Reports from Reuters within the week indicated that Mobil Producing Nigeria Unlimited (MPN), a unit of ExxonMobil, will resume shipment of Qua Iboe crude, Nigeria’s largest grade of crude oil in October, three months after the company declared a force majeure on the exports of the grade.
Accordingly, ExxonMobil is offering an October-loading cargo of Qua Iboe crude oil, the first offer since it declared the force majeure. The report however stated that it was not clear if the pipeline through which the crude grade passes had been repaired, or if the company expected it to be back on stream in time to load crude in October.
Notwithstanding, the report noted that the cargo had been offered for October 8 to 16 loading at a premium of $1.80 per barrel to dated Brent. If this sails through, Nigeria could perhaps be on the path to recovery in terms of production and sales volumes.
Before Mobil declared the force majeure, the last ship to reportedly load crude at the Qua Iboe terminal was the Ottoman Nobility on July 9. One of the three other ships scheduled to load the crude had been near the terminal since July 12.
A vessel loads one million barrel of the grade every three to four days, and exports of 250,000 barrels per day aboard eight vessels were scheduled for July when Mobil observed a leak caused by what it described as a “system anomaly” during a routine check of its loading facility on July 14, 2016.
When MPN took this decision, the cause of the leak was not clear, but it came just days after a militant group, the Niger Delta Avengers (NDA), claimed to have bombed the company’s 48-inch Qua Iboe crude oil export pipeline on July 11.
24 hours after the claim by the militants, the company’s spokesperson, Todd Spitler, however debunked the claim, saying, “there was no attack on our facilities.”
And while ExxonMobil said at the time it declared the force majeure that the export terminal was operating, traders reportedly said the company did not release a revised loading schedule for the crude exports. The new development however suggests that Nigeria was ramping up its production.
Is Stability Returning in Nigeria’s Oil Fields?
In March, Nigeria lost its longstanding position as Africa’s top oil producer to Angola when its oil production dropped to 1.677 million barrels per day (mbpd). Compared to Angola’s 1.782mbpd production then, the country was behind Angola by about 105,000bpd of production volumes.
Nigeria’s trailing Angola was primarily occasioned by resumed militancy in her oil-bearing Delta region in February. From when militant groups resumed bombing oil installations in the region, the country’s production began to slide away from the 2016 budget target of 2.2mbpd.
Six months after, the OPEC in its Monthly Oil Market Report (MOMR) for September, which was released last Monday, indicated that Nigeria’s oil output had taken a further dip to 1.468mbpd in August from 1.52mbpd recorded in the previous month.
OPEC, which nevertheless, based its report on direct communication with the country, also stated that Angola saw its oil output rise to 1.775mbpd in August from 1.767mbpd the previous month.
The cartel also said Libya’s production dropped to 292,000bpd from 313,000bpd, while Venezuela produced 2.104mbpd, down from 2.117mbpd, Ecuador, 542,000bpd from 549,000bpd it previously recorded, while Iraq saw its production dropped by 2,000 barrels to 4.354mbpd.
The MOMR equally stated that Saudi Arabia, the biggest producer in the group, recorded the biggest increase in August as it produced 10.605mbpd, up from 10.577mbpd in the previous month and Iran which has just come out of a global embargo, continued to increase output in a bid to snap up more market share with 3.653mbpd, up from 3.631mbpd.
Coming with the unstable oil prices in the global market, the situation appears quite difficult for Nigeria. This is even more with OPEC’s forecast of an oversupply into 2017.
Hopes of Stability Still Guarded
About 90 per cent of Nigeria’s foreign earning comes from oil and gas produced in the Niger Delta but the situation in the region has not improved even with the federal government’s attempt at dialogue with militants.
It is also a fact that for Nigeria to improve her foreign exchange earnings and work out ways to get out of her current economic recession, the Niger Delta region will have to be considered as an important factor.
The region’s light crude oil is sought after by refineries in the US and Europe. Aside this, Nigeria also holds the world’s seventh largest proven gas reserves and supplies up to 10 per cent of global liquefied natural gas, if production shuts-in continue on the scale it is now, the country will produce less as well as have less foreign exchange to balance its trade and perhaps get out of recession.
In addition, terrorism in the Middle East makes Niger Delta an alternative supply source for countries like China and India whose economies have good demands for oil. A restive Niger Delta will however cut whatever gains the country stands to make from such conditions.
Fuelled by agitation for resource control and environmental pollution, the Niger Delta unrest has continued to impact heavily on Nigeria’s oil production. The region has continued to ask for increased control of its oil resources, and adequate compensation for the oil spillage in the area.
Its militants have also indicated the willingness to dialogue with the government, which some weeks back said it had secured their commitment to a ceasefire on vandalism of oil installation and production disruption; the situation has however, remained unchanged going by a recent bombing of an oil pipeline and OPEC’s August production report.
Although the government has not said anything new about its planned dialogue with the militants, it would however appear like the plan has encountered some hitches, thus leading to the bombing of the Afiesere-Iwhrenene major delivery line to UPS/UQCC, operated by Nigeria Petroleum Development Company (NDPC) and Shorelines Petroleum in Ughelli North Local Government Area of Delta State by the Niger Delta Greenland Justice Mandate (NDGJM), one of the many militant groups in the early hours of Tuesday.
The attack, which was reportedly confirmed by a leader of the group, Aldo Agbalaja, was almost at the same time the foremost Niger Delta Avengers (NDA) which ceased its bombing of oil facilities last month to dialogue with the government, accused the country’s military of harassing old men, women and innocent youths in the region under the guise of hunting for militants. This therefore raises suspicion that the dialogue may not have started.
According to OPEC, Nigeria in July recorded the biggest increase in oil output from her field. That was however not enough to bring her back to Africa’s top producer.
It said that while OPEC’s collective crude oil production in August was 33.24mbpd, a decrease of 23,000bpd, Nigeria and Libya contributed immensely to the drop.
“Crude oil output increased mainly from Saudi Arabia and Iran, while Nigeria and Libya showed the largest drop,” the MOMR said.
It also said that Africa’s oil supply is projected to average 2.12mbpd in 2016, representing a decline of 20,000bpd year-on-year, with increases however expected from Congo by 50,000
bpd to average 320,000bpd, and Ghana’s production start-up in the Tweneboa, Enyenra, Ntomme project, as well as a production ramp-up in the country’s Jubilee field in the second half of the year.
OPEC also raised its forecast of oil supplies from non-member countries in 2017. It said new fields were expected to come online especially from US shale drillers who have proved more resilient than expected to cheap crude.
It added that demand for its crude will average 32.48mbpd in 2017, down by 530,000bpd from the previous forecast. These forecasts, however, do not look favourable to Nigeria.
With oil prices still under pressure at an average of $47 per barrel, and renewed oversupply concerns, Nigeria now appears to have to contend with two tough challenges – dealing with instability in price and her production levels. The combined effect of these pose serious threats to forex earnings and naira exchange rate stability.
As stated by PricewaterhouseCoopers (PwC) in 2016 edition of its ‘Africa Oil and Gas Review’ published in August, Nigeria is not only affected by the decline in the oil price, but also by the reduced production due to the severe security issues onshore and increased piracy incidents.
PwC further said that: “This is adding an additional layer of complication, causing hesitation among oil majors to invest further. Consequently, many are considering postponing additional investment.”
Ogun Records N13.3B Internally Generated Revenue Monthly in Q1 of 2021
Ogun State Government has recorded an average of N13.3billion monthly as Internally Generated Revenue (IGR) in the first quarter of 2021.
The government said it is also planning to raise its yearly Gross Domestic Product (GDP) rate from the current single digit by 25 percent.
The Commissioner for Finance, Dapo Okubadejo disclosed this to newsmen in Abeokuta ahead of the state’s investment summit tagged: ‘OgunIseya21: Becoming Africa’s Model Industrial and Logistics Hub’, slated for July 13th-14th, 2021.
Okubadejo who doubles as the State’s Chief Economic Adviser noted that the state’s IGR had experienced an upward movement after last year’s shortfall due to the Covid-19 pandemic and the attendant lockdown.
“We had a significant turnaround in the first quarter of this year. In fact, as of April, we have done almost N40bn in the Internally Generated Revenue. Our target this year is to exceed all the previous records we have set in IGR. That’s why we have put in place, all these transformation initiatives, friendly policies and also facilitate this investment summit to further showcase Ogun State as the preferred industrial destination,” he said.
The Finance Commissioner was supported in highlighting the investment potentials of the summit by his counterparts from the Ministries of Industry, Trade and Investment, Mrs. Kikelomo Longe; Works and Infrastructure, Ade Adesanya; Culture and Tourism, Toyin Taiwo; Budget and Planning, Olaolu Olabimtan and the Director-General, Public-Private Partnership, Dapo Oduwole.
Unemployment To Push More Nigerians Into Poverty – NESG
On Friday, The Nigerian Economic Summit Group said that many more Nigerians are expected to fall into the poverty trap amid rising unemployment in the country.
The NESG, a private sector-led think-tank, noted in its economic report for the first quarter of 2021 that the country’s economic growth in the period under review was relatively weak.
It said, “Nigeria’s economic growth trajectory is better described as jobless and less inclusive even in the heydays of high growth regime in the 2000s.
“While the Nigerian economy recovered from the recession in Q4 of 2020, the unemployment rate spiked to its highest level ever at 33.3 percent in the same quarter.
“With the COVID-19 crisis heightening the rate of joblessness, many Nigerians are expected to fall into the poverty trap, going forward.”
The group noted that the World Bank estimated an increase in the number of poor Nigerians to 90 million in 2020 from 83 million in 2019.
“This corresponds to a rise in headcount poverty ratio to 44.1 percent in 2020 from 40.1 percent in 2019. The rising levels of unemployment and poverty are reflected in the persistent insecurity and social vices, with attendant huge economic costs,” it said.
According to the report, huge dependence on proceeds from crude oil, leaving other revenue sources unexplored, indicates that Nigeria is not set to rein in debt accumulation in the short to medium term.
The NESG noted that public debt stock continued to trend upwards, with a jump from N7.6tn ($48.7bn) in 2012 to N32.9tn ($86.8bn) in 2020.
It said public debts grew by 20 percent between 2019 and 2020, adding, “This is partly due to the need for emergency funds to combat the global pandemic and alleviate its adverse economic impacts on households and businesses.”
According to the group, Nigeria needs more than an economic rebound, and there is a need to improve growth inclusiveness.
It said, “Nigeria has struggled to achieve inclusive growth for many decades. Since recovery from the 2016 recession, the economy has been on a fragile growth path until it slipped into another recession in 2020 due to the COVID-19 pandemic.
“This suggests that the country needs to attain high and sustainable economic growth to become strong and resilient.
“The relationship between economic growth and unemployment rate in Nigeria suggests that economic growth has not led to a reduction in the unemployment rate – jobless growth.”
The NESG said to reverse this recurring trend, there was an urgent need for collaborative efforts between the government and relevant stakeholders towards addressing the constraints to value chain development in high-growth and employment-elastic sectors, including manufacturing, construction, trade, education, health and professional services, with ICT and renewable energy sectors as growth enablers.
It noted that despite the re-opening of the land borders that the Nigerian government shut since October 2019, inflation reached a four-year high of 18.1 percent in April 2021.
“While we expect improved agricultural production in coming months to partially ease inflationary pressures, this positive impact could be suppressed by recurring key structural bottlenecks including insecurity in the food-producing regions, electricity tariff hike, fuel price increase and hike in transport and logistic costs,” it added.
IMF Queries FG Strategies On Fuel Subsidy, Unemployment, Inflation
The International Monetary Fund has raised the red flag over Nigeria’s resumption of petrol subsidy payments, describing it as injurious to the economy.
It also reiterated the importance of introducing a market-based fuel pricing mechanism and deployment of well-targeted social safety nets to cushion any adverse impact on the poor.
In a report produced after a virtual meeting with Nigerian authorities from June 1 to 8, the IMF also expressed concerns over the rising unemployment and inflation rates, even as it admitted that real Gross Domestic Product was recovering.
The IMF team, led by Jesmin Rahman, further hailed the Central Bank of Nigeria for its efforts at unifying the exchange rate by embracing needed reforms.
The Fund said: “Recent exchange rate measures are encouraging, and further reforms are needed to achieve a fully unified and market-clearing exchange rate.
“The resurfacing of fuel subsidies is concerning, particularly in the context of low revenue mobilisation.
“The Nigerian economy has started to gradually recover from the negative effects of the COVID-19 global pandemic. Following sharp output contractions in the second and third quarters, GDP growth turned positive in Q4 2020 and growth reached 0.5 percent (y/y) in Q1 2021, supported by agriculture and services sectors.
“Nevertheless, the employment level continues to fall dramatically and, together with other socio-economic indicators, is far below pre-pandemic levels. Inflation slightly decelerated in May but remained elevated at 17.9 percent, owing to high food price inflation. With the recovery in oil prices and remittance flows, the strong pressures on the balance of payments have somewhat abated, although imports are rebounding faster than exports and foreign investor appetite remains subdued resulting in continued FX shortage.
“The incipient recovery in economic activity is projected to take root and broaden among sectors, with GDP growth expected to reach 2.5 percent in 2021. Inflation is expected to remain elevated in 2021, but likely to decelerate in the second half of the year to reach about 15.5 percent, following the removal of border controls and the elimination of base effects from elevated food price levels.”
The IMF also recognised that tax revenue collections were gradually recovering but noted that with fuel subsidies resurfacing, additional spending for COVID-19 vaccines and to address security challenges, the fiscal deficit of the Consolidated Government is expected to remain elevated at 5.5 percent of GDP.
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