Flexible exchange rate: Lekoil converts investment budget to naira
Sequel to the Federal Government’s introduction of flexible exchange rate to boost the value of the local currency, an indigenous oil firm, Lekoil has converted around half of its investment budget into naira from U.S. dollars.
Lekoil, a Nigerian oil explorer listed in London, has decided to use the naira’s slide to its advantage by paying for some domestic services with local currency.
Chief Executive Officer of the company, Olalekan Akinyanmi, said the firm is positioned to benefit from the Nigerian currency’s weakness to fund an oil field expansion.
He said: “As a result of the significant devaluation of the Nigerian Naira to the U.S. dollar in 2015, we have moved a significant portion of our capex from U.S. dollars to naira,”
The Central Bank of Nigeria (CBN) had said the flexible exchange rate policy would allow the forces of demand and supply to determine the rate of naira will commence today.
With the new regime, CBN expected that the naira will trade between 250 and 300 a dollar at the interbank market, while it will ensure availability of the hard currencies through the FX Primary Dealers for customers.
Akinyanmi said 50-60 per cent of Lekoil’s annual capital spending budget was now denominated in dollars, compared with 100 percent last year.
The company, which said its projects can make money even if oil prices fall to $25 a barrel, plans to bring production at its Otakikpo oil field to 10,000 barrels per day by the end of the year.
Lekoil, with a market capitalisation of around 80 million pounds ($114 million), said the attacks were a concern but its own operations was not impacted and were well protected.
The oil firm recently said it was refinancing an existing debt facility and the completion of a new debt facility raising, in aggregate of $20 million and provides an operation update for Otakikpo.
According to the company, Otakikpo-002 has been completed, evacuation facilities are nearing completion and the rig has been mobilised to Otakikpo-003.