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$1bn Spent on Kerosene Subsidy in 2015 – Osinbajo

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  • $1bn Spent on Kerosene Subsidy in 2015

Nigeria spent the sum of $1bn as subsidy on kerosene last year, Vice-President Yemi Osinbajo said on Tuesday.

According to him, the massive dependence on kerosene and firewood by millions of households across the country made the Federal Government to spend such an amount subsidising the commodity.

Osinbajo, who spoke at the Domestic Liquefied Petroleum Gas Stakeholders’ Forum organised by his office in collaboration with the Federal Ministry of Petroleum Resources in Abuja, explained that the low level consumption of the LPG by Nigerians was a major reason for the high demand for kerosene and firewood.

“The low LPG consumption in Nigeria has resulted in heavy dependence on kerosene and firewood as primary domestic cooking fuel. The government has undertaken huge subsidy of over $1bn in 2015 on kerosene subsidy,” he stated.

This, he said, was not beneficial for the country economically and health wise, as data at the disposal of the government showed that thousands of women and children had died as a result of diseases caused by firewood and kerosene polluted air.

The vice-president emphasised the need to unlock the domestic LPG value chain, stressing that this was one policy that the current government was passionate about since Nigeria had one of the largest gas reserves in the world.

He stated that the gas sector had the potential to revolutionise Nigeria’s fuel consumption, adding that a gas policy was being developed to address the gas development issues.

Osinbajo also noted that in 2015, operators imported 40 per cent of the total volume of domestic LPG consumed in Nigeria, a development that impacted the country’s foreign exchange reserves adversely.

He stated that the country’s LPG consumption recorded a steady decline until 2007 when the Nigeria Liquefied and Natural Gas Company intervened, adding that since then, the demand for domestic gas had been on the increase.

He said, “In the gas policy, liquefied petroleum gas has been identified as a viable source of stimulation of the socio-economic health of our nation. Nigeria’s LPG consumption had been declining until the NLNG intervened and since then, our LPG consumption has grown from 50 metric tonnes per annum to 400MTPA.

“Though this signifies some improvement in domestic LPG consumption, it translates to a per capita consumption of less than 2.5kg when compared to higher per capita consumption of some African countries. Also, about 40 per cent of our domestic LPG consumption in 2015 was imported, this impacts on our foreign exchange.”

The Managing Director, NLNG, Mr. Tony Attah, stated that despite the progress recorded in the domestic LPG sub-sector, there were still bottlenecks frustrating the full-fledged development of the market.

Also on Tuesday, Osinbajo said the government hoped to conclude the sale of a $1bn Eurobond by the end of the first quarter of 2017 and would seek to make its foreign exchange market more flexible.

The country is in its deepest recession in 25 years and needs to find money to make up for shortfall in its budget. Its revenues from oil have plunged due to low international prices and militant attacks on the crude-producing heartland, the Niger Delta, cutting output.

To help cover its budget shortfalls, the government was keen to ensure it was collecting taxes efficiently, Osinbajo told Reuters in an interview.

“We will continue to consider the issue of raising tax and raising VAT. But at the moment, we are more concerned with ensuring that we really improve our coverage,” he said, referring to tax collection.

The government began the process of appointing banks for the sale of the Eurobond in September and had said it wanted to issue the bond by the end of the year. It has yet to announce a lender to lead the sale.

“At the very latest, between the end of the year and the first quarter of next year, we will begin to see all that process concluded,” Osinbajo said.

The vice-president said the severe loss of petro-dollars had caused serious foreign exchange shortages and had been worsened by attacks on oil pipelines and export terminals.

The government had wanted to issue the Eurobond to help plug a gap in its record N6.06tn budget this year, in addition to tapping concessionary loans from the World Bank and China as its oil revenues fell.

So far, only the African Development Bank has come to its aid, approving a $600m loan, the first tranche of a total $1bn package.

Osinbajo also said his office was working with the central bank to make the foreign exchange market more flexible and more reflective of actual demand and supply.

The regulator in June officially ended its policy of pegging, or fixing, the naira’s exchange rate at 197 per dollar to let the currency float freely. But the exchange rate has since been stuck at N305 to N315 on the official market due to dollar shortages, while on the black market, the naira is changing hands at 470 per dollar.

Nigeria’s crude production, which was 2.1 million bpd at the start of 2016, fell by around a third in the summer following a series of attacks by Niger Delta militants who want a greater share of the country’s energy wealth to go to the impoverished southern oil-producing region.

“At one point, we were losing almost one million barrels per day, which translated to 60 per cent of oil revenues…and that affects the availability of dollars,” Osinbajo said.

He also said the government was prepared to talk with the militants but that maintaining security was essential for law enforcement.

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

Electricity Consumers Get 611,231 Meters Under MAP Scheme

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Electricity Consumers Get 611,231 Meters Under MAP Scheme

A total of 611,231 meters have been deployed as at January 31, 2021 under the Meter Asset Provider initiative since its full operation despite the COVID-19 pandemic and other extraneous factors, the Nigerian Electricity Regulatory Commission has said.

NERC disclosed this in a consultation paper on the review of the MAP Regulations.

The proposed review of the MAP scheme is coming nearly four months after the Federal Government launched a new initiative called National Mass Metering Programme aimed at distributing six million meters to consumers free of charge.

“The existence of a huge metering gap and the need to ensure successful implementation of the MYTO 2020 Service-Based Tariff resulted in the approval of the NMMP, a policy of the Federal Government anchored on the provision of long-term low interest financing to the Discos,” NERC said.

The commission had in March 2018 approved the MAP Regulations with the aim of fast-tracking the closure of the metering gap in the sector through the engagement of third-party investors (called meter asset providers) for the financing, procurement, supply, installation and maintenance of meters.

It set a target of providing meters to all customers within three years, and directed the Discos and the approved MAPs to commence the rollout of meters not later than May 1, 2019.

But in February 2020, NERC said several constraints, including changes in fiscal policy and the limited availability of long-term funding, had led to limited success in meter rollout.

NERC, in the consultation paper, highlighted three proposed options for metering implementation going forward.

The first option is to allow the implementation of both the NMMP and MAP metering frameworks to run concurrently; the second is to continue with the current MAP framework with meters procured under the NMMP supplied only through MAPs (by being off-takers from the local manufacturers/assemblers).

The third option is to wind down the MAP framework and allow the Discos to procure meters directly from local manufacturers/assemblers (or as procured by the World Bank), and enter into new contracts for the installation and maintenance of such meters.

“Customers who choose not to wait to receive meters based on the deployment schedule of the NMMP shall continue to have the option of making upfront payments for meters which will be installed within a maximum period of 10 working days,” NERC said.

The regulator said such customers would be refunded by the Discos through energy credits, adding that there would be no option for meter acquisition through the payment of a monthly meter service charge.

“Where meters have already been deployed under the meter service charge option, Discos shall make one-off repayment to affected customers and associated MAPs. Such meters shall be recognised in the rate base of the Discos,” it added.

NERC urged stakeholders to provide comments, objections, and representations on the proposed amendments within 21 days of the publication of the consultation paper.

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Nigeria’s Economy Moving in Right Direction but Slow – Amina Mohammed

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Nigeria’s Economy Moving in Right Direction but Slow – Amina Mohammed

Nigeria is moving in the right direction economically but its movement is not fast, the United Nations stated on Thursday.

Deputy Secretary-General of the United Nations, Amina Mohammed, said this during a meeting at the headquarters of the Federal Ministry of Industry, Trade and Investment in Abuja.

She said the challenges in Nigeria were huge, its population large but described the country’s economy as great with lots of opportunities.

The UN scribe stated that after traveling by train and through various roads in the Northern parts of Nigeria, she discovered that the roads were motorable, although there were ongoing repairs on some of them.

Mohammed said, “This is a country that is diverse in nature, ethnicity, religious backgrounds and opportunities. But these are its strengths, not weaknesses.

“And I think the narrative for Nigeria has to change to one that is very much the reality.”

Speaking on her trips across parts of Nigeria, she said, “What I saw along the way is really a country that is growing, that is moving in the right direction economically. Is it fast enough? No. Is it in the right direction? Yes it is.

“And the challenges still remain with security, our social cohesion and social contract between government and the people. But I know that people are working on these issues.”

She said the UN recognised the reforms in Nigeria and other nations, adding that the common global agenda was the Sustainable Development Goals.

Mohammad commended Nigeria’s quick response to the COVID-19 pandemic, as she expressed hope that the arrival of vaccines would be the beginning of the end of COVID-19.

On his part, the Minister of Industry, Trade and Investment, Adeniyi Adebayo, told his guest that the Federal Government was working hard to make Nigeria the entrepreneurial hub of Africa.

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N10.7tn Spent on Fuel Subsidy in 10 Years – MOMAN

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N10.7tn Spent on Fuel Subsidy in 10 Years – MOMAN

Nigeria spent a total of N10.7tn on fuel subsidy in the last 10 years, the Chairman, Major Oil Marketers Association of Nigeria, Mr Adetunji Oyebanji, has said.

Oyebanji, who was the guest speaker at the 18th Aret Adams Lecture on Thursday, said N750bn was spent on subsidy in 2019.

He highlighted the need for a transition to a market-driven environment through policy-backed legislative and commercial frameworks, enabling the sustainability of the downstream petroleum sector.

“Total deregulation is more than just the removal of price subsidies; it is aimed at improving business operations, increasing the investments in the oil and gas sector value chain, resulting in the growth in the nation’s downstream petroleum sector as a whole,” he said.

The managing director of 11 Plc (formerly Mobil Oil Nigeria Plc) said steps had been taken, “but larger and faster leaps are now required.”

According to him, deregulation requires the creation of a competitive market environment, and will guarantee the supply of products at commercial and market prices.

“It requires unrestricted and profitable investments in infrastructure, earning reasonable returns to investors. It requires a strong regulator to enable transparency and fair competition among players, and not to regulate prices,” Oyebanji said.

He noted that MOMAN had recently called for a national debate by stakeholders to share pragmatic and realistic initiatives to ease the impact of the subsidy removal on society – especially on the most vulnerable.

He said, “A shift from crude oil production to crude oil full value realisation through deliberate investment in domestic refining and refined products distribution, creates the opportunity to transform the dynamics of the downstream sector from one of ‘net importer’ to one of ‘net exporter’, spurring the growth of the Nigerian economy.

“Effective reforms and regulations are key drivers for the growth within the refining sector. Non-functional refineries cost Nigeria over $13bn in 2019. If the NNPC refineries were operating at optimal capacity, Nigeria would have imported only 40 per cent of what it consumed in 2019.”

Full deregulation of the downstream sector remains the most glaring boost to potential investors in this space, according to Oyebanji.

He said, “As crude oil prices will fluctuate depending on the prevailing exchange rates, it will be astute to trade in naira to avoid inevitable price swings.

“There needs to be a balance between ensuring the sustainable growth of the crude oil value chain (upstream through downstream) and providing value for the Nigerian consumer and the Nigerian economy.”

He said the philosophy should be for the government to put the legislative and commercial framework in place and let the market develop by itself.

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