Connect with us
deals book
Advertisement
Polaris bank
Advertisement
Oando
Advertisement
Alpha
Advertisement
Hotflex
Advertisement
Binance
Advertisement
Advertisement
UBA
Advertisement
Patricia
Advertisement
Access bank
Advertisement
app

Business News

Nigeria gets real with $62 billion demand from IOCs 

Timipre Sylva stated yesterday that the government knows that the full amount expected from the IOCs might never be recovered.

Published

on

NCDMB launches LPG Composite Cylinder Manufacturing plant in Bayelsa, IOCs, Nigeria, Timipre Sylva, crude oil, Minister proposes 2020 timeline for rehabilitation of Warri, Kaduna refineries , FG to cut huge energy cost through gas commercialisation initiative, FG discloses plan to sell fuel at N97 per litre , FG give reasons why it won’t allow marketers determine petrol price despite deregulation, FG explains reasons for deregulating downstream oil sector

Despite ongoing litigations by Nigeria demanding that international oil companies operating in the country should pay up money they owe to the tune of $62 billion, the country’s Minister of State for Petroleum Resources, Timipre Sylva stated yesterday that the government knows that the full amount might never be recovered.

Sylva reportedly disclosed this in Abuja while answering questions from journalists at the end of this week’s Federal Executive Council Meeting. He got real by noting that $62 billion is quite a lot that nobody can easily bring out.

“Nobody can bring out that kind of money. I mean, we can’t get $62 billion. We can maybe get something from them but not $62 billion. It’s an opportunity we have lost.”

 

Nairametrics has been consistent with its coverage of this story, partly because of the magnitude of the money and what it could potentially do for the economy, especially now that Nigeria is cash strapped. Moreover, the circumstances that led to the demand by the Nigerian Government is also quite intriguing. Recall that we previously reported that this development dates back to 1993 when Nigeria entered into contracts with the IOCs to begin extraction of the country’s crude oil. At the time, the revenue sharing model was 20% to Nigeria and 80% to the IOCs.

IOCs, Nigeria, Budget 2020: Oil workers to earn N75 billion

Oil workers

However, there was a proviso that the contract could be revisited (with the sharing model changed) if oil prices ever exceeded $20 per barrel. Now, even though oil prices have since then gone up, Nigeria did not receive greater share of the oil revenues until recently when it started demanding that the oil majors should pay up.

The IOCs in question here are ExxonMobil Corp, Chevron Corp, Total SA, Royal Dutch Shell, and Eni SpA. Interestingly, they have all contested the government’s $62 billion claim, expressing unreadiness to pay the money. Nigeria is now willing to negotiate with them.

More so, the Nigerian Government said it was taking other measures towards ensuring that a considerable part of the money is eventually recovered. One of such measures is to revisit/amend the 1993 contract-law. Already, this law has been amended by the Senate earlier this week. All that is now needed is for the executive arm of government to pass the law. Sylva said this should be done quickly.

[READ MORE: Nigeria to negotiate with IOCs over $62 billion demand]

“We have to ensure that this bill is passed. With this bill now, there will be some adjustments in the fiscal regime and we believe that the government will get a lot from the oil companies, especially their deep shore exploration activities.”

 

Nigeria is currently trying to raise money from anywhere possible in order to facilitate economic activities in the country. It recently implemented several economic policies to this effect and is currently pursuing this recovery agenda which could do a lot of good to the economy if successful.

[READ MORE: IOCs are owing Nigeria $20bn, and FG wants them to pay now]

Jaiz bank

Emmanuel is a professional writer and business journalist, with interests covering Banking & Finance, Mergers and Acquisitions, Corporate Profiles, Brand Communication, Fintech, and MSMEs.He initially joined Nairametrics as an all-round Business Analyst, but later began focusing on and covering the financial services sector. He has also held various leadership roles, including Senior Editor, QAQC Lead, and Deputy Managing Editor.Emmanuel holds an M.Sc in International Relations from the University of Ibadan, graduating with Distinction. He also graduated with a Second Class Honours (Upper Division) from the Department of Philosophy & Logic, University of Ibadan.If you have a scoop for him, you may contact him via his email- [email protected] You may also contact him through various social media platforms, preferably LinkedIn and Twitter.

Click to comment

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Coronavirus

FG denies report on reintroduction of Covid-19 restrictions, clarifies position

The FG has denied media reports that it has reintroduced new Covid-19 restrictions as part of measures to curb the spread of the new India variant into the country.

Published

on

FG publishes list of suspended passports for refusing post-arrival Covid-19 test

The Federal Government has denied media reports that it has reintroduced new Covid-19 restrictions as part of measures to curb the spread of the new India variant into the country.

The government explained that it was only maintaining the curfew under phase 4 of the phased restriction of movement adding that it never relaxed the curfew imposed earlier under phase 3 of the eased lockdown.

This clarification was made by the Secretary to the Government of the Federation (SGF) and chairman of the Presidential Steering Committee, (PSC) on Covid-19, Mr Boss Mustapha, on Monday, saying that it was erroneously reported.

Mustapha said the announcement by the National Incident Manager, Dr Mukhtar Mohammed, during the PSC press briefing was taken out of context because the federal government did not relax the curfew imposed earlier under Phase 3 of the eased lockdown.

What the SGF is saying

Mustapha said, “Under the Fourth Phase of restriction of movement, night clubs, gyms and others will remain closed till further notice; while all citizens will also ensure that mass gatherings outside work settings do not exceed a maximum of 50 people in an enclosed space.

These restrictions have been in existence under the Third Phase but are being maintained under Phase Four of the phased restriction of movement.’

He further said because people had been violating the safety protocols, they had forgotten that the protocols were never relaxed in the first place.

The SGF said, “Therefore, the PSC hereby reiterates that there is no newly introduced lockdown. There is no need for the panic that followed the announcement of the Fourth Phase of the phased restriction of movement.

Hotflex

We will continue to appeal to members of the public to comply with these restrictions because they are necessary safety measures against contracting the dreaded coronavirus, which is still ravaging human populations across the world.’

Also, the Minister of Information and Culture, Alhaji Lai Mohammed, at a meeting with Online Publishers on Tuesday, in Lagos, denied reports on the introduction or even reintroduction of new restrictions on Covid-19.

Alhaji Lai Mohammed said there were no new restrictions, adding that the PSC on Covid-19 only reiterated existing regulations to control the spread of the disease. He said the only thing that was newly introduced was that anyone, including Nigerians travelling from Brazil, Turkey or India, must go through compulsory quarantine.

In case you missed it

It can be recalled that there were media reports that the Federal Government had reintroduced Covid-19 restrictions across all 36 states and the Federal Capital Territory (FCT) following the disturbing resurgence of the coronavirus pandemic with the new India variant.

President Muhammadu Buhari had approved the transition of the Presidential Task Force (PTF) on Covid-19 to PSC on Covid-19, with effect from April 1, 2021, with a modified mandate to reflect the non-emergent status of Covid-19 as a potentially long-term pandemic.

Continue Reading

Financial Services

Inflationary concerns may lead to higher rate; Why 3 CBN MPC members want rates hiked

Despite the slight push back, the MPC decided to hold the rates, owing to the supply factor and the weak economic recovery of Nigeria.

Published

on

CBN forex restrictions on food itemsCBN approves new cheque standard for banks

Three members of the CBN’s Monetary Policy Committee proposed a rate hike citing several factors including Nigeria’s galloping inflation rate. Their decisions contradict those held by other members of the committee who voted for a continuation of the current monetary policy rate of 11.5%.

This was contained in the personal statement of members of the  Monetary Policy Committee (MPC) in the meeting held on the 22nd and 23rd of March 2021. The decision to hold the rate steady was not unanimous as three out of the nine members voted to increase rates. These disconnects from the majority took their stand as a result of inflationary concern facing the Nigerian economy.

According to the Central Bank of Nigeria Communiqué No. 135 Of The Monetary Policy Committee Meeting, the members who were in support of hiking rates are namely; OBADAN, MIKE IDIAHI; SHONUBI, FOLASHODUN A.; and ADENIKINJU, ADEOLA FESTUS. The prime reason was the risk of high inflation on the economy.

Despite the slight push back, the MPC decided to hold the rates, owing to the supply factor and the weak economic recovery of Nigeria. The CBN governor Godwin I. Emefiele and five others were in support of maintaining rate despite unstable inflation postulating that supply factor is fundamental to healthy recovery especially as a result of the pandemic.

Emefiele said: “Supply constraints remain the key driver of both the inflationary pressure and the weak growth that we observe today. The weak GDP recovery provides an argument for further policy ease to support growth, but rising inflationary expectations justify a tightening. My inclination today is for a more balanced and cautious approach to monetary impulses.”

Even though Emefiele admitted that inflation rate could rise in the near term, he feared that an adjustment of the MPR could worsen Nigeria’s “conditions” especially with the tepid recovery we are still experiencing.

“I reiterate the imperatives of targeted lending to productive sectors to sustain growth without undermining our core objective of price stability. Based on the near-term inflation expectations and growth outlook, my position is to maintain the current stance of monetary policy and intensify our interventions. An adjustment today could in my view, destabilize the fragile recovery and worsen domestic conditions.”

However, some members who did not share the view and speculation about higher inflation may affirm this stand OBADAN, MIKE IDIAHI postulated that the CBN should put more pressure on deposit money banks to comply with the LDR scheme, according to him.

OBADAN stated that, “We are faced with the dilemma of low and fragile growth that needs to be reversed, accelerating inflation also needs to be tamed because it is Classified as Confidential and has a negative impact on people’s welfare and macroeconomic stability which is required for enhanced investment and production. Orthodox policy instruments available to the Bank are not capable of achieving the desired goals of strong growth and inflation control simultaneously without sacrificing one for the other. Stability needs to be brought to bear on the policy-induced drivers of the current inflation acceleration, while the MPR can be raised marginally with three objectives in mind: to signal the sensitivity of the Bank to address any possible monetary influence on inflation.”

A skeptical and more hawkish Obadan also suggested that the recent inflation rate was also due to monetary policy reasons such as increased lending due to CBN’s LDR Policy, depreciation of the naira and a lower interest rate environment which drives people into assets that provide a hedge against the naira.  He also suggested that more efforts should be geared towards attracting foreign portfolio inflows.

“The factor of monetary influence on inflation cannot be ruled out completely. It interacts with other factors to drive inflation, perhaps, in a limited role. Against the backdrop of the Loan-to Deposit Ratio (LDR) policy, I do not expect the MPR adjustment to adversely affect the volume of lending significantly. To this end, we should put more pressure on the deposit money banks to comply with the LDR policy. Marginal upward adjustment of the MPR can also signal the desire of the Bank to tackle the phenomenon of negative real interest rate. Finally, in the short term, it could be a signal to foreign private investors while we implement measures to ensure stable sources of external reserves accretion in the medium term. Yes, foreign portfolio investment flows are indeed hot monies that tend to be very volatile. However, under conditions of improving growth, such flows could play a stabilising role in the economy. So, my vote is: raise MPR by 50 basis points and leave the other parameters as they are.”

SHONUBI, FOLASHODUN A., on the other hand, emphasized inaction was not an option considering how weak and fragile the economy currently is.

“Clearly, not doing anything will portray the Bank as abandoning its mandate of price stability. In as much as growth remains weak and fragile, we cannot afford to pull the brake to avert a more damaging reversal of the trend in output growth. Notwithstanding that the present inflationary pressure is largely attributed to non-monetary factors, its persistence, and reversal of the moderation in month-on-month growth stresses the need for the Bank to take immediate action. Whereas it may appear unfeasible to deploy the conventional monetary policy to pursue growth and tame inflation simultaneously, the Bank cannot abandon either of the objectives at this time.”

He also called for the continued intervention in key sectors of the economy postulating that this will boost economic growth.

“I believe the Bank’s interventions through the aggressive provision of credit should continue as a complement to the ongoing effort by the fiscal authority to boost economic activities. As the Government acts more decisively to discourage bad behaviour and restore orderliness, we must collectively work to overcome the insecurity challenges. At the same time, we must begin to tighten to deal with the subtle monetary component of inflationary pressure and curb spiraling inflation, without suffocating economic growth.”

Jaiz bank

Adenikinju, the last of the trio emphasized on the need for the CBN to focus on addressing higher inflationary environment. He also explained that addressing inflation will signal to economic agents that the central bank is keen on stabilizing prices thus curbing the demand for forex.

He stated that the persistently high inflation rate is cause for concern and that the CBN should begin refocusing its efforts to counter it, signaling to the wider economy that the CBN’s top priority would help to minimize foreign exchange market excesses, reduce liquidity-induced inflationary pressures on the economy, and protect fixed-income earners.

“The rising global commodity prices, plus the depreciating exchange rates and relatively high costs of shipping and clearing of goods at the Nigerian ports have all contributed to high imported inflation and reduced the extent to which imports could have mitigated the impacts of high domestic food prices in the short term. However, the weak economic growth, rising unemployment and poverty also mean that we cannot aggressively pursue strict price stability at a time we are slowly crawling out of recession. I see the CBN intervention credit as complementary and not a substitution to credit from the deposit money banks. Also given the focus of capital expenditure of the government this year, it then means that we can focus on growth and tackle inflation at the same time. However, I believe the persistently high inflation rate is concerning enough for CBN to start shifting its focus to address it. Signaling to economic agents that price stability remains the focus of the CBN will also curb some of the excesses in the foreign exchange market and reduce the liquidity induced inflationary pressures on the economy and protect fixed income earners.”

Bottom line

Whilst the trio may not have gotten their wish, we believe the CBN might raise rates to cool off the galloping inflation rate. The CBN has gradually raised rates on its short-dated securities, a clear indication that it is worried about widening the negative real interest rate emanating from rising inflation.

Continue Reading

  





Nairametrics | Company Earnings

Access our Live Feed portal for the latest company earnings as they drop.