The global oil crisis, which has caused a historic crash in crude oil prices, is currently affecting Nigeria’s indigenous crude oil-producing firms. This unfortunate situation is also believed to pose a serious threat to Nigerian banks.
What we know: A monitored report from Bloomberg suggests that these independent oil producing firms, which pump some 400,000 barrels of crude oil per day (about a fifth of the country’s crude oil output), risk causing some liquidity crisis among some of the local banks that finance them.
See the oil firms: Some of the indigenous oil firms that are going through this financial crisis include Shoreline, Aiteo Group, Eroton Exploration & Production Company, Seplat Petroleum Development Company, and others.
The independent oil producing firms account for about 90% of the $8 billion that are being owed to financial institutions, including local banks. While a portion of those loans were hedged at $50 per barrel, a greater percentage of them were not. This, thereby, raises the risk of default by the oil firms.
According to data from the Central Bank of Nigeria (CBN), about a third of loans by the Nigerian banks were given to oil firms, although some of their transactions are hedged.
Why is this happening? The impact of the Coronavirus pandemic, coupled with the oil market crisis, has seen global crude oil prices crash far below the projected price for the year. While the Brent crude sold at slightly above $21 per barrel yesterday, Nigeria’s headline crude, Bonny Light, sold for slightly above $16 per barrel. In fact, the Bonny Light was earlier sold at a hugely discounted price of $10 per barrel due to the supply glut in the market and the issue of storage crisis.
This will greatly affect the ability of the independent oil producers to meet up with their debt obligations to local banks, as they will need crude oil to sell between $35 and $40 per barrel in order to stay in business.
While commenting on the situation, the Chief Executive Officer of Shoreline Group, Kola Karim, said:
“Government needs to come up with the independents and the other oil producers, a financial rethink of the funding mechanics for the industry, if not we’ll see a total collapse which in turn will drag down the banks.”
Meanwhile, some analysts are of the opinion that if this low crude oil price persists for about 6 months, a full-blown crisis will be experienced in the banking sector. Already, Nigerian banks are said to be complaining about the N1.4 trillion debt they are owed. This is because the situation is making it difficult for them to meet regulatory cash reserve targets.
AfDB appoints Rabah Arezki as new vice president and chief economist
Before Arezki joined the World Bank, he worked at the International Monetary Fund (IMF).
The African Development Bank Group (AfDB) has announced the appointment of Dr Rabah Arezki as Chief Economist and Vice President, Economic Governance and Knowledge Management, with effect from October 1, 2020.
This was disclosed in a press statement on the bank’s website on July 13, 2020.
Dr Rabah Arezki, who is an Algerian citizen, is currently the Chief Economist for Middle East and North Africa Region at the World Bank, a role he has held since 2017.
At the World Bank, he led the development of the Bank’s “moonshot approach” for the Middle East and Africa which aims to achieve full internet and digital payment connectivity. He championed the agenda on fair competition, data and transparency to empower and unlock the potential of the region’s youth.
Before Arezki joined the World Bank, he worked at the International Monetary Fund (IMF) from 2006 to 2017. He started his career at the IMF as an Economist and became the Chief of the Commodities and Environment Unit in the Research Department. He provided leadership on IMF’s rapid response to the historical collapse in oil prices that started in 2014. He advised authorities all around the world on risk mitigation policies.
Dr Arezki is a senior fellow at Harvard University’s John F. Kennedy School of Government, an external Research Associate at the Oxford University, UK, a research fellow at the CESifo, a global independent research network. Dr. Arezki is also a resource person for the African Economic Research Consortium and a Research Fellow at the Economic Research Forum. He has been a non-resident Fellow at the Brookings Institute, USA.
He has published extensively both in top academic journals and policy-oriented outlets and is a co-editor and co-author of five books including Shifting Commodity Markets in a Globalized World. Many of his research papers have been cited extensively in academic circles and in prominent media outlets.
In his statement after his appointment, Dr Arezki said, “The African Development Bank is making excellent progress in accelerating Africa’s development. I am excited with the opportunity to work with President Adesina and the Bank’s leadership and teams to further provide top notch policy, knowledge and capacity building support for African countries.”
Dr Arezki holds a Masters in Economics and Statistics from Ecole Nationale de la Statistique et de l’Administration Economique (ENSAE) – France (2003), and a PhD in Economics from the European University Institute – Italy (2006). He is multilingual and fluent in French, English, and Arabic.
In his own response, the President of the African Development Bank Group, Akinwumi Adesina, said, “I am delighted that Dr. Rabah Arezki is joining the African Development Bank Group following an impactful career at the World Bank and the IMF. Rabah is an outstanding researcher and policy expert with extensive experience in research, policy and reforms.”
“His leadership will be especially important as the Bank designs and deploys policy-based operations to address COVID-19, advances policy reforms, and supports African countries growth recovery efforts from the pandemic,” Adesina added.
NSE simplifies investing in the capital market with comic book
StockTown is dedicated to providing financial literacy education to Nigerians.
The proliferation of dubious investment schemes that often result in loss of money by unsuspecting members of the public continues to make the role of financial literacy imperative. To play its part, Nigeria’s leading bourse, The Nigerian Stock Exchange (NSE or The Exchange) has issued the second edition of its comic, StockTown, dedicated to providing financial literacy education to Nigerians.
The comic, available in digital format on a dedicated website at www.nse-stocktown.com builds on The Exchange’s advocacy for safe and trusted investment schemes.
The story picks up from the first edition, following the life of Mora Johnson as she seeks to liberate her family from their financial struggles by investing in the capital market. This second edition highlights some major lessons for potential and existing investors including the need for vigilance in avoiding Ponzi schemes and unregulated investments, whilst advising prospective investors to seek proper guidance before making investment decisions. Readers can look forward to a simplified explanation of the history of the capital market, its evolution over the years, and how anyone can start making investments today in the Frequently Asked Questions (FAQs) section of StockTown.
Commenting on the importance of this comic book, Head, Corporate Communications, NSE, Olumide Orojimi said, “Investor Education is a priority for us at The Exchange. We have identified the need to empower individuals across all levels to make good financial decisions and better their lives now and in the future. As the investment landscape continues to evolve to accommodate more retail participants, we are excited to leverage new and existing platforms to present investment products and processes in ways that are both appealing and easy to understand, particularly in this new normal. We hope that StockTown becomes a widely-read resource for potential and existing investors, the financially excluded, millennials and the larger public.”
StockTown is just one of the many ways NSE demonstrates its strong commitment to promoting financial literacy in Nigeria. Even amidst the Coronavirus pandemic and the temporary closure of The Exchange’s facilities, NSE continues to host virtual financial literacy workshops with students and young upwardly mobile professionals. Furthermore, The Exchange has hosted several webinars on various products including Exchange Traded Funds (ETFs), Green Bonds, and Securities Lending to provide more information to the market on available securities and how to trade them.
It should also be recalled that NSE is a member of the Financial Literacy Technical Committee of the Securities and Exchange Commission (SEC); as well as the National Finance Inclusion Steering Committee led by the Central Bank of Nigeria with a mandate to reduce the level of financial exclusion in Nigeria to 20%.
5th evacuation flight for Nigerians in the US scheduled for July 31; see details
The evacuees are to forward the details of tickets and contact addresses of their next of kin.
The Federal Government has approved the 5th Evacuation flight for Nigerians stranded in the United States of America, for July 31.
According to a tweet from the Minister for Foreign Affairs, Geoffrey Onyeama, the Ethiopian airline, flight number ET547 will leave George Bush international airport Houston, Texas on Friday 31, July 2020 by 16:00 hours and arrive Murtala Muhammed International Airport Lagos on Saturday 1st August 2020 by 20:00 hours.
Notice on the FIFTH Evacuation Flight from the United States of America to Nigeria. #StayHomeSaveLives #COVID19Nigeria #COVID19 #PTFCOVID19 @NigeriaGov @DigiCommsNG @USinNigeria @FMICNigeria pic.twitter.com/JtKJn977ow
— Geoffrey Onyeama (@GeoffreyOnyeama) July 13, 2020
An official statement released by the Consulate General of the Federal Republic of Nigeria, Atlanta, Georgia in collaboration with other Nigerian missions in the United States of America, states that Nigerians registered with any of the three Nigerian missions in the USA, and interested in boarding the flight, can purchase their one-way tickets.
“The airfare is $1,500 for economy class and $3,000 for business class for adult/child fare, including all taxes, with the usual percentage reduction for infants under 2 years,” it read.
In addition, the intending evacuees are also expected to forward the details of purchased tickets together with the contact address of their next of kin in Nigeria to the consulate.
In line with the protocols announced by the Presidential Task Force on COVID-19, all of the returnees are to present a negative COVID-19 test result (not older than 14 days), and undergo a temperature check before boarding the evacuation flight, and upon arriving Nigeria, are expected to proceed on a 14-day self-isolation.
In the last couple of months, the federal government, through the ministry of foreign affairs has evacuated hundreds of stranded Nigerians from different countries including the United States of America, the United Kingdom, Egypt, Malaysia, and Thailand.
The returnees bear the cost of their flight tickets and are expected to self-isolate for two weeks, upon their return to Nigeria. Returnees, who receive a clean bill of health after the isolation, are given their passports and allowed to go home.