Oil
Nigeria government may lose $12billion due to oil theft – Okonjo-Iweala
ABUJA – Revenue earned by Nigeria this year may be as much as $12 billion short of budget estimates as theft of crude and output disruptions persist in the oil-rich Niger River delta, Finance Minister Ngozi Okonjo-Iweala said. The government will draw down its oil savings in the Excess Crude Account to compensate for the drop in revenue to keep the budget deficit under control, Okonjo-Iweala said in an interview with Bloomberg in Abuja.
Savings in the special crude account have dropped by half as President Goodluck Jonathan’s government tries to make up for the drop in oil revenue and fund a deficit that has reached 2.5 percent, according to the central bank. With a 2013 budget based on a daily output of 2.53 million barrels and an oil price of $79 a barrel, Nigeria expected revenue of almost $80 billion from exports. In the first half of the year, oil receipts amounted to $28.2 billion, more than $7 billion below the estimate, according to central bank figures.
“What is amazing now is that we’ve had this quantity of shock and we were able to weather it,” Okonjo-Iweala said. “You can say theft, but it’s still a quantity shock.”
Nigeria depends on crude exports for about 80 per cent of government revenue and 95 percent of export income. Criminal gangs tapping oil from pipelines for illegal sale have posed the biggest threat to output since a government amnesty in 2009 reduced armed attacks led by rebels fighting for greater control of the region’s resources.
The revenue shortfall due to output disruptions will probably be between $6 billion and $12 billion, said Bright Okogu, director of the Budget Office, who sat in on the interview with the finance minister. The government saves the balance of oil revenue above the budgeted price in the Excess Crude Account, which had a balance of just under $5 billion, down from about $9 billion at the beginning of the year, according to the minister. Nigeria’s vulnerability to shocks is heightened because of lower government revenue from oil, putting pressure on the currency, central bank Governor Lamido Sanusi said in an interview in Oslo.
“The great challenge now is that the fiscal buffers are not as strong as they would be because of the revenue shortfall,” Sanusi said. “If there are any adverse external developments that would feed into this weak revenue profile and put pressure on exchange rates.”
The central bank draws down its foreign-currency reserves to sell dollars at twice-weekly auctions to keep the naira within a band of 3 percent around 155 per dollar. The naira gained 0.2 percent to 158.73 against the dollar on the interbank market as of 2:09 p.m. in Lagos, the commercial capital. “This increases the pressure on the external balance which means the external reserves and exchange rate will be under pressure,” Bismarck Rewane, chief executive officer at Financial Derivatives Co., said by phone from Lagos today. “Once the external balance is under pressure, there is an underlying threat that will manifest in speculative attack against the currency.”
Okonjo-Iweala is seeking to meet a budget deficit target of 1.9 percent of gross domestic product this year. The shortfall reached 2.5 percent in the second quarter during the peak of the output outages, according to data from the central bank. President Goodluck Jonathan is due to present his 2014 budget to lawmakers on Nov. 12. ”When there’s a breakage the impact is that the pipes are shut down, the effect is that 400,000 barrels are shut down,” Okonjo-Iweala said. “The actual theft is like 70 to 80,000 barrels a day.”
The average price of Nigeria’s light, sweet crude has stayed above $100 a barrel this year. The official selling price of Nigeria’s benchmark Qua Iboe crude for November loading was set at $3.50 a barrel more than dated Brent, the European benchmark, according to state-run Nigerian National Petroleum Corp. Dated Brent was priced at $108.92 a barrel at 9:18 a.m. in London. Income earned by Nigeria from crude exports, taxes and other sources are shared among the three tiers of government, including the federal, 36 state governments and 774 local councils. At allocation meetings in August and September, funds received were not enough to meet expected allocations, prompting complaints from some state officials. The disputes over allocations “are over,” Okonjo-Iweala said. “Everybody realizes that we have to allocate what comes into the coffers.”
– VANGUARD
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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