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Refining, Regulatory Challenges Worry Oil Industry Stakeholders

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  • Refining, Regulatory Challenges Worry Oil Industry Stakeholders

After over 60 years of commercial production of crude oil and gas, the country is still grappling with low refining capacity and continues to depend largely on importation to meet its fuel needs.

Many Nigerians, including industry stakeholders, have over the years lamented the ailing government-owned refineries, which were built between 1965 and 1989.

The refineries, which are located in Port Harcourt, Kaduna and Warri, have a combined installed capacity of 445,000 barrels per day, but have continued to operate far below the installed capacity for many years.

The proposed rehabilitation of the refineries by the current government has suffered delays as the third-party financiers for the project have yet to be announced, more than a year after the Nigerian National Petroleum Corporation said 28 firms had expressed interest in their financing.

The refineries lost N96.34bn in the first nine months of last year, compared to a loss of N95.09bn recorded in the whole of 2017, according to the NNPC.

Kaduna refinery, which only processed crude oil at 4.7 per cent capacity utilisation in January last year, was idle from February to September, 2018.

The Warri refinery was idle in January and September, but processed crude oil in seven other months, while the Port Harcourt refinery was idle in March, July, August and September but processed crude in the other months.

“We just have to look for ways to ensure adequate internal refining. The advantage of internal refining is that we will have sufficient petroleum products. There is no reason why a litre of kerosene or diesel should cost above N200,” a petroleum expert, Mr Bala Zakka, told our correspondent in a telephone interview.

He said the country had been relying on fuel imports for many years, adding that adequate domestic refining would help the country free itself from foreign currency pressure.

“The pressure on our external reserves will also be minimised,” he added.

According to Zakka, the global oil and gas industry is becoming highly competitive, and energy demand is increasing with nations now coming up with innovative ways of making sure they reduce their dependence on other countries for their sources of energy.

He said, “The United States is looking for innovative ways to make sure they take advantage of their shale oil and make it suitable for refineries. Asian countries like China and India are thinking in the same direction.

“So, for Nigeria, what is going to happen is that there is going to be much less demand for the Nigerian crude oil, and global demand may even go down because countries are looking inwards for innovative sources of energy apart from the other sources of energy that we call renewable energy.”

An energy analyst and Partner at Bloomfield Law Practice, Mr Ayodele Oni, also noted that despite the abundant oil and gas reserves in the country, “we are not doing enough in terms of value addition in the country.”

He said, “A major worry for me is the uncertainty created by the non-passage of the Petroleum Industry Bill. It is important government says it is not passing any new law for another five years than for the uncertainty to exist.

“Most times, investments in the oil and gas industry are long-term projects. So, if the rules change midway, it can be a big problem. I think it is better to have harsh laws with certainty and consistency than to have uncertainty and inconsistency because businesspeople plan on the basis of laws and policies.”

A key obstacle to the growth of the industry has been widely described as the regulatory uncertainty caused by the delay in the passage of the PIB.

The PIB, which has been in the works since 2008 when it was first introduced to the legislature, suffered setbacks in the 6th and 7th National Assembly.

The bill seeks to change the organisational structure and fiscal terms governing the industry.

Currently, before the 8th National Assembly, it was split into four parts — Petroleum Industry Governance Bill, Petroleum Industry Administration Bill, Petroleum Industry Fiscal Bill and Petroleum Host Community Bill — to fast-track its passage into law.

The Senate on May 25, 2017, passed the PIGB, which seeks to unbundle the NNPC and merged its subsidiaries into an entity.

After its passage by both the Senate and the House of Representatives, the PIGB was transmitted to President Muhammadu Buhari for assent in July last year to enable it to become law but it emerged in August that Buhari declined to assent to it.

The Senior Special Assistant to the President on National Assembly Matters (Senate), Ita Enang, identified the provision of the PIGB permitting the Petroleum Regulatory Commission to retain as much as 10 per cent of the revenue generated as one of the reasons Buhari declined to assent to the bill.

A former President of the International Association for Energy Economics, Prof. Wumi Iledare, stressed the need to address the uncertainty surrounding the industry’s governance and institutional framework.

“We all thought the PIGB would be passed but it wasn’t. I think if we want 2019 to start on a good note for the industry, we need to remove the cloud of this uncertainty with respect to the governance of the industry,” he told our correspondent.

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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AB InBev Opens Applications For Beer Garage Africa Innovation Challenge

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The world’s largest beer company, AB InBev, has partnered with Hindsight Ventures to launch the Beer Garage Africa Innovation Challenge, which will offer startups access to venture development and grant funding.

AB InBev, which has over 500 brands and over six million B2B customers in over 100 countries, launched Beer Garage a few years ago with the objective of driving innovation by building a strong community of ecosystem stakeholders.

As part of this initiative, AB InBev is now launching the Beer Garage Africa Innovation Challenge, a pan-African challenge to identify hi-tech, high potential startups and founders building innovative solutions across Africa.

To do so, it has partnered with Startup Réseau, an India-headquartered global startup accelerator, which will operate the programme through its Africa-focused vertical Hindsight Ventures.

Ten startups will be selected to take part in a Global Venture Bootcamp, a three-week venture mentorship and leadership development programme that will be delivered by successful founders, industry leaders, domain experts and investors. The Beer Garage Africa Innovation Challenge will culminate with a demo day, which will be attended by AB InBev’s global leadership as well as Hindsight Ventures’ global investor pool. On the demo day, one African startup will stand to win US$5,000 in grant capital. All selected startups get access to US$150,000 in technology credits from partners.

“We are really excited by this partnership, which allows us to drive a pan-African program. With a billion people in the continent, over 300 million new internet users expected to come online over the next three years, a fast-growing mobile internet penetration – and now, with global venture capital money making its way to African entrepreneurs, this is a great opportunity for startups to engage with AB InBev as a partner of choice,” said Ajay Ramasubramaniam, founder and chief executive officer (CEO) of Startup Réseau.

Pritam Dutta, global director for fintech ventures and innovation at AB InBev, said the Beer Garage Africa Challenge was an opportunity to leverage the emerging tech startup ecosystem and funnel novel ideas into AB InBev.

“We set out to build out a stronger connect into the Africa ecosystem, find disruptive startups which could be a great pipeline for our future disruptive innovations and further accelerate our innovation agenda, delivering strong business impact,” he said.

Applications for the challenge are now open here.

Beer Garage is one of the global innovation hubs at AB InBev with the objective of driving innovation by building a strong community of ecosystem stakeholders.

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Merger and Acquisition

Sub Saharan Africa Mergers and Acquisition Transactions Totalled US$ 78.3 Billion During First Nine Months of 2021

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Refinitiv today released the Sub-Saharan African investment banking analysis for the first nine months of 2021. According to the report, an estimated US$387.5 million worth of investment banking fees were generated in Sub-Saharan Africa during the first nine months of 2021, a 15% increase from the same period in 2020. 

While debt capital markets underwriting fees increased 148% to US$117.8 million, the highest year-to-date period since our records began in 2000, fees from equity capital markets underwriting, M&A advisory and syndicated lending all declined from the first nine months of 2020.  Equity fees declined 17% to US$50.7 million, while syndicated lending fees declined 4% to US$148.2 million. Advisory fees earned in the region from completed M&A transactions reached US$70.8 million, down 3% from last year to the lowest first nine-month total since 2013.  Fifty-eight percent of all Sub-Saharan African fees were generated in South Africa during the first nine months of 2021, and 23% were earned from deals in the financial sector. Standard Chartered earned the most investment banking fees in the region during the first nine months of 2021, a total of US$33.1 million or an 8.5% share of the total fee pool.

MERGERS & ACQUISITIONS

Boosted by the US$44.1 billion Naspers/Prosus share swap in May, the value of announced M&A transactions with any Sub-Saharan African involvement reached US$78.3 billion during the first nine months of 2021, more than four-times the value recorded during the same period last year and the highest first nine-month total since our records began in 1980.  The number of deals increased 4% from last year to a three-year high of 584.

M&A involving a Sub-Saharan African target reached US$61.8 billion, again lifted by the share swap to an all-time record first nine-month total, while the number of deals increased 8% over last year.  Inbound deals, involving an acquiror outside of Sub-Saharan Africa, increased 86% to US$9.6 billion, while Sub-Saharan African outbound M&A more than doubled to US$11.5 billion. With advisory work on deals worth a combined U$52.1 billion, Morgan Stanley held the top spot in the financial advisor ranking for deals with any Sub-Saharan African involvement during the first nine months of 2021.

EQUITY CAPITAL MARKETS

Sub-Saharan African equity and equity-related issuance reached US$971.2 million during the third quarter of 2021, the highest quarterly total in more than two years.  Despite the strong third quarter, total proceeds raised during the first nine months of 2021 was down 42% from last year at US$1.2 billion, the lowest first nine-month total since 2005.   Pepkor Holdings, Lighthouse Capital and retail pharmacy chain Dis-Chem Pharmacies were among those in the region raising new equity funds from follow-on offerings during the third quarter.  There have been no initial public offerings in the region so far during 2021. Investec and Goldman Sachs share first place in the Sub-Saharan African ECM underwriting league table during the first nine months of 2021. 

DEBT CAPITAL MARKETS

Sub-Saharan African debt issuance totalled US$37.2 billion during the first nine months of 2021, up 149% from the value recorded during the same period in 2020 and the highest first nine-month total since our records began in 1980.  The number of issues increased 33% over the same period.  US$15.2 billion worth of the bond proceeds were raised during the third quarter alone, with both Prosus and the Federal Government of Nigeria raising US$4.0 billion.  Government & Agency issuance accounted for 55% of proceeds raised during the first nine months of 2021, while the financial sector accounted for 24%. Citi took the top spot in the Sub-Saharan African bond book runner ranking during the first nine months of 2021, with US$6.0 billion of related proceeds, or a 16% market share.

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Merger and Acquisition

Access Bank Completes Acquisition of African Banking Corporation of Botswana Limited

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Africa’s leading bank, Access Bank Plc has now completed the acquisition of a 78.15 percent shareholding in African Banking Corporation of Botswana Limited (BancABC Botswana).

Access Bank announced in a statement signed by Sunday Ekwochi, Company Secretary, Access Bank Plc.

According to the lender, the new acquisition will form part of the Bank’s nexus for trade and payments in Southern Africa and the broader COMESA trade region.

BancABC Bostwana is the fifth-largest bank in Botswana and is a well-capitalized franchise poised for growth in its local market. The lender’s achievements in the retail banking space will provide an opportunity for the Bank to deploy its best-in-class digital platforms and product suites to the benefit of BancABC Botswana’s customers and enable it to complete strongly across its core business segments.

Commenting on the transaction, Dr. Herbert Wigwe, GMD/CEO of the Bank, “We are pleased with the successful conclusion of this transaction which will provide significant synergies by combining BancABC Botswana’s strong retail banking operation with Access Bank’s wholesale banking capabilities. It will also strengthen the quality of earnings through revenue diversification and growth in the corporate and SME banking segments for BanABC Botswana. The combination is another step towards our broader vision of becoming the world’s Most Respected African Bank.”

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