The Nation Newspaper

Category: Issues

  • Boosting local phosphate production

     

    Nigeria is Africa’s biggest crop producer; she is also among the biggest consumers of agricultural nutrients. But at two kilogramme/hectare, her phosphate fertiliser application level is far below the global average of 16kg/hectare. Nigeria also ranks below her peers, such as Kenya and Ethiopia, which boast 19kg/hectare and 13kg/hectare. However, to strengthen local phosphate mining capabilities, Nigeria has joined forces with Morocco. DANIEL ESSIET reports.

    Nigeria’s population is projected to hit 400 million by 2050. This has necessitated the need to prioritise raising agricultural productivity to achieve food self-sufficiency. One of the key factors identified as having the capacity to raise agricultural productivity and achieve food security is access to and efficient use of input, particularly phosphate fertiliser.

    The snag, however, is that Nigeria and, indeed, much of the developing world, has not been able to effectively acquire and use this critical input to raise productivity. Nigeria appears to be worse hit. For instance, at two kilogramme/hectare, her phosphate fertiliser application rate, according to experts, is far below the global average of 16kg/hectare.

    Nigeria also ranks below her peers on the continent such as Kenya and Ethiopia, which parade 19kg/hectare and 13kg/hectare phosphate fertiliser application rates. And the implication of this is certainly not lost on stakeholders and the authorities in the agric sector.

    This is so considering the need for increased crop production to ensure food self-sufficiency for the projected population by 2050. This is because low use of fertiliser contributes to growing yield gap, which is the difference between how much crop could be produced in ideal circumstances compared to actual yields.

    The consensus is that phosphorus is a major mineral nutrient required by crop plants for optimal growth and productivity. It is one of the main three nutrients most commonly found in fertiliser and is the “P” in the NPK balance that is listed on fertiliser.

    Phosphorus, according to experts, is  present in soil in a chemical form known as phosphate. Adding phosphorus-containing fertiliser to the soil boosts productivity, but that kind of fertiliser is becoming less and less readily available. That’s because such fertiliser requires large amounts of phosphate rock, which must be mined from the earth.

    But, the authorities in the agric sector appear to be rising to the occasion. On the strength of a strategic partnership between Nigeria and Morocco, there are hopes on the horizon that Nigeria’s local phosphate mining capabilities and capacities would soon be strengthened.

    Such hopes are supported by Nigeria’s rich but largely untapped phosphate reserves. The country already boasts a wide range of phosphate minerals, which are highly concentrated in phosphate rocks. They are found in Sokoto, Abia, Imo, Edo, Anambra and Ogun states.

    In Sokoto State, for instance, phosphates of  Paleocene sedimentary  deposits occur in the Dange Formation.  Exploration work by   Nigerian Geological Survey Agency  also  established the occurrence of phosphate nodules   and  pellets  in  Dange,  Gidan Bauchi, Illela, Gada and Kalambaina.

    The Sokoto phosphates reserves are estimated to be about 10 million tonnes.  Phosphate rocks are also found in Oja-Odan and Ifo areas of Ogun State.

    Experts say Nigerian phosphates have very high reactivity, thus making them suitable as fertiliser material even indirect application to soil.

     

    Sokoto State throws its hat into the phosphate ring

    Sokoto State Governor Aminu Tambuwal may have already seen the immense potential in local phosphate production, which was why he recently led a high-powered delegation to Morocco to finalise discussions with Morocco’s OCP Group and the Solid Minerals Development Fund (SMDF), for the establishment of a phosphate blending plant in his state.

    The Nation learnt that the move came after the Managing Director, OCP Africa Fertilisers Nigeria Limited, Mohamed Hettiti, visited Sokoto and held extensive discussions with the state government.

    As a expression of the state’s readiness to partner with OCP Morocco, Tambuwal is said to have allocated 10 hectares of land for the phosphate blending plant. A Certificate of Occupancy (C of O) has since been issued to OCP Morocco.

    During Governor Tambuwal’s visit to Morocco, the Executive Secretary of SMDF, Hajiya Fatima Umaru Shinkafi, signed a cooperation agreement with the OCP Africa Fertilisers for the development of Nigeria’s phosphate deposits.

    Africa Fertilisers Nigeria is one of the networks of OCP Africa, a subsidiary of Morocco’s OCP Group. Created in 2016, OCP Africa is an execution of OCP’s partnerships in Nigeria and other African countries.

    OCP has 12 subsidiaries in Africa, but the group focuses on Ethiopia, Nigeria, Ghana, Ivory Coast and Senegal.

    OCP Group, which holds 75 per cent of the world’s phosphate reserves, is one of the leading exporters and producers of raw phosphate, phosphate-based fertiliser, and phosphoric acid in the world. The company develops precision agriculture techniques to help farmers improve the quality and yield of their crops.

    While Hajia Shinkafi signed on behalf of the Federal Government, Hettiti signed for OCP Africa Fertilisers.

    The agreement, which was an extension of President Muhammad Buhari administration’s Presidential Fertiliser Initiative (PFI), will ensure technical cooperation between SMDF and OCP Africa in the fields of phosphates exploration and appraisal.

    It will also support SMDF effort to develop phosphate mining and provide training and academic exchanges aimed at developing human capacity in the mining sector through the training of exploration geologists and mining engineers.

    On the strategic partnership, Shinkafi stated that phosphate is one of the five strategic minerals that have been identified by the SMDF for immediate intervention.

    “Agriculture and mining have been put at the forefront of the government’s priorities, and agro-minerals (e.g. phosphate) readily provide a good link between the two important subsectors of the economy,” she said.

    The SMDF scribe explained that SMDF has prioritised phosphate for solid minerals development in Nigeria due to the presence of reserves and its potential for direct application of Nigeria’s reactive phosphate on the nation’s acidic soil.

    “Matching South Africa’s phosphate application rate will make Nigeria the largest phosphate fertiliser market size 10 times that of South Africa valued at $260 million, as Nigeria’s phosphate fertiliser application rate is 2kg/hectare.

    “The figure is far below the world average application rate of 16kg/hectare and peer countries such as Ethiopia and Kenya averaging 13kg/hectare and 16kg/hectare,” Shinkafi said.

    She said based on regional application rates, Nigeria has the potential to consume 2.4 million tons of phosphate fertilisers yearly, but consumes less than 200, 000 tonnes.

    She expressed hope that the exploitation of Sokoto phosphate deposits will provide an economically viable method of achieving this potential.

    Hettiti stated: “The SMDF targets development of the phosphate mining industry in Nigeria, which is why OCP will leverage on its capabilities and technical know-how to achieve those objectives.

    The local production of phosphate will provide a cost-effective solution to increasing Nigeria’s phosphate fertiliser application rate.

    It could be recalled that President Buhari recently directed the SMDF to drive the development of Nigeria’s phosphate and potash reserves as an extension to the PFI.

    The Federal Government established the SMDF in 2007, through the 2007 Minerals and Mining Act, to drive investments in Nigeria’s mining sector.

    The SMDF, which became fully operational under Buhari’s administration, had identified $500 million worth of investment in the sector.

    Nigeria is the biggest agriculture market and crop producer. She is also among Africa’s biggest consumers of agricultural nutrients including phosphate.

    Interestingly, by directing attention to local phosphate production to meet her food needs, Nigeria appears to be responding to global trends and developments in the phosphate industry, where researchers across multiple disciplines are seeking ways to improve soil phosphate management.

     

    The SYMPHOS event

    They are also intensifying efforts in understanding how plants can adapt to limited phosphorus. It was the focus of the fifth International Symposium on Innovation and Technology in the Phosphate Industry (SYMPHOS) held in Benguerir City, Morocco.

    The conference, which was an initiative of the OCP Group and the Mohammed VI Polytechnic University (UM6P), Morocco, covered  various topics, including a range of innovative developments relating to fertiliser production, forecasts of rock phosphate availability and an overview of fertiliser blending technologies.

    The event attracted commercial and operational decision-makers from across the phosphates and fertiliser supply chain.

    Launched in 2011, SYMPHOS is held every two years. It is an international hub of innovation around phosphates and its derivatives.

    The event has become an international benchmark in the sector, offering a forum that promotes diversification, modernisation and development of the phosphate industry and support for the development needs of worldwide agriculture.

    Aware that innovation is the primary tool for rational and sustainable exploitation of phosphate reserves, OCP Group uses SYMPHOS to highlight its commitment to sustainable and prosperous agriculture throughout the world.

    By bringing together the global phosphate community to share expertise, skills and experiences, SYMPHOS aims at contributing to the emergence of the ideas of tomorrow, and taking up the major challenge of soil and resource conservation for sustainable agriculture.

    This year’s SYMPHOS examined new techniques and technologies to improve production systems in the phosphate industry and to conserve resources.

    This involved considering the future of the phosphate industry in the context of a sustainable development and clean technologies approach, discussing phosphate-based raw materials, intermediate products and finished products.

    Special place was given to the Moroccan model of industrial management and innovation development in the phosphate industry, particularly in the areas of mining, beneficiation of phosphates, adding value and fertiliser production.

    The Secretary General, UM6P, Hicham El Habti, reiterated that balanced fertiliser is essential for sustainable agricultural intensification. He said OCP, through its Research & Development (R&D) programme and in close co-operation with the Mohamed VI Polytechnic University, was developing fertiliser that is specific to the needs of African soils and crops.

    El Habti also said OCP was developing locally-appropriate service models for African farmers to have reliable and affordable access to these input and-related products.

    OCP Group Director of R & D Mr. Rachid Boulif said the conference aimed to boost the growing relations between Morocco and the rest of Africa in education, research and innovation fields.

    He said the conference aimed to explore the latest innovations and services to the phosphates industry. The forum, according to him, was aimed uniting agriculture professionals with industry professionals and create a platform for debate and thought exchange on some of the most important policy issues facing the sector.

    According to him, OCP group intends playing a leading role in the process of improving agricultural productivity in Africa by focusing on support for producers and also its innovation capabilities and expertise in the field of fertiliser serving institutions and operators, depending on their needs.

    The keynote address was delivered by Prof. Gunter Pauli, best- selling author of Blue Economy, Belgium and founder of Zero Emissions Research and Initiatives (ZERI). His address was entitled: “The emerging era of entrepreneurs for the common good.”

    Pauli called for smarter fertiliser use, noting that a smart system is one that takes cognizance of the soil conditions, crop type, crop history, geography and weather patterns.

    He explained that farmers must apply better fertiliser-to-yield ratios than developing nations, in addition to scientific, quantitative data analysis to determine the proper amount of fertiliser to use in a given situation.

    Working, in conjunction with the governments and relevant research bodies of the world’s fastest-growing phosphorus consumers, Pauli said, is promoting the development of economical, efficient applications of new and cutting-edge recycling technologies that are tailored to specific regions.

    The goal, according to him, would be to reduce their waste and increase their recycling, and it will emphasise the economic potential of such systems.

    Pauli said his organisation has initiated several projects dealing with matching the supply of urban nutrients from waste to the demand of nutrients from urban agriculture in order to increase local self-sufficiency.

    He called on governments and private sector across the continent to meet demand for sustainable products through integrated, efficient production of food, feed, bio-based products, services and energy with minimal environmental impact.

    Pauli said there was the need for Africa to create a sustainable and competitive bio-based industry providing jobs and growth.

    Bio-economy, according to him, is about using renewable biological resources and making the economy more sustainable and resource-efficient.

    The OCP Group is also building a phosphate fertiliser plant in the country. The plant will cost $1.5 billion and will have a total capacity of one million tonnes of ammonia.

    OCP signed a protocol agreement in June to build the industrial platform with Nigeria’s Sovereign Investment Authority. Hettiti said OCP Group will build two industrial fertiliser plants in the country.

    He said the plants will “help to boost local production, create permanent jobs and facilitate export opportunities”.

    The plants, according to Hettiti, will also ensure a decrease in Nigerian imports of NPK fertiliser, which combine three macronutrients: Nitrogen, phosphorus, and potassium.

    “We have an objective to balance the trade between Morocco and Nigeria. We do not want only importation into Nigeria. Nigeria is importing Di-Ammonium Phosphorous (DAP) fertiliser from Morocco,” Hettiti said.

    The planned plant, whose location has not been finalised yet, will produce ammonia, according to Hettiti, that can be exported to Morocco. For this reason, “We are investing that amount to build a DAP plant,” he said.

  • Counting border closure’s cost

    By Muyiwa Lucas

    Mixed reactions have continued to greet the closure of the nation’s borders. While some say it is part of efforts to save the economy from collapse, others say it is an assault on the economy and disregard for the ECOWAS Trade Protocol, MUYIWA LUCAS reports.

    For over 15 years, Moussa Qasim, a Beninoise, has been taking advantage of the trade liberalisation policy of the Economic Community of West African States (ECOWAS).

    The ECOWAS Trade Liberalisation Scheme (ETLS) adopted in 1979 had opened the way for him to grow his business considerably, given the freedom of movement he enjoys among the countries. And for him, his main marketplace is Nigeria, which he says, takes up over 90 per cent of his products, ranging from agricultural, artisanal handicrafts and unprocessed products, including industrial products. In return, Qasim takes back to his country beverages, and some food items believed to be easily affordable here and more profitable in Benin Republic.

    From this cross-border trading, Qasim is able to cater for his family needs, including paying for one of his children’s tertiary education in Europe. But the tide is changing. Since middle of August, when the Federal Government closed the country’s borders across four of the six geo-political zones, business has not been the same for not only for Qasim, but also for several other traders across the sub region.

    From comercial motor cyclists, transporters, bureau de change operators, to cross-border traders, the story is the same: biting economy. There are fears that if the border  closure continues, the  Bennoise, Nigeriens and Chadians’ businesses may crumble.

    ECOWAS-ETLS

    The ETLS is a trade instrument designed by the Regional Economic Community. Article (3) of the Revised Treaty of ECOWAS stipulates the removal of trade barriers and harmonisation of trade policies for the establishment of a Free Trade Area, a customs union, a common market and an eventual culmination into a monetary and economic union in West Africa.

    The ECOWAS-ETLS is the main framework for trade and market integration in ECOWAS as it addresses protocols on the free movement of goods, persons and transportation. The ETLS main pursuit of consolidating the free trade area is guided by the National Approval Committees that informs the member states. It is for this reason that the ECOWAS implemented a Customs and Connectivity programme to simplify the movement of goods in the region. The ECOWAS Common External Tariff has thus been operational since 2015. Moreover, member states are increasingly implementing the ECOWAS Single Customs Declaration Form for their customs administrations.

    For all products covered under the ETLS, they are granted with concessions like no quantitative restrictions, total exemption from import duties and taxes, non-payment of compensation for loss of revenue for items (i) and (ii) as a result of their importation.

    To qualify for admission into the ETLS, such products must originate from the ECOWAS region. The following are the three criteria for admission of products into the scheme: at least 60 percent local content of products, at least 30 percent value addition for products.

    The abuse

    The ECOWAS-ETLS may have been abused by the country’s neighbours – hence the decision to keep the borders shut. For instance, a top government official in the Seme-Krake border told this reporter that Benin Republic, especially, has been abusing the ETLS’ provosions.

    The official, who pleaded anonymity, explained that it is a common practice for importers to bring in goods from Europe, load same back into trucks onward to Nigeria. Such consignment, he explained, are then left to enter under the provisions of the ETLS since there was no way to say they were imported.

    Besides, the several cries and warnings of the Federal Government were said to have fallen on deaf ears of the government of the neighbouring country of Benin Republic. But the reluctance of the Franco-phone country can be understood.

    Under its rice fortification policy, four multi-national companies and about 30 other smaller importers, including individuals, were said to have been given approval to import foreign parboiled and white rice into the country through Benin Terminal, Cotonou, and Bollore seaport- Benin Republic’s two seaports. The white rice, according to sources, are consumed  within the country while the foreign parboiled rice are exported to Niger and Chad, which in turn, are smuggled into the Nigerian market through the north and southern parts.

    The Value News, an online publication,  claimed that it obtained a document showing that African Agro Foods, one of the companies owned by Pan Lebanes Group, has a mandate to ship into Benin Republic 360,000 MT, or 30 percent of the annual  parboiled rice imports; Diefezi Fils Sarl, 300,000 MT; Sonam, a company floated by the Stallion Group based in Dubai, Quatar, having the Presidential nod to import 240,000MT or 20 percent of the total  parboiled rice needed in the country. These are eventually exported to land locked countries or smuggled  into Nigeria.

    It further claimed that another Dubai based company, ABC Enterprises, due to its limited financial muscle was said to have been given approval to ship into that country 10,000 MT yearly. This is in addition to 29,000 MT, or 24 percent, allegedly approved for the other group of rice importers through the two seaports in the country. These, it is believed, accounts for why the tiny sub-regional country is flooded with rice. And with a small population incapable of consuming the volume of imports, Nigeria became her ready market.

    Qasim, though unable to put a figure to the volume of rice import, nonetheless, revealed that in Benin, the warehouses are filled to the brim with rice, including vessels on its waters loaded with the commodity, but no patronage arising from the border closure. The smaller shops along the Cotonou road and the ones at Seme-Krake Joint Border  between Nigeria and Republic of Benin, were also said to have been filled up waiting for Nigerian buyers, who were nowhere to be seen close the border. Although there are no official cost to goods tied down at the Seme-Krake border, experts said it is not less than N750 million.

    Experts and stakeholders blamed Benin Republic for allowing countries like Taiwan to dump foreign parboiled rice in their country and then re-bag such products and smuggle them into Nigeria, taking advantage of the ECOWAS protocol, which allows access to free trade within the sub region.

    Last year, Nigeria’s former Minister of State for Agriculture and Rural Development, Heineken Lokpobiri, blamed rice smuggling on ECOWAS-ETLS protocol on free trade. He was unequivocal that the nation’s fight against the smuggling of foreign rice has been frustrated by her neighbours, particularly Benin Republic. He said the country spent up about $5 million for the importation of rice daily, but that through new policy programmes by the ministry and the intervention of partners like IFAD, the figure had reduced drastically.

    Such policies like the Anchor Borrowers Programme and Nigerians answering the clarion call of this administration to go back to the farms to produce what her people will eat and eat what she produces, has made the country to be rated as the highest producer of rice and cassava in Africa. Sadly, it is believed that Benin Republic has undermined these policies through being a conduit for smuggling into Nigeria.

    Long plan

    But the plans to stop this economic haemorrhage had been long thought of. Weeks later, Nigeria’s former Minister of Agriculture, Audu Ogbeh, hinted of the Federal Government’s plan to shut the land border between Nigeria and a ‘neigbouring country’ to avoid smuggling of foreign rice into the country. He had explained that doing so had become necessary to encourage local production and sustain the economy of the country.  He said this also denies Benin citizens the opportunity to grow rice and benefit from the Nigerian market.

    “We have engaged the government of Benin Republic, up to the presidential level. The (Nigerian) president had to invite the president of Benin Republic to engage him because we are neighbours; let’s see how we can work together and curb this issue of smuggling,” Ogbeh had said back then.

    Benin Republic groans

    The effect of the border closure has taken a heavy toll on the Beninoise economy, including economies of other West African countries. One of the very visible effect is the further crashing of the CFA- the currency of the Franco-Phone West African countries, against the naira. Before this period, N1,000, which exchanged for CFA 1500 before the border closure now, exchanges at CFA1650 to N1000 in Benin Republic.

    The Premium Motor Spirit (PMS), otherwise known as petrol, sourced through smuggling across Nigerian  borders with the Franco-phone West African nation, now sells at CFA500 (N302) per litre. This same product sold at CFA 300 (N181) just before the closure.

    Qasim said life in Cotonou is getting tougher daily, considering that all business houses related to doing business with Nigeria closed. For now, most warehouses in Cotonu are filled and overflowing with goods mainly rice and frozen food, meant for Nigeria.

    A look across the Seme-Krake border revealed the several hundreds of trucks parked at the borders, loaded with goods destined to Nigeria, but they have not been able to cross the border to Nigeria. Findings revealed that most of the trucks trapped at the border contain goods that fall under the acceptable category of goods in the ETLS agreement.

    “Generally, business is very dull – the closure has affected all ECOWAS countries. Most Benin warehouses are filled up with rice and frozen chicken. Generally, business is very dull in Benin Republic because most businesses are patronised by Nigerians-across the border and inside the country,” he said.

    He warned that should the Nigerian government continue with the operation for up to six months, the economies of most West African countries will collapse as most of them depend on smuggling of foreign goods.

    Niger’s sucker punch

    For the Beninoise President, Patrick Talon, these may not be the best of times. Four weeks ago, his country’s economy, which is heavily dependent on rice import, received a deadly blow.

    Determined to persuade the Nigerian government to reopen the borders, the Republic of Niger President, Issoufou Mahammadou, bows to pressure  from both official and unofficial quarters  to ban the export of foreign rice from Republic of Benin to the country.

    Issoufu, it is believed, may have taken the decision, as demanded by Nigeria’s President Muhammadu Buhari, to stop the smuggling of foreign parboiled rice into the through the northern frontiers. Nigeria and Niger share common borders in the north west geo-political region comprising Kano, Jigawa, Kano, Katsina, Sokoto, Zamfara and Kebbi states.

    Since June 2015, rice imports in Benin Republic had soared, when the Central Bank of Nigerian (CBN), under Godwin Emefiele   created a list  of 41 products, which were later increased to 44 with the addition of textiles  for which importers  do not have access  to discounted foreign exchange.

    Fruitfulness

    For now, the closure seem to have been a fruitful initiative. The Comptroller-General of the Nigerian Customs Service (NCS), Hameed Ali, said: “When we closed the border, my fear was that our revenue was going to drop. To be honest, our revenue kept increasing. There was a day in September that we collected N9.2 billion in one day. It has never happened before.

    “This is after the closure of the border and since then, we have maintained an average of about N4.7 billion to N5.8 billion on a daily basis, which is far more than we used to collect.

    “What we have discovered is that most of those cargoes that used to go to Benin (Republic) and are then smuggled into Nigeria now come to us.

    “Now that we have closed the border, they are forced to bring their goods to either Apapa or Tin Can Island and we have to collect duty on them.

    “If that (border closure) would continue, to us, it is a welcome situation. Our revenue has not reduced. As a matter of fact, it is increasing as a result of the closure of the border.

    “About 10.2million litres of fuel have been cut down from what we assume, we have been consuming,” Ali prided.

    Yet, commendations has continued to trail the closure. For instance, the President of National Council of Managing Directors of Licensed Customs Agents (NCMDLCA), Mr. Lucky Amiwero, is of the opinion that while the border closure is against international treaties and protocols Nigeria entered into willingly, but the action has so far proved to be the most potent approach to tackling the several years of massive smuggling of goods from Nigeria’s neighbouring countries into Nigeria and smuggling of Nigerian fuel to those countries.

    Amiwero, who noted that smuggling has been a major challenge to the Nigerian economy, submits that: “if this operation is sustained till at least the end of the year, the Nigerian economy will feel the impact in a very positive way while the West African countries which over the years depended on allowing their countries to be smuggling routes in and out Nigeria will be forced to re-strategise on ways to ensure the survival of their economies,” he said.

    According to him, there is no need to lose sleep over the hundreds of trucks of ETLS goods trapped at the borders because those goods attract just one per cent duty payment to the Federal Government, and therefore do not constitute any major economic loss to the country. “Most of those goods are ETLS goods, but in reality are not produced in those West Africa countries purportedly exporting them to Nigeria. They just gather the goods from different parts of the world, repackage and re-export to Nigeria as ETLS goods. That in itself is smuggling,” he said.

    For him, the closure is a blessing to the Nigerian ports in disguise. “If the operation is sustained, most of the people importing goods they want sell in Nigeria, but had been patronising Benin and Togo ports will have no other option than to start to route their import to the Nigerian seaports. They don’t have option; their market is here,” he said.

    No retreat, no surrender

    The National Security Adviser (NSA), Maj.-Gen. Mohammed Babagana Monguno (rtd), has also hinted that the closure would not end soon.

    The exercise, tagged: ‘Exercise ‘Swift Response’, he said, therefore, would be in place “until the neighbouring countries can ensure that their countries will no longer serve as transit routes for smuggling of goods into and or destination of smuggled Nigerian fuel’’.

    “There is no going back on the border closure  with  the  neighbouring  Republic of Benin and Niger. The countries share boundaries with Nigeria in the north west, north central, southwest and south-south geo-political regions till the  countries bow to government demand to stop  smugglers from using their countries as base to turn Nigeria  into  a dumping ground for prohibited goods, particular , foreign parboiled rice from the Asian country of Thailand. Harmful products, mall and light arms including foreign rice were smuggled into the country through unapproved routes  from the north and  southern part of the country,” he added.

  • Better seeds could help African farmers grow far more

    An air of Malthusian gloom hangs over smallhold farmers in Sironko, in eastern Uganda. In the old days, they say, their parents reaped plentiful harvests from fields fed with manure. Now the soil needs to be coaxed into life with chemical fertilisers they cannot afford. As the population grows, farmers squeeze onto shrinking plots of land. The weather has become erratic: the growing season might begin with a week of downpours followed by drought. The rain and the sun no longer balance, complains one farmer, Zaituni Mudondo, banging a maize cob on the ground.

    So there is something unusual about Ruth Akello, who lives just down the road. Her house is sturdier than the rest, with a solar panel outside. She is also building another home in a nearby town. Asked about maize-Uganda’s most ubiquitous crop, which accounts for about 20% of people’s overall calorie intake-she pulls out a record book and phones her husband to check the numbers. The couple have grown 100 bags this year (about ten tonnes) and sold almost all of it. Her neighbours use old-fashioned methods of farming, she explains. “But me, I use the modern way.”

    One crucial difference between Ms Akello and her neighbours is the seed she uses. Whereas most smallholders keep some of the previous year’s crop to plant, as they have done for generations, she buys improved hybrid seeds. Her plot hints at the huge difference that modern seeds can make to the lives of Africa’s hundreds of millions of farmers. It also raises a question: why don’t more people plant them?

    The green revolution began with seeds. By the early 1960s scientists had created dwarf varieties of rice and wheat, which put more of their energy into edible bits and did not topple over when fed with fertiliser. Agricultural productivity duly took off in Asia and Latin America, making everybody richer. Douglas Gollin, an economist at Oxford University, and others estimated last year that a 10% increase in the share of land planted with high-yielding crops by the year 2000 is associated with 10-15% growth in gdp per head. Maize, which is easier to hybridise than many crops, has steadily become more productive in countries such as America and China (see chart).

    Sub-Saharan Africa is decades behind. Some of its poorest countries, such as Chad and the Democratic Republic of Congo, scarcely have seed markets. Uganda has several seed producers and a president, Yoweri Museveni, who exhorts the wananchi (“common people”) to adopt modern farming practices. But it has a long way to go. Surveys five years ago revealed that only 21% of maize farmers and 15% of all crop farmers in the country used hybrid seeds.

    Uganda’s wealthier neighbour, Kenya, ought to be doing much better. Hybrid maize seeds have been widely available there since the 1970s, and about three-quarters of farmers use them, according to the Tegemeo Institute in Nairobi, which conducts surveys. Kenya is also a leader in research. On a 200-hectare farm in Kiboko, south-east of Nairobi, cimmyt, an international institute, tests new strains in deliberately tough conditions. Thanks to a technique known as doubled haploid breeding, it can churn out new varieties quickly.

    Yet Kenya is no Eden either. As its population has grown, crop farmers have moved onto parched soils that used to be seen as fit only for cattle ranching. Climate change may also be having an impact: three out of the past five years have been poor for maize. Farmers are now being assailed by fall armyworm, a hungry caterpillar. Gradual improvements in farming methods have not been enough to overcome these challenges. Like Uganda, Kenya awaits a proper green revolution.

    In Kenya and many African countries supposedly high-yielding seeds do not always work. Emilia Tjernstrom of the University of Wisconsin in America has tested seeds bought from local dealers. On average only 76% of the seeds germinated and in some samples none did. Fake hybrid seed is widespread, says Mary Wangeci, an agricultural supplier in Machakos, near Nairobi. Clued-up farmers are gradually learning to scan the bar codes on seed packets with their phones to see if the product is genuine. Unfortunately, the neediest farmers are not so savvy.

    And the commercial seeds on the market do not always produce bountiful harvests. Because scientists are always working on maize, new hybrids are generally better than old ones. Plants also need to be appropriate for local conditions, which vary more in Africa than in other parts of the world. But Kenya’s bestselling maize seed, known as 614, was released in 1986. And although it grows well in the rainy highlands, it fares poorly in the hotter, drier parts of the country.

    Maize 614 is produced by a state-controlled outfit, the Kenya Seed Company, which dominates the market. It is cheaper than seeds produced by rival companies, partly because the government holds down its price. Launching a competitor is difficult for other reasons. Getting approval is expensive and takes five years-“if you’re really sharp, four years”, says Saleem Esmael, who runs the Western Seed Company. The stringent trials that the government insists upon are supposed to protect small farmers, but the result is old, inferior seeds on the market. Stephen Mugo of cimmyt compares the system to a bicycle with 100 padlocks-safe, but not useful.

    Uganda has a less cumbersome approval process and a more open seed market. But its government still finds ways to meddle unhelpfully. In 2013 Mr Museveni launched “Operation Wealth Creation”, which involved troops distributing seeds, fruit trees and cows. By 2017 private companies were selling half of their maize seed to the government. It typically takes three seasons, or 18 months, to ramp up production; reputable growers could not keep up with the sudden surge in demand. Seeds reached farmers late, or grew badly. The government then cut its purchases just as suddenly as it had started them. Companies were left with warehouses of seed they could not sell.

    Under tight security at the research station in Kiboko, which includes a man who shoots inquisitive monkeys with a catapult, some unusual maize plants are growing. Created by multinational companies, these are genetically modified to resist another pest, the stem borer. So far, the trial has been a success: the modified plants have hardly been touched, while nearby control plants are shredded. But farmers are unlikely to be able to plant the new maize soon, since both Kenya and Uganda ban genetically modified crops. Few sights are more frustrating.

  • Race for more revenue gathers steam

    The Federal Government has been implementing diverse policies designed to raise revenue. The government’s plan to raise Value Added Tax (VAT) from five per cent to 7.5 per cent, imposition of tax on technology firms and banking software manufacturers and the new policy mandating banks to collect five per cent stamp duty on every Point of Sale (PoS) transaction are some of the moves to raise cash to fund N8.9 trillion 2019 budget and other infrastructure projects. COLLINS NWEZE examines the new policy and its implications for businesses and the economy

    The Federal Government and its agencies have not hidden their thirst for more revenue. From new campaigns to deepen tax and revenue nets to regulations in banking sector to get customers pay more for banking services, there is a new drive to mobilise funds to provide the requisite infrastructure that will catalyse the economy.

    The proposal by the Federal Executive Council (FEC) to raise Value Added Tax (VAT)  from five per cent to 7.5 per cent  has  continued to generate varied reactions from stakeholders in the economy.

    While the Manufacturers Association of Nigeria (MAN) believes the raise will spike inflation and affect people’s purchasing power,  the Chartered Institute of Taxation of Nigeria (CITN) says the increase was long overdue and should be commended because  it will help government realise its developmental objectives.

    Before the policy, government also took major steps to tax technological firms. Government is targeting the  Nigerian digital economy which is worth  $88 billion  with capacity to create three million jobs by 2021 but it is largely untaxed. It is looking at getting more taxes from multinational companies such as Google,  Apple, Twitter, Amazon, Facebook, Uber, eBay and banking software manufacturers by developing framework that will get them pay taxes locally. Achieving that will however require new tax laws that capture their mode of operations.

    These firms deploy the  Base Erosion and Profit Shifting (BEPS) rule to shift profits from the spots where economic activity and value creation occur into low or no-tax locations. The practice and absence of  suitable tax laws have constrained  the Nigerian tax authorities from taxing the digital economy.  The Federal Inland Revenue Service (FIRS) is engaging the National Assembly to amend the tax laws to align with changing technology advancement and halt tax revenue leakages from the digital space.

    It is beleived that a large part of government revenue will come from this segment of the economy. Millions of Nigerians that make purchases for goods and services online from entities that have no physical presence in the country deny government the much-needed tax revenue. Google, Apple, Amazon, Facebook, Twitter, Uber, eBay, anti-virus firms and banking software providers among others, fall within the digital economy space.  They employ thousands of workers to check every loophole that will enable them evade taxes. They also retain the services of the big accounting and global law firms with the sole aim of driving down the rate of tax they pay wherever they operate or their goods are sold.

    Tax-motivated profit shifting of this kind has risen up the multilateral agenda since the 2007-2008 global financial crisis, with organisations such as the International Monetary Fund (IMF) pointing to ample evidence that it is taking place. Estimates of the global scale of annual public revenues lost to profit shifting vary. One recent estimate  put global losses from corporate tax avoidance at about $500 billion yearly, with developing countries, including Nigeria hardest hit.

    Traditionally, discussions about who pays tax and where have been based on two models: residence taxation and source taxation. The former holds that people and companies should contribute to the public services provided for them by the country where they reside and that this tax applies to all their income, no matter where it comes from. The latter holds that the country providing the opportunity to generate income or profits should have the right to levy tax.

     

    CBN wades in

    The Central Bank of Nigeria (CBN) came out with a new policy mandating banks to take N50 stamp duty fee on every Point of Sale (PoS) transaction.

    The directive on the Unbundling of Merchant Settlement Amounts was contained in the CBN circular to all banks, processors and switches titled: Review of Process for Merchants Collections on Electronic Transactions.

    The new policy requires that instead of Stamp Duties Payment on aggregate transaction, the charges  will now be taken on individual transaction that occur on PoS.

    The circular signed by CBN Director, Payments System Management Department,  Sam Okojere,  authorised banks to unbundle merchant settlement amounts and charge applicable taxes and duties on individual transactions as stipulated by the regulators.

    Merchant Service Charge was also reviewed downward from 0.75 per cent capped at N1,200 to 0.50 per cent capped at N1,000.

    The CBN and Nigeria Interbank Settlement System (NIBSS) are working closely, including setting remittance processes that ensure that the stamp duty charge for PoS is collected.

    In an NIBSS report titled: Returns on Stamp Duty Collection for Merchant Transactions, the payment agency said the new stamp duty payment plan is in line with the provision of the Stamp Duties Act and Federal Government Financial Regulation 2009.

    The policy, it added, was aimed at ensuring strict adherence to the CBN guideline on the subject, collection and Remittance of Statutory Charges on receipts to Nigeria Postal Service under the Stamp Duties Act dated  January 15, 2016.

    The procedural processing guide for stamp dutycharges for PoS, web merchant and all deposit money banks (DMBs) should download daily PoS/Web settlement report from their respective processors settlement file transfer portal.

     

    N8.9tr budget funding

    The N8.9 trillion 2019 budget needs adequate funding for it to achieve the desired results.

    Report from Afrinvest West Africa, showed that the oil price assumption was kept at $60/barrel, which  it believes is conservative, as Brent crude oil price has recently increased due to moderating oil supply due to Iran sanctions and Organisation of Petroleum Exporting Countries (OPEC) output cuts which have brought the average daily oil price to $63.5/b as at May this year.

    “The oil production assumption of 2.3mb/d is ambitious as we expect 2.1mb/d in 2019 and the official exchange rate of N305/$ was kept, consistent with the CBN’s stance. These assumptions translate to a projected oil revenue of N3.7 trillion as against (N3 trillion in 2018), which we believe is unrealisable due to the repayment of cash call arrears, petrol subsidies and the prospect of lower than expected oil production. The projected non-oil revenue was unchanged at N1.4 trillion in 2019, reflecting a more measured expectation,” the report said.

    The report explained that the largest share of non-oil revenue at 57.7 per cent is expected to be generated from Companies Income Tax (CIT) while 21.8 per cent and 16.6 per cent are to be collected through Customs and Excise Duties and VAT respectively. Meanwhile, independent revenue is projected lower at N624.6 billion lower than last year’s figure of N848 billion.

    “While this shows that the Federal Government is finally being realistic, we expect this to be below projections. Overall, considering that the Federal Government collected an estimated N3.7 trillion in 2018, we expect sustained underperformance in revenue by as much as 41.2 per cent in 2019,” analysts at Afrinvest said.

    This year, total recurrent expenditure is projected at N6.9 trillion, crowding out capital spending which is 30 per cent of total spending.

    “While the Federal Government’s projects fiscal deficit stands at N1.9 trillion or 1.4 per cent of Gross Domestic Product (GDP), our estimates of N4.8 trillion and 3.4 per cent respectively shows that this is likely to be worse than expected. The implication of a much wider fiscal deficit would be both higher than expected borrowing and partial implementation of the already poor capital spending,” the report added.

     

    Stakeholders react

    President, Chartered Institute of Taxation of Nigeria (CITN) Dame Olajumoke Simplice said despite the planned VAT raise, Nigeria’s VAT is still one of the lowest in the world, adding that she expected the new rate to be pegged at  7.5 per cent or 10 per cent.

    According to her, the last VAT review was 25 years ago. She said the country  also has the lowest VAT rate in Economic Community of West African States (ECOWAS) sub-region.

    According to the CITN chief, VAT review should take place every five years.

    “VAT is a tax on consumption and is only paid when you consume goods or pay for services. Nigeria’s decision to raise VAT is good for its trade relations with other countries. Besides, VAT is very easy to collect and should be utilised for the development of the economy,” she said.

    Simplice said government should also be held accountable on what the funds from VAT are spent, adding that the funds should be judiciously used for developmental projects.

    According to her, the new VAT rate will increase prices of goods, but is unlikely to affect manufacturers because they will pass the increased prices of goods to consumers.

    Simplice advised tax payers to form pressure groups to monitor tax revenue spending and ensure accountability on the part of government.

    The International Monetary Fund (IMF) has consistently advised Nigeria to raise its VAT and channel the funds to developmental projects and budget funding.

    At the conclusion of the Funds 2018 Article IV Consultation with Nigeria, its Executive Board emphasised the need for a growth-friendly fiscal adjustment, which front-loads non-oil revenue mobilisation and rationalises current expenditure to reduce the ratio of interest payments to revenue to a more sustainable level and create space for priority social and infrastructure spending.

    The board said: “In addition to ongoing efforts to improve tax administration, directors underlined the need for more ambitious tax policy measures, including through reforming VAT, increasing excises, and rationalising tax incentives.”

    Speaking on tax reforms at the Fiscal Monitor Session of the event, IMF Assistant Director, Fiscal Affairs Department, Cathy Pattillo, said tax reform in the country is very important issue.

    She said IMF’s main recommendation for Nigeria is the need for a comprehensive tax reform that would sustainably increase non-oil revenue.

    “And the reason why that is needed is that Nigeria has one of the lowest ratios of non-oil revenue to Gross Domestic Product (GDP) at around 3.4 per cent in the world. And the total tax revenue to GDP at six per cent is also very low compared to peers,” she said.

    According to her, the interest to tax ratio is low, adding that the funds realised should be spent on important developmental projects such as infrastructure and human capital. She also advised the Federal Government to increase excise taxes, and begin aggressive streamlining of tax incentives and exemptions.

    Speaking on the new VAT raise rate proposal, which is expected to take effect after the relevant law has been passed, the Manufacturers Association of Nigeria (MAN) described the timing of the increase as inappropriate.

    The group said the step will also spur spontaneous increase in inflation rate occasioned by increase in prices of goods and services.

    MAN said although, it appreciates the need for the government to generate more revenue to fund its developmental initiatives amidst declining revenue from oil, increasing the VAT at this time was inappropriate, especially at a time when the minimum wage of N30, 000 was just agreed upon.

    A statement by MAN Director-General Segun Ajayi-Kadir said the increase could send a wrong signal that the government is not sensitive to the plight of the low- and middle-income earners who are clearly in the majority.

    Also speaking on taxation and need to diversify the country’s revenue base, Executive Chairman, Foundation for Economic Research and Training, Prof Akpan Ekpo, said  Federal Government’s revenue is dependent on oil.

    He said: “I call the oil revenue exogenous revenue because you have no control over the price and you are not even in control of the output. You cannot use that to finance long-term development. You should see it as a windfall and use it as such, as they did in Norway. We have not done that over the years. So we must diversify the economy into other areas so that we can earn foreign exchange from other sources outside the oil sector.

    “Another way of making money is to look at the tax structure. I am not saying we should increase tax rate, but we need to bring more people into the tax net. A lot of Nigerians who are wealthy or rich do not pay tax, you have to bring them into the tax net.  Then you have to tax luxury goods heavily. For example, if you go to Abuja and Lagos airports, the number of private jets that you see, they should pay tax.  People will not like to hear this, our VAT rate is the lowest in the world. If you tinker with VAT to even 6.5 per cent, that will generate a lot of revenue. So, those are the areas, because right now the government needs liquidity to do a lot of things,” he said.

    According to Ekpo,  who was immediate past Director-General, West African Institute for Financial and Economic Management (WAIFEM), it is good to tax people.

     

    Understanding digital economy

    Digital services often result in consumers in one country receiving a product or service without the supplier of that product or service being physically present in the country.

    Already, the question of how the increasingly digital economy will be taxed is under discussion by revenue authorities, multinational entities and advisory bodies alike around the world.

    The debate is even getting louder in Nigeria, where the FIRS is working with the National Assembly to amend the tax laws to ensure that revenue from technology companies are captured.

    The FIRS  Executive Chairman, Babatunde Fowler, said the agency will soon begin VAT collection on online transactions.

    Speaking during a FIRS stakeholders retreat in Lagos, with the  theme: Parliamentary Support for Effective Taxation of the Digital Economy, he said the digitilisation of the economy is considered to be a major stimulant to growth, development and innovation.

    He said online and cross-border transactions requiring little or no physical presence have transformed world trade. The digitalisation of the economy has also created a big challenge for taxation as most local laws are not robust enough to address the complexities created by the new digital economy.

    Fowler said there are plans for banks to act as collecting agents for VAT on online transactions for purchase of goods and services done by multinational tech giants without physical presence in the country. The agency is also working with the National Assembly to get the tax laws amended to that effect.

    The FIRS chief said a number of countries have made new regulations, adding that the bill on the amendment of of the tax laws will be brought the Senate to enable the country move fast in tapping tax revenue opportunities in the digital economy.

    He said the country needed to start from the basics, adding that banks should help the government is harnessing tax revenue from the digital economy. “I support the idea of using the banks to extract tax revenue from the digital economy. Let’s review the activities of banks as it relates to the digital economy and check areas that require legislation. The banks need to be engaged to help government collect the taxes from the digital economy,” the FIRS chief said.

    He said FIRS generated N5.3 trillion last year, which is N1.4 trillion deficit against the N6.7 trillion it targeted for the year.

    But in spite of the shortfall, the 2018 figure showed an increase of N1.3 trillion or 32 per cent over the N4.03 trillion generated in 2017. Data presented by the agency on the occasion showed that it generated revenue comprises of N2.5 trillion from oil tax revenue and N2.8 trillion from non-oil tax revenue.

    He said: “In the 2019 budget, the target for FIRS is within the region of N8 trillion and with other arms of government support, we believe we can achieve it.”

    Associate Director, Andersen Tax, Ogochukwu Isiadinso, explained that since non-resident companies are taxed in Nigeria based on profits derived from Nigeria, the question as to whether a foreign company is liable to income tax in Nigeria is usually controversial.

    Section 13 of Companies Income Tax Act (CITA) implies that a non-resident company must have physically performed activities in Nigeria, directly or indirectly, before such a company can be liable to income tax in Nigeria. For instance, where a software company provides online data to users in Nigeria without being physically present in Nigeria in any form, it may be difficult to conclude that such a company is liable to CIT in Nigeria, although the company could have derived income from the country.

    “A major challenge is therefore determining at what point such non-resident would be deemed to have carried on business in Nigeria and therefore liable to income tax in Nigeria. Also,  customers that complete transactions on online platforms may not be aware of the exact location of the digital goods and services they are consuming. In some instances, the jurisdiction may be in dispute as the location of the seller can be different from the location of the goods being sold.

    “To ensure digital companies do not escape tax in Nigeria, the FIRS has often required Nigerian companies to withhold tax on all payments made to non-resident persons regardless of the non-establishment of the tax presence specified under Section 13 of CITA. This requirement has encountered resistance from taxpayers given that such non-resident persons may not be liable to tax under Nigerian laws,” she said.

    Partner & Head Consumer and Industrial Markets KPMG Nigeria, Tayo Ogungbenro, said  digital economy is the combination of several general purpose technologies and the range of economic and social activities carried out by people over the internet and related technologies.

    “The digital economy encompasses physical infrastructure like broadband lines, routers, computers, smartphones, – the applications they power (Google, Salesforce), the functionality they provide ( data analytics, cloud computing) among others. It is expected generate up to $88 billion and three million jobs by 2021.

  • Agric revolution: Can high fertiliser cost force a reversal?

    The timely delivery of affordable and high-quality fertiliser in commercial quantity to farmers largely drove the revolution in the agricultural sector. It was an outcome of the Federal Government’s successful implementation of the Presidential Fertiliser Initiative (PFI) and other strategic initiatives to revitalise fertiliser blending plants across the country. But, the increase in the price of fertiliser, caused by insecurity, particularly in the Northeast, may have thrown spanner in the works. Will this threat reverse the gains of the agric revolution and hurt the drive for food self-sufficiency? Assistant Editor CHIKODI OKEREOCHA asks.

    The authorities in the agricultural sector may not admit it, at least, openly. But, by now, they must be covertly and deeply troubled that the impetus that came the way of Nigeria’s push for food self-sufficiency, following the widely acknowledged revolution in the agric sector, has come under severe threats.

    The increase in the price of fertiliser, which is, undoubtedly, one of the most critical farming input, has raised fears that the gains so far achieved in the agric sector by this administration, particularly in its first term in office, may be reversed, if nothing is done to check the price hike.

    The Nation learnt that the scarcity and skyrocketing price of fertiliser, which have thrown farmers, especially those in the insurgency-prone states of the Northeast, into panic, were caused by the restriction of sales of certain brands of fertiliser for security reasons.

    According to some farmers in the affected states, the security agencies, particularly the military, restricted the sale of some brands of fertiliser in some states, such as Yobe, Taraba, Bauchi, Adamawa, Gombe and Borno, citing the use of such brands for Improvised Explosive Devices (IEDs).

    Since 2009, the Northeast has been the theatre of a bloody campaign by Boko Haram insurgents. Despite sustained efforts by the Federal Government to rein in the blood hounds, the indiscriminate bombing of mostly-soft targets, using IEDs, said to have been made from chemical components from some brands of fertiliser, has refused to abate.

    As part of efforts to halt the bombings, security agencies banned the use of Nitrogen, Phosphorus and Potassium (NPK) and Urea. However, the ban inadvertently made it difficult for farmers to secure fertilisers, particularly Urea, in the open market.

    The Chairman of Adamawa State chapter of Rice Farmers Association of Nigeria (RIFAN), Mr. Stephen Maduwa, confirmed this much when he said the scarcity and high cost of fertiliser in the state were as a result of the ban of NPK and Urea.

    He quoted the military authorities as saying the products were being used by insurgents to produce explosives. “The scarcity situation is worrisome because it is also affecting government’s Anchor Borrowers Programme (ABP) in the state,” Maduwa lamented.

    The National Vice Chairman, National Association of Agro-Chemicals and Allied Dealers, Alhaji Usman Bapullo, brought the disturbing reality nearer home. He said because of the restriction, the cost of the commodity increased by as much as 45 per cent.

    Consequently, a 50 kilogramme (kg) bag of NPK, which originally sold for N4,300, now goes for N6,500, while Urea, which sold for N5,000, is now N7,000. He, however, said there was liquid NPK and Urea, which had not been banned, but farmers were not familiar with the liquid one.

    The situation is the same in Yobe State, where the restriction on sales of fertiliser had created scarcity of the product. Yobe State Governor Mai Mala Buni, at a recent town hall meeting in Potiskum, said it took series of discussions between the state government and security organisations to lift the sanction on sales of NPK fertiliser.

    “As for Urea fertiliser, it is still banned for sale across the state for security reasons,” the governor said.

    The Nation learnt that in Yobe, a bag of NPK is sold for between N7,000 and N9,000, depending on distance and availability of the product.

    Most farmers in the state depended on liquid fertiliser, with five litres of the product sold for N25,000. The governor, however, said the state government had awarded a contract for the supply of NPK fertiliser to the state for onward distribution to farmers.

    Similarly, farmers in Borno State, the epicentre of Boko Haram insurgency, have also expressed concern over the high cost of fertiliser. For instance, a rice farmer at Zabalmari Village of Jere Local Government Area of the state, Hussaini Usman, said the high cost of fertiliser was affecting his production.

    Usman said a small size bag of Single Superphosphate (SSP) and NPK brand of fertiliser were sold at N2,500 and N3,000, as against the old price of N1,000 and N2,000, respectively.

    However, the Kaduna State Government said it has enough stock of fertiliser to be sold to farmers during the crop season in the state.

    Deputy Director and Desk Officer for fertiliser distribution in the state’s Ministry of Agriculture and Forestry, Mr. Bungwun Bege, said the state government had entered into an agreement with two firms, Flour Mills and TAK Fertiliser, as the major suppliers of the commodity to farmers.

    He said each of the firms had agreed to deliver 5,000 metric tons at the initial stage to farmers at government-approved rate of N5,500 per 50kg bag, “and so far, there is no price increment of the product by the suppliers.”

    Bege said there was no scarcity of the commodity in the state. His words: “Flour Mills has five trucks while TAK has two trucks of 600/50kg bags in State Government stores in each of the 23 local government areas in the state.

    “While farmers in some local governments have bought up to 19 trucks, others are yet to buy up two trucks, as they buy according to their needs,” he said.

    Bege added that so far, the ministry was yet to receive any complain of either scarcity or hike on the price of the commodity from farmers in any part of the state.

    Why government is jittery

    The Federal Government set off a major revolution in the agricsector when it came up with the PFI. Essentially, the PFI, which was inaugurated in December 2016, was aimed at delivering commercially-significant quantities of affordable and high-quality fertiliser at the right time to farmers.

    The initiative was borne out of the desire to end fertiliser importation and the attendant impact on the country’s foreign exchange reserves. It was designed to stimulate significant economic activities across the agriculture value chain and catalyse growth by meeting the fertiliser demand of farmers during the wet farming season.

    Before the strategic intervention, the non-availability of fertiliser was, arguably, one of the major obstacles to increased productivity in the agric sector. Its scarcity was a serious disincentive to farmers’ efforts to contribute to economic diversification through small, medium and large-scale agriculture.

    But, the Federal Government, through the PFI, changed the narrative. On the strength of the PFI, the fertiliser blending industry bounced back. The initiative, which involved a partnership with the Government of Morocco for the supply of phosphate to produce fertiliser locally, resulted in the revitalisation of several fertiliser blending plants.

    Nigeria, with its 11 fertiliser blending plants in bad shape in 2015, now has 22 approved plants, 18 of which are producing at installed capacity.

    As at 2017, a year after the introduction of the PFI, the initiative had delivered 10 million 50kg bags (500,000 Metric Tonnes (MT) of NPK 20:10:10 fertiliser at a price of N5, 500. That was down from the price of N9, 000 per 50kg bag in 2016, representing a 40 per cent reduction.

    The PFI, according to the Minister of Information and Culture, Alhaji Lai Mohammed, also targeted the delivery of 20 million 50kg bags (1 million MT), which will double the 2017 figure. He recalled that before PFI, each imported fertiliser bag was subsidised to the tune of N6, 000 per bag.

    Noting that over six million bags of fertiliser had been sold to farmers at N5, 500 per bag, the Minister also said there had been a higher patronage for the country’s rail network due to movement of raw materials and finished goods.

    “Also, the bag-making sector of the economy was boosted, with over 10 million packaging bags produced exclusively for PFI. Sixty thousand direct jobs and even higher number of indirect jobs have been created,” Mohammed said.

    The Nation learnt that the changing fortunes of the fertiliser blending industry and by extension, the agricultural sector, where the government is pushing to achieve self-sufficiency in food production and consumption, was largely as a result of a Memorandum of Understanding (MoU) it signed with Morocco in 2016 to produce fertiliser locally.

    The deal with the Moroccan Government was for the supply of phosphate to ensure the production of one million tons of fertliser locally. The agreement was anchored by Fertiliser Producers and Suppliers of Nigeria (FEPSAN) and OCP, Morocco’s state-owned company and global leader in phosphate and its derivatives.

    The gradual, but steady revolution in the nation’s fertiliser blending industry following the deal, raised hopes of restoring Nigeria’s position as the food basket of the West African sub-region. This was because it reduced farmers’ overheads, boosted yield and encouraged more players to invest in the agric value chain.

    To consolidate on the gains of the PFI and, ultimately, achieve self-sufficiency in fertiliser production, the Federal Government, through the Central Bank of Nigeria (CBN) also barred official foreign exchange (forex) allocation to fertiliser imports. The inclusion of fertiliser on the list of items not valid for forex took effect from Friday, December 7, last year.

    A reliable source close to FEPSAN told The Nation that the ban on the importation of fertiliser has started manifesting in the form of increased inflow of investments into the agric sector, massive job creation and conservation of foreign exchange.

    For instance, the fertiliser sector, according to the source, who declined to be mentioned, churned out over 100, 000 jobs in 2018 alone. The size of investment in urea production also swelled to over $9 billion, with Dangote Fertiliser and Indorama Eleme Petrochemicals Limited in Port Harcourt, the Rivers State capital, exporting about 800, 000 metric tons of urea.

    He also said under the PFI, Nigeria recorded the highest fertiliser consumption figure ever. “In 2017, our local consumption was 1.56 million tonnes of fertiliser. In 2018, Nigeria recorded 1.4 million tones. The highest consumption we had previously was 1.2 million tones, and that was in 2014,” the source told The Nation.

    He also pointed out that as a result of the increased capacity of local producers, NPK fertilisers are now available to farmers at affordable rates of about N5, 500 per bag, adding that “the icing on the cake” for farmers was the blending of soil-specific and crop-specific fertiliser.

    However, the scarcity and high cost of fertiliser may havedeflated members of FEPSAN, farmers and indeed, the authorities and industry stakeholders. Many of them now fear that the gains of the agric revolution, especially the fertiliser segment, may be reversed, with Nigeria’s hope of reclaiming her position as the sub-region’s food basket hanging in the balance.

    Rising food prices justify fears

    So far, the Boko Haram insurgency is limited to the Northeast region. But, like wildfire, the ripple effects of the activities of the dreaded group have spread to all parts of the country, resulting in acute shortage of food items and, of course, increase in the price of available supply.

    Professor of Plant Protection and Improvement, Department of Crop Science & Biotechnology, Imo State University, Owerri, Onuh Martin, put the situation in perspective when he said the pervasive insecurity foisted on the country by insurgency and other  criminalities have driven most farmers away from their farms.

    Today, few farmers have the courage to go to their farms, as fear of recurring herdsmen/farmer clashes, kidnappings, rape and armed robbery, among others, have become the beginning of wisdom.

    The result, predictably, has been low agricultural production, and of course, increase in prices of the few items that manage to get to the markets.

    Indeed, in the last few weeks, prices of most staple food items have gone up, raising fears that these staples may soon disappear from the menu tables of many Nigerians who may no longer afford them. Some of the staples affected include rice, beans, garri, semovita, tomato, pepper, and frozen foods, among others.

    The Nation’s random checks in some major markets in Lagos, showed, for instance, that a bag of 50 kilogrammes of foreign rice, which hitherto sold for between N13, 300 and N13, 800, has gone up to as much as N16, 000.

    Prices of other food items such as yam, beans, tomato, onion and pepper, as well as frozen foods such as Turkey and chicken, have also gone up.While some experts blame this on seasonal shortage in supply, the displacement of most farmers across the country by rising insecurity is also a major factor.

    Is food security threatened?

    The Country Manager, OCP Africa, Caleb Usoh, emphasised that in addition to input, such as better seed, and farming practices, fertiliser could be a game changer in food security among smallholder farmers battling falling harvests and unproductive soils.

    Usoh, who spoke at the recently-concluded African Farming Second Edition Agribusiness Summit in Abuja, urged the government to pay attention to the fertiliser industry because the future growth of agriculture lay in efficient utilisation of plant nutrients.

    According to him, OCP has been playing a major part in assisting Nigeria and other African countries to feed themselves by ensuring that smallholder farmers are able to use fertiliser optimally to boost their yields.

    Noting that improved access to fertiliser is key to food security, Usoh said by using more fertiliser correctly, farmers could grow more nutritious food, achieve household food security, create jobs, increase incomes and boost rural development.

    Impliedly, the high cost of this critical farming input, could impinge on Nigeria’s quest to achieve food security, if urgent steps are not taken to rein in insurgents and other criminal activities hurting food production.

    This is so considering the fact that most of the food items such as yam, beans, tomato, onion and pepper come from the north, where insurgency and other shades of criminality are evidently more pronounced.

    AfDB, AFAP $5.4m grant to the rescue

    The African Development Bank (AfDB) and the African Fertiliser and Agribusiness Partnership (AFAP), last week, signed two grant agreements to implement trade credit guarantees worth $5.4 million to support fertiliser value chains in Nigeria and Tanzania.

    Both parties signed the grant agreements, which hold the potential to benefit hundreds of thousands of smallholder farmers, at the African Green Revolution Forum in Accra, Ghana on September 5, this year.

    AfDB Vice President for Agriculture, Human and Social Development, Dr. Jennifer Blanke, said the agreements would provide the input needed for Africa to have “the productivity that we hope for”.

    “We are just thrilled to be getting together with our partners in order to expand the efforts to make sure that we are financing the development of manufacturing and blending of fertiliser,” Blanke said. “This is an African effort, led by Africans, for Africa,” she added.

    The grants are designed by the Bank’s Africa Fertiliser Financing Mechanism (AFFM) to provide sustainable financing solutions to boost the fertiliser value chain in Africa.

    AFAP CEO Jason Scarpone signed the agreements on behalf of the continental body, emphasising the importance of value chain financing – bringing fertiliser financing from manufacturer, to distributor, to retailer to farmer. “Few succeed in doing it. This project will be successful,” he said.

    The two deals are the first agreements signed by AFFM, which is hosted by the AfDB, since it became fully functional last year; they pave the way for the first implementation of trade credit guarantee projects for fertiliser financing led by AFFM in Nigeria and Tanzania. The AFAP will be the implementing partner operating in the two countries on behalf of the AFFM. The Partnership has substantial experience in supporting the agricultural value chain across the continent.

    Scheduled for implementation over a two-year period, the projects will lead to the enhancement of fertiliser value chains in the two countries. The Nation learnt that the project will target 10 importers, five blenders/manufacturers, and 37 hub agro-dealers as direct beneficiaries, 520 retail agro-dealers as indirect beneficiaries and 700,000 smallholder farmers as final beneficiaries.

    It remains to be seen how Nigeria plans to leverage on this fresh window of opportunity to make fertliser affordable to farmers and by so doing, consolidate on the gains of the agric revolution while starve off an impending food crisis.

  • ‘CBN’s 60% loan to deposit ratio ’ll lift growth’

    The Central Bank of Nigeria’s (CBN’s) policy mandating banks to lend 60 per cent of their deposits or be sanctioned will take effect by month end. Coronation Merchant Bank Limited Investment Banking Director Abiodun Sanusi speaks with COLLINS NWEZE on the steps banks are taking ahead of the policy deadline. He discusses the state of the economy and impact of high interest rate regime on banking business.

    We are in the third quarter of the year heading towards the end of the year. If you are to review the performance of the economy, would you say it has fared well within the past nine months?

    This is an election year, especially looking at the handover regime of the Federal Government. Such a year is usually slow because a lot of focus is on the political landscape rather than the economy. As you know,  in terms of economy it is about cumulative impact; if your first quarter is slow, your second quarter would be slow too. So, generally, the economy has not grown. The population growth of Nigeria is three per cent per annum, any growth below three per cent means we are decelerating on per capita income basis.

    Although we are growing, we are not growing as fast as our population growth, which is what we have witnessed in the past two years. What it means is that government policies have not fully impacted on the economy but we are seeing a lot of progress being made now that the government has settled in. The ministers have been approved and assigned portfolios and also we are in the budget session. So, we should see some increase in growth in 2023 with the right approach in the right direction on the economy. However, so far the economy has been flat. We have not grown up to the potential we are expected to grow.

    Given that banks are also key players in growing the economy. Does this mean the banks are not effectively playing their part, which has led to the Central Bank of Nigeria (CBN) initiating the 60 per cent loan-to-deposit ratio policy?

    If you look at the structure of our economy, you need to do a deep root analysis of the Gross Domestic Product (GDP). Agriculture contributes about 23 per cent, Oil and Gas 10 per cent, Telecoms is about eight to 10 per cent. Unlike what people think in terms of major economic activities, oil and gas is not contributing much to the GDP. I think some private sector policies should be taken, especially in the power sector. The power sector has not lived up to expectations after the privatisation. We experienced a not cost effective pricing during the election, which is why there has not been a lot of investment there. Also, fuel subsidy is a drag; in other parts of the world, they subsidise production not consumption.  Thus the government needs to tackle issues like this in order for there to be adequate distribution of capital to develop infrastructure.

    Security has also been an issue as there have been reports of kidnappings on key trade routes, which have affected production and business activities of farmers. The banks are mediators, so they do the best they can and you need to also consider that none of the banks have delivered double digit growth rate. Technically, a lot of policies need to be implemented to open up the economy. The revival of the Telco industry was immense and we need to see that in the power sector, oil and gas downstream sector and others. Then, you would see that the banks would support the economy because banks are interested in making profit.

    Are there other factors limiting banks?

    In addition, what is also limiting the banks is the high interest rate we have in Nigeria. The CBN is saddled with two things: stabilising the currency and reducing the interest rate. Stabilising the currency requires attracting foreign investments; as we speak, there are about  $20 billion of foreign portfolio investments in Nigeria, which is a huge volume of our reserves. We need to keep that large volume of dollars in Nigeria, which requires us offering attractive interest rate to investors on a risk adjusted bases which is what CBN is trying to do. Once you have a high interest rate regime at the risk free level, it affects the entire economy because the bank buys their credit based on what the risk free rate is.

    If it is 15 per cent, definitely they would lend to corporate clients higher than that because of the credit risk premium they need to get for extending credit to the corporate sector, which is why it has been challenging for the banks to lend at a single digit rate. However, I also understand the challenges of the CBN as it needs to ensure it maintains the stability of the foreign currencies. So, it has to be a collective effort with the government playing its part effectively without interfering in the private sectors transactions. We need to diversify our economy, which means both the private sector and government need to implement policies that would reduce our consumption of importable products so that we demand less foreign currencies. We need to focus on boosting our production rate.

    Do you think CBN’s directive on 60 per cent loan to deposit ratio will affect the profitability of banks given that a lot of the real sector operators are seen to be risky.  Do you see banks non-performing loans going up as a result of this new policy?

    It depends on the stands the banks take because it is a business decision. There are two stands; one of them is, if I am falling short of the loan to deposit ratio which most banks are, I would increase  my loans which is convert my positions of investments in treasury bills and bonds to high risk. That means that assets you considered risky before,  you started putting your money in them. In that instance, there is more possibility the non-performing loan ratio would increase. The other strategy is if I am happy with my risk asset and I do not want to increase it,  I would shed my deposit. We have started seeing it. Some of the banks have started shedding their deposits by reducing the deposit rates they give to institutional investors, the pensions and the likes.

    However, they cannot control the retail deposit because the citizens need to keep their money in the bank, but deposits from treasury bills, institutional investors, corporates the banks can reject it. So it is neither here nor there depending on the stand the bank takes. You can increase your risk asset which can likely increase your non performing loan ratio, or not if you start lending to good sectors or assets that are good.

    If you are skeptical of the risk, you can reduce your   deposits and you still maintain your loan to deposit ratio, but the overall impact is that banks want to give out more loans due to this policy, whether you want to do option one or two.

    We have also started seeing instances whereby companies that are struggling to pay back their loans have started restructuring their loans because the banks want to keep the loans rather than write them off which is good for the economy. A lot of manufacturing companies suffered interest rates at 23 per cent before the end of recession. That affected a lot of the profitability and capability to payback their loans and default rate increased. With this policy, banks have started to create a restructuring and a longer term loan that those businesses deserve.  So overall, there is a huge positive gain in this 60 per cent loan to deposit ratio which means more loans would be given and also banks are now tenuring the loans from maturity to longer times.

    What do you think this policy means for the capital market and do you think investors would react to this positively? Also, what are your views on the recapitalisa-tion of the insurance industry?

    In terms of insurance consolidation, there are two things, either the insurance companies raise capital through right issues or through  a merger and acquisition route. There are views that mergers and acquisition would dominate more than capital risks and that insurance players would reduce from 59 to 25. If mergers and acquisition dominate and the number of players reduces to 25, we are going to see more follow on offerings, more Initial Public Offerings in the capital market and if the insurance industries and investment banks are able to communicate the equity story because there is enormous potential in the sector. With the follow on offerings, it can also be a catalyst to what we have seen in the capital market in the past four years.

    So, the insurance consolidation is going to have a positive impact on the capital market. When there is more consolidation, we would have bigger players and investors that would be more confident to invest in it. As we speak, there are lots of pension funds that have not been invested in the insurance sector.

    We expect that after the recapitalisation of the insurance industry in 2020, there is going to be a lot of money in insurance sector. The challenge is where is this capital going to be used? If you look at the purchasing power of average Nigerians who are supposed to pay for this insurance, they are mostly concerned about basic needs. So, where are the insurance companies going to deploy this money?

    If a research team goes out to conduct a market survey in outer parts of Lagos and they understand what the consumer is doing, asking the five things people want, insurance would not be one of them. So, insurance is not a product you can just advertise and sell. It does not work like that which is why micro insurance is wonderful in a way, if you are bundling a micro insurance product with something like a Telco, which everyone uses and you put a small slice as the Telco fee as the insurance premium, then you can grow it successfully and familiarise people to the market with that at the same time. You cannot put up advert boards and advert campaigns telling people to buy insurance. It is different for pensions because we see people paying pension advancements but insurance does not follow that rule. Therefore, I do not think people would be able to take out money from their account to pay for insurance.

    Making some sort of insurance mandatory is a better way of doing it. In terms of what a lot of the companies would spend the money on, it is most likely technology because you are going to create systems that would service a lot of clients.

  • Pilots, aviation professionals swell unemployed rank

    The rise in the number of collapsed indigenous airlines have collapsed has triggered unemployment among professionals in the aviation sector. As a fall out, hundreds of pilots, cabin attendants, aircraft maintenance engineers, flight dispatchers and other avionics technicians are roaming the streets. Besides the experienced crop of professionals who are jobless, an army of young pilots with insufficient flying hours has swollen the ranks of the unemployed, writes KELVIN OSA OKUNBOR.

    These are not the best of times for professionals in the aviation industry. The recurring bust and boom circles for indigenous carriers have triggered a spike in unemployment among aviation professionals.

    In the last  two decades, the industry has witnessed a sharp decline in the number of local carriers as many of them have ceased to operate for various reasons.

    Nigeria Airways Limited, which provided employment and training  for all categories of aviation professionals, was liquidated in 2004.

    The liquidation of the largest carrier in the sector’s history its over 6,000 personnel jobless.

    Since then, its horde of pilots, rated in many aircraft types, engineers, flight dispatchers, cabin crew and others have remained unemployed.

    Airlines’ collapse, experts say, has triggered  job losses in the sector, where some skills set cannot be easily transfered to other industries because of licensing, certification and other considerations.

    Experts say the rising unemployment in the sector calls for concern because of the huge sums invested in training the professionals whose skills are industry specific. They argue that skills acquired by pilots, aircraft engineers, cabin crew and other technical personnel are limited  in application to other sectors.

    Investigations by The Nation revealed that many pilots who worked for Chanchangi Airlines, Albarka Air Services, Freedom Air Services, Falcon Air, Sosoliso Airlines, Bellview Airlines, Kabo Air, Okada Air, Capital Airlines, Associated Aviation, EAS Airlines, Virgin Nigeria Airways, DASAB Airlines, Spaceworld International Airlines, IRS Airlines, Afrijet Airlines and others are idle.

    The high rate of unemployment is worrisome to stakeholders, as efforts by the Federal Government to compel foreign carriers to engage Nigerian pilots have not yielded the right results.

    There was a proclamation by the government in 2014 that foreign carriers flying into Nigeria must have at least a local pilot and aircraft engineers in their crew. The Nation learnt that about N10 million is required to train and be certified as a pilot or an aircraft engineer at the Nigerian College of Aviation Technology (NCAT), Zaria, Kaduna State and the International Aviation College (IAC) in Ilorin, Kwara State.

    While many domestic airlines are closing shop in Nigeria, the situation is different in other parts of the world. For instance, the  Middle East and Far East are in dire need of pilots to meet the growth of their aviation sectors.

    Major aircraft manufacturer – Boeing – had projected that more than 248,000 new pilots would be needed to drive the growth in air transportation, with China in Asia – Pacific region leading the pack.

    In Nigeria, the Nigerian Civil Aviation Authority (NCAA), National Association of Aircraft Pilots and Engineers (NAAPE), NCAT and IAC are worried by the redundancy of experienced hands and lack of practical training fields for upcoming ones. A few years ago, NCAA statistics indicated that there were about  554 pilots and over 913 aircraft engineers with valid Nigerian licence.

    Operators of many of the domestic carriers that could have hired the associate pilots have closed shop, leaving only seven — Air Peace, Med view Airline, Dana Air, Ark Air, Aero Airline, A2MAN Air and Overland Airways. Pilots, who command flights and engineers, who fix the aircraft are the first set of casualties whenever an airline collapses.

    According to global statistics, Nigeria ranks high among the nations where experienced and fresh pilots scramble for non-existent jobs, whereas China would require 5,000 pilots yearly in the next two decades to cope with its ever-growing aviation industry.There are reports that many Chinese carriers are shopping for experienced pilots to address the shortage.

    The dearth of insufficient flying hours, type rating and up-to-date training, among other requirements critical for job placement, may have shut out the products of Nigeria’s aviation colleges. But NAAPE is not folding its arms on the development.

    Its President, Abednego Galadima, said the body was designing a template to facilitate the engagement of unemployed pilots. He put the number of unemployed pilots and aircraft engineers at about 600, a development he described as unacceptable and must, therefore, be addressed to tackle the challenge of ageing workforce in the sector.

    Galadima spoke of NAAPE’s plans to partner NCAT for associate pilots to earn enough flying hours and put them in good stead for employment. He said: “At some point, we have a case where we have over 250 unemployed associate pilots.

    ”The unemployment rate is a big problem in the country particularly as the two professions require one to be current; and most of the pilots and engineers were trained with huge sums. So, the investment will just be lost if they do not retain currency, because they will not be employable again without currency,” Galadima said.

    He  called on the government to initiate a scheme that will provide a window for unemployed pilots to get further training to make them marketable.

    He said: “That is why we are advocating that the government do something.  In fact, we have put in a proposal to a number of our partners; we are still looking for more partners to fund it; just like what the government is doing for the unemployed through the N-Power programme.

    “If that can be extended to aviation, NAAPE is willing to partner with anybody. If NCAT is given some money, young pilots will go and build hours flying aircraft there and also use simulator as well. It will help them build more hours and gather more experience and expertise.

    “For the  engineers, too, we are putting a scheme in place in that proposal, where they can be deployed to aviation entities where we have senior engineers that will take them through on-the-job training and guide them properly.

    ”These are the things we are doing. We are approaching the Ministry of Transportation (Aviation Section) with Local Content Development Board. We will approach Petroleum Trust Development Fund (PTDF), Industrial Training Fund (ITF) and appeal to their conscience.”

    Galadima said the proposed national carrier will also create a window for unemployed pilots and aircraft engineers.

    The NAAPE chief said: “If the National Carrier comes up, it will be a plus to us. While the airline will absorb some pilots and aircraft engineers, it is our hope that some of the unemployed will find somewhere to fit in. Government is talking about five aircraft to start the operation. You know that it will require a minimum of 50 pilots.

    Why pilots are jobless

    Explaining why many pilots are unemployed, NCAT Rector Captain Abdulsalami Mohammed said local pilots sought to operate commercial airlines after training. He urged newly-trained pilots to seek to fly private airplanes, including sortie aircraft and others under General Aviation, to gain experience before applying to operate commercial airlines.

    Abdulsalami said a large number of pilots with valid licences cannot get jobs because they tend to seek for jobs with commercial airlines which demand for experienced pilots.

    According to the NCAT captain, working with general aviation is the practice, he added: “Unemployed pilots is a subject that is dear to me because every day I get a call from someone who wants his son employed or I get a question on why would I bother to come out and train as a pilot when there are no jobs.

    ”As you know, we have many unemployed young pilots in the market and the airlines are reluctant to employ and train them because they claim that when you train some of them they run away.”

    The Chairman of Airline Operators of Nigeria (AON), Captain Nogie Meggison, described the high unemployment rate as alarming.

    He said besides the 100 pilots trained by the Kano State Government a few years ago, in Jordan, about 400 others are unemployed, including ex-agitators from the Niger Delta trained under the Federal Government Amnesty Programme.

    Medview Airlines Chief Executive Officer (CEO) Muneer Bankole said the unemployment of local pilots could be traced to the 2004 liquidation of the Nigeria Airways Limited (NAL).

    According to him, the liquidation closed the window  for  training and type-rating for fresh pilots. Bankole said if NAL was not liquidated, many pilots would have been gainfully absorbed to get the requisite experience.

    Urging the authorities to address the drift, Meggison cautioned that the growing unemployment among pilots could hinder the growth of the aviation industry.

    He condemned the influx of foreign pilots and engineers into the industry. According to him, there are no fewer than 1,000 foreign pilots engaged by local and foreign registered airlines and over 500 foreign engineers employed in the country.

    Way forward

    Meggison is pushing for the creation of an enabling policy that would check the influx of foreign pilots and engineers into Nigeria, to check the high unemployment rate. He insisted that some domestic carriers have done well by engaging some of the pilots.

    Meggison said: “The government should compel foreign carriers to set up a line station for aircraft maintenance in the country and employ local engineers to assist in turning around the sector.

    “They should look into other avenues also. If policies are not put in place, the challenge of unemployment may not be resolved soon. It is shameful that licensed young pilots are now driving kabu kabu (taxis) to make ends meet.  This is totally unacceptable. Not that there are no jobs, but jobs are taken over by foreigners.”

    Like Meggison, Captain Dele Ore, a pilot and former commander of the zPresidential Fleet, described the high unemployment rate as sordid.

    Blaming the trend on the absence of a well-thought-out government policy, Ore lamented that the development has created room for foreigners to dictate the pace in the industry.

    Insisting that the government cannot force local airlines to hire Nigerians at a time some of them are facing hard times and struggling to survive, Ore advocated a “deliberate government policy” that would encourage airlines to ensure that a Nigerian passport holder sits in the cockpit of every aircraft flying in the country’s airspace.

    To Bankole, one way to solve the problem is for the government to compel airline operators to embark on training and retraining of young professionals.

    He declared that though training and type-rating of pilots would improve employment generation for the industry, most of the indigenous carriers are not interested in training of technical personnel, but prefer to poach from other airlines.

    However, to solve the problem, he said the government should ask individual airlines to come together and advise it on how to improve the sector. “We need commitment from individual carriers on manpower development for us to grow the sector,” Bankole said.

    An expert, who pleaded for anonymity, said: “As at today, becoming a pilot from the scratch costs nothing less than $250,000 and one would have expected that immediately after graduating from the flying school, either in Nigeria or overseas, they would automatically get jobs, but that is not the case.”

    As the country’s aviation is shrinking, China, Europe and the United States are in dire need of pilots. The disadvantage of this is that most of these airlines, based abroad, are looking for pilots who already have hundreds of hours under their belt; and they are reluctant to retrain pilots that have been out of jobs for years or have never been employed.

    About a year ago, Chinese airlines began massive demand for pilots as they needed to hire almost 100 pilots a week for the next 20 years to meet growing travel demand. Facing a shortage of candidates at home, carriers dangled lucrative pay packages at foreigners with cockpit experience.

    Investigations revealed that the near collapse of General Aviation in the country also compounded the woes of Nigerian pilots. General Aviation (GA) is the term for all civil aviation operations other than scheduled air services and non-scheduled air transport operations for remuneration or hire. GA flights range from gliders and powered parachutes to corporate business jet flights.

    The majority of the world’s air traffic falls into this category.  Most of the world’s airports serve GA exclusively. They cover a range of activities, commercial and non-commercial, including flying clubs, flight training, agricultural aviation, light aircraft manufacturing and maintenance.

    Also worrisome is the fact that Nigeria’s wealthy elite prefer to hire foreign pilots to fly their private jets. Reason: Nigerian pilots fresh from aviation school have between 300 and 400 flight hours’ experience while there is a preference by employers for pilots with between 1,200 and 1,700 flight hours, for safety reasons.

    An expert said: “The foreign pilots deemed to have the required flight hours were given time and opportunity to do so. Why should it be different for Nigerian pilots? The question is, how can they accumulate such hours when they have not been given the opportunity to fly?”

    “Not only the exorbitant cost in Nigeria, there is another great hurdle: how do you get the required number of flight hours needed for the next level after you have obtained your Commercial Pilot Licence? When the pilot has obtained this licence, he is expected to go for type- rating; that is specialising in a particular aircraft type. It is after that that he could be employed as a flight officer.

    ”In Nigeria, the challenge is there is no platform for the person who has a Commercial Pilot Licence to type-rate on any particular aircraft. Such platform was provided by the defunct NAL, which actually trained most Nigerian pilots that operate today in various parts of the world.”

    South Africa Airways, Kenya Airways, Ethiopia Airlines, Air Maroc and Egypt Air are some of the major national carriers on the continent that churn out trained pilots every year.

    They also provide them the aircraft for type- rating before they start flying as flight officers. Ethiopia and Kenya supply the Middle East and others pilots and other aviation personnel because they have a successful training academy that have lasted for years and they latch on their national airlines, which provide the platform for the trained pilots to garner flight experience.

    Chief Executive Officer, Aero Contractors, Captain Ado Sanusi, noted that local airlines employ seasoned and expatriate pilots for many reasons. Besides their reliability, Sanusi said young indigenous pilots hardly stay with the airline that trained them long enough to justify the resources expended on their training.

    Sanusi explained: “In developed countries, if you finish with 250 hours, you don’t go to airlines; you go to flying school till you get 1,500 hours before you start coming to fly for airlines.

    “It is when you get Airline Pilot Licence (APL) that you fly for an airline. But, we take them with commercial pilot licence, with very low hours, we train them or let us say they even train themselves, they come to us with very low hours, 250 hours and 300 hours.

    ”Taking a trainee pilot with that number of hours will increase the airline’s insurance premium because the airline is using inexperienced and low time co-pilot. The increasing insurance premium will put a lot of stress on the aircraft because they are going to be doing training and everything. And when the pilot becomes proficient, then he now says I am paying him small remuneration and he leaves.

    ”When you come in with low flying hours, you pay the airline to gain up to 500 and 1000 hours on the type of the aircraft. But now, I am bringing you in, giving you this training on the aircraft, giving you the opportunity to have this experience, without any government incentive to the airline and I am a privately owned company, I am doing business purely on profit basis; I am not doing it on charity.

    ”Then after you have been trained and I have paid a high insurance premium; after I have suffered a lot on my landing gear because of hard landings that pilots do while training; after I have suffered all that expense in maintenance of the aircraft and other expenses, you now say, I am paying you a little, so, you want to leave me and go to another airline.”

    Meggison said the disturbing unemployment rate among qualified pilots informed his decision to gather them under the auspices of Nigerian Professional Pilots (NPP). “I set up this platform for young pilots who haven’t found jobs as common pool where employers can tap from. It also provides them the opportunity to come together and get acquainted with developments in the aviation sector,” Meggisson said.

    He said no fewer than 170 licensed pilots have been registered by NPP, adding that they meet regularly. Meggison said: “The awareness will also tell industry operators there is a pool of young pilots they can draw from rather than engaging expatriate pilots alone. If we do not address ingenious pilots’ unemployment, soon we would be shocked with what has hit us.

    ”So, we are looking at opportunities of engaging the government on how best we can reduce pilot unemployment, one of which is to create a better aviation environment for local skills.”

    A pilot with Bristow Helicopters Nigeria Limited, Captain Akin Oni, attributed the pilots’ predicament to their inability to pass competence tests and low quality training from overseas training institutions as part of the reasons many indigenous pilots are unable to secure employment in the sector.

    A data obtained from the NCAA  said the  number of expatriate pilots in the country dropped from 631 in 2016 to 609 in 2017.

    The number of licensed pilots operating in the country rose from 2,226 in 2016 to 2,356 in 2017. The pilots are engaged by passenger and cargo airlines, five helicopter companies and other charter airlines.

    Aviation security consultant and Secretary-General of the Aviation Safety Round Table Initiative Group Capt. John Ojikutu (rtd), however, stated that the drop in the number of expatriate pilots was still negligible, consid ering the number of Nigerian pilots who needed jobs.

    ”We can’t say we have achieved much until it drops by at least 30 to 50 per cent. Until it drops further, it will not make any sense,” he said.

    Insisting that many unemployed Nigerian pilots roam the streets, Ojikutu said: “There are quite a lot of pilots hanging around, but most of the airlines bring in expatriates not because of anything, but for capital flight.

    “That figure that shows their number is reducing may be true but is it reasonable enough? The difference is still not much.”If in 2016 we had over 600 and in 2017, it reduced to 500, it means about 100 of them have left, that would have been better,” Ojikutu said.

    The onus is on the airlines; if we really want to have more Nigerian pilots, they should absorb them.”But to absorb them most times, the airlines ask them to go for type-rating with their money and where will many of them get between $100,000 and $200,000 for that from? These are people who are looking for jobs.

    ”He stated that in the days of NAL, the government sponsored the training of many pilots, a responsibility, which he noted many domestic airlines had refused to take.”The entire pilots, who were trained by the Nigeria Airways, were quickly employed by other airlines when it was liquidated; they are now old and there is no space for more pilots and because of that, airlines go out to get expatriates.

    They bring them in, pay them in dollars rather than absorb and train Nigerian pilots.”NCAA spokesman Sam Adurogboye urged the government to come up with a policy that will mandate foreign airlines to engage indigenous pilots as crew members. Proposed National Carrier to the RescueA few months ago the  National Association of Aircraft Pilots and Engineers has asked the Federal Government to quicken the inauguration of Nigeria Air.

    The association said the Federal Government should quickly remove all obstacles on the path of the new national carrier so that it could become operational.”The urgent need to inaugurate the Nigeria Air requires no further restating. It is considered a great disservice to hesitate, or delay, this laudable project any further, considering the rich harvest of gains expected from the coming on stream of the national carrier,” the association said.

    In a communiqué issued at the end of its National Executive Council meeting and signed by its General Secretary, Ocheme Aba, NAAPE also called for a review of the Nigerian Civil Aviation Authority’s policy on pilots’ simulation training.

    According to the association, the situation where after training, a pilot’s simulator certificate’s ownership is vested in the airline where he works, is a form of slave labour and denies pilots the right to their intellectual property.

    It added, “Besides, this situation has created a chaotic atmosphere where pilots who have been relieved of their employment through redundancy and other means by various airlines are unable to secure other employment with their pilot’s simulator certificate even as such certificates are current.”The present policy connotes that a valid certificate may be invalidated within its validity period. This contravenes the periodic renewal policy. It also does incalculable damage to the holder, and no good to any party.”Among other issues, the association also commended the Federal Government on the Executive Order No 5.It stated that having reviewed the content, principles and objectives of the Order, which reinforced the Expatriate Quota Policy and the Local Content Act for the purpose of assuring that qualified Nigerians were given preference for Nigerian generated employment opportunities, it found it laudable and timely

     

  • FATF: Probing compliance with anti-money laundering rules

    The Financial Action Task Force (FATF) team will this month conduct its annual Mutual Evaluation on Nigeria. The exercise allows it to assess Nigeria’s compliance with the Anti-Money Laundering and Counter Financing of Terrorism (AML/CFT) rules. The team will be assessing banks’ and Bureaux de Change (BDC) operators’ compliance level, writes COLLINS NWEZE.

    The sorry state of public institutions in the Economic Community of West African States (ECOWAS) is disturbing. In many public schools, students learn while sitting on the floor, hospitals lack basic drugs, while road networks are little better than death traps.

    These societal ills thrive where corruption and illicit financial flows are rampant and Africa has remained one of the biggest losers, with over $30.4 billion ferried out of the continent annually.

    To tackle Illicit Financial Flows (IFFs) in Nigeria, the Financial Action Task Force (FATF) will, this month, conduct stringent country evaluation and monitoring process in Nigeria during which banks and Bureaux de Change (BDCs) will be visited and assessed.

    The FATF, the global standard-setter in the fight against money laundering and the financing of terrorism and proliferation of weapons of mass destruction, conducts peer reviews of each member on an ongoing basis, providing an in-depth description and analysis of each country’s system for preventing criminal abuse of the financial system.

    The BDCs are conversant with the threats and dangers posed by Money Laundering and Terrorist Financing (ML/TF) in Nigeria, Africa and globally, and are helping to tackle the menace.

    President, Association of Bureau De Change Operators of Nigeria (ABCON), Alhaji Aminu Gwadabe, said the group, in collaboration with regulatory agencies and key government parastatals, conducts series of trainings to ensure compliance by its members.

    With over $30.4billion ferried out of Africa annually, ABCON is intensifying its commitment to fighting money laundering and terrorist financing by ensuring that its members comply with regulations in doing their business. Gwadabe said the group is already equipping over 4,500 BDCs with the right technology and skills to tackle illicit financial flows within the country.

    He said the BDCs meet regularly with regulators, government agencies/officials and experts to analyse, monitor and identify strategies for effective implementation of Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) measures.

    He said the BDCs would welcome the FATF Mutual Evaluation team to Nigeria, saying the FATF assessment was designed to evaluate the implementation and effectiveness of the laws, regulations and other measures required to ascertain the effectiveness of the AML/CFT regime.

    The Mutual Evaluation will equally provide information on the progress made by Nigeria in meeting its obligations towards the FATF Recommendations.

    ABCON has, over the years, established itself as a key player in the Bureaux de Change (BDC) industry, and has also made several commitments and sacrifices to ensure that the sector continues to thrive and its members follow global best practices in the retail of foreign exchange to end users.

    The Inter-Governmental Action Group against Money Laundering in West Africa (GIABA) is at the centre of the fight against the menace and terrorist financing across the Economic Community of West African States (ECOWAS).

    According to the group, about $30.4 billion is illegally transferred out of Africa yearly.  To stem the menace, GIABA is empowering key institutions to tackle illicit financial flows within the region.

    GIABA information Manager, Lagos Office, Timothy Melaye, said the Financial Action Task Force (FATF) requires countries to identify, asses and understand the Money Laundering/Terrorist Financing (ML/TF) risks to which they are exposed, take measures and mobilise resources to ensure that such risks are mitigated.

    “GIABA is a change agent. We build capacity, collaborate and sanction countries when they refuse to comply with the Financial Action Task Force (FATF) 40 recommendations. We also promote the economies of member ECOWAS states,” he said.

    FATF Mutual Evaluation and BDCs’Preparations 

    Gwadabe disclosed that ahead of the FATF Team visit, the ABCON, in collaboration with the Central Bank of Nigeria (CBN), is organising a sensitisation workshop for over 4,500 licensed BDCs in Nigeria. The workshop will hold in the six geo-political zones.

    He said as the global body that sets standard for AML/CFT efforts, the FATF team will assess banks and other financial institutions’ compliance with the AML/CFT measures, saying like in other previous visits, the FATF team will carry out checks at the branches of selected banks and BDCs across the country, as well as the airports and land borders.

    Gwadabe said Nigeria, which has been in the forefront of mentoring other member states in the development of their AML/CFT systems, has largely addressed its action plan by enacting legislation to criminalise money laundering and terrorist financing. The country is also implementing procedures to identify and freeze terrorist assets and ensure that customer due diligence requirements apply to all financial instructions.

    BDCs’ Compliance/Digitisation of Operations

    Gwadabe said BDCs have met a number of compliance requirements specified by FATF and local regulators, saying they have conducted enhanced due diligence, a major compliance requirement on some high-risk customers. He said the collation and reporting of foreign currency transactions and suspicious transactions by BDCs are now fully automated.

    He saud ABCON had in February, launched its Live Run Automation Portal in Lagos, stating that the technology automates all BDC Operations with those of Nigeria Inter-Bank Settlement System (NIBSS), Nigeria Financial Intelligence Unit (NFIU) and the Central Bank of Nigeria (CBN), enabling improved compliance of the BDCs with set regulations.

    The platform allows BDCs send their reports online real time, thereby removing the challenge of manual rendition of reports. The project has given a favourable rating in the perception index of BDCs in Nigeria especially in the eyes of international investors.

    Gwadabe said we are in the digital age, BDC operators under his leadership are committed to staying ahead of the competition by deploying time-tested technology to deliver effective services to customers and ensure compliance. He said the Live Run portal has enhanced BDCs compliance with set regulations and promoted market integrity, pointing out that the portal has sustained transparent transactions in the BDC corridor, boosted members morale  and ensured their continuous operations.

    Continuing Anti-Money Laundering War

    Gwadabe said public institutions in ECOWAS region have suffered immensely from the corruption going on in the public and private sectors, saying  ABCON is aware of the growing concerns over illicit financial flows (IFFs) from West African economies and the need to tackle them by key stakeholders within the region.

    He acknowledged the Inter-Governmental Action Group against Money Laundering in West Africa (GIABA’s) 2016 – 2020 Strategic Plan, which showed that the Global Financial Integrity (GFI), the World Bank, the African Development Bank (AfDB), the Africa Progress Panel and the African Union’s High Level Panel on Illicit Financial Flows from Africa all paint a grim profile of the problem.

    A joint study conducted by the GFI and the AfDB showed that between 2000 and 2009, about $30.4 billion was illicitly transferred out of Africa each year. Over a longer period of 30 years, calculated from 1980, the resource drain was between $1.2 and $1.3 trillion. Outflows from West and Central Africa stood at (37 per cent), followed by North Africa (31 per cent) and Southern Africa (27 per cent). The IFFs are derived from various predicate offences of money laundering.

    Partnerships/Capacity Building for BDCs

    ABCON, severally, organised trainings for its members, and at other times, partnered NFIU and the EFCC to build capacity for operators.

    They have educated BDC operators on how they can help in tackling money laundering, terrorist financing and the benefits of keeping records of their transactions.

    The anti-money laundering training that ABCON organised with NFIU and EFCC in Lagos was meant to familiarise BDCs with the process of money laundering — the criminal business used to disguise the true origin and ownership of illegal cash — and the laws that make it a crime.

    Speaking during the sensitisation programme against money laundering and terrorism financing campaign at MM2, Lagos, which was attended by many BDC operators, the Acting Chairman, EFCC, Ibrahim Magu, called for continuous sensitisation on issues around AML/CFT reporting to improve transparency in BDCs operations.

    He said the EFCC would continue to campaign for financial integrity and transparency in BDCs’ operations. Other stakeholders at the event also spoke on the use of BDCs for illicit political transactions, illegal border cash evacuation, reporting of suspicious transactions, fraud accounts transactions and cash dollar deposits on domiciliary accounts.

    The NFIU/EFCC/ABCON goal is to ensure that BDCs are not used to launder funds by Politically Exposed Persons (PEPs). Their target was also to upscale BDCs’ compliance with the AML/CFT for Banks and Other Financial Institutions in Nigeria, Regulations 2013.

    These capacity building workshops have helped BDCS to understand how to raise and submit both the Suspicious Transaction Reports (STRs) and Currency Transaction Reports (CTRs) to regulators.

    Report Filling by BDCs

    ABCON has continued to ensure that BDCs file their reports as and  when due. They file reports on all transactions from N10 million for companies and N5 million for individuals. The reports are sent on weekly basis  to NFIU, CBN and EFCC.

    The BDCs also do customers Know Your Customer (KYC) and due diligence reports.

    Daily Transaction Returns (DTR) gives details of the total sales made for the day by the BDC and comes in as DTR 202, DTR 217, DTR 305 and DTR 315.

    The DTR 217 return gives the information of the customers of whom the forex was sold to. Information like, the name, the international Passport number, Bank Verification Number, address, TIN number, email address among others while DTR 305 provides details of the customers as well their destination and reason for the purchase of forex. The total amount of forex sold to them is also mentioned with the transaction date.

  • 15 years of Cabotage: How has NIMASA fared?

    The Cabotage Act has remained a very contentious policy in the country’s sector. While the industry regulators claim to have taken very proactive measures in ensuring its full implementation, the concerned operators have continued to cry blue murder over the continued rising influence of foreign operators. How well has the Nigerian Maritime and Safety Administration (NIMASA) fared in its implementation of this policy? MUYIWA LUCAS reports.

    Globally, maritime plays a key role in the alleviation of poverty through employment and other economic opportunities. This comes by way of creating opportunities for the engagement of seagoing personnel and ship recycling, ship owning and operating, shipbuilding and repair and port services, among others.

    And with a coastline of about 870 kilometres and about 3,000 kilometres of inland waterways, including several natural resources like petroleum, natural gas, tin, columbite, iron ore, coal, zinc, limestone, lead and other minerals, Nigeria can be said to have been aptly positioned by nature for greatness.

    Determined to take advantage and ensure her citizens benefit to the fullest from the sector, government enacted the Coastal and Inland Shipping (Cabotage) Act, 2003 (Cabotage Act) on April 30, 2003; its provisions became enforceable from May 1, 2004- allowing one year transitional period.  The law was enacted with provisions to empower local investors to take control of the domestic shipping trade and from it develop enough muscle to assume the right of place for the country as a maritime nation in the movement of her import/export cargoes including crude oil to and from international markets.

    The Act was also to promote economic growth and national development; stimulate and expose Nigeria’s indigenous shipping operators to shipping business in the coasts as a stepping stone to deep sea/international shipping; enhance indigenous maritime capacity by igniting the flame of education, training and employment of seafarers, ship operators and ship managers since the ships to be used in domestic shipping would be Nigerian-built and Nigerian-owned, crewed and operated; protect the nation’s security interests; improve Balance of Payment; provide level ground for fair competition amongst the indigenous shipowners and operators, among others.

    The Act

    The Cabotage Act, designed as a tool or driver for economic development, is set out in nine parts made up of 55 sections. In the first part, which comprise of Sections 1 and 2, it defines Cabotage, the scope of the Act and the intention of the Legislature, spelling out new parameters for the regulation of the oil and gas industry in the country, covering all aspects of exploration, production and development activities. Part 2, comprising Sections 3-8 provides that a vessel other than a vessel wholly owned and manned by a Nigerian citizen, built and registered in Nigeria shall not engage in Cabotage. This restriction applies up to the extent of the Exclusive Economic Zone, which is approximately 200 nautical miles seaward from the outer limits of the coastline. Part 3 contains Section 9-14, covering aspects of waivers and the conditions precedent to the granting of waivers, the duration of waivers and further empowers the Minister of Transport to publish guidelines for the waiver system.

    Furthermore, in Part 4, which houses Sections 15-21, issues bothering on the licensing of foreign vessels, especially that of bringing foreign flagged vessels under the control of the regulatory body were dealt with. Part 5, comprising of Sections 22-28, deal with registration issues. In very clear terms, Section 22 of this part provides for the establishment of a Special Cabotage Vessels Register while Section 23 qualifies the conditions for registration of Cabotage vessels. Part 6, containing Sections 29-34 seeks to create a cabotage enforcement unit within the Nigerian Maritime Administration and Safety Agency (NIMASA) to monitor the implementation of and compliance with cabotage, even as its Section 31grants the enforcement officers very wide powers of arrest and detention of the vessel in the conduct of the duties.

    In Part 7, Sections 35-41 though criminalise acts in contravention of this Act by imposing stiff fines for non-compliance; it however did not specify any jail terms for erring vessels or its crew. Part 8, accommodates Sections 42-45, and established a Cabotage Vessel Financing Fund (CVFF). The Section 43 of the Act imposes an additional surcharge or tax of two percent of the contract sum of any contract performed by any vessel. In Part 9, made up of Sections 46-55, miscellaneous and sundry issues relating to the application of the Act, the discretion of the Minister and of transitional provisions and repeals.

    On trial /obstacles

    The Cabotage Act is designed to guarantee the participation of Nigerian citizens in its own domestic maritime trade. However, there are continued hindrances to the achievement of the objectives of the Act in the last 15 years. This is why the Act has largely been described as a failure by critical stakeholders in the industry on the basis that all the prevalent conditions bedeviling the maritime industry that the law was expected to address has remained unsolved.

    One of these is the issue of the Cabotage Vessels Finance Fund (CVFF), which was planned as a support funding to indigenous investors in the shipping industry. Apart from the fund remaining undisbursed, the actual amount accrued so far for this purpose remains unknown to industry stakeholders. The government has continued to hinge its failure to disburse the CVFF on the excuse that earlier disbursed Ship Acquisition and Ship Building Fund (SASBF) was not refunded as expected by the borrowers. Some even went into litigation with government.

    Failure on the part of NIMASA to process the applications for the CVFF loan for tonnage expansion; lack of commitment by the National Petroleum Investment Management Services (NAPPIMS) and the Petroleum and Pipeline Management Company (PPMC) to guarantee cargo support to indigenous operators; NIMASA’s lukewarm attitude in enforcing the provisions of the Act.

    Equally worrisome is that most of the cabotage vessels operated by most indigenous shipping companies are below specified standards and are unseaworthy, a situation that has led to the recent proscription of the use of certain ships on the Nigerian waters. Also is a growing dearth of qualified indigenous seafarers and certified marine engineers and navigators to operate the few available cabotage vessels.

    Besides, whereas the law provides that Nigerians be given preference for jobs in the sector and allow foreigners only in areas where there are no competent Nigerians, the industry has remained dominated by foreigners as government has refused to demonstrate willingness to stop the domination. NIMASA is viewed by many stakeholders to have derailed into focusing on collecting revenue for government from a foreigners dominated sector rather than create avenues for promotion of shipping trade with Nigerians at the fore.

    Irrespective of the fact that the Federal Government had several times reassured that it will fund indigenous operators, stop abusive waivers and promote Nigerian flag, the very lucrative deal of lifting Nigerian crude oil and bringing in refined petroleum products into the country has for long been dominated and controlled by foreigners as the Nigerian National Petroleum Corporation (NNPC) persistently maintains that Nigerians do not own ships that can efficiently participate in the oil industry.

    Statistics

    According to a research published by the European Centre for Research Training and Development UK, Nigeria is said to generate more than 70 percent of the cargo throughput in West and Central Africa; but regrettably, the sector is characterised by the domination of foreign flag vessels especially those of developed market economies of Western Europe and America. The publication further revealed that as at 2013, about 98 percent of the sea freight in Nigeria was still done by foreign companies and that foreigners make up about 85 percent of the maritime workforce in Nigeria (Global shipbuilding Market Report, 2013).

    In similar vein, the 2017 report of the National Bureau of Statistics/Nigerian Ports Authority (NPA), the ship traffic statistics at Nigerian ports reflected that a total number of 19,833 vessels berthed at the various ports between 2013 and 2016. Similarly 543,842,425 tonnages were registered within the period under review. Year 2014 recorded the highest number of vessels berthed as well as tonnages registered while the least were recorded in 2016. Tin Can Island Port handled the most ships accounting for 33 percent of total number of ships that berthed in all ports and 32 percent of total tonnage registered in all ports. It is closely followed by Apapa port which accounted for 28 percent of ships that berthed.

    SOAN’s position

    For the Ship Owners Association of Nigeria (SOAN), the issue of Nigerian vessels competing favourably remains a concern. According to the association’s President, Dr. M. K. George Onyung, harder times lie ahead of the full implementation of the Cabotage regime. This, he explained, is because of the recent banning of certain category of vessels or ship from the Nigerian waters. He said there is a need for capacity building in the sector if the country is to reap the full benefits of the Act. Stakeholders are worried that a major problem to enjoying the Act remains the interest of foreign vessels owners. This, they argued, is because they have a way of influencing government to circumvent whatever action is being planned to improve the ship owning by Nigerians. For example, they explained that in the original bill leading to the Act, oil rig was listed as a vessel but somehow it was removed from it later on.

    Onyung contended that the cabotage law requires that costal trade will be done by Nigerian ships, including the lifting of crude oil to the tune of up to 90 percent Nigerian content. “We have to build that capacity.  I do not see why anybody tells me that we bring a 2020 or 2019 built vessel that is compliant with all the carbon emissions control rules of construction,  it will be discriminated against. There is no racism in shipping because a ship is a country. If you discriminate against a Nigeria flag vessel anywhere in the world is like you are discriminating against Nigeria. So if you have a Nigerian vessel that is a super tanker, that is going to Gulf of Mexico to deliver a cargo, as long as it is running based on international best practices and international standard, nobody would look down on it. So if a Nigerian ship begins to operate according to international best practices, people will give respect to it,” he explained at a news event last Thursday. He, therefore, urged NIMASA and government to look at it in that perspective. We have come a long way and we want to work with the government.

    He revealed that government should deploy the CVFF as there are so many ship builders in the world that want to fund ships up to 85 percent. He said if indigenous operators have no ships or vessel, then the Act remains in vain as Nigerians will not be able to benefit from act.

    NIMASA’s five-year plan, changing tide

    Stakeholders in the industry maintained that to enhance indigenous participation and reduce the foreign dominance in the sector, NIMASA should make the cabotage vessel finance Fund/loan facility accessible to local operators for fleet expansion and to make solid arrangements for cadet-ship sea-training to enhance proficiency and avoid importation of manpower. PPMC and NAPPIMS should guarantee long time charter of the fleet as a kind of incentive against idle moment. On the other hand, local operators should try to present standard and seaworthy vessels for optimal cabotage operations and clean sea assurances.

    Indeed, there seems to be a new wave of direction in NIMASA. Recently, the agency commenced the process that will end the regime of cabotage waivers in the country. The process, which began with a brainstorming session of critical stakeholders in the maritime sector at the Eko Hotel and  Suites, Lagos, is expected to present a roadmap for the exercise within five years.

    The planned stoppage of the waivers was staggered into phases, and would ultimately make room for indigenous shipowners take charge of local cabotage trade. Indeed, granting of waivers is said to have created huge capital flight on the nation’s economy as Nigeria continues to lose in excess of N2 trillion annually for not developing local shipping capacity. Stakeholders estimate that the maritime industry alone. It is estimated that maritime industry can generate close to N7 trillion annually because developing shipping comes with spinoff effects on other industries such as insurance, steel for the use of ship building and ship repair yards. Unfortunately, over 80 percent of Nigerian seaborne cargoes are carried by foreign-flagged and registered vessels today.

    “For a very long time, indigenous operators have been very concerned about cabotage waivers. This stems from the fact that it appears that waivers is now a norm instead of exception. We are determined to bring to an end the waivers regime so that cabotage will flourish in Nigeria and Nigerians will benefit from coastal trade,” he said.

    As part of steps the NIMASA has taken, the agency has taken preliminary steps to give Nigerian operators a strong footing in the Cabotage regime. To this end, vessels which flout the Cabotage Act will no longer be granted waivers, because granting waivers to vessels which do not comply with the Cabotage Compliance Strategy (CCS)- introduced to ease the law’s implementation, cannot help the economy. “Our laws forbid foreign vessels operating in our territorial waters save for compliance with the Cabotage Act. There shall be no sacred cow when we commence clampdown on erring vessels. We want to increase the number of Nigerians who participate in the marine aspect of your business and we are working closely with the Nigerian Content Development and Monitoring Board (NCDMB) to have a joint categorisation of vessels operating under the Cabotage Act in order to ensure the full implementation of the Act,” he said, adding that NIMASA no longer considers applications for waiver on manning requirements for vessels engaged in coastal trade with regards to second officer, second engineer, second  mate down to able seamen, ratings and stewards.

    Besides, NIMASA has concluded plans to begin the disbursement of CVFF to assist local operators in the maritime sector. This is aside the provision of incentives in terms of giving tax waivers and the like to Nigerians who import maritime related equipment so that they can favourably compete with their foreign counterparts.

    This is traceable to lack of affordable funding for vessel acquisition, owing to the inability of the Nigerian banking industry to develop a framework for financing ship acquisition, which has a long gestation period.

    As a result, credit facilities received from Nigerian banks by indigenous ship owners to fund vessel acquisition, usually come with interest rates that are in double digit, sometimes over 20 percent. This makes it near-difficult for Nigerian indigenous shipping firms to compete with their counterparts that operate with offshore loans of single-digit interest rates.

    Other initiatives taken by NIMASA to boost Cabotage participation includes the recently rolled out plans targeted at putting an end to granting of waivers to foreign-owned, manned, built and flagged vessels. The new strategies are aimed at addressing issues around growing capacity in ship building by encouraging establishment of shipyards; creating affordable credit facilities to enable Nigerians acquire vessels; creating tax incentives for importing built vessels by Nigerians and building of qualified seafarers.

    Still, the director- general of NIMASA, Dakuku Peterside, said the agency is engaging with the Federal Ministry of Finance and the Nigeria Customs Service (NCS) to create a special tax incentive for Nigerians bringing vessels in the country. He explained that this strategy will involve creating special incentives that can enable shipbuilding yards to bring in components for building vessels in-country, adding that the government is also determined to ensure that Ajaokuta Steel Mill and Aluminum Steel Company in Akwa Ibom State, come on stream to provide the needed raw materials for ship building yards.

    “The current tax regime makes it impossible for Nigerian ship owners to compete with their foreign counterparts. For instance, foreigners bring in vessels for a short period and they have a special tax regime that enables them pay little to nothing for their vessels and crew to work and live in Nigeria, whereas a Nigerian is charged a full range of all tax applicable (14 percent), making it near impossible for their vessels to compete,” Peterside explained.

    He said NIMASA is determined to ensure that in the next five years, certain categories of vessels will be built in-country. This, he said, would put an end to issues around bringing in all kinds of vessels from outside the country and its attendant capital flight and job losses on the economy.

    “NIMASA is engaging with the office of the Vice President on the possibility of creating incentives for shipyards. We believe it will encourage a lot of entrepreneurs to invest in shipbuilding. We are also working in partnership with the Nigerian Content Development Monitoring Board (NCMB) and have commissioned an audit of all shipyards in order to identify a level support that will help revive them,” he said.

    The Executive Director, Finance and Administration, NIMASA, Bashir Jamoh, observed that ships cannot exist without cargo to lift. Therefore, NIMASA is also working towards ensuring that ship owners have cargo support. This is by way of guaranteeing ship owners cargo to lift by giving them right to lift government cargo and other heavy cargo, especially project cargo, while also looking for different windows to get favourable foreign exchange rate for the ship owners in terms of handling, purchasing, repairing their own ships. Jamoh revealed that changing Nigerian crude oil trading policy to Cost Insurance and Freight (CIS) from Free on Board (FOB), has gone far.

    The agency is talking with the Nigerian National Petroleum Corporation (NNPC) to ensure that Nigerian ship owners get the right to lift Nigerian crude oil. “Interestingly, from our conversations, we have evidence that Nigerians are already lifting oil without any problem,” he added.

    The planned floating of a $200 million by the Nigerian Content Development and Monitoring Board (NCDMB) to support indigenous shipping in the country, was also heralded as positive.

    Commendations

    Although stakeholders agreed that there are still a lot to be done in ensuring the success of the Act, experts say NIMASA deserves a pat on the back for what it has done so far.

    The Chairman, Technical Committee, SOAN, Dr. Lucky Akhiwu, observed that the Agency’s intervention is getting sea time training for sea farers which is  commendable.  He said it was important NIMASA put a system in place to monitor what the cadets are doing and keep record in order to certify that they cover the areas required by the regulations.

  • Financial inclusion: Pension assets hit N9.33tr

    The Micro Pension Plan (MPP) driven by the National Pension Commission (PenCom) has grown pension assets and boosted the Central Bank of Nigeria’s plan to take financial services to the grassroots. Pension assets rose from N9.12 trillion in April to N9.33 trillion in June, indicating a N21 billion increase. The CBN’s financial inclusion plan is receiving a boost from the pension industry where contributors have to open bank accounts to be enrolled into the scheme. The ongoing public enlightenment on the MPP benefits to contributors and the economy is building confidence in the financial system and securing contributors’ future, writes COLLINS NWEZE.

    Adult population that has embraced financial services is expected to hit 80 per cent by 2020, from about 65 per cent, Central Bank of Nigeria (CBN) statistics has shown. But achieving this mandate requires the collaboration of key stakeholders.

    The Micro Pension Plan (MPP) driven by the National Pension Commission (PenCom) is one avenue of bringing more people into the financial system.

    PenCom has taken up the challenge of providing financial products and services to the low-income population, which represents a large business opportunity for the private sector with the Contributory Pension Scheme (CPS).

    The scheme uses MPP to reach farmers, teachers, hair dressing saloon owners, petty traders, musician, actors/actresses, shoe shiners, bricklayers, among others.

    This is because for many people, the future remains uncertain. But for those who have planned for it through the right investment and savings, it is bright.

    And securing one’s future requires taking advantage of the opportunities that abound in the pension industry, which many people have seen as the last hope for retirees.

    The pension industry, tipped as one of the largest investment sectors, is gaining the attention the self-employed.

    At the end of last year, the global pension industry reportedly had an estimated asset under management (AuM) of $41.4 trillion, which represents 53.9 per cent of global assets under management. This significant asset size reflects the growing institutionalisation of retirement planning across the world. For Nigeria, the pension industry has in the past few years been dominated by high- investment returns, a departure from previous trends where net inflows accounted for the majority of the industry’s growth.

    PenCom exists for the effective regulation and supervision of the pension industry to ensure that retirement benefits are paid promptly.

    How much have pension assets grown?

    In the first quarter of the year, the growth of Retirement Savings Accounts (RSAs) holders under the CPS led to a N29 billion increase in pension assets. This has been attributed to salient policies being implemented by the Acting Director-General of PenCom, Mrs. Aisha Dahir-Umar. For instance, data obtained from the Commission shows that AuM in the second quarter of the year increased by N21 billion.

    According to the monthly report on summary of pension fund assets and RSA registration published on its website, pension fund assets rose from N9.12 trillion in April, this year to N9.33 trillion in June, indicating a N21 billion inflow. A breakdown showed a rise of N18 billion in total RSA fund as it moved from N6.94 in April to N7.12 in June, while investment in Federal Government securities fell by N6 billion, from N6.55 trillion in April to N6.49 in June while RSA Fund 11, which has continued to attract more investments moved from N4.02 trillion to N4.10 trillion, an increase of N8 billion.

    PenCom regulates and supervises the licensed pension fund operators and Pension Fund Administrators (PFAs) manage and invest the fund for contributors and retirees under the CPS. Thus, the fund had grown to N8.74 trillion in January; N8.91 trillion in February; N9.03 trillion in March; N9.12 trillion in April, N9.22 trillion in May and N9.33 trillion in June, which translates to N686 billion growth in six months.The report further showed that a major chunk of N7.21 trillion out of the N9.33 trillion recorded in June is from RSA holders.

    A further breakdown of the June report under review showed that out of the RSAs’ fund of N7.21 trillion, retirees fund, categorised under Fund IV is N751.73 billion while contributors, categorised under Fund I, Fund II and Fund III, own N6.51 trillion.

    Other contributions to the fund include N958.2 billion from schemes and N1.24 trillion from Closed Pension Fund Administrators (CPFAs).

    The PFAs, the report added, invested a major chunk of the fund, totalling N6.48 trillion into Federal Government Securities out of the N9.33 trillion in the period under review. Of the N6.48 trillion invested by the PFAs, N4.43 trillion was invested in Federal Government Bonds; N1.93 trillion in Treasury Bills; N11 billion in Agency Bonds (NMRC and FMBN); N86 billion in Sukuk Bonds; N12 billion in Green Bonds and N129 billion in state government Securities.

    The PFAs, however, invested N505.82 billion in corporate debt; N1.04 trillion was invested in local money market securities and N23 billion in mutual funds.

    Mrs. Dahir-Umar attributed the accumulation successes achieved since the inception of implementation of the CPS to the Commission’s esteemed contributors. “The achievements recorded by the Commission in the last 15 years would not have been possible without the support and understanding of all stakeholders, especially you, our esteemed contributors, who are about to retiree. I, therefore, urge you to contribute positively towards the success of the Pension Reform Programme,” she said.

    Financial analysts expect the industry’s growth to exceed 14 per cent in the year supported by an improved macroeconomic environment that would drive increased contribution. Also, investment returns are likely to improve in the year, largely driven by higher interest rates, which we expect to spike in the second half of the year.

    Analysts also view positively the commencement of the MPS, expected to increase the industry coverage ratio and help ramp up AuM.

    PenCom sustains campaigns

    PenCom is carrying out massive campaigns to enlighten the people, even at the grassroots, to embrace CPS at all stages of their business growth. The campaigns are going on televisions, radio, social media, online publications and other media platforms to get more people into the pension scheme and bring them to the financial services net.

    The campaigns are ongoing in the markets, shopping malls, private and public sectors, motor parks to ensure that all Nigerians within pensionable age embrace the CPS and secure their future, financially.

    PenCom said once a person reaches 18, such person qualifies and can contribute based on his income. The contributions can be daily, weekly, monthly, and contributions can be made through the mobile phones. Besides, should anything happen to a contributor’s business, such a person can get 40 per cent of the total contributions back to begin a new life.

    Also, in case of death, the contributor’s next-of-kin will be paid the balance in the account of the contributor. The Commission also said Pension Fund Administrators (PFAs) are registering people that want to join the scheme at zero cost.

    CPS gains private-public sectors’ acceptance

    PenCom says it has enrolled more than 8.5 million people into the CPS since its inception 15 years ago. Head of Communication Department of PenCom, Peter Aghahowa, said the scheme introduced in 2004 by the Federal Government was a process where certain percentage of enrollees’ salaries was saved monthly in a pool with the employers also contributing.

    The scheme had PenCom as the regulatory body, with PFAs working at its behest. Aghahowa said the scheme had made the life of retirees much easier, unlike the defined benefits scheme, which it replaced. He said the commission will continue to protect contributors’ funds and drive compliance by private sector employers through public awareness campaigns and engagement.

    This initiative, he added, is aimed at educating employees/employers and expanding the coverage of the CPS. According to him, the commission also monitors compliance through onsite inspections to ensure that employees of private sector organisations open RSAs and pension contributions are remitted promptly.

     Drivers of pension assets growth

    PenCom led by Mrs. Dahir-Umar  has achieved  milestones in pension contribu-tions, which is projected to hit N10 trillion by year-end and N15.1 trillion by 2023.

    PenCom introduced an Enhanced Contributor Registration System (ECRS) to tackle the challenges faced with the Contributor Registration System (CRS).

    Aside helping to lift contributors confidence and bring in more people into the financial system, the enhanced application is expected to open up transfer window for RSA holders to switch PFAs.

    ”Electronic submission of employer code requests by Pension Fund Administrators (PFAs) on employers and the full automation of the process of issuing employer codes. Updates and edits of contributors’ information on the National Databank maintained by the National Pension Commission by the PFAs. The deployment of the ECRS is a major step towards the introduction of the transfer widow, which will enable contributors change to the PFAs of their choice, in line with Section 13 of the Pension Reform Act (PRA) 2014,” it said.

    Aside the ECRS, PenCom under Mrs. Dahir-Umar unveiled the Micro Pension Plan (MPP) that allows the informal sector contributors under the CPS to withdraw at least 40 per cent of the contributions in their RSA. The extension of the CPS to the informal sector and the flexibility of its operation is one of the incentives expected to encourage participation and growth of the   pension industry.

    According to her, Section 2(3) of the Pension Reform Act, 2014 (PRA 2014) provides that employees of organisations with less than three employees as well as the self-employed persons shall be entitled to participate in the CPS in accordance with guidelines issued by the Commission. Majority of these categories of persons are found in the informal sector and have generally low and irregular incomes. The MPP has enabled artisans, such as photographers, caterers, hairdressers, motorcycle service operators, tailors, fashion designers, carpenters, and painters to embrace CPS and protect their future and businesses.

    ”As you are aware, the informal sector workers constitute the larger percentage of the working population in the country, there is, therefore, no doubt that robust participation would result to exponential growth of the pension funds which would consequently, provide funding for allowable and relevant investments that would impact positively on the economy. The MPP would contribute immensely to achieving the Pension Industry’s strategic objective of covering 30 per cent of the working population in Nigeria under the CPS by the end of 2024,” the PenCom chief said.