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Nigeria Lost Out on $10bn Oil Asset Divestment – Operators

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Nigeria’s Minister of State for Petroleum Emmanuel Kachikwu
  • Nigeria Lost Out on $10bn Oil Asset Divestment

Nigeria failed to benefit from the over $10bn raked in by international oil companies from recent divestment of assets in the country, industry operators said.

The divestment exercise, which started in 2010, saw a number of indigenous oil companies falling over themselves to snap up assets that had been described as over-priced.

In the past few years, mostly before the steep fall in global oil prices, the IOCs such as Shell, Total, Chevron, and Eni successfully disposed of stakes in some onshore and shallow water assets in the country.

But some industry operators said the country did not benefit from the divestment because a proper lease administration and an attractive investment environment were not in place.

The operators stated this while discussing how to grow Nigerian independents to world-class exploration and production companies at the Aspen Energy Roundtable conference held in Lagos on Tuesday.

The Chief Executive Officer, Seplat Petroleum Development Company Plc, Mr. Austin Avuru, said about $10.4bn was spent by indigenous oil firms to acquire divested assets in the last seven years.

He said, “It is not small money; 70 per cent of all of this came out of Nigerian banks. I can tell you that 60 per cent of this money would have gone to the DPR (Department of Petroleum Resources) if the DPR had handled the lease administration properly.

“But this is all the money that we as indigenous companies, using Nigerian banks, paid to the IOCs. I hope that will be a lesson for the next lease administration, bid rounds and renewals.”

Avuru stressed the need for the country to administer its resources in such a way that “maximum value is captured without expropriation.”

“We are the victims knocking our heads together and paying three times more for these leases because we have no option. There are no leases available. So, we knock our heads together and then the IOCs are smiling. We could have paid one third of what we paid to the government and everybody is happy,” he said.

The Managing Director, ND Western, Mr. Layi Fatona, said the divestment had grown a portfolio of new entities in the nation’s oil industry such as Seplat and ND Western.

“But the most important thing is that when you look at the spending, all of the money came mostly from the Nigerian banking system. And I ask a pertinent question: Shall we call this capital flight? All that money that was taken from the Nigerian banking system by essentially indigenous E&P companies paid to the IOCs left the shores of this country.

“How much of this money ended up as a backward reinvestment in the Nigerian petroleum industry?”

Fatona said some of the assets were over-priced but the sellers could not be blamed if the buyer was naive enough or consciously paid what was demanded.

He said if the government had created an environment where the IOCs could put back the money they got from the divestment, the oil majors would have done so.

“So it is not about capital flight; it is about the fact that we have failed holistically to create the environment where the seller of an asset who makes profit believes sufficiently in this society and put all the money back into the system,” he said.

Fatona said the divestment had provided an opportunity for indigenous companies, as assets acquirers, to learn to work with the dominant partner, the Nigerian National Petroleum Corporation.

He described the exercise as a catalyst for the Nigerian petroleum industry to build its own capacity.

The Chairman, Aspen Energy Nigeria Limited, Mr. Bayo Opadere, said the inherent potential of the Nigerian energy sector would not be realised if the players operated in silos and failed to engage in deliberate and structured conversations.

“It is against this background that Aspen Energy has undertaken the task of facilitating the roundtable conference. By this, we hope to create a platform for focused discussion that will articulate strategy and policy proposals on an ongoing basis.”

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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Economy

Nigeria’s Plan to Review Oil Companies’ Gas Flaring Strategies

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Oil

Nigeria is ramping up its efforts to address environmental concerns in the oil and gas sector with a comprehensive plan to review gas flaring strategies of international and indigenous oil companies.

The Minister of State for Environment, Dr. Iziaq Salako, announced this initiative during a national stakeholders engagement meeting on methane mitigation and reduction held in Abuja, Investors King reports.

Gas flaring, a common practice in the oil industry, releases methane—a potent greenhouse gas—into the atmosphere, contributing to climate change and posing health risks to communities near oil facilities.

Nigeria aims to end routine gas flaring by 2030, aligning with global climate goals and commitments.

Dr. Salako explained the importance of reducing methane emissions and highlighted the detrimental effects on public health, food security, and economic development.

He outlined practical steps being taken to tackle methane emissions, including the development of methane guidelines and the engagement of government institutions.

The ministry, through the National Oil Spill Detection and Response Agency, will conduct periodic reviews of oil companies’ plans to ensure compliance with the gas flaring deadline.

Deloitte management consultants will assist in conducting comprehensive forensic audits to scrutinize the legitimacy of forward-contracted transactions.

President Bola Tinubu’s commitment to environmental sustainability underscores the government’s dedication to addressing climate change and fulfilling its multilateral environmental agreements.

The engagement event served as a platform for stakeholders to discuss methane mitigation strategies, existing policies, and implementation challenges.

Collaboration and dialogue among diverse sectors are crucial in charting a unified course towards sustainable methane reduction in Nigeria’s oil and gas industry.

As the country navigates its environmental agenda, ensuring accountability and transparency in gas flaring practices remains paramount for achieving a greener and healthier future.

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Economy

Interest Rate Jumps to 24.75% as CBN Takes Aggressive Stance Against Inflation

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Dr. Olayemi Michael Cardoso

The Central Bank of Nigeria (CBN) has announced a significant increase in the monetary policy rate, known as the interest rate, to 24.75%.

This move disclosed by CBN Governor Olayemi Cardoso during the 294th Meeting of the Monetary Policy Committee press briefing in Abuja, represents a bold step by the apex bank to address the mounting inflationary pressures faced by the country.

With inflation soaring to 31.70% in February, the CBN aims to moderate this upward trend by tightening its monetary policy stance.

This decision follows the previous hike in the interest rate to 22.75% in February, showcasing the CBN’s commitment to combatting inflationary forces.

While the bank opted to maintain the Cash Reserve Ratio at 45%, the significant increase in the interest rate underscores the urgency of the situation and the need for decisive action.

Governor Cardoso emphasized that these measures are essential to stabilize the economy and safeguard the purchasing power of the Nigerian currency.

The 294th MPC marks the second meeting under Governor Cardoso’s leadership, indicating a proactive approach to addressing economic challenges.

The next MPC meeting is scheduled for May 20th and 21st, 2024, highlighting the ongoing commitment of the CBN to navigate Nigeria’s economic landscape amidst inflationary pressures.

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Economy

Nigeria Braces for 10th Consecutive Interest Rate Hike by Central Bank

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Central Bank of Nigeria (CBN)

As Nigeria grapples with persistently high inflation, the Central Bank of Nigeria (CBN) is gearing up to implement its tenth consecutive interest rate hike in a bid to curb the soaring prices and attract investment.

Analysts surveyed by Bloomberg are anticipating a substantial 125 basis-point increase in the key rate to 24%, marking one of the most significant adjustments in the current tightening cycle.

The decision, expected to be announced by Governor Olayemi Cardoso on Tuesday at 2 p.m. in Abuja, comes on the heels of inflation accelerating to 31.7% in February, far surpassing the central bank’s target range of 9%.

This surge has been primarily attributed to the sharp depreciation of the naira, prompting authorities to devalue the currency twice since June to narrow the gap with the unofficial market rate and encourage investor confidence.

While these measures have seen the naira strengthen in recent days and bolstered investment inflows, including a fourfold increase in overseas remittances and significant foreign investor portfolio asset purchases, there remains a palpable need for more decisive action.

Giulia Pellegrini, a senior portfolio manager at Allianz Global Investors, emphasized the necessity for the CBN to intensify its tightening efforts to regain foreign investors’ confidence in the local bond market.

While acknowledging the positive strides made by the central bank, Pellegrini stressed the importance of a more assertive approach to prevent the diversion of investor attention to other frontier markets.

As the Nigerian economy navigates through these challenging times, the impending interest rate hike signals the CBN’s determination to address inflation head-on and foster a more stable economic environment.

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