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Nigeria expects $62b from oil profits



  .. IMF urges CBN against revenue optimism

  .. IMF goofed – Buhari

 .. UAE builds 300MW renewable energy power plant in Lagos


BARRING further hitch, Nigeria is set to recover about $62 billion from international oil companies as part of the nation’s shares from past profits recorded by international oil companies in their operations. Under the production-sharing contract law, oil companies such as Shell, Exxo nMobil, Chevron, Total and Eni agreed to fund the exploration and production of deep-offshore oil fields on the basis that they would share profit with the government after recovering their costs.


When the law came into effect 26 years ago, crude was selling for $9.50 per barrel. The oil companies currently take 80% of the profit from these deep-offshore fields, while the government receives 20%. But oil traded at $59.07 a barrel on the ICE Futures Europe Exchange as 14:18 p.m. in London yesterday. The leverage to move after them is provided by a 2018 Supreme Court ruling which increased Nigeria’s share of income from production-sharing contracts.


Although President Buhari’s spokesman, Garba Shehu, did not respond to three phone calls seeking his confirmation of the development, it was learnt that while federal government has not said how it will recover the money, negotiations are already going on with the companies, notwithstanding government’s allegation that energy companies failed to comply with a 1993 contract-law requirement which concessions greater share of revenue to Nigeria whenever oil price exceeds $20 per barrel (bpd).


According to reliably sources, representatives of oil companies met with Attorney-General of the Federation and Minister of Justice, Mallam Abubakar Malami (SAN)  on ways of creasing out all grey hairs for amicable compliance with the new ruling of the apex court, with a view to avoiding any hostility towards investors while ensuring that the country’s laws are respected.


Observers say that this proposal will come handy for President Muhammadu Buhari in his push to bolster Nigeria’ revenue profile following continuous drop in both output and price of oil, which has remained the main stay of the national economy.


But International Monetary Fund (IMF), has urged Central Bank of Nigeria (CBN) to avoid steering into murky waters by advising federal government to take urgent steps towards tweaking its economic policies. IMF stated this through its Senior Resident Representative and Mission Chief for Nigeria, Amine Mati, in a report.


According to them, continuous over-optimistic revenue projections in Nigeria – leading to higher financing needs than initially envisaged – result to over reliance on borrowing from the CBN to finance unsustainable fiscal deficits.


“The current account’s shift to a deficit is expected to persist while the pace of capital outflows continues to weigh on international reserves,” the report said.

Coming on the heels of 2020 budget proposal presentation by President Muhammadu Buhari, the report was further reinforced by Bloomberg’s analysis of Nigeria’s projected and actual income between 2015 to 2018, confirming that Nigeria has been unable to meet its income target, because government was only able to collect 58% of 2019 revenue as at June due to shortfalls in both oil and non-oil earnings with crude sales standing at 49% below target.


The report further stated that in 2016, Nigerian projected revenue stood at N3.86 trillion but actual revenue was N3.19 trillion, regretting that ever since then, the margin has grown wider with N5.08 trillion projected revenue in 2017 while only 2.78 trillion was generated. The trend continued in 2018 when expected income was put at N7.17 trillion but actual income was N3.96 trillion, though IMF expressed optimism about growth in oil and agricultural sector.


“The outlook under current policies remains challenging. Growth is expected to pick up to 2.3 per cent this year on the strength of a continuing recovery in the oil sector and the regaining of momentum in agriculture following a good harvest,” the report continued.


However, President Buhari, yesterday, faulted some of the statistics so far released by World Bank and IMF on Nigeria economy, adding that homegrown solutions are only panaceas for the country to move forward.


He made the rebuttal while speaking about the importance of accurate data on policy making at the inauguration of Presidential Economic Advisory Council (PEAC), stating that realistic planning is only possible when there is dependable data to work with – an area his administration is seriously working on improving according to him.


However, Nigeria was recently listed among top 20 out of 190 countries that improved and carried out reforms in the ease of doing business. Meanwhile, United Arab Emirate (UAE) has built a 300MW renewable energy power plant in Lagos.


UAE Ambassador to Nigeria, Dr. Fahad Obaid Al Taffaq, revealed this when he paid a courtesy visit to Minister of Power, Saleh Mamman in his office, adding that the plant will be  ready to generate power soon to supplement national power grid.


According to Al Taffaq, the power plant has capacity for expansion to about 1,000mw within a few months of its operation electricity transmission and distribution network across Nigeria.


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