By John Ikani
Nigerian lenders likely do not have enough dollars to fund clients interested in acquiring assets of Shell Petroleum Development Company (SPDC) Limited.
This assertion was made by the Chief Executive Officer of the Guaranty Trust Holding Company (GTCO) Plc, Mr Segun Agbaje at its investor conference held virtually, according to Bloomberg.
Backstory
In May this year, Shell had said its onshore operations in Nigeria’s oil and gas industry were no longer compatible with its long-term climate strategy, coming under increasing pressure from investors to slash emissions and pivot toward cleaner energy
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.
Recently, Wood McKenzie, a leading global oil and gas consulting firm, put 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.
What Nigeria’s biggest lender is saying:
Agbaje of Guaranty Trust Bank said he didn’t see the likelihood of any client raising the estimated $2.3 billion needed to purchase the Shell assets.
Such a deal would require a syndication of up to $1.8 billion, and it “can be very tough to raise this kind of funding locally at the moment,” Agbaje said.
“When I look at the books of Nigerian banks today, I don’t see a lot of dollar liquidity,” Agbaje told an investor conference call in Lagos, according to Bloomberg, adding that “It’s 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.
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