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Economy

Second Wave Infections Threaten Oil’s Monthly Gaining Streaks

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global oil market

By Adedapo Adesanya

Oil prices may struggle to hold on to their five-month highs this week as fuel demand worries caused by the second wave of coronavirus infections outweigh any other factor that could lift the market.

Worldwide cases of COVID-19 reached 20 million on Monday and with the International Energy Agency (IEA) update to its oil demand forecast, demand is expected to suffer 7.9 million barrels per day decline this year. This compares with expectations of 8.9 million barrels per day demand contraction by the Organisation of the Petroleum Exporting Countries (OPEC).

The International Monetary Fund (IMF) in a report titled Global Imbalances and the COVID-19 Crisis also said it expects crude oil demand to record an 8 per cent decline this year. As a result, prices will be 41 per cent lower than they were last year on average.

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Last week, steady declines in the US Dollar supported by the commodity because such an occurrence typically makes buying oil cheaper for holders of other currencies.

The price of oil was also supported on Tuesday and Wednesday by the two reports of a crude oil inventory draw in the United States.

The Energy Information Administration (EIA) reported on Wednesday that US crude oil inventories fell 7.4 million barrels during the week ending July 31. Analysts had expected an inventory decline of 3.267 million barrels for the week.

On Tuesday, the American Petroleum Institute (API) reported an inventory draw of 8.587 million barrels for the last week of July.

On the supply side, Iraq said on Friday it would cut its oil output by a further 400,000 barrels per day in August and September to compensate for its overproduction in the past three months.

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The move would help it comply with its share of cuts by OPEC and their allies, together called OPEC+. The sharper cut will take Iraq’s total reduction to 1.25 million barrels per day this month and next.

The Saudi and Iraqi energy ministers said in a joint statement that OPEC+ efforts would improve the stability of global oil markets, accelerate its balancing and send positive signals to the markets.

Market analysts noted that Saudi Arabia and Iraq forging better relationships over the oil deal are excellent for the compliance outlook but while this might help the market hold on for a little while, it has little long-term advantage as Iraq has been known to be a laggard.

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Investors will also hope that the halt in talks between US Democrats and the White House on a new support package for cash-strapped U.S. states hit by the coronavirus pandemic continues as a delay in reaching a deal weighed on the market.

US House Speaker, Ms Nancy Pelosi and Treasury Secretary, Mr Steven Mnuchin both said they were willing to restart talks on a deal to cover the rest of 2020.

The market, however, resumed this morning pointing upward, supported by Saudi optimism on Asian demand and on Iraq’s pledge to deepen supply cuts.

As at the time of this report, Brent Crude was up 43 cents to $44.85 per barrel, while the West Texas Intermediate (WTI) was up by 61 cents at $41.83 per barrel.

Adedapo Adesanya is a journalist, polymath, and connoisseur of everything art. When he is not writing, he has his nose buried in one of the many books or articles he has bookmarked or simply listening to good music with a bottle of beer or wine. He supports the greatest club in the world, Manchester United F.C.

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Economy

NGX Considers Policy Advocacy to Woo Companies

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temi popoola NGX

By Dipo Olowookere

The chief executive of the Nigerian Exchange (NGX) Limited, Mr Temi Popoola, has said the exchange would consider policy advocacy aimed to encourage more companies from listing their shares on the bourse.

Speaking at an engagement session with institutional clients on Monday, July 26, 2021, Mr Popoola admitted that there was a dearth of listings on the exchange, but said efforts were being made to address the issue.

He identified two major areas around attracting more listings to the market first by considering the driving factor behind major spiked in listing activity and then considering barriers to entry.

In dealing with the first, he noted that, “It is impossible to disconnect policy from listing activities evidenced by the successes recorded in the eras of indigenization, privatisation and the banking sector consolidation.”

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“Our strategy will, therefore, be built around policy advocacy, whilst addressing barriers to entry such as time to market, ease of entry and benefits of listing,” he revealed.

However, he emphasised that the demutualisation of the Nigerian Stock Exchange (NSE) some months ago has positioned the exchange to deliver more value to stakeholders.

“Following the recent demutualisation of the exchange, it is important that we continue to function well and deliver the highest level of service delivery that our stakeholders are accustomed to. It is not lost on us that we have to embody many things for our wide variety of stakeholders.

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“As such we have begun to think about the exchange of tomorrow and how we can continue to meet evolving needs of the market. To do this, we will take on three major matters – listings, technology and investor participation,” he said.

Speaking technology, Mr Popoola recognised the advanced strides the exchange has made in digitisation over the years and indicated that it is time to take a step further to digital transformation, addressing how people connect to the bourse, how to distribute products through technology and how to democratise finance.

In this regard, he emphasised the need to attract more technology stocks to the Nigerian capital market in order to capitalise on the gains we see in global markets that are home to the world’s biggest technology companies.

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As for investor participation, Mr Popoola stated, “We have big plans to attract investors – retail and institutional, domestic and foreign – to our market.

“In terms of diversification, we understand that equities may no longer be the answer for all investors and we are focused on creating an exchange that understands investors’ appetite and is indeed the preferred destination for finding products that suit their needs.”

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Economy

NewGold ETF Attracts N4.41bn from Offshore Investors

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Newgold Issuer Limited ETF

By Dipo Olowookere

Exchange-Traded Funds (ETFs) space in Nigeria has continued to attract more offshore investors as it has remained as an avenue for them to diversify their investment portfolios.

Business Post reports that the demand for the form of investment asset has remained high despite foreign exchange (FX) restrictions in the country.

Recall that a month ago, this newspaper reported that foreign portfolio investors use this means to convert their Naira assets into Dollar as the nation grapples with forex liquidity.

Recently, the Nigerian Exchange (NGX) Limited released its quarterly report on the ETFs market for Q2 and it was revealed that foreign transactions increased by 99.64 per cent even as 10 stockbrokers drove 99.9 per cent of total transaction value and 97.3 per cent of total volumes of ETFs.

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It was observed that the NewGold ETF was the most active with its value rising by 99.58 per cent to N4.41 billion, taking the lead in both value and volume traded.

The report showed that offshore investors traded 524.241 units of NewGold valued at N4.41 billion, while Vetiva Griffin 30 followed with 501,48 units worth N8.12 million.

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In addition, Vetiva Industrial Goods transacted 248,469 units valued at N4.52 million, Meristem Value ETF sold 115,58 units valued at N1.87 million, while Stanbic IBTC ETF traded 19,774 units valued at N1.48 million.

Analysis of the report showed that Rencap led in terms of brokers’ performance as regards value, retaining its top position in this category, having traded about 69.7 per cent.

RMB followed, accounting for 12.72 per cent while ABSA Securities accounted for 9.04 per cent of transactions.

On the other hand, Vetiva led in terms of volume, accounting for 31.55 per cent in the period under review. Rencap followed with 24.9 per cent while IONE accounted for 14.66 per cent volume of transactions.

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However, market capitalisation declined by a record 39.7 per cent between both quarters as the commodity-backed ETP suffered net outflows of 54 per cent, from N12.0 billion in Q1 2021 to N5.5 billion in Q2 2021, due to FX restrictions in the regulatory climate.

Furthermore, trade volumes fell by approximately 69 per cent from about 5.3 million units in Q2 2020 to 1.6 million units in Q2 2021.

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Economy

CBN Gives Nearly 4 million Farmers N756.5bn

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Ghana peasant farmers

By Ashemiriogwa Emmanuel

The Central Bank of Nigeria (CBN) on Tuesday said it has disbursed N756.5 billion to nearly 4 million (approximately 3,734,938) smallholder farmers cultivating 4.6 million hectares of land to improve food security in the country.

The development was revealed by CBN Governor, Mr Godwin Emiefele, while presenting the communiqué of the Monetary Policy Committee (MPC) meeting in Abuja.

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According to the CBN boss, a total number of 627,051 farmers were granted N120.2 billion for the 2021 wet season under the Anchor Borrowers’ Programme (ABP) to cultivate 847,484 hectares of land.

“Under the bank’s development finance initiatives, the bank granted N756.5 billion to 3,734,938 smallholder farmers cultivating 4.6 million hectares of land, of which N120.2 billion was extended for the 2021 wet season to 627,051 farmers for 847,484 hectares of land, under the ABP,” Mr Emefiele said.

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Furthermore, the apex bank said a total of N121.6 billion has been shared among 32,617 beneficiaries under the Agribusiness/Small and Medium Enterprise Investment Scheme (AGSMEIS).

Mr Emiefele also disclosed that the bank has released N318.2 billion to 679,422 beneficiaries for the targeted credit facility.

These beneficiaries, as said by the CBN chief, includes 572,189 individuals and 107,233 small and medium scale enterprises (SMEs).

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Meanwhile, the committee reviewed the domestic economic developments and noted that the non-oil sector, agriculture and industry sub-sectors were the major drivers of improvement as it recorded growth rates of 2.28 and 0.94 per cent, accordingly.

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