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Nigerian Oil Sales Slow as Uncertainty Surrounds DSDP

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Silhouette of oil platform in sea against moody sky at sunset
  • Nigerian Oil Sales Slow as Uncertainty Surrounds DSDP

Trade of Nigerian crude oil has slowed with offers not meeting buying interest and uncertainty remains over the nation’s direct sale of crude oil and direct purchase of products’ programme for 2017.

A short-list of winners emerged for the swaps but final contracts have yet to be signed, Reuters quoted sources as saying.

Total was said to have sold a cargo of Bonga to Cepsa loading at the end of May, while ExxonMobil was still offering a cargo of Usan loading at dated Brent minus 50 cents, loading June 25-26. It originally offered the cargo last week.

Indonesia’s Pertamina is taking Bonny Light and Qua Iboe in its tender for crude loading in the second half of 2017.

Last month, it was reported that the Nigerian National Petroleum Corporation was drafting a preliminary list of recipients for the DSDP programme, with details on allocated volumes and specification changes still being decided.

Under the DSDP model, selected overseas refiners, trading companies and indigenous companies are allocated crude supplies in exchange for delivery of an equal value of petrol and other refined products to the NNPC.

Platts quoted sources as saying that the current list consisted of 10 pairs, with one company responsible for procuring the refined products in exchange for the crude oil, which will be allocated by a company that is currently under the NNPC 2017 crude oil term contracts.

It said, for example, one of the pairs on the list included Vitol and Varo Energy. Varo is currently under the 2017 NNPC crude oil term contract, and will provide crude to Vitol in exchange for refined products.

Sources said the delay in finalising the contracts could have something to do with the government’s plans to change the specification of refined product imports namely, petrol and diesel, as it seeks to shift towards cleaner fuels.

The NNPC and government officials have stated that from July 1, the specification of petrol imports would change to 150 parts per million sulphur maximum from 1,000ppm, and diesel imports will shift from 3,000ppm sulphur to 50ppm.

The DSDP arrangement started in April last year and replaced the controversial crude for oil product swap and Offshore Processing Agreements.

The DSDP scheme usually covers 12 months starting in April. The 2016 DSDP scheme had already been extended for April delivery.

The tender for the new DSDP contract was announced in January and 128 companies submitted bids, according to the NNPC.

The corporation issued the call for tenders in January in an effort to slash the size of the shortfall of refined products in the country seen since private marketers stopped importing fuel, especially petrol, due to a scarcity of foreign exchange.

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

CBN Predicts 2 Percent Growth for Nigeria in 2021

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Despite the economic recession and numerous uncertainties encompassing Nigeria in recent months, the Central Bank of Nigeria (CBN) has said the nation will grow by 2 percent in 2021.

Speaking at the 2020 bankers’ dinner organised by the Chartered Institute of Bankers of Nigeria (CIBN), Godwin Emefiele, the Governor, CBN, said implemented government intervention programmes will aid the nation’s recovery by next year.

Emefiele further stated that the intervention efforts represent around 3.5 percent of Nigeria’s current Gross Domestic Product (GDP).

He said, “Our actions in 2021 would be guided by the considerations that emerged from the Monetary Policy Committee meeting of November 23 & 24, 2020, which sought to address the major headwinds exerting downward pressure on output growth and upward pressure on domestic prices.”

On fast declining foreign reserves, the Governor said the institution has adopted a demand management framework designed to boost the production of items that can be produced locally and aid conservation of external reserves.

Due to the unprecedented nature of the shock, we continued to favour a gradual liberalisation of the foreign exchange market in order to smoothen exchange rate volatility and mitigate the impact which rapid changes in the exchange rate could have on key macro-economic variables,” Emefiele stated.

The CBN projection came few weeks after the National Bureau of Statistics (NBS)’s report showed Africa’s largest economy contracted by 3.62 percent in the third quarter following a 6.10 percent decline posted in the second quarter. Nigeria officially slid into the worse economic recession in almost 30 years and the second economic recession under the current administration.

While, the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, has projected that Nigeria would rebound from the recession in this final quarter or the very first quarter of 2021, falling revenue generation, rising capital flight amid weak demand due to the negative impact of coronavirus on earnings, household incomes and lack of jobs remain a concern.

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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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