Category Archives: ECONOMY

Akinwumi Adesina: Africa must trade smart by ensuring rapid growth

 

 

The president of the African Development Bank (AfDB), Dr. Akinwumi Adesina, has said that with the rapidly changing world of trade and rising echoes of unilateralism, Africa must trade smartly, starting by ensuring rapid growth in intra-African trade.

Adesina pointed to the important role of the African Continental Free Trade Area (AfCFTA) in that regard, saying that, when fully implemented, the AfCFTA would raise the share of intra-African trade in Africa’s total trade from 16 per cent to 52 per cent.

It would also increase the value of Africa’s traded goods and services by $35 billion per year, he added.

He made the remarks in Abuja during a gala dinner organised to mark the 2018 Annual Meetings and 25th Anniversary of the African Export-Import Bank (Afreximbank).

Adesina commented Afreximbank for its achievements, saying that the AfDB was very proud that the institution it helped create 25 years ago had fully come of age.

“Today, Afreximbank is the leader on financing trade in Africa,” he said.

Highlighting the importance of trade finance, especially for small and medium-sized enterprises (SMEs), Adesina noted that the AfDB had provided trade finance lines of credit of $650 million and trade finance mitigation support of $250 million to support Afreximbank’s trade finance activities.

He called for strong partnership between AfDB and Afreximbank in the development of export processing zones, especially staple crop processing zones, so as to help transform rural economies based on agricultural industrialisation and value addition.

Earlier, Dr. Mahmud Isa-Dutse, permanent secretary in the ministry of finance of Nigeria, which hosted the gala dinner, congratulated Afreximbank on the celebration of its 25th anniversary.

He pledged Nigeria’s continuing support for the bank as it continued to deliver on its mandate of promoting African trade.

Rising debt service to revenue ratio can expose Nigeria to debt crisis, DMO warns

 

…Pegs 2018 borrowing limit at $6.25bn
…Asks FG to privatise Nipost, Mint, others

                                                             Oniha, DG, DMO

Debt Management Office, DMO,  warned that Nigeria’s high debt service to revenue ratio, which deteriorated in 2016, could trigger a debt crisis. The DMO gave this warning in its 2017 Debt Sustainability Analysis, DSA, saying the country could experience debt crisis in the event of prolonged shocks (decline) in revenue, exports and naira devaluation.
The DMO also said for the country to stay within its 25 percent debt to Gross Domestic Product, GDP, threshold, the three tiers of government should not borrow more than $6.25 billion in the 2018 fiscal year.
The DMO stated: “The Fiscal Sustainability Analysis for the Federation (federal, states and FCT), showed that the ratio of Total Public Debt-to-Gross Domestic Product, GDP, remained below its threshold throughout the projection period. The ratio of Total Public Debt-to-GDP for 2017 was projected at 19.80 percent.
“Both the External and Fiscal Sustainability Analyses showed that all the revenue indicators (the ratios of Debt-to-Revenue and Debt Service-to-Revenue) deteriorated under varying shocks, suggesting that any prolonged shocks on the revenue would lead to debt distress in the medium to long-term, except other sources of revenue are speedily developed to enhance the revenue generation performance of the country.”
The DMO recommended that in order for the country to remain in the proposed country-specific threshold of 25 per cent borrowing limit, it would have to borrow (domestic and external) the maximum of $6.25 billion or N1,906.37 billion for this year.
“In order to estimate the borrowing limit for 2018, it requires the determination of the difference between the proposed Country-Specific Threshold of 25 percent and the end period.
“Therefore, the maximum amount that could be borrowed (domestic and external) for the fiscal year-2018 by the government without violating the proposed Country-Specific Threshold of 25 percent up to 2020 would be $6.25 billion or N1,906 billion (at N305 per dollar).”
Asks FG to privatise Nipost, Mint, others “Accordingly, for the fiscal year 2018, the maximum amount of $6.25 billion that could be borrowed is proposed to be sourced equally (50:50) from the Domestic and External sources, respectively, as follows: new Domestic borrowing $3.125 billion or N953.18 billion and new External borrowing: $3.125 billion or N953.18billion.”
The DMO also recommended that the government should boost revenue generation strategies by broadening the tax base, increasing tax revenue collection and privatise some viable enterprises.
“In order to enable government raise fresh funds to supplement its revenue for capital investments, government is encouraged to privatise some of its viable enterprises and have them listed on The Nigerian Stock Exchange.
“Hence, the need for government to sustain the on-going efforts aimed at reforming, restructuring and repositioning some of these enterprises for privatisation or commercialisation, including Nigerian Postal Services, NIPOST; Nigerian Commodities Exchange, Lagos International Trade Fair Complex, National Stadia and Nigerian Security and Minting Company, NSPMC.
“Aside saving government huge budgetary funds usually allocated for such entities annually, it will lead to wealth redistribution through public ownership of enterprises, as well as facilitate further deepening of the domestic capital market.”

 

Before the closure of Third Mainland Bridge

 

Image result wey dey for pictures of third mainland bridge                      Third Mainland Bridge Lagos

 

It is gratifying to note that the Federal Government has shifted the date for closure of the Third Mainland Bridge in Lagos for repairs from Friday, 27th July to Friday, 24th August 2018.
Minister of Power, Works and Housing, Mr Babatunde Fashola, justified the action thus: “The shift was done in order to give succour and relief to the people of Lagos State and other inter-state road users and support the efforts of the state government”.
This shows there is genuine coordination of efforts among the organs of the Federal Government and between the Federal and Lagos State governments towards bringing sanity back to the highways of the nation’s economic melting pot. Hitherto, the desired synergy between the Federal Government and the Lagos State Government, whose elected officials are of the same party, had not been in evidence.
The importance of Lagos in the socio-economic and political affairs of the nation can no longer be ignored. The current scourge of traffic gridlocks due to the presence of thousands of trucks from all over the federation, choking mobility and hampering the economic well-being of the State and the nation at large, is a poignant pointer to the need to always give Lagos special considerations.
When the Third Mainland Bridge is eventually closed either for inspection or actual repair works, it will exert heavy impact on road users in the city-state and outliers. It will virtually return Lagos to the situation it was before the Bridge was inaugurated by former military President, Ibrahim Babangida, in 1990. When considered that the size of the city and its precincts as well as its population have grown to perhaps more than double what they were in 1990, the implications for the impending traffic nightmares can only be better imagined than experienced.
Before this bridge is shut down for repairs, we suggest that the authorities first examine the possibility of partial closure, whereby the inspection or repair work is alternately conducted on one side of the eight-lane bridge while motorists continue to use the other side.
If that is not possible, then there is no other alternative than the total removal of trucks from all the expressways of Lagos. During this period, the multi-agency task force jointly set up by the Federal Government and LASG must work virtually round the clock and strictly enforce zero tolerance to any form of road blockage in any part of the city.
The authorities should also consider letting heavy trucks run only during after-hours and either move to holding bays or go straight to evacuate goods from the ports.

AfDB approves $250m risk participation agreement with ABSA

 

 

The African Development Bank (AfDB), this week, approved an unfunded $250-million risk participation agreement (RPA) with ABSA Bank.

This RPA, housed within the AfDB’s Trade Finance Operations, will enhance Africa issuing banks’ ability to leverage trade financing through a multisectorial approach.

When fully used, forecast estimates indicate that the facility will catalyze roughly over $2-billion worth of trade in three years.

The facility’s alignment to address the acute market demand for trade finance  in Africa through Agriculture, Transport, and Manufacturing is consistent with the AfDB’s goals of ensuring that Africa industrialises and trades more.

By extension, this RPA will also foster financial sector development and regional integration, the AfDB said in a statement.

Presenting the project to the AfDB board,  financial sector development director Stefan Nalletamby made a robust case for how, through strategic partners like ABSA, the AfDB’s RPA instrument continues to facilitate trade on the continent; thereby helping to reduce Africa’s trade financing gap.

“This facility, through a 50:50 risk sharing approach, will help to promote broad-based economic growth on the African continent through increased facilitation of import-export  activities of African corporates and small- and medium-sized enterprises, and increase intra-Africa trade and regional  financial integration in line with the AfDB’s Hi5 strategic objectives,” he said.

Under the RPA, the AfDB and ABSA will share the default risk on a portfolio of eligible trade transactions originated by African issuing banks and indemnified by ABSA.

The AfDB’s commitment under the RPA is to assume up to 50% of every underlying transaction issued by the said African issuing banks, while ABSA will confirm such a transaction and bear not less than 50% of its underlying risk.

Nigeria Outlook H2-18: Caught Between Two Stools

 

Global Economy: Is the party over?

Entering H2-18, the harmonized global growth of last year is fizzling out amid trade tensions between the US, China and most of the advanced economies. Economies of commodity-exporting countries are poised to strengthen as demand and supply dynamics continue to favour gradual uptick in prices. However, policy normalization in the US is rattling financial markets with currencies of emerging and frontier economies taking the most hit.

According to the World Bank’s mid-year revised projections for 2018, 45.0% of countries are expected to experience further acceleration compared to 56.0% in 2017. Furthermore, growth in advanced economies is expected to moderate slightly to 2.2% in 2018 (from 2.3% in 2017), as fiscal stimulus in the United States offsets lags in other areas. Meanwhile, growth in commodity-exporting emerging market and developing economies is expected to strengthen as commodity prices trend higher. As such, global growth is projected to remain flattish at 3.1% in 2018 and moderate in the next two years to 2.9% by 2020.
Sub-Saharan Africa (SSA): Slow growth amid rising challenges

In H1-18, SSA growth was restrained by poor momentum in Nigeria and South Africa (as at Q1-18) despite higher commodity prices, sustained global growth and increased fiscal stimulus. During the period, major economies in the region (Nigeria, South Africa, Kenya, Ivory Coast, Ghana, Angola, and Senegal), all approached the Eurobond market, issuing a total of $15.2bn.

However, foreign exchange conditions weakened against the US dollar as portfolio funds reversed on the back of rising U.S treasury yields. A major milestone for the region during H1-18 was the endorsement of the African Continental Free Trade Area (AfCFTA) by 44 of the 55 African Union member countries, to promote intra-African trade and accelerate regional integration.

That said, economic outcomes were divergent across the region as output recovery in Nigeria moderated in Q1-18 owing to relapse in critical non-oil sectors. Also, despite clarity in the political climate, South Africa recorded a broad-based slowdown in Q1-18 as GDP growth eased to 0.8%y/y driven by an underwhelming performance in the manufacturing and mining sectors. In H2-18, the build-up to 2019 election in Nigeria, upticks in commodity prices and weak policy implementation, are the key factors to watch. Nonetheless, the ratification of the AfCFTA by individual member countries portends a positive outlook for the region beyond 2018.
Nigeria: Caught between two stools

Macro variables in the Nigerian economy moved in tandem with our expectations in H1-18. Q1-18 GDP sustained gradual recovery, up 1.95%y/y. Headline inflation rate moderated to 11.6% in May-18. FX rates were broadly stable across segments as external reserves surged, adding $9.0bn from Jan-18 to Jun-18, settling at $47.8bn. Furthermore, oil prices surprised positively, averaging $71.0/b relative to our projected $55.0-60.0/b for the year. Monetary policy stance was less hawkish, though policy rates were held unchanged throughout the period.

However, fiscal policy remained aggressive as the second tranche of the $5.0bn Eurobond approved by the national assembly in 2017 was issued in Feb-18 while the Voluntary Asset and Income Declaration Scheme (VAIDS) deadline was extended till Jun-18. Unsurprisingly, the 2018 Budget was delayed till June.

Going into H2-18, we expect pre-election politics to take center stage. We anticipate a choppier socio-political outlook as the usual electioneering cycle plays out again. Nevertheless, recovery in the broader economy is expected to improve, thanks to conditions in the oil market which continue to support Nigeria’s external trade balance, government revenue, business, and investor optimism.

The downside risk to stronger growth include the clashes between Herders and Farmers, which dragged Agriculture sector GDP in Q1-18, as well as a potential oil output volatility. Accordingly, we have adjusted our FY-18 GDP growth forecast to 2.3%. Inflation rate is likely to creep back to 12.9% by year-end averaging 12.6% for the year. We think events in the local and global economy do not favour a rate cut in the immediate term, hence, we expect the MPC to keep rates unchanged in H2-18. FX rate should remain stable despite political risk, thanks to a robust external reserves position which is enough to cover c.12 months of import.

Also, mop-up exercise by the CBN should increase as fiscal and political spending rises. Accordingly, the overall theme for the Nigerian economy in H2-18 hangs on a balance between uncertainties around global geopolitical/local pre-election uncertainties and investor optimism about the gradual improvement in the macroeconomic space. As such, we note that the outlook for the Nigerian economy in H2-18 is “Caught between two stools”.

Naira Assets: A wobbly finish to a stylish start

As against the stratospheric start to the year, Nigerian equities closed H1-18 flattish, up 0.1%, as foreign portfolio investors took a flight to safety in Q2-18. The fixed income market witnessed a moderation in yields (down 69bps) compared to Dec-17 as the CBN scaled down on OMO mop-up and the DMO opted for funding from the international debt market to average down cost of debt servicing and incentivize corporate issuers in the local market. In H2-18, we highlight that geopolitical and pre-election uncertainties in the global and domestic economy may offset the anticipated improvement in the macroeconomic space.

Thus, we revise our return estimates for the equities market to 4.6%, predicated on improved corporate earnings and the implementation of new Multi-Fund Structure for PFAs by PENCOM. For fixed income securities, the CBN would likely become more aggressive with OMO sales to keep naira assets more attractive and maintain FX stability. Amplified by the play of political uncertainties and fears of rising US interest rates, we expect a slight uptick in the yield environment.

Total: We Have Injected $10bn into Nigeria’s Economy

 

Total E&P Nigeria Limited has put the value of its total investment in the Nigerian economy in the last five years at $10 billion.

The Executive General Manager, CSR, Mr. Vincent Nnadi, said this at the Total Business Sustenance for New Entrepreneurs Graduation ceremony that took place in Abuja.

Nnadi, in an interview, disclosed that the oil and gas conglomerate was also planning projects worth $16 billion and plans to use mostly local skills and talents in order to continue its fight against unemployment.

“We have for the first time recorded a high level of local content on this project and 77 per cent of it is fabricated in Nigeria,” Nnadi explained.

“It is a very large contribution to the economy and will be using local expertise.
“We have a very strong cooperative social responsibility.
“We have to support our society to progress by helping to solve some of the societal problem. One of these major problems is the issue of unemployment.”

On the skills acquisition training in conjunction with Toncia Energy Consulting and Professional Services Limited, Nnadi said the company would be monitoring the trainees to ensure smooth transitioning from training to practice.

“This is the second level of skills training we are doing. The first level was basic skill acquisition.
“We mentor them and will expose them backing them up with microfinance.

“We are also working with some banks to financially support some of the best business plans and even creating market opportunities for them.

“We will continue to monitor them along with Toncia Energy to make sure they are actually practicing what they have studied.”
One of the trainees of the program, Christiana Titus, expressed her gratitude to Total.

2018: Devt Tips for a Better Second Half

 

 

 

Development in the past six months in this country throws up various perspectives and viewpoints, depending on who is involved. To a layman like this reporter, Nigeria’s development process has been marked by false starts, stalls and jump-starts.

 

Persistent Corruption
On one hand it is easy to feel elation at the federal government’s declaration of emergency on corruption in a half-year which followed the recent visit of the Chair of Transparency International, Delia Rubio to a recent high-level workshop organised by the Civil Society Legislative Advocacy Centre headed by Auwal Musa Ibrahim in Abuja.

But it is also sobering to discover that in 2017 Nigeria slid down 12 places on the global ranking of the Corruption Perception Index of the same anti-corruption agency (TI) with 28 marks out of a possible 100 marks, which was released earlier this year.

And while anti-corruption crusaders are busy jubilating over the recent conviction and 14-year sentences passed on two former governors who were prosecuted by the Economic and Financial Crimes Commission (EFCC) for corrupt practices while in office, many citizens still believe the current administration has not totally purged itself of corrupt individuals, with some bad and corrupt eggs still operating in its uppermost ranks.

The best thing to do in the second half of this year is for the federal government to walk the talk and make the emergency declaration on corruption count by purging its ranks of corrupt individuals or those who have strong allegations of corruption hanging over their heads.

This will serve to pacify the disappointed citizens and neatly fit into the profile of PMB as a national, continental and global anti-corruption crusader.

 

State Police
The strident calls for the creation of State Police gathered steam in the first half of the year, mainly because of the incessant killings caused by marauding herdsmen, ritual killers and kidnappers.

Although the President directed the federal Police hierarchy to hire 10,000 new personnel, many view that as a drop in the ocean and just a temporary stop-gap measure which cannot successfully check the widespread killings and insecurity in the land.

This brings into play the need for State Police and even Community policing to complement the federal forces, which are reportedly currently less than 400,000-strong and which cannot adequately police Nigeria’s estimated population of 186 million citizens.

Incidentally, the National Assembly, especially the Upper chamber is spearheading the move for creation of State Police and they are powerful stakeholders in the quest to restore security in the country. Their efforts must not be allowed to flag in the second half, and the legislators should by supported by the Executive on this matter, for the benefit of all. That is not too hard to ask for.

 

Budget Implementation
The 2018 budget of N9.12 trillion was delayed for more than seven months by both the executive and legislature before the President finally signed the final copy into law in June.

The budget figure, which is the highest ever in the history of the country, has been described by the current administration as a pro-poor and people-friendly document, has a huge chunk allocated to capital expenditure and projects which are expected to benefit the general populace in a trickle-down style.

However, the ripple effect of the budget has not been fully felt by the citizens, and this second half of the year presents a golden opportunity for the federal government to put smiles on the faces of Nigerians.

Although the President initially accused the National Assembly of tampering with the budgetary allocations, he however signed the budget because, according to him, he “didn’t want to further slow down the pace of recovery of Nigeria’s economy”. He also pledged to work with the national assembly on the budget process and to bring a supplementary budget to re-capture the cuts made by the legislators during their oversight.

To the budget monitor, although the final passage of the budget was delayed, it is better late than never. The Ministry of Budget and National Planning and concerned players now have a good chance to effect some of the budgetary provisions in the second half of this year, and to finally put smiles on the faces of the long-suffering citizens. Nigerians are watching and waiting.

 

Agric Revival
On the agricultural front, Nigeria has recorded landmark results in the area of local rice production and market capture, which has reportedly reduced importation of foreign rice products by more than 90 per cent, despite efforts of smugglers.

Agricultural processing has also gone up several notches in the first half of the year, with the President commissioning some huge projects and processing plants around the country, which can only bode well for the economy and help reduce unemployment in the second half of the year.

With the active involvement of giant organisations like Dangote Group, Olam Nigeria and Flour Mills Nigeria in the agricultural sector, the private sector has shown a remarkable capacity to drive investments and profitable ventures in the industry, and the ripple effect is being felt around the country.

But to effectively raise the bar to make agriculture revenue a viable alternative to oil revenue, the federal government has to lead the struggle by granting some tax holidays, concessions and incentives to players in the vital sector, and the second half of 2018 presents a good chance to boost an already important industry. In this present agricultural revival, everyone is a winner and the positive trend is a welcome development.

 

Poverty Ranking
The first half of the year witnessed Nigeria’s emergence as the country with the highest level of extreme poverty, overtaking India in the process.

According to a report, the number of those living in extreme poverty in Nigeria is growing by six people every minute, while the May 2018 survey by the World Poverty Clock also showed that the country had an estimated 87 million people in extreme poverty; compared to India’s 75 million.

Ironically, the population of those living in extreme poverty is going down in India, which has an estimated population of over 1.3 billion, while Nigeria has an estimated population of 186 million.

The latest poverty ranking struck a blow to the federal government’s efforts to lift more citizens out of poverty, but it also presents a good opportunity for the current administration to re-jig its anti-poverty strategies in the latter part of this year.

If the number of people living in extreme poverty in Nigeria can be reduced considerably through government efforts and interventions, it would be a strong point in the favour of an administration which seeks to stage a comeback to power at the general elections next year. That, to this reporter, is a valid development yardstick.

 

Political Instability
Politics and development are interwoven in the quest for good governance, and one cannot be sacrificed at the expense of the other in any country that wants to move forward.

However, the problem is that Nigeria is going through a hybrid period of political instability, which also has its ripple effect on the economy and her development process.

This year has particularly witnessed upheavals in the political space and being so close to the election year, which is just a matter of months away, the present administration has to calm the troubled political waters in the most adroit way so as not to upset the gains recorded so far in Nigeria’s relative progress.

Although carpet-crossing and horse-trading cannot cease in politics, each camp owes it to the citizens who elected them into power to maintain peace and decorum devoid of rancour and acrimony, with a ripple effect on peaceful development and harmony.

If this current administration can manage to get along with its foes in the political space through matured compromise in this volatile second half of the year, that can only bode well for the citizens and for the country’s development. That is a worthwhile goal.

Accrued Rights: PFAs Yet to Feel Impact of N54bn Released By FG

 

 

 

 

Pension Fund Administrators (PFAs) are yet to feel the impact of the N54 billion released by the federal government last year for payment of accrued rights of pensioners for 2016 and 2017.

A reliable source  disclosed that the attributed the development to the non- appointment of board for the pension industry regulator, the National Pension Commission (PenCom), a situation which was said to have been slowing down activities of both the pension fund administrators and PenCom.

The Managing Director/Chief Executive Officer, IEI-Anchor Pensions, Glory Etaduovie, who also confirmed this, said though the fund was said to have been paid, not all PFAs have received it.

He said though the affected PFAs were still hopeful, the delay in releasing the said funds to the pension fund administrators managing the RSAs of those affected, may not be unconnected with lack of board for the regulator.

He said delay in appointment of board for the commission was also affecting the activities of the PFAs.
Before now managing directors of some PFAs had complained that delay in releasing the accrued rights is affecting smooth running of the contributory pension scheme (CPS).

But the federal government had last year, made budgetary provision of N54 billion for payment of accrued rights of its workers and pensioners for 2016 and 2017.
Accrued rights are entitlements of workers in pension terms before the advent of the private sector managed contributory pension.

It is pension rights of government workers that were in service before the commencement of CPS.
The CPS enabling laws demands that the government should release the money to PenCom, who in turn releases to the workers or pensioners through the various PFAs managing their RSAs.

But the government has been owing the pensioners in this regard.
Findings showed that since the inception of the CPS, total accrued rights owed by government to workers and retirees amounts to N300 billion.

The Acting Director General National Pension Commission, Aisha Dahiru Umar, had said the released fund would boost efforts at clearing outstanding pension liabilities especially the accrued rights of retiring government workers.
But some PFAs maintained that they were yet to feel the impact of the released funds.

Etaduovie, while speaking at a forum organised by the National Association of Insurance and Pension Correspondents (NAIPCO), also noted that one of the major challenges facing the CPS despite its success story and advantages was the unwillingness of some state governments and their workers to accept the scheme.

According to him, most state governments take the CPS for granted, while some have no political will to key into it.
He said similarly, some civil servants at state level do not like the CPS because they assumed that it pays them less than the Defined Benefit Scheme, “forgetting that it is better to have what is theirs very handy than waiting for the huge one you are not sure of.”

“There appears to be a dislike by some civil servants for the contributory pension scheme because it is thought that it pays lower than the defined benefits scheme. This leads to attempts by some implementers to frustrate it in many states.

“This is not true as the individual contributors’ funds would grow as the number of years a person is working increases and the investment returns are applied on a compound interest basis.

“They forget quickly that the governments can no longer carry such weights directly as it did in the past. Presently, it is difficult for many state Governments to meet up salary payments. This is the new reality”, he emphasised.

He said for now, only 15 state governments have keyed into the scheme adding that it was painful that others have decided to take the scheme for granted.
He cautioned against this saying some, “states are not able to pay salaries and government is not buoyant anymore to carry burden of pension benefits provisions.”

Expert Seeks Increased Private Sector Participation in Economy

 

                                       Gbola Sokoya

 

 

If Nigerians are to survive the present economic situation, government must allow more of private participation in the running of the nation’s economy, the Chairman, Pinnacle Leadership and Entrepreneurial Academy, Gbola Sokoya has said.

Speaking in a planned lecture scheduled to hold in Lagos on Thursday, Sokoya decried the fact that there had been too much involvement of government in the running of the nation economy.

This, he said, has had negative effect on the economy.

Sokoya said the forthcoming lecture titled, “Sustainable National Development in Globalised Economy,” to be delivered by a United States of America-based Nigerian professor of Economics and Management, Prof. Sesan Soyaka, aims to simulate the private sector participation to get involved in national economic growth.

He noted, “There is too much of government involvement in the day to day running of the economy in Nigeria. Government is involved in everything that happens and this, to a large extent retards the economic growth of the nation.”

Speaking further, he said, “If more money is invested into the economy by the private sector, the development of the economy of this nation would be more rapid. Private sector has better efficiency than public sector, which is a proven case everywhere.

“No doubt, the plan of the present administration to stimulate the economy is good. I have read the Economic Recovery and Growth Plan (ERGP) of this administration and I think it is in the right direction.
“That is why I want to stimulate the private sector, so that we do not just sit down and criticise government but take initiatives to contribute to the growth of the nation’s economy.

“You don’t need to talk to government before you know that the 180 million people in Nigeria must eat. Even if your own business is going to feed just hundred persons, just start it.
“Even if it means for you to sew cloths, everybody has to wear cloth, just start something. We have a huge market. You need to see the numbers of foreigners that come into this country on a regular basis looking for business opportunities. They are even trading in businesses that you and I can easily handle. There is too much of government in the economy, we need more of the private sector presence,” he said.

Cole Appointed into W’Bank Advisory Council
The Executive Director and Co-founder of Sahara Group, Tonye Cole has been appointed into the World Bank Group’s (WBG) Expert Advisory Council on Citizen Engagement.
The WBG established the Expert Advisory Council in 2014 to guide the development and implementation of the Strategic Framework for Mainstreaming Citizen Engagement in the bank’s operations.

The strategic framework was designed to give citizens a stake in decision-making in order to improve the intermediate and final development outcomes of their partnerships with government.

A statement on Monday, disclosed that Cole, would be one of the first two Nigerians ever appointed to the council.
The statement quoted the Sahara Energy boss as saying, “This platform will help articulate and address the real concerns of the private citizenry across the globe on a size and scale only the World Bank can provide.”

“The World Bank is a results driven institution. I am delighted at the opportunity to collaborate with other members of the council on robust agenda setting and implementation of initiatives that are so crucial to global sustainable development.”

Cole is one of the two designated private sector specialists on the council, which is composed of two representatives each from civil society, academia, the private sector, governments, foundations and development partner/donor organisations.
Other new members joining the Council are Flavia Milano (Inter-American Development Bank), Helena Bjunemalm (Swedish International Development Agency), Emily Martinez (Open Society Foundations) and fellow Nigerian Muhammed Sanu Abdullahi (Government of the State of Kaduna).

“My work with global agencies and institutions on sustainable development has only reinforced the importance of private and public-sector collaboration.
“My colleagues and I believe that continued cross-sectorial and multi-stakeholder engagement can transform the landscape on sustainability and social development for the next generation. I am feeling very positive as we collectively embark on this new chapter,” he added.

Commenting on Cole’s appointment, World Bank official, Jeff Thindwa, who oversees the council’s nomination and selection process, expressed delight at Cole’s addition to the Council, saying, “Mr. Cole will bring a unique private sector perspective to the Council. Combined with his longstanding experience serving global development institutions in various capacities, this positions Mr. Cole to make an impactful contribution to the work of the Council.”
Speaking on the appointment, Bethel Obioma, Head, Corporate Communications, Sahara Group, said it offers yet another platform for Cole to share his passion for “giving wings to aspirations.”

Tackling Operational Disruptions in Oil and Gas Industry

…the increasing labour-related disruptions of the activities of operators in Nigeria’s oil and sector has added to the security-related operational shutdowns, pipeline vandalism and crude oil theft prevalent in the oil producing region will worsen Ease of Doing Business in the country…

 

 

 

A recent revelation that the oil and gas-producing fields in Nigeria are shut down for 80 -160 days yearly because of operational-related incidents, revealed the kind of enormous challenges that made Nigeria a high-risk environment for the oil and gas industry.

A former Director of the Department of Petroleum Resources (DPR), and Lead Consultant to the National Assembly on the Petroleum Industry Bill (PIB), Mr. Osten Olorunsola told the industry stakeholders recently that oilfields in the country were shut down yearly for as long as 160 days on account of various operational challenges.

Olorunsola, who spoke in Abuja, at a roundtable on the PIB organised by the Nigeria Natural Resource Charter (NNRC) and Media Initiative on Transparency in Extractive Industries (MITEI), had explained that no other oil and gas-producing country experienced the kind of production disruptions suffered by Nigeria.

According to him, most oil producing countries recorded just about 30 and 45 days of production downtime and produce hydrocarbon for an upward of about 330 days.

This, he explained, was not the case in Nigeria where he noted that frequent pipeline breakages and uncertainties in security of assets, amongst other issues, were responsible for the lengthy operational downtime the country currently records.

“You can imagine being in business and you can’t do anything for two years, and you have staff and you just pay them salaries for two years – you must be a generous NGO (Non-governmental Organisation). In terms of real operational shutdowns, we are seeing something between 80 and 160 days, which is not good,” Olorunsola said.

“There are operations around the world where production days – you can almost guarantee 330 days; you can’t do all through the year because you have scheduled maintenance and all that, but usually it does not last more than 30 and 45 days; anything more than that is not good,” he added.
Olorunsola cited the case of the Trans Forcados oil pipeline, which was down for two years, shutting in production from oil fields, following the subsea bombing of the asset by the Niger Delta Avengers (NDA) in February 2016.

He added that in 2018 alone, some trunklines had been shut down for up to 84 days, thus impeding oil production.

Despite the efforts of the federal government to improve the country’s ease of doing business, operators in the oil and gas industry are challenged by security issues with the attendant cost premium, which falls outside their direct sphere of influence.

Insecurity, especially in the oil-producing Niger Delta region, poses the greatest threat to the survival of the oil and gas industry in Nigeria, inflating the costs of projects beyond global average.

Unlike the operators in the Gulf of Mexico, Persian Gulf, and the UK Red Sea, the oil and gas producing companies in the Niger Delta, which largely dominates the Gulf of Guinea, rely on costly transportation options such as helicopter transport and aviation for personnel and goods, as a result of the insecurity of Nigeria’s waterways.

The challenge of insecurity, added to overregulation and bureaucracy, as well as inadequate infrastructure, have increasingly impacted on the competitiveness of Nigeria’s operating environment and denied the country huge investments.

For instance, while Nigeria lost her influential position as the supplier of up to 10 per cent of the Liquefied Natural Gas (LNG) sold in the global market on account of lack of new investments in LNG in the country, the Italian oil and gas major, ENI, which has visible presence in Nigeria, is investing $8 billion to develop a gas field off the coast of Mozambique.

The company had committed to a deal signed in 2017 to build two LNG terminals in Cabo Delgado, the northern province of Mozambique to make the country a major supplier of LNG to the Asian market.

Precisely in June 2017, Eni signed an agreement with the Mozambique government to develop its portion of the Coral South LNG project where the Italian giant would be responsible for financing, construction, drilling and installation services.

This development came when the proposed Olokola LNG in the border town between Ondo and Ogun States, Brass LNG in Bayelsa State and the Train 7 of the Nigeria LNG Limited have remained on the drawing board for close to two decades due to loss of investor appetite, occasioned by the risks peculiar to the Nigerian environment.

Increasing labour-related challenges
As the Nigeria’s oil and gas industry contends with the security challenges, which cost them to defer the production of about 400,000 barrels of oil equivalent per day in 2016 and spent $500 million on security services to safeguard their workers and equipment in the same year, the oil workers’ union are increasingly worsening the challenges in the operating environment by frequent disruptions of operations in protest against what they perceive as injustice against their members.

First, the workers brought the operations at the head office of Addax Petroleum in Lagos to a halt following an accusation that the company engaged in anti-labour practices by being insensitive to their health and safety concerns in its operational areas, career progression and development.

Secondly, the oil workers also picketed the French oil major, Total Exploration and Production Nigeria Limited (TEPNG), in Port Harcourt, Rivers State, over an alleged removal of the company’s department responsible for employment from Nigeria to Paris, France.

Also, the operations of Neconde Energy Limited were also disrupted last year over the company’s alleged anti-labour practices, particularly an alleged breach of agreements to pay the workers transfer and severance benefits.

Similarly, last year, the picketing of Mobil Producing Unlimited, an affiliate of ExxonMobil, continued for several days with oil workers threatening to escalate the crisis to Shell, Chevron and Total until the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu had to intervene personally after the failed intervention of the Minister of Labour and Employment, Dr. Chris Ngige.

Even services providers in the oil and gas sector were not spared by the workers, forcing the Petroleum Technology Association of Nigeria (PETAN) to cry out that their members were being forced to close shop.

The case of General Electric was interesting as it was also picketed not because its workers belonged oil workers’ unions but for allegedly owing Arco Group, which the oil workers claimed had prevented Arco from paying the salaries of their colleagues working in the company.
Shell and Chevron in Nigeria had also suffered the same fate over alleged plans to cut jobs and amidworkers’ demands for temporary employees to be given permanent contracts.

Latest case of ExxonMobil
On April 20, 2018, the Supreme Court ruled that all Supernumerary (SPY) police personnel working for Mobil Producing Nigeria (MPN) were employees of the company and thus entitled to all remunerations, benefits, terms and conditions as employees of ExxonMobil.
It was estimated that approximately 925 personnel were affected by the ruling of the apex court.

As a result, the company was said to have implemented a non-voluntary separation programme in July 2018 for the approximately 500 affected personnel, who were still in active service.
In addition to receiving a separation package that includes compensation based on years of service and position, the affected personnel were also said to have been offered assistance from a human resources consultant to help find employment opportunities with a third-party security services provider.

The position of the company was that the activities it undertook to provide compensation packages to the individuals affected by the April 2018 Supreme Court judgment were consistent with the court’s ruling and prior company practices.

The company maintained that it typically retained security services through third parties who were best positioned to provide these core competencies.
On the allegations by the ex-Spy policemen that their jobs were taken over by expatriates, the company had denied that the security services previously provided by the SPY personnel were being replaced with expatriate staff.

Impacts of frequent disruptions
Globally, workers have the right to peacefully protest perceived injustice. But resorting to self-help by restricting the access of other workers to their business facilities are illegal acts that infringe on the rights of others.

Indeed, the use of brute and physical force for blockading offices and operational facilities poses a safety and health risk to the other users of the facilities and impedes critical business activities that support revenue generation, which benefits all the stakeholders – government, companies, host communities and the protesting workers.

Apart from the 400,000 barrels of crude oil deferred in 2016 due to security challenges, according to the Oil Producers Trade Section (OPTS) of the Lagos Chamber of Commerce and Industry (LCCI), statistics has also revealed that strike action threatens approximately 450,000 barrels of crude oil production, amounting to over $31.5 million daily revenue loss to Nigeria.

Workers’ threat to the oil and gas industry is also a threat to budget implementation, with potential to plunge Nigeria back into recession.

Considering the N12 billion reportedly lost by the telecommunications giant, MTN, to the four-day shutdown of its facilities by the Nigeria Labour Congress, the recent operational disruptions at ExxonMobil also had the potential to hurt Nigeria’s drive for Foreign Direct Investment (FDI) by sending the wrong signals to prospective investors.

There is no doubt that some of these companies flout labour laws, but blockading offices is not the appropriate means of enforcing the labour laws.

The government should set up a mechanism, if it is not already in place, to enforce the Nigeria’s labour laws without the workers resorting to self-help.

In view of the critical role of the oil and gas sector in driving the Nigeria’s economy, it is important that this critical sector is ring-fenced by the federal government from some of these avoidable challenges by making it a strategic national asset.

This would entail clearly outlined and enforced win-win systems of dispute resolution for both the industry operators and their workforce, and also stringent sanctions for frivolous disruptive actions.

 

Expert Advises States to Set Aside Sinking Funds

 

 

 

Pension fund management expert and the Executive Director, Business Development, South and Strategy, Premium Pensions, Mrs Kemi Oluwashina has stressed the need for state governments to set up what she described as ‘sinking funds’ to address problem of arrears of pension entitlements owed to retirees in various states.

Oluwashina, who gave the advice during a courtesy visit to the Head of Service of Enugu State, Mr Chidi Ezema, defined sinking fund as an account that is used to deposit and save money to repay a debt or replace a wasting asset in the future.
According to her, it’s like a savings in which you deposit money regularly that can only be used for a set purpose.

“A sinking fund is essentially established to ease the process of retiring debt or prevent defaulting on debts. It can serve several purposes, but the main purpose is to lower the outstanding principal before it becomes due,” she explained.
According to her, non-payment of pension entitlements, especially accrued rights to retiring or retired workers was affecting the successes recorded in the contributory pension scheme in Nigeria, as she emphasised the need for state governments to establish sinking funds to address the problem.

She pointed out that the liability of unpaid pension entitlements would never go away until it is frontally tackled.
“It is a fact that the real value of unpaid pension liabilities gets eroded with time to the detriment of the retirees who are already passing through untold hardship things only get worse when the liabilities keep piling up. Setting aside this special fund is a midway approach to addressing the liabilities,” she insisted.

Continuing, she said, “While Accrued Rights are largely entitlement of workers before the advent of the private sector – driven contributory pension scheme, its late payment by especially, the various tiers of government renders pension administration cumbersome or even impossible.

“This is because Accrued Rights have to be lumped into Retirement Savings Accounts (RSAs) before lump sum and Programmed Withdrawals could be worked out for retirees. Most, if not all retirees from government establishments for now have their entitlements locked in both the old Defined Benefit Scheme and the new Contributory Pension Scheme,” she noted.

She said backlog of pension liability was more pronounced in most state governments who have neither been making any serious effort to address the issue, nor keyed into the new scheme by domesticating the Pension Reform Act 2014.
According to her, while the federal government is making efforts to offset the unpaid Pension Accrued Rights for the period covering May 2017 to April 2018, which currently stands at N97.55 billion, most state governments still struggle with payment of salaries let alone addressing issues of pension.

Pension liabilities before the advent of the Contributory Pension Scheme stood at N2 trillion while the scheme has accumulated Funds under Management in excess of N8 trillion since inception in 2004.
She said her visit to the Enugu State Head of Service was to demonstrate appreciation for the efforts being made by the state government to join the league of states that had keyed into the contributory pension scheme.

Nigeria, Niger Inch Closer to Building 150,000bd Boarder Refinery

 

 

 

Nigeria and the Niger Republic on Tuesday made some progress on the planned construction of a 150,000 barrels per day (bd) processing capacity refinery to be built in a border town in Katsina between both countries.

Both countries in Abuja, set up two task teams to be jointly managed by officials from them. They said they will get the private sector finance to execute the projects.

The task teams which were inaugurated by President Muhammadu Buhari, alongside the President of Niger, Mahamadou Issoufou, would develop a detailed project implementation roadmap that covers bankable feasibility studies for the refinery and associated pipeline project; optimal project site and pipeline routes; security plan; as well as selected consortia of investors for the projects.

Headed by the Minister of State for Petroleum Resource, Dr. Ibe Kachikwu, and his Nigerien counterpart, Foumakoye Gado, the teams would be expected to submit their report by December 2018, after which implementation of the project would commence and possibly last over two years.

Speaking at the ceremony, which held at the State House, Buhari said the initiative would provide a reliable market for stranded crude oil volumes from the Niger Republic, as well as provide petroleum products for Nigeria to enable it exit importation of refined products as she planned to do in 2019.

He noted that the project will be private sector driven with the full support of the governments of both countries.

“Nigeria and Niger have excellent relations for several decades, as neighbours sharing a long border with common cultural and historical ties. Nigeria sees this cooperation on crude oil export from the Republic of Niger and construction of refinery facilities in Katsina State as a win-win for both nations,” said Buhari.

He further stated: “In addition, it is my hope that the current frontier exploration efforts in the northern part of the country (Chad Basin, Gongola Basin, Sokoto Basin, Bida Basin and Benue trough) will also result in the  provision of additional hydrocarbon inflow to the corridors of the proposed pipeline and a potential refinery around Kaduna axis.

“I am happy that several productive engagements held between the Nigerian and Nigerien authorities have resulted in the positive agreements to progress with activities on this important project.”

Inaugurating the task team, the president said: “A steering committee has been set up to be chaired by the Nigerian Minister of State for Petroleum Resources and the alternate chairman is the Nigerien Minister of Petroleum, to provide strategic leadership, direction and governance oversight for the project.

“Further to this, a senior level joint technical team is carefully selected based on competence to develop the implementation roadmap and strategy on both the refinery and pipeline projects. This team will be led by Nigeria’s engineer, Rabiu Suleiman, supported by the Director General Hydrocarbon of Niger Republic.”

 

Nigerien President, Issoufou, also agreed with Buhari and stated that the project would strengthen existing economic and political ties between both countries.

He said: “The country sees the refinery as a way of uniting with the country after being separated by colonialism. The initiative remained a way growing intra-African relationship.”

Issoufou also suggested that African countries would hardly develop if they concentrated on export of raw resources as against processed goods.
 
He thus asked Nigeria to lead in ensuring the oil and gas sector of the continent is developed. 
 
He also said Niger will sign the African Continental Free Trade Agreement (AfCFTA) to expand her economy, adding that Niger would rely on Nigeria to help grow its oil and gas sector. 
 
Providing some insights into the projects, Kachikwu said the decision to build the refinery and pipeline was taken after it was discovered the initial plan to build a line to the Kaduna refinery for crude oil supplies from Niger was uneconomical.
He noted that almost nothing of both governments’ funds would be put in the projects, adding that investors were already lining up to partake in it.
According to him, about 50 investors were at the Tuesday meeting at the State House to observe the processes and firm up their initial expressions of interest.
The minister equally stated that the governments were mindful of the security challenges up north but not deterred by it, and would push on with the plan.
Niger Republic, he noted, had been least-impacted by the security challenges occasioned by the Boko Haram terrorists.
“There is a decision to build a pipeline from Niger Republic into Nigeria’s boarder town and construct a refinery with capacity probably between 100,000 and 150,000 barrels per day. It is all dependent on the Niger crude volume and what they find.

“The study has to be done and we know what is involved. The technical and financial components, negotiating the finance. We have mentally structured our minds to a two-year period but it depends on what we find,” Kachikwu explained.

He noted that Katsina was chosen to host the refinery because it was close to Niger, adding there was a potential for an extension to Kaduna.

He said the project would have “private-sector led multi-stakeholder partnership with or without equity participation from federal governments, state governments or agencies as necessary”.

“Long term contracts for the supply of feedstock, adequate funding from reputable financial institutions, provision of guarantees and incentives that will safeguard investments and returns at the setup of the company, and respect for the sanctity of contracts,” he said.

2016 Audit Report: Presidency Illegally Moved N14bn to Establish Army Barracks

  •  DPR, FIRS overpaid N837.082bn  324 MDAs fail to submit their accounts for audit

 

 

 

 

The audited report of the federal government for the 2016 financial statement from the Office of the Auditor-General for the Federation (OAuGF), Mr. Anthony Mkpe Ayine, has revealed that the presidency illegally withdrew N14 billion from the Stabilisation Fund for the establishment of an Army barracks.

The report, which is posted on the OAuGF’s website also indicated that one of the flaws among the agencies of government pointed was poor book keeping practices, especially in the oil mineral sector, in the management of revenue generation and expenditure, and described it as a major challenge in the anti-graft war in public finance expenditure.

The audit report cited one case of discrepancy by the relevant government agencies, which culminated in the over-payment of two revenue generating agencies, including the Department of Petroleum Resources ( DPR) and the Federal Inland Revenue Service ( FIRS).

According to the report,  the overpayment stood at N837.082 billion as cost of revenue  collection by the two bodies.

It said: “Our examination of the Accountant-General’s Transcript and FAAC figures revealed that the FIRS and DPR were over paid cost of collection in the month of August 2016 in the amounts of N305,922,200.48 and N531,160,436.78 respectively totaling N837,082,637.24.

“ It was observed that what was captured in the Accountant-General’s Transcript as payments for the month of August for FIRS and DPR as cost of collection differs from what FAAC approved in the FAAC file. It is expected that only figures approved by FAAC are to be paid by the Accountant-General of the Federation. The difference resulted in overpayments of N837,082,637.24 by the Accountant-General to the two collecting agencies.”

Also contained in the report was the fact that joint venture (J V) cash calls ( funds injected into JVs by the NNPC on behalf of the Federation could not be accounted for in the books of the OAGF and the FAAC.

“These  funds are obtained out of revenues accruing to the Federation that would otherwise have been paid onto the Federation Account for allocation to the three tiers of government. Firstly, it is unclear how and where the asset values of these investments in Joint Ventures on behalf of the Federation are determined and reported.

“Secondly, from the analysis and review of the Revenue and Account documents presented by the Crude Oil Marketing Department (COMD) of the NNPC in respect of Sales of crude oil and gas and payment of JV Cash Call funding, it was observed that only a marginal sum was returned as revenue from Export of Crude Oil and Gas revenue inflows to the Federation Account for January to December, 2016,” the report said.

“From the total receipts by NNPC of $2,399,642,012.90 (N569,143,803,033.21 from export sales of crude oil and gas for the year, a total amount of $2,348,880,056.93(N517,354, 153,159.77) was paid out to fund JV Cash Calls, leaving only $72,875,099.00 (N22,423,859,671.82) which was paid to the Federation Account.

“It should be noted, that the above JV Cash Calls deducted from the proceeds from export oil and gas sales did not include an amount of N355,173,305,887.21 also paid from the receipts from Domestic Crude oil sales as JV cash calls,” the report stated.

It also pointed out is that the “examination of records and documents presented to the Audit Team in respect of the Excess Crude Account (ECA), revealed that a sum of N361,230,422,517.15 summarised below and classified as PPT/Royalty was deducted from total oil and gas revenue collected before the balance was paid to the Federation Account.

“These deductions would appear to contravene the provisions of Section 162 (1) of the Constitution of the Federal Republic of Nigeria, 1999 which states as amended,” it stressed.

There was also the issue of zero collection of oil revenue for some period.

According to the report,  “ It was observed from the CBN Components Statements that no collections were reported into the Federation Revenue Account by some revenue collecting Agencies for certain months of the year. It was not clear from available records why these months recorded no revenue collections and no explanation was provided for this.

“The Accountant-General has been requested to obtain an explanation from the Group Managing Director of NNPC and Director DPR for the non-collection of revenue during these relevant months,” as well as “ensure that any revenue found due for these months is remitted to the Federation Account, and evidence forwarded for audit verification.”

Meanwhile, no fewer than 324 Ministries Departments and Agencies (MDAs) of the federal government failed to submit their accounts for audit in 2016, according to the report.

This figure contrasts with the 215 MDAs which did not submit their accounts in 2015.

There are over 900 MDAs at the federal level. The Auditor-General pointed out that the extensive violation of statutory financial reporting obligations by parastatals is of great concern. According to the report, as at April 2018, 109 MDAs had not submitted their accounts beyond 2013, while 76 agencies submitted last for the 2010 financial year even as 65 others never submitted any account since inception. The report was however silent on culpable agencies. “The extensive violation of statutory financial reporting obligations by Parastatals is of great concern.

Only 51 audited financial statements for 2016 and 149 for 2015 were submitted to the office of the Auditor-General as at December 27, 2017.

The report noted that the development runs foul of the Financial Regulation 3210 (v), which mandates the chief executives of agencies to submit audited accounts to the Office of the Auditor-General of the Federation, OAuGF “not later than 31st May of the following year of Account.”

Section 85 (5) of the Constitution of the Federal Republic of Nigeria 1999 (as amended), empowers the Auditor-General  to submit a report on the audit of the Accountant-General’s Financial Statements to the National Assembly within 90 days of receipt of the statements from the Accountant-General of the Federation.

However, the Auditor-General observed in the 2016 audit report that the financial statements of the federal government for the year ended December 31, 2016 were first submitted to him by the Accountant-General of the Federation on June 30, 2017.

“Following my preliminary observations,” he noted, “the Statements were significantly amended and resubmitted on 29th September, 2017. Further amendments to the Financial Statements led to another re-submission on 29th December, 2017 and 16th January, 2018 before the final version was eventually submitted on 20th March, 2018.

“The Financial Statements of Government Statutory Corporations, Companies, Commissions, etc, otherwise called Parastatals are not audited by my Office, in line with Section 85(3) (a) of the 1999 Constitution. However, in accordance with Section 85(3) (b) of the Constitution, their Annual Accounts and Auditor’s reports thereon shall be submitted to me for comments.

“Most of the government Corporations, Companies and Commissions have not submitted their audited accounts for 2016 to me. Only 51 audited Financial Statements for 2016 and 149 for 2015 have been submitted to my Office as at 27th December, 2017, despite the provision of Financial Regulation 3210(v) which enjoins the Chief Executive Officers of these bodies to submit both the Audited Accounts and Management Report to me not later than 31st May of the following year of Account,” the Auditor-General added in the report.

 

ANAN Harps on Veritable Budgetary System for Nigeria

 

 

 

 

The President/Chairman of Council, Association of National Accountants of Nigeria (ANAN), Alhaji Shehu Ladan has advised the federal government and members of the National Assembly to develop a veritable budgetary system for the country.

Ladan, made the recommendation in a statement obtained at the weekend.

He said that a veritable budgetary system would properly address the perennial challenges in the budgetary process, particularly the delays in budget formulation and appropriation.

The ANAN president said that such delays remained major constraints in governance.

“In order to checkmate the incessant delays in budget approval, the executive and the legislature should agree to enact a law that would prescribe the maximum period for the passage of the annual budgetary Appropriation Bill as practised in many countries, such as the UK and USA.

“It is important to increase stakeholders’ participation in the preparation and implementation of budget in order to foster greater understanding of the budgetary system as well as cooperation in the implementation of the approved budget.

 “Government should re-energise the Budget Implementation Monitoring Team (at all tiers of government) composed of experts from both the public and private sector to ensure effective and speedy implementation of priority projects contained in the 2018 budget,” he added.

Continuing, he noted that professionals such as accountants would help the government, especially in the area of value for money audit towards efficient budget implementation.

According to him, since the unprecedented delay in passing the budget this year would result in uncertainties and heavy cost overrun during implementation, there was the need for timely release of funds to finance the approved capital projects by minimising bureaucracy in the disbursement process.

He advised that the benchmarks used in the formulation of the 2018 budget should be constantly analysed, where necessary revised, through the implementation period.

According to Ladan, looking at the total expenditure vis-a-vis the expected revenue of the federal government, it was obvious that the country needs to mobilise resources from borrowing sources.

He explained that possibly, the federal government would have to sell some assets to finance the huge budgetary deficit, which represents nearly a quarter of the expected expenditure.

The ANAN president suggested that the federal government should also harness other sources of revenue to finance the budget deficit and future budgets.

“These should include the utilisation of the recovered stolen monies, unclaimed financial assets and others.

“The unclaimed financial assets include: shares, bank deposits, insurance, dividends and other assets that have been untouched for several years (e.g. over 10 years) and those assets whose ownership cannot be established; worth trillions of naira.

“Government could channel a large proportion of the proceeds from these unclaimed financial assets in financing the national budget.

“In terms of revenue generation, ANAN appreciates that there is an expected increase in the contribution of non-oil revenue to 46.8 per cent, which is in line with the desired need to reduce the country’s over-dependence on the oil revenue.

“The Central Bank of Nigeria (CBN) should strengthen the drive to lower the demand for Forex by solidifying the currency swap agreement entered into with China,” Ladan said.

He advised that government should constantly explore innovative ways to enhance the living conditions of the citizens, particularly by implementing more pro-poor policies.

The ANAN president said that these might include policies that would foster the growth of micro, small and medium scale enterprises (MSMEs), aimed at poverty alleviation and sustainable development

Furthermore, Ladan urged the federal government to strengthen the national security architecture of the country and strive to maintain peace and harmony throughout the country for stability and sustainable development.

Not Yet Uhuru (Peak) for Nigeria’s Economy

 

 

Despite a two-percent growth forecast for Nigeria in 2018 by the International Monetary Fund (IMF), the reality may be different as the largest economy in Africa remains susceptible to impact of oil shocks. This is especially because government’s efforts to diversify the economy through the non-oil sector, agriculture and tax have so far yielded few successes. Bamidele Famoofo writes

Whilst Nigeria, the largest economy in Africa, has been projected to expand its economy by two percent in 2018 and 2.3 per cent in 2019, both forecasts by the International Monetary Fund (IMF) are based on probability that global oil prices remain stable.

According to the IMF team, which visited Abuja on its routine economic review mission recently, the country remains vulnerable to oil price and production shocks, in spite of the respite it has enjoyed as a result of higher oil prices and short-term portfolio inflows in recent times.

 

Oil

It has been about  60 years since Nigeria found crude oil in its land. Since then, the oil and gas sector has become one of the  sources of the country`s economy. Available information shows that Nigeria gets about 90 per cent of its foreign exchange earnings from oil. Also, at least 20 per cent of GDP comes from oil. Therefore, it is no wonder that the oil and gas industry is one of the most crucial in Nigeria.

At the beginning of the 1950s, crude had an insignificant amount in the total export. According to the statistics, it covered about two per cent (2 per cent) of export products. The real rise of crude oil started between 1960 and 1970. Nigeria could provide only about 5 million barrels per year in the 1960s. However, at the beginning of the 1970s, this number rose to 600 million barrels. Therefore, governmental revenues from the petroleum industry increased from N66 million in the 1970s to N10 billion in the 1980s. With increased production capacity, revenue from oil sales has risen significantly since the 1980s.

Between 1999 and 2016, Nigeria has earned N77.348 trillion from the oil and gas industry, according to data compiled by the Central Bank of Nigeria (CBN). But that, according to economic pundits, has not translated into good livelihood for its citizens. In 2017 alone, Nigeria raked in N7.3 trillion from sales of oil products according to figures from the Nigeria National Petroleum Corporation (NNPC).

 

Non-oil

Statistics made available by Financial Derivatives Company Limited, a leading economic research and analysis company, says non-oil exports increased by 55 per cent to $1.26billion in the third quarter of 2017. “This represents a paltry 2.6 per cent of total exports projected at $48billion for 2017 and implies that the country is still heavily dependent on oil and gas”.

“Non-oil revenue has remained below expectations, with yields from tax administration measures – including the Voluntary Asset Income Declaration Scheme (VAIDS) and increased tax audits – yet to fully materialise,” IMF disclosed.

The lacklustre performance of non-oil was linked to weak performances in the sector as lower purchasing power weighs on consumer demand and as credit risk continues to limit bank lending.

“Corporate tax collection efforts improved but revenue shortfalls and the late adoption of the 2018 budget impede its implementation,” the fund added.

 

Recommendations

The IMF team led by Senior Resident Representative and Mission Chief for Nigeria, Amine Mati, which visited Nigeria between the latter part of June and early July to discuss recent economic and financial developments, update macroeconomic projections, and review reform implementation with top government officials, admonished government to take urgent action “on a coherent set of policies to reduce vulnerabilities and increase growth over the medium term remains.”

The IMF recommended specific and sustainable measures to increase the currently low tax revenue – including through avoiding new tax exemptions – and ensuring budget targets are adhered to even in an election year.

According to the fund, this process should be supported by keeping monetary policy tight through appropriate monetary policy tools that will help contain inflationary pressures and support a move towards a uniform market-determined exchange rate.

It pointed out that moving ahead with structural reforms was needed to invigorate inclusive growth, particularly in the power sector, where it noted that faster progress would be needed to ensure financing shortfalls in the sector are met in a sustainable manner.

 

Achievements

The statement added: “Higher oil prices and short-term portfolio inflows have provided relief from external and fiscal pressures, but the recovery remains challenging. International reserves remained stable at about $47 billion, supported by some convergence in existing foreign exchange windows, and despite some reversal of foreign inflows since April.

“Inflation declined to its lowest level in more than two years. Real Gross Domestic Product (GDP) expanded by two per cent in the first quarter of 2018 compared to the first quarter of last year.

It stated that current public spending in Nigeria had remained in line with expectations, stating that carryover from 2017 to 2018, helped increase capital spending in the first four months of 2018, despite delayed approval of the 2018 budget.

It added: “Lower yields have kept interest payments within the budgeted envelope, but the federal government’s interest-to-revenue ratio is expected to absorb more than half of revenues this year.

“Reforms to improve the business environment are progressing, including through identification of priority investment projects and the adoption of the Company and Allied Matters Act (CAMA) – a legislative landmark for private sector development.

“The implementation of the Power Sector Recovery Plan is advancing through a mini-grid policy and regulations on eligible customers and meter asset providers.

“Under current policies, the outlook remains challenging. Growth would pick up to about two per cent in 2018, weighed down by lower than expected oil production and relatively weak agriculture growth.

“The fiscal deficit would narrow slightly, with higher oil revenues offsetting increased spending, including those planned in a supplementary budget. Inflation would pick up in the second half of 2018 as base effects dissipate and higher spending and supply constraints in agriculture put pressure on prices. “Increased oil exports would keep the current account in surplus, helping stabilise gross international reserves even if the current pace of foreign portfolio outflows continues.”

 

Growth Initiative

In a frantic move to diversify the economy from oil, the federal government in April 2017, launched its economic blue print christened Economic Recovery and Growth Plan (ERGP). It was a medium-term plan that spans 2017 to 2020.

Integral to the ERGP is an ambitious roadmap to return the economy to the path of growth and achieve seven per cent growth rate by 2020.

The driver of the ERGP is the Focus Laboratories on power, agriculture and manufacturing which was inaugurated by the Vice President, Prof. Yemi Osinbajo. 

According to Prof. Osinbajo, the Focus Laboratories would further boost economic growth and ensure continuity in Nigeria’s determination to build a competitive economy.

 “The labs will operate by bringing together all private and public sector officials to achieve the ERGP’s objective of reaching seven per cent economic growth by 2020”, Osinbajo said.

Budget & National Planning Minister Udoma Udo Udoma, said the government would improve power generation and its operational capacity to 10 gigawatts by 2020.

But two years to the deadline, the federal government has only succeeded in generating four gigawatts.

The minister said the removal of the bottlenecks has become imperative because $245.1 billion would be required to implement the ERGP, out of which $195.98 billion would be sourced from private sector and $49.15 billion from the public sector.

“The objectives are restoring economic growth, investing in the people, and building a globally competitive economy”, Udoma disclosed.

Deputy Senate President Ike Ekweremadu who represented Senate President Bukola Saraki at the launch of the Lab, commended the move by the executive arm of government at ensuring the implementation of the plan. He remarked that government had become serious about developing the economy.

Dr Idris Jala, Head of the Malaysian Performance Management Delivery Unit (PEMANDU) said the Malaysian economic history has a lot of semblance with the Nigerian experience.

He however recommended transformational leadership at all levels, which entailed taking actions that might be painful in the short-term but beneficial in the long-run to the people.

“Malaysia also used the lab process with great success as a tool for the transformation of its economy”, he said.

Nevertheless, analysts warned that the level of commitment from the government and private sector would determine the possibility of generating $24 billion worth of investment for the country from the labs.