Nigeria may not profit from China’s infinite LNG thirst

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China’s demand for Liquefied Natural Gas (LNG) is bound to shoot through the roof, indicating the world most populous nation’s move away from dirtier to cleaner forms of fossil fuels but Nigeria may not benefit from this demand curve. SIA Energy, a Chinese energy consulting firm estimates that demand for imported liquefied natural gas in China will more than double in size, from its current benchmark of less than 40 million tonnes per annum (mtpa) to 90 mtpa by 2030.

Dulles Wang, director for Wood Mackenzie director Dulles Wang told Canadian energy news source JWN that “between 2020 and 2040, over the next 20 years, we are expecting the gas market to expand by close to 40 percent. About two-thirds of the growth, in terms of gas demand is going to come from China.”

China is pushing away from fossil fuels and setting extremely lofty goals for decreased carbon
emissions in the very short term as well as the long term. In order to meet the country’s lofty anti-coal goals, China will need to significantly increase their imports of liquefied natural gas, as at present just about 57 percent of the country’s natural gas demand can be met with domestic supply.

“Except Chinese LNG buyers get in on Train 7, which awaits final investment decision later this year, there is no chance that Nigeria’s LNG cargoes will find their way to China. LNG projects are usually fully booked before they take off. Nigeria has very little spare capacity for the spot market”, said Victor Eromosele, former chief financial officer at Nigeria LNG Ltd.

In 2018, the buzz term in the natural gas world was the alarmist cry of “stranded assets”, with head lines shouting that overproduction of shale oil and gas in North America would leave … Read More...

Why No Challenge Will Hold Back China’s Development

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 Which side will win out in the ongoing trade war, China or the US?

  That was a question I was asked the other day, when I had the honour and pleasure to address hundreds of students in the prestigious University of Abuja on China’s development and its foreign relations.

  No one will emerge as the winner in a trade war. China wants trade, not war. Honestly.

  Since it took office in 2017, the new US administration has threatened additional tariffs and other measures and provoked frequent economic and trade friction with its major trading partners. In response to the economic and trade friction unilaterally initiated by the US since March 2018, China has had to take forceful measures to defend the interests of the nation and its people.

At the same time, committed to resolving disputes through dialogue and consultation, China has engaged in multiple rounds of economic and trade consultations with the US in an effort to stabilize the bilateral commercial relationship.

China’s position has been consistent and clear — that cooperation serves the interests of the two countries, that conflict can only hurt both, and that cooperation is the only correct choice for both sides. Concerning their differences and frictions on the economic and trade front, China is willing to work together with the US to find solutions, and to reach a mutually beneficial and win-win agreement. However, cooperation has to be based on principles. There are bottom lines in consultations.

“China will not compromise on major issues of principle,” the newly-issued white paper by China, namely China’s Position on the China-US Economic and Trade Consultations, reaffirms, “ China does not want a trade war, but it is not afraid of one and it will fight one if necessary. China’s position on this … Read More...

Like fund managers, Nigeria needs to reconsider oil-based portfolios

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Hedge funds and portfolio managers are reviewing assumptions that oil prices will rise and liquidating bets because the U.S.-China trade war paints a gloomy global economic outlook and Nigeria needs to see this as an invitation to act.

Data compiled by Reuters show that money managers have reduced their net long position over the four weeks to May 21. Net long refers to a condition in which an investor has a portfolio consisting of more long positions than short positions in a given asset, market, portfolio or trading strategy. Investors who are net long will benefit when the price of the asset increases.

The net long concept can also be applied to Nigeria economy’s dependence on oil. Africa’s biggest oil producer holds a net long position on oil. Unlike fund and portfolio managers who can move swiftly, Nigeria is unable to do so.

Nigeria will find itself in a precarious situation if escalating U.S.-China trade tensions drastically weaken oil prices. It is widely known that Nigeria relies heavily on crude oil exports which account for over 90 percent of export earnings and over 70 percent of government revenues.

A sharp decline in oil prices has the potential to threaten Nigeria’s economic recovery while disrupting exchange rate stability. The potential decline in foreign exchange reserves from lower oil is likely to weaken the Naira consequently translating to rising inflationary pressures.

“Consumers and businesses will feel the heat as inflationary pressure mounts, while the drop in foreign reserves may complicate the Central Bank of Nigeria’s efforts to defend the Naira” Lukman Otunuga, research analyst at FXTM told BusinessDay in an emailed response.

For fund and portfolio managers, the change in the net long position in the week to May 21 was almost exclusively due to liquidation of … Read More...

Beware of China’s new Colonialism 

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America is slowly awakening to the growing menace of China’s plans for economic supremacy.

In 2013 Chinese President Xi Jingping launched an international investment program that became known as the Belt and Road Initiative (BRI). Under a new mantra to connect the global economy, China began investing heavily in foreign infrastructure projects in over 60 countries that account for 60 percent of the world population and 30 percent of global gross domestic product.

 

From 2013 to 2018 China made an estimated nearly $614 billion worth of investments in countries participating in BRI. Morgan Stanley predicts China’s overall expense from BRI could reach $1.3 trillion over the next decade.

 

President Xi considers BRI an opportunity to share China’s model for economic growth with the developing world. Geopolitical rivals are concerned BRI investment programs will deepen China’s political influence and military expansion.
Is BRI a lifeline for the developing world, or economic imperialism?
In Africa, it is clear that China’s campaign of foreign investment is a new form of colonialism. The continent, where I live and work, is ground zero.

 

When BRI launched in 2013, it prioritized regional development projects in Asia, the Middle East, Africa and Eastern Europe. Italy became the first major industrialized nation in the Group of Seven to join BRI, despite opposition from the U.S. and the European Union.

 

U.S. officials are right to be concerned about the expansion of an infrastructure network that leaves crippling debt, faulty construction and project mismanagement in its wake.

 

The Center for Global Development published a study of 23 countries participating in BRI and found 10 to 15 are in danger of debt distress. Other high-profile cases in Sri Lanka and Pakistan are examples where BRI projects left the local governments in
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