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Senate Probes $60bn Loss in 24-year-old Oil Deal

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  • Senate Probes $60bn Loss in 24-year-old Oil Deal

The Senate has begun investigation into the alleged loss of about $60bn to the non-enforcement of the terms of Production Sharing Contracts signed between the Federal Government, through the Nigerian National Petroleum Corporation, and International Oil Companies in 1993.

This followed the adoption of a motion entitled, ‘Need to Enforce the Terms of 1993 PSC Agreement between the lOCs and the Federal Government’, and moved by Senator Donald Alasoadura and co-sponsored by Senators Ahmadu Abubakar, Baba Kaka Bashir Garbai and Ali Wakili.

The upper chamber of the National Assembly mandated the Committee on Petroleum Resources (Upstream) to “investigate the implementation of Production Sharing Contract agreements of 1993 and determine the extent of revenue losses, and proffer lasting solutions to the problems of implementing the agreement.”

The lawmakers also urge all those charged with the statutory responsibility of reviewing the contract to immediately do so to reflect the current economic realities.

The motion, which was presented by Abubakar, read, “The Senate notes with shock that Nigeria lost close to $60bn to the non-enforcement of the terms of the PSCs signed between the Federal Government and the IOCs in 1993 through the NNPC.

“The Senate notes further that the 1993 PSCs provide that royalties paid by the IOCs on oil blocks located in deep water should be reviewed upward when crude oil price exceeds $20 per barrel.”

It added, “The Senate is concerned that these provisions were later backed by the Deep Offshore and Inland Basin Production Sharing Contracts Act (No. 09) of 1999. Significantly, Section 16 (1 and 2) of the Act provides that if the price of crude oil at any time exceeds $20 per barrel, the share of government shall be renegotiated to such extent that the production sharing contracts shall be economically beneficial to the government of the federation.

“The Senate is aware that in addition, the decree is subject to review after a period of 15 years from the date of its commencement (January 1, 1993) and every five years thereafter.

“The Senate is worried that oil price crossed the $20 mark (in real time) in May 2004, yet the royalties were not reviewed upward as provided by the terms and conditions of the PSCs (15 years from 1993), as provided by the terms of the contract, leading to monumental loss of revenue to the federation.”

The lawmakers explained that the PSC also provided for fiscal terms that were different from the Petroleum Profit Tax Act, noting that the tax rate for the PSCs was 50 per cent, compared to 65.75 per cent and 85 per cent rates in the PPTA.

They also noted that the PSCs also provided for the investment tax credit of 50 per cent against the rate of between five per cent and 20 per cent provided in the PPTA.

Seconding the motion, Senator Yahaya Abdullahi said serious issues had been raised on the deal “because it affects the revenue of the government and the failure of a party in the agreement.”

According to him, the non-compliance with the terms of the agreement has resulted in the colossal losses incurred by the government.

Abdullahi said, “This is not the only area; there are so many areas where either through the failure of the Executive arm of government or those who have been saddled with the responsibility of protecting the interest of Nigerians, there have been so many kinds of these instances where things have been codified in the law of the federation and the Acts of the National Assembly, but those who are saddled with the responsibility of implementing those laws are not doing true to the laws.”

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.

Economy

Stop Maize, Soybean Export to Reduce Scarcity – NIAL

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Stop Maize, Soybean Export to Reduce Scarcity – NIAL

The Nigerian Institute of Animal Science on Tuesday called on the Federal Government to halt the continued export of maize and soybean to reduce the scarcity of the commodities as well curb their price hike in Nigeria.

Registrar and Chief Executive Officer, NIAL, Prof. Eustance Iyayi, told journalists in Abuja that the poultry sector was currently hit by the severe scarcity of maize and soybean.

This, he said, was due to the continued export of the commodities, the COVID-19 pandemic, which had disorganised the international supply chain, lingering insecurity in the North-East, farmers/herders conflict and flooding in some parts of the country.

“Maize and soybean are being exported and this has exacerbated the situation leading to local scarcity and price escalation of the commodities in poultry production,” Iyayi stated.

He added, “The increasing prices of the essential commodities has resulted in the increase in price of finished feeds by about 75 per cent.

“This has led to the closure of small and medium sized poultry farms thereby threatening about 10 million jobs as a result of this scarcity.

“To set the poultry industry from total collapse, the institute urges the government to immediately halt the exportation of soybean and maize and grant import permit to importers at the official foreign exchange rate.”

Iyayi said there was shortage of soybean in Nigeria and other countries, stressing that the little amount being produced across the country should not be exported.

He said the current maize yield of about one to two tonnes per hectare being produced in Nigeria would not be enough to sustain the country.

The NIAL helmsman stated that the country should be producing between seven and 10 tonnes per hectare in order to meet the requirements for humans and animals.

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Petrol Landing Cost Jumps to N186, Oil Hits $64

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Petrol Landing Cost Jumps to N186, Oil Hits $64

Against the backdrop of the rising price of oil prices, the landing cost of Premium Motor Spirit (petrol) imported into Nigeria has increased to N186.33 per litre.

Investors King had exclusively reported on February 9 that the landing cost of PMS rose to about N180 per litre on February 5 from N158.53 per litre on January 7.

Crude oil price accounts for a large chunk of the final cost of petrol, and the deregulation of petrol price by the Federal Government last year means that the pump price of the product will reflect changes in the international oil market.

Going by the petrol pricing template of the Petroleum Products Pricing Regulatory Agency, the landing cost of petrol rose to N186.33 per litre on February 16, with the pump price of the product expected to be N209.33 per litre.

The international oil benchmark, Brent crude, closed at $63.96 per barrel on February 16, up from $59.34 per barrel on February 5.

The rising price of crude oil pushed the cost of petrol quoted on Platts to $560.75 per metric tonne (N163.08 per litre, using N390/$1) on February 16 from $543.25 per metric tonne (N157.99 per litre) on February 5.

Other cost elements that make up the landing cost include freight (N10.29), lightering expenses (N4.57), insurance cost (N0.25), Nigerian Ports Authority charge (N2.38), Nigerian Maritime Administration and Safety Agency charge (N0.23), jetty throughput charge (N1.61), storage charge (N2.58), and financing (N1.33).

The freight cost increased to $35.41 per MT (N10.29 per litre) last Wednesday from $30.04 per MT (N8.74 per litre) on February 5.

The pump price is the sum of the landing cost, wholesale margin and the distribution margins. The wholesale margin is N4.03 while the distribution margins comprise transporters allowance (N3.89), retailer (N6.19), bridging fund (N7.51), marine transport average (N0.15), and admin charge (N1.23).

Apart from the changes in global crude oil prices, the exchange rate of naira to the dollar also affects the cost of imported petrol.

The cost of petrol would be higher if the 410/$1 rate at which the naira closed on Monday at the Investors’ and Exporters’ Foreign Exchange Window was used. The naira closed at 480/$1 at the parallel market.

The Nigerian National Petroleum Corporation, which has been the sole importer of petrol into the country in recent years, is still being relied upon by marketers for the supply of the product despite the deregulation of the downstream petroleum sector.

Oil marketers said recently that they were ready to resume importation of petrol if the foreign exchange was made available to them at a competitive rate.

“The discussion we should be having today is how best to maximise the benefits of the removal of price controls and subsidies while minimising the adverse effects of this action on our citizens,” the Chairman, Major Oil Marketers Association of Nigeria, Mr Adetunji Oyebanji, said at a virtual press briefing.

Brent crude, against which Nigeria’s oil is priced, rose by $1.67 to $64.58 per barrel as of 6:08pm Nigerian time on Monday.

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Economy

FG to Lift 100 Million People Out of Poverty With Gas Expansion Project

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FG to Lift 100 Million People Out of Poverty With Gas Expansion Project

The Federal Government has said about 100 million Nigerians will be lifted out of poverty through the National Gas Expansion Programme (NGEP).

The Minister of State for Petroleum Resources, Chief Timipre Sylva, disclosed this on Monday during the inauguration of the NGEP in Ado Ekiti, Southwest.

Sylva said the project was “a practical demonstration of President Muhammadu Buhari’s commitment to lift 100 million Nigerians out of poverty by using gas value chain as catalyst for social and economic development in Nigeria”.

The minister said, “The programme has its main objective to reinforce and expand gas supply as well as stimulate demand in Nigeria through effective and efficient mobilisation and utilisation of all available assets, resources and infrastructure in the country.

“The programme is geared towards the implementation of Mr President June 12, 2019 promise to take hundred million Nigerians out of poverty within the current decade by ensuring that locally produced, available, accessible and affordable fuel is sufficiently supplied across the country”.

Sylva added that Nigeria was richly endowed with mineral resources, specifically, hydrocarbons, crude oil and natural gas with proven gas reserves of over 200 trillion cubic feet of natural gas, which he said had presented the country with opportunity to use gas as a catalyst for social economy renaissance.

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