As Shell Cuts It’s Dividend Payout, The Hollow Expectations Of Oil As Nigeria’s Revenue Source Shows

The Oasis Reporters

May 1, 2020


A few decades back, enlightened Nigerians and investment savvy ones struggled to buy shares in Shell and other crude oil based companies, either in exploration or in marketing. No one envisaged a decline to their earnings. Most school leavers too, dreamt daily of employment in major oil corporations.

But events are changing fast in the industry that provides more than three quarters of Nigeria’s foreign exchange earnings.

Consider this Financial Times report reproduced here:

“Royal Dutch Shell cut its dividend for the first time since the second world war as the coronavirus pandemic halved quarterly earnings and forced the oil major to confront a new longer-term reality for the energy industry.

Oil companies are in crisis mode as lower energy prices and a collapse in demand for fuels and chemicals puts intense pressure on their finances, with severe lockdowns and travel bans in place across much of the world.

The cut in the payout by two-thirds is part of a “reset” of the Anglo-Dutch group’s dividend policy, not a short-term measure, amid persistent concerns about economic growth and questions over future oil prices in a world that shifts towards cleaner fuels.

The company is taking the first steps of a “fundamental shift for Shell over the next 30 years”, chief executive Ben van Beurden told reporters on Thursday, “balancing short-term needs with long-term goals” to become a net-zero emissions business by 2050. He said it was “hard to say” if oil demand would ever return to previous highs.

The first oil “supermajor” to cut its dividend, Shell reduced its quarterly payout to 16 cents per share from 47 cents. Shares in the company, which was the biggest dividend payer on the FTSE 100 in 2019, opened 6 percent lower after the news “.

Quite dramatic it is, as this report shows.

Nigeria’s Bonny Light crude is reported to be receiving little or no glances, as barrels upon barrels remain on the high seas, attracting demurrage charges on hired vessels while buyers are not forthcoming.

Meanwhile, if the country ever needed a better cash flow position to pay wages and fight the Coronavirus pandemic, it is now.

Which way now for a country on lockdown ?

While the country that Shell emanates from, Netherlands is able to provide for it’s citizens on lockdown, Nigeria has managed to distribute weevils infested bags of rice to states for distribution to citizens.

States like Oyo have made attempts to return the expired rice, not even fit for animal consumption, back to the Customs command.
Delta state’s commissioner for Information, Charles Aniagwu has equally complained that the Covid-19 rice palliatives gift to the State was full of weevils.

What then is the option beyond lifting the lockdown partially, with the added risk of spiking infection in the face of poor medical facilities?

Either way, there are no easy choices before the Buhari administration.

Additional reporting: FT

Greg Abolo

Blogger at The Oasis Reporters.

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