2 BUSINESS DAY NEWS Nigeria rig count falls as oil prices rally DIPO OLADEHINDE
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s oil prices soar, Nigeria’s rig count for the month of July hit a slight decline to 32 as against 33 rig count recorded in May, at a time the 14-member Organisation of Petroleum Exporting Countries (OPEC) also recorded a decline of minus 13 rig counts while the total world rig count increased by 55. BusinessDay analysis of the report of OPEC showed that since the beginning of 2018 Nigeria’s oil rig count has been hovering around 32 to 33. According to online sources Petropedia.com, Rig count is an official listing of all the oil and gas rigs that are operational at a certain location. It also demonstrates the necessary details such as the location of each rig and its functional status. Data obtained from OPEC for the month of July showed OPEC highest oil producer Saudi Arabia’s rig count fell by 8, having had a rig count of 139 in June, as against 147 recorded in May. Venezuela’s rig count fell by 2 as it recorded 68 as against 70, within the period under review. Abayomi Fawehinmi, an energy analyst in a Lagos based oil firm said oil rigs are indications of drilling activities going on in a country’s oil sector however it can be very dodgy at times. “Some rigs are like beasts and drill faster, cheaper and better than the others while some other rigs can also be docile,” Fawehinmi told BusinessDay. Gabon and Qatar rig count fell by one each to 3 and 10 respectively in July 2018 as against 4 and 11 respectively in the month of June 2018. Eight countries, Algeria, Angola, Equatorial Guinea, Iran, Iraq, Kuwait, Libya and the United Arab Emirates (UAE), had zero change in their rig count, with 50, 4, 1, 61,
60, 54, 1 and 54, respectively. “So a country can let go of 3 old rigs and get a new one that is better than all the 3 old rigs combined,” Fawehinmi told BusinessDay by email. World rig count showed an upward move of plus 55, as it recorded 2, 232 in June, as against 2,177 recorded the previous month. There was also an upward move of plus 67 for non-OPEC rig count, which jumped to 1,688 in June, compared to the 1, 621 it recorded in May. Leading the OPEC loss pack was Algeria, which had minus five, having recorded 50 as against 55 during the period under review. It was followed by Saudi Arabia, which had a loss of four, following its record of 142 rig count in December, as against 146 rig count recorded the previous month. The United States showed an increase of 11, having deployed 1, 056 rigs in June, as against 1, 045 deployed the previous month, while Canada had plus 53, as it deployed 136 rigs in June as against 83 rigs deployed the month before. The OECD members witnessed a rig count of plus 65, having recorded 1, 319 as against 1, 254 recorded within the period under review. The Baker Hughes rig counts are counts of the number of drilling rigs actively exploring for or developing oil or natural gas in the U.S., Canada and international markets. The company has issued the rig counts as a service to the petroleum industry since 1944, when Hughes Tool Company began weekly counts of the U.S. and Canadian drilling activity. The monthly international rig count was initiated in 1975. According to data obtained from the Bloomberg terminal, Brent crude, the international benchmark was trading around 0.95 percent higher at $74.45 on Monday, while West Texas Intermediate futures rose 0.33 percent to trade at $69.24.
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Wednesday 08 August 2018
L-R: David Alan Smith; Kent Alfred Dean Clark; Cletus Ibeto, chairman, Ibeto Group; Dave Umahi, Ebonyi State governor; Amanda Jo Wester, head of delegation; Patrick Richard Mokros, and Egerton Foster, during the working tour to Ibeto Cement Company - Nkalagu Plant in Ebonyi State by the American Actualisation Team
Decisive month for Buhari as AfCFTA deadline nears ODINAKA ANUDU
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igeria has until August 30 to sign the African Continental Free Trade Area (AfCFTA) without which the country may be excluded from spirit and letters of the treaty, at least temporarily. The world will not end if Nigeria does not sign the treaty, but investors will prefer Rwanda which has access to 1 billion people (in Africa), a potentially bigger market, than the protectionist Nigeria with an access to just about 200 million people, analysts warn. Other countries will also move on without Nigeria and the country will be a late comer by the time it makes up its mind to sign, they warn. “The fact that Nigeria does not sign does not mean that anybody will wait for Nigeria. It will simply mean that life will go on without Nigeria, and then it becomes progressively much more difficult for you to catch up because, eventually, to the extent that you do not want to cap your growth, to the extent that you do not want to lose the market opportunities that you
have, you still have to sign,” Babajide Sodipo, regional trade adviser at the African Union Commission, said at the just concluded 12th Annual Business Law Conference of the Nigerian Bar Association Section on Business Law (NBA-SBL) in Abuja. Nigeria kick-started the AfCFTA negotiations but pulled out in March, purportedly on the concerns of manufacturers and labour unions. BusinessDay earlier reported that Muhammadu Buhari’s decision was based on consideration of what certain parts of Nigeria stood to gain or lose. The AfCFTA is easily the largest trade agreement since the World Trade Organisation (WTO) in 1994, targeted at creating a single market for Africa’s 1.2 billion people and exposing each country to a $3.4 trillion opportunity. The deal is expected to raise Africa’s nominal GDP to $6.7 trillion by 2030 if all African countries sign up. There will be free movement of labour and people, meaning that a lawyer in Nigeria can serve the entire African market without restrictions. Nigeria has almost 200 million population, while Africa’s population is 1.2
billion. The Manufacturers Association of Nigeria (MAN) believes that the AfCFTA is shrouded in secrecy and that Nigeria will be worse for it if the country signs the agreement in its current form. MAN says it is coming up with studies to determine the impact of the AfCFTA in three weeks. “We have always said Nigeria should sign. We know we have a problem with manufacturing, but the totality of our economy is not about manufacturing, which contributes less than 12 percent to the GDP. Services alone contributes up to 55 percent,” Babatunde Ruwase, president of the Lagos Chamber of Commerce and Industry (LCCI), said. “It is Nigerian banks that are pushing the Ghanaian economy and an average Nigerian will be able to set up a shop in another country,” Ruwase said. Forty-four countries signed the AfCFTA in March in Kigali, but 49, including South Africa, which earlier refused to sign, have now joined the fray. The treaty will liberalise 90 percent
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Lack of funds, not knowledge main reason Nestle benefits from FX stability Nigerian millennial’s are not investing as earnings surge 30% DAVID IBIDAPO & OMOBOLA ADU
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alf year (H1) results of Nestle Nigeria Plc, a unit of the world’s biggest food company, reveals that profit after tax (PAT) grew by 30 percent to N21.5 billion in H1 2018 from N16.5 billion in H1 2017. BusinessDay analysis shows that the relatively stable exchange rate environment witnessed in the first half of the year 2018 in Nigeria has impacted significantly on the earnings growth of Nestle Nigeria Plc. A critical look into its financials discloses that the first half of 2018 has been a good half so far for the company. As a result of the stable value of Naira against the US dollars, the company was able to cut down heavily on its Net foreign exchange loss by 99 percent during the period. As at H1 2017, Net foreign exchange loss stood at N5.17 billion, however, in H1 2018, net foreign exchange loss was as low as N50.19 million.
Interest expenses on financial liabilities and finance expenses also declined by 52 percent and 85 percent respectively. Analysis reveals that Nestle reduced levels of borrowing from financial institution and intercompany loans. Excluding the impact of foreign exchange differences, the company borrowed less from companies within the sector. Intercompany loans amounted to approximately N485 million which represents a decline of about 65 percent from initial intercompany loan of N1.37 billion recorded in H1 2017. The largest listed consumer goods firm also grew its revenue in H1 2018 by 11 percent to approximately N135.3 billion from N121.9 billion in H1 2017. Nestle Nigeria is about 64 percent owned by Switzerland’s Vevey-based Nestle SA. The company makes Maggi cube seasoning and Milo cocoa as demand for packaged foods grow in Africa’s largest economy. Nestle Nigeria stock is up 51 percent in the past year.
Omobola Adu, Emeka Ucheaga & David Ibidapo
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nvesting in financial securities may be the only way to secure a rich and prosperous future but millennial’s just aren’t taking advantage of the investment opportunities available today. Millennial’s are individuals born between 1980 and 1999. With an estimated total population of 105 million people, millennial’s account for more than half of Nigeria’s population. A survey conducted by BusinessDay revealed that millennial’s are not actively participating in the financial and real estate market. Up to 63 percent of millennial’s don’t own stocks, 71 percent don’t invest in treasury bills or bonds and as much as 84 percent have no investment in real estate. You will think they must be saving up their funds to run a business but as many as 64 percent of millennial’s say they don’t own a business. When asked why they don’t invest, they asserted “lack of funds.” 55 percent of millennial’s blame their low participation in the in-
vestment market to unavailability of funds. 27 percent say they don’t have sufficient knowledge about the market, while a remarkable 3 percent say they have stayed away from investing because it’s too risky. With half of Nigeria’s population not investing, it’s not rocket science to figure out why equity market transaction volumes have stagnated in recent years. About 32 million millennial’s in Nigeria cumulatively earn an estimated N27.9 trillion annually, using the per capita income of N873,144 in Nigeria. That’s more than double the total equity market capitalization today and 3 times Nigeria’s 2018 budget. While the national millennial income makes these young folks seem like a wealthy demography, the N27.9 trillion annual income breaks into only N72,762 per millennial every month. This paltry sum places them in the working class group, below the middle class group of the elder population.It becomes more comprehensible when millennial’s blame their poor participation on lack of funds. Investment firms must then create more financial
products that give millennial’s access to a diversified portfolio in the financial and real estate market not only to help in securing the future of these millennial’s but also to get a big bite from the N27.9 trillion millennial purses. It is also important for investment firms to work harder in creating awareness of the available investment products to ensure that lack of knowledge is no longer a hindrance to investing for millennial’s. With inflation running hot, savings with single digit inflation cannot be enough to protect the purchasing power of millennial’s. Since 2009, equities have returned 15.8 percent, bonds have returned 13.84 percent and Treasury bills have returned an average of 12.4 percent. Creating low cost retail financial products is only way forward for both the financial industry to build their asset base and millennial’s to get more exposure into the dynamic and rewarding financial market.
See full report in BusinessDay on Friday