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Thursday 15 August 2019
BUSINESS DAY
news Congo could rival Nigeria for Africa’s top oil producer spot with new discovery
L-R: Adesola Adeduntan, chief executive officer, First Bank of Nigeria Limited; Kofo Akinkugbe, managing director, SecureID Limited, and Seyi Oyefeso, group executive, commercial banking group, First Bank of Nigeria Limited, during the bank’s delegation visit to SecureID Limited’s smart card manufacturing plant in Lagos.
…as poor fiscal, regulatory environment delays new investments ISAAC ANYAOGU
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i t h ov e r 1 . 8 million barrels per day (bpd) oil production, Nigeria is Africa’s biggest oil producer. But this status may be up for contention in as little as six months as the Republic of Congo could ramp production to over 1.3 million bpd from new discoveries. Mohamed Rahmani, a marketing director of SARPDOIL in Congo’s la Cuvette region, told Reuters that the field is estimated to hold 1 billion cubic metres of hydrocarbons, including 359 million barrels of oil, with a potential for daily output of 983,000 barrels. Congo currently produces 350,000 bpd. The Delta de la Cuvette deposit covers an area of 9,392 square metres, has four wells, the first of which has been drilled since March, according to the African Society for Petroleum Research and Distribution (SARPD-OIL) and the PEPA company which are in charge of the operation. Both firms are owned by Congolese businessman, Claude Wilfrid Etoka, a close business associate to the Congolese government. Exploration studies indicate that the deposit could produce over 1 billion cubic metres of
hydrocarbons, including 359 million barrels of oil, being 983,000 barrels per day. Production from all the discovered wells could add the Republic of Congo to the list of contestants for top oil producer spot in Africa which includes Nigeria and Angola. Nigeria’s 1.855 million bpd production in June is the highest in the past four years, according to data from the Organisation of Petroleum Exporting Countries (OPEC). Nigeria’s output averaged 1.6 million bpd in 2017. Angola currently produces 1.4 million bpd. This development casts an uncomfortable light on Nigeria’s inability to guide new projects, which would raise production and grow reserves, to Final Investment Decision (FID) many years after oil discoveries were announced. Shell’s plan to expand 225,000 bpd Bonga South West/Aparo, has been unable to reach FID based on disagreement over fiscal terms. The project has been suspended every year since 2016. Other projects that have stalled include 120,000bpd
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Banks intensify credit push to costumers as Sept. 30 deadline nears HOPE MOSES-ASHIKE
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eposit Money Banks (DMBs) are aggressively pushing credit to consumers in compliance with the directives of the Central Bank of Nigeria (CBN). The CBN had given the banks September 30 as deadline for attaining a minimum loan to deposit ratio (LDR) of 60 percent, which was targeted at increasing credit to the real sector of the economy. The LDR is a ratio between a bank’s total loans and total deposits, which is generally expressed in percentage terms. A high loan to deposit ratio means that the bank is issuing out more of its deposits in loans and vice-versa. Some banks have unveiled to the public their loan portfolio plans, targeting key sectors of the economy, while some others are sending SMS to their customers for access to quick cash of
up to N5 million. For instance, one of the messages from a tier-one bank reads: “Dear customer, need cash urgently? Dial ….. to get QuickCredit of up to N5 million instantly. Repay, at 1.75 percent monthly. No collateral. No hidden charges.” Polaris, a tier-2 bank, announced yesterday that it has launched a collateralfree salary advance solution, where customers can access up to 50 percent of their net monthly salary capped at N500,000 for a 30-day tenor or next salary date by dialling *833*12#. The service is available 24/7 on all telecommunication networks. “FSDH Research has observed that many banks and other credit providers in Nigeria have recently begun aggressively pushing credit to their customers,” said Ayodele Akinwunmi, head of research, FSDH Merchant Bank Limited.
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Emefiele launches charm offensive to woo foreign investors
…in London, says CBN will meet all FX demand …Amid rising backlog put at $400m-$500m HOPE MOSES-ASHIKE, OLUFIKAYO OWOEYE & OLUWASEGUN OLAKOYENIKAN
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he Central Bank of Nigeria (CBN) will meet all dollar demand as long as foreign reserves are above $30 billion and oil prices are not below $45 per barrel. The CBN also aims to maintain price and monetary stability, amid a bid to achieve higher growth rates for the next five-year term of Godwin Emefiele, even as bond yields are expected to remain elevated. This was disclosed by Emefiele in London this week in a meeting with select foreign investors, who are being wooed anew amid signs of a growing backlog of foreign exchange (FX) demand, which sources tell
BusinessDay is between $400 million and $500 million. Market sources add that about $200 million worth of the FX demand is a ‘permanent’ backlog from people who are always waiting for better rates from the CBN, which can be cleared at the Investors and Exporters (I&E) forex window. However, the balance of backlogs, between $200 million and $300 million, is said to be demand coming from corporates and airlines. Em e f i e le d u r i ng t h e confidence-building trip assured investors that his reappointment as CBN governor signals continuity of various policies. “The market should know what he is about by now and for better or worse, more of the same is expected,” a source at the meeting said.
The CBN will offer more open market operations (OMO) auctions to counter the upcoming maturities due in September/October (having had fewer auctions of late) and could tighten liquidity to increase yields to maintain Nigeria’s relative attractiveness to Egypt for fixed income flows. The governor also gave assurances that the CBN will not devalue the currency unless reserves dip below $30 billion (on a gross basis), at which point there would be an FX adjustment by 10 percent to about N400/$1, in line with current Purchasing Power Parity levels. But otherwise the naira peg to the dollar will be maintained and the apex bank will spend reserves first to meet dollar demand. The CBN estimates that
there are some $15bn in foreign fixed-income funds held onshore (in Nigeria), which it can handle. Ayodele Akinwunmi, head, research, FSDH Merchant Bank Limited, said over N9.6 trillion worth of government securities are expected to mature in the financial market between August and December this year. Sources present at the meeting say the CBN governor’s only evasiveness was on the progress of reserve build year to date (YTD), which he avoided when twice asked why reserves have been largely flat against strong inflows YTD and a generally healthy oil price.
•Continues online at www.businessday.ng
PFA assets surge 165% to N9.33trn in 6 years on higher compliance Endurance Okafor
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he ass ets under management (AUM) of Nigeria’s regulated pension industry jumped 165 percent to an alltime high of N9.33 trillion in June 2019, from N3.52 trillion in the second quarter of 2013, driven by a surge in compliance and contribution level. However, pension assets have only slightly surpassed 2013 levels in dollar terms as they are up just 15 percent to $25.5 billion ($1/N365) today from $22 billion ($1/N160) in 2013. According to data by the National Pension Commission (PenCom) analysed by BusinessDay, the nominal growth in the assets of PFAs translated to an increase of
…up only 15% in dollar terms N5.81 trillion in the space of six years. “The compliance level has increased and also the number of people contributing to pension funds has also increased,” Dayo Obisan, president, Fund Managers Association of Nigeria (FMAN), said. Obisan noted that the increase in contributors’ income may have also driven the asset managed by the PFAs to its current levels. Pension funds assets are defined as assets bought with the contributions to a pension plan for the exclusive purpose of financing pension plan benefits. The pension fund is a pool of assets forming an independent
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legal entity. As at June 30, 2019, the asset managed by PFAs was up 13.3 percent, year-on-year, from N8.23 trillion a year ago to N9.33 trillion in the second quarter of 2019. On monthly comparison, the AUM of the regulated pension industry increased marginally by 1.1 percent between May and June 2019. BusinessDay analysis of the recently released PenCom data shows there were a total of 8.68 million contributors as at end-May, implying an average portfolio size of N1.06m. Growth in the AUM of the pension industry in the period under review may look inspiring, however when @Businessdayng
compared to some African countries like South Africa and Kenya, Nigeria still lags. Despite the solid growth, asset under management accounted for just 8 percent of 2018 Nigeria Gross Domestic Product (GDP) of $375.8 billion, running behind many emerging markets. According to data by investment firm FBNQuest, the South African industry dates from 1996 and its AUM represents more than 70 percent of GDP, while the latest figure for Kenya is 15 percent. “The industry in Nigeria is in need of several new products and innovative leadership,” FNBQuest said.
•Continues online at www.businessday.ng