Our banks lack enough dollars to fund acquisition of Shell assets in Nigeria – GTCO CEO
Nigerian lenders do not have enough dollars to fund clients interested in acquiring assets of Shell Petroleum Development Company Limited (SPDCL), said Mr Segun Agbaje, Chief Executive Officer (CEO) of the Guaranty Trust Holding Company (GTCO) Plc, according to Bloomberg report.
Such a deal ,said Agbaje who spoke at GTCO’s investor conference held virtually, would require syndication of up to $1.8 billion, and mobilising that kind of funding locally at the moment can be very tough.
Royal Dutch Shell Plc had admitted that its spill-prone activities in Nigeria are incompatible with efforts to go green after more than half a century of pulling oil out of the country’s wetlands.
The Anglo-Dutch firm has been gradually selling onshore assets in the West African country, attempting to put to rest long-standing issues such as pollution caused by broken pipelines and the ensuing court disputes with local populations.
Shell’s ambition to turn itself into a clean energy behemoth and progressively wind down its oil and gas sector to reach net-zero carbon emissions by 2050 has exacerbated the problem in the last year.
Shell announced in May that it would abandon its onshore oil operations in Nigeria because they no longer fit with the company’s strategic goals.
Agbaje said, “Such a deal would require syndication of up to $1.8 billion and it can be very tough to raise this kind of funding locally at the moment.
“When I look at the books of Nigerian banks today, I don’t see a lot of dollar liquidity. It is becoming a very difficult deal for people to pull off.”
Nigerian banks have seen their capacity to embark on such transactions decrease significantly since they syndicated $3.3 billion in debt to Dangote Industries for a refinery and petrochemical complex in 2013 and recently financed Heirs Holding’s $1.1 billion acquisition of OML 17.
According to Agbaje, Dollar inflows into Nigeria were slowed by a drop in crude prices and an economic downturn brought on by the COVID-19 pandemic, putting pressure on reserves.
GTCO is seeking a license from the Central Bank of Nigeria to establish a payment firm in order to mitigate issues in its primary activities.
Agbaje said the company was waiting for regulatory permission on an acquisition that would allow it to run pension and asset management companies.
“Our desire in the medium to long term is that the three new businesses will contribute about 30 per cent of group profit,” he said.
After interest earnings from loans and investment securities fell 22% to N116.9 billion in the first half, the company’s net income fell 16% to N78.1 billion (US$189.8 million).
Nigerian banks, which in 2013 syndicated $3.3 billion debt to Dangote Industries for a refinery and petrochemical plant and recently financed Heirs Holding’s $1.1 billion acquisition of OML 17, have seen their capacity to take on such deals wane considerably. A slump in crude prices and an economic downturn arising from the coronavirus pandemic curbed foreign-currency flows into Africa’s largest crude producer and pressured reserves.
Recently, Wood McKenzie, a leading global oil and gas consulting firm, putting the total value of SPDC, the subsidiary the parent company proposes to totally divest from, at about $2.3 billion. But the IOC must get consent as well as negotiate the Nigerian National Petroleum Corporation (NNPC)’s pre-emptive rights before the assets can be sold, it was gathered.
As many as 19 Oil Mining Leases (OMLs) would be put up for sale by the oil giant in onshore locations and shallow waters in the company’s eastern and western operations in the Niger Delta.
In February, a Dutch court held Shell’s Nigerian subsidiary responsible for multiple oil pipeline leaks in the Niger Delta and ordered it to pay damages to farmers.
Meanwhile, Chevron Corporation has pledged to triple to $10 billion its investments to reduce its carbon emissions footprint through 2028, but said it was not yet ready to commit to a 2050 net-zero emissions target.
Oil producers globally are under mounting pressure from investors and governments to join the fight against climate change and sharply cut greenhouse gas emissions by mid-century, with US majors lagging efforts by European companies.