As part of its commitment to boost profitability and improve shareholders value, Seplat Petroleum Development Company Plc has announced plans to exceed $500 million capacity investment in gas business by the end of 2016.
The company has also set full year production guidance target of 41,000 to 48,000 barrel per day with capital expenditures of about $130 million.
Addressing shareholders during the company’s yearly general meeting in Lagos yesterday, the Chairman of the company, Dr ABC Orjiako explained that the company’s investment in gas business in 2014 stood at $300 million.
“Our gas commercialisation is what distinguishes us from others. We are dually listed which makes us an international brand, visible to internatiional scrutiny with high level of corporate governance
“This enables the company become attractive entities to investors in all parts of the world and have quick access to capital for project execution”.
The chairman pointed out that the company in 2015 completed and commissioned the Oben gas plant phase 1 expansion programme which doubled its gross processing capacity to 300 MMscfd (million standard cubic feet) while assuring shareholders that the company would continue to deliver good returns, amid harsh operating environment.
“The Oben gas plant phase 11 expansion is underway with additional processing modules ordered. Once installed, the additional processing modules will take gross processing capacity to an expected minimum level of 525 MMscfd,” he said.
Concerning the Niger- Delta unrest, he said that the company would continue to engage its host community to avoid disruption of its operations, adding that company had restrategised to mitigate export of resources through alternative channels.
Also speaking at the event, the company’s Chief Executive Officer, Austin Avuru said that the company in 2015 acted quickly and decisively in response to the weak oil price environment by adjusting on its work programmes and cost structures.
Avuru, however noted that the company’s 2016 full year production expectation had been impacted by the current shut-in of the Forcados terminal.
He expressed optimism that the company is well positioned currently to withstand interruptions than in prior years. He said that the company would focus on protecting the business and managing value through effective cost reductions, optimising operations, deleveraging and strengthening the balance sheet.
Avuru added that the strategies would position the company to take advantage of opportunities that would inevitably follow the current downturn.
The company’s revenue declined by 35 per cent in the first quarter to N16.59 billion from N25.56 billion while profit before tax also dipped by 161.7 per cent from N4.83 billion to a loss before tax of N2.98 billion.
The directors of the company are however, recommending a final dividend of N7.92 ($0.04) per share, bringing the total dividend payment for 2015 to N15.84 ($0.08) per share.
Also, for the year ended December 2015, its gross revenue stood at N112.86 billion ($570 million), down 26 per cent year-on-year, while net profit for 2015 stood at N13.27 billion ($67 million) and cash flow from operations before movements in working capital stood at N37.62 billion ($190 million) against capital investments of N301 billion ($152 million).
The Chairman, Zenith Bank Plc, who is also the founder Jim Ovia Foundation, Mr. Jim Ovia, wednesday attributed the lack of efficient broadband required for speedy telecommunications service as one of the reasons Visafone was sold to South African telecommunications firm, MTN.
He did not however disclose how much the outfit was sold to MTN.
Speaking at the Digital Africa conference and exhibition 2016 organised by Digital Africa Global Consult in Abuja, Ovia stressed that without adequate technology infrastructure to power constant connectivity, Internet of Things (IoTs) would be difficult to achieve.
He said: “We have a lot of devices some of which will be dead equipment. Connectivity is very important and without it, internet of things or internet of everything cannot take place. I wouldn’t say that connectivity is the most important thing, but it is extremely very important.
“In some of this connectivity you need it by way of broadband or by way of fibre optics to give you the broadband or may be a wireless. Or may be the spectrum of between 700-800 MGHz that gives you the broadband speed that you need today, and so you can now understand why Visafone eventually sold its network to MTN.”
According to him, the reason there were so many complaints was because of the resource availability that Visafone had, which had to do with the broadband, he added.
He said policymakers must ensure that Nigeria is not left behind in the technological development of the future, adding that during the great industrial revolution, Africa was left behind.
Ovia added that the present technology that enables economy to flourish is so pervasive that nobody can be restricted as students can now have access to information like their counterparts in South Africa, Russia and other places in the world.
In his remark, the Minister of Communications Technology, Mr. Adebayo Shittu, who was represented by the Director of Information and Communications Technology (ICT), Mrs. Moni Udorh, said the administration would not fail in using ICT to drive the economy.
The minister said: “We have been doing everything possible in this direction. If we continue on this path, ICT should be contributing between 20 and 30 percent to the country’s Gross Domestic Product (GDP) in few years’ time. We will strive to make it happen.”
On government’s plan to establish an ICT University, he said: “We also have plans to create ICT-focused university. We have discovered that many of the youths lack requisite skills to compete in the international market. The university will bridge the skills gap.”
While making his contribution, the Chairman of Digital Africa Consult, Mr. Evans Woherem, said since inception of the annual event in 2013, global ICT experts have been provided a platform in the annual event to highlight the avalanche of challenges inhibiting Africa’s efforts at embracing evolving technologies and proffer solutions on how to get out of this digital doldrums.
He said: “The conference provides access to a captive audience eager to understand where the consumer ecosystem currently is, and where the opportunities lie. Also, it is an important platform to network, share knowledge on the latest developments in the technology ecosystem, do business, and sign deals.”
According to him, the 2016 edition has as its theme accelerating Africa’s Development through Internet of Everything (IoE). He added that suddenly, the Internet of Things or Internet of Everything has become the revolutionary technology trend in the world today.
Nigeria lost at least $565.6m (N111.4bn) to alleged irregularities and other questionable practices during the 2005, 2006 and 2007 oil block bidding, an ad hoc committee of the House of Representatives stated in Abuja on Wednesday.
The committee, acting on information it obtained from the Department of Petroleum Resources, noted that some firms that won licences merely made part payments and left the balance unpaid.
The committee, which is chaired by Mr. Gideon Gwani, is investigating Oil Prospecting Licences, Oil Mining Leases and other oil and gas assets granted by the Federal Government.
A member of the committee from Bayelsa State, Mr. Diri Nouye, for instance, queried the decision of the DPR to allow such outstanding payments in breach of regulations and resulting in losses to the government.
“Why was this outstanding allowed? Was it that the blocks were not producing? By the submission of the DPR, it means that for 2005 to 2007, the country lost over $565.6m. This is a monumental loss of revenue,” he said.
The committee also discovered that many firms that actively participated in the bids and won were later short changed, as the blocks were awarded to companies that did not participate in the process.
The committee cited OPLs 917, 226, 227, 280 and 278 as examples.
Speaking specifically on the case of OPL 280, Gwani pointed out how another firm came after the close of proceedings to pay $55m for a block that was originally offered for $210m.
According to him, Tankers Systems Engineering Nigeria actually participated and won the bid for $210m.
However, it reportedly paid only $21m, as a result of which the offer was terminated on January 1, 2006.
Gwani stated, “The President ordered the cancellation of the offer and Sterling Global came and paid $55m to assume ownership.
“The question now is what happened to the balance? How did Sterling Global, which did not participate in the bid, win it and with a generous 75 per cent difference?”
Besides, the committee noticed that most of the awards violated key provisions of the Petroleum Act, especially Sections 1 (42) and 2(3) where it was stated that “the term of an oil mining lease shall not exceed 20 years, but may be renewed in accordance with the Act.”
Gwani also quoted Section 12(1), which states, “Ten years after the grant of an oil mining lease, one-half of the area of the lease shall be relinquished to the basket or the holder can apply for re-allocation of a part or the whole acreage.”
But, lawmakers said these provisions were breached, leaving a situation whereby bid winners held on to the blocks after the expiration of the 10 years without re-negotiating the deals with the government.
However, in a presentation to the committee, the DPR gave several excuses, including claims that litigation stalled efforts to reclaim some of the wells after the expiration of the 10 years.
Some members of the Organisation of Petroleum Exporting Countries including Saudi Arabia are looking to revive the idea of coordinated oil-output action by major producers when the group meets today (Thursday) in Vienna.
A senior OPEC source was quoted by Reuters to have said this, but Iran signalled the country was not ready for any such pact.
“The Gulf Cooperation Council is looking for coordinated action at the meeting,” the source said, referring to a group combining OPEC’s biggest producer Saudi Arabia and its Gulf allies, namely, Qatar, Kuwait and the United Arab Emirates.
Saudi Arabia effectively scuppered plans for a global production freeze – aimed at stabilising oil markets – in April. It said then that it would join the deal, which would also have involved non-OPEC Russia, only if Iran agreed to freeze output.
Iran has been the main stumbling block for OPEC to agree on output policy over the past year as the country boosted supplies despite calls from other members for a production freeze.
The country argued that it should be allowed to raise production to levels seen before the imposition of now-ended Western sanctions over its nuclear programme.
On Wednesday, Iran said its position had not changed and even though its exports were rising quickly, it was too early for Tehran to join such a pact – meaning it would need an exemption, which Saudi Arabia has repeatedly resisted.
“Iran supports OPEC’s efforts to bring stability to the market with fair and logical prices, but it will not commit to any output freeze,” Iran’s representative to OPEC, Mehdi Asali, was quoted as saying by Iranian oil ministry news agency SHANA.
“The issue of output rationing can be discussed after the market stabilises,” Asali said.
A source familiar with Iranian thinking said Tehran was not willing to discuss a freeze as Iran had yet to reach pre-sanctions output levels.
At its previous meeting in December 2015, OPEC failed to set any production policy including a formal output ceiling, effectively allowing its 13 members to pump at will in an already oversupplied market.
As a result, prices crashed to $27 per barrel in January, their lowest in over a decade, but have since recovered to around $50 due to global supply outages.
Those include declining production from US shale producers badly hit by low prices but also forest fires in Canada, militant attacks on pipelines in OPEC member Nigeria and declining output in Venezuela, also a member of the group.
Nigerian officials are meeting bond investors in London next week, according to a person familiar with the matter, as the government considers tapping international debt markets for the first time in three years to help finance its record budget deficit.
Minister of Finance Kemi Adeosun will head the meetings on June 7, which have been arranged by Standard Chartered Plc, according to the person, who asked not to be identified because they’re not authorised to comment publicly.
According to Bloomberg, the Director General of the Debt Management Office, Abraham Nwankwo; an adviser at the finance ministry, Dami Adesanya, and a representative of the central bank will be part of the Nigerian delegation.
The talks will probably focus on Nigeria’s currency controls and its policy of pegging the naira against the dollar, according to Standard Life Investments Limited, which manages around $1.3 billion of fixed-income assets in emerging markets.
The curbs have exasperated investors, who say the currency is overvalued, and cause investment into Africa’s largest economy to shrivel.
President Muhammadu Buhari and Central Bank Governor, Godwin Emefiele hinted in the past two weeks that they will shift their stance and allow more flexibility.
“A lot of Nigeria’s problems today can be traced back to the pegged exchange rate,” a money manager at Standard Life, which has recently bought Nigerian Eurobonds in anticipation of a devaluation, Mark Baker said by phone from London.
“The current policy mix is clearly unsustainable, given what’s happened with oil prices and the impact on the fiscal position. A weaker currency is obviously needed to help boost fiscal revenues.”
The government said earlier this year that it plans to raise about $5 billion of external debt in 2016 to help fund a N6.1 trillion ($31 billion) budget that’s meant to stimulate its contracting economy. Adeosun said in April that Nigeria was considering a debut yuan-denominated bond as it may be cheaper than dollar-debt.
Nigeria’s external reserves fell by 2.65 per cent to $26.42bn on May 27, the Central Bank of Nigeria statistics showed on Tuesday.
The reserves stood at $27.15bn a month ago.
The foreign exchange reserves have dropped by over 10 per cent from last year when they were at $29.7bn.
The global plunge in oil prices has caused the reserves to be depleting very fast. The development has forced the CBN to introduce foreign exchange controls, which have frustrated businesses and caused the economy to contract.
The CBN’s Monetary Policy Committee had last Tuesday announced plans to adopt a flexible exchange rate policy as the external reserves fell to $26.56bn as of May 23.
Investors, businesses and stakeholders in the economy are passionately awaiting the details of this plan, which the CBN hopes to release soon.
The external reserves had lost over $2bn dollar this year.
Nigeria recorded a balance of payments deficit of 1.4 per cent in its Gross Domestic Product at the end of 2015, owing largely to its first current account deficit (three per cent of the GDP) in over a decade.
As a result, external reserves dropped by $6bn to $28.4bn in December 2015, Moody’s Rating said in a report recently.
Analysts said the CBN’s decision not to devalue the naira had led to the sharp drop in the external reserves.
But they lauded the MPC’s plan to adopt a flexible exchange rate policy, noting that the move would help to boost forex inflow into the country.
An economist and Chief Executive Officer, Financial Derivatives Company Limited, Mr. Bismarck Rewane, who hailed the MPC’s decision on the exchange rate policy, said adopting flexible exchange rate policy would eliminate the fears foreign investors nursed about the Nigeria’s forex policy.
According to him, the decision may make the naira to depreciate initially but it will find its equilibrium price against the dollar and other major currencies over time.
Rewane said, “The CBN has finally come to terms with economic reality. This is what we have been talking about in the last one year – a managed floating exchange rate regime.”
He added, “This is what we need. It will bring in transparency to the forex market; eliminate the fears investors have been nursing about devaluation and encourage inflow of forex into the country.”
Another economic analyst and Head, Investment Advisory, Sterling Capital, Mr. Sewa Wusu, who also hailed the MPC decision, said, “The muted economic growth was traceable to structural issues such as scarcity of forex and fuel. The MPC’s latest decision on the exchange rate will help stimulate growth. It is a right move.”
Jaiz Bank Plc on Tuesday declared a profit after tax (PAT) of N794.2 million the for 2015 financial year, representing an increase of 576 percent when compared with N126.8 million recorded in the previous year.
Chairman, Jaiz Bank, Alhaji Umaru Abdul Mutallab said the performance demonstrated continued growth and operational efficiency as the bank’s finance income also grew by 47 percent to N4 billion from N2.72 billion in 2014.
Speaking in Abuja at the bank’s fourth annual general meeting (AGM), he said the bank’s total assets closed at N52.6 billion compared to N44 billion the previous year.
He said customer deposit base further closed at N38.7 billion for the 2015 financial year with current account and customers’ investment account deposits showing strong growth of 43 percent and 39 percent, and valued at N15.5 billion and N23.2 billion respectively.
He said: “In the next five years, I see this bank (Insha Allah) in every nook and cranny of this country and other sub-Saharan African countries. In sub-Saharan West Africa, there’s still the big problem of paucity of banking services. The small and medium scale enterprises (SMEs) do not have adequate access to financial services. So this bank wants to champion the funding of small and medium scale enterprises.”
Also, outgoing Managing Director of the bank, Mr. Mahe Abubakar said the bank had provided financing worth N25.39 billion to 1,507 customers in 2015 from 1,076 customer in 2014.
He added that the bank has had to reduce its expenses to the nearest minimum to mitigate the effect of the difficult business environment, preserving its asset value and increasing income streams to safeguard the interest of shareholders through a robust risk management framework.
He said: “With this major milestone achievement, we face 2016 with a lot of optimism to deliver significant level of profitability that will see us pay dividend by the end of year 2017.”
Meanwhile, the Board of Directors of the bank at its AGM appointed Mr. Hassan Usman as substantive Managing Director to run the affairs of the bank subject to the approval of Central Bank of Nigeria (CBN). The decision was reached after a rigorous selection exercise where seasoned Islamic bankers within and outside the country were screened and interviewed.
Usman is taking over from Abubakar who had been acting since December 2015. However, Usman is not new to this position as he had previously acted as Managing Director in 2013.
The National Bureau of Statistics said on Tuesday that the country recorded a decline of N793.5bn in the first quarter merchandise trade to close at N2.72tn from N3.51tn in the fourth quarter of 2015, the first time in the last seven years.
The bureau, in the trade statistics report released on Tuesday, said the drop in the first quarter trade represented a decline of about 22.6 per cent over what was recorded in the preceding quarter.
It attributed the decline in the first quarter trade to a sharp drop in both import and export trade.
For instance, the report stated that while the country experienced a decline of N671.1bn, representing 34.6 per cent, in the value of exports, imports also dropped by N122.4bn or 7.8 per cent.
The report noted that the difference between the country’s total exports, which was put at N1.269tn, and total imports of N1.454tn made Nigeria to record a negative trade balance of N184.1bn in the first quarter.
The report read in part, “The total value of Nigeria’s merchandise trade at the end of Q1 2016 stood at N2.72tn. From the preceding quarter’s value of N3.51tn, this was N793.5bn or 22.6 per cent. This development arose due to a sharp decline in both imports and exports. Exports saw a decline of N671.1bn or 34.6 per cent, while imports declined by N122.4bn or 7.8 per cent.
“The steep decline in exports brought the country’s trade balance down to -N184.1bn, or N548.7bn less than in the preceding quarter.
“The crude oil component of the total trade decreased by N716.7bn or 46.6 per cent against the level recorded in Q4 2015.”
The report explained that the import trade stood at N1.45tn at the end of the first quarter of 2016 as against the preceding quarter’s value of N1.57tn.
The structure of Nigeria’s import trade, according to the report, was dominated by the import of machinery and transport equipment, fuel and chemical-related products.
These, the NBS report stated, accounted for 34.7 per cent, 17.4 per cent and 14.7 per cent, respectively.
On the other hand, the report stated that commodities such as oils, fats and waxes; beverages and tobacco contributed the least, accounting for 1.5 per cent, 0.8 per cent and 0.6 per cent, respectively.
In terms of exports, the report revealed that the highest export product for Nigeria in the first quarter was mineral products, which accounted for N1.05tn or 83 per cent of the total export earnings.
Further analysis of the report showed that in terms of exports by continent, Nigeria mainly exported goods to Europe and Asia, which accounted for N467.1bn or 36.8 per cent and N360.6bn or 28.4 per cent, respectively.
Furthermore, Nigeria exported goods valued at N161.3bn or 12.7 per cent to the continent of Africa, while that of the Economic Community of West African States was put at N50.4bn.
Financial analysts blamed the negative trade balance recorded in the first quarter of 2016 on the country’s inability to formulate an effective strategy to boost exports.
They also said the inability of exporters to know the economic direction of the government owing to the delayed passage of the 2016 budget as well as overdependence on revenue from oil were some of the major reasons for the decline in merchandise trade.
The Head, Banking and Finance Department, Nasarawa State University, Uche Uwaleke, said the negative trade balance recorded at the end of the first quarter of 2016 and the fact that a significant proportion of the exports were mineral products underscored the need to diversify the export base.
He said. “The fact that imports declined by just 7.8 per cent speak volumes of the weak elasticity of imports in spite of the high exchange rate. This revelation goes to buttress my position that devaluation of the naira will not make any significant impact on our trade balance given the inelastic nature of imports and the country’s shallow export base.
“The NBS report also shows that the bulk of Nigeria’s imports is from China. By implication, a lot of pressure will be taken off the dollar if the Nigeria-China agreement on yuan transactions is well implemented.
“The naira will also firm up as a direct consequence of settling imports from China in yuan instead of the dollar.”
Also reacting to the negative trade balance for the first quarter, the President, National Association of Nigerian Traders, Ken Ukaoha, said a lot of factors contributed to the development.
He said, “We have for so long remained import-dependent; we have also continued to cultivate a mono product economy, which is oil, and our earnings from oil is presently disappointing. Apart from the fact that the price of oil is depreciating, you also find out that the quantity of our export is going so terribly low as a result of vandalism.
“In terms of other non-oil exports, the country has still not yet got its act together. This is because diversification, which should have pioneered our exports, has not been effective. As we speak today, we don’t have a trade policy in place and we don’t have an export strategy in place.
“We are talking about import substitution, but all the strategies needed there are not in place. Also, the delay in the passage of the budget made all the private sector operators who are major players in exports to relax waiting for the budget passage in order to know the next line of action.”
On what could be done to reverse the trend, Ukaoha said the National Economic Management Team should as a matter of urgency come up with a trade policy.
Other economic experts said the negative trade balance meant the nation would likely record a severe negative balance of payment for the first quarter of this year.
This, they said, had serious negative consequences for the economy as the nation’s external reserves would deplete further.
“The implication of a negative trade balance for a country that does not have invisible imports is that we are going to have a severe negative balance of payment; the implication of this is that our external reserves will deplete further because we will need to use much of it to pay for imports,” the Chief Executive Officer, Cowry Asset Management Limited, Mr. Johnson Chukwu, said.
He advised the Federal Government to develop a strategy to grow non-oil exports in the face of the global plunge in oil prices.
The Head, Investment Research, Afrinvest, an investment bank and research firm, Mr. Ayodeji Ebo, said the negative trade balance further buttressed the challenges facing the economy.
While linking the decline in imports to the Central Bank of Nigeria’s restrictive foreign exchange policy, the expert said the decrease in exports could be linked to the sharp drop in global oil prices and production.
“It is a further call on the CBN to implement the flexible exchange rate policy it has announced. This will help to boost exports,” Ebo added.
Nigeria, which recently lost its Africa’s top oil producer status to Angola on the back of huge decline in its output, stands a chance of losing some of its traditional buyers to rival producers such as Iran and Saudi Arabia, industry experts have said.
Following the spate of production disruptions largely caused by the recent upsurge in militant attacks on oil infrastructure in the Niger Delta that have cut Nigeria’s output to the lowest in almost three decades, exports of the commodity from the country have taken a serious beating.
The nation relies heavily on earnings from oil exports, and the production cuts come as an additional headache for an economy that is already suffering from the sharp drop in oil prices since 2014.
Currently, four of the nation’s five largest export streams have been totally suspended as Forcados, Qua Iboe, Bonny Light and Brass River are under force majeure – a legal clause that allows the exporters to stop shipments without breaching contracts.
All but that of Qua Iboe was as a result of militant attacks.
Iran, which is engaged in a battle for market share in a bid to regain customers after years of curbed oil sales that crippled its economy, has ramped up its production and exports. Saudi Arabia, the biggest producer in the Organisation of Petroleum Exporting Countries, does not look set to rein in production.
An oil expert and Professor of Law and Co-Director, Institute for International and Immigration Law, Thurgood Marshall School of Law, Texas Southern University, United States, Emeka Duruigbo, in an emailed response to questions from our correspondent, said, “There is a real struggle to acquire or maintain market share by existing or fully returning players, notably Iran and Saudi Arabia.
“Venezuela is facing severe budgetary constraints verging on an economic calamity, a problem that can be ameliorated by extra income from additional oil sales, especially outside its OPEC quota.”
While noting that the US had recently removed a decade-long prohibition on export of crude oil, Duruigbo said, “Any opening created by Nigeria’s inability to meet its supply commitments is an invitation to these countries to exploit the gap and leverage their strengths. I would be deeply concerned if I were manning Nigeria’s economic ship at the moment.”
The Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, had on May 16 put the drop in the nation’s oil output at 800,000 barrels per day following attacks and disruption of production in the Niger Delta.
With more disruptions seen since then, the nation’s output is said to have plunged by about 1.1 million bpd.
The Head of Energy Research, Ecobank Capital, Mr. Dolapo Oni, said, “Since that supply is no longer available for the market, it will give room for other producers such as Iran and Saudi Arabia to ramp up production and fill the gap. And that is what I expect to happen.
“There is a risk that Nigeria may lose its market share to those countries. But countries such as India like Nigerian crude,” he said, adding that other buyers in Asia such as Malaysia and Singapore might turn to other producers for their imports.
Iran is fulfilling its pledge to raise oil production and exports almost six months after western sanctions on the nation were lifted, surprising many analysts and commentators, the Financial Times reported last week.
Oilfields in the country pumped almost 3.6 million bpd in April, a level last reached in November 2011 before sanctions over its nuclear programme were tightened, said the International Energy Agency. Crude exports surged to two million bpd last month, just 200,000 bpd below late 2011 levels.
Iran was said to have shipped more crude oil to India, China and other countries it was permitted to sell to under sanctions. It has also re-established relationships with European buyers and secured new sales agreements with big international oil traders such as Vitol and Glencore, as well as energy majors such as Repsol of Spain.
Meanwhile, imports of Nigeria’s Liquefied Natural Gas by Japan fell by 22.3 per cent from a year earlier to 143,347 metric tonnes in April, according to Platts.
Japan’s LNG imports reached 6.4 million metric tonnes in April, down 3.3 per cent from a year ago, led by lower supply from Qatar and Nigeria, data released on Friday by the Ministry of Finance showed.
The International Institute for Petroleum Energy Law and Policy (IIPELP) has said Nigeria would refine up to 1.3 million barrels of crude oil daily (mbpd) by 2023 to meet the fuel demand of her growing population.
IIPELP, an energy law and policy think-tank disclosed this in its recent policy analysis and brief on the government’s review of operations in the country’s downstream, which saw it increase petrol pump price.
The policy brief was obtained by THISDAY in Abuja. It contained amongst other things, the Institute’s support for the government decision on the downstream sector, but called for deeper policy thrusts.
It said at the country’s current crude oil production level, such demand would be huge on the country, hence, the need for proactive policy measures to avert possible instances of energy crisis.
“In IIPELP’s analysis, by 2023, given the current rate of growth, Nigeria’s refining capacity would have to grow to 1.3 million barrels of oil per day which currently exceeds government entitlement crude under current fiscal arrangements.
“This means that Nigeria would need to import crude to feed potentially an expanded refinery capacity or compel its partners’ entitlement crude to be delivered to the domestic market,” said the institute in the brief. It explained its choice to support government’s recent move in the downstream sector saying: “IIPELP welcomes the move by the federal government, though belatedly, to restore some semblance of macro-economic stability in the country.
“Going by the latest news of a possible devaluation of the currency, these steps would enable sound economic management and encourage genuine investors.”
It further said: “The removal of subsidy or shall we say, the adjustment of petroleum products prices to reflect an exchange rate closer to reality should allow for the country to be served by oil companies other than NNPC.
IIPELP has always believed that the way to reform the petroleum sector or any other sector is to incentivise supply and this can only be done when there are potentially, multiple sources of that supply and investment decisions can be made on a sound economic basis.”
The Institute added that between 2010 and 2014, Nigeria spent in excess of ₦7 trillion on a subsidy programme it said was widely fraudulent.
It added: “In the process, the country exhausted its “excess crude account” and increased domestic borrowing from ₦4trillion as at 2010 to ₦11 trillion as at end of the year 2014.” Subsidy in Nigeria, it explained represented the largest wealth transfer scheme from the poor to the wealthy ever invented.
It said in its advice to the government on the best way to manage the process: “It is trite that the liberalisation of the downstream petroleum sector is both a necessary and sufficient condition for Nigeria’s economic development. “However, it is apt to state here that this policy has had a track record of success in countries where there is economic transparency, fiscal discipline and consolidation.”
“IIPELP’s position is that this decision of the government will be akin to “chasing shadows” if these policies are introduced, as they have, without a complementary emphasis on fiscal discipline and strong institutional governance. “Worthy of note is the fact that fiscal discipline goes beyond simply fighting corruption activities by past leaders in the country, this is only a part of it. A good fiscal discipline framework should and must be non-partisan,” it added.
