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Domestic Production of Vehicles Hit 45,000 Units Per Annum

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  • Domestic Production of Vehicles Hit 45,000 Units Per Annum

Like cement, Nigeria appears to be on the track towards becoming vehicles manufacturing country again as local production has increased to 45,000 units per year, up 80 per cent from 25,000.

Based on this growth, PricewaterhouseCoopers (PWC), has projected that the Nigerian auto industry is expected to produce about four million cars annually by 2050.

Also, with this development, Dr. Innocent Chukwuma, Chairman, Innoson Vehicles Manufacturing Limited, IVM, said: “After sometime, Nigeria will manufacture cars for the whole of Africa.”

Recall that in the 1980s,about 120,000 brand new vehicles were being assembled in the country by six assembling plants made up of two car plants and four commercial vehicles plants.

The industry collapsed when government embraced World Trade Organisation’s free trade policy and opened up the country’s borders to imports including second hand vehicles.

Breakdown of the units of vehicles

Investigation revealed that the industry is gradually picking up again as data from National Automotive Design and Development Council (NADDC) has revealed.

The document showed that “Up until 2015, Nigeria imported about 400,000 vehicles (100,000 new and 300,000 used) valued at $4.2 billion. Local production capacity is about 300,000, but utilisation is currently at about 15 percent of installed capacity. This translates to 45,000 units of vehicles per annum.”

NADDC, while not giving the detailed breakdown of the units of vehicles each company produces, said: “The response to the federal government’s automotive policy by the new investors so far has exceeded our expectations.

The current status of implementation of the policy is that the 14 existing assembly plants like VON, PAN, Innoson, Anammco and Leyland-Busan had started assembling new products in 2014, and new ones were established, assembling the following: Nissan, IVM, Peugeot, Hyundai, Honda, Kia, VW, Ford, Changan, GAC, Cars, SUV and light commercial vehicles;Hyundai, IVM, Nissan and Ashok-Leyland buses; MAN, IVM, Sino, Shacman, MAN, FAW, Aston, Foton Forland and Isuzu Trucks; and Proforcearmoured vehicles. The total installed capacity is over 300,000 units per annum.

NADDC said: “By December 2014, the existing assembling plants had commenced operation at various capacity levels to offer existing brands out of new relationship with new Original Equipment Manufacturers (OEM).

Production of Chinese multi-brands

PAN (former Peugeot) in Kaduna resumed the assembling of Peugeot cars, ANAMMCO in Enugu now produces Shacman Trucks of China, Leyland-Busan of Ibadan sustained its production of Chinese multi-brands including NISSAN, VW and HYUNDAI cars and SUV, ASHOK-LEYLAND buses. Innoson Vehicles Manufacturing (IVM) added cars to its commercial vehicle assembly operation; Nissan, VW, Hyundai, kia cars and SUV, Shacman, Sino FAW and MAN Trucks and Ashok-Leyland buses are now assembled in Nigeria.”

Also, it was further learned that 12 new companies, including Honda and Century Auto (Toyota), TATA, Coscharis Auto (FORD, Joylong , Dongfeng), Globe Motors (Higer), Leventis (FOTON-Diamler), KewalramChanrai (GM, Mitsubishi) and Tilad (Shinery), Aston have been given bona-fide manufacturing status and are on track to start assembly operations in Nigeria.

Director General NADDC, Engr. Aminu Jalal, said: “The industry is long-term in nature and requires policy continuity and consistency. This is already assured as the new government has decided to continue with the policy. Nigeria is therefore on track to becoming a vehicle manufacturing nation.”

Hindrances to full capacity utilisations

Investigation further revealed that the existing plants owners are being hindered to fully utilize their production capacities now due to some bottlenecks. Engr. LuqmanMamudu, Director, Policy and Planning at NADDC, said that one of the problems is logistics.

“To order your SemiKnocked Down, SKD, and Completely Knocked Down, CKD, from the sources take quite a while, and the bureaucracy is strangulating, so you find that most of the operators are not able to get their inputs, that is the kits, into their plants as at when due.

Influx of second-hand vehicles

”We also have the problem of second hand vehicles. Something needs to be done about this influx of second-hand vehicles, because second-hand vehicles reduce the market that is available to local investors.”

However, a PWC report presented by a Partner at the firm, Mr. Andrew Nevin, explained that the projected growth requires sustained and effective investments in the auto industry made only possible by the government implementing political, economic and legal policies that create a suitable environment for such investments.

Nevin who did the official presentation of the PWC auto industry report, during a seminar organised by the automobile and allied product group of the Lagos Chamber of Commerce and Industry (LCCI), recently, said “We created three scenarios in this case depending on growth rate and the government support to the auto industry, By 2050, production in this country will hit almost seven million vehicles and imported used vehicles popularly referred to as ‘Tokunbo’ cars will become non-existent by 2034 as a direct result of local production.

“We believe that by 2050, Nigeria should produce over 4 million vehicles. We have also created a pessimistic scenario, which is the third scenario because the world might not turn out the way we think, but even with the pessimistic scenario, Nigeria will be producing about two million vehicles. Essentially, PWC is saying that by 2050, Nigeria is going to be a market that makes at least four million new vehicles a year and would also stop importation of used vehicles.

“There is also going to be the need for experienced car people, Nigeria can achieve its potential to produce over seven million cars by building and working with people that really understand the industry. We believe that the Nigerian auto industry in 2050 would be producing up to four to seven million cars, but it needs the support of the government policies and the industry to do the right things,” he said.

Speaking at the 9th Bola Tinubu Colloquium, with the theme: ‘Make It in Nigeria,’ Chukwuma, Chairman of IVM, said ”most of the companies in Nigeria are assembling cars, but IVM doesn’t assemble,we aremanufacturing cars, not assembling. We are manufacturing cars with the support of Nigerians and after sometime, Nigeria will be manufacturing cars for the whole of Africa.”

Investment incentives

Under the new automotive industry policy, the federal government has put on the table, the following incentives, among others: “Import duty for CKD for vehicle assembly is zero per cent while that of fully built up units is 35 per cent; Import duty for SKD assembly is 10 per cent; import duty for automotive assembly operation equipment is zero per cent. Also, the Nigerian government has mandated all its ministries, agencies and parastatals to patronise the products of local automotive assembly plants.

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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