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Earnings of Port Terminal Operators Drop by 22.4 % in Real Terms — Akintola Williams

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Nigerian ports authority
  • Earnings of Port Terminal Operators Drop by 22.4 % in Real Terms

Despite the 151.2 percent increase in Terminal Handling Charges (THC) over the 10-year concession period (2006-2016), concessionaires have been reported to have recorded a 22.4 per cent drop in real earnings within the period.

In a research report released by Akintola Williams Deloitte, a top accounting and audit firm, the inverse earnings was as a result of adjustments for naira depreciation and inflation.

THC is the payment received from transferring cargo from ship/quay side to the container yard for release to clearing agents/customers. It is the main source of revenue for the terminal operators. The charges are regulated by the Nigerian Ports Authority (NPA) on behalf of the Federal Government.

Terminal operators business

According to the report entitled Public Private Partnership (PPP) as an anchor for diversifying the Nigeria economy: Lagos Container Terminals Concession as a Case Study, “Between 2006 and 2010, the charges were N31,850 per THC. They increased in 2011 to N45,500 and increased to N80,000 in 2016. This showed a 43% increase in the first four years, 76 per cent increase in the later years 2011 to 2016 and an overall increase of 151 per cent from inception of the concession.

“During the same period between 2006 and 2016, the terminal operators business was adversely impacted by the rise in Consumer Price Index (CPI)/Inflation with the CPI Nigeria rising to over 177 per cent since 2006. Foreign exchange (FX) fluctuation also impacted the value of the THC with over 224 per cent FX depreciation between 2006 and 2016.

“Adjusting THC yearly with changes in Nigerian CPI only would have increased the fees in 2016 to N92,560 while adjusting for both FX and Nigerian CPI would have increased the fees to N185,112. In real economic terms the operators are losing revenue by not adjusting their THC in line with market realities.”

The report noted that the foreign exchange challenges that Nigeria faces as a result of the fall in global oil prices is further pronounced for terminal operators as a large part of their CAPEX (capital expenditure) and operational costs are in US Dollars. It said the operators’ dollar denominated costs included equipment acquisition and maintenance costs and payment of lease fees to the Nigerian Ports Authority (NPA).

It said, “83% of terminal operators revenues are received in naira,17% is received in US dollars. Terminal operators have to constantly source for US dollars through the parallel market at very high rates in order to meet their statutory and operational cost obligations.” The firm added that terminal operators are faced with huge challenges in the area of storage as the terminals are used as “cheap storage warehouse alternatives” by cargo owners.

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.

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Communities in Delta State Shut OML30 Operates by Heritage Energy Operational Services Ltd

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Oil

The OML30 operated by Heritage Energy Operational Services Limited in Delta State has been shut down by the host communities for failing to meet its obligations to the 112 host communities.

The host communities, led by its Management Committee/President Generals, had accused the company of gross indifference and failure in its obligations to the host communities despite several meetings and calls to ensure a peaceful resolution.

The station with a production capacity of 80,000 barrels per day and eight flow stations operates within the Ughelli area of Delta State.

The host communities specifically accused HEOSL of failure to pay the GMOU fund for the last two years despite mediation by the Delta State Government on May 18, 2020.

Also, the host communities accused HEOSL of ‘total stoppage of scholarship award and payment to host communities since 2016’.

The Chairman, Dr Harrison Oboghor and Secretary, Mr Ibuje Joseph that led the OML30 host communities explained to journalists on Monday that the host communities had resolved not to backpedal until all their demands were met.

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Crude Oil Recovers from 4 Percent Decline as Joe Biden Wins

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Oil Prices Recover from 4 Percent Decline as Joe Biden Wins

Crude oil prices rose with other financial markets on Monday following a 4 percent decline on Friday.

This was after Joe Biden, the former Vice-President and now the President-elect won the race to the White House.

Global benchmark oil, Brent crude oil, gained $1.06 or 2.7 percent to $40.51 per barrel on Monday while the U.S West Texas Intermediate crude oil gained $1.07 or 2.9 percent to $38.21 per barrel.

On Friday, Brent crude oil declined by 4 percent as global uncertainty surged amid unclear US election and a series of negative comments from President Trump. However, on Saturday when it became clear that Joe Biden has won, global financial markets rebounded in anticipation of additional stimulus given Biden’s position on economic growth and recovery.

Trading this morning has a risk-on flavor, reflecting increasing confidence that Joe Biden will occupy the White House, but the Republican Party will retain control of the Senate,” Michael McCarthy, chief market strategist at CMC Markets in Sydney.

“The outcome is ideal from a market point of view. Neither party controls the Congress, so both trade wars and higher taxes are largely off the agenda.”

The president-elect and his team are now working on mitigating the risk of COVID-19, grow the world’s largest economy by protecting small businesses and the middle class that is the backbone of the American economy.

There will be some repercussions further down the road,” said OCBC’s economist Howie Lee, raising the possibility of lockdowns in the United States under Biden.

“Either you’re crimping energy demand or consumption behavior.”

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Nigeria, Other OPEC Members Oil Revenue to Hit 18 Year Low in 2020

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oil-rig

Revenue of OPEC Members to Drop to 18 Year Low in 2020

The United States Energy Information Administration (EIA) has predicted that the oil revenue of members of the Organisation of the Petroleum Exporting Countries (OPEC) will decline to 18-year low in 2020.

EIA said their combined oil export revenue will plunge to its lowest level since 2002. It proceeded to put a value to the projection by saying members of the oil cartel would earn around $323 billion in net oil export in 2020.

If realised, this forecast revenue would be the lowest in 18 years. Lower crude oil prices and lower export volumes drive this expected decrease in export revenues,” it said.

The oil expert based its projection on weak global oil demand and low oil prices because of COVID-19.

It said this coupled with production cuts by OPEC members in recent months will impact net revenue of the cartel in 2020.

It said, “OPEC earned an estimated $595bn in net oil export revenues in 2019, less than half of the estimated record high of $1.2tn, which was earned in 2012.

“Continued declines in revenue in 2020 could be detrimental to member countries’ fiscal budgets, which rely heavily on revenues from oil sales to import goods, fund social programmes, and support public services.”

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