Nigeria Content Online

First Hydrocarbon
Nigeria Limited (FHN) has announced the acquisition of an equity
interest in the company by African Capital Alliance (ACA), a leading
Nigerian private equity firm.

The investment in
the company is non dilutive to existing shareholders, while ACA is
committed to lending further support to other FHN projects in Nigeria.

ACA is an
independent private equity firm, with $550 million under management,
investing in West Africa, principally in Nigeria and the Gulf of Guinea.

FHN was established
in 2009 with the objective of increasing indigenous involvement in the
upstream sector of the oil and gas industry.

Magaji Muhammed
Inuwa, director of FHN, said, “ACA’s reputation for investing in, and
supporting the growth of Nigerian ventures across all sectors is well
recognised, and we look forward to working with them to deliver on
FHN’s vision of increasing indigenous ownership in the upstream sector
of the Nigerian economy.”

Paul Kokoricha,
director of ACA, said, “The opportunity to invest in FHN is directly
aligned to our growth investment strategy and commitment to provide
support to develop the Nigerian indigenous sector.

“The obstacles to indigenous success in the upstream sector are well
known and FHN’s combination of access to Nigerian capital, growth of
indigenous capacity, as well as the technical and operational
excellence provided by their partner, Afren, is a strong basis for
success.”

Mobil Producing
Nigeria Unlimited (MPN), a subsidiary of Exxon Mobil Corporation, in
joint venture with Nigerian National Petroleum Corporation (NNPC), on
Monday, announced a rich gas condensate discovery in Oil Mining License
(OML) 104, approximately 75 kilometres offshore of Akwa Ibom State.

The Pegi-1
discovery well was drilled in 315 feet (96 metres) of water to a total
depth of 11,407 feet (3,477 metres) beneath the Awawa Field and
encountered 165 net feet (50.3 metres) of rich gas condensate.

Analysis of
recovered samples indicates an API gravity of approximately 41 degrees.
Significant additional potential remains in untested deeper targets
within the Pegi fault block as well as in adjacent fault blocks.

The Pegi discovery
is part of ExxonMobil and NNPC’s programme to increase oil and gas
reserves and production capacity, and to supply power and natural gas
to the growing Nigerian domestic market. Pending results from
additional exploration planned in the area, development studies will
determine the optimal plan for bringing these newly discovered
resources into production.

“This is another
example of our commitment to the growth of the oil and gas industry in
Nigeria,” said, Mark Ward, chairman and managing director of Mobil
Producing Nigeria Unlimited.

“We are focused on
developing oil and gas reserves, and supplying natural gas that will
boost commercial power production, in line with the Federal
Government’s aspiration,” he added.

Rich gas condensate
is a natural gas liquid containing a high percentage of heavier
hydrocarbon molecules such as butane and pentane.

The upbeat
witnessed at the Nigerian Stock Exchange (NSE) on Monday declined
yesterday as the performance of equities close on a negative note.

The market
capitalisation of 198 first-tier securities closed lower as market net
worth dropped by N92 billion at the close of Tuesday’s transaction;
from N8.01 trillion to N7.92 trillion, representing a decrease of 1.14
per cent. The NSE All-Share Index depreciated by 1.18 per cent on
Tuesday to close at 24,804.22 basis points from the previous day’s
figures of 25,102.20.

David Adonri, chief
executive officer of Lambert Trust and Securities Company Limited, a
stock broking firm, said equities’ value declined because short term
investors are reaping part of the attractive profit recorded in recent
rally sessions.

The Exchange
sectoral indexes reflected to sell activities yesterday as NSE-30,
which measures the performance of blue chips in the market, dropped by
0.02 per cent. The NSE Oil & Gas dropped the highest points by 0.44
per cent, followed by Food/Beverages to drop by 0.24 per cent; the
Banking moved up by 0.21 per cent while the NSE Insurance, the only
gainer, appreciated by 1.19 per cent.

Commenting on the
insurance sector performance, Mr Adonri said, “Corporate earnings in
the sector appear to be getting better. I think the insurance
sub-sector is presently seeing light.”

He said the sector had suffered what is technically called a fatigue after a long period of rally.

Most active

Banking sector led
the market transaction volume today with 174.41 million units valued at
N1.71 billion exchanged in 3,258 deals as against 157.48million units
valued at N1.28 billion exchanged in 3,213 deals recorded yesterday.

The volume recorded
in the sector was driven by transaction in the shares of Zenith Bank,
UBA, First Bank and Access Bank and the total volume of 104.60 million
units valued at N1.23 billion traded in the shares of the four stocks
accounted for 37.76 per cent of the entire market volume and their
value represented 46 per cent of the market’s value.

Transaction volume
on the exchange climbed by 22.81 per cent to close at 277.00 million
units exchanged in 5,711 deals as against a decline by -35.61% recorded
previous trading to close at 225.54 million units exchanged in 5,195
deals.

Barely two weeks
after the country received and outlook downgrade by Fitch Ratings,
Standard and Poor’s, another international rating agency has given the
country a pass mark with a ‘B+/B’ Ratings affirmed on resilient
economy. It also gave the country a stable outlook, despite what it
called ‘high political risk’.

In the report
published yesterday, S&P stated, “We consider that the ratings on
Nigeria are constrained by high political risk, but supported by a
strong balance sheet. We are affirming the ‘B+/B’ global scale ratings
and the ‘ngA+/ngA-1’ Nigeria national scale ratings.” The report says
Nigeria’s outlook is stable, “reflecting our expectation that Nigeria
will maintain its strong external and fiscal balance sheet, and that
budgetary performance will gradually improve over the next few years.”

Elections accentuate risk

The report added that political risk in Nigeria may be exacerbated by the forthcoming presidential elections.

“The affirmation
reflects our view that Nigeria’s economic performance and external
liquidity has been better than we previously expected, although its
fiscal performance has been weaker and political risk could heighten in
the run-up to the 2011 presidential elections,” said Standard &
Poor’s credit analyst Christian Esters.

It noted that
Nigeria remains a low-income country, with GDP per capita estimated at
$1.32 billion in 2010. Nevertheless, Nigeria has a strong fiscal debt
position, despite the sharp deterioration in budgetary performance
since 2009. “We estimate that Nigeria’s general government debt will
increase to above 16 per cent of GDP by year-end 2010, which is still a
comparatively low level.”

Comfortable external liquidity

The report said
Nigeria also benefits from comfortable external liquidity, with
continuous current account surpluses. “For 2010, we expect a surplus of
approximately 14 per cent of GDP, and gross external financing needs at
a low 54 per cent of current account receipts and usable reserves.”

The ratings firm
said the stable outlook reflects expectation that Nigeria will maintain
its strong external and fiscal balance sheet, and that budgetary
performance will gradually improve over the next few years. “We also
expect that tensions surrounding the forthcoming April 2011
presidential elections could increase political uncertainty and
destabilise the country for some time after the elections,” said Mr
Esters.

Finance minister,
Olusegun Aganga had rejected the Fitch ratings report on the ground
that it did not reflect the effort by government to address the
concerns raised. Fitch cited the depletion of the Excess Crude Account
(ECA), the decline in foreign exchange reserves and their own concern
that the reform agenda of the current administration which they found
to be very positive may not be implemented before the elections; the
following as the major reasons for the revision of the outlook.

Mr Aganga said, “We
do consider the decision to adjust the outlook downwards unduly
punitive and disagree with it given the numerous positive features of
the country’s economy and ongoing reforms.” He said government has
taken a number of measures which include the proposed establishment of
a Nigerian Sovereign Wealth Fund and urgent steps which are being taken
to address the infrastructure deficit particularly in the power sector
as outlined in the Power Roadmap that was unveiled by the President in
August.

The Nigerian Stock
Exchange (NSE) said the downward trend in the capital market is
traceable to the loss of N700 billion investors’ funds invested in
various Private Placement Offers (PPO).

Mr. Emmanuel
Ikazoboh, the NSE interim administrator, made the observation at the
listing of Multi-Trex Integrated Foods Plc on Monday in Lagos.

Mr. Ikazoboh said
the funds were invested during the boom period, prior to the 2008
financial crisis. He attributed the stock market decline to an
“estimated 40 percent divestment from the equity market to the various
private placements.”

The News Agency of
Nigeria (NAN) reports that Multi-Trex Integrated Foods listed by
introduction of 3.7 billion ordinary shares of 50k each at N3.00 per
share on the floor of the NSE.

“It is interesting to note that a good percentage of the trapped
money was from this exchange, as some investors sold their stocks to
invest them, as the PPO was very promising,” he said.

African leaders
have been urged to be more committed to the economic integration of
Africa through the coordination and harmonisation of taxes and other
trade elements.

Mr. Kamorudeen
Adigun, the immediate past president, Chartered Institute of Taxation
of Nigeria (CITN), gave the advice on Tuesday in Lagos during an
interview with the News Agency of Nigeria (NAN).

According to Mr.
Adigun, although the journey may take sometime to achieve, it has
become absolutely necessary that the commitment at the leadership level
be heightened.

The CITN chief said
that to achieve the dream, internal and international integration
through harmonisation of policies, rule of law, among others, should be
attained without delay.

“This is because
these factors are necessary for the foundation for regional
integration. To surmount these challenges, governments at all levels in
Africa must be up and doing in policy making and implementation. The
present collaboration among various professional bodies and the
creation of awareness within the region is a good step in the right
direction,” he said.

Mr. Adigun said that the coordination and harmonisation of taxes and
other trade elements had become necessary because of the position of
Africa in relation to various world statistics and indexes.

All federal
pensioners whose biometrics have been captured and claims verified,
will be paid their harmonised pensions this week.

The head of the civil service of the federation, Mr. Stephen Oronsaye, gave the directive to this effect in Abuja on Tuesday.

The affected
retirees included those under the purview of his office, who would be
paid arrears of the harmonised pension, in line with approved rates of
six percent and fifteen percent for 2003 and 2007 respectively.

Mr. Oronsaye wanted
the payments to be made without fail by Friday, according to a
statement issued by his chief press secretary, Tope Ajakaiye, and made
available to the News Agency of Nigeria (NAN) on Tuesday.

He confirmed that
his office had identified and addressed the major reasons why some
pensioners, whose biometrics were captured and verified during the June
2010 exercise, had yet to be paid.

He said that such
category of pensioners would also receive their payments, including the
harmonised arrears, without fail by Friday.

Mr. Oronsaye said there would be another chance for pensioners
nationwide and those abroad, who were not available during the last
biometric capturing.

Four
firms have been selected to act as financial and legal advisers for
Nigeria’s $500 million Eurobond, scheduled to open before year end.

Abraham
Nwankwo, director general of the Debt Management Office (DMO), said
Barclays Capital, a leading global British investment bank, and FBN
Capital, a subsidiary of First Bank of Nigeria, have been selected as
financial advisers; while White & Case, a United States of
America-based international law firm, and Banwo & Ighodalo, a
Lagos-based commercial law firm, have been selected as legal advisers
for the bond.

Mr.
Nwankwo added that despite the downgrade by Fitch Rating, Nigeria will
successfully raise the amount from the international bond market due to
the confidence level of potential investors in the Nigerian economy.

Debut Eurobond

Mr.
Nwankwo explained that Nigeria was making her debut in order to
establish her presence at the international financial market, as well
as create a benchmark yield curve by which other debt instruments in
the country can be measured.

Speaking
at a media briefing yesterday in Lagos, the director general said
Nigeria’s total debt profile is still within sustainable level. He said
the Federal Government has taken a decision to ensure that Nigeria’s
debt does not exceed the 25 percent debt to GDP (Gross Domestic
Product) threshold.

“Nigeria’s
debt to GDPO ratio is about 16 percent of GDP, even though the
internationally acceptable level is 40 percent of GDP,” he said.

This
was affirmed by Standard & Poor’s credit analyst Christian Esters,
who says that Nigeria has a strong fiscal debt position, despite the
sharp deterioration in budgetary performance since 2009.

“As
measured by narrow net external debt, Nigeria is in a net creditor
position. This is the result of strong current account surpluses over
the past few years, as well as the reduction in gross public sector
external debt,” Mr. Esters said in his ratings report on Nigeria,
released yesterday.

Sustainability

Mr. Esters said debt sustainability is dependent on the GDP size.

“If
your GDP is growing, you can be borrowing more, and yet your debt to
GDP ratio is going down. It is the GDP that determines the capacity of
your consumption and shows that your economy is growing.

“If
we can grow economy every year, our debt to GDP ratio can even drop to
less than 10 percent even if we are still borrowing, because it means
you have more capacity to carry that debt very comfortably,” he added.

The
World Bank recently cautioned Nigeria over her rising domestic debt,
which currently stands at about N3 trillion ($21.8 billion), while
external debt stands at about N645 billion ($4.3 billion).

Mr. Nwankwo insisted that Nigeria’s debt portfolio was being managed efficiently, as the cost of servicing it was minimal.

“Even
though we are borrowing at concessionary source externally, with
maximum charge of 1.25 percent per annum and over 35 percent of your
external debts are concessionary, how can somebody say that we are
paying high interest?” he asked.

He said it was not proper for states to access funds from the bond market and divert such funds to other ventures.

“Nobody can raise money from the domestic capital market without the
approval of Securities and Exchange Commission. SEC is supposed to look
out for investors by making sure that the proceeds from that bond are
really invested in the projects which were declared in the prospectus,”
he said.