- Kachikwu: FG to Review NNPC’s $6bn Oil Swaps
Apparently scandalised by the acute petrol scarcity, which marred the Yuletide celebrations, the federal government is set to review the $6 billion Direct Sale-Direct Purchase (DSDP) contracts of the Nigerian National Petroleum Corporation (NNPC).
The objective is to blacklist some oil traders whose failure to meet their petrol supply obligations plunged the country into the fuel crisis.
Thisday had reported exclusively that the scarcity was caused by some of the participants in the DSDP scheme, previously referred to as offshore crude oil processing agreements (OPAs) and crude-for-products exchange arrangements, who imported diesel for NNPC in November-December instead of petrol as stipulated in their contracts.
Speaking on the fuel crisis in an exclusive interview, the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, stated that some of the oil traders failed to deliver petrol to NNPC due to either lack of capacity to deliver or for profiteering reasons.
According to him, the failure of the companies to meet their contractual obligations caused the fuel crisis, which was aggravated by the high cost of crude oil in the international market.
The minister stated that in order to avert future fuel crises, the federal government would explore support mechanisms, by way of tax relief to boost the capacity of marketers to import petrol on their own.
Kachikwu said the federal government would review the list of the beneficiaries of the DSDP contracts to ensure that those companies that breached their contractual agreements would not benefit from the contracts.
Kachikwu said: “I think the immediate cause of this (fuel crisis) is the increase in the price of crude, and then a lot of deliveries at obviously a loss that NNPC is doing just to keep the nation going – also not the fault of NNPC.”
“That is what caused it. So we need to do better planning obviously in terms of foreseeing this and trying to provide for this. And there were a lot of people who took the DSDP programme to deliver products that failed in their deadlines – some for profiteering reasons, some for just sheer lack of capacity.
“So, we need to look at that list again and see who performed this year and who breached the contracts and make sure that those who did not perform are not back on that list again as we go forward,” Kachikwu explained.
Kachikwu said the long-term solution to the perennial crisis would be to encourage private marketers to import petrol on their own without relying on NNPC.
“I would like to see marketers being able to bring in their own products on their own and not NNPC bringing products for them. I would like to see NNPC bring its own products.
“If there is a support mechanism, we have to find a way – either through tax relief or whatever it is to try and address that issue so that everybody has the capacity to do business.
“That is one of the things I will be developing and try to see my principal (President Buhari) obviously in the coming days to address the long-term problems.
“Final one is that the refineries should work. All these will fall into insignificance if the refineries are up and running. And we are working hard to begin the refinery repairs.
“We are almost at the end of the recommendations that will go to Mr. President,” Kachikwu added.
He stated that the federal government would develop a model that would allow NNPC and the marketers to import their own products.
“At the end of the day, that is the solution. And I will have to sit down with the Group Managing Director of NNPC and obviously get approval of Mr. President and put together structures that will enable us to address this, so that people take responsibility and answer to liabilities.
“If you say you are going to bring a cargo and we depend on you, we are going to add a penalty on it if you fail to perform. We are going to be doing that, going forward,” Kachikwu noted.
Speaking to journalists while monitoring the fuel situation in Lagos on Christmas Day, Vice-President Yemi Osinbajo also attributed the scarcity to the failure of some companies to deliver petrol to NNPC.
“I think that going by what we have seen, there is what is called winter deliveries. Towards the end of the year, the premium goes up – the cost of fuel goes up in many parts of the world for those who are importing.
“Obviously, that gave rise to problems for those who were bringing in products. We had one or two short deliveries by the importers and that accounted for some of the problems,” he said.
“I think that over time – in fact, if you look at the past few months, NNPC has been importing and they have been doing a very good job because we didn’t have a shortage in October and we did not have a shortage in November; it is only in December that we had a disruption,” Osinbajo added.
Last April, NNPC signed about $6 billion in deals with local and international traders to exchange about 330,000 barrels per day (bpd) of crude oil for imported petrol.
Investigation revealed that the oil traders engaged by NNPC were meant to import petrol into the country after shipping crude oil to international refiners.
It was, however, learnt that in the months of November and December, some of the companies converted their DSDP contracts into diesel, as they could not bring back petrol owing to the high cost of the product in the international market.
The implication was a flooded domestic market with diesel, which is also imported by other private marketers as a deregulated product, while petrol, which other marketers lacked the capacity to import and had been relying on NNPC for supply, became scarce.
Nigeria, Morocco sign MOUs on Hydrocarbons, Others
The Federal Government and the Kingdom of Morocco have signed five strategic Memoranda of Understanding that will foster Nigerian-Morocco bilateral collaboration and promote the development of hydrocarbons, agriculture, and commerce in both countries.
The Minister of State for Petroleum Resources, Chief Timipre Sylva, led the Nigerian delegation to the agreement signing ceremony on Tuesday at Marrakech, Morocco, while the Chief Executive Officer of OCP Africa, Mr Anouar Jamali, signed for the Kingdom of Morocco, according to a statement by the Nigerian Content Development and Monitoring Board.
Under the agreement between OCP, NSIA and the Nigerian National Petroleum Corporation, Nigeria will import phosphate from the Kingdom of Morocco and use it to produce blended fertiliser for the local market and export.
The statement said Nigeria would also produce ammonia and export to Morocco.
“As part of the project, the Nigerian Government plans to establish an ammonia plant at Akwa Ibom State,” it said.
The Executive Secretary of NCDMB, Mr Simbi Wabote, and the Group Managing Director of NNPC, Mallam Mele Kyari, were part of the delegation and they confirmed that their organisations would take equity in the ammonia plant when the Final Investment Decision would be taken, the statement said.
Sylva said the project would broaden economic opportunities for the two nations and improve the wellbeing of the people.
He added that the project would also positively impact agriculture, stimulate the growth of gas-based industries and lead to massive job creation.
He said the President, Major General Muhammadu Buhari (retd.), had mandated the Ministry of Petroleum Resources and it agencies and other government agencies to give maximum support for the project.
“He mandated me to ensure that at least the first phase of this project is commissioned before the expiration of his second term in office in 2023,” he added.
According to the statement, the MOUs were for the support of the second phase of the Presidential Fertiliser Initiative; Shareholders Agreement for the creation of the joint venture company to develop the multipurpose industrial platform and MOU for equity investment by the NNPC in the joint venture and support of the gas.
Other agreements are term sheet for gas sales and aggregation agreement and MOU for land acquisition and administrative facilitation to the establishment of the multipurpose industrial platform for gas sales and aggregation agreement.
The NCDMB boss described the bilateral agreement as significant to the Nigerian economy as it would accelerate Nigeria’s gas monetisation programme through establishment of the ammonia plant in the country.
The agreement would also improve Nigeria’s per capita fertiliser application through importation of phosphate derivatives from Morocco, he added.
Wabote challenged the relevant parties to focus on accelerating the FID, assuring them that the NCDMB would take equity investment for long-term sustainability of the project.
He canvassed for the setting up of a project management oversight structure to ensure project requirements and timelines are met.
“There is also need to determine manpower needs for construction and operations phase of the project and develop training programmes that will create the workforce pool from Nigeria and Morocco and design collaboration framework between research centres in Nigeria and Morocco to develop technology solutions for maintaining the ISBL and OSBL units of the Ammonia complex,” he said.
Dangote Fertiliser Plant to Commence Shipment of Urea in March 2021
Dangote to Sells Petrol in Naira, Plans to Commence Urea Shipment in March 2021
The Governor of the Central Bank of Nigeria, Mr. Godwin Emefiele, has said Dangote Fertiliser Plant will commence shipment of Urea in March 2021.
The CBN governor disclosed this during an inspection tour of the sites of Dangote Refinery, Petrochemicals Complex Fertiliser Plant and Subsea Gas Pipeline at Ibeju Lekki, Lagos on Saturday.
Emefiele further stated that Dangote Refinery would sell refined petroleum products in Naira when it starts production.
This he said would save the country from spending 41 percent of the nation’s foreign exchange on importation of petroleum products yearly.
“Based on agreement and discussions with the Nigerian National Petroleum Corporation and the oil companies, the Dangote Refinery can buy its crude in naira, refine it, and produce it for Nigerians’ use in naira,” Mr Emefiele said.
“That is the element where foreign exchange is saved for the country becomes very clear. We are also very optimistic that by refining this product here in Nigeria, all those costs associated with either demurrage from import, costs associated with freight will be totally eliminated.”
Emefiele explained that this will make the price of Nigeria’s petroleum products affordable and cheaper in naira.
“If we are lucky that what the refinery produces is more than we need locally you will see Nigerian businessmen buying small vessels to take them to our West African neighbours to sell to them in naira.
“This will increase our volume in naira and help to push it into the Economic Community of West African States as a currency,” Mr Emefiele said.
UK Budget 2021: Will Sunak’s Budget Run Into Unintended Consequences?
Rishi Sunak’s Budget will encourage higher earners to consider their “international financial options” and will drive businesses away from the UK, warns the CEO of one of the world’s largest independent financial advisory and fintech organizations.
The warning from Nigel Green, chief executive and founder of deVere Group, comes as the Chancellor delivered his 2021 Budget in the House of Commons, his second since he took on the role.
Mr Green says: “The Chancellor has got an extraordinarily difficult hand to play as he tries to stem the economic damage caused by the pandemic, support jobs and businesses and, crucially, rebuild the public finances.
“Whilst Mr Sunak is being hailed a hero for the continued and unprecedented levels of support, it should also be remembered that he is – in a stealth move – dragging more people firmly into the tax net.
“He is raising taxes under the radar.
“Yes, there is no income tax rise. However, he is freezing personal tax thresholds, meaning as incomes rise and thresholds don’t, he is able to raise money by fiscal drag.”
Earlier this week, the deVere CEO noted: “Those most impacted by this stealth move will be looking at the financial planning options available to them, including international options, in order to grow and protect their wealth.”
Rishi Sunak also confirmed that corporation tax will increase to 25% from 2023, up from the current level of 19%.
Of this tax hike, Mr Green goes on to say: “Lower corporation tax helps job and wealth-creating business to survive and thrive. It also helps attract business to move and invest in the country.
“Instead of increasing taxes, Mr Sunak should have relentlessly focussed on growth and stimulus policies for businesses. This would have been of greater help to firms, the economy, jobs and, ultimately, the Treasury’s coffers.”
He adds: “Again, this corporation tax hike is likely to serve as a prompt for businesses to consider their overseas financial options.”
The deVere CEO concludes: “The Chancellor had to perform a tough juggling act. But stealthily dragging more people into the tax net and raising corporation tax might have negative, unintended consequences for the Treasury’s bottom line.”
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