The Nation Newspaper

Category: Money

  • Govt moves to reduce oil production cost to $10

    Govt moves to reduce oil production cost to $10

    By Taofik Salako, Deputy Group Business Editor

    The Federal Government is working towards attaining a $10 per barrel production cost sealing  in the oil and gas sector, the Minister of State for Petroleum Resources, Chief Timipre Sylva, has said.

    Sylva, who stated this yesterday at the Seplat Energy Summit 2020 to mark its 10th Anniversary, said government  through the Nigerian National Petroleum Corporation (NNPC)  has rolled out strategies to achieve $10/bbl unit operating cost without jeopardising growth.

    Sylva, who was a special guest of honour at the virtual summit, said the government had embarked on aggressive capital allocation to priority projects with low cost of production. He listed measures to be taken to include renegotiation of contracts to achieve a minimum 30 per cent cost reduction, downward renegotiation of all contracts and other business obligation.

    He said government has embarked on diversification of portfolio to non-oil businesses to cushion the effect of the future crash in crude oil price. “We have declared this year 2020 as “the year of Gas” and have commenced the National Gas Expansion Programme (NGEP). On Jan. 16, we inaugurated an Inter-agency Committee saddled with the responsibility of coordinating our concerted efforts to ensure the penetration of domestic utilisation of LPG, encourage auto Liquefied Petroleum Gas, Compressed Natural Gas and Liquefied Natural Gas for the domestic market. This will drastically reduce the massive outflow of the nation’s foreign exchange currently being expended in the importation of Premium Motor Spirit (PMS),” he said.

    Read Also: NNPC faults firm’s $125m claim over crude oil stored in China

    On COVID-19 impact on the industry, Sylva said the pandemic has caused a demand-supply imbalance, revenue decline due to low oil price, as well as a decline in demand of crude oil due to the global lockdown, adding  that the pandemic has caused pressure on Nigeria’s crude oil selling price due to supply glut and lack of buyers and production uncertainties due to refineries shutdowns in major refining centres across Europe and Asia. “The huge revenue lost due to sheer drop in oil price arising from supply-demand imbalance has significantly impacted the Nigerian economy due to budget deficits and delivery challenges, project slippages and job losses in the private sector.

    He praised the management and entire staff of Seplat for the phenomenal achievements and remarkable successes in the Nigerian oil and gas sector.

    “It is worthy to state here that SEPLAT was awarded some divested assets based on the Federal Government’s aspiration to develop indigenous capacity in the Nigerian Oil & Gas sector about 10 years ago. And over the past 10 years, Seplat has recorded monumental achievements and have grown to become a leading independent upstream Oil and Gas company in Nigeria,” Sylva said.

    He called on other indigenous oil and gas companies to emulate the company’s footsteps for enhanced growth and development. Mr Mele Kyari, the Group Managing Director, NNPC, reiterated government’s target to boost crude oil production to three million barrels per day.

    Kyari said that the significance of the oil and gas business in the continent was huge and could not be neglected.

  • ‘Remove 2 per cent levy from courier, logistic regulation’

    ‘Remove 2 per cent levy from courier, logistic regulation’

    By Simeon Ebulu

    Lagos Chamber of Commerce and Industry (LCCI), has asked the Federal Government to expunge the regulation in the courier service that requires that courier service providers  contribute two per cent of their total annual revenue to the Postal Fund which sum shall be used for postal development and delivery of postal services in rural and underserved areas.

    In a statement signed by LCCI’s Director-General, Muda Yusuf, the Chamber said it “has strong reservations” over a provision requiring a courier operator committing funds for the said purpose.

    “We submit that this provision will put too much burden on courier and logistics businesses and make them unsustainable.  These businesses are already grappling with multitude of taxes and levies in the course of their daily operations.  We request that this provision be expunged immediately in the interest of investments and investors in the courier and logistics sector of the Nigeria economy. The provision in the Courier regulation which vests the Minister with powers to compel any licensed courier and/or Logistics Services Operator to undertake free delivery service for the purpose of Universal Postal Service Obligations/or any Social Service Delivery in National Interest, needs to be reviewed.  It borders on overbearing powers with little regard for the interest of investors.

    Read Also: FG suspends increase in NIPOST license fees

    Yusuf said the provision “will undermine the confidence of investors in the courier and logistics business and should be immediately repealed,” saying it is a “negation of the efforts of the Federal Government to attract investment, create jobs and grow the economy.  He said the reality is that many corporate organisations are already undertaking various forms of Corporate Social Responsibility projects without being compelled or coerced to do so.

    LCCi also picked holes with another provision in the Courier regulation which stipulates that “all courier items/articles such as Right Issues, Shares Certificates, Statement of Accounts, Cheques, Letters or Offer documents, etc weighing below 0.5kg brought to a Courier/Logistics service operator shall be recorded and referred to the nearest Post Office of the Nigerian Postal Service for processing and delivery.  Failure to do so will attract payment to Nigerian Postal Service of a penalty of 90 per cent of the amount charged on the item by the erring Operator.”

    This is an “unfair provision.,” Yusuf said, pointing out that “the citizens should not be compelled to patronise NIPOST against their will, irrespective of the size or weight of the items. Indeed, it is an infringement on the rights of citizens and in conflict with the principle of fair.  It is a revolting provision which the  Minster for Communications needs to immediately expunge.

    “It is also important to clarify whether NIPOST or its parent Ministry has powers to regulate the business of Logistics in the country. The current NIPOST Regulation and Guidelines made copious reference to the business of Logistics.  The Lagos Chamber urged the government to take urgent steps to clean up these regulations in the interest of the Nigerian economy, business continuity, private sector development, and job creation.

    He said there is need to save the courier industry from a stifling and suffocating regulatory regime, saying the Nigerian courier industry is one of the most troubled sectors of the Nigerian economy at this time.

    “The foregoing limitations underscore the enormity of the challenges faced by courier companies in Nigeria. Most of them are in the Small & Medium Enterprise (SME) space, with little capacity to cope with these troubles,” he said.

  • Shareholders approve Japaul’s $70m capital raising

    Shareholders approve Japaul’s $70m capital raising

    By Taofik Salako, Deputy Group Business Editor

    Shareholders of Japaul Oil & Maritime Services Plc have approved major resolutions authorising the company to change it name, reconstruct its share capital and raise up to $70 million in new capital as part of significant redirection of the company towards growth and profitability.

    At the annual general meeting (AGM), shareholders approved the change of the company’s name from  Japaul Oil & Maritime Services Plc to Japaul Gold and Ventures Plc to reflect its new business focus from oil and gas servicing sector into natural resource management, specifically the exploration, mining, processing and export of minerals such as gold and lithium among others.

    Shareholders also approved the reconstruction of all existing ordinary shares of 6.0 billion ordinary shares of 50 kobo each while also authorising increase in authorised share capital to 60 billion ordinary shares. After the reconstruction, shareholders mandated the board to undertake public offering through combination of any of book building and public offer to raise $70 million or its naira equivalent through all possible legitimate means.

    The net proceeds of the proposed new capital raising will be used to finance the completion of expanded explorations; mining activities; mineral processing; export; engineering design; procurement; installation of a gold processing plant and working capital among others.

    Chairman, Japaul Oil & Maritime Services Plc, Mr. Paul Jegede said the changes underscored the company’s commitment and proactive nature in exploring opportunities to bring value to its shareholders.

    According to him, the diversification was due to the belief that natural resources are a viable substitute for oil, as necessitated by oil prices which have been nosediving even before the COVID-19 pandemic.

    Read Also: TAJBank holds 1st AGM as shareholders laud performance

    “The mining of these natural resources is not only profitable, it is without any negative impact on the environment,” Jegede said.

    He noted that Japaul has already acquired mining and exploration licenses through buy-overs for the exploration, mining and exportation of gold, lithium, copper, tin, lead and zinc across seven states in Nigeria where strategic minerals have been discovered in commercial quantities and reserves.

    He added that the company has also started a landmark restructuring and transitioning to become Nigeria’s first indigenous publicly quoted company in that space.

    Group Managing Director, Japaul Oil & Maritime Services Plc, Mr Akin Oladapo said the diversification is as a result of the company’s five-year growth plan.

    “We had the foresight that the situation of the oil and gas sector would not improve for a long time, which is the case today. We started training ourselves in mining related businesses and the rest is history. We have bought mining and exploration licenses for Gold, Lithium, Lead, Copper, Tin, Zinc etc., which our company will be working with,” Oladapo said.

    He said the company already have Canadian expatriates that have been doing explorations works for it, specifically, MATRIX GEOTECH in Toronto, Canada adding that the company’s strategy is to start mining gold as from 2021 to 2022 while exploration works continue on other licenses that it has.

    “With this new business focus, Japaul Gold and Ventures Plc is already positioned strategically for the supply of the oil of tomorrow to international markets which have unlimited demand as the world makes a more mineral-intensive transition from fossil fuel to low-emission energy and from the industrial revolution era to the use of more advanced technologies,” Oladapo said.

    Jegede explained that the oil and gas servicing sector has been posing a whole lot of challenge as about $150 million was invested by the company for the purchase of different marine vessels, which have since stopped bringing returns to the shareholders because there have been no contracts with international oil companies (IOC) to engage them.

    According to him, the few jobs available with the IOC became so competitive to the extent that the company had to give out a number of its vessels at daily charter rate which is below cost of operations. For instance, the AHTS vessel that it used to give out on charter for $30,000 per day came down to less than $10,000 per day which is even far less than the cost of running the vessel per day.

    “With this situation, we have been incurring losses for some time now and no dividend is being paid and debt in the bank was mounting. The company was finding it difficult to meet her various obligations. The way the daily charter rate for the vessels was going down is the same way the value of the vessels, which are the main assets of our company, was going down. The vessels became worthless,” Jegede said.

  • Union Bank posts N11.3b PBT

    Union Bank posts N11.3b PBT

    Union Bank of Nigeria Plc has released its result for the quarter ended June 30, 2020.

    The result showed N11.3 billion as the profit before tax as against N11.2 billion in the first half of last year. Gross earnings rose by 10 per cent to N79.9 billion as against N72.42 billion in the first half of last year driven by an increase in earning assets.

    In a statement, the bank said interest income rose six per cent to N57.2 billion as against N53.8 billion also driven by increase in earning assets, while customer deposits rose 12 per cent to hit N995.2 billion as against N886.3 billion last December, among other statistics.

    ‘’The slowdown limited growth in key income lines, including fees and commissions and cash recoveries. However, we continue to reinforce the use of our digital channels with 90 per cent of transactions completed digitally in first half  2020 as against 57 per cent in first half 2019), which translated to a 42 per cent growth in e-business fees from N2.5 billion in first half 2019 to N3.6 billion in first half of  2020.

  • FBN Holdings grows profit by 56.3% to N49.5b

    FBN Holdings grows profit by 56.3% to N49.5b

    By Collins Nweze

    FBN Holdings has posted N49.5 billion profit after tax for the half-year ended June 30, 2020. The result represents 56.3 per cent growth, compared with N31.6 billion achieved by the group during the first half of 2019.

    Further analysis of the unaudited results showed that gross earnings rose 5.8 per cent to N296.4 billion, as against N280.3 billion in same period of last year. Net-interest income of stood at N131.3 billion, down 7.4 per cent, compared with with N141.7 billion achieved last year while non-interest income stood at N80.1 billion, up 46.8 per cent year-on-year.

    The group’s profit before tax of stood at N41.4 billion, up 14.3 per cent year-on-year, compared with N36.2 billion achieved in 2019. It also recorded total assets of N7.1 trillion, up 14.9 per cent year-to-date  compared with N6.2 trillion achieved in 2019 while customer deposits stood at N4.4 trillion, up 8.8 per cent yer-to-date when compared with N4 trillion achieved in last year.

    It also recorded a non-performing loan ration of  8.8 per cent, an improvement from 9.9 per cent recorded in December 2019 while marinating  16.5 per cent Basel 2 Capital Adequacy Ratio as against 15.5 per cent last December.

    The group’s Firstmonie Agent banking network grew to over 59,000, further reaffirming FirstBank’s undisputed agent banking leadership, strong retail franchise and wide coverage.

    Commenting on the results,  the Group Managing Director of FBNHoldings, Urum Kalu Eke, said:  “The first half 2020 financial results are impressive and reconfirm our consistent focus on enhanced shareholder value. Despite the difficult operating environment, the H1 results demonstrate our resilience and capacity to deliver on long-term ambitions.‘’

    The 56.3 per cent year-on-year growth in profit after tax for the period is a testament to the strength of our organisation to continually deliver exceptional services to our customers in these unprecedented times. We have been able to achieve this feat by leveraging our agent banking network, innovative e-

    Commercial Banking  segment of the bank also achieved gross earnings of N278.7 billion, up 6.1 per cent year-on-year compared with N262.8 billion recored in June 2019.

    Commenting on the results, the Chief Executive Officer of FirstBank and its subsidiaries,  Adesola Adeduntan, said: “Over the period, the commercial banking group increased its year-on-year growth in gross earnings and profit before tax by 6.1 per cent and 9.2 per cent respectively, despite the economic shutdown during the quarter and varying degrees of challenges in the operating environment”.

  • Foreign trade knowledge vital to exporters, importers, says Sterling Bank

    Foreign trade knowledge vital to exporters, importers, says Sterling Bank

     By Collins Nweze

     

    Sterling Bank Plc has reiterated the need to educate exporters and importers of goods on how to manage the changes created by the COVID-19 pandemic in accessing foreign exchange for their businesses.

    The bank made this known at a webinar for customers in the business of import/export of goods and services  meant to highlight and address some of the challenges of the manufacturing and trade sectors of the economy in light of the pandemic.

    In a keynote address, Executive Director, Operations/ Chief Operating Officer (COO), Sterling Bank, Raheem Owodeyi, told participants that COVID-19 has disrupted global logistics, leading to price fluctuations in commodities and drops in Gross Domestic Product (GDP) and foreign reserves.

    He also said the situation had consequently made it a challenge for banks to support importers and exporters of goods and services in meeting their trade obligations to suppliers.

    Owodeyi said those who go  out to obtain the foreign exchange (forex) outside of the official channels tend to incur higher than required costs, and in a bid to reduce the constraints of its customers, the bank decided to put together the seminar to educate customers on how they couldmanage the changes created by the pandemic, dearth of forex and how they could source forex through the right channels.

    Also, Regional Coordinator, Nigerian Export Promotion Council (NEPC), Southwest Regional Office, Lagos, Samuel Oyeyipo, in his paper entitled: “Export trade in Nigeria, opportunities and requirements,” said exporters engage in export business to earn forex, gain access to bigger markets and increase profit levels.

    He explained that there are several opportunities in non-oil exports for leather, cashew, cocoa, rubber and manufactured products, among others as these have the potential to contribute to the nation’s non-oil forex earnings.

    He listed some of the major destinations for Nigerian exports as Europe, United States, Asia, other parts of the African continent and the Middle East, adding that steps taken to export products include an export plan, decision on the product or service to export, business registration with appropriate regulatory bodies, such as Corporate Affairs Commission (CAC) and Nigeria Export Promotion Council (NEPC), and opening of foreign currency domiciliary account to receive FX earnings.

    Other requirements include adequate packaging and labelling of products for export, which must meet certain international standards of containment, protection and preservation.

     

     

  • CBN’s backward integration programme lauded

    CBN’s backward integration programme lauded

     By Collins Nweze

     

    The Central Bank of Nigeria’s (CBN’s) policy to encourage backward integration of the local production of select items, including dairy products to save depleting national reserves, has been lauded by a stakeholder.

    The new policy offers challenges and opportunities for major manufacturers of milk and dairy products and is expected to help in reviving local production capacity and create employment for the populace.

    One of the major dairy companies that has keyed into the initiative,  CHI Limited, explained that despite the challenges of dairy backward integration policy like the incessant herders/farmers clashes, the opportunities in the value chain are numerous.

    In partnership with the Niger State Government and Central Bank, CHI Limited is investing in  infrastructural development, upgrade of facilities and construction of new ones at the Bobi Grazing Reserve, a pilot grazing reserve in Maringa Local Government, Niger State.

    Managing Director CHI Limited, Deepanjan Roy lauded the paex bank for the initiative and the Niger State Government for their support.

    “We are proud of our strategic partnerships and investments in the backward integration project of the Central Bank of Nigeria.

    With the support of the Niger State Government, we would work towards ensuring that this pilot scheme achieves its medium and long-term objectives of job creation, strengthening the supply chain of the dairy category in which we play, provide good raw materials to support our local company, provide consumers with more access to nourishing, healthy dairy products, and be the model for successful dairy backward integration,” he said.

    With the acquisition of over 4,000 hectares in the reserve, the company is partnering pastoralists to provide 2,000 hectares to allow for settlement and grazing for their cows.

    It has made available 1,200 hectares to subsistence farmers for grain production and another 300 hectares for growing some of the best breed of pasture – Napier grass, an essential fodder known to improve milk yield in cows.

    The final stretch of 800 hectares has been set aside for development of support facilities, specifically a milk collection and processing center where all the milk produced from the cows will be collected and processed in a hygienic manner.

    CHI Limited has also invested in the rehabilitation of the 15km road leading to the grazing reserve to improve access and reconstruction of its dam to ensure collection of adequate water for grazing the cattle, irrigation for farming, and other purposes on site.

     

  • Naira weakens further despite CBN’s intervention

    Naira weakens further despite CBN’s intervention

    By Taofik Salako, Deputy Group Business Editor

    Naira depreciated to new lows across many markets as continuing Central Bank of Nigeria (CBN)’s intervention failed to stem the fall of the Nigerian currency at the official and parallel markets.

    The naira depreciated against the dollar by 0.3 per cent or N1 to N389.50/$ at the official Investors & Exporters (I & E) window.

    Activity level at the I & E window also dropped by 33.2 per cent to $130.3 million as Nigeria’s foreign reserves declined by $86.7 million to $36.0 billion at the weekend.

    Weekly reviews at the weekend also indicated that naira dropped by N2 to N472.00/$ at the parallel market. At the forwards market, naira weakened against the dollar across most tenors, dropping by 0.3 per cent to N391.38/$ for the one-month, by 0.4 per cent to N395.16/$ for the three-month, by 0.6 per cent to N400/$ and by 1.1 per cent to N418.10/$ for the one-year contracts.

    The CBN continued its weekly intervention with its Secondary Market Intervention Sales (SMIS) Wholesale Window, offering a total of $100 million for the week.

    FSDH Group attributed the depreciation to “tight liquidity conditions”, referencing the inability of the apex bank to meet forex demand despite its guided exchange rate policy.

    After long-running regulated exchange rate policy that created wide gap between official and parallel market rates and fuelled illiquidity in the forex market, the CBN recently backed down and started moves to unify exchange rates by allowing greater market-determined pricing.

    Cordros Capital at the weekend noted that the naira may decline further citing widening current account position, currency mispricing, which could induce speculative attacks on the naira, and the resumption of forex sales to the Bureau De Change (BDC) segment of the market which should place an additional layer of pressure on the reserves as the apex bank.

    Afrinvest criticised the silence of the apex bank on its exchange rate policy and capital controls that have restricted the exit of foreign investors, after the apex bank ended its policy meeting last week with a decision to retain all monetary policy rates.

    “Our opinion is unchanged from our previous updates on the MPC meeting as monetary policy remains inconsistent and there is a lack of proper guidance,” Afrinvest stated.

    Senior Research Analyst, FXTM, Lukman Otunuga said forex performance as well as related crude oil prices, China’s economy and global relation between United States and China will influence Nigeria’s growth outlook.

    In its outlook for the second half of 2020, Afrinvest noted that with the onset of COVID-19 pandemic and high forex volatility, inflationary pressures have intensified. Analysts expected these to continue to fuel inflation.

    “The impact of exchange rate devaluation from N307.00/$1.00 to N360.00/$1.00 in the spot market and N360.00/$1.00 to N380.00/$1.00 at the I & E FX window, FX scarcity and the value added tax (VAT) increase should drive consumer prices higher. Consequently, we project an average monthly inflation of 12.8 per cent in 2020,” Afrinvest stated.

     

     

     

  • Eurobond issuance likely for African economies

    Eurobond issuance likely for African economies

    By Collins Nweze

     

    Every crisis presents opportunities and threats to businesses. For the Coronavirus (COVID-19) pandemic, its impact on businesses has been devastating, with the  aviation industry shut.

    The banking sector is also hit, with loan loss expected to escalate as borrowers begin to see the impact of the pandemic on their bottomline.

    These are extraordinary circumstances. Many economies are already taking unprecedented measures to keep their operations running and protect the health and well-being of their citizenry.

    One way to address the economic impact of the pandemic is through Eurobond issuances, which are expected to happen in many African economies in the second half of this year.

    In a report entitled: ‘’SSA Eurobond Market in Second Half -2020: Monetary stimulus to spur market recovery’’, United Capital said despite the COVID-19 pandemic, there is room for new Eurobond issuances in second half of the year.

    It explained that the issuance  would depend on the level of improvement seen in the external and domestic space in many economies.

    It added that its optimism is buttressed by the recovery in foreign investors’ appetite for Sub-Saharan Africa  (SSA) Eurobond at the secondary market.

    “Also, the need for most of the SSA economies to plug sizable budget deficit as well as refinance private debt obligations further adds to our optimism.

    At the secondary market, we expect interest to be dictated by the level of recoveries in the key export items of each country.

    In all, our outlook for sustained expansionary monetary policy conditions in advanced economies (especially in U.S and Europe) should create a bullish bias for investing in SSA Eurobonds in second half of 2020,” it said.

    Early in the year, activities at the primary Eurobond market were business as usual for SSA countries. Gabon opened the year with a $1 billion issuance in January, followed by Ghana with a $3 billion issuance in February. Both auctions were widely oversubscribed with subscription rates of 3.5 times and 4.7 times.

    At the secondary market, yields on the outstanding and new SSA notes re-priced higher in first quarter-2020, owing to the synchronised risk-off sentiments fuelled by the pandemic and the uncertainties involving the impact that it will have on the economy.

    However, the large-sized stimulus package unveiled across the developed market and  recovery in economic activities, had since refueled risk-on sentiments by foreign investors, with SSA Eurobond yields declining from their March-2020 highs.

  • ‘More economic transparency  needed’

    ‘More economic transparency  needed’

    By Collins Nweze

     

    The 2020 Edelman Trust Barometer has been released with stakeholders calling for more transparency in government and other key institutions within the economy.

    The report stated that of the four mainstream institutions of government, business, media and non-governmental organisations (NGOs), government remains the least trusted with Nigerians having no confidence in the ability of leaders to address the country’s challenges successfully.

    Conversely, Nigerians’ trust in chief executive officers of businesses as positive change agents rose while trust in NGOs and the media also increased, according to the supplementary data for Nigeria.

    The report presentation was done virtually due to disruptions caused by the coronavirus pandemic. The Chief Executive Officer of Edelman Africa, Jordan Rittenberry, presented the global 2020 Edelman Trust Barometer and the Impact of COVID-19 on Trust reports.

    Speaking on the need to enhance transparency and accountability in public and private institutions, stakeholders cited how complaints that trailed the Conditional Cash Transfer and School Feeding Programme were handled transparently by engaging civil societies to monitor as what public officials could do to earn public trust.

    An all-female panel drawn from the government, media, business and civil society also discussed the survey report and its implications for their  constituencies and Nigeria at large, in line with the theme: “Competence and ethics.”

    They were the Special Adviser to President Muhammadu Buhari on Social Protection, Mrs. Maryam Uwais; Director, Public Affairs, Lafarge Plc, Folashade Ambrose Medebem, among others.

    Revealing how public officials could boost their trust among Nigerians, Mrs Uwais said it was vital they brought transparency into their activities and remain consistent.

    Uwais said: “As a government official, I’ve found out that there’s a high level of cynicism; scepticism that runs through. ‘’

    The Edelman Trust Barometer is the annual global trust and credibility survey conducted by Edelman Intelligence, the independent research arm of the Edelman global network testing how well people trust those four critical institutions of the society to do what is right.

    This year’s survey conducted by Edelman Intelligence between October 19 to November 18, 2019, sampled more than 34,000 respondents across 28.