Economy
Brent Slips to $42 on COVID-19 Spread Fears
By Adedapo Adesanya
Brent crude returned to the $42 mark on Friday as the oil futures depreciated on the back of the ongoing spread of coronavirus, which has dampened the demand outlook, by extension the mood of the market.
Brent, against which most countries price their crude, moved down by 1.86 per cent or 82 cents to sell at $42.71 per barrel, while the United States’ futures, West Texas Intermediate (WTI) crude, made a 2.41 per cent or 99 cents slide to $40.31 per barrel.
Depressed prices came on the back of a surge in European coronavirus cases with several countries in partial lockdowns and many hoping that restrictions will begin to have an effect as intensive care units fill up.
Countries like Belgium, Germany, Czech Republic, Spain, Poland, Austria and France have experienced spikes while Italy has recorded more than 30,000 new daily cases on three occasions in the last few days, and currently has close to 800,000. Its death toll is the second highest in Europe after the United Kingdom at more than 40,000.
There are also a growing number of cases in the US, Japan and South Korea, all of which are major oil consumers.
Further adding to the negative outcome was the downward review of demand outlook by the International Energy Agency (IEA) and the Organization of Petroleum Exporting Countries (OPEC) this week.
The Paris-based IEA cut its 2020 global oil demand forecast and now expects world oil demand to contract by 8.8 million barrels per day this year.
The agency further added that it does not expect the prospect of a coronavirus vaccine to significantly boost demand until well into next year. For 2021, the IEA said world oil demand growth will rise by 5.8 million barrels per day, representing an upward revision of 300,000 barrels per day from last month.
For yet another month, OPEC revised down its expectations for global oil demand as the renewed spike in coronavirus cases in major economies is slowing down the oil demand recovery.
In its Monthly Oil Market Report (MOMR), the cartel cut its global oil demand forecast for this year by 300,000 barrels per day compared to last month’s estimate and now sees global oil demand at slightly above 90.0 million barrels per day this year, down by 9.8 million bpd compared to 2019.
The main reasons for the expected even lower demand for this year are the recent new lockdowns and curfews in many major European economies as well as weaker-than-expected demand in the developed economies in the Americas in the third quarter of 2020.
The weaker oil demand recovery is expected to continue into 2021, according to OPEC, which cut its estimate for global oil demand next year, too. In 2021, oil demand is expected to grow by 6.2 million barrels per day compared to 2020. This is a downward revision of 300,000 barrels per day compared to OPEC’s October forecast.
Next year, total global demand is expected to reach 96.3 million barrels per day, still lower than the demand before the pandemic.
At the same time, supply is rising as Libya opens the taps. The country’s production rose to 1.145 million barrels a day on Friday, according to a spokesman for its state-run National Oil Corporation (NOC)
However, the silver lining still remains as vaccines may roll out soon following announcement from Pfizer and BioNTech earlier in the week. This indicates that there are hopes that a safe and effective vaccine would help bring an end to the coronavirus pandemic that has infected more than 53.1 million and claimed over 1.3 million lives.
By Adedapo Adesanya
S&P Global has agreed to acquire a majority stake in Agusto & Co., a leading Pan-African rating agency with operations in Nigeria, Kenya, Rwanda and Ghana.
The investment, a strategic step for both companies, will complement and support the growth strategy of the S&P Global Ratings division in Africa. The terms of the transaction were not disclosed.
The company said in a statement on Tuesday that by combining S&P Global’s international expertise and resources with Agusto & Co.’s strong Pan-African presence and reputation for excellence, the partnership aims to expand market insights, strengthen credit transparency, and support market participants across the region.
“We are delighted to partner with Agusto & Co. to strengthen our domestic ratings presence across Africa,” said Mr Yann Le Pallec, President, S&P Global Ratings. “This transaction underscores our commitment to supporting growth and transparency in local credit markets throughout the continent. Africa’s opportunity is extraordinary, and by combining our global expertise with Agusto & Co.’s deep local insights, together we can foster informed analysis, constructive market dialogue, and greater investor confidence both regionally and internationally.”
“This partnership is a transformational milestone for Agusto & Co. and African capital markets, fulfilling our late founder’s vision of affiliating with a leading global rating agency,” said Yinka Adelekan, Managing Director of Agusto & Co.
“For more than 30 years, we have built a trusted credit rating institution across Africa. By combining our deep Pan-African market knowledge and analytical independence with S&P Global Ratings’ global expertise, resources and affiliate network, we believe this partnership will create new opportunities, enhance value for market participants, and support the continued development of transparent and resilient credit markets across the continent.”
Agusto & Co. is a leading Pan-African credit rating agency with a strong presence in Nigeria and other key African markets, rating financial institutions, corporates and other entities. Following the transaction, Agusto & Co. will continue to operate as a separate ratings entity and issue its own credit ratings and methodologies in accordance with applicable regulatory requirements.
The transaction is subject to customary closing conditions, including receipt of required regulatory approvals.
Subject to obtaining all required regulatory approvals, the transaction is expected to close during the second half of 2026.
The transaction is not expected to have a material impact on the financial results of S&P Global or S&P Global Ratings, the agency said.
Agusto & Co. was founded in 1992 by the late Nigerian economist and chartered accountant, Mr Olabode (Bode) Agusto. It was established as the first credit rating agency in Nigeria.
Mr Agusto, who served as the firm’s first managing director for 11 years, died in October 2023.
By Adedapo Adesanya
The Lagos Chamber of Commerce and Industry (LCCI) has urged the federal government to suspend plans to increase Nigeria’s mandatory pension contribution rate.
The chamber’s Director General, Dr Chinyere Almona, warned that the move could worsen the challenges facing businesses, threaten jobs and discourage investment.
She noted that while improving retirement security is important, raising pension contributions at a time when businesses are grappling with soaring inflation, extremely high borrowing costs, exchange rate volatility, rising energy prices and multiple taxes would place an unbearable burden on employers.
According to the DG, Nigeria’s existing contribution rate is already comparable with global standards, noting that the country’s 18 per cent mandatory contribution is close to the OECD’s 18.8 per cent average and significantly higher than rates in countries such as the United Kingdom (8 per cent), the United States (12.4 per cent) and Kenya (12 per cent).
She warned that increasing payroll costs at this time would discourage recruitment, suppress wage growth, place disproportionate pressure on micro, small and medium-sized enterprises (MSMEs), reduce Nigeria’s attractiveness to investors and push more businesses into the informal sector.
The advocacy group called on the government to defer the proposal until a comprehensive Nigeria-specific actuarial and economic impact assessment is conducted and extensive consultations are held with the organised private sector and labour unions.
The group recommended that instead of increasing mandatory contributions, the National Pension Commission (PenCom) should focus on developing innovative investment instruments capable of delivering higher returns on existing pension assets, saying this would improve contributors’ retirement savings without imposing additional financial pressure on businesses.
PenCom had recently proposed an increase in mandatory pension contributions as well as a 3 per cent mandatory annual contribution equivalent to 3 per cent of the total wage bill.
According to the insurance regulator, the proposal forms part of broader pension sector reforms designed to strengthen the financial security of Nigerian workers in retirement.
LCCI’s opposition to this proposed policy comes after the Organised Private Sector of Nigeria expressed its disdain over the issue, also citing rising inflation and economic hardship for its rejection.
By Adedapo Adesanya
Nigeria will receive about 154.2 million litres of imported Premium Motor Spirit (PMS) this week despite increased domestic refining capacity driven by the Dangote Petroleum Refinery.
The latest Nigerian Ports Authority (NPA) shipping schedule shows that five petrol-laden vessels carrying a combined 115,000 metric tonnes of PMS are expected to berth at Tin Can Island Port in Lagos and Calabar Port between Monday and Wednesday.
The continued inflow of imported petrol highlights how marketers are balancing local supplies with overseas purchases based on pricing, availability and commercial considerations, even as domestic refining capacity expands.
According to the NPA’s Daily Shipping Schedule – Vessels Expected, four vessels will discharge their cargoes at the KLT Phase 3A terminal in Tin Can Island, while one vessel is scheduled to berth at the North West Petroleum & Gas terminal in Calabar.
The vessel LESTE is expected to arrive on Monday with 30,000 metric tonnes of PMS, equivalent to about 40.23 million litres, while BORA will deliver 10,000 metric tonnes, or approximately 13.41 million litres, to the same terminal.
On Tuesday, ST ILHAAM is scheduled to discharge another 30,000 metric tonnes (about 40.23 million litres), followed by STELLAR, which is expected on Wednesday with an additional 30,000 metric tonnes, also translating to roughly 40.23 million litres.
At Calabar Port, SL AREMU is expected to berth on Tuesday with 15,000 metric tonnes of PMS, equivalent to approximately 20.12 million litres, at the North West Petroleum & Gas terminal.
The shipping schedule also lists STELLAR at the Dangote terminal in Lekki Deep Sea Port with an arrival date of July 24.
However, its cargo status is marked “INB”, indicating the vessel is in ballast and not carrying cargo, suggesting it may be positioning to load refined products rather than discharge them.
The latest imports come as Nigeria continues to operate a liberalised downstream petroleum market that allows marketers to source products from either domestic refineries or international suppliers.
Industry operators have consistently argued that imports remain necessary to guarantee supply, encourage competition and take advantage of favourable pricing opportunities.
The Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) has also maintained that the market remains open to all qualified operators, with fuel prices expected to reflect prevailing market conditions.
Although local refining output has risen significantly following the ramp-up of the 700,000 barrels per day Dangote refinery and ongoing rehabilitation of government-owned refineries, imported petrol continues to account for a portion of Nigeria’s fuel supply, reflecting the competitive dynamics of the deregulated market.
