- Nigeria Targets 2.6 Million Barrels Per Day Refining Capacity
Nigeria may be on the path to becoming self-sufficient in the production of petroleum products, as the Federal Government expects to increase the country’s refining capacity from 445,000 barrels per day to 2.62 million barrels per day.
To achieve this, the Department of Petroleum Resources (DPR), has granted licences to 22 private firms to establish refineries, which are expected to produce 1.97 million barrels per day in the short, medium and long period.
If these refineries come on stream, the country is expected to save over $15 billion yearly from the importation of petroleum products, create jobs and meet the needs of industrial firms, which depend on by-products from refineries.
Already, nine companies have submitted bids for co-location of new refineries within the complexes of Nigeria’s three existing refineries in Kaduna, Warri and Port Harcourt, which are expected to increase the nation’s refining capacity from 445,000 barrels per day (bpd) to 650,000bpd.
DPR, in its yearly report on the oil and gas sector stated that the Federal Government hoped to achieve 50 per cent domestic refining capacity by 2020, through a combined policy of deregulation and rehabilitation of aging plants.
According to the agency, in line with this aspiration, DPR has already granted 25 Licenses to Establish (LTE) and five Approvals to Construct (ATC) refineries in Nigeria to qualified companies.
It stated that one of the 25 LTE holders, Dangote Oil Refinery Company (DORC) has progressed the refinery development project to the equipment fabrication stage.
DPR said that the DORC project is due to be commissioned in 2018 and would add 500,000 BPSD to the domestic refining capacity.
The agency stated: “The modular refinery model is now emerging as a credible solution to the dismal share of domestic refineries. The model is gaining credence due to its comparatively lower establishment and running costs. Compared to bigger refinery projects, the modular solution appeals more to the marginal upstream producers desiring maximisation of assets value through local refining of produced oil.
“So far, DPR has issued 22 LTE and three ATC, respectively for modular Refineries projects. The projects have cumulative potentials to boost the domestic refinery capacity by more than 671,000BPSD on completion.”
The DPR noted that Nigerian refineries are plagued with peculiar domestic challenges and are not able to produce at sub-optimal levels partly due to the increasingly aging plants.
It added that incessant disruption of crude oil and product pipelines have posed further challenges to operations.
DPR said that there is a yawning gap between domestic demand and output from the domestic refineries, clearly underscores the need for proactive policies to bridge the gaps.
The agency noted that the continued low domestic refining capacity especially poses a peculiar policy challenge, in view of expanding local market for petroleum products.
According to the DPR, growing the domestic refining capacity would reduce the dependence on foreign products, boost local content, generate new jobs and develop requisite competencies in the ancillary sectors. “It would also free the foreign exchange market from undue demand pressures of petroleum products imports,” it added.
The agency said the future of the domestic refinery sector would be greatly improved through policy consistency, secured crude oil supplies and improved infrastructure. “Government is committed to tackling all the associated challenges facing the effective development of the domestic refinery sub-sector by promoting the business-friendly environment that is capable of driving the growth that will ensure the emergence of Nigeria as a refining hub in Africa,” it added.
The Director-General of Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf urged the Federal Government to liberalise the downstream petroleum sector for unfettered private sector participation and investment, while ensuring that the refineries are operated as commercial business entities.
He said the approach should be subjected to appropriate regulatory framework that defines the role of NNPC, while a model that would allow for a level playing field for all operators including the NNPC should be adopted.
“We have concerns over lack of clarity on the deregulation and liberalization of the sector. This policy lacuna has put many investments in the sector at risk; while many other investment decisions have been put on hold.
Unemployment To Push More Nigerians Into Poverty – NESG
On Friday, The Nigerian Economic Summit Group said that many more Nigerians are expected to fall into the poverty trap amid rising unemployment in the country.
The NESG, a private sector-led think-tank, noted in its economic report for the first quarter of 2021 that the country’s economic growth in the period under review was relatively weak.
It said, “Nigeria’s economic growth trajectory is better described as jobless and less inclusive even in the heydays of high growth regime in the 2000s.
“While the Nigerian economy recovered from the recession in Q4 of 2020, the unemployment rate spiked to its highest level ever at 33.3 percent in the same quarter.
“With the COVID-19 crisis heightening the rate of joblessness, many Nigerians are expected to fall into the poverty trap, going forward.”
The group noted that the World Bank estimated an increase in the number of poor Nigerians to 90 million in 2020 from 83 million in 2019.
“This corresponds to a rise in headcount poverty ratio to 44.1 percent in 2020 from 40.1 percent in 2019. The rising levels of unemployment and poverty are reflected in the persistent insecurity and social vices, with attendant huge economic costs,” it said.
According to the report, huge dependence on proceeds from crude oil, leaving other revenue sources unexplored, indicates that Nigeria is not set to rein in debt accumulation in the short to medium term.
The NESG noted that public debt stock continued to trend upwards, with a jump from N7.6tn ($48.7bn) in 2012 to N32.9tn ($86.8bn) in 2020.
It said public debts grew by 20 percent between 2019 and 2020, adding, “This is partly due to the need for emergency funds to combat the global pandemic and alleviate its adverse economic impacts on households and businesses.”
According to the group, Nigeria needs more than an economic rebound, and there is a need to improve growth inclusiveness.
It said, “Nigeria has struggled to achieve inclusive growth for many decades. Since recovery from the 2016 recession, the economy has been on a fragile growth path until it slipped into another recession in 2020 due to the COVID-19 pandemic.
“This suggests that the country needs to attain high and sustainable economic growth to become strong and resilient.
“The relationship between economic growth and unemployment rate in Nigeria suggests that economic growth has not led to a reduction in the unemployment rate – jobless growth.”
The NESG said to reverse this recurring trend, there was an urgent need for collaborative efforts between the government and relevant stakeholders towards addressing the constraints to value chain development in high-growth and employment-elastic sectors, including manufacturing, construction, trade, education, health and professional services, with ICT and renewable energy sectors as growth enablers.
It noted that despite the re-opening of the land borders that the Nigerian government shut since October 2019, inflation reached a four-year high of 18.1 percent in April 2021.
“While we expect improved agricultural production in coming months to partially ease inflationary pressures, this positive impact could be suppressed by recurring key structural bottlenecks including insecurity in the food-producing regions, electricity tariff hike, fuel price increase and hike in transport and logistic costs,” it added.
IMF Queries FG Strategies On Fuel Subsidy, Unemployment, Inflation
The International Monetary Fund has raised the red flag over Nigeria’s resumption of petrol subsidy payments, describing it as injurious to the economy.
It also reiterated the importance of introducing a market-based fuel pricing mechanism and deployment of well-targeted social safety nets to cushion any adverse impact on the poor.
In a report produced after a virtual meeting with Nigerian authorities from June 1 to 8, the IMF also expressed concerns over the rising unemployment and inflation rates, even as it admitted that real Gross Domestic Product was recovering.
The IMF team, led by Jesmin Rahman, further hailed the Central Bank of Nigeria for its efforts at unifying the exchange rate by embracing needed reforms.
The Fund said: “Recent exchange rate measures are encouraging, and further reforms are needed to achieve a fully unified and market-clearing exchange rate.
“The resurfacing of fuel subsidies is concerning, particularly in the context of low revenue mobilisation.
“The Nigerian economy has started to gradually recover from the negative effects of the COVID-19 global pandemic. Following sharp output contractions in the second and third quarters, GDP growth turned positive in Q4 2020 and growth reached 0.5 percent (y/y) in Q1 2021, supported by agriculture and services sectors.
“Nevertheless, the employment level continues to fall dramatically and, together with other socio-economic indicators, is far below pre-pandemic levels. Inflation slightly decelerated in May but remained elevated at 17.9 percent, owing to high food price inflation. With the recovery in oil prices and remittance flows, the strong pressures on the balance of payments have somewhat abated, although imports are rebounding faster than exports and foreign investor appetite remains subdued resulting in continued FX shortage.
“The incipient recovery in economic activity is projected to take root and broaden among sectors, with GDP growth expected to reach 2.5 percent in 2021. Inflation is expected to remain elevated in 2021, but likely to decelerate in the second half of the year to reach about 15.5 percent, following the removal of border controls and the elimination of base effects from elevated food price levels.”
The IMF also recognised that tax revenue collections were gradually recovering but noted that with fuel subsidies resurfacing, additional spending for COVID-19 vaccines and to address security challenges, the fiscal deficit of the Consolidated Government is expected to remain elevated at 5.5 percent of GDP.
Nigeria-South Africa Trade Hits $2.9bn
The volume of trade between Nigeria and South Africa hit $2.9 billion last year with expectation of it rising further with the African Continental Free Trade Area (AfCFTA) agreement.
Nigeria’s Consul General, Malik Abdul, in a statement noted that Nigeria accounts for 64 per cent of South Africa’s trade in West Africa and is one of his country’s top three sources of crude oil.
He further added that in 2020, South Africa imported R35 billion ($2.48 billion) worth of goods, predominantly crude oil from Nigeria and exported R6 billion ($425milion) to Nigeria.
He stated: “South Africa is currently among the top 10 per cent of investors in Nigeria, globally and Nigeria is South Africa’s 10th biggest export market in Africa and thirty-second globally. Nigeria accounts for 64 per cent of South Africa’s trade with West Africa and is one of South Africa’s top three sources of crude oil.
“Also, Nigeria in 2020 was South Africa’s top import market in Africa and sixth globally, after China, Germany, USA, India and Saudi Arabia. Over the past year, South Africa imported $2.48 billion worth of goods predominantly crude oil from Nigeria and exported $425 million worth to Nigeria.”
Also, the consulate said his embassy issued a total of 10,341 passports to Nigerian citizens in South Africa between March 2020 and May 2021.
The consul general further said the Mission had 404 unclaimed passports, and advised all those whose passports were processed and pending from August 2020 to come for collection.
Abdul added that the consulate was working to clear all COVID-19 lockdown backlog of applications, urging members of the public to exercise patience while the mission was resolving the backlogs.
On the re-introduction of administrative fees and charges for lost passports, Abdul said that the step was taken to harmonise and standardise consular services following approval from the Ministry of Foreign Affairs, Abuja.
The Mission had increased the fees for lost passports from R1,500 to R2,000, and admin charges of R120 for data capturing.
“On this issue, the Mission could not unilaterally impose any charges without headquarters’ approval or consent.
“The admin fees of R120 pertains to all services rendered by the two Missions,” he said.
According to the Nigerian envoy, the decision was taken to remove disparities in all consular services, noting that visa fees have also been harmonised.
On penalty for lost passports, Abdul disclosed that 484 Nigerian passports were reported missing at the mission between August 2020 and May 2021 with request for re-issue.
Abdul said it was discovered that there were criminal undertones and immigration rules infractions associated with the ‘so-called’ lost passport declarations.
“In line with practice in other Missions, there was a need to impose fines to deter people from engaging in such infractions.
“At such an astronomical rate of loss declarations, the option will be to refer such losses to Nigeria for processing.
“This will save the booklet for genuine requests of re-issue and thereby reducing the backlog and pressure on the Mission,” the envoy said.
Abdul disclosed that the consulate had received a directive to embargo processing of lost passports pending further instructions from the headquarters.
The consul general then accused some Nigerian groups in South Africa of, “peddling lies and outright falsehoods” against the Mission and his person.
“These disgruntled elements have gone ahead to incite fellow Nigerians with intent to sabotage the Mission.
“Moreover, a lie and falsehoods often repeated amounts to a propaganda which can be misinterpreted by the gullible and undiscerning as truth,” he said.
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