Markets

Oil Marketers Want Preferential FX Rate

Published

8 years ago

October 3, 2016

Oil Marketers Want Preferential FX Rate

Despite the preferential foreign exchange rate given to oil marketing firms by the international oil companies (IOCs), aimed at sustaining the importation of petrol into the country, the Major Oil Marketers Association of Nigeria (MOMAN) has decried the non-allocation of the same preferential FX rate for the importation of aviation fuel.

MOMAN has equally condemned the multiple levies, taxes, fees and charges on imported products by agencies of the same or different tiers of government, and urged the federal government to summon the courage to halt the annual fuel crisis during the yuletide season by empowering marketers and importers with the required FX to stockpile products ahead of the Christmas and New Year festivities.

In a communiqué issued yesterday by the committee of chief executives of Forte Oil Plc, Mobil Oil Nigeria Plc, Total Nigeria Plc, Oando Plc, Conoil Plc and MRS, the marketers stated that the cost of petrol at the international market had soared to $548 per tonne and called on the federal government to ensure that the dollar/naira parity should stay at a level that would sustain the sale of petrol at the open market price band of N135-N145 per litre.

Owing to the scarcity of FX, the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, a few months ago, negotiated a deal with the IOCs that prioritised oil marketers and allows the oil multinationals to sell FX directly to their downstream counterparts at a preferential rate in order to maintain the peg on the price of petrol at N145 per litre.

In the communiqué, the major oil marketing companies yesterday acknowledged what they described as the serenity in the supply of petrol in the country and extended their appreciation to the Ministry of Petroleum Resources, the NNPC and all other stakeholders.

“We note that there are some few glitches here and there and we call on the regulatory agencies to face these challenges with a view to nipping all nefarious activities associated with supply and distribution in the bud.

“Unknown to the general public, the private sector has depended on foreign exchange supplied into the system by the IOCs (international oil companies) through the intervention of the Hon. Minister of State Petroleum Resources.

“In order for the private sector to continue to play its role in the importation of PMS (petrol), the dollar/naira parity should stay at a level that will ensure that the open market price band of N135-N145 is maintained. This is especially so because the CIF price of petrol is rising in the international market. Today it is approximately $548 per tonne,” the CEOs explained.

They applauded the effort of the petroleum minister, but drew the attention of government to the product situation during the winter months, which coincide with reduced output of petrol in refineries abroad and increased activities of motorists in Nigeria as a result of the dry season and festive period.

In this regard, the oil marketers urged the government to summon the required courage to halt the annual ritual of product outages during the yuletide season.

According to MOMAN, the federal government should empower marketers and importers with the required FX to stock pile products in the country well ahead of the Christmas and New Year festivities.

The association also blamed the intermittent tightness in the supply of aviation fuel to the airlines, to the non-allocation of FX for the importation of jet fuel.

This situation has defeated the government’s intention of making Nigeria the aviation hub of the sub-region, they said.

On the issue of multiple taxes, the marketers noted that the government has the right to apply legitimate taxes, levies, fees and charges on goods and services.

The companies, however, condemned a situation where two agencies of the same state government apply the same law to charge different taxes or the states and federal governments are charging the same taxes on the same goods and services, and described the multiple taxes and levies as a disincentive to business.

The communiqué, which was signed by the Executive Secretary of MOMAN, Mr. Obafemi Olawore, also urged all tiers of government to review their tax policies and apply a single tax regime for the same service provided.

The committee of CEOs also lamented the deplorable condition of roads and charged the government to quickly fix the roads which have become traps leading to the loss of lives and property.

“We wish to draw the attention of stakeholders and regulators to safety regulations especially in the gross tonnage of tankers and the ability of the road to absorb the weight of loaded tankers.

“We also wish to appeal to the government to reduce the import duty on these haulage trucks to enable transporters meet the new replenishment policy which forbids the engagement of old or used trucks.

“The safety implications of not replenishing an aging truck fleet cannot be over-emphasised,” said the oil firms.

The oil marketing firms also called on the relevant agencies of government to review, monitor and enforce set standards in line with international best practices in the standardisation of trucks, retail outlets and products specifications.

Egina to Add 200,000bpd by 2018

In a related development, NNPC yesterday projected that Nigeria’s crude oil production was expected to increase by 200,000 barrels per day (bpd) by the first quarter of 2018.

This, according to the state-run oil firm, would be made possible with the commissioning of the Umbilical Flow-lines and Risers (UFR) for the Egina Deep Offshore Project.

Speaking during the load-out ceremony of the UFR for the Egina project by Saipem Contracting Nigeria Limited in Port Harcourt, Rivers State, the Group Managing Director of the NNPC, Mr. Maikanti Baru, also restated the commitment of the corporation to the development of local content in the oil and gas industry.

A statement by NNPC said Baru disclosed that the module would guarantee the drilling of the first oil from the 200,000bpd Egina field by the first quarter of 2018.

He commended Saipem for the successful completion of the Egina UFR project, including the engineering, procurement, construction, installation and pre-commissioning of 52 kilometres (km) of oil production and water injection flow-lines; 12 flexible jumpers; 2km of an oil export line; 20km of gas export pipelines alongside the installation; and commissioning of 80 kilometres of steel tube umbilical and mooring of the FPSO and offshore loading terminal. (OLT).

He said: “What is being celebrated is the efficacy of the Nigerian Content Act and the NNPC is strongly committed to the successful implementation of all provisions of the Act.”

Also speaking, the Managing Director of Total, Nicholar Terahz, said the Egina project was the largest contributor to the development of the Nigerian content in the oil industry, being the largest offshore project currently going on in the country.

He noted that the employment opportunities and technology transfer the project generated contributed significantly to the nation’s economy.
In his remarks, the Managing Director of Saipem, Guido D’Aloisio, said the performance of Nigerian engineers on the project was commendable, adding that the country would be proud of it.

The Executive Secretary, Nigerian Content Development and Monitoring Board, Simbi Wabote, who was represented by the board’s Director, Planning, Research & Statistics, Daziba Patrick Obah, said that the quality of jobs done on the project by Nigerians and the gains thereof would further deepen Nigerian content in the oil industry.

Discovered in 2003, the Egina field is located at some 20km from the Akpo field within Oil Mining Lease (OML) 130 and is situated in a water depth of 1,750m.

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Samed Olukoya

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Energy

Egypt Increases Fuel Prices by 15% Amid IMF Deal

Published

2 days ago

July 25, 2024

Samed Olukoya

Egypt has raised fuel prices by up to 15% as the country looks to cut state subsidies as part of a new agreement with the International Monetary Fund (IMF).

The oil ministry announced increases across a variety of fuel products, including gasoline, diesel, and kerosene.

However, fuel oil used for electricity and food-related industries will remain unaffected to protect essential services.

This decision comes after a pricing committee’s quarterly review, reflecting Egypt’s commitment to align with its financial obligations under the IMF pact.

Egypt is in the midst of recalibrating its economy following a massive $57 billion bailout, orchestrated with the IMF and the United Arab Emirates.

The IMF, which has expanded its support to $8 billion, emphasizes the need for Egypt to replace untargeted fuel subsidies with more focused social spending.

This is seen as a crucial component of a sustainable fiscal strategy aimed at stabilizing the nation’s finances.

Effective immediately, the cost of diesel will increase to 11.5 Egyptian pounds per liter from 10.

Gasoline prices have also risen, with 95, 92, and 80-octane types now costing 15, 13.75, and 12.25 pounds per liter, respectively.

Despite the hikes, Egypt’s fuel prices remain among the lowest globally, trailing only behind nations like Iran and Libya.

The latest increase follows recent adjustments to the price of subsidized bread, another key staple for Egyptians, underscoring the government’s resolve to navigate its economic crisis through tough reforms.

While the rise in fuel costs is expected to impact millions, analysts suggest the inflationary effects might be moderate.

EFG Hermes noted that the gradual removal of subsidies and a potential hike in power tariffs could have a relatively limited impact on overall consumer prices.

They predict that the deceleration in inflation will persist throughout the year.

Egypt’s efforts to manage inflation have shown progress, with headline inflation slowing for the fourth consecutive month in June.

This trend offers a glimmer of hope for the government as it strives to balance economic stability with social welfare.

The IMF and Egyptian officials are scheduled to meet on July 29 for a third review of the loan program. Approval from the IMF board could unlock an additional $820 million tranche, further supporting Egypt’s economic restructuring.

Crude Oil

Oil Prices Rise on U.S. Inventory Draws Despite Global Demand Worries

Published

2 days ago

July 24, 2024

Samed Olukoya

Oil prices gained on Wednesday following the reduction in U.S. crude and fuel inventories.

However, the market remains cautious due to ongoing concerns about weak global demand.

Brent crude oil, against which Nigerian crude oil is priced, increased by 66 cents, or 0.81% to $81.67 a barrel. Similarly, U.S. West Texas Intermediate crude climbed 78 cents, or 1.01%, to $77.74 per barrel.

The U.S. Energy Information Administration (EIA) reported a substantial decline in crude inventories by 3.7 million barrels last week, surpassing analysts’ expectations of a 1.6-million-barrel draw.

Gasoline stocks also fell by 5.6 million barrels, while distillate stockpiles decreased by 2.8 million barrels, contradicting predictions of a 250,000-barrel increase.

Phil Flynn, an analyst at Price Futures Group, described the EIA report as “very bullish,” indicating a potential for future crude draws as demand appears to outpace supply.

Despite these positive inventory trends, the market is still wary of global demand weaknesses. Concerns stem from a lackluster summer driving season in the U.S., which is expected to result in lower second-quarter earnings for refiners.

Also, economic challenges in China, the world’s largest crude importer, and declining oil deliveries to India, the third-largest importer, contribute to the apprehension about global demand.

Wildfires in Canada have further complicated the supply landscape, forcing some producers to cut back on production.

Imperial Oil, for instance, has reduced non-essential staff at its Kearl oil sands site as a precautionary measure.

While prices snapped a three-session losing streak due to the inventory draws and supply risks, the market remains under pressure.

Factors such as ceasefire talks between Israel and Hamas, and China’s economic slowdown, continue to weigh heavily on traders’ minds.

In recent sessions, WTI had fallen 7%, with Brent down nearly 5%, reflecting the volatility and uncertainty gripping the market.

As the industry navigates these complex dynamics, analysts and investors alike are closely monitoring developments that could further impact oil prices.

Commodities

Economic Strain Halts Nigeria’s Cocoa Industry: From 15 Factories to 5

Published

2 days ago

July 24, 2024

Samed Olukoya

Once a bustling sector, Nigeria’s cocoa processing industry has hit a distressing low with operational factories dwindling from 15 to just five.

The cocoa industry, once a vibrant part of Nigeria’s economy, is now struggling to maintain even a fraction of its previous capacity.

The five remaining factories, operating at a combined utilization of merely 20,000 metric tons annually, now run at only 8% of their installed capacity.

This stark reduction from a robust 250,000 metric tons reflects the sector’s profound troubles.

Felix Oladunjoye, chairman of the Cocoa Processors Association of Nigeria (COPAN), voiced his concerns in a recent briefing, calling for an emergency declaration in the sector.

“The challenges are monumental. We need at least five times the working capital we had last year just to secure essential inputs,” Oladunjoye said.

Rising costs, especially in energy, alongside a cumbersome regulatory environment, have compounded the sector’s woes.

Farmers, who previously sold their cocoa beans to processors, now prefer to sell to merchants who offer higher prices.

This shift has further strained the remaining processors, who struggle to compete and maintain operations under the harsh economic conditions.

Also, multiple layers of taxation and high energy costs have rendered processing increasingly unviable.

Adding to the industry’s plight are new export regulations proposed by the National Agency for Food and Drug Administration and Control (NAFDAC).

Oladunjoye criticized these regulations as duplicative and detrimental, predicting they would lead to higher costs and penalties for exporters.

“These regulations will only worsen our situation, leading to more shutdowns and job losses,” he warned.

The cocoa processing sector is not only suffering from internal economic challenges but also from a tough external environment.

Nigerian processors are finding it difficult to compete with their counterparts in Ghana and Ivory Coast, who benefit from lower production costs and more favorable export conditions.

Despite Nigeria’s potential as a top cocoa producer, with a global ranking of the fourth-largest supplier in the 2021/2022 season, the industry is struggling to capitalize on its opportunities.

The decline in processing capacity and the industry’s current state of distress highlight the urgent need for policy interventions and financial support.

The government’s export drive initiatives, aimed at boosting the sector, seem to be falling short. With the industry facing over N500 billion in tied-up investments and debts, the call for a focused rescue plan has never been more urgent.

The cocoa sector remains a significant part of Nigeria’s economy, but without substantial support and reforms, it risks falling further into disrepair.