Financial analysts in the country have called for a strong collaboration between financial sector regulators and the banking industry to chart an ideal course, given the receding state of the economy.
They identified huge communication gaps among the parties, saying the gaps must be closed if the country must move forward economically.
According to them, the country is going through hard times, which require a more holistic and thorough approach to check the level of economic decadence.
The analysts made this submission at a panel discussion organised for industries’ leaders held at the Nigerian Stock Exchange.
The Director of Investment Banking, Chapel Hill Denham, Mr. Ayo Fashina, noted that there was no need to borrow money when the country had assets to sell.
According to him, the Assets Management Corporation of Nigeria has over N3tn assets with the Central Bank of Nigeria, adding that the government, the banks and the regulators have to collaborate and help the country out of the current recession.
He said that banks already had liquidity challenges and the CBN needed to unlock liquidity in their balance sheet.
Other stakeholders at the meeting also urged the Federal Government to shelve the idea of borrowing from the international market considering the devaluation of the naira.
The Federal Government had said it would borrow $1bn from the international capital market to fund its expansionary budget and stimulate economic growth as inflation, slow growth and other challenges continued to hit the economy.
Fashina added, “If a foreign investor came in now, the same micro fundamental that happened in 2009 is happening now. Until the CBN issued special analysis of the banks because I am not sure that the assets level is right; for some banks, instead of qualifying their loans, they are putting them into watch list. How long will they continue to keep them in the watch list?”
Fashina attributed the drop in foreign portfolio investment in the country to volatility in foreign exchange, noting that unless the country fixed the exchange rate issues, foreign investors would not come to invest.
“The Nigerian economy is driven by the capital market and hence the NSE is currently constituted by 50 per cent foreign investors and 50 per cent local investors. The market is now coping with only the 50 per cent local investors while the 50 per cent foreign investors have taken flight for safety because of uncertainty of rate of foreign exchange,” he added.
Also, an economist and policy analyst, Dr. Ogho Okiti, said the country had not exited the problem of 2009 when AMCON was created, saying the non-performing loans had continued to increase.
He said, “I don’t know the facts from the banks. The stability and profitability of the banks are very weak. I hope we don’t repeat the same mistake of 2009.
“We have seen the symptoms and we don’t know how deep it will be. I am not saying the CBN is not going to bail out banks, but banks NPLs continue to increase.”
Nigeria officially slid into recession for the first time in more than 20 years as the National Bureau of Statistics recently announced a further contraction in the second quarter of the year.
The NBS said on Wednesday last week that the Gross Domestic Product contracted by 2.06 per cent after shrinking 0.36 in the first quarter.
It said the non-oil sector declined due to a weaker currency, while lower prices dragged the oil sector down.
A slump in crude prices, Nigeria’s mainstay, has hammered public finances and the naira, causing chronic dollar shortages. Crude sales account for around 70 per cent of government revenues.
Compounding the impact of low oil prices, attacks by militants on oil and gas facilities in the southern Niger Delta hub since the start of the year have cut crude production by about 700,000 barrels per day to 1.56 million bpd. The government’s 2016 budget assumed 2.2 million bpd.
The NBS said annual inflation reached 17.1 per cent in July from 16.5 per cent in June – a more than 10-year high – and food inflation rose to 15.8 per cent from 15.3.
Nigeria’s sovereign dollar bonds fell across the curve to their lowest value in more than two weeks after the NBS released its data, according to Reuters.
The NBS figures showed Nigeria attracted just $647.1m of capital in the second quarter, a 76 per cent fall year-on-year and nine per cent down from the first quarter.
Nigeria’s economy was last in recession, for less than a year, in 1991, the NBS data shows. It also experienced a prolonged recession from 1982 to 1984.
President Muhammadu Buhari was in power for some of that period as a military ruler after seizing power in a December 1983 coup and remained head of state until another military coup pushed him out in August 1985.
The office of the vice president, who oversees economic policy, said in a statement it expected a “better economic outlook” for the second half of 2016 “because many of the challenges faced in the first half either no longer exist or have eased”.
Oil and Gas Companies in Nigeria
Nigeria is an oil reach nation with several oil and gas companies operating in Africa’s largest economy. However, only ten oil and gas companies are listed on the Nigerian Exchange Limited (NGX).
Before we discuss in detail each of the listed oil and gas companies in Nigeria. A short background on Africa’s largest economy will help throw more light on the significance of the oil and gas companies or the entire oil sector to the Nigerian economy.
Nigeria is a petrol-dollar economy, which means Africa’s most populous nation, sells crude oil and use its proceed to service the economy. In fact, the Nigerian Naira is backed by crude oil like Canadian Dollar and other commodity-dependent economies.
But because the Central Bank of Nigeria (CBN) pegged the Naira against its global counterparts, the local currency does not reflect succinctly the fluctuation in global oil prices like other crude oil-dependent currencies.
Since global oil prices rebounded with the gradual reopening of economies, the oil and gas companies in Nigeria have also rebounded from the 2020 record low of $15 per barrel. The oil and gas sector has gained 62.76 percent from the year to date, according to the NGX Oil and Gas Index.
The index gauge price movements in 10 listed oil and gas companies in Nigeria. However, there are several oil and gas companies in Nigeria not listed on the Nigerian Exchange Limited.
Oil and Gas Companies Listed on the Nigerian Exchange Limited (NGX)
|Company||Ticker||Sector||Date Listed||Date Incorporated|
|ARDOVA PLC [CG+]||ARDOVA||OIL AND GAS||–||November 12, 1964|
|CAPITAL OIL PLC [MRF]||CAPOIL||OIL AND GAS||–||August 29, 1985|
|CONOIL PLC||CONOIL||OIL AND GAS||–||June 30, 1970|
|ETERNA PLC.||ETERNA||OIL AND GAS||–||January 13, 1989|
|JAPAUL GOLD & VENTURES PLC||JAPAULGOLD||OIL AND GAS||August 10, 2005||June 29, 1994|
|MRS OIL NIGERIA PLC.||MRS||OIL AND GAS||–||August 12, 1969|
|OANDO PLC [MRF]||OANDO||OIL AND GAS||February 24, 1992||August 25, 1969|
|RAK UNITY PET. COMP. PLC. [MRF]||RAKUNITY||OIL AND GAS||–||December 20, 1982|
|SEPLAT ENERGY PLC [CG+]||SEPLAT||OIL AND GAS||–||June 17, 2009|
|TOTALENERGIES MARKETING NIGERIA PLC||TOTAL||OIL AND GAS||–||January 6, 1956|
Oil Prices Extend Gains on Friday After Saudis Dismiss Supply Concerns
Oil prices extended gains on Friday after Prince Abdulaziz bin Salman, Saudi Energy Minister dismissed calls for more crude oil supply on Thursday.
Brent crude oil, against which Nigerian oil is priced, rose to $84.92 per barrel at around 8:31 am Nigerian time. The U.S West Texas Intermediate crude oil also responded positively to the comment, rising to $81.56 per barrel on Friday.
“What we see in the oil market today is an incremental (price) increase of 29%, vis-à-vis 500% increases in (natural) gas prices, 300% increases in coal prices, 200% increases in NGLs (natural gas liquids) ….”
He further stated that the Organization of the Petroleum Exporting Countries and allies led by Russia, have done a “remarkable” job acting as “so-called regulator of the oil market,” he said.
“Gas markets, coal markets, other sources of energy need a regulator. This situation is telling us that people need to copy and paste what OPEC+ has done and what it has achieved.”
Prince Abdulaziz explained that OPEC plus will add 400,000 barrels per day in November and do the same in December and subsequent months. The increase will be gradual he said.
“We want to make sure that we reduce those excess capacities that we have developed as a result of COVID,” he said, adding that OPEC+ wanted to do it “in a gradual, phased-in approach”.
Lack of Investment in Clean Energy Compromising Fight Against Climate Change and Poverty
New research highlights a chronic lack of finance that will leave billions of people in Sub-Saharan Africa and Asia without electricity or clean cooking by 2030; Urgent action to accelerate investment in clean energy for developing countries is needed from global leaders assembling at COP26 to ensure a just energy transition.
This year’s Energizing Finance research series – developed by Sustainable Energy for All (SEforALL) in partnership with Climate Policy Initiative (CPI) and Dalberg Advisors – shows the world is falling perilously short of the investment required to achieve energy access for all by 2030 for the seventh consecutive year.
In fact, tracked finance for electricity in the 20 countries that make up 80 percent of the world’s population without electricity – the high-impact countries – declined by 27 percent in 2019, the year before the onset of the Covid-19 pandemic. The economic strain caused by Covid-19 is expected to have caused even further reductions in energy access investment in 2020 and 2021.
Energizing Finance: Understanding the Landscape 2021, one of two reports released under the series, finds committed finance for residential electricity access fell to USD 12.9 billion in 2019 (from USD 16.1 billion in 2018) in the 20 countries. This is less than one-third of the USD 41 billion estimated annual investment needed globally to attain universal electricity access from 2019 to 2030.
Meanwhile, there is an abysmal amount of finance for clean cooking. Despite polluting cooking fuels causing millions of premature deaths each year and being the second largest contributor to climate change after carbon dioxide, only USD 133.5 million in finance for clean cooking solutions was tracked in 2019. This is nowhere near the estimated USD 4.5 billion in annual investment required to achieve universal access to clean cooking (accounting only for clean cookstove costs).
These findings have been released just ahead of COP26 in Glasgow, where global leaders will focus on how to spark meaningful progress on fighting climate change. As part of this, they will need to consider how to reduce global emissions from the energy sector while also increasing energy access in developing countries to support their economic development.
“We are at a critical moment in the energy-climate conversation,” said Damilola Ogunbiyi, CEO and Special Representative of the UN Secretary-General for Sustainable Energy for All and Co-Chair of UN-Energy. “What is clear is that the path to net zero can only happen with a just and equitable energy transition that provides access to clean and affordable energy to the 759 million people who have no electricity access and 2.6 billion people who lack access to clean cooking solutions. This requires resources to mitigate climate change and create new opportunities to drive economic development and enable people everywhere to thrive. Energizing Finance provides an evidence base of current energy finance commitments and the finance countries require to meet SDG7 energy targets.”
In 2018, 50 percent of total electricity finance flowed to grid-connected fossil fuels in the high-impact countries compared to 25 percent in 2019. While this is a positive trend for the climate, tracked investment in off-grid and mini-grid technology also declined and represented only 0.9 percent of finance tracked to electricity.
Dr. Barbara Buchner, Global Managing Director at CPI, who partnered with SEforALL on Energizing Finance: Understanding the Landscape 2021, said: “Achieving both the Paris Agreement and universal energy access requires far greater investment in grid-connected renewables and off-grid and mini-grid solutions than what has been tracked in Energizing Finance. These solutions are essential to helping high-impact countries develop their economies without a reliance on fossil fuels.”
To better illuminate the challenges high-impact countries face, the second publication in the series, Energizing Finance: Taking the Pulse 2021, offers a detailed look at the estimated volume and type of finance needed by enterprises and customers to achieve universal energy access for both electricity and clean cooking by 2030 in Mozambique, Ghana and Vietnam. Importantly, it illustrates the energy affordability challenges people face in these countries and the need for financial support for consumers, such as subsidies.
The report finds that providing access to clean fuels and technologies, i.e. modern energy cooking solutions, in Ghana, Mozambique and Vietnam will cost a total of USD 37-48 billion by 2030; 70 percent of which will be for fuels (e.g., LPG, ethanol and electricity). A more achievable scenario would be for all three countries to deliver universal access to improved cookstoves at a total cost of USD 1.05 billion by 2030.
“Ghana, Mozambique and Vietnam each have unique challenges to achieving universal access to electricity and clean cooking,” said Aly-Khan Jamal, Partner at Dalberg Advisors, who partnered with SEforALL on Energizing Finance: Taking the Pulse 2021. “This research digs deep into these national contexts to identify solutions that can make Sustainable Development Goal 7 a reality.”
Providing results-based financing for energy project developers and exploring policies that facilitate demand-side subsidy support and reduce taxes on solar home systems are among several policy recommendations presented for Ghana, Mozambique and Vietnam.
Energizing Finance also advocates for increased innovation in financial instruments to reach the scale of finance needed for universal clean cooking access; for integration of electricity access, cooking access and climate change strategies; and for national governments, bilateral donors, philanthropies, and DFIs to all increase their efforts to mobilize commercial capital to Sub-Saharan African countries.
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