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Nigeria Worries as Oil Prices Tumble

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Offshore oil platform is seen in Huntington Beach
  • Nigeria Worries as Oil Prices Tumble

Fears about early resuscitation of Nigeria’s economy has heightened as oil prices tumbled at the global market on Friday by more than three per cent after the Organisation of the Petroleum Exporting Countries said October output reached another record of 33.64 million barrels per day, up 240,000 bpd from September.

Nigeria, which largely depends on proceeds from its oil exports, is currently in economic recession, having recorded negative growth rate in its Gross Domestic Product in two consecutive quarters. This is reflected in drastic drop in income, employment, manufacturing and retail sales.

Although the Federal Government said it was already taking steps to take the country out of the economic mess, the continued militant attacks on oil installations in the Niger Delta and the new development in global oil market could frustrate the government’s efforts, according to experts.

Crude futures have wiped out gains made since the end of September when OPEC said it would agree to cut oil production to shore up persistently low prices, according to Reuters.

It said in a report on Friday that while investors had been sceptical that a deal to cut or freeze oil output levels would be reached at an OPEC meeting on November 30, an increasing amount of data had underscored a global skew towards oversupply.

It also noted that following the latest data, the cartel would have to trim up to a million barrels per day of output to make good on its promise to reduce production to between 32.50 million bpd and 33.0 million bpd.

It quoted a trader at Tyche Capital Advisors in New York, Mr. Tariq Zahir, as saying, “The next couple of weeks, even if they get a deal done, there’s so much oil coming to the market. Prices deserve to be here, maybe even a little lower.”

With oil price crashing to less than $50 per barrel, Nigeria’s production output has tumbled over 400,000 barrels due to militancy activities in the Niger Delta region. Oil production plummeted to 1.69 million barrels per day in the second quarter of 2016, down from 2.11 million barrel per day in the first quarter, with oil-based GDP contracting by 17.5 per cent in quarter two compared to 1.9 per cent in the first quarter.

As oil revenues dwindle, Nigeria has resorted to desperate measures including using crude to offset its debts.

For instance, the Federal Government recently said it had reached an outline settlement to resolve a protracted dispute with Western energy companies, under which the groups would be paid $5bn to cover exploration and production costs.

A report by Financial Times said Royal Dutch Shell, ExxonMobil, Eni, Chevron and Total had signed deals relating to the settlement of costs incurred between 2010 and 2015, as they also sought to forge new financing arrangements for their joint ventures in Nigeria.

The settlement, which would be a haircut on the over $6bn the oil majors claimed they were owed by Nigeria, would need the approval of two government bodies and the final sign-off from President Muhammadu Buhari, the report added.

Meanwhile, international Brent crude futures traded at $44.34 per barrel on Friday, down $1.50, or 3.27 per cent, its lowest since August.

The US West Texas Intermediate futures CLc1 were down by $1.51, or 3.4 per cent, to $43.14 per barrel.

The International Energy Agency has said the supply overhang could run into a third year in 2017, should OPEC fail to act.

In its monthly oil market report last Thursday, the IEA said global supply rose by 800,000 bpd in October to 97.8 million bpd, led by record OPEC output and rising production from non-OPEC members such as Russia, Brazil, Canada and Kazakhstan.

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 long experience in the global financial market.

Economy

Brent Crude Oil Maintains $43 Per Barrel Despite Surge in US Inventories

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Oil

Brent Crude Oil Sustains Upsurge Despite Rising US Inventories

Brent crude oil, against which Nigerian oil is priced, sustained its upsurge at $43 per barrel on Wednesday during the London trading session despite a report showing a build-up in the U.S. crude inventories in the week ended July 3, 2020.

Brent crude oil

According to the U.S Energy Information Administration (EIA) report released on Tuesday, crude oil production in the U.S is expected to decline by just 70,000 barrels per day from the 670,000 bpd previously predicted to 600,000 bpd.

While this was below the projected decline, it also points to a build-up in U.S stockpiles and suggested that oil production from the world’s largest economy may not decline as previously projected in 2020.

“The EIA’s forecast of a lower decline in U.S. output was partially offset by its outlook for firm demand recovery, which limited losses in oil markets,” Hiroyuki Kikukawa, general manager of research at Nissan Securities said.

“Still, expectations that the Organization of the Petroleum Exporting Countries (OPEC) and allies would taper oil output cuts from August and softer U.S. equities added to pressure,” he said.

The EIA projected that global oil demand will recover through the end of 2021 as demand was predicted to hit 101.1 million barrels per day in the fourth quarter of the year.

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Economy

Illegal Withdrawals: Rep To Investigate NNPC, NLNG Over $1.05bn

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House of representatives

Rep To Investigate NNPC, NLNG Over Illegal Withdrawal of $1.05bn from NLNG Account

The Nigerian House of Representatives has concluded plans to investigate illegal withdrawal of $1.05 billion from the account of the Nigerian Liquefied Natural Gas Limited (NLNG) by the Nigerian National Petroleum Corporation (NNPC).

The decision followed the adoption of a motion titled ‘Need to Investigate the Illegal Withdrawals from the NLNG Dividends Account by the Management of NNPC’ moved by the Minority Leader, Ndudi Elumelu, on Tuesday.

The House adopted the motion and mandated its Committee on Public Accounts to “invite the management of the NNPC as well as that of the NLNG, to conduct a thorough investigation on activities that have taken place on the dividends account and report back to the House in four weeks.”

Elumelu said, “The House is aware that the dividends from the NLNG are supposed to be paid into the Consolidated Revenue Funds account of the Federal Government and to be shared amongst the three tiers of government.

“The House is worried that the NNPC, which represents the government of Nigeria on the board of the NLNG, had unilaterally, without the required consultations with states and the mandatory appropriation from the National Assembly, illegally tampered with the funds at the NLNG dividends account to the tune of $1.05bn, thereby violating the nation’s appropriation law.

“The House is disturbed that there was no transparency in this extra-budgetary spending, as only the Group Managing Director and the corporation’s Chief Financial Officer had the knowledge of how the $1.05bn was spent.

“The House is concerned that there are no records showing the audit and recovery of accrued funds from the NLNG by the Office of the Auditor-General of the Federation, hence the need for a thorough investigation of the activities on the NLNG dividends account.”

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Economy

FG Gives Radio, Tv Stations Debt Relief, Writes Off 60 Percent Debt

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TSTV

FG Reduces Tv, Radio Stations Licence Fee by 30%, Writes Off 60% Debt

The Federal Government has reduced the existing licence fee paid by all open terrestrial radio and television stations by 30 percent.

The Minister of Information and Culture, Lai Mohammed, disclosed this at a press conference in Abuja on Monday.

He said the Federal Government has also decided to write off 60 percent of the N7 billion loan owed the government by television and radio stations.

He explained that the N7 billion is the total outstanding from television and radio stations on the renewal of their operating licences.

Mohammed, however, said for any station to benefit from the 60 percent debt relief, such a station must be ready and willing to pay the remaining 40 percent within the next three months.

According to him, the debt relief offer would open on July 10th and close on the 6th of October.

Mohammed said, “According to the NBC, many Nigerian radio and television stations remain indebted to the Federal Government to the tune of N7bn.

“Also, many of the stations are faced with the reality that their licences will not be renewed, in view of their indebtedness.

“Against this background, the management of the NBC has therefore recommended, and the Federal Government has accepted, the following measures to revamp the broadcast industry and to help reposition it for the challenges of business, post-COVID-19:

“(a) 60 per cent debt forgiveness for all debtor broadcast stations in the country; (b) the criterion for enjoying the debt forgiveness is for debtor stations to pay 40 per cent of their existing debt within the next three months.

“(c) Any station that is unable to pay the balance of 40 per cent indebtedness within the three-month window shall forfeit the opportunity to enjoy the stated debt forgiveness.

“(d) The existing license fee is further discounted by 30 per cent for all open terrestrial radio and television services effective July 10, 2020.

“(e) The debt forgiveness shall apply to functional licensed terrestrial radio and television stations only. (f) The debt forgiveness and discount shall not apply to pay TV service operators in Nigeria.”

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