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Economy & Politics

NEITI: Nigeria’s Oil Revenues Plunged by 55% to $24.8b in 2015

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29 December 2017, Abuja— Nigeria’s oil and gas revenues plunged from $54.5 billion in 2014 to $24.8 billion in 2015, while the country’s oil production fell from 798 million barrels in 2014 to 776 million barrels in 2015, the Nigeria Extractive Industries Transparency Initiative (NEITI) has disclosed.

According to the NEITI 2015 Oil and Gas Industry Audit Report, the total outstanding revenue from the sector as at 2015 was $3.7 billion and N80 billion, while losses incurred stood at $2.2 billion and N60 billion, and unreconciled revenues amounted to N317 billion.

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“Beyond providing a snapshot of what transpired in 2015, this report reveals money to be recovered, leakages to be blocked, and urgent reforms to be undertaken,” said Waziri Adio, the Executive Secretary of NEITI, at the release of the report today. “The most critical take-away is the need to expedite, expand and sustain reforms in this still critical sector of national life.”

The report shows that Nigeria suffered a 54.6% decline in oil revenues but only a slight 2.7% fall in oil production. “This was due to drastic reduction in the unit price of crude oil in the global market,” states the report. It will be recalled that the yearly average price of crude oil per barrel tumbled from $101.91 in 2014 to $52.16 in 2015.

Oil and gas revenues have been declining since 2011 when total revenues peaked at $68.4b. A five-year analysis in the report reveals that revenues declined by 8%, 7.7% and 6% in 2012, 2013 and 2014 respectively. However, the decline leapt to double digits in 2015 when total revenue dwindled by more than half.

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Total oil production also dropped but not by much: from 798 million barrels in 2014 to 776 million barrels in 2015. The report attributed the decline to oil theft and militancy. However, total gas production went up by 20.23% from 2, 593,090 mmscf in 2014 to 3, 250, 667 mmscf in 2015. The jump by a fifth was on account of the combined effect of increase in gas utilisation and decline in gas flaring.

According to the report, the total oil lifted in 2015 was 780 million barrels, about four million barrels higher than the amount produced with the balance drawn from previous years. Of the 780 million barrels, the companies lifted 467 million barrels while NNPC lifted 313 million barrels. NNPC’s liftings were split almost evenly between Federation Export and Domestic Crude Allocation, which accounted for 159.4 million barrels and 153.9 million barrels respectively. However, only 8.7 million barrels or 5.6% of crude oil allocated for domestic consumption went to the refineries in 2015 on account of the state of the refineries.

Here is a copy of the report.

Onome Ohwovoriole has a degree in Economics and Statistics from the University of Benin and prior to joining Nairametrics in December 2016 as Lead Analyst had stints in Publishing, Automobile Services, Entertainment and Leadership Training. He covers companies in the Nigerian corporate space, especially those listed on the Nigerian Stock Exchange (NSE). He also has a keen interest in new frontiers like Cryptocurrencies and Fintech. In his spare time, he loves to read books on finance, fiction as well as keep up with happenings in the world of international diplomacy. You can contact him via onome.ohwovoriole@nairametrics.com

Economy & Politics

NNPC diversifies into housing, power; plans to beat crude production cost to $10 per barrel

The Nigerian National Petroleum Corporation (NNPC) has announced that it is building up business portfolios in the housing, power, and medical sectors.  

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To cushion against the volatility in the global crude market and strengthen profitability, the Nigerian National Petroleum Corporation (NNPC) has announced that it is building up business portfolios in the housing, power, and medical sectors.

This is one of several measures the corporation is taking to sustain revenue generation for Nigeria, and cope with the boom and bust cycles which are gradually becoming a feature of the global crude oil market.

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NAN reports that this was contained in a statement from the Corporation Chief Operating Officer, Ventures and Business Development, Mr. Roland Ewubare, and signed by NNPC Spokesman, Kennie Obateru.

According to Ewubare, the NNPC will establish Independent Power Plants using the Ajaokuta-Kaduna-Kano (AKK) pipeline network, and consolidate its presence in the power sector.

(READ MORE: COVID-19: Nigerians react as CBN partners NNPC to feed, accommodate Nigerian returnees)

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The statement reads in part; “NNPC is creating an energy company that would have portfolios in renewable energy; we have initiatives on solar that is ongoing.

“We have got biofuels agreements with some state governments that would soon be activated. We do have a lot of non-core businesses that are aggregated under the Ventures and Business Development Autonomous Business Unit of the NNPC. 

“This would be expanded through effective collaboration and partnership with the private sectors,” 

NNPC diversifies into housing, power; plans to beat crude production cost to $10 per barrel

Lower costs, more profits

As part of moves to improve profitability, the NNPC also announced plans to drive crude oil production cost down to 10 dollar per barrel by Q4 2021,

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This according to the statement would be done by systematically and gradually beating down logistics costs.

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The Corporation’s revenue took a major hit in 2020 due to the slump in global oil prices, and this in turn affected the Nigerian budget given that oil proceeds account for a significant fraction of her income.

“When you have a low commodity price regime, as the case now, the only way we are able to squeeze out some reasonable cash and financial gain to the nation is by curtailing and constraining our costs in line with the GMD’s aspiration to push for a 10 dollar per barrel cost of production,” Ebuware said.

(READ MORE: NNPC pipeline vandalism up by 50% in January, may suspend crude oil production)

There is also an ongoing collaboration with selected partners to commercialise flared gas in order to preserve the flora and fauna of the country.

This would be done by converting it to Compressed Natural Gas (CNG) and Liquefied Natural Gas, for sale to consumers.

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The NNPC is partnering with private developers to reduce the housing deficit in the country and also partnering with medical centres to provide innovative healthcare for Nigeria.

 

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Business News

The conundrum in the retail pricing of PMS

Considering the landing cost of petrol is largely influenced by the prices of crude oil in the international market, we think prospects of continued recovery in crude oil prices is likely to put upward pressure on the cost of importing petrol.

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PPPRA, NNPC, Reduce funding oil subsidy - IMF to Nigeria , Oil marketers, PENGASSAN call for subsidy removal 

The decision of the Petroleum Products Pricing Regulatory Agency (PPPRA) to reduce the pump price of Premium Motor Spirit (PMS), also known as petrol, to N121.50 per litre from N123.50 per litre has been met with stiff resistance from oil marketing companies (OMCs). The Independent Petroleum Marketers Association of Nigeria (IPMAN) have also stated that it impossible for its members to sell petrol at the new price floor of N121.5 per litre.

We recall that on 18 March 2020, the Federal Government (FG) reduced the retail price of Premium Motor Spirit (PMS) by c.14% to N125/litre from N145/litre, following the global pandemic which led to an unprecedented decline in oil prices and by extension a reduction in the landing cost of petrol. Subsequently, the FG announced a further reduction to N123.50 which took effect on April 1, 2020. Earlier this month, the FG directed a reduction in the pump price of Premium Motor Spirit (PMS) for the third time to N121.50 per litre. We note that the adjustments in the retail price is in line with the directive from PPPRA on a monthly review of the pump price, depending on prevailing market realities.

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READ MORE: The good, bad and ugly of low oil prices for Nigeria

In our view, considering the landing cost of petrol is largely influenced by the prices of crude oil in the international market, we think prospects of continued recovery in crude oil prices is likely to put upward pressure on the cost of importing petrol. With the gradual relaxation of lockdown measures by countries who are starting to reopen their economies alongside the historic production cuts of OPEC+ which took effect last month (a 9.7mb/d oil production cut for May and June), we think the risks to oil prices are tilted to the upside in the near term.

Since hitting a two-decade low of US$19.33 on 21 April when the retail price of petrol was pegged at N123.50, brent crude prices have gained c.105% to close at US$39.54 on 3 June. Against this backdrop, we expect that the retail price of petrol should rather be adjusted upwards to reflect current market realities. The current situation appears no different from historical trends where the FG becomes reluctant to effect an upward adjustment in the retail price of petrol during periods of rising crude prices. This has often resulted in the renewed payments of the age-long fuel subsidy. We also think oil marketing companies (OMCs) who have only recently begun to import petrol alongside the Nigerian National Petroleum Corporation (NNPC) due to more favourable pricing could halt importation once again if domestic retail prices become unfavourable.

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Economy & Politics

NLC hastens House of Reps to criminalise casualization of workers

NLC has appealed with Speaker of the House of Representatives to hasten the labour act amendment and put an end to the casualization of workers.  

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The Nigerian Labour Congress (NLC)  has appealed to Femi Gbajabiamila, Speaker of the House of Representatives to hasten the labour act amendment and put an end to casualization of workers.

He added that when amending the Labour Act, labour unions should be made more independent and every Nigerian worker should be allowed to join the union of his choice.

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According to the NLC Chairman, Mr Ayuba Wabba, the prevalent practice of casualising workers has become a form of ‘modern day slavery’ and should be ended through legislation, NAN reports.

Wabba, who visited the Speaker, alongside other members of the NLC leadership urged the green chambers leader to strengthen the union through its legislations, as can be seen in other countries.

(READ MORE: Nigerians are enraged as lawmakers reject Innoson cars for latest Toyota Camry)

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Gbajabiamila assured the congress leaders that the house of representatives is willing to work with the union, in line with its motto “Nation Building, a Joint Task”.

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He noted that the House of Representatives already has plans to amend the Labour Act, and urged the union leaders to speedily bring in their input as time is of essence.

“You should do that on time because time is of the essence so that  we pass it very quickly,” Gbajabiamila said.

He assured them that strengthening the NLC, which happens to be an umbrella body of unions in the formal and informal sector, is key as it would encourage a stronger democracy in the country protecting the interest of Nigerians.

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READ ALSO: FG exempts tuition fees, basic food items, others from 7.5% VAT  

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What you should know

Casualisation is the practice of employing temporary staff for short periods and is often aimed at saving costs.

The Labour Act (Amendment) Bill 2019 awaiting second reading by the House proposes criminalising employing of workers on casual contracts beyond six months. It also proposes that any casual workers sacked by an employer after six months will be entitled to the benefits of full-time workers for six months, and prohibits outsourcing to third parties.

 

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