Nigeria, U.S. Target $600 Billion in Gulf of Guinea
29 Aug 2006
Author: Ayodele Aminu, Kunle Aderinokun and Onyebuchi Ezigbo
The Nigerian National Petroleum Corporation (NNPC) has described the Nigeria-United States Gulf of Guinea Energy Security Initiative as a measure aimed at securing $600 billion new investments through stable flow of crude oil from the region's estimated 14 billion barrels from the reserves.
Nigeria's apex bank, the Central Bank of Nigeria (CBN), also yesterday said it would continue to retain substantial portion of the nation's external reserves in the United States dollar in spite of the downward pressure on the currency in the international market.
Nigerian officials and their counterparts from the United States would today meet under the auspices of the bilateral security agreement to review security initiatives aimed at sustaining the status of the Gulf of Guines as the safest crude oil exporting zones of the world.
NNPC's General Manager, Group Public Affairs, Dr. Levi Ajuonuma who spoke to THISDAY on the significance of the initiative said since both countries shares a common interest, both as producer and end-user, it behooves on them to join forces in ensuring stable operations in the area.
Ajuonuma whose boss, the Group Managing Director of NNPC, Engr. Funsho Kupolokun serves as the Presidential envoy at the talks, said today's meeting is expected to review happenings in the region and fashion out fresh methods of engagement between the nations.
Against the background of heightening tension in the Niger Delta area, the GM said the country's over riding interest in the gulf is because it accounts for about 50 per cent of the crude oil as well as other economic potentials of the zone that stretches from the West Africa coast line through Cameroon to Angola.
The Gulf of Guinea region alone currently hosts about14 billion barrels of crude oil, mainly locked-up in the deep offshore, with 33 fixed crude oil production platforms, 20 floating production storage, 13 floaters and off-take vessels, all which are estimated at several billions of Dollars.
Speaking on the need for improved security within the region, Ajuonuma said the region is expected to host about 159 fixed platforms and 700 oil wells by 2008 and that any disruption of activities in the area would affect the world energy supply.
"Besides, every additional flow of one million barrels of crude oil from the gulf is expected to attract about $10 billion fresh investments to the contiguous countries", he said.
According to him, the country wants to position itself favourably through the Gulf of Guinea security strategy and to take advantage of the security situation in the Middle East by providing a secure and stable alternative
Meanwhile, the Central Bank of Nigeria (CBN) has said it would continue to retain substantial portion of the nation's external reserves in the United States dollar in spite of the downward pressure on the currency in the international market.Deputy Governor, Economic Policy, CBN, Dr. Obadiah Mailafia told financial journalists yesterday in Kaduna that the dollar is still the number one reserve currency in the world, stressing that most nation's crude are derived in dollars.
Specifically, Mailafia who stood in for the CBN Governor, Prof. Charles Soludo at a workshop organized by the apex bank for finance correspondents and Business Editors said CBN's outlook on external reserve currency holding portfolio was to hold on to the dollar and manage it for the long run, adding that penalties are usually paid for moving money from one currency to another.
On the present exchange rate of the naira which stood at N128.31 to one US dollar as at the close of business yesterday, he said CBN's policy was to sustain a stable value which will become strong in a slow and efficient manner.
"With WDAS, there is a market out there for the buying and selling of the currency and what the market determines would not be something that we are uncomfortable with. So we are comfortable with the present rate in the sense that we have stemmed the spiral decline of our national currency.
"As you know, the naira has stabilized. It has appreciated somewhat but we want to be sure that we have a stable currency. We don't want a situation where there is an extremely rapid appreciation and then when global oil prices slow down, there would be a decline. That kind of yo-yo situation of rise and fall, I don't think it is good for an economy.
"So we want a stable currency that fulfils the need of this economy. And if you have too much appreciation, of course, it will damage your exports. We want to encourage export diversification and you would agree with me that the way to do so is not just to allow the currency to appreciate the way that it wants. I know that some of our partners want this to happen but I can assure you that it will not be good for the long term interest of this economy," he emphasised.
Commenting against the backdrop of calls to appreciate the naira in view of the nation's huge external reserves of $38 billion as at July, which could finance 20 months imports, he said such a move would be harmful to the non-oil productive sectors of the economy.
Earlier, while declaring open the seminar, Soludo said the apex bank has reviewed the operations of foreign exchange market since the introduction of Wholesale Dutch Auction System (WDAS) in February 2006 and noted that the desired major objective has been achieved through market efficiency and convergence of inter-bank and official rates for the first time in the last 20 years.
"The full liberalisation of the forex market and tight monetary policy led to the convergence of rates in all markets and easy access to forex by end-users. It has helped to keep price inflation in check and reduced cost for producers and consumers while the parallel appreciated (the first in 20 years.)," he stressed.
He said the WDAS has removed the 20 per cent premium hitherto enjoyed by operators of the market who engage in round-tripping to take advantage of the differentials in the official and parallel markets.
According to him, "From the operations of the forex market, it is evident that the major objective of WDAS, namely greater efficiency of the forex market and convergence of inter-bank and official exchange rates had been achieved. Both inter-bank and official rates have converged for the first time in the last 20 years.