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WORLD NEWS

China lends Nigeria Dollars 2bn in exchange for oil talks.

By MATTHEW GREEN

576 words

22 April 2008

Financial Times

FTFT

Asia Ed1

Page 3

English

(c) 2008 The Financial Times Limited. All rights reserved
China has agreed to lend Nigeria Dollars 2.5bn for infrastructure projects in a renewed attempt to win access to markets and energy reserves in Africa's leading oil exporter.
Beijing has extended increasingly attractive offers of financial support to Nigeria in recent months to forge a closer relationship with Umaru Yar'Adua, Nigeria's president, who took office last May.
Odein Ajumogobia, Nigeria's oil minister, said Beijing had offered the Dollars 2.5bn (Euros 1.6bn, Pounds 1.3bn) loan in parallel with talks about gaining energy exploration rights, though he said no specific oil blocks were tied to the agreement.
"They've basically committed to these facilities and we're exploring with them their interest in investing in the upstream," Mr Ajumogobia told the FT. "We're working out the details."
Under the previous administration of Olusegun Obasanjo, an offer of a similar loan in return for oil blocks failed to lead to a deal. CNOOC, the Chinese state oil company, was considered by analysts to have paid above the odds in 2006 for its share of a Nigerian oilfield operated by Total.
While Chinese companies have been increasingly active in Nigeria, until now Beijing's overtures have yet to translate into an advantage in securing oil or other mineral rights as they have in other African countries such as Angola, Sudan and most recently the Democratic Republic of Congo.
The revived loan agreement suggests China is on a new charm offensive in Nigeria, where western majors such as Royal Dutch Shell, ExxonMobil and Total have traditionally dominated the oil industry.
Mr Yar'Adua led a delegation of ministers and business leaders to Beijing last month for talks about closer economic co-operation. The loan was put on the table alongside a separate offer of a Dollars 50bn facility to back projects by Chinese companies in Nigeria made by Sinsoure, China's export credit guarantee agency.
Shamsuddeen Usman, Nigeria's finance minister, said he had negotiated more favourable terms than those China was willing to accept when it made a similar loan offer to the previous government. "China is quite aggressive. It's very clear-headed in terms of its relationship with Nigeria," Dr Usman said. "The Chinese said: 'We recognise your problem is basically infrastructure.' That's the kind of music that Nigeria wants to hear."
China's offers of financing to African governments in return for access to natural resources have raised concerns that countries fresh from winning debt relief from western donors will start piling up new obligations. Nigeria has cleared Dollars 35bn under debt reduction deals with western creditors in the past few years, leaving it with very low levels of external commitments.
Dr Usman declined to give details of the terms for the loan, but said they fell within the limits defined by the International Monetary Fund to ensure Nigeria does not start stacking up unsustainable debts.
The Dollars 2.5bn loan could be used to fund projects in rail, power or telecommunications. Mr Yar'Adua has made repairing decaying infrastructure a priority.
The facility is comprised partly of a Dollars 500m loan taken on concessionary terms from China, which has already been signed. Dr Usman said a deal was close on a second loan for the remaining Dollars 2bn from the Export-Import Bank of China, on less concessionary terms.
20080422A103.207
Document FTFT000020080422e44m0000c

FT.com site : China oils Nigeria talks with loan.
Matthew Green in Lagos

550 words

21 April 2008

Financial Times (FT.Com)

FTCOM

English

(c) 2008 The Financial Times Limited. All rights reserved
China has agreed to lend Nigeria $2.5bn for infrastructure projects in a renewed attempt to win access to markets and energy reserves in Africa's main oil exporter.
Beijing has extended increasingly attractive offers of financial support to Nigeria in recent months to forge a closer relationship with Umaru Yar'Adua, Nigeria's president who took office last May.
Odein Ajumogobia, Niger-ia's oil minister, said Beijing had offered the $2.5bn ( 1.6bn, GBP1.3bn) loan in parallel with talks about gaining energy exploration rights, though he said no specific oil blocks were tied to the agreement.
"They've basically committed to these facilities and we're exploring with them their interest in investing in the upstream," Mr Ajumogobia told the Financial Times. "We're working out the details."
Under the previous administration of Olusegun Obasanjo, an offer of a similar loan in return for oil blocks failed to lead to a deal. CNOOC, the Chinese state oil company, was considered by analysts to have paid above the odds in 2006 for its share of a Nigerian oilfield operated by Total.
While Chinese companies have been increasingly active in Nigeria, until now Beijing's overtures have not translated into an advantage in securing oil or other mineral rights - as they have in other African countries such as Angola, Sudan and most recently the Democratic Republic of Congo.
The revived loan agreement suggests China is on a new charm offensive in Nigeria, where western groups such as Royal Dutch Shell, ExxonMobil and Total have traditionally dominated the oil industry.
Mr Yar'Adua led a delegation of ministers and business leaders to Beijing last month for talks about closer economic co-operation. The loan was put on the table alongside a separate offer of a $50bn facility to back projects by Chinese companies in Nigeria made by Sinsoure, China's export credit guarantee agency.
Shamsuddeen Usman, Nigeria's finance minister, said he had negotiated more favourable terms than those China was willing to accept when it offered a similar loan to the previous government. "China is quite aggressive. It's very clear headed in terms of its relationship with Nigeria," Mr Usman said. "The Chinese said: 'We recognise your problem is basically infrastructure.' That's the kind of music that Nigeria wants to hear."
China's offers of financing to African governments in return for access to natural resources have raised concerns that countries fresh from winning debt relief from western donors will start piling up new obligations. Nigeria has cleared $35bn under debt reduction deals in the past few years, leaving it with very low levels of external commitments.
Mr Usman declined to give details of the terms for the loan but said they fell within the limits defined by the International Monetary Fund to ensure Nigeria did not start stacking up unsustainable debts.
The $2.5bn loan could be used to fund projects in rail, power or telecommunications. Mr Yar'Adua has made repairing decaying infrastructure a priority.
The facility includes a $500m loan taken on concessionary terms, which has already been signed. Mr Usman said a deal was close on a second loan for $2bn from the Export-Import Bank of China.
63730142
Document FTCOM00020080422e44l0003y

Kremlin calls for Russian corporate invasion
Dominic Elliott

1,353 words

21 April 2008

Financial News

LONFIN

English

(c) 2008 Financial News Ltd. All rights reserved.
Dmitry Medvedev, Russia’s president-elect and anointed successor to Vladimir Putin, knows a thing or two about acquisitions.
He has been chairman of Gazprom for all but one of the past seven years and overseen the state-owned gas monopoly’s transformation into a global energy giant and its diversification into the banking, insurance, media, construction and agriculture sectors.
Medvedev had a place at the table when Russia’s largest takeover was arranged: Gazprom’s $13bn acquisition of billionaire Roman Abramovich’s 72.7% stake in oil company Sibneft in 2005.
But he has also tasted failure, through Gazprom’s ill-fated attempt to acquire state-owned oil company Rosneft, and its earlier bid to buy the core asset of petroleum producer Yukos. He is expected to step down just before he formally takes presidential office on May 7.
Speaking on his campaign stump in February, Medvedev addressed Russian companies on the subject of their mergers and acquisitions activity, urging them to follow the example of their Chinese counterparts and boost their overseas investment.
He offered companies that were prepared to do so Government support at home and abroad. He said this was particularly the case for the highly competitive energy and hi-tech industries.
That support may coincide with a new phase in Russian takeovers, according to Patrick Gahan, Dresdner Kleinwort’s head of consumer M&A and the former head of the bank’s Moscow office.
Natural resources and metals and mining companies have dominated Russia’s industrial landscape since 2000 and hold about three quarters of the country’s foreign assets.
Gahan said: “Russian companies in those sectors have been more visible internationally because of their size and influence. At the start of this decade, Russia M&A was heavily concentrated in those areas, but now other consumer-driven sectors are coming to the fore.”
If the pace of acquisitions by Russia’s largest state champions and multinationals over the past five years is anything to go by, their emergence from the periphery may be swift.
Russian acquisitions of overseas targets rose from a total value of $2.8bn in 2004 to a record $17.4bn (€10.9bn) last year. This year looks set to be another record, with $13bn of deals already hatched. The growth in takeover volume is expected to continue.
Vagit Alekperov, president of oil company Lukoil, said: “The majority of Russian companies have only begun their acquisitions overseas.”
A joint study by the Skolkovo business school in Moscow and Columbia University’s international investment programme published last December said the overseas asset accumulation of the top 25 Russian multinationals was outpacing that of their international rivals, meaning they are fast catching more established players.
Lukoil, which is 20% owned by US oil major ConocoPhillips, is typical of the make-up of Russia’s largest multinationals with a retail network spanning 22 countries but with the majority of its overseas holdings in Europe.
While 63% of the foreign affiliates of Russia’s multinational companies were concentrated in Europe at the end of 2006, according to research from Skolkovo and Columbia University, they are starting to become more adventurous in their quest for tie-ups. Aluminium giant United Company Rusal has bought assets in Australia, China, Guyana, Guinea and Nigeria – all in the last three years.
Alexander Bulygin, chief executive of UC Rusal, said: “Charting a clear path into emerging markets, notably China and Africa, can help Russian businesses to grow and also kick-start the world economy.
“UC Rusal is already ahead of the game. In China we have recently agreed a partnership with China Power Investment Corporation, one of China's largest energy corporations, and we have a strong presence in Africa.”
Hugo Stolkin, a partner at law firm Linklaters’ Moscow office who worked on Rusal’s three-way, $30bn merger with Sual and Glencore in 2006, said: “Rusal was already a major international force at the time of its merger with Glencore.”
Telecommunications has also been an area in which companies have spread their wings.
Altimo, a telecoms industry investor controlled by Russian conglomerate Alfa Group, bought Turkish wireless operator Turkcell in 2005, while the telecoms arm of conglomerate Sistema has bought networks in India and signed a joint venture with a state-owned Chinese company. Buying into technology was one of the reasons given for more overseas takeovers by Medvedev, who at the time called for Russia to develop a “national innovation system”.
There is a belief among Russia’s elite that some of the so-called “sleeping bears” of the post-Soviet era need to raise their game, but many of the more established companies, such as Rusal and Lukoil, already have sophisticated technology in their spheres. Other companies have developed “softer” business skills.
Suren Gortsunyan, a corporate partner at law firm Lovells in Moscow, said: “Russian business has evolved.
“People now use the latest legal structures, advanced financing and management techniques and have improved their corporate governance.”
Russian companies differ more from their international rivals in terms of their management structures. Here, oligarchs rule supreme, as evidenced in the struggle between five billionaires for control of metals group Norilsk Nickel. Oleg Deripaska, who is Russia’s richest man and runs Rusal with fellow oligarch Viktor Vekselberg, is attempting to buy a 25% stake in Norilsk from Mikhail Prokhorov.
Prokhorov, who at 42 is the same age as the youthful Medvedev, is looking to sell the stake after a public falling out with his business partner Vladimir Potanin, who owns a slightly larger stake in Norilsk but could cede control in the event of Prokhorov’s stake sale and a full takeover bid, planned by Rusal. To block Prokhorov, Potanin has forged an alliance with yet another billionaire, Alisher Usmanov, who owns iron ore producer Gazmetal. The fate of the Russian metals sector lies in the hands of a few.
Gortsunyan said: “Many Russian companies appear to be public but there are often only one or two people behind them. There is a lot of power in the hands of majority shareholders. This means decisions on takeovers can be taken quickly and efficiently.”
Russian companies are also capable of more subtle manoeuvring. Altimo, which is looking to expand its communications network to Vietnam, has set up a foundation to fund cultural and social projects in the south-east Asian country and has also sponsored a Russian ballet gala concert at the Hanoi Opera House.
There remain hurdles to the smooth progression of Russian takeovers overseas, according to Lukoil’s president. Alekperov said: “This process is hindered by several factors, the main ones being shortage of profitable assets and state protectionism, which not infrequently has political roots.”
Altimo and Sistema have first-hand experience of some of the problems after becoming embroiled in a protracted and highly complex legal dispute in the last few years over the purchase of some assets belonging to Bitel, Kyrgyzstan’s leading mobile phone company.
The sale of assets in Bitel, which was owned by the family of the country’s President, Askar Akayev, was complicated by political involvement at the time of the "tulip revolution".
But such stumbling blocks are not insurmountable. Alekperov said: “I am convinced that this process can be accelerated if co-operation in the corporate sector is based on international covenants. It does not necessarily have to be formal agreements.
“The essential idea is that partners should be able to trust one another and be sure that their national interests will not be infringed upon.”
This call for greater international openness from the president of Lukoil, Russia’s second biggest oil company, may seem ironic given recent draft legislation aimed at protecting the country’s strategic industries from foreign predators.
However, when Winston Churchill famously described Russia as a “riddle wrapped in a mystery inside an enigma” he said the key to understanding that riddle was Russian national interest. Medvedev’s offer of support to companies that invest abroad suggests national interest also underpins the growth in mergers and acquisitions involving Russian companies.
Document LONFIN0020080430e44l0009w
Vanguard (Nigeria) - AAGM: Oteh Lists Prerequisite for Success of LFC.
Babajide Komolafe

1,087 words

21 April 2008

Vanguard (Nigeria)

AIWVAN

English

The Financial Times Limited. Asia Africa Intelligence Wire. All material subject to copyright. Vanguard (Nigeria) (c) 2008 All rights reserved
VICE PRESIDENT, African Development Bank (AfDB), Ms Arunma Oteh, has hailed the plan to attract major financial institutions into Nigeria through the creation of the Lekki Financial Centre (LFC) but listed the prerequisite for the successful implementation and operation of the centre.
She also charged Nigerian banks to broaden access to finance for the population with a view to translating the consolidation gains into welfare gains for the population.
In a guest lecture delivered at the 2nd Nigerian Bankers' Award exclusively Vanguard in Lagos on Friday, Oteh said: "There is growing recognition that Africa is set to become the next major investment destination. Recognising this opportunity, the CBN under the FSS 2020 Vision has announced plans to transform Lagos into an international financial hub through the creation of the Lekki Financial Corridor (LFC).
Benefits of LFC
"The plan is to establish an international financial centre (IFC) that will attract major financial institutions to Nigeria.
The Global Financial Centre Index (GFCI) reports that there is no African city in the top 46 international financial centres, thus offering a distinct opportunity for the LFC to be a successful IFC.
There are many gains to be derived from the successful hosting of an IFC notably scale economies in the payment mechanism, improved collaboration and competition among financial institutions, improved liquidity and employment opportunities and increased human capital development that will inevitably translate into increased standard of living.
By attracting globally active banks, other gains that can be realised include the acquisition of best practices in management and information technology.
"The proposed LFC has the advantage of a large pool of skilled labour and large market in Nigeria, and a determined strategic support under the FSS 2020.
I am personally confident of the prospects of Nigeria becoming one of the World's top 20 economies in the Year 2020 as envisioned in the FSS 2020. Nigeria is unique in Africa, with the country accounting for half of the population and more than two-thirds of the output within the sub-region of West Africa.
Nigeria contributes 11.0 and 16.0 per cent of total output and foreign reserves respectively in Africa while accounting for 15.0 per cent of its population (African Competitiveness Report, 2007). There are, however, many challenges to the successful creation of the LFC.
The success of the planned LFC depends on being able to identify and create niche services and innovative products. Cross-listing opportunities with other major African stock markets will also enhance the position of Lagos as a financial hub.
Prerequsites for successful LFC
"Other prerequisite include the need for currency convertibility, stable exchange rate regime, and physical infrastructure including good aviation and telecommunication networks and trained human capital resource base.