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Nigeria’s Active Oil Rigs Hit Three-year High

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  • Nigeria’s Active Oil Rigs Hit Three-year High

From a record low of 23 in December 2016, the number of the nation’s active oil rigs rose to 35 in February this year, a level last seen in early 2015.

The upturn in the rig count was mostly triggered by the recent rally in global crude oil prices and the suspension of militant attacks on oil facilities in the Niger Delta.

The country recorded the second biggest increase in the number of rigs among its peers in the Organisation of Petroleum Exporting Countries in February, as four rigs were added to the 31 active in January.

Data obtained from Baker Hughes Incorporated and OPEC on Wednesday showed that the nation’s rig count stood at 38 in January 2015.

The slump in oil prices, which started in mid-June 2014, forced many companies operating in the Nigerian oil industry to slash their capital budgets and suspend some projects, resulting in a drop in the number of rigs.

One of the nation’s major independent oil companies, Seplat Petroleum Development Company Plc, said its rig-based activity at three oil blocks in 2017 was limited with just one rig deployed for a work-over well in the Orogho field.

The company, in its full-year 2017 financial results, said, “It is now selectively considering production drilling opportunities in the existing portfolio with a view to reinstating a work programme designed to capture the highest cash return production opportunities while diligently preserving a liquidity buffer.”

Rig count is largely a reflection of the level of exploration, development and production activities occurring in the oil and gas sector.

Contrary to the Federal Government’s target of increasing crude oil reserves, the country recorded a decline of 961.47 million barrels in the four years to 2016 on the back of low investment in exploration by oil companies.

The oil reserves fell from a high of 32.23 billion barrels in 2012 to 31.27 billion barrels in 2016 while the condensate reserves stood at 5.47 billion barrels from 4.91 billion barrels in 2012, according to data from the Department of Petroleum Resources.

The Federal Government in 2010 set the target of 40 billion barrels of crude oil reserves and a production of four million bpd by 2020 but exploration activity has slowed in recent years.

Nigeria saw the fourth largest drop in rig count among its peers in OPEC in 2016 as the number of rigs averaged 25, down from 30 in 2015 and 34 in 2014. It averaged 28 last year.

Industry stakeholders have continued to raise concerns as the regulatory uncertainty in the industry has also dampened companies’ appetite to embark on new projects.

“Regulatory uncertainty has resulted in fewer investments in new oil and natural gas projects, and no licensing round has occurred since 2007. The amount of money that Nigeria loses every year from not passing the PIB is estimated to be as high as $15bn,” the United States Energy Information Administration said in its ‘Nigeria Brief’.

Nigeria has the second largest amount of proven crude oil reserves in Africa, but exploration activity has slowed in recent years.

The EIA said, “International oil companies are concerned that proposed changes to fiscal terms may make some projects commercially unviable, particularly deepwater projects that involve greater capital spending.”

The Director, Department of Petroleum Resources, Mr. Mordecai Ladan, said in the latest Nigeria Oil and Gas Industry Annual Report that the Nigerian petroleum sector had been affected by the disruption occasioned by the 2014 price crash.

He said the speedy enactment of the petroleum industry governance law, and the pending bills, would place the Nigerian oil and gas sector on better pedestal to compete in the increasingly complex global energy terrain.

In February, the Group Managing Director, Nigerian National Petroleum Corporation, Dr. Maikanti Baru, said the passage of the PIB would unlock $10bn worth of oil and gas investment in the country.

The first part of the bill, Petroleum Industry Governance Bill, has been passed by the Senate and the House of Representatives, awaiting the President’s assent.

“When the other sections of the bill are finally passed, it will unlock over $10bn of investment held up due to uncertainty,” the NNPC GMD said.

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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Minister of Power Pledges 6,000 Megawatts Electricity Generation in Six Months

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Adebayo Adelabu has made a bold pledge to ramp up electricity generation to 6,000 megawatts (MW) within the next six months.

This announcement comes amidst ongoing efforts to tackle the longstanding issue of inadequate power supply that has plagued the country for years.

During an appearance on Channel Television’s Politics Today program, Adelabu said the government is committed to resolving the issues hindering the power sector’s efficiency.

He expressed confidence in the administration’s ability to overcome the challenges and deliver tangible results to the Nigerian populace.

Currently, Nigeria generates and transmits over 4,000MW of electricity with distribution bottlenecks being identified as a major obstacle.

Adelabu assured that steps are being taken to address these distribution challenges and ensure that the generated power reaches consumers across the country effectively.

The minister highlighted that the government has been proactive in seeking the expertise of professionals and engaging stakeholders to identify the root causes of the power sector’s problems and devise appropriate solutions.

Adelabu acknowledged the existing gap between Nigeria’s installed capacity of 13,000MW and the actual generation output, attributing it to various factors that have impeded optimal performance.

Despite these challenges, he expressed optimism that the government’s initiatives would lead to a substantial increase in electricity generation, marking a significant milestone in Nigeria’s energy sector.

Addressing concerns about the recent decline in power generation due to low gas supply, Adelabu assured Nigerians that measures are being taken to rectify the situation.

He acknowledged the impact of power outages on citizens’ daily lives and reiterated the government’s commitment to providing stable electricity supply within the stipulated timeframe.

The Minister’s assurance of achieving 6,000MW of electricity generation in the next six months comes as a ray of hope for millions of Nigerians who have long endured the consequences of inadequate power supply.

With ongoing reforms and targeted interventions, there is optimism that Nigeria’s power sector will witness a transformative change, ushering in an era of improved access to electricity for all citizens.

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Nigeria’s Economic Woes to Drag Down Sub-Saharan Growth, World Bank Forecasts

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The World Bank’s latest report on the economic outlook for Western and Central Africa has highlighted Nigeria’s sluggish economic growth as a significant factor impeding the sub-region’s overall performance.

According to the report, while economic activities in the region are expected to increase, Nigeria’s lower-than-average growth trajectory will act as a hindrance to broader economic expansion.

The report indicates that economic activity in Western and Central Africa is set to rise from 3.2 percent in 2023 to 3.7 percent in 2024 and further accelerate to 4.2 percent in 2025–2026.

However, Nigeria’s growth, projected at 3.3 percent in 2024 and 3.6 percent in 2025–2026, falls below the sub-region’s average.

The World Bank underscores the importance of macroeconomic and fiscal reforms in Nigeria, which it anticipates will gradually yield results.

It expects the oil sector to stabilize with a recovery in production and slightly lower prices, contributing to a more stable macroeconomic environment.

Despite these measures, the report emphasizes the need for structural reforms to foster higher growth rates.

In contrast, economic activities in the West African Economic and Monetary Union are projected to increase significantly, with growth rates of 5.9 percent in 2024 and 6.2 percent in 2025.

Solid performances from countries like Benin, Côte d’Ivoire, Niger, and Senegal are cited as key drivers of growth in the region.

The report also highlights the importance of monetary policy adjustments and reforms in supporting economic growth.

For instance, a more accommodative monetary policy by the Central Bank of West African States is expected to bolster private consumption in Côte d’Ivoire.

Also, investments in sectors such as agriculture, manufacturing, and telecommunications are anticipated to increase due to improvements in the business environment.

However, Nigeria continues to grapple with multidimensional poverty as highlighted by the National Bureau of Statistics.

Over half of Nigeria’s population is considered multidimensionally poor, with rural areas disproportionately affected. The World Bank underscores the need for concerted efforts to address poverty and inequality in the country.

Sub-Saharan Africa as a whole faces challenges in deepening and lengthening economic growth. Despite recent progress, growth remains volatile, and poverty rates remain high.

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Fitch Downgrades China’s Outlook to Negative Amid Real Estate Slump

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Fitch Ratings has downgraded China’s economic outlook to negative, citing concerns over the country’s mounting debt and the ongoing slump in its real estate sector.

This decision casts a shadow over China’s economic recovery efforts and raises questions about the resilience of its financial system in the face of mounting challenges.

The downgrade comes at a critical juncture for China as the government grapples with the fallout from a prolonged downturn in the real estate market, which has long been a cornerstone of the country’s economic growth.

Fitch’s decision underscores the severity of the challenges facing China’s economy and the urgent need for policymakers to implement effective measures to address the underlying issues.

Amid growing uncertainty about the outlook for the world’s second-largest economy, Fitch warned that the Chinese government is likely to accumulate more debt as it seeks to stimulate economic growth and mitigate the impact of the real estate slowdown.

The agency’s negative outlook reflects concerns that China’s debt burden could continue to rise, posing risks to the stability of its financial system.

The real estate sector, which has been a key driver of China’s economic growth in recent decades, has been experiencing a pronounced slowdown in recent months.

This downturn has been exacerbated by government measures aimed at curbing speculative investment and addressing housing affordability concerns. As property prices continue to decline and housing sales stagnate, fears of a broader economic slowdown have intensified.

China’s government has sought to downplay concerns about the impact of the real estate slump on the broader economy, emphasizing its commitment to maintaining stability and pursuing sustainable growth.

However, Fitch’s downgrade suggests that the challenges facing China’s economy may be more significant than previously thought and require a more comprehensive and coordinated policy response.

The negative outlook from Fitch follows a similar move by Moody’s Investors Service in December, highlighting the growing consensus among rating agencies about the risks facing China’s economy.

While financial markets initially showed little reaction to Fitch’s announcement, analysts warn that the downgrade could weigh on market sentiment in the near term, especially as investors await key economic indicators due to be released in the coming weeks.

China’s public debt has surged in recent years, fueled by government stimulus measures aimed at supporting economic growth and offsetting the impact of the COVID-19 pandemic.

With public debt nearing 80% of gross domestic product (GDP) as of mid-last year, according to the Bank for International Settlements, concerns about the sustainability of China’s debt levels have been mounting.

Despite these challenges, China’s sovereign bond market remains relatively insulated from external pressures, with foreign ownership accounting for a small fraction of total holdings.

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