The Nation Newspaper

Tag: sector

  • Strings of misfortune hit sector

    Strings of misfortune hit sector

    The outgoing year has been challenging for the petroleum industry. It recorded slow growth, following a dip in operators’ revenue, among other issues, writes AKINOLA AJIBADE 

    The oil and gas sector faced major challenges in the outgoing year. These ranged from the crisis in the global oil market – the fall in the international spot prices of crude oil to many local problems that have their roots in inequity in oil wealth distribution, resulting in militancy, especially in the oil producing areas of the Niger Delta.

     

    Fall in crude oil price

    The volatilities in the global oil market and the subsequent fall in the prices of crude oil is affecting Nigeria and other members of the Organisation of Petroleum Exporting Countries (OPEC).

    Being an oil-dependent nation, as its derives more than 70 per cent of its earnings from crude oil exports, Nigeria was hard hit by the crash in crude oil prices globally.

    The issue delayed the implementation of the 2016 Budget, as the Federal Government struggled to get money to execute fiscal projects.

    Also, it was the inability of the government to arrive at oil price benchmark, that is appropriated for the budget.

    The issue generated controversy, a development, which made the government to settle for $38 per barrel, as oil price benchmark for the 2016 Budget.

    Amid this, the government struggled to raise money to finance the budget, as international prices of crude oil dropped further.

    With crude oil price falling as low as $28 per barrel in the second quarter of the year,  stakeholders  said the  country is in for a big problem.

    The Ministry of Finance, in its report for August, said the weakening revenue and  the low oil  output, have compounded the problems in the country.

    According to a data from the Nigerian National Petroleum Corporation (NNPC), oil production was below two million barrels per day for the greater part of the year.

    It said the prevailing oil production level in the country, coupled with the low crude oil price, which at a point, fell to $28 per barrel, has negatively impacted on the government’s earnings and its capacity to implement many of its fiscal programmes.

    NNPC said the low crude oil output was as a result  youth restiveness in the Niger Delta  region and its accompanying breaking of oil pipelines owned by multinational oil companies such as Shell, Agip and others.

    Minister of State for Petroleum Resources, Dr Emmanuel Kachikwu, said the government has put in place measures to improve crude production and further boost the economy.

    He said the government was providing a conducive environment for operators to enable the industry achieve optimal level and further boost the economy.

    Kachikwu said: ‘’For most part of 2016, especially the third and the fourth quarter of the year, there was increase in the number of oil and gas pipelines bust by the militants in the Niger Delta region. It is regrettable that these things are happening in the country, where the development of oil and gas assets and other national assets should have been given enough consideration by its people.‘’

    He said the effects of destruction of oil facilities were visible in the region, adding that it boasts of 90 per cent of crude oil, which Nigeria relies on for sustenance.

    Also, a former Country President, International Association of Energy Economists (IAEE), Prof Wunmi Iledare, said oil production and exploration activities was reduced to a abysmal level in the year, because militants refused to stop bombing oil facilities in the Niger Delta.

     Niger Delta Avengers (NDAs) The self-styled militant group paralysed activities in the region, by breaking major oil and  gas installations  in the region. The body, which prided itself as fighting for the interest of the oil-producing region, destroyed facilities belonging to Shell, Agip and other International Oil Companies (IOCs) producing in the area.

    The facilities were of immense value to the nation’s oil and gas industry, such that any attack against them, would affect power generation and other activities in th value chain.

    The group did not only claimed responsibilities for the destruction of Escravos terminal and other facilities in August this year, but also threatened  to break more facilities before the end of the year.

    Transmission Company of Nigeria(TCN) Managing Director, Mr Abubakar Atiku Tambuwal, while assessing the performance of the oil and gas sector, said the industry would have performed better, if not for the activities of militants, who break the oil pipelines.

    He said the destruction of Escravos terminal was affecting activities in the petroleum and allied sectors of the economy.

    He said the bombing  of Escravos terminal, by the militants was affecting the sector greatly.

    He said the facility, owned by Shell Petroleum Development Corporation(SPDC), provides gas to Afam power plant, adding that the bombing of the facility by the militants, is hindering supply of gas to the plant.

     

    Shortage of gas

    The perennial gas problem has resulted in poor power generation in the country.  Like a recurring decimal, the issue of shortage of gas reverberated throughout the year, causing  untold damages to the power, manufacturing and other sectors of the economy.

    Tambuwal said power generation peaked at 5,000 megawatts (Mw) of electricity in February this year, because power companies were able to access gas for production unhindered.

    He said generation has in the past few months, dropped to a little over 2,5000 megawatts(Mw) of electricity from 5,000 megawatts(Mw) of electricity,  because power firms were unable to access gas for generation.

    He said: ‘’For sometime bow, power generation has been fluctuating between between 2,000 megawatts (Mw) of electricity to 3,000 megawatts (Mw) of electricity. The reason is because militants have broken many gas pipelines, a development, which has made it difficult for power firms to access gas for operation.’’

     Power sector crisis

    The nation’s power sector was troubled by high technical losses, inability to recover cost, vandalism, obsolete equipment,  huge debts, caused by failure of customers, especially Ministries, Departments and Agencies(MDAs), to pay their bills,  and loss of jobs, a fallout of cost-saving measures adopted by the power firms.

    Association of Nigerian Electricity Distributors(ANED) Executive Director,  Mr Sunday Oduntan, said the sector was enmeshed in crisis.

    In his presentation ‘Getting the power sector right to boost productivity’, at a stakeholders summit in Lagos, he said the sector was facing some challenges that had made it unable to play its role as the engine of growth and job creation.

    According to him, “The electricity supply chain still remain comatose, the promised increased generation and reliability as part of privatisation –has not happened; generation continued to hover around 3,000 and 4,000Megawatt; energy theft and meter bypassing are very rampant; and shortage of meters.

    He said Ministries, Departments and Agencies (MDA) are owing the power distribution companies (DisCos) N100billion debt, adding that the liquidity gaps of the energy distribution companies would hit N900billion before this December, unless urgent steps are taken by the operators, to improve funding in the sector.

     

    Subsidy removal

    Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, said the Federal Government is saving N16.4 billion monthly for removing fuel subsidy. He said the government would have been paying the money to offset the subsidy claims of oil marketers had it not taken the decision to remove the subsidy on petrol.

    He explained that at the time the government made the decision, it was incurring about N13.7 as subsidy on each litre of petrol bought by Nigerians.

    Kachikwu said: “There is no provision for subsidy in 2016 appropriation. As of today, the PMS (petrol) price of N86.50 gives an estimated subsidy claim of N13.7 per litre, which translates to N16.4 billion monthly. There is no funding or appropriation to cover this.”

     Fuel scarcity

    Long queue returned to the fuel stations nationwide in March and May 2016, due to inability of marketers to import bring in enough fuel to complement, whatever the Nigerian National Petroleum Corporation (NNPC) is supplying the market.

    Fuel scarcity continued to June, when the Federal Government introduced the new pump fuel price of N145 per litre. As usual, individuals and private entities were counting their losses, a development which made the labour  unions to threaten to go on strike.

    Manufacturers Association of Nigeria (MAN) President, Dr Jacobs said the country  lost several billions of naira to the fuel scarcity early in the year, adding that the issue has compounded the woes of his members.

     Flexible exchange rate

    The implementation of a flexible exchange rate policy by the Federal Government, is a blessing to fuel importers. Introduced to enable importers source for dollars from multiple windows and further ease the burdens on them, the idea has assisted marketers to import fuel into the country.

    The Independent Petroleum Marketers Association of Nigeria (IPMAN) National President, Chief Chinedu Okoronkwo, said marketers, as a result of the policy, were getting enough dollars for fuel importation.

    He said activities of marketers and other operators at the downstream sub-sector of the petroleum industry has improved in the year, following the decision of the government to liberalise the forex market.

    He said the industry can now meet its daily 40million litres target, without any problem, adding that the forex policy has improved the operation of the industry.

  • Sector still ‘green’ despite slow growth

    Sector still ‘green’ despite slow growth

     Faced with dwindling oil revenue, the nation is gradually returning to agriculture. In the outgoing year, many states collaborated in agricultural ventures, which are now yielding dividends. DANIEL ESSIET writes.

    It was another tough year for the economy.

    Economic growth was slower.  The main reasons for the relative slow down are not unique to Nigeria.The economy suffered from dwindling oil price, slowdown in infrastructural development, stagnation in improving power supply and higher borrowing costs involved in seeking funds for development.

    Notwithstanding, the agriculture sector offered attractive business opportunities, such as high-value products for domestic markets, aquaculture, vegetables and agro commodities, for the international market. There have also been successes in traditional crops with new demands.

     

    Lagos-Kebbi Rice Project

    Lagos and Kebbi state governments went into a partnership aimed at enhancing food security as well as boosting agro-economic activities in the two states. Specifically, the deal is geared towards improving rice production.

    The project has yielded results with bags of Lake rice rolled  out to Lagosians at N12,000 per 50 kg towards the Yuletide celebrations. Lagos State Governor, Mr. Akinwunmi Ambode and his Kebbi State counterpart, Alhaji Atiku Bagudu launched the much-anticipated Lagos-Kebbi Rice christened LAKE RICE, saying that the partnership which culminated into the launch was not only designed to ensure food security but showcase the ability of Nigeria to become a producing nation.

    Sales of the rice  were  made at all the 57 Local Government Areas (LG >?>?./ ./ As) and Local Council Development Areas (LCDAs) in Lagos to ensure proper distribution.  Part of the agreement is the establishment of a modern and commercially viable rice milling complex to be located in Lagos, with the capacity to process and mill 20 tonnes of rice per hour just as the finished product would be known as ‘Laskeb’ rice. Already, Kebbi has become a rice hub with the bountiful harvest recorded by farmers during this year’s dry season rice farming.

    Kebbi State has become a new haven to conventional, local millers and rice traders from Sokoto, Kano, Zamfara, EbonyI, Lagos, Maiduguri, Niger and other parts of the country. Also, it has continued to witness the influx of rice buyers from Niger Republic, Benin and other neighbouring countries.

     

    Sector’s Policy

    In August, the Federal Government inaugurated a roadmap for the agriculture sector, tagged: “The Green Alternative: Agriculture Promotion Policy, 2016-2020.”

    The Minister of Agriculture and Rural Development, Chief Audu Ogbeh, said the vision was to revive agric sector to boost food production in the country.

    According to Ogbeh, the policy will serve as the new fulcrum for economic diversification, inclusive growth and sustainable development in agric sector.

    “The launch of the `Green Alternative’ is an attestation that the change that the overwhelming majority of Nigerians canvassed and openly welcomed by giving Muhammadu Buhari a resounding victory in the last presidential election is here. “In this policy, you will see us navigating through the agricultural terrain, trucking on virtually every aspect, we launched on the human element.

    “We will reflect on years of neglect where agriculture was seen as a refuge for the wretched and unsophisticated,” Ogbeh said. The minister explained further that the emphasis on ”Green” would capture the essence, spirit and orientation of the new policy/strategy document. “The emphasis on green is deliberate; it is to underscore, not only the imperative of building a strong, vibrant and resilient economy, but also a green refreshing, generating, transformative-agriculture-led economy.

    “It is to ensure mutual complementary between efficient, effective and productive agricultural production, system and processes on one hand and environmental sustainability,” Ogbeh said.

    He stated that the policy had five major strategic driving forces namely, achievement of self-sufficiency and sustainable food security, reduction in import dependence and economic losses, particularly through value addition.

    Other, he said, were stimulation of agro-exports for enhanced foreign exchange earnings, enhancement of wealth and job creation, especially provision of employment opportunities for the teeming youths. The minister also said achievement of economic diversification to make the economy less oil-dependent was among the driving forces of the green policy.

    Ogbeh said that through the policy, farmers would have access to land, soil fertility, information and knowledge, inputs, production management, storage, processing, marketing and trade, including access to finance.

    Others are promoting agribusiness and ensuring investment development, institutional setting and roles, youth and women, infrastructure, research and innovation and nutrition security.

    Ogbeh conceded that the times were hard and that there is severe shortage of food, noting that Nigeria imports much of its food.

    Identified as likely to hinder policies put in place, are the menacing activities of herdsmen, that is slowly spreading all over the country, and Ogbeh disclosed that his talks with the Ministry of the Interior is to set up a unit in the Civil Defence Corps dedicated to guarding investments in agriculture.

    Ogbeh believes the permanent solution to this menace, is paddock development or ranching which  will put the cattle to pasture and ensure that herdsmen are curtailed  from roaming and can pay tax.

     

    Sector exports

    The development of export-oriented agriculture in Anambra ,was also one of the key developments  leading sector growth and diversification efforts. Across the country, there were a number of large-scale irrigation infrastructure projects that are quickly expanding irrigated land. Increased domestic consumption, exports and investment have led to consistent sector growth over the last six months.

    Diversification efforts by large agro-exporting companies have seen the rise of a few promising crops that are quickly climbing to the top of the country’s export list. These include vegetables, food stuff, cashew and cocoa.

     

    Growth drivers

     

    CBN Anchor Borrowers Programme

    True to his promise that he would revive agriculture by building on the policies of the past administration, President Muhammadu Buhari demonstrated the Federal Government’s commitment to agriculture by kicking off dry season rice and wheat farming in Kebbi State and also launching the N20billion Anchor Borrowers’ Programme (ABP), which the Central Bank of Nigeria has set aside for rice farmers across the country.

    The Anchor Borrowers’ Programme is an initiative of the Central Bank of Nigeria (CBN) aimed at creating an ecosystem to link out-growers (small holder farmers) to local processors. Central Bank of Nigeria Governor, Godwin Emefiele, said the Anchor Borrowers’ programme was designed to create economic linkages between farmers and processors, not only to ensure the output of rice and wheat, but also to bridge the gap between production and consumption.

    “Over 200,000 rice and wheat farmers will benefit from the scheme ranging from N150,000 to N250,000 to assist in procuring necessary agricultural input,’’ he said.

    In Imo State,the programme helped to bring down the price of rice. A 50kg bag of local rice sold for  N13,000 in some states that have embraced the Anchor Borrowers Programme.

    The Central Bank of Nigeria (CBN) ratified the disbursement of about N75 billion as loan to farmers in the 36 states and the Federal Capital Territory (FCT) under the  aegis of Nigerian Incentive-Based Risk Sharing in Agricultural Lending (NIRSAL).

    The Head of NIRSAL Project Implementation Office under the Development Finance Department of the CBN, Jude Uzonwanne, explained that the guarantee would be issued to farmers through commercial banks and other financial institutions.

    “NIRSAL is a flexible financing tool designed to change the behaviour of financial institutions and would mobilise financing for Nigerian agribusiness by using credit guarantees to address the risk of default,” he said.

    Uzonwanne also noted that the programme was created to provide access to finance to farmers by consolidating end-to-end agriculture value chains, such as input producers, farmers, agro dealers, agro processors and industrial manufacturers with agricultural financing value chains – loan product development amongst others.

    “The integration is driven by NIRSAL’s five pillars, particularly the Risk Sharing Pillar and the Technical Assistance pillars, such as Risk sharing Facility, allocated 45 billion, Insurance Facility (4.5 billion), Technical assistance facility (9 billion), Agricultural bank rating scheme (1.5 billion), and Bank incentive mechanism (15 billion).The loan guarantee scheme is a public-private sector plan initiated by the apex bank, the Bankers’ Committee and the Federal Ministry of Agriculture and Rural Development, to guarantee 75 per cent loans provided by Deposit Money Banks (DPB) to farmers as part of efforts to revitalise  the country’s agricultural sector.

    The Sultan of Sokoto, Alhaji Muhammadu Sa’ad Abubakar 111, praised the Anchor Borrowers’ Programme (ABP) of the Central Bank of Nigeria (CBN).

    Speaking at the kick off of the dry season wheat farming and distribution of wheat seeds as well as other farm input to farmers under the Anchor Borrowers’ Programme in Isa Local Government Area of Sokoto State, the Sultan appreciated the CBN for making the dry season farming possible with its support of funds for the programme, saying that the bank’s commitment is worthy of celebration.

    Abubakar maintained that the  Programme is key to ensuring food security for the nation. The monarch enjoined farmers to continue to be diligent in their farming as oil will only provide funds but will not put food on the table.

    Speaking further, the Sultan said there was need for partnership between governments at all a level to evolve solution to end the farmers and herdsmen crisis.

    But farmers said the programme needs reforms to achieve more inclusive growth to reduce poverty and boost shared prosperity.

     

     Tomato scarcity

    The Tuta Absoluta pest is a leaf moth that burrows into the fruits and stems of the tomato plant causing enormous food loss  invaded tomato farms this year.

    The Federal Government moved into action and proffered solution to the menace.

    The Ministry of Agriculture and Rural Development worked with Agronet, representatives of Russell, United Kingdom(UK) experts in Tuta Absoluta containment. The intervention programme involved containment packs for 50,000 hectares to be used by tomato producing states, capacity development on the containment solution, surveillance and monitoring in all 774 Local Govt. Areas.

    The Federal Government  partner ed states and local government areas to ensure a containment of pests and enable farmers to continue sustainable production of the fruits for local consumption and provide raw materials for processing.

  • We’re working towards private sector-driven economy, says President

    We’re working towards private sector-driven economy, says President

    The Presidential Enabling Business Council, approved by President Muhammadu Buhari, will work in with a private sector-led Enabling Business Environment Secretariat (EBES) to develop action plan for the implementation of reforms in the nation’s business environment.

    Buhari stated this in a message to the opening of the 37th Kano International Trade Fair, saying the Federal Government recognised the fact that the economy required a private sector-driven approach for sustainable growth.

    The President approved the Presidential Enabling Business Council, chaired by Vice President Yemi Osinbajo, to provide strategic direction and political will for reforms and action plans to remove bureaucratic bottlenecks and facilitate procedures for business and property registration, taxation, export and import documentation among others.

    “As a government, we are mindful of the fact that the kind of economic growth that Nigeria requires is one that is driven by the private sector, with the government acting only as an enabler and cheerleader; creating and implementing policy initiatives that would enable you – investors, traders, entrepreneurs, SMEs – to operate at maximum potential and create economic value, for yourselves, and for the people and government of Nigeria,” he emphasised.

    Represented by the Minister of Industry, Trade and Investment Dr. Okechukwu Enelamah, the President maintained that while his administration will attract foreign investment through a number of incentives, it was aware of substantial investible funds within the country, and will encourage such funds to be channelled into investment and enterprise.

    He reiterated that the government would restructure the economy away from dependence on oil and gas revenues to agriculture, oil minerals, manufacturing and Information and Communication Technology.

    Kano State Governor Dr. Abdullahi Umar Ganduje, who was represented by his deputy, Prof. Hafz Abubakar, hailed the Federal Government for working to create a favourable business climate in the country.

  • ‘Power sector revenue loss may hit N809b’

    ‘Power sector revenue loss may hit N809b’

    Should the lull in power supply persist, the sector’s revenue loss will be about N809.8 billion by next January, the Executive Secretary, Association of Nigerian Electricity Distributors (ANED),  Sunday Oduntan, has said.

    Besides, payment for electricity bills has fallen substantially as only 35 per cent of consumers pay   yearly.

    The loss in revenue was caused by problems, such as non-payment of bills by consumers and failure of the power distribution companies (DisCos) to pay the power generation companies (GenCos) in time,  among others.

    The Nation gathered that the sector loses between N10 billion and N15 billion to a wide range of   industry problems, such as pipeline vandalism, low level of water at the hydro power plants, erratic power supply, and inability of the consumers to pay their bills, among others.These problems have contributed to the erratic power supply in the country.

    Oduntan in a telephone interview with The Nation said the sector would be losing N809.8 billion by January, next year, if there is no improvement in the operation of the industry.

    He said the sector had recorded a shortfall in liquidity of N383.2 billion between 2013 and 2015, adding that the figure would increase as Nigeria’s economy continues its abysmal performance.

    Oduntan said: “Between November 1, 2013, when the new investors took over the unbundled assets of the Power Holding Company of Nigeria (PHCN) and December 2015, the sector lost revenues of about N383.2billion. This is the loss recorded by the sector in two years. This is lower than the total loss of N809.8 billion, which the industry will incur between December 2015 January 2017 if the industry continues to grapple with its problems.

    He said losses accruing  to the sector were substantial, adding that it would be difficult for the industry to recover the loss soon going by the numerous challenges facing it.

    According to him, the power generation companies, the electricity distribution, and others at the value chain, have suffered losses. He stated that the loss in revenue would continue if urgent steps are not taken by the Federal Government to improve the operating environment.

    Oduntan also said 30 per cent of the electricity consumers pay their bills yearly, stressing that the issue has impacted negatively on the operation of the sector.

    He said: “Consumers on average pay N2,000 out of N5,000 monthly bills DisCos have charged them. Cases abound where many consumers do not pay anything.  A research conducted by the association shows that less than 40 per cent of consumers in Nigeria pay their energy bills. The issue has further compounded the woes of the power firms and the economy in particular.”

    The industry, Oduntan said, is battling liquidity problems following the loss in revenue recorded in the past five years. He explained that the problems in the sector are in stages because they do not come once, stressing that the operators are badly affected.

    Also, the Chief Executive Officer, Frontiers Oil Limited, Mr. Thomas Dada, said the loss cuts across every aspect of the sector. He said gas suppliers are counting their losses too due to problems in the industry.

    He explained that pipeline vandalism has ripple effects on the sector because every operator in the value chain is affected by the development. “Both the producers and suppliers of gas used in generating electricity have lost huge revenues to pipeline vandalism. Whenever pipelines are vandalised in the Niger Delta region, producers and suppliers of gas count their losses. On several occasions, they incur double losses while trying to stay in business,” he said.

  • Reviving the textile sector

    •Problems beyond funding; govt must address power and other challenges

    At a Cotton, Textile and Garment (CTG) forum in Abuja, the Bank of Industry’s (BoI) acting Managing Director, Waheed Olagunju, gave what amounted to an update on the status of the funds created by the Federal Government and the Central Bank of Nigeria (CBN) to provide a breather to the ailing sector.

    Among the highlights, he disclosed that the bank had approved loans for 70 projects in the CTG value chain totalling N60billion under the initial N100billion textile revival fund instituted by the Federal Government in 2009. This, he explained, is aside the N50billion fund made available by the CBN as part of the latter’s efforts to promote the development of the textile and garment sector, of which the bank had also disbursed N13.37billion to various beneficiaries.

    He also spoke of yet another N50billion special intervention facility to facilitate the takeover of the existing debt as well as provide additional long-term loans and working capital to existing companies in the CTG sector, of which a total of N24.37billion has been disbursed to the various beneficiaries as of September 30. Olagunju also spoke of capacity utilisation of some of the beneficiary companies, which he said had increased from 40 per cent to about 60 per cent; ditto employment, said to have hit 60,000 across the industry.

    We consider it heart-warming that both the Federal Government and the apex bank have remained steady in their resolve to help the sector turn the corner. Considering the vital role of the sector in generating mass employment (it once reportedly provided three million direct jobs from cotton production to the weaving, spinning and printing of textile materials), and to help reduce the huge foreign exchange outlay spent on imported textile materials, the sector obviously deserves all the attention that the Federal Government can give it, particularly at this time.

    Overall, the picture painted by the BoI chief is that progress is being made in very important segments in the value chain. In other words, a lot of grounds have been covered in getting some of the operators to refurbish their obsolete equipment, refinance existing debts to get them back into production. Considering that the sector still has a long way to go to recover its verve, the least we can do is urge the apex bank and the BoI to maintain the course.

    Yet, as important as the measures are, we also recognise that the problems of the industry are multifarious and complex. Today, it’s been more than six years since the Obasanjo administration launched the initiative to revive the sector. Six years on, it is largely correct to state that not much was done to tackle the problems that took the industry down the slope even when officials have been known to talk glibly of the potential 600,000 jobs and annual revenue of $2billion to be generated from a revamped textile sector.

    The result is that these problems have not only persisted, new forms have since manifested creating a climate that can only be described as inhospitable and non-competitive, hence, we continue to talk of the terrible state of the nation’s infrastructure, particularly electricity, and how that impinges on the cost of doing business; the problem of multiple taxation that has remained a thorn in the flesh of all businesses; the smuggling of cheap textile materials – a sure killer for the local textile firms – and no less, the humongous cost of the failure to organise our cotton growers and hence harness the gains of backward integration.

    It is high time the Federal Government confronted these problems headlong. One sure way to do that is to give practical expression to the quest for local content by massively patronising local textile firms until they are able to compete. This seems to us one sure way to boost employment and to reduce the poverty now prevalent, particularly in the North, where textile industry once served as the backbone.

  • Over 4,000 jobs lost in steel sector in two years

    Over 4,000 jobs lost in steel sector in two years

    From 2014 till date, over 4,000 workers in the steel sector have lost their jobs, and many companies have closed down due to economic hardship in the sector.

    At the Steel and Engineering Workers’ Union of Nigeria (SEWUN) 2016 Annual Industrial Relations Workshop in Benin, Edo State, Its president, Comrade Elijah Adigun, said there was no company in the sector that has not engaged in one form of downsizing of workers or the other.

    According to him, the only reason for the redundancy was the scarcity of Foreign Exchange (forex) to import raw materials.

    “You will recall that in my address last year, I reported happenings within our sector in terms of failure of privatisation programme by the Federal Government that sold government’s shares in these industries to non-core investors, thereby rendering the very essence of privatisation totally useless. As we speak, none of these sold government agencies has made any progress,” Adigun said.

    Adigun said the situation had forced many companies to either downsize or shut down.

    “The unemployment situation is seriously bad, yet the government is appealing that they share our pains as if that will bring food to the table. What we need now is massive job creation and not empty slogan that appeals to nobody,” Adigun said.

    He pointed out that no meaningful success wouls be recorded in a country where the national minimum wage was N18,000, adding that no worker can survive with such meagre salary.

    “Government should, therefore, diversify the economy; create massive job opportunities for the army of unemployed youths with a living wage that will distract them from seeking alternative corrupt sources of income to make ends meet,” Adigun recommended.

    The General Secretary of the Union, Comrade Michael Ogbolu, said the union was against the sale of government’s assets, arguing that it will lead to the death of most of the organisations.

    “We are all living witnesses when the previous administrations privatised some wholly and partially owned Federal Government companies, while assuring Nigerians that the programme would lead to increased capacity utilisation aimed at creating jobs for our teeming workforce.

    “Instead, the programme led to the death of most privatised companies, because the companies were sold to entrepreneurs without expertise to manage the companies sold to them,” Ogbolu recalled.

    He said a good example  of the charade was the sale of Steyr Nigeria Limited, Bauchi; Leyland Nigeria Limited, Ibadan; National Trucks Limited, Kano; Volkswagen Nigeria Limited; among others.

    “Having successfully squandered the proceeds of sales of privatised companies and plunged the nation into recession, the same people are flying the kite to sell part of our remaining national assets such as the performing Nigeria Liquefied Natural Gas (LNNG).

    “We wish to call on the conference in session to as a matter of necessity endorse the wise resolution of the labour community to embark on protest should the Federal Government  persist to nurse the dream to further sell part of our performing national assets, as ordinary Nigerians including workers will bear the brunt of the aftermath,” Ogbolu said.

  • Forex, oil price slump cripple downstream sector

    The inability to access foreign exchange (forex) and the lingering crude oil price slump have been the major challenges facing the downstream subsector of the petroleum industry, the Chief Executive Officer, OVH Energy Marketing Limited (formerly Oando Marketing Limited), Yomi Awobokun has said.

    Awobokun stated this while fielding questions from reporters during the formal presentation of name change of Oando Marketing Limited to OVH Energy Marketing Limited in Lagos yesterday.

    He said OVH represents the new shareholders of the firm comprising Oando, Vitol and Helios. Although the corporate name has changed, the products of the firm are licensed to be marketed as Oando in order to sustain the Oando heritage and entrepreneurship.

    Awobokun said: “All the shareholders agreed that a name change will boost the capacity of the company but to sustain the Oando heritage and entrepreneur OVH is licensed to market its products as Oando. Our intention is grow our reach stabilise prices and supplies and add value to our shareholders.

    “The major value of this partnership is that it enabled access to capital by Oando. The downstream has been going through significant challenges including the unavailability of forex, drop in crude price and as a result of the entire externalities the economy is going through. The future leaders of this industry are those that are able to access capital. So the best of the deal is that it puts Oando to access capital and ensure supply. The partnership puts us in good stead to dominate the market.”

    On the allegation of sale of off-spec fuel, he said the report was malicious because it was very difficult for any marketer to import off-spec and it would be an international non-governmental organisation that would discover that.

  • Private sector participation in education is key’

    Private sector participation in education is key’

    Mr. Adolphus Abraham is the Group Head, Education of Sterling Bank Plc. In this interview with our reporter, Abraham highlights the various challenges in the education sector and what Sterling Bank is doing to remedy the situation

    How would you describe the state of education in Nigeria at the moment and what do you consider the major challenges facing the sector?

    To put it succinctly, I would say that the industry is decrepit and at the same time, emerging. Decrepit when you consider the challenges but emerging when you look at private participation and the volume of investment being made.

    One is dearth of Infrastructure! There are also the challenges of systemic decay of values, dearth of manpower, obsolete learning methodology, unnecessary bottlenecks for new entrants, misplaced priority on the part of industry players, lack of continuity and consistency of policy, weak regulation and control, extinction of skills training for players and weak financial system to adequately support the sector. Indeed, government should increase the budgetary allocation to the education sector to enable it attain the 26 per cent set by the United Nations Educational, Scientific and Cultural Organisation (UNESCO).

    Take budgetary allocation to education between 2010 till date for instance. In 2010, the budget was N234bn. It was 306bn in 2011 but in 2014 and 2015 it jumped to N493bn and N492bn respectively. These figures seem interesting but when you compare them to the budget size, you will be shocked to see that we contribute less to education on a yearly basis. In 2014, allocation to education accounted for 10 per cent of the total budget, while in 2015 it dropped to 6.2 per cent due to the disproportionate income in budget allocated to the sector.

    So where does the problem lie?

    Beyond government, there is a need for urgent intervention in the education sector by private sector operators because government cannot do it all alone. This is why we have decided as a bank to focus on the sector.  Sterling Bank’s intervention in the sector will help ameliorate some of the challenges.

    Over the years, youth unemployment has remained one of the daunting challenges in Nigeria. Recent statistics shows that over 25 million youths in the country are unemployed.  This abysmal statistic is linked to, among others, the issue of employability. Where jobs abound, the lack of competence to handle them arises. This problem can be attributed to the declining quality of education. This necessitated our foray into education as we too suffered the lack of employable graduates. We hope that not only do we contribute to reducing unemployment in white collar jobs but also to developing businesses for Nigerians.

    I would also urge that ‘capacity building’ be given conscious effort by concerned stake holders to develop themselves, imbibe the right attitude and paradigm shift in their value system. There is also the problem of service delivery which I should have mentioned earlier. Stake holders should be conscious of the manner with which they deliver service and the quality. Customers in this sphere are open to alternatives, both locally and internationally to satisfy their appetite for education. Consumers of educational facilities should also hold administrators accountable and demand quality.

    Recently your bank set up what it called ‘One Education’ desk or group as the case may be. Why did you venture into this business despite the enormous challenges?

    The involvement of Sterling Bank in the education sector is very strategic in the sense that our position is based on the outcome of various research conducted by the bank to determine the state of education in the country and areas that would require immediate intervention. There are two sides to education, the academic and the business sides. Most often, we concentrate on the academic side at the expense of the business. Our idea is to use the business orientation to drive the quality and delivery of academics. We have designed models to achieve this. It is not straitjacket. Every project has its own solution and this is driven by a thorough understanding of the problem or issue. Understanding the problem and adopting the appropriate solution is where we have strength as a bank.

    Let me say here that the federal and even state governments are doing their best to improve the sector. But government by its structure does not have the capacity to achieve the desired result. Don’t forget that government has a lot of other things to attend to. So it is our intention to introduce a unique model to support the various institutions including government to drive the quality and delivery of academics.

    What do you have to offer the sector?

    What we want to achieve for now is to make necessary impact by focusing on technology, content and personnel/ participants in the sector.

    It is worthy of note  that Sterling Bank is the first and only bank to publish two books on financial literacy for kids and teenagers which we distributed free to these set of children nationwide during the Global Financial Literacy Week two years ago. The second edition of the books was distributed to children during last year’s Financial Literacy Week and also this year nationwide. There is a need for institutions to promote financial literacy among students which would provide the foundation to understand the use and management of money ensure the child’s long-term financial security and equip them with  the ability to make informed and effective financial judgments.

    This is what we are doing at Sterling Bank. We take each group, either students or teachers and provide solutions that make their lives richer.

    Secondly, to help education providers manage cost and quality, we have built partnerships with technology providers for the sector. These partners are equipped to provide educational content, payment system, inventory management, security management etc. at lower costs than the schools are currently spending.

    Lastly, we have not left out the value chain. We are also determined to support publishers, bookshops, importers of educational materials, contractors, consultants to educational outfits to mention a few. Our package for the industry is holistic.

    What specifically have you been able to achieve so far?

    The One Education Group initiative is less than two years old. We have had to run a pilot to fully understand the business and the responsibility expected of us. So, in the few months of existence we can conveniently outline our achievements;

    They include: adoption of a public school for mentoring and infrastructural upgrade. We are going to be doing this annually. Every year, we will adopt a school. This year it was Ireti High School in Ikoyi and we have trained their teachers on financial literacy and a renovation of their Home Economics laboratory is ongoing.

    Second, we have established Financial Literacy Clubs in schools for free. Combined population of students is in excess of 10,000. We are signing on more schools this month as we build capacity of the trainers. Currently, all resources are sourced in-house.

    Third, we have deployed school management system and payment gateway for free to schools. We shall deploy more as we receive applications. The benefit of a web pay system cannot be overemphasised. They range from completeness and accountability of collections to proper documentation and quality service delivery in schools. It cost so much to deploy but we are giving it to schools for free!

    We have also partnered with one of our technical service providers to train over 1000 children during the last summer break on coding and computer skills. We are looking forward to owning a coding competition franchise.

  • Understanding the dynamics of real estate sector

    Is it possible to ask for the price of a Bentley in exchange of the quality of a Toyota? Impossible! Any sane person knows that. While many will consider this outrageous, it is indeed a stark reminder of the realities experienced in Nigeria’s real estate industry.

     As an avid property enthusiast, developer or an observer, you must have noticed the surge in the number of empty apartments in Ikoyi over the last few years. This disturbing phenomenon must have prompted the well-informed and educative research publication of economy watch, Financial Derivatives Company Limited, last week, which pointed out that “the number of vacant properties in the upper class real estate neighbourhoods of Lekki, Victoria Island and Ikoyi has risen by 72 percent over the last 18 months”.

    The padded cost of construction. Buyer Beware! This has become a motto on a whole new level for perceptive investors, who seek the much-deserved value for money. I can’t stress enough, the fact that the era of monkey dey work, baboon dey chop is long gone. To avoid drawing hasty conclusions and to guide our investment choices, investors should only listen to industry experts and verifiable perspectives as seen in the FDC research, and avoid the bandwagon of those listening to jaundiced opinions, which are quite popular.  For example, the fact that former UK Prime Minister David Cameron said Nigeria was ‘fantastically corrupt’, did not in fact mean each and every Nigerian was. Also, the fact that a few celebrities find themselves enmeshed in marital problems does not always mean that the marital life of every Nigerian is in danger. To put this more clearly, apartments that should not cost more than N100 million are costing investors N400 million to construct.  Therefore owners have no other choice than to let out the apartment at N40 million, transferring the padded cost of construction to tenants.

    ‘What’s the difference between the locally fried plantain bits sold in remote areas and its counterpart, the plantain chips sold in urban areas? Have you ever wondered why a good meal prepared in Ijebu Ode would cost less than one sold in Lagos? An estimated rental for an apartment in Ikoyi is about $80,000. The same apartment in Lekki would cost $30,000. What do you think makes the difference? VALUE – price, quality and location put together in the same place! If location is a fundamental principle in real estate, how much more luxury real estate?

    A developer who compromises on the quality of materials, no matter how highbrow the property’s location, has no right to place an exorbitant price on it. Thus, the argument for demand exceeding supply, as far as empty apartments in Ikoyi go, is unfounded.

    Luxury apartments are in high demand. Poorly finished buildings with exorbitant prices constitute the pile of empty apartments constantly being alluded to.

    During my interview on CNBC Africa, I once pointed out that luxury is not expensive. It is the intention to deliver luxury that is expensive. While the cost of a nice three-bedroom apartment in Johannesburg would go for about $350,000 the same apartment in Ikoyi would want $1M. If the cost of construction materials is the same all over the world, the price of marble, granite, cement, tiles, kitchen, doors paints etc, why is cost in Nigeria about 300% higher?

    A delicious meal requires a lot of money. You cannot offer a Toyota for the price of a Bentley. One might argue that both cars will eventually ply the same road but the efficiency and prestige of a Bentley speaks for itself. Luxury sells itself.   When you sell luxury, you sell peace of mind, you have not only sold something that would last for generations, but you win the heart of your client who now becomes your evangelist.

    With the oil price plummet and downtrend of major economies across the world, individuals and organizations no longer have loose money to throw around. And with the current downsizing by companies, prospective tenants demand full value for their hard-earned money.

    Nigerian developers must realise that times have changed. The ‘quick fix – quick gain’ syndrome has ended. Real estate developers who fail to understand that the current investors and real estate enthusiasts are upbeat about quality and finishing after having seen same from their travels around the world will soon fade away.

    If we desire to be the best and want to compete with foreign developers such as the Germans, Lebanese and Italians that have spent decades mastering their craft, we will need to raise our standards in the Nigerian construction market.  Or else, one day we would wake up to find all our apartments empty.

     

    • Ogundele, a real estate practitioner writes from Lagos.

  • Marketers hail deregulation of downstream sector

    The deregulation of the downstream oil subsector  is paying off as marketers are buying fuel from multiple outlets at prices.

    Independent Petroleum Marketers Association of Nigeria (IPMAN) National President, Chief Chinedu Okoronkwo said  his members have been buying fuel with ease from the Nigerian National Petroleum Corporation (NNPC) and private depot owners since the sector’s deregulation last May.

    He said due to deregulation, marketers were free to source for fuel at outlets or channels that benefit them.

    According to them, IPMAN members get premium motor spirit (PMS) from the Nigerian National Petroleum Corporation (NNPC) at N132.8 excluding the cost of transportation,  while those that are not satisfied with the NNPC price approach other importers and negotiate for a lesser price.

    Okoronkwo said: “The Federal Government through the NNPC was selling 30,000 litres of petrol to independent marketers at approximately N2.295million before it increased the price of fuel. Now the government sells 30,000 litres of petrol to marketers at approximately N3.99million. The differential is about N1.7million. Also, the government sells the product to us at N132. 28.

    “When marketers add the cost of transportation to it, about N10 per litre, depending on the distance, they sell at N145 per litre. Some marketers even sell at either N142 per litre or N143 per litre, and they make profit. That is the beauty of deregulation and by implication market forces.”

    According to him, the market is governed by the forces of demand and supply, and in the process, provides a flexible price regime for fuel marketers. The market, Okoronkwo noted, is structured in such a way that marketers can enter the market and exit the market anytime they like.

    He said contrary to reports, there was never a time the  Federal Government banned independent marketers from accessing depots for fuel, noting  that  the issue between the government and the his members has been resolved.

    “The issue of differentials is a normal thing in the industry. Whenever there is an official increase in the pump price of fuel, marketers would compare the old price and the new price and see the one that favours them. That was what happened when the price was increased to N145 per litre and that issue has been resolved as marketers have adjusted to the new price,” he added.