10 Feb

Daily Watch – $1bn Ogoni cleanup money not enough, Arik Air enters crisis mode

  • Nigeria has priced a $1 billion, 15-year Eurobond at 7.875 percent in an issue that is almost eight times subscribed, the finance ministry said on Thursday. The government will seek to have the paper listed on the FMDQ OTC Securities Exchange and the NSE, it said in a statement. The bond issue is aimed at helping finance a budget deficit exacerbated by lower oil prices and militant attacks in the crude-producing Niger Delta. The naira has also lost a third of its official value last year. The government has laid out plans to spend a record ₦6.86 trillion ($22.5 billion) to help pull the country out of recession in a draft 2017 budget sent to parliament for approval. It planned to spend ₦6.06 trillion last year but struggled to fund it. Finance Minister Kemi Adeosun said the government had a “commitment to invest in developing Nigeria’s infrastructure through a target 30 percent annual budget commitment to capital expenditure.” The government has set out a $30 billion overseas borrowing plan to finance infrastructure until 2018.
  • Nigeria wants to borrow at least $1 billion from the World Bank to help haul it out of a recession and plans to present the required economic reform proposals to the lender this month, Reuters cites unnamed officials and diplomats. The oil producer, which has been hit hard by a sharp fall in crude prices since 2014, has been in talks with the Washington-based lender for a year to secure a loan to help plug a yawning budget deficit and fund badly needed infrastructure projects. But the government has not specified how much money it was looking to borrow from the World Bank, saying only that it aimed to raise $5 billion abroad. It was previously also unclear when Nigeria planned to present its proposed reforms to the lender – which will not consider a loan before it reviews the plans to make the economy more resilient and attractive to investment. The government now plans to present its economic reform proposals by the end of February, according to government officials and Western diplomats who declined to be named as they are not authorised to speak publicly. One senior government official said the country would seek a loan of $1 billion from the World Bank, while a second senior official said it could seek as much as $2 billion. The Nigerian finance ministry declined to comment on the size of the loan being sought or the timing of the submission of the reform proposals. The World Bank also declined to comment.
  • The Asset Management Corporation of Nigeria on Thursday took over executive control of Arik Air to save the carrier from collapse due to its heavy financial debt burden. The airline will now be managed by Roy Ukpebo Ilegbodu, an aviation industry veteran with more than 30 years experience, under the receivership of Oluseye Opasanya (SAN). With the takeover by independent management under AMCON, owned by the federal government, the airline stands a chance of not going under, but to rebound and offer efficient services to passengers and meet its financial obligations, including paying workers’ salaries. The change in management came after the EFCC raided the airline’s headquarters and quizzed the Chairman, Sir Michael Arumemi-Ikhide, for several hours over the alleged misappropriation of ₦135 billion. The Guardian cites a high-ranking source at AMCON as saying that “the issue with Arik goes beyond wanting to recover debts owed.” According to the source, “Even if AMCON wants to recover the ₦135 billion, under the current economic crisis, how much will it realise from selling the aircraft? They’ve gone from 28 aircraft to just 10 in the fleet.” The source said further: “₦135 billion is just debts owed to AMCON. What about the $20million owed foreign partners for services or the ₦100million to renew its insurance?” Arik Air is West and Central Africa’s largest carrier operating on most domestic routes as well as key destinations in Africa, Europe and North America.
  • IBM is investing $70 million in building much-needed digital, cloud, and cognitive IT skills to help support a 21st-century workforce in South Africa, Kenya, Nigeria, Morocco, and Egypt. The initiative, “IBM Digital – Nation Africa”, provides a cloud-based learning platform designed to provide free skills development programmes for up to 25 million young African over five years, enabling digital competence and nurturing innovation on the continent. The Digital – Nation Africa is designed to boost overall digital literacy, increase the number of skilled developers able to tap into cognitive engines, and enable entrepreneurs and prospective entrepreneurs grow businesses around the new solutions. The initiative will be supported by the United Nations Development Programme (UNDP), which has a special focus on fostering market-driven ICT skills in Africa and the Middle East. IBM has a direct presence in 24 African countries and has made several significant investments on the continent in recent years, including offices, innovation centres and other advanced facilities.
  • The Board of Trustees on Ogoni cleanup has said the initial $1 billion earmarked for the project is unrealistic in the face of the dwindling value of the naira. The President of the Movement for the Survival of Ogoni People (MOSOP), Legborsi Pyagbara, disclosed this Thursday after the organisation’s meeting in Port Harcourt. He said when the project was conceived in 2011, the dollar/naira exchange rate was much lower, adding that it had since risen to over N500/$ on the parallel market. He said the committee had expected the speed of the implementation process to be faster but, “Under the existing circumstance, we need to revalue the exercise to do things properly, instead of being in a hurry and unable to accomplish the task at the end.” The organisation says $200 million would be released in five batches every year over the next five years to cover the budgeted amount.