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IMF Worries Over Nigeria’s Renewed Use Of Fuel Subsidies

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The International Monetary Fund (IMF) has expressed concern over Nigeria’s move to renew fuel subsidies and urged the government to continue efforts to unify its exchange rates.
Nigeria, Africa’s largest oil exporter, which still has to import almost all its fuel needs due to lack of refining capacity, said in March it had ended costly fuel subsidies.
It also has multiple naira rates running in parallel that were put in place during a 2016 oil price crash to avoid a big devaluation but which have underpinned an unofficial exchange market.
“The mission (IMF team) expressed its concern with the resurgence of fuel subsidies,” the IMF said in a statement following virtual meetings with the Nigerian authorities.
“The mission recommended maintaining the momentum toward fully unifying all exchange rate windows and establishing a market-clearing exchange rate,” it added.
The country’s central bank has recently been letting the currency’s official value gradually weaken in an apparent move to allow it to converge with what is known as the NAFEX rate, a market-determined rate for investors and exporters.
The IMF’s comments came after the World Bank this week said the central bank’s management of the foreign exchange regime had reduced access to foreign exchange, undermining investor confidence and investment appetite.
The IMF also said in its statement last Thursday that Nigeria’s banking industry remained well-capitalised with the level of non-performing loans (NPLs) contained.
“Nevertheless, it remains to be seen what share of forborne loans may turn non-performing as the impact of the pandemic abates,” it said, adding that NPLs often rose towards the end of an economic crisis.

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Oil & Energy

Nigeria Petitions OPEC+, Demands Quota Increase

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The Minister of State for Petroleum Resources, Timipre Sylva, said he has petitioned the Organization of the Petroleum Exporting Countries and its partners known as OPEC+ for an increased oil production quota for Nigeria.
Sylvia revealed this at the Gastech 2021 conference in Dubai, according to S&P Global Platts.
According to him, the country already wrote the group for an increment in its quota.
He said: “We’ve put request on the table, and we expect that to be looked at.
“We have capacity for more production than we are producing right now. Unfortunately, we are constrained by the quota.”
The Minister said the country’s full production capacity of about 2.2 million barrels per day should be reflected in a revised quota, saying that the country’s production struggles is due to technical problems from re-tapping reservoirs that had been shut to comply with the stringent OPEC+ cuts of the past 17 months, adding that production struggles would soon be fixed.
He said output could rebound to around 1.7 million barrels per day by November and two million barrels per day by the end of the year.
“We had some issues from shutting down the reservoirs,” he was quoted as saying by S&P Global Platts.
“When you shut down a reservoir, to restart it, sometimes there are challenges,” he added.

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Content Policy Saves $2bn In NLNG Train 7

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Nigeria was saved the sum of $2 billion dollars from the ongoing Train 7 of the Nigeria liquefied Natural Gas (NLNG) project as a result of using Nigerian firms, says the Executive Secretary, Nigerian Content Development and Monitoring Board (NCDMB), Mr Simbi Wabote
Wabote, stated this last Friday, shortly after receiving the award of African Local Content Icon, from the African Leadership magazine, in Yenagoa.
The NCDMB Executive Secretary, who dismissed the assertion that the Nigerian content policy was costly, and a ploy by foreign interests who do not wish the country to develop, described the claim as blackmail, because experience had shown that the policy was more cost effective for oil firms.
“The Nigerian content policy saves costs, from the projects that the NCDMB have supervised it is clear that it is better for the International Operating Companies in Nigeria, but foreign interests at global levels erroneously say that local content is expensive.
“Before the move to increase the participation of Nigerians in the oil and gas sector, the participation was at about three per cent and previous administrations relied mostly on taxes and revenue and lost sight of the opportunities for Nigerians to get involved in the sector.
“From the oil sector where I am coming from, it is five times more expensive to pay an expatriate than a Nigerian, so how can they say that local content is more expensive ?
“ On the Train 7 project if you look at the cost provided by foreign companies, you have a wide gap of about $ 2 billion from the quotations of the lowest submitted by foreign firms and the highest from Nigerian companies, so local content is better as we ensured that quality was not compromised.
“From 2010 till now, we have come a long way, for instance NLNG had 90 per cent of the workforce as expatriates, but today 90 per cent of the workers are Nigerians with some even occupying top positions in foreign oil firms.
“I am thankful to President Muhamadu Buhari, who gave me the opportunity to practice local content in the public sector, by appointing me in 2016 and reappointing me in 2020,” Wabote said.
On the African Local Content Icon Award bestowed on him, Wabote said that it came to him as a ‘pleasant surprise’ adding that the ideals of the African Leadership Magazine justified his decision to accept the award.
Speaking earlier, the Managing Editor of the African Leadership Magazine, Mr Kingsley Okeke, noted that the process leading to the selection was transparent and independently conducted with nominations received from across the African continent.
“We found in the accomplishment and achievements of the Executive Secretary of the NCDM, a worthy character we must encourage and export to the rest of Africa.
“Our focus at the magazine is to spotlight the positive developments in the African continent and change the narrative and stereotypes by western media,” he said.
The Tide source reports that the African Local Content Icon Award was presented by Mrs Laura Hall, President-elect of the National Black Caucus in the U.S congress, at the headquarters of the NCDMB in Yenagoa.
Hall said that blacks in the United States, represented by the Black Caucus, also have a similar challenge with building local capacity to compete with their white counterparts in executing contracts in the U.S.
She said the caucus would collaborate and share ideas with the NCDMB on ways to increase the capacities of blacks in the U.S.

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Oil & Energy

HOMEF Frowns At PIA Non-Commitment To End Gas Flaring

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The Health of Mother Earth Foundation. HOMEF, has expressed displeasure that the Petroleum Industry Act is not definite about ending gas flaring regime in the country.
Executive Director, HOMEF, Rev Nnimmo Bassey, said the Act creates numerous provisions for operators to continue flaring gas unchecked, as it gives power to the Commission to grant operators a permit to flare gas.
Bassey lamented that such permits could easily be abused and turned into a license for unchecked and perpetual environmental and health damage to communities (as has been done previously).
“The Act also does not state the timeframe allowed for flaring in the case of facility start up or for strategic operational reasons
“While the PIA makes the flaring of gas illegal, it nonetheless creates a series of exemptions which ensures that the same gas flare regime continues literarily unchecked.
“The Act identifies instances where gas flaring may be permitted. These include (a) in the case of an emergency; (b) pursuant to an exemption granted by the Commission; or (c) as an acceptable safety practice under established regulations.
“It goes further to clarify that the Authority or Commission may grant a permit to a Licensee or Lessee to allow the flaring or venting of natural gas for a specific period –
(a) where it is required for facility start-up; or
(b) for strategic operational reasons, including testing.
“The section however does not provide an explanation of what ‘strategic operational reasons’ are beyond testing. It also does not state the timeframe allowed for flaring in the case of facility start up or for strategic operational reasons. These provisions could be easily abused and turned into a license for unchecked and perpetual environmental and health damage to communities (as has been done previously).”
HOMEF maintained that to end gas flaring, offenders should be made to pay the full economic cost of the flared gas based on the prevalent market price of gas, as well as the related health and environmental costs.
The environmental rights group also said that the Act does not appear to consider Nigeria’s climate change pledges as contained in the nation’s Nationally Determined Contributions.

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