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Crude Oil: Nigeria’s volatile oil sector and economic progress   

Nigeria is Africa’s largest crude oil exporter and ranks among the top ten exporters in the world.

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Crude Oil worker, OPEC, oil prices, Bulls hit back to support US crude oil amid panic sell- offs in global equity markets, Nigeria’s local oil players smashed by low crude oil prices

Nigeria is Africa’s largest crude oil exporter and ranks among the top ten exporters in the world. The country’s economy remains heavily reliant on its oil sector as it is the main source of both government revenue and foreign exchange. Petroleum export accounts for c.70%-80% of revenues with several transmission channels into incomes and economic output.

Although the government has introduced a few policies in past years to diversify the Nigerian economy from its reliance on oil, the intended outcomes of those policies are yet to materialise- leaving the economy at the mercy of the volatile oil sector. Interestingly, the oil sector that wields so much power on the economy constitutes just about 9%-10% of the countryís GDP.

The Nigerian oil sector is no stranger to fire outbreaks, theft and sabotage from the Niger-Delta militia. The disgruntled militia in the Niger-Delta region often resort to vandalism as a way of getting government’s attention which ends up sabotaging the country’s economic progress. In 2016, one of such malicious attacks, alongside the slump in global oil prices, forced the country into its deepest economic downturn in over 30 years as the country’s crude output fell sharply from a peak of 2.2 million barrels per day (mbpd) to near 1 mbpd.

Nigeria's crude oil production, Crude Oil: Nigeria's volatile oil sector and economic progress   

Recently, the operator of one of the country’s major oilfields, Aiteo, disclosed to Reuters that attacks on the Nembe Creek Trunkline ñ which produces about 150k bpd ñ resulted in the trunkline being shut down for 61 days this year. The Nembe Creek Trunkline, one of two that exports Bonny Light crude oil, has been shut down twice this year- once in April and the other in September.

The operator also added that over the last four years, more than 200 days of shut down have been recorded. The pipeline attacks have resulted in losses in crude production, culminating in deficits in revenue to all stakeholders- including the government who appears to be in desperate need of revenues to bridge its rising fiscal deficits.

[READ MORE: Headline inflation jumps to 11.61% in October on border closure]

Naturally, mono-product economies are exposed to fluctuations in the prices of underlying commodities. Often, the proceeds during periods of high prices are poorly managed, leaving weak buffers to cover periods of downturn in such commodity prices.

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In our opinion, we believe reforms geared towards improving non-oil revenues are urgently required in improving fiscal buffers, strengthening domestic stability and insulating the economy from volatilities in crude oil prices. Looking ahead, we think the continued uncertainty around domestic crude production combined with the somewhat bleak outlook for global oil price in the long term should be a source of concern for policy-makers.

________________________________________________________________________

CSL STOCKBROKERS LIMITED CSL Stockbrokers,

Member of the Nigerian Stock Exchange,

First City Plaza, 44 Marina,

Stanbic 728 x 90

PO Box 9117,

Lagos State,

NIGERIA.

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Columnists

The role of healthy communication in the workplace

To foster a healthy work environment, employers should take communication more seriously.

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Networking, way to success in Nigeria

Profit is the purpose of every business organization. The best way to sustain profit is to strengthen the “Employer-Employee” relationship and the “Buyer-Seller” relationship. The profit of every business organization depends on these two. The success and failure of every business organization also depends on these two.

Communication is one of the major concerns in an organization and it is very necessary in our workspace and among people around us. Constant communication helps to build a strong connection in the relationship between an employer and an employee. It is crucial to the growth and success of your business and it allows everyone to provide input and feel that their ideas are valued.

Everyone can communicate as long as it is with words. In an organization, both the employer and the employees should develop good communication skills.

Your employees are part of the vision of your company and their opinions and innovations should be considered. This will go a long way in building a positive workplace culture.

Communication can be in oral or written form; and while written communication is the preferred form of communication in organisations, oral communication should neither be limited or downplayed. As an employer, your employees should be able to communicate freely with you. Communication reminds your employees about the goals of your company and helps you to delegate responsibilities effectively.

According to research, 57% of employees report not being given clear directions. A survey of 400 companies with 100,000 employees cited an average loss of $62.4 million per annum because of inadequate communication between the employer and the employees.

It is the responsibility of an employer to communicate the organisation’s vision, mission, goals and objectives to employees. Goals must also S.M.A.R.T (Specific, Measurable, Achievable, Realistic and Timely). Where communication is absent or ineffectively handled, employees can become unproductive, unresourceful, demotivated, and disorganised. There may also be high employee turnover which ultimately affects the profitability of the business. Without effective communication, an organisation will most likely be unable to retain its star performers or motivate average-performing employees into becoming highflyers.

Communication in organisations should not be left only to the Human Resources department, but feedback should also be encouraged from employees. Where there is a gap in communication, employees are left with no choice but to fill these gaps with rumours, (wrong) assumptions, gossip and the spread of misinformation. This creates an unhealthy work environment that is detrimental to the business.

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To foster a healthy work environment, employers should take communication more seriously. They should not only learn the art of effective communication but should also encourage and be receptive to feedback from their employees.

 

 

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Why NNPC’s Borno power plant may not materialise 

The glaring security challenge cannot be overlooked in considering a major power plant project in Borno State.

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Only a few days ago, the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mele Kyari, led a delegation to Borno State to meet with the Governor of the State, Babagana Zulum.

In the conversation with Zulum, Kyari promised the establishment of a gas-fired power plant in Borno State within a maximum of 4 months to solve the recent blackouts that resulted from insurgents cutting off Borno from the national grid since January this year.

In Kyari’s words, “We have talked to each other and we think it’s very possible to establish a dedicated power plant in Maiduguri which will serve current needs of power supply not only in Maiduguri but to other parts of the neighbouring cities.”

READ: NNPC GMD says AKK pipeline, Nigeria’s biggest gas project is 15% complete

Yet, there is a significant possibility that the power plant promised by Kyari may not materialize for many reasons, the first of which is security. In the meeting with Kyari, Governor Zulum had noted: “The ongoing insurgency has cut off the entire Borno from the national grid in the last three months. We put all our efforts and restored it back… but unfortunately, after 48 hours, the same group of insurgents went back and destroyed the main tower again.”

This glaring security challenge cannot be overlooked in considering a major power plant project in Borno State, particularly noting that the State and its surrounding communities have been the hot zone of insurgent and terrorist attacks by Boko Haram insurgents since 2009. Borno, Yobe and Adamawa have particularly been states where the insurgents have set up shop and carried out various activities, including kidnap, extermination of entire communities, burning of markets and religious buildings and the attack on the United Nations compound, in each case claiming tens or hundreds of innocent lives.

READ: Analysis: NNPC and its refining losses

One report reveals that at least 37, 500 people have been killed by the insurgent group since May 2011, a modest number, some say. Also, till date, some of the secondary school girls kidnapped in the April 2014 Chibok incident are yet to be returned to their families. It is then bewildering how Kyari intends to see to the construction and operationalizing of this gas power plant.

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Additionally, while the Minister of Petroleum for State, Chief Timipre Sylva, announced last year about the discovery of oil and gas deposits in the North, we have not seen any exploration and production kick-off. It then begs the question of where the gas for the Borno power plant intends to be sourced. The only gas pipeline that runs through the North – the AKK- is still in its first phase of construction out of three phases and has been earmarked at the earliest, to be completed in 2023 – not counting the typical delays the project will experience along the way.

READ: NNPC, only Nigerian company to cut losses by N800 billion in one financial year – GMD

Should the AKK by some stroke of luck materialize much earlier than the target date, the pipeline route is a considerable distance from Borno. It runs the route of Ajaokuta-Abuja-Katsina-Kano, its endpoint, a striking 481km from Borno State. Thus, there would have to be construction of a tie-in pipeline almost as long as the AKK from Kano to Borno State to get gas to Borno.

Optimists may reference the oil and gas discovery in the North and how production may start soon, thus obliterating the need for a 481km pipeline. This optimism however is not well-founded, as insecurity has been shown to be a major risk to oil and gas projects everywhere in the world. One of the major reasons the Trans-Saharan Gas Pipeline proposed to run from Nigeria to Algeria was abandoned was due to security challenges posed by Nigeria’s Movement for the Emancipation of the Niger Delta (MEND), the Tuareg guerilla movement in Niger and other insurgent groups along the proposed route of the pipeline.

READ: Why NNPC should be commercialised

Stanbic 728 x 90

These increased the risks across board, including for completion and operations through the lifecycle of the project. As such, failing to fix the security threats in northeast Nigeria makes any proposed gas plant project a pipe dream. Transporting gas via LNG trucks is not a better option, given that the drivers and their cargoes would be in danger of being kidnapped, shot at or bombed. The risks for both personnel and investors are high.

In any event, promising a power plant in 4 months for the people of Borno is unconscionable, since a typical gas power plant will take between 1 to 6 years to construct in relatively peaceful regions. What the government needs to do instead of making promises it cannot keep is to work arduously to fix the security challenges in Northern Nigeria and at the same time consider using decentralised solar power to provide power supply to homes, government institutions, schools and businesses while plans to produce gas in the region or transport gas to it are underway.

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