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Oil & Gas: DPR announces 2020 marginal field licensing round

While we see the need for these asset sales to generate much-needed revenue for the Federal Government, we are concerned that a bidding process under the current environment will be fraught with difficulties.

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Oil & Gas: DPR announces 2020 marginal field licensing round

The Department of Petroleum Resources (DPR) on Monday announced the commencement of the 2020 marginal field bid round. This bid round is coming 18 years after the last bid round in 2002 and is open to indigenous oil & gas companies and investors interested in participating in the exploration and production business in Nigeria. Marginal fields are known oil or gas discoveries on an IOC-owned block and where there has been no activity in at least the last 10 years. With the agreement of the IOC, the DPR carves-out a piece of land surrounding the discovery and this becomes a Marginal field. On this occasion, there are 57 marginal fields available for bidding, including 11 fields revoked by the DPR.

The exercise would be conducted electronically and would include expression of interest/registration, pre-qualification, technical and commercial bid submission, and bid evaluation. The process is expected to be completed in six months. The first bid round that was formally organised by the FGN began in 2001 and was concluded in 2003. At the end of the bid round, 24 licenses were awarded to 31 indigenous companies. Another bid round was proposed in 2013 with a lot of preparation and guidelines released. Unfortunately, it never held.

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Flagging off this bid round under the current economic situation points to the government’s urgent need for funds. According to the DPR guidelines, interested bidders will be required to pay a total of US$115,000 and N5m in non-refundable statutory fees comprising an application fee of N2 million per field, Bid Processing Fee of N3million per field, Data Prying fee of $15,000 per field, Data Leasing fee of $25,000 per field, Competent Persons Report of $50,000 and $25,000 for Fields Specific Report.

While we see the need for these asset sales to generate much-needed revenue for the Federal Government, we are concerned that a bidding process under the current environment will be fraught with difficulties. Firstly, the current fluctuations in oil prices may mean that intending investors may base their valuations on pricing models that can become unrealistic in the near term and then are unable to develop such fields acquired. Many local companies have been hard hit by the effects of covid -19 and the ensuing significant decline in oil prices, hence they may not have sufficient cash flows nor be able to raise needed funds from both local and international banks.

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In addition, we see regulatory difficulties hampering interest in the fields. For example, the lack of passage of the long awaited Petroleum Industry Bill (PIB) remains a significant deter. Furthermore, the recently passed Deep Offshore and Inland Basis Production Sharing Contracts (Amendment) Act (DOA) has made investments in Nigeria oil & gas assets less attractive. These negative regulatory sentiments has led to many IOCs decreasing investments in the Nigerian oil & gas industry. Overall, we think this may result in many of the fields ending up in the hands of individuals with cash but with no industry expertise. Again, with the current economic crunch, many of the fields may be sold significantly below their fair value.


CSL Stockbrokers Limited, Lagos (CSLS) is a wholly-owned subsidiary of FCMB Group Plc and is regulated by the Securities
and Exchange Commission, Nigeria. CSLS is a member of the Nigerian Stock Exchange.

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Patricia
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Corporate deals

Access Bank in advanced discussions with Zambian Bank regarding merger

The bank noted that there are no guarantees to whether the transaction pans out or not.

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Nigeria has over 40 million people without access to bank accounts – Access Bank, Access Bank Surulere branch engulfed by fire

Access Bank Zambia Limited announced that it is now in advanced discussions with Cavmont Capital Holdings Zambia Plc. regarding possible merger of Cavmont Bank LimitedThe announcement was disclosed by Nigerian Stock Exchange (NSE) in a corporate disclosure which was duly signed by the Company Secretary, Mr. Sunday Ekwochi. 

The disclosure by the bank read, Access Bank Plc (“Access Bank”) announces today that its wholly-owned subsidiary in Zambia, Access Bank Zambia Limited (“Access Bank Zambia”) has entered into exclusive discussions with Cavmont Holdings Zambia Plc (“Cavmont Capital”) regarding a potential transaction between Access bank Zambia and Cacmont Bank Limited (“Cavmont Bank”), a wholly-owned subsidiary of Cavmont Capital. The potential transaction relates to the sale of 100% of Cavmont Capital interest in Cavmont Bank to Access Bank Zambia.” 

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The bank has, however, noted that there are no guarantees as to whether the transaction pans out or not. There can be no certainty that a transaction will be agreed, nor as to the terms of any such agreement. The completion of a transaction would be subject to formal regulatory approvals. Access Bank will update the market as appropriate and in accordance with its disclosure obligations. It also advised shareholders accordingly, to exercise caution when dealing in Access Bank’s securities until a full announcement is made. 

Nairametrics had reported in October 2019 that Access Bank from the first quarter of 2020, would expand its footprint across Africa. After its merger with Diamond Bank, it acquired 100% of Kenya’s Transnational Bank Plc and its 28 branches, as the Central Bank of Kenya (CBK). Three months later, it also notified the Nigerian Stock Exchange of its intention to establish a subsidiary in Cameroon. 

Access Bank Plc. recorded a profit after tax of N40.9 billion in the first quarter period ended March 31st, 2020. This was bolstered by an increase in Net interest income which stood at N72.2 billion, indicating a 27% increase compared to N56.8 billion that was recorded in Q1 2019. 

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Its shares at market open today stood at N6.40, on the lower end of its 52-week range of N5.30 and N12.00. It’s price to earnings ratio was 2.24 and price to book, 0.3566 

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Business

CITN issues rejoinder to ICAN’s claim over court case

The rebuttal claims that there are some ‘critical misinterpretations’ contained in ICAN’s claims concerning the judgment.

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CITN

The Chartered Institute of Taxation of Nigeria (CITN) has issued a rebuttal to the “critical misrepresentations” that are supposedly contained in a notice to members sent out by the Institute of Chartered Accountants of Nigeria (ICAN) over a court case, as reported by Nairametrics.

Recall that ICAN had informed its members that Justice S. A. Onigbanjo of the High Court of Lagos State had ruled in their favour by striking out “Suit No. LD/3288GCM/19 – CITN VS ICAN” which was filed by CITN. In the suit, CITN had, among other things, prayed the court to restrain ICAN members from filing tax returns with the Federal Inland Revenue Service (FIRS) unless they have a CITN license.

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Now, in its rebuttal to ICAN’s claims concerning the court case, a copy of which was sent to Nairametrics, CITN clarified the following points:

  1. The Ruling of the Hon. Justice S. A. Onigbanjo of the 2/7/2020 in LD/3288GCM/19 did not invalidate the MOU and TOS because it did NOT address the issues in the substantive suit, itself. However, since ICAN has resiled from the MoU and ToS it freely entered with CITN, the CITN will not stop ICAN from walking away.
  2. The Judge only struck out the suit based on the Preliminary Objection of ICAN to the effect that the suit was an abuse of court process because the issues in it were the same as the issues in FHC/L/CS/125/2019 – ICAN VS FIRS & 1 OTHER which was earlier decided in favour of CITN.  However, the issues in the two suits are completely different and distinct as has now been explicitly admitted by ICAN in its Notice under reference when it said: “The earlier ruling at the Federal High Court in Suit No. FHC/L/CS/125/2019 did not make pronouncement on the memorandum and terms of settlement between ICAN and CITN.”ICAN having admitted  that the judgment in FHC/L/CS/125/2019 did not make any pronouncement on the MOU and TOS (and this is a fact), how then could issues in that suit be the same as those in LD/3288GCM/2019 (decided by Justice Onigbanjo) which only asked for judicial pronouncement on the MOU and TOS?
  3. Regulation 5 of the Tax Administration (Self-Assessment) Regulations, 2011, was categorically annulled by the Hon. Justice Liman in the judgment delivered in FHC/L/CS/125/2019 on 21/11/2019.  None of the lawyers to the parties (including ICAN) can deny hearing the annulment of Regulation 5 during delivery of the judgment. It is unfortunate that ICAN is jumping the gun in a case with a pending post-judgment application.
  4. In the judgment delivered in FHC/L/CS/1480/2018 – CHIEF IGBAROOLA & OTHERS VS FIRS & OTHERS on 21/5/2019, the Hon. Justice A. O. Faji, declared: “CITN Act is thus superior to ICAN Act on the issue of tax practice.  The Self-Assessment Regulations being in conflict with the CITN Act is null and void.  The Plaintiffs cannot practice as tax agents without first being members of the 2nd Defendant.”
  5. In the Court of Appeal judgement of 2013 between ICAN v. CITN, it was held that the power to regulate and control the tax profession, to the exclusion of any other body, in Nigeria lies with CITN.
  6. It is, therefore, now firmly settled from all the relevant judgements at the Lagos High Court, Federal High Court and the Court of Appeal, which have all upheld the primacy of the CITN Charter, that no member of ICAN can practice taxation without first being a member of CITN.
  7. For the avoidance of doubt, no ICAN member, who is not registered with CITN, has been permitted by any law or court decision to practice taxation. The law has made it clear about the professional body that can regulate tax profession in Nigeria and CITN reserves the right to invoke the relevant provisions against any person that violates the provisions of its charter.

You may read CITN’s full rejoinder by clicking here and follow up on ICAN’s notice to its members here.

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Coronavirus

EU in deals with Roche, Merck for supply of potential COVID-19 vaccine

The agreements with the 2 drug firms follow requests by EU countries in May.

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EU, Health: Nigeria records first case of coronavirus

As the race for the development of a vaccine for the coronavirus disease heats up, the European Commission has made deals with two drugmakers, Roche (ROG.S) and Merck KGaA (MRCG.DE), to secure supplies of experimental treatments for COVID-19.

Reports from Reuters suggest that the deals cover Roche’s arthritis medicine, RoActemra, and Merck’s multiple sclerosis drug, Rebif, both seen as potential treatments for COVID-19, and will secure supplies to any of the 27 EU member states willing to buy them.

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Merck had also been asked by the European Commission to be prepared to supply Rebif to European Union (EU) states upon request, if and when the c2 drug for COVID-19 treatment is confirmed.

The agreements with the 2 drug firms follow requests by EU countries in May to purchase the 2 drugs and as governments compete to have access to potential treatment and vaccines against the coronavirus disease, even before the efficacy is proven.

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Roche is presently at the late stage of a 330 patient trial of Actemra, also known as RoActemra in some markets, on COVID-19 patients, after the anti-inflammatory drug used against rheumatoid arthritis was deployed in China on patients that suffered from a severe immune system reaction.

This particular drug in combination with Gilead’s GILD.O antiviral remdesivir, has also been tested on COVID-19 patients. The Gilead’s antiviral remdesivir is the only drug authorized so far by the EU for use against COVID-19.

Rebif was developed by Serono, a Swiss biotech firm, before Merck acquired the company. Both Rebif and Actemra target proteins in the body associated with inflammation, and there is some hope that they may help severely ill COVID-19 patients suffering from cytokine storm, an immune system reaction that can lead to organ failure.

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Roche and Merck have agreed that they could meet the demand of the EU countries, in letters to the commission. The EU countries will now have to agree with the drug companies on the volume of supplies that will be needed.

Explore economic research data from Nairametrics on Nairalytics

It can be recalled that just a few days ago, Nairametrics reported that the British government and 2 pharmaceutical giants, GlaxoSmithKline and Sanofi, were on the verge of agreeing on a $624 million deal for the supply of 600 million doses of coronavirus vaccine. The UK government is considering taking up an option to buy the vaccine once the human trials turn out successful.

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