BRICS New Development Bank.

Okengwu said the partnership will help Nigeria at "being productive, taking goods and services in there, being able to meet global standards and being competitive.”

“It would've been horrible if Nigeria was not in BRICS and then we would've been left hanging with all these challenges we're having with our neighbors in the Sahel," Okengwu said.

Despite the optimism, analysts say Nigeria faces significant hurdles.

The country’s struggling economy and inadequate infrastructure raise concerns about its capacity for meaningful growth through BRICS. There's also concern about how Nigeria will balance its alliances with Western nations while deepening ties with BRICS.

However, Ndu Nwokolo, an economist with Nextier, suggested the challenge is manageable.

"It's about how smart you are to benefit from everybody,” Nwokolo said. “With what we're seeing by some of the pronouncements of [U.S.] President [Donald] Trump, Nigeria may benefit from it because already Trump is talking about increasing taxes [tariffs] even within ally states.

“So, if he's going to do that with countries we think are traditional partners, so who's telling you that he will not do more with countries that he considers outsiders,” he said. “So, we're looking at a situation where countries that are not originally traditional allies of America will try to pull together, and Nigeria may benefit from that.”

By Timothy Obiezu, VOA

Thursday, January 16, 2025

Video - Experts urge diversification of Nigeria’s economy



Under its crude-for-loan arrangements, Nigeria allocated 272,500 barrels of oil daily to service debts until 2029. While these deals provided much-needed liquidity after the naira's devaluation, they limit oil available for domestic consumption, sparking concerns.

Nigerian inflation rises for fourth straight month in December

Nigeria's inflation rate rose for the fourth straight month in December, advancing to 34.80% in annual terms (NGCPIY=ECI) from 34.60% in November, data from the statistics agency showed on Wednesday.

The agency said in a report that the uptick in December was due to increased demand associated with the festive period. Food and non-alcoholic beverages contributed the most to price pressures.

Inflation rose sharply after President Bola Tinubu devalued the naira currency and cut subsidies in 2023 to try to lift economic growth and shore up public finances.

It started to ease in July last year as the impact of the naira devaluation began to fade, before a series of petrol price increases again spurred inflationary pressures, exacerbating the worst cost of living crisis in decades in Africa's most populous nation.

Food inflation was 39.84% year-on-year in December, compared with 39.93% the previous month (NGFINF=ECI), due to price rises for items such as yam, sweet potatoes, beer, corn, rice and fish, the National Bureau of Statistics said.

The central bank hiked interest rates six times last year to try to get inflation under control.

Nigeria's government expects inflation to fall to 15% this year, helped by lower imports of petroleum products, Tinubu said during a budget speech in December.

By Chijioke Ohuocha and Mohd Shamsuddin, Reuters

Wednesday, January 15, 2025

Islamic police in Nigeria round up children living on streets to put them in camp "for their rehabilitation"

Authorities in northern Nigeria's largest city have begun evacuating more than 5,000 street children seen as a "security threat" and a growing concern as an economic crisis forces more to fend for themselves. The Hisbah, a regional police force tasked with enforcing Islamic Sharia law, have carried out midnight raids on motor parks, markets and street corners in the regional capital, Kano, since the beginning of the year, evacuating children as they sleep.

"We have so far mopped up 300 of these boys from the streets and taken them into a camp provided for their rehabilitation," Hisbah's director-general Abba Sufi told AFP. "Their continued living on the streets is a huge social and security threat because they are potential criminal recruits."

"They are a ticking time bomb that needs to be urgently defused with tact and care," said Sufi.

In November, Kano State governor Abba Kabir Yusuf set up a committee to rid the city of the street children, most of whom are boys. Many sleep in the open and have no access to education or parental care.
With the highest divorce rate in Nigeria, according to official figures, Kano is dealing with a surge in children from broken homes.

Largely left to fend for themselves, the boys roam the city, begging, selling items at traffic lights and scavenging for scrap metal to sell to get money to feed themselves.

The west African economic powerhouse faces its worst economic crisis in decades, with inflation soaring to 34.6 percent in November, leaving many struggling to eat.

Nigeria has 18.5 million out-of-school children, with Kano State accounting for 1.9 million, the highest rate in the country, according to the United Nations Children's Fund (UNICEF) in a 2022 survey.

The Kano figure accounts for 39% of the total number of children living in the state, the 2022 Nigeria Multidimensional Poverty survey said.

Officials told AFP that many of the children in Kano city came from neighboring states.

"Some of them are from Kano, while others are from other states," said Hisbah commander Aminu Daurawa. "The first step is profiling them and identifying where they came from."

Some were sent from villages to learn how to read the Koran at informal Islamic religious schools called almajiri. Residents said many students of the Koranic schools beg for food and alms between classes.

Attempts by authorities and local groups to intervene and support the age-old almajiri system have faced opposition from traditional clerics.

The Hisbah police plan to provide "psychosocial" support and counselling to the children before enrolling those who show interest in school, Sufi said, adding that others will be given seed money to start a trade of their choice.

Daurawa told AFP that out-of-state children will be repatriated after their rehabilitation.

Previous attempts to clear the city of street children have failed.

Between 2017 and 2018, the Hisbah evacuated some 26,000 children and reunited them with their parents in and outside Kano, but they returned to the streets after a lull, according to Daurawa.

During the COVID-19 pandemic, authorities in Kano shut almajiri schools and transported the pupils to their states, but they returned when the schools reopened.

"We want to avoid a repeat of the past experience, which is why we changed approach by camping the children and rehabilitating them before sending them back into the society," Sufi said.

Monday, December 30, 2024

Video - Nigeria faced significant economic challenges in 2024



The country endured record-high inflation and severe flooding that exacerbated food insecurity.

Friday, December 27, 2024

Video - Weak economy in Nigeria dampening festive spirit, hurting retailers



Record inflation, a petrol subsidy removal, the devaluation of the local currency, and several other issues combined to keep shoppers at home and cash registers quiet during the holiday season.

Tuesday, December 24, 2024

President Tinubu Defends Reforms Blamed for Hardship


Nigerian President Bola Tinubu defended sweeping economic reforms implemented since he took power in May 2023 as necessary to prevent a national crisis.

“We were spending our future, we were spending our generation’s fortune,” he told a rare media briefing in Lagos, the commercial capital, on Monday. “Why should you have expenditure that you do not have revenues for?”

The leader of Africa’s most populous nation has undertaken a number of measures, including devaluing the naira, abolishing a complex multiple exchange-rate system and scrapping costly gasoline subsidies since taking office.

‘Father Christmas’

Tinubu said that Nigeria had been playing “Father Christmas” to its neighbors by subsidizing gasoline. “I do not have any regrets whatsoever in removing the subsidies,” he said.


While the International Monetary Fund and World Bank have welcomed the reforms, they has triggered soaring inflation and led to a cost-of-living crisis, worsening the plight of millions of Nigerians who live below the poverty line.

In August, demonstrators took to the streets in frustration over the tough living conditions in protests that were met by deadly force by police.

More from Tinubu’s briefing:

. The president said he will not back down on his proposed tax changes, but signaled he could make concessions on value added tax to advance the overall measures, without being specific.

. Importing 2,000 tractors into Nigeria to encourage mechanized farming and increase agricultural output that can be sold for export.

. Tinubu says he does not believe in price controls and the market should be allowed to determine prices.

By Ruth Olurounbi and Anthony Osae-Brown, Bloomberg

Friday, December 20, 2024

President Tinubu unveils “ambitious” budget

Nigeria’s President Bola Tinubu presented a 47.9 trillion naira ($30 billion) budget for 2025 to parliament on Wednesday.

The bill, Tinubu’s second as president, assumes a benchmark oil price of $75 per barrel and production of just over 2 million barrels per day — an output level some analysts say would be hard to achieve. Nigerian budgets are anchored on oil sales which make up around 90% of foreign exchange earnings.

The budget also assumes inflation will fall from over 34% currently to 15% next year. It is an “optimistic forecast,” says Ibukun Omoyeni, an economist at Lagos-based Vetiva Capital. He believes inflation “may be much higher” than the government’s estimate and that a supplementary budget would need to be issued at some point.

Tinubu, who has largely stuck by a policy agenda that has sharply raised the cost of living during his tenure, said the latest budget was “ambitious but necessary” for the country’s future. Defense and security will take 10% of the proposed spending, while education and health account for 7 and 5% respectively.

The proposal projects that Nigeria’s economy will grow 4.6% next year, above recent estimates from Washington.

According to the IMF, Nigeria’s economy will grow next year by 3.2% after finishing this year with 2.9%. The World Bank’s growth projection for Nigeria for the next three years is an average of 3.7%.

Earlier this month, Nigeria issued a $2.2 billion eurobond partly to raise money needed to make up for this budget’s 3.9% deficit. Central Bank governor Yemi Cardoso described the bond sale as a measure of “growing confidence of investors and the resilience of the Nigeria credit, and evidence of our improved liquidity position.”

The bank under Tinubu’s direction has managed to stabilize the naira currency after a free fall at the beginning of the year following two devaluations. Next year’s budget is anchored on an exchange rate of 1,500 naira to the dollar, an estimate that isn’t far off the naira’s current position of 1,538.

But even if the exchange rate projection is feasible, Tinubu’s spending plan is “not realistic at all” based on its projections for inflation and oil revenues, says Basil Abia, co-founder of economic policy consultancy Veriv Africa. The firm’s best-case scenario projection for inflation next year is 31% — and that is if Nigeria produces at least 1.8 million barrels per day at $90 or more. But Nigeria’s output has been below that mark in the last half decade with insecurity in oil producing communities limiting production.

And Nigeria’s oil earnings next year could be affected by geopolitical factors beyond its control. “A Trump presidency means more American oil in the global market,” raising the prospect of prices going below $70, Abia said.

By Alexander Onukwue, SEMAFOR

Tuesday, December 3, 2024

Video - Ngozi Okonjo-Iweala secures second term at WTO



The former Nigerian finance minister ran unopposed, and the WTO's 166 members agreed by consensus to the proposal to reappoint her. Okonjo-Iweala called on members to adopt a creative approach to deal with the issues that will face the world trading system. Her next term is set to commence on September 1, 2025.

CGTN

Nigeria Raises $2.2 Billion in First Eurobond Issue Since 2022

Nigeria raised $2.2 billion with its first eurobond sale since February 2022, attracting demand for more than four times the amount on offer.

Africa’s biggest oil producer offered two maturities: a 6.5-year note that priced at 9.625%, and a 10-year issue that sold at 10.375%, Nigeria’s Debt Management Office said in an emailed statement late Monday. It raised $700 million in the shorter issue and $1.5 billion in the longer-dated paper, according to the statement.

“The transaction attracted a peak orderbook of more than $9 billion,” with demand from a combination of fund managers, insurance, pension and hedge funds as well as banks and other financial institutions, it said.

African borrowers have returned to international debt markets this year after a two-year hiatus in which most governments were locked out by debt distress and the punitive cost of borrowing. The Nigerian sale follows offerings by countries including Benin, Ivory Coast, Kenya and South Africa.

Measures taken by Nigerian President Bola Tinubu’s government over the past 18 months have resulted in the yield spread of its sovereign bonds over US Treasuries narrowing by more than 153 basis points, after reaching a high of 713 basis points on Aug. 5, according to the JPMorgan EMBIG Nigerian Sovereign Index.

Since his inauguration May 2023, Tinubu has allowed a more flexible exchange rate and ended gasoline subsidies, while the central bank has embarked on an aggressive interest-rate hiking cycle in a bid to curb inflation that’s near a three-decade high. The policy measures have drawn praise from international investors as well as the World Bank and the International Monetary Fund, while triggering protests in the nation that hosts the most number of poor people globally.

Proceeds from the issue will be used to partly finance an expected budget deficit of 9.18 trillion naira ($5.86 billion) this financial year, Tinubu said in a proposal sent to lawmakers last week.

Chapel Hill Denham, Citigroup Inc., Goldman Sachs Group Inc., JPMorgan Chase & Co. and Standard Chartered Plc acted as joint bookrunners, while FSDH Merchant Bank Ltd. was the financial adviser.

Nigeria deferred a planned $950 million Eurobond issue in May 2022 because of unfavorable yields, after raising a first tranche of $1.25 billion of seven-year paper at a yield of 8.375% in the same year. It shelved another planned issue earlier this year and instead sold dollar bonds in the domestic debt market, raising $900 million at a yield of 9.67%.

Bloomberg

Thursday, November 28, 2024

Wednesday, November 27, 2024

Nigeria Raises Interest Rates Again to Curb Lofty Inflation

The Central Bank of Nigeria raised interest rates for the sixth straight time this year, intensifying its quest to curb surging inflation and support the battered naira.

Governor Olayemi Cardoso told reporters in Abuja, the capital, on Tuesday that the monetary policy committee decided to lift the benchmark rate by 25 basis points to 27.5%. The increase was smaller than the median estimate of six economists surveyed by Bloomberg, who had expected a half-point hike.

He said the decision of the 12-member MPC was unanimous and there was “no going back” in the fight against inflation.

“Members reiterated their commitment to price stability as the bedrock of a thriving Nigerian economy,” Cardoso said. “We expect to see greater results in the first quarter of 2025.”

Nigeria’s annual inflation rate climbed to 33.9% in October, near its highest level since 1996, stoked by fuel and food price increases and persistent currency weakness, which makes imports more costly.

“With Governor Cardoso sounding optimistic that the effects of petrol price hikes and the naira’s large devaluations on inflation will soon fade, we think the monetary tightening cycle is now over,” said David Omojomolo, Africa economist at Capital Economics. “That said, we do not expect a turn to interest rate cuts until the second quarter next year.”

The naira has depreciated around 46% against the dollar this year, in part due to an effort to let it float freely after years of being pegged at an artificially strong exchange rate.

The unit has also suffered from poor liquidity, despite the central bank’s efforts to provide support by supplying scarce dollars to the local market to satisfy domestic demand for the US currency.

Still, Cardoso argued that since June, the naira has been relatively stable against the dollar.

Foreign exchange reform, alongside the rollback of costly fuel subsidies, were introduced by President Bola Tinubu after he took office in May 2023. The steps received plaudits from foreign investors and cries of protest at home, where the moves have inflamed a cost-of-living crisis.

The long-term goal is to make the economy more efficient and attractive to international investors. These fruits have been slow to arrive, though Nigeria surprised with better-than-expected annual growth of 3.5% in the third quarter after its services sector expanded at its fastest pace in almost two years.

By Nduka Orjinmo and Anthony Osae-Brown, Bloomberg

Monday, November 25, 2024

Video - Manufacturing sector weighed down by economic downturn in Nigeria



The country's local manufacturing body, Manufacturers Association of Nigeria blames the situation on inflation, the removal of petrol subsidy, and the devaluation of the local currency, which have all combined to suppress demand.

CGTN

Monday, November 18, 2024

Nigeria's richest man Aliko Dangote takes on the 'oil mafia'

Petrol production at Nigerian business tycoon Aliko Dangote’s $20bn (£15.5bn) state-of-the-art oil refinery ought to be some of the best business news Nigeria has had in years.


But many Nigerians will judge its success on two key questions - firstly: "Will I get cheaper petrol?"

Sorry, but probably no - unless the international price of crude drops.

And secondly: "Will I still have to spend hours watching my hair turn grey in a hypertension-inducing fuel queue?"

Hopefully those days are gone but it might partly depend on the behaviour of what Mr Dangote calls "the oil mafia".

For much of the time since oil was first discovered in Nigeria in 1956, the downstream sector, which includes the stage when crude is refined into petrol and other products, has been a cesspit of shady deals with successive governments heavily involved.

It has always been impossible to follow the money, but you know there is something dreadfully wrong when the headline "Nigeria’s state-owned oil firm fails to pay $16bn in oil revenues", pops up on your news feed, as it did in 2016.

It is only in the last five years that the state-owned Nigerian National Petroleum Company (NNPC) has been publishing accounts.

The Africa head at the Eurasia Group think-tank, Amaka Anku, hails the Dangote refinery, in which the NNPC has a 7% stake, as "a very significant moment" for the West African state.

"What you had in the downstream sector was an inefficient, corrupt monopoly," she says.

"What the local refinery allows you to do is have a truly competitive downstream sector with multiple players who will be more efficient, profit making and they’ll pay taxes."

To put it bluntly, the population of this oil-rich nation has been conned on a colossal scale for many years.

Oil revenue accounts for nearly 90% of Nigeria’s export earnings but a relatively small number of business people and politicians have gorged themselves on the oil wealth.

Aspects of the business model have been baffling, including that of Nigeria’s four previously existing oil refineries.

Built in the 1960s, 70s and 80s, they have fallen into disrepair.

Last year Nigeria’s parliament reported that over the previous decade the state had spent a staggering $25bn trying and failing to fix the moribund facilities.

So Africa’s largest oil producer has been exporting its crude which is then refined abroad, much to the delight of some well-connected traders.

It would be like a bakery with a broken oven. But rather than fix it, the owner sends balls of dough to another firm that shoves them in a working oven and sells the loaves back to the baker.

The NNPC swaps Nigeria’s crude oil for the refined products, including petrol, which are shipped back home.

Exactly how much money changes hands and who benefits from these "oil swaps" is just one of the unknowns in these deals.

"No-one has been able to nail down who exactly has benefited. It’s almost like a beer parlour gossip about who is getting what," says Toyin Akinosho of the Africa Oil+Gas Report.

The NNPC began subsidising the price of petrol in the 1970s to cushion the blow when global prices soared. Every year it clawed this money back by depositing lower royalty payments - the money it received for every barrel pumped out of the ground - with the Nigerian treasury.

In 2022 the subsidy cost the government $10bn, more than 40% of the total money it collected in taxes.

On his second day in office Nigeria’s Vice-President Kashim Shettima referred to "the fuel subsidy scam" being "an albatross around the neck of the economy".

Nigerian oil expert Kelvin Emmanuel says in 2019 the country’s official petrol consumption "jumped by 284% to 70m litres per day without empirical evidence to justify such a sharp increase in demand".

Parliament has previously reported that - at least on paper - importers were being paid to bring in far more petrol than the country consumed. There was a lot of money to be made exporting some of the subsidised petrol to neighbouring countries where prices were far higher.

The NNPC earned billions of dollars a year from the crude oil production. But for many years, under previous governments, some of its profits never reached the treasury as it was accused by state governors and federal lawmakers of including these inflated subsidy costs on its balance sheet.

The NNPC did not respond to a request for an interview or a response to these allegations but in June denied it had ever "inflated its subsidy claims with the federal government".

It may have been the main source of revenue for successive governments but for decades, until 2020, the board did not disclose its audited accounts. Its press release from March this year promised more transparency and accountability.

After coming to power in May 2023, President Bola Tinubu said the subsidy was unsustainable and suddenly cut it - pump prices immediately tripled.

He also stopped the policy of artificially propping up the value of the local currency, the naira, and let market forces determine its value.

When he took over, the exchange rate was 460 naira to the US dollar. In November 2024 it was over 1,600.

The triple shock of higher fuel prices, sporadic shortages of supply and a depreciating currency has been a tough body blow for people across the country, many of whom are forced to run generators to keep the lights on and phones charged.

"Beyond the financial burden, the uncertainty and stress of constantly dealing with fuel shortages have added a layer of anxiety to everyday tasks," is how one Lagos resident summed it up.

"I feel like I’m always navigating through crisis mode. It’s exhausting."

As the naira plunged and pump prices increased several times, the government, aware of the potential danger of protests, continued to pipette some medicine to the masses.

In a move which could be likened to swallowing half a paracetamol for acute appendicitis, the government made sure people were paying slightly less than the market rate for a litre of petrol.

In other words, the NNPC was selling at a loss and the subsidy was still alive.

But with two recent increases in October, Nigerians are now paying market prices for fuel for the first time in three decades. In the main city Lagos it went up from 858 naira ($0.52) to 1,025 naira per litre.

One of the major factors in Nigeria’s economic crisis has been a limited supply of foreign currency. The country does not export enough products and services to bring in the dollars.

But lots of people, including fuel traders, have been chasing the same limited supply of foreign currency, which leads to the naira losing even more value.

The good news is that Mr Dangote’s facility is going to buy crude and sell refined fuels in Nigeria in the local currency, which will leave more dollars available for everyone else.

The bad news for those hoping this will mean cheaper fuel is that the price Mr Dangote pays for a barrel of local crude will still be the naira equivalent of the international cost in dollars.

So if the price of crude goes up on the world market, Nigerians will still be forced to fork out more naira. Refining locally will mean less freight costs but that’s a relatively small saving.

It is hoped that the arrival of Mr Dangote’s oil refinery will help bring a measure of transparency to the sector.

He knew he would be upsetting some of those who benefit from the murky status quo when the $20bn project began. But, he says, he underestimated the challenge.

"I knew there would be a fight. But I didn’t know that the mafia in oil, they are stronger than the mafia in drugs," Mr Dangote told an investment conference in June.

"They don’t want the trade to stop. It’s a cartel. Dangote comes along and he’s going to disrupt them entirely. Their business is at risk,” says Mr Emmanuel, the oil expert.

The fact that there have been some public disagreements with the regulator has only fuelled that suspicion.

Mr Dangote’s refinery near Lagos is thirsty, with a capacity of 650,000 barrels of crude a day.

You would have thought being located in Nigeria would make supply easy but then up pops this headline: "Nigeria’s Dangote buys Brazilian crude".

It follows a row over supply and pricing. The regulatory authority has complained about Mr Dangote’s negotiating tactics.

Nigeria’s crude oil is low in sulphur and, as one of the most prized in the world, fetches a higher price than many of its competitors.

When discussions over price began, Farouk Ahmed, the chief executive of the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), accused Mr Dangote of "wanting a Lamborghini for the price of a Toyota".

Mr Dangote has complained of not being allocated as much crude as earlier agreed but even when the price issue is resolved, he will still need to import some crude.

“NNPC doesn’t have enough crude for Dangote. Despite all this instruction to give ample supply of crude to the refinery, NNPC can’t supply Dangote with more than 300,000 barrels per day," says Mr Akinosho of the Africa Oil+Gas Report.

He says this is partly because the NNPC has pre-sold millions of barrels of oil for loans.

In August 2023 it secured a $3bn loan from the Afreximbank financial institution. In return it is due to supply 164 million barrels of crude.

In September the NNPC admitted it was significantly in debt. It was reported to be owing its suppliers around $6bn for fuel brought into the country.

Nigeria’s oil production has plummeted in recent years from around 2.1 million barrels per day in 2018 to around 1.3 million barrels per day in 2023.

The NNPC has been stressing oil theft as the number one reason why production has dropped.

It says in just one week - from 28 September to 4 October - there were 161 incidents of oil theft across the Niger Delta and 45 illegal refineries were "discovered".

But Ms Anku believes that "the theft problem is overrated by the NNPC and the oil sector".

"It’s a convenient excuse,” she adds.

She points to other contributing factors causing the drop in production, including international oil companies selling their on-shore oil fields - some of which may no longer be viable having pumped oil for 60 years.

The 66-year-old Dangote, who is listed by the Bloomberg Billionaires Index as the second wealthiest person in Africa, made his fortune in cement and sugar.

He has always denied the suggestion that his empire benefitted from links to politicians in power who helped ensure he had a monopoly.

Today there are those who are critical of Mr Dangote’s tactics and amid tension with the regulatory authorities, the same accusation has resurfaced when it comes to the supply of fuel in Nigeria.

"Mr Dangote asked me to stop issuing licences for importation and that everyone should buy from him. To which I said 'No' because it’s not good for the market. We have energy security interests," says Mr Ahmed of the regulatory authority.

Mr Dangote has not commented on the accusation but has said it makes business sense for the traders to buy from his refinery rather than from outside.

A feud between the regulator and Mr Dangote over supplies and pricing has rumbled on and morphed into another row with local fuel traders refusing to buy from the new refinery.

The mud slinging has also included allegations that some traders have been buying up substandard fuel from Russia which is then blended with other products before being shipped into Nigeria.

But not everyone is worried or surprised by the disagreements.

Ms Anku points to lessons learnt from US businessmen back in the 19th Century.

"The JP Morgans and the Stanfords – they didn’t have it easy either. That’s why they had to go and get government support and subsidies to build their railways and so on.

"I see the drama as a very normal process as you’re changing the structure of the economy. There are losers, they lash out. There’s no chance they’ll stop the refinery from working or selling its products to the Nigerian markets… in my view."

The modern, local refinery has also led to a debate over the quality of fuel on the market. It is an important issue given the vast number of generators belching out fumes across Nigeria as a result of the woeful power supply.

"Every day I wake up to the smell of what I’m sure [could] kill me. It’s because of the quality of the diesel," says Mr Akinosho.

He sees Mr Dangote’s refinery as a real opportunity for higher quality petroleum products in Nigeria which would be better for both car engines and people’s lungs.

But right now, Nigerians being hit hard in the pocket may find it difficult to be optimistic.

Arguments between officials at the Dangote refinery, the oil marketers and the regulators are batted back and forth in the media. All sides have been accused of hiding some facts and figures which leaves people guessing what is going on inside this still somewhat opaque industry.

"Everyone is a villain. There are no heroes here," concludes Mr Akinosho.

By Will Ross, BBC

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