…deal reaches critical stage
French oil major, Total, has pruned the list of prospective buyers for its downstream assets in Nigeria from 12 to two, as the confidential process by the firm to exit downstream sector enters critical stage. About 12 foreign and indigenous firms had joined in hot race for Total’s multi-billion dollar downstream assets, which began in 2016.
The oil multinational is the last foreign company with investments in Nigeria’s petroleum product imports, storage and retails sub-sector after Exxon Mobil, in October 2016, sold its downstream assets worth N90 billion to NIPCO Plc.
Reaffirming that the downstream sector has grossly turned unprofitable for private participants, a source close to the deal told this newspaper that Total is already overstaying in the sector. More marketers, he declared, have now abandoned fuel imports for the Nigerian National Petroleum Corporation (NNPC). The corporation, which, on the other hand, had kept declaring losses due to shrinking profit margin of the business, confirmed that it had now turned the sole importer of premium motor spirit (PMS) also known as petrol. “Several meetings have been held at different parts of the world to consider confidential bids submitted by prospective buyers. As we speak, the number, which was about 12 when the process began in 2016, has been reduced to two,” the source said.
“Ten of them were disqualified because they could not scale through the due diligence ordeal and the process is now at the critical stage for the two firms in the neck-to-neck bidding.” Total, the only multinational player in Nigeria’s downstream, it was learnt, decided to sell off its downstream assets due to the shrinking profit margins at the sub-sector.
“The divestment of Total’s downstream assets too is on-going. It is a confidential deal, which meetings have been held outside the shores of Nigeria several times with contenders mostly indigenous firms,” the source close to the deal said. Total declined to comment on the transaction because of its confidentiality of the deal, but a source at the company confirmed the move in an earlier interaction.
“There is an on-going negotiation with companies for divestment of our downstream assets. About 12 firms have submitted proposal and we are making progress on the deal,” he said. Asked the reason behind the divestment, the source said: “The downstream sector is bearish, with profit margin shrinking every day. The consumption of petroleum product by Nigerians has dipped drastically, while the issue of foreign exchange scarcity made NNPC to be major player as we speak, in terms of importation.” The $600 million banks’ debts recovery in the downstream oil sub-sector took a new twist, as depot owners and fuel marketers resorted to workers’ mass sack and 75 per cent salary cut.
The lenders had earlier confiscated and placed on sale 13 tank farms, scores of filling stations, landed properties and exotic cars used as collateral by debtors in the downstream sector.
Other debtors – marketers and owners of tank farms, who are yet to pay up their debts to banks, also resorted to mass sack of workers and slash of their workers’ salaries. Long before the financial crunch in the downstream sub-sector reared its head, Executive Secretary of the Depot and Petroleum Products Marketers Association of Nigeria (DAPPMAN), Mr. Olufemi Adewole, had called attention to the impending danger to investors in the sub-sector.
The Federal Government, Adewole said, was responsible for the trouble being faced by investors in the sub-sector. From the last fuel subsidy regime, government owe marketers an accumulated sum of N650 billion and failure to meet the payment deadline had compelled marketers to disengage their workers. Interestingly, the banks and other lenders are threatening to declare more depot owners and marketers insolvent. Some of them confirmed that they adopted what they called ‘rightsizing of workforce’ as a strategy to overcome unbearable financial hardship rocking their sector.
.new telegraph