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FG Owes Oil Firms $8.1bn in Cash Calls

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markets energies crude oil

The Federal Government owes oil companies at least a total of $8.06bn in unpaid cash calls, as the Nigerian National Petroleum Corporation failed to pay $3.06bn in the first seven months of the year.

The nation’s oil and gas production structure is majorly split between Joint Ventures onshore and in shallow water with foreign and local companies and production sharing contracts in deepwater offshore.

The NNPC owns between 55 per cent (for JVs with Shell) and 60 per cent (for all others) and the JVs are jointly funded by the private oil companies and the Federal Government through the corporation.

The latest monthly report of the NNPC showed that the corporation paid a total sum of $1.932bn from January to July this year, as against $4.987bn expected to be paid for the period.

It paid $407,857,571 in January, $236,700,314 in February, $141,868,647 in March and $300,590,276 in April. The corporation paid $149,876,805 in May, $214,398,900 in June and $168,129,620 in July.

In July, N61,615,100,170 (equivalent to a functional dollar of $312,767,005.94 at a budgeted exchange rate of N197/$) was transferred to joint venture cash call from domestic crude oil receipts of N90,815,444,663 in addition to the $168,129,620.

The NNPC is expected to pay $712.46m to its joint venture partners monthly for the development of oil and gas assets, translating into $8.55bn for the year, up from $7.39bn in 2015.

Last year, the corporation recorded a shortfall of $3.3bn in its cash call payment as it was only able to pay $4.13bn to the JV partners.

In January, industry stakeholders including the Managing Director/Chief Executive Officer, Chevron Nigeria Limited, Mr. Clay Neff, said the cash call arrears owed by the NNPC was over $5bn.

The NNPC in the report said, “Total export crude oil and gas receipt for the period of August 2015 — July 2016 stood at $3.21bn. Out of which the sum of $3.16bn was transferred to JV cash call in line with 2015/2016 Approved Budget and the balance of $0.49bn was paid to Federation Account.

“However, this amount falls short of the calendarised appropriated amount of $615.80m and $712.46m for 2015 and 2016 respectively. This is due to worsening production and fall in crude oil price.”

According to the NNPC, the JVCC funding is a first-line priority statutory provision in the 2016 Budget.

“Funding approved JVCC commitments is necessary to protect current and future production and the vice versa is detrimental and unlawful,” it said.

The funding problem, which has lingered for over two decades, has been exacerbated by the steep fall in global oil prices which drove down the country’s earnings from the commodity, its major revenue-earner.

Production from JV assets has over the past few years seen significant decline, partly due to funding constraints occasioned by the NNPC’s inability to meet its share of cash call obligation.

An industry source had in June said as of January this year, about $5.5bn cash call arrears had not been paid to the International Oil Companies, while $1.1bn is owed to the indigenous companies.

The Group Managing Director, NNPC, Dr. Maikanti Baru, on Tuesday said it had started working out modalities that would enable it to exit JV cash call arrears by ensuring that outstanding and future payments were liquated from oil and gas royalties and taxes under a first-line charge model.

The Federal Government must get out of paying so-called cash calls to joint ventures with oil and gas companies to stand a chance of pulling its ailing economy out of recession, the Finance Minister, Kemi Adeosun, said this month.

The minister said the NNPC had spent N110bn ($360 million) on cash calls this month, which dwarfed the country’s N41bn income from oil production over the same period.

“We are already working to see how we can get out of the cash calls. And that is very fundamental to the economy,” Adeosun told a press conference.

“We are working with the Ministry of Petroleum Resources and NNPC … that’s a long-term plan: To allow those joint ventures to borrow money that they need rather than taking money out of the Federation Account.”

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.

Economy

Stop Maize, Soybean Export to Reduce Scarcity – NIAL

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Farm input

Stop Maize, Soybean Export to Reduce Scarcity – NIAL

The Nigerian Institute of Animal Science on Tuesday called on the Federal Government to halt the continued export of maize and soybean to reduce the scarcity of the commodities as well curb their price hike in Nigeria.

Registrar and Chief Executive Officer, NIAL, Prof. Eustance Iyayi, told journalists in Abuja that the poultry sector was currently hit by the severe scarcity of maize and soybean.

This, he said, was due to the continued export of the commodities, the COVID-19 pandemic, which had disorganised the international supply chain, lingering insecurity in the North-East, farmers/herders conflict and flooding in some parts of the country.

“Maize and soybean are being exported and this has exacerbated the situation leading to local scarcity and price escalation of the commodities in poultry production,” Iyayi stated.

He added, “The increasing prices of the essential commodities has resulted in the increase in price of finished feeds by about 75 per cent.

“This has led to the closure of small and medium sized poultry farms thereby threatening about 10 million jobs as a result of this scarcity.

“To set the poultry industry from total collapse, the institute urges the government to immediately halt the exportation of soybean and maize and grant import permit to importers at the official foreign exchange rate.”

Iyayi said there was shortage of soybean in Nigeria and other countries, stressing that the little amount being produced across the country should not be exported.

He said the current maize yield of about one to two tonnes per hectare being produced in Nigeria would not be enough to sustain the country.

The NIAL helmsman stated that the country should be producing between seven and 10 tonnes per hectare in order to meet the requirements for humans and animals.

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Economy

Petrol Landing Cost Jumps to N186, Oil Hits $64

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Petrol Landing Cost Jumps to N186, Oil Hits $64

Against the backdrop of the rising price of oil prices, the landing cost of Premium Motor Spirit (petrol) imported into Nigeria has increased to N186.33 per litre.

Investors King had exclusively reported on February 9 that the landing cost of PMS rose to about N180 per litre on February 5 from N158.53 per litre on January 7.

Crude oil price accounts for a large chunk of the final cost of petrol, and the deregulation of petrol price by the Federal Government last year means that the pump price of the product will reflect changes in the international oil market.

Going by the petrol pricing template of the Petroleum Products Pricing Regulatory Agency, the landing cost of petrol rose to N186.33 per litre on February 16, with the pump price of the product expected to be N209.33 per litre.

The international oil benchmark, Brent crude, closed at $63.96 per barrel on February 16, up from $59.34 per barrel on February 5.

The rising price of crude oil pushed the cost of petrol quoted on Platts to $560.75 per metric tonne (N163.08 per litre, using N390/$1) on February 16 from $543.25 per metric tonne (N157.99 per litre) on February 5.

Other cost elements that make up the landing cost include freight (N10.29), lightering expenses (N4.57), insurance cost (N0.25), Nigerian Ports Authority charge (N2.38), Nigerian Maritime Administration and Safety Agency charge (N0.23), jetty throughput charge (N1.61), storage charge (N2.58), and financing (N1.33).

The freight cost increased to $35.41 per MT (N10.29 per litre) last Wednesday from $30.04 per MT (N8.74 per litre) on February 5.

The pump price is the sum of the landing cost, wholesale margin and the distribution margins. The wholesale margin is N4.03 while the distribution margins comprise transporters allowance (N3.89), retailer (N6.19), bridging fund (N7.51), marine transport average (N0.15), and admin charge (N1.23).

Apart from the changes in global crude oil prices, the exchange rate of naira to the dollar also affects the cost of imported petrol.

The cost of petrol would be higher if the 410/$1 rate at which the naira closed on Monday at the Investors’ and Exporters’ Foreign Exchange Window was used. The naira closed at 480/$1 at the parallel market.

The Nigerian National Petroleum Corporation, which has been the sole importer of petrol into the country in recent years, is still being relied upon by marketers for the supply of the product despite the deregulation of the downstream petroleum sector.

Oil marketers said recently that they were ready to resume importation of petrol if the foreign exchange was made available to them at a competitive rate.

“The discussion we should be having today is how best to maximise the benefits of the removal of price controls and subsidies while minimising the adverse effects of this action on our citizens,” the Chairman, Major Oil Marketers Association of Nigeria, Mr Adetunji Oyebanji, said at a virtual press briefing.

Brent crude, against which Nigeria’s oil is priced, rose by $1.67 to $64.58 per barrel as of 6:08pm Nigerian time on Monday.

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Economy

FG to Lift 100 Million People Out of Poverty With Gas Expansion Project

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Gas Plant

FG to Lift 100 Million People Out of Poverty With Gas Expansion Project

The Federal Government has said about 100 million Nigerians will be lifted out of poverty through the National Gas Expansion Programme (NGEP).

The Minister of State for Petroleum Resources, Chief Timipre Sylva, disclosed this on Monday during the inauguration of the NGEP in Ado Ekiti, Southwest.

Sylva said the project was “a practical demonstration of President Muhammadu Buhari’s commitment to lift 100 million Nigerians out of poverty by using gas value chain as catalyst for social and economic development in Nigeria”.

The minister said, “The programme has its main objective to reinforce and expand gas supply as well as stimulate demand in Nigeria through effective and efficient mobilisation and utilisation of all available assets, resources and infrastructure in the country.

“The programme is geared towards the implementation of Mr President June 12, 2019 promise to take hundred million Nigerians out of poverty within the current decade by ensuring that locally produced, available, accessible and affordable fuel is sufficiently supplied across the country”.

Sylva added that Nigeria was richly endowed with mineral resources, specifically, hydrocarbons, crude oil and natural gas with proven gas reserves of over 200 trillion cubic feet of natural gas, which he said had presented the country with opportunity to use gas as a catalyst for social economy renaissance.

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