The International Energy Agency (IEA), in its latest monthly report, expects the coronavirus disease to erase almost a decade of oil demand growth in 2020, with countries around the world effectively having to shut down in response to the pandemic.
The report said that oil demand in April was expected to decline by 29 million barrels per day, when compared with the same period in the previous year.
(READ MORE: Banks that hedged against 2020 Oil price crash)
In view of this, it is obvious that the scale of the oil crisis has defied the efforts of OPEC+ and other oil-producing countries, as the idea of production shutdown is moving towards reality.
In Nigeria, the country’s headline crude, Bonny light, is a little over $18 per barrel, while the Brent crude just rebounded to about $25 per barrel. Due to low oil demand and increasing unsold cargoes of crude oil, the Bonny light crude was earlier sold for a discounted price of less than $10 per barrel.
In the meantime, oil-producing firms in the country have applied some measures in order to mitigate the impact of the shocks. These include staff reduction, downward review of contracts with oil service firms, working at reducing production cost, and so on.
However, these measures appear inadequate, as the global oil demand needs to improve. Crude also needs to start selling for between $35 and $40 per barrel in order for these companies to stay in business.
The Nigerian National Petroleum Corporation (NNPC), through its spokesman, Kennie Obateru, in his interaction with the press some days ago, disclosed that the oil firms may consider shutting down production if the situation persisted.
He said the firms could not keep producing without a market to sell. This, coupled with filled up storage capacity and prices below the cost of production, make it unsustainable for the oil firms to keep producing.
In a related development, CNBC reported that Goldman Sachs, in a note to investors, pointed out that the market is expected to test the global storage capacity in the coming weeks and will likely create more volatility with more spikes to the downside. This is because there will be nowhere to store the oil, thereby leaving no other option but a shutdown in line with the expected demand losses.
Similarly, an energy expert, Damola Adegun, admitted to Nairametrics that the market conditions could really be unfavourable. However, he clarified that the shutdown will not be automatic, as there were two conditions under which the shutdown could occur. Damola said:
“There are two ways that the shutdown can happen; these are voluntary shutdown or government sanctioned shutdown. The voluntary shutdown is basically if the extra low prices persist for a long time (that is 5 to 6 months). Then, you will see oil companies shut down some wells because of the high cost of keeping them.”
Going further on that, he said, “On the short run, they will not shut down because of cash flow and also because there is no bankruptcy pressure. Some of them will still try to stay alive just to meet one or two needs.
“For the government-sanctioned one, it will be mostly to comply with the pledges made to OPEC. The way they will do that is mostly by curtailing people from the production.”
Meanwhile, in the short run, the only shut-in that is likely going to happen is the government-sanctioned one which is OPEC induced output cut that is expected to kick in by May 1, 2020. The oil-producing companies will consider the voluntary option if the very low oil prices and high cost of production persist.
Recall that the coronavirus pandemic has led to a global economic crisis and an unprecedented slump in oil demand. This is crippling the oil industry, threatening its growth and even existence.
The historic low oil demand stems from the lockdown of households, businesses, and factories, as well as travel restrictions, which are all part of measures aimed at containing the spread of the coronavirus pandemic.
The crisis is further compounded by the global oil storage crisis; unsold oil inventories keep piling, and storage facilities are filling up fast in the midst of global supply glut. In fact, some days earlier, the American WTI was sold below zero dollars per barrel— meaning that the oil traders had to pay to get the crude off their hands.
The Organization of Petroleum Exporting Countries and its allies (OPEC+) and some top oil-producing countries, in a deal brokered by the US President Donald Trump, agreed to output cuts that could rise to almost 20 million barrels of crude oil per day.
However, these cuts have not had the desired impact on global oil prices, as the slump still continues. Analysts suggested that the action by these oil producers came late. They also painted a gloomy picture, explaining that the output cut is just a fraction of the solution to the decline in oil demand.
US imposes $15,000 visa bond on 15 African countries, others
The US has issued a visa rule requiring tourist and business travelers in some countries to pay a bond of up to $15,000 in addition to the visa fees.
The outgoing administration of US President, Donald Trump, on Monday, November 23, 2020, issued a new temporary visa rule that requires tourist and business travelers from 15 African countries and others to pay a bond of up to $15,000 in addition to the visa fees, which ranges from $16 to $300, in order to visit the United States.
According to TheCable, the US State Department said the visa bond pilot programme, expected to take effect from December 24 and end on June 24, 2021, is targeted at countries whose citizens have higher rates of overstaying B-2 visas for tourists and B-1 visas for business travelers.
The Trump administration said the six-month pilot program aims to test the feasibility of collecting such bonds and will serve as a diplomatic deterrence to overstaying the visas. Hence, overstay places significant pressure on Department of Justice and Department of Homeland Security.
The visa bond rule will permit U.S. consular officers to request tourist and business travelers from countries whose nationals had an overstay rate of 10% and above in 2019 to pay a refundable bond of $5,000, $10,000, or $15,000.
The countries whose tourist and business travelers fall into this category and subjected to the bond requirements are 24 countries, including 15 African countries. While these nations had higher rates of overstays, they sent relatively fewer travelers to the United States.
The countries include Afghanistan, Angola, Bhutan, Burkina Faso, Burma, Burundi, Cape Verde, Chad, the Democratic Republic of the Congo (Kinshasa), Djibouti, Eritrea, the Gambia, Guinea-Bissau, Iran, Laos, Liberia, Libya, Mauritania, Papua New Guinea, Sao Tome and Principe, Sudan, Syria, and Yemen,
Nigerian travelers escaped paying the temporary visa rule, as their overall score was below the threshold of 10% and above overstaying rate.
Senate approves issuance of N148bn promissory notes to Bayelsa, 4 others
Promissory notes worth N148,141,969,161.24 has been approved by the Senate as refund to Bayelsa, Cross River, Ondo, Osun and Rivers States
Promissory notes worth N148.141billion have been approved by the Senate as a refund to Bayelsa, Cross River, Ondo, Osun, and Rivers States for projects executed on behalf of the Federal Government.
The approval which was given by the Senate at the plenary on Tuesday, 24th November 2020, came after the presentation of a report by the Committee on Local and Foreign Debts, led by Senator Ordia Clifford (PDP-Edo).
According to a news report by NAN, this is a go-ahead to the Federal Government, who had sought the approval of the Senate for issuance of promissory notes for a refund on federal projects executed by State governments.
The request was contained in a letter addressed to President of Senate, Dr. Ahmad Lawan by President Muhammadu Buhari, and read at plenary. The Senate referred the matter to the Committee on Local and Foreign Debts for further legislative input.
Senator Ordia Clifford, while presenting the report of the committee, said the Permanent Secretary, Federal Ministry of Finance; Federal Commissioners of Finance and Works in the five states, had briefed the committee on details of the projects.
He said the Committee was presented with documents relating to the approvals of the Federal Government through the Federal Ministry of Works and Housing for the execution of the projects and certificates of completion, amongst other documents.
At the plenary today, Senator Ordia moved the motion that the Senate approves the Committee’s recommendations by approving the issuance of the promissory notes to the State governments.
According to him, the amount due to the five states is N148.14billion.
- Bayelsa was allotted N38.40billion
- Cross River was allotted N18.39billion
- Ondo was allotted N7.82billion
- Osun was allotted N4.57billion
- Rivers was allotted N78.95billion
What they are saying
The President of the Senate, Ahmad Lawan, disclosed that records showed PDP states had the highest refund, he said: “If you look at the list of states, only two are APC states and they have the least in terms of refund, this is fantastic and a mark of leadership by the Federal Government. This shows tolerance and leadership by this administration.”
Interswitch Group becomes Finastra’s lead technology partner in Nigeria
nterswitch Group has unveiled a consolidated partnership with Finastra, one of the world’s most influential Fintechs.
In a bid to further develop its market and expand, Interswitch Group has unveiled a consolidated partnership with Finastra, one of the world’s most influential Fintechs.
This is according to a verified post by Interswitch Group on Linkedin, as seen by Nairametrics.
What this means
The strategic partnership enables Interswitch to become Finastra’s lead technology partner and will avail the latter the opportunity to bring the broadest set of financial software solutions to financial institutions in Nigeria and across Africa, in conjunction with Interswitch’s strong understanding of the local banking and payments landscape, as well as the ability to deploy solutions across these markets.
Some of Finastra’s financial software solutions that will be incorporated into Interswitch’s digital solution include: Fusion Kondor and Fusion Trade Innovation, which will consolidate Interswitch’s position as a hub for financial solutions, including treasury and trade solutions.
What they are saying
Commenting on the partnership, the Founder and Group Chief Executive Officer of Interswitch, Mitchell Elegbe, was quoted by Tech economy saying: “Our partnership with Finastra is consistent with our strategic growth plan and we both share the vision of deepening access to financial services by providing world-class technology and innovative solutions.
“The partnership enables Finastra to seamlessly deploy its technology in this market. For Interswitch, we will be leveraging our proven success and expertise in delivering transaction banking solutions to support Finastra in localizing and implementing their technology in this region.’’
On the other hand, the Head of Partner Ecosystem MEA & CIS at Finastra, Hamid Nirouzad, said: “Interswitch has a proven track record of delivering solutions to commercial banks, as well as, a strong understanding of the local banking landscape across Nigeria and sub-Saharan Africa.
“Finastra is committed to providing its solutions to financial institutions across the world, and partnerships such as this will result in successful projects, with rapid delivery at a reasonable cost.”