Hope is rising for the country and its N6.08 trillion 2016 budget as the price of crude oil yesterday settled at $46.61 per barrel.The cheering news came as the World Bank expressed its readiness to assist the Nigerian National Petroleum Corporation (NNPC) technically and financially to achieve its 20-point development goals.
Due to several production cuts in the market, crude oil has spiked far above the Federal Government’s 2016 budget benchmark, which was pegged at $38 per barrel to provide some buffer for the national treasury.
With the $38 per barrel benchmark and a production estimate of 2.2 million barrels per day, this year, oil-related revenues are expected to contribute about N820 billion.
Although the actual export is still about 1.6 million bpd, analysts believe that the crude oil price would rebound when the Shell Petroleum Development Company (SPDC) fixes its Trans-Forcados pipeline and halts the force majeure on Forcados grade.
Sweet crude (Nigerian grade) for June delivery rose $1.40, or 3.3 per cent, to $44.04 a barrel on the New York Mercantile Exchange, the highest settlement since November 10.
Oil was propped up by the dollar, which fell ahead of a meeting of Federal Reserve officials on Tuesday and yesterday. The Fed could drop hints after its meeting about future interest-rate increases and the strength of the United States economy.
The Managing Director, World Bank, Sri Mulyani Indrawati, said the 20 fixes introduced by the Minister of State for Petroleum, Dr. Ibe Kachikwu to the NNPC business models had gone a long way in reforming the corporation for profitability.
Indrawati, who spoke when she paid an official visit to Kachikwu in his office in Abuja, applauded him for bringing transparency and accountability to bear on the operations of the NNPC and the entire oil and gas industry.
She said the World Bank was ready and available to offer the ministry technical support, advice and funding, stressing that sound policy thrust is key in the areas of fiscal direction, gas flareout and gas-to-power.
Kachikwu said since assumption of duty in August last year, a lot of reforms, ranging from the first phase of restructuring and the recent restructuring had served as enablers for the introduction of new business models that had drastically reduced the losses recorded by the NNPC in the past.
“We first started with the softer issues which were transparency issues, governance, restructuring and that was going well when we went straight into the business model. For example, when we came in, the NNPC was recording huge losses and we have been able to reverse that trend. If we continue with that sort of trajectory, then we should be able to record profit in the near future,” he said.
According to him, a lot of institutional framework such as restructuring, is still ongoing in all the parastatals he is overseeing.
“Infrastructure is the toughest gap as a lot of depots and pipelines need urgent attention and you need infrastructure in the upstream and downstream sector for you to deliver results, but we will continue to throw solutions at them and try to get private sector participation.
“The other tough gap is the funding. Just sheer funding of the upstream Joint Venture cash calls demands a lot of money and we are not pretending about it. Again, the President has travelled from point to point and a lot of people have offered to support,” the minister asserted.
He therefore urged the World Bank to offer support in the area of institutional framework and training for the Petroleum Ministry and the NNPC, adding that the training would provide the necessary skill sets that are required to grow the oil and gas industry in the country.
Kachikwu and his counterpart in the Aviation Ministry, Hadi Sirika, pledged to work together to eliminate the noticeable challenge faced by airline operators in accessing aviation fuel for their daily operations.
According to him, though the supply and distribution of JET A1 are outside the control of government because it has since been deregulated, a meeting of importers of aviation fuel will soon be convened to address all challenges impeding the seamless supply of the product.
Meanwhile, worried about Nigeria’s loss of revenue to neighbouring African countries due to ineffective logistics system and under-development of infrastructure along the regional corridors, stakeholders have stated that the nation can save about $21billion yearly in transaction cost from an efficient logistics and supply chain.
With a yearly financial deficit of $93 billion required for infrastructural development in Africa, according to statistics from the World Bank, value chain operators in the logistics industry noted that $20 billion investment in fulfilling the missing link in regional infrastructure configuration could increase regional trade by $250 billion over a decade, representing $25 billion yearly.
While the logistics and supply industry which currently stands at N200 billion has a potential yearly growth rate of 10 per cent, the stakeholders believe the gains of the industry may not be realised without strategic infrastructure and regional interconnection.
Indeed, a review of agricultural activities in Benin Republic by the United States Department of Agriculture (USDA) shows that Benin serves as a delivery corridor for West Africa, reaching more than 100 million people in the landlocked countries of Niger, Mali, Burkina Faso, Chad and the Northern states of Nigeria, due to relatively efficient port services and liberal trade policies.
The stakeholders, while speaking at the national logistics strategy summit, themed “Building national logistics strategy for better economic diversification” and presentation of the industry report in Lagos, yesterday, stated that Nigeria’s diversification agenda could only be effectively implemented when there is an efficient logistics and supply chain industry that can drive non-oil export
.
In his review of the report, Co-Chair, EU-Africa Business Task Force Summit Group, Brussels and Trade specialist, Prof. Ken Ife noted that transportation, warehousing, cargo consolidation and border clearance costs, form a critical component of the price of the nation’s commodities and global competitiveness, necessitating the creation of an effective national logistics strategy.
According to the World Trade Organisation (WTO), transaction cost of the type amenable to trade facilitation can be as high as 10 to 15 per cent of the nation’s total trade volumes which considering import and export hover around $21 billion.
The report reviewer noted that Nigeria’s logistics sector has continued to under-perform in comparison with its peers, adding that competition has placed a high premium on speed in meeting customer needs as the bigger players have maintained market leadership by using technology and performance anatomy to maintain excellence along the most profitable trade lanes.
