The Central Bank of Nigeria (CBN) will try to eliminate the spread between the official and black market exchange rate against the dollar, the Minister of Finance, Mrs. Kemi Adeosun said on Tuesday.
The naira is trading on the parallel market some 40 per cent lower than the official rate as low global crude prices have dried up vital oil revenues and pushed Africa’s largest economy into recession.
The central bank scrapped a 16-month-old peg of N197 to the dollar in June, but it continues to trade in the official market, so that the naira remains far stronger against the dollar there than on the parallel market. The government has blamed that black market for damaging the already shaky economy.
“The CBN is working on the elimination of arbitrage,” Adeosun told Reuters by text message, without saying how this would be done.
She earlier told a conference that the central bank was working on removing the price difference. Adeosun said this had been in response to a question about manufacturers not getting incentives to produce given an arbitrage opportunity.
A CBN spokesman, Isaac Okorafor, said the central bank was working towards “ensuring that the forex market operates as effectively as we would envisage.”
He said the aim was to “ensure there is no black market” but did not give details of how this would be achieved.
The naira has traded around N305.5 naira to the dollar on the official interbank market since August, while it was quoted at N490 to the dollar on the parallel market on Tuesday.
Minority shareholders in Mobil Oil Nigeria Plc are to enjoy more capital appreciation on their shares as Nipco Plc may buy their shares at N420 per share.
Nipco Plc, an indigenous Nigerian downstream oil and gas company, is acquiring 60 per cent stake in Mobil Oil Nigeria Plc for $301 million or N91.8 billion and has applied to the Securities and Exchange Commission (SEC) for approval of this acquisition. This transaction translates to N432 per share, which is a huge premium from the current market price of N280.
However, if this acquisition is approved by SEC at the price, Nipco being a holder of more than 60 per cent of the company would need to comply with the provision of the Investment & Securities Act by buying shares of minority shareholders at the same price of N423 through a mandatory takeover bid.
This would be a massive price appreciation to be enjoyed by minority shareholders of Mobil during the mandatory take over process. The shares of Mobil have witnessed an unprecedented rally since Nipco Plc signed the sales purchase agreement on October 17, 2016. The shares which stood at N186 on that day have soared to N280, indicating a jump of 127 per cent.
Shareholders of Nipco last week approved the acquisition at an Extra-ordinary General Meeting Speaking on the acquisition, the Managing Director of Nipco Plc, Mr. Venkataraman Venkatapathy had said the company considered it acquisition an important synergy.
“It is part of our strategic move to support Nipco’s continuous growth and expansion of its Nigerian retail footprint. We are confident of adding tremendous value to Mobil Oil Nigeria and likewise Mobil Oil will add a huge value to Nipco. In furtherance of this value addition, Nipco will continue to maintain the Mobil brand on its retail outlets as well as continue to blend and sell the Mobil brand of lubricants under Branding Licence(s) from ExxonMobil,” he said.
According to him, Mobil Oil will continue to run as a separate, distinct and independent company, from Nipco Plc, each with its own CEO who will report to its board of directors .
He added that Mobil Oil will continue to maintain the Mobil brand at its retail outlets as well as blending and selling Mobil brand of lubricants under branding licensee [s] from ExxonMobil.
An end of year renewed demand by bargain hunters lifted by stock market 5.8 per cent in 12 days on the last month of the year. The bearish trend in the market had depressed the market by 7.27 per cent in the month of November, making operators and other stakeholders to be apprehensive that negative sentiments would persist till the end of the year. However, a renewed demand by investors, who are taking advantage of low priced stocks, reversed the trend leading to a growth of 5.8 per cent.
Specifically, the Nigerian Stock Exchange (NSE) All-Share Index rose from 25,241.63 to close at 26,707.10 in 12 trading days between November 30, and December 16, 2016. Similarly, market capitalisation added N8.689 trillion to N9.189 trillion within the same period.
Investors renewed demand for oil/gas and banking stocks. Particularly, most investors have been swayed to oil stocks by the decision of Organisation of Petroleum Producing and Exporting Countries (OPEC) and non-OPEC members, who agreed a deal to curb their production. This decision led to a rally in the price of crude oil, which has in turn increased demand for oil stocks.
This development led to a recovery of 5.8 per cent or N500 billion within 12 days, compared with a decline of 7.27 per cent.
Analysts at FSDH Research had said the equity market recorded its second largest month on month loss in November, saying that macro-economic challenges continued to affect quoted companies.
They said, market activities picked up in the month of November 2016, compared with October 2016. The volume of stocks traded increased by 65.96 per cent to N6.09 billion. The value of stocks traded also increased marginally by 0.56 per cent to N32.20 billion.
According to them, the movement in the NSE ASI in November showed that the equity market is awaiting clear economic policy direction for investors to take positions.
“Any positive pronouncement in December 2016 from the federal government that will improve confidence in the economy will likely lead to a modest appreciation in the equity market. The planned crude oil production cut may have positive impact on oil price. Consequently, equity prices may respond positively,” the analysts said. Making recommendation on what investors should do, FSDH Research advised investors to maintain a medium to long term position in the equities market.
“We recommend that investors should maintain a medium-to-long term position in the equity market. We reiterate that long-term investors should take long positions in stocks that have strong fundamentals,” they said. The analysts added that the performance of the equity market in the last three years shows that the market recorded positive performances between November and December.
“However, the current economic headwinds and the initiative of the government may determine the movement in the equity market in December 2016,” they stated.
Oando Plc, an indigenous energy group, has announced the completion of a $115.8m (N35.3bn) partial divestment of its midstream subsidiary, Oando Gas and Power Limited, to Glover Gas & Power B.V., a special purpose vehicle owned by Helios Investment Partners LLP, an Africa-focused private investment firm.
The deal, according to a statement on Tuesday, will see Helios acquire 49 per cent in voting rights, while injecting cash into OGP and the larger Oando Group.
The Group Chief Executive Officer, Oando, Adewale Tinubu, was quoted as saying, “The commencement of this strategic partnership underlines Oando’s status as the indigenous partner of choice for international firms in our industry, while also acknowledging the group’s unwavering commitment to improving access to gas and power solutions for industries, consumers and commercial counterparties in the sub-region.
“This partnership will firmly leverage OGP’s local knowledge and expertise, alongside Helios’s global network and financial capabilities, to optimise our existing operations and expand our footprint.”
The Co-founder and Managing Partner, Helios Investment Partners, Tope Lawani, said, “The completion of the transaction underscored Helios’ commitment to investing in businesses that deliver energy access solutions to industries and consumers across the continent.
“We look forward to working closely with the OGP management team and other industry stakeholders to consolidate the company’s position as a premier provider of cost-effective and reliable gas and power infrastructure.”
According to the statement, the new partnership with Helios is also testament to Oando’s legacy of continuous growth through audacious acquisitions and successful partnerships, most notably its landmark $1.5bn acquisition of ConocoPhillips Nigeria in 2014.
The statement described the OGP as the pioneer developer of Nigeria’s foremost natural gas distribution network and had subsequently grown to become the largest private sector gas distributor in the country, delivering at peak 70 million standard cubic feet per day to over 175 industrial and commercial customers via a vast network of gas infrastructure.
According to it, with over 260km in pipeline infrastructure built, OGP provides energy solutions in the South-East and South-West primarily through its subsidiaries, Gaslink Nigeria Limited, Gas Network Services Limited and Central Horizon Gas Company.
“Amid a global downturn and pressured crude oil prices, the deal is another defining moment in Oando’s optimisation of its balance sheet and asset portfolio. By proactively implementing a strategic direction centred on self-sustaining entities, the company is addressing its immediate objective of aggressive debt reduction, while remaining a viable player in the sector,” it added.
According to the statement, since 2011, Helios has made investments in the African oil and gas sector, and partnered Vitol to purchase an estimated $1bn 40 per cent stake in the African downstream fuels business of Royal Dutch Shell.
Oando also completed a $210m recapitalisation of its downstream business with the consortium earlier in the year.
The volume of imported agricultural products rose by 33 percent in the third quarter of the year (Q3 2016), the National Bureau of Statistics (NBS) stated monday.
It added that raw materials imports grew 60 percent above the level in Q2While imported solid minerals grew 68.5 percent compared to the previous quarter.
The statistical agency further stated in its 3rd Quarter 2016 External Trade News: Trade Intensity Index/Re-Exports Analysis, which was released yesterday that the value of exported agricultural products rose by 5.30 percent relative to Q2., while imported raw materials was 32.05 percent higher in value than the previous quarter.
Essentially, the report serves to complements the quarterly trade reports- particularly the Q3 foreign trade statistics released recently, by providing a clearer analysis of sectoral classification of imports and exports at a more aggregated level, without crude oil and oil products which tend to distort and disguise other trade patterns due to their size.
In the new analysis by the NBS, wood fuels are separated from mineral fuel which was classed in the same category with crude oil and other oil products. It further enhances the regular trade report by deepening trade analysis by introducing the concept of re-exports and trade intensity, according to the NBS.
Nevertheless, other oil products grew by 43.3 percent in the period under review compared to Q2 estimates while solid minerals exports grew by 220.96 percent. The NBS said the value of manufactured products exports was also 21.86 percent more than the record in Q2 while crude oil exports rose 30.86 percent in Q3.
Nigeria’s external trade totaled N 4.72 trillion in Q3 and consisted of exports worth N2.30 trillion and imports valued at N2.41 trillion, indicating a slight negative trade balance of N104 billion. Crude oil exports accounted for N1.94 trillion or 4.2 percent of total trade.
According to the NBS:”The Country’s import intensities were also high with India (2.57, 2.49 and 1.28) and the Netherlands (4.38, 2.57 and 1.04) during the same months. However, the import intensity of Nigeria with United States and Spain were lower, with indices less than one other than for Spain in August. This is possibly a result of the mix of products imported from these countries, which may have been affected more by the CBN import regulations.”
The naira depreciated to N490 to dollar on the parallel market yesterday, compared with the N485 to the dollar it closed last Friday.
THISDAY checks showed that the nation’s currency, which earlier depreciated to N487 to the dollar, slipped further as a result of strong demand for the greenback.
A trader attributed the high dollar demand observed in the parallel market to the activities of importers who have to make payments to bring in goods for end of year sales.
Meanwhile, the Central Bank of Nigeria (CBN) has asked banks to submit bids for a “special currency auction” to clear the backlog of matured outstanding dollar obligations for selected sectors of the economy, traders said on Monday. The central bank instructed commercial lenders to submit backlog dollar demand from fuel importers, airlines, raw materials and machinery for manufacturing firms and agricultural chemicals by 1500 GMT for a special forex intervention, Reuters disclosed.
Traders said the central bank plans to sell “funded forwards of two to five months tenor” dollars to the targeted sectors at an auction ahead of the closure of the forex market for the year.
The central bank is expected to close all foreign exchange transactions this Friday ahead of its financial year end and the Christmas period. The naira currency has traded around N305.5 to the dollar on the official interbank market since August.
Two weeks ago, the bank had asked commercial lenders to submit bids for a special intervention auction targeting fuel importers, but the result of the auction has not yet been released, traders said.
On Monday, the Nigerian National Petroleum Corporation said it had imported about 38.7 million litres of aviation fuel, which it said “represented about 26-day sufficiency”, as part of its “ensure a hitch-free air travel across the country during and after the yuletide period”.
The Federal Government has secured $150m from the World Bank for the solid minerals sector support and economic diversification.
The Minister of Mines and Steel Development, Dr. Kayode Fayemi, disclosed this while briefing the press in Abuja on Monday on the activities of the ministry in 2016.
He also said that the ministry was seeking to raise $600m investment fund for the sector in alliance with the Nigerian Stock Exchange and the Nigerian Sovereign Investment Authority.
According to the minister, the World Bank fund will be used to provide technical assistance for the restructuring of the Mining Investment Fund.
Fayemi said, “We are working with the Nigerian Sovereign Investment Authority, the Nigerian Stock Exchange and others to assemble a $600m investment fund for the sector, which we hope to conclude and operationalise by the second quarter of 2017.
“We have secured support from the World Bank for $150m for the Mineral Sector Support for Economic Diversification programme, a critical component of which is to provide technical assistance for the restructuring and operationalisation of the Mining Investment Fund, which will make finance available to artisanal and small mining operators through development finance, microfinance and leasing institutions.
“The fund will also help to bring back on stream previously abandoned proven mining projects like tin ore, iron ore, coal, gold and lead-zinc.”
He added, “We are working to retrieve old data obtained on the various mineral deposits across the country, as well as enter into joint ventures with private exploration companies to generate new data from our Greenfield explorations. We hope that analysis of this information will help to further buttress our speculations on the quantity and quality of mineral deposits in the country.
“Our Nigerian Geological Survey Agency has undertaken additional ground investigations nationwide to upgrade our National Minerals Database and to further ascertain the assays of our mineral assets to the level that can easily attract financial investments and assure operators of the scope of operations required for further exploration and/or mining.
“We have improved the productivity of the sector by tripling the ministry’s contribution to the Federation Account to about N2bn in 2016, up from N700m in 2015.”
He also stated that the government had constructed 10 prototype minerals buying centres across the country for specific strategic industrial minerals.
Fayemi said the centres were to serve as standardisation centres to enable artisanal and small mining cooperatives and operators receive fair premium for their labour.
The minister also inaugurated the Mining Implementation and Strategy Team as well as 38 project vehicles purchased at a cost of over N400m for mines’ inspection.
The Mining Implementation and Strategy Team, which is headed by the Chairman of Nigerian Mining and Geosciences Society, Prof. Olugbenga Okunlola, is tasked with the responsibility of implementing the Federal Government’s blueprint for the mining sector.
The Bank of Industry (BoI) has signed a deal with three international development partners for the development of the country’s agricultural sector. The pact with GIZ and DFID will aid lending of up to N10 billion to small and medium enterprises in the agricultural sector.
Speaking at the signing of a memorandum of understanding (MoU) in Abuja, acting Managing Director, BoI, Mr. Waheed Olagunju said the agreement was a testimony to the bank’s support to the development of the agriculture sector. According to him, the bank’s passion for the sector was borne out of the conviction that it holds the key to the diversification of the nation’s economy at a time of dwindling oil revenue. He said based on the agreement, the bank would provide up to N10 billion exclusively for the acquisition of agro-equipment by either agricultural service providers or well established farmers.
According to him, the latest intervention to the sector was the largest the bank had earmarked for any product programme, noting that based on the pact, the amount would be repaid within a five year period by beneficiaries at a nine per cent interest rate. He said based on the agreement, micro enterprises would be able to access up to N10 million; while SMEs would access between N10 million and N50 million while medium scale entrepreneurs could access above N50 million but not exceeding N500 million.
Olagunju added: “In recognition of the catalytic role that agro-processing plays in boosting good production, BoI in collaboration with development partners have designed a program to provide finance for agro-equipment service providers and well established farmers as well. “It is envisaged that with better access to credit to fund acquisition of agro-equipment, there will be improved efficiency and production output in the agricultural sector. “A N10 billion fund has been earmarked for the acquisition of agro equipment and it is the largest amount of money that the bank has earmarked for any program and this is a testimony to the importance of agro mechanization in economic development of Nigeria.”
He said the programme will enable the bank create 10,000 direct jobs and 30,000 indirect jobs within the targeted period.
The Deputy Governor, Economic Policy, Central Bank of Nigeria (CBN), Dr. Sarah Alade has said corporate treasurers hold the key to financial stability in 2017.
Speaking at the maiden breakfast meeting of the Association of Corporate Treasurers of Nigeria (ACTN) in Lagos, Alade said that the survival of the financial system rests squarely on the shoulders of corporate treasurers.
She therefore, called on the corporate treasurers to avoid destructive cut-throat competition and oligopolistic dominance that could lead to failure of our banking institutions.
Alade, who spoke on “The Economic Outlook for 2017 and its impact on the Corporate Sector,” through Director, Monetary Policy, CBN, Moses Tule, urged corporate treasurers to collectively begin to take measures to fine-tune the effectiveness of the monetary policy transmission mechanism to ensure increased financial intermediation.
“As Treasurers, you are in a vintage position to know where the shoes pinches and you can collectively address the nuances in the system. The weather ahead is not so friendly but dogged determination by your good selves would help ride the stormy headwinds,” she said.
The CBN deputy governor noted that dwindling credit to private sector in spite of the liquidity surfeit in the banking system remains a puzzle contrary to conventional wisdom. “The headwinds I see tells me that only when you act together would you survive the tsunami. Thus, while transparency, professionalism, corporate governance and ethics draw you closer to each other, destructive cut-throat competition and oligopolistic dominance sure prepares a nesting place for failure of our banking institutions as was the case in our recent past,” Alade said.
She stated that achieving appropriate macroeconomic policies has continued to be a great challenge to the monetary authorities, stressing that “the monetary authorities are currently faced with very difficult choices in the tradeoff between tackling inflation, supporting growth and exchange rate stability.”
Also speaking at the meeting, Managing Director/CEO, FMDQ OTC Securities Exchange, Bola Onadele.Koko, urged corporate treasurers to always articulate their problems and think of solutions to them from the investment bankers perspective.
“In 2017, private company bond rules will be published by FMDQ. This will enable the private companies tap from the debt capital market,” he said.
Another speaker and Chief Executive Officer of Citi Bank Nigeria, Mr. Akin Dawodu, said “2017 is really just another year that corporate treasurers must be concerned about the liquidity situation of their institutions.
“That is an important factor they must all be concerned about. For Medium to Small sized Corporates, they should expect to see liquidity challenges within a tight monetary policy environment. They have to keep a focus on liquidity of their corporates,” he said.
Shareholders of Nipco Plc have applauded the move to acquire 60 per cent of Mobil Oil Nigeria Plc from Exxon Mobil Oil Corporation, United States.
Nipco Plc has signed an undertaking to acquire the 216,257,137 ordinary shares of Mobil Oil Nigeria for $301 million, subject to price adjustments for dividends and other factors.
At an extra-ordinary general meeting (EGM) held in Abuja, shareholders of Nipco lauded the acquisition and authorised the board to stand as Surety/Guarantor for Nipco Investments Limited,(its fully owned subsidiary) in its bid for the acquisition of the shares.
The shareholders also approved the guaranty dated 26th September, 2016 given by Nipco for the benefit of ExxonMobil Corporation in connection with the acquisition by Nipco Investments Limited of the sale shares.
EGM, one of the shareholders, Alhaji Sani Yau said the feat undertaken by the company is a commendable one, adding that it has further shown the firm’s level of confidence in the Nigerian economy.
According to him, the fact that Nipco had in the last 12 years focused exclusively on the downstream sector will give it necessary confidence and wherewithal to effectively position the company as an industry leader within the shortest possible time.
He maintained that the confidence reposed in Nipco to put Mobil Oil back into the leadership stride in the sector has stated to manifest in the upward rise of its shares by over 55 per cent since the news of the acquisition broke out. The shareholder said the acquisition would make the group combined retail outlets to grow to about 500 stations bearing in mind that retailing offers veritable opportunities for upward growth in the downstream sector.
Earlier, the Managing Director, Nipco, Mr. Venkataraman Venkatapathy said the acquisition was as a result of ExxonMobil selecting Nipco as the preferred bidder for the 60 per cent equity after a rigorous bidding process.
The MD, who represented the Chairman of Nipco, Chief Bestman Anekwe, said the acquisition is an important synergy and part of a strategic to support NIPCO continuous growth and expansion in the retail sector of the oil and gas industry. He said the company would continue to maintain the Mobil brand at its retail outlets as well as continue to blend and sell Mobil brand of lubricants under blending licence from ExxonMobil.
