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Manufacturing

GDP: Nigeria’s manufacturing sector on tight ropes

Only two sub-sectors in the manufacturing space reported real growths.

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Manufacturing: Momentum in activities slows in January, CBN’s forex intervention has encouraged influx of raw materials - Manufacturers , Manufacturing: Activity level slumps on COVID-19

It is no longer news that Nigeria’s manufacturing sector contracted by 8.78% in the second quarter in real terms. This is a major decline when compared with a marginal growth of 0.43% reported in Q1 2020, and a contraction of 0.13 reported in the corresponding quarter of 2019.

According to the National Bureau of Statistics, only two sub-sectors in the manufacturing space – chemical & pharmaceutical products and motor vehicles & assembling, reported real growths of 3.79% and 6.95%, respectively. This is higher than the real growths of 0.58% and 1.04% in the first quarter, and a contraction of 1.27% and 1.5% in the corresponding quarter of 2019.

The other 11 sub-sectors in the manufacturing space all contracted.

READ: Manufacturing PMI dips further as recession scare looms

Among the sectors that contracted were eight subsectors that reported double digits contraction, with oil refining activities contracting the most by 67.6%, extending the streak of contraction by six quarters. It should be noted that the last time the sub-sector reported a major expansion was during the fourth quarter of 2018 (33.6%).

The contraction in the activities of these subsectors is attributable to global & domestic supply chain disruptions, foreign exchange illiquidity, weak consumer spending, and high operating costs. Subdued operations caused by the lockdown and other containment measures to combat the pandemic also affected manufacturing activities.

READ: Manufacturing PMI slide into recession territory

The contraction in the manufacturing sector during the second quarter is consistent with analysts’ expectations, at least based on the CBN’s recent Manufacturing PMI reports. These reports signalled the contraction of the manufacturing sector in the second quarter, with the Manufacturing PMI for May and June standing at 42.4 and 41.1; well below the benchmark index of 50%.

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Expert’s perspective

The Director-General of Lagos Chamber of Commerce and industry, Dr Amuda Yusuf, maintained a cautious stance on the economy. He said that “although there has been a gradual reopening of the economy, business and commercial activities would remain subdued”.

He emphasized that with the protraction of the COVID-19 pandemic and lack of a vaccine, there is a high possibility that the economy would contract, though marginally, in the third quarter.

READ: Manufacturing sector in Nigeria and the reality of a “new normal”

The DG of LCCI further raised concerns about how the manufacturing sector has been struggling before the pandemic, despite being one of the biggest beneficiaries of CBN’s loan-to-deposit policy.

He explained that the weakness of the manufacturing sector was due to global & domestic supply chain disruptions, foreign exchange illiquidity, weak consumer spending and high operating costs.

In his statement, he called for the removal of the structural bottlenecks to productivity through a mix of fiscal, monetary and regulatory measures.

He counselled that, a proper blend of fiscal and monetary policies, with proper implementation of the sustainability plan among other measures, would give the economy a boost in the near term.

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Omokolade Ajayi is a graduate of Economics, and a certificate holder of the CFA Institute’s Investment Foundation Program. He is a business analyst, and equity market researcher, with wealth of experience as a retail investor.

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Energy

BUA Group awards contract for polypropylene plant in its refinery project

The completion of the project is to help boost Nigeria’s capacity to meet the country’s increasing demand for petrochemical products.

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BUA Group chairman, Abdulsamad Rabiu, African Continental Free Trade Agreement, AfCFTA, CCNN

Nigeria’s leading indigenous conglomerate, BUA Group has announced that it has signed a contract agreement with Lummus Technology for the establishment of a polypropylene plant in its refinery and petrochemical project.

The completion of the project is to help boost Nigeria’s capacity to meet the country’s increasing demand for petrochemical products.

The Chairman of BUA Group, Abdul Samad Rabiu, while disclosing the contract agreement, expressed confidence in the capacity and technical expertise of Lummus Technology to deliver a best-in-class project.

READ: BUA says its export-focused sugar project will create jobs and checkmate price hike

What the Chairman of BUA Group is saying

Rabiu in his statement said, “We are pleased to sign this polypropylene contract for our BUA refinery and petrochemicals project with Lummus Technology, a world leader in delivering polypropylene solutions, which will solve the increasing demand for high-performance grade polypropylene in Nigeria, the Gulf of Guinea as well as the Sub-Saharan Africa Region.

“We are confident in the capacity and technical expertise of Lummus Technology to deliver a best-in-class, 285,000 tpy polypropylene unit for our refinery project scheduled to come on stream in 2024.’’

READ: Dangote, BUA reconcile over sugar plant dispute after meeting with Ganduje, others

What the President/Chief Executive Officer of Lummus Technology is saying

On his part, the President/Chief Executive Officer of Lummus Technology, Leon de Bruyn, said that he was looking forward to working with BUA refinery on the project.

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Leon said, “We look forward to working with BUA Refinery on this critical project and supporting the first Novolen polypropylene unit in Nigeria. Our world-class Novolen technology is well suited to meet Nigeria’s increasing demand for the growing petrochemical products market.

It offers a flexible range of industry-leading products for all PP applications, and the industry’s lowest overall capital and operational costs while providing customers with high process reliability and flexibility in responding to market needs.”

READ: BUA Group, French company announce progress in 200,000 bpd refinery project

What you should know

Lummus Novolen Technology GmbH licenses polypropylene technology and provides related engineering and technical support/advisory services. Novolen also supplies NHP® catalysts for the production of high-performance polypropylene grades in the Novolen process, and NOVOCENE® metallocene catalyst for the production of special polypropylene grades.

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Companies

Our First Bank loan is being serviced, reduced by 30% in 2 years – Honeywell Group

The credit facilities accessed from First Bank were granted after due negotiations, with the necessary documentation and in line with regulatory policies and industry standards.

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Billionaire watch: Oba Otudeko’s stakes in Firstbank and Honeywell are worth N10.3 billion

The Honeywell Group has said that its loan with First Bank is being serviced as the conglomerate had reduced the facility by 30% in the last two and half years.

This was disclosed by the Group via a statement issued on Sunday and seen by Nairametrics.

According to the statement, the company and the bank have had a professional business relationship since 1975, which preceded the group’s investment in the bank over a decade later.

According to the Honeywell Group, the credit facilities accessed from First Bank were granted after due negotiations, with the necessary documentation and in line with regulatory policies and industry standards.

The Group further explained that following agreed terms, its facilities are adequately secured with First Bank with collaterals in place at over 170% of forced sales value and 230% at open market value.

It stated, “In 2015, First Bank under the directive of the Central Bank of Nigeria, drew our attention to a 2004 circular (BSD/9/2004) which requires that insider related facilities must not exceed 10% of paid-up share capital.

Based on this directive we subsequently entered negotiations with the bank to agree on an appropriate repayment structure and the final negotiated position was duly approved by the CBN.

In addition to the above, First Bank, on the directive of CBN, requested additional security in the form of FBN Holdings Plc shares held by the Chairman of Honeywell Group, Dr Oba Otudeko citing a 2001 circular. This was duly provided through an authorisation to place a lien on the shares.”

Honeywell Group has continued to meet all its obligations on its facilities with the bank according to agreed terms and has reduced its exposure by nearly 30% in 2.5 years. The facilities were charged at market rate and the bank continues to earn significant interest therefrom.”

What you should know

  • Nairametrics had reported when the Central Bank of Nigeria directed Honeywell to fully repay its obligations to First Bank within 48 hours, warning that failure to do so would cause the CBN to take regulatory measures against the insider borrower and the bank.
  • The Chairman of Honeywell Group, Oba Otudeko, also served as Chairman of FBN Holdings Plc until he was asked by the apex bank to go along with other directors on Thursday.
  • The apex bank had noted in a letter last Wednesday that First Bank had yet to comply with regulatory directives on divesting its interest in Honeywell despite several reminders.
  • Also, the CBN asked First Bank to forward evidence involving the divestment of interest in Honeywell Flour Mills and Bharti Airtel Nigeria Ltd within 90 days.

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