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Govt Owes Multinationals $10b in Crude Oil Over-lift

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Oil Prices below $50
  • Govt Owes Multinationals $10b in Crude Oil Over-lift

The Federal Government through the Nigerian National Petroleum Corporation (NNPC), is owing International Oil Companies (IOCs) about $10 billion in unpaid crude oil over-lift bills, The Nation has learnt.

The huge debts build-up in the last few years, were as a result of over-lifting of crude oil due to the government as royalty from the oil fields. It was learnt that the NNPC that superintends government’s interests in these oil acreages, often comes to these facilities with vessels to lift crude with a promise to reconcile the transactions with the operating companies, but in most cases, it never did.

A source who spoke on condition of anonymity, said the oil majors in Nigeria have been battling this problem over the years, saying the worrisome aspect of the issue is that the crude oil being lifted comes from oil fields developed under the Production Sharing Contracts (PSCs) arrangement.

Under this arrangement, the oil firms bear the total risk of exploration and development. When the field begins production the oil firm, depending on agreed terms, pays royalty to the government with oil. The royalty oil is the quantum of oil allocated to the NNPC that will generate proceeds equal to the actual royalty payable each month and the concession rent payable each year.

The source stated that in the PSC arrangement, government and operating companies committed to settling any issue that may arise through an arbitration panel where three lawyers would be present each representing the government or NNPC, the oil firm and, the remaining, an independent lawyer.

He said the government always abandons the decision of the arbitration panel and goes to a local high court to get judgment in its favour. “This is bare-faced bullying. How can the government flagrantly disregard contractual agreements, send a vessel to lift oil without considering the operator of the asset. They (government) will ask you to go to arbitration and will refuse to abide by the judgment of the arbitration panel.

“This attitude of the government is a major disincentive to investment in the oil and gas industry. Imagine where a company sources funds, takes the entire risk of exploration and if eventually oil is found, takes the entire risk of developing the field in challenging environments such as deepwater. This happens only in this country and I must let you know it is a major constraint to attracting global investible funds into this country.

“We all know other existing challenges in operating in this environment such as militancy, joint venture funding issues and the current state of the global oil industry. We hope this administration will address this issue of crude over-lift, among other problems,” the source said.

When The Nation contacted the Group General Manager, Group Public Affairs Division of NNPC, Mr Ndu Ughamadu, for comments, he said the issue was channelled to the appropriate department of NNPC for response and the division said it is untrue. He said: “The appropriate unit said it is not true.”

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.

Economy

COVID-19 Vaccine: Crude Oil Extends Gain to $48 Per Barrel on Wednesday

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Oil prices rose further on Wednesday as hope for an effective COVID-19 vaccine and the news that the United States of America’s President-elect, Joe Biden has begun transition to the White House bolstered crude oil demand.

Brent crude oil, a Nigerian type of oil, gained 1.63 percent or 78 cents to $48.64 per barrel at 11:50 am Nigerian time on Wednesday.

The United States West Texas Intermediate (WTI) crude oil rose by 1.36 percent or 61 cents to $45.52 per barrel.

OPEC Basket surged the most in terms of gain, adding 3.16 percent or $1.37 to $44.75 per barrel.

This was after AstraZeneca, Moderna and Pfizer-BioNTech announced the positive results of their trials.

Moderna and Pfizer had claimed over 90 percent effective rate in trials while AstraZeneca said its COVID-19 vaccine was 70 percent effective in trials but could hit 90 percent going forward.

The possibility of having a vaccine next year increases the odds that we’re going to see demand return in the new year,” said Phil Flynn, senior analyst at Price Futures Group in Chicago.

Also, the decision of President-elect Joe Biden to bring Janet Yellen, the former Chair of Federal Reserve, back as a Treasury Secretary of the United States is fueling demand and strong confidence across global financial markets.

President-elect Biden’s cabinet choices, particularly Janet Yellen’s Treasury Secretary position, are adding to upside momentum across a broad space of asset classes,” said Jim Ritterbusch of Ritterbusch and Associates.

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Economy

Seyi Makinde Proposes N266.6 Billion Budget for Oyo State in 2021

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The Executive Governor of Oyo State, Seyi Makinde, has presented the Oyo State Budget Proposal for the 2021 Fiscal Year to the Oyo State House of Assembly on Monday.

The proposed budget titled “Budget of Continued Consolidation” was said to be prepared with input from stakeholders in all seven geopolitical zones of Oyo state.

Governor Makinde disclosed this via his official Twitter handle @seyiamakinde.

According to the governor, the proposed recurrent expenditure stood at N136,262,990,009.41 while the proposed capital expenditure was N130,381,283,295.63. Bringing the total proposed budget to N266,6444,273,305.04.

The administration aimed to implement at least 70 percent of the proposed budget if approved.

He said “The total budgeted sum is ₦266,644,273,305.04. The Recurrent Expenditure is ₦136,262,990,009.41 while the Capital Expenditure is ₦130,381,283,295.63. We are again, aiming for at least 70% implementation of the budget.”

He added that “It was my honour to present the Oyo State Budget Proposal for the 2021 Fiscal Year to the Oyo State House of Assembly, today. This Budget of Continued Consolidation was prepared with input from stakeholders in all seven geopolitical zones of our state.”

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Economy

World Bank Expects Nigeria’s Per Capita Income to Dip to 40 Years Low in 2020

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The World Bank has raised concern about Nigeria’s rising debt service cost, saying it could incapacitate the nation from necessary infrastructure development and growth.

The multilateral financial institution said the nation’s per capita income could plunge to 40 years low in 2020.

According to Mr. Shubham Chaudhuri, Country Director for World Bank in Nigeria, the decline in global oil prices had impacted government finances, remittances from the diaspora and the balance of payments.

Chaudhuri, who spoke during the 26th Nigerian Economic Summit organised by the Nigerian Economic Summit Group and the Federal Government, said while the nation’s debt is between 20 to 30 percent, rising debt service remains the bane of its numerous financial issues and growth.

Nigeria’s problem is that the debt service takes a big part of the government revenue,” he said.

He said, “Crisis like this is often what it takes to bring a nation together to have that consensus within the political, business, government, military, civil society to say, ‘We have to do something that departs from business as usual.’

“And for Nigeria, this is a critical juncture. With the contraction in GDP that could happen this year, Nigeria’s per capita income could be around what it was in 1980 – four decades ago.”

Nigeria’s per capita income stood at $847.40 in 1980, according to data from the World Bank. It rose to $3,222.69 in 2014 before falling to $2,229.9 in 2019.

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