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Dollar Scarcity May Hamper Shell's Planned Sale of Nigerian Assets

The current challenge of dollar-crunch in the country may hinder plans by Royal Dutch Shell to sell off its onshore and shallow water assets, being managed by its Nigerian unit, the Shell Petroleum Development Company (SPDC), THISDAY learnt yesterday.

A Bloomberg report indicated that Nigeria's lenders likely do not have enough dollars to fund clients seeking to acquire the oil assets put on sale by the International Oil Company (IOC), quoting Guaranty Trust Bank Plc.

Guaranty Trust Bank Chief Executive Officer, Segun Agbaje said he didn't see the likelihood of any client raising the estimated $2.3 billion needed to purchase the Shell assets.

Such a deal would require a syndication of up to $1.8 billion, and it "can be very tough to raise this kind of funding locally at the moment," Agbaje said.

"When I look at the books of Nigerian banks today, I don't see a lot of dollar liquidity," Agbaje told an investor conference call in Lagos, according to Bloomberg, adding that "It's becoming a very difficult deal for people to pull off."

Nigerian banks in 2013, syndicated $3.3 billion debt to Dangote Industries for a refinery and petrochemical plant and recently financed Heirs Holding's $1.1 billion acquisition of OML 17.

A slump in crude prices and an economic downturn arising from the coronavirus pandemic curbed foreign-currency flows into Africa's largest crude producer and has continued to pressure its foreign reserves.

In May this year, Shell had said its onshore operations in Nigeria's oil and gas industry were no longer compatible with its long-term climate strategy, coming under increasing pressure from investors to slash emissions and pivot toward cleaner energy.

The company's Chief Executive Officer, Ben van Beurden, told investors that the additional community issues in the Niger Delta were becoming a huge challenge for the company.

"The balance of risks and rewards associated with our onshore portfolio is no longer compatible with our strategic ambitions. We cannot solve community problems in the Niger Delta and the company has started discussions with the government on how to move forward," he said.

The Anglo-Dutch company had been gradually selling onshore assets in the West African country for more than a decade, as it sought to put aside chronic problems such as pollution caused by ruptured pipelines and the resulting legal battles with local communities.

The issue has become more acute in the past year after Shell pledged to transform itself into clean energy giant and gradually wind down its oil and gas business to achieve net-zero carbon emissions by 2050.

The federal government also recently confirmed that talks were ongoing with Shell, but stated that it was encouraging the company to keep its onshore operations instead of divesting.

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