Starcom Media Changes to Media Seal

Following the recent global alignment which informed the partnership between Troyka Group and Publicis, a leading media buying agency in Nigeria, Starcom Media has changed its name to Media Seal. The rebranding becomes necessary because of the global alignment between Starcom Media and Publicis, which has automatically made Starcom a member of Troyka group family.

In a statement issued by the Rosabel group on the authority of its Group Managing Director, Ayo Oluwatosin, the decision to rebrand the company is part of a larger strategic goal aimed at repositioning the business for sustained market leadership in the unfolding new global play.

“Over the past 17 years, Starcom Media has become synonymous with delivering insight- driven strategies within the bounds of high ethical stands.
According to him, it is time to rebrand this winning team for greater efficiency and to take advantage of the market.

With the new arrangement, Media Seal would now work with clients in creating memorable consumer experience across diverse media platforms.
Oluwatosin explained that the Starcom team has a compelling pedigree in the industry which the new agency is set to take to another level with advanced technologies that unearth real consumer motivations. He added in the statement that over the years, the agency has won numerable awards from campaigns that have positively impacted clients’ business.

THISDAY

Guinness & Unilever Nigeria's Right Issue

Guinness Nigeria Plc and Unilever Nigeria Plc are two leading firms listed on the Nigerian Stock Exchange (NSE). Why Guinness is a leading brewing firm, Unilever controls significant share in the food and personal care products segment of the Nigerian market. Both have foreign investors as majority shareholders.

Diageo is the majority shareholder in Guinness; Unilever United Kingdom (UK) is the majority investor in Unilever Nigeria. Again, both companies have been suffering from a similar problem of increasing finance costs over the years due to their reliance on bank borrowings to fund their operations. This reliance on debts borrowings has over the years impacted their profitability and the level of returns to shareholders in form of dividends.
However, in order to reduce the cost of finance, both companies have decided to inject fresh equity capital from existing shareholders through Rights Issues.

Guinness Nigeria

Guinness Nigeria Plc is offering 684,494,631 ordinary shares of 50 kobo each at N58 per share to existing shareholders to raise about N39.70 billion. The offer opened on Monday, July 24 and will close on August 30, 2017. Stanbic IBTC Capital Limited is the issuing house for the rights issue. To many market operators, the equity capital injection is overdue for Guinness considering the fact the high cost of finance that stemmed from reliance on debt financing pushed the company into a loss position.
In the third quarter ended March 30, 2017, Guinness posted a loss of N2.6 billion as against a profit of N900 million in the corresponding period of 2016.

In fact, as at half year ended December 31, 2016, Guinness Nigeria’s net debt to equity ratio stood at 103.9 per cent, indicating that the company was highly leveraged and needed urgent equity injection to reduce the erosion of its earnings through high interest charges.
Hence, analysts had said the decision to go for a rights issue would go a long way in repositioning the firm for better future performance.

Speaking on the rights issue, Managing Director/Chief Executive Officer of Guinness Nigeria, Mr. Peter Ndegwa said it would deleverage the company’s balance sheet and reduce finance costs.
He noted that the company obtained a loan from Diageo in 2016 to manage foreign exchange related obligations, saying that between 2015 and 2016 obtained loan facilities from various financial institutions to fund working capital requirements and business expansion operations.

Ndegwa said: “This rights issue will allow the company to deliver on its strategic objectives and give all our shareholders a unique opportunity to increase their shareholding in the company. Our expectation is that funds raised will help mitigate the impact of increasing finance costs, optimise our balance sheet and improve the company’s financial flexibility.”
Already the chairman of the company, Mr. Babatunde Savage, has told shareholders why they should exercise their rights fully.

“The company’s unique competitive advantage in terms of total beverage alcohol portfolio, consistent strong support from Diageo, world class local production assets, scalable beer operating model and strong corporate governance standards within its board and management, sets it apart as an excellent investment opportunity,” Savage said.

According to him, the devaluation of the Nigerian currency, foreign exchange scarcity and volatility, higher interest rates, a decline in real gross domestic product(GDP), weak financial markets and increase in cost of imported raw materials impacted on the company’s performance, over recent years.

“We have embarked on a number of restructuring initiatives in order to return the company to profitability. For example we have increased sourcing of our raw materials locally, deepened our partnerships with local distributors, reduced prices to grow volumes and gain market share, enhanced operational efficiencies and broadened our product portfolio to meet consumer preferences amongst others. We believe the capital injection rights issue will help the company to deliver on our strategic objectives and give all shareholders a unique opportunity to increase their shareholding,” he stated.
Over the past few years, consumers have considerably shifted to value brands due to weakening economic conditions.

Ndegwa said Guinness, which has traditionally operated in the premium/mainstream beer and malts markets has responded by repositioning and expanding its portfolio and has become the only truly total beverage alcohol player in the country offering products right across the board from spirits, to beer, ready-to-drink and non-alcoholic beverages.

“In addition the company plans to fully participate in the premium and mainstream spirits segments, leveraging its recent acquisition of rights to Diageo’s international premium spirits brands and mainstream spirits such as Johnnie Walker and McDowells. The company also intends to enhance its presence in the lager, beer and ready-to-drink markets with plans to launch new products designed specifically for the Nigerian market,” he said.

Unilever Nigeria
Unilever is shopping for N58.851 billion from existing shareholders. The company is offering 1.962 billion ordinary shares of 50 kobo per share at N30 per share. The offer opened on July 31 and will close September 8, 2017.
The MD/CEO of Unilever Nigeria Plc, Mr. Yaw Nsarkoh has called on shareholders and capital market stakeholders to support the ongoing rights issue that will position the company to deliver better value going forward.
According to him, through this rights issue, the company will be able to reinforce its financial flexibility to support its growth initiative, while giving shareholders an opportunity to consolidate their shareholding position.

“The rights issue is part of Unilever Nigeria’s long term strategic intent to strengthen the company’s capital base by deleveraging its balance sheet, support its working capital needs and position the company to exploit value accretive opportunities,” Nsarkoh said.

He explained that the net proceeds would help the company repay outstanding foreign currency denominated liabilities, purchase additional raw materials required for Unilever’s products and to meet other working capital requirements in order to build long term value for all stakeholders.
In the same vein, the Chairman, Unilever Nigeria Plc, His Royal Majesty Nnaemeka Achebe, said rights issue represents a milestone event in Unilever Nigeria’s history as it marks the company’s first follow-on equity offering since its listing in 1973.

“The rights issue reiterates our confidence in Unilever Nigeria’s robust future and commitment to building a more enduring business in Nigeria. We acknowledge with deep appreciation the unwavering support we have received from our stakeholders and shareholders even in trying times which has enabled us deliver positive results. We urge all shareholders to support the company’s objective by participating in the rights issue to ensure the company obtains the flexibility to attain its growth objectives,” he said.
Unilever posted profit before tax of N5.044 billion for the half year ended June 30, 2017, compared with N1.487 billion in 2016, showing a growth of 239 per cent. Similarly, while PAT stood at N3.676 billion, up by 236 per cent from N1.093 billion in 2016.

The company had reduced its finance cost by 40 per cent to N1.7 billion from N2.8 billion, following lower interest paid on loan obtained from Unilever Finance International AG.
Although the company increased its loans and borrowings by 176 per cent from N7.426 billion to N20.501 billion with N15 billion from Unilever Finance International, the interest rate was 6.45 per cent, compared with N5 billion borrowed locally that attracted 13.9 per cent. Part of the proceeds of the rights issue would be used to repay loan.

Need for minority shareholders to take up their rights
There are compelling reasons why the minority shareholders local should not to miss out in the rights issues of both companies. Firstly, both issues offer the investors an opportunity to retain their holdings in the firms at prices lower than current market prices. For instance, at an offer price of N58, shareholders of Guinness are exercising their rights N27 lower than the market price of N85, as at last Friday. Similarly, Unilever’s offer price of N30 per share is N15.49 lower than its market price of N45.49 as at last Friday.
Secondly, failure on the part of the Nigerian shareholders to take up their rights would offer the foreign majority investors an opportunity to increase their stake and possibly take over the companies 100 per cent in the nearest future.

In Guinness, Diageo, is already controlling 54.32 per cent and the company has signified its readiness to exercise its full rights. Similarly, Unilever Overseas Holdings has 60.06 per cent shareholding in Unilever Nigeria, while Stanbic Nominees has 10.43 per cent. The remaining 29.51 per cent is held by other minority shareholders. Any failure of the minority shareholders not to take up their rights portends high risk for them.

Although the Finance Director of Unilever, Mrs. Adesola Sotunde-Peters has assured that Unilever UK, would pay for its rights and not convert its loans into equity, market analysts said the minority shareholders should ensure they also take up their rights.

“As you may know, once a majority shareholder holds 60 per cent stake in a company, that majority shareholder has the privilege to buy out the minority shareholders. And given the current holdings of foreign investors in Guinness and Unilever, any failure on the part of the minority shareholders will jeopardise their stake in the companies,” a market operator said.

THISDAY

Electricity Unions Oppose FG’s N39bn Meter Loan to Discos

The two main electricity unions in Nigeria have opposed the recent decision of the federal government to grant N39 billion loan to the 11 electricity distribution companies (Discos) to procure and install meters to customers in their networks.

The unions – National Union of Electricity Employees (NUEE) and Senior Staff Association of Electricity and Allied Companies (SSAEAC) stated their position on the loan at an event organised by the Abuja Electricity Distribution Company (AEDC) in Abuja.

The event was the signing of staff condition of service between the Disco and the unions.
The Minister of Power, Works and Housing, Mr. Babatunde Fashola had during the recent 18th power sector stakeholders meeting in Kano, announced that the government would provide a financial facility worth N39 billion to enable the Discos procure and install more meters to reduce the huge metering gap in their networks as well as improve their revenue collections.

But reacting to the proposed loan shortly after accepting to sign the staff condition of service agreement with the AEDC, the General Secretary of NUEE, Mr. Joe Ajaero asked the Managing Director of AEDC, Mr. Ernest Mupwaya if it was right for the government to provide such financial supports to the Discos and other operators in the sector after selling off the power assets to their current operators.

Ajearo stated that in addition to the N39 billion loan, NUEE was also not in support of the N701 billion intervention fund the government had earmarked to support power generation companies (Gencos).
According to him, the electricity sector could be described as a being in trouble if it still required financial bailouts from the government after four years of its privatisation.

“If after four years of running as private companies you (power firms) are still looking for bailout funds or loans, then I think there is problem, because it shouldn’t be so,” Ajaero said.
Similarly, the President of SSAEAC, Mr. Chris Okonkwo, who also signed the AEDC staff condition of service agreement for his group, stated that the association would oppose the use of public funds to support the power companies.

He said the firms had not delivered satisfactorily after four years of their privatisation and so do not merit such financial supports from the government.
“Labour will not accept the borrowing of N39 billion by the federal government to Discos for the procurement of meters. We raised this issue at the Trade Union Congress meeting and we advise you (Discos) to start looking for alternatives,” Okonkwo stated.

However, Mupwaya stated in his remarks that the signing of the staff condition of service agreement with the unions would further enhance the Disco’s partnership with them, as well as help nurture employee engagements.
“We are trying to create space where views of employees are respected and we are promoting employee engagement, as the answers to our new challenges lie in our collective effort,” he said.

THISDAY

Nigeria’s External Debt May Hit N6.31tn in 2018 - PWC

Following the move by the federal government to issue foreign bonds to refinance maturing naira-denominated treasury bills, Nigeria’s external debt has been estimated to increase by about 46per cent to N6.31 trillion ($20.6 billion) by the end of 2018.

PwC, a professional services firm stated this in a report in which it assessed the development.
The Federal Executive Council (FEC) recently approved a plan to issue $3 billion worth of foreign bonds of up to three years’ maturity to refinance maturing naira-denominated treasury bills.

This decision was in line with the federal government’s debt management strategy to rebalance its debt portfolio for domestic and foreign debt, from the current 69%:31% to a targeted 60%:40%.
Although the plan was yet to be approved by the National Assembly, PwC estimated that if implemented, it would have a modest impact on broad debt sustainability indicators.

“Although timelines are not clear, we suspect issuance is unlikely to be earlier than 2018, given the extensive preparatory work required in issuing international sovereign bonds.
“Consequently, we assume the impact on public debt ratios would become evident as from 2018. We estimate that Nigeria’s stock of treasury bills would be around NGN3.8 trillion by end-2017.

“Refinancing $3 billion worth of maturing bills with dollar borrowing would result in a reduction in this stock by as much as nine per cent. External debt on the other hand would increase by about 46 per cent to N6.31 trillion ($20.6 billion) by end-2018,” it added.
Under this scenario, the firm projected that debt to GDP would rise by three percentage points, from an estimated 16 per cent in 2017 to 19 per cent in 2018. Nonetheless, it stated that the impact on the cost of debt was likely to be muted.

The Debt Management Office (DMO) reports the weighted-average interest rate on debt which takes into account the proportion of instruments issued.
Treasury bills account for 16 per cent of total federal government debt, and the portion to be refinanced is about one-quarter of treasury bill maturities in 2018.

“Thus, we estimate the weighted average interest rate could increase to 13 per cent, in 2018 from an estimated 12 per cent in 2017 and 11 per cent in 2015.
“Our analysis of key debt sustainability indicators suggests that the probability of debt distress at this time is low.
“We define debt distress as a scenario which requires a country to: incur substantial arrears on external debt; receive debt relief; and receive non-concessional balance of payments support from the International Monetary Fund (IMF),” the report added.

Among the various indicators based on the level of debt stock, external debt to exports is cited as the most useful, as exports provide the basis for debt repayments.
Furthermore, PwC estimated that Nigeria’s external debt to exports could rise by seven percentage points to 34 per cent in 2018.

This, they firm however said was well below the threshold of 100 per cent prescribed by the International Monetary Fund and the peak of 104 per cent recorded during Nigeria’s debt crisis in 2004.
But devaluation in the currency would be a key risk to external debt sustainability, they stated.
“However, this risk is somewhat offset by the natural hedge provided by the high foreign currency composition of government revenues.

“Under a scenario of an export shock similar to the episode recorded in 2015, we assume a 44 per cent decline in exports in 2018. Following this, we estimate external debt to exports will rise sharply to 71 per cent, up from 27 per cent in 2017.

“While Nigeria’s debt vulnerability worsens under this scenario, it still remains below the 100 per cent threshold level – at this level, Nigeria’s external debt would need to reach $60.2 billion,” the report added.
“While Nigeria’s near term public debt ratios remain relatively comfortable, we are mindful of the trend in debt service ratios. We estimate that debt service to revenue ratio is likely to remain elevated at 50 per cent in 2018, breaching the recommended threshold of 25 per cent.

“This represents the fourth consecutive increase since 2015. Given the outlook for lower oil revenues, we expect the government to do more in mobilising non-oil revenues to bridge the fiscal deficit, to meet the objective of reducing the “crowding out” impact of domestic borrowing.

“There is room for tax mobilisation as Nigeria’s non-oil tax to GDP at 2.3 per cent in 2016 remains well below the average of 16 per cent among sub-Saharan Africa countries.
“Similarly, the policy framework for investment incentives should be periodically assessed against intended policy objectives and revenue forgone. This would ensure that the investment incentive framework is targeted, cost effective and sustainable,” it added.

THISDAY

Rivers State/World Bank Create 5,500 Jobs

The World Bank has said it had created 5,500 jobs in Rivers State under its State Employment and Expenditure for Results (SEEFOR).

Team Leader of World Bank-assisted SEEFOR, Mr. Ismaila Ceesay, made the disclosure on  Tuesday when he led the team on a courtesy visit to Rivers State Governor, Nyesom Wike, in Port Harcourt.

He said the SEEFOR Programme had already generated 5,500 jobs, with another 5,000 to be generated in October.
He noted that the indirect benefits of the programme include the provision of water, sanitation and basic amenities to the people.

Ceesay said: “Rivers State is working steadfastly with the Task Team with Satisfactory performance. The project is having two more years. We have excellent project partners in Rivers State”.
He noted that a new financial system was being worked out that would enhance the capacity of Rivers State to access more funds from the World Bank.

Wike, in his response, lauded the World Bank for the creation of 5,500 jobs in the state and the commencement of the process for the creation of additional 5,000 jobs for the youths.

While commending the World Bank for her support, Wike directed the immediate release of N35million for the state to access the $3million grant from the World Bank for the further execution of the Fadama Project.
He urged the World Bank to assist the state to develop a framework to improve the state’s revenue profile.
The governor solicited the partnership of World Bank in the comprehensive conduct of the biometric verification of civil servants, which will reduce the wage bill of the state.

He also declared that Nigerians were unhappy with the woeful performance of the All Progressives Congress (APC) and that the party would be voted out in the forthcoming general elections.
Wike said no political miracle would lead to the APC having another chance to govern the country.
He stated that the mistake has already been made by Nigerians, emphasising that the country cannot afford to make this costly mistake again in the future

THISDAY

UBA Holds Statutory Provision against 9mobile Loan

The United Bank for Africa (UBA) on Tuesday explained that it has always maintained a statutory prudential provision of two per cent against its exposure to 9mobile.

A source at the bank explained that the statutory prudential provision has always been on the loan to the troubled network provider.

The lender however said it had a N38 billion ($125 million) exposure to 9mobile.
UBA said the exposure was secured, and part of a syndicated loan with 12 other banks extended to EtisalatNigeria four years ago.
“We have taken a general loan loss provision on Etisalat,” Reuters quoted UBA’s Chief Executive, Kennedy Uzoka to have told an analysts call.

“It’s instructive to note that Etisalat has reasonably turned around in terms of subscribers and revenues,” he said, adding that the bank was one of the lenders managing its receivables.
Zenith Bank said this month it had made a 30 percent provision on its loan to 9mobile, the country’s fourth-largest telecoms group.

Uzoka said Nigeria is its largest market, but that he expects the bank’s African operation to contribute about 50 percent to group earnings over the medium term from 32 percent in the first half of the year.
He said the lender had applied to British regulators for a banking license.
UBA shares, which have gained 114 percent so far this year, dipped 0.52 percent to N9.58 on Tuesday.

THISDAY

FG Launches N5 billion Loan for Small-Scale Miners

To boost the capacity of artisanal and small-scale miners to participate in the development of the solid minerals sector, the Federal Government on Tuesday launched N5 billion Nigerian Artisanal and Small-Scale Miners, Financing Support Fund to grant loans at single digit interest rates.

The Fund, which is operated by the Federal Ministry of Mines and Steel Development in collaboration with the Bank of Industry, would be available for only certified artisanal small-scale miners, constituting more than 80 per cent of the operators in the industry.

Under the terms of the memorandum of understanding signed on Tuesday in Abuja, the government would contribute N2.5 billion of the Fund, which would be matched by another N2.5 billion by BOI.

Qualified artisanal miners would be allowed to access between N100,000 and N10 million, while small-scale miner could get between N10 million and N100 million.

The Minister of Mines and Steel Development, Kayode Fayemi, and the Managing Director/CEO of Bank of Industry, Olukayode Pitan, signed the MOU in Abuja on Tuesday.

Mr. Fayemi said the launch of the Fund was to address the challenge of insufficient funding and poor access to capital, which posed a major factor militating against artisanal and small-scale miners who account for the bulk of activities in the mining sector.

The Minister said the BOI would serve as the custodian and manager of the fund, to be given to the artisanal and small scale miners at five per cent interest rate.

He said with the appointment of BOI as the custodian and manager of the Fund it would facilitate financing of artisanal and small scale mining projects involving industrial minerals, precious stones, precious metal (Gold), dimension stone and such other strategic minerals in Nigeria as would be approved by the ministry and BOI from time to time.

The Minister said the Fund would be available in the form of term loans, or working capital, to be utilized for the purchase of requisite items of plant and machinery; payment for drilling, geological and other services related to mining business as may be required, among others.

Besides, he said proper funding would help to integrate the artisanal and small-scale miners into the formal sector, enhance their growth and development in a structured manner, and spur productivity and job creation in the mining sector.

Other efforts by the ministry to address the challenge of insufficient funding and lack of access to capital, include N30 billion from the mining sector component of the Natural Resources Development Fund and the $150 million from the World Bank to support the Mineral Sector Support for Economic Diversification (MinDiver) programme.

“The Solid Minerals Development Fund, SMDF, is now spearheading the assembly of a $600 million investment fund for the sector, working with entities as the Nigerian Sovereign Investment Authority, NSIA, the Nigeria Stock Exchange, NSE and others,” the minister said.

He said these efforts were a departure from the past, where only N352 million was released to the ministry, out of the N1 billion allocated to it in 2015.

In addition to the funding support from multilateral agencies, partnerships on technical cooperation, Mr. Fayemi said several agreements were also brokered or re-activated with foreign governments.

These include existing technical partnerships with the governments of South Africa, China, Australia, Canada, the United Kingdom and the United States of America in line with the framework of Africa Mining Vision, to develop mining.

Mr. Pitan said the BOI was convinced the fund would step up a rapid development in the mining sector, just as a similar funding arrangement boosted the country’s movie sector.

He said BOI was a pioneer in the area of funding mining activities where other banks have shown reluctance to invest.

The project management committee made up of BOI officials with expertise in mining finance and project supervision, would be headed by the Minister of State for Mines and Steel Development, Abubakar Bawa Bwari.

The committee would be responsible for appraising, recommending, disbursing, implementing and monitoring projects as well as recovering loans and interests from the approved projects.

NNPC not Hawking Nigeria’s Crude Oil from ‘Hotel Rooms’

Days after raising alarm about the fraudulent activities of a syndicate of crude oil sale scammers, the Nigerian National Petroleum Corporation, NNPC, again on Tuesday denied insinuations that some of its top officials were selling Nigeria’s crude oil from “the confines of hotel rooms”.

The Corporation’s Group General Manager, Crude Oil Marketing Division, Mele Kyari, who was shedding light on the scamming syndicate’s mode of operations, said the NNPC “doesn’t sell crude oil from hotel rooms as done by scammers.”

Mr. Kyari said some of the ways the scammers lure unsuspecting would-be crude oil buyers included offers of higher discounts on cargoes, non-OPEC crude specification, crude oil allocation, presentation of crude oil sale letters as well as “conducting business transactions from hotels in Abuja and other places.”

He said there was only one way to buy crude oil from the NNPC – through the advertisement for the selection of customers screened for compliance with the Corporation’s expectations and standards.

“There are very high standards we have set for such transactions. If you don’t meet them, you cannot be our customer. And once you become our customer, we sign a single annual contract with you,” Mr. Kyari said.

The crude contracts, he pointed out, were typically between 30,000 to 32,000 barrels per day, bpd, which accumulated into a standard cargo size of 950,000 bpd monthly and not 2 to 3 million bpd contracts as peddled by the scammers.

Mr. Kyari observed that for the crude oil sale processes to be completed, the customer must show he had the capability to sell the cargo to the market and that the Corporation could get its money back.

“Today, the entire process of crude oil marketing had become seamless and real-time, with electronic platforms, such as Platts and Argus acting as reporting agencies for global crude oil trading programmes.

“The beauty of selling crude oil is that the moment we sell the cargo to you, the entire world knows that cargo X is with Mr. Y. So you see, you don’t have to scavenge for who buys your crude,” he said.

He informed would-be buyers not to be gullible as the scammers always cashed in on their gullibility to swindle them, adding that those who fall for the scammers were either ‘not in the business’ or were themselves fraudulent.

He said the good thing in all the unwholesome development was that NNPC documents had not leaked, as almost 98 per cent of the documents involved were fake documents produced by the scammers.

In line with federal government’s anti-corruption crusade, he said NNPC management was committed to promoting transparency and accountability in its operations, while the COMD would continue to collaborate with the relevant security agencies as the Nigerian Police Force, NPF, the Department of State Services, DSS, and the Economic & Financial Crimes Commission, EFCC to checkmate fraudsters.

“Already, this massive collaboration with security agencies is paying off. Some arrests have been made, while on our part, we assist the security agencies by providing evidence in the course of their prosecution,” he noted.

He called on the general public to always alert the Corporation on suspected crude oil scammers by reporting them via the e-mail: comdenquiry@nnpcgroup.com.

Restating the success of the NNPC’s flagship crude oil for product exchange scheme, also known as Direct Sale Direct Purchase Programme, DSDP, the GGM said this would not only ensure transparency, but also the stability of products supply across the country.

Gas Supply to Power Plants Increases by 123% – NNPC

The Nigerian National Petroleum Corporation, NNPC, on Tuesday said it had increased daily average natural gas supply to gas power plants by 123 per cent.

Ndu Ughamadu, NNPC Group General Manager, Group Public Affairs Division of the corporation said this in a statement in Abuja on Tuesday.

He said the increase accrued to 730 million standard cubic feet per day (mmscf/d) in June 2017 as against 327mmscf/d in the corresponding period in 2016.

Quoting June 2017 Monthly Financial and Operations Report released on Tuesday, Mr. Ughamadu said gas supply to power plants increased slightly by 0.13 per cent from 729mmscf/d in May 2017 to 730mmscf/d in June 2017.

The report indicated that nationwide petroleum products supply continued to record remarkable stability.

This the report said followed the performance of Nigeria’s three refineries which produced between five and six million litres of Premium Motor Spirit (PMS), also known as petrol, per day in June.

“The refineries also produced between five and six million litres of Automotive Gas Oil (AGO), also known as diesel, per day in the period under review.

“The corporation has maintained seamless nationwide supply and distribution of petroleum products which guarantee stable products and queue-free filling stations across the nation,” Mr. Ughamadu quoted the report.

He said the performance of the Port Harcourt Refinery continued to improve with a boost to the midstream value chain as it inched toward sustained commercial operations.

It would be recalled that the pump price of diesel crashed by 42 per cent nationwide, following interventions by the corporation in May.

On pipeline vandalism, Mr. Ughamadu said that the corporation recorded about 86 cases of pipeline breaks across the country in the period under review.

He said of the 86 cases, 77 were due to pipeline vandalism, representing almost 40 per cent increase relative to cases recorded in the previous month (May 2017).

He also said while the Port Harcourt-Aba line recorded the highest pipeline breaches of 55 points (66 per cent), there was also an unusual upsurge in the activities of vandals along Kaduna-Zaria.

The line, he said, witnessed 13 vandalised points during the period.

“There was also a slight decrease in national gas production, compared to previous month which stood at 227.15BCF or an average of 7,571.50 mmscfd, the report said.

“This was despite sustaining the success recorded by its enhanced crude oil evacuation and oil lifting in June, 2017 following re-opening of Forcados Oil Terminal (FOT) on March 31.”

Mr. Ughamadu called on Nigerians to continue to support NNPC in the area of security with a view to ensuring zero vandalism of the nation’s oil and gas infrastructure.

(NAN)

N359.39bn went to Fuel Subsidy from Excess Crude Account in 2015 – FRC

The Federal Government withdrew the sum of N359.39bn from the Excess Crude Account in 2015 to fund the payment of petroleum products subsidy in 2015, the Fiscal Responsibility Commission has said.

The FRC said this in a report on the Excess Crude Account obtained by our correspondent in Abuja on Monday.

According to the FRC, the withdrawal of N359.39bn to fund subsidy on petroleum products was illegal because it contravened the purpose for which the ECA was set up.

However, the report noted that for the first time, the government withdrew N98.19bn from the ECA to share among the three tiers of government after satisfying the condition stipulated for withdrawing money from the account.

It said the withdrawal was the first time the three tiers of government were sharing money from the ECA when oil prices fell below the budget benchmark in three successive months, indicating that the governments had been sharing money from the account even when the oil prices were above the benchmark.

To show how low the fortune of the country had fallen, the report said the total remittance into the ECA in 2015 amounted to only N48.94bn compared to N796.7bn paid into the account in 2014.

The report said, “The ECA was created as a stabilisation and savings fund to augment budgets, mainly on account of the volatility of the international oil market. The account is, therefore, funded with proceeds accruing from oil revenues in excess of the oil benchmark price as approved in the Medium-Term Expenditure Framework and budget.

“The sum of N458.14bn was withdrawn from the ECA in 2015 compared with N927.33bn withdrawn in 2014. Other than the distribution of N98.19bn shared among the tiers of government, the withdrawal of N359.39bn for the payment of petroleum products subsidy was in violation of Section 35 of the FRA 2007. Such payment was clearly outside the scope of the ECA.

“It is worth mentioning that this is the first time since 2008/2009 when the ECA was utilised for the purpose it is meant for. The oil slump, which started in the second half of 2014, resulted in international oil price falling below the benchmark price continuously more than the three months stipulated as the primary condition for withdrawal from the ECA to augment the budget.”

It also said, “The operation and management of the ECA over the years has been in breach of the FRA 2007, the consequence of which is the difficulty in the implementation of budgets across the three tiers of government with the continued sharp drop in oil revenue.

“The discipline to manage the ECA with prudence was clearly abused. The actual balance in the ECA has become contentious, especially as this has never been disclosed in the budget implementation reports despite repeated suggestions for this to be done.”

The FRC added that the non-disclosure of the opening and closing balances of the account had made the full appraisal of the account impossible.

Punch

Shell, Chevron in the Dark on NNPC’s Plan to Extend $1bn Gas Pipeline to Cote d’Ivoire

Shell and Chevron, which are major shareholders in the Chevron-run West African Gas Pipeline Company Limited (WAGPCo), owners of the $1 billion West African Gas Pipeline, are not yet aware of the plan by the Nigerian National Petroleum Corporation (NNPC) to extend the 678-kilometre pipeline to Cote D’Ivoire.

The Managing Director of WAGPCo, Mr. Walter Perez that the existing pipeline, which runs from Nigeria to Togo is currently underutilised with only 70 million standard cubic feet per day of gas (mmscf/d) available in the 150mmscf/d capacity pipeline.

Perez, however, noted that the 70 mmscf of gas available daily is enough to service end users in Ghana, Togo and Benin Republic.

N-Gas, which is a separate company, also jointly-owned by Shell, Chevron and the NNPC, buys gas from oil companies in Nigeria and transport the it to its customers in Benin, Togo and Ghana, through the pipeline, operated by WAGPCo.

With headquarters in Accra, WAPCo is owned by Chevron West African Gas Pipeline Ltd (36.9 per cent); NNPC (24.9 per cent); Shell Overseas Holdings Limited (17.9 per cent); Takoradi Power Company Limited (16.3 per cent), Societe Togolaise de Gaz (two per cent) and Societe BenGaz S.A. (two per cent).

The pipeline is connected to Escravos-Lagos pipeline from Itoki area of Ogun State and goes through Agido near Badagry in Lagos, passing through 33 Nigerian communities and thereafter goes offshore to the three countries.

Despite the inadequate gas supply to the existing pipeline, which has left the $1bn facility virtually empty, the Group Managing Director of NNPC, Dr. Maikanti Baru, represented by the corporation’s Chief Operating Officer in charge of Gas and Power, Mr. Saidu Mohammed, had told a delegation led by the Deputy Director, Production, Ministry of Petroleum of Cote d’Ivoire, Mr. Patrick Marshal, in Abuja early this month, that Nigeria would extend gas supplies from Escravos  to Cote d’Ivoire through the pipeline.

The commitment to extend the pipeline is also coming at a time many power generating plants in Nigeria are idle as a result of insufficient gas to generate electricity.

However, Chevron and Shell, which are also major shareholders in the project, are not part of the plans to extend the pipeline.

A Shell official who spoke on condition of anonymity, said extending the pipeline was not a priority of the company as “project economics would not justify such investment in the face of the prevailing gas supply challenges in Nigeria”

“Where is the gas that will feed the pipeline? The agreement initiated by ECOWAS is that N-Gas should be allocated a space in the pipeline to take up to 200 million standard cubic feet of gas per day to its customers. But at the best of times, the gas supply has never exceeded 120 mmscf/d.  So, what are the fundamentals driving the proposed extension?” he queried.

A Chevron source, who also spoke on the matter, disclosed that NNPC, Shell and Chevron, which are the owners of N-Gas, had paid in excess of $15 million as compensation to Ghana’s Volta River Authority (VRA), for failure to meet their contractual obligations on gas supply to the Ghana’s electricity producing company as specified in a 20-year contract.

According to him, the contract provides that if N-Gas does not supply the gas, it pays compensation to enable VRA buys crude oil to augment the gas shortfall.

“They have defaulted on several occasions and paid compensation in excess of $15 million. If the shareholders are paying compensation because they default in providing gas, how could they talk of extending the pipeline to supply gas to additional areas when there is no gas to feel the space in the existing pipeline and supply current customers? I think NNPC was making political statement,” he explained.

WAGPCo’s nameplate capacity is to transport 475mmscf of gas per day but only less than 130 mmscf/d of gas was available at the best of times, thus leaving the facility to be sub-optimally utilised.

Perez said that the pipeline has the capacity to move 150 mmscf of gas to customers daily at the moment but is currently transporting only70 mmscf/d because that is what the customers require.

“We can move over 150mmscf per day today but we are operating at 70 mmscf/d currently. Today, they (customers) require 70 mmscf/d and that is why we are moving 70 mmscf/d. What they call for is 70 mmscf/d and that is why we are moving 70 mmscf/d but we are working to increase it to higher levels but today, that is what they are calling for,” he explained.

Perez also cited pipeline vandalism, debt and availability of alternative energy supplies to the company’s customers as some of the challenges facing the company.

“The industry has been challenged with vandalism but the good news is that the volumes of gas have come back and we are quite please with that,” he said.

“The challenge for us is that when the gas supply is not available, our customers have to find alternative supplies of energy. That is a real challenge for us. When the pipeline was built, there was gas only in Nigeria and very affordable but today, people have access to LNG and are also developing their own resources. So, when our pipeline is not available, it makes our customers to go out and look for alternatives. For us, it is important that when the gas is available, we can move it. Today, like I said, the customers are calling for a certain amount and we are providing them,” Perez explained.

“Debt is an issue that we are working to resolve. We see a window of opportunities coming in the next couple of months. So, we are working with the people involved to settle their accounts with WAGPCo,” he added.

Due to the non-utilisation of the pipeline by N-Gas, sub-regional ministers, otherwise referred to as the Committee of Ministers of the West African Countries had planned to amend the International Project Agreement (IPA) to enable other entities to use the pipeline.

Meanwhile, the NNPC has disclosed that it will drastically cut down by 80 per cent, the amount of Nigerian crude oil it gives to third-party traders to export on its behalf for Nigeria from 2018.

It said from the end of 2018, its reformed trading subsidiary – the NNPC Trading Limited, would market 80 per cent of Nigerian crude in the international market, leaving the remaining 20 per cent for third-party traders.

Usually, the corporation uses tenured oil lifting contract with third-party traders to sell volumes of Nigeria’s share of oil produced in its Joint Venture (JV) and Production Sharing Contract (PSC) with International Oil Companies (IOCs) operating in the country.

For instance, it shortlisted 39 firms comprising 18 Nigerian-owned oil companies; 11 international trading houses; five foreign refineries; three foreign National Oil Companies (NOCs) and two of its trading subsidiaries, to lift and export about 700,000 barrels per day (bpd) of crude oil in the 2017 lifting term contract.

However, in an interview in the latest edition of a refurbished in-house quarterly magazine of the NNPC, the Managing Director of NNPC Trading Limited, Ibrahim Waya, disclosed that from 2018, the corporation would be marketing most of its crude oil with minimal volumes to third-party traders.

Waya, explained that the plan was in line with the merger of NNPC’s four trading subsidiaries – Duke Oil; Hyson Carlson; Nigermed; and NAK Oil, into a single unit, and training of young oil traders at the Princeton College of Petroleum Studies, Oxford England, to undertake the task.

“We have a vision, we want to be somewhere and when we look at what we are doing today, compared to where we were yesterday, we know that we are on a threshold of history,” said Waya in the interview.

However, the NNPC has invited the Economic and Financial Crimes Commission (EFCC), and Department of State Security (DSS) to deal with the lingering acts of fraudulent crude oil sales contract.

In a statement from its Group General Manager, Public Affairs, Ndu Ughamadu, it noted that the fraudulent activities of crude oil scammers was on the rise, and provided insights into the mode of operations of the perpetrators.

Quoting its Group General Manager, Crude Oil Marketing Division (COMD), Mr. Mele Kyari, the statement said the scammers were fond using hotel rooms to perpetrate their acts, adding that NNPC does not sell crude oil from hotel rooms.

Kyari, said the scammers usually lure their unsuspecting victims with higher discount offers on cargoes, and crude allocation.

He noted that: “Some of them even go to the extent of luring their victims to hotels to transact these fraudulent crude oil contracts. The entire public should know that NNPC doesn’t do business of crude oil marketing from hotel rooms.”

According to him, there was only one way of buying crude oil from the NNPC which was through advertisement for the selection of customers who were screened for compliance with NNPC’s expectations and standards.

“There are very high standards we have set and if you don’t meet them, you cannot be our customer. And once you become our customer, we sign a single annual contract with you,” Kyari added, while stating that the crude contracts were typically 30,000 to 32,000bpd which accumulate into a standard cargo size of 950,000bpd per month, but not two to three million bpd contracts as peddled by the scammers.

He also said for the crude oil sale processes to be completed, the customer had to show that he had the capability to sell the cargo to the market and that the NNPC could get its money back.

Stating that 98 per cent of all the documents used by the scammers were fake, Kyari explained that the processes employed by the corporation had not leaked so far.

He said in line with the government’s anti-corruption crusade and NNPC’s commitment to transparency and accountability, the COMD had been collaborating with the Nigerian Police Force (NPF); DSS; and EFCC to checkmate the fraudsters, and that the collaboration was yielding results.

THISDAY

Caverton Shares Gains 16% as Investors React to Chevron Contract

Investors last week renewed demand for the shares of Caverton Offshore Support Group Plc (COSG), following the news of award of a contract to it by Chevron Nigeria Limited (CNL).

COSG was   awarded a five-year logistics support contract by CNL operator of the Nigerian National Petroleum Corporation (NNPC/CNL Joint Venture, for   the provision of aviation services with a two- year renewable option.

Confident that the contract would boost the bottomline of COSG going forward, investors increased demand for the shares of the company. The high demand led to a growth of 16 per cent in the stock, rising from N1.00 to N1.16 per share last week.

COSG had explained that the contract was awarded following an extended competitive tendering process.

“Caverton emerged successful after scaling through both the technical and commercial evaluation ahead of other bidders. Given CNL’s reputation for very high safety and quality standards, it is safe to say that Caverton’s commitment to safety, quality and continuous improvement contributed in no small measure to this successful bid. Caverton will service this contract with 11 Bell manufactured helicopters in line with CNL’s requirement. As part of the contract, Caverton will provide guaranteed medevac response to CNL 24 hours a day, seven days a week, covering their entire area of operations,” the company had said.

Speaking on the development, the Group Chairman of the Caverton,  Mr. Remi Makanjuola said: “We are thankful to our clients, the aviation regulators, our shareholders, our staff and many others who have played a role in our development and success as a company. Special recognition to the Access Bank Group that has supported Caverton on various projects over the years. Caverton Helicopters is poised to continue to work on consolidating its vision to be the leading provider of premium aviation services in sub-Saharan Africa to the oil and gas industry.”

Over the past decade, Caverton has worked hard to raise the bar in key areas in this specialised sector: helicopter availability, on-time departure, service and maintenance quality; doing all this while pursuing a robust local content strategy.

“The positive impact of these efforts is the growing confidence in our services by the international oil companies and others, resulting in an increasing market share,” the company said.

Stock market operators had said the contract was  a good development that will  boost  the  financial performance of COSG, noting that the company would deliver improved returns to investors going forward.

THISDAY

Nigeria’s Fiscal System Targets Revenue Rather Than Profit - Mackenzie

Nigeria’s fiscal system in the oil and gas industry is one of the five fiscal regimes with the highest Effective Royalty Rate (ERR), along with Indonesia’s Production Sharing Contract (PSC), China’s PSC, Kazakhastan and the area of the United Sates where royalty is payable to land owners on negotiated rates and on federal and state lands on regulated rates, a new study by Wood Mackenzie has revealed.

The report further indicates that Nigeria is also among the 12 oil producing countries where the fiscal system is targeted on revenues, rather than profits.

The other 11 countries include: Russia, Indonesia, Egypt, Venezuela, Iraq, Kazakhastan, Angola, China, Canada, Brazil and the oil-producing area of Alaska in the United States.

According to the report, while the fiscal system in the United Kingdom, Norway and offshore Australia is targeted purely on profits, Nigeria’s fiscal system and those of the 12 other countries are based on revenues.

“Fiscal terms are a key differentiator in companies’ strategic positioning geographically and in investment decisions. While prospectivity is invariably the number one driver for investment decisions, the potential value of discoveries is heavily influenced by the fiscal regime. And with capital scarce, the level and form of the government’s share of project value comes to the fore. Terms must be competitive if the government is to have any success in attracting new investment,” the report said.

The report noted that the global upstream investment is at low ebb with conventional projects being challenged by low oil prices, high costs and weak economics.
With these challenges, Wood Mackenzie argued that finances are stretched with only a limited capital available for growth investment.

“Companies are preserving capital and high grading opportunities as they work to reduce break evens on new projects. Only the lowest cost and highest return investments, whether short or long term, will get the green light in this environment. And nervous investors are looking for projects that will recover their costs quickly,” the report added.

“But generating profits at current prices is not simply down to a company’s ability to keep costs below current prices. Governments have a role to play too. If the fiscal system is targeted on revenues, rather than profits then, for the investor, a $50 per barrel price could mean as little as $25 per barrel is available to cover costs and make a return on investment,” the report added.

“One of the first challenges for a government wanting to establish if its terms are competitive or not, is to identify who its competitors are. What is the peer group of opportunities that investors will be considering for investment as well as the blocks in your round? And this could be very different, depending on the investor, who may be focused on: a region, and compare opportunities only with those on offer in neighbouring countries; maturity of basin, focusing on frontier, emerging or mature basin opportunities; specific types of investment, for example, gas or deepwater opportunities; all global opportunities equally,” the report explained.

THISDAY

Inflation Drops to 16.05%

The Consumer Price Index, CPI, which measures inflation, dropped to 16.05 per cent in July, the National Bureau of Statistics, NBS, said on Monday.

According to a report released by the NBS titled Consumer Price Index, the fall recorded was 0.05 per cent points lower than the rate recorded in June (16.10), making it the sixth consecutive decline in the rate of headline inflation since January 2017.

The NBS noted further that the percentage change in the average composite CPI for the twelve-month period ending in July 2017 over the average of the CPI for the previous twelve-month period was 17.47 per cent. This is 0.11 percent point lower from 17.58 percent recorded in June 2017.

The Urban index rose by 16.04 per cent in July 2017, down by 0.11 percent point from 16.15 per cent recorded in June, and the Rural index increased by 16.08 per cent in July from 16.01 per cent in June.

The bureau noted that the Food Index increased by 20.28 per cent in July, up by 0.37 per cent points from the rate recorded in June (19.91 per cent), representing the highest year on year increase in food inflation since the beginning of the new series in 2009.

Further analysis showed that the rise in the index was caused by increases in prices of bread and cereals, meat, fish, oils and fats, coffee, tea and cocoa, potatoes yam and other tubers and vegetables.

Meanwhile, the ”All Items less Farm Produce” or Core sub-index, which excludes the prices of volatile agricultural produce eased by 0.30 per cent during the month to 12.20 per cent points from 12.50 per cent recorded in June.