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Refineries’ Upgrade Suffers Delay, NNPC Records N68bn Loss

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  • Refineries’ Upgrade Suffers Delay, NNPC Records N68bn Loss

The proposed rehabilitation of the nation’s ailing refineries has suffered delays as the third-party financiers for the project have yet to be announced, more than a year after the Nigerian National Petroleum Corporation said 28 firms had expressed interest in its financing.

The refineries lost a total of N68.12bn in the first half of this year, making a profit of N928.81m in April, for the first time in 10 months, according to the latest data from the NNPC.

Nigeria has four refineries, two in Port Harcourt and one each in Kaduna and Warri, with an installed capacity of 445,000 barrels per day, but they have continued to operate far below the installed capacity for many years.

Kaduna refinery did not process any crude from February to June, the NNPC data showed.

Despite being a key oil producer and exporter, Nigeria relies heavily on the international market to meet its fuel needs.

The NNPC said in a statement on January 23, 2018, that it was inching closer to arriving at the choice of financiers for the refineries, with the Group Managing Director, Dr Maikanti Baru, saying the agreements on the potential financiers for the refineries were being fine-tuned.

“We are pushing towards the final selection of our financiers and we expect that when that is done, we’ll get the agreements and present them to our board, (that is) meeting this month to secure their endorsement and once we have the funding, we would start the rehabilitation of the refineries towards a 90 per cent capacity utilisation per stream day before the end of 2019,” Baru had said.

The Minister of State for Petroleum Resources, Dr Ibe Kachikwu, was quoted by S&P Global Platts on Wednesday as saying in an interview on the sidelines of the Africa Oil Week conference in Cape Town that he was hopeful the government would pin down details on the overhaul of the country’s refineries by the end of this year.

Kachikwu, who acknowledged that the process had been beset by delays, said, “Before the end of the year, we should see a sign-off and actually physical construction and works could start early-2019.”

The NNPC, in its quarterly publication for the fourth quarter of 2017 which was obtained by our correspondent in January, said about 30 would-be financiers had submitted expressions of interest after a widely publicised bid.

It said for a start, it had gone back to the original refineries’ builders, namely JGC Corporation of Japan for Port Harcourt Refinery, Italy-based Snamprogetti, for Warri Refinery, and Japan-based Chyoda, for Kaduna Refinery.

The Chief Operating Officer in charge of the refineries and petrochemicals autonomous business unit, NNPC, Mr Anibor Kragha, was quoted in the publication as saying that the original builders had actually started conducting studies to determine the cost of fixing the plants and returning them to the minimum capacity utilisation of 90 per cent.

He said once the final costing was achieved, the corporation would move in swiftly to perfect the proposed funding option and execute the upgrade of the plants within a 24-month window ahead of the 2019 deadline of the Federal Government for zero fuel imports.

Two weeks ago, the NNPC said it was in talks with prospective financiers to carry out a major overhauling of the refineries aimed at substantially increasing local supply of petroleum products and ending imports.

The plan involves securing financiers’ money to fund the refineries’ repairs, with the investors reimbursed through the off-take of refined products from the plants.

One of our correspondents gathered that three plants at the Warri refinery had been shut down for almost six months following an alleged directive by the NNPC since May this year.

Multiple sources told our correspondent, who was at the refinery on Monday and Tuesday, that the plants were shut down for the purpose of maintenance but for over five months, no repair or maintenance had been carried out.

A top official said, “We’re not currently producing. We’ll soon start in the next couple of weeks. We are hoping that one of the plants will come up next week and hopefully before the end of this month all the plants would have come on stream again.”

“We have been directed to resume production. There is too much politics surrounding the refineries. Since the plants were shut down, no maintenance was done on them. This is why I told you that there is too much politics in the running of the refineries. The only thing that was changed during the period is the Digital Control System Unit.”

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

Nigeria, Morocco sign MOUs on Hydrocarbons, Others

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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.

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Dangote Fertiliser Plant to Commence Shipment of Urea in March 2021

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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.

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Economy

UK Budget 2021: Will Sunak’s Budget Run Into Unintended Consequences?

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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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