The Nation Newspaper

Tag: firms

  • Four firms to mine gold, iron ore in Osun, Kebbi, Kogi

    Four firms to mine gold, iron ore in Osun, Kebbi, Kogi

    Four foreign companies are to begin mining of gold and iron ore in Nigeria this year, Mohammad Amate, the Director-General, Nigerian Cadastre Office, said yesterday.

    The companies will operate in Kebbi, Osun and Kogi states, Mr. Amate told the News Agency of Nigeria (NAN) in Abuja.

    Mines Geotechniques Nig. Ltd., an Australian firm, and Northern Numero Resources Ltd. from the UK, have licences to mine gold in Kebbi State. Two other Australian companies, Segilola Nigeria Ltd. and KCM Mining Ltd. —will mine gold in Osun State and iron ore in Kogi state, respectively.

    The companies have completed exploration programmes in areas approved for them and they will begin actual mining this year, Amate said.

    KCM Mining Ltd., which started exploration activities about four years ago in Kogi, completed the exercise last year. It delineated about 500 million tonnes of iron ore.

    Segilola Nigeria Ltd. will operate in Osun State. It has concluded exploration and has delineated more than one million ounces of gold there.

    The director-general said the four firms that would commence mining activities this year were among 20 foreign companies granted mining exploration licences by the Federal Government.

    Aside from Australia, he said, other firms from Canada, UK, Italy, China, Niger, India, South Africa and Ukraine had indicated intention to mine mineral resources in Nigeria, noting that some of the firms were at various levels of exploration.

    “The companies have to conduct exploration first before mining to ensure that the area is rich in minerals or not and to know the types of minerals therein,’’ he explained.

    Mr. Amate said the Ministry of Mines and Steel Development has put necessary policies in place to encourage investment in the solid minerals sector.

    He added that investors had started showing interest in the sector, with most of them coming from outside the country.

    “You can see the number of foreign companies that are coming to take exploration licences and have even carried out exploration programmes.

    “We are now getting foreign mining companies that are coming to invest in Nigeria and it is a good thing for the industry,” he said.

    “Mining is a major sector that employs a lot of labour and with the coming of the mining companies, many Nigerians will be employed.’’

    He, however, added that “we insist that any company that wants to pick up a licence must employ qualified Nigerians and the companies are complying.’’

    He said Nigeria was the only country in Africa that had 100 per cent geological data generated through airborne geophysical survey, which was done through sustainable management of mineral resources programmes.

     

  • 2012 results: Eight firms get NAICOM’s approval

    EIGHT out of the 22 insurance firms on the awaiting list of the National Insurance Commission (NAICOM) for approval of their 2012 International Financial Reporting Standard (IFRS) compliance accounts have finally scaled the hurdle. This is coming 10 days to the end of this financial year.

    The eight firms, which got their accounts approved are Oceanic Insurance Company Limited, Lasaco Assurance Plc; Crystal Life Insurance; Mutual Benefits Life Assurance Limited; Mutual Benefits Assurance Plc, Nem Insurance Plc; Linkage Assurance Plc and Union Assurance.

    This was made known by NAICOM in the ‘Submission Status Of 2012 Financial Statements of Insurance Companies as at December 20, this year.

    Before now, 21 out of the 59 firms were on the awaiting list, the remaining 13 were jostling for the regulator’s nod.

    Investigation, however, revealed that NAICOM, which approved the accounts of the eight companies in one week, has been working round the clock, to enable them pass the accounts of other companies.

    It was also gathered that the Board of Directors of some firms have relocated their Chief Financial Officers (CFO) to NAICOM headquarters in Abuja with an order that they get the accounts right to enable them secure NAICOM’s approval.

    But as the scrambling continues, six other firms are yet to submit their 2012 audited and annual reports. Only Guinea Insurance, which was among the awaiting list before now, was been able to submit. By tomorrow, these firms risk suspension of their licences, going by the provision of the Insurance Act, 2003.

    The firms that are yet to submit are Industrial & General Insurance Plc, International Energy Insurance Plc, NICON Insurance, Alliance & General, Alliance & General Life Assurance Plc and Goldlink Insurance Plc.

  • Firms must pay their debts, says Otti

    Power firms must meet their debt obligations to banks or lose out, the Group Managing Director, Diamond Bank Plc, Dr Alex Otti has said.

    At a national discourse in Lagos, Otti said the firms were required to pay back debts owed the banks to sustain the relationship.

    He said: “In respect of the firms that bided and bought the assets of PHCN, loans given to them must be paid to ensure mutual growth. The story of power supply is all too familiar with current peak time generating capacity of about 4,517 megawatts when there is estimated latent demand of 19,000 to 20,000 megawatts.

    ‘’We will not mourn a lot about this, but will like to take the discourse to the direction of how our infrastructural deficit can be addressed in an accelerated manner.

    “Good enough, a step has been taken in the right direction with the establishment of a Sovereign Wealth Fund of $1billion and a clear mandate to invest part of the money in infrastructural development. We need to take an additional step to ensure sustainability of this initiative by ensuring that the funding mechanism is agreed upon by all parties – Federal, state, and local governments.’’

    He said privatisation is good, if it is done properly. Otti said the government invested a lot of money on Ajaokuta and Osogbo Steel Rolling Mills without achieving success. He said most banks engage in oil and gas transactions, without having knowledge of what it entails.

     

  • PHCN firms’ owners grumble

    PHCN firms’ owners grumble

    New owners of the Electricity Generation Companies (GENCOs) are threatening a legal action against the Nigeria Electricity Regulatory Commission (NERC).

    They are not happy over the draft of interim rules and other regulatory issues that, in their view, seek to reduce the revenue of the companies instead of the provisions of the Multi-Year Tariff Order (MYTO).

    The GENCOs collectively wrote a petition to the commission three days ago to reject the proposal, stressing that the NERC and the Bureau of Public Enterprises (BPE) were not keeping to the terms of the sales of the power entities.

    NERC General Manager (Marketing and Rates) Abdukadir Shetimma revealed the content of the petition to the stakeholders at the two-day workshop with the purchasers of the Power Holding Company of Nigeria (PHCN) in Abuja.

    He said: “Basically, what the comment is saying is that BPE and NERC are reneging from the terms of sale of the companies; they have paid for the companies you cannot be given any revenue less than what is in the MYTO. So, give us our monies in full or we will go to court. Basically, that is the kind of language or the conclusion or the comments by the GENCOs.”

    Shetimma explained that the commission proposed the interim rules in the interim period since the transitional electricity market had not begun and cannot before the physical handover of the companies to the purchasers.

    He said: “The Transitional Electricity Market (TEM) is a market where there will be trading by contract, there will be rules and all the rules in the market will be enforced and all the contracts will be in force. But that will not be in force because we have not met the conditions precedent to the Electricity Transition Market.

    “And more importantly, the losses in the tariff are far from reality. The baseline losses and the population in the tariff have been questioned and we need to establish those baseline losses and factor them into the tariff so that there will be sufficient revenue in the entire value chain. We have to have a set of rules to guide the industry within this period when the losses will be validated, the tariff will be adjusted and the remaining few issues will be concluded. “

    NERC, according to him, has proposed to commence the interim period on November 1 and end it on February 28.

    He added that after all the conditions, which include the settlement of PHCN workers’ benefits, the Federal Government could declare the Electricity Transition Market on March 1, 2014.

    His words: “We believe that the interim period is going to start from the first of November, and we expect that that day will coincide with the physical handover to the purchasers. And we expect it to end on February 28. And we will work for them to commence on March 1 or earlier than that.”

    On how the sector would earn its revenue within the period, Abdulkadir said the revenue would be from the DISCOs’ monthly N20billion collections, the MYTO, which is N19.5 billion in the 2013 budget.

    The General Manager, however, noted that from the amount set out in the MYTO 2, each DISCO will earn 100 per cent for salaries, fixed and valuable costs of 20per cent, return on capital 50 per cent and depreciation 10 per cent.

    The GENCOs have already made their positions known in a petition on Tuesday.

    The representative of Ughelli Generation Company, Janet Ubowu, who spoke in her personal capacity, said NERC had exposed them to the risk of underpaying their banks.

    According to her, the commission is asking the purchasers to be patient should also understand that their banks lack such understanding.

    Speaking on behalf of five distribution companies – Ibadan, Yola, Kano, Jos and Enugu – Robert Yates said that the companies demanded that the commission grants them 100 per cent salaries, 70 per cent fixed and variable costs, 60 per cent return on capital and depreciation 10 per cent of the revenue.

    Besides, Smaila Zubello of Eko DISCO said: “We want NERC to understand that investors have commercial instincts. We cannot do things differently in breach of our bankers deal.”

    On the PHCN workers’ fate, the representative of BPE, Mr. Amaechi Aloke, noted that the Federal Government would have paid off 38,000 staff out of the 45,000 who were verified by end of the year.

    He added that for 20 years, the BPE has always asked the investors in privatised entities to retain the workers for six months, stressing that the case of the PHCN workers cannot be an exemption.

  • PHCN’s successor firms ‘ll deliver on power, says BPE

    Ahead of the take off of the 13 successor power generation and distribution companies next month, the Bureau of Public Enterprises (BPE) has assured that the coming on board of the GENCOS and DISCOS would mark a turning point in the history of the power supply in the country.

    It added that the decision to allow private organisations to invest in the sector is a good one, which is capable of making the nation achieve the objectives of providing electricity for economic growth.

    BPE’s spokesman, Joe Anichebe, said the technical expertise of the 13 successor firms is not in doubt, adding that they have what it takes to improve the status of electricity generation and distribution in the country.

    He said the agency took the technical proficiency of the companies into consideration before allowing them to submit bids for the power projects.

    Anichebe said a lot of companies were evaluated based on their technical skills prior to the period before they were selected to offer bids, adding that they were found to possess enough expertise to run the sector.

    He said the new entrants have excellent track records, noting that they stand out in the markets that are bigger than where they have won the bids to manage the distribution and generation assets.

    “The winners have the required technical skills,” he said.

    Anichebe said the companies would not experience difficulties in the area of collecting revenue because of their expertise. “Like any other business, people will pay for the services they are enjoying. In the case of utilities’ bill, they use what is called aggregate collection and losses system because people are not paying for the power they are using,” he said.

  • ‘Oil firms are paying for govt’s failure’

    It is hell for companies operating in the oil-producing areas because they have a lot of demands to contend with from their host communities. Why is this so? A law teacher at Afe Babalola University in Ado-Ekiti (ABUAD), Patrick Tolani , blames it on the failure of government. Tolani, the Executive Director, Institute for Oil, Gas, Energy, Environment and Sustainable Development Law (OGEES) of ABUAD’s College of Law, also tells Adegunle Olugbamila, in this interview, that the Petroleum Industry Bill (PIB) is not in the country’s best interest.

     

    What is wrong with the existing oil and gas laws? Will the Petroleum Industry Bill (PIB) address the shortcomings in the sector?

    First, I think I should talk about the PIB. In terms of framework, it’s amazing. For the first time, the government is bringing together every law in the petroleum industry into one. Whatever you are, you can actually pick a particular legislation that addresses all the issues in the industry. It is sad that the bill has taken nearly 10 years since it was drafted. We started in 2008. The bill has stayed too long. When it becomes law, there are areas it will address.

    One of such is that it gives room for more local oil companies to be involved in acreages on the fields that are unused for now. The international oil companies have some oil fields they are not exploring, or producing oil from, and that is not good for the country. So, the government thinks it’s good to take some of those fields and give them to local companies.

    Another good thing about it is the 10 per cent profit of every oil company that is supposed to go into the development of local communities.

    What is the perception of foreign firms about the PIB?

    They feel the new bill is unrealistic and punitive. Their view is that the new regime under the PIB would be more punitive. When you ask for excessive tax, you create an opportunity for people to evade tax. My opinion is to allow the National Assembly, government and oil companies to sit down and find the way forward because, at the end of the day, Nigeria will be the loser for it. More of the companies may continue to reduce their portfolio. Now, most of them are doing head cut and divesting and selling their fields daily. While the PIB is good for local oil companies, the truth is, it’s not in the best interest of the country.

    Kidnappings and pipeline vandalism seem to be rearing their ugly heads again in the oil-producing communities, despite the amnesty programme. What is the cause?

    The communities, unfortunately, don’t know government. As far as they are concerned, the government is in Abuja. But since they cannot lay hands on the government, they vent their grievances on the facilities of oil companies in their areas; and that is why they expect oil companies to build schools, provide roads, pay them, build houses and do other things for them. But the reality is that oil companies cannot replace the government.

    The failure of the government is visited on oil facilities almost daily and this is not good for the economy and business. Government must sit up and face its responsibilities. It must become more transparent and reduce, if it cannot eliminate, corruption. Above all, it must do tangible things for the oil communities. It is inequitable for the communities not to enjoy the good things of life.

    But the impression in many quarters is that the multinationals are not doing enough of corporate social responsibility.

    There is a misconception here! Corporate social responsibility is not a legal obligation. It is an act of charity. But what the communities are saying is that the oil companies should take over the role of the government.

    What would you proffer as the permanent solution to this?

    OGEES has designed two initiatives to tackle this problem. The first is the Niger Delta Participatory Development Framework (PDF), which should build on the success of the GMoU concept of Shell and the Multi-Agency Monitoring Consorting (MOMC), conceived to be an independent information hotline.

    OGEES is also planning to convene the first edition of its Sustainable Development Discussion Forum (SDDF), where topical issues affecting the oil industry will be discussed and solutions to the seemingly intractable problems facing the industry proffered. Oil theft will have to be addressed at the parley, which will hold next quarter of this year.

    With the happenings in the region, you’ll realise that things have fallen apart. The communities must talk to oil companies, oil companies must talk to the government. Other stakeholders must sit down and look for solutions to the problems. Dictating solution and different programmes from Abuja will not help anybody. From OMPADEC, to Niger Delta Development Commission to the Ministry of Niger Delta Affairs, people are not interested in those offices; they are interested in changes to their lives.

    To evolve changes, there must be solution that comes from the bottom to the top. If that does not happen, I hope we don’t close the chapter by saying: “There was oil in the country.” We are losing a minimum of 200,000 to 300,000 barrels of oil to illegal bunkering daily. Whenever there is force majeure, we lose a minimum of 150,000 oil barrels a day. The truth is that our leaders probably don’t understand the implication of this. I hope the country does not go bankrupt.

    How would you appraise the level of oil spillage in the creeks by vandals?

    Crude theft and vandalism of our pipelines have forced oil companies, notably, Shell Petroleum Production Company to declare force majeure at least three times this year alone. On each occasion, about 150,000 barrels of oil was shut-in to prevent further spill and save the environment from the devastating effect of such occurrences.

    What this means is that the companies would have to spend millions of naira on investigation, deploy money and men to mend the vandalised pipelines and also carry out remediation operations which are not by any means cheap. Furthermore, as a nation, we send wrong signals to our trading partners about our capability to meet our supply obligations. That is not in the best interest of the country and the economy, at a time when we should be seeking loyal trading partners who would stick to us in the face of competing sources of supply. Furthermore, the regular shut-in of crude oil by major oil companies, is really hurting the economy.

    Our findings have confirmed that the oil theft is no longer being carried out by pockets of hungry hoodlums in the communities; but has actually been taken over by powerful cartels who operate with all the sophistication of well-organised outfits. Unfortunately, still, our oil is in high demand by countries that are taking advantage of the porosity of our security arrangement to benefit from our oil resources illegally. This is a national shame that must be addressed.

    Worst still, the oil producing communities are faced with the dilemma regarding who to support in the face of poverty and employment. On the one hand, they show no sympathy to the government and to the oil companies whom they accuse of many years of pillaging their land and resources without any demonstrable benefit to them. On the other hand, their health and livelihoods are endangered due to the high level of pollution taking place on their land.

    Efforts aimed at addressing the power problem appear to be unsuccessful, as more industries relocate into neighbouring countries where power is relatively more stable. What’s the way out?

    In my own opinion, we do not have a sustainable strategy that can make us get things right. All the billions spent in the power sector were not based on proper strategy that can deliver results. And when all you do is fire brigade approach, you can get pockets of success here and there, but you cannot be really successful. Anytime we have a government that can develop a proper strategy with proper funding, I can assure you, we will achieve results. But for now, I’ve not seen any in place, and that is why we keep spending money and not getting results. If we have a strategy that every President will be committed to, I believe we will be getting somewhere.

    Sometimes I wonder how companies make profit with the amount of money spent on power? You go to hotels where they run the generator from 6pm-6am, and if power doesn’t come, they continue with the generator for the whole day even if there is only one guest in the entire hotel. So, I’m not surprised that industries move to other countries, but that is the reality.

    But it seems this lack of strategy you talk about cuts across all sectors.

    You are right. It is also the same in the area of security. Now tell me, which area have we fared better? Health, education, industry just name it? The fact is that we talk, but we don’t put our money where our mouth is. We need to ask ourselves, do we need a strategy on renewable energy? Yes, we may have, but ask those people that the government has put in the council the level of government’s funding, and it’s nil. Do we want to promote solar energy? We have sun in this country. We can do windmill, but we are not focused and we are losing so much in this country.

    How does OGEES intend to contribute its share towards the fight against corruption?

    At OGEES, we will use our four mandate areas – research, training, consultancy and publication, to enlighten people on how corruption can be reduced. Though fighting corruption is not why we are set up, as an academic body, OGEES cannot afford to shy away from this national tragedy.

    The truth is: we are not asking questions from our leaders. I feel so sad when I hear some people say, ‘you disrespect the President,’ there’s nothing about the President of Nigeria that cannot deliver anything to the people of Nigeria. As a leader, you earn respect of Nigerians when you can deliver the dividends. Interestingly, the Nigerias are not asking for too much. They are only saying give us roads, good schools for our children, water, and accommodation, and the rest will fall into place.

    Nigerians appear to be poor managers of electricity. How can your institute shape their attitude to ensure efficient energy management?

    There is a lot of systemic problems starting from the ways we are billed, and until we are able to face that challenge, there will continue to be wastage. From NEPA to PHCN, these companies just allocate figures, except for the few people that use prepaid cards. And then the light hardly ever comes. I’ve heard people say: “Whether I switch off my electricity or not, PHCN will still bring the same electricity bill anyway.”

    Aside, we as Nigerians have this ‘it-does-not-belong-to-me’ attitude. We tend to be reckless in our use of light because of this mindset that it belongs to the government. This poor management of power by Nigerians is not only hurting them, but also the environment. What we need is a wholesale national orientation because these are habits and they die very hard.

     

     

  • Hezbollah: Court refuses application to reopen sealed firms

    •Parties to adopt written addresses, September 30

    A  Federal High Court in Abuja yesterday refused to hear an application seeking to reopen two companies sealed by the Federal Government for allegedly being used by the owners for terrorism activities.

    The companies – Amigo Supermarket and Wonderland Amusement Park Resort, which are located in Abuja – are charged with their Lebanese owners, who are standing trial on for terrorism-related charges. They are accused of complicity in the unlawful importation and storage a large cache of arms and ammunition discovered in May in a house in Kano.

    They are also charged with being members of Hezbollah, a terrorist organisation.

    The Lebanese are: Mustapha Fawaz (49), Abdallah Thahini (48) and Talal Ahmad Roda (51).

    The trial ended in the case yesterday. The defence closed its case after calling four witnesses, including a Lebanon-based lawyer, Youssef Finianos, who was invited to explain the status of Hezbollah in Lebanon.

    Fawaz and Thahini, while testifying yesterday, denied involvement in any terrorism activity.

    Justice Adeniyi Ademola turned down a request by the defence lawyer, Ahmed Raji (SAN), that he consider an application seeking the reopening of the two companies sealed by security operatives following the arrest of the Lebanese in May.

    Raji had complained that the continued closure of the companies was at a huge loss to the owners, because some of the equipment and goods were beginning to go bad from disuse.

    Following an indication by the lead prosecution lawyer, Simon Egede, that he would file a counter-application to oppose the defence application, the judge expressed his preference for the continuation of the trial instead of considering an interlocutory application.

    At a point, the parties agreed to a compromise, which requires that representatives of the companies and officials of the Department of State Services (DSS) would jointly inspect the facilities at the companies twice a week – Tuesday and Thursday. The judge adopted the arrangement.

    Justice Ademola also directed that the companies make available to the DSS the names of its workers who would participate in the inspection and the time of the exercise a day before the inspection.

    Testifying earlier, Finianos denied that Hezbollah is a terrorist organisation in his country. He, however, admitted that the European Union (EU) recently declared it a terrorist organisation.

    The Lebanese explained that back in his country, Hezbollah was seen as a resistant movement, with the primary responsibility of preventing the occupation of southern Lebanon by Israel.

    Finianos, who testified as the second defence witness, said Hezbollah was not declared a terrorist group in his country.

    He admitted that there were unproven cases in the past where the allegation of violent crimes had been made against the group.

    Fawaz and Thahini denied being members of Hezbollah.

    They claimed to have been interrogated at the DSS office by some foreigners, who they claimed were members of Israeli’s intelligence outfit, the MOSSAD.

    Although Fawaz admitted undergoing 30 days’ training under Hezbollah on weapon usage, Thahini denied ever receiving any such training.

    Fawaz, who was the third defence witness, admitted making video recordings of the aerial view of Abuja from atop Sheraton Hotel.

    At the closing of the defence’s case, the parties agreed to return on September 30 for the adoption of their final written addresses.

     

     

     

     

     

     

     

  • ‘Indicted’ firms make fuel suppliers’ list

    ‘Indicted’ firms make fuel suppliers’ list

    The Federal Government has expanded its list of fuel suppliers to include companies previously named in a multi-billion dollar subsidy fraud investigation, reports Reuters

    Nigeria has expanded its list of fuel suppliers to include companies previously named in a multi-billion dollar subsidy fraud investigation, sources familiar with the matter said, while large global trading houses have been left empty-handed.

    Africa’s most populous country, which relies on fuel imports because it lacks the capacity to refine its own crude oil, tried to remove fuel subsidies last year but was forced to partially reinstate them after a wave of strikes and protests.

    A parliamentary investigation later found the subsidy’s administration had facilitated around $6 billion of corruption over three years, with half the approved fuel imports never arriving or being sold to neighbouring countries.

    “Nigerian authorities have taken some measures to improve controls,” said Marc Gueniat of Swiss NGO The Berne Declaration which campaigns against corruption in the developing world.

    “But the fact that certain companies accused of participating in the fraud are continuing to benefit from allocations raises the question of whether the political will to change is sincere,” he added.

    Nigeria’s gasoline subsidy soaked up 1 trillion naira ($6.2 billion) last year, equivalent to 20 percent of the federal budget and exceeding a budgeted 888 billion naira.

    The list of gasoline importers compiled by Reuters using information from five sources showed around 3.4 million tonnes was allocated for the third quarter to more than 40 companies, expanded from 30 last year.

    The list showed four companies that failed to cooperate with parliament’s probe were named as suppliers. These were Nepal, Fresh Synergy, Ibafon and Techno, which the parliamentary report showed collectively claimed for subsidies of nearly $60 million.

    Nepal’s website lists its CEO as Ngozi Ekeoma who has twice been arraigned by the Economic and Financial Crimes Commission in relation to fraudulent subsidy payments. She has pleaded not guilty to the charges. Phone calls to her company went unanswered.At least three other companies awarded third quarter allocations – Masters, Matrix and MRS – were also ordered to account for their shipments or refund falsely claimed subsidy money in another government report released last June.

    Matrix provided documents to Reuters showing it had since been exonerated by authorities.

    The other firms declined or did not respond to repeated requests for comment by email and telephone. It was not clear if these companies had since repaid their debts or been cleared.

    The finance ministry would not comment on specific firms but provided a document which showed that in total only 14 billion naira out of 232 billion in questionable claims, or around 6 percent, had so far been refunded.

    The ministry has previously said importers will not be delisted so long as they paid back money owed to the state.

     

    Effective controls?

     

    Absent from the list are large trading houses like Vitol , Mercuria and Trafigura which have historically played an important role in supplying fuels to Nigeria but have been replaced by local firms.

    However, some still provide fuels indirectly to the country or via crude-for-product swap deals.

    The government has arraigned some fuel marketers and industry sources say fuel regulator the Petroleum Products Pricing Regulatory Agency (PPPRA) has introduced measures designed to limit abuse of the system.

    PPPRA did not respond to request for comment.

    Nigeria has already spent $1.2 billion on subsidy payments this year and economists say any sign of a spike in subsidy costs could risk Africa’s second largest debt issuer spending oil savings or widening its budget deficit.

    Industry sources suggested the rise in the number of importers may have been partly an attempt to stave off future supply problems, as some importers struggled to get bank loans.

    “What they are doing now is giving smaller allocations to more and more companies because of the credit situation. The number is creeping higher and it could be a cause for concern if it continues,” said Dolapo Oni, oil and gas analyst at Ecobank.

    The supply list showed Nigerian energy firm Oando PLC won the biggest allocation of 135,000 tonnes while Total and Folawiyo, in which global commodity merchant Glencore is a minority stakeholder, won 90,000 tonnes each.

     

  • Unclaimed dividend should revert to firms

    Unclaimed dividend should revert to firms

    The Chief Executive Officer, Partnership Investment Company Plc,Victor Ogiemwonyi, in this interview with Tonia Osundolire speaks on the prospects of the economy, the capital market and several emerging issues

     

     

    What is your assessment of the Nigerian Stock Exchange (NSE)?

    The activities at the Nigerian Stock Exchange (NSE) are better. The management has shown competence. We can see that many things are happening and there is gradual recovery too. NSE has come up with some good initiatives, which has been well executed. This calls for praise for the management. We have to give credit to the interim administration of the NSE for the painstaking way they went about recruiting the new management. There are few areas where some things would have been done differently, but we have to give them a pass mark so far.

    Where are the areas you think things could have been done differently?

    The rapid disengagement of some of the old experienced members of staff could have been handled differently. But that is history. The important thing is that things are working well.

    How can the capital market be further deepened?

    The market needs deepening. This means having more securities listed on the Exchange. We also need different types of securities and of course more liquidity. Current initiatives, such as the newly launched Alternative Securities Market (ASEM), the retail bonds trading initiatives as well as the new listing requirements are some of the things being done to deepen the market. Of course, the market making and short selling programmes are all part of that too, because they help to create liquidity. But we also have to be gradual about it, so we don’t create unintended consequences. There are a whole lot of other things we need to do to further deepen the market.

    You said there are a lot of other things needed to deepen the market. What are you referring to?

    For instance, deepening and broadening the market will translate to more activities in an expanding prosperity loop. Any growth on the funding side of the equation, whether as a result of increased internal allocation or because of external inflows, which is not matched by a comparable increment in absorption capacity on the asset side will, ultimately, result in price inflation like a price bubble. A classic case of “too much money chasing too few goods” as we saw in 2007/2008. This would drive many investors to invest in shaky ‘private placement issues‘.

    We could also introduce some derivatives like “options” since these will enhance risk management for investors. But we will have to be careful not to do things that will bring unintended consequences. We cannot be introducing complex derivatives into a market with anemic underlying assets. Our focus now should be on creating or expanding the number of tradable instruments available under the basic asset types such as equities and bonds. Our goal should be to have a market with a thousand stock market listings. This is why the recently launched Alternative Securities Market (ASEM) is a step in the right direction. Our SMEs are ready and waiting to be taken to the next level.

    We must also realise that markets exist to allocate and manage risks, and there is no better weapon in the risk management arsenal than diversification. To broaden our markets is to expand the range of diversification opportunities available to investors. Success in doing this will manifest in an increased market size.

    Looking at the performance of the market, what do you think is responsible for the dearth of Initial Public Offerings (IPOs) in the market?

    The IPO market will come back when confidence fully returns. The issuers of IPOs don’t want failed issues and are waiting to see the market fully return. Investors are worried that they will lose money again. We have to be more patient; the IPOs will come back once it is clear that the recent gains will stay. We have a lot of volatility in the secondary market now, because of the tentativeness of investors. They go in and quickly come out with whatever profits they can get.

    Your response can be interpreted to mean that confidence is yet to return to the market. So, what can we attribute the recent growth recorded in the market to?

    Confidence is not a light bulb you switch on and off; it takes time. We are doing all the right things now to restore investor confidence. There are a few more things to do. The planned campaign the market operators and regulators agreed on is still pending.

    Look at the New York and the India Stock Exchanges. They are not only back, they are at record levels. But it took a long time in coming. The recent growth, as I explained before, is realistic because it is starting from a low base after the last market crash.

    What is your take on the position of SEC on unclaimed dividend and what solution do you recommend?

    Unclaimed dividend has become a recurring issue. The truth is that we will not overcome it unless we completely go e-dividend. The proposition to turn the outstanding balances to an agency does not have my support. I believe the company paying the dividend should have it back to be invested in the company for the benefit of owners of the business. We should let the company use it for its business as long as nobody shows up to make a claim.The company should be made to make a disclosure of the amount outstanding on their unclaimed dividend account and report this at every Annual General Meeting (AGM). The liability to pay it back to anyone who makes a legitimate claim should be made indefinite. That is, let the company that made the profit keep it until the rightful owner shows up.

    What do you think the registrars can do to reduce the value of unclaimed dividend?

    The registrars will have to be more efficient. For instance, they can make efforts to find the rightful owners for dividends by occasionally publishing them in newspapers. Yes, I know they publish them now in the annual reports, but many don’t even get the annual reports. Publishing it in local newspapers will give the names more prominence. Even those who miss it will be alerted by their friends and relatives.

    Do you still consider the demutualisation of the NSE necessary and what change will it add to the capital market?

    Demutualisation is not optional; this is the way of the future. Every Exchange will one day be demutualised. That is the best practice going forward. It will ensure that everyone has a chance to have a piece of it and the governance will be better since it will have to meet the same standards that all quoted companies are subjected to. The accountability to shareholders will ensure it will always aim to make money and still run on best practices.

     Some said the performance recorded in the market is cosmetic. Do you agree?

    I don’t know how the stock market performance can be categorised as cosmetic; stock market goes up and down all the time. The performance is not great yet and can be seen as too rapid for now, but we are also coming from a very low base after the crash. We have to understand that the index went all the way to 66,000 points in March 2008; we are just little over 35,000. Look at the Stock Exchanges around the world, most have fully recovered and, in some cases, are setting new records. The New York Stock Exchange has just done that. The stock market sometimes does not always reflect the economy accurately, but you can discount the fact that it reflects the optimism of those who invest in it. Just ask yourself, if the market is doing as well as it is doing now, what will happen if our infrastructural problems gets better? Unless you are totally pessimistic about the future of Nigeria, in that case, I don’t share your view. I may be wrong but the future of Nigeria looks bright to me despite all the problems. The foreign investors investing in our market are not stupid.

    There has been clamour for the government’s intervention to ensure listing of some firms in key sectors of the economy, such as the telecoms and oil and gas, among others. What is your view on this?

    I must confess I was a proponent of this at some point, but I have since changed my mind because these things cannot be forced. I believe a good incentive package, such as lower taxes for listed companies and a rapid privatisation programme will do the trick. Just two weeks ago, I wrote that the divestment of the oil majors from their onshore wells should be seen as an opportunity to indigenise our oil industry by bunching all the assets to be divested together to be acquired by Nigeria Petroleum Development Company (NPDC) and floated on the stock market as an independent company from Nigeria National Petroleum Corporation (NNPC). The comparative advantage in this model cannot be the same, even if all the pieces now being acquired eventually come to list on the Exchange. Bringing it to the stock market will make it to have broad ownership and will find all the money it needs from investors on the stock market who will buy the shares. It will be accountable to its shareholders and, because it already has producing wells, it will be attractive to investors. It will also be a way to solve the community problems by writing into its articles that 10 per cent of its profits will be used to fund its community programmes. That also means there will be no more government funding. The NPDC will be established as a proper development agency funded from this company and will be run as a subsidiary development company, such as Mubadala the United Arab Emirate (UAE) firm that runs the Emirates institutions.

    Why are the oil majors not listed in the market despite the fact that they are major drivers of the economy?

    I think my short answer to that is: Why don’t we start with the NNPC?

    What do you think can be done to woo companies to list on the NSE?

    Companies will come when they feel the market is more stable. If the government is giving incentives for listed companies it will also help. More than anything else, the government needs to crank up the privatisation programme. A major privatisation listing will bring the market back quickly.

     In the medium to long term, what is your preview of market outlook?

    I am always bullish about the stock market because I know that the problems we talk about in Nigeria are also opportunities. The moment the economy gets the right boost with better infrastructure, the market will take off. Imagine what will happen when we get our energy problems solved and we find a way to put all the young people to work, the sky will be the limit.

     

  • ‘Banks prefer lending to oil firms’

    THE Group Managing Director/Chief Executive Officer, Skye Bank Plc, Mr Kehinde Durosinmi-Etti, said banks are more favourably disposed to lending to oil producing firms if such firm’s oil reserves are confirmed.

    Speaking during the United Kingdom-Nigeria Investment Partnership forum in Lagos, he said oil exploration is capital intensive and it only makes sense to ensure that funds being availed the oil companies are paid back so that the banks will not suffer monumental losses and put shareholders capital at risk.

    Speaking on Sustainable oil and gas sector reforms, he said the consolidation in the industry has strengthened banks’ ability to fund the oil and gas sector. He added that his bank has contributed in strengthening players in the local exploration market.

    He said since banks do not want to lose money, they would rather lend to oil exploratory companies after reserves have been confirmed.

    On the marginal oil fields which were given to indigenous companies and investors, he said the challenge banks face in lending to indigenous oil firms is that some of the companies have one dominant individual as the promoter which is not in tandem with good corporate governance.

    According to him, where the money needed by the oil companies is huge, loan syndication or club arrangement is preferred as it shifts the burden of providing the capital from one financial institution.

    He said out of the 29 marginal oil blocks granted sometime ago, only nine are operating, noting that sustainability of operations is hampered by communal unrest, environmental factors and corporate social responsibility.