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FG Owes Insurance Operators N8.4billion Premium

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WAPIC
  • FG Owes Insurance Operators N8.4billion Premium

Despite the ‘no premium no cover’ regime, the federal government is owing the Insurance Industry about N8.4billion, which ought to have been paid for the group life insurance coverage for all federal civil servants.

Group life insurance is insurance cover undertaken by the federal government through the Office of Head of Civil Service of the Federation on behalf of its federal civil servants for their protection against unforeseen circumstances, such as death and disabilities associated with industrial hazards while in active service.

The debt emanated from the outstanding balance of premiums owed to participating underwriters in group life insurance of federal civil servants in 2012 and 2016.

Reliable sources from one of the participating insurance companies hinted that in 2012, each of the underwriters were paid between 40 – 50 percent of their expected premiums for the group life insurance cover of civil servants assigned to them while over 50 percent (about N3 billion) of the total N6 billion premiums still remained unpaid till date, barely four years after.

The Source explained that although, the former President Goodluck Jonathan’s administration claimed that it could only afford 50 percent of the amount, the federal government, through the Office of Head of Civil Service of the Federation (OHCSF), never got back to the underwriters in subsequent years to offset the debts on premiums.

Further, with the exception of 2013- 2015, when the premiums were fully paid, the industry operators said that the federal government, is also yet to pay premiums for the renewal of the Group life Insurance of workers for the year, 2016.

The government merely informed the 20 selected participating underwriting firms without yet any financial commitments by payment of premiums. The expected premiums is N5.4 billion.

The Group Life Insurance of civil servants, which expired since July last year, ought to have been renewed by August 12, 2016 but up till date, the beginning of the second quarter of 2017, it has not been renewed due to lack of funding by the federal government.

Also, the insurance cover of assets of the federal government nationwide expired since August, last year. The processes for its renewal which will gulp several billions are yet to commence.

A Source at the OHCSF said that insurance of government assets, can wait for now, though no reason was given for downplaying the process.

The implication is that in the event of disaster affecting any of the government assets, there will be no compensation since it is no “no premium, no cover” regime.

Industry operators complained that the inability of the federal government to meet its financial obligations to insurance industry has consistently robbed the sector expected capital and thus, hamper its contributions to nation’s Gross Domestic Product (GDP) and economic growth.

Presently, the contribution of insurance sector to nation’s GDP is less than one percent, compared to 9.5 percent contribution by the new pension scheme.

In respect of the amount required and the approved underwriters, the Permanent Secretary (Common Services Office) in the OHSF, Mr. Yemi Adelakun, said: “It is usually N5.4 billion annually for civil servants. That’s the figure and that had been recurring for the last three or four years.

For this current one, I think we shortlisted 21 insurance companies and Bureau of Public Procurement (BPP) gave us certificate of no objection for 20. And we can only work with those approved by the BPP and that approval has been confirmed by Mr. President.”

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.

Crude Oil

Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

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Oil

Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

Oil retreated from an earlier rally with investment banks and traders predicting the market can go significantly higher in the months to come.

Futures in New York pared much of an earlier increase to $63 a barrel as the dollar climbed and equities slipped. Bank of America said prices could reach $70 at some point this year, while Socar Trading SA sees global benchmark Brent hitting $80 a barrel before the end of the year as the glut of inventories built up during the Covid-19 pandemic is drained by the summer.

The loss of oil output after the big freeze in the U.S. should help the market firm as much of the world emerges from lockdowns, according to Trafigura Group. Inventory data due later Tuesday from the American Petroleum Institute and more from the Energy Department on Wednesday will shed more light on how the Texas freeze disrupted U.S. oil supply last week.

Oil has surged this year after Saudi Arabia pledged to unilaterally cut 1 million barrels a day in February and March, with Goldman Sachs Group Inc. predicting the rally will accelerate as demand outpaces global supply. Russia and Riyadh, however, will next week once again head into an OPEC+ meeting with differing opinions about adding more crude to the market.

“The freeze in the U.S. has proved supportive as production was cut,” said Hans van Cleef, senior energy economist at ABN Amro. “We still expect that Russia will push for a significant rise in production,” which could soon weigh on prices, he said.

PRICES

  • West Texas Intermediate for April fell 27 cents to $61.43 a barrel at 9:20 a.m. New York time
  • Brent for April settlement fell 8 cents to $65.16

Brent’s prompt timespread firmed in a bullish backwardation structure to the widest in more than a year. The gap rose above $1 a barrel on Tuesday before easing to 87 cents. That compares with 25 cents at the start of the month.

JPMorgan Chase & Co. and oil trader Vitol Group shot down talk of a new oil supercycle, though they said a lack of supply response will keep prices for crude prices firm in the short term.

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Crude Oil

Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

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Crude oil

Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

Oil prices rose on Monday as the slow return of U.S. crude output cut by frigid conditions served as a reminder of the tight supply situation, just as demand recovers from the depths of the COVID-19 pandemic.

Brent crude was up $1.38, or 2.2%, at $64.29 per barrel. West Texas Intermediate gained $1.38, or 2.33%, to trade at $60.62 per barrel.

Abnormally cold weather in Texas and the Plains states forced the shutdown of up to 4 million barrels per day (bpd) of crude production along with 21 billion cubic feet of natural gas output, analysts estimated.

Shale oil producers in the region could take at least two weeks to restart the more than 2 million barrels per day (bpd) of crude output affected, sources said, as frozen pipes and power supply interruptions slow their recovery.

“With three-quarters of fracking crews standing down, the likelihood of a fast resumption is low,” ANZ Research said in a note.

For the first time since November, U.S. drilling companies cut the number of oil rigs operating due to the cold and snow enveloping Texas, New Mexico and other energy-producing centres.

OPEC+ oil producers are set to meet on March 4, with sources saying the group is likely to ease curbs on supply after April given a recovery in prices, although any increase in output will likely be modest given lingering uncertainty over the pandemic.

“Saudi Arabia is eager to pursue yet higher prices in order to cover its social break-even expenses at around $80 a barrel while Russia is strongly focused on unwinding current cuts and getting back to normal production,” said SEB chief commodity analyst Bjarne Schieldrop.

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Crude Oil

Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

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oil

Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

Oil prices rose to $65.47 per barrel on Thursday as crude oil production dropped in the US due to frigid Texas weather.

The unusual weather has left millions in the dark and forced oil producers to shut down production. According to reports, at least the winter blast has claimed 24 lives.

Brent crude oil gained $2 to $65.47 on Thursday morning before pulling back to $64.62 per barrel around 11:00 am Nigerian time.

U.S. West Texas Intermediate (WTI) crude rose 2.3 percent to settle at $61.74 per barrel.

“This has just sent us to the next level,” said Bob Yawger, director of energy futures at Mizuho in New York. “Crude oil WTI will probably max out somewhere pretty close to $65.65, refinery utilization rate will probably slide to somewhere around 76%,” Yawger said.

However, the report that Saudi Arabia plans to increase production in the coming months weighed on crude oil as it can be seen in the chart below.

Prince Abdulaziz bin Salman, Saudi Arabian Energy Minister, warned that it was too early to declare victory against the COVID-19 virus and that oil producers must remain “extremely cautious”.

“We are in a much better place than we were a year ago, but I must warn, once again, against complacency. The uncertainty is very high, and we have to be extremely cautious,” he told an energy industry event.

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