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Oil Prices Rise On Likelihood Of OPEC Supply Cuts

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Oil prices rose on Monday after Saudi Arabia said producer club OPEC and Russia were likely to keep withholding supplies, and in relief that the United States and Mexico averted a trade war that would have damaged the global economy.

Front-month Brent crude futures, the international benchmark for oil prices, were at $63.71 at 0017 GMT, 42 cents, or 0.7%, above Friday’s close. U.S. West Texas Intermediate (WTI) crude futures were at $54.43 per barrel, 44 cents, or 0.8%, above their last settlement.

Traders said crude prices were rising because of statements by OPEC’s de-facto leader Saudi Arabia on Friday saying that the group was close to agreeing on extended supply cuts.

“With a production cut extension now sounding more likely than not, it should be incredibly supportive for oil prices,” said Stephen Innes, Managing Partner at Vanguard Markets.

The Organization of the Petroleum Exporting Countries (OPEC) and some non-members, including Russia, known collectively as OPEC+, have withheld supplies since the start of the year to prop up prices.

“Also with the Mexican stalemate averted and no harmful shockwaves from this weekend G-20 meeting, risk assets should open with a bounce in their step and oil could trade favorably as WTI and Brent will continue to track the broader risk environment high,” Innes said.

Stock markets jumped on Monday after a deal between the United States and Mexico to combat illegal migration from Central America late last week averted a tariff war between the neighbors.

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Bank customers start payment of charges for deposits, withdrawal of cash

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The Central Bank of Nigeria, CBN, has given an order that customers making cash deposits or withdrawals will pay charges beginning from today in line with its new policy.

The objective of the “transaction fees” is to give vent to the Central Bank’s policy designed to reduce cash in use.

CBN Payments System Management Department Director Sam Okojere on Tuesday announced the take-off of the charges in a statement.

“The transactions will attract three per cent processing fees for withdrawals and two per cent processing fees for lodgments above N500, 000 for individual accounts.

“Corporate accounts will attract five per cent processing fees for withdrawals and three per cent processing fee for lodgments above N3 million.

“The charges will, however, only apply in Lagos, Ogun, Kano, Abia, Anambra, Rivers and the Federal Capital Territory (FCT),” he said.

Okojere said the implementation of the cash-less policy nationwide would take effect from March 31, 2020.

Also to further promote the cashless economy and to enhance the collection of applicable government revenues, the CBN announced a review of the process for merchant settlement.

The regulator has, effective today, approved for banks to unbundle merchant settlement amounts and charge applicable taxes and duties on individual transactions as stipulated by regulations.

Okojere announced a downward review of the Merchant Service Charge (MSC) from 0.75 per cent capped at N1,200 to 0.50 per cent capped at N1,000.

“The cash-less policy provides safe and efficient mechanisms for making and receiving payments with minimum risks to the CBN, payment service providers and end-users.

“The cashless payment is catching on to the extent that even the lowly members of the society now do transactions online.

“Without this policy, Nigeria cannot be integrated into the world’s financial system,” the statement read.

Pushing for the full use of the online payment system, the apex bank said for Nigeria to actively play at the world stage, “our payment system must be successfully benchmarked against the global best practices, as in most developed nations of the world.”

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The Americans will see attack on Saudi oil as an attack on them

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One of the two oil facilities struck in the early hours of Saturday morning was recently described by one industry expert as the the Achilles Heel of the Saudi oil industry.

Its size and production capacity makes it a critical part of the global oil supply industry.

It’s not yet clear how much damage was caused to the two plants or for how long production will be impacted, but the Saudi oil minister confirmed overnight a temporary loss of 5.7 million barrels per day of production because of the attacks.

For context, Saudi Arabia pumped 9.8 million barrels per day in August.

The Abqaiq plant was the target of a failed al Qaeda attack in 2006. Since then it has been heavily fortified but is still vulnerable from the air, especially from drones which can bypass air defence systems.

In terms of the impact on the global market and oil supply: well, short term there may be a problem which will become clear when the markets open on Monday morning.

But longer term the gap will probably be bridged by increasing production elsewhere and by releasing reserves into the market.

The much bigger concern now is the geopolitical fallout and the consequence for regional security.



Drone attacks targeted a major Saudi Aramco processing facility and oilfield in the kingdom's east

The US government is in no doubt that the Saudi drone attacks were the work of Iran.

The operation was claimed by the Yemeni Houthi rebel group but they are known to get weapons and technology from their main backer, Iran, who are suspected by other nations to use relatively low-tech ‘attack drones’ as weapons.

With cheap new technologies, small attack or ‘kamikaze’ drones are proving to be disproportionately effective when successful.

Two weeks ago, Israel carried out what they said was a preemptive strike on fighters they said were linked to Iran’s elite Quds Force who were preparing to launch a drone from Syria (where Iran now has a strong foothold) to attack Israel.

US Secretary of State Mike Pompeo said Tehran had launched an “unprecedented attack on the world’s oil supply”, adding that there was “no evidence that the drones were launched from Yemen”.

It’s true that, geographically, the two oil refineries are closer to Iran and Iraq (where Iran has a foothold) than to Yemen.



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Who launched the drone attack against Saudi oil facilities?

The Americans have always blamed Iran for stoking the flames of the Yemen conflict. But the drone attack represents, in US government eyes, an attack on global energy supply which they’ll interpret as an attack on them.

“We call on all nations to publicly and unequivocally condemn Iran’s attacks,” Mr Pompeo tweeted. “The United States will work with our partners and allies to ensure that energy markets remain well supplied and Iran is held accountable for its aggression.”

In such a chaotic and delicate region, an attack of this type is very dangerous.

Donald Trump has been hoping to meet Iranian President Hassan Rouhani in his latest attempt at rapprochement (after limited success with North Korea’s Kim Jong Un and no success with Afghanistan’s Taliban).

Last week he fired his national security adviser John Bolton who was calling for a much harder line on Iran.

While Mr Bolton sits out of office no doubt saying “I told you so”, President Trump must now be pondering the merits of the proposed meeting with the Iranian president.

His own secretary of state seems clear: “Tehran is behind nearly 100 attacks on Saudi Arabia while Rouhani and Zarif pretend to engage in diplomacy…”

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Vat Increase: Businesses In Lagos To Pay 12.2 Per Cent On Goods, Services

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Businesses in Lagos will pay 12.2 per cent on the sale of goods and services once the 7.2 per cent Value Added Tax increase comes into force.

An analyst with Afrinvest, Adedayo Bakare, pointed this to SaharaReporters on Wednesday during a chat.

The Lagos State Government had since collected tax from restaurants and other retailers under a sales tax law despite a Supreme Court ruling against such in September 2018.

Bakare while speaking with SaharaReporters, said, “In Lagos, consumption tax is already 10 per cent because Lagos State charges five per cent VAT and there is also another consumption tax of five per cent.

“So, for Lagos State, automatically, consumption tax is 12.2 per cent.”

Citing the data on VAT collection given by Nigeria’s former Finance Minister, Kemi Adeosun, in 2018, Bakare said only about four states were generating most of the VAT, adding that the tax burden on just a few is disproportionate.

“Meanwhile, when they generate all these money, they will share it between 36 states when most of the money is generated in just four states.”

While admitting that the hike in VAT was not wrong, Bakare said there was a more urgent need to keep widening the tax net.

He added, “It is important that they widen the tax net to bring more informal businesses to the formal sector.”

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