goldbest

THE THREE Cs OF CREDIT

2022-08-30T06:09:00.000-07:00

The Three C's of Credit

Character:

refers to how a person has handled past debt obligations: From the credit history and personal background, honesty andreliability of the borrower to pay credit debts is determined.

Capacity:

refers to how much debt a borrower can comfortably handle. Income streams are analyzed and any legal obligations lookedinto, which could interfere in repayment.

Capital:

refers to current available assets of the borrower, such as real estate, savings or investment that could be used to repay debtif income should be unavailable.

Kolo by Real Onyechi.

2022-08-29T10:35:00.007-07:00

https://madnaija.xyz/Hit/datas//2022/08/Realonyechi_-_Kolo.mp3

SERMON AT THE LORD OF HOSTS MIRACLE CHAPEL

2021-09-06T05:25:00.002-07:00

SUNDAY SERVICE AT THE LORD OF HOSTS MIRACLE CHAPEL. Sunday 5^th September, 2021.

Calvary greetings brethren.

Below is the sermon today at The Lord of Hosts Miracle Chapel, 52 Road, A close, House 32, Gowon Estate, Egbeda, Lagos.

Theme of sermon: Church attendance

Texts: Matt 18:19-20, Eph 1:22-23, Eph 4:11-12

I give God all the glory and accolades for giving me the rare privilege of preaching the sermon to the church congregation on the first Sunday of September 2021. I am most grateful to the almighty God.

Two key words in the caption readily come to mind namely church and attendance. A church is a place where people gather to worship God. In other words, it is a fellowship centre, not necessarily the building you are seeing physically.

Attendance is the act of being physically present at an event or go regularly to the place. In the new testament the church is referred to as the body of Christ. Check the passages. Church attendance is the foundation for Christian life.

Again the church is a meeting place. That means it can be in your living room, your neighbourhood or a designated place.

HOW DO YOU ATTEND CHURCH?

1. You come to church early. If you come late to church the angel assigned to take attendance will mark you absent. There is no reason for you to come late to church. Not even rain, hold up or distance. I adjusted my schedule to meet up with the resumption time in my former company. If I can adjust my time schedule to please my former boss, why can’t I do more than that to please God.

2. You must participate in all the activities of the day, especially if you are a worker. Make some notes of Sunday school teachings, bible study and of course main sermon.

3. Do not resort to gossip. Comport yourself. Keep a dignified silence when somebody wants to engage you in gossip.

4. Obey ushers while in church. If you disobey them, you are disobeying constituted authority. You are invariably disobeying God.

5. Pay attention on what is being said or taught in church. Make some notes for your review at a later date.

BENEFITS OF CHURCH ATTENDANCE

1. Church attendance connects us to God. It gives us a physical space to connect and draw closer to God. It opens us up to God in order to understand His message to us.

2. Church attendance gives us a chance to reflect on gratitude. Some members of the church that left exhibited the height of ingratitude for what they gained from the church. They are definitely not sincere in their church attendance.

3. Church attendance connects us socially. You make new friends in a new environment including church. Some people meet their spouses in the church. Some people meet their mentors and benefactors in the church.

4. Church attendance makes us to feel reverence. It gives peace of mind. It affords us a place to pray and express humility and gratitude.

5. Church attendance provides us with opportunity to give back. Our church is a cheerful giver. The church pays school fees for some people, give some members transport fare, pay rent for some members, buy clothes and furniture for some members. It is only expedient for such members to reciprocate the nice gesture of the church.

6. Church attendance helps us to find the lesson in our trial. At The Lord of Hosts Miracle Chapel, the spirit of God uses the woman of God to give messages to members with a view to proffering solutions through fasting and prayers.

7. Church attendance teaches us forgiveness. Forgiveness is the hallmark of Christendom. You must learn how to forgive. Jesus told Peter that your brother will offend you seventy times seven times and you must forgive. Matt 18:21-22.

DISADVANTAGES OF SKIPPING CHURCH.

1. We miss out on worship. God requires us to attend church so that we can worship Him. Rom 12:1

2. We miss out on spiritual growth and capacity. The church is the body of Christ. When we are in union with fellow believers we are in union with Christ

3. We miss out on an opportunity to minister to others. The bible enjoins us to serve and minister to one another. James 5:16. Confess your sins to one another and pray for each other so that you may be healed.

4. When we skip church we disobey God’s command. Church attendance is the formal gathering of God’s people for worship. We are commanded not to neglect meeting together. Heb 10:25.

WHAT TO DO AFTER ATTENDING CHURCH.

1. Reach out to people that are absent from Church and by so doing you are evangelising and winning souls for Jesus.

2. Go to church with an open mind. Do not be dogmatic with your beliefs. Open yourself up and grab the vibrations coming out from the alter.

3. Dress up a little. It is customary to wear nice clothes to church. Churches have dress codes. Here in LHMC women do not wear trousers to church. They must have their hair and shoulders fully covered. On the other hand men do not wear shorts or cap. If you are not sure especially if you are new member ask questions.

4. Pay attention and follow the lead of others. Nobody knows it all. Ask questions if confused of anything.

5. Talk to someone about joining the church. By so doing you are increasing the number of worshippers and it will be marked for you in spirit.

6. Volunteer your time, your talent or your finance in the service of God. Do not be docile while in church

To conclude, the following points are things church members must understand.

1. When you miss church nobody is losing but you.

2. When you withdraw as a worker, God replaces you on time to the point you become irrelevant.

3. When you deliberately refuse to support church projects, God raises other better and serious givers.

4. When you start fighting the church, God sees you as an enemy.

5. When you leave church more serious people come in.

6. When you eat your tithe and offering and sacrifice, the grace on the church stops working for you.

7. When you gossip your church to other members or outsiders, you become a rebel and a disloyal worshipper.

8. When you speak evil of the church, the angels working with the church withdraws from you. Very serious. Bad case!

9. When you do not want control, discipline and correction from the church, you are prone and closer to danger.

10. Your church is the symbol of the ministry’s mantle and mandate and not you, so with or without you, the work of God will succeed. See yourself privileged to be part of God’s programme.

Those who fight the church do not end well. May we not fall in that category in Jesus Christ name. Amen

Sermon by Elder Jerome C. Njoku.

A GUIDE FOR PRAISING GOD

2020-02-26T07:10:00.002-08:00

MIDWEEK SERVICE AT LORD OF HOSTS MIRACLE CHAPEL.

The teaching today 26^th February, 2020 at The Lord of Hosts Miracle Chapel, plot 116, 5^th Avenue, Beside Okiki Hall, Gowon Estate, Egbeda, Lagos.

Theme: A guide for praising God.

Text: Ps 150

This psalm is the whole gamut of praise, joy and worship. Some scholars have described psalm 150 as the grand finale of the psalms, like those final bursts of light and colour at the end of a festival. Others call it a guide for praising God, while some others call it ‘let your balloon go!’ The psalm begins with the phrase ‘praise ye the Lord’

The psalm answers four of the basic questions about praising God namely

1. Where do we praise God –

a. In the sanctuary – Vs 1 says praise ye the Lord, praise God in the sanctuary. The Hebrew word sanctuary means a place set apart, a specific place where believers gather to worship the lord. We should worship God privately and in public. Every service should be praise and worship.

b. In the firmament – the sanctuary is not the only place where God is to be praised. The last part of vs 1 says ‘praise God in the firmament of His power’. The Hebrew meaning of firmament is expanse. That means heaven. In Gen 1:8 we are told the expanse of God’s power is unlimited. Wherever His expanse of power exist He should be praised there. The expanse of God’s power is everywhere and so wherever we find ourselves we should praise God there.

2. Why should we praise God –

There are multitudes of reasons why we should praise. Vs 2 of psalm 150 says ‘praise God for his mighty acts: praise Him for His excellence of His greatness.

a. For what he does – one mighty act of God was when He colocalised situation of His people to set them free from Pharaoh. But when Pharaoh changed his mind and pursued the Israelites to recapture them, God did a mighty act by dividing the red sea to consume the Egyptians.

God through Elijah on mount camel did a mighty act to show Himself and subdued the prophets of Baal.

Our Lord Jesus fed 5000 people with just 5 loaves of bread and 2 fishes just by giving thanks and praising God.

b. For who He is – we have to praise God for who He is. Praise Him according to His excellence of His greatness. He is the creator and sovereign of the universe. He is all wise, all powerful and He is loving and merciful.

3. How do we praise God –

a. With instruments – vs 3-5 says ‘praise God with instruments and organs. Praise Him with your voice. Make a joyful noise in praising God.

b. Praise God with dance - Vs 4. Also Ecl 3:4 says there is time to mourn and time to dance. Much as we are not given any specifics as to how to dance in praising God, however because of what the bible teaches about modesty and purity, we know that any dancing which praises God must be chaste and wholesome, and never suggestive or provocative. We should remember that King David so danced to the Lord that his royal apparel fell off but that was unconsciously and should not give anybody the impetus to dance naked. Don’t dance azonto or skelewu while praising God. Follow the injunction in 1 Corr 14:40 to wit ‘let all things be done decently and in order.

4. Who should praise God –

a. Heavenly Hosts – vs 6 of ps 150 says ‘let everything that has breath praise the Lord. Praise ye the Lord’. Both living things and inanimate things are enjoined to praise God. Ps 148:1-5.

b. Human beings – the emphasis in vs 6 is for everything that has breath to praise God. Regardless of location, age, race, background, economic status, health conditions or anything else, everyone has reasons to praise God.

To conclude, if you know Jesus as your Lord and Saviour, if your life is linked trustfully and obediently to Him, then however tough things get, and whatever losses you have incurred, and however much your heart may be breaking, in spite of it all, you can still sing through the tears, you can still sing in spite of pain. You can still praise God, because you have got Jesus in your heart to strengthen you, sustain you, comfort you and guide you and then take you home to heaven when this earthly struggle is over.

Phil 4:6-7, Paul wrote ‘Be careful for nothing, but in everything by prayer and supplication with thanksgiving let your request be made known unto God. And the peace of God which passeth all understanding shall keep your hearts and minds through Christ Jesus’

The following poem is apt –

Praise God from whom all blessings flow

Praise Him all creatures here below

Praise Him above, ye heavenly hosts

Praise Father, Son and Holy Ghost

Amen.

Sermon by Elder Jerome C. Njoku.

ONYINYECHI song number 3

2019-10-12T08:45:00.001-07:00

GIVING WITH ALL YOUR HEART

2019-10-02T12:36:00.002-07:00

MIDWEEK SERVICE AT LORD OF HOSTS MIRACLE CHAPEL.

The teaching today 2^nd Oct, 2019 at The Lord of Hosts Miracle Chapel, plot 116, 5^th Avenue, Beside Okiki Hall, Gowon Estate, Egbeda, Lagos.

Theme: Giving thanks with all your heart.

Text is from 2 Corr 9:7

“Each of you should give what you have decided in your heart to give, not reluctantly or under compulsion, for God loves a cheerful giver.” NLT

Thanksgiving is something we should do every time and day. In the good or in the bad, in the ups or in the downs, our natural response must be gratitude.

There are examples of people who uniquely gave thanks with all their hearts in the bible. I have five of them. The list is not however exhaustive.

Hannah – The story of Hannah is well known. She is one of two wives of Elkana. While she was barren, her mate Penninah had children. Hannah was always reviled, maligned and mocked by Penninah because of her barrenness. This prompted Hannah to go to God in prayers. Her prayer was so fervent that the priest Eli thought she was drunk too early in the morning. She asked God for a child (not Children) and made a promise to give God the child back. God answered her prayer and she fulfilled her promise. She gave with her whole heart!

David – David danced before the Lord in the streets as a response of praise to his holy God. David is a man known for praise. Even in the darkest season of his life, he pointed to the goodness of God. He gave thanks to God always with his whole heart.

Mary the mother of Jesus – Finding out she was pregnant with the saviour of the world wasn’t the easiest news to swallow and the aftermath took some faith. But Mary the young girl chosen to carry the baby Jesus would exemplify great praise. While visiting Elizabeth who was also carrying John The Baptist same time, Mary had a moment to sing to the glory of God in Luke 1:46-55. That song is celebrated today as the canticles of virgin Mary otherwise known as Magnificat. Mary gave thanks wholeheartedly!

The healed leper – In Luke 17, when Jesus entered a village there were ten lepers that called out to Him for healing. Jesus told them to go and show themselves to the priest and as they did, all ten were healed. However only one returned to Jesus to give thanks. The other nine vanished into the crowd, only one gave thanks where thanks were due, and his healing was made permanent. May we not behave like the nine lepers in Jesus name.

Jesus – Jesus is God and by that he didn’t have to give thanks for anything, but he did. Jesus set a remarkable example for us in many ways but one was in thanksgiving. He was a man who gave thanks to His father in so many ways.

· He gave thanks to God as He was surrounded by thousands of hungry people and five loaves of bread and two fishes were multiplied to feed 5000 people. John 6:11

· He gave thanks to God for hearing His prayer for raising of Lazarus, before Lazarus was raised from the dead. John 11:41

· He knew the cross was before Him and gave thanks to His father as He broke the bread and drank the wine with His disciples at the last supper.

To conclude – We have a perfect example of righteous living from our Lord Jesus and one thing He shows us is the position of praise and thanksgiving. In all the instances as highlighted were instances of tense. The pressure to feed 5000 people, raise a friend from the dead and face death on a cross will be intense for most of us.

Jesus’ response was not to panic or run to people but to turn to God. No matter what situation we find ourselves whether good or bad we should cultivate the natural response of thanksgiving.

May God help us and give the grace to always cultivate a natural response of quality praise and thanksgiving offering to Him all the time in Jesus mighty name. Amen.

Sermon by Elder Jerome C. Njoku.

EIGHT YEARS ANNIVERSARY OF LORD OF HOSTS MIRACLE CHAPEL

2019-06-09T07:59:00.002-07:00

THE LORD OF HOSTS MIRACLE CHAPEL. Sunday 9^th June 2019.

Calvary greetings beloveth.

Today’s service was very memorable and unique. The reason is that on 8^th of June 2011, Lord of Hosts Miracle Chapel was officially institutionalised as a spiritual church by God Himself. The chapel was hitherto operating as a prayer centre anchored by the woman of God seer Bright Ndibunwa. It is on that note that today’s service was dedicated to marking 8 years anniversary of the church.

Below is the sermon today at The Lord of Hosts Miracle Chapel, plot 116, 5^th avenue Gowon Estate, Egbeda.

Theme: Abraham’s timely obedience to God’s call. (Bright Ndibunwa’s timely obedience to establish The Lord of Hosts Miracle Chapel).

Text: Genesis 12 from 1.

Abraham at 75 yrs of age and childless was commanded by God to leave his place of abode and go to a place yet unspecified. In spite of the fact the new place was not specified by God, Abraham religiously obeyed God’s command without an iota of reservation.

This scenario was replayed eight years ago when seer Bright was also commanded to metamorphose the prayer centre to a full blown church. Against her wish of being a business woman, she obeyed God and ever since she has remained resolute and focussed in her calling. Her obedience just like father Abraham was timely.

As children of God we should discover what God is asking us to do and obey without hesitation. We should obey on time too. Very important. When God asks us to move we should move. It is only when we move that we discover new things.

When God calls you, you are expected to remain focussed. Abraham like seer Bright were focussed after heeding God’s call. Hence they obeyed and on time too.

Abraham was not distracted by the fact that he was used to the mammoth crowd of people surrounding him in the neighbourhood. Same goes to seer Bright. She did not allow her ambition to be in business to override her calling. With the support of her amiable and supportive husband, she answered the call timely enough. And today the church has survived despite pockets of hatred, acrimony and rancour which are necessary evils.

God moved Abraham because He had a lot of goodies in store for him as a result Abraham blossomed even in dryness courtesy of God’s presence in his life.

The presence of God was with Abraham and 75 yrs was the beginning of a basket of blessing for him. In analogy, the presence of God is with LHMC AND 8 YRS IS JUST THE BEGINNING OF MANY WONDERFUL AND MONUMENTAL EXPLOITS AHEAD. So shall it be in the east, west, north and south in the mighty name of Jesus. Amen.

Sermon by seer Bright Ndibunwa.

BELOW IS MY POEM TO CELEBRATE THIS GREAT CHURCH ON THE OCCASION OF HER 8 YRS ANNIVERSARY.

Come gather all, from great to least

Come celebrate this special feast

This is the day by God’s own choice

Our church was born, let us rejoice

May God be praised! May God be blest!

May He find here His place of rest

We honour those who built with care

His throne on earth, this house of prayer

May all who come, find truth and light

Receive new hope of future bright

God fill us with abundant grace

Many Angels guard this holy place

We thank you, Lord, for what you’ve done

Here in this place through your dear servant

Abide with us your spirit show

As rivers, may your blessings flow.

Amen

By elder Jerome C. Njoku.

KEYS TO EFFECTIVE TIME MANAGEMENT

2019-04-25T02:38:00.002-07:00

KEYS TO EFFECTIVE TIME MANAGEMENT

Effective Christian time management is encapsulated in Eph 5:15-16 which says “Be very careful then how you live – not as unwise but wise, making the most of every opportunity, because the days are evil.” In King James’ version of the bible it is said we should work circumspectly.

Walking circumspect signifies to look round and about on all hands. To be very watchful daily, and cautious in order to avoid danger, discern enemies before they come too close and secure your interest by every possible and lawful means.

This admonishment is for a reason – the days are evil. You should sojourn on this planet earth like a wise man and not like a fool. This will help you redeem the lost time because the days are evil. This means the present times are dangerous, they are full of trouble and temptations, and only the watchful and diligent have any reason to expect they shall keep their garments unspotted.

We should see ourselves as stewards of God in the body temple. Our time belong to God, every moment is His and we are under most solemn obligation to improve it to His glory. Of no talent He has given will He require a more strict account than our time.

Let us look at God’s time template recipe for success – time is the measurement of unit of life. Time renders relevance.

Planning – what and how

Ø Motivation – personal rewards

Ø Directing – implementation

Ø Monitoring – record keeping

Ø Controlling – eliminating unfavourable variances, reinforcing favourable variances

Ø Communication – coordination of information

More men fail through lack of purpose than lack of talent. The bad news is time flies. The good news is that you are the pilot.

PRINCIPLES OF TIME MANAGEMENT

Important and urgent:

o Foremost is your relationship with God – Matt 6:33. Seek ye first the kingdom of God and His righteousness and all these things will be added unto you.

o Your relationship with family i.e. spouse and children. They will support or derail your relationship with God.

o Your relationship with the ministry of God. What are you doing in the vineyard of God?

o Your talent – how does your talent impact on God’s work. Do not copy the foolish servant that buried his talent under the earth. Do something for God by showcasing your talent in the house of God.

o Health – meals, rest, exercises, pleasure.

o Career – education and finance. Do not let your passion debar your quest for wisdom, knowledge and understanding.

Important but not urgent:

o Friends especially friends that have negative influence on us.

o Relationship that lead us to sin.

o Peer reference – comparing yourself with others rather than comparing yourself with yourself.

o Unhealthy competition in the church. We should not waste our time in such.

Urgent but not important:

o Fashion

o Latest gossip

o Appearance

o Movies especially the obscene ones

Not important not urgent:

o Idleness. Prov 20:4-5. In the middle east, the season for planting is winter, rainy season. A lazy man (sluggard) avoids the discomfort and work of ploughing a muddy field in the cold. At harvest time he looks for crop from his field but he has nothing. Lack of work leads to lack of benefits. A person’s plans are like deep waters only a wise man draws it out.

o Loitering – no idea what to do with time.

o Procrastination – delay is dangerous.

o Misplaced priority – doing the right things at the wrong time

On every task, draw an action plan, meaning from objectives to success. The plan must be:

ü Specific – goals listed from 1 to 10 for example.

ü Measurable – what are the outcome of the goals or plan. It must be quantifiable.

ü Attainable – do not plan for the unachievable. Your plan must be achievable otherwise it is a waste of time.

ü Resource oriented – there must be tools to bring the plan to fruition. There must be infrastructure for the plan to blossom.

ü Must be time sensitive or time bound – allot time frame to the plan and monitor it. Identify time available for the plan and work towards achieving it.

Seek God’s guidance on time as in Ps 90:12. “Teach me to number my time/days so that I apply my heart to wisdom”. Identify time wasting activities and weed them off. Know when you are most productive and make the most of it. Is it in the wee hours of the morning, or late morning, or in the afternoon, or in the evening or in the night?

JESUS EXAMPLE WITH TIME

1. Time with God – Matt 3:16. After His baptism the heavens opened and the holy spirit poured on Him and He communed with God

2. Time with the disciples – Matt 9: 10 – end. He had time to teach His disciples and interpret parables to them.

3. Time to attend wedding – John 2:1-11. He turned water to wine in Galilee.

4. Time to work in the synagogue – Matt 13:54. He began teaching people in the synagogue from tender age.

5. Time for ministry – preaching, teaching, healing, meeting the needs of the dying souls. Matt 5:22-29

6. Time to meet Lazarus – John 11:1-45. He mapped out time to go and raise Lazarus so that people around would know that it was God that actually sent Him.

Put God first in the day. Martin Luther King said “I have so much to do today, I couldn’t possibly do it all without three hours of prayers.” Ps 90:17 says “The lord favour rest upon, establish the work of our hands.”

Brethren, think the work of the ministry of Christ. Plan on the conduct of your God given duties. Rom 8:28 “And we know that all things work together for good to them that love God, to them who are the called according to His purpose”.

God given activity is always regimented with the appropriate timing as in the case of Passover feast. Num 9:3. “In the 14^th day of this month, at even, ye shall keep it in His appointed season: according to all the ceremonies thereof, shall ye keep it”

Lastly – Time lost can never be regained. Time is lost in smaller quantities. Make good use of time in between major activities. Procrastination is a thief of time. A wise man does at once what a fool does at last. A year from now you would wish you had started.

Warren Buffet used to be the richest man in the world. He started investing at the age of nine but later regretted not starting at the age of five. Whatever you have resolved to do, do it quickly, defer not till evening what the morning can accomplish.

The best time to plant a tree is twenty years ago. The next best time to plant it is now. It is never too late to start. Do not waste others’ time because time is wealth. How do you feel when you miss your flight by five minutes? Remember we will all account for the use of every moment of our time.

Thank you.

Jerome C. Njoku 08035316842, 08099384111.

EASTER SUNDAY 2019 SERMON

2019-04-21T10:23:00.002-07:00

LORD OF HOSTS MIRACLE CHAPEL. Sunday 21^st April 2019. Easter Sunday Service.

Calvary greetings beloveth.

Below is the sermon today at Lord of Hosts Miracle Chapel, plot 116, 5^th avenue Gowon Estate, Egbeda.

Theme: Jesus walked and worked at the right time. Text: Matthew 27:45-end, 28.

Our Lord Jesus came at the appointed time and performed His tasks at the appointed time. He started His scheduled duties from childhood. In other words He started on time and that’s why He finished on time. Methinks those that finish their assignment on time die young largely because they completed their jobs on time, hence time to go!

Whenever and wherever you see Jah children, in your own interest please leave them alone. It is dangerous to mess up a person that has God by his side. This was what happened to Judas Ischariot. He was messed up big time because he had the unfortunate and inglorious destiny to betray Jesus. He was carried away and made himself a scape goat.

We as children of God should not allow our carnality and inordinate ambition and frivolous desires to rule and ruin our sense of reasoning. Most of such frivolous plans and targets result in ephemeral outcomes which are often time exercises in futility.

Jesus time on planet earth was spiritually regimented and all His activities were carried out without any dull moment. We should plan our time well while we live because any activity not carried out on due time and season cannot be rewound.

Let us buy the appropriate time in our lives to the glory and honour of God almighty. Judas bought the time to betray Jesus, Joseph of Arimathea bought the time to donate his expensive tomb for Jesus burial, while Mary Magdalene bought the time to have the rare privilege of being the first to learn of Jesus resurrection.

What time are we as children of God buying in this season of resurrection of our Lord Jesus Christ? Let us inculcate the habit of buying the right time to execute the right activity in the vineyard of God, all to His glory and honour, remembering that God sacrificed His only begotten son for our sake. This is what we as children of God owe Him in return.

As we do that may we reap the benefits of Christ crucifixion, death and resurrection in Jesus mighty name. Amen.

Sermon by seer Bright Ndibunwa.

SERMON ON THE MOUNTAIN - THE BEATITUDES PLUS EXPLANATORY NOTES

2019-04-07T07:44:00.001-07:00

LORD OF HOSTS MIRACLE CHAPEL. Sunday 7^th April 2019.

Calvary greetings beloveth.

Below is the sermon today at Lord of Hosts Miracle Chapel, plot 116, 5^th avenue Gowon Estate, Egbeda.

Theme: Sermon on the mountain – The beatitudes. Text: Matthew 5 from verse 1.

Our Lord Jesus taught His disciples on a mountain hence the topic – sermon on the mountain. Below is the teaching and the explanation thereon:

1.BLESSED ARE THE POOR IN SPIRIT FOR THEIRS IS THE KINGDOM OF GOD.

Who are the poor in spirit? The poor in spirit are not necessarily the poor in material things. The poor in spirit are people that are humble, responsible, not taking mundane matters as important. People that are down to earth, meek and have the spirit of tolerance.

2. BLESSED ARE THOSE WHO MOURN FOR THEY SHALL BE COMFORTED.

Those who mourn are not necessarily the bereaved. Those who mourn are those that their rights are denied them. Those that are in dire need of help. Those working tirelessly without result to show for their effort. The down trodden.

3. BLESSED ARE THE MEEK FOR THEY SHALL INHERIT THE EARTH.

A classic example of a person that was meek was Moses. He was the meekest person that ever lived. In spite of his travails in the hands of the Egyptians, when God called him to lead His people, God still sent him back to Egypt, he did not complain. He obeyed. The meek are not most of the inhabitants of the world of today who exhibit arrogance flagrantly. The meek are not those that feel they have arrived and know it all.

4. BLESSED ARE THOSE WHO HUNGER AND THIRST FOR RIGHTEOSNESS FOR THEY SHALL BE FILLED.

This group of people are those that desire to know God more. Those that know that God is a God of justice. Those that live the life of not wanting to offend anybody. Those that seek the peace.

5. BLESSED ARE THE MERCIFUL FOR THEY SHALL SEE MERCY. These are people that know that when they show mercy they receive mercy. Those that sow the seed of mercy, compassion, comfort, love, peace to people around them. Those that do not exhibit the spirit of self-centredness.

6. BLESSED ARE THE PURE IN HEART FOR THEY SHALL SEE GOD.

These group of people are those that forgive easily. Those that leave vengeance to God knowing that vengeance is for God. Those that know how and when to let go. Those that forgive and forget.

7. BLESSED ARE THE PEACE MAKERS FOR THEY SHALL BE CALLED THE CHILDREN OF GOD.

These are the mediators. We should learn how to make peace in our homes, at our work place and in the church. We should avoid sowing seed of discord amongst children of God. Sowing seed of discord is an abominable act in the sight of God. Prov 6:19.

8. BLESSED ARE THOSE WHO ARE PERSECUTED FOR RIGHTEOUSNESS SAKE FOR THEIRS IS THE KINGDOM OF GOD.

Those that do all things in the name of God not minding the consequences. Those that are reviled, maligned, mocked and falsely accused for propagating the word of God.

As we go out this week may we imbibe the tenets and rudiments of the beatitudes and attract God’s blessing in our work according to His will in Jesus name. Amen.

Sermon by seer Bright Ndibunwa.

ONYINYECHI MUSIC

2019-03-20T09:47:00.001-07:00

ONYINYECHI INTERVIEW 2

2019-03-20T09:45:00.002-07:00

ONYINYECHI INTERVIEW 1

2019-03-20T09:43:00.000-07:00

LENT AND THE TEMPTATION OF JESUS CHRIST

2019-03-13T09:57:00.000-07:00

The teaching today 13th March, 2019 at The Lord of Hosts Miracle Chapel, plot 116, 5th Avenue, Beside Okiki Hall, Gowon Estate, Egbeda, Lagos.

Theme: Lent and The temptation of our Lord Jesus Christ.

Text is from Luke 4:1-13.

Devil tempted Jesus in three ways:
1. With Food
2. Power and Glory
3. Material Things i.e. wealth and money

1. FOOD - Jesus was famished after a long spell of fasting. Satan capitalised on that situation to ask Him to turn stones to bread. “Man shall not leave by bread alone” was the apt response from the master. The food for both the belly and the spirit is every word that comes from our father in heaven i.e. the bible.

2. POWER AND GLORY – Jesus was taken atop to see the power and glory of the world which was a beauty to behold. The devil claimed that all that razzmatazz was at his beck and call and would belong to Jesus if He would bow and worship the devil. But our Lord Jesus exhibited His true being and rebuked and renounced the devil.

3. MATERIAL THINGS i.e. WEALTH AND MONEY – Throw yourself down and you will be saved by the angels in line with the scriptures, the devil told Jesus. For the third time Christ debunked the devil and told him categorically that only God should be worshipped.

Brethren, this is the whole essence of lent. So in this Lenten season how are we faring in the spiritual warfare with the devil? Are we, by our greed and insatiable wants creating potential entrance for Satan to come into our lives? We should all strive to emulate our Lord Jesus Christ in His victory over the evil machinations of the enemy, as shown in the three types of temptations above.

Jesus left some examples as the tenets and rudiments of Lent namely:
1. Jesus received the Holy Spirit and went to accomplish His mission.
2. Jesus prayed, fasted and sacrificed His resources in the desert in order to prepare His mission.
3. He made His final decision to save humanity through His death.
4. He was in the desert for 40 days and thereafter gathered the required strength and power for His ministry.
5. He defeated and conquered the devil with all his tricks.

As children of God we should not be in a hurry to establish a church just because we claim to have been “called”. We should be ready to develop and follow the process as enunciated by our Lord Jesus Christ above. And more importantly we should participate in the Lenten season and reap the benefits it tends to offer.

As we do this may we by the power of the Holy Ghost be filled by the word of God which is life everlasting. Amen.

Sermon by Priest Evarist Ndibunwa.

PERSONAL DEVELOPMENT PLAN - PDP

2019-03-06T08:09:00.002-08:00

PERSONAL DEVELOPMENT PLAN - PDP

The Sunday School Teaching today 10th March, 2019 at The Lord of Hosts Miracle Chapel for the youths.

Theme PDP – PERSONAL DEVELOPMENT PLAN.

What is PDP? The answer is derived above…… personal development plan! Let us look at the key words:
Personal - means concerning or affecting a particular person or his/her private life and personality.
Development – means act of improving by expanding or enlarging or refining.
Plan – means an arrangement scheme, a design, a series of steps to be carried out or goals to be accomplished.

Nobody ever wrote down a plan to be broke, fat ,lazy or stupid. Those things are what happen when you do not have a plan…….Larry Winget.

Why do you need a personal development plan? It is pertinent to note that before you embark on a journey whatsoever, you have to put pen to paper and highlight the things you expect and things you want to do. For the new undergraduates this year, what crossed your mind the moment you got wind of your admission to the university? What plan did you in place thereafter?

A personal development plan consists of defining:
1. What is important to you
2. What you want to achieve
3. What strengths you already have that will help you achieve your goals
4. What you need to improve and develop with time

The following are personal development plan template to help you structure your thinking and create a strategic plan for achieving your goals:

Step 1. DEFINE YOUR GOALS

This is the first step. What are those things you want in life. For example, new skills, achievements that will make you happier, learn a new language etc. write them down e.g 1 to 10 or more in number and review it them from time to time.

Step 2. PRIORITISE YOUR GOALS
No doubt some goals are more important than others or better still some goals precede others. Therefore such goals should get your priority attention.

Step 3. SET A DEADLINE
If you have a goal but do not know when you want to achieve it, chances are that it will never happen. Also if you are planning to achieve a big project in a very short time, chances are that it might not happen. Example is Dangote Refinery. Be realistic, specific and make good assumptions time wise.

Step 4. UNDERSTAND YOUR STRENGHTS
Everyone in the world is good at something and has above average skills/ strengths in some specific areas. Ask yourself – what are your key strengths? If you are not sure of the answer, ask your friends or family. Your key strengths are those things that make you unique and special. No one can ever take it away from you. Knowing yourself is a confidence booster.
Even our Lord Jesus asked His disciples this question in Matt 16:13-20. Not that He didn’t know but He wanted a confirmation of who He really is. Once you understand what your strengths are, write them down.

Step 5. RECOGNISE YOUR OPPORTUNITIES AND THREATS
Your current character or attitude can make or mar your quest to achieve your goals. Write down at least 5 things you need to stop doing or indulging in. on the other hand write down five things that can help you achieve your goals.

Step 6. DEVELOP NEW SKILLS
A PDP is a plan for how to go from the place you are now to the place you want to be. A PDP will help you go from a position of weakness to a position of strength in the period under reference. If you want to get something you need to give something in return. If you to start a new trade you need to learn the trade and master it. Example is ibo boys and serving their master for 5 to 10 years before they are settled. So which skills or knowledge will help you to achieve your goals.

Step 7. TAKE ACTION
What is your PDP for the year 2019. Your PDP must be a detailed, well- structured and written plan that will demand your loyalty and commitment. He fails to plan, might be planning to fail. Part of the action to take include:
a. Build spiritual capacity – move from just relationship with God to quality fellowship with God. Let God command your attention in everything you do.
b. Read inspirational and motivational books. Number one of such books is your bible. Another one is seven habits of most successful people by Franklin Covey.
c. Attend seminars, conferences and workshops. Sometimes they free.
d. Identify your mentors and coaches and relate with them from time to time.
e. Cut off negative relationships and friendships. These drain your personal energy.
f. Undertake wise and intelligent investments.
g. Cultivate positive habits and behavours. Obey your parents. This is the only commandment of God with a promise.

Step 8. GET SUPPORT
Who can help you achieve your goals faster. For example if you want to change your career you can talk to a career adviser, if you want to lose weight you can talk to a fitness coach, and if you want to improve in your finances you can talk to a financial adviser like yours truly.

Step 9. MEASURE YOUR PROGRESS
The best motivator to stay persistent in achieving your goals is your own progress no matter how little. It is important to recognise that you are moving forward and to write down things that you are doing well. Identify your accomplishments and areas that require improvements and write them down.

In this lecture, you have learnt that you must do a lot of writing things down and review them from time to time. That is the only way to achieve your PDP for the year 2019 and beyond.

As you do that may God in His infinite mercy grant us wisdom, knowledge and understanding in our everyday endeavours in Jesus mighty name I pray. Amen.

By Jerome C. Njoku – Elder.

JOB SOWED GOODNESS AND OBEDIENCE TO GOD.

2019-03-03T05:53:00.003-08:00

LORD OF HOSTS MIRACLE CHAPEL. Sunday 3rd March 2019.

Calvary greetings beloveth.

Below is the sermon today at Lord of Hosts Miracle Chapel, plot 116, 5th avenue Gowon Estate, Egbeda.

Theme: Job sowed goodness and obedience to God. Text: Job 1: from verse 1.

Job was very wealthy during his time. His wealth did not prevent him from living righteous before God. God himself called him blameless.

Job was blessed with 7 sons and 3 beautiful daughters. His children and wealth did not prevent him from serving God in truth and in spirit.

Are we living like Job? What does God see as He watches our behaviour? Are we getting it right? Are we sowing the right seeds in our marriage, for example. Are we sowing love, humility and kindness in our marriage?

Job conducted his business the right way to please God. He guided and guarded his children, putting them in spiritual check all the time. Job would call in his children and sanctify them after they have had their parties.

God bragged about Job. Can God brag about us. Better still can we brag about our spouses and vice versa?

Let us embrace Job’s sterling qualities as children of God and as we do may God bless us all. Amen.

Sermon by seer Bright Ndibunwa.

BUSINESS MODEL IN AN FMCG INDUSTRY (FAST MOVING CONSUMER GOODS)

2019-03-02T02:35:00.002-08:00

MASTERS ENERGYFEEDBACK FORM
NAME OF HOD:
NAME OF SUBSIDIARY/BUSINESS UNIT: Masters Energy Commodities Trading Ltd
BUSINESS ADDRESS: 31A Remi Fani Kayode Street, Ikeja GRA
PHONE NO:

Below is a business model that can help business owners and entrepreneurs especially in FMCG industry. (FAST MOVING CONSUMER GOODS)

Kindly answer all questions as comprehensively as possible.
1. Describe your business unit, its functions, products (if any) and its objectives?

Masters Energy Commodities Trading Limited is a business entity with vested interests in Fast Moving Consumers Goods (FMCG).
With the re-basing of Nigerian economy in second quarter of 2014, while the petroleum oil & gas accounts for about 14.4%, the real sector
(including agriculture, manufacturing and industry) account for about 54% of $510billion (total GDP). This is where the Commodities unit
of Masters Energy operates.
Masters Energy Commodities’ interest covers but not limited to the followings:
Trading
Manufacturing and
Export

PRODUCTS:
A. TRADING PRODUCTS
• Rice (Trading)
• Wines (Trading)
• Oils and fats (Olive oil, Vegetable oil) (Masters Olive Oil)
MANUFACTURED PRODUCTS
• Packaged Water (Masters Water®)
• Carbonated Drinks (Masters Cola®…)
• Instant noodles (Masters Instant Noodles®)
• Biscuits and snacks (Cheese balls) (Masters Biscuits®/Masters Cheeseballs®)
• Processed fruit and vegetables

2. Explain how the functions of your unit tie in with the overall vision and objectives of the Masters Energy Group.

With over 130% drop in global price of petroleum crude in the last 4years, this development has dealt a big blow in the oil sectors and
all the players both in the upstream and downstream.
Masters Energy Commodities Trading Limited provided a good and alternative diversification base for the parent company, Masters Energy
Group.

3. What are the critical success factors for your business unit? Pls explain in detail.

a. Market research: To use scientific methods to identify viable products
b. Effective product development team
c. Customer Service Relation
d. Cost management and reduction: To ensure competitiveness in the industry.
e. Engagement of professionals and competent hands to oversee strategic positions.
f. Financial discipline
g. Robust working capital

4. What are the major challenges you currently experience as a business unit?

1. Inadequate working capital
2. Lack of clear and functional business structure and organizational chart
3. Non availability of profitable and fast moving products
4. Staff training almost non-existent. No commodity staff has gone on training since the establishment of the unit
5. No business distributorship model
6. Strict compliance of cash and carry based sales model sometimes sabotaged by some staff and out station marketing staff

5. Which regulatory agencies govern the operations of businesses in your industry?

1. Standard Organization of Nigeria (SON)
2. National Agency for Food Drug Administration and Control (NAFDAC)

6. Is your business in compliance with all the relevant regulatory authorities in your industry?
Yes

7. If not, why?
Not applicable

8. How many staff do you currently have in employment?
There are 12 staff pan Nigeria as follows:

 Enugu 2 Marketing
 Onitsha 1 Marketing
 Abuja 1 Marketing
 Lagos 5 Finance 3, Marketing 2
 Lagos 1 Finance, seconded from Dupson***
 Business Devt. 2 Work for all spectrum of commodities units
**** Strong case is hereby made for upgrade to full finance staff

9. Do you have the right human resource mix required to meet your set targets?
• Yes

• Labour/Factory Act related issue to meet set target in the manufacturing sector

10. How many staff do you require to operate optimally?

Staff as presently constituted is adequate for now. However, depending on level of business activity increase, more staff may be required
in the long run

11. Does your business compete favorably with competitors in your industry? If not, why?
Under normal condition, that is given the right product mix, the unit enjoys good patronage, profitability and liquidity. However, due to
the limiting factors highlighted above (i e lack of FMCG in stock at present), competition is anything but intense

12. What are the current limitations to the success of your business unit?

1. Non availability of fast moving and profitable products e.g olive oil, rice, vegetable oil, milk etc
2. Non availability of robust and prudent working capital management. Bank accounts are managed to the exclusion of Commodities management
team
3. Foreign exchange risk – Fluctuation in foreign exchange rate affects pricing on replacement costing model. For example if a product is
imported at say 250NGN/DOLLAR in December 2016 and the product has to be imported at 305/dollar in March 2017, the selling price based on
replacement cost will not be competitive.

13. Can some of your business processes be outsourced to save costs? If yes, name them.

• Yes
1. Transportation and distribution of finished products
2. Marketing-Product branding activities

14. What recommendations would you suggest for the improvement of your internal business processes?

• Cost saving measures
• Responsive Supply Chain Management
• Lean Manufacturing (for manufacturing sector)
• Sound and responsive working capital management
• Product awareness among staff

15. What tailor-made recommendations do you propose to bridge funding challenges in the long term?

1. Disallow treasury dept the sole management of commodities bank accounts
2. Constant stocking and restocking of FMCG
3. Cash and carry based sales for staff and relatives and friends of staff
4. At least 50% of generated profits to be ploughed back to trading

16. Would it be more efficient for your business to operate as a department/sub unit under the company than as a separate corporate entity?
State reasons.

It will not make good business sense to establish a subsidiary and come back to down grade it to a department for the following reasons:
1. Modern businesses are being unbundled in this century and that seems the way forward
2. There is synergy experience
3. Low overheads
4. Room for diversification
5. Risk reduction and management – When a business diversifies the risks are spread
6. Capital preservation – You protect the capital you have because funds are allocated to the subsidiary
7. Ability to hedge – enable the group to grow both when market booms and returns crumble in one sector.

17. Drawing comparisons within your industry, comprehensively describe your five year business projections and plans for business expansion.

1. Excellent customer efficient service delivery
2. Avoidance of wastages
3. Marketing by all staff
4. Pursue continuous product improvement on all product lines
5. Re-engineer west coast storage and sales of products
6. Institutionalize customer feed-back for efficiency and effectiveness
7. Offer ancillary services like pos, paypal, online trading

18. Kindly present the cost benefit analysis for your business expansion projections.

1. Increased customer demand and booming sales, taking into consideration a variety of factors like increased customer base, robust product
awareness, aggressive and bullish marketing
2. No. 1 above goes with the relevant costs. The cost incurred in achieving increased customer demand and booming sales may appear huge and
horrendous but in per unit terms is less than selling price per unit, which in turn results in profit.
3. Other inherent costs include expansion cost, operating cost, cost of granting credit etc
4. After aggregating the foregoing, we can then test the efficacy or otherwise of the expansion programme by calculating pay back period and
return on investment
5. The expansion programme is a success if 4 above turns positive.

19. What are the cost implications/requirements of your projections with the proposed timelines?

1. Staff costs – more staff will be required
2. More funding – adequate working capital
3. Increased credit lines
4. Stock holding costs

20. State how you intend to compete in your industry with your expansion plan.

1. Know the competition – Find out who the competitors are, what they are offering and what their unique selling point is.
2. Know your customers (kyc) – find out what matters to the customers
3. Differentiate – give customers good reasons to always come back
4. Step up marketing strategy – tell customers who we are, what we sell and why they should buy from us
5. Update our image – add aesthetics to our environment and instill good dress code in our marketing force and front desk personnel
6. Look after the existing customers – they are our competitors target
7. Target new markets – this will increase market base
8. Employ skilled, motivated staff – people are often more impressed by a good working atmosphere and benefits such as flexible working and
structured career development than paying a competitive wage
9. Expand our offer – deploy pos, paypal, online payment etc
10. Look to the future – keep up with developments in the sector, follow consumer trends, invest in new technology and have a clear idea of
where to be in the next three to five years.

Thank you.

WHO IS A MOTHER

2019-02-18T02:28:00.004-08:00

WHO IS A MOTHER

This is my own explanation of a mother. Who a mother is can be derived from the spelling of M O T H E R! So here we go.............................

M Manager. A good mother manages her home very well. Managing a home cannot be outsourced. The moment the managerial status eludes the mother of the house, the home crumbles.

O Organiser. The mother of the house should be able to organise the home more effectively than anybody else.

T Teacher. A good mother should be able to teach her children. How often do you as a mother teach your children the ways of God rather than the ways of man. You should teach them especially the females good dress sense.

H House Keeper. A good mother is the heart of the house. She keeps her home with passion. She makes sure nothing goes wrong. She sees to it that things are put in their proper positions and places.

E Economist. A good mother is the finance minister and central bank governor of the house. Suffice it to say that even if the home is awash with cash, without sound and prudent management the family will find itself in abject poverty.

R Responsible. A good mother is responsible for all the her children and husband. When one is responsible for others she is also responsive to their needs.

May we pray that God should bless all good mothers in the mighty name of Jesus Christ. Amen.

LET YOUR NAME BE WRITTEN IN THE BOOK OF LIFE

2019-02-18T02:12:00.001-08:00

The teaching today 6^th February, 2019 at The Lord of Hosts Miracle Chapel centred on what we must do to have eternal life. Text is from Luke 10:17-37

There are two segments of the teaching. The first segment was about the seventy people our Lord Jesus sent out to profess the word of God. When they came back they reported that they did exploits so much so that even the demons were subdued at the mention of the name of Jesus Christ. They exuded so much excitement in their testimony. However Jesus exhorted them to strive to always do those things that will make their names be written in Heaven, rather than just rejoicing that the demons were subject to them. As we go out this week may we strive to do the bidding of our Lord Jesus Christ so that our names be written in the book of eternal life and if already there may our names not be removed in Jesus mighty name.

The second segment was the lawyer’s encounter with Jesus. The lawyer trying to tempt Jesus asked Him what he must do to inherit eternal life. He thought he was smart but Jesus was smarter when He asked what the law said in the statute books. The lawyer answered correctly when he said “you shall love the Lord your God with all your HEART, and with all your SOUL, and with all your STRENGTH, and with all your MIND; and your neighbour as yourself.”

This shows that our love for God must be total and not haphazard. This is as encapsulated in Luke 10:27 with the key words HEART, SOUL, STRENGTH and MIND. And your NEIGHBOUR as yourself.

The lawyer was not done yet. He continued in his game of smartness when he wanted to know who his neighbour was. Our Lord once again outwitted him with a parable of a man attacked by thieves and left half dead. A priest passed by without helping. Likewise a Levite. But a good Samaritan stopped and helped the battered man, sheltered him and deposited money for his upkeep in a guest house.

Now the question is who is neighbour to the battered man. For the third time the lawyer answered correctly pointing to the good Samaritan. And Jesus admonished him to go and do likewise.

The teaching made us to understand that our neighbour is not just the person living near us. It could be that person in need that we meet on our way, or the person that needs a sachet of water from us, or that person that is hungry and we know it. The list is endless. May God grant us the grace to have the gift of giving as we hear this word in Jesus mighty name. Amen.

Sermon by Priest Evarist Ndibunwa.

HEZEKIAH'S SEEDS IN THE HOUSE OF GOD

2019-02-18T02:03:00.003-08:00

LORD OF HOSTS MIRACLE CHAPEL. Sunday 10^th Feb 2019.

Calvary greetings beloveth.

Below is the sermon today at Lord of Hosts Miracle Chapel, plot 116, 5^th avenue Gowon Estate, Egbeda.

Theme: Hezekiah’s seeds in the house of God. Text: 2nd Chronicles 29: from verse 1.

Hezekiah ascended the throne of his forefathers at the tender age of 25 years. As soon as he ascended the throne, he swung into action on the very first day of the first month. He opened the doors of the house of God and repaired them. The doors had not been opened for a long time. He also called in the priests and Levites to sanctify the temple which his predecessors had defiled. This action of his forefathers kindled the wrath of God and God visited the people of Israel with grave sufferings. Hezekiah atoned the benevolence of God asking Him to temper justice with mercy on the people.

These are some of the seeds Hezekiah sowed in the house of God. He followed the footstep of his father David by exhibiting diligence and devotion in things of God.

We should therefore strive to do something for God before expecting Him to do something for us. Are we sowing in the house of God? Are the seeds adequate? We need to sow adequate seeds if we must attract God’s favour.

Hezekiah’s seeds saved him when God wanted to cut his life short. He reminded God of all the things he did in His sanctuary and in turn God spared him and elongated his life. Hezekiah ruled for 29 solid and eventful years.

So brethren let your seed work for you as you go about your business this week. God bless us all in Jesus name. Amen.

Sermon by seer Bright Ndibunwa.

HOW TO COMPETE IN YOUR INDUSTRY WITH YOUR EXPANSION PLAN

2017-07-07T08:21:00.000-07:00

1. How to compete in your industry with your expansion plan.

1. Know the competition – Find out who the competitors are, what they are offering and what their unique selling point is.

2. Know our customers (kyc) – find out what matters to the customers

3. Differentiate – give customers good reasons to always come back

4. Step up marketing strategy – tell customers who we are, what we sell and why they should buy from us

5. Update our image – add aesthetics to our environment and instill good dress code in our marketing force and front desk personnel

6. Look after the existing customers – they are our competitors target

7. Target new markets – this will increase market base

8. Employ skilled, motivated staff – people are often more impressed by a good working atmosphere and benefits such as flexible working and structured career development than paying a competitive wage

9. Expand our offer – deploy pos, paypal, online payment etc

10. Look to the future – keep up with developments in the sector, follow consumer trends, invest in new technology and have a clear idea of where to be in the next three to five years.

Thank you

HOW TO IMPROVE AUDIT PLANNING

2017-06-20T09:02:00.000-07:00

For decades, auditors have faced the competing pressures of enhancing audit effectiveness while performing audits more efficiently. By investing more time—and the right procedures—in the planning phase of an audit, both can be achieved, according to Patricia Bottomly, CPA, national assurance partner at BDO USA LLP in Los Angeles.

Bottomly presented a session on improving audit planning effectiveness and efficiency at the AICPA ENGAGE Conference on Monday in Las Vegas. During an interview before the conference, she said that the key is using the required risk assessment procedures and internal control considerations to develop audit procedures that provide the biggest bang for the buck.

Begin with the end in mind

As Stephen R. Covey writes in The 7 Habits of Highly Effective People, beginning with the end in mind means “to start with a clear understanding of your destination.”

For audits, the destination is AU-C Section 200.06: “GAAS require the auditor to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error.” Reasonable assurance is achieved when the auditor has obtained sufficient evidence to reduce the risk of an inappropriate opinion to an acceptably low level.

Bottomly said she has seen too many auditors rush through the planning stage and dive straight into the execution phase in an effort to increase efficiency. These auditors may be assuming they already know where the risks are.

However, she finds that by keeping the end firmly in mind, the planning stage provides an opportunity to maximize both efficiency and effectiveness for the entire audit.

Understanding the entity

Auditors are required to obtain an understanding of the entity, but the auditor doesn’t need to understand everything about the entity. Rather, Bottomly explained, the auditor should focus on obtaining the information that will help in designing audit procedures and in identifying areas of risk.

Extra time and effort applied upfront translates to efficiency and effectiveness for the audit as a whole. For example, when planning the audit of a manufacturer, it’s essential to develop an understanding of the company’s manufacturing process, the flow of transactions, and any related controls before determining the sampling or testing procedures. Without that understanding, the planned sampling and testing methodology may be impractical or may not provide the desired results.

Auditors also need to be aware of the potential for hidden or undetected risks. An example of a hidden risk is a complex derivative attached to a loan agreement that the auditor is unaware of until the loan agreement is read for the first time during fieldwork. Knowing about the derivative during the planning stage allows for appropriate staffing on the engagement team and including the appropriate procedures in the audit plan.

Assessment of control activities

“We really want to make sure that during the planning phase we identify and focus on those control activities that are relevant to our audit,” Bottomly said. Identifying the relevant controls requires a deep understanding of the company and its operations.

When determining which control activities are relevant, the auditor also needs to remain focused on the end goal of the audit—namely, obtaining reasonable assurance that the financial statements are free from material misstatement.

Returning to the example of a manufacturer, Bottomly explained that auditing the inventory requires understanding the company’s process for allocating and tracking labor and overhead. “Even if that area were not a significant risk or there were no fraud risks, and we don’t plan on relying on controls, we may still determine that those controls are relevant to our audit because we need to fully understand the process and the controls over that process in order to design our audit procedures.”

Avoid easy traps

Bottomly also cautioned against the checklist approach—that is, performing procedures just because they are on a checklist. Every step in the entire audit—including the planning phase—needs to have the end in mind. “I would definitely not recommend people spend more time in planning just to spend more time, but to make sure they spend the right amount of time performing the right procedures,” she said.

Likewise, repeating the procedures used in the previous year can also be a trap. Before repeating those procedures, the auditor should consider whether there were any changes at the company that could affect their effectiveness. Another important consideration is whether the procedure provided useful information in an efficient and effective manner in the previous year.

“I think sometimes work is just carried over from year to year until at some point someone says, ‘Why are we doing this procedure?’ If you don’t have a good answer for that, you probably either don’t need to do that procedure, or you’re doing the wrong procedure,” Bottomly said.

The importance of planning

“No one thinks that planning is unimportant, but they may think they already know where the risks are or which procedures they need to perform,” Bottomly said.

By focusing on risk assessment procedures and the internal control considerations during the planning phase, auditors can tailor their audit approach and save time on the overall audit without impacting audit quality.

A TO Z ABOUT LPG BUSINESS

2017-05-16T08:37:00.000-07:00

BUSINESS PLAN

LPG MARKETING & DISTRIBUTION

for

Masters Energy OIL & GAS LTD

LAGOS, NIGERIA

March, 2013

CONTENTS
PAGE NO.
EXECUTIVE SUMMARY
1 INTRODUCTION
2 LPG-PRODUCT, SOURCES & SPECIFICATIONS
3 MARKET ANALYSIS
4 PROJECT DESCRIPTION
5 PROPOSED FUNDING MODEL / OPTIONS
6 REVENUE MODEL
7 FINANCIAL ANALYSIS
8 SWOT & RISK ANALYSIS
9 STATUTORY & REGULATORY FRAMEWORK
ANNEXURES
1 LAYOUT OF PROPOSED LPG PLANT & BULK STORAGE FACILITY
2.1 SUMMARY
2.2 FIXED ASSETS
2.3 MILESTONES
2.4 MANPOWER PROJECTIONS & COST
2.5 CASHFLOW PROJECTIONS
2.6 PROJECTED BALANCE SHEET
2.7 FEASIBILITY ANALYSIS
APPENDIX
1 TECHNICAL DETAILS OF CONTAINERISED LPG BOTTLING PLANT

EXECUTIVE SUMMARY

Masters Energy Oil & Gas Ltd, proposes to venture into the business of ‘LPG Marketing & Distribution’ in Nigeria. This report is a Business Plan – giving the details of the project and deliverables which are as under ::

 Overview of LP Gas Sector in Nigeria

 Review of business opportunities in LPG sector in Nigeria.

 ‘Business Plan’ for MEOGL’s entry into LPG sector.

 Revenue model and projected Cash Flow Statement including manpower deployment

 Financial feasibility of LPG business

Salient points, which need to be noted, are as listed below:

1. Nigeria is a gas-resource country with huge gas reserves. It has proven gas reserves of about 184 TCF.

2. The gas resources are largely unexploited with total gas production estimated current daily production at 4.6 BCFD with nearly 55% or close to 2.5 BCFD being flared.

3. Gas resources can only be developed when the gas can be economically produced and transported to markets.

4. The federal government has been leading a spirited campaign to revive LPG business in Nigeria and asked the International Oil Companies (IOCs) to make cooking gas available and affordable in Nigeria.

5. Nigerian domestic gas market - the entire country of 140 million people is estimated to have about 500,000 cylinders only.

6. Potential market size of the LPG market in Nigeria – is based on the population of 150 million and the number of households in the country currently estimated at 9 million. The average home consumes one 12.5kg cylinder a month or 150 kg annually. This translates to 1.35 million MT per annum.

7. Present total consumption in the country is about 120,000 MT, hence there is a market balance of about 1.230 million MT per annum awaiting potential investors. Nigeria’s LPG market is estimated to have a potential of over N37 billion per annum.

8. The market potential for LPG in Nigeria is huge considering the population size. Current per capita consumption is 0.5 kg per capita. Comparative figures for other African countries are - Senegal consumes 8 kg per capita, South Africa 5 kg per capita, Cote d Ivoire 5kg per capita, Gabon 20 kg per capita. Tunisia, Libya and Morocco consume 45 kg per capita.

9. Masters Energy Oil & Gas Limited (MEOGL) is a wholly indigenous petroleum products marketing company registered in Nigeria, established in 2005.

10. Masters Energy City was commissioned in 2009 and houses its 158,000 MT petroleum products storage facility, reputed to be the biggest in sub-Saharan Africa and stores all refined products lines (i.e. PMS, AGO, DPK, ATK, LPFO and other chemicals). Other features of the Energy City include: Functional & Dedicated Jetty, Logistics Centre.

11. MEOGL has a functional and dedicated 8 m draft finger jetty with 300 m shoreline protection, approach channel of 9 m deep with a width of 40 m which allows 30,000 tonnage tankers to conveniently discharge at the jetty.

12. MEOGL plans to build a 17,000 MT (34000 M3) bulk LPG storage terminal for with a provision of future expansion to 25000 MT.

13. MEOGL also has a Transport Division that is very strong, robust and competitive, comprising of many long trucks and Peddler trucks; and a vibrant Marine and Shipping Subsidiary that renders shipping services.

14. MEOGL presently has over 60 retail outlets scattered all over Nigeria and presence in over 16 states of Nigeria.

15. Storage terminal will also have ‘mother bottling’ plant of 2400 bottle/day capacity (on single shift basis). Output from this plant will feed company’s own retail outlets as well as re-sellers. Filling capacity of this plant will be gradually ramped-up to three shift working as the market for domestic LPG cylinders develops.

16. Masters Energy City Gas Cylinder Filling Plant (Satellite Plant) - The company plans to set up 3nos such plants every year, for first six years of operations, in the six geographical zones in the country. Capacity of each plant will be 200 MT/month (640 cylinders/day).

17. MEOGL believes that the project will cover a minimum construction period of 2 years, while sales cash flow shows repayment capacity of 10 years.

18. Proximity to target market and to the source of supply in Bonny will give MEOGL an edge over our competitors.

19. MEOGL has already signed a SPA (Sales Purchase Agreement (SPA) with the NLNG- which ensures assured supply of LPG. This comes as a trade advantage to Masters Energy as it puts them in a position to control 30% of the market and gain monopoly control of the Eastern, Mid-Western and North Eastern segments of the Nigerian Gas Market.

20. There are significant barriers to entry for potential competitors due to the cost of building a storage terminal & jetty. Economy of Scale will be due to the size of MEOGL’s Terminal.

21. PROJECT COST

The total Project cost estimated for the project is about Eighty Six Million USD approx. as stated below:

Particulars Amount in Mio. USD

Cost of Land 9.375
Plant & Machinery
(including dedicated Jetty) 52.881
Factory construction (Civil & Structural) 9.112
Preliminary expenses 4.827
Total Fixed Capital 76.197
Add: Margin Money for Working Capital 15.000
Total Project Cost 91.197

22. PROJECT FINANCING

Project will be financed with promoter’s equity and long term financing from
lending institutions.

Loan Finance 72.506 Mio.USD
Equity Financing 18.692 Mio.USD
Debt:Equity Ratio 3.88

22. Financial Summary :

Returns and other financial aspects of the project are as mentioned below:

RETURN ON INVESTMENT (IRR) 25%
PAY-BACK PERIOD -INVESTMENT 4.54 YEARS
NPV (INVESTMENT) 43.44 Mio.USD
RETURN ON EQUITY (ROE) 57%
PAY-BACK PERIOD - EQUITY 2.62 YEARS
NPV (EQUITY) 66.63 Mio.USD

23. MEOGL’s Board and Management include highly skilled professionals with vast experience in petroleum sector as well as from a diverse range of industries.

Based on the foregoing, the projected Cash Flow Statement, financial feasibility and understanding of Nigerian market requirements, prima facie MEOGL’s entry in LPG Sector in Nigeria makes sound business case.

1. INTRODUCTION

MASTERS ENERGY OIL & GAS LTD. (MEOGL) is a Nigeria based, wholly indigenous petroleum products marketing company, established in the year 2005 and licensed by the Department of Petroleum Resources (DPR) to engage in trading of petroleum products and other services. Masters Energy is a full service energy company involved in the upstream and downstream arms of the Nigerian Energy Sector with business interests in Transport, Crude Oil, Processed wet Products, Petrochemical and Gas. The company has been passionate & singularly dedicated to the cause of creating & enhancing value for the Nigerian Economy, Energy Sector apart from their own customers & stakeholders.

With a vision to become world’s bench mark in the oil and gas industry, MEOGL has been aggressive over the past 7 years. The company has developed state-of-the-art infrastructure facility for Petroleum storage with a capacity of 158,000 MT in Rumuolumeni, Port Harcourt, Rivers state which was completed and deployed in the year 2009. In addition to this platform, the company has also invested in transportation and setting up of distribution network of Retail outlets especially in the South & Eastern parts of Nigeria. The company has about 57 retail outlets to date which ensure effective product distribution & contribute towards sustainable development of the region. Over the years, the company has turned over 3.8million MT of wet products for third parties, having berthed over 150 vessels of 25,000 MT average at her storage facility in Port Harcourt, while they have done over half of this volume for their own customers within the same period.

With a high level of customer orientation running through the organization, MEOGL’s mission is to deliver world class services to their customers & other stakeholders through sound management, innovation and technology. By adopting fresh and innovative approaches to marketing of petroleum products, their goal is to exceed the expectations of every client by providing outstanding customer service, increased flexibility and greater value.

Having been recognized as the ‘Fastest growing Oil company’ in Nigeria, in 2010, MEOGL is now well positioned to meet the demands of an ever dynamic sector through investments in infrastructure for development of Oil & Gas Sector in Nigeria. Their long term objective is to become an active player in the mid and upstream sectors of oil and gas industry.

DOMESTIC LPG

Liquefied Petroleum Gas (LPG) – marketing & distribution, is another sector that offers tremendous investment opportunity within the petrochemical industry in Nigeria. Nigeria has about 186 trillion cubic feet of gas. Large volume of this gas is produced as associated gas during crude oil production which was hitherto being

flared. About 75% of the gas was being flared during the 1980s resulting in emission of about 70million MTs of CO2 in the atmosphere annually. Thus it is ironical that despite the huge gas reserve, Nigeria is amongst the lowest LPG consuming countries in Africa with a current per capita consumption level of less than 0.5 kgs. Millions of Nigerians who were using LPG as a cooking gas in the 1990s, abandoned the use of LPG when it became scarce and the price of the 12.5kg cylinder shot past N8000, heading to N10,000, due to epileptic supply and downtime of the nation’s 4 refineries causing recurrent scarcity of the product.

In September 2006, the Board of Nigeria LNG, worried about the scarcity of LPG in the midst of abundant gas, decided to revive the market and reduce the dependence on firewood fuels for cooking by majority of Nigerians. The project christened ‘Domestic LPG (DLPG)’ by NLNG, involves lifting gas from Bonny on board a mother vessel; processing the gas for domestic consumption on the vessel, transfer of gas to a smaller ship called ‘shuttle vessel’ for discharge at the jetty & storage terminals.

Thus, as part of Nigeria's efforts to develop her estimated 186 trillion standard cubic feet of gas (tscf) reserves, re-invigoration of the use of cooking gas is an important aspect of Nigeria's gas master plan. Strategies are now being stimulated to make gas available to Nigerians at highly reduced prices while NLNG, prodded by the federal government has domiciled 150,000 metric tones of LPG for the domestic market.

The federal government has been leading this spirited campaign to revive LPG business in Nigeria. The Federal Government, through the former Minister of State for Petroleum Resources, Mrs. Dizieani Madukue, at the last African Summit of the World LP Gas Association, made a pronouncement that Nigeria would develop cooking gas market from the current 100,000 metric tones to one million MT per annum by 2015.

The need to increase LPG consumption in Nigeria cannot be ignored by anyone because of the country’s large latent demand potential and population – considering the following advantages it offers to all stakeholders :

People (Domestic consumers) (a) Clean & easy to use fuel; Reduce dependence on firewood, biomass & kerosene – which are less convenient & pose potential health hazards;
(b) Better availability would enable more Nigerians who had abandoned use of LPG in the 1990s when it became scarce & expensive - to switch back to LPG;
Hotels, catering outfits, restaurants and bakers all demand LPG as an alternative source of energy since the firewood and kerosene stove are fast becoming obsolete.

Government (a) Kerosene is currently heavily subsidized by the Govt; Promoting Switch from Kerosene to LPG can eliminate / save on the huge subsidy burden incurred by Govt;
(b) Consistent with the ‘zero flare’ aspiration of the government, the associated gas from crude production – can be commercialized to earn more revenue to the exchequer;
Environment (a) Reduction in flaring of associated gas from crude production - which is now been brought down to 24% level; thus reducing CO2 emissions into the atmosphere;
(b) Save forests & greenery as switching to LPG will reduce dependence on wood & biomass – which are causing deforestation in the country
Industry Better availability would promote use of LPG as fuel in industry & also for power generation at competitive rates - thereby also reducing the atmospheric emissions;

Employment Generate more employment opportunities due Industrial development as well as LPG distribution & marketing supply chain;

Investors (a) Presents a good opportunity for Investors to participate in the development of region & country at large;

(b) A sound business opportunity for investors with reasonable returns on Investment;

Thus promoting LPG market would be winning opportunity for all stakeholders.

Following the unprecedented demand for LPG in Nigeria and attendant scarcity of the product which has resulted in sharp and arbitrary price increases, the distribution of gas products has been deregulated. Consequently, private individuals and firms can now set up LPG plants.

Following this determination of the federal government to maximize the nation's gas potentials and get Nigerians to adopt LPG as their primary energy for cooking, a retinue of new players are now positioning and repositioning in the steadily returning Liquefied Petroleum Gas (LPG) market. Growing the LPG market in Nigeria is a critical component of the nation's Gas Master Plan and therefore presents a lot of emerging opportunities & challenges for investors in this sub-sector. The market is currently fraught with decayed infrastructure and to achieve the five- year growth projection of the Federal Government, it will therefore need to attract massive investments across the LPG value chain from jetty, storage, logistics to filling plants and cylinders, among others.

With a resolve to strengthen government’s efforts in achieving the demand growth projections, MEOGL has evolved a Masterplan for their entry into LP Gas business.
In preparing its entrance into a market dominated by established players such as Oando, Total, Nipco, and Navgas, Masters Energy has taken stock of its strengths and weaknesses in crafting a winning strategy with a goal to gaining a market share of 30% over the next five years. This strategy takes into consideration an inventory of the cumulative assets deployed by other players, existing sales position, statutory controls and the future potentials of sales.

Accordingly, they have taken the following steps-

a. Signed a Sales Purchase Agreement (SPA) with the NLNG- Masters Energy has entered into an agreement for the storage of 25,000MT (17,000 MT in the first phase and 8,000 MT in the second phase) of Liquefied Petroleum Gas with the Nigerian Liquefied Natural Gas (NLNG), this agreement confirms the supply of this volume by the NLNG to Masters Energy on a regular basis. This comes as a trade advantage to Masters Energy as it puts us in a position to control 30% of the market and gain monopoly control of the Eastern, Mid-Western and North Eastern segments of the Nigerian Gas Market.

This agreement further supports cost savings in favor of Masters Energy, considering the NLNG supply position being at Bonny and Masters Energy storage at Rumuolumeni, both within Rivers State

b. Infrastructure- Masters Energy has made available, land mass of 120 Acres of Land in the Energy City for the development of 25,000MT Gas storage plant. With the agreement signed with NLNG, they have taken over a minimum of 30% of the future market and in comparison with the current market, this translates to 54%.

c. People- Ahead of this infrastructural development, Masters Energy has determined the staffing structure and training needs to the extent that key human capital have under-gone all necessary trainings and are ready to take on the challenges of the market. This puts us ahead of competition by the time the storage structure gets on-stream.

d. Market- The Gas market is divided into North, west East and Southern zones, the existing players are focused on the Western zone of the market in terms of infrastructure, people and market, with our focus on the East, South and the North-Eastern parts of the market, this confirms that the market segmentation skews favorably to Masters Energy.

Further to the above, Masters Energy has invested in Energy Retail Outlets across the country, these outlets will support the distribution of the bottled Gas.

The Masters Energy City LPG plant is expected to capture all the value chain benefits from LPG storage facility right down to the final consumer dispenser business unit. This would enable the total business to conveniently edge against future negative effects of competition. The Company hopes to make a significant contribution to the social as well as economic development of South, East and North-Eastern regions.

2. LPG – PRODUCT, SOURCES & SPECIFICATIONS

2.1WHAT IS LPG?

LPG is a derivative of two large energy industries: natural gas processing and crude oil refining. When natural gas is extracted from the earth, it is a mixture of several gases and liquids. Methane, which is sold by gas utilities as ‘natural gas’ constitutes about 90 percent of this mixture. Of the remaining 10 percent, 5 percent is propane and 5 percent is other gases such as butane and ethane. Before natural gas can be transported or used, the LP Gases (which are slightly heavier than methane, the major component of natural gas) are separated out. Depending on the “wetness” of a producing gas field, gas liquids generally contain 1%-3% of the unprocessed gas stream. Some LP Gases are also trapped in crude oil. In order to stabilize the crude oil for pipeline or tanker distribution, these “associated” or “natural gases” are further processed into LP Gas. Worldwide, gas processing is a source of approximately 60% of LP Gas produced.

In crude oil refining, the LP Gases are the first products produced on the way to making the heavier fuels such as diesel, jet fuel, fuel oil, and gasoline. Roughly 3% of a typical barrel of crude oil is refined into LP Gas although as much as 40% of a barrel could be converted into LP Gas. Worldwide, crude oil refining is the source for the other 40% of LP Gas supplies although the ratio between gas processing and refining varies among Petroleum producing countries.

LP Gas production from these sources is a natural derivative. That means production of LP Gas is assured since the primary motive for gas processors and refiners is to produce fuels other than LP Gas but first the LP Gases are produced Although tied to the production of natural gas and crude oil, LP Gas has its own distinct marketing advantages and can perform nearly every fuel function of the primary fuels from which it is derived.

2.2 WHY LPG?

LPG represents a key phase in the transition to advanced modern fuels, replacing traditional fuels and kerosene. In most countries, this transition is virtually complete at per capita household incomes greater than US$2,000. When/if natural gas becomes available through the establishment of local distribution networks as the economy matures, LPG is itself usually displaced. However, LPG often remains the main fuel for residential/commercial heating and cooking in rural areas remote from the natural gas grid. In most developing countries, the distribution of natural gas to residential customers is unlikely to become widespread for many years, if ever at all.

LPG is well positioned to assist developing countries in the transition to modern fuels for the following reasons: :

Availability. The transportation system that moves it is in place, the tanks to store it are available, and the appliances and equipment that provide heat and power are "on the shelf".

Portability. LPG can be stored, transported and used virtually anywhere from downtown urban areas to remote regions of the globe. It is not dependent on natural gas or electric grid systems.

Infinite shelf life. LPG does not deteriorate over time unlike some other liquid fuels that gel, stratify or evaporate. In the context of rural energy shelf life is critical, as traditional fuels can have a short shelf life and must be protected from the weather to prevent deterioration.

High energy density. Compared to traditional fuels in terms of weight equivalency, LPG has ten times the energy. .

Flexible temperature control. LPG appliances and equipment allow easy and instantaneous adjustable flame temperatures to suit the needs of consumers. LPG refrigerators do not have temperature control limitations common to kerosene refrigerators, thus maintaining the "cold chain" essential for critical vaccines used in primary health care.

Environmentally friendly. It burns cleanly without smoke or residual ash, thus avoiding the health hazards associated with indoor use of traditional fuels. In the event of a leak, LPG does not contaminate the soil or aquifers. .

Compatible and flexible. LPG is not only compatible with renewable energies as discussed herein but also with new technologies such as fuel cells and micro turbines.

2.3 PRODUCTION PROCESS OF LPG

There are two methods for the production of LPG: 1) Extracted from natural gas: 2) By product of Oil refining process

However, it should be noted that from natural gas, LPG can only be extracted from the points where propane and butane is mixed with the natural gas in certain quantity. In the following lines production/extraction process of LPG from natural gas has been elaborated.

The patented AET Process LPG Recovery Unit technology utilizes non-cryogenic absorption to recover C2+ or C3+ natural gas liquids (LPG’s) from natural gas streams. The absorbed LPG is in the rich solvent from the bottom of the LPG absorber column are fractionated in the solvent regenerator column which separates LPG’s overhead and lean solvent produced at the bottom. After heat recuperation, the lean solvent is pre-saturated with absorber overhead gases. The chilled solvent flows in the top of the absorber column. The separated gas from the presaturator separator forms the pipeline sales gas.

Depending upon the economics of ethane recovery, the operation of the AET LPG plant can be switched on-line from ethane plus recovery to propane plus recovery without affecting the propane recovery levels. The AET LPG plant uses lighter lean oils. For most applications, there are no solvent make-up requirements. AET can design retrofits for heavy lean oil facilities.

Production Process Flow Diagram

LPG SPECIFICATIONS

LPG QUALITY DATA
Property Test Method Units Min Max
BUTANE

Composition liquid volume

Ethane
Propane
total Butane

C5+
Total olefins

ASTM D2163

Volume %
Volume %
Volume %

Volume %
Volume %

97.0

2.0

1.0
0.1
Corrosive compounds copper strip ASTM D1838 1
Total Sulphur ASTM D5534 PPM (wt) 30
Hydrogen Sulphide ISO 6326-4 PPM (wt) 5
Vapour pressure @100 F ASTM D2598 psig 70
Water content
% Residual matter ISO 13757 PPM (wt)

2.4 USES OF LPG

The initial stage of switching from traditional fuels or kerosene to LPG in developing countries typically involves the use of a cylinder attached to a simple burner. As familiarity with LPG grows and incomes rise, the user may install a modern cooker inside the home, possibly with the gas supplied by rubber pipe from a cylinder placed outdoors or in a separate room. Later, hot water and/or a refrigeration system may be added. In remote rural communities, LPG can also be used to power electric generators, although diesel is generally a more economic option. Further, LPG can be used in conjunction with renewable technologies for decentralized power generation, to meet loads that may be beyond the capacity of the renewable system or as back-up fuel where intermittence may be a problem. .

Internationally, LPG is being consumed as a fuel in the following sectors:
• Domestic (household) sector as cooking, heating and in nominal quantities as lighting fuel.
• Commercial sector such as cooking fuel in hotels and restaurants.
• Automotive sector as fuel for taxis, vans and private cars.
• Industrial sector as cutting and heating fuel.
• Agriculture sector for crop drying, etc.
• Other industrial uses such as manufacture of petrochemicals.

2.5 SECTOR CHARACTERISTICS AND OVERVIEW

LP Gas can be transported, stored, and used virtually anywhere in the world. It does not require a fixed network and does not deteriorate over time. LP Gas is very clean burning and has lower greenhouse gas emissions than any other fossil fuel when measured on a total fuel cycle. Originating mainly from natural gas production, it is also non-toxic and will not contaminate soil or aquifers in the event of a leak.

LP Gas is cost-effective, since a high proportion of its energy content is converted into heat. LP Gas can be up to five times more efficient than traditional fuels, resulting in less energy wastage and better use of energy resources. LP Gas is a multi-purpose energy. There are more than a thousand applications, from cooking, heating, air conditioning and transportation, to cigarette lighters.

Liquefied Petroleum Gas, more commonly known as LPG, is hydrocarbon fuel, lighter than petroleum, occurring naturally in oil and gas fields or extracted in the oil refining process. These high quality gases are very suitable for compact storage and transport in liquid form,
in pressurized bulk vessels or cylinders. .

LPG is the term widely used to describe a family of light hydrocarbons called “gas liquids”. The most prominent members of this family are propane (C3H8) and butane (C4H10). Other members of the LPG family are ethane and pentane. .

It is the unique character of LPG that makes it such a popular and widely used fuel. LPG at normal temperature and pressure is a gas, and changes to a liquid when subjected to modest pressure or cooling. In liquid form, the tank pressure is about twice the pressure in a normal truck tyre. .

The reason LPG is liquefied is to make it easy and efficient to transport and store. One unit of liquid has the same energy content as 270 units of gas. Thus, LPG has density for storage and transportation, yet all the benefits of a clean vaporous fuel when used at the burner tip or engine.

For standard heating and cooking purposes, LPG usually consists of a mixture of propane and butane. Propane starts vaporizing above -45°C, so it is more versatile for general use. Butane starts vaporizing above -2°C and requires a propane/butane mixture in cold environments, as it will not vaporize as readily as propane.

3. MARKET ANALYSIS

Nigeria is a major crude oil producer. Large volume of gas is produced as associated gas. For many years, gas had little use in the Nigerian environment and was flared extensively. About 75 % of the gas produced was flared in the 1980s. This resulted in the emission of about 70 million MT of CO2 into the atmosphere annually. The practice has declined and gas flare is currently at about 24 % level.

Consistent with the zero flare aspiration of government and the need to commercialize gas, it is currently used for LNG and fertilizer production thereby generating revenue. Wood, biomass and kerosene are largely used for cooking. Extensive use of wood and biomass is leading to deforestation in the country.

A major consequence is ozone layer depletion through carbon emission. On the other hand kerosene used in homes is highly subsided by the government. Government intends to eliminate the subsidy programme in view of the huge funding implications. The appropriate substitute fuel is LPG.

Nigeria is a gas-resource country with huge gas reserves. It has proven gas reserves of about 184 TCF divided into 95 TCF associated gas and 89 TCF non-associated gas (probable and possible reserve is 300 TCF) and estimated as the world’s 7th largest gas reserves. However, there has been no significant gas exploration to date and growth in the gas reserves are largely linked to oil exploration. The development of the gas sector in Nigeria has been constrained majorly by the absence of pricing, fiscal terms, institutional and infrastructural arrangements, legal and regulatory framework and financing. As a result, the development of a Natural Gas Policy and a Gas Master Plan was initiated to reposition the gas sector.

3.1 OVERVIEW OF NIGERIAN GAS SECTOR

The gas resources are largely unexploited with total estimated daily gas production at 4.6 BCFD with nearly 55% or close to 2.5 BCFD being flared and the balance split between reinjection, NLNG feedstock, internal fuel usage and a small percentage marketed as LPG. The sector suffered an uncoordinated development by the government in harnessing the potentials in these resources. The evolution of the gas sector in Nigeria has three distinct phases, the Pre-1999 era considered as the Demand Constrained Era, the 1999-2005 NLNG Era and the Post 2005 Demand Boom/Supply Constrained Era.

The Post 2005 Demand Boom/Supply Constrained Era was precipitated by a sudden boom in demand from both domestic and export sectors. The major drivers of this phase was a rising and high gas price in key export markets as reserves declined propelling a vibrant export for LNG business in Nigeria and causing (a) relocation of gas based industries to reserves rich and low gas cost countries like Nigeria, Egypt, Trinidad etc, (b) an aggressive domestic power sector reform and (c) a successful campaign by the Government to attract gas based investors. This sudden shift from demand to supply constrained birthed the Gas Master-plan initiative. The Gas Master-Plan was borne in response to the clamp down in emission levels and sudden boom in gas demand in Nigeria.

The Master Plan is hinged on harnessing the abundant gas resources for domestic utilization but this presented the challenge of guarantying gas supply. This is mainly governed by the practical issues of linking the upstream (exploration) and downstream (distribution and marketing) activities. These supply challenge issues are classified into Availability, Affordability and Commerciality of supply, Deliverability and its Cost Effectiveness, Legal and Regulatory Framework and Funding issues.

Gas resources can only be developed when the gas can be economically produced and transported to markets. The form and complexity of the process of gas production and utilization is staggering and means that the resulting gas market is unlikely to conform to economic efficiency if left to its own devices. Thus, the most critical challenge to the Gas Master Plan is the varying capacities of the various sectors to afford gas. In particular, the power sector which is the singular largest buyer is least able to pay. At present, the total grid capacity in Nigeria, a population of about140 million is 5924.7MW and only 4586MW are available. This shows the huge appetite of the power sector for gas to stimulate the growth of the economy. Timely availability, affordability and commerciality of supply natural gas are critical preconditions for realizing the government’s aspiration for the domestic economy.

Nigeria has about 184 trillion cubic feet of gas but is ironically among the lowest consumers of LPG in Africa. The federal government has been leading a spirited campaign to revive LPG business in Nigeria and recently summoned the International Oil Companies (IOCs), and handed them a six month ultimatum to make cooking gas available and affordable in Nigeria.
Following this determination of the federal government to maximize the nation's gas potentials and get Nigerians to adopt LPG as their primary energy for cooking, a retinue of new players are now positioning and repositioning in the steadily returning Liquefied Petroleum Gas (LPG) market. Growing the LPG market in Nigeria is a critical component of the nation's Gas Master Plan and market watchers say government's efforts have begun to yield fruits. A lot of new investments are now coming into the domestic cooking gas market.

Market watchers say cylinders can be used to grow Nigerian gas market as the entire country of 140 million people is estimated to have about 500,000 cylinders only, most of them old, dilapidated and therefore dangerous.

Millions of Nigerians abandoned the use of cooking gas in the 1990s when it became scarce and the price of the 12.5kg cylinder shot past N8000, heading to N10,000, depending on where you were buying. But as part of Nigeria's efforts to develop her estimated 186 trillion standard cubic feet of gas (TSCF) reserves, re-invigoration of the use of cooking gas is an important aspect of Nigeria's gas master plan. Strategies are now being stimulated to make gas available to Nigerians at highly reduced prices while NLNG, prodded by the federal government has domiciled 150,000 MT of LPG for the domestic market.

3.2 INDUSTRY OVERVIEW:

Nigeria’s demand for LPG grew rapidly from 34,000 MT in 1980, to about 129,000 MT in 1990, however, due to epileptic supply and downtime of the nation’s 4 refineries there was recurrent scarcity of the product leading to the decline in consumption and subsequent adoption of kerosene and firewood as alternative domestic fuels.

With the entrance of the Nigerian Liquefied Natural Gas (NLNG) company there has been relative stability and guaranteed supply of LPG and this has led to a growth in consumption. Due to problems that plagued the industry prior to the intervention of NLNG there is a gap in the market in terms of cylinder/accessories, distribution infrastructure and coastal storage terminals to absorb the new supply.

Considering market potential, roughly 1.230 million MT of Liquefied Petroleum Gas (LPG) or cooking gas await investors in Nigeria. The market for LPG will continue to expand as a result of increased awareness of LPG as an efficient energy source.

To calculate the potential market size of the LPG market in Nigeria we considered the population of 150 million and the number of households in the country currently estimated at 9 million. The average home consumes one 12.5kg cylinder a month or 150 kg annually. This translates to 1.35 million MT per annum (1MT = 1,000 Kg)

In view of the total consumption in the country of about 120,000 MT, there is a market balance of about 1.230 million MT per annum awaiting potential investors. Nigeria’s LPG market is estimated to have a potential of over N37 billion per annum, with 50 per cent rate of return on investment.

Further evidence of the untapped LPG market in Nigeria can be gleaned from a country by country comparison: Nigeria consumes 0.5 kilogram per capita per annum compared with Cameroon, Cote d’Ivoire, Ghana and Senegal with a combined average of 3.7 kilogram per capita per annum.

3.3 MARKET STRUCTURE AND FUNDAMENTALS FOR STORAGE FACILITIES IN NIGERIA

THE PAST

In the 1980s and 1990s, Nigerians consumed over a hundred thousand MT of LPG and then the figures began to go down. The four refineries in the country were desultory and could not supply the market in spite of a combined installed LPG capacity of 360,000MT. The effects of this spiraled down to other things: wastage of primary and secondary storage capacity of about 37,000mt. The 2 storage tanks built and owned by NNPC were a hopeless situation for LPG at the only functioning artery of petroleum products in the country, the NOJ Jetty at Apapa; an abandoned jetty in Calabar; corroded and decrepit cylinders; deteriorating infrastructure; over 300 non-functional filling plants; downturn in business in supply; dwindling investments; all time high LPG prices; and an increase in the use of kerosene and firewood, endangering health and the environment.

This situation left in its wake the dereliction of facilities used for the supply of LPG to a nonetheless growing population, making it a bourgeois affair to use LPG as cooking fuel. The industry lost a major part of its market.

In September 2006, the Board of Nigeria LNG, worried about the scarcity of LPG in the midst of abundant gas, decided to revive the LPG market and reduce the dependence on firewood fuels for cooking by majority of Nigerians. The decision was the beginning of a fierce confrontation with infrastructural challenges that beset the industry.

A major challenge was the NOJ jetty in Apapa which was over-burdened with mass importation of petroleum products. Unfortunately for the LPG businesses, LPG was down the pecking order of petroleum products that could run down the storage tanks owned by PPMC. It was the case of inertia in Calabar where the second jetty sat. In addition to the daunting challenges, the low draught at the jetty did not make it possible for very large vessels to berth, the kind that would uplift from the Bonny terminal where NLNG exports gas. And so a major town hall meeting in 2006 was organized by the company to forge a way out of the quagmire. This led to a dedication of 150,000mt annually by the NLNG Board, selection of six lifters (off-takers) and an ingenious idea of a Ship-to-Ship(STS) supply of LPG to the domestic market on a Free-on-board basis (FOB). The project, christened Domestic LPG (DLPG) by NLNG, involved lifting gas from Bonny on board a mother vessel; processing the gas for domestic consumption on the vessel; transfer of gas to a smaller ship called the Shuttle Vessel; and discharge at the jetty in Apapa. It was a brilliant idea.

NLNG picked part of the cost for the mother vessel with a commitment from the lifters that they will invest on infrastructural development to make robust the supply chain.

THE PRESENT

With as little as 150,000 MT, the market began to open up. Even though consumption per capita remained low at about 0.5 kilograms per capita (Ghana is 3 kg per capita while Morroco is 44.40 kg per capita) and the market could only take about 60,000 MT from NLNG annually, the market commenced with a slow awakening. To start with, the off-takers came to surmount operational problems and infrastructural challenges. That included chartering the shuttle ship and using the PPMC facility in Apapa together. They also contributed enormously to bring back to life the PPMC terminal and improve load-out.

NLNG’s contribution of about 80% to LPG supplies led to millions of dollars spent to move the volume to consumers. NLNG spent over $7million a year on the supply vessel; more upstream players are investing in gas processing plants and more gas producers are coming into the game; more investments in through-put facilities, for example, NAVGAS facility costing $50million; NIPCO worth N7billion and millions of dollars of off-takers investments in the development of their supply chain.

As part of plans to develop a formidable chain of supply, many of the off-takers invested in cylinders; not only revitalizing the market with new cylinders, but bringing smaller cylinders as a palliative to those who could not afford the popular 12.5kg cylinders. Currently, more off-takers are participating in the DLPG and the program is beginning another cycle of contract with these off-takers. Masters Energy is one of the new off-takers. The increasing demand for LPG outgrew the STS model of supplying gas to the domestic market.

THE FUTURE

In the Nigerian population lies a goldmine. Another 150,000 MT to be dedicated by NLNG and more volumes from the convalescing refineries will push the supply volumes up in the coming five years but the extant challenges will become more profound.

These challenges can become opportunities for investment; gateways for investors into an undermined industry and a long term plan to accommodate future growth in demand. It is a myriad of opportunities along the value chain of the LPG market.

More volumes would mean the need for additional coastal storage. This bit is capital intensive nevertheless necessary. These storages, with dedicated terminals, will increase capacity for lifters to be able to bring LPG onshore and distribute to inland storages and filling plants. They become a fundamental part of a robust LPG circulation system. Dropping a notch down the value chain are inland storages (storage tanks) that will ensure consistent supply in the regions across the country.

Further down the chain are filling plants. A consumption level up to 750,000 MT per annum will translate into 250 LPG plants and 74,970 retailing outlets. Initiatives are underway to introduce mobile filling plants (distribution vans) that can take LPG to end-user’s doorsteps, make it more accessible. There is need for more of such initiatives.

Another link in the chain is trucks. The trucks transport LPG from coastal storages and /or inland storages to filling plants. Setting up a truck company would be good business. Presently, the, market is being underserved with an estimate of 150 trucks. The market needs about 2,000 trucks.

The next link in the chain is the cylinders, the vessels used to deliver LPG to homes from all the storages and filling plants. A shortage of cylinders translates into inaccessibility; and that and other safety issues arising from circulation of decrepit cylinders accounts for slow growth in the market. Investments are needed in the manufacturing of cylinders either by way of importation of steel plates for cylinder manufacturing in the country. This is an investment area requiring investors’ attention. Cylinder refurbishing plants, cylinder accessories’ manufacturing plants can be set up that will also stimulate industrial and commercial activities in the market. Finding a way out of the initial entry investment gridlock can open a vista of opportunities in manufacturing, distribution and warehousing.

Masters Energy has established relationships with Standards Organization of Nigeria (SON) approved cylinder manufacturers in Turkey, India and China.

3.4 DEMAND ANALYSIS

Domestic demand for gas grew from below 40,000 MT per annum in 1980 to 130,000 MT per annum in 1990 due to improved refinery capacity in Nigeria. Between 1992 and 2002 domestic demand dropped to 40,000. In 2007, NLNG intervened by devoting 150,000 MT to the domestic market and this boosted utilization to 120,000 MT per annum. It is projected that domestic utilization will grow to 300,000 MT in 2013 and up to 1 million MT by year 2019.

The market potential for LPG in Nigeria is huge considering the population size. Current consumption is 0.5 kg per capita. Senegal consumes 8 kg per capita, South Africa 5 kg per capita, Cote d Ivoire 5kg per capita, Gabon 20 kg per capita. Tunisia, Libya and Morocco consume 45 kg per capita.

Present demand of LPG in Nigeria is estimated to be ~ 300,000 MT per annum. This is expected to reach up to 1,000,000 MT in 2019. This translates into CAGR of 22.2 % which is quite robust. Any further positive change in CAGR on account of change in government policies (e.g. shifting of HHK subsidy to LPG) will increase dramatically the LPG consumption / usage in domestic sector.

LPG demand in Nigeria is largely dependent on the price on HHK (House Hold Kerosene)

PROJECTED IMPACT OF HHK SUBSIDIES ON THE LPG SUBSECTOR AND THE ECONOMY

YEAR (A) HHK SUBSIDY IN
BILLION NAIRA
(B) 10 % OF
HHK
SUBSID Y TO BE
USED
(C) ACTUAL
12.5KG FIGURES
(D) ADDITIONAL NO. OF12.5KG TO BE GENERATED
BY SUBSIDY
(E) TOTAL
(F)=
D + E %
INCREASE

(G)
2006 88.456 8.8456 4,640,000 5,897,066 10,537,066 127.0
2007 90.814 9.0814 4,800,000 5,342,000 10,142,000 111.0
2008 188.554 18.8554 8,000,000 9,427,700 17,427,700 118.0

This table assumes 10% of HHK subsidy expended on LPG from 2006-2008.
The result translates to over 100% increase in LPG utilisation for each of the 3 years

Currently out of 150 million households in Nigeria, only 7 million rely on LPG, and the rest on conventional fuels like coal, firewood, kerosene, dung cake etc, which indicate the strong demand for Liquefied Petroleum Gas (LPG) sector.

Liquefied Petroleum Gas (LPG) is used as fuel for cooking and heating in the manufacturing industry. It is also used for power generation.

3.5 PRODUCTION

LOCAL PRODUCTION OF LPG

Current production of LPG is about 2 Million Tons per year. Nigeria's LPG production is expected to increase to 4 Million Tons by 2015.

While over 2 million tons of LPG is exported annually by NLNG (Shell/NNPC), Exxon Mobil and Chevron, no one has taken much interest in the domestic market. Not even NNPC - which should normally be the face of the public

Export of LPG from major producers is as mentioned below:

• Exxon Mobil- OsoBrt - 600,000 Tons per year

• NLNG - Bonny Island - 700,000 Tons per year

• Chevron - Escravos - 500,000 Tons per year

• Warri / PH Refinery- 100,000 Tons per year

LIQUEFIED PETROLEUM GAS PRODUCERS IN NIGERIA

Total LPG Production Capacity (2.5 Million MT) as per details below :

COMPANY LPG PRODUCTION PER ANNUM DOMESTIC SUPPLY OBLIGATION
REFINERIES
PH Refinery 130,000 MT 130,000 MT
Warri Refinery 70,000 MT 70,000 MT
Kaduna Refinery 160,000 MT 160,000 MT
SUB-TOTAL(1) 360,000 MT 360,000 MT

ExxonMobil 1,040,000 MT NIL
NLNG 830,000 MT 150,000 MT
Chevron Escravos 280,000 MT NIL
SUB-TOTAL(2) 2,150,000 MT 150,000 MT

TOTAL 2,510,000 MT 510,000 MT

The demand of LPG in Nigeria is consistent over the years, supply of LPG from producers (or extractors) to distributors and marketing companies has been limited due to infrastructure deficit, which often creates scarcity. Besides that, LPG producers are also limited in numbers and LPG marketing companies need to have a quota of gas to be allocated by the producer.
This factor makes LPG business vulnerable in the hands of LPG producers.
In Nigeria, distribution of LPG began with NNPC & other private players. It started as an alternative to the then popular fuels of Nigeria - Coal, Kerosene, Biomass/wood and Dried Dung Cake. As per its prices, it was not feasible even to the then middle class to shift to LPG.

In Nigeria, LPG finds is prime usage in Domestic sector with - consumption in households, in commercial sector, Auto LPG and in Industry.
Currently, the LPG business is fragmented in two parts: Industrial & Commercial LPG and Domestic LPG. Both businesses run on base of understanding & regulation. Industrial & Commercial LPG is a more competitive business segment than the Domestic LPG. In Domestic LPG competition is largely limited by dividing boundaries of area for distribution of LPG.

3.6 PRODUCT PRICING

 Until the year 2000, all domestic LPG was provided by the refineries. This LPG was largely butane rich LPG (>90%).Butane LPG prices ex-refinery was in the region of N 40,000 per ton. Domestic cooking gas sold at Naira 400 per 12.5 kg cylinder.

 From year 2000 onwards, because the refineries were epileptic, prices of refinery LPG gradually shot up to N 90,000 per ton. Domestic cooking gas sold at Naira 1,500 per 12.5 kg cylinder

 By 2006, refineries were almost shutdown. Consequently LPG prices shot up further to Naira 150,000 per ton. Hyson and Lee Global started LPG importation. Imported LPG attracts 40 % duty.

 By 2007, prices became astronomical- up to Naira 250,000 per ton. LPG for cooking gas retailed at more than Naira 3,000 per 12.5 kg cylinder. Domestic LPG consumption dropped dramatically.

 In 2008, NLNG butane LPG was available through 6 off takers at a price of around Naira 150,000 per ton ex Lagos PPMC depot.

 Present pricing of LPG is taken @ 950 US $ per MT.

3.7 SUPPLY-CHAIN
In Nigeria, LPG is either produced as a by-product in Crude oil production or from refineries.
From both, the ports and the refineries, LPG is brought to the large storage facilities with the use of ships/ vessels / barges. Here the LPG is stored under highly refrigerated and pressurised condition. Bulk storage tankfarm therefore forms a key element in LPG distribution & logistics.

Oil Refinery

A list of selected depot owners in Nigeria with their estimated yearly capacity & turnover is given below:
COMPANY NAME ESTIMATED CAP. OF TANK FARM ESTIMATED
TURNOVER in BILL. NAIRA LOCATION
TOTAL GAS 1,000 MT N 4.32 B LAGOS
PPMC 4,000 MT N 17.28 B APAPA
NAVGAS 8,000 MT N 36 B LAGOS
NIPCO PLC 4,500 MT N 19.4 B LAGOS
AP PLC 500 MT N 2.16 B LAGOS
CONOIL 500 MT N 2.16 B LAGOS
SAHARA ENERGY 1,000 MT N 4.32 B CALABAR
VITOL 8,000 N 36B LAGOS
TOTAL EXISTING CAPACITY 27,500 MT N 121.64
Assumptions:
• Each storage facility turns over full capacity twice a month; thus max. monthly throughput can be 55,000 MT/month =660,000MT/A;
• Sales price per ton is N180,000 (based on cost of 20 ton truck in the market)

It can be seen from the above mentioned figures that present installed LPG Bulk storage capacity is very much inadequate, considering the projected demand for LPG in domestic sector. Present LPG bulk storage capacity is mainly concentrated in Lagos and around (i.e. West Nigeria). Port Apapa facility is very much congested and normally preference is given to unloading of ‘white’ petroleum products. This make the LPG bulk unloading very time consuming and cumbersome.
Hence creating a bulk LPG storage capacity of 34,000 M3 with dedicated jetty for LPG will be a distinct advantage to MEOGL.

Barriers to LPG market growth in Nigeria

Nigeria has the potential to produce 2.5m MT/yr. of LPG. The capacity is not effectively utilised due to barriers namely:

• Poor infrastructure (receiving jetty facilities, poor road conditions)
• Low house hold income
• Kerosene subsidy
• High cost of cylinders and accessories
• Low public awareness of LPG as a suitable fuel
• Cost of LPG.

3.8 EXPORT MARKET POTENTIAL

3.9 DISTRIBUTION & RETAILING
Typical distribution process and supply chain of LPG and LPG cylinders is as illustrated in the following diagram:

Petroleum Products Distribution zones in Nigeria are as shown below:

Marketing and distribution companies uplift LPG from the production site using own/rented tankers and store it at their storage site. Marketing/distribution companies which are also known as bottling companies fill gas cylinders with LPG and store them for distribution. Appointed Distributors/Sub-distributors bring their gas cylinders on their own vehicles to the marketing company site, get them filled (or exchange them with the filled cylinders), make payment and carry their cylinders to the distribution point. From their distribution points cylinders are supplied to the retailers or agents from where it is provided to the end user. In case of household or commercial use small capacity cylinders (normally 6 kg to 12.5 kg) are further filled and supplied to the users directly by the sub-distributor. This filling process also be carried out at marketing company site and sub-distributors uplift cylinders from the site and store them at their location, from where they are distributed among households and commercial users.

From the storage facilities, LPG is directly distributed to bulk industrial purchasers via large bulk road tankers. For the domestic customers, LPG is distributed in packed form through dealers. Dealer holds the stock of filled cylinders. When the customer’s LPG cylinder is emptied, it is replaced by the local operating dealer. The dealer recovers the cost of transporting cylinders from commission on a per refill basis. A group of dealers in a given area receive the filled cylinders from the designated bottling plant. A dealer sends the empty cylinders to the required bottling stations via truck. These bottling plants take back the empty cylinders and load the truck with the filled ones. The filled cylinders are then sent back to the dealer. The various bottling plants in turn receive the LPG from storage facilities with the use of tankers. The tankers are dedicated to transporting LPG, and hence, the company pays the transporters for both delivery and return trips to the storage facilities.

3.9.1 Market Segments
The LPG market is segmented according to the purpose of the use of LPG as a fuel, i.e. for domestic, commercial and industrial use. Accordingly the weight of the cylinder varies (standard weights), as the usage depends on the type of consumer and to lessen the transportation cost. In the industrial category, there are bulk users too, who are served in bullets (huge tanks).

3.9.2 Brand Positioning
One of the important features is that neither the business persons nor the consumers are able to see the product, therefore building the perception of trust and importance in the minds of the consumers makes a difference. Deliverability assurance and Safety measures is one of the key distinguishing features of the company providing the service.
As mentioned before that LPG business is mostly self-propelled. Demand, in absence of any other substitute fuel as of now, implies that it overshoots the Supply. Thus some direct marketing measures can be implemented in the form of pamphlets etc. and through some customer awareness programs in mass media.

3.9.3 Customer Retention Techniques
The LPG business is mostly self propelled and doesn’t need much marketing measures. In the domestic category, the distributor represents the company and mostly the consumer chooses the distributor who is closest to his/her locality. Though there are a few factors which improve the service level of the business viz.
a) For the industrial and consumers the reliability of providing the LPG cylinders in normal as well as emergency times is of utmost priority, as the opportunity cost is huge in industry.
b) Another important aspect is the price of LPG, as the prices charged by the company is not regulated and hence can be tinkered with.

3.9.4 Challenges to Extending LPG for Domestic Use

3.9.4.1 Supply & accessibility
In order to meet the increasing demand of LPG by domestic as well as auto fuelling sectors the country needs additional LPG production capacity, adequate transportation and distribution network.

3.9.4.2 Supply of reliable cylinders
Another challenge pertaining to LPG distribution is assuring the reliable supply of refill cylinders. For small and remote markets, refills may be delivered once a week or once every other week. For those users that do not keep a second cylinder, this could mean going without fuel for as long as two weeks. Signing up for two cylinders to avoid running out of cooking fuel would further increase the start-up cost of LPG service. Again, this infrequent delivery of refill cylinders serves as a disincentive against switching entirely to LPG.

3.9.4.3 Cylinder management
As we know that LPG has to be stored under pressure, metal cylinders are required. To cover the cost of cylinder manufacture, an initial deposit fee is required. The combination of the start-up cost and the cash outlay at each refill (which typically cannot be broken up into smaller installments) presents a serious barrier to the uptake and regular use of LPG by low-income households.

3.9.4.4 Affordability
The economically disadvantaged, face the problems of high first costs of LPG (connection and equipment) and the lumpiness of relatively high refilling bills and loans are difficult to service without financial returns from the investment.

3.9.4.5 LPG Promotion Programs
3.9.4.5.1 LPG scheme
A scheme can be implemented for the expansion of domestic LPG use in target areas. Under this scheme, one can distribute domestic connections to women of below the poverty line (BPL) families in the rural areas of the state. Each connection can be accompanied by a one-off subsidy to the extent of the initial cost, to overcome the barrier to fuel switching. It is meant to reduce dependence on firewood, reduce the drudgery of collection of/cooking on firewood, reduce pollution and improve the health of women.
• Suggestions from local self help groups (SHGs) for improvement include the credit for refills and reduction in cylinder size.

3.9.4.5.2 Village LPG Distributor (VLD)

This scheme envisages the increase in LPG population coverage from 10% to almost 50% by 2015. The scheme is primarily to reach LPG in villages, so that dependence on conventional fuels like biomass/ wood, coal etc. is reduced. This will not only help in conservation of forests but will also have positive impact on environment as well as on the health of our rural womenfolk.
This Scheme can be implemented by the LPG Marketing Companies in addition to their Marketing Plan for setting up regular LPG distributorships. Identification of locations would be finalized by the Marketing Company (MC) based on the present penetration/coverage, minimum refill/sale potential for sustaining the VLD.
According to the program, the program will be sustainable for cluster of villages having about 2000 families and consumption of 6 kg per month, out of which half may go for LPG. Contrary to 1000 cylinders (6 kg/cylinder), VLD will be set up with the potential of 500 cylinders. The net income for the proprietor expected is N 50,000 per month. VLD will be setup by Marketing Companies who have its bottling plant nearest to the identified cluster of villages.

3.10 COMPETITION SCENARIO

Marketing companies in Nigeria are seen as facilitator to the nation’s development. Hence, apart from churning profit for sustainable existence and growth, it has to operate in accordance with the nation’s interest.
In domestic segment, MC has to sell its product at a price decided by the market. So, there exists scope of price war, which leaves the MCs to compete on market share. But, to avoid unwanted friction and hence deadweight loss to the society, the regulatory body can maintain the optimum number of dealers in an area. The number of dealerships of a company can be decided by the committee in accordance to their market share and presence in the region. Hence, chances of competition for market share in domestic segment can be limited.

Though, in industrial segment, with lack of price regulation and hence better scope for margin there is an intense competition in the form of:
1. Price
2. Service
3. Promptness in delivery
4. Hours of catering or working hours

3.11 WAY FORWARD FOR NIGERIA

Nigeria, through the NLNG, international oil companies (I0Cs) and refineries, has the potential of producing about 2.5mm MT of LPG annually. NNPC in collaboration with the government can successfully substitute LPG for kerosene. In order to achieve the kerosene to LPG conversion objectives, the following steps are necessary:

• Corporate and government adoption of the kerosene to LPG program as a means of reducing the huge subsidy on kerosene.
•. Clear definition of program objectives and deliverables.

Pilot scheme
• Initiation of a pilot kerosene to LPG project (LPG Direct) in selected LGAs of Abuja Area Councils of (FCT).
• Acquire tanks with mobile weighing and filling facilities.
• Acquire 3 kg and 6 kg gas cylinders for distribution to participants.
• Provide LPG filling skids at the stations.
• Expand the capacity of the existing facilities.
• Acquire or charter flat bottom LPG vessels for shuttle.
• Evaluate fiscal policy options including VAT removal, import duty exemption and incentives for local cylinder manufacturers.
• Encourage new investment in LPG infrastructure to reduce product prices and the bottleneck in LPG supply chain.
The kerosene to LP Gas program will create investment opportunities for SMEs. The roll out of the program will create employment and create a multiplier effect in the industry.

4 PROJECT DESCRIPTION

4.1 THE COMPANY

Masters Energy Oil & Gas Limited (MEOGL) is a wholly indigenous petroleum products marketing company registered in Nigeria, established in 2005 with a vision to be the world’s bench-mark in the oil and gas industry.

MEOGL is licensed by Department of Petroleum Resources (DPR) as importers, bulk buyers and sellers of petroleum products. MEOGL also does retail marketing which includes on the spot depot sales of product, product storage/warehouse services, contract supply services and supply to corporate organisations, private businesses and institutional users.

MEOGL aspires to live out its vision, “To be the world’s benchmark in the oil and gas industry.” The pursuit of this vision propelled MEOGL in 2006 to acquire over 110 hectares of land in Rumuolumeni, Port Harcourt for the construction of an ultra modern integrated oil & gas logistics centre, christened “Masters Energy City”, thus making it the first and only wholly Nigerian one-stop Energy Solution Provider.

The first phase of Masters Energy City was commissioned in 2009 and houses its 158,000 MT petroleum products storage facility, reputed to be the biggest in sub-Saharan Africa and stores all refined products lines (i.e. PMS, AGO, DPK, ATK, LPFO and other chemicals). Other features of the Energy City include: Functional & Dedicated Jetty, Logistics Centre and other future development projects.

MEOGL has a functional and dedicated 8 m draft finger jetty with 300 m shoreline protection, approach channel of 9 m deep with a width of 40 m which allows 30,000 tonnage tankers to conveniently discharge at the jetty. MEOGL’s jetty has been included on NPA global map, which has been certified by both NPA and NNPC. Masters Energy is a key player in the downstream sector of oil & gas. MEOGL presently has over 60 retail outlets scattered all over Nigeria and presence in over 16 states of Nigeria. MEOGL projects to have retail outlets in all the 36 states of Nigeria including the Federal Capital Territory in a very short time.

MEOGL also has a Transport Division that is very strong, robust and competitive, comprising of many long trucks and Peddler trucks; and a vibrant Marine and Shipping Subsidiary that renders shipping services.

MEOGL’s future development plans include the setting up of the following: Liquefied Petroleum Gas (LPG) Plant, Bitumen Plant, Lubricant Plant and a 20,000 barrel per day Modular Refinery, all within the Energy City.

Masters Energy Oil & Gas Limited is managed by highly qualified professionals with years of experience in diverse fields.

4.2 BOARD AND MANAGEMENT TEAM

MEOGL’s Board and Management include highly skilled professionals with experience from a diverse range of industries:

Anchoring the Team is Mr. Uchechukwu Ogah, the President of Master Energy Oil & Gas Limited, with an HND in Accountancy and Finance, BSc. Degree in Business Administration, Masters of Business Administration and capped with professional qualification from the Institute of Chartered Accountants of Nigeria and Chartered Institute of Bankers of Nigeria. Prior to the establishment of Masters Energy, he had worked for Zenith Bank in various departments such as Internal Control, Human Resources Management, Business Development and Strategic Planning.

Assisting the President of Masters Energy is Mr. Vincent Ajala, the Executive Vice Chairman/Chief Executive Officer of the Company. He has a Post graduate Certificate in Management from the Oxford Brooks University and a Higher National Diploma from the Institute of Management & Technology Enugu. He came aboard Masters Energy with virile working experience that spanned the Oxford University Press (Now UPL) Ibadan, British Caledonian Airways (Now British Airways). He is also an Aluminous of the prestigious Lagos Business School (LBS), the Pan African University.

Also on the Board of Masters Energy is Mrs. Ngozi Ogah, who holds BSc. and HND Degrees in accounting from Enugu State University and Institute of Management & Technology, respectively. Added to her qualifications are certificates from the Lagos Business School (LBS) and Oxford Princeton College, London. Her work experience spans many companies, most notably Julius Barger Plc.

Heading the Legal Team is Mrs. Patience Dappa. She doubles as the Head of Legal and the Company Secretary. She brings to the table, experience that covers more than 20 years professional practice, having worked with the Messrs Alegeh & Associates, with special skills in properties, company Law & Litigation from where she moved to T & A Management Consultants as Company Secretary. She eventually established Pat Dappa & Associates from where she was invited to join the Team of Legal Luminaries appointed to review and proof read the Laws of Delta State in 2005. Pat holds Bachelors’ Degree in Law from the University of Calabar and a Masters Degree in Humanitarian Law and Refugee Studies from the University of Lagos. She is a member of the Chartered Institute of Arbitrators (UK), International, Commonwealth and Nigerian Bar Associations.

Mallam Abdullah Dodo Maijamaa is Executive Director in charge of Assets Management, purchasing, supplies and general Administration of non human capital of Masters Energy. He holds a Degree in Accounting from Ahmadu Bello University, Zaira and a Post Graduate Diploma in Hotel Management from Manchester Metropolitan University, United Kingdom. He was Chief accountant, Hill Station Hotel Ltd, Jos; Chairman, Keffi Local Government in present Nasarawa State; General Manager, Bristol Hotel, Lagos; General Manager, Kano Central Hotel; Director of Operations and then Managing Director, Nigeria Hotels Limited Lagos.

The Group Executive, Trading, Mr. Femi Sotunde, joined Masters Energy after working for 10 years in the Energy Desk of banks such as Ecobank, Zenith Bank and Fidelity Bank. He has strong skills in corporate finance and credit. Femi, without doubt has very high knowledge of the Energy Sector. He holds a Degree in Bioscience from University of Ilorin, with a second class upper and has attended many senior management courses in the prestigious Lagos Business School and holds an MBA in Human Management Science from Lagos State University.

Mr. Franck SAGBOHAN is the General Manager Technical of Masters Energy Gas.
Franck accumulated more than twelve years experience in gas depot operations at the ADDAX-ORYX Benin Oil & Gas Terminal where he functioned as Assistant Officer in charge of Operation and Head of Centre for Butane Gas Filling. He is a highly trained Industrial Auto Technician; he forwarded his Higher Education at the Polytechnic University Centre of Benin before starting up his career as Head of Team at the gas operation company, SOBEGI BENIN whereby he functioned for two years. His academic and professional experience was strengthened by an important internship at VERON in France related to storage, distribution and fire fighting procedures involved in LPG depot operations.

Heading the Commercial arm of Masters Energy Gas is Mr. Emeka Obuekwe. Prior to joining the Gas subsidiary, Emeka was in the Petroleum Trading arm of Masters Energy. He obtained a Masters Degree in Financial Economics from Boston University, USA after a BSc Degree in Banking & Finance from the University of Nigeria, Nsukka. He is an alumnus of the Oxford Princeton programme having attended several Energy trading and Gas related courses. He is a member of the National Gas Association and LPG group of the Lagos Chamber of Commerce.

With a vision to be the world’s bench-mark in the oil and gas industry, MEOGL is poised to provide excellent world-class services to its stakeholders and Nigerians.

MEOGL is well positioned to meet the demands of an ever dynamic sector. MEOGL’s long term ambition is to become an active player in the mid and upstream sectors of oil and gas.

Aware of the challenges of the industry, MEOGL has re-positioned and re-engineered to enhance the profile of indigenous Nigerian oil marketing companies in the competitive and complex global energy market.

Within a short time of its existence, tenacity of purpose has seen MEOGL operate a haulage division with over 100 trucks in its fleet; all traversing the length & breadth of Nigeria delivering products to its customers.

MEOGL’s retail outlets, predominantly sited in the South-East are operational and contributing to availability and affordability of petroleum products to Nigerians.

4.3 THE PROJECT

Masters Gas, a subsidiary of Masters Energy Group, is processing their licenses and permits from DPR to build and operate LPG bulk storage, LPG distribution infrastructure including LPG re-filling plants. The company has acquired about 392,000 square meter land space beside Saipem Agip, Port Harcourt, Rivers state, Nigeria for the purpose. The company’s ultra modern facility is located in Port Harcourt and more bottling plants are envisaged across the major cities in Nigeria to make cooking gas available and affordable to more people. The company has also invested in LPG truck rentals to ease off distribution of LPG gas to all the nook and corners of Nigeria. The future strategic plan of the company is to include Natural Gas distribution network via pipelines.

Jetty is currently being expanded to three finger jetty. On completion of the third finger, the jetty will conveniently berth 3 vessels simultaneously. There are only two jetties in the country that have the capacity to berth 3 vessels with over 9 meter draft in this jetty.

Masters Energy Oil and Gas Limited, intends to set-up a fully integrated LPG Plant in its Energy City logistic centre at Rumuolumeni, Port Harcourt, River State. The facility shall comprise of :

- Dedicated Jetty for LPG vessels

- Bulk storage terminal for LPG with 25,000MT storage capacity (Phase-1 capacity will be 17,000MT) to warehouse Gas received from NLNG

- Mother Bottling Plant with dedicated 100MT capacity x 2nos storage bullets

The Plant will handle and receive LPG at its own Jetty facility, right down to the supply of consumer retail packs of LPG, while conforming to the highest HSE standards. The Company hopes to make a significant contribution to the social development of its customers and communities. It is intended that with the coming on stream of the LPG Plant, a focus on marketing LPG to rural communities and the building of new retail centers across the country shall be an excellent step forward in realizing company’s goal in the energy sector.

This project is aimed at supporting the sales drive of the Federal Government in the Eastern, Mid-Western and North-Eastern parts of Nigeria and it comes to Masters Energy under a partnership arrangement with confirmed product supply and a ready market that was never tapped and with a capacity that is far above the planned product availability.

The market covers about 11 States with estimated average population 58 million people culled from the last population count. The population gives a platform for about 1/3 of the National population and this will translate into the same volume in Gas market across board.

These locations are projected to take 30% of the future supply of Gas in Nigeria. With this agreement and storage capacity, MEOGL is in a position to control 54% of the present market and 30% of the emerging one.

Proposed Production distribution arrangement is as follows :

The Masters Energy City LPG plant is expected to capture all the value chain benefits from LPG storage facility right down to the final consumer dispenser business unit. This would enable the total business to conveniently edge against future negative effects of competition.

Masters Energy City LPG business unit shall comprise of three different business units:

1. Masters Energy City Storage Terminal.

Location for setting up a LPG distribution plant has major implications on fixed costs, operational costs and procedures. The proposed LPG Bulk Storage facility & Bottling Plant will be established at Port Harcourt. The location has basic infrastructure and facilities required for LPG bottling plant and distribution unit. Small ‘Satellite’ LPG Bottling Plants will be located at various strategic locations in the country.

Masters Energy City Storage Terminal shall constitute the main business unit of the facility. It shall receive its feedstock from refineries (Foreign and Local) and oil and gas production platform via LPG tanker Vessels. Patronage by throughput from other customers shall be allowed. It could also supply other depot via coastal LPG Tanker Vessel.

MEOGL has planned to build a 17,000 MT (34000 M3) storage terminal for liquefied petroleum gas products plus a dedicated jetty.

This Tank Farm will be completed and commissioned in January 2015. The tank farm is expected to generate income from three main sources, namely:

1. Throughput charges for those using the storage facilities provided by the farm i.e. other off-takers to NLNG, LPG importers, PPMC, and other Independent Marketers.

2. Trade income by virtue of active engagement in liquefied petroleum gas marketing

3. Jetty Fees from vessels berthing at the depot

These three major lines of operation are vital to the economies of Nigeria, Africa and it is MEOGL’s mission to create wealth and add value to these economies.

The depot jetty design is such that it can receive products from barges and even tanker vessels up to 30,000 MT capacities. The Depot is designed to receive, store and load to tanker Lorries of between 5,000 MT and 20,000 MT haulage capacities. Product specifications for the liquefied petroleum gas are attached as Annex ‘A’. The product will only be available for local consumption.

The Tank Farm has been conceived to meet the needs of users in the South Eastern, South-South and North-Central parts of Nigeria who hitherto had to travel to Lagos to buy liquefied petroleum gas. This increased the cost to the end-user due to additional transportation charges.

Feed stock for the Tank Farm will come from the Nigerian Liquefied Natural Gas (NLNG) Company. MEOGL has signed a Sales Purchase Agreement (SPA) with the NLNG guaranteeing supply.

Storage terminal will also have bottling plant termed as ‘MOTHER BOTTLING PLANT’ of 2400 bottle/day capacity (on single shift basis). Output from this plant will feed company’s own Retail outlets as well as Re-sellers. Filling capacity of this plant will be gradually ramped-up to three shift working as the market for domestic LPG cylinders develops.

Enclosed as Annexure-1 is the layout of the proposed LPG Plant & storage facility.

2. Masters Energy City Gas Cylinder Filling Plant (Satellite Plants)

These units will be situated in the middle of the supply chain and will be set up by MEOGL. The feedstock will be received from the Masters Energy storage terminal to be supplied to these LPG cylinder filling plant. The company plans to set up three of such plants every year, for first six years of operations, in the six geographical zones in the country. Capacity of each plant will be 200 MT/month (200x1000/12.5/25= 640 cylinders/day). Estimated cost of setting up such satellite plant is ~ 1.0 Mio US$ including cost of land.

LPG Bottling Plant are sophisticated and require fool proof systems because Liquefied Petroleum Gas is flammable and prescribed instructions for fire extinguishment systems must be complied with. Qualified Consultant Engineers shall be engaged for preparing layout and structural drawings for LPG set-up.

In order to comply with the safety standards prescribed by the explosive department and provisioning for the future expansion in the storage capacity, a minimum of 2 Acre area would
be required for the LPG bottling plant setup.

PLANT CONSTRUCTION COST

The LPG storage and distribution site (LPG bottling plant) can be divided into three areas:
Administration block will be used for accounts, administration and other official purposes. LPG dispensing/filling area will be used to fill cylinders. Four LPG dispensers will be installed. LPG bulk storage and supply receiving area will house a 50MT storage tank and LPG tank truck unloading area.

1. Administration block/Office area
2. LPG dispensing/filling area
3. LPG bulk storage & supply receiving area

Typically, these plants will comprise of :

Sr No. Machinery
1. Bulk storage tank – 50MT
2. Filling Dispensers
3. Pumps
4. Cylinders
5. Supporting structures, Piping, Instrumentation & controls, Electricals

6. Fire fighting equipments

Satellite bottling plants will be set up (3nos /year over initial 6 years) and are assumed to cost USD 1 million each with cost break up as follows :
Sr.No. Particular Amount in USD
1 Land Cost 100,000
2 Building & Civil works 150,000
3 Plant & Machinery 750,000
Total 1000,000

There are few local suppliers/ manufacturer of storage Tanks and other related machinery for LPG distribution setup.

Other options viz. Mobile Containerized Bottling plants are also being reviewed. (See Appendix-1 for Technical Details).

3. Masters Energy City Gas Distribution Unit.

This business unit is aimed at meeting up with the logistic challenges of directly reaching out to the final consumers in the supply chain. Several LPG tanker trucks shall be purchased for this purpose. It is assumed that the Gas Distribution Unit will operate as separate Business Unit and business plan for the same is not under purview of this feasibility report.

4.4 TECHNOLOGY OPTIONS

PROPOSED PROJECT PARAMETERS

Installation & Capacity Human resource Technology location
Jetty & Unloading facility
- 3 Berths

LPG Bulk Storage Terminal
- 17000 MT (34000 M3)
- LPG Bottling Plant
2400 cylinders/day

LPG Bottling Plants
- 40 MT – LPG Storage
- LPG Bottling Plant(10MT/day)
800 cylinders/day

LPG Retails Outlets

40

14 per plant Local and Imported

Machinery -
Local and Imported

Machinery -
Local and Imported
Energy City, in Rumuolumeni,
Port-Harcourt, Rivers State

Energy City, in Rumuolumeni,
Port-Harcourt, Rivers State

Any urban City

For a LPG storage and distribution plant, technology options are important while selecting filling equipment, storage tanks and filling pumps. For the proposed project following technology options have been assumed:

Technology Supplier Company
Gas filling dispenser German / imported To be finalised
Pumps USA / imported To be finalised
Storage Tanks International Italy

4.5 HUMAN RESOURCE REQUIREMENT

A team of approximately 40 employees will need to be hired for establishing and running LPG bottling plant in the initial years. Additional people will be hired with increased level of operation & increased no. of shifts. The following table presents details about the staff to be hired for LPG Terminal & Bottling plant.

POSITIONS
DEPOT MANAGER 1
LOADING BAY OPERATIVES 7
BOTTLING PLANT OPERATIVES 5
SUPERVISORS - LOADING BAY 2
BOTTLING PLANT - WITHIN DEPOT 2
SECURITY - GATES 4
SECURITY - TANKS 3
SECURITY -BOTTLING PLANT 3
SECURITY -TRUCK PARK 1
ENGG/MAINTENANCE 1
LOGISTICS UNIT 2
COMMERCIAL
COMMERCIAL MANAGER 1
REGULATORY/ COMPLIANCE 1
BUSINESS DEVELOPMENT/MARKETING 6
MARKET ANALYSIS 1

TOTAL- DEPOT & BOTTLING UNIT 40

A team of approximately 14 employees will need to be hired for establishing and running LPG bottling plant. The following table presents details about the staff to be hired and their estimated payroll requirements.

BOTTLING PLANT – manpower requirement

PLANT INCHARGE 1
SUPERVISORS 2
OPERATORS 4
LOGISTICS / ACCOUNTS 2
QUALITY / TECHNICAL 1
SECURITY 4
TOTAL 14

Depot & Plant In-charges will be responsible for the operation of the unit. As the operations will be of technical sort, it would need trained, experienced staff familiar with compliance norms & safety standards. It is proposed that staff with a minimum of 5 to 6 years of relevant experience shall be hired. It is also proposed that safety audits shall be conducted at regular intervals & adequate training will be imparted to employees to ensure safe & reliable operations of the facility.

4.6 PROJECT COST

Total estimated project cost is as follows :

Srno Particular Estimated cost
(in USD) Sub-Totals
(in USD)

1. Land/Improvemenents (EQUITY) 9,375,000
2. Jetty (EQUITY) 9,316,770
18,691,770
3. Engineering Design/ Project Management 2,702,316
4. Piling 4,347,826
5. Procurement of Spheres 9,559,813
6. Transportation 3,167,500
7. Construction of Spheres 7,453,416
8. Painting of Spheres / Piping 1,552,794
9. Civil works, Buildings, Drainage etc. 2,173,914
10. Mechanical Equipments, Piping Materials, Fire fighting equipments etc. 5,448,101
11. Electrical / Instrumentation procurement 1,900,621
12. Installation of Electricals / Automation & Controls 1,565,217
13. Bottling Plant procurement / Construction 1,532,219
14. Spare Parts 633,500
15. Commissioning 1,013,601
16. Contingency & escalation provision 4,557,084
17. Procurement of Bottles 2,520,000
18. Interest during Construction period 7,378,053 57,505,977
18. TOTAL PROJECT COST 76,197,747
19. MARGIN MONEY FOR WC 15,000,000
20. TOTAL PROJECT INVESTMENT 91,197,747

PROPOSED DEBT:EQUITY RATIO 3.88

Total project cost is USD 76.197 Million including cost of land, jetty, bulk storage& handling facility, LPG bottling plant; It also includes a provision of USD 2.52 Million towards upfront payment for procurement of LPG bottles;

In addition, USD 15 million is considered towards 'Margin Money for Working capital' taking the total Project investment to USD 91.197 million; thus increasing the debt : equity ratio to 3.87.

Project cost includes 'Interest during construction period' at the rate of 12%;

4.7 PROJECT FINANCING

Proposed Means of Financing of the Project is as follows :

Sr.No. Particulars Amount in USD

1. Equity 18,691,770

2. Debt finance (including Interest during construction period) 72,505,977

TOTAL 91,197,747

4.7.1 EQUITY

This represents the amount already injected and will be injected by the promoters in the form of cost of land acquisition, development and dedicated jetty construction. Equity contribution is estimated at USD 18,691,770.

4.7.2 PROJECT LOAN (DEBT)

A Project loan of USD 65,127,923 (including margin money of USD 15,000,000 towards working capital requirement) is required to finance this project. This shall be raised from any reputable bank or syndicate of banks that believes in this project and would like to identified with it.

In addition to the above main project cost, we also expect to raise USD 18 million (at the rate of USD 3 million each year starting from year-1 to year-6) towards construction of bottling plants (Total 18 plants at an estimated cost of USD 1million each).

Security

- The bank(s) will have first charge over the fixed and floating assets of the special purpose vehicle created for this project.

- A lien on the products in the tanks

- Personal guarantee of the directors.

The company is inviting financial institutions to provide the required financing for the design, construction and Commissioning needs of the project in addition to the requirements of Margin money towards Working capital with a moratorium of 2 years.

The company has contracted an experienced designer and builder to put together a comprehensive engineering design, procurement and construction program for the 17,000 MT capacity LPG Tank farm at the site in Port Harcourt on fixed price, data caption basis.

A preliminary financial structure based on the estimated budget has been included in the financial model; as a result the following should be viewed as an indicative structure only. Please note that the indicative interest rates and fees have been modeled at conservative levels to demonstrate the robustness of the cash flows and are subject to confirmation and negotiation.

The financing plan envisaged by the Company is as detailed below:

Facility1: Project Finance Facility
Amount: $65.2 Million dollars for
$18.0 Million dollars (at the rate of USD 3 million /year from year-1 to year-6 (post commissioning of project towards addition of bottling plants)
Lender: Syndicate of financial Institutions
Purpose: To finance the construction of 17,000MT (34,000 cu. mt) LPG Tank farm & bottling plants;
Tenor: 10 years (including 2year moratorium post construction)

4.8 MARKET ENTRY TIMING

There is no specific time for the entry in LPG marketing. After allocation of quota from the producer/ Major market, a marketing company can start its operations immediately as demand is persistent in urban areas.

4.9 PROPOSED BUSINESS LEGAL STATUS

The legal status of business tends to play an important role in any setup; the proposed LPG Marketing and Distribution business is assumed to operate on as a private limited company. It is mandatory for an oil or gas company to register as a private limited company.

1. PROPOSED FUNDING MODEL / OPTIONS

NATURE OF PROJECT

MEOGL proposes to develop a 25,000MT storage capacity to warehouse Gas from NLNG, at Energy City, in Rumuolumeni, Port-Harcourt, Rivers State.

This project is aimed at supporting the sales drive of the Federal Government in the Eastern, Mid-Western and North Eastern parts of Nigeria and it comes to Masters Energy under a partnership arrangement with confirmed product supply and a ready market that was never tapped and with a capacity that is far above the planned product availability.

The market covers about 11 States with estimated average population 58million people culled from the last population count. The population gives a platform for about 1/3 of the National population and we see this translated into the same volume in Gas market across board.

These locations are projected to take 30% of the future supply of Gas in Nigeria. With this agreement and storage capacity, Masters Energy is position to control 54% of the present market and 30% of the emerging one.

MEOGL believes that the project will cover a minimum construction period of 2 years, while sales cash flow shows repayment capacity of 10 years, however, to achieve this project MEOGL has considered a funding structure that has taken critical consideration of the needs of the project from take off to completion and further into sales and repayment of exposures of financiers.

In the light of this consideration, it is proposed to have the following structure –

Considering the repayment tenor of the likely exposure of financiers of this project, MEOGL considered a bridge support that will take care of the project period, while various refinancing options are taken up to pay out the bridge funding agencies.

a. The structure considers the option of taking the whole funding need from a source to take care of design, construction, installation of fittings, purchase of equipments and machinery, testing and commissioning of the plant upon completion.

b. To protect the above exposure, MEOGL requires Guarantee from a group of local banks via Club funding model or syndication as each funding structure requires collaterization in some form.

c. MEOGL will look forward to taking out the bridge finance funder upon completion of the project via Term loans or other forms of facilities structure, relying on the cash-flow from trading to take out the lenders in under mutually acceptable tenor

d. MEOGL is aware of the need for further cushion for the Term Loan Financiers; hence it will consider the renewal of the Guarantees earlier used for the Bridge funding during the project construction.

In view of the above described platform, MEOGL proposes other funding parameters to make up its bouquet of various funding options, which include:

i. VENTURE CAPITAL :- MEOGL is open to funding of this project through venture capital from Local or International platforms, either considering the single throng funding of both the construction and sales/repayment tenors of 12 years, or any of the two (Construction or repayment tenors).

ii. PRIVATE EQUITY:- Private Equity owners are also welcome on the Board of this project under mutually agreed terms and conditions.

For these two platforms and without any form of apprehension, MEOGL is willing to get funding under most unambiguous terms and conditions, especially in the areas of Security, Interest rates or Dividend (ordinary or preferential).

iii. PUBLIC DEBT
iv. BOND

In view of the options expressed above, MEOGL is open to other options that can equally support the development of this project.

Securitization/Collateral

1. Corporate Guarantee
2. Trust Deed nomination
3. Future cash flow: we shall be offering the cashflow of the Gas company to financiers
4. Stock of product funded by the company

The Gas Company will offer to give Corporate Guarantee to financiers as a primary security platform to confirm the passion and seriousness of project owners to the financiers/investors, while not limiting the security cover to Corporate Guarantee, MEOGL assures that the land on which the plant to be built will be the primary asset of the Gas company and it resides under the control of a Trustee, from where the financier’s interest will be noted.

Further upon completion of this project the next phase is product sales and MEOGL is willing to set up the cash-flow from sales as part of the collateral to financiers. Also to give additional comfort to financiers, MEOGL will offer stock bought with the company’s money as security.

6 REVENUE MODEL

KEY ASSUMPTIONS FOR REVENUE MODEL

6.1 BASIS

1. All figures are in US DOLLARS
2. Exchange rate 1 euro = N204.00
3. Exchange rate 1 dollar = N160.00
4. Project cost figures are based on preliminary budget estimates
5. Disbursements tied to time schedule and terms of payment with vendors.
6 Project Timeline is considered as 24 months and project will be commissioned into service in year 2015.

6.2 DEMAND PROJECTIONS

• Domestic demand is projected as 300,000 MT/A in year 2013 which is expected to grow at a CAGR of 22.22% to achieve a volume target of 1000,000 MT/A in year 2019 as per figures below, in line with projections of the Federal Government:

Year Demand
in MT

2013 300000
2014 366600
2015 448140
2016 547722
2017 669433
2018 818189
2019 1000000

• It is assumed that regional growth in the Target market area of South & South-East (constituting 11 states) will also keep pace with the overall demand growth and will have a demand share of approximately 33%.
• It is assumed that demand for Domestic usage will be 75% of the overall demand and Industrial will be 25% by volume. For the purpose of the analysis it is assumed that only 12.5kgs cylinders will be used as selling unit for the domestic sector;

6.3 DEPOT THROUGHPUT PROJECTIONS

• There are 6 loading bays, It takes an average of 1 hour to load one (20 ton) truck.
• Sales figures in the depot are based on the average retail price in 2012 of one 20ton LPG truck of N3.497 million ($21,860)

• That sales will grow exponentially as customers who hitherto travelled from the east to Lagos to buy gas, will patronize the terminal in the 2nd year;

• From 5th years onwards sales growth will be slower as we reach full capacity and competitive pressures stabilize growth
• We have assumed 6 hour working days in the first two years
• We have assumed 24 working days each month.
• In year 3 we increase shifts and increase working hours per day to 12 and loading 56 trucks per day; From year 4, it is assumed that loading time /truck will be reduced and 8 trucks will be loaded/shift;
• By year 6, we have increased number of shifts to 3 and load 18 hours per day

Yearwise, throughputs considered are as follows :

Year Nos of Loading Despatch Despatch
Shifts Trucks/d per month per year
(in MT)

1 1 18 8640 103680
2 1 36 17280 207360
3 2 56 26880 322560
4 2 80 38400 460800
5 2 80 38400 460800
6 3 90 43200 518400
7 3 90 43200 518400
8 3 100 48000 576000
9 3 100 48000 576000
10 3 108 51840 622080

6.4 BOTTLING PLANT

• LPG bottling plant inside the Depot which is termed as "MOTHER PLANT" will have a capacity of 300 bottles/hr; Utilization of the plant will be ramped up from 50% in Year 1 to 75% in Year 2 to 100% in year 3.

Years Nos of Prodn
Shifts per day
(Bottles/d)
1 1 1800
2 2 2400
3 2 3600
4 2 3600
5 3 4800
6 3 4800
7 3 5400
8 3 5400
9 3 6000
10 3 6000

• In order to meet the growing demand from retail sector, it is considered that further Bottling plants will be added at the rate of 3 new plants every year during the first 6 years; These bottling plants which are termed as 'SATELLITE PLANTS' will have capacity of 200MT/month on the basis of single shift operation; Cost of each of these plants is taken as USD 1million each.
• Satellite plants will have a capacity utilization of 50% in year 1 which will be ramped up to 75% in year 2 and 100% in year 3;
• These Satellite plants will be set up in the predominantly in the Target Market constituting the 11 states and a few also in the key markets - Lagos, South East, North Central and South-South.
6.5 PROJECT COST

• Total project cost is USD 76.197 Million including cost of land, jetty, bulk storage & handling facility, LPG bottling plant; It also includes a provision of USD 2.52 Million towards upfront payment for procurement of LPG bottles;

• Satellite bottling plants to be set up (3nos /year over 1st 6 years) are assumed to cost USD 1 million each with cost break up as follows :
Land Cost 100000 USD
Building & civil works 150000 USD
Plant & Machinery 750000 USD

• In addition, USD 15 million is considered towards 'Margin Money for Working capital' taking the total Project investment to USD 91.197 million; thus increasing the debt: :equity ratio to 5.3 which we have assumed is within the norms of lending Financial Institutions;
• Project cost includes 'Interest during construction period' at the rate of 12%;

6.6 REVENUE MODEL

• Jetty fees earned from 3rd party vessels is estimated based on the assumption of 24 vessels /year and fee per berth of USD 25000/-;
• Throughput charges will be earned by storage /handling of LPG for other marketers, volumes of which are taken as 20,000MT in year 1 and 30,000M in later years.
• Throughput charges are assumed as Naira 2/kg
Sales through RO

• No. of Retail outlets are currently 60 and will be 80 by year 2015, when the LPG facility goes on stream.
• It is assumed that every year 20 new Retail outlets will get commissioned into service.

• Demand at the RO for LPG bottles - is taken as 200 bottles/month in year 1 and it is assumed due incentives being proposed by the Govt, it will grow by 30% each subsequent years to reach a peak level of 1000 bottles/month;
• It is assumed that LPG cylinders will be supplied to ROs on basis of upfront payment (including deposit towards cylinders); Transfer price to ROs is taken as USD 1250/MT on self-collection basis;
Sales through Resellers

• In addition to ROs, in order to increase the spread, it is assumed that Resellers will be appointed at strategic locations; As these Resellers are expected to have better reach, it is assumed that each reseller will be in a position to sell 800 bottles/mon in the 1st year which will be ramped upto 3000 bottles/year;
• It is assumed that LPG cylinders will be supplied to Resellers on basis of upfront payment (including deposit towards cylinders); Selling price to ROs is taken as USD 1250/MT on self-collection basis;
Supplies to Franchise

• In addition to Retail outlets & Resellers, it is proposed that Franchise will be appointed who will invest in Bulk Storage, bottling & distribution of products under the 'Master' brand. Thus, they will supplement the bottling capacity of MEOGL and in return for their . These Franchise will buy the product from MEOGL in bulk at the prevailing market rates ( USD 1100 /MT);
• All sales whether through Franchise, RO or Resellers - is proposed to be done 100% on cash basis; No credit sales are considered;

6.7 COST OF SALES

• Cost of Sales figures are based on average platts price for LPG of $950.00 MT in year 2011-12 and includes $50 premium to cover logistics costs
• Production losses in storage/handling /filling (overall) are taken as 0.3%
• Manpower cost considered as per prevailing rates; average 5% increase in salary /wages is considered year on year; Manpower cost also includes Manpower requirements at Mother bottling plant as well as Satellite bottling plants;
• No additional manpower charges to MEOGL is considered on account of LPG selling activities at RO;
• Business development support will be provided by MEOGL by a team comprising of 1 Business development manager assisted by 1 graduate and OND holders covering 1 state within coverage area
• Gas Terminal will share services with existing White products depot for services such as Administration, HSE, Accounts, Technical, Quality control & Stores etc.
• Maintenance costs are taken at 0.5% of Plant cost;
• Sales and marketing expenses, 1% of sales the 1st yr as we build market share and 0.3% in subsequent years
• Insurance on Fixed Assets is taken at 0.5% of Plant cost and Insurance on Product is taken at 0.3% of product cost;

6.8 FINANCIAL OVERHEADS

• Depreciation has been worked out on WDV method & following Depreciation rates have been considered :

o Plant & Machinery 20%
o Factory construction 2%

• No separate Vehicles, Furnitures & Fixtures, Office Equipments have been considered for this facility as the same are assumed to be shared with the White product depot
.
• Preliminary expenses (viz. Engineering design, project management, construction supervision, commissioning support etc.) are proposed to be amortized over a period of 5 years; Further, as the product has a ready market, it is assumed that no major expenditure on Advertising, business promotions etc. would have to be incurred.
• It is assumed that LT borrowings will have 2 year moratorium period post commissioning. Repayments will start from Year 3 of operation. Interest rate is taken at 12% p.a.

• Working capital requirement has been estimated on following basis :
Inventory of RM 3 months
Salary (Production staff) 3 months
Power cost 3 months
Misc. expenses 1 month

• It is assumed that increases in Working capital requirements will be met from Internal accruals (cashflow)

Corporate tax rate is taken at flat rate of 20%. It is also assumed that Losses can be carried forward and adjusted against profit of subsequent years.

7 FINANCIAL ANALYSIS

FINANCIAL SUMMARY & KEY ASSUMPTIONS

SUMMARY

7.1 PROJECT COST
Particulars Amount in USD
Cost of Land 9,375,000
Plant & Machinery (including dedicated Jetty) 52,881,941
Factory construction (Civil & Structural) 9,112,907
Preliminary expenses 4,827,898
Total Fixed Capital 76,197,747
Add: Margin Money for Working Capital 15,000,000
Total Project Cost 91,197,747

7.2 MEANS OF FINANCING

Loan Finance 72,505,977
Equity Financing 18,691,770
Debt:Equity Ratio 3.879

7.3 PROJECT RETURNS & OTHER FINANCIALS
RETURN ON INVESTMENT (IRR) 25%
PAY-BACK PERIOD -INVESTMENT 4.54 YEARS
NPV (INVESTMENT) USD 43.4 MILLION

RETURN ON EQUITY (ROE) 57%
PAY-BACK PERIOD - EQUITY 2.6 YEARS
NPV (EQUITY) USD 66.63 MILLION

A Enclosed as Annexure-2 is the Financial projections for the Project for the 10 years of operation prepared on the basis of ‘Revenue Model’ as described in Chapter 7.

Following are enclosed :

Annexure No. Description
2.1 Summary
2.2 Fixed Assets
2.3 Milestone payments – Interest during construction period
2.4 Manpower Projections & Cost
2.5 Cashflow Projections
2.6 Projected Balance Sheets
2.7 Feasibility Analysis

Conclusions :

Based on the financial projections, the project is prima facie economically attractive.

8. SWOT & RISK ANALYSIS

8.1 SWOT ANALYSIS

Given below is realistic & objective assessment of Strengths, Weaknesses, Opportunities and Threats involved in this project.

STRENGTHS
1 Proximity to our target market and to the source of supply in Bonny will give us an edge over our competitors.

2. There are significant barriers to entry for potential competitors due to the cost of building a storage terminal.

3. Economies of Scale – due to the size of our Terminal, will be in favor of MEOGL

4. Less friction with host community since MEOGL already have a Tank Farm for white products operating in the same location in the last 3 years.

5. Strategically located retail outlets for the distribution of gas cylinders.

6. Dedicated jetty for LPG will make for faster turnaround time and eliminate demurrage claims.

7. Ensure the efficient distribution of products in the catchment area of MEOGL (namely South-South & South-East)

8. Guaranteed product availability and supply.

9. Encourage the adoption of LPG as an alternative to kerosene and firewood.

10. Reduce deforestation and indiscriminate felling of trees.

11. Provide above average returns for all stakeholders

12. Utilisation of locally available primary products.

WEAKNESS
1 Inadequate Operational Experience in LPG handling, storage & bottling
2. Inadequate Marketing experience in LPG
3. High Debt::Equity Ratio
4. Use of Floating Storage and Shuttle Vessels: The current supply scheme implemented by NLNG relies on a Mother Vessel which loads from NLNG’s Bonny plant and sails to Lagos waters from where Off-takers lift with a shuttle vessel. The reason for this is that only refrigerated vessels can load from the Bonny plant and these are normally large vessels which carry volumes larger than existing storage facilities. The Mother Vessel therefore acts as a floating storage facility for the scheme.

OPPORTUNITIES
1. The possession of a tank farm or throughput agreement with an existing tankfarm is a prerequisite for signing a sales purchase agreement (SPA) with NLNG.

2. Existing Storage capacity for LPG in Nigeria is concentrated in West (Lagos).

3. Existing capacity nationwide of 27,500 MT cannot satisfy projected demand (in the near-term) of 300,000 MT per annum.

4. The South East and South South areas consume 50% of kerosene imports( LPG substitute) in Nigeria.

5. The establishment of Masters Energy gas storage in Port Harcourt will drive down the cost of LPG in the region.

6. We will gain competitive advantage in the market due to proximity to our catchment area.

7. Potential demand for LPG in Nigeria is estimated at 1.3 million MT per annum based on our population.
The Federal Government wants to increase LPG usage to 1 million MT per annum in 2015, the existing capacity in the country is grossly inadequate to meet the expected demand.
8. Industries in Aba, Port Harcourt, and Onitsha are likely to switch to gas to power their facilities since it will become more available and cheaper than diesel.

9. The abundance of Natural gas in Nigeria, 184 trillion cubic meters of proven reserves, make LPG the fuel of the future.

10. LPG typically returns 50% annually for vertically integrated players. Masters Energy is in the process of acquiring a vessel for LPG and bottling plants within and outside our target market.

11. Deregulation of the petroleum sector will eliminate subsidies for kerosene and increase demand for LPG in the long run.

12. Reduction in the cost of liquefied petroleum gas (LPG) in the South- South and Eastern region, and also to the Northern parts of the country- will facilitate growth in demand.

13. Drive the economy in the region by providing a cheaper and cleaner burning fuel for industries.

14. Encourage the use of LPG as autogas for vehicles.

THREATS
1 LPG prices are based on volatile & high International prices; Without a subsidy or a price moderating mechanism, domestic market price therefore fluctuates with movement in international prices;
2. Contractor /Construction performance Risk

3. Country Risk

4. Demand Risk

5. Political Risk

6. Regulatory Risk

7. Cost Overrun Risk

8. Security Risk – Niger Delta related

9. Exchange Rate risk

10. Supply Risk

11. Operating Risk

12. Competitive Risk

Based on the above analysis, it is clear that the Strengths & Opportunities more than outweigh the Weaknesses & Threats.

It is important to highlight the abundant investment opportunities created as a result of the federal government’s GAS MASTER PLAN.

Whilst the introduction of the Gas Master Plan has created new investment opportunities in the Nigerian gas sector, significant progress has indeed been made within the sector in the past few years.

The Government has focused on this sector and has approved ‘LPG production and distribution policy 2008’. This policy aims at increasing LPG supplies, streamlining its distribution at affordable prices, especially to LPG starved areas of the country and promoting healthy competition or growth of LPG market while ensuring minimum safety standards across the Liquefied Petroleum Gas supply chain. To achieve this goal, issues regarding LPG production, LPG licensing, safety standards, pricing, distribution in under developed areas and import of LPG have been addressed in this policy.

8.2 RISK ANALYSIS

KEY SUCCESS FACTOR & PRACTICAL TIPS

Following are the key success factors in LPG business :

o Site feasibility of the LPG Storage Terminal & LPG Bottling Plant

o Dealing with a Major marketer/importer Directly

o Understanding the supply and demand for composite product like kerosene

o Understanding the LPG market and Government Gas master plan policy

RISK SUMMARY ANALYSIS

The risk assessment process is used to identify and evaluate the impact of various points like Country Risk, Political Risk, Demand, Supply, Security, Exchange Rate, Contractor’s non-performance, Operational risk on current project under review. This analysis focuses on existing problems, importance of country risk of Nigeria and also intends to show the regulatory framework issue, micro economic and macroeconomic issue to give a detailed picture of the Nigerian business Risk.

8.2.1 CONTRACTOR/CONSTRUCTION PERFORMANCE RISK

The risk that the construction of the storage tanks will not be completed on time and according to designed specifications, which will result in the inability of the depot to provide through put service targeted. An incomplete project may not be able to generate cash flow to support repayment of the facilities.

MITIGANT
The contractors to the projects will issue performance Bonds guaranteeing the quality of work to be delivered and executed within the period of construction. The bank (s) will also appoint an independent project engineer who oversees work progress and approves bill of quantities presented. The contractor was also appointed based on their experience and capacity as examined in the contract analysis. This has since been done.

The entire project is planned as a fixed – price turnkey contract for which a world class Engineering, Design, Procurement and Construction (EPC) Contractor will be selected to handle the project. The facility being sought for, for the construction of the depot will be disbursed directly to the Engineering Procurement and Construction Contractor on a milestone basis subject to receipt of Performance certificate(s) issued by a first Class bank in Nigeria. In addition, there are severe penalties included in the contract for delays.

The EPC contractor to be selected will have the requisite experience and track record in the construction and operation of similar Gas plants.

8.2.2 COUNTRY RISK

Country risks cover the political economy. Examples of country risk include civil unrest, guerrilla sabotage of projects, work stoppages, any other form of forcemajeure, exchange controls, monetary policy, inflationary conditions, etc.

MITIGANT
To take out political risk insurance against force majeure specific events. The political situation has been stable in the past 12 years with the successful transition from one civilian regime to the next. Standard and Poors outlook for the country was upgraded at the beginning of the 2012 from stable to positive citing improved reforms, growth in GDP and low sovereign debt.

8.2.3 DEMAND RISK

The risk that the customer may be unable to lease out the tanks or sell the product due to a fall in demand.

MITIGANT
Currently, end-users and operators of bottling plants in the South South, South East, and North Central travel to Lagos to buy gas. The cost of the gas includes the shipping cost from Bonny where the NLNG is located, and the cost of transporting the gas back to the eastern part of the country. The proximity of our tank farm to our target market gives us an edge. In addition the size of our tank in comparison to existing capacity gives us scale advantage. Total installed capacity in Nigeria is 17,000 MT, majority of the capacity is in Lagos. Our proposed facility is 25,000 MT, more than double the size of individual competitors.

Total installed capacity in our target market is 1,000 MT. Demand analysis based on kerosene usage in Nigeria shows that 50% is consumed in the South East and South South. Projected demand for LPG in Nigeria is 1.3 million MT per annum, current demand is 120,000 MT, leaving a gap of 1 million MT per annum. Annual rate of return is 50%.

Per capita consumption in Nigeria is 0.5 kg per annum, the average for West Africa is 8 kg per capita, for Egypt 45.5kg per annum and 57 kg for Morocco

8.2.4 POLITICAL RISK

The risk that a change in government may change, negatively, the Government’s policy towards the downstream sector.

MITIGANT
The advantages of gas over other domestic fuels will make it imperative for any successive government to encourage its usage. It burns cleaner and more efficiently than kerosene and firewood. The current drive by Governments in Africa to reduce carbon emissions and curtail desertification increases the relevance of gas as a viable energy source. There is also a push to reduce the flaring of Natural Gas in Nigeria from which liquefied petroleum gas is a by-product

8.2.5 REGULATORY RISK

The risk that the regulatory authorities may not allow the construction to be completed. However, it’s worthy to mention here that the Regulatory Authorities offered considerable assistance in this regards before, during and after the construction period.

MITIGANT
The company has obtained all the necessary approvals guiding the construction of LPG tank farms from regulatory authorities before disbursement (This is a condition precedent). Agencies such as DPR, SON, NNPC, Local Government, Rivers State Ministry of Planning etc approve of the construction work before commencement of the project and disbursement of fund.

8.2.6 COST OVERRUN RISK

This is the risk that the cost of purchase of the items and material for the construction works may increase above the budgeted amount.

MITIGANT
This risk is mitigated by providing for 10% of the project cost to cover overruns due to inflation, foreign exchange differentials and other exigencies. We are also projecting a 20% sensitization on the bill of quantities against the cash flow projection of the company for the project which is well above the current inflation rate of 7%. The cash flow analysis is based on the possible fluctuation in market prices of material, items for construction and economic situation.

8.2.7 SECURITY RISK –NIGER DELTA SPECIFIC

Recently, there have been a whole lot of cases in the Niger Delta which has led to hostages, kidnapping and in some cases resulted to killings and general abuse. This has translated to persistent disruption of flow of production and thereby reduces the revenue generation.

MITIGANT
Masters Energy has been operating in the region since 2009. The company has a 158,000 MT capacity tank farm for white products. There have been no incidents since inception. The company has a very robust community relations department. They have actively engaged the communities by employing youth and training them on vocational skills. We have berthed over 200 vessels since 2009 with no issues pertaining to piracy.

Additionally, the amnesty program of the Federal Government has reduced restiveness in the region. Business activities have since returned to the area. Rivers State Government by way of incentives reduced the taxes for those companies operating at the Onne Port and equally asked those companies who had moved out of the State to return.

8.2.8 EXCHANGE RATE RISK

This is the risk that the Naira will lose value against the dollar and jeopardize dollar repayments.

MITIGANT
We will employ hedging tools such as currency swaps, forwards, and options

8.2.9 SUPPLY RISK

The general issue here is with securing supplies for the project - feedstock. The three critical dimensions of supply are quality, quantity and availability. Does the input meet the necessary quality requirements of the project? Can the project get enough of the input? Is the supply reliable or are interruptions likely?

MITIGANTS
We have signed a long tern Sales Purchase Agreement (SPA) with the Nigerian Liquefied Natural Gas (NLNG) company. The duration of the contract is 5 years commencing from the completion of the Tank Farm. The contract specifies quantity and quality obligations of the supplier. The contract is a Take-or-Pay one which means that the supplier must provide feedstock of a specific quantity or quality for the duration of the SPA.

8.2.10 OPERATING RISK

This risk centers around the efficient continuous operation of the project.

MITIGANT
There is an Operations and Maintenance (O& M) contract in place.

8.2.11 COMPETITIVE RISK

The risk that competitors will build similar facilities within our catchment area and erode our profits.

MITIGANT
The cost of building an LPG storage terminal of the capacity envisaged is a major barrier to entry to potential competitors. We also have the advantage of a dedicated jetty, eliminating demurrage, and a draught of over 10 meters allowing for larger vessels to berth. We have a grip on the market having operated the largest white products tank farm for the last three years. We have mapped out effective strategies to dominate the market. We will acquire an LPG tanker allowing us to increase efficiency and reduce our cost profile. We also have off-take agreements with most of the major buyers in the region.

9. STATUTORY & REGULATORY FRAMEWORK

9.1 LPG LICENSING

Pre-Qualification for LPG License

Any company willing to distribute and market Oil and Gas needs to obtain a license from DEPARTMENT OF PETROLEUM RESOURCES (DPR)

DPR issues provisional licenses to technically and financially sound applicants/ parties for construction of works commensurate with their work program, for a certain period

DPR inducts reputable third party inspectors to check/monitor compliance with the terms and conditions of licenses.

The licenses can be cancelled in case of non-compliance with licensing terms and conditions.

9.1.1 PROCEDURE AND REQUIREMENTS FOR THE GRANT OF APPROVAL TO CONSTRUCT AND OPERATE A LIQUEFIED PETROLEUM GAS (LPG) PLANT.

A. APPLICATION PROCEDURE

 In accordance with Part VI Section Sub 87 -section (2) of the Petroleum Regulation 1967, Petroleum Gas plant or installation shall be constructed or modified without approval granted by the Director of Petroleum Resources.

 Accordingly, all applications for approval to construct/modified a Liquefied Petroleum Gas plant or installation shall be addressed to the Director of Petroleum Resources, 7, Kofo Abayomi Street, Victoria Island, Lagos, Nigeria giving full details of the proposals. Each application shall be accompanied by three copies of the following:

 Detailed approved plans drawings showing the existing or proposed buildings on the site and the relative distances to the roadways and adjoining properties.

 Piping and instrumentation diagram of the Gas filling Plant and Sectional design drawings of the storage tanks.

 Certificate signed by the Chief Federal/State Fire Officer or an officer authorized by him in that behalf, that he is satisfied with the proposed arrangements for the prevention of fire.

 A letter from the appropriate Town Planning Authority, authorizing sitting of the Liquefied Petroleum Gas filling plant at the proposed arrangements for the prevention of fire.

 An evidence that the company is duly incorporated by the Federal Ministry of Trade to deal in Petroleum products.

 A current 3-year tax clearance certificate.

 Codes, Standards and Specifications adopted in the design of the tanks.

 Non-Destructive Examination report or Pressure test report of the LPG storage (Pressure) tank.

B. REGULATIONS AND CONDITIONS GOVERNING THE CONSTRUCTION OF LIQUEFIED PETROLEUM GAS (LPG) BOTTLING/FILLING PLANT.

Liquefied Petroleum Gas must be stored under pressure in vessels designed to withstand safely the vapor pressure at the maximum temperature. Construction of such vessels must be to an acceptable design codes such as:

 The American Society of Mechanical Engineers (ASME) boiler and Pressure Vessel Code for unified pressure vessels. Code reference ASME.

 The American Petroleum Institute Standard 2510 (2)

 British Standard (BS) 1500 Part 1, fusion Welded Pressure Vessels for use in the Chemical, Petroleum and Allied Industries or BS 1505.

 Nigerian Standards Organization approved standard on pressure vessels and liquefied Petroleum Gas containers. NIS 220/85.

 BS 5500 for new vessels design, construction, test and certification.

9.2 ENVIRONMENTAL AND PROTECTIONS ASPECTS

LPG is much cleaner than diesel. The dirty black smoke that we see coming from diesel vehicles is particulates – a known cause of sickness and deaths. By replacing a diesel engine with an LPG powered equivalent, over 90 percent of this particulate matter can be eliminated.

LPG powered vehicles emit significantly fewer greenhouse gases and other pollutants than petrol-powered equivalents. LPG typically has around 20 per cent less ozone forming potential (a measure of the tendency to generate photochemical smog), between 10 and 15 per cent lower greenhouse gas emissions and only one fifth air toxics emissions.

LPG delivers clear environmental benefits over diesel and petrol. Recent independent automotive tests submitted to the Department for Transport have shown that LPG emits:

 120 times less particulate matter compared to diesel;
 less than half the NOs of petrol and less than one twentieth the NOs of diesel;
 17 per cent less CO2 compared to petrol and 2 per cent less CO2 compared to diesel, on a wheel to wheel basis

LPG’s impact on the environment in the unlikely event of a spillage is minimal as propane is lighter than water. It therefore readily disperses without combustion and with no contamination of water courses or surrounding land – unlike petrol or diesel where spillage is a major environmental concern.

9.3 PRODUCT/PROJECT STANDARDS AND COMPLIANCE ISSUES

Rules and regulations which govern any explosive material also apply on LPG. Its transportation, storage, construction of storage facility, filling of cylinders and their transportation all need to be carried out according to the standards and specifications provided by the explosive department, government of Pakistan. For LPG business, a license will be required from explosive department of the concerned province. Details have been provided in the following lines.

9.3.1 REQUIREMENTS FOR GRANT OF PERMANENT LICENSE UNDER EXPLOSIVES

I) Formal application with attested photocopy of National Identity Card briefly stating the purpose of obtaining License and justification.
II) Application in the prescribed form , dully filled in and signed by the applicant.
III) Distance Form D, dully filled in against all columns there of as per schedule VI of the Explosives Rules and signed by the applicant.
IV) Original receipt for the amount payable
V) No objection certificate along with the signed plan from the District Authority concerned to the effect that the Authority has No objection to the grant of license to the application for possession/sale of Explosives.
VI) Six copies of plan duly signed by the applicant and drawn to scale showing full constructional details of the proposed LPG storage site, and site with full surroundings and important land marks to facilitate its location. The distances maintained around the proposed LPG storage site shall be marked clearly.

VII) Documents showing the extent of possession/ownership of land for maintaining required safety distances from the explosives storage magazine.

VIII) Present consumption of explosives in the area and nature of work requiring use of explosives.

IX) Expected market potential in 5 years from now with full justification.

X) Complete details of the present consumers of explosives in the area giving their names, complete postal addresses, nearest Police station(s), approximate daily consumption of explosives by each consumer stating their nature of work requiring explosives.

XI) Details of other explosives magazine(s) 6 existing if any within a radius of 50 KM from the site of proposed magazine.

XII) Any proof/certificate showing competence and experience of the applicant or his authorized worker/agent/employee/supervisor in the handling of explosives.

XIII) Details of vehicle to be used for transport of explosives from source of supply to the storage magazine and the approximate distance in between.

XIV) Undertaking by the applicant to the effect he will observe strictly all the requirements of Explosives Rules.

XV) Certificate to the effect that guard over the magazine will be provided 24 hours by the license.

To ensure safety throughout the LPG supply chain, LPG storage tanks, cylinders, LPG transport tankers and distribution outlets of the licensees should meet the minimum safety standards as laid down in applicable Rules.

9.3.2 CONDITIONS FOR TRANSPORT OF COMMERCIAL EXPLOSIVES IN A VAN BY ROAD

1. The vehicle shall be in perfect serviceable condition in all respects.

2. The words DANGER and EXPLOSIVES shall be written conspicuously in Red color on three sides of the vehicle so as to be clearly visible from a distance and electric lamp with siren shall preferably be fixed on the vehicle for use in emergency.

3. There shall be no naked iron or steel in the interior of vehicle and no footwear with exposed iron or steel shall be worn by attendants on the vehicle.

4. The interior of vehicle shall be kept thoroughly clean from grit, oil rag, waste and other combustible material at all times.

5. All electric cables must be with heavy sheathing. No junction boxes, switches, fuses, lamp fittings or other electrical appliances or cable joints shall be allowed within the cargo compartment.

6. A quick action cut-off valve shall be fitted to the fuel pipe in an accessible position.

7. The driver shall not be under the age of 21 years and the attendant shall not be under the age of 18 years. The driver shall hold heavy duty driving licence.

8. Persons in-charge of the vehicle must be experienced in the handling of explosives.

9. All persons engaged in loading, unloading or conveying explosives shall observe all necessary precautions for the prevention of accidents by fire or explosion and no unauthorized person shall be allowed to have an access to the vehicle.

10. No person shall smoke while driving, attending to or working on the vehicle and no matches or sources or fire of heat, smoking material shall be carried on the vehicle.

11. Every consignment of explosives for transportation shall be accompanied by a license

12. Loading and unloading shall NOT be done in the vehicle while its engine is running or its fuel tank is being filled.

13. Explosives in excess of the authorized limit shall NOT be carried on the vehicle.

14. Damaged packages shall NOT be loaded in the vehicle.

15. Explosives shall NOT be carried in the Driver’s Cabin under any circumstances.

16. Detonators or other explosives containing their own means of ignition and Fire crackers shall NOT be loaded together or with any other explosives and must be transported separately.

17. All packages must be well secured and effectively protected against weather and the risk of pilferage or sabotage.

18. All packages must be appropriately labeled as to the nature of Explosives.

19. If loading, unloading takes place in wet weather, adequate stops shall be taken to keep the packages of Explosives dry.

20. The loading or unloading of explosives when once begun shall be proceeded with all due vigilance until the same has been completed.

21. No extra fuel shall be carried during conveyance other than in the fuel tank of the vehicle.

22. Vehicle shall not be taken to any garage or repair station while carrying explosives and condition of types, breaks and explosives shall be checked after short breaks during journey.

23. Efficient locking arrangement shall be provided at all times.

24. Efficient chemical fire-extinguisher of adequate capacity shall be carried on the vehicle.

25. At least one person (attendant) shall accompany the driver and the vehicle containing explosives shall not be left unattended except when absolutely necessary.

26. Other vehicle with its engine running shall NOT as far as possible be allowed within fifty feet of the vehicle containing explosives.

27. The vehicle shall NOT be driven at the speed more than 30 miles (50
Kilometers) an hour on smooth road.

28. Populated areas shall be avoided as far as possible and vehicle SHALL NOT be parked in any building during journey.

29. The vehicle shall NOT be driven in any street or public place within the limits of local administration and will be driven in accordance with the conditions of a written permit granted by the Local Authority.

30. Explosives shall be delivered to authorize consignee only.

31. In case of any emergency, one person shall warn the traffic and one person shall inform police and the consignor or consignee, as may be convenient by the quickest possible means.

32. One copy of the drawing approved by the Department of Explosives shall always be kept with the driver of the vehicle for production on demand by an inspecting officer.

9.4 REGULATORY ENVIRONMENT

BACKGROUND

The Nigerian National Petroleum Corporation [NNPC] and The Department of Petroleum Resources [DPR/ The Inspectorate] are amongst the regulators primarily responsible for formulating and enforcing regulations in the Industry [see Key Players in next chapter]. The DPR is an arm of the Federal Ministry of Petroleum and Mineral Resources and is vested with the authority of the Petroleum Inspectorate, mentioned in the NNPC Act of 1977 and the Petroleum Act 1969. Section 9(2) of NNPC Act 1977 makes provision for the Minister of Petroleum Resources to delegate to the Chief Executive of the Inspectorate such powers conferred on the Minister under the Petroleum Act 1969, the Pipeline Act or any other enactment as he may deem fit.

The Petroleum Inspectorate is principally responsible for the enforcement of the under mentioned Acts and Regulations:

• Oil Pipelines Act Cap 145, 1956.
• The Minerals Oil Safety Regulations 1963
• Oil in Navigable Waters 1968
• Petroleum Decree 1969
• Petroleum (Refining) Regulations 1974
• Petroleum Production and Distribution (Anti-Sabotage) Act 1975
• Petroleum products (Identification of Tankers) Regulations 1985.
• Oil Pipelines Act Chapter (CAP.) 338, Laws of the Federation Of Nigeria (L.F.N.) 1990

To discharge some of its responsibilities, the Inspectorate requires the cooperation of Law Enforcement Agencies, the Nigerian Ports Authority, Customs and Excise Department and the Nigerian Navy.

Legal Framework:

1. Constitution of the Federal Republic of Nigeria: Chapter II of the Constitution deals with the Fundamental Objectives and Directive Principles of State Policy. Under this Chapter is Section 16 which provides that the government shall manage and operate the major sectors of the economy. Although the term

2. Petroleum Act 1965: The Petroleum Act vests in the Federal Government, the ownership of petroleum resources in Nigeria. Petroleum is defined in the Act to include natural gas. Under the Act, prospecting, exploration, production and distribution of petroleum may only be done with the consent of the Minister in charge of petroleum. The Act gives the Minister power to issue necessary regulations necessary for the discharge of its duties under the Act.Section 4 of this Act provides that no person shall import, store, sell, or distribute any petroleum products in Nigeria without a license granted by the Minister of Petroleum Resources.

Any person who engages in any act requiring a license without the appropriate license required shall be guilty of an offence and liable on conviction for two years or a fine of N2, 000 [please see the Special Tribunal Act which is intended to provide a more appropriate penalty in view of the current value of this sum] and in addition, the petroleum products in respect of which the offence was committed shall be forfeited.

3. Petroleum Industry Bill (PIB): The PIB may be the most comprehensive and far-reaching piece of legislation that the present National Assembly may legislate upon. Gas has become an increasingly contributor to the national energy mix and so is given significant consideration in the Bill. The Bill covers areas such as policy formulation, regulation, and commercial operations. The Bill proposes the development of a fiscal regime for gas that is decoupled from oil and will create a level playing field for oil investors in gas. There is, on the whole, a separation of the oil and gas value chain into upstream, midstream and downstream which potentially will reduce overlapping responsibilities and bureaucratic bottlenecks. The Bill also seeks to impose domestic supply obligation on companies exporting liquefied gas in Nigeria.

4. The NNPC Act 1977: This is the Act that establishes the Nigerian National Petroleum Company [NNPC]. Section10 of the Act provides for the establishment of the Petroleum Inspectorate [Department of Petroleum Resources], which shall be an integral part of the Corporation. It further authorizes the Petroleum Minister to delegate to the Alternate Chairman or the Chief Executive of the Inspectorate any of the powers conferred upon the Minister under any Act or enactment. In particular, the Minister may delegate to the Inspectorate any of the under-mentioned matters. In effect, the DPR has responsibilities for the following matters except determined otherwise by the Minister:
• Issuing permits and licenses for all activities connected with petroleum exploration and exploitation and refining, storage, marketing, transportation and distribution.
• Acting as an agency for the enforcement of the provisions of the Petroleum Act, NNPC Act or any other enactment. In exercising any of these powers, the DPR is not answerable to any person or authority except the Minister.

5. Environmental Impact Assessment Act 1992:

Environmental Impact Assessment is mandatory for the construction of LNG facilities. This is issued by the Federal Ministry of Environment. The National Environmental Standards and Regulations Enforcement Agency Act (NESREA), the Environmental Impact Assessment Act (EIA) and the Environmental Guidelines and Standards for the Petroleum Industry in Nigeria (EGASPIN) prescribe environmental and emission standards applicable to natural gas activities in Nigeria.

The Federal Ministry of Environment, formerly the Federal Environmental Protection Agency [FEPA], is responsible for ensuring the formulation of and compliance monitoring of environmental standards. The Ministry has very wide powers covering all industries including the petroleum industry. The Ministry is responsible for approving Environmental Impact Assessments [EIA] of all projects and activities undertaken by players in the Industry. New oil and gas projects require EIA approved by the Ministry before any construction can commence.

The Department of Petroleum Resources (DPR) has also issued a set of Environmental Guidelines and Standards for the Petroleum Industry in Nigeria (1991), which overlap with and in some cases, differ from those issued by the Ministry. For the most part, the specific standards set are comparable to those in force in Europe or the U.S.

The Environmental Impact Assessment Act (Decree No. 86 of 1992) requires an environmental impact assessment (EIA) to be carried out “where the extent, nature or location of a proposed project or activity is such that it is likely to significantly affect the environment.” The public and private sectors are enjoined to give “prior consideration” to the environmental effects of any activity before is embarked upon. An EIA is compulsory in certain cases, including oil and gas field’s development and construction of oil refineries, some pipelines, and processing and storage facilities.

Some state governments have established state authorities, which monitor compliance with the EIA Act. For instance, the Lagos State Government established the Lagos State Environment Protection Agency [LASEPA] for monitoring and enforcing compliance with environmental laws within Lagos State. In July 2002, the Nigerian government ordered oil companies operating in the country to comply with the Environmental Guidelines and Standards for the Oil Industry, published by the Department of Petroleum Resources (DPR), the monitoring arm of the Nigeria National Petroleum Corporation (NNPC), or risk paying a fine. The 300-page guidelines provide rules to reduce pollution and procedures for environmental monitoring. The DPR also has been tasked with conducting regular health, safety and environment audits of the oil companies.

Companies in the Industry having chemical plants within Lagos are required to submit the following reports to the Federal Ministry of Environment, the DPR and relevant state authorities e.g. Lagos State Environmental Protection Agency [LASEPA]:

• Environmental Impact Assessment
• Monthly Effluent Analysis Report
• Environment Audit Report to be submitted upon commencement of operations

6. Companies and Allied Matters Act (CAMA) Cap C20, 2007 Edition, Laws of the Federarion of Nigeria (LFN): The CAMA regulates the incorporation, management and winding up of companies in Nigeria. It established the Corporate Affairs Commission (“CAC”), Abuja to administer its provisions.

Section 197 (1) of the CAMA prescribes that every charge created by a company with the intention that it provide security, shall be void against the liquidator and any creditor of the company unless it is registered with the Nigerian Companies Registry (i.e. the Corporate Affairs Commission (“CAC”)) within ninety (90) days of its creation. The CAMA requires the registration of all floating charges and specified categories of fixed charges including charges “for the purpose of securing any issue of debentures.”

The registration with the CAC is done after stamping of the security documents and attracts a fee of one percent (1%) of the amount secured. Barring any unforeseen circumstances, the registration of a charge with the CAC can generally be concluded within a period of two (2) weeks from stamping of the security documents.

Section 197 (1) of the CAMA prescribes that every charge created by a company with the intention that it provide security, shall be void against the liquidator and any creditor of the company unless it is registered with the Nigerian Companies Registry (i.e. the Corporate Affairs Commission (“CAC”)) within ninety (90) days of its creation. The CAMA requires the registration of all floating charges and specified categories of fixed charges including charges “for the purpose of securing any issue of debentures.”

The registration with the CAC is done after stamping of the security documents and attracts a fee of one percent (1%) of the amount secured. Barring any unforeseen circumstances, the registration of a charge with the CAC can generally be concluded within a period of two (2) weeks from stamping of the security documents.

7. The Customs and Excise Management Act (CEMA) Cap C44, LFN 2004

The CEMA 2004 forms the legal basis for the imposition of import and excise duties on the importation into, and exportation of goods out of, Nigeria.

Section 37 of CEMA provides that no imported goods shall be delivered or removed on importation until the importer has paid the proper officer any duty chargeable thereon. The import duty payable will depend on the category of the imported item, based on the Harmonised System (HS) Code.

8. Nigeria Investment Promotion Act

9. Companies Income Tax Act ,Cap C21, 2007 Edition, Laws of the Federation (“LFN”)

The Companies Income Tax Act (“CITA”) provides the legal basis for the imposition of taxes on the incomes of companies in Nigeria, other than those involved in the exploration and production of petroleum. Section 9(1) of CITA imposes tax upon the profits of any company accruing in, derived from, brought into, or received in Nigeria in respect of a trade or business. The CITA is administered by the Federal Inland Revenue Service.

Nigerian Companies (i.e. companies incorporated in Nigeria) are liable to tax on their worldwide income. A non-Nigerian company doing business in Nigeria and receiving payment abroad will be liable to tax in Nigeria to the extent that such income is derived from its operations in Nigeria.

The current tax rate is 30% of taxable profits and it is computed on a preceding year basis. In respect of non-Nigerian companies, taxable income is defined as gross revenue multiplied by a deemed profit rate (this is usually 20%). The effective income tax is therefore usually 6% (30%*20%) for non-resident companies.

In Nigeria, the liability of a non-resident company to tax is mainly dependent on whether the company has a permanent establishment (PE) in Nigeria and whether any income is attributable to that PE. Specifically, Section 13 (2) of CITA provides that the profits of a non-Nigerian company shall be deemed to be derived from, and therefore taxable in, Nigeria under any of the following conditions:

• if the company has a ‘fixed base’ in Nigeria.

• if the company operates in Nigeria through a dependent agent authorised to conclude contracts or deliver goods or merchandise on its behalf.

• if the company executes a turnkey project in Nigeria.

• if transactions between the company and its Nigerian subsidiary or related party are deemed not to be at arm’s length.

The Nigerian court has also held, in the case between Shell Petroleum International BV and the Federal Board of Inland Revenue, that “the place of business from which a taxpayer carries on his business means any identifiable place. It is a place which a taxable person is using at a given time. The place need not be owned or rented by it. It might even be a hotel or given to it gratis once the taxpayer is carrying on its business in such location”. Thus, once a foreign entity can be identified to be carrying on a business at any particular point in Nigeria, it becomes liable to Nigerian taxation.

10. Withholding tax (WHT)

WHT is governed by the CITA and other Nigerian tax laws which require tax to be deducted at source when payments on qualifying transactions become due from, or payable by, one company to another company. The company making the payment is required, to deduct therefrom, tax at the appropriate rate and to remit to the relevant tax authority the amount so deducted.

Once deducted, WHT must be remitted to the relevant tax authority within a reasonable period, but not later than 21 days after the payment is made or credited, whichever occurs first. WHT deducted from companies must be remitted to the FIRS while WHT deducted from individuals, partnerships and other unincorporated bodies must be remitted to the relevant State Board of Internal Revenue (SBIR).

The tax deducted represents an advance payment of corporate income tax and it is applied as a tax credit against the tax liability of the company from whom the tax is withheld for the relevant tax year. Where the WHT credit exceeds the assessment for a given year, the excess may be carried forward to a future period.

Payment of WHT is to be made in the currency of transaction (or currency of payment of the contract sum). The rate ranges between 5% and 10%; depending on the nature and description of transaction, the beneficiary and the residence of the beneficiary.

Applicable WHT rate of rent and interest is 10% while that of contract of service is 5%. However, for beneficiaries of interest payment resident in a country that has a double taxation treaty with Nigeria, the WHT rate is reduced to 7.5%. This is the final tax liability on this stream of income.

11. Exempted Income

To encourage longer-term inflows of foreign funds, section 11 of CITA provides that interest payable on a foreign loan may be exempted from tax as follows:

Repayment Period
Including Moratorium Grace Period Tax Exemption Allowed
Above 7 years Not less than 2 years 100%
5-7 years Not less than 18 months 70%
2-4 years Not less than 12 months 40%
Below 2 years NIL NIL

The “repayment period” is the total period within which the borrower is obliged to repay the loan, commencing from the date the loan is granted till the last installment is paid. Thus, a loan that is repayable over a period exceeding 7 years (including a 2 year grace/moratorium period) will enjoy 100% exemption.

The law does not define the terms: “grace” and “moratorium” periods. In our opinion, therefore, the interpretation of these two words would largely depend on the provisions of the loan agreement between the borrower and the lender.

We are however, aware that, in practice, the terms “moratorium” and “grace period” are used interchangeably to refer to the period during which the beneficiary is not required to make any repayment of either the principal amount or interest accruing on the loan.

11. Bi-lateral Investment Treaties / Double Taxation Treaties/Agreements (DTTs/DTAs)
Nigeria has DTTs with Canada, Romania, Belgium, France, the United Kingdom, Czech Republic, Pakistan, China, the Netherlands and South Africa. These agreements offer some tax advantages to companies resident in treaty countries.

The usual WHT rate for dividend, interest and royalty is 10%. For companies from treaty States however, a reduced rate of 7.5% is applicable.

12. The NDDC Act / Niger-Delta Master-plan

13. The Gas Master Plan: The three components of the Gas Master Plan are – the Domestic Gas Supply Obligation (which is the government’s first attempt at refocusing the gas resource for domestic use), the Pricing Framework (which reiterates the Federal Government’s commitment towards making gas available and affordable in the domestic market) and the Gas Infrastructure Blueprint (which focuses on the Central Processing Facilities and domestic gas transmission systems within the country)

14. Arbitration and Conciliation Act (……)Nigeria is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards and the Convention has been ratified and incorporated as the second schedule to the Nigerian Arbitration and Conciliation Act. Nigeria is also a signatory to and has ratified the ICSID convention.

14. Banks and Other Financial Institutions Act

15. Consumer Protection

16. Stamp Duties Act Cap S8 Laws of Federation of Nigeria (“LFN”) 2004 (“SDA”): Under Nigerian law, stamp duty is chargeable on a wide range of instruments with connection to Nigeria. Specifically, stamp duties are payable, ad valorem, on virtually all security documentation. Duty rates range from 0.375 percent to 1.5 percent of the amount secured, and vary with the specific type of security and the nature of the assets involved. Under the Stamp Duties Act Cap S8 Laws of Federation of Nigeria (“LFN”) 2004 (“SDA”), relevant instruments are required to be stamped within thirty (30) days of execution or, where executed outside Nigeria, within thirty (30) days of receipt of the instrument in Nigeria. The obligation to stamp is statutorily imposed on the obligee (the banks); although in practice, the burden for the payment of the duty is usually transferred to the obligor (the borrower).

The payment of stamp duty is particularly relevant for the purpose of enforcing the security created by the security documents. This is because instruments that are required to be stamped under the SDA are precluded from being admitted in evidence by a Nigerian court without the required duty and applicable penalties first being paid. Further, late payment of stamp duty attracts a penalty of interest at the rate of 10 percent per annum from the due date up to the time when the amount of interest is equal to the unpaid duty. Thus, in order to enforce the security interests created by documents such as a letter of pledge, contracts assignment agreement and or deed of charge over account in Nigeria, it is imperative that same are duly stamped.

Where stamp duty is chargeable at an ad valorem rate of the amount secured, most times, depending on the sum that was borrowed, the borrower may be unable to pay the full stamp duties payable or, even where able, the parties may agree that it is prudent to minimise the transaction costs. In practice, parties need not secure the entirety of the borrowing company’s obligations in the first instance but may agree on a notional amount for stamping purposes and subsequently, where the need arises, upstamp the secured amount to the full obligation. This structure will assure that the parties only incur the full stamp duty obligation where the need arises. In this regard, section 202 of the Companies and Allied Matters Act Cap C20 LFN 2004 (“CAMA”), permits parties to a registrable charge to determine a figure as the maximum amount secured by the charge, particularly where the charge secures fluctuating or uncertain amounts. The proviso to section 202 of CAMA further states that the maximum sum deemed to be secured by a registrable charge can be increased at any time prior to the winding up of a company, provided additional stamp duty is “subsequently” paid on such increase. It is however pertinent to note that the instrument will only be enforceable in respect of the additional amount, from the date of up-stamping thereof and charges registered by third parties over the same asset during the intervening period may claim priority over the additional amount in respect of which the instrument is up-stamped.

17. VAT Act (VATA) Cap V1 LFN 2004

The VATA governs the administration of VAT in Nigeria. A flat rate of 5% is applicable on the supply of all goods and services except those specifically exempted under the First Schedule to the VAT Act. Both resident and non-resident companies engaged in VATable activities in Nigeria are required to register for the tax, and to include VAT on their invoices to customers.

For a non-resident company, the local recipient of the service is required to withhold VAT on the invoices and remit it directly to the FIRS. Government bodies and agencies are also required to withhold VAT charged by contractors and remit directly to the FIRS.

2016-11-30T04:54:00.000-08:00

TREND IN FRAUD DETECTION:

The Role of Professionals as Litigation Witness

Overview of Fraud

Fraud is criminal deception

Fraud is theft

Fraud is profiting by deceit or trickery

Fraud involves theft of funds or information

Fraud is the use of another’s assets without permission.

Fraud may be done directly or indirectly;

Someone can steal outright or encourage stealing

Types of Fraud

Types of fraud may include but not limited to these;

A. Business Fraud/Fraud committed in business:

oPreparation of Financial Statements using false data.

oAbuse or personal use of business resources.

B. Employee Fraud/Fraud committed by employees:

oGaining advantage through forgery of documents

oStealing the cheques of a business

oGiving discount improperly or without necessary approval.

oFixed assets theft

oCreating fictitious expenses and obtaining the disbursements

Why do Fraud Occur?

Before now we had fraud triangle concept to fraud occurrence , that is;

ØMotivation/Pressure

ØOpportunity

ØRationalization

Now we have fraud quadrangle

Motivation/Pressure

Opportunity

Rationalization

Expertise.

Emerging trends in fraud Detection

•The degree of fraud sophistication has increased

•There is an increase in cross-border fraud

•Technology is being used to perpetrate fraud

•Government have multiple agencies focusing on fraud.

•Forensic Accountants involvement in investigating financial fraud cases

•Technology is increasingly being used to detect fraud

Practitioners/Lawyers who specialises in fraud need to be equipped to deal with the emerging trend

ØThe important weapon in the practitioners’ armoury is a Forensic Accountant

In understanding fraud; the goal should be:

Prevention of fraud

Detection of fraud

Investigation of fraud

Fraud Prevention

An Entity’s size, geographical diversity and organisational complexity should be considered when designing and implementing effective fraud prevention programmes

Forensic Accountants start by researching into what’s happening in the business at the time of engagement to create an effective fraud prevention program

vThe research is called a FRAUD RISK ASSESSMENT ANALYSIS

üThe crucial variables to research into are:

vThe key players in the company

vThe corporate culture that exists (ethical behaviour)

vThe nature of the industry in which the business operates

vThe current state of the company’s system of internal controls

vLaws and regulations that the company is subject to

üForensic Accountant should identify key internal controls in place in the organisation, as well as risks that are not addressed by the existing controls and evaluate their significance

•Interview management and employees, employees are generally aware of potential fraud risk and faulty internal control

•Administer fraud risk questionnaires to employees

Fraud Detection

The Initial detection of fraud is very exigent, because it is more difficult to prevent frauds committed by top management or owners of the firm.

Senior level managers, low level employees take the risk of committing fraud, because of their conviction that their crimes will go undetected.

All fraudulent activities would normally start with small amounts, but if not discovered or detected early, it would increase to higher amounts.

Table 1.0 Current model employed to curb fraud in many organisations revealed the percentage of fraud identified by groups as shown in the table

In Planning the Investigation, the finding should focus on:

üExact nature of the allegations

üTime frame when the fraud occurred

üWho in the organization is involved in the fraud

üHas the organization performed Preliminary Investigation into the matter.

üIs there history of similar fraud in the company

üLocation of the alleged fraud.

THE PROFESSIONALS IN FRAUD INVESTIGATIONS

Accountants

Auditors

Forensic Accountants

Accounting is the preparation of financial Statements, while auditing is the examination of those financial statements.

FOUR CARDINAL POINTS IN ACHIEVING THE VISION OF AN ORGANISATION

2016-09-20T07:24:00.001-07:00

THE FOUR CARDINAL POINTS IN ACHIEVING THE VISION OF AN ORGANISATION:

Every organization has a vision stated in clear terms.

Achieving the vision is beyond reciting, pasting on wall or reading and re reading it. It has nothing to do with shouting it out loud for everybody to hear and supposedly believe that you know and can remember the wordings.

Achieving the vision is all about internalizing it, making it a way of life and working silently but conscientiously towards achieving the vision and by extension the overall corporate objective.

So what are the cardinal points? Here goes............................

· RESIST THE TENDENCY TO CRITICISE NEW IDEAS

· RE INVENT YOUR BRAND IN ORDER TO GAIN NEW BANDWIDTH

· CONTRIBUTE BEYOND THE ORDINARY IN ORDER TO BECOME EXTRAORDINARY

· EMBRACE SHARED OWNERSHIP AND PRACTICE CONNECTIVE LEADERSHIP.

Three set of innovative words are apt and need to be pondered on:

1. new bandwith

2. shared ownership

3. connective leadership.

To get a clear understanding of these words peruse them in the context they are used and grasp them. Then you are at the threshold of being a party to realization of the vision.

LAST LINE.................................

IF YOU CONTRIBUTE TO REALISING THE VISION OF A VISIONER, GOD WILL SANCTION YOUR OWN VISION AND MOTIVATE YOU ADEQUAELY TO IT'S LOGICAL REALISATION.

JEROME C. NJOKU ACA, AMNIM.