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More Shipping Firms to Merge in 2017

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Trade - Investors King
  • More Shipping Firms to Merge in 2017

Indications have emerged that more mergers and acquisitions of shipping companies would be sealed in 2017, just as the cost of operations keep soaring.

Besides, growing level of merger of shipping firms showed that the worth of the container consolidation among the five majors currently estimated at $33.4 billion will soon soar with more agreement coming on stream in the New Year.

A recent Fitch Rating showed that muted demand growth would exacerbate overcapacity for the shipping sector in 2017, putting pressure on freight rates and driving further consolidation and defaults.

Fitch expects performance in all segments to be under pressure and has therefore maintained its negative outlook for the sector.
With the persistent crash in the container shipping business, world biggest shipping companies are losing billion of dollars. While some (including Hanjin Shipping) have liquidated, many more firms are finding solace in mergers.

The consolidation moves will further strengthen the capacity of the shipping firms and allow them to stay afloat in business. However, a number of seafarers will be layed off in the repositioning process.

Meanwhile, tanker shipping will face slightly less stress than dry bulk and container shipping, according to Fitch.Many container shipping and tanker shipping companies had sufficient cash to cover short-term maturities at their most recent reporting date, but they are still reliant on uninterrupted access to bank funding to cover negative free cash flow. This funding is even more critical for companies that are not able to cover their upcoming maturities.

Therefore, the filing for receivership in August by Korea-based Hanjin Shipping, the seventh-largest container shipping company in the world, may have far-reaching ramifications, according to Fitch.

In particular, creditors’ withdrawal of support may indicate a reassessment of the financing landscape, where secured bank funding for new vessels has remained relatively accessible even as market conditions have deteriorated.

Fitch expects more Mergers And Acquisitions (M&A) activity and defaults in the short and medium term. But these will only restore equilibrium and boost freight rates if they prompt capacity reduction.

In container shipping Fitch expects consolidation to affect companies across the entire segment, with smaller operators focusing on survival through increasing scale while market leaders such as Maersk Line defend their market position through M&A.

The latest statistics revealed by Vessle Value tagged: “2016 Container Consolidation” stated that these top five fleets are currently worth $33.4 billion and account for 33 per cent of the entire container fleet.

Senior Analyst at Vessel Value, William Bennett, gave the breakdown as; Moller Maersk AS/ Hamburg SUD has total value of $49.9 billion with 319 vessels holding 9.7 per cent of the total global fleet; China Cosco Holdings Co. is valued $47 billion with 190 vessels and 6.9 per cent market fleet; CMA CGM/APL is valued $46 billion with 150 vessels and six per cent market fleet. Also is Hapag-Lloyd/ UASC/ CSAV worth $5.4 billion with 123 fleets and 5.3 per cent of total fleet; and MOL/NYK Line/ K Line valued at $5.1 billion with 129 vessels and 5.2 per cent of market fleets.

According to the statistics, Maersk has paid roughly $4 billion for Hamburg Süd whose fleet is worth $1.5 billion. The deal is expected to complete end 2017. Entry of Hamburg Süd into the 2M alliance will put the alliance into the lead with 15 per cent of global capacity.

The Chinese state cabinet approved the merger of COSCO and China Shipping back in December of 2015. China COSCO Holdings have the largest fleet on order with 29 ULCVs and 4 post-panamax containerships. The Chinese owned container fleet is the most valuable at $17.6 billion and accounts for around 17 per cent of the market.

The largest acquisition in the French giant’s history, CMA CGM acquired Singaporean company. Recently it was also confirmed that APL would join CMA CGM in the Ocean Alliance which will subsequently represent 14 per cent of global container capacity, second only to the 2M alliance. The acquisition will make the combined fleet the 3rd most valuable in the industry.

Hapag-Lloyd completed their integration of Chilean line CSAV earlier this year. The new merger will bring Hapag-Lloyd’s average age down to 7.8 years from 8.7 years. Hapag-Lloyd and UASC will be the fourth most valuable fleet up from 10th and 8th, respectively.

One of the more recent mergers to be announced is that of MOL, NYK and K Line. Only the container businesses of these companies will merge and the consolidation is expected to be complete by 2018. The most valuable Japanese container fleet is Shoei Kisen valued at USD 3.0 billion and ranked 8th. In comparison, none of the other Japanese entities feature in the top 10 most valuable container fleets. The merger shows that consolidation can be used very effectively in the container industry to create a large footprint with only mid-size lines. The new arrangement makes the merged entity the 5th most valuable at $5.1 billion.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Shell’s $2.4bn Asset Sale Under Close Scrutiny

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Shell

The proposed $2.4 billion asset sale by energy giant Shell to Renaissance Africa Energy has become the focal point of intense scrutiny as the Federal Government of Nigeria aims to ensure transparency and regulatory compliance in the transaction.

The deal has sparked widespread interest and raised questions about its implications for the country’s energy landscape.

Shell, a prominent British energy major with a century-long history of operations in the Niger Delta, announced in January its intention to divest its Nigerian onshore subsidiary, Shell Petroleum Development Company of Nigeria Limited, to Renaissance Africa Energy.

This landmark agreement, if finalized, would represent a pivotal moment in Nigeria’s energy sector dynamics.

Renaissance Africa Energy, a consortium comprising five companies, including four Nigerian-based exploration and production firms and an international energy group, has confirmed its participation in the deal.

The consortium’s involvement underscores its strategic positioning to capitalize on Nigeria’s vast energy resources and contribute to the country’s economic development.

The proposed transaction, however, is contingent upon approvals from the Federal Government of Nigeria and other relevant regulatory bodies.

To ensure adherence to regulatory protocols and safeguard national interests, the government has initiated a comprehensive due diligence process, commencing with a high-level meeting held on Monday.

Parties involved in the deal, alongside officials from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), convened in Abuja for a thorough examination of the transaction details.

Gbenga Komolafe, the Chief Executive of NUPRC, outlined the government’s objective to conclude the divestment exercise by June, underscoring the importance of timely and meticulous evaluation.

Komolafe revealed that the government has enlisted the expertise of two globally renowned consulting firms, S&P Global and the BCG Group, to facilitate the due diligence process.

These consultants, recognized for their proficiency in financial analysis and regulatory compliance, will collaborate with NUPRC to ensure that the transaction aligns with industry best practices and regulatory standards.

The due diligence meeting served as a forum to discuss the proposed divestment of Shell’s participating interests in the SPDC JV assets, which are currently operated by the Shell Petroleum Development Company of Nigerian Limited.

These assets, awarded as Oil Exploration Licence-1 in 1949, have played a pivotal role in Nigeria’s hydrocarbon industry, contributing significantly to the nation’s crude oil and gas output.

With an estimated total reserve of nearly 5 billion barrels of oil and extensive gas resources, the SPDC JV assets hold immense strategic importance for Nigeria’s energy security and economic prosperity.

However, as Nigeria seeks to optimize its energy sector operations, the selection of a responsible and capable successor to manage these assets remains paramount.

As discussions continue and the due diligence process unfolds, stakeholders remain optimistic about the prospects of the deal.

Representatives from Shell, Renaissance Africa Energy, and regulatory authorities expressed their commitment to ensuring a transparent and seamless transition, with the overarching goal of advancing Nigeria’s energy sector agenda.

The outcome of the scrutiny surrounding Shell’s $2.4 billion asset sale will not only shape the future of Nigeria’s energy landscape but also demonstrate the country’s commitment to fostering a conducive investment environment and promoting sustainable development in the oil and gas sector.

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POS Terminal Deployment in Nigeria Hits 2.68 Million in March 2024

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POS Business in Nigeria

The total Point of Sale (POS) terminals deployed across Nigeria have now reached 2.68 million as of March 2024.

According to data released by the Nigeria Inter-Bank Settlement System (NIBSS), this represents a Year-on-Year (YoY) growth rate of 47.36% and reflects the accelerating pace of digitalization within the nation’s financial sector.

The proliferation of POS terminals signals a fundamental shift towards cashless transactions, as businesses and consumers increasingly embrace the convenience and efficiency offered by digital payment solutions.

This surge in adoption highlights the growing reliance on technology to facilitate financial transactions, driving innovation and transforming the way commerce is conducted across various sectors of the economy.

Breaking down the figures, January 2024 saw a deployment of 2.47 million POS terminals, representing a significant YoY increase of 50.61% compared to the same period in 2023.

Similarly, February 2024 witnessed a surge in deployment with 2.58 million POS terminals, marking a YoY growth rate of 54.49% compared to February 2023.

While these numbers paint a picture of rapid expansion, a closer examination reveals that there are over a million registered POS terminals yet to be deployed or taken up by merchants.

In January 2024, the number of registered terminals reached 3.44 million, rising from 2.31 million in 2023. February and March continued this trend, with registered terminals reaching 3.6 million and 3.73 million respectively in 2024.

The increase in registered POS terminals underscores the potential for further expansion and utilization within Nigeria’s digital payment landscape.

As the number of terminals continues to grow, there is a clear indication of the country’s readiness to embrace cashless transactions on a broader scale, paving the way for increased financial inclusion and efficiency.

Industry stakeholders view this surge in POS terminal deployment as a positive step towards realizing Nigeria’s vision of becoming a digital economy powerhouse.

However, challenges such as infrastructure development, regulatory frameworks, and merchant adoption still need to be addressed to fully harness the potential of digital payments in driving economic growth and development.

As Nigeria moves towards a cashless future, collaboration between the public and private sectors will be crucial in overcoming these challenges and ensuring that the benefits of digitalization are accessible to all segments of society.

With the continued expansion of POS terminal deployment, Nigeria is poised to emerge as a leader in digital payments innovation, transforming the way transactions are conducted and driving economic progress in the process.

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Appointments

President Tinubu Appoints Nigeria’s Renowned Banker, Jim Ovia as Chairman of Nigerian Education Loan Fund

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President Bola Tinubu has approved the appointment of the Founder and Chairman of Zenith Bank Plc, Jim Ovia, CFR, as the Chairman of the Board of the Nigerian Education Loan Fund (NELFUND).

This was announced in a State House Press Release by the Special Adviser to the President on Media and Publicity, Chief Ajuri Ngelale on April 26, 2024.

According to the statement, ‘‘the President believes Mr. Ovia will bring his immense wealth of experience and professional stature to this role to advance the all-important vision of ensuring that no Nigerian student suffers a capricious end to their pursuit of higher education over a lack of funds and of ensuring that Nigerian youths, irrespective of who they are, have access to higher education and skills that will make them productive members of society and core contributors to the knowledge-based global economy of this century.’’

Jim Ovia, CFR, is the Founder and Chairman of Zenith Bank Plc, one of Africa’s largest banks with over $21.4 billion in assets and shareholders’ funds of over US$2.4 billion as at December 2023.  Zenith Bank is a global brand listed on the London Stock Exchange and the Nigerian Stock Exchange.

In addition to major operations in Nigeria and other West African countries, the Bank has sizeable operations in London and Dubai.

Jim Ovia is the Founder and Chancellor of James Hope University, Lekki, Lagos which was recently approved by the National Universities Commission (NUC) to offer postgraduate degrees in business courses.

James Hope University commenced activities in September 2023.

Through his philanthropy – the Jim Ovia Foundation – he has shown the importance he accords good education.  In support of the Nigerian youth, Jim Ovia Foundation offers scholarships to indigent students through the Mankind United to Support Total Education (MUSTE) initiative.

Most of the beneficiaries of Jim Ovia Foundation scholarship are now accountants, business administrators, lawyers, engineers, doctors etc.

He is the author of “Africa Rise and Shine”, published by ForbesBooks. The book which encapsulates Zenith Bank’s meteoric rise, details the secrets of success in doing business in Africa. He is an alumnus of the Harvard Business School (OPM), University of Louisiana (MBA), and Southern University, Louisiana, (B.Sc. Business Administration). Jim Ovia is a member of the World Economic Forum (WEF) Community of Chairpersons, and a champion of the Forum’s EDISON Alliance.

In recognition of Jim Ovia’s contributions to the economic development of Nigeria, in 2022, the Federal Government of Nigeria honoured him with Commander of the Federal Republic, CFR. Also, in May 2022, Jim Ovia was conferred with the National Productivity Order of Merit (NPOM) Award by the Federal Government of Nigeria.

Earlier, he has been conferred with the national awards of Member of the Order of the Federal Republic, MFR, and Commander of the Order of the Niger, CON, in 2000 and 2011, respectively, as a testament to his visionary leadership and contributions to Nigeria’s financial services sector.

The National Student Loan Programme is a pivotal intervention that seeks to guarantee sustainable higher education and functional skill development for all Nigerian students and youths.

The Nigerian Education Loan Fund, the implementing institution of this innovation, demands excellence and Nigerians of the finest professional ilk to guide and manage.

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