19 Oct

Daily Watch – External reserves drop further, JVs get control of their budgets

  • Nigeria’s external reserves dropped to about $30.04 billion as at Friday, October 16 according to data available on the website of the CBN. External reserves were about $31.3 billion on September 1, suggesting that a net spend of $1.3 billion in September through forex sales. This is the lowest it has reported since July 14. Some of the CBN’s capital control policies have come under severe criticism, but the CBN Governor, Godwin Emefiele and Federal Government have stubbornly defended the policies and have vowed not to devalue of the naira.
  • The Ghanaian government, on Friday, settled part of its debt to the West African Gas Pipeline Company (WAPCo) and the Nigeria Gas Association, NGA, following the first round of talks with the Nigerian authorities. These negotiations will continue as the payment of $10 million buys Ghana some time to conclude negotiations to curtail the cut in gas supply from Nigeria. WAPCo had threatened to cut gas supply to Ghana on Friday, over $180 million debt owed NGA, but it suspended the decision after the deadline for payment elapsed.
  • President Buhari is giving the NNPC’s exploration joint ventures control over their own budgets as a way of overcoming chronic cash shortages. This move, which will save the federal government cash calls running into several billions of dollars for funding the joint venture oil blocks, is seen as one of the reforms points proposed by the Petroleum Industry Bill. The PIB provides for the incorporation of the joint venture assets into companies, enabling them to raise funds independently from financial markets and control their budgets. According to a letter seen by Reuters, the JVs will be turned into firms that control their own budgets, similar to gas firm NLNG, which “sources for its own funding, pays taxes and royalties and also pays dividends,” the letter said. NLNG, in which Shell, Eni and Total have stakes along with NNPC, is one of the few efficient oil operations in Nigeria. Nigeria produces about 2.2 million barrels per day of oil with foreign and local companies through production sharing contracts and joint ventures (JVs). But projects have been held up because NNPC needs parliamentary and regulatory approval to spend.