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Oil price drops as Nigeria’s output rises

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  • Airfares soar by 57% over new forex policy

Oil prices dropped more than three per cent yesterday due to return of Nigerian and Canadian crude output from outages and as traders booked profits at the end of the best quarter in seven years.

According to Reuters, the market soared more than 25 per cent in the second quarter, as part of an 85 per cent rebound since hitting 12-year lows early this year, as unplanned production cuts from Canada to Nigeria eased the glut that prompted the worst price rout in a generation.

However, production in Nigeria has risen to about 1.9 million barrels per day (bpd) from 1.6 million, due to repairs and a lack of new major attacks on pipelines in the Delta region, the Nigerian National Petroleum Corporation said.

Resurgent Nigerian supply will put pressure on prices, Goldman Sachs said, adding that outages caused by Canadian wildfires would virtually end by September.

OPEC’s oil output rose in June to its highest in recent history, a Reuters’ survey showed, as Nigeria’s output partially recovers from militant attacks and Iran and Gulf members boost supplies.

Brent futures for August delivery, which expired yesterday, settled down 93 cents, or 1.8 percent, at $49.68 a barrel. The more active Brent contract for September delivery settled at $49.71, down 3.1 percent.

In the meantime, foreign travels, especially for leisure during this year’s summer, may be out of the reach of many Nigerians, as the Federal Government’s newly introduced exchange rate policy has made airfares on foreign routes to go up by at least 57 per cent, according to findings by our correspondent.

The adoption of N283/dollar as the new interbank exchange rate for the conversion of flight tickets, which are globally priced in dollars, by the Switzerland-based International Air Transport Association has made international airfares on Nigerian routes to rise considerably.

IATA is a trade association for the world’s airlines consisting of about 260 airlines represented in 117 countries and accounting for 83 per cent of the total global air traffic.

Findings from international airlines and travel agencies operating in the country revealed that the airfares might increase further as the summer peak season travels begin this week.

A return economy class ticket to Johannesburg from Lagos, which used to go for between N110,000 and N130,000, is now priced at between N170,000 and N230,000, according to information obtained from travel agents and airlines. This represents 66 per cent increase.

Airlines flown by passengers on the Lagos-Johannesburg route are South Africa Airways, Arik Air, Kenya Airways, RwandAir and Ethiopian Airlines.

Similarly, a return economy class ticket on the Lagos-London route, which used to go for between N250,000 and N450,000 depending on the class a passenger chooses to fly, is now priced between N350,000 and N750,000 for various airlines plying the route. This represents about 57.1 per cent increase in fares.

Airlines flown by Nigerians on the Lagos-London route are British Airways, Virgin Atlantic Airways, Arik Air, Medview Airlines, Emirates Airlines, Etihad Airways, KLM Royal Dutch Airlines, Airfrance, Royal Air Maroc, Egypt Air and Kenya Airways.

The famous Lagos-Dubai route that formerly witnessed a return economy ticket going for between N130,000 and N180,000, now goes for between N220,000 and N320,000, depending on the carrier a passenger chooses to fly. This represents about 74.1 per cent increase.

Carriers commonly flown on the route are Emirates, Etihad, Qatar Airways, Ethiopian Airlines and Kenya Airways.

According to officials of travel agencies and airlines, international airfares will rise further as the summer peak season sale will hit its peak later in July.

Apart from the increase in airfares necessitated by IATA’s decision to increase the exchange rate for the pricing of airfares from N200 to N283, top officials of foreign airlines operating in Nigeria told our correspondent that the international carriers were rushing to recoup the losses caused by the months of delay in repatriating their sales proceeds.

Over 25 foreign airlines operating in the country had about $600m stuck in Nigeria as of March 2016. This was before the Central Bank of Nigeria floated the naira and made dollars available for them to repatriate ticket sales proceeds two weeks ago.

According to air travel experts and airline officials, IATA usually adopts the CBN’s interbank official rate for member airlines to price their tickets.

They said only a margin of about N3 was usually added to the CBN interbank official exchange rate to cover for logistics costs incurred from currency movements.

A travel expert and Managing Director of Airlines Logistics Management and Support Limited, Chief John Adebanjo, said, “The interbank exchange rate moved from N197 to over N280 per dollar two Mondays ago. This is why IATA moved its exchange rate for the conversion of flights tickets from N200 per dollar to N283 per dollar for the pricing of international airfares.

“You know that airfares are priced in dollars. This amount will keep changing in line with the daily changes at the interbank forex market.”

According to the Chief Executive Officer, Gadshire Travels, Mr. Gbenga Adebayo, international airfares are usually priced in dollars and, as such, the increase in the interbank rate is expected to lead to a rise in airfares.

He believes that after the summer travels, airfares will come down.

“Moreover, as foreign airlines recover from the losses incurred from the months of delay in repatriating their ticket sales proceeds, airfares will drop; we hope,” Adebayo added.

Nation with additional report from Punch

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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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