The Nation Newspaper

Category: Issues

  • StanChart may exit non-core business segments

    Standard Chartered could exit non-core business areas in response to the potential losses in the commodities sector.

    A GTR report said the bank is believed to have up to some $61 billion in outstanding loans to commodity traders and manufacturers at a time when the prices of oil, copper, iron ore and other major components of Standard Chartered’s portfolios are hitting all-time low.

    Economists at Macquarie, the Australian Bank, became the latest to forecast gloomy times ahead for Standard Chartered, with analysts predicting cumulative losses of almost $6 billion – about the same amount as a year’s profits.

    While reiterating the bank’s stance of not responding to individual analysts’ notes, a Standard Chartered spokesperson in Singapore told GTR that the bank has hiked up diligence and has the capability of absorbing any losses. They also said it is open to “exiting or reconfiguring non-core and underperforming businesses”.

    Many banks are expected to incur heavy losses due to the collapse in commodities markets. However, a series of research notes have predicted that the British-based bank will be hit hardest. “StanChart will suffer from a combination of commodity finance-related defaults and revenue pressure, in our view,” said the authors of the Macquarie report.

  • Foreign banks mull credit cut to local lenders

    Foreign banks are contemplating reducing the volume of credit extended to local lenders in the midst of declining oil prices, The Nation has learnt.

    The move has prompted the Central Bank of Nigeria (CBN) to advise lenders against such decision, which it sees as inimical to the economy.

    The slide in the cost of crude to around $57.8 per barrel from $110 six months ago, is no doubt straining Nigeria’s earnings and indirectly affecting cash flow of oil firms that borrowed from banks.

    So far, foreign investors are rethinking their investment plans in the country and the equities market, seen as the barometer for the economy has received serious beating in recent months.

    CBN Governor, Godwin Emefiele, who reiterated the call for continued extension of credit to the banks during the last stakeholders’ meeting held in Lagos, assured the global lenders that all is well with Nigerian banks.

    Meanwhile, while the foreign banks are exercising more due diligence in giving out fresh credits, Nigerian banks are pulling back from internationally syndicated dollar loans as falling oil prices and new regulation introduced by the CBN late last year has pushed up borrowing costs.

    In December, the CBN imposed new regulations on Nigerian banks, requiring banks with exposure to the oil and gas sector in excess of 20 per cent of their total credit facilities to hold provisions of 125 per cent against these assets.

    “The CBN is clearly trying to stop the occurrence of non-performing oil and gas loans (in Nigeria) by imposing these hefty provisioning rules. It is not clear how long these rules will be in place, but they will deter Nigerian banks from borrowing at the moment,” analysts at Reuters said.

    Beside the higher cost of provisioning, Nigerian bank borrowers also face the prospect of higher pricing for dollar loans from international lenders, which have become more cautious about lending into Nigeria. “We did see some last minute flexing on the price of one deal at the end of last year after the liquidity for the deal changed,” they said.

    A combination of these issues, including the devaluation of the naira, which has also made the cost of local borrowing more expensive, means Nigerian banks are likely to steer clear of international dollar lending where possible — at least in the short term.

    Bankers had hoped that Nigeria would become the new African sweet spot, perhaps even taking over from South Africa as the centre of African syndicated loan activity, reported Reuters.

    The Chief Executive Officer, Sterling Bank Plc, Yemi Adeola has described the continuous fall in prices of crude oil as purely political.

    The bank chief said the fundamentals of the oil industry, do not justify the fall in prices. “What has happened is purely political. The fundamentals in the oil industry does not justify the sharp fall in prices. It will get to a point, after all the political issues are resolved, the price will bottom-out, and will start bouncing back. This is not the first time that oil prices will go down. In 2008/2009, it tested $47 per barrel not for too long, and it bounced back. This one will drag for a while, maybe six months or so, but it will bounce back,” he predicted.

    Adeola said he does not want to discuss the politics of the US and the Gulf countries, but the truth is that in advanced countries, banks do not panic when crude oil prices go down, because asset is there and it is permanent.

    “For as long as you have proven reserves, what you need to do is restructure the tenor of your loans.  So, if I lend for five years and oil price goes down, I will not get my money in five years, but I will get it in 10 years by simply restructuring the loans. At Sterling in particular, we looked at oil accounts in our books and there is nothing to worry about. We stress-tested them, and we found that our customers can still do well even if oil price drops to $50 per barrel,” he said.

    Nigeria expects economic growth this year to be 5.54 per cent, down from an estimated 6.23 per cent for 2014, after the government trimmed its expenditure following a slump in the price of oil.

    Inflation is expected to rise this year to 8.78 per cent, up from an estimated 8.0 per cent last year, driven by the CBN’s devaluation of the naira, which has been hit by the drop in the price of oil, Nigeria’s main export.

  • Service delivery via social media

    Social Media operators across Africa converged on Lagos last weekend for the annual Social Media Awards Africa (SMAA), an initiative sponsored by Sterling Bank Plc.  The Executive Director, Finance & Strategy of the Bank, Mr. Abubakar Suleiman and other stakeholders speak on why banks should invest in the social media space and other developments in the thriving subsector, writes COLLINS NWEZE.

    The social media have and will continue to transform into what was never anticipated. Most operators of social networks are surprised with the diverse and astounding ways users have been able to engage and utilise their platforms.

    In Nigeria, the internet is highlighting the transformative nature and capacity of these networks to ensure that desired result is achieved.

    Sterling Bank is one of the lenders that has utilised the beauty of invention within social media- capacity and infinite opportunities therein to serve its customers better.

    The Executive Director, Finance & Strategy, Mr. Abubakar Suleiman, admitted that many organisations are playing big in the social media space and the competition on the various platforms is being intensified and that the bank cannot be left behind.

    The bank executive director, who spoke following the Bank’s successful sponsorship of the annual Social Media Awards Africa in Lagos, said Facebook and Twitter alone reportedly serve an estimated 1.5 billion users globally.

    For him, that is more than enough attraction. “The followership is huge and cannot be ignored by any forward looking organisation. Then you have other platforms that are patronised by millions of people worldwide on a daily basis including Nigeria, where it has assumed a new dimension. For us at Sterling Bank, it is a response to the needs of our customers, who are fully engaged in the social media space and in line with our objective of being a customer-friendly financial institution,” he said.

    Speaking on the bank’s product development on social media, Suleiman said the bank took the use of the social media platform to another level last year when it introduced the social lender (Quick Cash Scheme).

    The scheme, he said, is designed to provide quick cash to members of the on-line community.

    “My submission is that social media allows your business to extend well beyond the immediate geographic area. With social media you can cut cross country, state, and even national barriers. Besides, if you look at our population, you will see that the youth constitutes a reasonable percentage. To reach out to them, you must use a platform where they access information, where they spend most of their time on a daily basis and it is definitely in the social media space,” he insisted.

    Suleiman said Sterling Bank identifies with Generation Y, (also known as the millennials), and will sustain its position as an organisation that understands the needs of its customers.

    The lender also leverages relevant platforms to proffer innovative solutions, which in turn enriches the lives of its customers. It will equally continue to focus on providing timely and convenient solutions to support its online customers through the social media platforms.

    Why support the initiative

     Suleiman said for the bank, it is not about what it wanted to gain from supporting the awards.

    “It’s all about recognising excellence and rewarding same. The Social Media Awards Africa is a premier continental initiative designed to recognise and celebrate excellence, creativity and enterprise in the use of social media by individuals and organisations across Africa. Sterling Bank is happy to associate with this because it is committed to advancing human and social development across Africa with a focus on the growing relevance of social media around the world and Africa in particular.

    “Apart from providing a platform for the bank to further consolidate its position as a leading light in the Social Media space, the lender has taken this project as a Corporate Social Responsibility initiative,” he said.

    The bank, he said, is always delighted to be associated with initiatives that will impact the lives of our people not only in Nigeria, but globally.

    This, he added, has seen the lender going into partnerships with institutions, especially in the areas of the environment, entertainment and education.

    The bank is in partnership with the Lagos State Waste Management Authority (LAWMA) and provided kits for its over 30,000 highway managers. It has also done same for some other states in the country.

    How the winners emerged

     The process leading to the emergence of the winners, he said, was handled by an independent organisation different from Sterling Bank. He praised the organisation’s professionalism in conducting the entire process.

    “We have absolute confidence in them. From the members of the Advisory Board to the Jury, you would see that people with rich background in Social Media were involved.I was particularly fascinated by the voting pattern and the level of transparency in the process. It must have generated a lot of palpitation for the contestants, who eventually emerged tops,” he said.

    The event, he explained, brought together social media influencers, experts, enthusiasts and policy makers to explore and forge new developmental paths for Africa.

    “The SMAA seeks to recognise and reward creativity and excellence among users of social media across Africa. The voting phase, which was part of the process led to the emergence of 43 finalists for the four categories. A total of 923 nominations were received during the nomination period as follows: Personality Based got 468 nominations; Platform Specific got 266 nominations; Institutional received 115 nominations while indigenous got 74 nominations.

    “Also, during the window period, over 5.5 million connections, at least 821,886 retweets and 29 million accounts were reached through all 22 social media platforms where the messages were promoted. The 15 winners of the award have received the sum of $15,000 as prize money from the bank. The prize money was handed over to the winners at the SMAA presentations with each of the winners going home with $1,000 each,” he said.

     

    Feedback from social media fol     lowers

     

    Suleiman said the bank is excited about the interest the award is generating barely few days after the awards.

    “I must say that already, the award is generating interest among institutions across the continent as a Non-Governmental Organisation (NGO), African Media Initiative based in Kenya has indicated interest and confirmed training for all the finalists. The Chief Executive of the organisation, Mr. Eric Chije, who was at the event, also commended the Bank for appreciating excellence and contributing to the continued growth of social media both in Nigeria and on the African continent,” he said.

    Suleiman insisted that the level of interest and participation has been very heart-warming, adding that the bank would continue to provide the required support to aid the achievement of the objectives of subsequent awards, which would be bigger and better.

    “Since its launch last year September, the Award has expanded both within and outside Africa. It has also trended globally and become the second most talked about subject on Twitter in Nigeria, South Africa, Uganda, Kenya, the United Kingdom (UK) and the United States (US),” he said.

    Member, Advisory Board, Social Media Africa Awards, Ini Onuk said with four major categories and 15 awards, the SMAA is a genuine, timely intervention for promoting distinctive creativity, peerless innovation and pervasive developments on the African continent through the best use of social media platforms and the rest of the social web.

    “Social media has reconfigured the way in which all businesses and public entities now communicate. Open-sourced and inherently radical, it has created a space adverse to the tight image controls that brands once successfully exercised,” she said.

    She said before now, it was almost impossible to reach certain brands, persons and products, but with social media, marginalised dissenters can now make mince meat of the mightiest multinational brands, thanks to an explosion of public platforms that have created unlimited venues for sharing facts, spreading rumours and propagating aggressive calls to action.

    Social Media Influencer, Rich Simmonds, said social media platforms, e-commerce providers, and mobile money services, technology payment firms have brought new twists to how banking is done. He said Facebook, Twitter, LinkedIn, are helping banks reach out to the youth population.

    He said the SMAA was designed to recognise and celebrate excellence, creativity and enterprise in the use of social media – through its tools and platforms – by individuals and organisations across Africa. He commended Sterling Bank for making this year’s event a success.

    Simmonds said the event was an opportunity for participants to showcase the very best in Social Media on the African continent and reward individuals and institutions that have added value to the continent through the unique use of the platform.

    He said stakeholders should not overlook the importance of social media in today’s society and the increasing role it plays in the lives of people on a daily basis.

    Besides, Nigeria has over 63 million internet data subscribers; 11 million Facebook users and fourth fastest growing number of users worldwide. On Twitter, the country has 1.6 million profiles while 1.03 million business profiles and an unconfirmed number of professionals are hooked to LinkedIn.

    Analysts insist that with 25 banks and a network of 5,500 branches nationwide; 25 million banking customers against 127 million active mobile connections and 25 million users of smartphone, there is no doubt that a fertile market for digital play exists.

  • The bitter side of honey production

    The bitter side of honey production

    The market for beekeeping and honey production is huge. From cosmetics, medicine, confectioneries, and the pharmaceutical industries, to religious groups, the demand for organic honey and other bi-products  is growing. However, despite its huge employment and foreign exchange earning potential, apiculture, as the business is called, is not for the lily-livered. Beekeepers and operators in the local honey production industry are faced with formidable challenges, writes DANIEL ESSIET.

    A piculture, the business of bee-keeping and honey production, is a goldmine. With 4, 500 hives from where he produces about 50 tonnes of honey a year, Chief Executive, Centre for Bee Research & Development, Igbeti, Oyo State,  Bidemi Ojeleye, has since carved a niche for himself in apiculture. He and a few other beekeepers are encouraged by the growing demand for organic honey and other products from the bee family.

    Their ever-growing clientele comprise mostly of mostly operators in the cosmetics, medicine, confectioneries and the pharmaceutical industries, including religious groups. Because of the huge local and global demand for honey and its by-products, Ojeleye believes that beekeeping offers tremendous opportunity for rural farmers to contribute to the fight against poverty and hunger. The business, he added, also has huge employment and revenue earning capacity.

    According to him, the beekeeping industry when fully developed, can create thousands of jobs and a dozen new products and services as government seeks to diversify the non-traditional agricultural sector. Apiculture specialist, Mr. Victor Obi, agrees with him, noting that honeybees are quite valuable as they contribute to the successes of agriculture and industry, adding that Nigeria’s potential for local honey production is high and is a major export commodity.

    While maintaining that the development of beekeeping in Nigeria is important to meet local demand and contribute to the global demand for apiary products, Ojeleye regretted that beekeeping is still being done in a very traditional way, saying at the moment, the primary interest and product of the industry is liquid honey, which probably accounts for more than 95 per cent of the resources. Most of the liquid honey reaches end-users as bottled honey.

    The Apiculture specialist emphasized that despite its capacity to replace oil as the nation’s foreign exchange earner, Nigeria’s beekeeping and local honey production industry has not witnessed rapid growth. Rather, the industry has declined, with reduction in the number of beekeepers, apiaries and hives, which is reflected in the poor supply of honey, a healthy, natural sweetener.

    According to him, Nigerians are yet to recognise its huge potential, which perhaps, explains why there has not been significant investment in apiculture to allow that segment of the real sector blossom.

    Besides, a lot of domestic impediments still hold operators down. For instance, despite the increasing demand for honey and other bee products, such as bee wax (for making cosmetics, antiseptics, and for floor, furniture and shoe polish), bee cake, bee pollen, royal jelly, propolis, and bee bread, among others, local beekeepers are finding it difficult to meet the demand for original, pure honey and other bee products.

    While noting that there are encouraging signs from a few beekeeping businesses that seem to be making serious efforts to diversify operations into these products, he said from an industry standpoint, there will be no meaningful development or commercialization of these products in the short-to-medium term; for the same reasons that non-honey hive commodities are untapped.

    Apart from inadequate yield due to lack of investment, there is also the challenge of inadequate or poor infrastructure, such as roads and access to farm input. Right now, most bee farmers cannot access inputs and rural services and extension information to take advantage of its growing demand . There is also absence of coordination in form of farmers’ cooperatives to achieve scale.

    At present, there are no clusters of small and medium supply chain firms with training and market-linking assistance to maximise efficiency and innovation. There is no proper coordination with the agriculture ministry to bring about integrated solutions to the bottlenecks that hold down operators in bee farming and honey production. Beekeeping, its multiple benefits

    The tremendous potential of the beekeeping industry is not widely acknowledged even amongst beekeepers. This partially explains why there has not been any remarkable investment and growth in the number of beekeepers and hives. For instance, as Obi pointed out, most people do not know that the value of beekeeping to the economy is far greater than the value of the honey, which is harvested. This is because honeybees are the most efficient pollinators for several crops and environmentally important non-crop plants.

    This is why Obi is advocating for measures by the Federal Government to rebuild the industry. He observed that at present, there is nationwide  shortage of pure honey, as a result of which prices have been going up and the trend is expected to continue for some time.

    Former Chairman, Oyo State Beekeepers Association, Ayodele Salako, also said there are many value added products of beekeeping. The Chief Executive, Soba Bee Ventures, Oyo State, agrees with him. He noted, for instance, that liquid honey is the easiest, least expensive and least profitable hive commodity to produce. Aside from beeswax, which is an unavoidable by-product of honey production, there is comb honey, pollen, propolis, royal jelly, bee venom, package bees and queen bees, among others.

    He said there are export markets for all these products. He however, noted that nothing dramatic is likely to happen with any of these commodities in the short term because they all require significantly greater resources than liquid honey, better support services and infrastructure and an industry which is generally well developed and better organized.

    For him, every beekeeper who has dared to dream big knows of at least three or four of these products. Samples are almost always on display at local agriculture and trade shows. He said this is proof that interest and technical competence are both present in the industry.

    Experts say that honeybees contribute an estimated $200 billion to the global economy through crop pollination and production of honey, beeswax and other bee products. In sub-Saharan Africa, beekeeping is important as a source of food, employment, environmental conservation and diversification of the export base.

    Also, compared to other agricultural enterprises such as fish farming, poultry and livestock, beekeeping is a relatively low-cost, low labour intensive enterprise that does not require vast tracts of land. This makes it viable for women, youth and other disadvantaged groups.

    Although, domestic honey prices have risen sharply over the last five years, and there is export potential for honey to niche markets in Europe, the European Union — the preferred export market for African honey and beeswax — has a negative perception that African honey and beeswax are smoky, dirty and of inferior quality due to rudimentary harvesting and handling processes.

    On the balance, the  process of honey production is arduous, dangerous, and pays little for many people, but it serves as a social event for locals through which knowledge and skills regarding honey production and living in forests are taught and exchanged. Many believe that honey production is indispensable for the growth of younger generations.

    Beekeeping: A business for the lion- hearted While the aforementioned challenges apply to operators in virtually all other sectors and businesses, apiarists have their own unique challenges. For instance, while admitting that the potential to make good money from beekeeping and honey production is huge, Ojeleye said that apiculture is hard work. “Being stung by bees every day is just one of the things one can look forward to as an apiarist. Though it looks like a simple enterprise, but it’s far from it,” he said, adding, “It requires dedication and passion.”

    He is right. The Nation learnt that most farmers abandoned beekeeping because they were afraid of handling these Africanized colonies that have proven to be aggressive. Indeed, for a bee farmer, walking around on a hot day, sweating heavily in a thick suit, with angry bees hovering around cannot be one of life’s pleasant experiences. Yet, dedicated beekeepers do this almost daily in their quest for top quality honey to meet a growing consumer demand.

    This partly explains the decline in production, which is jeopardizing the national honey industry since most farmers are not interested in keeping bees or are unable to do so since they live close to residential areas. Financial institutions are not helping matters either. Most of them are afraid to invest in the honey industry.

    Indirectly this has caused decline since most beekeepers have lost confidence in the sector. Fewer people are keeping bees and there is also significant unsatisfied demand for honey. So far, there is no national agricultural incentive to encourage investment in the beekeeping sector.

    That is not all. According to Ojeleye, bees need balanced protein and carbohydrate diet to stay healthy. Generally there are three distinct working seasons with bees, each varying slightly from year to year.

    Hive maintenance and preparation typically take place in June and July; pollination season from the end of July to the end of October; honey production season from September to May. During these two months –June and July – the bees gather protein-rich pollen from the aloes and citrus trees. The bees are also fed with sugar water solution to provide the carbohydrates they need, but which are in short supply in the wild at that time of year.

    Also, since the hives are not close to one another, farmers are sometimes faced with the task of repairing hives damaged by human honey thieves and vandals when the hives are in other places. Some other beekeepers hire guards to protect the hives. They also implement hive management and hive manipulation. Hive management, for Ojeleye, includes checking for pests and diseases, which are of course, common and feared problem for today’s beekeepers.

    The most serious diseases could disrupt breeding in honeybee hives.

    For this reason, farmers have to deal with more common pests and diseases in his day-to-day management. It’s crucial for him to remain updated on what’s out there and to be alert. Some bee diseases are a grave threat to the industry. Sometimes, the infected hives must be burnt to stop the disease from spreading.

    There are several major honeybee pests, and beekeepers need to know them and maintain rigorous vigilance against them being introduced into the farm. There are also dozens of viral diseases. However, recent research show that the path by which most of these viruses enters a country is importation of honeybee queens and package bees.

    Also, having so many hives placed on so many sites increases the threat of honey theft and hive vandalism. But Ojeleye relies on the landowners to inform him of problems. He decides how many hives to place at a particular bee forage site according to the honey production potential of the targeted flora species in the area.

    Another challenge is finding safe and suitable bee forage areas. Like other beekeepers, Ojeleye has had to win many landowners over before they will allow him to use their land as hive and foraging sites. For this reason, he is very strict about abiding to the landowner’s rules about the use of land for placing hives. This approach reduces the risk of losing a productive site because of a landowner withdrawing permission for hives to be placed there.

    Sometimes, beekeepers lose their total bee population due to high mortality and other natural factors, such as swarming behaviour, when the bees in one of the hives find a new home elsewhere. The beekeeper replaces lost stock by breeding replacement queen bees either by splitting an existing single hive into two, or by catching wild bee swarms in a catch box baited with bee wax and propolis (a mixture of beeswax and resins collected by the honeybee from the flowers and leaf buds of plants.

    Indeed, the sector is facing many hurdles. The most daunting perhaps, has to do with maintaining the quality of its products. It has been a challenge to ensure that the honey received has not been adulterated.

    Some farmers initially used molasses and liquid sugar to try and increase the quantity of their supplies.

    Ojeleye cited inadequate finance and technical support from government as major impediment to the development of the beekeeping industry, a position shared by other beekeepers. Some farmers recently said legislative restrictions and growing government marginalization of the sector are key issues that are slowing down its growth.

    For instance, previous methods of honey harvesting excluded women from the practice since they could not climb trees to reach the beehives.

    This led to the introduction of the Langstroth hive. The advantage of the Langstroth hive over traditional hives is that the bees build honeycomb into frames, which can be moved easily because the frames are designed so that the bees do not attach wax honeycomb between the frames or to the walls of the hive. This ability to move the frames allows the beekeeper to manage the bees easily and efficiently.

    Inclement weather also an issue Ojeleye said when a beekeeper has done all that he could, the profitability of his business is left entirely to the vagaries of the weather. A nectar flow may be truncated or wiped out by a spell of prolonged rainfall or dry weather, a cold front or extended windy conditions. Generally, anything that impacts the flowering trees and other plants from which honeybees collect nectar or pollen within a three kilometers radius of an apiary will affect hive productivity; negatively or positively.

    Local beekeepers have very good reasons to be concerned about global warming and climate change. Salako said, for instance, that deforestation is a problem. It reduces the availability of nesting sites for feral colonies and diminishes the amount, variety and quality of forage for honeybees.

    The net effects on beekeeping are reduced colony carrying capacity of the area and reduced hive productivity. In the past, the main drivers were old traditional activities such as charcoal burning and cutting yam sticks. The impact of these activities is soft, when compared with several other drivers, which have near permanent or irreversible effects.

    If the business must blossom Ojeleye said the government and financial institutions must revive their interest and seriously support beekeeping/farming, which is at present operating at below capacity. For him, liberalisation combined with improvements in rural infrastructure would no doubt open the door to a progressive and financially rewarding honey production system. He   said local beekeepers have the capacity to produce enough honey to satisfy the local market provided they receive adequate resources and support.

    According to him, beekeepers do not have the financial wherewithal to acquire  equipment/input/bees and so must be supported. He also recommends that the industry must be given some level of institutional support in terms of structures and systems for its protection, and to facilitate its growth and development.

    For Obi, a former staff of National Root Crop Research Institute, Umudike, Umuahia, Abia State, there is urgent need to stop the use of pesticides. He said the use of synthetic chemical pesticides on nearby crops has always been a problem for beekeepers. He noted that the problem is as a result of crop farming models by respective communities and wider society.

    “Beekeepers must join whatever efforts there are for reduced use of these substances. Furthermore, developments else where in the agricultural sector are likely to result in greatly increased and more widespread use of these insecticides,” the apiculture consultant said, adding that government must impose bans and/or severe restriction on the use of some of these insecticides.

    Experts also urged government to strengthen bees’ habitat in core areas, double the number of acres dedicated to beekeeping, and increase funding for surveys to determine the impacts on pollinator losses. While urging the Federal Government to use its research, land management, education, and public/private partnership capacities to broadly advance honey bee health and habitat, Ojeleye appealed to the government to allocate hectares of standing forest, which has been committed for sustainable beekeeping activities.

    Experts also caution against wanton tree-felling and indiscriminate setting of fire on forests, as forests are good source of attraction for bees in their search for nectar.

    Government’s response The Minister of Agriculture and Rural Development, Dr. Akinwumi Adesina recently expressed government’s determination to resuscitate honey production. According to him, Nigeria is in a position to produce more honey if it maintains its rich natural vegetation, which is best known for beekeeping, leading to increased production and related products.

    The Minister noted that demand at the local market has been increasing year after year, with more people using honey for different purposes.

    Adesina urged increased sensitization and promotional activities so that demand will push production to higher levels down the years. He said that involvement of youths in beekeeping would bring benefits to the nation as a whole because youths who languish in the country’s metropolises would be incentivised and induced to stay in their home villages, engaging in beekeeping business.

     

    Conclusion

    For stakeholders and industry watchers, the market for locally produced honey has much room to grow and has space for new entrants.

    This is because the industry’s total production is nowhere near meeting national demand, resulting in importation to fill the shortfall.

    To reverse the trend, stakeholders want the government to do more by empowering the youths by providing them with some portions of forested land, which is suitable for beekeeping activities. According to them, beekeeping can contribute to food production through increased pollination of food crops and cash crops and production of bee products for the market.

  • Oil price crash: implications for Nigeria

    Oil price crash: implications for Nigeria

    Since mid last year when the price of oil started plummeting, there have been concerns over its implications for the global economy, especially Nigeria, which is heavily dependent on oil for revenues. There is widespread fear over how far Nigeria can go if the slump in oil prices continues, Assistant Editor EMEKA UGWUANYI takes a look at the situation and what it portends for the country.

    The price of oil, like any other commodity, swings. Over the years, there has been evidence that when the price of oil goes up steadily over a long period, the tendency is for a drastic price drop to be expected. It is because of the volatility and politics of oil, which determine the way the price goes, that led to the formation of the Organisation of Petroleum Exporting Countries (OPEC) in September, 1960, to intervene in shoring up prices through production cut when needed.

    Such interventions in the past, according to the former Minister of Petroleum, Odein Ajumogobia, had immensely helped in the rebound of prices. For instance, prices had averaged $18 per barrel from 1990 to the end of 1997, but from December 1997 to July 1999 oil prices had fallen from $18 per barrel to about $12 per barrel. In December 1998, the price dipped below $10 per barrel, and by April 1999 the price was just over $11 per barrel. But OPEC intervened by joining forces with non-OPEC producers such as Mexico, Oman, Norway and Russia to cut 2.1 million barrels with effect from April 1, 1999. By the end of April, the price had rallied, reaching about $16 per barrel and $18 by July. It later rose to $20 per barrel.

    Also between 2007 and 2008, the world witnessed the greatest level of volatility in the oil market with prices going up from $65 per barrel in 2007, to an all time high of $147 per barrel in July 2008 and many analysts predicted a rise to $200 per barrel, but by October of the same year, it dropped to $32 per barrel. Similarly, OPEC intervened, cut production and price rallied and rose to $70 per barrel. Very few people predicted that oil price would rise soon to $100 per barrel and by the beginning of last year oil prices had gone up averaging about $110 a barrel before the current slump set in mid-last year.

    However, the fear that the current price slump may last longer than expected is hinged on the fact that the leading oil producing  members of OPEC such as Saudi Arabia and Kuwait have refused to buy into the proposal by other members to cut production. Besides, the United States (US), a major global oil producer and consumer, is accessing its oil reserves apart from the regular production; therefore, it is not buying from external market. Also, oil demand by other big buyer countries such as China has dropped, following a lull in the economy. Therefore, the glut in supply is expected to continue until all members of OPEC reach a consensus to cut production perhaps in their next meeting in Vienna, Austria, on June 5, this year.

    There are various unconfirmed reports why the big time oil producers are pushing the commodity into the market despite the low price. For instance, the President of Dangote Group, Aliko Dangote, who spoke on ‘Global Energy Policies and Power Play- Emerging Regional Dynamics,’ at a forum in Lagos, said the topic is about the Gulf of Guinea in general, and Nigeria in particular, now that not a single drop of oil from Nigeria, and only an insignificant quantity from the region in general goes to the US, the traditional market for the bulk of the oil trade from the region. The new trend, he said, is not likely to change in the foreseeable future.

    He said until very recently, sustained high oil prices as well as an increasing demand fueled by growth-induced demand in fast growing countries such as China, India and other emerging economies, have encouraged the development of new sources of oil, especially shale oil and gas, as well as the emergence of new oil regions. He stated that high oil prices over the past decade or so have also accelerated the search for alternative fuels and continued improvements in fuel efficiencies. The consequence of these developments have created a significant shift in the supply dynamics and an oversupply situation with the resultant collapse of the oil price which, in just a few months, has seen a 20-25 per cent drop from over $100 per barrel to just below $80 per barrel by November last year. The price further fell to below $50 per barrel by close of the year.

    Dangote said: “These demand- supply dynamics however, are not the only drivers of the recent price collapse. Some observers have suggested that global politics and power play are also at work. Could it be the “Swing Producers” flexing their influence? Saudi Arabia, which is capable of pumping 12 million  barrels per day versus the US nine million barrels per day appears to have started a price war designed to punish its major competitor (Russia), who is unable to tolerate oil price at levels below $75.

    “In October 2014, as oil prices slipped towards $85, the Saudis increased their production and offered discounts to major Asian customers, and this month, with US prices nearing $80, Saudis again offered discounts to their North American customers in a transparent bid to gain the market share.

    “United States oil supply un-disputably has contributed to low prices, the question is how soon low oil prices can chase American oil from the market. No doubt, an extended period of low prices would kill projects in oil sands, deepwater and the Arctic, which typically require many years and billions of dollars to develop. But the Saudis are also not able to sustain low prices, as their economy is now accustomed to oil above $100. It is believed that Saudi Arabia needs the price to be above $90 to balance the books, but can live with lower oil price for longer than their competitors.

    “Another scenario: Could this be high stakes poker by world powers? USA and Saudi Arabia playing the oil card against Iran and Russia? Think about this a minute: “the Obama administration wants Teheran to come to their position over its nuclear programme. It also wants Vladimir Putin to back off eastern Ukraine. After recent experiences in Iraq and Afghanistan, the white House has no desire to put American boots on the ground to force their position. Instead,  it is in alliance with Saudi to drive down oil price by flooding an already weak market with crude?

    “As the Russians and the Iranians are heavily dependent on oil exports, the assumption is that the economic impact of sanctions and significantly reduced oil revenue, will make them easier to deal with. So have the US and Saudi Arabia found a common cause to use oil as the leverage? Saudis want to put pressure on Iran and to force Moscow to weaken its support for the Assad regime in Syria. As oil and gas account for 70 per cent of Russian exports and its budget does not add up unless the oil price is above $100, the US is able to bring deeper economic pressure on Russia in addition to sanctions. Could this be another dynamic?” He noted that the increasing instability as a result of the terrorist activity in Nigeria also worsens the impact of crude price fall.

    Also, some stakeholders said the oil price crash is a deliberate arrangement besides increasing shale oil output. They said some militant groups, such as the Islamic State in Iraq and Syria (ISIS), access crude oil illegally and sell it through informal channels  at very low prices to fund their activities. But with low oil prices, it would be difficult to find buyers, which will affect them negatively or weaken them, a reason such groups have resorted to kidnapping and asking for ransom. There are speculations too that the fall in price is also deliberate to punish Nigeria for not legalising same sex marriage and giving freedom to homosexuals.

    However, Ajumogobia and the former President of the Nigerian Association of Petroleum Explorationists (NAPE), Mrs. Adedoja Ojelabi, said increase and decline in oil price are normal, noting that what matters is to manage the revenues from the period of high price well to make up for that of low price. It is important to save for the rainy day, they said. Ojelabi said the falling oil price shouldn’t have been a concern if the necessary precautions were put in place. She said in any normal market, prices are expected to rise and fall, but the fact is that as a country, we don’t anticipate issues that will drive prices up or down. She stated that although Nigeria doesn’t have control over oil price because it is internationally determined through the forces of demand and supply, but it can mitigate the effect locally through building of relevant infrastructure such as refineries and electricity, among others.

    “If we have self-sufficiency, the effect will trickle down to other sectors of the economy. Imagine if Nigeria doesn’t import products, but produces and refines more than it requires locally, in a period of continued drop in prices, it can export refined products and create jobs and value in-country. Also if proceeds from oil have been sufficiently invested in making power available to Nigerians, the benefits should be unquantifiable because uninterrupted power supply will boost industrialisation, manufacturing and technology development,” she said.

     

    Challenges

    The greatest challenge that crude oil price crash poses to Nigeria, according to analysts, is the inability to fund the budget for smooth running of the economy and government. For instance, Dr Austin Nweze, a lecturer at the Pan Atlantic University, Lagos and governorship aspirant in Ebonyi State under the Social Democratic Mega Party, said Nigeria runs a rental economy where commodities such as oil, which account for 80-90 per cent of the nation’s revenue, are exported. Therefore, there is no in-country value creation, which could have been if the crude oil is substantially refined in the country.

    He said as the 2015 budget stands, it is undecided with oil benchmark of $65 per barrel, while oil price is below $50 per barrel. If there is no money to fund the budget, it means there will be no implementation of capital projects and workers’ salaries will be difficult to pay. There was such a scenario in 1998 when the price of oil was very low and salaries could not be paid and teachers were out of school because schools were closed.

    Nweze noted that although, the government has the option of borrowing to fund the budget, but it should know that it has paucity of infrastructure from where money could be generated to pay back. Besides, the foreign exchange reserves have dropped significantly. He said when borrowing, countries consider their percentage debt to Gross Domestic product (GDP). This consideration is critical, he noted. He said that countries with high GDP such as the U S can go as high as 80 per cent but because Nigeria runs a rental economy, its percentage debt to GDP should not be more than 10 per cent even though the standard acceptable limit is 40 per cent, adding that currently Nigeria’s percentage debt to GDP is well over 20 per cent.

    He also said if the oil price slump persists for so long, many economic activities and projects may be put on hold and that implies job cuts, retrenchment and downsizing of the workforce.

    The Group Managing Director, Nigerian National Petroleum Corporation (NNPC), Dr Joseph Dawha, corroborated Nweze’s view on loss of jobs and projects stagnation when he spoke at a conference in Lagos on January 20 this year. The ongoing decline in crude oil price, according to him, will cause delay of about three deep water projects in Nigeria.

    Dawha, who spoke through the Group General Manager, National Petroleum Investment Management Services (NAPIMS), Mr. Jonathan Okehs, said that many companies had serious cash flow challenges due to oil price decline, which has reduced their capital expenditure. “To many healthy companies balance sheet these will result in delay of economically viable projects. Delay in major projects will now be featuring in many companies’ projects and progammes, especially for offshore projects.”

    He said a number of deep water projects will suffer delays or outright cancellation including one in Angola, three in Nigeria and one in Ghana. In shallow water, two projects in Angola, one in Nigeria and two in Ghana may also suffer delays. According to him, in Nigeria the challenge for the industry is how to manage major projects through both price and physical uncertainty.

    The President of NAPE, Chinwendu Edoziem, also expressed concern that the oil price crash may lead to stopping exploration for discovery of new oil fields. He said that it is the price of crude that determines whether an oil firm will go and drill or not. Search for oil is often driven by price of crude, so let’s pray the price rallies.

     

    Solutions

    Dangote said international relevance and influence in any geo-political interaction and power play depend fundamentally on the internal social cohesion, economic strength, and political stability of the player nation. In other words, international political prestige and clout depend on the legitimacy and transparency in governance and socio-economic development of the country. For Nigeria to achieve its aspirations in the global arena, two imperatives must be vigorously pursued: significant improvement in governance and broad based inclusive socio-economic development.

    Nigeria, he noted, must increase its local processing and consumption. This has been the goal of the government for many years. But the progress has been impeded by lack of investment in the downstream petroleum sector as well as a very outdated policy and regulatory environment for the oil and gas sector.

    He said despite Nigeria’s GDP rebasing, which brought it to the 26th largest economy in the world and the largest economy in Africa, its GDP per capita still remains low at $ 2,688 and ranks her as 121st in the world (South Africa has a much higher per capita GDP of $7507 and ranked 69th in the world.

    The much anticipated  Petroleum Industry Bill (PIB), according to him, needs to be passed as it affects the source of the bulk of national foreign exchange earnings. “This is critical to the transformation of the sector and its repositioning to play an effective role in the new economy. The removal of Petroleum Fuel Subsidy is also critical because it benefits the more affluent, which is a small minority of the population,” he added.

    Nigeria’s inability to monetise its enormous natural gas resources, according to Dangote, is a major challenge.  Gas, he said, has great potential to accelerate economic growth, adding that the huge deficit in the nation’s energy consumption especially electricity, which has constrained our economic growth, can be easily eliminated if gas is fully utilised. “The key is to adopt a pricing regime for gas that will encourage investment in gas infrastructure,” he added.

    The Executive Secretary of Major Oil Marketers Association of Nigeria (MOMAN), Mr. Obafemi Olawore, also confirmed that the percentage reduction in pump price to N87 per litre from N97 by the government last week was not commensurate with reductions in some countries across the world. He said if the country doesn’t import products and the value of naira didn’t go down, with crude price of less than $50 per barrel, Nigerians could have been buying the product far less than it is now. But because we import the petroleum products in dollars with current pressure on naira, reducing the pump price further may not be in the interest of the country, economy and Nigerians, because the subsidy will still soar despite low price of crude. There is need to shore up the value of the naira.

    Nweze said because of dwindling oil receipts resulting in the decline of government revenue, it can borrow to fund the budget but must try to develop infrastructure that will be generating money to pay back the debt. Such infrastructure, he said, should be developed under public, private partnership for prudent management and sustainability. For private sector to participate in building of refineries, he stated that government should encourage investors by giving them robust incentives and removing subsidy. This, according to him, will engender competition and investors who feel that importation is cheaper than refining in the country, will import and price of products will crash.

    Ajumogobia said the government has to address the issue of pipeline vandalisation, oil theft and militancy, develop the culture of maintenance of critical infrastructure in the oil and gas industry, make the existing refineries operational and encourage construction of new ones, meet its funding obligations in oil and gas projects, and ensure that policies that guide the oil and gas industry are stable and properly implemented. Most importantly, oil revenues must be properly managed to care for the rainy days.

    Former Group Managing Directors, Jackson Gaius-Obaseki and Funsho Kupolokun, among others also backed the handover of the existing refineries to the private sector.

  • How import duty waivers, concessions deplete economy

    The inability of the Nigeria Customs Service (NCS) to meet its N1.2 trillion revenue target last year has been attributed to the indiscriminate waivers granted by the federal government  to companies and individuals listed and not listed under, or covered by Schedule Two of the Common External Tariff for import duty exemptions.

    A senior terminal operator who craved anonymity, told The Nation that despite the N20billion waivers granted the energy companies between January and May last year, all the terminals at the Lagos ports still depended on private sources of power. He said the trend is worrisome because there appears to be no end in sight.

    The official complained that they use between six and eight drums of diesel everyday to power their generators and other equipment. He attributed the high cost of goods clearance at the ports to the failure of  government to power the ports despite the fact that it was part of the concession agreement for it to do so.

    “Last year, the Federal Government said, based on its commitment to tackling the epileptic power situation in the country, and addressing the issue of estimated billing, it  granted about N19.662 billion in waivers and exemption to energy firms in the country between January and May last year and the effect of it is yet to seen anywhere, not even the ports where the Federal Government generates several billions of naira every week.

    “As far as many of us operating at the ports are concerned, some of the waivers granted by government are favoured waivers that violate all known anti-trust laws and deplete the nation’s economy,” the official said.

    The official lamented that most Nigerian rulers behave as if they have no stake in the country, lamenting that they run the system without  conscience.

    “Our rulers have failed to demonstrate to us that they are leaders. They have failed to display the required patriotism to move the people and the country forward,” he said, adding that import duty waivers, exemptions and concessions which are used to protect local businesses and jobs elsewhere, have been abused many times in the country, causing huge losses to the economy.

    He alleged that those responsible for granting the waivers have abused the system, and denied the country and the economy the much-needed revenues with  attendant benefits associated with it. He wondered why there is no power at the ports despite the huge amount of money generated from it and the waivers granted by the government for imported equipment.

    Investigation also revealed that all Customs offices at the Lagos ports including the offices belonging to the Nigerian Ports Authority (NPA) and other government agencies, run on power generating plants 24 hours. The NCS at the Tin-Can Port alone uses over five drums of diesel everyday to deliver its core function of trade facilitation and revenue generation.

     

    Some benefiting firms

    Waivers and exemptions amounting to about N19.662 billion were granted to energy firms in the country in five months, between January and May last year. The amount is 51.23 per cent of the N38.381 billion allocated to the Ministry of Water Resources in the 2014 budget; 31.48 per cent of the N62.45 billion allocated to Power; 31.75 per cent of the N61.928 billion allocated to Petroleum Resources and 29.5 per cent of the N66.645 billion allocated to agriculture.

    Data from the Budget Office of the Federation, Ministry of Finance, showed that oil and gas firms enjoyed about N18.881 billion in waivers and exemptions, while power companies enjoyed N780 million.

    Government said based on its  commitment to tackling epileptic power situation in the country and the need to address the issue of estimated billing, it was extending N326.174 million grant in exemptions to two pre-paid electricity meter companies for the importation of metering facilities. The companies are Momas Electricity Meters Manufacturing Company Limited and Mojec International Limited.

    Specifically, Momas got two exemptions: the first was for N32.272 million for the importation of semi-knocked down meters and three-phase normal credit meters, as well as one and three-phase standard pre-payment meters and all other related equipment.

    The second exemption, amounting to N163.69 million was for the importation of meter plastic machines and accessories, compression mould machine and all other meter related equipment.

    Mojec International, on the other hand, got N130.213 million in exemption for the importation of machinery/equipment and components for single and three-phase pre-paid meters.

    Indorama Eleme Fertiliser and Chemicals Limited, accounted for 53.4 per cent, or N10billion  of the total waivers and exemptions granted to energy firms in the period under review. It enjoyed a N6.96 billion waiver for the importation of its machinery, equipment and spare parts for the utilisation of  natural gas meant to bring about an increase in power generation.

    The company was also granted a N3.54 billion waiver for the importation of fertiliser equipment, catalysts and chemicals, pile and spare parts, among others.

    Also, Chevron Nigeria Limited enjoyed a waiver of N4.88 billion for the importation of machinery, equipment and spare parts for the Escravos Gas to Liquids (EGTL) plant, and a host of other pipelines.

    United Cement Company of Nigeria got N1.969 billion in exemption for the importation of machinery, equipment and spare parts aimed at boosting natural gas utilisation and power supply.

    NIPCO Plc also got N1.087 billion in exemption for the importation of machinery, equipment and spare parts.

    Other energy firms that got waivers and exemptions in the period under review include Green Fuels Limited–N14.37 million, for the importation of machinery, equipment and spare parts for compressed natural gas (CNG) to Independent Power Plants (IPPs). Edo Cement Company Limited got N240 million for the importation of gas generators, plants, machinery, equipment and spare parts.

    Accugas Limited got N30.87 million in exemption for machinery, equipment and spare parts for pipeline while Exterran Nigeria Limited got N66.09 million in exemption for the acquisition of natural gas powered compressors and spare parts.  Procter and Gamble was not let out of the spreee as it got N29.754 million in exemption for machinery, equipment and spares.

    Others are Sumal Foods Limited – N42.878 million; Federal Ministry of Power/Marubeni Engineering Corporation – N454.185 million and De United Foods Industries Limited – N19.978 million.

     

    Waivers in other countries

     

    The President, Association of Nigerian Licensed Customs Agents (ANLCA), Alhaji Olayiwola Shittu, said import duty waivers are mechanisms employed by countries to meet their economic goals, especially in protecting local industries, creating jobs, promoting exports, as well as generating and preserving foreign exchange.

    Shittu explained that  waivers are  also used to exclude local industries from paying import duty on certain goods for a fixed period. Countries such as Malaysia, Japan, India, China and others, at various times, have used import duty waivers, concessions and exemptions to protect and build their local manufacturing, agricultural, textile and motor industries. Today, all these countries have become export-oriented economic power giants, he said.

     

    Waivers in Nigeria

     

    Part of the objectives of the waivers in Nigeria, the ANLCA chief said, are to boost local industries, make the much-needed raw materials or goods available in the short-term and generate employment.

    However, he said for many years,  none of these lofty objectives has been achieved, saying most of the local industries have closed shops for lack of raw materials, resulting in the growing army of the jobless in the country.

    Investigations have shown that some organisations that got waivers for equipment used them to import furniture, cars, clothings and other luxuries that have no direct impact on the economy.

     

    Waivers, foreign firms and job loss

    The Managing Director, Nigeria Gas and Steel Limited, Hasib Moukarim, said indiscriminate grant of waivers to foreign firms by the Federal Government has led to the loss of several billions of naira and millions of jobs.

    He said  government should end the regime of waivers and concessions to importers of finished products, stressing that such waivers were depleting government’s earnings, while enriching foreign firms.

    He said for the Customs to meet its revenue target this year, the Federal Ministry of Finance, the Budget Office and the Federal Ministry of Industry Trade and Investment, must synergise and ensure that the waivers achieve its objectives.

    He urged Nigerians to defend the interest of local manufacturers against government’s unfavourable policies and foreign domination of the nation’s emerging market.

    “When finished goods are brought into the country duty-free, we are directly creating employment for workers of the foreign companies because such goods imported with waivers will become cheaper than the locally produced ones and this will increase the demand and sale of foreign manufacturers,” Moukarin said.

    He said by granting waivers to foreign companies, locally produced goods have become more expensive while demand had gone down. He noted that this development is threatening the survival of local companies that the waivers were designed to protect.

    “This type of scenario has forced many companies to retrench substantial percentage of their workforce with the consequence of worsening the unemployment situation in the country,” he said.

    He said for any company to qualify for waiver, or concession, the Federal Ministries of Finance as well as Industry, Trade and Investment should  conduct a thorough investigations to verify the authenticity of the items the beneficiaries intend to import  without paying duty.

    Local manufacturers have complained in the past that some foreign companies are abusing waivers by importing more than what they need for their projects and flooding the market with the surplus, thereby killing local industries.

     

     Minister of Finance, NCS disagree over figures

     

    The controversy over the accuracy of the data and figures on the value of the waivers and concessions is made more curious by the contradictions in the figures given as waivers by the Comptroller General, NCS, Alhaji Dikko Abdullahi and the Coordinating Minister of the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala.

    Abdullahi who spoke on the floor of the National Assembly when he was invited to explain  the shortfalls in projected revenue last year, said in the last three years, the country had lost N1.4 trillion to import waivers.  But Dr. Okonjo-Iweala said the amount was N171 billion.

    A senior NCS officer who spoke on condition of anonymity said more than 65 per cent of beneficiaries received the grant for goods not approved by the government, which ordinarily should be limited to raw materials, machinery and spare parts.

    A memo signed by the Minister of State, Finance, Yerima Ngama, and dated December 11, 2013, explained that the Federal Government has expanded the scope of the Negotiable Duty Credit Certificate (NDCC) to cover “other goods,” a decision, Mr. Ngama said, was reached by the Federal Executive Council (FEC).

    Investigation however showed that the list of beneficiaries include private individuals and businesses whose imports appear not valuable to the economy.

    The Customs officer said there were so many questionable waivers. For instance, he said, a total of N91.506 billion was given as concessions to 290 beneficiaries between January and December 31, 2011. He said one of the firms which he claimed was the biggest beneficiary, got N32.774 billion, stating that there was no indication about the line of business for which it was granted the incentive.

    Besides, he alleged that about N389.15 billion was granted to 149 entities in 2011 through concessions on fuel, lubricants and allied businesses. He said the list included major oil marketers that received over N145.7 billion worth of waivers. He added that the Nigerian National Petroleum Corporation (NNPC) and a few other companies received about N143 billion in waivers as well.

    For 2012, the Customs official said a total of N191.545 billion was granted to 416 beneficiaries, including individuals and private businesses, adding that  another 287 beneficiaries, got a total of N83.260billion in concessions and waivers for imports between January  and end of September last year.

    He alleged that a major motor dealer was granted N698.177million for importing fully built four-wheel drive motor vehicles, motorised tanks and other armoured  vehicles. Between 2010 and 2013, records showed that the motor firm received about N2.46billion concession from the government for the importation of vehicles valued at about N7.932billion.

    A senior official, National Council of Managing Directors of Licensed Customs Agents (NCMDLCA), Ben Ndee, said import duty waivers in Nigeria only serve as a tool to enrich politicians and should therefore be scrapped.

    He said import duty waivers in “customs duty waiver speaks volume of profligacy in our country.” He said the NCS should be repositioned to check this fraud to enhance its revenue target and boost the economy.

    Chairman, ANLCA, Ikorodu Chapter, Chief Tomi Aloba, said since duty free imports are sold in the market at expensive prices like those with payable duty, the benefits of import duty waivers,  are lost and therefore, needless.

    “A manufacturer importing raw materials that was given duty waiver sells his products at the same price as the same commodity imported without waiver, so, what is the need? There is no need for it,”  he said. Another clearing agent and a chieftain of the National Association of Government Approved Freight Forwarders (NAGAFF), Ugochukwu Nnadi, also said the import duty waiver has been abused and should be scrapped.

    However, a member of the Ports Consultative Council (PCC), Ajanowu Vincent, disagrees. He said there are certain categories of imports for which waivers should be granted to boost local industries and enhance production capacity.

     

    Effects of waivers

    Investigation revealed that in recent months, waivers granted to some individuals were used to import refined vegetable oil, soya bean meal and related products. This has put local vegetable oil producers on the verge of extinction.

    For instance, investigation has shown that most of the oil mills in Kano, including Nigeria Oil Mills, Kano Oil Mills and PS Mandrid, located in Bompai Industrial Estate, have closed down with attendant loss of over 20,000 direct and indirect jobs.

    Also in Lagos, Port Harcourt and Jos, where there are oil and related mills, the spokes-man of the producers, Mr Alaba Salau, said the operators were not finding it easy with many imported vegetable oil in the market.

    He said: “While few of us are just managing to survive, many others are making arrangement to close down and start importation. But that is not a good omen for the country because one of the by-products of vegetable oil mill is used for animal feed by poultry farmers.

    “The irony of granting waivers is that while the Federal Government tells Nigerians of its resolve to promote made-in-Nigeria goods, in secret, it grants waivers to political associates and cronies to import and make cheap money, thereby undermining local production,” he said.

    A Deputy Comptroller-General of Customs (Human Resources), said in 2011 alone, the Federal Government lost N37.2 billion to import duty waivers granted importers of raw materials alone. This was equivalent to seven per cent of the total Customs collection for the year.

    Following public outcry against such brazen abuses of the nation’s fiscal laws, the Dr. Okonjo-Iweala announced on September 22, 2011 that the President will no longer grant such waivers and that all “those who usually go to see the President at night will no longer be allowed to do so. If they have any proposal, it must be presented to the Economic Team.”

    In Nigeria, well-connected importers secure waivers on duty, levy, Economic Community of West African States (ECOWAS) Trade Liberalisation Scheme (ETLS) charges, Comprehensive Import Scheme (CIS) and other charges. As a result, abuse of the waivers is routine as politicians and businessmen continue to collude to undermine the nation’s economy.

    Since 2010, the import waiver cartel have ensured the sustenance of their nefarious activities. “A company (name withheld) got the authority’s nod to import 250,000 metric tons of rice with waivers on import duty. The company got waivers on import duty, ETLS, CISS and other charges, whereas the company’s name does not exist on the database of the Corporate Affairs Commission (CAC),” a senior NCS offcer said.

    According to the Customs and Exercise Department, a ton of rice (20 bags) cost $550 (about N82,000), while importers are expected to pay 0.5 per cent as ETLS, one per cent as CIS, 10 per cent as duty and 20 per cent for levy. However all these were waived.

    The list of Nigerians involved in import waivers racket include clerics, business men listed in Forbes Magazine as the some of the richest in Africa and former governors.

     

    Task before the National Assembly

    Shittu said the National Assembly needs to wake up to its responsibility as a constitutional organ for checks and balances. The constitution, he said, empowers the parliament to make laws and approve all public spending. Where the government serially flouts the laws, the lawmakers are empowered to correct the situation.

    Olabintan also said the lawmakers must continue to perform their oversight functions and should not allow the executive to carry on as it pleases.

    Other operators said the lawmakers should stop the Presidency and Dr. Okonjo-Iweala  and the Customs from granting waivers except they are approved by the parliament.

    Stakeholders in the economy have urged  the National Assembly to protect the nation’s economy by scrapping indiscriminate duty waivers.

     

  • How indiscriminate waivers, quotas hurt agric sector

    How indiscriminate waivers, quotas hurt agric sector

    The backward integration policy in the agric sector, particularly on major food items such as rice and fish, raised stakeholders’ hopes of a substantial cut in the country’s huge import bills. But that has not happened. Instead, the policy may have been hijacked by phoney investors and importers who, despite not having any record of investments in rice and fish production, enjoy Federal Government’s waivers and import allocation quotas. This has implications for Federal Government’s Agricultural Transformation Agenda, writes Assist. Editor CHIKODI OKEREOCHA. 

    When the Federal Government, through the Ministry of Agriculture and Rural Development, moved to extend the implementation of the Backward Integration Policy (BIP) to the agric sector, stakeholders in the sector lauded the initiative.

    To stakeholders, the policy, which worked wonders in the cement sector where it was first implemented in 2002, would replicate its success story in the agric sector, particularly on rice and fish, two major food items, where the BIP was extended in the hope of cutting the country’s huge import bills on the items.

    Minister of Industry, Trade and Investment, Dr. Olusegun Aganga, said Nigeria spends an estimated N360 billion yearly on the importation of rice. The country is ranked world’s second largest importer of rice behind China, consuming nearly six million tons yearly. The country also imports an estimated 1.9 million metric tons of fish valued at N125.38 billion annually. Such huge import bills are considered outrageous and unacceptable by the minister and stakeholders in the agric sector.

    For one, Nigeria is blessed with arable farm land and manpower to support local rice production. For another, the country also has abundant aquatic resources in form of inland and territorial water bodies in addition to a huge local consumer market to support fish production. What was lacking perhaps, is a policy in the mould of BIP to encourage fish importers to engage in fish farming enterprises with the aim of increasing local production and reducing import, with genuine local rice processors or investors with verifiable investment in the local processing of rice being issued import quotas that attract lower levies and taxes.

    In other words, the BIP empowers only genuine investors in local production and processing of rice as well as fish importers with genuine investment in fish farming to import the difference between what the country could produce locally and the shortfall that must be covered through importation. This was why the policy raised the adrenalin of stakeholders who embraced it. Their expectation was that its success in the cement sector would be replicated in the agric sector.

    Aganaga said in the cement industry where it has been implemented since 2002, the policy has seen the country’s cement capacity increase from two million to about 28 million tons, with total installed production capacity of 45 metric million tons per annum (MMTPA) and bagging capacity to 27.7 MMTPA. He also said the industry attracted investment of about $6billion, provided direct and indirect employment for about two million people. In addition, Nigeria has been able to save about N210billion in foreign exchange per year according to the minister.

    However, the policy which worked magic in the cement sector has failed to reposition the agric sector much to the disappointment of key stakeholders, especially farmers. Rather than improve the fortunes these two sub-sectors, the BIP is threatened by a rash of discretionary waivers and import allocation quotas to phoney investors. Most of the investors, it was alleged, have no track record of investments, either in form of paddy or rice milling. Same for the fisheries sub-sector. Here, investors with considerable investments in cold storage facilities and well-established supply chains across the country are denied import allocations. Rather, individuals and companies with little or no track record in fish importation are allegedly allocated import quotas.

    Analysts say discretionary grant of waivers and concessions to non-committed investors appears to be more pronounced in the rice sub-sector where industry stakeholders are now screaming blue murder over possible loss of huge investments by committed investors.

    In a protest letter to the government through the Ministers of Finance/Coordinating Minister for the Economy, and Industry, Trade and Investments, Dr. Ngozi Okonjo-Iweala and Aganga, respectively, the stakeholders drew attention to the “indiscriminate and wrongful award of import licences as well as concessions to businessmen with absolutely no investments in the rice sector.” They alleged that such businessmen are now “making billions of naira selling those licences to importers in the market.”

    It was alleged that many of the non-committed investors who got the import allocation quotas for rice are trading it to interested stakeholders at between 60 and 80 per cent levy after obtaining same at 20 per cent.

    Documents obtained by The Nation showed that investors, who have only submitted expressions of interest in the sector without any visible form of investment, might be enjoying waivers amounting to about N20 billion under the exercise. This means that the development may have cost the government N20 billion in form of Customs revenues.

    Under the new rice policy, a core strategy under the Agricultural Transformation Agenda (ATA), allocation of rice import quotas by the Federal Ministry of Agriculture and Rural Development showed that a move to bridge the supply gap of import-grade rice of 1.5 million metric tons was designed to ensure that existing rice millers and new investors receive a preferential levy of 20 per cent and duty of 10 per cent. But other importers pay higher levy of 60 per cent and duty of 10 per cent.

    The Minister of Agric and Rural Development, Dr. Akinwunmi Adesina had in a letter to Mrs Okonjo-Iweala, on the allocation of rice import quotas, noted that the criteria for allocating quotas under a methodology, which assigns weight to key criteria of self-sufficiency in rice production and milling in Nigeria, include the submission and approval of a Domestic Rice Production Plan (DRPP) among others. Adesina said a supply gap of import-grade rice was determined to be 1.5 million metric tons for last year while an inter-ministerial committee discussed the methodology for allocation of the import quotas.

    “Subsequently, a letter was sent to existing rice millers and new investors to submit a DRPP, and based on their submissions, 1.3 million metric tons of rice import quotas were issued to 25 qualifying millers at the preferential levy of 20 per cent and duty of 10 per cent. The remaining 0.2 million metric tons of rice imports will be at the higher levy of 60 per cent and duty of 10 per cent for other rice importers”, the letter read in part.

    However, documents made available to The Nation showed that the supply gap estimate is unrealistic when compared to a total of 2.74 million metric tons of imported rice that made its way into the country last year – representing a combination of rice imported into the country and the smuggled commodity from neighbouring West African countries. In other words, through the indiscriminate granting of waivers, government may have been promoting the activities of rice smugglers, losing an estimated N20 billion in the process.

    Also, the allocations released by the Ministry of Agriculture include several beneficiaries who fail to meet the finance ministry’s stipulated criteria. Documents further showed that new investors without milling capacity or investments in the country received the highest quota of the allocations to approved rice millers, while millers did not receive allocations and in some instances, received very low allocation. Of the 28 companies, only 16 allegedly have mills. The remaining 12 have no milling capacities, but account for higher imports than the qualified millers.

    The composition of the inter-ministerial committee and the strategy deployed in arriving at the supply gap also raised eyebrows in the industry. This is so considering that about three million metric tons of rice was smuggled from Cotonou in 2013, while an estimated 1.5 million was accounted for last year. Also, with President Goodluck Jonathan approving the BIP plan in May last year, the delayed implementation of the policy till December did not go down well with stakeholders.

     

    Rice investors react

     

    For the President, Rice Millers Importers and Distributors Association of Nigeria (RiMIDAN) and Chairman, Rice Investors Group, Mr. Tunji Owoeye, the BIP on rice is work in process.

    He said: “It’s still a new programme subject to amendments. These kinds of actions happen in the oil industry too. The policy would be reviewed by May and the flaws would be corrected.”

    On those who traded the allocation quotas they got, he said: “If anyone is disgruntled, the issue should be addressed as the policy is still in its early stage. It’s not a perfect plan.”

    According to Mr. Owoeye, 22 companies have been given allocation, adding that some of them never expected they could get it because many of them were not even prepared for it. “They did not even apply. Government just gave them allocations to encourage local content investments. Some don’t even have structures to do the business. I’m not supporting them to trade, but very few are doing that,” he explained, adding that what government has been doing between the last two and three years is to get across the rice value chain to get an investment plan in the industry.

    He said consequently, inspection was conducted based on the claims, while proposals were also requested through expression of interest from other investors. “This is the first time government is doing something right in the sector. The Millers who got the allocation did not even know the Minister of Agriculture,” he said, adding that the interests of those who have expressed huge investment stake were also taken care of. While noting that members of the association have come a long way to ensure that the policy works, he said it was intended to encourage millers to build capacity.

    Will genuine investors whose investments are currently on the line because of the alleged indiscriminate approach of the Federal Government in granting waivers and import allocation quotas to investors who have no investments in the industry be swayed by Owoeye’s explanations? Time, they say, will tell.

     

    Fisheries sub-sector also hit

     

    In line with the BIP, all fish importers must engage in fish farming enterprises like their counterparts in other parts of the world. The aim is to boost local production and reduce import. But the sub-sector is also caught in the web of indiscriminate grant of waivers and allocation quotas, dashing the hopes of stakeholders.

    A study carried out by a committee of the fisheries sub-sector headed by Prof Doyin Salami of the Lagos Business School is said to have discovered that the dichotomy in fish price hinges on the neglect of big importers and subsequent allocation of import quota to individuals and companies with little or no track record in importation.

    It was however learnt that aggrieved stakeholders in the sector may soon breathe a sigh of relief.

    Dr. Adesina said government intends to review the fish import quota as a way of cutting down the increment on its price  across the country. The review, the he also said, is to ensure that established importers are given import allocations that reflect their operational capacity.

    According to him, the review is aimed at ensuring that established importers, with considerable investments in cold storage facilities and well established supply chains across the country are given import allocations that better reflect their operational capacities. He said the ministry would work to clear any distortion in the market, announcing an increase in fish import quota for the third quarter of the year in order to address anomalies discovered by the committee.

    Envisaging a stretch in the period of importation to close the gap in supply, the Adesina reminded stakeholders that government’s plan is to reduce the import bill and encourage investment in aquaculture. He urged the Federal Department of Fisheries to support efforts at helping the companies to fall in line with reform objectives of the government which have far reaching benefits for local production.

    Agric Transformation Agenda threatened

    The shoddy implementation of BIP on rice and fish has far-reaching implications for the on-going reforms of the Agricultural Transformation Agenda (ATA) launched in 2011. Aside from fears that the nation may be losing N40 billion yearly in the rice segment of the agric sector alone due to the activity of smugglers and individuals pretending to be investing in the local production and processing of rice, industry sources say that the ATA may have been put on a reverse gear.

    Coming barely two weeks into the 2015 deadline set by the Federal Government to attain self-sufficiency in rice, stakeholders fear that the deadline will not be met.

    A  petition by stakeholders read: “The way it is going, another few years will be wasted and the nation drawn back. With oil prices falling, ATA provides the best opportunity for the country to generate alternative revenue by reducing import and in the near future, join the export market. With this sort of policy, this thing is not going to work. The rice import allocations will derail the self-sufficiency efforts.”

    Players across the value chain, with  substantial investments said the crisis they are facing is “imminent crisis of viability and closure” following the government’s “seemingly biased” allocation of import quotas. They insist that the allocations “provide a free ride for smugglers, thereby derailing the objectives on rice self-sufficiency.”

    Part of the objective of the administration is to turn Nigeria into a net exporter of rice, thereby driving the goal of the ATA to unlock the country’s large agricultural potential, diversify the economy, revive its rural areas and turn Nigeria into a global powerhouse in crop production. But with fraudulent importers and investors now capitalising on government’s shoddy implementation of the BIP on rice, experts say the objective may not be achieved.

    Stakeholders in the fish business are also worried that the discrepancy in fish import experienced lately would not only impede access to one of the most affordable and veritable source of animal protein and omega-3 fatty acids, which are predominantly found in imported fish, but is said to have caused the price of the commodity to rise beyond the reach of low income earners.

    Experts say because of her huge wealth and employment generation capacity, the future of Nigeria is hinged on agriculture. They say the sector is believed to hold the key for inclusive growth that will help lift millions of Nigerians out of poverty into wealth. This position is true, particularly now that government’s attention is shifting to the non-oil sector following the continued plunge in crude oil prices and the falling value of the naira against other major currencies.

    The e=1xperts said the sector is capable of making up for the loss in oil revenue. The fear, however, is that with the way the sector is being managed, the expected succour  may be long in coming.

  • Hope rises in insurance sector

    Hope rises in insurance sector

    Relief may soon come the way of insurers, as the Federal Government focuses on the sector for economic development, reports Omobola Tolu-Kusimo.

    With the fall in crude oil price and plans to diversify the economy away from oil revenue as major source of income, the Federal Government is now  looking at the insurance sector as one major area to grow the economy. The Minister of Finance and Coordinating Minister for the Economy, Dr. Ngozi Okonjo-Iwaela, indicated Federal Government’s renewed interest in the sector at a recent conference in Abuja with the theme: The Role of Insurance in a Nation’s Economy. It was the first time such a conference was initiated by her ministry.

    Before now, the minister has never attended any insurance sector meeting and conference personally like she does in other financial service sectors like banking, pension and capital market. But at the summit organised at her instance, she had interactions with key players from insurance and re-insurance companies; insurance brokers and agents; underwriters, actuaries and loss adjusters; various consumer groups; two local and foreign investors in the sector; and regulators and government officials. Perhaps, to underscore the importance the minister attaches to the sector, she said President Goodluck Jonathan was waiting for a report on the outcome of the summit to take the next step.

    For operators and stakeholders in the insurance sector, the conference was timely. It came at a time operators were agitating for government’s intervention to grow the sector. Apart from raising hopes that government may have started recognising the fact that the Insurance sector is a critical part of any nation’s economy and has the potential to galvanise the optimal performance of other sectors, the intervention also brightened hopes that the botched N1 trillion gross premium income targets may be attained or even surpassed.

    Dr Okonjo-Iweala hinted on such possibility. In her opening remarks, she said: “Mr. President is very excited at the potential of this sector, and is looking forward to reviewing the outcomes of this conference. Our objective today is to examine ways of invigorating the industry in our country for the next decade to ensure that it contributes to our national economic growth. The industry is an important component of the financial system in any country. Insurance helps in mitigating risks and thereby provides utility for individuals and corporations.”

    She said from economics perspective, risk-averse agents facing uncertainty are better off with insurance, as it helps them in their consumption and also improve their planning. “As Finance Minister, I can tell you that a vibrant insurance industry promotes savings and investments, increases the overall financial assets in an economy and drives development of capital markets. In times of natural disasters such as floods, hurricanes, droughts, insurance companies also help in providing financing to mitigate the social costs of catastrophes,” she added.

    The minster further said the insurance industry is a major contributor to job creation across the world. According to her, a vibrant insurance industry results in direct job creation for agents, brokers, underwriters, actuaries and so on; and also indirect jobs for many other industries whose risks are covered by the industry. “So the industry is an important sector; moreover it is big business. In developed economies, insurance companies are large financial players, they are among the largest institutional investors; they are major shareholders in Fortune 1003 companies; they own some of the largest international banks; and they are big investors in the bond markets and private equity funds around the world’, she stated.

    Mrs Okonjo-Iweala recalled that the insurance sector had grown steadily in the past decade because of work done by NAICOM and various stakeholders. She disclosed, for instance, that total premiums have quadrupled in the past 10 years growing from N75 billion in 2005 to more than N300 billion today. She noted that not surprisingly, there has been strong external interest in the sector with the entry of foreign investors such as Old Mutual and Sanlam from South Africa. She said just last week, AXA of France reportedly acquired a majority stake in Mansard Insurance for $246 million.

    She therefore, stressed that Nigeria has an insurance market filled with opportunities and many foreign investors are going to get even more interested in the coming years. She believes that there are even more opportunities going by the way Federal Government introduced insurance products in the growing mortgage and housing sectors. She, however, said in spite of the investor interest in the sector, the insurance sector in Nigeria, Africa’s largest economy, must be growing even faster. She said:”When we benchmark ourselves against other emerging markets, we realise that we still have a lot of work to do. The current insurance penetration like the ratio of premiums to Gross Domestic Product (GDP) is only 0.4 per cent in Nigeria, compared to 1.1 per cent in Ghana; three per cent in Kenya; and for the BRICS, Brazil is four per cent; Russia 1.3 per cent; India four per cent; China three per cent; and South Africa 15 per cent.

    “Moreover, for Nigeria, when you look at assets in our overall financial system, insurance also accounts for only three per cent of total assets, compared to 12 per cent from pension assets and 79 per cent from banking assets. This is different from other emerging markets such as Brazil and Mexico, where insurance assets accounts for about six per cent of total financial assets; and for India where insurance contributes about 14 per cent of total financial assets.”

    As promising as Nigeria’s insurance sector is, there are several challenges to be addressed. Some of them, according to Dr. Okonjo-Iweala, include lack of consumer trust, a fragmented industry with some weak and insolvent players, low enforcement of compulsory insurance policies, lack of professionalism by some agents and brokers in the industry, and a general shortage of skilled professionals in the entire industry. She said while the government has carried out reforms in the banking and pension sector, the insurance sector is next and would take off soon.

    While articulating Federal Government’s vision for the sector and where it sees the industry by 2020, she said the first part of the vision would be to grow the gross written premiums of N300 billion today to N1 trillion in the next three years, and to N5 trillion within the next decade. “So, we should be attaining gross premiums of about $30 billion in a decade from today,” she said, adding that the second part would be to deliver jobs in the industry.

    As the minister pointed out, the insurance sector is a powerful engine for job creation in the economy. She, however, regretted that today, there are only about 30,000 people working in the industry. “This sector should clearly be creating many more jobs for us. So the second objective of our vision would be to grow the number of direct jobs created in this industry from the current 30,000 people to 100,000 people in the next three years, and to more than 300,000 people in the next decade,” she declared.

    The third part of the vision, she disclosed, would be to widen access by growing the number of insurance policyholders in the country. “We are a country of 170 million people, but with only three million policyholders. Let us also work to achieve a minimum of 10 million policyholders in the next three years, and 30 million policyholders in the next decade,” she said.

     

    Team work, the way to go

     

    Dr Okonjo-Iweala insists that to develop the sector, all hands must be on deck. “We cannot develop this sector alone. All of us stakeholders will all need to work together to realise the potential of this industry,” she argued. Continuing, she said: “Clearly, the Federal Government has an important role to play in this sector. We need to get better at enforcing compliance for some compulsory classes of 10 insurance such as for motor vehicle insurance and group life insurance. We also need to clarify various regulations. For example on banc assurance, the use of corporate agents and we need to work on strengthening the supervisory powers of NAICOM.”

    She said too often, at such gatherings, stakeholders talk a lot but do not come up with concrete plans. “I would like to encourage you to be open and honest in sharing your perspectives and feedback. But I would not want us to get stuck only in rehashing the difficulties but to proceed to focus on the concrete actions which can help this sector to realise its full potential,” she stated.

    The minister’s appears to enjoy the support of the President on the need to leverage on the potential in the sector to grow the economy. Indication to this emerged few days after the conference when President Goodluck Jonathan, in his acceptance speech at the Peoples Democratic Party (PDP) Convention held in Abuja, confirmed that his administration is working to revitalise the sector.

    The President said: “Compared to other emerging economies, our insurance sector has not achieved its full potential. Today, only three million of our citizens are insurance policy holders, and overall insurance penetration is less than 0.5 per cent of our GDP. We want to transform this sector, just as we have done for our banking and our pensions industry. Our goal is to grow the total insurance premiums in our country from N300 billion currently to N1 trillion in the next three years and to increase the number of direct jobs created in this sector from about 30,000 people today to over 100,000 people in the next few years.”

     

    Stakeholders react

     

    For Director-General, Chartered Insurance Institute of Nigeria (CIIN), Kola Ahmed, the Federal Government was re-focusing its attention on the sector because of the crash in fuel price, which is affecting the economy because petroleum is the nation’s main source of income.

    “It is a blessing in disguise for the sector and I want to believe that the government means well this time around because of the seriousness with which the programme  was packaged and the attention given to it by the minister, ” he told The Nation.

    Ahmed disclosed that various committees were set up during the summit, which had more than 50 per cent chief executive of insurance companies in attendance. He added that the minister made it known that all the committees set up must start work immediately and that they have the backing of the government.

    He noted that the operators spoke out and mentioned the issue of government not being supportive of the industry by not paying its insurance premiums, not insuring assets and properties as expected. “I believe that with the present state of the economy, especially with what is happening in the oil market, which is affecting our economy and the fact that the government has tried everything with the banks which seems to have reached their saturation point, their focus on insurance sector will bring a change to the sector and the country generally,” he said.

    Similarly, Chairman, Nigeria Insurers Association (NIA) and Managing Director, Linkage Insurance, Godwin Wiggleon, said: “The President is trying to transform every sector of the  economy. He has done it in agriculture, stock exchange, and banking and even in entertainment, but he has now seen insurance as a vital sector that can boost the economy. I see a better future for the sector and we should be looking at a different sector from this year 2015.”

    The Managing Director, FBN Life, Val Ojumah, also thinks that the government is turning to all sectors of the economy to find out what they need to do to turn the nation’s economy around. He noted that with the general elections around the corner, government will do all it can to contribute to every sector.

    Earlier in his welcome address at the summit, Commissioner for Insurance, Fola Daniel, said the event was unique because it was organised under the auspices of the Coordinating Minister for the Economy to set a three-year agenda for the transformation of the insurance sector.

    Speaking on past reforms in the sector and their outcome, he stated that the first notable initiative for the reform of the industry was the Financial Systems Strategy, code-named FSS 2020 developed in 2007 to position the financial services sector to drive the vision of making Nigeria one of the most 20 developed economies in the world by 2020, and the financial centre of choice in Africa.

    He said following the aspects of the strategy that relate to the sector, NAICOM developed and launched its MDRI with the objectives to build capacity for NAICOM staff and stakeholders in the industry, develop the insurance agency system; build confidence and integrity in the industry, create awareness and secure the support of government and relevant agencies and ensure public compliance with various compulsory insurance requirements of the law.

    According to him, a significant element of the MDRI was a target of N1trillion gross premium income by the year 2012. He however, said implementation challenges and the impact of the 2008 financial crisis on the sector impeded the attainment of the initiative. He said notable among the negative impacts were the huge losses suffered by insurance companies as result of the near collapse of the capital market and decline in the growth of personal lines as a result 2009 changes in the financial services industry.

    He added that as at the end of year 2013, the gross premium income of the industry only grew to N300billion from N101billion in 2007. Although, the 2013 achieved gross premium income puts Nigeria as third from fifth position in Africa, “we know and I am convinced that we can do a lot better.”

    On key challenge to the growth of the industry, he said: “It is how to get sufficient number of potential customers to buy insurance. This decision is influenced by factors such as the image of the industry, financial literacy, economic constraints and attitude of the consumers, amongst others. There is also a mutually reinforcing relationship between the industry’s growth and the level of national economic development.”

    According to him, in advanced economies, personal lines insurance for example, has acquired a cultural status and is given priority as a means to mitigate various risks and reduce incidence of poverty. But it is not the same in Nigeria. “The major question to answer therefore will be what to do in Nigeria to break barriers and release the potential that ought to come with demographic advantage,” he said.

    The commissioner expressed hope that the interaction in the summit would result in workable programmes that will not just address these challenges, but also identify initiatives that will radically transform the industry to enhance its relative contribution to the nation’s economy. He stated that before now, the Federal Government did not genuinely accept insurance as an important tool to the development of the country owing to its past dealings with the sector.

    He said  although group life insurance is made compulsory for employers to provide for their employees by the Insurance Law created by the same Federal Government through NAICOM, government has continued to flout the law as it did not provide the policy for its workers in 2012 and 2013.

    In the years that the Federal Government bought the policy, he said it did not pay insurers premiums as and when due and at the moment, it owes them premiums worth billions of naira  it purchased to cover its workers. As a result, many workers did have valid insurance cover. It was not until last year when NAICOM enforced the “No Premium, No Policy” in the sector that the Presidency began to gradually pay premiums.

    However, with this refocusing, the consensus of operators and stakeholders in the insurance sector is that a new dawn may be in the horizon for the insurance industry, one that would position the sector to contribute to national development, particularly that the challenges arising from the plunge in oil price.

  • How viable are states’airports?

    How viable are states’airports?

    Airports as economic and social infrastructure are expected to be catalyst for accelerated development, where they are sited. But, attendant low passenger and cargo traffic into some airports is raising doubts over their economic viability, Senior Correspondent KELVIN OSA OKUNBOR reports.

    Airports are springing up in many state capitals.

    Without considering its economic viability, many states are embarking on the money guzzling facility.

    Aviation experts are worried over the increasing number of airports across the country, wondering how viable they are.

    Last month, Kebbi State became the latest state to inaugurate an airport.The N17billion airport is named after the late Premier of Northern Nigeria, Sir Ahmadu Bello.

    About four years ago, Jigawa State opened the Dutse International Airport.

    States that have built airports include: Akwa Ibom, Katsina, Bauchi, Gombe,  Delta  and Taraba.

    To experts, some of these airports are not economically viable because passenger traffic into them does not match the huge investment outlay on such facilities.

    While a lot of activities are going on at the Delta State Airport in Asaba, with three airlines: Aero, Arik and Air Peace connecting flights in and out of the place, the same cannot be said for the Katsina State Airport, where there are no scheduled operations.

    The level of flight activities at the Uyo Airport in Akwa Ibom State,  with Aero, Arik, Dana Air, and Discovery Air providing scheduled flights cannot be compared with Bauchi and Gombe where only Overland Airways provides flight services.

    The Taraba State Airport in Jalingo is pathetic case. No airline operates flights into the airport for now.

    Worried by this trend, experts argue that the states must step up efforts to attract economic and business activities to the airports to make them viable.

    Some industry analysts reason that the states must woo airlines to operate into such airports by developing the routes to make them viable.

    One of the ways of doing this, they say, is to offer incentives to airlines to increase the frequency of flight operations into those airports.

    While concerns over the viability of these airports is growing, more states have signified their intention to build their own airports.

    They include: Kogi, Ogun, Ekiti, Osun, Zamfara, Lagos, Anambra and Bayelsa. Construction is on going in some of these states.

    The question that many are asking borders on the rational for states to invest billions of naira into a seemingly unviable project.

    In an interview, Kebbi State Governor, Saidu Dakingari, said airports are futuristic projects needed to link any state to the national air link.

    He said there is nothing wrong in states building airports because they serve as a catalyst that accelerate economic development.

    The Kebbi State governor said airports as essential air transport infrastructure has the capacity to open up any state for business opportunities to the world, if there is a link by air.

    He said the Sir Ahmadu Bello International Airport in Kebbi, could not be described as unviable because its location is best suited to serve as a hub for agro allied export not just for the State, but also serve neighbouring countries including Benin, Republic of Niger , Mali, and other countries.

    He said state governments are investing in airports to create an avenue where agro allied produce for such an area could be flown by air into the international market.

    Though an initiative of Kebbi, the Sir Ahmadu Bello International Airport, the governor said, is already in discussions with some foreign carriers including Emirates, which is considering the use of the facility for cargo and passenger operations between Abuja – Kebbi into Cotonou and Niamey.

    He said if the airport were not viable such offers would not be in the burner .

    “In the North today, airports are a catalyst for development. Accessibility to any place using the airport is key in running any business. Our airport in Kebbi is already receiving the attention of private sector players,” he explained, adding that Dangote is planning to put over $9 million investments  in the agro- allied produce in the state.

    ‘’In the state, the availability of the airport In Kebbi is drawing investment.

    ‘’This airport is very busy, it will grow passenger traffic and there is a lot of viability for this airport. So, people who say that state airports are are not viable are not saying the truth.

    ‘’This airport is futuristic, we are Looking at private sector players leading the airport by airlines like Emirates, Ethiopian Airlines.

    ‘’These airlines could use this airport as a hub to drive cargo development within West Africa.

    ‘’One key strategy is for us to use consultants to drive development  by attracting more more airlines into this airport .

    Our strategy is to attract more airlines to make the airport more viable , other than having just a single carrier, we could open discussions with many airlines , including Arik and Aero to make the airport more viable.

    ‘’Our goal is to run the airport efficiently. Our plan is develop the airport to connect it with the Inland Port at Lolo, the dry port that could drive cargo and passenger movement with the country and West Africa.”

    Also, the Jigawa State Governor, Mallam Sule Lamido, said state airports are the way to go because they offer a window for the development of agro-allied activities where they are located.

    He spoke against the background of the  new Dutse International Airport.

    Lamido said with the right partnership with airlines, no state airport could be described as unviable.

    He said the construction of the airport became a necessity to attract more investors to the state.

    Lamido insisted that there were many investors willing to come to the state if there was a functional and safe airport, stressing that the construction of an airport in the state was  inevitable.

    He observed that the airport would be the hub in the region in terms of exportation of agricultural produce to other parts of the country and beyond.

    He added:  “This project is one of the projects initiated by the administration to transform the Northwest geopolitical zone with an agro-allied airport. The airport was designed specifically to develop unique economic opportunities for different states in the region.

    “We are also building a cargo airport for the export of agricultural produce. We are into livestock production; therefore, we can export the produce from the airport, so it is going to be a cargo cum commercial airport. It is a huge opportunity for the country and all these will make the airport viable and sustainable. So, this state has the potential to be the hub of the North in terms of economy, tourism and a number of things.”

    In an interview, the Chairman of Air Peace, Mr Allen Onyema, said there is nothing like an unviable state airport if the owners and managers of such airports liaise with airlines to develop routes.

    He said the state that have built airports conceived them as air transport infrastructure that would accelerate economic development.

    Onyema said: “It is wrong for people to say that many state airports are unviable.

    ‘’What they should say is how to develop such routes and attract airlines to keep regular services into such airports.

    ‘’There is need to link every part of this country by air.That is why states are building airports. Will anybody say that the Kebbi Airport is not viable, when airlines are competing to sign agreement with the state government to fly into the new airport.

    ‘’This explains why Air Peace signed an agreement with Kebbi State to develop the airport and make it more viable. The agreement with the Kebbi State government is part of efforts by the governor to open the state to all parts of the world through air link.

    ‘’The airport would accelerate the socio-economic development of the state. The airport is expected to generate jobs for people of the state. It would attract investment in many sectors of the economy.

    “It is important to clarify that there is nothing like unviable airport, state governments must give operators the opportunity to help open up airports. If you do not start it, the airports would not be open.”

    In an interview at the opening of the Dutse Airport in Jigawa State, the former member of House of Representatives and a pilot, Hon. Ibn Na’Allah, said there was need for more airports across the country.

    He said airports were built for some economic reasons, which include safety and security.

    He said: “A lot of people don’t understand the economic importance of airports. Airport is of the strongest security and economic importance in any community. Let me tell you what this would do; today, if somebody is sick and needs to be evacuated, he can be evacuated out within the shortest possible time. They can use this airport for export and this is an agrarian society. Of course, as I’ve always said, the people of Jigawa will find it convenient to come home and definitely boost the economic activities of the country.”

    Besides, the General Manager, Corporate Communications, FAAN, Mr. Yakubu Dati, said the construction of more airports by states would further enhance movement of cargoes and passengers in the country.

    He maintained that construction of more airports would also boost the economy of the country vis-à-vis safety and security.

    Dati argued that the global aviation industry had moved away from the transportation of passengers alone to include air freight, saying that most of the airports would contribute to the country’s Gross Domestic Products, GDP, with the carriage of farm produces from their environments.

    He said: “We have to look at the fact that the aviation industry is changing worldwide. It is not just about transporting air passengers alone; it is becoming a key in the movement of cargo. If you have an airport in these states, by the time they think about moving farm produce, they will be making enormous revenues daily.”

    But, the Managing Consultant, Centre for Management Development, Mr. Anthony Umoh, said before such project could be implemented by the government, it is necessary for it to carry out a feasibility study with regards to the viability of an airport in such a state.

    According to him, constructing an airport in an unviable environment would lead to draining the inadequate resources, but maintained that if it is proven that it would be viable, there was no reason it should not be established in such a state.

    “So, it is necessary that a feasibility study is carried out; if you like, give it to one, two or three different consultants so that they can confirm that it is a viable project. If it is not viable, it will just drain on public funds. But if it can be established that it is going to be viable, there is no reason it should not be carried out.”

    The Secretary-General, Aviation Round Table (ART), Mr. Sam Akerele, said state government should do a rethink  before embarking in construction of airports.

    He decried a situation where a state government spends about N20billion on the construction of an airport only for the government to generate less than N1 billion from the airport in a year, warning that most of the airports might be diverted to other uses in the future.

    He said: “Either we like it or not,  just a few airports are viable in this country.

    ‘’For instance, a state government will construct an airport with about N20 billion and makes less than N1 billion from that airport in a year. Are we moving forward or backward? If care is not taken, the airports will turn to football pitches in the future because the government might find it difficult to continue to maintain unviable airports when the viable ones are still been consistently maintained and upgraded by the government.

    ‘’Most of these airports are unnecessary and have political undertone.”

    In his contribution,  an aviation consultant,  Lafeef Ejioye, decried the construction of airports by states, saying that of all the airports, only Lagos, Abuja, Kano and Port Harcourt airports are viable.

    He said rather than construct airports for economic reasons, state governments only consider political expediency, adding that it was a colossal waste by the states.

    The Chief Executive Officer, Overland Airways, Captain Edward Boyo, said state airports could be made more viable if airlines and the managers of the airports have an understanding of the airplane type to be deployed in them.

    He said the deployment of small and medium range aircraft, including the ATR 72 is key in driving the development of state airports due to issues bordering on capacity. He said: “Overland  Airways is providing air transport services to every state  airport in  Nigeria  through  continuous  development  and  delivery of aviation  products and services to meet the needs of air travelers in the country.

    ‘’Overland  Airways  has realised that to be responsive, airlines must be committed to the revival and sustenance  of hitherto perceived unviable routes in the country thereby supporting  the  growth  of  the  air  transport industry in Nigeria and enhancing business and cultural ties in the communities it serves.’’

  • Fish importation ban: The morning after

    Fish importation ban: The morning after

    More than a year ago, the Federal Government, in a bid to stimulate local fish farming, placed a structured ban on fish importation. Stakeholders in the fish sector, however, expressed fears that the policy would price fish out of the reach of the masses. About a year into the implementation of the policy, MUYIWA LUCAS reports about its gains and pains.

    It was a well-intended plan to kick-start a backward integration policy for the fishery sector. But at the time the Federal Goverment through its Ministry of Agriculture and Rural Development (FMARD) made its intention known to begin a structured embargo on the importation of fish into the country starting from last January, several interest groups took positions on the issue.

    In the thinking of the Minister of Agriculture, Dr Akinwumi Adesina, the government’s action was aimed at an integrated policy that will gradually deliver the country from the wasteful dependence on fish produced in foreign lands, while the country’s  abundant aquatic resources remained untapped. The policy targets a 25 per cent annual reduction in fish importation into the country, and in line with the backward integration policy, all fish importers must begin to engage in fish farming enterprises like their counterparts in other parts of the world with the aim of increasing local production and reducing fish importation.

    According to the Federal Government, the only fish specie strictly regulated and prohibited from being imported are farmed fish, which is in line with best practices all over the world. Government’s decision in arriving at the policy stemmed from the reasoning that a responsible ministry would not fold its arms and watch an important sector such as the fisheries sub-sector go down the drain while financing other nations’ economies through indiscriminate importation, when the its economy suffers further devastation.

    An estimated 1.9 million metric tons (MT) of fish valued at N125.38 billion is said to be imported into the country, a situation the Ministry says is unacceptable. From the Minister’s account, Nigeria’s total demand for fish was 2.7 million MT, while it produces about 800,000 MT locally, with the deficit of 1.9 million MT addressed by importations.

    Indeed, the decline in the nation’s fisheries sub-sector has become obvious for many years. Since 2005, the government had observed with concern the escalating foreign exchange demand for fish importations. The Central Bank of Nigeria (CBN) also noticed an unsustainable surge in the demand for foreign exchange for fish importations by various companies operating in the country.

    This explains Adesina’s decision to correct the abuse, which Nigeria has long been subjected to as a dumping ground for unwholesome frozen fish. Some of these malpractices include over-invoicing, foreign exchange capital flight, and ghost importation.

    Stakeholders in the fish business are also worried that the discrepancy in fish importation experienced lately would not only impede access to one of the most affordable and veritable source of animal protein and omega-3 fatty acids, which are predominantly found in imported fish, but would have caused the price of the commodity to rise beyond the reach of low income earners.

    A cautious market survey revealed how imported fish such as Titus and Kote, for instance, have their prices increased from N10, 500 and N7, 500 last year to N13, 500 and N10, 200 respectively as the Yuletide approaches. It is expected to further increase as the season closes in. It is a fact that the prices of other species of imported frozen fish are increasing, orchestrating anxiety among stakeholders and keen observers, who as it were, blame the deficit in frozen fish supply on the galloping price of fish in the local market.

    And while the Catfish Farmers Association of Nigeria (CAFAN) is at ease with the resultant friction in the fish market, commending government’s stance on fish importation as a best practice for developing local fish production, job creation and saving foreign exchange, the Nigerian Trawler Owners Association (NTOA), on the other hand, has consistently criticised the policy as unwholesome for the country’s teeming population, which depends on fish for healthy living.

    The Association cited a statement in a 2012 publication of the Federal Ministry of Agriculture and Rural Development, titled: “Action Plan for Aquaculture Value-Chain Development for Nigeria”, where it claimed that: “Nigeria already has a shortfall of fish with a total fish production currently estimated at 600, 000 metric tons per annum with importation approximated at over 700, 000 metric tons and a projected demand for fish at 2.6 million metric tons, suggesting there is an actual deficit of 1.3 million metric tons.”

    With locally farmed fish production less than a quarter of Nigeria’s requirement and about 41 per cent of the total annual protein intake by an average Nigerian from frozen fish, NTOA wondered why CAFAN has remained a strong advocate of the policy, describing as feeble CAFAN’s argument that fish importation places unnecessary pressure on the naira by draining foreign exchange reserves and exporting jobs overseas.

    Nigeria currently imports pelagic fish such as Blue Whiting (Panla), Herring (Shawa), Horse Mackerel (Kote), Mackerel (Titus), Alsakan Pollock and Sardinella, which are unlike Demersal fish found near the bottom of the ocean.

    Aside from the cheaper cost of imported fish to locally farmed fish, is the issue of protein content. Pelagic fish, for instance, are said to be extremely healthy and offer a good source of protein and better source of Omega-3 fatty acids. A nutritionist, Taiwo Sanni, explained that this nutritional value enhances the heart and decreases risk of cardiovascular disease just as Omega-3 fatty acid is proven to reduce risks of arrhythmias (abnormal heartbeats), which can lead to sudden death.

    Yet, the Federal Ministry of Agriculture and Rural Development (FMARD), in its publication, submitted that catfish are on the other hand, considerably lower in Omega-3 fatty acids by an average of 6.3 times when compared to pelagic, herring, sardines and 5.4 times lower in healthy oils when compared to mackerel. This finding is also corroborated by The American Heart Association’s position, which encourages eating fish (particularly fatty fish) at least twice daily.

    Unfortunately pelagic fish are not found in Nigerian waters as their natural habitats are the cold seas of Europe, Russia and the southern oceans of South America. Only Demersal fish species such as croaker, sole and African mix are found in the Gulf of Guinea (Nigeria’s ocean).

    The Coordinator of Media Advocate Intelligence Resource, Mr. Manny Philipson, argued that going by the nation’s population growth, it would require an increase of 100, 000 metric tonnes of additional fish annually, which is four times the growth rate of farmed catfish production in the past five years, to feed the nation.

    He reasoned that the estimated annual increase of 30, 000 metric tonnes of fish to 153, 000 in five years from (2007 – 2012) clearly suggests that average increase in farmed fish output of 24, 600 metric tonnes is grossly inadequate when viewed against the United Nations’ (UN) five million people projection per annum, which could reach 210 million people by 2020. This view may be in sync with a 2012 FMARD publication – Action Plan for Aquaculture Value-Chain Development for Nigeria, which submits that it is unlikely that the growth in farmed fish production would meet Nigeria’s requirements in the near future.

    Stakeholders are of the opinion that the Federal Government should improve on its support to fish farmers through the provision of fishmeal and soybean meal, which account for 60 per cent of fish – feed input cost to rather boost locally farmed fish production. Presently, the ministry is not relenting in empowering local fish farmers. For instance, as at the time of implementing the regulated ban on fish importation earlier in the year, nine states and the Federal Capital Territory (FCT) had benefited from input supply, and 840 fish farmers per state were supplied with 500 fish juveniles (free) per fish farmer and five bags of fish feed at 50 per cent cost price.

    Last year, a total of 3.6 million juveniles, 36,000 bags of 15kg of feeds and 200 water testing kits were provided to fishermen in 10 states, at a cost of N1.5 billion. These efforts, it is said, may have been responsible for the glut in local fish producers, especially the CAFAN, recorded in the market during the year, necessitating the government’s efforts to search for export market for their products.

    Also, to continue to cater for the populace, the ministry initiated the registration of all artisanal fishing crafts and boats to ensure that the artisanal sector, which contributes 80 to 85 per cent of the total fish production in the country, is well organised and duly recognised. This, it was gathered, would provide an estimate of the fishing efforts in Nigerian waters, and effective management and security of the fishing environment. It is also to give the operators an identity beyond the shores of Nigeria, especially when fishing in coastal waters shared with neighbouring countries.

    Other value chains being developed by the ministry, include the Tilapia Value Chain, Lates Niloticus Value Chain and the Shrimp Value Chain.