Connect with us
nairametrics

Columnists

Oil Bears have a Joker: Libya

OPEC decided to exempt Libya from its oil production cuts due to the production lost through conflicts and its closure of ports and oilfields.

Published

on

Worry, as Coronavirus threat pushes oil price below budget benchmark

After a successful meeting where OPEC and its ally nations finally agreed on the 6th of June 2020 at the virtual conference to extend on their oil-production cuts through July, reports from Africa suggested that two of Libya’s oilfields would reopen soon. Could this be a hurdle for the oil cartel to scale through as prices soar on capped output by its members?

Sequel to my last piece, who will ruin the OPEC+ party? Bearish traders were hoping for an unsuccessful meeting this weekend. There were indications that few member nations were going to ruin the agreements because they found out some members were cheating. Fortunately, Saudi and Russia were able to yield their influence on these member nations to compensate for their failed quotas and extend their production cuts for extra months. Mexico did what we expected Mexico to do as they insisted on sticking on the April agreement and not extending.

However, Mexico’s stance could not affect the success of the OPEC meeting held this weekend. Iraq and Nigeria agreed to extend their quotas to compensate for their negligence in complying with the previous agreements. After settling what happened to be the tempest in the teapot, OPEC moved on to have a successful meeting. The success of the conference has gotten prices soaring these past few days as the Bulls now target the $50 range.

READ MORE: Brent crude falls, global investors fear strengthened on resurgence of COVID-19 cases

But would that be possible with incoming oil supply from Libya? Earlier in April, OPEC decided to exempt Libya from its oil production cuts due to the production lost through conflicts and its closure of ports and oilfields. Economic consideration will safeguard them from cuts, but does the world need Libyan oil at this period. “Work at the El-Sharara and El-Feel oilfields will be resumed soon,” Ali al-Theeb said in an interview late Friday. El-Sharara is Libya’s largest oilfield that has the capacity to produce over 300, 000 barrels a day. That is a third of the country’s production capacity. Libya is also Africa’s largest reserve, but conflicts since 2011 have not allowed the oil-rich nation to enjoy from its oil wealth.

GTBank 728 x 90

Libya’s biggest oilfield might resume production after a five-month shutdown as international pressure wants to end the country’s civil war. On Sunday, the State-run National Oil Corp said that “after lengthy negotiations with militants to reopen a valve closed since January, the Sharara field would soon restart. It is believed that production will resume at an initial 30,000 barrels per day and it would take about three to four months to return to full capacity due to damage caused by the shutdown, as said in its statement.

The oilfield was supplying about 300,000 barrels before it was abruptly disrupted by attacks from Khalifa Haftar, who leads a rebel military force.

READ ALSO: AfDB develops Index to aid women empowerment 

GTBank 728 x 90

What is happening in Libya now?

Last week, a blueprint for the settlement of the war in Libya was drafted by Egypt, and a request was sent to the UN. The request would require the UN to send invitations to all conflicting parties to Geneva to negotiate an agreement on the blueprint’s implementation. According to the report, the proposal called for a truce beginning this week, and the withdrawal of mercenaries from Libya and the disarmament of their militia. Khalifa Hafter, the Libyan military commander, gave consent to this ceasefire proposal.

Download the Nairametrics News App

This event allowed production to resume, although there were reports on Tuesday that production had been stopped for the second time this week. The situation remains volatile as analysts believe there is still some volatility in the North African country. The shutdown of these oilfields has crippled the country’s primary source of income. Libya is safe from OPEC cuts because years of war have ravaged the nation financially, and it must recoup its losses. But when Libya would resume peaceful production and restructuring is a question, only a few can answer as the situation does not look resolved yet.

Dapo-Thomas Opeoluwa is a Global Markets analyst and an Energy trader. He is currently an MSc. Student in International Business, Banking and Finance at the University of Dundee and holds a B.Sc in Economics from Redeemers University. As an Oil Analyst at Nairametrics, he focuses mostly on the energy sector, fundamentals for oil prices and analysis behind every market move. Opeoluwa is also experienced in the areas of politics, business consultancy, and the financial marketplace. You may contact him via his email- [email protected]

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.

Columnists

Local refining; A panacea for Nigeria’s reliance on imported refined products

The start up of refineries will attract , enhance employment opportunities and conserve the foreign exchange earnings of the country.

Published

on

Analysis: NNPC and its refining losses 

News reports earlier this week say the Vice President, Prof. Yemi Osinbajo, speaking at a virtual meeting noted that the problems associated with Nigeria’s refineries will persist if the Federal Government continues to own and run them. According to him, the government should have no business running refineries as they should be in the hands of the private sector. He further noted that the government’s focus currently is to assist the private sector develop modular refineries. He listed a few private refineries coming on stream which include a 100,000-barrel capacity refinery located near Portharcourt, the Niger Delta Petroleum refinery in Delta state and six modular refineries that should come on stream soon.

Explore the Nairametrics Research Website for Economic and Financial Data

About 90% of the refined petroleum products consumed in Nigeria are imported. The nation’s refineries located in Kaduna, Warri, and Port Harcourt with a combined nameplate capacity of 445,000 bpd have long operated at low levels due to many years of underinvestment and poor maintenance. Despite continuous talk of revamping the
refineries, in 2019, combined capacity utilization of Nigerian refineries fell to 2.5%, an all-time low annual activity level since 1998 when NNPC started providing the data. Last year, Pipelines & Product Marketing Company (PPMC) reported that it imported 9,158,528mt of refined products (PMS, HHK, AGO & ATK) while it evacuated only 963,302mt of refined products from Nigerian refineries, implying local production was just at 10.5% of total refined products available for distribution. Going by the historical performance of these refineries, it is safe to agree with the Vice President that the Nigerian government has no business running refineries.

READ: Hotels in Nigeria are on the verge of collapse

Asides the modular refineries mentioned by the Vice President expected to come on stream soon, the country is also patiently awaiting Dangote’s 650,000 barrels perday capacity refinery. The BUA group also recently announced plans to commence a 200,000 barrels per day refinery and petrochemical plant in Nigeria to be located in Akwa Ibom State. Although it is widely believed that the local refining operations will reduce the nation’s reliance on
imported refined products, the question in the minds of many Nigerians is how local refining of petrol will impact the pump price. In this regard, the Minister of Finance, Budget and National Planning, Zainab Ahmed, stated that refining petrol locally will not significantly reduce the price of petrol since the refineries will sell at the international price, noting that the only expected savings will be freight or shipping.

GTBank 728 x 90

READ: DPR reveals 4 major areas of focus for downstream operations of oil and gas sector

That said, Nigeria as a country has a lot to benefit from being a net exporter of refined petroleum products. Nigeria is the second largest producer of oil in Africa. The combination of rising shale production in the US, continued oversupply in the export market and weak demand, means the market for Nigerian crude is quite uncertain and a shift from export of crude to refined products bodes well for the country. The start up of these refineries will also
attract investment in warehousing and storage facilities, enhance employment opportunities and conserve the foreign exchange earnings of the country

READ: Six Modular Refineries billed to commence operation, FG says 

GTBank 728 x 90

CSL Stockbrokers Limited, Lagos (CSLS) is a wholly owned subsidiary of FCMB Group Plc and is regulated by the Securities and Exchange Commission, Nigeria. CSLS is a member of the Nigerian Stock Exchange.

Continue Reading

Columnists

Key ‘side-hustles’ Nigerian Bankers supplement their income with

The need to meet up with their financial obligations has forced some bankers to adopt side hustles.

Published

on

bankers, How much banks pay, Key 'side-hustles' Nigerian Bankers supplement their income with

The headline above seems a little inappropriate given the earnings of Bankers, vis-à-vis statistics on salaries and wages in the Nation.

The average Nigerian Banker earns at least four times the poorly implemented National minimum wage of N18,000; gets his pay promptly without being owed arrears, and enjoys other employment benefits, such as healthcare, without hassles.

Why then would these privileged few, whose wage bill cost the 13 NSE listed banks, a whopping N178b in the first three months of 2020, lockdown notwithstanding, need to supplement their already impressive income?

READ: 3 major ways COVID-19 will affect Banks’ 2020 profits

Simple, because they need to meet up with their financial obligations.

GTBank 728 x 90

The expectations are high for anyone with a decent job in a country where the unemployment rate is currently 27.1%, and where 28.6% of its population are underemployed.

The expectations are even higher for those whose work is in the banking sector, of whom it is erroneously believed, have access to unlimited funds, and an endless flow of credit facility, because they facilitate the consummation of volumes of such transactions daily.

(READ MORE: Naira expected to be under pressure until backlogs for FX payments are cleared )

GTBank 728 x 90

The peculiarity of HR policies in Nigerian banks does not allow for ‘helping’ of relatives into the same system, as is obtainable in the Nigerian Civil service. Hence, the basic assistance which Bankers can offer their ever-expanding network of dependants is direct financial aid, forcing them to engage in moonlighting activities to meet up the ‘hype’.

The activities below are from close observation and interactions with Nigerian Bankers.

Forex dealings

The existence of different exchange rates, coupled with the scarcity of FX for most sectors of the economy has given rise to opportunities for arbitrage and round-tripping. Most bankers, who by virtue of their jobs have become privy to their customers’ FX needs, are able to broker deals; matching the demand of FX with supply, and earning handsome margins in the process. Gratitude, loyalty, and referrals from their customers are an added bonus for flouting their Bank’s internal policies on staff participation in FX dealings.

Such dealings have in recent times expanded to include transactions in cryptocurrencies.

Personal professional practice

Nigerian Banking industry is a melting pot of various first degrees, with some using their bank jobs as a stop-gap for their employment problems, as they seek to improve on their chosen professions. Hence, it is not uncommon to see bankers start and run their startups in other fields, while still in paid employment of their banks.

Although, the Banks are likely to frown on not getting 100% commitment from their employees; they continue to provide a rich base of potential clients for these startups and have been their customers too.

Fidelity ads

Sports betting and Mobile Money agencies

Sports betting in Nigeria has opened up a new world of investment possibilities for sports enthusiasts and shrewd businessmen. Since 2009, when the first online sports betting site launched in Nigeria, over twenty more have joined to compete for the market in Africa’s most populous black nation, and they all seem to be thriving, as each sports competition sees the unveiling of another sports betting site in Nigeria.

(READ MORE: Bank like a hero with the Stanbic IBTC Super App “Voice Banking” feature)

Bankers, with their knowledge of the industry figures, have had a first mover’s advantage in being agents of these sport betting firms.

The same holds true for Mobile Money agencies, where Bankers have been known to use the influence of their office to expedite mobile money agent approvals and secure POS terminals, which have consequently become inaccessible to the common man.

READ: Analysis: UACN, is the dividend worth it?

Other activities

As with most business endeavours, Bankers generally indulge in businesses, in which they have a comparative advantage. Bankers in big cities use their cars to run shifts under popular cab-hailing services; some moonlight as real estate agents, because they can match customers with their real estate needs. A few others have become millionaires, by investing in their customers’ businesses. The possibilities are endless, as Bankers seek to make ends meet through their ingenuity, while staying relevant in their careers.

Explore the Nairametrics Research Website for Economic and Financial Data

Coronation ads

Cyprian Ekwensi in his classic novel ‘Chike and the River’, made popular the phrase of a man who lives by the bank of the Niger, washing his hands with spittle. Sadly, this has become the lot of most Nigerian Bankers, as they live from paycheck to paycheck, exploring one loan option to pay off a previous loan, even as they condescend to their customers in volunteering financial advice, that they are better off implementing in their personal finances.

No one is immune to the economic squeeze our double-digit inflation has brought on fixed income earners, especially not our beloved bankers.

app

Continue Reading

Columnists

Emerging concerns on crude oil price dents economic recovery

The economy continues to face severe dollar shortages due to lower oil receipts which continues to pressure the nation’s FX reserves.

Published

on

Crude Oil prices, oil

Yesterday, Brent crude oil price settled at US$41.44/bbl, down 10.7% from 6-month high of US$45.86/bbl. We note rising emerging concerns on the outlook for oil price in the global market. Cases of coronavirus are now rising faster in many European countries that had earlier taken gradual steps to open up their economies. For example, in the United Kingdom, Prime minister Boris Johnson stated the possibility of another lockdown to curtail the recent resurgence in new cases of infections. Furthermore, Libya (who has not been producing crude) announced the lifting of the force majeure on some oilfields & ports where fighters no longer have their presence. This implies Libya would resume production soon which may lead to a glut in the crude oil market particularly as the country is exempted from all OPEC cuts. The fear of increased supply comes amidst fragile demand for jet fuel.

The renewed concerns around crude prices is an unwelcome development for Nigeria considering the fact that hope of an economic rebound is largely hinged on sustained rebound in crude prices. Last week, the Minister of Finance highlighted that the country has suffered a 65% slump in revenue largely due to weak oil revenue. Furthermore, the
economy continues to face severe dollar shortages due to lower oil receipts which continues to pressure the nation’s FX reserves. In addition, external trade condition continues to worsen with a trade deficit of N2.2tn in H1 2020. With oil prices still down by c.30% from 2019 levels amidst the nation’s pledge to OPEC cuts, we do not expect any significant improvement in external conditions. However, we believe news of a decline in crude prices may provide succour for the Nigerian consumer given that lower crude price is expected to translate into lower petrol prices following the deregulation of the downstream sector.

That said, we reiterate our position that the diversification of the economy from oil remains the key strategy in reducing the vulnerability of the Nigerian economy to volatilities in oil market. The non-oil economy (which accounts for c.90% f GDP) remains crucial and its potentials can be best exploited by the private sector.


CSL Stockbrokers Limited, Lagos (CSLS) is a wholly owned subsidiary of FCMB Group Plc and is regulated by the Securities and Exchange Commission, Nigeria. CSLS is a member of the Nigerian Stock Exchange.

GTBank 728 x 90

Continue Reading
Advertisement
Advertisement
Advertisement
ikeja electric
Advertisement
Patricia
Advertisement
FCMB ads
Advertisement
Advertisement
IZIKJON
Advertisement
Fidelity ads
Advertisement
first bank
Advertisement
bitad
Advertisement
deals book
Advertisement
financial calculator
Advertisement
deals book
Advertisement
app
Advertisement