By Olamide Peters

The oil market is in a death spiral. This has been recognized by our Acting President, Mr. Yemi Osinbajo but still we send people to a senseless death to prospect for new sources of oil in the Chad basin.

The recent slaughter of oil prospectors from the University of Maiduguri in the Cage basin by Boko Haram and its affiliates is shameful and a sign of how cheap life is in Nigeria.

The oil market is in a long term terminal decline. This is well known. Why is there a need to find new sources when we are unable to extract and sell what we already have access to?

There are so many things that do not make sense about the Federal Government’s decision to send people to prospect in this notoriously dangerous area.

Firstly, if there were profitable oil to extract, don’t we think that the large international Oil companies would have done so when the area was peaceful and oil prices was high? There may well be oil there, but the logistics of extraction and transportation will be horrendous.

Secondly, in a period where oil prices are low and the demand for oil globally is in long term decline, why does the government consider it a valuable use of human life to prospect for more of the dying commodity? We already have more oil at our disposal than we can sell.

The only coherent reason for this prospecting is to try and find a source of oil away from the Niger Delta region in order to reduce disruption by Delta militants.

However, to think that this can be done in an area where despite many millions of dollars being spent on the military, the insurgents still roam freely is beyond stupid. Truly out of the frying pan and into the fire.

Finally, all analysts are predicting that low oil prices are the new normal.

The low price alone means that the extraction logistics for this area do not make profitable sense. Which company would pay for a license to extract there?

It was with huge sadness that Naira Insider notes that the usually sensible Ag President yesterday said that prospecting would continue.

If there are any more deaths, then those driving this senseless and dogmatic approach will have the blood of innocent citizens on their hands.

http://nairainsider.com/business-insider/government-sending-people-senseless-slaughter-chad-basin/

It is now a fact in plain sight that Aliko Dangote owns and runs the whole of Nigeria.

The Federal Government yesterday stated that they begged Dangote to complete his oil refinery by 2019 to enable their only coherent flagship economic policy of ending refined petroleum product import.

This is a staggering and new position for the country to find itself in. This is all down to a series of government administrations and their respective failure to diversify the economy leading to Dangote achieving near monopolistic power in many industries.

In most developed economies, there is a body which polices the business sector in order to prevent the situation which we in Nigeria have actively encouraged.

The anti-trust areas of most governments are large and powerful because history has shown that too much power concentrated in the hands of one individual is not conducive to the public good.

Russia is run by oligarchs but now Nigeria has become a dictatorship.

No Government now or in the future can survive without the support of Dangote.

This has now been announced publically by the Federal Government in respect of their only economic policy which has the chance to help the lives of ordinary Nigerians, that of reducing import of fuel products.

There is now nothing that Dangote can not request of the Government to support his growing empire.

The further announcement yesterday of the magnitude of the Dangote power plants to produce many times the quantity of electricity currently available in the country tightens his strangle hold.

No one doubts his savvy and brilliance.

His objectives are currently aligned with the needs of the country.

But make no mistake, once his needs or the needs of his heirs diverges from the path of the people, there will be great suffering.

What a position for citizens to be in.

Our current hope of lifting the nation from poverty lies in the hands of one individual while the Government chooses to kill off competition and put all their eggs in the Dangote basket.

Mark my words, it will end in tears.

http://nairainsider.com/insider-insights/official-dangote-runs-country/

One of the big stories during the week was the announcement that the United Kingdom will ban diesel cars by the year 2040.

To some, this may come as big news but to others, it is part of a progress report in the quest to rid the world of pollution from cars by making the switch to electric vehicles.

Other countries have previously set deadlines for a switch to electric vehicles; Austria has set 2020, Norway 2025, France 2040, Netherlands 2030, Belgium 2030, Germany 2030, India 2030 and China 2025.

So you can imagine Nigeria’s market for crude oil sales winding down on oil use in 13 and 8 years respectively.

With all productions shut in and an expected reduction in global oil price, Nigeria’s highest source of revenue would be nearing extinction.

For a country whose main chunk of revenue comes from the petrodollars, which of course has not been properly invested since the discovery of oil at the end of the 1950’s, this should serve as a wake up call to urgently review economic strategy but alas, the economic managers are blind to this global disruption.

Comparing most oil producing countries with Nigeria brings to light how Nigeria hugely mismanaged her oil wealth.

The country has lost economic mileage and failed to put in place critical infrastructure like other better managed economies as seen in Saudi Arabia, Iran, Qatar (with natural gas) and indeed the UAE; Nigeria in its current state will take decades to catch up in terms of development.

The electric vehicle disruption should be handled like a national emergency as alternatives to economic revenue should immediately be planned and implemented before it gets too late.

Already, the dwindling oil prices and production cuts will almost perpetually result in running a budget of deficits.

Borrowing will no longer become an option as the country is highly leveraged and will soon go above its borrowing limits with the attendant risk of inability to service its debts.

I had the opportunity to speak to one of those vested with the responsibility of managing our economy and pressed him on the question of measures put in place to prevent the negative effects of this disruption to our economy. The answer I got was shocking.

His point of view is that we will continue to produce crude and buy Asian spec cars which will continue to run on fossil fuel.

Due to the nature of our chance meeting, we did not have much time to discuss his sentiments thoroughly, however, I managed to quickly point out how wrong he was.

For starters, the Asian producers are seriously working towards the deadline of the ban and have no incentive of producing specifically for our market since what we buy is a mix of brand new and fairly used cars and the numbers will not stack up for them.

So for Nigeria it will be "what you see is what you buy", which of course will be the electric cars.

Then the question of the expected drastically reduced oil revenue with no buffer or alternative is what we could not quickly discuss.

Essentially, Nigeria does not need a prophet to make the announcements that recession looms and with no solution in the near future, the country will further sink into depression.

Solution

Here are a few opportunities that we can turn into solutions.

We can start by gleaning data from the Nigeria Customs Service and make concrete efforts to produce the products we import and consume.

To make this happen we can as a matter of emergency, invest in critical infrastructure like light and the transportation network to move goods and services around and begin to export in order to receive foreign exchange to fund our foreign trade.

Agricultural activities should be deepened nationwide and processing plants located close to source of input materials. Once a nation begins to feed itself, that nation would have gone half way towards wealth.

Money is further made from adding value to agricultural products and selling quality finished products. Nigeria has labour in abundance and only needs to polish up skills in various area of production.

For a country that lacks energy with most of the populations carrying power banks everywhere to charge phones, an innovation may be to see possibilities of inventing powerful mobile power banks to charge electric cars even while in motion.

So much revenue can be generated from such projects in the short and medium term pending when there is available charging points nationwide.

The solution lies with us Nigeria. We have to think, plan and act.

Our economic managers have to be pushed into closed doors to fashion out concrete solutions to these looming problems while the leadership of the country must have a genuine mindset to turn things around.

Keep in mind that the previous and present generation may have failed the future generation by plundering our common wealth leaving nothing to show for the resources God has placed freely to our disposal.

Nigeria needs to act before it is too late.

http://nairainsider.com/business-insider/electric-car-disruption-wake-call-nigeria/

The Senate yesterday, in a closed door session, threatened impeachment of house leadership over transparency of spending.

The whole episode is a disgrace and exposes the grubby dealings of our senators.

Whilst the dispute was dressed up in fancy language, essentially those lower down the house think that the leadership has diverted monies earmarked for expenses on privileges for senators like housing and cars.

As the saying goes, the is no honor amongst thieves.

Having cited themselves their unjustified privileges, the senators find that their own colleagues are stealing from them.

We at Naira Insider would laugh were it not such a national disgrace; the squabble over the spoils of looting from us the citizens, and in so doing effectively shut down the Senate from making laws and decisions that move the country forward.

How much lower can our elected officials sink.

http://nairainsider.com/commentary/senate-disgrace-low-can-go/

The President of the United States of America, Donald Trump and the Nigerian President, Muhammadu Buhari have something in common - They both claimed they would “drain the swamp” of corrupt and moribund politicians when in power.

They also have something else in common - both have failed to do anything about it...so far.

Buhari got off to a bad start by watering down his zero tolerance approach before elections to allowing thieves to return money and evade further prosecution.

Since then it has got worse. Stella, Deizani, Saraki,

Budget stuffers, subsidy thieves, governors all acting with impunity.

There have been no notable, successful prosecutions.

And no sign of any.

There has been however a bit of noise, a few arrests, a few EFCC beatings.

This is unacceptable.

The one thing we all thought President Buhari could accomplish, he has completely failed at.

The rats that were hiding in their holes when he first came to power are now brazenly playing in the swamp again.

One successful big name prosecution - Give us, the people, just one successful big name prosecution.

Is that too much to ask?

Sadly, it appears it is.

http://nairainsider.com/commentary/draining-swamp-buhari-style/

Reported comments from the MD of AMCON (Asset Management Company of Nigeria), Mr. Ahmed Kuru, over recent days suggest that the Federal Government backed institution is beyond repair.

AMCON was established in the dark days of the financial crisis as a “bad bank”, where all banks could unload their bad debts (non-performing loans or NPLs in bank speak) so that the weight of the debts that were not being repaid would not drag the banks under and, in a domino effect, drag the whole economy of Nigeria with them.

At the time, the concept of  bad banks had worked in several countries and were seen as a bona fide solution to the issues facing Nigeria.

But this is Nigeria. Immediately it was established, AMCON was an easy target for corruption and Nigeria’s elite to either wipe the slate clean or make more money. Funded by, guess who? Yes, you the citizens.

So how does the AMCON money making machine work? It is a value exchange chain where everyone in the chain benefits, except those who fund it, tax payers and bank shareholders/depositors. The value exchange chain works like this;

Banks overextend lending to an elite person or their relative. This loan is never repaid and everyone makes money from the loan including bank employees.

The bank then declares the loan to be “non-performing”. Meaning it can be considered for “sale” to AMCON.

Bank declares the loan to AMCON at a higher value than it really is. It includes spurious interest and charges and potentially inflating the initial principal value. This is “value exchange” step 1. AMCON takes on the loan and pays the bank a higher value for the loan than it is really worth. The bank and/or its employees pocket money. (Incidentally, the elite borrower of the original loan may also make money here if they extort the bank by threatening to expose the deal).

When AMCON takes on the loan they take the banks collateral that was used to secure the original loan as well (if it exists). The collateral assets are generally re-valued at this point.

This is a crucial money making and value exchange step.

The valuations are generally hugely inflated so that the original elite borrower can be absolved of a large proportion of their obligation.

This is value exchange step 2 and allows many notable Nigerians to wipe the slate clean of debt, leaving AMCON still saddled with the payment it has made to the bank to “buy” the loan in the first place and a lot of over valued collateral assets still legally owned by the original borrower.

In the final value chain step, AMCON can then sell the assets and make personal money as well as paying down some of the debt.

Unfortunately, for AMCON personnel pockets as well as the AMCON bank account, this is often successfully blocked in court by the elite because as we all know, contract enforceability is a fluid concept in Nigeria.

Another unfortunate problem for AMCON when it comes to selling the assets is that they were so hugely overvalued in the take on process that they can not sell the assets for anything near this take on value.

This means that the sale can not be justified with any form of transparency and this fact alone has stymied more asset sales than any other reason (the rest are shrouded in mystery, just look at the recent sale of Keystone etc).

This value exchange launders the debt, makes personal million and billionaires and takes money from citizens and redistributes to the elite. It has also allowed banks with negligent and corrupt lending practices to kick the can of insolvency down the road by offloading “NPLs” to AMCON and pay for this slowly through funding AMCON annually.

So far so terrible.

But it gets worse. AMCON is now a failed institution with no hope of paying back the bondholders or the CBN who have pumped money in. Mr. Ahmed Kuru is putting himself in danger by recently declaring this and threatening to stop the money train rolling.

If AMCON's technical insolvency is to be prevented from becoming actual insolvency, then either the government will have to bail it out (costing the citizens billions/trillions) or the elites assets will have to be sold in massive numbers in a slow market.

None of the above options are palatable to the Federal Government and its elite supporters. So an attempt will be made to put off the problem, let the dust settle for a few more years and hope that in the meantime the reputation of Nigeria’s financial position, contract enforceability and debt paper does not become so tarnished or laughable as to grind the system to a halt.

Make no mistake, the AMCON position is this grave and the knock-on impact for Nigeria’s economy and banks is equally serious.

This is why Mr. Kuru will be silenced and the institution left in peace for some years.

POSTSCRIPT: With AMCON taking on no further debt, the banks lending is slowly coming home to roost again with bad debt creating the Zombie banks Naira Insider has long been warning of.

http://nairainsider.com/companies-insider/amcon-reek-corruption-failure-will-not-disperse/

Most analysts agree that the extractive oil industry is in long term decline due to new technologies replacing the need for petroleum products.

There are various simple indicators of this that demonstrate the expectations of motor companies, oil companies and financiers/analysts.

Tesla (US electric car manufacturer) briefly exceeded BMW value (market capitalisation) in June. BMW value has sunk approximately $20bn since 2015 and Tesla having increased by approximately $30bn. This shows the market sentiment of the direction of the future

Saudi Aramco (the Saudi Arabian state oil company) has announced its move into the chemicals and plastics market. This is a seismic move. The Saudis have never diversified sources of primary revenue before and have never shown any interest in doing so. When the most powerful voice in OPEC and the wider oil Industry announces such well advanced plans, lesser players (such as Nigeria) need to pay attention.


Reports are increasingly suggesting that there will be a shift to electric vehicles, with the tipping point coming sooner than expected. The most desirable cars in New York and London are no longer gas guzzling Range Rovers but Teslas. Research and development spending for all serious international automobile manufacturers is mainly focused on electric and self driving cars.

All this points to consumption of petroleum products for automobile usage falling and if the forecasts are to be believed, this will be a precipitous fall once the tipping point for electric vehicles is reached.

It is no longer a case of IF but WHEN.

Of course, this is bad news for Nigeria, but it is the timing of his tipping point that is critical.

How long does it take to diversify an economy?

It is the view of Naira Insider that if this tipping point is reached in the next 10 years, it will be disastrous for the country.

More likely and worryingly, if oil prices fall dramatically in the next 5 years as a result of the tipping point being forecast as imminent, then Nigeria could hit serious problems in the next 3 to 5 years.

How quick is diversification? Well, if agriculture is taken as an example, then the time taken for a crop to reach mature yield varies from 6 months to 9 years.

With  terrible performance of the government on diversification so far and the lack of domestic credit at rates of return that agriculture companies can pay back.....the future is bleak.

http://nairainsider.com/economy-insider/global-oil-industry-decline-next-nigeria/

How much longer can the Central Bank of Nigeria (CBN) pump dollars into the Forex market for negligible results  before the impact on foreign reserves becomes too negative to continue?

This is the key question facing the economy of the country currently.

At best the CBN is propping up the Naira against the economic fundamentals facing the country. It's actions are certainly not bringing the value of the Naira towards N200 per USD.

With WTI crude oil prices low and going lower, this strategy looks unsustainable and is achieving little in terms of strengthening the Naira.

http://nairainsider.com/forex-insider/cbn-dumps-another-195m-forex-market/

The Nigerian Stock Exchange (NSE) has announced today a series of transparency initiatives aimed at increasing investor confidence.

These amount to no more than dressing up a pig by putting lipstick on it.

The reality is that the stock market is a hive of insider dealing and market manipulation by the owners of companies.

These transparency initiatives provide no more than a thin veil of credibility to a clearly inefficient and controlled market.

As stated many times previously, Naira Insider knows of many cases of corporate accounts and reporting manipulation.

This in itself provides no credibility for the market that is supposed to provide accurate and up to date information on the performance of floated companies to current and prospective shareholders.

All those involved in companies and finance in Nigeria know the game and it’s rules.

None these people would dream of investing in the shares of quoted companies without inside knowledge of what was going to occur in the future or a market manipulation strategy involving collusion.

Anyone else is just playing with knives.

The NSE is currently in an extended bull run.

The is no fundamental analysis that supports this gain in value.

Normally a weaker currency will make domestic shares more attractive to foreign buyers, however in this case, international investors are (rightly) staying well clear.

This begs the question; Who is driving up the market? There is only one likely culprit…. domestic institutions.

Starved of sources of revenue and capital, the banks are bidding up the values of companies in order to sure up their capital position to enhance their balance sheets and drive capital performance.

This has happened in many places around the world when growth stagnates and financial institutions need to perform.

All that is needed is a relatively liquid market of assets.

Examples include Iceland with company values and Ireland with property.

The NSE management need to look hard at their performance and integrity over the last 5 years.

Nothing they have done has improved the efficiency or transparency in the market.

http://nairainsider.com/business-insider/nse-transparency-initiatives-putting-lipstick-pig/

Godwin Emefiele is being lauded in some quarters as the saviour of the Naira through his shrewd and measured action as Governor of Central bank of Nigeria (CBN).

At Naira Insider we beg to differ.

Luck has played a role in the appreciation of the Naira and this will not last forever.

Regular readers will know of our prediction that oil prices will fall over the next 18 months, and potentially much further in the medium term.

Sub $50 per barrel for WTI crude appears to be the new normal and we are predicting sub $45 to be the stable level inside the next 6 months.

As oil prices falls, Emefiele’s ability to pump the market full of dollars will be curtailed and this one singular blunt instrument of CBN’s foreign exchange policy will have been exhausted.

What then?

The real sector is still struggling (unless Dangote is in the title of the company).

There is no meaningful access to credit for most companies and the recent rise in the stock market has no foundation in fundamentals other than believing the economic drivel being spouted by uninformed cheerleaders.

Therefore, any movement in the Nigerian economy is still largely driven by the oil price and the operations of International Oil Companies (IOCs).

So Emefiele has been lucky – so far.

Commodities move in cycles – what goes down must come up, and so it has been with oil prices.

However, the game is changing.

The oil market is not operating to the old rules (see other Naira Insider articles) and Emefiele and the Naira look like they might be left high and dry.

http://nairainsider.com/forex-insider/emefiele-financial-guru-lucky-mugu/

As oil prices continue to reflect uncertainty, Organization of the Petroleum Exporting Countries, (OPEC) finds itself in a no-win situation with prices almost certainly to soften over the next year.

This would obviously be dire for the value and strength of the Nigerian Naira and for Government spending.

Over the last year, OPEC has been trying hard to bolster prices through agreements within the member countries (with some collaboration at least on paper with Russia) by focusing on cutting supply.

This is a shaky agreement which has benefited Nigeria in the short term due to the fact that Nigeria has been exempted from any of the cuts so far.

However, the higher price has encouraged US shale oil back into the market and has meant temptation aplenty for other country producers to produce more than their quota.

On the other hand, allowing oversupply crashing oil prices and hurts everyone, including the bigger and more influential players in the oil cartel such as Saudi Arabia and Qatar.

So what happens now? Damned if they restrict production as it encourages the Americans with the capacity to produce 9 million barrels per day, damned if they don’t as prices will drop through oversupply from it's member countries.

For Nigeria, a mere pawn in OPEC's game, this can only mean bad news as it is tough to envisage a scenario under which prices do not fall.

http://nairainsider.com/economy-insider/opec-damned-damned-dont/

The International Monetary Fund (IMF) yesterday upgraded the economic growth forecast for Nigeria from 0.7% to a jaw dropping 1.9%.

The IMF change their forecast’s for most economies as often as most of us change our underwear, to point that constant changes has lead to a loss of credibility in the last few years.

The last announcement will mean that Kemi “the village bean counter” Adeosun and other Federal Government (FG) jokers will congratulate themselves on a job well done.

However, the truth is more troublesome.

The Nigerian economy is entirely dependent on crude oil price and crude oil production and anyone who questions this by citing diversification is being tricky or delusional and needs their head checked.

The outlook for the crude oil market through the rest of 2017 and 2018 looks appears to suggest sustained lower prices.

There is already a glut in the market and Libya, Nigeria and US shale are expected to dump more into the market over the coming months.

In Nigeria's case this comes as a result of the reopening of Forcados bringing an extra 200,000 barrels per day (bpd) into the market.

In addition, Libya is currently pumping 250,000 bpd more that it’s April average.

The shaky OPEC production cut deal looks even more rickety against this backdrop and as for Russia, well they are not cutting as hard or fast as they said they would.

All this adds up to depressed oil prices throughout 2017 and 2018.

In fact, many analysts are citing a price per barrel of around $40 during this period and forward contracts certainly indicate this is likely.

With a lower oil price comes lower FG revenue and less money for them to pump into the real economy and artificially support the Naira.

The FG has indicated a willingness to borrow to sustain spending, something that the IMF and other international bank institutions actively encourage to keep themselves in business.

But the FG does not appear to wish to meet the conditions required to access this cheap money (mainly a floating Naira) and have chosen instead to gorge on Chinese debt and issuing Eurobonds.

The issue with these approaches is the cost attached.

It is relatively easy money now but they are loans like any other and would need to be repaid with steep interest.

If the FG does not use the funds to stimulate the economy through smart investments, diversification and cutting out corruption, there will be no money available to pay back.

In addition, as the oil price falls, buyers of government debt will require a higher interest rates to compensate them for the additional risk.

Readers of Naira Insider will already know of how Chinese debt is Neo-colonialist alchemy on behalf of the Chinese and should be avoided.

One other factor to note - the new Central Bank of Nigeria (CBN) Forex window is trading dollars at ABOVE the black market rate.

Meaning that in that controlled window, the CBN can not even manage demand effectively.

International investors are prepared to take a huge hit just in order to repatriate their naira investments into dollars which is extremely worrisome.

Think about it - these investors would rather loose money than leave it in the country showing the amount of confidence they have in the Nigerian Economy.

In addition, the information from these investors is that they are only getting access to a small fraction of the dollars they are trying to buy.

The pent up demand of investors trying to unravel their Naira positions is significant potentially leading to further devaluation of the local currency at the expense of Nigeria as a whole.

So we must be skeptical of this growth forecast and instead nervously watch oil prices which have always been a better predictor of Nigerian economic growth.

There are many tools at the FG's disposal and failure to diversify the economy has left recovery still looking a long way off and as the Americans say, this may just be a dead horse bounce.

http://nairainsider.com/economy-insider/imf-economic-growth-upgrade-requires-suspension-of-reality/

Today’s headline, rolled out slavishly by our mainstream media is plain fake news - There will be no $30bn Japanese investment in Nigeria.

It is these misleading stories that deceive Nigerians.

The Japanese have no more plan to invest $30bn in Nigeria than I do to strip naked, paint myself blue and run down Lagos, Marina shouting “I love Ghanaian jollof rice”.

The details of the story show a classic move of diplomacy by a state that has been bankrupt for decades but wants to try and gain relevance.

Japan has deep domestic structural economy issues that have plagues it for decades.

This, coupled with the deeply conservative nature of Japanese business men means they will not come anywhere near Nigeria.

The story actually indicates that they are looking to invest in Africa in general.

In the details it appears clear that the Japanese are “saving face” on a commitment made at a conference in 2016.

It all sounds like a poor attempt to match the neo-colonialism of their old enemies, the Chinese.

The best that will happen is that they will buy out one of our Insurance companies therefore, securing for themselves one of the bright stars in the otherwise dull sky of Nigerian business.

This will bring little or no benefit to the country at large.

So, beware fake news.

http://nairainsider.com/business-insider/fake-news-alert-japanese-invest-30bn-nigeria/

Whatever the rights or wrongs of an independent Biafra, it is undeniable that the current level of noise and agitation is holding the region back.

Investors especially foreign investors other than the Chinese appear to be wary of investing in states in a potential Biafran territory or because any sign of impending social upheaval typically makes investors stay away in droves.

Northern and Western states appear to be benefiting from this uncertainty as investors attracted to Nigeria appear to be focusing their attention on non-Biafran areas.

In their minds, there are so many risks involved in investing in Nigeria so why add social upheaval to the list?

Naira Insider is purely interested in the advancement of all Nigerians through the development of the economy and few regions around the country boast the natural resources available in the South East.

With this impartiality and our business focus in mind, it does appear that spending a little time investing in the region would be beneficial to all parties.

With more economic activity especially from outside investors, there will be increased negotiating power as a southeastern bloc with the Federal Government.

Moreover, more economic empowerment might reduce the feelings of enforced impoverishment felt by resurgent Biafrans.

So it is unclear why Governors in the area are not making more serious attempts to stimulate their local economies.

Low performing local economies only increase the chances of social upheaval at its worst.

http://nairainsider.com/business-insider/is-fear-of-a-biafran-conflict-impeding-foreign-investment-in-the-south-east/

Saudi Aramco, the Saudi Arabia state oil company, announced a new pricing strategy which has differential pricing.

They plan to sell crude oil at cheaper rates to Asian countries and at higher rates to the United States of America and others.

Saudi Arabia is apparently trying to protect it’s market share in reaction to output coming into the market from Iran and Iraq in greater volumes.

Readers of Naira Insider will know that we predicted that Saudi Arabia and other Arab states would have to address the holes in the pockets left by the lower oil prices.

This is one such gambit.

How this affects the global price index remains to be seen; However, this development is bad news for Nigeria.

Saudi Arabia price cuts to Asian countries (which presumably includes India, China etc), hits Nigeria in its precise target markets.

This is as painful as it seems.

Since US enthusiasm for buying Nigerian Oil has waned, our exports to China and India have grown.

These two countries have been the buyers that have saved Nigeria’s oil industry in recent dark months.

So the news that Saudi plans to drop prices in these markets is terrible news for Nigeria.

Price competition for our limited customers is all we need.

We should watch regional prices with care.

If the Federal Government can only gather 50% of budgeted revenue (as recently stated in January 2017 official figures), then lower oil prices in key markets will be extremely problematic and difficult for the FG to explain to the masses.

http://nairainsider.com/business-insider/aramco-pricing/

The Central Bank of Nigeria (CBN) under the governance of Mr. Godwin Emefiele has announced ANOTHER FOREIGN EXCHANGE “window”.

The market reaction has now settled and we can see the long term impact.

This particular window is said to be for bond and stock investors as well as exporters.

The novelty with this window is that it will supposedly float with market demand for the controlled supply.

Is this little a more than a throwing a bone to those who demand a floating naira?

Could this also further an opportunity for CBN officials to trouser profits from controlling another market and being able to arbitrage rate differences?

The picture is always so confusing. Perhaps deliberately.

We can now see what impact this announcement and related sale of future contracts has had.

The answer is precisely nothing. Nada.

The rates have not moved. Why?

Perhaps there are more fundamental problems for investors and exporters than a small amount of dollars being made available if they can even navigate the corruption to get their hands on it.

The fundamentals for Nigeria are poor.

Perhaps dollar scarcity has been a symptom and not a cause of the malaise.

Now that is cause for concern. Is this a sign that receiving scarcity will not impact rates as there is now no wish to trade?

It remains to be seen – but this is, perhaps, a sign.

http://nairainsider.com/forex-insider/mr-godwin-emefiele-window-cleaner/

nonsobaba:
Another jealous wawa/abakaliki buffon on d loose. First of all, the $2bln is not coming from d state coffers but from the private investors partners ie Elite International and Orient Petroleum, as d project is a PPP on a BOT(Build, Operate and Transfer) contract. Second, if your wawa/abakaliki skull can realise that 2 almajiri states of Gombe and Jigawa have already built and operate their own airports, then d viability of this Anambra airport should be d least of your worries, also considering d fact that it is Anambra people, traders and businessmen that feed d patronage of Asaba airport and d overrated one in Enugu. Anambra people, being patrotic and proud of our state, will naturally switch patronage to d new international airport in Umueri once it is completed. Enugu airport is too far away, so no anambra businessman will waste his time going there again, except those old politicians who live there. D bottlenecks and hold-ups associated with crossing d Niger bridge, will also discourage usage of asaba

So instead of starting with information, your strategy is to start with abuse. All the writer is saying that based on experience in Nigeria, these things never come to fruition so he's taking a wait and see approach.

Even if Obiano delivers in this deal, why should we be impressed that someone performed their job. That's the problem in the country. We employ someone to do a job, do it and get on with it. Instead, we are impressed that they did their job; a job that we the people are paying them for.

Raise your standards.

Banks are not lending to Agricultural producers and have in the last 12 months refocused on the Oil sector.

This is disastrous in the long term for Nigerians and particularly problematic for the voiceless, rural masses desperate for paid employment.

The reasons for this are simple, yet soul crushing.

Agriculture landing is long term.

The nations banking sector has gorged on quick high interest yielding loans to Oil and Gas oligarchs for so long, that they have forgotten what it is like in the real world.

Providing credit to a petroleum products importer involves a bank providing a 60 day line of credit (sometimes revolving) yielding up to 25% interest.

The stupendous profit margins produced by the business of these government cronies allows them to pay the fees, the bribes both to state bodies and the banks, and still make money.

This is due to the state run oligopoly created by current regulation (a whistle blowing story for another day).

All this means is that myopic and ill educated bankers can only see profit margins through the prism of 60 day turnarounds and enormous profit.

Agriculture lending generally needs 3 to 9 years before the business sees a return on their investment and anything more than a 7% interest rate is a heavy burden to bear.

Not attractive when your Oil and Gas client offers to buy you a Toyota Prado if you approve his dodgy funding.

State Run Intervention Funds

State run intervention funds are corrupt and do not help.

The intervention funds, when announced are usually gobbled up by large oligarchs to put into their, and their friends’ trousers or to further finance their rice or tomato interests.

Genuine entrepreneurs and international businesses are left with the remaining dregs.

If there are some meager rations left, then the number of people taking a cut or adding interest to the original fund’s low interest source results in the cost becoming extravagant and unmanageable for most.

Inexplicably, for Government Intervention funds aimed at agriculture, the tenor of these loans are usually short (3 years) leading to the acknowledged position between lender and borrower that there will have to be a restructuring in a few years after inception.

From the borrowers perspective, this provides the Cosa Nostra banks an opportunity to take over your flourishing business and if they choose to play hard ball, there is no certainty.

Sharp practices in the Retail banks

Sharp practices in the retail banks, through which the intervention funds are distributed, lead to further fleecing of the farmer.

It is relatively well known in the sector that once the CBN approves your funding and releases it to the retail bank, the retail bank then holds the capital and refuses to release it to the borrower.

Various excuses are found to enable this.

The upshot is that the interest starts mounting up for the farmer without having received any funds and the bank have the excess capital it can use for more short term lending to oil companies.

Financial magic!

Collateral required by Banks

Finally and perhaps the main reason for the sector being held back is the stipulation of collateral required by the banks to secure the funding.

In most cases, even though they make huge interest on the loans and plan to claim any assets in a couple of years through declaring the farmer to be non-performing, the banks ensure no one but oligarchs gets funding by saying that collateral must be posted of around 200% of the value of the loan (land can not be offered).

This means that all decent sized funding is out of reach except to the corrupt or the connected.

Conclusion

The FG states that it wishes to expand Agriculture and diversify the economy.

There is no evidence of making this the case.

The only difference to the sector since intervention funding schemes like NIRSAL were introduced, is that the people who run the Agriculture desks at the CBN and retail banks are all wearing Rolex watches.

Meanwhile, agriculture in previously failed states like Cote D’Ivoire takes off and eclipses our motherland.

Admittedly, there are large rice and tomato concerns being developed in Nigeria – but the names of the benefiting owners are the usual suspects who have built their wealth on the backs of the poor.

(source of lending data: Business Day)

http://nairainsider.com/agriculture-insider/truth-behind-dearth-agricultural-lending/