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Udoma Explains Government’s Intensification of Oil Exploration

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  • Udoma Explains Government’s Intensification of Oil Exploration

Nigeria’s Minister of Budget and National Planning, Senator Udoma Udo Udoma, at the weekend in Lagos said the federal government was aware of the diminishing long-term prospects of crude oil, explaining that this was why it was important to maximise the use and exploitation of the nation’s petroleum resources now.

Udoma stressed that this was also why the government was determined to move away from exporting raw crude oil and instead to encourage local refining and processing, as well as the local production of the various derivatives from crude oil for which there will continue to be domestic and international demand.

He spoke during an interactive session with civil society organisations and private sector players on the 2017 Medium Term Economic Framework (MTEF) and Fiscal Strategy Paper (FSP) and said the government was considering total oil production volume of 2.3 million barrels per day with an oil price benchmark of $45 per barrel for the 2018 budget.

He said the government was targeting revenue generation of N5.16 trillion for 2018 as against N5.08 trillion in 2017. The amount would be generated from oil revenue estimated at N2.1 trillion; non-oil revenue of N1.36 trillion; dividend from Nigeria Liquefied Natural Gas -N29.58 billion, and minerals and mining — N1.06 billion.

Others are independent revenue from agencies of government — N847.9 billion, domestic recoveries and fines — N364 billion, other federal government recoveries — N138.43 billion and grants and donor funding — N281.6 billion.

He said the budget would also be predicated on an exchange rate of N305/$ as well as 12.42 per cent inflation rate.

Other budget benchmarks which the minister stressed that might also be adjusted included nominal GDP of N133.97 trillion and N81.60 trillion nominal consumption.

He explained: “The MTEF outlines the federal government’s fiscal policies and our macroeconomic projections for the next three years from 2018 to 2020 and it provides the broad framework for the 2018 budget.

“In line with the goals of the Economic Recovery and Growth Plan (ERGP) 2017-2020, the medium term fiscal policies of government will be directed at achieving macroeconomic stability, accelerating growth, intensifying economic diversification and promoting inclusiveness.
“The need to look onwards to boost non-oil revenues cannot be overemphasised, as we diversify.

“We are on track to achieve full recovery and return firmly to the path of growth. Fiscal prudence must be observed at all levels of governance.”

He said the MTEF and FSP were drawn from the Economic Recovery and Growth Plan (ERGP) 2017-2020, which is the blueprint guiding all the economic plans of the government.

The ERGP, the minister stated, was itself the product of extensive consultations with a broad spectrum of Nigerians, including development experts, top economists and other critical stakeholders, adding that all budgets prepared within the planned period must be drawn from, and align with the provisions of the ERGP.

During the interactions, he explained the basis for the key assumptions and macroeconomic framework contained in the proposed MTEF, particularly the projections for oil production levels, crude oil price benchmark, exchange rate, inflation rate and GDP growth rate, among others.

These, Udoma noted, were all being exposed for consideration and discussion purposes, and welcomed comments and suggestions on them.
He said the consultations, which started penultimate Thursday with the governors, and continued last Tuesday and Thursday with the National Assembly, CSOs, private sectors operators (PSOs), the media and general public in Abuja, were for the purpose of seeking public input into the preparation of the MTEF as recommended by the provisions of the Fiscal Responsibility Act.

The minister explained that though government’s plan, as set out in the ERGP, is to diversify the economy as soon as possible away from reliance on crude oil proceeds, “we need the revenues from crude oil to fund the necessary infrastructure investments that are required to provide the enabling environment for the diversification of the economy into agriculture, manufacturing, construction and services”.

Udoma stated that the production level of 2.3 million barrels per day (mppd) projected for 2018 is realisable, adding that the country has the technical capacity to produce much more than that.

From available statistics from the Nigerian National Petroleum Corporation (NNPC), he stated that with the inclusion of current condensates production of 400,000 to 450,000 barrels a day, “we have been able to produce more than two million barrels a day at some periods this year”.

Addressing concerns raised over the level of borrowing and the continued provision for a deficit in the budget, the minister, while appreciating the concerns about the growing debt figures, explained that the issue was not so much about debt problem, but much more of a revenue problem.

According to him, even with the current levels of borrowing, the country’s fiscal deficit is still well within the three per cent threshold prescribed by the Fiscal Responsibility Act, adding that government was continuously monitoring the deficit level to ensure that it remains within the threshold.

The minister also admitted that it would be very challenging to achieve the target GDP growth rate of 4.8 per cent set out in the ERGP for 2018.

However, he emphasised that it could be achieved if the country is able to attract a high amount of private sector investment to drive economic growth.

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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Energy

Nigeria’s Power Sector to Get $7.5bn from $30bn African Electrification Initiative, Says Minister Adelabu

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Minister of Power Adebayo Adelabu has said that Nigeria is set to receive a portion of a $30 billion investment aimed at electrifying Africa.

During a visit to Splendor Electric Nigeria Limited, Adelabu revealed that the World Bank and the African Development Bank (AfDB) have committed to this ambitious initiative with Nigeria slated to receive approximately $7.5 billion, or 25% of the total fund.

The groundbreaking initiative is designed to extend electrification to an additional 300 million Africans over the next five years.

This large-scale project aims to address the energy deficit that has long plagued the continent and is expected to transform the power infrastructure significantly.

Adelabu expressed optimism about Nigeria’s role in the project, citing the country’s large population and ongoing power sector reforms as key factors in securing a substantial share of the funds.

“I want to inform you of the proposal or the intention, which is at an advanced stage, by the World Bank and the African Development Bank to spend about $30 billion to extend electrification to an additional 300 million Africans within the next five years. Nigeria is going to participate fully in this. I am confident that nothing less than 20% or 25% of this fund would come into Nigeria because of our population,” Adelabu stated.

The minister’s visit to Splendor Electric Nigeria Limited, a porcelain insulator company, underscores the government’s commitment to involving local businesses in the electrification drive.

The investment will focus on enhancing and upgrading power infrastructure, which is crucial for improving electricity access and reliability across Nigeria.

Despite the promising news, Nigeria continues to face significant challenges in its power sector. The country’s power grid has suffered frequent collapses, with the Nigerian Bureau of Statistics reporting less than 13 million electricity customers and frequent nationwide blackouts.

The International Energy Agency highlighted that Nigeria’s national grid experienced 46 collapses from 2017 to 2023, exacerbating the nation’s energy crisis.

To combat these issues, the government is also advancing the Presidential Power Initiative, a project in collaboration with Siemens, which aims to build thousands of new lines and numerous transmission and injection substations.

Adelabu noted that the pilot phase of this initiative is nearing completion and that Phase 1 will commence soon.

With over 200 million people and a chronic energy shortfall, Nigeria’s power sector is in urgent need of overhaul.

The additional $7.5 billion from the African Electrification Initiative represents a critical step toward achieving reliable and widespread electricity access.

The investment is expected to stimulate not only infrastructure development but also economic growth, creating opportunities for local companies and improving the quality of life for millions of Nigerians.

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Crude Oil

Oil Prices Climb as Markets Eye Potential US Rate Cuts in September

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Oil prices rose during the Asian trading session today on speculation that the U.S. Federal Reserve may begin cutting interest rates as soon as September.

Brent crude oil, against which Nigerian oil is priced, increased by 32 cents to $82.95 a barrel, while U.S. West Texas Intermediate crude oil climbed 34 cents to $80.47.

The anticipation of rate cuts stems from recent U.S. inflation and labor market data indicating a trend towards disinflation and balanced employment, according to ANZ Research.

The Federal Reserve is set to review its policy on July 30-31, with expectations of holding rates steady but providing clues for potential cuts in September.

The potential rate cuts could stimulate economic activity, increasing demand for oil. This optimism has been partially offset by recent concerns over China’s slower-than-expected economic growth, which could dampen global oil demand.

President Joe Biden’s announcement to not seek re-election and endorse Vice President Kamala Harris had minimal impact on oil markets.

Analysts suggest that U.S. presidential influence on oil production is limited, although a potential Trump presidency could boost oil demand due to his stance against electric vehicles.

In response to economic challenges, China surprised markets by lowering key policy and lending rates. While these measures aim to bolster the economy, analysts remain cautious about their immediate impact on oil demand.

With OPEC+ production cuts continuing to support prices, the focus remains on the U.S. Federal Reserve’s next moves.

Any decision to cut rates could further influence oil prices in the coming months, highlighting the interconnectedness of global economic policies and energy markets.

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Crude Oil

Dangote Refinery Clash Threatens Nigeria’s Oil Sector Stability

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Nigeria’s oil and gas sector is facing a new challenge as a dispute between Dangote Industries Limited and the Nigerian Midstream and Downstream Petroleum Regulatory Agency (NMDPRA) intensifies.

The disagreement centers on claims by NMDPRA that diesel from the Dangote Refinery contains high sulfur levels, making it inferior to imported products.

The $20 billion Dangote Refinery, located near Lagos, has the potential to process half of Nigeria’s daily oil output, promising to reduce dependency on foreign fuel imports and create thousands of jobs.

However, the recent accusations have cast a shadow over what should be a significant achievement for Africa’s largest economy.

Industry experts warn that the ongoing conflict could deter future investments in Nigeria’s oil sector.

“Regulatory uncertainty is a major disincentive for investors,” said Luqman Agboola, head of energy at Sofidia Capital. “Any factor affecting foreign investment impacts the entire value chain, risking potential energy deals.”

The regulatory body, led by Farouk Ahmed, maintains that Nigeria cannot rely solely on the Dangote facility to meet its petroleum needs, emphasizing the need for diverse sources.

This position has stirred controversy, with critics accusing the agency of attempting to undermine a vital national asset.

Amidst these tensions, energy analyst Charles Ogbeide described the agency’s comments as reckless, noting that the refinery is still in its commissioning stages and is working to optimize its sulfur output.

In response, Dangote Industries has called for fair assessments of its products, asserting that their diesel meets African standards.

The refinery’s leadership argues that certain factions may have ulterior motives, aiming to stifle progress through misinformation.

As the dispute continues, the broader implications for Nigeria’s oil sector remain uncertain. The outcome will likely influence not only domestic production but also the country’s standing in the global energy market.

Observers hope for a resolution that supports both industrial growth and regulatory integrity, ensuring stability in a sector crucial to Nigeria’s economy.

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