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Experts See Bright Economic Outlook, Predict Growth in 2017



  • Experts See Bright Economic Outlook, Predict Growth in 2017

Analysts at both Standard Chartered Bank and Moody’s have predicted a bright economic outlook for 2017 as they predicted that the nation’s economy would rebound from its current recession and record growth in 2017, despite the challenges posed by weaker oil earnings and foreign exchange.

The two experts, Managing Director and Chief Economist, Global Research, Africa, Standard Chartered Bank, Razia Khan, and senior analytical adviser at Moody’s, Aurelien Mali, noted so in an advisory note and in an interview with Reuters respectively. While Khan predicted a 2.8 percent growth, Mali predicted 2.5 per cent expansion provided the country can achieve 2.2 million barrels per day production.

Nigeria, Africa’s largest economy faces its worst economic crisis in 25 years, which was caused by low oil prices that have eroded both government reserves and spending, and shortage of the greenback in the system.

According to Managing Director and Chief Economist, Global Research, Africa, Standard Chartered Bank, Razia Khan, “Growth in the non-oil sector, which accounts for c.92 per cent of GDP, was finally positive (but only just, with ‘growth’ of 0.03 per cent y/y), following two consecutive y/y contractions in Q1 and Q2. While the flat non-oil GDP data marks some improvement versus previous quarters, there is little to suggest that it has meaningfully improved economic momentum. With no evidence of improved FX liquidity, and the FX shortage still one of the key constraints on activity in Nigeria, we now expect negative growth to persist in Q4-2016. Consequently, we lower our 2016 GDP forecast to -1.7 per cent y/y (0.4 per cent prior).

“We raise our real GDP growth forecast for 2017, but only on a weaker base. Important reforms, not least those centered on Nigeria’s FX market, are required to unlock faster and more sustained economic growth, in our view. Despite the challenge posed by weaker oil earnings, Nigeria’s record on economic reform to date has disappointed”, she stated.

Khan also noted further that oil sector was in deeper contraction. According to her, “The big driver of the contraction in Q3 GDP was the decline in oil-sector growth, which the Nigerian Bureau of Statistics estimated average oil production at only 1.63mn barrels per day (mb/d), far below the 2.2mb/d assumed in the 2016 budget. This poor performance came despite the resumption in August of amnesty payments to Niger Delta militants, and more optimistic official oil output projections.

“Although early Q4 will likely have seen some improvement in oil production, we see little reason for optimism regarding the outlook. Talks between the presidency and community leaders in the Niger Delta in early November failed to produce a conclusive outcome. These discussions were followed shortly by the resumption of attacks on oil installations (claimed by a separate militant group, the Niger Delta Avengers), reducing oil production by c.300,000 barrels per day (b/d).

“Countering this are reports that locally owned companies, which contribute sizeably to onshore production in the Delta, are becoming more adept at dealing with pipeline attacks. There is talk of more transportation of oil via barges, allowing exports to continue even as pipelines are repaired, albeit at a higher cost and only in small amounts. However, to date, there has been little evidence of this being sufficient to lift production data.

On his part, Mali explained that “With resumption of oil production and the dollars that should come, we expect that Nigeria would be able to accelerate the implementation of the budget,” Mali said.

“With acceleration, we expect that (growth) could reach 2.5 percent next year,” he said.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and, with over a decade experience in the global financial markets.

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Crude Oil

Petrol Subsidy Likely to Gulp N2T This Year –Rainoil GMD



petrol scarcity Nigeria

Nigeria may end up spending N2 trillion on petrol subsidy this year if the current situation persists, the Group Managing Director, Rainoil Limited, Dr Gabriel Ogbechie, has said.

Ogbechie said this on Sunday at the Nigeria History Series of the Centre for Values in Leadership, themed ‘Indigenous participation in the downstream oil and gas sector’ moderated by Prof. Pat Utomi.

While lamenting the lack of deregulation in the downstream sector, he said the government was spending about N8m daily on petrol subsidy.

He described the sector as highly regulated, saying, “I wonder if there is any other sector of the economy that is as regulated as the downstream.”

He said, “The biggest elephant in the room today as far as the downstream is concerned is the failure, so to speak, of the government to deregulate the downstream – fixing the price at which petroleum products are sold, I believe, is very seriously harmful to this economy.”

According to him, the landing cost of the petrol imported into the country is about N300 per litre, based on the current naira-dollar exchange rate.

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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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Egbin Decries N388B NBET Debt, Idle Capacity



Egbin-Power-Plant - Investors King

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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