Editorial Team

Marcel OkekeEditor

Eunice SampsonDeputy Editor

Joy Patrick-AkpanKazeem Aremu

Sunday Enebeli-UzorUgochi Chibuzor Nweke

Chinemerem OkoroResearch Economists

Rotimi ArowobusoyeSylvester UkutLayout/Design

September 22, 2017 | Vol.12 No.38

Total, Others Invest U$16bnin Nigeria’s Oil and Gas Sector

OIL AND GAS INDUSTRY UPDATE

In a bid to ramp up Nigeria’s crude oil

production, Total Upstream Nigeria Lim-

ited Plc and the Nigerian National Pe-

troleum Corporation (NNPC) have con-

cluded plans to invest a massive $16bn

in the development of an oil field, known

as Egina project.

The scheme would be completed by the

fourth quarter of 2018 and could add

nearly 200,000 bpd to the nation’s crude

oil production. At the prevailing market

price of $56 per barrel as at September

21st, Nigeria could earn a whopping

$11.2 million daily from this project.

The field is situated about 150km off

the coast of Nigeria and is being devel-

oped by Total Upstream Nigeria (24%)

in partnership with CNOOC Limited

(45%), South Atlantic Petroleum,

Sapetro (15%) and Petrobras (16%).

Egina infrastructure comprises floating

production storage and offloading

(FPSO) unit, an oil offloading terminal

and various subsea production systems.

The field, Egina-1 well, was found and drilled

in December 2003.

The Egina FPSO project is jointly being con-

structed by Korea-based Samsung Heavy In-

dustries (SHI) and LADOL free zone. Other

stakeholders include National Petroleum In-

vestment Management Services (NAPIMS),

Total Upstream Nigeria Limited, Nigerian Con-

tent Development and Monitoring Board

(NCDMB), Nigerian Export and Processing

Zones Authority and the Nigerian Ports Au-

thority.

Recently, the project financiers launched a

$30 million production manifold, which uti-

lizes nearly 5.5 million man-hours. The mani-

fold has 6-slots with a lifespan of 25 years

subsea. The production manifold, con-

structed by Aveon Offshore Ltd, is key to fi-

nal crude production as it handles pump-down

tools, well testing and chemical injection,

among others.

Nonetheless, the main challenge facing the

project’s viability is the Organisation of Pe-

troleum Exporting Countries (OPEC) existing

Floating Production Storage and Offloading

Source: Total.com

In a bid to ramp up Nigeria’s

crude oil production, Total

Upstream Nigeria Limited Plc

and the Nigerian National Pe-

troleum Corporation (NNPC)

have concluded plans to invest

a massive $16bn in the devel-

opment of an oil field, known

as Egina project... pg. 1

Plans are in motion for the Ni-

gerian National Petroleum

Corporation (NNPC) to part-

ner with a Danish firm –

Unibio A/S Limited – to pro-

duce animal feeds. The pro-

posed joint venture company

will be established for the pro-

duction of animal feeds from

the nation’s abundant natural

gas resources... pg. 3

In the second quarter of 2017,

overall passenger traffic (do-

mestic and international) in-

creased by 21.06 per cent over

the previous quarter, accord-

ing to Air Transportation data

released by the National Bu-

reau of Statistics (NBS)... pg.

4

Nigeria’s total public debt

stock, made up of external and

domestic debt stocks of the

Federal Government and all

State Governments, stood at

US$64.194billion (about

N19.64trillion) as at June 30,

2017, according to data re-

leased by the Debt Manage-

ment Office (DMO)... pg. 5

2

deal to cut members’ output. Nigeria’s output limit is cur-

rently pegged at 1.8 million barrels per day. The cartel

and non-OPEC members have scheduled a meeting in

Vienna to deliberate another output extension. Conse-

quently, oil prices have rebounded more than 15 percent

in recent months to trade above $56 a barrel, indicating

that the agreement has pared back excess supply in the

global oil markets. But is still a far cry from the peak of

$112 per barrel attained in mid-2014.

Opportunities• Could further ease foreign exchange liquidity in the

interbank market

• Could substantially plug the nation’s rising debts and

fiscal deficits

• International Oil Companies (IOCs) would be encour-

aged to increase investment in the Nigerian oil and

gas sector

• May increase revenue accruing to the government

Threats• Restiveness in the Niger Delta

• Gas flaring rises as oil production ramps up

• Deteriorating oil production facilities

• Developing local content and technical know-how in

offshore deep water projects

• Crude oil and petroleum product theft

OutlookWith the relative stability in Nigeria’s foreign exchange

market and the recent rally in the prices of crude oil, the

Egina project is on track for completion in record time.

However, oil price and output trajectories would continue

to dictate the quantum of future investment in the indus-

try. Indeed, the Egina Project is expected to boost the

country’s oil reserves by a colossal 550 million barrels,

ceteris paribus.

Total, Others Invest U$16bn in Nigeria’s Oil and Gas Sector

Source: Organisation of the Petroleum Exporting Countries (OPEC)

3

NNPC to Partner Danish Firm on Animal Feeds Production

AGRIC SECTOR UPDATE

Plans are in motion for the Nigerian National Petroleum

Corporation (NNPC) to partner with a Danish firm – Unibio

A/S Limited – to produce animal feeds. The proposed

joint venture company will be established for the produc-

tion of animal feeds from the nation’s abundant natural

gas resources. The Joint Venture (JV) between NNPC and

Unibio is expected to boost the Nigerian animal feeds

market currently valued at N800 billion. The JV opera-

tion will see the government of Denmark financially guar-

anteeing the project with a 10 per cent equity finance.

Unibio International incorporated in 2014, is an SME op-

erating in the biotechnology sector with core competences

in fermentation technologies. The company owns the

rights to the U-Loop technology which is a unique fer-

mentation technology. The concept underlying Unibio’s

U-Loop technology is simply the conversion of natural

gas (methane) into a highly concentrated protein prod-

uct called UniProtein. Uniprotein has a raw protein con-

tent of at least 72 per cent which is a key component in

animal feeds. The UniProtein can then be used as a di-

rect supplement in feed for animals such as pigs, poultry

and fish. UniProtein is a good substitute for fishmeal, a

traditional feed component which is fast becoming a

scarce resource.

Moreover, feed production in Nigeria is low compared

with the country’s population. The United Nations has

projected a continuous growth of the country’s popula-

tion. This has created opportunity in the Nigerian live-

stock feed market for ‘UniProtein’ whose investment in

the country is expected to boost food production tre-

mendously. In addition to the expected growth in local

production and consumption of the feeds, the possibility

of revenue generation in foreign currencies through ex-

port also exists. Unibio asserts that multinational food

and care products companies such as Nestlé, Procter and

Gamble, as well as Colgate-Palmolive, have already started

using the products as feedstock in their manufacturing

processes. Nigeria is the first country where Unibio will

commence its operations in Africa.

Unibio has stated that UniProtein is not genetically modi-

fied but is the result of a natural process industrialised by

Unibio. It is a non-polluting product, as it is produced by

a microbial culture with natural gas as the sole carbon

and energy source. The only waste product from its pro-

duction is clean water. It is thus free from toxins, dioxin

and heavy metals due to the controlled production pro-

cess and the fact that all minerals used are food grade.

Unibio’s ‘UniProtein’ addresses the ever growing need for

animal protein, which will continue to increase in line

with population growth. The beauty of the Unibio’s

UniProtein, however, is the use of methane which makes

the process environmentally friendly and sustainable.

OutlookNNPC’s partnership with the Danish firm, Unibio, to utilise

Nigeria’s abundant natural gas resources for the produc-

tion of animal feeds is a good step towards government’s

drive to diversify from crude oil. The collaboration with

the Danish government is expected to impact positively

on Nigeria’s ability to generate additional revenue, guar-

antee food security and job creation. As the first African

country to partner with the Danish firm on the produc-

tion of UniProtein, it is imperative that Nigeria leverages

on this project and harnesses all opportunities therein.

4

Air Passenger Traffic Up 21.06% in Q2 2017

AVIATION SECTOR UPDATE

In the second quarter of 2017, overall passenger traffic

(domestic and international) increased by 21.06 per cent

over the previous quarter, according to Air Transporta-

tion data released by the National Bureau of Statistics

(NBS). The quarter-on-quarter growth in Q2 2017 over

Q1 2017 is partly due to the reopening of the Abuja air-

port in the second half of Q2 2017, which once again

increased activities in the aviation sector. Similarly, air-

craft movement increased by 11.23 per cent in Q2 2017

over Q1 2017.

However, the Q2 figure of overall passenger traffic showed

a decline of 18.56 per cent, year-on-year. Also, aircraft

movement fell by 20.40 per cent, year-on-year. The sharp

drop in year-on-year passenger and aircraft movement

in Q2 2017 can be attributed to high double-digit infla-

tion during Q2 2017, which averaged 16.53 per cent year-

on-year in Q2 2017. Particularly, air fare charges had

averaged 57.3 per cent four major airports (Lagos, Kano,

Abuja and Port Harcourt) in Q2 2017 over the corre-

sponding period of 2016. During the period under re-

view, air travel was largely restricted to necessary and

business-related activities.

Total Passenger Traffic:Domestic Vs InternationalIn the second quarter of 2017, the total number of pas-

sengers to go through Nigerian airports was 3,033,182.

Of these, 70.6 per cent were domestic passengers, trav-

elling within Nigeria, while the rest were international

passengers, entering or leaving Nigeria. This represents

an increase of 527,570 (21.1%) relative to the number

reported in the first quarter of the year. However, the

number was 20.34 per cent less than the number of pas-

sengers recorded in Q2 2016 (2,688,800).

Murtala Muhammed Airport (MMA) in Lagos remained

the busiest domestic airport in the second quarter of 2017,

accounting for 40.7 per cent of the total domestic pas-

sengers (870,795) and 74.8 per cent of total interna-

tional passengers (666,429). Despite its closure for six

weeks in March/April before it commenced business, Abuja

airport recorded the second highest number of passen-

ger traffic, accounting for 28.4 per cent of the total do-

mestic passengers (608,533) and 14.5 per cent of the

total international passenger (129,489) during the pe-

riod under review. While Port Harcourt airport was the

third busiest domestic airport, Kano International Airport

Source: National Bureau of Statistics (NBS)

Real Year on Year Growth in Air Transport Sector, (%)

5

Total Number of Passengers, 2016 – 2017 Q2,Domestic and International

remained the third largest in terms

of international passenger traffic.

OutlookDespite the marginal growth in air

passenger traffic in Q2, 2017, the

NBS data showed sharp decline in

year-on-year passenger and aircraft

movement in Q2 2017 attributable

to high double-digit inflation rate,

which averaged 16.53 per cent year-

on-year. Given the continued decel-

eration in inflationary pressure and

improving business environment, air

passenger traffic is expected to re-

bound in the quarters ahead.

Air Passenger Traffic Up 21.06% in Q2 2017

Source: National Bureau of Statistics (NBS)

Nigeria’s total public debt stock, made up of external and

domestic debt stocks of the Federal Government and all

State Governments, stood at US$64.194billion (about

N19.64trillion) as at June 30, 2017, according to data

released by the Debt Management Office (DMO). This

represents a 2.1 per cent or US$1.324 bill ion

(N1.80trillion) increase from the US$62.870billion

(N19.16trillion) recorded at the end of first quarter 2017.

The Federal and State Governments have continued to

borrow from internal and external sources to fund their

budgets in the face of dwindling government revenue.

According to the DMO, total external debt stock

(FGN+States) stood at US$15.047bil lion (about

N4.603trillion) during the period under review, domestic

debt for the federal government and all state govern-

ments stood at US$39.337billion (about N12.033trillion)

and US$9.809billion (N3trillion), respectively. This is up

from total external debt stock (FGN+States) of US$13.807

billion (about N4.230trillion), FGN domestic debt of

US$39.077billion (about N11.971trillion) and all state

Nigeria’s Public Debt Stock Hits US$64billion In Q2, 2017

NATIONAL DEBT UPDATE

governments’ domestic debt of US$9.985bil lion

(N2.959trillion) as at end of first quarter 2017.

Nigeria’s External LendersMultilateral Agencies comprising the World Bank Group,

the African Development Bank (AfDB) Group, Islamic

Development Bank and others remained Nigeria’s high-

est external creditors/lenders, accounting for 64.29 per

cent of the nation’s total external debt stock

(US$9.674billion). Bilateral commitments represent 13.78

per cent of the nation’s external debts. These include

US$1.768bill ion from the EXIM Bank of China;

US$218.25m from the Agence Francaise de Development

and a total of US$85.82million from the Japan Interna-

tional Cooperation Agency (JICA) and the Germany’s KFW.

Nigeria’s Eurobond of US$3billion and the recently floated

Diaspora Bond of US$300million represent the country’s

commercial loans and accounts for 21.93 per cent of the

external debt stock.

6

Source: Debt Management Office (DMO)

Nigeria’s Public Debt Stock Hits US$64billion In Q2, 2017

Outlook: More borrowingunderwayNigeria’s public debt has increased in recent years as the

Federal Government has stepped up borrowing to finance

budget deficits owing to declining revenue. According to

Nigeria’s economic Recovery and Growth Plan (ERGP),

the country’s domestic debt stock is expected to rise by

N2.34trillion this year, while the foreign component is

being projected to increase by N4.38trillion. Already, the

country has floated a N100billion Sovereign Sukuk and

also plan to raise N20billion via Green Bond. More so, the

government has approved the issuance of dollar-backed

Treasury bills and also extended the maturity period from

between 91 and 364 days to between two and three years

respectively. The increasing public debt stock and the

subdued domestic output growth imply a rising debt to

GDP ratio. According to the 2016 DMO’s Debt Sustainability

Analysis (DSA), the ratio of Public Debt-to-GDP stood at

13.02 percent as at end of December, 2015. Although

Source: Debt Management Office (DMO)

the debt-to-GDP ratio currently appears low relative to

the Country’s Specific limit, the increasing debt servicing

obligations as a proportion of total expenditure coupled

with a low revenue base, may hinder debt sustainability

in the near to medium term.

Nigeria’s Public Debt Stockas at June 30, 2017 (in Millions)

Nigeria’s External Debt Stock as at 31st March 2017 (in millions of USD)

7

Market Highlight

CAPITAL MARKET UPDATE

Source: Nigeria Stock Exchange (NSE)

The Nigerian equities market rebounded to end the

outgone trading week on a positive note as the bulls

regained dominance in the local bourse. Keymarket per-

formance gauge, the All-Share Index (ASI), appreciated

by 1.38 percent or 483.24 to close at 35,488.81, from

35,005.57recorded in the preceding week.

Market Capitalization also rose by 1.38 percent or N166

billion, advancing to N12.234 trillion, from the N12.068

trillion recorded the previous week. Similarly, all other

Indices finished higher during the week with the excep-

tion of NSE Consumer Goods and NSE Oil/Gas indices

that depreciated by 0.23 per cent and 3.05 per cent while

the NSE ASeM Index closed flat. Also, market sentiment

was slightly higher as Twenty-five (25) equities appreci-

ated in price during the week in contrast toTwenty-three

(23) equities that appreciated in the previous week.

At the end of the week’s trading, a total turnover of 1.096

billion shares worth N17.859 billion were traded by in-

vestors on the floor of the Exchange in 16,070 deals, in

contrast to a total of 896.618 million shares valued at

N15.368 billion that exchanged hands last week in 17,048

deals.Trading in the Top Three Equities namely – Guar-

anty Trust Bank Plc, Access Bank Plc, Jaiz Bank Plc (mea-

sured by volume) accounted for 450.567 million shares

worth N10.942 billion in 1,834 deals, contributing 41.11

per cent and 61.27 per cent to the total equity turnover

volume and value respectively.

Recent Developments• Avon Crowncaps & Containers Plc (“Avon Crowncaps”

or the “Company”) was delisted from the Daily Official

List of The Nigerian Stock Exchange following the ap-

proval of the application to voluntarily delist from The

Exchange. The Company was effectively delisted from

the Daily Official List of The Exchange on 18th Sep-

tember2017.

• Sequel to the bonus issue of 1 for 5, a total quantity

of 12,672,000 units were added to the outstanding

8

Market Highlight

shares of Nigerian Enamelware Plc on 18th Septem-

ber, 2017 thus bringing the totaloutstanding shares to

stood at 76,032,000.

• The Rights Issue of 12,133,646,995 Ordinary Shares

of N0.50 each at N4.10 per share of Union Bank of

Nigeria Plc has opened for subscription. Acceptance

list opens Wednesday, 20 September 2017 and closes

Monday, 30 October 2017.

OutlookThe Nigerian equities market shrugged off previous week’s

losses to rebound in the outgone week as the bulls re-

gained dominance in the local bourse. The market per-

formance was supported by renewed investor sentiments

and bargain hunting in financial services industry stocks.

In trading sessions ahead,the direction of the market will

to bedetermined by the outcome of the Monetary Policy

Committee (MPC) Meeting of the Central Bank of Nigeria

(CBN) scheduled to hold on Monday 25th and Tuesday

26th September, 2017.

33,500.00

34,000.00

34,500.00

35,000.00

35,500.00

36,000.00

36,500.00

37,000.00

37,500.00

22

/0

8/

20

17

23

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29

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30

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31

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P-1

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06

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-SE

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18

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19

-SE

P-1

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7

NSE ALL SHARE INDEX

162,737,902.00 174,656,115.00

137,351,043.00

429,224,116.00

192,204,274.00

-

50,000,000.00

100,000,000.00

150,000,000.00

200,000,000.00

250,000,000.00

300,000,000.00

350,000,000.00

400,000,000.00

450,000,000.00

500,000,000.00

18/09/2017 19/09/2017 20/09/2017 21/09/2017 22/09/2017

Volume Traded

Source: Nigeria Stock Exchange (NSE)

Source: Nigeria Stock Exchange (NSE)

9

Crude Oil Market Update

Oil Market Review (September 18th – 22nd, 2017)

DISCLAIMER: This publication is strictly for information purposes only. Zenith Bank Plc and its employees make no representa-

tion as to the accuracy and completeness of the information contained in this publication. Therefore we accept no liability for any

loss that may arise from the use of such information.

At the end of trading on Friday September 22nd, crude

oil prices ended higher, close to their highest levels in

months, as major producers’ meeting in Vienna said they

may wait until January before deciding whether to ex-

tend output curbs beyond the first quarter. West Texas

Intermediate (WTI) settled up 11 cents or 0.2 percent to

close the week at $50.66 a barrel on the New York Mer-

cantile Exchange. Brent crude, the global benchmark,

rose 43 cents, or 0.8 percent, to settle at $56.86 a barrel

on ICE Futures Europe. Earlier at the beginning of trad-

ing this week on Monday September 18th, Brent crude,

the global benchmark, slipped slightly but stayed close

to multi-month highs as traders braced for a potential

stockpile build. Brent crude futures settled 14 cents lower

at $55.48 a barrel, while WTI crude futures settled up 2

cents at $49.91.

On Tuesday September 19th, West Texas Intermediate

(WTI) crude lost 43 cents to close at $49.48 a barrel on

the New York Mercantile Exchange. Brent crude, the glo-

bal benchmark, was down 34 cents to end at $55.14 a

barrel on ICE Futures Europe. During midweek trading

on Wednesday September 20th, oil prices rose despite a

rise in U.S. crude inventories, with the market heading

for its largest third-quarter gain in 13 years after the

Iraqi oil minister said OPEC and its partners were consid-

ering extending or deepening output cuts. On Thursday

September 21st, WTI crude futures dipped 14 cents, or

0.3 percent, to settle at $50.55 a barrel. Brent crude

futures gained 14 cents, or 0.3 percent, to end at $56.43

a barrel.

Oil & Gas Price Movement: September 18th – 22nd, 2017

Date 18/9/2017 19/9/2017 20/9/2017 21/9/2017 22/9/2017

WTI Crude ($) 49.91 ↑ 49.48 ↓ 50.41 ↑ 50.55 ↓ 50.66 ↑

Brent Crude ($) 55.48 ↓ 55.14 ↓ 56.29 ↑ 56.43 ↑ 56.86 ↑

Natural Gas ($) 3.146 ↑ 3.122 ↓ 3.094 ↓ 2.946 ↓ 2.946 –

Source: Reuters and New York Mercan4le Exchange. ↑ indicates an increase in price. ↓

indicates a price reduction – indicates no change