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Oando aims to pick up Nigerian assets from embattled majors

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

LONDON (Reuters) – Nigerian-based oil producer Oando wants to double its oil output by 2019, targeting assets likely to be shed by majors hit by the crude price drop.

Chief Executive Wale Tinubu told Reuters in an interview on Monday the retreat among the world’s major producers from the onshore Nigerian oil industry would likely leave a lot of assets on the market.

“When you compare the size of the resource base (the majors) have in Africa vis-à-vis the rest of the world, it’s clear that they will have to do Nigerian divestments and we are the natural buyer of choice,” he said.

Oando, which produces some 50,000 barrels of oil a day, already bought ConocoPhillips’ Nigerian assets for $1.5 billion in July last year, with a view to meeting its target of hitting 100,000 bpd by 2019.

“We are driven, we are keen and we are on the lookout for opportunities and we are confident of securing opportunities towards increasing our reserve base and our production,” he said.

The price of oil has halved to below $50 a barrel over the last 12 months, as global supply has outstripped demand.

“We’re betting on an eventual oil price rise and we see the best time for securing those reserves as being now and not when the market rebounds,” Tinubu said.

Nigerian onshore oil projects have been plagued by industrial scale oil theft, security problems and oil spills, the latter having become a growing legal liability for major oil companies.

Nigeria is Africa’s largest oil producer and contributes some 2 million barrels a day to total world supply.

Shell has already sold some of its Nigerian oilfields and said last week it will focus its future investments there on natural gas. Its French peer Total agreed in March to sell a stake in an onshore oilfield to Nigeria’s Aiteo Eastern E&P.

Local oil producer Afren Plc, which went into administration in July, owns oilfields in Nigeria, but Tinubu said Oando was not considering them.

“We looked at it but we’re not really interested. It doesn’t satisfy our criteria we believe there are many better opportunities out there,” he said.

 

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Ibe Emmanuel Kachikwu Takes on Corruption at Nigeria’s State Oil Company

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

nigeria oil

by Enu Afolayan, Contributor

The President of Nigeria, Muhammadu Buhari, is committed to fighting corruption in his country. On June 26th, immediately after being elected, he ordered the dissolution of the board of the Nigerian petroleum company NNPC. Nigeria extracts two million barrels of crude every day, which makes it the largest producer of black gold in Africa. By attacking the petroleum sector, Buhari made a brave attempt to solve the country’s most serious mismanagement and corruption problem.

In 1970s, Buhari was the Minister of Oil and oversaw the birth of the NNPC. Corruption began to spread in the corporation as early as 1978, when it failed to repay the Treasury of Nigeria. Now, the “Father of the NNPC” is determined to put an end to the widespread corruption. He appointed Ibe Kachikwu as the new head of the petroleum corporation to take on this challenge.

Kachikwu arrived at the helm of NNPC right after the publication of an independent analysis by the Resource Governance Institute (NRGI). The analysis unveiled that over $32 billion in oil revenue was lost by Nigeria due to money laundering at the NNPC.

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“Don’t panic,” Nigerian central bank head urges banks

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

ABUJA (Reuters) – Nigerian central bank Governor Godwin Emefiele ruled out on Thursday a naira devaluation and told people not to panic about the government shifting its bank accounts to the central bank, a move that would drain billions of dollars from the financial system.

In an interview with Reuters, Emefiele said he was ready to inject liquidity if needed into the interbank market, which dried up this week following a directive to government departments to move their accounts into a “Treasury Single Account” at the central bank.

The policy is part of new President Muhammadu Buhari’s drive to fight corruption, but analysts say it could suck up as much as 10 percent of banking sector deposits in Africa’s biggest economy – hammering banks’ liquidity ratios.

Amid confusion over implementation of the policy, overnight interbank lending rates spiked to 200 percent this week, but Emefiele denied the policy had provoked a liquidity crisis.

“There is no shortage of liquidity,” he said, pointing to an oversubscribed sale of treasury bills on Wednesday. “A spike is a momentary action. It’s sentiment,” he said.

Emefiele said less than one trillion naira ($5 billion) would be moved into the single account but did not give details.

Emefiele was also emphatic about maintaining the naira currency – which has dived in the past year due to a collapse in oil revenues – at its current level of 197 to the dollar.

“There will not be a devaluation because right now the currency is appropriately priced,” he said.

In a series of unconventional interventions to protect the naira, the bank has blocked access to foreign currency to import items ranging from soap and toothpicks to cement and private jets.

Emefiele said the list of restricted items could be expanded to encourage local production.

He rejected claims by Nigerian firms about the difficulties of getting hold of dollars and ruled out the possibility of a default by any company with dollar-denominated debt.

(By Julia Payne and Ulf Laessing, Reuters)

 

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JP Morgan to remove Nigeria from government bond index

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

LAGOS (Reuters) – JP Morgan will remove Nigeria from its Government Bond Index (GBI-EM) by the end of October, the bank said on Tuesday, after warning the government of Africa’s biggest economy that currency controls were making transactions too complicated.

The removal will force funds to sell Nigerian bonds, triggering potentially significant capital outflows and raising borrowing costs for the government.

Struggling with a plunge in vital oil revenue, Nigeria had imposed currency restrictions to defend the naira after the burning of dollar reserves failed to halt a slide.

The JP Morgan index tracks around $210 billion in assets under management.

Some bonds will be removed from the index by the end of September and the rest by the end of October, JP Morgan said.

The bank had warned Nigeria that to stay in the index, it would have to restore liquidity to its currency market in a way that allowed foreign investors tracking the index to conduct transactions with minimal hurdles.

Nigeria became the second African country after South Africa to be listed in JP Morgan’s emerging government bond index, in October 2012, after the central bank removed a requirement that foreign investors hold government bonds for a minimum of one year before exiting.

The index added Nigeria’s 2014, 2019, 2022 and 2024 bonds, giving Africa’s biggest economy a weight of 1.8 percent in the index.

“Foreign investors who track the GBI-EM series continue to face challenges and uncertainty while transacting in the naira due to the lack of a fully functional two-way FX market and limited transparency,” the bank said in a note.

The central bank had to devalue the naira and pegged it at a fixed rate against the dollar, turning trading into a one-way quote currency market whose lack of transparency upset investors and businesses.

The index provider said Nigeria would not be eligible for re-inclusion in the index for a minimum of 12 months. To get back in, it would have to establish a consistent record of satisfying the index inclusion criteria, such as a liquid currency market.

Nigeria’s Finance Ministry, central bank and Debt Management Office said in a statement they “strongly” disagreed with the index expulsion, saying that market liquidity was improving.

“While we would continue to ensure that there is liquidity and transparency in the market, we would like to note that the market for (government) bonds remains strong and active due … to diversity of the domestic investor base,” the statement said.

Traders told Reuters on Tuesday the central bank started rationing dollars to foreign investors last week.

Nigeria’s foreign reserves stood at $31 billion as of Sept. 7, down more than 21 percent from a year earlier, when they were $39.6 billion, the central bank said.

“Nigeria’s inclusion in the GBI-EM index was generally seen as a big step forward in its integration into global financial markets, opening the market to new investment and raising its profile worldwide. That will now be reversed,” said Alan Cameron, an economist at Exotix.

With Nigeria’s removal, countries such as Malaysia, Indonesia and Thailand have increased their weight by more 25 basis points as of Aug. 31, JP Morgan said in the note.

Foreign holdings of Nigerian government bonds stood below $2.75 billion, said Samir Gadio, the head of Africa strategy at Standard Chartered Bank. They had been around $8 billion in September 2014.

“This will initially trigger excess volatility in the market as exiting offshore accounts and onshore investors may push yields higher,” Gadio said. “A potential exclusion from the GBI-EM indices would make it more difficult to attract foreign portfolio flows in the future as Nigeria will need to rebuild its market credentials.”

By Chijioke Ohuocha (Reuters)

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Nigeria’s New President Inherits a Country Without its Black Gold

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accrareport_nigeria-oil

Paralyzed by gasoline shortages, Nigerian authorities appear close to reaching a solution. The crisis began in early March, weeks before the 29 March election that elected Muhammadu Buhari as Goodluck Jonathan’s replacement. Nigeria has long paid oil importers subsidies to control price and guarantee a steady supply. That, however, no longer seems to be working.

Oil suppliers’ credit lines were tightened amid the falling global price of oil, a slump in Nigeria’s currency, the naira, and the unpaid debt by the former President’s government. Suppliers claim that more than 900 million euros are owed in back-payments of government subsidies.

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Nigeria’s new president vows to fight endemic corruption

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muhammadu buhari

Along with security and unemployment, Nigeria’s new president Muhammadu Buhari, has declared corruption as one of the top three challenges he plans to tackle during his term.

The 72-year-old former military ruler took office on 29 May after defeating incumbent Goodluck Jonathan in the race to run a country struggling with a waning economy, endemic corruption, rampant unemployment, and the on-going security threat from Boko Haram.

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