Contrary to expectations, the Federal Government has failed to carry out its planned sale of some of its stake in joint venture oil assets, the second year in a row.
This can be seen from the highlights of the 2020 Budget presented by the Minister of Finance, Budget and National Planning, Mrs Ahmed Zainab as it was not included as one of the sources for expected revenue.
According to the 2019 approved budget presentation, President Muhammadu Buhari had directed that immediate action should commence to restructure the JV oil assets. This, he said was to enable the reduction of shareholding to not less than 40% and that this exercise must be completed within the 2019 fiscal year, Punch reported.
“The overall revenue performance in 2018 is only 55 per cent of the target in the 2018 budget partly because some one-off items such as the N710bn from Oil Joint Venture Asset restructuring and N320bn from revision of the Oil Production Sharing Contract legislation/terms have yet to be actualised and have thus been rolled over to 2019.
“We have again reflected projected proceeds from oil assets ownership restructuring as revenues for transparency and monitoring. Expected funds have been earmarked to fund critical capital projects as this was not achieved in 2018,” the document read.
What you should know: In 2017, the President Buhari administration stated that it would reduce its stakes in JV oil assets, refineries and other downstream subsidiaries such as pipelines and depots in its Economic Recovery and Growth Plan.
The Nigerian upstream operational structure is essentially divided between JV onshore and shallow water with local oil firms and multinationals. It also entails Production Sharing Contract (PSC) between both parties in deepwater offshore, which has attracted enormous interests and massive involvement of International Oil Companies (IOC) over the years.
Ownership Structure of JVs: The JV between the Nigerian National Petroleum Corporation (NNPC) and Shell allows the NNPC to own 55% stake while the one between the NNPC and others like Chevron and ExxonMobile allows the NNPC to own 60% shareholding.
The JV contract requires the government and the other parties to contribute to the funding of the operations according to their stake in the partnership. However, the government has, over the years, been accused of failing abysmally to live up to this obligation. This has made it heavily indebted to the other parties.
Just In: PPPRA reduces petrol price to N121.50 per litre
“After a review of prevailing market fundamentals in the month of May and considering marketers realistic operating costs as much as practicable, we wish to advise of a new PMS guiding pump price…”
The Petroleum Products Pricing Regulatory Agency (PPPRA) has announced a new retail price band for oil marketers.
In a circular dated May 31st, as seen by Nairametrics, the downstream regulator said oil marketers are now expected to sell petrol within the price range of N121.50 and N123.50. Part of the circular said:
“Please recall the recently approved pricing regime which became effective March 19, 2020, and the provision for the establishment of a monthly price band within which petroleum marketers are expected to sell PMS at the retail stations.
“After a review of prevailing market fundamentals in the month of May and considering marketers realistic operating costs as much as practicable, we wish to advise of a new PMS guiding pump price with the corresponding ex-depot price for the month of June 2020, as follows; price band N121.50 – N123.50 per liter.”
Hedge funds, institutional investors rush to own stakes in Bitcoin
Hedge funds are firms that offer alternative investments to a specific type of investors (high net worth individuals), in a bid to protect their investment portfolios from market uncertainty, while generating positive returns regardless of market sentiments.
With global economic uncertainty gradually becoming a daily norm, institutional and hedge funds around the world have been rushing to have a stake in crypto assets which all have been outperforming other financial assets in 2020).
Just recently, a popular hedge fund based in New York –Grayscale Investments –caught the investment world by surprise by buying up Bitcoin (BTC) at a great rate in recent months.
Lennard Neo, the head of research at Stack Funds, told Cointelegraph that institutional investors have been seeking for other options, not just to provide returns, but also to hedge their existing portfolio from downside risks. Neo said:
“Similar to Grayscale, Stack has seen an uptick in investors’ interest — almost double that figures of pre-crash in March — in Bitcoin. I would not say they are ‘gobbling up BTC’ blindly but cautiously seeking traditional structured solutions that they are familiar with before making an investment.”
In addition, Paul Cappelli, a portfolio manager at Galaxy Fund Management, explained in detail the reasons for this demand. According to him, “we’re seeing increased interest from multiple levels of investors’ wealth channels, independent RIAs, and institutions.
“The recent BTC halving came at an interesting time amid the COVID-19 outbreak and the growing unease about quantitative easing. He noted: “It clearly demonstrated BTC’s scarcity and future supply reduction as concerns deepened around unprecedented stimulus by the Fed with the CARES Act.”
Also, Michael Sonnenshein, the Managing Director of Grayscale Investments, explained briefly why his firm uses Bitcoin as an option in hedging its firm’s portfolio position.
“All three are facing issues this time around. Bitcoin has emerged as an alternative hedge, operating independently of the dramatic monetary policies enacted by central banks,” he said.
What you need to know about Hedge Funds
They are firms that offer alternative investments to a specific type of investors (high net worth individuals), in a bid to protect their investment portfolios from market uncertainty, while generating positive returns regardless of market sentiments.
Measures introduced by Nigeria to ensure transparent use of the $3.4 billion IMF loan
Most of the critics of the government’s borrowing pattern have often expressed serious doubt about the judicious use of these funds, as they believe most of them might end up being embezzled.
Following the approval and disbursement of $3.4 billion Rapid Financing Instrument (RFI) to Nigeria, which is the largest COVID-19 emergency financing package so far released by the International Monetary Fund (IMF), the multilateral financial institution now expects transparent and accountable use of the funds.
The IMF’s financial assistance to Nigeria is meant to support the healthcare sector, stabilise the economy, and protect jobs and businesses that have been severely impacted by the pandemic.
The Bretton wood institution has been disbursing funds to work closely with member countries to ensure transparent and judicious use of the financial support, while making sure they are used for the intended purpose.
The IMF’s mission chief for Nigeria, Amine Mati, during a conversation, pointed out the measures to be taken by Nigeria in order to enhance transparency and governance in the use of the $3.4 billion IMF emergency financing.
According to the IMF chief, the Nigerian Government had committed to undertake an independent audit of crisis mitigation spending and related procurement processes, as well as to publish procurement plans and notices for all emergency response activities which include the names of companies that were awarded the contracts and the beneficial owners.
Mr. Mati also disclosed that special budget lines are to be created to record all crisis emergency response measures, which are published daily on Nigeria’s treasury online portal. These measures will not only ensure that financial assistance received as part of the COVID-19 response is used for its intended purposes, but will also significantly strengthen the oversight of the entire budget used for the government’s crisis response.
— IMF (@IMFNews) May 31, 2020
Implementing these measures will help to drastically reduce the governance and transparency challenges as well as corruption vulnerabilities of a country like Nigeria. Most of the critics of the government’s borrowing pattern have often expressed serious doubt about the judicious use of these funds, as they believe most of them might end up being embezzled.