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Business News

Oando Plc to cut down on CAPEX, operating expenses following oil price crash

“As a business, we took a pragmatic approach to hedge our barrels ahead of this…” –Irune

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Oando's Ainojie ‘Alex

Following the global oil price crash that has seen Brent Crude decline by as much as 60%, Oando Plc said it has decided to cut down on its CAPEX and operating costs.

These are some of the immediate changes the Nigerian oil company is making in a bid to cushion the effects of the economic fallout from the oil price crash. Earlier, the company ensured to hedge all of its barrels just as a precautionary measure.

Oando’s Chief Operating Officer, Ainojie Alexander Irune, disclosed all these earlier this week when he joined CNN’s Julia Chatterley to talk about the global oil price crash and the effects on the Nigerian economy.

When asked to explain whether Oando Plc is financially capable to cope in the meantime pending when the oil market would bounce back, Irune said:

“You’re right to some extent Julia, I think you would see some casualties along the way. What we must do is stay optimistic. I know for most Oil Producers currently, there are costs that as Independents, we have very little control over, so if I break down that operating cost for you, there is a 20-40% that sits out of our control in terminally fees, transportation fees for crude, we have very little control over that. As Independents, our human resource, our payroll, operations largely; is where we look to make those cuts and of course the capital side.

“To your point, will this be enough? I think the question is the price of oil. We’re seeing an uptick in the price, we are seeing the decision by OPEC to cut 10 million barrels come in to realise the intention of OPEC; they’ve taken that huge step. But more importantly,
the Government is stepping in to ensure that Independents like ourselves are engaged in conversations to ensure that process of survival, which is indeed a process for us, unknown as well, is managed jointly, to see that it takes the least amount of time to see a recovery.”

Oando is yet to release its 2019 FY results as at May 2020. In its 2019 9 months’ results, profit was N13 billion compared to N10.3 billion a year earlier. Nairametrics expect a robust 2019 results but expect a sharp drop in the first quarter in 2020. Oando share price fell to an all-time low of N2 per share before rising to N2.65, one of the better performances.

Emmanuel is a professional writer and business journalist, with interests covering Banking & Finance, Mergers and Acquisitions, Corporate Profiles, Brand Communication, Fintech, and MSMEs.He initially joined Nairametrics as an all-round Business Analyst, but later began focusing on and covering the financial services sector. He has also held various leadership roles, including Senior Editor, QAQC Lead, and Deputy Managing Editor.Emmanuel holds an M.Sc in International Relations from the University of Ibadan, graduating with Distinction. He also graduated with a Second Class Honours (Upper Division) from the Department of Philosophy & Logic, University of Ibadan.If you have a scoop for him, you may contact him via his email- [email protected] You may also contact him through various social media platforms, preferably LinkedIn and Twitter.

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    Financial Services

    Ratings agency, Moody’s reveals it is reviewing First Bank’s ratings

    Moody’s explained why it might downgrade First Bank’s ratings.

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    Moody’s Ratings agency said on Thursday that it has put First Bank of Nigeria on review for a downgrade after the central bank sacked the board of directors and replaced them with new directors.

    Moody’s made this statement in a report titled ‘Removal of Non-Executive Board Members Highlights Governance Shortcomings.’

    In a quote, Moody’s said:

    “Moody’s Investors Service, (“Moody’s”) has today placed all long-term ratings and assessments of First Bank of Nigeria Limited (First Bank) on review for downgrade. The review will focus primarily on an assessment of evolving governance considerations at First Bank, specifically corporate governance developments. The rating action follows the dissolution of First Bank’s board by the Central Bank of Nigeria (CBN), the bank’s primary regulator, on 29 April 2021. As a result of this action by the CBN, all the non-executive directors were removed while the executive management remained in place.”

    The Governor of the Central Bank of Nigeria, Godwin Emefiele, had last week announced the sack of the entire board of directors of FBN Holdings Plc and its subsidiary, First Bank of Nigeria Ltd following the initial removal of its MD/CEO Dr Sola Adeduntan. Following his sacking of the board, he set up a new board for the bank holding company and its subsidiary and also reinstated Adeduntan as MD/CEO.

    Moody’s mentioned that the regulatory actions demanded of First Bank by the CBN introduces a clould of uncertainty over the outlook of the bank. For example, the CBN had asked the bank to divest from its holdings in two listed companies while also recovering its loans from one of them.

    “The review for possible downgrade reflects the rating agency’s view that the removal of all non-executive directors of the bank’s board by the regulator demonstrates corporate governance shortcomings and weaknesses in board oversight. The bank also needs to implement regulatory directives concerning the resolutions of loans to, and shareholding in non-banking related parties, which reportedly had not been executed in the recent past.

    Moody’s notes that the outcomes of these developments are uncertain at this point, and the final and long-term governance, reputational and financial implications of the events for First Bank are also unclear.”

    The central bank directive sacking the board of the bank also retained its executive management perhaps suggesting that the CBN had confidence in the ability of the MD and his team to manage the bank. Moody’s also noted this in its briefing.

    “While the bank’s executive management team remained the same, the rating agency believes these developments could distract management’s focus on implementing the bank’s strategic plan and road to recovery. First Bank management’s immediate key target was to reduce nonperforming loans (NPLs) to levels comparable with domestic peers. The rating agency recognises that, in the context of asset risks, the bank took steps to reduce its stock of problem loans, with its reported NPL ratio falling to 7.7% at year-end 2020 from 25.9% in 2018.”

    Will Moody’s downgrade First Bank?

    The rating agency explained that the decision to downgrade will depend on how strong the bank’s corporate governance structure is and whether the CBN will impose additional sanctions. If any of these crystallizes, it could downgrade its ratings.

    “The bank’s long-term deposit ratings can be downgraded if flaws in the bank’s governance systems exist, and if the CBN imposes additional sanctions on the bank, including, but not limited to, conditions to address any vulnerabilities that may be discovered. Financial output that is less than anticipated could also result in a rating downgrade.”

    Moody’s, however, poured water on any optimism around a rating upgrade.

    Given the review for downgrade and the pessimistic outlook on the government of Nigeria, there is a slim chance that First Bank’s ratings will be upgraded. Stronger solvency progress than currently reflected in the ratings, combined with a stabilization of the sovereign outlook, could result in the outlook being stabilized.

    Why is rating important?

    Corporate Organizations desire positive ratings because of the effect it has on their ability to raise capital as well as the cost of capital. A high credit rating typically attracts positive investor sentiments helping organizations tap the debt and equity markets, especially from institutional investors.

    Jaiz bank

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    Spotlight Stories

    Tip Jar, Twitter’s new giveaway feature that lets users send money to you

    Twitter has introduced a new feature called Tip Jar that allows you send money to your favourite tweeters.

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    US Elections: Twitter, Facebook suspend several news accounts

    Twitter has introduced a new feature called Tip Jar that allows you send money to your favourite tweeters.

    According to the blog post, “Tip Jar is an easy way to support the incredible voices that make up the conversation on Twitter. This is a first step in our work to create new ways for people to receive and show support on Twitter – with money.”

    The new feature utilizes different payment platforms like PayPal, Venmo, Patreon, CashApp, and others.

    Users can link their Twitter accounts with Tip Jar to any of these payment providers. Twitter takes no cut.

    READ: Facebook is creating an audio chat product similar to Clubhouse

    You’ll know an account’s Tip Jar is enabled if you see a Tip Jar icon next to the Follow button on their profile page. Tap the icon, and you’ll see a list of payment services or platforms that the account has enabled. Select whichever payment service or platform you prefer and you’ll be taken off Twitter to the selected app where you can show your support in the amount you choose.

    Twitter has released series of features this year as part of its efforts to grow Twitter’s user base to 315 million daily active users by the end of 2023.

    The company also launched Twitter crop where images don’t get crop again on Twitter for Android or iOS. Standard aspect ratio images (16:9 and 4:3) will now display in full without any cropping and images will look just like they did when you shot them.

    Hotflex

    READ: Does YouTube stand a chance against TikTok?

    Lauren Alexander, a Twitter spokesperson said, “Today’s launch is a direct result of the feedback people shared with us last year that the way our algorithm cropped images wasn’t equitable, The new way of presenting images decreases the platform’s reliance on automatic, machine learning-based image cropping.”

    Twitter has tested several features and more will be rolled out soon.

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