The Nation Newspaper

Category: Issues

  • How to boost local fertiliser production

    At an average of 12 kilogrammes per hectare, fertiliser usage in Nigeria and other African countries have been considered low, compared to the global average of 100 kilogrammes per hectare. But, prompted by Africa’s fast-growing population, as well as the increasing awareness that high quality fertiliser is key to increased and sustainable food production, experts at the 10th Annual Argus Africa Fertiliser conference in Marrakesh, Morocco, brainstormed on how to boost agric productivity through increased use of fertiliser. DANIEL ESSIET, who attended the conference, reports.

    They came from far and near, but were united in their resolve to force a dramatic change in the way African countries practice agriculture. To experts and policy makers from the fertiliser supply chain in Nigeria and other African countries, who gathered at the recently-concluded 10th Annual Argus Africa Fertiliser conference in Marrakesh, Morocco, the need to boost Africa’s agricultural productivity through increased use of fertiliser has never been this compelling.

    For one, Africa’s population is growing fast, requiring the production of enough food to feed the growing population. The snag, however, is that Nigerian soil and those of other African countries are said to be among the most degraded in the world.

    Besides, the scope for bringing additional land under cultivation is limited. This, according to experts, has necessitated the need to turn to fertilisers and other complementary inputs to increase food and agricultural production.

    It was, therefore, hardly surprising that finding solutions to boosting fertiliser supply and agri-business trade investments in Africa was the focus of the fertiliser conference in Morocco.

    At the event, which was sponsored by Office Cherifien des Phosphate (OCP) Africa, industry experts and stakeholders agreed that the fertiliser industry will continue to play a central role in feeding Africa’s ever-growing population and agricultural demands.

    The delegates, who included industry executives, government and public sector representatives, fertiliser suppliers, farmer organisations and logistics companies, among others shared insights, identified problems and presented joint solutions on how to boost Africa’s agricultural productivity through increased use of fertiliser.

    The conference, which brought together over 500 key players from the fertiliser supply chain, expressed worries over Africa’s low fertiliser application or usage rate.

    For instance, despite the continent’s growing population, the average rate of use of fertiliser in Nigeria and other African countries is a paltry 12 kilogrammes (kg) per hectare, compared to the global average of 100 kg per hectare.

    The low fertiliser application rate, according to experts, is because fertiliser’s other complementary inputs are not accessible and affordable to smallholder farmers, who constitute the bulk of food producers on the continent.

    African Union’s (AU’s) Rural Economy and Agriculture High Commissioner, Ms Josefa Sacko, also attributed the situation to poor policies, low investment, unattractive investment conditions and ill-equipped smallholder farmers.

    She said the African fertiliser industry is facing challenges, but those challenges also represent opportunities. She, however, emphasised that to produce enough food to feed the continent’s growing population, agric productivity has to increase through the use of fertiliser as well as improved seeds and other technologies.

    Sacko recalled that the special AU Summit of Heads of State and Governments, which held in Nigeria in June 2006, adopted the Abuja Declaration on Fertiliser for an African Green Revolution.

    The Declaration, she said, was a commitment to increase Africa’s fertiliser use from the then-average of 8kg per hectare to 50kg per hectare by 2015. She, however, regretted that the target was never met.

    She also regretted that rather than being met, average fertiliser use in Africa has continued to stand at an average of 12kg per hectare, compared to 150kg per hectare in Asia, for instance.

    Sacko expressed concerns that few countries in Africa were making efforts to implement the Abuja Declaration, urging the continent’s governments to support indigenous private sector companies to produce fertiliser that can be distributed among AU-member states.

    The AU High Commissioner pointed out that for Africa to increase her fertiliser consumption rate, the cost of the critical input, among other factors, needs to come down substantially. “We still have a long way to go to increase agric productivity. It’s important to expand the discussion about the soil health and how it supports fertiliser,” Ms Sacko added.

    Ms Sacko also said for African countries to achieve food security, there is need to increase investments in the fertiliser sector. She, however, noted that for this to happen, it will take much more than political commitments. According to her, it will require practical measures to encourage investors to explore opportunities across the sector’s value chain.

    Agriculture and Agro-Industry Department Director, African Development Bank (AfDB), Dr. Martin Fregene, noted that the potential for increasing the continent’s food basket was huge.

    He, however, pointed out that smallholder farmers in many African countries are challenged by poor access to fertiliser. While pointing out that access to quality fertiliser will boost crop production, he called for policies that will promote unhindered access to the input.

    Fregene, however, said the AfDB will provide credit guarantee of up to four million Euros for fertiliser importers and agro dealers.

    He said the guarantee, which is under the African Fertiliser Financial Mechanism (AFFM), was to ensure that Africa meets its 20 million tonnes of fertiliser need yearly, which, according to him, will require an investment of $20 billion yearly.

    AFFM is a joint initiative of the Bank, the AU and the United Nations Economic Commission for Africa (UNECA), established by a declaration of the AU Heads of State Fertiliser Summit, which held in June 2006 in Abuja.

    With the support of UNECA and the AU Commission, the AFFM, with its secretariat in Tunis, had the objective of increasing fertiliser use in Africa from 12 kg per hectare average to 50 kg per hectare, to boost agricultural productivity.

    AFFM aims to create a catalytic environment for the investments needed in Africa to enhance fertiliser production and consumption at affordable prices. It focuses on two types of activities, namely: facilitation and encouraging the private sector to invest in fertiliser ventures aimed at expanding national and regional production capacity.

    The AfDB director added that improved access to quality and affordable fertiliser, as well as other inputs such as better seed and farming practices, are game changers in the continent’s push for food security. He said farmers are failing to raise their productivity to boost food security because of limited access and low use of fertiliser, a critical but neglected input.

    He also said there is need to finance the entire fertiliser value chain and support farmers through smart subsidies. He said the establishment of the AFFM was agreed upon at the 2006 African Fertiliser Summit in Abuja, Nigeria, to meet the financing requirements of the various activities agreed on to boost the growth of the fertiliser industry in Africa.

    AFFM offers loans of over 400 million dollars to finance projects to achieve the goals of the Abuja Declaration. Fregene said AfDB’s Technologies for African Transformation (TAAT) was working with AFFM and financial institutions to identify the right value chain actors and new activities for funding.

    The role of OCP

    With her fast-growing population, Africa is widely acknowledged as one of the most important fertiliser markets in the world. However, big ticket investments in fertiliser production are lacking, which was why the African agric sector suffers from low usage of the product.

    However, Morocco’s OCP Group has weighed in on the situation. The Group is working to transform Africa into the home of one of the largest fertiliser complexes in the world. The aim was to meet the local demand for fertiliser and export to the regional markets.

    In doing so, OCP Africa Managing Director, Karim Lotfi Senhaji, said fertiliser was a food production lifeline; that a thriving fertiliser industry means more productive farmers and better livelihoods. He stated that the fertiliser industry has a crucial role to play in addressing food security challenges, as the continent’s population continues to expand rapidly.

    OCP, he explained, hosted the event, focusing on the challenges facing the fertiliser industry and the need for producers to collaborate in the areas of research, technologies and exchange of best practices and ideas.

    While pointing out that Africa’s rapidly growing population and planned capacity expansions are key drivers for sustained growth for fertiliser producers, Senhaji said increased demand and supply gap in fertiliser provides an opportunity to expand the fertiliser manufacturing capacity.

    OCP Africa, he added, has been expanding its investments, boasting 12 subsidiaries in Africa in the process. Senhaji, however, said the group will focus on Ethiopia, Nigeria, Ghana, Ivory Coast and Senegal. The Nigerian plant, he said, will cost $1.5 billion and would have a total capacity of one million tonnes of ammonia.

    He said the continent’s agricultural production will need to be more than double by 2050 in order to meet the growing demand for food. “The fertiliser industry is arguably, one of the most important industries globally.

    “Fertiliser provides food security and nutrition for the population, brings prosperity and growth to the agricultural sector, and–if applied in an efficient manner–helps preserve our planet’s ecosystems,” Senhaji said.

    He added that in the next few years, the role of the fertiliser industry in ensuring global prosperity will increase tremendously, as the global challenges faced today are becoming ever more complex and difficult to address.

    The OCP boss also stated that OCP Africa has partnered several national and international companies to form joint ventures in order to diversify its product offerings, expand into global markets and increase local sector participation.

    He said, for instance, that in Ethiopia, the Moroccan firm expects its chemical plant to be operational by 2023 or 2024, with an initial capacity of 2.5 million tonnes of fertiliser.

    In Ethiopia, OCP sold a customised fertiliser, combining phosphates, nitrogen and sulphur, which helped to increase maize yield by 37 per cent.

    The group, which controls 75 per cent of the world’s phosphate reserves, has a 65 per cent market share of phosphates-based fertiliser in Africa.

    “However, in 2018, sales dropped because the market went down mainly due to a rise in international prices,” Senhaji said.

    The OCP boss said the country‘s university has created a master’s programme in fertiliser management. The graduates of the programme will serve as highly skilled talent pool that foreign manufacturers could draw on. Domestic manufacturers will also benefit.

    The Vice President, Local Market Farming Development of OCP, Madam Fathiha Charradi, said the company was ready to partner Nigeria to adopt the Al Moutmir approach in order to improve the lot of farmers.

    She said at the heart of the project are three principles: scientific approach, partnership and the farmers. The farmers go through training sessions where they have the opportunity to ask questions and share ideas.

    The project also uses tools such as digital technology to interact with farmers. She said Morocco has also established a strong culture of support and training for farmers, including 52 agricultural vocational training centres across the country.

    Charradi said agricultural extension agents have been equipped with the information and training to provide advice to farmers on how to operate new irrigation technologies, adding that farmers can do more with the current resources at their disposal, if equipped with the right scientific knowledge.

    She also said there is need to bridge the information gap among service providers and farmers, ensuring that practical advice are available on sustainable field practices that preserve and improve soil. There is also the need to continue to support farmers in optimising fertiliser application.

    Charradi also harped on the need for the African fertiliser industry to assist in human capacity building, as well as the introduction of new technologies to farmers.

     

    Eyeing Nigeria’s fertiliser market

    OCP Country Manager, Mr. Caleb Usoh, said Nigeria’s Niger Delta will get a multi-million ammonia fertiliser processing plant. The plant, according to him, will cost $1.5 billion and would have a total capacity of one million tonnes of ammonia.

    Usoh told The Nation that studies are going on the plant site that will be located near a seaport, as the products will be meant for export.

    Nigeria currently imports ammonium phosphorus fertiliser from Morocco. With the plant, only phosphorus will be imported and blended with ammonia in-country.

    Usoh said his organisation was ready to offer Nigerians fertiliser mixed with micro nutrients, which will be applied to obtain optimal yields.

    He explained that the ‘Agribooster’ programme was part of the company’s ongoing efforts to facilitate the provision of all necessary resources, training, and extension service, and market access for smallholder farmers across Nigeria.

    According to him, “the Agribooster programme is a unique initiative that works across the supply chain to connect African farmers with quality inputs, financing and insurance and provides comprehensive training on proper input use, thereby increasing farmers’ crop yields and incomes”.

    Usoh added that the programme also supports the strengthening of the farmers’ commercial ties and enables them to benefit from training and extension/propagation services based on agricultural best practices.

    He said with its growing presence across the continent, OCP understands the diversity and complex needs of Africa’s soils, and is committed to offering the right fertiliser products at the right time, in the right place and at the right price.

    OCP International, Morocco, owns the largest phosphate- based fertiliser producing plant in the world. The company believes that overall, the outlook for the African fertiliser sector is positive, but that the sector must adapt to the changing nature of global trade and technology.

    Senhaji said, for instance, that fertiliser industry’s future depends on players’ ability to provide goods and services that help feed the world, improve lives, and protect the environment.

    His words: “Without fertilisers, more than half of current food production would be compromised, which highlights the industry’s irreplaceable role in providing nutrition to billions of people on the planet.

    “Our products are the essential engines of agricultural productivity. Fertiliser, if correctly used, can significantly protect and enhance a nation’s soil resources. This is particularly important for our region, as we live in an environment characterised by harsh climate conditions and scarce water resources.”

    The OCP chief highlighted ongoing research on the next generation of fertiliser, which he noted, would make efficient use of nitrogen and phosphate in processes that would not concurrently produce carbon dioxide.

    He emphasised OCP Africa’s role, particularly through AFFM, and the need to stimulate private sector participation in the industry, adding that Africa has potential to become a major fertiliser market.

    Senhaji added that the region was endowed with mineral reserves of the three major plants’ macronutrients: nitrogen (N), phosphate (P) and potash (K). Moreover, the continent is subject to rapid population and income growth and changing food consumption habits.

    He added that the pace and diversification of Africa’s food needs will require the region’s farmers to increase agricultural production and yields, which will boost fertiliser demand. Otherwise, the continent’s economic growth potential will remain stunted.

  • ECOWAS protocol under xenophobia threat

    The Economic Community of West African States (ECOWAS) Protocol allows free movement of persons, goods and services within the sub-region. But, events in the sub-region, particularly the xenophobic attacks on Nigerian traders and businesses and the persecution of member-nations in Ghana, have provoked anger. These, analysts believe, have brought the protocol under threat. Assistant Editor OKWY IROEGBU-CHIKEZIE reports.

    Although members of the Economic Community of West African States (ECOWAS) use three languages: English, French and Portuguese as their lingua franca, there are well over a thousand other languages in the sub-region. They include cross-border native languages, such as Hausa, Fulfide, Yoruba, Wolof and Ga. Interestingly, the region’s lingua-cultural diversities present opportunities and challenges in equal measure.

    It was against this backdrop that the ECOWAS Protocol was initiated to foster interstate economic and political cooperation among member nations. And all seemed well until recently when the Ghanaian government was accused by Nigerian traders and businesses in Ghana of xenophobic attacks. Some of them said they have suffered incalculable maltreatment in the hands of their host. President, Nigeria Union of Traders’ Association (NUTAG), Ghana, Chief Chukwuemeka Levi Nnaji, is one of them.

    At an event tagged: Stakeholders Forum on ECOWAS Trade, organised by the Lagos Chamber of Commerce & Industry (LCCI), Nnaji said though the rules of ECOWAS engagement was clear, the Ghanaian government flouted it by using GIPC Acts 865, 2013.

    He said Section 27 (1a) of the Act states that: “A person, who is not a citizen or an enterprise, which is not wholly owned by a citizen, shall not invest or participate in the sale of goods or provision of services in a market, petty trading, hawking or selling of goods in a stall at any place.”

    Nnaji argued that this is contrary to ECOWAS Protocol, which states that citizens of ECOWAS shall have the same condition as the citizens of their host country in relation to registration of businesses and payment of taxes.

    He accused the Government of Ghana of using the GIPC Act to infringe on the rights of other ECOWAS citizens in Ghana, whereas Ghanaian citizens have continued to enjoy unhindered privileges conferred on ECOWAS citizens all over ECOWAS states, such as Nigeria, Togo, Benin, Gambia and  others.

    Nnaji recalled how Nigerians have been suffering harassment under various Ghanaian administrations since 2007, when they were mandated to move away from any market where there are two or more Ghanaian shops. He further stated that Nigerian businessmen were made to part with $5,000 and $300 as registration and processing fees.

    The NUTAG president said after complying with the alleged xenophobic directives of the government, the Ghana Union of Traders’ Association (GUTA) forcefully closed their shops and attacked Nigerian traders, especially in the Ashanti region out of envy, asking them to leave their country.

    He also alleged that they have been denied Residence Permit, as the government allegedly insisted that they must register a limited liability company as they have been stopped from registering sole proprietorship with other hidden charges running into thousands of dollars.

    Nnaji said: “Getting a Residence Permit is more difficult than getting USA Green Card. The condition is that you must register a limited liability company.

    “If you don’t give a Ghanaian not less than 10 per cent share, which he will not actually pay because he is doing you a favour, then you must pay $500 for work permit before you are issued a Residence Permit. Again, you must obtain a non-citizen identity (ID) Card of $120 and renew same with $60 every year.”

    But the Ghana Minister, Counsellor Trade & Investment, Mr. Sintim Barimah Asare, denied the xenophobic complaints by Nigerian traders. Rather, he accused them of selling fake drugs in the shops closed. He said his country has a law, which prohibits foreigners from what he called “Table Top” businesses reserved for poor Ghanaians.

    He said other nationals were affected, not Nigerians alone. He also denied the closing of over 400 shops belonging to Nigerians, insisting that only 117 shops were closed down due to non-compliance with work permit, company registration and trading in fake products.

    Asare, however, said the Ghanaian Government has ordered the shops opened, but some Nigerian shop owners refused to open in solidarity with their members, who are law breakers. He said though his country believes in the spirit of ECOWAS Protocol, his government owes Ghanaian citizens the duty of protection against aggressive neighbours.

    A member of Nigeria/Ghana Business Council, Mrs. Abiola K. Ogunbiyi, questioned the ECOWAS integration policy, noting that it has not lived up to its billings. She said the Protocol has been disregarded.

    Mrs Ogunbiyi observed that trade is a relationship of trust. According to her, the protocol treaty presupposes that “we understand each other in terms of business and informal trade”.

    She encouraged member nations to create awareness to avoid the kind of altercation between Nigeria and Ghana traders, where the Ghanaian Government was accused of maltreating Nigerians.

    She accused ECOWAS states of failing in the area of genuine interaction among themselves. She wondered why Chinese traders did not get the same treatment as their West African counterparts, noting that Chinese Government has found a way to make Ghana a tourist destination.

    She said the Chinese came to Ghana 25 years ago, targeting the tourism sector and it worked for them. He, however, regretted that ECOWAS citizens did not have such affinity and so this might have caused the altercation between Nigerian and Ghanaian traders.

    But Mrs Ogunbiyi’s position was stoutly debunked by NUTGA Secretary-General Evaristus Nwankwo, who insisted that the shops closed were not drug shops, but motor parts shops. He questioned why the so-called fake drug dealers were not apprehended and sent to jail until now.

    Nwankwo said some of them remained closed due to their refusal to pay 200 cedis, which is about N15,000 for what they called “breaking of key”.

    He wondered how a key used by a trade organisation such as GUTA to illegally lock shops owned by Nigerians can cost that much. He, therefore, called on Nigerian Government to either force its Ghanaian counterpart to play by the rules or retaliate as many Ghanaian businesses operate in Nigeria.

    According to him, the ECOWAS Protocol has been relegated to the background, as the interaction, free trade and affinity proposed by the founders have been sacrificed.

    Another stakeholder, Sir Pantaleon Ogbonna Ezena, said his shop was locked up even after paying his income tax and Pay as You Earn (PAYE). He also disproved what the Ghanaian diplomat said about Nigerians engaging in illegal and fake drugs business.

    He said he deals on science equipment and not drugs and motor parts. According to him, their host government does not want to see them succeed in business and is using all tactics to frustrate them out of Ghana.

    Ezena recalled how he invited his Ghanaian friends and neighbours to his home town, but noted that the gesture was never reciprocated by them as they see Nigerians as ambitious and aggressive.

    He called on the Nigerian Government to address the situation before it escalates in the sub-region. Although he agreed that other ECOWAS citizens were affected by the maltreatment by Ghanaians, the targets, he said,  were Nigerians, because at a point  their shops were vandalised and burnt.

    Ezena disclosed that most of them have been sent out of business and had no choice, but to either return to Nigeria or send their families back while they wait for the government’s intervention. He advised Nigerian Government to treat the situation with the doctrine of reciprocity to send a message to Accra.

    The President, Lagos Chambers of Commerce and Industry (LCCI), Mr. Babatunde Paul Ruwase, said in these days of growing forces of globalisation, individualistic disposition and outlook may not be sustainable.

    Ruwase advised that recent developments in the European Union (EU) marked by Brexit and the protectionist stance of the United States (US) do not detract from the immense benefits and value of economic integration.

    He said with a robust market of over 386 million people, significant benefits of economies of scale would be enjoyed by businesses in the ECOWAS sub-region in the event of full market integration.

    Ruwase said: “This would lower unit costs and enhance competitiveness. Integration is, in fact, the main vehicle for boosting trade within the sub-region. With integration, our economies would be stronger and their capacity to cope with the challenges of globalisation would be enhanced.”

    He regretted that some member countries have put in place domestic policies, which negate the spirit of economic integration.

    He said: “There are also numerous institutional and infrastructural problems militating against the lofty objectives of ECOWAS.

    “We, therefore, need to tackle the current frustrating barriers to trade in the sub-region. The trade treaties are not being fully implemented. Compliance levels are very low and commitment to the trade protocols is very weak. After 43 years of ECOWAS, we are still grappling with numerous tariff and non-tariff barriers to trade.”

    Ruwase pledged that the Chamber would continue to focus on the recent experiences of Nigerian traders in Ghana, within the larger context of the economic integration objectives of ECOWAS.

    As a result of the poor posture of ECOWAS countries on the protocol, stakeholders have called on the government to be mindful of other protocols they sign, such as the New Partnership for Africa’s Development (NEPAD) and the Economic Partnership Agreement (EPA).

    For instance, NEPAD was adopted by the African Union (AU) in 2002 as the primary mechanism to coordinate the pace and impact of Africa’s development in the 21st Century.

    Its primary objective was to provide a new mechanism, spearheaded by African leaders, to eradicate poverty and place African countries, individually and collectively, on a path of sustainable growth and development.

    According to stakeholders, it was also made to halt the marginalisation of Africa in the globalisation process, accelerate the empowerment of women and fully integrate Africa into the global economy.

    NEPAD evolved from three initiatives designed to address the complex challenges to growth faced by African states: the Millennium Africa Recovery Plan (MAP), led by former South African President Thabo Mbeki; the Omega Plan, developed by the former President of Senegal, Abdoulaye Wade.

    The other was the New African Initiative (NAI), which was combined with the first two initiatives. In 2001, these were reworked and expanded to provide a framework for African states.

    Another protocol that Nigeria has been advised to be aware of is the EPA. The former Tanzanian President, Mr. Benjamin Mkapa, advised Nigeria to resist pressure to sign the EPA with the EU because, according to him, such contract is counter-productive.

    Mkapa sounded this warning as a guest speaker at a forum organised by the Manufacturers Association of Nigeria (MAN) recently. He warned Nigerian and other African leaders not to touch EPA as he likened it to a poisoned chalice.

    He wondered how the continent can be asked to allow finished goods from advanced economies. He said such agreement was not in line with the aspirations of African countries, noting that African leaders should imbibe home-grown solution to address some of the developmental needs facing the continent, especially in industrialisation.

    The Tanzanian President lamented that the continent was being encouraged to export primary products, instead of adding value to them, which is sent back to Africa as finished products at a higher cost. He said this can only be likened to modern day slavery.

    “We should not follow global trend, rather we should work on where we have comparative advantage. Unfortunately, globalisation has made it almost impossible for national concept and value chain to prosper. African leaders must come to terms with what is good for their people and pursue it,” Mkapa said.

    He also advised that African leaders should desist from following the options presented by Europeans, but rather look to China in terms of development and adaptation.

    He said adopting the Chinese model is not only cheaper, but can easily lead to technology transfer and faster development judging from the growth of the Chinese economy in a short space of time.

    Consequently, Mkapa encouraged African countries to “undertake some degree of industrialisation to add value to their agricultural and primary products and natural resources and ultimately, increase government revenue”.

    The former MAN President, Dr. Frank Udemba Jacobs, also said MAN saw the EU’s EPA as a dagger directed at the heart of Nigeria’s industrial sector.

    He explained that they have advised government that signing the agreement in its present form would impact negatively on local manufacturing and result in shutdown of industries with heavy job losses, because of the unfair competition that will evolve.

    “Nigeria’s manufacturers are obviously unimpressed by the promised EU package of about $9 billion to the 15 members of ECOWAS, over a five year period, as MAN estimates that the Nigerian Treasury could lose over $1.3 trillion revenue from a significant reduction in import duties, if the EPA is also endorsed in its present state,” Jacobs said.

    Nonetheless, proponents of EPA argued that the objective of ECOWAS Common External Tariff (CET) is to “build bridges of development, investment and trade cooperation between members of the Community and between ECOWAS as a trade block and other such regional or third party trade and economic union.”

    Also, the pro-EPA lobbyists are optimistic that CET’s operation would create a level playing field for imports into the sub-region and significantly reduce smuggling and re-export of third party imports into Nigeria.

    According to them, this is because of more favourable duty differentials of Nigeria’s neighbours. It was also speculated that the product of CET will be reflected in reduction of import duty leakages and contraction of opportunities for bribery and corruption at the nation’s ports.

    Despite the supposed benefits, MAN has remained uncomfortable with the adopted classifications of Customs duties under the CET. For instance, essential social commodities, including pharmaceuticals, books, newspapers and others attract zero per cent duty; basic goods and raw materials attract five per cent, while intermediate goods attract 10 per cent.

    Furthermore, finished consumer goods attract 20 per cent duty, while an additional tariff band of 35 per cent was created for those goods under Nigeria’s Absolute Import Prohibition List.

    However, MAN recognised the difficulty in properly evaluating the categorisations, because of the fairly loose class definitions adopted.

    For example, Nigeria has a growing pharmaceutical sub-sector, which could become non competitive with zero per cent tariff for drugs and medicaments imports from countries with lower cost of borrowing and superior supportive infrastructure.

    MAN was also concerned that food and agricultural imports from such better endowed competitors may also reduce Nigeria’s chances of success in her attempts to be self-sufficient in rice and maize production.

    Additionally, the manufacturing community noted that although the tariff for raw materials and production machinery has been set at five per cent, it would probably be more appropriate for these imports, for which there are no potential local substitutes, to also attract zero percent duty.

    To them, this would further reduce production cost and cushion the adverse impact of high cost of funds and power on made-in-Nigeria products.

    In addition, MAN’s opposition to EPA is premised on the reality that the sub-region’s different levels of economic strength and industrialisation will put Nigeria and other ECOWAS members at a trade disadvantage.

    The above notwithstanding, economic and industrial growth, according to experts, are products of leadership’s abiding vision and the application of appropriate monetary and fiscal frameworks that accommodate lower single digit interest rates, low inflationary rate, appropriately price, stable and sustainable exchange rate regime, with supportive social and industrial technology and infrastructure.

    Regrettably, these features, many analysts say, have remained alien to the Nigerian economy and, invariably, negate the expected benefits of the ECOWAS CET.

    They, however, advised the Nigerian Government to protect the sectors in which Nigerian manufacturers already have a foothold, with the possibility of further growth that would  positively impact employment and, ultimately, government revenue.

  • Forex interventions: Meeting end-users’ needs

    A country’s currency remains its pride among nations. For many Nigerians with memory of naira exchanging above N520 to dollar at the parallel market nearly two years ago, the stability in the market now is a welcome development.

    The impact of the Central Bank of Nigeria (CBN) policies on the local currency, including the introduction of Chinese Yuan into the intervention, has impacted positively on the naira stability.

    Today, with key policy initiatives, especially the introduction of the Investors’ & Exporters’ Forex Window, the apex bank has brought convergence in the market, keeping the naira stable at N361 to the dollar in the parallel market. The apex bank has also continually intervened in the forex market at the retail end, supplying both dollar and yuan to meet forex demands.

    The total foreign exchange (forex) interventions by the Central Bank of Nigeria (CBN) stood at $963 million as at August 2018. According to a report by Financial Derivatives, a financial market research firm, the forex interventions have helped to stabilise the naira against global currencies, especially the dollar.

    At the parallel market, the naira started the period at N360/$, and inched up marginally, closing at N361/$ on August 28.

    This can be attributed partly to the CBN’s intervention of approximately $963 million in the period. The naira also appreciated against the pound and euro to close at N464/£ and N412/Euro on August 28, from N474/£ and N415/Euro on August 13.

    At the interbank foreign exchange market, the naira started the period at N306.05/$, and depreciated marginally by 0.033 per cent to close at N306.15/$ on August 28.

    The naira depreciated by 0.050 per cent to close at N362.38/$ at the IEFX window from N362.20/$ on August 13. Total forex traded at the IEFX window was $2.93 billion, compared to $1.73 billion in the corresponding period in July.

     

    I&E Forex Window

    In the first two weeks of introducing I&E Foreign Exchange Window, forex speculators lost over N500 million, as the CBN sustained its dollar interventions in the interbank market. The losses grew to over N1 billion in the first two months after more foreigners began to use the window, and its impact on the forex market deepened.

    The economy has also enjoyed major inflow of forex in recent months with over $51 billion recorded in the I&E FX Window. The I&E Forex window, also called willing-buyer willing-seller window, allows foreign investors to find buyers for their dollars at a mutually-agreed price. The CBN controls about 15 per cent of all the transactions carried out in the window.

    As it stands now, many forex users will have no problem accessing forex for his holidays trips given the level of stability and liquidity existing in the foreign exchange market.

    The coming of I&E Forex window was followed by continuous interventions by the CBN which enabled banks and bureau de change (BDC) operators to meet forex demand at the retail end of the market. The naira now exchanges at N362 to dollar at both the BDC and parallel market rates while the official rate for the local currency stood at N305.6 to dollar.

    Aside establishing the I&E Forex window, the CBN also opened a special forex window for Small and Medium Enterprises (SMEs). The window, which allocates $20,000 per business per quarter, helps the SMEs import “eligible finished and semi-finished items” needed for their businesses. The CBN said the bank’s special intervention was necessitated by its findings that many SMEs were being crowded out of the forex space by large firms.

     

    Dollar/yuan interventions

    The CBN has injected $340 million into the interbank retail Secondary Market Intervention Sales (SMIS). This is in addition to the sale of 69 million Chinese Yuan (CNY)  in the spot and short tenored forwards.

    The figures obtained from the CBN showed that the United States (US) dollar denominated interventions were only for concerns in the agricultural and raw materials sectors.

    According to its Acting Director, Corporate Communications, Isaac Okorafor, the sales in Chinese Yuan were through a combination of spot and 15-day tenors. He said the exercise, in line with its guidelines, was for the payment of Renminbi denominated Letters of Credit for agriculture as well as raw materials and machinery.

    Okorafor also explained that the requests attended to were bids received from authorised dealers, adding that Renminbi’s availability was sure to ease pressure on the foreign exchange market.

    He attributed the relative stability in the foreign exchange market hugely to the continued intervention of the CBN as well as the sustained increase in crude oil prices in the international market.

    The CBN spokesman further assured that the CBN would remain committed to ensuring that all the sectors continue to enjoy access to the foreign exchange required for the business concerns, whether in US dollars or Chinese yuan.

    It will be recalled that the CBN on Friday, July 20, announced the commencement of its intervention in the sale of foreign exchange in Chinese Yuan (CNY), marking the concrete commencement of the Bilateral Currency Swap Agreement (BCSA) signed with the People’s Bank of China (PBoC) on April 27, 2018.

    The statement announcing the flag-off of the sale had explained that there would be no predetermined spread on the sale of FX Forwards by authorised dealers to end-users under the Special SMIS-Retail, adding that authorised dealers would be allowed to earn 50 kobo on the customers’ bids.

     

    Apex bank seeks lifestyle changes

    CBN Governor Godwin Emefiele has called for a change of lifestyles among Nigerians to sustain naira’s recovery against the dollar. He said in a campaign shared by Okorafor: “The size of Nigeria’s reserves and the value of the naira critically depend on our lifestyles and on the value and types of imports we allow into the country.”

    Emefiele’s message implied that a change in consumption pattern from foreign to indigenous goods would impact positively on the value of the local currency.

    Analysts said the CBN’s assurance to stakeholders that it will continue to intervene in the forex market, a promise it has kept for more than seven months stabilised the market.

    But stability is bad news for forex speculators. They prefer volatility which makes them to declare more profits.

    Head, Currencies Market at Ecobank Nigeria, Olakunle Ezun, said the forex market has lost its drive for profitability and is no longer exciting for players. He said the boom time for forex dealers was over after the CBN kept its dollar intervention promises. “In terms of forex business, it is not as exciting as it used to be. What makes the market exciting is volatility. The operators are not always happy when market becomes stable, because their profit margin drops. The profit-taking opportunity in the market is very lean at present and so are the turnover and spread,” he said.

    He said Nigeria’s currency crisis was triggered by a dip in crude oil prices, which adversely affected foreign reserves and created chronic dollar shortages. It was the need to curb dollar shortages and stabilise naira against world currencies that prompted the CBN to regularly inject dollars into the market to narrow the gap between official and black market rates. This measure has not only led to convergence between parallel and black market rates, but has chased currency speculators out of the market.

    While the banks have continued to get dollar supplies to meet the demand of genuine forex users, the black market operators whose cost of operation has remained the lowest in the value chain, have also stayed put in the business.

    “The black market operators do not need licence to operate, neither do they demand for documentation from forex buyers. They are simply doing cash and carry business and have largely benefited from the rate convergence although their profit margin has also dropped,” a Lagos-based BDC operator, Isah Yakubu, said.

    He said black market forex has been in operation for over 100 years, adding that patronage for this market has continued at all times, not-withstanding the state of the economy and forex market.

    For the currency speculators, who buy dollar for keep, and sell when it strengthens, the forex business has been a nightmare after the CBN sustained its interventions. After recording huge losses in naira and foreign currencies, these speculators seem to have been chased out of the country’s forex market.

    Afrinvest West Africa Limited Managing Director Ike Chioke said the jump in foreign inflows was not a surprise given the development in the forex market, particularly the launch of the I&E forex window in April.

    “The knock-on effects of strong portfolio flows are already evident in performance of the domestic equities market which has historically been driven by foreign portfolio investors,” he said. Chioke said a strong positive correlation exists between the exchange rate and crude oil price in the country.

     

    Forex restriction on 41 items

    The CBN’s restriction of 41 items from accessing forex from official windows was one of such policies that has also boosted forex stability. More than two years after the policy shift, its objectives such as encouraging local production of the affected items and boosting local industries suffocated by the importation of competing products are being realised.

    The policy implementation was part of the home-grown solutions introduced by Emefiele to sustain forex market stability and ensure the efficient utilisation of available forex to grow critical segments of the economy.

    The policy implies that those who import these items can no longer buy foreign currency from the official window to pay overseas’ suppliers. Rather, they will have to source forex from the parallel market or BDCs to pay for their imports.

    The CBN boss said the bank has been developing home-grown policies to surmount challenges that confronted the economy in recent times.

    For instance, over the last 10 years, the CBN had invested over N2 trillion in funding agriculture, Small and Medium Enterprises (SMEs) and other manufacturers in the value-chain.

    The regulator said the apex bank would continue to support operators in the agriculture, SMEs and manufacturing enterprises through its development finance initiatives, with a view to complementing the Federal Government’s efforts at diversifying the economy and ensuring that the nation is self-sufficient in food production.

    Speaking on the 41 items, Emefiele said: “The issue of those 41 items, unfortunately, is one that has been on my table. But I think it is important that in the life of an economy, there is a need for us to take a look and ask ourselves: what really are we importing into this country? “When this thing started, we said: Why should we import rice? Why should we import toothpick? Why should we import palm oil? At a point in this country, Nigeria was the largest producer and exporter of palm oil and we were controlling 40 per cent of the market share.

    “So, there is the need for us to say at this time when there is a scarcity of forex, it should be set aside for the import of items we cannot produce in this country.”

    The CBN boss’ logic is that when items, such as palm oil, are imported, the local producers are made poorer. “When we import rice, we impoverish the rice producers in Abakaliki, Kebbi, Sokoto, Katsina and other parts of the country. We need to look at that very seriously because God has blessed this country, with good climate, good weather, which should be taken advantage of. Since we can produce these things, let’s use them to feed our people so that we can save foreign exchange for the country,” he said

    Emefiele said he was satisfied with the outcome of the policy, adding that more time was needed to evaluate its success. The CBN governor said the policy could be reviewed when it was concluded that local manufacturers of the restricted items had become very competitive. Emefiele clarified further: “My view would be that if you have forex, you should devote it for the import of items that are important and can’t be produced in the country. “If you have excess forex, save it or create reserves. My view, which is the view of government, is that there are certain items that we can produce locally.

     

    Measures to strengthen naira

    Some of the measures put in place by the CBN to end the naira crisis include the first Naira-Settled Over-the-Counter (OTC) Forex Futures Market (FFM) launched with FMDQ OTC Securities Exchange and the planned resumption of dollar sales to the BDCs.

    The FMDQ OTC Securities Exchange (FMDQ) is an organisation with the strategic intent of bringing about revolutionary changes and fostering the development of the Nigerian financial markets

    The naira-Settled OTC Forex Futures are non-deliverable forwards, or a contract where parties agree to an exchange rate for a pre-determined date in the future, without the obligation to deliver the underlying dollar on the maturity/settlement date.

    On the maturity date, it will be assumed that both parties would have transacted at the spot forex market rate. The party that would have suffered a loss with the spot forex rate will be paid a settlement amount in naira to ensure that both parties enjoy the rate that had been guaranteed to each other through the OTC Forex Futures.

    FMDQ’s Managing Director/Chief Executive Officer Bola Onadele Koko said: “The naira-settled OTC Forex Futures product is a major milestone development in the evolution of the  financial markets. The Futures market is an opportunity to transform risk into certainty – a major paradigm shift in the financial markets landscape.

    “This innovation offers opportunities for government, businesses, pension fund administrators, investors and individuals among others to hedge (not speculate) to cope with exchange rate risk.

    “It also affords the CBN a greater opportunity to manage exchange rate volatility, thus achieving greater market confidence, liquidity, improvement in business planning, job security, employment, better allocation of resources, global competitiveness of the Nigerian financial markets, and all in all, a thriving economy.”

    Stakeholders proffer solution

    Chioke believes the incorporation of a long-term diversified strategy in fiscal policy is required to cushion shocks in various segments of the economy. To him, the persistent pressure on the naira could have been minimised if a counter fiscal policy had been developed, as the CBN cannot continue to defend the naira with foreign reserves. “To reduce this pressure, an inward looking policy (tax incentives, infrastructure development and production subsidy) should be emphasised to reduce the dependence on imported goods”, he said.

    Ezun said: “There is a limit to how far a policy can support naira. Demand for dollar is huge because the economy is import dependent. A lot of industries still depend on importation of raw materials and finished goods making our import bills to go up.”

    Association of Bureaux De Change Operators of Nigeria President, Aminu Gwadabe said the country has not been able to build strong buffers, so that when crisis of this nature occurs, as seen in other countries, the economy would be protected. He said: “The United Arab Emirates has over $400 billion in their reserves and that is a very big buffer for them as it protects their local currency at any given time and that is what I would want to see in Nigeria. Don’t forget that without the buffers, there is no way one can defend the local currency.”

    He said: “As a Nigerian, anytime I see the gap increasing, I’m worried and I say that this gap has to be reduced. The rising gap between both markets is fueled by compromise. Nigeria is an economy where you see compromise. Speculators are the biggest challenge facing the naira.

    “Don’t forget that speculation is on its own a business. Once the CBN follows one road, they will find a way to frustrate the policy and ensure the survival of their business. But with increased transparency and liquidity, the activities of speculators will be reduced and volume of parallel market operators will also be reduced. We should move from the era of dollar allocation to think of how to bring in the dollars”.

    The economy has expanded by an average of 1.73 per cent year-to-date. Whilst Nigeria’s GDP growth rate has remained positive for five consecutive quarters since its exit from the recession in second quarter of last year, it remains below its population growth rate of 2.7 per cent. The decline in quarter-on-quarter growth is also reflective of a much needed boost to the real sector.

    The introduction of initiatives such as the Differentiated Cash Reserve Requirement and the Corporate Bonds Funding Programme targeted at improving credit to employment elastic sectors including agriculture and manufacturing sectors is a welcome development. This would increase borrowing in these sectors, improve activities and boost economic growth. However, the slowdown in growth rate in second quarter Q2’18 would be a key consideration for the MPC at its next meeting on September 24/25.

  • Innoson, GTB Feud: The Untold Stories

    Innoson, GTB Feud: The Untold Stories

    Recently, the Innoson/GTBank story has gained so much media prominence, especially following the arrest of the Innonson chairman a few days ago by EFCC(Released).  Though the case is pending in court, Innoson has taken the battle to social media. There have been numerous sponsored social media campaigns against the Bank such as #BewareOfGTBank and #WhatIsWrongWithGTBank.

    The company has also gone Television, with its owner, Dr Innocent Chukwuma granting an interview to TVC, where he claimed he had obtained a judgement of N8bn against the bank. He added that the bank pleaded with him over their inability to pay, and that he graciously offered to accept shares of the bank as payment.

    GTBank on their part has chosen to remain silent on the matter, perhaps trusting in the integrity of the legal system as against playing to the gallery. A staff of the bank who spoke under anonymity, stated “Irrespective of the issues we are facing with the company, Innoson remains a customer of the bank and we owe him a duty of confidentiality and to conduct ourselves in a responsible manner towards him”.

    This statement didn’t stop us from conducting our own investigations on the matter, and below are our findings, put in bullet points for your optimum understanding.

    The obvious:

    Innoson is, and still remains, a customer of GTBank.

    What we discovered:

    1. GTBank (in 2009) granted Innoson several credit facilities (i.e loans) totalling N2,400,000,000,00 (two billion, four hundred million Naira only), to part finance working capital requirements, import new motorcycles and motorcycle spare parts, agricultural spare parts and plastic manufacturing equipment (“Imported Goods”).
    2. Under the loan terms agreed by Dr. Innocent Chukwuma on behalf of Innoson, proprietary interest in the Imported Goods was consigned exclusively in favour of the Bank. This means that the Bank was the exclusive owner of the Imported Goods.  Accordingly, the original shipping documents (i.e. the Bills of Lading) were in the custody of the Bank, and have remained in the custody of the Bank at all times.
    3. Because GTBank was the exclusive owner of the imported goods, ownership of the goods could only be transferred to Innoson (or any other third party) by the Bank. The condition in the agreement between the Bank and Innoson, for the release of the Imported Goods by the Bank to Innoson, was the payment of 25% of the value of each Letter of Credit transaction by Innoson.

    What we learnt:

    1. Innocent Chukwuma approached the Bank, on behalf of Innoson, requesting the release of the shipping documents without payment of the agreed+ 25% equity. The Bank declined his request as a result of Innoson’s failure to meet the agreed conditions.
    2. It came to the Bank’s knowledge sometime in June, 2011 that the Imported Goods for which the Bank declined to release shipping documents to Innoson in view of its failure to meet the agreed conditions, had been fraudulently procured by Innoson.
    3. The Bank discovered that Innoson, under the control of Dr. Innocent Chukwuma had forged the Bank’s endorsement on the bills of lading to the Shipping Line and fraudulently cleared the Imported Goods which were in the name of the Bank. The Imported Goods, being property of the Bank should not have been cleared from the Port without the original shipping documents being endorsed by the Bank in favour of Innoson, or any third party.
    4. The signatures of 4 (four) staff of the Bank, to wit, Taofeek Olalere, Dan Attah,   Bunmi Adeyemi and Amazu Amalachukwu, as well as the Bank’s stamp were forged on all the shipping documents used by Innoson to fraudulently clear goods at the port.  The Bank did not at any time endorse or transfer the shipping documents to Innoson, as the originals of each of the relevant Bill of Lading remain in the Bank’s custody to this very day.
    5. When the Bank reported the matter to the Nigeria Police, Dr. Innocent Chukwuma claimed the Bank released the shipping documents to him. Consequently, the Police commenced investigation into the Bank’s complaint, including a forensic examination of the disputed signatures, and established that the signatures of the Bank’s staff were forged, and the Imported Goods were fraudulently cleared from the Nigerian Ports Authority by Dr. Innocent Chukwuma and his accomplices.

    What we heard from the Police:

    1. Police investigations confirmed that Innoson and Dr. Innocent Chukwuma deliberately set out to defraud, steal from the Bank and convert the Imported Goods belonging to the Bank by deceptive means and through forgery and misrepresentation. The unlawful takeover of the Imported Goods, which served as the Bank’s collateral, left an indebtedness in excess of the sum of N1,654,481,895.04 (one billion, six hundred and fifty four million, four hundred and eighty one thousand, eight hundred and ninety five Naira, four Kobo) as at September 26, 2012.
    2. Chief Innocent Chukwuma was arrested and interrogated by operatives of the EFCC, following which he agreed to make monthly payments into Innoson’s account until the full liquidation of Innoson’s indebtedness to the Bank.  However, Innoson defaulted in making the agreed payments.  Investigations by the Nigeria Police following a petition by the Bank in September 2013 also found Innoson and Chief Innocent Chukwuma culpable of the criminal allegations levied against them by the Bank, and Chief Innocent Chukwuma was accordingly charged to court by the Police.

     

    1. The Police filed Charge No. FHC/L/565C/2015-Inspector General Of Police And Innoson Nigeria Limited; Innocent Chukwuma;Charles Chukwuma;Maximian Chukwura; Mitsui Osk Lines; Annajekwu Sunny for fraudulent clearance of goods, forgery, conversion, stealing and conspiracy presently pending before Faji J, at the Federal High Court, Ikoyi and adjourned to November 21, 2017 for arraignment/or hearing of motion for issuance of Bench Warrant.

    What Innoson did:

    1. Innoson approached the Bank for a reconciliation of his account and pleaded for a debt forgiveness. A reconciliation was carried out on the account – which had a debit balance of N1,654,481,895.04 as at December 31, 2011. In the spirit of amicable resolution and EFCC intervention, the Bank said it agreed to forego the sum of N559,374,072.09 which represented default charges that has accrued on the account and debited in line with the loan agreement between the customer and the Bank.

     

    1. Based on this, the Bank decided to accept from the customer, the sum of N1,095,107,822.95 as full and final payment of the customer’s indebtedness to the Bank, provided that same shall be fully paid not later than (30) days from the date of the letter written to him

     

    1. Surprisingly, Innoson commenced suit no:FHC/AWK/CS/2012 against the Bank at the Federal High Court, Awka stating the bank had debited its account with excess charges totalling N559,374,072.09 and obtained judgement in excess of N4.7Billion against the Bank. Again choosing to dishonour an agreement that was amicable reached between him and the Bank for a full and final settlement of N1,095,107,822.95 wherein the Bank graciously forgave him the sum of N559,374,072.09 which accrued on his account during the period which he abandoned his account.

     

    1. To further stall the criminal proceedings against him, Chief Innocent Chukwuma and his company instituted suits at the Federal High Court, Abuja, as well as the Federal High Court, Awka in January 2014 against The Inspector General of Police, The Nigeria Police Force and Investigating Officer(s), seeking declaratory and injunctive reliefs, including orders restraining the Police from commencing criminal proceedings against Innoson and Chief Innocent Chukwuma. Furthermore, in a bid to stall the Bank’s recovery steps, and distract the Bank from focusing on the criminal action, as well as civil actions filed for recovery of the debt, Chief Innocent Chukwuma and his company Innoson, have continued to institute various spurious suits before various courts, claiming frivolous and outrageous sums against the Bank.

     

    What GTBank is not saying:

    1. In responding to Innoson’s motion for a stay of criminal proceedings at the Court of Appeal, the Honourable Justice J.S Ikyegh on September 17,2017 dismissed the motion for being unmeritorious and ordered that proceeding in the criminal case against Innson should proceed.

     

    1. On October 12, 2017, the Police through its Charge No. FHC/L/565C/2015- filed an application for the issuance of bench warrant against Innocent Chukwuma; Charles Chukwuma and Annajekwu Sunny for fraudulent clearance of goods, forgery, conversion, stealing and conspiracy presently pending before Faji J, at the Federal High Court, Ikoyi and adjourned to Decemeber 8, 2017 for arraignment/or hearing of motion.

     

    What we think:

    Innoson and GTBank should resolve the issues privately.

  • ‘Britain not ready to release Nigeria’s stolen funds’

    Steve Franklin is an American widely traveled journalist and author, President of Nigerian American Press Association (NAPA) a famous media association of Nigerians and American journalists with over 100 memberships. He’s a very outspoken media professional who passionately follow events in Africa. In this interview with Adetutu Audu, he chronicles several vices imbibed in Britain as they continually squander Nigeria’s Stolen Wealth kept in Britain’s Bank Account for their own rapid development at the latest  Anti-Corruption Summit in UK.

     How do you view the on-going Anti-Corruption Summit in Britain?

    As far as I am concerned, I know that from the outset of United Kingdom Anti-Corruption Summit, David Cameron, British Prime Minister had convened that meeting to embarrass and disgrace Nigeria, which was why he referred to ‘Nigeria and Afghanistan’ as two most corrupt nations in the world during his pre-summit chat with Queen Elizabeth II. Were it not the video camera that captured that scathing and derogatory statement, Cameron could have denied he did not utter it. Britain is not a saint, but very corrupt. In the present list of Transparency International Corruption Index, UK occupied 10th position with Germany, Luxembourg.

    You are aware in the UK Anti Corruption Summit, Cobus de Swardt, Managing Director of Transparency International reacted to Cameron comments regarding Nigeria, Afghanistan as ‘Most Corrupt’ when he said: ‘There is no doubt that historically, Nigeria and Afghanistan have had very high levels of corruption, and that continues to this day. But the leaders of those countries have sent strong signals that they want things to change, and the London Anti-Corruption Summit creates an opportunity for all the countries present to sign up to a new era. This affects the UK as much as other countries we should not forget that by providing a safe haven for corrupt assets, the UK and its Overseas Territories and Crown Dependencies are a big part of the world’s corruption problem.’

    I can tell you that majority of British politicians and Nigerians are presently condemning Cameron for trying to place Britain as a saint, immunized from stealing. In Africa, I have heard lots of people say ‘A Pot cannot be calling the Kettle Black.’ May be you don’t know yet, British opposition politicians and anti-corruption campaigners have said Cameron was ill-placed to criticize Nigeria when Britain’s own record on combating corruption was less than glorious.

    Unilaterally, they have said that corrupt politicians and business people from Nigeria and many other countries have laundered their ill-gotten gains in Britain’s property market, while London also has ties to numerous tax havens routinely used to hide stolen money to develop their country. There will be an Agreement to be signed at the end of the summit on Reparation of Nigeria’ stolen funds in United Kingdom.

    Are you sure that after Nigeria may have signed the Agreement on Stolen Funds Reparation, the UK Government will return the money?

    Based on Britain’s body language, I am sure they are not ready to return Nigeria’s stolen funds stashed in various banks which I will reveal shortly soon. They act and see themselves as Dictator, suffering from Colonial Master’s Syndrome. They want to use Nigeria’s stolen funds to build and rapidly develop their own nation to their optimal satisfaction. When they are through, they will then recycle same stolen funds into their banks and begin to give to Nigeria in piece meal after a long waiting period. They will then attach stringent conditions for Nigeria to follow in implementing the piece meal funds reparation. If they feel that the returned funds is not well executed according to British laid down rules, they will delay releasing other stolen funds.
    My position is further confirmed by a reported statement from British High Commissioner to Nigeria, Paul Arkwright, who said that the UK government had no plan to keep the money, but there are certain legal requirements that Nigeria had not met to ease the recovery of the money. He agreed that the money belongs to the Nigerian people but left a caveat that they ‘need to make sure that the money is well spent when it returns to Nigeria’. They need to make sure they ‘can do that in a proper way, which is fully in compliance with the British law.’ What an insult. Nigeria is a Sovereign nation like Britain, with laid down rules on procedures. Britain must do away with its Master-servant mentality. They cannot enforce British laws on Nigerian laws. That is why I call them dictator of the highest order. Nigeria had her independence since October 1, 1960, yet you are not willing to let the country grow, progress forward. What a shame.


    Can you mention those British Banks where British Government hides Nigeria’s stolen funds?

    Let me say here that British Government is government built mostly on stolen funds from the money pilfered by some politicians in those countries and kept in their banks. It is strange that UK knows those funds were stolen from Nigeria yet they instruct their banks to collect such funds, so that they may use the funds through backdoor and play it around in a circle, when tired, they return the funds into the banks. It is that simple. It will shock you to hear that British banks being used by UK Government to hide Nigeria’s funds are: HSBC, Barclays, Natwest, & Royal Bank of Scotland. Till date, no British bank has been publicly fined or even named by the regulators for taking corrupt funds, whether willingly or through negligence.

    Recently, an International corruption watchdog said high street banks in the United Kingdom could have helped fuel corruption in Nigeria by accepting millions of dollars in deposits from dubious politicians in the West African nation.

    How come five leading UK banks have failed to adequately investigate the source of tens of millions of dollars taken from two Nigerian governors accused of corruption in the past. Robert Palmer, a campaigner at Global Witness corroborated my position when he said ‘Banks are quick to penalize ordinary customers for minor infractions but seem to be less concerned about dirty money passing through their accounts.

    He also said ‘Large scale corruption is simply not possible without a bank willing to process payments from dodgy sources, or hold accounts for corrupt politicians in the knowledge of the government.

    I strongly share in the belief that Financial Services Authority (FSA) have failed woefully to do more to prevent money laundering through British banks. The fact that they reportedly acknowledged that in accepting the money, Barclays, NatWest, Royal Bank of Scotland (RBS) and HSBC, as well as Switzerland’s UBS, might not have broken the law is a shame on British Government.

    In Britain, banks help in facilitating corruption. Name one British bank that has been publicly fined or even named by the regulators for taking corrupt funds, whether willingly or through negligence or sacked. In United States, banks that breach the law have been fined hundreds of millions of dollars for handling dirty money. Barclays, HSBC and UBS are all members of the Wolfsberg Group, an international body set up in 2000 to try to improve global anti-money laundering procedures. This revelation was made by Robert based on court documents from cases the Nigerian government has brought in London in an attempt to get funds returned that it said were stolen by two former state governors: Diepreye Alamieyeseigha of Bayelsa state and Joshua Dariye of Plateau state.

  • Why NIPP should be sustained

    Why NIPP should be sustained

    The National Integrated Power Project (NIPP) is a programme designed to, not only  boost power supply, but also to actualise the Federal Government’s industrialisation aspiration through an enduring stable power supply. The programme is currently stagnated and faces an uncertain future, reports, EMEKA UGWUANYI.

    Despite the challenges  facing the National Integrated Power Project (NIPP), electricity supply from the power stations built under the initiative, accounts for at least 25 per cent of the total output from the national grid. The percentage contribution by the project excludes capacities of some of the power plants that don’t get gas to fuel the turbines.

    At the moment, the NIPP programme is facing an uncertain future with huge debt overhang as the Niger Delta Power Holding Company (NDPHC) that oversees the project is being owed N64 billion by the Federal Government, work and privatisation schedules have been disrupted and currently at standstill. The NIPP dream according to industry stakeholders, must not be killed if government’s aspirations in the power sector should be achieved.

    The National Integrated Power Project (NIPP) superintended by the Niger Delta Power Holding Company (NDPHC) on behalf of the three tiers of government (federal, state, local government) is a programme conceived in 2004 to fast-track the addition of significant new generation capacity to Nigeria’s electricity supply system. After the establishment of the programme, the government in 2005 incorporated NDPHC to serve as the legal vehicle to contract for, hold, manage and operate the assets developed and built under the NIPP using private sector best practices.

    The original plan was that NDPHC would also build hydropower dams in the North in the second phase of the NIPP after the completion. The 10 power plants built under the NIPP include Alaoji Generation Company in Abia State, Benin Generation Company in Ihovbor, Edo State, Egbema Generation Company in Imo State, Gbarain Generation Company in Bayelsa State, Calabar Generation Company, Cross River and Geregu Generation Company in Kogi State. Others are Omotosho Generation Company in Ondo State, Ogorode Generation Company in Sapele, Delta State,  Omoku Generation Company in Rivers State Olorunsogo Generation Company in Ogun State. They have a combined installed generation capacity of 5,453 megawatts (Mw) and they are all gas powered. Apart from increasing the power supply, the plants were meant to take substantial quantity of natural gas to actualise government’s efforts to end gas flaring and utilise the flared and non-associated gas for the good of the citizenry.

    Besides power generation, the NIPP project factored in construction of complementary electricity transmission and distribution infrastructure, as well as the infrastructure required to deliver the natural gas needed at the power plants. Therefore, investment and provision of infrastructure under the NIPP cut across the entire electricity power value chain but currently the projects seem abandoned.

    The National Integrated Power Project (NIPP) superintended by the Niger Delta Power Holding Company (NDPHC) on behalf of the three tiers of government (federal, state, local government) is a programme conceived in 2004 to fast-track the addition of significant new generation capacity to Nigeria’s electricity supply system

     

    Implications

    Discontinuing the NIPP programme would have far-reaching impact on the power sector. Besides affecting the level of output, the fate of thousands of direct and indirect jobs provided by the project will be hanging. For Dr. Austin Nweze, an oil industry analyst and don at the Pan Atlantic University, Lagos, because of the strategic nature of the project, if the government abandons the project, the current contractors handling the project will leave and certainly government will re-award it to fresh contractors at higher cost. The old contractors in view of their commitments to the financial institutions and breach of contract may take the government to court.

    Nweze said: “It would be unfortunate for the government to abandon the NIPP programme. There should be continuity in government. Government is a continuum. Therefore whoever is there today may be out of there tomorrow but the most important thing is that projects embarked upon by an administration that are beneficial to the populace, should be continued by successive administrations. But this is not the case in Africa and particularly in Nigeria, where governments don’t see anything good in what their predecessors did.

    “It behoves the government in power to continue the project initiated by the previous administration for the benefit of the citizens but in Africa, leaders shove aside all the efforts and projects of their predecessors and this attitude has drawn back  Africa and Nigeria over the years.This has resulted in wasted resources and funds in billions of dollars that were invested in such projects.”

    He said the present government should not throw away the baby with the bath water, adding that the project will be continued so far as it is in the interest of the populace. Abandoning such a huge and calculated project meant to enhance the economy and future of the country will cost the country more in the future, he added. Nweze said: “It will cost us more as a nation if the project is abandoned. The absence of continuity in government and abandonment of projects embarked on by previous government is an attitude that has led to many foreign investors and people not doing business in Nigeria on the long term and this will derail the long term objective of a nation.

    “The United States of America and Europe solved their power problems within 50 years but in Africa and Nigeria, we have been struggling to solve the same problem in over 100 years and this has remained a major setback to industrialisation. In Nigeria, 85 per cent of manufacturing components depend on power, and stable power supply improves the quality of life. With stable power supply, production cost of goods and services will drop substantially.

    “Also if the government directly or indirectly shows disinterestedness in the project, the contractors will abandon it and the same contracts will be re-awarded in the future at a higher cost. Also if the project is abandoned, salaries will not be paid, the contractors can take the government to court for breach of contract, and this may lead stagnation of the economy with the attendant job losses, among others.

    “President Muhammadu Buhari should manage the process well. Irrespective of the past negotiations, government should settle the debts owed NDPHC and keep the project running. Whatever the former President, Goodluck Jonathan did, was not on personal basis but on behalf of the nation, therefore Buhari should continue the project from where the previous government stopped.”

    A source in the power ministry told The Nation that currently as activities on the NIPP and at NDPHC stand still, over $14 billion pledged to be invested in the second phase of NIPP by foreign firms has been stalled.

    According to the source, the second phase projects include construction of large hydropower plants such as Mambilla, Gurara II and 10 small hydropower plants, transmission and distribution facilities and equipment.

    He said the State Grid of China/CET/Westron, had committed to invest over $8 billion in first tranche and additional $4 billion later (on equity/loan participation) in Transmission Company of Nigeria through NDPHC with minimum $600 million contribution by NDPHC. He noted that Africa Group from United States of America has also committed to invest over $2 billion in power projects in Nigeria using NDPHC as a fulcrum. There are some other interested investors committed to self-financing small transmission projects in the range of $50 million and $200 million, citing a firm called Ak-Ay, as an example, he added.

    He stated that the delay in closing transactions on the NIPP first phase and the over N64 billion owed the NDPHC by the Federal Government, the foreign investments seem stalled and when the foreign companies begin to withdraw their commitments, it would be difficult to achieve the second phase of NIPP. Therefore, the earlier the issues confronting the first of NIPP are addressed, the better for Nigerians and the economy.

    He said: “On NIPP phase two programme implementation, the National Economic Council (NEC) approved the construction of some hydro-electric projects and additional strengthening of the transmission network from the proceeds of the sale of 80 per cent shares in NIPP generation projects for implementation as Phase II of NIPP.

    “Meanwhile, 80 per cent share sales transaction  supported by Messr CPCS Transcom International of Canada resulted in $5.7 billion, however, as no payments have been received from the share sales transaction due to gas and market bankability limitations, the NIPP Phase two implementation cannot commence as initially intended.”

     

    Challenges

    Besides the initial problem the NIPP programme had in 2007 when it was alleged that $16 billion was invested in the project with nothing to show for it, the project has been a huge success. The 2007 problem dragged the project into controversy and litigation, and later suspension by the government in power then, which described it as a huge fraud and drainpipe of public funds, but after two years, the suspension was lifted and the government continued with the project.

    By mid 2013, the 10 power plants constructed under NIPP phase one have reached various completion levels generating over 2,000 megawatts (Mw) of electricity. In line with the original plan, 80 per cent stakes in the 10 plants were put up for sale to generate part of the funds that would be used in the second phase. The board of NDPHC comprising representatives of the shareholders and statutorily chaired by the Vice President, had agreed that the $4.3 billion proceeds expected from the sale of the power plants will be reinvested into the project to ensure the country attains the stage of supplying uninterrupted power to its citizenry.

    But currently, the divestiture of NDPHC generation assets is uncertain as the planned privatisation transaction of the 10 power plants is stalled due to inadequate gas for full commercial operation, and partial payment of energy invoices arising from the poor liquidity of the sector and this constitutes a major setback as NDPHC alone is owed over N64 billion. Besides, four of the 10 power plants including Alaoji, Gbarain, Ogorode and Omoku are under litigation. In view of the development, most of the bidders have withdrawn their bid bonds hence the uncertainty on the fate of the transaction.

    According to the industry source, resolution of these issues would pave way for the sale and commencement of new investment under NIPP phase II in which the organisation would invest in transmission infrastructure, large hydropower and 10 other small hydropower plants.

    He stated that following the challenges confronting the project and the over N64 billion owed the NDPHC by the Federal Government, the foreign investments may be stalled. He said: “On NIPP phase two programme implementation, the National Economic Council (NEC) approved the construction of some hydroelectric projects and additional strengthening of the transmission network from the proceeds of the sale of 80 per cent shares in NIPP generation projects for implementation as Phase II of NIPP.

    “Meanwhile, 80 per cent share sales transaction supported by Messrs CPCS Transcom International of Canada resulted in $5.7 billion, however, as no payments have been received from the share sales transaction due to gas and market bankability limitations, the NIPP Phase two implementation cannot commence as initially intended,” adding that the situation is worsened by the withdrawal of bid bonds by the prospective investors.

    He however, stated that the share sales transaction has to be redesigned for phased closure, adding that public procurement process for the engagement of a project management consultant to support NDPHC in project selection, design and implementation of NIPP Phase two projects has been completed with AF-Consult/Otis emerging victorious.

     

    Funding and progress

    The NIPP projects are funded from the excess crude account, with the Federal Government contributing 47 per cent of the funds, while the state governments contribute 35 per cent and the local governments 18 per cent. As at May this year, about $11.1 billion has been committed to the project. Out of the $11.1 billion, $7.1 billion went into the building of the 10 generation plants, $0.5 billion into gas assets, transmission assets $2 billion, and distribution assets $1.5 billion.

    The NIPP plants were designed to deliver combined installed capacity of 5,453 megawatts (Mw). Eight of the 10 power plants are designed as Open Cycle Gas Turbine (OCGT) power plants and the other two as Combined Cycle Gas Turbine (CCGT) power plants. The CCGT power plants can generate power through gas and steam turbines. For instance, the Alaoji power plant was designed as a CCGT project with a plant capacity of 1,131.4 Mw. The NDPHC had projected to attain a combined generation of 5153.1Mw by mid 2014 when it planned to fully privatise the power plants and hand them over to the new investors. However, the projections were disrupted due to lack of gas supply to the power plants and inability of some of the preferred bidders to make payments for the assets they bought.

    Under the NIPP programme, 296 distribution injection substations have been undertaken and 265 completed. The remaining 31 substations are in advanced stages of completion. Also all the High Voltage Distribution System (HVDS) outgoing 11kV feeder networks from 162 of these completed substations have had their CSP transformers fully deployed to serve consumers, The Nation learnt.

    The programme also carried out the installation of 114 transmission lines and substation projects. The projects were done to evacuate power from the new power plants as well as expand the capacity of existing substations to wheel the additional generation. It was also necessary to enhance the grid by closing the loop from South-South via South East and North Central to North East Nigeria. The projects include the Makurdi-Jos  330kv and 330/132/33kv lines; Makurdi 330/132kv; 330kv DC Makurdi-Aliade; 330kv DC Aliade-Ugwuaji and 330/132kv New Haven, Enugu, among other across the country. Some of the project contractors and EPC (enginerring, procurement and construction) contractors include Colenco, North China, Dextron, Energo, CCC International, Payma Bargh and Cartlark, Fichtner, Hoquado Limited.

    But currently, the divestiture of NDPHC generation assets is uncertain as the planned privatisation transaction of the 10 power plants is stalled due to inadequate gas for full commercial operation, and partial payment of energy invoices arising from the poor liquidity of the sector and this constitutes a major setback as NDPHC alone is owed over
    N64 billion

    The Managing Director of NDPHC, James Olotu in a forum in Lagos, said some substantial investments have been made in transmission and distribution. He said 2,370MVA of 330kV and 132kV transformer capacities are in service in the national grid, while over 80 per cent of transmission lines have been strung out of 2,903km line with  substantial transmission lines already in service. He also noted that  substantial upgrade has been carried out to strengthen the weak transmission system along the stretch of the eastern transmission loop which extends from Afam in Rivers State to Ikot Ekpene in Akwa Ibom State, Ugwuaji in Enugu State, Markurdi in Benue State and then Jos in Plateau States.

     

    Why sustenance

    The management of NDPHC, according to records, has shown a measure of accountability. Data obtained by The Nation showed that the NIPP projects were duly processed and approved. The PricewaterhouseCoopers (PwC) has audited the NDPHC accounts for financial years 2005 – 2012, while the audits of 2013 – 2014 accounts are ongoing.  Also external investigations of NDPHC affairs since 2005 to this year, gave the company clean report of integrity, transparency and full accountability. The investigations include those carried out by the National Assembly, SSS/ICPC/EFCC, and the Presidential Project Assessment Committee (PPAC).

    The 10 power plants are still at different levels of completion while there are several uncompleted distribution and transmission jobs ongoing in various parts of the country. Discontinuing the project at this time according to stakeholders, would mean wastage of resources and funds. The $11 billion already invested in the project will not be optimised and the over $14 billion investment foreign firms have committed,  will not only be stalled but the NIPP second phase dream would have been aborted.

     

  • NNPC audit report: The morning after

    NNPC audit report: The morning after

    The Nigerian National Petroleum Corporation (NNPC) is in the eye of the storm. With the release of the Pricewaterhouse Coopers’ audit report that found the state-run oil firm culpable of monumental fraud in the management of the nation’s commonwealth, the corporation is now the butt of scathing criticisms by angry Nigerians. Assistant Editor EMEKA UGWUANYI looks beyond the audit report and captures the mood of Nigerians itching for a functional, transparent and prudent NNPC.

    Nothing would gladden the heart of the Lead Director, Centre for Social Justice (CSJ), Eze Onyekpere, than to see a quick and fundamental restructuring that would separate the Nigerian National Petroleum Corporation (NNPC), the oil and gas industry regulator, from also being an active player in the industry.

    To him, such restructuring would immediately usher in a regime of private sector efficiency and pave the way for investors to finance big ticket and long-term transactions and projects in the oil and gas industry. He said what the sector needs is beyond a probe of the missing $20billion, but a probe of the management of NNPC since the return to civil rule in 1999.

    “The money earned in the last 15 years is not matched by developments and expenditures that Nigerians can see,” he told The Nation.

    Onyekpere, a lawyer, is not alone in his desire for a quick restructuring of the state-run but largely inefficient oil firm. “As the NNPC is constituted, it is a conduit. It is supposed to be made autonomous so that the private sector would put in money. But interests will not allow them because anytime there is politics in the air, they pull money from there and that is why NNPC is the way it is.

    “Let the government privatise the NNPC so that people and, mostly indigenous entrepreneurs,  invest in it. There are areas where foreigners should not play and the areas they have to play in,” Dr. Austin Nweze of the Pan Atlantic University, Lagos, said.

    The don said for NNPC to meet the expectations of Nigerians and add value to the economy, it must be free from governme’s interference. He pointed out  that the NNPC’s legal department sometimes makes drafts for business transactions without knowing the names of companies involved, with such names being added by politicians later.   “That is the NNPC we have,”  he said in utter disappointment.

    He lamented that the Petroleum Industry Bill (PIB) that could have corrected a lot of issues in the industry and the NNPC have been enmeshed in regional politics and international conspiracy that has stopped the bill from being passed into law thereby stunting the growth of the industry.

    Nweze emphasised that until NNPC is restructured and the PIB passed into law so that everybody’s interest is covered, the corporation would not be able to operate as an enterprise built for profit-making. “PIB has been bedevilled by politics. The sincerity of purpose which the bill wanted to express has been stalled over the years because people from some parts of the country felt the content of the bill is not in their interest and doesn’t favour them; hence they stood against its passage. These are the same people that control 83 per cent of the entire oil blocks in the country,” Dr. Nweze said, adding that the industry is controlled by foreigners, which is one of the issues the PIB wanted to address by encouraging increased local participation.

    He told The Nation that even the Joint Venture (JV) partnership as it is currently is lopsided in favour of the multinationals because NNPC doesn’t know the volume of oil due to it. He lamented that NNPC depends on multinationals’ measurement and whatever figures they give. Besides, whatever the multinationals say is their costs of production stands because thestate oil firm doesn’t have the technology to determine the accuracy or otherwise of the figures.

    “The JV should be renegotiated to benefit Nigerians more,” he insisted, adding that NNPC should have its own equipment and facilities to enable it explore, produce and be able to measure the quantity of oil it produces.

    Onyekpere and Nweze echo the frustration of many Nigerians who feel cheated out of their common patrimony following the large-scale fraud recently uncovered by the audit report on the NNPC by PricewaterhouseCoopers (PwC).

    The international audit firm had, in its report, taken the NNPC to the cleaners, exposing monumental fraud that has pushed the anger of not a few Nigerians to the boiling point.

    Since the report was made public, the NNPC has been in the eye of the storm, with many calling on the incoming administration to beam its searchlight on the corporation and reform it.

    For Nweze, the NNPC, from the beginning, has been a conduit from which people in government siphon money. “It didn’t start today. It existed in the military era and through other governments. NNPC is where every government goes to get money. Everything about NNPC stinks and the mess didn’t start today. The issue of corruption in NNPC is beyond PwC’s report. The report should have covered a longer period at least from 1999 because no such report has been done in the past,” he said.

    Nweze said each time NNPC wants to solve one problem, it ends up creating another. Sometimes they create new departments and jobs for people who don’t need them. “You see people with Local Purchase Orders (LPOs) and letters from government officials attached to it. Such LPOs are sold with a margin to a third party to implement.

    “There was a man I met at NNPC who said he was a contract facilitator and he sells LPOs. That is the kind of things you see in NNPC. Because of the way NNPC is structured, that was why former President Olusegun Obasanjo became the Petroleum Minister and nobody asked questions,” he said.

    He,however, advised the incoming administration of Gen. Muhammadu Buhari (rtd) to take a more critical look at the report with a view to identifying and plugging  the various pipes through which leakages are explored. “If he focuses on probing activities of the NNPC, his first four years will be focused on investigating the corporation. “Also if Buhari wants to probe the NNPC from the beginning, the culprits can plan to overthrow his government because it is a high stake risk because of the calibre of people involved. My advice is that he should leave sleeping dogs lie but identify the holes and plug them to prevent future looting and stealing,” he advised.

    On his part, Onyekpere expressed disappointment over some aspects of the report. He said: “PricewaterhouseCoopers said documents concerning transaction and transfer of divested oil blocks by Shell to National Petroleum Development Company (NPDC) by NNPC were not made available to them. So with utmost respect to PwC, this goes to show that what they did cannot in any sense of the word qualify as an audit before any addition of the term “forensic” to the audit.

    “It seems that it was a poor attempt to cover up some fraud. If the parties they were supposed to audit were not cooperating with them, they should have stopped work and told Nigerians rather than the shoddy job done. In one breath, they stated that no money is missing and in another, they did not have access to records to come to that conclusion. That is not my understanding of an audit.”

    While noting that it is a welcome development that the president-elect would upon assumption of office probe the alleged missing $20billion, he said this will help to establish the veracity of the allegation, expose and punish any culprit(s) and restore public confidence in the industry.

    The demand for this fresh probe, he said, is accentuated by PwC’s affirmation that “it was unable to provide an opinion or attestation to the numbers provided nor did it claim it had done an examination in accordance with generally accepted accounting standards. It therefore did not vouch for the veracity and accuracy of the figures.”

    Notwithstanding the shortcomings of the report, Onyekpere said there was need for restructuring of the NNPC and that the kind of restructuring CSJ is agitating for is a  process of liberalisation that creates opportunities for Nigerians and their friends to be in a win-win situation, adding that  this will untie the binding constraints on Nigeria’s development.

    “This will be a PIB type of reform that addresses fundamental issues in the sector without creating new bottlenecks and opportunities for rent seeking by government agencies and functionaries.  This will bring in more rent and taxes for the Federation Account, make gas available for power generation and increase the stock of processed gas that can be used locally by industries and for export,” he explained.

    He said the thrust of reforms for NNPC should focus on transforming it into an oil company to be owned by government and private investors.

    This, according to him, would position it to transact business like any other company without the impediments of government interference.

    “The new company will operate with the best norms of ethics and corporate governance and should be able to raise credit on the strength of its balance sheet. Government will no longer be in a position to hire and arbitrarily sack its managing directors and top executives for political expediency and reasons,” he pointed.

    Besides, management workers would now be recruited like other top notch executives in the competitive oil industry. The new company will no longer be an octopus with enormous powers rolling together the player in the industry and regulatory roles. The reforms will also involve unbundling the NNPC and its subsidiaries to become corporate organisations standing on their own with specific roles and duties in accordance with their memorandum and articles of association. He said the PIB has sought to delineate the contours for unbundling the NNPC.

    “One is at a loss as to the reasons informing the National Assembly’s refusal to pass the bill in three years. It is a big shame,” he said.

    Onyekpere is not done. He insisted that the NNPC must be detached from the day-to-day running of government and politics; have quality personnel and must be properly managed. “The management must be transparent and accountable to shareholders. It should be adequately funded. Government should be involved like other shareholders, but should not laden the company with its inefficiency,” he pointed out.

    According to him, the restructuring is not going to be a complex exercise, as the foundations of this quick reform have been laid since 2005. “All it takes is to dialogue with the incoming National Assembly on the PIB and any modification thereof and get same approved and assented to within a space of two months after the inauguration of the new National Assembly,” he said, lamenting that it is a shame that the outgoing Peoples Democratic Party (PDP) administration produced the president, the majority and the leadership in the National Assembly but could not muster the political will to pass the PIB in the interest of nation.

    He, however, said there is absolutely nothing wrong with the concept of JVs; the only challenge is the way it has been implemented in Nigeria. As he pointed out, JVs can be profitably run if they are managed transparently and in the best corporate traditions. “The failures and challenges in the oil industry are not about forms of partnerships; they are man-made and the product of the greed of a few coupled with the docility of the larger population and the entrenched impunity in the system. But the way forward is the PIB model with a few modifications,” he explained.

     

    Genesis of corruption

    The huge corrupt activities in the NNPC, especially in petroleum products’ import and subsidy reimbursement, started with the collapse of the refineries. Previously the refineries were properly maintained, but decay set in as a result of neglect by the government, particularly the last sets of the military junta.

    By the time the civilian government took over in May 1999, the four state-owned refineries were operating below 30 per cent of their installed capacities even when they got 445,000 barrels per day of crude oil allocation through the NNPC, which is the volume of crude refined by the refineries at maximum capacities.

    Ever since, the refineries have not been fully operational. Attempts by the government to boost in-country refining capacity by issuing licences to private companies to build refineries didn’t bailout the comatose refining sector, as none of the licencees was able to make it. That is how Nigeria became 100 per cent dependent on imported petroleum products to meet its domestic consumption.

    According to the Managing Director, Seplat Petroleum, Mr. Austin Avuru, in June 1992, the former Petroleum Minister, Prof Jubril Aminu was sacked because of queues occurring in petrol stations.

    In those 23 years, things moved only downwards to a point where refineries are not working and queues at fuel stations have become a norm despite trillions of naira spent on fuel importation and subsidy.

    In 2011 alone, subsidy gulped over N2 trillion in the world’s seventh largest exporter of crude oil.

     

    The way out

    To prevent this anomaly, experts and stakeholders say  the refineries must function at close to nameplate capacities, the downstream fully deregulated and subsidy completely removed. To stop all manner of fuel subsidy and corruption through the Offshore Processing Arrangements (OPA) and product exchange referred to as (swap), stakeholders say that existing refineries should not only be in working condition, but also work at nameplate capacities, while construction of new ones must follow.

    According to them, as long as Nigeria doesn’t refine its petroleum products needs in-country but depend on importation to meet is fuel requirement, Nigeria’s oil and gas industry will continue to be enmeshed in corruption because all the arrangements in whatever name they come but involves bringing fuel from outside the country, will certainly create windows for sharp practices.

    For instance, the PWC report showed that money spent on fuel subsidy for the last quarter of 2011 was $9.97 billion and within the period audited it was discovered that duplicated claim for Premium Motor Spirit (PMS) or petrol subsidy claim, duplicated Dual Purpose Kerosene (DPK) subsidy claim, subsidy computation errors, subsidy claim on un-incurred DPK cost, and over-claim of subsidy, among other unsubstantiated costs and errors in cost schedules, amounted to about $2 billion.

    Nweze, for instance, insists that subsidy must be removed because it adds undue extra cost on fuel. Besides, removal of subsidy, he said, will encourage competition among entrepreneurs in that sector. “It will encourage local entrepreneurs to build refineries in the country. Oil marketers can import and sell at a price considered okay. There will be free market entry and exit,” he told The Nation.

    According to him, Nigeria refines its crude in Singapore and gets the right quantity, but in other countries, the government gets less. “The removal of subsidy will stop all these in the long run as enough crude will be refined in-country and the cost of products will be much less in the long term,” he argued.

    Money is also fraudulently lost through the OPA by which the NNPC provides crude oil to another party that would refine the crude oil on behalf of the corporation and returns the refined products to the NNPC based on the yield slate of the party’s refinery, and NNPC pays the refining and other incidental costs.

    The same applies to the product exchange (swap) transactions in which the NNPC contracts to supply the other party with crude oil in return for the other party supplying the NNPC with refined products for sale locally on a value-for-value basis. These holes, experts say, have to be plugged to prevent frittering away public funds. And the way to go is to deregulate the downstream arm of the oil industry and stop subsidy.

    Until now, the NNPC has been spending billions of naira to replace the Fluid Catalytic Cracking Units (FCCU) of the refineries, and soon after the replacement, the components would be reported to have gone bad again. As a result of this development, NNPC officials were continuously changing the component at high price.

    The refineries over the years have been conduit pipes from where the government and officials of the oil firm allegedly siphon money hence the continuous call for their privatisation. Some governments have tried to privatise the refineries but such attempts were stalled by some vested interests.

    At a forum in Lagos, oil and gas industry operators spoke with one voice on the need to make NNPC autonomous and take away the management of the refineries from the government to the private sector. The former General Manager, Warri and Kaduna Refineries, and Chairman, Petrodata Management Services, Babajide Soyode and former Group Executive Director, Corporate Services, NNPC and now Chairman, Transmission Company of Nigeria (TCN), Mr. Ibrahim Waziri, supported sale of the refineries.

     

     

  • How agric corridors can boost food production

    How agric corridors can boost food production

    Experts say the use of agric corridors holds the key to Nigeria’s search for sustainable food security. It is an innovative strategy of developing underutilised land areas with  great potential to enhance food production and economic growth.  They, however, argue that despite its capacity to transform the nation’s subsistence agriculture into profitable enterprises, the strategy requires substantial investments in infrastructure, especially in the area of transport networks, DANIEL ESSIET writes.

    The consensus among experts in the agric sector is that the adoption of new strategies aimed at sustainably increasing agricultural production is key to feeding an estimated 250 million people by 2020.

    To them, one sure approach to achieving this is by creating agric corridors, an innovation that encourages the development of underutilised land areas that have great potential to enhance food production and economic growth. The strategy, according to them, is a Public-Private Partnerships (PPP) approach, which takes the entire agric value chain into consideration with the aim of improving efficiency through targeted investments.

    The strategy, The Nation learnt, works by recognising the fact that there are regional differences in production of many commodities, and that different agro-climatic zones and other bounteous natural advantages offer immense opportunities for high growth in the agriculture and allied sectors.

    For instance, while the southern part of the country is known for vegetables, root and tuber crops, the Northcentral zone or Middle Belt is known for root, tubers and cereals. The thinking is that by exploring the regional competitive advantage to develop all the commodities that the nation is blessed with, Nigeria can ride on the agric corridor approach to increase food production.

    The Project Director, Cassava Adding to Africa (CAVA), Prof Kola Adebayo, said the nation’s agriculture is affected by the diversity of climatic conditions, soil types and water sources.  What is required to stimulate  balanced  economic  growth, according to him, is for the government to recognise these diversities and limitations and create  distinct  growth corridors for  the  production of  key crops and  livestock.

    For  instance, establishing  agric corridors  in the  northern  zones that  focuses  on growing  grains would  give  the nation high returns. In the same vein, such facilities in the Southwest will support growers of cocoa and cashew nut. Crops such as ginger will prosper in the Northeast and Western part of the country.

    Prof Adebayo said the same consideration should be given to livestock production. Emphasis, he noted, should be in terms of environmental advantage and cost merits that support profitable production. Each agric corridor, he said, should focus on a chosen commodity or livestock while government takes into consideration geographical and/or sectorial strengths. In all the corridors, Adebayo said infrastructure and supportive industries such as input production and supply enterprises, meat production lines, fisheries, forestry, commodity processing and storage enterprises are necessary.

    The CAVA Project Director listed other important elements to include linkages to enable easy movement of products to consumption areas, including supporting services such as transport, commodity grading and quality control. In locating them, however, he said the aim should be to elevate the overall standard of living and achieve balanced socio-economic development across the country.

    By being largely regional, Adebayo said agric corridor developments provide a model that transcends state boundaries, employing a range of modernisation techniques. Nigerians, he said, should be provided incentives to invest in commodity marketing, manufacturing, export and support services.

    He, however, noted that there are constraints to agricultural enterprises performance, one of which is the lack of processing and storage facilities. Others include poor infrastructure, including epileptic power supply, inadequate supply of water among others.

    According to him, these factors are responsible for the declining export crop production and food shortages. He, therefore, said putting agric corridors in place would help create a national network of agro service centers to facilitate the distribution of modern inputs, including the provision of tractors and farm machinery services to farmers.

    That is not all. Adebayo said other benefits of the agric corridor approach include the availability of raw materials and other inputs, market availability, good climate/environment, high returns on investment, use of modern crop varieties and other technologies. The system, he added, would make other portfolio of technologies available to farmers, including availability of improved varieties, biological control of pests and diseases and processing of raw materials into high quality products.  There is also the possibility of linking farmers to agro inputs and industries.

    The agric expert however, pointed out that the successful implementation of the strategy is contingent on an enabling environment for agriculture to grow in equilibrium with other sectors.

    He said whether trade corridors can be successfully linked to broad-based agriculture development is a question of high-level political will and action.

    Publicity  Secretary, National  Cashew  Association of Nigeria (NCAN), Sotonye Anga, said  the  government  should buy into the  project since it  considers high growth of agriculture and allied sectors as means to accelerate the nation’s Gross Domestic Product (GDP) growth, enable farmers to earn more income and ensure food security.

    According to him, Nigeria has rich bio-diversity and agro-climatic zones suited for majority of the agricultural and horticultural crops and a long coastline that encourages fisheries.

    He noted that despite the nation’s inherent natural advantages, the performance of agriculture and allied sectors have been affected by poor traffic infrastructure that has to be upgraded to support production, profitability, competitiveness and sustainability of crops, livestock and poultry. In anticipation of influx of new investments, he said government needs to build effective corridors geared towards the competitive advantage of a territory. He added that agric corridors will draw private capital and large-scale investment to projects that benefit small scale farmers and boost food security.

    The corridors, according to him, will foster agriculture in an area connected by lines of transportation such as highways, railroads, ports or canals. The strength of the approach, he noted, is integration of investments, policy frameworks and local institutions.

    Since the new vision of agriculture requires the PPPs approach, Anga said investments in farms will follow in form of transportation infrastructure investments. According to him, agric corridors will involve investment in roads and dams, reduction of tax burdens on agribusinesses, promotion of clusters of businesses and infrastructure.

    According to him, there is need for an enabling institutional structure for addressing the challenges of facilitating the flow of investment, technologies and modern skill sets to the agric sector. He said agribusinesses need incentives to deploy investments in developing the much needed agric infrastructure and agro based industry units in a fair and transparent manner for ensuring sustainable development. Anga argued that to position the country on the path of sustainable agricultural growth involves creating the enabling framework and infrastructural facilities that will generate higher returns to farming communities.

    National President, Association of Small Business Owners of Nigeria (ASBON), Dr Femi Egbesola, said government has come up with a plan to increase capabilities and income of farmers and rural communities. He said  the  agric  sector  need  a  policy  drive  that  benefit land owners, farmers, fishermen, rural workforce, other producers and also improve the competitiveness of Small and Medium Enterprises (SMEs). These, he said, would lead to better unit value realisation, besides facilitating large investments and opening avenues for export markets.

    To move the industry forward, he canvassed implementation of a policy, which promotes a holistic and sustainable growth of farming, horticulture, agro-forestry, dairying and animal husbandry, fisheries, and food processing sectors, including related and allied industries.

    He also stressed the need to harness the expertise of the private sector, as well as a structured and pragmatic approach for the development of agri-infrastructure through PPPs, which will lead to greater industrialisation. He, therefore, called on the government to establish corridors to ease transportation of goods to and from the interiors and the ports.

    According to him, there are lots of activities taking place across the sector, which need to be captured using economically efficient means of transportation. He noted that lack of basic rural infrastructure to bring produce to towns or store them make farming business difficult. If well designed, he said, agric corridors could do more to support agricultural development by creating employment and helping to increase food security. He pointed out that the regional dimension of agric corridors can immediately help food security by connecting food surplus with food deficit areas, and increasing intra-regional trade of food staples.

    Egbesola said with the approach, government would be able to identify growth areas with untapped agricultural potential along the corridors and support value chains that may prove attractive for investment. He explained that in the corridors, small producers will be introduced to the clusters and the value chains. He, however, pointed out that in developing agricultural growth corridors, it has to be linked directly to  the agricultural  development  agenda  of the  government to  connect  small farmers to markets, achieve capacity and competitiveness and assist  operators to  solve their basic economic weaknesses.

    He said ASBON is currently promoting value chain agriculture in Ogun State and that it is making effort to create better business environment for small holders. With agric corridors, he said other associations will be able to cluster small scale and investment in specific value chains and link small farmers with large estates. While stressing that agribusiness is expected to act as growth engine, he said government’s efforts should revolve around agricultural and agribusiness development concentrated around a major infrastructure investment or set of interrelated infrastructure projects.

    For the Provost, Federal College of Agriculture, Akure, Dr Samson Odedina, there is need to promote profitable and sustainable production, processing, marketing and utilisation of agricultural commodities and agricultural based products in  areas  where  selected communities/states have some competitive advantage.

    The commodities of focus, he noted, should contribute significantly to food security and/or income generation in the communities/states. According to him, this has been captured on the staple crop processing zones programme of the government through the Agricultural Transformation Agenda (ATA), adding that  the  programme  involves undertaking an integrated competitiveness and feasibility analysis, which leads to the development of production, processing and marketing programme for the selected commodity.

    The programme, he said, involves the formation of a cluster that comprises all stakeholder groups including farmers, processors, input suppliers, marketers, transporters, equipment fabricators, industrialists and others in businesses revolving around the selected commodity. He said by working with the cluster, an implementation plan is developed and implemented for improved production, processing, marketing and utilisation of the selected commodity.

    The Minister of Agriculture, Dr. AdesinaAkinwumi, said government is implementing the Staple Crops Processing Zones (SCPZ) scheme to reduce post-harvest wastages and creating job opportunities that would develop the rural country side. It is also designed to boost food production and drastically reduce Nigeria’s dependence on food import while creating business and job opportunities for investors.

    Today, the zones are located within 14 states or corridors to provide services and interventions to mitigate risks at every step of the value chain by linking players from inputs to end markets to streamline the process for investors.

    The  14 states and corridors are Anambra/Enugu, Bayelsa, Benue; Borno, Cross River, Kano Kogi, Kwara Lagos, Nasarawa, Niger, Ogun, Rivers, Taraba and Kebbi/Sokoto. Adesina said Nigeria has transformed in such a way that agribusiness now dictates the pace of economic activities.

    The minister noted that tremendous transformation has taken place in the sector since the government launched the ATA in 2011, which set a target of adding 20 million metric tons of food to the domestic output. About 75 per cent (15.7 million metric tons) was achieved two years ago.

    Country Director, (Nigeria) United Nations Industrial Development Organisation (UNIDO), Dr. Patrick Kormawa, sad globally, Nigeria is reputed to be the largest producer of cassava, yam and food sorghum, at 54 million metric tonnes (MMT), 38 MMT and 6.9 MMT respectively, while the country places second and third globally in citrus and ground nut production.

    According to him,  processing remains rudimentary, with post-harvest losses for various commodities remaining high as these are associated with inability to meet market requirements.

    To overcome challenges to agro-processing, Komowa said providing support for infrastructure has been identified as a key intervention that requires urgency.

     

  • SMEs’ thorny road to recovery

    SMEs’ thorny road to recovery

    Things appear to be looking up for Small and Medium Enterprises (SMEs), despite challenges before the sector credited with the capacity to create jobs, boost production and diversify the economy, writes Assistant Editor CHIKODI OKEREOCHA.

    the Director-General/CEO,Nigerian Youth Chamber of Commerce (NYCC), Comrade Peter Ayim, is upbeat that Small and Medium Enterprises (SMEs) will soon gather momentum to catalyse industrial growth.

    His optimism is hinged on the recent signing of a service agreement between Bank of Industry (BoI) and Business Development Service Providers (BDSPs) as well as other strategic initiatives aimed at unlocking the opportunities in the sector, globally acknowledged as the engine of growth. This is because of its capacity to create jobs, boost production and diversify the economy.

    BoI had on November 21, last year signed a service agreement with 122 BDSPs. The synergy, seen by industry stakeholders as a revolutionary step in development banking, entailed BDSPs collaborating with the development finance institutions to identify credible SMEs that require funding. They would also develop bankable business plans and proposals for SMEs to facilitate their access to finance. The BDSPs, according to BoI’s Managing Director,  Rasheed Olaoluwa, would also provide post-finance services, such as mentorship, handholding, advice and inculcation of best practices for SMEs, among others.

    A few months after the agreement was consummated, Ayim confirmed to The Nation that the BDSPs have hit the ground running by preparing SME projects for possible financial support by BoI. For instance, NYCC, one of the BDSPs that scaled BoI’s rigorous and painstaking selection process, is engaged with about 10 SMEs.

    “We have been engaging with 10 SMEs. While some came to us on their own, Skye Bank Plc, one of the SME-friendly banks referred some to us. We are talking to the SMEs,” he said.

    Comrade Ayim added that as part of the chamber’s services to its clients, it has also commenced discussions with Raw Material Research and Development Council (RMRDC), to organise a workshop for the SMEs.

    “The service agreement was the missing link,” he said, noting that the signing of the agreement effectively addressed the gap in the areas of poor packaging of loan requests and non-bankable business plans, which are some of the factors responsible for the low level of financial support to SME operators.

    He added that as the umbrella body and voice of youth entrepreneurs, the chamber is proud to be associated with an initiative that is poised to stimulate SMEs. While describing the initiative as an emerging trend, he called on SMEs to take advantage of the window created by BoI to build their capacity to play their role as growth drivers. He said while NYCC and other BDSPs are preparing the enterprise operators by providing them with a range of services, the collaborating banks provide the working capital.

    Chairman Managing Consultant, Resort Consult Limited, a BDSP, Mr. Femi Ekundayo, is no less excited over the prospects of SMEs riding on the platform of the agreement to scale up their operations.

    “It’s a good thing that BoI did”, he said, noting that Resort Consult Limited, a financial consultancy firm specialising in financial advisory service, project and manpower development, is appraising two SME projects before forwarding them to BoI.

    “We are appraising two projects. We expect that by April after the elections the projects would be completed and approved,” he disclosed. Ekundayo, however, said in rendering services to the SME sector, BDSPs are faced with the challenge of the attitude of SME operators, most of who do not want to be persuaded that there is light at the end of the tunnel for them.

    “Despite that a lot of interventions made in the sector brightened prospects for SME operators, it takes a lot of persuasion to make them know that there is light at the end of the tunnel for them,” he said.

    He identified other challenges facing SMEs to include lack of technical capacity to package their feasibility studies and businesses very well; lack of good management structure and accounting system to make them attractive to financial institutions for any form of assistance, as well as harsh economic environment. For instance, most SMEs are weighed down by high operating cost due to lack of basic infrastructure particularly power.

    Perhaps, most importantly, with the economic crisis caused by crashing oil prices and, subsequently, the devaluation of the naira, SMEs who depend on high import with the associated foreign exchange risk are unable to compete in the global market. The current lending rate of between 20 and 30 per cent is also considered unfriendly for SMEs, as most of them find it difficult to sustain their businesses at that level.

     

    SME-friendly banks to the rescue

    The recent signing of a Memorandum of Understanding (MoU) between BoI and 10 SME-friendly banks set the tone for a major reversal in the fortunes of the sector with regards to project funding. The 10 commercial banks renowned for their SME-centric activities were carefully chosen to partner with BoI in the financing of their SME customers. The banks include Access Bank, Diamond Bank, Ecobank, Fidelity Bank, FirstBank, First City Monument Bank, Skye Bank, Stanbic IBTC Bank, Standard Chartered Bank, and United Bank for Africa.

    Essentially, the banks are collaborating with BoI in the provision of long-term loans to qualified SMEs based on BoI’s Risk Acceptance Criteria (RAC) and the provision of working capital to the SMEs also based on individual bank’s RAC. Olaoluwa explained that the terms of the loans will be in accordance with BoI term loan with a tenor of three to five years. While the moratorium will be 6-12 moths, interest rate is between 9 and 10 per cent per annum. On the other hand, working capital facilities by SME-friendly banks will be on a tenor of 6-12 months.

    The BoI MD listed sectors to be financed to include agro-processing, solid minerals and metals, light manufacturing, logistics, etc. identified under the Nigeria Industrial Revolution Plan (NIRP) launched by the Federal Government recently. While describing the synergy between BoI and the SME-friendly banks as unprecedented, he said it will undoubtedly foster greater access to finance for SMEs, financial inclusion for Nigerians and also engender wealth creation and accelerated job creation for Nigerians.

    Banks have since keyed into this aspiration, having seen the synergy as opening up a new vista for them in that sector of the economy.

     

    CBN shows the way

    The launch of the N220 billion MSMEs’ Development Fund in August 2013 by the CBN was a shot in the arm of MSMEs.

    The intervention, which CBN Governor Godwin Emefiele, described as an innovative way of improving MSMEs access to finance, was aimed at shoring up the sector’s potential for job creation and poverty reduction in the country. One way it hopes to achieve this is by addressing the challenge of high cost of funds that has continued to affect operators’ profitability.

    This is so because most commercial banks charge as high as between 22 and 25 per cent interest rates. Micro-finance Banks (MFBs) even charge higher, insisting on between 30 and 40 per cent interest rates. The exorbitant interest rate charged by the commercial banks is also believed to be partly responsible for why local industries are uncompetitive.

    This was why the CBN in its guidelines said the fund attracts nine per cent interest rate. The fund would also be administered through private or state owned Micro-Finance Institutions (MFIs), Finance Houses, and Cooperative Finance Agencies. Such MFIs or micro-finance banks must pass CBN’s competency and proficiency tests in order to certify them capable of distributing these funds to MSMEs. State governments will be able to access up to N2 billion each for lending to eligible beneficiaries through Participating Financial Institutions (PFIs) in their states.

    In other words, the CBN will not be lending directly to farmers or businesses. What the fund does is a wholesale fund. It provides funding to the PFIs. MFIs or micro-finance banks can also come to the fund. The CBN will assess them; give them the money at low interest rate. The PFIs would undertake that they will lend at low rate of interest to micro-entrepreneurs, the low-income earners, farmers, artisans and the active poor who operate in the informal sector. Also, PFIs can only finance agricultural value chain activities, trade and commerce; cottage industries, artisans, among others.

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

    The icing on the cake of the intervention for MSMEs perhaps, was the provision that 60 per cent of the fund, representing N132 billion, be earmarked for providing financial services to women-owned businesses. Emefiele said PFIs would be required to submit periodic returns on disbursements as well as an analysis of the social impacts of the fund. He added that the finance sector regulator will also undertake regular on and off site checks to ascertain the veracity of the reports received.

     

    SON, OPS also involved

    Rejection of made in Nigeria goods because of poor quality and packaging remains a pain in the neck of most SME operators. To halt the trend, which inflicts losses to operators and by extension, the local economy, the Standards Organisation of Nigeria (SON) is certifying SMEs in the country to prepare them for export. This is in the hope of stopping the high scrutiny given made-in-Nigeria goods at the global market.

    During a visit by the National President, Nigerian Association of Chamber of Commerce, Industry Mines and Agriculture, Alhaji Mohammed Abubakar to SON in Lagos, its Director-General, Dr. Joseph Odumodu, said the agency found that apart from challenges of funding and poor management facing SMEs, what makes SMEs fit for export is not just for their products to meet Nigerian standards but also meet international standards. “We intend to work with SMEs going forward to build them to international standards,” he said.

    Odumodu stated that as part of the agency’s emphasis on making made in Nigeria products acceptable all over the world, its accredited laboratory is for a specific competence, which boasts of carrying chemical and biological testing for agricultural products in the country. He said Nigeria has entered a phase, which he called the map for world quality due to its latest accredited laboratory.

    While urging SMEs to take advantage of this golden opportunity to push their products to the world, he said SON intends to certify 50 SMEs to International Standard Organisation (ISO) 9001 quality management systems.

    SME operators are not folding their arms. Recently, the Lagos Chamber of Commerce and Industry (LCCI), part of the Organised Private Sector (OPS) commenced a programme of equipping SMEs with requisite skills needed to make their products competitive.

    LCCI President Alhaji Remi Bello, stressed that the Chamber was embarking on the initiative because the sector has been proven by developed economies of the world as a tool to accelerate economic growth and development.

    Bello, who spoke through LCCI Director General, Mr. Muda Yusuf, during the graduation of 25 mentees of the chamber’s mentoring programme scheme 2, said the mentoring programme is aimed at match-making young business leaders with experienced business owners to share their experiences with the mentees in order to make their products competitive anywhere in the world.

     

    More hurdles to cross

    Ordinarily, a combination of these interventions ought to take the SME sector out of the woods. But this has not happened. Although, operators and experts say that there is silver lining on the horizon for SMEs as a result of the increased focus on the sector, they however, contend that there are still a number of hurdles that must be crossed if SMEs must get to the ‘Promised Land’.

    One of such hurdles, according to Mr. Ekundayo, is the lack of technical/financial management capacity by most SMEs. He also said SMEs lack technical capacity and are constrained by harsh economic environment induced by high operating cost due to lack of basic infrastructure, particularly power.

    The poor state of roads also increases the cost of transporting both raw materials and finished goods to and from markets. They are also under constant threats from different organs and tiers of government who collect regressive and multiple taxes and levies.

    Most importantly perhaps, the current economic crisis caused by crashing oil prices and subsequently, devaluation of the naira, is taking a huge toll on SMEs who depend on high import. With the associated foreign exchange risk, most SMEs are unable to compete in the global market place. The current lending rate of between 20 and 30 per cent is considered unfriendly for SMEs, as most of them find it different to sustain their businesses at that level.

    That is not all. The attitude of some SMEs, according to Ekundayo, is not helping matters. He said despite the fact that a lot of interventions made in the sector have brightened prospects for SME operators, “It takes a lot of persuasions to make them know that there is light at the end of the tunnel.”

     

    Recommendations

    Ayim noted that although, Nigeria has the required number of active enterprises, with a predominantly youthful population of over 70 million youths, what is required is for government to give them the needed impetus by deliberately creating the enabling environment that will remove all the barriers that impede youth-led micro enterprises.

    According to him, this could be done by building a robust and dynamic public/private enterprise development eco system. “This will facilitate diverse direct investment options in youth focused start-ups and micro-enterprises,” he told The Nation. While describing government’s diverse intervention programmes as ‘demonstration of commitment to encourage and support the promotion and development of entrepreneurship and the MSME, he said it is also important for government to explore other credible vistas so that more people can enter and actively participate in the MSME sector.

    “In the circumstance, a dynamic mix of micro-leasing, micro-insurance and demand-driven business development services offered within a cluster is a credible option that should be encouraged,” he said, adding that using this approach will enable more aspiring entrepreneurs who cannot meet the conditions of accessing available funding options to access appropriate equipment under a micro-leasing arrangement for their businesses while existing entrepreneurs can access equipment to grow and expand their businesses.

     

    Why SMEs hold the ace

    President Goodluck Jonathan underscored the critical importance of SMEs to Nigeria’s economic growth and development when at the recent inauguration of the MSMEs Council he said: “MSMEs are the innovators, the wealth creators, as well as employment generators. Every MSME today has the potential of growing to the large corporation of tomorrow, and that is why we are now backing the initiative with the creation of this Council.”

    Latest survey by the National Bureau of Statistics (NBS) put the number of MSMEs in Nigeria at 17.2 million. The enterprises, according to NBS, employ over 32 million people. Citing the survey, Jonathan said, “Over 95 per cent of registered businesses in Nigeria are small businesses. If each of these businesses employs one more person, we would create over 17 million extra jobs, which would indeed be a revolution in Nigeria’s job markets. This is the unexplored power of small businesses.”

    The President also explained how MSMEs’ impact on employment, saying that apart from employing people directly, MSMEs promote employment indirectly through creating market opportunities and improving market conditions. They also disperse and diversify economic activities, wealth creation and distribution as well as localize resources, mobilise savings, and stimulate indigenous entrepreneurship and technology especially in developing economies.

    The job creation capacity of  the sector appears to be the most interesting. For instance, 70 per cent of all new net jobs in the US are created by SMEs, according to National President of Nigerian Association of Small Scale Industrialists (NASSI), the umbrella association for all small scale enterprises and industries in Nigeria, Chief Chuku Wachuku. He however, said that in Nigeria SMEs contribute about 95 per cent to Gross Domestic Product (GDP), but their only problem is that whereas they contribute this percentage to GDP, the wealth addition stands at only 46 per cent.

    He noted that the economy of the emerging nations or even developed nations appreciate that economies must necessarily depend on MSMEs and the informal sector because it’s the engine of growth, propelling the economies of those countries by creating the bulk of job opportunities. He said government only creates the enabling environment for the private sector to thrive through unfettered access to credit facility to MSMEs in those countries as well as provide the necessary infrastructure.

     

     

  • Bickering over bill on private firms’ listing

    The dust raised by the Bill on Private Companies Conversion and Listing Bill 2013, which recently passed the second reading is yet to settle. The bill seeks to compel companies with shareholders’ funds and annual turnover exceeding N40 billion and N80 billion, respectively, to convert to public liability companies and get listed on the stock exchange. But the bill has not gone down well with members of the Organised Private Sector. They are kicking that the bill, when passed, would negatively affect their businesses, reports Assistant Editor OKWY IROEGBU-CHIKEZIE.

    The Deputy Chairman, House Committee on Capital Market Institutions, Hon. Chris Emeka Azubogu, certainly had good intentions when he sponsored the ‘Private Companies Conversion and Listing Bill 2013.’ Azubogu and other members of the green chamber who threw their weight behind the bill, noted, for instance, that it would boost the economy by stabilising the macro-economic system. They also envisaged that the bill, which provides for companies whose shareholders’ funds exceed N40 billion or annual turnover exceed N80 billion or total assets exceed N80 billion to convert to public liability companies and get their shares listed on any stock exchange, would boost the contributions of the formal sector and the Nigerian capital market to the Gross Domestic Product (GDP).

    However, what Azubogu probably never envisaged was that the private member bill, which seeks to enable private companies operating in the country to comply with regulatory requirements of the constitution by registering with the Securities and Exchange Commission (SEC), the apex regulatory body of the capital market, will become a subject of heated debate and controversy. Already, the bill is the butt of scathing criticisms by members of the Organised Private Sector (OPS). Some of them are kicking, insisting that the bill is not only strange to the constitution, but would also negatively affect the business environment.

    Specifically, members of the OPS argue that the bill would create undesirable and unnecessarily cumbersome regulation and scrutiny on the companies under the Companies and Allied Matters Act (CAMA), SEC and Nigerian Stock Exchange (NSE) rules and regulations. While admitting that the 1999 Constitution vests the National Assembly (NASS) with power to make laws regulating the ownership and control of business enterprises operating in country, they however, pointed out that the bill, if passed, will be a reminiscent of the indigenisation decree era when many companies were forced to leave the country.

    That is not all. The proposed bill, which has already passed the second reading, the OPS members insisted, makes nonsense of the several representations made by government and private sector operators to attract foreign investors into the country. As far they are concerned the bill is counter-productive to the drive for foreign investments because foreign investors prefer to operate under stable economic policies. Besides, it will negatively affect Nigeria’s reputation.

     

    Nature of the Bill

    The bill, when passed into law, will compel a private company that falls into the category to, within 12 months from the commencement of the bill, take all necessary steps to convert from a private limited liability company to a public company within the provisions of Companies and Allied Matters Act (CAMA).

    Such a company shall, within 12 months from the date of conversion, take all necessary steps to list its shares on a stock market for brokerage. Azubogu said a private liability company, which the provision of the bill applies, shall maintain or cause to be maintained proper accounts and records to enable fair view to be formed of its assets, liabilities, income and expenditure.

    He added that the SEC shall in addition to its powers under the Investment and Securities Act 2007, have powers to administer the provision of the bill among others. He listed the incentives that companies that fall into this category shall enjoy as follows: If a company lists 40 per cent of its issued share capital, it shall be eligible for a tax incentive at a rate of one-third of its applicable income tax, 30 per cent of its issued share capital. It shall enjoy up to one-fourth of its applicable income tax while the company that issue up to 20 per cent of its called up capital will get one-eighth of its applicable income tax.

     

    Members of OPS disagree

    Members of the OPS said after a careful and painstaking review of the private company’s conversion and listing bill 2013, they came up with a number of conclusions. For instance, speaking through its Deputy Chairman, Commercial Law and Taxation Committee, Mr. Bimbo Atilola, the Lagos Chamber of Commerce and Industry (LCCI) submitted that the proposed bill would negatively impact on local investment and the broader economy. Besides, the bill, LCCI said, would lead to considerable loss of revenue to the government.

    Mr. Atilola also argued that the NSE may not have the depth and liquidity needed for the investment arising out of the mandatory listing of these companies. Furthermore, he said the procedure for going public is expensive and onerous and not every investor or would-be investor local or foreign has the temperament for such. Moreover, he said it would impact negatively on corporate governance, which is the engine room critical for the survival of any company.

    He pointed out that listing on the floor of the stock exchange is not a ticket to a company becoming successful.

    In other words, listing a company’s shares does not guarantee success of the relevant business.  This is because some companies that have been listed were delisted, and those that converted to public entities were re-registered to private companies. “Going public and being listed on the floor of the stock market are critical business decisions that only the companies’ management can make,” he argued.

    According to LCCI, the main benefits of buying publicly quoted shares are capital appreciation and the ease of disposal. These two concepts depend largely on the operational success of the relevant business. The Chamber therefore, said bringing so many companies into the picture without any sound and strong basis for doing so other than complying with some laws could create a situation whereby the All Share Index continues to nose dive to the absolute embarrassment of the country.

    LCCI further said contrary to the supposed intention of the Bill to redistribute wealth, just a insignificant percentage of the populace, particularly the money bags would benefit, as it would give them opportunity to channel their wealth to purchasing shares in some target companies. It would also lead to a situation where investors in the stock market would sell their investments in some companies to acquire the shares of these target companies, thus grossly distorting the stock market.

    LCCI further argued that the Bill is anti-entrepreneurship and discourages innovation. “A lot of people have worked assiduously hard to bring their companies to where they are today. The decision of whether to raise funds from the public through the stock market or to allow the public own shares in their companies should be absolutely theirs to make,” LCCI argued, adding that the Bill has no stipulation for the minimum percentage of the share capital to be offered to the public. This, it said, could lead to loss of absolute shareholder and Board control of the company.

    LCCI also sought to puncture arguments by proponents of the Bill that it will provide employment. According to the Chamber, the Bill will not necessarily create employment opportunities as many foreign investors have expatriated in their employment. Some even run highly mechanised or automated businesses.

    Besides, the Bill is said to be inconsistent with the Constitution and other laws regulating investments in the country. For instance, the LCCI pointed out that it contravenes the provisions of section 44 of the 1999 Constitution, which forbids compulsory acquisition of private property, and section 25 of the Nigerian Investment Promotion Commission Act which prohibits expropriation stating that “no person who owns, whether wholly or in part, the capital of any enterprise shall be compelled by law to surrender his interest in the capital to any other person”.

    It is also against the spirit of the Bilateral Investment Treaties (BIT) between Nigeria and certain countries, and therefore poses a huge reputational risk for Nigeria. They added that the Bill is appropriative to the extent that it compels privately owned companies to offer their private equities for sale on the floor of the stock exchange.

    LCCI, therefore, threatened to work against the bill, insisting that it is unconstitutional and ultra vires. It pointed out that section 44 of the constitution prohibits compulsory acquisition of property whether movable or immovable, tangible or intangible, in any part of the country, and where such compulsory acquisition is carried out, there must be prompt payment of compensation.

    “To compel a person to give up his asset, other than under the exceptional circumstances created by the constitution would amount to expropriation, which is prohibited under the Nigerian law.” LCCI said, insisting that private limited companies, due to a combination of factors, are preferred investment vehicles in Nigeria.

    They explained that the choice of foreign investment destination is informed by various considerations and the country’s enabling legal environment for doing business is an important consideration.

     

    Other private sector operators react

    The Chairman, African Capital Alliance, Mr. Dick Kramer, is one of those kicking. He said if the current bill is passed as proposed, many countries will distrust Nigeria and companies will decide to either stay or leave. He recalled the effect of the Indigenisation Decree of 1978 when companies were either forced to sell or lose their businesses. He therefore, expressed worries that the bill may force many companies to leave the country. This, he said, will affect foreign investment.

    “This is not a time to drive away private investment in non-oil sector. Nigeria needs to build a strong industrial base, put an enabling environment in place and ensure that private companies improve on compliance and corporate governance requirement. The world is a global village. Any attempt to nationalise businesses will have ugly consequences. This particular bill as it is will bring a down – turn in the next two to three years,” Mr. Kramer told The Nation.

    Head Corporate Services Division, NSE, Mr. Bola Adeeko gave a different perspective on the issue. He said the bill should not be thrown out in its entirety. According to him, listing a company brings many advantages to the company and the public such as enhanced corporate governance including offering the public the opportunity to partake in the wealth of the individual companies. He also said this will allow private companies out last their original promoters. He regretted that from records, private companies have the least tax compliance rate in Nigeria, which probably the promoters of the bill sought to address.

    Adeeko however, picked holes in the portion of the bill that sought to make listing compulsory instead of allowing it to be an economic decision by the companies concerned. He insisted that such paradigm shift for every company should be left entirely to them as a business decision or strategy.

    Although, the issue is expected to come up for further debate following the reconvening of the House last week after its recess, the battle line appears to have been drawn between the lawmakers and private sector operators. Members of OPS are said to be preparing for a showdown with the lawmakers it they go ahead and pass the bill into law. Some of them are said to be suspicious that the Bill may be targeted at giving Nigerians access to the stupendous profits by big organisations in the telecommunication industry such as MTN, Etisalat and others such as  British American Tobacco (BAT) and large consulting firms.