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Nigeria’s Oando plans $350 mil gas processing plant

Comments (0) Africa, Business, Latest Updates from Reuters

LAGOS (Reuters) – Nigeria’s Oando plans to build a gas plant for up to $350 million as it focuses on integrating gas production with its supply business, the head of the gas and power unit said on Thursday.

Bolaji Osunsanya, Managing Director of Oando Gas and Power said the plant, with a capacity to process 300 million standard cubit feet a day (scfd), will take 24 months to complete and cost $300 million to $350 million.

He said Nigeria had room to ramp up gas plants as current capacity was around 2 billion scfd, adding that its project was at the development stage to be launched in the first quarter.

London-listed Nigerian firm Seplat is also boosting gas capacity. It plans to increase gross output from around 120 million to 400 million scfd by 2017, as demand grows.

“We have done transport in the past, we are getting into (gas) processing right now,” Osunsanya told Reuters in an interview. “We are working ourselves up the chain.”

Oando’s gas and power unit reported a net income of $19 million for the nine months to September, down from $22 million the previous year.

Lagos-listed parent Oando, with interests in oil exploration, terminals and oil trading, has said it was seeking approvals to sell its gas and power investment to cut debt and raise up to 80 billion naira from shareholders.

Two years ago, Africa’s biggest economy broke up its monopoly on power generation and distribution by privatising the sector, hoping to attract foreign investors.

But the amount of power produced has stagnated since, failing to reach a 2012 peak of 4,500 megawatts of electricity due to gas constraints, plant outages and tripped circuits, according to Transmission Company of Nigeria.

Osunsanya estimated Nigeria will need around $55 billion over the next seven years to develop gas infrastructure to meet growing demand, which would include building new pipelines, processing plants and drilling of new wells.

He estimated demand at 5 billion scfd, of which 3.5 billion was needed for power and the rest for other uses. However, half the 7.5 billion scfd gas generated was flared or reinjected into the ground due to inadequate pipelines for distribution.

 

(By Chijioke Ohuocha. Editing by David Evans)

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Nigeria central bank cuts rates for first time in six years

Comments (0) Africa, Business, Latest Updates from Reuters

ABUJA (Reuters) – Nigeria’s central bank surprisingly cut the benchmark interest rate to 11 percent from 13 percent on Tuesday, its first reduction in the cost of borrowing in more than six years, in an effort to stimulate growth in Africa’s biggest economy.

The bank also reduced the cash reserve ratio for commercial banks to 20 percent from 25 percent, another move to try to inject liquidity into the banking system and encourage lending.

The central bank has been injecting cash into the banking system since October in a bid to stave off recession in Africa’s top oil producer, which has been hit hard by the sharp fall in crude prices over the last year.

“We must stimulate growth,” Governor Godwin Emefiele said, adding that committee members had voted by a margin of eight to two in favour of the reduction.

He said the step was taken “in consideration of the weakening fundamentals of the economy, particularly the low output growth, rising unemployment and the uncertainty of the global economic environment”.

The move took many in the market by surprise. In a Reuters poll, 15 of 23 analysts had predicted the central bank would hold the monetary policy rate at 13 percent, while four expected a 100-basis point cut.

The bank also broadened its interest rate corridor to 200 basis points above the benchmark rate and 700 basis points below, which means it will borrow from commercial lenders at four percent and lend to them at 13 percent.

The regulator hopes the measures will provide an incentive to banks to lend to local manufacturers such as food producers – in line with President Muhammadu Buhari’s policy of boosting output of rice and other basic food items.

Nigeria’s benchmark 20-year bond yield fell 95 basis point between Monday and Tuesday as some traders had expected the central bank to lower rates.

Emefiele said fresh liquidity from the cash reserve rate cut would only go to banks that were ready to channel it into “employment generating activities” such as infrastructure projects, the agricultural and minerals sectors.

He rapped those banks which had used a cut in the cash reserve ration in September to invest in bonds rather than lend to households and businesses.

“Unfortunately what we have found out is that rather than banks redeploying that liquidity… what the banks do is just dump their money on CBN (the central bank) and earn 11 percent – and I use the words – for doing nothing,” Emefiele said.

Standard Chartered’s chief Africa economist Razia Khan said the easing of monetary policy was aimed at boosting the real economy but their success would also depend on the availability of foreign exchange.

The central bank has restricted access to foreign currency to stop a slide in the naira, effectively pegging it at 197 to the dollar. Emefiele said the restrictions, which importers say is crippling their operations, were working well.

“Nigeria has sacrificed free movement of capital in order to keep the NGN at 200 (per dollar) while cutting interest rates to help the budget,” Charles Robertson, head of research at Renaissance Capital.

“Unfortunately this will not produce budget revenue growth…It also reduces the return for owning naira, which will presumably encourage more purchasing of U.S. dollars instead,” he said.

(By Julia Payne and Camillus Eboh. Additional reporting by Lagos newsroom; Writing by Alexis Akwagyiram and Ulf Laessing; Editing by Ed Cropley and Richard Balmforth)

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Mitsubishi Motors plans Nigerian assembly plant in next year

Comments (0) Africa, Business, Latest Updates from Reuters

ABUJA (Reuters) – Mitsubishi Motors Corp expects to open an assembly plant in Nigeria in the next year, joining the growing list of carmakers setting up local assembly plants in the west African nation, the Japanese group’s regional head told Reuters.

“It’s still in negotiation – you can say in the third round out of 10,” Anand Singh, the regional head in west Africa, said. “We have identified the land. Now we are waiting for some clearances from customs, finance ministry … so that’s the status.”

Analysts say the auto market in Africa’s biggest economy has huge potential.

Only a small number of new vehicles are sold annually as the market has hitherto been dominated by secondhand imports.

However, along with the threat of imposing prohibitive import duties the government has been pushing for the development of local production under a National Automotive Industry Development Plan, with the industry ministry having ordered local car distributors last year to come up with plans for new assembly plants.

It was then up to the local companies to partner with a foreign car producer, Singh told Reuters.

Earlier this week Ford Motor Co announced the opening of its new Nigerian plant, its first in Africa outside South Africa, through dealer Coscharis Motors Ltd.

Germany’s Volkswagen AG also resumed local assembly operations in July, with local partner Stallion Group, after a 20-year hiatus, while Honda announced in July the start of local production for its Accord car.

President Muhammadu Buhari, who is keen to promote a “Made in Nigeria” industrial policy, also met this week with French carmaker Peugeot’s executive vice president for Africa and the Middle-East, Jean-Christophe Quemard, to discuss the revival of local production, Buhari’s office said.

 

(Reporting by Julia Payne; Editing by Greg Mahlich. Reuters)

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Nigeria hopes to reach rice mill deal with China by year-end

Comments (0) Africa, Business, Latest Updates from Reuters

ABUJA (Reuters) – Nigeria hopes to reach a deal with China within weeks to set up 40 rice mills, its new agriculture minister said, as part of plans to eliminate the need for any imports of grain within two years.

Audu Ogbeh said in his first interview since taking office last week that Africa’s top oil exporter wants to boost production of tomatoes, soy beans, nuts and plant two million cocoa trees to reduce an annual food import bill of $20 billion and create jobs for its impoverished youth.

President Muhammadu Buhari, who took office in May on a campaign to usher in a new era for a country hit by corruption and mismanagement, wants to boost the agricultural sector and end reliance on oil exports after a plunge in crude prices.

That will be an uphill challenge as pot-holed roads hamper the transport of goods. Nigeria has tens of millions of farmers but the vast majority of them work on a subsistence basis and live on less than $2 a day.

As a first step, the new government hopes to reach by year end a deal with China to import equipment to build rice mills, Ogbeh said late on Thursday.

“The federal government plans 40 mills with the Chinese spread across the country, each capable of milling 100 tonnes per day,” Ogbeh said.

He declined to give more details on the talks, which began under the previous administration led by President Jonathan. Chinese state media and a Nigerian government document obtained by Reuters have said the oil producer was talking to China’s state Import and Export Bank.

 

CHALLENGES

Ogbeh said Nigeria wanted to be self-sufficient in wheat in three years, confirming a Reuters report earlier this month citing a confidential government paper.

He said Africa’s biggest economy had a similar goal for cashew and cocoa, while the government also wanted to ramp up farming of soy beans, groundnuts, bananas and tomatoes within the next three years.

Nigeria produced 3 million tonnes of rice last year, along with 64,000 tonnes of wheat, United States Department of Agriculture (USDA) figures show.

But it still needed to import 2.3 million tonnes of rice in 2012  — a record high, according to the latest U.N. statistics which also show some 4.1 million tonnes of wheat was brought into Nigeria in the same year – nearly double the amount imported in 2000.

Ogbeh said he also had plans to improve Nigeria’s position as the world’s fourth largest cocoa producer by planting at least two million cocoa trees – in 27 of the country’s 36 states – annually for the next three years. The minister said the same number of cashew trees will be planted over that period.

To attract more young people into farming, the new government plans to retain a policy it inherited, through which farmers could receive central bank loans at a rate of 9 percent, as opposed to borrowing from commercial banks at around 18 per cent.

The prospect of little financial reward has led to the average age of a Nigerian farmer rising to around 65, said Ogbeh, since many young people find the work unappealing.

He also said he was in talks with the minister of education to allocate at least an acre of land to each of some 12,000 students at the country’s three agriculture universities during their studies to gain farming experience.

 

(By Alexis Akwagyiram and Felix Onuah. Writing by Alexis Akwagyiram; Editing by Ulf Laessing and William Hardy, Reuters)

 

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Africa’s richest man resigns from Dangote Flour as Tiger Brands cuts funding

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LAGOS (Reuters) – Africa’s richest man Aliko Dangote and three other directors resigned from the board of Dangote Flour Mills on Monday as majority owner Tiger Brands cut funding support to its struggling Nigerian division.

South Africa’s Tiger Brands said it was “currently exploring various alternatives with regard to its investment in Dangote Flour Mills, which also announced a change of name to Tiger Branded Consumer Goods Plc.

Aliko Dangote holds 10 percent of the company’s equity in through Dangote Industries. The other directors who resigned are Olakunle Alake, Asue Ighodalo and Arnold Ekpe.

 

(Reporting by Chijioke Ohuocha, Reuters)

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New MTN boss hints at cut to $5.2 bil Nigeria fine

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JOHANNESBURG (Reuters) – The newly installed head of South Africa’s MTN has hinted that he would seek to reduce a $5.2 billion fine imposed on African’s biggest mobile telecoms company by the Nigerian authorities.

Non-executive chairman Phuthuma Nhleko was named executive chairman of MTN for up to six months after Sifiso Dabengwa stepped down as CEO with immediate effect on Monday.

His priority is dealing with the crisis in Nigeria, Africa’s most populous nation, which is MTN’s largest market and contributes more than a third of its revenues.

“I can’t say whether we’ll pay the whole fine. I don’t want to negotiate with Nigerian regulators on a public forum,” Nhleko, who is also a former CEO of MTN, told Talk Radio 702.

MTN has a deadline of Nov. 16 to pay the fine imposed on its unit in Nigeria for failing to cut off more than 5 million users with unregistered SIM cards.

The Nigerian communications regulator has been pushing cell phone network companies to verify the identity of their subscribers because of fears that unregistered SIMs were being used for criminal activity.

MTN would not comment on whether it has approached banks to ensure enough cash is available should the fine be enforced.

“The planning is based on all possible outcomes and contingencies and our aim is to comply with all regulations in Nigeria,” said MTN spokesman Chris Maroleng.

But analysts say Nhleko is pulling out all the stops to get the fine reduced.

“Nhleko will bring the matter to a conclusion,” said 36One Asset Management analyst Jean-Pierre Verster.

“I expect there will be a discount of somewhere between 5 percent and 75 percent.”

He sees the Nigerian regulator’s renewal of MTN’s operating licence last week as a sign that the regulator could cut MTN some slack.

Political risk consultancy eurasia said MTN would probably secure a reduction to the fine.

“We expect an eventual compromise to sharply scale back the size of the penalty (to less than half the original amount), especially as MTN takes concrete steps to address the regulator’s concerns,” it said in a published note.

Shares in MTN were down 3.9 percent at 153.75 rand by 1252 GMT, compared to a 1.6 percent drop in the Johannesburg Stock Exchange’s benchmark Top-40 index.

 

(Reporting by TJ Strydom; Editing by James Macharia and Keith Weir)

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Access Infra Africa signs plan for $100 mil Nigerian solar plant

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ABUJA (Reuters) – Access Infra Africa has signed a joint development agreement with Nigerian Quaint Global Energy Solutions for a 50 megawatt solar power plant that is expected to provide electricity for over 600,000 homes in northern Nigeria, the partners said on Tuesday.

The west African nation has chronic power shortages due to a dilapidated transmission grid and natural gas constraints while the new generating and distribution companies are still struggling to be profitable since the 2012 privatisation of the sector.

Power output has risen since President Muhammadu Buhari was inaugurated at the end of May, fluctuating at just under 4,000 MW per day over the last few weeks versus just over 3,000 MW under the former administration, according to transmission data. But the level is still far below the country’s needs.

Businesses rely heavily on expensive diesel generators while the average Nigerian must put up with days of blackouts.

The ABIBA plant in northern Kaduna state is expected to be built in the next two years though the partners must still negotiate a Power Purchase Agreement (PPA) with the Nigerian Electricity Regulatory Commission (NERC) before it can seek financing from banks.

Access Infra Africa, a renewable power developer with a presence in 17 African countries, will contribute the bulk of the 30 percent equity put down for the $100 million project.

Quaint has also received a $1.3 million grant from the U.S. Trade and Development Agency for ABIBA.

If successful, the solar farm would be the first in the country and largest such plant on the continent outside South Africa.

Other renewable energy projects became stuck in the PPA phase under the previous administration and stalled due to an unprofitable tariff but the NERC announced a new feed-in tariff at the start of November for renewable projects up to 30 MW.

Buhari has made increasing power generation a priority as better access to power will be key to his goal of diversifying the economy.

 

(Reporting By Julia Payne; editing by Susan Thomas)

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Nigeria’s Stanbic IBTC cuts 2015 loan growth forecast to 3%

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LAGOS (Reuters) – Nigeria’s Stanbic IBTC has cut its 2015 forecast for loan growth to 3 percent from 10 percent, citing the impact of slowing economic activities on businesses, the local unit of South Africa’s Standard Bank said on Monday.

Africa’s biggest economy posted its lowest output growth for five years in August with its economy expanding 2.35 percent in the second quarter against 6.54 percent a year ago. Stanbic said the slowdown continued in the third quarter.

The mid-tier lender said loans grew marginally by 1 percent to 418.3 billion naira ($2.1 billion) in the first nine months and lowered its return on equity (ROE) target to 15 percent from 18 percent, it said in a presentation.

 

(Reporting by Chijioke Ohuocha, editing by David Evans, Reuters)

 

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Nigeria gives MTN two weeks to pay $5.2 billion fine

Comments (0) Africa, Business, Latest Updates from Reuters

LAGOS/JOHANNESBURG (Reuters) – Nigeria’s telecoms regulator on Friday gave MTN Group two weeks to pay a $5.2 billion fine imposed on Africa’s biggest mobile phone company for failure to cut off millions of users with unregistered SIM cards.

The Nigerian Communications Commission (NCC) imposed the penalty on Monday on MTN’s Nigeria unit, the group’s biggest market by subscribers, sending the phone operator’s stock tumbling by about 20 percent this week, though they bounced 2 percent by midday Friday.

The fine comes months after Muhammadu Buhari swept to the helm of Africa’s biggest oil producer after a campaign in which he promised tougher regulation and a fight against corruption.

The telecoms regulator said MTN failed to disconnect subscribers with unregistered or incomplete SIM cards, after ordering all network operators to do so. NCC said only MTN had failed to comply with the directive.

An NCC source has said the regulator’s decision was based on advice from Nigeria’s state security service, which suspected unregistered SIM cards were being used for criminal activity in a country facing Islamic militant group Boko Haram’s insurgency.

NCC spokesman Tony Ojobo said MTN had until Nov. 16 pay up, but the two sides were in talks to resolve the matter.

“The outcome of the discussion may affect the date. That’s why they are having the discussion so that they can reach a solution,” Ojobo said.

MTN declined comment.

 

INTERNAL SECURITY

Nigeria’s presidency and internal security agency were also involved in the talks, a regulatory source said. MTN Chief Executive Sifiso Dabengwa flew to Abuja to make what three sources familiar with the matter said was an attempt have the penalty reduced.

If it stands, the fine, almost a quarter of Nigeria’s 2015 budget of $22 billion, would wipe out more than two years of MTN’s annual profits.

It was unclear what would happen to MTN, whose Nigerian license is up for renewal in 2016, if the company fails to pay the fine, but NCC’s powers include revoking licenses.

Some analysts said the size of the fine risked damaging Nigeria’s efforts to shake off its image as a risky frontier market for international investors.

“Why this over-reaching regulation? It simply adds to perceptions about Nigeria as unfriendly place for foreign capital,” Vestact fund manager Sasha Naryshkine said in Johannesburg.

But Frost & Sullivan analyst Joanita Roos said the move helped, rather than damaged, Nigeria’s image. “The harsh action taken by regulators … does in fact protect and contribute positively to the reputation of the country.”

MTN also faces a Johannesburg bourse investigation on the timing of the announcement that it was facing the penalty. MTN’s confirmation came after news reports of the fine. South African companies are required to immediately disclose any price-sensitive information.

(By Chijioke Ohuocha and Tiisetso Motsoeneng. Additional reporting by TJ Strydom in Johannesburg; Editing by James Macharia and David Holmes.  Reuters)

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Nigeria planning $25 bil infrastructure fund

Comments (0) Africa, Latest Updates from Reuters, Politics

ABUJA (Reuters) – Nigeria plans to set up a $25 billion infrastructure fund to invest in the transport and energy sectors in Africa’s most populous nation, a spokesman for Vice President Yemi Osinbajo said on Thursday.

Laolu Akande said money for the planned fund would come from local and international sources including Nigeria’s sovereign wealth fund and domestic pension funds.

“The vice president disclosed that other sovereign wealth funds have already indicated an interest in the fund, which would be used to address the nation’s decaying road, rail and power infrastructures,” said Akande.

He did not say when exactly the fund would be set up.

The nation of 170 million people is Africa’s top oil producer, but it requires infrastructure development to help boost economic growth.

The West African nation’s economy, the biggest on the continent, has been hammered by the fall in oil prices. The country relies on crude exports for around 70 percent of government revenues.

Osinbajo, who has been asked to oversee economic policy by President Muhammadu Buhari, referred to the infrastructure fund proposals while speaking to diplomats, including ambassadors from Italy and Canada, the vice presidency said in a statement.

Osinbajo also reiterated the administration’s view that Nigeria’s currency, the naira, does not need to be devalued, the statement said.

“It is not a solution. We are not exporting significantly. The way things are, devaluation will not help the local economy,” he was quoted as saying.

His comments come days after former central bank governor Lamido Sanusi said Nigeria would have to devalue and loosen monetary policy to stimulate its economy.

The naira was officially devalued last November and underwent a de facto devaluation again in February.

Godwin Emefiele, the current central bank governor, has repeatedly said the currency was “appropriately” priced and has ruled out another naira devaluation.

 

(Reporting by Felix Onuah; Writing by Alexis Akwagyiram; Editing by Hugh Lawson, Reuters)

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