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N820bn Oil Revenue Under Threat as Exports Drop

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Silhouette of oil platform in sea against moody sky at sunset

The proposed oil revenue in the 2016 budget presented by President Muhammadu Buhari to the National Assembly about three weeks ago is facing a setback as the nation’s crude exports begin to fall amid further slide in global oil prices.

Industry analysts also say crude oil production in the country will continue its decline this year, meaning lower revenue for the government.

Nigeria, Africa’s top oil producer, relies on crude oil for most of its export earnings and government revenue.

Buhari had in the 2016 to 2018 Medium Term Expenditure Framework and Fiscal Strategy Paper sent to the National Assembly for this year’s budget said oil-related revenues were expected to contribute N820bn.

But the total exports of Nigerian crude oil are expected to slide in February after reaching a three-month high in January, Reuters reported, citing a compilation of loading programmes.

The export programme for Brass River crude, which was under force majeure, had not yet been issued as of Friday, leaving just 56 cargos for a total of 53 million barrels planned for February loading.

While a Brass River programme is expected once the force majeure is lifted, it will not enable February exports to reach the 61.7 million barrels initially planned for January.

The Atlantic Basin was said to be still oversupplied with oil and there were at least a dozen January loading Nigerian cargos looking for outlets.

The country’s output declined by 50,000 barrels per day in December due to disruptions to exports from the Brass River and Bonny production streams, a Reuters survey found out.

The President projected crude oil production of 2.2 million bpd and a benchmark price of $38 per barrel for this year’s budget, down from 2.2782 million bpd in 2015 budget.

The Head, Energy Research, Ecobank Capital, Mr. Dolapo Oni, who noted that the country’s oil production declined significantly last year, said, “Our production is really having issues, and I think it might be worse in 2016. Our production is likely to reduce this year.

“There are not as many fields likely to come on stream this year. Most companies just want to focus on their existing production. So, it is possible we won’t see as much new production come on stream to reverse the trend of decline in major fields we have. That might make production go down.”

He predicted that he nation’s oil production might fall to 1.9 million bpd on the average this year, compared to 2.2 million bpd and 2.1 million bpd in 2014 and 2015, respectively.

“This is worrisome for the government revenue because the budget is benchmarked on 2.2 million bpd production,” Oni said.

The global benchmark Brent crude on Wednesday dropped below $35 per barrel for the first time since July 2004 amid the ongoing row between key producers, Iran and Saudi Arabia, and after a sharp rise in United States’ gasoline inventories.

With the further slide on Wednesday, Brent was more than $3 per barrel lower than Nigeria’s proposed crude oil benchmark price for this year’s budget.

Brent fell to $34.52 per barrel from $36.42 per barrel the previous day amid growing global supply glut of crude.

The supply glut in the world oil market, which is said to be oversupplied to the tune of two million bpd, is expected to be exacerbated by the full return of Iran to the market after the expected lifting of Western sanctions.

There have been calls in some quarters for a downward review of the $38 per barrel oil benchmark price.

The Chairman, Trade Union Congress of Nigeria, Rivers State Chapter, Mr. Chika Onuegbu, said, “More worrisome is that some analysts, including the International Monetary Fund, have projected that crude oil will fall to $20 per barrel in 2016. Also, Goldman Sachs insists that the fall in crude oil price will be sustained and oil price will fall to $20 per barrel.

“Anyone who is a keen observer of the events that are shaping the crude oil price will recognise that we are in for a sustained low crude oil price regime. Accordingly, it is doubtful if the budgeted oil revenue of N820bn will be realised in 2016. If the budgeted oil revenue is not realised, this will negatively impact on the 2016 budget performance.

“It is, therefore, important that the government begins to make contingency arrangements should crude oil price fall below the benchmark price, or better still, review the benchmark oil price downwards.”

Punch

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Business

Fidelity Bank Partners Edo State and GIZ to Host CBN RT200 FX Exports Roundtable and Sensitisation Workshop 

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fidelity bank - Investors King

Leading financial institution, Fidelity Bank Plc, has announced plans to host an exports roundtable and policy sensitisation workshop for businesses in Benin-City, Edo State capital in partnership with the Edo State Investment Promotion Office (ESIPO) and GIZ on Tuesday, 24 May 2022.  

The event, which would be the fourth edition of the bank’s CBN RT200 FX Sensitization seminars following successful outings in Kano, Ondo and Plateau States in February, March and April 2022 respectively, is part of the bank’s initiatives to help importers pivot to exports.

According to the Divisional Head, Export and Agriculture, Fidelity Bank Plc, Isaiah Ndukwe, Fidelity Bank’s decision to partner ESIPO and GIZ is borne out of the need to help exporters to build their business management capacity and is further proof of the value the bank provides to export-oriented businesses in Nigeria.

“At Fidelity Bank we are known for empowering our customers with the necessary financial and non-financial services to upscale their businesses. We consider the CBN RT200 FX scheme an amazing opportunity for businesses to bolster their FX earning capacity and we are delighted to collaborate with ESIPO and GIZ to host businesses in and around Benin City to a workshop to help them take advantage of the scheme”, explained Ndukwe.

Launched on February 10, 2022, by the Central Bank of Nigeria (CBN) as part of measures to reduce the increasing demand for foreign currency by importers, the RT200 FX scheme is designed to help Nigeria achieve $200 billion in FX repatriation from non-oil exports over the next five years. The policy has been hailed by stakeholders in the export sector as an initiative capable of stimulating the growth of non-oil exports in Nigeria.

“The goal of the roundtable is to identify and promote viable non-oil export opportunities, provide financing options, and proffer steps to removing the identified bottlenecks in the export process for non-oil products from Edo State to the global market. It will provide a platform for the exporters to meet with the export regulatory bodies and express their challenges which hinder exports. The event will also serve as an opportunity for the regulatory agencies to address the challenges on the spot and provide solutions to them with a view of enhancing Nigeria’s capacity in the African Continental Free Trade Area deal”, commented Marcus Unuebho of the Business Development Support and Export Unit, ESIPO.

On his part, the Technical Advisor for Edo State, Local Economic and Value Chain Development, GIZ SEDIN, Nosakhare Omon Aigiomawu stated that, “Micro, Small and Medium Enterprises are the drivers of local economic development. Collaborating to provide market linkages and access to finance would address major constraints to these groups and ensure more employment creation as well as higher income”.

Fidelity Bank is a full-fledged commercial bank operating in Nigeria with over 6.5 million customers serviced across its 250 business offices and digital banking channels. The bank was recently recognized as the Best SME Bank Nigeria 2022 by the Global Banking & Finance Awards. The bank has also won awards for the “Fastest Growing Bank” and “MSME & Entrepreneurship Financing Bank of the Year” at the 2021 BusinessDay Banks and Other Financial Institutions (BAFI) Awards.

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SMEs

Bank of Industry Disburses N213.63bn to Over 30,000 Businesses in 2021

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The Bank of Industry (BOI) has revealed that it disbursed a total of N213.63 billion to 30,406 businesses in Nigeria in the 2021 financial year.

The Managing  Director of BOI, Olukayode Pitan disclosed this at the 62nd Annual General Meeting (AGM) of the bank on Thursday in Abuja. He said that the bank was able to successfully scale up its developmental impacts in 2021 despite the challenges and limitations caused by COVID-19.

Pitan said “at the peak of COVID-19 in 2020, the bank took steps to support customers with a two per cent reduction in interest rates for a year alongside an extension of loan tenors and moratoriums. He said that the operating environment improved in 2021 and that is the reason they have decided to extend the incentives until March 31, 2022.”

He added that all ongoing projects were reviewed to assess emerging risks and opportunities and also additional support was provided.

“In the year under review, the bank disbursed a total of N213.63 billion to 30,406 Nigerian enterprises through both direct and indirect methods. This represents a 47.3 per cent increase over disbursements in 2020.

“The 2021 disbursements include N2.99billion to 22,120 farmers through our smallholder  farmers on  lending product and one billion Naira to 4,000 micro-retailers through our MSMEs distributor finance programme.

“At BoI, we have since taken measures to ensure that our systems, processes and people are continuously equipped to meet the evolving business environment.

“Today, we are a more agile and adaptive institution,  able to provide the necessary developmental support for Nigeria’s real sector in an ever-changing economy.

“Our commitment to building a resilient organisation that can respond to the needs of our customers and operating challenges is unwavering.

“We strongly believe that we can achieve this with the continuous support of the stakeholders.” he further said. 

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Company News

Dangote Seeks Over N300 Billion To Complete Refinery

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Aliko Dangote - Investors King

Business tycoon, Aliko Dangote has finalized plans to seek over N300 Billion ($750 million)  through bonds to complete his refinery project in Lagos State.

Investors King gathered that the refinery project was supposed to be finished in 2019, but funding issues and the COVID-19 pandemic threw a wrench in the works, forcing the deadline to be moved back to 2023.

Dangote sought to raise $750 million from the Nigerian bond market with Dangote Oil Refining Company Limited and Dangote Fertiliser Limited, both Dangote Industries Limited companies, serving as co-obligors under the proposed programme, according to Fitch Ratings.

In order to prevent another extension and complete the refinery project next year, a portion of the funds will be used to cover the $1.1 billion needed to complete the refinery project while the remainder will come from either a Dangote Cement asset sale or the refinery project itself, equity sales.

“If the transaction is not successful, or should completion costs overrun or market conditions in the cement or urea sector deteriorate materially, we do not believe that DIL’s existing creditors would have further lending capacity.

“We believe that further asset sales, either in cement, or stakes in the projects, would be the more likely options to address funding of the refinery,” Fitch’s report reads.

About nine months ago, recall that Dangote opted to increase the workforce of his refinery by 17,000. Investors King reported that “the project currently employs 29,000 Nigerians and 11,000 foreigners at the 650,000 barrels-per-day world’s largest single refinery project located in the Ibeju Lekki area of Lagos. This is a ratio of around three Nigerians to one expatriate presently, which will increase local talent with the new additions.”

Speaking in a broadcast, Investors King quoted Dangote saying “When we started the project, we were supposed to bring a lot of foreign workers, but as we speak today, we have less than 11,000 expatriates. We have almost about 29,000 Nigerian workers that are getting massive training. We are also creating a lot of capacity in the country, which will be of great help for future oil projects in Nigeria, most especially with the opening up of the oil industry through the new Petroleum Industry Act….”

As a matter of fact, the idea of a successful Dangote Refinery project has been the expectation of both citizens of Nigeria and the Government, because,  it will help bring a stop to the importation of crude oil.

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