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Banks Ready to Fund Refineries Rehabilitation, Says NNPC

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  • Banks Ready to Fund Refineries Rehabilitation, Says NNPC

Banks have expressed their readiness to fund the rehabilitation of the nation’s ailing refineries, the outgoing Group Managing Director of the Nigerian National Petroleum Corporation, Dr Maikanti Baru, said on Thursday.

After efforts to secure offshore funding for the rehabilitation of the refineries proved abortive, the NNPC said in February this year that it had to resort to immediate direct funding from internal cash flows and debt financing from the financial markets for the project.

“The government and the NNPC are determined to rehabilitate the refineries and put them back to what they were and be efficient as they should be,” Baru said.

He spoke in Lagos after his induction as a fellow of the Nigerian Academy of Engineering during the institution’s 2019 annual lecture, titled ‘Fuelling the Nigerian economy: State of domestic refining and distribution facilities.’

The refineries, located in Kaduna, Port Harcourt 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.

Baru noted that there were decades of neglect mainly due to funding, saying, “We took some steps in 2016 when we came in.”

He stated that certain bodies had made a commitment to come and support the rehabilitation of the refineries but the negotiations did not yield the desired result.

He said, “So, we now decided as the NNPC, with the permission of Mr President, to go to the capital market to raise the funds to repair the refineries. It is not just repairs but rehabilitation; some units are completely out. We will not just repair them, we are going to modernise them and put them in a better position.

“With the gracious approval of Mr President, we need to do a detailed bankable study before we go to the capital market. So, the NNPC, using its internal resources, now embarked on this detailed study, which will be completed in October. Once we have that study, the banks are ready to fund us and we are going to rehabilitate the refineries.”

Asked if he would be willing to serve in another capacity if given the opportunity after his exit from the corporation next month, Baru said, “Well, the service to Nigeria is everybody’s call. Every patriotic Nigerian should be willing to do that. However, the system that has been put in place is that a public servant retires when he is 60 and also worked 35 years.

“However, if it’s the prerogative of the President to invite you to do more and of course, you should look at it and do more. So, it is graciously accepted my statutory retirement but if he says I should come and serve, I’m willing to serve.”

The NNPC had planned to rehabilitate the refineries in order to attain a minimum of 90 per cent capacity utilisation, using third-party financiers and the original refinery builders to provide the requisite funding and technical support.

The corporation, its transaction advisers and an inter-ministerial team on refineries rehabilitation were said to have reviewed expressions of interest from 28 potential financiers.

But after over one and half years, the negotiations with financiers stalled in December 2018 due to varying positions on key commercial terms.

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

Japan Donates US$6.5 Million to WFP to Stem Food Insecurity in South Sudan

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The United Nations World Food Programme (WFP) welcomes a contribution of US$6.5 million from the Government of Japan. This contribution is timely at the start of the lean season when more than 7.2 million people in South Sudan are expected to face acute food shortages.

This latest contribution consists of US$4.5 million for life-saving food assistance to people who are severely food insecure and US$ 2 million to restore livelihoods and enhance resilience.

WFP will use this contribution to support 115,000 people in Jonglei, Warrap, Northern Bahr el Ghazal and Lakes States, where food insecurity has reached catastrophic levels due to continuing violence, two years of excessive flooding, displacement and the loss of livelihoods, livestock, infrastructure and homes that have left millions of people highly vulnerable and unable to provide for themselves.

“It is our sincere wish that Japan’s grant helps save the people from food insecurity accelerated by natural disaster, communal violence and displacement and bring those suffering people back to a normal living environment which is the precondition to pave the way to nation building and economic development in South Sudan,” said H.E. Tsutsumi Naohiro, Ambassador of Japan to the Republic of South Sudan.

The contribution will also support WFP’s livelihoods and resilience-building programmes, which include creation of community assets such as access roads and multi-purpose water points. These communal assets are geared towards improving families’ access to local markets to sell their produce and purchase food and other essentials, as well as their access to clean water.

“We are grateful to Japan for this timely contribution at a time when food needs are the greatest but funding for humanitarian assistance is dwindling because of the economic impact of COVID-19. This noble gesture demonstrates the government of Japan’s commitment towards alleviating suffering and contributing to peace in South Sudan,” said Matthew Hollingworth, WFP’s Country Director in South Sudan. “It is a great boost towards our saving lives and changing lives efforts.”

The Government of Japan has funded food assistance to developing countries since 1968. Japan has supported WFP’s work in South Sudan since 2013, contributing more than US$35 million.

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Oil Firms Borrowed N130B From Banks in February – CBN

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Operators in the downstream, natural gas and crude oil refining sectors of the Nigerian oil and gas industry borrowed N130b from Nigerian banks in February amid the significant rise in global crude oil prices.

The debt owed by the oil and gas companies rose to N4.05tn in February from N3.92bn in January, according to the latest data obtained from the Central Bank of Nigeria on Monday.

Operators in the upstream and services subsectors owed banks N1.26tn in February, down from N1.27tn a month earlier.

The combined debt of N5.31tn owed by oil and gas operators as of February 2021 represents 25.29 percent of the N21tn loans advanced to the private sector by the banks, according to the sectoral analysis by the CBN of deposit money banks’ credit.

Oil and gas firms received the biggest share of the credit from the deposit money banks to the private sector.

The slump in oil prices in 2020 as a result of the coronavirus pandemic hit many oil and gas companies hard, forcing them to slash their capital budgets and suspend some projects.

A global credit rating agency, Moody’s Investors Service, said last month that the outlook for Nigeria’s banking system remains negative, reflecting expectations of rising asset risk and weakening government support capacity over the next 12 to 18 months.

“Nigerian banks’ loan quality will weaken in 2021 as coronavirus support measures implemented by the government and central bank last year, including the loan repayment holiday, are unwound,” said Peter Mushangwe, an analyst at Moody’s.

The rating agency estimated that between 40 percent and 45 percent of banking loans were restructured in 2020, easing pressure on borrowers following the outbreak of the pandemic.

Another global credit rating agency, Fitch Ratings, had noted in a December 8 report that Nigerian bank asset quality had historically fallen with oil prices, with the oil sector representing 28 percent of loans at the end of the first half of 2020.

It said the upstream and midstream segments (nearly seven percent of gross loans) had been particularly affected by low oil prices and production cuts.

“However, the sector has performed better than expected since the start of the crisis, limiting the rise in credit losses this year due to a combination of debt relief afforded to customers, a stabilisation in oil prices, the hedging of financial exposures and the widespread restructuring of loans to the sector following the 2015 crisis,” it said.

The rating agency predicted that Nigerian bank asset quality would weaken over the next 12 to 18 months.

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Fall in Economic Activities in Nigeria Created N485.51 Billion Fiscal Deficit in January -CBN

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The drop in economic activities in Africa’s largest economy Nigeria led to a N485.51 billion fiscal deficit in January, according to the latest data from the Central Bank of Nigeria (CBN).

In the monthly economic report released on Friday by the apex bank, the weak revenue performance in January 2021 was due to the decline in non-oil receipts following the lingering negative effects of COVID-19 pandemic on business activities and the resultant shortfall in tax revenues.

In part, the report read, “Federally collected revenue in January 2021 was N807.54bn.

“This was 4.6 per cent below the provisional budget benchmark and 12.8 per cent lower than the collection in the corresponding period of 2020.

“Oil and non-oil revenue constituted 45.4 per cent and 54.6 per cent of the total collection respectively. The modest rebound in crude oil prices in the preceding three months enhanced the contribution of oil revenue to total revenue, relative to the budget benchmark.

“Non-oil revenue sources underperformed, owing to the shortfalls in collections from VAT, corporate tax, and FGN independent revenue sources.

“Retained revenue of the Federal Government of Nigeria was lower-than-trend due to the lingering effects of the COVID-19 pandemic.”

“At N285.26bn, FGN’s retained revenue fell short of its programmed benchmark and collections in January 2020, by 41.3 per cent and 7.5 per cent respectively.

“In contrast, the provisional aggregate expenditure of the FGN rose from N717.6bn in December 2020 to N770.77bn in the reporting period, but remained 14.4 per cent below the monthly target of N900.88bn.

“Fiscal operations of the FGN in January 2021 resulted in a tentative overall deficit of N485.51bn.”

The report noted that Nigeria’s total public debt stood at N28.03 trillion as of the end-September 2020, with domestic and external debts accounting for 56.5 percent and 43.5 percent, respectively.

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