Connect with us
Gage

Columnists

Oil Bears have a Joker: Libya

OPEC decided to exempt Libya from its oil production cuts due to the production lost through conflicts and its closure of ports and oilfields.

Published

on

Worry, as Coronavirus threat pushes oil price below budget benchmark

After a successful meeting where OPEC and its ally nations finally agreed on the 6th of June 2020 at the virtual conference to extend on their oil-production cuts through July, reports from Africa suggested that two of Libya’s oilfields would reopen soon. Could this be a hurdle for the oil cartel to scale through as prices soar on capped output by its members?

Sequel to my last piece, who will ruin the OPEC+ party? Bearish traders were hoping for an unsuccessful meeting this weekend. There were indications that few member nations were going to ruin the agreements because they found out some members were cheating. Fortunately, Saudi and Russia were able to yield their influence on these member nations to compensate for their failed quotas and extend their production cuts for extra months. Mexico did what we expected Mexico to do as they insisted on sticking on the April agreement and not extending.

However, Mexico’s stance could not affect the success of the OPEC meeting held this weekend. Iraq and Nigeria agreed to extend their quotas to compensate for their negligence in complying with the previous agreements. After settling what happened to be the tempest in the teapot, OPEC moved on to have a successful meeting. The success of the conference has gotten prices soaring these past few days as the Bulls now target the $50 range.

READ MORE: Brent crude falls, global investors fear strengthened on resurgence of COVID-19 cases

But would that be possible with incoming oil supply from Libya? Earlier in April, OPEC decided to exempt Libya from its oil production cuts due to the production lost through conflicts and its closure of ports and oilfields. Economic consideration will safeguard them from cuts, but does the world need Libyan oil at this period. “Work at the El-Sharara and El-Feel oilfields will be resumed soon,” Ali al-Theeb said in an interview late Friday. El-Sharara is Libya’s largest oilfield that has the capacity to produce over 300, 000 barrels a day. That is a third of the country’s production capacity. Libya is also Africa’s largest reserve, but conflicts since 2011 have not allowed the oil-rich nation to enjoy from its oil wealth.

Specta

Libya’s biggest oilfield might resume production after a five-month shutdown as international pressure wants to end the country’s civil war. On Sunday, the State-run National Oil Corp said that “after lengthy negotiations with militants to reopen a valve closed since January, the Sharara field would soon restart. It is believed that production will resume at an initial 30,000 barrels per day and it would take about three to four months to return to full capacity due to damage caused by the shutdown, as said in its statement.

The oilfield was supplying about 300,000 barrels before it was abruptly disrupted by attacks from Khalifa Haftar, who leads a rebel military force.

READ ALSO: AfDB develops Index to aid women empowerment 

What is happening in Libya now?

Coronation ads

Last week, a blueprint for the settlement of the war in Libya was drafted by Egypt, and a request was sent to the UN. The request would require the UN to send invitations to all conflicting parties to Geneva to negotiate an agreement on the blueprint’s implementation. According to the report, the proposal called for a truce beginning this week, and the withdrawal of mercenaries from Libya and the disarmament of their militia. Khalifa Hafter, the Libyan military commander, gave consent to this ceasefire proposal.

Download the Nairametrics News App

This event allowed production to resume, although there were reports on Tuesday that production had been stopped for the second time this week. The situation remains volatile as analysts believe there is still some volatility in the North African country. The shutdown of these oilfields has crippled the country’s primary source of income. Libya is safe from OPEC cuts because years of war have ravaged the nation financially, and it must recoup its losses. But when Libya would resume peaceful production and restructuring is a question, only a few can answer as the situation does not look resolved yet.

Coronation ads

Dapo-Thomas Opeoluwa is a Global Markets analyst and an Energy trader. He is currently an MSc. Student in International Business, Banking and Finance at the University of Dundee and holds a B.Sc in Economics from Redeemers University. As an Oil Analyst at Nairametrics, he focuses mostly on the energy sector, fundamentals for oil prices and analysis behind every market move. Opeoluwa is also experienced in the areas of politics, business consultancy, and the financial marketplace.You may contact him via his email- [email protected]

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.

Columnists

Nigeria’s high recurrent costs, low revenue and escalating debt numbers

Nigeria continues to face issues of poor revenue generation and a lack of will to efficiently manage its expenditure.

Published

on

Debt, Fitch downgradesS&P downgrades Nigeria, Nigeria’s credit rating faces downgrade by Fitch, Oil price crash, Coronavirus: The trouble that lies ahead for Nigeria, Avoiding 2016: What Nigeria should do to fight the coming economic storm, Fitch downgrades, federal government (FG)

In the recently released Q3 2020 debt report by the National Bureau of Statistics, the total public debt was N32.22trn as of 30 September 2020, with local debt making up 62.18% of the total public debt in the period while external debt made up 37.82%.

This is similar to the country’s debt structure in the same period of 2019 when domestic debt made up 68.45% of total public debt and external debt made up 31.55%. Whilst debt to GDP ratio remains within the acceptable threshold, we are increasingly concerned about the nation’s ballooning debt service to revenue ratio.

READ: U.S. budget suffers a deficit of $3.1 trillion in 2020, as pandemic slams the economy

Recall that the Federal Government of Nigeria following a series of revisions to the 2020 appropriation bill arrived at a fiscal deficit of N4.98trn. Based on the finance ministry data, an aggregation of debt monetization (N2.86trn) and New borrowings (N3.28trn) was used to finance the deficit.

READ: Heads of defaulting revenue generating agencies will be severely sanctioned – Buhari

Specta

The 2021 appropriation bill forecasts a budget deficit of N5.60tn which would be financed mainly by borrowings of N4.69tn, privatization proceeds of N205.15bn and project linked bilateral & multilateral loans of N709.69bn. The country’s financing structure is of concern when one considers that the budget is tilted more towards recurrent expenditure than capital expenditure and raises questions on the sustainability of the current fiscal practices.

READ: FG directs the suspension of NIMC staff involved in extortion of NIN applicants

The significantly higher recurrent component of the budget continues to drag the country’s economic growth, resulting in poor infrastructural development. Spending more on capital projects can promote industrialization, improve local purchasing power and help the federal government’s diversification drive.

READ: NEM Insurance CEO/MD purchases 4 million additional shares worth N9.2 million

Coronation ads

Nigeria continues to face issues of poor revenue generation and lack of will to efficiently manage its expenditure. No significant cuts have been made to its overheads and statutory spending has continued to rise. Nigeria’s growing debt stock with little to show for it in terms of capital expenditure remains a major concern.

READ: Nigeria’s total public debt stock increased by N2.381 trillion in 3 months


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.

Coronation ads

Stanbic IBTC
Continue Reading

Columnists

How Africa’s youth contribute to the African society

The growth of technology has created an opportunity for several African youths to come up with new innovations.

Published

on

Africa has been called a lot of names – dark continent, the savage, the continent of Safaris, third world, emerging market continent and more recently, Sh**hole, but it is hardly called the Continent of Youths.

It is not a secret that the youths are the future of the African continent. They are already emerging and will be the next thought leaders, creators and innovators that will help galvanize the African continent to greater heights.

According to the United Nations in 2015, Africa has 226 million youth aged 15-24 and one-fifth of the world’s youth population. This means that one out of every five youth on earth is from Africa. The African Youth population is forecasted to grow by 42% by 2030. There should be a new focus on the youth in Africa, as we examine how much they contribute currently to the continent.

One area where youth are thriving well in Africa is in the tech sector. The sector has become an interesting source of Foreign Direct Investments and in 2019 accounted for close to half a billion-dollar raked into the continent. In 2020, – the Paystack/Stripes deal brought in about 200 million dollars. The growth of technology has created an opportunity for several African youths to come up with new innovations, which are even more helpful in the current fledging economic and social climate affected by the pandemic.

There are several examples of many African youths using technology to start new ventures. Mike Endale, an Ethiopian American based in Washington, D.C, who is the principal at BLEN Corp, an information technology firm that leads the Ethiopia COVID-19 Emergency Tech Volunteer Task Team and assists Ethiopia’s Ministry of Health. During the pandemic, they have recruited over 1,700 software engineers and have even created an Africa COVID-19 response toolkit.

Specta

Temie Giwa-Tubosun, the founder of LifeBank in Nigeria, is another African youth making strides in the tech scene. Since its establishment in 2016, it helps to deliver 22,830 units of blood, according to Next Billion, to hospitals in Nigeria, which help connect donors to blood banks. Next Billion also stated that LifeBank conducts drive through COVID-19 testing and supply oxygen to health centers. The Lifebank recently expanded in East Africa. In December 20280, the US- Africa Business Center of the US Chamber in conjunction with the American Business Council Nigeria in recognition of the great impact of start-ups in the wake of the Pandemic, inaugurated a digital entrepreneurship competition.

African youths are also thriving in the entertainment sector, particularly in the music business.  The Afrobeats genre continues to rule the music world and the likes of Burna Boy, Davido, Mr. Eazi and Omah Lay, who are still in their 20’s, spearhead and remain the face of the genre. The international recognition of Afrobeats has given artists more visibility on the global forefront. This was the case for Davido, Mr. Eazi and Tiwa Savage, who were featured on the cover of the Billboard magazine. Music remains of significant importance and the youths are a big factor to the success of the industry.

In Nigeria, the music revenue grew from $26 million in 2014 to $34 million dollars in 2018, according to Statista. The music revenue in Nigeria is expected to increase to $44 million by 2023 as reported by Statista.

Africa’s youth are also flying high in the area of sports, particularly in soccer. Wilfred Ndidi and Kelechi Ihenacho of Nigeria (both players at Leicester City in the English Premier League) come to mind. Also, Percy Tau, a South African soccer player, who was with R.S.C Anderlecht in Belgium, will now be returning to his parent club, Brighton & Hove Albion in the premier league. Tau plays in a forward position and he is expected to make his debut for the seagulls (Brighton & Hove Albion) in the 2020-21 season of the premier league.

Coronation ads

Lastly, youths in Africa have also been influential on the activism forefront, especially in the last couple of years. This was evident in October of 2020, when several Nigerian youths took to the streets to fight against police brutality in the End SARS protests. In Uganda, Musicians like Bobi Wine’s foray into Politics first as a parliamentarian and presidential candidate is attracting more youth to get into politics.

Other youths like Christelle Kwizera, founder of Water Access Rwanda, have been involved in helping communities with access to water. According to Global Citizen, Kwizera’s plan is to eradicate water scarcity and to provide clean water for people in local communities. Currently, her organization has supplied 70,000 people in Rwanda with clean water. Kwizera’s efforts earned her the Cisco Youth Leadership Award at the 2020 Global Citizen Prize.

African youths definitely have a lot to offer in several sectors and this would be vital to the growth of the continent. African governments need to understand this and invest meaningfully and in a sustainable way on the youth population to reduce the migration drain.

The enthusiasm, the work rate, and efforts are why the current children of Africa have an opportunity to be wonderful leaders of tomorrow. With the right nurturing environment in place, Africa’s future is in safe hands.

Coronation ads

 

Stanbic IBTC

Written by Paul Olele

Jaiz bank ads
Continue Reading

Columnists

World Bank’s global outlook amid COVID-19 surge

The World Bank’s projection for Sub-Saharan Africa (SSA) is expected to grow by 2.7%, while the expected growth for Nigeria is set at 1.1% in 2021.

Published

on

Recently, the World Bank published its January 2021 global economic prospects. The bank expects global growth to expand by 4% in 2021 from an estimated 4.3% contraction in 2020.

In the report, the World Bank expressed concerns about the recovery phase of many economies, especially the emerging and developing economies except policymakers can put in place robust and comprehensive policy framework to improve the existing frail business and economic environment caused by the unprecedented coronavirus pandemic.

The bank’s growth projection for advanced economies (AEs) and emerging & developing economies (EMDEs) including China was 3.3% and 5.0% in 2021 respectively. Sub-Saharan Africa (SSA) is expected to grow by 2.7%, while the expected growth for Nigeria is set at 1.1% in 2021.

The World Bank appears less optimistic about the growth prospects across the globe including Nigeria as many countries are enfeebled as a result of the ripple effect of the pandemic causing elevated debt levels, rising unemployment and with the new strain of Covid-19 in many countries resulting in renewed lockdowns and restrictions, growth estimates may not be met. The bank stresses that quicker vaccination process across the world would aid faster economic growth which could step up to 5%, while a possible delay in rollout of vaccines amid rising infections could hamper growth expansion to 1.6% in 2021.

The prospect of quick vaccination appears a little bleak to us at this time. To give perspective, according to the Center for Disease Control (CDC) a few days ago, only 6.7 million Americans had received at least the first dose of the vaccine and that is roughly 2% of America’s population in 2 months.

Specta

The bank extended its weakened optimism to Nigeria as the country faces severe pressures from dwindling oil revenues, weak private investments, eroding consumer spending power and declining foreign investor participation.

In our opinion, restoring the economy to the path of sustainable growth requires government’s conscious efforts in addressing structural challenges impeding growth in the economy.


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.

Coronation ads

Continue Reading
Advertisement




Advertisement