Local crude oil producers in Nigeria are demanding to be paid with United States dollars as the currency of their operations by local refiners in Nigeria.
The producers made the demand at a meeting with the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), convened to activate local domestic crude supply obligation.
Section 109 of the Petroleum Industry Act (PIA) introduces the obligation by the oil industry in Nigeria and stipulates that the supply of crude oil to the domestic market shall be on a willing supplier and willing buyer basis.
The volume of crude oil that oil-producing companies shall dedicate to the domestic crude supply obligation shall be based on an allocation system determined by the NUPRC.
Speaking at the meeting, Oluwadare Agbelese of Watersmith said: “A broader discussion needs to be held with the NMDPRA and the CBN to ensure that off-takers have priority access to forex so that they can pay for the product in a competitive manner just like the operators would if they were selling to external off-takers.”
Also raising other concerns, Tunde Akinpelu from Aiteo sought to know whether the local refiners have the flexibility on their crude oil appetite. Adding that, “Kaduna refinery does not process all the product sleeves that we have in Nigeria. So in Port Harcourt and Warri.”
Another stakeholder, Abdalla Buba talked about allowing some time for adjustment in the transition from the pre-PIA regime to the PIA regime.
Responding to the concerns raised, the Chief Executive of the NUPRC, Gbenga Komolafe, said any company that fails to respond to a request for production within a specified period is liable to pay an administrative fine of $10,000 to the NUPRC and shall not be granted an export permit.
He said the move by the commission is in a bid to ensure domestic sufficiency, adding that the nation’s inability to meet it’s domestic refining obligation has impacted negatively on the state of the economy given the numbers that are rolled out in terms of under-recovery.
Komolafe said: ‘It behooves us as an industry to find a way to make Nigeria a net exporter of refined product. It is important that we engage the industry as we are trying to implement this important provision of the PIA, which is the domestic crude oil obligation.
“The domestic crude oil obligation refers to the requirement imposed by the government on oil producers to allocate a certain portion of their crude oil production for domestic consumption. What we are trying to do in effect as a commission is to begin the enforcement of this critical provision of the PIA.
“There are now firm attempts to step up domestic refining with some modular refineries. We now also have the largest refinery in Africa, the Dangote refinery. We have received a request from the refinery to guarantee fixed stock and we believe as a nation, it will be a shame if we cannot meet the fixed stock of the refinery.”
In furtherance of the latest move, The NUPRC has written to the producers to furnish them with copies of the committed agreement for the commission to distill the available barrels that are not committed.
Speaking on the concerns around dollar payment terms, Komolafe said the law already envisages a willing buyer, willing seller situation. “The currency of purchase will either be in naira or in dollars. The parties will sit and agree to a purchase agreement and the currency of the transaction.
“We will also escalate to other stakeholders to see how domestic refiners will be able to meet their obligation.”
Speaking on the implementation mechanism, he said; “we are conscious of the fact that every refinery is configured to take a specific type. We will collate that data and factor obligation in respect to the compactable crude type.
Order CBN to honour Letters of Credit– SINET to Tinubu, NASS
Amidst several hardships facing the Nigerian populace, the Social Integrity Network, (SINET) has urged President Ahmed Bola Tinubu and the leadership of national assembly to compel the Governor of Central Bank of Nigeria (CBN) Mr. Olayemi Cardoso, to order and reconsider honouring the forward contracts that are genuinely backed up with proper compliant documents for utilisation against each Letters of Credit (LCs) opened by the commercial banks using the forwards as a hedge.
The group also urged the Federal Government to make further clarification concerning a statement credited to the CBN Governor on issues regarding the alleged and well-publicized revelations of a $2.4 billion forex trading fraud.
SINET recalled that “On February 5, 2024, the governor of CBN made this declaration in both his interactions with Senate committees and his interview on a national television, following the engagement of Deloitte Management Consultant to conduct a forensic investigation where he claimed that the said amount was uncovered.
A statement issued on Monday by SINET national coordinator, Ibrahim Issah, disclosed that “On the contrary, we wish to unequivocally state that these claims lack merit and do not take into account the consequences they will have on businesses, public perception, or the economy of our cherished nation and its implication on forex both at home and abroad.”
According to him, “Without sentiment, the claim is completely falsehood and unacceptable as he, the CBN governor, failed to consider its economic implications. It is pertinent to state that genuine businessmen and women across the country, borrowed Funds from commercial banks, some with interest rates as high as 30% to secure forex from the CBN through their respective commercial banks since CBN does not sell the dollars to individuals directly.
“The same funds have been deposited with CBN for the past one and half years for forwards allocated for which the Apex Bank is now claiming were fraudulent transactions. May we remind Mr. Governor that while the CBN allocated the forwards after collecting the naira for each forward allocated, the commercial banks used these same forward contracts as a hedge and issued Letters of Credit (LCs) to their various customers against their offshore credit lines and also as a sovereign guarantee to their offshore banks which stand unpaid till today as a result of the failure of CBN to honour the various forward contracts.
“May we also remind our CBN Governor that as a result of their failure to honour these contracts, the outstanding foreign loans continue to accrue interest (post-negotiation charges), which the commercial Banks are passing to their customers: the same customers you say do not have a genuine claim.”
The statement further stressed that, “The public would like to ask Mr. Governor the following questions: What will happen to the foreign bank that is expecting their payment to be paid back? What will happen to the businessmen and women who had borrowed Naira from commercial Banks and paid the same into the CBN account for the purchase of forex for over eighteen months? Who will bear the interest charged on borrowed funds locally? Who will bear the charges running against the offshore lines used in establishing Letters of Credit? What will happen to the businesses? What will happen to the employees that are dependent on the survival of the businesses that CBN is trying to kill?
“We call upon the senate president and, in fact, the president and Commander In-Chief of the Federal Republic of Nigeria to call the CBN governor to order and reconsider honouring the forward contracts that are genuinely backed up with proper compliant documents for utilisation against each Letters of Credit (LCs) opened by the commercial banks using the forwards as a hedge.
“Let us state categorically that the CBN is killing businesses by cancelling the forward contracts that were sold to them about 18 months ago at the rate of N450/dollar and now selling the same funds to the commercial banks and directing the bank to sell the money at the rate of 1,500/dollar to the same businesses who initially had a forward contract at the rate of N450/dollar.
“May we also remind Mr. Governor, that failure to honour these forward contracts is taking commercial banks longer time to clean the offshore lines already used for establishing Letters of Credit against which shipments have been done and payment made to LC beneficiaries by the offshore banks. The delays of the commercial banks to settle their Forex obligations to their offshore banks is making our country risk to be very high.
“Lastly, the public will like to call on the coordinating minister for the economy, Mr. Wale Edun to engage the CBN regarding this issue of undelivered forward contracts because at present in Nigeria, almost 60% of companies in the manufacturing sector have been closed due to the volatility of Forex in Nigeria in order to avoid the other 40% from also closing down.
“This will go a long way to help the few remaining manufacturing companies still in operation in Nigeria and also encourage the new investors that the president and commander in-chief of the federal republic is trying woo to bring their investments to Nigeria.”
Senate Passes Sen Ashiru’s Bill To Establish National Road Transport Council
The Senate on Tuesday granted first reading to a bill seeking to establish a National Road Transport Council which is to be saddled with the responsibility of regulating the road transport industry and the transport profession in Nigeria.
The bill titled National Road Transportation Council (Establishment) Bill 2024 is sponsored by Deputy Senate Leader Senator Oyelola Ashiru and was introduced to the Senate plenary after the Senators resumed from their 30 day recess.
Further details of the bill fronted by the Kwara South Senator reveals that if signed into law a council board will be established which shall consist of a Board chairman and six members drafted from each geo-political zone of the country.
More insights of the bill sighted by the Sun also states that the board shall be presided by a representative from Ministries of transport, commerce and industry and aviation and they shall not be below the rank of a Director.
As highlighted in the explanatory memorandum of the bill , [b]the functions of the proposed council include; creating an effective regulatory framework on road transport service operators; determining the standard of knowledge and skills required for road transport service operators; encouraging the advancement of education in road transportation; ensuring accessibility of road transport facilities, [/b]channels, and routes; monitoring the performance of the regulated road transport industry; conducting background check on road transport service operators; registering all road transport service providers and determine the fees for such registration; setting guidelines and general policies for road transport service operators; updating the Federal Government on its activities and progress through annual and audited reports; reviewing progress and suggest improvement within the provisions of this Bill and do such other things as are necessary or incidental to the objects of the Council under this Bill or as may be assigned by the Federal Government.
The bill received the nod of the Senators via voice votes presided by the Senate President Godswill Akpabio shortly after it was introduced to the floor of the Red Chambers by the Leader of the Senate, Senator Opeyemi Bamidele.