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Palm oil: Nigeria’s FX policy hurts Thailand

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The Central Bank of Nigeria (CBN)’s restriction on 41 items banned from its official foreign exchange window is currently hurting importation of palm oil from Thailand, New Telegraph has learnt.

Thailand is facing glut in its palm oil market due to low demand from Nigeria. Nigeria is among the top five markets for Thailand and Indonesian crude palm oil before the apex bank rolled out its forex policy on some imported items.

It was gathered that efforts by Thailand to team up with the European Union, the US, Norway and Japan and ask Nigeria to lift its foreign currency restrictions on certain imports has not yielded result.

Other exporters of palm oil to Nigeria are Indonesia  and Malaysia, which are also affected by CBN’s policy adversely.

In June 2015, CBN excluded importers of 41 goods and services from accessing foreign exchange at Nigerian foreign exchange markets in order to encourage local production of those items.

But at a meeting of the Council for Trade in Goods under the World Trade Organisation (WTO), it was learnt that Thailand had raised the CBN issue on the 41 items with some WTO members, including the European Union, Norway, the United States and Japan.

Thailand said the apex bank’s restrictions did not comply with the commitments given by Nigeria to the WTO.

Also affected by the restriction are vegetable oils, vegetables and processed vegetable products among other goods.

It was learnt that manufacturing firms in Nigeria, which depend on cheap imported palm oil from Thailand, Malaysia and Indonesia due to high price of the commodity in the country, are also finding it difficult to source foreign exchange to bring the commodity to the country.

Nigeria has been facing low production in the last one decade due to high demand by manufacturers. Investigation by this newspaper last February, showed that the price of the commodity, which was N250,000 per ton in 2016, has risen to N1.3 million per ton due to short supply and recession in the country, while global price of the commodity was $979 (N372, 020) per ton.

Findings from Lagos Port Complex revealed that the country took delivery of 600,000 tons between January, 2016 and January, 2017 to consolidate the 970,000 tons produced in the country annually.

Between January and April, 2017, only 50,010 tons of palm oil was shipped to the country due to lack of forex. In January, SeaPrice ferried 15,000 tons to Lagos Port Complex; Chemtrans Havel, 10,700 tons last February; Star Ploeg, 16,400 tons in March and Mid Nature, 8,000 tons in April 2017.

It would be recalled that Nigeria, which was the largest producer of palm oil in the world with a market share of 43 per cent in the 1960s now has a world share of 2.9 per cent, with Indonesia leading with 33 million metric tons; Malaysia, 19.8 million metric ton; Thailand, two million; Colombia, 1.108 million metric tons and Nigeria, 970,000 metric tons.

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Aircraft insurance premium: Issues, fears, prospect

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Aircraft insurance premium: Issues, fears, prospect

While aircraft insurance premium has marginally reduced as a result of safety record, other factors have made it to be on the high side, which has made airline operations cumbersome. WOLE SHADARE writes

 

Good safety record
Nigeria and global aviation industry has continued to enjoy good record when it comes to accident; an indication that the Nigerian Civil Aviation Authority, NCAA has lived up to expectation despite many challenges confronting the regulatory body and the entire aviation industry.
Aviation safety in Nigeria and Africa continued to improve over the past five years. Reports from Accident Investigation Bureau show that accidents have drastically reduced primarily because of safety decision implementation on the part of the airlines, regulators and other service providers.
The impeccable safety record may have lowered premium on aircraft insurance. Aside reduction in accident, there are other factors such as insecurity and trust, which make aircraft insurance premium higher.
The situation was helped by the attainment and retention of the United States Federal Aviation Administration aviation category one status.

The irony
An airline operator who spoke to New Telegraph on condition of anonymity, confirmed that premium on aircraft based on air safety in Nigeria has reduced but admitted that the violation of Cape Town Convention by some airlines and huge insecurity in some parts of the country has raised it on the other hand.
He said before the issue of insecurity came up, many Nigerian operators enjoyed good bargain from insurance firms, adding that it could have been better if Nigerian insurance firm have the capacity and capability to ensure airlines comprehensibly.
He posited that the West used high insurance premiums to extort funds from the continent’s carriers, stressing that aviation risk had reduced among the continent’s carriers.
He cited lack of air accident among commercial airlines in the past two years and the high rating received by African carriers from the International Air Transport Association (IATA) as an indication that safety had improved in the sub-sector.
He said: “They call it country risk, but I don’t think it’s a country risk. I just think it’s a way of getting money from Africa by the West. I don’t actually know what they meant by country risk. I think African countries will have to come together to fight this. It’s not only in insurance, even when I am leasing aircraft, they still claim country risk, later, and they say stability and mention security.

Humongous costs
A report available to This newspaper that eight indigenous airlines in Nigeria, expend about N11 billion on aircraft and passengers’ insurance premiums annually, representing 8 per cent of total value of each aircraft in their fleet.

Different ball game
But their counterparts in Europe and America, expend a mere 1 percent of aircraft cost as insurance premiums for airplanes and passengers. This is as a result of huge volume of aircraft and other equipment for insurance, coupled with its huge market compared to Nigeria.
The amount of money paid by the Nigerian airlines is different from what business aviation; charter operators and private jet owners pay as insurance premiums on their jets annually.
Eighty percent of insurance premiums are carried out abroad with international insurance companies such as Lloyds of London while the other 20 percent is domiciled in Nigeria with local insurance firms who act as brokerage firms.
Some of the major foreign insurance firms Nigerian airlines insure their aircraft are Allianz Aviation Insurance, Aerospace Insurance and Lloyds of London.

Fleet depletion
Also, investigation by our correspondent revealed that active scheduled aircraft among the indigenous carriers have dropped to just 40 from the initial 75 aircraft about two years ago.
An average age of aircraft in the country’s sky is between 16 and 24 years old while a used 1999 Boeing 737-300 aircraft, which 90 percent of the nation’s airlines use for flight operations is valued at $4.5 million in the international market (about N1, 642,500,000 at the exchange rate of N365 to a dollar).
An average age of aircraft in Nigeria’s sky is between 15 and 23 years old while a used 1999 Boeing 737-500 aircraft, which 90 percent of the nation’s airlines use for flight operations is valued at $4.5 million in the international market (about N1, 642,500,000 at the exchange rate of N365 to a dollar).
Aviation Insurance experts have said airline operators in Nigeria should stop benchmarking their premium rates with those of Nigerian neighbours such as South Africa, London and other western countries, arguing that safety culture in Nigera is very poor when compared with those of other countries.
The aviation insurance experts spoke against complaints by Nigerian airline operators, said those aviation insurance operators in Nigeria charge high insurance premium whereas their counterparts in other counties charge lower rates.

Expert’s view
Chairman Nigeria Insurers Association (NIA), the umbrella body of insurance underwriters in Nigeria, Eddie Efekoha, recently said there is no basis of comparison between Nigerian aviation insurance providers and their foreign counterparts because the level of risk exposures of both differs. According to him, countries’ risks differ. “All these aviation operators over there, do they pay premium on monthly or daily basis and when you get to the airport, look at our airports, with all the touts and what have you, so everything is wrong with it, so the rates cannot but be high. When we get our things right, the premium can reduce. Of course, size is an issue. You are generating a premium for instance that cannot buy one plane but like the likes of BA, their premium can buy three planes. So size is an issue,” he explained.

Last line
It is ironical that while premium on aircraft is stable for years as a result of impeccable aviation safety, other things such as insecurity and lack of trust are the new consideration for high insurance premium for aircraft for Nigerian operators.

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Fuel imports: Ceaseless culture of waste

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Fuel imports: Ceaseless culture of waste

The cost on importation of refined petroleum products into Nigeria in just three months hit N963.2 billion – an amount enough to build 28 units of 20,000-barrel capacity modular refineries. ADEOLA YUSUF reports the colossal waste

 

Nigeria has not stopped to pay heavily for its years of reckless neglect of its refineries. Africa’s biggest crude exporter, as at the last count, spent a whooping N963.126 billion in worth and cash to import 6.149 billion liters of refined petroleum products from refineries abroad in the first three months of 2018.
Investigation by New Telegraph, which revealed this, showed that the amount is enough to build 28 units of 20,000-barrel capacity modular refineries at the official rate of N34.465 billion ($133 million) in the country.
Data provided by the Petroleum Products Pricing and Regulating Agency (PPPRA), which was verified and validated by the Nigeria Bureau of Statistics (NBS), revealed that between January and March, 2018, the country spent N963.126 billion to import Premium Motor Spirit (PMS) also known as petrol; Automative Gas Oil (AGO) popularly called diesel; House Hold Kerosene (HHK) also called kerosene and Aviation Turbine Kerosene (ATK) also known as aviation fuel.

Analysis of imports
The NBS report indicated that the month of March recorded the highest volume of PMS imported into the country at 2.41 billion litres, while the highest volume of AGO and kerosene were imported in January and February respectively.
The study showed that statewide distribution of truck-out volume for the quarter for PMS was 4.89 billion, AGO recorded 1.24 billion litres, while kerosene was 201.49 million litres.
It indicated that a total of 150.81 million litres of ATK was distributed nationwide during the period under review.

Breakdown of expenses
NBS data showed that in the period, N759.696 billion (N759,696, 000,000) was based on N133.28 per litre modulated landing cost, spent to import 5, 670, 337, 898 billion litres of petrol into the country.
Diesel is a totally regulated product in Nigeria and in the same period under review, the importation of 954,465,319 million liters of AGO otherwise known as diesel into the country gulped N165.93 billion (N165.934.609.500) at the average modulated landing cost of N173.85 per litre.
For House Hold Kerosene (HHK), Nigeria, this newspaper’s findings showed, spent N13.3 billion (N13,262,553,000) to import a total of 66, 914, 711 million litres at the average landing cost of N198.2 per litre in the first quarter of the year.
The Aviation fuel whose global landing cost also averaged N198.2 also gulped N24.2 billion (N24, 193,679,400) for the importation of 122,067,017 million litres of the product between January and March 2018.
A month-by-month breakdown of the expenditure on importation of petrol into the country, according to the NBS data, showed that last January alone, N204.308 billion (N204, 308, 240, 000) was spent on importation of 1,532, 800, 028 billion litres of the product at N133.28 per litre modulated landing cost.
The figure went up in February with the importation of 1,730,119,386 billion litres of petrol, which gulped a total of N230.574 billion (N230, 574, 400, 000) at the rate of N133.28 per litre.
March recorded highest number of expenditure on importation of petrol. This month, a whooping N320. 804 billion (N320, 804, 960, 000) was spent to import 2, 407, 418, 484 billion litres of petrol at the modulated landing cost of N133.28 per litre.
A month-by-month breakdown of the expenditure on importation of petrol into the country, according to the NBS data, showed that last January alone, N204.308 billion (N204, 308, 240, 000) was spent on importation of 1,532, 800, 028 billion litres of the product at N133.28 per litre modulated landing cost.
The figure went up in February with the importation of 1,730,119,386 billion litres of petrol, which gulped a total of N230.574 billion (N230, 574, 400, 000) at the rate of N133.28 per litre.
The month of March recorded highest number of expenditure on importation of petrol. This month, a whooping N320.804 billion (N320, 804, 960, 000) was spent to import 2, 407, 418, 484 billion litres of petrol at the modulated landing cost of N133.28 per litre.
A breakdown of the figure according to the NBS showed that in January alone, the country spent N6.8 billion (N6,790,332, 000) on importation of 34, 258, 514 mkillion litres of kerosene at the modulated price of N198.2 per litre.
Lasg February, the figure was down to N5.382 billion (N5, 382, 715, 600), which was spent to import 27,158,292 million litres of the product at the modulated price of N198.2 per litre.
Further checks by this newspaper showed that N1.09 billion (N1.089,703,600) was spent on importation of 5, 497, 905 million litres of the product.
For ATK, a breakdown of the figure showed that the 49, 037, 113 million litres of the product imported into the country gulped N9, 719 billion (N9, 719, 728, 000) at the rate of N198.2 per litre in the month of January.
The 40, 092, 398 million litres of the product imported in February gulped N7.946 billion (N7, 946, 234, 000) while the expenditure in March was down to N6.528 billion (N6, 528, 311, 000) fot the importation of 32, 937, 506 million litres of Aviation fuel.
The figure of expenditure on importation of diesel was far higher with N49.165 billion (N49, 165, 301, 550) spent in January alone to import 282, 802, 798 million litres of the product at the rate of N173.85 per litre in the month. For February, the 330, 835, 694 million litres of diesel imported into the country gulped N55.516 billion (N55, 515, 838, 600).
The figure went higher in March, in which the 340, 826, 827 million litres of diesel imported into the country at the rate of N178.85 per litre average modulated landing cost gulped N59.253 billion (N59, 262, 773, 950).

Cause of waste
Four refineries in Nigeria have a combined capacity to refine 445,000 barrels of crude per day.
Unfortunately, they are installations through which corruption has been perpetrated, coupled with incompetence and policy summersault of the Nigeria’s government over the years. The four ailing refineries in Port Harcourt (two), Warri and Kaduna have been producing at ridiculous level and had, despite years of the country’s waste on importation of petroleum product as a result of the state of the refineries, gulped up over $2 billion in Turn Around Maintenance (TAM).
Nigeria swaps 445, 000 barrels with refiners under the arrangement of Direct Sale Direct Purchase (DSDP) contracts, while the Nigerian National Petroleum Corporation (NNPC) and some private importers cough out money to import the deficit in other to meet up with over 50 million litres daily fuel consumption in the country.

Previous accounts of waste
Nigeria had imported 22.5387 billion litres of petroleum products worth over N3.24 trillion in 2017. With the volume and values of imported petroleum product in the first quarter, the country is on the verge of surpassing the amount it spent last year to import the products by the end of 2018.
The N963.126 billion spent to import the petroleum products in the first quarter, investigation by New Telegraph showed, is enough to build 28 units of 20,000-barrel capacity modular refinery.

Cost of modular refineries
A 20, 000 barrels per day capacity refinery takes an investment of about $113 million to build, according to the promoter of the integrated modular refinery being constructed at Tomaro, a coastal community in Amuwo-Odofin Local Council Area of Lagos.

The TAM of waste
As ineffective as the refineries in Nigeria have proven to be, N264 billion have been injected into their Turn Around Maintenance (TAM).
Investigations by this newspaper revealed that the Federal Government has jettisoned any plans to review the investments made between 1999 and 2015 on the refineries, despite ineffectiveness of the contracts.
Instead, the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, said in a podcast that the Federal Government was aggressively pursuing the refineries’ improvement programme to realise its agenda to end fuel importation by 2019.
A senior officer at the Ministry of Petroleum Resources told this newspaper that government would not reopen books on the investments made on maintenance of the installations.
The nation’s three refineries located in Port Harcourt, Warri and Kaduna, documents of NNPC showed, had gulped up to $1.746 billion or N264 billion using a 16 year average USD/naira exchange rate of N150.99/$1.
The $1.746 billion TAM investments were different from the $308 million reportedly spent for the same purpose by the military governments of late General Sani Abacha ($216 million) and General Abdusalami Abubakar (rtd) $92 million.
The former GMD of NNPC, Funsho Kupolokun, had, according to report, said that over $1 billion was committed to refineries’ repairs between 1999 and 2007. After the late President Musa Yar’Adua stopped the sale of the refineries in 2007, the NNPC reportedly announced it had awarded contract to a Nigerian firm to carry out a comprehensive TAM on all the refineries. The contract sum as revealed by the then NNPC boss, Abubakar Yar’Adua, was $57 million.
In 2009, the then GMD of NNPC, Alhaji Mohammed Sanusi Barkindo, also announced that the corporation spent $200 million on the maintenance of the Kaduna refinery. In 2012, NNPC was reported in local media to have planned repair of the refineries with N152 billion. Former minister Alison-Madueke was quoted to have said $32 million had already been paid for the materials needed for the said refineries repairs.

Last line
Although the Federal Government has, after myriads of policies summersaults, allowed the liberalisation of the refining sector in the country, it should show the much needed seriousness that would support the private investors to succeed.
On the other hand, it should not abandon its refineries in other to assuage fears in some quarters that neglect of public refineries would breed total reliance on private entities.

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FG: Total bullish on oil, gas local content

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FG: Total bullish on oil, gas local content

 

Total Exploration and Production Nigeria (TEPN) is pushing the boundaries of the Nigeria’s oil and gas local content, the Federal Government has said.
The Nigerian Content Development and Monitoring Board (NCDMB), an agency of government, said this in a statement last weekend.
It said that the biggest Offshore Loading Terminal (OLT) Buoy has been fabricated to offload crude oil from the Egina’s Floating Production Storage and Offloading vessel (FPSO) to be operated by TEPN.

Aveon Offshore, the company that fabricated the OLT-Buoy, has, with this, recorded a new Nigerian Content feat with the fabrication of the biggest Buoy ever made in Nigeria and the first to be delivered ahead of schedule and launched on a dedicated slid way.

Executive Secretary, Nigerian Content Development and Monitoring Board (NCDMB), Engr. Simbi Wabote and the Managing Director of Total Exploration and Production Nigeria, Mr. Nicolas Terraz commissioned the buoy, according to the statement. It will be used to offload crude oil from the Egina’s Floating Production Storage and Offloading vessel.

“Wabote spoke at the event and commended Aveon Offshore for another sterling execution of a project., the statement added.
“With an assemblage of over 1,300tonnes of steel for this buoy, I am happy you did not cave in under the weight of the challenges but you have once again proved your mettle.”

He noted that many other Nigerian service companies performed creditably on different scopes of the Egina deepwater project.
Earlier in his comments, Chairman of Aveon Offshore, Mr. Tein George disclosed that the company had no prior experience on a similar project but NOV APL and NCDMB gave their backing and Total got convinced to have the company execute the fabrication of the buoy.

He also pleaded with the Federal Government and the international operating companies to approve new projects to ensure that the skills that were acquired and facilities developed on the Egina project would not be lost.

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