[PMIs re-capitalisation to shrink number of operators by 50%] BUSINESSDAY MTN MOBILE NEWSPAPER Friday, Sept 06, 2013 HEADLINES: -- [South Sudan makes $1 billion in oil sales, passes on a quarter to Sudan] -- [NNPC warns oil block buyers may lose operating rights] -- [Nigeria’s interest rates drop as Central Bank repays N97.17bn Treasury bills] -- [Telcos, banks target $35.6bn revenue in cloud-service market] -- [Nigeria’s farming reforms still face hurdles, say companies] [PMIs re-capitalisation to shrink number of operators by 50%] As the clock ticks away towards the December 31, 2013, deadline for all primary mortgage institutions (PMIs) to re-capitalise to the stipulated N5 billion minimum capital base, the number of operators in the sector may likely shrink, going by the current level of capital raising by the institutions, BusinessDay has learnt. Mortgage industry watchers specifically say the shrinkage will be by as much as 50 percent. Presently, there are 83 operators and going by the speculations may drop to about 41. The Central Bank of Nigeria’s (CBN) new operational guidelines for the PMIs stipulates N2.5 billion as the new minimum capital base for PMIs operating at state level, and N5 billion for those wishing to operate at national level. This is a huge challenge for the operators whose minimum capital base is currently at N100 million. “This is not time for tea party,” according to one of the operators who pleaded anonymity, adding that “it is a bit of a challenge and the market is upbeat now as everybody is out looking for equity.” Femi Johnson, the new president of the Mortgage Banking Association of Nigeria (MBAN), expects that, at the end of the day, at least half of the operators would remain in business. “When I say half of them, it doesn’t mean that others will not be in business. It is just that the number will shrink by way of business combination. A lot of people are talking to one another; you find situations where three or more banks are talking of merger while some others are talking about acquisition and so, at the end of the day, the number will reduce which does not mean that some of the operators will fizzle out of business,” he assures. Johnson stresses that the deadline is December 31, quoting the CBN as saying that whatever money anybody was expecting should come in two months before this time and they should be sure that such money was not stolen or terrorist money. According to him, a lot of the operators have decided to operate at state level while a few others are ready to operate at the national level, adding that those who cannot make it to the national level for now can operate at the state and upgrade to the national level later. (Continued) ........ [PMIs re-capitalisation to shrink number of operators by 50%] (Continued) To Subu Giwa-Amu, CEO, FBN Mortgages, this development will impact the bottom line of most PMIs, adding that, with the new capitalisation requirements, the consolidation round will see most of the operators scaled down to a few dozens. Walter Akpani, MD/CEO, United Mortgages Limited, adds that the revised guidelines will bring a positive turnaround in the mortgage industry, hoping that it will, in the first instance, provide a level playing field for all operators, and engender confidence in PMIs. He points out that the revised guideline is an opportunity for the PMI’s to be more creative, envisaging that growth will be witnessed among those PMIs that are able to add value to their customers in terms of product offering and cost of doing business. Anthony Owuye, CEO of Personal Trust Savings and Loans Limited, shares this optimism, adding that when the Federal Government, through the Federal Mortgage Bank of Nigeria (FMBN), gets its acts right by providing social mortgage, the PMIs will be in a position to provide the facility for affordable housing. Some of the operators are quite excited about the ongoing re-capitalisation effort because of its immediate and long-term benefit and expected positive impact on housing. Feelers from the sector indicate that most of the operators are strategising and/or negotiating business combinations in terms of mergers and acquisitions to raise the required capital, while only a few appears to have sorted out their capital raising business. The PMIs have the options of raising capital through rights issue, private placement, public offer, business combination, mergers and acquisition, take-over or downscaling. BusinessDay learnt that many of the PMIs, which have been faced with liquidity challenges are contemplating the downscaling option. ........ [South Sudan makes $1 billion in oil sales, passes on a quarter to Sudan] South Sudan made almost $1 billion from oil sales since resuming production in April, of which it had to pass on a quarter to arch foe, Sudan, for exporting crude through its territory, the oil ministry said on Thursday. The landlocked African nation needs to export the crude, its economic lifeline, through two pipelines crossing Sudan, from which it seceded in 2011 after decades of civil war. The neighbours, who fought one of Africa’s longest civil wars ended in 2005, agreed in March to resume cross-border flows. Juba had shut down its oil production in January 2012 when a row over pipeline fees escalated. Sudan had threatened since April to halt oil exports in a conflict over alleged rebel support but agreed to continue crude flows at a summit of the two presidents on Tuesday. South Sudan sold around 9.1 million barrels of oil for $969 million until the start of September, its oil ministry said in a statement. It had to pay $91 million in fees for using pipelines crossing Sudan and the Port Sudan port, Reuters reports. An extra $147 million Juba paid as part of a package to compensate Sudan for the loss of most oil reserves with southern secession, as agreed in a deal in September. Juba needs to make this monthly payments to Sudan for more than two years. South Sudan is producing 180,000 barrels of oil per day (bpd) and plans to add 20,000 bpd after Sudan abandoned its threat to halt flows, Nicodemus Ajak Bior, the ministry’s press officer, told Reuters. “Technical teams are meeting and plan to increase the production starting within the next two weeks,” he said. “Preparations are on.” He gave no detailed timeline, saying only that it aimed to have an output of 250,000 bpd by the end of the year. South Sudan used to pump 300,000 bpd until it closed all wells in January 2012. Restarting hundreds of wells has proved a challenge, while some oilfields were also damaged during weeks of border skirmishes between the two countries in April 2012. Sudan needs the pipeline fees as badly as the South does the oil sales to stabilize its ailing economy. Oil used to be Sudan’s main export product until southern. ........ [NNPC warns oil block buyers may lose operating rights] Nigeria’s state oil company warned investors interested in three shallow water oil blocks offered for sale by Chevron that buyers may lose the right to operate them. U.S.-based Chevron is selling minority stakes in joint ventures that operate five oil blocks. The majority owner is the Nigeria National Petroleum Corporation (NNPC). Nigeria wants more direct ownership of its oil and gas through NNPC or local firms, leading several oil majors including Chevron to dispose of assets in Africa’s top oil and gas producer. NNPC published a notice in local newspapers on Thursday saying that there had been a ”recent high level of interest shown by various investors in the ongoing divestment programme for OMLs 52, 53 and 55 by Chevron Nigeria”. It reminded those considering investing that, although Chevron currently operates the blocks, the state oil firm has the right to take over the operatorship as majority shareholder, Reuters reports. Chevron owns 40 percent of the blocks and NNPC 60 percent. “Chevron shall cease to be the operator upon assignment of their participating interest,” it said. “Therefore prospective buyers should note that automatic operatorship does not come with the acquisition of any of these blocks.” Not having operatorship poses significant risks for would be investors in the fields, not least that the NNPC’s development subsidiary, NPDC, lacks the finance and expertise. It has usually had to call in a third-party operator anyway. The notice seemed calculated to avoid messy tussles that ensued when Shell sold some oil blocks two years ago. In that case, the buyers, including Poland’s Kulczk Oil Ventures, UK-based Heritage Oil and independent energy firm Eland Oil, thought they had also purchased Shell’s operatorship. But NNPC, as majority owner, handed management of the fields to its subsidiary, saying it wanted to increase the amount of oil it produces and not give away rights to other companies. Chevron’s share of a total of five blocks it is selling amounts to reserves of 200 million to 250 million barrels of crude and condensate, two oil industry sources have said. At least some of the blocks are already producing. Analysts say that when NNPC contracts out the operating of blocks, such a move is a potential avenue for corruption. In May, for example, lawmakers probed contracts in which the NPDC gave two local firms with no previous operating experience lucrative deals to operate blocks that it lacked the capacity to run, with no competitive bidding. Uncertainty surrounding the investment climate and rampant oil theft have shrunk Nigeria’s production to below 2 million barrels per day. In recent months, oil exports from the OPEC member have been the lowest since 2009, when a militant rebellion was at its peak, according to central bank data. ........ [Nigeria’s interest rates drop as Central Bank repays N97.17bn Treasury bills] Interest rates at the interbank market Thursday dropped by 11.66 percent from 15.18 percent on Wednesday to 13.41 percent. Consequently, the Nigeria Interbank Offered Rates (NIBOR) increased across tenor bucket. For instance, call tenor went down to 12.33 percent from 14.45 percent, the previous day. Similarly, 7 days and 30 days tenors dropped from 14.58 percent and 14.95 percent the previous day to 12.70 percent and 13.04 percent respectively, Thursday. Sewa Wusu, Head of Research, Sterling Capital Markets Limited, told BusinessDay in an e-mail response that NIBOR responded to increased system liquidity following the repayment of Open Market Operation (OMO) maturities of about N97.17billion by the Central Bank of Nigeria (CBN). According to him, the N152.71billion repayment in matured Treasury-bills was net off by the auction of the same amount with total subscription of N378.31 billion or 147 percent oversubscription rate. The local currency, Naira yesterday remained stable at the interbank market closing at N163.60/$, data from the Financial Markets Dealers Association (FMDA), have indicated. Naira on Wednesday weakened against the US dollar losing 65 kobo at the interbank market to close at N163.60/$ compared to N162.95, traded the previous day. However, Naira also remained stable at official, bureau de change and parallel markets closing at N155.76/$, N163.50 and N164.00/$. The CBN on Wednesday offered $300 million but sold $266.5 million to 19 deposit money banks at its twice weekly WDAS at N155.76/$. ........ [Telcos, banks target $35.6bn revenue in cloud-service market] ........ Telecommunications operators in Nigeria’s competitive market are seeking greener pastures in cloud computing, judging by the massive financial resources ploughed into data centres infrastructure over the past two years. The total value of the cloud computing service market revenue is expected to reach $35.6 billion by the end of 2013, according to a Visiongain report. Analysts say telcos are angling for a piece of the pie in view of the lull in voice penetration, which is compelling them to seek alternative sources of revenue. A world-class data warehouse is estimated to cost between $20 million and $30 million. For instance, Globacom has already completed a 2,000 square feet data centre in Lagos. The telecoms firm is planning to build a 40,000 square feet data centre in Abuja as part of its first phase of rollout. In the second phase, Globacom will build the second similar sized data centre in Ibadan. This robust data ecosystem would allow the firm provide cloud services to a plethora of industry verticals. Also, MTN Nigeria has deployed a high-grade data centre with 500 square metres of collocation and hosting space in Lagos. By virtue of this infrastructure, the South African company is offering cloud-based services targeted at small and medium enterprises (SMEs) in the country. This is ditto for Airtel, which opened its 1,858 square metre Lagos data centre in 2012, to cater to its subscriber base. ‘Cloud computing’ refers to the use of computing resources (hardware and software) delivered as a service over the internet. It is more commonly used to refer to network-based services, which appear to be provided by real server hardware, that in fact are served up by virtual hardware, simulated by software running on one or more real machines. Such virtual servers do not physically exist and can therefore be moved around and scaled up (or down) on the fly without affecting the end user – arguably, rather like a cloud. The popularity of the term can be attributed to its use in marketing to sell hosted services in the sense of application service provisioning that run client server software on a remote location. “Currently, local clouds are led by telcos hosting services locally. Before the end of 2013, banks are likely to come online and build and merge operating infrastructure,” Rex Mafiana, NetApp’s district manager for West Africa, was quoted in a recent report. To him, banks are stepping up investments in data centres, cloud-based services to meet the mandates of the Central Bank of Nigeria (CBN). “I also think that the market potential for cloud computing is increasing, especially with the cashless initiative of the CBN,” Tope Aladenusi, head, security, privacy and resiliency at Akintola Williams Deloitte, told BusinessDay in an interview. “SMEs, merchants, trader, schools, hospitals, bank, etc., now have to receive and transfer fund electronically. Also, when you have solutions on the cloud, total cost of ownership (TCO) is indeed lower. You do not have to own the hardware, software, provide electricity and broadband internet for your entire customers to access the solution. (Continue) ........ [Telcos, banks target $35.6bn revenue in cloud-service market](Continue) ........ In the midst of implementing International Financial Reporting Standards (IFRS) in 2011, the apex bank announced plans that required lenders to maintain independent servers within Nigeria to manage their data. Nigerian-owned Inlaks Computers has designed a number of private clouds for clients like FirstBank, UBA, and the CBN. The CBN has also clearly stated its desire to cut banks’ operating cost by pooling resources, such as power and IT systems. Such moves are encouraging to grow domestic cloud-hosting capacity. Nigeria has a cloud computing market potential of $1 billion, but broadband infrastructure bottlenecks is a critical drawback hindering the steady adoption of cloud services. “There are infrastructure challenges hindering the growth of cloud computing, but we are assured that the challenges are surmountable. Stakeholders in telecoms are working tirelessly to not just improve internet penetration but reduce the cost of broadband access,” Bolaji Finnih, managing director of RightClick, a local tech firm, told BusinessDay. “Although, there are many benefits to adopting cloud computing, there are also some significant barriers to adoption. One of the most significant barriers to adoption is security. There are also issues regarding compliance, privacy, infrastructure and legal matters,” he added. “Cloud adoption will be a clear business strategy requirement for most firms over the next three to five years,” Richard Edet, formerly of German software maker, SAP, was quoted as saying, in a report. Interestingly, cloud computing is also receiving strong push from the public sector. The Federal Government intends to cut down its spend on ICTs by embracing cloud computing services. ........ [Nigeria’s farming reforms still face hurdles, say companies] Nigeria is reforming its farming sector to bolster production and draw investment but companies this week said more needs to be done to tackle entrenched corruption, poor infrastructure and rogue government agencies. Nigeria’s annual economic summit focused on agriculture for the first time, in line with President Goodluck Jonathan’s commitment to fixing Nigeria’s biggest employer. Agriculture Minister Akinwumi Adesina, who has been praised by donors and businesses for his efforts, was keen to stress the success of reforms began two years ago. He said subsidies used to reduced the cost of fertiliser for farmers were not longer managed by corrupt politicians but instead were given directly to farmers. He said food imports had fallen by 850 billion naira ($5.2 billion) and food production was up by 8 million tonnes, helping to create 2.2 million new jobs, Reuters reports. The government wants to add 20 million tonnes of domestic food production by 2020 and rice, corn, sorghum, palm oil and cocoa have already increased, Adesina said. The world’s second-largest importer of rice, Nigeria aims to become self-sufficient by 2015 after introducing a 100 percent tax on polished rice imports this year, likely to mostly affect countries like India, Thailand and Brazil. Security sources and farmers have said one backlash has been a rise in smuggling of rice and sugar from neighbouring countries and into ports. Higher cassava output has been used to make flour, reducing wheat imports mostly from the United States by almost 9 percent, Adesina who noted bank lending to agriculture had risen to 25 billion naira this year from just 3.5 billion in 2012. (Continue) ........ [Nigeria’s farming reforms still face hurdles, say companies](Continued) ........ Duties on agricultural equipment have been scrapped and tax breaks given to companies willing to invest in both farming and industrial processes, as well. The country’s reforms have drawn new foreign investors such food giant Cargill, seed company Syngenta and brewer SABMiller, while Dangote Sugar and others are investing more. However, many companies asked to speak at the summit gave a less rosy picture, saying state and local governments still extort unofficial payments, while officials at ports and customs either worked around government policies or outright ignored them. Confusing laws on land, much of which is owned or claimed by government officials, also mean it is difficult to expand. That has left 60 percent of Nigeria’s arable land fallow, farmers say. RHETORIC VS ACTION “We’re still battling with the basics; visa processing times, port delays, access to credit, transport systems. Rhetoric is all we are getting. It’s time to walk the walk,” said Alan Jack, managing director of Shonga Farms, a mainly poultry and milk farming group which supplies the Lagos branch of Kentucky Fried Chicken, owned by Yum! Brands. Jack said imported chicken from Brazil cost 135 naira per kilo, while a chick in Nigeria cost 180 naira, making government plans to emulate its South American rival unrealistic. “Ports would scare the life out of anyone. It’s the worst thing about your system,” said Calvin Burgess, chief executive of Dominion Farms, a U.S.-owned firm looking to farm rice in Taraba state. He said $10 million of agriculture equipment was delayed for almost a year because customs and other agencies sought bribes and noted Dominion had operated in Kenya for 10 years “without anything like these problems”. The government says port reform is a key policy, but investors say progress is slow. Industry players were also critical of Nigeria’s dilapidated road network and troubled power supply noting it is often more profitable to ship produce to the U.K. rather than transport it from Lagos in the south to the biggest northern city, Kano. “We don’t benefit from any infrastructure put in place. We have to build our own roads and provide our own electricity,” said Gbenga Oyebode, chairman of palm oil firm Okomu Palm, said. Nigeria is privatising much of its power sector, which should help improve electricity shortages that hurt the agriculture sector. Nigeria’s reforms are needed to reduce reliance on a struggling oil sector and cut a $11 billion food import bill. ........ 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Posted on: Mon, 16 Sep 2013 22:34:54 +0000
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