THE ART OF THE DEAL NIGERIAN STYLE

“Nigeria has a bit of a cash flow problem right now. Our reserves are not as strong as we want them. The impact of that is the value of the naira is coming down.” Declared Dr. Ibe Kachikwu, Nigeria’s minister of state for petroleum.

So the Government negotiated with India a major sales of oil with a significant $15 Billion down payment for oil exports. Governments of Nigeria and India have agreed on a $15billion transfer of funds to boost the West African country’s ailing economy – The funds are payment for oil exports to India by Nigeria over a certain period of time. The federal government of Nigeria is set to receive $15bn from the Indian government in December to help Nigeria solve liquidity issues that have been caused by the low oil price that has lasted for two years and continue to be low compared to 2011.

The Minister of Petroleum explained that the money is Nigeria’s earning from oil that it will sell to India over a period of time. The Indian government will however ‘help’ Nigeria by paying for the products upfront. India is one of the largest buyers of Nigeria’s oil. It is a brilliant way of leveraging the country’s assets to get out of the recession. “So, what we are trying is to leverage the assets we have to receive immediate cash,” declared Kachikwu .

Well, it is a brilliant way for Nigeria to receive a necessary cash infusion that will help the economy and may help in facing the challenges of today: Boko Haram in the North, the Delta Avengers in the South and all the other issues. It should help the overall Nigerian economy. It is a great news for the entire continent because Nigeria remains the largest economy of Africa.

Combined this announcement with the declaration of Saudi Energy minister Khalid al-Falih who said that “Oil markets were at the end of a downturn”, we can now expect to see a price slowly climbing. The Saudi declaration is sending a clear message to what will happen in Vienna at the end of November. This is good news for Nigeria and all OPEC members with economy heavily depending on Oil revenue.

Clearly the Saudi declaration comes on the day Saudi Arabia launched the sale of $17.5 billion Bonds and is exploring seriously a “going Public” for ARAMCO. -It might be self-serving- but it works. Reported by the Wall Street Journal, the largest emerging-market bond issue and first international bond sale for the Kingdom seems to have been oversubscribed close to 10 times!

The sale is the latest example of a Persian Gulf state turning to international markets to offset declining oil revenues. Other oil exporters from the Gulf region such as Qatar, Bahrain, Oman and Abu Dhabi earlier this year raised $20 billion in total through international bond issues. Times are changing Oil is not brining any longer the revenue manna it was a few years ago. The conflict between Iranian and Saudis is in part responsible for the low price but they all may have understood that their economy is better with more revenues and we could see soon Oil back at $60 or 70, which will make OPEC members happier.