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Why Nigeria’ll Resist Oil Cut, by Kachikwu

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  • Why Nigeria’ll Resist Oil Cut, by Kachikwu

In another 10 days, Nigeria’s exemption from production quota will be reviewed by the Organisation of Petroleum Exporting Countries (OPEC) in Vienna, Austria. The Federal Government plans to plead with the cartel to grant it a seven-month grace to stabilise its oil production.

Nigeria will resist any attempt to curb its oil production, the Minister of State for Petroleum Resources, Dr. Emmanuel Ibe Kachikwu, has said.

The minister spoke ahead of the countries meeting with the Organisation of Petroleum Exporting Countries (OPEC) and Russia before the end of the month.

Nigeria and Libya, two members of the oil cartel enjoying exemption from oil production cut deal have been invited to an OPEC Committee meeting scheduled for September 22 in Vienna, Austria.

But 10 days ahead of the meeting where the latest developments in the oil sectors of both countries would be reviewed, Kachikwu gave reasons Nigeria must not be told to cap its oil production quota.

Kuwait’s Oil Governor Haitham al-Ghais told Al-Rai newspaper penultimate week that the oil cartel will be consulting with Nigeria and Libya to review the latest development in their oil sectors.

He said the group will hold a technical committee meeting on September 20, looking at the continued effects of the United States (U.S.) shale oil on the global market and the impact of Hurricane Harvey.

Ghais said: “The amount of production affected by the hurricane is estimated at 700,000bpd, which may strengthen the status of the market.”

He added that U.S. production had increased by 500,000bpd so far this year, compared to last year’s.

It was learnt that the September 20 meeting will be followed by another meeting on September 22, where a committee overseeing the deal, composed of oil ministers from Kuwait, Russia, Venezuela, Algeria, Oman and Saudi Arabia, would be in attendance.

The Nigerian position may pose a threat to the cartel’s effort to cut global supplies and boost crude prices towards $60 a barrel. The price prices hovered around $54.42 yesterday.

Kachikwu told the Financial Times that Nigeria’s energy sector was still suffering from years of violent disruptions and needed more “recovery time” before joining a supply deal agreed last year between some of the world’s biggest oil producers.

The minister, who was at OPEC meetings, said in an interview, that Nigeria would not consider sealing its production until at least March next year.

According to him, there has been no proof that the country’s rebound in production would last.

“We have a nine-month exemption period within which to come back to the table,” Kachikwu said, referring to the decision to extend the near two million barrel a day supply cut deal from June.

“You need that timeframe to see if any recovery is sustainable,” the minister explained.

His stance puts Nigeria on a potential collision course with other OPEC members as the country’s output has rebounded strongly in the past 12 months, blunting the effectiveness of a deal between 24 countries to shave almost two per cent of global oil output.

Nigeria and Libya were exempted from the cuts due to disruptions of oil production by militants in the Niger Delta. The agitations of the restive militants and the internal crisis in Libya, led to serious drop in oil output in both countries.

However, productions have improved following negotiations with leaders from the region. The Pan Niger Delta Development Foundation (PANDEF) has been negotiating with the Federal Government as part of efforts to restore peace to the oil producing region.

Nigeria’s production rose by 50,000 barrels a day in June, according to a Bloomberg survey.

Abdulsamad Al-Awadhi, a London-based analyst and Kuwait’s former representative to OPEC, said capping Libya and Nigeria might help but would not cut the supply by much.

Al-Awadhi said: “OPEC needs to have better compliance, and it must respect the right of Libya and Nigeria to go back to the market.

“Other countries that raised output while Libya and Nigeria are out should do more and give space to these two countries to go back to the market.”

The decision to grant Libya and Nigeria exemptions to production cuts was a collective decision, and any proposal to include them in OPEC’s plans will also require a joint decision, Secretary-General Mohammed Barkindo told reporters at an event in Istanbul.

OPEC and non-OPEC members agreed to cut oil production at its meeting in Austria on November 30 last year. The decision followed an agreement by OPEC members at a meeting in Algiers, Algeria on September 28 to limit supply with special conditions given to Libya, Nigeria and Iran, whose output has been hit by wars and sanctions.

The agreement was tagged ‘Algiers Accord.’ The production cut agreement, which began January 1, compelled OPEC’s 14 members and 10 non-OPEC countries, led by Russia, to cut a combined 1.8 million bpd in output through March.

Militants rescind threat

A coalition of militants in the Niger Delta, who had previously vowed to attack oil and gas pipelines if their demands were not met by October 1, has agreed to rescind their threats on the fossil fuel infrastructure in the oil-bearing region.

The Presidency held talks with the coalition last week, after which the group declared its loyalty to the PANDEF, which is negotiating with the Federal Government to increase the proportion of oil revenues used to develop the oil-rich delta.

A statement by the group reads: “Niger Delta Forum (PANDEF), the coalition of Niger Delta agitators, which comprises over 250 groups with their leaders and representatives present at yesterday’s (last week) meeting, officially withdraw our quit notice issued to the Northerners and Yorubas living in Niger Delta region; call off planned resumption of attacks on oil and gas installations across the Niger Delta region and beyond from September 10, 2017; suspend the October 1, 2017 declaration of the Niger Delta Republic; declare support for the Pan Niger Delta Forum.

“We have also resolved to work with PANDEF and give it our maximum support and we urge the federal government to continue a dialogue and implement the 16-point demand presented by PANDEF on behalf of the Niger Delta region.”

The news of the rescinded threat came as foreign companies start reinvesting in Nigeria after a year of high militant activity in 2016.

Shell has begun pumping natural gas from the second phase of development at the Gbaran-Ubie Niger Delta project at the end of last month. The gas from the expanded project will go to both the local market and export markets and will be transported via a new pipeline connecting the central processing facility at Gbaran-Ubie to a non-associated gas plant.

Hurricane concerns

Oil prices rose yesterday after OPEC forecast higher demand in 2018 and said its output fell in August.

The cartel has agreed that its production-cutting deal with non-member countries could help reduce the global crude glut.

In its monthly report, the OPEC also said the two hurricanes that hit the U.S. in recent weeks would have a “negligible” impact on demand.

The market was assessing Hurricane Irma’s effect on demand, even as key refinery restarts in the wake of Hurricane Harvey boosted expectations for crude oil consumption.

Weekly U.S. inventories data will shed light on the hurricanes’ impact. Analysts forecast crude inventories last week rose while products drew down.

The American Petroleum Institute’s (API’s) data report was due last night and the U.S. Department of Energy’s Energy Information Administration (EIA) reports expected today.

This week’s numbers might be incomplete indicators of the longer-term supply and demand outlook, said Mark Watkins, regional investment manager at U.S. Bank.

“Over the next two to three weeks, the EIA inventory numbers will be rather sloppy because you have production disrupted, refineries going offline and online,” he said, adding that OPEC figures are a better signal. “That’s why you have to look out further.”

Brent crude LCOc1 rose 43 cents or 0.8 percent to $54.27 per barrel by 1:14 p.m. (1556 GMT). During the session it traded as low as $53.42.

U.S. West Texas Intermediate (WTI) CLc1 was up 21 cents or 0.2 percent to $48.40 a barrel. It hit a session low of $47.73.

Output by OPEC’s 14 member countries fell in August by 79,000 barrels per day (bpd) from July to 32.76 million bpd.

Should OPEC keep pumping at August’s rate, the market would see a small supply deficit next year, versus a 450,000-bpd surplus implied by last month’s report.

OPEC said inventories were falling and an increased premium of Brent crude for immediate delivery over that for later supplies raised hopes that the market was rebalancing.

The U.S. Energy Information Administration said it expects U.S. crude oil production in 2018 to rise by more than previously expected.

The agency forecast that 2018 crude oil output will rise 590,000 barrels per day to 9.84 million bpd. Last month, it expected a 560,000 bpd year-over-year increase to 9.91 million bpd.

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.

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Economy

World Bank Lauds Kogi’s 2020 Financial Statement

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The World Bank has heaped praise on the Government of Kogi State concerning the state’s audited financial statement for 2020. The financial institution was said to have described the financial report as a standard to look up to concerning transparency and accountability in the public sector.

In a statement which was dated November 21, 2021 it was said that the bank made the commendation in a letter which was sent to the Accountant General of the state.

As said in the statement, the letter which was taken by the Kogi State Accountant General on November 2025 was signed by Deborah Hannah Isser, the Task Team Leader of the States Fiscal Transparency, Accountability and Sustainability Programme (SFTAS), Nigeria Country Office, Western and Central African Region.

SFTAS is a $750 million programme which has been set up to reward states for meeting any or every one of the indicators which demonstrate improvements in fiscal transparency, sustainability and accountability.

The indicators, which are nine in number were a byproduct of the former Fiscal Sustainability Plan of the federal government where States would be rewarded for meeting up to 22 targets.

The World Bank had previously backed the federal government to give incentives to the states in order to properly execute the 22-point Fiscal Sustainability Plan, which has now gone under a revamp as the nine Disbursement Linked Indicators under SFTAS.

Some of the criteria on which judgement will be based on are: improvement in financial reporting and budget reliability, improved cash management, increased openness, citizen participation in the budget process, reduced revenue leakages through the execution of State Treasury Single Account (TSA), a strengthened Internally Generated Revenue (IGR) collection, biometric registration and Bank Verification Number (BVN) used to reduce payroll fraud.

The World Bank commended the Kogi State government for preparing its audited financial statements in line with the basis of the International Public Sector Accounting Standards.

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Nigeria’s Rigid Forex Policy Discouraging Investors, Fueling Inflation – World Bank

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The World Bank has blamed the Central Bank of Nigeria’s rigid forex policy for the drop in Nigeria’s capital importation and rising inflation rate.

The bank disclosed in its November report, Nigeria Development Update.

Explaining modalities for its position, the World Bank stated that there had been constant pressure on the Nigerian Naira with the current forex policy, forcing the central bank to consistently increase its nominal official exchange rate in an effort to ease some of the pressure.

This, it blamed on the rigid foreign exchange management system of the Central Bank of Nigeria, saying the system has also been responsible for the rising inflation rate in Nigeria.

The report read in part, “The government’s exchange rate management policies continue to discourage investment and fuel inflation. Exchange rate stability is a key CBN policy objective, and to preserve its external reserves the CBN continues to manage FX demand and limit the supply of FX to the market.

“Pressure on the naira remains intense, and while the CBN has raised the nominal official exchange rate three times since the start of the pandemic (by 15 per cent in March 2020, five per cent in August 2020, and seven per cent in May 2021), FX management remains too rigid to respond to external shocks. Meanwhile, exchange-rate management has emerged as one of the key drivers of inflation.”

The World Bank further stated that the central bank foreign exchange system needs to be more flexible to withstand external shocks, especially given Nigeria’s mono-product nature. It added that the NAFEX rate does not reflect the true market rate but the central bank managed rate.

It read in part, “While the CBN supplied an average of $2.5bn to the Investors and Exporters forex window in the months just prior to the COVID-19 crisis, it only supplied an average of $0.5bn in the months thereafter.

“The NAFEX rate, which is now the guiding exchange rate for the economy, continues to be managed and is not fully reflective of market conditions. The parallel market premium over the NAFEX rate reached 29 per cent in August 2021 after the CBN cut off its weekly supply of $20,000 per bureau de change. The CBN has intermittently supplied forex to BDCs since 2005, providing ample opportunities for currency round-tripping.”

The institution however advised that Nigeria adopt a more predictable, transparent and flexible foreign exchange management system in order to attract and sustain private investment flows.

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Nigeria’s Non-oil Revenue Now N1.15 Trillion – Minister of Finance

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Mrs. Zainab Ahmed, the Minister of Finance, Budget and National Planning, has said that Nigeria’s non-oil revenue is now N1.15 trillion, representing 15.7 percent above the country’s target. This, she claimed, was a result of the federal government’s efforts at diversifying the nation’s economy.

Mrs. Ahmed disclosed this at the Institute of Directors (IoD) 2021 Annual Directors Conference which was held on Wednesday in Abuja.

According to the News Agency of Nigeria (NAN) the event with the theme: “Creating the Future: Deepening the Corporate Governance Practice through Multi-Sectoral and Multi-Generational Collaborations,” was meant to discuss economic development.

Mrs Ahmed added that the recent development was in line with President’s commitment to further diversifying the Nigerian economy which is heavily dependent on oil. She observed that Nigeria was showing resilience in recovery from recession from coronavirus (COVID-19) pandemic which intensely affected global economies.

The minister said the federal government alongside the private sector had implemented a wide range of monetary measures to stimulate economic recovery, growth and development, job creation and improved standards of living.

She also explained that the government was doing everything to improve and diversify Nigeria’s revenue generation.

Nigeria was quickly able to exit recession and is on her way to path of sustainable growth and we are intensifying efforts to grow and diversify our revenue sources to grow revenue from the current 8 per cent.”

“Our non-oil revenues have grown to N1.15 trillion, representing 15.7 per cent above set target. We are working on the 2021 finance bill and it’s nearing completion. Also, the recent approval of the medium-term national development plan is an important milestone of Buhari’s commitment to delivering sustainable growth and we require strong support and monitoring during implementation,” she said.

Mrs Ahmed reinforced the government’s decision to do something about infrastructure and reduce the cost of production for businesses in the country.

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