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Nigerian banks at risk due to debts by independent oil producers

According to data from the Central Bank of Nigeria (CBN), about a third of loans by Nigerian banks were given to oil firms.

April 26, 2020

By Chike Olisah

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.

https://nairametrics.com/2020/04/26/banking-crisis-imminent-in-nigeria-due-to-debts-by-independent-oil-producers/

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Deutsche Rohstoff-Agentur warnt: Werden Rohstoffe für den deutschen Markt knapp?

24.04.2020

Die Corona-Krise könnte für die deutsche Industrie schlimme, bisher kaum bedachte Folgen haben. Nämlich dann, wenn sich China dazu entschließt, seine Rohstoff-Exporte zu reduzieren.

• China ist der weltweit führende Rohstoffproduzent
• Wachsender Eigenbedarf Chinas
• Es drohen Versorgungsengpässe für die deutsche Industrie

Das Reich der Mitte ist für Deutschland ein wichtiger Rohstofflieferant, insbesondere bei einigen für die Hochtechnologieentwicklung relevanten Rohstoffen, wie Seltene Erden-Metalle, Wolfram, Antimon und Magnesium. Vor diesem Hintergrund hat die Deutsche Rohstoffagentur (DERA) davor gewarnt, dass eine zu hohe Lieferabhängigkeit die Gefahr von Versorgungsengpässen nach sich zieht, “wenn unvorhersehbare Ereignisse oder Konfliktsituationen auftreten”.

Genau dazu könnte es nun angesichts neuer politischer Vorgaben aus Peking und der Folgen der Corona-Krise kommen. So berge die aktuelle Strategie Chinas das Risiko, dass kritische Rohstoffe “verstärkt für die eigene industrielle Fertigung” eingesetzt werden, um höherwertige Produkte herstellen zu können. Dies wiederum könnte zu einer Beeinträchtigung der Rohstoffversorgung für die deutsche Industrie und “einem intensiveren Wettbewerb in der Herstellung von höherwertigen Materialien und Industriegütern führen”.

Chinas enorme Marktmacht

Die Gefahr scheint groß zu sein, denn China ist der weltweit führende Rohstoffproduzent. Laut DERA erzielte das Land im Jahr 2017 mit 17,8 Prozent den höchsten wertmäßigen Anteil an der weltweiten Bergwerksproduktion und lag damit noch vor Australien und Brasilien. Besonders wichtig ist Chinas Rolle bei der Verarbeitung von Rohstoffen. Hier führt das Land mit weitem Abstand und ist für 50,4 Prozent der weltweiten Raffinade-Produktion verantwortlich.

Bedenklich stimmt, dass China bei 17 von insgesamt 27 Rohstoffen, welche die EU als “kritisch” einstuft, der weltweit größte Produzent, entweder bei der Bergwerks-oder Raffinadeproduktion ist. Dazu gehören laut DERA alle SE-Elemente sowie Magnesium, Wolfram, Antimon, Gallium und Germanium.

Neue Strategie und ihre Folgen

Wie DERA erklärte, setzt China auf eine wirtschaftliche Neuausrichtung. Dabei wird die Nichteisenmetall-Industrie tiefgreifenden Reformen unterzogen. Diese Strukturreform habe zu kurzfristigen Einschränkungen der Bergwerks- und Raffinadeproduktion geführt und somit die Preisvolatilität auf den Rohstoffmärkten verstärkt.

Auch die Umwelt-Standards wurden angehoben. Die daraus resultierenden Maßnahmen um die Verschmutzung von Luft, Böden und Wasser zu verringern, haben zur Folge, dass die Bergwerks- und Raffinadeproduktion temporär ausgesetzt und Produktionsbetriebe geschlossen werden.

Ambivalente bilaterale Beziehungen

Chinas Beziehung zu seinen Handelspartnern EU und USA schätzt die DERA als ambivalent ein. Auf der einen Seite bestehen starke Handelsverflechtungen und eine nachhaltige Beschaffung von Rohstoffen ist für chinesische Unternehmen eine wichtige Voraussetzung für Geschäftsbeziehungen mit europäischen Unternehmen.

Auf der anderen Seite konkurriert das Reich der Mitte um den Zugang zu wichtigen Rohstoffen und will strategisch wichtige Rohstoffe zunehmend für die Fertigung eigener, höherwertiger Produkte einsetzen. So habe China inzwischen selbst einen hohen Bedarf an vielen kritischen Rohstoffen wie z. B. Antimon, SE-Elemente, PGM, Magnesium, Naturgraphit und Wolfram.

DERA warnt vor Risiko

Angesichts dieses Wettbewerbs um Rohstoffe warnt die DERA vor Risiken für die Versorgung der deutschen Industrien. Zwar sei China bisher ein relativ zuverlässiger Rohstoff-Lieferant gewesen, aber die hohe Lieferabhängigkeit berge dennoch die Gefahr von Versorgungsengpässen, insbesondere da abzusehen sei, dass China auch weiterhin der weltweit größte Rohstoffkonsument bleiben wird.

Redaktion finanzen.net
https://www.finanzen.net/nachricht/rohstoffe/china-im-fokus-deutsche-rohstoff-agentur-warnt-werden-rohstoffe-fuer-den-deutschen-markt-knapp-8771432

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IMF to recommend $3.4bn emergency funding for Nigeria

Nigeria’s economy could shrink the most in almost half a century this year after the collapse of the price of crude.

by Alonso Soto • Bloomberg
24 Apr 2020

A health worker takes a swab during a community coronavirus testing campaign in Abuja [File: Kola Sulaimon/AFP via Getty Images]

The staff of the International Monetary Fund will recommend the approval of $3.4 billion in emergency funding to Nigeria when the lender’s executive board meets next week, according to two people with direct knowledge of the plan.

The loan, scheduled to be repaid in a maximum of five years, would be the largest allocation yet by the IMF to an African country to assist with the coronavirus pandemic. The lender approved a disbursement of about $1 billion to Ghana earlier this month. The outbreak is reducing demand for and prices of Africa’s commodities, while domestic lockdowns have shuttered industries and trade.

Nigeria’s request for $3.4 billion will be considered on April 28, an IMF spokesperson said. A finance ministry spokesman declined to comment.

Hit by crashing oil prices and lockdowns, Nigeria requested the amount under the Rapid Financing Instrument, which offers funding without the strings of a full program, said the people, who asked not to be identified because the information is not yet public. Nigeria also requested another $3.5 billion in total from the World Bank and the African Development Bank.

The oil producer’s economy could shrink the most in almost half a century this year after the collapse of the price of crude, which makes up more than haft of government revenues and 90% of exports.

The IMF will mobilize more than $18 billion to respond to more than 40 African countries who have requested assistance to battle the pandemic, Managing Director Kristalina Georgieva said last week.

SOURCE: BLOOMBERG
https://www.aljazeera.com/ajimpact/imf-recommend-34bn-emergency-funding-nigeria-200424164501868.html

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Nigeria visa firm owned by man on fraud charges

By Sam Piranty, BBC News, 8 April 2020

The owner of the Nigerian government-appointed company which produces visas for people wishing to travel to Nigeria from around the world is facing charges of fraud and money laundering in Nigeria in relation to a different company, the BBC has learnt in a joint investigation with the Premium Times.

There is no suggestion of wrongdoing by the visa-processing company and the allegations have no relation to the management of the visa business.

Mahmood Ahmadu, together with his former company Drexel Tech, was charged by the Economic and Financial Crimes Commission (EFCC), on two counts of fraud and three counts of money laundering.

Three others, including former Interior Minister Abba Moro, face charges of fraud and breach of public procurement laws.

All those charged, including Mr Moro and Mr Ahmadu, deny any wrongdoing.

Mr Ahmadu has been highly regarded in Nigeria and was given the Order Of The Niger, a prestigious national award, by President Goodluck Jonathan in 2014.

His lawyers say at no time did the EFCC or any other authority in Nigeria or elsewhere declare him “wanted”. They say he is not standing trial. He maintains his innocence and his lawyers deny that he is facing charges.

Stadium stampede

But the EFCC charge sheet alleges that Mr Ahmadu, together with other defendants, was involved in organising a recruitment exercise that led to the deaths of Nigerians.

Job-seekers lie on the pitch after a stampede in Abuja National Stadium, where thousands of job-seekers came to apply for work at the Nigerian immigration department, in Abuja, on March 15, 2014Image copyrightAFPImage captionJobseekers were crushed in a stampede

Mr Ahmadu’s former company, Drexel Tech, was engaged in 2013 to organise a recruitment drive supposedly for 4,000 vacancies in the Nigerian Immigration Service (NIS).

However the NIS later said there were no vacancies. In total, 676,675 Nigerians applied for the jobs, paying 1,000 naira (£2; $2.30) each to register.

When dates for a recruitment exercise were set, several people died during a stampede as thousands of jobseekers scrambled into the Abuja National Stadium to take part in the exercise allegedly organised by the Interior Ministry.

“I was surprised about the recruitment exercise because I was not aware of it,” then NIS Controller General, David Paradang, later told the Federal High Court in Abuja.

‘Hiding in Europe’

The EFCC has said that Mr Ahmadu, who the charge sheet describes as “at large”, and the co-accused, made a total of 677m naira (£1.4m; $1.6m) from the recruitment exercise.

The charge sheet

The charge sheet alleges that Mr Ahmadu and Drexel Tech Nigeria Ltd spent part of the money to purchase property in Abuja while just over 100 million naira, it is claimed, was converted to dollars for the personal use of Mr Ahmadu and the company.

While all the other co-accused, including Mr Moro, presented themselves for questioning and are currently standing trial, the EFCC says that Mr Ahmadu did not come forward to talk about his alleged role in the recruitment exercise.

Back in 2016, then spokesperson of the EFCC, Wilson Uwujiaren, told the Nation newspaper: “We may enlist Interpol and relevant agencies in the UK to track down Mahmood Ahmadu. He used to have companies in the UK and with his biometrics, there is no hiding place for him. We have already watch-listed him.”

Last week, the EFCC’s current spokesperson, Tony Orilade, told the BBC that there is still a case against Mr Ahmadu.

“The charge sheet reads that he is at large. The position of the EFCC is clear: the proceeds of the recruitment remains illegal…

“The EFCC is aware he is hiding in Europe. He has not been seen since arraignment.”

Mr Ahmadu’s visa company, Online Integrated Solutions (OIS), states on its website that it is present and conducting business on behalf of the Nigerian Government in 25 major cities across the world in Nigeria, China, Lebanon, UAE, Malaysia, Italy, Netherlands, South Africa, USA , France, Germany, UK, India, and Canada.

The company prides itself as “a specialist Nigerian visa and passport application agency” in partnership with diplomatic missions across the world to “expedite hitch-free travel” to global destinations. The company makes millions of dollars every year.

The BBC made numerous attempts to contact Nigerian Interior Ministry and the country’s High Commission in London. They did not offer any response.

The BBC contacted the UK’s Home Office and the Foreign Office who were not prepared to comment on the case.

The UK’s Department for Business, Energy and Industrial Strategy said that “a foreigner charged with a crime abroad can still set up a company and run it in the UK, if no arrest warrant has been issued”.

Nigeria visa firm owned by man on fraud charges

bbc.png

Nigeria visa firm owned by man on fraud charges

Mahmood Ahmadu was allegedly involved in a fake recruitment drive, which saw 16 die in a stampede.

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Game changer: Will Turkey unlock potential oil bonanza for Somalia?

BY HASSAN YUUSUF WAAL

OP-ED
APR 23, 2020

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In the last decade, Somalia has made remarkable progress on multiple fronts: good governance, security, the economy and the military system. Somalia is opening its waters to exploration as it seeks to become a regional economic hub. Some studies suggest that the seafloor beneath Somalia’s coastal waters may contain up to 100 billion barrels of oil. Thus, foreign investors have shown considerable interest in Somalia’s oil and gas resources.

Turkey, a partner and a close ally of Somalia, could be joining the race to explore the oil deposits along Somalia’s Indian Ocean coast. On Jan. 20, President Recep Tayyip Erdoğan said that Turkey had received an invitation from Somalia to explore for oil in its seas. The news has been greeted with much optimism by many, particularly the Somali people.

Turkey’s humanitarian diplomacy has won the hearts and the minds of Somali people. Since then-Prime Minister Erdoğan’s first visit to Somalia in 2011, Turkey has poured millions of dollars of aid into Somalia, supporting health, education, infrastructure, military rebuilding and peace building.

On the other hand, Turkey-Somalia relations are also based on economic cooperation and trade. Turkey has arguably shifted the donor-recipient paradigm to a win-win development. According to the Turkish Foreign Ministry, the bilateral trade volume between Turkey and Somalia increased from $144 million (TL 1 billion) in 2017 to $187 million in 2018, and $206 million in the first 10 months of 2019. It is worth mentioning that the relationship between Somalia and Turkey dates as far back as the 16th century and is based on mutual interest and shared values.

Oil in Somalia

The history of oil exploration in Somalia dates back to the early 1950s when Agip (now known as Eni) and Sinclair Oil Corporation carried out geological studies. In the late 1980s, companies including Conoco, Chevron and Shell were awarded exploration licenses. However, when Somalia plunged into civil war in 1991, those oil companies which bought oil blocks declared force majeure on their operations.

In recent years, a number of seismic studies concluded that Somalia has oil and gas reserves offshore worth extracting. Spectrum’s findings indicate that there is a high potential for hydrocarbon exploration in offshore Somalia. Neil Hodgson, executive vice president of geoscience at Spectrum said, “Analysis is suggesting offshore Somalia stands as a beacon on the East African margin, offering the potential for the next giant oil discoveries in the future.”

As a result, the last few years have witnessed a growing interest in Somalia’s offshore oil and gas resources. Last June, the Ministry of Petroleum and Mineral Resources of Somalia reached an agreement with the Shell and ExxonMobil joint venture to repay the rental fees of $1.7 million for offshore blocks from 1990 to 2008. While there are high hopes for oil discovery in Somalia, there is an equally long list of challenges.

Current challenges

Somalia’s major challenges include political instability, security issues, limited infrastructure, corruption and foreign interference.

Violent extremism is still a serious threat to peace and stability in Somalia. On Dec. 28, 2019, a suicide car-bombing at a busy junction in Mogadishu killed 79 people, including two Turkish citizens.

There is endemic corruption in Somalia, especially in politics. It is a severe impediment to the economic and social development of the country. According to Transparency International’s 2019 Corruption Perceptions Index (CPI) report, Somalia is the 180th least corrupt nation out of 180 countries.

After the fall of the Somali state in 1991, the country has become a breeding ground for external competing forces whose malign motives have destroyed the country – hazardous waste dumping, weapon trafficking, illegal fishing, the geopolitics of the region, etc. Somalia has endured a prolonged period of commercialized anarchy. But things are gradually changing for the better in Somalia, thanks to the current Federal Government of Somalia (FGS) and its international partners.

Future prospect

Despite the challenges, Somalia is a country full of hope and bright prospects for the future. It offers plenty of opportunities. Somalia boasts the longest coastline in Africa (3,300 km) and untapped natural resources. It is located in a very strategic place, as a gate to the Red Sea and the Gulf of Aden. Moreover, there are more than 2 million Somalis who live in the diaspora. They send around $2 billion of remittances back home annually – an economic lifeline for the conflict-ridden country. They also send back social remittances-skills, expert knowledge, etc.

The big caveat, though, is unless the necessary preconditions for Somalia’s oil discovery – such as stability, regulatory and accountability – are met, success is far from guaranteed, or perhaps it may trigger more violence, corruption (rent-seeking) and continued poverty. So, what has Somalia’s government done to tackle the above-mentioned challenges?

Indeed, the FGS has taken some significant steps that are critical for building effective political and social institutions and more specifically for offshore oil and gas reserves to be exploited most effectively. With the support of international partners, the government has undertaken security sector reforms. Efforts are now underway to transfer security responsibilities from the African Union Mission in Somalia (AMISOM) to the Somali National Army.

In terms of policies and regulatory frameworks, major new laws were passed that include a petroleum law, anti-corruption law and new election law which is based on “one person, one vote,” replacing the controversial clan-based electoral system. On Feb. 8, President Mohamed Abdullahi Farmajo signed the landmark petroleum legislation into law – an important piece of legislation that safeguards the revenue sharing agreement between the federal government and the states as well as the environment. It has removed major barriers to exploration. Additionally, the president signed anti-corruption and new election legislation into law in September 2019 and February 2020, respectively.

Moreover, the FGS has pushed through financial and economic reforms that will pave the way for Somalia’s $5 billion debt cancelations. Following the meetings of the executive boards of the International Monetary Fund (IMF) and World Bank, on Feb. 12 and 13, respectively, Somalia was commended for its strong commitment to reform and rebuilding key economic institutions. “Today’s agreement by the IMF Executive Board that Somalia can be eligible for debt relief under the Enhanced HIPC Initiative marks a historic moment,” said Kristalina Georgieva, managing director and acting chair of the IMF. World Bank Group President David Malpass also said, “Today was an important step toward Somalia resuming financing from international financial institutions.”

So, will Turkey venture into this new territory of offshore drilling in Somalia, and what are the implications? Indeed, Turkey will accept Somalia’s invitation for two reasons: Firstly, Turkey has a no-strings-attached policy and unwavering support for the fellow Muslim country. Turkey is in Somalia to show solidarity with the brothers and sisters of Somalia. Turkey has reiterated many times that this is not just for one day and it will continue to work for its brothers and sisters and will never abandon them. That pledge has been fulfilled. And, arguably, Turkey has succeeded where many other foreign backers and NGOs have failed before. Today, Turkey provides a great deal of infrastructure development and technical assistance to Somalia. Trade and economic cooperation between the two countries is also rapidly growing.

Secondly, as an emerging and industrialized economy, Turkey needs the natural resources of Africa. Hence in 2005, Turkey launched the Open to Africa policy which aims to increase economic and strategic relations with African countries. According to Anadolu Agency (AA), “Turkey’s bilateral trade volume with Africa increased threefold from 2003 to reach $18.8 billion in 2017, as exports totaled $11.6 billion and imports $7.1 billion.”

Is the risk of Somalia’s oil exploration worth the reward? The Somalia stakes are high due to the country’s rich abundance of oil and non-petroleum mineral wealth. The success of Turkey’s engagement with Somalia can be partly attributed to the risk-taking factor. Despite the security challenges, the Turkish government and Turkish nongovernmental organizations and businesses have expanded their aid and business operations to many parts of Somalia. From this perspective, Turkey has a comparative advantage in discovering Somalia’s oil first. Oil discovery in Somalia could help transform Somalia’s economy and play a big role in Turkey’s energy security and investment opportunities.

Meanwhile many oil interests, including Western oil companies who have legacy oil contracts signed before the civil war in 1991, have recently turned their sights on Somalia’s potential oil and gas resources. This next great oil frontier will create fierce competition that will bring many benefits to the Somali people. However, as evidently seen in many parts of Africa and developing countries, resource richness can be a curse rather than a blessing. Good governance is the only answer to the challenges of the resource curse.

* Activist, freelance writer and documentary filmmaker based in Northampton, U.K.

ABOUT THE AUTHOR

* Activist, freelance writer and documentary filmmaker based in Northampton, U.K.

https://www.dailysabah.com/opinion/op-ed/game-changer-will-turkey-unlock-potential-oil-bonanza-for-somalia