Already heavily indebted, Nigeria is struggling to harness enough revenue to run the country. However, when Finance Minister, Zainab Ahmed, disclosed that the country pays more to service debits than she does to generate revenue, the magnitude of the debt to revenue deficit hit home. ASSISTANT EDITOR NDUKA CHIEJINA looks at the issues involved and reports.

Recently, the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, disclosed that the Federal Government of Nigeria (FGN) had “only N1.63 trillion, 49% of the prorata target of N3.32 trillion” as revenue as at April 2022. This figure is made up of FGN share of oil revenues of N285.38 billion (representing 39% performance); while non-oil tax revenues totalled N632.56 billion – an 84% performance.

Company Income Tax (CIT) and Value Added Tax (VAT) collections were N298.83 billion and N102.97 billion, representing 99% and 98% of their respective targets. Customs collections (made up of import duties, excise and fees, as well as federation account special levies) trailed target by N76.77 billion (25.42%). Other revenues amounted to N664.64 billion, of which independent revenue was N394.09 billion. On the other hand, government’s actual spending, as of April 31st, was N4.72 trillion. Of this amount, N1.94 trillion was for debt service, and N1.26 trillion for personnel costs, including pensions; while N773.63 billion has been spent on capital expenditure.

All these may look like the Minister was throwing numbers around; she is not. The Minister is warning Nigerians to brace up for a bumpy ride as the 2022 budget of 17.12 trillion is under threat. The real danger contained in her presentation is that Nigeria now spends more money servicing debt (another phrase for paying back her loans) than she generates as revenue.

The Director General of the Debt Management Office (DMO), Ms. Patience Oniha, told The Nation that the development “is a case of revenue underperformance.” According to her, “if revenues were high with our low debt to GDP ratio, debt service to revenue ratio would have been low.” She admitted that debt service to revenue is high, which explains why the government is trying to increase revenue. Notwithstanding, Nigeria provides for debt servicing in the annual budgets and the Medium Term Expenditure Framework (MTEF), which means it is planned for and not ad hoc.

On his twitter handle, Taiwo Oyedele of PricewaterhouseCoopers (PwC), said “this means the Federal Government revenue was insufficient to pay interest on debt. So, the Federal Government borrowed even more to balance interest payment and of course also borrowed to pay salaries and other expenses.” He told The Nation that, “the high debt service cost to revenue ratio of the Federal Government resulted from three main factors over a period of time: low revenue generation, rising expenditure, and debt accumulation. Nigeria’s public debt has been rising faster than GDP growth rate; while the debt service cost is increasing at a faster pace than revenue growth.”

As a solution, he said government needs to “ensure expenditure efficiency, block leakages, reprioritise spending, create an attractive policy environment for private sector participation in viable infrastructure; while reforming the tax system to improve revenue generation. The key reforms required include harmonisation of taxes and revenue agencies as well as leveraging on technology and tax intelligence to curb evasion and aggressive avoidance”.

Reacting to claims by some politicians that the country is bankrupt, Oyedele argued that “bankruptcy is technically the inability to meet one’s financial obligations as they fall due. This is more associated with a company or an individual rather than a country, which can often borrow to meet its obligations or resort to central bank overdraft financing where necessary. However, a country facing a debt crisis may be unable to meet its foreign currency obligations. As Nigeria is still able to meet its local and foreign debt obligations, the country cannot be described as bankrupt, although we are facing significant revenue and debt challenges.”

Read Also: LCCI: how to reduce Nigeria’s debt

Asked if Nigeria can get out of the current state of indebtedness, Oyedele said that “debt in and of itself is not a problem if it is productively utilised. We, however, need to start reversing the revenue expenditure imbalance to avoid unsustainable debt accumulation. Once the country’s expenditure profile is under control and revenue generation improves, then the indebtedness will become manageable.”

He, however, noted that “there is certainly room for more transparency in how public debt is being accumulated and managed, including ensuring completeness for instance to include central bank overdraft. On the revenue side, government must set the tone regarding tax culture for instance by enforcing tax compliance by MDAs while ensuring accountability and prudence to improve the tax morale of Nigerians.”

While analysing the figures, Gbolade Idakolo, MD/CEO SD&D Capital Management Limited, said “what this means is that there is already a N300 billion deficit in the first quarter of 2022. If the trend continues, according to the minister, it means there will be no infrastructural projects in 2023 amongst other problems like compounding hardship on the people, increasing inflation and untamed insecurity.”

Idakolo outlined a number of factors that brought the country to this sorry level. According to him, Nigeria’s oil revenue has been dwindling in the past 10 years “due to unchecked crude oil theft. It was confirmed by the Federal Government in January this year that over 95 per cent of Nigeria’s crude oil are been stolen. What that means is that money that was supposed to come into the federation’s purse as revenue has been stolen.”

Another reason why Nigeria spends more money servicing debts rather than having more revenue for development is that “there has been consistent and uncontrolled corruption in the fuel subsidy programme that has led to continuous reduction of NNPC’s contribution to the monthly Federation Account Allocation Committee (FAAC).” There has also been increased borrowing by the government for different purposes without commensurate revenue to service these debts accordingly.

“The Nigerian government has been investing majorly in infrastructure that cannot generate revenue for the government in the last seven years, and the same government has failed to tame insecurity and corruption, which have resulted in the loss of confidence by foreign investors who would have brought in some hard currency.”

On his part, Prof Uche Uwaleke, explaining why Nigeria engaged in so much borrowing, said “rising government borrowing may be justified by the huge infrastructure deficit in the country. In order to narrow this gap, according to the National Integrated Infrastructure Master Plan, Nigeria needs to invest US$3 trillion in infrastructure over the next 30 years -US$100billion annually in other words. This translates to a yearly investment of over N42 trillion! This is more than the size of the total annual budgets of the federal and sub-national governments.”

Again, he said “rising public debt may be justified by the need to fast-track economic growth for an economy that has gone through severe external shocks in recent times (collapse in crude oil price in 2015 and COVID-19 in 2020), leading to weak real GDP growth rates. The inability of real GDP growth to exceed population growth rate (estimated at 2.6% annually) has fuelled unemployment and poverty now at 40.1 per cent (82.9 million people). But for government borrowing, the economy would not have made it out of the recession cycles.”

Looking at possible solutions

Proffering solutions, Idakolo argued that “the Federal Government must as a matter of urgency block the loopholes that have allowed our crude oil to be stolen without proper accountability. The Federal Government should reduce the cost of running the government by looking critically at the (Stephen) Oronsanye report for implementation and it should embark on critical projects that can improve commerce, like key road infrastructure, power to the industrial sector and agricultural revolution.”

The Federal Government, he added, “should, as a matter of urgency, stop insurgency, kidnapping and banditry by enacting laws and providing a security architecture that will stop their activities for good. It should stop forthwith further borrowings and negotiate with our creditors for relief (if possible) and look inwards for funding of the government.”

Finally, he advised the Federal Government to listen “to chambers of commerce, the government appointed economic council and other professional bodies that have been providing solutions that are often ignored to collate their suggestions for use to save the economy.” The government, he said, must sincerely fight corruption and reduce ethnic discrimination in government appointments.”

A Twitter user, Dr Ødegaard’s solution includes removing “fuel subsidy; fuel to sell for between N300-N400 per litre; increase VAT to 10 per cent from 7.5 per cent; remove forex subsidy and allow the naira to trade at its value and focus on exports that will earn us revenue.” Ødegaard advocates the removal of “electricity subsidy. The NLC forced the Federal Government to sell gas to Gencos at a reduced fee to keep the cost of electricity low. The Discos can’t charge market reflective tariffs. The Federal Government will also cover the cost. A broke country acting like a rich kingdom.”

In addition, Ødegaard wants universities and polytechnics granted autonomy and “wean ASUU and other staff salaries off Federal Government books. Let the universities pay their staff. Keep the subsidy for technical colleges and primary and post primary education. Use TETFUND as support/create a scholarship fund system.”

For the health sector, he wants the government to “implement health insurance at state level and remove healthcare subsidies. Cover only the vulnerable and allow hospitals to charge the rates while Insurance covers the risk. Paying N500 to see a doctor in UCH is a subsidy. The Federal Government is paying the cost. Concession the teaching hospitals.”

In the case of agriculture, the government should “keep agricultural input subsidies e.g equipment and machines, seedlings etc. to ramp up food production. Civil servants at Federal Government level, he said, “take a substantial part of Federal Government recurrent expenditure.” Going forward, “right-size the civil service and freeze employment for a while. Use the savings to augment the minimum wage and provide welfare cushions.”

“Keep the House of Representatives and scrap the Senate. Select ministers from the House of Representatives and drop the idea of ‘ministerial positions.’ The President’s cabinet should be formed from the House of Reps. Toll the roads and pursue PPP for capital projects. Allow states to take ownership of their mining/extractive industries and let every state develop at its own pace. Cede policing to the states.” According to him, “these are radical changes that should be made.”

Former Deputy Governor of the Central Bank of Nigeria (CBN), Kingsley Moghalu, reacting to the debt to revenue ratio imbalance development, said, “now that we have earned N1.6trillion in Q1 of 2022 and spent N1.9 trillion to service debt, effectively borrowing over N300 billion to pay our debt, the jury is in. We have fallen off the debt cliff. The next government in Nigeria, whoever leads it, will have to pull a rabbit out of a hat to keep our fiscal boat afloat. Asset sales and debt restructuring will likely be inevitable.

“Unlike in the OBJ (former President Olusegun Obasanjo) era, no one will give us debt relief. Our case is weak because we have been irresponsible. Simple. The issue for us as a developing country was always the ratio of debt to our revenues. Now it’s at 120 per cent. Welcome to Nigeria.”

 Fears and concerns

Prof Uwaleke noted that “there is the concern that some of the borrowing may not be channelled to productive use and thus compounding the debt burden. Nigeria’s public debt stock has risen by as much as 238 per cent between December 2014 and September 2021. For the external component, the increase between the same period has been by over 850 per cent! A major concern is the opportunity cost of debt service given the forgone use to which this huge sum (revenue) could have been put. Many people over the years have been worried that part of the borrowing may have been used to fund recurrent expenditure.”

Another concern, he said, “stems from the evidence that domestic debts are dominated by FGN Bonds most of which do not appear tied to self-liquidating projects. The real infrastructure-tied bonds, Sukuk and Green bonds, represent an insignificant proportion (less than 3 per cent) of domestic debt instruments.”

However, “Eurobonds (including one Diaspora bond) represent just about 39 per cent of the total external debt stock but has been taking up the lion’s share of external debt service payments. Between January and March 2021, Eurobonds took up the lion’s share of actual external debt service payments at over 75 per cent, according to the DMO.”

Uwaleke disagrees with the Debt Management Office’s insistence that the borrowing space is a function of the size of the GDP. “The flaw in this stance is that too much emphasis on GDP could lead to costly borrowing decisions given that it is one indicator that is susceptible to creative accounting. The country’s low debt to GDP ratio is obviously due to the rebasing exercise conducted in 2014.” In summary, Uwaleke believes that “government borrowing is not bad. The key challenge is to ensure that they are put to good use and in ways that enable the needed traction to the country’s economy.

The National Water Resources Bill, currently before the House of Representatives, has attracted controversies around the country. Many have argued that the bill is not the ideal piece of legislation for the country at this point in time, since previous attempts at getting the bill passed had failed. In this report, TONY AKOWE analyses why the return of the contentious bill to the parliament is generating new controversies

Governor Samuel Ortom of Benue State was the first to raise alarm over the National Water Resources bill, alleging that it was an attempt by the federal government to take over surface and ground waters belonging to the states as part of efforts to promote the suspended RUGA project by the government. The bill is one of the bills under consideration in the House of Representatives that has attracted so much controversy. The bill first came to the House as an Executive bill. But it has roundly been rejected by members of the House and many Nigerians, especially state governors who argued that the bill is against the principles of the 1999 Constitution.

The argument against the bill has been that it tends to take certain powers away from the states and bestowing them on the federal government. The bill was supposedly passed by the House on the 7th of July, 2020. But members argued that the passage was through the back door and that they were not aware of the passage. This took proponents of the bill back to the drawing board, trying to repackage the bill for representation to the House for consideration.

After the initial uproar, matters concerning the piece of legislation died down, giving an impression that it has been forgotten. At every opportunity, Minister for Water Resources, Suleiman Adamu, tried to justify why the law was necessary, insisting that its passage will be to the advantage of the states. But at one of its plenaries in June before embarking in the Sallah break, the bill resurfaced having been re-gazetted by the House for first reading. This time, the bill is expected to go through the full process of law making, including a public hearing.

Sada Soli Jibiya, Chairman, House Committee on water resources, said the bill was redrafted with inputs of state governors and their attorneys general.  But Mark Gbillah, House member from Benue State felt that the bill returning to the parliament through the back door was not ideal, adding that the governors were not in any position to tell the House what they should or should not do.

What the bill seeks to achieve

A close study of the bill disclosed that the use, management and control of all surface water and underground water affecting more than one state in the country is vested in the federal government of Nigeria; while allowing states to make provisions for the use, management and control of water resources occurring solely within the boundaries of the states in line with regulations and guidelines made pursuant to this bill on policy and principles of integrated water resources management.

The bill seeks to create seven different water sources whose ownership will be vested in the federal government, classifying them as “Water Bodies declared as affecting more than one State pursuant to item 64 of the Exclusive Legislative list in Part 1 of the Second Schedule to the Constitution of the Federal Republic of Nigeria, 1999.” It lists all inter-state water, whether surface or underground, from time to time contained within or flowing or percolating through such sources, and the tributaries and catchment areas thereof as belonging to the federal government. These include: “Source 1: the River Niger from the border between the Federal Republic of Nigeria and the Niger Republic to the outlet of the Kainji reservoir, including the Sokoto Rima River from the border with the Federal Republic of Nigeria; all the tributaries of the River Niger crossing the border to the Benin Republic: and the Sokoto sedimentary (western) hydro-geological area.

“Source 2 – The River Niger from the outlet of the Kainji reservoir to the point of confluence of the River Niger and the Benue River, including the Kaduna River with the tributaries; Gurara River; all the tributaries of the River Niger crossing the border to the Benin Republic; and the upper Niger sedimentary (Niger) hydro-geological area. Source 3 – The Benue River from the border between the Federal, Republic of Nigeria and the Republic of Cameroon to the point of confluence of the Benue River and the River Niger, including the Gongola River; the Pai-yul River; the Wase River; the Shemankar River; the Dep River; the Mada River; all the tributaries of the Benue crossing the international border to the Republic of Cameroon, and the Benue sedimentary (Benue) hydro-geological area. “Source 4 – The River Niger from the confluence thereof and of the Benue River, including the Delta of the River Niger and all water tributaries or influent thereto or diffluent therefrom, including the Anambra River; the Imo River; the Akwa lbom River; and the Aboine River.

“Source 5 – All water courses directly or indirectly influent to the Lagoon and other littoral Lagoons and water courses from the border with the Republic of Benin to the mouth of the Forcados River, including the Oshun River; the Ogun River; the Shasha River; the Owena River; and the Ogun/Oshun sedimentary (south-western) hydro geological area. Source 6 – All water rising or situated in the Federal Republic of Nigeria which are directly or indirectly influent into the Lake Chad, including the Chad sedimentary (north-eastern) hydro geological area.  Source 7 – The Cross River from the boundary between the Federal Republic of Nigeria and the Republic of Cameroon and all water tributaries or influent thereto or diffluent therefrom including the Cross River sedimentary (South-eastern) hydrogeological area.”

The bill, however, stipulates that the use of water in the country will now be subject to licensing provisions and relevant regulations issued by the National Water Regulatory Commission, also established under the bill. Section 61 (2) of the bill states that “In considering an application for water use or waste water discharge licence or a general authorisation, and in stipulating any conditions to be imposed thereon, the CMO shall take into account such factors as it considers relevant while advising the Commission. The factors include national water resources policy and strategy; existing lawful uses of the water; including customary use to the extent that such use does not conflict with the provisions of the bill, or water resources policy of the government or Hydrological Area Water Resources Strategy; efficient and beneficial use of water in the public interest.”

It also includes any basin management strategy applicable to the relevant water resource, including consideration of water conservation measures; the likely effect of the water use to be authorised on the water resource and on other water users, including avoidance of significant harm to customary users; the class and resource quality objectives of the water resource; the investments already made and to be made by the water user in respect of the water use; the strategic importance of the water use to be authorised; the quality of the water in the water resources, which may be required for the reserve and for meeting international obligations; and the probable duration, if any, undertaking for which a water use. It states further in clause 62 that “any person who, undertakes the following activities (in this section referred to as “prescribed activities”) in relation to national water sources described in S. 2(1) and listed in the First Schedule to this Bill, shall be licensed by the Commission.”

The activities include abstraction of surface water and groundwater; diversion, pumping, storage or use on a commercial scale of any water; the construction of boreholes for commercial purposes; construction and operation of hydraulic structures for rivers, dams, water intake barrages, groynes, bed and bank stabilisation, dykes, polders, wells and public and private irrigation and drainage systems. The activities also include diversion or impoundment of water for the purposes of mining and discharge of waste water from mining into any water course; discharging industrial or agricultural waste or wastewater into a water body through a pipe, canal, sewer, sea outfall or other conduit according to environmental standards and undertaking drainage and land reclamation. It also include disposing in any manner of water which contains waste from, or which has been heated in, any industrial or power generation process according to standards defined by the relevant environment standards enforcement agency; removing, discharging or disposing of water found underground if it is necessary for the efficient continuation of an activity or for the safety of people; leachate containment activities according to environmental standards; capital dredging; sand dredging, rock blasting and rock removal in rivers and construction of infrastructure, roads and bridges across rivers and streams among others.

According to the bill, the objective is to ensure that the nation’s interstate water resources are protected, used, developed, conserved, managed and controlled in ways which take into account, amongst other factors, citizens’ right of access to safe water and basic sanitation, meeting the basic human needs of present and future generations and promoting equitable and affordable access to water and reducing poverty, among others. In carrying out its activities, it says “the institutions established under this bill shall be guided by the following principles in achieving the objective set out in subsection (1) of this section, which include participation and consultation with states, local governments, communities, women and other stakeholders; the coordinated management of the water resources sector at the lowest appropriate level and administrative efficiency.

In addition, the proposed law says that a person may, without a licence: (a) take water from a water source to which the public has free access for the use of his household or for watering domestic livestock; (b) use water for the purposes of subsistence fishing or for navigation to the extent that such use is not inconsistent with this bill or any other existing law. It states further that where a statutory or customary right of occupancy to any land public trusteeship of water exists, take or use water without charge from the underground water source, or if abutting the bank of any watercourse, from that water course, for reasonable household use, watering livestock and for personal irrigation not for commercial purposes; or store and use runoff water from a roof.

The law grants the Minister responsible for water resources in the country the permission to promote the protection, use, development, conservation, and management of inter-state water resources throughout Nigeria and to ensure the effective exercise of powers and performance of duties by institutions and persons identified under this bill and in the constitution. The Minister is also empowered to make regulations, policies and strategies for the proper carrying out of the provisions of this bill and functioning of the Ministry in accordance with this bill as well as in accordance with other directives he may receive from the President and any guidance from the Council. He is also empowered to enter into international agreement on behalf of the country in consultation with the Federal Executive Council.

While trying to address the fears on ancestral land, the law say “where a statutory or customary right of occupancy to any land public trusteeship of water exists, take or use water without charge from the underground water source, or if abutting the bank of any watercourse, from that water course, for reasonable household use, watering livestock and for personal irrigation not for commercial purposes”

The Water Resources Minister, Suleiman Adamu, said those criticising the proposed law are adversaries of the nation. The Minister dismissed allegations that the bill is a ploy by the government to take over the ancestral land of Nigerians, arguing that the bill was in the national interest because it will be beneficial to all Nigerians. To him, Nigerians are just being emotional in rejecting the bill that is supposed to be a very important step toward improving the water resources sector of Nigeria. “Enemies of Nigeria have decided to unnecessarily politicise something that is in the best interest of the people. Everybody downstream of River Niger or any river is the most protected community and individuals as long as this bill is concerned. We have now institutionalised the National Council of Water Resources. This is a Council we meet annually, the Minister, Commissioners responsible for water resources from every state, and other experts and stakeholders.

“We are now making it a law, so everything we are going to discuss water resources will be discussed under that Council and every state is represented. In every country of the world, you need to have data for everything. Every day, we are drilling boreholes in this country; we don’t even know how many boreholes we have. We have to license boreholes so we know what is happening to our groundwater. Of course, we won’t prevent anyone from drilling borehole in his house; we are concerned about the people that are drilling 10–20 boreholes and doing bottled water and beverages at your expense.

“They are taking what belongs to you and selling it back to you. So, we are saying, if someone is taking groundwater and commercialising it, he has to pay the relevant taxes. For me, the most painful thing is that people have been misinformed and misled. If we allow all those spreading lies to succeed, all the benefits we have been talking about will be lost, and we will be back to square one with no appreciable progress in the water sector,” Adamu said.

The controversies and fears

But contrary to claims by Jibiya that the new bill has the input of the governors, the Nigeria Governors Forum faulted the bill, saying it was inconsistent with the 1999 Constitution as it failed to address the interests of states. The governors called for a rejig of the bill to accommodate the concerns of the states. “We believe that the bill does not adequately address the interests of the states and is inconsistent with the provisions of the Constitution of the Federal Republic of Nigeria. The bill should be reviewed with a view to accommodating the concerns of all states. The governors unanimously decided to spearhead the programme in their states, particularly in areas such as institutional and innovation systems strengthening, livestock value-chain enhancement, crisis prevention and conflict mitigation, and project coordination”, a communique by the Nigeria Governors’ Forum, signed by its Chairman, Kayode Fayemi, said.

However, spokesman of the House of Reps, Benjamin Kalu, said the House will reject the bill if it still has the same contentious provisions, which made it fail to sail through the first time. He said “but if it is a replica of what was presented and rejected, I am sure that what happened before would happen again. If that has been cured and the title remains the same, the bill might pass if the concern has been cured. But if it is a replica of what was presented and rejected, I am sure that what happened before would happen again. But let us wait.”

Some of the contentious provisions in the proposed legislation include clause 13, which provided that: “In implementing the principles under subsection (2) of this section, the institutions established under this act shall promote integrated water resources management and the coordinated management of land and water resources, surface water and ground water resources, river basins and adjacent marine and coastal environment and upstream and downstream interests.” Also section 2(1) of the bill provided that: “All surface water and groundwater, wherever it occurs, is a resource common to all people,’’ while Section 120 of the bill makes it compulsory for Nigerians to obtain a driller’s permit before sinking a borehole in their homes.” Section 98 of the bill states that, “the use of water shall be subject to licensing provisions.” Section 107 says a license might be cancelled if the licensee fails to make beneficial use of the water. Section 104 addresses emergency powers in case of shortage of water. The bill will empower the government to “direct a person, who has a supply of water in excess of his needs for domestic purposes to reduce the amount he is permitted to abstract under the terms of any licence or general authorisation.”

Chairman of the Committee on Water Resources, Jibiya, who is the sponsor of the bill, said all needed information on the bill will be sent to his colleagues to read through, vowing that if issues arise again he will withdraw the bill. “Let me assure my colleagues on my honour that the comments of the governors’ forum are attached to the bill and the comments of the Attorney General, which was requested by the Federal Ministry of Water Resources, are attached to the bill. All attorney-generals of different states of the federation commented on the bill before they could address some of the issues that were raised on the floor. I will not stand here to see a particular section of this country short-changed by a legislation of this country.”

Activities of crude oil thieves, operators of illegal refineries, pipeline vandals and illicit bunkering operations have continuously robbed the country of billions of dollars that could have been used for the good of the majority. In this report, PRECIOUS IGBONWELUNDU chronicles efforts being made by the Nigeria Navy to halt the trend.

If human and natural endowments are global indexes for any country’s wealth, Nigeria would pass as the richest or one of the richest countries in the world. Ordinarily, Nigeria should be a prosperous country, with about 36 trillion barrels of crude oil, 182 trillion cubic feet of gas reserves and the capacity to produce about 2.4 million barrels of oil daily and eight billion cubic feet gas; over 5,779 oil wells, 9,717km of pipelines, 112 flow stations, 16 gas plants and 126 production platforms offshore. Yet, with these endowments, the country is fantastically deprived – no thanks to oil thieves.

Activities of crude oil thieves, operators of illegal refineries, pipeline vandals and illicit bunkering operations have continuously robbed the country of billions of dollars that could have been used to fix infrastructure for the good of the majority.

Revealing the havoc these criminals wreak on the country’s Gross Domestic Product (GDP) recently, the Group Managing Director of Oando Plc, Adewale Tinubu, said Nigeria loses 20 per cent of her daily crude production and 20,000 barrels of oil per day to thieves and pipeline vandals. Tinubu, who spoke at the opening ceremony of this year’s Nigerian Oil and Gas (NOG) conference and exhibition in Abuja, expressed concerns at the alarming decline in the country’s oil production between March and May, which stood at 43 per cent.

The Nigeria National Petroleum Corporation’s (NNPC) Chief Executive Officer (CEO), Melee Kyari, noted that the country lost $1.5 billion to oil thieves between January and March this year. These horrible situations are not current happenings. In the wake of the Amnesty Programme extended to the Niger Delta militants by the Federal Government, those who surrendered their firearms with a pledge to eschew criminality found a way to run well-coordinated oil theft and illegal refinery empires that make billions of naira to accrue to them monthly while the country bleeds.

Despite actions by successive governments to stem the tide through kinetic and non-kinetic approaches, the menaces have proven endemic with allegations of complicity of security agents, community leaders, oil companies and even government officials.

Although several suspects, including teenagers and expectant mothers, have been arrested in the past, massive Illegal Refining Site (IRS) destroyed with equipment burnt and petroleum products-laden vessels impounded, perpetrators seemed to be emboldened. The illegal refineries have pipes running through the backyards of some houses close to the jetties, from where the criminals load the products into waiting boats. In other instances, the IRS is strategically positioned in the hearts of islands with several dug pits, underground wells and installed equipment, including distillers, and tanks with connecting pipes for ease of refining.

A 2013 report by Chatham House revealed that the illegal refining industry in Nigeria is worth $8 billion. Also, the Nigeria Extractive Industries Transparency Initiative (NEITI) said the country lost about $42 billion to crude oil theft as well as domestic and refined petroleum products losses between 2009 and 2018.

The choke-point management regime

Disturbed by the continuous vandalism of oil installations and pipelines with attendant losses to the country, the Nigerian Navy (NN), in 2015, launched the Choke-Point Management and Control Regime, which saw the deployment of Naval Security Stations (NSS) or Houseboats anchored permanently at strategic/problematic areas on the waterways to monitor and intercept vessels suspected of illegality.

This practice succeeded in driving the criminals from the sea, following the arrest of suspected illegal bunkering operators and interception of oil vessels alleged to have either loaded stolen products or those gotten from illegal refineries. Trapped in their enclaves, the criminals resorted to opening one-stop shops in these sites where their clients come to with drums, kegs and specially constructed waterproof boats to purchase crude oil, diesel, kerosene or bitumen in commercial quantity.

This reality necessitated the launch of the Swamp Buggy Operation by the then Chief of the Naval Staff (CNS) Vice-Admiral Ibok-Ete Ibas (retired) in 2019 with the approval of President Muhammadu Buhari. This operation, which utilised the element of surprise tactics, saw the deployment of gunboats with armed operatives to creeks and enclaves in Delta, Rivers and Bayelsa states where the criminals ran their illegal empires for complete destruction. This resulted in keeping the thieves off business for some time; thus boosting the country’s daily production and, by extension, earnings.

But since the operation was capital-intensive and required more manpower, it was seen as a temporary solution and relaxed when the activities of the vandals and IRS operators were reduced. This raised the hopes that other anti-crude oil theft, pipeline vandalism and IRS operations that were ongoing would sustain the tempo.

Sadly, that was not to be. In no time, the criminals returned to their businesses with vigour; causing severe harm to the economy and the environment. In Rivers State, for instance, black soot took over the air, causing severe panic among the residents.

Operation Dakatar Da Barawo

With the alarms raised by the government on the billions of naira lost to the criminals in the first three months of this year, as well as the public health concerns occasioned by black soot, the Nigerian Navy, on April 1, set up Operation Dakatar Da Barawo, a Hausa phrase that means “stop the thieves” with a mandate to dominate the waterways through aggressive and intelligence-driven patrols that were aimed at curbing the menaces and preventing the movement of stolen oil products to other countries through the sea.

While flagging off the operation in Onne, Rivers State, the CNS, Vice-Admiral Awwal Zubairu Gambo, said reports of massive revenue losses necessitated the multi-pronged efforts to curb the excesses of the criminals.

He emphasised that the Navy, under his watch, was committed to eradicating acts of criminality in the country’s maritime space and the Gulf of Guinea (GoG), even as he explained that the operation would dominate the country’s backwaters through aggressive and intelligence-driven patrols. “It would also be dedicated to monitoring pipelines; block identified strategic estuaries to prevent conveyance of stolen crude oil from inshore to sea and to maintain credible presence along the coastline of areas prone to crude oil theft,” Gambo said.

Within the 90 days it has operated, statistics released penultimate week by the Director of Naval Information (DINFO), Commodore Adedotun Ayo-Vaughan, showed that the operation denied the criminals about N24,082,006,103.96 worth of crude oil and products.

Specifically, Ayo-Vaughan said operatives recovered 21,698,562.59 litres of Automated Gas Oil (AGO), 36,707,420.16 litres/230,882.73 barrels of crude oil, 649,775.38 litres of Dual Purpose Kerosene (DPK), 345,000.49 litres of Premium Motor Spirit (PMS), 380,000 litres of sludge and 66,000 litres of Low Pour Fuel Oil (LPFO). Ayo-Vaughan said for the month of June alone, the operation denied oil thieves approximately N7,036,534,578.96 worth of products in the Niger Delta region; while in April, over N10billion worth of products were recovered and destroyed from the thieves’ enclaves, including 6,558,000 litres of AGO, 103,291.91 barrels of crude oil, 319,150 litres of DPK, 45,000 litres of PMS and 650,000 litres sludge. The operatives also deactivated 148 IRS and 36 wooden boats.

Some arrests, seizures recorded last month

Giving updates on the operation, Ayo-Vaughan, on June 20 said NNS VICTORY at Calabar intercepted a merchant vessel, MV EDIDIONG with International Maritime Organisation (IMO) number 782500, laden with unspecified litres of AGO suspected to be an illegally refined product.

“Preliminary investigation showed that the vessel had a legitimate permit to load product from six to 19 June which had expired. It was also discovered that the vessel has been operating without switching on her Automatic Identification System (AIS). The vessel and its seven crew members were, therefore, detained and are currently in custody for detailed investigation.

“Similarly, NNS SOROH at Yenagoa sustained patrol around Oyoma, Swali, Sagbama, Kuolama, Akassa and Onimbu areas. The Base arrested one wooden boat laden with about 1,200 litres of illegally refined crude oil products along the Akassa axis. The Base also handed over to the Nigeria Police Force (NPF) Bayelsa State Command, five suspects arrested at a loading point in Kaiama with intent to illegally transfer refined crude oil products from a large wooden boat to a tanker truck.

“On the same day, NNS DELTA at Warri raided a previously deactivated IRS at Atamba Creek in Gbodoro Community, Warri South West Local Government Area where the IRS operators had resumed operation. The IRS had three large pits cumulatively laden with about 200,000 litres of stolen crude oil, eight ovens and 14 metal storage tanks all containing about 170,000 litres of illegally refined AGO, including about 135,000 litres of illegally refined DPK.

“The IRS was again deactivated and the products handled appropriately. Afterwards, the Base sighted a wooden ‘Cotonou’ boat hidden inside a creek, laden with about 25,000 litres of illegally refined AGO. The product and the boat were handled appropriately while a pumping machine was recovered. Later the Base proceeded to another IRS in Banga creek where six ovens, 10 empty and one storage tank is laden with 5,000 litres of illegally refined AGO were discovered.

“Also, 10 large pits, all filled with about 350,000 litres of stolen crude oil were discovered. The IRS was deactivated and all products were handled appropriately. Further exploration of the creek led to the discovery of six wooden boats cumulatively laden with about 90,000 litres of illegally refined AGO. The boats and products were handled appropriately.

“On June 21, NNS PATHFINDER at Port Harcourt raided an IRS at Orutoru Community and Amabiribe/Abuja Creeks in Bonny Local Government Area of Rivers State, where two IRS were sighted. The sites had about five metal ovens and about eight metal tanks of different sizes.

“One of the tanks had freshly illegally refined products suspected to be AGO of about 250,000 litres while two tanks were laden with stolen crude oil estimated to be about 170,000 litres and the remaining five tanks were empty. Further to this, one pumping machine and five rubber hoses were all recovered from the IRS.

“Similarly, on the same day, NNS DELTA at Warri raided a previously deactivated IRS at Madangho creek in Ugborodo community and discovered it was active with ovens and tanks containing about 80,000 litres of illegally refined AGO. Also, there were three pits filled with about 120,000 litres of stolen crude oil. The IRS was again deactivated and all the products were handled appropriately.

“Also, an IRS at around Bennet Island in Warri South Local Government Area of Delta State was raided and deactivated. The IRS had five metal storage tanks containing about 16,000 litres of stolen crude oil and about 7,000 litres of illegally refined AGO. A total of three pumping machines and one generator were recovered from the site.

“Furthermore, the Base intercepted two wooden boats around Obodo Omadino in Warri South Local Government Area. The wooden boats were laden with about 25,000 litres of suspected stolen crude oil. Another IRS was found that had one large pit and five storage tanks containing about 20,000 litres of stolen crude oil and 150,000 litres of illegally refined AGO. Five pumping machines were recovered from the site. The site and wooden boats were handled appropriately.

“The summary of data and achievements of OPDDB from 20 to 30 June 2022 is as follows: AGO- 1,301,750 litres @ N820/litre = N1, 067,435,000; Crude Oil – 21,744 barrels (@ $120/barrel) = N1, 083,555,705.6 ($2,609,280); DPK-154,500 litres @ N679.54/litre = N104, 988,930; total approximated value of products denied oil thieves from June 20 to 30 2022, is N2, 255,979,635.6 only,” he said.

Ayobo said 14 IRS, 88 ovens, 52 large pits, 119 large tanks were destroyed; 12 suspects were arrested, two persons rescued, a vessel was intercepted, 16 boats and four vehicles were impounded, an outboard engine, six generators an inverter, 14 welding machines, 21 pumping machines, seven hoses and a filing machine were recovered.

Naira continues its free fall against other convertible currencies, especially the United States dollar, hitting an unprecedented low of over N700 to a dollar last week. Arguably, the worst foreign exchange crisis to hit Africa’s largest oil producer, Nigerians and business owners, especially members of the Organised Private Sector (OPS), are groaning over the huge toll the crisis is taking on their socio-economic life and businesses. CHIKODI OKEREOCHA, MUYIWA LUCAS, COLLINS NWEZE and OKWY IROEGBU-CHIKEZIE report.

The Chief Executive Officer (CEO), Common Sense Group, a company with interest in real estate, training and seminars, consultancy and investment, Dr. Olumide Emmanuel, is, by his own admission, unperturbed by the crisis rocking Nigeria’s foreign exchange market, where the value of the naira has been crashing against major international currencies, especially the United States dollar. It was a disaster forewarned and shouldn’t be surprising to anyone, he said.

“Since 2016, I have been telling whoever cared to listen that the naira will exchange for N1, 000 to a dollar. So, I am not worried about the state of the naira at the moment,” he told The Nation.

Justifying his unperturbed stance on the unfortunate forex market crisis, he asked: “Why should anyone be surprised at the state of the naira? Nigeria is not a producing economy but a consumption economy. What are we producing here that will make the naira strong?”

Dr. Olumide said that at a workshop his company had in 2016, in Dubai, United Arab Emirates (UAE), “It (the naira crisis) was a major discussion we had and we warned about its crash.”

However, his, and indeed, other experts’ warning, went unheeded. Now, the chicken has come home to roost, as Nigerians woke up to the rude shock of the crash in the value of the naira against the dollar, last week. The naira hit an all-time low of N700/$1 at the parallel market. A week before, it closed at N630/$1 and stayed within the N620/$1 band for weeks before the current low. Many black-market dealers were said to have asked for between N700 to N710/$1, even though actual transactions stayed within the N700/$1 band. Nigeria’s currency fell to the lowest on record amid a lack of dollar supply in the authorised foreign-exchange market.

Pressure on foreign reserves, which has been dropping in recent times, despite higher oil prices in Africa’s largest crude producer, forced the Godwin Emefiele-led CBN) to cut down on dollar sales, therefore creating scarcity of the greenback on the market. The CBN had devalued the naira several times in the last couple of years, as it succumbed to demand pressure amid worsening scarcity of the greenback in Africa’s most populous and largest oil producer. The CBN, The Nation, learnt, has a huge backlog of unmet dollar demand from investors, according to the International Monetary Fund (IMF).

However, the apex bank has not thrown its hand up in the air while the naira maintained steady steep down the slope. As part of its longer-term forex strategy to save the naira, the CBN announced a rebate scheme to raise $200 billion in earnings from non-oil proceeds over the next three-to-five years. The CBN does this by incentivising exporters to repatriate and then sell dollars into the local market. This move and several others, The Nation learnt, were targeted at making the local currency stronger against the greenback and other global currencies.

However, reacting to the steep slump in the value of the naira, which was unprecedented, and has since put Emefiele in the eye of the storm, Dr. Olumide said it was hardly surprising since, according to him, dollar is about production and consumption and since Nigeria is not producing anything as a country, there is nothing to bring into the economy as foreign exchange.

“Nigeria’s only means of dollar earning is through crude oil export. But sadly, we are selling it back through refining of crude oil abroad and also by buying it back through importation of refined petroleum products,” he said.

The investment expert said because of Nigerians’ propensity to consume and not produce, and the attendant effect of such proclivity on the value of the naira, he has long known that keeping one’s money in naira is one of the biggest investment errors to commit. “You have to diversify. You need to have multiple streams of income across industries. You also need to keep your investments across currencies, rents, and geographical regions,” he advised.

However, Dr, Olumide’s wise counsel appears to have come a little too late, as Nigerians and operators in diverse sectors are already feeling the heat of the prevailing unfavourable exchange rate of the naira, which may soon hit N1, 000/$1, as the expert predicted, if nothing is done urgently to halt the slide.

 Naira crash spells doom for real sector, says LCCI

The Deputy President, Lagos Chamber of Commerce & Industry (LCCI), Gabriel Idahosa, lamented that the naira crisis spells doom for the real sector. He said, for instance, that real sector operators will experience aggravated levels of what they are in already, such as increased losses, scaling down of operations, suspension of operations, and cutting down of staff, etc. Idahosa pointed out that this will lead to further decline in production at enterprise and national levels.

“As a result, the unemployment situation and related social/security issues will escalate, as a growing number of able-bodied Nigerians willing and unable to find any viable means of earning livable income may turn to crime,” he said.

The LCCI chief further lamented that the ability of operators in the real sector to do medium-and long-term planning is seriously hampered in a rapidly inflationary environment. He added that the steady decline in Foreign Direct Investment (FDI) seen in recent times will also continue at a faster rate as confidence in the local currency drops. Indeed, FDI into Nigeria has been dropping in recent times, with the National President of Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), Ide J.C. Udeagbala, drawing attention to the National Bureau of Statistics (NBS) recent report that FDI declined by as much as 81 per cent.

Yet, the loss of FDI is just one dimension to which the Nigerian economy is affected by insecurity. “Domestic food production is at risk and there is a dimension of insecurity that is contributing to rising production costs and reduced consumption of goods and services,” Udeagbala added.

He also decried the high rate of unemployment in Nigeria, noting that it has become a major concern to the OPS. This, according to him, is so because the 33.3 per cent rate of unemployment often quoted by the NBS is two years old and does not take into full consideration the impact of the COVID-19 pandemic and the conflict in Europe, on the Nigerian labour market.  Udeagbala said based on this, more than 22 million Nigerians are unemployed.

Productivity badly hit, says NACCIMA

The Acting Director-General of NACCIMA, Mr. Opeyemi Alaran, aligned with Olumide that the current sorry state of the naira wasn’t surprising. “What is happening now is what NACCIMA has been hammering on since the beginning of the year that immediate action should be taken to address all the economic indices that point to a possible recession by the end of this year,” he said.

NACCIMA, as the ‘Voice of the Nigerian Business’, last week, warned that the economy may slip into a recession by the end of this year. Udeagbala, citing NBS report on national output, said the economy grew by 3.11 per cent in the first quarter of 2022, a slight reduction from 3.98 per cent in the fourth quarter of 2021. Udeagbala spoke in Lagos, at the Association’s Third Quarter Press Briefing to review the state of the economy and NACCIMA’s contributions on key issues and policies for inclusive economic growth.

At the event, he acknowledged the positive growth statistics published by the NBS for the second quarter 2022, but said the Association’s concern stemmed from the possible false sense of security that NBS’s statistics may create. According to him, this was because the second quarter of 2022 may not fully capture the supply and value chain disruptions brought about by the COVID-19 pandemic and  the Russia-Ukraine war. He said the private sector was concerned that external shocks brought about by the Russia-Ukraine conflict has put immense pressure on the economy’s productive capacity.

Udeagbala stated that as a matter of fact, Nigeria’s Gross Domestic Product (GDP) growth rate has been dropping on a quarter-by-quarter basis since the 5.01 per cent growth recorded in the second quarter of 2021. “We, therefore, urge once again, the implementation of government policy that places priority on improving domestic production otherwise, face a likely state of economic recession by the end of 2022,” he stated.

Alaran confirmed NACCIMA’s fears, saying, “It’s like what we have been warning against is coming to fruition.” It was in an apparent reference to the prevailing sharp slump in the value of the naira, which, when combined with the quarterly drop in Nigeria’s GDP growth rate raised fears that another round of recession may be lurking in the offing. A recession occurs upon two consecutive quarterly negative GDP growths. And Nigeria recorded a recession in 2016, followed by a second recession in 2020, forced by the COVID-19 pandemic, which caused a significant decline in oil revenues as global economic activities stalled for months.

As further sign of the precarious state of the economy, inflation measured on year-on-year basis has grown from 17.17 per cent as at May 2022, to 18.6 per cent as at June 2022. “As an economy, we have now surpassed the highest rate of inflation of 18.17 per cent in March 2021,” Udeagbala lamented.

He, however, said while NACCIMA welcomes the decision of the Monetary Policy Committee (MPC) of the CBN to raise the Monetary Policy Rate (MPR) from 13 per cent to 14 per cent, “we want to state that this is majorly an inflation management measure and does not address the root cause of the inflation.” The NACCIMA chief traced the cause of Nigeria’s rising inflation on rising food prices brought about by a number of factors, including the devaluation of the naira and the cost of energy, which has affected production and transportation.

From the foregoing, Alaran was emphatic that the steep slide in the value of the naira was only a symptom of the numerous familiar challenges holding the private sector down, such as high inflation rate, insecurity, high operating cost environment caused largely by poor infrastructure particularly inadequate electricity supply and the high cost of alternative sources, among others.

He lamented that the prevailing unfavourable exchange rate of the naira to the dollar is already taking a huge toll on private sector businesses. “Our productive capacity is dwindling. The private sector is alarmed because we are still very import-dependent for quite a number of raw materials and intermediate goods,” he said.

High cost-input pressures rattle manufacturers

Manufacturers appear worse hit by the prevailing unfavourable forex crisis. This is because the importation of productive inputs that are not locally available by manufacturers is done in dollars, and it has been extremely difficult for manufacturers to access dollars from commercial banks to do business. The President of Manufacturers Association of Nigeria (MAN), Engr. Mansur Ahmed, put manufacturers’ dire situation in perspective when, at a recent Annual General Meeting (AGM) of the Association, he said over 40 per cent of manufacturers could not get dollars to import key inputs, spare parts and machines for production.

He said the forex guidelines and policies have a significant impact on the sector. “Now, forex access in the sector is given based on some metrics, which include type of company, the amount being requested, what you are spending it on and sources of the forex, among other things,” Mansur stated.

As if this is not enough disincentive to manufacturers, the continued free fall of the naira has only compounded the woes of local manufacturers, as the cost of importation of raw materials and machinery has skyrocketed, for instance, with those in the Small and Medium Enterprise (SME) segment evidently worse hit. Some of them, including large manufacturers, who are unable to bear the burden of high operational cost, have been forced to increase the unit price of their manufactured products in order to remain in business.

Even at that, the declining purchasing power of most Nigerian consumers, caused by the crashing naira value and other challenges in the economy, has forced many consumers to resist any price increase by manufacturers. As a result, local manufacturers appear to have been boxed to a corner, with little room to maneuver, as inventory of unsold goods piles up, with attendant hit on their profit margin and of course, competitiveness.

This must be why the Director General of MAN, Segun Ajayi-Kadir, is pushing the Federal Government, through the CBN, to grant concessional forex allocation at the official rate to manufacturers for importation of productive inputs that are not locally available. He also urged the CBN to fast-track the move toward a single exchange rate to ensure transparency in the forex market.

Ordinary Nigerians, including students, artisans, salary earners, traders, and house wives are also groaning over the sharp increase in the price of foods and other household items. For instance, a meal of bread and beans that was regarded as ‘poor man’s food’ has suddenly become a luxury. A family loaf of bread, which hitherto sold for N400, now goes for between N800 and N1, 000. A derica of beans is now N600. Energy prices have also skyrocketed, particularly prices of diesel, aviation fuel and petrol, which all had trickle-down effects on the cost of foods, manufactured products, other commodities, transportation and accommodation. Most notably, the price of diesel has spiked by about 230 per cent in the last one year, standing at more than N800 per litre currently.

The way out

For Dr. Olumide, the only way to force a rebound in the value of the naira is by focusing on things Nigeria can export, especially those he classified as the ‘low hanging fruits’ like technology, talents and agriculture. “We also have to reduce our appetite for foreign goods. For instance, we can implement policies to put a stop to importation of foreign cars, ban all foreign clothes, foods, drinks etc. Doing this will make our local industries grow; and in 90 days you will be shocked at the result we will get,” he added.

According to him, most of the afore-mentioned were what China did by closing its economy to the world. “So, we need to close our economy to the world if only we want to revamp it. Give people like one year notice to carry out the law on this and after which you fully implement. This timeframe is important so as not to destroy peoples’ livelihood and so they will be able to clear and dispose of all their imports before the day of implementation,” Olumide stated.

On his part, Alaran said there is the urgent need for concerted efforts to reverse Nigeria’s age-long import-dependency for quite a number of raw materials and intermediate goods. “We are appealing to the CBN and the Federal Government to attack the root cause of the problem, which is the need to ensure the private sector is able to produce. If there is forex, the private sector will be able to produce more and be able to export more,” he said.

The NACCIMA acting DG also said a window of opportunity still exists for the Federal Government to implement private sector-friendly policies that will increase private sector productivity. “To us, that is the panacea to all these challenges. If the private sector is able to become more productive, gradually, all these other economic indices that are pointing to a recession will begin to disappear,” Alaran emphasised.

NACCIMA also called on the Federal Government to quickly address the increasing insecurity challenges, poor infrastructure, irregular power supply and the increasing inflation rates which have remained threat to businesses and investments in the country.

The MAN DG said the time has come to look inward. Specifically, manufacturers want government to incentivise investment in the development of raw-materials locally through the backward integration and resource-based industrialisation initiatives. They also said government should call for more investors to key into these initiatives with appropriate and definite incentives. “For instance, there is need for urgent investment and production of Active Pharmaceutical Ingredients (API) in the country; investment and production of machines; iron and steel; petrochemical materials, etc., to support manufacturing activities,” manufacturers said.

For Ajayi-Kadir, Nigeria needs to resolve all forex-related challenges confronting the productive sector by making a detour from the CBN’s foreign exchange regime that greatly contradicts one of the goals of the National Development Plan, which seeks to attain quick convergence of the foreign exchange rates.