Friday, 07 August 2020
Business and Economy

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Oil Price Apocalpyse Will Bankrupt Nigeria, Africa’s Richest Nation

With oil prices falling below zero dollars per barrel, it's only a matter of time before Nigeria's debt-ridden government goes bankrupt.

  • Oil prices have fallen to all-time lows with some benchmark futures trading for less than zero.
  • Nigeria’s Bonny light hasn’t fallen into negative territory yet. But the country is still generating massive losses on every barrel of oil it produces.
  • After decades of mismanagement with government policies, Nigeria is on the road to a Venezuela-like collapse.

Nigeria may have one of the worst governments in the world. Even in good times, the country was in poor shape. But now, with oil prices falling to all-time lows, Nigeria is about to go the way of Venezuela and Zimbabwe with total economic collapse.

The Nigerian government depends on oil for 60% of its revenue and 90% of its foreign exchange. But with prices for several oil benchmarks falling below zero, Nigeria is generating massive losses for every barrel it produces. Add this to a rising debt load, bad economic policies, and political instability, and you have a recipe for disaster.

Where Did Nigeria’s Oil Money Go?

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There are many proposed explanations for Nigeria’s situation. Some blame corruption, while others blame colonialism. But the real problem has been disastrous government policy. Like Venezuela, Nigeria allowed its central government to exert outsized control over its economy, which led to inefficiency and stagnation.

Until recently, Nigeria’s Federal government was responsible for practically all oil refining through its state-owned Nigerian National Petroleum Corporation (NNPC). But because its poorly-managed refineries fell into disrepair, the government relied on imports to meet its populations’ demand for fuel.

Put simply, Nigeria produces crude oil which it sells to the United States, China, and the European Union, only to re-import gasoline at a higher price, subsidize that gasoline, and sell it to consumers at a massive loss.

According to Bloomberg, Nigeria spent four times as much money subsidizing fuel as it spent building schools, health centers, and science labs in 2019. This has led to mass emigration and widespread poverty in the country. Now, with oil prices at unprecedented lows, the country is about to collapse in a Venezuela-like catastrophe.

Socialism gone wrong. Nigeria spends a staggering amount of money subsidizing fuel. Data by Bloomberg.

Nigeria Has The Highest Break-Even Oil Price In The World

According to the Fitch Rating Agency, Nigeria’s break-even oil price is $133, the highest in the world. This is because of an inflated government budget that includes, among other things, Senator salaries in the range of $37,000 a month.

The country’s cost of producing oil is $15-17 per barrel, but with crude prices falling near or below zero, this won’t be enough to avert a sovereign debt crisis.

Nigeria’s benchmark Bonnie Light crude hasn’t hit zero yet. But with millions of barrels sitting unsold, Nigeria may start paying customers to take delivery due to its lack of onshore storage facilities. According to some sources, Nigeria is losing an average of $35 million a day in accruable revenue. And its currency, the Naira, maybe on the verge of a Zimbabwe-like devaluation because oil is the only source of the foreign exchange needed to prop it up.

The Next Sovereign Debt Crisis

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Drunk on cheap debt from China, domestic lenders, and high-interest rate Eurobonds, Nigeria is on the cusp of a massive sovereign debt crisis.

The country’s total debt stands at an estimated $84 billion, with up to 80% of its bilateral debt owed to China. According to Forbes, debt servicing eats up a full 2/3rds of all government revenue. And China is reluctant to forgive these debts — especially as it attempts to revive its own struggling economy.

Nigeria owes a huge amount of money to China. But China isn’t willing to write off these loans. Data by Bloomberg

Paradoxically, Nigeria’s President Muhammadu Buhari has decided to pile on even more debt recently, approving an additional $23 billion loan request from international lenders.

To address these challenges, Nigeria has discontinued its insane fuel subsidy and is considering reducing its 2020 budget by around $4.9 billion. According to the country’s finance minister Zainab Ahmed, the new budget assumes crude oil production of 2.1 million a day at an average price of $30 a barrel. But with oil prices falling below zero, this new budget won’t stop Nigeria’s slide towards insolvency.

It is also important to note that Nigerian senators will still enjoy their $37,500 monthly salaries under the new budget cuts.

By William Ebbs@ebbs_william;

Culled from: https://www.ccn.com/oil-price-apocalpyse-will-bankrupt-nigeria-africas-richest-nation/

Posted On Wednesday, 22 April 2020 12:56 Written by

Former finance minister of Nigeria, Dr Ngozi Okonjo-Iweala was caught Wednesday spreading fake news.

In a post on Wednesday, Ngozi underscored a point about observing social distancing in food aid distribution in the COVID-19 era.

She cited a purported example from Rwanda and attached a photo to underscore her point.

“Responsible food distribution with social distancing to assist lower income households in the #COVID19 era! A great example from #Rwanda where community workers also distribute food and other necessities door-to-door @PaulKagame”, she tweeted.

Ngozi Okonjo-Iweala
@NOIweala

Responsible food distribution with social distancing to assist lower income households in the era! A great example from where community workers also distribute food and other necessities door-to-door @PaulKagame

View image on Twitter

But as it turned out, the photo was not on point.

The reference to Rwanda was also false.

The event and photo she cited happened in The Gambia in 2019 during the Ramadan.

” But unfortunately, the picture attached to your tweet is fake, didn’t happen in Rwanda, but Gambia, it happened in May, last year, during Ramadan”, wrote Bashir Ahmad, President Muhammadu Buhari’s aide.

Bashir Ahmad
@BashirAhmaad

Good afternoon Ma’am @NOIweala, it is very true that Rwanda, Nigeria and other African countries are really trying. But unfortunately, the picture attached to your tweet is fake, didn’t happen in Rwanda, but Gambia, it happened in May, last year, during Ramadan. ! ?? https://twitter.com/noiweala/status/1247854465702559745

View image on Twitter
Ngozi Okonjo-Iweala
@NOIweala

Responsible food distribution with social distancing to assist lower income households in the #COVID19 era! A great example from #Rwanda where community workers also distribute food and other necessities door-to-door @PaulKagame

View image on Twitter

Caught out and with eggs plastered on her face, Ngozi later apologised.

She blamed a friend for making her commit the error.

“Thanks to those who have drawn my attention to the food distribution picture I tweeted earlier today. A friend sent it to me that it’s from Rwanda. Whether Gambia or Rwanda, the point I want us to focus on is that it is a safe way of handling food distribution”, she wrote.

Bashir later tweeted another photograph of a better food distribution by Governor Umara Zulum of Borno State.

This happened in February this year..

Then, Zulum gave out cash and food to Nigerian refugees in Rann.

Bashir Ahmad
@BashirAhmaad

Maiduguri, Borno State, Nigeria. ?? https://twitter.com/noiweala/status/1247953910146519042

View image on Twitter
Ngozi Okonjo-Iweala
@NOIweala

Thanks to those who have drawn my attention to the food distribution picture I tweeted earlier today. A friend sent it to me that it’s from Rwanda. Whether Gambia or Rwanda, the point I want us to focus on is that it is a safe way of handling food distribution.

Posted On Thursday, 09 April 2020 00:40 Written by

Nigeria's President Muhammadu Buhari says he will be stepping down when his second term in office ends in 2023.

In a New Year message, Mr Buhari said he would not attempt to exceed the constitutional mandate.

The president said he was determined to help strengthen the electoral process both in Nigeria and across the region, and cited his primary concerns as the security of the nation and the safety of Nigerians.

A BBC correspondent says speculation that Mr Buhari planned to remain in power has been rife in recent days.

Posted On Friday, 03 January 2020 05:44 Written by

The Phoenix Suns and the Los Angeles Lakers are set to square off in a Pacific Division matchup at 10:30 p.m. ET on Wednesday at the Staples Center in the final game on the New Year’s Day NBA schedule. Los Angeles is 26-7 overall and 11-4 at home, while Phoenix is 13-20 overall and 7-8 on the road. The Lakers have the second-best record in the NBA. Los Angeles is looking for its third consecutive win after getting past a four-game losing streak. The Suns have won two straight after snapping an eight-game losing streak. Los Angeles is favored by 11.5 points in the Lakers vs. Suns odds, while the over-under is set at 226.5. Before entering any Suns vs. Lakers picks, you’ll want to see the NBA predictions from the model at SportsLine.

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Los Angeles wrapped up 2019 with a 108-95 victory over Dallas. Anthony Davis had 23 points along with nine rebounds. The Lakers held the Mavericks to a season low in points and limited Dallas to 36 percent shooting from the field.

LeBron James had 13 points and 13 assists against the Mavericks. He leads the league in assists with 10.8 per game.

Phoenix didn’t have too much breathing room in its game with Portland on Monday, but still walked away with a 122-116 win. They overcame a 19-point first half deficit and outscored Portland in the final quarter, 39-27.

Devin Booker scored 33 points to go with seven assists and made all 15 of his free-throw attempts. Kelly Oubre Jr. had 29 points, hitting a career high seven 3-pointers. Ricky Rubio had 18 points and 13 assists.

Deandre Ayton returned from a five-game absence because of an ankle injury and grabbed 12 rebounds. The Lakers won the first meeting between the teams,123-115 on Nov. 12.

The Lakers enter the contest with a 48.2 field goal percentage, good for second best in the league. Less enviably, Phoenix has allowed opponents to shoot 47.8 percent from the floor on average, which is the fourth highest shooting percentage allowed in the league.

Posted On Wednesday, 01 January 2020 20:24 Written by

The UK and US considered a navy-backed oil embargo against Nigeria, following the 1995 execution of writer and activist Ken Saro-Wiwa, a document released by the UK government reveals.

Saro-Wiwa and eight other campaigners from the Ogoni ethnic group were hanged on 10 November 1995.

They had been found guilty by a secret military tribunal of the murder of four Ogoni chiefs by a mob.

The nine denied the charge and said they had been framed.

Saro-Wiwa led mass protests against oil pollution in Nigeria's Ogoniland.

The protests were seen as a major threat to Nigeria's military ruler at the time, Gen Sani Abacha, and Anglo-Dutch oil giant Shell.

The executions led to Nigeria suspension from the Commonwealth.

The UK's then Prime Minister, John Major, called it a "fraudulent trial" and described the executions as "judicial murder".

Notes of a meeting between Mr Major and US President Bill Clinton, nearly three weeks after the executions, show the steps the leaders contemplated to isolate Nigeria.

The two men met while Mr Clinton was on a visit to the UK.

Human rights activists with black masks and hangman's nooses around their neck demonstrated 10 November,outside Shell India's headquaters in South BombayImage copyrightGETTY IMAGES
Image captionThe hangings caused caused global outrage

According to the notes, the UK believed that an oil embargo would "only be effective" if done through the UN Security Council and "could only be made to work by a naval blockade".

Such steps would result in "wrecking Nigeria's economy" as it was heavily reliant on oil exports.

'Sycophants surround Abacha'

Mr Clinton agreed, but said the US would only implement an embargo if "all other parties" were willing to do so, pointing out that sanctions would be vetoed by China if brought before the UN Security Council.

There had been pleas from across the world for Nigeria's military leader at the time, Sani Abacha, to exercise clemency, but Western governments had struggled to reach the leader.

Mr Clinton's special envoy to Nigeria, Donald T McHenry, had been unable to see Abacha and concluded that he was "almost wholly insulated from the outside world" and "information was filtered by sycophants: they had no idea of genuine opinion within Nigeria or internationally".

Media captionPM John Major: The executions were judicial murder

The hanging of the Ogoni campaigners took place just as Commonwealth heads of state were meeting in New Zealand for their biennial gathering.

The UK issued a statement condemning the executions, but it was South African President Nelson Mandela who led the international criticism.

He called for Nigeria to be suspended from the Commonwealth "at once" and that the suspension should not be lifted until the country had shown "much quicker" progress in returning from military to civilian rule. All political prisoners should be released, he argued.

In this, Mandela was backed by his Zimbabwean counterpart Robert Mugabe and Kenya's Daniel arap Moi, but the suggestion was criticised by a number of other African leaders, including Ghana's President Jerry Rawlings.

Mandela outspoken

The Commonwealth went ahead with the suspension, but Mandela was determined that the measures should not end there.

He continued his international engagement, making phone calls to Mr Clinton and keeping in touch with Mr Major by phone after the Commonwealth summit ended.

In demanding strong action Mandela appeared to have been isolated from the rest of his government.

Newspaper reports at the time indicate that then Deputy President Thabo Mbeki and the Deputy Foreign Minister, Aziz Pahad, had been reluctant to pursue sanctions against Nigeria.

Ken Wiwa, son of condemned Ogoni human rights activist Ken Saro-WiwaImage copyrightGETTY IMAGES
Image captionKen Saro-Wiwa's son, Ken Wiwa, appealed to the Commonwealth to take action after his father's execution
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The UK, together with the European Union (EU), took a number of steps.

Ambassadors to Nigeria were recalled, military training and aid were suspended and an EU-wide arms embargo was instituted.

While Mr Major was willing to consider wider economic sanctions, he was unwilling to do so alone.

The UK accounted for just 1% of Nigeria's oil exports, while the US took 40%.

As a result, Mr Major told Mr Clinton, "we were not well placed to press for [sanctions]".

The UK also had a good deal to lose if Nigeria retaliated.

Pressure from Shell

There was a considerable British expatriate community in Nigeria and UK investments in the country totalled between $3.9bn and $6.5bn (£3bn and £5bn).

This included Shell, which extracted half of the country's oil and was contemplating building a major natural gas project.

The Shell chairman at the time, Cornelius Herkströter, wrote to Mr Major at the height of the controversy, pointing out just how important these investments were.

He argued that the gas liquefaction plant would "make a major contribution to environmental improvement in the region" since it would reduce the need for the flaring of gas.

In the end, the problem of getting UN Security Council approval for an oil embargo appeared to have blocked progress on wider sanctions.

Nigeria was only re-admitted to the Commonwealth in May 1999, on the day on which the country's new civilian government assumed power - ending three-and-a-half years of isolation.

Posted On Tuesday, 31 December 2019 03:51 Written by

Members of a group that pledged allegiance to the Islamic State of Iraq and the Levant (ISIL or ISIS) have executed four Nigerian hostages held since July, the French aid group Action Against Hunger said on Friday.

The four victims were among the six hostages held by the armed fighters from the Islamic State West Africa Province (ISWAP) group in Nigeria, the Paris-based NGO said, adding that one of its staff and two drivers were among those killed.

"The armed group responsible for the kidnapping of humanitarian workers on July 18, have murdered four hostages," the Action Against Hunger said in a statement that did not identify the victims.

Another of the hostages was killed in September.

The French aid group called for the immediate release of the last hostage, saying it is "extremely concerned and calls for the immediate release of its staff member, Grace, who remains in captivity."

The six, an Action Against Hunger employee, two drivers and three health ministry personnel were kidnapped while delivering humanitarian aid to vulnerable people near the town of Damasak in Borno State.

Their driver was killed in the kidnap ambush carried out by ISWAP group, which is said to be a splinter group of the armed group, Boko Haram.

ISWAP fighters have repeatedly attacked military bases and previously targeted aid workers in northeast Nigeria.

"Action Against Hunger condemns these latest killings in the strongest terms and deeply regrets that its calls for the release of the hostages have not been acted upon," the group said in its statement.

On Thursday ISWAP fighters killed 14 pro-government fighters and a police officer in northeast Nigeria, militia leaders told AFP on Friday.

The militia comprised local hunters across the northeast along with the state-funded Civilian Joint Task Force, an armed vigilante group.

The decade-long armed uprising has killed 35,000 people and displaced about two million from their homes in northeast Nigeria.

The violence has now spread to neighbouring Niger, Chad and Cameroon, prompting a regional military coalition against the fighters.

Action Against Hunger said it is currently providing food assistance every month to approximately 300,000 people in northeast Nigeria, as well as helping thousands more with life-saving health and nutrition services.

Posted On Sunday, 15 December 2019 16:47 Written by

Nigeria's Punch newspaper says it will henceforth prefix President Muhammadu Buhari’s name with "Major General", his rank when he led a coup in the 1980s, because he is acting like a "military dictator".

The paper also said it would refer to his administration as a "regime", until members of his government purged "themselves of their insufferable contempt for the rule of law”.

In a scathing editorial, published both online and its print version, the newspaper said the government's "actions and assaults on the courts, disobedience of court orders and arbitrary detention of citizens reflect its true character of the martial culture".

Last Friday's dramatic arrest in court of Omoyele Sowore, the publisher of online newspaper Sahara Reporters - a day after his bail was upheld by a high court - was cited by the paper in a long list of alleged "violations of rights".

The president was also accused of failing to release the leader of a banned Shia Muslim group, Ibrahim el-Zakzakky, and his wife, and the country's former security adviser Sambo Dasuki - all have been granted bail by different courts but remain in detention.

Mr Buhari is serving his second term in office as a civilian president - having won elections in 2015 and 2019.

One of his spokesperson, Femi Adesina, has taken to Twitter to make light of the editorial, saying the president had earned that rank while serving in the military.

But the editorial has struck a nerve at Aso Rock, as the official presidential complex is known.

Another presidential spokesperson, Garba Shehu, denied the allegations of human rights violations and described the newspaper's decision to label Mr Buhari a "dictator" as politically motivated.

After his election in 2015, Mr Buhari announced that he was dropping the title of "general" to reflect his new role as an elected president.

Many Nigerians saw it as a bid to whitewash his image as he faced criticism for his 20-month stint as a military leader - a time marked by a brutal clampdown on press freedom and human rights abuses.

The Punch is one of Nigeria's oldest and most respected newspapers and has been known for its hard-hitting editorials.

Many are watching to see what effect its stance will have on other Nigerian news outlets, especially newspapers, which have been known to bond together when challenging the authorities.

Twenty-six male cross-dressers have been arrested at a birthday party in Kano state, northern Nigeria, the Islamic police say.

Deputy commander Tasiu Ishaq said the young men, who were dressed as women, were detained on Sunday.

“It is a shame that men and good citizens can put up such a behaviour and act like women,” he said.

Commander Ishaq said the men had been “preached to” about the spiritual consequences of their actions and would be released to their parents.

One of the accused men told the BBC that a friend had invited him to the party and that the person whose party it was escaped when the Islamic police arrived.

“They have preached to us and we have prayed since they arrested us. I regret what happened and I will stop this behaviour by God’s grace,” he said.

Kano is one of the states in northern Nigeria that enforces Sharia, Islamic religious law, which has been in place since 2001.

The Islamic police have the power to arrest people they believe are carrying actions that are contrary to Islamic laws.

Posted On Thursday, 12 December 2019 04:09 Written by

The United States authorities have frozen about $14.2 million in bank accounts linked to companies registered by Allen Onyema, the chairman of Air Peace Limited.

Mr Onyema and Ejiroghene Eghagha, Air Peace’s head of finance and administration, were indicted 19 November for alleged money laundering and bank fraud in the United States.

Both suspects strongly denied the allegations and said they looked forward to proving their innocence in court.

The charges were first made public by the United States Department of Justice on Friday night.

The charges said Mr Onyema used several companies he set up in the U.S. to launder funds and commit bank fraud through issuance of counterfeit letters of credit.

Some of the companies’ bank accounts in the U.S. and Canada had been frozen with their substantial balances as part of the investigation, court documents showed.

The documents showed that $4,017,852.51 was seized from JP Morgan Chase Bank account number ending in 5512 held in the name of Springfield Aviation Company, LLC.

Another $4,593,842.05 held in Bank of Montreal with account number ending 7523 in the name of Springfield Aviation Inc. was also seized.

The American government also traced and seized $5,634,842.04 held in Bank of Montreal with account number ending in 515 in the name of Bluestream Aero Services, Inc.

American law enforcement authorities indicated in the charge document that efforts had commenced to secure final forfeitures of the funds.

In an earlier statement Saturday, Mr Onyema said he was innocent.

“As the press statement clearly stated, these are indictment (sic) that only contain charges,” the statement said.

“I am innocent of all charges and the US government will find no dirt on me because I have never conducted business with any illegalities.

“Be rest assured that I also have my lawyers on this and these mere allegations will be refuted. I never laundered money in my life, neither have I committed bank fraud anywhere in the world. Every Kobo I transferred to the US for aircraft purchase went through the Central Bank of Nigeria LC regime and all were used for the same purpose.

“The American companies that received the funds are still in business. I never took a penny from any US bank or Nigerian bank. I am willing to defend my innocence in the US courts,” the AirPeace CEO stated.

Posted On Monday, 25 November 2019 04:33 Written by

Renowned professor of virology, activist and former minister of petroleum, Tamuno David-West is dead.

He died Monday at the University College Hospital (UCH), Ibadan at the age of 83 years.

David-West was born in Buguma, Kalabari, Rivers State.

He worked as lecturer and became a professor at the University of Ibadan where he lived and died. He joined the university in 1969 and became professor of virology in 1975.

David-West served in Nigerian government as commissioner for education and a member of the Executive Council of Rivers State from 1975 to 1979.

He was a member of the 50-person Constitution Drafting Committee for the Federal Military Government in 1979.

He served as federal minister of petroleum and energy under General Muhammadu Buhari from 1984 to 1985 and as minister of mines, power, and steel under General Ibrahim Babangida in 1986.

He was eventually removed as minister and arrested by the Babangida regime for allegedly contributing to the economic adversity of the country. He was discharged and acquitted of these charges by Nigeria’s Special Appeal Court on 8 August 1991.

A strong supporter of President Muhammadu Buhari, David-West will be remembered for his strong views on national issues and how he brought historical perspectives to proffer solutions to national crises.

Posted On Monday, 11 November 2019 17:47 Written by

A university don has raised alarm that the country loses over $100 billion annually to exposure of lead, which occurs as a result of unregulated and indiscriminate use of lead substances by faceless producers in manufacturing of paints and other domestic and industrial products as well as smuggled substandard paints and printers’ inks.

Babajide Alao, a professor of Chemistry, University of Lagos, who disclosed this in Lagos recently at the 2019 Coating s Show of the Paint Manufacturers Association of Nigeria (PMA), a sub-sector of the Manufacturers Association of Nigeria (MAN), with theme “Future Trends in Coatings Technology” noted that West Africa paint market losses between $100 – $237 billion annually on consumption of poisonous lead paints.

He pointed out that Nigeria being the largest market in the region consumes more than half of the total worth of the market as it losses over $100 billion, adding that the global lead paints would be faced out by 2020 as agreed by the United Nations.

Alao explained that lead affects the intellect of children and adults, stressing that cancer, high blood pressure and other related health challenges are caused by the inhalation of lead substance from the air as it is emitted from walls and every item coated with the lead paints in the environment.

“The Nigerian coating industry is at a cross-road to adopt innovative global technologies. Eliminate lead compounds in paints and coatings are now imperative. Alternatives are now widely available as global raw material manufacturers are gradually phasing out leaded ingredients. Examples in some other developing country – Philippines shows that it is feasible and indeed increases the net-worth and profits of manufacturers, as it leads to environmental sustainability, it also increases the manufacturers CSR and image with consumers,” he stressed.

Earlier in in welcome address, the Chairman, PMA Mr. Sunday Babatunde, regretted that the Mandatory Conformity Assessment Programme (MANCAP) has not been able to tackle adulteration and faking of its members premium brands of paints, stressing that it remains a big challenge to them.

Babatunde said; “Adulteration and faking of our members premium brands of paints is still a big challenge to us. This has negatively affected the volumes/profitability and of course returns on investments of the companies whose products are prune to the menace. Even with the introduction of Mandatory Conformity Assessment Programme (MANCAP) the Standards Organisation of Nigeria (SON) has not been able to tackle the problem due to inadequate monitoring and enforcement. The paint industry is a peculiar industry because of the low entry barrier.”

Posted On Saturday, 02 November 2019 23:31 Written by
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