The Nation Newspaper

Tag: Oil price

  • Sliding oil price significant, scary, warns LCCI

    The Director-General, Lagos Chamber of Commerce and Industry, Mr Muda Yusuf has said the sliding oil price is significant and disturbing, adding that it is at its lowest in four years.

    Speaking with The Nation, Muda said for an economy that is 95 per cent dependent on oil for its foreign exchange earnings; and 85 per cent dependent for revenue, this development should be a cause for concern.

    He said the single most important vulnerability of the  economy is its heavy dependence on oil.

    “Crude oil market conditions have profound implications for the Nigerian economy.  Current trend with oil price pose major downside risks to some key macroeconomic variables and the general economic conditions. The main impact points include: government fiscal operations, naira exchange rate, capital flow reversals, stock market, foreign reserves, inflation, interest rate among others,” he said.

    He added that the declining oil price means reduction in revenue inflows, adding that this has implications for the capacity of government at all levels to meet their statutory obligations.

    He said: “Most states are over 80 per cent dependent on statutory allocations which make the impact of declining oil price very profound.This is even moreso when the culture of big and profligate spending has been entrenched.  Already, some states are having issues with the payment of the salaries of their workers.  Many have issues with payment to contractors. Major adjustments in government spending [at all levels] are clearly inevitable.

    “The good news in all of these is the likely moderation of cost of fuel importation. This is well known to be a major burden on the finances of the country.The share of the nation’s resources committed to fuel importation and fuel subsidy is horrendous and perhaps scandalous. It is hoped that declining oil price would moderate this cost.”

    However, the major way forward to tackle the scenario, according to Muda, is for the government to focus more on the non oil sector.

    “The non-oil export sector is likely to profit from current situation, especially where production processes have high local content. Although the capacity of the non-oil export sector is low at the moment. However, there is hope that if the government concentrate on the non oil sector , there will be a boost to the government revenue and the economy,” Muda said.

  • ‘How to sell Nigeria’

    ‘How to sell Nigeria’

    WITH the fallen oil price, tourism experts have urged the government to look inwards and harness the enormous wealth in the sector. They called for infrastructural development and funding that would boost the sector’s growth.

    This, they said, could be done by showcasing Nigeria’s potentials to the world through organising international tourism summits and proactive projects that would draw tourists from across the world.

    According to the Chief Executive Officer of the De Tourism World Inter-National, Mr Uwakwe Solomon, who called for public/private partnership, Nigeria is blessed with alot of mineral resources.

    He said: “Nigeria is blessed with a lot of mineral resources it is high time the government focus more resources to develop the tourism sector. We have lots of sites that can become a major revenue earner for the country if they are renovated, put in good shape and managed well. This would require the cooperation between the government and private sector.”

    To lead by example, Mr Solomon said De Tourism World Inter-National is determined on selling Nigeria’s rich tourist sites and tourism potentials to the world through several projects. For over three years, he said, his organisation has been gathering materials and documenting sites scattered across the country which would soon be featured on TV stations. The organisation’s projects would be unveiled at its tourism expo billed for next year in Abuja.

    “We want to sell Nigeria’s rich tourism potential to the world. The research projects would further showcases the hospitality, travel and tourism industries with special focus on the documentaries of Nigerian wonderful tourist sites and attractions put at par with those found overseas through both the print and audio-visual means. These are coming in an entertaining manner as a TV programme with the primary objective of encouraging and promoting sustainable tourism and general infrastructural development. To further promote the sector’s prospects, we are organising the international tourism expo that would hold next year at the prestigious Transcorp Hilton Hotel, Abuja. Dr Tee Mac Omatshola Iseli (MFR) is the expo’s celebrity ambassador,” Mr Solomon, also known as M.C Pa-Solo, said.

  • Oil price drops below $70

    Nigeria currency, the naira yesterday fell to record low against the dollar as it depreciated 2.9 per cent to N184.5 to $1 after crashing to N184.51 due to sliding oil prices.

    Russian currency, the Rouble too suffered its biggest one-day decline since 1998 as oil prices continued to fall, escalating fears about the its economy.

    Rouble slid almost nine per cent against the dollar before rallying after suspected central bank intervention.

    Russia, like Nigeria,  is heavily dependent on revenues from oil exports, making its currency vulnerable to falling prices.

    Brent crude hit $67.53 a barrel, the lowest it has been since October 2009, before regaining some ground.

    It was just above $70 in late trading yesterday, while United State (U.S) crude was at $66.34 a barrel, having hit an intraday low of $63.72 – the lowest since July 2009.

    Russia is the world’s second-largest oil exporter, with oil and gas accounting for 70 per cent of its exports and half of government revenues.

    Nigeria, Africa’s second highest producer, depended on oil for more than 90 per cent of its revenue.

    Oil prices have fallen by more than a third since the summer, while the rouble is down nearly 40 per cent against the dollar since January.

  • How to cushion effect of declining oil price, by Dangote

    How to cushion effect of declining oil price, by Dangote

    BUSINESS mogul Aliko Dangote has suggested ways out of the woods amid declining oil prices.

    Speaking during the International Conference & Exhibition of the Nigerian Association of Petroleum Explorationists (NAPE) in Lagos, the President, Dangote Group  cited some causes of the continued fall in oil price, and suggested how the Federal Government would best deploy proceeds from oil sales in sustainable development.

    He said increasing exploitation of shale oil by oil consumer countries, such as the United States, increased exploration and production of oil following high price of crude fuelled by emerging economies in Asia, discoveries of oil in new climes and power play in the global oil business, among others, were responsible for the continued drop in price of oil.

    The Dangote chief, however, said proper investment of oil proceeds by the government would cushion the effect of adverse situations, such as periods of poor pricing of crude, which is the mainstay of Nigeria’s economy.

    Primary among the options is the diversification of the economy and exiting the mono-economy.

    He mentioned some vital decisions to make the petroleum industry have a marked impact on the economy. They include giving attention to the  reform of the oil and gas policy and regulatory environment and ensuring that the much anticipated and long awaited Petroleum Industry Bill (PIB) is passed into law.

    Dangota said: “This affects the source of the bulk of national foreign exchange earnings. This is critical to the transformation of the sector and its repositioning to play an effective role in the new economy.

    “The second critical imperative is the removal of petroleum fuel subsidy. In reality, this subsidy of gasoline fuel benefits the more affluent, but small minority of the population. It has social governance as well as economic development ramifications. The subsidy diverts resources to the well off, while starving much needed funding from the sorely needed infrastructure developments.

    “The third policy imperative has to do with Nigeria’s inability to monetise its enormous natural gas resources. This has been a major policy failure in view of the great potential of gas to accelerate economic growth. The huge deficit in our energy consumption especially electricity, which has constrained our economic growth can be easily eliminated. The key is to adopt a pricing regime for gas that will encourage investment in gas infrastructure.  Whilst the gas policy and Gas Master Plan have been developed, progress has been limited by inability or unwillingness to implement.

    “A fourth imperative is the growing incidence of sea piracy in the Gulf of Guinea, with Nigeria reportedly being the home of most of the pirates. The Gulf of Guinea cannot evolve into a substantial Intercontinental Petroleum Trading Centre, with the threat of piracy looming largely over tankers plying the Gulf on petroleum trading voyages. Nigeria, being the largest trading partner on the Gulf and having the largest Navy must take decisive action to stamp out piracy completely.

    “Lastly, indigenous participation in all areas and sectors of the oil and gas industry must continue to attract focused attention and encouragement from the government.”

    He said  Dangote Group intends to contribute to the economic value chain in the petroleum industry through a Joint Venture (JV) partnership with First Exploration & Production (E&P) in a vehicle called West African E&P (WAEP), which will focus in upstream assets to provide feedstock to the midstream and downstream businesses. In the downstream, the Dangote Group plans to build 500,000 barrels per day oil refinery, largest in sub-Saharan Africa; 750,000 tonnes per annum (TPA) polypropylene petrochemical complex; fertiliser plant; and 2.8 million tons per annum (mtpa) Urea and Ammonia plant. The company plans to build gas infrastructure to support the Federal Government’s Gas Revolution and supplement the Gas Master Plan that delivers gas to the domestic market.

    “The Dangote Group and its partners are committed to delivering these projects before the end of this decade.  Our decision to embark on these investments is motivated by a strong desire to help transform the industry into a veritable driver of national economic growth and industrialisation. We are confident that public policy will continue to move in the direction that will expand the space for private sector to assume leadership in the economic development arena. Nigeria will be uniquely positioned to begin to exert geopolitical influence in global energy policies and power play if it can strengthen its internal governance structure, carry out long delayed policy and regulatory reforms, address social iniquities, and create a conducive environment for the private sector to play a lead role in our economic transformation journey,” he added.

  • Oil price falls as uncertainty hits energy markets

    Oil price falls as uncertainty hits energy markets

    • .1m bpd greenfield refinery for Ogun

    Oil prices fell yesterday following uncertainty about future action from the U.S. Federal Reserve and data showing the U.S. unemployment rate unchanged.

    Benchmark crude for February delivery fell 43 cents to $92.66 per barrel at late afternoon Bangkok time in electronic trading on the New York Mercantile Exchange. The contract closed up 17 cents at $93.09 a barrel on the Nymex on Friday after the U.S. Energy Department’s Energy Information Administration reported a much bigger drop in the nation’s crude supplies than analysts expected.

    Separately, crude stocks fell by about 12 million barrels for the week ending December 28, according to the American Petroleum Institute.

    Monday’s decline in oil prices follows the release of a transcript of the Federal Reserve’s December meeting showing that policymakers disagreed over how long to keep a bond-purchase program in place.

    Traders inferred the Federal might shorten the program, which could send U.S. interest rates, and therefore the dollar, higher. That in turn would hurt the price of oil. Oil, which is priced in dollars, tends to fall as the dollar strengthens and makes crude more expensive for investors holding foreign currencies.

    Meanwhile, a 100,000 barrels per day greenfield refinery is to be built in Ipokia, Ogun State.

    The project followed the successful completion of a joint venture financing agreement with Eton Group, Eton Finance Private Ltd of Singapore and Eton’s subsidiary, Niger Delta Refinery and Petrochemicals Company Ltd.

    Under the agreement, Eton Group is to finance the refinery with a total of N304.2b ($1.95b) in the joint venture funding with both companies working together to realize the goals of the project.

    At the signing ceremony held in Abuja, the Executive Chairman of Badagry Petroleum Refinery , Alh. Razak Awayewaserere signed on behalf of his company while Alan Rennie, the Managing Director of Niger Delta Petrochemicals Company, who is also a Director of Eton Finance Private Ltd signed for Eton Group.

    According to Alh. Awayewaserere who explained that the project received Approval in principle in 1993, financial and administrative formalities would be concluded within four months after which the project would move to the next phase of Feed, approval, fabrication and construction.