A Week in Nigeria: 23 November
Highlights from Reuters coverage of Nigeria over the last seven days
In this week’s round-up: Nigeria releases GDP and inflation data, U.S. indicts Air Peace CEO on money laundering charges, ex-attorney general arrested in Dubai over $1.3bn oil block, and sabotage on key crude oil line has caused significant production losses.
- Nigeria’s statistics office released GDP and inflation data that, respectively, pointed to the impact of oil prices and the closure of the country’s land borders. Economic growth rose to an annual rate of 2.28% in the three months to the end of September after the production of its main export commodity, crude oil, rose to a more than three year high. It was the highest quarterly growth since the last quarter of 2018 as the oil sector rose 6.49%. The non-oil sector rose 1.85% during the period. Africa’s largest economy expanded by 0.17% in the previous quarter and 0.47% in the same period a year earlier. Growth rates in Nigeria have been bouncing back this year, though from a low base, after the oil sector, which accounts for around two-thirds of government revenue and 90% of foreign exchange, shrugged off its negative performance in the first quarter. Crude production in the third quarter stood at 2.04 million barrels per day, its highest since the first quarter of 2016.
- The GDP data, released on Friday, came ahead of the central bank’s announcement of its main interest rate on Tuesday and days after the statistics office said annual inflation hit a 17-month high in October. Higher food prices pushed up inflation after borders with neighbouring countries were closed in a crackdown on smuggling. Annual inflation was 11.61% in October, up from 11.24% in September, the National Bureau of Statistics said on Monday — the highest rate since May 2018. Consumer inflation had dropped to its lowest in almost four years in August. The central bank, which is due to set its benchmark interest rate on Tuesday and has targeted single-digit inflation, held its main interest rate at 13.5% at its last meeting. “Given the increase in inflation, we now expect that policymakers will leave their key rate on hold,” John Ashbourne, senior emerging markets economist at London-based Capital Economics, said in a note. A separate food price index showed inflation at 14.09% in October, compared with 13.51% a month earlier. “This rise in the food index was caused by increases in prices of meat, oils and fats, bread and cereals, potatoes, ham and other tubers, fish and vegetables,” the statistics office said in its report. Shoppers and traders in Abuja and Lagos told us the price of rice, in particular, had risen rapidly in recent weeks.
The issue of land border closures continued to elicit a strong response on social media.
These two tweets were part of a Twitter thread by Amaka Anku, of Eurasia Group, in which she tried to look at the border policy in more depth.
- The founder and CEO of one of Nigeria’s largest airlines, Air Peace, has been indicted by the U.S. Department of Justice on charges of bank fraud and money laundering for the alleged illegal movement of more than $20 million, the department said. Allen Onyema was accused of transferring the money from Nigeria through U.S. bank accounts in a scheme involving false documents based on the purchase of airplanes, the justice department said in a statement dated Nov. 22. The airline’s chief of administration and finance, Ejiroghene Eghagha, has also been charged with bank fraud and identity theft in connection with the alleged scheme, the statement said. Both Onyema and Eghagha denied any wrongdoing in statements issued by their lawyers, adding that they would defend themselves against the allegations. “Onyema allegedly leveraged his status as a prominent business leader and airline executive while using falsified documents to commit fraud,” U.S. Attorney Byung J. Pak was quoted as saying by the Department of Justice. Legal firm A.O. Alegeh & Co. said “the allegations are unfounded and strange,” in statements on behalf of each of the accused. It added they both looked forward to “an opportunity to rebut these allegations in court”. Air Peace, founded by Onyema in 2010, flies to destinations across Nigeria as well as international routes to other West African countries including Ghana, Sierra Leone and Senegal.
- Nigeria’s former attorney general Mohammed Adoke has been arrested in Dubai, his lawyer said, seven months after Nigeria’s anti-graft agency issued a warrant for his arrest as part of an investigation into one of the oil industry’s biggest suspected corruption scandals. Adoke’s lawyer, Mike Ozekhome, said Adoke was arrested by Interpol on Monday 11 Nov., after travelling to Dubai for a medical appointment. The investigation by Nigeria’s anti-graft agency relates to the $1.3 billion sale of a Nigerian offshore oilfield known as OPL 245 by Malabu Oil and Gas in 2011. The agency obtained arrest warrants in April for Adoke, former petroleum minister Dan Etete, and an Eni manager. Eni and Shell jointly acquired the field from Malabu, which was owned by Etete. The oilfield sale has spawned legal cases across several countries, involving Nigerian government officials and senior executives from ENI and Royal Dutch Shell. Shell and Eni, and their executives, have denied any wrongdoing. Etete has also denied wrongdoing. In an Italian case, prosecutors accuse former and current executives of Eni and Shell of paying bribes to secure the licence, and allege roughly $1.1 billion of the total was siphoned to agents and middlemen.
- Sustained economic sabotage by vandals on Nigeria’s oil-exporting Nembe Creek Trunk Line (NCTL) has led to significant losses in production, operator Aiteo said. Nigeria, Africa’s biggest crude oil producer, is accustomed to attacks on oil pipelines. Sabotage in the oil-producing Niger Delta region in 2016 cut Nigeria’s crude output from a peak of 2.2 million barrels per day (mbpd) to near 1 mbpd, pushing the OPEC member into its first recession in 25 years. The NCTL, one of two that exports Bonny Light crude oil, has been shut down more than once this year. It was shut down due to a fire in April, and placed under force majeure in September. “The disruptions that these attacks have brought about has led to direct, irretrievable and significant losses in production and consequently has created revenue deficits that directly impact all the stakeholders,” Aiteo said in a statement. “By virtue of this level of sabotage, the NCTL has been shut down for 61 days this year alone, constituting 83% cause of downtime in this year only,” it said. It added that over the last four years, more than 200 shut down days had been recorded.
- OPEC and its allies are likely to extend existing oil output cuts when they meet next month until mid-2020, with non-OPEC oil producer Russia supporting Saudi Arabia’s push for stable oil prices amid the listing of state oil giant Saudi Aramco. The Organization of the Petroleum Exporting Countries - of which Nigeria is a member - meets on Dec. 5 at its headquarters in Vienna, followed by talks with a group of other oil producers, lead by Russia, known as OPEC+. The current oil supply cuts run through to March 2020. On Dec. 5, Saudi Arabia is set to announce the final pricing of the initial public offering of Aramco, in what it hopes will be the world’s largest IPO. The oil price at the time is likely to be key to Aramco’s listing, expected around mid-December. “So far we have two main scenarios: either meet in December and extend the current cuts until June; or defer the decision until early next year, meet before March to see how the market looks and extend the cuts until the middle of the year,” said an OPEC source. “It is more likely that we will extend the agreement in December to send a positive message to the market. The Saudis don’t want oil prices to fall, they want to put a floor under the prices because of the (Aramco) IPO.” OPEC sources said market conditions in the first quarter of 2020 remain unclear amid concerns of a slowdown in oil demand and weak output compliance by some producers such as Nigeria and Iraq, which is complicating the outlook.
- Still on oil-related news, the chief executive officer of Seplat will retire in July and will be replaced by the chief financial officer, the Nigerian oil company said. Austin Avuru, who was managing director before becoming CEO, will retire after 10 years at the helm, it said in a statement. The company said Roger Brown, the CFO for the last six years, had been chosen by the board to take over as CEO when Avuru steps down on July 31. The company, which has dual listings in Lagos and London , has focused heavily on gas investments, drilling and acquisitions to boost output with the aim of tapping into demand for electricity. It supplies about 30% of the gas required for power generation in Nigeria. Seplat said it planned to expand its energy business activities, which included pursuing offshore assets. It said this would require a review of the company’s structure.
- Nigeria will issue a sovereign guarantee note worth 500 million euros to Credit Suisse and a syndicate of international lenders, the minister of state of finance, budget and national planning said. The minister said the note would serve as collateral for a loan facility the syndicate is setting up for the government-owned development lender Bank of Industry.
- Nigeria’s excess crude account stood at $324.54 million as of November 20, the accountant general said. Ahmed Idris gave the figure during a meeting of the country’s National Economic Council. The oil savings account, which holds dollar reserves from sales of crude above the assumed benchmark price, contained $1.92 billion as of June 2018. The council also resolved to invest $250 million in the country’s sovereign wealth fund and consider ways it can leverage a portion of the country’s pension assets for co-investment with the fund.
- And we reported that Nigeria has lodged an appeal against an order to pay $200 million to a British court for a stay on asset seizures while it challenges a ruling that would have allowed a firm to try to seize more than $9 billion in assets, according to its attorney general. Process & Industrial Developments, a private firm set up to carry out a gas project with the West African country under a 2010 contract, won a $6.6 billion arbitration award after the deal collapsed. The award has been accruing interest since 2013 and is now worth more than $9 billion. In September, a British judge gave Nigeria permission to seek to overturn the ruling that had been in favour of P&ID, which was established by two Irish nationals with little experience in oil and gas. In exchange for granting Nigeria’s request for a stay on any asset seizures while its legal challenge was pending, the country was ordered to pay $200 million to the court within 60 days.