Nigeria Content Online

The Memorandum of
Understanding (MoU) of the multibillion dollar Brass Liquefied Natural
Gas (LNG) Project will be signed between Bayelsa State government and
the Nigerian National Petroleum Corporation (NNPC) this week.

Governor Timipreye
Silva of Bayelsa State told journalists yesterday at the conference of
the Nigerian Content Consultative Forum (NCCF) in Yenagoa, the state
capital, that the MoU is a reflection of the level of confidence by the
state administration in the development of the oil industry.

The MOU is coming
just as the Nigerian Content Development and Monitoring Board (NCDMB)
and the International Oil Companies (IOCs) have agreed to constitute a
quarterly audit on the implementation of the Nigerian Content Law,
approved last April by President Goodluck Jonathan.

The shareholders in
Brass LNG include NNPC, 49 percent; Eni International, 17 percent;
Phillips (Brass) Limited, an affiliate of Conoco Phillips, 17 percent;
and Brass Holdings Company Limited, an affiliate of Total, 17 percent.
The 10 percent in the project reserved for the communities is to be
shared equally between Rivers and Bayelsa State governments.

“We are hoping to
sign the MoU with NNPC this week. Brass LNG has gone so far and we are
hoping that with International Oil Companies (IOCs) coming to Bayelsa
State, and setting up shops, we are certain that more employment
opportunities will be generated for our people,” he said.

NCDMB executive
secretary, Ernest Nwapa, said the board and the IOCs agreed at the end
of a recent meeting that a high level group would work together to
audit the implementation of the Nigerian content and turn in review
reports on actions taken in pursuit of the Nigerian Content policy.

Improved local content

Diezani
Alison-Madueke, the petroleum minister, reiterated the administration’s
commitment to a new Nigerian oil and gas industry on the basis of the
local content policy “with a clear strategy for employment creation and
participation of Nigerians, as well as a programme for integration of
oil producing communities into mainstream economic activity that
creates linkages to other sectors of the Nigerian economy.”

The minister
acknowledged the progress so far recorded through the Nigerian content
policy, though she identified the difficulty in accessing oil fields as
the greatest challenge to operators in the Niger Delta.

“The challenge of
funding and promoting investments to sustain the operations of the
industry is formidable, but the greatest threat to the industry’s
survival today is related to maintaining unfettered access to the oil
fields for efficient and safe operations. If access to the oil fields
is constrained, our growth aspirations cannot be realised, as was
demonstrated at the height of the Niger Delta crisis when the country
lost over 50 percent of daily production, suffered severe disruptions
and loss of basic liberties, lives, and property,” Mrs. Alison-Madueke
said.

She said the
expectation was that the implementation of the Nigerian Content Act
will result in the retention of over $10 billion out of an average $20
billion annual oil and gas industry expenditure in the Nigerian
economy, creation of over 30,000 direct employment and training
opportunities in the country, and establishment of three to four new
pipe mills to service the industry.

The
moves by the House of Representatives committee on capital market to
revisit the unclaimed dividends issue has been described as
overzealous, in the light of more pressing national issues.

The
contentious issue of unclaimed dividend has been a long standing one.
The Securities and Exchange Commission (SEC) has proposed to set up a
body to take the funds off the books of the companies to be managed
separately. The amount has risen to nearly N20 billion over the years,
while the last attempt to set up the fund was rejected by the National
Assembly in 2006 due to public outcry.

The
latest move seeks to lump the unclaimed dividend with other funds under
the Unclaimed Dividends, Dormant Accounts and Abandoned Property Bill,
for which a public hearing was held last week.

Correct approach

The
Capital Market Solicitors Association (CMSA) said the issue should be
resolved with consideration for the interest of the heirs of the owners
of the unclaimed dividends.

“We
think that the correct approach is to have an agency, which can be SEC,
with power to investigate and trace the next of kin of owners of
unclaimed dividend. The company with claimed dividend is to be made
obliged to refer to SEC or the agency for investigation once the
unclaimed dividend is outstanding for six years,” the association said.

In
its official presentation to the House of Representatives public
hearing on the matter, the association emphasised the need for
procedures simplification of the processes for replacement of lost or
expired dividend warrants, as well as transmission of shares.

“No
doubt, if the procedure is cumbersome, it has the effect of swelling
the proof of unclaimed dividends, as small holders and even at times
large holders do not see it as worth the effect. They simply abandon
their dividend,” the body added.

No need for bureaucracy

Victor
Ogiemwonyi, managing director of Partnership Investment, a financial
services firm, said the House proposal was predicated on a wrong
premise.

“There
is no doubt about who owns these assets, whether unclaimed dividends or
dormant accounts, the owners exist. Even when they are dead, their
successors in title are there to make a claim today or in the future,”
Mr. Ogiemwonyi said.

He said the idea was another attempt to take away from others what rightfully belongs to them.

“There
is no need to create a bureaucracy to do what is not needed; worse
still, create laws that are not needed. More importantly, the
proposals, if passed into law, will infringe on a fundamental right,
the right to property,” Mr. Ogiemwonyi said.

Boniface
Okezie, chairman of Progressive Shareholders Association of Nigeria,
said the proposed Bill was unnecessary, especially in the light of more
pressing problems besetting the country.

“If the National Assembly have their hands full, they would not
dabble into an issue that does not concern them. Is it their money? No
roads from east to west, north to south. No electricity, educational
system is in shambles, and all the House can do is to deliberate on
unclaimed dividend,” Mr. Okezie fumed.

Nigeria has started
the process of meeting the April 2011 extended deadline for her
validation as an Extractive Industries Transparency Initiative (EITI)
compliant country.

Nigeria was among
the four EITI candidate countries denied membership by the validation
committee of the international transparency body during its board
meeting in Dar-es-Salaam, Tanzania, last month. The others were
Cameroon, Kyrgyzstan, and Gabon.

Though Nigeria was
adjudged by the board to be “close to compliant”, the country was given
a six-month extension period to take steps to remedy its status, latest
by April 2011.

The steps include
the conclusion and dissemination of its ongoing 2006-2008 audit report
in the oil and gas sector; development of a board charter to strengthen
the work of the National Stakeholders Working Group (NSWG); ensuring
that all government disclosures are based on audited accounts of oil,
gas, and mining companies, as well as relevant government agencies.

Determined to meet
the deadline, the Nigeria Extractive Industries Transparency Initiative
(NEITI) hosted a workshop in Abuja on the ‘Standard Data Request
Template’ to facilitate the collection and collation of the information
and data to be used in producing the make-up EITI audit report.

Assisi Asobie,
NEITI chairman, who underlined the importance of the template as a key
tool for disclosure, said that the capacity of any EITI implementing
country to produce regular and timely reports is dependent on the
nature of the template used.

The Nigeria
Extractive Industries Transparency Initiative (NEITI) is the Nigerian
subset of a global initiative aimed at following due process and
achieving transparency in payments by Extractive Industry (EI)
companies to governments and government-linked entities.

Required data for template

He added that the
oil and gas companies would be expected to provide, among other
information, data on payments made to different government departments
by payment types, accompanied with auditors’ issued statements on
quality of data, duly signed off on accuracy by a competent senior
official; as well as detailed reconcilers in the form of receipts and
bank statements.

Similarly, the
NEITI boss said government would be required to gather and make
available reconcilers and auditors’ statements on data from all its
ministries, departments, and agencies which receive revenues from
operating companies.

Besides, government
is expected to issue statements, duly signed off by its senior
officials, on the quality of data provided by MDAs, while data are to
be provided in a company-by-company, payment-type by payment-type
format, with receipts and bank statements as reconcilers, where date do
not match up with those provided by the companies.

Civil society’s role

On their part,
civil society organisations, which have already been furnished with the
electronic copies of the template for the 2006-2008 oil and gas
industry audits, are expected to be fully engaged in the process by
making their inputs to the template structure, design, and
administration; as well as help persuade oil and gas companies and
governments to respond by providing the required information and data.

Though there are
other disclosures and reporting activities recognised by the global
EITI, Mr. Asobie said other core requirements include revenue
allocation to subnational levels, communities; calculations of what
companies pay against what they should pay; and transparency of
licences or other contract terms.

AIESEC Alumni
Nigeria, a domestic arm of the world’s largest fully student-run
organisation (AIESEC International) will host its 2010 Omolayole Annual
Management Lecture on Wednesday, December 8th, in Lagos.

The lecture, which
is in its 26th year, will focus on the ‘Role of Taxation in Achieving
the Nation’s Vision 20-2020 Objectives’ and will be delivered by an
AIESEC Alumnus, Ifueko Omoigui-Okauru, a Chartered Accountant/Business
Consultant and current executive chairman, Federal Inland Revenue
Service.

Emmanuel Ijewere,
the past president of the Institute of Chartered Accountants of Nigeria
(ICAN) and expert on tax matters, will be the chairman of the lecture,
while Babatunde Raji Fashola, the governor of Lagos State, will be the
special guest of honour.

Mrs.
Omoigui-Okauru’s presentation will take a holistic view of the nation’s
visioning process, the objectives, and the role of taxation in
realising these objectives: to be amongst the top 20 nations in the
year 2020.

The Capital Market
Committee (CMC) has approved the proposal of The Nigerian Stock
Exchange (NSE) for extension of the trading hours on the floors of The
Exchange by two hours from 9.30 am to 2.30 pm, as against the current
time of 9.30 to 12.30 pm. The extension takes effect from tomorrow.

Speaking on the
issue yesterday, the interim administrator of The Nigerian Stock
Exchange, Emmanuel Ikazoboh, said the approval was a right step in the
right direction, stressing that extension of the trading hours was one
of the strategic moves by the leadership of the Exchange to reposition
it for enhanced competitiveness.

He further said
that the extension would give foreign investors, especially those in
the United States of America (USA), opportunity to participate in the
Nigerian market.

The CMC, which meets every quarter, is an industry-wide committee
comprising members of the Securities and Exchange Commission (SEC),
NSE, representatives of capital market operators, and other capital
market operators.

Egypt’s current
account deficit widened to $802.2 million in the July-September
quarter, from a deficit of $493.4 million in the same quarter a year
earlier, the Central Bank said on Tuesday.

The balance of
payments registered a surplus of 14.7 million versus a surplus of $2.05
billion in July-September 2009. Direct foreign investment during the
quarter fell to $1.60 billion from $1.73 billion.

Kenya’s Central
Bank said on Tuesday it would be revising its monetary policy targets
after signs that two years of monetary easing had lowered commercial
lending rates and increased loan volumes.

Central Bank of
Kenya governor, Njuguna Ndung’u, said that although the financial
sector was deepening, there was scope for banks to raise credit
further. The bank’s Monetary Policy Committee (MPC) cut its benchmark
lending rate by 300 basis points between late 2008 and July this year.

It has since left
the rate unchanged at 6 percent, saying growth is on track,
inflationary risk is minimal, and credit is growing.

“The market is
deepening very fast. Everybody is bringing back money into the market,
it is improving the transmission mechanism of monetary policy. We have
to revise our framework in line with that,” Mr. Ndung’u told a press
conference.

Nigeria’s private sector credit is gradually improving, according to the latest data released by the Central Bank.

Data from the
regulatory body says private sector credit growth rebounded marginally
in October, reaching 6.9 percent year-on-year, from 5.3 percent in
September and 4.5 percent in August.

In nominal terms,
credit to the private sector reached N10.5 trillion in October, from
N10.3 trillion in September, N10.1 trillion in August, and N10.2
trillion at the end of 2009.

Finance experts say
while it appears that private sector credit has only moved up 3.2
percent year to date, its month-on-month growth rate has been in
positive terrain for three consecutive months (for the first time since
December 2009), at 1.9 percent in October, from 2.2 percent in
September and 2 percent in August.

Samir Gadio,
emerging markets strategist, Standard Bank, said one of the reasons
behind the substantial decline in annual growth rates is the high base
effect in the data.

“Private sector
growth expanded 84.8 percent year-on-year in 2008, predominantly due to
margin lending-related activities. The combination of a high base
effect and the continued deleveraging in the financial system since
2009, as well as a sharp deceleration in lending associated with the
structural issues in the banking system and increased risk aversion,
could only result in a sustained fall in annual credit growth figures,
until the end of the first half of the year,” Mr. Gadio said.

Experts say some technical reforms will be needed to boost retail lending, despite the significant improvement.

Mr. Gadio says the
tightening in monetary conditions by the Central Bank, following the
Monetary Policy Committee held on September 21 has not helped the
private sector credit outlook, adding that Sanusi Lamido Sanusi, the
Central Bank governor, recently indicated that he did not expect an
improvement in lending in 2010, at least until the banks are
restructured.

Yes, more loans are available

Bashir Borodo,
president of the Manufacturers Association of Nigeria (MAN), confirmed
that access to loan in the sector has improved.

“Yes, I must say
that access to loans has improved. This is because there is more
liquidity in the system, partly because of the direct intervention of
the Central Bank in terms of its guaranteed loans. Right now, we are
very optimistic that this change would continue this year and in 2011,”
Mr. Borodo said.

A source at
Intercontinental Bank said the improvement could be traced to the
special funds deployed by the Central Bank to the private sector.

“We should remember
that the Central Bank gave money for loans for those sectors, and they
are guaranteed. The banks have no option than to put these funds up for
loans. Also, this is the year’s end, many companies have to produce
more to meet year end demands and this means they would have to make
more demands for loans and fortunately, there are more guaranteed funds
from the regulatory body,” he added.

“Risks are better
evaluated now. Because of what banks have faced, they have strengthened
their risk management departments with better and more hands. Also, the
cost of money is reducing. There are now more willing deposits, current
and savings account, and this encourages the banks to lend now,” the
source said.

Nigeria expects its
budget deficit to widen to 6.1 percent of GDP this year, more than
double the level set under a fiscal responsibility act three years ago,
as government spending rises ahead of elections next April.

Revenue shortfalls
from the oil and gas sector, unexpected wage increases, and election
costs will contribute to the widening deficit, Finance Minister,
Olusegun Aganga, said in an annual briefing on sub-Saharan Africa’s
second biggest economy.

Government revenue
is projected at 3.18 trillion naira, with expenditure expected to be
5.16 trillion, Mr. Aganga said in the review, released on Monday.

Analysts have
expressed concern about the state of public finances in Africa’s most
populous nation, as presidential, parliamentary, and state governorship
elections approach.

Recurring
expenditure accounts for more than half of the country’s overall
spending, meaning it is paying more to keep government running than it
is investing in badly-needed infrastructure and other capital projects.

Government
borrowing has risen sharply, increasing by more than 50 percent since
the start of the year, compared to private sector credit growth of just
three percent over the same period.

The government has
said it will also issue bonds to pay workers at former state telecoms
company, Nitel, and to fund part of the electoral commission’s budget,
further increasing domestic debt.

Still, the head of
the debt management office has pointed to a debt-to-GDP ratio of 16
percent that is expected to remain stable next year, depending on the
rate of economic growth, suggesting Nigeria could easily raise more
debt if needed.

But authorities
have also spent billions of dollars of oil savings since the start of
the year alone, and seen foreign exchange reserves fall 20 percent
year-on-year by mid-November to $34 billion.

Ratings agency,
Fitch, last month, cited those factors when it cut its sovereign credit
outlook for Nigeria to negative from stable.

Oil savings dwindle

The Excess Crude
Account (ECA), into which Nigeria saves revenues above a benchmark oil
price, has dwindled from $20 billion at the start of late President
Umaru Yar’Adua’s term in 2007, to around $4.4 billion when President
Goodluck Jonathan took over in May, and less than $1 billion now.

The government says
the ECA has served its purpose as an account to be used to protect
Nigeria against a fall in commodities prices or a global downturn.

But analysts say
the reduction is alarmingly sharp during a period of relatively high
oil prices – Thursday’s price of $85 a barrel is a 40 percent premium
on the $60 assumption in the 2010 budget – and a recovery in Nigerian
oil production.

Mr. Aganga said
last week Nigeria’s foreign reserves were well below where they ought
to be, and that a plan was in place to restore them.

He has also said
spending for next year will be capped at 4.56 trillion naira, as the
government seeks to rein in expenditure over the next three years.

Parliament approved spending of more than 4.8 trillion naira for 2010, up more than 50 percent on the previous year.

The much awaited
sale of seven rescued banks is gradually unfolding, as the various
parties put finishing touches to the deal. While some prospective
financiers, particularly foreign investors, don’t want to stake their
funds, some local entities are making efforts to tidy up loose ends.

After injecting
N627 billion to resuscitate Intercontinental, Oceanic, Finbank, Union
Bank, Afribank, Bank PHB, and Spring banks last year, the Central
Bank’s plan is to allow new core investors that would entrench a new
culture of corporate governance, which the regulator said was lacking.

After several
months of negotiation, Lamido Sanusi, the Central Bank governor, said
recently that bids have been received for the affected banks from two
foreign institutions and some local banks. However, no foreign
institution has made its intention pubic. FirstRand, the South African
bank, regarded as one of the bidders, has said it is not bidding.

No foreign interest

Sam Moss,
spokesperson for Firstrand, said the institution is not interested in
any of the rescued banks, even though it has already registered its
presence in the country’s financial sector. JP Morgan, another foreign
financial institution, has also said it is not interested in any of the
rescued institutions.

“While we are not
purchasing a local bank, we do have relationship with some of them and
helping to build capacity,” said Tosin Adewuyi, JP Morgan’s senior
country officer in Nigeria.

However, the
International Finance Corporation (IFC), the investment arm of the
World Bank, may be backing the sale of the rescued banks, with the
recent signing of cooperation agreement with First City Monument Bank
(FCMB). The agreement, which comes with a $70 million investment in the
bank, also includes a clause for future partnership. A statement by the
bank says the areas of partnership include “acquisition finance of a
distressed bank.” FCMB is one of the bidders for Finbank.

IFC support

IFC’s country
manager for Nigeria, Solomon Adegbie-Quaynor, said, “IFC is committed
to supporting the full recovery of Nigeria’s banking system, and our
investment in First City Monument Bank reflects this strategy.”

“The CBN cannot
sell any bank because it does not have the power to sell what does not
belong to it. The only instrument is for the CBN to liquidate and
transfer to the Nigeria Deposit Insurance Corporation and these two
options will be too heavy considering the current condition of our
economy,” said Sunny Nwosu, coordinator of one of the numerous
shareholder groups recently.

Boniface Okezie,
another shareholders’ group coordinator, said pending court cases would
stall any attempt by the CBN to sell the banks. He said CBN has not
disclosed how much each of the banks require to recapitalise, which is
why the shareholders are in court to prevent the sale.

Mohammed Abdullahi,
CBN spokesperson, said so far, the banks were making appreciable
progress in reaching agreement with potential core investors.

“Individual banks
can tell you how far they have gone. They are talking with people, and
it has reached advanced stage,” he said.

He, however, said the banks are in a better position to talk on how far they have gone with the various bidders.