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Category: Issues

  • Digitalising forex market to stabilise naira

    Digitalising forex market to stabilise naira

    • Moving from paper-based processes to electronic platforms for conducting forex transactions will discourage speculative demands and hoarding of forex in cash, thereby infusing more transparency and accountability into the forex market

    If everything goes as planned, Nigeria will soon transition from its paper-based forex exchange methods to transparent electronic platforms. This shift, driven by the urgent necessity to tackle forex market challenges, seeks to discourage speculative demands and hoarding of forex in cash. Its ultimate goal is to stabilise the naira and prevent its free fall.

     The Minister of Finance and Coordinating Minister of the Economy, Wale Edun, gave this hint last week, when he disclosed that the Federal Government plans to digitalise Nigeria’s foreign exchange market. This, he stressed, is a weapon to combat illegal activities and enhance transparency in the forex market. Speaking at the Nigerian Economic Summit Group (NESG) conference in Abuja, Edun said the FX market will be simplified and digitalised such that all legal and legitimate transactions will fall within the preview of the authorities. “Anything outside that will be illegal and a criminal offensive and will be robustly followed up,” he said. He further stated that President Bola Tinubu has issued an executive order, granting full legal validity for all cash within the domestic economy to enter the formal money supply system without hindrance. “There is another executive order that allows the domestic issuance of foreign currency instruments, so that they could have an incentive to provide that foreign exchange from whatever source market into income bearing instruments,” he added.

    Over the years, Nigeria has faced significant challenges in managing its forex regime, leading to a situation that has been characterised by scarcity, depreciation and significant pressure on the country’s foreign reserves. Several factors have contributed to this situation. One of them is Nigeria’s dependence on oil revenue. Nigeria is highly dependent on oil revenues, with crude oil accounting for a significant portion of its export earnings and forex inflows.

      Another factor considered to have put the naira in dire straits is the foreign exchange controls executed by the Central Bank of Nigeria (CBN). Nigeria has employed various forex control measures in the past to manage its reserves and stabilise the naira. These controls, such as restricting access to forex for certain import items, led to a thriving parallel market for foreign currency, with a significant disparity between the official and parallel market exchange rates. This created an avenue for rent-seeking and corruption, while also distorting the forex market. Due to falling oil prices and a decline in oil production, Nigeria’s foreign reserves have been gradually depleted over the years. External shocks, such as the economic impact of the COVID-19 pandemic, have further put severe pressures on the reserves. This depletion makes it challenging for the country to adequately meet its forex obligations and maintain stability in the forex market. Smuggling and illicit financial flows have also taken a negative toll on the naira.

     Another major contributor to the sad fate of the naira is the challenge of import dependency. The country is heavily reliant on imports for several goods and services, including food items and petroleum products. This dependence places a strain on the country’s foreign reserves, as significant amounts of foreign currency are needed to finance these imports. In recent years, Nigeria has taken steps to address some of these challenges and reform its forex regime. This includes the implementation of a managed floating exchange rate system, efforts to diversify the economy away from oil, and measures to attract foreign investment. Additionally, the country has initiated policies to curtail smuggling, enhance transparency, and promote economic diversification to reduce import dependency. Despite these measures, the forex crisis persists.

     Digitalising Nigeria’s forex regime is one such initiative that could address some of the existing issues. It has the potential to increase transparency, improve efficiency, and reduce the opportunities for corruption and rent-seeking in the forex market. The next day after Edun spoke at the NESG conference, the Presidential Fiscal Policy and Tax Reform Committee, led by Taiwo Oyedele, submitted its preliminary report to President Tinubu and made several recommendations. Among the recommendations was that the government should “digitalise Nigeria’s forex regime and discourage speculative demands and hoarding of forex in cash.”

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     The committee proposed expanding the forex market by integrating Bureau de Change (BDCs), forex apps, and retail forex dealers into the official foreign exchange market. This move aims to eliminate the black market. Additionally, digitising the forex regime was recommended to discourage currency speculation and cash hoarding. The committee suggested imposing excise taxes on foreign exchange transactions outside the official market to generate revenue. As a short-term solution, forward contracts for Premium Motor Spirit (PMS) importation were suggested, pending improvements in key economic indicators. Lastly, discontinuing the forex Verification Portal was also part of the recommendations. However, the success of these reforms will depend on effective implementation, sound economic policies, and sustained efforts to address the underlying structural issues that have contributed to Nigeria’s forex regime challenges. As a first step, the Federal Government is pressing ahead with the digitalisation of the forex regime. 

    What the new measure means

    Digitalising Nigeria’s foreign exchange regime would involve transitioning from traditional, paper-based processes to electronic platforms for conducting forex transactions. By doing so, Nigeria intends to discourage speculative demands and hoarding of forex in cash. This move would bring more transparency, efficiency, and accountability to the forex market. Similar practices of digitalising forex regimes and discouraging hoarding and speculation can be found in various countries across the globe. For instance, countries such as India, South Africa, and Brazil have implemented digital initiatives to modernise their forex systems and reduce the dominance of cash-based transactions.

     These efforts aimed to foster a more stable and controlled forex market, minimising the potential for illicit activities and promoting easier cross-border transactions. This move can bring several benefits to Nigeria’s economy and financial sector. One of them is enhanced transparency as digitalisation allows for better tracking and monitoring of forex transactions, which reduces the potential for fraudulent activities and promotes transparency. It enables authorities to have real-time access to data, promoting accountability and curbing corruption. Increased efficiency also allows for automating forex processes, thus eliminating the need for manual paperwork; it equally streamlines the overall forex operations. Digital platforms can facilitate faster, more accurate and seamless transactions, leading to improved efficiency in the forex market.

     There will be minimised speculative demands because by digitalising forex transactions, Nigeria can discourage speculative demands, reducing the volatility and uncertainty in the forex market. Digital platforms can enable better monitoring of forex flows, preventing excessive speculation and market manipulation.

     Digital forex transactions would discourage hoarding of forex in cash. With electronic platforms, individuals and businesses can easily and securely transact in forex digitally, reducing the reliance on physical cash and promoting a more efficient use of forex reserves. Easier cross-border transactions can be facilitated as digitisation simplifies cross-border transactions by reducing the paperwork, bureaucracy, and time required for processing. This would ease trade and investment flows, making it easier for Nigerian businesses to engage in international trade and attract foreign investment into the country.

     Embracing digital forex systems allows Nigeria to align itself with global trends and standards. It facilitates integration with international financial systems and fosters better collaboration with other countries, encouraging cross-border investments and financial partnerships. By adopting digital forex regime, Nigeria can unlock these benefits and pave the way for a more efficient, transparent and inclusive forex market. In general, digitalising Nigeria’s forex regime has the potential to positively impact the country’s foreign reserves in several ways. Because digital forex transactions reduce the need for intermediaries and minimising the risk of corruption, this could potentially attract more foreign investors to the country and increase the inflow of foreign currency, thus boosting Nigeria’s foreign reserves. If digitalising the forex regime involves implementing measures to curb illicit financial flows and money laundering, this could reduce the outflow of foreign currency from the country, thus positively impacting the foreign reserves.

    What happens after forex market is digitalised?

    When Nigeria digitalises its forex regime, it could have a significant impact on the forex parallel (black) market. Digitalisation of forex regime would involve using digital platforms and technologies to streamline foreign exchange transactions, making them more transparent and efficient. This move can potentially reduce the demand for the parallel forex market. The parallel forex market exists due to restrictions and inefficiencies in the formal forex market, which can lead to a scarcity of foreign exchange. As a result, individuals and businesses turn to the parallel market to meet their foreign exchange needs.

     By digitalising the forex regime, Nigeria can enhance the accessibility and availability of foreign exchange through formal channels. However, whether or not the digitalisation completely eliminates the parallel forex market will depend on various factors such as the effectiveness of the digital platforms, the government’s policies and regulations, and the overall stability of the economy.

     While digitalisation can significantly reduce the activities in the parallel market, complete elimination may not be immediate or guaranteed. But there are other challenges that may pop up. The cyber risks associated with digitalisation the forex regime primarily revolve around potential security breaches, data privacy concerns, and vulnerabilities in the digital infrastructure. With the digitalisation of Nigeria’s forex regime, there’s an increased reliance on technology, which can introduce certain risks. Cyber criminals may target the system to gain unauthorised access, manipulate data or disrupt operations, aiming to exploit any weaknesses in the digital ecosystem.

  • A new paradigm in EFCC’s anti-graft war

    A new paradigm in EFCC’s anti-graft war

    • The proactive approach of prevention will dismantle the roots of corruption and pave the way for national progress

    In Nigeria’s unyielding battle against corruption, a pivotal shift in strategy has emerged; emphasising prevention as the bedrock of the country’s anti-graft initiatives.

    Simply put, prevention represents a shift from a reactive to a proactive approach to tackling corruption. This paradigmatic change signifies a proactive approach, focusing on eradicating the very origins of corruption rather than merely addressing its symptoms.

     The new paradigm shift was announced by the new Chairman of the Economic and Financial Crimes Commission (EFCC), Ola Olukoyede, shortly after his confirmation by the Senate.

     Without downplaying prosecution, the EFCC will be more primarily concerned with preventing corrupt practices in the country, he vowed. Embracing the wisdom of the well-known proverb “prevention is better than cure” underscores the significance of taking precautionary steps to avert problems before they arise, instead of managing the consequences afterwards.

     This perspective emphasises the importance of proactive and preventive actions. It suggests that it is far more effective and efficient to prevent an issue or challenge from occurring initially, rather than attempting to resolve it once it has manifested.

     Addressing the underlying causes and implementing preventive measures not only saves time and resources but also minimises the efforts that would otherwise be expended on handling the aftermath of a problem.

    Nigeria lost 2.9trn through contract fraud in three years

    He emphasised the crime prevention point with an example illustrating the extent of procurement fraud in Nigeria. He revealed that between 2018 and 2020, approximately ?2.9 trillion allocated for various government projects was misappropriated by contractors for personal gain.

     “I did a survey between 2018 and 2020 on 50 entities in Nigeria, both human and corporate entities. I picked just one scheme, one species of fraud, which is called contract and procurement fraud. I discovered that within the three years, Nigeria lost N2.9 trillion,” he stated.

    The new EFCC boss further stated that the funds pilfered during the assessed period could have been allocated to valuable government initiatives had the past leadership of the anti-corruption agency taken measures to prevent its diversion.

     “When I put my figures together, I discovered that if the country had prevented the money from being stolen, it would have given us 1,000 kilometres of road, it would have built close to 200 standard tertiary institutions. It would have also educated about 6,000 children from primary to tertiary levels at N16 million per child.

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     “It would have also delivered more than 20,000 units of three-bedroom houses across the country. It would have given us a world-class teaching hospital in each of the 36 states of the country and the Federal Capital Territory. This is where we are coming from, this is where we are. Where we are going, it depends on the decision the Senate would take this afternoon,” he said.

     He also canvassed a review of the criminal justice system, stressing that a review of the system would not only reduce the time spent on investigations and trials of suspects but save the country some money. Besides, he wants the federal, state and local governments to establish a transactional credit system to discourage corrupt tendencies in the civil service.

     Olukoyede, who also called for a collaborative effort in tackling corruption, stated that an average individual would steal if given the opportunity. He made reference to civil servants whom he accused of living in luxury homes and buying vehicles that their savings could not afford.

     He said: “The time has come for all anti-corruption agencies to focus more on prevention than enforcement. Enforcement is a very strong tool in our hands and we are going to apply it very seriously. The savings of an average civil servant in Nigeria all through his service years cannot build the type of houses they are building and cars they are riding.

     “The problem we have is just like the proverbial monkey that was locked up in a cage with a bunch of ripe bananas. The owner stood outside with a cane. The monkey would either eat the bananas, get beaten and be alive, or allow the bananas to get rotten and die of hunger. “Everyone wants to live a luxurious life and the incentives are all over the place. I will do more in the areas of blocking the leakages. We spend more money fighting corruption when we could have spent less to prevent it without downplaying the importance of enforcement.”

     Olukoyede pledged to implement a transactional credit system. This system aims to restrict the purchase of luxurious properties with cash, enabling the monitoring of financial transactions. He emphasised that relying solely on enforcement efforts would be insufficient without an effective credit system in place, highlighting the importance of such financial mechanisms in anti-corruption initiatives.

     “There is what we call a transactional credit system. If we continue to allow Nigerians to buy houses, cars and other luxurious properties by cash because we don’t have an effective credit system, 1,000 anti-corruption agencies will not do us any good and that is the reality.

     “We must create an atmosphere to make sure that people have choices. If I don’t steal money, can I afford to train my children in school with good standards? If I don’t steal money, can I buy a car after I have worked for five years? If I don’t steal money, can I put a three-room bungalow in place after I have worked for 20 years? An average Nigerian does not own a home, when he has the opportunity, he would steal. Even if he did not have the opportunity, he would create one,” he said.

     The EFCC Chairman emphasised the importance of delivering proper justice in fraud cases by urging judges to consider more than just technicalities when making judgments. He proposed that cases related to fraud allegations should be resolved within a timeframe of not more than five years, spanning from the High Court to the Supreme Court.

     “In order to encourage our criminal justice system to work, the substance should be taken above technicalities. We must encourage our criminal justice system to adjudicate in such a way that it will not drag on for a very long time.

     “Prosecution should not be allowed to last for a maximum of five years from the court of first instance to the Supreme Court.  The Senate can work on that very seriously. If we make the administration of the criminal justice system really work, you will see the great work the anti-corruption agencies are doing,” he stated.

       Evaluating Nigeria’s anti-corruption campaign amidst global standards

    Numerous studies analysing the efforts of anti-corruption commissions worldwide have established specific evaluation criteria for the success of any public policy.

     To achieve its intended goals, a policy must be effective (able to accomplish its stated objectives), efficient (attain its goals with reasonable costs and within a reasonable timeframe), innovative and politically and administratively feasible. This means that Nigeria’s anti-corruption campaign, aimed at minimising corruption to the utmost extent, relies heavily on institutional capacity (including the powers, resources and leadership of implementing bodies), political determination and the actions of key figures such as political and business elites.

     Regrettably, research focusing on anti-corruption commissions in Africa has revealed persistent challenges, often referred to as the ‘seven sins.’ These include economic limitations, political reluctance, legal inefficiencies, organisational weaknesses, governance gaps, performance issues and public scepticism.

     In summary, the effectiveness or success of an anti-corruption agency requires substantial long-term resources, a skilled and motivated workforce, robust legal and administrative authority, solid backing, possibly even from the President, adequate accountability and transparency, a supportive institutional environment, especially within related sectors such as the police and judiciary and accessible financial records.

     Is the described situation applicable in Nigeria? Regrettably, Nigeria’s efforts to combat corruption find themselves ensnared in the aforementioned challenges.

    The key anti-corruption bodies, namely the EFCC and ICPC, suffer from insufficient administrative capacity, including limited powers, inadequate human and material resources and an inefficient legal system.

     Additionally, the lack of widespread support and commitment from major political figures at both the national and sub-national levels, as well as from civil society, exacerbates the issue. This collective failure significantly contributes to the persistent presence of endemic corruption throughout the country, despite the widely publicised anti-corruption campaign.

     Wanted: Legislation on unexplained wealth

    In Nigeria, there is a pressing demand to establish comprehensive, internationally recognised legislation to tackle the possession of unexplained wealth or assets. This urgent need was underscored during a recent workshop conducted by the EFCC and the National Judicial Institute (NJI), aimed at enhancing the capacities of judges and other anti-graft stakeholders.

     During the workshop, Wahab Shittu (SAN) highlighted the absence of legislation in Nigeria addressing unexplained wealth, unlike other jurisdictions such as the United States, United Kingdom, Hong Kong, and Kenya.

    The Communique addressed various crucial issues, emphasising the necessity for advanced training of judicial officers and anti-corruption agency staff. 

    This training should cover new trends and skills vital for intricate processes such as asset tracking and seizures, plea bargaining, cryptocurrency,  data protection, artificial intelligence, and emerging types of economic and financial crimes.

    Participants also stressed the importance of full implementation of the Proceeds of Crime (Recovery and Management) Act of 2022; ensuring that criminals do not benefit from their ill-gotten gains.

     Additionally, there was a call for the development of a comprehensive Whistleblower and Witness Protection Act to facilitate the investigation and prosecution of corruption cases by relevant agencies.

    The three-day workshop, attended by esteemed jurists, including Supreme Court Justices, Court of Appeal Judges, Federal and State High Court Judges and Senior Advocates of Nigeria (SANs), highlighted the need for future engagement with members of the National Assembly and the Nigerian Bar Association, as the discussed issues also impact their constituents.

    The way forward

    Prevention, as a strategy, moves beyond punitive measures and delves into the heart of the matter. It aims to eliminate environments conducive to breeding corrupt practices, fostering a culture of integrity, transparency and ethical conduct.

    But this is possible only when there are effective corruption prevention strategies. One of such strategies is holistic educational initiatives. Implementing comprehensive anti-corruption education programmes from primary education onwards, nurturing a generation equipped with ethical values and a strong moral compass and institutional strengthening is essential to the attainment of success.

     Fortifying governmental, educational and corporate institutions to ensure robust governance structures, enforce transparency and uphold the rule of law also have a role to play.

     To succeed in its anti-graft battle, Nigeria needs to work on establishing secure channels for reporting corruption, safeguarding whistle-blowers and encouraging citizens to actively participate in exposing corrupt practices; embracing innovative technological solutions such as e-governance platforms, block-chain and data analytics to create transparent systems, minimising human intervention and reducing avenues for corruption; promoting ethical leadership within public and private sectors, emphasising accountability, fairness and integrity; thus setting high standards for professional conduct.

     There is also the need to overcome cultural acceptance of corrupt practices, which requires a gradual shift through awareness campaigns, by highlighting the societal benefits of integrity and ethical behaviour. So also are legal reforms. Regularly revisiting and enhancing anti-corruption laws to address emerging challenges, closing legal loopholes, and ensuring stringent penalties for offenders and the need to address the root causes such as poverty and lack of access to basic amenities through social welfare programmes and economic reforms to reduce susceptibility to corruption.

     Incorporating prevention as the cornerstone of Nigeria’s anti-corruption drive can pave the way for a transformative era. By nurturing ethical citizens, fortifying institutions, leveraging technology and addressing challenges head-on, Nigeria can lay the foundation for a society where integrity reigns supreme.

  • Diezani’s UK trial: Justice abroad?

    Diezani’s UK trial: Justice abroad?

    • The former petroleum minister may join the growing list of politically exposed Nigerians who evaded justice at home but got served abroad

    Since she left the country just days before the end of former President Goodluck Jonathan‘s administration in May 2015, hardly has a month passed without one allegation or the other against former petroleum minister Diezani Alison-Madueke surfacing in the news. This month was no exception, but this time, the news was from abroad.

     The internet was awash on October 2 with news that Ms. Allison-Madueke had been arraigned for alleged bribe-taking by the United Kingdom (UK) police. The former minister, who currently lives in St John’s Wood, an upmarket area of West London, is alleged to have accepted £100,000 in cash, chauffeur-driven cars, flights on private jets, luxury holidays for her family, and the use of multiple London properties from oil and gas contractors.

     Other gratifications listed against her by the International Corruption Unit of the UK’s National Crime Agency (NCA) are furniture gifts, renovation work and staff for the London properties, payment of private school fees for her son, and gifts from high-end designer shops such as Cartier jewellery and Louis Vuitton goods. Appearing at Westminster Magistrates Court, Alison-Madueke spoke only to give her name, date of birth and address. She was not asked to formally enter a plea, although her lawyer Mark Bowen told the court she would plead not guilty.

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     The charges against her, read out in court, all related to events alleged to have taken place in London. Prosecutor Andy Young said she was alleged to have accepted a wide range of advantages in cash and in kind from people who wanted to receive or continue to receive the award of oil contracts, which he said were worth billions of dollars in total. District Judge Michael Snow granted Alison-Madueke bail but imposed terms including an 11:00 p.m. to 6:00 a.m. curfew, an electronic tag to be worn at all times and a 70,000-pound surety to be paid before she could leave the court building. Her next court appearance will be at Southwark Crown Court, which deals with serious criminal cases, on October 30.

     Following the news, the Economic and Financial Crimes Commission (EFCC) said it had obtained an arrest warrant for Alison-Madueke and initiated extradition proceedings. “She will soon have her day in our courts,” it said in a statement.

    The 63-year-old Bayelsa-born former senior official of Shell Petroleum served as a key figure in the administration of former President Goodluck Jonathan administration between 2010 and 2015. She also acted as president of the Organisation of the Petroleum Exporting Countries (OPEC). The former minister has been on bail since first being arrested in London in October 2015.

    Andy Kelly, head of the NCA International Corruption Unit, said: “We suspect Diezani Allison-Madueke abused her power in Nigeria and accepted financial rewards for awarding multi-million-pound contracts. These charges are a milestone in what has been a thorough and complex international investigation. Bribery is a pervasive form of corruption, which enables serious criminality and can have devastating consequences for developing countries.” 

    Kelly said that assets worth millions of pounds in relation to the case have been frozen as part of the investigation. In March, the NCA which targets international and organised crimes, provided evidence to the United States Department of Justice allowing them to recover assets totalling $53.1 million linked to Alison-Madueke’s alleged corruption. The Federal High Court Abuja had in January 2022 issued a second arrest warrant against Allison-Madueke over money laundering by the Economic and Financial Crimes Commission (EFCC).

    Failed extradition bids

    When news of her current travails broke, it renewed interest in Nigerian anti-graft agencies’ eight-year bid to prosecute her for alleged looting. Alison-Madueke has been in the sights of EFCC since leaving office and, following a series of direct and indirect links with several corruption cases, has become one of the country’s most politically exposed persons since the era of former President Muhammadu Buhari. The Buhari administration often cited Alison-Madueke’s activities at the Ministry of Petroleum Resources and the Nigerian National Petroleum Corporation (NNPC) as part of the worst forms of corruption under Jonathan.

     However, several attempts by the Buhari government to bring her home from abroad and put her in the dock failed.  The suspended EFCC chairman, Abdulrasheed Bawa, who was at one time appointed by Magu to head the team investigating Alison-Madueke and her allies, once travelled to the United Kingdom to interrogate the former minister but could not gain access to her.

    EFCC’s investigations culminated in the money laundering charges filed against her in 2018. The commission also targeted high-worth assets it believed she acquired with proceeds of crimes for forfeiture. The Federal High Court, Abuja, on January 24, issued an arrest warrant against Alison-Madueke, over corruption charges pending against her. It was the second arrest warrant to be issued against the ex-minister. On December 4, 2018, a judge of the High Court of the Federal Capital Territory (FCT), Valentine Ashi (now deceased), ordered the EFCC, the Police, the Department of State Security (DSS), and all other security agencies to arrest her within 72 hours.

     Similarly, the International Criminal Police Organisation (Interpol) on February 3, 2023 said the UK Government rejected its request to extradite the former minister. Assistant Inspector General of Police (AIG) Garba Baba Umar, who is the Head of Interpol’s National Central Bureau (NCB), Abuja, stated this on the side-lines of an investigative hearing by a House of Representative Adhoc committee. The committee was investigating the alleged illegal sale of 48 million barrels of crude oil. Umar told the Committee that mutual legal assistance (MLA) processes were followed in a bid to bring Alison-Madueke back but the UK government refused.

    Billions in cash, assets seized

    If EFCC failed in extraditing her, it did succeed at confiscating billions in cash and assets reportedly linked to her through the judicial system. About N47.2 billion and $487.5 million in cash and properties were traced to Alison-Madueke after investigations, according to an EFCC statement. However, the EFCC was not the first to record some success against the former minister’s perceived assets.

     On October 3, 2015, Alison-Madueke was arrested with four other people by the International Corruption Unit (ICU) of the UK’s National Crimes Agency (NCA). She was, however, granted bail after she had been detained for several hours. The agency announced that the arrests were part of an investigation into suspected bribery and money laundering offences. Two days later, the NCA secured the seizure of the sum of £5,000 and $2,000 from Alison-Madueke’s mother, Mrs. Beatrice Agama. The court also seized £10,000 from Melanie Spencer, one of the other persons arrested in the case. The NCA also secured the seizure of the sum of £27,000 (N8,155,164.37) in the case involving Alison-Madueke at the Westminster Magistrates Court, London.

     But the former minister has consistently maintained her innocence. On May 26, she accused the EFCC and the Attorney-General of the Federation (AGF) of falsely portraying her as corrupt. Alison-Madueke sued them for N100 billion as compensation for their alleged libellous publications which, she said, falsely portrayed her “as a common looter of the national wealth and a debased and corrupt public officer.”

     The suit filed at the High Court of the Federal Capital Territory (FCT), Abuja, is challenging publications that date back to 2016. Through her lawyer, Mike Ozekhome (SAN), she urged the court to declare some specific corruption allegations, which appeared on various news platforms and EFCC websites between 2016 and 2022 as false. Apart from asking for compensation, the former minister also urged the court to order the EFCC and the AGF to retract the alleged libellous publications. She also urged the court to order the EFCC and the AGF to “publish an unreserved apology in at least three (3) national newspapers, including ThisDay, The Punch and The Sun newspapers within seven (7) days from the date of judgment.”

     She has also addressed the belief that she fled the country shortly after the Jonathan administration ended in May 2015 in fear of being caught and prosecuted by the Buhari government. Alison-Madueke said she flew to the UK on 22 May 2015, about a week before the new government came to power, to attend to her failing health. She said towards the end of the Jonathan administration, she was diagnosed with “the most aggressive form of breast cancer –Triple Negative Cancer and was hurriedly flown to England on 22 May 2015, in order to undertake a critical course of treatment.”

     The treatment she took, according to the former minister, “consisted of two operations, eight months of intensive chemotherapy and five weeks of radiotherapy and I have remained in England ever since then, undergoing medical care and treatment.” In November 2015, a photo showing an emaciated Ms Alison-Madueke was released on social media platforms by a media personality, Dele Momodu.

     But the former minister seems to have made a full recovery. A crisp photo of her at an event surfaced online on July 20, in a rare public show since she declared her struggle with cancer. It featured her smiling beside Senator Ben Bruce during the celebration of her son’s graduation from the University of Reading. Her son’s achievement is a testament to the power of good parenting. Excellence indeed runs in the family.” The photo, however, raised curiosity as to whether she was indeed sick ab initio.

    Will Alison-Madueke go the way of Ibori?

    Britain, the former colonial power of Nigeria, has always been a favoured destination for wealthy members of the Nigerian political elite looking to enjoy the fruits of their wealth. But this is not the first time a Nigerian politician has been accused of and charged with financial crime abroad. The charges mostly result in convictions. An exception is the case of the former governor of Bayelsa State, Deprieye Alamieyeseigha, who was arrested in London in 2005 on charges of corruption amounting up to $1million. He however fled and escaped trial.

     In March 2023, an agreement was signed between the United States and the Nigerian government to return the amount. In 2012, former Delta State Governor James Ibori pleaded guilty at London’s Southwark Crown Court to 10  charges of fraud and money laundering and was sentenced to 13 years in jail. Earlier in May this year, Senator Ike Ekweremadu, his wife and a doctor were sentenced to prison by British courts for attempted organ harvesting in the UK. Ekweremadu was sentenced to nine years and eight months. His wife, Beatrice, was sentenced to four years and six months, and the doctor, Obinna Obeta, was sentenced to 10 years at the Old Bailey in the UK.

     In a country where corruption trials involving politically exposed persons often last or are stalled for years with eyebrow-raising outcomes, many in Nigeria will see Alison-Madueke’s UK trial as, perhaps, their best chance for justice whether she is convicted or acquitted.

  • The $1.1tr all-time high FAAC cash

    The $1.1tr all-time high FAAC cash

    The increasing funds distributed monthly during FAAC meetings should translate into an improved quality of life for Nigerians. Simultaneously, state governments should boost economic activities within their regions to expand their revenue sources

    These are happy days for state governments in Nigeria. Following President Bola Ahmed Tinubu’s decisions to put an end to fuel subsidy payments and unify the foreign exchange regimes, disbursement from the federation account has shot up from an average of N700 billion a month during the administration of Muhammadu Buhari to over N900 billion a month. June revenue shared in July was N907.054 billion; July revenue shared in August was N966.110 billion while August revenue disbursed in September was a never-before witnessed N1.1 trillion.

     The removal of fuel subsidy, unification of exchange rates, and increased disbursements to beneficiaries by the Federation Account Allocation Committee (FAAC) since June 2023 are interconnected and can impact each other in various ways. Fuel subsidy removal refers to the discontinuation of government subsidies on fuel. In Nigeria, fuel subsidy removal means that the government will no longer bear the cost difference between the actual market price and the subsidised price of fuel. This measure was to cut costs and reduce fiscal deficits.

     During his national broadcast on July 31, President Tinubu explained the rationale for the policy measures his administration has taken.  “For several years, I have consistently maintained the position that the fuel subsidy had to go. This once beneficial measure had outlived its usefulness. The subsidy cost us trillions of Naira yearly. Such a vast sum of money would have been better spent on public transportation, healthcare, schools, housing and even national security. Instead, it was being funnelled into the deep pockets and lavish bank accounts of a select group of individuals.

     “This group had amassed so much wealth and power that they became a serious threat to the fairness of our economy and the integrity of our democratic governance. To be blunt, Nigeria could never become the society it was intended to be as long as such small, powerful yet unelected groups hold enormous influence over our political economy and the institutions that govern it.  The whims of the few should never hold dominant sway over the hopes and aspirations of the many. If we are to be a democracy, the people and not the power of money must be sovereign.

     “The preceding administration saw this looming danger as well. Indeed, it made no provision in the 2023 Appropriations for subsidy after June this year. Removal of this once helpful device that had transformed into a millstone around the country’s neck had become inevitable. Also, the multiple exchange rate system that had been established became nothing but a highway of currency speculation. It diverted money that should have been used to create jobs, build factories and businesses for millions of people. Our national wealth was doled on favourable terms to a handful of people who have been made filthy rich simply by moving money from one hand to another. This too was extremely unfair.

     “It also compounded the threat that the illicit and mass accumulation of money posed to the future of our democratic system and its economy. I had promised to reform the economy for the long-term good by fighting the major imbalances that had plagued our economy. Ending the subsidy and the preferential exchange rate system were key to this fight. This fight is to define the fate and future of our nation. Much is in the balance. Thus, the defects in our economy immensely profited a tiny elite, the elite of the elite you might call them. As we moved to fight the flaws in the economy, the people who grow rich from them, predictably, will fight back through every means necessary.”

     Removing fuel subsidies has, therefore, freed up a significant amount of funds that were previously allocated for subsidy payments. These funds are now being reallocated or disbursed to other sectors or beneficiaries, potentially leading to increased disbursements from FAAC to the three tiers of government. These increased disbursements can be utilised for public projects, social welfare programmes, infrastructure development, or other areas. Prior to the unification, Nigeria had multiple exchange rates (official, parallel market, etc.) causing distortions and challenges in the economy. Unification involves merging these rates into a single exchange rate to create stability, promote efficiency as well as positively impact government revenue.

     Previously, Nigeria calculated its oil revenue using the official exchange rate of N460 to $1; however, with the naira now floating at N770 to $1, the country is expected to generate nearly double the revenue from the sale of crude oil. As a result, the new foreign exchange policy will bolster revenue for state, federal, and local governments. By increasing the factor price from N460 to over N700 for every $1 earned, there will be a substantial rise in oil earnings, even with no change in production output. This translates to approximately N300 more per $1 earned, multiplied by the 1.6 million barrels of crude oil produced per day. In consequence, this amounts to a substantial sum of money.

     With a unified exchange rate regime, the government can capture more revenue from oil exports and other sources. This increased revenue can subsequently lead to higher disbursements from FAAC to the beneficiaries. In other words, the removal of fuel subsidies and the unification of exchange rates has created savings, increased government revenue, and made more funds available for disbursements to beneficiaries by FAAC from the federation account.

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     However, the actual impact of the increased disbursements depends on various factors, including the effectiveness of revenue management, economic conditions, and government policies. The increased disbursements by the Federation Account Allocation Committee (FAAC) to the three tiers of government would have several implications for the Nigerian economy and the states.  

    Impacts of greater allocations

      The injection of such a large sum of money into the economy can act as a stimulus by boosting economic activities across various sectors. This can lead to increased consumer spending, investment, and job creation. The allocation provides financial relief for state governments that heavily rely on federal allocations to fund their budgets. Many states in Nigeria depend significantly on these monthly allocations to meet their financial obligations, including payment of salaries, infrastructure development, and service delivery.

     The funds disbursed can be utilised by state governments to finance critical infrastructure projects and social programmes, thus contributing to the development of the states. This can include investments in road construction, healthcare, education, and other public services. Some states  have accumulated substantial debts, causing debt servicing to be a significant burden. The allocated funds can help states with high debt burdens to repay or service these debts, improving their fiscal position and reducing financial strain.

     The disbursement can have a positive impact on the living conditions and well-being of citizens through improved infrastructure, provision of public services, and opportunities for employment and income generation. For the states, having a larger share of the FAAC allocation can reduce their dependence on other sources of revenue, such as taxes or borrowing which can lead to more stable financial management.

     However, it’s important to note that the amount allocated may not always meet the full financial needs of the states. There can be disparities in the allocation, and in some cases, it might not be sufficient to cover all budgetary requirements, leading to potential financial challenges. The allocation also plays a role in state economic planning. States need to consider these funds when devising their budget and economic development strategies.

     The allocation from FAAC has a significant impact on the economy and state governments. It provides crucial funding for government operations and can influence economic growth, but it also highlights the importance of effective financial management and planning at both the federal and state levels. It is important to note that the reliance on monthly federal allocations leaves many states vulnerable to fluctuations in oil revenue, as Nigeria still depends on oil exports. Also, the effective utilization of these funds by states is crucial to maximize their impact on economic development and social welfare. It is essential for states to prioritize transparency, accountability, and prudent financial management to ensure the funds are efficiently utilized and properly accounted for.

     Professor Uche Uwaleke, Director, Institute of Capital Market Studies, Nasarawa State University Keffi, argued that “naira devaluation following unification of exchange rates means more naira from crude oil sales to the federation account. It contributes to fuelling inflation. During my time as Finance Commissioner a few years’ ago, the average inflow into the federation account was about N600 billion. Today, FAAC is sharing over N1 trillion. This development is impacting negatively on prices of goods and services and on the exchange rate as much of it is used to chase scarce forex.

     “The new Fx regime will definitely see a rise in FAAC allocation. Also, another advantage is that there will be increase in naira in terms of dollar denominated assets held by state governments. The way forward is to ring-fence the bulk of this exchange gain in an account meant for capital projects.”

     Mr Gbolade Idakolo, Managing Director/CEO SD&D Capital Management Limited, believes that “the floating of the naira and subsidy stoppage has boosted the revenue accruing to the Federal government which has also increased the amount shared in FAAC. This increase has been witnessed right from the month of June and it will continue if the government fine-tunes its revenue strategies. This means that the federal government now has more revenue to share across the three tiers of government and meet loan obligations. The most important expectation from Nigerians is that this increased revenue should be used wisely for the overall benefit of the people.”

     On his part, Chairman of the Revenue Mobilization Allocation and Fiscal Commission (RMAFC) Mohammed Bello Shehu when reacting to the news of fuel subsidy removal in a statement said that “the cessation of under-recovery payments would eliminate the uncertainty surrounding the subsidy regime. It will free up funds for the execution of critical national development and human capital enhancement projects such as the provision of an affordable transport system, investment in the education sector, improvement in health care, and infrastructural development.”

     On its part, the Central Bank of Nigeria (CBN) has overtime cautioned against unmitigated release of funds into the system which it argued could cause an increase in domestic prices (inflation) in the short to medium term. It mentioned two key developments that are likely to contribute to this upward pressure: the recent deregulation of petrol prices and the transition to a unified and market-determined exchange rate. The CBN believes that the policy environment and how it affects domestic prices will require closer collaboration between it and the fiscal authority. In other words, the central bank and the government need to work together to address the impacts of these developments on the economy and manage any resultant inflationary pressures.

     At the last Monetary Policy Committee (MPC) meeting address, former Acting Governor of the CBN Folashodun Shonubi, said “key developments that would likely sustain upward pressure on domestic prices, in the short to medium term, are the recent deregulation of petrol price and the transition to a unified and market-determined exchange rate. The unfolding dynamics in the policy environment and the resultant pass-through to domestic prices would thus require greater collaboration between the Bank and the fiscal authority.”

     In other words Wale Edun (Coordinating Minister for the Economy) and Yemi Cardoso (CBN Governor) will have to come together to forge a common alliance of political and economic understanding for the well-being of the country.

  • Benefits of Nigeria/UAE deal

    Benefits of Nigeria/UAE deal

    • Restoration of diplomatic relations will open new vistas in trade, investment and tourism sectors in both countries

    Besides being a hub for aviation, tourism and businesses, the United Arab Emirates (UAE) is home to many Nigerians. It was, therefore, a piece of cheering news when President Bola Tinubu announced that his administration has finally resolved the diplomatic dispute between the United Arab Emirates (UAE) and Nigeria, Africa’s largest economy.

     The UAE imposed a visa ban on Nigerians in October last year, shortly after Emirates Airlines suspended flights to Nigeria. The move was allegedly a response to Nigeria’s failure to help Emirates Airline repatriate its earnings in foreign exchange, amounting to $85 million. Additionally, the UAE’s Etihad Airways stopped flights to Nigeria. Emirates Airline is owned by the government of the UAE. Specifically, it is owned by the Investment Corporation of Dubai, which is a government-owned entity. The airline is part of the Emirates Group, which also includes other aviation-related companies and services. Like the Emirates Airline, Etihad Airways, part of the Etihad Aviation Group, is owned by the government of the Emirate of Abu Dhabi in the United Arab Emirates (UAE).

     The UAE immigration authorities subsequently announced a ban on visa applications from Nigerians. The UAE government said the suspension would subsist pending the resolution of issues between it and the Nigerian government. The country also stopped issuing tourist visas to persons under the age of 40, a policy that affected many Nigerians as well. The row has had a significant negative impact on travels, bilateral trade and investments. The UAE is a major trading partner for Nigeria, and the suspension of flights had made it more difficult for businessmen and women to operate.

     The sour relations between both countries had earlier witnessed the Emirates Airlines suspending its operations to Nigeria on December 13, 2021, in reaction to Nigeria’s Federal Government’s withdrawal of the carrier’s flight frequencies, except one, to Nigeria. But, the UAE was the first to reduce Air Peace’s request for three weekly flights to one, and had claimed it did not have enough slots for the airline. On its part, Air Peace said it would be suspending operations with effect from Tuesday, November 22, 2022, “till further notice.” It, thereafter, redirect its flights operation to other routes.

    Nigerians, known for their adventurous spirit and penchant for visiting Dubai for holidays, shopping, and medical tourism, found themselves compelled to seek alternative airlines like Kenyan Airways or embark on circuitous routes via cities such as Cotonou, Accra, or other West African nations. Even when opting for these detours, travellers were subjected to a mandatory 14-day quarantine upon their arrival in Dubai. This stringent procedure has resulted in significant discomfort for Nigerian travellers, prompting calls from aviation experts for a diplomatic resolution between the two countries.

     The total volume of bilateral oil trade between Nigeria and the UAE amounts to approximately $1.5 billion. Essentially, the UAE serves as a pivotal nexus, especially for Nigerian enterprises seeking to engage in commerce across the Eastern regions, encompassing countries such as China, Japan, Korea, and the broader Middle East. Many Nigerian businesses view the UAE as a central gateway to accessing these markets. Therefore, the recent suspension of bilateral travel between Nigeria and Dubai in recent months has had adverse consequences on the operational capacities of numerous Nigerian companies engaged in international business. One noteworthy challenge stems from the absence of Nigerian banks with UAE as a designated trading hub, a role crucial in facilitating trade across the Eastern hemisphere. The inability to travel and conduct business in the UAE has emerged as a prominent concern, hindering the ability of Nigerian companies to engage in international trade and business ventures.

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     Without mincing words, the travel ban, before President Tinubu’s intervention, had adverse effects on the economic interests of both nations and placed numerous Nigerian business owners in the UAE in challenging circumstances. Many experts believe this positive development will strengthen the interests of both countries in terms of trade, investments, security, and tourism. Numerous Nigerians, whose business endeavours were halted due to the ban, will now have the opportunity to revive their ventures. This signifies significant economic growth for both Nigeria as a nation and its citizens, when weighed in terms of missed opportunities in agriculture, tourism, trade, investments, peace, and security since the travel ban was enacted. It is also a win-win situation when seen from the strain the diplomatic row placed on the bilateral relationship between the two countries.

    Issues behind the diplomatic row

    Beyond the issue of repatriating revenues, it’s important to note that during the diplomatic rift last year, the Director-General of the Nigerian Civil Aviation Authority (NCAA), Captain Musa Nuhu, provided insights into the situation. He explained that NCAA withdrew its approval for Emirates to operate 21 flights to Nigeria due to the refusal of the General Civil Aviation Authority (GCAA) of the UAE to grant equal rights to the sole Nigerian carrier, Air Peace, which operated flights to Dubai via Sharjah. Nuhu clarified that the then Minister of Aviation, Hadi Sirika, had granted Emirates Airlines 21 weekly frequencies to two major Nigerian airports: 14 to Lagos and seven to Abuja.

     When Emirates suspended its services to Nigeria, it stated, “Emirates is committed to its operations in Nigeria, and we stand ready to reinstate services once restrictions are lifted by the Nigerian authorities, ensuring travellers have more choice and access to trade and tourism opportunities in Dubai, and beyond to our network of over 120 destinations.” In solidarity with Emirates, Etihad Airways also suspended its flights to and from Nigeria. While the issue of repatriating revenues was well-known, records indicate that some Nigerians traveling to the Middle East nation were involved in criminal activities.

     It was a known fact that wealthy Nigerians have made huge investment in real estate in UAE. Therefore, analysts predicted that Nigerians would feel it more if UAE decides to permanently cut diplomatic relations with the country. The UAE had forced Nigerians out of the country at different times, compelling the Federal Government to send airplanes to evacuate the citizens back to the country. This came after eight Nigerians were sentenced to death in Sharjah for robberies at money exchanges and cash machines (ATMs) across the emirate in December 2016. Also, prostitutes and fraudsters were also known to have descended on Dubai.

     Some Nigerians believed to be members of cult groups, who were armed with cutlasses, were arrested fighting on the streets of Ajman, Dubai. Knowing that those behind the clashes were young Nigerians, the Arab nation decided to restrict issuance of visa to those below 40 years, except those travelling with family members on tourism. Some smart Alecs circumvented this regulation by obtaining visa for family visit and travelling alone. The UAE was equally ahead of them, detaining such travellers on arrival.

     At the height of the visa ban, hundreds of Nigerians lost their jobs and were stranded for months. It was gathered that the Nigerians realised the sordid situation upon securing another jobs. Unable to bear the ensuing misery, some of them returned to Nigeria since they committed no crime in their host country. Others stayed, hoping that the decision would be rescinded. Many Nigerians who are professionals resorted to doing menial jobs, owing to the allures of the UAE, its cultures and traditions across its seven emirates namely; Abu Dhabi, Dubai, Sharjah, Ras al-Khaimah, Ajman, Umm al-Quwain and Fujairah. To many Nigerians working in the emirates, the urge to live and work in the country was tempting despite not having work permits.

    Reversal of visa ban and inking of billion-dollar deal

    Last week, following the lifting of the visa ban by the UAE, Nigeria secured an investment deal worth billions of dollars, according to the Presidency. According to Presidency, Nigeria and the emirates established a framework for investments worth billions of dollars across multiple sectors, including defence and agriculture. “What we’ve done today is to not only normalise relations, but then to add new dimensions to that relationship or partnership that are mutually beneficial to both nations. And I think as we move forward, the details of those investments will become clear,” the Presidency said.

     In line with the Bilateral Air Service Agreement (BASA), the Federal Government and the emirates have agreed to give reciprocal rights to Nigerian airlines. Minister of Aviation and Aerospace Development, Festus Keyamo, while speaking at the side-lines of the 7th African Aviation Summit in Abuja, at the weekend, said during his meeting with Emirates and Etihad airlines, he insisted Nigerian airlines should be given reciprocal rights.

    On resumption of flight operations by Emirates and Etihad, he said: “We are working out the details. We cannot say the time frame.” But the Presidency said Emirates and Etihad airlines are expected to resume operations immediately without any payment by the Federal Government. This was to include a successful negotiation of a new foreign exchange liquidity programme with the UAE.

     While the specific financial details of the deal remain undisclosed, President Tinubu’s willingness to break the deadlock reflects a more open approach to foreign investors who have voiced concerns about the challenges of repatriating funds from Nigeria, particularly in light of the strict foreign currency restrictions imposed during President Muhammadu Buhari’s tenure. In a departure from previous policies, Nigeria has announced that the new agreement will also encompass the launch of a joint foreign exchange liquidity program with the UAE. Further particulars regarding this program will be unveiled in the upcoming weeks.

    Moreover, both nations have agreed that the investment arms of the UAE government will inject “several billions of US dollars” into various sectors of the Nigerian economy, including defense, agriculture, among others. The official statement also underscored President Tinubu’s appreciation for UAE leader Al Nahyan’s steadfast friendship and his resolute efforts to collaborate in fully normalising and elevating the standard of relations between these two prominent countries.

     As Nigerians were celebrating the announcement by the Federal Government, in a statement on its website on the diplomatic meeting, Emirates News Agency, UAE’s official news agency, did not mention anything about the lifting of visa ban on Nigerians as well as flight resumption. The agency only mentioned that the UAE President and Tinubu explored opportunities for further bilateral collaboration in areas that served both countries’ sustainable economic growth, including the economic, development, energy and climate action fields.

  • Enter 4-D model of strategic diplomacy

    Enter 4-D model of strategic diplomacy

    • The new approach will expand traditional diplomatic toolkit and reshape Nigeria’s foreign policy landscape for more dynamism

    It is the odyssey of a diplomat who has come full circle – a homecoming of sorts. As an illustrious son of Nigeria, his job is to bring the world closer to his homeland. And in the truest sense of the idiom, the appointment of Ambassador Yusuf Tuggar, formerly Nigeria’s envoy to German (2017-2023) and now Minister of Foreign Affairs, has put a round peg in a round hole.

     Ambassador Tuggar, after his inauguration by President Bola Tinubu, gave an insight of what to come in terms of Nigeria’s foreign policy direction. In due time, he said, the Federal Government will unveil a new vision for Nigeria’s foreign policy: 4-D’s diplomacy. The new Minister of Foreign Affairs said FG is set to reset the policy to address challenges across the country. He explained that Nigeria will concentrate more on Development, Democracy, Demography and Diaspora (4-D diplomacy) to address challenges across the country.

     According to him, the Foreign Ministry is at the forefront of promoting Nigeria’s interest and protecting citizens abroad. “It is the highest honour to be asked to serve as Minister of Foreign Affairs by His Excellency, President Bola Ahmed Tinubu. As a historically important Ministry, Foreign Affairs has long represented the highest standard of excellence. It is, therefore, our job to ensure those standards will never fail. These are turbulent times. From the unfolding political crises in Niger Republic to the regional insecurity and economic insecurity, we have a lot of work to do. In due time, we will also be unveiling a new vision for Nigeria’s foreign policy, four D’s diplomacy.

      “Through this doctrine centred on development, democracy, demography and diaspora, we hope to find modern solutions in order to address complex modern problems. I will be counting on your cooperation and partnership. And by the special grace of God and with your support, I am sure that we can place Nigeria where she belongs – at the pinnacle of visional and global decision-making,” Tuggar said.

     Since gaining independence in 1960, starting with Jaja Wachuku as the first Minister for Foreign Affairs and Commonwealth Relations (later known as External Affairs), Nigeria’s foreign policy has consistently revolved around key tenets. These include a strong emphasis on Africa as a regional power, unwavering commitment to principles like African unity and independence, the ability to exert influential leadership within the region, promoting peaceful conflict resolution, adhering to non-alignment during the Cold War, refraining from interfering in the internal matters of other countries, and fostering regional economic collaboration and growth. It also includes the promotion of peace and stability, economic diplomacy, and active participation in international organisations – a policy thrust birthed in response to both domestic and international dynamics.

    While Nigeria has made significant contributions to African and global affairs, it has also faced challenges and criticisms in its foreign policy endeavours. Over the years, Nigeria has been criticised for its perceived ineffectiveness in resolving regional conflicts, particularly in West Africa. Despite its role as a regional powerhouse, Nigeria has struggled to bring about lasting solutions and peace to conflicts-ridden neighbouring countries.  Critics also argue that Nigeria’s foreign policy lacks consistency and clear direction, with shifts in leadership and changes in government having sometimes led to abrupt changes in foreign policy priorities, making it difficult to sustain long-term strategies to earn desired results.

     Although Nigeria has placed a strong emphasis on economic diplomacy as a key component of its foreign policy, it has not been without its fair share of criticism. The nation has been called out for its challenges in fully capitalising on its economic potential and effectively securing favourable trade agreements, with issues such as corruption and bureaucratic red tape acting as stumbling blocks in the path of Nigeria’s economic diplomacy efforts. Experts have also lamented that Nigeria has not consistently lived up to its self-proclaimed leadership role in Africa. This criticism is often linked to Nigeria’s domestic challenges, which have sometimes diverted its attention away from regional and continental issues. This is a crisis that is made worse by ongoing security challenges, particularly from terrorist groups like Boko Haram, which have questioned the effectiveness of Nigeria’s counterterrorism efforts and ability to contain and eradicate extremist groups within its borders.

     Despite Nigeria’s recognition of the significance of its diaspora community, some contend that the nation has not taken sufficient measures to actively involve and leverage the skills and resources of Nigerians residing abroad. Furthermore, Nigeria’s susceptibility to the fluctuations in global oil prices due to its dependence on oil exports is viewed as a vulnerability in its energy diplomacy. Critics argue that diversifying the economy and reducing the emphasis on energy diplomacy should be prioritised, rather than relying solely on it as a primary foreign policy instrument.

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    Inside the innovative 4-D diplomacy model

    According to scholars in international relations and global governance, 4-D diplomacy is a modern approach to diplomacy, which goes beyond traditional state-to-state interactions and incorporates various actors and dimensions. The 4-D diplomacy, also known as the 4-D approach or Comprehensive Approach, is a foreign policy strategy that integrates four key dimensions: Diplomacy, Defense, Development, and Digital (or Information). It seeks to address complex global challenges by combining efforts across these dimensions.

     In the context of today’s highly interconnected world, leading scholars have significantly advanced the field of 4-D diplomacy, offering profound insights into its multifaceted aspects, its significance and far-reaching implications in contemporary international affairs. Among these notable scholars are John Kirton, a distinguished Canadian political scientist; Andrew F. Cooper, renowned as a professor of political science at the University of Waterloo; R. S. Zaharna, widely recognised for her expertise in public diplomacy; Jorge Heine, a respected professor at the Balsillie School of International Affairs; and Paul Sharp, a distinguished scholar in the field of international relations.

     As the world moved from the Cold War Era, characterised by intense military competition, and entered the Post-Cold War Time, global dynamics began to shift, making new thinking inevitable. Non-traditional security threats such as terrorism, transnational crime, and cyber-attacks emerged. The new challenges increasingly became too difficult to tame solely through traditional diplomacy and defense mechanisms. With greater interconnectedness, countries soon realised the need for a more comprehensive approach to foreign policy. The 4-D approach began to take shape as countries recognised that diplomacy, defense, development, and digital tools all have roles to play in addressing modern global challenges. Overall, the new model is a response to the evolving nature of global challenges, reflecting that traditional diplomatic and military tools are necessary but often insufficient to address complex issues such as terrorism, conflict resolution, and cyber security. Instead, a multifaceted approach that integrates these four dimensions is seen as more effective in today’s interconnected world.

     Apart from strictly political issues, contemporary diplomacy concentrates on the problems of trade, economic, scientific and military issues. As a tool for amassing increased inclusivity, 4-D diplomacy broadens the scope of diplomatic engagement to include a wide range of actors, such as non-governmental organisations (NGOs), civil society groups, businesses, and individuals. Experts believe this inclusivity allows for a more comprehensive and diverse set of perspectives and ideas in diplomatic discussions. It is also useful for enhanced problem-solving, since it involves multiple stakeholders, which can lead to more creative and innovative solutions to complex global challenges. Different perspectives and expertise can contribute to finding effective ways to address issues like climate change, conflict resolution, and public health crises.

     This is where 4-D diplomacy comes in. 4-D diplomacy brings about improved implementation, because engaging with a diverse set of actors can facilitate the implementation of diplomatic agreements and initiatives. When various stakeholders are involved from the outset, they are more likely to have a stake in the success of the diplomatic effort and can contribute to its execution, experts said. The situation is not different in crisis management. In times of crises, such as natural disasters or pandemics, 4-D diplomacy allows for a rapid and coordinated response. Governments, international organisations, NGOs, and local communities can work together to provide humanitarian assistance and disaster relief more efficiently.

     For any nation desirous of increased transparency, 4-D diplomacy can promote transparency and accountability in diplomatic processes. When multiple actors are involved, there is a greater likelihood of information sharing and public scrutiny, reducing the potential for hidden agendas or corruption. That is not all. Any diplomacy that engages with a wide range of actors can help build a country’s soft power, which is the ability to attract and influence others through cultural, economic, and political means. By collaborating with diverse partners, a nation can enhance its global reputation and influence. The world is constantly evolving, and traditional diplomacy may not always be agile enough to address emerging challenges. 4-D diplomacy’s flexibility and adaptability make it well-suited to navigate the rapidly changing global landscape.

     Also, in preventative diplomacy, 4-D diplomacy makes it possible to engage various stakeholders in diplomatic efforts, which can help to prevent conflicts and crises before they escalate. Early warning systems and collaborative approaches can identify potential issues and work toward resolutions proactively. It promote global governance, since it is a model that supports the idea of global governance, where international challenges are addressed collectively through cooperation and coordination. This approach can contribute to a more stable and prosperous world.

     Several countries around the world have embraced the 4-D diplomacy or a multifaceted approach to their foreign policy, recognising that addressing complex global challenges require engagement across diplomatic, defense, development, and digital dimensions. The United States employs a comprehensive approach to its foreign policy, integrating diplomacy, defense, development, and digital strategies. It has a vast military presence worldwide, engages in development assistance through various agencies like USAID, conducts digital diplomacy through its State Department, and forms strategic alliances to address global security and economic issues. China’s foreign policy has also evolved to include comprehensive strategies that encompass diplomacy, military modernisation, economic development, and digital influence. It is known for its Belt and Road Initiative (BRI), which combines economic development, infrastructure investment, and diplomacy across multiple regions.

     Also, the United Kingdom employs a multifaceted approach to foreign policy, engaging in diplomatic negotiations, contributing to international defense efforts, providing development aid, and participating in digital diplomacy initiatives. It leverages its status as a permanent member of the UN Security Council. Like its peers, France has a robust foreign policy that includes diplomatic efforts, military engagement in peacekeeping missions, development assistance through its development agency (AFD), and active participation in digital diplomacy initiatives. It plays a significant role in various international organisations. Russia employs a multifaceted approach to its foreign policy, including traditional diplomacy, military interventions, economic partnerships, and digital influence. It engages in digital diplomacy efforts to shape narratives and influence global opinion. India’s foreign policy encompasses diplomacy, defense cooperation, development assistance, and a growing role in the digital realm. It engages in military partnerships, provides development aid to neighboring countries, and leverages digital platforms for diplomatic outreach. Japan employs a comprehensive foreign policy approach that includes diplomacy, defense cooperation, development assistance, and a growing focus on digital diplomacy. It collaborates with international partners on various global challenges. Germany combines traditional diplomacy, participation in international defense efforts, development cooperation through agencies such as GIZ and digital diplomacy initiatives. Is Nigeria joining the big league?

  • Oil theft: Between economic gains and deterrence

    Oil theft: Between economic gains and deterrence

    The onslaught against crude oil theft has been reinvigorated with the security personnel recording impressive results. However, stakeholders warn that there is a need to distinguish between legitimate and illegitimate oil businesss. Besides, economic and environmental experts, among others, insist that there are grave consequences ahead if the process of seizure and destruction of such vessels are not properly guided. MUYIWA LUCAS reports.

    The country’s security forces are furious. Their fury stems from the continued operations of economic saboteurs in the mold of crude oil thieves who have perfected their criminal activities that are bleeding the country’s finances and throwing it into a quagmire.

    Not only has this sordid act denied the country of valuable revenue, it has also boxed her into a corner such that in the last five years, the allocated crude oil production output to the country by the Organisation of Petroleum Exporting Countries (OPEC), has not been met as a result of crude oil theft and other leakages in the system.

    A peep into the loss inflicted by oil theft is well captured in a March 2022 Oil and Gas Industry Report of the Nigeria Extractive Industries Transparency Initiative (NEITI). The five-year report, showed that 272.2 million barrels (mmbbls) of crude oil was lost to mainly oil theft between 2016 and 2020.

    Then, this volume loss amounted to $14.65 billion based on the prevailing international crude oil price in those times. Specifically, losses recorded in 2016 was about 101.05 mmbbls; in 2017, it was 36.46 mmbbls; 2018, 53.28 mmbbls; 2019 recorded 42.25 mmbbls loss and in 2020, 39.16 mmbbls.

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    The immediate past Speaker of the House of Representatives, Femi Gbajabiamila, drawing from a report submitted to him, also expressed concerns over a $23 billion loss looming over the country as a result of the activities of crude oil thieves.

    It is, therefore, instructive that the security forces have moved in to stem this tide, recording successes in the fight against the oil marauders. For instance, last month, the Nigerian National Petroleum Company Limited (NNPCL) said a private security contractor, Tantita Security Services, owned by former Niger Delta militant Chief Government Oweizide Ekpemupolo, popularly known as Tompolo, had intercepted a suspicious vessel with a cargo of crude oil on board.

    “The vessel, MT Tura II (IMO number: 6620462), owned by a Nigerian company, Holab Maritime Services Limited with Registration Number RC813311, was heading to Cameroun with the cargo on board when it was apprehended at an offshore location (Latitude: 5.8197194477543235°, Longitude: 4.789002723991871°), with the captain and crew members on board,” it said.

    According to the NNPCL, investigations showed that the crude oil cargo was illegally sourced from a well-jacket offshore in Ondo State, as there was no valid documentation for the vessel or the crude oil cargo onboard at the time of the arrest.

    “Further investigation into the activities of the vessel at the NNPC Limited Command and Control Centre also revealed that the Vessel has been operating in stealth mode for the last 12 years. The last reported location of the vessel was Tin Can Port in July 2011,” the statement said.The arrested vessel was subsequently set ablaze with its 150, 000 metric tonnes of crude oil.

    Earlier this month, another vessel bearing a Togolese flag for transporting stolen crude in  Koko, Delta State, was purportedly arrested by the same  private security outfit, TSS. The TSS said the 1, 117 tons vessel was carrying about 8,100 barrels of crude, and was being escorted by some naval officers led by a senior commander.

    Recall that last October, security agents also destroyed a vessel used for crude oil theft off the Niger Delta creeks after the vessel was reportedly arrested by Tompolo’s firm.

    However, the Navy said the vessel was certified by the government agency for regulating midstream and downstream petroleum operations in Nigeria.

    “MT Praisel was duly approved by Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA)” to load 1,114,721 Litres of High Pour Fuel Oil (HPFO) from Greenmac Energy Storage/Tarus Jetty Koko from July 26 to August 8, 2023.

    On August 5, the Air Component of Operation Delta Safe (OPDS), destroyed three boats loaded with stolen crude and another illegal refinery with reservoir and tanks in Rivers State.

    The Director of Public Relations and information, Air Cdre Edward Gabkwet, in a statement, said one of the operations took place at about four Nautical Miles Southeast of Bille, a riverine area located west of Bonny Island and South of Port Harcourt, in Rivers State.

    According to him, the NAF aircraft on surveillance sighted three boats tapping crude oil from a pipeline.“Consequently, the boats were engaged and destroyed by the aircraft. Again, flying towards Port Harcourt, the crew also observed an active illegal refining site with tanks and reservoirs loaded with suspected refined products, about four miles Southeast of Idama in Rivers State. The site was also attacked and destroyed,” he said, adding that air strikes against economic saboteurs would be sustained until they desist from their acts of thievery and sabotage.

    But experts and stakeholders have expressed divergent views over the destruction of crude oil alongside the vessels arrested. While some are in agreement, saying it would send a strong message to perpetrators of the crime, others see it as a loss to the country, insisting that there is a need to distinguish between oil theft and genuine participants in the business. Yet, for others, it is an attack on the environment.

    The Executive Director, Environmental Rights Action/Friends of the Earth Nigeria (ERA/FoEN), Mr. Chima Williams, rued the implication of such exercise. According to him, destroying and wasting stolen crude, is a disfavour to the economy, as such crude could generate funds that would build infrastructure and better lives.

    “Destroying badges of crude that runs into millions is equivalent to denying the nation and its people of the revenue that can be derived from such large amounts of crude. This is a country in dire need of resources to rebuild the economy, to build infrastructures and to better the lives of the people. The country is in heavy debt, yet we are destroying sources of enhancing our economy. The burnt vessels can be transformed into other uses like enhancing the work of seafarers in the country,” he noted.

    Williams further argued that the burning of crude oil laden vessels released a high level of chemical content into the water bodies that destroys the eco lives and aquatic organisms that humans need to survive.

    “Destroying such vessels with their crude contents produces high level chemical debris that follows tidal movement to other parts of the country. This kind of devastation destroys the aquatic organisms needed to satisfy man’s nutritional and survival needs,” he added.

    An Abuja-based public affairs analyst, Akintayo Balogun, also described as economic waste the destruction of crude oil seized from oil burglars as a wasteful, unnecessary, and a very bad decision economically, environmentally, psychologically, and unwise.

    “The revenue that the nation should have generated vide the said crude oil is being thrown away for nothing. Nigeria is in serious debt and has spent the last eight years living on borrowed funds. While this is the situation, Nigeria is carelessly throwing away the bath water and the baby. This ought not to be,” he noted in a statement.

    Another public analyst, Mayowa Sodipo, noted that there was the need to define what constitutes crude oil theft and licenced operators. He explained that the conflicting positions held by the TSS and the Navy over the arrest of the vessel MT Praisel should serve as the reason restraint should be further exercised in destroying vessels alleged to be involved in oil theft.

    “TSS said the vessel MT Praisel was arrested for crude oil theft and was led by a Naval officer guiding it, but the Navy came out to explain that the vessel had permit to load crude oil. Suppose due diligence was not carried out to ascertain the truth what and the vessel was burnt, who bares the loss?” Sodipo asked.

    Process

    Under the terms and conditions for the sale and purchase of crude oil, Part II of the contract for 2021-2023, Section 5.2.1 under  “Vessel Vetting/Clearance” stipulates that each vessel, which is to load crude oil pursuant to the contract shall be nominated in writing by the buyer to the seller not later than 30 days before the first day of the date-range in which the buyer wishes to lift crude oil. Such notices shall specify the following: The name of vessel, date built and flag; the vessel’s dimensions and other specifications, which shall be within the maximum and/or minimum limits specified by the seller from time to time and shall satisfy the standards and regulations of the terminal operator at the relevant time. It shall further indicate the quantity and grade(s) of crude oil to be delivered, the co-loading date and crude stream of co-loads (if any). There shall be at least 24 hours’ time allowable between co-loads of different crude streams.

    Section 5.4 on “Documentation instructions” says the buyer shall submit in writing to the seller, documentation instructions not later than 10 days before the first day of the date range in which the buyer wishes to lift crude oil. Such documentation instructions shall specify the following: vessel name; quantity to be loaded; crude oil grade/stream; SDWT; IMO Number; Draft; LOA; Beam; Flag of vessel; Year built; the ETA of the vessel.

    Clearly, it further stipulates that any deviation exceeding six hours from the original ETA or where any delayed arrival of the vessel will prevent her from being berthed or moored the same day due to any night–time navigational or any other applicable restrictions shall immediately be advised by buyer to seller and terminal operator supported with reasons for such deviation or delay.

    Given these stipulations, stakeholders have continued to wonder why crude oil theft thrives because if these regulations are adhered to, then no vessel could have made it to the loading vicinity as they are expected to have transmitted their documentations ahead of time.  

  • Making sense of NBS data on unemployment

    Making sense of NBS data on unemployment

    Explaining the new methodology behind Nigeria’s 4.1 per cent unemployment figure, NBS said the latest figure doesn’t change current jobs crisis and that the methodology used in collecting labour market data is in line with the latest guidelines of the International Labour Organisation

    By the time the National Bureau of Statistics (NBS) released the labour report for the fourth quarter (Q4) of 2022 and the first quarter (Q1) of 2023 last week, little did it know it was courting controversies. The report averred that the new methodology sanctioned by the International Labour Organisation (ILO) was used in data gathering. Under the old methodology, the NBS pegged Nigeria’s unemployment rate at 33.3 per cent as at Q4 2020, but the revised methodology put it at 4.1 per cent in Q1 2023.

     In simpler terms, the NBS said the unemployment rate stood at 4.1 per cent in the first quarter, down from 5.3 per cent in the fourth quarter of 2022. The NBS last published unemployment data in March 2021, where it reported a record high 33.3 per cent jobless rate in the fourth quarter of 2020. Under the revised system, the NBS defines employed persons as those in paid jobs and who worked for at least one hour in the last seven days, and considers underemployment as those working less than 40 hours a week and declaring themselves willing and available to work. The NBS said the revised data “aligns with the rates in other developing countries where work, even if only for a few hours and in low-productivity jobs, is essential to make ends meet, particularly in the absence of any social protection for the unemployed.”

    Read Also: Bus fare rises by 97.88% in one year, says NBS

     As defined by the ILO, an unemployed person is a person aged 15 or over who simultaneously meets three conditions: being unemployed for a given week; being available to take a job within two weeks; having actively sought a job in the last four weeks or having found one starting in less than three months.

     The latest Nigeria unemployment report has raised some believability questions. The Statistician-General of the Federation, Prince Adeyemi Adeniran, gave the Nigeria Labour Force Survey (NLFS), Q4 2022 & Q1 2023. Critics were quick to raise issues about how unemployment could suddenly decline from 33.3 per cent in the first quarter of 2020 to 5.3 per cent in the fourth quarter of 2022 to 4.1%. NBS Director, Publications and Public Relations, Mr. Wakil Ibrahim, explained that the data was not of unemployment but that of hours at work. He explained that the Nigeria Labour Force Survey (NLFS) was conducted by the NBS in collaboration with the World Bank (WB) and the ILO in response to the labour market dynamics. According to him, the report covers the fourth quarter of 2022 and the first quarter of 2023, presenting an in-depth analysis of key labour market indicators including unemployment, underemployment, informal employment and hours worked.

    Explaining the

    new methodology

    The NBS, in April 2023, announced that it would be changing the way it calculates the unemployment rate. It said the new approach, which would align with the International Labour Organisation’s (ILO) guidelines, was expected to reveal a sharp drop in the country’s job data. Since it was released, the report has drawn flaks, with many analysts quizzing the accuracy of the new methodology. The new figures may lead to an underestimation of the true level of unemployment crisis in the country, they argued.

     In the old methodology, the ‘unemployed’ were categorised as people of working age who worked below 20 hours or did not work but searched and was available in the reference week. However, under the new NBS methodology, if you have not worked in the past seven days, have been looking for work in the past four weeks, and are ready to start work, you are considered unemployed.  Also, in the old methodology, the NBS sampled 33,300 households quarterly; while the new approach adopted a sample size of 35,520 households spread across 12 months. The old system data collection was between 17-21 days every quarter; while data was collected continuously for a period of 12 months under the new methodology.

     The NBS said some people who were previously classified as unemployed are now categorised as employed. How?  The new methodology does not require people to have worked for at least 20 hours per week to be considered employed. As a result, people who are working in the informal sector, or who are only able to find part-time work, are now classified as employed.

    The NBS, he said, embarked on a revision of the methodology through the adoption of the 19th International Conference of Labour Statisticians (ICLS) “Resolution concerning statistics of work, employment, unemployment, and labour under-utilisation,” and the latest International Labour Organisation (ILO) model questionnaire which includes unemployment among persons engaged in “Own Consumption work.” He explained that the revised methodology aligns with that of Nigeria’s neighbours in Africa such as Ghana, Niger, Chad, Cameroon, Benin Republic, Gambia, etc., in line with international best practices.

     The NBS boss explained further that the enhanced methodology, which was informed by the need to produce comparable labour statistics, focuses on the review of definitions and concepts, data collection, coverage, etc. According to him, “the revised methodology defines employed persons as those working for pay or profit and who worked for at least one hour in the last 7 days, and considers underemployed persons as those working less than 40 hours per week and declaring themselves willing and available to work more. Unemployed persons are those not in employment but actively searching and are available for work (i.e. did nothing for pay or profit). In addition, working-age population covers ages 15 and above, and a distinction is made between commercial and subsistence agriculture in the revised methodology.”

     He also added that the old methodology defines the working-age population as those within the age bracket of 15-64 years, considering those working between 20 and 39 hours as underemployed, and those working between 1 and 19 hours as unemployed (including those who did nothing). Continuing, Adeniran explained that subsistence agriculture and temporary absentees from employment work were not properly represented in the old methodology. These improvements, among others, captured in the revised computations will make Nigeria’s Labour Force data comparable with other countries.

    Key highlights of the report

    The report showed that about three-quarters of working-age Nigerians were employed – 73.6% in Q4 2022 and 76.7% in Q1 2023. This indicates that most people were engaged in some type of job for at least one hour in a week, for pay or profit during the time under review. “The unemployment rate was 5.3% in Q4 2022 and 4.1% in Q1 2023.” This aligns with the rates in other developing countries where work, even if only for a few hours and in low-productivity jobs, is essential to make ends meet, particularly in the absence of any social protection for the unemployed.

     “Active search for employment in the NLFS refers to specific action individuals take within the previous four weeks to actively seek a job or start a business. Examples of such actions could include submitting job applications, attending job fairs, networking, reaching out to potential employers, and registering with employment agencies amongst others,” the NBS report said.

     The NBS boss said the share of wage employment was 13.4% in Q4 2022 and 11.8% in Q1 2023, while more Nigerians operate their own businesses or engaged in farming activities, recorded at 73.1% in Q4, 2022 and 75.4% in Q1, 2023. The report also revealed that about one-third (36.4% in Q4 2022 and 33.2% in Q1 2023) of employed persons worked less than 40 hours per week in both quarters. This was most common among women, individuals with lower levels of education, young people, and those living in rural areas. It pointed out that underemployment rate, which is the share of employed people working less than 40 hours per week and declaring themselves willing and available to work more, was 13.7 per cent in Q4 2022 and 12.2 per cent in Q1 2023.

     The rate of informal employment including agriculture among the employed Nigerians was 93.5 per cent in Q4 2022 and 92.6 per cent in Q1 2023.  “The report not only offers a snapshot of the current employment landscape but also provides a foundation for evidence-based policymaking. It’s an insight into labour market statistics to empower stakeholders to make informed decisions that can shape the country’s labour market and economy.”

     The Bureau in a similar the Bureau revealed that in the first quarter 2023, about 76.7% working – age Nigerians were employed. It added that the figure rose from the 73.6% recorded in the preceding quarter. This was contained in its summary of: “Nigeria Labour Force Survey Q4 2022 & Q1 2023.” The document explained that NBS has enhanced its methodology of collecting labour market data through the Nigeria Labour Force Survey (NLFS) in line with ILO guidelines. It noted that the data collection for the revised NLFS is based on a sample of 35,520 households nationwide.

     According to NBS, it is conducted continuously throughout the year, with national-level results produced quarterly and state-level results at the end of a full year. “The results presented in this report are for the reference periods of Q4 2022 and Q1 2023. About three-quarters of working-age Nigerians were employed – 73.6% in Q4 2022 and 76.7% in Q1 2023.”

     The International Labour Organisation (ILO) sees an hour at work in a week as employment, yet backtracking to submit that the data is not about employment but about hour at work. In other words, the NBS seems to have lost its believability in the framework of semantics. Following the ILO standard, NBS reduced the hours from 20 to an hour. Alluding to the ILO, Ibrahim submitted that whoever works for an hour in a week is deemed employed. “We were using 20 hours before. And the ILO has passed that one. They have brought it to one hour. If you work for one hour in a week, then you are employed,” he said.

    According to him, one hour at work was used to calculate the rate that culminated in 4.1 per cent. “It is the hours that were reduced from 20 hours as working hours to one hour. That is what was released. And we got that figure from which unemployment reduced from 33% to 4.1 per cent. It is the hours that were reduced from the 20 hours as working hours to one hour. That is what was reduced and we got that figure. There are different methodologies. It is not the same methodology. It is from one hour employment that we got 5.3% and from 20 hours we got 33.3 per cent.”

     The NBS spokesman pointed out that the methodology served as a peer review mechanism to put Nigeria on a labour scale with its counterparts in Africa: Ghana, Niger, Chad, Cameroon, Benin Republic, and Gambia. He said from 20 hours at work, the NBS arrived at 33.3 per cent unemployment rate which ought to have been the news. That is the news but the way you people (media) reported it that it reduced from 33.3 per cent to 4 per cent, it is incorrect. It is not unemployment. We are talking about hours of work. From 20 hours to one hour as it is from the ILO International as definition of labour.”  

  • Reforming taxation to raise revenue

    Reforming taxation to raise revenue

    • President Tinubu’s tax transformation agenda is necessary to support sustainable development

    Our aim is to transform the tax system to support sustainable development while achieving a minimum of 18 per cent tax-to-GDP ratio within the next three years. Without revenue, the government cannot provide adequate social services to the people it is entrusted to serve.” With these words, President Bola Ahmed Tinubu, last week, set an ambitious target for the Presidential Fiscal Policy and Tax Reform Committee to grow the country’s Tax to Gross Domestic Product (GDP) ratio by 18 per cent in three years. In other words, President Tinubu has directed the Committee to find ways of raising between $56.5 billion (N44.12 trillion) to $89.61 billion (N69.98 trillion) in the next three years.

     If this is achieved, it means that Nigeria would have completely closed the N20 trillion tax gap (shortfall in revenue) in one fell swoop. The tax-to-GDP ratio is a comparison between a country’s tax revenue and its gross domestic product (GDP), which measures the government’s control over economic resources. This ratio provides insights into the economic position and potential growth of a nation. By collecting a percentage of the GDP as tax revenue, the government determines the tax-GDP ratio. For Nigeria, the tax-to-GDP ratio for 2021 has been revised upward by the National Bureau of Statistics (NBS) to 10.86 per cent, contradicting the earlier reported figure of six per cent.

     Looking at successful tax reforms implemented between 2004 and 2015 in four low-income and emerging market economies, which showed significant revenue gains, provides some insight. The experiences of Cambodia, Georgia, Guyana, and Liberia demonstrate that, despite any challenges, countries can strengthen their tax collection capacity by implementing reform strategies with specific features. When it comes to the highest tax rates globally, Bhutan leads with rates up to 50 per cent tax-to-GDP, followed by Hungary with a standard rate of 27% per cent; while Croatia, Denmark, Norway, and Sweden share the third spot with a standard rate of 25 per cent. In Africa, improved mobilisation of both tax and non-tax revenues helped countries increase their tax revenue. According to the list, the top ten highest taxed African countries include Côte d’Ivoire, South Africa, Uganda, Senegal, Zimbabwe, Guinea, the Democratic Republic of Congo, Mauritania, Morocco, and Zambia.

    Read Also: CITN boss: taxation, Nigeria’s response to dwindling oil revenue

    What experts are saying on the issue

     Prof. Uche Uwaleke, Director Institute of Capital Market Studies, Nasarawa State University, Keffi thinks the three-year tax-to-GDP ratio of 18 per cent is attainable, being a little above the Sub-Saharan average of 15 percent. “To begin with, Nigeria’s tax collection efficiency ratio is among the lowest in the world. So, I think the plan is to significantly increase this through centralising revenue collection in the Federal Inland Revenue Service (FIRS). This will no doubt result in more efficient revenue collection as opposed to the current fragmented structure.”

     Bernardin Akitoby, an assistant director in the IMF’s Fiscal Affairs Department said “a typical developing economy collects just 15 per cent of GDP in taxes, compared with the 40 per cent collected by a typical advanced economy. “The ability to collect taxes is central to a country’s capacity to finance social services such as health and education, critical infrastructure such as electricity and roads, and other public goods. Considering the vast needs of poor countries, this low level of tax collection is putting economic development at risk.

     The IMF Fiscal Affairs expert noted that “although reform must be tailored to individual circumstances, three lessons stand out: tax reform requires first and foremost a broad social and political commitment; it rests on broad-based strategies that recognise that what and whom to tax should go hand in hand with how to tax; and it should be developed with the longer view in mind.”

     Speaking to the 18 per cent tax-to-GDP assignment given to him and other members of his committee, Taiwo Oyedele, Chairman, Presidential Fiscal Policy and Tax Reforms Committee explained that “there are three pillars to the mandate of this committee, one of it is fiscal governance and the other one is tax reform and the third one is growth facilitation.” These three pillars, he said, also have five dimensions: fiscal management, tax policy review, tax law reform, competitiveness and business enabling as well as revenue administration. What that means is within a period of one year, which is the period that Mr. President has directed for this committee’s work to be done.

     “We know that the likes of IMF for example prescribe a minimum of 15 per cent tax-to-GDP ratio for you to meaningfully finance development for a country, and we know that the average tax-to-GDP ratio for Africa is in the region of 17-18 per cent. So the target that has been set for this committee is to help Nigeria move towards 18 per cent thereabout over the next three years. We are currently at about 10.86 per cent if you look at the revised number of tax-to-GDP ratio that was produced up until 2021 fiscal year. We don’t know what the figure for 2022 is yet, but whatever that is, we are looking to roughly double our revenue from taxes for over a period of three years.

     “We do not want to introduce new taxes, in fact we want to get rid of many of the taxes we currently have that are not productive so it would then seem counter intuitive that you are going to reduce the number of taxes that people pay and yet you want to collect more,” Oyedele said.

    Taxes that will drive the proposed 18% growth

    According to Oyedele, South Africa is the second largest economy in Africa. Nigeria, which is the largest economy, has about 220 million people while South Africa is nearly 60 million people. So Nigeria is almost four times the number of South Africa in terms of population, in terms of economic size, may be about 20-30 percent but when you look at the tax numbers, it calls for sober reflection. South Africa, last year, collected about N78.2 trillion equivalent from tax service; that amount is more than the budget of the federal government or the states in Nigeria.

     Substantial tax revenue can be generated exclusively through the collection of personal income tax (PIT), Oyedele said. “The most underperforming tax in Nigeria is the personal income tax, because personal income tax across the world is the highest revenue yielding head, whether developing or developed country. Countries make the most money from personal income tax. South Africa made N27.7 trillion from personal income tax. I couldn’t find the figure for Nigeria in 2022 so I put 2021 and the amount is not pretty but I just wanted it to look decent and it’s N1.6 trillion.

     In value added tax (VAT), Oyedele said South Africa made N19.5 trillion last year while Nigeria collected N2.5 trillion. In company income tax (CIT), South Africa generated N16 trillion while Nigeria, plus Petroleum Profit Tax (PPT) considered a CIT as well, made N7 trillion. “Individually, each of their (South Africa) PIT, VAT and CIT is more than our entire tax collection in Nigeria across all the three levels of government. So, in other words, the solution to our problem is not to introduce more taxes but to focus on the fields that are high revenue yielding and easy to administer and difficult to evade and we will make far more than we are collecting today in the form of taxes; we do not need many taxes to collect more revenue but the reverse – less taxes, more revenue,” Oyedele said.

    How to achieve the task ahead

      The first task is how to close the tax gap. Said Oyedele: “We think that, as of today, the tax gap is somewhere in the region of N20 trillion and what that means is if you just focus on the major taxes, VAT, CIT, PIT, there are people who as of today should be paying and they are not compliant. Some people and businesses are in the tax net with just one finger, how do you then get all the body to be inside of the tax net.

     “The other areas where we think we can generate revenue from is, really bringing down the cost of collection. The cost of collection in Nigeria is so huge despite collecting little in revenue, particularly because you have too many agencies trying to collect revenue and those are not their core mandate. So these agencies are actually being distracted from doing what they are supposed to be doing to support the economy. So take those functions away from them, they focus on their primary responsibility, which means they facilitates economic growth and the FIRS for example will then collect those revenue more efficiently and save us the cost of collection.”

     Oyedele and his Committee members will attempt to make some savings by looking at the incentives; tax holidays and waivers “and ask whether these incentives are productive, if you give away one naira and you are getting less than one naira in return then maybe that’s time to review those incentives,” he said.

    He also believes that Nigeria is not “at that point yet where we want states to start setting their own tax rate because if you don’t do that within a proper framework, what’s going to happen is it becomes chaotic. Because you find that in large parts, many of the organisations that really have the volume and employing a lot of people as well as across the value chain, they tend to cut across states. We don’t want to make doing business with them more difficult than it is currently.

    “If you are earning so little, you shouldn’t have to pay income tax at all. That also helps us see who has the ability to pay and is not paying their fair share. If for example we are able to come out with a harmonised tax code even for local government and states, you can then replicate that for states to adopt so they are not starting from scratch and we have some level of consistency across the country, so I think we will get to a point but I don’t know how quickly that will be, when states will be able to compete by giving incentives to attract investments to their domain, etc.,” Oyedele said.

    The Executive Chairman of the FIRS,  Muhammad Nami, under whose watch Nigeria’s tax-to-GDP was increased from six per cent to 10.86 per cent, said the SAMA (Strategic Account Management Association) strategy that was used to increase the country’s tax-to-GDP to 10.86 per cent will also be employed to achieve President Tinubu’s target. “Sources which previously put the country’s tax-to-GDP ratio at between 5% and 6% did not consider tax revenue accruing to other government agencies in their computation. Particularly, revenues collected by agencies other than the FIRS, Customs and States Internal Revenue Service were excluded. This situation was peculiar to Nigeria as most other countries operate harmonised tax system (all or most tax revenues are collected by one agency of government) with single-point tax revenue reporting.  As such, all relevant tax revenues are included in the computation of the tax-to-GDP ratio. In re-computing the ratio, key indicators that were previously left out were taken into account. This resulted into a revised tax-to-GDP ratio of 10.86 per cent for 2021 as against six per cent hitherto reported.”

     Mr. Nami further noted that Nigeria’s tax-to-GDP ratio should ordinarily be higher than 10.86 per cent “but for certain economic and fiscal policy factors, including tax waivers and leakages occasioned by the country’s fragmented tax system. It is important to note that the tax-to-GDP ratio for Nigeria should be higher, but for the impact of tax waivers contained in our various tax laws (including exemptions to Micro, Small and Medium Enterprises brought-in by Finance Act, 2019), low tax morale, leakages occasioned by the country’s fragmented tax system and the impact of the rebasing of the GDP in 2014,” he explained.

     Showing the direction the FIRS would like to take in meeting the President’s target, Nami urged “the government to consider reviewing its policies on tax waivers thereby guarantying increased revenue to prosecute its programmes and positively move the needle of the country’s tax-to-GDP ratio.

  • Unlocking Nigeria’s untapped mining potential

    Unlocking Nigeria’s untapped mining potential

    Nigeria is endowed with over 44 strategic solid minerals in about 450 locations across the country. This puts her mining sector in a vantage position to dislodge oil as major revenue earner and economic diversification driver to create jobs and significantly cut down forex spending. Experts, however, say that reaping the sector’s bountiful but untapped benefits depends on how the administration tackles the challenges holding down mining operations across the country. They also put forward some key initiatives to unlock the sector’s immense potential and achieve its N284 billion revenue and three per cent contribution to Gross Domestic Product (GDP) targets by 2025. Assistant Editor CHIKODI OKEREOCHA reports.

    In its heydays in the 1960s and 1970s, the mining sector, next to agriculture, was economy’s major growth driver, contributing approximately four to five per cent to the Gross Domestic Product (GDP), according latest report by multinational professional services firm PricewaterhouseCoopers (PwC Nigeria). Nigeria was a significant player in most of the core global mining commodities such as coal, tin, columbite and gold.

    For instance, coal fully met the nation’s needs for the railway system and electricity supply. Tin also yielded substantial foreign exchange earnings. Other strategic minerals that gave Nigeria a competitive edge in the global minerals market included iron ore, barite, lead/zinc, bitumen, and limestone. The extraction of those minerals provided employment opportunities for Nigerians either as miners, supporting staff or workers in auxiliary mining services.

    Sadly, however, the fortunes of the once minerals-abundant nation, where over 44 different solid minerals were later discovered in about 450 locations across the country, have since declined, with the sector’s contribution to GDP crashing precipitously to a meager 0.17 per cent over the past five years (2018 – 2022). No thanks to the discovery of oil in 1956 which diverted the interest of both government and investors (local and foreign) from mining of solid minerals to the new resource (oil).

    Since then, Africa’s biggest economy has been monolithic, depending on the oil and gas sector, which contributes about 40 per cent to nominal GDP, over 90 per cent of export earnings and 75 per cent of gross revenues. Oil export is also the country’s major foreign exchange earner. But, like the rejected stone that became the builder’s cornerstone, there has been push to force the mining sector back into reckoning, following the sharp decline in revenue from crude oil in recent years.

    The thing is that falling oil prices and the economic downturn that ensued compelled a strategic rethink in favour of economic diversification with the mining sector as the arrowhead. The belief is that mining, given its huge potential, can create opportunities for growth and development through enhanced revenue derived from export earnings, taxes and royalties, job creation, knowledge, skill and technology transfer, as well as provision of infrastructure and social services.

    Accordingly, a Mining Roadmap was developed in 2016 by the Federal Government to drive the Nigerian mining industry’s growth and development, create a globally competitive sector capable of contributing to revenue and GDP, provide jobs and also advance social and human security for Nigerians. It lso focused on using the nation’s mining assets to drive domestic industrialisation initially, and then migrate to winning in global markets.

    A roadmap and its ambitious targets

    The mining sector’s contribution to GDP, albeit less than one per cent between 2015 and 2021, increased steadily from 0.13 per cent in 2015 to 0.23 per cent last year, according to PwC, the Mining Roadmap of 2016 targeted to increase the sector’s contribution to GDP from 0.5 per cent to approximately three per cent by 2025.

    Its revenue target is no less heart-warming. The sector has increased its solid mineral revenue generation since 2015, with the Federal Government’s solid mineral receipts witnessing a growth of 78 per cent from N64.46 billion recorded in 2015 to N114.8 billion in 2020. While a trend analysis of the sector’s earnings revealed a snail speed growth, the roadmap targeted N284 billion by 2025.

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    Similarly, the mining sector, as at 2015, employed over 86,000 of the workforce. This number rose to over 111,000 in 2017 and subsequently to 130,000 in 2020. While its employment-generation potential is, admittedly, far from being realised, the roadmap targeted about three million jobs by 2025.

    A roadmap and its targets

    Ambitious and promising, no doubt, PwC, however said in order to achieve the three per cent target set in the Mining Roadmap for 2025, significant efforts must be undertaken to catalyse growth in the sector.

    “The Nigeria’s mining industry continues to attract domestic and international investors despite that it is still quite underdeveloped.

    “Given the industry’s potential as a major revenue earner for the country, government needs to tackle the challenges in the mining industry if it is to reap the benefits of the sector,” PwC, in the report, entitled ‘Nigerian Mining – Progress, But Still a Long Way To Go’, said.

    The report, which was published last week, and made available to The Nation, comprehensively reviewed the mining sector’s macroeconomic environment, looked at mining and Environmental, Social, and Governance (ESG) and also reviewed the mining regulatory framework.

    The publication also reviewed some of the strategic minerals in the sector, and concluded that the mining of iron ore, baryte and coal, for example, is weak, while the mining of lead/zinc and gold is moderate; the mining of limestone is a bit strong.

    It added that in spite of the presence of mineral resources like Iron ore, baryte, lead/zinc, gold and coal, Nigeria still import steel and local scrap that are processed from iron ore, as well as roofing sheets and batteries that are processed from lead/zinc, and jewelry that are processed from gold. It also stated that there is a minimal local use of coal in the country. The report also highlighted some of the achievements of the previous administration in this sector and how well the mining roadmap has been implemented to date. For instance, analysing the report, Partner, Mining Leader, PwC Nigeria, Cyril Azobu, said the former President Muhammadu Buhar’s administration made a significant breakthrough with the launch of the Electronic Mining Cadastre plus (eMC+).

    The eMC+ is a digital cadastral system that grants access and manages titles for all existing investors and prospects in real-time and around the world.

    “In line with the Nigerian Minerals and Mining Act 2007, each state across the country has inaugurated a Mineral Resources and Environmental Management Committee (MIREMCO).

    “The purpose of MIREMCO, according to the Mining Act, is to oversee mining operations, supervise the environmental aspects of mines and tackle illegal mining and trafficking of minerals across the states of the Federation,”Azobu added.

    Other achievements of the past administration, according to the report, include hosting of the annual Nigerian Mining Week, an annual event, physical and online, for all the mining stakeholders and influencers in the public and private sector wanting to do business in Nigeria; establishment of mineral value processing clusters across the country; bitumen bid round to enable Nigeria to harness its bitumen resources through private sector investment

    Others are initiation of a fresh concession programme for the Ajaokuta steel plant and its key source of Iron Ore; the Presidential Artisanal Gold Mining Initiative (PAGMI) designed to mine and aggregate gold from artisanal and small-scale miners, including developing a production to market plan for the Gold sector; the National Integrated Mining Exploration Programme (NIMEP) designed to de-risk investment in the sector and provide geoscience data.

    “The current administration should build on these, while embracing needed improvements and added initiatives to expedite the mining sector’s journey towards shared prosperity,” PwC said, blaming the challenges of the sector on insecurity, smuggling, tax alignment issues, illegal mining and inadequate funding on the part of government. For instance, the report quoted the former Minister of State Mines and Steel Development, Uchechukwu Ogah, as saying that Nigeria lost revenue estimated at $5 billion to smuggling of gold in the past six years. “The spike in gold smuggling in the country has once again highlighted the socio-institutional and structural challenges in governance,” the report said.

    Charting the path forward

    Apparently believing that if fully harnessed and processed, Nigeria’s rich solid minerals endowment could be the wedge to push through the current administration’s renewed hope agenda, Partner, Head Mining Sector Business Development at PwC Nigeria, Habeeb Jaiyeola, advised President Bola Tinubu to consider moving the sector forward.

    He said this could be done by tackling insecurity, harmonising policies and regulations in the mining sector, driving strategic minerals development and de-risking investments in the sector.

    For the Manager, PwC Nigeria, Eche Uduji, “The new administration should focus on creating more private sector-driven success stories, which will contribute to attracting other stakeholders into the sector and creating a vibrant gold value chain in Nigeria.

    Uduji said the Federal Government, through effective collaboration with host communities, should use technology and licensing databases to improve tracking and formalisation, adding that this will also aid targeted support by the government on training, access to equipment and funding, and implementing safe mining practices.

    The PwC manager noted that although, the Artisanal and Small Scale Mining (ASM) department of the Ministry has taken steps in this direction, this needed to be significantly enhanced.

    The report also stressed the need to institute and implement mineral value addition policy. “The Federal Government should develop mineral-specific value addition policies, to encourage downstream processing and enhance sustainable economic growth through value addition. The policy would also position local industrial activities to be aligned with mining activities,” it stated.

    However, PwC’s pathway to a revitalised mining sector is not limited to government alone. Its report also said ESG remains crucial to the mining industry. “The mining industry must demonstrate its commitment to addressing environmental, social, and governance (ESG) issues in all aspects of its operations, while also recognising the associated risks and opportunities.

    “By doing so, mining companies can deliver long-term benefits to governments, shareholders, workers, and the communities in which they operate. Companies that proactively respond to these emerging trends tend to perform better financially,” the report stated.

    Indeed, in a previous study, PwC said it found that mining companies with higher ESG ratings outperformed the overall market during the peak of the COVID-19 crisis.

    “These companies achieved an average total shareholder return of 34 per cent over the previous three years, surpassing the general market index by 10 per cent. This demonstrates the positive correlation between strong ESG practices and financial success,” the report said.

    Conducive regulatory framework is also key

    To further attract investment, generate revenues and develop the local mining industry, the Federal Government has begun legal, regulatory, institutional, and fiscal reforms for the mining sector.

    Key initiatives in this regard include the establishment and recent automation of a cadastral system for mineral title administration and the review of the Minerals and Mining Act, 2007.

    The revision of the mining act is expected to introduce regulations which align with global best practices and create an enabling environment for much more involvement of both local and foreign investors.

    The industry’s principal law is the Nigerian Minerals and Mining Act 2007 (Chapter N162 Laws of the Federal Republic of Nigeria 2004 (the Mining Act) and the Minerals and Mining Regulations 2011 issued pursuant to the Minerals and Mining Act.

    Under the constitution and the Nigerian Minerals and Mining Act 2007, the Federal Government has title to all mineral resources beneath or upon any land within Nigeria, including Nigeria’s continental shelf, territorial waters, and exclusive economic zone. However, private parties may acquire the right to search for or exploit minerals through one of the following mining titles: a reconnaissance permit, an exploration licence, a mining lease, and small-scale mining lease.

    Currently, mining titles are granted on a first- come, first-served. However, Minerals and Mining Act of 2007 grants the Minister of Mines and Steel Development the power to designate certain areas where a mining lease or exploration license may be granted further to a competitive bidding exercise. While the Ministry is the policy maker for the sector, the Federal Ministry of Environment is responsible for environmental matters in the relevant state for the mining and co-regulate environmental matters The report noted that in Nigeria, mining is largely a greenfield sector and is in the process of developing an attractive mining value chain.

    “Nigeria should focus on investor friendly fiscal and regulatory policies in order to attract Foreign Direct Investment (FDI) ahead of other countries,” it said.