Nigeria releases N591.3bn towards cash call repayment in 6 months


October 9, 2017 | 1:00 am
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Between January and July this year, the Federal Government paid the sum of N591.3 billion as cash call repayment to five International Oil Companies (IOCs) including ExxonMobil, Chevron, Shell, Total and Eni but contrary to expectations, the investors are not beating down Nigeria’s door.

According to the Nigerian Bureau of Statistics (NBS) data, the Federal Government paid N60.350bn in January, N82.8bn in February and N94.4bn in March. For the months of April and May, it paid N68.5bn and N60.38bn respectively. The month of July recorded the highest payment of N130.7bn.

But Nigeria, which has witnessed a decline in militancy, enabling oil production to rise higher than 1.8million barrels per day is yet to attract new investments. Baker Hughes reports that Nigeria’s rig count fell by 11% to 8% in September in spite of increased production.

Analysts at Financial Derivatives Company (FDC), led by economist, Bismark Rewane, said in their research that foreign exchange revenues spiked to $2.95bn in September, contributing to the growth of the Investor/ Exporter window flows which are now at $12.14bn since inception. Increased crude sales led to an estimated $3bn in monthly dollar inflows which bucked gross external reserves to $32.9bn.

However, these are benefits of prior investments. Chuks Nwani, an energy lawyer based in Lagos, said that a key reason for the low investment appetite is the lack of confidence in the government by investors and the pervading uncertainty in the sector.

“As things stand, investors are yet to have full confidence in the government and they are waiting for government to pay a significant proportion of the cash call repayment before investments decisions can be taken,” said Nwani.

Industry operators also say the current frosty relationship among the nation’s oil sector managers, increases uncertainty in the sector. Ibe Kachikwu, minister of state for petroleum resources, in August wrote a memo to the president, accusing Maikanti Baru, the Nigerian National Petroleum Corporation, (NNPC), group managing director of insubordination and lack of due process in the award of contracts worth $25bn.

“Investors cannot mirror uncertainties,” Isreal Aye, an oil and gas lawyer, earlier told BusinessDay in a related matter.

Nigeria announced exit from cash call arrears from January this year, a debt burden that rose to $6.7bn according to NNPC data, by reaching an agreement with IOCs to trim down the amount to $5.1bn knocking off $1.6bn. By the terms of the agreement, Nigeria will repay the $5.1bn over the course of five years.

As an alternative to the Cash Call JV funding arrangement, it was resolved that going forward, the Federal Government will continue to receive royalties, taxes and profit from its equity share of JV oil and gas production, while the cost of operation is deducted upfront, says the NNPC.

“So, in essence, government said go ahead, do the business and give me what I am entitled to. So for every barrel of oil we produce now, the only thing that is taken is the cost element and once that element is deducted, the companies are willing and ready to put down their own part of the money,” said Bello Rabiu, chief operating officer in charge of NNPC Upstream autonomous business unit, to the corporation’s magazine.

Meanwhile, the investment horizon looks good for oil sector investments. FDC analysts found that Brent crude rose 7.5% to an average of $55.7pb in September and closed at a 26-month high at $59pb, attributed to Turkey’s threat to choke off Kurdish oil exports by 552,500bpd and slow U.S refining activities with rising global crude demand supported prices. The Organisation of Petroleum Exporting Countries (OPEC) and the International Energy Association (IEA) raised their forecast for global oil consumption to 1.6mbpd.




October 9, 2017 | 1:00 am
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