According to data from the National Bureau of Statistics, the oil economy declined by -11.8% y/y in Q2 ’22 compared with 6.6% y/y recorded in Q1 ’22. This decline can be largely attributed to production cuts on the back of oil theft and infrastructural deficits.
Turning to contribution to GDP, the oil sector accounted for 6.3% to the GDP compared with 6.6% recorded in the previous quarter. Meanwhile, the non-oil sector contributed 93.7% highlighting the sector as the major driver of the economy.
In February, oil prices exceeded USD100/b after Russia’s attack on Ukraine exacerbated concerns around disruptions to global energy supply. The Russia-Ukraine crisis as well as the sanctions against Russia impacted global oil supply. Furthermore, the US announced a ban on Russian oil on 08 March, which resulted in further upticks in oil prices.
Although oil prices had been volatile since the Russia-Ukrainian crisis began, prices began to dip below USD100/b in August. This was largely driven by concerns around a global economic downturn amid monetary policy tightening by central banks and covid-19 restrictions in China (the largest energy consumer).
Following the oil price decline, in its October ’22 meeting, OPEC unanimously agreed to adjust oil production downwards by 2mbpd in November ‘22. The adjustment was intended to spur a recovery in oil prices. Since the announcement, Brent crude price has increased by 2% to USD95.1/b.
OPEC data shows that Nigeria produced about 1.14mbpd of oil in September ’22 compared with 1.18mbpd recorded in the previous month. This is below the expected 1.6mbpd OPEC quota. Furthermore, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) noted that production from 13 out of 29 oil terminals declined between July to September.
The worst hit crude terminals include Bonny, Brass and Forcados.
In a bid to address the oil theft menace in the Niger Delta region, we understand that the FGN awarded a pipeline surveillance contract worth N48bn per annum run within the region in August. A few months after the contract was awarded, about 58 illegal connections were discovered in both Delta and Bayelsa states.
The FGN further disclosed that a probe mechanism has been setup to ensure culprits face the full extent of the law.
Despite developments regarding clampdowns on illegal oil refineries and bunkering, Nigeria may struggle to fully benefit from the global oil market. The latest commodity output report released by the World Bank (in October) disclosed that the benchmark crude oil price, Brent crude is expected to average USD92/b in 2023.
In an oil producing economy like Nigeria, oil price increases should reflect more revenue dividend as it is expected to enhance foreign exchange earnings and build reserves.
However, payment of petrol subsidy and low oil production occasioned by the activities of oil vandals have hampered oil revenue growth.
We understand that the effects of global warming have triggered the need for countries to shift attention to renewable energy sources. However, Nigeria’s oil economy should experience a face-lift on the back of the Dangote refinery which has an expected refining capacity of c.650,000 bpd.
Vice President, Yemi Osinbajo Seeks Collaboration With Vietnam on Agriculture and Technology
Nigeria’s Vice President, Prof Yemi Osinbajo has sought collaboration with Vietnam in the areas of agriculture and technology. The vice president spoke in Vietnam at a bilateral meeting on Monday.
During the meeting with his Vietnamese counterpart, Võ Thị Ánh Xuân, Osinbajo acknowledged both countries’ market potentials in the digital economy, telecommunications, and agriculture.
Speaking at the Presidential Palace in Hanoi, Vice President Yemi Osinbajo noted that telecommunication penetration in Nigeria is one of the deepest in any developing country, stating that about 120 million Nigerians now use one telecom service or the other.
Calling for collaboration on digital economy, Osinbajo said “We have close to 120 million of our citizens who have put to use telecom equipment or devices. And also, broadband connectivity is vastly improved. We hope that by 2025, we will have broadband connectivity for all of our over 200 million people”.
On the call for collaboration in the area of agriculture, the vice president noted that cashew production is an important area in which both counties can partner.
He said ” Given the food crisis that the world faces today, and is likely to continue facing even in the coming years, I like to say that the way forward is for our countries to collaborate. For instance, establishing cashew processing plants in Nigeria”.
Investors King understands that Vietnam is the world’s second-largest cashew processor with an annual processing capacity of 1.2 million tons representing up to 40 percent of the world’s total capacity.
Speaking at the event, the Vietnamese Vice President commended Nigeria’s leadership role in the ECOWAS sub-region and Africa generally, especially in the peaceful resolution of disputes.
She also commended Nigeria’s handling of the Covid 19 pandemic while reposing confidence in Nigeria’s ability to resolve challenges confronting the African continent and the West African region in particular.
Conclusively, she added that her country would continue to work with Africa to meet its aspirations in agriculture, clean energy and digital penetration.
Togo, Benin, and Niger Republic Owe Nigeria N4.1 Trillion in Electricity Debts
Nigeria currently supplies electricity to the Republic of Benin, Togo, and Niger through the Nigeria Bulk Electricity Trading, NBET Plc
The House of Representatives on Public Account has disclosed that Nigeria’s neighbouring countries, Togo, Benin, and Niger Republic owe the country about N4.1 trillion in electricity bills.
The revelation was contained in a letter sent by the committee to the Managing Director of Nigeria Bulk Electricity Trading, NBET Plc, Dr. Nnaemeka Eweluka.
According to the letter which was signed by the Chairman of the Committee, Hon. Oluwole Oke, the Managing Director of NBET is expected to appear alongside Dr. Marilyn Amobi, who served as MD/CEO from 2016 to 2020.
The house committee has accused the former MD, Amobi of non-rendition of the Audited Accounts for the years 2014, 2015, 2016, 2017, 2018, and 2019.
Investors King understands that Nigeria currently supplies electricity to the Republic of Benin, Togo, and Niger through the Nigeria Bulk Electricity Trading, NBET Plc. About 6 percent of the electricity generated in the country is sold to the neighboring countries.
Meanwhile, according to the managing director of NBET, the federal government is working on structures that will enhance power distribution in the country, stating that most of the power-generating companies are currently located in the southern part of the country.
“Most of the power generation companies are located within the south-south and south-west largely because of gas with one in the south-east, of course, we have the hydros in Niger state,” he said.
The MD added that Nigeria could generate up to a capacity of about 14,000 megawatts. He however noted that the distribution capacity is only between 4,000 to 5,000 megawatts per day.
Eweluka nonetheless sounded a note of hope, making references to the intervention projects that are currently ongoing such as the partnership with Simens.
“To address this gap between what is available and what the system can currently carry; there are a number of intervention projects that the government is currently pursuing, that include the presidential power initiatives in partnership with Siemens,” he concluded.
No Plan to Increase Fuel Price; Says FG
The Federal Government has stated that it has no plan to increase fuel price during the yuletide period.
This assurance is coming amid the nationwide fuel scarcity which has pushed the price of petrol above N250 in many retail stations.
Investors King learnt that fuel is being held for N250 per litre in Abuja and several other cities across the country while black marketers are charging between N400 and N450 per litre.
The scarcity and the high price of fuel are however becoming unbearable for many Nigerians, especially those who have reasons to embark on business travel for the December festivals.
According to the National Public Relations Officer, Independent Petroleum Marketers Association of Nigeria (IPMAN), Chief Ukadike Chinedu, most of the association members, who owned the bulk of the filling stations across the country, were now subjected to purchasing PMS at about N220/litre, which was why many outlets currently dispensed at about N250/litre and above.
He noted that the cost of the commodity has been on the rise due to its unavailability and other concerns in the sector.
He added that the price of fuel could be sold from N350/litre to N400/litre before the end of the year.
Meanwhile, a number of senior officials at the NNPC had stated that the subsidy was becoming too burdensome on the national oil company, as this was another reason for the scarcity of PMS.
According to a source who is familiar with the development as reported by Punch News, “How can we continue to import 60 million litres of petrol daily and keep subsidising it, while millions of litres are either diverted or cannot be accounted for? The burden is too much, as you rightly captured in that story”.
Investors King understands that NNPC is the sole importer of petroleum into the country and it pays billions of naira every month to subsidise the product to N147 per litre.
Reuters News reported that in August 2022, NNPC paid more than $1 billion as fuel subsidy while the federal government earmarked N3.6 trillion as fuel subsidy in the 2023 budget proposal.
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