The Nation Newspaper

Category: Consumer Watch

ADVAN seeks stakeholders’ intervention over ARCON’s arbitrary policies

The Advertisers Association of Nigeria [ADVAN] has called upon the Advertising Regulatory Council of Nigeria [ARCON] to pull the reins on its regime of arbitrary policy initiatives and embark on critical stakeholder dialogue and engagement to foster renewed hope and support for the industry.

In a statement issued by the executive council members, ADVAN pointed out a lot of loopholes in the 2022 (ARCON) law and asserted that the new law has several provisions that are clearly unconstitutional.

For ADVAN, a major item that has stood out is that ARCON, according to the law, is allowed to set up a tribunal that would hold ‘trials’ for any persons or organisations that contravene the provisions of the ARCON law.

According to the Press statement, ADVAN said that this provision is an “extremely concerning development, because Nigeria as a democratic entity has clear separation of powers between the different arms of government.

“A regulatory body for advertising cannot set up a tribunal with powers to hear, try, deliver judgment and sentence, as such is clearly a violation of the constitution of the nation.”

Continuing ADVAN noted that “ARCON cannot constitutionally act as both the prosecutor and the judge in relation to matters which they have by themselves, labelled as advertising offences”.

It said the tribunal constituted by ARCON is merely an appendage of ARCON and it is propagating the agenda of ARCON.

The body recalled that in January 2024, ARCON issued notices to law abiding organizations in Nigeria on various unclear charges of infractions, with fines up to N1 million per infraction. “It is critical to note that these organisations include multinationals, Indigenous conglomerates and various levels of businesses that serve as the backbone of the Nigerian economy. ARCON has now issued notices to the CEOs of these organisations to face the ARCON ‘Tribunal’ on various claims of infractions.

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The body said it vehemently opposes the harassment of its members (which are corporate entities that utilize advertising and marketing to promote their goods and services).

It said the harassment and threats of criminal trials of CEOs of both local and multi-nationals is antithetical to the reforms being proposed by the Federal Government through the Presidential Enabling Business Environment Council on Ease of Doing Business (PEBEC), and the need to remove all forms of bottlenecks in driving the Nigerian economy.

ARCON has severally insisted that its reforms are targeted at enthroning transparency, equitable practices and growth of the Nigerian advertising industry. For the tribunal, the government declares that it is an independent specialized judicial body established to ensure equity and openness in all disputes allegedly committed under the Act.

ADVAN also denied that it made contributions to the Advertising Industry Standard of Practice (AISOP) midwifed by the then Advertising Practitioners Council of Nigeria (APCON), now ARCON.

According to ADVAN, “It is worthy to note that while the leadership of APCON, now ARCON claimed that it invited all critical stakeholders to deliberate on the AISOP: “The truth is that ADVAN has clearly stated on several occasions, both in private with the Registrar of APCON Dr Lekan Fadolapo and in many public fora, that not a single contribution presented by ADVAN was included in the AISOP.”

March 17, 2024
Terra Seasoning Cubes redefine value with Saver and Super Packs

At a time disposable income is shrinking fast, consumers are more than desirous of culinary seasonings with offerings that offer quality at cheaper and economic packs.

Terra seasoning cubes, now a household name in the Nigerian market, offers just that and more with its super saver pack with enhanced quality, taste, and affordability converging to redefine your shopping experience. The new packs deliver the same premium quality and delightful taste you expect in a more convenient and cost-effective package.

With the Saver and Super Saver packs, gone are the days of frequent market visits to settle for small, individual packets. Instead, embrace the freedom, affordability, and convenience of purchasing required quantities at once.

Available in Chicken and Beef variants, containing 50cubes in a pack, while Super Saver pack is available in Chicken variant, containing 100cubes in a pack, is one item that would be a must-have in most kitchen lists.

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Deepanjan Roy, Group Executive Director – TGI says the success of the Saver and Super Saver pack sizes is a result of the company’s resolve to put the interests of consumers first by seeking ways to continually excite and add value to their lives.

“We believe in going above and beyond to understand the needs and preferences of our consumers and the Saver and Super Saver packs are a testament to this commitment. These packs offer not only unparalleled convenience and value along with the assurance of premium quality and delightful taste,” he stated.

Probal Bhattacharya, Chief Marketing Officer, TGI Group, expressed delight with the brand’s latest innovation; the Saver and Super Saver packs. With these packaging options, Terra Cubes is setting a new standard in value within the seasoning market.

“The Super Saver & Saver packs were born out of our understanding of our consumers, their need for a more convenient pack with the adequate quantity that seamlessly fits into their consumption and planned purchase behaviour. These new offerings have been designed for consumers who want the right quantity of their favorite seasoning cube, Terra, in a pack size that balances convenience with superior value for money,” he said.

February 25, 2024
Golden Terra Oil campaign rekindles memories of love and tradition

In the bustling kitchens of homes across Nigeria, something magical is happening.

Amidst the sizzle of pans and the aroma of spices, families are coming together in a celebration of love, nourishment, and togetherness. Golden Terra Soya Oil’s “Pour Pure Love” campaign has captured the hearts and taste buds of consumers nationwide.

For Alhassan Sule, an engineer, watching the ad repeatedly reminds him of a time long gone, yet still etched vividly in his memory. As he watches the scene unfold on screen—a mother stirring a pot of soup, the aroma filling the kitchen—he can’t help but be transported back to his own childhood home.

Suddenly, he was a young boy again, sitting at the kitchen table, watching his mother cook with the same love and care.

He could almost taste the flavors of her cooking, and feel the warmth of her embrace as she served him a bowl of steaming hot soup.

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But it wasn’t just the sights and smells that brought tears to his eyes; it was the flood of emotions that accompanied them—the love, the warmth, the sense of belonging. In that moment, he realized how much those simple meals had meant to him, how they had formed the foundation of his most treasured memories.

As the ad came to an end, he finds himself smiling through his tears, grateful for the reminder of the love that had always been there, even in the simplest of moments. And as he reached for a bottle of Golden Terra Oil at the supermarket, he did so not just as a consumer, but as someone who had been touched by the power of nostalgia and the enduring bond of family.

The “Pour Pure Love” campaign emphasises the importance of creating an emotional connection with consumers by offering meaningful connections in addition to high-quality products.

Probal Bhattacharya, Chief Marketing Officer, TGI Group stated that the outpouring of positive reviews and engagement from consumers for the “Pour Pure Love” campaign underscores the enduring connection between Golden Terra Soya Oil and the moments of motherly love and care shared around the dining table.

“Our goal is to be more than just a product on the shelf – we strive to be a trusted companion, a source of inspiration, and a symbol of warmth and love. With the Pour Pure Love campaign, Golden Terra Oil pays tribute to all the world’s Moms for the warm tasty meals that fill our hearts and our souls with all the love that they pour selflessly into our lives.”

February 25, 2024
Indigenous movies excite consumers more, says Nollywood Director Owu

It was excitement, glamour as people from different walks of life gathered recently in Lekki, Lagos to watch the screening of the epic film ‘Asiri Ade’ by Nigeria Nollywood’s esteemed director, Adeoluwa Owu.

‘Asiri Ade’ unfolds a compelling narrative of politics, love, and intrigue, as two kingdoms consider a royal union for different motives. With elements of hidden romance, a lurking killer, and a power struggle, the film encompasses a blend of epic, romance, and thriller genres. The production quality, authentic storytelling, impeccable character delivery, and masterful post-production underscore Adeoluwa Owu’s genius extraordinary filmmaking skills.

Acknowledging the challenges and excitement that marked the filmmaking journey, Owu said “The outcome is a film that promises an unforgettable and immersive experience for audiences. “Asiri Ade” is not just a film; it’s an artistic endeavor that showcases the creativity, dedication, and passion of all involved”.

Speaking about consumers attitude to indigenous films, he said that he is excited that Nigerians are clamoring for and embracing indigenous stories in recent times as against the past where such stories were not appreciated.

In an exclusive interview with our correspondent, he said ‘’I am excited that Nigerians are beginning to troop out and clamour for stories that are indigenous and personal to us; case study is “Jagun Jagun”; ‘’Anilulapo’’, and now, ‘’Asiri Ade’’.

‘’I am excited that these have opened up and it is no longer a thing in the past where people will be like, ‘Nigerian film, I am not interested’; it is now, ‘Nigerian film, oh, what do they have to offer’.

Mojisola Sapara, Director of Content Acquisition & Distribution at Papaya Studios, emphasized the studio’s mission to bring fresh and diverse stories to the screen. Through

collaborations with top talents and fostering creative innovation, Papaya Studios aims to shape the future of entertainment in Africa.

‘’That is what the narrative is right now and it is just beautiful to watch this change and the switch, ‘’ he said.

The director, who is also the supervising producer for Asiri Ade, said the movie was an epic story of love and mystery, saying ‘’It tells a story of love interest and a conflict within families and royalties.’’

‘’I am super excited that the world can get to see it because it is an epic story; however, it required that we looked for a location that could depict the time and era.

‘’So, the film is set back in 1885 in old Oyo, Nigeria, where kings and royal families were still at the helm of affairs of society.

‘’We had to do a big construction, production design, built an entire village, just to be able to be able to match what we were trying tell.

‘’So the biggest scale of it was getting the aesthetics to look right and getting the right actors to play the part; and being a Yoruba film, it was also essential that we got actors that could fluently deliver in expressions and Yoruba dialect properly.

‘’Those were the initial challenges apart from the basic film making challenges, but we were able to surmount every situation, especially as this was done with Papaya studios, ‘’ Owu said.

One of the cast in the movie, Mike Afolarin, described the movies as a wonderful story, serving as a reminder that every action had repercussions at some point.

‘’Therefore, we should just be mindful of our doings and dealings because like one thing you do today, can come back to bite you at any time.

‘’So, I think that is the core message from this movie and it was such a great opportunity for me to play a Yoruba character; I love challenges and took it up, hoping to see how it comes out, ‘’ Afolarin said.

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Another cast in the movie, Bolanle Ninolowo, who commended the industry, said, however, the major challenge in the industry include poor remuneration for actors and crew members.

The epic film boasts a stellar cast, including renowned actors Gabriel Afolayan, Bolaji Ogunmola, Omowunmi Dada, Fathia Williams, and other exceptional talents.

February 25, 2024
Soaring prices, FCCPC’s tardiness make Price Control Board inevitable

There is a tweet that I came across last week: it says that if you want to pay for something and the seller’s phone rings that you should quickly make payment before the seller picks the call because if he\she picks the call before payment is made that the price of the goods will automatically go higher because the caller will tell the seller of the latest price increment. That is the sad reality in Nigeria now.

Sharing his experience, Mr. Kenneth Bode recently contracted a furniture maker to do some work for him. They agreed on a price and he immediately advanced him some money. He was supposed to pick the work after one week. Three days later, the furniture maker called him to say that he had gone to market to purchase wood and other materials for the furniture only to find out that prices had gone up.

He told Mr. Bode pointblank that he was ready to refund him if there was not an upward review of the previous price they agreed on. Exasperated Mr. Bode had to add almost up to 30% of the price that they previously agreed.

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Like Bode, Mrs. Obiamaka Nwoye laso suffered the same fate. She bought a 50kg bag of foreign short grain rice from her customer of many years in November 2023 at N41,000. According to her, the long imported rice grain was selling for N51,000. However, a few weeks after that, she kept hearing from different people that the price of rice was going up every day. On the 5th of this month, she called the same rice seller and she told her that foreign short grain was selling for N60,000 while the long grain was selling for N64,000. Two days later she called the same rice seller and she told her that short grain was now selling for N69,000 while the long grain goes for N74,000.

Also, Mrs. Funke Adeyo said she bought a D’erica cup of beans for N700 early last week. The next day she gave her daughter N700 to buy the same beans from the same shop but her daughter came back without the beans because the price had gone up to N750. By the next day again the same beans from the same shop had gone up to N800. The same thing applies to all products.

A bag of cement that was selling for N5,200 sold at N7,500 last weekend. By the time you are reading this, the price would have jumped up going by the way prices are jumping up in Nigeria.

Most supermarkets no longer put prices on the shelves because prices change almost every day. Emeka Orji who went to Shop Smart Supermarket in the Island said he was so frustrated because you will have to take every product to the checkout counter before you can know the price of what you are buying.

“It is only when the cashier scans the barcode that you can see the price, making shopping very difficult.”

In a recent press release from the government regulatory agency Federal Competition Consumer Protection Agency, FCCPC admitted that participants in the food chain play a major role in the arbitrarily increase in prices of goods.

“The Commissions surveillance efforts suggest participants in the food chain and distribution sector including at the retail level are engaging in conspiracy, price gouging, hoarding and other unfair tactics/strategies to restrict the supply of food, manipulate and inflate the price of food in an indiscriminate manner, this conduct violets both moral and legal codes. Taking advantage of consumer anxiety and vulnerability to inflate prices, and restrict or distort competition is obnoxious, unscrupulous, exploitative and illegal.”

In the view of analysts, the Nigerian market is free and mostly unregulated thus sellers and producers of consumers goods are allowed to peg their prices wherever tickles them and wherever satisfies their greedy urge, they are only forced to readjust the price by competitors or by other market factors and never by the Nigeria government, unlike other countries where the government mandates services providers and sellers on the price range they are to peg for a product or service.

In choice cities like Abuja, Lagos or Port Harcourt, landlords and house owners charge arbitrarily for rent on houses with the perception that if a particular tenant cannot afford to pay the rent, there are other tenants who are willing to pay whatever rent that is fixed on the house.

Transport companies as well do raise their fare arbitrarily, without any control or regulations.

Thankfully, the Price Control Board, an agency under the Federal Ministry of Commerce and Industry and the Federal Competition and Consumer Protection Commission (FCCPC) have the primary statutory duties of these agencies are to protect consumers, make sure they are not being cheated or ripped off by producers and service providers and fix prices for some popular basic consumer goods, but these agencies, sadly are not just doing enough.

It is so bad that most Nigerians do not even know that there are government agencies that have been charged to control prices and are also charged to prosecute service providers who charge exorbitant prices. They need to be more proactive now than before because producers and service providers due to the economic hardship and high cost of raw materials are shifting all the burdens, including tax to the final consumers.

Good enough, Dr. Adamu Abdullahi, Acting Executive Vice Chairman of FCCPC noted in statement that in rare situations and pursuant to part X1, and section 88 of the Federal Competition and Consumer Protection Act, [FCCPA], that the Commission may advice the President fix the prices of certain goods and services based on empirical evidence.

February 25, 2024
Upsurge in betting, gaming with over 65m Nigerians hooked-Report
- By Jill Okeke and Paul Onehi
It’s no longer news that betting, gambling and gaming have become so popular in Nigeria, despite concerns by many faith-based organisations who consider these games as antisocial activities.

Interestingly, the advent of online betting has drastically contributed to the rise of gambling in the country.

In fact, online betting has continued to grow in Nigeria and more betting companies such as, Bet9ja, 1xBet, BetKing, BetWinner, N1Bet, Parimatch, 22bet, Yangasport amongst others, have increased the numbers of entrants in the industry.

The high rate of unemployment and poverty has been attributed to the major cause for the rise in gambling, betting and gaming in the country.

A lot of Nigerians would tell you that they partake in it because they have to survive while some others want to make extra cash and quick money by the side.

An example is Segun Akinrodoye a.k.a Cheche, 25, who has been betting from his pre-degree days at the Federal University of Technology, Owerri (FUTO).

He says he was very close to making over N100m from betting in April. It was a single game that brought all the cards down.

“My God, I cried, honestly. A friend told me to change the Leicester option to handicap win but I didn’t. I wanted to but I don’t know how I overlooked it, “lamented Akinrodoye on his unfortunate loss.

As an addict already hooked, Akinrodoye spends an average of N1, 000 every week on multiple games, while the highest amount he has made from placing bets on football games is N127,000.

His reason for betting was to settle some issues at home. “Well, then things were a little bit hard for my parents and myself too. Pops was seriously sick and I already owed school fees for my fourth year before going for I.T,” he says.

Though he didn’t win the huge sum of money, he hasn’t stopped placing bets. “I picked myself up again,” he says about his loss. “I might be close now so I’m not giving up yet” he states.

Akin Oguntade a regular staker noted that, he personally makes a living from betting, noting that, before delving into betting, he considered those playing bet as unserious people but when he graduated from school as an (NCE) holder in 2018, as a young man who was eager to find a job after graduation but couldn’t, find any, he had to look for means to survive.

“Man must chop, that was when I decided to go into betting, and since then I have never regretted it.”

Also, a staker, Mr. Henry Aiyana disclosed that many people are gambling now because of the situation of the country, saying that they gamble to make a living.

One Mr. Ogor Emeka who is a phone accessories vendor, shares his own opinion about gambling and betting, that gambling is a legal business, because betting is now a trending means of survival for both youths and adults in Nigeria to make a living.

Speaking with one of the Bet9ja shop owners Mr Ade Segun, situated in the Jafojo Iyana-Ipaja area of Lagos, he said “there’s money in the betting business that is why I decided to put money together to own a bet shop.”

Another patron, who simply gave his name as Segun, told our correspondent that betting is one of the businesses most Nigerians patronise a lot.

The attraction, he says, is the hope the stakers invest in it: they always hope to win their stakes thus the attraction never dies.

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According to the Executive Secretary, National Lottery Trust Fund, NLTF, Bello Maigari, said that more than 65 million Nigerians spend millions on betting, despite worsening economic hardship.

This is just as Maigari revealed that the global online betting market had experienced exponential growth, making it worth over $50 billion.

The NLTF boss, who made the observation while speaking at the national gaming conference in Lagos, said: “It is not out of place to look at some statistics that underscore the significance of this industry and situate its centrality in promoting the renewed hope agenda of this administration.

“In Nigeria, the online betting sector has seen exponential growth, with millions of Nigerians engaging in various forms of online gaming and betting.”

Interestingly, another report published in March 2023 by Orange Business Intelligence Technology, ORBIT, noted that Nigeria’s betting industry reached over $2 billion in revenue in 2020, with over 60 million Nigerians between 18 and 40 spending $5.5 million daily.

A National Sports Industry Policy from the same year estimated that the industry could generate up to $4.7 billion in annual revenue, create 10 million jobs, and generate between 1.5-3% of GDP over ten years.

“With a population of over 200 million people and the largest betting market in Africa, our country is making giant strides in online sports betting.”

“Currently, there are over 65 million Nigerians actively engaging in this activity, spending $15 on average every day. On record daily, 14 million bets are taken, and payments are made online. “

“It is expected to experience an annual growth rate of nearly 10% to reach more than $366 million by 2027,” Maigari said.
January 21, 2024
Yoghurt brand rejigs identity

It was all excitement and fun as Nutri-Yo, a leading yogurt brand in Nigeria, unveiled a refreshed brand identity and reformulated product line to deliver enhanced nutrition to consumers.

Unveiling the new look Nutri-Yo to the Media, distributors and partners at a posh event in Radisson Blu, GRA Ikeja, the company revealed that the move is in its commitment to consistently innovate in giving the consumer only the best they deserve.

In his opening remarks, Vishal Patil, General Manager of CWAY Group, expressed excitement about the Nutri-Yo rebrand signifying the company’s unrelenting commitment to innovation, customer satisfaction and exceeding expectations.

Highlighting the journey since Nutri-Yo’s inception in 2018, Patil emphasised the brand’s integral role in Nigeria’s food and beverage landscape.

Rohit Prakash Gupta, Marketing Director of CWAY Group, reiterated the brand’s commitment to enhancing product quality. Gupta stated, “Nutri-Yo is crafted with our consumers in mind, aiming to offer the finest yogurt available. This relaunch is an important step in our ongoing commitment to innovation.”

In his address, Mr. Samuel O. Akinrimisi, Deputy Marketing Director at CWAY Food and Beverages Nig. Co. Ltd, outlined the strategic objectives of the Nutri-Yo relaunch. These objectives include a targeted 20% incremental increase in sales volume compared to 2023.

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Akinrimisi emphasised, “We aim to elevate Nutri-Yo to a premium status brand, foster brand awareness, stimulate repeat purchases, and enhance loyalty. The revitalised brand will maintain the familiar 500ml, 400ml, and 125ml sizes, assuring consumers that the taste they love remains unchanged while benefiting from a more fortified formulation with extra vitamins.”

Jennifer Egbuonu, Brand Manager for Nutri-Yo, assured consumers of the brand’s commitment to family-friendly, high-quality products.

Senior Regional Sales Manager, Ufuoma Warri addressed pricing concerns, affirming Nutri-Yo’s commitment to maintaining affordability. “As a brand, we remain dedicated to providing pocket-friendly pricing to our consumers. Our distributors will also receive the necessary support to ensure seamless product availability for retailers and consumers alike.”

January 21, 2024
Coca-Cola Nigeria wins big at SERAs awards

In a dynamic celebration of corporate responsibility, Coca-Cola Nigeria earned premier accolades at the 17th SERAS Africa Sustainability Awards. The distinguished event, convened at Oriental Hotel in Lagos, acknowledged Coca-Cola Nigeria’s unwavering commitment to water stewardship and societal improvement.

Under the theme “Circular Economy as the New Market Disruptor: SDGs Innovation as key to vision 2030,” the beverage leader’s substantial contributions were lauded across five themes: Circular Economy, Women Empowerment, Health/Well-being, Water Management and Social Enterprise of the Year.

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Speaking on this achievement, Coca-Cola Nigeria’s Public Affairs, Communications, and Sustainability Director, Nwamaka Onyemelukwe, reiterated the company’s dedication to sustainability as a core function of its operations. “These awards affirm our resolute commitment to sustainability and corporate social responsibility. It underscores our unwavering pledge to contribute positively to the communities we serve,” she added.

January 21, 2024
Terra sets gold standard for seasoning cubes

The gold standard in the Seasoning Cube has been launched, Terra Gold Cube. Terra Gold is making a significant leap in the culinary space across Nigeria.

Breaking away from traditional flavour-centric cubes, Terra Gold represents a paradigm shift in the culinary landscape by offering endless possibilities without confining itself to a singular flavour.

Unlike conventional cubes boasting specific taste profiles, Terra Gold stands out by breaking the mould – it is a cube without boundaries, a defined flavour, and limitations.

Justifying the new variant of the seasoning cubes, Probal Bhattacharya, Chief Marketing Officer, TGI Group says the launch of Terra Gold Cube marks an exciting chapter in the brand’s innovative journey in the Nigerian market.

“We are excited for the diverse array of delicious dishes that Terra Gold can be used to enhance. From hearty stews and nourishing soups to the beloved Jollof rice, Terra Gold delivers a rich and consistent taste for every kind of meal, so choose wisely, choose Gold. We are thrilled to witness the transformative impact that Terra Gold will bring to kitchens across Nigeria, inspiring a new wave of culinary masterpieces one dish at a time,” he said.

Read Also: Adeleke’s sacking of 1,500 teachers increased out-of-school children in Osun, says Oyetola

Terra Gold is designed to harmoniously elevate the taste of your favorite stews, soups, and beloved Jollof rice, acting as a versatile enhancer without imposing its own taste identity. Its appeal lies in its ability to seamlessly blend and amplify the natural flavours of your dishes, enhancing them to perfection without overpowering or dictating a specific taste.

The beauty of Terra Gold lies in its neutrality and its versatile nature that transcends the confines of traditional seasoning. This unique attribute appeals strongly to a wide consumer base seeking flexibility and endless possibilities in their culinary choices.

From mouthwatering stews to soul-nourishing soups and the beloved Jollof rice, Terra Gold is designed to complement and enhance the flavours of iconic Nigerian dishes, promising a delightful culinary experience with every use.

Crafted from premium ingredients, the new Terra Gold cube has been designed to meet the needs of consumers who want to cook any kind of meal without worrying about the flavor type of cube to use.

January 21, 2024
‘How AFREXIM’s $3.3b crude prepayment loan will improve forex liquidity’

In late 2023, the Nigerian National Petroleum Company Limited (NNPCL) helped Nigeria secure a $3.3 billion crude oil pre-payment loan from the African Export-Import (AFREXIM) Bank. The arrangement christened “Project Gazelle” is the first of its kind to be facilitated by any government institution in the country. While many Nigerians have hailed the move, others have expressed concern about the implication of the loan for the country’s oil production. In this interview with Oluwatosin Ojo, NNPCL’s Chief Corporate Communications Officer, Femi Soneye explains issues around the loan and its benefits to the nation. Excerpts:

Project Gazelle has thrown up a lot of issues involving forward sale of oil. What is a crude oil backed forward-sale financing agreement? How does it work?

A forward sale financing is an agreement between the owner of a product and a potential off-taker (buyer) that allows the off-taker to pre-pay, that is, pay ahead, for the future product of the seller. Under the arrangement, the seller agrees to sell its product to a Special Purpose Vehicle (SPV) in the future in exchange for immediate funding. This done, The SPV then goes to a bank or financial institution and obtains financing based on the agreed forward sale value of the product. This financing is often collateralised by the future product itself. The advantage to the seller is that it is able to use the proceeds from the forward sale to finance its operations ranging from operational expenses to production costs, and investments in new projects.

This seems clear enough but a key sticky issue is repayment…

I was coming to that. It’s a simple and straightforward matter. The SPV is able to use the proceeds of the sale of the product(s) to meet its financing obligations whilst flowing back to the original seller any upsides from the final sales.

So, what is Project Gazelle all about? What are the details of the deal with AFREXIM?

Project Gazelle is the code name given to the structured crude oil backed forward-sale finance facility sponsored by Nigerian National Petroleum Corporation Limited (“NNPC Ltd”), which is the Seller. By this arrangement, NNPC Ltd has dedicated a specific number of barrels of crude oil to a Special Purpose Vehicle (“SPV”) which has in turn approached international financial institutions to provide the funding required to pay for the forward-sale. The proceeds of the forward-sale are thus made available to NNPC Ltd for its use.

Why is NNPCL involved in this arrangement? What is the compelling need for it to get involved in this kind of deal?

NNPC Ltd entered into this arrangement to ultimately provide dollar financing to the Federal Government. It is a short to mid-term solution to the foreign exchange shortage challenge currently being faced by the country. Nigeria needs to urgently improve its foreign exchange position. As of June 2023, the Central Bank had over US$6 billion of unmet obligations – forward contracts with third party institutions which were past their expiry dates.

These unmet obligations have pressured the nation’s external reserves and resulted in a significant devaluation of the Naira. The pre-financing arrangement allows the Federal Government to receive foreign exchange, in advance, to enable it resolve its unmet FX obligations. These inflows of foreign exchange will ensure exchange rate stability and is an immediate quick-win available to the country.

Can this type of financing really help improve flow of foreign exchange into a country?

Forward sale contracts help resource producing companies such as the NNPC Ltd to deliver significant upfront funding for new projects prior to eventual production and export. Usually, the funding available is used as investments in existing and prospective resources, this could result in more oil and gas production in the country as new projects come on stream, and higher oil and gas exports, bringing in more dollars and foreign currencies.

International banks have a track record for providing forward-sale financings. This basically brings new Foreign Direct Investments (“FDIs”) into the country. With Nigeria having over 35 billion barrels of proven reserves that need to be exploited and produced, a fraction of these prospective reserves can be used to raise the required funding. With a forward sale financing, the country can securitise these proven oil reserves today. This improves foreign currency inflows immediately rather than having to wait for years.

Also, by supporting more exports and bringing in overseas financing, forward-sale financing can significantly boost the availability of foreign currency for an oil/gas dependent country. This improves the country’s ability to pay for imports and manage its overall economy. When exports finally start, the forward-sale investments are repaid using the money earned from those same exports. This improves the country’s balance of payments. The financing gives the government more stable and predictable oil earnings. This helps in planning budgets and managing foreign exchange reserves.

But there are other ways of obtaining foreign currency…

Yes. Nigeria can obtain foreign currency by increasing its oil production which will lead to a growth in crude exports. Unfortunately, a ramp-up in production will not occur in the short term due to the current lack of foreign direct investments into the oil and gas sector. Fortunately, as I said earlier, Nigeria is blessed with over 35 billion barrels in oil reserves and is at liberty to sell some of these reserves on a forward basis, wherein it sells only a small portion of its oil for cash forwards. Nigeria is able to source foreign exchange from other sources including Eurobonds and Debt Issuances. These sources are, however, currently constrained given the increased borrowing of recent years as a result of the poor fiscal state of the economy.

So, why is the crude price used to determine the volume of crude pledged for the forward-sale financing lower than the current market price?

There are a few key reasons why the crude price used for determining the volume pledged in a forward-sale financing deal is usually lower than the current market price. For one, oil prices are volatile which means prices can go up and down within a period. Using a benchmark lower price provides a safety margin during extended periods of price declines before the full repayment of the facility. To ensure a limited risk of default, Lenders want a low price for safety. Borrowers want a high price to minimise pledged volumes. The negotiated price sits in the middle. Some revenues go to cover costs before repaying the loan. A lower price estimate also makes provision for these incidental costs. In summary, lenders want safer, lower price assumptions. The negotiated price balances the interests of lenders and borrowers and reflects a prudent approach to ensuring the security of such transactions.

What happens when sales proceeds are much higher than the repayment amount?

If oil prices spike significantly, the future value of oil sale could become much higher than the forward-sale financing. In this case, the company (seller) simply repays the original loan amount plus interest as agreed, even if sales proceeds are higher. Any excess revenues are paid to the issuer (seller). For example, if a $100 million forward sale financing for 1 million barrels of exports at $100/barrel, but oil prices jumped to $150/barrel, those 1 million barrels would now fetch $150 million. The financiers will receive the $100 million+ interest and the excess $50 million will flow back to the seller.

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Let’s look at two key areas of the Project Gazelle that have attracted a lot of comment – the interest rate and repayment…What is the interest rate on the Project Gazelle transaction?

The interest rate is benchmarked on a three-month term Secured Overnight Financing Rate (“SOFR”) plus a margin. The Secured Overnight Financing Rate (SOFR) is a broad measure of the cost of borrowing cash overnight collateralised by treasury securities. It was adopted to replace the LIBOR rate which for decades was the appropriate benchmark for these types of international transactions.

The current three-month SOFR rate stands 5.35%. The agreed margin on the transaction is 6.0% and there is also a liquidity premium of 0.5%, bringing the total interest rate at the start of the Facility to 11.85% However, it should be noted that the transaction is structured as a floating rate, which means that movements in the base SOFR rate will reflect in the underlying pricing of the instrument.

In recent years, the SOFR has trended upwards due to several factors including the impact of the Covid-19 pandemic and rising inflation globally. The SOFR averaged as low as 0.04% in 2021, rising to the current levels of 5.35% as of December 2023. The SOFR rate is forecasted to trend downwards over the tenor of the facility, reducing from 5.35% to as low as 3.3% by 2028 which means the interest rate will also drop as it is benchmarked against the SOFR. On repayment, the Facility will be repaid from the future sale of oil produced by the borrower. For project Gazelle, up to 90,000 barrels has been earmarked for this purpose.

The quantity of crude earmarked is sized to ensure that there is sufficient cash available for the repayment of the facility as and when due and ensure that the Borrower can also meet the other cashflow obligations, taking into consideration the expected future price of crude oil globally.

Finally, how will repayments be affected by oil prices?

Repayments are usually tied to the value of future exports. So, if oil prices rise, more money comes in from the sale of the 90,000 barrels, allowing faster repayment. But if oil prices fall, repayment may be slower. For example, if the PXF loan was $100 million to be repaid from 1 million barrels of future oil sale, repayment would vary depending on the eventual price per barrel. For example, at $150 per barrel, 1 million barrels fetches $150 million. Loan is fully repaid. At $60 per barrel, 1 million barrels fetches $60 million. Loan repayment would be lower. For Project Gazelle, the projected price used for determining the allocated crude is $65 per barrel.

January 21, 2024