 It's the breakfast and plus stevia every car. We look at our first major conversation and the focus this morning It's the inability of Nigeria to meet her quota the spin put out by the OPEC Nigeria missed out its crude oil output target for January 2022 pumping 1.46 million barrels per day against a target of 1.683 Million barrels per day as approved by the organization of petroleum exporting countries OPEC The inability of Nigeria to meet her target is as a result of pipeline vandalism Delaying full implementation of the Petroleum Industry Act among others all the countries in this category include Angola Congo Equatorial Guinea, we will be looking at the economic implication of the shortcoming as we have an analyst join the conversation Muktaq Mohammed is an economist. It's good to have you join us this morning on the show Good morning Muktaq Mohammed Thank you my pleasure. Good morning. All right. Muktaq Mohammed is an economist It's also a financial advisor and an investment banker Let's quickly start off on this note What do you make of the fact that Nigeria again has been unable to meet her target in terms of production has been stipulated by OPEC? Well, it's not good news for us as a country Because he took it down to being oil our only major source of external revenue at the moment And so that's not good news for us And that means that we are actually losing a lot and that is already affecting our federation account in terms of our Location and unfortunately again, it's during the time that oil price has peaked seven years high That we are experiencing this for me It's a it's a challenge that the government have not been able to deal with even previous governments Not just this government. I think we need to do the right thing and of course both of those challenges are not rocket science There are things that could be addressed with technology There are things also that could be addressed in terms of being famed in decision-making And surely when you come up with a with with with with with a template or a document I think you should We should use to break a particular sector So what we're saying is that we had a document we have everything that we thought was working for us All of a sudden the government put a break on it So it's policies on my side also is a part of the problem that we have in terms of meeting some of these demands Well, some of the excuses or the consents that have been put out by the authorities is that first of all the issue of us being unable to meet the target is as a result of the activities of Vandals so vandalism of Pipelines all teft amongst all the issues. Do you really agree with this because I mean these issues have always been with us in terms of You know production. I mean meeting our target As a 2016 just to also just to put it out in 2016 We we had a capacity of producing about two million barrels per day So and this issue of oil theft and vandalism has always been with us even as a 2016 So what could really really be the reason why we are not meeting the target has been put out by the by OPEC Well vandalism is part of it definitely then we're not talking about So now she's the PI PI bill that was not has not seen the light of the day And when you look at vandalism you try to repeat a particular industry bill also PIB bill because if you remember that bill was also meant to address vandalism because the oil community You have the pipeline that pass through your area then you be given a percentage if that pipeline is not vandalized But you are named after that vandalism you are not entitled to that so Well, that law is not passing to play also It has also as an implication that mean the vendors can continue to do what they want to do The oil thieves can continue to do what they want to do Secondly again, you must not Look at in terms of divestment because major oil marketers are also selling some of their assets to Nigerians And they will take time for this Nigerian company to begin to enhance this asset and begin to make it productive So those for me are the key indices that I'm causing what we are seeing as in even the vandalization Like I said, not rocket science. It's just that government has not had a political way of the technology to drive to drive that And that also have to come in when you when you have to do something you need to come out with a bill to address And that bill has come in place. But unfortunately, there's uncertainty in that bill as it stands No, so Muktaq Mohammed my concern here is in 2016 if we look at the production capacity of the country we were producing up to 2 million barrels per day as it was So and the issue of vandalism at the time did not disappear. So you still have You know vandalism or vandalization of the pipelines or pipelines amongst other issues the issue of theft I mean, you also want to talk about the the issue of the Militants in the region even though at this point in time we're experiencing some relative peace So why is it that at this point in time? We're making excuse. We're making an excuse for Vandalism the issue of militancy all theft as an excuse not to meet the quota that's been put out For a country that is very dependent on oil production and looking at the current oil price right now One should think that we should take advantage of this and push our production Yes In 2016 we have those challenges and with that oil production Still at 2 million but not to forget that we have the pandemic also that also played a role in terms of production And remember, this is not just relevant This is not just Nigeria alone even Angola also has been affected by this So it's more or less like supply chain destruction due to the pandemic also contribute to what we are seeing now Even if you those other indices that you have placed about what has always been there But now I think added with the pandemic also must have increased that Remember and again, we are beginning to get a lot of Nigeria data that a lot of illegal refineries have increased over the over the years because in 2015 We may have some illegal refineries but not compared to now when you when you look at what the governors of river state Is saying that we some weekend some few weeks ago. So it's all about security security must have improved in terms of a Relative peace in the Niger Delta But those security may come at a cost because if it's security officials are not the one involved in In oil chief and oil private that means there's a lot of compromise So that also could increase Could contribute to the to the downturn that we are seeing test of production But basically I think one of the major costs of this destruction Was not like the ticket away but the pandemic also has played a very huge role in that and the fact that it's not All in a given that it's affected also and go land some other oil public hallucinations Okay. Um, well that sounds, uh, you know somehow Maybe, you know to some extent, okay You you probably might just make an excuse for covid among other issues But it's really quite worrisome because if you look at our production capacity And you know the quota that's been pushed out. We haven't really been meeting it, you know for a very long time But let's also look at some consents that some experts have raised that they're talking about the p Uh, the pia and the fact that that has also contributed I like you to take us through how that has affected, you know, our You know meeting of the target for oil production Yeah, that has affected strongly because and before now most of the major oil marketers and most of those that want to come to Nigeria We're looking at the pia bill to determine when when they want to come into the country Would there would that bill be passed into law? Will it make it a level playing ground? We still have subsidy What is the in terms of relationship with the committee the committee that we'll be producing from and that bill came into law most of them were I mean getting ready to begin to say look want to invest in this country and then Assistant because the bill had been passed into law some of them were going through the bill all of the sudden within within Months to the full implementation of that bill the government is saying now that we don't think that bill could see the light of the day because It's not the totality of that bill But the main bone of contention of that bill has always been the oil subsidy And that is what the major marketers and other people that want to come and invest in Nigeria Other companies that want to come invest in Nigeria are looking at because I cannot come to invest in an environment that is poor with uncertainty If I invest here, if I'm producing petroleum food or will I be also be paid? Subsidy in the terms of National terms of my own production also that is a major challenge. They were also looking at and unfortunately Like I said, um, government have turned back on that decision. And so it's a very huge Setback to the oil industry very very huge setback to the oil industry So but with the fact that we're not being able to meet the 1.68 million arboros per day that's been put out by the By OPEC, how do we then now, you know, the issue of the 2022 budget? How do we not fund the budget? Fund the budget as being a challenge and you continue to be a challenge because again The government does not have the political way to fund to go about the budget We look for easy way out of every situation that we find ourselves And not the easy way out for the government to keep borrowing to address those issues So the government will continue doing that because that's the easy way out the other way out Which is not easy, but we need a lot of work is for government to begin to look at some of our key Project as a means of security to begin to secure. I mean where we call the PPP the public-private partnership That will also help in terms of funding of the budget because when you look at the budget deficits, you look at deficits This time not so much in the recurrent expenditure For most of those deficits that most of the borrower in terms of appetite expenditure in terms of project So can those projects become like the PPP PPP? Whereby we can use those projects as a means of collateral and tell Beauty and not pray for the next two in five years and two there there Then you will have to pay some of these debt and the beauty about it is that you have a snowball effect because It does not stop them from paying taxes and those that were employed by those who paid that So government will gain gain in the short term. They will still gain in the long run. They will maintain a high gain So the other The key way is to look inwardly and begin to drive our economy And the other way is again is to use tax also. But in terms of this government We see tax as a means of revenue. Government have not looked at tax as a means to grow the economy So definitely there is a challenge and there will continue to be a challenge The problem in the Nigerian budget will always be revenue Government have not come up with key strategy in terms of building revenue from up I mean from down to up So but let's also look at the general implication of all of this on our economy What is what does this mean for the Nigerian economy at this time? and In terms of monetary value, how much are we losing? In terms of monetary value, we are losing millions of dollars Especially I can't really quantify the amount now, but when you look at the two bit two million barret I mean, I mean that you said in 2016 and compared to 1.64 million So we're already losing almost 300 million barret So that is huge and for for in monitoring monitoring turn But again, we have to look at the economic turn again That also means it's going to affect a lot of project like you pointed out in the budget deficits And that also means that they is going not to going to affect only federal government Going to affect all the state because even with the rising price in crude oil Which is supposed to bring more money to the local government to the state government and to the federal government We've seen that the latest support on Nigerian below statistical for the From from the from the revenue sharing Formula says that this this state are not getting that because of the short for so It's a very huge one and it's going to affect us economically Very very very well, especially in the area of meeting some of our key capital expenditure projects So apart from the key capital expenditure project, how how does all how will it also affect, you know Nigerians the common man as we like to always put it on the streets Why you are very common man is simple. We will not end more dollars and most of the things that we We we we consume in these countries is imported from outside the show of the country So they read these things with volatility will continue to see it because we are not any modular to begin to trade The the demand and supply angle because all what you are seeing in the volatility has to do with demand and supply So once we are not telling that then the cost of good and services will go up and that is what really affect the common man So let's also share your thoughts and some economics have also posited that The morale of the upstream sector is very low and as a result you also have the IOC is moving away from The use of fossil fuel and tilting towards the global energy at this point in time We are still grappling with you know Fusil fuel and it's used and the fact that we're very dependent. I economy is dependent, you know an oil for her revenue How would Nigeria, you know, survive in the midst of all of this? Is there anything that can be done? Definitely lots have been done I mean it's a service sector that go any economy all over the world If you look at the The multi trillion companies all over the world are all in the service sector and service sector is driven by technology And Nigeria is not yet ready. Even if you look at the PI that PI APO, you see that we are still making them provision from the NMPC revenue for the development of more wells We're not looking at other ways of renewable energy because like I said, we always look for the easy way out and we're Forgotting that by 2030 most of those companies that have made by our Will be we will be from there. They will be using fossil fuel. They'll be going more for We are not looking up the future like we've always done as a country because we are still Being the fear of our raw material being where the world has gone beyond the raw material They're beginning to look at value added services by the other material and drive this value added services About technology. I don't think we have that and also that is challenging because you cannot drive technology without power So we must address all key infrastructure challenges. So Assistant nice is very going to be a nuclear starts whether for this present administration Or for the incoming administration and it's not going to be a one often It's going to take years So we need to start doing the right thing at the right time and the first one we need to do We need to begin to look at power We need to begin to look bring your bills that we encourage especially the enterprise in Nigeria you to begin to set up technological driven company to begin to enhance some of this product add value to it And that will be the key driver of our economy going forward Okay, so as we begin to cause the conversation down right now Brent, which is actually used to price the oil market for Nigeria report says that we're looking at $80 or $88 per I mean per barrel in terms of sales right now Is there anything that we can actually do you know to up our production? Is there any way out of this so we can make money? Because at the end of the day that would be it now that we're having the prices globally we're looking at $90 per barrel and of course the The price bench for us right now on the crude against Nigeria Which she is being george or practiced by has dropped by that margin of 0.78 percent and so he lives out at $88 per barrel Is there anything that we can do to push production up because I think that this price is fair Definitely is fair when you look at our benchmark with the current budget at $10 60 per barrel So we are already having an excess to put into our excess could account of about $28 So that is good for us But how what do we do to push up to make sure we meet up with some of these are demands is a major challenge And I think the first thing we need to look at now is beginning to be for security in those areas We need to be for security We need to go to those communities that the vendors are because these vendors are not spirit There are people that are living big community and some of them are doing this because of their their grief By once one Decision of the order from the oil companies that are located in their in their area So we begin to need to see how we can address this situation We can remember that some years ago during the administration We came out with the unnasty program that only had the highest In terms of production because we made the locusts to begin to guide that and that's why the PAI would have been one of those Game changer because now every community want to protect the pipeline that pass through their area to for them to gain 5% that so we need to go back to make the And the community realize again that they have to be let them know that the PAI be last not been thrown out completely It's just that we have challenging tests of the subsidies So once this pipeline pass through yet, you still have that 5% interest of income from it So I think if we do that we need to engage them because definitely when we talk of oil Steve then the securities will need to do more on that because I mean it's not rocket science These are high refinery What does it take the governor of the state to begin to discover illegal refineries that have been operating for the long term? So the security approaches need to up their game to and make sure they address these challenges But I think majorly we need to engage the communities in terms of making them know that ownership of every pipeline that pass through their community But we have also seen the river state governor. Yes, some we can be very vocal in terms of I mean of recent times in terms of the activities of illegal refineries And you also want to agree with me that the government has promised that the potackered refinery, you know in 2022 will be open functional You know functioning up to its minimal capacity and that therefore should mean some good news Do you see that also helping us in terms of pushing up our Production output to our target as it were has been put out by the relevant authority When we look at when we when we look at what the NMPC is saying about the Potackery refinery come in sooner when we look at the money that have been put in there In terms of last year about the hundred billion was paid a salary and yet there was not a single production It does not come for good news. You you shouldn't be excited about that And then we should know that in terms of when we have a local refinery We are looking more or less on the terms of and the could indigenous And production to upper indigenous so that will not import more of us and refine petroleum products So when we talk about refinery we're talking about refined petroleum product That was good news to meet up only our local demand but same Meeting of the international demand tends to have an oil price There's still a lot to be done on that and like I said that has to do with a lot of security Improving the refineries all about meeting our local demand But in terms of improving the security for the exportation of crude Oil that is meeting up international demands and also be able to begin to make Add up money to the to after our preparation account. So there are two different things One is for the local but in terms of address that one that will bring income to Nigeria Which has to do with crude oil production We need to do more in the area of security and engage in the communities So I seem to be lost somewhere and I don't mind a clarity on the issue because the argument of a time by Specialists or professionals in this particular segment will say that the reason why we are constantly the way we are It's because we have to export our products and then import it back the refined product And so the argument over time has been that let's get the refineries functional And so if the government is saying that in 2022 we're going to have the put a but how could refinery been I mean rehabilitated and functioning at its capacity and producing at the capacity that it has been You know created to produce then it should also contribute. So I'd like to give some clarity there, please Yeah, the clarity I'm telling you that even if it's producing it's producing for locals I mean, we're going to be thinking of local demands the refinery all about we talk about the refineries in the area of meeting of our local demands not made because we don't we don't export refined What we when we export is put the raw material they put petroleum products What I mean is that if that refinery comes to play like they are promising that it will be able to meet up local demand And so what we are looking at meeting of local demand that means it would draw the intense of subtly payment That government normally paid in terms of importing of this refined product from outside the show of this station That's that's basically what I'm trying to talk about not really that meeting of international demand Anybody refinery that we are cooking towards working want to reduce the importation of this food product from Ryan and the way that the other way that you could Agree with you that it could help us is a tense of our revenue because that means that we will not be spending so much In particular in petroleum products. So that would have a bottom line tense of the sharing to the tree Tier of government that is what that's the that's where it will come to the refinery So we boost our revenue internally especially because that will reduce our dependent on important refined petroleum products Okay, so this also is also another concern that's been put out there the issue of the joint venture And the fact that the government is participating that's affecting and making it so impossible for oil companies You know to have its way Would you mind to share your thoughts on the issue of joint venture in terms of you know the oil sector And how it affects our output as a country in terms of meeting the target That is where that's why the paib was to also address in terms of joint venture because Government was looking at making this his own part of his shares to begin to go to Nigeria and generally at the long run Going to make like nmpc Also begin to be a part owner the minister of petroleum resources have a particular number of shares from this joint venture So they wanted to look at it and in the long run this this will be sold out to Nigerian public and it become a Private driven economy that will only just the profit then will go to government government will not be putting so much in there But unfortunately like I said the bill has not seen the light of the day That is the only way because it's not in the business of government to be in business We keep saying the government is supposed to be a regulator to create a nebulous environment whereby businesses can strive so when government goes into business They give a room for a lot of corruption because in terms of auditing of this account We just blew back to the nmpc telling us that it's possible They have needed about three trillion in terms to deal with their subsidy And they are not giving any data to tell us this are daily consumption. This are monthly consumption What is responsible for this increase in All right Well, I wish we had more time to continue with the conversation But I would like to let you go at this point in time. Thank you so much Muktak Mohammed for being part of the conversation. We appreciate your time right here Thank you very much. My pleasure. All right. Muktak Mohammed is an economist is also a financial investor as an investment banker by the way and also a financial analyst Thank you so much for being part of the conversation. We do appreciate We will have to take a break right now when we return a second conversation We look at the senate confirming seven nominees are INEC commissioners And we would also look at what that means for us looking at the 2023 elections. Stick around. We'll be right back