Nigeria Content Online

The recently
introduced Nigerian Content Act will guarantee that indigenous Nigerian
service companies are accorded exclusive considerations in the award of
contracts and services on land and swamp operating areas of the
nation’s oil and gas industry.

The Acting
Executive Secretary of the Nigerian Content Development and Monitoring
Board (NCDMB), Ernest Nwapa, gave the assurance yesterday in Abuja, at
the quarterly meeting of the Board with multinational service companies.

According to Mr.
Nwapa, the provision of the Act challenges Nigerian service companies
to demonstrate capacity to take advantage of the policy by acquiring
the necessary technical competence to execute such contracts.

The emerging nature
of the oil and gas business, he pointed out, is such that the operating
companies outsource most of the activities to service providers, mostly
foreign companies operating in Nigeria, while some Nigerian companies
pretend to work as foreign counterparts.

“By our own
estimation, over 75 percent of the work done in the industry, both in
terms of man-hours and spend, are done by the service companies.

“It is in these
service companies that the technology resides, and this is where we can
get more people employed and the only way of doing that now is to make
sure that substantial value of that work is domiciled in Nigeria and
the spend is retained in Nigeria. That is what the government and the
people of Nigeria expect us to do,” he said.

Nwapa further
explained that government was happy that well established service
companies are operating in the nation’s oil and gas industry, adding
that government was not planning to drive them out of the country.

He, however,
explained that government was committed to ensuring that indigenous
companies get more opportunities to participate, or make the
multinational service companies become more Nigerian.

“We have to merge
the two approaches. But, it has to be very clear that this is no longer
a question of having a registered Nigerian company that has no assets.
We would be testing the companies that have Nigerian subsidiaries to
ensure that they have capacity to work in Nigeria and are owned
substantially by Nigerians.

“It makes no sense
working in Nigeria, only to retain 5 or 10 percent of what is derived
and export over 90 percent of the proceeds from Nigerian contracts to
the real owners of the company assets abroad,” he said.

Government, the
Board Secretary further explained, was also using the Act to secure the
future of the country and sustain the activities in the oil and gas
industry, adding that the new law would improve the sector’s cost
effectiveness, its ability to service and maintain the assets, which
cost huge funds to acquire, employ Nigerian youths, integrate
inhabitants of the oil producing communities into industry activities,
and maintain tranquility in the Niger Delta, where most of the oil and
gas fields are situated.

Nwapa also noted
that the monitoring Board had commenced enlightenment campaign across
the country about the benefits of the new law, adding that it would, in
the coming weeks, engage people living in the oil producing communities
to reassure them that the post-Amnesty Programme of the Federal
Government was on course and capable of boosting its efforts.

The Board would
promote the development of critical facilities needed in the industry
like Steel Pipes and Plate Mills, Umbilical Spool Bases, Deepwater
Logistics Facilities, FPSO Topside integration facility, and
Offshore/Onshore Module Fabrication Yards.

Others facilities
to be set up by the NCDMB are repair and dry-docking facilities for
marine vessels drilling Rigs, Shipbuilding activities, Heat Exchangers
Assembly Plants, wellhead and valves manufacturing, and assembly plants
and Subsea Production Systems testing facilities.

He stressed that there is no better way of providing employment for
the ex-militants, other able bodied indigenes of the Niger Delta, and
indeed other Nigerians through the industry, than by creating these
facilities and job opportunities.

Inconsistency of
charges by telecoms service providers is fast becoming an issue of
concern to the Nigerian mobile telecoms user, according to findings
from a new research into the sector.

The Nigerian
telecoms market, with its subscriber base of over 70 million and the
largest and fastest growing market in Africa, still faces several
challenges as users say they are worried about call tariffs and
irregularities by service providers.

Ciuci Consulting, a
finance research and consulting firm behind the study, said it was
aimed at obtaining information on the most critical service needs of
both prepaid and postpaid mobile phone users.

The survey,
conducted in Lagos State with a total of 500 respondents, showed that
among other challenges, a major issue experienced by mobile users is
the inconsistency of charges for mobile services.

When asked about
whether they are or have been charged above the advertised rates for
services used, 71 percent of the respondents said they have not been,
while 29 percent said they had been. 60 percent said they would switch
providers as a result of inconsistent charges, while 40 percent said
they would not.

In the report of
the survey, titled ‘What do Nigerian mobile phone users want’, 59
percent of the respondents said they had received from their service
providers as a reward for patronage, while 41 percent said they had not
received any form of discounts. 45 percent of the respondents said they
would switch their operators for not receiving discounts after long
time patronage, while 55 percent said they would not.

Chukwuka Monye,
Managing Partner, Ciuci Consulting, said he was moved to carry out a
research and then a survey on the sector, given the advancement and
growth rate of mobile phone subscribers in the country, in the period
following the launch of mobile services, which has exceeded projections.

“We have gotten
what users want, and we believe that service providers would find this
report very useful in knowing and addressing the actual needs of their
customers,” he said.

Call tariffs

Alongside
inconsistent charges, call tariffs continue to be a topical issue among
both operators and users of mobile services. Consumers constantly groan
about the high cost of services, while operators find reasons to
justify why the charges for services are what they are. Though service
providers are now using the new inter-connects rates, operators have
still not cut down their tariff.

Consumers had hoped
for an immediate reduction on call costs from the effective date,
January 1, and wondered why it seems the same charges are still being
deducted for calls to other networks.

Bola Adegoke, a
mobile user, said he is worried at the irregularities. “There has been
a lot on the issue of deduction when the network is bad, which none of
the operators I used has at anytime be apologetic to, but the issue of
indiscriminate and imbalance deduction is what I think should be
checked.

“Sometimes, you
make a call of few seconds and discover that a huge airtime has been
deducted and some other times, it’s the charges of an undelivered
message that was deducted for. It is mad, and no one is checking all
this,” he said.

Yemi Babaniyi said
though he has not been closely monitoring charges to note
irregularities, he believes charges could be lower. “I use MTN. I think
they are the most expensive network at the moment, and I am worried
about their expensive charge rate.”

However, despite
the consumers’ agitations, network operators argue that the present
tariff is right for the market, and have promised no specific
reductions, noting that tariff reduction can be considered on the basis
of customer satisfaction.

The Nigerian
Communications has stated clearly that it is not empowered to order
operators to reduce the tariff. NCC officials say Nigerian
Communications Act 2003 only empowers the NCC to intervene in the
aspect of interconnect rate and to encourage competition.

According to them,
an effective way to achieve reduction in tariff is to encourage robust
competition, as it is such competition that can actually bring down
tariff.

A push by African
countries to require mobile phone users to register their numbers is
curbing the continent’s spectacular market growth of recent years and
jeopardising the goal of telephone access for all.

Analysts said that
mobile operators were set for a short-term hit in revenues, as many of
Africa’s poorer or more remote users struggle to produce the necessary
documents and so risk being cut off.

A number of African
governments are calling on companies to register all their pre-paid
mobile phone users, who make up 97-99 percent of the market on the
continent, in order to boost national security and help fight
phone-related crime.

“The introduction
of mandatory registration of SIM cards in at least 10 countries has
resulted in a dramatic slowdown in subscriber growth, and will see the
disconnection of millions of unregistered subscribers,” economic
forecast group, IHS Global Insight, said in a report.

South Africa has
led implementation of the policy, giving customers until the end of
this year to register numbers. Both MTN Group Ltd. and Vodacom Group
Ltd. last year reported falls in users by 6.4 and 4.9 percent,
respectively.

Drops are expected
elsewhere as another nine nations, which include Kenya, Cameroon, Ivory
Coast, and Ghana, and account for about 80 percent of subscribers in
Sub-Saharan Africa, follow suit. Deadlines range from later this month
to 2011.

“As the
registration deadline passes in each country, a significant one-off
drop-off is expected as those unregistered SIM cards are deactivated,”
IHS said in the March study.

Culling sim cards

The ease with which
Africans can get a mobile phone number — picking up SIM cards and
credit cheaply on the street with no need for documentation — has
helped swell official user numbers from just one million in 1996, to
around 350 million by the end of 2009, according to the United Nations.

But many on the
continent have more than one SIM card, mainly to avoid the costs of
calling one network from another. Analysts say many of these are likely
to culled.

“(Registration)
will have an impact initially. People with two cards may end up
choosing one,” said Christopher Hartland-Peel, an African equity
analyst at Exotix.

“But it will be a short-term issue — it’s going to be like stopping at a red light (and going on),” he added.

Informa Telecoms
and Media said a similar move by Algeria in 2008 had hit subscriber
numbers. No. 2 operator, Mobilis, had nearly two million SIM cards
de-activated and revenues fell to $140 million in Q4 2008 from $173
million in Q4 2007, it said.

A spokesman for
France Telecom, whose Orange unit operates in a number of nations
calling for SIM registration, said the policy was “complicated in the
timeframe” but teams were working to minimise the impact on revenues
and subscribers.

MTN has said the losses of its pre-paid users had not led to a meaningful drop in revenues in South Africa.

“SIM registration
is a cost and a hassle, but it is not going to affect the companies
over time,” said Andre Wilff, a telecoms analyst at Africa Analysis.

“It will dent
operators’ subscriber growth as it is being implemented, but they will
show growth again. Once it has come and gone, things will go back to
normal again,” he said.

Other issues such
as negotiations in many countries over higher interconnection rates,
increased competition, and fees to the government were more of a worry
to those firms, he said.

Extending deadlines

Similar schemes
have been implemented elsewhere in Japan, Australia, Thailand, and
Germany. U.S. lawmakers, last month, unveiled a bill to identify
pre-paid users as a way to stop terrorists, drug dealers, and gangs
from using anonymous numbers.

The high percentage
of pre-paid SIM card use in Africa means comparisons are difficult to
make, but Wilff said research into similar policy moves in Malaysia had
showed growth quickly returning after the initial disruption during the
process.

While African
governments say the move will boost security and curb phone-related
crime, some fear it will instead be used to monitor and crack down on
opposition figures.

But analysts warn
that producing documents, ranging from basic identity cards, to also
needing utility bills in some cases, could prove to be the biggest
headache for millions, on a continent where so many live in the
informal economy.

The lack of ability
or readiness of people to register their phones on time will curb their
ability to communicate and limit newfound user access to money transfer
and information services.

Tanzania has had to
extend its deadline, as just 10 million of the estimated 18 million had
registered on time. It is not yet clear how strict governments will be
in cutting users off.

“The problem is
that if the process is rushed through as a political imperative, it
could run against the goal of universal service,” IHS said.

Despite
the low performance recorded in the financial reports of most quoted
companies at the Nigerian Stock Exchange (NSE), particularly the
banking sector, some operators said investors’ confidence at the
capital market remains positive.

Emmanuel
Olugbenga, finance analyst at WealthZone Company, an investment
management company, said the bold moves by the Central Bank of Nigeria
(CBN), last year, “to revamp and sanitise the banking industry has
really helped restored investors’ confidence in the market regardless
of the continuous poor results being posted. Investors are still very
much active at the capital market, especially those with long term
plan.”

Also,
Jide Oke, chairman, Lagos chapter of the Nigerian Institute of Quantity
Surveyors, said confidence has been restored to the banking sector, “as
could be seen with the sanctity of the results declared by the banks in
recent times. The era of bubble capitals and bogus profits, which later
turned as farce is gone in the banking sector and for the first time in
recent times, banks in Nigeria declared losses, truly in line with
their performance. And if banking is based on trust and integrity, then
we have seen the first gain of the reform,” Mr. Oke said.

Low turnover

The
financial results of Union Bank of Nigeria for the first quarter ended
March 31, 2010, presented to the NSE on Monday, shows a 33.21 per cent
decrease in turnover and a 96.60 per cent decline in profit after tax
were recorded. The bank’s unaudited result shows turnover of N34.235
billion as against the N51.255 billion recorded in 2009. Profit before
tax stood at N3.560 billion compared with N93.273 billion in the
preceding year, representing a 96.18 per cent decline. Also, the profit
after tax recorded stood at N3.326 billion compared with N97.883
billion in the previous year.

The
directors of the bank said they have intensified loan recovery efforts.
“With the support of the CBN and increasing success in the loan
recovery drive and the restructuring effort, the bank should be
operating profitably going forward,” they added. Oluremi Oyepeju,
chairman of Ibadan Zone, Shareholders Solidarity Association, said,
“The result of Union Bank is encouraging. It has proved that Nigerian
managers and investors are capable of resuscitating these troubled
banks. There is, therefore, no need for the Central Bank to sell the
banks to any foreign investor.”

Improper behaviour

Meanwhile,
as some operators believe recovery is gradually coming back to the
global market, Arunma Oteh, director general of the Securities and
Exchange Commission (SEC) warned of the challenges that are capable of
reversing the gains already made in the market. She said this at the
International Organisation of Securities Commission, in Canada, last
week.

“The challenge of improper behaviour driven at this time by the
morbid desire to recover incurred losses from the financial crisis is
on the increase,” she said. “As regulators, we need to remain on top of
the situation and developments in our markets and refuse to take our
feet off the important throttle of effective surveillance of the
markets. Enforcement actions must also be taken where necessary if the
markets are to remain stable and continue to command investor
confidence.”

Some
banks are optimistic on returning to profit before the end of the year,
after the remarkable losses declared by almost all the banks in the
December 2009 mandatory common year end.

Bank PHB, one of
the banks affected by the Central Bank’s special audit has said it
expects to return to profitability before the end of the year. In a
filing to the Nigerian Stock Exchange on Monday, Bank PHB, said it
expects to return to profitability in the third quarter this year with
a pre tax profit forecast of N11.2 billion. The bank forecasts gross
earnings of 15.7 billion naira for the period. Comparisons were not
available because the bank, one of the first of the rescued
institutions to give a timeline for a return to profitability, has
changed its accounting year to the calendar year.

More business focus

A senior official
of the bank who requested not to be named said to achieve this, the
bank has essentially retooled its mode of operations. “Basically, we
have essentially retooled our operations,” he said. “We are now more
business focused especially expanding our international trade and
retail banking businesses. We are also engaging in aggressive loan
recovery strategies and expect to write back some of the previous
provisions earlier made in 2009. We have also largely held down
operating expenses to a sustainable level in line with current
earnings.”

Most bank CEO’s
said during their annual general meetings held in the first quarter of
the year that after a difficult year in 2009, attention has now been
turned to increasing efficiency and enhancing profitability. Some
finance experts are of the view that a lot of the concern in the
banking sector have been captured and brought into perspective during
the CBN/NDIC audit in September 2009. In this view, they say outlook is
fundamentally positive as real GDP growth in Nigeria is expected to
accelerate in 2010 adding that the expansionary budget has been
approved and the Asset Management Company bill has been passed while
oil is still trading at an average of $80 to the barrel.

Renaissance Capital, an international finance advisory and research firm says banks’ 2010 profit forecasts are well supported.

“We expect concerted effort towards loan recovery in 2010 by the
banks and we expect that the 2010 profit forecasts are well supported,
as we forecast robust loan and deposit growth, a wider net margin, an
improved efficiency, lower loan loss provisions and a lower tax rate of
20 per cent.

The
federal government yesterday warned the Power Holding Company of
Nigeria (PHCN), and gas supply companies in the country, that it would
no longer tolerate inadequate gas supply as reason for failure to
supply electricity to consumers.

Despite various
deadlines by government in the last eight years towards improved power
generation capacity, inadequate gas supply by the joint venture oil
producing companies has often been cited as reason for the inability of
the PHCN, and other independent power producing companies, to meet the
mandate.

At the signing of
the gas supply and purchase agreement (GSPA) for the supply of gas for
power generation yesterday in Abuja, Dieziani Alison-Madueke, the
minister for petroleum resources, said government has provided enough
incentive to guarantee adequate supply of gas for electricity
generation in the country. The agreement was executed between Egbin
Generating Company Limited (a subsidiary of the PHCN), and the Nigerian
National Petroleum Corporation (NNPC)/Pan Ocean Joint Venture for the
supply of 65 million standard cubic feet of gas per day from the Pan
Ocean Oil Company of Nigeria (PANOCO)’s Ogharafe gas plant to Egbin
Power Station in Lagos.

Pan Ocean is one of
the three gas suppliers that would be servicing Egbin, one of Nigeria’s
power generating plants, currently accounting for more than half of the
country’s available power supply capacity. The other suppliers include
NNPC/Shell Petroleum Development Company (SPDC) joint venture and their
Chevron Nigeria Limited (CNL) counterparts.

Over N150 billion invested annually

According to Mrs.
Alison-Madueke, government in the last three years has, through the
various joint venture oil companies operating in the nation’s petroleum
industry, invested an average of $1 billion (about N150 billion)
annually on the development of gas supply infrastructures and the
domestic gas market. This figure, she said, is about to grow
considerably for both government and the JV partners as the government
is poised to aggressively pursue the development of the National Gas
Master Plan as well as the execution of various projects to realize the
agenda in the power sector.

The new gas pact,
the minister explained, would not only help address the fundamental
challenge of gas-to-power, but would provide the world class GSPA
template for the country’s domestic gas-to-power market. The template,
which is a product of wide consultation with different people,
stipulates all terms and conditions for effective and bankable supply
for the gas-to-power as part of the critical steps necessary to rapidly
reposition the nation’s domestic gas market both for sustainability and
to encourage potential investors in independent power projects in the
country.

“To facilitate the
conclusion of government’s effort to entrench a world class sustainable
commercial framework for gas-to-power in the country, other planned
suppliers to Egbin, notably Shell and Chevron JVs, have been mandated
to step up discussions and ensure a timely closure of their respective
agreements for execution latest by June 18 next week,” she said.

Nuhu Wya, minister of power, who noted the benefits of the
collaboration between the ministry and the JV partners said that with
the various gas supply agreements in place in the industry, the power
generation and gas supply companies would no longer have any excuse for
not delivering electricity to Nigerians in line with government
national aspirations.