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Nigeria’s Corporate Governance Remuneration Structure Weak – Report

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  • Nigeria’s Corporate Governance Remuneration Structure Weak

The corporate governance principles of Nigeria have not provided a remuneration structure for directors of companies, a recent report has shown.

A study by the Association of Chartered Certified Accountants and KPMG on the corporate governance of 15 African countries showed that there was no linkage between the performance and remuneration of company directors.

Speaking at a press conference to unveil the report in Lagos, the Partner and Head of Board Advisory Services, KPMG in Nigeria, Tomi Adepoju, said it was discovered that the standards of corporate governance code across several African countries were aligned with the Organisation for Economic Co-operation and Development Principles of Corporate Governance.

However, findings from the report showed the ability of companies to recoup directors’ remuneration in the event of negligence or fraud was one of the common elements of the OECD-related principles that were not found in Nigeria and other African countries.

Nigeria was also found among the markets that specifically disallowed performance-related payments for non-executive directors together with Mauritius, South Africa, Egypt and Ghana in the report entitled: ‘Balancing rules and flexibility for growth’.

Adepoju said, “We also noted that certain elements of the OECD principles were not featured in a number of markets, including Nigeria. This relates to requirements to allow shareholders to consult each other on issues on their basic rights.

“We all know that in Nigeria, there were instances where companies went under or there were large frauds. In other markets, they go after the director involved and the director has to pay back all the fees he or she has collected. This is not really embedded in a number of codes from Africa. We didn’t see much in terms of allowing performance enhancing mechanisms for employee participation.”

Speaking about the findings in relation to Africa’s development, the Head of Policy, Sub-Saharan Africa, ACCA, Jane Ohadike, said more awareness and efforts would be needed to strengthen remaining critical areas of corporate governance, particularly for remuneration structures, performance evaluation, risk governance, and board composition and diversity.

According to her, most markets mandate the basic corporate governance requirements such as financial disclosure, shareholders’ rights and the role of the board, supplementing these with non-mandatory guidelines for good practice.

Ohadike explained, “Achieving the right balance between rules and flexibility is a tricky task for any country, but of fundamental importance for those where corporate governance is critical to support robust economic growth.

“Although decisions about how to shape a corporate governance framework and how fast to do so may be unique to each market, and there is no ‘one-size-fits-all’, there is value in continuing to compare and incorporate internationally accepted standards of corporate governance.”

“We hope this study can contribute to raising the standard of corporate governance requirements across Africa,” Adepoju stressed.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Crude Oil

OPEC+ Production Cuts Set to Balance Global Oil Market, Says Russian Deputy PM

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In a statement on Monday, Russian Deputy Prime Minister Alexander Novak expressed confidence that the global oil market will achieve balance in the second half of 2024, thanks to the production cut strategies implemented by the Organization of the Petroleum Exporting Countries and its allies, collectively known as OPEC+.

OPEC+, which includes major oil-producing countries such as Saudi Arabia and Russia, has been actively managing oil output to stabilize the market since late 2022.

In their most recent meeting on June 2, the group agreed to extend their latest production cut of 2.2 million barrels per day (bpd) until the end of September. This cut is scheduled to be gradually phased out starting in October.

“The market will always be balanced thanks to our actions,” Novak stated, emphasizing the importance of the coordinated efforts by OPEC+ in maintaining market equilibrium.

The U.S. Energy Information Administration (EIA) recently projected that global oil demand will surpass supply by approximately 750,000 bpd in the latter half of 2024 due to the continued reduction in OPEC+ output.

This outlook was echoed in a report by OPEC last week, which highlighted an anticipated oil supply deficit in the coming months and into 2025.

Novak’s remarks come at a crucial time for the global oil market, which has experienced significant volatility over the past year.

The OPEC+ alliance has been pivotal in mitigating some of this instability by adjusting production levels in response to fluctuating demand and other market dynamics.

Analysts suggest that the measures taken by OPEC+ will play a vital role in ensuring that the oil market remains stable as the world continues to navigate economic uncertainties and fluctuating energy demands.

The production cuts are expected to support oil prices by limiting supply, thereby helping to balance the market.

The impact of these production cuts is already being felt, with oil prices showing signs of stabilization.

However, the market remains sensitive to geopolitical developments and economic trends, which could influence future supply and demand dynamics.

As OPEC+ prepares to unwind some of its production cuts in the coming months, industry observers will be closely monitoring the market’s response.

The gradual phasing out of the cuts is designed to prevent any sudden shocks to the market, allowing for a smoother transition and sustained balance.

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Crude Oil

Oil Prices Steady Amid U.S. Political Uncertainty and Middle East Tensions

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Oil prices held firm on Monday as the political uncertainty in the United States and ongoing tensions in the Middle East persist.

Brent crude oil, against which Nigerian oil is priced,  fell slightly by 13 cents, or 0.2%, to $84.90 a barrel after a 37-cent drop on Friday.

Similarly, U.S. West Texas Intermediate crude stood at $82.15 a barrel, down 6 cents, or 0.1%.

The dollar’s strength, which followed a failed assassination attempt on U.S. presidential candidate Donald Trump, exerted some pressure on oil prices.

A stronger dollar typically makes oil more expensive for buyers using other currencies, leading to reduced demand.

“I don’t think you can ignore the uncertainty that the weekend’s assassination attempt will cast across a deeply divided country in the lead-up to the election,” said Tony Sycamore, market analyst at IG.

In the Middle East, efforts to end the Gaza conflict between Israel and Hamas stalled over the weekend.

Talks were halted after three days, although a Hamas official indicated that the group had not withdrawn from discussions.

The situation escalated further when an Israeli attack targeting a Hamas military leader killed 90 people on Saturday, maintaining the geopolitical premium on oil.

Despite these geopolitical tensions, oil markets remain supported by supply cuts from OPEC+. Iraq’s oil ministry has pledged to compensate for any overproduction since the beginning of the year, reinforcing the market’s stability.

Last week, Brent fell more than 1.7% after four weeks of gains, while WTI futures slid 1.1%. The decline was largely attributed to a fall in China’s crude imports, which countered robust summer consumption in the United States.

“While fundamentals are still supportive, there are growing demand concerns, largely emanating from China,” noted ING analysts led by Warren Patterson.

China’s crude oil imports fell 2.3% in the first half of this year to 11.05 million barrels a day, with disappointing fuel demand and reduced output by independent refiners due to weak profit margins.

Also, crude throughput at Chinese refineries dropped 3.7% in June from a year earlier to 14.19 million barrels per day, marking the lowest level this year, according to customs data.

China’s economy has slowed in the second quarter, weighed down by a protracted property downturn and job insecurity, keeping alive expectations that Beijing will need to implement more stimulus measures.

In the United States, the active oil rig count, an early indicator of future output, fell by one to 478 last week, marking the lowest level since December 2021, according to energy services firm Baker Hughes.

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Nigeria Awards $21M Contract to Meter 187 Crude Oil Flow Stations

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Crude Oil

The Federal Executive Council (FEC) has approved a $21 million contract to meter 187 crude oil flow stations across Nigeria.

The decision was announced by the Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, during a press briefing in Abuja.

Minister Lokpobiri highlighted that this initiative is part of the government’s broader strategy to reorganize the oil and gas sector, ensuring accurate accounting of the country’s crude oil production and exports.

The contract, awarded to the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), aims to install metering systems at flow stations within the Niger Delta region.

“This project marks a major development that has never happened in this country. The metering of our 187 flow stations will provide proper accountability of our oil production and exportation,” Lokpobiri stated. The project is expected to be completed within 180 days.

In addition to the metering contract, the FEC also approved the deployment of advanced software to monitor the movement of Nigeria’s crude oil from the point of loading to its final destination.

This technology will allow real-time tracking of crude oil shipments, addressing long-standing issues of oil theft and misreporting.

Lokpobiri explained, “With this advanced cargo tracking technology, we will know from the point of loading in Nigeria up to the final destination. This step is crucial in ensuring Nigerians get maximum value for the crude oil produced.”

The metering and monitoring initiatives come at a time when Nigeria faces significant challenges in its oil production.

Domestic refineries have complained of insufficient crude supplies, and there have been persistent concerns about the transparency of actual crude oil volumes produced in the Niger Delta.

Nigeria’s current production stands at less than 1.3 million barrels per day, below the 1.5 million barrels daily quota approved by the Organisation of Petroleum Exporting Countries (OPEC).

The initiatives are part of the government’s efforts to ramp up crude oil production and increase revenue.

“Oil remains the fastest way to raise the funding needed to address our economic and social problems,” Lokpobiri noted.

The accurate tracking and metering of oil production are expected to bolster investor confidence and contribute to the country’s economic stability.

The minister also hinted at ongoing efforts to rekindle investor confidence in Nigeria’s oil sector, which has seen a decline in major investments over the past 12 years.

“Since the inception of this administration, we have been working hard to bring back the confidence of the investing community,” Lokpobiri declared.

In a related development, the Port Harcourt refinery is expected to come on stream soon, although Lokpobiri did not specify a date for its operational commencement.

The refinery’s activation is anticipated to further boost Nigeria’s oil processing capacity and reduce dependence on imported refined petroleum products.

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