Nigeria LNG Limited (NLNG) has put the immediate loss of foreign investment due to the delay in the takeoff of its Train 7 plant at $25 billion (N10 trillion).
According to the company, another impact will be the potential loss of about 18,000 jobs required for the construction activities of Train 7. Speaking at the on-going 2017 Nigeria Oil and Gas Strategic Conference and International Exhibition in Abuja titled: “Nigeria’s Gas Sector – The Catalyst for Economic and Industrial Growth,” the Managing Director of NLNG, Tony Attah, said the Federal Government should focus on how to grow the Nigeria oil and gas sector.
Attah emphasised the need to focus on NLNG model and get moving on the Natural Gas Policy, implement fiscal reforms in joint ventures, production sharing contracts and service contracts as well as embed adequate institutional reforms while ensuring that the Petroleum Industry Bill (PIB) is passed into law without delay.
But the Minister of State for Petroleum, Ibe Kachikwu, said that the Federal Government has initiated gas policy interventions that would move the economy from oil to gas. He disclosed that the country will diversify the gas supply options within Nigeria, to ensure security of supply; extend gas penetration in the domestic market in order to facilitate the growth of the electric power, agricultural, and industrial sectors; gain a presence for Nigerian gas in international markets; and operate a gas industry with a clear division of roles between private and public sectors
Also, the Group Managing Director Nigeria National Petroleum Corporation (NNPC), Dr. Maikanti Kacalla Baru, said about $51 billion investment opportunities exist today in the midstream and downstream gas sector to achieve the growth phase in the Industry in Nigeria.
Baru posited that about $35.4 billion investment will be required in the gas exploration and production activities, power plants projects, fertilizer plants, virtual pipelines and flare gas commercialization initiatives.
The GMD added that $16 billion investment will also be needed in the Free Trade Zones (FTZ) infrastructure development and concessioning, port infrastructure, central gas processing facilities, gas transmission, LPG plants, real estate development, pipe milling and local fabrication yards among others.
Speaking further, Attah said that hopes for economic and industrial growth will be dashed if inhibitors such as the removal of legislative frameworks like the NLNG fiscal incentives, Guarantees and Assurances Act, are permitted in the Nigerian gas industry
Attah stated: “It is time for gas. We need deliberate decisions and policies to decouple oil from gas and attract investment. We need to do that now. Investments in the gas and LNG industry are declining. It is already difficult as things stand. To find Foreign Direct Investment (FDI) and growth in the gas industry has been cautious after the recent down-beat global crude oil price. In addition to this, Nigeria is ranked 167 of 189 countries in the ease of doing business index.” “Yet, experts maintain that there is the strong likelihood of increased gas demand in future and that is where the silver lining is. However, if we continue with the self-inflicted barriers in our gas industry, we might miss the opportunity to make this country a major player in the global energy mix,” he said.
“The industry has benefited the economy, diversifying the revenue and export base as well as channelling FDI into the country, creating jobs and contributing significantly to the local manufacturing capacity in the country, but all that would be laid waste if we continue shift policies and renege on international agreements that put some framework into the business and generated investor confidence. We need to be creative with incentives that will attract investments and preserve the sanctity of contracts and agreements for all of this to come together in our national interest.
“Take Nigeria LNG for instance. Only recently, the House of Representatives began moves to amend the NLNG Fiscal Incentives, Guarantees and Assurances Act, a key enabler responsible for the success of the company. NLNG is a successful Nigerian company, with an asset base of $11 billion as well as the fourth largest LNG plant in the world. It has generated $90 billion in revenues as at 2015, paid $5.7 billion in taxes as well as committed more than $200 million to corporate social responsibility projects especially in the areas of capacity building and infrastructure development. All these were achieved with a management staff entirely made up of Nigerians, with 95 per cent of the total workforce made up of Nigerians.
The National Assembly, on Thursday, scored the Federal Government low on the performance of the capital expenditure in the 2016 budget.
The Federal Government, however, blamed the low performance on revenue shortfall, adding that while the total revenue target was N1.506tn, only N398bn was generated in the 2016 fiscal year, with a revenue shortfall of about N1.15tn.
The government also said it had achieved 55 per cent performance on the N870bn capital expenditure.
These were made known at a forum jointly organised by the Senate and House of Representatives Committees on Appropriations.
The Chairman of the Senate Committee, Senator Danjuma Goje, had asked the Federal Government officials how much had been released and cash-backed, the percentage of releases and percentage of cash backs out of the total budget.
In her presentation, the Minister of State for Budget, Mrs. Zainab Ahmed, recalled that the 2016 budget was predicated on an oil benchmark price of $38 per barrel, with an average oil output of 2.2 million barrels per day, and official exchange rate of N197 to a United States dollar.
She added that based on the aggregate revenue of N3.86tn, the size of the 2016 budget was N6.06tn, with a deficit of N2.2tn or 2.14 per cent of the Gross Domestic Product, which was supposed to be financed with local and foreign borrowings as well as recoveries.
Ahmed said, “We had last year prepared a Strategic Implementation Plan for the 2016 budget and this plan was principally prepared to guide the implementation of the budget. To this end, we identified 34 key priority areas and with very clear and verifiable targets.
“However, challenges in the economy have undermined the full realisation of the objectives set out in the SIP. Notwithstanding, for most of 2016, crude oil prices exceeded the benchmark of $38 per barrel. There had been a significant shortfall of projected revenue, which was caused largely by the disruption of crude oil production by militant activities.”
Others factors that affected the 2016 revenue target, she said, were fuel supply shortages, significant challenges with power supply and foreign exchange supply scarcity.
The minister stated, “The shortfall in the level of crude oil exports resulted in significant reduction in government revenues and foreign exchange shortages, which caused the economy to slip into recession. Since 95 per cent of our foreign exchange earnings come from the petroleum sector, this has impacted adversely on the level of non-oil revenues as well. The non-oil revenues were significantly impacted, as a lot of activities, even in the non-oil sector, depend largely on foreign exchange.
“On the expenditure side of the budget, the personnel costs were met completely; debt service obligations were fully met, but capital expenditure was behind targeted estimates. It is, however, important for us to note that by the close of the year, about N834bn was already released as capital expenditure. Let me also say that this is the highest release in the history of our country for a very long time. In fact, it exceeds the aggregate capital expenditure of the 2015 budget.”
The Accountant General of the Federation, Ahmed Idris, in his presentation, stated that one critical aspect of budget implementation that concerned his office was that of funds release “as appropriated and as approved.”
According to Idris, the total capital payment or releases for 2016 as of Thursday was N870,055,792,283.
He put the amount of Internally Generated Revenue at N398,335,850,749.45, adding, “There was also receipt or approval from FAAC of N4.058tn during the year.”
He said, “In doing that, we have invited the Minister of Finance (Kemi Adeosun) and other officials of the ministry; Minister of Budget (Senator Udo Udoma); Minister of State for Budget (Zainab Ahmed); Director General, Budget Office (Ben Akabueze); the Accountant General of the Federation (Ahmed Idris); Director General, Debt Management Office (Abraham Nwankwo); and the Governor of Central Bank of Nigeria (Godwin Emefiele).
The session started on a dramatic note when a member of the committee, Senator Jibrin Barau, called the attention of the lawmakers to the absence of some officials from the meeting.
“Chairman, I can see that the Minister of Finance is not here and this is a very important session that the minister needs to be here. I don’t know why she is not here,” he said.
Adeosun later joined the session.
Goje also announced the absence of the Governor of the Central Bank of Nigeria, Godwin Emefiele, and asked to know his representative.
An Acting Director of the CBN, Mr. Mohammed el-Yakubu, indicated that he was representing Emefiele and expressed the “sincere apologies” of the governor to the lawmakers.
But the announcement angered the lawmakers.
Members of the committee asked that Emefiele’s representative to leave the meeting, insisting that the CBN governor or one of his deputies should be at the meeting.
The Nigerian Stock Exchange (NSE) has announced the listing of $1 billion Federal Government (FGN) Eurobond which will be issued under the country’s newly established Global Medium Term Note programme on the floor of the Exchange today.
The 15-year domestic Sovereign Eurobond priced at par and at a coupon of 7.875 per cent per annum is the first foreign currency denominated security to be listed and traded in the Nigerian capital market.
The Director General, Debt Management Office (DMO), Abraham Nwankwo said the listing of domestic Sovereign Eurobond reinforces FGN’s commitment to deepen and grow the Nigerian capital market. Developing the domestic market can help bridge the infrastructure deficit constraining the nation’s economic growth.
Foreign Exchange (FX) denominated bonds are unsecured and include bonds denominated in Euros with annual coupons ranging from 7.25 per cent to 8.375 per cent and maturity dates ranging from 2013 to 2033. Bonds denominated in British pounds with annual coupons ranging from 8.375 per cent to 8.875 per cent and maturity dates ranging from 2015 to 2023 are also included within foreign currency denominated bonds.
Nwankwo noted that the Eurobond, which was over-subscribed by 780 per cent, is part of FGN’s funding strategy for its 2016 capital expenditure and will be spent on key infrastructure projects, in line with its economic plan.
“This huge over-subscription rate underscores a buoyant investors’ appetite for building exposure to Nigeria and demonstrates international confidence in the economy’s long term prospects”.
The Executive Director, Market Operations and Technology, NSE, Ade Bajomo commended the DMO for listing the Eurobond in the nation’s bourse. He noted that the domestic listing would diversify its investors’ base by giving Nigerian institutional investors access to the bond.
Bajomo said the listing of the dollar denominated bond on the exchange would boost price discovery and liquidity in the local market as well as help attract reliable long term foreign currency denominated funds into the financial market.
“It will also set the foundation for raising and listing more foreign denominated securities in Nigeria which will open up additional capital raising options for issuers and portfolio diversification opportunities to investors”.
To enhance seamless trading and settlement of the Eurobond, Bajomo said the exchange, in collaboration with the Central Securities Clearing System (CSCS) developed and presented a framework depicting onshore and cross border trade and settlement process to issuers and transaction parties, in line with its robust market practices strategy.
Standard Chartered Plc (Group), the parent company of Standard Chartered Bank of Nigeria, has posted a profit before tax of $1.1 billion, in 2016 financial year.
The result represents an increase of $300 million from $800 million in 2015, while the group’s operating expenses at $10 billion, showed a five per cent reduction from 2015 record and lower for the second year running.
However, the group’s Operating income of $13.8 billion showed an 11 per cent decline from 2015 record, but stable through each quarter of 2016, while cost efficiencies of over $1.2 billion created capacity to increase investment in the second half.
Despite loan impairment provision in the ongoing business of $2.4 billion, the bank also restructured charges worth $855 million related primarily to the liquidation portfolio and redundancy costs. The Group Chief Executive Officer, Bill Winters, said: “We made good progress in 2016, cleaning up our balance sheet and fortifying our capital position. We are attacking our cost base, reinvesting significantly to strengthen our competitive advantages and continuing to enhance our financial crime controls.
“Our financial returns are not yet where they need to be and do not reflect the Group’s earnings potential. Having worked hard to secure our foundations we are now focused on realising that potential.”
He said the underlying basic earnings was per share of 3.4 cents, against negative 6.6 cents in 2015, while returns on Ordinary shareholders’ equity is 0.3 per cent against negative 0.4 per cent in 2015.
According to him, the bank strengthened capital and improved liquidity position, such that Common Equity Tier 1 ratio of 13.6 per cent went up 100bps mainly due to reduced risk-weighted assets; $2 billion additional Tier 1 capital issued in August 2016; and a further $1 billion in January 2017.
There was also a loan-to-deposit ratio of 67.6 per cent, which also reflects a high level of funding from customer deposits, while no Ordinary Share dividend was declared for 2016 period.
The Regional Chief Executive Officer, Africa and Middle East, Sunil Kaushal, said: “Our results demonstrate the progress made in the execution of our strategy. We will continue to make investments through the cycle in controls, people and infrastructure to grow safely and capture the medium-term opportunity within the AME region.
“The environment remains challenging but we are getting on with our plan to improve our performance by putting our clients’ needs back at the heart of everything we do.”
He noted that the bank’s conscious decision to invest in sub-Saharan Africa, while continuing to consolidate and build on its differentiated position in the Middle East has made an important contribution to the overall performance.
Despite good growth in Africa impacted by foreign exchange fluctuations, Standard Chartered’s Africa and Middle East business recorded underlying profit before taxation of $431 million in 2016, compared to $188 million in 2015, due to lower impairments and reduced expenses.
The Transnational Corporation of Nigeria Plc has posted a loss before tax of N5.93bn for the financial year ended December 31, 2016.
This is against the N3.32bn profit reported a year ago.
Its group revenue stood at N59.42bn as against N40.75bn posted in 2015.
These were contained in the firm’s report filed with the Nigerian Stock Exchange on Wednesday.
On the other hand, Cutix Plc, for the nine months ended January 31, 2017, declared a profit before tax of N409.5m compared to N206.5m reported a year ago.
Its revenue for the period stood at N2.76bn, as against N2.10bn reported a year ago.
Transcorp Plc posted a gross revenue of N7.6bn for the second quarter of 2016.
Then, the company’s cost of sales went up a little to N1.8bn compared to N1.6bn recorded in 2014. Gross profit for the quarter rose by 3.2 per cent to N5.7bn compared to N5.5bn.
Its net income had risen to N1.8bn compared to N1.7bn reported in 2014. This was a growth of 7.4 per cent.
The Federal Government on Wednesday approved N701bn payment assurance guarantee for any energy produced by the electricity generation companies through the Central Bank of Nigeria in order to strengthen the Nigerian Bulk Electricity Trading Plc, has also
It also approved a short-term financing option for two ongoing projects, the Lagos-Ibadan Expressway and the Second Niger Bridge.
These were some of the decisions taken at the Federal Executive Council meeting presided over by the Acting President, Prof. Yemi Osinbajo, at the Presidential Villa, Abuja.
The Minister of Information and Culture, Alhaji Lai Mohammed; Minister of Power, Works and Housing, Mr. Babatunde Fashola; and Minister of Agriculture, Chief Audu Ogbeh, briefed journalists at the end of the meeting.
Fashola recalled that the council had a few weeks ago announced the approval for early works for the second Niger Bridge, which is a Public-Private Partnership initiative.
He added that some private agreements had been signed to build the Lagos-Ibadan Expressway.
The minister said he briefed the council on the PPP status of the projects and presented options to the government.
He said the essence was that where those PPPs were having problems, the government must lead and finance the infrastructure, while continuing to engage the private sector.
Fashola said, “Government remains committed to having private participation in infrastructure renewal. But government as a matter of strategy thinks that it can continue until financial closures, agreements and all of that are put in place when PPPs become ready and viable to help deliver.
“So, it was a strategy memorandum. The conclusion essentially is that government is committed to doing short financing as much as possible and encouraging PPP as much as possible.”
He said the decision to approve payment guarantee for the NBET was meant to solve some of the liquidity problems, especially as they related to the government firm that buys power from the generation companies.
The minister said the liquidity problems that had characterised the market had affected the NBET’s ability to deliver on its PPP obligations through the generation companies.
Fashola stated, “In order to strengthen the NBET, the CBN is approving a payment assurance guarantee for any energy produced by any generation company so that they can pay their gas suppliers when they get paid in order for the hydro plants to continue to operate.
“What we seek to achieve here is to bring some stability to the production side of the power value chain and also give confidence to investors who want to come in, who are concerned about how to recover their money.”
The equities market on Wednesday went down again by N50bn after 19 stocks closed in the red.
At the close of trading on the floor of the Nigerian Stock Exchange, the NSE market capitalisation dropped to N8.715tn from N8.765tn, while the All-Share Index closed at 25,183.10 basis points from 25,329.06 basis points.
A total of 228.023 million shares valued at N2.39bn were traded in 2,958 deals.
The equities market declined further, shedding 0.58 per cent at the close of the day’s trading to settle the year-to-date returns at -6.29 per cent. The volume and value of transactions declined by 48.70 per cent and 34.47 per cent, respectively. There were eight gainers in all.
Vitafoam Nigeria Plc was the best-performing stock after advancing by 4.65 per cent to close at N1.80. The ticker was closely followed by the NPF Microfinance Bank Plc, Seplat Petroleum Development Company Plc, NEM Insurance Company Nigeria Plc and Nigerian Aviation Handling Company Plc, which advanced by 4.46 per cent, 3.09 per cent, 2.47 per cent, and 2.04 per cent, accordingly.
On the other hand, Cadbury Nigeria Plc shares dropped by 8.77 per cent, recording the highest decline, to close at N7.80. The losers’ train was followed by Guinness Nigeria Plc, FCMB Group Plc, Zenith Bank Plc and FBN Holdings Plc, which dropped by 4.96 per cent, 4.88 per cent, 4.76 per cent and 4.43 per cent, respectively.
All the NSE sector indices recorded declines, save for the NSE oil/gas and NSE insurance indices which advanced by 1.01 per cent and 0.01 per cent, respectively. The NSE banking and NSE food/beverage indices recorded the largest declines, after paring by 1.18 per cent, 1.27 per cent, respectively.
Commenting on the outcome of the market, analysts at Meristem Securities Limited said, “We note that the few earnings results released have not stimulated positive investor sentiments in the market, as a few companies which have declared disbursements with attractive dividend yields have witnessed share price declines.
“We, however, advise dividend-inclined investors to take position in fundamentally justified counters with attractive expected dividend yields, while we caution that there might be no attendant capital appreciation.”
Meanwhile, at the close of Wednesday’s trading session, the open buy-back and overnight rates recorded respective declines of 1.00 per cent and 1.33 per cent, to settle the average money market rate at 12.09 per cent.
In the Treasury bills space, bullish activities were recorded as the average yield declined by 1.33 per cent to settle at 14.50 per cent at the close of trading. The one-month, three-month and six-month instruments logged declines of 1.81 per cent, 1.58 per cent and 0.61 per cent, respectively.
There were slightly bullish sentiments in the Treasury bonds space, as the average bond yield declined by 0.25 per cent to settle at 16.36 per cent. Yield declines were recorded on all instruments save for the May-2018, June-2019, March-2024 and July-2034 bonds, which advanced slightly by 0.07 per cent, 0.04 per cent, 0.04 per cent and 0.03 per cent, respectively.
The naira traded flat at the parallel foreign exchange market, closing the day at N455/dollar. However, at the interbank forex market, the currency appreciated marginally by 0.08 per cent, to close at N305.25/dollar.
The Nigerian equities market shed N281 billion in market capitalisation in February following persistent bearish trading. At the close of trading yesterday, which was the last day of the month of February, the Nigerian Stock Exchange (NSE) market capitalisation stood at N8.765 trillion, down from N9.046 trillion at the beginning of the month. Similarly, the NSE All-Share Index (ASI) shed 3.6 per cent in February, declining from 26,289.95 to close at 25,329.08
Market operators have said the bearish trend witnessed in 2016, would continue into 2017 due to headwinds that have dampened investor demand for equities.
High rates of returns in fixed income have attracted most investors to that sector of the market, while foreign exchange challenges have discouraged many foreign investors from the market. Besides, poor earnings by some companies engendered by the challenging operating environment have equally been a drag on the market.
Analysts at Meristem Securities Limited, an investment banking firm, had said in 2016, the market sentiments waned under continued pressure from a barrage of negative news flows such as persistent inflationary pressure, and the paucity of foreign exchange (FX), which consequently led to the further depreciation of naira against major currencies.
Speaking on the activities of the equities market in 2017, they said the market would remain weak in the first half of the year on the back of subsisting macroeconomic uncertainties, while they anticipate a modest recovery towards the tail end of the year.
“However, we note that market recovery is partly hinged on stability in the fx market and moderation in exchange rate gap between the interbank and parallel markets. Based on our mix of methodologies, we arrived at a 2017 index level of 27,812, 50, indicating a +3.49 per cent potential market return by December 31, 2017,” they declared.
The naira continued to strengthen on the parallel market on Monday to close at N435 to the dollar, stronger than N450 to the dollar at which it closed last Friday, as the Central Bank of Nigeria (CBN) continued to relentlessly pump the greenbank into the interbank foreign exchange market to meet the demand of bank customers.
But the buy rate of the greenback rose slightly to N430 to the dollar Monday, against N440 last Friday. Several parallel market operators who had been stockpiling dollars for months, were seen lamenting that the CBN’s intervention was forcing them to offload their dollars at a loss.
But as they bemoaned their losses, market analysts cautioned that they were likely to incur more losses, as the CBN, in keeping with its determination to increase liquidity in the FX market Monday pumped a fresh $180 million into the interbank market.
A breakdown of this amount showed that the CBN sold $100 million through its special wholesale intervention forwards and pumped an additional $80 million to the banks, specifically for school fees, medicals, and Business and Personal Travel Allowanced, among other invisible transactions.
CBN also said it would with “immediate effect give Travelex $4 million weekly to satisfy demand for travel allowances at the Lagos and Abuja airports”.
In a statement released Monday, the CBN’s acting Director, Corporate Communications, Mr. Isaac Okorafor, said the central bank’s commitment to providing enough FX for legitimate business remains unshaken, reiterating that it would do “everything possible” to maintain the steady supply of forex to the market.
In all, the new FX measures introduced by the CBN aimed at improving liquidity in market has led to the appreciation of the naira by N85 in just one week.
Analysts are projecting that the naira might appreciate to about N400 to the dollar on the parallel market this week, effectively meeting the CBN’s objective of closing the gap between interbank and parallel market rates. The CBN had maintained that much of the dollar demand was a bubble created by speculators and hoarders of the greenback.
Also, speaking on a programme monitored on Raypower FM in Lagos Monday, Okorafor urged currency dealers and others hoarding dollars to make hay and sell their holdings in order to avoid heavy losses.
He added: “I want to assure that we would provide enough liquidity in the market and we will sustain liquidity in the market. The country is opening up and foreign reserves are improving. Many people outside are beginning to realise the huge opportunities in this country.
“You can see the subscription of the Eurobond. It clearly shows the potential in this economy. This economy is bottomless when it comes to investment opportunities.
“So, ultimately, the exchange rate would improve and anybody hoarding dollars would suffer for it.” Responding to a question on the impact of the continuing ban of 41 items from accessing the official FX market, the CBN spokesman said: “The savings we have made from the elimination of the 41 items from the FX market have been very huge.
“Nigerians are beginning to adapt to made-in-Nigeria products and indeed we have supported some local manufacturers.
“Apart from rice, we are funding the production of palm oil and other produce. “We have two firms now producing toothpicks in Nigeria. So, you can see that even though people criticized the removal of the 41 items, which is one thing that we held on to, to change the entire economic landscape of this country.
“No country is known to have succeeded or became great by depending on outsiders for its food, fashion, drinks, and others. We cannot continue like that. “We must change our appetite for foreign goods and services. We are determined to fund the FX market.” Meanwhile, Nigeria’s external reserves increased further to $29.414 billion, according to latest figures made available by the CBN.
THISDAY’s findings showed that this represented an increase of 14 per cent over $25.843 billion at the end of last year.
The Central Bank of Nigeria (CBN) yesterday released additional $180 million to the forex market to further ease business transactions in the country.
The intervention was done in two phases – an $80 million offer for Personal Travel Allowance (PTA), school fees and medicals at the inter-bank market and $100 million Wholesale Forwards Market sell, which by the new policy, is reduced to maximum of 60-day tenor.
The CBN Acting Director of Corporate Communications Department, Isaac Okorafor, said that the latest moves were part of the bank’s pledge and determination to increase liquidity in the foreign exchange market.
“In keeping with its determination to increase liquidity in the foreign exchange market, the Central Bank of Nigeria (CBN) has released another $100 million into the wholesale forwards segment of the market and pumped an additional $80 million into the banks specifically for the settlement of dollar demand for school fees, medicals and Personal Travel Allowance (PTA), among others. “The commitment to providing enough forex for legitimate business remains unshaken and we will do everything possible to ensure the steady supply of forex to the market,” he said.
Only last week, the apex bank had pumped $500 million into the market, which impacted positively on the value of the naira against major currencies of the world, particularly the United States dollar, which fell against the naira from N520 to N466 to $1.
The efforts by the CBN in making available large amount of forex to the market has led to the appreciation of the naira by over N85 in less than one week. There are fears in the market that the local currency may well be on a permanent journey to its natural value put by some analysts at less than N300 to the dollar.
The CBN had maintained that much of the dollar demand had been a bubble created by speculators and hoarders of the greenback. On a radio programme yesterday, the apex bank had warned market players and keepers of dollars to make hay and sell their holdings to avoid heavy losses.
Meanwhile, analysts, although raising fears of sustainability of the market intervention, have admitted that the new policy direction is gradually bringing sanity into the forex market, as well as strengthening naira’s value.
