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Palm Oil: Industry potentials remain untapped    

Based on the December 2019 World Bank price index for crude palm oil at US$769.93, Nigeria lost N90.1 billion to importation of what it could produce last year.

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Palm Oil: Industry potentials remains untapped    

A report from one of the national dailies says Nigeria loses over N90 billion yearly, and in the next three years will lose not less than N270 billion to deficit and importation of palm oil. According to the report, based on the December 2019 World Bank price index for crude palm oil at US$769.93, Nigeria lost N90.1 billion to importation of what it could produce last year and may lose about N270.2 billion from 2020 to 2022.

India to discourage palm oil imports through heavy fines 

Historically, Nigeria once ranked among the top Palm Oil-producing nations globally and was a key exporter of the product. However, underinvestment and years of neglect has seen industry production decline to a point where the country is now a net importer of the commodity. Meanwhile, Nigeria’s food manufacturing and household product industries, both of which are heavy users of the product have expanded greatly, creating significant opportunities for importers.

In an effort to encourage local production, the government introduced an import tariff of 35% on Crude Palm Oil (CPO). Despite this, the palm oil industry in Nigeria has remained very fragmented, dominated by small scale farmers which results in significantly lower quantity and quality of output in comparison to the country’s production potential.

The key drivers of sales in the industry are the level of customer demand (which a growing Nigerian population always provide), and the international price of CPO. A decline in CPO prices has historically presented additional challenges for the two major domestic palm oil producing companies quoted on the Nigerian Stock Exchange, namely Okomu Oil Palm and Presco Plc.

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[READ MORE: Inflation: Headline Inflation sustains uptrend)

A decline in the international price of CPO always leads to increased imports of palm oil, as well as smuggling from neighbouring West African countries, forcing Okomu and Presco cut prices to retain industrial buyers. While palm oil importers into Nigeria are expected to pay an import duty of 35%, our experience indicates that importers were really never deterred.

Palm Oil: Industry potentials remains untapped    

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However, the closure of the land borders has been of enormous support to the local palm oil industry especially in the light of relatively high CPO prices. Our review of the third and fourth quarter numbers of Okomu Oil showed significant improvement, suggesting that the closure of the land borders has impacted domestic sales volumes positively.

_______________________________________________________________________

CSL STOCKBROKERS LIMITED CSL Stockbrokers,

Member of the Nigerian Stock Exchange,

First City Plaza, 44 Marina,

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PO Box 9117,

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Lagos State,

NIGERIA.

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Why I am now buying Bitcoin

Gold was the go-to asset class to hold cash in times of uncertainty but cryptocurrencies are now seeing big utility enhancements.

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Investor moves $133 million worth of Bitcoins, suspected from Coinbase, World's biggest sovereign wealth fund now owns cryptos, Investors cashing in big time, as 95% BTC wallets are currently in profit, blockchain technology, Bitcoin giving better returns than the Nigerian stock market, What it will take Bitcoin to hit $100,000?, Buying signal; Bitcoin whales with 1000 BTC or more continue to rise

On November 26th by 4.30 am, according to trading records from Coinbase, an online market for Cryptocurrencies, Bitcoin (BTC) was trading at $17,331. By 9.30 am BTC prices had fallen to a low of $16,299, on December 1st when I wrote this article, Bitcoin was now trading at a high of $19,915.

If an investor has bought 1 unit of Bitcoin by 9 am on Thursday 26th, and sold at 3 am December 1st, his gain would be $3,616 or a 22.18% return. According to a report by the NASDAQ, BTC return this year has been like a Space X rocket, this year alone bitcoin is up 166%, gold is up 24%, US Bonds 7%, US Stocks 5.5%.

READ: FCMB Group posts N48.3 billion revenue in Q3 2020

Cryptocurrencies have been up cumulatively 5,000% (yes Five thousand) but I have not personally considered them an investment. The reality is even as BTC surged to $19,000 in 2017, there was still essentially a bet on someone else buying them from you, what in finance is called the “greater fool theory” (it’s a real theory, google it). Bitcoin for instance has a fixed supply, so as long as demand increases, the price will go up.

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READ: ChainLink now the 5th most valuable crypto, gains 418% since July 1

Cryptocurrencies have no inherent value, if you had left 100 units of Bitcoin bought for $200 units in a vault in 2015 and returned in 2017, the value would still be $200 but the price you would sell it for would be $19,000. Why no inherent value you ask? well because Bitcoin has limited use except for speculating. A Bloomberg article in May 2019 based on data from blockchain researcher Chain analysis found, “only 1.3% of economic transactions came from merchants in the first four months of 2019, with little change from prior 2 years”.  This was why I never considered investing in BTC, it was a game of chicken to see how high it could rise.

READ: CRR Compliance: Banks suffer another N226 billion in CRR debits

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However, in November, I changed my strategy. I have now added cryptocurrencies as a viable investment in my portfolio.

Three reasons why I have now decided to buy cryptocurrencies:

  1. The world is awash with cash and low output, inflation cometh. Even before the COVID-19 hit, most of Europe and Japan were already offering negative rates and using monetary quantitative, then Biden won. Biden also nominated Janet Yellen as his Treasury Secretary. Yellen is a proponent of deficit spending, i.e. a Keynesian. All this translates to the fact that a lot of cash is going to pour into the Western economies soon and remain there to keep rates low, and the dollar low. Thus, any cash holding in US currency will see yields fall
  2. Global fixed-income rates are going to remain low, and Covid-19 has taken property funds off the table. Fixed income investing across the spectrum will see flat rates. This will mean all short to long-duration fixed income funds plus fixed income funds tied to income from rentals will see a fall in yields.
  3. There is now much greater acceptance and regulation of cryptocurrencies especially in the key market of the US. Facebook Libra ran into headwinds with his plan for a global cryptocurrency, but today the regulatory landscape has improved. US banks now can provide custody services for cryptocurrencies and the US Department of Justice policy enforcement for digital coins as well.

READ: Unity Bank Plc posts gross earnings of N11.04 billion in Q3 2020

The summary of those three points highlighted above is this, investors seeking outlets to park cash that will at least hold value until there is clarity on inflation fears will buy cryptocurrencies. Gold was the go-to asset class to hold cash in times of uncertainty but cryptocurrencies are now seeing big utility enhancements. Paypal for instance will issue cards based on bitcoin to allow everyday buying and selling based on a bitcoin account. I am yet to see a gold-backed debit card. These enhancements mean bitcoin and other cryptocurrencies now can come out of the speculative space and into retail, again boosting demand.

READ: Aviation contribution to GDP drops by 38.86% in Q3 2020 – NBS

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That is a game-changer.

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What is the risk to this? That Cryptocurrencies become so widely accepted that the US Treasury introduces her own Fed Coin. This move will draw away many who are buying Bitcoin and other cryptocurrencies and reduce demand for bitcoin, bringing down the price.

READ: Cornerstone Insurance Plc projects PAT of N537.4million in Q1 2021

 

Follow me @finplankaluaja1

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OPEC+ agree to raise oil production

For Nigeria, a combination of both higher oil prices and lower production cuts is needed to fund the country’s 2021 budget.

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OPEC+ 2, Oil production drops, as Nigeria complies with OPEC+ output cuts  

Following yesterday’s meeting, OPEC and other oil-producing nations led by Russia reached a deal to modestly increase production in January amidst a raging second wave of the coronavirus pandemic though with the prospect of vaccines offering some hope.

Based on the agreement, members of the Organization of the Petroleum Exporting Countries along with Russia and other countries will raise production gradually by 500,000 barrels a day over a 3month period starting in January. The increase, though less than 1% of the global oil market, comes amidst a second wave of coronavirus which is currently weighing on demand.

According to reports, the agreement was a compromise between countries that wanted a much larger increase of two million barrels a day, which was previously agreed on, and others that would prefer to maintain current production cuts of c.7.7mbp. The latter are considering the many uncertainties around the pandemic and the possibilities that demand will remain low. That said, the disagreement between both groups suggests that agreed quotas may not be adhered. Looking ahead, we expect the modest increase in OPEC+ production and the prospects of the discovery of effective vaccines to remain positive for oil prices in the short term if production cuts are adhered to. We however expect the rally in oil prices to be capped by subdued growth in the global economy which would continue to limit
the pace of recovery in oil demand.

Coming home to Nigeria, a combination of both higher oil prices and lower production cuts is needed to fund the country’s 2021 budget which is predicated on a production volume of 1.86mpd and oil price of US$40 per barrel. Amidst a recession, the hope of an economic rebound is largely hinged on sustained rebound in crude prices as the country has suffered a significant slump in revenue largely due to weak oil revenue. Furthermore, the economy continues to face severe dollar shortages due to lower oil receipts which continues to pressure the nation’s FX reserves.

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CSL Stockbrokers Limited, Lagos (CSLS) is a wholly owned subsidiary of FCMB Group Plc and is regulated by the Securities and Exchange Commission, Nigeria. CSLS is a member of the Nigerian Stock Exchange.

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6 Things to consider when looking for suppliers for your business

By putting these 6 things into consideration, you’ll tailor your supplier-selection process to your unique business needs.

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6 Things to consider when looking for suppliers for your business

Great suppliers are a fundamental part of your business. They allow you to produce and get your products and services to your customers. But finding reliable suppliers for your business takes real effort. It requires much more than just skimming through a series of price lists. Here are 6 things to consider when looking for suppliers for your business.

READ: Africa’s internet economy has the potential to reach 5.2% of the continent’s GDP by 2025 – Goggle/IFC

1. Your Overall Budget

Your overall budget is one of the most important things to put into consideration when you’re searching for the best suppliers for your business. While you may not know the accurate cost of certain things, you need to have a clear idea of the amount of money you’re able and willing to spend before approaching potential suppliers. And one good way to do that is by researching how much some of the products and materials you need will cost you.

Assuming your business offers HVAC installation, maintenance, and repair services. You’ll need to know the prices of various HVAC parts, including air filters, belts, capacitors, fan motor, and coil condenser cleaners. The best way to do that is to visit the site of HVAC suppliers in your area and see how much they sell these parts. This information will help you create a reasonable budget. If you’d like a suggestion, you can take a look at Cold Air Central for quality HVAC parts and other products.

READ: China publicly presents its COVID-19 vaccines, 2 doses to cost below $146

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2. Reliability

Reliability is another important factor to consider when picking suppliers. Reliable suppliers provide quality products and materials in a timely manner. It’s always a good idea to work with reputable and well-established suppliers, as they have adequate resources and resilient systems that enable them to deliver without hiccups. But you can still work with small suppliers, especially if you cultivate a meaningful relationship with them.

READ: Port Harcourt Refinery to get a facelift in Q1 2021 – NNPC

3. Stability

When looking for the best suppliers for your business, go for those who are experienced, and have a stellar record of accomplishment. Stability is crucial, particularly if you’re looking for a long-term partnership with a specific supplier or there is only one supplier of a specific product or material that your business requires. You must also ensure the supplier is financially stable before entering any contract with them. A great way to do that is to request the credit history of a potential supplier.

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READ: Nigeria’s Manufacturing Sector contracts for 6th consecutive month

Another great way of finding out if a prospective supplier is stable is to check out review websites for testimonials from previous clients. You can also visit their official social media pages to see how they engage their followers and how they address complaints. If there are so many negative reviews and comments from customers, there is a high likelihood that they’re not going to be the best option for you.

READ: Apple drops 4%, iPhone sales slump

4. Location

Consider location when searching for competent suppliers. Working with distant suppliers may sometimes result in longer delivery times and additional freight expenses. But if you want something fast, dealing with local suppliers might be a wise decision. That doesn’t mean you should overlook distant suppliers. Be sure to review freight policies of far-off suppliers. You may discover that bulk orders might attract free shipping. Or better yet, you can merge different orders to lower costs.

READ: FG, Tiimafrica to provide $5,000 one-time grant to young business owners

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5. Production Capabilities

Look for suppliers who can produce the items you want. To verify the production capabilities of a potential supplier, you must do more than just speaking to a representative. A good one should consistently supply items that meet your standards.  Visiting the supplier is the only sure way to confirm their production capabilities.

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An in-person visit will give you a chance to audit the quality management system of the factory. If you don’t know what to check for during the visit or you want to do away with the cost of traveling overseas to the factory, working with a third-party can be a great option.

READ: TikTok in talks to move global headquarters to London over Chinese tussle with US  

6. Cultural Fit

Check whether the goals and values of a potential supplier are aligned with yours. If they are, then partnering with that supplier would be a great idea. Some of the things that will help you tell whether a potential supplier is a cultural fit include:

  • The type of companies they work with.
  • A detailed quote that meets your specific requirements.
  • Minimum order quality.
  • A deep understanding of your business.

 

Conclusion

By putting these 6 things into consideration, you’ll tailor your supplier-selection process to your unique business needs. That way, you’ll choose the right supplier who will consistently deliver quality products and materials that your business requires. It could also enable you to cultivate long-term mutually beneficial relationships with your suppliers and reduce stress in selecting partners.


 

About author

Rachel Eleza, Growth Marketing Director at UpSuite and a part-time writer.

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