Crude oil prices were two-month low early yesterday, on fears that global inventories of crude and the increase in United States rig count could remain high.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in August traded at $45.05 a barrel, down by $0.19, or 0.4 per cent, in the Globex electronic session.
September Brent crude on London’s ICE Futures exchange fell by $0.24, or 0.5 per cent, to $46.72 a barrel.
Also, Organisation of Petroleum Exporting Countries (OPEC) oil basket’s price stood at $43.36 per barrel on July 18, or $0.12 more than on July 15. The OPEC Reference Basket (ORB) is made up of the following oil brands: Saharan Blend (Algeria), Girassol (Angola), Oriente (Ecuador), Rabi Light (Gabon), Minas (Indonesia), Iran Heavy (Islamic Republic of Iran), Basra Light (Iraq), Kuwait Export (Kuwait), Es Sider (Libya), Bonny Light (Nigeria), Qatar Marine (Qatar), Arab Light (Saudi Arabia), Murban (UAE) and Merey (Venezuela).
According to the latest OPEC report, the total US rig count, which includes the loss of one gas rig to 89, climbed by 10 to 431 on a monthly average.
The US oil rig count rose for the fourth time in five weeks, adding 11 oil rigs in the week to 1 July and bringing the total count up to 341, according to Baker Hughes’ latest survey.
On a monthly basis, the total US rig count in June increased by 13 rigs m-o-m to 420 rigs, but declined by 452 rigs.
OPEC stated: “Oil rigs were also up by 11 rigs in June compared to a month earlier, all in the Permian Basin. In yearly terms, there was a drop of 303 rigs to 332 rigs in the previous month, of which 187 rigs were in Texas. It seems that producers have increased the number of rigs just to compensate for the heavy declines in crude output seen in April and May 2016”.
The increase in crude oil production in Nigeria is expected to affect the prices of crude oil.
Specifically, the country’s crude oil output increased by 97,000 barrels per day, up from a total of 1.426 million barrels per day that was recorded in April to 1.523 million bpd in June, according to OPEC.
“According to secondary sources, total OPEC-14 crude oil production averaged 32.86 million bpd in June, an increase of 264,000 bpd over the previous month. Crude oil output increased mostly from Nigeria, Iran, Saudi Arabia, Libya and the UAE, while production showed declines in Venezuela and Iraq,” it stated.
Nigeria’s economy, the biggest in Africa, is likely to contract by 1.8 per cent this year, the International Monetary Fund has said.
The Washington-based lender cut its 2016 growth forecast for Nigeria from 2.3 per cent projected in April, according to its World Economic Outlook update released on Tuesday.
The projection for next year was reduced to 1.1 per cent from 3.5 per cent.
“In Nigeria, economic activity is now projected to contract in 2016, as the economy adjusts to foreign currency shortages as a result of lower oil receipts, low power generation and weak investor confidence,” the IMF said.
The IMF almost halved its 2016 growth forecast for sub-Saharan Africa to 1.6 per cent and cut its 2017 projection to 3.3 per cent from four per cent.
It said the substantial downgrade of the region’s forecast reflected the “challenging macroeconomic conditions in its largest economies, which are adjusting to lower commodity revenues.”
The lender said Africa’s second largest economy, South Africa, would expand by 0.1 per cent this year and one per cent next year.
The IMF stated, “The outlook for other emerging and developing economies remains diverse and broadly unchanged relative to April. That said, gains in the emerging group are matched by losses in low-income economies.
“Indeed, low-income countries saw a large downward revision in 2016, in large part driven by the economic contraction in Nigeria, and also worsened the outlook in South Africa, Angola and Gabon.”
Nigeria’s Gross Domestic Product contracted by 0.36 per cent in the first quarter of the year, and economic experts have predicted the economy will record another negative growth in the second quarter.
The Governor, Central Bank of Nigeria, Mr. Godwin Emefiele, said a recession appeared to be imminent.
The IMF country representative in Nigeria, Gene Leon, had recently said that while the country’s economy should look better in the second half of the year, growth would probably not be sufficient to negate the outcome of the first and second quarters.
The currency restrictions imposed by the CBN last year in an attempt to protect the dwindling external reserves prompted investors to flee and led to dollar shortages, pushing down the naira.
“The forecast of 1.8 per cent probably assumes a downturn in the second half,” a Johannesburg-based Africa analyst at Rand Merchant Bank, Nema Ramkhelawan-Bhana, told Bloomberg on Tuesday.
“I think there will be sustained pressure from the oil economy, and its ripple effects to other sectors of the economy,” Ramkhelawan-Bhana added.
The nation’s inflation rate accelerated to 16.5 per cent in June, the highest in almost 11 years.
The Central Bank of Nigeria, which kept its benchmark rate at 12 per cent in May, will announce its next policy decision on July 26. Six of nine analysts in a Bloomberg survey forecast borrowing costs will stay unchanged.
The IMF also cut its forecasts for global economic growth this year and next as the unexpected United Kingdom vote to leave the European Union creates a wave of uncertainty amid already-fragile business and consumer confidence.
Oando Plc has said it would record lower earnings for the second quarter ended June 30, 2016. In a notification to the Nigerian Stock Exchange (NSE), the oil firm said the lower earnings would result from the impact of the Naira devaluation by the Central Bank of Nigeria that is expected to amount to an unrealised foreign exchange loss arising from United States dollars (USD) denominated liabilities, outstanding bank trade facilities as well as vendor payables.
Oando said: “As at the time of the devaluation the company had USD denominated borrowings of $260 million in our Naira dominated earnings businesses, consisting of ~$68 Million in core loans, $89 million in bank trade facilities, $83 Million in asset financing and $21 million in other payables. A 40 per cent devaluation in the value of the Naira against the US dollar from the bank rate of N199.00:$1.00 to N280.00:$1.00, has effectively resulted in these significant foreign exchange losses which we have prudently booked into our financial statements.”
The indigenous energy group bounced back into profitability for the first quarter (Q1) ended March 31, 2016. Despite the prevalent challenging operating landscape, the company recently assured stock operators during its ‘Facts behind the figures’ session at the NSE, of its desire to return to consistent profitability by growing its dollar earning higher margin upstream and export trading businesses.
Commenting on the company’s confidence in its diversified business model and the long-term prospects for growth in Nigeria and beyond, Group Chief Executive, Oando, Mr. Wale Tinubu, said: “This first quarter of 2016 demonstrated our dedication to return our business to profitability by the end of the 2016. We have implemented constructive corporate initiatives which are driving forces for our business in this new global reality of economic restraint and lower oil prices in our industry.
The successful and ongoing implementation of these initiatives reiterates our strategy of growth, deleverage and a return to profitability by the end of 2016. As a group we have placed our focus on growing our upstream higher margined business while still holding fundamental interests in the midstream and downstream sectors. We look forward to a rewarding year, where we solidify our aspirations and return to profitability.”
Tinubu noted that market-driven efficiencies have encouraged the management to implement a necessary corporate reset through recapitalisation to ensure alternative capital access to optimise our business operations and value preservation for our shareholders.
Oando also recently agreed a N70.5 billion recapitalisation of its Downstream business with Vitol, the world’s largest commodities trader and Helios Investments Partners, a premier West African focused private equity firm.
The MTN Group on Tuesday said that a poor financial performance in Nigeria, as well as the N330bn fine imposed on it by the Federal Government would push its headline earnings per share into red.
According to the telecommunications firm, it is likely to report negative basic headline earnings per share and basic earnings per share for its half-year results for 2016.
The company said that the expected decline in the HEPS and EPS “is primarily because of the regulatory fine imposed on MTN Nigeria, following a resolution with the Federal Government of Nigeria on June 10, 2016.”
It also said that foreign exchange losses in a number of operations, losses from joint ventures and associates, and hyperinflation adjustments on MTN Irancell were also expected to have a negative impact on the HEPS and EPS for the half-year.
It stated, “The results are further expected to be negatively impacted by the under-performance of MTN Nigeria and MTN South Africa.”
United Capital Plc wednesday raised the hopes of its investors for another bountiful harvest as the company reported a jump of 154 per cent in profit after tax (PAT) for the half year (H1) ended June 31, 2016.
The investment banking firm had last year recorded an impressive performance and rewarded shareholders with a dividend of 35 kobo per share.
However, going by the unaudited H1 results made available to stock market operators by the NSE yesterday, shareholders should expect better performance at the end of the current financial year. According to the results, United Capital recorded gross revenue of N3.655 billion in 2016, up by 34 per cent from N2.750 billion posted in the corresponding period of 2015. Investment income rose from N1.349 billion to N1.721 billion, while fees and commission income grew from N817 million to N980 million. Net operating income settled at N3.411 billion, up from N2.546 billion, while total revenue stood at N3.655 billion, compared with N2.750 billion in the corresponding period of 2015. In spite of the rise in inflation, the management of the United Capital maintained a commendable cost strategy that led to a reduction in total operating expenses from N1.128 billion to N1.074 billion.
Consequently, the company ended the year with a profit before tax of N2.065 billion, indicating a growth of 47 per cent. However, the company’s bottom-line was boosted by a N1.526 billion realised from the sale of investment in an associate company to hit N3.591 billion in 2016, up from N1.408 billion in 2015.
The Group Chief Executive Officer of United Capital Plc, Mrs. Oluwatoyin Sanni had told shareholders that she was confident in company’s ability to consistently deliver value to all stakeholders in the current year.
“I have no doubt in my mind that the strategies we have put in place in light of our expectations of market scenarios in the coming year will prove effective in delivering much better results. I must thank all of you for your constant support in our task of building a leading financial services firm in Africa. I am confident that with the dedication of our resourceful staff and your unalloyed support, we will continue to delight you with superior return in every line of business we are involved,” Sanni said.
The Lagos state government has expressed confidence in the new board and management of Skye Bank Plc, noting that the bank is safe and in good financial health.
In a circular released yesterday by the states Permanent Secretary Ministry of Finance/Accountant General A. S Umar (Mrs), and circulated to the states MDA and Local Governments, she noted that the state government is a major stakeholder in Skye Bank.
She further advised public servants and to desist from panic withdrawals as negative rumours making rounds against the bank were unfounded.
Lagos State economy with a population nearing 21 million and four million in the middle class has been described by the local and international agencies as Africa’s fifth largest economy in GDP which is estimated at about $131 billion The new business partnership between Skye Bank and the state is therefore expected to further boost the bank’s capacity as one of Nigeria’s leading retail and commercial bank, a statement from the bank explained.
The new management of First Bank of Nigeria Limited has allayed fears that its exposure to huge Non- Performing Loans (NPL) would impact negatively on the financial health of the bank, stressing that its strategic focus is the reduction in its recurrent expenditure and impairment charges as well as developing and positioning the bank as a topline revenue earner in the economy.
Speaking in an interactive session with the media in Lagos on Tuesday, the Managing Director, Dr. Adesola Adeduntan who led his management team at the session assured that with a customer base of 10million depositors, 7000 branch network across Nigeria and with over 3million Automatic Teller Machines (ATM) deployed across the country, “our bank is aiming to regain its number one regional spot and remains fully embedded in the Nigerian economy in terms of growth and development of the economy.”
He acknowledged that although the bank had challenges and had to contend with high running cost as well as impairment charges, he assured that new management had deployed technological know-how to reduce the trend adding that “the cost to income which was at 67% has been reduced to 57% and our target is to further achieved a reduction to 48% just as we are also looking at getting a better credit profile for our NPLs.”
Adeduntan said despite the bank’s huge NPL exposure, “our fundamentals remain strong because our liquidity ratio is above 15% as required by the regulator. We are currently dealing with the exposures in our books but lots of them are already secured and we have the Profit and Loss (P&L) account to deal with the NPL exposures which have arisen from our failed investment in the oil and gas sector.”
On what the new management is doing to ensure it returns the bank to its number one position, Adeduntan said “right now we are engaged in recoveries and remediation. But importantly, the entire credit system has been overhauled and we have adopted a new model driven by People, Policy, Process and Technology.”
He said the bank under the new management “has adopted the Oracle risk management system and has recruited an internationally certified Credit Risk Officer to ensure that our NPL never goes way near where it is today and we are not in the category of any bank the regulator is intervening because our capital adequacy ratio is above the required minimum. In addition, we have revoked lending authority from junior officers and centralized the approval process to forestall infraction.”
He said under the new management, the bank is changing its business culture and getting its staff to refocus on ‘the customer first’, adding that although there has been spates of retrenchment across banks in the country, he assured that “we have no immediate plans for retrenchment, our staff will continue to be utilised in viable areas so long as they remain useful.”
The African Development Bank (AfDB) and the African Securities Exchanges Association (ASEA) have signed a five-year Memorandum of Understanding (MoU) to amplify the impact of their strategically aligned joint efforts to promote resources mobilization to fund Africa’s economic growth.
The MoU would provide a collaborative framework for harmonizing and coordinating the efforts of AfDB, the premier international development financial institution for Africa, and ASEA, the premier body of African stock exchanges, towards deepening and connecting African financial markets.
The partnership will facilitate various projects of mutual interest to both the Association and the Bank, targeting areas such as financial markets infrastructure development, introduction of new products in the market, improving market liquidity and market participation, information sharing and capacity building amongst other programs.
The President of AfDB, Akinwumi Adesina argued that the strengthening and deepening of Africa’s financial markets, as a strong tool to mobilize domestic and international savings at an efficient cost, and channeling them towards funding Africa’s private sector, was critical to accelerating the pace to achieve the bank’s 10-year strategy from 2013-2022 all inclusive growth in Africa. “It is therefore integral to the Bank’s High 5s Priority Agenda to ‘Light up and Power Africa’ to ‘Feed Africa’, to ‘Integrate Africa’, to ‘Industrialize Africa’ and to ‘Improve the Quality of Life of Africans’, all of which embody core elements of the 2030 Agenda for Sustainable Development Goals (SDGs).”
According to the President, African Exchanges Linkage Project (AELP), Oscar Onyema explained that the maiden project to be undertaken under the cooperation initiative would be the AELP.
“Collaboration will extend to other joint projects or programs over time. Co-initiated by ASEA and the Bank, the AELP is aimed at addressing the lack of liquidity in African capital markets by creating linkages across markets. It is envisaged that the linkage would allow cross border visibility and open-up markets for investors to trade in any of the linked markets.”
He noted that the AELP would primarily commence with the four pilot Exchanges selected by ASEA as regional hubs during the incubation phase of the project, namely the Casablanca Stock Exchange (CSE), the Johannesburg Stock Exchange (JSE), the Nairobi Securities Exchange (NbSE) and the Nigerian Stock Exchange (NiSE), adding that it would eventually be extended to other ASEA Member Exchanges.
With regards to the AELP, according to Onyema, these linkages would support innovation, stimulating the creation of suitable products in relations to instruments listed on the various linked markets creating more investment opportunities for the investor community.
He stressed that the linkages would also afford issuers access to deeper pools of capital and a wider community of investors and analysts, adding that AfDB and ASEA are devoted to ensuring that the continent achieve its full economic potential through the AELP with a continuous robust relationship.
Union Dicon Salt Plc (UDS) has unveiled a $100 million expansion strategy, aimed at transforming the firm into an integrated food manufacturing and Agro – business to boost profitability.
Under the diversification scheme, which would be completed within 48 months, the firm plans to build production capacity in key food areas, become a national manufacturer and distributor of fast moving consumer goods and an integrated supply that would enable it become a processor of agricultural products and food ingredients.
Already, the company, had, last month, signed agreement with PNG Gas in Delta State to supply gas to its proposed starch processing plant in Umutu in Delta State, as continuation of its strategic plan to becoming a fully integrated firm.
Speaking during the company’s ‘Facts Behind the Restructuring’ in Lagos on Monday, the Managing Director of the company, Chuka Mordi explained that the firm has invested in an installation of a 10,000 MT PA starch processing plant for the conversion of cassava to starch. According to him, the company has also invested in Alape SCPZ investment to increase starch processing capacity to over 90,000 MT PA five years, with enzymatic conversion to maltose syrup.
He added that agreements have been signed with GEA Westfalia and Fortescan Ltd for plant installation and commissioning.Mordi pointed out that the strategy was to create an integrated processing business by controlling output from root to final product, in order to maintain strict quality and ensure feedstock supply that may arise from logistics.
Ite“Union Dicon Salt Plc. was a successful salt processing and distribution company, and a highly regarded brand, in Nigeria; The UDS brand retains significant potential: brand recognition, logistics, and goodwill.
“As a strategic investor in the company, CBO commenced plans in 2014, to revive UDS Plc, an opportunity to diversify the business (operations, & products) for increased competitiveness.
“UDS has the capacity to actively participate in the over USD 140bn food and consumer market in West Africa, that is forecast to rise to over USD 212bn by 2020. This market, which includes pre-processed, and processed consumer products, present a compelling entry opportunity to UDS Plc.
“Management has initiated a 48-month, USD100m strategy aimed at transforming UDS Plc. into an integrated FMCG & Agri – Business with an initial focus on food and agriculture.”
In view of the current state of UDS’s assets and infrastructure, he explained that investment is ongoing to scale up the new operations that the business has acquired.He noted that key investments under this basis are assets that guarantee quick gains, and that will ensure immediate cash flow generation.
He added that the company has commenced a clear-targeted marketing campaign aimed at renewing public consciousness of the UDS brand.
The Speaker, House of Representatives, Yakubu Dogara has said that the parliament would partner with the council of the Nigerian Stock Exchange (NSE) to ensure full implementation of the capital market 10-year masterplan.
Dogara, who identified lack of proper stakeholders’ engagement as one of major setback of the capital market, assured the council of NSE that the Legislation would work with the council and other relevant stakeholders in addressing issues bordering the market.
“Part of the problem we had in the past is because we did not have that kind of synergy with the council very well, they have worked in that direction. “There is positive synergy now between the legislative and the council and utilising that, we can achieve a lot.“The stakeholders conference that took place some weeks ago and there was a communique that came out at the end of that stakeholders forum.
“We promised that whatever outcome that was generated from that stakeholders summit, we will ensure that we implement it if it is related to what we can do as a parliament. He added that the parliament would address some of the issues raised at the just concluded stakeholders forum by giving considerations to some of the capital market bills in the National Assembly (NA).
“The Investment and Securities Act is there, the Companies and Allied Matters Act is there before the NA and I believe that public hearing will take place very soon. Notices of hearing in all cases is the fundamental requirement,” he added.
On the listing of multinationals, Dogara explained that the Parliament would look at the agreements of these companies with the Bureau for Public Enterprises (BPE), noting that the Parliament would compel them to list if it was stated on the agreement.
“Where there are clauses that require them to list and they have not done so through the power of oversight, we would ensure that it is done. They must be penalized in line with the agreement signed with BPE.
“There is an on-going discussions about strengthening those clauses in BPE to ensure that we emphasis that once a company is privatized you must list a reason part of the equity in the market and we must follow through to ensure that it is done,” he assured.
Dogara said that the house would ensure that this was done in respect of spectrum given out to telecommunication firms, which, according to him, would expire soon.
“We will ensure that this will be a cardinal requirement that will compel them to list some part of the equity in the market. If we do that, we would be sure that sooner or later, we would be sure of having some of these firms list on our market,” he said.
