Refineries to work optimally in 2017 – NNPC – Punch

The Nigerian National Petroleum Corporation on Tuesday said it would embark on a comprehensive rehabilitation of the nation’s refineries to achieve optimal capacity utilisation in 2017.

NNPC Chief Operating Officer, Refineries, Mr. Anibor Kragha, said this in Abuja in a statement by Mr. Ndu Ughamadu, the Group General Manager, Group Public Affairs Division. 

The three refineries in Warri, Kaduna and Port Harcourt have had skeletal operations this year.

The statement reported Kragha as saying that the Corporation was determined to move away from the approach of quick fixes and undertake a comprehensive revamp of the plants.

He said, “The plan for next year is to get the comprehensive rehabilitation programme done.

“The situation is like having three cars in your garage that have not been maintained for 15 to 20 years while you expect optimal performance from them.

“Changing one fuel pump here, one compressor there is not helpful. What we are doing now is to step back and take a holistic approach and do a full rehabilitation of all the refineries.”

He noted that once the exercise was achieved, a chart for routine Turn Around Maintenance Programme would be drawn.

On the earlier plan to have other refineries co-located with the existing refineries, Kragha explained that though the plan was still on course, none of the projected co-location refineries would come on stream in 2017 based on existing timeline for assemblage of the plants.

He added that the Port Harcourt Refinery was a ”few steps away” from commencing the production of Aviation Turbine Fuel known as aviation fuel.

He said, “We are very close; we have done tests with some of the key marketers. We have achieved all the parameters, we just want to be 110 per cent certain.”

The statement stated that earlier, the Managing Director of the Kaduna Refining and Petrochemicals Company, Mallam Idi Maiha, assured that KPRC was ”assiduously working towards a target of 75 per cent capacity utilisation in 2017”.

Mariah projected that the KPRC would supply one cargo of crude oil per month.

Also, the Managing Director of Warri Refining and Petrochemicals Company, Mr. Solomon Ladenegan, noted that ”despite the hostile operating environment, fraught with incessant cases of pipeline pulverization and outright product theft, the refinery was looking forward to better days ahead”.


FG finalising economic recovery and growth plan – Businessday

The Federal Government says it is finalising a Medium Term Economic Recovery and Growth Plan (ERGP 2017 – 2020) which addresses the current economic challenges and is aimed at restoring growth.

Udoma Udo Udoma, Minister of Budget and National Planning, disclosed this during the break down of the 2017 budget yesterday.

“The Plan builds on the existing Strategic Implementation Plan (SIP), and contains strategic objectives and enablers required to revive the economy. The strategic objectives of the NERGP are: Pulling the economy out of recession; Investing in our people; and laying the foundation of diversified, inclusive and sustainable growth.”

Udoma said the plan will focus on five strategic areas including; Macroeconomic Stability; Competitiveness; Growth and Diversification ;Social Inclusion, as well as Governance and Enablers.

He did not say when the plan would be released but sources tell BusinessDay that top consulting firm, Mckinsey and leading Nigerian economists have been mandated to come with the plan, which is likely to be released early 2017. The current administration has often been criticised for not having a clear economic agenda.

But the Minister said that “The 2017 Budget proposal reflects many of the reforms and initiatives in the SIP and NERGP and in the 2017-2019 Medium Term Sector Strategies (MTSS), as well as the 2017-2019 Medium Term Fiscal Framework.”

He disclosed that a “Multi-criteria analysis (MCA) approach was adopted to prioritise and select 2017 capital projects for 14 large capital spending MDAs involved in the MTSS. Projects were linked to government policies and strategic priorities.”

Listing the critical priorities of the 2017 budget, the minister said the focus is “on critical on-going infrastructure projects such as roads, railways, power, ICT, that have quick positive effects on the economy

Also included are the utilisation of Special Economic Zones and Industrial Parks as vehicles to accelerate domestic economic activity for innovation and wealth creation; contributing to food security and creating platform for agro-business in agriculture supply chains through the Agriculture Green Alternative Plan.

It also aims at establishing a Social Housing Fund to deepen the mortgage system and expand its availability across all states of the federation; encouraging and stimulating the growth of small and medium scale industries for innovation, job creation, productivity and wealth creation; and providing social safetynets for poor and vulnerable Nigerians.

Udoma also identified several key reform initiatives in the 2017 budget that are aimed at improving the revenue base of the country. These include; Subjecting the JV operations to a new funding mechanism, which will allow for Cost Recovery. Additional oil-related revenue include: Royalty Recoveries, Marginal Field Licenses, Early licensing renewals, which the Minister of state for petroleum resources said could bring additional US$1 billion in revenues.

Udo Udoma also said that the Federal Government would sustain the use of TSA to monitor the financial activities of over 900 MDAs from a single platform; broaden the tax base, improve effectiveness of revenue collecting agencies, improve tax compliance; reduce leakages by tracking trade mis-invoicing and introducing the single window to drive customs efficiencies.

He said it would further mprove the performance of independent revenue of government by ensuring that all MDAs (particularly revenue generating MDAs) present their budgets in advance, and remit their operating surpluses as required by the FRA; and extend the Integrated Personnel Payroll Information System (IPPIS) to all MDAs.

The minister disclosed that 56% of the capital allocation of the 2017 budget would be spent on infrastructure, while governance and security would gulp 20%. Economic reforms and growth are taking 12% of capital allocations, while social development would take 7%.
Other sectors consuming capital allocations in the 2017 budget include states and regional development, which is getting 4% and environment, gets 1%.
“By setting aside N2.24 trillion (inclusive of capital in statutory transfers), which is 30.7% of the total budget for capital expenditure, the objective, as set out in the SIP, of devoting at least 30% of the budget to capital expenditure has been achieved.
Much of the capital provision is directed at those projects which will facilitate economic growth, diversification, and competitiveness, ease of doing business, social inclusion, jobs, as well as governance.
This will ultimately engender the attainment of the Sustainable Development Goals (SDGs)” the minister said.

“The largest capital allocation goes to the Federal Ministry of Power, Works and Housing – N564 billion (7.7%) (25% increase over 2016 estimate). To address contractors’ liabilities, the Federal Government intends to issue over N2 trillion worth of bonds to clear outstanding contractors’ liabilities. These bonds would have a 10-year maturity and the amortisation is expected to begin in 2018.
“With regard to existing liabilities on bonds which were issued to contractors by past the administration, we have set aside the sum of N177.46 billion in the 2017 budget as a sinking fund to retire the maturing bonds.”

A total of N1.047 trillion was set-aside in the budget for infrastructure. This comprises of Power, Works and Housing N529billion; Transportation: N262 billion; Special Intervention Programmes: N150 billion. Defence: N140 billion;Water Resources: N85 billion;Industry, Trade and Investment: N81 billion;

Interior: N63 billion; Education N50 billion; Universal Basic Education Commission – N92 billion;Health: N51 billion; Federal Capital Territory: N37 billion; Niger Delta Ministry; N33 billion; Niger Delta Development Commission – N61 billion and Agriculture: N91 billion.

Landing cost of fuel hits N210 – Businessday

The landing price of fuel has hit an all-time high of N210 per litre, forcing the Petroleum Products Pricing Regulatory Agency (PPPRA) to consider reviewing the current fuel-pricing template, say sources in the oil and gas industry.

The governing board of the PPPRA is meeting today and sources say big on the agenda, would be a review of the current pricing template, which came into effect in May.

Crude oil price has been rising in the last few weeks, following an agreement by the Organisation of Petroleum Exporting Countries (OPEC) and non-OPEC oil-producing members to cut oil production in a bid to push up crude oil prices.

The price of Brent closed at US$55 per barrel on 19 December, more than $10 above the average US$42 in May, when the current fuel-pricing template was fixed by the PPPRA at N145 per litre.

“Based on the current landing pricing, the Federal Government has to make a decision fast, on whether to officially reintroduce subsidies, or take them out completely. The government is only in this difficulty because they have always stopped short of completely deregulating the sector,” said an industry source.

The price of petrol could rise as high as N220 per litre if the new realities of the oil market are taken into consideration.
Dolapo Oni, head of energy research at Ecobank, told BusinessDay that his estimates put the landing cost at N165 per litre, “However, that was when oil price was at $52 dollars per barrel, now that it is $55, I am not surprised landing cost is now N210 per litre.”

When the current fuel price was fixed in May, it was based on an exchange rate of N285 to the US dollar. But the naira has traded around N305.5 to the dollar on the official interbank market since August, while it was quoted at N487 to the dollar on the parallel market on Monday. The CBN has an arrangement where fuel marketers are able to buy at the subsidised rate of N305 to the dollar from International Oil Companies (IOCs).

On 19 December (Monday), the Central Bank of Nigeria (CBN) asked banks to submit bids for a “special currency auction” to clear the backlog of matured outstanding dollar obligations for petrol importers and selected sectors of the economy.

But Dolapo Oni cautions that selling dollars at subsidised rates to petrol importers, in order to keep the petrol retail price at N145 per litre is an unsustainable solution waiting to crumble.

“A short term solution is to liberalise the downstream petrol sector, while increasing our refining capacity will have desirable outcomes in the long term,” Oni added.

Estimates from the PPPRA show that the country needs an average of US$500 million every month, to import refined petroleum products, since all of its three refineries are currently producing at less than 25% of their installed capacity.

The CBN has had to resort to special dollar auctions to meet the demand by fuel importers and ensure that the country does not run dry of petrol.

The Central Bank instructed commercial lenders to submit backlog dollar demand from fuel importers, airlines and manufacturing firms by 3 pmMonday, for a special dollar intervention.

Sources tell BusinessDay that the backlog is in billions of dollars and it would be difficult for the CBN to completely clear the backlog without a significant dent on its reserves which hit a new high of US$25 billion on 15 December.

Nigeria is in its first recession in 25 years, caused by low global oil prices, which have cut the supply of dollars needed to fund imports. Attacks by militants on pipelines in the oil-rich Niger Delta since January have reduced crude output, reducing dollars earned.

The dollar shortage in the OPEC member, whose crude sales make up two-thirds of government revenue, has caused many companies to halt operations and lay off workers, compounding the economic crisis.

Inflation has accelerated to an 11-year high of 18.4 percent, while unemployment rate cemented a six-year high of 13.9 percent in the third quarter of 2016.

Traders said the Central Bank plans to sell “funded forwards of two to five months tenor” dollars to the targeted sectors at an auction ahead of the closure of the foreign exchange market for the year.

The apex bank is expected to close all foreign exchange transactions this Friday ahead of its financial year-end and the Christmas period.

Two weeks ago, the bank had asked commercial lenders to submit bids for a special intervention auction targeting fuel importers, but the result of the auction has not yet been released, traders said.

Sources say that the sharp change in the landing price of petrol may have forced the CBN to cancel the initial plans to sell dollars to fuel marketers.

Africa’s largest economy has suffered from an acute shortage of jet oil used by airlines in the last few months, causing many operators in the sector to refuel from neighbouring countries, while flight cancellations by local airlines have become commonplace as a result of the shortages.

On Monday, the Nigerian National Petroleum Corporation said it had imported about 38.7 million litres of aviation fuel, which it said “represented about 26-day sufficiency”, as part of its “ensure a hitch-free air travel across the country during and after the yuletide period.”


Kano awards N167.5b for Kanawa economic city construction – The Guardian

By Abba Anwar, Kano

The Kano State Government has signed a N167. 508 billion agreements with an indigenous company, Brian and Hammers Ltd., for the construction of Kanawa Economic City, situated at Dangwauro in the outskirts of the state capital.

The project, which will be executed in 72 months, will be cascaded in three phases and will accommodate a world Trade Centre, Educational Institute, Light factories, 160 mega warehousing facilities, banks, a clinic and trailer parks in addition to other auxiliary infrastructure. On completion, it is expected to create about 500,000 jobs for youths in the state.

Speaking during a brief ceremony at the Government House in Kano, the State Governor, Dr. Abdullahi Umar Ganduje, explained that “the significance of the Kano Economic City is an indication that the present administration is committed to the overhaul of our marketing and commercial structures with the provision of modern facilities and other infrastructural facilities as roads to ease vehicular transportation as well as movement of goods.”

He, therefore, maintained that the signing of the agreement has opened up a new chapter for the commercial development of the state in its journey towards evolving as a mega commercial city.Ganduje, who noted that efforts by past administrations to actualise the project had failed, stated that the decision to sign the agreement with the new developers was a significant departure from past proposals, asserted that it is cogent enough to raise the hope that “the state would soon have a befitting market and other facilities solely financed by the company”.

In his remarks, the Managing Director, Brian and Hammers, Malam Umar Abdullahi, said the decision of the company to work with the government of Kano State on the project is based on the explicit determination of the Ganduje administration to improve human and infrastructural development of the state.

He promised that his company would deliver a world class facility that would complement the state’s role as a major commercial nerve centre of the entire West African sub-region.

Highlights of the occasion included the presentation of Certificate of Occupancy of the 121 hectares of land to the project developers, witnessed by Senators Barau I. Jibrin (Kano North), Senator Kabiru Gaya (Kano South) and the Chief Whip of the House of Representatives, Alhasan Ado Doguwa, among other dignitaries.The foundation laying ceremony of the project is expected to be performed by President MuhammaduBuhari next January.

UPDATE 1-Nigeria to close capital’s airport for 6 weeks to fix runway – Reuters

* Flights to use tiny domestic airport at Kaduna

* Concerns about security on road to Abuja 

* Economist calls decision ‘catastrophic’ (Adds economist, background)

By Felix Onuah and Ulf Laessing

ABUJA/LAGOS, Dec 20 (Reuters) – Nigeria will close the airport in the capital Abuja for six weeks from February to repair its badly damaged runway, the government said on Tuesday, after airlines threatened to stop flying there.

Flights to Abuja will be diverted to Kaduna, a tiny airport for domestic flights where airlines use handwritten boarding passes. It lies about 160 km (100 miles) to the north and is linked to the capital by a pot-holed road frequented by criminals.

“The impact (on the economy) will be catastrophic,” said Bismarck Rewane, a leading economist. “Kaduna airport does not have the facilities. The road is very bad. There are kidnappings, Boko Haram,” he added, referring to the Islamist militant group. A former minister was abducted on the road in October.

Nigeria has delayed infrastructure investment for decades, partly because of corruption. That has slowed the development of Africa’s biggest economy, now hit by recession because of low oil prices.

Abuja airport, the main gateway to the country apart from the commercial capital Lagos, will reopen after six weeks, but the repairs will last six months, the transport ministry said.

Closing the airport would allow German company Julius Berger to carry out “total reconstruction work on the badly damaged airport runway,” it said in a statement. The federal government would provide security for bus shuttles to Kaduna airport.

Nigeria has also been overhauling the Abuja-Kaduna rail link.

“I don’t know why they cannot do this at night or on weekends so they don’t have to close the airport,” said Rewane, CEO of Lagos consultancy Financial Derivatives. “If the railway is ready it would work… (but) nobody will use buses.”

In October, Dubai-based airline Emirates stopped flying to Abuja, blaming the state of the runway among other factors, according to the ministry.

A South African Airways plane was damaged in August while landing at Abuja, Nigerian media have said. Several airlines have reduced flights to the capital or threatened to stop flying there unless the runway is fixed.

Lagos is Nigeria’s biggest city but the government and central bank are based in Abuja, some 750 km away.

Kaduna has seen riots between a Shi’ite Muslim sect and the majority Sunni population. At least two Shi’ites were killed in October. A year ago, the army killed 348 members of a Shi’ite sect in Zaria, a city north of Kaduna, a judicial inquiry said.

Boko Haram, which has been waging a seven-year insurgency in the northeast, has also targeted Kaduna, though not recently as the army has pushed back the jihadists to a remote corner of the West African nation. (Reporting by Ulf Laessing and Felix Onuah; Editing by Mark Trevelyan)


UPDATE 2-Nigerian central bank seeking end to spread between naira rate and black market -governor – Reuters

(Adds finance minister quote)

By Alexis Akwagyiram and Felix Onuah

Dec 20 Nigeria’s central bank will try to eliminate the spread between the official and black market exchange rate against the dollar, the finance minister said on Tuesday.

The naira is trading on the parallel market some 40 percent lower than the official rate as low global crude prices have dried up vital oil revenues and pushed Africa’s largest economy into recession.

The central bank (CBN) scrapped a 16-month-old peg of 197 naira to the dollar in June, but it continues to trade in the official market, so that the naira remains far stronger against the dollar there than on the parallel market. The government has blamed that black market for damaging the already shaky economy.

“The CBN is working on the elimination of arbitrage,” Finance Minister Kemi Adeosun told Reuters by text message, without saying how this would be done. 

She earlier told a conference that the central bank (CBN) was working on removing the price difference. Adeosun said this had been in response to a question about manufacturers not getting incentives to produce given an arbitrage opportunity.

A CBN spokesman, Isaac Okorafor, said the central bank was working towards “ensuring that the forex market operates as effectively as we would envisage”.

He said the aim was to “ensure there is no black market” but did not give details of how this would be achieved.

The naira has traded around 305.5 naira to the dollar on the official interbank market since August, while it was quoted at 487 to the dollar on the parallel market on Monday. (Reporting by Felix Onuah and Alexis Akwagyiram; Writing by Ulf Laessing and Paul Carsten; Editing by Mark Heinrich)

UPDATE 1-Nigeria’s finance minister says central bank will eliminate naira black market – Reuters

ABUJA Dec 20 (Reuters) – Nigeria’s central bank will try to eliminate the currency black market, where the naira trades about 40 percent below the official rate against the dollar, Nigeria’s finance minister said on Tuesday.

Africa’s largest economy, dependent on oil exports, is in its first recession in 25 years as low global crude prices take their toll.

The central bank scrapped a 16-month-old peg of 197 naira to the dollar in June, but it continues to trade in the official market, so that the naira remains far stronger against the dollar there than on the parallel market. The government has blamed that black market for damaging the already shaky economy.

The central bank (CBN) “has been directed to do this and CBN has promised to do something by putting a system in place to eliminate the black market because it’s damaging the economy”, Finance Minister Kemi Adeosun told a conference.

A CBN spokesman, Isaac Okorafor, said the central bank was working towards “ensuring that the forex market operates as effectively as we would envisage”.

He said the aim was to “ensure there is no black market” but did not give details of how this would be achieved.

The naira has traded around 305.5 naira to the dollar on the official interbank market since August, while it was quoted at 487 to the dollar on the parallel market on Monday. (Reporting by Felix Onuah and Alexis Akwagyiram; Writing by Ulf Laessing and Paul Carsten; Editing by Kevin Liffey; Editing by Andrew Heavens)

FG secures $150m from World Bank for mining sector – Punch

By Everest Amaefule, Abuja

The Federal Government has secured $150m from the World Bank for the solid minerals sector support and economic diversification. 

The Minister of Mines and Steel Development, Dr. Kayode Fayemi, disclosed this while briefing the press in Abuja on Monday on the activities of the ministry in 2016.

He also said that the ministry was seeking to raise $600m investment fund for the sector in alliance with the Nigerian Stock Exchange and the Nigerian Sovereign Investment Authority.

According to the minister, the World Bank fund will be used to provide technical assistance for the restructuring of the Mining Investment Fund.

Fayemi said, “We are working with the Nigerian Sovereign Investment Authority, the Nigerian Stock Exchange and others to assemble a $600m investment fund for the sector, which we hope to conclude and operationalise by the second quarter of 2017.

“We have secured support from the World Bank for $150m for the Mineral Sector Support for Economic Diversification programme, a critical component of which is to provide technical assistance for the restructuring and operationalisation of the Mining Investment Fund, which will make finance available to artisanal and small mining operators through development finance, microfinance and leasing institutions.

“The fund will also help to bring back on stream previously abandoned proven mining projects like tin ore, iron ore, coal, gold and lead-zinc.”

He added, “We are working to retrieve old data obtained on the various mineral deposits across the country, as well as enter into joint ventures with private exploration companies to generate new data from our Greenfield explorations. We hope that analysis of this information will help to further buttress our speculations on the quantity and quality of mineral deposits in the country.

“Our Nigerian Geological Survey Agency has undertaken additional ground investigations nationwide to upgrade our National Minerals Database and to further ascertain the assays of our mineral assets to the level that can easily attract financial investments and assure operators of the scope of operations required for further exploration and/or mining.

“We have improved the productivity of the sector by tripling the ministry’s contribution to the Federation Account to about N2bn in 2016, up from N700m in 2015.”

He also stated that the government had constructed 10 prototype minerals buying centres across the country for specific strategic industrial minerals.

Fayemi said the centres were to serve as standardisation centres to enable artisanal and small mining cooperatives and operators receive fair premium for their labour.

The minister also inaugurated the Mining Implementation and Strategy Team as well as 38 project vehicles purchased at a cost of over N400m for mines’ inspection.

The Mining Implementation and Strategy Team, which is headed by the Chairman of Nigerian Mining and Geosciences Society, Prof. Olugbenga Okunlola, is tasked with the responsibility of implementing the Federal Government’s blueprint for the mining sector.

Currency Interventions Return to Ground Zero of Negative Rates – Bloomberg

  • Danske Bank says Danish central bank may be selling kroner
  • Danish currency intervention would be first since June

The world-record holder in negative rates is probably offloading kroner in its first currency interventions since June as the central bank gets dragged back into an active fight to defend its euro peg. 

Denmark’s krone has now strengthened beyond a point that “the central bank previously did not accept,” Arne Lohmann Rasmussen, head of fixed-income research in Copenhagen, said by phone on Monday. Though it’s impossible to say for sure, Danske Bank believes “the central bank is either already in the market to stabilize the krone or will intervene later,” he said. The central bank is due to announce its currency market operations on Jan. 3.

Graphic shows EURDKK. The central bank defends a krone rate of 7.46038 against the euro.


The krone has approached levels last seen in early 2015, after Switzerland’s decision to send the franc into a free float triggered a speculative attack on the krone as some hedge funds predicted it would be next to float. In the event, the Danish central bank prevailed, the speculators were fought back and the peg is intact.

Denmark’s currency regime was tested again in June, when Britain’s vote to leave the EU drove investors into markets they perceived as safe, such as AAA-rated Denmark’s krone assets. Denmark responded with interventions.

But the fallout of the U.S. election, and Donald Trump’s surprise win, has been slightly less straightforward. The haven demand wasn’t as pronounced and Danske Bank says there’s no speculative attack to speak of.

Instead, pressure on the krone stems from Denmark’s pension industry. Danske estimates that about one-third of Danish pension foreign holdings are in American stocks. The U.S. equity market rally since Nov. 8 has helped drive a roughly 6 percent appreciation in the dollar against the krone. As pension funds convert those dollar holdings into local currency, they create demand for kroner.

“It seems there’s krone buying going on when the U.S. market opens,” Rasmussen said. “The U.S. equity rally is forcing Danish pension funds to hedge more currency risk by buying Danish krone contracts.”

Meanwhile, Denmark’s current account surplus is close to 10 percent of GDP, among the biggest in the rich world, according to Danske Bank. That reflects net investment in Denmark, which also creates demand for kroner and adds to the pressure the central bank must fight.

“Fundamentally, the big Danish current account surplus is creating a structural pressure for the krone to appreciate,” Jan Storup Nielsen, senior analyst at Nordea in Copenhagen, said by phone.

And then there’s the ECB’s decision to extend its quantitative easing program, forcing the Danes to chase the euro down the path set by ECB President Mario Draghi.

“This underscores the challenges the Danish central bank faces in 2017,” Rasmussen at Danske said.

The upshot is more Danish currency interventions and bigger currency reserves. But with the benchmark interest rate in Denmark already at minus 0.65 percent after almost half a decade of negative rates, another rate cut is unlikely, according to Nordea.

“It’ll take a lot before the central bank alters its policy rate,” Nielsen said. “They should be able to handle the situation easily using interventions.”

    Deutsche Bank’s Five Reasons Why the Pound Is Overvalued – Bloomberg

    It’s time to short the sterling, according to the German bank.