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Business News
Nigerians purchasing power to drop in 2020 – CBN survey
The CBN has released a new report showing that Nigerians will distance themselves from purchasing luxury items like cars, houses and others.
The Central Bank of Nigeria (CBN) has released its Consumer Expectations Survey (CES) for the fourth quarter of 2019 and it revealed that Nigerians will distance themselves from purchasing luxury items. This is could be attributed to the overall buying intention index in 2020 that is expected to stand at 36.5 index points.
The report stated that the conditions index for big-ticket items in the current quarter stood at 29.7 points.
What it means: This means that most consumers did not intend to buy big-ticket items during this period, as many Nigerians would not purchase luxury items like cars, houses, and other expensive items in 2020.
The negatives for the year: In CES, the apex bank warned that rising inflation and high prices would negatively impact the purchasing power of consumers.
Factors projected to drive increase in prices are food and other household needs, savings, purchase of appliances/consumer durables, education and purchase of houses and vehicles. Consumers will not be willing to borrow cash either for the purchase of these goods or any items as projection shows the borrowing rate will fall.
Surprisingly, consumers still expect a positive overall outlook for the next 12 months despite the inflation, price hike and projected unemployment in the country for 2020. To cap this up, the report shows the unemployment index remained positive at 21.0 points in Q4 2019. Therefore, the rise in unemployment is expected by consumers in the next 12 months
But consumers’ overall confidence outlook rose in Q4 2019, as consumers were optimistic in their outlook although consumer confidence is lower than the corresponding period of 2018.
“Consumers also had a positive outlook for the next quarter (current quarter) and the next 12 months.
“The majority of consumers believe that the next 12 months would not be an ideal time to purchase big-ticket items like motor vehicles and house.
“Most respondents expected the naira to remain unchanged; inflation rate to rise, and borrowing rate to fall in the next 12 months,” the report read in part.
[READ MORE: CBN retains Loan to Deposit Ratio at 65%)
Positives for the year: According to the report, consumers have positive outlooks due to improved family income and family financial situation. The expected increase in net household income, expectations to save a bit and/or have plenty over savings and an anticipated improvement in Nigeria’s economic conditions in the next 12 months birthed the favourable outlook.
What this means: Supermarket, real estate owners, and other consumer-driven goods will experience a drop in demand for their products and services. And with unemployment projected to rise in 2020, the impact is likely to be significant at most. The Nigeria Employers’ Consultative Association (NECA) had reported that the rate of unemployment in Nigeria may rise to 33.5% next year from the current rate pegged at 23.1%.
If demand drops in these sectors, it means the revenue contribution by these sectors to the Nigerian economy will drop, or growth will be slow for the businesses trading big-ticket or expensive items as earlier mentioned.
Corporate deals
Heirs Holdings acquires stakes in Shell, Total, ENI
Heirs Holdings has acquired 45% of OML 17 from Shell Nigeria as part of its expansion into the oil and gas industry.
Heirs Holdings has expanded its Oil and Gas portfolio, as it acquired 45% of OML 17 from Shell Nigeria.
The company acquired related assets, through TNOG Oil and Gas Limited (a related company of Heirs Holdings and Transcorp), from the Shell Petroleum Development Company of Nigeria Limited, Total E&P Nigeria Limited and ENI.
This was disclosed by the company in a statement issued on Friday and seen by Nairametrics.
According to the statement, TNOG Oil and Gas Limited will have sole operatorship of the asset in a transaction that is one of the largest oil and gas financings in Africa in over a decade.
- “With a financing component of US$1.1 billion, provided by a consortium of global and regional banks and investors. OML 17 has a current production capacity of 27,000 barrels of oil equivalent per day and according to our estimates, 2P reserves of 1.2 billion barrels of oil equivalent, with an additional 1 billion barrels of oil equivalent resources of further exploration potential. The investment demonstrates a further important advance in the execution of Heirs Holdings’ integrated energy strategy and the Group’s commitment to Africa’s development, through long term investments that create economic prosperity and social wealth.”
What they are saying
In the statement, Chairman of Heirs Holdings, Tony Elumelu, said:
- “We have a very clear vision: creating Africa’s first integrated energy multinational, a global quality business, uniquely focused on Africa and Africa’s energy needs. The acquisition of such a high-quality asset, with significant potential for further growth, is a strong statement of our confidence in Nigeria, the Nigerian oil and gas sector and a tribute to the extremely high-quality management team that we have assembled.
- “As a Nigerian and more particularly an indigene of the Niger Delta region, I understand well our responsibilities that come with stewardship of the asset, our engagement with communities and the strategic importance of the oil and gas sector in Nigeria. We see significant benefits from integrating our production with our ability to power Nigeria, through Transcorp, and deliver value across the energy value chain.”
The President and Group Chief Executive Officer, Transcorp, Owen Omogiafo, explained that the deal further demonstrates the company’s integrated energy strategy and its determination to power Africa.
- “Heirs Holdings was advised by Standard Chartered Plc, as Global Coordinator, and United Capital Plc, with a syndicate of lending institutions including Afreximbank, ABSA, Africa Finance Corporation, Union Bank of Nigeria, Hybrid Capital, and global asset management firm, Amundi. The deal also involves Schlumberger as a technical partner, as well as the trading arm of Shell as an off-taker.
- “Heirs Holdings has created one of Africa’s largest, indigenous owned, oil and gas businesses, headquartered in Lagos, Nigeria and led by a board and management team with significant regional and global experience in production, exploration, and value creation in the resources sector.”
What you should know
- Two years ago, Nairametrics reported that Elumelu’s Heir may acquire Shell, as the Royal Dutch Shell Plc was reportedly considering the possibility of selling its two oil mining licenses in the oil-rich Niger-Delta.
- According to reports, Heirs Holding Ltd was already raising funds to acquire the two oil mining licenses 11 and 17 valued at $2 billion. The assets include a natural gas-fired power plant which will be managed by Transnational Corporation of Nigeria Plc.
- Transnational Corporation Plc in its Half year results for the period ended 31 June 2018, recorded a 44.8% increase in revenue from its Power segment of operation from N27.97 billion in half-year 2017 to N46.08 billion half-year 2018. The largest of its five revenue segments.
- According to the report, the decision to sell off these assets is triggered by the continued unrest in the oil-rich region and age long accusation of environmental pollution levelled against the Dutch oil firm.
- Shell has over the years faced stiff opposition in operating within the Niger-Delta region, with several reports of pipeline vandalism and youth restiveness in the region. This situation has left the oil company with undeveloped oil and gas reserves.
Economy & Politics
Okonjo-Iweala speaks on Twitter’s suspension of Donald Trump
Dr Ngozi Okonjo-Iweala has given her opinion on Twitter’s suspension of US President, Donald Trump.
Twitter board member and candidate for the DG of the WTO, Ngozi Okonjo-Iweala, has said Twitter has rules under which it operates and CEO Jack Dorsey’s statement contains all that needs to be known concerning the suspension of US President, Donald Trump from its platform.
Okonjo-Iweala disclosed this in an interview with Arise TV on Friday evening.
- “Twitter tries to help the public conversation in the world and gives people a means to engage on important issues,” she said.
On the decision to censor Donald Trump
She said the Board agreed as a team to have one voice on the decision to suspend Donald Trump from the service and that CEO Jack Dorsey gave all that needed to be known.
Okonjo-Iweala stated;
- “Being on the Twitter board, I have to respect our rules for communications on what is happening. I have to be very honest that we as a board agreed that we have a team that will deal with this, to make sure that we have one voice. But, I can tell you that if you want to know why the decisions were taken, please look at the statement by the CEO, Jack Dorsey, I think it tells you all you want to know.
- “Twitter is an organization that has rules under which it operates, and if you read what it puts out, you will see that things are being implemented according to the rules.
On welcoming rules and regulations for the social media giant
Okonjo-Iweala said;
- “Let’s wait and see, I don’t want to pre-judge or comment on anything. I don’t want to go beyond what I am willing to say, but let’s wait and see. These are very difficult times in the world. We all saw what happened in the United States. We have to be very careful. We would see what the future would be for the tech companies.”
Flash back:
- Nairametrics reported that social media network, Twitter, permanently suspended U.S President, Donald Trump, citing the risk of further incitement of violence.
- Jack Dorsey, the CEO and founder of Twitter, said that the decision to ban Donald Trump from the social network was the right decision, but one that sets a dangerous precedent.
Appointments
Joe Biden appoints Nigerian-born Funmi Olorunnipa Badejo as Counsel
Nigerian-American, Funmi Olorunnipa Badejo has been appointed as a member of the office of the White House Counsel.
