17 Nov

Daily Watch – Car sales decline, FG’s debt to oil majors rises

  • The cash call arrears the FG owes oil majors has swollen to over $8.5 billion (₦2.6 trillion), a development that has seen the government making moves to exit the Joint Venture cash call system. The NNPC’s GMD, Maikanti Baru told the Nigerian Association of Petroleum Explorationists’ 34th Annual International Conference and Exhibition that, “In 2016 alone, underfunding of the NNPC cash calls is estimated to be about $2.5 billion. This is aside from the inherited arrears estimated at over $6 billion.” The nation’s oil and gas production structure is split between JV onshore and in shallow waters with foreign and local companies, and Production Sharing Contracts in deep water offshore. The NNPC owns between 55 percent of the JVs with Shell and 60 percent of all the others, and the JVs are jointly funded by the private oil companies and the Federal Government through the corporation. He noted that the chronic JV funding shortfalls being experienced in the industry had resulted in declining JV oil production from about one million barrels of oil per day three to five years ago to about 800,000 bpd today.
  • The CBN on Tuesday dismissed news reports that Heritage Bank was in distress and unable to discharge its obligations to depositors. The apex bank said in a statement that Heritage Bank was not in distress and called on depositors to disregard the reports and continue doing business with the lender. The statement read in part, “The attention of the CBN has been drawn to false and malicious stories on the social media insinuating that Heritage Bank is under financial distress and therefore unable to discharge its obligations to its depositors. We wish to state that Heritage Bank is not in distress and, as such, its depositors should go about their transactions without fear. For the avoidance of doubt, we wish to further state that no Nigerian bank is in distress. The CBN, as the industry regulator, has a duty to depositors, in particular, and the economy in general, to ensure the soundness of all financial institutions.” The apex bank also said that it would continue to ensure the soundness and safety of the Nigerian financial system.
  • BusinessDay reports that Nigerian banks have increased the tenors of 60 to 70 percent of loans in the oil sector as part of a general restructuring following prodding by the CBN. Both GTB and First Bank have the highest proportion of loans to the oil and gas sector according to Moody’s, and investors were worried about forex liquidity for the banks following an almost 40 percent decline in forex deposits. Declining oil prices over the last two years have led to a decline in revenues for Nigerian oil companies, making it more difficult for them to service their foreign currency borrowings.
  • The Federal Executive Council Wednesday approved the bilateral agreement for the avoidance of double taxation and the prevention of physical evasion of taxes on income and capital benefits between Nigeria and Singapore. Finance minister, Kemi Adeosun said the deal was to facilitate more trade between Nigeria and Singapore by ensuring that nationals or enterprises from either country are not taxed twice on income or profits derived from each of the countries. The minister stated that the agreement would encourage more direct foreign investments into Nigeria, allow investors to know what their tax obligations will be and ensure sustainable tax regime for each country. “The basis for which we choose to sign this agreement with Singapore ‎is that Singapore is a major trading partner with Nigeria. They buy oil from us. Petroleum export to Singapore for the last five years is about $264 billion, and we import about N311 billion worth of goods from them.
  • Arik Air announced flight reductions on Wednesday due to the lingering scarcity of JET A1 fuel. The local carrier said the aviation fuel scarcity began last week when major oil marketers began to ration the supply of the product to airlines. In a statement, it said, “With a daily fuel need of about 500,000 litres and an average of over 100 daily flights, Arik Air is mostly affected by this scarcity which is the fourth this year alone. As a result of the worsening supply situation of aviation fuel, Arik Air has announced a further reduction in flights from Nov. 16 to cope with the fresh scarcity.” The airline said that the reduction will reduce unpleasant flight delays and cancellations which passengers have experienced in recent times, saying it will notify passengers through SMS or email messages in situations where flights would be delayed or cancelled due to the scarcity.
  • C&I Leasing has said its growth for Q3 2016 was as a result of the company’s subsidiary businesses, which contributed about 26 percent to the group’s earnings for the period. The group, in a statement, said each business division recorded impressive growth. According to it, despite the current market realities in the country’s economy, the business reported revenue of about ₦13.4 billion for the Q3 period ending September 30, 2016, compared to ₦11.9 billion recorded in the corresponding period of last year. The company’s CEO, Andrew Otike-Odibi said the company also realised a ₦333.7 million as PAT in Q3 of this year, compared to ₦345.5 million in 2015, a net profit margin of 2.5 percent. The CEO explained that the foremost finance lease, support and logistics solutions and other ancillary services in the country, were on top of its chain of businesses in the Q3, adding that the company’s lease rentals income rose to ₦8.6 billion in Q3 2016, compared to ₦7.1 billion in the Q3 2015. While PBT dipped to ₦373.9 million compared to ₦446.6 million in 2015, he, however, noted that the PBT loss was as a result of the country’s economic woes as many manufacturing companies experienced foreign exchange and other economic challenges in the Q3 of the year. He added that its outsourcing income rose by 5.1 percent year-on-year from ₦3.9 billion in Q3 2015 to ₦4.1 billion in Q3 2016. Commenting on the results, Otike-Odibi said, “Despite current market realities, we have been able to deliver an impressive set of results on account of the strength and resilience of our business model.”
  • Nigeria’s shrinking economy has led to a decline of 37.5 percent in new and used automobiles sales, according to the Director-General, National Automotive Design and Development Council, Aminu Jalal. Jalal told reporters that the country which was recording annual car sales of 450,00 now sees automobile purchases of 250,000 owing to the drop in consumers’ purchasing power. He added that for every percent increase in Gross Domestic Product growth, there is a corresponding two percent increase in automobile demand.