News Roundup: Japaul says bye-bye to oil and gas, embraces gold
Hello again and welcome to another corporate news roundup. This is courtesy of Nairametrics.
Let's dive right in...
1/Last week, Japaul Oil and Maritime Services Plc disclosed that it had concluded plans to raise N27 billion ($70 million) in a share offer come November 2020. Money raised through the offer will be used to finance the company’s plan to switch over to mining, as crude oil exploration and production operations wane due to the devastating impact of the coronavirus pandemic.
Speaking during an interview in Lagos, the company’s Chairman, Jegede Paul, admitted that the COVID-19 pandemic and crash in global oil prices hit them hard. Japaul is an oil services firm that currently provides offshore construction, equipment leasing, and oilfield support services Nigerian oil companies.
“The oil companies that we are serving have little jobs to do and the little jobs that are there, we are all battling to do at prices that are below our costs. By the next two years, we will completely be a mineral company,” Jegede said.
In the meantime, Japaul has obtained licenses to mine gold, lead, nickel, and copper which it had identified in commercial quantities in various parts of the country. Already, it has hired a Canadian firm, Matrix Geotechnologies Ltd, as a consultant to help develop its new business focus.
The company also intends to buy up smaller firms that already have licenses to mine those minerals, as part of plans to boost its production.
2/Lagos-based wireless towers operator, IHS Holding Ltd., is seriously considering a potential initial public offering in America. A major shareholder in the company, Wendel SE, disclosed this last week, whilst noting that the deal could become the biggest IPO ever carried out by an African company in the United States of America.
The company first hinted at an IPO in 2018. However, plans were paused along the way because the timing, the number of equities to be offered, and the price range of the shares were not yet concluded upon.
Meanwhile, between late 2019 and early 2020, the company disclosed that the plan was back on track. Note that the company has a $7 billion valuation, according to data obtained from Bloomberg. This would make its IPO one the biggest by an African company in the US.
3/Moving on now to the financial services sector, Nairametrics reported last week that the value of loans given out by Nigerian banks to the private sector increased from N16.251 trillion in June 2019 to N18.632 trillion as at the end of May 2020.
Information obtained from the Central Bank of Nigeria (CBN) noted that this represents a 21.53% (or N3.5 trillion) increase within a 1-year period.
Further breakdown pf the data showed that the oil and gas industry (downstream, natural gas and crude oil refining) attracted the most loan during the period with N3.60 trillion. This was followed by the manufacturing sector which attracted N1.99 trillion within the same period. Also, the general services segment also attracted N1.60 trillion in May 2020.
Kingsley Obiora, a Deputy Governor at the CBN, offered further explanation, saying that “under the circumstances, the financial system has maintained a sound and stable position, following effective interventions by the CBN.”
He also disclosed that “Non-performing loans (NPLs) decreased to 6.4% at the end of June 2020, compared to 9.4% in the corresponding period of 2019, reflecting recoveries, write-offs and disposals.”
4/Last week, more Nigerian banks sent out notices informing their customers about the limits placed on how much they can spend when shopping abroad with their naira-denominated debit cards.
Nairametrics reported that one of such notices said: “Dear Customer effective 16 August 2020, your Naira Mastercard International will be reduced from $500 to $300 monthly.”
Just last month, Stanbic IBTC Bank informed its customers that starting Monday, July 20th, 2020, they will only be able to spend $500 per month when shopping abroad with their naira debit cards transactions. A monthly limit of $100 was also been placed on withdrawals.
Similarly, Zenith Bank Plc said it will be suspending the use of debit cards for cash withdrawals abroad, albeit temporarily. The monthly sending limit for card users abroad was also slashed by the tier-1 bank to $200.
Other banks such as Ecobank Nigeria and Fidelity Bank Plc earlier reduced their monthly cash withdrawals for their customers when using their cards in places outside of Nigeria.
Note that this is happening because the banks are simply trying desperately to conserve the dollar in their disposal whilst limiting foreign currency settlement risks. A Zenith Bank spokesperson was once quoted as saying that “this review is in response to today’s economic realities.”
Forex liquidity within the banking sector has been largely impacted by reduction in foreign remittances from Nigerians in diaspora due to the COVID-19 lockdown. Persistent dollar scarcity could lead to a further reduction in spending limits, except the CBN intervenes.
5/In fintech news, Airtel Africa Plc announced a strategic partnership with MoneyGram, which is expected to enable more than 19 million Airtel Money customers to receive MoneyGram transfers (from around the world) right on their mobile money wallets on their phone.
A statement issued by the company indicated that the development would also enable senders overseas to push funds directly and instantly to an Airtel Money mobile wallet in a more convenient way for customers.
This is the latest in a string of strategic partnerships being made by Airtel Africa to position its fintech business unit – Airtel Money. Just last week, the telco announced that it had partnered Standard Chartered Bank, with plans to expand its range of products and encourage financial inclusion.
6/In what must have been a fascinating development for many Nigerian importers, it was disclosed, last week, that Nigeria’s maritime agencies are currently working out the modalities on how to begin transporting containers from Lagos to Onitsha using barges.
Nairametrics reported that the Nigerian Ports Authority (NPA) is working alongside the Nigerian Shippers Council and the Nigerian Inland Waterways Authority (NIMASA) in this regard.
It should be noted that barges are long flat bottomed boats that are used to convey freights through canals and rivers…
Now, this is an interesting development because it is going to save importers/businesses lots if and when implemented. A recent research report by SBM Intelligence revealed that it costs more to transport containers from Nigeria’s Apapa port to local warehouses, compared to how much it costs to do same in places like South Africa and even Ghana.
In specific terms, businesses spend an average of $2,050 transporting containers from Apapa port. This is far more than the $208 it costs to transport containers from Durban Harbour to South African warehouses and the $285 it costs to do same in Ghana.
Considering the fact that a significant number of the containers that berth in Apapa goes straight to the South Eastern part of the country, this plan by Nigeria’s maritime agencies is expected to significantly help cut down shipping costs for many businesses.
7/In manufacturing news, the Group Managing Director of Flour Mills Nigeria Plc, Paul Gbedebo, disclosed last week that Nigeria’s currency devaluation would hurt the company’s profit margins.
Gbedebo also told Bloomberg that his company may not be able to pass the rising costs to consumers. In the meantime, Flour Mills has taken half the risks of naira’s devaluation, which weakened by 25% in Q1 2020. Flour Mills has only adjusted its prices by 12%.
Speaking further, the MD disclosed that Flour Mills intends to increase its local sourcing of raw materials, in view of the forex constraints currently being experienced by most businesses in Nigeria.
Speaking further, Gbedebo disclosed that Flour Mills sources 25% of its raw materials locally and now plans to increase local sourcing by 40% come 2024, in view of the Forex constraints.
The plan to increase local sourcing of raw materials would also help the company to reduce the costs of maize per ton, following CBN’s recent announcement that it would stop issuing FX to maize importers at the official rate.
Flour Mills Plc, which is one of Nigeria’s largest millers, first began sourcing its raw materials locally following the 2016 currency crisis in Nigeria. It currently sources around 25% of its raw materials locally.
8/Nigerians went on a Twitter rampage, last week, blasting DStv’s owners (MultiChoice) after some customers were informed about impending fee increases.
Nairametrics reported that DStv Compact subscribers were informed to expect a 13.3% price increase to N7,900 up from N6,975, starting September 1st.
DStv Compact Plus subscribers were also informed that the subscription fee would be increased by 9.8%, from N10, 925 to N12, 000. In the same vein, the subscription fee for DStv Premium was increased from N16, 200 to 18,400, indicating a 13.6% hike.
Note that this is happening barely a few days after lawmakers in Nigeria’s lower legislative chamber summoned the company’s management to explain an earlier price hike in June.
Some of the customers were complained, wondered why MultiChoice would increase now without considering the negative impacts the Coronavirus pandemic has had on their customers’ finances.
9/In appointment news, MTN Group Limited (the parent company of MTN Nigeria) announced the appointment of Ralph Mupita as the Chief Executive Officer.
A statement by the company said Mupita will take over from Rob Shuter on September 1, 2020.
While commenting on Muputa’s appointment, MTN Group’s Chairman, Mcebisi Jonas, said the choice of Mupita had come after a rigorous and extensive search process. The statement by the company quoted him to have said:
“We are pleased to have appointed someone of Ralph’s calibre, experience and ability to fill the group president and CEO position. Ralph’s experience as the group CFO, strong knowledge of our businesses and markets, as well as successful background in financial services, M&A and emerging markets, place him in an excellent position to lead the growth and sustainability of the business going forward.”
In the meantime, Shuter will remain with the company until the end of his fixed-term contract in early 2021. Afterwards, he will leave to join BT Group Plc as head of the Brutish operators’ enterprise division.
10/Lastly on this week’s Corporate News Roundup, the Nigerian Stock Exchange ended the week cumulatively on an impressive note. The NSE All-Share Index and Market Capitalization both appreciated by 0.09% to close the week at 25,221.87 and N13.158 trillion, respectively.
A total of 950.414 million shares (valued at N10.123 billion) were traded in 16,647 deals. This is a contrast to a total of 1.327 billion shares valued at N13.934 billion which were traded during the preceding week.
The Financial Services industry (measured by volume) led the activity chart with 624.278 million shares valued at N6.181 billion traded in 8,313 deals.
Trading in the top three equities – Zenith Bank Plc, Guaranty Trust Bank Plc, and Transnational Corporation of Nigeria Plc (measured by volume) accounted for 298.901 million shares worth N4.761 billion in 3,056 deals.
31 equities appreciated in price during the week, higher than 29 equities during the preceding week. 27 equities depreciated in price, lower than 33 equities in the previous week, while 105 equities remained unchanged, higher than 101 equities recorded in the previous week.
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