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With Local Content, Strong Economy is Possible

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yemi osinbajo
  • With Local Content, Strong Economy is Possible

The failure of the leadership to maximise Nigeria’s enormous potential has been making the country suffer different economic woes.

Right now, Nigeria is wrestling with recession. And not a few actual and perceived economists have employed different nomenclatures like compression and depression to illustrate the state of the economy, while also making projections on where the country will be if the current negative economic trend continues.

Therefore, Nigeria requires diverse activities that are well situated to fuel the economy for a quick recovery from the current quagmire it’s in.

And to address the myriads of problems it presently faces, suggestions from some tested experts both from within and outside of the country have largely been in favour of aggressive reform of institutions and provision of enabling grounds for suitable hands to deliver viable economic outputs.

Clearly, the need to accentuate and achieve these critical national objectives can be identified in the theme and structure of the just concluded Nigeria Oil and Gas Conference and Exhibition, famously called NOG, Africa’s leading oil and gas conference which for the past 16 years has been gathering influential operators and relevant stakeholders in the oil and gas sector for development and to deepen business opportunities.

Actually, today’s topic, Fuelling the Economy, was taken from one of NOG’s agenda for this year’s edition. It is a welcome coincidence, you will agree, given the nation’s pressing needs, and the necessity of charting a way forward. Listed under this agenda by the conference organisers are Nigerians whose operations in the oil and gas industry are deemed germane to the solutions that the Nigerian government seeks in moving quickly out of recession.

Dr. Ladi Bada, CEO of Shoreline Natural Resources, Mr. Demola Adeyemo-Bero, managing director of First E&P and Mr. Taofik Adegbite, chief executive officer of Marine Platforms to mention just a few of the top industry players in attendance, were on hand to offer wider perspectives for a good way forward for Nigeria.

Adegbite’s Marine Platforms is a fascinating case study on how well wholly-indigenous Nigerian companies can perform in demonstrating Nigeria’s local capacity and competence in the technical areas of the oil and gas industry; and at the same time, how difficult it is for most Nigerian companies to keep the momentum of success in a business environment that is full of confusing policies and overlapping regulations.

In the first panel discussion, Adegbite duly affirmed the benefit of the Nigerian Local Content law which he said had provided the legal framework that enabled his company and several others to participate fully in the industry and to help retain in Nigeria billions of dollars that were constantly being repatriated from the country by foreigners due to previous lack of acknowledgment of the capability of Nigerians to take the local jobs available in the sector.

Adegbite therefore attributed the tremendous success made by his company, and the massive contribution his firm is making to the Nigerian economy, to the enactment and operation of a law that serves to empower Nigerian people and the economy.

Conversely, the CEO also shared the pains his firm is facing and unusual resilience being put up by his organisation, and possibly other Nigerian companies to remain virile during this tough moment.

And he admonished the government to tidy up its policies and laws so as to create more opportunities than stumbling blocks.

Interestingly, almost all the speakers on the panel, who were carefully drawn to represent the regulators, legislature and the operators, seemed to agree on the major problems plaguing the industry, and slowing down its gains to the country.

Really, the many paradoxes and contradictions in the Nigerian system deserve an urgent elimination for the country to attain greater heights and for the injection of necessary energy into the economy. Contributions from other members especially from those on the side of the government were disturbing as they confirmed the fears of many on the disruptions and uncertainties in the business atmosphere that were perhaps unwittingly created by the government itself.

Representing the Department of Petroleum Resources (DPR), a major regulator of the industry, in the discussion, Ms. Patricia Maseli, expressed frustration on the different means of control of the sector and opined that the various regulatory agencies presently in place need to be streamlined.

Similarly, the head of the Nigerian Content Development and Monitoring Board (NCDMB), the government agency that oversees the local content policy, Mr. Simbi Wabote, raised concern on some of the policies affecting quick attainment of the goals of the NCDMB.

Wabote also cited the example of a ridiculous policy that allows foreign operators to bring vessels in on a Temporary Import Permit (TIP) at a low rate while indigenous vessel owners are made to cough out Full Duty Payment (FDP), a higher cost on their assets.

Strangely, and quite so often, it seems to be quite easy for us to locate the part where the shoe pinches. On the other hand, we are ever so reluctant to undertake the proper action of ditching the discomforting footwear and seeking better replacement.

Of course, we all know before this more difficult time that it takes someone with steely will to function well in Nigeria’s business climate. From appalling infrastructure to needless bureaucracy of company registration procedures, unabated insecurity, the demoralising rigour of accessing funds and to other encumbrances, many potentially viable business initiatives are dead even before starting off.

It is actually quite sickening to imagine that it took continuous intensification of the World Bank’s current poor ranking of Nigeria as 169th out of 190 countries on its ease of doing business index to make us sit tight to discuss serious business in all spheres of our development.

Even though Nigerians have seen, quite regularly, lots of sitting for critical national issues which ended as permanently quashing of transformative actions, we can see promise in the decision of the Acting President Yemi Osinbajo, who has been holding fort quite effectively for the President, to recently roll out a 60-day national action plan to strengthen Nigeria’s economy with focus on ease of business for both local and foreign enterprises.

In the same manner, the minister of State for Petroleum Resources, Dr. Ibe Kachikwu and the group managing director of Nigerian National Petroleum Corporation (NNPC) Dr. Maikanto Baru, who both spoke at the NOG, freshly promised to deliver on the rejuvenation of the perennially sickly Nigerian refineries.

For as long as I can recall, Nigerians have been groaning about the deplorable state of the country’s three existing refineries, and its attendant effects on the lives of the masses who are end users of different petroleum products.

But shamefully, despite several previous promises of revamp by the government, the refineries with combined installed capacity of 445, 000 barrels per day, still struggle to churn out just about 21, 000 barrels per day. Nonetheless, Nigerians are still counting on the renewed commitment of Buhari’s administration to deliver change in that aspect, and across all sectors of the economy.

Meanwhile, it should be consistently emphasised that there is actually need for sufficient fuel to power the thinking of the individual behind the country’s policies and regulatory agencies to conduct economic affairs in ways that will deepen more business activities in the country.

And this is because the country is indeed endowed with people with enormous capacity and resources to get the economy on a fast pace.

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.

Markets

Refinitiv Expands Economic Data Coverage Across Africa

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Building on its commitment to drive positive change through its data and insights, Refinitiv today announced the expansion of its economic data coverage of Africa. The new data set allows investment managers, central bankers, economists, and research teams to use Refinitiv Datasteam analytical data for detailed exploration of economic relationships and investment opportunities among data series covering the African continent.

Securing reliable, detailed, timely, locally sourced content has not been easy for economists who have in the past had to use international sources which often can take many months to update and opportunities to monitor the market can be missed. Because Africa is a diverse continent, economists and strategists need more timely access to country-specific data via national sources to create tailored business, policy, trading and investment strategies to meet specific goals.

Africa continues to develop critical infrastructure, telecommunications, digital technology and access to financial services for its 1.3bn people. The World Bank estimates that over 50% of African inhabitants will be under 25 by 2050. This presents substantial opportunities for investors who can spot important trends and make informed decisions based on robust and timely economic data.

Stuart Brown, Group Head of Enterprise Data Solutions, Refinitiv, said: “Africa’s growing, dynamic and fast evolving economies makes it a focal point for financial markets today and in the coming decades.  As part of LSEG’s commitment to empowering the global markets with accurate and timely data, we are excited about making these unique datasets available via the Refinitiv Data Platform. Our economic data coverage of Africa will provide our customers with deeper and broader inputs for macroeconomic analyses and enable more effective investment strategies and economic research.”

Refinitiv Africa economic data coverage:

  • Africa economics content comprises around 500,000 nationally sourced time series data covering 54 African nations
  • Content is sourced from national statistical offices, central banks and other key national institutions
  • The full breadth of economics categories in Datastream including national accounts, money and finance, prices, surveys, labor market, consumer, industry, government and external sectors
  • International sources including OECD, World Bank, IMF, African Development Bank, Oxford Economics & more provide comparable data & forecasts across the continent

Refinitiv® Datastream® has global macroeconomics coverage to analyze virtually any macro environment, and better understand economic cycles to uncover trends and forecast market conditions. With over 14.2 million economic times series map trends, customers can validate ideas and identify opportunities using Refinitiv Datastream. Access its powerful charting tools, 9,000 pre-built chart templates and chart studies for commonly used valuation, performance, and technical and fundamental analysis.

 Refinitiv continually grows available data – the China expansion in 2019 covered a unique combination of economic and financial indicators. Refinitiv plans to expand Southeast Asia covering Thailand, Vietnam, Philippines and Malaysia with delivery expected in 2021. This ensures that Refinitiv will have much needed emerging market economic content.

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Crude Oil

Oil Rises on Drawdown in U.S. Oil Stocks, OPEC Demand Outlook

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Oil prices rose in early trade on Wednesday, adding to overnight gains, after industry data showed U.S. oil inventories declined more than expected and OPEC raised its outlook for oil demand.

Brent crude futures rose 28 cents, or 0.4%, to $63.95 a barrel at 0057 GMT, after climbing 39 cents on Tuesday.

U.S. West Texas Intermediate (WTI) crude futures similarly climbed 28 cents, or 0.5%, to $60.46 a barrel, adding to Tuesday’s rise of 48 cents.

Oil price gains over the past week have been underpinned by signs of a strong economic recovery in China and the United States, but have been capped by concerns over stalled vaccine rollouts worldwide and soaring COVID-19 infections in India and Brazil.

Nevertheless, the Organization of the Petroleum Exporting Countries (OPEC) tweaked up its forecast on Tuesday for world oil demand growth this year, now expecting demand to rise by 5.95 million barrels per day (bpd) in 2021, up by 70,000 bpd from its forecast last month. It is banking on the pandemic to subside and travel curbs to be eased.

“It was a welcome prognosis by the market, which had been fretting about the impact the ongoing pandemic was having on demand,” ANZ Research analysts said in a note.

Further supporting the market on Wednesday, sources said data from the American Petroleum Institute showed crude stocks fell by 3.6 million barrels in the week ended April 9, compared with estimates for a decline of about 2.9 million barrels from analysts polled by Reuters.

Traders are waiting to see if official inventory data from the U.S. Energy Information Administration (EIA) on Wednesday matches that view.

Market gains are being capped on concerns about increased oil production in the United States and rising supply from Iran at a time when OPEC and its allies, together called OPEC+, are set to bring on more supply from May.

“They may have to contend with rising U.S. supply,” ANZ analysts said.

EIA said this week oil output from seven major shale formations is expected to rise by 13,000 bpd in May to 7.61 million bpd.

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Energy

African Energy Developments Demand Sustained Investment With New Projects in Mozambique, Tanzania, Uganda, and Senegal

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Workers

In the past twelve months, the African energy sector has seen several encouraging developments – in the form of both Foreign Direct Investment (FDI) and strategic partnerships – that have advanced the sustainable development of its natural resources. In fact, despite a global downturn in investment in 2020, FDI flows to developing economies accounted for 72% of global FDI, the highest share to date. Given the magnitude of Africa’s oil and gas reserves – not to mention its abundant renewable resource wealth – the continent remains a highly attractive market for inbound investment, which is vital for its growth.

Take Uganda, for instance, which is home to one of the largest onshore discoveries in sub-Saharan Africa. Following multiple petroleum discoveries in Uganda’s Albertine Graben – estimated to contain 6.5 billion barrels of oil, of which 1.4 billion are considered recoverable – foreign investments into the country are expected to reach nearly $20 billion. Last April, Total E&P Uganda B.V. signed a Sale and Purchase Agreement with Tullow Oil PC, through which Total will acquire Tullow’s entire 33.34% interests in Uganda’s Lake Albert development project and the East African Crude Oil Pipeline (EACOP). Five months later, the Ugandan Government and Total signed a host government agreement for EACOP, representing a significant step toward reaching a final investment decision. The deal pushes along an extended development process – slowed by infrastructure issues, tax complications, then COVID-19 – that not only promises to bring first oil by 2022, but also provides a pathway to monetization via associated transport infrastructure.

In addition to developments at Lake Albert, the Ugandan Government has proven its commitment to attracting FDI to its hydrocarbon sector through its second licensing round held last year, as well as its invitation to local and foreign entities to forge joint-venture partnerships with the Government. By prioritizing the establishment of mutually beneficial partnerships, the emerging East African producer aims to facilitate the successful transfer of skills, knowledge and technology, initiating an influx of technical expertise and working capital into the country.

“Those who have been locked out from access to opportunity want the same from the energy sector that the energy sectors want from governments.  We must not forget local content, local jobs, local opportunities especially for young people and women” Stated NJ Ayuk Executive Chairman of the African Energy Chamber.

Meanwhile, in West Africa, Senegal has been reaping the rewards of a long-standing partnership with Germany, which has resulted in more than one billion Euros in funding, including significant support for small-scale power plants and renewable energy projects. Holding sizeable potential for solar and wind energy development, Senegal serves as a regional leader in renewable deployment as a means of rural electrification. Indeed, energy is a central component of poverty alleviation across Africa, with electricity access enabling greater independence, clean cooking and potable water, as well as dramatically improving the well-being of individuals, businesses and communities alike.  Rural populations are cognizant of the challenges posed by a lack of stable electricity supply – increased urban migration, lack of access to basic services, low economic competitiveness, to name a few – and distributed renewables can represent the fastest and least expensive path to electrification.

European interest in Senegal has shed light on and served as a model for co-operation opportunities between renewable-rich African countries and developed partners, which offer cutting-edge technologies and technical expertise to transform raw resources into viable off-grid and mini-grid solutions.

Furthermore, while the cost of deploying renewable technology has never been lower, the availability of renewable-focused capital has never been higher. Investment in commercial and industrial solar has demonstrated resilience against the pandemic, continuing to be seen as a safe investment in light of rising utility costs and increasing distribution of both solar and financial technologies. Yet resource potential and low costs of equipment are not enough; Senegal and other resource-rich African nations require active investor interest and strong government support to unlock diversified energy mixes. In turn, a lack of investment represents a pointed threat to the achievement of long-term energy security.

“Young people and women have shown their great resilience, and it is our hope we close these deals in the renewable energy sector, Africans can have a sense of some hope that they will be included in the industry contracts and opportunities. It is no longer correct for the African to be the last hired and the first fired” Concluded Ayuk.

Moreover, without sustained levels of FDI continuing to move the needle on oil, gas and renewable developments, energy export revenues run the risk of being stranded and resources left undeveloped. For emerging producers like Uganda – as well as Tanzania, Kenya, Mozambique, among several others – this would mean foregoing critical government revenues that could aid in a much-needed, post-COVID-19 economic recovery. FDI is vital to Africa’s growth, and while it may be challenging to procure capital in a tepid global economy, it is even more difficult not to. Yes, COVID-19 has put emerging producers in a tough spot: new exploration is seen as risky, and new producers lack existing assets or low-cost development of marginal fields on which to fall back. However, it is not an option to slow or postpone time-sensitive developments that promise to harness natural resource wealth and make sustainable improvements in standards of living across the continent. Africa requires a sustained flow of investment and has proven time and again that it offers the scope of projects and magnitude of resources that are worthy of foreign capital.

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