Oil
New Oil Discoveries Threaten Nigeria’s Revenue, LCCI Warns
LAGOS – The Lagos Chamber of Commerce and Industry (LCCI) has warned that new oil discoveries across various countries pose threats to the nation’s revenue.
The President, LCCI, Mr. Goodie Ibru, explained that the United States of America, which is a major importer of Nigeria’s crude oil, is already devising means and methods towards becoming a net oil exporter.
Ibru, speaking during the chamber’s Q2 press conference on the economy, stated that the nation’s extreme dependence of government finances and external trade balances on proceeds from the sector could spell doom for the nation’s economy due to the evolving global oil markets.
“US Energy Information Agency (EIA) forecasts the US oil imports to 6mbpd, roughly a third of what it uses, by 2014 as the country moves closer to oil dependence by 2035,” he said.
In his words, “Over the fifteen-month period to July 2012, US crude oil imports from Nigeria dropped to about 333,000 bpd from over 1.1mbpd, displacing West African oil from the US market. This will probably put downward pressure on price due to greater competition.”
He pointed out that additional discovery in an offshore oilfield in Angola has been projected to make the country the largest producer in Africa, ahead of Nigeria.
According to him, the domestic and international issues facing the oil and gas sector pose both risks and opportunities for the Nigerian economy, adding that the greatest risk is the potential shock to fiscal sustainability if the global oil price slumps under the current challenges confronting the ability of Nigeria to expand oil output.
He therefore called for the urgent need to diversify the economy, as the risks to sustainability of current levels of oil prices are real. He said, going forward, the solution is to fix the structural problems in the economy, especially power, railways and the road network.
“All these are critical to enhancing efficiency, productivity and progress in other sectors of the economy such as manufacturing, agriculture, Information Communication and Technology (ICT), services and downstream oil and gas,” he said.
He noted that the credit situation still remains a major problem for investors in the economy maintaining that as regards to previous review, retail lending rates was well above 22 per cent making many small and medium scale enterprises to face difficulties in accessing credit even at this high rate.
He said the tight credit situation is a major inhibiting factor to the capacity of domestic enterprises to take advantage of the robust Nigerian market. “We reiterate our call to both fiscal and monetary authorities to work together to ease credit conditions, especially for the small and medium enterprises and more importantly domestic businesses”, he added.
On the Naira exchange rate, the LCCI president stated that in the last couple of weeks, the naira has come under pressure exchanging for about N163 to the dollar in the parallel market, and said the trend is beginning to generate concerns about threats to macroeconomic stability while inflation rate stood at single digit of 9 per cent in January and later decelerated 8.4 per cent in June.
He added that Nigeria’s foreign reserve, at $47.99 billion in mid July 2013, was positive as it could cover approximately eleven months of imports, but however stated that, the dwindling oil output and development in the global market pose a risk to sustainability of the reserves at current levels.
He said the fiscal provisions in the Petroleum Industry Bill (PIB) such as royalties, fees and fines is not very attractive for investment, saying that there are so many entrants in global oil market and advised that Nigeria must make the oil and gas sector attractive so as not to drive investments elsewhere.
Ibru also called for the harmonisation of regulatory agencies, stressing that harmonising them would go a long way in reducing the cost of governance in the country. He said the power situation in the first half of the year was unsatisfactory stating that firms’ expenditure on diesel and petrol was unbearable.
“It is curious that in the midst of all these shortcomings, electricity tariff is being reviewed upwards. The programmed periodic increase in fixed charge is unfair to electricity consumers and should be reserved. There should be a good balance between the protection of the interest of investors and that of the consumers,” he added.
– THIS DAY
In a strategic move to revitalize Nigeria’s oil and gas sector, the Federal Government has unveiled two key fiscal incentives aimed at attracting investment and enhancing energy security.
The announcement was made by Mr. Wale Edun, the Minister of Finance and Coordinating Minister of the Economy on Wednesday.
The first initiative, the Value Added Tax (VAT) Modification Order 2024, introduces critical exemptions for essential energy products and infrastructure, including Diesel, Feed Gas, Liquefied Petroleum Gas (LPG), Compressed Natural Gas (CNG), Electric Vehicles, Liquefied Natural Gas (LNG) infrastructure, and Clean Cooking Equipment.
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These exemptions are designed to reduce living costs for Nigerians, promote energy security, and accelerate the transition to cleaner energy alternatives.
The second initiative, the Notice of Tax Incentives for Deep Offshore Oil & Gas Production, offers new tax relief options for deep offshore exploration projects.
This measure aims to position Nigeria’s deep offshore basin as a premier destination for international oil and gas investments, boosting the country’s appeal to foreign investors.
These reforms are part of a broader set of policy initiatives, known as Policy Directives 40-42, endorsed by President Bola Ahmed Tinubu.
The directives reflect the administration’s commitment to fostering sustainable development in the energy sector and enhancing Nigeria’s competitive edge in the global oil and gas market.
By Yemie Adeoye
NIGERIA’s President Bola Tinubu has announced that the protracted ExxonMobil-Seplat upstream oil divestment will be formally approved by the Minister of petroleum within a matter of days, just as he announced his government’s intention to expand the Compress natural Gas, CNG buses initiative.
The President who stated this during his Independence day nationwide broadcast stated that the move is in line with his administration’s commitment to free enterprise, free entry and free exit in investments which is the hallmark of his administration investment policy.
“Fellow compatriots, our administration is committed to free enterprise, free entry, and free exit in investments while maintaining the sanctity and efficacy of our regulatory processes. This principle guides the divestment transactions in our upstream petroleum sector, where we are committed to changing the fortune positively. As such, the ExxonMobil Seplat divestment will receive ministerial approval in a matter of days, having been concluded by the regulator, NUPRC, in line with the Petroleum Industry Act, PIA. This was done in the same manner as other qualified divestments approved in the sector.”
The President also seized the opportunity to plead with Nigerians to be patient with his administration’s reform policies. “As your President, I assure you that we are committed to finding sustainable solutions to alleviate the suffering of our citizens. Once again, I plead for your patience as the reforms we are implementing show positive signs, and we are beginning to see light at the end of the tunnel”.
“Our energy transition programme is on course. We are expanding the adoption of the Presidential Initiative on Compressed Natural Gas for mass transit with private sector players. The Federal Government is ready to assist the thirty-six States and FCT in acquiring CNG buses for cheaper public transportation.
Fellow Nigerians, while we are working to stabilise the economy and secure the country, we also seek to foster national unity and build social harmony and cohesion. Our economy can only thrive when there is peace”. he enthused.
As part of the administration’s push to improve Ease of Doing Business (EoDB), Nigeria’s Vice President Kashim Shettima has expressed support for ExxonMobil’s plan to invest $10 billion in the country’s deep-water oil sector.
Speaking on Wednesday, September 25, 2024, during a meeting with ExxonMobil executives at the 79th United Nations General Assembly (UNGA) in New York, Shettima called the investment “a clear testament to the administration’s economic reforms and investor-friendly policies.”
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This announcement follows news that international maritime company DP World intends to develop a multibillion-dollar port project in Nigeria.
Stanley Nkwocha, Senior Special Assistant to the President on Media and Communications, shared the development in a statement on Wednesday. He quoted Shettima as saying: “ExxonMobil’s potential investment aligns with the vision of President Bola Ahmed Tinubu’s administration for a more investment-friendly Nigeria.
We are committed to fostering an environment that supports such transformative projects.”Shettima also discussed the administration’s broader efforts to improve the ease of doing business, highlighting the “Renewed Hope Agenda,” which aims to simplify bureaucratic processes, enhance transparency, and offer fiscal incentives to attract global investors.
“Our administration has taken bold steps to unify the exchange rate, remove fuel subsidies, and implement tax reforms. These measures, though challenging in the short term, are intended to create a stable and predictable business environment in the long term,” he added.
On the oil and gas sector, Shettima mentioned that the government is revising the fiscal framework for deep-water operations to attract investment while ensuring fair returns for the Nigerian people.
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