17 Mar

Daily Watch – Blackouts fuel petrol consumption, Aero sheds 60 percent weight

  • Nigerian banks have opposed a proposal by Etisalat Nigeria to convert part of a $1.2 billion loan from dollars into naira and want Abu Dhabi telecoms group Etisalat and its other shareholders to recapitalise it instead, a source said. A banker with knowledge of the negotiations told Reuters that the seven-year syndicated loan, on which Etisalat Nigeria missed a payment, has a dollar portion of $235 million which the telecoms operator wants to convert into naira to overcome hard currency shortages on Nigeria’s interbank market. “Etisalat is asking for us to convert the dollar component to naira but banks don’t want that option and have told them to talk to their parent to settle the loan,” the source said, adding that regulators favoured the conversion. The UAE’s Etisalat own 45 percent of Etisalat Nigeria, while Abu Dhabi’s Mubadala owns 40 percent of the company, which is due to meet its lenders on Thursday for debt talks mediated by Nigeria’s central bank and the telecoms regulator. This meeting came about after authorities agreed with local banks to prevent Etisalat Nigeria, which was not available for comment, going into receivership. Most of the 13 lenders involved in the Etisalat Nigeria loan had raised dollars abroad to participate, meaning that further naira weakness would see them receive fewer dollars. Etisalat had written down the value of Etisalat Nigeria last year to $50 million due to naira weakness, Moody’s said in a note, adding that the default at the affiliate company did not affect the parent’s credit profile.
  • The House of Representatives passed a bill Thursday for an Act to amend the Public Procurement Act of 2007. Speaker Yakubu Dogara who presided over sitting said the Act was aimed at sanitising the country’s business environment. A major highlight of the amendment is the removal of the finance minister as Chairman of the National Council on Public Procurement, a position that would be replaced with a nominee of the President and the introduction of a new section 1(2)(a). Dogara argued that the amendment was based on the fact that the finance ministry which is a procurement entity cannot sit on procurement matters that may concern it, a scenario which runs contrary to “the principle of natural justice, where cannot be a judge in his own matter.” The House in section 35(1) also increased mobilisation fees from 15 to 50 percent or more for contractors and suppliers as may be prescribed by the Bureau, while section 35(3) prescribes a two-year jail term for any person who accesses mobilisation fee and fails to carry out the services or works commensurate to the fee paid. Section 25 (3) of the law shortened the time provided in the bill for emergency procurement activity to ensure timely execution but “the procurement entity acting with respect to paragraph (i) of this section shall notify the Bureau within seven days of such action.” The new law also provides for the establishment of Parastatal Tenders Board in each Federal ministry, extra-ministerial department and all agencies of government.
  • The CBN on Thursday cleared more retail currency bureaux to take part in a weekly dollar sale to boost liquidity and support the naira which is weak on the black market. Aminu Gwadabe, president of Nigeria’s bureau de change operators, said the central bank cleared 3,124 bureaux for this week’s $25 million auction to be sold by international money transfer firm Travelex at ₦381 per dollar. The bank approved 3,114 bureaux last week, Gwadabe said. The central bank, under pressure from the government to narrow the gap between the official and black market rates and support the weakening naira, has stepped up dollar sales on the official interbank market in recent weeks. On Thursday the bank also announced an offer for $100 million in currency forwards and sold more treasury bills than originally planned at an auction after it lured demand for one-year debt with yields above inflation. The bank raised ₦253.8 billion at an auction on Wednesday, ₦40 billion more than it had offered to sell. It offered the one-year bill at 18.55 percent to raise ₦166.3 billion against a yield of 18.49 percent at its last auction and higher than February’s inflation rate of 17.78 percent. Yields on the six-month bill were unchanged from the last sale at 17.20 percent to fetch ₦48.5 billion, while a ₦39.0 billion bill due in three months was sold at 13.60 percent against 13.65 percent previously. Total demand stood at ₦216.38 billion against ₦312.44 billion at the last sale.
  • A shortfall of 16,256 MW in the country’s electricity requirement has fueled a sharp rise in demand for petrol, as the national daily average consumption has risen from 40 million litres to 51.8 million litres, according to the NBS. The increase contradicts Ibe Kachikwu’s recent announcement that the government had succeeded in blocking fraud impacted volumes of petrol consumed daily from 50 million litres to 28 million litres. The national daily petrol consumption had long become controversial, as it is believed that some oil marketers used spurious figures in order to make higher subsidy claims for imports. Indeed, the National Assembly has alleged over-importation of more than 40 percent of actual need and has reopened a probe into fuel imports in Nigeria, from 1999 to date. The NBS PMS import for Q4 2016, showed an increase in the volume of petrol imported into the country during the period, which rose steadily from 1.4 million in October to 1.7 million in December.
  • Aero Contractors has issued letters of redundancy to about 60 percent of its total workforce, the Punch reports. The airline said it is grappling with huge and unrealistic personnel costs as well as other operational challenges worsened by a lack of aircraft to keep all the workers meaningfully engaged. Aero said in a statement on Thursday that the issuance of notification of redundancy was a business decision that would ensure its survival. “The current situation where over 1,000 people are basically not engaged due to lack of serviceable aircraft is not sustainable for the airline. The huge monthly salaries associated with a bloated workforce will eventually kill the airline, which is not the intention of the current government,” the airline said in the statement. It stated that it currently had an aircraft-to-employee ratio of 1:500, perhaps the “worst in the history of the global airline industry.”
  • Total Nigeria grew its profit by 266 percent for the 2016 financial year. For the year ended, December 31, 2017, the company recorded a profit of ₦14.797 billion, appreciating from ₦4.047 billion recorded in the corresponding period of 2015, NSE filings on Wednesday showed. Its revenue for the period also rose by 40 percent to ₦290.95 billion from ₦208.027 billion posted in 2015. The firm’s profit before tax advanced by 213 percent to close at ₦20.35 billion from ₦6.49 billion. It proposed a final dividend of ₦7.00/share, which implies a dividend yield of 2.55 percent based on Thursday’s closing price of ₦274.55 per share. Total currently has over 500 service stations, five liquefied petroleum gas bottling plants and three lubricants blending plants, while operating out of five aviation storage facilities and other facilities spread across the country.