The Nation Newspaper

Category: Issues

  • Taking agency banking to new heights

    The promotion of agency banking is one of the principles adopted by the Central Bank of Nigeria (CBN) and commercial banks to take banking to the grassroots. First City Monument Bank (FCMB) has not only promoted the agency banking model, but increased its commitment to agricultural financing to ensure that people at the grassroots, who are mainly farmers, have access to financial services. This is in line with the government’s plan to create jobs and wealth for the people, writes COLLINS NWEZE.

    The majority of Nigerians in rural areas do not have access to financial services. The Central Bank of Nigeria’s (CBN’s) introduction of agency banking is aimed at connecting rural dwellers to the financial system.

    Many commercial banks have joined the CBN to promote agency banking and fund agriculture at the grassroots. First City Monument Bank (FCMB) is one of them.

    A banking agent is contracted by a commercial bank and approved by the CBN to provide specific services for the bank. The agent is equipped with the skills necessary to provide basic banking services according to set  standards.

    The FCMB has reiterated its commitment to assisting the Federal Government in achieving its development goals.

    This is because it is believed that the main task of governance all over the world is to provide social and economic infrastructure, protect life and property, and also create employment for the unemployed.

    The need for economic development through poverty reduction, employment generation and wealth creation must be given priority by government. But to what extent can this responsibility be left to the government alone?

    The FCMB, which has been in operation for 34 years, believes the responsibility should not be left to the government alone. Since Nigeria is blessed with favourable climatic conditions, ample arable land and fertile soils, some solution has been proffered.

    The bank is empowering small holder farmers as well as micro, small and medium scale enterprises which are the powerhouse of developed economies.

    In Nigeria, the Federal Government has concluded plans to align its fiscal, monetary and trade policies to stimulate economic growth.

    FCMB’s Managing Director, Adam Nuru, said the lender has an objective that enables it to partner with the government in various  economic activities that impact positively on the people. Such areas include the micro, small and medium enterprises which are key to economic growth.

    In one of the economic outreaches championed by FCMB, Nuru said: “The bank has designed a group lending programme which aims at creating financial awareness and empowerment for financially active women through micro-credits, procurement and deployment of Point of Sale (PoS) and free mobile phones among these women.

    “These women have been identified in self-organised and homogenous groups that provide support and peer pressure to reimburse loans. It is quite innovative in Nigeria.  Our focus on this aspect with the accruing benefits, are the unbanked, under-banked and low income customer segments who are also being acquainted with financial inclusion.’’

    The bank, he said, is committed to bringing financial services closer to both urban and rural small income earners. This enables them access loans in groups to be able to drive inclusion.

    “The scheme also offers more flexible financial services to small income earners in the market especially women to increase their work capital. It is another opportunity that enables small income earners expand their asset base to finance their household needs,” he stated.

    The bank has sinplified its lending to the people. For the upcoming, small and medium sized businesses to benefit, prospective participants must be between 18 and 60 and belong to a group. The group’s size must be five to 25 members who enjoy mutual trust, confidence and respect, and live or work in close proximity to one another.

    “The customer must have an income generating activity or business which has been in existence for at least six months. The borrower must exhibit the potential to save. And Group members are expected to be residing within a radius of one kilometre. FCMB is also offering free four weeks of training organised for borrowers before loans’ disbursement,” Nuru said.

    Vice-President Yemi Osinbajo, disclosed that the government’s success at restoring growth depends on improved macroeconomic conditions. Hence, fiscal, monetary and trade policies are being aligned to stimulate the economy and support growth while preventing overheating.

    Also, sectoral policies were being implemented by the Federal Government to diversify the economy by boosting investments in agriculture, manufacturing, mining, construction and the digital economy. The Deposit Money Banks, Osinbajo noted, were vital to the implementation of the government’s Economic Recovery and Growth Plan (ERGP).

    At the donation of a robust Home Grown School Feeding (HGSF) programme web portal developed by FCMB for deployment nationwide to the Federal Government,  Nuru informed Osinbajo that the bank, as one of the top lenders in Nigeria, is already providing financial and technical advisory support to several operators in various sectors.

    He listed these to include power sector projects, export trade, Small and Medium Scale Enterprises (SMEs), among others. ‘’We will continue to intervene and offer support as well as solutions in developmental areas that would fast-track the growth of the aspirations of individuals, businesses and the country in general,’’ he added.

    Also, FCMB’s Microfinance project from inception, set the pace for rural and semi-urban economic prosperity and the resultant effect, has been profound. The Microfi-nance Bank (MfB) also developed a robust software application for online real time transaction and reporting. It has also commenced Bank Verification Number (BVN) registration for microfinance banks’ clients with credit check on customers for improved loan assessment process.

    The MfB’s operation is in operation in 53 branches covering 11 states in five geopolitical regions. The FCMB Group Lending and Agency Banking projects are a digitised credit and savings solution which facilitates instant account opening with debit card issuance for online real time transactions driven by PoS and mobile devices.

    Group Chief Executive of FCMB Group Plc, Ladi Balogun, said: “The bank’s project is driving financial inclusion in Nigeria through the deployment of agents in communities without financial service providers. The project is highly driven by technology to create a distinct offering from other existing micro lending businesses.The automation of loan processing, disbursement, and repayment via PoS and/ or mobile solutions ensures an efficient and swift loan disbursement and collection process.’’

    In agriculture, it is a concern, however, that as desirable as agriculture is to economic well-being, Nigeria is yet to maximise its potential.

    FCMB’s intervention in the agric  sector has left a far-reaching impact on this crucial part of the economy.

    Tractor Owners and Hiring Facilities Association of Nigeria (TOHFAN) Chairman, Danladi Garba, praised FCMB for its support to the agric sector and farmers in Lagos.

    FCMB had provided funding worth N300 million to TOHFAN for the acquisition of tractors that were distributed to operators and benefiting farmers throughout Nigeria.

    The bank also collaborated with Doreo Partners, an impact investing firm with a proven track record of exclusively investing in profitable, high growth, early stage businesses that improve the livelihoods of Nigerian smallholder farmers, to launch a support programme for farmers, known as Babban Gona (or ‘’great farm’’).

    This is an agricultural franchise model, where farmers are trained, provided end-to-end support, and offered specially packaged loans to carry out their farming.

    In line with its commitment to financial inclusion, which entails bringing the underbanked and unbanked population into the financial system, a drive which the CBN has been pursuing actively, FCMB selected a region with a high degree of financial exclusion, bringing on board farmers in the Gimba, Soba and Maigana communities.

    The franchise has about 18000 farmers, developed by Doreo Partners and has a vision of reaching in excess of a million farmers in the near future

    Another testimony associated with FCMB is the success of Psaltry International Farm in Ado-Awaye, Iseyin in Oyo State, whose achievements in cassava business and agric value chain management have assumed international dimension.

    Managed by Mrs. Yemisi Iranloye, a biochemist and agric entrepreneur, the business has a farming base of over 10,000 hectares of land with about 2,000 out-growers. It also has a factory that processes cassava to food grade starch for supplies to large corporates in the food and beverage industries.

    FCMB’s facilitation of about N1billion for Psaltry Farm under the Central Bank of Nigeria’s (CBN’s) funding schemes for the sector has given the Iseyin agric community the much-needed economic boost.

    Apart from FCMB’s relationship with Psaltry, the bank partnered  the farm to provide basic agricultural training for its farmers to understand the technical details of growing their produce for higher yield and improved income.

    FCMB distinguishes itself by its extraordinary people and culture, a customer-focused and performance-driven environment.Its unique retail lending capabilities enables it to offer valued services to millions of underserved Nigerians, while supporting its portfolio diversification objectives to deliver sustainable growth. Its investment and transaction banking services further distinguish it as a bank for companies, doing business within and outside Nigeria, with customers in need of value-added solutions.

    The bank’s distinctive capabilities and culture provide it with the critical elements for sustained growth and the competitiveness to fulfill its mission.

    With these, among others, the Federal Government, has called on other financial institutions as well as other patriotic individuals to join FCMB to add value for national empowerment and economic development.

     

  • Much ado about proposed Pension Act amendment

    Much ado about proposed Pension Act amendment

    Nigeria’s N6.5 trillion pension asset is under threat as the National Assembly is proposing 10 bills to amend the Pension Reform Act (PRA) 2004 repealed by PRA 2014. But stakeholders in the pension industry are kicking, insisting that the bills, if passed into law, may render contributors and retirees vulnerable and destabilise the financial system. OMOBOLA-TOLU-KUSIMO looks at the contentious issues.

    Thirteen years after its introduction, the Pension Reform Act (PRA) 2004 repealed by the PRA 2014 is facing its worst threat ever. There are fears that if the bills before the National Assembly (NASS) seeking to amend the PRA 2014 sail through, the fate of contributors and retirees hangs in the balance.

    Stakeholders in the pension industry are apprehensive that if the bills, about 10, are passed into law, they will render contributors and retirees vulnerable, insecure and also destabilie the financial system.

    The PRA Act 2004 established the Contributory Pension Scheme (CPS), which was borne out of the crisis that bedevilled the old and unfunded Defined Benefit Scheme (DBS), under which pension administration and management was chaotic.

    It was also marred by poor records of beneficiaries. Deficit in pension liabilities was  N1.6 trillion. Fraud and non-uniformity in pension arrangements in the public and private sectors were also rife.

    But the enactment of the PRA 2004 and its implementation changed the narrative. For instance, pension administration, management and regulation were streamlined.

    The checks and balances entrenched in the framework of the CPS by virtue of the Pension Fund Administrators (PFAs), Pension Fund Custodians (PFCs) and industry regulator National Pension Commission (PenCom) significantly addressed the bills in the old DBS.

    The Nation learnt from operators and stakeholders that the contributory nature of the  system as well as its unitised nature also made it personalised as it engrained ownership for its well organised contributors.

    The system became transparent and appropriately funded. From a deficit of N1.6 trillion in the advent of PRA 2004, the new CPS has grown to over N6.5 trillion in assets. Over the years, the fund has accumulated without any incidence of fraud recorded.

    Sadly, however, these benefits for contributors and other stakeholders in the  industry are about to be frittered away by what many people described as multiple, spurious bills by the NASS seeking to amend the PRA 2004  earlier amended by PRA 2014.

    One of the bills, The Nation learnt, is said to have been sponsored by Hon. Oluwole Oke. It is seeking to exclude the paramilitary, including members of the Nigeria Police, Nigerian Security and Civil Defence Corps, Nigeria Customs Service, Nigeria Prison Service, Nigeria Immigration Service and the Economic and Financial Crimes Commission (EFCC) from the application of the CPS.

    The bill is said to be relying on the exemption of the Armed Forces and Intelligence agencies in 2011 from the CPS.

    The other bill that may have set the NASS and concerned stakeholders in the industry on the war path is said to have been sponsored by Senator Aliyu Wamako. It seeks to allow 75 per cent lump sum withdrawal from RSAs upon retirement, and leave 25 per cent to be spread over the expected years of retirement for periodic payments.

    Another bill is seeking that PFAs open branches all over the country. The bill wants PFAs to open at least one branch in each geo-political zone. One seeks to raise the contribution ratio for employers from 10 per cent as stipulated in the PRA 2014 to 12 per cent, with exemption of permanent secretaries and professors, among others.

    But the bills have not gone down well with PenCom, including pension operators under the auspices of Pension Fund Operators Association of Nigeria (PENOP). For instance, in a statement they argued that the bills, if passed into law, would be counter-productive.

    Specifically, they raised the alarm that the bills could hurt the Federal Government’s fiscal policy and distort the nation’s financial system . Besides, they argued that the bills would, among others, encourage corruption in pension administration.

     

    PENOP kicks

    Opposition against the proposed bills appears to be led by pension fund operators. PENOP Chairman, Mr. Longe Eguarekhide, articulated the position of the operators in a statement he made available to reporters.

    He said: “Hon. Oke, in May 16, again sponsored another bill seeking to “Amend PRA 2014 to exclude the paramilitary from the application of the CPS and other related matters. The bill passed its second reading and was referred to the relevant Committee of the House of Representatives for further action.”

    He stated that the above-mentioned bill, which is similar in context to that of the Armed Forces and Intelligence agencies, seeks to exempt the  organisations from the CPS and return them to be 100 per cent underwritten in relation to pension arrangements by the Federal Government.

    Eguarekhide said the bill wants to return them to the former DBS, pointing out that the arguments by the promoters of the bill include national security, occupational hazard, delays in the payment of entitlements, low monthly pensions being paid to the retired personnel and preference for the DBS.

    He, however, noted that the reasons that informed the decisions of both the Federal Government and the Sixth NASS to decline the request and the bill for exemption of the Police and other paramilitary agencies from the CPS in 2011, despite these same arguments, were still valid, adding that the arguments against exemption were further reinforced by some economic, fiscal, social and public policy reasons.

    Eguarekhide’s grouse is that the exemption of the Police and other paramilitary agencies personnel means more financial burden on the Federal Government in terms of unsustainable pension obligations.

    He gave statistics to back his claim. He said: “In the last 10 years, for instance, the number of Federal Government’s employees that retired under the CPS from the six agencies sought to be exempted is 50,730.

    “The total accrued benefits of these personnel amounted to N208.22 billion, which had been redeemed by the Federal Government, and paid into their Retirement Savings Accounts (RSAs) and consolidated with their monthly pension contributions to fund their retirement benefits.

    “These retirees are receiving their retirement benefits promptly as and when due. Exempting them from the CPS would imply that government would shoulder the huge financial obligation of payment of their pensions as well as that of future retirees through budgetary provisions, with no guarantee of availability of funding and; or timeliness of payment.”

    The PENOP chair continued. He said the Federal Government was overburdened with the payment of pensions as illustrated by the 2016 Appropriation Act, which made a provision under the Service Wide Vote for N200.17 billion as total pension and gratuities allocation.

    “This allocation is still insufficient to fund the pension liabilities of the Federal Government,” Eguarekhide pointed out, stressing that the exemption of the Police and other paramilitary agencies personel indicates the dismantling of the institutions, systems and processes that government had in place in the last few years towards the implementation of the pension reform programme.

    He said this included the culture of national savings as well as the efforts to eradicate the structures that encouraged corruption during the pre-pension reform era. “This is contrary to the policy thrust of the administration of diversification of the economy and fight against corruption,” he claimed.

    Eguarekhide noted that about 70 per cent of the N6.4 trillion pension assets is invested in Federal Government securities. “Exempting some government agencies would lead to divestment from Federal Government’s securities before maturity. This would have ripple effects on not only on government’s finances, but also on the entire financial system,” he added.

    He pointed out that another immediate negative impact of the exemption of these agencies is the erosion of the pool of long-term investible funds accumulated under the CPS, which is suitable for economic development as illustrated in other jurisdictions, including developed economies.

    “This would undermine the process of the attainment of development initiatives in the infrastructure, housing and real sectors of the economy, which are largely hinged on the utilisation of a portion of the pool of pension fund assets, Eguarekhide said. He added that it would also result in loss of confidence in the pension reform and other reform initiatives of the government.

    He said the growing culture of national savings built within the last decade would also be destroyed.

    “It is pertinent to note the successful implementation of the pension reform, the discipline with which the industry players have been discharging their responsibilities and the resultant impact on the economy. Foreign investors have also invested heavily in some major PFAs,” Eguarekhide said.

    Besides, he said it would be contrary to public policy for the Federal Government to succumb to the clamour for exemption of its employees from the CPS, which has, so far, been efficient.

    “From these afore-mentioned negative impacts, it calls to question the motives of the sponsor of the bill and the supporters within the listed paramilitary organisations. Research and experience have shown that 60 per cent of retirees in the paramilitary services have sufficient funds in their RSAs to allow for an upward review of their monthly pensions.

    “On the other hand, 40 per cent has insufficient funds left over after they have been paid their lump sums to support a decent standard of living  monthly. It is clear that a compromise can be considered for the majority of retirees who complain about low monthly payments.

    “However, for those with insufficient funds, there is an urgent need for the Minimum Pension Guarantee framework as stipulated in the PRA 2014 to be set up and funded to alleviate their situation,” Eguarekhide said.

    Continuing, he said a pull-out of the paramilitary services was not the answer to the problem, especially given the state of public finances, the obvious great advancements and positive fallouts achieved in pension reform to date, and the provisions of the PRA 2014 for grievance resolution and adjustments in pension savings rates between employers ad employees.

    PENOP emphasised that permitting this bill to gain root as the Armed Forces amendment Bill did, would spell doom for the public sector segment of the Contributory Pension System and for the entire industry as other groups within the scheme could follow suit.

     

    PenCom faults proposed amendment

    PenCom has faulted the proposed amendment on the 75 per cent lump sum. In a position paper by PenCom on the “Bill for an Act to further Amend the PRA 2014 to Provide for Definite Percentage a Retiree can withdraw from his RSA and for Other Matters Related Thereto”, Acting Director-General, Aisha Dahir, said the bill  referred to the PRA 2004, which has been replaced by the PRA 2014.

    The proposed the bill, she said, sought to amend the sections and the provisions in the PRA 2004, adding that this was erroneous and that it should have been PRA 2014.

    “A review of the title of the bill reveals that it is meant to amend the PRA 2004 to provide for definite percentage that a retiree can withdraw from the RSA. This appears to be at variance with the explanatory memorandum to the bill, which provides that the bill seeks to provide succour to retirees in the delay and other difficulties they are encountering in withdrawing their savings from the RSA,” PenCom said.

    The Commission did not mince words when it argued that the proposal for payment of 75 per cent of RSA balance as lump sum to a retiree is faulty, and is based on a misunderstanding of the concept of pension payment under the CPS.

    “It is trite that lump sum should not be fixed. Rather, what should be implemented is a minimum replacement ratio as monthly pensions. Accordingly, the retiree should keep an amount that can procure an amount of monthly pensions as replacement of salary over an expected life span,” the Commission said.

    Noting that one of the objectives of the CPS is to assist improvident individuals by ensuring that they save to cater for their livelihood during old age, PenCom chief said the proposed amendment would mean leaving only 25 per cent to be spread over lifespan of retiree.

    It argued that this might be longer than 20 years, thus giving meagre monthly pensions below the replacement ratio of a minimum of 50 per cent of last pay.

    “It is doubtful if the 25 per cent balance in a retiree’s RSA, after deduction of 75 per cent lump sum, would, if spread throughout the retiree’s expected life span, be adequate to reasonably cater for his livelihood during old age.

    Accordingly, the proposed amendment would only result in the depletion of the RSA without regard for the retiree’s continued subsistence, thereby impoverishing retirees.The proposed amendment, therefore, would necessarily defeat the highlighted objective of the scheme,” PenCom claimed.

    It also stated that the proposed amendment would undermine the objective of pension reform seeking to ensure workers save to cater for their old age. Retirees would spend the money quickly and return to dependency and insecurity, it added.

    “Indeed, it will return retirees to active life rather than retirement, thereby reducing their life expectancy. The proposed amendment will negatively impact the economy by drawing large amounts out of the pool of pension assets,” the commission added.

    It also pointed out that the above-named issue is never the case in all jurisdictions the world over. Conversely, the proposed amendment in Section 2(c) of the bill seeks to exclude persons who retire before 50 years in accordance with the terms of employment from accessing the RSA in line with Section 7(1) of the PRA 2014.

    The amendment seeks to ensure that persons who retire before 50 in accordance with the conditions of employment access the RSA in line with the mode stipulated for employees who disengage or are disengaged from employment before 50 and are unable to secure another employment within four months.

    PenCom noted that such persons are only allowed to withdraw an amount of money not exceeding 25 per cent of the total amount in the RSA. “We are of the considered opinion that this proposed amendment would be unfair on an employee who duly retires in accordance with the terms and conditions of his employment and should not be allowed,” it said.

     

     Pensioners condemn bills

    Pensioners under the auspices of Nigeria Union of Pensioners (NUP) have also condemned the bills, saying that they will kill the CPS. Its National President, Mr. Abel Afolayan, said the union is aware of the Bills and are not in support of it.

    He said: “We are aware of the bills seeking to revise certain portions of the PRA 2014. Our position is that it is too early to revise the Act. The PRA 2004 was revised and repealed into PRA 2014 and we believe it should be allowed to run for some time. When we fully explore the provisions, we can then know the sections that are due for revision.

    “In the case of the 75 per cent lump sum bill, for instance, we believe that it will not be in the best interest of retirees. This is because when a retiree is allowed to pull out 75 per cent lump sum from his RSA, the remainder 25 per cent will not be enough to provide monthly or quarterly pension payments and as such we will be back to the problem of old age poverty.”

    Afolayan, however, said there was likely to be a public hearing on the bills and that the union, including the Nigeria Labour Congress (NLC) and the Trade Union Congress (TUC) would oppose them. “Our positions are not different because we are one body,” he said.

     

    Experts react

    Centre for Pension Right Advocacy Director, Ivor Takor, a lawyer, said the promoters of the new amendment failed to note that the PRA 2014 established a CPS and not a Provident Fund Scheme (NPF).

    Section 7(1) and Section 2 of Pension Reform Act 2014 attest to this, he said. The International Labour Organisation (ILO) defines pension as old age protection, which covers if not all the population, at least a section of it and in the case of Nigeria, the workers, he added.

    The pension expert pointed out that the difference between pension funds and provident funds is that members of pension funds are able to take out a small portion of their retirement benefits, typically one-third or one forth-in a lump up-front sum.

    The remaining benefits, according to him, are distributed in monthly payouts.

    He also said that members of provident funds could take out as much of their benefits as they would like in a lump sum.

    “The NPF was established in Nigeria in 1961 for non-pensionable private sector employees. It was largely a saving scheme and was replaced by the National Social Insurance Trust Fund (NSITF) in 1993.

    “That the Senate is contemplating a back door re-introduction of a Provident Fund, which was jettisoned 24 years ago in 2017 through the proposed amendment is unthinkable and at best, retrogressive,” Takor said.

    He argued that in a country lacking minimum standards of social security for her senior citizens, such as medical care, sickness benefit and old age benefit as provided for in ILO Social Security (Minimum Standards) Convention 1952 (No.102), one is at a loss as to what the Senate expects the life of retired workers would be, after collecting 75 per cent of their retirement benefits as lump sum as being proposed in the amendment.

    Takor said: “Senator Wamako and other sponsors of the amendment should ask their colleagues in the Senate, who are former governors, why they had to rush to enact Pension Laws for themselves at the dying days of their tenures after serving for only eight years as governors.

    “These laws provide for their pension and other allowances, which include houses, vehicles, domestic helps, security operatives and provisions for medical tourism. One of the answers they may get is that they were protecting their future against old age poverty.

    “We are not unmindful of the fact that the proposed amendment may be popular with some workers, because collecting a huge lump sum from one’s RSA immediately after retirement is very attractive. Saving for the rainy day can be a difficult pill to swallow for most middle class and low income earners.

    “They are not alone in this, as the majority of state governments, if not all, fall in this category. A case in point is the Nigerian Sovereign Wealth Fund, which some governors kicked against. We note that paying of taxes is not a popular thing among citizens of any country, including Nigeria.”

    The expert, however, said no government has ever promulgated a law abolishing taxes, and the reason is that taxation is one of the biggest sources of revenue for the development of any nation.

    Takor further said the challenge facing federal civil servants under the CPS established under the PRA 2014 is that the Federal Government was not funding accrued rights.

    He explained that accrued rights are benefits which workers, who were in the public service prior to 2004, when the CPS was introduced are entitled.

    He urged the Senate to rather intervene by making the Federal Government pay outstanding accrued rights.

    Takor recalled that last April, through the intervention of the Speaker of the House of Representatives, the Federal Government released N54 billion out of the outstanding accrued rights. He said this was what was expected from the Senate rather than embarking on an amendment that is not in the interest of the contributors or retirees.

    Earlier former President Olusegun Obasanjo had supported the CPS. Last month, he said in Kigali, Rwanda that pension funds should be used for development.

    He said: “Most African countries have  established CPS. I did that when I was president. We used to have the British type where you paid a pension as you retired.

    “In Nigeria, we were not doing contributory pensions and we had a backlog of unpaid pensions; so we introduced the CPS, and that money has ballooned to almost $30 billion.

    “If the money is properly managed, properly husbanded, it could be available for investment because it isn’t hot money. It is money that is there for when people want to retire, but it is also money that must not be allowed to fizzle out.”

    Obasanjo said one could not afford to give it out to people who would not bring it back, because “When people who have contributed this money want to retire, it must be available for them, but until then it can be used for development’’.

    Efforts by The Nation to speak with the Chairman, House of Representatives Committee on Pension, Hon. Hassan Shekarau, were not successful as his telephone was switched off.

    Will the National Assembly listen to the voice of reason and jettison the amendment or call the bluff and go ahead with it? Time will tell.

     

  • Upping the ante in insurance penetration

    Upping the ante in insurance penetration

    Africa’s insurance market is estimated at $64 billion. But Nigeria, despite its potential, is not in the picture because of low insurance penetration. But, the National Insurance Commission (NAICOM) and operators are determined to reverse the trend by driving insurance awareness. Insurance Correspondent OMOBOLA TOLU-KUSIMO reports.   

    The figures are unflattering. Despite laying claim to being sub-Saharan Africa’s largest and most populous economy, Nigeria’s insurance penetration rate is a paltry 0.3 per cent, compared with South Africa’s 16.9 per cent, which is said to be one of the highest in the world. It also accounts for three quarters of insurance uptake in the region.

    Yet, Nigeria’s poor performance in deepening insurance penetration goes back in time. In 2015, for instance, its insurance penetration in the non-life insurance business was a mere 0.2 per cent. It was one of the lowest rates in the world.

    Sadly, non-life insurance penetration levels in smaller and less-endowed African countries like Kenya and Morocco were high. Same for life insurance penetration, which remained low in Nigeria.

    The Nation learnt that among the top 10 African life insurance markets, Kenya, Zimbabwe and Cote d’Ivoire had the highest compound annual growth rates from 2011 to 2015. Interestingly, while Nigeria was conspicuously missing, other mature markets with high life insurance penetration rates such as South Africa and Namibia, grew by more than five per cent in 2015.

    Overall, the continent’s life insurance real premium growth slowed to 2.8 per cent in 2015, down from 5.1 per cent the year before, but still 1.5 percentage points higher than real non-life premium growth.

    However, the African Insurance Organisation (AIO) in its ‘AIO 2017 Insurance Barometer’ presented at the just-concluded conference in Uganda, stated that as life insurance penetration was low in all North- and most sub-Saharan African markets, the growth potential remains enormous.

    The AIO survey was conducted by 29 senior executives of regional and international insurance companies and intermediaries operating in Africa.The executives, who participated in the survey, were emphatic that widespread lack of insurance awareness and trust were main factors responsible for Nigeria’s lacklustre performance in the life insurance segment of the market.

    The CEOs recommended that leveraging cost efficient distribution channels, such as bancassurance, Internet or mobile phone distribution, will be key to selling life insurance to a larger share of the population living in low income countries, including Nigeria.

    South Africa may have heeded this wise counsel. With the near-term outlook for the life insurance industry in South Africa becoming challenging, and given sluggish domestic economic growth, South African life insurers have recently intensified efforts to sell insurance to the lower income segment of the society. Their hope was that this will support growth and broaden the reach of life insurance.

    AIO noted that except for South Africa, which is among the most advanced life insurance markets in the world, accounting for approximately 86 per cent of Africa’s total life premiums, most other African life insurance markets are small by international standards.

    Apart from South Africa, only Morocco generated a life premium volume of more than $1 billion in 2015. But in the case of Nigeria, AIO noted that regional disparities were huge.

    For instance, while the industry, according to the survey, is heavily concentrated around Lagos in the south-west, Nigeria’s north remained largely untapped by insurers. This, it said, was due to challenges related to product distribution in rural areas.

    With a volume of $46 billion, or 72 per cent of total African insurance premiums, the AIO survey maintained that South Africa was still by far Africa’s largest insurance market. It listed other major markets to include Morocco, Egypt, Kenya and Nigeria.

    As the survey observed, “Non-life insurance penetration levels in nearly all African countries were lower than the global average of 2.7 per cent. Only South Africa was on par.

    “At l.9 per cent and two per cent, Kenya and Morocco, respectively, have higher non-life insurance penetration levels than could be expected, based on their economic development.”

    The survey pointed out that insurance market development in both countries was facilitated by advanced and well-respected regulatory and supervisory authorities. It added that other positive factors included a strong and fast-growing middle class, rapid urbanisation and large infrastructure projects.

    Some of the projects include the standard gauge railway project in Kenya or the $ 3 billion project related to building additional 700 miles of new highways in Morocco.

    On the other end of the spectrum, the survey said Nigeria’s non-life insurance penetration was much lower, standing at 0.2 per cent, in 2015, despite its large industrial sector and its wealth in raw materials.

     

    African insurance market potential

    The AIO said Africa’s insurance landscape showed that sub-Saharan Africa represents a market of over 935 million people. Combined Gross Domestic Product (GDP) hovers around $1.6 trillion as the continent remains one of the most underinsured regions worldwide.

    The organisation, however, said the attitude of Africa’s insurers towards this market is fairly bullish. “On a scale of -5 to + 5 the ranking varies between two and 2.5, depending on the reference year.

    “By hindsight, the executives polled stated that their expectations of the market’s development were mildly more positive in 2015, compared with 2016, when the impact of the economic downturn was felt most vividly on insurers,” it said.

    The AIO projected that on the back of a positive economic momentum, insurance will expand more rapidly again. “The rather optimistic assessment of Africa’s insurance markets overall reflects the strong fundamentals of the industry.

    “With a young, growing and more affluent population, large commodity resources, enormous infrastructure deficiencies and a low insurance penetration, Africa’s insurance markets show many of the prerequisites that point to an accelerated growth path,” the survey said.

    The region’s executives jointly agreed that the use of new technologies, in particular brought about by Africa’s pervasive use of mobile phones, and the introduction of a broad range of micro-insurance products will open the doors widely to large sections of the society, which previously had little access to insurance products.

    “The combination of these strengths is thought to help improve Africa’s exceptionally low insurance penetration and provide a solid footing for the industry to stride forward with confidence. Africa’s exceptionally low insurance penetration is seen as its biggest opportunity for future growth,” the executives noted.

    They also predicted that the continent’s insurance penetration will greatly improve once demand for commodities recover and public investments in infrastructure pick up again. They added that the insurance sector is faced with a young, growing and better educated population eager to protect its newly accumulated assets.

    The CEOs further said, “The growing demand for insurance products, both in commercial and personal lines, is met with a broader spectrum of insurance products – ranging from agricultural insurance to micro-insurance and new offerings across personal lines.

    “In addition, product distribution greatly benefits from new technologies, such as the increasing use of mobile and internet applications, which greatly enhances efficiency and facilitates access to Africa’s large client segments living in remote areas.”

     

    Other strong underlying factors

    According to AIO, African insurance premium volume dropped sharply from $70 billion in 2014 to $64 billion in 2015, as many key African currencies such as the Egyptian Pound and the Nigerian Naira have weakened against the US$ in 2015 and 2016.

    “Currency depreciation remains the main cause for the declining premium volumes in US$ terms. However, only two major African insurance markets, Nigeria and Libya experienced negative real premium growth adjusted for inflation in original currency terms in 2015,” the survey said.

    It also observed that insurance uptake was very low in Africa due to a high poverty rate and a lack of capital and expertise within insurance companies that would help tap into the market. Also, the lack of effective and transparent legal, judicial and regulatory systems in combination with immature financial markets was an issue.

    Besides, the survey said the common use of informal types of insurance such as local safety nets based on transfers from relatives and friends rather than services of regulated and supervised formal insurance contributed to the low penetration.

    It, however, stated that a number of underlying positive factors support the outlook for a booming African insurance market. ”A very low insurance penetration rate means high growth opportunities and potential. In addition, the continued growth of international investments in the continent is driving the demand among investors for insurance products,” it said.

    Furthermore, the awareness to insure against natural disasters, the survey said, was rising, even as insurers are benefiting from positive changes in regulation and compliance systems. “Shifting demographics, changing cultural norms, an increasing urbanisation as well as the declining influence of the extended family as sources of informal insurance are likely to accelerate insurance sales further,” it predicted.

     

    NAICOM, operators move to drive

    penetration

    The Commissioner for Insurance, National Insurance Commission (NAICOM), Mr. Mohammed Kari, attributed Nigeria’s low insurance penetration to economic recession. According to him, the Commission and operators identified recession as being responsible for the lack of appreciation of insurance.

    The NAICOM boss, however, said the Commission was addressing the issue with publicity campaigns, which have been structured by the Insurers Committee. “The way out is to continue to advocate for people to appreciate insurance fast. We believe that with insurance awareness campaign, people will appreciate insurance more,” Kari stated during the conference in Uganda.

    Explaining  further, the Commissioner said: “The AIO Barometer also reported lack of growth in premium income from Nigeria particularly on the general insurance aspect. But it is the same old issues of lack of appreciation of insurance, which is the reason why the market is simultaneously leading the awareness campaign.

    “It is pertinent to state that the barometer also identified one major factor, which is that insurance is not something people buy in our part of the world. They buy only when they have excess spending. Unfortunately, the economy is bad now and most people relegate insurance to the background in the list of their budget. This problem has to with individual or personal lines.”

    Kari also said the problem of the public, on the other hand, was related to the head of organisations. “If the organisation’s head does not accommodate insurance in his personal understanding, it will also reflect officially, unfortunately. So, other than targeting the individual clients, we are also working on the public sector especially,” he added.

    To drive home his point, the NAICOM boss pointed out that there is no energy provider or marine insurer whether cargo or oil that does not appreciate insurance. “But it is the individual awareness that is lacking and if we can change that a little the impact will be huge,” he said, pointing out that the Commission was launching the Market Development and Restructuring Initiative (MDRI).

    The Managing Director of Old Mutual, Raimund Snyders, said operators in Nigeria and other countries must deal with the challenges hindering insurance penetration in the country.

    He listed some them to include poor insurance awareness, remote or dispersed rural clientele, inconsistent communication technology, lack of innovation, over or lack of appropriate regulation; unreliable or poor income levels; complex products; corruption and language diversity.

    To encourage penetration, Snyders, who said there is a lot to be learnt from South Africa, said operators must create awareness and educate the people; implement compulsory insurance demand scheme; recapitalisation and consolidation policies of government and the insurance regulatory authorities, smart contracts, block chain and bitcoin micro-insurance and use of technology.

    For the Managing Director, Custodian and Allied Insurance, Mr. Wole Oshin, Nigerian consumers are still insufficiently entrenched in the financial services system. He pointed out that a poor and underdeveloped consumer lending market was a key obstacle, if they are to achieve a greater insurance penetration.

    “In Nigeria, 90 per cent of all cars on our roads are fully paid for, a contrast to what obtained in more mature markets. If consumers lease or borrow to finance the acquisition of goods, the rate of insurance penetration will automatically surge,” he added.

    The Managing Director, AfricaRe, Nigeria, Corneille Karekezi, on his part, said technology will have a massive impact on the whole insurance value chain, including, but not limited to customer acquisition, product distribution, pricing, risk management and predictive analytics.

    He stressed that technological revolution will also require a new understanding of traditional risks, such as motor and emerging risks, such as cyber.

    The Managing Director, UAP Old Mutual, Uganda, Mr. David Kuria, stated that a strong political will and active government support were needed to advance the insurance sector in Africa.

    He observed that compulsory insurance coverage needs to be more strictly enforced, new regulations, for example in the areas of Bancassurance and micro-insurance, ought to be implemented sooner rather than later.

    The Managing Director, NEM Insurance Plc, Nigeria, Tope Smart, noted that one of the observations of the AIO Conference was the level of insurance penetration in Nigeria among other countries that has remained the same in between last year and this year, while other countries like Kenya and some two other countries were able to grow their level of penetration.

    He blamed Nigeria’s poor outing on recession. “Nigeria was in recession last year and we are yet to come out of it. That means that the development of government activities in the country was very low. Insurance cannot be in isolation and we are working hard to ensure that before the end of the year Nigeria will be out of recession,” he said.

    Smart, however, said operators expect that there will be an improvement in the level of government activities this year, and that transactions relating to insurance will improve and operators will increase their insurance penetration.

    “We also know that we need to drive awareness because people now need insurance more. The insurance rebranding programme of the Insurers Committee is part of the things that I think we have to look at,” he added.

    Rogers & Co. Ltd, a listed international services and investment company established in Mauritius in 1899 in a presentation on, “Driving Insurance Penetration” said there is need to develop affordable need-based products and build an appropriate delivery system.

    The company said they must render service that is simplified to customers, have speed and convenience, while they should also provide lifestyle data, be social media savvy, target marketing, prevent business model and ensure usage based costing.

    The General Manager, Reinsurance, Namib Re, Namibia, Rudolph Humavindu, said the systematic use of data will help insurers to further personalise customer experiences. Insurers will be able to create new products tailored to the specific needs of individuals and to make relevant risk recommendations, leading to greater customer satisfaction and eventually lower premiums.

  • Upping the ante in insurance penetration

    Upping the ante in insurance penetration

    Africa’s insurance market is estimated at $64 billion. But Nigeria, despite its potential, is not in the picture because of low insurance penetration. But, the National Insurance Commission (NAICOM) and operators are determined to reverse the trend by driving insurance awareness. Insurance Correspondent OMOBOLA TOLU-KUSIMO reports.   

    The figures are unflattering. Despite laying claim to being sub-Saharan Africa’s largest and most populous economy, Nigeria’s insurance penetration rate is a paltry 0.3 per cent, compared with South Africa’s 16.9 per cent, which is said to be one of the highest in the world. It also accounts for three quarters of insurance uptake in the region.

    Yet, Nigeria’s poor performance in deepening insurance penetration goes back in time. In 2015, for instance, its insurance penetration in the non-life insurance business was a mere 0.2 per cent. It was one of the lowest rates in the world.

    Sadly, non-life insurance penetration levels in smaller and less-endowed African countries like Kenya and Morocco were high. Same for life insurance penetration, which remained low in Nigeria.

    The Nation learnt that among the top 10 African life insurance markets, Kenya, Zimbabwe and Cote d’Ivoire had the highest compound annual growth rates from 2011 to 2015. Interestingly, while Nigeria was conspicuously missing, other mature markets with high life insurance penetration rates such as South Africa and Namibia, grew by more than five per cent in 2015.

    Overall, the continent’s life insurance real premium growth slowed to 2.8 per cent in 2015, down from 5.1 per cent the year before, but still 1.5 percentage points higher than real non-life premium growth.

    However, the African Insurance Organisation (AIO) in its ‘AIO 2017 Insurance Barometer’ presented at the just-concluded conference in Uganda, stated that as life insurance penetration was low in all North- and most sub-Saharan African markets, the growth potential remains enormous.

    The AIO survey was conducted by 29 senior executives of regional and international insurance companies and intermediaries operating in Africa.The executives, who participated in the survey, were emphatic that widespread lack of insurance awareness and trust were main factors responsible for Nigeria’s lacklustre performance in the life insurance segment of the market.

    The CEOs recommended that leveraging cost efficient distribution channels, such as bancassurance, Internet or mobile phone distribution, will be key to selling life insurance to a larger share of the population living in low income countries, including Nigeria.

    South Africa may have heeded this wise counsel. With the near-term outlook for the life insurance industry in South Africa becoming challenging, and given sluggish domestic economic growth, South African life insurers have recently intensified efforts to sell insurance to the lower income segment of the society. Their hope was that this will support growth and broaden the reach of life insurance.

    AIO noted that except for South Africa, which is among the most advanced life insurance markets in the world, accounting for approximately 86 per cent of Africa’s total life premiums, most other African life insurance markets are small by international standards.

    Apart from South Africa, only Morocco generated a life premium volume of more than $1 billion in 2015. But in the case of Nigeria, AIO noted that regional disparities were huge.

    For instance, while the industry, according to the survey, is heavily concentrated around Lagos in the south-west, Nigeria’s north remained largely untapped by insurers. This, it said, was due to challenges related to product distribution in rural areas.

    With a volume of $46 billion, or 72 per cent of total African insurance premiums, the AIO survey maintained that South Africa was still by far Africa’s largest insurance market. It listed other major markets to include Morocco, Egypt, Kenya and Nigeria.

    As the survey observed, “Non-life insurance penetration levels in nearly all African countries were lower than the global average of 2.7 per cent. Only South Africa was on par.

    “At l.9 per cent and two per cent, Kenya and Morocco, respectively, have higher non-life insurance penetration levels than could be expected, based on their economic development.”

    The survey pointed out that insurance market development in both countries was facilitated by advanced and well-respected regulatory and supervisory authorities. It added that other positive factors included a strong and fast-growing middle class, rapid urbanisation and large infrastructure projects.

    Some of the projects include the standard gauge railway project in Kenya or the $ 3 billion project related to building additional 700 miles of new highways in Morocco.

    On the other end of the spectrum, the survey said Nigeria’s non-life insurance penetration was much lower, standing at 0.2 per cent, in 2015, despite its large industrial sector and its wealth in raw materials.

     

    African insurance market potential

    The AIO said Africa’s insurance landscape showed that sub-Saharan Africa represents a market of over 935 million people. Combined Gross Domestic Product (GDP) hovers around $1.6 trillion as the continent remains one of the most underinsured regions worldwide.

    The organisation, however, said the attitude of Africa’s insurers towards this market is fairly bullish. “On a scale of -5 to + 5 the ranking varies between two and 2.5, depending on the reference year.

    “By hindsight, the executives polled stated that their expectations of the market’s development were mildly more positive in 2015, compared with 2016, when the impact of the economic downturn was felt most vividly on insurers,” it said.

    The AIO projected that on the back of a positive economic momentum, insurance will expand more rapidly again. “The rather optimistic assessment of Africa’s insurance markets overall reflects the strong fundamentals of the industry.

    “With a young, growing and more affluent population, large commodity resources, enormous infrastructure deficiencies and a low insurance penetration, Africa’s insurance markets show many of the prerequisites that point to an accelerated growth path,” the survey said.

    The region’s executives jointly agreed that the use of new technologies, in particular brought about by Africa’s pervasive use of mobile phones, and the introduction of a broad range of micro-insurance products will open the doors widely to large sections of the society, which previously had little access to insurance products.

    “The combination of these strengths is thought to help improve Africa’s exceptionally low insurance penetration and provide a solid footing for the industry to stride forward with confidence. Africa’s exceptionally low insurance penetration is seen as its biggest opportunity for future growth,” the executives noted.

    They also predicted that the continent’s insurance penetration will greatly improve once demand for commodities recover and public investments in infrastructure pick up again. They added that the insurance sector is faced with a young, growing and better educated population eager to protect its newly accumulated assets.

    The CEOs further said, “The growing demand for insurance products, both in commercial and personal lines, is met with a broader spectrum of insurance products – ranging from agricultural insurance to micro-insurance and new offerings across personal lines.

    “In addition, product distribution greatly benefits from new technologies, such as the increasing use of mobile and internet applications, which greatly enhances efficiency and facilitates access to Africa’s large client segments living in remote areas.”

     

    Other strong underlying factors

    According to AIO, African insurance premium volume dropped sharply from $70 billion in 2014 to $64 billion in 2015, as many key African currencies such as the Egyptian Pound and the Nigerian Naira have weakened against the US$ in 2015 and 2016.

    “Currency depreciation remains the main cause for the declining premium volumes in US$ terms. However, only two major African insurance markets, Nigeria and Libya experienced negative real premium growth adjusted for inflation in original currency terms in 2015,” the survey said.

    It also observed that insurance uptake was very low in Africa due to a high poverty rate and a lack of capital and expertise within insurance companies that would help tap into the market. Also, the lack of effective and transparent legal, judicial and regulatory systems in combination with immature financial markets was an issue.

    Besides, the survey said the common use of informal types of insurance such as local safety nets based on transfers from relatives and friends rather than services of regulated and supervised formal insurance contributed to the low penetration.

    It, however, stated that a number of underlying positive factors support the outlook for a booming African insurance market. ”A very low insurance penetration rate means high growth opportunities and potential. In addition, the continued growth of international investments in the continent is driving the demand among investors for insurance products,” it said.

    Furthermore, the awareness to insure against natural disasters, the survey said, was rising, even as insurers are benefiting from positive changes in regulation and compliance systems. “Shifting demographics, changing cultural norms, an increasing urbanisation as well as the declining influence of the extended family as sources of informal insurance are likely to accelerate insurance sales further,” it predicted.

     

    NAICOM, operators move to drive

    penetration

    The Commissioner for Insurance, National Insurance Commission (NAICOM), Mr. Mohammed Kari, attributed Nigeria’s low insurance penetration to economic recession. According to him, the Commission and operators identified recession as being responsible for the lack of appreciation of insurance.

    The NAICOM boss, however, said the Commission was addressing the issue with publicity campaigns, which have been structured by the Insurers Committee. “The way out is to continue to advocate for people to appreciate insurance fast. We believe that with insurance awareness campaign, people will appreciate insurance more,” Kari stated during the conference in Uganda.

    Explaining  further, the Commissioner said: “The AIO Barometer also reported lack of growth in premium income from Nigeria particularly on the general insurance aspect. But it is the same old issues of lack of appreciation of insurance, which is the reason why the market is simultaneously leading the awareness campaign.

    “It is pertinent to state that the barometer also identified one major factor, which is that insurance is not something people buy in our part of the world. They buy only when they have excess spending. Unfortunately, the economy is bad now and most people relegate insurance to the background in the list of their budget. This problem has to with individual or personal lines.”

    Kari also said the problem of the public, on the other hand, was related to the head of organisations. “If the organisation’s head does not accommodate insurance in his personal understanding, it will also reflect officially, unfortunately. So, other than targeting the individual clients, we are also working on the public sector especially,” he added.

    To drive home his point, the NAICOM boss pointed out that there is no energy provider or marine insurer whether cargo or oil that does not appreciate insurance. “But it is the individual awareness that is lacking and if we can change that a little the impact will be huge,” he said, pointing out that the Commission was launching the Market Development and Restructuring Initiative (MDRI).

    The Managing Director of Old Mutual, Raimund Snyders, said operators in Nigeria and other countries must deal with the challenges hindering insurance penetration in the country.

    He listed some them to include poor insurance awareness, remote or dispersed rural clientele, inconsistent communication technology, lack of innovation, over or lack of appropriate regulation; unreliable or poor income levels; complex products; corruption and language diversity.

    To encourage penetration, Snyders, who said there is a lot to be learnt from South Africa, said operators must create awareness and educate the people; implement compulsory insurance demand scheme; recapitalisation and consolidation policies of government and the insurance regulatory authorities, smart contracts, block chain and bitcoin micro-insurance and use of technology.

    For the Managing Director, Custodian and Allied Insurance, Mr. Wole Oshin, Nigerian consumers are still insufficiently entrenched in the financial services system. He pointed out that a poor and underdeveloped consumer lending market was a key obstacle, if they are to achieve a greater insurance penetration.

    “In Nigeria, 90 per cent of all cars on our roads are fully paid for, a contrast to what obtained in more mature markets. If consumers lease or borrow to finance the acquisition of goods, the rate of insurance penetration will automatically surge,” he added.

    The Managing Director, AfricaRe, Nigeria, Corneille Karekezi, on his part, said technology will have a massive impact on the whole insurance value chain, including, but not limited to customer acquisition, product distribution, pricing, risk management and predictive analytics.

    He stressed that technological revolution will also require a new understanding of traditional risks, such as motor and emerging risks, such as cyber.

    The Managing Director, UAP Old Mutual, Uganda, Mr. David Kuria, stated that a strong political will and active government support were needed to advance the insurance sector in Africa.

    He observed that compulsory insurance coverage needs to be more strictly enforced, new regulations, for example in the areas of Bancassurance and micro-insurance, ought to be implemented sooner rather than later.

    The Managing Director, NEM Insurance Plc, Nigeria, Tope Smart, noted that one of the observations of the AIO Conference was the level of insurance penetration in Nigeria among other countries that has remained the same in between last year and this year, while other countries like Kenya and some two other countries were able to grow their level of penetration.

    He blamed Nigeria’s poor outing on recession. “Nigeria was in recession last year and we are yet to come out of it. That means that the development of government activities in the country was very low. Insurance cannot be in isolation and we are working hard to ensure that before the end of the year Nigeria will be out of recession,” he said.

    Smart, however, said operators expect that there will be an improvement in the level of government activities this year, and that transactions relating to insurance will improve and operators will increase their insurance penetration.

    “We also know that we need to drive awareness because people now need insurance more. The insurance rebranding programme of the Insurers Committee is part of the things that I think we have to look at,” he added.

    Rogers & Co. Ltd, a listed international services and investment company established in Mauritius in 1899 in a presentation on, “Driving Insurance Penetration” said there is need to develop affordable need-based products and build an appropriate delivery system.

    The company said they must render service that is simplified to customers, have speed and convenience, while they should also provide lifestyle data, be social media savvy, target marketing, prevent business model and ensure usage based costing.

    The General Manager, Reinsurance, Namib Re, Namibia, Rudolph Humavindu, said the systematic use of data will help insurers to further personalise customer experiences. Insurers will be able to create new products tailored to the specific needs of individuals and to make relevant risk recommendations, leading to greater customer satisfaction and eventually lower premiums.

  • Thumbs down for passage of PIGB

    Thumbs down for passage of PIGB

    The Petroleum Industry Bill (PIB) was an all-encompassing bill when it went to the National Assembly a few years ago. But the lawmakers have broken it into bits. The first part of it, the Petroleum Industry Governance Bill (PIGB) has been passed, but its passage seems to have left a sour taste in the mouths of labour leaders, stakeholders and experts. To them, the passage of the bill in tranches and the non-incorporation of the host communities’ demands pose dangers. TOBA AGBOOLA reports.

    The last may not have been heard about the Petroleum Industry Governance Bill (PIGB) passed into law by the Senate. Although the development has been generally hailed as a milestone achievement, some labour leaders, stakeholders and experts have picked holes in the piecemeal approach in passing the bill and the non-incorporation of host communities’ demands. Some of them who spoke with The Nation argue this could endanger the peace in the Niger Delta.

    For instance, an oil & gas analyst, Mr. Ifeanyi Izeze, said the passage of the bill in tranches could delay efforts at addressing issues concerning oil communities, which may endanger the peace in the Niger Delta. He said it would be wise for the government to ensure that the bill properly addresses the needs and interests of oil producing communities.

    Warning that the passage of the bill in tranches may delay community development, which may lead to crisis in the Niger Delta, Izeze said the Federal Government should ensure that it earns higher revenue from crude oil resources. According to him, the International Oil Companies (IOCs) have cheated the country for too long in respect of fiscal policy, warning that “If they (IOCs) are not ready to agree with the government’s fiscal policy, they should sell off their assets and leave the country.”

    A former Chairman of the Nigerian Extractive Industries Transparency Initiative (NEITI), Mr. Assisi Asobie, also said the piece-meal passage of the PIB by the lawmakers was a grand conspiracy against the Niger Delta people often seen as victims of the country’s bad politics. “I think some people are playing very bad politics with a serious matter,” he charged.

    Asobie said the best thing would have been for the National Assembly (NASS) to collaborate with the executive to ensure that rather than private member bills, they can agree on a draft from the executive to speed up the process. “It is not going to be that easy for them to expect the executive to accept and assent to what they (the lawmakers) have just passed,” he said.

    While insisting that the handling of the passage of the PIB by the NASS was poor, Asobie, who is a lecturer at the Nasarawa State University, accused the lawmakers of playing costly politics with a serious national issue like the passage of the PIB. According to him, the PIB is the draft law containing proposed legal, fiscal and regulatory frameworks guiding operations of the  petroleum industry.

    He, however, said despite the importance of the document to the oil industry, which accounts for more than 80 per cent of foreign exchange earnings, its passage has been delayed for almost three successive dispensations. “Look at the timing of the announcement of the passage of the Bill, which was very close to May 29, to present a picture that the NASS had achieved its objectives,” he pointed out.

    The PIGB only deals with the one aspect of the PIB, which is the governance and institutional framework of the Nigerian petroleum industry. Other aspects of the Petroleum Industry Bill (PIB) such as The Petroleum Fiscal Framework Bill; The Petroleum Industry Downstream Administration Bill; The Petroleum Industry Revenue Management Framework Bill and the Petroleum Host Community Bill are yet to be passed..

    The PIGB aspect, which has been passed, provided for a new legal framework for the sector, a new fiscal regime, governance and regulatory framework for the petroleum industry. It also defined who gets what and how between government and investors on various business arrangements in the sector.

    The main objectives of the Bill, according to the Minister of State for Petroleum Resources, Ibe Kachikwu, include the creation of efficient and effective governing institutions with clear and separate roles for the petroleum industry; establishment of a framework for the creation of commercially oriented and profit-driven entities that will ensure value-add and internationalisation of the petroleum industry.

    Others are the promotion of transparency and accountability in the petroleum industry; and the creation of a conducive business environment for operators in the petroleum industry.

    Speaking on the need for quick passage of the Bill, the President, National Union of Petroleum and Natural Gas Workers (NUPENG), Igwe Achese, called on the NASS to expedite action on its passage in order to return the industry to growth.

    He said NUPENG had examined the progress so far made in the passage of the PIGB and other components of the proposed PIB, and expressed disappointment at the slow pace of work in the passage despite the assurances by the leadership of the NASS that the bill will receive accelerated hearing and passage.

    Achese said: “We consider the delay in the passage of the bill to be majorly responsible for the rot in the industry and the slide in the returns accruable from investments made by successive governments and investors.

    “We call on the NASS to expedite parliamentary actions for speedy passage of the bill for the purposes of engendering transparency, accountability and commensurate returns in the operations of the oil & gas sector. We believe that this will further enhance the sector’s visibility and attractiveness to foreign and local investors.”

    Similarly, the Acting General-Secretary of Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), Mr. Lumumba Okugbawa, described the passage of the bill as a step forward in addressing the many challenges facing the nation’s oil and gas sector.

    He, however, noted that the PIGB was only part of the entire PIB, adding that it was necessary to pass it to create a law to regulate activities in the industry.

    The Chairman, (PENGASSAN/NUPENG) National PIB Committee, Mr. Chika Onuegbu, said Nigeria had lost about $235 billion investments to failure to reform the oil and gas industry, even as the Federal Government struggles to pay up over $9 billion cash call arrears to oil firms.

    Onuegbu noted that Nigeria’s plan to increase crude oil production capacity, raise crude oil reserves, and eliminate gas flaring, among other objectives, required significant investments in the petroleum sector. This, he said, will in turn require the appropriate funding levels and mix to deliver the investments.

    In his own estimation, the Chairman of Petroleum Technology Association of Nigeria (PETAN), Mr. Bank Anthony Okoroafor, said Nigeria lost $10 billion fresh investments to the non-passage of the PIB. He said passing the PIB will help establish a new framework for good governance and best practices.

    Okoroafor also said that the law would enhance government revenue and block leakages through better tax codes and undo the harm done by the Producing Sharing Companies contracts of 1993.

    The Ijaw National Congress (INC) said there was not much to celebrate in the passage of the PIGB by the Senate without the passage of other bills that will help to bring about the much needed reform of the sector along the wishes of stakeholders in the industry.

    Spokesman for the INC, Mr. Victor Burubo, said that with the recent passage of the PIGB, the Senate has shown once again that it was not acquainted with the yearnings and needs of Nigerians.

    Burubo said: “For the avoidance of doubt, we demanded that the land of the host communities should count. Land is the people’s investment, their shareholding and equity in the business conducted on it.

    “It should count rather than the current exploitative system where the land owners are treated as ‘noisy neighbours’ to be suppressed or appeased with pea nuts. This remains our demand.” He called on the House of Representatives to do the needful and pass a bill that resonates with the wishes of people in the Niger Delta.

    Burubo insisted that the PIGB, without the interest of Niger Delta people was totally unacceptable. He said the INC and other stakeholders insist that the new bill would be meaningless without meeting the aspirations of the host communities and other stakeholders.

    Martin Onovo, a petroleum engineer, also dismissed the applause for the Senate on the passage of the PIGB, saying, “It ought to have been a comprehensive approach covering the entire document.

    “The action of the Senate has defeated the original idea of the proponents of the PIB, who sought the harmonisation of the different laws governing the operations of the oil and gas industry.

    “What they have succeeded in doing is further introduction of different laws, a process that will involve money in paying for the different stationeries and other administrative costs,” he said, noting that there was nothing to celebrate until the passage of the bill that considers the interest of the oil communities in the reform of the oil sector.

    The immediate past chairman of the Agric and Agro-Allied Group of Lagos Chambers of Commerce and Industry (LCCI), Mr. Adeola Elliot, noted that though the PIGB covers institutions, regulations and command structure, he fears that implementation of the provisions of the bill might pose a challenge.

    He also argued that the host community aspect of the bill ought to be given accelerated hearing and passage for the much expected reform in the petroleum industry.

    The Managing Director of Afrinvest Securities Limited, Mr. Ayodeji Ebo, agrees with Elliot. He said although, the passage of the PIGB was a welcome development, there was need to implement it fully.

    Hear him: “This is a positive move towards attracting investment into the Nigerian oil & gas sector. Nigeria has lost significant investment to other African nations due to the delay in the passage of the bill.

    In addition, Nigeria has a poor record of implementation; hence the focus will be on how the Federal Government goes about its implementation. With the restructuring of the NNPC into three major companies, we expect this will reduce the revenue leakages as well as cost of operations.”

    The PIGB, which deals only with the administrative aspect of the proposed PIB, split the NNPC into the Nigeria Petroleum Regulatory Commission (NPRC), Nigerian Petroleum Assets Management Company (NPAMC), and the National Petroleum Company (NPC).

    Although, the bill has nothing to do with the protection of the interest of the oil-producing communities in the Niger Delta, the Senate had explained that the other segment that would address the contentious host community issues would soon be presented for fresh legislative work.

  • Port Harcourt Refinery: A concession gone awry

    Port Harcourt Refinery: A concession gone awry

    The rehabilitation and subsequent concessioning of the nation’s moribund refineries, starting with the Port Harcourt Refinery and Petrochemical Company, has pitched the executive arm of government against the legislative arm. While each of the parties to the controversy may have reasons for insisting on its position, industry experts and stakeholders say that urgent resolution of the disagreement will save Nigeria huge foreign exchange and jobs from importation of refined petroleum products. Assistant Editor EMEKA UGWUANYI reports.

    The executive and legislative arms of government are at loggerheads over the repair,  maintenance and concession of Port Harcourt Refinery and Petrochemical Company by Nigerian Agip Oil Company, the Nigerian subsidiary of Italian oil giant Eni, in partnership with Oando Plc, a Nigerian oil and gas conglomerate, the local vehicle.

    While the executive, through the Ministry of Petroleum Resources (DPR), believe that the arrangement was in Nigeria’s interest considering the technicalities and huge financial resources required to rehabilitate and manage a refinery, the legislature thinks otherwise.

    To the lawmakers, the DPR, under the arrangement, took a unilateral and unlawful action devoid of transparency and due process when it awarded the contract allegedly without wider consultation or open bid.

    The lawmakers, who have been literarily up in arms in the past two weeks, argued that the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, should have consulted and engaged widely with stakeholders and the public on the plan to rehabilitate and concession the refinery.

    Consequently, the aggrieved lawmakers have directed the Minister to put on hold the rehabilitation plan until they conclude investigation into the entire process of award of the contract to Agip and Oando.

    While the executive may have acted in good faith, in view of decades of government’s fruitless efforts to fix the moribund refineries after billions of naira have been sunk in Turnaround Maintenances (TAMs), the legislature argue that as a country guided by rules, the executive through the Ministry and the DPR should not have been involved in an arrangement that allegedly stood transparency on its head.

    The Head, Energy Research, Ecobank Group, Mr. Dolapo Oni, sought to justify the position of the executive when he said that the Minister’s involvement of private sector-driven firms was an excellent idea. According to him, the refineries had suffered negligence for a long time.

    His words: “Private sector help is appreciated in revamping the refineries. The refineries have suffered poor maintenance and needed to be restored to their true state. There are parts of the plants that need to be changed over the years, but because the refineries are managed by government, there were no funds to put them in their proper shape.”

    Oni said this was Kachikwu has been globe-trotting in search of investors with the requisite technical and financial muscle to bring the refineries back on track. “So, when the minister found Agip agreeing to his proposal to take over the Port Harcourt refinery, he quickly handed it over to the firm,” he said.

    Oni while reacting to the Senate’s directive that all processes to the rehabilitation and concession of the refinery to Agip and Oando be stopped, however, said although he doesn’t have the details of the transactions to enable him make informed comments, he does not see anything wrong with the Senate insisting on making details of the award public.

    Listen to Oni: “We don’t have the full details of the transaction. The Minister didn’t explain whether the Agip/Oando partnership will transfer ownership of the refinery to the government at some point or whether the partnership will seek repayment of the rehabilitation and management from the government. Making the details of the contract public is important.

    “Don’t also forget that the same Agip promised to build a brand new refinery in the Niger Delta. Will Agip hands off its involvement in the Port Harcourt refinery on completion of construction of the new one or will it manage the two refineries? These knotty areas need to be explained so that Nigerians and other interested investors will know.”

    Oni, however, said that the Senate should have invited Kachikwu for proper briefing before stopping the contract, noting that such unilateral decision by the Senate does not speak well of the country to investors. “The Senate should have called for proper briefing with the Minister before going public to stop the deal. The hallowed chamber’s action signals to the investors that we are not together as a people,” he said.

    Ecobank Group research head stated that the Ministry needed to conduct a proper concession process, while the Senate, going forward, needs to urgently notify the public what they found in the Ministry and lift the suspension so that work will continue on the refinery.

    This said this was necessary because Nigerians needed the refineries to work toi halt the huge roreign exchange and jobs that go into the importation of petroleum products.

    The Senate had last week asked the Federal Government through Kachikwu to suspend all processes for the concession of the Port Harcourt refinery to Agip and Oando Plc. The suspension order was sequel to a motion moved by Senator Sabo Mohammed at the plenary.

    In the motion entitled ‘Non-transparent transaction relating to the planned concession of the Port Harcourt Refinery to Agip and Oando by the Ministry,’ the Senate noted its worry on the “non-transparent transactions” of the planned concession.

    In the motion, Mohammed said: “The Senate is aware that the Federal Government recently entered into an agreement with Nigerian Agip Oil Company, a subsidiary of Eni, an Italian oil giant, to construct a $15billion refinery in the Niger Delta region.

    “It is a deal that also includes investment by Agip in a power plant, with the Italian company assisting Nigeria in the repairs of the Port Harcourt refinery.”

    “The Senate notes that the Minister stated that the agreement was part of a broader Federal Government plan to increase capacity for local production and consumption of petroleum products, with the aim of ending fuel importation in Nigeria by 2019.

    “It also notes that while the resolve by the Federal Government to increase local refining capacity is laudable and should be applauded by all Nigerians, the observance of corporate governance principles and the country’s extant laws must be followed to the letter.”

    On this note, Senate President Bukola Saraki who presided over the plenary, set up a seven-man ad hoc committee led by Senator Abubakar Kyari to investigate the transaction and the processes applied to select Agip/Oando for the deal.

    The Senate also mandated the ad hoc committee to probe the cost and timeframe of the concession. The hallowed chamber also stopped the entire transaction until the committee submits the outcome of its investigation.

    Besides, the lawmaker stated that the Senate was concerned that the planned concession of the refinery “without recourse to due process is illegal and a clear attempt at ridiculing Nigerians, and will definitely create a big hole that will be hard to fill in the anti-corruption crusade of the present administration.”

    The Senate said it was aware that in such transactions, the best practice was to select partners through open and competitive bids. Such steps, it added, will prepare the business for sale, market the business, select the buyers and close the transaction.

    The upper chamber noted that any exclusive arrangement that does not follow the above procedure, hatched in the dark without the knowledge and participation of relevant stakeholders, tends to lead to sub-optimal outcomes for the seller; in this case, the Federal Government.

    The Senate also said it was aware that the major stakeholders such as the Bureau of Public Enterprises (BPE) that was empowered by law to conduct such an exercise and labour unions were not aware of the deal that is supposed to be signed officially in July this year.

    Besides, the Senate expressed concerns that since Agip has no technical record or history in the Port Harcourt refinery that was built by a Japanese firm, one would have expected the concerned authority to look at the Warri refinery that was built by Agip where they have technical record.

    Mohammed also stated that the Senate was saddened that on assumption of office as the Group Managing Director of the Nigeria National Petroleum Corporation (NNPC), Kachukwu declared that by the end of 2015, the refineries in the country would be working at 90 per cent capacity.

    This, according to the Minister, will drastically reduce fuel importation and subsidy payments. Mohammed, however, stated that up till now, 2017, the refineries have yet to be fixed and can’t  produce at 50 per cent capacity let alone 90 per cent.

    To the lawmaker, such concession would have been wonderful should it result to an end to importation of refined products by 2020. “Is it Agip or Oando Plc that is taking over the Port Harcourt refinery? Was there observance of the privatisation law as regards due diligence and selection from preferred bidders before ceding Port Harcourt refinery to Agip/Oando?” he asked, insisting that the Minister needs to explain some issues in the transaction.

    Senator Dino Melaye also accused the executive of taking Nigerians for granted. Citing the concession of power supply to electricity generation and distribution companies and the concession of Ajaukuta and Delta steel companies, which have resulted to total decay of the industries, he said these may be replicated in the Port Harcourt refinery.

    However, the Chief Strategy and Corporate Services Officer, Oando Plc, Ainoije ‘Alex’ Irune, noted that Oando chose to be part of the deal because it shares government’s aspiration to make Nigeria self-sufficient in fuel production.

    “We wish to explicitly state that Oando shares the vision of the Nigerian Government to become a petroleum product self-sufficient country in the short to medium term and ultimately be a net exporter of such products.

    “Accordingly, pursuant to the Memorandum of Understanding (MOU) reached with the Federal Government and NAOC/ENI. Oando will partner with NAOC/ ENI in the proposed rehabilitation of the Port Harcourt Refinery (PHRC).

    “This will be based on a Repair, Operate and Maintain (ROM) agreement, which will see PHRC’s capacity grow from its current 30 per cent to 100 per cent, its name plate capacity of 210,000 barrels per day,” he said.

    ‘Alex’ Irune  said in line with the concerted efforts of the Ministry and the NNPC to aggressively drive private sector led refineries rehabilitation and expansion programmes, Oando as local partners to NAOC/ENI will support the rehabilitation of PHRC’s on activities. He said active negotiations are ongoing and it is expected that a final agreement will be reached by end of July, 2017.

    However, the outcome of the probe panel set up by the Senate to look into the rehabilitation and concession deal will determine how the partnership goes.

    The Minister had stated in Vienna, Austria, during the 172nd Organisation of Petroleum Exporting Countries (OPEC) meeting that the refineries concession cannot be done in an open bidding process because it’s a highly technical area.

    Also, Kachikwu had on May 9 after meeting with Acting President Prof Yemi Osinbajo and Agip officials at the State House, announced that the Nigerian Agip Oil Company had committed to repair the Port Harcourt refinery, as part of a $15 billion investment that includes building a 150,000 barrels per day refinery and a power plant in the country.

    As a follow up, the Chief Executive Officer of Oando Plc, Wale Tinubu, also on May 11, on the floor of the Nigeria Stock Exchange, said his company had received approval of the Federal Government partner with Agip on the refinery deal.

    Kachikwu said the entire refinery transaction was aimed at strengthening Nigeria’s drive to end fuel importation by 2019. In addition, last month, Kachikwu vowed to resign should Nigeria fail to achieve self-sufficiency in crude oil refining by 2019 with full implementation of government’s policies on the matter.

    In an interview with the BBC, Kachikwu insisted that the target for Nigeria to attain self-sufficiency in terms of crude oil refining remains 2019, adding that Nigeria should be more concerned about processing crude oil rather than shipping it out for processing elsewhere and importing refined products.

    But with the current disagreement with the lawmakers, there are fears that Kachikwu may renege on his pledge.

     

    Promises, woes of the refineries

     

    The Group Managing Director, (NNPC), Dr. Maikanti Baru, had last month stated that the Corporation was shopping for $16 billion to grow its upstream and refining operations and increase the nation’s oil refining from the current 445,000 barrels per day (bpd) to 700,000 bpd within the next few years.

    He said: “With respect to our refineries, our plan is to rehabilitate, and revamp our existing four refineries. We invite you investors to participate in this process. On successful rehabilitation and revamp, our plan is to upgrade the combined nameplate capacity from 445,000 barrels per day to 700,000 barrels a day within the next few years. We would require investments of between $5billion and $6billion.”

    He said NNPC was also mindful of the need to construct new refineries and hence it encourages investors in this area. According to him, the big picture is to transit from a net crude oil exporter to a net petroleum product exporter as more value and opportunities abound in the latter.

    Whether this aspiration will be accomplished, time will tell.

    Meanwhile, General Electric (GE) has pledged to assist the Federal Government in the revitalisation of the country’s refineries. The President and Chief Executive Officer of GE’s Grid Solutions/Energy Connections, Africa, Dr. Lazarus Angbazo, told reporters recently that the company still stands on its promise and was waiting for the NNPC on the areas to intervene in.

    Angbazo confirmed that the resuscitation of the refineries would enable Nigeria become self-sufficient in petroleum production, adding that the company would not hesitate in helping the country to meet the 2019 target to halt importation of petroleum products.

    According to the Central Bank of Nigeria (CBN’s) report, the Federal Government spent $6.09 billion on petroleum imports in the first six months of last year despite scarce foreign exchange and pressure on foreign exchange reserves. Even now, the government spends substantial amount on fuel importation and subsidy.

    Also, between 2000 and 2017, the government has spent over N10 trillion on fuel subsidies. According to the Chairman, Senate Committee on Petroleum Resources (Downstream), Senator Marafa Kabir Garba, the NNPC alone collected over N5 trillion on subsidies from 2006 to 2015.

    Reports also showed that the first Port Harcourt refinery was constructed by Shell-BP in 1965 at a cost of £12 million. It had a capacity of 38,000 barrels per day (bpd) and later upgraded to 60,000 bpd and was taken over by the Federal Government in 1971.

    The Federal Government in 1974 engaged a Texas based petroleum consultancy firm for a feasibility study on how to increase supply. In November 1975, contract for the construction of Warri Refinery and Petrochemical Company was awarded to Snamprogetti SPA of Italy for 100,000 bpd at the cost of $478 million. It was for a 30-month period and was commissioned in September 1978.

    Kaduna Refinery and Petrochemical Company contract was awarded to Chiyoda Engineering and Construction Company of Japan at a cost of $525 million in 1976 for 100,000bpd (refining in two streams of 50,000 for fuels and 50,000 bpd for lubes) with a completion period of 36 months and was commissioned in 1980.

    The 1974 feasibility was updated to meet new products demand. Warri was upgraded from 100,000 to 125,000 bpd while Kaduna fuel plant was increased from 50,000 to 60,000 bpd in 1985. The second Port Harcourt refinery was also designed for 150,000 bpd and awarded to a consortium of JGC Corporation, Marubeni Corporation (both Japanese) and Spibatignolles of France in October 1985 at a cost of $850 million for 36 months completion and commissioned in 1989.

    According to the report, between 1991 and 1992, the new Port Harcourt plant exported products and made $280 million for government. Exports, however, stopped later because Kaduna and Warri productions dropped.

    Currently, Nigeria refineries with a combined capacity of 445,000 barrels per day cannot produce 20 per cent of its installed capacity as the preference is imported fuel. The nation’s consumption capacity is put at highest 40 million litres of petrol about 208,799.40 barrels of crude per day, which can comfortably be produced locally.

    The oldest refinery in the world, the Digboi refinery, Assam in India constructed in 1901 is still refining crude. The oldest refinery in Jeddah, Saud Arabia was constructed in 1967. The newest complex refinery in the United States, the Marathon Petroleum Company in Garyville, Louisiana was constructed in 1977 and upgraded from a 200,000 bpd to 522,000 bpd capacity plant in 2014.

    The consensus of experts and industry stakeholders is that the only sustainable way to make the refineries work is to completely hand them over to genuine private sector operators, not fronts of government officials that will not play the game according to the rules.

  • Flooding: Lagos moves to avert disaster

    Flooding: Lagos moves to avert disaster

    Flooding, is big headache for Lagos State. Yearly, it devises means of curtailing the menace in order to save lives and properties. The government gathered stakeholders to find solution to the seemingly intracable problem plaguing communities along the plains of Ogun River, MUYIWA LUCAS reports.

    Sunday Osagie, a young man living in Edo State, had earnestly looked forward to his vacation in Lagos. That was in June 2012. But he didn’t plan for what he later experienced. His holiday was spent indoors, courtesy of the heavy downpour that began on the second day of his arrival. For seven days, the heavens opened up, emptying its bellies, filling the surface of the earth with water. Across the state were endless stretches of rainwater, which constitututed heavy floods.  And in the process, the state’s economy practically shut down. For more than two weeks after the downpour, everywhere in the state remained flooded.

    It has since been established that while nature may take its natural course in flooding, human activities such as dams’ construction may lead to flooding if not properly managed. The perenial Lagos flooding, experts say, could be attributed to many factors such as torrential rainfall, poor drainage system, poor sewage management and disposal, poor urban planning control, deforestation and climate change. All of these factors have combined to make flooding a regular occurrence in most areas of the state, particularly the Ogun River downstream areas, such as Akute, Kara market, Ishasi, Isheri, Ojodu –Abiodun, Ajiliti and Ajegunle Mile 12 axis of the state.

    Determined to find a lasting solution to it, the state last week, organised a two-day summit on the “Negative Impacts of Flooding of Ogun River on Adjoining Towns and Villages in Lagos State”.  The summit, which held in Alausa, Ikeja, aimed at mitigating the effects of the flooding of Ogun River plains and maximising the benefits derivable from the river basin, which include transportation, fishing/farming, power generation and water supply.

    The State Governor, Mr. Akinwunmi Ambode, who spoke through his Commissioner for the Environment, Dr. Babatunde Adejare, said Lagosians along the plains of the Ogun river usually suffer the hardship brought about by the recurrent flooding of the river, owing to the discharge of water from the Oyan Dam, managed by Ogun-Oshun River Basin Development Authority (OORBDA).

    “Over the years, people in flood plains, especially Ajegunle (Ikorodu), Owode-Elede, Agiliti, Maidan and Itowolo, have been at the receiving end of the flooding of the plains of Ogun River” he said.

    According to him, the operational activities of dams, being subject to vagaries of nature, sometimes produce unpleasant consequences to the immediate environment, while human activities, resulting in flagrant abuses of the environment are also contributory factors.

    He said: “While the forces of nature can be adapted to, all man-made factors must be adequately dealt with for sustainable environmental renewal,” adding that, to bequeath a sustainable environment to posterity, Lagosians must change their attitude to the environment.

    Ambode disclosed that in response to the phenomenon of Flooding, the state had strengthened Flood Early Warning Signs (FEWS) to deliver reliable, timely and effective flood information to the people at an appropriate response time.

    As part of measures to relieve the pains of people living along Ogun River plains, Governor Ambode, stressed the commitment of his administration to strengthen the existing relationship with the Ogun-Oshun River Basin Development Authority for effective Dam management.

    Ogun-Osun River Basin is located in the Southwestern part of Nigeria, with a land area of 101,802 km2, which is 11 per cent of the total area of the country. The river basin covers Lagos, Ogun, Osun, Oyo and parts of Kwara States. It is drained by two main rivers–Ogun and Oshun, a number of tributaries and smaller rivers, the most important among them are Sasa, Ona, Ibu, Ofiki, Oni, Oyan, Opeki and Yewa.

    In his paper presented at the summit entitled: “Some Evidence of Changing Climate and the implications on Flood Events in Nigeria,”Director-General/Chief Executive Officer (CEO), Nigerian Meteorological Agency (NiMET), Professor Sani Abubakar Mashi, agreed that in addition to the changes in weather patterns, Nigeria has also been experiencing extreme weather events in line with the global trend. He said the extent and intensity of the 2012 flood in Nigeria was almost the worst in recent history.

    He based his submission on statistics from the National Emergency Management Agency (NEMA), which reported that at least 363 persons were killed; 5,871 people were injured; over 590,000 homes were destroyed and over 2.1 million persons displaced by the flood in 2012.  Mashi further said the Post-Disaster Needs Assessment (PDNA) carried out by the World Bank revealed that the losses and damages to infrastructure- transport, electricity, water and sanitation, occasioned by the flood amounted to $398 million. The combined value of the damages and production losses stood at $16.9 billion, representing 1.4 per cent of real gross domestic product (GDP) growth in 2012.

    The floods affected 35 out of the 36 states, covering 3,870 communities in 256 Local Government Areas. He said Agriculture ranks among the most vulnerable sectors to extreme weather events. The estimated damage and loss inflicted on the agricultural sector in Nigeria by the 2012 flood, according to him, stood at N481.53 billion, representing 40.6  per cent of the total for the productive sectors.

    From the various plenary session and presentations at the summit, it was evident that flooding in Lagos can be attributed to natural and anthropogenic causes. The natural causes include the flat topography, coastal location, low elevation relative to mean sea Level, climate, hydrology, and soil characteristics while anthropogenic causes include haphazard land-use and physical planning.

    Besides, Lagos, through its Lagoon and Creeks, receives all the waters from the Ogun and Osun river basins for onward release to the Atlantic Ocean via the Commodore Channel. This, in combination with its small geographic size, and extensive urbanisation make Lagos incredibly vulnerable to flooding. Also is the effect of climate change, which is said to be responsible for the extreme weather events such as floods that the country now experiences.

    The summit also noted that the hydrological network within the country are few with insufficient annual financial budgetary support to maintain basic hydrological services and their data collection activities, putting lives and infrastructure at risk and limiting the potential for better and informed decision making. It further noted that flood prevention and management efforts can only be achieved if interdisciplinary and inter-governmental approaches are adopted, and affected communities are sensitised of potential and actual risks in order to induce their pre-cautionary actions, and ature conservation measures adopted.

    The Oyan and Ikere Gorge dams, stakeholders agreed, are underutilised assets, especially as regards their hydro-electrical power generation and irrigation potentials, which offer alternative uses of the Ogun and Oshun basins’ waters that should help prevent flooding of downstream communities. They are convinced that the rapid increase in settlement areas, and corresponding decrease in vegetation cover, non-urban land (floodplains) and channel coverage along the Ogun River course in Lagos and Ogun states are the underlying reasons for the flood impacts during heavy rainfall and release of water from Oyan dam in Ogun State.

    Communique

    Arising from the summit, a communique was issued and signed by stakeholders in attendance. Part of it was that: Physical development (housing estates, industrial estates etc) on Ogun River flood plains must be discouraged by both governments of Lagos and Ogun; that Lagos State should strengthen collaboration with the NiMET, OORBDA, Nigeria Hydrological Services Agency (NiHSA) and other relevant MDAs, for early warning systems on Ogun River; all identified stakeholders (Federal Government, Lagos, Ogun, Oyo states and OORBDA) should ensure that both Oyan and Ikere Gorge dams are put to their maximum usage in order to prevent flooding the downstream. Where necessary, new upstream dams, channels, floodwalls, levees, retaining walls and piers, as well as non-structural options such as natural ecosystems, planted degraded wetlands be used as buffers against flood prone areas. All these they said, should be seriously considered as protective measures by the Federal Government; Lagos and Ogun states and that they should liaise with other relevant stakeholders, especially OORBDA to produce flood risk maps, comprehensive flood plain management plans and set up flood management teams for communities at risk. The stakeholders, it was agreed, must adopt Integrated Water Resources Management plan (IWRM), which promotes the co-ordinated development and management of water, land and related resources, in order to maximise the resultant economic and social welfare in an equitable manner without compromising the sustainability of vital ecosystems.

    It was also agreed that the Federal and Lagos State, OORBDA and tertiary institutions should facilitate easy access to all relevant data in the public domain from past studies relevant for flood management. Re-afforestation of the flood plains, they said, must be seriously considered for urgent implementation by Lagos and Ogun states, while the Federal Government should partner Lagos State for further studies to better understand the tidal effect of Lagos Lagoon and the Atlantic Ocean on the flood plains.

    The OORBDA and the Lagos State Ministry of the Environment, it was recommended, should spearhead the formation of a Technical Committee to work with other states(Ogun, Osun and Oyo) to facilitate regular holding of similar fora. OORBDA, again, should strive to reduce the negative impacts of the Oyan and Ikere Gorge Dams on communities in the Ogun River Basin by followinginternationally acceptable best practices in their reservoir operations.

  • Minimum wage: Labour walks tightrope

    Minimum wage: Labour walks tightrope

    Citing workers’ reduced purchasing power forced by prevailing harsh economic realities, labour has kicked its heels in, insisting on an upward review of the minimum wage from N18, 000 to N56, 000. But employers disagree, citing devastating effects of economic recession on organised businesses. Government on its part is dilly-dallying. The stage appears set for a showdown with labour. But there are fears that factionalisation in the labour movement and the economic downturn might conspire to throw spanner in the works. Assistant Editor CHIKODI OKEREOCHA reports.

    The situation is dicey. Despite its seeming hard stance on the National Minimum Wage issue, labour appears to be walking a tightrope. Even before labour rode on the platform of last Monday’s Workers’ Day celebration to renew the push for an upward review of the minimum wage from the current N18, 000 to 56, 000, there were indications that organised labour may have been swimming against the tide.

    Although, the law makes the review of the National Minimum Wage every five years legitimate, those schooled in the dynamics of labour unionism fear that labour’s sustained agitation for a better deal for workers may suffer serious setback following the emergence of factions in the labour movement. Private sector employers are also kicking, insisting that the crippling effects of economic recession on organised businesses have made it impossible to pay a new minimum wage.

    The Nigerian Labour Congress (NLC) has been engulfed in leadership tussle since its last 11th National Delegates’ Conference in February 2015 ended in a fiasco.  A supremacy battle between two factions led by Comrades Ayuba Wabba and Joe Ajaero over the disputed outcome of the Delegates’ Conference has since thrown the labour movement into confusion. Ajaero had alleged that the election, which produced Wabba as NLC’s National President was never  transparent and the outcome therefore, unacceptable.

    Efforts by former Edo State Governor Adams Oshiomhole and other past labour leaders to broker peace between both factions failed to yield positive result.  The recommendations of the Reconciliatory Committee headed by former NLC President Hassan Sunmonu were never implemented either. The feud later snowballed into the formation of a new labour centre, United Labour Congress (ULC), headed by Ajaero. That was in December last year. The splinter group boasts no fewer than 25 industrial unions.

    Some of the affiliates of the ULC include National Union of Petroleum and Natural Gas Workers (NUPENG), Nigeria Union on Electricity Employees (NUEE), Nigeria Union of Mine Workers, National Union of Banks, Insurance and Financial Employees (NUBIFFE), Nigeria Union of Rail Workers, National Union of Lottery Agents, & Employees, Association of Nigeria Aviation Professionals (ANAP) and National Association of Aircraft Pilots and Engineers (NAAPE).

    Now, the ghost of labour’s failure to remain a united entity may have come back to haunt the labour movement when it needed cohesion most. The thinking within labour circles is that the inability of the labour leaders to mend the cracks in the wall before it came down crashing may throw spanner in the works and weaken the current agitation for a new minimum wage, rather than strengthen it. They fear that the Federal Government and private sector employers might cash in on labour’s disunity to deny workers an enhanced pay package.

    Such fears are not without justification. For instance, while the Wabba-led NLC and the Trade Union Congress (TUC) have jointly presented a N56, 000 national minimum wage demand to the Federal Government, the Ajaero-led ULC pushed for a N96, 000 as minimum wage, insisting that workers deserved even more. Ajaero, however, assured that the different figures presented by the ULC and the combination of NLC and TUC will not create any problem.

    According to him, the three labour centres have found themselves in a worst situation and overcome it. He said this happened during the last fuel price increase and the palliative committee later set up to negotiate with the government. “I don’t think we are going to have problem with 96, 000 or 56, 000 as figures. We will harmonise it. Just like before we went for palliative committee, we had different positions,” the labour leader said.

    Despite Ajaero’s assurances that the three federations will unite and work together to harmonise their different positions on the new national minimum wage in the interest of Nigerians and the workers, recent developments do not seem to inspire such optimism.

    Indications that the emergence of factions in the labour community might throw spanner in the works emerged on Monday during the May Day Rally when NLC and ULC held parallel ceremonies in Asaba and Effurun, Delta State, respectively.

    As if that was not enough signal that the agitation for a better deal for workers may hit the rocks, Minister of Labour and Employment Dr. Chris Ngige inadvertently brought nearer home the danger the leadership crisis in the labour movement poses to the current agitation for a wage review when he blamed Monday’s disruption and protest by workers during the May Day celebration in Abuja on factions in the NLC.

    This year’s May Day Rally with the theme, “Labour Relations in Economic Recession: An Appraisal” was marred by protests. For close to one hour, angry workers barred government officials from delivering the speech from the Federal Government.

    According to Wabba and his TUC counterpart, Comrade Bobboi Kagama, Nigerian workers expressed their anger and disappointment on the non-implementation of the minimum wage thereby disrupting the 2017 May Day celebration.

    The aggrieved workers were said to have insisted that the Federal Government had a responsibility to give them a definite position on the lingering issue of a new minimum wage in the country. The absence of the President and his deputy from the event did not go down well with them.

    But Ngige thinks otherwise. He said the workers’ rage was not about minimum wage or the absence of the President and his deputy at the rally. Rather, the venue was infiltrated by non-workers due to factionalisation within the labour federation.

    The minister, who said his conclusion was based on intelligence report, however, assured that government will address the issue of minimum wage and the backlog of promotion arrears and allowances.

    “So, workers should be patient and give us some time. Within the next quarter, the minimum wage committee will start functioning and in the next three months too backlog of all arrears and other allowances that are due to them will be paid,” Ngige  assured.

    But it was not the first time factionalisation was believed to have frustrated labour from presenting a common, united position on a national issue. For instance, both factions held parallel May Day events in 2015 and 2016. The feud between the two gladiators was also said to be responsible for weakening the badly organised general strike in May last year against fuel price hike.

    While the May 2016 struggle against fuel price hike was on, the Ajaero faction could not join the ranks of workers on strike called by Wabba’s faction. Instead, his group opted to hold meetings and collaborate with government in finding solution to the issue. Because of the internal crisis, the leadership of the mainstream faction led by Wabba could not adequately mobilise affiliate industrial unions and workers for the action.

    Recall that when the government invited the factions to a meeting over the issue, Wabba reportedly said he would not hold meeting with government alongside the Ajaero faction. This forced government to hold separate meetings with the factions. The result was that as soon as the strike threat was over, government lost interest and, to date, has done much, if anything, cushion the effects of the policy on workers and Nigerians.

    This was in stark contrast to January 2012 when millions of Nigerian working masses, youths and students, market women and artisans as well as the rural and urban poor, participated in strikes and demonstrations against increase in fuel prices by the erstwhile Jonathan government. The fact that then there was a united labour platform strengthened that struggle.

     

    Economic recession

    is sore point

    The current N18, 000 National Minimum Wage Act was signed into law by former President Goodluck Jonathan on March 6, 2011. Both houses of the National Assembly passed it into law, with a proviso for it to be reviewed upwards after five years.

    The law, which increased the national minimum wage across the country from N7, 500 to N18, 000 per month, also states that once an employer in the public or private sector has a workforce of about 50 persons, he or she is bound by the law to pay a minimum wage of N18, 000.

    Apparently drawing strength from the law, NLC and TUC, on April 27, 2016, made a proposal of N56, 000 minimum wage to the Federal Government. The ULC on its part proposed N96, 000.

    According to Wabba, workers’ demand for an upward review of the minimum wage from the current N18, 000 to N52, 000 was reasonable, considering the prevailing harsh economic realities.

    He told The Nation, for instance, that rising inflation was biting harder on Nigerian workers and reducing their purchasing power, even as high cost of goods and services were seriously affecting workers’ overall welfare.

    “It’s time for the minimum wage to be reviewed both in law and practice, because the cycle is due and inflation is biting very hard, high cost of goods and services is affecting workers seriously,” he stated.

    Wabba asked, “What is the value of N18, 000 when it was signed, looking at inflation, purchasing power and ability to pay?” While noting that NLC and TUC have been reasonable in making such demand, he expressed hope that other social partners will look at it from labour’s perspective, commitment and nationalism in putting up those demands.

    Wabba is not done. He added that an upward review of the minimum wage was imperative in view of the current fight against corruption. Hear him: “If you don’t pay workers well to meet up with their bills we can’t fight corruption.” He warned that workers should not be treated as slaves, as companies are still making profit.

    The labour leader reiterated that Nigerian workers are at the receiving end of the present economic crisis caused by crashing oil prices in the international market. He argues that it is only when workers are paid well and as and when due, that the productive arm of the economy can get the boost to support the resuscitation of the depressed economy.

    The General Secretary, National Union of Food Beverage and Tobacco Employees (NUFBTE), Comrade Peter Ozo Eson, agrees with him. He said Nigeria’s only way out of the present economic quagmire is a well remunerated workforce.

    “It is unfortunate that workers are being made to suffer the effects of recession, which they were not the cause. Owing workers or depressing them will not be the way out of recession. To get out of recession, salary should be paid as and when due,” he said.

    Ozo Eson maintained that it is when workers spend the salary earned that the manufacturing and other service sectors presently going through various challenges can get a respite.

    He said the organised labour is now ready to ensure that no employer, be it federal, state or private employers, owe workers, while equally pushing for the renegotiation of the existing minimum wage.

     

    Employers disagree

    Incidentally, the same recession cited by labour as reason for demanding a wage increase for workers is being bandied by employers for their inability to pay a new wage. The Nigeria Employers Consultative Association (NECA), which handles the private sector, was emphatic that private operators will not be able to pay new wage increase now.

    It is not that NECA is unaware that the current economic downturn had taken huge toll on workers. Rather, NECA argues that private operators are hamstrung by the same economic depression that has seen their businesses dwindle in recent times, forcing some of them to reduce their workforce or and close shops.

    NECA Director General Mr. Olusegun Oshinowo recently urged stakeholders in the socio-labour community and players in the Nigerian industrial relations’ system to be circumspect in their approach to the heated issue of the national minimum wage. He, however, admitted that there was indeed, an understanding that the national minimum wage would be due for discussion after five years.

    “The clamour for discussions by the NLC and TUC is therefore, legitimate” Oshinowo said, adding that there is a time-tested and enshrined procedure for the discussion of the national minimum wage, which entails the setting up of a National Minimum Wage Committee.

    The Committee, he said, comprises representatives of the Federal Government, led by the Office of the Secretary to the Government of the Federation, State Governments, usually represented by three state governors, employers in the private sector under the aegis of NECA and organised labour as represented by NLC and TUC.

    Oshinowo said the principle of reasonableness and superior arguments has always carried the day during minimum wage dialogue and that conclusions at the platform would not necessarily be for or against increase. He said it would be to examine the need for or against and justifications for whatever positions are canvassed.

    The NECA DG said it is the Committee’s responsibility to sort out the issue of desirability of review or sustenance of status quo in the event that timing for upward review is inappropriate. To him, labour’s demand for N52, 000 new minimum wage is unreasonable and unrealistic.

    But Wabba would have none of that. He told The Nation that while those dismissing labour’s demand as unreasonable and unrealistic are entitled to their opinion, the reality is that workers presently cannot feed themselves because of the high cost of goods and services.

    His words: “Everybody has the right to his or her opinion, but the opinion of the workers is that a review of the minimum wage is legitimate both by law and practice. Five years cycle is legitimate. Many workers cannot send their children to school, many cannot pay their rent, and many cannot even go to work regularly.”

    Oshinowo, however, insisted that at the National Minimum Wage Committee, employers will canvass the position that private sector cannot afford a pay increase at this point in time when economic recession and its attendant devastating effects on organised businesses is visible.

    For Ajaero, the issue of National Minimum Wage is an inclusive one. He, therefore, warned that minimum wage cannot be negotiated without NECA who handles the private sector. He pointed out that all workers, both in the private and public sectors should be adequately represented, as well as the state governments.

    He has an ally in Wabba in that score. Wabba said it was necessary for the Technical Committee for Palliatives and Minimum Wage set up to negotiate the minimum wage to be comprehensive to avoid possible hitches. He said this was why there was the need to carry along State Governors, the Organised Private Sector (OPS) and other critical stakeholders.

    Wabba said the Committee will be a 26-member Committee where the state governors will be represented, “because they have actually been the problem militating against the review of the minimum wage.” He said left for the Federal Government, there would not have been any problem with regards to implementing the new minimum wage.

     

    MAN, OPS also

    The Manufacturers Association of Nigeria (MAN) and the Abuja Chamber of Commerce and Industry (ACCI) have also argued that the N56, 000 demanded as minimum wage is unrealistic.

    MAN President Dr. Frank Jacobs and ACCI President Mr. Tony Ejinkeonye pointed out that the current economic realities might make it difficult for the Federal Government to afford labour’s N56, 000 minimum wage demand. They, therefore, called for caution.

    “Everybody is entitled to make demands to satisfy his or her personal interest, but the question is: ‘can this economy withstand that kind of minimum wage?” Jacobs asked, pointing out that much as it is okay for labour to demand a wage rise, the system may not pay.

    On his part, Ejinkeonye admitted that the level of inflation in the country had made it imperative for workers’ salaries to be reviewed upward. He, however, said there was the need for such review to be tailored to government’s ability to pay.

    “I support the minimum wage, which supports an increase in remuneration for workers, but it has to be tailored carefully. If there is going to be salary increment, the state of our economy has to be really checked so that if government is to take a decision, it would be taken in a holistic manner,” Ejinkeonye said.

    Similarly, the immediate past President General of Maritime Workers’ Union of Nigeria (MWUN), Comrade Tony Nted, said current economic realities do not support a wage increase. “I have said it before and I am very upright; that this is not the right time; that we are going through pains, but we have to bear it. We have to bear and pay the price for the recession,” he said.

    He told The Nation in a chat that asking government to increase the minimum wage when some states cannot even pay the current N18, 000 is wrong. “I think the time is inappropriate. I am not saying the review is not due, or that what they are paying is right; I am looking at the timing, which is not right,” Nted argued.

    The labour unionist said rather than ask for a new minimum wage, labour should ask government to create the enabling environment for business to thrive, so that investors can come in. “If there is no security investors will not come. In other parts of the world, government doesn’t create jobs; it is the private sector that creates jobs.

    “Government only creates the enabling environment for businesses to thrive. Government’s policy should be stable to attract investors. Government should also try to understand that business and politics should not be mixed together. There is difference between business and politics,” Nted added.

    Oshinowo agrees with him, noting that the “The priority now should be for all stakeholders to join hands with government to deliver on inclusive growth that will ensure job security and job creation.”

    Where does this leave workers whose standard of living has evidently deteriorated? Will labour’s argument that the new minimum wage will make sure that the poor or the poorest of the worker is protected against exploitation hit the right chord in the ears of government and private employers? Is labour fighting a lost battle?

    These are questions agitating the minds of stakeholders, as labour intensifies the push for a new minimum wage. Such questions are even more pertinent considering the fact that some state governors, citing sharp decline in national revenue triggered by fall in oil prices earlier threatened to stop paying the N18, 000 minimum wage or retrench workers.

    Besides, some governors and lawmakers are said to be currently pushing a bill, which seeks to remove the National Minimum Wage from the exclusive to the concurrent legislative list. The bill, which scaled through the first reading before the House embarked on Easter recess, is said to be ready for second reading on the floor of the House soon.

    Expectedly, the move has not gone down well with labour. The Wabba-led NLC is already threatening fire and brimstone. He said he will mobilise Nigerians against governors and the National Assembly members for sponsoring such an anti-workers’ legislation that seeks to “strangulate workers.”

    Wabba argued that all over the world, minimum wage is on the exclusive list. “We are talking about protecting the most vulnerable group. That is the principle and philosophy. It is an International Labour Organisation (ILO) core issue under decent work agenda. It is a core ILO issue that all countries are conformed to,” he fumed.

    Ajaero is no less peeved. At the pre-2017 May Day seminar organised by ULC, in Lagos, he said the move was ill-motivated to deny workers their right to live well, which is what some of the governors have been advocating but “we will mobilise against them.” He said if the planned delisting of wage from the exclusive legislative list succeeds, it means that the country would no longer have a national minimum wage.

    “It means that each state of the federation will be empowered to legislate and arrive at what should be their respective minimum,” Ajaero said. He noted that the concurrent list stipulates that powers are shared jointly by both the central and regional or state governments as stipulated in the Constitution. Even though both governments can make law on matters that fall under the concurrent list, the central government is supreme.

     

    Govt’s position

    The Technical Committee on Palliative and Minimum Wage headed by Ngige had submitted its report to the Federal Government and advised the government to immediately set up the Tripartite Committee on Minimum Wage, which will negotiate a desirable national minimum wage for the country.

    Ngige assured that government would address the issue of minimum wage, including issue of backlog of promotion areas and allowances. He explained that although, these were captured in the 2016 budget, the releases, for some reasons, could not come. He, however, said the President of the Senate has now given his assurance on the matter.

    “So we are going to capture them in the 2017 budget and once it’s captured in the appropriation, the Minister of Finance will handle the rest,” Ngige said, noting that the issue of minimum wage was being delayed because the government employed what it called a tripartite negotiation also known as social dialogue so as to capture all sectors.

    He said this was because the issue did not concern the government or public sector alone, but also the private sector so, it needed time to carry everybody along. “We have finished the framework for the composition of the committee of the minimum wage and we have passed it round to government to source the requisite and qualified persons that will man this committee,” he explained.

    While urging workers to be patient, the minister promised that within the next quarter, the minimum wage committee will start functioning and in the next three months too, backlog of all arrears and other allowances that are due to workers will be paid.

    “The Federal Government has been friendly to workers to the extent that it even went ahead and initiated the bailout fund. No government has done that before and that was because we did not want to lay off any worker,” Ngige stated.

    The minister’s position is in sharp contrast with the one he earlier canvassed. He had earlier said that the review of salaries of workers at the moment was not on the table because of the country’s economic challenges. He said other tiers of government that have more money could pay higher wages.

    Will Ngige’s change of gear and promises douse the agitation for a new minimum wage? More importantly, will the internal crisis in the labour movement allow it close ranks and force down the hands of governors and private sector operators to pay a new minimum wage? The situation is indeed, dicey.

  • Forces against Nigeria’s rice revolution

    Forces against Nigeria’s rice revolution

    Despite consuming about seven million metric tons (MT) of rice yearly, Nigeria produces a meagre 2.7 million MT. This leaves a supply gap of 4.3 million MT to imports, which cost the Federal Government an estimated N360 billion yearly. This figure is expected to rise as consumption is projected to hit 35 million MT due to population growth. Sadly, Nigeria’s quest for self-sufficiency in rice production has continued to be hampered by issues around quality, price instability, and harvesting/processing challenges, among others. DANIEL ESSIET examines the forces against Nigeria’s rice revolution.

    With 45, 000 hectares of rice farm, the Chief Executive, T.W. Heritage, owners of Kereksuk Rice Farm in Nassarawa State, Mr. Rotimi Williams, is contributing his quota to the Federal Government’s target of achieving self-sufficiency in rice production and consumption. His farm produces about 8, 000 metric tonnes of rice paddy yearly, which he sells to major milling firms across the country.
    However, Williams’ investment and his inroad into the rice sector are still considered a drop in the ocean in Nigeria’s quest for self-sufficiency in rice. This is not his making, but the barrage of unresolved issues and challenges facing him and indeed, other local investors in the rice value chain, which has continued to hamper the nation’s target of self-sufficiency in rice.
    Nigeria consumes about seven million Metric Tons (MT) of rice yearly. The country produces 2.7 million MT, leaving a supply gap of 4.3 million MT to imports, which cost the Federal Government an estimated N360 billion yearly.
    Experts fear that this figure will rise as rice consumption is projected to hit 35 million MT by 2050, due to population growth. This was why the government came up with the target to achieve self-sufficiency in rice by 2017. However, five months into the target year to end rice importation, there are no visible signs on the horizon that this will be achieved.
    Williams and other operators in the rice sub-sector, who spoke with The Nation said issues around quality, price instability, and harvesting/processing challenges, among others, remain the clog in the wheel. They argued that until and unless these issues are resolved Nigeria’s dream of achieving the feat will not be realised.
    Williams put the problems in perspective when he lamented that local rice production remained uncompetitive because of rising cost of input. He said for instance, rice farmers and investors are bugged down by rising cost of inputs such as seed, irrigation water, fertilisers and other assorted chemicals and pesticides, among others.
    According to him, rice farmers are contending with high electricity bills and other inputs, which have pushed up cost of domestic rice prices. He said prices of domestic rice have doubled in the last two years despite the ban on rice importation. At present, the price of local rice is higher than imported one. A module of 1.4 Kilogramme (kg) of local rice cost N300, while imported one is N200.
    “The quality of our seeds is a contributory factor in the high cost of our locally produced rice. The resulting yield from these seeds means that the cost at which millers purchase paddy is high, with varying quality and subsequently, the rice recovered after milling is below the global average of 62 per cent,” Williams explained.
    Aside poor quality of seed and disincentive to local rice farmers, there are others like land preparation process and inputs for rice farming, which are lot more demanding than most crops. He pointed out that majority of the rice paddy available for sale to millers are grown by subsistence farmers.
    “It is obvious that yields will be a lot less in comparison to the likes of Thailand and India that use full mechanisation process for land preparation. They also use high quality inputs such as fertiliser and high-yielding seeds. We are still playing catch-up with leading rice-producing countries, which makes our produce less competitive,” Williams lamented.
    Indeed, experts in the rice sub-sector have said Nigeria lagged far behind other rice-producing countries in seed development and per acre yield. They also believed that lack of strict quality control was a major reason why Nigerian rice did not get much positive response in the market as imported ones.
    Funding, according to them, constitute an issue. It was learnt that most banks in the country would rather fund acquisition of machinery than rice production. Coupled with the fact that cost of funds are in double digits, most farmers have no access to such funds and those that have struggled to pay up and this, by extension, reflected in the price of rice.
    “Given the high cost associated with the actual production of paddy, there is no subsidisation on the cost of paddy to millers, as we see in Thailand. Therefore, this cost is passed on to the final consumer,” Williams said.
    Nigeria’s huge infrastructure deficit has not helped matter either. Lack of access roads, which increased transportation cost, has continued to frustrate rice farmers. Also, the nation’s perennial inadequate power supply means that rice millers have to run on diesel-powered generators at huge cost.
    The Chairman, Kebbi State Rice Farmers Association, Alhaji Sahabi Augie, lamented that farmers are still battling with high costs of inputs, including seeds, fertilizers, chemicals and diesel, used for running milling machines. He said the situation was responsible for rice not being produced cheaply.
    Augie said, for instance, that fuel is sold for N180 per litre around Kebbi State, and he needs to buy it daily to operate irrigation pumps. The same applies to all farmers because they use fuel for irrigation water. He, however, expressed happiness that the price of fertiliser has gone down to N5000 a bag.
    At the trading and processing ends of the value chain, The Nation reliably learnt from industry operators that sharp practices capable of undermining government’s set target for rice have been going on. For instance, many traders resort to blending and mixing high-quality varieties with low-quality ones in a bid to compete with imported brands.
    Some processors are also fingered as being culpable. Some of them in a bid to make quick profits at the detriment of Nigeria’s long-term commercial interest, allegedly process and polish low-quality varieties in a way that makes it difficult for one to differentiate them from the high-quality varieties.

    Nigeria insignificant in global chart
    Last year, the global production of paddy rice was estimated at 749.8 million MT, translating to about 499.9 million MT of milled rice, according to the United Nation’s Food and Agricultural Organisation (FAO). This volume was produced mostly in the Asian countries.
    Nigeria is the largest consumer and producer of rice in Africa. According to Rice Authority, a Philippine online platform for global rice importers and exporters, Nigeria imports about 1.4 million tonnes (4.8 per cent of global rice imports).
    Between 2012 and 2015, Nigeria spent over N474 billion on rice importation, according to the Central Bank of Nigeria (CBN).
    Right now, major states producing Nigerian local rice include Kebbi, Sokoto, Ondo, Abia, Delta, Kogi, Benue, Kano, Niger, Kaduna, Taraba, Adamawa, Kwara, Ebonyi, Cross River, Bayelsa, Borno, Enugu, Ekiti and Ogun.
    Experts said Nigeria has high potential for irrigated rice development with vast but untapped potentials in the flood planes of river Niger, Benue, Cross River, Kaduna-Karadawa Sokoto-River, Gongola, Chad Basin, Ogun, Osun, Imo, Anambra and Benin-Owena River Basins, totaling about 1.4 million hectares.
    They note that maintaining a favourable rice supply-demand balance in the future depends largely on the exploitation of the production capacity of the rainfed systems in the Southern part of the country.

    Government’s interventions
    When President Muhammadu Buhari launched the pilot phase of the Anchor Borrowers’ Programme (ABP) in late 2015, it was seen by many operators and stakeholders as an indication that the government was determined to turn things around in the rice sub-sector.
    The programme, which mainly targets small-holder subsistence farmers with a view to helping them scale their businesses to commercial level, encourages farmers across the country to become rice growers on at least one hectare of land each. It also targets millers with the aim of increasing their capacity utilisation.
    At the launch of ABP, President Buhari said Nigeria was spending not less than one trillion naira on the importation of food items that could have been produced locally, a situation the CBN said was contributing “greatly to the depletion of the nation’s foreign reserves, especially in the face of low oil revenue resulting from falling oil prices.”
    This was why the CBN said it had decided to shift from merely concentrating on price, monetary, and financial system stability to acting as a financial catalyst in specific sectors of the economy, particularly agriculture, in an effort to create jobs on a mass scale, improve local food production and conserve scarce foreign reserves through the ABP.
    The implementation of the programme involves the CBN, Bank of Agriculture, Nigerian Agricultural Insurance Corporation, State Governments, integrated millers and farmers.
    The Nation learnt that the programme may have started yielding result. For instance, President, Rice Farmers Association of Nigeria (RIFAN), Alhaji Aminu Goronyo, said the price of rice may drop to N6, 000 in the next six months, following the ABP intervention.
    He told The Nation that in some northern states, paddies now go for as low as N10, 000. Goronyo said the demand and consumption of locally produced rice has increased tremendously in recent time, just as farmers are smiling to the bank as a result of the patronage they are enjoying.
    According to him, there has been increased productivity in the north as more farmers have keyed into the CBN’s Anchor Borrowers Programme. He also said his association was mobilising rice farmers to take advantage of the CBN window nationwide to get involved in rice production.
    “We are going to assist the Federal Government to produce more than enough rice. It is part of the plan to bring down the price of rice. There are several efforts that we are making to see that in no distant time, the price of rice will come down for Nigerians to have access to affordable milled rice,” Goronyo assured.
    The ABP strategy, according to him, entails expansion of areas under rain fed farming and irrigation, reduction of post-harvest losses through mechanisation, improved seed production systems and market development improvement, among others.
    Goronyo expressed optimism that price of rice will continue to drop as prices of inputs fall. He said the Association had signed a Memorandum of Understanding (MoU) with some farm input suppliers in the country to ensure prompt supply of cheap fertilisers and pesticides to boost production.
    RIFAN President also pointed out that local rice is now well-processed and cheaper than imported ones, resulting in increased demand.
    Augie agreed with Goronyo that the price of rice will crash soon, adding that this will be possible if the government works with the private sector to reduce the cost of production.

    Private sector operators wade in
    The Federal Government through the CBN is not alone in the current efforts to reposition the sector and achieve set target. For instance, Coscharis Farms, which is a 2, 600 hectares rice plantation, funded through the ABP, is aimed at boosting food production in the country, especially rice.
    The CBN granted Coscharis Farms a N2 billion Commercial Agricultural Credit Scheme (CACS) to boost its capacity to produce rice all-year round, which is three harvests in a year.
    Coscharis Group Chairman , Mr. Cosmas Maduka, said Coscharis Farms Limited will provide full time employment for about 3, 000 people as well as drive ancillary industrial growth in the state when all the phases of the investment are completed.
    He said the farm phase of the business employs over 250 people, adding that the rice mill and irrigation components of the investment for which the CBN has given approval in principle to finance, will significantly enhance the capacity of the business to create more jobs and boost economic activities.
    Dangote Industries Limited (DIL) has also thrown its hat in the rice cultivation ring. The indigenous conglomerate has since signed a Memorandum of Understanding (MoU) with the Ministry of Agriculture and Rural Development (FMARD) to invest $1billion (N306 billion) on the establishment of full integrated rice production and processing operations across Nigeria.
    Farmland in Edo, Jigawa, Kebbi, Kwara, and Niger states, totalling 150,000 hectares, have been penciled down for commercial production of paddy rice. Dangote inaugurated its 8,000-hectare rice out-growers’ scheme in Hadejia, Jigawa State early this year when he distributed rice seedlings to farmers.
    The scheme was said to have helped reduce the level of Nigeria’s imports while potentially providing direct and indirect jobs to about 10, 000 Nigerians.
    An agri-business Specialist with Agribusiness Supplier Development Programme (ASDP) of the United Nations Development Programme (UNDP), Dr. Nelson Abila, said his organisation was working with some development partners to build the capacity of rice stakeholders throughout the value chain, from farmers to millers and parboilers.
    By helping actors along the value chain add value to rice, Abila said the project is helping raise income, improve rice quality, and expand the market for locally produced rice.
    According to him, Nigeria has the potential to become a big rice granary in Africa with advantages of having ample suitable lands and water resources, and good climate.
    Similarly, Canada’s Department of Foreign Affairs, Trade and Development (DFATD) and AfricaRice, in partnership with McGill University, are spearheading an ambitious project on food security in Africa, with a focus on rice post-harvest handling and marketing.
    The project involves Cameroon, The Gambia, Ghana, Mali, Nigeria, Senegal, Sierra Leone, and Uganda. It seeks to introduce improved harvesting and post-harvest practices and equipment throughout the value chain to achieve high-quality grain.
    Most smallholder farmers and processors in Africa’s rice sector are women, who often have fewer rights than their male counterparts to access the vital resources they need to farm, process, and sell. The project, therefore, hopes to ensure that women farmers obtain their fair share of attention in rice Research & Development (R&D).
    The project also aims to develop new rice-based products, explore innovative uses of husks and straw, improve the policy environment, and build the capacity of rice stakeholders.
    The project envisages that by 2020, post-harvest losses will decline by 10 per cent and this will help increase farmers’ nominal annual income in the eight project countries by about $32 million.

    Fertiliser racketeering, subsidy
    are pains
    Despite moves to achieve self-sufficiency in rice production, many farmers complain of endemic corruption in the sale and distribution of fertilisers, a critical input for rice farming. This has prevented fertiliser from getting to the right people. Some of the people, who got fertilisers were said not to be farmers, but racketeers, who sell them to real farmers at a premium.
    Williams was emphatic that “Except farmers get fertiliser at reduced cost, and tractors free of charge, the situation may not change”. He also said it costs so much to produce a bag of rice to make profit when the government floods the market with subsided Lake Rice.
    While lamenting, for instance, that he could not sell his rice after the government had flooded the market with lake rice at subsided price of N13, 000, he said it was challenging for him to cultivate over 4, 000 acres of rice farm without the government support.
    Williams argued that government’s continued intervention by way of subsidies to bring down the price of rice would not help private investors, who are spending so much to stay in business. “We are likely to face a major problem if the issue of government intervention to force down the price of rice is not urgently addressed because farmers need to sell the produce, which they have heavily invested in,” he said.
    According to him, rice farmers depend on income from their produce to take care of their families and repay the loans they took from financial institutions.
    He advised the government to provide subsidies that are rationalised, adding that interventions that are against market competition will not allow dynamism and equitable participation of industry players.

    Post-harvest challenges
    Although rice, according to experts, grows well in all the six geo-political zones of Nigeria, the demand for polished long grain, stone free and odourless rice by urban dwellers is the reason Nigerians demand imported rice. They noted that at present, locally produced is uncompetitive in the market because it is fraught with stones.
    Some foreign large mills, taking advantage of this, would always request for brown rice rather than buy and encourage paddy production by local farmers.
    Nigerian growers also struggled to meet quality standards set by foreign agri-businesses, with consumers complaining of having to extract grit from rice. Local rice, according to consumers, is good, but, the problem is the stones in it. This is why they prefer foreign ones that have no stones.
    According to experts, the quantity and quality of locally produced rice have been the areas of concern, especially during post-harvest operations, which usually resulted in huge loses. The qualitative losses come mainly as a result of poor handling after harvesting and poor processing techniques.
    Farmers, again, have had thousands of bags of rice locked up in warehouses due to the unavailability of mills to process the commodity, a situation that compelled them to manually process the rice, which invariably do not meet market standards.
    Aside denying farmers their primary source of livelihood, the situation is seen as an impediment to government’s quest to motivate rice farmers into boosting local production of the commodity to achieve food security and meet the target.
    The Country Manager, Harvest Plus Nigeria, Dr. Paul Ilona, told The Nation that rice production suffered from lack of investment in irrigation development and research. This, he said, had slowed the adoption of high- yielding varieties and improved crop management techniques.
    Ilona noted that the quality of the local rice had been a major concern to the future of the rice sector.

    Way forward
    The consensus of rice farmers is that there is the need to mechanise rice farming in the rural areas to increase productivity. Some of them, who spoke with The Nation, said mechanisation remained the key driver for change in the rice sub-sector, as this will not only benefit farmers, but make quality local rice available in the market.
    To Williams, Nigeria will not achieve self -sufficiency in rice in the near future unless the government makes the required huge investment in key areas of the rice value chain. He, therefore, advised the government to prioritise the value chain and place more emphasis on quality seed and actual production than milling.
    He said this is because the big millers are more concerned with imports than backward integration. According to him, the quality of rice produce by smallholder farmers still falls below the standard and must be strengthened with quality inputs if government is serious about closing the import gap.

  • Row over N22b pension legacy fund

    Row over N22b pension legacy fund

    The Pension Transitional Directorate Department (PTAD) was established in 2013 to manage the N22 billion pension legacy fund under the old pension scheme known as Defined Benefit Scheme (DBS). But the agency literally is taking up arms against some insurance firms for failing to remit the cash in their custody, OMOBOLA TOLU-KUSIMO writes.

    Are 10 insurance firms owing the Federal Government’s Pension Transitional Directorate Department (PTAD) N22 billion meant for the Pension Legacy Fund? Yes, says PTAD. Yes, but. .., say some of the firms.
    The fund includes the liabilities and assets of pension funds of erstwhile pension offices and treasury funded pensions of parastatals, universities and colleges of education in charge of pensioners under the old pension scheme, known as the Defined Benefit Scheme (DBS).
    The PTAD, under the Pension Reform Act (PRA) 2004, now PRA 2014, is charged with pension management under the DBS for pensioners who did not transit to the Contributory Pension Scheme (CPS).
    The Directorate has been paying the affected pensioners since its was established in August 2013. However, investigations by The Nation show that while the 10 affected insurance firms have since transferred the pension liabilities back to PTAD as mandated by the Pension Reform Act, they are yet to transfer the assets worth N22 billion to the Directorate.
    Already, PTAD is screaming blue murder that the non-remittance of the assets has made it difficult for it to properly pay pension arrears. PTAD claims that the insurance firms have held onto the pension legacy fund in contravention of the Act.
    A source listed the firms to include NICON Insurance Plc, UNIC Insurance Plc, LASACO Assurance, Custodian and Allied Insurance Plc, Standard Alliance Life Assurance, and AIICO Insurance.
    Others are Goldlink Insurance, Industrial and General Insurance Plc, Nigerian Life and Provident Company and Leadway Assurance.
    Leadway Assurance, according to the source, recently paid N330.2 million it claimed to have held to PTAD. Similarly, Custodian and Allied and LASACO are said to have paid N148 million and N309 million, as first instalments.
    NICON Insurance is said to have more than half of the fund in its custody, worth N12 billion.
    PTAD Executive Secretary, Mrs. Sharon Ikpeazu, explained that the agency, which charged with pension management under the DBS for pensioners who did not transit to the CPS, had been paying the affected pensioners since its establishment.
    She said this was despite that the firms were holding back the assets, which were meant to fund the payment of pensions to pensioners from parastatals, universities and colleges of education.The PTAD chief, however, confirmed that only Leadway had transferred the funds in its kitty to the agency’s e-collection account with the Central Bank of Nigeria (CBN), that to recover the assets, the Directorate on two occasions invited some of the firms to a meeting.
    According to her, NICON, UNIC, LASACO Assurance, Leadway Assurance, Custodian and Allied, Niger, Standard Alliance Life Assurance, AIICO, Goldlink, IGI and Nigerian Life and Provident Company turned up at the meeting to disclose their balances.
    ”Consequently, Leadway Assurance has paid N330.2 million it claimed to be owing, while Custodian and Allied and LASACO paid N148 million and N309 million, as first instalment,” Ikpeazu told The Nation. She said while Leadway paid off its outstanding balance as at February 16, this year, Custodian paid its first instalment as at last month; LASACO paid as at February 7, with the next instalment due on March 31, 2017.
    “Apart from inviting the affected firms to a meeting, PTAD, it was also learnt, went a notch higher by setting up a Pension Recovery Committee that is looking at the assets, accrued interest on the assets overtime, among other claims made by the firms.
    “A dedicated account has been opened at the CBN called Recovery Pension Funds e-Collection Account, especially for the recovered funds,” Ikpeazu said, threatening that PTAD might report the case to the Economic and Financial Crimes Commission (EFCC) to recover the finds/assets should the firms fail to pay up.”

    Insurance firms react
    PTAD’s threats to report the case to EFCC may have hit the right chord in the ears of the affected insurance firms. The Managing Director, AIICO Insurance, Mr. Edwin Igbiti, affirmed that the company has N1.54 billion pension asset in its custody. He, however, said the assets were held in instruments in accordance with insurance laws. Specifically, he said the company was willing to transfer only the assets backing up this fund to PTAD. Subsequently, the company, he said, has requested for a meeting to discuss the modalities. PTAD is the government’s directorate saddled with managing the pensioners of the Federal Government under the old scheme.
    The funds managed by the insurance firms were remittances from the Ministry of Finance for paying pensioners under the insured scheme,” Igbiti said. He, however, explained that in 2014, after the creation of the Directorate, the Ministry took over the function and instructed that all payments should stop in July 2014, which AIICO complied with.  Said Igbiti: “As at the time, there were no outstanding obligations.We would like to clarify that AIICO is not withholding any funds, which are pension funds that have been invested.
    “Also, the total fund in AIICO’s books as at date and spread among 18 parastatals is N1.54 billion, and are in assets held in instruments in accordance with insurance laws. In compliance with the instruction of PTAD, AIICO forwarded to the office, a comprehensive statement of the accounts detailing how funds were received and the disbursement made.’’
    AIICO chief told The Nation that after the meeting with the House of Representatives Committee on Insurance, PTAD and the insurance firms were mandated to discuss the modalities of the transfer of the assets.
    “The mandate was followed up with our letter stating again the fund balance and the intention to transfer only the assets backing up this fund to PTAD and subsequently requested for a meeting to discuss the modalities,” he stated.
    Igbiti added that after two attempts to meet with PTAD, a meeting was scheduled for Thursday, April 6, 2017, but that it could not hold. He said a new date was yet to be fixed. “AIICO is not reluctant to transfer assets and has begun the process, which we hope will be concluded soon,” he assured.
    Similarly, the Managing Director, Standard Alliance Insurance Plc, Mr. Bode Akinboye, said the company was holding meetings with the regulator, National Insurance Commission (NAICOM), stressing that a reconciliation meeting was already afoot.
    Akinboye, however, explained that the money was paid to the firms by the Federal Government under the old pension scheme, noting that this money is supposed to be transfer to PTAD. He, however, pointed out that to remit it without proper planning would bring loss to the affected firms. The money, he said, had been invested on long- term projects, such as real estate and shares, that would require time to mature and recoup.
    ”We are going through reconciliation because during the pension transition arrangement, there was some money that was managed by Pension Transition Committee under the Presidency. Some of it is what we are trying to transfer back to PTAD.
    “We cannot bring out the money now without proper planning. PTAD is saying give us back the money, but we are saying that it is not going to be that straightforward. The portfolio will include dividend share and we all know what has happened in the last eight years to shares at the capital market. There is no way it won’t be negative.”
    Also, the Deputy General Manager, NICON Insurance Plc, Mr. Kunle Adewale, said the company had given PTAD a proposal on how they intend to pay. “At present, we have sent a proposal to discuss a full and final payment and we are waiting for PTAD to give us a response,” he said.
    He added that overtime, technicalities were involved, but that the most important thing was that the company had made a proposal to pay.
    LASACO Assurance Plc Managing Director, Mr. Segun Balogun, said his company was paying back as agreed by PTAD.
    Goldlink Insurance Plc spokesperson, Mrs. Adeola Adigun, said the company was about to transfer the assets to PTAD. ”We are at an advanced stage to pay by transfer to PTAD. However, the liability being an industry issue is under close monitoring by Nigerian Insurance Association (NIA), the umbrella association of the insurance industry,” Adigun said. Efforts to get UNIC Insurance’s reaction proved abortive. Its Managing Director did not respond to text messages sent to him nor return calls made to his mobile phone.

    How PTAD’ ll use recovered funds
    Upon recovery of the assets, PTAD would use the funds to settle pension payment arrears. Already, the agency, according to Mrs Ikpeazu, was working with the Minister of Finance to ensure that all outstanding legacy funds were transferred to the agency to have money to defray some of the liabilities arising from the non-payment of pensions.