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Domestic Airlines Seek $50m Grant From CBN’s Special Forex Window

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  • Domestic Airlines Seek $50m Grant From CBN’s Special Forex Window

Domestic airline operators in the country have appealed to the Central Bank of Nigeria (CBN), to allot the local industry at least $50million grant from the foreign exchange (forex) special intervention programme.

The airlines, while commending the take-off of the programme, said domestic operators deserved equally wider forex window like their foreign counterparts, given their more important role in development of the local economy.

Recall that the CBN, following agitations by stakeholders, in October intervened in the inter-bank forex market, granting concession to some sectors, through forward settlement. Besides aviation, raw materials and machineries for manufacturing companies and agricultural chemicals are other beneficiaries.

The CBN’s Special Secondary Market Intervention Sales (SMIS) is, however, a one-off exercise dedicated to the clearance of the backlog of matured forex obligation for airlines, especially the international carriers that have funds stuck in Nigerian.

The Guardian yesterday learnt that the forex bidding processes opened about two weeks ago, with invitation sent to the airlines to place their request. Some airlines, however, could not meet the deadline as the invitation allegedly came without prior notice and closed too soon.

For airlines that made submission, on the basis of naira, they could immediately pool their forex grants expected within 60 days. Chairman of Arik Air, Joseph Arumemi-Ikhide, said considering the need of the local airlines, they deserved more than what they had been given in the short period that the window was opened for bidding.

Arumemi-Ikhide stressed that all activities of the airlines, from maintenance to fuel and other services are denominated in foreign exchange.

He said while the foreign airlines were being given more forex grants on account of their funds stuck in the Nigerian economy, the domestic airlines are more important to the economy since the money remains in the Nigerian system.

According to him, “That is why we are asking for better allocation that should also be a regular programme instead of one-off and the sudden approach. CBN should give us between $40million and $50million to grow the economy.

“Foreign airlines are collecting the money to take back to their country and pay salaries of their people overseas. We are the ones that remain here to benefit the system.

“We also have money stuck everywhere, we are not making noise about it. Arik’s money is in Angola and West African countries, why didn’t the International Air Transport Association (IATA) speak for the repatriation of our funds? It behoves upon us all to support our own and stop favouring foreign airlines against those that are ours,” he said.

The chairman noted that since former President Olusegun Obasanjo, no other administration has been bold enough to support and promote domestic airlines, but often quick to unfairly condemn them as weak.

Executive Vice President of Arik, Chris Ndulue, said while the forex intervention is good for the industry, it should be made available on continuous basis to the beneficiaries.

Chief Executive Officer of Med-View Airlines, Muneer Bankole, had also commended the initiative, with optimism that its implementation would upturn the fortunes of the aviation industry.

Bankole said: “The currency is actually the backbone of airlines, as it is all over the world. It has to be dollar denominated and the situation here has not helped the sector. We have cried out to the government to build an environment and a window in the Central Bank for the airlines to access, for relief. So, it is good that the intervention is coming but has to be properly done to benefit all,” he said.

 

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.

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Crude Oil

Sirius Petroleum and Baker Hughes Collaborate on OML 65 Drilling in Nigeria

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Sirius Petroleum, the Africa-focused oil and gas production and development company, has signed a memorandum of understanding with Baker Hughes. The MoU names Baker Hughes as the approved service provider for Phase 1 of the Approved Work Program (AWP) of the OML 65 permit, a large onshore block in the western Niger Delta, Nigeria. Baker Hughes will provide a range of drilling and related services at a mutually agreed upon pricing structure to deliver the initial nine-well program.

Sirius has signed various legal agreements with COPDC, a Nigerian joint venture, to implement this program. COPDC has signed a Financial and Technical Services Agreement (FTSA) with the Nigerian Petroleum Development Company (NPDC) for the development and production of petroleum reserves and resources on OML 65. The FTSA includes an AWP which provides for development in three phases of the block. and Sirius has entered into an agreement with the joint venture to provide financing and technical services for the execution of the PTA.

The joint venture will initially focus on the redevelopment of the Abura field, involving the drilling and completion of up to nine development wells, intended to produce the remaining 2P reserves of 16.2 Mbbl, as certified by Gaffney Cline and Associates (GCA) in a CPR dated June 2021.

Commenting, Toks Azeez, Sales & Commercial Executive of Baker Hughes, said: “We are extremely happy to have been selected for this project with Sirius and their JV partners. This project represents an important step towards providing our world-class integrated well-service solutions in one of the most prolific fields in the Niger Delta. Baker Hughes’ technological efficiency and execution excellence will help Sirius improve its profitability and competitiveness in the energy market.”

Bobo Kuti, CEO of Sirius, commented: “We are delighted to have secured the services of one of the world’s leading energy technology companies to work with our joint venture team to deliver the approved work program on the block. OML 65. We look forward to building a long and mutually beneficial partnership with Baker Hughes.”

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Energy

Egbin Decries N388B NBET Debt, Idle Capacity

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Egbin Power Plc, the biggest power station in Nigeria, has said it is owed N388bn by the Nigerian Bulk Electricity Trading Plc for electricity generated and fed into the national grid.

The company disclosed this on Tuesday during an oversight visit by the Senate Committee on Privatisation, led by its Chairman, Senator Theodore Orji, to the power station, located in Ikorodu, Lagos.

The government-owned NBET buys electricity in bulk from generation companies through Power Purchase Agreements and sells it to the distribution companies, which then supply it to the consumers.

The Group Managing Director, Sahara Power Group, Mr. Kola Adesina, told the lawmakers that the total amount owed to Egbin by NBET included money for actual energy wheeled out, interest for late payments and available capacity payments.

Egbin is one of the operating entities of Sahara Power Group, which is an affiliate of Sahara Group. The plant has an installed capacity of 1,320MW consisting of six turbines of 220 megawatts each.

The company said from 2020 till date, the plant had been unable to utilize 175MW of its available capacity due to gas and transmission constraints.

Adesina said, “At the time when we took over this asset, we were generating averagely 400MW of electricity; today, we are averaging about 800MW. At a point in time, we went as high as 1,100MW. Invariably, this is an asset of strategic importance to Nigeria.

“The plant needs to be nurtured and maintained. If you don’t give this plant gas, there won’t be electricity. Gas is not within our control.

“Our availability is limited to the regularity of gas that we receive. The more irregular the gas supply, the less likely there will be electricity.”

He noted that if the power generated at the station was not evacuated by the Transmission Company of Nigeria, it would be useless.

Adesina said, “Unfortunately, as of today, technology has not allowed the power of this size to be stored; so, we can’t keep it anywhere.

“So, invariably, we will have to switch off the plant, and when we switch off the plant, we have to pay our workers irrespective of whether there is gas or transmission.

“Sadly, the plant is aging. So, this plant requires more nurturing and maintenance for it to remain readily available for Nigerians.

“Now, where you have exchange rate move from N157/$1 during acquisition in 2013 to N502-N505/$1 in 2021, and the revenue profile is not in any way commensurate to that significant change, then we have a very serious problem.”

He said at the meeting of the Association of Power Generation Companies on Monday, members raised concern about the debts owed to them.

He added, “All the owners were there, and the concern that was expressed was that this money that is being owed, when are we going to get paid?

“The longer it takes us to be paid, the more detrimental to the health and wellbeing our machines and more importantly, to our staff.”

Adesina lamented that the country’s power generation had been hovering around 4,000MW in recent years.

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Crude Oil

Oil Rises on U.S. Fuel Drawdowns Despite Surging Coronavirus Cases

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Oil prices climbed on Wednesday after industry data showed U.S. crude and product inventories fell more sharply than expected last week, reinforcing expectations that demand will outstrip supply growth even amid a surge in Covid-19 cases.

U.S. West Texas Intermediate (WTI) crude futures rose 48 cents, or 0.7%, to $72.13 a barrel, reversing Tuesday’s 0.4% decline.

Brent crude futures rose 34 cents, or 0.5%, to $74.82 a barrel, after shedding 2 cents on Tuesday in the first decline in six days.

Data from the American Petroleum Institute industry group showed U.S. crude stocks fell by 4.7 million barrels for the week ended July 23, gasoline inventories dropped by 6.2 million barrels and distillate stocks were down 1.9 million barrels, according to two market sources, who spoke on condition of anonymity.

That compared with analysts’ expectations for a 2.9 million fall in crude stocks, following a surprise rise in crude inventories the previous week in what was the first increase since May.

Traders are awaiting data from the U.S. Energy Information Administration (EIA) on Wednesday to confirm the drop in stocks.

“Most energy traders were unfazed by last week’s build, so expectations should be high for the EIA crude oil inventory data to confirm inventories resumed their declining trend,” OANDA analyst Edward Moya said in a research note.

On gasoline stocks, analysts had expected a 900,000 barrel decline drop in the week to July 23.

“The U.S. is still in peak driving season and everyone is trying to make the most of this summer,” Moya said.

Fuel demand expectations are undented by soaring cases of the highly infectious delta variant of the coronavirus in the United States, where the seven-day average for new cases has risen to 57,126. That is about a quarter of the pandemic peak.

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