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Business News

Forte Oil to divest Nigeria business, shuts Ghana operations

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Forte Oil Plc has revealed plans to sell some of its upstream and power segments in Nigeria.

According to Reuters, the company will divest from its Ghana operations and strategically focus more on its core operation in Nigeria which is fuel distribution.

The operations in Ghana has declared losses over the last three years and has uncollectible trade debts due to tough economic conditions and a currency devaluation.

Recall that Forte Oil had in 2013 through its subsidiary Amperion Power Distribution Company acquired the Geregu Power Plant in Kogi state under the privatization exercise carried out by the Bureau of Public Enterprise.

Figures from its recently released Q1 2018 financial result for the first quarter ended 31st March shows an 18% surge in revenue from ₦33 billion recorded in Q1 2017 to ₦39 billion in  2018.

A breakdown of the revenue from its operating segments show that the fuel segment which is responsible for the sale of petroleum products and Aviation Turbine Kerosine recorded the highest revenue of ₦25 billion during Q1 2018 against ₦22 billion in Q1 2018 while the power generation  segment recorded ₦10 billion in Q1 2018 as against ₦6 billion recorded in Q1 2017.

Forte Oil’s share price also plummeted 49 percent last year after it struggled to access forex to import products. It now has a total market value of ₦57.3 billion.

Its share price is currently flat and trading at ₦45.20 as at close of trading yesterday on the floor of the stock exchange.

What this sale means for the company.

After the approval by shareholders on May 23, the funds will be used to expand and strengthen its fuel distribution operations across the country including the construction of storage infrastructure.

The company has two storage depots, five aviation fuel depots, and a lubricant blending plant. It also has 100 trucks for distribution of products across its more than 500 retail outlets which would require a lot of capital to expand.

The company will also leverage on the anticipated full deregulation of the petroleum industry which had operated under a tightly regulated fixed margin.

Forte Oil Plc was incorporated on 11 December 1964 as British Petroleum. It became African Petroleum through the nationalization policy of the Federal Government of Nigeria in 1979.

The Company changed its name to Forte Oil Plc in December 2010 upon restructuring and rebranding. Forte Upstream Services Limited, AP Oil, and Ghana Limited are wholly owned by Forte Oil Plc

It owns 57 percent of Amperion Power Distribution Company Limited. While Amperion Power Distribution Company Limited owns 51% of Geregu Power Plc.

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Fikayo has a degree in computer science with economics from Obafemi Awolowo University. ITIL v3 in IT service management. An alumnus of Daystar Leadership Academy. Prior to joining Nairametrics had stinct in Project management, Telecommunications among others. Also training in Consulting and Investment banking from Edubridge Academy. He has very keen interest in Politics, Agri-business, private equity and global economics. He loves travelling and watching football. You can contact him via [email protected]

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Obituaries

BREAKING: Former minister and senator, Aisha Al-Hassan is dead

Ex-Women Affairs minister, Aisha Jummai Al-Hassan, popularly known as Mama Taraba is dead

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A former Minister for Women Affairs and ex-Governorship Candidate in Taraba State, Aisha Jummai Al-Hassan, popularly known as Mama Taraba is dead.

According to media reports she died in a hospital on Friday in Cairo, Egypt at the age of 61.

Al-Hassan, who was a former senator of the Federal Republic of Nigeria from Taraba North Senatorial District, was the All Progressive Congress (APC) Governorship Candidate for Taraba in the 2015 general elections.

She later contested for the same seat on the platform of the United Democratic Party in the 2019 general elections after resigning from APC and as a minister in the administration of President Muhammadu Buhari on July 27, 2018.

The former senator was born on the 16th of September, 1959 in Jalingo, Taraba State, to Alhaji Abubakar Ibrahim, Sarkin Ayukan Muri.

Aisha Jummai Al-Hassan attended Muhammed Nya Primary School, Jalingo and LEA Primary School, Tudun Wada, Kaduna before proceeding to Saint Faith College (now GGSS) Kawo Kaduna where she studied between January 1973 and June 1977.

Details later…

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Financial Services

Ratings agency, Moody’s reveals it is reviewing First Bank’s ratings

Moody’s explained why it might downgrade First Bank’s ratings.

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Moody’s Ratings agency said on Thursday that it has put First Bank of Nigeria on review for a downgrade after the central bank sacked the board of directors and replaced them with new directors.

Moody’s made this statement in a report titled ‘Removal of Non-Executive Board Members Highlights Governance Shortcomings.’

In a quote, Moody’s said:

“Moody’s Investors Service, (“Moody’s”) has today placed all long-term ratings and assessments of First Bank of Nigeria Limited (First Bank) on review for downgrade. The review will focus primarily on an assessment of evolving governance considerations at First Bank, specifically corporate governance developments. The rating action follows the dissolution of First Bank’s board by the Central Bank of Nigeria (CBN), the bank’s primary regulator, on 29 April 2021. As a result of this action by the CBN, all the non-executive directors were removed while the executive management remained in place.”

The Governor of the Central Bank of Nigeria, Godwin Emefiele, had last week announced the sack of the entire board of directors of FBN Holdings Plc and its subsidiary, First Bank of Nigeria Ltd following the initial removal of its MD/CEO Dr Sola Adeduntan. Following his sacking of the board, he set up a new board for the bank holding company and its subsidiary and also reinstated Adeduntan as MD/CEO.

Moody’s mentioned that the regulatory actions demanded of First Bank by the CBN introduces a clould of uncertainty over the outlook of the bank. For example, the CBN had asked the bank to divest from its holdings in two listed companies while also recovering its loans from one of them.

“The review for possible downgrade reflects the rating agency’s view that the removal of all non-executive directors of the bank’s board by the regulator demonstrates corporate governance shortcomings and weaknesses in board oversight. The bank also needs to implement regulatory directives concerning the resolutions of loans to, and shareholding in non-banking related parties, which reportedly had not been executed in the recent past.

Moody’s notes that the outcomes of these developments are uncertain at this point, and the final and long-term governance, reputational and financial implications of the events for First Bank are also unclear.”

The central bank directive sacking the board of the bank also retained its executive management perhaps suggesting that the CBN had confidence in the ability of the MD and his team to manage the bank. Moody’s also noted this in its briefing.

“While the bank’s executive management team remained the same, the rating agency believes these developments could distract management’s focus on implementing the bank’s strategic plan and road to recovery. First Bank management’s immediate key target was to reduce nonperforming loans (NPLs) to levels comparable with domestic peers. The rating agency recognises that, in the context of asset risks, the bank took steps to reduce its stock of problem loans, with its reported NPL ratio falling to 7.7% at year-end 2020 from 25.9% in 2018.”

Will Moody’s downgrade First Bank?

The rating agency explained that the decision to downgrade will depend on how strong the bank’s corporate governance structure is and whether the CBN will impose additional sanctions. If any of these crystallizes, it could downgrade its ratings.

“The bank’s long-term deposit ratings can be downgraded if flaws in the bank’s governance systems exist, and if the CBN imposes additional sanctions on the bank, including, but not limited to, conditions to address any vulnerabilities that may be discovered. Financial output that is less than anticipated could also result in a rating downgrade.”

Moody’s, however, poured water on any optimism around a rating upgrade.

Given the review for downgrade and the pessimistic outlook on the government of Nigeria, there is a slim chance that First Bank’s ratings will be upgraded. Stronger solvency progress than currently reflected in the ratings, combined with a stabilization of the sovereign outlook, could result in the outlook being stabilized.

Why is rating important?

Corporate Organizations desire positive ratings because of the effect it has on their ability to raise capital as well as the cost of capital. A high credit rating typically attracts positive investor sentiments helping organizations tap the debt and equity markets, especially from institutional investors.

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