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Indigenous Oil Firms Default on Local Content Payment

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  • Indigenous Oil Firms Default on Local Content Payment

Some indigenous oil companies have failed to make their contribution to the Nigerian Content Development Fund, the Nigerian Content Development and Monitoring Board has said.

The NCDF, which is funded from one per cent being deducted from the value of all upstream contracts, is managed by the NCDMB.

The fund is underpinned by Section 104 of the Nigerian Oil and Gas Industry Content Development Act, which provides that the funds be used for developing capacity in the oil and gas industry.

The Executive Secretary, NCDMB, Mr. Simbi Wabote, said international oil companies were complying reasonably in remitting one per cent of the value of their contracts but some service companies and indigenous operating firms defaulted in their payment.

A statement from the NCDMB quoted him as saying this at the public hearing conducted by the Joint Senate Committee on Petroleum Upstream and Gas in Abuja on Tuesday, with the intent to determine the extent of compliance with the NOGICD Act and the utilisation of the NCDF.

He said the industry would aspire to domesticate the full capacity and capability required for the integration of Floating Production Storage and Offloading vessels between now and year 2027.

Noting the successful in-country fabrication of six modules of the Total Egina FPSO, Wabote said the integration of the modules on the FPSO at the SHI-MCI yard would be done in Lagos in September 2017.

Another major target of the board, according to him, is to establish a local content bank of Nigeria “to focus on establishment of facilities for domiciliation of services with emphasis on optimal use of local resource input.”

Wabote said Nigerian content activities recorded six million training man-hours and had been able to retain $5bn in the local economy from the annual $20bn industry expenditure, which ended up in foreign economies in the past.

According to him, 36 per cent of the marine vessels operating in the Nigerian oil and gas industry are now owned by indigenous players, a marked improvement from total foreign domination of the industry before the implementation of the Act.

He cited the establishment of five world-class fabrication yards as another evidence of Nigerian content implementation, saying 60,000 metric tonnes of fabrication could be done in-country.

The NCDMB executive secretary, however, said the impact of local content in the oil and gas sector had not been sufficiently linked to other sectors of the economy and canvassed the support of key government agencies in deepening local content in the country.

In his welcome address, the Senate President, Dr. Bukola Saraki, represented by the Senate Leader, Senator Ahmed Lawan, highlighted the importance of local content in economic development, saying its full implementation would help create employment and grow the economy.

He said the National Assembly was keen to ensure that oil and gas companies complied with the Nigerian Content Act, especially in the employment of competent Nigerians and utilisation of local good and services in their operations.

Also speaking, the Chairman, Senate Committee on Gas, Senator Bassey Akpan, asked the NCDMB to submit a detailed report on the operations of the NCDF from inception, including information on the beneficiaries, defaulting firms and amount owed.

He expressed disappointment that only three companies had benefitted from the NCDF, saying, “There is no need to warehouse the funds with the Central Bank of Nigeria while Nigerian companies are suffering from lack of capital. There is no way they can build capacity.”

The Chairman, Petroleum Technology Association of Nigeria, Mr. Bank-Anthony Okoroafor, asked the Senate to support the NCDMB to ensure that at least 20 indigenous companies accessed the NCDF every year.

He also proposed guidelines that would ensure that “companies that bid as lead bidders should have the capacity to carry out more than 80 per cent of the required work scope while companies that have not built capacity should bid as sub-contractors.”

Okoroafor added, “Contract execution and distribution strategy should be such that Nigerian companies with proven capacities should be given preference in terms of percentage of work allocation. In addition, Nigerian companies should be given preference when reallocating any scope of work that could not be handled by the incumbent contractor.”

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, Morocco sign MOUs on Hydrocarbons, Others

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The Federal Government and the Kingdom of Morocco have signed five strategic Memoranda of Understanding that will foster Nigerian-Morocco bilateral collaboration and promote the development of hydrocarbons, agriculture, and commerce in both countries.

The Minister of State for Petroleum Resources, Chief Timipre Sylva, led the Nigerian delegation to the agreement signing ceremony on Tuesday at Marrakech, Morocco, while the Chief Executive Officer of OCP Africa, Mr Anouar Jamali, signed for the Kingdom of Morocco, according to a statement by the Nigerian Content Development and Monitoring Board.

Under the agreement between OCP, NSIA and the Nigerian National Petroleum Corporation, Nigeria will import phosphate from the Kingdom of Morocco and use it to produce blended fertiliser for the local market and export.

The statement said Nigeria would also produce ammonia and export to Morocco.

“As part of the project, the Nigerian Government plans to establish an ammonia plant at Akwa Ibom State,” it said.

The Executive Secretary of NCDMB, Mr Simbi Wabote, and the Group Managing Director of NNPC, Mallam Mele Kyari, were part of the delegation and they confirmed that their organisations would take equity in the ammonia plant when the Final Investment Decision would be taken, the statement said.

Sylva said the project would broaden economic opportunities for the two nations and improve the wellbeing of the people.

He added that the project would also positively impact agriculture, stimulate the growth of gas-based industries and lead to massive job creation.

He said the President, Major General Muhammadu Buhari (retd.), had mandated the Ministry of Petroleum Resources and it agencies and other government agencies to give maximum support for the project.

“He mandated me to ensure that at least the first phase of this project is commissioned before the expiration of his second term in office in 2023,” he added.

According to the statement, the MOUs were for the support of the second phase of the Presidential Fertiliser Initiative; Shareholders Agreement for the creation of the joint venture company to develop the multipurpose industrial platform and MOU for equity investment by the NNPC in the joint venture and support of the gas.

Other agreements are term sheet for gas sales and aggregation agreement and MOU for land acquisition and administrative facilitation to the establishment of the multipurpose industrial platform for gas sales and aggregation agreement.

The NCDMB boss described the bilateral agreement as significant to the Nigerian economy as it would accelerate Nigeria’s gas monetisation programme through establishment of the ammonia plant in the country.

The agreement would also improve Nigeria’s per capita fertiliser application through importation of phosphate derivatives from Morocco, he added.

Wabote challenged the relevant parties to focus on accelerating the FID, assuring them that the NCDMB would take equity investment for long-term sustainability of the project.

He canvassed for the setting up of a project management oversight structure to ensure project requirements and timelines are met.

“There is also need to determine manpower needs for construction and operations phase of the project and develop training programmes that will create the workforce pool from Nigeria and Morocco and design collaboration framework between research centres in Nigeria and Morocco to develop technology solutions for maintaining the ISBL and OSBL units of the Ammonia complex,” he said.

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Economy

Dangote Fertiliser Plant to Commence Shipment of Urea in March 2021

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Dangote to Sells Petrol in Naira, Plans to Commence Urea Shipment in March 2021

The Governor of the Central Bank of Nigeria, Mr. Godwin Emefiele, has said Dangote Fertiliser Plant will commence shipment of Urea in March 2021.

The CBN governor disclosed this during an inspection tour of the sites of Dangote Refinery, Petrochemicals Complex Fertiliser Plant and Subsea Gas Pipeline at Ibeju Lekki, Lagos on Saturday.

Emefiele further stated that Dangote Refinery would sell refined petroleum products in Naira when it starts production.

This he said would save the country from spending 41 percent of the nation’s foreign exchange on importation of petroleum products yearly.

Based on agreement and discussions with the Nigerian National Petroleum Corporation and the oil companies, the Dangote Refinery can buy its crude in naira, refine it, and produce it for Nigerians’ use in naira,” Mr Emefiele said.

That is the element where foreign exchange is saved for the country becomes very clear. We are also very optimistic that by refining this product here in Nigeria, all those costs associated with either demurrage from import, costs associated with freight will be totally eliminated.

Emefiele explained that this will make the price of Nigeria’s petroleum products affordable and cheaper in naira.

If we are lucky that what the refinery produces is more than we need locally you will see Nigerian businessmen buying small vessels to take them to our West African neighbours to sell to them in naira.

“This will increase our volume in naira and help to push it into the Economic Community of West African States as a currency,” Mr Emefiele said.

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Economy

UK Budget 2021: Will Sunak’s Budget Run Into Unintended Consequences?

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Rishi Sunak’s Budget will encourage higher earners to consider their “international financial options” and will drive businesses away from the UK, warns the CEO of one of the world’s largest independent financial advisory and fintech organizations.

The warning from Nigel Green, chief executive and founder of deVere Group, comes as the Chancellor delivered his 2021 Budget in the House of Commons, his second since he took on the role.

Mr Green says: “The Chancellor has got an extraordinarily difficult hand to play as he tries to stem the economic damage caused by the pandemic, support jobs and businesses and, crucially, rebuild the public finances.

“Whilst Mr Sunak is being hailed a hero for the continued and unprecedented levels of support, it should also be remembered that he is – in a stealth move – dragging more people firmly into the tax net.

“He is raising taxes under the radar.

“Yes, there is no income tax rise. However, he is freezing personal tax thresholds, meaning as incomes rise and thresholds don’t, he is able to raise money by fiscal drag.”

Earlier this week, the deVere CEO noted: “Those most impacted by this stealth move will be looking at the financial planning options available to them, including international options, in order to grow and protect their wealth.”

Rishi Sunak also confirmed that corporation tax will increase to 25% from 2023, up from the current level of 19%.

Of this tax hike, Mr Green goes on to say: “Lower corporation tax helps job and wealth-creating business to survive and thrive. It also helps attract business to move and invest in the country.

“Instead of increasing taxes, Mr Sunak should have relentlessly focussed on growth and stimulus policies for businesses.  This would have been of greater help to firms, the economy, jobs and, ultimately, the Treasury’s coffers.”

He adds: “Again, this corporation tax hike is likely to serve as a prompt for businesses to consider their overseas financial options.”

The deVere CEO concludes: “The Chancellor had to perform a tough juggling act.  But stealthily dragging more people into the tax net and raising corporation tax might have negative, unintended consequences for the Treasury’s bottom line.”

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