BY MICHAEL EBOH

Nigerians missed out in the over $30.82billion or N4.87trillion cumulative dividends declared in 2012 by international oil companies in their home countries, following their refusal to enlist on the Nigerian Stock Exchange, NSE.

Five oil majors operating in Nigeria – Royal Dutch Shell Plc, Chevron, ConocoPhilips, Statoil, and Eni, declared combined total dividend of $30.82billion for the 2011 financial year.

However, two other oil majors, Mobil and Total listed their downstream operations for the benefit of Nigerians.

But the five oil companies, though listed in their home countries, have refused to list on the NSE, hence depriving Nigerians from participating in their dividends over the years.

In its annual report for the year ended, December 31, 2011, presented last year, Royal Dutch Shell Plc, incorporated in The Netherlands, declared a dividend of $7.315billion (N1.16trillion).

Chevron, on the other hand, paid a total dividend of $6.139billion (N970billion) to its shareholders for its 2011 financial year. ConocoPhilips declared a dividend of $3.6billion (N569billion) for its 2011 financial year, Statoil paid out a dividend of 49 billion Norwegian Krone or $8.88billion (N1.4trillion), while Eni declared total dividend of Euro 3.695billion (N779billion).

Stock market analysts argued that unless something is done by the Federal Government, the National Assembly and the Nigerian capital market and petroleum industry regulators to encourage or compel the oil majors to get listed in the country.

They maintained that otherwise, Nigerians and the investing public will continue to lose out from the huge dividends declared by these companies, leaving the country to benefit from the pittance doled out by them in the name of Corporate Social Responsibility, CSR.

The loss of revenues from dividends is in spite of the huge increases in oil and gas production post government’s Amnesty programme, which should have been reciprocated with enhanced revenues.

Business performance
In its 2011 financial statement released last year, Shell said its sales volumes were higher from Nigeria Liquefied Natural Gas, LNG, helped by a stable gas supply, and from the Sakhalin-2 LNG project, where production reached 10 million metric tonnes per annum, mtpa.

These increases, according to Shell, were partly offset by the reduction in its share of LNG production from Woodside Petroleum Ltd – the result of Shell’s sale of part of its shareholding in the company in November 2010.

Shell further stated that the Gbaran-Ubie project achieved peak gas production of one billion standard cubic feet per day, scf/d in early 2011.

On the other hand, Chevron, in its 2011 financial statement stated that “In 2011, improved recovery increased volumes by 58 million barrels worldwide. For consolidated companies, reserves in Africa increased 48 million barrels due primarily to secondary recovery performance in Nigeria. Reserves in the United States increased by six million, primarily in California. Other Americas increased four million barrels.”

Continuing, it stated, “In 2011, extensions and discoveries increased consolidated companies’ reserves 4,680 BCF worldwide. In Australia, the Wheatstone Project accounted for the 4,035 BCF in additions. In Africa, the start of a new natural gas development project in Nigeria resulted in the 290 BCF increase. In the United States, development drilling accounted for the majority of the 287 BCF increase.”

Oil majors’ defence
However, security issues, inability to enforce contracts, absence of critical infrastructure and the likely impact of the Petroleum Industry Bill, PIB, have been identified as factors preventing the oil majors from listing on the Nigerian capital market.

Shell said in its report, “We face various risks in our Nigerian operations. These risks include: security issues surrounding the safety of our people, host communities, and operations; our ability to enforce existing contractual rights; limited infrastructure; and potential legislation that could increase our taxes or costs of operation.

“The Nigerian government is contemplating new legislation to govern the petroleum industry which, if passed into law, would likely have a significant impact on Shell’s existing and future activities in that country and could adversely affect our financial returns from projects in that country.”

Continuing, the Dutch oil major added, “The flaring or burning off of gas in our upstream business contributed to our overall Greenhouse Gas, GHG, emissions in 2011. The majority of this flaring takes place at facilities where there is no infrastructure to capture the gas produced with oil – known as associated gas.

“Most of the continuous flaring takes place in Nigeria, where the security situation and lack of partner funding had previously slowed progress on projects to capture associated gas.

“The Shell Petroleum Development Company of Nigeria Limited has begun working on projects that will cost over $2billion to help reduce gas flaring, in addition to the $3billion previously spent.

“Progress will depend on continued partner support, the local security conditions and the development of an effective market for gas in the country.”

CBN calls for further legislation
Irked by the refusal of the oil firms to list their shares on the NSE, Mr. Sanusi Lamido Sanusi, Governor of the Central Bank of Nigeria (CBN), called for a legislation that would compel the oil majors and other multinational firms to list their shares on the NSE.

He said, “There’s certainly no reason for them not to list. They don’t need to own 100 per cent of their company. We have a capital market; any company that generates revenue beyond a certain amount in this market should be compelled to list.

“They bring in their capital, they can take all their dividends, no problem; they can bring in their investments; they pay their taxes, no problem, but they should list on the capital market.

“You can’t have a capital market that has such a narrow range of products. It is not for the companies to decide when they want to list, is we must compel them to list.

“It is an egg and a chicken situation. Have we ever thought of the fact that perhaps the reasons we don’t have these products, the reasons we have poor governance is because these companies are not listed and that if you actually got them listed the market would develop.”

Continuing, he said, “I will give you a few example: take a company like Michelin, Michelin was in Nigeria, it closed down its factory because we don’t have power and infrastructure and moved to a neighbouring country to produce tyres…but Michelin still maintains ownership of 30,000 hectares of prime land in Ondo State, producing rubber and exporting to a neighbouring country. Take away the land and let them go and get 30,000 hectares of land wherever they went.

“We want Foreign Direct Investment, FDI, but it has to be investment that is committed to the growth of the economy.

“You cannot turn Nigeria into a banana republic, where everybody come and take rubber and go and produce manufactured goods and then export back to us. If you run away from Nigeria, throw away Nigerians from jobs because we do not have power, and then go to a neighboring country, then let that country give you the land to produce your raw materials.”

In his own view, an investment analyst, Mr. Abiodun Hakeem, said, “There is need to urgently shore up the liquidity of Nigeria’s capital market which will in turn, restore the much-needed investor confidence. Getting telecommunication firms as well as oil and gas multinationals to list on the exchange will boost liquidity that will transform the fortunes of the capital market.”

Hakeem cited instances of some African countries that have legislations in place compelling multinationals to list on the host countries’ exchanges.

He said: “In 2002, Kenya enacted Foreign Investor Regulation which compelled multinationals operating in the country to list on the capital market. The legislation provided for a minimum of 25 per cent reserve of the issued share capital for local investors, while the balance of 75 per cent was left for other categories of investors.

“The legislation made it possible for Kenyan citizens to invest in companies like Nation Media, a regional media player; TPS East Africa, a tourism operator and Safaricom, a mobile telecommunication company, amongst others.”

He also noted that the Tanzanian parliament in February 2010 passed a Communication Bill which made it mandatory for mobile telecommunications companies to be listed on the Dar es Salaam Stock Exchange, DSE. According to the bill, telecommunication companies operating in Tanzania are required to offer shares to the public.

“They were also required to list with the DSE within three years after the Act came into force, but subject to requirements of the Capital Market and Securities Act,” Hakeem added.

Former President, Chartered Institute of Stockbrokers (CIS), Mr. Mike Itegboje, said the National Assembly should use the doctrine of necessity as the major reason for such legislation.

“It is in the mutual and collective interest of all stakeholders for this to be done. The local investors   will ensure that their investments in the companies are protected since they will also share in the dividends and other benefits. The foreign   stakeholders and shareholders will be at peace. The market capitalisation will increase in real terms. It will attract more international investors for equity and debt instruments to be issued by these companies. Now is the time,” Itegboje maintained.

Caution is necessary
However, Mr. Chidi Momah, General Counsel, Total E&P Nigeria, cautioned on the need to exercise restraint in plans to ensure compulsory listing for oil majors, saying it might have a negative impact on the development of the stock exchange.

He said, “Much of the invested revenue in the market, today, will be pulled from current investments to buy shares in these companies, and will likely result in a two-tier market with these companies having a disproportionate impact on the direction of the Nigerian Stock Exchange.”

According to him, there would be a greater degree of success if the appropriate investment climate is created, where companies will seek to invest and will seek to be listed on local stock exchanges.

He averred that a situation where force is being applied will not present Nigeria as an investment-friendly destination and will have limited success.

Momah lamented the fact that oil majors in Nigeria, in his own views, are considered as unlimited ‘cash cows’ and available for all purposes.

He said. “In addition to a Petroleum Profit Tax, PPT, rate of 85 per cent, they pay ‘drip, drip, drip’ taxes and fees. Niger Delta Development Commission, NDDC levy, which is three per cent of budget; Education tax – two per cent of assessable profits; Nigerian Content Fund – one per cent of value of contracts awarded.

“In spite of the above payments to government and its agencies they also spend billions of Naira on Community and Social Responsibility projects.

“There is a ‘Marine Security Agency’ Bill in the National Assembly which is proposed to be paid for by charging one per cent of the value of gross tonnage of cargo both inwards and outwards, and a Maritime Security Levy to be assessed and administered by the Agency.”