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FG Spends $10bn on Ajaokuta Steel Company

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Ajaokuta Steel

The Minister of State for Solid Minerals Development, Mr. Abubakar Bawa-Bwari, said on Thursday that the Federal Government had spent over $10bn on the Ajaokuta Steel Company in the last 35 years.

He also said the government escaped paying damages in excess of $525m to Global Infrastructure Holdings Limited by signing a modified concession agreement with the latter to enable the firm to retain the National Iron Ore Mining Company, Itakpe. The modified seven-year concession agreement was signed on August 1, this year.

NIOMCO was designed to feed Ajaokuta Steel Company with the requisite raw materials to produce steel, but both firms have made little progress.

Bawa-Bwari, who appeared before the House of Representatives Committee on Privatisation and Commercialisation in Abuja, said, “The most important thing is that everybody agrees that Ajaokuta should work. We have spent over $10bn over 35 years and we cannot afford to continue to waste more time.

“This modified agreement is the best option available to government today. This agreement will free us from all the legal issues. We will monitor it and ensure that the GIHL too keeps to its promise that they have turned a new leaf.”

The minister spoke amid protests by steel sector stakeholders, including workers, host communities and the Bureau of Public Enterprises.

Bawa-Bwari said that the present administration signed the agreement to free NIOMCO, Ajaokuta Steel Company and the Delta Steel Company, Ovian-Alaja, from the ‘legal encumbrances’ that had stalled the operations of the steel firms for several years since they were first privatised in 2004.

The minister said that it was the administration of former President Goodluck Jonathan that first initiated the modified agreement with the GIHL in 2013 as part of ‘out of court settlement’ for the government’s breach of the original agreement it signed with the Indians in 2004.

He said that the initial concession was to last 25 years with a provision for “automatic renewal.”

However, the minister said the late President Umaru Yar’Adua reversed the privatisation of NIOMCO in 2008 without meeting the requirements of the clauses built into the agreement.

He added that the GIHL reacted by dragging the government before the Court of Arbitration, further crippling the operations of NIOMCO and other steel firms tied to it.

The minister explained how, acting on legal opinion by the Office of the Attorney-General of the Federation, the Jonathan administration opted for an out of court settlement in the form of a modified concession agreement in 2013.

But he noted that the controversy that surrounded the modified agreement again did not allow for its take-off until the current government acted on it on August 1 this year.

But the Chairman of the committee, Mr. Ahmed Yerima; the Chairman, Sub-committee on Steel, Mr. Gabriel Kolawole, and other lawmakers disagreed with the minister.

For instance, Yerima queried why the BPE was not fully involved in the process.

Some members wondered how the same government that spent over $10bn on Ajaokuta Steel was in a hurry to return to the GIHL just to avoid paying $525m damages.

The BPE, through its acting Director-General, Mr. Vincent Akpotaire, said it had not been fully involved in the privatisation of NIOMCO and Ajaokuta since 2004.

Akpotaire recalled that there was only one meeting where the BPE made proposals to the government, but stressed that the agency was not accorded further invitations.

“The way forward is perhaps to unbundle the various plant lines in Ajaokuta, which can all stand independently on their own as against going for a single core investor again,” he stated.

Akpotaire also said records indicated that NIOMCO and Delta Steel did not find their feet after the first privatisation in 2004 because the GIHL “clearly lacked the capacity” to deliver.

Workers of the steel firms and members of the host communities opposed the latest agreement on account of unresolved issues; one of which was the non-payment of outstanding benefits.

Others were calls for the payment of compensation for lives lost in the host communities during the various protests staged by their youths to oppose the privatisation policy.

The committee said it would have to report its findings to the general House.

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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Economy

No Plan to Increase Fuel Price; Says FG

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NNPC - Investors King

The Federal Government has stated that it has no plan to increase fuel price during the yuletide period.

This assurance is coming amid the nationwide fuel scarcity which has pushed the price of petrol above N250 in many retail stations.

Investors King learnt that fuel is being held for N250 per litre in Abuja and several other cities across the country while black marketers are charging between N400 and N450 per litre.

The scarcity and the high price of fuel are however becoming unbearable for many Nigerians, especially those who have reasons to embark on business travel for the December festivals.

According to the National Public Relations Officer, Independent Petroleum Marketers Association of Nigeria (IPMAN), Chief Ukadike Chinedu, most of the association members, who owned the bulk of the filling stations across the country, were now subjected to purchasing PMS at about N220/litre, which was why many outlets currently dispensed at about N250/litre and above.

He noted that the cost of the commodity has been on the rise due to its unavailability and other concerns in the sector. 

He added that the price of fuel could be sold from N350/litre to N400/litre before the end of the year. 

Meanwhile, a number of senior officials at the NNPC had stated that the subsidy was becoming too burdensome on the national oil company, as this was another reason for the scarcity of PMS.

According to a source who is familiar with the development as reported by Punch News, “How can we continue to import 60 million litres of petrol daily and keep subsidising it, while millions of litres are either diverted or cannot be accounted for? The burden is too much, as you rightly captured in that story”. 

Investors King understands that NNPC is the sole importer of petroleum into the country and it pays billions of naira every month to subsidise the product to N147 per litre. 

Reuters News reported that in August 2022, NNPC paid more than $1 billion as fuel subsidy while the federal government earmarked N3.6 trillion as fuel subsidy in the 2023 budget proposal. 

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Fuel Scarcity: NNPC Declares 2billion Liters in Stock, Blames Scarcity on Road Construction

NNPC Claimed it as 2 billion litres of fuel despite scarcity

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Petrol - Investors King

The Nigerian National Petroleum Company (NNPC) has blamed the recent fuel scarcity on road construction around Apapa, noting that the corporation has about 2 billion litres of fuel in stock. 

According to a statement issued by NNPC Executive Vice President, Downstream, Mr Adeyemi Adetunji, the Nigeria National Petroleum Company has about 2 billion litres of fuel which can last the country conveniently for more than 30 days. 

The Executive Vice President further blamed the queues on the road construction around Apapa axis which has slowed down the movement of oil trucks to several parts of the country. 

“The recent queues in Lagos are largely due to ongoing road infrastructure projects around Apapa and access road challenges in Lagos” he said. 

He however noted that more filling stations should have Premium Motor Spirit (PMS) otherwise known as petrol with the ease in gridlock along the apapa axis. 

“The gridlock is easing out and NNPC Ltd has programmed vessels and trucks to unconstrained depots and massive load outs from depots to states are closely monitored,” he said.

Investors King gathered that several states including Abuja have been impacted by the supply chain difficulty caused by the construction around Apapa. 

The scarcity of fuel has therefore led to the hike in price. In most places across the country, fuel is sold as high as N250 per litre. Several fuel stations are already taking advantage of the situation coupled with the increase in the movement of people and goods owing to the December festivals.

Speaking further, Adeyemi noted that the situation will soon be back to normalcy as NNPC is taking measures to address the situation. 

“We want to reassure Nigerians that NNPC has sufficient products and we significantly increased product loading in selected depots and extended hours at strategic stations to ensure sufficiency nationwide.

“We are also working with industry stakeholders to ensure normalcy is returned as soon as possible,” he concluded. 

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Economy

Global Growth to Drop Below 2% in 2023, Says Citi

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GDP Growth- Investors King

Citigroup on Wednesday forecast global growth to slow to below 2% next year, echoing similar projections by major financial institutions such as Goldman Sachs, Barclays, and J.P. Morgan.

Strategists at the brokerage cited continued challenges from the COVID-19 pandemic and the Russia-Ukraine war — which skyrocketed inflation to decades-high levels and triggered aggressive policy tightening — as reasons behind the outlook.

“We see global performance as likely (being) plagued by ‘rolling’ country-level recessions through the year ahead,” said Citi strategists, led by Nathan Sheets.

While the Wall-Street investment bank expects the U.S. economy to grow 1.9% this year, it is seen more than halving to 0.7% in 2023.

It expects year-on-year U.S. inflation at 4.8% next year, with the U.S. Federal Reserve’s terminal rate seen between 5.25% and 5.5%.

Among other geographies, Citi sees the UK and euro area falling into recession by the end of this year, as both economies face the heat of energy constraints on supply and demand front, along with tighter monetary and fiscal policies.

For 2023, Citi projects UK and euro area to contract 1.5% and 0.4%, respectively.

In China, the brokerage expects the government to soften its zero-COVID policy, which is seen driving a 5.6% growth in gross domestic product next year.

Emerging markets, meanwhile, are seen growing 3.7%, with India’s 5.7% growth — slower than this year’s 6.7% prediction — seen leading among major economies.

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