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FG Loses N43.48bn Foreign Airlines BASA Remittances

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Emirates Airline
  • FG Loses N43.48bn Foreign Airlines BASA Remittances

The federal government may have lost over N43.48 billion ($144 million) remittances paid by international airlines as reciprocity charges in the Bilateral Air Service Agreement (BASA) from 2014 to the end of 2016 due to the decision of the Ministry of Transport to stop collecting the charges without providing alternative payment platform for the airlines.

These are royalty payments for the frequencies operated by the foreign airlines from Nigeria to destinations where there are no corresponding reciprocity from Nigerian airlines. The payments are calculated per passenger and over the years millions of dollars have accrued to Nigeria, which were used for airport and other aviation development. These funds used to be in the custody of the defunct Nigeria Airways Limited (NAL) before it was liquidated.

However, the federal government has just been allowing these foreign airlines to operate freely to Nigeria and at the same time government allots multidesignations to the foreign carriers thus stifling the market for the local airlines.

Industry stakeholders said such accruals could have been used to upgrade and rebuild the nation’s navigational aids, provide airfield lighting at the country’s many airports or used to support aviation agencies and reduce the huge charges domestic carriers pay to the parastatals.

The then Ministry of Aviation scrapped the payments in response to the request of the International Air Transport Association (IATA), which indicated that its member airlines should stop paying royalties to nations.

It was gathered that mostly European carriers campaigned for the abrogation of payment of royalties through IATA and while other countries were still studying the request, Nigeria hastily adopted the policy. As a result, over 30 foreign carriers that operate into Nigeria do not pay royalties to government.

According to authoritative source from the Ministry of Transport, the ministry, which quickly spearheaded the scrapping of BASA funds did not introduce slot allocation as an alternative and which would have yielded more revenues to government.

While Nigeria had since scrapped the payment of royalties, other countries still collect same from airlines that operate to their cities.

The source said that the decision was self-serving and was never done in the interest of the country.

Rather, some airlines might have massaged the parochial interests of officials in the Ministry of Aviation to quickly adopt the policy which deadline had not been given and might not be given in the nearest possible time,” a source said.

“Since the scrapping of payment of royalties there has not been any directive about what to do next. This would be handled by the Ministry of Transport because it was the Ministry that removed the payments, although in other countries it is the Civil Aviation Authority that negotiates BASA and frequencies with representatives of other countries. It is a peculiar situation in Nigeria that the Ministry has to do all these things,” the source added.

The source noted that since the scrapping of BASA funds there has been funding gaps because “we don’t go to their countries, they come. We don’t have the capacity to operate international destinations, but the decision was taken too quickly by the Ministry of Transport. Overseas, you deal with CAAs. It is even our officials that fly to those countries to go and negotiate when we do not have our airlines to benefit from it. They should have come here to negotiate with us, which is the way it is done elsewhere.”

Industry veteran and former President of Aviation Round Table (ART), Captain Dele Ore on Monday condemned the decision of the federal government to scrap the payment of royalties by the foreign airlines and said the decision to remove it was ill advised because there is nothing Nigeria is getting from the foreign carriers.

The Executive Chairman of Airline Operators of Nigeria (AON), Captain Nogie Meggison attributed the decision to scrap the BASA payment by the Ministry to the many bad policies that had held the aviation industry down, saying that it is BASA that governs the country’s foreign airlines’ policy and therefore should be reviewed.

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.

Gold

Gold Gained Ahead of Joe Biden Inauguration 2021

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Gold

Gold Gained Ahead of Joe Biden Inauguration 2021

Gold price rose from one and a half month low on Tuesday ahead of President-elect Joe Biden’s inauguration on Wednesday.

The precious metal, largely regarded as a haven asset by investors, edged up by 0.2 percent to $1,844.52 per ounce on Tuesday, up from $1,802.61 on Monday.

According to Michael McCarthy, the Chief Market Strategies, CMC Markets, the surged in gold price is a result of the projected drop in dollar value or uncertainty.

He said, “The key factor appears to be the (U.S.) currency.”

As expected, a change in administration comes with the change in economic policies, especially taking into consideration the peculiarities of the present situation. In fact, even though Biden, Janet Yellen and the rest of the new cabinet are expected to go all out on additional stimulus with the support of Democrats controlled Houses, economic uncertainties with rising COVID-19 cases and slow vaccine distribution remained a huge concern.

Also, the effectiveness of the vaccines can not be ascertained until wider rollout.

Still, which policy would be halted or sustained by the incoming administration remained a concern that has forced many investors to once again flee other assets for Gold ahead of tomorrow’s inauguration.

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Crude Oil

Crude Oil Holds Steady Above $55 Per Barrel on Tuesday

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Oil

Crude Oil Holds Steady Above $55 Per Barrel on Tuesday

Brent Crude oil, against which Nigerian crude oil is priced, rose from $54.46 per barrel on Monday to $55.27 per barrel as of 9:03 am Nigerian time on Tuesday.

Last week, Brent crude oil rose to 11 months high of $57.38 per barrel before pulling back on rising COVID-19 cases and lockdowns in key global economies like the United Kingdom, Euro-Area, China, etc.

While OPEC has left 2021 oil demand unchanged and President-elect Joe Biden has announced a $1.9 trillion stimulus package, experts are saying the rising number of new cases of COVID-19 amid poor vaccine distribution could drag on growth and demand for oil in 2021.

On Friday, Dan Yergin, vice-chairman at IHS Markit, said in addition to the stimulus package “There are two other things that are going with it … one is of course, vaccinations — in the sense that eventually this crisis is going to end, and maybe by the spring, lockdowns will be over.”

“The other thing is what Saudi Arabia did. This is the third time Saudi Arabia has made a sudden change in policy in less than a year, and this one was to announce (the) 1 million barrel a day cut — partly because they are worried about the impact of the surge in virus that’s occurring,” he said.

Also, the stimulus being injected into the United States economy could spur huge Shale production and disrupt OPEC and allies’ efforts at balancing the global oil market in 2021.

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Crude Oil

Crude Oil Pulled Back Despite Joe Biden Stimulus

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Crude Oil Pulled Back Despite Joe Biden Stimulus

Crude oil pulled back on Friday despite the $1.9 trillion stimulus package announced by U.S President-elect, Joe Biden.

Brent crude oil, against which Nigeria’s oil is priced, pulled back from $57.38 per barrel on Wednesday to $55.52 per barrel on Friday in spite of the huge stimulus package announced on Thursday.

On Thursday, OPEC, in its latest outlook for the year, said uncertainties remain high in 2021 with the number of COVID-19 new cases on the rise.

OPEC said, “Uncertainties remain high going forward with the main downside risks being issues related to COVID-19 containment measures and the impact of the pandemic on consumer behavior.”

“These will also include how many countries are adapting lockdown measures, and for how long. At the same time, quicker vaccination plans and a recovery in consumer confidence provide some upside optimism.”

Governments across Europe have announced tighter and longer coronavirus lockdowns, with vaccinations not expected to have a significant impact for the next few months.

The complex remains in pause mode, a development that should not be surprising given the magnitude of the oil price gains that have been developing for some 2-1/2 months,” Jim Ritterbusch, president of Ritterbusch and Associates, said.

Still, OPEC left its crude oil projections unchanged for the year. The oil cartel expected global oil demand to increase by 5.9 million barrels per day year on year to an average of 95.9 million per day in 2020.

But also OPEC expects a recent rally and stimulus to boost U.S. Shale crude oil production in the year, a projection Investors King experts expect to hurt OPEC strategy in 2021.

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