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FG Saves $1.7bn on Cash Call Payment to IOCs

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Nigeria’s Minister of State for Petroleum Emmanuel Kachikwu
  • FG Saves $1.7bn on Cash Call Payment to IOCs

The Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, on Thursday said a solution put in place by his ministry and the Nigerian National Petroleum Corporation to find a sustainable solution to the funding of Joint Venture cash call obligations of the Federal Government had led to savings of $1.7bn.

Kachikwu said this in a chat with State House correspondents after making a presentation to the National Economic Council in which he sought endorsement for a proposal approved by the Federal Executive Council to change the funding configuration of Joint Ventures for upstream companies.

With the solution, he said government had been able to save over $1.7bn on the $6.8bn that was previously owed.

While adding that the government owed only $5.1bn as opposed to $6.8bn, the minister said $5.1bn would be paid within five years interest-free.

According to him, the cash call arrangement in the oil sector will end completely by next year.

He recalled that the cash call arrears in the oil sector over five years up until December 2015 was about $6.8bn, while the arrears for this year was put at $2.5bn.

While stating that there was no justification for the previous arrears at a time when global oil prices were at the peak, the minister attributed the arrears of 2016 to the effect of militancy and the drop in oil prices from $110 to $40 per barrel.

He said the barrels of oil to pay for this would come from the incremental generation by the oil companies and not on the current 2.2 million barrels daily production figure for the country.

The minister said, “Beginning next year, if this goes into place, the issue of cash call era would have disappeared. The effect of this is that investments in excess of $15bn are likely to be announced by the oil companies, bringing back most of the projects within couple of weeks. Once this is signed, we are using this as a parameter to save at least $1bn from 2017.

“We will be looking at reducing the cost of barrel per production from the current $27 per barrel, which is one of the highest in the world, to a figure within the threshold of $18 per barrel over the next two years, ultimately to about $15 over the next four years.”

Kachikwu added, “The barrel reserve production should increase to about 2.5 million by 2019 and potentially to about three million by 2021. So, there will dramatic effects. For the first time, the oil industry will take responsibility for arranging their own funding and being able to produce oil and save the Federal Government the whole nightmare of cash calls every year.”

“So, this is a very dramatic move in the oil industry. We are still going to make presentation to the National Assembly for them to understand this.”

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.

Banking Sector

Union Bank CEO, Godson Chukwuemeka Okonkwo Acquires 2.4 Million Shares in the Bank Ahead of Acquisition

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Union bank - Investors King

The Chief Executive Officer, Union Bank Plc, Godson Chukwuemeka Okonkwo, has purchased 2,431,917 ordinary shares of the bank, according to the latest disclosure filing from the lender.

The CEO acquired the 2,431,917 shares of Union Bank at N4.90 per share on Thursday 6th May 2021 from the floor of the Nigerian Exchange Ltd.

Okonkwo’s N11.916 million investment was after Investors King reported a possible acquisition of the bank by Zenith Bank or Access Bank following sources cited by Bloomberg.

Bloomberg said, “Atlas Mara Limited, the London Stock Exchange-listed pan-African banking group started by Mr. Bob Diamond has received a number of approaches for its 49.97 per cent holding in Lagos-based Union Bank of Nigeria.”

It also stated that Atlas Mara received interests from Nigerian and Middle Eastern lenders for its remaining assets on the continent, according to Bloomberg sources.

The sources claimed the banks in talks with Atlas Mara asked not to be identified as talks are private. But they mentioned Nigeria’s Zenith Bank Plc, Access Bank Plc and Morocco’s Attijariwafa Bank as some of the banks that have so far expressed interests in acquiring Union Bank.

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Banking Sector

Zenith Bank, Access Bank, Others Express Interest in Acquiring Union Bank

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Atlas Mara - Investors King

Zenith Bank and Access Bank are some of the financial institutions in talks to acquire Atlas Mara Ltd.’s 49.97 percent stake in Union Bank Plc.

Bloomberg said, “Atlas Mara Limited, the London Stock Exchange-listed pan-African banking group started by Mr. Bob Diamond has received a number of approaches for its 49.97 per cent holding in Lagos-based Union Bank of Nigeria.”

It also stated that Atlas Mara received interests from Nigerian and Middle Eastern lenders for its remaining assets on the continent, according to Bloomberg sources.

The sources claimed the banks in talks with Atlas Mara asked not to be identified as talks are private. But they mentioned Nigeria’s Zenith Bank Plc, Access Bank Plc and Morocco’s Attijariwafa Bank as some of the banks that have so far expressed interests in acquiring Union Bank.

Middle Eastern banks and private equity suitors have also shown interest, according to the people. Some potential buyers have indicated they may acquire all of Atlas Mara’s remaining assets in Africa, which would include its Zimbabwe unit, the people said.

Atlas Mara has been working with Rothschild & Co. to consider options for its Union Bank stake. No final decisions have been made, and there’s no certainty the deliberations will lead to a transaction, the people said.

Representatives for Atlas Mara and Zenith Bank didn’t immediately respond to requests for comment. Attijariwafa Bank Managing Director Ismail Douiri and a representative for Access Bank declined to comment.

Speaking on the matter, Frontier and Sub-saharan Africa Banks’ Analyst, Renaissance Capital, Adesoji Solanke, on Thursday said this is good for Atlas Mara.

He said “Good for Atlas Mara if they’re able to exit successfully, as they’ve been selling a bunch of assets over the past year, to KCB and Access Bank respectively across different markets. Whether they get a good valuation for Union Bank is another thing.

“We don’t think it’ll be a transformational deal for Access or Zenith (Return-on-Equity dilutive for both), but could be a good way for the Middle Eastern banks to get a decent foothold in the market. We suspect getting the other private equity investor block to sell will be critical as we wouldn’t expect a strategic bank investor to desire a minority shareholding.”

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Finance

Nestle Nigeria Reports N12.4 Billion Profit After Tax in Q1 2021

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Nestle Nigeria - Investors King

Nestle Nigeria Plc, a food and beverage specialty company headquartered in Lagos and majorly owned by Nestle S.A of Switzerland, grew revenue to N87.258 billion in the first quarter (Q1) of 2021 from N70.329 billion filed in Q1 2020.

The company disclosed in its unaudited financial statement released in late April.

Gross profit stood at N34.743 billion in the quarter, up from N31.658 billion achieved in the same quarter of 2020.

Results from operating activities rose from N17.538 billion in Q1 2020 to N20.314 billion in Q1 2021.

While finance income contracted from N335.242 million in Q1 2020 to N123.340 million in Q1 2021. Finance costs rose to N1.435 billion in the quarter, up from N417.928 million recorded in Q1 2020.

Net finance income/cost stood at N1.312 billion, up from N82.686 million in Q1 2020.

Profit before tax rose to N19.002 billion in the quarter under review, better than the N17.455 billion achieved in the corresponding quarter of 2020.

Nestle Nigeria paid N6.602 billion as income tax for the period, slightly higher than the N6.259 billion paid in Q1 2020.

Profit after tax expanded to N12.400 billion in the quarter, up from N11.195 billion filed in Q1 2020.

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