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LCCI seeks reduction of oil benchmark to $40

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The Lagos Chamber of Commerce and Industry has proposed an oil price benchmark of between $40 -$45 per barrel for the Nigeria’s 2015 budget, saying the $65 per barrel proposed by the government was too optimistic given the current reality of the global oil market.

In his presentation at a press conference on the 2015 Appropriation Bill of the Federal Government and the Current Economic Situation, by Alhaji Remi Bello, President, LCCI said, “The fundamentals of supply and demand in the oil market cannot support this benchmark in the short to medium term; currently it is at less than $50 per barrel. Ideally, the benchmark should be significantly below the actual price in other to create room for possible savings and adjustments for volatility shocks.”

Similarly, he said the oil production benchmark of 2.278 million barrels per day prescribed in the Appropriation Bill was also optimistic having regard to the persistent oil theft which had continued unabated in recent years.

“The quantity of oil theft has been estimated at about 400,000 barrels per day. There is also the divestment by the major oil companies and sluggish investment in exploration as a result of policy uncertainties and security concerns.

“In recent years oil output has ranged between 1.8million and 2million barrels per day. The oil production benchmark should therefore be guided by this experience,” he said.

Bello described appropriation for petroleum subsidy as the biggest burden on government treasury in the country with N200 billion proposed as subsidy for PMS (petrol) in 2015 down by 80 per cent from N971 billion in 2014. While welcoming this development, he noted that the provision of N91 billion for kerosene subsidy in 2015 is difficult to justify.

“Besides the global oil price dropping to below $50 per barrel there is no longer any justification for budgetary provisions for petroleum products subsidy. We urge the National Assembly to take this into account in its deliberations on the 2015 Appropriation Bill. Times like these call for utmost prudence and curbing of leakages,” he said.

On appropriation for debt service, he said, “We are deeply concerned over the growing budgetary appropriation for debt service. The amount has grown from N712 billion in 2014 to N943 billion in 2015. This is even more disturbing when compared to budgetary appropriation of N93.66 billion for infrastructure and N633billion for capital projects.

“This relativity does not reflect our development priorities and the urgent need to fix the huge deficit in infrastructure. This also raises the concern about the growing domestic debt and the burden it imposes on the economy.

“As a percentage of revenue, the debt service provision is over 25%. As a percentage of infrastructure budget, it is 906%; as a percentage of capital budget it is 148%. The trouble is that the bulk of the debts [mainly domestic] were incurred for recurrent spending and the high cost of running government business. They were not incurred for developmental purposes. This makes the servicing even more burdensome on the economy and the citizens.

“We would like to caution once more to avoid relating debt to the re-based GDP in determining the borrowing the nation’s threshold. This is because a large component of the re-based GDP are not revenue generating. If the current trend of debt accumulation continues, it is only a matter of time for debt service provision to completely crowd-out capital expenditure in the budget.

“The concern about the structure of the appropriation is that it is at variance with the urgent imperative of economic diversification and austerity measures. Economic diversification requires a critical mass of investment in infrastructure. The following facts are worthy of note:

“While the total budget decreased by 8.4%, recurrent budget increased by 5.66%; Capital expenditure dropped by 59% [when compared with 2014] to N633.53billion which is less than 15% of the total budget; spite of the pronouncement of the austerity measure, personnel cost increased by 6.3%; Also, in spite of the pronouncement on fiscal prudence and call for sacrifice, the contentious Service Wide Votes increased from N301.84billion to N348.69billion in 2015, an increase of 15% “A sincere commitment to the regime of austerity measures, cost reduction and economic diversification calls for a major review of the expenditure structure by the National Assembly.”

On moves to deepening revenue profile, he said the chamber shared the concern of the government on the need to diversify and deepen its revenue base and that it should intensify efforts in the areas of Remittances by MDAs to federation account; Improving tax administration to enhance compliance; Addressing fiscal leakages and corruption; Reducing the cost of governance in all tiers and levels of government.

He said, “We further submit that emphasis should be on efficiency of tax administration not imposition of new taxes or fees on investors; taxation should reflect the ability to pay in order to meet the desired distributive role; we advise against imposition of excessive fees and charges on businesses in the name of expanding revenue from non-oil sector of the economy.

“A period like this calls for economic stimulus to reinvigorate the economy and expand the frontiers of the non-oil economy. Government and its agencies should therefore refrain from policy choices that could further stifle investments.”

On fiscal sustainability calls for a review of expenditure at all levels of government, he argued that it is easier to cut spending than to raise revenue and implored the National Assembly to take a critical look at some areas in order to curb leakages and ensure cost reduction in government spending.—Ships and Ports

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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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