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FG, Oil Firms Optimistic About Increased Crude Production

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  • FG, Oil Firms Optimistic About Increased Crude Production

The Federal Government and oil firms have expressed optimism that crude production in the country will increase this year as efforts to stem militancy in the Niger Delta and introduce a new funding structure for joint venture assets gain traction.

Nigeria, which had been exempted from the deal by the Organisation of Petroleum Exporting Countries to cut output from January, hoped to pull its economy out of recession on the back of the upswing in global crude prices and restore oil production to at least 2.2 million barrels per day, President Muhammadu Buhari said in early December.

Negotiations with militants in the Niger Delta to end attacks on oil facilities are also progressing and a new funding scheme for upstream ventures with foreign partners was recently agreed.

For now, the country continues to suffer from the oil price downturn as oil accounts for about 90 per cent of its foreign exchange earnings and about 80 per cent of the government’s total revenue.

“The government is sure that the target to raise oil production to 2.2 million bpd or even more next year is realisable,” Femi Adesina, presidential spokesman told S&P Global Platts.

“The peace deal with militants to ensure zero disruption is in progress, though slow, but I can assure you that with a show of faith, the peace deal will be consummated in no time,” Adesina said.

Oil companies believe the return of peace in the restive Niger Delta region is key to the execution of the projects needed to increase production.

Just as the government needs higher oil production for more revenue, companies need the peace and security in the Niger Delta to be able to move in and repair damaged assets, especially in onshore and shallow waters, and even plan new projects.

“Once this is achieved, production can even reach 2.3 million bpd,” said one official at a Western oil company.

Nigerian oil output, which had recovered sharply in October from a 30-year low of around 1.4 million bpd in May, suffered a setback after another attack on the Trans-Forcados pipeline on November 2 impacted the transportation of the crude and shut-in the popular Forcados grade.

“With oil prices boosted by the OPEC and non-OPEC production cut, we companies are encouraged to invest next year but only if the Nigerian government can achieve a win-win situation with the militants in the Niger Delta,” the Managing Director, Britannia-U, Uju Ifejika, said.

A recovery in Nigeria’s oil production is premised not only on solving the Delta militancy, but also on the country’s successful negotiations of years of debts owed to its partners on counterpart funding for oil ventures, and introduction of new funding mechanism to drive investment in the upstream sector.

Nigeria negotiated $1.7bn off the $6.8bn in unpaid bills over the last four years owed its partners including Shell, ExxonMobil, Chevron, Total and Eni, to exit the cash call arrangement.

The nation was eyeing additional output of between 300,000 bpd and 700,000 bpd from onshore and shallow fields operated jointly with foreign partners over the next two years as a result of the financing deal, the spokesman for the Nigerian National Petroleum Corporation, Ndu Ughamadu, said.

“The Nigerian petroleum sector, which has recorded low investment in recent years, will soon experience an upbeat in a flurry of activities following the cash-call exit agreement between the NNPC and its Joint Venture partners,” he said.

“The agreement will stabilise and also increase upstream production over time. The repayment of the arrears in a sustainable manner is a key enabler to additional investment in the upstream sector in Nigeria,” the Chairman, Oil Producers Trade Section of the Lagos Chamber of Commerce and Industry, Clay Neff, said.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Nigeria’s Plan to Review Oil Companies’ Gas Flaring Strategies

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Nigeria is ramping up its efforts to address environmental concerns in the oil and gas sector with a comprehensive plan to review gas flaring strategies of international and indigenous oil companies.

The Minister of State for Environment, Dr. Iziaq Salako, announced this initiative during a national stakeholders engagement meeting on methane mitigation and reduction held in Abuja, Investors King reports.

Gas flaring, a common practice in the oil industry, releases methane—a potent greenhouse gas—into the atmosphere, contributing to climate change and posing health risks to communities near oil facilities.

Nigeria aims to end routine gas flaring by 2030, aligning with global climate goals and commitments.

Dr. Salako explained the importance of reducing methane emissions and highlighted the detrimental effects on public health, food security, and economic development.

He outlined practical steps being taken to tackle methane emissions, including the development of methane guidelines and the engagement of government institutions.

The ministry, through the National Oil Spill Detection and Response Agency, will conduct periodic reviews of oil companies’ plans to ensure compliance with the gas flaring deadline.

Deloitte management consultants will assist in conducting comprehensive forensic audits to scrutinize the legitimacy of forward-contracted transactions.

President Bola Tinubu’s commitment to environmental sustainability underscores the government’s dedication to addressing climate change and fulfilling its multilateral environmental agreements.

The engagement event served as a platform for stakeholders to discuss methane mitigation strategies, existing policies, and implementation challenges.

Collaboration and dialogue among diverse sectors are crucial in charting a unified course towards sustainable methane reduction in Nigeria’s oil and gas industry.

As the country navigates its environmental agenda, ensuring accountability and transparency in gas flaring practices remains paramount for achieving a greener and healthier future.

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Economy

Interest Rate Jumps to 24.75% as CBN Takes Aggressive Stance Against Inflation

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Dr. Olayemi Michael Cardoso

The Central Bank of Nigeria (CBN) has announced a significant increase in the monetary policy rate, known as the interest rate, to 24.75%.

This move disclosed by CBN Governor Olayemi Cardoso during the 294th Meeting of the Monetary Policy Committee press briefing in Abuja, represents a bold step by the apex bank to address the mounting inflationary pressures faced by the country.

With inflation soaring to 31.70% in February, the CBN aims to moderate this upward trend by tightening its monetary policy stance.

This decision follows the previous hike in the interest rate to 22.75% in February, showcasing the CBN’s commitment to combatting inflationary forces.

While the bank opted to maintain the Cash Reserve Ratio at 45%, the significant increase in the interest rate underscores the urgency of the situation and the need for decisive action.

Governor Cardoso emphasized that these measures are essential to stabilize the economy and safeguard the purchasing power of the Nigerian currency.

The 294th MPC marks the second meeting under Governor Cardoso’s leadership, indicating a proactive approach to addressing economic challenges.

The next MPC meeting is scheduled for May 20th and 21st, 2024, highlighting the ongoing commitment of the CBN to navigate Nigeria’s economic landscape amidst inflationary pressures.

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Economy

Nigeria Braces for 10th Consecutive Interest Rate Hike by Central Bank

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Central Bank of Nigeria (CBN)

As Nigeria grapples with persistently high inflation, the Central Bank of Nigeria (CBN) is gearing up to implement its tenth consecutive interest rate hike in a bid to curb the soaring prices and attract investment.

Analysts surveyed by Bloomberg are anticipating a substantial 125 basis-point increase in the key rate to 24%, marking one of the most significant adjustments in the current tightening cycle.

The decision, expected to be announced by Governor Olayemi Cardoso on Tuesday at 2 p.m. in Abuja, comes on the heels of inflation accelerating to 31.7% in February, far surpassing the central bank’s target range of 9%.

This surge has been primarily attributed to the sharp depreciation of the naira, prompting authorities to devalue the currency twice since June to narrow the gap with the unofficial market rate and encourage investor confidence.

While these measures have seen the naira strengthen in recent days and bolstered investment inflows, including a fourfold increase in overseas remittances and significant foreign investor portfolio asset purchases, there remains a palpable need for more decisive action.

Giulia Pellegrini, a senior portfolio manager at Allianz Global Investors, emphasized the necessity for the CBN to intensify its tightening efforts to regain foreign investors’ confidence in the local bond market.

While acknowledging the positive strides made by the central bank, Pellegrini stressed the importance of a more assertive approach to prevent the diversion of investor attention to other frontier markets.

As the Nigerian economy navigates through these challenging times, the impending interest rate hike signals the CBN’s determination to address inflation head-on and foster a more stable economic environment.

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