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Naira pressure worsens as reserves fall to $40.46bn

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ABUJA – The pressure on the naira heightened yesterday after reports that Bank of America suddenly downgraded naira-linked instruments on fears of further value hemorrhage in the market.

The downgrade followed the fall in Nigeria’s external reserves below the psychological resistance level of $41 billion yesterday ebbing to $40.6 billion (seven months imports) because of the frequent requirement to resort to the once healthy reserves to defend the national currency.

The external reserve level is now about 17 percent lower than 2013 peak of $48.86 billion and 6.67 percent below December’s level of $43.6 billion.

The Bank of America says whereas there might be the political will to continue to defend the naira, the running down of the reserves remained a constraining factor and then went on to recommend underweight position, forecasting a further weakening of the national currency to N170 in 2014.

The naira value fell to N172 to the dollar yesterday on the parallel market and closed N164.46 on the inter-bank market, losing 0.81 percent despite Shell selling an undisclosed sum, while ExxonMobil sold $50 million and Addax selling $8 million.

The fall in the value of the naira left some analysts saying a devaluation of the currency is now a matter of when and not if.

Leading economist, Bismarck Rewane, said last night, “Once we go below $40 billion in reserves, all bets will be off and then you have a real crisis.”

According to the Economic Intelligence Unit (EIU), “Whereas the short term currency stability seems likely to return, we have more serious doubts about the naira’s medium-term prospects.”

Added the EIU, “The economy and with it confidence in the currency, has been adversely affected by lower oil prices, faltering oil production and political uncertainty. We expect the oil sector to continue to under perform both this year and next.

Meanwhile, political uncertainty, having been exacerbated by the upheaval at the CBN, will continue to increase ahead of the 2015 elections. On top of this will be the effect of the US tapering of its monetary stimulus. Portfolio investment inflows surged into Nigeria during 2011-2012 and much of 2013, but will fall significantly in 2014-15, both owing to investor concern about events in Nigeria and as investment flows back towards developed markets.”

Financial markets were thrown into a spin last Thursday when it emerged that President Goodluck Jonathan had forced out CBN Governor Sanusi Lamido Sanusi in a move many linked to claims of missing oil revenues although this was denied by the government.

However, the pressure on the naira which predated the ouster of Sanusi has not abated despite assurances from acting CBN Governor Sarah Alade that the apex bank will not abandon the stout defence of the national currency which had been associated with the Sanusi era.

On Friday, the CBN intervened to bolster the naira but with many betting on the likelihood that the apex bank will be forced to adjust its naira rate band, the naira continues to fall under speculative pressures.

The CBN sold $399.73 million on Monday but this has not brought the much-needed respite for the naira because negative market sentiment continues to spur dollar demand pressure as the external reserve jitters continue.

– BUSINESS DAY

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Tesla Aims for 2028 Commercial Production of Flying Car

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Tesla has set a 2028 commercial production date for its new Roadster sports car that can briefly rise into the air using rocket technology.

According to CNN, the date was revealed when the manufacturers demonstrated its functionality on Thursday at a SpaceX testing facility in Texas, United States, where the two-seater vehicle performed a series of manoeuvres, including driving upside down before making a short airborne movement.

The prototype was operated without a driver during the test, with Musk saying the decision was taken “to make sure we don’t kill anyone.”

“Success is not guaranteed. I mean that. It’ll probably work, but if it doesn’t work, we’re at a safe distance,” he said.

READ ALSO: 2027 Election: ‘Your Future Is More Valuable’ — IGP Warn Youths Against Political Violence

CNN reported that the vehicle uses 10 nozzles and high-pressure air tanks to generate thrust, with Musk claiming it could accelerate from zero to 60 miles per hour in less than a second.

The Tesla boss attributed the development to cooperation between the electric vehicle manufacturer and SpaceX, the rocket company he also leads.

He described the project as “the results of what happens when you have a collaboration with the world’s best car company and the world’s best rocket company.”

Musk also sought to assure spectators that the demonstration was genuine, saying, “We need an audience to prove that it’s not AI or SI. So you guys can tell people you saw it with your eyes, because what you see with your eyes, you will not believe.”

Despite the display, questions remain about whether the vehicle can achieve sustained flight and how practical it would be for everyday transportation.

Roger Conner, curator for vertical flight at the Smithsonian’s National Air and Space Museum, told CNN that combining the requirements of road vehicles and aircraft presented significant engineering challenges.

“Aircraft are extremely sensitive to weight, whereas with ground vehicles you want them to have bumpers and crumple zones and all that,” he said.

“Inevitably, something that is a hybrid between the two is going to be a poor performing aircraft and a poor performing vehicle, and also quite expensive,” he added.

Conner questioned whether the demonstration amounted to flying in the conventional sense.

“We’re not talking about sustained flight. We are literally talking about hopping,” he said.

However, Jim Dukhovny, chief executive of flying car startup Alef, said the technology was achievable, while pointing to the difficulties involved in making such vehicles transition safely from vertical take-off to forward flight.

“It absolutely is 100% feasible,” he told CNN.

“That being said, the hardest part on all eVTOLs, and for us, it’s a transition from (rising) vertical to (moving) forward. It needs to be extremely careful, making sure you do not lose lift, and making sure it’s very stable,” he added.

CNN also reported that Alef’s prototype weighs about 254 pounds, uses eight propellers and is designed to carry one person.

Musk said Tesla intended to begin production of the new Roadster in 2028.

CNN reported that the latest display adds to Musk’s ambitions to push Tesla’s vehicle technology beyond conventional electric cars, although the prototype’s ability to operate as a practical flying vehicle has yet to be established.

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Marketers Eye Portion of FG’s Petrol Discount

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The Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN) has urged the Federal Government to add its member-stations to the petrol discount programme.

It cautioned that the current arrangement could limit the reach and deny vast consumers in underserved communities the benefits of the 30-day discount window.

The PETROAN also urged the FG to allocate at least 30 percent of the discounted petrol volume to outlets operated by its members.

READ ALSO: Tanzania Nears Completion of $42bn Equinor, Shell-Led LNG Project

The calls followed last week’s announcement by the Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, of a petrol discount at Nigerian National Petroleum Company Limited (NNPC Ltd) retail outlets, with priority given to public transport operators nationwide.

According to the National Publicity Secretary, Independent Petroleum Marketers Association of Nigeria (IPMAN), Chinedu Ukadike, the exclusion of independent marketers could undermine the programme’s effectiveness, particularly in communities where NNPC retail outlets have limited presence.

He argued that independent marketers, with their extensive nationwide distribution networks, were better positioned to extend the benefits of the intervention to consumers in remote and underserved areas.

“Independent oil marketers have over 90 percent coverage and presence in the nooks and crannies of this country. You are giving NNPC that is situated only in the town. So how do the poor masses, whom you intend to ensure that this petroleum product will alleviate their sufferings, how would they now get it?” Ukadike asked.

He said the association was not opposed to the government’s policy but insisted that independent marketers should be included to ensure wider access to the discounted product.

“But it’s government policies; we are not against government policies, but let it be all-inclusive; let independent marketers be part of it,” he said.

Ukadike also urged the government to extend the discount period to 60 days, citing logistical challenges that could delay the movement of petrol from coastal depots to other parts of the country.

“And the 30 days should be extended to 60 days. Because of the circulation of petroleum products, most times it takes two weeks for a truck to leave Apapa and get to Gombe, Maiduguri, because of the bad road and all the rest of them and loading process,” he added.

Similarly, PETROAN National President, Billy Gillis-Harry, urged the Federal Government to allocate 30 per cent of the discounted petrol volume to the association’s retail outlets to facilitate broader national distribution.

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Tanzania Nears Completion of $42bn Equinor, Shell-Led LNG Project

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In the bid to transform Tanzania into the East African regional energy hub, the country is on the verge of concluding an agreement with a consortium of energy companies, including a $42 billion LNG project.

It was gathered that the project is designed to tap the 47.13 tcf of gas discovered in Tanzania’s deep offshore fields, part of the country’s estimated 57.54 tcf in total discovered reserves, the sixth-largest in Africa, behind Nigeria, Algeria, Senegal, Mozambique and Egypt.

READ ALSO: Shell Identifies Keys to Nigeria’s Energy Future

Equinor and Shell would be the lead operators, alongside involvement from ExxonMobil Pavilion Energy and Medco Energi, while state oil major, the Tanzania Petroleum Development Corporation (TPDC), would also hold an equity stake in the project.

“It’s almost there,” Khamis Mussa Omar, Tanzania’s finance minister, told Reuters.

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