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Uncertainty abounds as Forte Oil Pivots away from Upstream and Power



Last week, Forte Oil informed the investing public of its decision to sell off its upstream and Ghanaian units, as well as its stake in the Geregu power plant.

The company attributed its decision to a need to focus on the downstream segment. The move is however subject to the approval of shareholders at its forthcoming 39th Annual General Meeting.

Forte Oil share price is down 20% in the last one year and about 6% year to date. Since this announcement, the share price has dropped from a year high N47 to N40 suggesting that the market may not have been impressed by the move to spin of upstream and power segment of its business operations.

Ghanaian operations are minuscule

Ghanaian operations have been insignificant at both the top and bottom lines. AP Oil and Gas Ghana accounted for just 0.9% of the Group’s revenues of N148.6 billion in 2016 and 3.6% of Group revenues of N129.4 billion in 2017.

Bottom line contributions are even far smaller. The Ghanaian segment made a loss before tax of N59 million in 2016, and a profit before tax of just N29 million in 2017.

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Forte made an equity investment of N670 million in AP Oil and Gas Ghana, in addition to cumulative preference shares worth N424.9 million.

Prior to the decision to put the Ghanaian subsidiary on sale, the company had taken several impairments on its investment. Impairments of N547 million were taken in 2016 and N410 million in 2017 respectively.

Selling off Geregu power plant is puzzling

While the decision to sell its Ghanaian unit makes sense, offloading its stake in Geregu is quite puzzling. Forte Oil prides itself as the leading integrated energy company in the country. Also, gross profit margins from Geregu has been impressive, at between 35% and 40%. 

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  • Forte owns 57% of Amperion Power Distribution Limited, BSG Resources Limited owns 38%, while Shangai Municipal Electric Power Company (SMEPC) has a 5% stake.
  • Amperion Power Distribution Limited, in turn, owns 51% of Geregu Power Plc. In effect, Forte owns about 29% of Geregu Power Plc.
  • Amperion completed the acquisition of a majority stake in the Geregu Power plant for $132 million in August 2013. The company has since invested funds into rehabilitation of the plant.
  • Like fuel, an increase in electricity tariffs is almost inevitable, most likely after the elections. All variables used to calculate the current rates have since gone up.

Having invested so much in the plant’s rehabilitation and in view of the potentials the industry has, Forte selling its stake comes across as contrarian. 

A buyer won’t come easy

Nigeria’s power sector has struggled with various issues ranging from poor collection rates, to tariffs that are not cost-effective, and an absence of metered customers.

  • This has cascaded from the final consumer to the GENCOs. Getting a buyer for its stake In Geregu may take some time.
  • The prospective buyer would also have to assume responsibility for the loans guaranteed by Forte Oil Plc.

As at the 3 months ended March 2018, the Group had a long-term loan of N11.4 billion for its acquisition of the Geregu Plant through Amperion.

The case for downstream

Forte has one of the largest networks of petrol stations in the country. In a country of over 120 million people, many are dependent on petrol for running their cars and generating sets; this serves as an advantage.

  • Also, as a means of diversifying its revenue base, Forte recently announced that it had obtained the distributorship rights for the Havoline line of lubricants.
  • Interesting to note that Forte Oil’s revenue from its downstream division has been on the decline in the last three years. Revenue has dropped from N152 billion in 2015 to N121 billion (restated) and N78.8 billion in 2016 and 2017 respectively.
  • The drop is largely attributed to its volume declines as NNPC remains the sole importer of fuels in the country.
  • By focussing on downstream only, analysts suggest Forte Oil is positioning itself ahead of the commencement of operations of the Dangote Refinery as well as other smaller modular operations currently being constructed across the country.

Last year, the MD/CEO of Forte Oil Mr. Akin Akinfemiwa, announced Forte Oil was in talks with a major refinery to “form a strategic partnership for local refining of petroleum products in Africa’s top oil exporter”

Forte Oil is a market leader when it comes to downstream operations and while fuel subsidy still persists they perhaps believe this won’t be sustained. If fuel subsidy is removed, margins could improve for a sector that has relied on volumes and government handouts to survive.

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There is also lubricants and diesel and other by-products where subsidy no longer exists. Forte Oil recently acquired rights to distribute Chevron’s Havoline Motor Oil which is expected to help boost its Lubricants and Greases division valued at about N12 billion.

Against sole reliance on downstream earnings

Petrol prices remain heavily regulated by the Federal Government through the Nigerian National Petroleum Corporation (NNPC). The Buhari administration in 2015 increased the pump price of petrol from N86.50 to N145 per litre.

  • A combination of the depreciation of the naira against the dollar, as well as rising crude oil prices, mean that petrol landing prices have since gone up. The government has however been reluctant to increase pump prices once more to avoid a populist backlash.
  • This has left the NNPC as the sole importer, even as it racks huge losses. The government has also been reluctant to use the term, ‘subsidy’ preferring to call it an under recovery.
  • Downstream players continue to be owed by the Government through the PPPRA. Q1 2018 results by the company show that it is owed N18.8 billion by the Petroleum Support Fund (PSF).

Post-May 2019, the government could decide to increase pump prices again, to enable major marketers to begin importing again. Till then, most downstream players will continue to struggle.

Going Forward

Forte’s strategy may not deliver returns in the near to medium term but will pay off were the government to fully deregulate the downstream sector.

While Nigeria is much closer to that, no one knows exactly when it will take place. The Buhari administration has doggedly stood against the removal of fuel subsidy, against advice from policy observers. 

However, with oil price racing above $70 and predicted to hit $100 it is unlikely that the government will continue to tow this line. Fuel subsidy could be removed after the election in 2019, paving the way for Forte Oil to perhaps win in the battle for the downstream sector.


Onome Ohwovoriole has a degree in Economics and Statistics from the University of Benin and prior to joining Nairametrics in December 2016 as Lead Analyst had stints in Publishing, Automobile Services, Entertainment and Leadership Training. He covers companies in the Nigerian corporate space, especially those listed on the Nigerian Stock Exchange (NSE). He also has a keen interest in new frontiers like Cryptocurrencies and Fintech. In his spare time, he loves to read books on finance, fiction as well as keep up with happenings in the world of international diplomacy. You can contact him via [email protected]

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Strong performance from Stanbic IBTC, despite weak retail banking position

Will Stanbic IBTC be able to generate profit from its personal banking division by full year? 



Stanbic IBTC made a profit after tax of N45.2billion, growing its profit by 24.7% when compared with this period last year.

The feat is remarkable; given that majority of financial institutions responded as expected to the economic downturn triggered by inflationary pressures, oil price instability, and lack of notable business activities, necessitated by the corona-virus pandemic that has characterised the 2020 business calendar year.

These other organizations reflected positions worse off than their escapades in 2019. In cases where improvements in bottom-line were seen, it was only marginal. 

READ: STANBIC IBTC posts Profit After Tax of N45.2 billion in H1 2020

Stanbic IBTC was not exempted from these economic trials, their immensely diversified business portfolio boosted their numbers on multiple fronts. Robust presence in Asset Management paid off, as commissions and fees represented a massive 62% of general fees and commission income. It’s Corporate and Investment division continues to produce astoundingly, contributing the highest and growing profit after tax of 49.2%. 

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This focused and efficiently monitored diversification, is turning Stanbic IBTC into world-beaters, reflecting in the expansion of its gross earnings by 7.8%, from N117.4billion in HY’2019 to N126.6billion so far this year.

This position could have appeared even better; had STANBIC been able to demonstrate in its personal and business banking segment, the same excellence, noticeable in its other business segments (Wealth, Corporate and  Investment).  

READ: Jaiz Bank: First shared-profit bank in Nigeria approaches 10 years

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It’s Personal banking (generally regarded as Retail banking), encompasses the provision of banking and financial services to individual customers and SME’s (Small and Medium scale enterprises), mortgage lending, leases, card products, transactional and lending activities such as telephone banking, ATM’s, etc. The segment suffered this year, closing with a loss of N3.2billion, despite being responsible for over 58.4% of general staff costs. This poor position was sponsored by a reduction in income levels, especially non-interest income from fees and commission.

Unsurprisingly, given CBN’s policy at the start of the year to implement a much-reduced transfer fee rate, an increase in Non-performing loans is another causal factor for its loss this half-year. STANBIC cannot afford to bask in the euphoria of the massive successes of its Wealth and Corporate segment, at the expense of Retail banking.

READ: Zenith Bank blows past Access Bank as customer deposits cross N4 trillion

Retail banking is fundamental to any bank looking to be a force, or preserve its going-concern status in this critically competitive economic environment. It has been the subject of immense research in the last decade, with many banks devising strategies to acquire a large chunk of the market share in this business segment. The banking landscape is evolving amidst growing competition, such that a bank that generally does well in its retail banking segmentis perceived as strong by the public. This has an underrated capacity to effortlessly attract more customers. Banks need to revisit the drawing board and re-embrace their sacred purpose of serving the basic and pure needs of their individual customers. 

Michael Lafferty, Chairman of the Lafferty Group, whilst describing Retail banking said, Retail banking is the foundation on which global banks are built,” It is a vast retail and consumer banking market, pointing out that the world’s biggest banks built their financial empire from the mass market. 

READ: Foreign investment inflow into banking sector falls by 95% in Q2 2020

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Stanbic IBTC must be conscious in its quest to provide universal banking and find a balance in product and service offerings across its business segment. 

A summary of the performance parameters in its financial statementshows growth in gross earnings, from N117.4billion to N126.6billionand improvement in earnings per share from 342kobo to 419kobo. 

Attention now shifts to the impact of the bank’s new super app, supposedly a one-stop-shop for its diverse offerings, including banking, investing, pensions, trading, and insurance, and how it affects the bottom line in subsequent quarters.  

Explore the Nairametrics Research Website for Economic and Financial Data

Lastly, will Stanbic IBTC be able to generate profit from its personal banking division by full year We await their H2’2020 results. 

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Is Zenith Bank thriving on the strength of sound financial indices?

Zenith Bank posts N103.8bn profit in half-year financial result.



Zenith Bank reaffirms market dominance and leadership with Q3 2019 results, Zenith Bank Plc, Access Bank Plc and United Bank for Africa Plc, Zenith Bank reports 7.9% profit increase for full-year 2019

Sound financial indices have made Zenith Bank one of the largest banks in the Nigerian banking Industry. It was recognized as the Most Valuable Banking Brand in Nigeria 2019, in the Global Banker magazine Top 500 Banking brands; and Best Commercial Bank in Nigeria 2019, by the World Finance.

Zenith Bank has successfully bolstered this narrative even further with the release of its Half Year 2020 Financial Report, where it closed with a profit of N103.8 billion.

Growing profit position in these perilous times, speaks remarkably of the suppleness and elasticity of any establishment. A lull in economic activity caused by inflationary pressures, precariousness of the market, and the coronavirus pandemic has forced most Deposit Money Banks (DMBs) to cave in, and reveal achievements worse off than their 2019 results y/y – but not Zenith Bank Plc. The institution has showcased beyond reasonable doubt, that the apparent limitations are incapable of distorting its active growth pattern.

Zenith Bank closed H1 2020, 16.8% better off than it did in 2019 y/y, in terms of profit after tax. Although this massive leap, hugely resulting from tax paid as profit before tax, noted just a 2.2% growth. Further analysis of its HY’2020 results, demonstrates more efficiency, a focused cost of fund optimization, and an aggressiveness in generating income across its business heads and segments. This strategy had begun since 2018, and was shared by the bank when it disclosed planned implementation of an improved core banking system, hoping it would ultimately enhance efficiency while reducing costs.

Zenith Bank has thrived on the strength of its sound business model, corporate governance, conservative risk management, and strategic corporate social investment. The bank has been very forceful in the market, improving massively across all of its income generating segments, despite the plausible and obvious hindrances. This is a testament to its superiority, and sponsors its claim for supremacy.

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The bank made N22billion from foreign exchange revaluation gains and despite evidence to the contrary, it endeavored in operating expenditure (OPEX). OPEX may have grown by 7.7%, but disclosures and note to the accounts shows that in virtually every expense head, costs dropped. The 7.7% was triggered majorly by Information Technology related costs, fuel and maintenance, and an increase in the compulsory banking cost fund, set up for the Asset Management Company of Nigeria (AMCON) by the CBN.

Now, like every hero susceptible to their hubris, Zenith has its own problems, which questions its position at the top. Yes, the bank may have an amazing and constantly improving interest expense to interest income ratio, but it does not possess the finest result in this regard as of yet. HY 2019 interest expense took as much as 33.6% of its income, while HY 2020 dropped to 27.4%. This is good, but still considerably high, if we carry out a peer-to-peer analysis with Guarantee Trust Bank Plc (masters of low-interest expenses), whose ratio stands at 16% for HY 2020.

However, Zenith has sustained the momentum of positioning itself as the crème de la crème in the Nigerian Banking Industry for quite some time. The bank’s pattern of growth and performance, strongly indicates its capabilities to manage its interest expense in subsequent quarters. It will be interesting to see how this pans out by year end.

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In summary, despite economic difficulties this year, with most bank’s bottom-line at a worse position than the corresponding period last year, Zenith posted improved profit yet again. Could this be enough to portray supremacy?

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UBA Plc H1’2020 results, a true reflection of its rightsizing decision? 

UBA’s H1 2020 result is yet another demonstration of the resilience of its business model.




The upward review in benefits of some employees and directors this year, coupled with the rising operational costs, constitutes the hot topics from the 2020 semi-annual results released by UBA Plc. 

Widely regarded as the banking sector’s largest employer of labour in Nigeria, the bank in December 2019, embarked on a ‘rightsizing’ exercise, which partly resulted in new hires, as well as promotions, improved remunerations, and benefits for existing employees.

READ: Zenith Bank’s Profit After Tax in H1,2020 rises by 16.8% to N103.8 billion

The Group Head, Media and External Relations, UBA Plc, Nasir Ramon commenting on this said, over 5000 staff of UBA Plc, started the new year with a lot of cheer, as the bank promoted to new grades, coupled with salary upgrades. Beneficiaries of this exercise will receive up to 170% increase in their salaries and benefits, whilst a good number have been moved to higher grade levels.” 

Directors saw their emoluments amplify by 177.7% (Fees and Sitting allowances) as demonstrated in the financial statements of the bank. Rising to N50million in June 2020, from N18million in 2019 y/y. 

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READ: Access Bank posts Profit Before Tax of N74.31 billion in H1 2020

Now, Deposit Money Banks (DMB’s) might be adjudged to be honorable in all of their objectives, but the truth is they are neither self-sacrificing nor are they expected to be. DMB’s are established for profit, and would incessantly prioritize business good sense over social empathy, for the sake of their owners The import of this is, UBA Plc expects its colossal investments in employees and directors to overwhelmingly reflect in its bottom-line. 

Half-year 2020 results is clearly not in sync with this philosophy, as it reflects a weakened position compared to the corresponding period last year, despite the investments in human capitalProfit before tax dropped by 18.7%, from N70.3billion recorded in HY’2019 to N57.1billion in the current period. Profit after tax waned as well by 21.7% to N44.4billion from N56.7billion in HY’2019. 

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READ: Are tech talents Africa’s ‘new export’?

Interestingly enough, the top-line fared pretty well. Interest income and fee income showed improvements, albeit marginally by 0.3% and 6.7% respectively. This makes it illogical to attribute the entirety of the decline in profit to the recent austerity measures put in place by the CBN, reducing funds transfer fees and card maintenance charges 

The Coronavirus pandemic played a big role too, by widely stunting the economy in the second quarter of 2020, and negatively impacting profit. But even these do not provide substantial and sufficient convictions as to why the Tier-one bank did not hit the profit-bar it set for itself, from its truly emphatic 2019 financial year. Does this mean that UBA Plc got the decision wrong at the start of the year? 

READ: FUGAZ; Nigerian banks considered too big to fail

Six months seem too short a period to immediately class management’s decision to jack up the benefits and emoluments of its internal customers as a failed one. Although, no one anticipated the travails of COVID-19 and its resulting consequences, investments in human capital is widely proven to yield tremendous growth in the long haul. Besides the fact that it has given UBA Plc a solid reputation in the market place, it also makes the company very attractive to the very best of industry talents. Furthermore, employee engagements of this nature, foster brand loyalty which ultimately trickles down to how passionately these personnel undertake their tasks and deliverables. The true bearing of this investment is expected to reflect in due course, in subsequent quarters.  

Commenting on the result, UBA’s Group Managing Director/Chief Executive Officer, Mr Kennedy Uzoka said, “Our H1 2020 results is yet another demonstration of the resilience of our business model in an extremely uncertain and tough operating environment. We recorded commendable growth in our underlying business in terms of customer acquisition, transaction volumes, and balance sheet whilst inflation, depressed yield environment and exchange rate volatility impacted our net earnings as anticipated.” 

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READ: GTBank, Access Bank, 11 others pay workers N271.64 billion in H1 2020

Rising cost

In today’s increasingly aggressive marketplace, where consistently generating revenue, is paramount to preserving the longevity and going-concern status of any establishments, costs must also be accorded as much attention and significance. Tightening and managing costs with the aim to improve and generate profit is genius strategy especially in today’s banking industry. The banking industry is under threat from ruthless competitions. Multifarious streams that had hitherto been available for generating income for DMB’s are being severely hindered by the ‘austere’ policies (from the perspective of commercial banks) from the apex bank, making effective cost management a survival mechanism. 

Explore the Nairametrics Research Website for Economic and Financial Data

Employee benefits rose by 20% from N37.2billion in HY’2019 to N44.6billion in HY’2020, while Directors’ emoluments (Fees and Sitting Allowance) as earlier stated, surged by 177% from N18million in 2019 to N50million in 2020 y/y. The total operating expenses increased 22.6% in 2020UBA Plc, unavoidably expended N22.4billion on Banking Sector Resolution cost trust fund, in compliance with the CBN’s requirement to contribute to the cause of the Asset Management Company of Nigeria (AMCON). Security and other payments for core services experienced increase as well compared to the preceding year. 

Avoidable expenses like Penalties and Premises Maintenance Charge, should be extensively reviewed and extinguished wherever possible, to improve bottom line. UBA plc has forked out N565million in penalties so far in 2020representing 6177.7% increase from just N9million in 2019 y/y. This is a prime example of the operational brick walls, UBA Plc must properly address to improve its fortunes in subsequent quarters. 

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