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FG revenue crisis deepens as oil hits $28, $10 below 2016 budget benchmark

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  • Okorocha sacks 3,000 workers

Worries about Iran’s return to an already oversupplied oil market drove down global benchmark, Brent crude on Monday to as low as $27.67 per barrel, its lowest since 2003, before recovering to trade at $28.50.

With the further slide, Brent, against which Nigeria’s oil is priced, was almost $10 lower than the oil benchmark price of $38 per barrel proposed by President Muhammadu Buhari for this year’s budget.

Buhari had in the 2016 to 2018 Medium-Term Expenditure Framework and Fiscal Strategy Paper sent to the National Assembly for this year’s budget said oil-related revenues were expected to contribute N820bn.

The price of the Nigerian crude oil, Bonny Light, fell to $28.93 per barrel as of Monday, compared to $29.47 last week, according to latest data obtained from the Central Bank of Nigeria. Iran’s Deputy Oil Minister, Roknoddin Javadi, on Monday expressed confidence that his country could produce extra 500,000 barrels per day.

Iran has the fourth largest proven oil reserves in the world, according to the US Energy Information Administration.

The United States over the weekend revoked sanctions that had cut Iran’s oil exports by about two million barrels per day since their pre-sanctions 2011 peak to a little more than one million bpd.

The potential return of Iranian oil exports to South Africa threatens to displace barrels from Saudi Arabia and Nigeria that plugged the supply gap when sanctions were imposed on OPEC’s fifth-biggest producer, according to Bloomberg.

The re-emergence of Iranian crude oil provide options for those willing to buy from Iran,” the Executive Director, South African Petroleum Industry Association, Avhapfani Tshifularo, said in an e-mailed response to questions.

“Iranian imports are likely to displace the Nigerian and Saudi Arabian crudes, since they seem to have filled the gap when South Africa stopped importing Iranian crude oil.”

The Head of Energy Research, Ecobank Capital, Mr. Dolapo Oni, said in a telephone interview with our correspondent, “Nigeria’s crude will continue to face challenges to sell because other grades are now cheaper and also attractive to buyers. The same revenue implication: lower revenue for the government.”

On the return of Iran to the market, he said, “Iran remains a major threat to Nigeria in India, and that could affect trade this year. Before now, traders have had issues selling our cargoes.”

The Managing Director, Financial Derivatives Company Limited, Mr. Bismarck Rewane, had last week said, “In 2014, the price of oil was $116 per barrel and the cost of production was $25 per barrel. The yield on every barrel was $91.

Cost of production per barrel is still $25, the price is $30. So, the yield has gone from $91 to $5 per barrel. That is the magnitude of the problem.

“In 2008, we suffered for nine months only and oil price bounced back. But the average price of oil in 2009 was $61.9 per barrel; in 2016, the average price is projected at $45. External reserves in 2009 were $53bn; gross external reserves today are $28bn. The exchange rate in 2009 was N150 to the dollar at the BDC and official, 154. Today, the BDC is N300, while the official rate is N199. The Excess Crude Account was $22bn in 2009; it is $2bn today. The total external debt in 2009 was $10.4bn; while it is $17.1bn today.”

Meanwhile, angry reactions have started trailing the sacking of over 3,000 workers in the 19 Imo State government parastatals, agencies and departments.

Some of the establishments visited by Vanguard, yesterday, looked like a grave-yard as some of the workers affected by the sack order were seen in groups, bemoaning their predicament.

Meanwhile, the organized labour in Imo State, had directed Imo workers in the 19 parastatals, agencies and departments, affected by the recent sack order  by the state government, to “report to their places of work and close at the approved time.”

The directive, which was signed by all the labour leaders in the state, including the state Chairman and Secretary of Nigeria Labour Congress, NLC, Mr. Austin Chilakpu and Kenneth Onwuemeodo respectively, followed a government order sacking over 3,000 workers on its payroll.

“The workers are directed to, in line with the rules governing attendance to work, report to their various places of work and close at the approved time,” the labour leaders directed.

The aggrieved unionists equally insisted that “workers cannot be sacked or suspended or  given any form of punishment through radio announcement, a complete disregard to due process.

“It is also necessary to further point out that workers, who have worked up to the 15th of the month, cannot be suspended and backdated to January 4, 2016,” the unionists fumed.

Labour recalled that when the factional National President of the NLC, Mr. Ayuba Wabba, visited Governor Rochas Okorocha in Government House, Owerri, last Wednesday, he not only promised that no worker in the state would be sacked or suspended, but also denied that salaries of Imo workers had been slashed.

Agency report with additional report from Vanguard

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WAIVER CESSATION: Igbokwe urges NIMASA to evolve stronger collaboration with Ships owners

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…Stresses the need for timely disbursement of N44.6billion CVFF***

Highly revered Nigerian Maritime Lawyer, and Senior Advocate of Nigeria (SAN), Mike Igbokwe has urged the Nigeria Maritime Administration and safety Agency (NIMASA) to partner with ship owners and relevant association in the industry to evolving a more vibrant merchant shipping and cabotage trade regime.

Igbokwe gave the counsel during his paper presentation at the just concluded two-day stakeholders’ meeting on Cabotage waiver restrictions, organized by NIMASA.

“NIMASA and shipowners should develop merchant shipping including cabotage trade. A good start is to partner with the relevant associations in this field, such as the Nigeria Indigenous Shipowners Association (NISA), Shipowners Association of Nigeria (SOAN), Oil Trade Group & Maritime Trade Group of the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA).

“A cursory look at their vision, mission and objectives, show that they are willing to improve the maritime sector, not just for their members but for stakeholders in the maritime economy and the country”.

Adding that it is of utmost importance for NIMASA to have a through briefing and regular consultation with ships owners, in other to have insight on the challenges facing the ship owners.

“It is of utmost importance for NIMASA to have a thorough briefing and regular consultations with shipowners, to receive insight on the challenges they face, and how the Agency can assist in solving them and encouraging them to invest and participate in the maritime sector, for its development. 

“NIMASA should see them as partners in progress because, if they do not invest in buying ships and registering them in Nigeria, there would be no Nigerian-owned ships in its Register and NIMASA would be unable to discharge its main objective.

The Maritime lawyer also urged NIMASA  to disburse the Cabotage Vessel Financing Fund (CVFF)that currently stands at about N44.6 billion.

“Lest it be forgotten, what is on the lips of almost every shipowner, is the need to disburse the Cabotage Vessel Financing Fund (the CVFF’), which was established by the Coastal and Inland Shipping Act, 2003. It was established to promote the development of indigenous ship acquisition capacity, by providing financial assistance to Nigerian citizens and shipping companies wholly owned by Nigerian operating in the domestic coastal shipping, to purchase and maintain vessels and build shipping capacity. 

“Research shows that this fund has grown to about N44.6billion; and that due to its non-disbursement, financial institutions have repossessed some vessels, resulting in a 43% reduction of the number of operational indigenous shipping companies in Nigeria, in the past few years. 

“Without beating around the bush, to promote indigenous maritime development, prompt action must be taken by NIMASA to commence the disbursement of this Fund to qualified shipowners pursuant to the extant Cabotage Vessel Financing Fund (“CVFF”) Regulations.

Mike Igbokwe (SAN)

“Indeed, as part of its statutory functions, NIMASA is to enforce and administer the provisions of the Cabotage Act 2003 and develop and implement policies and programmes which will facilitate the growth of local capacity in ownership, manning and construction of ships and other maritime infrastructure. Disbursing the CVFF is one of the ways NIMASA can fulfill this mandate.

“To assist in this task, there must be collaboration between NIMASA, financial institutions, the Minister of Transportation, as contained in the CVFF Regulations that are yet to be implemented”, the legal guru highlighted further. 

He urged the agency to create the right environment for its stakeholders to build on and engender the needed capacities to fill the gaps; and ensure that steps are being taken to solve the challenges being faced by stakeholders.

“Lastly, which is the main reason why we are all here, cessation of ministerial waivers on some cabotage requirements, which I believe is worth applause in favour of NIMASA. 

“This is because it appears that the readiness to obtain/grant waivers had made some of the vessels and their owners engaged in cabotage trade, to become complacent and indifferent in quickly ensuring that they updated their capacities, so as not to require the waivers. 

“The cessation of waivers is a way of forcing the relevant stakeholders of the maritime sector, to find workable solutions within, for maritime development and fill the gaps in the local capacities in 100% Nigerian crewing, ship ownership, and ship building, that had necessitated the existence of the waivers since about 15 years ago, when the Cabotage Act came into being. 

“However, NIMASA must ensure that the right environment is provided for its stakeholders to build and possess the needed capacities to fill the gaps; and ensure that steps are being taken to solve the challenges being faced by stakeholders. Or better still, that they are solved within the next 5 years of its intention to stop granting waivers”, he further explained. 

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Breaking News: The Funeral Rites of Matriarch C. Ogbeifun is Live

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The Burial Ceremony of Engr. Greg Ogbeifun’s mother is live. Watch on the website: www.maritimefirstnewspaper.com and on Youtube: Maritimefirst Newspaper.

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Wind Farm Vessel Collision Leaves 15 Injured

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…As Valles Steamship Orders 112,000 dwt Tanker from South Korea***

A wind farm supply vessel and a cargo ship collided in the Baltic Sea on Tuesday leaving 15 injured.

The Cyprus-flagged 80-meter general cargo ship Raba collided with Denmark-flagged 31-meter wind farm supply vessel World Bora near Rügen Island, about three nautical miles off the coast of Hamburg. 

Many of those injured were service engineers on the wind farm vessel, and 10 were seriously hurt. 

They were headed to Iberdrola’s 350MW Wikinger wind farm. Nine of the people on board the World Bora were employees of Siemens Gamesa, two were employees of Iberdrola and four were crew.

The cause of the incident is not yet known, and no pollution has been reported.

After the collision, the two ships were able to proceed to Rügen under their own power, and the injured were then taken to hospital. 

Lifeboat crews from the German Maritime Search and Rescue Service tended to them prior to their transport to hospital via ambulance and helicopter.

“Iberdrola wishes to thank the rescue services for their diligence and professionalism,” the company said in a statement.

In the meantime, the Hong Kong-based shipowner Valles Steamship has ordered a new 112,000 dwt crude oil tanker from South Korea’s Sumitomo Heavy Industries Marine & Engineering.

Sumitomo is to deliver the Aframax to Valles Steamship by the end of 2020, according to data provided by Asiasis.

The newbuild Aframax will join seven other Aframaxes in Valles Steamship’s fleet. Other ships operated by the company include Panamax bulkers and medium and long range product tankers.

The company’s most-recently delivered unit is the 114,426 dwt Aframax tanker Seagalaxy. The naming and delivery of the tanker took place in February 2019, at Namura Shipbuilding’s yard in Japan.

Maritime Executive with additional report from World Maritime News

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