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FG May Sell NNPC’s Refineries as Scrap Metals, Says Kachikwu

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  • FG May Sell NNPC’s Refineries as Scrap Metals

The Minister of State for Petroleum Resources, Dr. Ibe Kachikwu has stated that the federal government might sold the country’s refineries as scrap metals in few years’ time if the Nigerian National Petroleum Corporation (NNPC) did not sit up and make the refineries to be functional.

As the then Group Managing Director of NNPC, Kachikwu had in September 2015 given a 90-day ultimatum to the Warri Refining and Petrochemicals Company (WRPC), to commence operation at its full 125,000 barrels per day capacity.

“So, whatever you need to do to get your refinery back on track please do it now because this is the time. It’s a 90-day fast-track programme and whatever you need me to do to make that happen, let me know,’’ Kachikwu reportedly said at the end of a facility tour of the plant.

But nearly two years after the expiration of the ultimatum, the refinery has continued to operate epileptically.

For instance, the NNPC’s latest financial report for May 2017 showed that the consolidated capacity utilisation of the three refineries declined from 24.59 per cent in April 2017, to 23.09 per cent in May.

In fact, the Warri Refinery, which got the ultimatum to operate at full capacity, had operated at zero capacity utilisation in May was zero as it did not refine any crude in May, compared to the 9.92 per cent capacity utilisation it recorded in April.

Also the capacity utilisation of the Kaduna Refinery dropped to 27.59 per cent in May 2017, down from 31.3 per cent in April.

In a remark during a facility tour of Dangote Refinery in Ibeju-Lekki area of Lagos, Kachikwu disclosed that the country might end up selling the refineries as scrap metals in a matter of years if the NNPC did not sit up to rehabilitate the plants.

Kachikwu noted that apart from the savings in foreign exchange for Nigeria, Dangote Refinery has brought hope in a country where the people have lost hope in the ability of the country to do things right.

According to him, the foreign exchange savings is minute compared to what the refinery “is doing in terms of the hope that the future portends because we are in a country where increasingly people are losing hope in our ability to do anything right.”

“I said it in very many speeches that if our own refineries do not sit up, we probably, would be selling scrap metals in a matter of years and that is the reality. So, what this project has also done is motivated substantially, the NNPC because to take very seriously my drive to repair the refineries and get them working.

It is not anything compared to the sheer size of what you are doing here, but at least, it complements. I think Nigeria should be the citadel of petroleum exports in Africa. We have wasted this opportunity when we would have done it cheaper. But the time is never too late. If you could do a project of $12 billion to $14 billion at the private sector basis, it goes to say that the private sector is really the answer to Nigeria’s problems,” Kachikwu explained.

Kachikwu said Nigeria’s oil and gas industry had in the past destroyed itself in terms of practices and policies and habits.

“Now, where do we come in as government? I think the first thing is that we must look seriously at whatever incentives this business needs. You don’t invest $14 billion in a country without sufficient incentives to drive the business. So, whatever it takes and I think somebody is doing studies,” he added.

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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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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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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