13 Oct

Daily Watch – GE confirms “keen interest” in Nigerian railways, Major shakeup rocks FAAN

  • Nigeria is planning to borrow more abroad than locally to fund next year’s budget in a bid to benefit from lower debt costs and reduce pressure on its interest bill, Budget and National Planning Minister Udoma Udo Udoma said. “There is going to be a shift to foreign, especially concessional debt,” Udoma said in a Bloomberg interview Tuesday. “Lower interest rates from foreign debt will help us manage our debt servicing, and also free domestic credit for the private sector.” The country will probably boost its budget by 12.6 percent to ₦6.87 trillion ($22 billion) in 2017, according to preliminary budget documents. That’s to stimulate growth after the economy contracted in the first half of this year as a drop in prices and production of crude oil squeezed government revenue, and shortages of power and foreign currency weighed on output. The DMO has said it plans to raise as much as $4.5 billion in the international market through 2018, starting with $1 billion of Eurobonds this year. The African Development Bank plans to lend Nigeria $4.1 billion over the next two years, and $10 billion by 2019. The country’s debt stood at $61.45 billion by June, of which $11.26 billion was foreign borrowing, according to debt office data. At 13.2 percent of GDP, Nigeria has one of the lowest debt ratios in sub-Saharan Africa, while its debt-service costs as a percentage of revenue are above 35 percent, according to budget documents.
  • The naira continued its appreciation on the parallel market Wednesday as it climbed to ₦468/$ from ₦470/$ the previous day, following the implementation of an arrangement that saw the intervention of Travelex in the BDC segment of the market. Also, the naira remained stable in the interbank market as the spot rate of the naira closed at ₦304.75/$. The CBN and Travelex last Friday started implementing a new arrangement whereby the global FX dealer now sells dollars to BDCs. The policy has seen an increase in the level of liquidity in the market.
  • U.S. conglomerate, General Electric (GE), has confirmed that it has a “keen interest” in acquiring a Nigerian railway concession project worth around $2 billion. President Muhammadu Buhari had during his independence broadcast to the nation disclosed that GE would be investing $2.2 billion in a concession to revamp, provide rolling stock, and manage some of the country’s railways. “On railways, we have provided our counterpart funding to China for the building of our standard gauge Lagos-Kano railway. General Electric is investing two point two billion USD in a concession to revamp, provide rolling stock, and manage the existing lines, including the Port Harcourt-Maiduguri Line. The Lagos-Calabar railway will also be on stream soon,” the president had said. Confirming the $2 billion investment on Sunday, GE, in a statement to Reuters, said: “Given the size and scope of the proposed project, it is likely that the debt and equity commitments required from lenders, consortium partners and other co-developers will be in the range of $2 billion or more.” It said the concession was in the formal procurement process.
  • The Nigerian Liquefied Natural Gas Limited says it now has assets worth at least $13 billion, making the company an inspirational Nigerian success story. Its Managing Director, Tony Attah made the assertion during a technical session at the ongoing 22nd Nigerian Economic Summit (NES) in Abuja. According to Attah, the NLNG Act and the shareholding and governance structure of the company were key factors responsible for the NLNG’s continued success. Attah, in his presentation to the forum, remarked that the NLNG Act provides incentives, assurances and guarantees which significantly encouraged investment in its projects, adding that experience has clearly shown that countries cannot hope to legislate investments into existence without addressing issues relating to accompanying incentives, guarantees, and assurances. “These incentives made it attractive for international investors and financiers to invest even during a period Nigeria was perceived to be a pariah state. Those investments grew and they resulted in an inspirational Nigerian success story that the company is today, with assets now worth over $13 billion,” he said. This has allowed Nigeria LNG to be able to generate $85 billion in revenues, pay $5.5 billion in taxes as well as commit more than $200 million to corporate social responsibility projects.
  • UBA has reported a 7.7 percent growth in nine months profit after tax amounting to an approximated ₦52.27 billion compared to the ₦48.56 billion it recorded last year. According to the lender’s consolidated interim financial statements for the period ended September 30, profit before tax grew by 7.3 percent from ₦57.37 billion last year, to ₦61.56 billion. In a note filed at the NSE, UBA also sidestepped recessionary tendencies in its operating environment as gross earnings soared from an initial ₦245.49 billion to ₦265.57 billion, leaving an upward margin of ₦20.08 billion or 8.17 per cent. The bank also recorded growth in its total assets from ₦2.75 trillion in the comparative period of 2015 to ₦3.48 trillion. Commenting on the result, CEO/MD Kennedy Uzoka said: “We maintained growth in earnings and sustained our asset quality. Increasingly, we are leveraging our unique pan-African platform to drive new customer acquisition and market share gains across our subsidiaries in Africa, thus providing significant diversification in revenue.”
  • About 21 senior officials of the Federal Airports Authority of Nigeria were removed on Wednesday in a major shake-up. Those affected, including directors, general managers and deputy general managers, were reportedly handed their termination of appointment letters. The Punch cites sources at the FAAN head office of FAAN as saying that a further 10 general managers were demoted, having been “improperly promoted.” An unnamed aviation ministry official said the sackings was the first move in a shake-up planned by the government to reposition FAAN. It is said that the federal government had been concerned about certain issues at FAAN such as the employment of about 40 general managers, the creation of many directorates that led to a duplication of duties and raised the authority’s monthly overhead to an estimated ₦800 million. This restructuring exercise is also reportedly being planned for the Nigerian Civil Aviation Authority and the Nigerian Airspace Management Agency.