Economy
Ardova to Fund Enyo Acquisition With Debt, Equity
By Dipo Olowookere
In the first month of 2021, the board of Ardova Plc announced that the company was planning to acquire a retail downstream player, Enyo, as part of its efforts to capture the retail segment of the oil business.
Enyo is an energy firm with about 93 outlets spread across the country and while addressing an analyst call last week, the management said the “deal fits nicely into our strategic plan” and would complement its retail base because of the access to the retail outlets.
It further said the integration of the 93 retail outlets of Enyo into the over 450 outlets of Ardova would allow the organisation to “deliver more through the channels” and provide “opportunities around digitalisation.”
At the conference call attended by Business Post, the management explained that the transaction is purely an acquisition and not a merger and would be funded through debt and equity.
“Let me make this clarification that the Enyo deal is an acquisition, not a merger as we are buying the company 100 per cent.
“We intend to fund the transaction via debt and equity and the deal fits nicely into our strategic plan,” a member of the management informed participants.
In January 2021, when Ardova informed the investing public about the development, it said the transaction is expected to be completed in the first quarter of the year. However, it is still not certain if this timeline would be met.
Some days ago, Ardova released its financial statements for the 2020 accounting year and in the period, it reported an increase in revenue, N181.9 billion versus N176.6 billion in 2019 and a profit after tax of N1.9 billion.
The board then recommended a dividend of 19 kobo, which did not go down well with shareholders and shares of the company were punished, declining significantly within a few days.
While commenting on this at the analyst call, the chief executive of Ardova, Mr Olumide Adeosun, explained that the board was aware of the resentment that followed the cash reward, but emphasised that the payment was a mere reward for investors’ loyalty.
He expressed optimism that in the coming years when the company fully settles down, shareholders would be given an encouraging cash reward.
“The payment for the year was to reward the loyalty of shareholders, we are still in the foundational stage of our acquisition. We expect to pay our shareholders with less disappointing dividend in the future,” Mr Adeosun explained.
In 2019, a company known as Ignite Investments and Commodities Limited owned by Mr Abdulwasiu Sowami acquired a 74.02 per cent equity stake in Forte Oil Plc from Mr Femi Otedola.
Last year, which was the first full year after the transaction, the operations of Ardova were impacted by the COVID-19 pandemic.
However, the firm managed to grow its earnings by 2.9 per cent year-on-year on the back of a 3.4 per cent growth in the fuels business (constituting 90 per cent of revenue), high margins on lubes sales (9 per cent of revenue) as well as the transport and logistics business (constituting 0.2 per cent of the group revenue).
Also, the gross profit margin improved to 6.7 per cent compared to 6.4 per cent in the prior period, reflecting the increased earnings-generating capacity of the business.
In the year, operating expense declined by 13.4 per cent amidst inflationary pressure and an inflation rate of 15.75 per cent in December 2020.
But in the 2021 fiscal year, Ardova said “Our focus will be to capitalise on the milestones achieved in 2020.
“We will further improve operational efficiency across our key strategic transformational themes of future-proofing our business, connecting with our people, engaging with customers and stakeholders while enhancing value for investors.”
By Adedapo Adesanya
It was not a good day for the Nigerian Naira at the two major foreign exchange (FX) market on Friday as it suffered a heavy loss against the United States Dollar at the close of transactions.
In the black market segment, the Naira weakened against its American counterpart yesterday by N10 to quote at N1,485/$1, in contrast to the N1,475/$1 it was traded a day earlier, and at the GTBank forex counter, it depreciated by N2 to settle at N1,467/$1 versus Thursday’s closing price of N1,465/$1.
In the Nigerian Autonomous Foreign Exchange Market (NAFEX) window, which is also the official market, the nation’s legal tender crashed against the greenback by N6.65 or 0.46 per cent to close at N1,464.49/$1 compared with the preceding session’s rate of N1,457.84/$1.
In the same vein, the local currency tumbled against the Euro in the spot market by N2.25 to sell for N1,714.63/€1 compared with the previous day’s N1,712.38/€1, but appreciated against the Pound Sterling by 73 Kobo to finish at N1,957.30/£1 compared with the N1,958.03/£1 it was traded in the preceding session.
The market continues to face seasonal pressure even as the Central Bank of Nigeria (CBN) is still conducting FX intervention sales, which have significantly reduced but not remove pressure from the Naira. Also, there seems to be reduced supply from exporters, foreign portfolio investors and non-bank corporate inflows.
President Bola Tinubu on Friday presented the government’s N58.47 trillion budget plan aimed at consolidating economic reforms and boosting growth.
The budget is based on a projected crude oil price of $64.85 a barrel and includes a target oil output of 1.84 million barrels a day. It also projects an exchange rate of N1,400 to the Dollar.
President Tinubu said inflation had plunged to an annual rate of 14.45 per cent in November from 24.23 per cent in March, while foreign reserves had surged to a seven-year high of $47 billion.
Meanwhile, the cryptocurrency market was dominated by the bulls but it continues to face increased pressure after million in liquidations in previous session over accelerating declines, with Dogecoin (DOGE) recovering 4.2 per cent to trade at $0.1309.
Further, Ripple (XRP) appreciated by 3.9 per cent to $1.90, Cardano (ADA) rose by 3.5 per cent to $0.3728, Solana (SOL) jumped by 3.4 per cent to $126.23, Ethereum (ETH) climbed by 2.9 per cent to $2,982.42, Binance Coin (BNB) gained 2.0 per cent to sell for $853.06, Bitcoin (BTC) improved by 1.7 per cent to $88,281.21, and Litecoin (LTC) soared by 1.2 per cent to $76.50, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) traded flat at $1.00 each.
By Adedapo Adesanya
Crude oil prices edged up on possible disruptions from a US blockade of Venezuelan tankers as the market waits for news about a possible Russia-Ukraine peace deal.
Brent futures rose 65 cents or 1.1 per cent to $60.47 per barrel while the US West Texas Intermediate (WTI) futures expanded by 51 cents or 0.9 per cent to $56.66 per barrel. Both Brent and WTI were down about 1 per cent this week after both crude benchmarks fell about 4 per cent last week.
US President Donald Trump said he was leaving the possibility of war with Venezuela on the table, noting that there would be additional seizures of oil tankers near Venezuelan waters after the US seized a sanctioned oil tanker off the coast of Venezuela last week.
The American President this week ordered a “blockade” of all sanctioned oil tankers entering and leaving Venezuela, in the US’ latest move to increase pressure on Nicolas Maduro’s government, targeting its main source of income. The pressure campaign on President Maduro has included a ramped-up military presence in the region and more than two dozen military strikes on vessels in the Pacific Ocean and Caribbean Sea near Venezuela, which have killed at least 90 people.
President Trump has also previously said that US land strikes on the South American country will soon start.
Meanwhile, US Secretary of State Marco Rubio on Friday said that the US is not concerned about an escalation with Russia when it comes to Venezuela, as the Trump administration builds up military forces in the Caribbean.
This development comes as President Trump seeks an end to the unending war between Ukraine and Russia that is heading towards its fourth year.
European Union leaders decided on Friday to borrow cash to loan 90 billion Euros to Ukraine to fund its defense against Russia for the next two years as Russian President Vladimir Putin offered no compromise on Friday on his terms for ending the war in Ukraine and accused the European Union of attempting “daylight robbery” of Russian assets.
Ukraine, meanwhile, struck a Russian “shadow fleet” oil tanker in the Mediterranean Sea with aerial drones for the first time.
Earlier this week, the US and Ukraine both signaled progress in negotiations about a peace agreement during talks in German capital city of Berlin. The US is now reportedly offering Ukraine security guarantees modeled on NATO’s Article 5 mutual defense pledge.
By Adedapo Adesanya
President Bola Tinubu on Friday presented a budget proposal of N58.47 trillion for the 2026 fiscal year titled Budget of Consolidation, Renewed Resilience and Shared Prosperity to a joint session of the National Assembly, with capital recurrent (non‑debt) expenditure standing at 15.25 trillion, and the capital expenditure at N26.08 trillion, while the crude oil benchmark was pegged at $64.85 per barrel.
Business Post reports that the Brent crude grade currently trades around $60 per barrel. It is also expected to trade at that level or lower next year over worries about oil glut.
At the budget presentation today, Mr Tinubu said the expected total revenue for the year is N34.33 trillion, and the proposal is anchored on a crude oil production of 1.84 million barrels per day, and an exchange rate of N1,400 to the US Dollar.
In terms of sectoral allocation, defence and security took the lion’s share with N5.41 trillion, followed by infrastructure at N3.56 trillion, education received N3.52 trillion, while health received N2.48 trillion.
Addressing the lawmakers, the President described the budget proposal as not “just accounting lines”.
“They are a statement of national priorities,” the president told the gathering. “We remain firmly committed to fiscal sustainability, debt transparency, and value‑for‑money spending.”
The presentation came at a time of heightened insecurity in parts of the country, with mass abductions and other crimes making headlines.
Outlining his government’s plan to address the challenge, President Tinubu reminded the gathering that security “remains the foundation of development”.
He said some of the measures in place to tame insecurity include the modernisation of the Armed Forces, intelligence‑driven policing and joint operations, border security, and technology‑enabled surveillance and community‑based peacebuilding and conflict prevention.
“We will invest in security with clear accountability for outcomes—because security spending must deliver security results,” the president said.
“To secure our country, our priority will remain on increasing the fighting capability of our armed forces and other security agencies by boosting personnel and procuring cutting-edge platforms and other hardware,” he added.
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