Nigeria Content Online

Africa could
attract billions of dollars in new investment over the next few years
as emerging market investors search for higher returns and foreign
perceptions of risk improve, Ernst & Young said on Tuesday.

The global
accounting firm said in a report titled “It’s time for Africa” that
foreign direct investment (FDI) into the continent was forecast to
reach $150 billion by 2015 from $84 billion in 2010, driven by strong
growth in new projects from next year.

Ernst& Young
surveyed over 562 global executives on where they would invest over the
next decade and 42 percent of them were considering investing further
in Africa while an additional 19 percent confirmed maintaining
operations in the region.

The report said the
continent was becoming increasingly attractive to international
investors planning new developments and expanding existing ones and
that perceptions were becoming increasingly positive over the longer
term.

It identified Asia as the only continent ahead of Africa in terms of investors’ perceptions.

“While Africa’s
challenges are well documented, there is an increasing recognition that
the continent is on an upward trajectory; economically, politically and
socially,” Ernst & Young’s said in its 2011 Africa attractiveness
survey.

It projected GDP to
grow to $2.6 trillion by 2020 from $1.6 trillion in 2008 and consumer
spending to increase 62 percent to $1.4 trillion over the same period.

Investors’ interest

Key sectors
targeted by investors include consumer products, construction,
telecoms, financial services and mining and metals — perceived to have
the highest growth potential over the next few years.

The survey showed
emerging market investors were positive about Africa’s attractiveness,
viewing the region as critical to their own growth, while developed
markets investors were cautious, saying that the region still needed to
develop further.

The African
continent, home to one billion people, had long been ignored by
international investors who only thought of the region in terms of
political instability and corruption.

But as the majority
of the 54 countries which make up Africa embrace democracy and install
reform-minded governments, analysts say the world’s poorest continent
and least tapped frontier markets could fast become a diamond in the
rough.

Ernst& Young
said investments in the continent by African countries grew 21 percent
between 2003-2010, but actual amounts were less than invested by other
emerging economies.

It highlighted the
high levels of risk involved in investing in Africa but said the
profitability levels compensated for the risk and that some sectors had
little competition.

“Despite the
improving perceptions of Africa, it is in competition for the
international capital and resources that will help drive and sustain
growth and social development,” it said.

“It is currently ranked in the same category as Latin America and Eastern Europe in terms of attractiveness for investors.”

REUTERS

The
federal government said it plans to cut budget deficit from 4.1 percent
of deficit recorded last year to about 3.6 percent in 2011. Bright
Okogwu, director general in the budget office said the determination to
achieve this cut is at the heart of the non passage of the 2011 budget
into the second quarter of the year.

The
federal government had sent a budget proposal of N4.23 trillion to the
National Assembly for consideration. Out of this amount, N2.48 trillion
or 58.8 percent was earmarked for recurrent expenditure while N1.01 was
for capital expenditure. This figure was upped by 17.7 percent to N4.97
trillion, an increase of over N745 billion by the legislators, thereby
inflating the budget above the threshold set by government.

The
President had based his estimates on crude oil benchmark of $65 per
barrel which was raised to $75 by the Senate which also increased the
allocation to the National Assembly from N111.24 billion to N 232.74
billion, representing 4.7 percent of the total budget.

Trimming the budget

Answering
questions yesterday on the delay in the passage of the budget at the
regional economic outlook summit organised by the International
Monetary Fund (IMF) in Lagos, Mr Okogwu said the executive was still
meeting with the lawmakers on ways of trimming the budget to acceptable
level.

“We
are currently in negotiation with the National Assembly. The idea is to
restructure the budget. We believe that it needs to be changed to some
extent. As part of the fiscal consolidation, we proposed a budget
deficit of 3.6 percent of GDP (Gross Domestic Product) which means that
in reality, we are looking to come to about 3 percent of GDP.” He said
part of the fiscal consolidation of government includes improving the
revenue generation side and to block leakages. “What came out was about
4.1 per cent and that is why the minister for finance has said the
budget is not implementable. We had a meeting with the leadership of
the National Assembly and we have agreed that the budget will be
amended to some extent to a level that will fit in with our suggestion
about fiscal consolidation. The idea is not to spend all that comes to
you but to save some for the future years when things may not be so
good and for future generation,” Mr Okogwu said.

He
admitted that the election programme also affected the budget
negotiation adding that now that the elections are over, the parties
would return to finding the middle ground.

Increase interest rates

In
its outlook, the IMF said sub-Saharan African countries need to
increase interest rates in order to encourage foreign investment
inflows and stimulate growth, in the aftermath of the global financial
crisis. Abebe Selassie, divisional chief, African department of the IMF
said though many countries in the region have demonstrated resilience
during the crisis, it was time for them to move ahead. “Fiscal policies
should move away from supportive stance to more neutral stance. Rates
have been accommodative but now that there is recovery, rates should be
more neutral,” he said.

Africa could
attract billions of dollars in new investment over the next few years
as emerging market investors search for higher returns and foreign
perceptions of risk improve, Ernst & Young said on Tuesday.

The global
accounting firm said in a report titled “It’s time for Africa” that
foreign direct investment (FDI) into the continent was forecast to
reach $150 billion by 2015 from $84 billion in 2010, driven by strong
growth in new projects from next year.

Ernst& Young
surveyed over 562 global executives on where they would invest over the
next decade and 42 percent of them were considering investing further
in Africa while an additional 19 percent confirmed maintaining
operations in the region.

The report said the
continent was becoming increasingly attractive to international
investors planning new developments and expanding existing ones and
that perceptions were becoming increasingly positive over the longer
term.

It identified Asia as the only continent ahead of Africa in terms of investors’ perceptions.

“While Africa’s
challenges are well documented, there is an increasing recognition that
the continent is on an upward trajectory; economically, politically and
socially,” Ernst & Young’s said in its 2011 Africa attractiveness
survey.

It projected GDP to
grow to $2.6 trillion by 2020 from $1.6 trillion in 2008 and consumer
spending to increase 62 percent to $1.4 trillion over the same period.

Investors’ interest

Key sectors
targeted by investors include consumer products, construction,
telecoms, financial services and mining and metals — perceived to have
the highest growth potential over the next few years.

The survey showed
emerging market investors were positive about Africa’s attractiveness,
viewing the region as critical to their own growth, while developed
markets investors were cautious, saying that the region still needed to
develop further.

The African
continent, home to one billion people, had long been ignored by
international investors who only thought of the region in terms of
political instability and corruption.

But as the majority
of the 54 countries which make up Africa embrace democracy and install
reform-minded governments, analysts say the world’s poorest continent
and least tapped frontier markets could fast become a diamond in the
rough.

Ernst& Young
said investments in the continent by African countries grew 21 percent
between 2003-2010, but actual amounts were less than invested by other
emerging economies.

It highlighted the
high levels of risk involved in investing in Africa but said the
profitability levels compensated for the risk and that some sectors had
little competition.

“Despite the
improving perceptions of Africa, it is in competition for the
international capital and resources that will help drive and sustain
growth and social development,” it said.

“It is currently ranked in the same category as Latin America and Eastern Europe in terms of attractiveness for investors.”

REUTERS

The Nigerian Stock
Exchange (NSE) yesterday announced that Adeolu Bajomo, the newly
appointed executive director in charge of the Exchange’s Market
Operations and Information Technology Department, has resumed duty.

The Exchange’s
spokesperson, Wole Tokede, said Mr Bajomo’s resumption from Barclays
Bank, where he worked as the head of Replatforming Programme for Africa
and Indian Ocean region, would be a boost to the management of the
Exchange.

Oscar Onyema, the
chief executive officer of the Exchange, who also resumed last month,
in a statement yesterday said, “This is a key addition to the NSE
management team, and we are excited about the potential to rapidly move
the NSE transformational agenda forward.”

The new executive
director said that he sees his employment at the Exchange as a
privilege and opportunity to use his professional experience spanning
over 23 years to contribute his quota to the growth and development of
his fatherland.

“I am excited about
being back in Nigeria and joining the Exchange at this critical point
of the economic development of our great country. I am looking forward
to contributing to the transformation of the Exchange and repositioning
it for sustainable growth and wealth creation for the benefit of our
operators, and realising its full potential both regionally and
globally,” Mr Bajomo said.

The appointment of
a substantive chief executive officer and executive directors for the
Exchange was part of agenda put in place by the Securities and Exchange
Commission, the capital market regulator, following its intervention in
the management of the Exchange last year.

Trading performance

Meanwhile, the
value of equities at the Exchange yesterday rebounded appreciably after
recording losses on Monday. The Exchange market capitalisation of the
194 First-Tier equities closed yesterday at N8.014 trillion after
opening the day at N8 trillion, reflecting 0.18 per cent or N14 billion
gains.

A total of 27
stocks appreciated in price on Tuesday lower than the 28 recorded the
previous trading day, while 27 stocks depreciated in value higher than
the 23 of last Friday.

Neimeth
International and Custodian & Allied Insurance topped the price
gainers’ table with an increase of five per cent each, to close at
N1.47 and N3.15 per share, respectively. Berger Paints and Cement
Company of Northern Nigeria followed in the chart with an increase of
N4.96 and N4.95, to close at N12.48 and N10.60 per share.

On the flip side,
Glaxo Smithkline and Paints & Coating Manufacturer led on the price
losers’ chart with a loss of 4.96 and 4.92 per cent respectively, to
close at N24.13 and N2.32 per share. Eterna Oil and International
Breweries followed with a decrease of 4.88 and 4.79 per cent, to close
at N4.68 and N5.76 per share.

The Banking
subsector maintained its lead as the most active with 204.857 million
quantities of shares, valued at N1.805 billion. The subsector’s volume
was largely driven by shares of United Bank for Africa, First Bank and
Guaranty Trust Bank.

Restructuring the federal allocation formula is the only way to stem labour unrest in Nigeria, the Lagos State Governor, Babatunde Fashola has said.Mr Fashola said this while addressing members of the Nigerian Labour Congress yesterday at the commemoration of Workers’ Day. He also said some policies of the federal government must be amended as they breach the constitutional procedure.

Every May 1st is designated Workers’Day and member organisations of the Labour Congress had gathered, as usual, at Onikan Stadium yesterday to mark the day,under the theme, “Growing the national economy for job creation and people’s welfare.”

“In order that the newly approved minimum wage to be effective and sustained and for the states and local governments to be able to function and provide basic social services, the adoption and implementation of the recommendation to amend the revenue allocation formula is [a] precondition that will help us stem any labour crises,” he said, adding that “not all states will be able to pay the new wage structure unless there is an urgent amendment of the country’s revenue allocation formula that gives more money to the state and local governments.”

Outdated laws Mr Fashola, for some years, has been very vocal about the need to amend the formula for sharing revenues from the federation account.

He said, the revenue allocation formula, like many other laws in the country, is out-dated in the recent political awakening that has pushed people to demand more services from their government.

He argued that the state governors are at the receiving end of this political agitation as the federal government is far and too removed from them.

“A situation in which the Federal Government currently takes as much as 52.68 per cent of the centrally-collected revenues in the federation Account, leaving the states and local government with 26.72 and 20.60 per cent respectively is not acceptable,” he said, adding that his administration has had to augment local governments’ payroll in order to avert an imminent crisis.

He argued that since public agencies like the Nigerian Port Authority, Nigerian Airways Limited, Nigeria National Shipping Line, Ajaokuta Steel Company, National Insurance Corporation of Nigeria, National Fertilizer

Company of Nigeria, Nigerian Aviation Handling Company, Nigerian Sugar Company among others have all been privatised, there is no meritorious reason for the federal government to still retain more than 50 percent of the country’s revenue.

Mr Fashola also called for strict adherence to constitutional provision by receiving government agencies like the Nigeria National Petroleum Corporation, the Nigeria Customs Services, Federal Inland Revenue Services among others, which he said operates “a policy not backed by the law that allows them defray their operational expenses for revenues collected on behalf of the federation rather than being paid from the federation account”.

“This is a clear violation of section 162, subsection 1 of the constitution”, he said, “The correct and lawful practice is that the operations of these agencies of the federal government must be funded by the federal government from its own budgeted share of the federation account and not by any deduction at source as appears to have been the case.”

Better allocation for states

While proposing that states’ share of national revenue be increased to 42 per cent as recommended by a committee setup by the Governors’ Forum, on which he served as the chairman, Mr Fashola called for an organised labour movement to “demand a more development focused budget that allows us to invest at least 50 per cent of state and federal government budgets in capital projects.”

In his remark, State Chairman of the Trade Union Congress (TUC), Akeem Kazeem, while condemning the recent post-electoral violence that claimed the lives of some youth corps members, said only policies specifically targeted at the working class can lift Nigeria out of the mire of ethnic and religious violence.

He said “the cowardly and dastardly act again has brought to the fore the need for the trade unions and labour movements to take up the driver’s seat in our search for nationhood”.

On his part, the State Acting Chairman of the Nigeria Labour Congress (NLC) Idowu Adelakun urged the Lagos state government to order the immediate payment of gratuity of the thirty-two workers of the

Lagos State Sports Council who retired between 2005 and 2008 because it is the only reward they have for their long service year.

Bank lending should rise significantly in the second quarter of the financial year once the April 2011 elections, which have prompted a slowdown, are over, according to Bisi Onasanya, group managing director and chief executive officer of First Bank Nigeria.

Mr Onasanya told Oxford Business Group (OBG), a consultancy firm, that financial risk exercises undertaken last year by the Central Bank of Nigeria (CBN) and the April elections had both contributed to a dip in loan growth.

Figures show that lending growth turned a corner to reach 5 percent by the end of last year after plummeting in the wake of the 2008 global financial crisis, which was exacerbated in Nigeria by troubles in the domestic banking sector.

“Lending growth was suppressed last year, partly due to a conservative response from banks following the stress test which the CBN conducted in 2010,” he said. “The elections are slowing loan growth for the first half of 2011, but there will be a major increase after elections in April. I expect loan growth of 10 percent in 2011, which is double the 5 percent figure for 2010.”

Businesses face challenges

Mr Onasanya acknowledged that businesses in Nigeria still faced an uphill struggle to obtain credit from banks, despite CBN Governor Lamido Sanusi’s high-profile campaign to encourage growth by stimulating Small and Medium Enterprise financing. He believes banks are unlikely to increase lending to smaller businesses, which are viewed as a higher risk than big corporations, unless lending rules are relaxed.

“Although SMEs have access to some credit, the risk tolerance limit is too high,” he said. “The banks can’t be blamed since they have to meet provisions when the CBN tests their portfolios. The government and the Central Bank should consider implementing risk sharing to increase the flow of credit to higher risk areas.” With bidding for Nigeria’s unhealthy banks drawing nearer, Mr Onasanya highlighted the importance of ensuring that the selling process was clearly laid out in a framework if legal wrangles and lengthy court cases were to be avoided.

Ten of Nigeria’s banks are up for sale after they failed to meet standards set out in an audit undertaken by the CBN in the wake of the 2008 crisis. The move is set to bring consolidation to the sector, with observers expecting the process to reduce the number of players to 15.

“Due process must be followed involving the boards of directors and shareholders,” he said. “Otherwise, if the distressed banks are sold by the CBN rather than by the actual owners, each acquisition will go into irreconcilable litigation.”

By most accounts, agriculture is the mainstay of most African
economies, as experts insist that Africa has what it takes to produce food for
its population of about one billion people and even export food to other
regions of the world. The continent, which is blessed with good weather and
geographical conditions, has the capacity to produce food to feed its
inhabitants, all things being equal.

Agricultural experts, however, note that some regions of the
world, including Africa, have been experiencing a food crisis, as global food
prices spiralled upwards, partly because of rising fuel prices, among other
factors.

The rising food prices have elicited a lot of concern from
observers and agencies such as the World Bank, whose Food Price Index is
currently around its 2008 peak.

Since June 2010, an additional 44 million people fell below the
1.25-US-dollar poverty line as a result of higher food prices, says the latest
edition of World Bank’s Food Price Watch.

The situation may even get worse, as simulations show that a
further 10-percent increase in the food price index could lead to 10 million
people falling into poverty, while a 30-percent increase could increase poverty
by 34 million people.

African economies

However, the situation varies from country to country. The World
Bank publication indicates that low-income and lower-income countries are
experiencing an average 5 percent points’ higher food price inflation, when
compared to better-off countries. A special focus on the Middle East and the
North African region in the publication reveals a double-digit food price
inflation in Iran,

Egypt and Syria, with more moderate levels in other parts of the
region. In spite of the gloomy picture, experts, nonetheless, insist that
Africa has the wherewithal to produce abundant food, attain food security and
even export food to other continents. Calestous Juma, a professor of the
Practice of International Development, Harvard Kennedy School in the US,
belongs to this school of thought.

He stressed that agriculture remained the strength of most
African economies, adding that if agriculture was given priority attention in
Africa, the region had the capacity to withstand the vagaries of rising global
food prices.

Mr Juma, who said this at the recent IMF/World Bank Spring
Meeting at Washington DC in the US, stressed that African leaders should focus
their attention and energy on how to use agriculture to foster the region’s
development.

“Agriculture and economy are one and the same, in the sense that
the African economy is driven by agriculture,” he said, adding:

“Therefore, the countries’ ministers of agriculture ought to be
the presidents to enable them to effectively coordinate agricultural activities.”
Mr Juma reiterated that the rising food prices in Africa could be effectively
curtailed if there was a pragmatic focus on agriculture.

Develop agriculture

Sharing similar sentiments, Ngozi Okonjo-Iweala, the managing
director of the World Bank, urged African leaders to focus more attention on
developing their countries’ agricultural sectors, while making pragmatic
efforts to boost food production.

“I think African countries really have to sustain their efforts
to use agriculture funds to ensure food security,” she said.

Mrs Okonjo-Iweala stressed that the global food crisis had been
haunting the world, adding, however, that virtually all the African leaders had
come to realise the pivotal roles of agriculture in efforts to boost the
economy.

Agnes Edmond, an agriculturist, supported Mrs Okonjo-Iweala’s
sentiments but insisted that greater efforts should be directed at expanding
the people’s access to credit facilities for agricultural ventures.

She noted that most African farmers were hamstrung by their lack
of access to agricultural funding, adding that issues regarding the land tenure
system should also be examined.

“Africa has a lot of contentious issues. Corruption should be
checked, the land tenure system should be properly managed, while farmers
should have little difficulties in accessing credit for farming activities,” Ms
Edmond said.

European shares hit
a two-month high in holiday-thinned trade on Monday on optimism the
earnings season will stay strong in the near-term and in a knee-jerk
reaction to news that al Qaeda leader Osama bin Laden was killed.

Mr Bin Laden’s
death in a shoot-out with U.S. forces in Pakistan on Sunday ended a
nearly 10-year worldwide hunt for the mastermind of the September 11
attacks and prompted equity investors to believe global risk threats
might reduce.

Although analysts
said that the positive impact of the news might be short-lived and
focus will soon shift back to economic fundamentals and company
earnings.

At 0735 GMT, the
FTSEurofirst 300 index of top European shares was up 0.3 percent at
1,160.03 points after touching 1,162.05, the highest since early March.
The Euro STOXX 50 — an index of the euro zone’s top blue chips — was
up 0.3 percent at 3,021.50 points.

The UK stock market was closed for a holiday.

“It’s a
psychological and knee-jerk reaction and we have to see how long it
lasts,” said Koen De Leus, strategist at KBC Securities, referring to
the news of Mr bin Laden’s death.

“The market is also
getting support from earnings, which are good. We have some important
economic figures this week that might set the near-term direction.”
Investors awaited the release of the U.S. Institute for Supply
Management’s manufacturing index at 1400 GMT, U.S. jobless claims
figures on Thursday and non-farm payrolls numbers on Friday.

Across Europe,
France’s CAC 40 gained 0.5 percent, while Germany’s DAX rose 0.9
percent to its highest level in more than three years.

“Last week and this
week taken together, more than two thirds of the DAX companies will
report. In these two weeks, the chances for a test of the equity
market’s leeway on the upside will be better than in the weeks to
come,” said Tammo Greetfeld, equity strategist at UniCredit in Munich.

“Going forward, the
newsflow is unlikely to live to high expectations given a number of
burdening factors that have accumulated,” he said, referring to factors
such as a rise in oil prices, more and more central banks raising
interest rates, cyclical indicators which are past their peak, the
catastrophe in Japan and the euro zone debt crisis.

Among individual
movers, Demag Cranes surged 22 percent after U.S. crane maker Terex
said it would launch a takeover offer for its German rival in an 884
million euro bid.

Danish food
ingredients and enzymes maker Danisco gained 4.3 percent after its
board of directors unanimously recommended that Danisco shareholders
accept DuPont’s improved offer for Danisco.

On the downside,
Actelion fell 5 percent after the company said it may appeal against a
jury’s decision in a Californian court to award Asahi Kasei Pharma
Corporation up to $547 million in a dispute with Actelion unit CoTherix.

TNT was down 3.8
percent after reporting a worse than expected performance in its mail
unit, adding to woes in its global express division.

Oil prices fell more than 3 percent on Monday after U.S. forces
killed al-Qaeda leader Osama bin Laden after a decade of military operations
across central Asia and the Middle East.

ICE Brent crude futures for June fell $4.22 to a low of $121.67
a barrel before recovering some ground to trade around $122.85 by 0942 GMT.
Last month Brent hit a 32-month high above $127.

U.S. crude slid $2.40 to $111.53. Early futures market volume
was depressed by a public holiday in Britain and several other countries, which
may have added to price volatility, oil brokers said.

The oil market focused on whether the news would help unwind the
risk premium attached to prices because of war in Libya and unrest in the
Middle East and North Africa.

“There’s probably a knee-jerk reaction to the extent that part
of the geopolitical risk has been supported by al-Qaeda, so there will be an
initial sell-off,” said Jeremy Friesen, commodity strategist at Societe
Generale.

Economists including David Cohen from Action Economics warned
that in the near term, Mr bin Laden’s killing might trigger a violent response
by al-Qaeda, but analysts said it was unlikely the network would succeed in
disrupting oil supplies.

The closest al-Qaeda has been to hitting the oil industry was on
February 24, 2006, when Saudi forces repelled a suicide attack on the Abqaiq
oil-processing centre, the world’s largest.

The U.S. Department of Homeland Security (DHS) and the FBI have
not issued any warning of a credible or imminent threat, but President Barak
Obama warned Americans to remain vigilant.

“Temporary”

Thorbjørn Bak Jensen of Global Risk Management suggested the
initial sell-off was unlikely to last.

“We regard the reactions as temporary as nothing fundamentally
new is really on the table. If anything it might be a good idea to secure oil
costs,” he said.

Oil was already down before the bin Laden news, after NATO air
strikes over the weekend killed one of Libyan leader Muammar Gaddafi’s sons and
industry sources said Saudi Arabia raised output in April.

Mr Gaddafi’s youngest son and three grandchildren were killed in
a NATO air strike, the Libyan government said on Sunday. Britain said that
while it was not targeting the leader, it was homing in on the regime’s
military machine.

“What’s happening in Libya is probably an event that will see
Gaddafi moved out of his position, so the risk premium which relates to Middle
East concerns will start to erode,” said Jonathan Barratt, head of Commodity
Broking Services.

Saudi Arabia’s crude oil output edged back up in April to around
8.5 million barrels per day (bpd) from roughly 8.3 million bpd in March as
demand picked up, Saudi-based industry sources said on Sunday.

The dollar strengthened by around 0.2 percent on Monday
following last week’s slide, deterring investors from piling into commodities
this week and triggering a 10 percent plunge in spot silver prices.

Money managers increased their bets on higher U.S. crude oil
prices to a combined record level in New York and London in the week to April
26, data from the CFTC showed on Friday, as U.S. prices rose to their highest
level since September 2008.

Volatility and uncertainty due to the pan-Arab protests and
Libya’s conflict have tempered oil trading. The U.S. 30-day average volume was
down by nearly 130,000 lots compared with the 250-day average at the end of
last week, Reuters data showed.

Oil prices fell more than 3 percent on Monday after U.S. forces
killed al-Qaeda leader Osama bin Laden after a decade of military operations
across central Asia and the Middle East.

ICE Brent crude futures for June fell $4.22 to a low of $121.67
a barrel before recovering some ground to trade around $122.85 by 0942 GMT.
Last month Brent hit a 32-month high above $127.

U.S. crude slid $2.40 to $111.53. Early futures market volume
was depressed by a public holiday in Britain and several other countries, which
may have added to price volatility, oil brokers said.

The oil market focused on whether the news would help unwind the
risk premium attached to prices because of war in Libya and unrest in the
Middle East and North Africa.

“There’s probably a knee-jerk reaction to the extent that part
of the geopolitical risk has been supported by al-Qaeda, so there will be an
initial sell-off,” said Jeremy Friesen, commodity strategist at Societe
Generale.

Economists including David Cohen from Action Economics warned
that in the near term, Mr bin Laden’s killing might trigger a violent response
by al-Qaeda, but analysts said it was unlikely the network would succeed in
disrupting oil supplies.

The closest al-Qaeda has been to hitting the oil industry was on
February 24, 2006, when Saudi forces repelled a suicide attack on the Abqaiq
oil-processing centre, the world’s largest.

The U.S. Department of Homeland Security (DHS) and the FBI have
not issued any warning of a credible or imminent threat, but President Barak
Obama warned Americans to remain vigilant.

“Temporary”

Thorbjørn Bak Jensen of Global Risk Management suggested the
initial sell-off was unlikely to last.

“We regard the reactions as temporary as nothing fundamentally
new is really on the table. If anything it might be a good idea to secure oil
costs,” he said.

Oil was already down before the bin Laden news, after NATO air
strikes over the weekend killed one of Libyan leader Muammar Gaddafi’s sons and
industry sources said Saudi Arabia raised output in April.

Mr Gaddafi’s youngest son and three grandchildren were killed in
a NATO air strike, the Libyan government said on Sunday. Britain said that
while it was not targeting the leader, it was homing in on the regime’s
military machine.

“What’s happening in Libya is probably an event that will see
Gaddafi moved out of his position, so the risk premium which relates to Middle
East concerns will start to erode,” said Jonathan Barratt, head of Commodity
Broking Services.

Saudi Arabia’s crude oil output edged back up in April to around
8.5 million barrels per day (bpd) from roughly 8.3 million bpd in March as
demand picked up, Saudi-based industry sources said on Sunday.

The dollar strengthened by around 0.2 percent on Monday
following last week’s slide, deterring investors from piling into commodities
this week and triggering a 10 percent plunge in spot silver prices.

Money managers increased their bets on higher U.S. crude oil
prices to a combined record level in New York and London in the week to April
26, data from the CFTC showed on Friday, as U.S. prices rose to their highest
level since September 2008.

Volatility and uncertainty due to the pan-Arab protests and
Libya’s conflict have tempered oil trading. The U.S. 30-day average volume was
down by nearly 130,000 lots compared with the 250-day average at the end of
last week, Reuters data showed.