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$35bn Spent on Fuel Subsidy in Five Years – Ex-NNPC Director

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Oil Prices - Investors King

Nigeria spent an estimated $35bn as subsidy on petroleum products out of the $300bn earned from crude oil from 2010 and 2014, a former Acting Group Executive Director of the Nigerian National Petroleum Corporation, Dr. Tim Okon, has said.

This is coming as experts have urged the Federal Government to discontinue its overdependence on oil revenue, noting that it should seriously work towards diversifying the economy away from oil.

Okon and some professors, as well as other stakeholders in the oil and gas sector, spoke during the 6th Emmanuel Egbogah Legacy Lecture Series with the theme, ‘Managing Petroleum Revenue under Volatile Price Dynamics’, organised by the Emerald Energy Institute, University of Port Harcourt, Rivers State, on Wednesday.

While delivering the keynote address, Okon, who is the chief executive officer, International Institute of Petroleum, Energy Law and Policy, and a special adviser on fiscal strategy at the Federal Ministry of Petroleum Resources, stated that the subsidy programme was actually designed for the poor but it benefitted a few rich persons massively.

He said, “In the period when Nigeria earned close to $300bn as revenue from oil, from 2010 to 2014, we were spending approximately $7bn annually on subsidy. Worse than this was that in spite of the huge revenue inflows, we were also borrowing.”

He also decried the magnitude of borrowing by the Federal Government and stressed that Nigeria might be heading towards a situation in which it would sustain its operations mostly on public debts if care is not taken.

“If we continue to borrow, we will be returning to the point where we may seek debt forgiveness. This is why we are concerned about this development,” Okon said.

The ex-NNPC director lauded the halt in the subsidy regime and stated that the billions of dollars spent on subsidising petrol across the country would have been used to fix all the country’s refineries as well as build the Mambilla Power Plant, which has the capacity of generating about 3,000 megawatts of electricity.

He said, “Of course, spending money on consumables versus having productive capacity is another issue. At one point in time, the subsidy programme was worth $7bn a year. This, however, was despite the fact that the total cost of getting our refineries fixed was about $3bn. But the $7bn was spent through the exhaust fumes of our vehicles.”

Okon explained that Nigeria had been in the oil business for several decades and had seen how crude prices fluctuated over the years, adding that it was worrisome that the current fall in crude prices had taken a huge toll on the Nigerian economy.

He said, “Volatility is not new; commodity price changes are not new and, therefore, Nigeria ought to, having being an oil producer for quite some time, have an understanding of this cycle. But the question is, why is it now difficult?”

He frowned on the way and manner in which government’s revenue was managed, noting that efficient planning tools abound that could help in the management of proceeds from oil, particularly in a volatile market.

The ex-NNPC official stated that there was the need to deal with the revenue governance framework, adding that one way was the ability to create adequate buffers.

He said, “Our failure to create enough buffers has resulted in the situation that we have found ourselves. The second approach for most countries who are oil producers is that when the prices are high, you have to save and that is the purpose of the Sovereign Wealth Fund. Nigeria’s SWF, the last time I checked, was about $1.2bn, while that of Saudi Arabia, when I last checked it up, had come down from $783bn to about $600bn.”

He said Nigeria’s SWF had been eroded due to political interferences over the years, as against what was obtainable in 2007/2008 when the fund was used to support the economy during the fall in global crude oil prices at that period.

Proffering solutions to the myriad of challenges confronting the country, particularly in its oil and gas sector, Okon said it was high time Nigeria diversified its revenue-generating sources.

According to him, the country should also undertake resource diversification and the burden on the oil and gas industry should be reduced since it contributes only about 15 per cent to the Gross Domestic Product.

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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Government

As Abuja-Kaduna Train Service Resumes, FG pledges Security of Lives

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Lagos-Ibadan Train Services - Investors King

The federal government of Nigeria has said the Abuja-Kaduna is set for resumption after being suspended for almost two months.

Spokesperson of the Nigerian Railway Corporation (NRC), Yakubu Mahmood said in a statement on Monday that  the “decision to resume operations by the government does not mean efforts to secure the safe release of those abducted would be shelved.”

“The government wishes to assure the relatives of the abducted citizens still in captivity that the safe rescue of these passengers is a top priority and not to misconstrue the resumption of train services, like abandonment or nonchalant attitude of the government towards their plight,” the statement reads.

“The federal government will never abdicate its responsibility in rescuing these valuable citizens, however, the government assures of its resolve not to succumb to threats by any faceless group.”

“The resolve to resume train services on the route was reached even as most of the kidnapped passengers are still held captive by abductors,” it added.

Relatives of the abducted passengers had warned the federal government against resuming operations along the route until their loved ones were rescued.

Earlier on Monday, reports have it that one of the kidnap victims of the train attack was freed by bandits on compassionate ground.

Eight passengers died in the attack, while over 60 people still remain with the kidnappers.

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Lagos State Bans Okada in Six Local Councils, Nine LCDAs

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Fahim Sakeh, Gokada founder, Murdered in New York

Lagos State Governor, Babajide Sanwo-Olu has banned the operations of motorcycles, otherwise known as Okada in six local councils and Nine LCDAs. This comes on the heels of the growing menace and nuisance constituted by the motorcyclists.

The directive was issued at a meeting in the State House in Alausa to the Commissioner of Police, Area Commanders, and Divisional Police Officers on Wednesday.

The six local councils listed by the governor are Ikeja, Surulere, Eti-Osa, Lagos Mainland, Lagos Island, and Apapa.

Effective from June 1, 2022, the Governor directed security operatives to enforce the proscription order across the listed councils. According to the Governor, the ban is indefinite and total.

Recall that about a year ago, Investors King reported Lagos Government’s plan to execute a complete ban on okada, Keke, and introduce their own mini-buses. While the introduction of mini-buses might not be the major factor for this ban, the aim still remained the same – to reduce the lawlessness and crime rate across the state.

Sanwo-Olu said the Government took the decision in line with the State’s Transport Sector Reform Law of 2018 to immediately address the chaos and menace created by the operations of Okada in the listed areas.

“After critical review of our restriction on Okada activities in the first six Local Government Areas where we restricted them on February 1, 2020, we have seen that the menace has not abated. We are now directing a total ban on Okada activities across the highways and bridges within these six Local Government and their Local Council Development Areas, effective from June 1, 2022.

“This is a phased ban we are embarking on this period, and we expect that within the short while when this ban will be enforced, Okada riders in other places where their activities are yet to be banned can find something else to do. We have given the notice now and we expect all commercial motorcycles plying the routes in the listed councils and areas to vacate the highways before enforcement begins. The enforcement will be total,” he said.

As a matter of fact, the Governor recommended residents who patronize Okada riders on highways to use the government’s alternative transportation initiatives to organize their journey. He stated that the government has rolled out Last Mile Buses, medium-capacity and high-capacity buses to commuters in the impacted districts.

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After Six Years of Promise, Power Generation in Nigeria Hits Low Again

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Electricity - Investors King

Despite promises made by President Muhammadu Buhari to provide Nigerians with 10,000 Megawatts of electricity in 2016, power generation still stands at 3,871MW.  

Investors King gathered that the Transmission Company of Nigeria (TCN) failed to allocate 1,357MW of electricity from a paltry 3, 871MW generated on Sunday to power distribution companies (DisCos). 

In a data report generated by Punch from the division of TCN, Nigerian Electricity System Operator, nine DisCos out of 11 were on Sunday allocated a total of 2, 514MW, leaving 1,357 unallocated.

A breakdown of the allocation for Sunday showed that Abuja DisCo received a total of 289.92MW; Benin DisCo, 226.89; Eko DisCo, 377.31MW; while 251.89MW was allocated to Enugu DisCo. Ibadan DisCos got an allocation of 348.73MW while Ikeja DisCo received the highest load of 478.15MW.

Jos DisCos got the lowest allocation of 138.66MW, Kaduna DisCos received 201.68MW, while Kano DisCos got 201.68MW.

In the last two years, Nigeria’s power generation has been on a record low of not up to 4000MW. The DisCos have most times, dragged TCN for weak transmission lines, low allocation, liquidity gap and others. The TCN, on the other hand, sometimes accuses the DisCos of load rejection.

Although the country’s national grid has a 13,014.14MW capacity, the GenCos generate a meagre 7,652.6MW, while TCN has capacity to wheel 8,100MW.

Experts say Nigeria needs at least 30, 000MW electricity for its over 200 million population to reach sufficiency. The national peak forecast is 19,798MW.

The highest generation ever achieved was 5801.6MW, and that was two years ago. 

In a relative situation, the Port Harcourt Electricity Distribution (PHED) has decried the incessant attacks on its facilities in the four states under its jurisdiction.

The company said it was bothered by the recent damage of electrical facilities belonging to the Transmission Company of Nigeria in Cross River State. The Head, Corporate Communications, PHED, John Anonyai, in a statement released in Port Harcourt on Tuesday, stated that the damage caused blackouts in some parts of Calabar, the state capital.

The statement read: “The management of the Port Harcourt Electricity Distribution (PHED) Plc uses this medium to express her displeasure over the incessant vandalism of electric power facilities in its franchise, particularly the recent case responsible for the power outage in Cross Rivers State.

“This shameful act of vandalism that has rocked Calabar and its metropolis occurred about a month ago and has completely deprived deserving customers access to electricity services across the state.

“Historically, this is not the first time that heartless vandals are targeting such facilities without fear of being caught or electrocuted despite the heavy radiation of power transmitted from the towers.

“Painfully, for every act of vandalism which interrupts service delivery abruptly, PHED is always held liable with different sides to the story without facts as we currently experience in Calabar over this incident.”

According to Anonyai, residents of Calabar had been enjoying relative supply before the black-out as opposed to the current falsehood peddled by a sect of unknown faces whose plan was to trigger an unwarranted backlash against the company.

“It is pertinent to give a clue that the vandalized facilities at Oku Iboku belong to the Transmission Company of Nigeria.

“This, notwithstanding, as a responsible company that values the needs and comfort of her esteemed customers particularly in times like this, the company has been collaborating with TCN to restore supply.”

“It is no longer business as usual as the company will explore every single regulatory window to ensure collections and will only resort to disconnection where customers have clearly demonstrated recalcitrance by disregard to repeated demand and reminders to pay their bills,” PHED Managing Director/Chief Executive Officer, Dr Henry Ajagbawa said in a statement. 

“We therefore appeal to our esteemed customers to ensure they pay their bills as at when due while hands are on deck to ensure continuous supply of uninterrupted power to the people of Cross River State and other franchise areas,” he added. 

With almost nine years of privatisation, the Federal Government said it had spent over N2tn on resolving decades of rot in the power.

 

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