Economy

More Worries for Nigeria as Brent Crude Hits $130 Per Barrel

Published

3 years ago

07/03/2022

By Adedapo Adesanya

Instead of Nigeria being joyous over the rising price of crude oil in the international market, the opposite is the case as the country may not be able to earn more from the commodity it has in abundance.

Crude oil sales account for about 90 per cent of the country’s foreign exchange (FX) earnings but the double-whammy reality of Brent crude hitting $130 per barrel is a big headache for the nation.

Following the continued conflict between Russia and Ukraine, the United States has confirmed that it is in talks with European allies to potentially sanction Russian crude oil in response to ongoing aggression in Ukraine, sending oil prices briefly above $130.

US Secretary of State Antony Blinken noted over the weekend that the country is “… now in very active discussions with our European partners about banning the import of Russian oil to our countries, while of course at the same time maintaining a steady global supply of oil.”

Analysts noted that if Russia’s oil is cut off, the market could face a 5 million barrel shortfall which could push oil prices to $200 per barrel.

The situation is compacted by stalling talks with Iran over a potential new nuclear deal.

For Nigeria, the rise in prices means the federal government will pay more money on fuel subsidy with the landing cost of petrol increasing on the back of the rise in crude oil price.

This means that the country will see an increase in the price of petrol at the pump as well as a rise in other basic needs since mobility is a critical factor in the economy.

Despite being Africa’s largest crude producer, moribund refineries coupled with infrastructural underdevelopment makes Nigeria one of the most import-dependent countries in the world.

And with the recent postponement of fuel subsidy removal by 18 months, it means that the petrol import bill and subsidy payment will increase as a result.

President Muhammadu Buhari had said rising crude oil prices presented a great opportunity for Nigeria, especially with the passage of the Petroleum Industry Act (PIA).

Represented by the Minister of State for Petroleum Resources, Mr Timipre Sylva, while speaking at last week’s 5th Nigeria International Energy Summit (NIES) in Abuja, he said there was now a level of certainty for the regulatory, administrative and fiscal framework for the industry.

“With the PIA in place, there should be no excuses. The enabling investment environment which has been the bane of the industry has been taken care of by provisions in the PIA,” the Minister stated.

This had been in the context of utilisation of gas because last month, Mr Sylva in an interview with Bloomberg, expressed fears of the impact of high oil prices on the economy.

He maintained that Nigeria’s comfort zone in terms of oil prices was between $70 and $80 per barrel.

He said, “I’m hopeful the prices will move around, maybe $80, maybe $70. We are hoping it will come down to somewhere around $70 to $80, which will be sustainable for us by the end of the year.

“We are working hard on that (production increase). What happened to us was the fact that we had to cut back at the time, and, of course, in such a way you can’t really cut back mathematically.

“So, you want to cut back 100,000 barrels that you shut out, maybe we’ll shut down about 200,000 to 300,000 barrels. So at the end of the day, we over-complied because we just couldn’t achieve it mathematically.

“In trying to cut down, we cut down too much. And now to come back, it’s not been easy for us to get the wells back to production.”

Now, it is almost double this threshold and have been projected to stoke inflationary fears which will further hamper Nigeria’s economy and as a result be felt by the average Nigerian.

Economy

Afriland Properties Lifts NASD OTC Securities Exchange by 0.04%

Published

3 hours ago

11/12/2024

Adedapo Adesanya

By Adedapo Adesanya

Afriland Properties Plc helped the NASD Over-the-Counter (OTC) Securities Exchange record a 0.04 per cent gain on Tuesday, December 10 as the share price of the property investment rose by 34 Kobo to N16.94 per unit from the preceding day’s N16.60 per unit.

As a result of this, the market capitalisation of the bourse went up by N380 million to remain relatively unchanged at N1.056 trillion like the previous trading day.

But the NASD Unlisted Security Index (NSI) closed higher at 3,014.36 points after it recorded an addition of 1.09 points to Monday’s closing value of 3,013.27 points.

The NASD OTC securities exchange recorded a price loser and it was Geo-Fluids Plc, which went down by 2 Kobo to close at N3.93 per share, in contrast to the preceding day’s N3.95 per share.

During the trading session, the volume of securities bought and sold by investors increased by 95.8 per cent to 2.4 million units from the 1.2 million securities traded in the preceding session.

However, the value of shares traded yesterday slumped by 3.7 per cent to N4.9 million from the N5.07 million recorded a day earlier, as the number of deals surged by 27.3 per cent to 14 deals from 11 deals.

Geo-Fluids Plc remained the most active stock by volume (year-to-date) with 1.7 billion units sold for N3.9 billion, trailed by Okitipupa Plc with 752.2 million units valued at N7.8 billion, and Afriland Properties Plc with 297.5 million units worth N5.3 million.

Also, Aradel Holdings Plc remained the most active stock by value (year-to-date) with 108.7 million units worth N89.2 billion, followed by Okitipupa Plc with 752.2 million units valued at N7.8 billion, and Afriland Properties Plc with 297.5 million units sold for N5.3 billion.

Economy

Naira Trades N1,542/$1 as FX Speculators Dump Dollars in Panic

Published

4 hours ago

11/12/2024

Adedapo Adesanya

By Adedapo Adesanya

The Naira continued to appreciate on the US Dollar at the Nigerian Autonomous Foreign Exchange Market (NAFEM), gaining 0.7 per cent or N10.23 on Tuesday, December 10 to trade at N1,542.27/$1 compared with the preceding day’s N1,552.50/$1.

The Central Bank of Nigeria (CBN)-backed Electronic Foreign Exchange Matching System (EFEMS) platform introduced to tackle speculation and improve transparency in Nigeria’s FX market has been attributed as the source of the Naira’s appreciation.

Speculators holding foreign currencies, particularly the US Dollar, have seen the value of their money drastically drop due to the appreciation of the local currency. This is forcing them to dump greenback into the system and take the domestic currency alternative- a move that has seen available FX increase.

Equally, the domestic currency improved its value against the Pound Sterling in the official market during the trading day by N6.81 to sell for N1,955.12/£1 compared with Monday’s closing price of N1,961.93/£1 and against the Euro, it gained N10.84 to close at N1,613.00/€1, in contrast to the previous day’s rate of N1,623.84/€1.

Data from the FMDQ Securities Exchange showed that the value of forex transactions significantly increased yesterday by $228.85 million or 257.2 per cent to $401.17 million from the preceding session’s $112.32 million.

However, in the parallel market, the Nigerian currency weakened against the US Dollar on Tuesday by N5 to settle at N1,625/$1 compared with the previous day’s value of N1,620/$1.

In the cryptocurrency market, Dogecoin (DOGE) lost 4.8 per cent to sell at $0.39116, Litecoin (LTC) depreciated by 3.3 per cent to trade at $110.25, Binance Coin (BNB) went south by 2.3 per cent to $681.44, Ethereum (ETH) dropped 1.6 per cent to finish at $3,671.08, and Cardano (ADA) slid by 0.5 per cent to $0.8837

Conversely, Ripple (XRP) jumped by 5.4 per cent to $2.23 amid a continued shift for the coin with its parent company seeing the benefits of a crypto-friendly regulatory environment for US-based companies.

XRP is closely related to Ripple Labs, a high-profile payments company targeted by the SEC in 2020 on allegations of selling the token as a security to U.S. investors. Ripple fully cleared a long-drawn court case in 2024.

Further, Solana (SOL) expanded by 0.8 per cent to $219.75, Bitcoin (BTC) grew by 0.4 per cent to $97,446.95, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) remained unchanged at $1.00 each.

Economy

Chinese Demand, Europe, Syria Development Buoy Oil Prices

Published

5 hours ago

11/12/2024

Adedapo Adesanya

By Adedapo Adesanya

Oil prices rose on Tuesday, influenced by increasing demand in China, the world’s largest buyer, as well as developments in Europe and Syria, with Brent crude futures closing at $72.19 per barrel after chalking up 5 cents or 0.07 per cent while the US West Texas Intermediate finished at $68.59 a barrel after it gained 22 cents or 0.32 per cent.

China will adopt an “appropriately loose” monetary policy in 2025 as the world’s largest oil importer tries to spur economic growth. This would be the first easing of its stance in 14 years.

Chinese crude imports also grew annually for the first time in seven months, jumping in November on a year-on-year basis.

Speculation about winter demand in Europe also contributed to the rise in prices as the period has been known for high demand.

In Syria, rebels were working to form a government and restore order after the ousting of President Bashar al-Assad, with the country’s banks and oil sector set to resume work on Tuesday.

Although Syria itself is not a major oil producer, it is strategically located and has strong ties with Russia and Iran – two of the world’s largest oil producers.

Market analysts noted that the tensions in the Middle East seem contained, which led market participants to price for potentially low risks of a wider regional spillover leading to significant oil supply disruption.

The market is also looking forward to the US Federal Reserve, which is expected to make a 25 basis point cut to interest rates at the end of its December 17-18 meeting.

This move could improve oil demand in the world’s biggest economy, though traders are waiting to see if this week’s inflation data derails the cut.

Crude oil inventories in the US rose by 499,000 barrels for the week ending November 29, according to The American Petroleum Institute (API). Analysts had expected a draw of 1.30 million barrels.

For the week prior, the API reported a 1.232-million barrel build in crude inventories.

So far this year, crude oil inventories have fallen by roughly 3.4 million barrels since the beginning of the year, according to API data.

Official data from the US Energy Information Administration (EIA) will be released later on Wednesday.

Also, the market is getting relief from the recent decision of selected members of the Organisation of the Petroleum Exporting Countries and its allies, OPEC+ to delay the rollback of 2.2 million barrels per day of oil production cuts to April from January. Another 3.6 million barrels per day in output reductions across the OPEC+ group has been extended to the end of 2026 from the end of 2025.