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Op-Ed

For the record: Ahaji Shehu Shagari (1925-2018)

Kayode Soyinka

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Former Nigerian President Shehu Shagari arrives to attend the inauguration of new Nigerian President at the Eagles Square in Abuja, on May 29, 2015 - AFP
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From the onset, Alhaji Shehu Shagari, who won the 1979 Presidential election, although the verdict was controversial, never gave the impression of being a man who had clear idea of what government was all about. If anything, he appeared to be the reincarnation of Prime Minister Abubakar Tafawa Balewa: purposeless, weak, and even to some, lazy – characteristics not surprising in a man who, after all, had never courted power and wanted only to be a senator.

In the way he operated and performed as president of Nigeria, it was clear that what President Shagari found most attractive was the pomp and pageantry that came with leadership. General Olusegun Obasanjo, who handed over the reins of power to him, said of him, in his book, Not My Will: “He was pushed into power by those who wanted to make use of him and he was unfortunately too weak, and somewhat ill-prepared for the trappings of political power to check the abuses of his power by those who made use of him”. Shagari himself later demonstrated his lack of confidence in government when he made his famous remark to the effect that, in reality, there were only two major political parties in Nigeria during the Second Republic: the civilians on the one hand and the military on the other.

Because he inherited a healthy economy and because, like former Head of State, General Yakubu Gowon, the oil boom really was a real boon for him, Shagari saw his problem not as earning money for the country, but as not knowing what to do with it.

When he came to power October 1, 1979, the price of oil was $40 per barrel on average and the production level was two million barrels per day throughout 1980 and the beginning of 1981. The price of oil had jumped from about $14 per barrel in the third quarter of 1979 to $40 per barrel in the first quarter of 1980. In 1979/80 Nigeria’s revenue was estimated at N12.272 billion (about £9 billion), to which oil contributed about N9.489 billion (£7.6 billion).

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Op-Ed

Gold: Positioned to thrive in low-interest-rate environment

Rising concerns surrounding the health of the global economy is another one of the engines that will help drive Gold prices

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Gold: Positioned to thrive in low-interest-rate environment

The investment case for Gold is set to remain robust as speculation mounts that major central banks will ease monetary policy in an effort to counter a global economic downturn.

The yellow metal shone with extreme intensity during the second quarter of 2019, rallying roughly 9 per cent to levels not seen above $1,435 in over six years, thanks to an environment that included ongoing global growth concerns, geo-politics, trade tensions and Dollar weakness.

Weak macro data, which reflects downward revisions in global growth over the past 12 months, is prompting a handful of central banks including the European Central Bank (ECB), Federal Reserve (Fed) and Reserve Bank of Australia (RBA) to signal a willingness to ease monetary policy and increase economic stimulus to support growth.

In a low-interest-rate environment filled with chronic uncertainty, Gold can climb another 5 per cent over the course of Q3 – claiming the title as one of the high flyers among safe-haven assets, in competition with the Yen. 

Will Gold’s fortunes hang on the Fed’s actions?

Will Gold’s fortunes hang on the Fed’s actions?

What investors need to watch as the second half of the trading year gets underway are the actions of the Federal Reserve. Will the US central bank confirm market expectations and cut interest rates as early as July? If it fails to do so, Gold risks rapidly surrendering its second-quarter surge.

Essentially, if the Fed sits on its hands beyond July, profits will be taken from the table on the $120+ rally that transpired in Gold throughout June. 

Unfavourable global conditions to keep Gold in fashion

Rising concerns surrounding the health of the global economy is another one of the engines that will help drive Gold prices.

Although a sense of optimism has returned after the Trump-Xi Jinping meeting at G20 ended in a trade truce on tariffs, it does not change the reality that global growth is decelerating.

The World Bank recently downgraded it’s 2019 world growth forecast to 2.6 per cent from 2.9 per cent and if the recent disappointing PMI releases across the manufacturing sectors in Europe, China and the United States are anything to go by, global growth is moving towards the lower bound of 2 per cent as the decade draws to a close.

Warning signals over potential cracks in the largest economy in the world, indications of tepid growth in the EU, disappointing data from China’s manufacturing sector and lacklustre growth in the United Kingdom amid Brexit-induced uncertainties are likely to sweeten appetite for safe-haven assets. 

It’s all about central bank stimulus and lower yields 

In the longer term, Gold should also find support from lower treasury yields, especially if the 10-year treasury dips below 2 per cent again as persistent growth fears and trade developments result in lower interest rates across the globe.

While the outlook for the precious metal points to the upside, potential roadblocks on the horizon include easing trade tensions and signs of global growth stabilizing. Both outcomes would pose a challenge to buyers.

What do higher Gold prices mean for African markets?

What do higher Gold prices mean for African markets?

Gold-producing nations on the continent, like South Africa and Ghana will certainly benefit from higher prices.

Economic conditions in Africa’s most industrialised economy remain unfavourable thanks to a tornado of domestic and external risks. Economic growth contracted by 3.2 per cent during the first quarter of 2019 thanks to a sharp decline in manufacturing, agriculture and mining.

Given how Gold remains one of South Africa’s most valuable exports, rising Gold prices have the potential to stimulate growth – especially when factoring in how exports account for roughly 30 per cent of GDP.

Economic growth in Ghana remains robust with GDP expanding 6.7 per cent during the first quarter of 2019. With Ghana claiming the title of Africa’s top Gold producer, higher prices will be supportive of the mining sector which expanded 20.9 per cent in Q1.

When adding to the fact that roughly 5.7 per cent of Ghana’s GDP and 40 per cent of gross foreign earnings are acquired from the mining sector, Gold’s bullish outlook brightens Ghana’s growth prospects.

Gold bulls to dream big and reach for the stars 

Taking a look at the technical picture, Gold remains firmly bullish on the monthly charts as there have been consistent higher highs and higher lows.

Prices have scope to push higher on the monthly charts should $1360 prove to be reliable support.

For as long as bulls are able to defend $1360, there should be enough confidence to challenge $1430 and $1500 – a level not seen since April 2013. Alternatively, a decline back below $1360 will most likely swing open the doors towards $1324 and $1300, respectively.

This bullish setup becomes invalidated if prices find comfort below $1300.

The views expressed in this piece are the author’s own and do not necessarily reflect News Central TV’s editorial stance.

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Op-Ed

Remembering Abdirahman Osman: Reformer and Friend

People close to Mogadishu’s slain mayor said he never complained about the huge burden of getting the city back on its feet.

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Abdirahman Omar Osman, spokesperson of the President of Somalia addresses the Somali media during a visit by the African Union's Peace and Security Council (PSC), on it's first visit to the Somali capital Mogadishu, with the President of Somalia in 2013.

Abdirahman left his family in London to answer the call to rebuild Somalia several years ago. He did so at great personal risk and in spite of the fact that he was leaving a comfortable life and a good job to take on a position in Mogadishu with no salary and immense danger.

He told me that he did so because he believed that there was hope for Somalia, that there was work to be done and that the biggest chunk of that work had to be done by Somalis themselves.

Everyone knew Abdirahman by his nickname, Engineer Yarisow. In Somalia, virtually everyone has a nickname; it’s an affectionate way that Somalis relate to each other. Never mind the nicknames can be as rude as they are hilarious: they are often based on one’s physical shortcomings. If you have a big nose, for instance, your nickname in Somalia will likely be ‘fat nose’ or something along those lines.

Abdirahman was a great man of summary stature, his nickname, therefore, was naturally ‘short man’ – Yarisow. He was an important man whose door was always open to those who came looking for him, particularly those in the media industry. He was kind, committed and deeply respectful to everyone. He was our friend.

We last met while he was still the Minister for Information, Culture and Tourism. We had coffee in his office and we talked about the editorial I penned on his behalf for the EU-AMISOM Special Edition Magazine. We joked about having arosto at a Somali restaurant in Harrow, near where his family lived and where I had some relatives.

He went on to become the Mayor of Mogadishu and the Governor of the Banadiir region. It was in this capacity that he breathed his last, having been targeted by religious extremists. Eng Yarisow always knew that the rebuilding of Somalia would require sacrifice and would come at great cost to many. He knew that the toll for a new Somalia would be high. He has paid it at the highest price: with his life.

Rest well aboowe. Your work and your name is indelibly carved in the hearts of your people, your family, friends, colleagues and all who knew you. May Allah grant you the highest place in Janna. Amin.

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Op-Ed

Will oil prices help or harm Nigeria’s economy in Q3?

Global Oil prices looked tired, exhausted and ready for an early summer break during the second quarter of 2019

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Will oil prices help or harm Nigeria’s economy in Q3?

Global Oil prices looked tired, exhausted and ready for an early summer break during the second quarter of 2019 as global growth fears overshadowed supply disruptions and ongoing OPEC supply cuts. At the time of writing, Oil prices remain shaky and vulnerable despite OPEC+ latest decision to extend production cuts until March 2020.

The crucial question is whether Oil prices will ever recover and trade back towards the $70+ levels. That depends less on geopolitical tensions in the Middle East and more on whether the US and China can reach a trade deal, settling disputes over tariffs and opening the door to continued global growth.

In this case, it’s likely that Oil prices will be injected with a renewed sense of confidence on the back of boosted global growth expectations and demand for Oil. But what if the current circumstances persist and the US-China trade disputes continue throughout the second half of 2019? 

Taking each scenario one-by-one, starting with the upside for Oil prices, Nigeria’s economy could benefit considerably if a US-China trade deal is reached and global growth expectations become brighter. The manufacturing sectors in the US and China are the Oil-gobbling engines which drive demand for international Oil suppliers.

China is the world’s top crude Oil consumer, importing more than 50 per cent of its consumption, part of which comes from Nigeria. In the fourth quarter of 2018, Nigeria exported ₦23.5 billion worth of crude Oil to China and remains a major trading partner to the Asian giant. It’s likely that if China’s economy roars back to life, Nigeria’s growth would see more long-term support, benefiting foreign exchange reserves and the naira.

Although unlikely, if a trade deal were to be announced early in the quarter, it’s possible the nation’s 2019 budget would also see ample support from increased Oil revenues from China. This argument doesn’t apply to the US which has considerably reduced its crude Oil imports from Nigeria as it heads towards energy independence, relying instead on domestic production to meet its own needs.  

If you take the negative outlook on Oil, it’s more likely the rise in Oil prices is a temporary result of supply shortage fears and the prevalent trend in Q3 will be downward pressure from concerns over a global recession. In this unfavorable scenario, the world’s two largest economies do not reach a trade deal in the third quarter and aggregate demand for Oil continues falling as it tracks economic weaknesses in China and the US.

As demand for Oil is whittled away, Nigeria’s foreign exchange reserves may be negatively impacted, along with the Naira, the 2019 budget, and most importantly GDP growth.

In terms of the national budget sheet, expenses like the petrol subsidy may take the limelight as they drag on revenues, overshadowing growth and threatening fiscal stability. 

There’s another factor we haven’t talked about so far but it’s significant in terms of Oil market economics. Oil sales are denominated in US Dollars. Recently, the currency has weakened against its rivals, meaning that Oil is more affordable and possibly giving traders an incentive to snap up contracts at current levels before they rise further.

If the Dollar bears have their way and the currency keeps declining, Oil price benchmarks could see further support in the third quarter. The impact of a weaker USD might not be as strong as a US-China trade deal, but it could feed positively into Nigeria’s Oil revenues and go some way to counter possible losses from ongoing global recession fears. 

To sum up, Nigeria’s foreign exchange reserves, currency, growth, and budget will face headwinds should trade disputes persist.

However, provided the USD keeps weakening, there’s scope for support from higher Oil prices based on bargain hunting. There’s always the possibility that the US and China could decide on a trade deal, if this happens sooner than later, Nigeria’s economy would benefit accordingly. 

The views expressed in this piece are the author’s own and do not necessarily reflect News Central TV’s editorial stance.

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