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Economy

Forex crisis threatens modular refineries N25bn daily crude input

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Modular refineries in Nigeria are currently facing the threat of shutting down operations following their inability to access foreign exchange for the purchase of crude oil, a commodity priced in United States dollars.

Nigeria has 25 licenced modular refineries with a combined capacity of producing 200,000 barrels of crude oil daily.

Although not all of the plants are currently operational, it was gathered that the functional ones were increasingly finding it difficult to purchase crude due to the worsening foreign exchange crisis in the country.

Brent, the global benchmark for crude, traded at about $80/barrel on Sunday and had remained within that range for months.

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With an estimated capacity of 200,000bpd, the modular refineries, if fully operational, would refine about $16m (or N25.14bn if Thursday’s official closing rate of N1,571/dollar is used.”

Annually, it means the modular refineries has capacity for about 73 million barrels annually, representing about $5.84bn worth of crude oil.

But the facilities, which produce Automotive Gas Oil, popularly called diesel, Dual Purpose Kerosene or kerosene, naphtha and black oil, are now finding it hard to make the refined products available to oil marketers for distribution to consumers.

They explained that the scarcity of dollars had made it almost impossible for operators to purchase crude oil, as the modular refinery players and oil marketers demanded for the sale of crude oil in naira from the Federal Government.

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The modular refinery operators, who spoke under the aegis of Crude Oil Refinery Owners Association of Nigeria, also lamented that the Federal Government had not been able to keep its part of the bargain with respect to the provision of feedstock to local crude oil refiners.

Speaking with our correspondent on the matter, the Publicity Secretary, Crude Oil Refinery Owners Association of Nigeria, Eche Idoko, stated that modular refineries may close shop if nothing is done to ameliorate the situation.

CORAN is a registered association of modular and conventional refinery companies in Nigeria, while modular refineries are simplified refineries that require significantly less capital investment than traditional full-scale refineries.

Idoko said, “The purchase of crude oil in dollars is currently the major challenge to modular refineries. We buy crude in dollars and sell our refined products in naira, and this is a major challenge. And apart from that, where do you get the dollars to pay for the crude?

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“You heard the Manufacturers Association of Nigeria crying out recently about the dollar saga. We have requested that crude oil be sold to us in naira. And when you do this, you ease the pressure on the naira and this will make our diesel cheaper.

“It will encourage more investors to build and patronise the local refineries. If you take petroleum products off the foreign exchange market, you would have helped the naira by 60 per cent.”

Asked whether the inability of modular refineries to source dollars for crude oil purchase was slowing down production at the plants, Idoko replied, “Yes. We’ve not been able to get enough crude and from the little that we see, we’ve not been able to get forex to buy them.”

On whether this posed a threat to the survival of the plants, the spokesperson of the group said, “Exactly, it is a threat to our existence and it also opens the country to the volatility in the international market.”

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Although the association could not state the estimated volume of crude refined by modular refineries in Nigeria, it stated that operators in the sector could refine about 200,000 barrels daily if all of them were operating.

Idoko said, “Right now, I don’t have the actual volume of crude that modular refineries refine annually. However, it is important to state that what each refinery produces in a month is dependent on the amount of crude they are able to get.

“The government has not been able to fulfill its own side of the obligation by providing 60 per cent of the crude required by modular refineries, as captured in the Petroleum Industry Act. So a lot of modular refineries are performing below capacity.

“For instance, OPAC has a 10,000 barrels per day installed capacity, but the most they have been able to refine is like 3,000 to 4,000bpd. The Edo refinery has 1,000bpd, but sometimes they do just 500bpd. Aradel and Waltersmith are the ones that refine as much as 70 and 80 per cent of their capacities because they have their own marginal fields.

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“Waltersmith has a capacity of 5,000bpd, while Aradel has 10,000bpd refining capacity. However, if all the modular refineries come onstream, all those that have been licensed so far, our crude demand would be about 150,000bpd and 200,000bpd.”

Nigeria currently has 25 licensed modular refineries. Five of them are operating and producing diesel, kerosene, black oil and naphtha. About 10 are under various stages of completion, while the others have received licences to establish.

Officials of the Federal Ministry of Petroleum could not be reached to tell whether the government would consider selling crude to the modular refineries in naira, as they had yet to respond to enquiries up till when this report was filed.

However, the Minister of State for Petroleum Resources, (Oil), Heineken Lokpobiri, recently confirmed the lack of crude to domestic refiners, noting that Nigeria’s inability to meet its crude oil production quota approved by the Organisation of Petroleum Exporting Countries was the major limiting factor.

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Lokpobiri, however, stated that the government was working hard to meet the production quota in order to supply crude oil to local refiners as stipulated in the Petroleum Industry Act.

Meanwhile, Idoko noted that “the current NNPC boss, petroleum minister and NUPRC have all talked about the possibility of having some arrangements with us in naira. But that hasn’t been implemented. Our people still source crude from domestic producers in dollars.

“We buy crude in dollars and sell our refined products in naira. So it is not that we earn dollar proceeds. Our earnings from the sale of diesel, kerosene and black oil is in naira.

“The only dollar component is the sale of naphtha, but most of our refineries won’t sell naphtha, they put it back into the system and reproduce kerosene or diesel. So we still have to visit the Central Bank of Nigeria or domestic dollar market to source our dollars.”

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Marketers react

Commenting on the development, oil marketers stated that the continued fall of the naira against the dollar was limiting the release of refined petroleum products from the modular refineries.

Marketers under the aegis of the Natural Oil and Gas Suppliers Association of Nigeria stated that operators of these refineries had stated that the country’s foreign exchange crisis had made it difficult to put a price on refined petroleum products.

They called on the Federal Government and NNPCL to start supplying crude oil to local refineries in naira, considering the persistent fluctuations of the dollar.

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The President, NOGASA, Benneth Korie, who conveyed the resolutions of members of the association after their meeting in Abuja, stated that the government should peg the foreign exchange rate at N750/$ in order to enable refineries to start pumping out refined products.

“If for example crude is $80/barrel, we will have to convert it to naira and sell to Nigerians at the naira rate. Let me start by telling you the implications. The problem holding most of these refineries and modular refineries from coming up is the exchange rate crisis.

“So the answer to this is for the government to come out and tell Nigerians that this is how much the dollar is, not this forex rate we hear on TV. Let the government come out and tell us the rate, not the black market rate.

“I know our budget this year was benchmarked at about N750/$. So if the government can maintain the exchange rate at N750/$, heaven will not fall, whether there is inflow or no inflow. It is not the first time we are seeing the dollar at N400 and they (black marketers) are selling for N800.

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“So let’s go back and try it, because if we allow this crisis to continue, the dollar may get to what we cannot handle; it may get to the point that all our food items could be sold at dollar rates if care is not taken.

“Therefore, let us go back to N750/$ as it was stated in the budget and work with that, so that the crude oil that will be sold to the refineries will be sold at the exchange rate of N750/$, and it should be converted and we pay in naira.”

Explaining further, he said, “If you are buying crude oil from the government, you pay in dollars, but how do you blend? How much are you going to sell your refined products when you don’t know how much the dollar is going to be tomorrow?

“So it will affect you as a businessman. But if we have one price from the government, then when you are buying the crude from the government or NNPC, you will calculate it based on the government’s rate, convert it to naira and then sell it to Nigerians in naira.

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“But when you go to get dollars today and they say it is N1,500, how do you calculate? It creates confusion. So it is causing a problem. Let’s have one rate from the government and things will change positively.”

The NOGASA president went ahead to speak on refineries under the management of NNPCL, as he stated that the forex crisis was also affecting these plants.

“For the Port Harcourt refinery, they said it will come up, and they are also into the business of buying and selling, so if the dollar is not stable, be rest assured it is their problem too,” Korie stated.

When probed further on whether the forex crisis was a major factor limiting the release of products from the refineries, he replied, “For most of them, yes!. This is because you don’t know how much you are going to buy the dollar and so you cannot tell how much you are going to sell (your products). It (dollar) is not stable.”

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Speaking further on modular refineries, Korie said operators in this space were finding it tough to source dollars to make crude oil purchase, stressing that the instability of forex had remained a challenge.

On modular refineries, the problem they have is that they do not know how much they will buy and you are selling to them at the dollar rate. If you go to any modular refinery to buy products, the products’ price will be the same at almost the same price as the one you import,” the NOGASA boss stated.

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Economy

CAC issues guidelines for banks recapitalisation, merger

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The Corporate Affairs Commission has issued fresh guidelines to assist Deposit Money Banks in the ongoing recapitalisation.

The commission, in a statement signed by its management and posted on its Facebook account on Friday, said the new directive is pursuant to its powers under Section 8 (1) (e) of the Companies and Allied Matters Act No. 3 of 2020, stressing immediate adherence to the policy.

It said the new guidelines were issued to guide proper filing for new incorporations, increase in share capitals, mergers and upgrade or downgrade of licence authorisation.

For new incorporations, the CAC stated that intending applicants must submit necessary requirements including, “An approved name reservation or availability, approval-in-principle from sector regulator, duly completed on-line incorporation form and payment of stamp duty and filing fees for the category of license authorisation.”

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It added that a certificate of incorporation shall be issued within 24 hours for applications that satisfy all requirements for incorporation of companies prescribed in the, “Commission’s operations checklists available at www.cac.gov.ng/resources.”

Also, banking institutions seeking to increase their share capital through private placements, rights issues and/or offers for subscription must submit a duly signed company resolution, return of allotment and other statutory declaration by directors verifying that the issued share capital is fully paid- up

Other requirements include, “Notice of the fact that regulatory approval is required, an affidavit deposed to by a director of the company to the effect that regulatory approval is required for the increase, an amended memorandum of association reflecting the new share capital.

“Payment of stamp duties and filing fees, Issuance of a letter acknowledging notice of increase and requirement of regulatory approval, filing of regulatory approval and the issuance of a certificate of increase.”

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Under this category, the commission warned that the notice of the fact that regulatory approval is required must be filed in accordance with the provisions of Section 127 (3), (4) & (5) of CAMA.

“Annual returns and information on persons with significant control must be filed up-to-date and certificate of increase shall be issued within 24 hours of filing of regulatory approval,” it said.

Similarly, small and medium banking institutions seeking to merge must submit duly signed special resolution for merger by each of the merging companies.

Other requirements are “the scheme of merger duly approved by the Securities and Exchange Commission.

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“A certified true copy of court order authorising Extraordinary General Meeting of each of the merging companies. Evidence of publication of court ordered meeting in two newspapers and the Federal Gazette and a CTC of Court order sanctioning the Scheme of Merger.

“All enquiries and complaints on these guidelines and applications submitted in pursuance of the recapitalisation exercise should call +234 816 920 9551,” the statement added.

Recall that the Central Bank of Nigeria in March 2024 directed all banks to increase their capital base for improved productivity.

The apex bank had directed commercial banks with international authorisation to increase their capital base to N500bn and national banks to N200bn.

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It also said commercial banks with national licences must meet a N200bn threshold, while those with regional authorisation are expected to achieve a N50bn capital floor.

This process has commenced fully with banks issuing public offers and rights issues to meet the two year target.

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Economy

Oando denies owning blending plant in Malta

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Oando PLC has denied allegations on social and digital media that it owns a blending plant in Malta.

The energy company also denied importing dirty fuel into Nigeria through a Maltese company, Raz Hansir Oil Terminal Limited.

A statement by the company secretary, Ayotola Jagun, said the allegations levelled against Oando of being a shareholder, and its principals of being board members of Raz Hansir Oil Terminal Limited, a company that operates an oil storage and blending facility responsible for importing adulterated petroleum products into Nigeria, were unfounded.

“We wish to refute such claims and attest that neither Oando PLC nor its Executives have ever held shares, investments, or interests in the fictitious Maltese company.

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“As part of a comprehensive investigation into the basis of the false claims, we conducted a search of the Malta Business Registry, the official repository for all registered entities past and current within the country. Our search yielded no results for a company bearing that name. Subsequent due diligence efforts similarly failed to uncover any record of the company’s existence.

“We therefore believe that the false claims are of the malicious intent of misleading the public and our stakeholders,” Jagun stated.

The company reiterated that as a publicly listed company, any corporate actions, such as acquisitions, are declared publicly in accordance with applicable corporate governance laws and rules.

“Furthermore, it is imperative that information released about a publicly quoted company such as Oando, is thoroughly researched and deemed accurate before it is published in the public domain.

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“The company’s securities are traded daily across two exchanges (NGX and JSE). To prevent misinformation and confusion among investors, as well as our other stakeholders, we implore all members of the press to take adequate steps to ensure the veracity of reports by fielding all enquiries with Oando PLC’s Corporate Communications department,” Jagun submitted.

Malta and its oil became a topic of discussion lately following allegations by the President of the Dangote Group, Alhaji Aliko Dangote that some officials of the Nigerian National Petroleum Company Limited own blending plants in Malta.

Amid the crisis surrounding his $20bn refinery, Dangote had said: Some of the terminals, some of the NNPC people and some traders have opened blending plants somewhere off Malta. We all know these areas. We know what they are doing,” Dangote said.

Data from Trade Map showed that Nigeria imported fuel worth $2bn in 2023 alone.

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Earlier, the Group Chief Executive Officer of the NNPC, Mele Kyari, said he does not own a blending plant outside Nigeria.

Kyari stated that he had been inundated with calls from family members and friends, asking if he truly owned a blending plant in Malta.

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Economy

Guinness loss widens to N54.76bn as finance cost spikes by over 100%

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Guinness Nigeria Plc has released its audited financial statements for the year ended June 30, 2024.

Guinness Nigeria Plc loss for the year came in higher at N54.766billion, from loss of N18.168billion in 2023, representing 201percent increase.

The company’s net finance costs rose by 117.79 percent to N99.087billion in 2024, from N45.496billion in 2023. Its loss before income tax (LBT) rose to N73.679billion from N22.138billion loss before tax in 2023 financial year.

The brewer’s full year revenue of N299.489billion as against N229.440billion represents 31percent increase. Its profit from operating activities printed at N25.407billion in 2024, from N23.357billion in 2023, up 9percent.

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The brewer’s full year revenue of N299.489billion as against N229.440billion represents 31percent increase. Its profit from operating activities printed at N25.407billion in 2024, from N23.357billion in 2023, up 9percent.

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