₦airaland Forum

Competition pushes Rwandan banks to launch new products

Rwandan banks have rolled out new products, and slashed lending rates amid rising competition from regional banks entering the market.

In the past three months, banks have repackaged their products, introduced new products like branchless, mobile and electronic banking, and lowered their lending rates.

Central bank figures indicate that commercial banks’ average lending rate slipped to 16.72 per cent from 16.87 per cent in May.

The average deposit interest rate was reported at 8.2 per cent in March, 8.1 per cent in April and up to 9.9 per cent in May.

Industry analysts say the entry of Equity Bank and Kenya Commercial Bank is awakening competition in the retail market as majority of the existing banks had been focusing on corporate clients with little activity in the retail market.

Equity and KCB have introduced agency banking targeting the lower end market.

The recent acquisition of 80 per cent shares in Commercial Bank of Rwanda (BCR) by Kenyan based I&M Bank is expected to further accelerate competition in the sector.

I&M said its entry into Rwanda aims to tap into the growing regional trade and facilitate its customer’s businesses.

In the first quarter of this year, the consolidated assets of the banking sector grew by 2.9 per cent to Rwf1.2 trillion ($1.9 billion) according to preliminary statistics from the National Bank of Rwanda.

Rwanda’s banking sector continues to dominate, controlling over 73 per cent of the total assets.

“It is going to be challenging (for new players), given that everybody has been stepping up their game,” said Lawson Naibo, the chief operating officer of Bank of Kigali (BK), currently the biggest local bank by assets, controlling about 32.8 per cent of the market share.

Central bank figures indicate that new loans grew by 38.9 per cent in the first five months of 2011.

According to Jean Bosco Iyacu, the acting head of retail banking at KCB Rwanda, despite micro and macro - economic challenges facing the banking industry at the moment — the rising cost of funds, inflationary pressures, the depreciation of the Rwanda francs against major hard currencies — the banking industry continues to maintain a positive outlook.

However, he cautioned about the likelihood of competition reducing the banks’ profit margins.
The potential threat linked to the positive outlook is that many regional and international players would be more attracted to the market. This would have an effect, in the long run, of reducing existing players’ margins and returns, especially if all of them concentrate on major centres across the country by serving the already served,” Mr Iyacu said.
But competition has also led to aggressive branch expansion and banks have repackaged some products like home loans.

Earlier this year, to increase uptake of mortgages, KCB Rwanda offered the full amount to the borrower, as opposed to the market requirement of 30 per cent of the value of the property as equity contribution.

On the other hand, BCR has partnered with SORAS and South- African firm Home Finance Guarantors Africa Reinsurance to allow relatively low income earners to make the 20 per cent deposit to qualify for a mortgage.

Analysts say the rising competition will see Kigali’s nine commercial banks rethink their strategies to retain market share.
But perhaps the biggest benefit from the competition will be increased access to financial services.

Rwanda currently has a low banking penetration of 22 per cent banking assets to gross domestic product, the second lowest after Burundi in East Africa.

The introduction of agency or branchless banks, which has been rolled out by KCB Rwanda and Equity Bank, is expected to be a key driver.

This is in addition to mobile banking which has been rolled out by almost all the commercial banks.

In the first quarter of this year, KCB Rwanda introduced a mobile banking platform — KCB Connect — which allows a customer to transfer money from their bank account to their mobile phone and vice versa, among other services.

BK has also partnered with telecom companies MTN Rwanda and Tigo, and launched a mobile money service that allows customers to withdraw, deposit and transfer money at any of its 56 branches countrywide.

“Mobile banking will be the key vehicle for Rwanda achieve its vision 2020 of financial inclusion,” said Mr Iyacu.

World Bank to give tea agency Sh1 billion loan

The Kenya Tea Development Agency is set to receive Sh1 billion from the International Finance Corporation (IFC) to construct a warehouse that is expected to save the company millions of shillings every year in lease payments.

KTDA is the marketing agency for an estimated 562,000 small scale tea farmers, and has been hailed for its positive contribution to economic growth by helping farmers access international markets more efficiently.

The IFC, the World Bank’s private lending arm, is proposing to lend KTDA $12 million (Sh1 billion), half the amount the company needs for construction of a new warehouse that will see it reduce outsourcing costs for tea storage.

“KTDA is constructing a new state-of-the-art 200,000 square feet warehouse complex to replace 50 per cent of its current warehousing space, which is leased from third parties,” says a disclosure note by IFC on the proposed loan.

The planned warehouse is to be located in Malindi, Lamu County.

“The Project will be implemented and located in Section V Mainland North, situated west of Mombasa Municipality (Miritini), Mombasa, Kenya,” says the disclosure note.

IFC, which is the World Bank’s private lending arm, says that the site was chosen due to good access to major transport routes.

Increased outreach to farmers and increased export of tea are additional results expected from the Sh1 billion proposed loan the disclosure note adds.

KTDA is owned by 54 tea companies, each of which own between one and two per cent of the agency and have amongst them 65 tea factories.

The IFC note says that by the end of 2011 the company represented 562,000 small scale farmers and the company makes money by warehousing, tea sales to export and domestic markets, and other services provided to the 65 factories.

Data from the Tea Board of Kenya shows that small-scale farmers accounted for 56 per cent or 224.9 million kilogrammes of the 399 million kilogrammes exported in 2011.

Tea production was lower by five per cent due to poor weather in the first half of the year.

FDI to Ethiopia Falls

Foreign Direct Investment to Ethiopia has fallen by 82 million US dollars to just 206 million according to a World Investment Report released by the United Nations Conference on Trade and Development.

The low performance is influenced by Ethiopia’s position in the East of Africa which is a region of low FDI traditionally said the report.

The region's FDI flow increased in 2009-2010 and reached 3.96 billion US dollars in 2011 which was just 5% lower then the peak seen in 2008 noted the report.

It is expected that the discovery of gas resources in the area which was long perceived as lacking natural resources will reverse the trend in the near future added the UN report.
Ethiopia is enacting measures to attract foreign direct investors because local investors lack the capacity to add value to the investment sector in the country according to the Ethiopian Investment Agency.

Ethiopia needs to seek foreign investors until local ones are able to develop the resources within the country according to Aklilu Wolde Mariam, Director of the Promotion and Research Directorate of the EIA.

It is to be remembered that Ethiopia has issued 51,891 licenses to investment projects according to the Ethiopian Investment Agency.

The licensed projects are primarily in the agricultural, manufacturing, hotel and tourism as well as other said Aklilu Woldemariam Director of the Research and Promotion Directorate of the Agency.

Shell to pull cash from Europe

LONDON – Royal Dutch Shell is pulling some of its funds out of European banks over fears stirred by the euro zone’s mounting debt crisis, The Times reported on Monday.

The company’s chief financial officer, Simon Henry, told the newspaper that Shell is cutting back its exposure to European credit risk in the worst-hit economies and putting a higher price on doing business with the region’s peripheral nations.

“There’s been a shift in our willingness to take credit risk in Europe. The crisis has impacted our willingness to afford credit,” Henry is quoted as saying.

Henry is cited as saying that the Anglo-Dutch oil major would rather deposit $15bn of cash in non-European assets, such as United States Treasuries and US bank accounts.

The firm is forced to keep some money in Europe to fund its operations, but is keeping the bulk of its reserve liquidity out of the euro zone to avoid growing macroeconomic risk, the report said.

Investors buy seven bank-owned insurance firms

No fewer than seven insurance companies, which were formerly either wholly or substantially owned by banks, have been bought by local and foreign investors, investigation has revealed.

The new change of ownership of the underwriting firms is in compliance with the Central Bank of Nigeria ’s directive that Deposit Money Banks should divest from non-banking operations and concentrate on their core business of banking.

Guaranty Trust Bank was one of the earliest banks to commence divestment from its insurance subsidiary, Guaranty Trust Assurance Plc. The underwriting arm has consequently been sold to a consortium of five foreign investors, with the name changed to Mansard Insurance Plc.

Other insurance subsidiaries sold are ADIC Insurance Limited; Oceanic Insurance Life; Oceanic Insurance General; Law Union and Rock Insurance Plc; Crystalife Assurance Plc; and Great Nigeria Insurance Plc.

Skye Bank has divested its stake from Law Union and Rock Insurance and Crystalife Assurance. However, the former two insurance arms have yet to officially unfold their new brands or owners.

Following the CBN’s directive, Diamond Bank had also divested its stake from ADIC Insurance, while the former Oceanic International Bank Plc, now Ecobank Plc, had divested its stake from Oceanic Life and Oceanic General Insurance, selling it to a South African firm, Old mutual.

Also, Wema Bank has divested its stake from GNI, through a management buyout arrangement.

The National President, Constance Shareholders Association of Nigerian, Mr. Shehu Mikail, has expressed worry that many of the insurance companies are not giving shareholders full disclosure on the sale of the firms.

He said, “Most of the insurance companies are not carrying us along in the sale of the firms, which is wrong. They should let us know those who want to buy these companies so that we can know if they can be trusted.”

While noting that the repeal of the universal banking was necessary, he said it would enable the banks to concentrate on their core business of banking, thereby promoting professionalism in the insurance industry.

The Commissioner for Insurance, Mr. Fola Daniel, said that the banking institutions owning insurance companies were actually divesting from the subsidiaries, adding that the commission was quite satisfied with the progress recorded in that area so far.

He, however, assured stakeholders of the commission’s determination to ensure fairness to all.

“As the regulator, we are much interested in what happens to these entities; what sort of investors take over. We need to protect all stakeholders, including the investors, the staff, and even, the insured. We have put in place an appropriate measure to ensure that no stakeholder is short-changed or put in a disadvantaged position as a result of the divestment,” he said.

He, however, said that because of the benefits in bancassurance, NAICOM would not abolish it when universal banking ends.

“Bancassurance that will be allowed in practice will take cognisance of the extent to which a bank may get involved in the marketing of insurance products,” the NAICOM boss stated.

On his part, the President, Chartered Insurance Institute of Nigeria, Mr. Wole Adetimehin, noted that the involvement of the banks introduced unhealthy practices in the industry and jeopardised corporate governance.

According to him, the former banks’ insurance subsidiaries had more access to funds, which enabled them to insure banks’ huge assets, than those firms that had no link with the banks.

This is a welcome development...kudos to the governor

…SAYS THE NATION MUST GET IT RIGHT THIS TIME

Lagos State Governor, Mr. Babatunde Raji Fashola (SAN) on Friday flagged off the States’ Gross Domestic Product SGDP Computation in Nigeria with a charge that the country must get it right this time around.

The Governor who spoke at the Banquet Hall of the Lagos House, Ikeja, venue of the flag-off organized by the National Planning Commission in collaboration with Lagos State, the Governors’ Forum and the National Bureau of Statistics said failure to get it right will result into a situation where the country is fed with data from outside her shores.

According to the Governor, relying on such externally generated data could be fraught with distortions like contention that the average Nigerian live on below one dollar per day, stating that he has however always countered such assertion because he knows that that the average person in Nigeria lives on much more than that because even if the cost of sending SMS short text that Nigerian send to themselves they will realize that the average person live above one dollar per day.

“Even when we try to get data, we report irrelevant considerations. So, this is one exercise we must not toy with. Very importantly, it will ultimately benefit our nation, benefit our states and our Local Governments”, he added.

Governor Fashola asserted that in Lagos data collection and planning have become an exercise that the State does not compromise on, adding that if Nigerians do not know how many people are in the country and what each of the component unit is producing, the people cannot properly plan the progression and the development of the country.

“We cannot project that this is where we are going to be in number of years, if we are going to be in a particular number of years if we do not know how much power we need, we cannot plan the supply of that power”.

Governor Fashola who commended the Commissioners for Economic Planning and Budget from the various states who have participated in the exercise said getting it right will make the work of the National Planning Commission easier.

“It will be easier for all of the states to cross check and validate the data they get from the States Bureau of Statistics with national data while speaking with one voice so that there would not be a situation where the Gross Domestic Product of one state is bigger than that of the whole country”, Governor Fashola said .

He reiterated that the data so collected will also have the respect of the people who are the owners of the data such that nobody will seek to unilaterally impeach the data so gathered.

Fashola reiterated that if there is any cause for the State to disagree with the National Planning Commission, it is simply because it has seen a better way of doing things and achieving the results.

“I have always argued that our prosperity does not lie in what any individual can do for this country. It will be more in what individually and collectively we allow this country to do for herself through her various States and Local Governments. Let us free up Nigeria and allow States be the centres of development and let us now measure that development and growth by aggregating it to the centre”.

He also commended the National Planning Minister for the good work he is doing at the commission, adding that this explains why he is one of the longest serving Ministers in the country.

He described GDP as an important score of value of the nation’s international assessment as a country, adding that the country can get it right if it wants and that depends on regarding data collection, data processing and data analysis as very dispassionate science which anybody should not play politics with.

“We had a momentous opportunity in this country to conduct a census in 2006 and I think we did a less than salutary work on it and that was a critical data collection exercise that will have helped us and we subjected it to political consideration”.

The Minister of National Planning and Deputy Chairman of the National Planning Commission, Dr Shamsuddeen Usman in his speech formally commended the efforts of the Governor for the giant strides made towards the transformation of Lagos State in the last five years.

“Your transformational efforts have traversed every sphere of life in the State: roads, bridges, schools and other physical infrastructure, water sanitation, education and health among others”.

He said the Gross Domestic Product which is a key barometer for measuring the level of economic activity has been compiled in Nigeria, only at the national level on an aggregate basis by the National Bureau of Statistics since colonial times.

He explained that the inclusion of States’ Gross Domestic Product (GDP) in the national data framework will enhance its comprehensiveness and reliability, spur growth and development, promote accountability and create awareness of the outcomes of efforts at the sub-national levels.

He informed that a clear roadmap has been put in place for the implementation of the States’ GDP computation Project in two phases with phase one from December, 2011 to October 2012 while the second phase is November to June 2013.

The State Commissioner for Economic Planning and Budget, Mr. Ben Akabueze in his welcome remarks, recalled that Lagos was the first State to compute its State GDP beginning from Year 2007, using secondary data while projections were made for Years 2008 and 2009.

He said owing to the determination of the State Government to ensure that planning is based on empirical and reliable data, the Ministry of Economic Planning and Budget obtained the approval of the Governor in Year 2011 to compute the State GDP for Year 2010 using primary data sources.

He added that the exercise covered the 28 relevant economic sectors across the State and was based on the production approach, stating that the exercise has since been concluded and revealed that the State’s GDP had been previously grossly understated.

Messages of goodwill were also delivered by representatives of the Governor of the Central Bank of Nigeria, Mallam Lamido Sanusi Lamido, the Representatives of the United Nations Development Programme (UNDP) and Nigerian Governors Forum Secretariat with all of them emphasizing the importance of States Gross Domestic Computation as a good framework for planning.

The Governor later flagged off the exercise which was attended by members of the State Executive Council including the Secretary to the State Government, Mrs Ranti Adebule, Ekiti State Commissioner for Budget Mr. Debo Ajayi, Statistician General, Dr Yemi Kale and Secretary of the National Planning Commission, Mr. Ntufam Fidelis Ugbo and other dignitaries.

Lekki FTZ attracts $1.1bn investment from oil firms, others

06 January 2012, Sweetcrude, LAGOS - THE Lekki Free Trade Zone, LFTZ, in Lagos has attracted $1.1 billion (N170.5 billion) investment commitment from 48 investors, Minister of Trade and Investment, Olusegun Aganga, has disclosed.

The minister who spoke based on briefings by the Managing Director of the zone, Mr. Chen Xiaoxing, noted that investment so far in the zone cuts across the oil and gas, transportation and health sectors, among others.

He spoke during the LFTZ Investment Forum and opening of the Eko Expo 2012, in Lagos, weekend.

According to the minister, some of the top investors in the zone include Puma Energy Free Zone Enterprise, which is investing in oil and gas terminal depo construction. The company is investing $400 million in the zone.

The minister also listed other investors to Imad Oil and Gas FZE, which is investing $200 million; China Railway Construction Corporation ($50 million); and YFK Pharmaceutical FZE ($30 million), among others.

Maintaining that the LFTZ had all the features to make it one of the most successful Free Trade Zones in Africa, Aganga said, “The Lekki Free Trade Zone is indeed the biggest of the 19 Free Trade zones Chinese investors have presently outside China and it has all the features to make it one of the most successful Free Trade Zones in Africa.

“I have been informed by the Managing Director of the zone that about 48 investors have already committed to investing close to $1.1 billion in the zone.

“I, therefore salute the commitment of the major stakeholders in the LFTZ venture, the Lekki Worldwide Investment Limited, the China African Lekki Investment Limited, the Nigeria Export Processing Zones Authority, and indeed, the host community. I also commend the staff and management of LFTZ for their hard work and dedication, which has helped to shape this ongoing success story.”

The minister added that, in line with the determination of President Goodluck Jonathan’s administration to transform the Nigerian economy through sound and viable trade and investment policies, the Federal Government would support the Lagos State Government, the consortium of Chinese investors and other stakeholders in ensuring that the LFTZ was developed to attain its full potential.

Continuing the minister expressed satisfaction with the management’s drive to attract significant investment into the zone, the technology it had brought and the jobs that had been created to date.

He said: “In today’s world, business relationships are symbiotic in nature. While we are expected to provide a conducive environment for investors, we also expect that investments coming to the zones will create jobs for Nigerians.

“And to enhance the contribution of FTZs to the growth of the Nigerian economy, my ministry will work with the African Free Trade Zone Association, through NEPZA, to provide the necessary facilities to support the operational efficiency of FTZs in the Nigeria.

“Globally, FTZs are known to have one of the largest job creation capacities. Record has shown that for every job created in FTZs, two additional jobs are created through a multiplier process.”

Speaking during the event, Governor Babatunde Fashola of Lagos State commended Aganga for his commitment to fast-tracking the completion of the LFTZ. He said, “What we are seeing here today is the first tentative test for the implementation of the plan for the Lekki Free Trade Zone. The project will out-live many of us and will be a good legacy that our children will be proud of and thankful to those who visualised the project.

“The partnership we have with the Federal Government and the enthusiasm the Minister of Trade and Investment has shown towards the project is a very strong signal of our commitment to taking advantage of the
investment opportunities in the state now.”

He, however, said that there was a need for a direct gas pipe line into the zone for the generation of power, noting that this was a major requirement for the sustainability of the zone.

Algeria’s New Hydrocarbons law to sweeten terms for non-conventional gas

06 August 2012, Sweetcrude, LONDON - Algeria’s new law on hydrocarbons will give more tax advantages to foreign investment in non-conventional hydrocarbons, the head of the country’s state oil and gas company said Thursday.

In remarks carried by Algeria’s state news agency APS, Sonatrach Chief Executive Abdelhamid Zerguine, said the law, which would be examined soon by the government, “should give a little more incentive for foreign investors” on non-conventional oil and gas.

Sonatrach said last month it will soon sign partnership agreements with Royal Dutch Shell PLC and Exxon Mobil Corp. on shale gas exploration in the north African country.

Last year, Eni SpA said it signed a cooperation agreement for the development of unconventional hydrocarbons, with particular focus on shale gas, adding that it confirms the country has significant shale gas reserves it wishes to explore and develop with Sonatrach.

Court orders TSKJ to pay $35m tax liability to FIRS

06 August 2012, Sweetcrude, ABUJA - THE Abuja division of the Tax Appeal Tribunal, TAT, has ordered TSKJ – the construction contractors to the Nigeria LNG Limited, NLNG – to pay N5.14 billion ($35,938,087) as tax liabilities to the Federal Inland Revenue Service, FIRS.

The order specifically concerns TSKJ II, a multinational company and parent firm to TSKJ Nigeria Limited.

It follows an appeal by TSKJ II, challenging the FIRS Tax assessments in a contract for the construction of the Nigeria liquefied natural gas project. The assessment is for the period, 2006 to 2008,

Acting Chairman of the Tribunal, Hon. Nnamdi Ibegbu (SAN), who issued the order, also awarded N300, 000 against TSKJ II as cost of the three appeals decided in favour of FIRS.

The company (TSKJ II) had filed three separate appeals with suits No TAT/ABJ/APP1010/2008, TAT/ABJ/APP/006/2006 and TAT/ABJ/APP/017/2010 before the tribunal.

In the appeal to the Tax Appeal Tribunal by TSKJ II against the FIRS assessment, the company challenged FIRS refusal to amend its assessments for 1997-2002 and additional assessment raised by the Service and 550, 556.74 dollars tax liabilities for 2008 and 2009 tax years, among others.

In the first ruling on the appeal of FIRS assessment for 1997-2002, the Tax Appeal Tribunal upheld FIRS assessment that TSKJN is to pay $ 16,688,267 dollars as tax.

Also, in the ruling, the court upheld FIRS assessment of $ 19,249,820 million dollars.

In trying to fulfill its tax obligations for the years in question, TSKJ II filed its tax returns, under Section 26 of Companies Income Tax, CITA, but made deductions on expenses incurred by its subsidiary, TSKJ Nigeria Limited, but, the FIRS scoffed at that.

FIRS maintained that since TSKJ II did not file its audited accounts, but filed under Section 26 of CITA, deductions in favour of TSKJ Nigeria Limited were not allowable.

Rather, FIRS maintained, Section 26 of CITA gives the FIRS Board discretionary powers to allow 80 per cent turnover as expenses/costs, and assess the remainder of 20 per cent of turnover at 30 per cent.

Statutorily, companies are required to file returns based on audited accounts, but TSKJN filed its returns for the years in question based on the Section 26 of CITA, with turnover as basis for assessment.

The FIRS additional assessment was also based on the company’s refusal to file its returns based on its audited accounts, in accordance with the law.

The tribunal said that tax law on the issues raised were clear and that there were no ambiguities whatsoever in Sections 41 and 26 of Companies Income Tax Act (CITA), which provides that payments to a subcontractor in any transaction by the taxpayer is not an allowance deductible under section 20 of CITA.

Said the TAT Chairman: “On resolving this issue in favour of the respondent, it is not disputed that the Appellant filed its returns on turnover basis, so under that basis, it is the respondent who defines what amount is fair and reasonable percentage of the turnover.

“It is undisputed that 80 percent covers all the costs incurred by the taxpayer when using the Turnover Basis of Assessment. There is no provision of the law which makes subcontract allowable deduction.”

He, therefore, dismissed the appeal.

Heritage Oil seeks $370m for acquisition of Nigerian asset

London-listed independent oil and gas exploration and production company, Heritage Oil announced Monday that it aims to raise $370 million through a rights issue to help pay for the acquisition of a 45% interest in OML 30 in Nigeria.

Tony Buckingham, Chief Executive Officer, who made the disclosure, said the Nigerian asset would provide oil and cash that would go to improve his company’s financial profile.

“We are delighted to have entered into an agreement to acquire a significant interest in the transformational OML 30 in Nigeria. OML 30 is expected to provide significant production and be cash flow generative immediately, thereby de-risking Heritage’s financial profile,” he said.

According to him, a recently published independent reserves report “gave an economic valuation of between US$3.4 billion and US$4.1 billion, using a discount rate of 10%, for the current 2P reserves at OML 30 and our assets in Russia,” highlighting the underlying value within the company’s enlarged portfolio.

He added that his company’s long term outlook is supported from full development of Miran field in Kurdistan and OML 30 field in Nigeria while short-medium term outlook is buoyed from the rising production from its Russian field and early development of Miran field.

It plans to conduct an extended well test on the Miran reservoirs to sell between 3,000 and 5,000 bopd into the local market in Kurdistan.

Heritage Oil also announced that its production averaged 567 barrels of oil per day (bopd) in the first half of 2012, up 35% from a year earlier, and reached 711 bopd in July.

Analysis – Iraq output overtakes Iran

London, 3 August (Argus) — Opec output declined slightly in July, and Iraq overtook Iran as the organisation's second-largest producer.

Iranian output slipped because of an EU embargo that started on 1 July, prohibiting EU insurance firms from covering Iran's crude exports (see below). Overall Opec output fell to 31.41mn b/d in July, which was roughly 80,000 b/d below output in June (see table).

Iran lost its place as Opec's second-largest producer for the first time in 22 years. It produced 200,000 b/d less than in June. A 190,000 b/d rise in Iraq's output in July almost offset the loss of Iranian production. Loadings from southern Iraq rose by just over 210,000 b/d in July, after maintenance to an offshore loading point in June depressed shipments. But exports from northern Iraq were down by around 25,000 b/d last month.

Angola's output fell by 50,000 b/d in July because of a brief gas leak at the Girassol field and upstream maintenance. Libya's output also fell by 50,000 b/d in July. Protests for autonomy in eastern Libya disrupted exports early in the month. And a power generation shortage reduced output from NOC subsidiary Agoco.

Saudi Arabia's output remained roughly unchanged from July at around 10mn b/d. Riyadh is reluctant to reduce output. It wants to ensure that prices do not rise above current levels, damaging the global economy, particularly since the EU debt crisis remains unresolved.

The aim of Saudi Arabia's output policy “is not to aggravate the problems that the world economy is facing”, a Middle East Opec delegate says. It is “too early to say that the time to reduce output has come”, he says. “We do not want prices to rise and harm the global economy.”

Contributory factors
Riyadh is offering the global economy “some kind of an economic stimulus” and is happy with prices around $100/bl, the Opec delegate says, echoing Saudi oil minister Ali Naimi's earlier statements. Riyadh wants “to contribute to global economic growth by keeping oil prices at a suitable level”, he says.

Saudi Arabia, which has a capacity of over 12mn b/d, is the only Opec member that can raise output to help meet any global shortfalls. The IEA says the limited amount of global spare capacity means that even a relatively small crude supply disruption could prompt IEA emergency stock releases.

Nigeria: Privatisation of PHCN - Bidders Ask FG for Deadline Extension

As the deadline for the submission of bids for the Power Holding Company of Nigeria (PHCN) GENCO and DISCO assets expired last Tuesday, interested firms have implored the Federal Government to extend the time frame in order to ensure proper participation of companies.

The bidders who made this appeal in letter to the Director-General, Bureau of Public Enterprise Ms Bolanle Onagoruwa at the weekend noted in dismay that of the one hundred and eleven pre-qualified bidders for the PHCN successor distribution companies, only fifty-four of them successfully submitted their bids within the time.

Against this backdrop, the bidders urged the Presidency, the National Council in Privatisation (NCP) and the Bureau of Public Enterprises (BPE) to jointly reconsider granting a 48-hour concessionary timeline that will elapse 5 p.m. August 31, 2012.

According to them, such gesture will give the pre-qualified bidders for the six generating companies and the eleven distribution firms as announced by the BPE at the pre-qualification stage the opportunity to make and/ or complete their submissions.

The group expressed fear that of the 25 bidders who submitted for the GENCOS, about 14 of them representing 56% may be disqualified for lack of complete documentation including but not limited to the required bid bonds.

A breakdown of the bidders, showed that across board, each of the GENCOS recorded a submission rate of 60% as Ughelli Genco which recorded 56% tops the list.

Conversely, the bidders disclosed that the Shiroro Genco recorded only one submission by all regards a failed bid ab-initio.

The bidders posited that the total population of EOI's harvested for both the successor generating and distribution companies amounted to 190 but only 79 of them submitted their bids, adding that this translates to a submission rate of 41.5 per cent.

They however averred that global standards suggest that for such a process to be considered effective and truly competitive, at least a 60% submission rate should be recorded in a best scenario and at worst 50 per cent.

"In individual successor company terms, at least five bidding companies and at worst three should be evaluated for positions of "preferred," 'reserved' and 'alternate.' They said that this allows for proper evaluation flexibility.

The bidders stated that the deadline for the submission of the bids for the DISCOs was 5p.m. last Tuesday and various consortium along with other bidders missed the time limit by just seven minutes with very valid reasons.

They recalled with pain that the conditions for the bid were constantly being changed by the personnel managing the process for the Bureau, adding that this was evidenced by the multiple deadlines set by the Bureau.

"With every change came the onerous tasks of adjustments and re-strategising and the consequent toll it took on the participating firms," they said.

The bidders also lamented the non existence of multiple collection centres as would have been expected for investment of this magnitude as what recently obtained in the energy sector.

In the light of the above, the bidders enjoined the Federal Government to ensure that the power sector becomes vibrant once again by allowing the participation of credible Nigerian companies who have demonstrated genuine capacity to deliver in the face of daunting economic challenges in the company.

The bidders however stated that the country as a whole has so much at stake by ensuring that Nigeria's destiny is in the hands of Nigerians rather than foreigners.

Nigeria: Prepaid Meter Contract - Power Minister, NERC Chairman Risk Jail

The Minister of Power, Professor Barth Nnaji, and the Chairman of the Nigerian Electricity Regulatory Commission (NERC), Dr. Sam Amadi risk being committed to prison for allegedly refusing to obey a Federal High Court sitting in Abuja restraining them from going ahead with the award of contract for manufacturing prepaid meters.

Justice Kayode Eso (rtd) of the Court of Arbitration had earlier issued an order restraining the Power Holding of Nigeria (PHCN) from awarding the contract to any other company pending the determination of the appeal brought by a firm, Ziklagsis Network Limited.

But Nnaji was said to have vowed that the government of Nigeria would not be bound by any court order. PHCN had in 2003 entered into a tripartite agreement with Ziklagsis, Unistar High-Tech System Limited for the maintenance of Prepaid Electricity Meters.

This development prompted lawyer to Ziklagsis, Dr. Alex Iziyon (SAN), to file Form 48 at a Federal High Court in Abuja, a committal order indicating that Nnaji and Amadi had continued to obeyed the court's order and should be committed to prison.

The Ziklagsis, in separate letters to Nnaji and Amadi, alleged that the agreement was frustrated by very senior management staff of PHCN through various manipulations.

Nigeria Oil Output Rises to Record on Improved Security

Crude oil output in Nigeria, Africa’s biggest producer, reached an “all-time high” after security improved in the southern oil-producing Niger River delta region, Andrew Yakubu, group managing director of the Nigerian National Petroleum Corp., said.

Total production rose yesterday to 2.7 million barrels a day from 2.4 million barrels, he said in an e-mailed statement today from Abuja, the capital.

“The security measures put in place by the federal government in the Niger Delta region was beginning to yield positive results,” Yakubu, who was appointed to the job in June, said in the statement. Security along oil pipelines and production facilities has been restored, he said.

Energy companies have stepped up production as attacks on installations in the delta declined following a 2009 government amnesty for militants in the region fighting for a greater share of oil resources. Attacks by armed groups cut more than 28 percent of the country’s output between 2006 and 2009, according to data compiled by Bloomberg.

At least 90 percent of the country’s oil is pumped by the state oil company, also known as NNPC, in joint ventures with Royal Dutch Shell Plc (RDSA), Exxon Mobil Corp., Chevron Corp. (CVX), Total SA (FP) and Eni SpA. (ENI)

Nigeria depends on oil exports for more than 80 percent of government revenue and 95 percent of foreign-exchange income. The West African nation earned $196 billion from oil and gas shipments in the four years through 2010, according to the National Bureau of Statistics.

Tanzania set for talks on LNG development

01 August 2012, Sweetcrude, DAR ES SALAAM - THE Tanzanian national oil firm and Norway’s Statoil will soon hold formal talks on their plan to build a liquefied natural gas, LNG, plant in the East African country to take advantage of the country’s recently discovered gas resources.

The Norwegian state oil company is looking to commercialise the Lavani and Zafarani discoveries, with combined resources of around 9 trillion cubic feet, made in its operated Block 2 together with partner ExxonMobil.

Statoil has confirmed that it is currently in dialogue with Tanzania Petroleum Development Corporation (TPDC) and the authorities about a possible development of the LNG facility.
Formal talks on the plan will hold later this month, Bloomberg reported.

“We are currently in an early phase of evaluating the concept selection for a possible LNG plant,” Statoil spokesman Fredrik Norman said.

A Statoil delegation is due to arrive in Tanzania this month for “inception talks”, according to TPDC’s principal petroleum geologist Kelvin Komba.

BG Group, which has separately discovered about 7 Tcf of recoverable resources off Tanzania, has been engaged in a parallel process for the past two years, including identifying potential sites for an LNG plant, company spokesman Kim Blomley said.

Komba said that Tanzania is currently drafting a gas policy and legislation to guide development of the nascent industry following the breakthrough offshore finds.

The government may however require operators to satisfy local demand for gas before export and jointly develop a single LNG plant, instead of building at several sites, to cut costs, he said.

“This will be cost-effective, and it works for us, because it is government that will pay for the plants through foregone revenue in companies recovering costs,” Komba said.

This could mean Statoil, which has previously been looking at a possible floating LNG solution as part of a standalone development, working together with BG Group to develop one facility.

A Statoil spokesman recently told Upstream “it is only natural to have a dialogue with other operators in the region”, adding that plans by Tanzania’s government to have an LNG project up and running within seven years were “not totally unrealistic”.

UNEP welcomes Nigeria’s Hydrocarbon Pollution Restoration Project

Says Ogoniland oil clean-up, new future for Niger delta communities finally in sight 01 August 2012, Sweetcrude/African Press Organization (APO), NAIROBI, Kenya - The UN Environment Programme (UNEP) has welcomed the Government of Nigeria's decision to proceed with a major oil contamination clean-up of Ogoniland in the Niger Delta. Twelve months ago UNEP presented its scientific assessment of oil pollution in Ogoniland to Nigerian President Goodluck Jonathan, underlining serious public health and environmental impacts. The report emphasized the need for swift action to prevent the pollution footprint from spreading further and exacerbating the already tragic legacy for the Ogoni people. Diezani Alison-Madueke, the Nigerian Minister of Petroleum Resources, announced late last month that the Hydrocarbon Pollution Restoration Project had been established to “fully implement the United Nations Environment Programme's Assessment Report on Ogoniland”. The clean-up will reportedly be conducted under a new Nigerian government initiative—the Hydrocarbon Pollution Restoration Project. The Government of Nigeria has indicated that it will now define the scope, actions and financing of the project. The UNEP Environmental Assessment of Ogoniland had proposed an initial sum of US$1 billion to cover the first five years of clean-up operations. While some on-the-ground results could be immediate, overall the report estimated that countering and cleaning up the pollution and catalyzing a sustainable recovery of Ogoniland could take 25 to 30 years and will require long term financing. Achim Steiner, UN Under-Secretary General and UNEP Executive Director, said today: “On the anniversary of the Ogoniland assessment there are now clear and encouraging signals that the government is keen to move on the recommendations—this is a welcome development for the people and the environment of this region who have suffered, and continue to suffer, the legacy of some 50 years of unsustainable oil exploration and production.” “UNEP stands ready to assist the government and its agencies with expertise for getting the Hydrocarbon Pollution Restoration Project up and running so as to improve the lives and livelihoods of the Ogoni people,” he said. Over recent weeks, UNEP has held discussions with Sir Peter Idabor, the Director-General of the National Oil Spill Detection and Response Agency (NOSDRA) and is engaged with the government to chart transformative pathways forward in order to realize the assessment's recommendations. “The immediate need is for the necessary funds to be mobilized and to be deployed to take the Project forward at a scale and speed commensurate with the challenge. Everyone has a part to play in realizing significant and positive results from the Government of Nigeria, local authorities and the oil industry to NGOs and local communities,” said Ibrahim Thiaw, Director of UNEP's Division of Environmental Policy Implementation, who on 4 August last year presented the UNEP report to the government. It woill be recalled that in compiling its two-year scientific assessment, the UNEP team examined more than 200 locations, surveyed 122 kilometres of pipeline rights of way, reviewed more than 5,000 medical records and engaged over 23,000 people at local community meetings. Altogether more than 4,000 samples were analyzed, including water taken from 142 groundwater monitoring wells drilled specifically for the study and soil extracted from 780 boreholes. In one community, at Nisisioken Ogale, in western Ogoniland, the report found that families were drinking water from wells that was contaminated with benzene – a known carcinogen – at levels over 900 times above World Health Organization guidelines. The Rivers State Government introduced alternate water supplies to the affected communities at Nisisioken Ogale, immediately following the release of UNEP's report, with trucks delivering safe drinking water. The Environmental Assessment of Ogoniland report is available online at: www.unep.org/nigeria. Site-specific fact sheets containing detailed information about 67 of the contaminated sites studied in detail are also available at this website. In August 2011, President Jonathan set up a government committee to review UNEP's report and make recommendations on immediate and long-term remedial actions. Since handing over its report, UNEP has signaled its willingness to be a partner in the environmental restoration of Ogoniland and its surrounding creeks, in conjunction with the government, the oil industry and the traditional rulers and people of Ogoniland.

IFC lends $80m for gas-fired plant expansion to increase power generation in Ghana

The International Finance Corporation (IFC) July 24, 2012 announced it is giving a loan of $80 million to the Takoradi International Company (TICO), to help expand its gas-fired Takoradi 2 power plant (“T2”) in order to generate more electricity in Ghana.

The IFC believes the increase of power will “spur economic growth” in the country.

Alongside the $80 million, IFC said it will provide an additional $15 million loan to TICO on behalf of the Canada Climate Change Program, for which IFC is the implementing agency.

TICO is a joint venture between Abu Dhabi National Energy Company PJSC (TAQA) which holds 90% with the Volta River Authority (VRA) having 10% in the venture. TAQA is the operator of the T2 facility.

TAQA on July 16, 2012 said it has secured a $355 million of project financing for the 110 megawatts expansion of the T2 power plant.

The African Development Bank (AfDB) on the same day (July 16, 2012) announced its approval of a $60 million loan for the project expansion which is expected to save Ghana about $30 million a year in fuel costs.

Mitsui & Co of Japan and Korea’s KEPCO have been contracted to start the expansion this month and expected to be commissioned in 2015, TAQA said.

T2 will use waste heat recovery technology for the expansion, which means the plant will be able to generate 50% more electricity with only marginal incremental fuel consumption and without increasing greenhouse gas emissions. The increased efficiency will also lower the cost of electricity generated by T2, officials have said

Tanzania plans sovereign wealth fund for gas finds

DAR ES SALAAM (Reuters) – Tanzania is to set up a sovereign wealth fund to ring fence future earnings from its major gas discoveries in the southern parts of the country along the Indian Ocean coastline, its president said.
The east African nation of 42 million people tripled its estimated gas reserves in June after offshore finds by Norway’s Statoil, U.S. group ExxonMobil and Britain’s BG Group and its partner Ophir Energy.

President Jakaya Kikwete told the nation that his government was studying various models for managing revenues from gas production, adding they were focusing on those that have sovereign wealth funds.

“We want to learn from them by setting up our own fund to ensure we similarly benefit,” he said in a televised address late on Wednesday.

When the country eventually sets up the fund it will join other African countries like Nigeria and Ghana, who are also moving towards the establishment of state-owned investment funds for revenues generated from the energy sector.

Kikwete said the government’s intention was to ensure natural gas revenues were used to speed up development.

“Since 1954 some 61 wells have been drilled. Out of those, natural gas was found in 22 wells … We haven’t been lucky yet to find oil but we have discovered gas in both onshore and offshore areas,” he said.

Tanzania’s recoverable gas reserves stood at 28.9 trillion cubic feet, Kikwete added.

“Offshore oil and gas exploration started in 2004 with just one company but we now have 18 companies. Gas exploration has escalated since the first gas discovery in 2010 … I believe that a lot more gas will be discovered,” he said.

Tanzania, which is east Africa’s second-biggest economy could see an increase in revenue of up to $3 billion a year from gas exports, according to the World Bank.

Kikwete said cheap access to gas would encourage construction of fertiliser plants and boost power generation.

“Some 350 megawatts of electricity in the national power grid currently comes from natural gas and our target of generating 3,500MW by 2015 largely depends on natural gas,” he said.

Kikwete said the government was working on a new national gas policy, gas utilisation master plan and legislation to regulate the fast-growing industry.

PIB offers incentives for oil production —Alison-Madueke

The Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, on Tuesday described the Petroleum Industry Bill recently sent to the National Assembly by President Goodluck Jonathan as a viable document offering incentives for crude oil production.

Speaking at a summit in London organised by the Ministry of Trade and Investment in conjunction with the Bank of Industry, Alison-Madueke in a presentation titled, “Investment Opportunities in Nigeria’s Downstream Oil and Gas Value Chain,” called on investors around the globe to take full advantage of the enormous opportunities the proposed oil industry reform law offered.

The minister noted that apart from providing a healthy deregulated environment for private sector participation in the downstream sector, the PIB offered a refreshing fiscal regime with strong incentives for production.

“We have a fiscal regime by royalty and tax which is now predicated on production as opposed to terrain and investment as was previously done. Royalty by production as we have outlined in the bill will capture the output of company as opposed to its location; it will create a fair balance between small and big operators operating in the same terrain, it will give operators the opportunity to make fair returns during field decline, and it proposes lower rates on condensate from large fields as well as ultra deep water fields,’’ Mrs. Alison-Madueke said.

She noted that the new bill provided for a robust and efficient tax regime based on Corporate Income Tax, the Natural Hydrocarbon Tax and Production Bonus based regimes.

On the reported concerns raised by some operators over the proposed increase in government take from 61 to 72 per cent in the deep and ultra deep offshore, the minister stated that in arriving at the figure, the government considered all the variables taking into account the interest of the nation as well as what was obtainable in other jurisdictions across the world.

Gas Master Plan and challenge of inadequate funding

Four years after the country’s Gas Master Plan was unveiled, stakeholders examine the progress made so far and express worry about bottlenecks threatening its implementation, STANLEY OPARA writes

The Nigerian gas revolution is aimed at harnessing the nation’s vast gas reserves (estimated at 187 trillion cubic feet) plus undiscovered potential of 600tcf of gas to drive a transformation of the nation’s economy under the outline defined in the Gas Master Plan unveiled in 2008.

The key objectives of the gas revolution include the monetisation of Nigeria’s gas reserves through reduction and ultimate stoppage of gas flaring and raising domestic gas supply from the current level of 1.0 billion cf/d to over 10 billion cf/d by 2020.

This is basically targeted at feeding the domestic power sector, which has a multi-billion dollar investment blueprint based on the sector’s privatisation plan, among other critical sectors like agriculture and industry.

It is also expected to enable private participation in the gas value chain and position Nigeria as the regional hub for gas-based industrialisation by adding value to its natural gas.

Experts in the Petroleum Sector recently met in Lagos at the 12th Petroleum Policy Roundtable organised by the Centre for Petroleum Information. It had the theme,’ ‘Making the Gas Revolution Happen.’

Speaking on the role of private equity in the ongoing gas revolution, a partner with African Capital Alliance, Mr. Afolabi Oladele, says the gas revolution is expected to attract huge Foreign Direct Investment into Nigeria, and has led to a couple of projects.

According to him, India’s Nagarjuna Fertilisers had expressed its commitment to building two fertiliser plant at about $2bn; Saudi Arabian Natpet is to invest initial $3.5bn in a petrochemical plant while Oando, in partnership with Agip Oil is to invest about $10bn over a period of three years in building a central gas processing facility.

He also adds that Chevron is to supply the needed gas to the CPF provided the needed pipelines and infrastructure are in place while two fertiliser plants are expected in Delta State and Lagos, as well as five fertiliser blending plants and one methanol plant, courtesy the gas revolution.

There is also a plan for a distribution network to improve the supply of liquefied petroleum gas to the North.

Oladele, however, says the gas revolution highlights the huge infrastructure gap in the sector and requires extensive pipeline backbone for successful implementation.

“For example: The recently completed construction of 128km 18” pipeline connecting Akwa Ibom State to Cross River State by the JV between Oando and Nigeria Gas Company. Calabar to Kano pipeline needs to be revived at a cost of about $2bn. At least 2,000 km of pipelines need to be constructed within five years to 2016,” he says.

The gas revolution, according to him, has highlighted massive funding gap for private sector participation as the government is incapable of providing the required funding within the target programme time frame.

He explains, “The GMP estimates that at least $150bn is required in new investments across the upstream, midstream and downstream gas sector over the next four years.

“With the country’s current economic data: Gross Domestic Product of $247.1bn in 2011; external reserves of $37.7bn in May, 2012; debt currently standing at about 17.6 per cent of GDP; and fiscal deficit at about 3.3 per cent of GDP, the government cannot fund the infrastructure development needs.

“Neither do the local banks have the capacity to finance the big ticket projects because they require long- term risk capital that is beyond their purview hence the need for other funding options.”

The African Capital Alliance Partner maintains that private equity is a powerful financing innovation introduced into the World in the 1940s.

He explains further that private equity is a pool of capital mobilised for investments under privately negotiated transactions in expectation of outstanding returns over a finite investment period. It is a highly specialised financial intermediation activity, and an alternative asset class, generally entailing equity investment in unlisted companies.

According to Oladele, private equity has grown to become an industry with multi-trillion dollars under management worldwide, with about $232bn and $168bn raised globally in 2005 and 2008 respectively

Private equity funds, he explains, are pooled from institutions and individuals with substantial net-worth.

He adds, “The sources include institutional investors like banks and other financial institutions (about 40 per cent of global commitments in 2006), pension funds, endowment funds and foundations, academic institutions, other body corporate and development finance institutions.

“Others are Fund of Funds and high net worth individuals.”

He says private equity continues to make great contributions to entrepreneurship, wealth creation and growth and development of countries worldwide, and remains a veritable tool for unlocking value and enhancing capacity

Speaking on commercialising gas in small and mid-sized fields, the Managing Director/Chief Executive Officer, Seplat Petroleum Development Company Limited, Mr. Austin Avuru, says Nigeria has no gas exploration to date as growth in reserves is largely linked to crude oil reserves growth.

He, however, says, “The nation’s gas agenda is robust. It puts gas-to-power at the core, but also envisions an aggressive gas based industrial growth. This in turn will drive further growth of power demand.”

In realising the country’s gas aspiration, Avuru says there is the need to embark on major reforms of the gas sector to assure delivery on a sustainable basis.

The Seplat boss says, “We need to commence implementation of the Gas Master Plan strategic framework towards wholly competitive, market driven domestic gas sector by 2014. We also need to put in place transitional framework to facilitate gas access in the short to medium term – particularly for the power sector.

“There is the need to redefine the commercial framework for domestic gas supply to assure long run sustainability of supply – pricing, contracting (agreements), among others.

“We need to commence implementation of a gas infrastructure blueprint to enable flexible delivery of high quality gas to power and other end users; award one of the three Central Processing facilities, and award the 120km x 48” Ob/Ob-Oben East West gas pipeline contract.”

He says the objectives of the GMP are to maximise the multiplier effect of gas in the domestic economy, optimise Nigeria’s share and competiveness in the high export markets, and assure the long term energy (gas) security for Nigeria.

The key components of the plan, he adds, are; Domestic gas supply obligation regulations which mandate all oil and gas producers in Nigeria to set aside a pre-determined amount of gas for utilisation in the domestic market as a precondition for export and the gas infrastructure blueprint that will guide future infrastructure investments in gas in time for capacity increase in gas supply to the domestic market.

In the same vein, the General Manager Finance, Nigeria LNG Limited, Mr. Victor Eromosele, says the terrain in LNG is fast changing as Africa in 2010 accounted for 18 per cent of annual world LNG trade of nearly 300 billion cubic metres.

The African LNG terrain, he adds, is set to change as Angola, Mozambique and Tanzania look set to join the African LNG league by 2016.

He maintains, “Australia is set to top the league table in 2020, moving up three places and deposing Qatar to second.Will Nigeria still maintain its fifth position?

“By 2020, Nigeria potentially could add another 27-40mtpa to current 24 mtpa capacity of Bonny Island plant if the three pending final investment decisions are taken without further deferment.”

Kenya inflation drops to a 17-months low

NAIROBI (Reuters) - Kenya's year-on-year inflation fell to 7.74 percent in July and to its lowest level in 17 straight months, the statistics office said on Tuesday, pointing to another rate cut in September.

A Reuters poll of 10 analysts had forecast the annual rate of inflation would fall for an eighth straight month and gave a median estimate of 9.16 percent.

Analysts attributed the steep drop from 10.05 percent in June to a combination of base effects due to a higher comparison in the year-ago period and lower fuel prices.

Finance Minister Robinson Githae said the fall, which sent the rate firmly into single digit territory, marked a key victory for the Treasury, which had aimed to bring it down to this level by September.

"This is one of the battles we have fought in the ministry of finance... We have achieved our single digit inflation target two months earlier. Inflation is under control," he told a Kenya investment summit in London.

Prices of food and transport fell at the fastest pace during the month, the Kenya National Bureau of Statistics said, adding that the month-on-month overall decline for all prices was 0.85 percent.

Together with its neighbours Ugandan and Tanzania, the east African nation fought a seemingly losing war against soaring inflation and a sharp weakening of the shilling last year.

Uganda, which faced popular protests from citizens who were squeezed hard by high prices for most of 2011, also reported a big improvement in the rate of inflation for July.
Across the region, poor people bore the brunt of the inflation and currency crises, having to scrap some items like bread from their diets and to walk to work due to high public transport costs, in order to make ends meet.

CURRENT ACCOUNT DEFICIT

After the inflation data for Kenya was issued, focus turned to the country's poor external position, which could curb the pace of monetary policy easing by the central bank.

"This is because Kenya's outsized current account deficit persists, and improvement on this front will not be as rapid as was the case with inflation," said Razia Khan, head of research for Africa at Standard Chartered in London.

The current account deficit edged down to 11.3 percent of GDP in May from 11.4 percent in the previous month, the central bank said earlier this month, warning that it was still high.

Policymakers cut the central bank's benchmark lending rate by a bigger-than-expected 150 basis points to 16.5 percent earlier this month, claiming victory over inflation, which peaked at just under 20 percent last November.

"The MPC (monetary policy committee) are to be commended for getting ahead of the curve with their 150 basis points rate cut. They have to cement that advantage with a further cut of no less than 200 basis points and signal that they are ready to do more," said Aly Khan Satchu, an independent trader and analyst.

Although the tight monetary stance adopted by policymakers in the final quarter of last year, it has also crimped economic activities, at a time when exports to the euro zone, a key trading partner, and tourists from the single currency bloc have been hit by the euro area crisis.

Zimbabwe puts squeeze on banks for higher capital

HARARE (Reuters) - Zimbabwe has increased minimum capital requirements for banks to as much as $100 million, a move which could hold back a drive to force foreign banks to sell majority shares to locals while forcing small, locally owned ones to merge.

In a monetary policy statement presented in Harare, central bank governor Gideon Gono pushed for consolidation, warning that poorly capitalised banks posed a threat to the stability of the financial sector and the economy as a whole.

"Mergers and acquisitions have become a major strategic option, aimed at entrenching a strong, efficient and diversified financial sector that ensures the safety of depositors' funds and plays a developmental role in the economy," Gono said.

He added that the size of Zimbabwe's economy was too small to support 25 banks, some of which are already struggling. As many as four banks have been forced to closed or placed under administration in the past year.

The new capital requirements are higher than those in much larger regional economies such as South Africa, Kenya and Angola, according to central bank statistics.

Commercial and merchant banks, whose current minimum capital requirements are $12.5 million, will need to have $25 million in capital by December this year, which will rise to $100 million by June 2014, Gono said.

Mortgage lenders' minimum capital will go up to $20 million in December 2012 from the current $10 million, ultimately rising to $80 million in June 2014.

According to Gono, the latest local bank to fail, Royal Bank, registered a $6 million loss in the six months to June as it choked under a bad loan book, 99 percent of which was not performing
Britain's Standard Chartered and Barclays Plc and South Africa's Standard Bank and Nedbank are the major foreign banks with operations in Zimbabwe.

Local investors in Zimbabwe are likely to struggle to raise the capital needed to buy shares in foreign-owned banks, should the sector be forced to take locals on board as majority shareholders.

Earlier this month, Zimbabwe's empowerment minister Saviour Kasukuwere gave foreign banks one year to hand over 51 percent shares to locals under a controversial ownership law being championed by President Mugabe.

Kasukuwere and Gono, both Mugabe appointees, have frequently wrangled over the application of the empowerment law -- which has so far been used to compel mines to cede shares to locals -- to the banking sector.

On Tuesday, Gono repeated his warning that forcing foreign banks to localise could adversely affect Zimbabwe's stuttering recovery.

Indian into Africa: SREI Infrastructure Africa Fund

India’s Business Standard reports that Indian SREI Infrastructure are planning to set up the SREI Emerging Africa Fund to focus on opportunities in telecom, roads, power and ports, possibly also mining and energy, areas where SREI have a track record. The company reportedly aims for a first close of USD50-100m and plan to raise USD300m later. Initial activity will be concentrated in Nigeria, Tanzania, Kenya, South Africa, Mozambique and Namibia.

Indian corporates – e.g. Airtel, Essar and others – have already deepened their engagement with sub Saharan Africa. SREI say they will engage with the usual suspects, for example Germany’s DEG, the Netherlands’ FMO and Belgium’s BIO, to raise funds. SREI already has business connections with these. The article also points out that SREI may well be pursuing direct connections for its own businesses, e.g. through pursuing coal-mining investments to power its own power plants.

Helios Towers Eyes USD200m for Further African Expansion

Helios Towers Africa will soon close on USD200m in expansion financing from the International Finance Corporation (IFC) and other investors, LBO Wire reports. HTA was established as a pan-African telecoms tower operator in 2009 with a USD350m investment from a group of investors including PE firms Helios Investment Partners, Albright Capital and Soros Funds. The group has since purchased tower assets in Tanzania, Ghana and the DRC. LBO writes that the IFC will now make a USD100m equity commitment to HTA from two of its funds, with another USD100m coming from new and existing investors, some of whom will be investing in Africa for the first time. HTA is looking to expand its sub-Saharan Africa footprint even further, as the demand for shared telco tower infrastructure rises across the continent.

Adlevo Capital Acquire Stake in Nigerian Pagatech


Adlevo Capital have acquired an unspecified stake in Nigerian mobile money services firm Pagatech, co-investing alongside Omidyar Network, Acumen Fund, Capricorn Investment Group, and current investor, Goodwell West Africa Microfinance Development Company. Pagatech intend to use the capital injection to fund its growth and expansion across Nigeria.

In Nigeria, as in many other countries across the continent, access to retail financial services is still underdeveloped. Around two thirds of Nigeria's 160m population have mobile phones, so this channel has enormous potential. Adlevo Capital’s Managing Partner Yemi Lalude commented on the deal: ‘What we like about Paga is their holistic approach to servicing merchants by providing a secure and simple solution for both banked and un-banked users to pay for goods and services.‘

China Mining Fund Targets Africa

State-owned private equity managers China Mining United Fund (CMUF) will launch a second fund for investment in African mineral assets, Bloomberg and Engineering News report. The vehicle is one of the first state-owned RMB PE funds to gain approval to invest abroad. It is CMUF’s second fund, and is expected to follow a similar structure to the USD2bn Fund I. For this round, “CMUF is targeting stakes in companies that are close to starting production in deals from USD20m to USD100m,” Bloomberg reports. The fund will also look to invest in Australia, Asia and Europe.

China has been investing directly in African mineral projects for some time. However, these projects have not traditionally been funnelled through private equity funds.

FG to inaugurate SWF by year end–Okonjo-Iweala

The Minister of Finance and coordinating minister of the economy, Mrs. Ngozi Okonjo-Iweala, said on Monday that the Federal Government would inaugurate the Sovereign Wealth Fund by the end of the year.

Okonjo-Iweala said on the sidelines of a conference in London that the government would announce the management team for the fund in August.

She also disclosed that the government would issue a second Eurobond of at least $600m next year which could be open to members of its diaspora.

Reuters quoted Okonjo-Iweala as saying, “The members of the SWF board have been chosen and will be announced in August once due diligence has been carried out. By September/October, we should be getting the team in place and we should be able to inaugurate by the end of the year. We are in the last stage of due diligence.

,”The fund will be inaugurated with an initial $1bn,” according to the minister, after the government gained approval in June from Nigeria’s state governors, who initially blocked the savings fund, saying it was unconstitutional.

“We’re at a stage now where it’s accepted by the governors. The issue is how much goes into the fund not whether the fund should exist,” she added.

The fund was supposed to replace the Excess Crude Account, in which Nigeria saves oil revenues over a benchmark price, currently $72 a barrel. Governors get a portion of any money withdrawn from the ECA but the SWF won’t give those guarantees, which means they are likely to want most of Nigeria’s savings to be kept in the ECA.

The aim of the SWF is to save money for future generations, to finance infrastructure and to defend the economy against commodity price shocks.

Analysts said that the ECA could be easily dipped into by government. The account contained more than $20bn in 2007 but despite years of record high oil prices it now holds around $6.9bn.Nigeria issued a debut $500m Eurobond in January last year, which was 2.5 times oversubscribed

FCMB to complete merger with Finbank by Q3

First City Monument Bank Plc has said it will complete its legal and operational merger with Finbank Plc by the end of the third quarter.

Reuters quoted the Chief Executive Officer, FCMB, Mr. Ladi Balogun, as saying at in investor conference call, “We took full control of Finbank in Febuary 9, and a complete integration is on the way. It will happen by the end of the third quarter.

“We have received approval in principle for the acquisition from the Securities and Exchange Commission, and we are looking at getting a date to arrange a court-ordered meeting of shareholders in the next few days.”

Balogun said he expected Finbank to contribute more than 10 per cent to profits this year after the merger.

SEC had delayed the approval of the acquisition for months.

Banking sources had said that the acquisition had suffered a major setback over recent discovery of hidden bad loans and huge debt profile of the troubled bank.

FCMB, however, said in a statement to shareholders that bank had won all necessary regulatory approvals for the deal and Finbank would become a wholly-owned subsidiary of the bank.

The bank, which refused to disclose the amount paid for the stake in the bank, said the buyout ended the recapitalisation process for FinBank.

However, the Scheme of Arrangement showed that Finbank was being acquired for N6bn.

Reacting to the delay by SEC, the Group Head, Corporate Communications, FCMB, Mr. Kenny Aliu, had said, “We like doing things thoroughly. Currently, we are going over the final details of the transaction. In our view, the transaction is seamless and everything is on track as far as our relationship with all relevant regulators is concerned. Everything is going on track; there is no cause for concern. We are not aware of any setback. It has not being communicated to us.”

The shareholders of FCMB had, on September 29, 2011, approved the bank’s acquisition of Finbank through its subsidiary, FCMB Investments Limited.

The shareholders, also at the court-ordered Extra Ordinary General Meeting, endorsed the issuance and allotment of the bank’s shares or payment of cash to the shareholders of Finbank.

Another USD2m for Nollywood VC Stars, Iroko Partners

Iroko Partners, the Nigerian online distributer of African movies and music, have secured another USD2m in venture capital funding, Reuters reports. This follows an USD8m Series A round in April 2012 that brought international attention to the potential for bigger VC deals in Africa. The latest funding, from Swedish VC firm Kinnevik, will support Iroko as it pushes into American and European markets through cable and satellite TV partners. Iroko has now commanded support from two quite serious western VCs: Kinnevik, which was an early investor in Groupon, and international VC heavyweight Tiger Global, the Series A funder. Iroko’s steadily rising profile is sure to bring increasing credibility to the African VC and mobile tech space.

In other Iroko news, Nigeria’s Daily Times reports that Iroko is taking legal action against Google’s Android Development Challenge winner, Afrinolly. The start-up runs a mobile application that showcases Nollywood movies and trailers – the same centrepiece of Iroko’s online platform. Iroko says Afrinolly is providing content through its application that has been illegally sourced from Iroko’s legally licensed YouTube channel, NolloywoodLove.

CB&I announces agreement to acquire the Shaw Group

CB&I (NYSE: CBI) announced today that it has entered into a definitive agreement to acquire Shaw Group (NYSE: SHAW), a Fortune 500 company primarily focused on serving clients in the power generation and government services sector. The acquisition is expected to close in early 2013.

“This is a highly compelling transaction that we believe will create significant value for our shareholders”

Combining CB&I and Shaw will create one of the most complete energy focused technology, engineering, procurement, fabrication, construction, maintenance, and associated services companies in the world. With a global workforce of nearly 50,000 employees, backlog of over $28 billion, and engineering and fabrication facilities strategically located on all continents, the company will have the critical mass necessary to execute the largest energy infrastructure projects now and into the future.

"This is a highly compelling transaction that we believe will create significant value for our shareholders,” said Philip K. Asherman, President and CEO of CB&I. “Shaw is a great company with tremendously talented employees. By adding them into the CB&I family, we will become fully diversified across the entire energy sector, from Power Generation to LNG, from Refining to Gas Processing, from Offshore to Oil Sands, and beyond. We will have the capabilities and the expertise to provide our clients with the full range of solutions, wherever they are in the world.

Most important, we will have the experience and relationships necessary to successfully meet and exceed our clients’ expectations.”

CB&I will acquire Shaw for $46.00 per share in cash and stock.

Shareholders will receive $41.00 in cash and $5.00 in CB&I equity (0.12883 shares based on an agreed upon recent average stock price of $38.81 per share) for each share of Shaw stock at closing. CB&I will use cash on the balance sheets of both companies, along with approximately $1.9 billion in debt to finance the acquisition. Based on the estimated cash position of Shaw at the end of its August 31, 2012 fiscal year, this equates to an enterprise value of approximately $2.0 billion. Using consensus estimates, the implied transaction multiple is 7.0x Shaw’s fiscal 2012 adjusted EBITDA. First year earnings per share are anticipated to be double-digit accretive before transaction related costs.

“I am extremely proud of the company we have built and operated for the last 25 years. Shaw’s leadership position in the power, environmental and infrastructure industries will complement CB&I’s current business, and I am confident that, together, these two companies will continue to excel,” said J.M. Bernhard Jr., Chairman, President and Chief Executive Officer of Shaw. “While Shaw has been growing in our business and has many opportunities ahead of us, we believe this transaction is in the best interest of and creates significant value for our shareholders, our employees and our customers.”

The acquisition of Shaw Group by CB&I has been unanimously approved by the Directors of the respective company’s boards. The transaction is subject to approval by each company’s shareholders, along with the receipt of certain regulatory approvals and the satisfaction of other customary closing conditions. Philip K. Asherman will continue as President and CEO of the combined company.

Praise, criticism for Pennsylvania shale law

Responsible development of natural gas reserves requires sound environmental protection to proceed, an environmental group in Pennsylvania said.

A Pennsylvania court last week said local governments are permitted to regulate where natural gas is allowed in shale plays in the state. Lawyers who represented local townships in the dispute told CNN last week they expected the case to be appealed to the state Supreme Court.

Industry groups favored state control over natural gas drilling, saying the rule would provide a level of uniformity in the state's vast natural gas reserves.

Marcellus Shale Coalition President Kathryn Klaber said the lack of such uniformity was the "Achilles' heel" of the Pennsylvania shale gas sector.

The Pennsylvania Environmental Council, however, said the rights and responsibilities of local governments need protection.

"Responsible development of natural gas in Pennsylvania requires thorough consideration of our unique community and natural resources, with appropriate site-specific and regional protections in place as a result of that analysis," the group said in a statement.

Pennsylvania hosts a portion of the Marcellus shale play, one of the largest sources of natural gas in the United States.