Something odd occurred in the crude oil markets days ago. Prices plunged so low that some oil traders had to pay oil buyers to bail them out.
The price of U.S. oil, also known as West Texas Intermediate (WTI), dropped more than $50 a barrel to about -$30 per barrel—meaning that an oil trader trying to sell a barrel of crude oil had to pay a buyer $30. This was the first time ever that crude oil prices became negative.
Oil futures contracts are structured for crude oil buyers to take possession of crude in May, so on the day before expiration, nobody wanted crude oil because oil storage tanks around the world were almost full.
Ugonna Ohiri-Anyanwu, CFA, a financial expert at one of the leading Tier 1 Nigerian bank, explained to Nairametrics the reasons crude oil had lost value. She said:
“Oil is a commodity; hence, it has a tendency to have large fluctuations/volatility in prices. Its prices are largely driven by the forces of demand and supply.
“Crude oil’s recent plummeting can be attributed to the decline or non-existence of demand, owing to the recent outbreak of the Covid-19 virus which has seen the whole world shut down its operations, thereby affecting logistics and the possibility for crude oil to be physically delivered.
“It was projected that the world demand for crude would decline by 30% by April 2020 and there is the possibility of a further decline in prices if demand continues to decline; hence, largest oil-producing countries are considering cutting supply to match the recent low demands and avoid a further decline in price.”
In addition, the demand for crude oil is still dropping, in spite of a deal brokered by the Saudis, Russians, and other oil producers to reduce oil production. The world is already experiencing an oil glut market, with about 100 million barrels of crude produced daily. As at the start of 2020, Brent crude sold at about $60 a barrel, but by Thursday, it dropped to about $24 per barrel.
Omeiza Makoju, ACCA, an energy analyst at an oil-producing firm, spoke on phone with Nairametrics explaining how cheap crude oil has become. He said:
“As at the close of global markets on 29/04/2020, WTI and Brent prices per barrel were $15 and $22 respectively (Average volume of an oil barrel is 158.987 litres). Applying N360/$, which is our current exchange rate according to the “adjustment of price” by the CBN, the price of WTI and Brent per litre in Naira is N36 and N51 respectively.
“This interestingly shows that the current price of a litre of Brent is the same as the average price of a litre of bottled water in Nigeria. This is just a coincidence and does not answer the question. From a global perspective, the major cause of dwindling oil prices is the sharp fall in global demand. The sharp fall is as a result of the double whammy effect of the COVID-19 pandemic and the Saudi and Russian oil price war currently ravaging world economies.
“The bigger problem is the pandemic which has led to a shutdown of global economies and which in turn has led to a drastic reduction in the consumption of crude oil. The biggest consumers have had to shut down their industries and also have to contend with oil glut/storage difficulties offshore and onshore.”
He also explained in detail, how oil demand had plummeted, causing storage facilities to fill up rapidly.
“The global oil glut is also evident in the news with images of storage tankers filled up with oil, floating, and begging to be purchased at low prices. In the Nigerian context and in addition to the impact of the pandemic, it is also clear that there are other significant local constraints we face that makes us willing to sell at low prices in a bid to survive.
“Some of them include a lack of suitable oil refining and storage capacity, operational inefficiencies, host community challenges, and financing difficulties.”
Unfortunately, oil analysts believe that the prices of oil will continue to decline as global consumption of crude oil will remain low until a vaccine is created to treat COVID-19. How soon this will be remains the major concern of world leaders, as the killer disease has brought the world to it knees.
Electricity tariff increase is suspended for 2 weeks
The FG and the Nigerien Labour Unions have agreed to suspend the electricity tariff increase for a period of two weeks.
The Federal Government and the Nigerien Labour Unions have agreed to suspend the electricity tariff increase for a period of two weeks. This was part of the agreement reached between Labour and the Government as they deliberated to avert a nationwide strike that would have grounded an already deteriorating economy.
While the strike was over two major issues, an increase in electricity charges and fuel price respectively, the decision to call off the strike was based on the suspension of the electricity bills. The following terms of reference underpinned the agreement between Labour and the Government.
Terms of reference for suspension of electricity increase for 2 weeks.
Terms of reference “The Terms of Reference (ToR) are as follows: To examine the justification for the new policy on cost-reflective Electricity Tariff adjustments. “
- Both parties are to examine the justification for the new policy on cost-reflective tariff adjustment
- To look at the different Electricity Distribution Company (DISCOs) and their different electricity tariff vis-à-vis NERC order and mandate.
- Examine and advise government on the issues that have hindered the deployment of the six million meters.
- To look into the NERC Act under review with a view to expanding its representation to include organized labour.
- The Technical sub-committee is to submit its report within two weeks.
- During the two weeks, the DISCOs shall suspend the application of the cost-reflective electricity tariff adjustments. “The meeting also resolved that the following issues of concern to Labour should be treated as stand alone items:
- The 40% stake of government in the DISCO and the stake of workers to be reflected in the composition of the DISCOs Boards.
- An all-inclusive and independent review of the power sector operations as provided in the privatization MOU to be undertaken before the end of the year 2020, with Labour represented.
- That going forward, the moribund National Labour Advisory Council, NLAC, be inaugurated before the end of the year 2020 to institutionalize the process of tripartism and socio dialogue on socio-economic and major labour matters to forestall crisis.
What this means: The decision reached between the government and labour means the service reflective tariff regime which started on September 1 2020 is effectively suspended. Customers are therefore no longer required to pay the service reflective tariffs and will revert to the previous MYTO tariffs of 2015.
- By looking at the “different Electricity Distribution Company (DISCOs) and their different electricity tariff vis-à-vis NERC order and mandate” it appears labour might be looking to recalibrating the tariffs for some Discos.
- According to documents on the tariff order published by the NERC, some Discos have tariffs for residential customers that are as high as N62/kWh while it’s just under N54 for others.
- Labour could also get involved in determining the veracity of the tariff bands that determines which customers pay what as electricity tariffs.
Just-in: NLC, TUC suspend nationwide strike
Hike in electricity tariff to be suspended for 2 weeks, while new pump price of petrol remain unchanged.
The Nigerian Labour Congress (NLC) and the Trade Union Congress (TUC) have suspended the planned nationwide strike and protest that was to commence on Monday, September 28, 2020, over the recent hike in electricity tariff and petrol pump price.
This follows the agreement reached between the Federal Government and the organized labour during the meeting held by both parties which started on Sunday night and dragged on till the early hours of Monday morning.
The disclosure was made by the Minister of State for Labour and Employment, Festus Keyamo, through a tweet post on his twitter handle.
In the agreement between the Federal Government and organized labour, the hike in electricity tariff is to be suspended for a period of 2 weeks, while the new pump price of petrol is to remain unchanged.
According to the agreement, which was seen by Nairametrics, both parties agreed to set up a technical committee on Electricity Tariff reforms, comprising Ministries, Agencies, Departments, NLC and TUC, which will work for a duration of 2 weeks with effect from Monday, September 28, 2020, to examine the justification of the new policy in view of the need for the validation of the basis for the new cost-reflective tariff.
This is due to the conflicting field reports which appear different from the data presented to justify the new policy by NERC, metering deployment, challenges, timelines for massive rollout.
The technical committee is to be headed by the Minister of State for Labour and Labour, Festus Keyamo.
Other members of the committee include the Minister of State Power, Godwin Jedy-Agba, Executive Chairman, National Electricity Regulatory Commission (NERC), James Momoh, Special Assistant to the President on Infrastructure, Ahmad Zakari as the Secretary.
Also in the committee are Onoho’Omhen Ebhohimhen, Joe Ajaero (NLC), Chris Okonkwo (TUC) and a representative of electricity distribution companies.
The terms of reference for the technical committee include;
- To examine the justification for the new policy on cost-reflective electricity tariff adjustments.
- To look at the different Electricity Distribution Companies (DISCOs) and their different electricity vis-à-vis NERC order and mandate.
- Examine and advice government on the issues that have hindered the deployment of the 6 million meters.
- To look into the NERC act under review with a view to expanding its representation to include organized labour.
FG & LABOUR reach agreement at 2:53am. Deregulation to stay as Govt rolls out palliatives for labour (details in 2 weeks); Electricity tariffs suspended by Govt for 2 weeks with a joint Committee headed by @fkeyamo to examine the justification for the new policy. Strike suspended pic.twitter.com/9tOTlJ9o1l
— Festus Keyamo, SAN (@fkeyamo) September 28, 2020
COVID-19 Update in Nigeria
On the 27th of September 2020, 126 new confirmed cases and 2 deaths were recorded in Nigeria
The spread of novel Corona Virus Disease (COVID-19) in Nigeria continues to record increases as the latest statistics provided by the Nigeria Centre for Disease Control reveal Nigeria now has 58,324 confirmed cases.
On the 27th of September 2020, 126 new confirmed cases and 2 deaths were recorded in Nigeria, having carried out a total daily test of 3,011 samples across the country.
To date, 58,324 cases have been confirmed, 49,794 cases have been discharged and 1,108 deaths have been recorded in 36 states and the Federal Capital Territory. A total of 505,556 tests have been carried out as of September 27th, 2020 compared to 502,545 tests a day earlier.
COVID-19 Case Updates- 27th September 2020,
- Total Number of Cases – 58,324
- Total Number Discharged – 49,794
- Total Deaths – 1,108
- Total Tests Carried out – 505,556
According to the NCDC, the 126 new cases were reported from 12 states- FCT (30), Lagos (24), Rivers (23), Ogun (13), Katsina (9), Plateau (9), Ondo (6), Kaduna (4), Kwara (4), Imo (2), Bauchi (1), Edo (1).
Meanwhile, the latest numbers bring Lagos state total confirmed cases to 19,239, followed by Abuja (5,674), Plateau (3,388), Oyo (3,254), Edo (2,624), Kaduna (2,397), Rivers (2,347), Ogun (1,836), Delta (1,802), Kano (1,737), Ondo (1,631), Enugu (1,289), Ebonyi (1,040), Kwara (1,032), Abia (891), Gombe (864). Katsina (857), Osun (827), Borno (741), and Bauchi (698).
Imo State has recorded 568 cases, Benue (481), Nasarawa (449), Bayelsa (398), Jigawa (325), Ekiti (321), Akwa Ibom (288), Niger (259), Adamawa (237), Anambra (234), Sokoto (162), Taraba (95), Kebbi (93), Cross River (87), Zamfara (78), Yobe (76), while Kogi state has recorded 5 cases only.
Lock Down and Curfew
In a move to combat the spread of the pandemic disease, President Muhammadu Buhari directed the cessation of all movements in Lagos and the FCT for an initial period of 14 days, which took effect from 11 pm on Monday, 30th March 2020.
The movement restriction, which was extended by another two-weeks period, has been partially put on hold with some businesses commencing operations from May 4. On April 27th, 2020, Nigeria’s President, Muhammadu Buhari declared an overnight curfew from 8 pm to 6 am across the country, as part of new measures to contain the spread of the COVID-19. This comes along with the phased and gradual easing of lockdown measures in FCT, Lagos, and Ogun States, which took effect from Saturday, 2nd May 2020, at 9 am.
On Monday, 29th June 2020 the federal government extended the second phase of the eased lockdown by 4 weeks and approved interstate movement outside curfew hours with effect from July 1, 2020. Also, on Monday 27th July 2020, the federal government extended the second phase of eased lockdown by an additional one week.
On Thursday, 6th August 2020 the federal government through the secretary to the Government of the Federation (SGF) and Chairman of the Presidential Task Force (PTF) on COVID-19 announced the extension of the second phase of eased lockdown by another four (4) weeks.