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Steel industry calls for state support to avoid ‘full blown crisis’

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Steel industry

Steel industry calls for state support to avoid ‘full blown crisis’

The steel industry has called for urgent state support to avoid a “full blown steel crisis”, warning that plans to issue loans to soften the impact of soaring gas prices “won’t address the problem”.

As industry leaders voiced dismay at the perceived lack of support from government, trade unions wrote to the prime minister warning he was at risk of making a “historic mistake with devastating consequences” for an industry employing 32,000 people.

Uncertainty about how to support power-hungry industries such as steel has already sparked a political row between the Treasury and the business secretary, Kwasi Kwarteng, over whether to offer financial support.

While the Treasury is understood to be reluctant to fund a bailout, ministers are weighing up proposals from Kwarteng to provide short-term loans or guarantees while gas prices are high, to help sectors such as steel, glass, chemicals and paper.

Representatives from the industry met officials from BEIS on Tuesday but left disappointed at a lack of detail on the proposals and concerned that the loan plan won’t help.

“If it is only these loans that are on the table, then for the steel industry that won’t address the problem,” UK Steel’s director, Gareth Stace, told the Guardian.

“We need to get back round that table to discuss and agree better solutions.”

Three steelworkers’ unions – Community, the GMB and Unite wrote to the prime minister on Tuesday, urging action to protect thousands of jobs.

“The seriousness of the situation requires swift and decisive action from government. But it seems government ministers have been too busy squabbling, and that’s why we wrote to the prime minister urging him to get a grip and act to resolve this crisis before it is too late.”

In their letter to the prime minister, the steelworkers’ unions said other European countries had provided assistance to their own steelmakers.

“Brexit was supposed to make it easier for the government to back British industry and British jobs, but all we are seeing is the same old procrastination and excuses for doing nothing,” they wrote.

UK Steel had earlier backed Kwarteng in calling for assistance from the chancellor, Rishi Sunak. The Treasury initially appeared to reject, issuing an unusual reprimand to the business secretary for suggesting help might be available.

Since the split, officials from the departments are understood to have thrashed out the short-term lending plan.

But UK Steel said this would leave the industry still battling against a “hostile environment” and at risk of shutdowns.

In an earlier statement, Stace said: “Our message directly to the prime minister is please don’t just apply a sticking plaster to what is a significant long-term problem. Action can and must be taken now to secure the foundations of British industry.”

Kwarteng met representatives from industries including steel, paper, glass and chemicals on Friday and again on Monday, to hear their arguments for longer-term help, such as measures to ease electricity costs, which are high relative to European peers.

Stace said any measures to help steel had to put UK producers on a “level playing field” with overseas rivals.

“If any package delivers less than this and we still continue to pay more for energy than French and German steel producers and we remain at a competitive disadvantage,” he said.

“Steel producers here in the UK will continue to have to pause steel production, will be less efficient and will lose margins and market share.

“This is a hostile environment for industrial investment in the UK and for the government’s levelling-up agenda.”

The business department said the steel industry’s international competitors were often benefiting from pricing regimes that transferred the cost of industrial energy usage onto households.

“Ministers and officials continue to engage constructively with industry to further understand and to help mitigate the impacts of high global gas prices,” said a spokesperson.

“Our priority is to ensure costs are managed and supplies of energy are maintained.

“Some countries on the continent have lower industrial electricity prices in part because some costs are recovered from consumer bills.”

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Naira depreciates further to N614/$ at parallel market

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Naira depreciates further to N614/$ at parallel market

The Nigerian naira has dropped to N614 against the dollar at the parallel section of the foreign exchange market.

The figure signifies a depreciation of N7 or 1.2 percent compared to the N607 it traded last two weeks.

Bureaux De Change operators (BDCs), popularly known as ‘abokis’, who spoke to TheCable in Lagos on Tuesday, said they purchase the greenback at N608/$, make a gain of N6, and then sell at N614.

At the official market, the naira also depreciated by 0.21 percent to close at N421/$ on Monday, according to information obtained from FMDQ OTC Securities Exchange — a platform that oversees official foreign-exchange trading.

Nigeria operates multiple exchange rate windows ranging from the importers and exporters window (I&E) window, where forex is traded between exporters, investors, and purchasers of forex, the SMEIS window where forex is sold to importers, and others.

International organisations such as the World Bank and the International Monetary Fund (IMF) have constantly advised the Central Bank of Nigeria (CBN) to unify the official and parallel market exchange rates.

But Godwin Emefiele, the CBN governor, had said that despite advice offered by IMF and the World Bank, developing economies such as Nigeria had the liberty of adopting “homegrown solutions to their economic problems.

According to him, the managed floating exchange rate, which allows the CBN to intervene in the market when there is a supply shock, would be in place as long as supply exceeds demand.

“They want us to free the exchange rate. And you do know that this has some impacts on the exchange rate itself,” he had said.

“When you allow that to happen, you will have an uncontrollable spiral on the naira.

“But what managed float means is that we have some measures in place to help control the spiral.”

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FG, states in trouble, as NNPC again fails to remit, despite N470.61bn revenue

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FG, states in trouble, as NNPC again fails to remit, despite N470.61bn revenue

These are challenging times for the federal and state governments as one major source of income to the federation account seems to be totally cut off.

On Monday, The National Petroleum Company Limited (NNPC) revealed it failed to remit monies to the federation account in May 2022 despite making N470.61 billion.

This is the fifth straight month NNPC has failed to credit the federal account while exporting crude at an average price of $100 per barrel.

Details of the June FAAC report obtained by The Harmattan News showed NNPC since the start of the year made N1.897 trillion, over N234.1 billion more than the expected revenue.

Sadly, however, NNPC said all the revenue had gone into various expenditure which includes petrol subsidy, oil search, Pipeline Security & Maintenance cost, National Domestic Gas Development and Nigeria Morocco Pipeline cost among others.

As expected, the bulk of the expenditure, N1.27 trillion, went toward recovery (also known as petrol subsidy).

In fact, NNPC said it has budgeted another N617 billion for petrol subsidy in June.

The report reads: “The Value Shortfall on the importation of PMS recovered from May 2022 proceeds is N327,065,907,048.06 while the outstanding balance carried forward is N617bn .”

“The estimated Value Shortfall of N845,152,863,012.97bn (consisting of arrears of N617bn plus estimated May 2022

Value Short Fall of N227,721,200,478.23) is to be recovered from June 2022 proceed due for sharing at the July 2022 FAAC Meeting,” it added.

The development means states have a tough road ahead and will have to look inwards to cover for the drop in federal allocations.

Already, some states have announced plans to slash workers’ salaries over dwindling income.

Kano Sate has already announced plans to slash workers’ salaries, following in the foot steps of the Ekiti State government that announced civil servants’ and political appointees’ salaries will be slashed in response to the present economic reality in the country.

Ekiti went further to suspend minimum wage implementation with no date of resumptions.

The Harmattan News had recently reported that pension contribution from governments dropped to a 16-year low in the first quarter of 2022.

From recent developments, it is more likely the figure will tank further.

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Nigerian govt to auction N225bn bond as search for funds continues

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Nigerian govt to auction N225bn bond as search for funds continues

Federal government bonds worth N225 billion would be auctioned today, Monday, June 20, 2022, by the Debt Management Office (DMO) at the primary market.

The debt instrument is being sold by the central government to raise funds to finance the 2022 budget deficit and in today’s exercise, the DMO is offering the notes in three tenors.

The debt office is anticipated to sell the FGN bonds at double digits to make the asset class more attractive to investors.

In a circular published on its website and obtained by The Harmattan News, all three maturities are re-opening, meaning they are from the previously sold bonds.

The circular noted that N75 billion worth of a 10-year bond with maturity in 2025 would be offered for sale at the auction. Another N75 billion worth of a 10-year note maturing in 2032 is up for grabs and N75 billion worth of a 20-year instrument with maturity in 2042 would be sold.

Intending subscribers would be expected to reach out to primary dealer market makers to buy the bonds for N1,000 per unit subject to a minimum subscription of N50 million and in multiples of N1,000 thereafter.

The interest would be paid by the government semi-annually, while the bullet repayment will be done on the maturity date.

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