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Nigeria’s Projected 2.5mbpd Oil Output Cannot Grow Economy

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  • Nigeria’s Projected 2.5mbpd Oil Output Cannot Grow Economy

The Nigerian Association of Energy Economics (NAEE) has said Nigeria’s constant projection of 2.5 million barrels per day (mbpd) of crude oil production in her national budget will be inadequate to grow her economy, stressing that the country needs to produce at least 4 million bpd to boost the economy.

NAEE also said the country’s continued reliance on generating sets to provide the energy needed by her economy was abnormal.

It said the country appeared unserious with the kind of energy policy it wanted to pursue for her economic growth.

President of NAEE, Prof. Wumi Iledare stated at the association’s celebration of the 2016 World Energy Day in Abuja, that the 2.5mbpd oil production projection of the country showed that her economy is not competitive and growing at a rate commensurate with that of her competitors.

“My premise is that if you look at the population of Nigeria and what you need energy to do, and I gave an example of the population of the United States with 300 million people, they consume 16 to 8mbpd and translated that to us that if the Nigerian economy is actually growing the way it is supposed to grow, the 2.5mbpd will be used by our economy and there won’t be any to export,” said Iledare.

He also said: “So, I foresee a situation where if we are going to have any oil export at all, we should be targeting at least 4mbpd. If we are going to grow our GDP at 12 per cent per annum to be able to catch up with the world, we cannot use our oil for money, we should use our oil for power and 2.5mbpd cannot generate the electricity that we need to grow our economy. Oil is an input of production and that is what it should be. If this economy expands, 2.5mbpd will not sustain it.”

Iledare also spoke on the country’s electricity sector, saying that the economy’s reliance on generating sets as an energy source was unsustainable.

According to him, “4000MW of electricity for 170 million people cannot grow the economy and the only reason why we are still happy is because we are looking at energy from a residential point of view. 4000MW for an economy like ours is a child’s play and that is why we depend on generators.”

“It is inefficient to use generators to power an economy and that is why the cost per dollar of GDP in Nigeria is significantly high, meaning that our economy is using energy inefficiently,” he stated.

He said on claims by electricity operators in the country that they do not have a tariff that is cost reflective for investment in the sector: “All over the world, when you are in a monopoly market, you cannot allow the supplier of that monopoly product to fix the price. In the energy sector, the price cannot be uniformed because the cost of distributing energy to different sectors of the economy will be different.”

“When you find out the cost of what it will take you to deliver your energy, you go to the NERC and debate it to get the tariff that will fall within the expected investment costs. You cannot increase tariff without investment that is where the problem is, the Discos cannot ask for a higher price if they do not have the evidence that they actually invested money to improve services,” he added.

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

Once Again The National Grid Collapsed

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Nigeria’s electricity transmission system, also known as the National grid, has suffered another system collapse, plunging Lagos, the country’s commercial capital, Kano and other major cities into a blackout.

The collapse, which occurred about 11.00 am on Tuesday, was confirmed by two of the country’s electricity distribution companies in separate messages to their customers.

“We regret to inform you that the power outage being experienced across our franchise – Kaduna, Sokoto, Kebbi and Zamfara states – is as a result of the collapse of the national grid,” Kaduna Electric said on Twitter.

Eko Electricity Distribution Company Plc, in a text message to its customers, said: “Dear customer, there is a partial system collapse on the national grid. Our TCN partners are working to restore supply immediately. Please bear with us.”

The grid, which is being managed by the government-owned Transmission Company of Nigeria, has continued to suffer system collapse over the years amid a lack of spinning reserve that is meant to forestall such occurrences.

Spinning reserve is the generation capacity that is online but unloaded and that can respond within 10 minutes to compensate for generation or transmission outages.

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Economy

FG Consider Diversification To Generate Revenue

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As revenue from oil nosedives following incessant global price fluctuations, the Federal Government is now channeling efforts to the development of minerals in the mines and steel industry to shore up foreign exchange earnings.

Officials of the Federal Ministry of Mines and Steel Development said on Wednesday that while there had been concerted efforts to develop various minerals in the sector, much emphasis had been placed recently on the development of bitumen, barite and gold.

They told our correspondent in Abuja that the government through the mines and steel ministry was striving to diversify the Nigerian economy away from oil as the major foreign exchange earner for Nigeria.

They also confirmed that large quantities of gold had been discovered in various locations in Zamfara and Osun states.

Asked if the government had initiated programmes to explore the minerals and boost revenues now that the country’s income had plunged, the Special Assistant on Media to the Minister of Mines and Steel Development, Ayodeji Adeyemi, replied in the affirmative.

He said, “Indeed, the ministry has the mandate to generate revenue and diversify the economy through the mines sector.

“And bitumen is one of the key resources which the nation is abundantly endowed with, that has been identified for strategic development.”

To buttress his position, Adeyemi shared some recent presentations of the Minister of Mines and Steel Development, Olamilekan Adegbite, where the minister said his ministry was gathering data on some bitumen fields across the country to attract investors.

“A lot of people are interested in bitumen, which is coming from both local and foreign investors. However, we are still acquiring data in some of the fields,” the minister stated.

On barite, the minister said the mines and steel ministry was working on raising the quality of barite produced in Nigeria to an internationally acceptable standard, as certified by the American Petroleum Institute.

Adegbite said his ministry had contracted a consultant to help raise the standard in the local production of barite to ensure that oil industry players make use of barite produced in Nigeria as against importing the commodity from other countries.

He said, “Barite is a critical weighting material in drilling fluids used in the oil industry. We have a lot of barites but the issue is that it is not produced to API standards. However, we are putting a system in place which would be ready to launch in about July.

“We have got the millers who can produce barite to API standard. Hence we will be able to compete with foreigners and it would save Nigeria a lot of foreign exchange in import substitution.”

On the development of gold, officials at the ministry further stated that the commodity had been aggregated for the production of bullion bars and that this was the first time that such aggregation was happening in Nigeria.

They stated that the gold was sourced from artisanal miners, while the final refining to bullion was done in Turkey.

The sources stated that the ministry had registered two refineries that would now refine to LBMA standard when they come on stream. LBMA is the de facto standard, trusted around the world.

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Economy

Nigeria Sovereign Investment Authority Generates N160.06 Billion in 2020

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The Nigeria Sovereign Investment Authority (NSIA) generated revenue of N160.06 billion in 2020, according to the latest audited financial reports announced by the Managing Director of NSIA Mr. Uche Orji.

The NSIA income came from devaluation gain of N51 billion, and core income of N109 billion compared to N33.07 billion in 2019.

But Orji lamented: “Covid-19 adversely affected logistics around infrastructure projects, especially the toll road projects and the presidential fertiliser initiative.

Despite the pandemic, the Authority achieved 33 percent growth in Net Assets to N772.75 billion compared to the previous year’s performance of N579.54 billion.

Orji said the NSIA “received additional contribution of $250 million; and provided first stabilisation support to the Federal Government of $150 million withdrawn from Stabilisation Fund last year.”

The same year, the NSIA received $311 million from funds recovered from the late General Abacha from the United States Department of Justice and Island of Jersey for deployment towards the Presidential Infrastructure Development Fund (PIDF) projects of Abuja-Kaduna-Kano Highway, Lagos Ibadan Expressway and Second Niger Bridge.

In response to COVID-19, Orji said: “NSIA partnered the global Citizen, a not-for profit group, to form the Nigeria Solidarity Support Fund. Separately NSIA acquired and distributed oxygen concentrators to the 21-teaching hospital as part of corporate social responsibility; in addition to staffing support to the Presidential taskforce on COVID-19.”

In 2020, the NSIA “invested additional capital into NG Clearing, the first derivative clearing house in Nigeria to maintain NSIA’s shareholding at 16.5 per cent following the company’s rights issue of 2020″ Orji said.

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