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Delays in negotiating PSCs may have cost Nigeria $16 billion

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Crude Oil worker, OPEC, oil prices, Bulls hit back to support US crude oil amid panic sell- offs in global equity markets, Nigeria’s local oil players smashed by low crude oil prices

The Nigeria Extractive Industries Transparency Initiative (NEITI)  disclosed that Nigeria had lost at least $16 billion over a ten-year period (2008 – 2017) due to non-review of the 1993 Production Sharing Contracts (PSCs) with oil companies.

NEITI said in a statement by its spokesman, Dr. Orji Ogbonnaya Orji, that it arrived at the figure from a quantitative study which was done in conjunction with Open Oil (a Berlin-based extractive sector transparency group).

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In its latest publication titled, “1993 PSCs: The Steep Cost of Inaction”, NEITI called for an urgent review of the PSCs to stem the huge revenue losses to the Federation.

The study indicates that the losses could be up to $28b if, after the review, the Federation were allowed to share profit oil from two additional licenses.

As noted in the brief:

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“Between 1998 and 2005, total production by PSC companies was below 100,000,000 barrels per year while JV companies produced over 650,000,000 barrels per year’’. By 2017, total production by PSC companies was 305,800,000 barrels, which was 44.32% of total production. Total production by JV companies was 212,850,000 barrels, representing 30.84% of total production.”

NEITI in the policy brief stated that the Deep Offshore and Inland Basin Production Sharing Contracts provided for a review of the terms on two conditions:

The first review was to be triggered if oil prices exceeded $20 per barrel. Section 16 (1) of the Deep Offshore and Inland Basin Production Sharing Contracts specifies that:

“The provisions of the Act shall be subject to review to ensure that if the price of crude oil at any time exceeds $ 20 per barrel, real terms, the share of the Government of the Federation in the additional revenue shall be adjusted under the Production Sharing Contracts to such extent that the Production Sharing Contracts shall be economically beneficial to the Government of the Federation.”

The second review was to be activated 15 years following commencement of the PSC act.

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Financial Services

FBN Holdings announces N25 billion capital injection into FirstBank

The fresh equity capital injection is coming on the heels of FBN Holdings’ recent divestment from FBN Insurance.

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N25 billion worth of equity capital has been injected into First Bank of Nigeria Limited by its parent company, FBN Holdings Plc. The move is coming on the heels of FBN Holdings’ recent divestment from FBN Insurance.

A statement signed by FBN Holdings’ Company Secretary, Seye Kosoko, as seen on the Nigerian Stock Exchange’s website, noted that the N25 billion capital injection is part of the net proceeds from the FBN’s divestment from  FBN Insurance Limited.

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Meanwhile, following this N25 billion capital injection, First Bank of Nigeria Limited’s Capital Adequacy Ratio (CAR) has increased to 16.53%. This is before capitalising year to date profit for half-year 2020.

More details: While commenting on this development, FBN Holdings’ Chief Financial Officer, Oyewale Ariyibi, was quoted to have said that “divestment has unlocked significant value embedded in the former subsidiary which is being leveraged to strengthen the core baning business for which the Group is renowned.”

Apparently, the overriding objective of this move by FBN Holdings is to “optimise capital across the Group to drive business growth, enhance efficiency, and improve overall shareholders’ value.”

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The backstory: Back in April this year, FBN Holdings Plc first disclosed ongoing talks with Sanlam Emerging Markets (Proprietary) Ltd over a possible sell-off of its 65% stake in FBN Insurance to the South African firm. Fast-forward to early June, FBN Holdings again informed stakeholders that it had completed the divestment process. All the while, no mention was made about the value of the transaction until now.

Note that FBN Holdings Plc reported a profit after tax of N49.5 billion for the half-year period ended June 30th, 2020. This represents a 56.3% increase when compared with N31.6 billion reported in H1 2019. The company’s Chief Executive Officer, UK Eke, recently commented on performance, noting that “the H1 2020 financial results are impressive and reconfirm our consistent focus on enhanced shareholder value.”

FBN Holdings’ share price on the Nigerian Stock Exchange is currently trading at N5.05. The company has a market capitalisation of about N181.3 billion, according to information gleaned from Bloomberg.

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Hospitality & Travel

UAE denies placing travel ban on Nigerians, gives reason for suspending visa issuance

The travel between Nigeria and UAE remained limited due to the closure of the Nigerian airspace.

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UAE denies placing travel ban on Nigerians, gives reason for suspending visa issuance

The United Arab Emirates (UAE) Embassy in Nigeria has reacted to media reports about the purported travel restrictions imposed on Nigerians wishing to travel to the UAE.

In its response, the UAE Embassy in Abuja refuted the accuracy of the information which was contained in those reports, while also affirming the growing bilateral relations between the 2 friendly countries.

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This disclosure was made in an official statement by the United Arab Emirates Embassy in Abuja on Thursday, August 6, 2020.

The embassy, in its statement, said the UAE government acknowledged that travel between Nigeria and the UAE has been limited due to the closure of the Nigerian airspace. Part of the statement said:

In response to recent press and social media reports regarding purported travel restrictions between the UAE and Nigeria, and in an affirmation of the growing bilateral relations between the two friendly countries, the UAE Embassy in Abuja denies the accuracy of the information contained in these reports.

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“At the onset of the COVlD-19 pandemic, the UAE took a number of precautionary measures to combat the virus’ spread, including the temporary suspension on issuing UAE visas for all nationalities as of March 17, 2020.

“After entering the recovery phase of the pandemic, the UAE eased some measures on July 7, permitting visitors from various countries to adhere to the necessary precautionary measures, including by showing negative PCR test results within 92 hours of travelling to the UAE. This includes those visiting from Nigeria.”

(READ MORE:FG travel restrictions on 13 countries: A little too late?)

The statement also noted that the UAE Embassy and the Nigerian Government will continue to work closely to obtain the necessary approvals to facilitate travel between both countries.

It can be recalled that there were media reports which were triggered by claims of a travel agency, saying that visa renewals for Nigerians in the UAE, approval for permanent residents, and tourist visas have been discontinued.

Some social media users, in reaction to the development, linked the new restrictions to some of the fraud cases involving some Nigerians in Dubai recently

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Hospitality & Travel

FG commences process of resumption of international flight operations in weeks

The government has expressed its readiness to reopen the nation’s airspace in a matter of weeks.

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COVID-19: Reactions trail FG travel ban on 13 countries

The Federal Government has commenced the process of gradual resumption of international flight operations which were suspended as part of measures to contain the spread of the COVID-19.

Airport authorities have expressed their readiness to reopen the nation’s airspace in a matter of weeks rather than months.

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During a briefing on Thursday, the National Coordinator of the Presidential Task Force (PTF) on COVID-19, Sani Aliyu, said that approvals have been given for aviation authorities to commence the process for the resumption of international flight operations.

Aliyu revealed that the Nigerian Civil Aviation Authority (NCAA), other aviation agencies and the airlines, are to come up with a safe process through which airlines operating international flights can resume operations.

The PTF National Coordinator further disclosed:

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For international travel, we have made recommendations to the aviation industry to commence the process for reopening international airports, provided all existing international and local COVID-19 protocols are in place.

“We have modified the protocol for passenger arrivals at the airports. Domestic passengers arriving at the airports are advised to arrive one hour before their flights and three hours before international flights when this restarts.”

He said passengers arriving for domestic flights can now arrive an hour and a half before departure, while international flight passengers are to arrive 3 hours before departure.

In his statement earlier, the Chairman of the Presidential Task Force (PTF) on COVID-19, who also doubles as the Secretary to Government of the Federation, Boss Mustapha, had disclosed that the major changes being proposed in the eased lockdown were aimed at achieving gradual reopening of international flight operations within parameters.

It also includes reopening of rail transportation within established parameters and the granting of permissions to exit classes to resume ahead of examinations.

In his own contribution, the Minister for Aviation, Hadi Sirika, said that the decision to resume flight operations was not purely an aviation problem, as it had to do with health.

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He revealed that the PTF had set up a technical committee that would deliberate on the date that all the stakeholders in international air transport would be happy to start operations.

While sharing in the pain of Nigerians, Hadi Sirika admitted that the closure of the international air space had separated families and friends, denied people access to hospitals and schools abroad as well as denied them access to their businesses.

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