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How Nigeria Can Become A Leading Oil and Gas Supplier To The European Market

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Crude oil - Investors King

Apart from retaining its position amongst the leading oil and gas producers in Africa in 2022, Nigeria, with over 37 billion barrels of crude oil reserves, has the potential to improve its energy exports to Europe and help address anticipated crude oil and natural gas shortages. 

With the European Union planning to ban crude oil imports from Russia by increasing trade with other non-Russian economies and the Russian government promising to cut gas supplies if sanctions from western countries continue, potential supply disruptions to Europe are anticipated. Accordingly, the west African country is expected to ramp up production in 2022 and retain its position as Africa’s largest crude oil producer, a development that will enable Nigeria to increase its energy capacity available for exports.

Nigeria’s annual crude oil production is expected to increase to 1.46 million bpd in 2022,  following low production levels in 2021 that were driven by the COVID-19 pandemic. This will provide an opportunity for Nigeria to increase its exports to Europe, become a global energy hub and to fully make use of its hydrocarbon resources for economic growth. Nigeria heavily relies on its offshore projects to sustain crude oil production and supply, with 65% of the country’s total production in 2022 anticipated to come from such projects. However, this will change with Nigeria’s crude oil production anticipated to decline in 2023 onwards due to decreases in production in legacy fields. Nigeria will have to wait for deep water projects to come online to improve its production capacity, according to the African Energy Chamber’s (AEC) Q1 2022 Outlook.

“Nigeria needs to ramp up crude oil production on existing discoveries that have not yet materialised to be able to sustain a secure supply in future to meet local, regional and international demand. Lifting of force majeure at the Brass terminal, Bonny NLNG and Okpai Power Plant comes at the right time. We have to continue paying attention on vandalism, sabotage and theft in oilfields. The close collaboration between the government and Industry could not be more important now” stated NJ Ayuk, Executive Chairman of AEC.

Meanwhile, on the gas front, Nigeria’s massive production capacity in 2022 will place the country among the top three producers in Africa and a potential supplier to meet demand in Europe. Nigeria has an estimated gas reserve of 209 trillion cubic feet and will produce 1,780 billion cubic feet in 2022, up from 1,450 billion feet in 2021. Existing producing projects and the projects currently under development in Nigeria are expected to ensure a resilient supply through 2025. With this portfolio, Nigeria has an advantage for Europe to look up to the west African country as a potential supplier.

In addition, the multi-billion 4,128km Trans-Saharan Natural Gas Pipeline being built by the governments of Nigeria, Niger and Algeria will enable the integration of Trans-Mediterranean, Maghreb-Europe, Medgaz, and Galsi Pipelines for Europe to leverage west and north Africa’s oil and gas resources to meet demand. Once completed, the pipeline will transport 30 billion cubic metres of natural gas per year and Nigeria, as a leading producer in Africa, can produce a significant share of that capacity.

“Nigeria is rich in oil and gas resources but still does not have adequate infrastructure such as a functioning refinery. In order to utilize its oil and gas resources effectively, Nigeria needs to build more infrastructure locally to process its energy. To be able to build the infrastructure needed, there is a need for direct involvement from a combination of the private and public sector partners,” stated Hendrick Malan, the CEO of energy market research firm, Frost & Sullivan, in an exclusive interview with the AEC.

Additionally, Nigeria’s current natural gas producing fields are expected to see a steep decline as we approach mid-2020s, a worrying situation that can reduce the country’s production capacity. Majors including ExxonMobil, Shell and TotalEnergies, who have been top producers of oil and gas in Nigeria, are expected to diversify their portfolios from 2022 onwards and exit the market, a move that might negatively affect production and reduce the ability of the West African country to expand its energy exports to Europe. ExxonMobil has already signed a $1.2 billion deal with local firm Seplat Energy to handover four oil mining licenses and natural gas recovery plants. Factors such as vandalism of infrastructure, a continued lack of investment in new exploration activities and political instability/civil unrest in oil and gas rich regions of Nigeria also continue to disrupt the country’s ability to optimize oil and gas production and increase exports.

Regulatory reforms and market improvement

The recent enactment of the Petroleum Industry Act (PIA) is a game changer for Nigeria’s oil and gas market with the regulation anticipated to increase the entrance of international majors and investors. The PIA is expected to provide clarity to market players on issues around taxation, investment and licensing, that have previously slowed down projects’ deployment. The law will boost investment in oil and gas upstream activities to improve exploration, production, infrastructure development and the country’s energy portfolio.

Despite efforts the Nigerian government has implemented to improve its oil and gas market, the country’s hydrocarbon energy resources remain untapped. Nigeria has not been able to fully leverage its oil and gas reserves to meet local demand and to increase exports. Today, 50% of the Nigerian population is living in energy poverty. AEC’s upcoming annual conference, African Energy Week (AEW) which will take place October 18-21, 2022, in Cape Town, will discuss policy, investment and infrastructure requirements for Nigeria to boost its energy production to meet local demand whilst expanding its energy exports to Europe.

With Europe seeking alternative supply chains to reduce reliance on Russian gas, Nigeria could provide a significant share of the capacity the bloc needs. The European Commission, governments, energy companies and financial institutions can help Nigeria with the funding and technical expertise required to speed up the development of infrastructure for increased production and energy transportation. AEW 2022 will hosts discussions around future Nigeria-Europe partnerships on oil and gas trading.

The African Petroleum Producers Organisation, a consortium of hydrocarbon producing countries, will rally its member countries including Africa’s top oil and gas producers Nigeria, Equatorial Guinea and Algeria to participate at AEW 2022 and discuss continental energy market trends, opportunities and the role its member states can play to ensure global energy security.

AEW 2022 will host panel discussions, round tables, presentations and high-level meetings about how Nigeria and APPO member states can improve exports to Europe whilst addressing energy poverty at continental level.

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MEND Tackles Ex-Agitators For Threatening To Bomb Oil Installations In Rivers 

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A war of words has ensued between a militant group, the Movement for the Emancipation of the Niger Delta (MEND) and a coalition of ex-agitators over alleged plan to attack oil installations in the region by the latter group.

Following the political crisis rocking Rivers State, a coalition of ex-agitators and fighters in the region under the aegis of Niger Delta Development Force had last week threatened to blow-up oil facilities in the region over what it termed a plot to seize financial allocations meant for local government areas in Rivers State through the courts.

The former warlords dared the Federal Government and the Central Bank of Nigeria, saying if they proceeded in withholding the funds for the state, it would have grave consequences.

Kicking against the threat, MEND’s spokesman, Jomo Gbomo, in a statement on Friday, said it will support security operatives in safeguarding crude oil installations from any attack.

Gbomo also said MEND is not in support of the violence that Rivers State has been experiencing due to the lingering feud between the Minister of the Federal Capital Territory, Nyesom Wike, and his successor and estranged political godson, Siminalayi Fubara.

Describing the attack plan as threat to the economy of the country, Gbomo said it would be most unfortunate for a political dispute between two politicians to cost the state and Nigeria assets that are pivotal to nation’s survival.

Noting that the both feuding political gladiators are sons of the Niger Delta, the spokesman asked those making the threats not to allow themselves be tricked using the present circumstance into carrying arms against the Nigerian state on behalf of any of them, not even for any price.

He said as an Ijaw son, he knows the gains of having an Ijaw man as governor in Rivers, adding that it is an achievement which would not have been possible but for the collaboration of other ethnic groups.

According to him, the current healthy collaboration from the various ethnic groups which produced an Ijaw son as governor was spearheaded by the FCT Minister.

The statement said not only would MEND back the Federal Government in protecting oil facilities, but it would also ensure that the masterminds of the threats to attack oil installations are fished out and meant to face justice.

The MEND spokesman, however, urged the elders and traditional institutions in the region to intervene in the face-off between Governor Fubara and the FCT Minister.

He also urged parties in the festering political crisis to seek judicial redress if peaceful dialogue fails.

 

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Northern Governors Oppose New VAT Model as FG Defends Tax Reform Bills

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Value added tax - Investors King

The Federal Government has addressed concerns raised by the Northern Governors’ Forum regarding the proposed tax reform bills before the National Assembly.

Investors King gathered that Governors of 19 Northern States of Nigeria, under the platform of the Northern Governors’ Forum met with the traditional rulers from the region to agree to disagree with the Federal Government’s new value-added tax model.

In a communiqué read by the chairman of the forum, Governor Muhammed Yahaya of Gombe State, the governors strongly opposed the new derivation-based model for Value-Added Tax (VAT) distribution in the new tax reform bills proposed by President Tinubu’s government.

Addressing the governors’ concern, the FG in a statement on Thursday by the President’s Special Adviser on Information and Strategy, Bayo Onanuga stated that the proposed bills will streamline Nigeria’s tax administration processes, enhance efficiency and eliminate redundancies across the country’s tax operations.

According to Onanuga, the bills which is currently before the National Assembly for consideration emerged after extensive review of existing tax laws.

The statement reads, “While we commend the Governors and traditional rulers for supporting President Bola Tinubu over the success recorded in addressing the country’s security challenges, we consider it necessary to address the misunderstandings and misgivings around the tax reform already embarked upon by the administration.

“President Tinubu and the Federal Executive Council recently endorsed new policy initiatives aimed at streamlining Nigeria’s tax administration processes, enhancing efficiency and eliminating redundancies across the nation’s tax operations.

“These reforms emerged after an extensive review of existing tax laws. The National Assembly is considering four executive bills designed to transform and modernise Nigeria’s tax landscape.

“First is the Nigeria Tax Bill, which aims to eliminate unintended multiple taxation and make Nigeria’s economy more competitive by simplifying tax obligations for businesses and individuals nationwide.

“Second, the Nigeria Tax Administration Bill (NTAB) proposes new rules governing the administration of all taxes in the country. Its objective is to harmonise tax administrative processes across federal, state and local jurisdictions for ease of compliance for taxpayers in all parts of the country.

“Third, the Nigeria Revenue Service (Establishment) Bill seeks to rename the Federal Inland Revenue Service (FIRS) as the Nigeria Revenue Service (NRS) to better reflect the mandate of the Service as the revenue agency for the entire federation, not just the Federal Government.

“Fourth, the Joint Revenue Board Establishment Bill proposes the creation of a Joint Revenue Board to replace the Joint Tax Board, covering federal and all states’ tax authorities.

“The fourth bill also suggests establishing the Office of Tax Ombudsman under the Joint Revenue Board, which would serve as a complaint resolution body for taxpayers.

“It is instructive to note that these proposed laws will not increase the number of taxes currently in operation. Instead, they are designed to optimise and simplify existing tax frameworks.

“The tax rates or percentages will remain the same under these reforms, as they focus on ensuring a more equitable distribution of tax obligations without adding to the burden on Nigerians.

“The reforms will not lead to job losses. On the contrary, they are structured to stimulate new avenues for job creation by supporting a dynamic, growth-oriented economy.

“Importantly, these laws will not absorb or eliminate the duties of any existing department, agency, or ministry. Instead, they aim to harmonise revenue collection and administration across the federation to ensure efficiency and cooperation.

“At the moment, tax administration lacks coordination among federal, state, and local tax authorities, often resulting in overlapping responsibilities, confusion, and inefficiency. Without reform, this inefficiency will persist.

“The proposed laws aim to coordinate efforts between different tiers of government, resulting in better tax resource management and greater clarity for taxpayers.

“Under existing laws, taxes like Company Income Tax (CIT), Personal Income Tax (PIT), Capital Gains Tax (CGT), Petroleum Profits Tax (PPT), Tertiary Education Tax (TET), Value-Added Tax (VAT), and other taxing provisions in numerous laws are administered separately, with individual legislative frameworks.

“The proposed reforms seek to consolidate these multiple taxes, integrating CIT, PIT, CGT, VAT, PPT, and excise duties into a unified structure to reduce administrative fragmentation.

“On the proposed derivation-based VAT distribution model, which the Northern Governors oppose, it must be stressed that the new proposal, as enunciated in the Bill, is designed to create a fairer system.

“The current model for distributing VAT is based on where the tax is remitted rather than where goods and services are supplied or consumed. The ongoing tax reform seeks to correct the inherent inequity in the current derivation model as a basis for distributing VAT revenue.

“The new proposal before the National Assembly outlines a different form of derivation which considers the place of supply or consumption for relevant goods and services. This means that states in the Northern region that produce the food we eat should not lose out just because their products are VAT-exempt or consumed in other states.

“These reforms are critical to improving the lives of Nigerians and were not put forward by President Tinubu to undermine any part of the country. There is no better time than now for the National Assembly to give due consideration to these bills that will overhaul our tax systems and create the revenue all the tiers of government require to fund the development our country and people urgently need.”

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Solid Minerals Sector Adds Over N1 Trillion to Nigerian Treasury in 16 Years – NEITI

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The Nigerian Extractive Industries Transparency Initiative (NEITI) said the solid minerals sector has contributed around N1.137 trillion in direct payments to various government levels over 16 years.

This was disclosed in the 2023 Solid Minerals Audit Report, the 16th audit cycle, which provided a comprehensive overview of the sector’s contributions from 2007 to 2023 published on Wednesday.

The report was conducted by indigenous firm Haruna Yahaya and Co., and covered the solid minerals industry’s economic contributions, revenue streams, and exports, providing recommendations for sector reforms.

The report showed a substantial increase in government receipts from N7.59 billion in 2007 to N341.27 billion in 2022, a 44-fold rise, indicating solid sector growth.

The 2023 report underscored the sector’s evolution into a vital revenue contributor for Nigeria, with cumulative contributions now exceeding N1 trillion. It disclosed that in 2022, the sector generated N345.41 billion, with a reconciled final revenue of N329.92 billion.

Meanwhile, the report also identified the solid minerals sector’s Gross Domestic Product (GDP) contribution at 0.83 percent in 2022, with incremental growth to 0.75 per cent in 2023, underscoring untapped potential.

The initiative reiterated the policy measures and reforms needed to unlock the sector’s capacity to significantly contribute to Nigeria’s economic diversification

“Company payments analysis indicated that total government revenue, including reconciled and unilaterally disclosed figures, reached N401.87 billion in 2023.

“Key revenue streams included VAT (N128.32 billion), FIRS taxes (N370.09 billion), Education Tax (38.64 percent), Company Income Tax (10.64 percent), and royalties (N9.06 billion).

The report also showed that discrepancies initially amounted to N301.6 billion but were reconciled down to N100 million, demonstrating NEITI’s transparency commitment.

The production and export data showed 95.07 million tonnes of minerals produced in 2023, with a significant export volume of 4.32 million metric tonnes, valued at N117.29 billion.

The report highlighted top mineral-producing states, including Ogun, Kogi, and Rivers, with Ogun leading production. Revenue contributions were led by Osun, Ogun, and Kogi states

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