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Nigeria, Saudi Arabia in move to ‘stabilise’ oil market

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  •  Signs pact for exchange of Country-by-Country Reports

President Muhammadu Buhari and his Saudi Arabian counterpart, King Salman Bin Abdul-Aziz in Riyadh, have backed efforts to stabilise the global oil market.

The agreement was reached after the two leaders held bilateral talks during which they had extensive discussions on regional and global issues.

According to a statement signed by the President’s Senior Special Assistant on Media and Publicity, Mallam Garba Shehu, Buhari and his host accepted the fact that their countries’ economies were tied to oil and that wellbeing of both countries will be in jeopardy with instability in the world oil market.

But, Buhari made no commitment to a production freeze in the talk that was held in Riyadh, the Saudi capital.

“President Buhari and King Salman committed themselves to doing all that is possible to stabilise the market and rebound the oil price,” Shehu said in the statement.

Buhari, who arrived in Riyadh Monday night, is in the oil-rich country a week after Saudi Arabia, Russia, Venezuela and Qatar agreed at talks in Doha to freeze production at January levels in a bid to stem the free fall in oil prices.

The agreement is conditional on other major producers joining in, as oil heavyweights seek to ensure that others do not take advantage of output limits to win market share.

The statement after Tuesday’s talks made no mention of Nigeria joining the freeze but analysts say the OPEC member is likely to eventually support the move.

A report in the AFP said the official Saudi Press Agency (SPA) also reported the talks between Saudi’s Deputy Oil Minister, Prince Abdulaziz bin Salman and Minister of State for Petroleum, Dr. Emmanuel Ibe Kachikwu.

The talks, the report said, centred on “the best way for (market) stability” and “the cooperation of producing countries inside and outside OPEC (Organisation of Petroleum Exporting Countries)”.

Saudi Arabia and its Gulf allies in the oil cartel had been refusing to cut production, leading to a supply glut that has seen prices fall by 70 per cent since mid-2014.

Poorer OPEC members, including Nigeria, have been hard hit by the price drop but even the wealthy Gulf states have been forced to adopt austerity measures to cope with falling oil revenues.

“I wouldn’t be surprised to see them voice their support to the freeze agreed in Doha,” Abhishek Deshpande, lead oil market analyst at Natixis in London, said of Nigeria.

He said that unless Iraq and Iran also commit to limit production such talks “carry very little weight”.

The two countries (Iraq and Iran) are OPEC’s second-and third-largest producers.

Iran, returning to world markets as sanctions are lifted under its nuclear deal, has insisted on boosting production to pre-sanctions levels.

“Some neighbouring countries have increased their production over the years to 10 million barrels per day and export this amount, then say let’s all freeze our oil production,” Iranian Oil Minister, Bijan Zanganeh said yesterday.

“They freeze production at 10 million bpd and we freeze at one million bpd. This is a very funny joke,” Zanganeh said.

Saxo Bank analyst Christopher Dembik told AFP that Nigeria’s position is “a bit ambiguous,” supporting the mooted freeze but at the same time wanting to increase its production to respond to domestic market needs.

“In the longer term, there is no reason why the country (Nigeria) won’t align itself with the position of Saudi Arabia and Russia,” Dembik said.

Nigeria and Saudi Arabia would also discuss their position towards Iran and Iraq, he added.

“Nigeria could have a crucial role in this respect because of its measured position” that Iran and Iraq should elevate their production before envisaging freezes, Dembik said.

He went on: “It is probable, then, that Nigeria, meanwhile establishes a bridge for negotiations, notably between Riyadh and Tehran.”

According to OPEC’s Monthly Oil Market Report, Iraq produces about 4.4 million barrels a day, followed by Iran at more than 2.9 million.

Saudi Arabia’s output is close to 10.1 million barrels a day, according to last month’s (January) data.

Kachikwu, who doubles as the Group Managing Director (GMD) of the Nigerian National Petroleum Corporation (NNPC), also discussed joint oil and gas investments during his meeting with Abdulaziz, the SPA reported.

Oil prices nudged higher yesterday as the two OPEC members met.

United States (U.S.0 benchmark West Texas Intermediate crude for delivery in April was up one cent at $33.40 a barrel. Brent North Sea crude for April rose 18 cents to $34.87 compared with Monday’s close.

In the meantime, Nigeria, along with 30 other countries, has signed the Multilateral Competent Authority Agreement, MCAA, for the automatic exchange of Country-by-Country (CbC) Reports. According to a Tax Alert issued by PricewaterHouseCoopers (PwC) Nigeria, Nigeria formally endorsed the agreement on January 27 this year. The mandatory preparation of CbC Reports by Multinational Enterprises [MNEs] is one of the recommendations under Action 13 of the Organisation for Economic Cooperation and Development’s (OECD) Base Erosion and Profit Shifting (BEPS) project.

The Report contains financial and other data with respect to each jurisdiction where a MNE operates and can be used by tax administrators to assess high-level transfer pricing risks and other BEPS related risks. The initiative shows Nigeria’s dedication to the implementation of the OECD’s BEPS recommendations.

Action 13 of the OECD’s BEPS Action plans had recommended the preparation of CbC Reports by MNEs as their Ultimate Parent Companies were also required to report certain data on a country by country basis including information on revenue, profit or loss before income tax, income tax paid, accumulated earnings, number of employees and tangible assets.

These critical information also cover those on each entity within the group showing the tax residence of each, main business activity and so on. The information provided in the CbC Reports are expected to assist tax authorities in assessing high level transfer pricing and BEPS related risks.

To ensure quick implementation of this recommendation, the OECD developed a CbC Reporting Implementation Package. The package consists of a model CbC legislation (for introducing CbC requirements into local tax laws) and three Model Competent Authority Agreements (to facilitate the exchange of CbC Reports by tax authorities). Nigeria’s signing of the MCAA will allow the country access to CbC information of MNE groups with operations in Nigeria.

The principal objective of the MCAA is to aid the annual automatic exchange of CbC Reports between or amongst countries, in which an MNE carries on business even if through a Permanent Establishment [PE]. The CbC Reports will also provide some of the information needed by tax authorities to better understand the way MNEs structure their global operations.

According to PwC, the signing of the MCAA by Nigeria is an indication that the country is taking the recommendations from the BEPS project seriously and that CbC Reporting legislation will be introduced in Nigeria shortly.

Once this is done, Nigerian headquartered MNEs will be required to provide the relevant CbC information on all their operations outside Nigeria to the FIRS. “For MNE’s with headquarters outside Nigeria, the FIRS can obtain the information from the tax authorities (if a party to the MCAA) of the country where the headquarters is located. It is also possible for the FIRS to request the CbC Reports directly from a Nigerian subsidiary of an MNE which is headquartered outside Nigeria”, PwC stated.

Nation with additional report from National Mirror

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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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