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Africa Needs to Develop Auto Sector Strategy – Nemeth

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Nemeth and Buhari

The Chairman of African Association of Automotive Manufacturers (AAAM), Mr. Jeff Nemeth has said that Africa needs to have deliberate policies and systems to grow its auto sector.

AAAM was inaugurated on November 25, 2015 by founding members BMW, Ford, General Motors, Nissan, Toyota and Volkswagen, focusing on key markets of the African Continent.

Jeff Nemeth said, “The aim of the African Association of Automotive Manufacturers is to unlock the economic potential of the African continent by promoting a policy environment that is conducive to the development of the automotive sector.”

He said, “As the African continent becomes increasingly important within the global economy, it is crucial that we develop an auto sector strategy backed up by incremental investments in infrastructure, skills development and in-market localisation programmes.”

Nemeth, who is the President and CEO of Ford Motor Company Sub-Saharan Africa Region, stated this in his brief speech at the launch of the Ranger 2.2 Automatic drive in George, South Africa, recently.

According to him, “This (auto sector strategy) will make new vehicles more affordable, boost the industrialisation of the economy and lead to the growth of middle income households, which will be the main driver for new vehicle sales.”

He said, “Outside of South Africa, which has a well-developed world-class automotive industry, Nigeria is recognised as a strategic market over the long term due to its demographics.

Quoting available statistics, he said, “Although Nigeria is recognised as Africa’s largest economy, the automotive sector is relatively small, with an estimated 44 vehicles per 1,000 inhabitants, according to Deloitte Africa’s Automotive Insights, published in April 2016.

“This is far below the global average of 180 vehicles per 1 000 inhabitants, and lower than other developing regions such as Latin America (176) and Asia, Oceania and the Middle East (79),” the report indicates.

“One of the biggest challenges we face in Africa is the lack of reliable data on the number of new and second-hand vehicles sold on the continent, as very few countries have formal reporting or legislative structures to monitor the automotive sector,” Nemeth adds. “This is exacerbated by the large number of second-hand imports, with only a small proportion of new cars sold due to the high import duties and lack of affordable financing options.”

He said AAAM’s mandate, thus, is to engage with government, industry bodies and representatives from the motor sector to provide advice on opportunities to formalise, develop and grow all aspects of the local automotive industry.

This, he said includes promoting an investor-friendly regulatory framework that would support the development and implementation of policies to establish a viable automotive manufacturing industry on the continent that includes both assemblers and suppliers.

Nemeth said, “To unlock this market potential will require greater government and private sector partnerships to develop a formal legislative environment that is conducive to longer-term growth. It needs a more robust automotive strategy that promotes a sustainable and stable environment in support of local manufacturing operations.”

A delegation from AAAM, led by Jeff Nemeth, recently, visited Nigeria to engage with government and industry leaders.

The programme included high-level discussions with President Muhammadu Buhari, along with government ministers and representatives from Nigeria’s National Automotive Design and Development Council (NADDC) and the National Automotive Manufacturers’ Association (NAMA).

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

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Energy

Seplat Energy Plc Records $535 Million in Revenue in the First Nine Months of 2021

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Seplat Energy Plc - Investors King

Seplat Energy, a leading Nigerian independent energy company listed on both the Nigerian Exchange Limited and the London Stock Exchange, recorded $535 million in revenue in the nine months that ended 30 September 2021.

Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) stood at $266.4 million while cash realised from operations was $163.8 million, the company stated in its unaudited financial statements for the period.

Total expenditure for the period was $83.9 million. Cash at the bank was estimated at $273.9 million and the energy company posted $479.8 million as net debt. See other details below.

Operational highlights

  • YTD working-interest production of 47,280 boepd down 6.7% year on year largely as a result of the shut-in of the Forcados Oil Terminal (FOT) in August (Q3: 40,381 boepd)
  • Liquids production down 16.6% year on year at 27,804 bopd, recovering to 33kbopd liquids in October
  • Gas production up 13% to 113 MMscfd, despite FOT impact on associated gas
  • Completed two gas wells and three oil wells in the period, new Gbetiokun wells performing strongly

Financial highlights (9M 2021)

  • Revenue after adjusting for an underlift was $535 million
  • EBITDA of $266.4 million
  • Cash generated from operations $163.8 million
  • Cash at bank $273.9 million, net debt of $479.8 million
  • Total capital expenditure of $83.9 million
  • Interim dividend of 2.5 cents ($0.025)

Corporate updates

  • Name changed to Seplat Energy Plc to reflect new strategic vision outlined in July; new branding launched in October
  • Acquisition of Cardinal Drilling rigs for $36 million and cessation of legal proceedings by Access Bank Outlook for 2021
  • Expected production narrowed to 48-50 kboepd for full year, subject to market conditions
  • Amukpe-Escravos Pipeline (AEP) commissioning has commenced, oil flow expected in December 2021
  • Capex now expected to be $167 million for the full year
  • ANOH project remains on track for first gas in H1 2022

Commenting on the financial statements, Roger Brown, Chief Executive Officer, said: “Production has recovered strongly since the outage at Forcados Oil Terminal (FOT) and we have been averaging nearly 33kbopd liquids throughout October. Now that production has normalised, we expect production to be in the range 48-50 kboepd for the year, provided uptime on the Forcados Pipeline and FOT remains above the budgeted 80%. I’m pleased to report that our new wells at Gbetiokun are performing strongly, and we will soon commence drilling the exciting Sibiri prospect on OML40.

“We have taken the difficult, but practical decision to bring an end to the uncertainty of the Access Bank legal dispute regarding Cardinal Drilling Services, which completes the Board-mandated removal of Related Party Transactions.

“Although we maintain our previously stated position that legal action against the Company was wholly without merit, the risk of significant disruption to our operations and other opportunities from a long, drawn-out legal case brought us to a negotiated settlement with Access Bank. We have therefore acquired the four Cardinal rigs and we are now focusing on fast tracking their deployment in future drilling campaigns. `

“Our business model is robust, despite setbacks in the third quarter, thanks to the prudent and flexible approach we have taken to managing the business. With an increased focus on efficiency in our operations, improving uptime by opening up the Amukpe to Escravos Pipeline and driving further cost reduction across our portfolio, this will provide the bedrock allowing us to operate effectively in fluctuating commodity prices and generate returns for shareholders. I am optimistic that the coming year will be much stronger, with many of the problems of the past put behind us.

“After we set out our future strategy in July’s Capital Markets Day and launched our new corporate name of Seplat Energy plc, complete with its new branding, we are now focusing on building out and executing the energy transition that is right for Nigeria. A strong step forward will be when we bring on stream the ANOH project next year delivering more transition gas to an energy poor market, over reliant on expensive, high carbon-emitting electricity generated from small-scale diesel and PMS generators. Our three-pillar strategy is designed to ensure we balance carbon emission reduction with the essential social agenda for undeniably the most under-electrified, youngest and fastest growing population on earth.”

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Crude Oil

Crude Oil Drops on Wednesday as U.S. Oil Inventories Jump Unexpectedly

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Crude oil - Investors King

Global oil prices fell by 1 percent on Wednesday after data from the U.S. Energy Department showed that the United States oil inventories unexpectedly rose by 4.3 million barrels last week. More than the 1.9 million barrels predicted by experts.

The unexpected increase in United States inventories weighed on crude oil prices on Wednesday, erasing $1.31 or 1.5 percent from Brent crude oil after it rose to a seven-year high on Tuesday. While the U.S West Texas Intermediate (WTI) dipped by $1.09 or 1.3 percent to $83.56 a barrel.

Still, gasoline stocks declined by 2 million barrels across the United States, a situation likely to push pump prices even higher.

“The market continues to deplete Cushing crude oil inventories and that is impacting the Brent-WTI spread and ultimately we’re going to see crude oil diverted from the Permian up to Cushing rather than going to the Gulf Coast,” said Andrew Lipow, president of Lipow Oil Associates in Houston.

However, the shaky COVID-19 recovery in most economies has led to doubts over the sustainability of rising oil prices.

“(Some) countries are falling into an autumn Covid-19 case spike,” said Louise Dickson, senior oil markets analyst at Rystad Energy, “which poses downside risk for oil demand growth in the very near-term and could provide a soft pressure on oil prices.”

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Crude Oil

Brent Crude Oil Extends Gain to $86.66 a Barrel Amid Tight Supply

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Brent crude oil - Investors King

Tight global oil supply pushed Brent crude oil, against which Nigeria oil is priced, to a multi-year high of $86.66 per barrel on Monday at 3:30 pm Nigerian time.

Oil price was lifted by rising fuel demand in the United States and tight global supply as economies recover from pandemic-induced slumps.

The global energy supply crunch continues to show its teeth, as oil prices extend their upward march this week, a result of traders pricing in the ongoing rise in fuel demand – which amid limited supply response is depleting global stockpiles,” said Louise Dickson, senior oil markets analyst at Rystad Energy.

Goldman Sachs on the other hand is predicting a further increase in Brent crude oil to $90 a barrel, citing a strong rebound in global oil demand due to switching from gas to oil. This the bank estimated may contribute about 1 million barrels per day to global oil demand.

The investment bank said it expects oil demand to reach around 100 million barrels per day as consumption in Asia increases after the devastating effect of COVID-19.

While not our base-case, such persistence would pose upside risk to our $90/bbl year-end Brent price forecast,” Goldman said in a research note dated Oct. 24.

Earlier this month, the Organization of the Petroleum Exporting Countries, Russia and their allies, known as OPEC+ agreed to continue increasing oil supply by 400,000 bpd a month until April 2022 despite calls for an increase in global oil supplies.

The decision bolstered the price of Brent crude oil above $84 per barrel and expected to push the price even further to $90 a barrel. Low global oil supply amid rising demand for crude oil will continue to support oil prices in the near term.

Despite the recent power cuts and impacts to industrial activity in China, oil demand is likely instead supported by switching to diesel powered generators and diesel engines in LNG trucks, as well as by a ramp up in coal production,” Goldman Sachs stated.

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