Connect with us
Gage

Business News

Critical times loom for Nigeria as oil price dips below $60 budget benchmark

Oil price dropped to below $60 a barrel in the early hours of Tuesday. This is the first time crude oil price would fall below $60 since January 2019.

Published

on

Recession, 2020 revised budget, spending inefficiencies, and a looming debt hole  , President Muhammadu Buhari, loans, Oil price, FG, Solar vehicles, P&ID firm, Nigeria's GDP, Debt Servicing: Nigeria pays $1.12 billion to World Bank, others in 10-month , How the latest Fitch report affects you in 2020 , Nigeria’s credit rating faces downgrade by Fitch, Nigeria’s fiscal crisis looms, oil hits $32, S&P downgrades Nigeria to junk rating, as India cuts interest rates

Oil price dropped to below $60 a barrel in the early hours of Tuesday, as trade tension between the U.S and China intensifies. This is the first time Brent oil price would inch down below $60 since January 2019.

Specifically, Brent Crude oil price has continued its free fall in recent days and it has finally fallen below $60, as it traded at $59.79 per barrel. Also, the West Texas Intermediate (WTI) was down 24 cents, or 0.4%, at $55.42 a barrel.

Trade tension dips oil price: The latest drop in oil price is due to concerns about weaker crude demand after U.S. President Donald Trump disclosed he would impose tariffs on more Chinese imports, which is potentially ramping up a trade war between the world’s two largest economies.

  • Earlier on, investors’ sentiment in the global oil market slightly improved when President Trump and his counterpart, President Xi Jinping, agreed to restart the trade talks when the two world leaders met at the G-20 summit in Osaka, Western Japan.
  • While briefing reporters, Trump revealed that even though the U.S does not plan to lift existing import tariffs, the North American country would refrain from slapping new levies on an additional $300 billion worth of Chinese goods.
  • However, the recent drop in oil price came after Trump announced that he would impose a 10% tariff on $300 billion of Chinese imports while further threatening to raise duties if the President of China, Xi Jinping, failed to move more quickly towards a trade deal.
  • China has also pledged to impose new “necessary countermeasures” to protect its interests after the latest tariff threat and oil price is quickly responding.

[READ: President Buhari signs N8.91 trillion 2019 budget into law]

Nigeria’s budget benchmark: The sharp drop in oil price may threaten the implementation of Nigeria’s 2019 budget. Recall that President Buhari signed the N8.83 trillion budget for the 2019 fiscal year with an assumption that oil price would remain $60.

Specta
Office of budget

Office of budget

Essentially, the 2019 budget was benchmarked at $60 just as Brent Crude in October 2018 climbed to a record high of $86.74 per barrel. However, the recent dip in oil prices suggests that critical times are ahead.

  • That experts have called for a downward review of the budget benchmark means Nigeria would have to borrow to fund the revenue shortfall.
  • Nigeria’s debt currently stands at N24.9 trillion and analysts have predicted N30 trillion debt by the end of 2019.
  • Nairametrics also revealed that Nigeria spent a whooping N293 billion to service external debt only in half-year 2019.

[READ: Nigeria paid N293 billion to service external debt in half-year 2019]

Another development is being mooted that oil prices could drop to as low as $20 and $30 a barrel as industry experts anticipate the U.S-China trade war to further escalates.

Coronation ads
  • Goldman Sachs, as reported by Reuters revealed that Oil demand has disappointed in 2019 due to weaker economic activities, unfavourable weather and trade tensions.
  • Following the escalating global trade tension, a $20 to $30 oil price means Nigeria would devalue the naira.
  • The CBN Governor, Godwin Emefiele recently disclosed that the CBN would devalue the naira if the oil price falls to that region. This may nosedive the Nigerian economy into another recession.

[READ FURTHER: This is when I will devalue the naira – Emefiele]

 

Samuel is an Analyst with over 5 years experience. Connect with him via his twitter handle

Click to comment

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Coronavirus

FG yet to purchase Covid-19 vaccines – Minister of State for Health

According to a disclosure made by the Minister of State for Health, the FG is yet to purchase any COVID-19 vaccine.

Published

on

NPHCDA to address infrastructural gaps in COVID-19 vaccine supply, FG to focus on procurement of Covid-19 vaccine in first quarter 2021

The Federal Government has said that it is yet to purchase any Covid-19 vaccines as the country is still assessing the prices of different shots, their availability and the logistics required for a nationwide roll-out.

This is coming at a time when developed economies are rolling out the vaccines in their countries and concerns have been raised about the availability of the Covid-19 doses in the African continent.

This disclosure was made by the Minister of State for Health Adeleke Olurunnimbe Mamora, during a telephone interview with Bloomberg.

What the Minister of State for Health is saying

Mamora said that once the government determines which vaccines are accessible and affordable, authorities then have to consider storage and distribution issues as they prepare to give shots to 200 million people.

He said, “We haven’t made any purchases at this point in time.’’ He added that the government expects to have a definitive plan by the end of January.

Specta

Nigeria is working with the World Health Organization backed COVAX programme and hopes to receive its first doses in January. The Minister for Finance, Budget and National Planning, Zainab Ahmed, had said that the country is working on what type and quantity of Covid-19 vaccines to procure and financial provision will be made in the 2021 budget for the vaccines.

COVAX is a global initiative backed by the World Health Organization which aims to provide equitable access to Covid-19 vaccines, especially to poor countries.

What you should know

  • It can be recalled that Bloomberg had reported that experts and a state governor had expressed doubts about the ambitious plan by Nigeria to vaccinate as much as 40% of its population this year due to lack of resources and infrastructure.
  • The Chief Executive Officer of Nigeria’s National Primary Health Care Development Agency, Faisal Shuaib, said on Thursday the country expects to receive 100,000 doses of Pfizer Inc’s shot at the end of January through the Covax initiative.
  • Nigeria has officially reported 107,345 Covid-19 cases, with 1,413 casualties, but testing is not easily accessible for most people, with only about 1.1 million tests conducted so far.

Continue Reading

Economy & Politics

Nigerian government spends equivalent of 83% of revenue to service debt in 2020

The Federal Government of Nigeria achieved a debt service to revenue ratio of 83% in 2020.

Published

on

The Federal Government of Nigeria achieved a debt service to revenue ratio of 83% in 2020. This is according to the information contained in the budget implementation report of the government for the year ended December 2020.

According to the data seen by Nairametrics, total revenue earned in 2020 was N3.93 trillion representing a 27% drop from the target revenues of N5.365 trillion. However, debt service for the year was a sum of N3.26 trillion or 82.9% of revenue.

Nigeria’s debt service cost of N3.26 trillion has now dwarfed the N1.7 trillion spent on capital expenditure of N1.7 trillion incurred in 2020. This is also the highest debt service paid by the Federal Government since we started tracking this data in 2009.

The total public debt (External and Domestic) balance carried by Nigeria as of September 2020 stood at N32.22 trillion ($84.57 billion). Included in the total debt is a domestic debt of about N15.8 trillion.

 

Specta

What this means: Nigeria’s debt to GDP ratio is estimated at about 22%, one of the lowest in the world and much below what is obtainable in most emerging markets.

  • However, the challenge has always been the debt service to revenue ratio, a metric that reveals whether the government is generating enough revenues to pay down its debts as they mature.
  • Since the first recession experienced in 2016, Nigeria has struggled with higher debt service to revenue ratio as revenues slid in direct correlation with the fall in oil prices.
  • Nigeria’s government spent about N2.45 trillion in debt service in 2019 out of total revenue of N4.1 trillion or 59.6% debt service to revenue ratio.
  • At 83%, 2020 ranks as the highest debt service to revenue ratio we have incurred. Before now it was 2017 with 61.6%.

Breakdown of what debts were serviced

The following amount was spent on debt service during the year

  • To service domestic debt, the government spent N1.755 trillion in 2020 as against a budget of N1.87 trillion.
  • For foreign debts, a sum of N553 billion was spent against a target budget of N805.47 billion. The drop here is likely a result of lower interest rates on foreign borrowing as well as very limited borrowing from the foreign debt market during the year.
  • The government only contributed N4.58 billion into its sinking fund instead of the budgeted N272.9 billion.
  • The sinking fund is required to set aside funds that will be used to pay down on other loans such as bonds when they mature in the future.
  • Finally, a sum of N912.57 trillion was spent on servicing CBN’s loans, granted via its Ways and Means provisions.
  • Nairametrics reported last week that a total sum of N2.8 trillion was extended by the CBN to the FG as Ways and Means.

What happens next: In 2021, the government projects a debt service of N3.1 trillion against revenue of N6.6 trillion or a debt service to revenue ratio of 46.9%.

Coronation ads
  • The government plans to spend N4.3 trillion on capital expenditure during the year.

 

 

Continue Reading

Tech News

Top 10 Nigerian tech companies and capital raised in 2020

These are the top 10 tech companies and the capital they raised in 2020.

Published

on

Startup funding in Africa, Fintech, Disrupt Africa

African startups raised over $1 billion in funding in 2020, with Nigerian startups raising 17% of this amount – 55.37million in Q1 2o2o and 28.35million in Q2 2020, according to Techpoint.

These are the top 10 rankings of the highest fundraisers for 2020.

Flutterwave

The startup provides digital payments infrastructure and services which enable global merchants, payment service providers, and pan-African banks to accept and process payments across various channels.

It raised a $35M Series-B round led by US venture capital firms Greycroft and eVentures in January 2020. The funding was invested in technology and business development to grow market share in the countries it operates in.

54gene

The startup is equalizing precision medicine by including underrepresented Africans in global genomics research. It raised $15M in a Series A funding round in April 2020 led by Adjuvant Capital – a life sciences fund backed by the International Finance Corporation, Novartis, and the Bill & Melinda Gates Foundation.

Specta

These new funds will be used to address the gap that exists in precision medicine for people on the African continent.

Aella Credit

The startup is a one-stop app for all your financial needs. Aella makes it super easy for anyone to borrow, invest, and make payments. It secured a $10 million debt financing round from a Singaporean company – HQ Financial Group.

The new capital raised from Singapore is expected to facilitate the credit company’s effort to provide financial inclusion to many more of the people who are currently unbanked across Nigeria, West Africa, and other emerging markets.

Helium Health

The startup has become the leading provider of full-service technology solutions for healthcare stakeholders in Africa. It raised a $10 million Series A round in April 2020.

Coronation ads

Global Ventures and Africa Healthcare Master fund (AAIC) co-led the investment round. Helium plans to use the latest funding round to hire and expand to North and East Africa, including Kenya, Rwanda, Uganda, and Morocco.

Kuda Bank

The startup provides a full banking service on your smartphone. It secured a US$10 million seed round in November 2020 – the biggest seed round ever to be raised in Africa, led by Target Global with participation from Entrée Capital and SBI Investment.

The funding will be used to help accelerate its growth plans and keep up with customer demand. Specifically, funds will be used for key hires, product development, and to expand operations across Africa.

Trade Depot

The startup is a Nigerian B2B eCommerce company that utilizes an end-to-end distribution platform aimed at connecting the world’s top consumer goods companies directly to retailers in Africa.

Coronation ads

It raised $10-million in a pre-Series B equity round co-led by Partech, International Finance Corporation, Women Entrepreneurs Finance Initiative (We-Fi), and MSA Capital in July 2020.

Stanbic IBTC

The new investment will enable Trade Depot to continue connecting international brands with small businesses in Nigeria, expand into other African cities, launch a suite of financial products, and credit facilities aimed at supporting its retailers.

Field Intelligence

The startup is helping governments and businesses make good on the promise of healthcare in the fastest-growing parts of the world by making the pharmaceutical supply chain radically simple, affordable, and easily accessible.

Jaiz bank ads

It raised a $3.6 million Series A round in March 2020, led by Blue Haven Initiative, with investors including Newtown Partners via the Imperial Venture Fund and Accion Venture Lab.

The investment will be used to scale Shelf Life expansion throughout Nigeria and Kenya, as well as the development of additional services for Shelf Life clients and their patients.

MedSaf

The startup connects suppliers to hospitals and pharmacies directly to make the pharmaceutical supply chain more efficient. The health start-up raised $3.5M in a seed funding round in December 2020.  It will use this funding to expand to other African countries.

Auto Chek

The company is an automotive technology company that aims to build solutions for the African market. It raised $3.4 million in pre-seed funding round in November 2020, co-led by TLcom Capital and 4DX with inclusion from Golden Palm Investments, Lateral Capital, Kepple Africa Ventures.

Auto Chek will use the investment to grow its Nigerian and Ghanaian markets, invest in its tech, and grow its team.

Despite the ravaging impact of Covid-19, Nigerian tech start-ups raised millions of dollars in funding. We hope to see more investors in the first quarter of 2021.

Rensource Energy

The startup allows qualifying companies throughout Nigeria and West Africa to start selling Power-as-a-Service (PaaS) to their customers.

app

It raised $3 million from Proparco, with the support of the European Union under the Africa Renewable Energy Scale-Up facility (ARE Scale-Up). The funding will be used to contribute to facilitating energy access in the context of a significant and growing energy gap in Nigeria and support the development of innovative solar energy solutions.

Continue Reading
Advertisement




Advertisement