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Nigeria’s energy crisis increases production costs by 40%— Report

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A recent report by Nanyang Technology University’s Centre for African Studies has revealed that Nigeria’s poor electricity contributes to up to a 40% rise in the cost of manufactured products.

Nigeria’s manufacturing sector can employ a larger share of the labour force, and has far higher productivity than agriculture, according to a report titled “Back to Growth: Priority Agenda for the Economic Revival of Nigeria,” which was recently presented in Lagos by the author and Director of the Centre, Amit Jain.

“Electricity blackouts, together with transport bottlenecks, crime, and corruption, are among the key impediments to firm growth. Outages and voltage fluctuations are commonplace.

“This damages machinery and equipment. Consequently, most firms rely on self-supply of electricity through the use of generators, which increases the cost of production and erodes competitiveness”, the report said.

Nigeria’s underdeveloped power sector makes it difficult for the country to achieve widespread economic development and compels the majority of companies to produce a sizable amount of their own electricity. The nation has recently seen the departure of well-known companies due to growing operating expenses.

Given the challenges in ensuring steady power supply throughout the nation, the report suggested the government look into creating industrial clusters. The primary advantage of clustering businesses, according to the report, is that it makes it possible to prioritise infrastructure development in order to give businesses a competitive edge while providing access to resources like raw materials, skilled labour, and technology.

It read further, “The clusters should ideally be located within zones that are well connected with roads, power lines, and telecommunications.

“Although Nigeria has scored some success with informal clusters, such as the computer village in Otigba, Lagos; the auto and industrial spare parts fabricators in Nnewi; the leather tannery in Kano; and the footwear, leatherworks, and garment cluster in Aba, very few are working to their full potential.

“Lack of coordination between the federal and state governments and patchy implementation of industrial policy has meant that the infrastructure required to attract manufacturing investment is inadequate.”

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Nigerian centra bank’s N1trn OMO bills oversubscribed

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The Central Bank of Nigeria (CBN) has issued N1.053 trillion (680 million dollars) in short-term instruments in the recently concluded sale of government securities.

The sale is a component of CBN’s liquidity management exercise, according to a statement released on Sunday night by Mrs. Hakama Sidi, Acting Director of the Corporate Communications Department.

The apex bank’s N500 billion offer at the Open Market Operations (OMO) auction was oversubscribed, according to Sidi. Foreign investors accounted for 79% of all bids, or 530 million dollars. The auction was the first since last week’s Monetary Policy Committee (MPC) meeting, which was followed by a virtual meeting with international portfolio investors.

Sidi claims that Olayemi Cardoso, the governor of the CBN, utilised the two sessions to establish a comprehensive plan aimed at reducing inflation, stabilising the currency rate, and boosting trust in the banking sector and the overall economy.

The apex bank now enjoys a high degree of confidence from investors, she added, and the management of the CBN was hopeful that its monetary policy initiatives were starting to have a good impact.

Cardoso, in the meantime, emphasised in the investor meeting the prospects for a steady rise in the CBN’s foreign exchange reserves. He gave them assurances about increased market liquidity and the quick resolution of the outstanding backlog of legitimate FX transactions.

“The CBN is committed to supporting price stability by taking the necessary measures to increase liquidity in the foreign exchange markets sustainably.

“Our focus is on building a fully functioning market that allows smooth entry and exit for investors,” he said.

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Partners ‘willing to walk away,’ US warns Tanzania over gas project delays

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Tanzania’s much-awaited, multimillion-dollar liquefied natural gas project is facing impending investor withdrawals from the United States, if delays caused by negotiating technicalities persist, the country has warned.

 

Companies like Exxon Mobil, who have been pushing the deal with Tanzanian authorities, have reached a point where they are now “willing to walk away,” US Deputy Assistant Secretary of State Joy Basu told journalists.

 

Basu, whose portfolio in the Joe Biden administration includes overseeing economic and regional affairs in Sub-Saharan Africa cautioned that “there is LNG in lots of places around the world now, and for Tanzania the window for this particular investment is closing fast. Such windows do not remain open forever.”

 

In meetings with Tanzanian government officials during the week to monitor the development of a US-Tanzania commercial dialogue that was initiated in October of last year, she stated that the project’s status was a top priority.

 

One of many international companies involved in the LNG project in southern Tanzania is Exxon Mobil, headquartered in Houston, Texas. The project’s estimated cost increased from $30 billion in 2014 to $42 billion by the previous year.

 

The project’s other partners include the state-owned Tanzania Petroleum Development Corporation, Exxon Mobil, Pavilion Energy (Singapore), Medco Energi (Indonesia), and Britain’s Shell and Norway’s Equinor, which have been designated as joint main operators.

 

She said that the project’s status was a major priority during meetings with Tanzanian government representatives this week to track the progress of a US-Tanzania commercial dialogue that was started in October of last year.

 

In order to expedite the development of its natural resources, the government intends to work with China’s Cnooc Ltd. to jointly explore for oil and gas in two offshore blocks that are owned by Tanzania Petroleum Development Corp., a state-owned company.

 

Since a downturn in 2020 when it 57.1 billion cubic feet of natural gas, a decline from 63.8 billion cubic feet the year before, the continent’s search for hydrocarbons has increased gradually as European countries look to diversify their energy sources and reduce their reliance on Russian gas.

 

Apart from the established main gas producing countries like Nigeria, Algeria, and Egypt, other African nations like Tanzania have been rising as potential players in the natural gas industry.

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