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NIGERIA: Power Privatisation Process was Scuttled by Vested Interests

A former Minister of Power, Prof. Bart Nnaji, has stated that the power privatisation process that led to the handing over of Nigeria’s power assets to the private investors, in line with the Electric Power Sector Reform Act of 2005, was scuttled by vested interests of the programme.

Speaking last night on Arise Television, a sister broadcast station of THISDAY Newspapers, Nnaji noted that the two criteria set out under the privatisation programme to determine qualified investors were financial capacity and technical competence.

Nnaji, however, alleged that at a certain stage of the process, these two requirements were scuttled, stressing that some of the investors who bought the assets do not have the capacity to raise funds.

“Some of them have financial capacity but not all. The distribution companies were not sold based on the highest price but to those who will reduce the losses. So, you have to invest money. But many of the distribution companies do not have the capacity to raise funds,” he explained.

Nnaji also debunked the allegation by some of the investors that the workers of the defunct Power Holding Company of Nigeria (PHCN), who were opposed to the privatisation of PHCN assets did not allow the investors access to the assets for the purpose of due diligence.

According to him, the federal government deployed soldiers to guard PHCN assets and also ensure that investors were allowed access to the assets slated for privatisation.

The former minister argued that there was no investor who wanted to gain access to the assets but was denied access by the workers.

“The unions were opposed to the privatisation but there was no investor that wanted to go into the assets and conduct due diligence but was not allowed to go because we deployed soldiers. The issue is simply that they don’t have the money to invest,” he said.

Nnaji noted that another major constraint facing the investors is inadequate gas, adding that the International Oil Companies (IOCs) have failed to meet their obligations on the supply of gas to the domestic market.

According to him, if the country does not invest in gas supply to power the electricity infrastructure, the country will continue to repeat the same story of inadequate electricity supply even in the next five years.

“It is an important decision we have to take. When you are going to invest in asset, you have to be sure where your fuel will come from. That is due diligence. But there are serious constraints in gas in Nigeria. The amount of gas that has to go into the domestic market has to be established. The international oil companies are not meeting their obligations,” he said.

Nnaji also blamed weak transmission infrastructure for the erratic power supply in the country, saying that the transmission facility cannot transmit up to 6,000 megawatts.

“We have two major constraints. We have the gas constraint and the transmission challenge. As of now, we can’t transmit 6,000 megawatts. It is about investment,” he added.

To address the country’s power deficit, Nnaji called for the introduction of cost-reflective tariffs and the concessioning  of the Transmision Company of Nigeria (TCN) to a number of companies.

“One way to solve the problem is to concession TCN to a number of companies. There should also be cost-reflective tariffs to allow producers to recover their costs,” he added.

According to him, having small distribution networks with embedded generation similar to the system in Aba, Abia State, is also one of the ways to move the country’s power sector forward.

“There is nothing that stops a system fashioned that way from delivering world class power,” he said.

Nnaji also blamed politics and those who benefit from the current poor power situation for the failure of successive administrations to solve the problem of inadequate power supply in the country.

CBN auctions $418 million to agric, aviation, oil sectors

Okorafor

• Apex bank pledges to sustain forex supply 
The Central Bank of Nigeria (CBN) has auctioned $418 million at the marginal rate of N310 to a dollar to airlines, agriculture, petroleum and raw materials sub sectors.

The CBN acting Director, Corporate Communications, Mr. Isaac Okorafor said in Abuja that the $480 million offered at the weekend was in addition to the $350 million sold as wholesale auction for travel allowance and school fees at the same period.

He said that in the weeks ahead, the CBN would further sustain its intervention through the sale of foreign exchange to all segments of the market, like the interbank and the Bureau de Change segment.

“The bank will sell short tenured forwards of seven to 30-day maturity to meet demand of manufacturers and all other foreign exchange users. These significant injections of foreign exchange into the market should reassure all foreign exchange users of our determination to continue to meet all legitimate forex demand in the market,” he said.

Okorafor reiterated the bank’s commitment to achieving exchange rate stability in the Nigeria market.

The CBN had in recent months injected dollars to the inter-bank and Bureau de Change foreign exchange market in its bid to sustain forex supply to different categories of users.

This translated to the appreciation of the naira from an all time low of about N560 to a dollar, to N355 within two months.

However, in the last two weeks, the Naira began to weaken again against the dollar, which was attributed to alleged hoarding of the greenback by commercial banks, and insufficient supply to the BDC segments and other stakeholders.

To remedy this, the CBN had threatened to penalise any bank refusing to sell forex to customers.

Also, forex supply to the BDC was increased from $8,000 per week to $10,000. The naira now sells at N405 to a dollar in the parallel market.

http://guardian.ng/news/cbn-auctions-418-million-to-agric-aviation-oil-sectors/

WHY PRIVATIZATION HAS NOT IMPROVED POWER SUPPLY IN NIGERIA

While gas shortages, inadequate transmission, and losses pose critical bottlenecks, the main challenge for the power sector in Nigeria is the lack of liquidity (or weak commercial viability) of actors along the value chain – from gas-to-power production to power generation, transmission and distribution. Once there is sufficient flow of funds and a visible path to profitability, investments in improvements and expansion will alleviate losses as well as gas and transmission inadequacies.

Insufficient power supply is perhaps the least understood yet the most widespread developmental challenge in Nigeria, affecting consumers across locations, sectors and socio-economic strata. It is widely believed that insufficient power supply in Nigeria is due to low generation capacity. It may surprise many that Nigeria utilizes only a third of its available generation capacity: while only 3500-5000 MW is typically operational, Nigeria’s installed generation capacity stands at 12,522 MW. You may ask, why would a country starved for power have so much idle capacity? It is a combination of gas supply shortages and inadequate transmission capacity to wheel the entire available capacity. 

Analogically, idle generation is like a car with a large engine capacity but short on fuel (gas supply) and with inadequate tires (transmission). Beyond the issue of idle generation, a staggering 40 percent of the energy generated is lost due to the Aggregate Technical, Commercial and Collection (ATC&C) losses, well above the North American and European average of 8 percent.

The key challenges are further discussed in more detail below:

Lack of liquidity and high losses

Distribution companies are not collecting enough cash from consumers to cover the costs of power production and delivery. Hence, the bulk trader – the Nigerian Bulk Electricity Trading Plc (NBET) – is unable to pay generation companies due to debts owed by distribution companies. In Q4 2016, on average, NBET received payments for only 17 percent of power sold to distribution companies. The deficits are caused by chronic losses coupled with poor collection mechanisms. Given that the power sector investment framework is dependent on NBET’s ability to absorb risks of on-payments across the value chain, there is very little symmetry between power generation and cost recovery. Market inefficiencies at the current scale will only drive away investment and pile up debts.

Insufficient transmission capacity and public management of the Market and System Operators
The Transmission Company of Nigeria (TCN), which is still publicly owned, has been inefficient in technically and commercially operating the sector; this inefficiency finds its origins in the decades of public sector management that plagued the electricity sector prior to privatization. The transmission system (or national grid) is insufficient to wheel the total available generation capacity and the government has been slow to expand the grid. When the sector was vertically integrated under NEPA, there were no proper accounting for energy generated and sold. In other words, there were no defined trading points between actors along the chain.

Insufficient and Unstable Gas Supply
Despite huge natural gas reserves (being the country with the 9th largest proven reserves of natural gas), Nigeria is yet to fully harness gas production for its domestic power needs. Only 56 percent of available gas-fired generation capacity is operational, mostly due to lack of gas supply. Experts argue that the gas shortage is primarily due to economic disincentives in form of the Domestic Supply Obligation (DSO), which prices gas-for-power below competitive market rates. Other challenges are inadequate gas infrastructure and recurrent vandalism. Going by Nigeria’s energy mix (85 percent gas-fueled), the regulator must ensure that consumers cover costs plus a reasonable rate of return on investment for both the power and gas-to-power value chains.

What can be done to address Nigeria’s challenges?
Notwithstanding power sector privatization, the government remains a vital player in enabling investment in the sector. Power transmission, regulation, training, financial guarantees, are among areas where the government’s role is critical to ensure the functional performance of the sector. The current Minister for Power, Works, and Housing, Babatunde Fashola, has announced that the government’s strategy for transforming the power sector is to attain ‘incremental, steady, and uninterrupted’ power supply. To achieve incremental power, the government aims to solve the ‘problems of yesterday’, primarily by reducing losses and resolving legal and regulatory disputes holding back projects. Attaining steady power entails increasing generation capacity on the grid while promoting captive and off-grid power generation. When generation exceeds the demand for power, the government will ensure uninterrupted supply by consolidating commercial viability of the firms and promoting energy efficiency.

In addition to the on-going efforts by the government to grow Nigeria’s power sector, we propose the following interventions:

Ease liquidity constraints
Additional funds (through government loans) will help firms along the chain partially offset accumulated debt incurred from collection shortfalls, improve credit-worthiness and overall service delivery in the long run. The government’s recent 702 billion naira disbursement to NBET through the Economic Growth Recovery Plan, in March 2017, would help ease liquidity constraints in the near-term. While this is step in the direction, pumping public funds into the highly inefficient market bears the risk of even greater losses and slower progress towards a cost-reflective power market.

Facilitate transactions and boost generation
The government should assist project developers by minimizing regulatory hurdles and facilitating access to finance and financial guarantees, such as the guarantees used in the financial closure of the Azura IPP. Additionally, the government should seek ways to unlock alternative sources of infrastructure finance such as the Pension Funds and Sovereign Wealth Fund. The National Integrated Power Projects (NIPPs) should also be accelerated to increase generation and transmission capacity.

Reform the transmission sector
It does not help that the government is holding on to transmission. The role of TCN transcends technical management of the grid as the System Operator (SO). They also function as the commercial administrator of entire electricity market through their Market Operator (MO) function. The transition of TCN into an Independent Systems Operator (ISO) and Transmission Service Provider (TSP) should be accelerated to promote market confidence.

Reform the gas sector
Liberalizing the gas-to-power market and removing the DSO cap (which prices local gas-for-power below competitive international market rates) would be a step in the right direction. However, in reality, it does not matter whether international gas prices align with the DSO price because there are unique risks and costs in operating in Nigeria. Once there is sufficient profit (resource rents) in the gas-to-power value chain, investors will see opportunity and make it work.

Develop a strategy to ensure electricity affordability
Policymakers and regulators should find ways to ease tariff burden on consumers by re-evaluating the tariff structure based on the purchasing power of consumers. Developing a strategy to manage the affordability factor, while ensuring that the total quantum of tariff is sufficient to cover investments in the entire chain will improve collection and promote liquidity across the value chain.

Expand access to 0ff-grid electricity and renewable energy
Attaining Nigeria’s aggressive electrification targets of 90 percent access by 2030 will require a two-pronged approach. While expanding on-grid power, the sector should also facilitate the development of business and consumer solutions for off-grid energy. Renewable energy companies serving the off-grid market should be supported and barriers to entry (such as high import duties and access to finance) should be reduced.

If Nigeria is to diversify and industrialize, its needs to fix its power sector because reliable power supply is vital to growing the share of manufacturing and service-based sectors. This much is clear: Nigeria has a huge power-hungry and viable market for investment, along with abundant energy resources. But unfortunately, this is also clear: the liquidity crisis has put the sector in dire straits and there seems to be a lack of appreciation of the importance of power supply to Nigeria’s economic development. 

To attract investment in power, the government must re-think its approach to governing the sector by shifting from traditional risk-averse and rigid regulatory frameworks (such as those applied in its natural resources sectors) to dynamic regulatory tools with sound risk-management mechanisms that promote competition, while protecting its broader societal goals.

DO BUSINESS, STAY MOBILE WITH TECNO PHONEPAD 3

Clearly, Africa’s frontier phone maker, TECNO Mobile, is on a roll as the company unveils two of its latest devices almost consecutively. Barely a week ago in Nairobi, it launched its Camon CX smartphone, and just yesterday, March 27, 2017, it launched its PhonePad 3, at the Sheraton Hotel, Ikeja, Lagos.

There is no doubt that the Chinese mobile multinational is one of the most innovative in the mobile industry as they strive to keep up with trends. As the world evolves, TECNO Mobile evolves with it. What else could account for the latest PhonePad 3? Aptly dubbed ‘Do business, stay mobile’, the PhonePad 3 is a user-friendly high-end device designed to meet the needs of professionals and business owners on the go.

“With the release of the PhonePad 3, we want to continue to show that TECNO is not taking its foot off the pedal in bringing very competitive smartphones to users across the African mobile market,” Emeka Onuh, the retail sales manager of TECNO Tablet, said at the launch. Adding that the new device improves and facilitates proper business communications, efficiency and productivity.

Tecno PhonePad 3 features



Sleek appearance – TECNO PhonePad 3 is a slim sleek beauty with a metal unibody design and brushed metal back that comes in three colours – grey, champagne gold, and blue. The beauty has a 7.5 inch IPS HD screen, with a screen-to-body ratio reaching up to 74 percent. The phablet also flaunts a 13-megapixel rear camera with dual true tone LED flash and 5-megapixel front camera.

Improved productivity – The PhonePad 3 has a non-removable 4100mAh battery that could last for 48 hours when fully charged. It is equipped with a modest quad-core 1.3 GHz MediaTek MT8375W processor and a 2GB RAM for a smooth and lag-free operation. Plus a 16 GB internal memory that is expandable to 128GB via MicroSD card

Swift connectivity – The new device comes with a dual micro sim setup and ultra-fast 4G LTE connectivity. Not forgetting the fingerprint sensor by the side for easy unlocking.

Essential business apps: The phablet comes with pre-installed premium business applications including CamScanner and Camcard. As the name implies, the CamScanner scans documents at a single tap. And with Camcard, users can easily scan business cards with the phone camera.

The new TECNO phablet will be one of the most sought after devices to grace the African mobile market this first quarter of 2017. And with the PhonePad 3 costing about N75, 000($245), it is clear that Africa’s frontier phone maker is sticking to its novel strategy of a pocket-friendly price while it keeps raising the bar on technological advancements.

Expectations that Gordhan will go, leave South African markets on edge

JOHANNESBURG (Reuters) - South Africa's currency and bonds weakened again on Wednesday as expectations rise that President Jacob Zuma will sack finance minister Pravin Gordhan following the funeral of anti-apartheid icon Ahmed Kathrada later in the day.

"Speculation is that the duo may be fired tomorrow evening, after Uncle Kathy's funeral," Zuma's one-time protege Julius Malema said on his Twitter feed, referring to Gordhan and deputy finance minister Mcebisi Jonas.

Malema, the firebrand leader of the Economic Freedom Fighters (EFF) party, is also a former leader of the Youth League of Zuma's ruling African National Congress (ANC).

The rand fell by 1 percent against the dollar in early trade. Local assets have been under pressure since Zuma ordered Gordhan on Monday to abandon an investor roadshow abroad and fly home, triggering speculation about his future. Zuma has not given a reason for the recall.

Gordhan is seen as an emblem of stability by many investors and his comment on returning to South Africa on Tuesday that he was still the finance minister helped trim the rand's losses.

Zuma is expected to act at or after a cabinet meeting later on Wednesday, the start of which has been postponed to enable ministers to attend Kathrada's funeral.

"The reshuffle is imminent," Daniel Silke, a director at Political Futures Consultancy said. "I think it's coming once the funeral is over, it's just a matter of time."

Kathrada, an anti-apartheid activist who was sentenced to life imprisonment alongside Nelson Mandela, was an open critic of Zuma and the president will not attend his funeral in compliance with the wishes of Kathrada's family.

Njabulo Nzuza, the Secretary General of the ANC Youth League, called for cabinet changes.

"There should be no panic in the country, a cabinet reshuffle, which can only be done by the president, is part of normal government operations," he said in a statement.

Talk Radio 702 said Gordhan's dismissal had been discussed on Monday at talks between Zuma and the South African Communist Party, allies of the ANC.

Some pundits say Gordhan is being pressured by a faction allied to Zuma, which has criticised his plans to rein in government spending as the economy stagnates.

Nigeria, Norway rally investors on non-oil export promotion

•Government targets $18 billion by 2019

To boost bilateral ties and increase inflows of foreign direct investments, stakeholders within Nigeria and Norway have sought opportunities in the non-oil sector in addressing economic challenges bedevilling the two nations.

Besides, the Nigerian Export Promotion Council (NEPC) has identified a potential earning of $18 billion from non-oil export sector by 2019 if opportunities in the sector are properly harnessed.

According to stakeholders, the challenges impacting both on the Nigerian and Norwegian national economies have created unprecedented opportunities to strengthen commerce and investment ties between our countries.

Speaking at the Nigerian Norwegian Chamber of Commerce’s quarterly business roundtable in Lagos, the Chairman of the Chamber, Chijioke Igwe stated that though the global economy is undergoing both structural and cyclical adjustments, due in part to the collapse of energy prices, there are significant areas of complement across the economic landscapes of both Norway and Nigeria.

He said: “Both our countries have had a long and productive trade relationship over many years; both economies are also committed to economic diversification from the traditional engine of growth, the energy sector

“While Norway has a highly developed industrial and services base, Nigeria presents viable investment potential, with the wealth of human capital, agriculture, mineral resources, infrastructure and value added manufacturing”.

The Chief Executive Officer of NEPC, Olusegun Awolowo stated that the Federal Government’s agenda to replace oil as the major national foreign exchange earner will see the country’s earnings growing to $30 billion by 2025 if there is an increase in production output from farms, while exporters explore ways to penetrate new markets.

Awolowo stated that the outputs from the farms are very low to meet local demand, even as pressure rises to increase foreign exchange earnings from non-oil export.

“The world’s largest exporters tend to be wealthier than other nations even as only three countries in the top 20 exporters depend mainly on oil exports. It is time for Nigeria to plan for a future with zero oil. As such we are focusing on sectors based on financial value, degree of complexity and products where the nation has comparative advantage”, he added.

Citing the need to deepen trade ties between Nigeria and EU countries, the Head of Trade and Economics section, EU Common Embassy in Nigeria, Filippo Amato stated that the body is interested in the development of the country and would not jeopardise its growth.

Igwe added that the NNCC was established in order to create a platform to facilitate trade and investment, remove perception barriers and mitigate transaction risks that its members might experience in exploiting the commercial potential in Nigeria.

NIRSAL to facilitate new N60billion loans for 2017

To expand lending to 3.8 million farmers by 2026

The Nigerian Incentive Based Risk Sharing System for Agricultural Lending (NIRSAL), plans to facilitate about N60 billion in fresh commercial bank lending to farmers in the current financial year.

The agency also said it will execute the $300 million African Development Bank, AfDB’s Youth Enable Programme, and operationalising the $500 million Mechanisation Partnership with the Brazilian Government and a host of others.

The moves are geared toward enhancing access to credit by farmers as well as making agribusiness more attractive to the youths to curtail the high rate of rural-urban migration.

The Managing Director of NIRSAL, Aliyu Abbati Abdulhameed, disclosed this in Lagos, last week, while delivering a paper titled: “Powering Nigerian Agriculture Through Innovative Financing: The NIRSAL Edge” at the BusinessDay Agribusiness & Food Security Summit 2017.

In a statement from the agency, Abdulhameed also expressed NIRSAL’s readiness to play its role in the realisation of the economic recovery plans, while listing its key plans for the year.He said: “NIRSAL’s broad objective is to increase lending to 3.8 million farmers by 2026 through cooperatives and value chains.

“NIRSAL also plans to reduce the break-even interest rate to agribusiness borrowers from 22 per cent to between 7.5 per cent and 10.5 per cent.”Commending the Federal Government’s efforts in making agriculture one of the six priority sectors of focus in the Economic Recovery Growth Plan (ERGP), the NIRSAL boss said the decision is the right one because agriculture has unrivalled capacity in job creation, poverty reduction and inclusive economic growth.

He noted that the current economic context and the changing global economy demanded that Nigeria moved with greater urgency to fix agriculture.He said the agency’s readiness to play its role, is a tribute to the farsighted vision of President Muhammadu Buhari, the leadership of Godwin Emefiele, the Governor of the Central Bank, and the active support of Chief Audu Ogbeh, the Minister of Agriculture and Rural Development.

Abdulhameed asserted that the Buhari administration’s strong emphasis on agriculture is very evident in the series of practical programmes and initiatives, with support for agencies such as NIRSAL underscoring this clear commitment.

In his words: “It is heart-warming indeed that the Federal Government is going beyond the much talked about potential of agriculture to actually demonstrating, through practical policies and initiatives that it is committed to transforming agriculture for the good and progress of the country.”

Abdulhameed argued that NIRSAL is a key part of the government’s multi-pronged strategy to move agriculture beyond potential to significant progress, adding that its role is to help solve the longstanding problem of inadequate financing of the agricultural sector by leveraging its $500 million fund to incentivise lending to the sector.

According to him, NIRSAL does this by ‘de-risking’ the agricultural financing value chain, building long-term capabilities and institutionalising agricultural lending through risk sharing with banks, technical capacity building as well as the provision of incentives to encourage bank lending.

Speaking on the impact of NIRSAL on lending to agriculture while operating as a transition office between 2012 and 2016 – a period he termed as, NIRSAL 1.0, Abdulhameed said the institution provided bank guarantees totalling N64.142 billion for agricultural projects.

Similarly, he said NIRSAL facilitated bank finance worth N695million ($3.5 million) for the purchase of 227 tractors to Tractor Owners and Hiring Facilities Association of Nigeria (TOHFAN), and Small Scale Women Farmers Organisation, to ensure access to tractors at low prices.

Also, within this period, NIRSAL boosted capacity of commercial banks by providing technical training for 187 bank desk officers, 185,000 farmers and 205 extension workers across the country.

Abdulhameed informed participants at the summit that NIRSAL is now fully staffed, and is ready for full operations nationwide. He announced 2017 as marking the start of NIRSAL 2.0, a period he said will be defined by pro-active action and deployment of strategic projects that will fix lingering problems in the agricultural value chains and create impact.

Also present at the event were Senator Heineken Lokpobori, Honorable Minister of State for Agriculture and Rural Development, Prof. Ruerd Ruben, Research Coordinator Food Security, International Value Chain & Impact Assessment at the Agricultural Economics Institute of Wageningen University, the Netherlands and Alhaji Sanni Dangote of Nigeria Agric Business Group (NABG) amongst others.

Source:The Guardian.

Irish musician acquires Nigerian firm for $80m

A private equity firm with interest in agriculture and technology, 8 Miles, on Tuesday acquired minority stakes worth about $80m in the Nigerian biscuit company, Beloxxi Industries Limited.

Irish pop star, Sir Bob Geldof, is the founder of 8 Miles.

The company also bought a minority stake in Blue Skies, an ethical fruit business that looks to expand into Nigeria and neighbouring West African countries.

Blue Skies, which operates in Ghana, Egypt and South Africa, did not disclose the financial details of the transaction.

However, its Chairman and Founder, Anthony Pile, said in a statement that Blue Skies and 8 Miles shared the vision “for improving the lives of people, protecting the environment and making enough money at source to advance our objective to supply best quality products to the people of the world.”

On the Beloxxi deal, the consortium of investors includes Nigeria-based African Capital Alliance and DEG, a subsidiary of the German KfW Development Bank.

Geldof had in August 2016 shown interest in Nigeria’s snacks industry and had sought to invest in Beloxxi, makers of Beloxxi cream cracker biscuits, towards boosting Africa’s biggest economy.

He had said that growth in the snacks market of large cities, such as Lagos, had been strong in recent years, “but the investment comes as the country struggles through the worst economic crisis in decades, driven by low oil prices and worsened by a failing government response that has included capital controls and import restrictions.”

Inflation had soared to more than 16 per cent at the end of 2016 and companies, including Beloxxi, along with multinational giants such as Unilever, had been forced to increase their prices, hitting consumers at a difficult time.

The President and Chief Executive Officer, Beloxxi, Mr. Obi Ezeude, said that before the $80m lifeline, the company reduced its dependence on imported raw materials and was striving to keep the prices of its biscuits affordable for the poorest Nigerian consumers.

Given the market challenges, he said that Beloxxi had been forced to increase the price of its smallest-sized product, a three-biscuit package of 21 grams, to N15.

Ezeude added, “With this equity investment, we will expand our current operations from five production lines to about 10 production lines. That will increase our capacity from 40,000 metric tonnes to 100,000 metric tonnes of Beloxxi cream crackers per year.”

“This is a landmark transaction that demonstrates the capacity for growth in the manufacturing sector in Nigeria. The investment will further increase the capacity of Beloxxi Industries and enable it to explore the export market, accessing the much needed foreign exchange whilst maximising the potential for growth in Nigeria.”

Source:Punch

Fading oil industry brings economic uncertainty in Gabon

* Oil sector accounts for 45 percent of gross domestic product

* Oil revenues declined as prices fell, companies cut jobs

* Opposition tapped into anger about economy

By Gerauds Wilfried Obangome and Edward McAllister

LIBREVILLE/DAKAR, March 28 (Reuters) - Charles Lekabi lived comfortably as a driver for an oil company in Gabon's industrial town of Port Gentil until he was laid off three years ago.

"Today, I struggle to pay my rent," said Lekabi, who worked for French oil company Total for seven years before he was let go for economic reasons.

"Since I was laid off, I bought a car to do taxi rides. At least with this car I can continue to feed my family."

A steep drop in oil prices in 2014 hit the oil industry worldwide. In OPEC member Gabon, production is in decline, the recovery is slow and may not come at all.

The oil sector has accounted for 80 percent of exports, 45 percent of gross domestic product, and 60 percent of budget revenue on average in the past five years, according to World Bank data.

With revenues declining and the population feeling the squeeze, President Ali Bongo is facing the strongest opposition in years and some social upheaval including a spate of strikes by oil workers demanding better pay and new contracts.

"Depleting oil revenues are pushing Gabon's economy towards the cliff edge," said Maja Bovcon, senior Africa analyst at global risk firm Verisk Maplecroft.

"Gabon is confronted with an unlucky combination of political and economic circumstances."

Bongo said that economic growth last year was expected to have reached 3 percent, a slowdown from the average of 6 percent since he first took office in 2009.

The budget was cut by over 5 percent in 2017 because of declining oil production and prices. Income per capita rocketed from $3,090 in 2000 to $10,410 in 2014 as oil prices shot higher. But it fell in 2015 for the first time in 15 years, as oil prices slid.

Companies including two of the largest producers Total and Royal Dutch Shell have scaled back, costing thousands of jobs. Exploration in deep water off the pristine Atlantic coastline that was supposed to make up for falling onshore output has yielded little.

The former French colony is also still reeling from a disputed election last September that turned violent in the beachside capital Libreville, harnessing anger among poor people who say oil revenues never trickle below the moneyed elite.

Bongo was initially handed victory, but opposition leader Jean Ping called the election a sham, declared himself president and demanded a recount in the Haut-Ogooue province, a Bongo stronghold where initial results showed the president won 95 percent of the votes on a 99.9 percent turnout.

The case went to the Constitutional Court, which ruled in Bongo's favor.

Bongo, whose family has ruled the country of nearly 2 million for 49 years, has said he will diversify the economy beyond oil into mining, forestry and agriculture. He aims to rein in spending and increase social programs, though it is unclear how much progress has been made so far.

Bongo said last year Gabon was building a manufacturing industry for wood products instead of only exporting the raw commodity from its forests and was developing mining by producing manganese. He also said the government was distributing land to boost agriculture.

The International Monetary Fund said that progress had been made to diversify the economy but recommended "decisive action" to address short-term revenue problems, without elaborating.

In a statement in February the IMF said it had begun discussions about a "possible financial arrangement" with Gabon.

GETTING QUIETER

Oil companies are also looking closely at their operations in Gabon where production has dropped over 40 percent from a 1997 peak of 370,000 barrels per day (bpd), according to the U.S. Energy Information Administration.

Last year, output reached just 230,000 bpd, according to consultancy Wood Mackenzie, which expects output to drop to 220,000 bpd in 2017. Accelerated declines are forecast in 2018 and 2019.

Citing volatile oil prices, Total in February said it had sold stakes in some of its mature Gabon assets to London-based Perenco. Shell, which has operated in Gabon for over 50 years, last week announced that it has sold its onshore assets in Gabon to Carlyle Group for $587 million.   

 Drilling in offshore prospects, where the hope for new oil is highest, has been at a standstill since August 2016, according to Drillinginfo, which monitors rig activity in the region. There were nine offshore rigs operating in 2014, four in 2015, one in 2016 and none today, its data shows.

"In Gabon, it is quiet and getting quieter," said Andrew Hayman, an Africa specialist at Drillinginfo. "There has not been the success that there has been in Congo to the south."

Total this month said it had started production from its Moho Nord site off the coast of the Republic of Congo.

In Gabon, 3,000 oil workers have been laid off during the downturn, the oil workers union ONEP told Reuters. It said the oil sector and connected activities now account for between 8,000 and 11,000 jobs.

Oil worker strikes have flared up and interrupted production this year, fueled by what ONEP described in a statement this month as "flagrant violations of human dignity".

At one site run by Maurel et Prom Gabon SA soldiers took over the site in February to ensure operations continued.

Former oil workers see their options dwindling.

Estelle, 27, a former office worker for Perenco, was laid off two years ago, for economic reasons. She is still unemployed.

“Today, I have to start from zero,” she said.

($1 = 612.1700 CFA francs)

Nigerian Banks lose N1trn current account deposits in February

TOTAL current account deposits of banks fell by N1 trillion in February, implying banks generated fewer deposits during the month due to the biting effect of the economic recession. 

This was one of the highlights of the Depository Corporation survey for February 2017 recently published by the Central Bank of Nigeria (CBN). Among other things, the survey revealed that total demand (current account) deposit of banks fell by 10.75 per cent to N8.6 trillion in February from N9.636 trillion in January. 

Similarly, currency outside the banks declined month-on-month (m-o-m) by 1.16 per cent to N1.61 trillion. Consequently, Narrow money supply declined m-o-m by 9.36 per cent (and 11.35 per cent year-to-date, y-t -d) to N10.21 trillion.

According to the report, broad money supply, M2, moderated month-on-month by 4.34 per cent to N22.37 trillion following a 0.46 per cent increase in Net Domestic Assets (NDA) to N13.82 trillion and an 11.21 per cent decline in Net Foreign Assets (NFA) to N8.55 trillion.  The increase in NDA followed a 0.54 per cent  m-o-m increase in Net domestic credit to N26.77 trillion which more than offset a 0.62 per cent increase in other liabilities (net) to N12.95 trillion. 

Monetary policy stance 

On asset creation, the public sector continued to crowd out the private sector as credit to the government increased m-o-m by 2.90 per cent to 4.41 trillion, outpacing the 0.09 per cent increase in credit to the private sector to 22.36 trillion. The mild growth in credit to the private sector may have also been informed by relatively high non-performing loans. 

In February, the accommodative monetary policy stance remained in effect, reflected in the monthly decline in Reserve money by 1.61 per cent (and year-to-date by 5.06 per cent) to N5.54 trillion in the month of February as bank reserves decreased month-on-month by 2.28 per cent (year-to-date by 2.86 per cent)  to N3.22 trillion while currency in circulation fell m-o-m by 0.79 per cent (and 9.19 per cent y-t-d) to N1.98 trillion. 

*Forex sales, TBs rattle interbank money market 

The interbank money market suffered bouts of intense scarcity of funds which sent up cost of funds to the roof following liquidity outflows to fund foreign exchange purchase and investment in treasury bills (TBs).  

Analysis of TBs trading during the week showed  that the CBN offered and sold N135 billion worth of Primary Market TBs comprising N28.1 billion worth of 91-Days bills, N23.7 billion worth of 182-Days bills, and N83.2 billion worth of 364-Days bills. 

While the 91-Days bills were undersubscribed with total public subscription at N17.1 billion, the 182-Days and 364-Days bills were oversubscribed with total public subscription at N28.3 billion and N90.4 billion respectively. In addition to this, the CBN also sold $264.3 million in forwards and spot transactions as well as $500 million special intervention sales. 

As a result market liquidity, which closed last week at N21 billion dropped to minus N220 billion on Wednesday. This trend was however halted on Thursday and Friday, due to inflow of N264.3 billion from payment of matured TBs, and inflow of statutory allocation funds of N429 billion. Reflecting the volatility of market liquidity, short terms cost of funds which closed the previous week at 16 per cent shot up to 100 per cent on Wednesday before crashing to 10 per cent at the close of business on Friday. In terms of the direction of cost of funds this week, analysts at Afrinvest Plc, a Lagos based investment firm noted that: “In the coming week, we expect money market rates to remain dictated by CBN’s sustained but unpredictable interventions in the currency market.” 

However, analysts at Cowry Assets Management Plc, a Lagos based investment firm, predicted a moderation in cost of funds due to impact of the inflow of the statutory allocation funds. Naira to appreciate to N375/$: Financial sector operators have predicted that the interbank foreign exchange rate and the parallel market exchange rate will converge at N375 per dollar, implying further appreciation of the naira to N375 per dollar in the parallel market. 

According to Afrinvest Plc, “Our interactions with operators and other stakeholders in the market suggest to us that with rates converging towards the N375/1 retail intervention rate, the apex bank may be eyeing unified FX rates at N380.00/1-N370.00/$ before cutting intervention to give way for a well-functioning interbank market. Nonetheless, this remains unlikely in the interim given the absence of the political will and overarching implication of this on  price-level and public welfare.” 

This  optimism followed  last week’s appreciation of the naira to a 7-month high of  N390  per dollar in the parallel market, in response to sustained dollar injection by the Central Bank of Nigeria (CBN). Parallel market  exchange rate From N445 per dollar the previous week, the parallel market exchange rate dropped steadily throughout the week to close at N390 per dollar, indicating 12.4 per cent appreciation of the naira. 

The huge appreciation was triggered by combination of decline in dollar demand and further injection of dollars by the CBN. Bureaux De Change (BDC) operators told Vanguard there is little dollar demand in the market, while people who had hitherto horded dollar are offering them for sale to avoid further financial loss. 

During the week, the CBN injected $264.3 million dollars comprising $181.3 million for 60 days forwards transaction and $83 million to meet customers demand for personal travel allowance, business travel allowance, school fees and other invisible transactions. The additional dollar sales came on heals of the CBN’s Governor’s vow that the apex would sustained its intervention in the foreign exchange market. 

Addressing the press after the Monetary Policy Committee (MPC) meeting on Tuesday, Emefiele warned that those doubting CBN’s ability to sustain the programme would be the losers as, according to him, the rates were already converging.  He said, “We have seen the foreign exchange rates now converging and we are strongly optimistic that the rates will converge further.

 “In terms of sustainability, it is important for us to state at this point that reserves are trending upwards, close to $31 billion and the fact that we have done this consistently up to four to five weeks should tell everybody or those who doubt the strength of the CBN to sustain this policy that we are able. “It remains for me to say that they are taking a risk and are on the wrong side of the bet, given the direction that we are coming from. There is a determination to see to the convergence of those rates.   And with what we have seen so far, we are very optimistic that those rates will converge.”