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Foreign Investors’ Acquisition of Local Firms Over Forex Looms

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DOLLAR CURRENCY
  • Foreign Investors’ Acquisition of Local Firms Over Forex Looms

Unless the Central Bank of Nigeria (CBN) is consistent in making foreign exchange (forex) available for manufacturers to import raw materials that are yet to have local alternatives, foreign investors with access to cheaper funds may acquire controlling stakes in these local firms.

Already, some firms that are unable to sustain their operations, having suffered huge losses in 2016 due to currency adjustments and inadequate access to forex, are being acquired by new investors, while others are exploring the Nigerian Stock Exchange (NSE) by way of rights issue before considering bailout from their parent companies. Indeed, many listed local producers lost over N50 billion in profit across the food, beverages, conglomerates and drug manufacturing sectors.

As it is, the CBN which has been injecting forex into the system lately to stabilise the naira may have to do more to help the real sector. If the low supply of foreign exchange for local production continues, it means the control of the manufacturing sector will slip into the hands of foreign investors even as the growth of local content remains inhibited when returns on investments are repatriated from the economy.

For instance, the parent company of Guinness Nigeria Plc – Diageo – is already planning to take up its rights by way of a debt/equity swap wherein the outstanding foreign currency loan (N20.3 billion as at first half of 2017) from Diageo will be used as payment for its rights in Guinness.
The acquisition of Nigeria’s Swiss Pharmaceutical Company (Swipha), was completed at the weekend with the French generic medicine manufacturer, Biogaran, announcing over 95 per cent stake in the company.

For Nestle Nigeria Plc, its profit after tax was negatively impacted both by the revaluation of foreign loans resulting from the devaluation of the naira and higher income tax provisions due to the expiration of the pioneer status. The company closed the year at N7.9 billion profit from N23.7 billion in 2015.

The capacity utilisation in the nation’s drug manufacturing sector and other productive sectors had dropped to an all-time low of 20 per cent due to inadequate access to foreign exchange for the importation of critical raw materials, mainly active pharmaceutical ingredients (APIs) and machinery inputs. There is also the challenge of competition from poorly regulated markets.

The acquisition of Swipha may have been made possible due to the inability of the Nigerian firm to sustain its operations arising from the high cost of doing business and huge debt.

Guinness Nigeria Plc suffered a loss of N4.7 billion in 2016 from a profit after tax of N1.17 billion in 2015, even as it announced a rights issue price at N58.00, 17% discount, to market price.

The company intends to use the funds to improve its balance sheet given its relatively high debt level (Debt/Equity ratio of 1.3 vs. Nigerian Breweries of 0.1), finance its working capital needs and expand its operations.

The Nigerian Breweries, following the huge forex loss, ended the year with profit before tax of N39.675 billion, down from N54.514 billion in 2015 and profit after tax of N28.416 billion as against N38.05 billion in 2015.

On plans for the acquired Swipha, President of Biogaran, Pascal Brière told The Guardian that the new management’s first priority would be the revitalisation of the company and give confidence to employees on its commitment to a prosperous future.

The President of the Manufacturers Association of Nigeria (MAN), Dr. Frank Jacobs, however, dismissed the notion of firms selling their factories to new owners, saying that the CBN had cleared many of the backlogs of foreign exchange, thus, bringing firms back in business.

He said that 2016 was a terrible year for everybody but businesses were able to sustain their operations.

“Situations may be very difficult; it may also be that some businesses are relocating or seeking new areas of investments, but they are not closing down. I know it is part of the things that happened in the course of the forex crisis. Once an area of business is no longer lucrative, chances are that the business divests, but it does not mean that it is closing operations. They may not be doing it exclusively because of scarcity of forex but due to infrastructure challenges, among others,” Jacobs said.

According to a former National Coordinator of Independent Shareholders Association (ISAN), Sir Sunny Nwosu, the move by Guinness to raise capital from the stock exchange, though belated, is in the right direction, considering the need of the firm to sustain its business and enhance shareholders’ return on investments.

The Minister of Industry, Trade and Investment, Dr. Okechukwu Enelamah, has admitted that some of the policies implemented by the Federal Government affected manufacturers negatively.

Enelamah, who made the remarks in an interview with CNN in London, was quoted as saying: “Some policies we passed affected manufacturers in terms of their raw materials and we are correcting those now. We want to discourage dumping and bad practices that happened in the past. But we need to do it in a way that does not hurt local manufacturing.”

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.

Economy

The Kenya Private Sector Alliance (KEPSA) and The Canada-Africa Chamber of Business Announce Major Memorandum of Understanding (MoU)

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The Kenya Private Sector Alliance and The Canada-Africa Chamber of Business are proud to announce collaboration to promote, support and facilitate bilateral trade and investment opportunities from Canada into Kenya.

The first engagement will be a virtual trade mission to Kenya from Canada in May.

The 3-year agreement MoU was signed today during the Second Session of the Binational Commission meeting between the Governments of Kenya and Canada – and is subject to ongoing renewal.

“This MoU will solidify the existing trade relations between Kenya and Canada and establish strong bonds between the two countries that will go a long way to boost private sector trade and investment. The MOU will also enable us to exchange business information with CACB which is critical especially to our members who wish to expand their coverage to international market,” explained Ms. Carole Kariuki Karuga, KEPSA CEO.

The Kenya Private Sector Alliance is the apex body of private sector in Kenya.

The Canada-Africa Chamber of Business is a 27-years old organization committed to accelerating trade, business and investment between Canada and Africa.

‘Nairobi is a vital gateway not just to Kenya and the region, but the continent’s economies of the future in Africa,’ noted Garreth Bloor, President of The Canada-Africa Chamber of Business.

‘KEPSA is world leader in the private sector, showcasing excellence on the global stage. This MoU is a great honour for The Canada-Africa Chamber of Business, our leadership, and all our members across Canada,’ says Deepak Dave, the organization’s long-standing representative in Nairobi and Chief Risk Officer at the African Trade Insurance Agency.

‘The joint intended results of the co-operation agreement between CACB and KEPSA seeks to increase two-way trade and investment between Canada and Kenya in all sectors – while laying the foundations to explore trade missions to Kenya by The Canada-Africa Chamber of Business and to Canada by KEPSA,’ said Sebastian Spio-Garbrah, Chair of The Canada-Africa Chamber of Business.

Guided by this MOU, CACB and KEPSA will work together towards on a case-by-case basis exploring events together, exchange of business information and reciprocity members of the Kenya Private Sector Alliance to enjoy the privileges of membership afforded to CACB members, and to ensure KEPSA members are well-positioned in the Canadian market for investment and trade in all sectors and that CACB members are well-positioned in the Kenyan market for investment and trade in all sectors.

“As KEPSA, we remain committed to establishing progressive business and trade partnerships with Canada and other similar minded parties for a mutual benefit of our members as well as those of our CACB counterparts,” said Ms. Carole Kariuki Karuga, KEPSA CEO.

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Economy

India, Spain, the Netherlands, USA, Nigeria’s Major Export Markets -NBS

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India, Spain and the Netherland top Nigeria’s export markets in the final quarter of 2020, according to the latest data from the National Bureau of Statistics (NBS).

The Commodity Price Indices and Terms of Trade Q4 2020 report showed that the United States and China trailed the three.

However, the NBS revealed Nigeria exports mainly crude oil and natural gas during the period under review.

It, “The major export and import market of Nigeria in Q4 2020 were India, Spain, the Netherlands, United States and China.

“The major export to these countries were crude petroleum and natural gas. The major imports from the countries were motor spirits, used vehicles, motorcycles and antibiotics.”

The bureau stated that the all-commodity group import index increased by 0.13 per cent between October and December 2020.

This was driven mainly by an increase in the prices of base metals and articles of base metals (one per cent), boilers, machinery and appliances; parts thereof (1.03 per cent), and products of the chemical and allied industries (0.75 per cent),” it stated.

The NBS, however, noted that the index was negatively affected by animal and vegetable fats and oils and other cleavage products.

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Economy

Onyeama: Qatar To Invest $5bn In Nigeria’s Economy

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The oil-rich state of Qatar is to invest a total of $5 billion in Nigeria’s economy, the Foreign Affairs Minister, Godfrey Onyeama, has disclosed.

Onyeama, who spoke Sunday at a send forth dinner in honour of Nigeria’s Ambassador-designate to the State of Qatar, who is also the outgoing Director of Protocol (DOP) at the State House, Ambassador Yakubu Ahmed, also stated that recent career ambassadorial appointments made by the gederal government was based on merit, experience and professionalism.

The minister further said there had been discussions with Qatar on partnership with Nigeria’s Sovereign Wealth Fund (SWF), for significant investments in the region of $5 billion in the Nigerian economy.

According to him, ‘‘Qatar is a weighty and strategic country and very strategic in that part of the world and we are putting our best feet forward to advance the interest of our country economically and in other areas.”

He recalled that President Muhammadu Buhari had visited the State of Qatar in 2016 and the Emir of Qatar, Tamim Bin Hammad Al-Thani, reciprocated with a State visit in 2019.

Onyeama also explained that only trusted hands with a track record of diligence, experience and professionalism in the Foreign Service were recently appointed career ambassadors by the federal government.

The minister said the appointment of Ahmed and other career ambassadors were predicated on posting dedicated and keen Foreign Service practitioners to serve as image makers of the country.

He said: ‘‘Ambassador Yakubu Ahmed is a dedicated professional with a penchant for rigour and detail. He is very capable and one of the best in the Ministry of Foreign Affairs. He is personable, affable, extremely friendly, dispassionate and objective.

‘‘He is going to head a very important mission, a very important country, reckoned to be one of the richest countries in the world, per capita, and there’s a lot we will be doing with the State of Qatar.”

Also speaking, the Deputy Chief of Staff, Adeola Rahman Ipaye, described the honoree as a ‘‘perfect gentleman, very even-natured and always well turned out’’.

Ipaye said he had no doubt that the newly appointed ambassador would serve the country well in Qatar, adding that: ‘‘We are further encouraged that when he completes this assignment, he would return to serve Nigeria in a higher capacity.’’

In his remarks, the Permanent Secretary, State House, Tijjani Umar, while congratulating the outgoing DOP on his appointment, lauded Ahmed for excellent service to the State House and the nation.

‘‘He served this institution and the nation with the deepest sense of responsibility and it is very important that we establish a tradition where the system appreciates those who have served it well and those who will continue to serve it well,’’ he said.

Umar urged the new envoy to keep very fond memories of his time at the Presidential Villa, assuring him of the prayers and goodwill of all the staff.

Responding, Ahmed thanked President Buhari for the great honour and privilege of making him his principal representative in Doha, Qatar.

The Ambassador-designate pledged to deplore his energy and skill to the promotion of the existing cordial relationship between Nigeria and Qatar, particularly in the areas of economic, political, cultural and consular affairs as well as other key areas.

Ahmed, who joined Nigeria’s Foreign Service in 1993, said during his years in public service he had learnt that ‘‘patriotism, selfless service, diligence, determination and perseverance will always result in the achievement of the desired objective’’.

According to him, these virtues would be his ‘‘watchword’’ in the pursuit of Nigeria’s foreign policy objectives and the attainment of national interests.

The Ambassador-designate singled out for appreciation the Chief of Staff to the President, Prof. Ibrahim Gambari, and the state Chief of Protocol, Ambassador Lawal Kazaure, saying he had learnt a lot working under their mentorship.

He expressed gratitude to the Minister of Foreign Affairs and the Permanent Secretary, State House for giving him the opportunity of a memorable work experience in the State House.

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