19 Jan

Daily Watch – Oil component of Budget under threat, Farmers return to North-East

  • The current dip in oil prices will significantly reduce the Federal Government’s take from the profits of oil and gas companies this year, raising further questions about the viability of the 2016 budget document. Oil prices at less than $28 per barrel, make production unprofitable for many smaller Nigerian companies that pump at a cost of $30 per barrel and incur extra security costs to protect installations, analysts say. Oil majors, such as Shell and Exxon Mobil, with larger economies of scale, pump at lower cost of about $20 for a barrel. Indigenous producers, including Seplat, Neconde Energy, Conoil and First Hydrocarbon, account for about 20 percent of Nigeria’s production of 2.04 million barrels per day, with international oil companies making up the rest. Petroleum Profits Taxes (PPT) generated by Nigeria’s Federal Inland Revenue Service (FIRS) fell by 55 percent to N1.09 trillion in 2015 from N2.45 trillion collected in 2014 data from the tax agency shows.
  • BusinessDay is reporting that the production of food and cash crops such as rice, wheat, onions, vegetables, tomatoes, Gum Arabic and beans will improve, as Boko Haram loses more territory in the North-East. Farmers who earlier abandoned their fields and ran to relatively peaceful states such as Kano, Kaduna and Sokoto, are now gradually returning, raising hopes that the production of cash and food crops will return to the previously high levels. Seasonal rains, which water the fields for bountiful harvests are expected to begin between March and April, making the return of the farmers fortuitous.
  • India says it has doubled its annual oil purchase deal with Nigeria for 2015/16 to 60,000 bpd. The chairman of the Indian Oil Corporation, B. Ashok made this statement recently. This also comes as Indian refiners boosted imports of African crude oil in 2015 to the highest in at least five years and slightly cut their intake from Latin America as refiners benefited from changing global oil flows caused by surplus supply. In 2015, India imported 787,700 bpd of African oil with the continent accounting for about a fifth of the South Asian nation’s overall imports from 16.7 percent a year ago, according to data compiled by Reuters.