The National Assembly is currently debating the $38 benchmark price for crude put in place by the Federal Government for the 2016 Budget. Just as the debate is raging the price of crude is taking a dive and fell to as low as $32 this week. Contrary to most expectations, the middle east diplomatic stand off between heavy weights Saudi Arabia and Iran isn’t helping. The world is still getting battered with a crude oil glut and oil-producing countries struggling with an economic crisis are offering crude at cut throat prices all in the bid to stay afloat. This has made the chat above very important.
The Organization of Petroleum Exporting Countries which Nigeria belongs to, have a crude oil basket of its own which is different from the widely used Brent Crude. OPEC currently pumps about 41% of the world’s oil making it a major factor in the determining the price of crude. Despite this influence, oil also has several grades and each grade has its own price. To therefore determine a uniform price for its members, OPEC regularly publishes an oil price basket showing the average price of crude among its member countries.
OPEC Basket composition
Saharan Blend (Algeria), Girassol (Angola), Oriente (Ecuador), Minas (Indonesia), Iran Heavy (Islamic Republic of Iran), Basra Light (Iraq), Kuwait Export (Kuwait), Es Sider (Libya), Bonny Light (Nigeria), Qatar Marine (Qatar), Arab Light (Saudi Arabia), Murban (UAE) and Merey (Venezuela).
Looking at the chart, it’s clear OPEC countries are at an average selling crude at a price much below the Brent. Even though Nigeria’s Bonny Light trades at a slight premium to the Brent, the drop in price in the oil basket could suggest a stiffer competition for Nigeria’s crude. India is currently Nigeria’s largest importer of crude but we have recently faced stiff competition from other OPEC and non-OPEC members. As the price of crude continues to dip the less likely it is for us to meet our benchmark price of $38.
Insurance: NAICOM revises recapitalisation guidelines
In our view, we think the decision to extend the deadline is reasonable under current circumstances. The coronavirus pandemic has ravaged global economic and financial systems thus making it more difficult for an already unattractive insurance sector to raise much-needed capital.
In a circular communicated to insurance providers in Nigeria, National Insurance Commission (NAICOM) has announced an extension to the deadline for insurance providers to meet up with the regulator’s new minimum capital requirement. In addition, NAICOM has broken the recapitalisation exercise into two phases. The first phase must be complied with by 31 December 2020.
To comply, insurance providers must meet 50% of the new minimum capital requirements while reinsurance providers are required to meet up to 60% of the new minimum capital requirement. The second phase which will end on the final deadline of 30 September 2021 would require 100% compliance with the minimum capital requirement from all insurance and reinsurance providers.
The revised guidelines requires Life insurance providers to have minimum capital of N4bn (existing minimum – N2bn) by 31 December 2020 and paid up capital of N8bn by 30 September 2021. General insurers are required to meet a minimum paid-up capital of N5bn (existing minimum – N3bn) and N10bn by 31 December 2020 and 30 September 2021 respectively. Composite insurers are expected to have a minimum of N9bn in paid up capital (existing minimum – N5bn) by 31 December 2020 and N18bn by 30 September 2021 while reinsurers should have N12bn (existing minimum – N10bn) in minimum paid up capital by 31 December 2020 and N20bn by 30 September 2021.
In our view, we think the decision to extend the deadline is reasonable under current circumstances. The coronavirus pandemic has ravaged global economic and financial systems thus making it more difficult for an already unattractive insurance sector to raise much-needed capital. We note that several players have initiated the process of raising the needed funds from their existing shareholder base via the right issues. However, we highlight that some of the players currently have a negative book value of equity and are trading below their par values. Hence, raising equity capital does not appear feasible. That said, we expect to see a flurry of mergers and acquisitions in the industry once conditions become more favorable.
CSL Stockbrokers Limited, Lagos (CSLS) is a wholly-owned subsidiary of FCMB Group Plc and is regulated by the Securities and Exchange Commission, Nigeria. CSLS is a member of the Nigerian Stock Exchange.
Oando loses Chief Legal Officer
Chief Legal Officer of Oando Plc, Ngozi J Okonkwo is dead.
Adewale Tinubu, Group Chief Executive Officer of Oando Plc announced this via a tweet.
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— Wale Tinubu (@AdewaleTinubu) June 4, 2020
Until her death, she was the Chief Legal Officer of Oando Plc, having joined the company as Head, Legal Services of the company in 2009.
According to a tweet from one of her nephews, she battled cancer for a while, recovered before having a relapse during the recent COVID-19 crisis.
She went hard all the way, she was going to beat the cancer and do it in style. Unfortunately she was a citizen (read denizen) of a country determined to kill its children.
— Deno Landing🦍 (@zvko_) June 4, 2020
Before joining Oando, she worked as Junior Counsel with F.O Akinrele & Co., and also with KPMG Professional Services (previously known as Arthur Andersen) as Manager in the Tax, Regulatory and People Services unit and Head of indirect tax services.
She obtained LLB (Hons) from University of Nigeria, Nsukka in 1997 and BL from the Nigerian Law School, Lagos in 1999. She was a member of the Nigerian Bar Association, honorary fellow of the Association of Fellows and Legal scholars of the centre for International Legal Studies, Austria, Associate Member of the Chartered Institute of Arbitrators, United Kingdom and Associate Member of the Chartered Institute of Taxation, Nigeria.
NNPC diversifies into housing, power; plans to beat crude production cost to $10 per barrel
The Nigerian National Petroleum Corporation (NNPC) has announced that it is building up business portfolios in the housing, power, and medical sectors.
To cushion against the volatility in the global crude market and strengthen profitability, the Nigerian National Petroleum Corporation (NNPC) has announced that it is building up business portfolios in the housing, power, and medical sectors.
This is one of several measures the corporation is taking to sustain revenue generation for Nigeria, and cope with the boom and bust cycles which are gradually becoming a feature of the global crude oil market.
NAN reports that this was contained in a statement from the Corporation Chief Operating Officer, Ventures and Business Development, Mr. Roland Ewubare, and signed by NNPC Spokesman, Kennie Obateru.
According to Ewubare, the NNPC will establish Independent Power Plants using the Ajaokuta-Kaduna-Kano (AKK) pipeline network, and consolidate its presence in the power sector.
The statement reads in part; “NNPC is creating an energy company that would have portfolios in renewable energy; we have initiatives on solar that is ongoing.
“We have got biofuels agreements with some state governments that would soon be activated. We do have a lot of non-core businesses that are aggregated under the Ventures and Business Development Autonomous Business Unit of the NNPC.
“This would be expanded through effective collaboration and partnership with the private sectors,”
Lower costs, more profits
As part of moves to improve profitability, the NNPC also announced plans to drive crude oil production cost down to 10 dollar per barrel by Q4 2021,
This according to the statement would be done by systematically and gradually beating down logistics costs.
The Corporation’s revenue took a major hit in 2020 due to the slump in global oil prices, and this in turn affected the Nigerian budget given that oil proceeds account for a significant fraction of her income.
“When you have a low commodity price regime, as the case now, the only way we are able to squeeze out some reasonable cash and financial gain to the nation is by curtailing and constraining our costs in line with the GMD’s aspiration to push for a 10 dollar per barrel cost of production,” Ebuware said.
There is also an ongoing collaboration with selected partners to commercialise flared gas in order to preserve the flora and fauna of the country.
This would be done by converting it to Compressed Natural Gas (CNG) and Liquefied Natural Gas, for sale to consumers.
The NNPC is partnering with private developers to reduce the housing deficit in the country and also partnering with medical centres to provide innovative healthcare for Nigeria.