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Indigenous Oil Firms Bleed Over N4.9tn Debts

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  • Indigenous Oil Firms Bleed Over N4.9tn Debts

Nigerian oil and gas firms have taken a serious beating from the downturn in the industry amid a debt burden of N4.9tn that is weighing on many of them.

After becoming key players in the nation’s oil and gas industry in recent years, indigenous firms are now struggling to maintain the assets they acquired through the Federal Government’s marginal field programme and recent divestments by oil majors.

Over 130 blocks are in the control of indigenous operators, who were awarded some 50 marginal blocks through discretionary allocations in the 1990s, another 24 through marginal fields bidding round in 2003, and 60 more blocks through conventional bidding rounds in 2005 and 2007, according to the Oxford Business Group.

But total oil production from the local firms fell to 46.01 million barrels last year from 80.17 million barrels in 2015, bringing their share of national production down to 6.4 per cent from 10.3 per cent, the February report of the Nigerian National Petroleum Corporation showed.

The dip in global oil prices since mid-2014 coupled with the resurgence of militant attacks in the Niger Delta last year has significantly hammered the operators’ ability to earn revenues and repay debts owed to banks and others.

Prior to the fall in crude oil prices from a peak of $115 per barrel in 2014, banks gave loans to local oil and gas companies for the acquisition of assets, mostly being divested by the IOCs such as Royal Dutch Shell, Chevron and Total.

But several of the companies, including Seplat Petroleum Development Company Plc and Neconde Energy Limited, suffered severely from the shutdown of the Trans Forcados Pipeline, their main export route, for more than a year.

As of the end of December 2016, loans to the oil and gas sector constituted 30.02 per cent of the gross loan portfolio of the nation’s banking system as credit to that sector grew from N4.51tn to N4.89tn, according to latest Financial Stability Report of the Central Bank of Nigeria.

The report stated that during the second half of last year, credit risk trended higher as non-performing loans in the banking industry grew to N2.08tn at end-December 2016 from N1.68tn at end-June 2016.

Seven Energy International Limited, an integrated gas company in South-East Nigeria, has been grappling with severe liquidity challenge.

It announced in April that it had requested a standstill from its lenders under the $385m Accugas term facility dated June 23, 2015, and had not made payments of interest and principal due thereunder on March 31, 2017.

On April 11, the group failed to pay the interest due on the $300m, 10 ¼ per cent senior secured notes due 2021 and the $100m, 10 ½ per cent notes due 2021, and did not satisfy the conditions to pay payment-in-kind interest.

“The 30-day grace period for payment of interest under the SSNs and the 10 ½ per cent notes expired on May 11, 2017, which represents an event of default under the terms of the SSNs and the 10 ½ per cent notes,” the group said.

Seven Energy said on May 15 that it was being advised by Ernst & Young and continued in constructive discussions with potential investors and lenders, with a view to achieving a comprehensive capital restructuring.

“The group is in parallel discussions with all of its financial creditors, including an ad hoc group of holders of the SSNs, with a view to obtaining agreements to standstill on debt service obligations and waive any defaults arising under the various finance agreements,” it added.

It said its liquidity was severely affected by a range of external factors, including loss of material cash flow from its Strategic Alliance Agreement since February 2016 because of recurrent militant activity that resulted in the closure of Forcados export terminal, and a significant backlog of unpaid invoices relating to the supply of gas to federal and state-owned power stations.

Last month, the Chairman, Obijackson Group, Dr. Ernest Azudialu-Obiejesi, said the group had yet to repay the $558m loan from banks used to acquire 45 per cent interest in Oil Mining Lease 42 from Shell, Total and Agip Joint Venture in 2011, through which its upstream subsidiary, Neconde Energy, was created.

Following the shutdown of Trans Forcados Pipeline in February 2016, the company’s oil output fell to 15,000 barrels per day from about 52,000 bpd after six months of no production last year.

One of the major indigenous independent companies, Seplat Petroleum Development Company, which said its net debt stood at $516m as of December 2016, had to reduce its rig-based activity to comprise only the workover and re-completion of the Sapele-4 well as a water disposal well last year.

The company said it adopted a prudent approach and proactively engaged in discussions with its lenders in the $700m seven-year term loan to re-align near-term debt service obligations within the existing tenor.

Its three-year secured revolving credit facility of $175m at six per cent is scheduled to mature in December this year, according to its 2016 financial statements.

“The company is currently engaged with the lenders on the three-year corporate facility with a view to extending the tenor until the end of 2018 and re-profiling principal repayments, while it looks at optimising the capital structure,” Seplat said.

Another major indigenous player, Oando Plc, has had to sell some of its subsidiaries, including Oando Gas and Power, Oando Energy Services Limited and Alausa Power Limited, to reduce its debt, which stood at N355.4bn in the first quarter of last year.

With a debt of N225.9bn as of March 2017, the group said it secured the lenders’ consent last year for the sale of its non-operated interests in OMLs 125 and 134, but awaiting the final approval of the Minister of Petroleum Resources.

The Vice President/Head of Energy Research, Ecobank, Mr. Dolapo Oni, noted that most of the indigenous firms had been facing funding challenges in recent years, adding, “They are not getting funding from their banks for major projects, but their banks have restructured their loans to ensure that at least they can remain in operation.

He described the reduction in lending from banks as a major blow to the oil firms because “they need funding to be able develop their fields and increase production.”

“They need equity injection because they are all dependent on debts. As long as they are dependent on debts, they will be exposed and their cash flow will be affected when oil price fluctuates, like we have seen in the last three years,” Oni added.

The Chairman, PetroAfrique Oil & Gas Limited, Mr. Adams Okoene, said most of the companies had borrowed money from banks to carry out development on their fields.

The former Chief Executive Officer, Midwestern Oil & Gas Company Limited, noted that the Forcados terminal had only just come back into operation after a long time, adding, “All those who rely on that outlet to sell their crude have almost died because they had to be looking for alternatives.”

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

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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Economy

France, Nigeria to Build New Partnership

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France is currently aiming at building a new partnership with Nigeria, with the dispatching of its Minister in charge of Foreign Trade and Attractiveness, Franck Riester, to Nigeria.

Riester, who was expected at the time of filing this report on Monday, is scheduled to visit Nigeria from 12-14 April, 2021.

A statement from the French Embassy in Nigeria said: “Franck Riester is visiting Nigeria from 12 to 14 April, a visit that follows up on the priorities set by French President Emmanuel Macron during his official visit to Nigeria in July 2018 and his desire to build a new partnership between Africa and France.

“As the largest economy in Africa and the economic engine of West Africa, Nigeria is indeed a major partner for France, the first in sub-Saharan Africa with bilateral trade amounting to a total of 4.5 billion USD in 2019 (2.3 billion USD in 2020, due to the Covid-19 pandemic).”

It disclosed that the minister will have several official meetings in Abuja and Lagos, in order to underline the importance of the bilateral economic relationship and to prepare the summit on the financing of African economies in Paris on 18 May.

It revealed that the objective of the mission is also to further strengthen the links between the French and Nigerian private sectors, and “in this regard, the minister will have in-depth discussions with the main Nigerian economic actors to strengthen bilateral cooperation and investments, both in Nigeria and in France, particularly in the logistics sector”.

It said while in the country, the minister would meet with young Nigerian entrepreneurs in the cultural and creative industries sector, to discuss the major role of their country in African creativity and the development of the African entrepreneurial ecosystem, with the support of France.

It further said: “The minister will also open the ‘Choose Africa’ conference, a €3.5 billion initiative by President Emmanuel Macron dedicated to supporting the development of start-ups and SMEs in Africa to enable the continent to benefit fully from the opportunities of the digital revolution.”

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Economy

COVID-19: USAID to Provide $3m Grant, Technical Assistance to Combat Food Insecurity in Nigeria

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The United States Agency for International Development (USAID) is providing financial grant and technical assistance worth $3 million to combat food insecurity in Nigeria compounded by COVID-19 pandemic.

A statement by the agency on Monday said: “On April 12, 2021, the U.S. Agency for International Development (USAID) in Nigeria launched a COVID-19 Food Security Challenge that will provide $3 million in grant funding and technical assistance to youth-led and mid-stage companies working in food value chains in Nigeria.”

The statement lamented that Nigeria is experiencing food insecurity compounded by the COVID-19 global pandemic and its effects on the food value chain in the country.

It stated that the pandemic has disrupted the already fragile agricultural value chains, especially smallholder farmers’ ability to produce, process and distribute food, which has disrupted agricultural productivity and markets, and negatively impacted livelihoods, especially among vulnerable households, women and youth.

The USAID Mission Director, Anne Patterson, said: “We are launching the COVID-19 Food Security Challenge to help innovative Nigerians alleviate food insecurity.

“This assistance encourages private sector-led solutions to boost food production, processing and create market linkage along the agriculture value chain in a sustainable way across Nigeria.”

The statement revealed that in launching the challenge, USAID seeks commercially viable youth-led and mid-stage companies already working in food production, processing, and distribution, noting that successful applicants will present ideas that demonstrably help farmers and other stakeholders in the agricultural value chain increase, agricultural productivity and food security within the next six months.

According to the statement, the challenge will award 15 to 25 youth-led companies up to $75,000 each and award 10 to 15 mid-stage companies up to $150,000 each.

Winners will receive funding and technical assistance to rapidly expand their activities to mitigate the effect of COVID-19 on Nigeria’s food value chain and improve the resilience of vulnerable households to the negative impacts of the pandemic.

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