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Obaseki Raises Alarm Over Rising Debt Profile As Shell Set The Stage To Pull Out Of Nigeria

By Stephen Ubanna

Between 199 and now, state governors have been running down to Abuja, the Federal Capital Territory , FCT, every month to share  the Federation Account  Allocation,  FAAC ,  monthly disbursements without considering the rising debt profile of the country.

Take for instance  in the month of March, the Federal, states and the 774 Local government were said to have shared  the FAAC  disbursement of NN601.11 billion ,     while the government was said to have  printed  an additional N50 billion or60 billion to top the amount for the states to share. That much was confirmed by Godwin Obaseki, the People’s Democratic Party, PDP, and governor of Edo state.  

Obaseki , the Edo state governor who is not happy over this culture of sharing the  FAAC, monthly disbursements with borrowed funds to run the economy by the  President Muhammadu Buhari, Administration, a retired army General,  had said that it  will throw the country into a deepening  debt profile of N15 trn   – N16trn by 2023. Recall that in taking over from former President Goodluck Jonathan in his first term in office in 2015,  the Transition Committee formed by the Katsina state born Nigerian President  to facilitate he transfer of power from the Jonathan Administration had said that the Administration left the country with an unpaid debt of N7trn.

Obaseki: Governor, Edo state

 The Investment Banker turned politician who could not hide his feelings was said to  was said to have  raised  alarm about the critical state of the debt profile of the country now because of the huge  amount that had been borrowed from the Asian country of China, Development Bank, World Bank/International Monetary Fund, IMF, and other Multi-lateral Financial Institutions , including  countries like Brazil,  to service the ailing Nigeria’s economy on Wednesday, March 30, 2021,  at the Transition Committee members meeting  at the Government House in Benin City, the Edo state capital.

. He fears that Nigerians may wake up one day  like the Citizens of the South American country of Argentina  and found the naira  exchanging for between N1000.00 and N2000.00 to the North American country of the United States dollar, because ‘’we don’t have Forex, coming in’’. At present, the UUSD is exchanging at the black market for N480.00. According to him, the All Progressive government Congress, APC, government at the Federal level has been ‘’borrowing and borrowing without any means or idea of how to pay back’’.  

He had alluded to the fact  that the situation may be worse as the US Oil giant, Chevron and the Royal Duthch Shell Petroleum Development Company, SPDC, which no  longer have Confidence on the Nigerian economy  that it is  no longer interested in risking    investing their funds in the Nigerian ailing economy as they had done in the past.

 Recall that the British oil giant, Nigerian AGIP Oil Company, NAOC,   and Total,E&P, had had already divested in OML 17 . The governor’s major’s worry is that going by the way shell is divesting , it may eventually pull out of Nigeria, which may further spell doom on the economy. But the god news is that the Eastern Niger Delta and Associated Infrastructure,  TNOG, Oil and Gas Ltd,  a related Company of Heirs  Holdings  and Transnational  Corporation PLC, an indigenous and Gas oil Company, founded by Tony Elumelu,  who incidentally is the founder of Tony Elumelu Foundation and Chairman, UBA plc, popular , Pan African African Bank ,had acquired the  three multi-national oil Companies 45 shares in the OML17 to sustain the tempo of investment in the nation’s oil sector.  The Nigerian National Petroleum Corporation, NNPC, still maintain the majority share of 55%.   In taking over the 30 shares of the British oil giant 30% share in the OML17, which gives the Nigerian Company the operating role as obtained when shell was still holding the controlling share in the OML 17 before its divestment, the Nigeria investor would still be the operating Company.

Elumelu: Chairman , Heirs Holdings And Operator, OML17

Already, the Nigerian investor has paid $4  453 million, out of the $533 million already settled for consideration with the Board of Directors of Shell. The Company was said to have also paid the amount to fully take over the Shell 30 shares in the, Oil Mining Lease, OML 17. It was said to have also paid the Total, E&P Nigeria Limited 10% equity and NAOC, Five percent shares.

 Shell may have set the stage to pull out from Nigeria because of the fluctuations in oil and gas price in the international oil market,  changes in the demand for its products, foreign exchange fluctuations, high cost of drilling and production results, drop in reserves estimates , loss of market shares and  industry Competition. 

Okunbo: Shell MD & Country Chairmaan

Other reasons forcing the British oil giant to pull out of Nigeria, nclude environmental and physical risks associated with the identification of stainable potential acquisition of properties and targets. This is in addition to the successful Negotiations and completion of the OML17 transactions and the risk of doing business in developing countries and countries subject to international sanctions like Nigeria.

  More frustrating to the Multi-national oil Companies in doing business in Nigeria, particular, shell, was the fact that’’ the Legislative, fiscal and regulatory developments and regulatory measures addressing climate change did not favour them. 

The oil and Gas Companies may have further been encouraged to pull out of Nigeria because of the high political risks and the risks of appropriation and the renegotiation of the terms of contracts with the NNPC , and other governmental entities  including, delays  or advancement in the approval of projects  and the disbursement of shared costs as well as the risks associated with the Asian country of China emerged coronavirus, popular, COVID19.

The changes in trading conditions in the international oil and Gas market coupled with the fact that the government has not given them  assurance that what have been provided  to show  that the future dividend payments  will match or exceed  previous dividend payments  to the Company.     

Stephen Ubanna

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