Application of the Delayed Royalty Framework for Onshore Petroleum Investment in Nigeria

2021 ◽  
Author(s):  
Frank Egede ◽  
Oghenerume Ogolo ◽  
Victor Anochie ◽  
Amina Danmadami ◽  
Zephaniah Ajibade
Keyword(s):  
Economic Models ◽  
Payment System ◽  
Oil Price ◽  
Modeling Technique ◽  
Royalty Rate ◽  
Royalty Payment ◽  
Fiscal System ◽  
The Government ◽  
The Impact

Abstract Nigeria uses the concessionary petroleum fiscal system for onshore investment in the country where the ownership of the hydrocarbon resources belongs to the contractor's. The government then gets her revenue through payment of royalties and taxes. A fixed royalty rate of 20% is specified for onshore petroleum investment in the country. This kind of royalty payment system is regressive in nature and affects the sustainability of E&P firms during period of low oil price. This research considered the incorporation of a delayed royalty framework into the concessionary petroleum fiscal system in Nigeria. Two economic models were built to evaluate upstream petroleum investment in Nigeria onshore environment using the spreadsheet modeling technique. The delayed royalty framework was incorporated into one of the model. The delay in royalty payment was made as a function of the time it takes the contractor to recoup his capital before payment of royalty and taxes. Oil price was varied in the model between $30-$90/bbl to see the impact of the delay in royalty payment on the sustainability of the investment under the delayed royalty framework. It was observed that the delayed royalty framework made the contractor to recoup his capital early during the life of the investment. It also increased the contractor's revenue which will help to increase the sustainability of the investment during period of low oil price.

scholarly journals Changes in Crude Oil Prices and the Flow of Government Revenue

2019 ◽  
pp. 1-12
Author(s):  
Chukwunweike Stella ◽  
Achu Tonia Chinedu ◽  
Awa Kalu Idika
Keyword(s):  
Oil Prices ◽  
Oil Price ◽  
Government Revenue ◽  
Distributed Lag ◽  
Autoregressive Distributed Lag ◽  
Oil Revenue ◽  
Crude Oil Prices ◽  
Regression Techniques ◽  
The Government ◽  
The Impact

This work is set out as an investigation into the impact of change in oil prices on government revenue broken into oil and nonoil component. Drawing data from the Central Bank Statistical Bulletin and covering the period 1981 to 2018. The Autoregressive Distributed Lag (ARDL) Model was used because of its advantages over other regression techniques. It was found that changes in oil price affected oil revenue within the studied period leaving no significant impact on nonoil revenue. The result obviously reflects the Nigerian economy and its mono-product characteristic. It is therefore recommended that a conscious policy effort should be made to diversify the economy in a manner that makes revenue to the government multifarious functions.

scholarly journals Asymmetric Impacts of Oil Price on Inflation: An Empirical Study of African OPEC Member Countries

2018 ◽  
Author(s):  
Umar Bala ◽  
Lee Chin
Keyword(s):  
Food Production ◽  
Inflation Rate ◽  
Oil Prices ◽  
Oil Price ◽  
Price Changes ◽  
Long Run ◽  
Dynamic Panels ◽  
The Government ◽  
Opec Member ◽  
The Impact

This study investigates the asymmetric impacts of oil price changes on inflation in Algeria, Angola, Libya and Nigeria. Three different oil price data were applied in this study; the specific spot oil price of individual countries, the OPEC reference basket oil price and an average of the Brent, WTI and Dubai oil price. The dynamic panels ARDL were used to estimate the short and the long-run impacts. Also, this study partitioned the oil price into positive and negative changes to capture asymmetric impacts and found both positive and negative oil price changes positively influenced inflation. However, the impact was found to be more significant when oil prices dropped. The results from the study also found that money supply, the exchange rate and GDP are positively related to inflation while food production is negatively related to inflation. Accordingly, policymakers should be cautious in formulating policies between the positive and negative changes in oil prices as it was shown that inflation increased when the oil price dropped. Additionally, the use of contractionary monetary policy would help to reduce the inflation rate, and lastly, it is proposed that the government should encourage domestic food production both in quantity and quality to reduce inflation.

scholarly journals Economic Modelling of the Delay in Passing the Petroleum Industry Bill in Nigeria and Its Impact on Deep Offshore Investments and Government Take Statistics

2020 ◽  
Author(s):  
Oghenerume Ogolo ◽  
Petrus Nzerem
Keyword(s):  
Petroleum Industry ◽  
Economic Models ◽  
Economic Modelling ◽  
Government Revenue ◽  
Production Sharing ◽  
The Government ◽  
Petroleum Sector ◽  
The Impact ◽  
Offshore Region

Abstract The petroleum industry bill (PIB) in Nigeria aims to reform the petroleum sector of the country and increase government revenue from petroleum investments. Despite the benefits the bill offers to the country, its passage has suffered several setbacks. This research therefore studied the impact of the delay in passing the bill on deep offshore investments. Economic models were built using the fiscal terms in PIB 2009 and 1993 production sharing contract (PSC) arrangement to evaluate the impact of the bill. The model with the 1993 PSC fiscal terms was adjusted to capture the delay in passing the bill. The bill was assumed to be passed on a yearly basis for 10 years (2010 to 2019). The impact of the delay in passing the bill based on the reserve portfolio of firms in the deep offshore region of the country was also evaluated. The delay in passing the PIB reduced the government take. It was seen that for the non-passage of the bill, the government lost about $1227.2 MM. When the bill was passed in 2019, the government had been losing about $11.843 MM on a yearly basis due to the delay in passing the bill.

scholarly journals Impact of Oil Price Fluctuations on Human Development: A Standard Study of Iraq

2018 ◽  
pp. 396-399
Keyword(s):  
Human Development ◽  
Oil Prices ◽  
Oil Price ◽  
Price Fluctuation ◽  
Price Fluctuations ◽  
Long Run ◽  
The Government ◽  
Oil Revenues ◽  
The Impact ◽  
Oil Price Fluctuation

This paper examines the impact of oil price fluctuations on Human development in Iraq. We employed UNDP statistical data in HDI and oil prices were obtained from OPEC official statistics. EGARCH model is applied to estimate the series of oil price fluctuation. Further, we applied ARDL bound test approach to estimate the long run relationship between HDI and oil price fluctuation. Evidence shows that there is a long run relationship among the variables under study. A significant impact on human development index is witness due to fluctuations in oil prices. Since the dependence of Iraqi economy on oil exports tightly align the government spending with oil revenues. Therefore, this study proposes that Government should adopt a diversified policy and invest in other sectors of the economy, such as the industrial sectors. Investment in these sectors will help to increase the output of exportable goods. Exports of these goods can earn more foreign exchange. This will reduce the heavy reliance on oil revenues. The government needs to spend more money to provide infrastructure like transport facilities and stable electricity supply. This will help encourage private companies to invest more in their economic resources by reducing the cost of doing business.

scholarly journals Empirical analysis of crude oil consumption and price on Ghana’s economic growth

2020 ◽  
Vol 5 (4) ◽  
Author(s):  
Gideon Kweku Appiah ◽  
Ebenezer Oduro ◽  
Shadrack Benn
Keyword(s):  
Economic Growth ◽  
Crude Oil ◽  
Time Series Data ◽  
Oil Price ◽  
Series Data ◽  
Energy Information Administration ◽  
Oil Consumption ◽  
The Government ◽  
The Impact ◽  
Adf Test

AbstractThe objective of this paper was to investigate the impact of crude oil consumption and oil price on the growth of the Ghanaian economy. It proceeded with annual time series data (1980-2016) sourced from World Development Indicator (WDI) and Energy Information Administration (EIA). All variables used in the study were integrated of order one as suggested by the Augmented Dickey-Fuller (ADF) test. Further, the Johansen Cointegration test suggested the existence of cointegration among the variables. The study used the OLS estimation procedure.The study found a positive and statistically significant relationship between oil price and economic growth in the long run. On the other hand, an inverse relationship was found between crude oil consumption and economic growth in the long run.Based on the findings the study recommends that the government diversify the economy to reduce the shock the economy might experience in times of oil price shocks. Further, risk management instruments like physical reserves and hedging against oil prices should also be employed.Also, the study recommends policies that encourage efficient consumption of crude oil, especially in the productive sectors like industry in order to trigger growth. This notwithstanding, the study recommends effective measures to mitigate the externalities associated with increased production and consumption of crude oil, such as the carbon tax.

scholarly journals Asymmetric Impacts of Oil Price on Inflation: An Empirical Study of African OPEC Member Countries

Energies ◽  
2018 ◽  
Vol 11 (11) ◽  
pp. 3017 ◽  
Author(s):  
Umar Bala ◽  
Lee Chin
Keyword(s):  
Food Production ◽  
Oil Prices ◽  
Oil Price ◽  
Price Changes ◽  
Distributed Lag ◽  
Autoregressive Distributed Lag ◽  
Dynamic Panels ◽  
The Government ◽  
Opec Member ◽  
The Impact

This study investigates the asymmetric impacts of oil price changes on inflation in Algeria, Angola, Libya, and Nigeria. Three different kinds of oil price data were applied in this study: the actual spot oil price of individual countries, the OPEC reference basket oil price, and an average of the Brent, WTI, and Dubai oil price. Autoregressive distributed lag (ARDL) dynamic panels were used to estimate the short- and long-term impacts. Also, we partitioned the oil price into positive and negative changes to capture asymmetric impacts and found that both the positive and negative oil price changes positively influenced inflation. However, the impact was found to be more significant when the oil prices dropped. We also found that the money supply, the exchange rate, and the gross domestic product (GDP) are positively related to inflation, while food production is negatively related to inflation. Accordingly, policy-makers should be cautious when formulating policies between the positive and negative changes in oil prices, as it was shown that inflation increased when the oil price dropped. Additionally, the use of a contractionary monetary policy would help to reduce the inflation rate. Lastly, we suggest that the government should encourage domestic food production, both in quantity and quality, to reduce inflation.

The Impact of Oil Price Shock on Rice Prices in Asean Area: A Framework

2020 ◽  
Vol 11 (1) ◽  
pp. 112-112
Author(s):  
Sri Herliana ◽  
Dedi Budiman Hakim ◽  
Yusman Syaukat ◽  
Tanti Novianti
Keyword(s):  
World Market ◽  
Vital Role ◽  
External Factors ◽  
Oil Price ◽  
Rice Market ◽  
The World ◽  
Rice Price ◽  
Rice Prices ◽  
The Government ◽  
The Impact

The conditions of the world rice market and the domestic rice market are unstable markets and are heavily influenced by external factors. There are many factors that can affect the price of unhulled rice and rice at the farm level, one of which is the effect of the integration of world and domestic rice markets. Thus the events or shocks that occur on the world market will affect the conditions of the domestic rice market. External factors affecting rice trade include petroleum. Oil as one of the factors influencing changes in the demand and supply of various traded commodities because of its vital role. Oil price fluctuations are often used as a benchmark for the stability of world trade conditions.Research specifically on the impact of rice was carried out by Chintia (2013) which states that oil price shocks cause domestic rice prices to have a fluctuating pattern and have an increasing trend, but domestic rice prices always fluctuate on trend. An attractive characteristic of the domestic rice price is that it is always above the world rice price. This occurs because rice is a commodity that has many interventions by the government in maintaining domestic rice price stability and maintaining the purchasing power of the public as consumers and farmers as producers. In the short term, the domestic rice price is influenced by the domestic rice price itself, the imported rice price, and the world crude oil price. In the long run, the domestic rice price is influenced by world rice prices, imported rice prices, and rice production. This paper will discuss the framework for the impact of oil shocks on rice prices in the ASEAN region. This framework is the basis for the stages in conducting further research Keywords: Impact, Rice, oll price, Rice, ASEAN

Property bubble complicates Norway growth effort

2015 ◽  
Keyword(s):  
Emerging Market ◽  
Oil Price ◽  
Local Elections ◽  
Content Type ◽  
Formidable Challenge ◽  
Investment Returns ◽  
Oil Sector ◽  
The Government ◽  
Oil Wealth ◽  
The Impact

Subject The impact of the low international oil price on the Norwegian economy. Significance The oil sector accounts for almost 30% of state revenues and almost 22% of GDP. The current low oil price level thus represents a formidable challenge. Growth is slowing and unemployment rising: on September 3, Statistics Norway cut its forecasts for 2015 and 2016 average GDP growth to 1.3% and 1.8%, respectively. However, Norway transformed its oil wealth into financial wealth when the oil price was high and now funds government spending from the investment returns: years of budget surpluses and a deep sovereign wealth fund (SWF) provide Norway with significant fiscal leeway. Impacts Independent forecasts suggest growth will be weaker than official projections, at 1.3-1.6% in 2016-17. Unemployment could rise above Statistics Norway's expected 2016 peak of 4.6%, likely to around 5.0%. The slowdown appears to be damaging the government and boosting the opposition Labour Party before September 14 local elections. Regions most exposed to the oil industry will be worst affected, especially around Stavanger. The SWF plans to raise its emerging market exposure, but Asian holdings are only around 15%, offering some protection from China turmoil.

scholarly journals Impact of Oil Price Changes on Certain Budget Variables, Government and Tax Revenues, External Grants, and Government Expenditures in Jordan

2018 ◽  
Vol 10 (7) ◽  
pp. 150
Author(s):  
Amjad Qwader
Keyword(s):  
Alternative Energy ◽  
Time Series Data ◽  
Ordinary Least Squares ◽  
Oil Price ◽  
Government Expenditures ◽  
Series Data ◽  
Price Changes ◽  
Tax Revenues ◽  
The Government ◽  
The Impact

This study evaluated the impact of oil price changes on certain budget variables in Jordan over the period of 1992 to 2015. Time series data were analyzed using econometric techniques that included ordinary least squares. Findings from the analysis revealed a statistically significant positive correlation for oil price on government and tax revenues, external grants, and government expenditures, whereas oil price on budget deficits had a statistically significant negative correlation. Therefore, the study proposes that the government of Jordan directly invests its oil tax revenues in economic sectors, such as agriculture and manufacturing, to broaden the sources of revenue, as well as exploit such revenues to establish alternative energy projects, whether from the sun, wind, or both. In addition, the establishment of such projects is suitable for the conditions of the Jordanian environment.

Venezuela economic angst boosts political turbulence

2015 ◽  
Keyword(s):  
Attorney General ◽  
The United States ◽  
Oil Price ◽  
The Political ◽  
Policy Reforms ◽  
Legislative Elections ◽  
Content Type ◽  
National Assembly ◽  
The Government ◽  
The Impact

Significance Over the holiday period, the government seized the political initiative ahead of a difficult year that will end with legislative elections. Maduro reshuffled his foreign policy team and announced a six-month economic recovery plan, before heading to China to secure a reported 20 billion dollars of new financing. In the National Assembly, the ruling United Socialist Party of Venezuela (PSUV) broke with its own constitution to renew judicial, electoral and citizen powers (ombudsman, attorney general and comptroller general) amid claims of opposition filibustering. Impacts Tentative economic policy reforms will not keep pace with the impact of oil price falls. A divided opposition will be focused on the pending anniversary of last year's violent protests. Following sanctions in December, the United States will increase pressure over the trial of opposition leader Leopoldo Lopez.

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