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Absence of Cabinet Stalls Afam, Yola Power Firms Sale

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Electricity - Investors King
  • Absence of Cabinet Stalls Afam, Yola Power Firms Sale

The failure of President Muhammadu Buhari to constitute the Federal Executive Council is stalling the conclusion of the sale of Afam Power Plc and the Yola Electricity Distribution Company, an investigation has shown.

Members of the National Council on Privatisation which has the statutory role to approve the sale of the companies whose technical and financial bids have been concluded are drawn from the Federal Executive Council.

Traditionally, the Minister of Finance is the Vice-Chairman of the council which is chaired by the Vice-President, Prof Yemi Osinbanjo. Some other members of the cabinet which has yet to be constituted by the President are members of the council.

Our correspondent reported that the Technical Committee of the NCP had approved the N124.3bn bids for Afam Power Plc and Yola Electricity Distribution Company but the process could not proceed because the NCP could not sit without forming a quorum.

At the financial bids opening for the two power companies in April, Transcorp Power Consortium had emerged the bid winner for 100 per cent equity in Afam Power Plc with an offer of N105.3bn.

Similarly, Quest Electricity won the bid for 60 per cent equity in Yola Electricity Distribution Plc with a bid of N19bn.

Both the management committee of the Bureau of Public Enterprises and the Technical Committee of NCP had reviewed and approved the transactions before the transactions were passed on to the NCP.

Our correspondent learnt that the privatisation agency had written the NCP but had not been able to get any reply because the NCP could not sit before the cabinet was dissolved preparatory to the swearing-in of Buhari for a second tenure which began on May 29.

It is after the approval of NCP that BPE can invite the prospective core investors to sign Share Purchase Agreements with them. Although NCP usually follows the advice of BPE, it also has the power to cancel any transaction.

At the bid opening in Abuja, Diamond Stripes Consortium was declared the reserve bidder for Afam Power Plc with a bid of N102.39bn while Unicorn Power Generation Consortium came third with a bid of N101.05bn.

The bidding for Afam closed in the second round. At the first round of bidding, Unicorn had emerged the highest bidder with a bid of N100.45bn; Transcorp submitted a bid of N89.37bn while Diamond put in a bid of N72.73bn.

It was when the potential investors were asked to reverse their bids for a second round that Transcorp Power Consortium which already operates the Ugheli Power Plant threw in the highest bid of N105.3bn.

On the other hand, Quest Electricity Nigeria Limited, which was the sole bidder for Yola Electricity Distribution Company submitted an initial bid of N17.67bn.

However, the company reversed its bid at the second round when it was told that its bid did not meet the reserve price set by the National Council on Privatisation.

The privatisation of Afam Electricity Generation Company could not be concluded during the first round of privatisation of electricity companies in 2013 due to issues stemming from gas supply to the plant.

For the YEDC, although it was successfully privatised and handed over to the core investor in 2013, a force majeure was declared in 2015 by the core investor, citing insecurity in the North-East region of the country. Consequently, the company was repossessed by the Federal Government.

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 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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Nigeria’s Oil Sector Sees $16.6bn Investment Boost, Plans $20bn Expansion

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Steel sector

Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, announced on Monday that approximately $16.6 billion in investments have been committed over the past year.

This significant influx of capital marks a period of rejuvenation for the oil sector following years of stagnation caused by policy inconsistencies and the delayed passage of the Petroleum Industry Act.

Lokpobiri shared these updates during a briefing in Abuja, where he highlighted the achievements in the oil sector since President Bola Tinubu assumed office on May 29, 2023.

The minister emphasized that the government’s efforts to create a more investment-friendly environment have paid off, attracting substantial foreign and domestic investments.

Rekindling Investor Confidence

“One of our main objectives has been to create an environment where investments can thrive,” Lokpobiri stated. “Today, I am pleased to announce that our efforts have rekindled investor confidence in the sector.”

He pointed to notable investments, including $5 billion and $10 billion commitments in deepwater offshore assets, and a $1.6 billion investment in oil and gas asset acquisition.

The surge in investments is attributed to a series of roadshows in the United States and Europe, which successfully showcased Nigeria’s potential and the government’s commitment to sectoral reforms.

This renewed global interest is also evident in the ongoing bid rounds for new assets.

Production Increase and Strategic Initiatives

A significant achievement since President Tinubu took office is the increase in crude oil production.

“When we took office, production was at approximately 1.1 million barrels per day, including condensates,” Lokpobiri reported. “Today, I am proud to report that we have increased our production to approximately 1.7 million barrels per day, inclusive of condensates.”

To achieve this increase, the government has undertaken several strategic initiatives.

These include revamping redundant oil assets, continuous engagement with international oil companies, and resolving industry disputes.

Efforts to protect critical assets and reduce oil theft have also been intensified, with collaborations between private security firms and government agencies leading to a sharp decline in crude oil theft.

Upcoming $20bn Expansion Deal

In addition to the recent investments, Lokpobiri revealed that the Federal Government is on the verge of finalizing a $20 billion deal aimed at further boosting oil and gas production.

During a meeting with Olivier Le Peuch, CEO of Schlumberger Limited, Lokpobiri disclosed that negotiations with major investors are nearing completion. “Investments of over $20 billion are coming. One company alone will invest $10 billion,” he noted.

This deal, once consummated, will represent one of the largest single investments in Nigeria’s oil sector in recent history, promising to significantly enhance the country’s production capacity and economic growth.

Ongoing and Future Projects

Lokpobiri also highlighted the commencement of production from Oil Mining Leases (OMLs) 13 and 85, managed by Sterling Exploration and First E&P respectively.

These projects are expected to produce an average of 20,000 and 40,000 barrels per day, further bolstering Nigeria’s output.

This period of renewed investment and increased production is a testament to the government’s commitment to optimizing the nation’s oil and gas assets.

President Tinubu’s administration aims to sustain this momentum, ensuring continued growth and stability in the sector.

Government Transparency and Accountability

In line with President Tinubu’s directive for transparency, all ministers have been tasked with presenting their performance reports to the public.

The Minister of Information and National Orientation, Mohammed Idris, announced that the first-anniversary celebrations will include sectoral media briefings by the 47 federal ministers, starting on Thursday.

These briefings are designed to keep Nigerians informed about the government’s achievements and ongoing initiatives.

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Energy

Oil Prices Stable Amid Federal Reserve’s Talk of Interest Rate Tightening

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Crude oil - Investors King

In a landscape where global oil markets often sway with the slightest economic shifts, stability can be a rare commodity.

However, amidst discussions from the U.S. Federal Reserve regarding potential interest rate adjustments, oil prices have remained surprisingly steady.

Brent crude oil, against which Nigerian oil is priced, gained 10 cents, or 0.1% rise to $82.00 a barrel, while U.S. West Texas Intermediate (WTI) crude oil edged up 7 cents to $77.64 a barrel.

The Federal Reserve’s release of minutes from its recent policy meeting unveiled deliberations on the possibility of raising interest rates to combat persistent inflationary pressures.

The minutes stated, “Various participants mentioned a willingness to tighten policy further should risks to inflation materialize in a way that such an action became appropriate.”

Such discussions surrounding interest rates can have a profound impact on oil demand. Higher interest rates typically result in increased borrowing costs, potentially constraining funds that could otherwise stimulate economic growth and, consequently, oil consumption—particularly in the United States, the world’s largest oil-consuming nation.

Additionally, the Energy Information Administration’s report indicating a 1.8 million barrel rise in U.S. crude stocks last week, as opposed to an anticipated draw of 2.5 million barrels, added a layer of complexity to the market dynamics.

This unexpected increase in inventory weighed on market sentiment, despite ongoing efforts to balance supply and demand.

Furthermore, global physical crude markets have been grappling with subdued refinery demand and abundant supply, exacerbating the pressure on oil prices.

Analysts from Citi highlighted recent market softness, attributing it to weaker data encompassing rising oil inventories, tepid demand, and refinery margin weakness, compounded by the looming risk of production cuts.

Russia’s announcement that it surpassed its OPEC+ production quota in April due to “technical reasons” added another dimension to the market narrative.

The Russian Energy Ministry revealed plans to present a compensation strategy to the Organization of the Petroleum Exporting Countries (OPEC) Secretariat shortly.

Against this backdrop, anticipation mounts ahead of the OPEC+ meeting scheduled for June 1, where crucial decisions regarding production cut levels will be deliberated.

Despite uncertainties surrounding the meeting’s outcome, industry experts foresee challenges in significantly tightening the market in the near term, potentially leading to a rollover of existing voluntary cuts.

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