Algeria hosts key energy summit amidst shifting dynamics

Algeria welcomed envoys from energy-rich nations to a significant summit aimed at addressing pressing challenges and exploring new avenues for collaboration. As leaders from 13 countries convened in the Algerian capital of Algiers for the Gas Exporting Countries Forum (GECF), the spotlight fell on Algeria’s ambition to position itself as a critical natural gas supplier, particularly for European nations seeking to diversify their energy sources and reduce reliance on Russia.

During the three-day summit, which includes prominent participants such as Russia, Iran, Qatar, and Venezuela, discussions revolved around the evolving dynamics of the energy market. With renewable energy sources gaining traction and demand for oil and gas experiencing fluctuations, the forum provided a platform for coordination on investments, enhancing ties with consumer countries, and bolstering production capacity.

Ahmed Dkhinissa, an analyst and professor at the University of Algiers, emphasized the significance of the GECF in fostering global cooperation. He stressed the need for consensus among member nations, highlighting the importance of addressing various issues ranging from climate concerns to geopolitical tensions.

Meanwhile, Noureddine Legheliel, a financial analyst, offered insights into the ongoing debate surrounding renewable energies. While acknowledging their potential, Legheliel emphasized that fossil fuels, including natural gas, would continue to play a significant role in the energy mix for decades to come.

Algeria’s aspirations to become a leading gas supplier to Europe have garnered attention against the backdrop of efforts by European countries to reduce dependency on Russian energy. As the continent’s second-largest pipeline supplier of gas, Algeria has positioned itself as a reliable partner for countries like Spain and Italy. Premier Giorgia Meloni’s visit to Algeria last year underscored the strengthening ties between the two nations.

Highlighting Algeria’s growing prominence as an energy supplier, officials at the summit showcased the country’s commitment to providing secure and dependable energy resources. Recent agreements, including a deal with Germany’s VNG by Algeria’s state-owned energy company Sonatrach, underscore Algeria’s strategic significance in the global energy market.

However, challenges persist for Algeria’s energy sector. Despite ambitious plans to expand production, the country faces hurdles in meeting its commitments to European consumers. Infrastructure constraints, sluggish demand, and intensified competition from other gas-producing nations pose significant obstacles to Algeria’s aspirations.

Source: AfricaNews, 1st March 2024

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Nigeria set for two aggressive interest rate hikes in Q1 – Reuters poll

By Vuyani Ndaba
February 23, 20245:37 PM GMT+1Updated 20 hours ago

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JOHANNESBURG, Feb 23 (Reuters) – Nigeria is set for two aggressive interest rate hikes within a little over a month to subdue inflation and boost the naira after a couple of missed monetary policy meetings, a Reuters poll found on Friday.
A survey taken in the past week suggests that Nigeria’s monetary policy rate will be hiked 225 basis points to 21.00% on Feb. 27, in Governor Olayemi Cardoso’s first monetary policy meeting since he took office a couple of months ago.

There was no clear majority in the sample of 15 analysts, with one expecting a 50 bps hike to 19.25% and one a 1,000 bps increase to 28.75%.
That sets the stage for Cardoso to possibly act aggressively, though some doubt authorities have the appetite.
“We expect significant policy tightening and the announcement of de facto system-wide tightening measures,” wrote Razia Khan at Standard Chartered.
“We think both steps are needed to attract greater foreign portfolio investment and anchor inflation expectations,” she added.

A 175 bps jump to 22.75% is expected in March.
Consumer inflation in Africa’s biggest economy quickened for the 13th straight month in January to 29.90%, raising the cost of living to unbearable levels for many in the continent’s most populous nation.
The Central Bank of Nigeria (CBN) has not had a policy meeting since July, putting it out of kilter with the rest of the continent’s key central banks that hold meetings almost every second month.

“Reassuringly, the CBN has announced that it will hold its first two MPC meetings of the year in quick succession, on February 27 and March 26,” wrote analysts at Barclays.
“This suggests to us that it is aware it is well behind the policy curve, and will need to deliver at least two strong doses of policy tightening.”
The naira fell to its weakest level at 1,680.5 per dollar on Wednesday in the official spot market amidst a chronic shortage of the U.S. currency.

David Omojomolo, Africa economist at Capital Economics, wrote that the latest devaluation may be enough to put the balance of payments on a stable footing, though as things stand the currency has continued to weaken on the parallel market.
A poll last month suggested economic growth in Nigeria would be 3.0% this year and 3.7% next.
“Nigeria needs to take a leaf out of Kenya or Zambia’s book – and ‘tighten’ monetary policy with rate hikes,” said Charlie Robertson, head of macro strategy at FIM Partners.
Stabilising the naira is probably the most pro-growth move the CBN could make, so interest rate hikes would benefit Nigeria more than harm it, he added.

Reporting by Vuyani Ndaba; Editing by Jan Harvey

Source: Reuters, 23rd February 2024

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Africa’s largest economy is battling a currency crisis and a crumbling economy

PUBLISHED: Wed, 21 Feb 2024 08:13:09 GMT
Elliot Smith
CNBC

With inflation nearing 30% and its currency hitting an all-time low, Nigeria is facing one of its worst economic crises in years.
The latest data from the National Bureau of Statistics on Thursday showed that the headline consumer price index (CPI) rose to 29.9% year-on-year in January, its highest level since 1996.
The surging cost of living and economic hardship sparked protests across the country over the weekend.

With annual inflation nearing 30% and a currency in freefall, Nigeria is facing one of its worst economic crises in years, provoking nationwide outrage and protests.

The Nigerian naira hit a new all-time low against the U.S. dollar on both the official and parallel foreign exchange markets on Monday, sliding to almost 1,600 against the greenback on the official market from around 900 at the start of the year.

President Bola Tinubu announced Tuesday that the federal government plans to raise at least $10 billion to boost foreign exchange liquidity and stabilize the naira, according to multiple local media reports.

The currency is down around 70% since May 2023 when Tinubu took office, inheriting a struggling economy and promising a raft of reforms aimed at steadying the ship.

In a bid to fix the beleaguered economy and attract international investment, Tinubu unified Nigeria’s multiple exchange rates and enabled market forces to set the exchange rate, sending the currency plunging. In January, the market regulator also changed how it calculates the currency’s closing rate, resulting in another de facto devaluation.

Years of foreign exchange controls have also generated enormous pent-up demand for U.S. dollars at a time when overseas investment and crude oil exports have declined.

“The weakened exchange rate should increase imported inflation, which will exacerbate price pressures in Nigeria,” Pieter Scribante, senior political economist at Oxford Economics, said in a note Friday.

The country is Africa’s largest economy and has a population of more than 210 million people, but relies heavily on imports to meet the needs of its rapidly growing population.

“Shrinking disposable incomes and worsening cost-of-living pressures should remain concerns throughout 2024, further stifling consumer spending and private sector growth,” Scribante added.

Inflation, meanwhile, continues to soar, with the headline consumer price index hitting 29.9% year-on-year in January, its highest level since 1996. The increase is being driven by a persistent rise in food prices which jumped by 35.4% last month compared to the year before.

The surging cost of living and economic hardship prompted protests across the country over the weekend. The plummeting currency has added to the negative impact of government reforms such as the removal of gas subsidies, which tripled gas prices.

President Tinubu said in late July that the government had already saved more than 1 trillion naira ($666.4 million) from removing the subsidies, which it will redirect into infrastructure investment.

Alongside soaring inflation and a plunging currency, Nigeria is also battling record levels of government debt, high unemployment, power shortages and declining oil production — its main export. These economic pressures are compounded by violence and insecurity in many rural areas.

“Excess market liquidity, exchange rate pressures, and food and fuel shortages threaten price stability, while inflation risks rising out of the government’s control,” Oxford Economics’ Scribante added.

“Robust import demand could force the Central Bank of Nigeria (CBN) to reimpose import bans and FX restrictions to lessen the burden on the balance of payments. This could exacerbate domestic product shortages and increase inflation further.”

Inflation is expected to peak at nearly 33% year-on-year in the second quarter of 2024, according to Oxford Economics, and could stay higher for longer given the plethora of economic risks ahead.

“Furthermore, rising inflation and increased hawkishness by the CBN indicate that the policy rate could be raised this quarter,” Scribante said. The policy rate currently sits at 18.75%.

“We expect a combined 200 bps in rate hikes at the next two MPC meetings, scheduled for end-February and end-March this year; however, we think that more hikes are needed to stem rising inflation,” Scribante added.

Jason Tuvey, deputy chief emerging markets economist at Capital Economics, sees the CBN opting for a bigger interest rate bazooka when policymakers meet on Feb. 26 and 27.

“The meeting will be a key test of whether the policy shift under President Tinubu is truly regaining some momentum,” Tuvey said in a note Thursday.

“We expect that the MPC will try to restore some of its inflation-fighting credibility by delivering a large interest rate of 400bp, to 22.75%.”

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Oil rises as investors weigh Red Sea attacks, US rate cut outlook

By Mohi Narayan
February 21, 20248:40 AM GMT+1Updated an hour ago

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NEW DELHI, Feb 21 (Reuters) – Oil prices regained some ground in Asian trade on Wednesday amid concerns over attacks on shipping in the Red Sea and growing expectations that cuts to U.S. interest rates will take longer than thought.
Brent crude futures rose 24 cents or 0.3% to $82.58 a barrel by 0721 GMT, while U.S. West Texas Intermediate crude futures (WTI) were up 21 cents or 0.3% at $77.25.

The Brent and WTI contracts fell 1.5% and 1.4%, respectively, from near three-week highs on Tuesday as the premium for prompt U.S. crude futures to the second-month contract more than doubled to $1.71 a barrel – its widest level in roughly four months.

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Nigeria’s new Dangote refinery to export first fuel cargoes

A view of the newly-commissioned Dangote Petroleum refinery is pictured in Ibeju-Lekki, Lagos, Nigeria May 22, 2023. REUTERS/Temilade Adelaja/File Photo Purchase Licensing Rights

LONDON/BRUSSELS, Feb 14 (Reuters) – Nigeria’s Dangote oil refinery has issued tenders to sell two fuel cargoes for export, the first from the newly commissioned refinery, trading sources with knowledge of the matter told Reuters.
The refinery, Africa’s largest with a nameplate capacity of 650,000 barrels per day, was built on a peninsula on the outskirts of the commercial capital Lagos by the continent’s richest man Aliko Dangote.
Nigeria has for years relied on expensive imports for nearly all the fuel it consumes but the $20 billion refinery is set to turn it into a net exporter of fuel to other West African countries, in a huge potential shift of power and profit dynamics in the industry.
Sources told Reuters last week that the refinery was preparing to deliver its first fuel cargoes to the domestic market within weeks.
The two fuels on offer are typical products of running light sweet crude through a crude distillation unit (CDU) in a refinery without further upgrading capacity. It is expected to take months for upgrading units to be brought online, experts have said.
The refiner began buying crude in December last year and Nigeria’s state-owned oil firm NNPC Ltd has been the main supplier. Dangote has also purchased some U.S. oil and is expected to receive 2 million barrels of U.S. WTI Midland in early March, according to LSEG and Kpler ship tracking.
Reporting by Ahmad Ghaddar and Robert Harvey in London, Julia Payne in Brussels. Additional reporting by MacDonald Dzirutwe in Lagos and Arathy Somasekhar Editing by Mark Potter, Kirsten Donovan

Source: Reuters, 14th February 2024

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