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Nigeria has deferred a plan to slash gas exports to Ghana beginning Friday over an outstanding debt of $181 million, alleviating a threat that could have worsened electricity blackouts and caused another headache for the government.
The West African Gas Pipeline Company (WAGPCo) said it was "cautiously optimistic" that Nigeria's N-Gaz consortium would accept a payment plan by Ghana's power generation company, the Volta River Authority (VRA), after talks in Accra next week.
Ghana gets around 25 percent of its power through gas from Nigeria that flows through the pipeline via Benin and Togo and the threat by N-Gaz to reduce volumes by 70 percent would have raised the cost of supply.
The issue is sensitive for President John Mahama's government ahead of elections next year that are expected to be closely fought. The ruling party already faces an economy that has slowed sharply and power cuts that have angered voters.
Mahama has vowed to end the blackouts by the start of next year and his minister for power, Kwabena Donkor, has said he will resign if the problem has not been fixed by then.
"By next week we are expecting a way forward … There appears to be a will by all the parties to resolve the issue without the flow of gas being cut off," Harriet Wereko-Brobby, spokeswoman for the pipeline company, told Reuters.
Donkor led a government delegation to Abuja for emergency talks on Thursday and Friday, and Wereko-Brobby said her company had been told the government paid N-Gaz $10 million. VRA owes the company $103 million of the outstanding total.
The power generation company's problems are a sign of the budgetary stress facing Ghana, a country that is following an International Monetary Fund programme to restore fiscal balance.
Ghana's exports of gold, cocoa and oil helped make it one of Africa's star economies but a decline in commodity prices has hit it hard. VRA stopped paying its bills in August 2014. Prior to that it had been borrowing money from Ghanaian banks at high interest rates to fund the payments, an energy expert said.
The power crisis stems from a fall in supply from Ghana's dams, government underpayment to the Electricity Company of Ghana, residents' illegal consumption and tariffs too low for VRA to recoup its costs, experts said.
In the long term, Ghana aims to solve the problem by greatly increasing its domestic gas production. The president of the World Bank said on Friday the government was on the right track.
"We are very supportive of President Mahama's current reform strategy. We think he's now making the hard decisions … to get Ghana back on the path of growth," World Bank Group president Jim Yong Kim told Reuters.
Anthony-Claret is a software Engineer, entrepreneur and the founder of Codewit INC. Mr. Claret publishes and manages the content on Codewit Word News website and associated websites. He's a writer, IT Expert, great administrator, technology enthusiast, social media lover and all around digital guy.
Mr Habib Abdulahi, Managing Director of Nigeria Ports Authority (NPA), has said that Nigerian ports have witnessed more efficient services and upsurge in cargo throughput because of the reforms in the sector.
Abdulahi, represented by Mr Nasir Mohammed, General Manager, Abuja Liaison Office of NPA, made the statement on Tuesday during the NPA day at the 10th Abuja International Trade Fair.
The fair, which started on Sept. 18 and is scheduled to end on Friday, has the theme: “Entrepreneurship as a panacea for economic growth’’.
He said that the government reforms had increased the level of private participation through entrepreneurial activities in the port sector.
“The resultant effects of the reforms are more efficient port services, upsurge in cargo throughput, reduction in cargo dwell time and improved vessel turnaround time. Other benefits of the reforms are deeper and safer navigation channels and improved port channel management,’’ Abdulahi said.
He said the NPA had significantly moved closer to achieve its vision of being “the leading port in Africa’’ due to the reforms.
Anthony-Claret is a software Engineer, entrepreneur and the founder of Codewit INC. Mr. Claret publishes and manages the content on Codewit Word News website and associated websites. He's a writer, IT Expert, great administrator, technology enthusiast, social media lover and all around digital guy.
A Federal High Court in Lagos on Monday fixed Oct. 23 for ruling in an application seeking to revoke an interim order restraining the enforcement of a presidential directive that oil and gas cargoes should be handled in Onne, Warri and Calabar.
The News Agency of Nigeria (NAN) reports that Lagos Deep Offshore Logistics Company (LADOL) had sometime in May through a motion ex parte urged the court to restrain the passage and assent of the bill “for an Act to amend the oil and gas free zone”.
Justice John Tsoho, who gave the interim order, also ordered that the status quo should be maintained till the hearing and determination of the main suit.
The defendants in the suit include the President of Nigeria, the National Assembly, Federal Ministry of Transport and the Attorney General of the federation.
LADOL had urged the court to ensure that vessels from foreign waters could berth directly at LADOL Free Zone in line with LADOL’s designation as a deep offshore logistics base permitted to receive two international vessels weekly.
However, Integrated Logistics Services Nigeria Ltd (INTELS) — an oil and gas firm – had brought an application urging the court to join the company as a defendant in the suit.
INTELS alongside Associated Maritime Services (AMS) were also urging the court to discharge the interim injunction.
INTELS had told the court that the issues for determination by the plaintiff touched directly on their business and financial interest particularly their interest in the oil and gas free zones in Onne, Warri and Calabar ports.
But LADOL had opposed the two applications for discharge of the order and the joinder application.
The News Agency of Nigeria (NAN) reports that at the resumed hearing of the case on Monday, the parties adopted their written addresses.
Justice Tsoho, however, adjourned the case till Oct. 23 for ruling.
Anthony-Claret is a software Engineer, entrepreneur and the founder of Codewit INC. Mr. Claret publishes and manages the content on Codewit Word News website and associated websites. He's a writer, IT Expert, great administrator, technology enthusiast, social media lover and all around digital guy.
Consumer Price Index (CPI) for the month of February 2015 has shown that inflationary pressure was mounting, pushing the Headline Index to move up by 8.4 per cent year-on-year, as against 8.2 per cent in January. CPI measures inflation rates and the increase reflects rising cost of goods in the economy.
In the CPI Report released yesterday the National Bureau of Statistics (NBS) said all the components that contributed to the index increased at a faster pace during the period, noting that the only exception was Recreational & Culture which also increased but at slower pace.
According to the report, Food prices as observed by the Food Sub-index increased at a faster pace in February partly due to increases in prices of imported food items. The Imported Food Sub-index increased by 8.8 per cent (year-on-year), the highest increase recorded since February 2013. The Food Sub-index rose by 9.4 per cent (year-on-year).
In the Group report, NBS said while most groups that contributed to the Food Sub-index increased at a faster pace during the month of February 2015, the pace of increase was weighed down by a slower increase in the Bread & Cereals sub-group.
The pace of advances recorded by the “All Items Less Farm Produce” or Core Sub-index increased for the second consecutive month in February, 2015. The Core Sub-index increased by 7.0 per cent (year-on-year), 0.2 percentage points from 6.8 per cent recorded in January 2015.
After increasing at same pace year-on-year fr the previous two months, food prices as measured by the Food Sub-index increased at faster pace in February, 2015, increasing by 9.4 per cent.
On a month-on-month basis, food prices increased at a slower rate in February relative to January, 2015. Food prices increased by 0.7 per cent down from 0.9 per cent. Price increases slowed across most groups that contribute to the Food Sub-index with the exception of Fish Group.
Anthony-Claret is a software Engineer, entrepreneur and the founder of Codewit INC. Mr. Claret publishes and manages the content on Codewit Word News website and associated websites. He's a writer, IT Expert, great administrator, technology enthusiast, social media lover and all around digital guy.
To the surviving league of industrialists in Nigeria, it is time to mourn the demise of one of their own, Chief Onwuka Kalu, the famed Okpuzu of Abiriba.
Until he succumbed to the four-year battle against cancer last week in a London hospital, the deceased’s name almost became synonymous with indigenous industry as his activities between a long period spanning 1970s and 80s laid the foundation for the emergence of local manufacturing and indigenous enterprise.
His close associates said the story of Onwuka Kalu epitomises the Igbo spirit – the spirit of enterprise, hard work, determination, intelligence and honesty. Chief Onwuka Kalu – the Okpuzu Ndigbo was an eminent industrialist, lawyer, politician and community leader. According to records, Onwuka Kalu achieved fame as a teenage millionaire trader who went into manufacturing of Rocket Nails and motor parts through Onwuka HiTek Plc, the first Nigerian company to be quoted straight on the first tier of the Nigerian Stock Exchange.
Today, the sheer industry and sophistication of locally manufactured goods in the popular Aba town is well known all over the world. However, it is on record that Onwuka Kalu, as a foremost promoter of Made-in-Nigeria goods, to a large extent popularised Aba as the Japan of Africa.
He was also the chairman, Onwuka Inter Biz, Aba. A fellow, Institute of Sales Management and associate member, Institute of Business Administration.
His enterprise did not end in the factory. He also tried his hands in banking. A man of big dreams, he was one of the first set of Nigerians to obtain a banking licence. He founded and chaired the board of Fidelity Bank but later exited in the heat of a boardroom squabble.
A great lover of children, Onwuka Kalu was passionate about promoting the welfare of African children. This moved him to set up the Children of Africa Foundation, with which he organised the Children of Africa Charity Concert that brought the global musical giants of the time to perform in a globally followed show in Lagos in 1991.
Having acquired fame and wealth, Onwuka Kalu also tried his luck in politics. He was a member of the 1988 Constituent Assembly. He later ran for governorship of Abia State in 2003 on the platform of the All Progressives Grand Alliance (APGA) but lost to the Chief Orji Uzor Kalu.
Records also showed that Onwuka Kalu was one of the victims of late despot Gen. Sani Abacha’s iron-fist reign. He was detained as a political prisoner for about a year at Alagbon, Lagos, losing one of his eyes in the process.
Onwuka Kalu, was born in Abiriba, Abia State on May 24, 1954. He had his early education at Amaogudu Primary School and JIKS Commercial Institute, Abiriba. He had his post primary education at Hendon College, London and Middlesex University, London from where he graduated with a law degree – LL.B (Hons).
Although he was a very bright and keen pupil, Onwuka Kalu’s education was interrupted by the Biafra-Nigeria war and the economic difficulties created for Igbo families by the Federal Government’s decision to wipe out their entire savings at the end of the war and pay them forty naira (twenty pounds) in exchange.
At the beginning of his illustrious career, he was once an assistant company secretary, Chika and Company Limited between 1971and 1974, and secretary of the company between 1975-1976. He was also the chairman, Onwuka Inter Biz, Aba. A fellow, Institute of Sales Management and associate member, Institute of Business Administration, Kalu was the co-coordinator of the first “Made-in-Nigeria Trade Fair” in Aba in 1982. He was also chairman, Manufacturers Association of Nigeria, (MAN), Eastern zone. Certainly, he legacies will live after him.
Anthony-Claret is a software Engineer, entrepreneur and the founder of Codewit INC. Mr. Claret publishes and manages the content on Codewit Word News website and associated websites. He's a writer, IT Expert, great administrator, technology enthusiast, social media lover and all around digital guy.
The downward review of the oil price benchmark, the approval of a higher exchange rate and other adjustments in the 2015 budget, as announced by the Senate recently can allay the fears already created by the persistent oil price shock and the attendant strains on the Nigerian economy, reports Festus Akanbi
As attention shifted away from the postponed general elections, the Senate last week, after rigorous parleys with officials of the Finance Ministry and Budget Office slashed the oil benchmark for the 2015 budget from $65 per barrel to $52. It also announced an upward review of the exchange rate from N165 to N190 to a dollar, in tandem with the recent adjustment in the rate of the naira against the dollar at THE FOREIGN EXCHANGE MARKET.
The federal government had made a final proposal of $65 per barrel of crude oil to the lawmakers after two reviews. The Minister of Finance, Ngozi Okonjo-Iweala, had in December 2014 presented the 2015 budget to the lawmakers based on a speculated oil production figure of 2.2 million barrels per day. At its closed door session last Tuesday, the Senate said its decision was due to the fact that the current oil price in the international market was between $60 and $62.
As it is, the oil price shocks and the attendant strains on the economy have dawned on the lawmakers who reportedly admitted that Nigeria would have to borrow in order to meet some of its obligations this year. The severity of the situation is also underscored by the realisation that most of the budgetary allocations to various sectors would have to be adjusted to reflect the true state of revenue expectations.
Another major highlight of the negotiations was the executive volunteering a 25 per cent cut in the State House budget. An initial agreement of N115 billion was also reached as the National Assembly budget, which is N35 billion or 23 per cent short of the lawmakers’ regular N150 billion annual budget. But THISDAY gathered that while majority of the lawmakers supported the cut in the National Assembly’s budget, some have kicked against it because they do not want to lose their privileges.
Interestingly, the league of economic analysts who had criticised the government for the rather ambitious position during the presentation of the budget last year, are back, but this time with commendation for both the executive and the legislative arms for responding to the reality in global economy.
More Realistic Approach
According to Managing Director of Financial Derivatives Company, Mr. Bismarck Rewane, the new adjustments to the budget appear more realistic and are capable of allaying the people’s fears to a large extent.
Speaking with THISDAY last week, Rewane said, “I think these projections are more realistic now than what we had before. It is a move in the right direction. A $52 oil benchmark is more realistic.”
Pointing out that the new benchmark does not give the nation’s economy enough buffer, Rewane recalled that “Venezuela, Iran and Angola are using $40 per barrel benchmark, but personally, I believe that $52 per barrel is adequate as a benchmark but it doesn’t give much of a cushion.”
He believes that “The exchange rate of N190 is a dramatic move but I think N200 to a dollar would have been a better price but it is definitely commendable. It is very realistic, this is a move that should have been done much earlier but I’m quite pleased for moving in this direction.”
For the Chief Executive, Proshare Nigeria, Mr, Olufemi Awoyemi, “The drop in oil price simply means we have less in foreign reserves and FOREIGN EXCHANGE to go round and government needs to devalue the currency so that it can have more naira to meet its responsibility.” He said that is why analysts believe the price has to move up again.
Time to Encourage Exporters “Secondly, because Nigeria has a diversified economy, the people need not worry even if the exchange rate gets to N250 or even N300. In fact, it makes it more compelling for us to find the ability to MAKE MORE MONEY for companies which are in exports for example, since they will have to produce locally because it doesn’t make sense for them to import anymore.
“So the higher the devaluation in terms of the exchange rate, the better for the Nigerian economy at the end of the day. The key question is this; every country is making its own currency weaker against the dollar, why should we make ours stronger?
“When you have a high exchange rate, what is going to happen? Import materials are the only things that carry the cost. If we are not importing but producing locally, it doesn’t make any meaning to us. What only get expensive are the things which you import. So what the government should do is to focus on policies which support local production. So whatever we lose in the next two years, we will gain them back later. Like some analysts believe, dollar is going to move up again and exchange rate is going to widen again.”
Awoyemi said there is no need to lose sleep over the 2015 budget. “The budget is just a statement of expenditure because in a budget like that of 2015 that has 30 per cent vote on capital expenditure, you can’t fund any development around that one because the whole thing is all about expenditure so people should really not bother about the budget since 70 per cent of the budget goes to expenditure. That won’t do anything,” he said, regretting that “we couldn’t meet the revenue target in the past five years, even at the period of oil boom.” Speaking in the same vein, a research associate with BGL Plc, Mr. Olufemi Ademola, expressed the belief that the new threshold is better and that if the budget is well managed, the nation might not need to go borrowing. Manageable Budget
He said, “I think it is better to a certain extent, it is something we can manage with. We had done a scenario analysis in the past looking at different prices and what to be expected, our suggestions then was that they should be looking at $50 dollars as oil price benchmark and N180 as exchange rate and that if they did that one, they should be covered to a large extent. Now that they have fixed $52 per barrel and an exchange rate of N190, it will give them a big leverage to the fact that we don’t need to borrow anything extra outside of that N170 billion they planned to borrow but they will have some more money.”
Ademola said the exchange rate of N190 is still okay, saying although the CBN has already yanked off the official exchange rate. “I expect the market to recover too and when the election is over and there is no crisis, there won’t be any reason to panic. I think it is a better speculation than the previous benchmarks. It is something that is easily achievable than what we had before,” he stated. A source told THISDAY that several senators who spoke at the closed-door session, expressed concern over the state of the economy, regretting that the nation would have to resort to borrowing to finance some projects. The federal government had on December 17 laid a budget of N4.357 trillion predicated on a $65 per barrel oil benchmark and an exchange rate of N165 to one dollar for the 2015 fiscal year.
The document also consisted of N2.622 trillion for recurrent expenditure, N627 billion for capital expenditure and N3.602 trillion as the government’s revenue target in 2015. Despite dwindling oil revenue at the time, the federal government stuck to the $65 per barrel oil benchmark proposed for the 2015 budget as contained in the revised Medium Term Expenditure Framework (MTEF) which it re-submitted to the National Assembly on December 2. Prior to reducing the oil benchmark to $65 a barrel, the federal government had reviewed the oil benchmark from $78 to $73 per barrel on November 18.
The Senate’s approval of the $52 oil benchmark, THISDAY learnt, may not be unrelated to the agreement reached by the executive arm of government and the National Assembly to settle for the new benchmark following weeks of negotiations between them. Both arms of government had been meeting to find an agreeable benchmark but disagreements over some budget details have lingered. A source privy to the negotiations disclosed that while the executive had proposed $50 per barrel, the lawmakers rooted for $55 per barrel, after which both parties were said to have finally agreed on $52 per barrel.
Dip in the National Account
The Accountant General of the Federation, Jonah Otunla, who confirmed the strings of losses to the oil price shock said the country suffered a substantial loss in revenue of about $77.53 million (about N13.025 billion) in November last year as a result of the massive drop in crude oil price at the international oil market.
He said the loss dropped to about $52.34 million (about N8.79 billion) in December, in addition to a 33 per cent decrease in the volume of export of the country’s oil for the two months, which translated to a loss of about $159.88 million (about N26.9billion).
Consequently, the AGF said the trend in declining oil revenues had continued during the month of January 2015, which saw gross revenue for the month decreasing by about N73.94 billion, from N490.03 billion in December 2014 to N416.096 billion.
He also attributed the declining revenue situation to the continued shutdown of some oil production facilities, which resulted in the shut-in of operations on some oil export trunk and pipelines at various export terminals.
Revenue yields from non-oil sources, he noted, also performed poorly below 2014 budgetary estimates by about N54.624 billion (about N165.323 billion as against N110.699 billion that was realised.)
Anthony-Claret is a software Engineer, entrepreneur and the founder of Codewit INC. Mr. Claret publishes and manages the content on Codewit Word News website and associated websites. He's a writer, IT Expert, great administrator, technology enthusiast, social media lover and all around digital guy.
Saipem Contracting Nigeria Limited has unveiled its new ultramodern Double /Quadruple Joint plant at its massive fabrication yard in Rumuolumeni, Port Harcourt.
The plant, which is part of its capacity development initiative, was unveiled by the Executive Secretary of the Nigerian Content and Development Monitoring Board NCDMB, Engr. Ernest Nwapa at an impressive event which held in Port Harcourt recently.
Acknowledging the testimonies of Nigerian subcontractors to Saipem who spoke at the ceremony, Nwapa emphasised that the Board has recorded tremendous success in the development of local in-country capacity by Nigerian Companies. He praised Saipem for its continuous improvement in its in country capacity.
Speaking earlier, the Managing Director of Saipem Contractor Nigeria Limited, Mr. Giuseppe Surace, explained that the Double/Quadruple Joint workshop is one in the series of his Saipem’s capacity development initiatives involving not only the development of infrastructure but investment in human capacity building.
He stated that since the past ten years, his company has continued to invest massively in the expansion of the capacity of its yard in Rumuolumeni Base Port Harcourt to support its in-country fabrication capability. He further stated that Saipem’s continued investment and contribution to the economy of Nigeria had earned her a place in the list of top 100 companies in Nigeria.
He acknowledge the support of its clients like Exxonmobil, SNEPCO, NAOC and particularly Total E & P in sustaining the operations at the fabrication yard by the award of contracts and assured that Saipem will continue to invest in the development of modern state of the art infrastructure and human resources to support its operations in Nigeria.
Dignitaries at the ceremony include Engr. C.P. Okorie, GM Monitoring and Evaluation, NCDMB; Nicolas Brunet, Deputy Managing Director of Total E & P; Vassily Barberopoulos, Managing Director of Nigeria Foundaries Limited; representatives of the House of Representatives’ Committee on Local Content, representatives of Shell, Chevron, Exxonmobil, Energy Works Technologies, Limited, Cico Construction Nigeria Limited, Mudiame Nigeria Limited, Pipe Coaters Nigeria Limited and representatives of the host community.
Anthony-Claret is a software Engineer, entrepreneur and the founder of Codewit INC. Mr. Claret publishes and manages the content on Codewit Word News website and associated websites. He's a writer, IT Expert, great administrator, technology enthusiast, social media lover and all around digital guy.
Trading floor of the Nigerian Stock Exchange…portfolio investors on a wait-and-see mode Gote
Beyond the logistic and financial implications of the postponement of the general elections, two major international research firms, Renaissance Capital and Standard Chartered Research, believe the Nigerian financial authorities may have to take some pre-emptive measures in order to tame the effects of the dwindling oil price on the economy before the new election dates, reports Festus Akanbi
After the initial shock that trailed the postponement of the general election originally scheduled to start yesterday, some stakeholders in the Nigerian economy including international economic watchers have begun to paint different scenarios that the postponement may create in the coming months.
No Cause for Alarm Interestingly, if the body language of those running the nation’s economy is to be relied upon, then there are chances that the postponement may not bring upset in the economy. The assurance was given by the Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, in an interview on ARISE NEWS TV (a THISDAY sister company) last week. In the interview monitored in Lagos, the minister said there was no reason to entertain the fear being raised in certain quarters, as INEC and President Goodluck Jonathan had promised that the elections would hold by March 28 and April 11 and the handover date of May 29 would remain unchanged.
The minister explained that the current fate of the economy in the face of regime of dwindling oil prices cannot bring the Nigerian economy to its knees, saying even the World Bank had predicted that Nigeria would grow at 4.8 per cent this year. “This shows that the Nigerian economy, unlike others that are contracting, still has traction, and most of this growth is driven by the non-oil sector. “So what this means is that even with low oil prices, we have other segments of the economy that could add another $3 billion to the coffers this year which would be shared by the states. “It could be better but it shows that the non-oil sectors’ contribution to total revenue is growing and we intend to tap on this to diversify the economy,” she said.
Standard and Poor’s Rating Also last week, the international rating agency, Standard & Poor’s released its latest assessment of Nigeria which retains the country’s sovereign rating at BB- with a negative watch. Previously, it was BB-.with a negative outlook. This means that the ratings agency has adjusted its rating slightly by placing the country on negative watch because of the pressure of falling oil prices on the economy as well as political risk. In the estimation of the Special Adviser to the Coordinating Minister of the Economy and Minister of Finance, Paul C Nwabuikwu, the rating showed that Nigeria has not been downgraded but that the country clearly needs to work harder to actualize its recently announced policy response to the current economic challenges. A statement from the minister’s aide said other oil producing countries, like Saudi Arabia, have also been put on negative watch, while a number of others, including Kazakhstan, Bahrain and Oman were downgraded outright. “It is important to note that in spite of the serious challenges arising from the sharp fall in oil prices, Nigeria is doing quite well compared to some other oil producing countries. For example, while the economies of Russia and Venezuela are projected to contract and experience negative growth this year, Nigeria’s GDP has been projected by the IMF to grow by 4.8% which is quite robust by global standards. “Overall, there are two broad implications. First, the economy, despite many challenges, retains key strengths. Second, we have to keep working harder to continue to turn these strengths into real value for the country and its citizens,” the statement read.
Shift in Polls and Pressure Despite the assurance from the nation’s top economic managers, international economic watchers said the shift in polls may force Nigerian government to frontload some policies initially designed as post-election economic policies. In a special report titled ‘Nigeria: Postponed Polls: Protracted Uncertainty Weighs on Naira’, the international investment and financial advisory firm, Renaissance Capital said by postponing the election, the authorities have further exposed the weakness of the local currency in the face of continued depletion of the nation’s foreign reserves.
Focusing on the dwindling value of the naira, Rencap’s report stated; “Ideally, we believe the Central Bank of Nigeria (CBN) would prefer to wait until after the elections to make difficult policy decisions. However, the low level of FX reserves ($33.9bn on 5 February), and their accelerated decline since the beginning of February, leads us to believe the CBN may not be able to hold out for six weeks. FX reserves are now at the same level they were in 2011, when the CBN devalued the naira. FX reserves fell by $408mn in the first week of February, double the $215mn decline in January. We think the CBN may be compelled to act sooner rather than later – particularly now that protracted political uncertainty is likely to intensify downward pressure on the naira.”
Capital Controls Noting that the emerging scenario has called for immediate review of bailout strategies for the naira, Rencap said its initial permutations that naira devaluation might wait till after the election may have to give way to an urgent decision on the local currency. Governor of the Central Bank of Nigeria, Mr. Godwin Emefiele, had at a recent parley with members of the organised private sector in Lagos, dismissed the possibility of further devaluation of the naira, a pronouncement supported by some economic experts who warned that another round of devaluation on the eve of a national election would put the government in trouble with the electorate. All these considerations, according to the Rencap’s report may have to give way in the face of the continuous pressure on the naira and the attendant erosion of the foreign reserves.
The report said, “Our base case is that a formal devaluation will be avoided until after the elections. We expect the CBN to move the mid-point of the official exchange rate band to above N200/$1. This would imply an interbank exchange rate close to N220/$1.” The report said that even if the Federal Government is bent on avoiding outright devaluation because of the likely response from members of the public, a form of capital controls is urgently needed. Rencap therefore said that “to hold off devaluation, we think Nigeria may require soft capital controls, which would lead to FX liquidity getting squeezed again.” This is however with its underlining risks as, according to the research firm, “This increases the risk of JP Morgan removing Nigeria from its key emerging currency bond index (JP Morgan will assess Nigeria’s place in the index in 2Q15) and FX reserves falling to such an extent that current credit ratings come into question. Our most plausible alternative scenario (30-40% probability) is that the CBN will loosen its hold on the naira before the 28 March elections. It would do this by allowing the naira to weaken on the official FX market (as it did in November, before the 8 per cent devaluation), which would translate into corresponding depreciations in the interbank and bureau du change markets. We believe this would help the CBN to stem the fall in reserves.”
Uncertainties Another international research firm which raised the spectre of fresh pressure on the economy, the Standard Chartered Global Research, said in its report last week that the extension of the election period creates additional uncertainty that may affect economic outcomes. “We do not share the view of many market participants that the authorities will wait until after the election to announce a large official devaluation of the NGN (Nigerian naira),” the research said. It disclosed that many offshore investors, still attracted by Nigerian yields, have been waiting for the uncertainty of the election period to pass before recommitting themselves to Nigerian markets. According to the report, ‘With prolonged election-related uncertainty, the risk is that these FX inflows are delayed. “We believe the Central Bank of Nigeria (CBN) has adopted a pragmatic approach to exchange rate and reserve management during this episode of weaker oil prices,” the report said. The CBN tightened policy in November while simultaneously devaluing the official retail Dutch auction system (RDAS) rate to more realistic levels (at the time). Access to FX through the RDAS window was also limited in order to safeguard FX reserves. Perhaps recognising that investor inflows ahead of an election were unlikely, the CBN did not tighten policy further at its January 2015 policy meeting. Nigeria’s well-behaved inflation trend, with CPI inflation still in single digits, and concerns over slowing growth may also have been factors behind that decision. The research firm therefore said, “The election delay puts at risk our call for further policy tightening at the March MPC meeting. With oil prices still languishing at low levels, resulting in minimal injections into the FX reserves, we expect the reserves to come under further pressure, perhaps dropping to about six months of import cover. “A further tightening of administrative controls is plausible, with fewer categories of demand eligible for RDAS auctions. We expect spreads between Nigeria’s parallel and interbank FX rates to remain pressured, although an agreement by Nigeria’s Financial Markets Dealers’ Association limiting daily NGN depreciation in the interbank market to two per cent will likely slow the pace of weakening. “Despite the weaker parallel-market NGN rate (which mainly reflects smaller-scale, informal-economy and bureau de change transactions), our SC-PCPT has not picked up evidence of pronounced inflationary pressure.”
Policy Risks The report added that the postponement of election will also potentially delay the formulation of policy aimed at helping Nigeria cope with lower oil prices. It said, “The 2015 federal government budget currently assumes a benchmark oil price of USD 65/barrel (bbl). This is widely anticipated to be revised lower after the election, and the decision may now be delayed. “Efforts to accelerate non-oil revenue collection, especially measures that do not require legislative approval, are likely to continue in the near term. These include new levies on luxury imports, a review of tax exemptions granted to some investors, accelerated tax audits, and a potential doubling of the VAT rate to 10 per cent. We see little reason why the VAT rate increase would have to wait until after the election, although there is likely to be some uncertainty around the timing.” It quoted the finance ministry as saying that state governments are likely to be the key beneficiaries of a VAT increase, as they will share the majority of the proceeds through monthly FAAC allocations. The report said with an estimated 80 per cent of the budget now devoted to recurrent expenditure, even the likely pause in economic activity before the election is unlikely to provide much support for public finances. “State government finances are especially pressured, pointing to more frequent supplier arrears. The slowdown in economic activity resulting from weaker government spending and payment arrears may offset any price increases associated with a weaker FX rate. This also likely helps to explain the current disinflation trend indicated by the SC-PCPT,” it added.
Market Reactions Also, the Managing Director/Chief Executive Officer of Financial Derivatives Company Limited, Mr. Bismarck Rewane, was quoted by Bloomberg as saying, “We are going to see the market react in a negative way. The economic uncertainty of the country has increased. By extending the uncertainty, investors who were waiting for the outcome of the election will not come back.” On his part, the Head of Research at Afrinvest West Africa Limited, Mr. Ayodeji Ebo, said: “We had expected that after companies release their full-year results in March and the election is over, some stocks will begin to recover. The postponement has extended the market uncertainties.” Also, the London-based Head of Africa Strategy at Standard Chartered Plc, Samir Gadio, said: “The market is likely to remain in a risk-aversion mode this week.” Confirming their forecasts, market capitalisation at the Nigerian Stock Exchange (NSE) fell significantly by N208.381 billion on Monday to close at N9.796 trillion, compared with the N10.005 trillion at the close of trading last Friday.
Similarly, the naira fell to a record low despite the intervention by the Central Bank of Nigeria (CBN). The nation’s currency closed at N196.50 against the dollar, extending its slide since the start of November to 18 per cent, according to Reuters. The naira also slumped 12 per cent against the dollar at the interbank market in the past three months, the biggest decline among 24 African countries tracked by Bloomberg, while in the Apapa area of Lagos the naira sold for around N207 to a dollar in the bureau de change segment of the market.
Anthony-Claret is a software Engineer, entrepreneur and the founder of Codewit INC. Mr. Claret publishes and manages the content on Codewit Word News website and associated websites. He's a writer, IT Expert, great administrator, technology enthusiast, social media lover and all around digital guy.
As shareholders’ interest in Access Bank’s efforts to raise N52.6 billion through a rights issue increases, investment analysts said at N6.90 per unit, the pricing of the rights issue is a discount to the bank’s book value of N12, which shows the inherent value for investors, reports Festus Akanbi
For managers of the various banking institutions in Nigeria, this is a trying period. From whatever angle banking operations are being viewed, the fact remains that apart from the increasingly difficult operating environment largely fuelled by the oil price volatility and the corresponding pressure on the economy, certain pronouncements of financial sector regulators are also weighing heavily on the banking industry.
Investment analysts therefore maintained that the emerging scenario has, more than any other period of the Nigerian banking history, raised the urgent need for banks to create alternative revenue streams in the face of the harvest of regulatory headwinds in the industry over the years.
The reality, according to them, has also accentuated the race for capital adequacy and increased competition for large ticket transaction. Market watchers said, the aforementioned realities and the ultimate need to improve shareholders’ return are factors which have made it imperative for banks to be aggressive.
It was therefore a welcome idea to shareholders of Access Bank when the bank opened its on-going rights issue where it seeks to raise N52.6 billion from existing shareholders. The bank is selling 7.628 billion shares of 50 kobo each at N6.90 each to raise the money that will enable the bank pursue its expansion and boosts its cash reserves. The right issue opened on January 26, 2015 and it will run till March 4, 2015.
Valuation However, analysts said the bank might be seeing the rights issue as an opportunity to reward its loyal shareholders given the fact that the N6.90 price per unit adopted is a discount to the book value of the bank put at N12 although the N6.90 is higher than current market price of Access Bank shares. Assessing the Rights Issue, analysts at WSTC Securities Limited said given the strong fundamentals of the bank, they consider this investment to be potentially profitable.
They said: “At a Price to Book Value of 0.61x, dividend yield of 8.70 per cent and earnings yield of 14.61 per cent, it is good especially for investors with a medium to long term investment horizon. Capital adequacy ratio and non-performing loans (NPLs) of 19 per cent and 2.7 per cent outperform the benchmark of 15 per cent and five per cent respectively. We believe that the group’s focus on shifting its loan book to customers with lower risk ratings, away from customers with higher risk ratings will help it to further reduce its NPLs. This should, in addition to the bank’s steady growth of its loan book, result in an increase in its after tax profits thereby creating more value for shareholders.”
Analysts said market prices of securities on The Nigerian Stock Exchange have dipped significantly and in many cases do not necessarily represent the “true value” of such listed companies.
This is because, global macro concerns regarding oil trading dynamics and domestic currency volatility have led to significant capital flight from the equities markets. They therefore explained that Access Bank’s share price is currently well below book and intrinsic value. Average broker consensus is a “buy” with a target price of N11.84. Stock is currently trading at a 126% discount to the broker consensus target price Use of Proceeds
The funds raised will be used to upgrade the bank’s information technology platforms and branch network to enable it provide better service and further improve the working environment. The effort will also help to improve its distribution channel infrastructure, which is a condition for the provision of more efficient services to clients. The funds will also be used to augment the bank’s working capital and support risk assets growth
Group Managing Director, Access Bank Plc, Mr. Herbert Wigwe, explained that the proceeds of the rights issue, among others, would enable it provide better services, upgrade its branch networks and further improve its working environment.
“The funds raised would provide Access Bank with additional capacity to further consolidate its leading corporate banking business as well as additional capital headroom to support our increasing market share in the SME and retail segments,” Wigwe said. He noted that despite the challenging conditions in the nation’s banking sector with regulatory changes and increased competition, Access Bank has continued to sharpen its execution skills, thereby ensuring a solid platform to build on. Wigwe explained that the capital raising is in line with the bank’s five-year corporate strategy plan to be one of the top three banks in the country and the world’s most respected African bank.
This, according to him, will be anchored on four critical pillars – capital, human capital, governance and risk management. “It will also enable the bank to be more competitive and meet the funding needs of its blue chip customers that meet its credit risk criteria,” he said.
Shareholders of the bank, who gave their nod for the rights issue had also authorised that the share capital of the bank be increased from N13 billion made up of 24 billion ordinary shares of 50 kobo and 2 billion preference shares of 50 kobo each, to N20 billion by the creation of 14 billion ordinary shares of 50 kobo each. Speaking at the meeting where the resolutions were made, the Chairman of the bank, Mr. Gbenga Oyebode, said despite the challenging conditions in the nation’s banking sector with regulatory changes and increased competition, the bank continued to sharpen its execution skills, thereby ensuring a solid platform to build on.
“I am pleased to inform you, our esteemed shareholders, that the results of the foundation laid in 2013 are already evident as seen from our recently released half year results which showed a 7 percent growth in profit after tax to N22.6 billion,” he stated. He added that the bank’s mid term strategy (2013-2018) seeks to optimize the vast opportunities existing primarily in Nigeria and also in the Sub-Saharan African region, and that in furtherance of its objectives of ranking as one of the top three banks in its chosen market, management had identified certain sectors and market segments as growth opportunities for the next five years.
The Bank Access Bank is recognised as a leading commercial bank in Nigeria with an extensive distribution network in Sub Saharan Africa and the UK.
Today, the bank, which has seven subsidiaries and 3,192 employees, boasts of 366 branches, 1,042 ATMs and 11,846 POS. Its Capital Adequacy Ratio is 2 per cent, with seven banking subsidiaries and 3,192 employees. In 2002, Access Bank was 65th out of 89 banks and the bank which boasted of 90,000 customers at the period, had a return on equity of 0.9 per cent and cost to income ratio of 93 per cent, while gross income stood at N2.6billion. Assets was estimated at N11.3 billion, market capitalisation was N25 billion, while the number of branches was 32.
In 2007, the banks fortune improved significantly as it moved to ninth position out of 25 consolidated banks. It recorded 600,000 customers; its return on equity was 25 per cent while its cost to income ratio was put at 62 per cent. It recorded a gross income of N27.9 billion. Its loan portfolio was N108billion, deposits was N205 billion while assets was N409billion.Its market capitalisation for the period was N342 billion. It grew the number of its branches to 118.
The bank rose to the fifth position out of the nation’s 21 banks in 2012 with 6.5 million customers. Its return on equities rose to 18 per cent, while cost to income ratio was 61 per cent. With a gross income of N208.3 billion and market capitalisation at N241 billion. Access Bank during the period under review approved N609 billion loans, grew deposits to N1,201 billion, with N1,745 billion worth of assets and 349 branches.
Growth Plan Access Bank Plc last year unveiled a five-year growth plan, which the Wigwe-led management is executing. The new vision is to make the bank the most respectable bank in Africa by 2018 and would be driven by what it called Speed, Service and Security (SSS). Speaking on the vision, Wigwe had said in the last 10 years, Access Bank had focused on wholesale banking, adding that part of the new vision is to get embedded in retail strategy in order to take over that segment of the market. “In our five-year business plan, we have customers as the central focus. We have said going forward into the future, our customers will be taken along as true partners. We want to be all that Nigeria needs in financial services; we want to be the change that Africa needs. By 2018, we will be known as the most respected bank in the African continent.”
According to the CEO, the bank has identified 14 target sectors that would drive the new vision, noting that the bank’s electronic transactions would be second to none globally. He said that going forward Access Bank would lay emphasis on growing the Small and Medium scale Enterprises (SMEs) as well as support women-owned businesses. He added that Access Bank would, in years ahead, be consolidating on its reputation to offer timely, improved and secured services to millions of customers.
“We will be transparent. We will take time to understand you and your needs. We will develop the society in which we do business and most importantly, we will deliver on speed, security and service. This is our promise and we want you to hold us responsible for this promise.”
Wigwe assured stakeholders that the bank would also provide all the necessary support to the real sector such that the small enterprises could become big corporate, saying in order to do this, credit would be deployed to critical sectors like infrastructure in view of the critical roles in national economic transformation.
Anthony-Claret is a software Engineer, entrepreneur and the founder of Codewit INC. Mr. Claret publishes and manages the content on Codewit Word News website and associated websites. He's a writer, IT Expert, great administrator, technology enthusiast, social media lover and all around digital guy.
Abimbola Akosile examines a memorable campaign unveiled by Coca-Cola recently to enhance consumers’ physical and visual enjoyment through a personal touch
What is in a name? Some people might be quick to answer in any of the following ways: A name is a powerful piece of who we are; a name is a very personal thing to an individual; a name identifies us, it is the sound we respond to; our name is an invocation of who we are. It is fundamental: it is not all of who we are and yet we are someone quite different when it changes. Coca-Cola Nigeria clearly understands the power of a name, judging from the success the ‘Share a Coke’ campaign has enjoyed since its introduction in Nigeria, four years after it was originally conceptualised and launched by Coca-Cola Australia. Not only is Coke pleasing its consumers with this landmark innovation, it also appears to have brilliantly replicated the success story attained in over 70 countries and in the process garnered more loyalty than it has ever done in recent years. Not surprisingly, Coca-Cola’s brand profile has risen consistently locally and globally since the introduction of Share a Coke and other novel ideas. Coca-Cola’s 2014 brand value is estimated at $81.6 billion, up 3 per cent from 2013, more than four times that of the nearest beverage brand on the list. Interbrand credited the 128-year-old brand with “continuing to evolve as markets continue to change, through innovation, staying ahead of trends.” Amongst other things, the firm cited the impact of Coca-Cola’s Share a Coke, highlighting its ability to “tap into self-expression and individual storytelling, likewise deepening (the brand’s) connection with individual consumers – particularly Millennials. After launching the Share a Coke campaign successfully, in hundreds of markets, Coca-Cola showed its ingenuity in being able to effectively connect emotionally, both locally and globally” the report stated. Share a Coke began in Australia in 2011, when the director of marketing, Coca-Cola South Pacific, Lucie Austin gathered her colleagues inside a Sydney conference room, listening to five agencies pitch concepts for Coke’s next summer campaign. A couple of weeks before, they had received a 151-word creative brief that gave them free reign to deliver a truly disruptive idea that would make headlines and capture the country’s attention.
The resulting campaign, known internally as “Project Connect” was aimed at strengthening the brand’s bond with Australia’s young adults and inspiring shared moments of happiness in both the real and virtual world. This evolved into Share a Coke, the one -of-a-kind campaign celebrating the power of the first name in a playful, social way by swapping Coke branding on bottles and cans with the most popular monikers in Australia. The stunt worked. Share a Coke became an instant hit. That year, Coca-Cola sold more than 250 million customized bottles and cans in Australia – a nation of just under 23 million people. Naturally, the campaign made its way around the world. Not long after the success story in Australia, Coca-Cola teams in Great Britain, Turkey, China, and the United States – put their own creative spin on the concept, while preserving the simple invitation to “Share a Coke with (insert name).”
Four years after, the Share-a–Coke train arrived in Nigeria in early January. Just before the campaign kicked off, the iconic brand, understanding the dynamism of Africa’s most populous country, strategically selected 600 of the most popular names from the array of names across the various regions of Nigeria which were emblazoned on the various Coca-Cola pack types. Sensitive to the fact that some rare indigenous names had been left out during the selection process, Coca-Cola created a virtual portal where Nigerians can create and share Coke bottles with their favourite names. To further ensure that no one is left out, the company also launched an experiential campaign in February, creating an opportunity in various neighbourhoods for those who could not find their names to order and receive on the spot customised Coke bottles with any names they desire at just N100 per bottle – same as the retail price of the product. The personalised labels, now allow people buy cans with their own names and those of their family, friends and loved ones, translating into a sharp rise in sales for the company.
Speaking on the recent strides of Coca- Cola Nigeria and the contribution of the Share a Coke campaign, Marketing Director, Coca-Cola Nigeria Limited Patricia Jemibewon, said the response to the initiative has exceeded the company’s expectations. “The personalised bottles have been highly sought after nationwide, so demand is very high. We are therefore taking Share-a Coke to the customers directly at various locations, where consumers can get a rare opportunity to watch the customising of a can of Coke.” Jemibewon said.
“Share-a-Coke recognises Nigeria’s culture and diversity. The campaign reinforces our ongoing commitment to refresh the world and inspire shared moments of optimism and happiness”, she concluded. Indeed, Share a Coke has transformed the global Coca-Cola brand into a special, personal experience for Nigerians- connecting Coca-Cola with consumers, helping families deepen their bond and spreading love among friends.
Anthony-Claret is a software Engineer, entrepreneur and the founder of Codewit INC. Mr. Claret publishes and manages the content on Codewit Word News website and associated websites. He's a writer, IT Expert, great administrator, technology enthusiast, social media lover and all around digital guy.
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