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Investors await Buhari’s plans to kick-start economy
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2 BUSINESS DAY NEWS
Investors await Buhari’s plans to kick-start economy As stock selloff signals lack of policy clarity LOLADE AKINMURELE
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igerian stocks are down some 4 percent since President Muhammadu Buhari’s re-election in February as investors struggle to find positive triggers to swoop for stocks at a time when the allure of double-digit yielding fixed income government securities has proved difficult to resist. Although the bearish stock market mirrors a global shift from risk assets to safe-havens, analysts say Nigeria has contributed to the stock downturn with its policy inaction at a cru-
cial time when peer countries are implementing the type of reforms capable of sending positive signals to investors. Egypt is talking up energy and investment reforms while Kenya is in the middle of repealing a regulation that caps bank lending. Those reforms mean both markets have done better than the Nigerian stock market this year. Back home in Nigeria, President Buhari is pushing for reforms in the oil and gas sector from the gas commercialisation programme which will put an end to gas flaring, even as Production Sharing Contracts (PSC) with International Oil and Gas
Monday 01 April 2019
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companies are being reviewed. Both reforms have the potential to attract private investments and create fresh revenue sources for the cash-strapped nation. But investors have not been impressed. Critics say the big ticket reforms that need to happen to boost economic growth are still stalling, whether it is the need to ditch expensive fuel subsidies or pass the Petroleum Industry Bill. “Nigeria is best summed up by investors as a country with a developed market growth rate but emerging market risk, so it is not exciting enough for stock investors. Instead, they are piling into fixed income where they are
taking much less risk,” said Wale Okunrinboye, head of research at Lagos-based pension fund manager, Sigma Pensions. “Buhari has not done much to change that story. He hasn’t convinced investors enough that the economy will fare better in his second term,” Okunrinboye added. Lagos has been the weakest performer year to date of the three biggest stock markets including Nairobi and Johannesburg. Jo’burg, being the most developed and liquid of the three markets, appears to have benefitted Continues on page 46
Moody’s confirms Access Bank’s longterm deposit rating, withdraws Diamond Bank’s rating OLUFIKAYO OWOEYE
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lobal credit rating agency, Moody’s has confirmed Access Bank’s long-term local currency deposit rating of B2, longterm foreign currency deposit rating of B3, long-term issuer ratings of B2, local currency senior unsecured rating of B2, local currency national scale deposit ratings of A1.ng/NG1, foreign currency national scale deposit ratings of A3.ng/NG-2, and national scale senior unsecured rating of A1.ng. Moody’s also affirmed Access Bank’s short-term bank deposit ratings, issuer ratings and counterparty risk ratings (CRR) at Not-prime and affirmed the short-term counterparty risk assessment (CRA) at Notprime(cr). The outlook on the bank’s long-term deposit ratings, long-term issuer ratings and senior unsecured rating was changed to stable from ratings under review. It also downgraded Access’ baseline credit assessment (BCA) to b3 from b2, its long-term CRRs to B2 from B1, long-term CRA to B2(cr) from B1(cr), and national scale CRRs to Aa3.ng from Aa1.ng. The BCA is a measure of the probability that a bank will require support to avoid default beyond the support provided by its affiliates. Diamond Bank’s baseline credit assessment was upgraded to b3 from caa3 and all Diamond’s ratings have been aligned with the ratings of Access. The outlook on Diamond’s long-term deposit and issuer ratings was changed to stable from ratings under review. Diamond’s ratings were subsequently with-
Continues on page 46
Inside Banks’ income from investment securities hit N655bn in 2018 P. 4 L-R: Umar Hamisu, MD, Investment Development Company, Kebbi State; Ladi Balogun, group chief executive, FCMB Group plc; Ahmed Karfi, MD, Investment & Property Development Company, Katsina State, and Misbahu Yola, MD, FCMB Pensions Limited, at the Annual General Meeting of FCMB Pensions (a subsidiary of FCMB Group) in Lagos.
NNPC records poor performance in 2018 despite $71 average oil price ... Brazilian, Chinese, Russian, Norwegian peers take the shine DIPO OLADEHINDE
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hen Nasir El-Rufai said in 2015 that Nigeria must do away with its “corrupt” oil company or stand the risk of being destroyed by it, not many stakeholders took him seriously. However, a deeper look at latest financial result of Nigerian National Petroleum Corporation (NNPC) shows the Kaduna State governor could be right after all. With international benchmark Brent crude averaging $71.19 per barrel in 2018, 31.5 percent gain from 2017 when it averaged $54.15 a barrel, state-owned NNPC performed poorly compared to its peers in China, Brazil, Russia and other
countries. BusinessDay analysis of NNPC’s full-year 2018 report shows between January and December 2018, Africa’s biggest oil producing country spent N730.9 billion on under-recovery, popularly called subsidy, while N140.6 billion was also spent on old, perennial problems such as pipeline repairs and management cost. Figures from the corporation’s operations and financial report for 2018 actual show gains of N393.5 billion made by its upstream and gasprocessing subsidiaries – Nigerian Petroleum Development Company (NPDC), Integrated Data Service Limited (IDSL), National Engineering and Technical Company Limited (NETCO), Nigerian Gas Company
ANALYSIS Limited (NGC), and Nigerian Gas Marketing Company (NGMC) – were wiped off largely by its downstream subsidiary operations which recorded deficits north of N351.7 billion. “If we do not kill NNPC, NNPC will kill Nigeria,” El-Rufai said at the 2015 Wole Soyinka Media lecture series. “Any organisation that takes 50 percent of federation revenue for itself and gives you the change has no right to exist. It is evil, it must die; it is just the manner of the death that we must talk about.” In full-year 2018, Nigeria recorded N24.9 billion on product losses, while cash call payment for the development of joint venture oil
and gas assets ate into the Federal Government’s revenue last year as a total of N1.829 trillion was paid to oil companies. The government generated N3.11 trillion from the sale of crude oil and gas in 2018, out of which N1.829 trillion was transferred into the joint venture cash call account while the balance of N1.28 trillion went into the Federation Account, the NNPC data revealed. “There is a lot of secrecy with NNPC. Also, despite doing so much under-recovery, how come a lossmaking organisation has not gone bankrupt?” said Luqmon Agboola, head of energy and infrastructure at Sofidam Capital. “Nobody is even asking questions surrounding the
revenue for the 450,000 barrels they get daily.” The combined value of output by the three refineries (at import parity price) for the month of December 2018 amounted to N10.86 billion while the associated crude plus freight costs and operational expenses were N8.89 billion and N19.29 billion, respectively, resulting in an operating deficit of N17.32 billion by the refineries. “There are people working in these refineries that are being paid and promoted for not doing anything but yet receive hefty salaries, so the refineries are loss centres and not profit-oriented compared to other oil producing countries which is a
Continues on page 46
Monday 01 April 2019
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