Back in 2017, I shared in an article, Now is a Good Time to Invest in the Nigerian Music Industry, the increasing appetite for Nigerian Music across the world and the importance of investing in the Nigerian music industry. I predicted that there was a need to watch out for the likes of Wizkid, Davido and Burna Boy, who even at that time were already leading the charge in the Afrobeats scene.
Two years later, the update on the Nigerian music industry has become even more interesting. The likes of Wizkid, who had already penned a deal with Sony RCA back in 2017, has begun to collaborate with more A list American artists like Ty Dolla $ign, Chris Brown, Goldlink, Swae Lee, Metro Boomin, and Offset (from the Migos). Wizkid also played a huge part in the recent Lion King album by Beyoncé, which showcased and celebrated an impressive array of mind-blowing Afrobeats sound.
Davido also went ahead to do major things in the diaspora. His songs “If” and “Fall,” which were released in 2017, became very trendy amongst the American audience recently. In fact, these songs are still constantly played on U.S radio daily. Apart from these two singles, he also collaborated with foreign artists like Casanova 2x, roc-nation rapper from Brooklyn, NY and R&B crooner, Chris Brown. He was also “brought out” to perform at a recent musical outing with the rapper 50 Cent in New York.
Other Nigerian artists have not also been left out. Tiwa Savage recently inked a management deal with Jay-z’s roc nation company, Tekno has produced for the likes of Swae Lee and Drake, Mr Eazi has begun to collaborate with Latin artists like J. Balvin & Bad Bunny, and Burna Boy has signed with Atlantic Records and released two albums that has greatly boosted his reputation in the diaspora.
Burna Boy is one artist to watch. Through his new project, he is beginning to walk the path of the political inclination of Afrobeat Icon, Fela. In his song, “Another Story”, which he sang with Ghanaian Artist, M.ani.fest, he talked about some aspects of the history of Nigeria. One can tell that he loves his country the way Fela did use his music as a podium to fight social injustice. The insights from the song “Another Story” is a fresh perspective teaching Nigerian history to the youths, who probably missed learning about Colonialism in the classroom.
Another Story becomes almost a history of colonialism which has become lost to the youth. He has used this to pitch and show people where Nigerians have come from and where they are going. In my opinion, I believe he is going further than Fela. Fela is the dough and now Burna has put the interesting toppings on the pizza – to use his analogy of Afrobeats at his recent interview with Trevor Noah. Music that endures should not be a pleasure for pleasure sake. It should hit the human cord, the rawness of human existence – I believe Burna has discovered that this is what makes a difference and he is running with it.
For Mr. Classic Man, Jidenna, his recent album which featured a song with Mr. Eazi called “Zodi” and another song “Sufi woman” capture the Afrobeats essence. Interestingly, he forayed into Afrobeatz before this album. His 2016 song “A little Bit More” and his 2017 collaboration with Major Lazer on the song “Particula” truly represent the Afrocentric vibes that now constitute this new sound of Afrobeats – though some people are still adamant that Jidenna style of music is a watered-down Americanized version of Afrobeats.
Apart from the leading artists in the Nigerian music industry, the alternative music scene is also growing. The likes of Santi and Odunsi are the leading faces in this genre. Santi released an album earlier this year and it featured notable American artists like Goldlink and DRAM. Odunsi has also found success as well. The artist recently signed with Universal Music Group Nigeria. This followed with the success of his album “rare,” which was released in 2018.
The album featured the likes of Davido, Santi, Tay Iwar & Nasty C from South Africa. Other artists like Jinmi Abduls have also risen in the past two years. He recently released JOLAG 2 in 2018, the follow up to his JOLAG EP in 2017. Currently, he has a new song called “Greed” with fellow alternative singer, Oxlade, who in his vein has gained credibility in the scene. He was also recently in Uganda where he performed at shows and also collaborated with new artists making waves in that country.
The state of the Afrobeatz scene is looking very solid right now and it makes perfect sense for foreign companies to invest in the industry.
Price Waterhouse Coopers (PWC) in a 2016 report estimated that the Nigerian music will be worth $86 million next year. This may just be a conservative estimate as the net worth of one player Don Jazzy is well above 86 million not to mention the net worth of the top ten in this league.
The growth may be accredited to the interests of foreign labels like Sony Music Africa and Universal Music Group as well as great revenues from mobile music, which depends on ringtones and ringback tones. By 2020, PWC estimates that digital platforms will make up 90% of Nigeria’s recorded music sales.
Nigeria should really begin to think deliberately on how to leverage music as they explore opportunities in the non- oil sector. Nigerian music can potentially be the Country’s export along with the Nigerian human capital.
The surge of the Nigerian music industry has been very impressive over the years; however, the issue of intellectual property remains a problem for artists and foreign investors, due to the constant piracy of content. The Alaba market area in Lagos is notoriously known for selling pirated albums of musicians, which in itself distorts the number of sales for an artist and infringes on copyright. There is also the challenge with the Collection regulatory environment.
In order to create further growth in the Nigerian music industry, the government can do more to encourage investments in this sector through well-thought incentives and regulatory environment that will encourage and not gag the growth of the sector. The protection and enforcement of intellectual property will further reassure current investors to expand their business and will attract new investors.
Whether the music is a soundtrack in Lion King or played endlessly on international radio stations, at clubs and parties across continents, the Nigerian Afrobeats music scene is getting increased visibility. World music is growing green and white.
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At least for the music industry …. we are in exciting times.
How Access Bank got Japaul to pay up N37 billion loan that had gone bad
Brute force, Courts, quid quo pro are hallmarks of Access Bank’s debt recovery schemes.
In 2018 when Access Bank took over Diamond Bank, in what is the largest merger in Nigeria’s banking history, they knew it was not a match made in heaven like their PR agencies will make you believe.
In merging with Diamond Bank and taking over their juicy assets, they had also taken over the lemons that had for years bedeviled the bank who had pioneered mobile banking applications well ahead of its time.
When Access Bank merged with Diamond Bank, the latter had total loans and advances of N787.8 billion out of which N219.9 billion in loans were impaired. Oil and gas-related loans made up a significant chunk of the loans and were estimated at about N302.6 billion, most of them distressed.
Included in the oil and gas loans was a $66.4 million in loans owed to the bank by Japaul Oil and Maritime, as they were referred to at the time. The loans had gone bad accumulating unpaid interest of about $11.2 million. By the time Access Bank took over the loans, Japaul agreed to a restructuring rolling over both the principal and interest.
This is typical of most Nigerian companies burdened with debts they cannot pay. To avoid being run over by the bank, the debtors will negotiate a restructuring, extending the loans by one to three years and if lucky, reducing the interest rates. In return, the bank books new fees (which are often paid in advance of the restructuring) and then gets to avoid huge provisioning mandated by the central bank.
It is often a ‘win-win’ situation that essentially kicks the can down the road until, like in the case of Diamond Bank, the chicken comes home to roost. But Access Bank is not new to slugging it out with debtors, particularly those who do not pay up. Upon takeover in 2019, Herbert Wigwe, the CEO of Access Bank announced that his bank was going to go after Diamond Bank debtors. In an interview in 2019 he maintained that “we recovered N2.2 billion bad debt in the year under review. Access Bank will intensify effort to ensure that it recovers the debt owed to Diamond Bank. We will go out for Diamond Bank’ debtors and if they are not ready to redeem their debt we will publish their names in the newspapers.”
In 2019, Access Bank swooped on Japaul Plc seeking repayment of their Diamond Bank loans which was now about N37 billion. The bank took over Japaul’s trading assets and integral to the going concern status of the company. Before now, Japaul made money rendering marine services, dredging, mining and construction mostly for the oil and gas companies.
But business has been bad for years now leading the company into net accumulated losses of over N50 billion as of 2018. For the 5 years leading to 2018, the company posted back to back losses with revenues going from N5.3 billion in 2015 to about N85.8 million in 2019. External loans had also ballooned from about N18.8 billion to about N38.8 billion. Its share price had also fallen to about 20 kobo per share by the end of 2019. It was nearing bankruptcy and something had to give.
They began a court battle with Access Bank over the loans and the threat of a liquidation eventually settling for a deal. Sources inform Nairametrics that Access Bank is one of the most aggressive banks in the business when it comes to playing dirty with debtors. Unlike Diamond Bank, Access Bank is ready to battle in the courts and is ready to deploy any legal means necessary to recover their loans even if their actions are viewed as uncanny.
Recently, the bank obtained a Mareva injunction sealing the offices and taking over the assets of Seplat due to a related party loan owed by the latter’s Chairman, ABC Orjiakor. Just like Japaul, the loans owed by ABC Orjiakor were also obtained from Diamond Bank. According to sources, when Access Bank swoops in for their loan recoveries, they deploy all tactics in the books to ensure all or most parts of the loans are recovered from chronic debtors.
Eventually, Access Bank and Japaul agreed to settle the matter outside the court. In exchange for repaying the N38 billion loan, Access Bank settled for a repayment of N30.9 billion. The deal involves Access Bank taking over two of Japaul’ s Dredgers (12& 13) for N5 billion and a Barge (Beau Geste) for N25.9 billion. Japaul also gave up its land in exchange for working capital of N1.5 billion from the bank.
In return, Japaul gets to clean up its balance sheet erasing what is left of its debt, booking a profit of about N40 billion and wiping off its negative equity of N35.5 billion. However, in one fell swoop. From negative equity of N35.5 billion, the company’s net assets are now N4.69 billion. A win-win for everyone.
We are not exactly sure what Access Bank plans to do with dredgers and barges it took over from Japaul. Interestingly, in the deal, Japaul also gets to lease back the two dredgers for a period of 6 years from Access Bank for a sum of N1 billion paid annually from 2021 – 2026. Japaul got a one-year moratorium on repayment expiring in December 2020.
Japaul has since changed its name to Japaul Gold and Ventures citing the dwindling oil and gas sector for its reasons. The company believes gold mining and technology are the future and is seeking to raise N25 billion in equity to pursue this course. Its share price has ostensibly risen by 150% since the turn of the new year, the best performing on the stock exchange.
For Access Bank, aggressively going after bad loans have paid off immensely. In 2019 the bank recovered N38.9 billion in bad loans barely a year after taking over Diamond Bank. In the first 9 months of 2019, a total of N24.7 billion was captured in bad debts recovered. It is a strategy that is working and there is no betting against Access Bank doubling down on aggressive recovery this year.
Champion Breweries, Raysun deal highlights disclosure shortcomings
Is Heineken taking over Champions Brewery?
Champion Breweries Plc informed the Nigerian Stock Exchange, last week, via a press release that an insider, Raysun, had purchased about 1.9 billion shares at a price of N2.6 per share.
The disclosure was part of the stock exchange’s requirement that listed companies must reveal deals made by insiders of the company for the benefit of shareholders and the investor community.
That’s about how far the press release went. It did not reveal why Raysun was purchasing? Who they purchased the shares from and why the deal is being consummated? In terms of corporate disclosure, this was a dud.
Raysun is the largest shareholder and majority owner of Champions Breweries. Raysun is also an entity owned by Heineken, the majority shareholder in Nigeria Breweries Plc – the largest brewer in the country. Thus, Heineken is an indirect shareholder of Champions Breweries.
These relationships give this deal enough scrutiny to warrant a better disclosure starting from the actual purchase of shares revealed in the press release.
Here are some contexts;
Champion Breweries shares breakdown
- Champions Breweries has a total of 7.82 million shares outstanding at the time of this purchase
- Raysun held about 60.4% shares in Champions Breweries according to disclosure in its 2019 annual report.
- Asset Management Nominees and Akwa Ibom Investment Corporation own 12.3% and 10% respectively. The rest of its shareholders own about 17.3% or 1,351,954 units.
- At the current share price of N1.12, Champion Breweries is valued at N10.57 billion by the market.
- However, Raysun’s purchase of 1.9 billion shares at N2.6 per share (valued at N4.9 billion, almost half of the current market capitalization), now values the company at about N20.3 billion.
Where did the shares come from? This is a vital question and here is why.
Going by the number of shares they bought last week (24% of equity), they only could have been able to purchase that many shares by buying up all the shares owned by the Asset Nominees (12.3%), all the shares owned by Akwa Ibom Investment Corporation (10%) and another 3% from other regular shareholders.
It could also be that either or both Asset Nominees and Akwa Ibom IC sold part of their shares and then they made up the rest by purchasing some from the market. Why is Heineken, through Raysun, acquiring so many shares? Is there a takeover deal in the offing? Do they plan to merge Champions Breweries with Nigeria Breweries or still keep it as a standalone company? Will Champions Brewery cease to exist if there is a merger or will they delist following this massive acquisition of the shares of their subsidiary?
The speculation is palpable.
This is what happens when listed companies refuse to properly disclose transactions involving mega share purchases of this nature. How does a majority shareholder go from 60.4% of shares to 84% and an announcement is not made explaining or clarifying who sold and if this is a takeover bid.
But investors seem not to mind at the moment, if the momentum of the share price is anything to go by. A 57% year to date gain is a testament to this. It appears investors expect a mandatory takeover announcement to be made anytime soon and are scrambling for the shares ahead of any announcement.
Unfortunately, this is not how markets should work anywhere, and the sooner it stops the better. The Nigerian Stock Exchange has made massive progress with compliance to disclosure requirements and we believe strongly that they will at some point bring Champion Breweries to order and have them disclose all the requisite information about this transaction. Better late than never.
Downstream players suffer revenue declines due to Covid-19, forex, fuel subsidy
2020 has no doubt been one of the most challenging years for players in the oil and gas downstream sector, having to deal with several issues.
Nigeria’s downstream oil and gas players are in the midst of one of the lowest revenue declines in their history of operations. In an industry used to the highs and lows of economic and commodity price cycles, 2020 poses one of the greatest challenges to oil and gas companies.
Total Plc, 11 Plc, MRS, Ardova and Conoil are some of the major downstream players (all quoted) that have suffered revenue declines and margin drops in one of the worst years in modern history.
- Conoil Plc, one of the major downstream players reported its 2020 9 months results revealing revenue declined 21.84% YoY t0 N88.1 billion.
- 11Plc, another major player in the sector, also saw its topline revenues plummet from N141.5 billion in the first 9 months of 2019 to N114.7 billion in the corresponding period in 2020.
- Total Nigeria Plc, one of the largest players in the downstream sector also recorded declining revenues. In 2019 it reported total sales of N181.6 billion compared to N117.3 billion in 2019. The 35% drop was the largest of the lot.
- The only outlier of the lot was Ardova Petroleum which somehow managed to record revenue growth with 2020 9 months revenue rising to N116 billion compared to N110.7 billion same period the year before.
In general, revenues for the major oil and gas downstream players in the country fell by a whopping 21% from N646.8 billion in 2019 (9M) to N514.2 billion in the corresponding period in 2020. What is to blame for these declines? Covid-19!
The Covid-19 pandemic triggered a nationwide lockdown for most of 2020 that has negatively impacted demand for petroleum products across the country. The lockdown has grossly affected volumes for downstream oil and gas companies hitting their margins and profitability.
Businesses across the country such as manufacturers, airlines, restaurants, schools, the transportation sector and motor vehicle owners have all reduced their demand for fossil fuel.
The downstream sector has also struggled to take advantage of the drop in oil prices as they still need to deal with the multiple devaluation of the naira and being able to gain access to foreign exchange. Their inability to access the forex market leaves them with little choice but to continue to rely on NNPC, the sole importer of petroleum products for their inventories.
In a recent comment, the Chairman of Depot and Petroleum Products Marketers Association of Nigeria (DAPPMAN), Mrs. Winifred Akpani, lamented that “the inability to source FOREX from the official CBN FOREX window by independent marketers is continually hindering the effectiveness of the principles of DEMAND and SUPPLY market forces to correct the current inefficiencies in the pricing mechanisms adopted in the deregulation process.”
Mrs. Akpani also explained that inability of marketers to source FOREX creates a situation which can be described as “pseudo subsidy” in the market, suggesting that being forced to sell petroleum products at fixed prices means they cannot recover their importation cost, most of which is paid for in US dollars.
This is further exacerbated by the fact that the federal government regulates pricing irrespective of the unique operating costs of these private oil companies. Also, being the sole importer of petroleum products means the NNPC will likely pass on inefficiencies in managing cost to petroleum marketers, eliminating any chances of efficient pricing that can be obtained from increased competition. The effects of these are low profit margins and ‘never-shifting’ revenue positions, except for exceptional cases.
Last December, the Federal Government revealed it was ending its subsidy programme, increasing fuel to reflect its market cost. However, it balked after pressure from the labour unions, reducing prices without recourse to sector players.
Despite these challenges, the sector will likely eke out some profits largely due to cost cutting initiatives and income from ancillary businesses. However, dividend payment might be a challenge as it will be advisable for these companies to set aside cash for what could be a pivotal year.
The Petroleum Industry Bill (PIB) will likely be signed into law this year and will produce new investment opportunities for the downstream sector if things go as planned. The government will likely relinquish its hold on the sector and fully deregulate the downstream before the end of the year.
When it does, those with a strong balance sheet will be winners.