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  • Amosun to investors: create wealth, jobs

    Amosun to investors: create wealth, jobs

    OGUN State Governor Ibikunle Amosun has urged investors to create wealth and job opportunities to better people’s lives.

    He spoke when he received the management of Procter and Gamble Nigeria Limited in his office in Abeokuta yesterday.

    The governor said while government would continue to foster peaceful co-existence between investors and their host communities, they should facilitate harmonious relationship with the communities through impacting social corporate responsibility.

    Amosun said: “I must commend you for what you have been doing. But there are still a lot to be done and this is why we still need assistance from investors like you to create wealth and job opportunities that would better the lives of our people. And on our part, we will continue to render services that would make your operations and relationship with us and the people seamless and mutually beneficial,” he stated.

    He solicited collaboration in the area of infrastructural development, particularly the construction of roads within the industrial areas of the state.

    Amosun promised government’s readiness to give the necessary support that would further ease the operations of industries in the state.

    The governor submitted that his administration would continue to give priority to developing and consolidating of roads in the industrial areas of the state, notwithstanding the dwindling federal revenue allocation.

    The company’s managing director, George Nassar, pledged his organisation’s continued partnership with the government on the state’s development, “particularly provision of basic amenities in critical segments of the society”.

    “This has been clearly demonstrated by the intention of the company to construct a three-room building block for Agbara Police Station and the donation of patrol/response vehicle to Agbara Police Command, also to aid policing in the state,” he added.

    Nassar added that the firm planned to procure a 350 KVA sound proof generator to the state Ministry of Health, assuring that the donations would be completed by next month.

     

  • South African bonds attract foreign investors

    south African bonds are up against quickening inflation, rising interest rates and the prospect of a Federal Reserve rate increase. That’s not deterring offshore investors.

    South African rand debt attracted the largest inflows in July out of eight emerging markets including Russia, Turkey and Poland, according to data compiled by Bloomberg. Foreigners bought a net $600 million of the nation’s bonds in the month, the most since April, the data show.

    Benchmark yields have climbed 120 basis points since January, making them the fourth-highest among emerging-markets tracked by Bloomberg indexes. The sell-off pushed yields to a level where they compensate investors for the risk of a Fed rate increase, which would draw money to the dollar, as well as prompting a tightening by the South African Reserve Bank as inflation accelerates, according to Pioneer Investment Management Ltd.

    “We increased positions in the last three months,” Hakan Aksoy, a portfolio manager at Pioneer, which oversees $244 billion, said by phone from London. “If there’s another sell-off, we would like to increase duration risk” in South African debt, provided the Fed doesn’t exceed expectations for rate increases this year, he said.

    Economists project a 50 percent chance the Fed will start with interest rate increases at its September meeting, according to the median probability of 46 economists in a Bloomberg News survey. Almost half the economists said the policy rate, currently near-zero, will end the year in a range of 0.5 percent to 0.75 percent.

    South African bonds could benefit if the Fed proceeds more cautiously, said Aksoy, who favours maturities from five to 15 years. Fed policy makers said the labour market and housing have improved, moving closer to ending an unprecedented period of near-zero interest rates, without providing a clear signal on the timing.

    “We are expecting a relatively slower rate hike process from the Fed,” Aksoy said. In that case, “South Africa will benefit more than the other emerging-market countries” as the bonds have sold off more than most peers.

    Yields on benchmark securities due December 2026 climbed 2 basis points to 8.27 percent by 4 p.m in Johannesburg, the highest since July 7. The rand strengthened 0.7 percent to 12.6151 per dollar after slumping 1.3 percent on Thursday to a record low close.

     

  • As Bayelsa woos investors

    When business leaders, investors, technocrats and allied stakeholders meet next week in Yenagoa, the Bayelsa State capital, for the second edition of the state’s Investment and Economic Forum, the attention would be on critical perspectives on economic diversification and the burning quest for industrialization in the state. It is also an auspicious time for the state government to brief the august gathering on its score card since the maiden edition last year, particularly on the investments generated and future possibilities.

    It has to be stated that the forum initiative is a commendable one which takes into account the nation’s vulnerable over-dependence on oil as its economic mainstay and the fact that the Bayelsa State government had been in the forefront of economic diversification before the current clamour for such idea as an inevitable course of action if Nigeria must survive now or in the future.

    But the challenge we face in economic development drive over the years is not that of policy but a decisive action plan to practically demonstrate our resolve to walk the talk and actualize our dream of economic viability with serious interest in an inclusive industrialization which is critical to the existence of a productive economy and thus effectively tackling the problem of job creation.

    This seems to be the fresh perspective which the Bayelsa State government is bringing into the mix of a calculated paradigm shift in addressing the inherent issues in economic development through an aggressive drive to woo serious investors to the state and ensuring a clement environment to do business with generous incentives.

    At a dinner with business executives in Lagos last week, the state Commissioner for Trade, Industry and Investment, Kemela Okara, brought the various issues and dimensions to the fore by explaining the difference which his ministry is making in making the investment landscape attractive to investors and the mutual benefits accruable to all parties. He reviewed the progress made from the maiden outing which drew over 800 participants as an avenue to showcase the investment opportunities in the state and the encouraging responses by notable investors who have already signed MoUs with the government to begin business in the state while further intensifying the clarion call for many others to come on board.

    However, in the second edition which holds from July 29 – 31, the focus, Okara said, would be to leverage on the success it had recorded by sensitizing investors to the major business areas where the state has comparative advantage like oil and gas, agriculture and power generation. The commissioner predicated the success of investment in these areas on the availability of raw materials and infrastructure, stating, for instance, that Bayelsa has the largest deposit of natural gas in the country and why power generation is being recommended to investors as a strategic move and great opportunity to add about 5,000 – 10,000 mw of power to the national grid, thereby adding fillip to the quest to transform the national economy. Okara also noted the huge potential in mechanized farming in the state with all the natural endowments as major incentives, especially in oil palm and rice processing, stressing that this is the reason why the government is bringing together large scale farmers to tap into the huge potentials which some investors are already exploiting as a lucrative business in the state.

    Yet the cornerstone of the on-going economic diversification in the state will have so much to do with industrialization. Conscious of the challenges, the state government, Okara said, will be selling the idea of its Eco Industrial Park (EPI) to the would be investors at the business summit. The EPI, as conceived by the government, is fashioned as world class 21st century model that can realistically meet the basic inter-related manufacturing needs of industrial concerns with the targets in chemical and pharmaceuticals, domestic and industrial plastics, rubber, wood and wood products, electrical and electronics, non-metallic mineral products, pulp and paper products and other manufacturing activities. Of significant value would also be the urea fertilizer plant which is being developed by the state government which Okara said would benefit those core investors who could key into its major facets of development and a major component of the nation’s agricultural needs with huge market and quite a lucrative investment. Real estate is also not left out which will place emphasis on both residential and commercial. Interestingly, some clever investors seem to be appreciating the message of the economic progress and possibilities in the state by signing MoUs with the government for business take-off including the N20 billion Kesio Building Materials Market which has about 500 stalls to create a cluster for people in the real estate just as others are participating in power generation, pharmaceuticals, telecoms, agriculture and ICT.

    This year’s edition of the business parley which has “Unfolding Bayelsa State’s Industrial Future”, Okara also informed the Lagos gathering, has attracted the participation of major private sector players like Shell Development Company, Okomu Oil Palm, PrescoPlc and Olam, among others.

    Although wooing investors is a normal step many governments have taken in the past, the difference in the Bayelsa foray is what the drivers of the initiative regard as the practical demonstration of the will to excel and help prospective investors actualize their business ideas and models in the state. The inter-related issues in this regard were well addressed by Okara when business executives and investors engaged him at the Lagos pre-event dinner, asking pertinent questions not just about the availability of natural resources but also on the critical support they hope could get from the government.

    These are very germane topics but which Okara answered by informing and assuring his audience that the Bayelsa State Government under the watch of Governor Seriake Dickson in the last three years had in addition to having invested massively in infrastructure, also worked tirelessly to create an enabling environment of stability, created institutional framework, legal structures and built relevant skills through manpower development. The major interest of government in the development of SMEs was also underscored by the disbursement of hundreds of millions of naira till date.  Thus economic diversification and industrialization had all along been in the front-burner of government economic policy which among other incentives would also encourage serious investors in the state with tax holidays and attractive Public-Private Partnership models.

    • Nnamdi wrote from Lagos.

  • Investors dump Zenith Bank amid downturn

    Zenith Bank Plc’s share price has dropped for two consecutive weeks as investors pumped the shares of the second most capitalised banking stock and fifth most capitalised company on the Nigerian Stock Exchange (NSE) unto the soft market.

    Zenith Bank has recorded the largest turnover of shares over the past two weeks, with the attendant voluminous sell orders depressing the bank’s market value. In the immediate past week, Zenith Bank recorded the highest turnover and one of the highest percentage losses among its peers, unexpected performance for a stock billed to release its half-year earnings within the next few weeks.

    Zenith Bank lost N38.62 billion in market capitalisation within the four-day trading session last week, representing 6.49 per cent decline, more than a triple of the average overall market decline of 2.15 per cent. The benchmark index at the NSE, the All Share Index (ASI), indicated a week-on-week decline of 2.15 per cent in the immediate past week.

    Zenith Bank recorded the highest turnover of 511.20 million shares worth N9.39 billion in 1,034 deals, about 43 per cent of the total turnover during the week. Zenith Bank’s share price dropped from its opening value of N18.95 to close the week at N17.72 per share.

    Zenith Bank’s capital loss of N38.6 billion represented almost one-fifth of the total market loss of N208 billion recorded last week as Nigerian equities continued to struggle with macroeconomic headwinds and poor first half earnings.

    Two weeks ago, Zenith Bank accounted for almost 20 per cent of total turnover during the week. Investors traded 249 million shares of Zenith Bank valued at N4.73 billion in 1,385 deals. The bank’s share price dropped by 2.12 per cent, trailing the average overall market decline of 2.49 per cent.

    A market dealer, who preferred anonymity because of trading rules, said Zenith Bank was under selling pressure because investors saw its main competitor, the most capitalised banking stock on the NSE, as attractive after the competing stock also dropped marginally.

    “They tend to go together, if the other stock appreciates to a large extent, investors who tend to see that as somehow expensive will shift to Zenith Bank and trigger a rally on the stock. Where the other stock is dropping, the tendency is for Zenith Bank to also drop since investors appear to prefer the other stock if it is available at a relatively lower price,” the dealer said.

    The dealer said the depreciation appeared to be more sentimental and in line with the overall downtrend than any fundamental concerns. Zenith Bank is expected to release its half-year results in the next few weeks.

    In the earlier first quarter report, Zenith Bank Plc started the year on a good footing with considerable growths in overall earnings and profitability.

    Interim report and accounts of Zenith Bank for the first quarter ended March 31, 2015 indicated that while gross earnings grew by 14 per cent, pre and post tax profits rose by 15 per cent and 17 per cent respectively. Earnings per share thus improved to 88 kobo within the three months, in contrast with 75 kobo recorded in corresponding period of 2014.

    Gross earnings rose to N113.32 billion by March 2015 compared with N94.32 billion by March 2014. Interest income for the period rose to N81 billion compared with N71 billion posted in the similar period of 2014 translating to 14 per cent increase. Similarly, non-interest income appreciated by 39.5 per cent N31.9 billion up from N22.9 billion in 2014.

    Operating income rose to N72 billion as against N66 billion in the similar period of 2014 translating to 9 per cent growth while operating expenses of N39 billion was recorded amounting to 4.8 per cent increase from N37.6 billion reported in the corresponding period of 2014.Profit before tax also rose from N28.92 billion to N33.13 billion while profit after tax increased from N23.68 billion to N27.68 billion.

    Total assets rose to N3.94 trillion in first quarter 2015 compared with N3.19 trillion recorded in comparable period of 2014. Gross loans and advances rose to N1.9 trillion, implying 9.9 per cent appreciation when compared with N1.7 trillion posted in the similar period of 2014. Similarly, customers’ deposit and total assets increased by 5.7 per cent and 4.9 per cent to N2.6 trillion and N3.9 trillion respectively during the period.

     

  • Social influence of angel investors  

    You do not get the opportunity to meet angels every day. If you meet an angel, and she is ready to invest in your dream, to save you stress of sourcing fund, count your lucky stars. Angel investors are still at the nascent in Nigeria.

    However, in Europe, angel investment is well established and the practice has taken roots. Venture capitalists lurk around; angels are invisible, until recently.

    For instance, a start-up in Nigeria, now one of the leading card companies, came to market on the magic carpet of angel seed. Angel seed have sustained its position long before the big money venture capitalists dived-in. Angel seed is like the moist and sunshine a nursery plant required to keep alive before the raining season.

    Angels were useful to this particular company at its nascent

    While the venture capitalists (such as Microsoft, Facebook, Apple etc, which have bought some thriving companies and take them to the next level) are useful, I equally acknowledge the place of the angel investors in the value chain. Without the angels to incubate the startups, the tier one venture capitalists would have nothing to gain. They would have nothing to build upon.

    Dotun Sulaiman, Tomi Davies and Collins Onuegbu, all members of Lagos Angel Network (LAN), are the new face of angel investment in Nigeria. As Onuegbu told me, venture capitalists only go to where the “money can be made”.

    Angels build dreams. Venture capitalists reap the harvest. LAN will be at the next Demo Africa in Lagos to help startups realise their dreams at the event.

    One other aspect of angels is that they provide financial backing for startups in exchange for equity. The capital angles offer can be a one-time injection of seed money or ongoing support to carry the startup through difficult times. If you have a dream and you need an angle for support, attend Demo Africa 2015. If you need funding, one of these angels can introduce you to a colleague or friend. The connections can prove useful.

    Besides, at Demo Africa, angels would offer startups contacts of strategic partners, advice and counsel, credibility by being associated with the investor, potential customers, employees, lawyers, banks and accountants. Startups would get contact of investment bankers and knowledge of the marketplace from the angels.

    Angels, who are mostly affluent individuals, play an important role in launching the future major companies of the world. Research has shown that every major technology company started with the help of angels.

    This means that majority of local companies such as Systemspecs, PFS, Arit of Africa, Upperlink and MTN have all benefitted from angels’ touch. Likewise, the foreign giants such as like Twitter, Square and Alibaba.com have drank water with disposable cups of the angels before drinking with gold goblets.

    However, startups have gained sincere handholding from angels at past Demo Africa. This tradition continues at the next edition. For startups and their dreams, it is not about the money. It is not about the equity.

    It is about the mentoring, which would prepare them for the next big leap. That is the social influence of angels. After all, you do not see an angel every day.

  • Buhari’s cabinet: We are hopeful, say industrialists, investors

    Buhari’s cabinet: We are hopeful, say industrialists, investors

    Amidt growing concern over the delay in the formation of a cabinet by President Muhammadu Buhari’s administration, industrialists and business operators are optimistic that the delay will  augur well for the economy. According to them, it will ensure that only technocrats who are square pegs in square holes make the list, thus boosting investor’ confidence, reports Assistant Editor OKWY IROEGBU-CHIKEZIE.

    It’s probably one of the hottest issues of national discourse, but to many industrialists and business operators, the anxiety over the delay in the announcement of President Muhammadu Buhari’s cabinet is unnecessary.

    Many who spoke with The Nation said contrary to insinuations that the delay in making the cabinet list is slowing down governance and investment decisions, it is better for the administration to take its time to study the complexities of the economy before announcing its cabinet. According to them, this was necessary to ensure a clean break from the past when square pegs were put in round holes, a reference to the appointment of non-technocrats to man key positions.

    The consensus of the Organised Private Sector (OPS), is that in the long run, the delay could turn out a shot-in-the arm for industrialists and other business operators, as the delay would ensure that only those properly schooled in the dynamics of the Nigerian economy are appointed, particularly now that the nation is facing its worst crisis ever. This, in turn, would boost investor’ confidence, guarantee the protection of their investment, and ultimately return the economy on the path of recovery.

    For instance, as former President of the Nigerian Institution of Estate Surveyors & Valuers (NIESV), Mr. Bode Adediji put it, the nation is in transition and so it needs to take time to ensure a dynamic and credible team to tackle the monumental problems confronting her.

    Adediji, who defended the President’s seeming inaction based on his (Buhari’s) anti-corruption credentials, insisted that he must be given enough time to assemble a crack-team for the job.

    Hear him: “Buhari needs to be diligent. A single man cannot effectively fight the war against corruption, or correct the ills of several years of under development. But based on his track record, l am confident that he is working silently for the good of the nation. I also urge his political party to quickly resolve their differences in order to usher in a sustainable change. A situation that they can’t agree on power sharing formula and other things of common interest, is not healthy for the country.”

    A Public Affairs Analyst, Mr. Mahmud Othman,  agreed with Adediji. He said he wouldn’t join the ranks of those criticising the president for not constituting his cabinet yet.

    According to him, “people are finding it very difficult to believe the level of damage to the economy. The transition committee headed by Ahmed Joda made a lot of discoveries. If you appoint ministers without knowing the state of the economy and bringing the right people on board, the economy will run into deeper problems. People are becoming impatient, but l will counsel that we are better off doing the right thing before constituting the cabinet.

    Othman said Buhari didn’t hide his preference to choose the best for the task ahead and not necessarily based on political consideration, but those who can deliver to move the economy forward. He pointed out that the economy is in tatters as can be seen from the various states that can’t pay workers’ salaries, let alone embarking on new projects.

    “Oil money is no longer available. The debt profile is scary. Personally l don’t envy any political appointee especially ministers because the expectations are too high. As a stop gap to the appointment of ministers, the Permanent Secretaries in the ministries are working and no investor will leave because of late appointment of ministers,” he added.

    The Public Affairs Analyst is not done. While disagreeing with those arguing that governance is crawling because of the delay in constituting a cabinet, he insisted that various aspects of governance backed by law are operating as they don’t need ministers to work. He said anti corruption agencies, such as the Economic and Financial Crimes Commission (EFCC) and Independent Corrupt Practices and other Offences Commission (ICPC), have suddenly woken up and are arresting those alleged to be corrupt unlike before. This, he said, is because they have read the president’s body language and known that he is not interested in condoling corruption.

    Othman however criticised the lack of information from the Buhari’s government. While noting that it is a minus to the administration, he said, “Frayed nerves are not calmed because it is a different thing for 36 ministers to be talking from the perspective of their ministries rather than what is obtainable now where nobody is hearing anything that can sooth the nerves of the public and people just believe that governance has taken flight.” He however, encouraged Nigerians to be hopeful and be confident that the Buhari administration will deliver on his campaign promises and that the nation will be great again.

    However, the President’s Special Adviser on Media and Publicity, Mr. Femi Adesina, over the weekend, sought to close the perceived communication gap when he said it will take time to clear the mess created by the Goodluck Jonathan administration. Adesina, in statement, said “It requires scrupulous and painstaking planning to clean the PDP’s Augean Stable.” He also noted that Nigerians were already on the side of the administration, which he said was on course.

    Adesina was reacting to the 30 days appraisal of Buhari administration by the opposition PDP. Its National Publicity Secretary, Mr. Olisa Metuh, had in a statement during the weekend, taken a swipe on the Buhari administration, noting that the enormity of the confusion surrounding the government and the ruling party in the last one month had made it imperative for Nigerians to pray as the success or failure of the Buhari administration would not only affect the President and his party, but also the entire nation.

    The statement by Metuh said: “We urge Nigerians to join hands in prayers and offer useful suggestions to President Muhammadu Buhari and the APC because with what we have seen in the last 30 days, the present administration is finding it very difficult to get its bearings right while showing no inclination towards implementing its numerous campaign promises for which they were voted into office at the centre. We are deeply worried that the President, who promised to unveil his cabinet two weeks after his inauguration, has not been able to decide on key appointments, such as ministers, Secretary to the Government of the Federation (SGF), Chief of Staff and advisers in key sectors of the economy.”

    Metu said the delay has brought government business in ministries, departments and agencies to a dangerous standstill with coordination of important policies vested on ministers and the SGF now in tatters while the system drifts. According to him, the situation is taking its toll on the economy, which has in the last 30 days witnessed unprecedented decline with a terrifying crippling of foreign and domestic investments, including activities in the money and capital market sectors. He said under Buhari, for instance, the stock market has lost over N238 billion while the All-Share Index fell by 849.87 basis points as at June 19.

    For Director-General, Lagos Chamber of Commerce and industry (LCCI), Mr. Muda Yusuf, there is no clear indication on the position of the government and investors need to know the direction the administration is going to avoid creating doubt in the minds of the public. By now, there should have been clear direction in key sectors of the economy such as energy, oil and gas, monetary and fiscal policies. The problems of uncertainty have persisted in the economy and the issue of conjecture has persisted in the economy with people guessing at what the government is planning as far as policy direction is concerned,” he told The Nation.

    While pointing out that people are not insisting on full implementation of the administration’s blue print on the economy, he said there is need for investors to have a bearing on what to expect in the new dispensation. But the thinking of other operators in various sectors is that the delay in constituting a cabinet was informed by the realities on ground particularly the need to get things right.

    For instance, apart from the need to clear the rot inherited from the previous administration, the crisis in the National Assembly over the choice of principal officers as well as the need to prune down the number of ministries and parastatals, The Nation learnt, are also responsible for the delay. But the consensus is that by the time the cabinet is eventually constituted, Nigerians and the economy would be better for it.

  • Chinese investors to stake $54m in Kwara

    Agroup of Chinese businessmen have planned to invest about $54m in the Kwara State industrial sector.

    The team led by Shi Zengchao, made this known  yesterday at a meetingt with Governor Abdulfatah Ahmed in Ilorin, the state capital.

    In a statement, Chief Press Secretary to the Governor, Alhaji Abdulwahab Oba, quoted Zengchao as saying that about $15 million would be invested in the next one year in order to ensure commencement of operations as early as possible.

    Zengcha said the group found Kwara state investment friendly due to the prevalence of peace in the state, as well as the investment drive of the state government.

    He added that when the efforts of the group finally take off, more Chinese investors will set up factories and other investments in all the sectors of the state’s economy.

    Responding, Ahmed said the policies of his administration were premised on human capital development and industrial growth in a peaceful environment across the state.

    Ahmed said the state’s International Vocational Centre in Ajasse-Ipo in Irepodun local government area of the state is designed to train qualified machinists who will fit perfectly into the developing industrial sector of the State.

    “We have a large army of employable youths; school leavers that require very little training and they will fit into the industry you are investing in.

    Your proposed investment is very attractive. There are a lot of idle hands that can be employed; indeed, if you want 50,000 people we can get you 50,000 people to work”, the governor said.

  • Refineries: How price regulation, PIB clip investors’ wings

    Refineries: How price regulation, PIB clip investors’ wings

    The Federal Government’s regulation of the downstream sector of the oil & gas industry and non-passage of the Petroleum Industry Bill (PIB) are scaring investors from grabbing the mouth-watering incentives introduced to attract investment in modular refineries. Assistant Editor CHIKODI OKEREOCHA reports that the battle for deregulation, which is now gathering momentum, will encourage investors to build refineries and sell products at competitive market prices.

    If assurances from the Nigerian National Petroleum Corporation (NNPC) are anything to go by, the Port Harcourt refinery will resume operation next month. The Corporation, through its former Group Managing Director (GMD), Joseph Dawha, said the four refineries will operate up to 80 per cent of their installed capacities, translating to five million litres of petrol per day.

    Based on the revised Turn Around Maintenance (TAM) strategy for the refineries, Dahwa also said that Warri and Kaduna refineries will be revamped and become operational within the next 18 months.

    With all plants producing at nameplate capacities, a significant improvement is expected on domestic refining and a drastic reduction  on importation of refined products.

    But, if Dahwa felt his assurances would gladden the hearts of Nigerians and restore their confidence in NNPC’s  management of the nation’s oil and gas resources, particularly the refineries, he got it all wrong.

    President Muhammadu Buhari, who has not hidden his administration’s resolve to beam a searchlight on the operations of the NNPC, sacked  the corporation’s 10-member board last weekend.

    The NNPC has been under attacks  over perceived sharp practices in the running of refineries and the management of revenues from crude oil sales and swaps.

    Not a few Nigerians, including industry operators, experts and stakeholders, saw the NNPC’s sudden assurances as medicine after death. And they have every reason for such skepticism.

    For instance, none of the four state-owned refineries has witnessed significant improvement in capacity utilisation despite the several billions of the tax payers’ money spent on yearly Turn Around Maintenance (TAM).

    Even, the five million litres daily production expected from the Port Harcourt refinery from next month, will be a drop in the ocean. On the average, Nigerians consume about 40 million litres of petrol daily. So, if all the four refineries – Port Harcourt (two), Kaduna and Warri- produce 80 per cent of their nameplate capacities, it will translate to five million litres from each of the refineries. All four will produce 15 million litres, leaving a shortfall of 25 million litres and a far-cry for local consumption demands.

    Impliedly, the much-needed succour may not come for Nigerians, who have been battling with acute fuel shortage since the beginning of the year. Yet, the problem is not limited to petrol alone. In all, the two refineries in Port Harcourt have a combined refining capacity of 210,000 barrels per day (bpd). The other two in Kaduna and Warri have installed capacities of 110,000 bpd and 125,000 bpd respectively.

    All added, the four refineries have a refining capacity of 445,000 bpd. But the Organisation of Petroleum Exporting Countries (OPEC) says that Nigeria has capacity to produce 30,400 barrels per of gasoline, 15,800 bpd of kerosene, 18,400 bpd of distillates and 20,700 bpd of residuals.

    The oil cartel put the country’s output of petroleum products by country at 89,000 bpd, which is a far-cry from 445,000 bpd.

    Experts blame the embarrassing scenario on mismanagement of the refineries.

     

    Modular refineries to the rescue

    The stakeholders and the authorities in the oil and gas industry have proposed the establishment of modular refineries as the quickest way to halt declining efficiency and productivity of the existing refineries. They believe such facilities will   boost local refining capacity.

    Modular refineries are crude processing facilities with narrow product line, limited to kerosene, diesel and low pour fuel oil (LFPO) with a production capacity of between one to 30,000 barrels per day or bigger. They have a completion period of between 18 – 24 months.

    Promoters of modular refineries believe the option will address the recurrent and embarrassing fuel scarcity within a short time and at rock-bottom costs.

    Looking at it from the investment angle, experts agree that investing  in, and construction of refineries is capital intensive, and that mini/modular refineries are cheaper and easier to build.

    According to the Department of Petroleum Resources (DPR), Nigeria’s oil and gas industry regulator, an investor requires between $1 million to $15 million to build a modular refinery.

    Stakeholders identified flexibility as another attraction as investors can build refineries that are relatively inexpensive, in multiple locations as and where demand is required.

    Besides, modular units can be expanded, thereby providing a cost-efficient and highly flexible means of delivering ‘on the spot’ refining capacity, either to remote geographical locations, or to regions requiring the benefits of locally processed oil products to meet increasing operational and local demand.

    This was what the 20, 000bpd modular refinery in Rivers State, Southsouth set out to achieve. The project, with an initial cost of $480 million and a 12-month completion period, is to be handled by an international consortium comprising the National Standard Finance of the United States (U.S.) and Omega-Butler Refineries of the United Kingdom (UK).

    Apart from producing petrol, diesel and gas, it will also produce bitumen. The Rivers State government will provide 40 hectares of land for the project, that has a capacity to generate 1,500 jobs.

     

    Experts speak

    The job creation potential of modular refineries is not lost on the Joint Task Force (JTF) Commander, Maj-Gen Emmanuel Atewe, who believes that modular refinery will improve fuel supply, create jobs and grow the economy.

    Gen. Atewe told The Nation that if modular refineries were working, scarcity and distribution glitches would become a thing of the past.

    He said: “I think the country needs modular refineries to refine crude oil. By this, I mean refineries with smaller capacities. When we have modular refineries, they will help in refining thousands of barrels of crude oil and the economy will be better for it. Besides reducing the perennial fuel scarcity, it will also provide jobs for people.”

    According to the JTF Commander, with gainful employment for the restive Diger Delta youths,  they will no longer engage in pipeline vandalism and oil theft.

    “Even, if they are going to commit such crimes, the rate at which they do so would not be high. Job creation is one way of reducing restiveness in the Niger Delta. I’m advising stakeholders to come together and see how they can build modular refineries and further provide multiplier effects on the economy,” he said.

    The Registrar/Chief Executive Officer, Institute of Business Development (IBD), Mr. Paul Ikele, was on the same page with the JTF chief. He described modular refineries as a sustainable option that will boost products supply across the country and also resolve the subsidy controversy.

    He said the granting of franchise to investors to build and operate modular refineries with newer technologies, will end the raging controversy over whether or not to remove subsidy.

    “If petroleum products are available to Nigerians on sustainable basis, the issue of payment of subsidy would not arise,” the IBD manager said. He pointed out that the technologies used in building the existing refineries were obsolete and demanding so much in maintenance.

    He said the country cannot cope with such huge resources on TAM in the face of the prevailing global economic downturn, occasioned by  tumbling oil prices.

    “Let’s look at modular or mini-refineries with newer technologies that can assist existing refineries whose maintenance demand so much due to obsolete technology,” he recommended.

     

    Government’s take

    The government has not lost sight of the benefits of modular refineries. At a recent conference on Health, Safety and Environment (HSE), organised by the DPR, the former Petroleum Resources Minister, Mrs. Dizeani Alison-Madueke, gave a hint of a plan to scrutinise and franchise aspiring operators to install and operate modular refineries.

    She said the government believed the short project cycle, low cost and flexibility for the establishment  of modular refineries will stimulate investors’ interest in local oil production and minimise oil theft and operation of artisanal (illegal) refineries.

     

    The minister further stated that to ensure the success of the initiative, several financial institutions had been approached to assist operators in the funding of the initiative, adding that the regulatory agency will soon roll out the details of the programme.

    At a one-day sensitisation programme, organised in Lagos, for the sstablishment of modular refineries, the DPR Deputy Director in charge of Technology and Standards, Mr. Alfred Ohiani, echoed Mrs. Alison-Madueke that the government has decided to once again encourage the establishment of modular refineries.

    He said investment in modular refineries, whose timeline and cost is limited, holds a better chance of achievement more quickly than the conventional refineries.

    Pointing out that the DPR will fast-track the process for investors in modular refineries, Ohiani added that the regulatory agency has slashed the licensing fee from $1 million to $500, 000 to further sway investors’ interest.

    Apart from reducing the fee, the government is also dangling other incentives such as reliable, sustainable and cheap sources of crude oil feedstock for the refineries and freedom to locate plants at numerous tax free zones across the country.

    Investors are also to enjoy the liberty of exploring regional and international markets.

     

    Price regulation, PIB as clogs

    With such mouth-watering incentives, investors should be falling over themselves to establish modular refineries. But that has not been the case. Rather, most investors have adopted a ‘wait-and-see-attitude’.

    The Nation learnt that government’s regulation of petroleum products’ prices and the delay in the passage of the controversial Petroleum Industry Bill (PIB) are two critical issues clipping investors’ wings.

    An economist, Mr. Henry Boyo, captured investor’s frustrations when he said there is uniformity in the price of crude oil produced in Nigeria, Saudi Arabia, and America, or elsewhere and that most investors are afraid of being asked by the Nigerian government to sell below production cost.

    Boyo said: “The process of producing crude oil or refined products is the same everywhere in the world; it is the same equipment. So, if you put in the same feed stock, what you will get at the end will be the same price.

    “At that level of business, investors have to go and borrow money. If they borrow money to set up refineries here in Nigeria and they produce and the output from their refineries is priced all over the world at X dollars per litre, that price is uniform because crude oil is the same price all over the world.”

    Boyo, who identified labour as the only thing that might change, Boyo said those who have either gotten licenses for refineries, or ready to do so, are worried that repaying loans may become herculean when compelled to accommodate subsidy   after borrowing to set up refineries.

    According to him, the existence of local refineries is not the issue, the price at which the products will be sold is critical, as this will determine how fast the investor recoups his money.

    Noting that although, the government, through the NNPC has pumped in so much money, enough to build new refineries, on TAM, the issue at stake is at what price will the products sell?

    The economist insisted that the issue is not whether or not to sell the refineries, but pricing.

    “Investors cannot produce and sell to marketers below the production cost. In no time, they will pack their loads and go,” he said, adding that once the pricing is right, those who got licenses for refineries will begin operation.

    He, however, was quick to point out that the naira-dollar mechanism will influence pricing.

    In 2002, the Federal Government, through the DPR, franchised 18 investors (local and foreign) to establish refineries.

    But, 13 years down the line, only the Niger Delta Petroleum Resources is in the process of activating the license. The remaining firms have been watching the investment environment to make informed decisions.

    Although, investors continue to hold back because of stringent guidelines, corruption and a harsh business climate, inadequate project funding, among others, Boyo said  government’s regulation of the downstream sector remains the greatest reason behind the investors’ cold feet.

    He said this was what informed the decision of President of Dangote Group, Alhaji AlikoDangote that after borrowing to provide a world-class refinery, he will not sell at a price below his production cost.

    Dangote, Africa’s richest man is currently investing $9 billion in aworld-class refinery in the Lekki area of Lagos, Nigeria’s commercial capital.

    According to the master plan, Dangote Group wanted to build a 450,000 bpd-capacity refinery, it has since increased the capacity to 650, 000 bpd.

    Analysts in the industry say despite Nigeria having the largest petroleum refinery in the world, Messrs Dangote will sell products at international prices.

     

    PIB also a spoiler

    Beyond pricing, the failure of the Sixth and Seventh National Assembly to pass the PIB into law has also not helped investors. The non-passage of the bill has made the commercial framework unclear to banks that will offer loans to investors.

    The PIB was designed to reform the entire hydrocarbon sector to increase the government’s share of revenue; increase natural gas production; streamline the decision making process by dividing up the different roles of the NNPC into a profit-driven company; privatise its downstream activities; and promote local content.

    The PIB will also provide for greater share of oil revenues to the producing communities and expand the use of natural gas for domestic electricity generation.

    For as long as the bill remained in the works, Nigerians cannot reap the fruits of the benefits.

    The bill has since become a subject of intense politicking at the National Assembly, which has different versions, especially around the more contentious contents such as the renegotiation of contracts with the International Oil Companies (IOCs), the changes in tax and royalty  structures and clauses to ensure that companies use or lose their assets.

    Experts argue that if the PIB, which they described as the roadmap for the opening up of the industry for increased investments had been passed, it would have comprehensively addressed the persistent fear of investors in building refineries, settled the issue of deregulation, as well as uncertainty concerning regular supply of crude oil at reasonable prices.

    Rivers State chapter Chairman of the Trade Union Congress of Nigeria (TUC), Comrade Chika Onuegbu, recently warned government and politicians to stop playing politics with the passage of the PIB.

    According to him, the non-passage of the document has blocked foreign investment in the sector that accounts for over 90 per cent of the nation’s foreign exchange earnings.

    Onuegbu, who made the declaration at a media chat with reporters in Lagos, noted that investors have continued to adopt a wait-and-see game, refraining from making any new investment pending the passage of the PIB.

    He said no Final Investment Decision (FID) has been taken on any oil and gas project in the country, not even on the government-promoted, Brass Liquefied National Gas (LNG) project since the introduction of the PIB as an Executive Bill in 2008  by the administration of  the late President Umaru Musa Yar’Adua.

    Onuegbu said: “It is worrisome that while we are dithering in Nigeria, there are new oil discoveries all over Africa, drawing in investors just as new technology is making hitherto unreachable and uneconomic hydrocarbon deposits accessible in Europe and North America, thus attracting investors to those environments.

    “We believe that the PIB represents a great opportunity for Nigeria to ensure a solid foundation on which the future of oil and gas operations in the country will rest. Also, that the petroleum resources which Nigeria have been endowed, work for and benefit the Nigerian people.”

    The delayed passage of the PIB is also believed to be responsible for the non-take-off of the three new green refineries with a total capacity of one million barrels in three states. The $23 billion (N3.7 trillion) project remained in the pipeline five years after it was conceived.

    On May 13, 2010, the Federal Government signed an agreement with the China State Construction Engineering Corporation (CSCEC) for the establishment of Greenfield Refineries in Lagos, Bayelsa and Kogi states at the cost of $23 billion (about N3.7 trillion) with a five-year completion period.

    Under the terms of the agreement, 80 per cent of the project cost was to be funded with a loan provided by CSCEC and a consortium of Chinese banks, led by the Industrial Commercial Bank of China (ICBC).  The NNPC was to provide 20 per cent of the funding as Nigeria’s equity stake.

    But five years after, the project is yet to see the light of the day, prompting legislative investigation last year by the House of Representatives Committee on Petroleum (Downstream).

     

    Calls for deregulation gather steam

    President, Lagos Chamber of Commerce and Industry (LCCI), Mr. Remi Bello, called for the deregulation of the downstream sector of the oil and gas sector as a way of out of the myriads of problems in the industry. He noted that a deregulated downstream will end scarcity of petroleum products, halt corruption in the subsidy regime, resuscitate the collapsed refineries, boost investments and create jobs.

    Insisting that the current regime of subsidy and government’s direct involvement in the operations of oil and gas sector should be discontinued, the LCCI chief said government’s management of the sector has done a colossal damage to the economy.

    “It is in the overall interest of the economy and the citizens that government should quickly deregulate the sector,” Bello said, urging labour unions and Nigerians to give the reform a chance.

    He was not alone. The Nigeria Employers’ Consultative Association (NECA) is also rooting for deregulation. It’s Director-General Segun Oshinowo argued that the the N10 reduction in the pump price of a litter of petrol by the government begged the more fundamental issue of appropriate policy framework that will promote investment in the sector and put a stop to the embarrassing and shameful practice of importation of products.

    Oshinowo said: “Our expectation therefore, is that government would seize the opportunity of the current decline in the price of crude oil to commence implementation of the policy on deregulation.

    “This is a unique timing the government cannot afford to miss as full implementation of deregulation, which in time past had led to price increase and reaction by the labour movement in form of industrial action, does not have any negative effect on the masses.”

    The NECA director further said that rather than the reduction from N97 to N87, there ought to be a far more holistic announcement of a new policy thrust of deregulation of the downstream sector and privatisation of the four refineries.

    According to him, the economy stands to gain a lot from the deregulation of the oil sector.

     

     

    Oil marketers’ position

    Oil marketers, under the aegis of Major Oil Marketers Association of Nigeria (MOMAN), argues that deregulation will bring in investments into the sector and encourage the establishment of private refineries.

    Its Executive Secretary Obafemi Olawore said the government should summon the courage to fully deregulate and remove subsidy, or embark on continuous subsidy regime payment as at when due.

    Olawore said: “If the government likes, they can introduce gradual removal of subsidy. But, it should not go beyond six to 18 months period.”

    He added that if fully deregulated with rules, the country will have serious investors coming in to invest adequately.

    He insisted that deregulation is the answer and that the government must educate the people to make them understand the advantages.

    Director-General, Enugu Chamber of Commerce, Industry, Mines and Agriculture (ECCIMA), Sir Emeka Okereke, urged the government to muster the political will to push through the deregulation policy.

    “The government has no business in business. Deregulation is an idea whose time has come. Put the right policies in place so that private investors can come in,” he told The Nation.

    Okereke recalled that because of political exigency, the administration of former President Goodluck Jonathan could not take the bull by the horns and deregulate the sector.

    He recalled how the Federal Government administration buckled under the pressure of civil society groups in 2012 during the nationwide protest against the removal of fuel subsidy.

    Saying that subsidy has become unsustainable, Okereke said: “Subsidy doesn’t make economic sense anymore. It has become unsustainable. We will never come out of the wood as long as we continue to subsidise the price of petroleum products. We cannot continue to postpone the evil day.”

    Agreeing that Nigerians will pay more at the initial stage, he said the benefit will be more on long-run when price mechanism, determined by competition, ultimately forces down prices.

    One of the key issues driving the agitation for deregulation is the payment of an estimated N1 trillion annually as subsidy. This has pitted the government against oil marketers on one hand, and against Nigerians on the other.

    Will President Buhari retain or jettison oil subsidy? He has left nobody in doubt on his plans to reorganise the NNPC. He has begun that process with the disbandment of the corporations’ board.

  • Saraki seeks more foreign investors

    Saraki seeks more foreign investors

    •As U.S. envoy expresses optimism about Nigeria

    Senate President, Bukola Saraki yesterday said  Nigeria’s doors would continue to be open to foreign investors.

    Saraki who spoke when the United States Ambassador to Nigeria, James Entwistle, visited him at the National Assembly in Abuja also said the coountry’s future is bright.

    He reiterated the commitment of the Senate to the enactment of appropriate legislations to sustain an investment-friendly atmosphere with a view to bringing the country out of the woods.

    He said with the abundant resources in the country, the government is confident that it will meet the yearnings and aspirations of Nigerians from all walks of life.

    Saraki extolled the cordial relationship between Nigeria and the U.S. saying that Entwistle’s visit was prompt coming at a time the country is preparing to confront most of the challenges standing in the way of its developmental goals.

    He listed the challenges impeding the progress of the country to include epileptic power supply, insecurity, unemployment and revenue leakages.

    He said the present administration is concerned about the well-being of Nigerians.

    Saraki said: “This 8th Senate has the mandate to give Nigerians the dividends of democracy. We will put in place comprehensive systems to make sure that our revenues meet our needs.

    “Our oversight functions will be strengthened to ensure that there will be no room for loopholes in implementing government plans and projects.

    “I can assure you that Nigeria will continue to be attractive to investment opportunities. We have the human capital and with our younger generation’s steadfastness, training and development, our much needed goals will be achieved.”

  • Nigerian equities slip further as investors await govt direction

    Nigerian equities slip further as investors await govt direction

    The topsy-turvy at the Nigerian stock market continued yesterday as prices of quoted equities generally fell for the second consecutive day. Key benchmark indices indicated overall average decline of 0.37 per cent, equivalent to a loss of N42 billion, yesterday, two points higher than 0.35 per cent decline recorded on Tuesday.

    Quoted equities, which had gained N1.82 trillion in the immediate rally that followed Nigeria’s successful April presidential election and the emergence of President Muhammadu Buhari, has since lost steam considerably as investors wait for the government to form its economic management team and make clear-cut pronouncements on key economic issues.

    Aggregate market value of all quoted equities, which had opened April at N10.718 trillion, closed the month at N11.787 trillion, representing a gain of N1.07 trillion, about 9.97 per cent. The benchmark index for the Nigerian stock market, the All Share Index (ASI), also indicated a month-on-month average gain of 9.3 per cent during the period, rising from the month’s opening index of 31, 744.82 points to close at 34,708.11 points.

    Aggregate market value of all quoted equities dropped yesterday from N11.470 trillion to close at N11.428 trillion. The ASI also decline from 33,602.67 points to close at 33,478.42 points. The negative trade yesterday further depressed the average year-to-date return at the Nigerian Stock Exchange (NSE) to -3.40 per cent.

    “The market has so far been driven by macroeconomic uncertainties as investors continue foot-dragging ahead of policy pronouncement,” Afrinvest Securities stated yesterday.

    Market analysts said investors were being cautious and biding their time to ensure they have a clear view of the economic direction of the new government.

    With 24 losers to 22 gainers, the downtrend was driven by both the widespread decline in share prices as well as losses recorded by some highly capitalised stocks including Dangote Cement, the largest stock by market capitalization, Access Bank, Zenith Bank, Diamond Bank and Guinness Nigeria.

    Guinness Nigeria recorded the highest loss, in value terms, of N9.75 to close at N174.80. Dangote Cement followed with a loss of N2 to close at N175 while Beta Glass dropped by N1.96 to close at N37.32 per share.

    On the upside, Nigerian Breweries led the advancers with a gain of N1.87 to close at N149.90. Berger Paints Nigeria followed with addition of N1.04 to close at N11.24 while Conoil rose by N1.03 to close at N41.98.

    Total turnover remained around average with the exchange of 204.99 million shares valued at N7.40 billion in 3,704 deals.