The Nation Newspaper

Tag: economic

  • Why Nigeria’s economic growth is slow, by bank chairman

    First Bank Plc Chairman Mrs. Ibukun Awosika has explained why there is slow economic growth in Nigeria.

    She said the national economy may not improve unless women empowerment is given a priority.

    Addressing the opening session of the International Law Students Association Conference at the Obafemi Awolowo University, Ile Ife, Awosika said statistics of gender distribution of Nigeria’s population indicate that women account for 48 per cent of the working population.

    Speaking on the theme of the conference: “Rethinking the role of women in modern day Africa,” she maintained that lack of empowerment provision for such a high number of people expected to contribute positively to the national economy, no doubt, would have negative impact on the general wellbeing of the populace.

    Mrs. Awosika said: “Almost 50 per cent business potentials of Nigeria are locked up because women were not empowered. Every Nigerian must be ready to lead right within his or her space. Women should work towards retaining values in them over a long time.”

    She noted that the society seemed to be deliberately working against giving women the needed support to operate.

    Mrs. Awosika added that as long as the status quo remains, the country may continue to record poor economic growth.

    The bank chairman noted that the long held belief that women with good economic means or career cannot keep home-front should be discarded.

    According to her, despite being married for 27 years and facing daring challenges of keeping her marriage, she said she has managed to combine effectively managing her home and career.

    She said: “I was three years old in my business when I got married. And I have been married for 27 years. You can be a successful career woman or business owner and still keep your home-front intact. Women constitute 48 per cent of Nigeria’s workforce. If that huge number is left with no meaningful contribution, economy cannot grow.

    “Women can manage business successfully, but we need to empower them. I urge you all to follow your dream with passion, the result is always big. The place of your birth is beyond your control, but what you make of your life is what matters.”

  • Expressway to economic haemorrhage

    Expressway to economic haemorrhage

    The clamour for Foreign Direct Investment (FDI) has been a sing-song since 1999. Ironically, as the Federal Government intensifies its drive for FDIs, multi-billion dollar investments are wasting away – no thanks to the appalling state of critical infrastructure across the country. MUYIWA LUCAS reports that except the government moves fast, investments at major economic hubs may shut down. 

     

    He was full of excitement when he took off from the Apapa Port in Lagos en route Onne in Port Harcourt, Rivers State. But seven hours after, Sunday Adetona, a truck driver, was still within the vicinity of the Lagos port. He was held in the gridlock on the Apapa-Oshodi Expressway.

    As a first time traveller to Onne, Adetona was oblivious of what the trip had in store for him. Although he had heard of the poor state of the East-West Road, he encountered more than what he bargained for. And travelling for a long time, he came to a dead end near Eleme-Onne, where the road had been cut, making it impossible for him to reach his final destination.

    That section of the road had been impassable for two years, it however became nightmarish recently, following the collapse of the bridge leading into the two petroleum refineries in Eleme, the Onne Port complex, including Onne Free Zone; the Indorama/Eleme Petro-chemical Plant, Notore Fertiliser plant and many businesses within the corridor.

    It was learnt that the collapse of that the Eleme stretch of the East-West Road has crippled investments estimated at over $50 billion in the Eleme-Onne axis of the industrial hub of the state. Observers say the estimate might be a far-cry, given the concentration of of firms and investments belonging to the government, private and corporate bodies on the corridor.

     

    The Onne Port Complex

    The Onne Port complex, which took off in 1982 as the Federal Lighter Terminal (FLT), has over the years, grown in leaps and bounds, courtesy of a Public/Private Partnership (PPP). It is situated on the Bonny Estuary on Ogu Creek, which is about 25 kilometers south of Port Harcourt. The geographical area of the Port spans between NAFCON (Now NOTORE) Jetty and Bonny Island. It cuts across three local government areas of Rivers State – Eleme, Ogu-Bolo and Bonny. The land area of approximately 2,500 hectares is situated on the soil of Eleme Local Government Area, while the channel to the Port on Bonny River and Ogu Creek within Bonny and Ogu-Bolo Local Government Areas. Additionally, the jurisdiction of the Port covers operations at the Nigerian Liquefied Natural Gas (NLNG) Jetty at Bonny, NOTORE Jetty and midstream discharge at Buoy 9. It is a major port in the region and it has several quays with facilities for cargo ships up to 60,000 grt.  It is also the main base for the offshore activity in the region and a large number of supply-vessels call at Onne every week. Stores and freshwater are available, as well as fuel and minor repairs.

    There are two major terminal facilities at Onne Port Complex. These are the Federal Ocean Terminal (FOT) and the Federal Lighter Terminal (FLT).

     

    The FOT

    The Federal Ocean Terminal (FOT) has a total quay length of 2,890 meters. This terminal which is deep and large was designed to accommodate and anchor bigger and ocean going vessels and to berth vessels of 40,100 to 50,000 DWT capacity.  It was envisaged to be the largest, deepest most modern Port in the West and Central African sub-regions and has potential for expansion to serve both local and international investors. Being Concessional to a multinational company, Intels Logistics Services (INTELS), the construction of the Ocean terminal, was designed to be in four phases. Three of this with 11 berths are completed and being utilised.

     

    The FLT

    The Federal Lighter Terminal (FLT) has a total quay length of 2, 022 meters. With the completion of FLT berth four in March 2007. The second, third and fourth berths operated by INTELS have been rehabilitated and deepened to 10 meters draft to accommodate moderately large vessels in addition to service boats. The first berth operated by Brawal has been rehabilitated and been deepened to eight meters draft.

     

    The Free Zone status

    The Port is designed as Oil and Gas Free Zone vide Federal Government Decree No. 8 of 1986. Currently about 150 companies are licensed to operate at the zone. Companies like Tenaries, Socotherm, Delta Environmental Services, West Atlantic Shipyard (WAS) etc. have added significant value to the economy of the country through their activities in pipe coating, pipe vending, waste treatment, boat building among others.

     

    Wasting investment

    The head of operations and technical services at the Oil and Gas Free Zones (OGFZA), which is the regulator of the Onne Free Zone, Mr. Adekunle Ajayi, confirmed that investment along the axis are wasting away and becoming unattractive. He blames this on the cut-off Eleme-Onne axis of the East-West Road. Collectively, he disclosed, businesses in that corridor, made up of INTELS, the West African Container Terminal (WACT), Brawal Shipping Company, all the IOCs represented in the free zone, is worth alone are worth more than $50 billion.

    The government investments and establishments affected by this development include OGFZA, the NPA, Nigeria Customs Service, the Nigerian Naval College and the Nigeria Immigration Service.

    Besides the identified investments, there are sundry businesses and government establishments on the corridor up to Ogoni. They are no longer accessible from Port Harcourt because of the failure of the road.

     

    Threat to FDIs

    OGFZA’s Managing Director Mr. Umana Okon Umana, is sad that the collapse of the road has left stranded, an economic hub that hosts, perhaps, Nigeria’s largest concentration of critical industrial concerns. He explained that apart from its adverse impact on existing businesses in the axis, the logistic crisis caused by the failed section of the road constitutes a serious deterrence to Foreign Direct Investment (FDI) which the Federal Government has been campaigning for. “No foreign investor wants to stake his money where he cannot have access to,” Umana said.

    Commending the Niger Delta Development Commission (NDDC) for its intervention, he suggested a holistic and permanent solution to the bad state of the road. The Rivers State Nyesom Wike lamented the economic loss to the federal and state governments in 2016. He spoke at a meeting with investors and government establishments in the axis. Both parties raised N3 billion to repair the failed section of the road spanning about seven kilometres. The money was said to have been disbursed to Reynolds Construction Company (RCC), the contractor handling the repair.

     

    A jinxed project?

    For most Nigerians and stakeholders, the East-West Road may have either become jinxed or a pawn in the country’s political chess game. Their reason: why should a 33-kilometre road, traversing five states in the Niger Delta – Akwa Ibom, Bayelsa, Cross River, Delta and Rivers – be unattended to for so long? They said the road remained deplorable, despite unbundling it to four sections.

    Section I (from Warri in Delta State to Kaiama in Bayelsa State) is being handled by Setraco; Section II (Kiama to Eleme Junction in Rivers State) awarded to Julius Berger; Section III (Eleme Junction to Onna in Akwa Ibom State) being handled by RCC and Section IV (Onna to Oron) also in Akwa Ibom, awarded to Gitto. The total project cost which stood at N197 billion, had ballooned to N568 billion by last year, according to the Niger Delta Minister, Usani Uguru Usani.

    Since the award of the contract, Nigerians, including some lawmakers and the opposition political party have continually sought clarification on issues ranging from completion of the project, which was initially slated for 2010, then shifted to 2014 and now unknown, to the process of the award. For instance, the Section IV of the project awarded for N26 billion, initially had N9.5 billion added after variation.

    In February, youths from Eket in Akwa Ibom State, threatened to disrupt construction work at Section IV of the East West Road if the Federal Government continued with plans to withdraw the case against Gitto Constuzioni Generali, the contractor handling the motorway project.

    Their position followed an application filed by the Attorney-General of the Federation (AGF) in a Federal Capital Territory (FCT) High Court, seeking to withdraw a case instituted by the Independent Corrupt Practices and other related offences Commission (ICPC) against Gitto and others.

    The ICPC had in August last year, 2016, arraigned Gitto with former Minister of Niger Delta, Godsday Orubebe, and two officials of the ministry, Lawrence Alaba and Ephraim Zari, on corruption and related charges. The accused persons allegedly conspired to misappropriate N1.9 billion out of the N2.3 billion earmarked for payment of compensation to owners of properties marked for demolition in respect of the Eket – Oron Road dualisation project.

     

    Like Onne, like Apapa

    If the Eleme-Onne Road has been described as an economic drainpipe on the economy, the story of the roadc leading into Apapa Port is a tale of a rape on the proverbial geese that lays the golden egg. Like Onne, Apapa Port remains the largest, busiest and most lucrative business hub in the West African sub region. It was established in 1913 and construction of the first four deep water berths began in 1921. The Apapa Port is well equipped with modern cargo handling equipment and personnel support facilities. It boasts of four wheel gate of about eight meters for oversize cargoes and this has given the Port an edge over others in the handling of oversized cargoes. For improved operational activities and efficiency, the landlord Port model was introduced by the Federal Government and this later culminated in the concession of the terminals to private operators in 2006.

    Presently, the Lagos Port Complex has five private terminals operated by AP Moller Terminal Ltd (APMT); ENL Consortium Ltd (ENL); Apapa Bulk Terminal Ltd. (ABTL); Greenview Development Nigeria Ltd (GNDL) and Lilypond Inland Container Terminal. The Port also has two logistics bases – Eko Support Services Ltd and Lagos Deep Offshore Logistics (LADOL) and eight jetties. Sugar, salt and flour are produced in factories belonging to operators within the port.

    The concession has triggered vast expansions in line with international best practices in Port infrastructure but the efficiency in the facility is still greatly hampered. One of the hindrances to the efficiency is the poor state of road in the axis. Embarking on a journey on the Apapa Port Road is like going on a suicide mission.

    It has always been lamentations for travellers on the route as trucks have taken over the entire stretch of the dual carriageway, from Berger Cement to Tin Can Port. Trailers and fuel tankers have made motoring on the nightmarish.  Indiscriminate parking has reduced the carriageway, causing traffic congestion. Whenever the ‘heavens weep’, travelling on the Oshodi-Apapa expressway is unthinkable.

    A recent trip to the axis revealed the pitiable state of the highway between Coconut Bus-stop and Tin Can Port second gate. The entire stretch, littered with gullies and potholes, reflects the years of neglect the road has suffered. To avoid spending hours in the traffic, commuters now resort to using the services of commercial motorcycle operators popularly. In fact, most commercial drivers and motorists now navigate through Olodi-Apapa through Boundary, Ajegunle, to access Apapa, a longer route but a better alternative.

    The location of no fewer than 20 tank farms in Apapa has compounded the woes for commuters. The defence for this has been that with the dearth of functional refineries, Apapa remains the ideal place because of the massive importation of refined petroleum products through the seaports. Lagos, which enjoys a near monopoly of fuel importation in the country, thus became the preferred destination for fuel dealers to load products en route other parts of the country.

     

    Economic loss

    The President, Dangote Industries Limited, Aliko Dangote, once estimated that the economy was losing over N290 billion daily to the bad road.

    “The economy loses more than N20 billion daily and N140 billion weekly. This road affects businesses across the country. All our operations in the hinterland like Ilorin, Kano, are operating at a paltry 40 per cent capacity because of this,” Dangote told reporters recently.

    Many companies on the Apapa corridor have either collapsed or forced to relocate their offices and operations.

    The once busy Apapa Mall is fast becoming a “ghost mall”; more than half of the shops in the mall have wound up, including the Cinemas.

    The Managing Director of Nigeria Ports Authority (NPA), Hadiza Usman, estimated the revenue target from activities at the Apapa ports at N250 billion in revenues. Stakeholders say described the estimates as peanut compared to the potentials of the Ports. They contend that if the NPA could have such targets with the sorry state of the road, what the government could rake in is in the realm of imagination if the roads are fixed.

    Besides, they want the government to plough back the funds money realised from the ports to fix the port roads- an amount that will be more than enough to do same.

    “Doing this will mean giving back to the geese its golden egg,” said Sanni Ayinde, a petroleum dealer in Apapa.

    Several containers are also said to be trapped inside the ports because of the gridlock in and out of the ports. Ships have also created a long queue on the high seas them cannot offload their cargo.

    Customs agents feel the heat, especially in the area of mounting demurrage since their containers are trapped inside the ports, while the terminal operators are unwilling to write off the cost. The development has affected the cost of freighting goods into the country as shippers charge a premium to bring goods into the country to cover the cost of staying a longer time going out of the country once in.

    Further losses to the economy comes in the form of diversion of cargoes meant for the Nigerian ports to neighbouring ports of Benin Republic and Ghana, the two ports that have over the years shown that they can conveniently take over the Nigerian shipping market, offering better turnaround time to shippers and importers.

    The Apapa Port road debacle is taking its toll on manufacturers as they have to wait for more time to take delivery of their raw materials

     

    What hope?

    After inspecting the rehabilitated failed portion of the Apapa – Ijora Bridge linking the Apapa Central Business District with the Lagos lsland last year, Power, Works & Housing Minister Babatunde Fashola gave assurance of a timely completion of the rehabilitation of access roads to Apapa/Tin Can Island Port-Nigeria National Petroleum Corporation (NNPC) Depot at Atlas-Cove.

    The access roads included the construction of a new bridge, running parallel to the existing bridge from Liverpool Roundabout across the Port Novo Creek in Lagos. The minister, who acknowledged the deterioration of facilities within Apapa, attributed it to years of neglect and abandonment of the rail system. He said the Federal Government was working on plans to revitalise the rail system for haulage, stressing that the movement of heavy goods on roads was no longer sustainable.

    The Dangote Cement and Flour Mills Nigeria may have come to the rescue, offering N4.3 billion to repair a two-kilometer section of the Apapa Road in Lagos.

    But the fact is – the Onne and Apapa highways are in critical need of intervention. Such intervention would not only boost revenue but save the economy from bleeding to death.

  • Economic recovery: Fiction or reality?

    SIR: Nigerians have reacted to the news that the recession is over. The latest National Bureau of Statistics (NBS) report says Nigeria has moved out of recession: “Economy grew in second quarter 2017 by 0.55% from -0.91% in first quarter 2017 and -1.49% in second quarter 2016. This in effect means Nigeria has exited recession”.

    To ordinary Nigerians, economic development or upward trajectory of the economy should have a significant effect of improving lives, boosting individual purchasing power through up-to-date payment of workers salary, and availability of food on our tables etc. The reality is that most Nigerians workers are not paid for several months; at the moment of writing, university lecturers and doctors are on strike over non-payment of allowances. Parents who withdrew their wards from schools for inability to cope with school fees are still struggling. Prices of food, beverages remain out of reach.

    Recession does not end on the pages of newspapers; certainly not the statistical data or graphs that reveal the actual health status of a nation. The market people – common man on the street and individual homes should be in the best position to give a clean health bill through their personal experiences.

    At the moment, Nigerian economy is still tied up to oil and gas sector. With crude oil prices stabilising and the crude production increasing to 2.2m per barrel, my fear is that in the event that OPEC asks us to cut production or militants strike again and cut production to what it was before the country slid into recession, what would happen?  NBS report did not reveal much in other sectors like agriculture in which this administration promised as alternative to the mono-cultural economy the country has operated for decades.

    Several factors are working against the administration’s bid for diversification. Currently, farmers are not able to do much for fear of Fulani herdsmen while those who could even attempt it are confronted by high cost of fertilizer and farm tools. The other challenge is the Boko Haram that have sent virtually 95% of farmers in the North-east into IDPs camps. Until this menace is tamed, we can’t say we are moving towards food sufficiency.

    The economy is still fragile and vulnerable, just like an egg; it can break at any time considering the weak and polices. Unless we focus on the reality and not trying to score a political point especially as we approach 2019 elections, will still be cerebrating emptiness.

    Recession is still on and Nigerians are still in pains. The president himself has affirmed this by saying “exit from recession nice if felt by ordinary Nigerians”. Frankly speaking, the president got it right again by not playing to the gallery as he did when he first returned from London that he has not been this sick. But the hyenas and the jackals around him always say the opposite for political gain.

    The truth is that the report does not yet reflect the reality on ground.?

     

    • Alifia Sunday,

    Ilorin, Kwara State.

  • Economic recovery: SDP says it is not yet time for celebration

    Economic recovery: SDP says it is not yet time for celebration

    The Social Democratic Party (SDP) says it is not yet time for celebration as the country is reported to be out of economic recession.

    The party made the observation in a statement issued by its National Publicity Secretary Mr Alfa Mohammed, on Wednesday in Abuja.

    Mohammed said that the party had taken notice of the reported growth in the country’s GDP as indicated by the report of the National Bureau of Statistics (NBS).

    He said that while technically Nigeria was out of recession as the report showed that the  GDP quarterly growth was no longer negative, economic hardship still continued and unemployment remained.

    “Hence, we are of the view that it is not celebration time yet, as the interest rate which determines the amount of money available for investment is still high.

    “Also the 16.25 per cent inflation rate reported in the month of May is still not a good enough indicator.

    “We are however of the opinion that if the growth in the non oil sectors are improved upon and capital spending is increased through effective budget implementation, then we can begin to have a sigh of relief soon.”

    He also stressed the need to see the reflection of the achievements in the welfare of the common man on the street.

    According to him, there are unpaid civil servants, pensioners and the students are out of the classes as well as none appreciable decrease in the unemployment rate. (NAN)

  • The youth and economic growth

    An important variable in determining the economic growth or development of a country is in how it affects the quality of life of the people within the given geographical context. More importantly, an even economy is one not tilted in favour of upper class, lower class dichotomy or split unevenly between its young and older generations but one observed to contain equal opportunities for exploration to all.

    Increasingly, in Africa and world over, the role of the young in the growth of the economies of their individual country has been recognised and accepted as indubitable. However, this recognition has not necessarily translated to specific government policies aimed at accommodating this agile and passionate group within the economic blueprint of their countries. In today’s Nigeria, twice as many youths are unemployed than adults.

    Africa has the fastest growing and most youthful population in the world. Over 40% of sub-Saharan Africa population is under the age of 15. It has become increasingly clear that insufficient attention has been paid to the creation of employment opportunities for young people. Nigeria’s population reached 182 million this year, with more than half its people under 30 years of age, putting a severe strain on a nation suffering from a slowing economy and declining revenue.

    As Africa’s most populous country, Nigeria is witnessing a growing youth bulge, with those under 14 years accounting for more than 40 percent of its citizens. As part of a strategy to sustain economic growth and support higher education, a bipartisan commitment to investment in apprenticeship, internships and work-study programmes proven to equip the youth for the world of work is highly needed.

    A youth has been classified within different age categories across the board, but according to the United Nations, for statistical purposes, a youth is defined as a person between the ages of 15-24, without prejudice to other member states.

    The definition of youth perhaps changes with circumstances, especially with the changes in demographic, financial, economic and socio-cultural settings. Other age classifications give a wider range bracket of 18-35.

    New graduates are faced with the dilemma of employers asking for years of experience as prerequisites of employment. Most of these graduates go on to spend years in unemployed limbo, thus creating an experience gap and a loss of opportunity to acquire further skill-sets in work environment for better opportunities.

    Another challenge facing the youth is the issue of inequality. Around the world, about 500 million young people today are living on less than $2 dollars a day.

    There are also crippling challenges such as insecurity, lack of access to credit facilities, poor education, and an unstable political climate, usually all combining to forestall any effort at self-sufficiency or growth by youths.

    These challenges have a direct correlation to youths becoming violent, restive and fraudulent, among other things. This in turn directly impacts negatively on the economy as a restive, criminal-minded youth population is a threat to a viable, stable and sustainable economy.

    However, in spite of burgeoning challenges, Nigerian youths are finding ways to survive, and even thrive in a ruthless economy, as necessity becomes the mother of invention.

    What this tells us is that there is yet a way to reap of the many benefits of engaging youths in the creative process of developing a thriving economic model. The benefits are indeed innumerable. The burgeoning problems highlighted above only have to be met with firm solutions driven by political will.

    Quality education at all levels should be made as accessible as possible for every citizen, to maximise the platform for vertical mobility. Increased investment in technology will spur growth as young people take advantage of innovative technologies that will greatly improve their education and quality of life.

    Economies can become more inclusive by listening to youth, and by providing the necessary channels for young people to be connected and effectively participate in the socio-political fabric of society. The expansion of information and communication technologies offers opportunities to promote inclusion and expand access to knowledge and participation of youth in public life. There is a universal desire on the part of youth for communication.

    Making it happen will foster opportunities, innovation, diversity, and economic inclusion. Human capital investments and other social services provided to mothers and children in the developing world are critically important.

    Conclusively, Africa’s and the world’s youth in general represents both an opportunity and a challenge for the continent. They are a potential human resource base for development if they are nurtured and can be a source of conflict and social tension if neglected.

    • By Dr. Kayode Ajulo

    Principal Partner,

    Kayode Ajulo & Co.

    Abuja.

  • Recession: Hope rises as economic indicators improve

    Recession: Hope rises as economic indicators improve

    The economy may be on its way out of recession. Besides the International Monetary Fund (IMF) prediction of 0.8 per cent growth by the end of the year, the feedback from critical sectors of the economy shows that the boom time is near. Improved access to foreign exchange, rising crude oil production and upbeat in the manufacturing sector are signs that the recession may not last beyond the third quarter as predicted by the Central Bank of Nigeria (CBN), writes COLLINS NWEZE. 

    If the latest International Monetary Fund (IMF) Report on Nigeria is anything to go by, the country may be on the way out its first recession in three decades. The IMF report, which is positive, has given hope of economuic recovery.

    The IMF is not the only institution that is upbeat about the Nigerian economy in the months ahead, the performance of key sectors within the economy and the improvement in foreign exchange (forex) access to both retail and wholesale users are also pointers that better days lay ahead.

    In the Purchasing Manager’s Index (PMI) for July released last Wednesday by the Central Bank of Nigeria (CBN), the statistics showed an expansion in manufacturing activities for the fourth consecutive month. The non-manufacturing sector growth also entered the third month.

    The sustained development in PMI readings since the turn of the second quarter coincides with the period the economy recorded improvements in forex liquidity and fiscal spending. That was as a result of rebound in oil earnings and external reserves, which are attributable to largely stable oil prices and increase in production volumes as well as increased flexibility in the CBN’s forex policy.

    The July manufacturing PMI grew from 52.9 points in June 2017 to 54.1 points in July – the highest level since the CBN started the data series in 2014. The major drivers of the expansion were: production level (59.3 points), new orders (52.7 points), supply delivery time (51.3 points), employment level (51.8 points) and raw materials inventory (53.6 points), sub-indices which grew 1.1 percentage points, 1.7ppts, 1.0ppt, 0.7ppt and 1.3ppts.

    The outcome of the enhancement in business sentiment was evident in 10 of 16 sub-sectors, which recorded growth in the period. They are: Appliances/components, computer/electronic products, cement, primary metal, chemical/pharmaceutical products, food, beverage & tobacco products, textile, apparel, leather/footwear, printing & related support activities, paper products, electrical equipment and transportation equipment all expanded.

    However, petroleum/coal products, fabricated metal product, furniture/ related products, non-metallic mineral products and plastics/rubber products declined.

    Likewise, the non-manufacturing PMI rose to 54.4 points (compared to 54.2 points in the previous month – June 2017) after two consecutive months of progress. The composite index was buoyed by increases in business activity (56.8 points), new orders (55.1 points), employment level (54.0 points) and inventory (51.9 points).

    Accordingly, of the 18 non-manufacturing subsectors, 16 recorded growth.

    Explaining the results, Managing Director of Afrinvest West Africa Limited, Ike Chioke, said a composite PMI above 50 points indicates that the manufacturing/non-manufacturing economy is generally expanding, 50 points indicates no change and below 50 points indicates that it is generally contracting.

    He said in an emailed report: “The positive trend reveals optimistic perception of manufacturers and business owners for the second half of the year on account of forex market flexibility and stability in cyclical anchors of the business cycle – oil production and prices – as well as economic development plans of the federal government; thus, further reaffirming our positive outlook for growth in 2017 (+0.8 per cent for 2017 fiscal year growth forecast).”

    Nonetheless, he said that the Gross Domestic Product (GDP)  growth below three per cent will have little impact on quality of life in the country as per capital income growth is likely to remain negative; hence, the need for more constructive policymaking to address structural constraints to high and sustainable growth – high interest rate, forex market distortion and low investment spending.

     

    Equities

    The equities market has equally benefitted from increased foreign exchange inflows into the economy. The All Share Index advanced on the last four trading days of last week, gaining 1.5 per cent week-on-week to settle at 37,425.56 points on Friday while year-to-date gain expanded to 39.3 per cent.

    Investors also accumulated N194 billion as market capitalisation advanced to N12.9 trillion, while the activity level improved as average volume and value traded rose 26.5 per cent and 319.3 per cent  to N502.6 million units and N22.8 billion respectively.

    Chioke said: “Although valuation multiples have increased since the macro-themed rally started in April, that does not imply the market is overvalued and we remain convinced there are opportunities for investors to key into.

    “Thus, even as the earnings season draws to a close, we expect the broader index to sustain the current momentum to deliver a positive return in the last five months of the year, albeit moderate in the single digit range.”

     

    Forex market

    Last week, the CBN conducted its weekly SMIS sales of $100 million in order to buoy forex liquidity whilst activities in other segments of the forex market recorded marginal improvements. At the official market, the CBN continued to keep rate steady, as the Naira maintained the penultimate Friday’s close of N305.65/$1 on the first session and appreciating slightly to N305.55/$1 at the weekend.

    Meanwhile, at the parallel market, the Naira touched another 2017-high of N363.00/$1.00, both on Tuesday and Wednesday, but depreciated to N365.04/$1.00 on Thursday, eventually closing the week at that level, indicating a flat week-on-week close.

    During the week, activities at the Investors & Exporters window remained robust, with $994 million recorded (as at Thursday) compared to $1 billion the previous week.

     

    IMF on Nigeria

    Between July 20 and 31, the IMF team, led by Amine Mati, was in the country to discuss recent economic and financial developments, update macroeconomic projections and review reform implementation.

    At the end of the visit, Mati, who is the Senior Resident Representative and Mission Chief for Nigeria at the IMF, issued the following statement: “The economic backdrop remains challenging, despite some signs of relief in the first half of 2017. Economic activity contracted in the first quarter of the year by 0.6 per cent, mainly as maintenance stoppages reduced oil production. However, following four quarters of negative growth, the non-oil economy grew by 0.6 per cent (year-on-year), on the back of a rebound in manufacturing and continued strong performance in agriculture.

    The various indicators suggest an uptick in activity in the second quarter of the year. Helped by favorable base effects, headline inflation decreased to 16.1 per cent in June 2017, but remains high despite tight liquidity conditions.

    The IMF said that preliminary data for the first half of the year indicate significant revenue shortfalls, with the interest-payments to revenue ratio remaining high (40 per cent at the end of June) and projected to increase further under current policies.

    The high domestic bond yields and tight liquidity continue to crowd out private sector credit. Given Nigeria’s low growth environment and the banking system’s exposure to the oil and gas sector, non-performing loans increased from six per cent in 2015 to 15 per cent in March 2017 (eight per cent after excluding the four undercapitalised banks).

    The government has started implementing a number of important measures to steer the economy out of the challenges. The Economic Recovery and Growth Plan (ERGP) is driving the diversification strategy and the security in the Niger Delta improved through strengthened engagement.

    The new Investor and Exporter FX Window has provided impetus to portfolio inflows, increased reserves above $30 billion, and contributed to reducing the parallel market premium.

    The IMF said the important steps have also been taken in implementing the power sector recovery plan, introducing a voluntary income and asset declaration programme and moving forward the 60-day national action plan to improve the business environment. Progress is also ongoing within the oil and energy sector through implementation of a new funding mechanism for cash calls.

    It said: “However, the near-term vulnerabilities and risks to economic recovery and macroeconomic and financial stability remain elevated. At 0.8 per cent, growth in 2017 will not be sufficient to make a dent in reducing unemployment and poverty.

    “Concerns about delays in policy implementation, a reversal of favorable external market conditions, possible shortfalls in agricultural and oil production, additional fiscal pressures, continued market segmentation in a foreign exchange market that remains dependent on central bank interventions, and banking system fragilities represent the main risks to the outlook.

    “Acting on an appropriate and coherent set of policies to enhance an economic recovery remains urgent. This includes the immediate implementation of specific priorities that will help achieve the ERGP goals.

    “In the near term, a stronger push for front-loaded fiscal consolidation through a sustainable increase in non-oil revenues would be needed to create space for infrastructure spending, social protection, and private sector credit.

    “This should be simultaneously accompanied by a monetary policy that avoids direct financing of the government and is kept sufficiently tight, a unified and market-based exchange rate, and rapid implementation of structural reforms.

    “Pursuing these policies would help reduce macroeconomic vulnerabilities and create an environment for a diversified private-sector led economy.

    “The team held productive discussions with senior government and central bank officials. It also met with members of parliament, representatives of the banking system, private sectors, civil society, and international development partners. The team wishes to thank the authorities and all those with whom they met for the productive discussions, excellent cooperation, and warm hospitality.”

     

    Inflation figures drop

    The nation’s inflation rate fell for a fifth consecutive month in June even as food-price growth surged. Inflation eased to 16.1 per cent from 16.3 per cent in May, the NBS said. The median of 15 economists’ estimates compiled by Bloomberg was for 16 per cent. Prices rose 1.6 per cent in the month.

    Inflation has been above the upper end of the central bank’s target band of six percent to nine per cent for two years. The CBN Governor, Godwin Emefiele, kept the main policy rate at a record high of 14 per cent since last July to fight price growth and support the Naira even as the economy has contracted for five consecutive quarters.

     

    Forex restriction on 41 items

    The CBN restriction of 41 items from accessing forex from official windows has also helped to resuscitate domestic industries and improve employment generation.

    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 homegrown solution, introduced by Emefiele, to sustain forex market stability and ensure the efficient utilisation of available forex to grow critical segment of the economy.

    This policy implies that, those who import these items can no access foreign currency through the official window to pay their overseas’ suppliers. Rather, they will have to source forex from the parallel market or Bureaux de Change (BDCs) to pay for their imports.

    The CBN chief 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 agriculture 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 on Arise Television, 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.”

    Emefiele’s logic is that when items, such as palm oil, are imported, the local producers are made poorer.

    He said: “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.”

  • Why sustenance of Niger Delta peace is key to economic recovery, by stakeholders

    Why sustenance of Niger Delta peace is key to economic recovery, by stakeholders

    To some experts and analysts, there is nothing in the N7.44 trillion 2017 “Budget of Economic Recovery and Growth” to inspire hope of a quick economic recovery. Rather, they argue that what will pull the country out of recession are basically developments in the oil and gas industry. They suggest how to make the relative peace in the Niger Delta permanent, reports Assistant Editor CHIKODI OKEREOCHA. 

    The fear of resurgence of militancy in the Niger Delta is the beginning of wisdom for the Federal Government, oil companies and stakeholders in the oil and gas industry.

    The relative peace in the oil-producing region has contributed to the increase in oil production to 1.8 million barrels per day (bpd). Oil output had been cut to about half a million bpd by a fresh wave of militancy by restive youths before the attainment of a ceasefire.

    With oil price yet to rebound and Brent crude standing at $48.46 per barrel as at the weekend, experts and operators in the oil and gas industry believe Nigeria might be out of recession faster than envisaged if the current 1.8 million bpd production output is sustained and pushed up further.

    But they said the Federal Government must muster the political will to sustain the prevailing peace in the Niger Delta for this to happen.

    Some of them, who spoke with The Nation, warned of the consequences of a resurgence of militancy in the Niger Delta, saying such development will hurt oil and gas operations. According to them, sustaining the oil production level was critical to the implementation of the N7.44 trillion Appropriation Act.

    The Chairman, Petroleum and Natural Gas Senior Staff Association of Nigeria and National Union of Petroleum and Natural Gas Workers (PENGASSAN & NUPENG) National Petroleum Industry Bill (PIB) Committee,  Hyginus Onuegbu, argued that the 2017 budget remained an estimate and that its revenue targets were based on mere assumptions.

    Acting President Yemi Osinbajo had last month signed the N7.44 trillion 2017 budget tagged “Budget of Economic Recovery and Growth” into law. The lawmakers had raised the figure from the initial N7.28 trillion estimate presented by President Muhammadu Buhari in December last year.

    Osinbajo said that the N7.44 trillion budget had a revenue projection of N5.08 trillion and an aggregate expenditure of N7.44 trillion; the projected fiscal deficit of N2.36 trillion is to be financed largely through borrowing.

    It also set aside N1.84 trillion for debt servicing, N177.4 billion for sinking fund, N2.97 trillion for recurrent expenditure (non-debt) and N2.177 trillion for capital expenditure.

    The Acting President said the budget would deliver positive economic growth and prosperity, as it would be implemented in line with the Economic Recovery and Growth Plan (ERGP). He said the budget was designed to bring the economy out of recession onto a path of sustainable and inclusive growth.

    But Onuegbu disagreed. As far as he is concerned, “the 2017 Budget should not be celebrated.”

    The immediate past Chairman of the Rivers State chapter of Trade Union Congress (TUC) said Nigeria will come out of recession not because of any special aspect of the 2017 budget.

    Onuegbu said: “This is a budget that was signed in the middle of the year. he charged, asking, “How can you sign a budget in the middle of the year and come round to say it will bring the country out of recession? When will capital development begin to take place?”

    Onuegbu insisted that the only viable way out of recession is for the Acting President and the Federal Government to take the peace that currently exist in the Niger Delta seriously and ensure that the promises made to the Niger Delta people are kept.

    According to him, this was necessary to avoid any disruption in oil and gas operations.

    “If there is crisis in the Niger Delta, the nation’s oil production target will not be met, and of course, its revenue target will not be met”, he warned.

    Before the truce, oil output was cut by 50 per cent the disruption of oil installations and operations by militants. It was the lowest in almost 30 years. The effects of the sharp drop were devastating. The government lost an estimated 60 per cent of its revenue to the series of attacks by militants on oil gas facilities.

    Besides, 60 per cent of her gas supply was lost to pipeline vandalism, a development which left sour taste in the mouths of investors in the power sector and by extension, electricity consumers across the country.

    The belief in some quarters is that the devastation would not have been far-reaching if Nigeria had not depended on oil for 70 per cent of its revenue and 95 per cent of her foreign exchange earnings. The reliance on oil as the mainstay of Nigeria’s economy accounted for why the crisis in the region pushed the economy into its worst recession in decades.

    It took the intervention of the Acting President to reign in the region. His diplomacy shuttle to oil-producing communities in some states in the Niger Delta where he held series of dialogue with leaders and representatives of the militants yielded positive report.

    The militants agreed to sheath their sword after securing Osinbajo’s assurances of government’s commitment towards genuine peace and development of the region. Certain promises were also made. The result was spontaneous. Disruption of oil production and destruction of oil installations and pipelines stopped, thus pushing up oil production level to 1.8 million bpd.

    But the expert’s argument is that sustaining the peace in the region must be sustained to maintain the prevailing oil production level, which they say is critical to the delivery of this year’s budget.

    “The Federal Government should understand that critical to the achievement and delivery of the 2017 Budget is the maintenance and sustenance of the peace in the Niger Delta so as to engender increase in oil & gas production that we are witnessing now”, Onuegbu told The Nation.

    A Lagos-based lawyer and public affairs analyst, Mr. Obiora Akabogu, aligned with Onuegbu’s position. Noting that Niger Delta remains Nigeria’s wealth base and the goose that lays the golden egg, he hinged the growth of the economy on the level of peace in that region.

    He urged the government to muster the political will to make necessary adjustments and concessions to ensure a lasting that region.

    Akabogu said: “There are some adjustments the government can make with executive fiat; you don’t even need constitutional amendments just to make the people of that area more comfortable.

    “People of that region are not greedy; they are easy to placate because if it were some other hostile environments they would have held the government to ransom until you meet up to 70 per cent of their demands.”

    He insisted that the government must develop the political will and strategy to develop that region and also resist pressure to mount military operation in that region.

    Akabogu said: “It is not a win-win situation militarily because of the peculiar topography of that region. Rather, dialogue and political will can do a lot of good to the Federal Government.

    “The mere fact that the budget came mid-way into the year shows you that the survival of the economy is not necessarily based on the budget; that there are other indicators and calculations.”

    Akabogu recalled that previous budgets have not done any serious miracle to the economy, but one way or the other, Nigerians have found a way to survive outside the budgets.

    He said that the budget may be ambitious important because of capital projects, the fact that it came late into the year meant that Nigerians should not expect too much.

     

    Fears of poo, shoddy implementation

    The late passage and signing of the budget into law has raised fears over possible delay in the kick-off of its implementation, and consequently, its capacity to achieve the intended outcomes.

    The Registrar/Chief Executive of the Institute of Business Development (IBD), Mr. Paul Ikele, said that beyond basing it on realistic assumptions, the budget must be judicious implemented to take country out of recession.

    He told The Nation that it was necessary to avoid the same low and shoddy implementation of last year’s budget if this year’s must succeed.

     

    Push for uninterrupted oil production heighten

    Akabogu explained that the optimism that the economy will bounce back has nothing to do with the budget’s intended outcomes, but with other extraneous calculations such as the predictions by World Bank and the International Monetary Fund (IMF).

    The World Bank recently upgraded its forecast for Nigeria’s economic growth to 1.2 per cent for 2017, citing improved oil production due to decreased militant activities.

    The bank, in its June 2017 Global Economic Prospects report, said: “Nigeria is forecast to go from recession to a 1.2 per cent growth rate in 2017, gaining speed to 2.4 per cent in 2018.”

    It noted that: “In Nigeria, militants’ attacks on oil pipelines decreased…..Oil exports are rebounding in Nigeria on the back of an uptick in oil production from fields previously damaged by militants’ attacks…”

    The IMF also raised its projections for Nigeria’s economic growth this year to 0.8 per cent. It also revised its forecast for Nigeria in 2018 to 2.3 per cent, from its previous projection of 0.7 per cent. The forecasts were revised up mainly to reflect high oil production due to security improvements in the resource-rich Niger Delta.

     

    How to sustain peace in the Niger Delta

    Onuegbu spoke of the need for the Federal Government to abide with the agreement it reached the leadership of communities in the Niger Delta for continued peace in the region.

    For instance, he said that issues around modular refineries must be resolved.

    His words: “When the Acting President came to the Niger Delta, he made a promise about modular refinery. As a matter of fact, some youths started organising themselves. In fact, there was an association of modular refiners in Nigeria. That is an issue that needs to be resolved.”

    The government had announced plans to establish modular refineries to engage youths engaging in illegal oil refining. The planned upgrade of illegal refineries in the region to modular refineries has been welcomed by the people.

     

    Suspicion

    As youths and prospective investors in modular refinery business waited anxiously for the government to come out with modalities for the take-off of the project, there were reports that the government would not allow the proliferation of such refineries across the Niger Delta.

    The Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, explained that having such refineries scattered across the Niger Delta would worsen environmental degradation and gas flaring, which will increase the problems of the region.

    According to him, the government would commission a broad study for the development of an intelligent plan for the construction of modular refineries in the region. ,

    The minister said: “It is important to clear a misconception, especially as it has to do with modular refineries.

    “Setting up smaller modular refineries in so many places in the Niger Delta would worsen gas flaring in the region and also bring about environmental challenges. It is critical to develop an integrated approach and plan to modular refineries construction in the Niger Delta, ensure that they are properly optimized and are not scattered everywhere.”

    But Onuegbu counselled the government against reneging on its promise about modular refineries. According to him, this was necessary in order to sustain the peace in the region and starve off disruption of oil and gas operations.

    Yet, the modular refinery, which has been put on hold, was one in the long list of issues agitating the minds of Niger Delta people that have not been resolved. There is also the issue of restructuring and funding of the Niger Delta Development Commission (NDDC).

    Onuegbu regretted that the government owed a lot of money to the NDDC, which it has yet to remit. He pointed out that these are funds necessary for the development of the Niger Delta.

    The Nation learnt that restructuring and funding of NDDC was part of the 16-point demand being adopted as working document to end the Niger Delta crisis when Osinbajo led a high-powered delegation to the region early this year, beginning with Delta State.

    The 16-point demand, prepared by the people of the Niger Delta under the aegis of Pan-Niger Delta Forum (PANDEF), under the leadership of Ijaw leader and elder statesman Edwin Kiagbodo Clark, was presented to Buhari when the President received them at the State House on November 1, last year.

    On PANDEF’s shopping list are: Presidential Amnesty Programme; Law and justice issues, Effect of increased military presence in the Niger Delta, Plight of Internally Displaced Persons (IDP), Relocation of administrative and operational headquarters of International Oil Companies (IOCs), Ogoni clean-up and environmental remediation, and the Maritime University.

    Other demands include: Strengthening the Niger Delta Ministry; the Bakassi question, Fiscal Federalism, Key regional critical infrastructure; Security surveillance and protection of oil and gas infrastructure; Power supply, economic development and empowerment; and Inclusive participation in oil industry and ownership of oil blocs.

    Sources close to the preparation of the 16-point demand hava admitted that the government has made some appreciable progress in meeting some of the demands. They note that the commencement of the clean-up of Ogoni land, the revisiting of the unpaid amnesty stipends and the National Maritime University, among others, are signs that the issues agitating the minds of the people are gradually being addressed.

    But, will the government pluck up the courage and political will to holistically address these demands rather than quick fixes? Will it strive to build trust, instill confidence and give the local communities in the Niger Delta some sense of belonging?

    As answers to these questions remain a matter of conjecture, the prevailing ceasefire militancy and may not be permanent for as long as the issues remain unresolved.

    Analysts say that no stone should be left unturned to guard against the resumption of hostilities in the oil-rich region and not hurt ongoing efforts at reflating the economy and take it out of recession.

  • Declining inflation sign of economic recovery

    Falling inflationary trends, including the National Bureau of Statistics (NBS’) new report indicating an improvement from 17.24 per cent in April to 16.25 per cent in May appears to support the Federal Government’s claims about improvements in the economy.

    In its report yesterday, the NBS noted that the economy is recording the fourth consecutive decline in the rate of inflation since January 2017, thereby justifying recent assertions by Minister of Budget and National Planning, Senator Udoma Udo Udoma that the country’s economic situation is changing for the better as the macroeconomic environment is being stabilized and inflation rate trending downwards.

    “The Consumer Price Index (CPI) which measures inflation increased by 16.25 per cent (year-on-year) in May 2017 .

    “This was 0.99 per cent points lower the rate recorded in April ( 17.24per cent) ; accordingly ,this represents the fourth consecutive decline in the rate of inflation since January 2017.

    “On a month-on-month basis, the headline index increased by 1.88 per cent in May 2017 , 0.28 per cent points higher than the rate of 1.60 per cent recorded in April 2017 indicating the existence of persistent pressure on prices despite the general decline in year on year inflation.

    “Month on Month inflation has cumulatively risen by 7.7 per cent since January 2017 .

    “The food index increased by 19.27 per cent (year-on-year) in May 2017 , down by 0.03 per cent points from the rate recorded in April ( 19.30 per cent) indicating continued pressure on food prices.

    “Price movements recorded by All Items less farm produce or Core sub-index rose by 13.00 per cent (year-on-year) in May , down by 1.80 per cent points from rate recorded in April (14.80 per cent); this represents the seventh straight month of decline in the core index since November 2016 ,” the NBS stated in its report.

    Senator Udo Udoma had said government interventions, particularly in fixing the nation’s broken infrastructure, are making impact. He said there are positive signs that the economy is working its way out of recession unto a path of sustained inclusive growth and development.

    He expressed optimism that the implementation of the Economic Recovery and Growth Plan (ERGP) will boost the economy while the new inflation rate of 16.25 per cent is now just 1.25 points away from the 15 per cent goal of the ERGP.

  • Sacked workers were economic saboteurs, firm alleges

    • Reinstate them, insists PENGASSAN

    The management of Neconde Energy Limited, an exploration and production (E&P) arm of the Obijackson Group, the operator of the oil mining lease (OML) 42 in Delta State, has  said sacked members of Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN),  who worked with the firm were economic saboteurs.

    PENGASSAN had threatened to shut down Neconde Energy operations  in Lagos and Warri for sacking five of its members who worked in the company without following due process.

    Obijackson Group spokesman,  Olusegun Fafore, in reaction said the sacked members strayed from the company’s operational rules.

    “The individuals in question committed an act of economic sabotage and total disregard for the human lives. This position followed our verification of their involvement in vandalisation of valuable equipment, assault, abduction and hostage taking of person on Thursday, 18th May 2017 at the Jones Creek, Delta State.  These dastardly acts were committed against fellow employees, who reported the matter to the management of the company.

    “As a responsible organisation, conducts like those perpetrated by these individuals are not in alignment with our organisational values and written company policy, which every employee is aware of, and understands.  The allegation that these individuals were victimised because of their involvement is not only baseless, but also unfounded because picketing of our office was on Monday, May 15th 2017 and a meaningful agreement was reached with the union, which resulted in speedy winding down of the picketing exercise,” he said.

    He continued:“So, the unpatriotic development that resulted in disengaging the employees happened days after our resolution of outstanding issues with PENGASSAN. Therefore, it was not just an act of economic sabotage, but a case of premeditated destruction of our facilities, and disruption of our operations and malice against our employees. Keeping them in our employment, without doubt, constitutes a threat to the lives of other employees, whom they abducted and held hostage.

    “Consequently, we were left with no option, after confirming their involvements in the dastardly acts, which contravened our corporate ethos, than to let them go. We are a company working to boost the economic development of Nigeria through our activities, but when employees work against the organisational purpose and national interest, then it is not inappropriate or illegal to disengage such employees.

    “Moreso, Nigerian courts have always upheld the sanctity of the terms freely agreed to by parties as set out in the relevant employment contract and the courts have enforced the same as binding. In the case of Chukwuma .V. Shell Petroleum Development Corporation, the Supreme Court of Nigeria upheld the Common Law principle that an employer has the right to terminate its employee for good reason, bad reason or no reason at all. Therefore, it is inherent in every employment contract that the employer has a right to hire and fire, provided that the procedure stated in the employment agreement is duly complied with.”

    PENGASSAN General Secretary, Comrade Lumumba Okugbawa, had written the firm, demanding immediate reinstatement of their sacked members or face industrial action.

    In the letter copied the Ministers of Labour and Employment and Petroleum Resources (State), as well as Nigerian National Petroleum Corporation (NNPC) Group Managing Director, Group General Manager, National Petroleum Investment Management Services (NAPIMS), Chief Executive Officer, Neconde and relevant officials of PENGASSAN, the association demanded the reversal of the sack by Neconde within 72 hours or face shut down of operation.

  • Fashola chides estate valuers, seeks valuation synced with economic realities

    Fashola chides estate valuers, seeks valuation synced with economic realities

    Is the current valuation of land and properties across the country reflective of economic realities?

    This was the poser for estate surveyors and valuers at the inauguration of the reconstituted Estate Surveyors and Valuers Registration Board of Nigeria (ESVARBON)  in Abuja, last Monday, by the Minister of Power, Works and Housing, Mr. Babatunde Fashola.

    “For me, I think the most important lessons that I like to share at this inauguration is to pose the question to you whether the current land evaluation system and values are consistent with the realities of our economy. Are these values consistent with reality? Why are we not seeing rates and rents and values drop? Why are we having many houses unoccupied where people are looking for accommodation? You, as experts, must answer that question,”  Fashola again asked the professionals at the gathering.

    According to the former Lagos State governor, in a very challenging economy where cash is clearly tight, can it be said that the market value of properties are really responding appropriately?

    The minister noted that since the global economy recessed or slowed, property owners in some other climes are offering  discounts  on their properties to ensure optimum occupancy. He, therefore, wondered why the reverse was the case in Nigeria, whose economy is being greatly challenged by tight capital.

    “It has always been the argument of property owners in the country that the properties were valued higher so they could have an “impact on percentages and commissions”. But I urged you as professionals and practitioners in the domestic property market to take a cue from your counterparts and other property sellers in the United Kingdom, who, because of BREXIT, began to offer discounts on properties to the citizens,” he advised, urging the practitioners to learn from the stock market and how markets react to policies.

    The minister explained that many years ago the domestic Stock Market was immune to policies, but today Nigeria’s Stock Exchange ranks with some of the best in the world because it reflects the realities of the country’s economy in many respects.

    He said one of the areas where Nigeria’s Ease of Doing Business ranking could improve was in the area of real estate valuation, “especially how to develop a harmonised code of charges”.

    “We had this problem back at state level where we found out that we were  charging about 10 per cent gross on fees and taxes while other countries close to us were charging one and two per cent. But the truth was that the values were not real,”he said.

    He, therefore, urged the the new board of ESVARBON to ensure that the disparity between the country’s land evaluation system and the current economic realities are reconciled. Besides, the estate valuers were also advised to develop an open evaluation for different parts of the country as well as evolve means of making estate valuation simple enough and responsive to the man on the street.

    He said other countries have evolved property calculators with which it only takes indexing a property owner’s location and that of his property to have a fair value of what his asset is worth.

    “So I will like to see, therefore, that as you take up the mantle of leadership today after inauguration, these are issues that I think you should put into the front burner agenda in terms of how you regulate the practice and also  the quality of people that you admit to the practice,” Fashola urged regretting that customer is clearly not the king, even with his money, in the domestic real estate transactions.

    He nonetheless extolled the virtues of the profession, saying that they are of significant importance to the economic growth of a nation. This, he said, is because they undertake the business of how land is turned from being a dormant asset into a valuable asset; thereby putting value on land.

    “This is why the Ministry of Power, Works, and Housing employs a number of Estate Valuers, considering that whether we are building new roads and there is a need to acquire Right-of-Way, or sometimes have to pay compensations, estate valuers are needed to value the land and properties involved.

    “For instance, some estate valuers have been incorporated into the Power sector for the development of the Mambila Hydro Power Dam. This is in the area of assessing the land that is needed and ultimately quantifying same for compensation to be paid. Others have also been employed for new Transmission Company of Nigeria (TCN) where the Ministry has to acquire Right-of-Way for its transmission lines.

    “All of those ,who are involved in one form of enterprise or the other must first of all appreciate the value of land as a major capital formation asset; whether it is for small businesses, large corporations, markets or motor parks. I can’t really think of a business that one wants to undertake where land is not a critical part whether it is just to own a small office or a small kiosk where you can sell very basic things, even to roast corn,” Fashola explained.