The Nation Newspaper

Category: Industry

  • Real sector burdened by high cost of borrowing

    Commercial banks’ double-digit cost of borrowing is hurting the real sector. It is discouraging productivity and investment. Manufacturers, particularly small scale enterprises, are also yet to heave a sigh of relief from the various single digit interest rate funding windows created for them by the Federal Government through the Central Bank of Nigeria (CBN). They are now calling for improved and sustained policy to reduce cost of borrowing. Assistant Editor CHIKODI OKEREOCHA reports.

     

    The campaign to force a reduction in the cost of borrowing to the real sector and also interrogate the performance of the various single digit interest rate funding windows available for the sector, particularly manufacturing, will surely top manufacturers’ policy advocacy this year.

    Indication that these will galvanize the advocacy machinery of the Manufacturers Association of Nigeria (MAN) and indeed, other members of the Organised Private Sector (OPS) emerged after manufacturers raised eyebrow that the double-digit rate at which commercial banks lend to the sector was discouraging productivity and investments.

    The Nation learnt that when the policy advocacy eventually kicks off, manufacturers will specifically be pushing that the Central Bank of Nigeria (CBN) improve and sustain the current policies aimed at increasing loans to the productive sector of the economy to stimulate national output.

    They will also be advocating the need for the CBN to review the guidelines of the various development funds put in place for the real sector to ensure that the terms and conditions are liberal enough to attract borrowing from the industrial sector.

    The stage for what promises to be a robust engagement between manufacturers and the Federal Government through its monetary authority, the CBN, was set after 82 per cent of Chief Executive Officers (CEOs) of manufacturing companies indicated that the double-digit rate at which commercial banks lend to the sector was discouraging productivity and hurting investment.

    This was contained in the Manufacturers CEOs Confidence Index (MCCI) for third quarter 2019, following which MAN said “It was imperative that it sustains the advocacy for policy measures that will lower the cost of borrowing to increase the sector’s productivity and competitiveness.”

    The association added that it will also be partnering the Federal Government to interrogate the performance of the various single digit interest rate funding windows available for the real sector.

    The MCCI gauges the pulse of the economy on quarterly basis. It deploys a set of diffusion factors, including business operating environment issues such as over-regulation, multiple taxes/levies, access to sea ports, local and raw-material sourcing, among others, to measure a quarterly perception and confidence of manufacturers in the economy.

    In addition to the set of diffusion factors for which information is generated on, the general macroeconomic ambience in terms of foreign exchange, lending rate, credit to the manufacturing sector etc. are also measured.

    A questionnaire structured with the diffusion factors, macroeconomic and business environment variables, and administered on the CEOs of MAN member-companies across the six geo-political zones of the country and the 10 sectoral groups of the association returned a disturbing verdict.

    It indicated that majority of respondents (82 per cent) disagreed that the rate at which commercial banks lend to the manufacturing sector encourages productivity in the sector. “This is evident in the double-digit cost of borrowing from the commercial banks even amidst measures by the monetary authority to reduce cost of borrowing in the country,” the report said.

    The index, which also added that the situation, discouraged investment particularly in the manufacturing sector, set the tone for manufacturers to push for a better deal from the commercial banks and from the various single digit interest rate funding windows put in place for the real sector.

    Indeed, at moment, commercial banks are said to charge as high as between 22 and 25 per cent interest on loans. Micro-finance Banks (MFBs) charge higher, insisting on between 30 and 40 per cent interest rates.

    The exorbitant interest rates charged by the commercial banks are said to be partly responsible for the shutting of many industries, while others simply relocate to neighbouring countries where they are sure of interest-friendly credit facilities.

    Worst hit by the prevailing unfriendly interested rate regime are Micro, Small and Medium Enterprises (MSMEs). The commercial banks are yet to change their perception about MSMEs; they are still wary of the risk of loan default by MSMEs so, they are reluctant to advance credit to the operators.

    There are 41 million MSMEs in the country, according to a national MSMEs survey carried out in 2017, by the sector’s regulatory agency, the Small and Medium Enterprise Development Agency of Nigeria (SMEDAN) in collaboration with the Nigerian Bureau of Statistics (NBS).

    However, the MSMEs, despite being acknowledged globally as the engine of economic growth because of their potential to create jobs, boost production, generate income and reduce poverty, are still plagued by a plethora of challenges among which is lack of access to credit.

    About 80 per cent of MSMEs are said to lack access to the financial market, according to a survey by the International Finance Corporation (IFC) and Mckinsey & Company, a United States (US)-based multinational management consulting firm.

    To close the financing gap in the MSME segment of the industrial sector and hopefully, boost the profitability and competitiveness of MSMEs in Nigeria, the Federal Government, through the CBN, launched the N220 billion Micro, Small and Medium Enterprises (MSMEs) Development Fund in August 2013, as well as other intervention funds.

    Read Also: Govt shuts cooking gas plants over ‘safety defaults’

     

    Access becomes an issue

    However, difficulties in accessing the N220 billion MSMEs Development Fund and other intervention funds meant for the sector have continued to stand in the way. The operators lament that it is easier for the camel to pass through the needle’s eye than to access the fund because of the stringent conditions and guidelines for accessing it.

    Under CBN’s guidelines, the fund, which attracts nine per cent interest rate, would be administered through private or state owned Micro-Finance Institutions (MFIs), Finance Houses, and Cooperative Finance Agencies.

    Such MFIs or micro-finance banks must pass CBN’s competency and proficiency tests in order to certify them capable of distributing these funds to MSMEs. State governments will be able to access up to N2 billion each for lending to eligible beneficiaries through Participating Financial Institutions (PFIs) in their states.

    In other words, the CBN will not be lending directly to farmers or businesses. What the fund does is a wholesale fund. It provides funding to the PFIs. MFIs or micro-finance banks can also come to the fund.

    The CBN will assess them, give them the money at low interest rate. The PFIs would undertake that they will lend at low rate of interest to micro-entrepreneurs, the low-income earners, farmers, artisans and the active poor who operate in the informal sector.

    Also, PFIs can only finance agricultural value chain activities, trade and commerce; cottage industries, artisans, among others.

    The apex bank in a bid to ensure that productive sectors of the economy attract more finance necessary for employment creation and diversification of the country’s economic base, also said a maximum of 10 per cent of the commercial component of the fund should be channeled to trading and commerce.

    Although, CBN requests that 60 per cent of the fund, representing N132 billion, be voted for providing financial services to women-owned businesses, PFIs would be required to submit periodic returns on disbursements as well as an analysis of the social impacts of the fund.

    The finance sector regulator will also undertake regular on and off site checks to ascertain the veracity of the reports received.

    That is not all. The CBN also demanded that borrowers provide 100 per cent near-cash cover in treasury bills or fixed deposit, a situation said to have made it difficult for most finance house operators to draw from the fund.

    Most of the finance house operators are therefore, reluctant to draw from the loan. In their own thinking, the CBN cannot force people to invest in treasury bills or keep fixed deposits because they want to borrow.

    Because of this, only commercial banks are said to be meeting the drawn-down policy and are accessing the loans. The snag however, is that this arrangement defeats the objective of setting up the fund.

    But an MSME operator said that the commercial banks are still being reluctant to grant the CBN intervention funds meant for the real sector because of risk of default.

    The operator, who declined to be mentioned, said the commercial banks prefer paying penalties to the CBN for deliberately withholding the funds or channeling them to other areas at the detriment of giving the MSMEs to use to run their businesses.

    However, as the President, Lagos Chamber of Commerce and Industry (LCCI), Mrs. Toki Mabogunje, explained, the intervention funds are available, but there are issues both on the side of the borrowers and the lender.

    “The lender complains that the borrowers are not bankable; that they are not meeting the criteria that the banks are asking them to meet in order to access the funds,” she told The Nation, adding that there are also issues around financial literacy.

    While also pointing out that some businesses themselves may not understand what is required for them to access these funds, Mabogunje said it was in an attempt to address issues around ease of access to the funds that the CBN came up with the idea of Moveable Collateral Registry, where a small business can use a moveable item as collateral to access the funds.

    “With Moveable Collateral Registry, you don’t have to have land and property; you can use your movable car, your freezer; women can use their jewelry; any kind of moveable asset you have can be used as collateral. So, the CBN is trying to encourage more people to register their assets in that registry so that they can use it as collateral for funds,” the lCCI boss explained.

    The National Collateral Registry of Nigeria is an initiative of the CBN, with support from the International Finance Cooperation (IFC), to improve access to finance particularly for MSMEs.

    It is a web-based system that allows lenders to determine any prior security interests, as well as to register their security interests over movable assets provided as collateral.

    The Collateral Registry facilitates the use of movable/personal assets as collateral that remain in possession or control of the borrowers and thereby improves access to secured finance.

    The web-based nature of the system offers remote access from the comfort of the borrower’s location even beyond normal business hours without visiting the registry office. It reduces and frees officials of the registry operations from paper burdens, manual reviews, searches and storage costs.

    Beyond the Registry, Mabogunje also said that at a certain level, at the micro level, that is the smallest of the small, up to a certain amount don’t even have to provide collateral.

    “What they need is a guarantor; they can provide two guarantors; you know how they use guarantor under federal policy, either they use civil servants, a military officer, a lawyer, a banker; there are certain people that will be accepted as guarantors,” she explained.

    According to the LCCI president, the matter is still being discussed and debated. “The funds are there, and we at the LCCI are also advocating for more simplification of that process so that there will be more access to the funds,” she added.

  • Fed Govt urged on Ajaokuta Steel Company

    By Chikodi Okereocha

     

    The Federal Government has been urged to ensure the take-off of Ajaokuta Steel Company in Kogi State for the development of the country.

    Making the call, a lecturer at the Department of Metallurgical and Material Engineering of the Nnamdi Azikiwe University, Awka, Anambra State, Prof. Eugene Nnuka, said without getting the steel complex in place, there was no way Nigeria could be aspiring to be a developed nation.

    “All hands should be on deck to make Ajaokuta Steel Company work for our industries to commence serious work of developmental magnitude,’’ he said, noting that the chain reaction of the steel company’s operation would change the economy of the nation for good.

    Read Also: Buhari orders completion of Ajaokuta Steel firm

     

    Nnuka added: “When this complex is put to work, then we can be rest assured that there will be job opportunities for our teeming youths through the chain reaction of its production. For the nation to get it right, round pegs should be put in round holes in this regard.”

    He, however, said it was a matter for joy when the Federal Government declared that it would not allow any person or organisation to stand in its way of reviving the steel firm.

     

  • Institute reiterates commitment to improving research

    By Chikodi Okereocha

     

    The Institute of Agricultural Research and Training (IAR&T), Ibadan, Oyo State, has reaffirmed its commitment to improving research on mandate crops in 2020.

    Giving the assurance in Ibadan, the institute’s Executive Director, Prof. Veronica Obatolu, said it planned to complete the prototype processing plant for processing kenaf fibre (one of its mandate crops) into yarns and other products.

    Obatolu said the institute will conduct more training for farmers, youths, and strengthen linkage with entrepreneurs and other stakeholders for investment in kenaf fibre processing to market for it.

    According to her, the institute will work towards the perfection and activation of an effective warning system on the menace of Fall Army worm infestation on maize farms.

    “On livestock, we plan for expansion of training and distribution of semen/improved breeds of pig to more farmers; conduct more training programmes for stakeholders.

    “On soil, there will be conduct of soil survey to cover more local governments across agro-ecological zones, launching of soil portal,  workshops on the use of the portal across agro-ecological zones,” Obatolu said.

    On value addition of commodities, the IAR&T chief said the institute plans to establish quality control lab and product packaging workshop; expand training to more youths and young entrepreneurs on export.

    Obatolu, however, said the institute had challenges, including lack of timely release of funds last year, which hindered research.

    “But, if we have adequate funds in time and support of relevant stakeholders, we shall achieve our goal this year by His grace,” she said.

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    Last year, Obatolu said the institute developed hybrid maize varieties, such as Ife Maize Hyb-1, Hyb-2 to Ife Maize Hyb-9, with potential for greater yield and increased competitiveness in the maize industry.

    On livestock, she said breeding  for upgrading of Fulani ecotype for generation of hybrids F1 was developed while there is need to develop F2 generation from the process.

    “There were distribution of se-men of improved breeds and artificial insemination for upgrade of local stocks, distribution of the improved breeds and capacity building on artificial insemination to farmers.

    “On value addition, we have development of products from under-utilised legumes with high commercialisation potential.

    “There were training of farmers, extension agents on management of fall army worm on maize fields, training on sustainable soil and water management for food security, among others were all carried out in 2019,” she said.

  • AfCFTA: Port reforms underway, says NPA boss

    By Chikodi Okereocha

     

    A head of the implementation of the African Continental Free Trade Area (AfCFTA) Agreement in July, the ports are undergoing infrastructure reforms.

    This is to allow free movement of business travellers and investments, while creating a continental Customs Union to streamline trade and attract long-term investments.

    The Managing Director, Nigerian Ports Authority (NPA), Ms Hadiza Bala-Usman, who made this known, said the AfCFTA will boost trade in  the country and the reforms will ensure seamless connectivity.

    Speaking at the 2019 International Ports and Terminal (NIMPORT) Conference and Expo, the NPA boss said when trade barriers are removed, more opportunities are created hence, the need to ensure that the country is not caught up with the many challenges it faces at the ports.

    “Investment in infrastructure will give opportunity to link critical hinterlands with rails, waterways, rehabilitation of roads leading to the ports and deliberate policies put in place to improve the transport sector.

    “All the investments in infrastructure with the signing of the AfCFTA are aimed at integrating the economy of the country and removing barriers,” Bala-Usman said, adding that there should be a deliberate policy targeted at improving the transport sector.

    She explained that issues, such as dredging of seaports, corruption, and manual processes in the sector, when handled, would ensure the country partakes effectively in the regional trade.

    Indeed, experts said Nigeria needs to tackle the myriad challenges, which arise from the state of the ports, especially the access roads to the ports that can hinder the smooth take-off of the agreement.

    Also, Deputy Director, Nigeria Railway Corporation (NRC), Mr. Ola Adeeyinwo, said the movement of cargo to the hinterlands has challenges due to the state of the rail tracks.

    According to him, it is only the Apapa port that is connected by rail and this affects the evacuation of cargo. Besides, after the port concession, most of the rail lines were removed.

    On his part, the Chairman, NIMPORT, a port and terminal promotion body, Mr. Fortune Idu, advised that the next level for regional trade development for African countries is for them to come together and form a trading bloc.

    He said the signing of AfCFTA by President Muhammadu Buhari was the long-awaited antidote to prepare Africa to compete in the global trade as a unified body.

    According to him, trading between countries has not been seamless and the continent has not been fully integrated in form of trade and connectivity.

    “The next level for regional trade development should come with accelerated port and logistics infrastructure development, trade integration and seamless facilitation and hinterland rail connectivity.

    “This next level will present the region as a global trade contender to Europe, China and America and the rest of the world,” Idu suggested.

    Read Also: Fed Govt to compensate terminal operators over port rails

     

    He, however, noted that the maritime sea corridors will continue to prove the greatest capacity for volume of trade and movement. He expressed optimism that the rail connectivity to hinterland will help guarantee that this volume is evenly distributed seamlessly.

    Idu urged African countries to work hard in creating the links by developing coastal water navigational and shipping capacities and regional pipelines where port cities like Lagos, Port Harcourt, Cotonou, Douala, others, will be connected directly.

    The Secretary-General, African Shipowners Association (ASA), Mrs. Funmi Folorunsho, advised the government to invest in ships to trade in line with the AfCFTA.

    According to her, since the signing of the agreement, nobody has said anything about the stand of the maritime industry and what the practitioners tend to benefit from it.

    Folorunso said there should be policy development and investment in shipowners.

    AfCFTA is expected to boost intra-African trade by 52.3 per cent by 2022. It is an opportunity for countries and companies to help each other grow, as they have done in other regions and it is so important to have supportive policies and putting infrastructure on ground.

    As at last July, 54 states, including Nigeria, had signed the free trade agreement to establish a single continental market for goods and services. The agreement also seeks to increase intra-African trade by cutting tariffs and harmonising trading rules at the continental level.

     

  • Patronage of local products: Calls for review of implementation

    The Federal Government, via Executive Order 003, mandated all government establishments to make Nigerian manufactured goods first choice in public procurement processes. The Order, issued in May 2017, was aimed at boosting the performance of  manufacturing companies for increased contribution to national output and employment creation. However, almost three years down the line, the envisaged benefits of the policy are yet to manifest, due to alleged shoddy implementation. This has prompted calls for a review of its implementation processes. Assistant Editor CHIKODI OKEREOCHA reports.

     

    When the Federal Government, via Executive Order 003, compelled its Ministries, Departments and Agencies (MDAs) to channel at least 40 per cent of their procurement to locally-made goods and services, it was no doubt, a strategic and laudable policy that expectedly, enjoyed the overwhelming support of manufacturers and other members of the Organiased Private Sector (OPS).

    For one, the Order, which took effect on May 18, 2017, resonated with their sustained advocacy for increased patronage of made-in-Nigeria products and services.

    Their hope was that the Order will boost the nation’s industrial sector’s competitiveness, resulting to increased revenue to government through taxes and job creation.

    The immediate past President of the Manufacturers Association of Nigeria (MAN), Dr. Frank Udemba Jacobs, was perhaps, the most vociferous in the campaign to ensure that the buy Nigeria policy was enshrined in the procurement policy and processes of both the Federal and State governments.

    He had consistently argued that government remained the largest single spender in the economy and could drive industrial development and economic growth by increasing its patronage of locally made products.

    Besides, the push for increased patronage by government at all levels, Jacobs said, was in consideration of the prevailing high cost operating environment in Nigeria and the need to keep local manufacturing companies in production. He also said there was need to retain jobs and create new ones.

    The Vice President, Prof. Yemi Osinbajo, then acting president, had on May 18, 2017, signed the Executive Order 003 (“EOS”), to promote patronage of local products.

    “All Ministries, Departments and Agencies (MDAs) of the Federal Government of Nigeria (FGN) shall grant preference to local manufacturers of goods and service providers in their procurement of goods and services,” it said.

    It also said, “Any document issued by any MDA of the FGN for the solicitation of offers, bids, proposals or quotations for the supply or provision of goods and services (Solicitation Document), in accordance with (1) above, shall expressly indicate the preference to be granted to domestic manufacturers, contractors and service providers and the information required to establish the eligibility of a bid for such preference.

    “All Solicitation Documents shall require bidders or potential manufacturers, suppliers, contractors and consultants to provide a verifiable statement on the local content of the goods or services to be provided.

    “Made-in-Nigeria products shall be given preference in the procurement of the following items and at least 40 per cent of the procurement expenditure on these items in all MDAs of the FGN shall be locally manufactured goods or local service providers.”

    The items included uniforms and footwear; food and beverages; furniture & fittings; stationery; motor vehicles; pharmaceuticals; construction materials; and Information and Communication Technology (ICT).

    The policy also stipulated that within 90 days of the date of this Order, the heads of all MDAs shall assess the monitoring, enforcement, implementation, and compliance with this Executive Order and local content stipulations in the Public Procurement Act or any other relevant Act within their agencies.

    Heads of MDAs are also to propose policies to ensure that the Federal Government’s procurement of goods and services maximises the use of goods manufactured in Nigeria and services provided by Nigerian citizens doing business as sole proprietors, firms, or companies held wholly by them or in the majority.

    They are also mandated to submit such findings to the Honourable Minister of Industry, Trade & Investment. The policy defined “local content” as “The amount of Nigerian or locally produced human and material resources utilised in the manufacture of goods or rendering of services.

     

    Laudable policy, shoddy implementation

    Although, the Executive Order 003 gladdened the hearts of not a few manufacturers and other business operators, the level of implementation of the initiative appears to have left much to be desired by manufacturers.

    For instance, 62 per cent of MAN Chief Executive Officers (CEOs) said patronage of Nigerian manufactured products has failed to improve as a result of the implementation of Executive Order 003.

    “The Executive Order 003, which mandated all government establishments to make Nigerian manufactured goods first choice in public procurement processes, has not been conscientiously implemented,” the CEOs said.

    Their verdict was contained in the manufacturers CEOs Confidence Index (MCCI), which gauges the pulse of the economy on quarterly basis. The response provided by the CEOs was used to compute the Index, which deploys a set of diffusion factors to measure a quarterly perception and confidence of manufacturers in the economy.

    The report said: “Unsurprisingly, formulation of laudable policies has never been an issue for Nigeria, but evidence has shown that poor policy implementation has been the challenge in the country.”

    It, therefore, canvassed the need “To properly review the implementation processes of the EO3 to ensure that government patronage of goods manufactured in Nigeria improves to boost the performance of the Nigerian manufacturing companies for increased contribution to national output and increased employment opportunities.”

    Manufacturers are not alone in their lamentation over lax compliance or shoddy implementation of the Order. For instance, the Nigeria Computer Society (NCS) also complained that compliance with Executive Orders 003 and 005 was not 100 per cent in the country.

    The NCS said the lack of compliance with the Executive Orders was largely affecting local Information and Communications Technology (ICT) companies in the country, noting that there was need for transparency and the use of local companies in solving the country’s needs, and that local content should be 100 per cent local.

    President Muhammadu Buhari signed the Executive Order 005 (“EO5”) on Friday, February 2, 2018, directing MDAs of government to engage indigenous professionals in the planning, design and execution of national security projects and maximize in-country capacity in all contracts and transactions with science, engineering and technology components.

    The thrust of the EO5 is the recognition of the vital role of science, technology and innovation in national economic development, particularly in the area of promoting Made-in-Nigeria Goods and Services (“MNGS”).

    Strategically, the main objectives of the EO5 are the harnessing of domestic talents and the development of indigenous capacity in science and engineering for the promotion of technological innovation needed to drive national competitiveness, productivity and economic activities which will invariably enhance the achievement of the nation’s development goals across all sectors of the economy.

    Read Also: Manufacturers make case for local products

     

    But the NCS while admitting that EO3 and EO5 were landmark achievements of its consistent advocacy in the last decade, however, noted with concern that the compliance with the orders was not 100 per cent.

     

    Why clamour for review intensified

     

    According to development experts, it is an established fact that when citizens of a country buy foreign goods, they pay the returns to factors used in producing such goods in the originating countries. This means that Nigerians who patronise foreign made goods pay wages, rent, interest and profit to the foreign countries with Nigeria’s local resources.

    On the other hand, greater patronage of made-in-Nigeria products would enhance the manufacturing sector, and this would result in increased revenue to government through taxes, employment creation, reduction in capital flight, anti-social vices as well as peace for the populace.

    The renewed agitation for a review of the implementation processes of the Executive Order by manufacturers also stemmed from the realisation that the increased patronage of locally manufactured goods and services by various tiers of government will help grow the industries, the economy and indeed, the naira.

    The belief is that by curtailing the growing demand for Foreign Exchange (forex) for consumption rather than capital products and equipment, the local currency (the naira) will be strengthened.

    Cutting down on Nigerians’ insatiable appetite for imported goods and services at the detriment of locally produced ones will significantly reduce the pressure on forex caused by the nation’s huge import bills and low receipts from exports.

    This must be why, from the onset, manufacturers insisted that strong local demand via the buy Nigeria campaign must be driven by states, if the targeted objectives are to be met. They believe that if the initiative must succeed, it should not be pushed by the Federal Government alone, but must have the buy-in of the 36 state governments.

    Recall that manufacturers, encouraged by the Executive Order 003, had gone a notch higher by pushing to get state governments to also set a minimum percentage threshold for their purchases of made-in-Nigeria products.

    The manufacturers specifically agitated that state governments gave about 35 per cent Margin of Preference (MoP) in terms of price consideration for locally made products as against the foreign ones.

    The 35 per cent MoP meant that even if local products cost more than foreign ones, the local ones should be patronised within the set margin of preference.

    This, according to them, will complement efforts to promote patronage of made-in-Nigeria products at the federal level, where the Federal Government had fixed a 40 per cent minimum threshold of purchases for Small and Medium Enterprises (SMEs) through Executive Order 001.

    The Executive Order No 001 of 2017 sought to promote transparency and efficiency in the business environment in the country. It contains far-reaching initiatives to be implemented by MDAs to ensure easier access to information, processes and documentation, as well as promote efficiency in public service delivery.

  • Push to curb multiple taxation, regulatory overlap

    At the last count, manufacturers pay over 30 different taxes, levies and fees to agencies of the federal, state and local governments. Although, this came in the wake of the increased revenue targets by government agencies, manufacturers are screaming blue murder that the barrage of taxes is depressing production and discouraging investments in the manufacturing sector. They are calling for a breather in the form of reduction of the various tax rates and harmonisation of the regulatory checklists.Assistant Editor CHIKODI OKEREOCHA reports.

     

    The spectre of multiple taxation and over-regulation by government agencies is hunting the economy. It has continued to leave sour taste in the mouths of manufacturers and other real sector operators. For instance, manufacturers pay over 30 taxes, levies and fees to agencies of the federal, state and local governments.

    As if this is not enough to depress production and discourage investments in the manufacturing sector, agencies of the federal, state and local authorities allegedly regulate the same manufacturing process, resulting to heavy man-hour losses, supervisory duplication and multiple regulatory charges.

    It is against this backdrop that not a few operators, particularly owners of Nigeria’s estimated 41 million Medium, Small and Micro Enterprises (MSMEs), who appear to be worst hit, feel that the time has come to streamline the multiplicity of taxes and ensure that only approved taxes, levies and fees are charged.

    They also believe that harmonising the operations, regulatory checklists and mandates of agencies of government at all levels to promote friendlier operating environment will be perhaps, one of the best New Year’s gifts to real sector operators by President Muhammadu Buhari’s administration.

    The Nation learnt that most industrialists consider the prevailing tax/regulatory environment in the country as unfriendly and a major factor for the increasing cost of doing business, which in turn reduces the industrial sector’s competitiveness.

    The fact that 89 per cent of Manufacturers Association of Nigeria (MAN) Chief Executive Officers (CEOs) agreed that multiple taxes and levies depress production in the manufacturing sector perhaps, reinforced this widely held belief.

    The manufacturers CEOs Confidence Index (MCCI), which gauges the pulse of the economy quarterly, said majority of MAN CEOs interviewed (89 per cent) agreed that multiple taxes and levies, depress production in the manufacturing sector.

    The MCCI deploys a set of diffusion factors, including business operating environment issues, such as over-regulation, multiple taxes/levies, access to sea ports, local and raw-material sourcing, to measure a quarterly perception and confidence of manufacturers in the economy.

    A questionnaire structured with the diffusion factors, macroeconomic and business environment variables was administered on the CEOs of MAN member-companies across the six geo-political zones of the country and the 10 sectoral groups of the association.

    The responses provided by the CEOs were used to compute the Index, which was released last week.The report said manufacturers pay over 30 different taxes, levies and fees to agencies of the federal, state and local governments, attributing the situation to the increased revenue targets by various government agencies.

    To further drive home their point, MAN CEOs, based on the degree of intensity of challenges that confronted their operations in the third quarter, ranked the duo of multiple taxation and overregulation as second. Inadequate electricity supply and high cost of self-generated energy was first on the list.

    They emphasised that multiple taxation and over-regulation, and of course, inadequate electricity supply, among other challenges, resonate with the ranking obtained in the two previous editions of the MCCI.

    Manufacturers, therefore, underscore the need for the government to  address the challenges to enhance the competitiveness of the manufacturing sector and return it to the path of sustainable growth.

    The Lagos Chamber of Commerce and Industry (LCCI) has also lent its voice to the call on the tax authorities to lessen the burden of multiple taxation on businesses, especially the Small and Medium Enterprises (SMEs).

    Admitting that there are issues around taxation, LCCI President, Mrs. Toki Mabogunje, said: “Tax is something we have been addressing overtime, but more needs to be done because for SMEs, the burden of taxation is quite huge and it can stifle growth.”

    Mabogunje, in an interview with The Nation, recalled that when President Buhari before the last election, was travelling around the country and seeking the support of Nigerians for a second term, the issue of growth of Micro, Small and Medium Enterprises (MSMEs) was a major subject.

    Mabogunje said: “We had a certain level of income generation, where you pay a tax that covers everything; it is when you cross that barrier that you need to pay other kinds of taxes. That is yet to come to reality, but we are still pushing for that.

    “But I think the one thing that seems to be getting more and more attention is that the country is beginning to realise that MSMEs are actually the foundation.

    “They are also thinking that we have to grow from small to medium and medium to large. We need more of the Dangotes; we need more like the big industrialists that we have in the country.”

    There are 41 million MSMEs in the country, according to a national MSMEs survey carried out in 2017, by the sector’s regulatory agency, the Small and Medium Enterprise Development Agency of Nigeria (SMEDAN), in collaboration with the Nigerian Bureau of Statistics (NBS).

    However, a plethora of challenges, including multiple taxation and over-regulation, have continued to undermine the profitability and competitiveness of MSMEs in Nigeria.

     

    How multiple taxation hurt manufacturers

    Nigeria is a federation made up of federal,  state and local governments. Each tier of government is saddled with the responsibility of providing certain services to the citizens and is also granted the funding source through the imposition and administration of assigned taxes and levies.

    In other words, modern governance is premised on a social contract that obligates the citizens, including corporate entities to pay taxes to the government and in turn, mandates government to provide certain goods and services for the well-being of the citizens.

    However, the perceived shoddy and un-coordinated nature of Nigeria’s tax administration appears to have put real sector operators, particularly manufacturers in a disadvantaged position in what is supposed to be a mutually rewarding social contract.

    To manufacturers, Nigeria’s un-coordinated tax system is a major dis-incentive; it has resulted to multiple taxation, which is taking a huge toll on businesses and reducing the global competitiveness of the industrial sector.

    This was why at various fora organised last year by MAN and other members of the Organised Private Sector (OPS), including the LCCI and the National Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), the need for a more business-friendly tax regimewas top on the agenda.

    The operators never stopped lamenting that the incidence of multiple taxation and astronomical increase in taxes and levies has led to disruption of businesses.

    For instance, in Lagos State, which parades a concentration of manufacturing concerns, they note that in addition to the taxes paid/payable to the Lagos State Government under Act CAP.T2 Laws of the Federation of Nigeria 2004, a total of 10 other taxes/levies are being collected.

    Read Also: How tax reforms will impact economy

     

    The Nation learnt that some of the taxes that have been giving industrialists sleepless nights include environmental development levy/charge, environment impact assessment levy/charge, and land use charge.

    Others are Lagos State Environmental Protection Agency (LASEPA) levy (laboratory analysis), Ministry of Transport (MOT) road worthiness charge, LASEPA petroleum storage charge for tanks above 10,000 litres.

    There are also solid waste charge, chemical storage permit, Lagos State Waste Management Authority (LAWMA) levy for waste disposal, and Lagos State fire service charge, among other levies and charges.

    The manufacturers’ grouse is that the application of these multiple taxes/levies impact negatively on companies. Apart from restricting business expansion and reducing profit, the situation, according to them, creates unemployment, retards economic development and growth.

    Apart from discouraging both local and foreign investments, multiple taxation also does not allow local products to compete with imported ones. The alleged use of unorthodox means of collecting taxes and levies also breeds corruption, which invariably stunt economic growth.

    However, amidst the hue and cry over multiple taxation, a highly placed government official said there is need to distinguish between taxes, levies, penalties and user charges. According to the official, who declined to be mentioned, generally, a tax is a compulsory financial charge or levy imposed by governmental authority, and for which no direct benefit is derived by the taxpayer.

    On the other hand, he said payments required for services rendered by the government are basically user charges. “Strictly therefore, multiple taxation can only be said to exist where different tiers of governments are levying taxes on the same activity/income,” the official clarified.

    He advised taxpayers to refer grey areas to the tax authorities for clarification, and where they disagree, they should utilise dispute resolution procedures available in the tax laws, as well as keep in focus that payment of tax is obligatory and not optional and that there are sanctions for non-compliance with statutory provisions.

    The official, however, assured of the current administration’s commitment to pursuing further reforms of the tax administration system with a view to further simplifying the assessment and payment process, enhancing transparency and harmonising taxes and levies collectible.

    The Nation learnt that as part of the on-going reform of the country’s tax system, the various tiers of government and their respective tax-collecting agencies have stepped up their tax education and enlightenment campaigns and set up revenue complaints unit.

    The harmonisation of local government levies and rates is also said to be on-going in some states across the country particularly Lagos.

    Some of these measures are in response to manufacturers’ calls on government to educate the public and facilitate compliance on the published list of approved or authorised taxes and levies in the state, local governments and its MDAs.

     

    Over-regulation also

    For manufacturers and indeed, other businesses across the country, the fear of the alleged high handedness of some regulatory agencies and multiple inspections/visitations from Ministries, Departments and Agencies (MDAs), amongst others, is perhaps, the beginning of wisdom.

    They lament that quite often, agencies of the federal, state and local authorities regulate the same manufacturing process, resulting to man-hour losses, supervisory duplication and multiple regulatory charges.

    “It is expedient that government harmonizes the operations, regulatory checklists and mandates agencies of government at all levels to promote friendlier operating environment, MAN said, in its MCCI.

  • Our high, low points in 2019, by OPS

    The Manufacturers Association of Nigeria created the Manufacturers CEOs Confidence Index (MCCI) to gauge the pulse of the economy quarterly. The MCCI for the third quarter of 2019 was 51.7 points. This represented a marginal increase of 0.8 index point over 50.9 index point recorded in the second quarter. Although the increase depicted an uptick in manufacturing sector’s performance, it was far below projections and expectations of MAN and the Organised Private Sector (OPS). Assistant Editor CHIKODI OKEREOCHA looks at issues and challenges that shaped the real sector’s performance in 2019.

     

    It was a fair and balanced assessment of the performance of the economy, particularly the real sector in the out-going year.

    So, by the time the newly-inaugurated President of the Lagos Chamber of Commerce & Industry, Mrs. Toki Mabogunje, was done reeling out some of the high and low points of the economy in 2019, it was clear on what policy direction the Federal Government should take if it must put the economy on the right track.

    For instance, by Mabogunje’s admission, there were more intervention funds in 2019 than they had ever been for people to tap into to grow their businesses.

    She gave thumbs up to the Central Bank of Nigeria (CBN), which, according to her, took a bigger role in ensuring that the intervention funds were made available.

    She, however, noted that there were issues around access to the intervention funds. “It’s not like the funds were not available, but there were issues both on the side of the borrower and on the lender.

    “The lender complained that the borrowers were not bankable, and were not meeting the criteria banks asked for in order to access the funds,” she told The Nation, during the weekend.

    She also said there were issues around financial literacy, as businesses themselves did not understand what was required for them to access the funds, adding that on the lenders side, there was also the argument that may be some of the requirements they were asking for were a bit too much.

    Mrs. Mabogunje said it was in a bid to simplify and address such issues that the CBN came up with the Moveable Collateral Registry, where a small business can use a moveable collateral to access the funds.

    “You don’t have to have land and property; you can use your car, freezer; women can use their jewelry; any kind of moveable asset you have can now be used as collateral,” she said, adding that at the micro level, there was no need for collateral; a business only needed to provide two guarantors.

    She, however, said the argument on both sides was being discussed and debated; that the LCCI would advocate for the simplification of the process so that there would be better access to the funds.

    Mrs. Mabogunje also listed the improvement in ease of doing business as another positive development, noting, however, that the LCCI would continue to push for improvements in the ease of doing business initiatives which the Presidential Enabling Business Environment Council (PEBEC) was dealing with and had made significant gains.

    The PEBEC is the current administration’s flagship initiative to reform the business environment, attract investment and diversify the economy. Although it was inaugurated in July 2016, some of its reforms manifested in 2019.

    Mabogunje said, for instance, that the Council’s reforms as well as the signing of the Executive Order on ease of doing business helped with the issues around immigration and the ports, thereby improving the ease of doing business in the country.

    More importantly, she pointed out that the PEBEC, during the year under review, moved from just dealing at the national level to dealing at the sub-national level.

    “They are now engaging with states; they are trying to encourage State Governments to try and step up and improve their various business environments so that there can be a better overall outcome for all of us.

    “We want those improvements to continue; we want to push for more of those improvements around the issues which the PEBEC, was dealing with,” she said.

    That is not all. There was also an improvement in tax administration, with tax authorities and Nigerians appreciating the use of technology more.

    “People were asked to do voluntary assessment of their taxes, as government tried to get more money into the kitty so that these monies can be used for development,” Mrs. Mabogunje said.

    She also pointed out that despite the growing realization in 2019 that the Small and Medium Enterprises (SMEs) were actually the foundation for economic growth and development, the burden of taxation was quite heavy on them and indeed, other real sector operators.

    She, therefore, said the LCCI, under her watch, will continue to push for enabling policies and reforms that will ensure the survival and growth of SMEs in the country.

    According to her, factors that are enabling for SMEs to grow such as infrastructure, particularly power, are still to be properly addressed.

    “Without power and other infrastructure, industries cannot grow; it will be difficult getting products out of the country as exports or importing goods into the country,” the LCCI boss said.

    Indeed, inadequate electricity supply was top on the list of challenges that confronted the Organised Private Sector (OPS), especially manufacturers. Based on the intensity, the Manufacturers CEOs Confidence Index (MCCI) ranked inadequate electricity supply and high cost of self-generated energy first and multiple taxation and overregulation as second.

    To gauge the pulse of the economy on quarterly basis, the Manufacturers Association of Nigeria (MAN) created the MCCI. The MCCI deploys a set of diffusion factors including Current Business Condition and Business Condition for the next three months to measure a quarterly perception and confidence of manufacturers in the economy.

    Other diffusion factors are Current Employment Condition, Rate of Employment, Employment Condition for the next three months and Production Level for the next three months.

    For instance, the indexes of Current Business Condition in the third quarter dropped to 41.5 points, from the 43 points recorded in the second quarter; Current Employment Condition, which stood at 35 points in the second quarter of the year, also improved to 42.3 points in the third quarter, while production expectation in the next three months increased marginally from 64 points recorded in the second quarter, to 66.4 points in the third quarter of the year.

    However, indexes of ‘Business Condition for the next three month dropped from 59 points recorded in the second quarter to 55.8 points in the third quarter of the year.

    Employment Condition for the next ‘3’ months’ also weakened marginally from 53 points of the second quarter to 52.5 points recorded in the third quarter of the year.

    The meager improvement in Production expectation and the Current Employment Condition expressed the degree of hope and intensity of the level of confidence of CEOs of manufacturing concerns that going forward, government would do the needful to make manufacturing operating environment friendlier before year end.

    While poor electricity supply was top of the list of manufacturers’ woes, the MCCI also identified high interest rate/difficult condition in accessing loans /high cost of funds, poor accessibility to ports/gridlock at the national ports/high Demurrages, bad roads/poor rail transport systems as third and fourth major challenges, respectively.

    Other issues that left sour taste in the mouths of manufacturers in 2019 included difficulty in sourcing forex/multiple forex widows/no special treatment of manufacturers in sourcing forex; low patronage/poor patronage from the government/low turnover.

    Manufacturers also lamented the challenge of counterfeiting/influx of sub-standard products/too many uncertified products in the market; high inflation/high cost of raw-materials; high cost of spare parts; insecurity across the country; closure of borders, among others.

    Read Also: Border closure short term solution to smuggling – OPS

     

    Indeed, as Mabogunje observed, border closures as well as the congestion of the ports were the biggest low points in the economy in the out-going year.

    She said the closure of the border by the Federal Government was high on LCCI’s agenda especially as Nigeria prepares for the implementation of the African Continental Free Trade Area (AfCFTA) Agreement from July 2020.

    Describing the AfCFTA as “A big opportunity for Nigeria,” she said: “The LCCI believes that AfCFTA is a great opportunity, but we can’t wait until we are ready. When will we be ready? Let’s start with it, and deal with our issues as they come along.

    “So, we are totally in support of the AFCFTA. We think we can’t wait until we are totally ready, that all hands should be on deck to make sure we address issues as they come along and try as much as possible to scale our hurdles as fast as possible so that we really can be competitive in the market.”

    According to the manufacturers, the afore-mentioned challenges resonated with the ranking obtained in the two previous editions of MCCI thus, underscoring the need for government to urgently address these challenges to enhance the competitiveness of the manufacturing sector and return the sector to the path of sustainable growth.

    “The manufacturing sector has been identified as the catalyst of industrialisation and engine of growth of any economy. The sector in Nigeria faced myriads of challenges, particularly poor economic infrastructure and regulatory challenges.

    “These issues account for the almost stationary performance state of the sector in recent times and underscore the need to deliberately chat a course of action to change the sector’s narrative,” MAN said, in its MCCI, which was made available to The Nation.

    Indeed, the report put the aggregate MCCI for the third quarter of 2019 at 51.7 points. This represented a marginal increase of 0.8 index point over 50.9 index point recorded in the second quarter of the year.

    The slight increase depicted an uptick in manufacturing sector’s performance. It also showed that manufacturers’ confidence in the economy improved in the third quarter.

    However, the slight improvement in performance was attributed to the doggedness of manufacturers, as the operating environment remained very challenging.

    The performance was also far below the projections and expectations of manufacturers and majority of the member-companies operating in the sector. MAN, through the report, therefore, urged the government to urgently address the challenges identified and give priority attentions to the general recommendations in the report.

    Some of the recommendations put forward by MAN to restore the sector to the path of meaningful growth include urgent resolution of the Nigeria-Benin border dispute; deliberate channeling of economic infrastructure to strategic economic hubs across the country; resolution of the issue of re-classification of manufacturers as strategic users of gas.

    Man also advised government to, among others, continue to improve in its monetary policy management by focusing on reducing inflation rate; improving the long-term loan portfolios and cost of credit for the industrial sector.

    It also urged the government to ensure that only approved taxes/fees & levies are collected by its agencies.

  • ‘Capital flight reduction not an option for Nigeria’

    With an investment of over $175 million in its Fabrication Yard in Port Harcourt, Rivers State, indigenous oil & gas servicing company MG Vowgas Limited says its plan to build Nigeria’s first ever modular refinery next year is on course. It’s Group Managing Director/Chief Executive Officer, MR. GODWIN IZOMOR, said before the end of the year, the project’s components will be assembled. In this interview with Assistant Editor CHIKODI OKEREOCHA, he also said the company has concluded agreement with the Research Department of the Federal Ministry of Defense to start building made-in-Nigeria ballistic airboats for use in the country. He, however, said there is need to halt or, at least, reduce capital flight to deepen local content and also remove the power sector from the exclusive list in order to open the sector to investments.

     

    Give us a brief background of MG Vowgas Limited?

    The inauguration of a democratic government in Nigeria some years ago has opened more windows of opportunities in the oil & gas sector for serious and committed companies, thereby increasing private sector participation in the economy.

    Participation of new entrants, particularly indigenous participation, is being encouraged in order to promote a vibrant economy and a springboard provided for the development of indigenous companies.

    This led professionals with extensive experience in Business & Corporate Strategy, Finance, Project Management, Management Consultancy, Supply Chain Management and Engineers to put heads together and create an organisation dedicated to giving the Nigerian oil & gas industry the much needed local participation and increased local content.

    This led to the birth of MG Vowgas Limited in 2006. MG Vowgas Limited is a wholly Nigerian company with a total capability across the spectrum of Building, Civil and Mechanical Engineering Works, Manpower Supply, Procurement, Engineering Design, Project Financing, Marine Support Services, Project and Integrity Management.

    MG Vowgas Limited aims to be a force and significant player across the entire value chain of the Oil & Gas, Chemical, Petrochemical, Industrial and Construction industry in Africa and beyond.

     

    What is the company’s area of specialty? 

    We have the capability of handling projects requiring millions of man hours in areas of engineering, global procurement, construction and installation.

    Our team of principal participants has successfully completed highly diverse construction projects in various locations in the areas of oil and gas pipeline facilities, design verification and construction as per all mechanical, electrical, civil works, erosion and flood control works etc.

    MG Vowgas Limited has a very strong financial base with the capability of mobilizing on any project at short notice. Basically, we are into fabrication and construction. We are an Engineering, Procurement, Construction and Installation (EPCI) company.

    Our work cuts across all the areas of oil and gas industries. We are also into marine; we have done various fabrications on marine vessels. By 2020, we are going to build the first Nigeria offshore loading facility in form of Floating Production Storage and Offloading (FPSO).

    Also, we are going to build the first ever Nigerian modular refinery here in this Fabrication Yard next year. We are already in a design process and by the grace of God before the end of the year we will assemble the component in this yard.

    What’s the worth of this Fabrication Yard?

    The Nigerian Content Development and Monitoring Board (NCDMB) categorized us based on what we have spent.

    Based on the certificate they issued to us, they under-quoted our worth; they quoted us $125 million, but this facility is worth over $175 million in investment.

    How has the journey been? 

    The journey has not been easy. As at today, we have over 230 staff, but that is a journey of three people today since 2009.

    The only thing I can tell you is that what keeps us strong is God. I can say that whatever we have achieved today is not just my effort, but the combined effort of the company’s dedicated staffs especially the technical guys.

    I mean those who have supported us and all my staffs that have been faithful even when there is no money; they are still working with us.

    MG Vowgas entered into a partnership with Ministry of Defense. What is the partnership about?

    Currently, we are working with the Nigeria Defense Research Department, Ministry of Defense, to build the first Nigeria airboat.

    The airboat has the capacity, the speed of 100km/h. The airboat is using the propeller, which is equivalent to the one used for airplanes; that is what we are using to power it and it will be powered between now and January.

    We expect President Muhammadu Buhari or the Chief of Defense Staff to come and commission it, which will be the first ever ballistic airboat in Nigeria.

    Apart from this partnership, what is your company’s short, mid and long term goal?

    By God’s grace, in 10 years from now, from what I have outlined, the first thing we are going to do from next year is build the first modular refinery.

    That’s one. Second, we are going to invest heavily with our partners in ship building. We have Brass Local Government Area in Bayelsa State, Nigeria, and Bonny, an island town and a Local Government Area in Rivers State in Southern Nigeria. Our partners are considering weather Bonny has the landmass for that investment.

    Secondly, Brass has a lot of land for us to play with so, we are going to compare which one is the best for us, because we must do everything as a company to help our country reduce capital flight.

    We need to appeal to the Federal Government to put up a policy in this regard. The second challenge we have as a company is sorting for steel we use in fabrication. As at today, every steel we use is imported either from China, Ukraine, Germany, amongst other countries.

    We cannot continue on this road as a country; the huge amount of money leaving this country is huge. The amount we use to import steel into Nigeria annually is enough to set up another steel company in Nigeria.

    So, we must encourage the Federal Government to ensure that before the next two year, Ajaokuta Steel Company is able to produce heavy sheet plate for in-country fabrication.

    The government has made it clear in its move to drive local content in the country, and that is what NCDMB is doing. NCDMB has moved to expand local content to other sectors of the economy, which is a good development, but there is urgent need for the Federal Government to focus on creating enabling environment and allow businesses for business men.

    The Federal Government also needs to focus on developing electricity. We are using an alternative power supply of about 6Mw to power this yard and ordinarily it is costing us so much.

    If we had a standard power generating system in Nigeria, the money am spending on providing power to run this place would have been part of the money we would have used to create jobs. But we spend it in security and power generation.

    How can the Federal Government encourage investors? 

    There are several ways government can encourage investors to invest in power generation in Nigeria.

    Currently, MG Vowgas and Schneider Electric are collaborating to build an Electric House Sub Station, or Power Station, (a prefabricated walk-in modular outdoor enclosure to house a Medium Voltage (MV) and Low Voltage (LV) switchgear as well as auxiliary equipment), to support the power generating sector.

    But the Federal Government needs to encourage the private sector to come in and invest in power generation, by creating a soft landing for them.

    Power generation is cheaper and affordable when produce locally with indigenous firm. The first thing the government needs to do is to remove power sector from the exclusive list for local companies to invest in; if power is taking out from the exclusive list you will see investors taking over every aspect of the sector.

    Nigeria is a large country with huge economy that anybody is ready to invest, and power is one of the key areas which Nigeria has to unlock for investors to come in.

    If Nigerian Telecommunications Limited (NITEL) were not unlocked, nobody would have heard about GSM by now. So, we have to break or unlock the power sector for business men to come in and invest.

    That is the only way we can achieve power generation in Nigeria that will be enough for everyone. If anybody tells you they have awarded contract for transmission line and power generations in Nigeria and will begin to have constant power supply across the nation in the next 20 years without unlocking the sector, it cannot happen.

    Read Also: Firm calls for use of steel drums in oil and gas sector

     

    What have been your challenges?

    The challenges are so numerous to be listed, that is why (NCDMB) has to work fast so as to categorize MG Vowgas, because you cannot continue to merge us with a company that has no office, no facilities and tell them to quote for us.

    That means that they will under quote and we will be going out of business, because we have huge overhead cost. So, one of the challenges we have is that the industry should discourage lowest bidder, instead of capacity to deliver the project.

    You are aware that today there is jobs that they give to counseling contractors that they have not been able to deliver in ExxonMobil.

    ExxonMobil had to cancel those contracts because those people do not have facilities; they do not have anything, they are just counseling contactors  that are registered in Nigerian Petroleum Exchange (NIPEX) and they send them tender bids, and they quote anything they can quote and at the end of the day they cannot deliver such services.

    So, we have to tell NAPIMS and the IOC to jettison the lowest bidder idea, because lowest bidder is going to kill local companies, those who are struggling to build facilities like ours.

    Lowest bidding will kill them so what we need to do is we have to encourage those who are qualified and have the capacity to deliver the project; this should be the first thing the IOCs should consider. Secondly, there is the challenge of security.

    We spend money even going to the location where we work; we spend heavy money on security. Where I am working in Agip, we have two gun boats and 15 personnel.

    In Chevron also, we have two gun boats and 15 personnel. So, constantly we are spending and those things are not cheap.  We spend huge amount of money. I pay my workers about N53 million monthly, while my expenses for security is almost N50 million monthly.

    Can you equate what you have spent to contracts that have been awarded to you by IOCs and other companies? 

    Basically, we have spent close to $175 million on this facility. One of the key things the IOCs look at is your certification in quality, your certification in Health Safety and Environment (HSE) and this are some of the things we take dearly.

    We have ISO 2015, which is quality and only few companies in Nigeria have achieved ISO 2015 base on quality on fabrication, not just quality on anything, but on fabrication.

    We have the best quality management system in Nigeria and  the only company I can see in fabrication that have quality management system that have just achieve this recently is LADOL.

    It is only LADOL that has achieved the ISO 2015 quality management system. Outside that I do not think anybody in fabrication have achieved that.

  • Driving Nigeria’s readiness for AfCFTA implementation

    The implementation of the African Continental Free Trade Area (AfCFTA) Agreement begins in July 2020. Seven months to its take-off, the National Action Committee approved by President Muhammadu Buhari to drive Nigeria’s readiness in projects and initiatives for AfCFTA implementation has intensified efforts to tighten all the loose ends. This and other trade remedy mechanisms put in place are seen as indications that Nigeria is poised to leverage opportunities within the trade liberalisation deal to shape more inclusive economic development. Assistant Editor CHIKODI OKEREOCHA reports.

     

    Nigeria looks good to latch on the African Continental Free Trade Area (AfCFTA) Agreement to facilitate economic growth and diversification, create jobs and wealth for investors and businesses. Ahead of the implementation of AfCFTA, which begins in July 2020, preparations are in top gear to ensure Nigeria benefits optimally from the trade liberalisation deal.

    Already, both the National Action Committee approved by President Muhammadu Buhari to coordinate the work of relevant Ministries, Departments and Agencies (MDAs) and drive Nigeria’s readiness in projects and initiatives, and the Nigerian Office for Trade Negotiations (NOTN) have commenced work aimed at achieving Nigeria’s objectives under the AfCFTA.

    The AfCFTA seeks to create a continental trade bloc of 1.2 billion people, with a combined Gross Domestic Product (GDP) of about $3 trillion. It was envisaged that AfCFTA – the world’s largest free trade area since the creation of the World Trade Organisation (WTO) in 1994 – will boost intra-African trade by about 60 per cent by 2022.

    According to the Senior Expert of Customs, AfCFTA unit of African Union (AU), Willie Shumba, “Intra-Africa trade is just 15 per cent of its total trade, compared with 19 per cent in Latin America, 51 per cent in Asia, 54 per cent in North America and 70 per cent in Europe.”

    Speaking at a recent forum in Lagos, with the theme: “The AfCFTA: Current Status of Negotiations,” Shumba regretted that African countries were not trading among themselves; that Africa’s fundamental role in global trade has been to provide raw commodities in exchange for manufactured goods.

    The AfCFTA, therefore, hoped to boost intra-African trade by committing African Union (AU) member states to liberalising services and trade and removing tariffs on 90 per cent of goods. It was also expected to help boost domestic and foreign investment in the partnering countries.

    The agreement entered into force on May 30, 2019, having been ratified by the required 22 countries.

    Currently, 54 countries are said to have signed; 27 countries have ratified the landmark agreement. Nigeria’s President Muhammadu Buhari signed the AfCFTA agreement on Sunday, July 7, 2019, making Africa’s largest and most populous country the 53rd to sign the free trade treaty.

    The signing was done in Niamey, Niger Republic, at the 12th Extraordinary Session of the Assembly of the AU on AfCFTA. Nigeria signed the agreement after 16 months of foot-dragging, during which government said it carried out thorough consideration of the agreement and country-wide sensitisation and consultation of stakeholders.

    Now, ahead of the July 2020 implementation of the Agreement, Nigeria, through the National Action Committee chaired by Minister of Industry, Trade and Investment, Chief Niyi Adebayo, as well as the NOTN have demonstrated Nigeria’s readiness to implement the agreement.

    For instance, NOTN Assistant Chief Trade Negotiator AfCFTA/ECOWAS, Ms. Demitta Gyang Chinwude, said a trade remedy mechanism for the rules-based safeguard of the Nigerian economy has been set up in the NOTN with trained specialists ready to counteract injurious trade practices against the Nigerian economy.

    This, The Nation learnt, became neccessary after members of the Organised Private Sector (OPS), particularly the Manufacturers Association of Nigeria (MAN), initially kicked against Nigeria signing the free rade deal. This was on grounds that it will open the floodgate for influx of foreign goods into the Nigerian market and turn the country into a dumping ground.

    Manufacturers had kicked their heels in, insisting, for instance, that the Rules of Origin (RoO) in the AfCFTA, which is used to determine the country of origin of a product for the purpose of international trade, cannot be adequately enforced to guard against the influx of goods into the Nigerian market.

    Specifically, MAN expressed fears that the RoO may not be adequately enforced because goods from the European Union (EU) may find their way into one of the African countries that have bilateral agreement with the EU.

    “When the goods get into the African country, they can repackage them, change the label from made in Europe to that of the African country. Those same goods will surely find their way to Nigeria, which is the main target market for the EU,” MAN argued.

    MAN further argued that AfCFTA’s market access was a concern to its members because it leaves low protection to locally produced goods. “The agreement says that 90 per cent of the tariff plan would be liberalised, leaving only 10 per cent to protect manufacturers. That 10 per cent is too low,” it insisted.

    Indication that MAN’s initial fears may have hit the right chord in the ears of the Nigerian authorities emerged last week when Adebayo reaffirmed government’s resolve that “We will not allow rogue traders to manipulate the RoO and disguise goods from outside the continent as made in Africa so as to qualify for duty-free passage.”

    The occasion was the National AfCFTA Forum, themed “Effective Implementation for Industrialisation and Inclusive Economic Development in Nigeria.” Co-organised by the Nigerian Government, it brought together the private sector in Nigeria to afford them the opportunity to learn how to best leverage the opportunities within the AfCFTA.

    The forum, which ran from December 5 to 6, 2019, in Lagos, was also a platform to actively engage with and consult intra-African actors across a diverse range of different sectors to better understand how the AfCFTA Agreement can shape more inclusive economic development in Nigeria.

    Other co-organisers included the United Nations Economic Commission for Africa (ECA), the EU, MAN, the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), in collaboration with the African Union Commission (AUC).

    The Forum was part of a comprehensive project, supported financially by the EU, aimed at deepening Africa’s trade integration through effective implementation of the AfCFTA.

    The ECA has also been working with its partners including the AUC, International Trade Centre (ITC), United Nations Conference on Trade and Development (UNCTAD), and a selection of independent trade experts to ensure effective AfCFTA implementation strategies.

    In partnering to organise the Forum, the Senior Advisor with the African Trade Policy Centre at the ECA, Mr. Adeyinka Adeyemi, stated that the role of the private sector was critical in AfCFTA’s implementation.

    However, Nigeria, which stands to be the ultimate beneficiary of these international collaborations, has not folded its arms. The Federal Government, through the National Action Committee and the NOTN, has continued to demonstrate its determination to fully implement the terms of the AfCFTA.

    The Committee’s Chairman, Adebayo, at the Forum, said the president had always maintained that trade was very important to Nigeria and Africa. He, however, added that fairness was key to the success of multilateral agreements.

    His words: “Our vision for intra-African trade is that of free movement of made in Africa goods. That is goods and services made locally with significant African content in terms of raw materials and value addition.

    “Nigeria’s vision for the AfCFTA is, therefore, free and fair intra-Africa trade that creates economic growth, wealth for investors and businesses, jobs and prosperity for our citizens.”

    Adebayo explained that from studies done so far, Nigeria had established that the AfCFTA could facilitate economic growth and diversification, through preferential access to Africa’s market for manufactured goods and services.

    Read Also: AfCFTA: we will not allow smuggling to continue, says Fed Govt

    The minister, however, pointed out that this could only be realised through addition of new production capacity, retooling and up-scaling existing businesses and assisting sectors that would be negatively impacted to migrate to new areas.

    He also harped on the need to prioritise the resolution of bottlenecks that hinder Nigeria’s competitiveness in production and trade, including hard infrastructure such as power and logistics as well as soft infrastructure such as policies and regulations.

    The minister sure hit the bull’s eye with regards to hard infrastructure particularly power, which is said to be perhaps, the greatest obstacle to Nigeria’s competitiveness in continental and global trade.

    The Minister of State for Power, Mr. Goddy Jeddy-Agba, admitted this much when he said Nigeria’s economic growth was largely tied to constant power supply across the country. He cited a 2017 report that showed that Nigeria ranked as the second worst nation with unsteady power supply in the world.

    Jeddy-Agba spoke in Calabar, Cross River State, during a retreat for heads of agencies and parastatals under the ministry. He said the retreat was to address the existing operational gaps between the ministry and its agencies, and also to enhance good working relationship that would help in the implementation of government policies.

    Underscoring the need to get the hard infrastructure particularly power right, the Jeddy-Agba said: “I cannot over-emphasise the fact that the entire nation has its eyes glued firmly on the power sector. Ironically, the power sector can be likened to human eye. Once the eyes are closed, darkness takes over…”

    However, soft infrastructure such as policies and regulations is no less important in driving Nigeria’s effective implementation of AfCFTA beginning from July next year. This must have been why Adebayo said enforcement of trade rules without compromising efforts on trade facilitation and ease of doing business, was crucial to AfCFTA.

    According to him, the Federal Government was determined to fully implement the terms of the AfCFTA and uphold its commitments on trade and regional integration.

    “However, we will not allow smuggling and other predatory trade practices to continue unchecked, as it undermines our economic development efforts and destroys local industries, leading to job losses,” Adebayo assured.

  • Why Should I Purchase Bitcoin?

    Since its creation a decade ago, Bitcoin has been continuously in the news for several reasons. In this period, the price of Bitcoin has experienced a constant parabolic uptrend. However, the buzz around Bitcoin reached a new level altogether in 2017, when its price reached an all-time high of $20,000.  This means that an individual purchasing Bitcoin worth $50 in 2009 could have earned millions of dollars by selling them off in 2017. In fact, it is known that some investors were actually rewarded with up to 1,350 percent return.

    The picture changed abruptly once again in 2018. After starting the year at $14,000, by the end of the year, the Bitcoin price plummeted to less than $4,000. Some experts suggested that this steep price correction was an indication of the “crypto bubble” finally bursting. However, investors must take encouragement from the fact that there are still enough reasons for buying Bitcoin. With the current level of Bitcoin price, there are excellent purchasing opportunities for investors.

    Mentioned below are some of the many reasons why Bitcoin is still an excellent investment option.

    Growing global adoption: Though the price of Bitcoin has fallen in recent times, there has been a sharp rise in its global adoption. For example, the Blockchain wallet reports significant growth in the number of users throughout the year 2018. In the past twelve months, the number of wallets has increased to over 32 million from 22 million. This is a clear indication that people’s interest in Bitcoin has not waned even after the price correction.

    Also, most of the popular peer-to-peer bitcoin exchanges have achieved excellent trading volumes in recent months. This suggests growth of bitcoin adoption in emerging markets, particularly in the South American countries. Throughout 2018, the Bitcoin trading volumes have been extremely high in Argentina, Colombia, Chile, Venezuela, and Peru.

    In the coming days, bitcoin merchant adoption is expected to increase even more because of the introduction of the Lightning Network. The availability of these new payment channels will ensure faster payments for almost zero processing fees.

    New Regulations: The absence of adequate regulations has always been an obstacle to the growth of Bitcoin. However, at the G20 meetings in 2018, the need for building a global regulatory framework for all types of crypto assets was discussed by lawmakers and financial regulators. This is a clear signal that in the near future, Bitcoin investment may be regulated by rules similar to the ones we currently have for forex and equity trading.

    With a regulated market for crypto assets, there is no doubt that more retail investors will be interested in joining the fray. This will provide Bitcoin investment the regulatory stamp of approval that is extremely essential for the institutional investors to start investing in this class of assets.

    Wall Street Goes Crypto: Nasdaq, Fidelity, and the Intercontinental Exchange (ICE) have recently revealed their plans to introduce cryptocurrency trading offerings very soon, for institutional investors. It is expected that Bakkt, a new venture from ICE, will encourage more Wall Street firms to trade Bitcoin because the planned trading platform will launch with crypto custody service as well as bitcoin derivatives. Later on, crypto merchant payment services are also expected to be rolled out by the platform.

    Innovation: One of the biggest reasons to invest in Bitcoin is the fact that bitcoin is not static. Bitcoin developers all over the world are working round the clock to improve the network so that it has better scalability, features that enhance user privacy, and advanced functionalities such as smart contracts.

    These were just a few reasons for you to buy Bitcoins. If you are seriously thinking of purchasing Bitcoin, you may contact xCoins today for more useful details and related services.