Importers in Nigeria are now diverting cargoes to neighbouring countries to avoid undue restrictions at the country’s ports and high custom duties, a report has disclosed.
The Chief Executive Officer of the Financial Derivatives Company Limited (FDC), Mr. Bismarck Rewane, disclosed this in his monthly economic news and views for September presented at Lagos Business School recently. This, he attributed to higher customs duties, bottlenecks and forex shortages, adding that smuggling activities are expected to increase.
Clearly, this may jeopardise the federal government’s efforts to boost non-oil revenue following the fall in crude oil prices.
Nigeria is officially in an economic recession.
The National Council of Managing Directors of Licensed Customs Agents (NCMDLCA), recently identified lengthy and cumbersome documentation process on export, multiplicity of regulatory/security agencies, high and duplicated terminal/ shipping company charges and process and lack of export infrastructures as major obstacles that affect export process from Nigerian ports.
In a letter to the Executive Director of the Nigerian Export Promotion Council (NEPC) and copied President Muhammadu Buhari, the Nigerian Ports Authority (NPA) and the Nigerian Shippers Council (NSC), NCMDLCA had called on the federal government to take urgent steps to remove the obstacles before it is too late.
The letter signed by its National President, Lucky Amiwero alleged that: “ The federal government agencies duplicate the process of quality inspection with that of the appointed federal government pre-shipment inspection on export. This constitutes serious bottleneck due to lengthy and cumbersome process, procedure and cost, which resulted in attendant delays and high costs that prompted the movement of our product to our neighbouring West African Ports.”
On the duplication of charges by shipping companies, the customs agents said: “The Nigerian Shipping companies in line with the contract of carriage, handle import container that are loaded back to the country of origin as empty container without any charge due to the level of export activities that is still very low in the country. The shipping lines Terminal Delivery Charges (TDC) is a charge that is not tied to service, as such charge is duplicated in the charges of terminal operators. Their charges do not represent any service to exporters in Nigeria in any form.”
Continuing, Rewane in the report pointed out that ships awaiting berth decreased to 41 from 45 last month, adding that ships awaiting berth are expected to decline further.
According to the report, weakness in macroeconomic condition in the country has translated to profitability decline by most quoted companies. He said earnings and profitability fell short of expectations as investor confidence worsened.
For the banking industry, the report pointed out that 74.6 per cent of industry revenues in their recently released half-year results amounted to N1.21 trillion concentrated in tier I banks.
“Industry’s profitability is slowed by high loan loss charge offs and rising operating costs. Impairment charge continues to record high credit losses of N218.9 billion for first half of 2016, from N41.3 billion as at first half of 2014. Size matters as tier II banks struggles to grow profit before tax. Tier II profit before tax as at the first half of 2016 was N50.3 billion, as against the N59.2 billion recorded in the first half of 2014,” it added.
CBN is conducting stress tests as well as routine examinations on banks in the light of growing non-performing loans (NPLs) and deteriorating asset quality due to naira weakness.
This, the FDC boss said raises apprehension on the state of Nigerian banks as the last released financial stability report was for December 2015.
“The economy has found its bottom and the only way is up. But the pace of recovery is dependent on pace of policy response,” it added.
According to the report, the top four fastest growing sectors accounted for only six per cent of new jobs as at the first quarter of this year, adding that sector activity does not mean job creation and employment. It pointed out that growth does not translate into increased consumption and income.
In its review of the real estate sector, it showed that Lekki has the highest vacancy rate at 65 per cent, adding that affordable rents are six to 10 per cent above asking rents of $780psqm in Victoria Island.
Residential index rose by 6.8 per cent quarter-on-quarter as commercial index remained flat at 148. Prime office rent drop by six per cent to $810 per sqm per annum.
“Nigeria in recession increases vacancy rates further. Carrying cost of properties is excruciating as landlords reduce rental payment to annually. Previously, they used to collect two to three years payment. Pedigree of tenants remains important. Replacement cost far in excess of market value,” it stated.
Communities in Delta State Shut OML30 Operates by Heritage Energy Operational Services Ltd
The OML30 operated by Heritage Energy Operational Services Limited in Delta State has been shut down by the host communities for failing to meet its obligations to the 112 host communities.
The host communities, led by its Management Committee/President Generals, had accused the company of gross indifference and failure in its obligations to the host communities despite several meetings and calls to ensure a peaceful resolution.
The station with a production capacity of 80,000 barrels per day and eight flow stations operates within the Ughelli area of Delta State.
The host communities specifically accused HEOSL of failure to pay the GMOU fund for the last two years despite mediation by the Delta State Government on May 18, 2020.
Also, the host communities accused HEOSL of ‘total stoppage of scholarship award and payment to host communities since 2016’.
The Chairman, Dr Harrison Oboghor and Secretary, Mr Ibuje Joseph that led the OML30 host communities explained to journalists on Monday that the host communities had resolved not to backpedal until all their demands were met.
Crude Oil Recovers from 4 Percent Decline as Joe Biden Wins
Oil Prices Recover from 4 Percent Decline as Joe Biden Wins
Crude oil prices rose with other financial markets on Monday following a 4 percent decline on Friday.
This was after Joe Biden, the former Vice-President and now the President-elect won the race to the White House.
Global benchmark oil, Brent crude oil, gained $1.06 or 2.7 percent to $40.51 per barrel on Monday while the U.S West Texas Intermediate crude oil gained $1.07 or 2.9 percent to $38.21 per barrel.
On Friday, Brent crude oil declined by 4 percent as global uncertainty surged amid unclear US election and a series of negative comments from President Trump. However, on Saturday when it became clear that Joe Biden has won, global financial markets rebounded in anticipation of additional stimulus given Biden’s position on economic growth and recovery.
“Trading this morning has a risk-on flavor, reflecting increasing confidence that Joe Biden will occupy the White House, but the Republican Party will retain control of the Senate,” Michael McCarthy, chief market strategist at CMC Markets in Sydney.
“The outcome is ideal from a market point of view. Neither party controls the Congress, so both trade wars and higher taxes are largely off the agenda.”
The president-elect and his team are now working on mitigating the risk of COVID-19, grow the world’s largest economy by protecting small businesses and the middle class that is the backbone of the American economy.
“There will be some repercussions further down the road,” said OCBC’s economist Howie Lee, raising the possibility of lockdowns in the United States under Biden.
“Either you’re crimping energy demand or consumption behavior.”
Nigeria, Other OPEC Members Oil Revenue to Hit 18 Year Low in 2020
Revenue of OPEC Members to Drop to 18 Year Low in 2020
The United States Energy Information Administration (EIA) has predicted that the oil revenue of members of the Organisation of the Petroleum Exporting Countries (OPEC) will decline to 18-year low in 2020.
EIA said their combined oil export revenue will plunge to its lowest level since 2002. It proceeded to put a value to the projection by saying members of the oil cartel would earn around $323 billion in net oil export in 2020.
“If realised, this forecast revenue would be the lowest in 18 years. Lower crude oil prices and lower export volumes drive this expected decrease in export revenues,” it said.
The oil expert based its projection on weak global oil demand and low oil prices because of COVID-19.
It said this coupled with production cuts by OPEC members in recent months will impact net revenue of the cartel in 2020.
It said, “OPEC earned an estimated $595bn in net oil export revenues in 2019, less than half of the estimated record high of $1.2tn, which was earned in 2012.
“Continued declines in revenue in 2020 could be detrimental to member countries’ fiscal budgets, which rely heavily on revenues from oil sales to import goods, fund social programmes, and support public services.”
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