The report is a possible harbinger of further reforms in the country that may counter the current tide of anti-multinational sentiment that has threatened future investment there. It ought to have a positive effect on the share price of companies doing business there, including ERHC Energy (OTC BB symbol: ERHE).
Here is the full press release:
March 29, 2005
International Monetary Fund
Press Release No. 05/71
March 29, 2005 International Monetary Fund
700 19th Street, NW
Washington, D.C. 20431 USA
Statement by IMF Staff Mission at the Conclusion of 2005 Article IV Consultation Discussions with Nigeria
The following statement was issued today in Abuja by an IMF staff mission:
"A staff team from the International Monetary Fund, led by Mr. Menachem Katz, visited Nigeria during March 8 -25, 2005 to conduct the 2005 Article IV consultation discussions, review performance in 2004 under Nigeria's home-grown program (NEEDS), and discuss the outlook for 2005 and the medium term. The team met with President Olusegun Obasanjo; the Minister of Finance, Dr. (Mrs.) Ngozi Okonjo-Iweala; the Governor of the Central Bank of Nigeria (CBN), Professor Charles Soludo; other senior officials of the government; representatives of the private sector, including the banking industry; and members of civil society and the international community. Overall, policy performance in 2004 was commendable. The authorities' macroeconomic policy framework in 2005, which builds on the unprecedented achievements of 2004, is consistent with continued macroeconomic stability.
"In 2004, policy implementation under NEEDS signaled a clear break from past imprudent practices. The key objectives of the 2004 program were achieved, namely to restore macroeconomic stability, enhance predictability and transparency of policies, and reduce the economy's vulnerability to oil price shocks. As a result, foreign direct investment expanded in 2004 and real GDP is estimated by the Federal Office of Statistics to have increased by 6 percent and non-oil GDP by 7.4 percent. Prudent fiscal management and savings by all tiers of government of the significant oil revenue windfall, along with tight monetary policy, contributed to lower inflation, a more stable exchange rate, and a significant build-up of international reserves. Several important reforms have also been initiated to enhance the transparency and accountability of public sector policies and institutions and to address Nigeria's deep-rooted macroeconomic and structural challenges; these reforms include implementation of the Extractive Industries Transparency Initiative (EITI) in Nigeria, the publication of monthly oil revenue distributed to the three tiers of government, a crackdown on corruption, civil service reform, and the passage of the Power Bill and the Public-Private Partnerships Bill.
"The outlook for 2005 remains positive, with real GDP projected to grow by 7 percent on the basis of higher crude oil and gas production and non-oil GDP by 5 percent. The mission stressed the need for the authorities to build on the macroeconomic achievements of 2004 to lay the foundation for faster growth and poverty reduction and to help achieve the Millennium Development Goals. The administration recognizes that the 2005 appropriation bill passed by the National Assembly is highly expansionary and has resolved to ensure that fiscal policy is consistent with the objective of maintaining macroeconomic stability in 2005. The spending increase, which is explained by Nigeria's enormous development needs, will require careful macroeconomic management if it is to be absorbed effectively. In particular, monetary policy will need to continue to be tight, targeting a 15 percent increase in broad money in 2005. In light of the envisaged increase in fiscal spending, more of the burden of consolidating macroeconomic stability will fall on the central bank. Overall, macroeconomic policies are consistent with the objectives of maintaining inflation below 10 percent and continued build up of international reserves.
"On the structural front, the mission agrees with the authorities' focus on improving governance and transparency, enhancing the efficiency of the public sector, strengthening the financial sector and improving the business environment, including plans to institutionalize reforms with several important bills such as the Fiscal Responsibility Bill, the CBN bill, Banking and Other Financial Institutions, procurement, EITI, and tax reform bills. The mission also supports the common external customs tariff scheduled to go into effect on July 1, 2005 in the context of the Economic Community for West African States (ECOWAS), as well as plans to phase out import bans by January 2007 and to re-energize the privatization process.
"The mission encourages the authorities to regularize relations with external creditors. The debt sustainability analysis prepared by the mission suggests that Nigeria's external debt is sustainable at current high oil prices. However, sensitivity analysis shows that the debt situation becomes unsustainable at historical oil prices (US$21 per barrel on average in 2006-25 as compared with US$37 in the baseline).
"The authorities reiterated their intention to continue with the current practice of intensified surveillance by the IMF. Fund staff will continue monitoring the authorities' quarterly fiscal and monetary targets, as well as key structural reform measures. The IMF's Executive Board is expected to discuss the staff's report on the 2005 Article IV consultation with Nigeria within the next few months. Nigeria has no outstanding obligations to the Fund."
IMF EXTERNAL RELATIONS DEPARTMENT
Public Affairs: 202-623-7300 - Fax: 202-623-6278
Media Relations: 202-623-7100 - Fax: 202-623-6772
9 comments:
Hey Joe - I'll keep clicking the advertisements if you promise to invest the proceeds in additional ERHE shares. Keep up the good work.
dddkim on RB sold out of ERHE according to your advice. Do you think it was good or bad?
dddkim could be very well right.
this is setting up to be a "sell the news" scenario, plan carefully now.
On the other hand, dddkim could be entirely wrong and this could be setting up to be a "buy the undervalued oil asset stake" scenario. ;) Either way, planning carefully is always good.
dddkim needs to take some personal responsibility for her actions...
Its not Joe's fault she sold all of her shares.
She should have sold a small percentage of them instead of the whole percentage.
Listen Dolly Parton (aka DDD Kim) can do whatever whe wants.
She is a "big" girl now. (no pun intended)
The lowest she could have sold at was .65 cents. The stock is only up about 10% since then.
She could easily get her shares back.
Well there goes Joe's chance for DDD Kim
I had planned to do an article on dddkim's post, but the time got away from me. She argued a very pragmatic, intelligent case. She is certainly walking away with a healthy profit and is not greedy. I didn't see anything in her post that suggested it was based on my advice, as I wrote that I had cancelled all sells and now still have the same stake.
As to the merits of her argument for selling, she is correct that many, perhaps but not certainly including myself, plan to sell on the news. I asked my wife how much longer she would be willing to wait, and she said "a year."
Dddkim is correct that the news never sounds quite so good when it comes as it does when it's being rumored, and that there have been many "false positives" in earlier cycles with this stock. That is all to her credit.
Frankly, though, a sell at this point is just plain wrong. The stock will go higher. There are still many buyers on the sidelines (she suggested that there are no more), and even if Barry Morgan is terribly wrong and we get no operatorships, we still will have rights valued at many billions of dollars.
For me, awards day would be the first time I would be tempted to sell. Yet I think there will be several days of increases, not just one buig day. And after the customary profit-taking at that point, I think there will be a long plateau and then some sharp price hikes towards the double-digits range. Everyone will be pumping ourt press releases from all the blocks. There will start to be 3-D from the EEZ, and news about the auction planned there. I am disappointed that (unless it comes today) there has been no buy-out offer that we know of, but I am still pretty sure one will come.
Dddkim also said she would buy back in when the price moderated after the awards. So she is not really out, and with her profit, she is not really hurting. I think she will regret having taken those steps, but that is how you manage a gamble - and everyone has a different way.
There may be an offer but there will be no sell of a majority stake in ERHE.
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