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Slow $100m Cabotage Fund Implementation Threatens Indigenous Shipping

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  • Slow $100m Cabotage Fund Implementation Threatens Indigenous Shipping

Concerned about drag in the implementation of the Cabotage Act, stakeholders have requested the Nigerian Maritime Administration and Safety Agency to facilitate the disbursement and utilisation of the Cabotage Vessel Financing Fund for the purpose of developing indigenous shipping capacity.

They expressed worry at a conference in Lagos that the slow in policy implementation was threatening the operation of indigenous shippers.

The Director-General of NIMASA, Dr. Dakuku Peterside, had said that over $100m Cabotage fund lay idle in the Central Bank of Nigeria’s coffers.

He spoke at a Ship and Maritime Infrastructure Financing cocktail party for stakeholders in Lagos, lamenting that the Treasury Single Account policy made it impossible for local operators to access the funds.

It was reported that scores of Nigerian vessels were currently lying idle on the sea due to lack of maintenance and cargoes. The operators blamed the lack of access to the cabotage fund for the problems.

The Secretary General, Shipowners Association of Nigeria, Mr. Tunde Balogun, noted in a recent interview that the maritime sector was not as lucrative as it should be due to the lack of effective implementation of the Cabotage Act and other existing maritime laws that ought to create an enabling environment for local operators to thrive.

The Cabotage Act, according to him, should promote indigenous participation in cargo carriage.

He said, “The tonnage is no longer there even the offshore rigs are cutting down on production and this also affects us. So, government needs to enforce the Cabotage Act now more than ever before because the volume of available business today is not even enough for us indigenous shipowners so we need an enabling environment to be able to compete favourably with the foreign participants in the sector.

“We need government to actually implement the Cabotage Law to give us the opportunity to move the available cargo and pay for the movement in naira. The waiver for temporary importation for foreign vessels should be removed. We think we should allow Nigerian shipowners to carry the available cargo today.

“Even with the Nigerian National Petroleum Corporation, I know there are contracts for chartering of vessels; this should be handled by indigenous ship owners only.”

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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Crude Oil

Oil Prices Surge in Asian Trading on OPEC+ Meeting Expectations

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Oil prices surged during Asian trading hours on Wednesday amid mounting expectations that major oil-producing nations will uphold output cuts at an impending meeting of the Organization of the Petroleum Exporting Countries and its allies, collectively known as OPEC+.

Brent crude oil, against which Nigerian oil is priced, gained 18 cents, or 0.2% to $84.40 per barrel while the U.S. West Texas Intermediate (WTI) rose by 28 cents, or 0.3%, to $80.11.

The anticipation gripping traders and analysts alike centers on OPEC+ sustaining voluntary production cuts, which currently total about 2.2 million barrels per day.

Sugandha Sachdeva, founder of Delhi-based research firm SS WealthStreet, underscored the significance of this move, asserting that it would be perceived as a concerted effort to stabilize prices and rebalance the global oil market.

Sachdeva further elaborated on the factors bolstering oil prices, noting, “The onset of the summer driving season in the U.S. spurs a seasonal uptick in consumption and typically aids a positive momentum in crude oil prices.”

As the Memorial Day holiday heralds the commencement of the peak demand season in the United States, the world’s foremost oil consumer, the decision to maintain production cuts is poised to lend support to prices as consumption surges.

Daniel Hynes, senior commodity strategist at ANZ Bank, remarked on the robust holiday travel activity witnessed in the U.S., both on roads and in the air.

However, amidst the optimism surrounding the OPEC+ meeting, concerns over heightened tensions in the Gaza Strip added a geopolitical dimension to market dynamics.

Israeli tank advancements into the heart of the Rafah section fueled apprehensions about a potential escalation of conflict in the broader Middle East, a region critical to global oil supply.

Market participants also awaited the release of U.S. crude inventory data from the American Petroleum Institute later in the day, with preliminary expectations suggesting a decline of approximately 1.9 million barrels for the previous week.

Additionally, investor attention was drawn to forthcoming U.S. inflation data, set to influence expectations regarding Federal Reserve interest rate decisions and, consequently, impact oil prices.

The U.S. core Personal Consumption Expenditures Price Index report for April, scheduled for release on Friday, is projected to hold steady on a monthly basis.

Against this backdrop of anticipation and geopolitical tensions, the oil market navigates a landscape shaped by supply dynamics, demand prospects, and macroeconomic indicators, all of which converge to define the trajectory of oil prices in the coming days.

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Oil Revenue Decline Spurs South Sudan to Seek $250 Million IMF Assistance

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South Sudan is seeking $250 million in financing from the International Monetary Fund (IMF) to address its ongoing balance of payment challenges and stimulate economic growth.

The request comes in response to a significant decline in oil revenue, a crucial source of the nation’s income, following damage to a key pipeline.

The pipeline, which transports two-thirds of South Sudan’s crude oil, sustained damage in February.

Repairs have been delayed due to conflicts in neighboring Sudan, where the conduit passes through areas controlled by the army and the paramilitary Rapid Support Forces.

Also, a blockade on the Red Sea has further hampered oil exports, exacerbating the economic strain.

Bank of South Sudan Governor James Alic Garang, speaking at the African Development Bank’s annual meetings in Nairobi, emphasized the urgency of securing alternative financial support.

“We are facing severe challenges with our oil exports, which constitute about 90% of our revenue,” Garang said. “The impact on our economy is profound, reducing the volume of oil available for international markets and decreasing the hard currency inflow essential for meeting our obligations.”

Since 2020, South Sudan has received three rapid credit facilities from the IMF. These measures led to the initiation of a program monitoring with board involvement last year.

The first two reviews of this program were completed this month, with a third scheduled for November. After this, the government will seek the full quota of approximately $250 million.

Governor Garang highlighted that meeting the IMF’s policy requirements is crucial for securing the funds.

“We have already delivered an audit of the central bank’s financial statements for 2021,” he noted. “However, there are still areas where we need to intensify our efforts. With the IMF, there is no free lunch. We’re working very hard to meet those policy requirements.”

Efforts to increase non-oil revenue have been made, but they fall short of the country’s needs. The decline in oil production has significantly affected foreign exchange reserves, which can now only cover about two months of imports, compared to the IMF’s threshold of 3.5 months.

In addition to seeking IMF assistance, South Sudan is in discussions with Qatar for a resolution following a $1 billion court award to the Qatar National Bank over a defaulted loan. “We are negotiating to pay part of it, but we’ll still need to settle this debt,” Garang stated.

The $250 million from the IMF is expected to address several critical areas, including economic growth, inflation control, and the distribution of resources across the country.

It will also support essential sectors such as education and health, providing much-needed relief as South Sudan navigates through these economic challenges.

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Oil Prices Steady Ahead of Crucial OPEC+ Meeting on Output Cuts

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Oil prices stabilized in Asian trading on Monday as markets turned their attention to an upcoming OPEC+ meeting, where producers are expected to discuss maintaining voluntary output cuts for the remainder of the year.

This critical meeting, scheduled for June 2, will be held online following a brief postponement, OPEC announced last Friday.

The Brent crude oil, against which Nigerian crude oil is priced, stood at $82.36 a barrel, while the U.S. West Texas Intermediate (WTI) crude oil rose by 28 cents to $78 per barrel.

The stabilization in prices comes after a week of declines with Brent ending last week about 2% lower and WTI losing nearly 3%.

This downturn was influenced by minutes from the Federal Reserve’s recent meeting, revealing that some officials are open to further tightening interest rates if deemed necessary to control persistent inflation.

Market activity is expected to be relatively subdued on Monday due to public holidays in the United States and the United Kingdom.

However, anticipation is building around the OPEC+ meeting, where producers will deliberate on extending the current voluntary output cuts of 2.2 million barrels per day into the second half of the year. Sources within OPEC+ suggest that an extension is likely.

Sugandha Sachdeva, founder of Delhi-based research firm SS WealthStreet, expressed confidence in the potential extension, stating, “Oil futures are expected to maintain today’s gains due to expectations of the cuts being extended.”

She also highlighted the influence of upcoming U.S. Producer Price Index (PPI) data on market movements, which will shape the Federal Reserve’s approach to potential rate adjustments.

Combined with an additional 3.66 million barrels per day of production cuts valid through the end of the year, these measures account for nearly 6% of global oil demand.

OPEC remains optimistic about continued growth in oil demand, forecasting an increase of 2.25 million barrels per day for the year, while the International Energy Agency (IEA) anticipates slower growth of 1.2 million barrels per day.

Analysts at ANZ noted that they will be closely monitoring gasoline usage as the Northern Hemisphere enters summer, a peak season for driving holidays.

They commented, “While U.S. holiday trips are expected to hit a post-COVID high, improved fuel efficiency and EVs could see oil demand remain soft,” but added that this could be offset by rising air travel.

This week’s market dynamics will also be influenced by the U.S. personal consumption expenditures (PCE) index, due to be released on May 31.

The PCE index is regarded as the Federal Reserve’s preferred measure of inflation, and its findings could provide further indications of the central bank’s interest rate policies.

In a related development, Goldman Sachs has revised its forecast for 2030 oil demand upwards to 108.5 million barrels per day from the previous 106 million barrels per day.

The investment bank also projects peak oil demand to occur by 2034 at 110 million barrels per day, followed by a prolonged plateau until 2040.

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