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Nigeria is sleepwalking into a disaster which has the potential to unleash instability, insecurity and crippling hardship. Unemployment is always a cause for concern, it is the clearest indication that the economy and policies are not working properly and a harbinger of social malaise and turmoil. Over the years we have witnessed it provoke social unrest and upheaval culminating in revolutions and the demise of the market economy. 

Nigeria have a chronic unemployment problem, aided by woeful government policy decision making and exacerbated by the lack of infrastructure.  Millions of Nigerians are woefully underemployed with productivity per person extremely low. CEIC calculates Labour Productivity Growth from quarterly Real GDP and quarterly Employment. The National Bureau of Statistics of the Federal Republic of Nigeria provides Real GDP in local currency, at 2010 base prices and Employment. The data is notoriously unreliable but if measured consistently provides a broad if not precise insight to the Nigerian job market

As if that were not bad enough it is now clear the government ministers in Nigeria responsible for solving the unemployment problem seems to inhabit another universe. A universe of suspended reality and where government ministers are able to make the most outrageous claims with no chance of being held to account.

Take the Minister of Industry, Trade and Investment who in a recent stakeholders meeting on job creation in Abuja unveiled a plan to create 20 million jobs in 4 sectors of the economy in the next 4 years. The good Dr Okechukwu Enalamah was short on detail save to point out he had tasked the Industrial Training Fund (ITF) to come up with a plan in so doing demonstrating his ignorance as to the statutory role of the ITF whilst freelancing for an equally poor Minister of Employment.

In tasking the ITF the Minister through his representative the Permanent Secretary Mr Sunday Akpan stated " to come up with revolutionary multi faceted job and wealth creation strategies that would be a lasting solution to the hydra headed problem". You would be forgiven for thinking that was the job of the recently 're-elected government. The ITF Director in what might pass for a game of 'Pass the parcel' pushed back by insisting job creation required the private sector participation. The Permanent Secretary is absolutelty right, yet investment requires a stable and enabling environment. 

The Minister went further to suggest that the ITF had actually " proposed pragmatic strategies that within the tenure of the next level will generate about 20 million jobs. This all off the back of the Nigerian Bureau of Statistics(NBS) putting unemployment in Nigeria at 20.9 million. I think it is fair to assume that it was the NBS's number that motivated the Ministers claim which is essentially a claim to eradicate unemployment over this parliamentary session. Setting aside the illogicality of his position or the fact that the NBS numbers are almost certainly wrong, would anyone reasonable person conclude the Honourable Minister had a firm grip of his portfolio. I wished I could say that his wildly over optimistic forecast was a consequence of a deep understanding of the economy, which as Minister for Trade and Investment he should possess. However the only sensible conclusion I can draw is that since nobody will hold him to account he can make the most spurious claims with zero censure. 

Nigerian workersHe goes on in his speech to praise the successes of the Buhari administration during its first tenure, a time which unemployment jumped  by over 30%, a period where Nigeria overtook India who has a population six times larger than it, as the country with the highest number of people living in extreme poverty and a time where Nigeria suffered its first recession for 3 decades. Like his fellow Minister Chris Ngige he speaks about unemployment as if he were an innocent bystander or a member of the Opposition " The number  without jobs in our country is at once scary and staggering and should be a source of worry to any administration that is committed to the welfare of Nigerians as the administration of President Muhammedu Buhari". The syncopanthy might keep him in the job but it serves the country very poorly.

Dr Okechukwu Enalamah  is by no means alone, always looking well fed and siated ministers in the Buhari administration seem bereft when it comes to joined up policy formulation. There is always an excuse, someone elses fault. I suppose it is easier to point a finger than look in the mirror. I would not be at all surprised if policy was arrived at by a combination of brainstorming and freewheeling whilst lurching from one Federal Executive Council to another without any recourse to the previous meeting. For example, the country wish to diversify the economy away from its over reliance on oil, apart from planting more yams what policies in the area of trade, education, healthcare etc do the government have? Is it not an indictment when the very minister responsible for trade and investment makes a stark admission of cluelessness. How can any investor  have any confidence when it is so patently obvious the minister himself is not up to the job

 

 

 

 

 

 

Monday, 18 March 2019 12:36

PALM OIL PRODUCTION UNDERPERFORMS

PALM OIL PRODUCTION A MEAGRE  PERFORMANCE

Nigeria from gaining a substantial share of the global oil palm industry now worth $62 billion annually, casting doubts on government’s ability to grow non-oil revenue. Nigeria’s oil palm industry’s contribution to global market share is a meagre 1.40 percent as of 2018, according to data from United State Department of Agriculture (USAD), as against 45 percent in 1960. If the country had maintained its 45 percent market share today, it would have been earning $27.9 billion from this crop alone. Oil palm refers to palm tree or the palm that produces oil. Crude palm oil (CPO) is the edible palm oil.

“The country’s production has been stagnant,” said Steven Babajide, country representative, Solidaridad’s Network, in an emailed response to questions.Even though big plantations are coming up, smallholder production which constitutes over 80 percent of the total palm oil output in Nigeria has continued to drop due to ageing trees and poor management,” he said.

 “The problem is further compounded by the inefficient processing technologies leading to 25-50 percent loss of crude palm oil,” said Babajide. Igwe Uche, national president, Oil Palm Growers Association of Nigeria (OPGAN), in a response to BusinessDay questions, said the production of smallholder farmers who produce the bulk of what the country consumes have been stagnated over the last five years.

“Demand for crude palm oil is increasing because our population is fast rising and industrial need for it is also on the increase,” Uche said.Analysts at Afrinvest Research Ltd, in their 2018 outlook for the oil palm industry, attributed the production downturn that damped market share to traditional and crude production methods by smallholder famers that account for 80 percent of the industry supply.

The report also identified other stumbling blocks to include the country’s focus on exploration and export of crude product, persistent low yields per hectare, and the impact of the civil war on oil palm producing communities.

“This culminated in the country becoming a net importer of the product in the 1980s as rising domestic consumption could not match sluggish growth in production,” said Afrinvest Research analysts.

Nigeria’s share of global production oil palm, which moved to 73.30 million metric tonnes in 2018 from 1.20 million metric tonnes in 1964, is abysmally poor.

Indonesia produces 41.50 million metric tonnes (MT), as against Malaysia’s 39.50 million MT. Both accounted for 80.10 percent of global production between 2016 and 2018. This compares with Thailand (2.90 million metric tonnes), Columbia (1.50 million metric tonnes), and Nigeria (1.0 million metric tonnes), according to USAD.

Experts have identified the root cause of the problems bedevilling the industry and have also proffered solutions to the downturn as the country seeks to diversify the economy away from black gold known as crude oil.

“Nigeria will need to plant at least 300,000 hectares in the near future, which is an investment of over N700 billion and it will take us several years,” Santosh Pillai, managing director of PZ Wilmar, said in an interview with BusinessDay.

“The industry requires massive investments and the government has to come with policies which will support development of the oil palm industry in a holistic manner,” he added. In 2017, total industry production settled at 970,000 metric tonnes while consumption was 1,355,000 million MT, leaving a deficit of 290,000 metric tonnes. Crude oil palm was among the 41 items excluded from foreign exchange market by the Central Bank of Nigeria in 2016.

The policy, in addition to growing population, added impetus to the earnings of the two dominant producers – Okomu Nigeria Plc and Presco Nigeria Plc – as local demand spiked without corresponding increase in supply. But the situation is gradually changing owing to smuggling of CPO from Malaysia to Ghana, and then to Kano into Nigeria.

“We must do something about smuggling,” Felix Nwabuko, managing director of Presco, told BusinessDay.

Monday, 18 March 2019 12:31

NIGERIA REFINING THE VISION

NIGERIA REFINING THE VISION

Nigeria is the only OPEC member country that imports gasoline (PMS) and holds the dubious distinction of being the largest importer in the world. The Nigerian Bureau of Statistics(NBS) has reported that in Q2 Nigeria reportedly imported over 3.89 million metric tons at a cost of over US$2.7bn.

The local state owned refineries have operated for years at capacity utilisation levels beneath 10% and currently are not operating. Nigeria purport to have 4 refineries with a nameplate refining capacity of 440,00bpd but that is misleading in itself. The only refineries which have operated regularly are the Warri Refining and Petrochemical Company and the 2nd Port Harcourt Refining and Petrochemical Plant. The refining narrative has been one of a litany of ineffectual turn around maintenance and dire management for decades. The current Minister of State for Petroleum Resources Dr Ibe Kwachiku has promised the Nigerians that the country will have no need to further import refined products from 2019. Most commentators regard his bravado as evidence of clear policy ineptitude and a fundamental denial of reality, only time will tell.

The authorities recognise that the current state owned refining model is broken but policy decision makers have been uncertain on how to solves the issues. It si our opinion that the Refineries be sold. Privatisation would create the environment for the investment that is required to operate the refineries profitably. Admittedly Civil Society Organisations (CSO) have protested vehemently against such a policy and it is unlikely to happen prior to the next election. NNPC the ostensible operators have begun the practise of issueing the monthly operating losses, presumably to establish the basis for the rationale for selling the Refineries. The refineries crude supply has been vulnerable to pipeline vandalism with numerous outtages over the years, any sale would need to provide a solution to such vandalism and would create substantial additional cost.

The DPR have issued 72 Refinery licenses over the last decade yet with the exception of the 1,000bpd refinery operated by he Niger Delta Exploration and Production (NDEP) Company at Ogbele, Delta State not a single private refinery has gone into production. It is difficult to conclude anything other than the fact that this state of affairs is a consequence of poor policy and a poor regulatory environment.

Government has sought to regulate the downstream sector in Nigeria creating models and enforcing regulations which create price distortions, dictate product pricing and perpetuate a cycle of inefficiency in the distribution of refined products. Deregulation is a prerequisite for operating profitable refineries. The economics of operating a modular refinery are marginal. A topping refinery with a limited product slate may appear attractive from an initial capex perspective, but most modular refineries do not incorporate fluid catalytic units (FCCU) and as a consequence do not produce high value transport fuels such as gasoline.

Attracting investment for private refineries in Nigeria is no mean feat. A 10,000 bpd refinery with a Nelscon Complexity index of 3.5 will cost a minimum of USD$200m. There will be additional costs depending on how the feedstock is delivered to the Refinery and distributed. A project sponsor would necessarily need to provide USD$60 million in equity funding with a favourable project finance structure of 30:70 loan to value. That would require USD$140m in debt funding. Setting aside any funding requirement that would require the operator to have qualified experience in running such a facility, any lender will require a feedstock supply agreement from a creditworthy counterparty. That usually means NNPC who are reluctant to enter into contractual supply agreements which might habour onerous penalty clauses for non performance. NNPC are prepared to provide 60% of the nameplate capacity of the Refinery on a best efforts basis. To my mind this unecessarily complicates the process of obtaing feedstock and may create additional logistical expenses. There are other options which include entering into agreements with a local crude producer, many of whom experience frequent production shut ins. There is however the question of proximity and feedstock cost to be resolved.

I have long argued that where NNPC enter into a feedstock supply agreement for Refineries producing exclusively for local consumption such transactions should be Naira denominated and on terms of credit which will allow deferred settlement. This will assist in mitigating the fx risk that exists as a consequence of the USD/NAIRA rates brought about by the timing difference between the purchase of the crude and the sale of the refined product.

The Department of Petroleum Resources (DPR) or it successor in title under the PIGB, need to create the optimal fiscal rules and regulations to lend support to the financial model that would be used to fund a refinery investment. It is unlikely that local debt can be accessed by project sponsors and all of the external lenders and prospective investors I have met have at the very top of their requirements; that fiscal incentives are structured in such a manner that they cover the periofd of time required to amortise their investments.

 

The Dangote 650,000 bpd refinery and Petrochemical Complex now scheduled for completion in 2020 is a game changer. It will when it reaches operational capacity invert trade flows for European suppliers and Refiners alike. It will establish Nigeria as an export hub at a time light sweet crudes become increasingly more valuable. Global environmental regulation dictates the increased value of sweet light crudes and a widening of the sweet-sour premium.

The question is how do modular refineries with low NCI operate in a market where Dangote Refinery becomes the dominant actor. What effects does it have on margins and crack spreads. If you take the view as I do , that it is entirely the correct strategy to develop Nigeria as a refining hub that meets it own consumption needs in the absence of regulation, then you must also accept that for foreign direct investors Modular Refineries represent a marginal investment. Such an argument can be proved counterfactually by the absence of any such investments. A number of Chinese investors have made promises to establishin mini refineries but typically in the context of agreements which provide them access to oil and gas concessions.

It is also probable that global trading houses such as Vitol, Trafigura, BP etc may wish to invest in either acreage in Nigeria or the existing refineries which I feel certain will be sold in 2019 as a means to maintain a foothold in the WAF market. The loss of Nigeria as a market for booth European Refiners and Global traders is an adverse event for them but might just benefit Nigeria in the long run.

Monday, 18 March 2019 12:27

IS THE PGB FATALLY FLAWED?

IS THE PIGB FATALLY FLAWED?

Ten years after the Petroleum Industry Bill began its tortuous odyssey which has included the Bill being broken into four portions, both houses of the National Assembly have finally harmonized the Bill's first portion, the Petroleum Industry Governance Bill (PIGB). The PIGB which replaces Nigeria’s main legislation in the Oil and Gas Industry seeks to promote transparency and accountability, establish a framework for the creation of commercially viable petroleum entities, create the governing institutions with clear and separate roles and foster a conducive business environment for petroleum industry operations. This Bill will dissolve The Nigerian National Petroleum Corporation (NNPC) and create three companies out of it; one regulatory commission and two independent companies with shareholders.

Monday, 18 March 2019 12:22

CBN PUMP UP THE T-BILLS

CBN PUMP UP THE T-BILLS

The Central Bank of Nigeria (CBN) plans to raise a total of N1.809 trillion from the debt market, in the first quarter  of 2019.This is according to data contained in the Nigerian Treasury Bills Issue Programme for the first quarter of 2019, posted on the bank’s website on Tuesday. The apex bank said it would raise

 

N823.43 billion from rollover programmes with a maturity period ranging from one to three years.According to the document, 91-day bills vlaued at N51.46 billion will be rolled over, together with 182-day bills worth N164.92 billion and 364-days bill worth N607.05 billion.The apex bank also said N985.93 billion worth of treasury bills would mature during the same period.They are in 91-day, 182-day and 364-day papers worth N59.02 billion, N248.84 billion and N678.06 billion respectively.

 

The CBN sells treasury bills twice a month to help the federal government raise money to fund its budget deficit.It issues treasury bills regularly as a control measure to help banks mop up excess liquidity and control the money supply. Meanwhile, the APEX BANK yesterday injected another sum of $210 million into the inter-bank foreign exchange market. The exercise was in continuation of its periodic intervention in the foreign exchange market.

 

Figures released by the CBN indicated that authorised dealers in the wholesale segment of the market received the sum of $100 million, while the Small and Medium Enterprises (SMEs) and the invisibles segments were allocated the sum of $55 million each.

 

The Director, Corporate Communications Department at the CBN, Isaac Okorafor, confirmed the figures and restated the Bank’s resolve to always meet the request of genuine customers in the various segments of the market.It will be recalled that on Friday, January 25, 2019, the Bank injected a total sum of $289.76 million into retail Secondary Market Intervention Sales (SMIS) and CNY38.70 million in the spot and short-tenored forwards of the inter-bank foreign exchange market.Meanwhile, the naira continued to exchange at an average of N360/$1 in the Bureau De Change (BDC) segment of the market.

Sunday, 17 March 2019 16:10

TIN EXPORTS NIGERIA

TIN EXPORT NIGERIA

 Synterra are able to export high grade tin ore from Nigeria. We agregate the Mining production of a number of artisanal miners and consolidate volumes for exportSynterra has entered into formal partnership ventures with established indigenous, local Miners that have good experience and control producing leases that would benefit from the application of mechanisation (mechanical processes) increasing production to create a Mining business which would deliver  exponential upside to both the Miner and his community and the investor.

Sunday, 17 March 2019 15:51

BERYLLIUM MINING OPPORTUNITIES

The Nigeria Solid Mineral and Mining Sector has in effect made the great leap forward which will now allow investors to take  advantage of the vast mineral potential Nigeria possess. There are numerous undeveloped deposits of solid minerals and Rare  Earth which are bound to become more sought after as the scramble for raw material progresses

 Synterra currently control Exploration Licenses for Beryllium, Tin, Lead and Zinc, Tantalite, Lithium and phosphates. Some of these  properties are producing using direct labour and artisanal miners. Many of these sites require investors to "mechanise" production to vastly increase output and provide exponential upside.Synterra have access to numerous Exploration Licenses for mineral properties with proven reserves and great investor value, risked to meet any investors appetite to find out more contact us at This email address is being protected from spambots. You need JavaScript enabled to view it. quoting Solid Minerals.

 

Our beryllium property in Gwantu, Kaduna State is a worldwide renowned site for both emeralds and aquamarine which we also hols exploration licenses.

Sunday, 17 March 2019 16:08

PROJECT BERYLLIUM NIGERIA

PROJECT BERYLLIUM NIGERIA

 

Synterra have acquired beryllium exploration licenses in Gwantu, Kaduna State which give us exclusive exploration rights for beryllium, acquamarine and emaralds.

 

It is the intention of Synterra  to  Identify a suitable off-taker in the PRC for its beryllium production in Nigeria. Synterra also seek to explore the feasibility  of entering into  a contractual relationship with a suitable smelter (and/or) Refiner. This would take the form  of  a term contract for the off-take or smelting of produced beryllium. We are also prepared to contemplate   joint venture  or special purpose vehicle structures where such relationships might be efficient in adding value to mining projects.

Sunday, 17 March 2019 16:05

REFINED PRODUCT TRADING

PRODUCT TRADING

 

Synterra Energy have been trading in both Crude Oil and Refined products for over 15 years. We import petroleum products and deliver offshore to IOC's operating Drilling Rigs. Importing is can be very profitable but requires vast experience. Synterra have such experience.

 

We are Principal Product Market Traders that operate in the International marketplace as buyers, sellers and distributors of Refined Petroleum Products and Crude Oil. Soltaire Energy are also firmly engaged in the Nigerian offshore as Marine Suppliers as well as being an Oil Services company. Our strategy is to add value along the distribution chain and Supply Network to boost indigenous capacity. We are committed to all the ideals of Corporate, Social and Environmental responsibility and the sustainable development of the Nigerian Oil and Gas Industry

 

There are a number of opportunities for physical trading of refined products which involves importing  gasoil, gasoline, Jet A1 , Bitumen and Base Oils

Many require leasing local storage or entering into a Collaboration Agreement with local tank farm owners.

Importing petroleum products into Nigeria is a risk management exercise which   involves exposure to  foreign exchange risk,  currency default risk,  open market risk, counterparty credit risk and operational risk

Nigerian banks cannot fund petroleum import transaction with credit facilities as all facilities must be collateralized . Interest rates on loans in Naira are prohibitive.  This makes any trade transaction using locally obtained credit  unprofitable.

Trading desk requires access to US Dollars on flexible and competitive terms.

Needs to have an active Naira hedging strategy and margin targets.

Sunday, 17 March 2019 16:03

UPSTREAM OIL AND GAS PROJECTS

UPSTREAM ASSETS AND ACREAGE

 Synterra have sourced and provided a number of funding proposal for the NNPC exploration and funding subsidiary NPDC. We have successfully raised finance for NPDC assets.

  We have sourced funds and arranged finance for assets held by NPDC. The funding arrangements have been for investments into acreage owned by the national oil company and where we have have had to attract investment. Similarly we have raised investment for local indigenous Upstream Operators. We have worked on  numerous Oil Mining Leases (OML) including OML119, OML111, OML65 and OML51. We have also sourced funding for investment in Oil Prospecting Licenses (OPL). We work closly with both the Department of Petroleum Resources, the Ministry and the NNPC where we have developed excellent relationships.

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