- Okowa investing Delta’s N20bn loan in family business, security guards firm – Stakeholders
- We stand to gain a lot from investment – Delta Government
BY BAMIDELE FAMOOFO
Governor Ifeanyi Okowa, Governor of Delta State, recently got the approval of the State House of Assembly to take a N20 billion loan from Fidelity Bank Plc, at an interest rate of 21 percent. The oil-rich State, by the move, will increase its debt burden by N32.6 billion from that singular transaction.
Figures from the National Bureau of Statistics on the level of indebtedness of states in the Federation as at the third quarter in 2022 showed that Delta State, despite the huge resources it attracts from the Federation Accounts Allocation Committee and its growing internally generated revenue, was the second most indebted state in the country as at end of third quarter in 2022. Delta came behind Lagos on the league of most indebted States in the period.
Specifically, Delta State total indebtedness as at nine months in 2022 stood at about N272 billion with Lagos State leading with a total debt portfolio of about N877.04 billion. While the level of borrowing by sub-nationals for the last quarter in 2022 is yet unknown, it’s almost certain that the debt status of states and the Federal Government will rise.
For Delta State, its debt portfolio is expected to at least increase to about N309.6 billion barring any other borrowing from other sources.
A letter of request to the State House of Assembly signed by Governor Okowa on January 25, 2023 which was seen by The Point showed that the state will pay an interest of N4.2 billion annually on the loan that has a life span of three years. In three years, the state is obligated to pay back N12.6 billion only on interest, bringing the total sum to N32.6 billion by 2025 when the contract will terminate with Fidelity Bank.
Explaining the purpose of the borrowing, Okowa said it will help the state finance its additional investment of 3 percent equity in UTM Offshore Limited Floating Liquefied Natural Gas Project.
Okowa said the investment was one of the means by which he hopes to further diversify the economic base of the state. He noted that the state wants to take advantage of the increasing demand for natural gas in Europe and other parts of the world due to a shortfall in supply as a result of the Russian-Ukrainian war.
UTM Offshore Limited, a company licensed by the Federal Government of Nigeria and backed by notable international partners as well as Afreximbank, gave Delta State the offer to take up 5 percent equity shares in the FLNG project under a term loan facility from Fidelity Bank in the first instance. According to Okowa, Delta State has the opportunity to uptake an additional 3 percent equity in the project which will also be financed with additional loan from the bank. Okowa further hinted that he has the backing of the Delta State Executive Council to borrow to invest in FLNG.
“The Delta State Executive Council at its first meeting held on Monday, 16th January 2023, considered and approved for the State Government to accept the offer by Fidelity Bank Plc, under the terms and conditions, to enable the State Government fund the additional stake of 3 percent in the UTM Offshore FLNG’s projects”, he said in a letter House of Assembly.
ABOUT FLNG PROJECT UTM
Offshore Limited is pioneering the development of the FLNG facility in collaboration with LNG Investment Management Services, a subsidiary of Nigeria National Petroleum Corporation PLC (NNPC Limited). The facility, a newly built vessel, would receive gas feedstock from an existing offshore facility, treat it to the required LNG standard, liquefy the gas, store the LNG and offload to LNG carriers.
When completed, the floating LNG shall have an LNG production capacity of 1.2 mmtpa, Turret and Mooring System, Gas pre-treatment modules, LNG production modules, living quarters, self-contained power generation and utilities as well as capacities for LNG storage and offloading.
To actualize the deal, UTM Offshore Limited signed agreements with three technical partners – Kellogg Brown and Root (KBR) UK; Japan Gas Corporation (JGC), Japan and Technip Energies Limited, France – for the commencement of the Front-End Engineering Design (FEED) for Nigeria’s first Floating Liquefied Natural Gas (FLNG) facility in November 2022.
The agreements were signed at a brief event at the Hilton Park Lane, London, UK.
The FEED contract with the three firms essentially entails conducting, for UTM Offshore Limited, various studies to figure out technical issues and estimate rough investment costs for the FLNG facility prior to the Engineering, Procurement, and Construction (EPC) phase of the project. The timeline for this phase of the FLNG project is 10 months.
The FEED contract signing was a followup to the successful execution of the preFEED agreement between UTM Offshore Limited with JGC, a leading international engineering design, procurement and construction firm, a statement explained.
It revealed that the Pre-FEED scope was completed within four months from the commencement date. KBR provided due diligence on the JGC scope by conducting a third-party review of all deliverables from JGC during the Pre-FEED phase. UTM Offshore Limited entered into the pre-FEED agreement with JGC and KBR in May 2021.
At the signing ceremony, the Managing Director and Chief Executive Officer of UTM Offshore Limited, Mr. Julius Rone, underscored the fact that like most other nations of the world, Nigeria was keen on and working assiduously towards achieving energy transition.
He said Nigeria’s energy transition necessarily should start with moving from huge dependence on crude oil to gas. “Like I have said in several fora, for us in Africa, especially Nigeria, energy transition is steeped in harnessing our abundant gas resources,” he said, adding, “At UTM Offshore, we completely agree with President Muhammadu Buhari that given Nigeria’s potential of about 600 trillion cubic feet of gas, the commodity has the enormous potential to diversify our country’s economy.”
He explained that the rising global demand for cleaner energy sources had offered Nigeria an opportunity to exploit gas resources for the good of the country. “We thank the president for making gas development and utilisation a national priority to stimulate economic growth, further improve Nigeria’s energy mix, drive investments, and provide the much-needed jobs for our citizens in the country,” he added.
Speaking at the FEED contract signing event, the Minister of State for Petroleum Resources, Timipre Sylva applauded the pioneering efforts of Rone and UTM Offshore, adding that the Federal Government would continue to support and create the enabling environment for business investments in the country, especially in the area of gas development.
“The PIA is already improving the petroleum industry’s reputation, paving the way for new investments, creating jobs, supporting the economic diversification agenda, and strengthening Nigeria’s ability to fulfill the world’s expanding energy demand,” he said.
The minister reiterated the Federal Government’s determination to leverage on natural gas as the nation’s transition fuel, with UTM’s Floating LNG Technology as the game changer.
While stressing the significance of innovation, technology, and policy as key drivers of change in the energy sector, Sylva maintained that gas remained the solution to ensuring Nigeria’s energy security, economic competitiveness, and reduction of greenhouse gas emissions.
The minister noted that the UTM FLNG would target the processing of associated gas currently flared in order to cut carbon emissions and monetize additional reserves for the domestic and global markets, which aligns with the Federal Government’s gas flare commercialization programme, and the decade of gas agenda. President of African Export-Import Bank (Afreximbank), Benedict Oramah, lauded the tenacious and transparent pursuit of the FLNG project by Rone and his UTM team, pledging the full backing of the bank for the project.
The UTM and Afreximbank also signed a $5 billion MoU for the financing of the FLNG in December 2021 with Oramah saying, “The UTM FLNG is one of the projects Afreximbank is very proud of: just like the Dangote refinery. We are proud to be associated with these two projects in Nigeria.”
Also, at the contract signing event in London, Nigeria’s High Commissioner to the United Kingdom, Ambassador Sarafa Ishola underscored the full backing of the Federal Government for the project.
“THE BENEFITS THAT COME WITH THE INVESTMENT FAR OUTWEIGH THE LOAN WHICH IT IS SEEKING FROM FIDELITY BANK TO INVEST”
“This is one of the occasions that makes us very proud as representatives of Nigeria in other countries,” he said, adding, “Nigeria is committed to climate change and COP 23 and what UTM, conceiving and actualising Nigeria’s first Floating LNG conforms with energy transition strategy of the Government of Nigeria.”
At the event were the heads of the regulatory authorities in Nigeria’s oil and gas sector, the Executive Secretary of Nigeria Content Development and Monitoring Board, Simbi Wabote; the Chief Executive Officer, of Nigerian Upstream Petroleum Regulatory Commission, Gbenga Komolafe; and Chief Executive Officer, Nigeria Midstream and Downstream Petroleum Regulatory Commission, Farouk Ahmed. All the regulatory chiefs commended the tenacity of Rone and his team and pledged their continuing support for the project. Top officials of the UTM FLNG’s technical partners, including the President of JGC Holdings, Tadashi Ishizuka; Chief Operating Officer of Technip Energies Limited, Marco Villa; the Vice President of KBR, Paul Baillie; and Head of LNG Operations at Vitol, Steve Brann, committed to concluding the project in a record time.
EXPERTS SPEAK
Investment experts are of the opinion that Delta State is moving in the direction to diversify its economy.
“This move will make the state less dependent on monthly allocation that comes from the Federal Accounts Allocation Committee”, a financial expert with Parthian Securities noted. The analyst who does not want his names in print however noted that the capital market would have offered the state a cheaper fund to invest in the laudable project.
“Funds from the capital market are cheaper and offer you a longer period to pay back. This will not put the state in any form of pressure when it is time to pay back,” he noted. Boniface Chizea, Chief Executive Officer, BIC Consultancy Services, noted that the benefits that come with the investment far outweigh the loan which it is seeking from Fidelity Bank to invest. “After the government of Mr. Okowa would have exited the government house, Deltans would keep reaping the fruit of the investment. “Besides the state having the capacity to back its loans, I strongly believe that dividends from the FLNG project will pay back and still leave something good for the government to build infrastructure in the state,” he said.
A stock market analyst and stockbroker, Adeola Salako, argued that Delta State has the capacity to pay any loan it is going to borrow from any financial institution based on records available on the level of revenue it generates independently from the State. He noted that revenue from FAAC accruable to the state could be used back the loan.
DELTA IGR
A check on internally generated revenue conducted by The Point showed that Delta State collected a total IGR worth about N204.62 billion in three years (2019-2021) according to figures obtained from the National Bureau of Statistics in 2022. Average IGR in the State stood at N68.21 billion per annum. Tax revenue accounted for about 90 percent of IGR in three years, representing about N184.11 billion.
On average, the state collected about N61.37 billion in tax revenue annually in three year while other sources of revenue available to the state stood at about N20.5 billion, averaging N6.83 billion per annum in the period. Delta State increased its total internally sourced revenue to N80.20 billion in 2021, up from N59.73 billion in 2020, representing an increase of 34.3 percent.
IGR, however, recorded a decline of 10.8 percent from N64.68 billion in 2019 to N59.73 billion in 2020.
STAKEHOLDERS KICK
Kazie Ochie, National Coordinator, Delta Grassroots Coalition, in a statement alleged that the N20 billion loan which the state government has just secured would not be spent for the purpose which it is meant but to push the political ambition of Governor Okowa and his associates.
“We have been silent over the humongous loans the Government of Delta State, under the leadership of His Excellency, Senator Dr. Ifeanyi Okowa has been taking from various banks in Nigeria, giving the government the benefit of the doubt that the loans were for altruistic purposes. But while we have overlooked every other loan, our conscience and curiosities were pricked by the very recent N20 Billion Naira loan Governor Okowa asked for and was graciously granted by the Delta State House of Assembly in a record time of eight minutes during its sitting on January 27, 2023 without debates or valid questions asked,” Ochie alleged in a statement.
“There are no doubts left now, that the loans are being channeled to worthy causes, personal worthy causes: the actualization of the Vice Presidency of Governor Ifeanyi Okowa and the governorship ambition of his stooge, Honourable Sheriff Oborevwori who is the Speaker of the rubberstamp Delta State House of Assembly.
“Our findings about the N20 billion loan facility from Fidelity Bank, after our due diligence, an elementary procedure in matters like this which the Delta State Executive Council and Delta State House of Assembly deliberately failed to do, are not only outrageous, they are confounding.
And it has become imperative that we inform Deltans whose lives and future are being mortgaged for selfish ambitions, how their resources are being looted in the open by a Governor in desperate need of funds for his selfish ambitions,” he stated. Further presenting his argument, Ochie said: “Here are the interesting but fraudulent facts about the purported transaction and UTM OFFSHORE LIMITED, the company in which Governor Okowa is “investing” the whooping sum of N20 billion of Delta State money borrowed from Fidelity Bank. The company which was incorporated on July 15, 2012 is owned by Mr. Julius Rone, a Warri Boy, Diploma holder and close associate of Honourable Sheriff Oborevwori, the Speaker of Delta State House of Assembly.
The other Directors and shareholders in the Company are his wife, Utibe Rone and three sons, Misan Ryan Rone, Oritsewinor Sean Rone and Oritsesesan Julius Rone.
Yes, you read that right. UTM Offshore Limited is a business owned by a husband, wife and three teenage children whose official business address is also their residential address at No 9, Opuda Close, Maitama, Abuja FCT, Abuja. “UTM Offshore Limited has been inactive since July 15, 2012 and only became active on December 2, 2021. And wait for this: the company’s Principal Business Activity as we found out at the Corporate Affairs Commission (CAC) as at February 2023, is to carry on the business of “Providing Guards for Pipeline Security, for products line, Crude line and Gas”.
In other words, the company’s areas of core competence is the provision of SECURITY GUARDS for pipeline infrastructure and NOT upstream or midstream business in the oil and gas industry let alone a Floating Liquefied Natural Gas (FLNG) Project. Biggest wonder of the world: Delta State Government is investing a huge amount of Twenty Billion Naira in a company that provides security guards, he further stated.
We stand to gain a lot from investment – Delta Government However, the Delta State Commissioner for Information, Charles Aniagwu said the state stands to gain a lot from the investment. Aniagwu said apart from yielding profit in the long run, the project would create employment for the people of the state as well as boost its internally generated revenue. According to Aniagwu, the company was at peace in siting the gas project in the state because the state government was investing in it. He declared that Delta is the most solvent state in Nigeria, noting that if the Federal Government was to pay what it is owing the state, the present administration would not leave any debt behind.
