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Oil Companies And Bank Loans

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Olusola Bello

The five banks which last weekend had their managing directors sacked by the apex bank are also known to have been involved in what is now called banks unusual romance with the oil and gas industry. The former bank bosses may have marched into the slippery terrain of the industry without first of all doing their home work on the vagaries of the sensitive sector. The bait which forced them to lower their guard was the fact that the oil firms continued to service their accounts a tendency which subsequently took the place of the good old collateral. Many analysis have faulted the banks’ failure to conduct due diligence on the sector before offering the companies jumbo loans that were not secured.
On their part, the oil firms selling the idea that the escalating price of crude oil would continue to point skywards, took advantage of the situation to churn out irresistible bankable proposals.
There was a sudden rise in the price of crude oil to about $140 per barrel while the price of products like Premium Motor Spirit (PMS) or petrol, Automotive Gas Oil (AGO) or diesel was sold at about N140 per litre. However, against the importers’ and their bankers’ expectations, prices started falling. Through this the importers incurred heavy losses.Again, the banks influenced by greed and their level of solvency threw so much money into the oil sector because they considered the sector as the honey pot that yielded quick and fantastic returns.
A source said that there are many factors that prompted the oil companies to also seek for loans, one of which was that some of them have no genuine intention to pay back the loans.
The loans, the source said were used for other purposes that were also hit by the economic recession and this has made it difficult for them to repay back the loans.
There have also been allegations of diversion of some of the loans by the oil companies to real estates. Unfortunately, the sector like other sectors of the economy also crashed, leaving their investments in danger.
Some of the oil companies were said to have taken loans to import products at higher prices only to sell at much lower prices in the bid to under-cut the established oil companies and gain popularity among consumers. While this was going on, the prices of the product plummeted and have not risen since that time. So, rather than make returns on their investments, the firms were recording loses.
Compounding the problems associated with the loans, was the steady upward movement of interest rates, exchange rate fluctuations and the devaluation of naira which some of the firms could hardly cope with because of their capital base.
For instance, the exchange rate was $1 to N117 as at the time the imports were made before they could arrive the country the exchange rate had risen to N150 to $1.
This situation made oil marketing companies to threaten to stop fuel importation into the country. They consequently gave conditions under which they would import products especially Premium Motor Spirit or petrol.
The private sector which imports at leat 50 per cent of the nation’s Premium Motor Spirit (PMS) requirements under the Petroleum Subsidy Fund (PSF) scheme while Nigerian National Petroleum Corporation (NNPC) delivered the balance were aggrieved that the government was not paying them what could cover their cost of importation.
The exchange rate was beyond what was provided for the Petroleum Product Pricing Regulatory Agency (PPPRA) import template. As a result, when the verified private sector subsidy claims for the third quarter of 2008 of $1,189,964,305.45 was paid in naira, on the 10th of January, 2009 at the rate of N117.91, the naira payment of N139,225,823,738.27, could only purchase $870,161,398.36 at the prevailing exchange rate thereby leaving a shortfall of $319,802,907.09, a sum equivalent to the nation’s cost of PMS import for a month.”
By virtue of the Clause 3.3 of the agreement between the PPPRA and importers on PSF, subsidy payment should be made monthly and within 15 days of submission of claim.
They argued that they were unable to recover these additional costs from the regulated pump price. The marketers had to fight for a foreign currency window to be made available for PMS importation, at current market trends. The private sector requires between $200m. $250m monthly for importation of petroleum products.
To ensure continuous supply of products, the marketers stated that they would require the following.
Immediate payment of all outstanding cost and exchange rate differential.
All payments for subsidy claims or contribution should be based on the prevailing exchange rate.
Interest on late payments of subsidy claims should be paid on past claims to enable importers recover cost of funding.
Current interest rate as a result of worldwide economic situation must be reflected in the template, PPPRA and Ministry of Finance must make payment within the period stipulated in the contract to avoid additional costs.
Foreign exchange availability is a precondition for guaranteed supply of petroleum products in some of the relatively new companies engaged in frivolous extravagance in their attempt to be heard and seen in places where ordinarily they should not be. A couple of them spend valuable time lobbying lawmakers and sponsoring government officials to international events and seminars without taking a look at the implications of the flamboyant lives on the business they are doing.
The government liberalisation of the sector which gave room to all manner of people coming into the sector with the hope of bringing in products and getting refunds through the Petroleum Support Fund (PSF) did not help matters. But this was not forthcoming on time as the government had to delay for a long while before paying up the difference between the landing cost of the products and the official price at the pump stations.
Lack of human capacity in the energy sector by most of the banks was a major snag in the way the banks transact their oil businesses. This has resulted in their inability to do due credit analysis on the various companies that were given the loans even as some of the companies that received credits did not have storage facilities. They are brokers or bulk purchasers who go about to beg fellow operators with depot to assist them with letters stating that they would be allowed to use their facility in order that federal government may give them licence to import products.
A particular company among the ones listed as owing some of the banks was alleged to have imported four ship loads of Automotive Gas Oil (AGO) without having any storage facilities. The ships were said to have stayed for 60 days on the Nigerian territorial waters without much success before they sailed back to Europe.
Culled from Business Day

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NCAA Certifies Elin Group Aircraft Maintenance

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The Nigerian Civil Aviation Authority (NCAA) has certified Elin Group Limited to operate as an approved aircraft maintenance organization (AMO).
Elin Group Limited confirmed the certification in a Statement released at the Weekend.
The Executive Director, Elin Group Limited, Engr. Dr. Benedict Adeyileka, noted the significance of the certification, stating that it recognizes the company’s commitment to upholding high maintenance standards.
Adeyileka also stated that “the issuance of the AMO Certificates and OPSPEC by the NCAA is a landmark for both Elin Group and Nigeria’s aviation industry. This approval empowers us to maintain our fleet and extend services to other operators, thereby supporting the sector’s growth.
“It affirms the standards we have upheld over the years and places on us the responsibility to expand services that strengthen the aviation ecosystem. We thank the NCAA for their confidence in our capabilities.
“This recognition inspires us to keep striving for excellence and innovation in building a stronger, safer, and more sustainable aviation industry.”
The certification follows the company’s recent completion of a 7,800 landings maintenance check on its Bombardier Challenger 604 aircraft and Agusta A109E helicopter.
This type of inspection, similar to a D-check in commercial aviation, was conducted entirely in Nigeria for the first time.
With the NCAA approval, Elin Group is authorized to maintain its own fleet and provide maintenance services to other operators.
The certification is expected to contribute to the growth of local aviation maintenance capabilities.
“PenCom Raises Capital Requirement For PFAs To N20b
…Sets December 2026 Deadline
The National Pension Commission (PenCom) has announced a sweeping revision to the capital requirements for Pension Fund Administrators (PFAs) and Pension Fund Custodians (PFCs), raising the minimum threshold for PFAs tenfold, from N2 billion to N20 billion.
The move, aimed at strengthening financial stability and operational resilience, marks one of the most significant regulatory shifts in Nigeria’s pension industry in over two decades.
In a circular titled “Revised Minimum Capital Requirements for Licensed Pension Fund Administrators and Pension Fund Custodians”, PenCom stated that PFAs with Assets Under Management (AUM) of N500b and above must now maintain a capital base of N20 billion plus 1% of the excess AUM beyond N500 billion.
The revised capital requirements for both PFAs and PFCs would take effect immediately for new licenses, while existing operators have until December 31, 2026, to comply.
PenCom would monitor compliance every two years based on audited financial statements, and any shortfall must be rectified within 90 days.
PenCom emphasized that the review is anchored in Sections 60(1)(b), 62(b), and 115(1) of the Pension Reform Act (PRA) 2014. It aims to support the long-term viability of pension operators, improve service delivery, and ensure the sustainability of the Contributory Pension Scheme (CPS), which has now been in operation for 21 years.
“PFAs are therefore required to maintain adequate capital to sustain the achievements of the CPS, support ongoing pension reform initiatives, and deploy adequate resources to effectively fund operations,” PenCom stated.
PFAs with AUM below N500b are also required to meet the new N20 billion minimum. Special Purpose PFAs, such as NPF Pensions Limited, must hold N30 billion, while the Nigerian University Pension Management Company Limited is required to maintain N20 billion.
“The capital requirement was reviewed in line with global best practice, which ensures that capital is proportionate to the risk exposure of the Pension Fund Operator. The new model aligned the capital requirement with the Pension Asset Under Management (AUM) and Assets Under Custody (AUC) of the PFAs and PFCs respectively”, the circular stated.
For Pension Fund Custodians (PFCs), the minimum capital requirement has been raised from N2 billion, unchanged since 2004, to N25 billion plus 0.1% of AUC.
The Commission cited the exponential growth in assets under custody and the increasing complexity of operations, including technology deployment, cybersecurity, and staff welfare, as key drivers of the revision.
“The operating landscape of PFC business has evolved significantly over 21 years,” the circular noted. “These developments underscore the need to reassess the adequacy of the existing capital threshold to ensure continued financial stability and effective risk management”, it stated.
The announcement signaled PenCom’s commitment to aligning Nigeria’s pension industry with global standards, ensuring that operators are well-capitalized to navigate macroeconomic pressures and deliver secure retirement benefits to millions of Nigerians.
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SMEDAN, CAC Move To Ease Business Registration, Target 250,000 MSMEs

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The Corporate Affairs Commission (CAC) and Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) are deepening partnership to ease business registration for small business owners in the country.
The agreement would provide the framework for free registration of 250,000 Micro Small and Medium Enterprises (MSMEs) across the country.
The Registrar-General, CAC, Hussaini Magaji, revealed this during the signing of a Memorandum of Understanding (MoU) between both organisations, in Abuja, at the Weekend.
Magaji said that the framework provided under the Renewed Hope Agenda of President Bola Tinubu’s administration would eliminate cost barriers by waiving all statutory fees.
According to him, entrepreneurs would now be able to obtain certificates seamlessly, without delays or middlemen, through the CAC portal.
He said, “Formalising a business is more than obtaining a certificate.
“It provides entrepreneurs with a legal identity, improves access to finance and markets, enhances record keeping and strengthens compliance with tax or regulatory obligations.
“For the government, it expands the tax base, improves policy design and reflects the two sides and contribution of our MSME sector.
“By formalising an additional 250,000 enterprises under this initiative, we are helping to create jobs, foster innovation and build a more inclusive economy,” he said.
The registrar-general, while commending SMEDAN on the partnership, urged the MSMEs to take advantage of this opportunity to formalise their businesses, access new opportunities and become part of Nigeria’s growth story.
Magaji also appealed to the media to Partner in amplifying this message to ensuring that every deserving entrepreneur is carried along.
On his part, the Director-General of SMEDAN, Charles Odii, hailed the initiative as a milestone for small businesses, describing it as one of the “big wins” of the current administration.
Odii explained that SMEDAN would mobilise, profile and guide eligible businesses for registration through its dedicated online portal.
He insisted that the platform would eliminate the role of middlemen, who previously inflated registration costs, sometimes charging between N30,000 and N100,000 against the official CAC rate of about N11,000.
Odii said the initiative would complement the President’s N200 billion economic assistance programme, which provides N50 billion in grants for nano businesses, N75 billion in single-digit loans for SMEs and N75 billion for manufacturers.
He said that the interventions demonstrated the resolve of government to ease the cost of doing business and expand opportunities for entrepreneurs.
The director-general said that the MoU was timely, especially as CAC prepared to review its fees by October, reiterating that the initiative ensures 250,000 businesses will benefit from free registration before the review.
According to Odii, many businesses collapse within their first five years due to a lack of structure, noting that registration was the first step to building resilience.
The SMEDAN boss assured that beyond registration, SMEDAN would continue to support entrepreneurs through business clinics, advisory services and linkages.
He said this would be done in collaboration with other agencies such as the Standards Organisation of Nigeria (SON) and the Nigerian Export Promotion Council (NEPC).
Odii also commended the President’s move to raise the tax exemption threshold for small businesses with N25 million to N50 million annual turnover, saying it will reduce the burden on enterprises and encourage compliance.
He thanked the Registrar-General of CAC, the Federal Ministry of Industry, Trade and Investment and the Chief of Staff to the President for their support in bringing the initiative to fruition.
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Blue Economy: Minister Seeks Lifeline In Blue Bond Amid Budget Squeeze

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Ministry of Marine and Blue Economy is seeking new funding to implement its ambitious 10-year policy, with officials acknowledging that public funding is insufficient for the scale of transformation envisioned.

Coordinating Minister of the Ministry,
Adegboyega Oyetola, said finance is the “lever that will attract long-term and progressive capital critical” and determine whether the ministry’s goals take off.
The Permanent Secretary of the ministry, Olufemi Oloruntola, stressed that the funding gap  must be closed to move from policy to practice.

“Resources we currently receive from the national budget are grossly inadequate compared to the enormous responsibility before the ministry and sector,” he warned.

He described public funding not as charity but as “seed capital” that would unlock private investment adding that without it, Nigeria risks falling behind its neighbours while billions of naira continue to leak abroad through freight payments on foreign vessels.

Oloruntola argued that the sector’s potential goes beyond trade, pointing to the surge of diaspora spending every festive season. With the right coastal infrastructure, he said, the marine economy could capture a slice of those inflows as foreign exchange and revenue.

The Chief Executive, Nigerian Exchange (NGX), Jude Chiemeka, said blue bonds, which are loans raised through the capital market, but tied specifically to projects that protect or develop marine projects, could unlock huge sums of much-needed capital.

He said “We have N24.6 trillion in pension assets, with 5 percent set aside for sustainability, including blue and green bonds,” he told stakeholders. “Each time green bonds have been issued, they have been oversubscribed. The money is there. The question is, how do you then get this money?”

The NGX reckons that once incorporated into the national budget, the Debt Management Office could issue the bonds, attracting both domestic pension funds and international investors.

Seychelles, he pointed out, raised $15 million from a blue bond to support its fisheries industry, a scale Nigeria, with over 853 km of coastline and significant freshwater bodies, could surpass.

Yet even as officials push for creative financing, Oloruntola stressed that the first step remains legislative.

“Even the most innovative financial tools and private investments require a solid public funding base to thrive.

“We therefore call on the relevant authorities, most especially the National Assembly, to prioritise the marine and green economy sector.”

“Nigeria must match ambition with resources” and “strategy into execution”, he said

It would be noted that with government funding inadequate, the ministry and capital market operators see bonds as alternative financing.

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