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PIB should be structured to attract more investment

As the nation anticipate a better business environment in the aftermath of the global credit crunch, Ibrahim Boyi, the Managing Director of Eterna Plc, elaborates its  effects on the oil and gas industry and justifies the reason why his company opted for a three year bond from Daewoo Securities International. He spoke with Dotun Ibowoye.

Excerpts:

Naira sign

With the continuous global meltdown, what are the prospects of indigenous oil and gas firms?
The global financial meltdown we had in 2008 and most of 2009 is likely receding especially at the international arena which includes Nigeria. Its effect on us in Nigeria was really enormous.

The financial crisis in the banking sector, this became further tragedy for operating companies. As some economies have stated picking up and showing positive signs in their financial crisis so it became a double tragedy for operating companies in Nigeria and for us the indigenous companies, we were really strongly hit by the happenings in the financial crisis.

When we came to the local setting here, the banking crisis of 2009, I can almost assure you that it wiped off a lot of companies. It was an extremely challenging proposition because credit actually dried up and banks started chasing their customers to pay-up.
They were eroding confidence, they were eroding reputation, so it has been a lot of set back to the economy.
Well, hopefully for some of us that have survived we believe that will continue to undergo shock for a while but there is hope for any company that is been able to survive, the future looks better and brighter and obviously in terms of opportunity because it has now totally constricted the number of players and also constricted the capacity of the players.

Today any company that can present a credible structure and any company that can present competence in one way or another will have the advantage of being better than it was.

The PIB has elicited different reactions from industry practitioners, with most people taking the stance that the bill is forward looking, what is your position on it generally?

I think the industry definitely requires the PIB. In what we have before were some pockets of laws and regulations, contradictory in some areas, and conflicting in other areas. In some cases inadequate.

The pockets of law presently used have not been able to address development of the industry. The PIB seems to be a very comprehensive effort to integrate all the sectors in the industry. It corrects virtually all the segments and elements of the sector.

It seems to have addressed al sorts of issues there.  But that is not to say that it is a full proof or the bill itself has addressed every conceivably worry or concern of the industry.

Obviously there will be people that will gladly accept it and importantly for us, the most critical of that bill needs to engender investment. It should be able to structure the industry to attract investments.

Investments are attracted by returns. So the environment and the PIB must be able to assure of certain level of returns for operators and again at other competing environments. That is the most critical sector of the bill that is the most important aspect of the bill remains the physical position of the legislative council. If that balance is structured then we will see a bill that is for outreaching that all the obstacles in that sector and, I am sure that in the process of formatting the law.

I believe some adjustment will be made and addressed in some of these things. It is certainly a wonderful development if all the stake holders see its advantages.

What positive contribution can be attributed directly to your company in the Nigerian Oil and Gas industry?
First and foremost, we are employers of labour, we pay tax and beyond that we are also an avenue for investment, shareholders are reaping the benefits of the dividends from the company. We have also contributed in the development of the oil and gas sector. We provide services for the oil industry, we provide fuel products to the customers, we also partner and represent some foreign company in Nigeria.

So Eterna has done fairly well, we haven’t done enough but I believe we have done fairly well and we have the opportunity to contribute significantly to the industry, though our vision is to be one of the biggest players in the oil and gas industry, so we are on course.

At your last AGM, you proposed a resolution based on an international bond from Daewoo Securities, what are the possible advantages of this bond as opposed to other sources of capital?

Like I mentioned earlier, following the financial crisis at the global level and also at the domestic level, the kind of erosion that businesses especially ours witnessed was really enormous.

There was erosion or virtually a dry up of credit in the system. Business like ours  requires funds to be able to achieve its goals and objectives, so being and able to raise enough capital locally or being and able to raise cheap capital locally was the basis that made us decide to look towards that avenue.

It is a trail that I know will attract a lot of other players. I am sure that a lot of other companies in our sector and other sectors will also attempt to raise funds from such source, apart from now being the alternative and most confirmed rate, it is also cheap. It is a lot cheaper than the local bank loan. It comes with its risk being foreign funds, they come with foreign exchange.

There are situations where you can sustain foreign exchange risk,  for instance dollar depreciation. The dollar can also collapse.

For us as a company, one of the efforts that we are doing is that we manage risk and we minimize it and maximize the profits. This bond has a very low interest rate. It is also a long term. It is not like the ones you got from banks that after three months they will start asking you to pay.

This is a three year bond and it is only payable at the end of three years. It’s clearly a different aspect of finance that is cheap and available.
What are the factors that have enabled Eterna Plc become one of the fastest growing oil firms in Nigeria?
Our understanding of the business – as a company and managers of business we understand the environment properly and we bring our skills, experience and knowledge into how we conduct our business. For us, that is what has set us apart and we are able to make sure that the industry develops and we position ourselves in that direction. That definitely has added a lot to what we have done and what we will be able to do.
How elaborate is your CRS?

As I mentioned earlier, it is our understanding of the need for the business. We realised that to be on the executive class in the downstream you need storage, it is the key infrastructure that is required to be able to guarantee the quality of services that you give to your customers.

If you don’t control that infrastructure, it limits your ability to participate effectively in the industry, it limits your efficiency, and of course it limits your growth. For us, that is the most important aspect of the business we believe it is a must to have it.

That is why we invested a huge investment on the tank farm and I can tell you that it is one of the key decisions that has made us to become what we have become and even survive the global credit crunch and to day we are reaping the benefit


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