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Kachikwu, Others Worry as Fuel Marketers Halt Importation

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Emmanuel Ibe Kachikwu
  • Kachikwu, Others Worry as Fuel Marketers Halt Importation

One year after the partial liberalisation of the nation’s fuel market, the Minister of State for Petroleum Resources, oil marketers and other stakeholders are concerned over the continued supply of over 90 per cent of petroleum products in the country by the Nigerian National Petroleum Corporation.

Most oil marketers have stopped fuel importation due to shortage of foreign exchange and increase in crude prices, which they claim have made it unprofitable to import petrol and sell at N145 per litre.

The Federal Government had on May 11, 2016 increased the price of Premium Motor Spirit (petrol) to N145 per litre from N86, putting an end to fuel subsidy to marketers.

Kachikwu, in his presentation at the 2017 first Business Clinic of the Petroleum Downstream Group of the Lagos Chamber of Commerce and Industry in Lagos on Friday, stressed the need to reposition the downstream sector of the oil and gas industry.

He noted that the downstream sector witnessed increasing gaps in product supply in the first and second quarters of 2016, adding that the non-availability of forex and the inability of marketers to open letters of credit had force them to stop importation.

The minister, who was represented by the Chief Operating Officer, NNPC, Mr. Henry Ikem-Obih, said the NNPC was forced to take up the obligation of providing more than 90 per cent of the domestic requirement to cover the demand for petroleum products.

“The NNPC was not designed to provide this kind of service. Historically, the NNPC had done an average of 48 per cent of Nigeria’s fuel requirement. What eventually happened was that the NNPC was stretched, and to complicate the situation, there was no provision for fuel subsidy in the 2016 Appropriation,” he said.

He said the environment had changed since the downstream sector was partially deregulated last year, adding that the rise in crude oil prices had pushed up the price of refined products.

Kachikwu said, “Again, we are back to the situation that we were last year. Today, the NNPC has gone back to importing about 95 per cent of products to ensure stability. In fact, through the months of December, January, February and most of March, we did a 100 per cent for the market. We have seen two windows for private importation in the last four weeks.

“The NNPC is absorbing some of the cost implications resulting from the increase in crude oil prices and the current price ceiling of N145 at the pump for the PMS.”

He stressed the need to revisit the price modulation that was introduced to reflect the movement of crude oil prices on fuel price.

The minister said, “If we had continued the modulation policy as structured, we probably would, at this stage, have created sufficient stability in the market where marketers can go out, get forex from the Central Bank of Nigeria, import products and recover their investments, or, in the worst case, break even.

“A lot of time, we control pricing because it is convenient and for several reasons. But it ultimately creates insecurity and distortions in the market.”

The Managing Director, Heyden Petroleum Limited and Chairman, Depot and Petroleum Products Marketers Association, Mr. Dapo Abiodun, said when the price band of N135 to N145 was introduced last year, crude oil price was around $35 per barrel and the exchange rate pegged at N285 to a dollar.

He said, “The plan last year was that as crude prices changed, hopefully, we would be able to keep exchange rate constant, we would continue to modulate the selling price maybe every quarter. The price of crude has moved up; the exchange rate has increased to N305/$; however, the petrol price band remains unchanged.”

He said marketers continued to import and their margins began to shrink, adding that they stopped importation when it became unprofitable.

Abiodun said, “Today, marketers own banks over $2bn. There is hardly any bank in Nigeria today that is advancing credit to any marketers. Today, the NNPC is warehousing subsidies plus the inefficiencies associated with the operations.”

The President, LCCI, Dr. Nike Akande, said the theme of the event, ‘Nigerian Economy in a Recession: Alternative strategies for the Petroleum Downstream Sector’, was apt and timely.

She said, “In the face of the evolving restructuring of the oil and gas sector in Nigeria and the call for new models of refineries, we call on the government to ensure an appropriate regulatory environment for the private sector to drive investments and operations of the sector for optimal profitability. We reiterate our call for the passage of the Petroleum Industry Bill to boost confidence and give direction in the sector for investors.”

Commenting on the NNPC’s dominance of fuel importation, the Chairman, Petroleum Downstream Group, LCCI, Mr. Ken Abazie, said, “We believe that is abnormal and it is not sustainable. It is no longer profitable to bring in petrol and sell at N145 per litre.”

He said the lack of adequate refining capacity in the country was a big challenge that needed to be urgently addressed.

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

Nigeria’s Real Estate Sector Shrinks by 8.06% in the Third Quarter -NBS

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Economic uncertainty plunged Nigeria’s real estate sector by 8.06 percent in the third quarter of the year, according to the National Bureau of Statistics (NBS).

Nigeria’s statistics office said “In nominal terms, real estate services recorded a growth rate of –8.06 per cent in the third quarter of 2020, indicating a decline of –11.78 per cent points compared to the growth rate at the same period in 2019, and by 9.12 per cent points when compared to the preceding quarter.

“Quarter-on-quarter, the sector growth rate was 18.92 per cent.

“Real GDP growth recorded in the sector in Q3 2020 stood at -13.40 per cent, lower than the growth recorded in third quarter of 2019 by –11.09 per cent points, but higher relative to Q2 2020 by 8.59 per cent points.

“Quarter-on-quarter, the sector grew by 17.15 per cent in the third quarter of 2020.

“It contributed 5.58 per cent to real GDP in Q3, 2020, lower than the 6.21 per cent it recorded in the corresponding quarter of 2019.”

Nigeria’s economy contracted by 2.48 percent in the first nine months following a 6.10 percent and 3.62 percent contraction in the second and third quarters respectively.

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Economy

Nigeria Requires N400 Billion Annually to Maintain Federal Roads -Senator Bassey

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The Chairman of the Senate Committee on road maintenance, Senator Gersome Bassey, on Friday said Nigeria requires about N400 billion annually to maintain federal roads across the country.

The Senator, therefore, described the N38 billion budgeted for road repairs in the 2021 proposed Budget as grossly inadequate. According to him, nothing meaningful could be achieved by the Federal Roads Maintenance Agency (FERMA) with such an amount.

He said, “For the 35 kilometres federal roads in the country to be motorable at all times, the sum of N400bn is required on yearly basis for maintenance.”

Bassey “What the committee submitted to the Appropriation Committee in the 2021 fiscal year is the N38bn proposed for it by the executive which cannot cover up to one quarter of the entire length of deplorable roads in the country.

“Unfortunately, despite having the power of appropriation, we cannot as a committee jerk up the sum since we are not in a position to carry out the estimation of work to be done on each of the specific portion of the road.

“Doing that without proposals to that effect from the executive, may lead to project insertion or padding as often alleged in the media.”

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Economy

Scarcity of Day-Old-Chicks Cripple Poultry Farmers in Akwa Ibom

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Despite billions of Naira spent on Akwa Prime Hatchery and Poultry Limited by the Executive Governor of Akwa Ibom State, Udom Emmanuel, poultry farmers in the state said they had to order day-old-chicks from outside the state as the 200,000 capacity poultry farm developed specifically to make day-old-chicks and other poultry products available at affordable prices is almost empty at the moment.

The farmers expressed frustration over many challenges they face in the course of bringing day-old-chicks from outside the state. Usually, Ibadan, Enugu and sometimes as far as Kaduna, while the hatchery built and inaugurated in 2016 remains idle.

Mr Ekot Akpan, one of the poultry farmers who spoke with the pressmen said the state had not had it this bad.

Akpan said: “For the 12 years that I have been in poultry farming, this is the first time that poultry farmers have been so harshly affected by both economic and non-economic factors. And, quite unfortunately, nobody is available to offer any explanation.

“Farmers have been left at the whims and caprice of owners of the means of production.

“There seems to be no government regulation of the poultry industry. How, do you explain a situation where you wake up suddenly and the price of a day old chick is selling for N600, a bag of feed goes as high as N6,000.

“And, in a state that government claims to be pursuing agriculture as one of his cardinal programmes.

“For instance, in 2016, the state government said it has constructed an hatchery, and the intention according the government was to ensure availability of day old chicks at affordable price to farmers, but, quite, unfortunately, that effort has not yielded any tangible result.

“Farmers are still getting their day old chicks from Ibadan, Kaduna, and Enugu. So, the question now is where is the hatchery?

“One would have expected that farmers would be buying old chicks at humane prices, but, from all indications they acclaimed hatchery is a ruse. So, which one is the Akwa Prime Hatchery producing,” he said.

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