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Investors Keen on Modular Refineries Despite Challenges

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modular refinery
  • Investors Keen on Modular Refineries Despite Challenges

After many years of lack of investment in private refineries in Nigeria, several local and foreign investors are keen to establish modular refineries in a bid to ramp up the nation’s crude oil refining capacity.

The Minister of State for Petroleum Resources, Ibe Kachikwu, said last week that 33 refinery licences had been given to private investors but lack of financing had been one of the major challenges facing them.

Of all the private investors that were given the licence to establish refineries, only the Niger Delta Petroleum Resources Limited in Rivers State has been able to build a 1,000 barrels-per-day refinery, and is working to increase the capacity to 10,000bpd.

Aside from the funding challenges, industry stakeholders have over the years stressed the need for the government to fully deregulate the downstream sector of the oil and gas industry to encourage private investors to come into the refining space.

According to the Department of Petroleum Resources, the establishment of modular refinery plants shall be with design capacity not more than 30,000 bpsd, and its location shall be strategic and influenced by proximity to the source of crude oil, producing marginal fields and tie-in to supply infrastructure or clusters.

Last week, Eko Petrochem and Refining Company Limited announced the provision of a grant by the United States Trade and Development Agency towards the construction of a 20,000bpd crude oil refinery in Lagos.

It said the grant of $797,343 was meant for a feasibility study supporting technologies and development of an implementation plan for the modular refinery on Tomaro Island in Lagos.

Eko Petrochem and Refining Company said it had selected Texas-based VFuels LLC to carry out the study, which would provide technical analyses and engineering and design needed to advance the refinery.

The Chairman, Eko Petrochem and Refining Company, Mr. Emmanuel Iheanacho, said the US government, acting through the USTDA, said the funds received would help ensure the timely completion of the project.

He said several studies, including the front-end engineering design as well as the environmental impact assessment, had been completed, adding that about $250m would be required to complete the refinery.

The Nigerian National Petroleum Corporation recently announced that an Indonesian firm, PT Intim Perkasa Nigeria Ltd, a subsidiary of PT Intim Perkasa, had indicated interest to build a 10,000 bpd modular refinery in Nigeria.

The Head of Investor Relations, PTPP (Persero) Tbk, partners to PT Intim Perkasa Nigeria Ltd, Mr. Adi Hartadi, had during a business meeting with the Group Managing Director, NNPC, Dr. Maikanti Baru, stated that the proposed refinery would be located in Akwa Ibom State.

Last month, stakeholders, including the Lagos Chamber of Commerce and Industry and oil industry players, expressed concerns over the low level of investment in refineries in the country despite the increase in the number of licences in the hands of private investors.

They said it was shameful that the country, Africa’s top oil producer, had continued to rely heavily on importation to meets its fuel needs over the years.

At the 2017 Second Business Clinic Programme organised by the Petroleum Downstream Group of the LCCI, the President, LCCI, Dr. Nike Akande, said the nation’s downstream sector was still grappling with many regulatory issues.

“An increase in investment in modular refinery and even bigger refineries will bring a lot of value to the Nigerian economy,” she said, adding that it would boost the inflow of foreign capital in the country.

The ECOWAS Regional Advisor, African Refiners Association, Mr. Tony Ogbuigwe, said fuel demand in Africa would continue to rise through to 2040, presenting a clear opportunity for modular and full-scale refineries.

He said, “We now have serious interests from Chinese investors to invest in new refineries in Nigeria. Our huge population and the consequent large demand is the attraction. By 2020, aggregate Nigerian demand will be equivalent to 800,000 barrels per stream day refining capacity.”

Ogbuigwe, who is the chief executive officer of PEJAD Nigeria Ltd, said the DPR had removed the stumbling block of a $1m registration fee for those seeking licence to establish refineries.

He described modular refineries as ideal for stranded production fields and remote locations, and could be put together within a relatively shorter time span.

According to him, a 20,000 bpsd modular refinery will cost about $250m, and it is easier to access funds for modular plants.

Ogbuigwe stressed the need for full deregulation of the downstream sector, adding that the private sector should drive new refinery investments and access to crude oil supplies should be made easier for investors on commercial terms.

He urged the government to divest its equity in the existing refineries to below 40 per cent, which should be managed by the Nigerian National Petroleum Corporation.

A Partner, PricewaterhouseCoopers, Mr. Pedro Omontuemhen, said Nigeria’s refineries had continued to operate at abysmally low utilisation rates, with 8.5 per cent combined utilisation last year.

He said, “To actualise the country’s quest for self sufficiency and end reliance on importation of refined petroleum products by 2019, modular refineries provide a cost-effective, flexible and commercially viable option.”

According to him, imports currently account for over 80 per cent of West Africa’s refined product supply.

Omontuemhen said, “Current demand for refined products in the region is estimated at 39 billion litres and refineries such as SIR (Ivory Coast), SOGARA (Gabon) and SAR (Senegal) cannot meet this. There is an opportunity for potential uptake by neighbouring countries if the market has Nigeria’s refined products readily available.”

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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Investment

Lagos State Government Set to Demolish $200 Million Landmark Beach Resort

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Landmark Beach

The Lagos State Government has issued a demolition warning to the proprietor of the $200 million Landmark Beach Resort, a renowned tourist destination in the region.

The resort nestled along the picturesque coastline faces imminent destruction to make way for the construction of a 700-kilometer coastal road linking Lagos with Calabar.

Paul Onwuanibe, the 58-year-old owner of the Landmark Beach Resort, revealed that he received a notice in late March instructing him to vacate the premises within seven days to facilitate the impending demolition.

The resort, which spans a vast expanse of land and hosts over 80 businesses, is a hub of economic activity, sustaining over 4,000 jobs directly. Also, it contributes more than N2 billion in taxes annually.

The news of the resort’s potential demolition has sparked concerns among investors and stakeholders in the tourism sector. Onwuanibe expressed dismay at the government’s decision, highlighting the substantial investments made in developing the resort’s infrastructure.

He explained that the planned demolition would not only lead to significant financial losses but also jeopardize the livelihoods of thousands of employees and businesses associated with the resort.

The Landmark Beach Resort is a popular tourist destination, attracting approximately one million visitors annually, both local and international. Its unique amenities, including a mini-golf course, beach soccer field, and volleyball and basketball courts, make it a favorite among tourists seeking leisure and recreation.

The prospect of the resort’s demolition has triggered widespread panic among international and domestic investors associated with the Landmark Group. Many are now considering withdrawing their investments, citing concerns about the viability of the business without its flagship beach resort.

The Lagos State Government’s decision to proceed with the demolition is part of its broader plan to construct the Lagos-Calabar coastal highway, a 700-kilometer roadway connecting Lagos to Calabar.

The government had earlier announced its intention to remove all “illegal” constructions along the planned route of the highway, including the Landmark Beach Resort.

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Investment

Investors Petition EFCC as Over N3 Billion Trapped in Agrorite Investment Scheme

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Agriculture - Investors King

Investors in one of Nigeria’s agritech crowdfunding platforms, Agrorite, have lodged a petition with the Economic and Financial Crimes Commission (EFCC) to recover more than N3 billion trapped in the company’s investment scheme.

Agrorite, which touted itself as a premier digital agricultural platform connecting smallholder farmers with finance and markets, is now at the center of a financial debacle.

The investment scheme operated by Agrorite attracted funding from eager investors who were promised returns on investments within a fixed timeframe.

However, the situation took a turn for the worse late last year when investors found themselves unable to access their funds as promised.

Despite repeated assurances from Agrorite’s founder and CEO, Toyosi Ayodele, the repayment deadlines were continually postponed until it became evident that the company had no intention of honoring its commitments.

The magnitude of the crisis became apparent as copies of the petition submitted to the EFCC revealed that investments totaling over N3 billion were trapped in Agrorite’s schemes.

Investors, including one individual who had invested N482 million in a Naira-denominated project and $100,000 in a dollar project, are now pinning their hopes on the EFCC to facilitate the recovery of their funds.

The dire consequences of the situation were tragically highlighted by the case of an elderly woman who had invested her entire pension benefit of N40 million in Agrorite.

Upon realizing that her savings might never be recovered, she collapsed and was rushed to the hospital, underscoring the devastating impact on individual investors’ lives.

Efforts to reach Agrorite’s CEO for comments proved futile, with reports indicating that he had been arrested by the EFCC in connection with the investment debacle.

While some staff members confirmed the CEO’s arrest, they claimed ignorance regarding the reasons behind the company’s inability to fulfill its financial obligations to investors.

According to them, the EFCC’s investigation revealed a severe lack of funds in Agrorite’s accounts, leading to the arrest of key management personnel.

As the EFCC intensifies its efforts to recover investors’ funds, Agrorite’s website, agrorite.com, has mysteriously disappeared from the web, further fueling suspicions of financial mismanagement within the company.

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Treasury Bills Yields Reach 17.67% Amidst Central Bank’s Tightening Policy

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FG Borrows

The Treasury Bills yields rose to 17.67% amidst the Central Bank’s rigorous tightening of monetary policy.

This sharp surge in yields reflects the profound impact of the Central Bank’s efforts to rein in inflation and stabilize the foreign exchange market, though at the expense of investors and borrowers alike.

The surge in Treasury Bills yields from a modest 6.29% at the beginning of the year to 17.67% as of March 26, 2024 underscores the magnitude of the Central Bank’s tightening measures.

This unprecedented rise comes in tandem with a series of aggressive interest rate hikes with the monetary policy rate soaring by 600 basis points to 24.75% since the start of the year. Such a drastic increase in borrowing costs has sent shockwaves through the financial sector and prompted investors to reassess their portfolios and risk appetite.

Analysts attribute this surge in Treasury Bills yields to the Central Bank’s unwavering commitment to curbing inflation and stabilizing the foreign exchange market.

By raising interest rates and tightening monetary policy, the Central Bank aims to stem the tide of rising prices and restore confidence in the Nigerian economy.

However, these measures come with significant repercussions for investors and businesses, as borrowing costs escalate and investment returns diminish.

The Central Bank’s decision to issue a total of N1.64 trillion in Treasury Bills in the second quarter of 2024 further underscores its commitment to tightening liquidity and reducing inflationary pressures.

This substantial issuance of Treasury Bills is expected to absorb excess liquidity from the financial system, thereby exerting downward pressure on inflation and supporting the stability of the Nigerian currency.

While the Central Bank’s tightening policy may yield benefits in terms of price stability and exchange rate management, it poses challenges for investors and borrowers alike.

High borrowing costs and elevated Treasury Bills yields have the potential to dampen investment activity and constrain economic growth, particularly in sectors reliant on credit and financing.

As the Treasury Bills market grapples with soaring yields and heightened volatility, investors are advised to exercise caution and adopt a prudent approach to risk management.

In an environment characterized by uncertainty and policy tightening, navigating the financial markets requires a keen understanding of macroeconomic dynamics and a proactive strategy to mitigate potential risks.

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