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Opinion & Analysis

HOW TO REPAIR A DAMAGED ECONOMY LESSONS FROM OBAMA

Jul 23, 2019

When Barack Obama took office as America's 44th president, he was faced with an acute, three pronged economic challenges.

The American financial system was in crisis to a greater extent than at any time since 1933.

America's international imbalances was on a worsening downward slide, The economy was in a deep recession supercharged by falling consumer purchasing power, declining house values, and cascading business losses.

In addition to the above mentioned, he was faced with four chronic problems viz

A worsening thirty years trend of inequality and insecurity Energy crisis and climate change, Increasing cost of health care Decay of America's public spaces and facilities.

All of the above mentioned scenario sounds familiar? That was the situation in Almighty America barely up to 8 years ago And this is our story in Nigeria today Now you will agree with me the story has changed for America.

America is out of recession thanks to a brilliant, hardworking and tireless president

How was the feat achieved ?

He blamed the out gone republican government most especially the two George Bush for the Economic mess?

NO !

He clamped down on any discerning voice of opposition and threw them into jail with spurious, unfounded criminal and fraud charges?

He restored confidence in the American economy not just with inspiring words /vague promises or as in the case with our Nigerian president by engaging in series of" blame it on Jonathan" propaganda, but by demonstrating that help was on the way. The American economy was vigorously restructured,

necessary stimuli were injected into the economy, the federal government embarked on a more robust housing and mortgage rescue program.

Let's learn from United States of America.

We can kick out recession, We can jump-start the Nigerian economy But we need to be aware of the cost of borrowing because Unnecessary borrowing may further kill our economy rather than revive it.

I advocate for a moderate deficit expenditure based budget. As at January 2015 our GDP stood at $574 billion making Nigeria the largest economy in Africa and about the 24th largest in the world.

What Nigeria needs therefore is not a large deficit budget but an ambitious tax hike to increase government income and an aggressive Industrialisation drive followed by massive increase in employment.

This is what is required to stimulate the economy and drive us out of recession.

Mr Itohoimo Udosen

Public/Political Affairs Analyst

This email address is being protected from spambots. You need JavaScript enabled to view it.

Business

Oil prices rise as US, China close to ending trade dispute

Jul 23, 2019

The prices of crude oil rose on Monday as hopes for an end to the year long tariff row between the United States and China approached a close.

Also the production cut deal by members and allies of the Organization of Petroleum Exporting Countries, OPEC, contributed to price rally.

International Brent futures were at 65.25 dollars a barrel at 07:13 GMT, up 18 cents, or 0.3 per cent, from their last close, while US West Texas Intermediate crude futures were at 55.94 dollars per barrel, up 14 cents or 0.3 per cent.

There are indications that US and China are close to a deal that would roll back US tariffs on at least 200 billion dollar worth of Chinese goods, just as Beijing has also pledged structural economic changes and elimination of retaliatory tariffs on US goods, a source briefed on negotiations said on Sunday in Washington.

The “substantive progress” China and the US have made in their trade talks has been “well-received” in both countries and around the world, a senior Chinese official said on Monday.

According to a Reuters’ survey, Supply from OPEC fell to a four-year low in February, as top exporter, Saudi Arabia and its allies over-delivered on the group’s supply pact while Venezuelan output registered a further involuntary decline.

“OPEC exports are off by over 1.5 million barrels per day (bpd) since November,” Barclays bank said in a note released on Sunday.

“The supply picture looks generally tighter this year,” said energy analysts at Fitch Solutions in a note on Monday, adding they expected Brent to average 73 dollars per barrel in 2019.

There are also indications that Oil prices have been further pushed up by US sanctions against OPEC-members Iran and Venezuela. Barclays bank is of the view that this has resulted in a reduction of around two million bpd in global crude supply.

There are also signs that the US oil production boom of the past years, which has seen crude output rise by more than two million bpd since early 2018 to more than 12 million bpd, may slow down.

World

Presidential Poll: U.S. congratulates Buhari, Nigeria

Jul 23, 2019

The U. S. has congratulated Nigeria on its successful presidential election and President Muhammadu Buhari on his re-election.

U.S. Secretary of State Michael Pompeo, in a statement, noted the assessments of international and domestic observer missions affirming the overall credibility of the election.

Pompeo said the United States’ assessment was “in spite of localised violence and irregularities”.

He called on all Nigerians to ensure successful Gubernatorial and House of Assembly elections on March 9.

Pompeo said: “The United States congratulates the people of Nigeria on a successful presidential election, and President Muhammadu Buhari on his re-election.

“We commend all those Nigerians who participated peacefully in the election and condemn those whose acts of violence harmed Nigerians and the electoral process.

“We note the assessments of international and domestic observer missions affirming the overall credibility of the election, despite localised violence and irregularities.

“We also congratulate all the other candidates for their peaceful participation in the electoral process.

“We call on all Nigerians to ensure successful state elections next week.

“Going forward, the United States remains committed to working together with Nigeria to achieve greater peace and prosperity for both our nations”.

In the presidential election, held on February 23, Buhari polled 15,191,847 votes and his closest challenger, People’s Democratic Party’s candidate and former Vice President Atiku Abubakar polled 11,255,978 votes to emerge a runner-up.

Buhari, who was declared re-elected by the Independent National Electoral Commission, also won in 19 states, to defeat other 72 candidates including Atiku, who won 17 states and the Federal Capital Territory, to occupy the second position.

Business

Record high US crude oil production drives prices down

Jul 23, 2019

The prices of crude oil declined on Thursday on the back of a record high production by the United States and weakening factory output in China and Japan.

International Brent crude prices were at $66.20 per barrel at 0525 GMT, after losing 19 cents, or 0.3 per cent from their last close.

The U.S. West Texas Intermediate crude oil futures were at $56.90 per barrel, declining four cents from their last settlement.

American crude oil production has surged to an unprecedented 12.1 million barrels per day over the last year.

Traders are also of the view that China’s weakening economy also weighed on oil prices.

Factory activity in China, the world’s biggest oil importer, shrank for a third straight month in February as export orders fell at the fastest pace since the global financial crisis a decade ago, official data showed on Thursday.

Amid weak demand from China, oil producers are having to cut prices.

Russia’s Surgutneftegaz is selling April-loading ESPO crude oil at the lowest level in three months, charging $2.20 to $2.40 per barrel over benchmark Dubai quotes.

In Japan, Asia’s second-biggest economy, factory output posted the biggest decline in a year in January as China’s slowdown affected the entire region.

World

Trump says he's inclined to extend China trade deadline and meet Xi soon

Jul 23, 2019

President Donald Trump said on Friday there was "a very good chance" the United States would strike a deal with China to end their trade war and that he was inclined to extend his March 1 tariff deadline and meet soon with Chinese President Xi Jinping.

U.S. and Chinese negotiators had made progress and will extend this week's round of negotiations by two days through Sunday, Trump told reporters at the White House as he met with his top negotiators and their counterpart, Chinese Vice Premier Liu He.

"I think that we both feel there's a very good chance a deal will happen," Trump said.

Liu agreed there had been "great progress".

"From China, we believe that (it) is very likely that it will happen and we hope that ultimately we'll have a deal. And the Chinese side is ready to make our utmost effort," he said at the White House.

The Republican president said he probably would meet with Xi in March in Florida to decide on the most important terms of a trade deal.

Extending the deadline would put on hold Trump's threatened tariff increase to 25 percent from 10 percent on $200 billion (153 billion pounds) of Chinese imports into the United States. That would prevent a further escalation in a trade war that already has disrupted commerce in goods worth hundreds of billions of dollars, slowed global economic growth and roiled markets.

Optimism that the two sides will find a way to end the trade war lifted stocks, especially technology shares. The S&P 500 stock index reached its highest closing level since Nov. 8. Oil prices rose to their highest since mid-November, with Brent crude reaching a high of $67.73 a barrel.

CURRENCY AGREEMENT

Trump and Treasury Secretary Steven Mnuchin said the two sides had reached an agreement on currency. Trump declined to provide details, but U.S. officials long have expressed concerns that China's yuan is undervalued, giving China a trade advantage and partly offsetting U.S. tariffs.

Announcement of a pact aimed at limiting yuan depreciation was putting "the currency cart before the trade horse," but would likely be positive for Asian emerging market currencies, said Alan Ruskin, global head of currency strategy at Deutsche Bank in New York.

"How can you agree to avoid excessive Chinese yuan depreciation or volatility if you have not made an agreement on trade that could have huge FX implications?" Ruskin asked in a note to clients.

In a letter to Trump read aloud by an aide to Liu at the White House, Xi called on negotiators to work hard to strike a deal that benefits both country.

Trump said a deal with China may extend beyond trade to encompass Chinese telecommunications companies Huawei Technologies and ZTE Corp.

The Justice Department has accused Huawei of conspiring to violate U.S. sanctions on Iran and of stealing robotic technology from T-Mobile US Inc.

Chinese peer ZTE was last year prevented from buying essential components from U.S. firms after pleading guilty to similar charges, crippling its operations.

MEMORANDUMS NO MORE

Trump appeared at odds with his top negotiator, U.S. Trade Representative Robert Lighthizer, on the preliminary terms that his team is outlining in memorandums of understanding for a deal with China. Trump said he did not like MOUs because they are short term, and he wanted a long-term deal.

"I don't like MOUs because they don't mean anything," Trump said. "Either you are going to make a deal or you're not."

Lighthizer responded testily that MOUs were binding, but that he would never use the term again.

Reuters reported exclusively on Wednesday that the two sides were drafting the language for six MOUs covering the most difficult issues in the trade talks that would require structural economic change in China.

Negotiators have struggled this week to agree on specific language within those memorandums to address tough U.S. demands, according to sources familiar with the talks. The six memorandums include cyber theft, intellectual property rights, services, agriculture and non-tariff barriers to trade, including subsidies.

An industry source briefed on the talks said both sides have narrowed differences on intellectual property rights, market access and narrowing a nearly $400 billion U.S. trade deficit with China. But bigger differences remain on changes to China's treatment of state-owned enterprises, subsidies, forced technology transfers and cyber theft of U.S. trade secrets.

Lighthizer pushed back when questioned on forced technology transfers, saying the two sides made "a lot of progress" on the issue, but did not elaborate.

The United States has said foreign firms in China are often coerced to transfer their technology to Chinese firms if they want to operate there. China denies this.

The U.S. Chamber of Commerce on Friday urged the U.S. government to ensure the deal was comprehensive and addressed core issues, rather than one based on more Chinese short-term purchases of goods.

China has pledged to increase purchases of agricultural produce, energy, semiconductors and industrial goods to reduce its trade surplus with the United States.

China committed to buying an additional 10 million tonnes of U.S. soybeans on Friday, U.S. Agriculture Secretary Sonny Perdue said on Twitter. China bought about 32 million tonnes of U.S. soybeans in 2017. The commitments are a "show of good faith by the Chinese" and "indications of more good news to come," Perdue wrote.

China was the top buyer of U.S. soybeans before the trade war, but Beijing's retaliatory tariffs on U.S. soybeans slashed business that had been worth $12 billion annually.

- Reuters

World

Venezuela’s military on red alert for US aid invasion

Jul 23, 2019

Venezuela’s military said Tuesday it was on alert at its frontiers following threats by US President Donald Trump and suspended air and sea links with the island of Curacao ahead of a planned aid shipment.

Opposition leader and self-declared interim president Juan Guaido has vowed to bring aid in from various points Saturday “one way or another” despite military efforts to block it.

But commanders doubled down on their allegiance to President Nicolas Maduro after Trump urged them to abandon him.

“The armed forces will remain deployed and on alert along the borders… to avoid any violations of territorial integrity,” said Defense Minister Vladimir Padrino.

Regional commander Vladimir Quintero later confirmed media reports that Venezuela had ordered the suspension of air and sea links with Curacao and the nearby Netherlands Antilles islands of Aruba and Bonaire.

Shipments of food and medicine for Venezuelans suffering in the country’s economic crisis have become a focus of the power struggle between Maduro and Guaido.

Aid is being stored in Colombia near the Venezuelan border and Guaido aims also to bring in consignments via Brazil and Curacao, which is off the coast of Venezuela.

A Brazilian presidential spokesman said the country was cooperating with the United States to supply aid to Venezuela but would leave it to Venezuelans to take the goods over the border.

Maduro says the aid plan is a smokescreen for a US invasion. He blames US sanctions and “economic war” for Venezuela’s crisis.

Guaido, the 35-year-old leader of the Venezuelan legislature, has appealed to military leaders to switch allegiance to him and let the aid through.

He has offered military commanders an amnesty if they abandon Maduro.

But the military high command has so far maintained its public backing for Maduro — seen as key to keeping him in power.

“We reiterate unrestrictedly our obedience, subordination and loyalty” to Maduro, Padrino said.

Guaido posted a series of tweets calling by name on senior military leaders commanding border posts to abandon Maduro.

He has branded Maduro illegitimate, saying the elections that returned the socialist leader to power last year were fixed.

The United States and some 50 other countries back Guaido as interim president.

Trump has refused to rule out US military action in Venezuela. He raised the pressure on Monday, issuing a warning to the Venezuelan military.

He told them that if they continue to support Maduro, “you will find no safe harbor, no easy exit and no way out. You will lose everything.”

Padrino rejected Trump’s threat, branding the US president “arrogant.”

If foreign powers try to help install a new government by force, they will have to do so “over our dead bodies,” Padrino said.

Venezuela’s deputy military attache at the UN announced Tuesday he was siding with Guaido.

“I declare myself to be in total and absolute disobedience to the illegally constituted government of Mr. Nicolas Maduro,” Colonel Pedro Jose Chirinos said in a video posted on social media.

Since Guaido declared himself interim president on January 23, he has received the support of an army colonel and an air force general, neither of whom actually have any troops under their command, a retired air force major general and a number of lower-level officers.

Business

Indian Oil signs first annual deal for U.S. oil

Jul 23, 2019

Indian Oil Corp, the country’s top refiner, has signed its first annual deal to buy U.S. oil, paying about 1.5 billion dollars for 60,000 barrels a day in the year to March 2020 to diversify its crude sources, its chairman said on Monday.

IOC is the first Indian state refiner to buy U.S. oil under an annual contract, in a deal that will also help boost trade between New Delhi and Washington.

The company has previously purchased U.S. oil from spot markets and signed a mini-term deal in August to buy 6 million barrels of U.S. oil between November and January.

IOC chairman Sanjiv Singh said the annual contract will begin from April. He declined to give the name of the seller or pricing details, citing confidentiality.

A trade source, who is not authorized to speak to media, said IOC has signed the deal with Norwegian oil company Equinor.

Equinor, which has set up an office in New Delhi to support oil marketing and trading, did not immediately respond to an email seeking comment.

Indian Oil buys about 75 per cent of its oil needs through long-term deals, mostly with OPEC nations.

The term deal will help cut IOC’s dependence on OPEC crude, said Sri Paravaikkarasu, head of east of Suez oil for consultants FGE in Singapore.

“Lots of geopolitical issues are going around. We expect lots of volume going away from Venezuela, west Africa and Iran, so it makes sense to have guaranteed term supplies from the U.S., where crude production is increasing,” she said.

“There is a push for diversification everywhere. South Korea is giving a freight rebate for non-Middle East crude imports,” she added.

India and the United States, which have developed close political and security ties, are also looking to develop bilateral trade, which stood at 126 billion dollars in 2017 but is widely seen to be performing well below its potential.

The two countries have set up seven groups of chief executives with top U.S. and Indian firms to boost bilateral trade in areas including energy.

Last week India’s top gas importer Petronet LNG signed an initial deal to invest and buy LNG from Tellurian Inc’s proposed Driftwood project in Louisiana in the United States.

NAN

Bank & Finance

Dollar weakens against peers

Jul 23, 2019

The dollar fell versus a basket of its peers on Monday as rising expectations of a U.S.-Sino trade deal led investors to shift away from the safety of the greenback into riskier assets.

Both the U.S. and China reported progress in five days of negotiations in Beijing last week, although the White House said much work remains to be done to force changes in Chinese trade behaviour.

Negotiations will continue next week in Washington as investors hope for an end to the trade war between the world’s two largest economies.

“Trade is the big focus for the markets…with talks shifting from Beijing to Washington, we could get more news flow,” said Michael McCarthy, chief markets strategist at CMC Markets.

“I expect the euro to remain under pressure this week while dollar and yen could also fall if we see risk-aversion based on negative trade news flow.”

The Aussie gained 0.2 per cent to 0.7154 dollar, after firming 0.48 per cent on Friday on hopes of a U.S.-China trade breakthrough. The kiwi dollar gained around 0.3 per cent on the dollar to 0.6886 dollar.

In Asia, the yen was steady versus the greenback at 110.53.

The escalating trade dispute between the world’s largest economies have kept markets highly volatile since last year.

U.S. duties on 200 billion dollars worth of Chinese imports are set to rise from 10 per cent to 25 per cent.

This happens if no deal is reached by March 1 to address U.S. demands that China curb forced technology transfers and better enforce intellectual property rights.

The dollar index, a gauge of its value versus six major peers, was down by 0.16 per cent at 96.74.

The index has gained 1.2 per cent so far this month in spite of weaker-than-expected U.S. data as well as a more cautious Federal Reserve, which is widely expected to keep rates steady this year due to a slowdown in growth and muted inflation.

The dollar index has gained mainly because of the euro, which has around 58 per cent weightage in the index.

The single currency was up 0.2 per cent at 1.1317 dollar in early Asian trade, after two straight weeks of losses.

Notwithstanding Monday’s gains, traders are betting on a weaker euro in the coming months as they expect the European Central Bank to keep its monetary policy accommodative due to low growth in the common area, tepid inflation and political uncertainties.

World

Trump to declare national emergency, but govt will stay open

Jul 23, 2019

U.S. President Donald Trump is expected to declare the situation on the border with Mexico a national emergency, in a move that would grant him vast powers and would likely be contested in Congress and in the courts.

Some members of Trump’s own Republican Party have expressed concerns about the national emergency, fearing both a degradation of the role of Congress and setting a precedent.

Democrats have long argued there is a humanitarian issue at the border but there is no national emergency.

The national emergency comes at the end of a process which saw Trump largely lose to Congress over funding for his proposed vast expansion of the border wall.

Trump pushed the federal government into the longest shutdown in history, ending last month after 35 days.

Trump announced his intention a day before funding for the government was again set to run out and as Congress was approving appropriations, but without cash for Trump’s wall.

The president has agreed to sign the funding bill and keep government open.

Trump is expected to take executive action to announce funding for the wall from alternative funds.

The entire process is being denounced by Democrats as a blatant attempt to bypass Congress, which is constitutionally viewed as having the power of the purse.

The appropriations bill has set aside 1.375 billion dollars for physical barriers on the border.

Trump campaigned on the border wall and pledged Mexico would pay for it.

He was also once a fierce critic of former president Barack Obama when he took executive action, evading Congress.

Business

Oil prices fall as U.S. rig count rise, trade concerns

Jul 23, 2019

Oil prices fell by around 1 per cent on Monday as drilling activity in the United States, the world’s largest oil producer, picked up and financial markets were pulled down by trade concerns.

A refinery fire in the U.S. state of Illinois, which resulted in the shutdown of a large crude distillation unit, that could cause crude demand to fall also weighed on prices, traders said.

U.S. West Texas Intermediate (WTI) crude futures were at 52.09 dollars per barrel at 0347 GMT, down 63 cents, or 1.2 per cent, from their last settlement.

International Brent crude oil futures were down 49 cents, or 0.8 per cent , at 61.61 dollars a barrel.

In the United States, energy firms last week increased the number of oil rigs operating for the second time in three weeks, a weekly report by Baker Hughes said on Friday.

Companies added seven oil rigs in the week to Feb. 8, bringing the total count to 854, pointing to a further rise in U.S. crude production, which already stands at a record 11.9 million bpd.

WTI prices were also weighed down by the closure of a 120,000-barrels-per-day (bpd) crude distillation unit (CDU) at Phillips 66’s Wood River, Illinois, refinery following a fire on Sunday.

Elsewhere, the head of Russian oil giant Rosneft, Igor Sechin, has written to the Russian President Vladimir Putin saying Moscow’s deal with the Organization of the Petroleum Exporting Countries (OPEC) to withhold output is a strategic threat and plays into the hands of the United States.

The so-called OPEC+ deal has been in place since 2017, aimed at reining in a global supply overhang.

It has been extended several times and, under the latest deal, participants are cutting output by 1.2 million bpd until the end of June.

OPEC and its allies will meet on April 17 and 18 in Vienna to review the pact. Analysts said economic concerns were also weighing on crude oil futures.

Vandana Hari of Vanda Insights said in a note that crude prices were dragged down “as China returned from a week-long Lunar New Year holiday and regional stock markets plunged into the red amid resurgent concerns over the U.S.-China trade dispute.”

Trade talks between the Washington and Beijing resume this week with a delegation of U.S. officials travelling to China for the next round of negotiations.

The United States has threatened to increase tariffs already imposed on goods from China on March 1 if the trade talks do not produce an agreement.

Preventing crude prices from falling further have been U.S. sanctions on Venezuela, targeting its state-owned oil firm Petroleos de Venezeula SA (PDVSA).

“The issues in Venezuela continue to support prices. Reports are emerging that PDVSA is scrambling to secure new markets for its crude after the U.S. placed additional sanctions on the country,” ANZ bank said on Monday.

Source: PmNews

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