RECENT moves in the downstream oil sector highlight Nigeria’s paradox of misery amid enormous endowment. While the Nigerian National Petroleum Company Limited pledged six million barrels of crude to the Dangote Refinery by December, five other smaller domestic refiners lamented their inability to commence production. Pump prices of refined products climbed higher amid continued supply hitches. Without further delay, President Bola Tinubu should drive a programme facilitating domestic self-sufficiency in refining.
Officials, including the Minister of State for Petroleum, Heineken Lokpobiri, admitted that the failure of the NNPC to supply Dangote Refinery and five modular refineries with crude feedstock had stalled their full take-off. They blamed lower-than-expected crude production for the lapse.
The Crude Oil Refinery Owners Association of Nigeria lamented that several more refineries were also nearing completion but were stuck because of supply uncertainties.
Meanwhile, pump prices spiked, creating further apprehension for business operators and deepening Nigerians’ agony. Manufacturers said the rise in per litre price of diesel to N1,275 in Lagos, and N1,300 ex-Lagos, was further impacting on production costs and prices.
Dangote cited the failure of the NNPC to provide it with crude for missing its latest production commencement target of October. It had missed several previous targets despite its official opening in May. It gave a new date of November 30.
Nigeria’s governance practices often defy logic. With over 37 billion barrels in crude oil reserves, it is Africa’s largest. It is nevertheless the continent’s highest importer of refined petroleum products.
It has four state-owned refineries, moribund for over three decades, running losses and gulping billions of dollars through dubious turnaround maintenance contracts, yet resists the rational option of selling them.
Instead of driving a vigorous programme to become sub-Saharan Africa’s refining hub, officials continue to frustrate private local refining initiatives.
The delay in supplying local refiners is curious; the NNPC should clarify whether it is still supplying itself 445,000 barrels of crude per day to sell and use its proceeds to import refined petrol, and whether it has stopped the controversial crude-for-refined products arrangement as ordered by Tinubu recently.
Analysts suggest that the NNPC should simply set aside the 445,000bpd for local refiners to guarantee them adequate feedstock. It is also curious that while NNPC unfailingly provided itself with the allocation for decades irrespective of crude production shortfalls, it now struggles to supply private refiners claiming reduced production!
Tinubu, who like his predecessors, has retained the petroleum portfolio, must resolve this logjam promptly. It is not rocket-science: while pricing and subsidy may remain issues, the solution to the downstream quagmire lies squarely in achieving self-sufficiency in refining.
The national folly must stop. In 2021, Nigeria spent $11.3 billion importing refined products, according to the Observatory of Economic Complexity, the 18th largest importer worldwide and Africa’s No 1. This rose to $23.3 billion in 2022, Aljazeera reported.
Among OPEC member states, Algeria refines 677,000bpd; Iraq’s over 15 refineries have a combined capacity of 1.0 millionbpd; Iran’s 2.64 mbpd capacity represents 22 per cent of the Middle-East’s total output, reports GlobalData. Libya’s refineries process 634,000bpd. Non-OPEC member, Egypt, with crude production of just 660,000bpd, nevertheless refines 833,000bpd, some of which it exports.
Nigeria should therefore adopt a national emergency programme on domestic refining. It must be private sector-led: the state-owned refineries should be sold immediately; the NNPC should withdraw completely from the downstream.
Why We Seek Inclusion In Conditional Cash Transfer –Obiora Oti
THE National Vice President of Mobile Money and Bank Association of Nigeria (MMBAN), Obiora Oti, said money wallet bankers would improve their capitalisation and liquidity if the government included them as facilitators in the conditional cash transfer scheme.
Oti told The ICIR exclusively on Wednesday, November 8, that many young people involved in the money wallet business could be supported with a seed capital of about N50,000 and become part of the Federal Government’s cash transfer scheme.
This development, he said, would ensure enough liquidity for them to stay in business since many of them have undergone financial inclusion training under the Central Bank of Nigeria (CBN) policy guidelines.
Oti recalled how he supported someone with seed money of N20,000 in 2020, during the COVID year, and how the person has become an aggregator and now manages N15,000,000 capital.
“This is how financial inclusion works, and it is one of the fastest ways of removing people from poverty,” he said.
“Typically, you don’t grow the gross domestic product (GDP) by throwing money to people through interventions. When there is a channel for such distribution, it stimulates the economy’s growth,” he added.
He also argued that empowering money wallet agents was a sure way of driving Nigeria’s financial inclusion and economic base.
According to Oti, Nigeria has many lessons from Kenya in its financial inclusion success story because of the Kenyan government’s involvement and facilitation through policy direction and incentives to operatives.
Agency banking allows customers to deposit and withdraw money instead of going to the bank or using automated teller machines (ATMs.)
Currently, there is one agency banking agent for every 80 Nigerians and one bank branch for every 27,000, according to a 2023 report on the Nigerian Financial Services Market.
Naira Falls To N1, 000/$ In Official Market
Despite recent moves by the Central Bank of Nigeria to strengthen the foreign exchange market, the naira closed trading on the Investor & Exporter forex window on Thursday at N996.75/$.
This is a 13.95 per cent decline from the N874.71/$ it closed trading on Wednesday. So far, the naira has lost 27.75 per cent of its value since opening the week at N780.23/$ according to details on FMDQ OTC Securities Exchange.
Since firming up against the dollar last week, after news that the apex bank was clearing some of its backlog broke, the naira has been on a steady decline in both the official and parallel markets.
So far, the naira has lost about 40 per cent of its value in 2023, earning the tag of one of the worst performing African currencies from the World Bank.
In the parallel market, the currency has lost value too, falling from N950/$ as of Friday to close to N1,140/$ as of Thursday according to Bureaux De Change operators who spoke to The PUNCH. This represents a 20 per cent decline.
A trader who only gave his name as Kadri said, “Dollar is N1,100 if you want to sell. It is N1,140 if you want to buy.” Another trader, Awolu, stated that he would buy the dollar at N1,100 from our correspondent.
He said, “Dollar is N1,100 if you want to sell to me.”
Earlier in the week, the President of the Association of Bureaux De Change Operators of Nigeria, Aminu Gwadabe, told The PUNCH that the dollar was gaining against the naira because people who had bought it at a higher price were resisting its fall.
He said, “Speculators are always looking at elements of sustainability. Once they sense that it (the injection) is not continuous, they begin to react. They begin to react. It is the reaction of the market we are witnessing. Also, there is resistance. There are people that bought at a higher price that this does not favour. People are not willing to take further losses.”
Concerned with the fall of the currency, the presidency recently stated that it is planning policies to strengthen the local currency.
A Special Adviser to the President on Economic Matters, Dr Tope Fasua, who was representing the Vice President, Kashim Shettima, at an event, said: “For those who are speculating and praying and wishing that the currency would become nonsense, I believe that the central bank is rolling out the policies and the government that I serve, led by the President, will shock some of them.”
Dangote Repatriates $688m From African Operations
Dangote Industries Limited has revealed that it has so far repatriated over $687.98m through various banks in Nigeria.
In a statement on Sunday, the company said it brought in $576,008,672.41 through various banks in Nigeria, in addition to a $111,968,109.38 cash swap arrangement between Dangote Cement Plc and Ethiopian Airlines.
Dangote re-affirmed its determination and belief in Nigeria, noting that the government of President Bola Ahmed Tinubu had shown the will and resolve to get the economy moving again.
“We are not body-shop investors. We believe in Nigeria, and we believe in Africa. We are genuine and authentic about our investments, and we call on all relevant agencies to investigate our FX transactions in the past 10 years and make public any infraction noticed or discovered.”
Insisting that all forex purchased in respect of its African Project Expansion were genuine and fully utilised for what they were meant for, the firm noted that the projects for which the forex was utilised were visible for everyone to see.
“It is on record that some of these projects were commissioned by Nigerian top-ranking government officials and in attendance were chief executives of various banks, captains of Industries, and the Presidents of the host countries supported by their Senior Government officials.
“The commissioning events of these projects were well documented and covered by both local and international media. There are also print and electronic copies of the commissioning ceremonies as further testimony to the judicious utilisation of the funds.”
Dangote further explained that its massive investments in Africa would lead to the repatriation of forex in the very near future and boost foreign exchange earnings in Nigeria, as well as stabilise the forex market.