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Minister Orders Aviation Agencies to Recover N40.08bn Debt from Airlines

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The Minister of State for Aviation, Senator Hadi Sirika has directed aviation agencies to recover the huge debts owed them by airlines and terminal facility operators before the end of September.

Sirika who gave the directive stated that the government needs the money for the development of the industry and remittance to federation account. Agencies are required to remit 25 percent of their earnings to the federal government account to enable the government meet its obligations to the people.

Sequel to the directive, the agencies such as the Federal Airports Authority of Nigeria (FAAN) and the Nigeria Airspace Management Agency (NAMA), have intensified their debt collection drive and have forced airlines to abort their operations.

It was also gathered that some of the airlines have started paying up the debts while some have met the agencies to reconcile their debts and work out repayment plan.
Also, the pay as you go policies of NAMA and FAAN have been reinforced to ensure that henceforth airlines do not owe the agencies.

A source at NAMA disclosed to journalists that the agency is owed N8.08 billion; the Nigeria Civil Aviation Authority (NCAA) owed N12billion, while FAAN is owed N20billion as at the time of filing this report.

ThisDay gathered from NCAA said it has introduced no-pay, no-service policy, whereby every airline must pay before the agency would attend to its needs such as issuing certificates to its crew, aircraft inspection after maintenance among others.

ThisDay also reliably learnt that almost all the debts are owed by domestic airlines as the International Air Transport Association (IATA) collects charges from international operators for the aviation agencies.

Another source said that some of the airlines are finding it difficult to reconcile their debts with some of the agencies due to the absence of transparent system to document the debts with evidence of the provision of service as it is done in other parts of the world. Some of the airlines, according to source, believe the debt that accrued to them was exaggerated and they are shortchanged because they are being forced to pay for the services that were not rendered to them by the agenciies.

Also an airline official told journalists that if airlines were able to maximise their equipment and operate up to 14 hours a day, they would generate enough revenues to offset their charges and taxes, but expressed the regret that the circumstances have forced airlines to perform grossly below maximum capacity.

“Most airports do not have airfield lighting so you cannot operate there in the night; there is no aviation fuel and this impedes flight operations and leads to cancellation and delay of flights and the price of aviation fuel has become outrageous because it is scarce. Besides, there are some of the charges that are inexplicable; that seem as if government wants to stifle air operations in Nigeria, if not I don’t see why they should be charging VAT on air transport.

Government must increase waivers it gives to airlines so that they could operate profitably. Air transport is the catalyst of the economy and without it the economy will be adversely affected,” a source told ThisDay.

Another operator said that while the minister’s directive was in order, it is his responsibility to ensure that the necessary infrastructure is in place to ensure seamless flight operations, noting that it was unrealistic to insist that the airlines should pay all their debts knowing that there is no airline in the world that is not indebted. The operator added that government’s inaction in providing the necessary facilities that inhibits the airlines from maximising their operation.

“Government should know that if it wants the airline industry to grow it has to cut down on these charges. That is a way of supporting the airlines. It should also know that if airfield lighting is working in 10 out of the 22 airports built by the federal government, airlines could operate into the night in these airports. But it is only four airports that have working airfield lighting,” he said.

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

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Energy

Egypt Increases Fuel Prices by 15% Amid IMF Deal

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Petrol - Investors King

Egypt has raised fuel prices by up to 15% as the country looks to cut state subsidies as part of a new agreement with the International Monetary Fund (IMF).

The oil ministry announced increases across a variety of fuel products, including gasoline, diesel, and kerosene.

However, fuel oil used for electricity and food-related industries will remain unaffected to protect essential services.

This decision comes after a pricing committee’s quarterly review, reflecting Egypt’s commitment to align with its financial obligations under the IMF pact.

Egypt is in the midst of recalibrating its economy following a massive $57 billion bailout, orchestrated with the IMF and the United Arab Emirates.

The IMF, which has expanded its support to $8 billion, emphasizes the need for Egypt to replace untargeted fuel subsidies with more focused social spending.

This is seen as a crucial component of a sustainable fiscal strategy aimed at stabilizing the nation’s finances.

Effective immediately, the cost of diesel will increase to 11.5 Egyptian pounds per liter from 10.

Gasoline prices have also risen, with 95, 92, and 80-octane types now costing 15, 13.75, and 12.25 pounds per liter, respectively.

Despite the hikes, Egypt’s fuel prices remain among the lowest globally, trailing only behind nations like Iran and Libya.

The latest increase follows recent adjustments to the price of subsidized bread, another key staple for Egyptians, underscoring the government’s resolve to navigate its economic crisis through tough reforms.

While the rise in fuel costs is expected to impact millions, analysts suggest the inflationary effects might be moderate.

EFG Hermes noted that the gradual removal of subsidies and a potential hike in power tariffs could have a relatively limited impact on overall consumer prices.

They predict that the deceleration in inflation will persist throughout the year.

Egypt’s efforts to manage inflation have shown progress, with headline inflation slowing for the fourth consecutive month in June.

This trend offers a glimmer of hope for the government as it strives to balance economic stability with social welfare.

The IMF and Egyptian officials are scheduled to meet on July 29 for a third review of the loan program. Approval from the IMF board could unlock an additional $820 million tranche, further supporting Egypt’s economic restructuring.

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Crude Oil

Oil Prices Rise on U.S. Inventory Draws Despite Global Demand Worries

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Oil

Oil prices gained on Wednesday following the reduction in U.S. crude and fuel inventories.

However, the market remains cautious due to ongoing concerns about weak global demand.

Brent crude oil, against which Nigerian crude oil is priced, increased by 66 cents, or 0.81% to $81.67 a barrel. Similarly, U.S. West Texas Intermediate crude climbed 78 cents, or 1.01%, to $77.74 per barrel.

The U.S. Energy Information Administration (EIA) reported a substantial decline in crude inventories by 3.7 million barrels last week, surpassing analysts’ expectations of a 1.6-million-barrel draw.

Gasoline stocks also fell by 5.6 million barrels, while distillate stockpiles decreased by 2.8 million barrels, contradicting predictions of a 250,000-barrel increase.

Phil Flynn, an analyst at Price Futures Group, described the EIA report as “very bullish,” indicating a potential for future crude draws as demand appears to outpace supply.

Despite these positive inventory trends, the market is still wary of global demand weaknesses. Concerns stem from a lackluster summer driving season in the U.S., which is expected to result in lower second-quarter earnings for refiners.

Also, economic challenges in China, the world’s largest crude importer, and declining oil deliveries to India, the third-largest importer, contribute to the apprehension about global demand.

Wildfires in Canada have further complicated the supply landscape, forcing some producers to cut back on production.

Imperial Oil, for instance, has reduced non-essential staff at its Kearl oil sands site as a precautionary measure.

While prices snapped a three-session losing streak due to the inventory draws and supply risks, the market remains under pressure.

Factors such as ceasefire talks between Israel and Hamas, and China’s economic slowdown, continue to weigh heavily on traders’ minds.

In recent sessions, WTI had fallen 7%, with Brent down nearly 5%, reflecting the volatility and uncertainty gripping the market.

As the industry navigates these complex dynamics, analysts and investors alike are closely monitoring developments that could further impact oil prices.

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Commodities

Economic Strain Halts Nigeria’s Cocoa Industry: From 15 Factories to 5

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Once a bustling sector, Nigeria’s cocoa processing industry has hit a distressing low with operational factories dwindling from 15 to just five.

The cocoa industry, once a vibrant part of Nigeria’s economy, is now struggling to maintain even a fraction of its previous capacity.

The five remaining factories, operating at a combined utilization of merely 20,000 metric tons annually, now run at only 8% of their installed capacity.

This stark reduction from a robust 250,000 metric tons reflects the sector’s profound troubles.

Felix Oladunjoye, chairman of the Cocoa Processors Association of Nigeria (COPAN), voiced his concerns in a recent briefing, calling for an emergency declaration in the sector.

“The challenges are monumental. We need at least five times the working capital we had last year just to secure essential inputs,” Oladunjoye said.

Rising costs, especially in energy, alongside a cumbersome regulatory environment, have compounded the sector’s woes.

Farmers, who previously sold their cocoa beans to processors, now prefer to sell to merchants who offer higher prices.

This shift has further strained the remaining processors, who struggle to compete and maintain operations under the harsh economic conditions.

Also, multiple layers of taxation and high energy costs have rendered processing increasingly unviable.

Adding to the industry’s plight are new export regulations proposed by the National Agency for Food and Drug Administration and Control (NAFDAC).

Oladunjoye criticized these regulations as duplicative and detrimental, predicting they would lead to higher costs and penalties for exporters.

“These regulations will only worsen our situation, leading to more shutdowns and job losses,” he warned.

The cocoa processing sector is not only suffering from internal economic challenges but also from a tough external environment.

Nigerian processors are finding it difficult to compete with their counterparts in Ghana and Ivory Coast, who benefit from lower production costs and more favorable export conditions.

Despite Nigeria’s potential as a top cocoa producer, with a global ranking of the fourth-largest supplier in the 2021/2022 season, the industry is struggling to capitalize on its opportunities.

The decline in processing capacity and the industry’s current state of distress highlight the urgent need for policy interventions and financial support.

The government’s export drive initiatives, aimed at boosting the sector, seem to be falling short. With the industry facing over N500 billion in tied-up investments and debts, the call for a focused rescue plan has never been more urgent.

The cocoa sector remains a significant part of Nigeria’s economy, but without substantial support and reforms, it risks falling further into disrepair.

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