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UK car industry says Brexit rules are denting competitiveness

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UK car industry says Brexit rules are denting competitiveness

Car remains the UK’s No 1 export but volatile energy prices and the cost of complying with EU regulations post-Brexit are blunting the industry’s competitive advantage, the sector’s trade body has said.

Nine in 10 firms in the industry told the Society of Motor Manufacturers and Traders (SMMT) that costs, measured in time and resources, had increased as a result of leaving the EU, with 60% saying the extra expense for trading with the bloc was a “much more significant rise than other export destinations”.

Mike Hawes, the SMMT chief executive, said: “The cost of complying with new regulations has made the UK potentially less competitive compared with some of our European counterparts.

“The first few weeks months were incredibly difficult. There were delays at borders, some of those were teething problems, some of those issues were more substantive. Undoubtedly the industry is facing additional cost and complexity; costs which generally have to be absorbed, to maintain competitiveness.”

The SMMT said that regardless of such issues, the EU would “remain a central trade partner”, with about half of all cars made in Britain exported to EU member states, while almost all vans exported by the UK end up on European roads.

Overall vehicle export revenues to all markets reached £27bn in 2020, even as the Covid pandemic disrupted trade flows and shut down markets around the world.

The UK automotive sector as a whole generated a total trade revenue of £74bn, with more than 80% of British-built cars and more than 60% of light commercial vehicles destined for export.

The SMMT hopes for caps on energy prices in recognition of the importance of the new generation of electric cars to the country’s climate emergency goals.

“Production of batteries, for instance, is a capital-intensive energy industry. It’s also an energy intensive industry. So being regarded as a energy intensive user would potentially allow us to take greater advantage of caps on energy.”

The industry has energy efficiency targets in place through climate change agreements with the Environment Agency that enable some energy discounting.

But Hawes said: “We are still disadvantaged compared with some of our European colleagues.”

Miyuki Takahashi, Nissan’s general manager for government affairs, told an SMMT conference on Tuesday that trading agreements between the UK and EU were “crucial and indispensable to sustain our business”, which includes its Sunderland manufacturing plant employing 6,000 people.

She added: “We want the UK to be our electric vehicle and battery hub … We are looking to localise many components of the battery and EV supply in the UK, to comply with rules of origin and to build up trade for the UK and Japan.”

While the UK is looking to join an Asia-Pacific free trade area, Takahashi said it was unlikely that it would mean more Nissan cars directly exported from the UK. “It’s much cheaper to send it from Japan – and when we think about carbon cycle, the shipment is a big part of the emissions.”

Adrian Hallmark, the chief executive of Bentley, told the conference the Brexit agreement was functioning but had added administration costs and would need constant updating. “We’ve got another six people, it now costs us £6m more and we’ve got an extra warehouse we didn’t need … The trade deal works – but it’s like we’ve got married and have a whole life together. Now let’s get the relationships working.”

He urged government to help “make the UK a safe haven, a go-to place for battery production” as the transition to electric vehicles approaches. Hallmark warned that otherwise rules of origin in the trade deals, which require most of the car’s value to be locally sourced, would need updating for electric vehicles if tariffs were to be avoided, with the cost of batteries up to three times that of Bentley’s traditional engines: “If we don’t find a way of managing the cost of battery and how it distorts the rules of origin, that will cause problems and create tariffs.”

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Marginal fields: NUPRC awards licences to 161 companies, rakes N200bn, $7m

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Marginal fields: NUPRC awards licences to 161 companies, rakes N200bn, $7m

The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) says the 2020 marginal field bid round exercise generated about N200 billion as well as $7 million in revenue for the federal government (FG).

Gbenga Komolafe, chief executive officer (CEO), NUPRC, made this known on Tuesday while issuing petroleum prospecting licences (PPL) to successful bidders in Abuja.

Marginal fields are smaller oil blocks developed by indigenous companies not exploited in the last ten years.

In May 2021, the Department of Petroleum Resources (DPR) — now NUPRC — completed the first successful bid programme after 18 years of bureaucratic bottlenecks.

Successful companies include Ardova Plc, Matrix Energy Ltd, Sun Trust Oil Company Limited, Deep Offshore Integrated Service Ltd, Island Energy Ltd, Sigmund Oil Field Ltd, among others.

Out of the 665 entities that expressed interest in the exercise, Komolafe said 161 PPLs were awarded to successful 2020 marginal fields companies while out of the 57 fields presented in the bid round, 41 were fully paid for.

He said 37 fields were also issued with the PPL, having satisfied all conditions for the award.

Komolafe said the marginal fields award initiative began in 1999 and was borne “out of the need to entrench the indigenisation policy of government in the upstream sector of the oil and gas industry and build local content capacity.”

He added that the scheme was also targeted at creating employment opportunities and encouraging increased capital inflow to the sector.

“Since its inception, a total of 30 fields have been awarded, with seventeen 17 currently producing. A breakdown of the allocation of the fields to indigenous operators is as follows: two fields awarded in 1999, 24 in 2003/2004, one each in 2006 and 2007, and two in 2010. 10 years later, in 2020, 57 fields were put up for bidding,” he said.

“It is significant to note that the passage of the Petroleum Industry Act has brought an end to the era of marginal field awards. Section 94(9) of the Act states that ‘no new marginal field shall be declared under this Act’.

“Accordingly, the minister shall now award PPL on undeveloped fields following an open, fair, transparent, competitive, and non-discriminatory bidding process in line with sections 73 and 74 of the Act.”

Meanwhile, Komolafe said revenue earnings in the country is not reflective of the upsurge in international prices of crude oil owing to sabotage, theft, as well as other operational challenges.

Consequently, he urged potential licensees to take advantage of the current market realities and promptly bring their fields to production.

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Naira depreciates further to N614/$ at parallel market

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Naira depreciates further to N614/$ at parallel market

The Nigerian naira has dropped to N614 against the dollar at the parallel section of the foreign exchange market.

The figure signifies a depreciation of N7 or 1.2 percent compared to the N607 it traded last two weeks.

Bureaux De Change operators (BDCs), popularly known as ‘abokis’, who spoke to TheCable in Lagos on Tuesday, said they purchase the greenback at N608/$, make a gain of N6, and then sell at N614.

At the official market, the naira also depreciated by 0.21 percent to close at N421/$ on Monday, according to information obtained from FMDQ OTC Securities Exchange — a platform that oversees official foreign-exchange trading.

Nigeria operates multiple exchange rate windows ranging from the importers and exporters window (I&E) window, where forex is traded between exporters, investors, and purchasers of forex, the SMEIS window where forex is sold to importers, and others.

International organisations such as the World Bank and the International Monetary Fund (IMF) have constantly advised the Central Bank of Nigeria (CBN) to unify the official and parallel market exchange rates.

But Godwin Emefiele, the CBN governor, had said that despite advice offered by IMF and the World Bank, developing economies such as Nigeria had the liberty of adopting “homegrown solutions to their economic problems.

According to him, the managed floating exchange rate, which allows the CBN to intervene in the market when there is a supply shock, would be in place as long as supply exceeds demand.

“They want us to free the exchange rate. And you do know that this has some impacts on the exchange rate itself,” he had said.

“When you allow that to happen, you will have an uncontrollable spiral on the naira.

“But what managed float means is that we have some measures in place to help control the spiral.”

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FG, states in trouble, as NNPC again fails to remit, despite N470.61bn revenue

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FG, states in trouble, as NNPC again fails to remit, despite N470.61bn revenue

These are challenging times for the federal and state governments as one major source of income to the federation account seems to be totally cut off.

On Monday, The National Petroleum Company Limited (NNPC) revealed it failed to remit monies to the federation account in May 2022 despite making N470.61 billion.

This is the fifth straight month NNPC has failed to credit the federal account while exporting crude at an average price of $100 per barrel.

Details of the June FAAC report obtained by The Harmattan News showed NNPC since the start of the year made N1.897 trillion, over N234.1 billion more than the expected revenue.

Sadly, however, NNPC said all the revenue had gone into various expenditure which includes petrol subsidy, oil search, Pipeline Security & Maintenance cost, National Domestic Gas Development and Nigeria Morocco Pipeline cost among others.

As expected, the bulk of the expenditure, N1.27 trillion, went toward recovery (also known as petrol subsidy).

In fact, NNPC said it has budgeted another N617 billion for petrol subsidy in June.

The report reads: “The Value Shortfall on the importation of PMS recovered from May 2022 proceeds is N327,065,907,048.06 while the outstanding balance carried forward is N617bn .”

“The estimated Value Shortfall of N845,152,863,012.97bn (consisting of arrears of N617bn plus estimated May 2022

Value Short Fall of N227,721,200,478.23) is to be recovered from June 2022 proceed due for sharing at the July 2022 FAAC Meeting,” it added.

The development means states have a tough road ahead and will have to look inwards to cover for the drop in federal allocations.

Already, some states have announced plans to slash workers’ salaries over dwindling income.

Kano Sate has already announced plans to slash workers’ salaries, following in the foot steps of the Ekiti State government that announced civil servants’ and political appointees’ salaries will be slashed in response to the present economic reality in the country.

Ekiti went further to suspend minimum wage implementation with no date of resumptions.

The Harmattan News had recently reported that pension contribution from governments dropped to a 16-year low in the first quarter of 2022.

From recent developments, it is more likely the figure will tank further.

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