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Aviation Crisis Deepens as Arik Suspends Operations – FG May Intervene, Says Ministry Official

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Hundreds of passengers of Nigeria’s biggest airline, Arik Air, were left stranded at airports across the country and beyond on Tuesday because of suspension of flight operations by the carrier.

Arik is having problems with the renewal of its insurance policy.

At the Murtala Muhammed International Airport, Lagos, and the Nnamdi Azikiwe International Airport, Abuja, it was observed that all the ticketing and reservation stands of the airline were closed and customers were directed to other carriers.

Airport officials told one of our correspondents that the carrier had been having issues for some time and that these were affecting its smooth operations.

The airline said in a statement that the development was caused by documentation issues relating to the renewal of its insurance policy.

It said the delay in renewing the insurance policy was caused by the two-day holiday, which was declared by the Federal Government to celebrate the Eid-el-Kabir.

Arik said the suspension of flights might  continue for the next few days until the approval of a waiver on a priority basis by the National Insurance Commission for a new insurance company to renew the policy.

It added that during the period of the disruption of operations, the management of the airline would be working hard to resolve the necessary documentation issues.

The statement read in part, “Arik Air, West and Central Africa’s largest airline, has alerted all air travellers of a temporary disruption to its operations pending approval of aircraft documentation related to insurance renewal. The airline said that it was working around the clock to resolve the necessary documentation, which has been a challenge due to the long weekend holidays.

“At the present time, all flights of the airline have been cancelled for Tuesday, 13 of September, 2016, and the airline has stated that it would be getting in touch with passengers to provide an update on rescheduling of their flights.

“This situation is likely to continue for the next few days until such time that NAICOM approves a waiver on a priority basis for the new insurance company to renew the policy.”

The airline however advised its customers to visit either its website or any of its ticket offices to know the status of their flights before proceeding to airports.

Arik Air’s Group Chief Executive Officer, Dr. Michael Arumemi-Ikhide, said, “The airline wishes to advise and assure the public, its customers, stakeholders and partners that we are fully committed to returning to our normal operations and minimise any unfortunate inconvenience to our passengers.

“Where flights have been cancelled, the airline will notify passengers through SMS and in such cases, passengers will be accommodated on first available alternative flights as soon as normal flight operations resume.

“The Group CEO apologised and appealed on behalf of the airline for the understanding of passengers, while it works diligently to resume normal operations at the earliest time.”

The Nigerian Civil Aviation Regulations kick against any airline operating an aircraft that has insurance issues.

Part 18.11.2 of the regulations dealing with aviation insurance states that “no person shall operate any aircraft in the public air transport category without adequate and valid insurance cover.”

Part 18.11.2.2 of the regulations states that “any person having a duty to maintain adequate insurance shall submit to the Authority on quarterly basis insurance certificates, evidence of paying premium and policy documents.”

However, the Assistant Director, Corporate Affairs, National Insurance Commission, Mr. Salami Rasaaq, said that NAICOM did not have any direct business with Arik Air but with its insurance company.

According to him, the commission did not delay the insurance of the aircraft because the request for the Approval in Principle was only submitted to it on Friday afternoon after the close of work.

“When you submit a request, there is due process to follow before you give an approval. A staff member on special risk had to go to the office today (Tuesday), which is a public holiday, to work on it, and we gave them one-month approval effective from today (Tuesday) to expire on October 12, by which time they are expected to do everything possible to get the one-year approval,” he said.

Rasaaq explained that the commission had specified a minimum of 10 days to the expiration of the policy for the request for the AIP.

“Because they were supposed to have applied 10 days before, which is the minimum to the expiration of the AIP, but the airline did not comply. But even if they did, the commissioner has said we will always work on it because of the interest of the public,” he said.

  • Aero and First Nation

The disruption of Arik’s operations is coming about two weeks after Aero Contractors Airlines Nigeria’s second largest commercial carrier, and First Nation Airlines announced the suspension of operations.

In the case of Aero, the airline had in a statement stated that the suspension was part of the strategic business realignment to reposition it and return it to the path of profitability.

It explained that this business decision, which was as a result of the current economic situation in the country, had forced some other airlines to suspend operations or pull out of Nigeria.

For First Nation, the Director-General, Nigerian Civil Aviation Authority, Capt. Muhtar Usman, had explained that the decision was taken in order to ensure that the airline carried out the required maintenance of its aircraft.

The NCAA DG had said, “First Nation Airline on its part is in the middle of an engine replacement programme for one of its aircraft. Another aircraft is due for mandatory maintenance as allowed by the regulatory authority.

“In these circumstances, these airlines clearly cannot continue to undertake schedule operations, hence the inevitable recourse to self-regulatory suspension.”

  • Foreign carriers boycott Nigeria’s fuel

Meanwhile, the scarcity of aviation fuel occasioned by dollar shortage has made the price of the Jet-A1 fuel to rise by 81 per cent from N220 per litre to N400, Reuters has reported.

This came barely two months after the price of the commodity, which contributes 30 per cent of airlines’ cost of operations, increased from N120 t0 N220 per litre.

The latest increase has made foreign airlines flying into Nigeria to start boycotting the country to refuel, according to Reuters.

It is the second blow for airlines operating in the nation’s recession-hit economy in a year. The Central Bank of Nigeria’s naira peg had made it almost impossible for them to repatriate profits from ticket sales as it tried to prevent a currency collapse.

The crash in the naira since a devaluation in June has led firms who market jet fuel locally, such as Total, Sahara and ConocoPhillips, to double the price to N220 a litre in August, and to as much as N400 presently, an airline executive told Reuters.

A Deputy Director at the Ministry of Aviation, James Daudu, said Jet-A1 prices were deregulated, and therefore outside government control, but stated that the Minister of State for Aviation, Mr. Hadi Sirika, was working with the Ministry of Petroleum Resources to see if “interventions” in the sector were possible.

“It would be a whole sphere of intervention, if possible, from the Central Bank of Nigeria to the Ministry of Petroleum Resources,” he said.

Even at the higher costs, marketers’ lack of dollars has made fuel scarce. Some carriers have had aircraft stuck, or were forced to cancel planned journeys, after frantic last-minute calls from ground staff warned that there was no fuel available.

“The economy is crying out for investment, and now it is going to be even harder for anyone to visit,” an economist with Capital Economics, John Ashbourne, said.

“Who is going to want to park a billion dollars in a country that you can’t even easily fly to? It sends the worst possible signal,” he added.

A spokesman for the Nigerian National Petroleum Corporation did not answer calls for comment.

The central bank hoped floating the naira would attract dollar inflows, but the naira has sunk by 50 per cent, forcing oil firms to charge airlines, stuck with piles of naira, in dollars for jet fuel.

“It’s an impossible situation. The oil marketers don’t want to sign long-term agreements anymore so we have to accept whatever prices they demand,” one airline executive said, adding, “We sell tickets in naira and now they want us to come with dollars.”

Spain’s Iberia and United Airlines cancelled their Nigeria services earlier this year, and two local carriers also halted operations. Other international airlines responded by boosting ticket prices within Nigeria, charging their globe-trotting elite as much as $2,000 for an economy class ticket to Europe to cut losses – more than double the cost of a Lagos ticket bought abroad.

Dubai-based Emirates has started a detour to Accra, Ghana, to refuel its daily Abuja-bound flight, a spokesman said. The airline already cut its twice-daily flights to Lagos and Abuja to just one.

The move was aided by a substantial drop in Ghana’s jet prices amid tax reform last month, according to the Ghana Chamber of Bulk Oil Distributors.

Air France-KLM said it was refuelling abroad in “very exceptional cases” by juggling suppliers and stomaching extra costs.

Germany’s Lufthansa is loading more fuel in Frankfurt for its Lagos flight, where the ground staff doubt their ability to refuel for the final destination of Malabo, the capital of Equatorial Guinea, an executive said. The airline did not respond to official requests for comment.

The scarcity has even pitted airlines against local consumers; a surge in demand for cooking and heating kerosene during the rainy season, when households cannot easily burn wood or charcoal, means if the airlines do not pay up, marketers will sell to locals.

Airlines met with Transport ministry officials last week in Abuja to press for lower fuel prices, industry sources said.

Nigeria used to be one of the most profitable markets for foreign airlines, landing planes with plenty of first and business class passengers to cater to executives and officials jetting around under former President Goodluck Jonathan administration.

British Airways, a popular choice for well-heeled Nigerians, said it was using smaller aircraft on its Lagos-London route, as did Air France-KLM.

Turkish Airlines’ use of smaller planes has added another inconvenience: passengers complained there is not always space for luggage on the smaller aircraft, delaying it for days. The airline did not respond to requests for comment.

  • Ooni’s botched visit to Sanusi

Members of the Yoruba community in Kano went back home disappointed on Tuesday after waiting in vain for the arrival of the Ooni of Ife, Oba Adeyeye Ogunwusi, at the Mallam Aminu Kano International Airport.

As part of activities to herald the monarch into the city of Kano, members of the Yoruba community, including a dance troupe, besieged the airport early in the morning to accord him a warm reception but dispersed disappointed after waiting for several hours.

The President of the Yoruba community in Kano, Alhaji Abdullatif Faisu, said that the trip was aborted at the 11th hour due to problems with the Ooni’s chartered flight.

The Ooni’s advance party was earlier at the airport awaiting the monarch’s arrival, but left with the gift that was to be presented to the monarch when it became apparent that Ogunwusi would no longer make the trip.

Another set of crowd, who had earlier assembled at the emir’s palace, later dispersed when it became evident that the Ooni’s trip had been cancelled.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

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Energy

Africa Renewable Energy Fund II Secures €125 Million First Close With SEFA and CTF Investments

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Solar energy - Investors King

The Africa Renewable Energy Fund II has achieved its first close at €125 million, following a joint investment of €17.5 million from The Sustainable Energy Fund for Africa and the Climate Technology Fund through the African Development Bank.

AREF II, a successor to the original Fund, is a 10-year closed-ended renewable energy Private Equity Fund with a $300 million target capitalization. The Africa Renewable Energy Fund II, managed by Berkeley Energy, invests in early-stage renewable energy projects, thereby not only de-risking the most uncertain phase of power projects, but also promoting increased green baseload in Africa’s generation mix.

The Sustainable Energy Fund for Africa and the Climate Technology Fund will each contribute roughly €8.7 million to mobilize private-sector investment into Africa’s renewable energy sector. The Sustainable Energy Fund for Africa will also contribute financing to the AREF II Project Support Facility, which funds technical assistance and early-stage project support to improve bankability.

Other investors include the U.K’s CDC Group, Italy’s CDP, the Netherlands Development Finance Company (FMO) and SwedFund.

“We are proud to be associated with Berkeley Energy and other like-minded investors, and look forward to AREF’s continued success and leadership in promoting sustainable power development on the continent,” said Dr. Kevin Kariuki, the African Development Bank’s Vice President for Power, Energy, Climate and Green Growth.

In 2012, the African Development Bank selected Berkeley Energy, a seasoned fund manager of clean energy projects in global emerging markets to set up AREF. AREF II has a sharper strategic focus than its predecessor on “green baseload” projects that will deliver firm and dispatchable power to African power systems through hydro, solar, wind and battery storage technologies.

Luka Buljan, Berkeley Energy’s Managing Director, said: “We are very excited to have reached this milestone with strong support from our backers. The catalytic tranche from the Sustainable Energy Fund for Africa and the Climate Technology Fund will assist in mobilising private institutional investors up to full fund size of €300 million. We now look forward to concluding the fundraising and delivering projects that will provide clean, reliable and affordable energy across African markets.”

“AREF is intertwined with the Sustainable Energy Fund for Africa’s history and success, and we have worked closely over the last decade to create precedents in difficult markets and challenging technologies. We look forward to continued collaboration to accelerate the energy transition in Africa,” said Joao Duarte Cunha, Manager for Renewable Energy Initiatives at the African Development Bank and Coordinator of the Sustainable Energy Fund for Africa.

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FG Earned $34.22B From Crude Oil and Gas in 2019 – NEITI

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Crude oil - Investors King

The Nigeria Extractive Industries Transparency Initiative (NEITI) on Thursday released its 2019 oil and gas industry audit report, which shows that Nigeria earned N34.22 billion from the oil and gas industry in 2019.

The audit, conducted by Adeshile Adedeji & Co. (Chartered Accountants), an indigenous accounting and auditing firm, reconciled payments from 98 entities. They include 88 oil and gas companies, nine government agencies and the Nigerian Liquefied Natural Gas (NLNG).

The 2019 figure is an increase of 4.88 percent over the $32.63billion revenue realised from the sector in 2018. A breakdown of the earnings showed that payments by companies accounted for $18.90billion, while flows from federation sales of crude oil and gas accounted for $15.32billion.

The report further showed that 10 years (2010-2019) aggregate financial flows from the oil and gas sector to government amounted to $418.544billion, with the highest revenue flow of $68.442 recorded in 2011, while the lowest revenue flow of $17.055 was recorded in 2016.

According to NEITI, the total crude oil production in 2019 was 735.244mmbbls, representing an increase of 4.87 percent over the 701.101mmbbls recorded in 2018. Production sharing contracts (PSCs) contributed the highest volumes of 312.042mmbbls followed by Joint Venture (JV) and Sole Risk (SR) which recorded 310,284mmbbls and 89.824mmbbls respectively. Others are Marginal Fields (MFs) and Service Contracts (SCs) which accounted for 21,762mmbbls and 1,330mmbbls respectively.

The report also showed that total crude oil lifted in 2019 was 735.661mmbbls, indicating a 4.93 percent increase to the 701.090 mmbbls recorded in 2018, with companies lifting 469.010mmbbls, while 266.650mmbbls was lifted by the Nigeria National Petroleum Corporation (NNPC) on behalf of the federation.

Analysis of crude oil lifted by NNPC showed that 159.411mmbbls was for export, while 107.239mmbbls was for domestic refining. 97 percent of the volumes for domestic refining (104.475mmbbls) was utilised for the Direct Sale Direct Purchase (DSDP) programme while the remaining 3 percent (2.764mmbbls) was delivered to the refineries.

NEITI reported that the value of the 2019 domestic crude oil earnings was N2.722 trillion. Of this figure, N518.074billion was deducted for Petroleum Motor Spirit (PMS) under-recovery by the NNPC.

This figure was N213.074billon above the approved sum of N305billion for under-recovery in 2019. Similarly, the sum of N126.664billion was incurred by the Corporation as costs for pipeline repairs and maintenances which showed a difference of N96.378billion from the approved sum of N30.287billion for that purpose.

The report also pointed out that N31.844billion was also deducted for crude and product losses due to theft.

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Crude Oil

Oil Prices Drop on Stronger U.S Dollar

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Crude oil - Investors King

The strong U.S Dollar pressured global crude oil prices on Thursday despite the big drop in U.S crude oil inventories.

The Brent crude oil, against which Nigerian oil is priced, dropped by 74 cents or 1 percent to settle at $73.65 a barrel at 4.03 am Nigerian time on Thursday.

The U.S West Texas Intermediate crude oil depreciated by 69 cents or 1 percent to $71.46 a barrel after reaching its highest since October 2018 on Wednesday.

Energy markets became so fixated over a robust summer travel season and Iran nuclear deal talks that they somewhat got blindsided by the Fed’s hawkish surprise,” said Edward Moya, senior market analyst at OANDA.

The Fed was expected to be on hold and punt this meeting, but they sent a clear message they are ready to start talking about tapering and that means the dollar is ripe for a rebound which should be a headwind for all commodities.

The U.S. dollar boasted its strongest single day gain in 15 months after the Federal Reserve signaled it might raise interest rates at a much faster pace than assumed.

A firmer greenback makes oil priced in dollars more expensive in other currencies, potentially weighing on demand.

Still, oil price losses were limited as data from the Energy Information Administration showed that U.S. crude oil stockpiles dropped sharply last week as refineries boosted operations to their highest since January 2020, signaling continued improvement in demand.

Also boosting prices, refinery throughput in China, the world’s second largest oil consumer, rose 4.4% in May from the same month a year ago to a record high.

This pullback in oil prices should be temporary as the fundamentals on both the supply and demand side should easily be able to compensate for a rebounding dollar,” Moya said.

 

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