Business News
Mobil targets bigger share of aviation fuel market
11 Plc (formerly known as Mobil Oil Nigeria) is targeting a bigger share of the Aviation fuel market in 2019.
11 Plc (formerly known as Mobil Oil Nigeria) recently released its full year results for 2018. Revenue increased from N125 billion in 2017 to N164 billion in 2018, up 31%.
While profit before tax was flat, profit after tax rose by 24% to N9.3 billion in 2018, up from N7.5 billion in 2017. Note that this change is largely due to the absence of an exceptional item recorded in 2017.
Furthermore, the company declared a final dividend of N8.25 per share, up 3% from the N8 dividend declared in 2017. This also amounts to a payout ratio of 31.8% of its earnings.
In an excerpt from the Chairman’s statement, the firm gave an update on progress made since it re-entered the aviation fuel market last year.
“We are pleased to inform you of our entry into the sale and marketing of Aviation Turbine Kerosene (ATK) at our Ground Aviation Terminal, Lagos, in the fourth quarter of the year under review (2018). Currently, we service some major international airlines with their ATK requirements.”
The company also disclosed its plans to cover an even bigger part of the market.
“Plans for expansion to other major airport locations across the country will follow soon, as we seek to penetrate the local ATK market.”
11 Plc had, in November last year, announced the resumption of ATK sales in partnership with Air BP. The firm stated that it would construct a new 20 million litre aviation jet fuel (ATK) tank, as well as lay new ATK pipelines linking the company’s facility at Apapa with the Apapa Jetty.
Total in the Bullseye?: Existing players in the space could see their market shares whittled down. 11, being a major petroleum marketer, has access to funding lines that would enable it to push large volumes into the market, and sell on credit. While 11 Plc did not give a breakdown of its Aviation sales, dominant players like Total could witness a drop in their market share.
Total Nigeria Plc, another major marketer, made N20.3 billion from aviation sales as at the nine months ended September 2018. This marked an increase from the N12.5 billion recorded in the comparative period of 2017. MRS Oil Plc had a drop in revenue from ATK. It dropped from N7.4 billion in 2017 to N4.9 billion in 2018.
Revving the engine: The move into new markets has been a key move by the firm since NIPCO took a majority stake in 2017. In June last year, it announced the reopening of its Liquefied Petroleum Gas (LPG) business. The company last operated in this segment 20 years ago.
Business News
IMF advises banks to suspend dividend payment
However, halting dividend payments may not go down well for many retail and institutional investors, who rely on bank dividends for regular income.
In an article published on its website, International Monetary Fund (IMF) Managing Director, Kristalina Georgieva, advised banks to halt dividend payment for now. According to her, with the expectation of a deep recession in 2020 and partial recovery in 2021, banks’ resilience will be tested. Therefore, having in place strong capital and liquidity positions to support fresh credit will be essential.
According to the article, one of the steps needed to reinforce bank buffers is retaining earnings from ongoing operations which are not insignificant.
IMF staff calculate that the 30 global systemically important banks distributed about US$250bn in dividends and share buybacks last year.
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In a circular dated January 31, 2018, the Central Bank of Nigeria (CBN) stipulated new conditions for eligibility of Nigerian banks to pay dividend and the quantum of dividend to be paid out by banks who are eligible. Prior to the release of the circular, dividend payout policy for Nigerian banks had been spelt out in Section 16(1) of BOFIA 2004 (as amended) and Prudential Guidelines for DMBs of 2010. The circular provided guidelines and restrictions around divdidend payout for banks based on NPL ratio, CRR levels, and Capital Adequacy Ratio (CAR).
However, there were no regulatory restriction on dividend payout for banks that meet the minimum capital adequacy ratio, have a CRR of “low” or “moderate” and an NPL ratio of not more than 5%. However, it is expected that the Board of such institutions will recommend payouts based on effective risk assessment and economic realities. Indeed, current economic realities demand caution.
Current economic realities mean that banks face asset quality threats, further devaluation threat which may impact capital in some cases, and lower profits which in turn affects the quantum of capital retained. Ideally, these should reflect in NPL ratio and CAR ratio and should immediately restrict banks’ ability to pay dividend. However, there is usually a time lag before these ratios begin to reflect the new economic realities. Therefore, IMF’s advise may come in handy for many banks.
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That said, halting dividend payments may not go down well for many retail and institutional investors, who rely on bank dividends for regular income. Banks like Zenith and Guaranty Trust have a good history of consistent dividend payment with attractive yields which is a major attraction for many shareholders.
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Economy & Politics
CBN reduces MPR to 12.50%, holds other metrics
Central Bank of Nigeria (CBN) has reduced the Monetary Policy Rate (MPR) from 13.50% to 12.50% and retains CRR at 27.5%, Liquidity ratio at 30%.
The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has reduced the Monetary Policy Rate (MPR) from 13.50% to 12.50%.
Governor, CBN, Godwin Emefiele, disclosed this while reading the communique at the end of the MPC meeting on Thursday in Abuja. Meanwhile, other parameters such as the Cash Reserve Ratio (CRR) remained at 27.5%, Liquidity ratio at 30%.
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Highlights of the Committee’s decision
- MPC cuts MPR by 100 basis points to 12.50%
- CRR stood at 27.5%
- The Liquidity Ratio was also kept at 30%
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CBN MPC cuts policy rate by 100 basis points to 12.5 %, maintains other parameters constant.
— Central Bank of Nigeria (@cenbank) May 28, 2020
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According to Emefiele, the decision of the MPC to reduce the Monetary Policy Rate was informed by the impact of the Covid-19 pandemic on the economy, increased inflationary pressure, restrictions in international trade and more.
He highlighted the decline in the nation’s GDP as well as the decline in the manufacturing and non-manufacturing purchasing index which were attributable to slower growth in production, rate of unemployment, amongst others.
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On reopening of the economy, Emefiele emphasised the need for Government to work towards a gradual reopening in line with recommendations of the Presidential Task Force (PTF) and advice from medical experts, insisting that efforts must be directed at saving not only lives but also livelihoods. He said,
“This is to enable the resumption of economic activities necessary to stimulate growth, accelerate the pace of recovery and restore livelihoods, particularly the vulnerable in our society.
“With respect to output, the Committee urged the Federal Government to continue exploring options of partnership with the private sector to fund investment in infrastructure. This would aid employment generation, support production and boost output growth.”
Economy & Politics
Buhari seeks approval from green chamber to borrow fresh $5.5billion
FG also seek approval for the revised 2020-2022 mid-term expenditure framework (MTEF) which became necessary as a result of the crash in crude oil prices and the cut in the production output.
President Muhammadu Buhari is seeking the approval of the House of Representatives to borrow fund to finance capital projects at the federal and state (to support state governors) levels in the 2020 budget.
This request was disclosed via the official twitter handle of the House of Representatives.
The president’s letter, which indicated that the fund would be sourced locally and internationally, was read on the floor of the House of Representatives by the Speaker, Femi Gbajabiamila, during plenary on Thursday, May 28, 2020.
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In the letter to the lower chamber, Buhari, is also seeking the approval for the revised 2020-2022 mid-term expenditure framework (MTEF) which became necessary as a result of the crash in crude oil prices and the cut in the production output.
Although the tweet did not contain the total amount of loan that is being requested, reports suggests that the President is seeking approval to borrow the sum of $5.513 billion from external sources to finance 2020 budget deficit and support state governments to meet challenges caused by the coronavirus pandemic.
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CBN MPC cuts policy rate by 100 basis points to 12.5 %, maintains other parameters constant.
— Central Bank of Nigeria (@cenbank) May 28, 2020
President @Mbuhari is also seeking the House approval to borrow locally & internationally to finance capital projects as well as finance projects to support state governors in the 2020 budget
The letter was referred to the House Committee on loans & debt management. #HousePlenary— House of Reps NGR (@HouseNGR) May 28, 2020
Details shortly…
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