Articles
WHAT PRESIDENT TINUBU OMITTED IN HIS NATIONAL BROADCAST
Nick Agule
Email: [email protected]
X: @NickAgule
Facebook: Nick Agule, FCA
President Tinubu in his nati...
Email: [email protected]
X: @NickAgule
Facebook: Nick Agule, FCA
President Tinubu in his nati...
Date: 2024-08-05 Read More
WHAT PRESIDENT TINUBU OMITTED IN HIS NATIONAL BROADCAST
Nick Agule
Email: [email protected]
X: @NickAgule
Facebook: Nick Agule, FCA
President Tinubu in his nationwide broadcast following protests that have erupted in some parts of Nigeria put forward initiatives the government is working on to improve the economic situation in Nigeria which deserve commendation.
However, contrary to the President's belief that his decision to "remove fuel subsidies and abolish multiple foreign exchange systems" requires patience by citizens because the policies will ultimately yield positive results for the economy is flawed. Here is why:
1. Fuel subsidy removal - for so long as President Tinubu fails to address the refineries question and Nigerians continue to buy petrol at N700-N1000 a litre and more for diesel with routine products scarcity, even if Nigerians are patient for the next 3 to 7 years, the pains will not lessen. The only way this fuel subsidy policy will ultimately be beneficial is if the President takes operatorship of our 4 refineries from the NNPCL and hands it over to globally renowned private sector downstream operators who will fix the refineries and supply petroleum products at far cheaper prices to Nigerians. Government can maintain ownership of the refineries but so long as an obviously incompetent NNPCL is not the operator, things will change for the positive. Without reducing fuel costs, the initiatives announced by the President for digital skills, agriculture and other businesses may be hard to see through and citizens will continue to groan in agony from high transportation and production costs!
2. Abolishing multiple exchange rate systems - this policy which has crashed the value of the naira from about N450 to a dollar before May 2023 to about N1,600 to a dollar today thus making imports including food and pharmaceuticals very expensive and out of reach of most Nigerians will continue to perpetuate poverty on the citizens even if they are patient for the next 3 to 7 years except other policy measures are taken including boosting power supply which will ignite local production of goods and services to reduce dependency on imports, crash prices, create jobs and tame inflation.
3. Removal of electricity subsidy - for so long as power supply hovers around the 3-4kMW mark for 200 million people when it should be at least 100kMW, even if Nigerians wait patiently for the next 3-7 years, this reform will only generate hardship and poverty for the citizens! The only way this policy will be ultimately beneficial to Nigerians is if power supply is increased to at least 30kMW in the next 3 years. At the point of privatisation of telecoms, NITEL was supplying only 500k telephone lines thus making the cost of owning a telephone line to be very expensive. When the private sector (MTN & co) came onboard they have so far invested over $100bn to boost supply of telephone lines to over 200 million today and because of this huge supply the unit cost of owning a telephone line has crashed to almost nothing! The opposite is the case with the power sector privatisation where NEPA was supplying 4-5kMW and after privatisation instead of boosting supply we are rather down to 3-4kMW with national grid routinely crashing! It means the private sector operators especially the DISCOs have not invested much in the sector. Instead of the minister for power reading the riot act to the power sector operators to invest to boost supply, he is championing tariffs increase to generate enough revenue from only 3kMW to meet all the costs of these private operators! Imagine if MTN & co were to generate all their revenues from only 500k telephone lines that NITEL operated pre-privatisation, the cost of telephones will still be high and unaffordable! The President must accompany the electricity subsidy removal policy with decisive action by transferring TCN (starved of funding) to globally renowned private sector operators and re-awarding the DISCOs licences (currently held by hurriedly incorporated shelf companies that neither have the money nor the technical capacity to invest) to equally renowned global power sector distribution operators who will commit billions of dollars of investment to boost capacity! Digital and creative enterprises announced by the President need power. Same for technical talent scheme will do better too with sufficient power. Nano businesses can't survive without power. The business loans may be hard to unlock value and may remain unpaid if power supply deficit persists.
4. The President also needs to address other underlying economic drivers like security for farmers, agric mechanisation, railways, steel plants, domestic gas, road infrastructure etc. These are some of the pillars to build an economy upon. Without them we may try to build but the efforts won't go far enough!
5. The Govt does not need to provide these pillars by itself but create the enabling environment for the private sector to step in with billions of dollars of investments.
6. It's not expected that all these pillars will be in place within 14 months of the life of this administration but the processes to get them in place need to be kick-started in earnest.
7. In summary, President Tinubu must accompany his policy reforms on fuel, electricity, exchange rate etc with complementary policies that bring succour to the citizens else what is happening now is like the President performing surgery without anaesthesia! The patient (the economy and citizens) will most likely die on the operating table instead of getting better!
President Tinubu needs to know that Nigerians have been patient but the patience is fast running out because the pains are becoming unbearable! Policies to mitigate the sufferings must be activated urgently and only then will the patience of Nigerians be obtained. When you are hungry but there's evidence that food is being prepared in the kitchen, you are more patient! Nigerians aren't seeing action in the kitchen which is resulting in the impatience! The President and his cabinet need to get into the kitchen fast!
Nick Agule is a Nigerian citizen and public affairs analyst.
Email: [email protected]
X: @NickAgule
Facebook: Nick Agule, FCA
President Tinubu in his nationwide broadcast following protests that have erupted in some parts of Nigeria put forward initiatives the government is working on to improve the economic situation in Nigeria which deserve commendation.
However, contrary to the President's belief that his decision to "remove fuel subsidies and abolish multiple foreign exchange systems" requires patience by citizens because the policies will ultimately yield positive results for the economy is flawed. Here is why:
1. Fuel subsidy removal - for so long as President Tinubu fails to address the refineries question and Nigerians continue to buy petrol at N700-N1000 a litre and more for diesel with routine products scarcity, even if Nigerians are patient for the next 3 to 7 years, the pains will not lessen. The only way this fuel subsidy policy will ultimately be beneficial is if the President takes operatorship of our 4 refineries from the NNPCL and hands it over to globally renowned private sector downstream operators who will fix the refineries and supply petroleum products at far cheaper prices to Nigerians. Government can maintain ownership of the refineries but so long as an obviously incompetent NNPCL is not the operator, things will change for the positive. Without reducing fuel costs, the initiatives announced by the President for digital skills, agriculture and other businesses may be hard to see through and citizens will continue to groan in agony from high transportation and production costs!
2. Abolishing multiple exchange rate systems - this policy which has crashed the value of the naira from about N450 to a dollar before May 2023 to about N1,600 to a dollar today thus making imports including food and pharmaceuticals very expensive and out of reach of most Nigerians will continue to perpetuate poverty on the citizens even if they are patient for the next 3 to 7 years except other policy measures are taken including boosting power supply which will ignite local production of goods and services to reduce dependency on imports, crash prices, create jobs and tame inflation.
3. Removal of electricity subsidy - for so long as power supply hovers around the 3-4kMW mark for 200 million people when it should be at least 100kMW, even if Nigerians wait patiently for the next 3-7 years, this reform will only generate hardship and poverty for the citizens! The only way this policy will be ultimately beneficial to Nigerians is if power supply is increased to at least 30kMW in the next 3 years. At the point of privatisation of telecoms, NITEL was supplying only 500k telephone lines thus making the cost of owning a telephone line to be very expensive. When the private sector (MTN & co) came onboard they have so far invested over $100bn to boost supply of telephone lines to over 200 million today and because of this huge supply the unit cost of owning a telephone line has crashed to almost nothing! The opposite is the case with the power sector privatisation where NEPA was supplying 4-5kMW and after privatisation instead of boosting supply we are rather down to 3-4kMW with national grid routinely crashing! It means the private sector operators especially the DISCOs have not invested much in the sector. Instead of the minister for power reading the riot act to the power sector operators to invest to boost supply, he is championing tariffs increase to generate enough revenue from only 3kMW to meet all the costs of these private operators! Imagine if MTN & co were to generate all their revenues from only 500k telephone lines that NITEL operated pre-privatisation, the cost of telephones will still be high and unaffordable! The President must accompany the electricity subsidy removal policy with decisive action by transferring TCN (starved of funding) to globally renowned private sector operators and re-awarding the DISCOs licences (currently held by hurriedly incorporated shelf companies that neither have the money nor the technical capacity to invest) to equally renowned global power sector distribution operators who will commit billions of dollars of investment to boost capacity! Digital and creative enterprises announced by the President need power. Same for technical talent scheme will do better too with sufficient power. Nano businesses can't survive without power. The business loans may be hard to unlock value and may remain unpaid if power supply deficit persists.
4. The President also needs to address other underlying economic drivers like security for farmers, agric mechanisation, railways, steel plants, domestic gas, road infrastructure etc. These are some of the pillars to build an economy upon. Without them we may try to build but the efforts won't go far enough!
5. The Govt does not need to provide these pillars by itself but create the enabling environment for the private sector to step in with billions of dollars of investments.
6. It's not expected that all these pillars will be in place within 14 months of the life of this administration but the processes to get them in place need to be kick-started in earnest.
7. In summary, President Tinubu must accompany his policy reforms on fuel, electricity, exchange rate etc with complementary policies that bring succour to the citizens else what is happening now is like the President performing surgery without anaesthesia! The patient (the economy and citizens) will most likely die on the operating table instead of getting better!
President Tinubu needs to know that Nigerians have been patient but the patience is fast running out because the pains are becoming unbearable! Policies to mitigate the sufferings must be activated urgently and only then will the patience of Nigerians be obtained. When you are hungry but there's evidence that food is being prepared in the kitchen, you are more patient! Nigerians aren't seeing action in the kitchen which is resulting in the impatience! The President and his cabinet need to get into the kitchen fast!
Nick Agule is a Nigerian citizen and public affairs analyst.
PRESIDENT BUHARI WAS WRONG TO DISOBEY THE SUPREME COURT
By
Nick Agule
Email: [email protected]
17.02.2023
No nation develops and no human society functions wi...
Nick Agule
Email: [email protected]
17.02.2023
No nation develops and no human society functions wi...
Date: 2024-06-05 Read More
PRESIDENT BUHARI WAS WRONG TO DISOBEY THE SUPREME COURT
By
Nick Agule
Email: [email protected]
17.02.2023
No nation develops and no human society functions without the Rule of Law.
By the plan of God, man must be run with the law (re: Garden of Eden) and any nation that fails to run man by the laws will fail like Nigeria regardless of our prayers for Nigeria in distress!
There are often judgements of courts that we are unhappy with but instead of disobeying them its the reason there's the appeal process in the judiciary. If you don't agree with a judgement you appeal it not disobey it.
We are calling for anarchy to give free hand to people (the president inclusive) to disobey Court rulings/orders/judgements if they don't agree with them!
We often forget that the countries our young professionals are japa..ing to are running that good because of the rule of law! We can never have a country we will all enjoy and be proud of if we support disregard for courts as a routine...you can take this to the bank!
In fact all a Nigerian president needs to do each day at the office is to - enforce the rule of law - and Nigeria will become a developed nation in less than 10yrs! To therefore see the Chief Law Enforcer become the law breaker does so much damage to our fledgeling democracy!
The international community are watching our president ignore/disregard court rulings and they are watching us learned people support the president. They won't take us serious! No investor will want to bring their money into a country where the law is not supreme and court judgements are routinely flouted!
We have to look at the wider implications of these actions!
Already damage has been done to buying votes as most of the cash hitherto outside the banking system is already banked. The real issue now is that the CBN is not releasing the new cash and they should simply not do so until the elections are over! There's no point for the president to take us 100yrs back by disobeying the supreme court!
My humble submission.
Nick Agule
Email: [email protected]
17.02.2023
No nation develops and no human society functions without the Rule of Law.
By the plan of God, man must be run with the law (re: Garden of Eden) and any nation that fails to run man by the laws will fail like Nigeria regardless of our prayers for Nigeria in distress!
There are often judgements of courts that we are unhappy with but instead of disobeying them its the reason there's the appeal process in the judiciary. If you don't agree with a judgement you appeal it not disobey it.
We are calling for anarchy to give free hand to people (the president inclusive) to disobey Court rulings/orders/judgements if they don't agree with them!
We often forget that the countries our young professionals are japa..ing to are running that good because of the rule of law! We can never have a country we will all enjoy and be proud of if we support disregard for courts as a routine...you can take this to the bank!
In fact all a Nigerian president needs to do each day at the office is to - enforce the rule of law - and Nigeria will become a developed nation in less than 10yrs! To therefore see the Chief Law Enforcer become the law breaker does so much damage to our fledgeling democracy!
The international community are watching our president ignore/disregard court rulings and they are watching us learned people support the president. They won't take us serious! No investor will want to bring their money into a country where the law is not supreme and court judgements are routinely flouted!
We have to look at the wider implications of these actions!
Already damage has been done to buying votes as most of the cash hitherto outside the banking system is already banked. The real issue now is that the CBN is not releasing the new cash and they should simply not do so until the elections are over! There's no point for the president to take us 100yrs back by disobeying the supreme court!
My humble submission.
THE MISSING VALUE IS A RESPONSIBLE GOVT!
My name is Nick Agule a public affairs analyst. I have exercised my freedom of free speech to respond to the author of the piece below. My respons...
Date: 2024-06-05 Read More
THE MISSING VALUE IS A RESPONSIBLE GOVT!
My name is Nick Agule a public affairs analyst. I have exercised my freedom of free speech to respond to the author of the piece below. My response is directly below. Please be patient to read down to mine. I am happy to receive rejoinders publicly or to my email: [email protected]
Thank you
THE MISSING VALUE.
By Harry Daniyan
I carried out a social experiment today.
I was walking along the pedestrian sidewalk in Utako Abuja when some cars (in a bid to avoid traffic) turned on the site walk, driving towards me.
Everybody gave way to the vehicles.
I didn't.
The driver almost hit me.
I stood my ground...
He honked.
"Oga, commot for road!"
No, sir.
This is the pedestrian walk way.
You should go back to the road.
"Are you blind? You no see traffic?"
I see it sir, but that doesn't give you the right to drive on the pedestrian sidewalk, sir.
A man & a woman came down...
The woman said, "Respect yourself ooo! If not for the white hair I see, I for deal with you!"
But ma'am, your driver is in the wrong.
Your anger should be directed at him, ma'am.
After a while, about 30 people gathered.
They all saw me as an irritant old man causing trouble...
People in the vehicles in the hold up also joined in verbally: "Baba! Why are you embarrassing yourself in public? Don't you have shame?"
(I actually don't have shame)
It's not about ME, guys. It's about this driver driving on the pedestrian sidewalk!
The mob came for me...
I was pushed around, someone slapped me, I saw anger & bile in the eyes of the mob.
I tried to EXPLAIN to them why I'm actually NOT wrong in this incident, the driver on the pedestrian sidewalk is the offender here.
They wouldn't have any of that!
They pushed me out of the way...
The driver drove off.
The people stood there, jeering at me.
I stood there, taking it all in: I wanted them to have their fill.
To them, they have just carried out justice!
Silly, frustrated old man!
Now, these are the average Nigerian masses.
They are angry at the Government...
They are angry at the Police.
They are angry at everything.
They are the "EndSARS" people.
They are the "Buhari Must Go" crew.
They are the "What is Osinbajo doing" mob.
They are the "Naira is Useless" folks.
But they don't see the irony in their action against me...
They are usually united against oppression.
But they identified with the driver breaking the law, against me trying to uphold it.
Truth be told, the problem with Nigeria is not the Government.
The problem with Nigeria is not the Police.
The problem with Nigeria is Nigerians...
It's interesting to note the average Nigerian talks about how those in the corridors of power oppress the people.
He talks about how those in government are fantastically corrupt.
But if he ever gets the opportunity to be in power, he'll do the exact thing he condemns!
All through the 20 minutes of the Utako incident with the driver, not ONE person saw things my way.
Not ONE person was enlightened enough to understand the pedestrian sidewalk is for PEDESTRIANS.
Until we understand these simple lessons in civics, we won't go far as a Nation...
It matters not who is in Government: APC, PDP, Buhari, Atiku, Obi, Tinubu or whoever.
The summation of Nigeria as a nation is not necessarily the Government: it's the PEOPLE.
And my social experiment today showed the people are just a wild bunch of crude, uncouth & uncivil mob.
▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪
We are always ready and eager to criticize others for not doing things correctly, but when our own interests and preferences are involved, we seek to change the standard. Those who lead us at every level are from our midst; they only reflect who we are as a people. Without individual sanity, the society cannot be sane!
As long as we are interested in trading blames, we will not be able to get the nation of our dream!
MY RESPONSE
By Nick Agule
On the face of it this article makes sense but look deeply and the Oga has got it totally mixed up!
Very often I ask people who talk/write like this if they know what makes citizens elsewhere behave orderly? It's not simple lessons in civics as the Oga says o! it's law enforcement by govt that he erroneously or mischievously says it's not the problem. Indeed govt is all the problem in Nigeria!
Let me describe what will happen elsewhere.
That pedestrian walkway will be marked by govt. which will clearly show motorists not to drive on it. The same govt will mount a camera to catch those breaking the law by driving on the walkway. Any vehicle whose tyre touches the markings will be photographed and the owner will receive a letter (penalty notice) in the post in a few days. The letter will offer the payment of fine or court case. If this letter is treated with levity by the addressee it will progressively lead to bankruptcy and jail term for the offender. This is what's keeping motorists off pedestrian walkways not elsewhere not lessons in civics!
On the other hand if the Oga blocks a motorist in oyibo land (that's taking the law into his hands) he can be ran over or even shot and the motorist will claim self-defence in court because they feared they were about to be harmed, robbed or even shot by someone blocking their way.
It's not citizens who enforce laws elsewhere, the legitimate law enforcement agents do. What citizens do is to call 999 when they see a crime being committed and the security will respond swiftly!
In Nigeria has the govt marked roads? NO!
Has the govt mounted cameras to catch offenders? NO!
Does the govt fine or charge to court offenders regardless of their status? NO!
Does the govt have an emergency number for citizens to call when an emergency happens like fire, medical, security? NO!
Does govt respond to security issues when called? NO!
Oga please turn your finger away from Nigerian citizens and point it to govt that failed to provide you an enabling environment to enjoy your walk! It's time you ask your LG chairman, Gov and president what they are spending trillions in budgets on if they cannot do simple things like mark roads and then police them with cameras to assure your safety!
When Govts fail (as they are in Nigeria) nations fail. And when nations fail, the people fail and anarchy reigns. Without a functional and responsible Govt, no society can function, this the fact that is lost on Oga.
As new Govts await inauguration at the federal and state levels on 29th May, let this blaming of the victims (hapless Nigerians) instead of the oppressors (Govts) - stop and let's engage in participatory democracy by applying pressure on those who sought our votes to deliver on their promises. We've been blaming the victims for 60yrs and nothing has changed or rather getting worse.
Thank you.
Thank you
THE MISSING VALUE.
By Harry Daniyan
I carried out a social experiment today.
I was walking along the pedestrian sidewalk in Utako Abuja when some cars (in a bid to avoid traffic) turned on the site walk, driving towards me.
Everybody gave way to the vehicles.
I didn't.
The driver almost hit me.
I stood my ground...
He honked.
"Oga, commot for road!"
No, sir.
This is the pedestrian walk way.
You should go back to the road.
"Are you blind? You no see traffic?"
I see it sir, but that doesn't give you the right to drive on the pedestrian sidewalk, sir.
A man & a woman came down...
The woman said, "Respect yourself ooo! If not for the white hair I see, I for deal with you!"
But ma'am, your driver is in the wrong.
Your anger should be directed at him, ma'am.
After a while, about 30 people gathered.
They all saw me as an irritant old man causing trouble...
People in the vehicles in the hold up also joined in verbally: "Baba! Why are you embarrassing yourself in public? Don't you have shame?"
(I actually don't have shame)
It's not about ME, guys. It's about this driver driving on the pedestrian sidewalk!
The mob came for me...
I was pushed around, someone slapped me, I saw anger & bile in the eyes of the mob.
I tried to EXPLAIN to them why I'm actually NOT wrong in this incident, the driver on the pedestrian sidewalk is the offender here.
They wouldn't have any of that!
They pushed me out of the way...
The driver drove off.
The people stood there, jeering at me.
I stood there, taking it all in: I wanted them to have their fill.
To them, they have just carried out justice!
Silly, frustrated old man!
Now, these are the average Nigerian masses.
They are angry at the Government...
They are angry at the Police.
They are angry at everything.
They are the "EndSARS" people.
They are the "Buhari Must Go" crew.
They are the "What is Osinbajo doing" mob.
They are the "Naira is Useless" folks.
But they don't see the irony in their action against me...
They are usually united against oppression.
But they identified with the driver breaking the law, against me trying to uphold it.
Truth be told, the problem with Nigeria is not the Government.
The problem with Nigeria is not the Police.
The problem with Nigeria is Nigerians...
It's interesting to note the average Nigerian talks about how those in the corridors of power oppress the people.
He talks about how those in government are fantastically corrupt.
But if he ever gets the opportunity to be in power, he'll do the exact thing he condemns!
All through the 20 minutes of the Utako incident with the driver, not ONE person saw things my way.
Not ONE person was enlightened enough to understand the pedestrian sidewalk is for PEDESTRIANS.
Until we understand these simple lessons in civics, we won't go far as a Nation...
It matters not who is in Government: APC, PDP, Buhari, Atiku, Obi, Tinubu or whoever.
The summation of Nigeria as a nation is not necessarily the Government: it's the PEOPLE.
And my social experiment today showed the people are just a wild bunch of crude, uncouth & uncivil mob.
▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪
We are always ready and eager to criticize others for not doing things correctly, but when our own interests and preferences are involved, we seek to change the standard. Those who lead us at every level are from our midst; they only reflect who we are as a people. Without individual sanity, the society cannot be sane!
As long as we are interested in trading blames, we will not be able to get the nation of our dream!
MY RESPONSE
By Nick Agule
On the face of it this article makes sense but look deeply and the Oga has got it totally mixed up!
Very often I ask people who talk/write like this if they know what makes citizens elsewhere behave orderly? It's not simple lessons in civics as the Oga says o! it's law enforcement by govt that he erroneously or mischievously says it's not the problem. Indeed govt is all the problem in Nigeria!
Let me describe what will happen elsewhere.
That pedestrian walkway will be marked by govt. which will clearly show motorists not to drive on it. The same govt will mount a camera to catch those breaking the law by driving on the walkway. Any vehicle whose tyre touches the markings will be photographed and the owner will receive a letter (penalty notice) in the post in a few days. The letter will offer the payment of fine or court case. If this letter is treated with levity by the addressee it will progressively lead to bankruptcy and jail term for the offender. This is what's keeping motorists off pedestrian walkways not elsewhere not lessons in civics!
On the other hand if the Oga blocks a motorist in oyibo land (that's taking the law into his hands) he can be ran over or even shot and the motorist will claim self-defence in court because they feared they were about to be harmed, robbed or even shot by someone blocking their way.
It's not citizens who enforce laws elsewhere, the legitimate law enforcement agents do. What citizens do is to call 999 when they see a crime being committed and the security will respond swiftly!
In Nigeria has the govt marked roads? NO!
Has the govt mounted cameras to catch offenders? NO!
Does the govt fine or charge to court offenders regardless of their status? NO!
Does the govt have an emergency number for citizens to call when an emergency happens like fire, medical, security? NO!
Does govt respond to security issues when called? NO!
Oga please turn your finger away from Nigerian citizens and point it to govt that failed to provide you an enabling environment to enjoy your walk! It's time you ask your LG chairman, Gov and president what they are spending trillions in budgets on if they cannot do simple things like mark roads and then police them with cameras to assure your safety!
When Govts fail (as they are in Nigeria) nations fail. And when nations fail, the people fail and anarchy reigns. Without a functional and responsible Govt, no society can function, this the fact that is lost on Oga.
As new Govts await inauguration at the federal and state levels on 29th May, let this blaming of the victims (hapless Nigerians) instead of the oppressors (Govts) - stop and let's engage in participatory democracy by applying pressure on those who sought our votes to deliver on their promises. We've been blaming the victims for 60yrs and nothing has changed or rather getting worse.
Thank you.
AbokiFx: Nigeria Fighting Spectators as Bandits Kill the Naira!
Date: 2024-05-24 Read More
AbokiFx: Nigeria Fighting Spectators as Bandits Kill the Naira!
Nick Agule
Twitter: @NickAgule
Email: [email protected]
21.09.2021
Introduction
Friday, 17th September 2021, Nigeria’s Monetary Policy Committee (MPC) rose from a two-day meeting after which the Central Bank Of Nigeria (CBN) Governor, Mr Godwin Emefiele addressed the press and made startling revelations regarding a website called AbokiFx which publishes both the official and parallel (unofficial) foreign exchange (forex) rates of the Naira against other global currencies. The CBN Governor accused AbokiFx of “illegal activity that undermines the economy” by engaging in “illegal forex trading”. He named the operator of the platform as Mr Oniwinde Adedotun, whom he (the CBN Governor) alleged is a Nigerian living in the UK and publishes arbitrary rates without contacting the Bureau De Changes (BDCs) and said, “We cannot allow you (Mr Adedotun) to continue to kill our economy.” The CBN Governor went further to highlight the modus operandi of Adetotun’s activities as “He gets naira notes and uses it to purchase dollars, take a position and change the rates over a given period, sell the dollars they purchased and make a profit. This is completely illegal; it is unacceptable, and we will pursue them.” It is understandable what drew the ire of the Central Bank Governor as the Naira which has been depreciating against the dollar since 2015 when it exchanged for N190/$ topped the N570/$ mark on same Friday the MPC concluded their meeting.
However, AbokiFX in a statement released online and also published on its website on Friday titled ‘Temporary suspension of rate publication – AbokiFx’, said “AbokiFX has taken the decision today, the 17th of September 2021, to temporarily suspend rate updates on all our platforms, until we get better clarity of the situation.” The platform then taunted the Central Bank Governor by saying it hopes that the suspension will result in the strengthening of the value of the Naira!
Government Chasing Shadows
Those who are old enough will recall that in the 80s and 90s, telephone services in Nigeria were solely provided by a government owned telephone service company called the Nigerian Telecommunications Limited (NITEL). This company was unable to provide enough telephone lines to Nigerians therefore leading to sharp practices in the sector. The government responded by fighting the symptoms (business centres) instead of the cause (inadequate supply of lines). Taskforces headed by young military officers were setup all over the country which daily were busy raiding business centres which offered telephone calls to patrons for a fee. Despite the taskforces’ enforcement, the activities of the business centres continued unhindered! Fast-forward to early 2000s and enter MTN and co and Nigeria’s telephone lines supply jumped from about 500,000 to nearly 200 million today! The supply gap of phone lines in Nigeria was closed by the privately owned telecoms companies and business centres died a natural death and along with them the taskforces and the military officers who commanded them returned to the barracks to face their military duties.
The Central Bank Governor is essentially taking the same route with forex as was done with business centres. Instead of fighting the bandits killing the Naira, the CBN Governor is busy chasing after spectators such as AbokiFx!
Bandits Killing the Naira
v The amount of Naira you need to pay to get a US dollar depends on the forces of demand and supply. If too much Naira is chasing the US dollar, the cost of the dollar will rise, there are no ifs and buts about this! Thus, the cost of the dollar has risen from N190 to about N570 precisely because Nigerians are chasing the dollar to import almost everything they consume! If the Central Bank Governor therefore wants to defend the Naira, he and the Government must fight the bandits killing the Naira. These bandits include:
1. Refineries - Nigeria is spending billions of dollars yearly to import petrol. The Government needs to fix the refineries or lease/sell them out to private operators so that the demand for dollars to import petrol will stop! This will give a big lifeline and protection to the Naira.
2. Electricity Deficit – Nigeria’s economy needs 200GW of electricity to function optimally, but it is currently being supplied with a miserly 4GW! The result is that the manufacturing sector has all but collapsed leading to the importation of most household items and consumables which are all priced in dollars. Another downside is that importers need billions of dollars to import generators. If Nigeria’s electricity supply is raised to even 40GW, this will give a huge lifeline to the Naira as the demand for dollars to import household items and generators will crash!
3. Gas Plants – Nigeria produces huge amount of gas and for inexplicable reasons sets the gas on fire causing huge economic and environmental losses. Nigeria then sources for US dollars to import gas from the US and other countries! If Nigeria stops this senseless waste of produced gas, harnesses the gas and channels it into electricity generation and Liquified Petroleum Gas (LPG) also known as cooking gas, the demand for dollars will fall and the Naira will be given breathing space!
4. Steel plants – Nigeria has built several steel plants dotted all over the country. These plants have been allowed to rot thus depriving the economy of the much-needed inputs into construction and vehicle manufacturing. Nigeria then sources hundreds of billions of dollars every year to import all sorts of vehicles into the country. Over 98% of automobiles on Nigeria’s roads are imported. If the steel plants are resuscitated to provide the needed inputs, the demand for dollars to import construction materials and vehicles will be asphyxiated and the Naira will breathe fresh air.
5. School fees – Nigeria has allowed the educational system to collapse with public schools all but become rot. Parents who can afford it have consequently chosen to educate their children in foreign schools. There is a huge demand for US dollars to pay fees abroad and the Central Bank subsidies the fees by emptying the foreign reserves to issue forex at near official rates for school fees. If Nigeria fixes the educational system and returns it to the glory days of the 60s-80s, there will be no need to send children abroad for education and the demand for the dollar will fall which will grant the Naira strength against the dollar!
6. Medical fees – The healthcare system in Nigeria has been allowed to rot thus forcing patients to seek medical care abroad which mounts a lot of pressure on the Naira. If Nigeria fixes its healthcare system, patients will not have a need to travel abroad and the demand for dollars will fall which invariable gives strength to the Naira!
7. Foreign holidays – Many factors including insecurity have pushed Nigerians into seeking foreign holidays at a huge cost to the Naira which is used in chasing the dollar to fund the holiday trips. If Nigeria tackles insecurity and develops a viable tourist industry given its excellent weather with summer all year round, not only will Nigerians no longer have a need to travel abroad for holidays, but foreigners will flock to Nigeria to enjoy the warmth and hospitality of the people. The reverse will be the case that instead of the Naira chasing the dollars to fund foreign holidays by Nigerians, it will be the dollar chasing after the Naira as foreigners holidaying in Nigeria will change their foreign currencies into Naira to pay for local costs. The Naira will gain double strength against the dollar if this happens!
8. Base rates – the MPC announced that it was holding the Monetary Policy Rate (MPR) at 11.5%. This high double-digit base lending rate is a bandit that kills the economy and hence the Naira. No economy will do well with double digit lending rates because the cost of credit will be too high, and businesses will shy away from borrowing to fund their operations to grow the economy. In comparison the UK base rate is 0.1%, US is 0.5% and South Africa is 3.5%. The MPC must juxtapose the control of inflationary pressures against economic growth and decrease the MPR to below 5% to boost the economy, encourage local production which in turn will take the pressure off the Naira chasing after the dollar to import consumer and capital goods.
9. Foreign Loans – The Government is borrowing heavily in dollars and needs to convert Naira into dollars to service the loans! This is putting immense pressure on the Naira and pinning it down in value. The Government must moderate its borrowing and instead looking inwards to unlock value from the huge resource endowments of the country.
Conclusion
The value of the Naira will continue to depreciate (fall) against the dollar and other global currencies until the Government takes steps to deal with the fundamental causes (bandits) that are asphyxiating the Naira. The Central Bank supplying dollars to the forex market will only grant temporary relief because it is not a sustainable solution. The Central Bank fighting spectators such as AbokiFx will also have little impact on the exchange rate. It is only by removing the bottlenecks (bandits) as highlighted above will the Government find a lasting and sustainable solution to Nigeria’s forex debacle!
References:
1. https://www.reuters.com/article/nigeria-rates-idAFL1N2QJ15I
2. https://www.ncc.gov.ng/statistics-reports/industry-overview#view-graphs-tables-
Twitter: @NickAgule
Email: [email protected]
21.09.2021
Introduction
Friday, 17th September 2021, Nigeria’s Monetary Policy Committee (MPC) rose from a two-day meeting after which the Central Bank Of Nigeria (CBN) Governor, Mr Godwin Emefiele addressed the press and made startling revelations regarding a website called AbokiFx which publishes both the official and parallel (unofficial) foreign exchange (forex) rates of the Naira against other global currencies. The CBN Governor accused AbokiFx of “illegal activity that undermines the economy” by engaging in “illegal forex trading”. He named the operator of the platform as Mr Oniwinde Adedotun, whom he (the CBN Governor) alleged is a Nigerian living in the UK and publishes arbitrary rates without contacting the Bureau De Changes (BDCs) and said, “We cannot allow you (Mr Adedotun) to continue to kill our economy.” The CBN Governor went further to highlight the modus operandi of Adetotun’s activities as “He gets naira notes and uses it to purchase dollars, take a position and change the rates over a given period, sell the dollars they purchased and make a profit. This is completely illegal; it is unacceptable, and we will pursue them.” It is understandable what drew the ire of the Central Bank Governor as the Naira which has been depreciating against the dollar since 2015 when it exchanged for N190/$ topped the N570/$ mark on same Friday the MPC concluded their meeting.
However, AbokiFX in a statement released online and also published on its website on Friday titled ‘Temporary suspension of rate publication – AbokiFx’, said “AbokiFX has taken the decision today, the 17th of September 2021, to temporarily suspend rate updates on all our platforms, until we get better clarity of the situation.” The platform then taunted the Central Bank Governor by saying it hopes that the suspension will result in the strengthening of the value of the Naira!
Government Chasing Shadows
Those who are old enough will recall that in the 80s and 90s, telephone services in Nigeria were solely provided by a government owned telephone service company called the Nigerian Telecommunications Limited (NITEL). This company was unable to provide enough telephone lines to Nigerians therefore leading to sharp practices in the sector. The government responded by fighting the symptoms (business centres) instead of the cause (inadequate supply of lines). Taskforces headed by young military officers were setup all over the country which daily were busy raiding business centres which offered telephone calls to patrons for a fee. Despite the taskforces’ enforcement, the activities of the business centres continued unhindered! Fast-forward to early 2000s and enter MTN and co and Nigeria’s telephone lines supply jumped from about 500,000 to nearly 200 million today! The supply gap of phone lines in Nigeria was closed by the privately owned telecoms companies and business centres died a natural death and along with them the taskforces and the military officers who commanded them returned to the barracks to face their military duties.
The Central Bank Governor is essentially taking the same route with forex as was done with business centres. Instead of fighting the bandits killing the Naira, the CBN Governor is busy chasing after spectators such as AbokiFx!
Bandits Killing the Naira
v The amount of Naira you need to pay to get a US dollar depends on the forces of demand and supply. If too much Naira is chasing the US dollar, the cost of the dollar will rise, there are no ifs and buts about this! Thus, the cost of the dollar has risen from N190 to about N570 precisely because Nigerians are chasing the dollar to import almost everything they consume! If the Central Bank Governor therefore wants to defend the Naira, he and the Government must fight the bandits killing the Naira. These bandits include:
1. Refineries - Nigeria is spending billions of dollars yearly to import petrol. The Government needs to fix the refineries or lease/sell them out to private operators so that the demand for dollars to import petrol will stop! This will give a big lifeline and protection to the Naira.
2. Electricity Deficit – Nigeria’s economy needs 200GW of electricity to function optimally, but it is currently being supplied with a miserly 4GW! The result is that the manufacturing sector has all but collapsed leading to the importation of most household items and consumables which are all priced in dollars. Another downside is that importers need billions of dollars to import generators. If Nigeria’s electricity supply is raised to even 40GW, this will give a huge lifeline to the Naira as the demand for dollars to import household items and generators will crash!
3. Gas Plants – Nigeria produces huge amount of gas and for inexplicable reasons sets the gas on fire causing huge economic and environmental losses. Nigeria then sources for US dollars to import gas from the US and other countries! If Nigeria stops this senseless waste of produced gas, harnesses the gas and channels it into electricity generation and Liquified Petroleum Gas (LPG) also known as cooking gas, the demand for dollars will fall and the Naira will be given breathing space!
4. Steel plants – Nigeria has built several steel plants dotted all over the country. These plants have been allowed to rot thus depriving the economy of the much-needed inputs into construction and vehicle manufacturing. Nigeria then sources hundreds of billions of dollars every year to import all sorts of vehicles into the country. Over 98% of automobiles on Nigeria’s roads are imported. If the steel plants are resuscitated to provide the needed inputs, the demand for dollars to import construction materials and vehicles will be asphyxiated and the Naira will breathe fresh air.
5. School fees – Nigeria has allowed the educational system to collapse with public schools all but become rot. Parents who can afford it have consequently chosen to educate their children in foreign schools. There is a huge demand for US dollars to pay fees abroad and the Central Bank subsidies the fees by emptying the foreign reserves to issue forex at near official rates for school fees. If Nigeria fixes the educational system and returns it to the glory days of the 60s-80s, there will be no need to send children abroad for education and the demand for the dollar will fall which will grant the Naira strength against the dollar!
6. Medical fees – The healthcare system in Nigeria has been allowed to rot thus forcing patients to seek medical care abroad which mounts a lot of pressure on the Naira. If Nigeria fixes its healthcare system, patients will not have a need to travel abroad and the demand for dollars will fall which invariable gives strength to the Naira!
7. Foreign holidays – Many factors including insecurity have pushed Nigerians into seeking foreign holidays at a huge cost to the Naira which is used in chasing the dollar to fund the holiday trips. If Nigeria tackles insecurity and develops a viable tourist industry given its excellent weather with summer all year round, not only will Nigerians no longer have a need to travel abroad for holidays, but foreigners will flock to Nigeria to enjoy the warmth and hospitality of the people. The reverse will be the case that instead of the Naira chasing the dollars to fund foreign holidays by Nigerians, it will be the dollar chasing after the Naira as foreigners holidaying in Nigeria will change their foreign currencies into Naira to pay for local costs. The Naira will gain double strength against the dollar if this happens!
8. Base rates – the MPC announced that it was holding the Monetary Policy Rate (MPR) at 11.5%. This high double-digit base lending rate is a bandit that kills the economy and hence the Naira. No economy will do well with double digit lending rates because the cost of credit will be too high, and businesses will shy away from borrowing to fund their operations to grow the economy. In comparison the UK base rate is 0.1%, US is 0.5% and South Africa is 3.5%. The MPC must juxtapose the control of inflationary pressures against economic growth and decrease the MPR to below 5% to boost the economy, encourage local production which in turn will take the pressure off the Naira chasing after the dollar to import consumer and capital goods.
9. Foreign Loans – The Government is borrowing heavily in dollars and needs to convert Naira into dollars to service the loans! This is putting immense pressure on the Naira and pinning it down in value. The Government must moderate its borrowing and instead looking inwards to unlock value from the huge resource endowments of the country.
Conclusion
The value of the Naira will continue to depreciate (fall) against the dollar and other global currencies until the Government takes steps to deal with the fundamental causes (bandits) that are asphyxiating the Naira. The Central Bank supplying dollars to the forex market will only grant temporary relief because it is not a sustainable solution. The Central Bank fighting spectators such as AbokiFx will also have little impact on the exchange rate. It is only by removing the bottlenecks (bandits) as highlighted above will the Government find a lasting and sustainable solution to Nigeria’s forex debacle!
References:
1. https://www.reuters.com/article/nigeria-rates-idAFL1N2QJ15I
2. https://www.ncc.gov.ng/statistics-reports/industry-overview#view-graphs-tables-
eNaira: The Eagle that Refused to Fly!
Date: 2024-05-23 Read More
eNaira: The Eagle that Refused to Fly!
Nick Agule
Twitter: @NickAgule
Email: [email protected]
05.10.2021
Introduction
The Central Bank of Nigeria (CBN) on Thursday, 30th September 2021 announced a last-minute postponement of the launch of Nigeria’s new digital currency – eNaira – planned for next day Friday, 1st October 2021, as part of the activities to celebrate Nigeria’s national day for 61 years as an independent nation. The Director of Corporate Communications of the CBN, Osita Nwanisobi was quoted to have adduced “in deference to the mood of national rededication to the collective dream of one Nigeria” as the reason for the postponement. An online publication – nairametrics.com – quoting sources close to the implementation of the initiative cited “an unanticipated surge in visits on the website of the Central Bank’s eNaira initiative” to be the reason for the sudden postponement of the launch. The postponement came at the backdrop of a Federal High Court sitting in the nation’s capital city of Abuja ruling that the eNaira launch can go-ahead despite subsisting litigation over its patent right filed by ENaira Payment Solutions Limited against the CBN over a claim of trademark infringement.
Whether the reason for the postponement is as adduced by the CBN or Nairametrics, it does not speak well of the CBN. The CBN cannot express ignorance of the activities lined up for the national day celebration and only became aware at the last minute that the mood of national rededication was not the ideal time to launch a highly advertised and anticipated product – the eNaira. If on the other hand the reason is due to a surge in the hits on the eNaira website as suggested by Nairametrics, again it is myopic and even timid for the CBN not to have anticipated the surge to make adequate preparations to provide a solution to cater for the millions of users that will expectedly access the system on day 1 of launch. This calls to question the project management capabilities within the CBN which must be urgently addressed if the eNaira project is to be delivered to world-class standards as it is expected.
Bigger Issues with eNaira
Regardless of the reasons proffered by the CBN for the eNaira launch postponement, there are bigger issues the apex bank must chew on and fix before a successful launch of eNaira will be possible. This column highlighted some of the issues last week (https://frontviewafrica.com/e-naira-nigerias-new-digital-currency-the-hope-and-gloom-by-nick-agule/) and we will articulate more here. If these issues are not adequately addressed, the eNaira unlike what the CBN wants us to understand will become a fatal blow to the Nigerian economy and destroy our financial system stability. Here are some of the issues that require urgent attention by the CBN before the eNaira launch:
1. eNaira will constitute a run on the banks – the CBN says users of the eNaira will have to withdraw their deposits from the banks and transfer the funds to their eNaira wallets before they are issued the eNaira. This will technically constitute a run on the banks as more and more users withdraw their deposits from the banking system into their eNaira wallets. The CBN has not offered any explanation if the banks will have access to the funds in the eNaira wallets. From the explanations offered by the CBN so far, the eNaira wallets will form a deposit system different from the Deposit Money Banks (DMBs)! But the CBN is not an DMB and it is left to be explained how the CBN intends to manage the deposits made in the eNaira wallets! It would appear that the CBN is now in direct competition with DMBs for sourcing deposits!
2. Deposit withdrawal will ruin banks’ ability to create credit – the CBN has not offered explanations on how the DMBs are expected to create credit if their customers withdraw their deposits into eNaira wallets. Neither has the CBN offered explanations on what happens to existing loan assets on the balance sheet of DMBs currently funded by customer deposits if such deposits are withdrawn into eNaira wallets as proposed by the CBN. It is also not clear how the CBN intends to create credit from the deposits made in eNaira wallets a critical financial intermediary role traditionally left to the DMBs!
3. eNaira is legal tender is tautology – It is not clear why the CBN says the eNaira is legal tender. What is legal tender is the Naira, the official currency of the Federal Republic of Nigeria. The eNaira is only a payment channel for the Naira in the same way as notes and coins, bank cards, bank transfers, cheques etc. It is tautology to say bank transfer or card payment as a mode of payment for the Naira is legal tender! It appears that the CBN is using this terminology to enforce and mandate the use of eNaira which is a strange stance because parties in a transaction should be allowed to offer and accept any payment channel of the Naira that is suitable to their circumstances.
4. To enforce payments in eNaira will ruin contracts – the CBN has mandated that once payment is offered in eNaira, a recipient has no right to refuse it. It is not clear why the CBN has taken this hard stance to mandate a payment channel. It is akin to the CBN saying if card payment is offered, a recipient has no right to refuse acceptance. If the CBN does not correct this anomaly, contracts that have been entered into will have to be rewritten to include a clause on mandatory acceptance of the eNaira when offered. This will throw spanners in the works of the seamless running of business in Nigeria.
5. International Payments – the CBN is yet to clarify how it plans to fund the international payments given the advertisement that a merchant in the UK can be paid in pounds using an eNaira wallet! Naira is not a convertible currency therefore it remains to be seeing how the CBN will fund the translation of payments from eNaira wallets to foreign currencies as advertised by the CBN. As eNaira is said not to be convertible to cash, it is not clear how the UK recipient will receive the pounds payment, will it be in an eNaira wallet or their normal bank accounts? The CBN must address these gaps before launching the eNaira.
6. No interest payments – the CBN proposes that funds transferred to eNaira wallets will not attract any interest whatsoever. The CBN is yet to explain how savings and fixed term deposits which traditionally attract interest payments from the banks will work with the eNaira system. Is the CBN going to offer savings and fixed term deposits accounts with the eNaira? These are unanswered questions which the CBN must address before the launch.
Recommendations
1. The CBN will do well by using the period of postponement to fix the issues raised in this article and the last week’s including any bugs with the system and to test the system robustly before rolling out.
2. The CBN should not mandate the use of eNaira from day 1 but allow the system to operate in parallel with the current payment channels until the system is tested and confirmed to be robust enough before it is mandated in a general rollout.
3. To avoid a run on the banks and to maintain deposit liabilities on the banks’ balance sheets to support their loan assets, the CBN should allow the DMBs to be the custodians of the eNaira wallets. This way, if a user transfers funds from their bank accounts to their eNaira wallets, the funds remain with the banks. This will maintain the financial system stability without creating a parallel deposit system in the economy.
Conclusion
From every indication, the eNaira was not well thought through and it is not ripe for a general rollout. The CBN must resist the temptation to rush the rollout of the eNaira. A major project of this nature is rolled out in phases and both the software and hardware are stress tested over a period of time, bugs fixed, systems fine tuned before a global rollout is made. The CBN must cover all the bases, cross all the ‘Ts’ and dot all the ‘Is’ before launching the eNaira project.
References:
1. https://guardian.ng/business-services/court-okays-enaira-rollout-as-cbn-postpones-launch/
2. https://nairametrics.com/2021/10/01/why-cbn-postponed-the-launch-of-enaira/
Twitter: @NickAgule
Email: [email protected]
05.10.2021
Introduction
The Central Bank of Nigeria (CBN) on Thursday, 30th September 2021 announced a last-minute postponement of the launch of Nigeria’s new digital currency – eNaira – planned for next day Friday, 1st October 2021, as part of the activities to celebrate Nigeria’s national day for 61 years as an independent nation. The Director of Corporate Communications of the CBN, Osita Nwanisobi was quoted to have adduced “in deference to the mood of national rededication to the collective dream of one Nigeria” as the reason for the postponement. An online publication – nairametrics.com – quoting sources close to the implementation of the initiative cited “an unanticipated surge in visits on the website of the Central Bank’s eNaira initiative” to be the reason for the sudden postponement of the launch. The postponement came at the backdrop of a Federal High Court sitting in the nation’s capital city of Abuja ruling that the eNaira launch can go-ahead despite subsisting litigation over its patent right filed by ENaira Payment Solutions Limited against the CBN over a claim of trademark infringement.
Whether the reason for the postponement is as adduced by the CBN or Nairametrics, it does not speak well of the CBN. The CBN cannot express ignorance of the activities lined up for the national day celebration and only became aware at the last minute that the mood of national rededication was not the ideal time to launch a highly advertised and anticipated product – the eNaira. If on the other hand the reason is due to a surge in the hits on the eNaira website as suggested by Nairametrics, again it is myopic and even timid for the CBN not to have anticipated the surge to make adequate preparations to provide a solution to cater for the millions of users that will expectedly access the system on day 1 of launch. This calls to question the project management capabilities within the CBN which must be urgently addressed if the eNaira project is to be delivered to world-class standards as it is expected.
Bigger Issues with eNaira
Regardless of the reasons proffered by the CBN for the eNaira launch postponement, there are bigger issues the apex bank must chew on and fix before a successful launch of eNaira will be possible. This column highlighted some of the issues last week (https://frontviewafrica.com/e-naira-nigerias-new-digital-currency-the-hope-and-gloom-by-nick-agule/) and we will articulate more here. If these issues are not adequately addressed, the eNaira unlike what the CBN wants us to understand will become a fatal blow to the Nigerian economy and destroy our financial system stability. Here are some of the issues that require urgent attention by the CBN before the eNaira launch:
1. eNaira will constitute a run on the banks – the CBN says users of the eNaira will have to withdraw their deposits from the banks and transfer the funds to their eNaira wallets before they are issued the eNaira. This will technically constitute a run on the banks as more and more users withdraw their deposits from the banking system into their eNaira wallets. The CBN has not offered any explanation if the banks will have access to the funds in the eNaira wallets. From the explanations offered by the CBN so far, the eNaira wallets will form a deposit system different from the Deposit Money Banks (DMBs)! But the CBN is not an DMB and it is left to be explained how the CBN intends to manage the deposits made in the eNaira wallets! It would appear that the CBN is now in direct competition with DMBs for sourcing deposits!
2. Deposit withdrawal will ruin banks’ ability to create credit – the CBN has not offered explanations on how the DMBs are expected to create credit if their customers withdraw their deposits into eNaira wallets. Neither has the CBN offered explanations on what happens to existing loan assets on the balance sheet of DMBs currently funded by customer deposits if such deposits are withdrawn into eNaira wallets as proposed by the CBN. It is also not clear how the CBN intends to create credit from the deposits made in eNaira wallets a critical financial intermediary role traditionally left to the DMBs!
3. eNaira is legal tender is tautology – It is not clear why the CBN says the eNaira is legal tender. What is legal tender is the Naira, the official currency of the Federal Republic of Nigeria. The eNaira is only a payment channel for the Naira in the same way as notes and coins, bank cards, bank transfers, cheques etc. It is tautology to say bank transfer or card payment as a mode of payment for the Naira is legal tender! It appears that the CBN is using this terminology to enforce and mandate the use of eNaira which is a strange stance because parties in a transaction should be allowed to offer and accept any payment channel of the Naira that is suitable to their circumstances.
4. To enforce payments in eNaira will ruin contracts – the CBN has mandated that once payment is offered in eNaira, a recipient has no right to refuse it. It is not clear why the CBN has taken this hard stance to mandate a payment channel. It is akin to the CBN saying if card payment is offered, a recipient has no right to refuse acceptance. If the CBN does not correct this anomaly, contracts that have been entered into will have to be rewritten to include a clause on mandatory acceptance of the eNaira when offered. This will throw spanners in the works of the seamless running of business in Nigeria.
5. International Payments – the CBN is yet to clarify how it plans to fund the international payments given the advertisement that a merchant in the UK can be paid in pounds using an eNaira wallet! Naira is not a convertible currency therefore it remains to be seeing how the CBN will fund the translation of payments from eNaira wallets to foreign currencies as advertised by the CBN. As eNaira is said not to be convertible to cash, it is not clear how the UK recipient will receive the pounds payment, will it be in an eNaira wallet or their normal bank accounts? The CBN must address these gaps before launching the eNaira.
6. No interest payments – the CBN proposes that funds transferred to eNaira wallets will not attract any interest whatsoever. The CBN is yet to explain how savings and fixed term deposits which traditionally attract interest payments from the banks will work with the eNaira system. Is the CBN going to offer savings and fixed term deposits accounts with the eNaira? These are unanswered questions which the CBN must address before the launch.
Recommendations
1. The CBN will do well by using the period of postponement to fix the issues raised in this article and the last week’s including any bugs with the system and to test the system robustly before rolling out.
2. The CBN should not mandate the use of eNaira from day 1 but allow the system to operate in parallel with the current payment channels until the system is tested and confirmed to be robust enough before it is mandated in a general rollout.
3. To avoid a run on the banks and to maintain deposit liabilities on the banks’ balance sheets to support their loan assets, the CBN should allow the DMBs to be the custodians of the eNaira wallets. This way, if a user transfers funds from their bank accounts to their eNaira wallets, the funds remain with the banks. This will maintain the financial system stability without creating a parallel deposit system in the economy.
Conclusion
From every indication, the eNaira was not well thought through and it is not ripe for a general rollout. The CBN must resist the temptation to rush the rollout of the eNaira. A major project of this nature is rolled out in phases and both the software and hardware are stress tested over a period of time, bugs fixed, systems fine tuned before a global rollout is made. The CBN must cover all the bases, cross all the ‘Ts’ and dot all the ‘Is’ before launching the eNaira project.
References:
1. https://guardian.ng/business-services/court-okays-enaira-rollout-as-cbn-postpones-launch/
2. https://nairametrics.com/2021/10/01/why-cbn-postponed-the-launch-of-enaira/
Nigeria: A Nation not Educating Her Children!
Date: 2024-05-23 Read More
Nigeria: A Nation not Educating Her Children!
Nick Agule
Twitter: @NickAgule
Email: [email protected]
31.08.2021
Introduction
At the end of July 2021, global leaders gathered in London at the Global Education Summit (GPE) with the theme - Financing GPE 2021-2025. It was a key moment for the global community to come together and support quality education for all children. At the summit, world leaders made 5-year pledges to support GPE's work and help transform education systems in up to 90 countries and territories. In all, the summit ran four thematic sessions – Education’s reset, Financing for Impact, Gender Equality, Ripple Effect.
Some of the key discussions and outcomes of the summit included the fact that business as usual will not suffice to build the workforce of the future; and that urgent action is needed to ensure adequate funding for the education outcomes that will position countries to exploit their demographic dividend and strengthen competitiveness. The summit tackled what can be done to protect and improve domestic financing for education, especially for girls, in the face strained budgets facing competing demands. Intergenerational dialogue to give young people a platform to elevate their concerns about potential cuts to education budgets and the consequences for their generation of high debt burdens also drew the attention of the attendees. It was indeed heart-warming to see Nigeria’s Maryjacob Okwuosa, a GPE Youth Leader, Transform Education/UNGEI, anchor one of the sessions.
Furthermore, the Financing for Impact thematic discussions focused on how the world can leverage disaggregated data and new analysis tools to build mechanisms that allocate financing to ensure quality learning for the most vulnerable and marginalized and making the best possible use of limited resources which challenges conventional wisdom about what works to improve learning outcomes.
Nigeria’s President Muhammadu Buhari and other African leaders attended the summit.
Education not a Priority to Nigeria
When President Buhari sat with other world leaders at the summit, perhaps it did not occur to him how infinitesimal his budgetary allocation to education is as compared to the other leaders he was rubbing shoulders with. For the 2021 federal budget, education was allocated a total of N771.46 billion which is just above 5% of the total budget. In dollar terms this translates to less than $2 billion. This is the lowest budgetary allocation to the education sector in by the federal government of Nigeria 10 years! The global benchmark for funding education is between 15-20% of total budget.
In comparison with the world leaders whom President Buhari sat next to at the summit, they have committed the following percentages of their total budget to education - UK 14.9%, Mexico 17.58%, South Africa 19.45%, Australia 13.61%, Ethiopia 27.1%, Singapore 28.84%, Norway 16.01% etc. Even countries such as Iran and Afghanistan have committed 21.115% and 15.66% respectively which is well above Nigeria’s!
Nigeria is therefore punching far below the weight given a population of 200 million people. This poor funding of the education sector portrays Nigeria as a nation that does not take education as a priority. To make matters worse, Nigeria’s budget implementation is never at 100% so even the budgetary allocation to education may end up not being released in full!
Outcome of Poor Funding of Education in Nigeria
Given the abysmally poor funding of education in Nigeria, the tragic consequences include:
1. Nigeria has the highest number of out-of-school children in the world. UNICEF data indicates that one in every five of the world’s out-of-school children is in Nigeria. About 10.5 million of the country’s children aged 5-14 years are not in school. Only 61 percent of 6-11 year-olds regularly attend primary school and only 35.6 percent of children aged 36-59 months receive early childhood education according to UNICEF’s data. In the north of the country, the picture is even bleaker, with a net attendance rate of 53 percent. UNICEF concludes that getting out-of-school children back into education poses a massive challenge.
2. Teachers who are the backbone of the education system are often away from the classrooms on industrial action. The Academic Staff Union of Universities (ASUU) the premier labour union of university teachers has recently served another notice to embark on an industrial action. There is hardly any academic session that runs unhindered without a strike action by teachers in Nigeria.
3. Infrastructure at all levels of education – primary, secondary and tertiary – has totally decayed. A recent video of a students’ hall of residence at the hitherto prestigious University of Nigeria is sickening.
4. Other factors such as COVID and the massive state of insecurity in Nigeria have also contributed to keeping students away from the classrooms thereby jeopardising an already bad situation.
Recommendations
For Nigeria to unleash the Power of a Healthy, Educated and Safe Child, the country must take immediate steps to implement the following recommendations:
1. Nigeria must make it a policy priority to comply with UNICEF’s charter that all children, no matter where they live or what their circumstances, have the right to quality education.
2. Nigerian governments at all levels – federal, state and local government – must hard-code budgetary allocation to education to the global benchmark of between 15-20%.
3. Nigeria has an abysmally low budget provision. The total federal budget of $35 billion for 200 million people is a far cry from California’s $200 billion for 40 million people. Even if Nigeria commits the entire $35 billion federal budget to education, it will not be sufficient to lift the sector out of the decay experienced for decades in the past. Nigeria must therefore take urgent steps to boost revenue and this column has served a menu of recommendations in the past to help the government in this direction.
4. The cost of running government is extremely high with redundant, duplicitous and non-performing Ministries, Departments and Agencies (MDAs) of government. Government must restructure by scrapping these MDAs to save money to fund education.
5. Government must address the non-payment of salaries and allowances to teachers to forestall industrial actions. A scheme where teachers’ salaries are automatically paid from arranged overdraft facilities with financial institutions should be considered.
6. The state of insecurity in the country has impacted negatively on the educational sector with a spate of school kidnappings and other banditry activities has led to closure of schools. Governments at all levels must intensify efforts at tackling the insecurity situation. Governments must also take steps in securing schools including an installation of an emergency response system to enable schools call for security intervention when they come under attack which will discourage future attacks.
7. The national assembly need to begin legislation to criminalise out-of-school children by putting responsibility on the parents/guardians to enrol children in school failure of which they will be arrested and prosecuted, and the children are handed over to foster parents/carers to be educated. This is what is obtainable in the countries whose leaders President Buhari rubbed shoulders with at the summit!
8. Government at all levels to develop partnerships with countries and other donor organisations to increase volume, efficiency and equity of domestic financing for education. President Buhari’s attendance at the GPE summit was a right step in this direction.
Conclusion
There is no economy without education. Education is serious business and together with healthcare must never be relegated in the pecking order of priorities by any government. Nigerian governments at all levels must step up their game to adequately fund and manage the education of all children. An uneducated child is a time-bomb, and all hands must be on deck to ensure all children receive qualitative and functional education.
References: 1. https://data.worldbank.org/indicator/SE.XPD.TOTL.GD.ZS
2. https://ourworldindata.org/financing-education
3. https://www.premiumtimesng.com/news/headlines/422829-buharis-2021-budget-share-for-education-is-nigerias-lowest-in-10-years.html
4. https://www.premiumtimesng.com/news/headlines/422829-buharis-2021-budget-share-for-education-is-nigerias-lowest-in-10-years.html
Twitter: @NickAgule
Email: [email protected]
31.08.2021
Introduction
At the end of July 2021, global leaders gathered in London at the Global Education Summit (GPE) with the theme - Financing GPE 2021-2025. It was a key moment for the global community to come together and support quality education for all children. At the summit, world leaders made 5-year pledges to support GPE's work and help transform education systems in up to 90 countries and territories. In all, the summit ran four thematic sessions – Education’s reset, Financing for Impact, Gender Equality, Ripple Effect.
Some of the key discussions and outcomes of the summit included the fact that business as usual will not suffice to build the workforce of the future; and that urgent action is needed to ensure adequate funding for the education outcomes that will position countries to exploit their demographic dividend and strengthen competitiveness. The summit tackled what can be done to protect and improve domestic financing for education, especially for girls, in the face strained budgets facing competing demands. Intergenerational dialogue to give young people a platform to elevate their concerns about potential cuts to education budgets and the consequences for their generation of high debt burdens also drew the attention of the attendees. It was indeed heart-warming to see Nigeria’s Maryjacob Okwuosa, a GPE Youth Leader, Transform Education/UNGEI, anchor one of the sessions.
Furthermore, the Financing for Impact thematic discussions focused on how the world can leverage disaggregated data and new analysis tools to build mechanisms that allocate financing to ensure quality learning for the most vulnerable and marginalized and making the best possible use of limited resources which challenges conventional wisdom about what works to improve learning outcomes.
Nigeria’s President Muhammadu Buhari and other African leaders attended the summit.
Education not a Priority to Nigeria
When President Buhari sat with other world leaders at the summit, perhaps it did not occur to him how infinitesimal his budgetary allocation to education is as compared to the other leaders he was rubbing shoulders with. For the 2021 federal budget, education was allocated a total of N771.46 billion which is just above 5% of the total budget. In dollar terms this translates to less than $2 billion. This is the lowest budgetary allocation to the education sector in by the federal government of Nigeria 10 years! The global benchmark for funding education is between 15-20% of total budget.
In comparison with the world leaders whom President Buhari sat next to at the summit, they have committed the following percentages of their total budget to education - UK 14.9%, Mexico 17.58%, South Africa 19.45%, Australia 13.61%, Ethiopia 27.1%, Singapore 28.84%, Norway 16.01% etc. Even countries such as Iran and Afghanistan have committed 21.115% and 15.66% respectively which is well above Nigeria’s!
Nigeria is therefore punching far below the weight given a population of 200 million people. This poor funding of the education sector portrays Nigeria as a nation that does not take education as a priority. To make matters worse, Nigeria’s budget implementation is never at 100% so even the budgetary allocation to education may end up not being released in full!
Outcome of Poor Funding of Education in Nigeria
Given the abysmally poor funding of education in Nigeria, the tragic consequences include:
1. Nigeria has the highest number of out-of-school children in the world. UNICEF data indicates that one in every five of the world’s out-of-school children is in Nigeria. About 10.5 million of the country’s children aged 5-14 years are not in school. Only 61 percent of 6-11 year-olds regularly attend primary school and only 35.6 percent of children aged 36-59 months receive early childhood education according to UNICEF’s data. In the north of the country, the picture is even bleaker, with a net attendance rate of 53 percent. UNICEF concludes that getting out-of-school children back into education poses a massive challenge.
2. Teachers who are the backbone of the education system are often away from the classrooms on industrial action. The Academic Staff Union of Universities (ASUU) the premier labour union of university teachers has recently served another notice to embark on an industrial action. There is hardly any academic session that runs unhindered without a strike action by teachers in Nigeria.
3. Infrastructure at all levels of education – primary, secondary and tertiary – has totally decayed. A recent video of a students’ hall of residence at the hitherto prestigious University of Nigeria is sickening.
4. Other factors such as COVID and the massive state of insecurity in Nigeria have also contributed to keeping students away from the classrooms thereby jeopardising an already bad situation.
Recommendations
For Nigeria to unleash the Power of a Healthy, Educated and Safe Child, the country must take immediate steps to implement the following recommendations:
1. Nigeria must make it a policy priority to comply with UNICEF’s charter that all children, no matter where they live or what their circumstances, have the right to quality education.
2. Nigerian governments at all levels – federal, state and local government – must hard-code budgetary allocation to education to the global benchmark of between 15-20%.
3. Nigeria has an abysmally low budget provision. The total federal budget of $35 billion for 200 million people is a far cry from California’s $200 billion for 40 million people. Even if Nigeria commits the entire $35 billion federal budget to education, it will not be sufficient to lift the sector out of the decay experienced for decades in the past. Nigeria must therefore take urgent steps to boost revenue and this column has served a menu of recommendations in the past to help the government in this direction.
4. The cost of running government is extremely high with redundant, duplicitous and non-performing Ministries, Departments and Agencies (MDAs) of government. Government must restructure by scrapping these MDAs to save money to fund education.
5. Government must address the non-payment of salaries and allowances to teachers to forestall industrial actions. A scheme where teachers’ salaries are automatically paid from arranged overdraft facilities with financial institutions should be considered.
6. The state of insecurity in the country has impacted negatively on the educational sector with a spate of school kidnappings and other banditry activities has led to closure of schools. Governments at all levels must intensify efforts at tackling the insecurity situation. Governments must also take steps in securing schools including an installation of an emergency response system to enable schools call for security intervention when they come under attack which will discourage future attacks.
7. The national assembly need to begin legislation to criminalise out-of-school children by putting responsibility on the parents/guardians to enrol children in school failure of which they will be arrested and prosecuted, and the children are handed over to foster parents/carers to be educated. This is what is obtainable in the countries whose leaders President Buhari rubbed shoulders with at the summit!
8. Government at all levels to develop partnerships with countries and other donor organisations to increase volume, efficiency and equity of domestic financing for education. President Buhari’s attendance at the GPE summit was a right step in this direction.
Conclusion
There is no economy without education. Education is serious business and together with healthcare must never be relegated in the pecking order of priorities by any government. Nigerian governments at all levels must step up their game to adequately fund and manage the education of all children. An uneducated child is a time-bomb, and all hands must be on deck to ensure all children receive qualitative and functional education.
References: 1. https://data.worldbank.org/indicator/SE.XPD.TOTL.GD.ZS
2. https://ourworldindata.org/financing-education
3. https://www.premiumtimesng.com/news/headlines/422829-buharis-2021-budget-share-for-education-is-nigerias-lowest-in-10-years.html
4. https://www.premiumtimesng.com/news/headlines/422829-buharis-2021-budget-share-for-education-is-nigerias-lowest-in-10-years.html
The Death and Funeral of Queen Elizabeth II – Lessons for Nigeria
Date: 2024-04-08 Read More
The Death and Funeral of Queen Elizabeth II – Lessons for Nigeria
Nick Agule
Twitter: @NickAgule
Email: [email protected]
27.09.2022
Introduction
Elizabeth Alexandra Mary who succeeded her father King George VI at his death as Queen of the United Kingdom and other Commonwealth realms on the 6th of February 1952 and took the name Queen Elizabeth II after a reign of 70 years finally transited from this world to the next on 8th September 2022 at a ripe age of 96 years. May her soul rest in peace.
This column this week is not necessarily about the life and times of the Queen but to select certain aspects of the events surrounding her last illness, death and burial and put forward lessons to be learnt by Nigerian leaders and citizens.
Illness
As the Head of State of her nation states, the health status of the Queen was not shrouded in mystery as it’s wont to happen in Nigeria. The citizens were fully kept abreast of the Queen’s health status through statements issued by Buckingham palace. In Nigeria notably during the presidency of Umaru Musa Yar’Adua and more recently President Buhari, Nigerian citizens were/have being kept in the dark about the health status of their leaders to the point that citizens filled the scarcity of information with rumours such as President Yar’Adua had died in Saudi Arabia and his body repatriated under the cover of darkness and a cabal was ruling in his name and President Buhari is a clone. Those who aspire to leadership must understand that their lives matter to those they lead, in the same way the health status of a pilot matters to all passengers onboard the flight. If the pilot wanted to keep his health status private, then he shouldn’t step forward to captain a jet with other souls onboard. The same thing applies to leadership where citizens submit their individual security and welfare to a sovereign leader who must be transparent to them about whatever it is that’s happening to his/her health. When a leader’s illness is made public as with the Queen’s, it tends to bring the whole nation to prayer for the leader’s wellbeing. If on the other hand a cabal is playing games with a leader’s health status, it riles the citizens to even mock the leader instead of praying for him or her. I recall how much emotions and empathy were poured out to King Hussein of Jordan by his citizens and globally when he went public that he had terminal cancer, and he flew his plane back to Jordan to die! The lesson for Nigerian leaders current and future is that if they don’t want their health status to be public knowledge, they should simply not aspire to leadership and stay out of the public eye.
Death
The death of the Queen was promptly announced. There was no room left for speculation and rumour mongering. It was the right thing to do, and the nation was brought together in unison to mourn her whether nationalist or republican in political persuasion. The transfer of power from the Queen to her eldest son – now King Charles III – was also seamless. In Nigeria transfer of power even in the traditional institution is often riddled with power tussles, infighting, communal crisis leaving dead bodies in its trail, and court cases. This struggle for power is often for selfish reasons and nothing to do with delivery of service to the people. Nigerian leaders must learn the lesson in orderly transition of power knowing that power itself is transient and we will all die and leave the trappings of power behind one day!
Funeral Arrangements
The Queen died on 8th September and was buried 11 days later on the 19th of September despite the invitation to over 100 world leaders who were expected to attend or send delegations. In Nigeria, a VIP of such calibre will be kept in the mortuary for months. Worst are poor people in villages who instead of burying their dead promptly keep them in mortuaries in the name of looking for money to do burial, but the mortuaries keep sucking money from them daily for months or even for over a year! Mortuary business is now one of the fastest growing businesses in Nigeria and units are now found located in some of the remotest and poorest communities across the nation! Nigerians must learn the lesson that prolonged storage of corpses neither brings back the dead to life nor provides money for the wasteful and elaborate funerals. Our Muslim brethren have the upper hand here with prompt committal of the dead and the Christians and others must copy because no where in the Bible is the practice of storing corpses preached. Even Jesus Christ was buried same day he died!
Orderly conduct The Queen’s body lay-in-state at Edinburgh and London allowing the citizens to file past in final respects to their monarch. Expectedly the queues were long and in London at a point running to 5 miles and 22 hours of waiting yet there was no disruption, and everything went orderly in Edinburg and London. There were no area boys disrupting the queue and no gun totting security men shoving, beating, and shooting at citizens to pave way for their paymasters to jump the queue. VIPs such as David Beckham queued for over 12 hours to take his turn. The reason people waited for up to 22 hours patiently was because they saw every person queuing, and nobody was jumping the queue, so they knew it was only a matter of time before it got to their turn. Nigerian leaders must learn lessons here that citizens will in the normal course of proceedings behave orderly if leaders don’t create room for favouritism and also provide adequate security to nip in the bud any deviants so that the vast majority of citizens will live their lives in peace and orderliness.
Funeral Service
The funeral service lasted for 1 hour! In Nigeria that is the time for the preacher alone! Then dignitaries will take time to real out the titles of personalities and then conclude by standing on all existing protocols. There was no sign of uniformed officers sitting at the back of the King and other world leaders. No gun totting security pushing and shoving in the greatest act of eye service to impress their paymasters. A gathering of over 100 world leaders had no visible sign of security yet the security was watertight and top notch with no security incident recorded. Security can be effectively and efficiently provided without the commotion by uniformed officers we witness in Nigeria. Notably also, the Queen’s coffin was simple and made of oak wood and not the expensive caskets that Nigerians including the poor spend fortunes to buy and then bury in the ground! There were no elaborate adverts on radio, newspapers, TV and other media by individuals and organisations falling over each other to be recognised as having paid tributes to the Queen all in the bid to win favours from her son the King later!
Normalcy Restored
Immediately after the Queen’s burial, the royal family took off a few days to mourn and thereafter life has returned to normal with the King since resumed to work and the Prime Minister and other government officials back to their normal beats. The news media also do not mention the Queen anymore. She has played her part and given a befitting farewell but the business for the living must now go ahead. In Nigeria there will be no governance for weeks and months to come as the leaders will still be receiving delegation after delegation paying condolence visits and looking for brown envelopes thereafter. We have no value for time and just waste it in the same way we are wasting gas in the Niger Delta as if it has no value!
Conclusion
If Nigeria is to be a great nation, we must not only copy the Range Rovers, well-tailored Suits, fine architecture, expensive smart phones etc. from the British, we must also copy character and the character of the leaders determines the character of the led. In the Bible, when a King (a single individual) worshipped idols, the people followed him to worship idols and when that King (the leader) followed after God’s heart, the people followed him to worship God. In 2023, let us all do our part by using our voter’s card to elect leaders with CHARACTER!!!
Twitter: @NickAgule
Email: [email protected]
27.09.2022
Introduction
Elizabeth Alexandra Mary who succeeded her father King George VI at his death as Queen of the United Kingdom and other Commonwealth realms on the 6th of February 1952 and took the name Queen Elizabeth II after a reign of 70 years finally transited from this world to the next on 8th September 2022 at a ripe age of 96 years. May her soul rest in peace.
This column this week is not necessarily about the life and times of the Queen but to select certain aspects of the events surrounding her last illness, death and burial and put forward lessons to be learnt by Nigerian leaders and citizens.
Illness
As the Head of State of her nation states, the health status of the Queen was not shrouded in mystery as it’s wont to happen in Nigeria. The citizens were fully kept abreast of the Queen’s health status through statements issued by Buckingham palace. In Nigeria notably during the presidency of Umaru Musa Yar’Adua and more recently President Buhari, Nigerian citizens were/have being kept in the dark about the health status of their leaders to the point that citizens filled the scarcity of information with rumours such as President Yar’Adua had died in Saudi Arabia and his body repatriated under the cover of darkness and a cabal was ruling in his name and President Buhari is a clone. Those who aspire to leadership must understand that their lives matter to those they lead, in the same way the health status of a pilot matters to all passengers onboard the flight. If the pilot wanted to keep his health status private, then he shouldn’t step forward to captain a jet with other souls onboard. The same thing applies to leadership where citizens submit their individual security and welfare to a sovereign leader who must be transparent to them about whatever it is that’s happening to his/her health. When a leader’s illness is made public as with the Queen’s, it tends to bring the whole nation to prayer for the leader’s wellbeing. If on the other hand a cabal is playing games with a leader’s health status, it riles the citizens to even mock the leader instead of praying for him or her. I recall how much emotions and empathy were poured out to King Hussein of Jordan by his citizens and globally when he went public that he had terminal cancer, and he flew his plane back to Jordan to die! The lesson for Nigerian leaders current and future is that if they don’t want their health status to be public knowledge, they should simply not aspire to leadership and stay out of the public eye.
Death
The death of the Queen was promptly announced. There was no room left for speculation and rumour mongering. It was the right thing to do, and the nation was brought together in unison to mourn her whether nationalist or republican in political persuasion. The transfer of power from the Queen to her eldest son – now King Charles III – was also seamless. In Nigeria transfer of power even in the traditional institution is often riddled with power tussles, infighting, communal crisis leaving dead bodies in its trail, and court cases. This struggle for power is often for selfish reasons and nothing to do with delivery of service to the people. Nigerian leaders must learn the lesson in orderly transition of power knowing that power itself is transient and we will all die and leave the trappings of power behind one day!
Funeral Arrangements
The Queen died on 8th September and was buried 11 days later on the 19th of September despite the invitation to over 100 world leaders who were expected to attend or send delegations. In Nigeria, a VIP of such calibre will be kept in the mortuary for months. Worst are poor people in villages who instead of burying their dead promptly keep them in mortuaries in the name of looking for money to do burial, but the mortuaries keep sucking money from them daily for months or even for over a year! Mortuary business is now one of the fastest growing businesses in Nigeria and units are now found located in some of the remotest and poorest communities across the nation! Nigerians must learn the lesson that prolonged storage of corpses neither brings back the dead to life nor provides money for the wasteful and elaborate funerals. Our Muslim brethren have the upper hand here with prompt committal of the dead and the Christians and others must copy because no where in the Bible is the practice of storing corpses preached. Even Jesus Christ was buried same day he died!
Orderly conduct The Queen’s body lay-in-state at Edinburgh and London allowing the citizens to file past in final respects to their monarch. Expectedly the queues were long and in London at a point running to 5 miles and 22 hours of waiting yet there was no disruption, and everything went orderly in Edinburg and London. There were no area boys disrupting the queue and no gun totting security men shoving, beating, and shooting at citizens to pave way for their paymasters to jump the queue. VIPs such as David Beckham queued for over 12 hours to take his turn. The reason people waited for up to 22 hours patiently was because they saw every person queuing, and nobody was jumping the queue, so they knew it was only a matter of time before it got to their turn. Nigerian leaders must learn lessons here that citizens will in the normal course of proceedings behave orderly if leaders don’t create room for favouritism and also provide adequate security to nip in the bud any deviants so that the vast majority of citizens will live their lives in peace and orderliness.
Funeral Service
The funeral service lasted for 1 hour! In Nigeria that is the time for the preacher alone! Then dignitaries will take time to real out the titles of personalities and then conclude by standing on all existing protocols. There was no sign of uniformed officers sitting at the back of the King and other world leaders. No gun totting security pushing and shoving in the greatest act of eye service to impress their paymasters. A gathering of over 100 world leaders had no visible sign of security yet the security was watertight and top notch with no security incident recorded. Security can be effectively and efficiently provided without the commotion by uniformed officers we witness in Nigeria. Notably also, the Queen’s coffin was simple and made of oak wood and not the expensive caskets that Nigerians including the poor spend fortunes to buy and then bury in the ground! There were no elaborate adverts on radio, newspapers, TV and other media by individuals and organisations falling over each other to be recognised as having paid tributes to the Queen all in the bid to win favours from her son the King later!
Normalcy Restored
Immediately after the Queen’s burial, the royal family took off a few days to mourn and thereafter life has returned to normal with the King since resumed to work and the Prime Minister and other government officials back to their normal beats. The news media also do not mention the Queen anymore. She has played her part and given a befitting farewell but the business for the living must now go ahead. In Nigeria there will be no governance for weeks and months to come as the leaders will still be receiving delegation after delegation paying condolence visits and looking for brown envelopes thereafter. We have no value for time and just waste it in the same way we are wasting gas in the Niger Delta as if it has no value!
Conclusion
If Nigeria is to be a great nation, we must not only copy the Range Rovers, well-tailored Suits, fine architecture, expensive smart phones etc. from the British, we must also copy character and the character of the leaders determines the character of the led. In the Bible, when a King (a single individual) worshipped idols, the people followed him to worship idols and when that King (the leader) followed after God’s heart, the people followed him to worship God. In 2023, let us all do our part by using our voter’s card to elect leaders with CHARACTER!!!
The World Bank vs Nigeria
Date: 2024-04-08 Read More
The World Bank vs Nigeria
Nick Agule
Twitter: @NickAgule
Email: [email protected]
26.04.2022
Introduction
In the last week, there was a big match between the World Bank team captained by the President, Mr. David Malpass and Nigeria captained by the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed ably assisted by the Central Bank of Nigeria (CBN) Governor Godwin Emiefele. Venue was the Bank’s headquarters in Washington DC during the World Bank/International Monetary Fund (WB/IMF) Spring Meetings. This column reviews the match and gives its verdict.
FIRST HALF
The World Bank fired the first shot by urging Nigeria’s federal government to reconsider its policy on fuel subsidy, saying that the huge amount being expended on the policy could be channelled to other critical sectors. The Bank described fuel subsidy as a major drain and waste on the economy and sounded the alarm bells that the federal and state governments may be unable to pay salaries from 2022. The Bank concluded that petrol subsidies as currently operated are benefiting the rich more than the poor therefore subsidies either for food or for fuel if it must exist should be carefully targeted at those most in need of it.
Nigeria’s Minister for Finance, Budget and National Planning moved to defend the shot fired by the WB/IMF by excusing the rise in prices of oil due to the war in Ukraine as the catalyst that has pushed up the expenditure on fuel subsidies and thrown the country’s budget deficit into crisis levels. But the Minister was insistent that despite the huge spiralling budget deficit, Nigeria does not have a debt crisis but only a revenue issue.
VERDICT
Nigeria is going about subsidies on petrol, foreign exchange and electricity the wrong way. Subsidies are more effective when they are applied to production, but Nigeria is applying subsidies to consumption which is further worsening the economic crisis instead of solving it. That the Federal Government (FG) plans to spend N4trn on petrol subsidies in a single year which is half of the cost of Dangote’s refinery is clear evidence of disarray in government policy on subsidies. That FG’s revenue for 2021 was N5.5trn and government plans to spend over 80% of that on petrol subsidies alone is insane! The budget deficit in 2022 of 7.35trn has subsidy taking more than 50%. In the few months that there was petrol scarcity, most retail outlets dispensed petrol at prices ranging from N200-400 but the Armageddon the FG says will take place if subsidies are removed did not happen! The economy held on with full resilience. Removal of subsidies will sure result in short term pains but the long-term benefits will far outweigh the pains. The FG has shown a total lack of courage to confront the criminal enterprise arising from petrol subsidies where the quantities of petrol imported upon which subsidies are paid are shrouded in secrecy and the security establishment feigns inability to police the borders to stop subsidised petrol from being smuggled across the borders to fuel the economies of the entire west African subregion. Given that the APC government promised a removal of subsidy which they described as non-existent during the electioneering campaigns leading to the 2015 elections, the government has broken the social contract entered into with Nigerians upon which the APC was voted into office!
SCORE: WB/IMF 1 – Nigeria 0
SECOND HALF
The World Bank fired the second shot by calling on Nigeria to do away with multiple exchange rate system, which the Bank said are complicated and not as effective as it would be if there were a single exchange rate. The Bank further said that the most useful thing for developing countries is to have a single exchange rate that is market-based, that is stable over long periods of time as that attracts investments.
Nigeria through the CBN attempted to defend and deflect the shot fired by the WB/IMF. He foreclosed the possibility of adopting a clean float foreign exchange management system as long as the supply shock remains. The CBN further maintained it would continue with a managed float approach, as Nigeria cannot afford to abandon the local currency to the vagaries of market forces because doing that will result in uncontrollable spiral on the naira which they currently control with managed float.
VERDICT
If the CBN is holding firm to the managed foreign exchange market to support the productive sector of the economy, it will have positive impact on the economy. But the CBN Governor is subsidising consumption by dolling out foreign exchange for payment of foreign school fees, holidays, mortgages, medical tourism etc and these services have very high-quality local alternatives of comparable international standards. It therefore amounts to doublespeak for the CBN Governor to be defending a managed float when it is not being used to boost productive economic activities in Nigeria but rather used to fund foreign schools, tourist sites, housing industry and medical sectors. On the other hand, the CBN is setting Monetary Policy Rate (MPR) at double digits thereby making credit unaffordable to local businesses. Cheap credit will boost local production of goods and services which the CBN is currently issuing foreign exchange to import. The CBN has therefore created a dual market with no control over the racketeering, rent seeking and arbitrage that is resultant. At this point the CBN needed to consider what is more painful, float the rate or lose billions through the sharp practices of rent seekers taking advantage of the dual market and common-sense would dictate that the former is less painful!
SCORE: WB/IMF 1 – Nigeria 0
Conclusion
The Match ended WB/IMF 2 – Nigeria 0.
The government of President Muhammadu Buhari have no economic policy to deal with the twin devils of petrol subsidy and exchange rate. There is no use advising the government which for 7 years have played deaf ears to all advice. The focus therefore is for the incoming government in 2023 to fundamentally deal with the twin evils once and for all.
Twitter: @NickAgule
Email: [email protected]
26.04.2022
Introduction
In the last week, there was a big match between the World Bank team captained by the President, Mr. David Malpass and Nigeria captained by the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed ably assisted by the Central Bank of Nigeria (CBN) Governor Godwin Emiefele. Venue was the Bank’s headquarters in Washington DC during the World Bank/International Monetary Fund (WB/IMF) Spring Meetings. This column reviews the match and gives its verdict.
FIRST HALF
The World Bank fired the first shot by urging Nigeria’s federal government to reconsider its policy on fuel subsidy, saying that the huge amount being expended on the policy could be channelled to other critical sectors. The Bank described fuel subsidy as a major drain and waste on the economy and sounded the alarm bells that the federal and state governments may be unable to pay salaries from 2022. The Bank concluded that petrol subsidies as currently operated are benefiting the rich more than the poor therefore subsidies either for food or for fuel if it must exist should be carefully targeted at those most in need of it.
Nigeria’s Minister for Finance, Budget and National Planning moved to defend the shot fired by the WB/IMF by excusing the rise in prices of oil due to the war in Ukraine as the catalyst that has pushed up the expenditure on fuel subsidies and thrown the country’s budget deficit into crisis levels. But the Minister was insistent that despite the huge spiralling budget deficit, Nigeria does not have a debt crisis but only a revenue issue.
VERDICT
Nigeria is going about subsidies on petrol, foreign exchange and electricity the wrong way. Subsidies are more effective when they are applied to production, but Nigeria is applying subsidies to consumption which is further worsening the economic crisis instead of solving it. That the Federal Government (FG) plans to spend N4trn on petrol subsidies in a single year which is half of the cost of Dangote’s refinery is clear evidence of disarray in government policy on subsidies. That FG’s revenue for 2021 was N5.5trn and government plans to spend over 80% of that on petrol subsidies alone is insane! The budget deficit in 2022 of 7.35trn has subsidy taking more than 50%. In the few months that there was petrol scarcity, most retail outlets dispensed petrol at prices ranging from N200-400 but the Armageddon the FG says will take place if subsidies are removed did not happen! The economy held on with full resilience. Removal of subsidies will sure result in short term pains but the long-term benefits will far outweigh the pains. The FG has shown a total lack of courage to confront the criminal enterprise arising from petrol subsidies where the quantities of petrol imported upon which subsidies are paid are shrouded in secrecy and the security establishment feigns inability to police the borders to stop subsidised petrol from being smuggled across the borders to fuel the economies of the entire west African subregion. Given that the APC government promised a removal of subsidy which they described as non-existent during the electioneering campaigns leading to the 2015 elections, the government has broken the social contract entered into with Nigerians upon which the APC was voted into office!
SCORE: WB/IMF 1 – Nigeria 0
SECOND HALF
The World Bank fired the second shot by calling on Nigeria to do away with multiple exchange rate system, which the Bank said are complicated and not as effective as it would be if there were a single exchange rate. The Bank further said that the most useful thing for developing countries is to have a single exchange rate that is market-based, that is stable over long periods of time as that attracts investments.
Nigeria through the CBN attempted to defend and deflect the shot fired by the WB/IMF. He foreclosed the possibility of adopting a clean float foreign exchange management system as long as the supply shock remains. The CBN further maintained it would continue with a managed float approach, as Nigeria cannot afford to abandon the local currency to the vagaries of market forces because doing that will result in uncontrollable spiral on the naira which they currently control with managed float.
VERDICT
If the CBN is holding firm to the managed foreign exchange market to support the productive sector of the economy, it will have positive impact on the economy. But the CBN Governor is subsidising consumption by dolling out foreign exchange for payment of foreign school fees, holidays, mortgages, medical tourism etc and these services have very high-quality local alternatives of comparable international standards. It therefore amounts to doublespeak for the CBN Governor to be defending a managed float when it is not being used to boost productive economic activities in Nigeria but rather used to fund foreign schools, tourist sites, housing industry and medical sectors. On the other hand, the CBN is setting Monetary Policy Rate (MPR) at double digits thereby making credit unaffordable to local businesses. Cheap credit will boost local production of goods and services which the CBN is currently issuing foreign exchange to import. The CBN has therefore created a dual market with no control over the racketeering, rent seeking and arbitrage that is resultant. At this point the CBN needed to consider what is more painful, float the rate or lose billions through the sharp practices of rent seekers taking advantage of the dual market and common-sense would dictate that the former is less painful!
SCORE: WB/IMF 1 – Nigeria 0
Conclusion
The Match ended WB/IMF 2 – Nigeria 0.
The government of President Muhammadu Buhari have no economic policy to deal with the twin devils of petrol subsidy and exchange rate. There is no use advising the government which for 7 years have played deaf ears to all advice. The focus therefore is for the incoming government in 2023 to fundamentally deal with the twin evils once and for all.
Russia-Ukraine War and Fuel Scarcity in Nigeria
Date: 2024-04-08 Read More
Russia-Ukraine War and Fuel Scarcity in Nigeria
Nick Agule
Twitter: @NickAgule
Email: [email protected]
08.03.2022
Introduction
The war in Russia and Ukraine is contributing to the fuel scarcity in Nigeria. This is a crisis the Government of Nigeria is living in denial to admit and tell the truth about. The current fuel scarcity may have started with the importation of adulterated petrol but the Nigerian National Petroleum Company Ltd (NNPC) provided that it was only 100 million litres of petrol that was imported which is just about two days consumption. But the scarcity has persisted for a month and counting so it is not possible that a disruption in supply for a day or two will cause a month-long crisis which is yet to abate.
The truth which the Government of Nigeria will not confess to is that global supplies of crude and petroleum products are being impacted by the war in Russia and Ukraine. According to Reuters, Russia exports around 7 million barrels of oil per day, or 7% of global supply. The International Energy Agency (IEA) states that Russia is the world's largest exporter of oil to global markets and the second largest crude oil exporter behind Saudi Arabia. As a fallout from the Russian invasion of Ukraine, global oil companies have announced their exit from Russia including BP who exited their 30-year partnership with Russian company Rosneft with a financial hit of $ 25 billion which was followed almost immediately by Shell who exited all its Russian operations, including a major liquefied natural gas plant with non-current assets worth about $3 billion according to Reuters. When such a major oil supplier like Russia is ostracised by the market, it is bound to cause disruptions in global oil dynamics. When it comes to oil, anytime Russia sneezes the world catches cold which is afflicting Nigeria badly whether the Government wants to admit it or not!
But Nigeria has itself alone to blame for allowing the downstream sector of the petroleum industry to rot thus hanging the country dangerously at the mercy of suppliers of petroleum products. It is unfathomable why a major global supplier of crude oil like Nigeria will not refine her crude oil – Nigeria is the only major oil producer that is refining zero barrels and depending 100% on imported petroleum products. If the leaders of Nigeria had not before now calculated the risk of a major global event (like COVID which grounded all flights or a shipping blockade) that will prevent ships to sail and Nigeria is left with no petroleum products for weeks or months and the catastrophe it will cause to our economy, wellbeing and existence, then this Russia-Ukraine war must serve as a wake-up call!
The current fuel crisis has also exposed the NNPC that they do not keep strategic reserves of petroleum products. Global strategic petroleum reserves (GSPR) refer to crude oil inventories (or stockpiles) held by the government of a particular country, as well as private industry, to safeguard the economy and help maintain national security during an energy crisis. Strategic reserves are intended to be used to cover short-term supply disruptions. The current fuel crisis has revealed that Nigeria is perhaps the only oil major that is not keeping GSPR.
Nigeria only recently signed a petroleum industry bill when the world is switching to renewable energy which again shows a country steeped into the past refusing to move along with the world. Then the news broke in the last few days that Nigeria is about committing to nuclear power again a source of power that the world is moving away from. With abundant renewable sources – water, wind, sun, waves, biomass – it is incomprehensible why Nigeria’s leaders are not tapping into these low-hanging fruits to power the economy but instead are either looking to dirty fossil fuels or high-risk nuclear power.
Recommendations
1. The Government of Nigeria must take immediate steps to achieve petroleum products refining sufficiency and independence by leasing or selling the 4 refineries operated by the NNPC.
2. The Government must take seriously renewable energy by changing the name and remit of the NNPC to Nigerian National Energy Company Ltd (NNEC) with a firm focus on renewables and perhaps gas as a transition fuel.
3. Nigerian Government must take immediate steps to keep Global strategic petroleum reserves (GSPR) to ensure supply security in the crisis situations as currently faced with the global supply disruptions resulting from the Russia-Ukraine war.
4. The Nigerian Government must immediately without any further delays create the enabling environment for private sector participation in the downstream sector of the petroleum industry. There has never been a day Nigeria was unable to produce crude oil which requires a far greater degree of expertise, money and technology because the private sector is running the sector. But just to refine which is nothing more than to cook (heat) the crude and collect varying petroleum products at the different levels of temperature, a government controlled NNPC cannot do it. Same Government controlled entities cannot provide power! Nigerian Liquified Natural Gas Limited (NLNG) a government owned but privately run gas company is doing excellently well and paying dividends in billions of dollars to government coffers something the NNPC has not done since inception! So examples abound of the private sector running business better than government and the downstream sector will thrive under private ownership and/or management.
On this 8th Day of March, this column wishes and felicitates with our womenfolk on the International Women’s Day. A country where a male citizen marries a foreign wife and she is granted citizenship but a female citizen who marries a foreign husband is denied citizenship must change and very swiftly too.
References:
1. https://www.reuters.com/business/energy/oil-spikes-2008-highs-us-europe-mull-russian-oil-import-ban-iran-delay-2022-03-07/
2. https://www.iea.org/reports/russian-supplies-to-global-energy-markets/oil-market-and-russian-supply-2
3. https://www.reuters.com/business/energy/britains-bp-says-exit-stake-russian-oil-giant-rosneft-2022-02-27/
4. https://en.wikipedia.org/wiki/Global_strategic_petroleum_reserves
Twitter: @NickAgule
Email: [email protected]
08.03.2022
Introduction
The war in Russia and Ukraine is contributing to the fuel scarcity in Nigeria. This is a crisis the Government of Nigeria is living in denial to admit and tell the truth about. The current fuel scarcity may have started with the importation of adulterated petrol but the Nigerian National Petroleum Company Ltd (NNPC) provided that it was only 100 million litres of petrol that was imported which is just about two days consumption. But the scarcity has persisted for a month and counting so it is not possible that a disruption in supply for a day or two will cause a month-long crisis which is yet to abate.
The truth which the Government of Nigeria will not confess to is that global supplies of crude and petroleum products are being impacted by the war in Russia and Ukraine. According to Reuters, Russia exports around 7 million barrels of oil per day, or 7% of global supply. The International Energy Agency (IEA) states that Russia is the world's largest exporter of oil to global markets and the second largest crude oil exporter behind Saudi Arabia. As a fallout from the Russian invasion of Ukraine, global oil companies have announced their exit from Russia including BP who exited their 30-year partnership with Russian company Rosneft with a financial hit of $ 25 billion which was followed almost immediately by Shell who exited all its Russian operations, including a major liquefied natural gas plant with non-current assets worth about $3 billion according to Reuters. When such a major oil supplier like Russia is ostracised by the market, it is bound to cause disruptions in global oil dynamics. When it comes to oil, anytime Russia sneezes the world catches cold which is afflicting Nigeria badly whether the Government wants to admit it or not!
But Nigeria has itself alone to blame for allowing the downstream sector of the petroleum industry to rot thus hanging the country dangerously at the mercy of suppliers of petroleum products. It is unfathomable why a major global supplier of crude oil like Nigeria will not refine her crude oil – Nigeria is the only major oil producer that is refining zero barrels and depending 100% on imported petroleum products. If the leaders of Nigeria had not before now calculated the risk of a major global event (like COVID which grounded all flights or a shipping blockade) that will prevent ships to sail and Nigeria is left with no petroleum products for weeks or months and the catastrophe it will cause to our economy, wellbeing and existence, then this Russia-Ukraine war must serve as a wake-up call!
The current fuel crisis has also exposed the NNPC that they do not keep strategic reserves of petroleum products. Global strategic petroleum reserves (GSPR) refer to crude oil inventories (or stockpiles) held by the government of a particular country, as well as private industry, to safeguard the economy and help maintain national security during an energy crisis. Strategic reserves are intended to be used to cover short-term supply disruptions. The current fuel crisis has revealed that Nigeria is perhaps the only oil major that is not keeping GSPR.
Nigeria only recently signed a petroleum industry bill when the world is switching to renewable energy which again shows a country steeped into the past refusing to move along with the world. Then the news broke in the last few days that Nigeria is about committing to nuclear power again a source of power that the world is moving away from. With abundant renewable sources – water, wind, sun, waves, biomass – it is incomprehensible why Nigeria’s leaders are not tapping into these low-hanging fruits to power the economy but instead are either looking to dirty fossil fuels or high-risk nuclear power.
Recommendations
1. The Government of Nigeria must take immediate steps to achieve petroleum products refining sufficiency and independence by leasing or selling the 4 refineries operated by the NNPC.
2. The Government must take seriously renewable energy by changing the name and remit of the NNPC to Nigerian National Energy Company Ltd (NNEC) with a firm focus on renewables and perhaps gas as a transition fuel.
3. Nigerian Government must take immediate steps to keep Global strategic petroleum reserves (GSPR) to ensure supply security in the crisis situations as currently faced with the global supply disruptions resulting from the Russia-Ukraine war.
4. The Nigerian Government must immediately without any further delays create the enabling environment for private sector participation in the downstream sector of the petroleum industry. There has never been a day Nigeria was unable to produce crude oil which requires a far greater degree of expertise, money and technology because the private sector is running the sector. But just to refine which is nothing more than to cook (heat) the crude and collect varying petroleum products at the different levels of temperature, a government controlled NNPC cannot do it. Same Government controlled entities cannot provide power! Nigerian Liquified Natural Gas Limited (NLNG) a government owned but privately run gas company is doing excellently well and paying dividends in billions of dollars to government coffers something the NNPC has not done since inception! So examples abound of the private sector running business better than government and the downstream sector will thrive under private ownership and/or management.
On this 8th Day of March, this column wishes and felicitates with our womenfolk on the International Women’s Day. A country where a male citizen marries a foreign wife and she is granted citizenship but a female citizen who marries a foreign husband is denied citizenship must change and very swiftly too.
References:
1. https://www.reuters.com/business/energy/oil-spikes-2008-highs-us-europe-mull-russian-oil-import-ban-iran-delay-2022-03-07/
2. https://www.iea.org/reports/russian-supplies-to-global-energy-markets/oil-market-and-russian-supply-2
3. https://www.reuters.com/business/energy/britains-bp-says-exit-stake-russian-oil-giant-rosneft-2022-02-27/
4. https://en.wikipedia.org/wiki/Global_strategic_petroleum_reserves
Agenda for In-coming Govts – It must be New Wine in New Wine Skins!
Date: 2024-04-08 Read More
Agenda for In-coming Govts – It must be New Wine in New Wine Skins!
Nick Agule
Twitter: @NickAgule
Email: [email protected]
Facebook: Nick Agule, FCA
23.05.2023
Introduction
Nigerians went to the polls on 25th February 2023 to elect a president and members of the national assembly. On the 18th of March 2023 it was the turn to elect governors and members of state assemblies. As the new leaders ready to take their oaths of office, this column sets the agenda for the next 4 years – the 11-point agenda.
1. Diaspora voting (political agenda) The incoming federal govt as a matter of priority and to win our confidence as diasporans must table an executive bill before the national assembly to amend the constitution of the federal republic of Nigeria to provide for diaspora voting. For us this is the main project that will lead to progress in other aspects of our country. Once political leaders in Nigeria know that they will be facing millions of diaspora votes that cannot be bought and cannot be rigged, we will begin to see good governance in Nigeria! As a diasporan, this is undoubtedly and indisputably our number 1 agenda for the incoming federal government.
2. Rule of law (political agenda) The difference between the UK where millions of Nigerians sojourn and Nigeria is the rule of law. As Nigerians we behave unruly in Lagos, get on a flight to London and behave very well once we arrive in the UK. The mental reset that happens airborne is that we know that in the UK you break the law, and you pay for it regardless of your status. Until we get Nigeria to this level of law enforcement, efforts by govt to reset the country will largely be in vain. The in-coming govts must begin law enforcement with themselves. Elected officials must declare their assets. Those breaking our laws must be dealt with regardless of their status and attachment to the leaders. Our judiciary must be allowed to dispense justice without looking at faces. The legislature must be given their independence. If the in-coming president and governors begin by fiddling with the leadership of the national and state assemblies respectively then we are not even ready for democracy yet. Fiddling with the leadership of the legislature by the executive arm of govt is like a driver disabling the brake pedal on his Ferrari! there can only be one outcome - accident! This is why it is troubling to hear people say the president-elect is to decide on the leadership of the national assembly. Those advocating these views are setting the president-elect for failure. Bottomline is that corruption is what’s killing Nigeria draining it of blood and only the rule of law will arrest the situation!
3. Electricity (economic agenda) At 3,000MW of electricity per day, the power supply in Nigeria is so abysmal there is no way the economy will jumpstart and thrive! what Nigeria has been trying to do over the past 60+ years is like a team of doctors trying to get a body that needs 200 pints of blood to function, to thrive and to flourish with only 3 pints of blood. It will never happen! that body will be largely in a coma! this is what is happening to our economy! India for example is supplying 400k MW daily to 1.4b people! if Nigeria were to supply India with power based on our output rating, we will be given them only 21k MW (as we are giving 3k MW to 200m people!). Meanwhile Nigeria is blessed with abundance of energy sources from gas (which we are tragically flaring) to renewables such as wind, sun, hydro and land for biomass! the in-coming govts must as a necessity declare a state of emergency in the power sector and attack the malaise in the same gusto that govt paid attention to Covid. If Nigeria gets even 30k MW daily for a start, the economy will take-off, with the private sector in the lead, creating humongous jobs and consequently shoring up govt revenues in leaps and bounds! Thankfully, President Muhammadu Buhari has assented to the constitutional amendment bill giving powers to States to establish independent electricity markets by generating, transmitting and distributing electricity in areas covered by the national grid in their states which hitherto was the exclusive preserve of the federal govt. States now no longer have an excuse not to power their economies! The federal govt should revisit the privatisation of the electricity sector by privatising transmission and restructuring distribution either for the existing DISCOs to sign technical partnerships or the licences re-awarded to global power sector operators who have the technical, financial and commercial pedigree to supply power to an economy of over 200 million people.
4. Security (political agenda) Govt as a matter of priority should declare a state of emergency in the security sector. The entire apparatchik of the security agencies must be relieved of their jobs and competent officers who love Nigeria above any ethnic or religious leanings to be appointed to restore security in all parts of Nigeria. Closer scrutiny and monitoring of the security votes at both federal and state levels should be intensified to ensure we have value for money. Without security it is impossible to get anything to work in Nigeria.
5. Agriculture (economic agenda) The mainstay of Nigeria's economy is our fertile lands from north to south and east to west. Everywhere in Nigeria agriculture is possible. The govt needs to take immediate steps to support farmers with mechanisation so that every available land in Nigeria is cultivated with machines. This way we will not only assure food sufficiency/security, but food exports will become Nigeria's highest forex earner. There are countries today including blocs like the EU who are phasing out the use of fossil fuels in few years to come, but no country can phase out food consumption. So, agriculture provides us with far better prospects for economic development than oil which the current govt is unfortunately expending humongous monies to explore for in places like Nasarawa state! The job creation capacity of agriculture is unquantifiable! Nigeria is blessed with an abundance of freshwater rivers all over the country. Each river is to be dammed to create an economy for fishing, portable water, irrigation, hydroelectricity and tourism. Agriculture alone is capable of taking off the streets all the unemployed youths we have roaming about in Nigeria today. With security sorted and mechanisation made available, agriculture will just boom! A low unemployment rate means no more idle hands to be used by evil people to perpetrate insecurity in Nigeria.
6. Infrastructure (economic agenda) A state of emergency needs to be declared on our infrastructure. The roads are collapsed. There is no rail service. Housing is unaffordable etc. Govt needs to focus on private sector participation by creating the enabling environment (transparency and accountability with investors). Just imagine if we begin by linking the federal capital to the 36 states capitals by rail for a start, this will facilitate the transportation of goods and passengers and create high quality jobs to jumpstart the economy.
7. Constitution review/electoral reforms (political agenda) For the past 24 years we have tried to implement a military junta contraption called a constitution. This was a document that Gen Abacha jumbled together to enforce his transmutation from a military junta to a civilian president where he will continue to exercise maximum control over Nigerians and our resources. That we have continued to use this document which even by its name is a scam - calling us a federal republic when in reality we are operating a unitary govt - must not be allowed to fester beyond 2024! Nigeria needs a brand-new constitution that will be put together by the people of Nigeria (another scam with the current contraption which says it's the people that put it together when in reality it was just 1 man hungry to perpetuate himself in power that did it) and caters for our agitations and aspirations.
8. Education/Healthcare (social agenda) Everywhere in the world including in the advanced nations, the 2 critical sectors that govts never completely let go to the private sector is education and healthcare because of their importance to human development. A citizenry that is illiterate and in poor health will under-perform, under-develop and under-deliver! In the UK for instance, the govt provides FREE HEALTHCARE at all levels – primary (GPs), secondary (hospitals) and tertiary (specialist hospitals) to all citizens. Equally the govt provides FREE EDUCATION to all children up to high school (A levels). Govt provides finance for university education such that a child from the poorest home can still attain their educational aspirations and the finance is paid back for several years but only after graduation and earnings at a particular threshold. The incoming govts must give immediate attention to these 2 key sectors to lift of the streets all the out of school children in Nigeria back to the classrooms and for Nigerians to begin to access quality healthcare. If the economy is jumpstarted, govt revenues will be shored up to fund education and healthcare even the more.
9. Gas (economic agenda) Gas is perhaps Nigeria’s richest resource but it’s also the one we tragically destroy instead of harnessing to unlock huge value from. The federal govt must as a priority take immediate steps to end gas flaring and convert the produced gas into other uses such as electricity generation, domestic gas supply, industrial gas supply, automotive gas fuel etc. In the UK, every building has gas piped into it just as water and electricity (gas is not bought in cylinders). Imagine the value that will be unlocked if Nigeria begins to pipe gas into every property beginning with our cosmopolitan mega cities. To convert gas to electricity requires only a tested and readily available piece of equipment – turbine – which when gas is piped into it, on the other side electricity is produced in plentiful. With gas piped to our industries and industrial layouts, there will be no need for diesel generators that cost a lot of money to buy, are expensive to maintain and very harmful to the environment. The gains from gas utilisation will be unquantifiable if tapped!
10. Refineries (economic agenda) It has been our collective shame as a nation that as one of the world’s largest producers of crude oil we have not refined a single barrel of crude oil for more than 20 years and counting. Govt must take immediate steps to transfer the 4 moribund refineries into the private sector either by outright sale, lease or concession. This singular step will end fuel scarcity, stop the crippling subsidy racketeering and save humongous costs of transporting crude to foreign refineries and then transporting products back to Nigeria. Thankfully Dangote refinery has come on stream to set the pace and the govt owned refineries must also follow.
11. Dual foreign exchange markets Nigeria is perhaps the only country aspiring to join the ranks of the developed nations that operates a dual foreign exchange (forex market) where an artificial market has been created by the Central Bank of Nigeria (CBN) where dollars are sold at huge discounts of about 50% of the market rates. This strange arrangement has created a big loophole where those privileged to have access to the dollars in the so-called official market simply round-trip it to the parallel market and walk away with humongous gains without lifting a finger to work. The CBN should be compelled to cancel this so-called official market so that there is a SINGLE market of dollar buyers and dollar sellers in Nigeria. If the Govt wants to support local industries who are struggling due to high forex rates then other avenues such as tax rebates, import waivers etc can be considered but giving them dollars at hugely discounted rates with the CBN unable to monitor the utilisation of the forex and thus unable to stop round-tripping is akin to robbing Peter (Nigerians) to pay Paul (the privileged).
Conclusion
I appeal to all Nigerians of all political persuasions to pray for the incoming leaders because if they succeed, we all succeed and if they fail, we all fail. Time for politics is over and now is time for governance and we all must have all our hands on deck to the change the narrative about Nigeria. I wish the incoming leaders well. God bless.
Twitter: @NickAgule
Email: [email protected]
Facebook: Nick Agule, FCA
23.05.2023
Introduction
Nigerians went to the polls on 25th February 2023 to elect a president and members of the national assembly. On the 18th of March 2023 it was the turn to elect governors and members of state assemblies. As the new leaders ready to take their oaths of office, this column sets the agenda for the next 4 years – the 11-point agenda.
1. Diaspora voting (political agenda) The incoming federal govt as a matter of priority and to win our confidence as diasporans must table an executive bill before the national assembly to amend the constitution of the federal republic of Nigeria to provide for diaspora voting. For us this is the main project that will lead to progress in other aspects of our country. Once political leaders in Nigeria know that they will be facing millions of diaspora votes that cannot be bought and cannot be rigged, we will begin to see good governance in Nigeria! As a diasporan, this is undoubtedly and indisputably our number 1 agenda for the incoming federal government.
2. Rule of law (political agenda) The difference between the UK where millions of Nigerians sojourn and Nigeria is the rule of law. As Nigerians we behave unruly in Lagos, get on a flight to London and behave very well once we arrive in the UK. The mental reset that happens airborne is that we know that in the UK you break the law, and you pay for it regardless of your status. Until we get Nigeria to this level of law enforcement, efforts by govt to reset the country will largely be in vain. The in-coming govts must begin law enforcement with themselves. Elected officials must declare their assets. Those breaking our laws must be dealt with regardless of their status and attachment to the leaders. Our judiciary must be allowed to dispense justice without looking at faces. The legislature must be given their independence. If the in-coming president and governors begin by fiddling with the leadership of the national and state assemblies respectively then we are not even ready for democracy yet. Fiddling with the leadership of the legislature by the executive arm of govt is like a driver disabling the brake pedal on his Ferrari! there can only be one outcome - accident! This is why it is troubling to hear people say the president-elect is to decide on the leadership of the national assembly. Those advocating these views are setting the president-elect for failure. Bottomline is that corruption is what’s killing Nigeria draining it of blood and only the rule of law will arrest the situation!
3. Electricity (economic agenda) At 3,000MW of electricity per day, the power supply in Nigeria is so abysmal there is no way the economy will jumpstart and thrive! what Nigeria has been trying to do over the past 60+ years is like a team of doctors trying to get a body that needs 200 pints of blood to function, to thrive and to flourish with only 3 pints of blood. It will never happen! that body will be largely in a coma! this is what is happening to our economy! India for example is supplying 400k MW daily to 1.4b people! if Nigeria were to supply India with power based on our output rating, we will be given them only 21k MW (as we are giving 3k MW to 200m people!). Meanwhile Nigeria is blessed with abundance of energy sources from gas (which we are tragically flaring) to renewables such as wind, sun, hydro and land for biomass! the in-coming govts must as a necessity declare a state of emergency in the power sector and attack the malaise in the same gusto that govt paid attention to Covid. If Nigeria gets even 30k MW daily for a start, the economy will take-off, with the private sector in the lead, creating humongous jobs and consequently shoring up govt revenues in leaps and bounds! Thankfully, President Muhammadu Buhari has assented to the constitutional amendment bill giving powers to States to establish independent electricity markets by generating, transmitting and distributing electricity in areas covered by the national grid in their states which hitherto was the exclusive preserve of the federal govt. States now no longer have an excuse not to power their economies! The federal govt should revisit the privatisation of the electricity sector by privatising transmission and restructuring distribution either for the existing DISCOs to sign technical partnerships or the licences re-awarded to global power sector operators who have the technical, financial and commercial pedigree to supply power to an economy of over 200 million people.
4. Security (political agenda) Govt as a matter of priority should declare a state of emergency in the security sector. The entire apparatchik of the security agencies must be relieved of their jobs and competent officers who love Nigeria above any ethnic or religious leanings to be appointed to restore security in all parts of Nigeria. Closer scrutiny and monitoring of the security votes at both federal and state levels should be intensified to ensure we have value for money. Without security it is impossible to get anything to work in Nigeria.
5. Agriculture (economic agenda) The mainstay of Nigeria's economy is our fertile lands from north to south and east to west. Everywhere in Nigeria agriculture is possible. The govt needs to take immediate steps to support farmers with mechanisation so that every available land in Nigeria is cultivated with machines. This way we will not only assure food sufficiency/security, but food exports will become Nigeria's highest forex earner. There are countries today including blocs like the EU who are phasing out the use of fossil fuels in few years to come, but no country can phase out food consumption. So, agriculture provides us with far better prospects for economic development than oil which the current govt is unfortunately expending humongous monies to explore for in places like Nasarawa state! The job creation capacity of agriculture is unquantifiable! Nigeria is blessed with an abundance of freshwater rivers all over the country. Each river is to be dammed to create an economy for fishing, portable water, irrigation, hydroelectricity and tourism. Agriculture alone is capable of taking off the streets all the unemployed youths we have roaming about in Nigeria today. With security sorted and mechanisation made available, agriculture will just boom! A low unemployment rate means no more idle hands to be used by evil people to perpetrate insecurity in Nigeria.
6. Infrastructure (economic agenda) A state of emergency needs to be declared on our infrastructure. The roads are collapsed. There is no rail service. Housing is unaffordable etc. Govt needs to focus on private sector participation by creating the enabling environment (transparency and accountability with investors). Just imagine if we begin by linking the federal capital to the 36 states capitals by rail for a start, this will facilitate the transportation of goods and passengers and create high quality jobs to jumpstart the economy.
7. Constitution review/electoral reforms (political agenda) For the past 24 years we have tried to implement a military junta contraption called a constitution. This was a document that Gen Abacha jumbled together to enforce his transmutation from a military junta to a civilian president where he will continue to exercise maximum control over Nigerians and our resources. That we have continued to use this document which even by its name is a scam - calling us a federal republic when in reality we are operating a unitary govt - must not be allowed to fester beyond 2024! Nigeria needs a brand-new constitution that will be put together by the people of Nigeria (another scam with the current contraption which says it's the people that put it together when in reality it was just 1 man hungry to perpetuate himself in power that did it) and caters for our agitations and aspirations.
8. Education/Healthcare (social agenda) Everywhere in the world including in the advanced nations, the 2 critical sectors that govts never completely let go to the private sector is education and healthcare because of their importance to human development. A citizenry that is illiterate and in poor health will under-perform, under-develop and under-deliver! In the UK for instance, the govt provides FREE HEALTHCARE at all levels – primary (GPs), secondary (hospitals) and tertiary (specialist hospitals) to all citizens. Equally the govt provides FREE EDUCATION to all children up to high school (A levels). Govt provides finance for university education such that a child from the poorest home can still attain their educational aspirations and the finance is paid back for several years but only after graduation and earnings at a particular threshold. The incoming govts must give immediate attention to these 2 key sectors to lift of the streets all the out of school children in Nigeria back to the classrooms and for Nigerians to begin to access quality healthcare. If the economy is jumpstarted, govt revenues will be shored up to fund education and healthcare even the more.
9. Gas (economic agenda) Gas is perhaps Nigeria’s richest resource but it’s also the one we tragically destroy instead of harnessing to unlock huge value from. The federal govt must as a priority take immediate steps to end gas flaring and convert the produced gas into other uses such as electricity generation, domestic gas supply, industrial gas supply, automotive gas fuel etc. In the UK, every building has gas piped into it just as water and electricity (gas is not bought in cylinders). Imagine the value that will be unlocked if Nigeria begins to pipe gas into every property beginning with our cosmopolitan mega cities. To convert gas to electricity requires only a tested and readily available piece of equipment – turbine – which when gas is piped into it, on the other side electricity is produced in plentiful. With gas piped to our industries and industrial layouts, there will be no need for diesel generators that cost a lot of money to buy, are expensive to maintain and very harmful to the environment. The gains from gas utilisation will be unquantifiable if tapped!
10. Refineries (economic agenda) It has been our collective shame as a nation that as one of the world’s largest producers of crude oil we have not refined a single barrel of crude oil for more than 20 years and counting. Govt must take immediate steps to transfer the 4 moribund refineries into the private sector either by outright sale, lease or concession. This singular step will end fuel scarcity, stop the crippling subsidy racketeering and save humongous costs of transporting crude to foreign refineries and then transporting products back to Nigeria. Thankfully Dangote refinery has come on stream to set the pace and the govt owned refineries must also follow.
11. Dual foreign exchange markets Nigeria is perhaps the only country aspiring to join the ranks of the developed nations that operates a dual foreign exchange (forex market) where an artificial market has been created by the Central Bank of Nigeria (CBN) where dollars are sold at huge discounts of about 50% of the market rates. This strange arrangement has created a big loophole where those privileged to have access to the dollars in the so-called official market simply round-trip it to the parallel market and walk away with humongous gains without lifting a finger to work. The CBN should be compelled to cancel this so-called official market so that there is a SINGLE market of dollar buyers and dollar sellers in Nigeria. If the Govt wants to support local industries who are struggling due to high forex rates then other avenues such as tax rebates, import waivers etc can be considered but giving them dollars at hugely discounted rates with the CBN unable to monitor the utilisation of the forex and thus unable to stop round-tripping is akin to robbing Peter (Nigerians) to pay Paul (the privileged).
Conclusion
I appeal to all Nigerians of all political persuasions to pray for the incoming leaders because if they succeed, we all succeed and if they fail, we all fail. Time for politics is over and now is time for governance and we all must have all our hands on deck to the change the narrative about Nigeria. I wish the incoming leaders well. God bless.
Petrol Subsidy – Nigeria’s Albatross!
Date: 2024-04-08 Read More
Petrol Subsidy – Nigeria’s Albatross!
Nick Agule
Twitter: @NickAgule
Email: [email protected]
10.08.2021
Introduction
Petrol subsidies gulp N150 billion every month in Nigeria! This startling and perturbing revelation was recently made by Zainab Ahmed the Minister of Finance, Budget and National Planning at a public consultative forum on the draft 2022-2024 medium-term expenditure framework/ fiscal strategy paper (MTEF/FSP).
According to the Minister, petrol subsidy does not benefit the average Nigerian but marketers who buy subsidised fuel from Nigeria and sell it in neighbouring countries at a higher price. And that the money used for the subsidies could be better applied to fund education, health, infrastructure, reduce borrowing and solve the crisis that states are having of not being able to pay salaries. The Minister further stated that it’s the car owners some with multiple cars that enjoy the subsidy as the common man would go with public transport that use diesel that has long had subsidy removed. The minister further disclosed that discussions are ongoing with President Muhammadu Buhari on measures to cushion the effects on Nigerians when petrol subsidy is finally removed. Despite this, the Ministry has still projected the fuel subsidy cost of at least N900 billion in 2022 Federal Government (FG) budget.
In this week’s column, we lend our full support to the policy direction of the FG on removal of petrol subsidies as it is the most sensible thing to do in the current realities of Nigeria’s economy.
Scaremongering by Beneficiaries of the petrol subsidy scam!
Anytime the FG attempts to remove subsidies on petrol, there is an orchestrated scaremongering campaign by beneficiaries of the scam led chiefly by the petrol marketers who find the labour unions and other civil society organisations as willing partners to protest the removal. The usual reasons adduced by the protesters of the subsidy removal are premised on inflation which will lead to weakening of purchasing power and consequently increase poverty especially of the already poor! But a scrutiny will expose these reasons as shallow, and a sham meant to hoodwink the uninformed into backing the protests. Let us examine some of the factors:
1. Food is more essential to life than petrol – There are products that are more essential to life than petrol such as food and drugs, yet these products don’t enjoy subsidies leaving their prices to be determined by market forces. Yet the poor who consume these goods have not experienced an armageddon as the scaremongers suggest.
2. The poor don’t own cars – a walk through any posh estate or neighbourhood in Nigeria will find multiple cars sometimes up to 10 garaged in front of each home. These are the people that petrol subsidy benefits. The poor people that the scaremongers say will experience calamity if petrol subsidy is removed don’t even own cars that use petrol!
3. The fuel used by the poor does not enjoy subsidy – poor people largely use public transportation to move about and the buses and trucks that convey them use diesel which has long had subsidies removed. Also, the poor people use kerosene for cooking and lighting which again has had subsidies long removed. So, the people the scaremongers say will be adversely affected by the removal of subsidies don’t even use the petrol!
4. Petrol price does not affect food inflation – Farm equipment used in the production of food use diesel and not petrol. Same with food processing plants. Food stuffs and finished products are also transported by trucks which use diesel and not petrol. Since subsidy has already been removed on diesel, it means current food prices already have the negative impact of the removal inbuilt and a removal of subsidy on petrol will not cause any significant increases in the prices of food.
5. Imported goods don’t use petrol – Nigeria is a heavy import dependent economy and an increase in the pump prices of petrol will have little effect on the prices of imported goods consumed by the poor. Rather the collapse in the exchange rate is the cause of the inflationary pressures on food prices imported into the country.
6.Government does not set prices for all other goods and services – All other goods and services consumed by the poor in Nigeria are paid for at market determined prices which the Government does not bother about. It is therefore strange that the FG has taken interest in a particular product – petrol – and insists that it must be sold at a fixed price to which a whole agency of government – the Petroleum Products Pricing Regulatory Agency (PPPRA) is in place to fix this price. It is even stranger for the FG to insist that once fixed, the pump price of petrol must be sold at the same rate in all the geographic space called Nigeria to which another agency of government – Petroleum Equalisation Fund (PEF) - is tasked with this responsibility. But the same FG sees a cow sold for N50,000 in Katsina and the same cow sold for N300,000 in Lagos without a bother about the poor who consume beef! the same FG sees a tuber of yam sold for N50 in Benue and same tuber sold for N1,000 in Port Harcourt without coming to the aid of the poor who will not survive without food! So, what is special about petrol that it is the ONLY product in Nigeria which the FG insists on fixing the price leading to trillions paid in subsidies yearly and 2 huge agencies of the FG setup to fix and ensure uniformity of the prices across the nation?
7. Neighbouring countries are paying market prices for petrol – All the neighbouring countries to Nigeria whose economies are smaller and weaker than Nigeria’s are paying market determined prices for petrol and yet they have not collapsed. This reality exposes the lies in the scaremongers’ story that Nigeria’s economy will be adversely affected if petrol is sold at market determined prices. Nigeria’s inflation rate is higher than most of her neighbours which is a clear testament to the fact that petrol prices are not a significant causative factor of inflationary pressures.
8. Petrol subsidies is robbing the poor to pay the rich – Over 90% of cars in Nigeria are owned by the middle to the upper class! The FG paying trillions of Naira in petrol subsidies amounts to taking money that should be used in providing welfare to the poor and paying it to the rich. This is contrary to the practice in all the developed world where the governments tax the rich to fund the poor. In the UK for instance, the government levies a duty of about 40% on every litre of petrol sold and the money is used to fund public transportation for the poor! If Nigeria must develop and take her place in the comity of nations, we must implement economic policies that are working for the nations we aspire to join their ranks.
9. Petrol subsidies is a cesspool of corruption – Data exists of cases of humongous corrupt practices in the petrol subsidy scheme including criminal convictions and many more cases in courts. Removal of subsidies on petrol will be the final nail in the coffin of corruption in the petrol subsidy scheme.
10. Nigeria is subsidising petrol for the West African sub-region – Given the porous nature of Nigeria’s borders, a subsidy scheme that makes petrol prices cheaper in Nigeria in comparison to the neighbouring countries is an incentive for cross-border ferrying of subsidised petrol from Nigeria to other countries. Nigeria is therefore effectively subsidising petrol across the entire breath of the West African sub-region. Removal of subsidies will make smuggling unattractive, and the menace will die a natural death.
Conclusion
Nigeria’s FG must show courage to take the bulls by the horns and remove subsidies on petrol once and for all. The initial price shocks will not take long before they will stabilise, and petrol will sell at market determined prices. When subsidies on diesel and kerosene were removed, the economy has since adjusted to the new prices and life is going on. If Nigeria’s neighbours can pay market prices for petrol, there is no justification for the continued haemorrhage of trillions of Naira that should be used in funding infrastructure and welfare schemes for the poor to be used to corruptly enrich those who benefit from the petrol subsidy scam!
Twitter: @NickAgule
Email: [email protected]
10.08.2021
Introduction
Petrol subsidies gulp N150 billion every month in Nigeria! This startling and perturbing revelation was recently made by Zainab Ahmed the Minister of Finance, Budget and National Planning at a public consultative forum on the draft 2022-2024 medium-term expenditure framework/ fiscal strategy paper (MTEF/FSP).
According to the Minister, petrol subsidy does not benefit the average Nigerian but marketers who buy subsidised fuel from Nigeria and sell it in neighbouring countries at a higher price. And that the money used for the subsidies could be better applied to fund education, health, infrastructure, reduce borrowing and solve the crisis that states are having of not being able to pay salaries. The Minister further stated that it’s the car owners some with multiple cars that enjoy the subsidy as the common man would go with public transport that use diesel that has long had subsidy removed. The minister further disclosed that discussions are ongoing with President Muhammadu Buhari on measures to cushion the effects on Nigerians when petrol subsidy is finally removed. Despite this, the Ministry has still projected the fuel subsidy cost of at least N900 billion in 2022 Federal Government (FG) budget.
In this week’s column, we lend our full support to the policy direction of the FG on removal of petrol subsidies as it is the most sensible thing to do in the current realities of Nigeria’s economy.
Scaremongering by Beneficiaries of the petrol subsidy scam!
Anytime the FG attempts to remove subsidies on petrol, there is an orchestrated scaremongering campaign by beneficiaries of the scam led chiefly by the petrol marketers who find the labour unions and other civil society organisations as willing partners to protest the removal. The usual reasons adduced by the protesters of the subsidy removal are premised on inflation which will lead to weakening of purchasing power and consequently increase poverty especially of the already poor! But a scrutiny will expose these reasons as shallow, and a sham meant to hoodwink the uninformed into backing the protests. Let us examine some of the factors:
1. Food is more essential to life than petrol – There are products that are more essential to life than petrol such as food and drugs, yet these products don’t enjoy subsidies leaving their prices to be determined by market forces. Yet the poor who consume these goods have not experienced an armageddon as the scaremongers suggest.
2. The poor don’t own cars – a walk through any posh estate or neighbourhood in Nigeria will find multiple cars sometimes up to 10 garaged in front of each home. These are the people that petrol subsidy benefits. The poor people that the scaremongers say will experience calamity if petrol subsidy is removed don’t even own cars that use petrol!
3. The fuel used by the poor does not enjoy subsidy – poor people largely use public transportation to move about and the buses and trucks that convey them use diesel which has long had subsidies removed. Also, the poor people use kerosene for cooking and lighting which again has had subsidies long removed. So, the people the scaremongers say will be adversely affected by the removal of subsidies don’t even use the petrol!
4. Petrol price does not affect food inflation – Farm equipment used in the production of food use diesel and not petrol. Same with food processing plants. Food stuffs and finished products are also transported by trucks which use diesel and not petrol. Since subsidy has already been removed on diesel, it means current food prices already have the negative impact of the removal inbuilt and a removal of subsidy on petrol will not cause any significant increases in the prices of food.
5. Imported goods don’t use petrol – Nigeria is a heavy import dependent economy and an increase in the pump prices of petrol will have little effect on the prices of imported goods consumed by the poor. Rather the collapse in the exchange rate is the cause of the inflationary pressures on food prices imported into the country.
6.Government does not set prices for all other goods and services – All other goods and services consumed by the poor in Nigeria are paid for at market determined prices which the Government does not bother about. It is therefore strange that the FG has taken interest in a particular product – petrol – and insists that it must be sold at a fixed price to which a whole agency of government – the Petroleum Products Pricing Regulatory Agency (PPPRA) is in place to fix this price. It is even stranger for the FG to insist that once fixed, the pump price of petrol must be sold at the same rate in all the geographic space called Nigeria to which another agency of government – Petroleum Equalisation Fund (PEF) - is tasked with this responsibility. But the same FG sees a cow sold for N50,000 in Katsina and the same cow sold for N300,000 in Lagos without a bother about the poor who consume beef! the same FG sees a tuber of yam sold for N50 in Benue and same tuber sold for N1,000 in Port Harcourt without coming to the aid of the poor who will not survive without food! So, what is special about petrol that it is the ONLY product in Nigeria which the FG insists on fixing the price leading to trillions paid in subsidies yearly and 2 huge agencies of the FG setup to fix and ensure uniformity of the prices across the nation?
7. Neighbouring countries are paying market prices for petrol – All the neighbouring countries to Nigeria whose economies are smaller and weaker than Nigeria’s are paying market determined prices for petrol and yet they have not collapsed. This reality exposes the lies in the scaremongers’ story that Nigeria’s economy will be adversely affected if petrol is sold at market determined prices. Nigeria’s inflation rate is higher than most of her neighbours which is a clear testament to the fact that petrol prices are not a significant causative factor of inflationary pressures.
8. Petrol subsidies is robbing the poor to pay the rich – Over 90% of cars in Nigeria are owned by the middle to the upper class! The FG paying trillions of Naira in petrol subsidies amounts to taking money that should be used in providing welfare to the poor and paying it to the rich. This is contrary to the practice in all the developed world where the governments tax the rich to fund the poor. In the UK for instance, the government levies a duty of about 40% on every litre of petrol sold and the money is used to fund public transportation for the poor! If Nigeria must develop and take her place in the comity of nations, we must implement economic policies that are working for the nations we aspire to join their ranks.
9. Petrol subsidies is a cesspool of corruption – Data exists of cases of humongous corrupt practices in the petrol subsidy scheme including criminal convictions and many more cases in courts. Removal of subsidies on petrol will be the final nail in the coffin of corruption in the petrol subsidy scheme.
10. Nigeria is subsidising petrol for the West African sub-region – Given the porous nature of Nigeria’s borders, a subsidy scheme that makes petrol prices cheaper in Nigeria in comparison to the neighbouring countries is an incentive for cross-border ferrying of subsidised petrol from Nigeria to other countries. Nigeria is therefore effectively subsidising petrol across the entire breath of the West African sub-region. Removal of subsidies will make smuggling unattractive, and the menace will die a natural death.
Conclusion
Nigeria’s FG must show courage to take the bulls by the horns and remove subsidies on petrol once and for all. The initial price shocks will not take long before they will stabilise, and petrol will sell at market determined prices. When subsidies on diesel and kerosene were removed, the economy has since adjusted to the new prices and life is going on. If Nigeria’s neighbours can pay market prices for petrol, there is no justification for the continued haemorrhage of trillions of Naira that should be used in funding infrastructure and welfare schemes for the poor to be used to corruptly enrich those who benefit from the petrol subsidy scam!
The Use of Social Media and the Costs to the Economy
Nick Agule
Twitter: @NickAgule
Email: [email protected]
Facebook: Nick Agule, FCA
16.11.2021
Introdu...
Twitter: @NickAgule
Email: [email protected]
Facebook: Nick Agule, FCA
16.11.2021
Introdu...
Date: 2024-04-08 Read More
The Use of Social Media and the Costs to the Economy
Nick Agule
Twitter: @NickAgule
Email: [email protected]
Facebook: Nick Agule, FCA
16.11.2021
Introduction
Recently I had a need to access the WhatsApp group for my class at St John's Seminary, Wonersh in Surrey, England, and the last time a post was made in the group was on July 20, 2021!
Instructively it's important to note that the Admin of this group (which I am one of them) did not need to make any rules about what members are to post and what not to post to the group. There was no need for the Admin to threaten sanctions against erring members. Since the group is for a class at the Seminary, people on their own volition post only matters related to the class. Even the Queen's husband died, there is Covid in the land, Boris Johnson is doing or not doing what is expected of him, an MP was murdered, birthdays have come and gone, anniversaries have been celebrated, jokes are there, daily or Sunday sermons are preached but from July to November (5 months) no single message was posted to the group about these happenings in England because nobody had anything RELATED TO THE GROUP to post as there are groups for different purposes! The Admin have not been busy monitoring the group so that violators will be sanctioned!
The discipline of WhatsApp group members as highlighted above is totally at variance with the usage of the app in Nigeria where despite different WhatsApp groups been setup for different purposes, members post any and everything under the sun to all groups regardless of the aims and objectives of the groups. The Admin for Nigerian WhatsApp groups first have to make rules on what to post or not but these rules are blatantly disobeyed and the Admins are always busy scanning through hundreds or even thousands of messages to police the groups. The sad thing is that the violators of these simple rules are expected to be responsible citizens such as mothers and fathers, professors, medical doctors, lawyers, accountants, military and police officers etc. Even the clergy and religious are not left out either.
When a typical Nigerian WhatsApp account is accessed, it is common to see hundreds of messages waiting in so many groups but 99% of these messages are forwarded, there is hardly anything original! People are lazy and cannot think, compose and write original thoughts on anything! It is like we all now have PhDs in forwarding technology! The worst part is that we don't even bother to double check, do due diligence or confirm the contents of the messages we are forwarding thus have unknowingly turned ourselves into accomplices of criminals who are out to harm people online. So, clear 419 job adverts with a url such as www.nigeriajobs.com/firs purporting to be FIRS recruitment is quickly forwarded and goes viral very quickly. Common cybersense should warn that the domain name nigeriajobs.com is not the official FIRS domain which is www.firs.gov.ng and that the nigeriajobs.com domain name though with an extension /fir does not and cannot make it official FIRS publication.
The other terrible thing with Nigerians use of WhatsApp is that our sense of cybersecurity is zero! WhatsApp has made it possible that you can transfer your account from one phone to another. When you want to do this transfer, WhatsApp will send a code to the old phone which you are to apply to the new phone to move your WhatsApp account to the new phone. Now when criminals get your number (which we supply freely on social media when someone says they want to dash free data or things like that) they setup a WhatsApp account on their phone using your number. WhatsApp thinks it's you who wants to transfer your account, so a code is sent to your phone. The criminal needs that code to steal your WhatsApp account, so the criminal puts a bold call to you and says there's an online meeting bla bla and they need you to send them the code so that they'll register you for the meeting. Profs, Drs, Barrs etc without interrogating this criminal just read out the code to them! Once the criminal enters the code on their phone, your WhatsApp account has left your phone to the criminal's phone. People in your group will just see a message that your number has changed to so and so number. The criminal is busy reading all your WhatsApp messages, if they have enough information they can steal your money in the bank, they also infiltrate your WhatsApp groups and begin to call more people asking them for codes. Some of the criminals even blackmail you for ransoms if they see shady dealings in your WhatsApp messages. With your WhatsApp account in their hands, there are endless possibilities of what crime they can perpetrate with your data.
Anytime someone posts on social media that their accounts have been hacked and advising friends are to beware, it is a confirmation that they behaved recklessly online and thus allowed some miseducated liferals to scam them. Simple cybersecurity defence measures like 2-factor authentication would have mitigated against such a risk!
The Downsides of the Abuse of WhatsApp Groups:
Unfortunately, the abuse of social media platforms such as WhatsApp in Nigeria has negative implications for the individuals, businesses and the nation including the following.
1. Too much junk forwarded to WhatsApp groups keeps Nigerians always on their phones scrolling through the messages because there's just too much garbage which people have to sieve through to avoid missing something important. People sit in important meetings and functions but are fixated on their phones. People are on social outings, but they aren't talking to each other because they are on their phones! Parents are paying no attention to kids because the phones are engaging both! Even at places of worship, people pull out their phones and are scrolling through it. There is so much time spent on the phones going through junk that could otherwise have been committed to more productive work.
2. Constantly being on our phones robs us of thinking and reflective times. The biggest ideas are birthed in our quiet moments, but social media contains so much noise that we are no longer thinking.
3. It costs money to buy data to access WhatsApp and other social media handles. With so much junk images and videos, Nigerians are throwing trillions of Naira down the drain without enjoying value for money.
4. Constant access to social media affects our mental health. We become addicted. Then some of the contents erode our long-held principles and values and we become junkies to manipulators who brainwash us with their ideologies. In tragic cases people have taken their lives spurred on by social media con messages.
5. Relationships are strained and even broken because we are paying too much attention to our phones instead of our partners!
6. National productivity is affected because workers are spending too much time on social media instead of delivering on their job responsibilities.
7. Social media affects driver safety too as accidents have happened because people were paying attention to their phones instead of on the roads. Other industrial and domestic accidents have happened because of loss of attention by workers who are distracted by the content on their phones.
Conclusion
Social media is a great innovation because opportunities and long lasting personal and business relationships are built and sustained. However, the wrong use of social media as highlighted in this article has negative consequences which must be avoided. One way to overcome addiction to social media is to set aside a specific time daily for social media access and keep strictly to it. Also, members of WhatsApp groups should exercise restraint, decorum and discipline in the use of the groups.
Twitter: @NickAgule
Email: [email protected]
Facebook: Nick Agule, FCA
16.11.2021
Introduction
Recently I had a need to access the WhatsApp group for my class at St John's Seminary, Wonersh in Surrey, England, and the last time a post was made in the group was on July 20, 2021!
Instructively it's important to note that the Admin of this group (which I am one of them) did not need to make any rules about what members are to post and what not to post to the group. There was no need for the Admin to threaten sanctions against erring members. Since the group is for a class at the Seminary, people on their own volition post only matters related to the class. Even the Queen's husband died, there is Covid in the land, Boris Johnson is doing or not doing what is expected of him, an MP was murdered, birthdays have come and gone, anniversaries have been celebrated, jokes are there, daily or Sunday sermons are preached but from July to November (5 months) no single message was posted to the group about these happenings in England because nobody had anything RELATED TO THE GROUP to post as there are groups for different purposes! The Admin have not been busy monitoring the group so that violators will be sanctioned!
The discipline of WhatsApp group members as highlighted above is totally at variance with the usage of the app in Nigeria where despite different WhatsApp groups been setup for different purposes, members post any and everything under the sun to all groups regardless of the aims and objectives of the groups. The Admin for Nigerian WhatsApp groups first have to make rules on what to post or not but these rules are blatantly disobeyed and the Admins are always busy scanning through hundreds or even thousands of messages to police the groups. The sad thing is that the violators of these simple rules are expected to be responsible citizens such as mothers and fathers, professors, medical doctors, lawyers, accountants, military and police officers etc. Even the clergy and religious are not left out either.
When a typical Nigerian WhatsApp account is accessed, it is common to see hundreds of messages waiting in so many groups but 99% of these messages are forwarded, there is hardly anything original! People are lazy and cannot think, compose and write original thoughts on anything! It is like we all now have PhDs in forwarding technology! The worst part is that we don't even bother to double check, do due diligence or confirm the contents of the messages we are forwarding thus have unknowingly turned ourselves into accomplices of criminals who are out to harm people online. So, clear 419 job adverts with a url such as www.nigeriajobs.com/firs purporting to be FIRS recruitment is quickly forwarded and goes viral very quickly. Common cybersense should warn that the domain name nigeriajobs.com is not the official FIRS domain which is www.firs.gov.ng and that the nigeriajobs.com domain name though with an extension /fir does not and cannot make it official FIRS publication.
The other terrible thing with Nigerians use of WhatsApp is that our sense of cybersecurity is zero! WhatsApp has made it possible that you can transfer your account from one phone to another. When you want to do this transfer, WhatsApp will send a code to the old phone which you are to apply to the new phone to move your WhatsApp account to the new phone. Now when criminals get your number (which we supply freely on social media when someone says they want to dash free data or things like that) they setup a WhatsApp account on their phone using your number. WhatsApp thinks it's you who wants to transfer your account, so a code is sent to your phone. The criminal needs that code to steal your WhatsApp account, so the criminal puts a bold call to you and says there's an online meeting bla bla and they need you to send them the code so that they'll register you for the meeting. Profs, Drs, Barrs etc without interrogating this criminal just read out the code to them! Once the criminal enters the code on their phone, your WhatsApp account has left your phone to the criminal's phone. People in your group will just see a message that your number has changed to so and so number. The criminal is busy reading all your WhatsApp messages, if they have enough information they can steal your money in the bank, they also infiltrate your WhatsApp groups and begin to call more people asking them for codes. Some of the criminals even blackmail you for ransoms if they see shady dealings in your WhatsApp messages. With your WhatsApp account in their hands, there are endless possibilities of what crime they can perpetrate with your data.
Anytime someone posts on social media that their accounts have been hacked and advising friends are to beware, it is a confirmation that they behaved recklessly online and thus allowed some miseducated liferals to scam them. Simple cybersecurity defence measures like 2-factor authentication would have mitigated against such a risk!
The Downsides of the Abuse of WhatsApp Groups:
Unfortunately, the abuse of social media platforms such as WhatsApp in Nigeria has negative implications for the individuals, businesses and the nation including the following.
1. Too much junk forwarded to WhatsApp groups keeps Nigerians always on their phones scrolling through the messages because there's just too much garbage which people have to sieve through to avoid missing something important. People sit in important meetings and functions but are fixated on their phones. People are on social outings, but they aren't talking to each other because they are on their phones! Parents are paying no attention to kids because the phones are engaging both! Even at places of worship, people pull out their phones and are scrolling through it. There is so much time spent on the phones going through junk that could otherwise have been committed to more productive work.
2. Constantly being on our phones robs us of thinking and reflective times. The biggest ideas are birthed in our quiet moments, but social media contains so much noise that we are no longer thinking.
3. It costs money to buy data to access WhatsApp and other social media handles. With so much junk images and videos, Nigerians are throwing trillions of Naira down the drain without enjoying value for money.
4. Constant access to social media affects our mental health. We become addicted. Then some of the contents erode our long-held principles and values and we become junkies to manipulators who brainwash us with their ideologies. In tragic cases people have taken their lives spurred on by social media con messages.
5. Relationships are strained and even broken because we are paying too much attention to our phones instead of our partners!
6. National productivity is affected because workers are spending too much time on social media instead of delivering on their job responsibilities.
7. Social media affects driver safety too as accidents have happened because people were paying attention to their phones instead of on the roads. Other industrial and domestic accidents have happened because of loss of attention by workers who are distracted by the content on their phones.
Conclusion
Social media is a great innovation because opportunities and long lasting personal and business relationships are built and sustained. However, the wrong use of social media as highlighted in this article has negative consequences which must be avoided. One way to overcome addiction to social media is to set aside a specific time daily for social media access and keep strictly to it. Also, members of WhatsApp groups should exercise restraint, decorum and discipline in the use of the groups.
Understanding Foreign Exchange, External Reserves and the Naira Exchange Rate – A Rejoinder
Date: 2024-04-08 Read More
Understanding Foreign Exchange, External Reserves and the Naira Exchange Rate – A Rejoinder
Nick Agule
Twitter: @NickAgule
Email: [email protected]
Facebook: Nick Agule FCA
09.11.2021
Prof Obadan was my best economics teacher at the University of Benin (Uniben). Soft spoken but highly articulate and intelligent, he was the real deal and made plenty sense always in and out of the classroom and I looked forward to his lectures. Unsurprisingly I scored good grades in his courses as I am someone who relied 70% on my lecturers and 30% on my own reading, thus scored high when the lecturers were sound and low when they were not good enough!
But I can't help but disagree with the erudite Prof on several counts in his article titled “Understanding Foreign Exchange, External Reserves and the Naira Exchange Rate.” For want of time and not to make it long, I'll not address all my areas of disagreement. I am often put off reading long write-ups (even though I am a chief culprit) but I read this piece to the end because Prof Obadan wrote it!
The Prof’s article can be accessed via this link: https://www.vanguardngr.com/.../understanding-foreign.../
My first area of disagreement with the Prof is on foreign exchange (forex) management. What Prof describes in his article is exactly what the Vice President of Nigeria (VP) is taking issues with. Currently when we earn dollars mainly from crude oil sales, the Central Bank of Nigeria (CBN) dishes out these dollars to importers and those needing dollars for assorted reasons (the oil dollars thus become ‘OUR’ dollars). But when these importers and exporters earn dollars, they keep it as ‘THEIR’ dollars! e.g. to pay school fees, the CBN doles out ‘OUR’ dollars to parents but when the students graduate and start sending dollars to the parents, they take it as ‘THEIR’ dollars and don't drop it in the ‘OUR’ dollar pot to fund fees for others but take it to the parallel market to sell! This CBN policy of issuing out ‘OUR’ dollars to strengthen the value of the naira has rather crashed the NGN from N0.70/$ to N570/$ today. The Prof and his colleagues on the board of the CBN must listen to the VP who is saying, let the Federal Government (FG) keep her dollars for government business and allow a free market where those with dollars (and many exist who earn far more than the government in dollars e.g. the upstream oil companies) trade the dollars with those who need dollars. So instead of the CBN doling out ‘OUR’ dollars to buyers to pay school fees, medical bills, travel costs, imports etc, let these buyers approach those with dollars and buy from them and this will reveal the true value of the naira and the CBN will no longer have to put pressure on the foreign reserves to defend the value of the naira! Unfortunately, Prof Obadan prefers a continuation of the old way that has led us to this N570/$ point. We don’t hear of the Bank of England doling out dollars or Euros to Bureau De Change (BDCs) in the UK or the Federal Reserve Bank doling out pounds sterling in the same way. Neither do we hear of these central banks allocating forex to their nationals who want to pay school fees, medical bills, mortgages, tourism etc abroad! The BDCs in the UK serve as intermediaries between those with pounds needing dollars and those with dollars needing pounds! It’s the same with BDCs in the US and elsewhere! The CBN must stop becoming a BDC and focus on its core job of monetary policy and maintaining financial system stability!
Prof calls the parallel market an illegal market! Haba! This is wishful thinking. Currently the CBN maintains a list of approved items for allocation of forex. Something like cars is not on the list. Could Prof please tell how an importer of cars is to source for US Dollars (USD) to pay for his goods as the CBN will not issue dollars to him? The parallel market is the only source for this importer and it's confusing why Prof will derisively refer to it as an illegal market. Is Prof suggesting that this car importer is engaging in an illegal activity by sourcing his dollars from the parallel market? Policy makers must not live in such denial. For so long as the CBN does not have ALL import items on its list of approved items for forex issuance, there will continue to exist a parallel market! Even for items on the approved list like Personal Travel Allowance (PTA) which the CBN restricts to $4,000 per quarter, how else can a traveller source for more if their needs exceed what is issued by the CBN? It must be the parallel market except the CBN mandates that no traveller in Nigeria will spend more than $4,000 on their foreign travels in any given quarter else they are engaging in an illegal activity by sourcing for dollars elsewhere.
Prof suggests a revival and rebuilding of the productive sectors of the economy, but the question is how? And here Prof like all other policy makers has ignored the elephant in the room - electricity - which is what's needed to revive and rebuild the productive sector. In fact, Prof gave kudos to the Govt for genuine efforts to develop domestic production structures but has failed to realise that this Govt in the nearly 7 years of its existence has not added a single MW of electricity to the supply chain! What then does the Prof take to be genuine efforts? Is it the deteriorating insecurity that has closed farming and other productive activities or the unpoliced unproductive sit-at-home orders in the East?
I am pressed to ask where has Prof been that he says increased oil prices leads to a stronger naira? Does he not know that the entire dollar earnings from crude sales are used to import petroleum products and gas? Empirically Prof can see that oil is currently at above $80/bbl but naira is depreciating so Prof's theory has failed empirical test!
Prof proffers as a solution the use of moral suasion to encourage Nigerians to patronise homemade goods but then why is the CBN at whose board he sits encouraging Nigerians to patronise foreign schools, medical facilities, travel, mortgages etc by draining foreign reserves to issue them dollars to pay for their choice of foreign over Nigerian made? How can the Prof be saying one thing and doing the direct opposite at the CBN boardroom?
Lastly did the Prof deliberately leave out his board membership of the CBN in his short profile at the end of his piece? If so, for what reasons?
Bottomline is that we have been doing the same thing Prof narrates in his article for over 60 years with colossal negative results with the naira depreciating from N0.70/$ in the 70s to N570/$ today. How can we then be doing the same thing and expecting different results, it is said this is a tell-tale sign of insanity! As for those analysts who fear that if the VP’s apt suggestion is implemented, there will be Armageddon, let's understand that the Nigerian economy though virgin and weak is very resilient! If someone said 7 years ago when exchange rate was N150/$ that it'll hit N580/$, I am sure these analysts would have said the economy will collapse but here we are managing with it and moving on. Same way we are holding on with nearly 20% inflation and nearly 50% unemployment rate! Therefore, if the VP’s suggestion is carried and the naira experiences a temporary devaluation, the ever-resilient economy will carry it but, in the end, things will correct more fundamentally, and we will be the better for it. Sometimes surgeons amputate limbs to save lives and make them better! The scaremongering about devaluation that has trailed the VP’s deep-rooted suggested solution to tackle the forex debacle more permanently and sustainably in Nigeria is highly unnecessary!
There are some analysts who think the naira will go on a free fall if the VP’s suggestion sees the light of the day, but I can confirm to them that there will be no sustained free fall of naira instead people will begin to look inwards, suddenly our schools and hospitals will be good enough. Innosons motors will just be fine and Obudu cattle ranch will be a choice over Disney world! Local rice will magically begin to taste better than imported rice! Local tailors will be chosen over foreign brands etc! When these choices change from foreign to local and demand for dollars crashes, the exchange rate will correct by itself! We have been living a false life for too long and I hear the VP saying let’s get real by taking tough decisions! Hard, difficult and painful decisions but the result will be great for the nation and all of us!
So far, the CBN and the Govt of Nigeria are fighting to strengthen the naira at far downstream and it'll only be a losing battle! If they want to arrest the flood drifting the naira away, they need to take the fight upstream by:
1. Fight power cuts to energise the economy (an economy needing 200GW of electricity being fed with 4GW is a non-starter!)
2. Energised economy will boost production
3. Boosted production will end imports
4. No more imports means no appetite for the dollars
5. Low appetite for dollars means fall in value of the dollar against the naira! Naira wins! Nigeria wins!!
It's not by fighting AbokiFx or draining the external reserves to artificially shore-up the value of the naira!!! Unfortunately, and tragically, nobody in leadership in Nigeria is taking step 1! Even state govts have taken their eyes off the ball of step 1 else they could be commissioning independent power plants fired by gas or renewable energy for their states! But nobody in Nigeria including the CBN Gov, Min of Finance, the President etc understands the importance of step 1 without which the economy will NEVER do well!!!
The FG understood that COVID-19 was a risk, and a high-powered presidential taskforce is in place that meets every weekday and reports to the president on a regular basis.
However, and tragically too, power cuts (insufficient electricity) pose a greater danger to Nigerians and our economy far much more than COVID has and will ever do! To date COVID has killed less than 3,000 Nigerians whereas insufficient electricity (power cuts) kills millions of Nigerians and businesses every year!
So really what is needed is a powerful presidential taskforce on electricity! There are two bottlenecks with electricity in Nigeria – transmission which is still in the hands of government and distribution which was handed to politically exposed persons with no pedigree, funding and technical expertise to run a power business. Once the FG exercises courage and debottlenecks these two inhibiting factors, Nigeria will take off and the Naira will achieve parity with the Dollar in under 5 years!!!
Twitter: @NickAgule
Email: [email protected]
Facebook: Nick Agule FCA
09.11.2021
Prof Obadan was my best economics teacher at the University of Benin (Uniben). Soft spoken but highly articulate and intelligent, he was the real deal and made plenty sense always in and out of the classroom and I looked forward to his lectures. Unsurprisingly I scored good grades in his courses as I am someone who relied 70% on my lecturers and 30% on my own reading, thus scored high when the lecturers were sound and low when they were not good enough!
But I can't help but disagree with the erudite Prof on several counts in his article titled “Understanding Foreign Exchange, External Reserves and the Naira Exchange Rate.” For want of time and not to make it long, I'll not address all my areas of disagreement. I am often put off reading long write-ups (even though I am a chief culprit) but I read this piece to the end because Prof Obadan wrote it!
The Prof’s article can be accessed via this link: https://www.vanguardngr.com/.../understanding-foreign.../
My first area of disagreement with the Prof is on foreign exchange (forex) management. What Prof describes in his article is exactly what the Vice President of Nigeria (VP) is taking issues with. Currently when we earn dollars mainly from crude oil sales, the Central Bank of Nigeria (CBN) dishes out these dollars to importers and those needing dollars for assorted reasons (the oil dollars thus become ‘OUR’ dollars). But when these importers and exporters earn dollars, they keep it as ‘THEIR’ dollars! e.g. to pay school fees, the CBN doles out ‘OUR’ dollars to parents but when the students graduate and start sending dollars to the parents, they take it as ‘THEIR’ dollars and don't drop it in the ‘OUR’ dollar pot to fund fees for others but take it to the parallel market to sell! This CBN policy of issuing out ‘OUR’ dollars to strengthen the value of the naira has rather crashed the NGN from N0.70/$ to N570/$ today. The Prof and his colleagues on the board of the CBN must listen to the VP who is saying, let the Federal Government (FG) keep her dollars for government business and allow a free market where those with dollars (and many exist who earn far more than the government in dollars e.g. the upstream oil companies) trade the dollars with those who need dollars. So instead of the CBN doling out ‘OUR’ dollars to buyers to pay school fees, medical bills, travel costs, imports etc, let these buyers approach those with dollars and buy from them and this will reveal the true value of the naira and the CBN will no longer have to put pressure on the foreign reserves to defend the value of the naira! Unfortunately, Prof Obadan prefers a continuation of the old way that has led us to this N570/$ point. We don’t hear of the Bank of England doling out dollars or Euros to Bureau De Change (BDCs) in the UK or the Federal Reserve Bank doling out pounds sterling in the same way. Neither do we hear of these central banks allocating forex to their nationals who want to pay school fees, medical bills, mortgages, tourism etc abroad! The BDCs in the UK serve as intermediaries between those with pounds needing dollars and those with dollars needing pounds! It’s the same with BDCs in the US and elsewhere! The CBN must stop becoming a BDC and focus on its core job of monetary policy and maintaining financial system stability!
Prof calls the parallel market an illegal market! Haba! This is wishful thinking. Currently the CBN maintains a list of approved items for allocation of forex. Something like cars is not on the list. Could Prof please tell how an importer of cars is to source for US Dollars (USD) to pay for his goods as the CBN will not issue dollars to him? The parallel market is the only source for this importer and it's confusing why Prof will derisively refer to it as an illegal market. Is Prof suggesting that this car importer is engaging in an illegal activity by sourcing his dollars from the parallel market? Policy makers must not live in such denial. For so long as the CBN does not have ALL import items on its list of approved items for forex issuance, there will continue to exist a parallel market! Even for items on the approved list like Personal Travel Allowance (PTA) which the CBN restricts to $4,000 per quarter, how else can a traveller source for more if their needs exceed what is issued by the CBN? It must be the parallel market except the CBN mandates that no traveller in Nigeria will spend more than $4,000 on their foreign travels in any given quarter else they are engaging in an illegal activity by sourcing for dollars elsewhere.
Prof suggests a revival and rebuilding of the productive sectors of the economy, but the question is how? And here Prof like all other policy makers has ignored the elephant in the room - electricity - which is what's needed to revive and rebuild the productive sector. In fact, Prof gave kudos to the Govt for genuine efforts to develop domestic production structures but has failed to realise that this Govt in the nearly 7 years of its existence has not added a single MW of electricity to the supply chain! What then does the Prof take to be genuine efforts? Is it the deteriorating insecurity that has closed farming and other productive activities or the unpoliced unproductive sit-at-home orders in the East?
I am pressed to ask where has Prof been that he says increased oil prices leads to a stronger naira? Does he not know that the entire dollar earnings from crude sales are used to import petroleum products and gas? Empirically Prof can see that oil is currently at above $80/bbl but naira is depreciating so Prof's theory has failed empirical test!
Prof proffers as a solution the use of moral suasion to encourage Nigerians to patronise homemade goods but then why is the CBN at whose board he sits encouraging Nigerians to patronise foreign schools, medical facilities, travel, mortgages etc by draining foreign reserves to issue them dollars to pay for their choice of foreign over Nigerian made? How can the Prof be saying one thing and doing the direct opposite at the CBN boardroom?
Lastly did the Prof deliberately leave out his board membership of the CBN in his short profile at the end of his piece? If so, for what reasons?
Bottomline is that we have been doing the same thing Prof narrates in his article for over 60 years with colossal negative results with the naira depreciating from N0.70/$ in the 70s to N570/$ today. How can we then be doing the same thing and expecting different results, it is said this is a tell-tale sign of insanity! As for those analysts who fear that if the VP’s apt suggestion is implemented, there will be Armageddon, let's understand that the Nigerian economy though virgin and weak is very resilient! If someone said 7 years ago when exchange rate was N150/$ that it'll hit N580/$, I am sure these analysts would have said the economy will collapse but here we are managing with it and moving on. Same way we are holding on with nearly 20% inflation and nearly 50% unemployment rate! Therefore, if the VP’s suggestion is carried and the naira experiences a temporary devaluation, the ever-resilient economy will carry it but, in the end, things will correct more fundamentally, and we will be the better for it. Sometimes surgeons amputate limbs to save lives and make them better! The scaremongering about devaluation that has trailed the VP’s deep-rooted suggested solution to tackle the forex debacle more permanently and sustainably in Nigeria is highly unnecessary!
There are some analysts who think the naira will go on a free fall if the VP’s suggestion sees the light of the day, but I can confirm to them that there will be no sustained free fall of naira instead people will begin to look inwards, suddenly our schools and hospitals will be good enough. Innosons motors will just be fine and Obudu cattle ranch will be a choice over Disney world! Local rice will magically begin to taste better than imported rice! Local tailors will be chosen over foreign brands etc! When these choices change from foreign to local and demand for dollars crashes, the exchange rate will correct by itself! We have been living a false life for too long and I hear the VP saying let’s get real by taking tough decisions! Hard, difficult and painful decisions but the result will be great for the nation and all of us!
So far, the CBN and the Govt of Nigeria are fighting to strengthen the naira at far downstream and it'll only be a losing battle! If they want to arrest the flood drifting the naira away, they need to take the fight upstream by:
1. Fight power cuts to energise the economy (an economy needing 200GW of electricity being fed with 4GW is a non-starter!)
2. Energised economy will boost production
3. Boosted production will end imports
4. No more imports means no appetite for the dollars
5. Low appetite for dollars means fall in value of the dollar against the naira! Naira wins! Nigeria wins!!
It's not by fighting AbokiFx or draining the external reserves to artificially shore-up the value of the naira!!! Unfortunately, and tragically, nobody in leadership in Nigeria is taking step 1! Even state govts have taken their eyes off the ball of step 1 else they could be commissioning independent power plants fired by gas or renewable energy for their states! But nobody in Nigeria including the CBN Gov, Min of Finance, the President etc understands the importance of step 1 without which the economy will NEVER do well!!!
The FG understood that COVID-19 was a risk, and a high-powered presidential taskforce is in place that meets every weekday and reports to the president on a regular basis.
However, and tragically too, power cuts (insufficient electricity) pose a greater danger to Nigerians and our economy far much more than COVID has and will ever do! To date COVID has killed less than 3,000 Nigerians whereas insufficient electricity (power cuts) kills millions of Nigerians and businesses every year!
So really what is needed is a powerful presidential taskforce on electricity! There are two bottlenecks with electricity in Nigeria – transmission which is still in the hands of government and distribution which was handed to politically exposed persons with no pedigree, funding and technical expertise to run a power business. Once the FG exercises courage and debottlenecks these two inhibiting factors, Nigeria will take off and the Naira will achieve parity with the Dollar in under 5 years!!!
CBN Management of Interest Rates and Forex and the Impact on Economic Growth!
Date: 2024-04-08 Read More
CBN Management of Interest Rates and Forex and the Impact on Economic Growth!
Nick Agule
Twitter: @NickAgule
Email: [email protected]
03.08.2021
Introduction
At the end of a recent Monetary Policy Committee meeting, the Central Bank of Nigeria (CBN) announced certain policy measures which include:
1. That the Monetary Policy Rate (MPR) will be retained at 11.5%
2. Stop forex sales to Bureau De Change (BDC) operators for Personal Travel Allowance (PTA) and Business Travel Allowance (BTA) needs of customers. The CBN justified the decision on the abuse of regulations and rent seeking behaviours of the operators.
In our column this week, we will analyse if the CBN policy measures are helping or hurting the Nigerian economy.
MPR
The Monetary Policy Rate (MPR) is the interest rate the CBN pays to commercial banks and others who deposit money with the CBN. The MPR is perhaps the most important interest rate in Nigeria because it influences the rates commercial banks charge people to borrow money or pay on their savings. When the CBN sets a double digit MPR, it leads to double digit interest rate on borrowings which discourages businesses from borrowing to invest in the economy which in turn stunts economic growth! The current CBN MPR of 11.5% in comparison with the Bank of England rate of 0.1% is a clear pointer to how cheap it is for individuals and businesses to access loans in the UK compared to Nigeria. A 30-year mortgage in the UK goes for less than 5% interest whereas its equivalent in Nigeria will be in double digits interest rates above 20%! At this high interest rate, credit becomes so expensive in Nigeria that businesses and individuals are only able to invest from savings. And because individuals cannot access cheap credit to buy capital goods such as vehicles and/or houses, the tendency for corrupt practices increases as individuals especially government officials have to loot the treasury to raise enough funds to pay in full for the acquisition of these capital goods! If credit was cheaply available, almost every employee on a steady salary would be able to access a mortgage loan and buy a house and instead of paying rent, they will be defraying the mortgage over time and own the house at the end of the tenure. This will also boost the demand for houses which in turn will spur the builders to increase the stock of houses in the market and through this millions of construction jobs will be created all to the good of the economy.
It is recognised that a lower interest rate leads to increased consumption which leads to higher inflation and with Nigeria’s inflation rate at 18% it is understood why the CBN will want to hike the MPR to reduce consumption and control inflation. But this is where boosting local production comes in to complement monetary policy. Nigeria’s economy needs 200,000MW of electricity and it is being fed with 4,000MW which is even not always available with a string of grid system collapses. Thus, monetary policy must be combined with fiscal policy (adequate budgetary provision for infrastructure) to achieve economic growth and counter balance the impact of a lowered interest rate on inflation.>
On another count, Nigeria is perhaps the only country where banks are at liberty to pay as low as 1% interest on savings and charge as high as over 20% on loans granted from these savings. Banks in Nigeria have become increasingly profitable at the expense of the economy! Because high interest charged on loans discourages borrowers, the banks resort to pinching from customer accounts through various charges including account maintenance fee, debit card issuance/maintenance fees, SMS charges etc. I bank with commercial banks in the UK and these banks offer fee-free banking, they issue debit cards for free, do not charge any fees like account maintenance, card maintenance, SMS etc because these banks are generating revenue from interest earned by lending to the economy!
FOREX
The CBN’s policy of issuing Foreign Exchange (Forex) to importers of services which are readily available in Nigeria is harming the economy badly! On the one hand the CBN’s policy direction is to boost the local production of goods and services and on the other hand the same CBN is draining foreign reserves to issue foreign exchange (US dollars) to those who have elected to consume foreign services even as there are adequate and competitive local alternatives. If parents decide to send their children abroad for education even as there are local universities both public and privately owned in Nigeria that can compete favourably with their foreign counterparts, let those parents source for forex in the parallel market to fund their consumption choices. It does not make sense that the CBN drains the foreign reserves owned by 200 million Nigerians to fund the lifestyle of only a few hundreds or thousands of Nigerians who prefer foreign schools to the local ones. The same applies to those who travel out for holidays without patronising the local alternatives. Ditto for medical care etc. All these services are available in Nigeria and the CBN’s continuing to fund these consumption choices of a few at the expense of all Nigerians is directly contradictory to the CBN’s cardinal policy of supporting local production of goods and services.
There are producers in Nigeria who earn in foreign currencies. The CBN needs to allow the earners of foreign currencies to sell to users of foreign currencies at market determined rates instead of draining foreign reserves to defend the value of the Naira which is akin to a father using his wealth to buy JAMB result for a child who is not performing well academically! The best the father will do for this child is to allow him/her to find their true level. If the CBN allows the Naira to find its true level, it will help the economy because if imports become too expensive, consumers will be forced to look at local alternatives! This will in turn boost local production and hence economic growth!
As the CBN has rightly found out, the current policy of draining foreign reserves to issue forex to consumers of foreign goods/services only encourages rent seeking and it is counterproductive to continue with a policy that has proved to be a source of corruption and manipulation.
Recommendations
1. Nigeria’s MPR rate at 11.5% is well too high! The CBN must take decisive measures to influence and even arm-twist the banks to offer more affordable interest rates on loans to enable cheap access to credit by individuals and businesses. The CBN could adopt a policy of not allowing banks charge interest on loans above a threshold on the interest they pay on savings. Thus if a 5% threshold is adopted and banks pay interest on savings of 1%, such banks cannot charge interest on loans above 6%!
2. Nigeria must take decisive steps in creating the enabling environment to boost production to tame inflation rather than using monetary policies such as MPR which is harming the economy rather than boosting it. Basic infrastructure such as electricity must be made available through public, private or public/private partnerships. A state of emergency must be declared in the power sector (in the same way Covid has a presidential task force) to rescue Nigeria’s economy from total collapse due to lack of adequate power supply.
3. The CBN must stop immediately the issuance of forex to travellers, school fees, medical fees and such non productive services that some Nigerians have decided to consume abroad. If these Nigerians consume these services locally, it will help boost local production which leads to economic growth!
Conclusion
Nigeria’s economy will never grow at the expected levels with only 4,000MW electricity! This is abysmally so low it is inadequate to energise the economy. The high interest rates charged by banks on loans is also a kneel on the neck of Nigeria’s economic growth! Draining foreign reserves to fund the consumption pattern of the rich and well-to-do is also causing damage to the economy. Government must address all these matters if the policy measures to grow the economy are to be effective.
Twitter: @NickAgule
Email: [email protected]
03.08.2021
Introduction
At the end of a recent Monetary Policy Committee meeting, the Central Bank of Nigeria (CBN) announced certain policy measures which include:
1. That the Monetary Policy Rate (MPR) will be retained at 11.5%
2. Stop forex sales to Bureau De Change (BDC) operators for Personal Travel Allowance (PTA) and Business Travel Allowance (BTA) needs of customers. The CBN justified the decision on the abuse of regulations and rent seeking behaviours of the operators.
In our column this week, we will analyse if the CBN policy measures are helping or hurting the Nigerian economy.
MPR
The Monetary Policy Rate (MPR) is the interest rate the CBN pays to commercial banks and others who deposit money with the CBN. The MPR is perhaps the most important interest rate in Nigeria because it influences the rates commercial banks charge people to borrow money or pay on their savings. When the CBN sets a double digit MPR, it leads to double digit interest rate on borrowings which discourages businesses from borrowing to invest in the economy which in turn stunts economic growth! The current CBN MPR of 11.5% in comparison with the Bank of England rate of 0.1% is a clear pointer to how cheap it is for individuals and businesses to access loans in the UK compared to Nigeria. A 30-year mortgage in the UK goes for less than 5% interest whereas its equivalent in Nigeria will be in double digits interest rates above 20%! At this high interest rate, credit becomes so expensive in Nigeria that businesses and individuals are only able to invest from savings. And because individuals cannot access cheap credit to buy capital goods such as vehicles and/or houses, the tendency for corrupt practices increases as individuals especially government officials have to loot the treasury to raise enough funds to pay in full for the acquisition of these capital goods! If credit was cheaply available, almost every employee on a steady salary would be able to access a mortgage loan and buy a house and instead of paying rent, they will be defraying the mortgage over time and own the house at the end of the tenure. This will also boost the demand for houses which in turn will spur the builders to increase the stock of houses in the market and through this millions of construction jobs will be created all to the good of the economy.
It is recognised that a lower interest rate leads to increased consumption which leads to higher inflation and with Nigeria’s inflation rate at 18% it is understood why the CBN will want to hike the MPR to reduce consumption and control inflation. But this is where boosting local production comes in to complement monetary policy. Nigeria’s economy needs 200,000MW of electricity and it is being fed with 4,000MW which is even not always available with a string of grid system collapses. Thus, monetary policy must be combined with fiscal policy (adequate budgetary provision for infrastructure) to achieve economic growth and counter balance the impact of a lowered interest rate on inflation.
FOREX
The CBN’s policy of issuing Foreign Exchange (Forex) to importers of services which are readily available in Nigeria is harming the economy badly! On the one hand the CBN’s policy direction is to boost the local production of goods and services and on the other hand the same CBN is draining foreign reserves to issue foreign exchange (US dollars) to those who have elected to consume foreign services even as there are adequate and competitive local alternatives. If parents decide to send their children abroad for education even as there are local universities both public and privately owned in Nigeria that can compete favourably with their foreign counterparts, let those parents source for forex in the parallel market to fund their consumption choices. It does not make sense that the CBN drains the foreign reserves owned by 200 million Nigerians to fund the lifestyle of only a few hundreds or thousands of Nigerians who prefer foreign schools to the local ones. The same applies to those who travel out for holidays without patronising the local alternatives. Ditto for medical care etc. All these services are available in Nigeria and the CBN’s continuing to fund these consumption choices of a few at the expense of all Nigerians is directly contradictory to the CBN’s cardinal policy of supporting local production of goods and services.
There are producers in Nigeria who earn in foreign currencies. The CBN needs to allow the earners of foreign currencies to sell to users of foreign currencies at market determined rates instead of draining foreign reserves to defend the value of the Naira which is akin to a father using his wealth to buy JAMB result for a child who is not performing well academically! The best the father will do for this child is to allow him/her to find their true level. If the CBN allows the Naira to find its true level, it will help the economy because if imports become too expensive, consumers will be forced to look at local alternatives! This will in turn boost local production and hence economic growth!
As the CBN has rightly found out, the current policy of draining foreign reserves to issue forex to consumers of foreign goods/services only encourages rent seeking and it is counterproductive to continue with a policy that has proved to be a source of corruption and manipulation.
Recommendations
1. Nigeria’s MPR rate at 11.5% is well too high! The CBN must take decisive measures to influence and even arm-twist the banks to offer more affordable interest rates on loans to enable cheap access to credit by individuals and businesses. The CBN could adopt a policy of not allowing banks charge interest on loans above a threshold on the interest they pay on savings. Thus if a 5% threshold is adopted and banks pay interest on savings of 1%, such banks cannot charge interest on loans above 6%!
2. Nigeria must take decisive steps in creating the enabling environment to boost production to tame inflation rather than using monetary policies such as MPR which is harming the economy rather than boosting it. Basic infrastructure such as electricity must be made available through public, private or public/private partnerships. A state of emergency must be declared in the power sector (in the same way Covid has a presidential task force) to rescue Nigeria’s economy from total collapse due to lack of adequate power supply.
3. The CBN must stop immediately the issuance of forex to travellers, school fees, medical fees and such non productive services that some Nigerians have decided to consume abroad. If these Nigerians consume these services locally, it will help boost local production which leads to economic growth!
Conclusion
Nigeria’s economy will never grow at the expected levels with only 4,000MW electricity! This is abysmally so low it is inadequate to energise the economy. The high interest rates charged by banks on loans is also a kneel on the neck of Nigeria’s economic growth! Draining foreign reserves to fund the consumption pattern of the rich and well-to-do is also causing damage to the economy. Government must address all these matters if the policy measures to grow the economy are to be effective.
No Credible and Transparent Electoral Process – No Economic Growth!
Date: 2024-04-08 Read More
No Credible and Transparent Electoral Process – No Economic Growth!
Nick Agule
Twitter: @NickAgule
Email: [email protected]
27.07.2021
Introduction
Democracy thrives on the tripod pillars of the rule of law, sanctity of the electoral process and independence of the legislative and judicial arms of governments. It is against this backdrop that the recent mishandling of the Electoral Amendment Bill by Nigeria’s National Legislature (The Senate and The House of Representatives) throws into question Nigeria’s commitment and determination to conducting free, credible and transparent elections. It will be repeating the obvious that this shoddy outing by the National Assembly will generate apprehension and lethargy in the investor community about the viability and safety of Nigeria as an investment destination.
It does not make sense that the same government that has ordered all Nigerians to register for the National Identification Number (NIN) in all parts of the country which requires the use of data services now turns around to remove electronic transmission of votes which was meant to add credibility to the electoral process on the excuse of non-availability of data services in all parts of the country. Similarly, students are also registering for examinations online all over the country which requires the availability of data services with no part of the country complaining of alienation or inability to register. The same goes for BVN and other services requiring the use of internet data. The excuse pushed forward by the legislature that not all parts of Nigeria have coverage of data services is at best suspicious and a pointer to the legislators setting the stage to rig the forthcoming national elections in 2023! This is precisely the wrong messages that the international community and investors do not want to hear! The negative impact on the economy can best be imagined!
In the aftermath of the legislative debacle, the Independent National Electoral Commission (INEC), Nigeria’s national electoral umpire came out to say that the technology to transmit electoral results electronically does not require data services but just a sim card in the same way text messages (SMS) are transmitted without the use of data services. One would expect that the legislators will contend that with 90% or more of the territory of Nigeria covered with text messaging services, they will approve electronic transmission of results.
Another notable fact is that about 28 Senators absented themselves from the chambers when the proceedings of the electoral bill were being deliberated upon. If these Senators deliberately stayed away when what is perhaps the most important instrument of citizen participation in a democratic dispensation, then they have lost any moral right to continue to represent the people. These Senators should have recall proceedings commenced against them if Nigeria is to send a clear message to the international and investor communities of her determination to protect the sanctity of the electoral process.
In 2019 President Muhammadu Buhari withheld assent to the electoral bill presented to him on the sole premise that it was too close to the conduct of the 2019 general elections. It is now more than 2 years since the elections were concluded with the President getting a second term. The failure of the President to assent to the electoral bill as he promised is a bad signal to the international and investor communities about the ability of Nigerian officials at the very highest levels to keep to promises. These errors must be corrected in the enactment of the 2021 electoral act. Mr President by assenting promptly to the 2021 electoral bill will be giving assurances to the international and investor communities that Nigeria is indeed open for business!
Recommendations
1. Nigeria’s National Assembly must as a matter of urgency reinstate electronic transmission of results to add credibility to the electoral process. It is only when the electoral process is free, credible and transparent that technocrats who will better manage the economy will be encouraged to step into the political arena.
2. Electronic transmission will cover about 90% of all votes cast. The National Assembly can make a step-out legislation for manual transmission of votes for the 10% or less territory that is not covered with text messaging services. The same provision has been made for the card reader which unlike the electronic transmission actually needs data services to work. So, if the National Assembly approved the use of card readers requiring data services, it becomes puzzling that they withheld approval of electronic transmission which does not even need data services to function.
3. The National Assembly must also as a matter of urgency approve the participation of Nigerians living the diaspora in the electoral process. The grounds of all Nigerian missions abroad (embassies and high commissions) are considered Nigerian territory by international conventions. A ballot box placed in the grounds of Nigeria’s foreign missions is same as placing that ballot in any polling unit in Nigeria because that foreign mission is tantamount to Nigeria’s soil. So, there is no necessity to amend the constitution before diaspora voting is made a reality. An amendment of the electoral bill empowering INEC to place ballot boxes in Nigeria’s foreign missions during the conduct of general elections will give full legal backing to diaspora voting. Countries such as the Republic of Chad have approved and are conducting diaspora voting, there is no reason that Nigeria cannot do same! There is a school of thought that the political class in Nigeria is apprehensive of diaspora voting because the diasporas are most likely not to sell their votes and their votes will thus become decisive in electing leaders at all levels. All Nigerians need diaspora voting to help elect more responsible and responsive leaders for the country!
4. Globally politicians are known to pursue their own interests at the expense of the people they represent if they (politicians) know they don’t need the people at the ballot box! In Nigeria we have watched one government come and go with no improvement in the standard of living of the people while the politicians become stupendously rich. Each government watches as the oil companies continue to burn produced gas while the economy which needs 200GW of electricity is fed with only 4GW which often experiences grid collapses. The only way Nigerians can bring politicians to provide responsible and accountable leadership of the economy, tame corruption and tackle insecurity crisis is through the ballot box! If these same politicians who are lording it over the people know that they will need the votes of the people at the ballot box, they will work more for the interest of the people. It is therefore recommended that all Nigerians take a keen interest in the electoral process as this is the only way to bring politicians to their knees! INEC has now opened the continuous voter registration portal at www.cvr.inecnigeria.org and all Nigerians of voter age are encouraged to access the site to register to vote if not yet registered, transfer their voter’s card to their new locations if they have moved or locate their voter’s card if they are yet to collect them. In a democracy the only power the people have over the politicians is their votes and it will amount to shooting themselves in the foot if voters show apathy to the electoral process thus abandoning the field to the politicians to stage a walk over and continue delivering bad governance.
Conclusion
Without a credible electoral process, investors will develop cold feet in sinking their monies in Nigeria’s economy. A faulty electoral process therefore leads to a kwashiorkored and emaciated economy which is robbed of the oxygen of foreign direct investments. A faulty electoral process also robs the economy of competent, capable, qualified and compassionate economic managers who have apathy to the electoral process and do not throw their hats into the political ring. The National Assembly will do the economy all the good by stopping the toying and playing of games with the electoral bill henceforth and remain focused on delivering to Nigerians an electoral bill that will engender confidence in the voter population, the international community and the investors.
Twitter: @NickAgule
Email: [email protected]
27.07.2021
Introduction
Democracy thrives on the tripod pillars of the rule of law, sanctity of the electoral process and independence of the legislative and judicial arms of governments. It is against this backdrop that the recent mishandling of the Electoral Amendment Bill by Nigeria’s National Legislature (The Senate and The House of Representatives) throws into question Nigeria’s commitment and determination to conducting free, credible and transparent elections. It will be repeating the obvious that this shoddy outing by the National Assembly will generate apprehension and lethargy in the investor community about the viability and safety of Nigeria as an investment destination.
It does not make sense that the same government that has ordered all Nigerians to register for the National Identification Number (NIN) in all parts of the country which requires the use of data services now turns around to remove electronic transmission of votes which was meant to add credibility to the electoral process on the excuse of non-availability of data services in all parts of the country. Similarly, students are also registering for examinations online all over the country which requires the availability of data services with no part of the country complaining of alienation or inability to register. The same goes for BVN and other services requiring the use of internet data. The excuse pushed forward by the legislature that not all parts of Nigeria have coverage of data services is at best suspicious and a pointer to the legislators setting the stage to rig the forthcoming national elections in 2023! This is precisely the wrong messages that the international community and investors do not want to hear! The negative impact on the economy can best be imagined!
In the aftermath of the legislative debacle, the Independent National Electoral Commission (INEC), Nigeria’s national electoral umpire came out to say that the technology to transmit electoral results electronically does not require data services but just a sim card in the same way text messages (SMS) are transmitted without the use of data services. One would expect that the legislators will contend that with 90% or more of the territory of Nigeria covered with text messaging services, they will approve electronic transmission of results.
Another notable fact is that about 28 Senators absented themselves from the chambers when the proceedings of the electoral bill were being deliberated upon. If these Senators deliberately stayed away when what is perhaps the most important instrument of citizen participation in a democratic dispensation, then they have lost any moral right to continue to represent the people. These Senators should have recall proceedings commenced against them if Nigeria is to send a clear message to the international and investor communities of her determination to protect the sanctity of the electoral process.
In 2019 President Muhammadu Buhari withheld assent to the electoral bill presented to him on the sole premise that it was too close to the conduct of the 2019 general elections. It is now more than 2 years since the elections were concluded with the President getting a second term. The failure of the President to assent to the electoral bill as he promised is a bad signal to the international and investor communities about the ability of Nigerian officials at the very highest levels to keep to promises. These errors must be corrected in the enactment of the 2021 electoral act. Mr President by assenting promptly to the 2021 electoral bill will be giving assurances to the international and investor communities that Nigeria is indeed open for business!
Recommendations
1. Nigeria’s National Assembly must as a matter of urgency reinstate electronic transmission of results to add credibility to the electoral process. It is only when the electoral process is free, credible and transparent that technocrats who will better manage the economy will be encouraged to step into the political arena.
2. Electronic transmission will cover about 90% of all votes cast. The National Assembly can make a step-out legislation for manual transmission of votes for the 10% or less territory that is not covered with text messaging services. The same provision has been made for the card reader which unlike the electronic transmission actually needs data services to work. So, if the National Assembly approved the use of card readers requiring data services, it becomes puzzling that they withheld approval of electronic transmission which does not even need data services to function.
3. The National Assembly must also as a matter of urgency approve the participation of Nigerians living the diaspora in the electoral process. The grounds of all Nigerian missions abroad (embassies and high commissions) are considered Nigerian territory by international conventions. A ballot box placed in the grounds of Nigeria’s foreign missions is same as placing that ballot in any polling unit in Nigeria because that foreign mission is tantamount to Nigeria’s soil. So, there is no necessity to amend the constitution before diaspora voting is made a reality. An amendment of the electoral bill empowering INEC to place ballot boxes in Nigeria’s foreign missions during the conduct of general elections will give full legal backing to diaspora voting. Countries such as the Republic of Chad have approved and are conducting diaspora voting, there is no reason that Nigeria cannot do same! There is a school of thought that the political class in Nigeria is apprehensive of diaspora voting because the diasporas are most likely not to sell their votes and their votes will thus become decisive in electing leaders at all levels. All Nigerians need diaspora voting to help elect more responsible and responsive leaders for the country!
4. Globally politicians are known to pursue their own interests at the expense of the people they represent if they (politicians) know they don’t need the people at the ballot box! In Nigeria we have watched one government come and go with no improvement in the standard of living of the people while the politicians become stupendously rich. Each government watches as the oil companies continue to burn produced gas while the economy which needs 200GW of electricity is fed with only 4GW which often experiences grid collapses. The only way Nigerians can bring politicians to provide responsible and accountable leadership of the economy, tame corruption and tackle insecurity crisis is through the ballot box! If these same politicians who are lording it over the people know that they will need the votes of the people at the ballot box, they will work more for the interest of the people. It is therefore recommended that all Nigerians take a keen interest in the electoral process as this is the only way to bring politicians to their knees! INEC has now opened the continuous voter registration portal at www.cvr.inecnigeria.org and all Nigerians of voter age are encouraged to access the site to register to vote if not yet registered, transfer their voter’s card to their new locations if they have moved or locate their voter’s card if they are yet to collect them. In a democracy the only power the people have over the politicians is their votes and it will amount to shooting themselves in the foot if voters show apathy to the electoral process thus abandoning the field to the politicians to stage a walk over and continue delivering bad governance.
Conclusion
Without a credible electoral process, investors will develop cold feet in sinking their monies in Nigeria’s economy. A faulty electoral process therefore leads to a kwashiorkored and emaciated economy which is robbed of the oxygen of foreign direct investments. A faulty electoral process also robs the economy of competent, capable, qualified and compassionate economic managers who have apathy to the electoral process and do not throw their hats into the political ring. The National Assembly will do the economy all the good by stopping the toying and playing of games with the electoral bill henceforth and remain focused on delivering to Nigerians an electoral bill that will engender confidence in the voter population, the international community and the investors.
NIGERIA’S ECONOMIC GROWTH – THE ELEPHANT IN THE ROOM LEFT UNATTENDED
Nick Agule
Twitter: @NickAgule
Email: [email protected]
When doctors apply therapy to an ailment but the pat...
Twitter: @NickAgule
Email: [email protected]
When doctors apply therapy to an ailment but the pat...
Date: 2024-04-08 Read More
NIGERIA’S ECONOMIC GROWTH – THE ELEPHANT IN THE ROOM LEFT UNATTENDED
Nick Agule
Twitter: @NickAgule
Email: [email protected]
When doctors apply therapy to an ailment but the patient does not get better, it is either the disease is not accurately diagnosed, or the right treatment is not being applied. The Nigerian economy has defied all solutions and has refused to grow so what is it? – wrong diagnosis or wrong treatment or a combination of both? Nigeria has had experienced economic managers like Dr Ngozi Okonjo-Iweala (who is currently managing global trade as the Director General of the World Trade Organisation) run the economy as minister of finance and coordinating minister of the economy for a combined period of 7 years without recording double digit economic growth. Nigeria has also had development plans such as Structural Adjustment Programme (SAP), Vision 2010, Vision 20:20:20, 7-Point Agenda etc without visible results. Nigeria has also instituted medium term planning strategies such as the medium-term expenditure framework (MTEF), but the economy is not responding to the implementation.
With unemployment at over 33%, youth unemployment at nearly 50%, inflation at over 18%, the Naira weakened to nearly N500 to a US dollar, it is evident that these development plans have largely being unsuccessful, and this is down to the so many kneels placed on the neck of Nigeria’s economy. In this article we will identify some of the factors where the diagnosis is missed or where the wrong therapy is being applied. The basis for appraisal will be the outcome of the 163 meeting of the Monetary Policy Committee (MPC) which was held in May 2021. 1. MPC OUTCOME: Notwithstanding that all these have helped in boosting output, the Bank should continue to aggressively increase its interventions in these subsectors, including agricultural processing and manufacturing.
Commentary: The MPC has taken its eyes off the elephant in the room which is the main driver of the economy in the industrial/information age - ELECTRICITY! The MPC fails to recognise that Nigeria’s economy needs 200GW of electricity but is currently being supplied with only 4GW. Agricultural processing and manufacturing will not experience growth without sufficient electricity supply no matter how much support the MPC provides. Agricultural post-harvest losses will continue to erode value as the economy groans under the weight of severe power deficit. The power sector must be fully privatised to allow investors to quickly increase power output to a minimum of 100GW within the next 5 years if Nigeria hopes to stimulate output and sustain growth of the economy as planned by the MPC.
2. MPC OUTCOME: It also recognized that measures put in place to stimulate output growth through the use of its intervention facilities to inject liquidity into employment generating and output stimulating initiatives like the Anchor Borrower Program, Targeted Credit Facility and Agri-Business Small and Medium Enterprise Investment Scheme (AGSMEIS) had started to yield results. Commentary: With the rising state of insecurity in Nigeria, the success of this policy will be curtailed as farmers and micro, small and medium enterprises (MSMEs) cannot thrive. Government must tackle insecurity to create the enabling environment for the MPC policy directions to achieve the desired outcomes.
3. MPC OUTCOME: In the Committee’s view, such measures should include boosting consumption and investments, as well as diversifying the base of the economy through FX restrictions for the importation of goods and food products that can be produced in Nigeria. Commentary: The policy direction by the MPC to restrict the supply of foreign exchange for the importation of goods and services which are available in Nigeria is contravened by the CBN policy of draining foreign reserves to issue FX to holiday makers (PTA), business travellers (BTA), school fees, medical fees etc. All these services are available in Nigeria and those consuming them are more than capable of fulfilling their FX needs from the parallel market if they decide to patronise foreign providers! It is therefore unclear why the CBN is working at variance with the MPC policy direction by playing Father Christmas with Nigeria’s foreign reserves. The CBN should stop the issuance of FX to all users who import goods and services to encourage local production and tame inflation as prescribed by the MPC. 4. MPC OUTCOME: Committee further recognized that the strategies put in place to rein in inflation through the use of series of administrative measures by the Bank to control money supply through liquidity mop up in the banking industry had started to yield results.
Commentary: On the one hand the MPC prescribes mopping up excess liquidity to control inflation but at same time the CBN conceded that they are printing money to fund the FG budget thus injecting money into a hyper-inflationary economy! These two policies are counterproductive, and it is yet unclear what the MPC and the CBN seek to achieve with two policies that are in the boxing ring with each other. The CBN must stop printing money to enable the excess liquidity mop-up measures to be effective.
5. MPC OUTCOME: Under the National Mass Metering program, N35.9 billion has been disbursed to 9 DisCos for the acquisition of 656,752 electricity meters. Under the Nigerian Electricity Stabilization Facility 2 (NEMSF-2), N93.8 billion has also been disbursed to 11 DisCos. Commentary: When Government gets privatisation right as it happened in the telecoms sector, the investors unlock value by investing in the sector, provide services and bill customers. The telecoms companies have to date invested over $70 billion in Nigeria to build infrastructure and provide telecoms services to subscribers. The privatisation of the power sector however was flawed because unlike the telecoms the licences were not issued to established power sector players with global capital, expertise and technology at their reach to upgrade and expand the distribution networks! The CBN is now making grants to the DisCos which if professionally managed should be generating trillions in revenue and paying taxes into the coffers of Government and not constitute drainpipes on Government’s revenues. The privatisation of the power sector needs to be revisited urgently so that the entire power value chain – generation, transmission and distribution – are fully privatised to established power sector players with regional/global pedigree if the Nigerian economy is to experience the growth envisaged by the MPC! 6. MPC OUTCOME: The MPC voted to retain the MPR at 11.5 per cent. Commentary: MPR is Monetary Policy Rate which is the rate the CBN lends to commercial banks. The higher the MPR, the higher the interest rate charged by banks on the loans they lend to the economy. The MPC objectives to boost output, diversify the economy, curtail importation etc are directly contravened with a double digit MPR retained by the CBN. For an economy to experience growth, credit must be readily available and cheap. The Bank of England base rate is currently 0.1%. The Federal Reserve Fund Rate is currently 0.25%. Whilst the dynamics of the UK and US economies are different from Nigeria’s, no economy can grow with double digit interest rates to economy. Additionally, banks in Nigeria pay as low as 1% on savings and turn around to charge over 20% on loans granted from these savings thus creating a huge margin which is inimical to economic growth. The CBN needs to take urgent steps to cut the MPR to no more than 5% to stimulate cheap credit to the economy. Additionally, the CBN needs to implement lending policies such that banks cannot charge interest on loans at more than specified basis points above the interest paid on savings. E.g. if the CBN specifies a 5-basis point margin, a bank that pays 1% interest on savings will only be able to charge a maximum of 6% on loans to the productive sector of the economy.
CONCLUSION:
For Nigeria’s economy to experience growth, there needs to be complementarity between Government macro and micro economic policies, alignment between Government institutions and actors, strong political will, full privatisation of key economic drivers such as power with Government retaining regulatory oversight, stoppage of forex allocations for the importation of goods and services produced in-country, reduction in the lending rates and more efficient allocation of resources. The MPC policy directives and the actions of the CBN are mostly at variance and counter-productive and this must be addressed to ensure the benefits of the policy directives are felt and the quality and standard of living of Nigerians is positively impacted.
Twitter: @NickAgule
Email: [email protected]
When doctors apply therapy to an ailment but the patient does not get better, it is either the disease is not accurately diagnosed, or the right treatment is not being applied. The Nigerian economy has defied all solutions and has refused to grow so what is it? – wrong diagnosis or wrong treatment or a combination of both? Nigeria has had experienced economic managers like Dr Ngozi Okonjo-Iweala (who is currently managing global trade as the Director General of the World Trade Organisation) run the economy as minister of finance and coordinating minister of the economy for a combined period of 7 years without recording double digit economic growth. Nigeria has also had development plans such as Structural Adjustment Programme (SAP), Vision 2010, Vision 20:20:20, 7-Point Agenda etc without visible results. Nigeria has also instituted medium term planning strategies such as the medium-term expenditure framework (MTEF), but the economy is not responding to the implementation.
With unemployment at over 33%, youth unemployment at nearly 50%, inflation at over 18%, the Naira weakened to nearly N500 to a US dollar, it is evident that these development plans have largely being unsuccessful, and this is down to the so many kneels placed on the neck of Nigeria’s economy. In this article we will identify some of the factors where the diagnosis is missed or where the wrong therapy is being applied. The basis for appraisal will be the outcome of the 163 meeting of the Monetary Policy Committee (MPC) which was held in May 2021. 1. MPC OUTCOME: Notwithstanding that all these have helped in boosting output, the Bank should continue to aggressively increase its interventions in these subsectors, including agricultural processing and manufacturing.
Commentary: The MPC has taken its eyes off the elephant in the room which is the main driver of the economy in the industrial/information age - ELECTRICITY! The MPC fails to recognise that Nigeria’s economy needs 200GW of electricity but is currently being supplied with only 4GW. Agricultural processing and manufacturing will not experience growth without sufficient electricity supply no matter how much support the MPC provides. Agricultural post-harvest losses will continue to erode value as the economy groans under the weight of severe power deficit. The power sector must be fully privatised to allow investors to quickly increase power output to a minimum of 100GW within the next 5 years if Nigeria hopes to stimulate output and sustain growth of the economy as planned by the MPC.
2. MPC OUTCOME: It also recognized that measures put in place to stimulate output growth through the use of its intervention facilities to inject liquidity into employment generating and output stimulating initiatives like the Anchor Borrower Program, Targeted Credit Facility and Agri-Business Small and Medium Enterprise Investment Scheme (AGSMEIS) had started to yield results. Commentary: With the rising state of insecurity in Nigeria, the success of this policy will be curtailed as farmers and micro, small and medium enterprises (MSMEs) cannot thrive. Government must tackle insecurity to create the enabling environment for the MPC policy directions to achieve the desired outcomes.
3. MPC OUTCOME: In the Committee’s view, such measures should include boosting consumption and investments, as well as diversifying the base of the economy through FX restrictions for the importation of goods and food products that can be produced in Nigeria. Commentary: The policy direction by the MPC to restrict the supply of foreign exchange for the importation of goods and services which are available in Nigeria is contravened by the CBN policy of draining foreign reserves to issue FX to holiday makers (PTA), business travellers (BTA), school fees, medical fees etc. All these services are available in Nigeria and those consuming them are more than capable of fulfilling their FX needs from the parallel market if they decide to patronise foreign providers! It is therefore unclear why the CBN is working at variance with the MPC policy direction by playing Father Christmas with Nigeria’s foreign reserves. The CBN should stop the issuance of FX to all users who import goods and services to encourage local production and tame inflation as prescribed by the MPC. 4. MPC OUTCOME: Committee further recognized that the strategies put in place to rein in inflation through the use of series of administrative measures by the Bank to control money supply through liquidity mop up in the banking industry had started to yield results.
Commentary: On the one hand the MPC prescribes mopping up excess liquidity to control inflation but at same time the CBN conceded that they are printing money to fund the FG budget thus injecting money into a hyper-inflationary economy! These two policies are counterproductive, and it is yet unclear what the MPC and the CBN seek to achieve with two policies that are in the boxing ring with each other. The CBN must stop printing money to enable the excess liquidity mop-up measures to be effective.
5. MPC OUTCOME: Under the National Mass Metering program, N35.9 billion has been disbursed to 9 DisCos for the acquisition of 656,752 electricity meters. Under the Nigerian Electricity Stabilization Facility 2 (NEMSF-2), N93.8 billion has also been disbursed to 11 DisCos. Commentary: When Government gets privatisation right as it happened in the telecoms sector, the investors unlock value by investing in the sector, provide services and bill customers. The telecoms companies have to date invested over $70 billion in Nigeria to build infrastructure and provide telecoms services to subscribers. The privatisation of the power sector however was flawed because unlike the telecoms the licences were not issued to established power sector players with global capital, expertise and technology at their reach to upgrade and expand the distribution networks! The CBN is now making grants to the DisCos which if professionally managed should be generating trillions in revenue and paying taxes into the coffers of Government and not constitute drainpipes on Government’s revenues. The privatisation of the power sector needs to be revisited urgently so that the entire power value chain – generation, transmission and distribution – are fully privatised to established power sector players with regional/global pedigree if the Nigerian economy is to experience the growth envisaged by the MPC! 6. MPC OUTCOME: The MPC voted to retain the MPR at 11.5 per cent. Commentary: MPR is Monetary Policy Rate which is the rate the CBN lends to commercial banks. The higher the MPR, the higher the interest rate charged by banks on the loans they lend to the economy. The MPC objectives to boost output, diversify the economy, curtail importation etc are directly contravened with a double digit MPR retained by the CBN. For an economy to experience growth, credit must be readily available and cheap. The Bank of England base rate is currently 0.1%. The Federal Reserve Fund Rate is currently 0.25%. Whilst the dynamics of the UK and US economies are different from Nigeria’s, no economy can grow with double digit interest rates to economy. Additionally, banks in Nigeria pay as low as 1% on savings and turn around to charge over 20% on loans granted from these savings thus creating a huge margin which is inimical to economic growth. The CBN needs to take urgent steps to cut the MPR to no more than 5% to stimulate cheap credit to the economy. Additionally, the CBN needs to implement lending policies such that banks cannot charge interest on loans at more than specified basis points above the interest paid on savings. E.g. if the CBN specifies a 5-basis point margin, a bank that pays 1% interest on savings will only be able to charge a maximum of 6% on loans to the productive sector of the economy.
CONCLUSION:
For Nigeria’s economy to experience growth, there needs to be complementarity between Government macro and micro economic policies, alignment between Government institutions and actors, strong political will, full privatisation of key economic drivers such as power with Government retaining regulatory oversight, stoppage of forex allocations for the importation of goods and services produced in-country, reduction in the lending rates and more efficient allocation of resources. The MPC policy directives and the actions of the CBN are mostly at variance and counter-productive and this must be addressed to ensure the benefits of the policy directives are felt and the quality and standard of living of Nigerians is positively impacted.
NO EDUCATION – NO ECONOMY
Nick Agule
Twitter: @NickAgule
Email: [email protected]
22.06.2021
The Universal Declaration of Human Right...
Twitter: @NickAgule
Email: [email protected]
22.06.2021
The Universal Declaration of Human Right...
Date: 2024-04-08 Read More
NO EDUCATION – NO ECONOMY
Nick Agule
Twitter: @NickAgule
Email: [email protected]
22.06.2021
The Universal Declaration of Human Rights (UDHR) by the United Nations is a common standard of achievements for all peoples and all nations which sets out the fundamental human rights to be universally protected. Everyone is entitled to all the rights and freedoms set forth in the Declaration, without distinction of any kind, such as race, colour, sex, language, religion, political or other opinion, national or social origin, property, birth or other status.
Article 26 of the UDHR states unequivocally that - Everyone has the right to education and higher education shall be equally accessible to all on the basis of merit. Other international and regional human rights bodies have provisions on the right to education including UNESCO’s (United Nations Educational, Scientific and Cultural Organisation) Convention Against Discrimination in Education (CADE, 1960). Furthermore Chapter 2 of the 1999 Constitution of the Federal Republic of Nigeria also makes provisions on Right to Education.
Recent data released by the Minister of State in the Federal Ministry of Education of Nigeria, Mr. Chukwuemeka Nwajiuba revealed that Nigeria has over 10 million out-of-school children which is a continental record or perhaps even a global record. This is a debilitating statistic to say the least!
There is no economy in the world that will thrive with such record numbers of out-of-school children as obtainable in Nigeria where there is a peculiarity in the penchant to fight the symptoms of national malaise while leaving the causes unattended. The country is committing huge sums in the fight against all forms of security challenges and criminality ranging from the dreaded Boko Haram, banditry, kidnapping etc without understanding that millions of poorly educated or out-of-school children form the recruitment pool for these criminal activities.
To underscore the lack of attention given to Education Nigeria, the Federal Government budgetary allocation to the education sector has been poor over the years. In the 2021 Federal budget, the total allocation to Education is N771.46 billion with recurrent expenditure standing at N545.24 billion and capital allocation at N226.22 billion. This is a paltry $1.5 billion to fund education from the secondary to federal polytechnics, colleges of education and universities. This is a non-starter as this allocation can hardly change the face of education in Nigeria as it is evident with the dilapidating conditions of infrastructure and the perennial industrial disputes by university teachers and other employees in the educational sector.
Globally Governments do not pay lip service or treat with levity the education of their citizens because there is no economy without education. An uneducated population is a danger to society as evident in the growing state of insecurity in Nigeria. It is on this note that it becomes disheartening to see the recent decision by the authorities of the Benue State University (BSU) in Makurdi to bar their students who are behind in the payment of school fees from taking the semester examinations. Some of the students are in their final year of studies and this decision if not reversed inevitably will cost them an additional year in school. To think that this is coming after the students were made to remain at home for a year (as the university teachers and the Federal government faced off in a confrontation bothering on conditions of service and Government funding of the universities) makes matters even worse. If education is a right as clearly enunciated in international conventions and the constitution of the Federal Republic of Nigeria, it behoves on Government to do everything to keep children in school. To think that the Benue State Government will take the opposite stand by withdrawing students (who are willing to continue with their studies) from a government owned and funded school goes contrary to the primary duty of government to provide welfare to the citizens. Security which is the second primary objective of government is also jeopardized if we have a multitude of young people who feel aggrieved from being deprived of getting an education to change their lives for the better.
There are those who have argued that some of the students of BSU are from well-to-do families and deliberately do not want to pay fees or they were given fees by their parents, but it was squandered. While there could be some merit to this argument, it behoves on the University and the Government to have gathered enough data to identify students who are truly from poor background so that they can be supported while students from well-to-do families would have been sent home to ask their parents to pay their fees. As the University and the Government were unable to gather this data, then for the sake of the students who genuinely are unable to pay their fees, all defaulting students would have been allowed to take their exams else the University has now thrown the baby and the bath water away! In a pandemic year where family finances have been put under pressure or wrecked, even banks and other financial institutions are granting moratorium on loan repayments to their debtors to enable them to recover. To think that this is the time BSU as a government owned and funded institution has decided to throw her students under the bus on account of fees owed is rubbing salt into injury already being suffered by the students having stayed at home for a year due to no fault of theirs.
And to cap the reign of impunity by the BSU Management, their agents are trolling their students online and a list of students who have voiced out their displeasure with the actions of the Management of the University have already being compiled and summoned to appear before a kangaroo disciplinary panel which has been set up by the University. One would expect a University to know that Article 19 of the UDHR guarantees everyone the right to freedom of opinion and expression. The freedom of expression is also protected by section 39 (1) of the constitution of the Federal Republic of Nigeria. The University authorities must listen to the voice of reason and not add further emotional injury to their already traumatised students and must stop this witch-hunting exercise immediately!
In places such as the UK, once a child is born, the Government begins to pay the parents child benefit as Government’s support to raise the child. These payments continue until the 19th birthday of the child at which time the child has only 2 years to graduate at university. If the parents decided to save this money for 19 years, it will pay the child's school fees to PhD levels. Not forgetting that education is FREE up to A levels so only university is paid!
If the parents of a child are working but on low income, the Government does not take tax from their salaries instead the Government taxes the rich heavily and pays some of that money to the poor parents in what's called child tax credit. So instead of tax taking from the salary, the Govt credits the salary by augmenting it. In the case of Benue, even the salaries of workers are not being paid as at when due!!! Also a child from a poor background in the UK who has got admission to university has all sorts of grants and scholarships open to them offered by charities, Govt, the universities etc.
If all funding options above fail, the Govt has a student loan scheme called student finance. All UK children who have a university place are offered student finance if they apply. There is enough money for all who apply. The student finance office pays the school fees directly to the universities and then pays to the student's bank account money for their accommodation and upkeep for every year they are at university. After graduation the student must not only start work but begin to earn at a particular level before the student finance begins deduction of the loan from their salaries. If the student never earns to the threshold, then they will not pay back of the loan.
This is the length to which Governments elsewhere go to keep children in school.
CONCLUSION
The Governments at all levels in Nigeria must take education more seriously with adequate budgetary allocation and ensuring every kobo spent counts towards the provision of qualitative education to the children. It is a primary responsibility of government and perhaps the most important duty of government. The Benue State Government must also wade into the crisis at the state University and impress on the Management to administer examinations to the students who were denied entry into the examinations halls. This is the minimum required for the government to show that it is taking education seriously!
Reference
1.https://www.un.org/en/about-us/universal-declaration-of-human-rights
2. http://portal.unesco.org/en/ev.php-URL_ID=12949&URL_DO=DO_TOPIC&URL_SECTION=201.html
3. https://www.budgetoffice.gov.ng/index.php/hmfbnp-public-presentation-of-2021-fgn-approved-budget?task=document.viewdoc&id=909
Twitter: @NickAgule
Email: [email protected]
22.06.2021
The Universal Declaration of Human Rights (UDHR) by the United Nations is a common standard of achievements for all peoples and all nations which sets out the fundamental human rights to be universally protected. Everyone is entitled to all the rights and freedoms set forth in the Declaration, without distinction of any kind, such as race, colour, sex, language, religion, political or other opinion, national or social origin, property, birth or other status.
Article 26 of the UDHR states unequivocally that - Everyone has the right to education and higher education shall be equally accessible to all on the basis of merit. Other international and regional human rights bodies have provisions on the right to education including UNESCO’s (United Nations Educational, Scientific and Cultural Organisation) Convention Against Discrimination in Education (CADE, 1960). Furthermore Chapter 2 of the 1999 Constitution of the Federal Republic of Nigeria also makes provisions on Right to Education.
Recent data released by the Minister of State in the Federal Ministry of Education of Nigeria, Mr. Chukwuemeka Nwajiuba revealed that Nigeria has over 10 million out-of-school children which is a continental record or perhaps even a global record. This is a debilitating statistic to say the least!
There is no economy in the world that will thrive with such record numbers of out-of-school children as obtainable in Nigeria where there is a peculiarity in the penchant to fight the symptoms of national malaise while leaving the causes unattended. The country is committing huge sums in the fight against all forms of security challenges and criminality ranging from the dreaded Boko Haram, banditry, kidnapping etc without understanding that millions of poorly educated or out-of-school children form the recruitment pool for these criminal activities.
To underscore the lack of attention given to Education Nigeria, the Federal Government budgetary allocation to the education sector has been poor over the years. In the 2021 Federal budget, the total allocation to Education is N771.46 billion with recurrent expenditure standing at N545.24 billion and capital allocation at N226.22 billion. This is a paltry $1.5 billion to fund education from the secondary to federal polytechnics, colleges of education and universities. This is a non-starter as this allocation can hardly change the face of education in Nigeria as it is evident with the dilapidating conditions of infrastructure and the perennial industrial disputes by university teachers and other employees in the educational sector.
Globally Governments do not pay lip service or treat with levity the education of their citizens because there is no economy without education. An uneducated population is a danger to society as evident in the growing state of insecurity in Nigeria. It is on this note that it becomes disheartening to see the recent decision by the authorities of the Benue State University (BSU) in Makurdi to bar their students who are behind in the payment of school fees from taking the semester examinations. Some of the students are in their final year of studies and this decision if not reversed inevitably will cost them an additional year in school. To think that this is coming after the students were made to remain at home for a year (as the university teachers and the Federal government faced off in a confrontation bothering on conditions of service and Government funding of the universities) makes matters even worse. If education is a right as clearly enunciated in international conventions and the constitution of the Federal Republic of Nigeria, it behoves on Government to do everything to keep children in school. To think that the Benue State Government will take the opposite stand by withdrawing students (who are willing to continue with their studies) from a government owned and funded school goes contrary to the primary duty of government to provide welfare to the citizens. Security which is the second primary objective of government is also jeopardized if we have a multitude of young people who feel aggrieved from being deprived of getting an education to change their lives for the better.
There are those who have argued that some of the students of BSU are from well-to-do families and deliberately do not want to pay fees or they were given fees by their parents, but it was squandered. While there could be some merit to this argument, it behoves on the University and the Government to have gathered enough data to identify students who are truly from poor background so that they can be supported while students from well-to-do families would have been sent home to ask their parents to pay their fees. As the University and the Government were unable to gather this data, then for the sake of the students who genuinely are unable to pay their fees, all defaulting students would have been allowed to take their exams else the University has now thrown the baby and the bath water away! In a pandemic year where family finances have been put under pressure or wrecked, even banks and other financial institutions are granting moratorium on loan repayments to their debtors to enable them to recover. To think that this is the time BSU as a government owned and funded institution has decided to throw her students under the bus on account of fees owed is rubbing salt into injury already being suffered by the students having stayed at home for a year due to no fault of theirs.
And to cap the reign of impunity by the BSU Management, their agents are trolling their students online and a list of students who have voiced out their displeasure with the actions of the Management of the University have already being compiled and summoned to appear before a kangaroo disciplinary panel which has been set up by the University. One would expect a University to know that Article 19 of the UDHR guarantees everyone the right to freedom of opinion and expression. The freedom of expression is also protected by section 39 (1) of the constitution of the Federal Republic of Nigeria. The University authorities must listen to the voice of reason and not add further emotional injury to their already traumatised students and must stop this witch-hunting exercise immediately!
In places such as the UK, once a child is born, the Government begins to pay the parents child benefit as Government’s support to raise the child. These payments continue until the 19th birthday of the child at which time the child has only 2 years to graduate at university. If the parents decided to save this money for 19 years, it will pay the child's school fees to PhD levels. Not forgetting that education is FREE up to A levels so only university is paid!
If the parents of a child are working but on low income, the Government does not take tax from their salaries instead the Government taxes the rich heavily and pays some of that money to the poor parents in what's called child tax credit. So instead of tax taking from the salary, the Govt credits the salary by augmenting it. In the case of Benue, even the salaries of workers are not being paid as at when due!!! Also a child from a poor background in the UK who has got admission to university has all sorts of grants and scholarships open to them offered by charities, Govt, the universities etc.
If all funding options above fail, the Govt has a student loan scheme called student finance. All UK children who have a university place are offered student finance if they apply. There is enough money for all who apply. The student finance office pays the school fees directly to the universities and then pays to the student's bank account money for their accommodation and upkeep for every year they are at university. After graduation the student must not only start work but begin to earn at a particular level before the student finance begins deduction of the loan from their salaries. If the student never earns to the threshold, then they will not pay back of the loan.
This is the length to which Governments elsewhere go to keep children in school.
CONCLUSION
The Governments at all levels in Nigeria must take education more seriously with adequate budgetary allocation and ensuring every kobo spent counts towards the provision of qualitative education to the children. It is a primary responsibility of government and perhaps the most important duty of government. The Benue State Government must also wade into the crisis at the state University and impress on the Management to administer examinations to the students who were denied entry into the examinations halls. This is the minimum required for the government to show that it is taking education seriously!
Reference
1.https://www.un.org/en/about-us/universal-declaration-of-human-rights
2. http://portal.unesco.org/en/ev.php-URL_ID=12949&URL_DO=DO_TOPIC&URL_SECTION=201.html
3. https://www.budgetoffice.gov.ng/index.php/hmfbnp-public-presentation-of-2021-fgn-approved-budget?task=document.viewdoc&id=909
NNPC AND NLNG – SAME PARENTS, DIFFERENT OUTCOMES
Nick Agule
Twitter: @NickAgule
Email: [email protected]
29.06.2021
I was moved to change this week’s f...
Twitter: @NickAgule
Email: [email protected]
29.06.2021
I was moved to change this week’s f...
Date: 2024-04-08 Read More
NNPC AND NLNG – SAME PARENTS, DIFFERENT OUTCOMES
Nick Agule
Twitter: @NickAgule
Email: [email protected]
29.06.2021
I was moved to change this week’s focus to the statement by Nigeria’s Senate President Ahmad Lawan that Nigeria is currently poor and has no other option but to borrow to finance infrastructure, but I am persuaded to leave it for subsequent weeks so that we can stay with the topic earlier slated for this week which is on the NNPC and the NLNG.
On Tuesday, 15 June 2021, on the Island town of Finima in Bonny at the shores of the Atlantic Ocean in Rivers state Nigeria, a significant and historic event took place, it was the ground-breaking ceremony to mark the commencement of the construction of Train 7 project of the Nigerian Liquified Natural Gas (NLNG) Limited. The project according to the company’s Managing Director Tony Attah is expected to attract an investment of $10 billion and will boost the production capacity of the plant by 35% about 8 million tonnes a year of liquefied natural gas to take the total annual production capacity to around 30 million tonnes per year and total Foreign Direct Investment (FDI) in excess of $30 billion. The project will create 12,000 direct jobs and indirect jobs in multiples of the direct jobs count.
President Muhammadu Buhari who also spoke at the flag-off of construction noted that the NLNG has generated revenues of $114 billion over the years, paying $9 billion in taxes and $18 billion in dividends to the federal government and $15 billion in gas feed purchase. The President sought for an on-time completion of the project so that train 8 project can commence.
The puzzling thing is that both the NLNG and its sister company the Nigerian National Petroleum Corporation (NNPC) are owned by the Federal Government of Nigeria (FGN). But while the NLNG is posting fantastic performances over the years, the NNPC on the other hand has constituted a drainpipe on national resources and is continuously posting losses. To rub salt into the wounds of the nation, the NNPC recently said they were contributing zero remittance to the federation account!
The focus for this week is to X-ray the reasons why two companies owned by the FGN and are operating in the same industry in the same geography are at the extreme ends when it comes to performance. Solutions to correct the anomaly will also be proffered. But before this, let us do a brief on the two companies. NNPC
The Nigerian National Petroleum Corporation (NNPC) according to its website is the state oil corporation which was established on April 1, 1977. In addition to its exploration activities, the Corporation was given powers and operational interests in refining, petrochemicals and products transportation as well as marketing. Between 1978 and 1989, NNPC constructed refineries in Warri, Kaduna and Port Harcourt and took over the 35,000-barrel Shell Refinery established in Port Harcourt in 1965. In 1988, the NNPC was commercialised into Strategic Business Units, covering the entire spectrum of oil industry operations: exploration and production, gas development, refining, distribution, petrochemicals, engineering, and commercial investments.
The performance of the NNPC has been abysmal over the years. From the published audited financial statements, the NNPC made total losses as a group of N803 billion in 2018 while the 2019 losses stand at N1.7 billion. Tragically the NNPC business which touches on the everyday lives of Nigerians – the refineries – is where the most shambolic performance was posted. In the last 2 years (2018 and 2019), the 4 refineries generated revenues of N4.4 billion only but spent N320.3 billion to refine zero barrels of crude oil. The absence of local refining of Nigeria’s crude has led the nation to continue importation of petrol at exceedingly high costs thus necessitating the haemorrhaging of the FGN revenues through the payment of trillions of naira in the notorious subsidies.
NLNG
Nigeria LNG Limited (NLNG) as contained on its website was incorporated as a Limited Liability company on May 17, 1989, to harness Nigeria's vast natural gas resources and produce Liquefied Natural Gas (LNG) and Natural Gas Liquids (NGLs) for export. The company is an Incorporated Joint Venture owned in the following proportions: Nigerian National Petroleum Corporation (NNPC) (49%), Shell Gas B.V. (25.6%), Total Gaz Electricite Holdings France (15%), and Eni International N.A. N.V. S.àr.l (10.4%). Today, NLNG has a total production capacity of 22 million Tons Per Annum (mtpa) of LNG and 5mtpa of Natural Gas Liquids (NGLs) from its six-train plant complex and thus has become a major player in the global LNG business and is touted as the fastest growing LNG company in the world by growing from 1-6 trains in record time. The company has 16 long-term Sale and Purchase Agreements (SPAs) with 10 buyers and controls about 6 per cent of global LNG trade. NLNG began its intervention in the supply of Liquefied Petroleum Gas (LPG), otherwise known as cooking gas, to the domestic market in 2007 under the NLNG DLPG Scheme. The supply has stimulated growth in the industry, guaranteeing LPG supply, availability and affordability. This has also inspired the development of different parts of the DLPG value chain. NLNG has a proven track record of resilient performance (Operational Excellence, HSE, etc.) and unswerving profitability.
FACTORS ACCOUNTING FOR THE DIFFERING PERFORMANCES
We will now examine the factors contributing to the performances of the two companies to be worlds apart:
1. Ownership – the NNPC is owned 100% by the FGN while the NLNG is owned 49% by the FGN and the rest shareholding is held by International Oil Companies (IOCs). It is therefore clear that government can own a profitable business, so ownership is less of a factor.
2. Business – both companies are operating in the oil and gas industry thus the business sector is also less of a factor. Many people confuse the NNPC as the regulator of the oil and gas industry whereas the corporation is an oil company in the same mould as Shell, Mobil, Chevron etc.
3. Management – the NNPC is managed by a government appointed Board and Management team. The NLNG on the other hand has an independent Board of Directors at the pinnacle of its governance structure, which enables effective business decision making for the company. The Management is also constituted by the shareholders with Shell always seconding one of its employees as the MD/CEO. This structure has supported the achievement of the company’s vision of being a global company, helping to build a better Nigeria, as well as other critical success factors such as funding, transparency, accountability, sustainability, reliability and growth in the company, making NLNG arguably the most efficiently run Nigerian business in the industry.
From the above, we can safely conclude that Management is everything! It is fine for the FGN to own businesses in any sector, but the FGN has proved that it cannot manage business! Business is better left to be managed by the Business community to deliver the best results while Government retains regulation to ensure standards are not compromised and consumers are always protected from sharp practices.
RECOMMENDATIONS
Having X-rayed the factors responsible for the differing performances of the NNPC and the NLNG, the following recommendations are made which if implemented by the FGN will bring the NNPC to the level of performance of the NLNG and even surpass it because unlike the NLNG which is dealing solely in gas, the NNPC is an integrated oil and gas company which positions it for superior performance to the NLNG.
1. The FGN to excise from the NNPC the crude produced by the by IOCs operating Joint Ventures (JVs) which the FGN has participating shares. Currently, the NNPC takes this crude, which is not produced by it, sells it, spends the money as much as they want, and only remit to the FGN any balance left! This encourages laziness and profligacy on the part of the NNPC as there is no motivation to make their own money knowing that the crude that belongs to the FGN is there for them to sell and spend from the proceeds! The NNPC is to be left with the crude they produce via their upstream (exploration and production) company – the Nigerian Petroleum Development Company (NPDC) Limited.
2. The FGN to privatise the NNPC by selling at least 50% of the shares to Nigerian citizens and IOCs to pave way for the injection of fresh capital and Management to reposition the company for profitability under the same operating structure as the NLNG.
3. Currently both the mission and vision statements of the NNPC do not contain the word profit or profitability! A business-like NNPC must be focused on delivering value and profitability to all the stakeholders. The name of the NNPC should thus be changed by removing “corporation” (which paints it as a government entity) and replacing it with “limited” (which connotes an entity geared up for profitability). The confusion about the NNPC being a regulator will also be removed.
4. The NNPC to be repositioned as the energy company for the future to transition into a global giant in renewable energy.
5. Nigeria is keeping her best brains in the private sector, and it is time to begin transitioning our competent and capable hands from the private sector to the public sector because it is the public sector that creates the enabling environment for the private sector to thrive. The current MD/CEO of NLNG Tony Attah who received glowing tributes at the Train 7 ground-breaking ceremony is a Nigerian who incidentally is very well known to me as we worked together in the same team – Corporate Planning and Economics – for Shell Nigeria where he was Head of Department, and I was a team member. I believe that if I whisper into his ears to consider contesting for the governorship of Kogi State (his home state) so that he will replicate for the people of Kogi the monumental achievements he has posted at the NLNG, I will most likely receive a negative response. This must change! We must get our best people into the public sector too if we hope for a change in the trajectory of our nationhood.
CONCLUSION
If the FGN shows courage, political will, and foresightedness to implement the recommendations as above, it will transform the NNPC from a loss-making business entity to a profit-making cash cow. This is exactly what the FGN needs at this time of dwindling revenues as lamented recently by the Senate President. A privatised and repositioned NNPC will occlude the haemorrhaging of government’s revenues thus vitiating the need for borrowings but instead shore up government’s coffers with humongous dividends and taxes paid.
References:
1.https://www.nnpcgroup.com/afs/Documents/2019%20Audited%20Financial%20Statements/2019%20NNPC%20GROUP%20AUDITED%20FINANCIAL%20STATEMENTS.pdf
2. https://www.nigerialng.com/the-company/Pages/Who-We-Are.aspx
3. https://www.nnpcgroup.com/NNPC-Business/Business-Information/Pages/Monthly-Performance-Data.aspx
4. https://www.nigerialng.com/Train7-Project/Pages/Home.aspx
Twitter: @NickAgule
Email: [email protected]
29.06.2021
I was moved to change this week’s focus to the statement by Nigeria’s Senate President Ahmad Lawan that Nigeria is currently poor and has no other option but to borrow to finance infrastructure, but I am persuaded to leave it for subsequent weeks so that we can stay with the topic earlier slated for this week which is on the NNPC and the NLNG.
On Tuesday, 15 June 2021, on the Island town of Finima in Bonny at the shores of the Atlantic Ocean in Rivers state Nigeria, a significant and historic event took place, it was the ground-breaking ceremony to mark the commencement of the construction of Train 7 project of the Nigerian Liquified Natural Gas (NLNG) Limited. The project according to the company’s Managing Director Tony Attah is expected to attract an investment of $10 billion and will boost the production capacity of the plant by 35% about 8 million tonnes a year of liquefied natural gas to take the total annual production capacity to around 30 million tonnes per year and total Foreign Direct Investment (FDI) in excess of $30 billion. The project will create 12,000 direct jobs and indirect jobs in multiples of the direct jobs count.
President Muhammadu Buhari who also spoke at the flag-off of construction noted that the NLNG has generated revenues of $114 billion over the years, paying $9 billion in taxes and $18 billion in dividends to the federal government and $15 billion in gas feed purchase. The President sought for an on-time completion of the project so that train 8 project can commence.
The puzzling thing is that both the NLNG and its sister company the Nigerian National Petroleum Corporation (NNPC) are owned by the Federal Government of Nigeria (FGN). But while the NLNG is posting fantastic performances over the years, the NNPC on the other hand has constituted a drainpipe on national resources and is continuously posting losses. To rub salt into the wounds of the nation, the NNPC recently said they were contributing zero remittance to the federation account!
The focus for this week is to X-ray the reasons why two companies owned by the FGN and are operating in the same industry in the same geography are at the extreme ends when it comes to performance. Solutions to correct the anomaly will also be proffered. But before this, let us do a brief on the two companies. NNPC
The Nigerian National Petroleum Corporation (NNPC) according to its website is the state oil corporation which was established on April 1, 1977. In addition to its exploration activities, the Corporation was given powers and operational interests in refining, petrochemicals and products transportation as well as marketing. Between 1978 and 1989, NNPC constructed refineries in Warri, Kaduna and Port Harcourt and took over the 35,000-barrel Shell Refinery established in Port Harcourt in 1965. In 1988, the NNPC was commercialised into Strategic Business Units, covering the entire spectrum of oil industry operations: exploration and production, gas development, refining, distribution, petrochemicals, engineering, and commercial investments.
The performance of the NNPC has been abysmal over the years. From the published audited financial statements, the NNPC made total losses as a group of N803 billion in 2018 while the 2019 losses stand at N1.7 billion. Tragically the NNPC business which touches on the everyday lives of Nigerians – the refineries – is where the most shambolic performance was posted. In the last 2 years (2018 and 2019), the 4 refineries generated revenues of N4.4 billion only but spent N320.3 billion to refine zero barrels of crude oil. The absence of local refining of Nigeria’s crude has led the nation to continue importation of petrol at exceedingly high costs thus necessitating the haemorrhaging of the FGN revenues through the payment of trillions of naira in the notorious subsidies.
NLNG
Nigeria LNG Limited (NLNG) as contained on its website was incorporated as a Limited Liability company on May 17, 1989, to harness Nigeria's vast natural gas resources and produce Liquefied Natural Gas (LNG) and Natural Gas Liquids (NGLs) for export. The company is an Incorporated Joint Venture owned in the following proportions: Nigerian National Petroleum Corporation (NNPC) (49%), Shell Gas B.V. (25.6%), Total Gaz Electricite Holdings France (15%), and Eni International N.A. N.V. S.àr.l (10.4%). Today, NLNG has a total production capacity of 22 million Tons Per Annum (mtpa) of LNG and 5mtpa of Natural Gas Liquids (NGLs) from its six-train plant complex and thus has become a major player in the global LNG business and is touted as the fastest growing LNG company in the world by growing from 1-6 trains in record time. The company has 16 long-term Sale and Purchase Agreements (SPAs) with 10 buyers and controls about 6 per cent of global LNG trade. NLNG began its intervention in the supply of Liquefied Petroleum Gas (LPG), otherwise known as cooking gas, to the domestic market in 2007 under the NLNG DLPG Scheme. The supply has stimulated growth in the industry, guaranteeing LPG supply, availability and affordability. This has also inspired the development of different parts of the DLPG value chain. NLNG has a proven track record of resilient performance (Operational Excellence, HSE, etc.) and unswerving profitability.
FACTORS ACCOUNTING FOR THE DIFFERING PERFORMANCES
We will now examine the factors contributing to the performances of the two companies to be worlds apart:
1. Ownership – the NNPC is owned 100% by the FGN while the NLNG is owned 49% by the FGN and the rest shareholding is held by International Oil Companies (IOCs). It is therefore clear that government can own a profitable business, so ownership is less of a factor.
2. Business – both companies are operating in the oil and gas industry thus the business sector is also less of a factor. Many people confuse the NNPC as the regulator of the oil and gas industry whereas the corporation is an oil company in the same mould as Shell, Mobil, Chevron etc.
3. Management – the NNPC is managed by a government appointed Board and Management team. The NLNG on the other hand has an independent Board of Directors at the pinnacle of its governance structure, which enables effective business decision making for the company. The Management is also constituted by the shareholders with Shell always seconding one of its employees as the MD/CEO. This structure has supported the achievement of the company’s vision of being a global company, helping to build a better Nigeria, as well as other critical success factors such as funding, transparency, accountability, sustainability, reliability and growth in the company, making NLNG arguably the most efficiently run Nigerian business in the industry.
From the above, we can safely conclude that Management is everything! It is fine for the FGN to own businesses in any sector, but the FGN has proved that it cannot manage business! Business is better left to be managed by the Business community to deliver the best results while Government retains regulation to ensure standards are not compromised and consumers are always protected from sharp practices.
RECOMMENDATIONS
Having X-rayed the factors responsible for the differing performances of the NNPC and the NLNG, the following recommendations are made which if implemented by the FGN will bring the NNPC to the level of performance of the NLNG and even surpass it because unlike the NLNG which is dealing solely in gas, the NNPC is an integrated oil and gas company which positions it for superior performance to the NLNG.
1. The FGN to excise from the NNPC the crude produced by the by IOCs operating Joint Ventures (JVs) which the FGN has participating shares. Currently, the NNPC takes this crude, which is not produced by it, sells it, spends the money as much as they want, and only remit to the FGN any balance left! This encourages laziness and profligacy on the part of the NNPC as there is no motivation to make their own money knowing that the crude that belongs to the FGN is there for them to sell and spend from the proceeds! The NNPC is to be left with the crude they produce via their upstream (exploration and production) company – the Nigerian Petroleum Development Company (NPDC) Limited.
2. The FGN to privatise the NNPC by selling at least 50% of the shares to Nigerian citizens and IOCs to pave way for the injection of fresh capital and Management to reposition the company for profitability under the same operating structure as the NLNG.
3. Currently both the mission and vision statements of the NNPC do not contain the word profit or profitability! A business-like NNPC must be focused on delivering value and profitability to all the stakeholders. The name of the NNPC should thus be changed by removing “corporation” (which paints it as a government entity) and replacing it with “limited” (which connotes an entity geared up for profitability). The confusion about the NNPC being a regulator will also be removed.
4. The NNPC to be repositioned as the energy company for the future to transition into a global giant in renewable energy.
5. Nigeria is keeping her best brains in the private sector, and it is time to begin transitioning our competent and capable hands from the private sector to the public sector because it is the public sector that creates the enabling environment for the private sector to thrive. The current MD/CEO of NLNG Tony Attah who received glowing tributes at the Train 7 ground-breaking ceremony is a Nigerian who incidentally is very well known to me as we worked together in the same team – Corporate Planning and Economics – for Shell Nigeria where he was Head of Department, and I was a team member. I believe that if I whisper into his ears to consider contesting for the governorship of Kogi State (his home state) so that he will replicate for the people of Kogi the monumental achievements he has posted at the NLNG, I will most likely receive a negative response. This must change! We must get our best people into the public sector too if we hope for a change in the trajectory of our nationhood.
CONCLUSION
If the FGN shows courage, political will, and foresightedness to implement the recommendations as above, it will transform the NNPC from a loss-making business entity to a profit-making cash cow. This is exactly what the FGN needs at this time of dwindling revenues as lamented recently by the Senate President. A privatised and repositioned NNPC will occlude the haemorrhaging of government’s revenues thus vitiating the need for borrowings but instead shore up government’s coffers with humongous dividends and taxes paid.
References:
1.https://www.nnpcgroup.com/afs/Documents/2019%20Audited%20Financial%20Statements/2019%20NNPC%20GROUP%20AUDITED%20FINANCIAL%20STATEMENTS.pdf
2. https://www.nigerialng.com/the-company/Pages/Who-We-Are.aspx
3. https://www.nnpcgroup.com/NNPC-Business/Business-Information/Pages/Monthly-Performance-Data.aspx
4. https://www.nigerialng.com/Train7-Project/Pages/Home.aspx
THE BUHARI INTERVIEW AND THE ECONOMY
Nick Agule
Twitter: @NickAgule
Email: [email protected]
15.06.2021
Early last week, President Buhari grante...
Twitter: @NickAgule
Email: [email protected]
15.06.2021
Early last week, President Buhari grante...
Date: 2024-04-08 Read More
THE BUHARI INTERVIEW AND THE ECONOMY
Nick Agule
Twitter: @NickAgule
Email: [email protected]
15.06.2021
Early last week, President Buhari granted an interview to the editorial team of a major Nigerian newspaper and TV stable. The President spoke on a variety of topical issues, but it is the economic matters addressed by the President that attracts our focus this week.
Arise News: What can you do to make Nigeria a more competitive and more attractive destination for Foreign Direct Investment (FDI)?
President Buhari’s response: The President approached the question by referring to EndSars protests. He then went on to say he asked the members of the Federal Executive Council (FEC) who are drawn from each state of the federation to return to their states and speak to the Governors, traditional rulers and the business community that there are no more vacancies at the FG level. The president also believed the same situation of no more vacancies exists at the state and Local Government (LG) levels too. The President concluded that nobody is going to invest in an insecure environment and as such the youths must behave themselves to make sure Nigeria is secured to attract FDI.
Commentary: In the pecking order of factors considered by investors before deciding on an investment destination, security is at the top, but it is not the highest consideration. I worked for a multinational oil company that operated in regions where there were wars or serious conflicts, but it did not discourage them from investing in these regions. Rather they carefully planned and executed security protection architecture for their people and assets in places such as Iraq, Afghanistan, Algeria etc!
What investors are more particular about is the rule of law and the independence of the judiciary because unlike security where they can take care of the protection of their staff and assets, they cannot appoint their own Judges to sit on any litigations they are involved in. Therefore, a country where the judiciary is not independent, and the wheels of justice grind so sluggishly as we have in Nigeria is a major turn-off for investors. Unfortunately, the President did not address the efforts of his government to ensure the independence of the judiciary. The midnight raids on Judges’ residences and the unceremonial removal of the Chief Judge of Nigeria under the President’s government has further dampened the enthusiasm of investors. The President missed the opportunity to assure the nation and the international community including investors of his government’s commitment to the independence of the judiciary which is the one of the highest attraction factors for FDIs. The FG’s recent altercation with Twitter is a big red flag for investors in terms of stability of government policy and reaction to disputes.
Still on security, a tourist stands a higher chance of becoming a victim of knife crime in London or Johannesburg compared to Lagos or Abuja. Statistics show that there in 2019/20 the number of knife crime offences recorded in London reached almost 16,000. The numbers in Johannesburg are even higher yet tourists choose these cities as holiday destinations over Lagos and Abuja which are relatively safer because they believe that law enforcement is stronger in the UK and South Africa compared to Nigeria. Law enforcement thus should be a major pre-occupation of President Buhari if Nigeria is to create the enabling environment for FDIs. Investors are also looking to the independence and strength of the legislative arm of government which acts as a check on the executive branch. The current faint-hearted attitude of the national assembly whose leaders emerged with the fingerprint of the executive branch written all over the process cannot engender confidence in the investing community.
Arise News: How do we deal with the subsidy question of petroleum and power? President Buhari’s response: The President alluded to Nigeria producing her own oil so the citizens won’t want to pay expensive prices. He lamented that Nigeria’s petrol is sold along the West African coast all the way to Ghana. He expressed anxieties that if the market forces are allowed to drive the prices of petrol that Nigerians will seek to overthrow his government. The solution according to the President is to strengthen the borders with customs and border guards. Commentary: The two biggest drainpipes on the Nigerian treasury are subsidies on petrol and the dollar! The President seems to be oblivious of the fact that subsidies have been removed on diesel which is the fuel for the productive sector of the economy. Kerosene which is fuel used mostly by the poor has also got subsidy removed! By succumbing to scaremongering that his government will be overthrown, the President is keeping subsidy on petrol which is fuel used mostly by big men in their gigantic SUVs which amounts to taxing the poor to fund the lifestyle of the rich! The President must show courage to tackle the subsidy issue in a more systematic and pragmatic way including in the short-term full liberalisation of the downstream sector and in the medium/long terms the full privatisation of all the refineries which are currently refining zero barrels but guzzling tens of billions in costs annually. These steps will not only assure petroleum products availability, but Nigerians will pay cheaper prices than what is currently obtainable under the government subsidy regime.
More troubling is that the President totally ignored the most important economic driver – power supply – which he did not address. Nigeria’s economy by global standards needs 200GW of electricity but is currently being supplied with 4GW! No economy will do well with such abysmal levels of power supply! Mr President must understand that it is sufficient power supply that will solve the other issues bedevilling the economy such as unemployment, high inflation, naira depreciation etc!
In his democracy day speech, the President again did not mention the power deficit thus relegating it to the background of issues being tackled by the government to boost the economy. Mr President has to realise that without power supply all the beautiful policies he stated in his speech will not flourish including the Anchor Borrowers Programme, AgriBusiness/Small and Medium Enterprise Investment Scheme, the Non-oil Export stimulation Facility, the Targeted Credit Facilities, BOI N200 billion facility to finance the establishment and operations of 60 new industrial hubs across the country, N50 billion Textile Sector intervention Facility, National Social Investment Programme, Development Bank of Nigeria 324 billion Naira in loans to more than 136,000 MSMEs, all these initiatives will require adequate electricity supply to power it before they boom! The motto of the FG on electricity should read – SEEK YE FIRST SUFFICIENT ELECTRICITY SUPPLY AND ECONOMIC GROWTH WILL BE ADDED ONTO US! The FG must as a matter of urgency declare an emergency in the electricity sector and setup a presidential task force on power in the same mould that COVID attracted attention, if our economy is to be rescued back from the brink and placed on the firm route to recovery! Arise News: Debt service to revenue ratio has risen from 40% to 90% under the Buhari government. Because of the heavy debt burden, it is becoming difficult to fund infrastructure. What measures is the Government putting in place to diversify the economy and to further increase revenue?
President Buhari’s response: The President blamed the infrastructural deficit on previous governments that sold more crude oil at higher prices but did not invest to expand the infrastructure.
Commentary: The President is right that previous governments did not deliver much in terms of infrastructural development, but this should not be an excuse to go on a borrowing spree. In 2020 the FG earned N3.9 trillion in revenues but spent N10.08 trillion leaving a deficit of over N6 trillion which was 150% of revenues. The picture in 2021 has not changed with total revenue projected at N7.99 trillion and expenditure at N13.59 trillion leaving a deficit of over N6 trillion again! Debt service in 2020 was N3.27 trillion and 2021 is projected at N3.32 trillion. We are effectively paying all the revenue we earn to lenders and then borrow to fund the budget! These are unsustainable levels of debt, and the FG must change the strategy of infrastructural financing from debt to privatisation!
When government borrows to fund infrastructure, it leaves a heavy debt burden on the FG’s balance sheet. If the government changes strategy and privatises as it was done for telecoms, the investors bring in their capital, technology and expertise and develop the infrastructure, offer services, bill consumers, generate revenue, pay their costs and retain a healthy return for the investors. Privatisation will not leave debt on government’s balance sheet rather government’s revenues will be shored up with taxes that will be accrue to government from the from the economic activities generated by the private sector using their own capital! The assets that have been created by the private sector will also remain on Nigerian soil and cannot be easily moved away by the investors. Thus, the infrastructural objectives of government will be achieved without government spending any monies and hence have no need for borrowing.
CONCLUSION:
President Buhari may mean well for Nigeria but his economic policies are not working with inflation currently at an all-time high of over 18%, unemployment at over 33%, Naira depreciated to over N500 to a dollar etc are tell tale signs of the failure of the economic policies to ignite growth as hoped. The President must focus on the structural and systemic foundations of the economy – rule of law, power supply, privatisation etc – if we are to reverse the economy from going over the cliff back on the road to recovery!
Twitter: @NickAgule
Email: [email protected]
15.06.2021
Early last week, President Buhari granted an interview to the editorial team of a major Nigerian newspaper and TV stable. The President spoke on a variety of topical issues, but it is the economic matters addressed by the President that attracts our focus this week.
Arise News: What can you do to make Nigeria a more competitive and more attractive destination for Foreign Direct Investment (FDI)?
President Buhari’s response: The President approached the question by referring to EndSars protests. He then went on to say he asked the members of the Federal Executive Council (FEC) who are drawn from each state of the federation to return to their states and speak to the Governors, traditional rulers and the business community that there are no more vacancies at the FG level. The president also believed the same situation of no more vacancies exists at the state and Local Government (LG) levels too. The President concluded that nobody is going to invest in an insecure environment and as such the youths must behave themselves to make sure Nigeria is secured to attract FDI.
Commentary: In the pecking order of factors considered by investors before deciding on an investment destination, security is at the top, but it is not the highest consideration. I worked for a multinational oil company that operated in regions where there were wars or serious conflicts, but it did not discourage them from investing in these regions. Rather they carefully planned and executed security protection architecture for their people and assets in places such as Iraq, Afghanistan, Algeria etc!
What investors are more particular about is the rule of law and the independence of the judiciary because unlike security where they can take care of the protection of their staff and assets, they cannot appoint their own Judges to sit on any litigations they are involved in. Therefore, a country where the judiciary is not independent, and the wheels of justice grind so sluggishly as we have in Nigeria is a major turn-off for investors. Unfortunately, the President did not address the efforts of his government to ensure the independence of the judiciary. The midnight raids on Judges’ residences and the unceremonial removal of the Chief Judge of Nigeria under the President’s government has further dampened the enthusiasm of investors. The President missed the opportunity to assure the nation and the international community including investors of his government’s commitment to the independence of the judiciary which is the one of the highest attraction factors for FDIs. The FG’s recent altercation with Twitter is a big red flag for investors in terms of stability of government policy and reaction to disputes.
Still on security, a tourist stands a higher chance of becoming a victim of knife crime in London or Johannesburg compared to Lagos or Abuja. Statistics show that there in 2019/20 the number of knife crime offences recorded in London reached almost 16,000. The numbers in Johannesburg are even higher yet tourists choose these cities as holiday destinations over Lagos and Abuja which are relatively safer because they believe that law enforcement is stronger in the UK and South Africa compared to Nigeria. Law enforcement thus should be a major pre-occupation of President Buhari if Nigeria is to create the enabling environment for FDIs. Investors are also looking to the independence and strength of the legislative arm of government which acts as a check on the executive branch. The current faint-hearted attitude of the national assembly whose leaders emerged with the fingerprint of the executive branch written all over the process cannot engender confidence in the investing community.
Arise News: How do we deal with the subsidy question of petroleum and power? President Buhari’s response: The President alluded to Nigeria producing her own oil so the citizens won’t want to pay expensive prices. He lamented that Nigeria’s petrol is sold along the West African coast all the way to Ghana. He expressed anxieties that if the market forces are allowed to drive the prices of petrol that Nigerians will seek to overthrow his government. The solution according to the President is to strengthen the borders with customs and border guards. Commentary: The two biggest drainpipes on the Nigerian treasury are subsidies on petrol and the dollar! The President seems to be oblivious of the fact that subsidies have been removed on diesel which is the fuel for the productive sector of the economy. Kerosene which is fuel used mostly by the poor has also got subsidy removed! By succumbing to scaremongering that his government will be overthrown, the President is keeping subsidy on petrol which is fuel used mostly by big men in their gigantic SUVs which amounts to taxing the poor to fund the lifestyle of the rich! The President must show courage to tackle the subsidy issue in a more systematic and pragmatic way including in the short-term full liberalisation of the downstream sector and in the medium/long terms the full privatisation of all the refineries which are currently refining zero barrels but guzzling tens of billions in costs annually. These steps will not only assure petroleum products availability, but Nigerians will pay cheaper prices than what is currently obtainable under the government subsidy regime.
More troubling is that the President totally ignored the most important economic driver – power supply – which he did not address. Nigeria’s economy by global standards needs 200GW of electricity but is currently being supplied with 4GW! No economy will do well with such abysmal levels of power supply! Mr President must understand that it is sufficient power supply that will solve the other issues bedevilling the economy such as unemployment, high inflation, naira depreciation etc!
In his democracy day speech, the President again did not mention the power deficit thus relegating it to the background of issues being tackled by the government to boost the economy. Mr President has to realise that without power supply all the beautiful policies he stated in his speech will not flourish including the Anchor Borrowers Programme, AgriBusiness/Small and Medium Enterprise Investment Scheme, the Non-oil Export stimulation Facility, the Targeted Credit Facilities, BOI N200 billion facility to finance the establishment and operations of 60 new industrial hubs across the country, N50 billion Textile Sector intervention Facility, National Social Investment Programme, Development Bank of Nigeria 324 billion Naira in loans to more than 136,000 MSMEs, all these initiatives will require adequate electricity supply to power it before they boom! The motto of the FG on electricity should read – SEEK YE FIRST SUFFICIENT ELECTRICITY SUPPLY AND ECONOMIC GROWTH WILL BE ADDED ONTO US! The FG must as a matter of urgency declare an emergency in the electricity sector and setup a presidential task force on power in the same mould that COVID attracted attention, if our economy is to be rescued back from the brink and placed on the firm route to recovery! Arise News: Debt service to revenue ratio has risen from 40% to 90% under the Buhari government. Because of the heavy debt burden, it is becoming difficult to fund infrastructure. What measures is the Government putting in place to diversify the economy and to further increase revenue?
President Buhari’s response: The President blamed the infrastructural deficit on previous governments that sold more crude oil at higher prices but did not invest to expand the infrastructure.
Commentary: The President is right that previous governments did not deliver much in terms of infrastructural development, but this should not be an excuse to go on a borrowing spree. In 2020 the FG earned N3.9 trillion in revenues but spent N10.08 trillion leaving a deficit of over N6 trillion which was 150% of revenues. The picture in 2021 has not changed with total revenue projected at N7.99 trillion and expenditure at N13.59 trillion leaving a deficit of over N6 trillion again! Debt service in 2020 was N3.27 trillion and 2021 is projected at N3.32 trillion. We are effectively paying all the revenue we earn to lenders and then borrow to fund the budget! These are unsustainable levels of debt, and the FG must change the strategy of infrastructural financing from debt to privatisation!
When government borrows to fund infrastructure, it leaves a heavy debt burden on the FG’s balance sheet. If the government changes strategy and privatises as it was done for telecoms, the investors bring in their capital, technology and expertise and develop the infrastructure, offer services, bill consumers, generate revenue, pay their costs and retain a healthy return for the investors. Privatisation will not leave debt on government’s balance sheet rather government’s revenues will be shored up with taxes that will be accrue to government from the from the economic activities generated by the private sector using their own capital! The assets that have been created by the private sector will also remain on Nigerian soil and cannot be easily moved away by the investors. Thus, the infrastructural objectives of government will be achieved without government spending any monies and hence have no need for borrowing.
CONCLUSION:
President Buhari may mean well for Nigeria but his economic policies are not working with inflation currently at an all-time high of over 18%, unemployment at over 33%, Naira depreciated to over N500 to a dollar etc are tell tale signs of the failure of the economic policies to ignite growth as hoped. The President must focus on the structural and systemic foundations of the economy – rule of law, power supply, privatisation etc – if we are to reverse the economy from going over the cliff back on the road to recovery!
Crashing Value of the Naira – Causes and Solutions
Date: 2024-04-04 Read More
Crashing Value of the Naira – Causes and Solutions
Nick Agule
Twitter: @NickAgule
Email: [email protected]
09.08.2022
Introduction
During the last week, news broke that Operatives of the Economic and Financial Crimes Commission (EFCC) raided Wuse Zone 4 where most bureau de change operators in Abuja run their businesses. It was further reported that sources at the EFCC gave reasons for the raid as:
“We (EFCC) are working on intelligence that some forces with massive naira inflow have mobilised resources and, are busy buying up available foreign currencies especially the US Dollar, to either hoard or smuggle the same out of Nigeria.”
This ignominious action by the EFCC comes after the Central Bank of Nigeria (CBN) infamously accused an online exchange rates platform (AbokiFx) as being responsible for the crashing value of the naira.
Nigerian Government Chasing Shadows!
A currency is a commodity, and its price depends on the forces of demand and supply. And often that price is not dependent on the value of the commodity or its importance to human life but rather on its availability. So, water is more valuable to life than gold but the price of water is far less than gold because water is more plentifully available, like you can see water for free in River Benue but not so for gold! (this is what economists call the paradox of value). So anytime a commodity becomes scarce, its price tends to rise and that is precisely what is happening to the dollar.
A few years ago, for those with naira who wanted to buy the dollar, the price of a single dollar note was N150. Today the price of the same single dollar has risen to over N700. The price of the dollar is said to be rising or gaining strength against the naira as you need a lot more naira today to buy a single dollar. Conversely, the value of the naira has been crashing because a few years ago, those with dollars who wanted to buy the naira got N150 for every dollar they sold. Today, the same dollar fetches them N700. The value (price) of the naira is therefore said to be falling as you can buy a lot more naira today with the same single dollar. This is how the foreign exchange (forex) markets work.
In the forex market in Nigeria today, there are more buyers of the dollar than buyers of the naira so even if angels fall from heaven, they will not help the naira rise against the dollar! The ONLY thing that will lift the naira is if Nigeria reverses the trend such that those with dollars looking to buy the naira are more in the forex market than those with naira looking to buy the dollar! And the ONLY way to reverse the trend to have more naira buyers than dollar buyers in the forex market is for Nigeria to produce goods and services. When Nigeria begins massive production of goods and services for both the domestic and export markets, two things will happen to help the naira gain strength against the dollar:
1. Since Nigeria will be consuming goods and services produced locally, there will be no need for importation. Once importation is curtailed, there will be no need for holders of the naira to buy the dollar again. For example, we currently sell petrol in naira and the naira is used to buy dollars to enable us import petrol. If our refineries are producing petrol locally, it will be sold in naira and there will be no need to buy the dollar to import petrol. The same effect will happen if we raise the standards of our schools and hospitals so that instead of people with naira looking to buy the dollar and pay fees/other costs and hospital bills abroad, they will simply use the naira to pay for the services in Nigeria.
2. As we begin to produce goods and services locally, foreign buyers will bring in dollars to buy the naira and pay for our goods and services which they will export. The trend will be reversed because it will be the dollar now looking for naira and thus the naira will begin to gain strength against the dollar. So, like in the example above, if our refineries are producing enough products for local consumption and a balance for export, foreign buyers will bring in dollars, buy the naira and pay for our petroleum products. Same will be the case for foreigners who bring in the dollar to buy the naira to pay school fees/other costs and medical bills to our functional world-class schools and hospitals.
How the Naira will gain strength
The naira will gain strength if Nigeria breaks from a consumption economy to a production economy. And the ways this will happen are as follows:
1. Power Supply – electricity is the lifeblood to any modern 21st century industrial age economy. By global standards, an industrial economy needs 1,000MW of electricity for every 1 million people to operate optimally. Nigeria therefore by global standards needs 200,000MW of electricity for optimal production but the economy is practically starved with only 3,000MW made available. There is no industrial age economy that will grow this such an abysmal power supply! 3,000MW should be electricity for only the FCT! Our contemporaries Brazil is supply 150,000MW for 215 million people and India is doing 400,000MW for 1.4 billion people, not up to global standards but much more than the abysmal 3,000MW Nigeria is supplying! So that first and most sustainable way to strengthen the value of the naira is to provide the economy with electricity simple!
2. The Central Bank must stop printing money – news broke a few weeks ago that the Federal Government’s total borrowing from the Central Bank of Nigeria through Ways and Means Advances (aka printing of money) rose from N17.46tn as of December 2021 to N19.01tn as of April 2022. This is what is substantially causing the “massive naira inflow” according to the EFCC which is distorting the forex market because the printed naira finds its way into the forex market. There are even allegations that government officials no longer accept naira in kickbacks/bribes and demand dollars from people who are left with no choices than to approach the forex market.
3. The Central Bank to stop the dual forex market – by creating a dual market – the so-called official market and the parallel market (also known as the black market), the central bank has created a rent-seeking platform that feeds the roundtripping of dollars procured in the official market at N400+ and sold in the parallel market at N700+. The CBN has created a spread of over N300 to fuel arbitrage between the two markets.
4. Increase dollar supply – the Nigerian economy is starved of dollars because the state of insecurity means foreign direct investment (FDI) is no longer coming in as before. Also, the NNPC is no longer dropping dollars from crude sales into the federation account because the entire proceeds of crude sales are paid to suppliers of petroleum products. Diaspora remittances have also suffered decline due to Covid and the war in Ukraine that is pressuring family incomes globally. The CBN therefore has no more dollars to pump into the forex market to support that naira leading to its free fall. Only an increase in dollar supply to the Nigerian economy will reverse this trend.
There are other ways to shore up the value of the naira but the above are the main ones and lack of space limits the full disclosure of all the ways.
Conclusions:
Bottomline is that production of goods and services is the only way the naira will be restored as a convertible currency and appreciate to even N1 to a dollar or become stronger than the dollar as it was the case in the years past. Banning AbokiFx, raiding bureau the change, blaming exporters who don’t repatriate proceeds, blaming the NNPC for non-remittances of crude sales etc. will never stop the value of the naira from crashing! Only production of goods and services will!
References:
1. https://guardian.ng/news/efcc-raids-abuja-bureau-de-change-operators-over-dollar-scarcity/
2. https://punchng.com/fgs-borrowing-from-cbn-hits-n19tn-inflation-may-worsen-report/
Twitter: @NickAgule
Email: [email protected]
09.08.2022
Introduction
During the last week, news broke that Operatives of the Economic and Financial Crimes Commission (EFCC) raided Wuse Zone 4 where most bureau de change operators in Abuja run their businesses. It was further reported that sources at the EFCC gave reasons for the raid as:
“We (EFCC) are working on intelligence that some forces with massive naira inflow have mobilised resources and, are busy buying up available foreign currencies especially the US Dollar, to either hoard or smuggle the same out of Nigeria.”
This ignominious action by the EFCC comes after the Central Bank of Nigeria (CBN) infamously accused an online exchange rates platform (AbokiFx) as being responsible for the crashing value of the naira.
Nigerian Government Chasing Shadows!
A currency is a commodity, and its price depends on the forces of demand and supply. And often that price is not dependent on the value of the commodity or its importance to human life but rather on its availability. So, water is more valuable to life than gold but the price of water is far less than gold because water is more plentifully available, like you can see water for free in River Benue but not so for gold! (this is what economists call the paradox of value). So anytime a commodity becomes scarce, its price tends to rise and that is precisely what is happening to the dollar.
A few years ago, for those with naira who wanted to buy the dollar, the price of a single dollar note was N150. Today the price of the same single dollar has risen to over N700. The price of the dollar is said to be rising or gaining strength against the naira as you need a lot more naira today to buy a single dollar. Conversely, the value of the naira has been crashing because a few years ago, those with dollars who wanted to buy the naira got N150 for every dollar they sold. Today, the same dollar fetches them N700. The value (price) of the naira is therefore said to be falling as you can buy a lot more naira today with the same single dollar. This is how the foreign exchange (forex) markets work.
In the forex market in Nigeria today, there are more buyers of the dollar than buyers of the naira so even if angels fall from heaven, they will not help the naira rise against the dollar! The ONLY thing that will lift the naira is if Nigeria reverses the trend such that those with dollars looking to buy the naira are more in the forex market than those with naira looking to buy the dollar! And the ONLY way to reverse the trend to have more naira buyers than dollar buyers in the forex market is for Nigeria to produce goods and services. When Nigeria begins massive production of goods and services for both the domestic and export markets, two things will happen to help the naira gain strength against the dollar:
1. Since Nigeria will be consuming goods and services produced locally, there will be no need for importation. Once importation is curtailed, there will be no need for holders of the naira to buy the dollar again. For example, we currently sell petrol in naira and the naira is used to buy dollars to enable us import petrol. If our refineries are producing petrol locally, it will be sold in naira and there will be no need to buy the dollar to import petrol. The same effect will happen if we raise the standards of our schools and hospitals so that instead of people with naira looking to buy the dollar and pay fees/other costs and hospital bills abroad, they will simply use the naira to pay for the services in Nigeria.
2. As we begin to produce goods and services locally, foreign buyers will bring in dollars to buy the naira and pay for our goods and services which they will export. The trend will be reversed because it will be the dollar now looking for naira and thus the naira will begin to gain strength against the dollar. So, like in the example above, if our refineries are producing enough products for local consumption and a balance for export, foreign buyers will bring in dollars, buy the naira and pay for our petroleum products. Same will be the case for foreigners who bring in the dollar to buy the naira to pay school fees/other costs and medical bills to our functional world-class schools and hospitals.
How the Naira will gain strength
The naira will gain strength if Nigeria breaks from a consumption economy to a production economy. And the ways this will happen are as follows:
1. Power Supply – electricity is the lifeblood to any modern 21st century industrial age economy. By global standards, an industrial economy needs 1,000MW of electricity for every 1 million people to operate optimally. Nigeria therefore by global standards needs 200,000MW of electricity for optimal production but the economy is practically starved with only 3,000MW made available. There is no industrial age economy that will grow this such an abysmal power supply! 3,000MW should be electricity for only the FCT! Our contemporaries Brazil is supply 150,000MW for 215 million people and India is doing 400,000MW for 1.4 billion people, not up to global standards but much more than the abysmal 3,000MW Nigeria is supplying! So that first and most sustainable way to strengthen the value of the naira is to provide the economy with electricity simple!
2. The Central Bank must stop printing money – news broke a few weeks ago that the Federal Government’s total borrowing from the Central Bank of Nigeria through Ways and Means Advances (aka printing of money) rose from N17.46tn as of December 2021 to N19.01tn as of April 2022. This is what is substantially causing the “massive naira inflow” according to the EFCC which is distorting the forex market because the printed naira finds its way into the forex market. There are even allegations that government officials no longer accept naira in kickbacks/bribes and demand dollars from people who are left with no choices than to approach the forex market.
3. The Central Bank to stop the dual forex market – by creating a dual market – the so-called official market and the parallel market (also known as the black market), the central bank has created a rent-seeking platform that feeds the roundtripping of dollars procured in the official market at N400+ and sold in the parallel market at N700+. The CBN has created a spread of over N300 to fuel arbitrage between the two markets.
4. Increase dollar supply – the Nigerian economy is starved of dollars because the state of insecurity means foreign direct investment (FDI) is no longer coming in as before. Also, the NNPC is no longer dropping dollars from crude sales into the federation account because the entire proceeds of crude sales are paid to suppliers of petroleum products. Diaspora remittances have also suffered decline due to Covid and the war in Ukraine that is pressuring family incomes globally. The CBN therefore has no more dollars to pump into the forex market to support that naira leading to its free fall. Only an increase in dollar supply to the Nigerian economy will reverse this trend.
There are other ways to shore up the value of the naira but the above are the main ones and lack of space limits the full disclosure of all the ways.
Conclusions:
Bottomline is that production of goods and services is the only way the naira will be restored as a convertible currency and appreciate to even N1 to a dollar or become stronger than the dollar as it was the case in the years past. Banning AbokiFx, raiding bureau the change, blaming exporters who don’t repatriate proceeds, blaming the NNPC for non-remittances of crude sales etc. will never stop the value of the naira from crashing! Only production of goods and services will!
References:
1. https://guardian.ng/news/efcc-raids-abuja-bureau-de-change-operators-over-dollar-scarcity/
2. https://punchng.com/fgs-borrowing-from-cbn-hits-n19tn-inflation-may-worsen-report/
No Rule of Law – No Economy
Date: 2024-04-04 Read More
No Rule of Law – No Economy
Nick Agule
Twitter: @NickAgule
Email: [email protected]
17.05.2022
Introduction
The rule of law is defined as the mechanism, process, institution, practice, or norm that supports the equality of all citizens before the law, secures a nonarbitrary form of government, and more generally prevents the arbitrary use of power (Britannica).
Two important key phrases can be surmised from the above definition – equality of all citizens before the law and nonarbitrary use of power. These two phrases were absent when Deborah Samuel a student in Sokoto, northwest Nigeria, was recently arbitrarily accused, judged, condemned, dragged out of her classroom and publicly humiliated, stoned and summarily executed by a murderous mob and her body cremated in a gory and most abhorrent manner. The rule of law is a pillar of democracy without which democracy will wobble and cannot stand which explains why Nigeria is not making progress politically and economically!
A nation where if someone does not like your face or what you have said and all it takes is for him or her to accuse you of blasphemy and immediately you are served a death sentence and summarily executed can never attract investors especially the much needed foreign ones with the capital, technology and expertise that is needed to unlock Nigeria’s economy to bring to an end the nation’s status as the poverty capital of the world. Which multinational company will want their staff to be put in such harm’s way?
Nations with capital punishment go through a painstaking judicial process presuming the innocence of the accused and usually going all the way to the highest court in the land before a death sentence is confirmed. And usually, it takes tens of years for the sentence to be executed because the state gives it enough time for any contrary evidence to emerge that will give a different verdict to the sentence and there have been instances where death row inmates have been found to be innocent and set free. That within a few minutes someone in Nigeria can be accused, judged, condemned and sentence carried out shows the distance the country is from the civilisation of the 21st century! This is surely a red flag that will cause shivers to run down the spines of investors and they will simply not show up regardless of the investments summits and foreign trips officials make in the name of shopping for investors.
A nation where as if the prevalence of jungle justice is not bad enough has an attorney general who procures judicial decisions through the black-market is a big turnoff for investors. Even 100 level law students should know the requirements for jurisdiction and locus and to think that an attorney general was ignorant of these basic tenets of the law in his haste and pursuit to procure a shady judgement which he triumphantly was boasting to use to delete certain provisions of the law cannot attract investors. When people commit their capital in a country, they want to have confidence in the legal and judicial process that when things don’t go according to plan, they can speedily and expeditiously receive adjudication in a fair, transparent and equitable manner. A nation parading an attorney general who is acting like a deputy god can never see serious investors and can as well forget about economic growth!
As if having a Lord of the Manor attorney general is not a big turnoff enough, Nigeria is a country where citizens are held hostage in the territory and sovereignty of the country and the chief of defence staff, the service chiefs, police and other security chiefs simply go to their offices, return home and have a good sleep (murdering sleep perhaps) without a bother about the fate of citizens held in captivity by a ragtag bunch of criminals. No investor of pedigree will take such a country serious. Investors are concerned and rigorously manage risks around the security and safety of their staff and a nation where thousands of citizens are being held in bondage in hundreds of sites around the country and even medical officials are brought into such hostage camps to deliver pregnant women and yet the security apparatus and architecture is acting timid will be avoided and given a cold shoulder by investors in same vein as Covid was!
Conclusions:
1. Without taking care of the rule of law, sanctity and independence of the judicial and legislative arms of government and free and transparent electoral process, the hope to see growth in Nigeria’s economy will remain a pipe dream!
2. Instead of constantly engaging in jamborees called investments summits, Nigerian governments at all levels need to do first do their homework of creating the enabling environment for investors to come through the door. Without this enabling environment first created, no amount of investment summits and foreign trips will bring in the much-needed investments.
3. We now live in a globalised world where information flows seamlessly across boundaries, so investors are already aware of the huge investment potentials in Nigeria. Investment summits therefore don’t add anything new to what investors already know. What is keeping investors away is such barbaric acts like the cold-blooded, daylight murder of Deborah Samuel and the ignorance being spewed out by otherwise educated and exposed people who have come out in support of such dastardly act.
4. A nation is as good as the quality of the leaders. Nigerians have a unique opportunity in 2023 to elect leaders at all levels who will heal the nation, unite the country and take care of basic requirements of the rule of law to create the enabling environment for investors to come in and lift Nigerians out of poverty. The most legitimate, legal, constitutional and less risky way to do this is simply for every Nigerian of voting age to approach a voter registration centre, register to vote, then troop out to vote for the right candidates regardless of their party platforms, watch the vote and go home satisfied that they have done their job to change the leadership of Nigeria for good. Voter registration closes on 30th June and if you don’t plan to be part of the electoral process because you fear for your life, would you rather prefer Deborah Samuel to happen to you?
References:
1. https://www.britannica.com/topic/rule-of-law
Twitter: @NickAgule
Email: [email protected]
17.05.2022
Introduction
The rule of law is defined as the mechanism, process, institution, practice, or norm that supports the equality of all citizens before the law, secures a nonarbitrary form of government, and more generally prevents the arbitrary use of power (Britannica).
Two important key phrases can be surmised from the above definition – equality of all citizens before the law and nonarbitrary use of power. These two phrases were absent when Deborah Samuel a student in Sokoto, northwest Nigeria, was recently arbitrarily accused, judged, condemned, dragged out of her classroom and publicly humiliated, stoned and summarily executed by a murderous mob and her body cremated in a gory and most abhorrent manner. The rule of law is a pillar of democracy without which democracy will wobble and cannot stand which explains why Nigeria is not making progress politically and economically!
A nation where if someone does not like your face or what you have said and all it takes is for him or her to accuse you of blasphemy and immediately you are served a death sentence and summarily executed can never attract investors especially the much needed foreign ones with the capital, technology and expertise that is needed to unlock Nigeria’s economy to bring to an end the nation’s status as the poverty capital of the world. Which multinational company will want their staff to be put in such harm’s way?
Nations with capital punishment go through a painstaking judicial process presuming the innocence of the accused and usually going all the way to the highest court in the land before a death sentence is confirmed. And usually, it takes tens of years for the sentence to be executed because the state gives it enough time for any contrary evidence to emerge that will give a different verdict to the sentence and there have been instances where death row inmates have been found to be innocent and set free. That within a few minutes someone in Nigeria can be accused, judged, condemned and sentence carried out shows the distance the country is from the civilisation of the 21st century! This is surely a red flag that will cause shivers to run down the spines of investors and they will simply not show up regardless of the investments summits and foreign trips officials make in the name of shopping for investors.
A nation where as if the prevalence of jungle justice is not bad enough has an attorney general who procures judicial decisions through the black-market is a big turnoff for investors. Even 100 level law students should know the requirements for jurisdiction and locus and to think that an attorney general was ignorant of these basic tenets of the law in his haste and pursuit to procure a shady judgement which he triumphantly was boasting to use to delete certain provisions of the law cannot attract investors. When people commit their capital in a country, they want to have confidence in the legal and judicial process that when things don’t go according to plan, they can speedily and expeditiously receive adjudication in a fair, transparent and equitable manner. A nation parading an attorney general who is acting like a deputy god can never see serious investors and can as well forget about economic growth!
As if having a Lord of the Manor attorney general is not a big turnoff enough, Nigeria is a country where citizens are held hostage in the territory and sovereignty of the country and the chief of defence staff, the service chiefs, police and other security chiefs simply go to their offices, return home and have a good sleep (murdering sleep perhaps) without a bother about the fate of citizens held in captivity by a ragtag bunch of criminals. No investor of pedigree will take such a country serious. Investors are concerned and rigorously manage risks around the security and safety of their staff and a nation where thousands of citizens are being held in bondage in hundreds of sites around the country and even medical officials are brought into such hostage camps to deliver pregnant women and yet the security apparatus and architecture is acting timid will be avoided and given a cold shoulder by investors in same vein as Covid was!
Conclusions:
1. Without taking care of the rule of law, sanctity and independence of the judicial and legislative arms of government and free and transparent electoral process, the hope to see growth in Nigeria’s economy will remain a pipe dream!
2. Instead of constantly engaging in jamborees called investments summits, Nigerian governments at all levels need to do first do their homework of creating the enabling environment for investors to come through the door. Without this enabling environment first created, no amount of investment summits and foreign trips will bring in the much-needed investments.
3. We now live in a globalised world where information flows seamlessly across boundaries, so investors are already aware of the huge investment potentials in Nigeria. Investment summits therefore don’t add anything new to what investors already know. What is keeping investors away is such barbaric acts like the cold-blooded, daylight murder of Deborah Samuel and the ignorance being spewed out by otherwise educated and exposed people who have come out in support of such dastardly act.
4. A nation is as good as the quality of the leaders. Nigerians have a unique opportunity in 2023 to elect leaders at all levels who will heal the nation, unite the country and take care of basic requirements of the rule of law to create the enabling environment for investors to come in and lift Nigerians out of poverty. The most legitimate, legal, constitutional and less risky way to do this is simply for every Nigerian of voting age to approach a voter registration centre, register to vote, then troop out to vote for the right candidates regardless of their party platforms, watch the vote and go home satisfied that they have done their job to change the leadership of Nigeria for good. Voter registration closes on 30th June and if you don’t plan to be part of the electoral process because you fear for your life, would you rather prefer Deborah Samuel to happen to you?
References:
1. https://www.britannica.com/topic/rule-of-law
MPR AT 13% – Misdiagnosis and Wrong Medication for Nigeria’s Ailing Economy
Date: 2024-04-04 Read More
MPR AT 13% – Misdiagnosis and Wrong Medication for Nigeria’s Ailing Economy
Nick Agule
Twitter: @NickAgule
Email: [email protected]
21.06.2022
Introduction
Between 23rd and 24th May 2022, the Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC) met and one of the key decisions taken by the MPC was to retain the Monetary Policy Rate (MPR) at 13.0%. The MPR is the rate at which the CBN lends to the commercial banks and in turn influences the rate at which banks lend to their customers. The MPR is used by central banks across the world as a monetary policy tool to control inflation, boost production, stimulate and stabilise the economy amongst other measures.
One of the economic indices that the MPR is used to stabilise is inflation which is a condition of rising prices of goods and services. If the inflation is high, the central bank increases the MPR which then makes it more expensive to borrow from the banks and consumers therefore spend less. Also, the interest offered on savings by the banks becomes higher and that attracts individuals/corporates to save instead of consumption. With less demand, the pressure on prices is lifted and inflation is contained.
The scenario described above is used to control DEMAND-PULL inflation where aggregate demand exceeds the supply of goods and services available to consumers. A higher MPR therefore curtails the demand and eases inflation.
But Nigeria’s inflation is COST-PUSH which will not respond to MPR increase measures. This is the tragedy of the recent CBN’s increase of MPR by 150 basis points from 11.5% to 13.0%. What the CBN has done is akin to injecting sniper or gamalin into an ailing body! A cost-push inflation is not resultant from demand which an increased MPR curbs, but from increased costs to producers who then pass these additional costs to consumers through increasing prices. So even if demand remains same but producers are experiencing rising costs, prices of goods and services will continue to increase as the producers recoup these rising input costs.
Even a student of economics will know that Nigeria’s inflation is cost-push arising from increased producer costs due to the following factors:
1. Adverse exchange rate – an importer who brought in a consumer product costing $1,000 when naira was N150 to a dollar would have paid N150,000 and if he added profit of 20% the selling price will be N180,000. The same product today at the same $1,000 will now cost N610,000 to import without even taking profit into account yet (naira now N610 to a dollar). This price increase has nothing to do with demand but everything to do with the import cost. Meanwhile the CBN is busy fighting this increased price with increase in MPR which is meant to curb demand! The CBN is administering a medicine for malaria when the economy is sick with cancer!
2. Diesel costs – the fuel used in the manufacturing sector has increased from N250/litre to N850 today. That’s an increase of over 200%. Manufacturers and service providers are increasing prices of goods and services to recoup these increased fuel costs. The prices are not rising due to demand! It is unfortunate the CBN doesn’t know!
3. War in Ukraine – the war in Ukraine has distorted the global supply chain of key inputs like wheat to the manufacturing sector. The increased costs must be passed on into increased prices of goods and services like bread. It is nothing to do with demand which unfortunately the CBN fails to diagnose!
4. There are other cost pressures like security, logistics, wages etc. that are pressuring producers to increase prices and demand is not the cause! The CBN policy targeted at demand is therefore ineffectual!
IMPLICATION OF INCREASED MPR TO 13.0%
Given that Nigeria’s inflation is cost-push, the implication of the CBN following sheepishly other global central banks to increase MPR to 13.0% are:
1. It makes borrowing more expensive so producers who should be increasing output and capacity to supply more to the economy are rather closing shop because they can no longer afford the prohibitive cost of financing their operations. The CBN is therefore sounding the death knell of the Nigerian economy instead of jumpstarting it to life.
2. Families are experiencing inelastic demand that does not respond to price movements. A father who must travel to his place of work everyday to put food on his family’s table will still travel even if the cost of transportation is increased. So even if the CBN increases the MPR to 50%, this father has no choice than to commute to work. What the CBN will end up doing by increasing MPR is to push this father increasingly into the poverty trap! The same applies to a mother who must buy garri to prepare eba for his family. Even if the cost of garri triples, she has no choice than to buy it, so her demand is inelastic regardless of whatever rate the CBN increases MPR to.
3. Nigeria’s unemployment rate hovers around 50% (one of the highest in the world) and even those who are in work are hardly paid and when paid the wages are not sufficient to take them home! Where therefore is the demand that the CBN thinks it can curb with increased MPR? The Nigerian Deposit Insurance Corporation (NDIC) says 99.4% of bank accounts in Nigeria contain less than N500,000! There is simply no demand! An increase in MPR is like the CBN administering medication for Alzheimer to someone who is not thinking well because of hunger! Death will be lurking by the corner which is the fate of Nigeria’s economy because all the increases in MPR instead of boosting the economy they are pushing it to the brink! The unemployment rate in the countries like the UK, US etc. whose central banks are increasing MPR hovers at less than 5% in comparison.
SOLUTIONS TO NIGERIA’S ECONOMIC CRISIS
Instead of using increased MPR as the monetary tool which does no good to the economy but rather strangulates it, what Nigeria needs to do to boost economic growth and development are:
1. Increase power supply from the current miserly 3GW to at least 40GW within the next 3-5 years. The UK is supplying 730GW to a population of 65 million people. India is supplying 400GW to 1.4 billion people. If Nigeria were to supply India power, we will be giving them 21GW! Electricity will boost domestic output which in turn will curb inflation!
2. The CBN must immediately stop issuing foreign exchange to importers of goods and services readily available in Nigeria such as school fees, medical tourism, mortgage, rent, holidays etc. to people to go and spend abroad. If these monies are spent in Nigeria, it will encourage local producers to produce more, and inflation will be arrested.
3. The Government must sell or lease the 4 comatose refineries immediately. This will end fuel price inflation through importation which in turn affects the prices of goods and services produced. This will be a more effective and sustainable way to curb inflation than increasing MPR.
4. Government must also tackle other structural issues such as insecurity which is affecting the agricultural sector leading to increased prices of food in the markets. More supply of food will manage inflation better than increased MPR by reducing the importation of food!
5. Reduce MPR to single digit so that the economy will be awash with cheap credit for producers to access to boost supply of goods and services, reduce unemployment and address exchange rate crisis through reduced importation. In comparison the UK bank rate was 0.5% all through COVID and it currently stands at 1%! check this against an ailing economy like Nigeria’s at 13.0%! Nigeria cannot survive which such high cost of credit!
6. Remove the CBN Governor who only understands politics and not policy! Nigeria must stop this practice of appointing commercial bankers are central bankers. Commercial banking and central banking require distinct skill sets. A central bank Governor with commercial banking pedigree will always think like a commercial banker – raise deposits and give loans! Central banking requires much more than this!
Conclusions:
The CBN must reverse the high MPR at 13.0% down to single digit because the dynamics of the Nigerian economy are different from other global economies who are now fighting inflation by increasing bank rates! Every doctor will advise against taking medication prescribed for another patient! Nigerian economy must not be force-fed with medication being adopted elsewhere in the world just for the sake of keeping up with the Joneses!
References:
1. https://www.cbn.gov.ng/monetarypolicy/decisions.asp
2. https://www.vanguardngr.com/2021/10/just-in-99-4-of-bank-accounts-contain-less-than-n500000-ndic/
3. https://www.bankofengland.co.uk/monetary-policy-summary-and-minutes/2022/may-2022
Twitter: @NickAgule
Email: [email protected]
21.06.2022
Introduction
Between 23rd and 24th May 2022, the Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC) met and one of the key decisions taken by the MPC was to retain the Monetary Policy Rate (MPR) at 13.0%. The MPR is the rate at which the CBN lends to the commercial banks and in turn influences the rate at which banks lend to their customers. The MPR is used by central banks across the world as a monetary policy tool to control inflation, boost production, stimulate and stabilise the economy amongst other measures.
One of the economic indices that the MPR is used to stabilise is inflation which is a condition of rising prices of goods and services. If the inflation is high, the central bank increases the MPR which then makes it more expensive to borrow from the banks and consumers therefore spend less. Also, the interest offered on savings by the banks becomes higher and that attracts individuals/corporates to save instead of consumption. With less demand, the pressure on prices is lifted and inflation is contained.
The scenario described above is used to control DEMAND-PULL inflation where aggregate demand exceeds the supply of goods and services available to consumers. A higher MPR therefore curtails the demand and eases inflation.
But Nigeria’s inflation is COST-PUSH which will not respond to MPR increase measures. This is the tragedy of the recent CBN’s increase of MPR by 150 basis points from 11.5% to 13.0%. What the CBN has done is akin to injecting sniper or gamalin into an ailing body! A cost-push inflation is not resultant from demand which an increased MPR curbs, but from increased costs to producers who then pass these additional costs to consumers through increasing prices. So even if demand remains same but producers are experiencing rising costs, prices of goods and services will continue to increase as the producers recoup these rising input costs.
Even a student of economics will know that Nigeria’s inflation is cost-push arising from increased producer costs due to the following factors:
1. Adverse exchange rate – an importer who brought in a consumer product costing $1,000 when naira was N150 to a dollar would have paid N150,000 and if he added profit of 20% the selling price will be N180,000. The same product today at the same $1,000 will now cost N610,000 to import without even taking profit into account yet (naira now N610 to a dollar). This price increase has nothing to do with demand but everything to do with the import cost. Meanwhile the CBN is busy fighting this increased price with increase in MPR which is meant to curb demand! The CBN is administering a medicine for malaria when the economy is sick with cancer!
2. Diesel costs – the fuel used in the manufacturing sector has increased from N250/litre to N850 today. That’s an increase of over 200%. Manufacturers and service providers are increasing prices of goods and services to recoup these increased fuel costs. The prices are not rising due to demand! It is unfortunate the CBN doesn’t know!
3. War in Ukraine – the war in Ukraine has distorted the global supply chain of key inputs like wheat to the manufacturing sector. The increased costs must be passed on into increased prices of goods and services like bread. It is nothing to do with demand which unfortunately the CBN fails to diagnose!
4. There are other cost pressures like security, logistics, wages etc. that are pressuring producers to increase prices and demand is not the cause! The CBN policy targeted at demand is therefore ineffectual!
IMPLICATION OF INCREASED MPR TO 13.0%
Given that Nigeria’s inflation is cost-push, the implication of the CBN following sheepishly other global central banks to increase MPR to 13.0% are:
1. It makes borrowing more expensive so producers who should be increasing output and capacity to supply more to the economy are rather closing shop because they can no longer afford the prohibitive cost of financing their operations. The CBN is therefore sounding the death knell of the Nigerian economy instead of jumpstarting it to life.
2. Families are experiencing inelastic demand that does not respond to price movements. A father who must travel to his place of work everyday to put food on his family’s table will still travel even if the cost of transportation is increased. So even if the CBN increases the MPR to 50%, this father has no choice than to commute to work. What the CBN will end up doing by increasing MPR is to push this father increasingly into the poverty trap! The same applies to a mother who must buy garri to prepare eba for his family. Even if the cost of garri triples, she has no choice than to buy it, so her demand is inelastic regardless of whatever rate the CBN increases MPR to.
3. Nigeria’s unemployment rate hovers around 50% (one of the highest in the world) and even those who are in work are hardly paid and when paid the wages are not sufficient to take them home! Where therefore is the demand that the CBN thinks it can curb with increased MPR? The Nigerian Deposit Insurance Corporation (NDIC) says 99.4% of bank accounts in Nigeria contain less than N500,000! There is simply no demand! An increase in MPR is like the CBN administering medication for Alzheimer to someone who is not thinking well because of hunger! Death will be lurking by the corner which is the fate of Nigeria’s economy because all the increases in MPR instead of boosting the economy they are pushing it to the brink! The unemployment rate in the countries like the UK, US etc. whose central banks are increasing MPR hovers at less than 5% in comparison.
SOLUTIONS TO NIGERIA’S ECONOMIC CRISIS
Instead of using increased MPR as the monetary tool which does no good to the economy but rather strangulates it, what Nigeria needs to do to boost economic growth and development are:
1. Increase power supply from the current miserly 3GW to at least 40GW within the next 3-5 years. The UK is supplying 730GW to a population of 65 million people. India is supplying 400GW to 1.4 billion people. If Nigeria were to supply India power, we will be giving them 21GW! Electricity will boost domestic output which in turn will curb inflation!
2. The CBN must immediately stop issuing foreign exchange to importers of goods and services readily available in Nigeria such as school fees, medical tourism, mortgage, rent, holidays etc. to people to go and spend abroad. If these monies are spent in Nigeria, it will encourage local producers to produce more, and inflation will be arrested.
3. The Government must sell or lease the 4 comatose refineries immediately. This will end fuel price inflation through importation which in turn affects the prices of goods and services produced. This will be a more effective and sustainable way to curb inflation than increasing MPR.
4. Government must also tackle other structural issues such as insecurity which is affecting the agricultural sector leading to increased prices of food in the markets. More supply of food will manage inflation better than increased MPR by reducing the importation of food!
5. Reduce MPR to single digit so that the economy will be awash with cheap credit for producers to access to boost supply of goods and services, reduce unemployment and address exchange rate crisis through reduced importation. In comparison the UK bank rate was 0.5% all through COVID and it currently stands at 1%! check this against an ailing economy like Nigeria’s at 13.0%! Nigeria cannot survive which such high cost of credit!
6. Remove the CBN Governor who only understands politics and not policy! Nigeria must stop this practice of appointing commercial bankers are central bankers. Commercial banking and central banking require distinct skill sets. A central bank Governor with commercial banking pedigree will always think like a commercial banker – raise deposits and give loans! Central banking requires much more than this!
Conclusions:
The CBN must reverse the high MPR at 13.0% down to single digit because the dynamics of the Nigerian economy are different from other global economies who are now fighting inflation by increasing bank rates! Every doctor will advise against taking medication prescribed for another patient! Nigerian economy must not be force-fed with medication being adopted elsewhere in the world just for the sake of keeping up with the Joneses!
References:
1. https://www.cbn.gov.ng/monetarypolicy/decisions.asp
2. https://www.vanguardngr.com/2021/10/just-in-99-4-of-bank-accounts-contain-less-than-n500000-ndic/
3. https://www.bankofengland.co.uk/monetary-policy-summary-and-minutes/2022/may-2022
ASUU’s Indefinite Strike – The Beating of a Dead Horse
Date: 2024-04-04 Read More
ASUU’s Indefinite Strike – The Beating of a Dead Horse
Nick Agule
Twitter: @NickAgule
Email: [email protected]
06.09.2022
Introduction
Just over a week ago, the Academic Staff Union of Universities (ASUU) the union of teaching and research staff at Nigeria’s universities declared an indefinite strike action to protest the non-implementation of agreements earlier signed with the Federal Government of Nigeria. The strike action according to the Union is to “save public universities in Nigeria”.
No doubt ASUU through the instrumentality of strike actions have achieved humongous gains not only for the federal universities but also for state owned ones and also for other tertiary educational institutions such as polytechnics and colleges of education. The establishment of institutions such as the Tertiary Education Trust Fund (TETFUND) which provides support to all levels of public tertiary institutions with funding and scholarships is a cardinal example of the successes of ASUU’s struggles over the past years.
Data reported to have been compiled by a local newspaper show that between 1999 and 2020, “ASUU went on strike for a total of 1,450 days.” In this latest round of strike, ASUU was on strike for 199 days before declaring the strike to be indefinite just over a week ago. The data shows clearly that Nigerian university students are spending more time at home than at the ivory towers. This is the worst state of affairs a nation can find itself that the future of the nation is being damaged irreparably with the Government and University teachers at each other’s throats with the students as the ultimate victims!
Granted that ASUU has gained widespread support over the years in her struggles to better the tertiary education sector in Nigeria, the declaration of an indefinite strike this time around portrays ASUU as lacking situational awareness and strategy. This is because from every indication, the current government have shown cause to believe that they have no interest whatsoever in meeting ASUU’s demands. Because while the government continually blames dwindling revenues as the reason they are unable to implement the agreements signed with ASUU, the same government is dolling out N6trn to ‘subsidise’ a single commodity – petrol. ASUU’s purported demand for N200bn to call off the strike is only 1/30 of the petrol subsidy bill therefore if the government were really intent on resolving the crisis, they would have done so.
ASUU seeing the handwriting on the wall that they are dealing with a government that will not really lose any sleep if ASUU stays on strike forever should have exercised better judgement by suspending the strike, returning students to the classes then await the next government whom from every indication by the 3 forerunning candidates will do better than the current government in giving attention to education. The fear that calling off the strike will give future governments the impetus to ignore ASUU does not really count and ASUU must not reduce the strike as a battle of egos. Indeed, ASUU is now beating a dead horse with the declaration of an indefinite strike.
Suggested ways to solve the perennial ASUU Strike Actions
1. Let every governing council be an employer and pay wages as agreed with each individual employee. It doesn't make sense that a professor in an expensive city like Abuja or Lagos earns same pay as a professor in Mkar or Oghara! Even within the same university, a professor who is high value and attracting research grants earns same with a professor producing no innovation, how does that make sense! Employees in each university should form unions to press home their demands with their governing councils. The idea of a national union for universities teachers is now obsolete really.
2. To adequately fund universities, let full fees be paid for university education and let government create a students’ loans scheme to ensure that every child that aspires to and qualifies for university education realises their ambition. Students’ loans scheme operates such that the loan is never paid back except the student graduates, gets a job and begins to earn at a particular threshold. Earning at that threshold means the students are now well off enough to contribute their own quota to the education of other students. This is how nations grow and become developed. Creation of the students’ loans board will also tackle the unemployment crisis because people will be employed to administer the scheme.
3. The low quality of graduates in Nigeria today cannot be blamed on poor funding alone. There are some bad eggs within the ranks of the academic staff who are also contributing to the decay through - non-attendances at lectures, pay for grades, sexual harassment of female students, writing projects for students, stealing research grants etc - are just a few of the ills causing the low quality of graduates out of our universities today. If the universities are really serious about quality, then they must start inhouse by clearing the augean stables to rid the citadels of learning of quacks parading as academics.
4. Nigeria will get a new president next year and the question is, what is ASUU doing to strike deals with the presidential candidates regarding adequate funding of education in return for block votes. ASUU is standing by docile, doing nothing to ensure a candidate who values education emerges as president next year because ASUU knows they can send children home indefinitely to fight a president who's giving nothing to education!
The above are only a few suggestions for getting our university system out of the woods. But the problem we have in Nigeria is that we like our country to be like the UK, US, Canada etc but are totally resistant to the things those nations did/doing to become great. We want everything free and still don't want to pay taxes! No nation develops without the sacrifices of citizens!
Conclusion
ASUU needs a holistic rethink of her strategy and at this point, recalling the students back to the classrooms is the most thoughtful and pragmatic thing to do.
References: 1. https://www.cfr.org/blog/nigerian-university-professors-are-strike-again-education-sectors-crisis-transcends-ivory
2. https://punchng.com/asuu-declares-indefinite-strike/
Twitter: @NickAgule
Email: [email protected]
06.09.2022
Introduction
Just over a week ago, the Academic Staff Union of Universities (ASUU) the union of teaching and research staff at Nigeria’s universities declared an indefinite strike action to protest the non-implementation of agreements earlier signed with the Federal Government of Nigeria. The strike action according to the Union is to “save public universities in Nigeria”.
No doubt ASUU through the instrumentality of strike actions have achieved humongous gains not only for the federal universities but also for state owned ones and also for other tertiary educational institutions such as polytechnics and colleges of education. The establishment of institutions such as the Tertiary Education Trust Fund (TETFUND) which provides support to all levels of public tertiary institutions with funding and scholarships is a cardinal example of the successes of ASUU’s struggles over the past years.
Data reported to have been compiled by a local newspaper show that between 1999 and 2020, “ASUU went on strike for a total of 1,450 days.” In this latest round of strike, ASUU was on strike for 199 days before declaring the strike to be indefinite just over a week ago. The data shows clearly that Nigerian university students are spending more time at home than at the ivory towers. This is the worst state of affairs a nation can find itself that the future of the nation is being damaged irreparably with the Government and University teachers at each other’s throats with the students as the ultimate victims!
Granted that ASUU has gained widespread support over the years in her struggles to better the tertiary education sector in Nigeria, the declaration of an indefinite strike this time around portrays ASUU as lacking situational awareness and strategy. This is because from every indication, the current government have shown cause to believe that they have no interest whatsoever in meeting ASUU’s demands. Because while the government continually blames dwindling revenues as the reason they are unable to implement the agreements signed with ASUU, the same government is dolling out N6trn to ‘subsidise’ a single commodity – petrol. ASUU’s purported demand for N200bn to call off the strike is only 1/30 of the petrol subsidy bill therefore if the government were really intent on resolving the crisis, they would have done so.
ASUU seeing the handwriting on the wall that they are dealing with a government that will not really lose any sleep if ASUU stays on strike forever should have exercised better judgement by suspending the strike, returning students to the classes then await the next government whom from every indication by the 3 forerunning candidates will do better than the current government in giving attention to education. The fear that calling off the strike will give future governments the impetus to ignore ASUU does not really count and ASUU must not reduce the strike as a battle of egos. Indeed, ASUU is now beating a dead horse with the declaration of an indefinite strike.
Suggested ways to solve the perennial ASUU Strike Actions
1. Let every governing council be an employer and pay wages as agreed with each individual employee. It doesn't make sense that a professor in an expensive city like Abuja or Lagos earns same pay as a professor in Mkar or Oghara! Even within the same university, a professor who is high value and attracting research grants earns same with a professor producing no innovation, how does that make sense! Employees in each university should form unions to press home their demands with their governing councils. The idea of a national union for universities teachers is now obsolete really.
2. To adequately fund universities, let full fees be paid for university education and let government create a students’ loans scheme to ensure that every child that aspires to and qualifies for university education realises their ambition. Students’ loans scheme operates such that the loan is never paid back except the student graduates, gets a job and begins to earn at a particular threshold. Earning at that threshold means the students are now well off enough to contribute their own quota to the education of other students. This is how nations grow and become developed. Creation of the students’ loans board will also tackle the unemployment crisis because people will be employed to administer the scheme.
3. The low quality of graduates in Nigeria today cannot be blamed on poor funding alone. There are some bad eggs within the ranks of the academic staff who are also contributing to the decay through - non-attendances at lectures, pay for grades, sexual harassment of female students, writing projects for students, stealing research grants etc - are just a few of the ills causing the low quality of graduates out of our universities today. If the universities are really serious about quality, then they must start inhouse by clearing the augean stables to rid the citadels of learning of quacks parading as academics.
4. Nigeria will get a new president next year and the question is, what is ASUU doing to strike deals with the presidential candidates regarding adequate funding of education in return for block votes. ASUU is standing by docile, doing nothing to ensure a candidate who values education emerges as president next year because ASUU knows they can send children home indefinitely to fight a president who's giving nothing to education!
The above are only a few suggestions for getting our university system out of the woods. But the problem we have in Nigeria is that we like our country to be like the UK, US, Canada etc but are totally resistant to the things those nations did/doing to become great. We want everything free and still don't want to pay taxes! No nation develops without the sacrifices of citizens!
Conclusion
ASUU needs a holistic rethink of her strategy and at this point, recalling the students back to the classrooms is the most thoughtful and pragmatic thing to do.
References: 1. https://www.cfr.org/blog/nigerian-university-professors-are-strike-again-education-sectors-crisis-transcends-ivory
2. https://punchng.com/asuu-declares-indefinite-strike/
Public Transportation – A Catalyst for Economic Development
Date: 2024-04-04 Read More
Public Transportation – A Catalyst for Economic Development
Nick Agule
Twitter: @NickAgule
Email: [email protected]
03.05.2022
Introduction
The London Underground Victoria Line trains run from Walthamstow in the north of the city to Brixton in the south departing every 2 minutes at 16 stations covering 21km. That’s an average of 60 trains per hour for 19 hours daily and 24 hours during the weekends. 200 million passenger trips are made on the line yearly (more than half a million passenger journeys daily). Victoria Line is only 1 out of 11 such underground train lines running in London covering 402km and serving 272 stations in total. The London Underground also known as the Tube which began in 1863 is said to handle up to five million passenger journeys a day. At peak times, it is reported that more than 543 trains are whizzing around the Capital underground.
The Tube is not the only public transportation system running in London. There are also the London buses famous for their red colours which began services in the 19th century and currently comprise a fleet of around 9,300 vehicles operating across 675 routes served by 50 bus stations and more than 19,000 bus stops. There is also the Docklands Light Railway (DLR) which began operations in 1987 and operates driverless and computerised trains stopping at 45 stations and comprising 149 vehicles, many operating in 3-car formation. There is the London Overground which was launched in 2007 that covers 112 stations across six routes. Then there is Transport for London (TfL) Rail services running from the West to Heathrow airport to Liverpool Street at the centre. There also Trams which began in the first half of the 20th century currently running 12 trams per hour. Water transport on the River Thames is also available operating at eight piers. The London Dial-a-Ride is a free door-to-door service for disabled people who can't use public transportation. A network of Circleways and Walkable streets is also being developed to encourage more people to cycle or walk with the aim that by 2041, 80% of journeys in London will be made by cycling, walking and public transport. Additionally, there are privately provided services such as taxis, private hire like Uber and coaches.
The above well-developed public transportation system described above serves 9 million people in London. This is the same population with Lagos Nigeria. Kano and Ibadan are nearly 4 million people each in population. Kaduna, Port Harcourt, Benin City and Maiduguri have all crossed the 1 million mark and heading to 2 million in population. These Nigerian cities do not even have a fraction of the organised public transportation system which serves the 9 million people of London. Nigerian commuters are daily thrown under the bus and reduced to riding on motorbikes (called okada), tricycles (called keke), rickety buses and other vehicles or even resort to trekking many kilometres while exposed to the rain, sunshine and other elements in very dehumanising conditions which lowers the dignity of the human person.
Economic Losses from Poor/Non-Availability of Organised Public Transportation in Nigeria
Successive governments in Nigeria at the federal, state and local levels have ignored public transportation with serious economic consequences. Nigerian citizens have been left to endure harrowing experiences commuting daily from their abodes (usually on the outskirts of the cities) to the cities where their jobs are located and to face the same nightmarish trips on their way back home after closing from work. The most notorious of these traffic hotspots are the Mararaba/Nyanya axis going in and out of the federal capital city of Abuja and the mainland/island daily commute in the commercial city of Lagos.
These monstrous traffic gridlocks that commuters endure daily cause serious economic losses such as failing health of commuters resultant from stress and fatigue which in turn escalates cases of absenteeism and the attendant high costs of healthcare. There is also high cost of fuel as journeys that ordinarily should not be more than 30 minutes last several hours in the gridlocks. Manhours are lost, the environment is damaged from pollution coming off the exhaust pipes of thousands of stationary vehicles most of them with old engines, damage to vehicles necessitating high repair/maintenance costs, accidents with casualties and fatalities, delays to business meetings, supply chain bottlenecks, expensive costs of moving goods which is inbuilt in the final prices the consumers bear thus causing more inflation. These are some of the avoidable economic costs of not implementing an efficient public transportation system for our urban centres.
To make matters worse, Nigerian Governors are fixated with building airports which end up being underutilised. The funds for these white-elephant airport projects will be better applied to building rail transportation the globally acclaimed best form of mass transportation as London has developed overtime. The push by the Lagos government to complete the twin rail routes – red and blue lines – is a fresh of breath of air in approach to public transportation and it is hoped that other states will copy and begin implementation of rail projects in their states. A light rail project for example will cost a fraction of the money wasted on airports and it will ferry millions of passengers daily with adequate return on investments, safe and comfortable travels and far more jobs created than any airport will do.
Recommendations
1. The Buhari government has given deaf ears to all the advice offered in the past 7 years of the government and it is not likely anything will change with the remaining year which is now all about politics. This column will therefore switch its focus to setting the agenda for the incoming governments at all levels in 2023.
2. The Federal government in 2023 must take immediate steps to instigate constitutional change to step down rail transportation from the exclusive list in the constitution to the concurrent list to pave way for full privatisation of the rail sector with the twin objective of providing comfortable, affordable and safe means of public transportation and creation of high-quality jobs.
3. An efficient and effective public transportation system will help meet the following UN Sustainable Development Goals (SDGs) - (1) No Poverty, (3) Good Health and Well-being, (8) Decent Work and Economic Growth, (9) Industry, Innovation and Infrastructure, (10) Reduced Inequality, (11) Sustainable Cities and Communities, (12) Responsible Consumption and Production, (13) Climate Action, (15) Life on Land. Public transportation must therefore be a key priority for all governments at all levels from 2023 as Nigeria strives to meet the UN SDGs!
References:
1. https://youtu.be/Hr5Riwkk0OI
2. https://tfl.gov.uk/corporate/about-tfl/what-we-do
3. https://worldpopulationreview.com/countries/cities/nigeria
4. https://www.un.org/sustainabledevelopment/
Twitter: @NickAgule
Email: [email protected]
03.05.2022
Introduction
The London Underground Victoria Line trains run from Walthamstow in the north of the city to Brixton in the south departing every 2 minutes at 16 stations covering 21km. That’s an average of 60 trains per hour for 19 hours daily and 24 hours during the weekends. 200 million passenger trips are made on the line yearly (more than half a million passenger journeys daily). Victoria Line is only 1 out of 11 such underground train lines running in London covering 402km and serving 272 stations in total. The London Underground also known as the Tube which began in 1863 is said to handle up to five million passenger journeys a day. At peak times, it is reported that more than 543 trains are whizzing around the Capital underground.
The Tube is not the only public transportation system running in London. There are also the London buses famous for their red colours which began services in the 19th century and currently comprise a fleet of around 9,300 vehicles operating across 675 routes served by 50 bus stations and more than 19,000 bus stops. There is also the Docklands Light Railway (DLR) which began operations in 1987 and operates driverless and computerised trains stopping at 45 stations and comprising 149 vehicles, many operating in 3-car formation. There is the London Overground which was launched in 2007 that covers 112 stations across six routes. Then there is Transport for London (TfL) Rail services running from the West to Heathrow airport to Liverpool Street at the centre. There also Trams which began in the first half of the 20th century currently running 12 trams per hour. Water transport on the River Thames is also available operating at eight piers. The London Dial-a-Ride is a free door-to-door service for disabled people who can't use public transportation. A network of Circleways and Walkable streets is also being developed to encourage more people to cycle or walk with the aim that by 2041, 80% of journeys in London will be made by cycling, walking and public transport. Additionally, there are privately provided services such as taxis, private hire like Uber and coaches.
The above well-developed public transportation system described above serves 9 million people in London. This is the same population with Lagos Nigeria. Kano and Ibadan are nearly 4 million people each in population. Kaduna, Port Harcourt, Benin City and Maiduguri have all crossed the 1 million mark and heading to 2 million in population. These Nigerian cities do not even have a fraction of the organised public transportation system which serves the 9 million people of London. Nigerian commuters are daily thrown under the bus and reduced to riding on motorbikes (called okada), tricycles (called keke), rickety buses and other vehicles or even resort to trekking many kilometres while exposed to the rain, sunshine and other elements in very dehumanising conditions which lowers the dignity of the human person.
Economic Losses from Poor/Non-Availability of Organised Public Transportation in Nigeria
Successive governments in Nigeria at the federal, state and local levels have ignored public transportation with serious economic consequences. Nigerian citizens have been left to endure harrowing experiences commuting daily from their abodes (usually on the outskirts of the cities) to the cities where their jobs are located and to face the same nightmarish trips on their way back home after closing from work. The most notorious of these traffic hotspots are the Mararaba/Nyanya axis going in and out of the federal capital city of Abuja and the mainland/island daily commute in the commercial city of Lagos.
These monstrous traffic gridlocks that commuters endure daily cause serious economic losses such as failing health of commuters resultant from stress and fatigue which in turn escalates cases of absenteeism and the attendant high costs of healthcare. There is also high cost of fuel as journeys that ordinarily should not be more than 30 minutes last several hours in the gridlocks. Manhours are lost, the environment is damaged from pollution coming off the exhaust pipes of thousands of stationary vehicles most of them with old engines, damage to vehicles necessitating high repair/maintenance costs, accidents with casualties and fatalities, delays to business meetings, supply chain bottlenecks, expensive costs of moving goods which is inbuilt in the final prices the consumers bear thus causing more inflation. These are some of the avoidable economic costs of not implementing an efficient public transportation system for our urban centres.
To make matters worse, Nigerian Governors are fixated with building airports which end up being underutilised. The funds for these white-elephant airport projects will be better applied to building rail transportation the globally acclaimed best form of mass transportation as London has developed overtime. The push by the Lagos government to complete the twin rail routes – red and blue lines – is a fresh of breath of air in approach to public transportation and it is hoped that other states will copy and begin implementation of rail projects in their states. A light rail project for example will cost a fraction of the money wasted on airports and it will ferry millions of passengers daily with adequate return on investments, safe and comfortable travels and far more jobs created than any airport will do.
Recommendations
1. The Buhari government has given deaf ears to all the advice offered in the past 7 years of the government and it is not likely anything will change with the remaining year which is now all about politics. This column will therefore switch its focus to setting the agenda for the incoming governments at all levels in 2023.
2. The Federal government in 2023 must take immediate steps to instigate constitutional change to step down rail transportation from the exclusive list in the constitution to the concurrent list to pave way for full privatisation of the rail sector with the twin objective of providing comfortable, affordable and safe means of public transportation and creation of high-quality jobs.
3. An efficient and effective public transportation system will help meet the following UN Sustainable Development Goals (SDGs) - (1) No Poverty, (3) Good Health and Well-being, (8) Decent Work and Economic Growth, (9) Industry, Innovation and Infrastructure, (10) Reduced Inequality, (11) Sustainable Cities and Communities, (12) Responsible Consumption and Production, (13) Climate Action, (15) Life on Land. Public transportation must therefore be a key priority for all governments at all levels from 2023 as Nigeria strives to meet the UN SDGs!
References:
1. https://youtu.be/Hr5Riwkk0OI
2. https://tfl.gov.uk/corporate/about-tfl/what-we-do
3. https://worldpopulationreview.com/countries/cities/nigeria
4. https://www.un.org/sustainabledevelopment/
Nigerian Electricity Sector Being Sabotaged
Date: 2024-04-04 Read More
Nigerian Electricity Sector Being Sabotaged
Nick Agule
Twitter: @NickAgule
Email: [email protected]
19.04.2022
Introduction
In the last week, Prof Frank Okafor a professor of Electric Power & Control Engineering University of Lagos and a former commissioner responsible for engineering and performance management at the Nigerian Electricity Regulatory Commission (NERC) was hosted on a television current affairs show where he said aside from 6-9pm when there is residential uptake of electricity supplied, during the rest of day THERE IS NO DEMAND for electricity in Nigeria.
The mindset of Prof Okafor is painful to assimilate but summarises the issue with the electricity sector in Nigeria – incompetence, inefficiencies and corruption are sabotaging the sector. And until this is resolved, Nigeria will continue to wallow in darkness.
EVERY ELECTRICITY GENERATOR IN NIGERIA IS DEMAND
Perhaps it does not strike Prof Okafor that SUPPLY is not problem of Nigeria’s electricity because everywhere in Nigeria where there is an electricity generating set it is DEMAND that the electricity sector is unable to fulfil. The generators will not be there if there is sufficient electricity supply. It is most likely that Prof Okafor has a generating set at home or some other source of electricity like solar. To think that a professor of electric power who should be up to date with research work in the electricity sector does not know this basic fact is troubling and mindboggling. And to make matters worse, Prof Okafor was appointed to high office at the NERC responsible for engineering and performance management and it can only be imagined the advice he offered to policy makers to the effect that demand was the issue with the electricity sector and not supply – this is what in academic parlance is called OP (off point)! At the time Prof Okafor was on TV talking that there is no demand for electricity in Nigeria, banks were announcing early closure of their branches due to lack of electricity supply and the expensive costs of generating electricity with diesel touching N800 per litre. Nigeria has also suffered a haemorrhage of manufacturing companies that have relocated to other west African countries because of lack of electricity supply! It is therefore very troubling for a professor to be unaware of the current issues and trends in a sector he is expected to be an expert and leader of research in.
If Prof Okafor was up to date with research work in the electricity sector, he would have come to grips with global data that a tiny country like Qatar is supplying 8GW of electricity daily to 2.8 million people and the UK is wheeling out 730GW daily to 65 million people, so for Prof to be talking of 200 million people not forming enough demand for 3GW supplied shows he is out of depth and perhaps even misinformed about a sector he is expected to be an expert in.
THE BIGGER ISSUES WITH ELECTRICITY IN NIGERIA
The electricity sector in Nigeria has bigger issues beyond Prof Okafor even though people like him compound the issues. The main problem with the electricity sector is government’s interference in a sector that is a business and not a social service. Just as it happened in telecoms, the same will happen in electricity sector if Government gives way to the business sector to come into the sector, invest, supply electricity to Nigerians and make a return on their investments.
A further surgical analysis of the electricity sector in Nigeria exposes the following cankerworms:
1. GENCOs (Generating Companies) – they are the least contributor to the problem because serious minded businesspeople like Tony Elumelu have invested in GENCOs and they have the capital to expand capacity to make money. But they are benefitting from a revenue-draining power uptake agreements where government pays them for power generated but not uptaken which must be stopped.
2. TCN (Transmission Company of Nigeria) - which carries power generated to the consumers is the biggest bottleneck. The Govt is still controlling 100% of TCN for reasons best known to them. The GENCOs can't generate more than TCN can carry, infact some of the grid collapses are from trying to inject more into TCN than it carry. The DISCOs can also only distribute what the TCN supplies to them. With an FG that's so poor that they are borrowing to pay salaries and petrol subsidies, there's zero chance they'll have money to invest in TCN. The solution simply is for the Govt to let go of TCN to the private sector. Imagine if Govt insisted that MTN and co can only use NITEL masts and other infrastructure to provide telecoms services but this is exactly what Tony Elumelu and other investors in GENCOs are facing with TCN.
3. DISCOs (Distribution Companies) - the next biggest culprit are the DISCOs which were sold/handed over to politically exposed persons with no pedigree in the power sector and neither the capital to invest to expand and maintain the distribution network. So, they keep asking consumers to buy transformers when it's the DISCOs who should be buying the infrastructure to run their business – just imagine MTN and co asking consumers to buy telecoms masts before they get mobile signals in their area. They also keep hiking the tariffs when they should be connecting more consumers to make money. They keep complaining of people not paying for power but it's their fault because if they invested they will bury all the electric cables deep into the ground out of reach of electricity thieves and also away from unfavourable weather where high winds/storms or even accidents take down electric poles! Elsewhere because no overhead electric cables, everything is buried in the ground and your supply once switched-off you cannot illegally connect it back. The solution is to privatise DISCOs to serious minded investors. In the meantime, any DISCO that rejects power must be treated by Government as an economic saboteur!
4. LEGAL FRAMEWORK – Electricity is currently on the exclusive list of the constitution. This must be changed to allow electricity to be regulated by the subnational governments too so that communities can generate and supply themselves electricity using mini-hydros, solar, wind technologies.
Conclusion
Every consumer who can run a generator can pay for public power supply. There is therefore humongous effective DEMAND for electricity in Nigeria but no supply to meet it. But it has become time-wasting advising the current Government. We therefore hope that those who are angling to become Nigeria’s president in 2023 will take this as an agenda.
References:
1. https://youtu.be/6T9muqGVa68
Twitter: @NickAgule
Email: [email protected]
19.04.2022
Introduction
In the last week, Prof Frank Okafor a professor of Electric Power & Control Engineering University of Lagos and a former commissioner responsible for engineering and performance management at the Nigerian Electricity Regulatory Commission (NERC) was hosted on a television current affairs show where he said aside from 6-9pm when there is residential uptake of electricity supplied, during the rest of day THERE IS NO DEMAND for electricity in Nigeria.
The mindset of Prof Okafor is painful to assimilate but summarises the issue with the electricity sector in Nigeria – incompetence, inefficiencies and corruption are sabotaging the sector. And until this is resolved, Nigeria will continue to wallow in darkness.
EVERY ELECTRICITY GENERATOR IN NIGERIA IS DEMAND
Perhaps it does not strike Prof Okafor that SUPPLY is not problem of Nigeria’s electricity because everywhere in Nigeria where there is an electricity generating set it is DEMAND that the electricity sector is unable to fulfil. The generators will not be there if there is sufficient electricity supply. It is most likely that Prof Okafor has a generating set at home or some other source of electricity like solar. To think that a professor of electric power who should be up to date with research work in the electricity sector does not know this basic fact is troubling and mindboggling. And to make matters worse, Prof Okafor was appointed to high office at the NERC responsible for engineering and performance management and it can only be imagined the advice he offered to policy makers to the effect that demand was the issue with the electricity sector and not supply – this is what in academic parlance is called OP (off point)! At the time Prof Okafor was on TV talking that there is no demand for electricity in Nigeria, banks were announcing early closure of their branches due to lack of electricity supply and the expensive costs of generating electricity with diesel touching N800 per litre. Nigeria has also suffered a haemorrhage of manufacturing companies that have relocated to other west African countries because of lack of electricity supply! It is therefore very troubling for a professor to be unaware of the current issues and trends in a sector he is expected to be an expert and leader of research in.
If Prof Okafor was up to date with research work in the electricity sector, he would have come to grips with global data that a tiny country like Qatar is supplying 8GW of electricity daily to 2.8 million people and the UK is wheeling out 730GW daily to 65 million people, so for Prof to be talking of 200 million people not forming enough demand for 3GW supplied shows he is out of depth and perhaps even misinformed about a sector he is expected to be an expert in.
THE BIGGER ISSUES WITH ELECTRICITY IN NIGERIA
The electricity sector in Nigeria has bigger issues beyond Prof Okafor even though people like him compound the issues. The main problem with the electricity sector is government’s interference in a sector that is a business and not a social service. Just as it happened in telecoms, the same will happen in electricity sector if Government gives way to the business sector to come into the sector, invest, supply electricity to Nigerians and make a return on their investments.
A further surgical analysis of the electricity sector in Nigeria exposes the following cankerworms:
1. GENCOs (Generating Companies) – they are the least contributor to the problem because serious minded businesspeople like Tony Elumelu have invested in GENCOs and they have the capital to expand capacity to make money. But they are benefitting from a revenue-draining power uptake agreements where government pays them for power generated but not uptaken which must be stopped.
2. TCN (Transmission Company of Nigeria) - which carries power generated to the consumers is the biggest bottleneck. The Govt is still controlling 100% of TCN for reasons best known to them. The GENCOs can't generate more than TCN can carry, infact some of the grid collapses are from trying to inject more into TCN than it carry. The DISCOs can also only distribute what the TCN supplies to them. With an FG that's so poor that they are borrowing to pay salaries and petrol subsidies, there's zero chance they'll have money to invest in TCN. The solution simply is for the Govt to let go of TCN to the private sector. Imagine if Govt insisted that MTN and co can only use NITEL masts and other infrastructure to provide telecoms services but this is exactly what Tony Elumelu and other investors in GENCOs are facing with TCN.
3. DISCOs (Distribution Companies) - the next biggest culprit are the DISCOs which were sold/handed over to politically exposed persons with no pedigree in the power sector and neither the capital to invest to expand and maintain the distribution network. So, they keep asking consumers to buy transformers when it's the DISCOs who should be buying the infrastructure to run their business – just imagine MTN and co asking consumers to buy telecoms masts before they get mobile signals in their area. They also keep hiking the tariffs when they should be connecting more consumers to make money. They keep complaining of people not paying for power but it's their fault because if they invested they will bury all the electric cables deep into the ground out of reach of electricity thieves and also away from unfavourable weather where high winds/storms or even accidents take down electric poles! Elsewhere because no overhead electric cables, everything is buried in the ground and your supply once switched-off you cannot illegally connect it back. The solution is to privatise DISCOs to serious minded investors. In the meantime, any DISCO that rejects power must be treated by Government as an economic saboteur!
4. LEGAL FRAMEWORK – Electricity is currently on the exclusive list of the constitution. This must be changed to allow electricity to be regulated by the subnational governments too so that communities can generate and supply themselves electricity using mini-hydros, solar, wind technologies.
Conclusion
Every consumer who can run a generator can pay for public power supply. There is therefore humongous effective DEMAND for electricity in Nigeria but no supply to meet it. But it has become time-wasting advising the current Government. We therefore hope that those who are angling to become Nigeria’s president in 2023 will take this as an agenda.
References:
1. https://youtu.be/6T9muqGVa68
Nigeria Gas Debacle: The rising cost of Cooking Gas!
Date: 2024-04-04 Read More
Nigeria Gas Debacle: The rising cost of Cooking Gas!
Nick Agule
Twitter: @NickAgule
Email: [email protected]
30.11.2021
Introduction
At the beginning of this month November 2021, President Buhari announced at that Nigeria has pledged to eliminate illegal gas flaring (which he said was Nigeria's single greatest contribution to greenhouse emissions) by 2030. The President made the commitment at the UN Climate Change Conference Glasgow 2021 tagged COP26 (26th meeting of the Conference of Parties).
As the President was speaking, the prices of cooking gas also known as Liquified Petroleum Gas (LPG) has been rising in Nigeria and is now up by as much as 100% since the beginning of the year. There are trio of factors largely responsible for the skyrocketing cooking gas prices namely:
1. The Federal Government (FG) implementation of a 7.5 per cent Value Added Tax (VAT) on LPG imports
2. Rising cost of crude oil and gas in the international market where we are buying gas to supply to the domestic market
3. The fall in the exchange rate of the Naira to the dollar which has now depreciated to over N500 to a dollar.
Nigerians are now being forced as a consequence of the skyrocketing LPG prices to resort to alternative sources of fuel including firewood which in turn is harmful to the environment due to deforestation and contribution to greenhouse emissions.
To flare gas and then turn around to import it is akin to a farmer who after harvesting yams, sets fire to the yams and burns them to zero value. This same farmer then looks for money elsewhere to go and buy pounded yam for the family! No matter how this is analysed, this farmer will be condemned as a mental case! No rational human being will set the harvest on fire and then go to another producer to buy the same commodities! But this is exactly the situation of Nigeria. Not only is the country losing value in flaring her produced gas and then going to buy it at high prices, but there is also huge damage to both humans and the environment resultant from the perpetual flares dotted all over the Niger Delta! That more trees will now be felled to provide firewood for cooking exacerbates the environmental damage.
The World Bank projected in 2017 that almost 8 billion cubic meters of gas was flared annually in Nigeria according to satellite data. Nigeria’s oil Minister Chief Timipre Sylva is reported to more recently to have said about 3 billion cubic meters of natural gas was lost to gas flaring in the first five months of 2020. The loss was valued at $230 million. This is even more puzzling why a nation will decide to set fire on about a quarter of a billion dollars’ worth of a commodity annually and then turn around to import same commodity from other countries at high prices!
According to a Survey, despite the presence of the Nigeria Liquefied Natural Gas company (NLNG), which largely produces natural gas and Liquefied gas, Nigeria imports around 70 per cent of LPG for domestic use, with the balance of about 30 per cent sourced locally by dealers. Given that imports constitute such a high percentage of Nigeria’s cooking gas supply, it is unfortunate that there will not be an end in the price escalation of product for so long as the Naira’s exchange rate against the dollar is doing badly!
In his own reaction to the development, the spokesperson of the Nigerian National Petroleum Corporation (NNPC), Garba-Deen Muhammad, is reported to have said the Minister of State for Petroleum Resources, Chief Timipre Sylva, had said the commodity (LPG) was deregulated. Mr Sylva himself is reported to have said a media briefing that “We are not in position to determine gas pricing because gas is not a regulated product. But, of course, we are also very concerned that prices are rising and so I am actually doing something about it in the interest of the ordinary Nigerian.”
But the question that is left to be answered is why the FG is not regulating LPG? If the FG has been regulating the prices of petrol with trillions of Naira paid in subsidies annually, then why leave LPG unregulated?
Recommendations
1. In the short term, the FG must take immediate measures including requesting the NLNG to increase supply to the LPG market. This will ensure more supply to market with consequent fall in prices.
2. In the medium term, the FG must read the riot act to the upstream oil companies in Nigeria to harness and utilise produced gas. One gas is produced, it must be used. This will make more gas available to the Nigerian economy for cooking, electricity generation, fuel for vehicles etc.
3. In the long term, the FG must have a zero gas flares policy and impose punitive duties on imported LPG to make it uneconomical to import. This makes Nigeria self-sufficient in gas supply thus taking off the pressure on the forex market by importers who source the dollar to import gas into Nigeria.
4. The FG must regulate the LPG market. With the Petroleum Industry Act (PIA) setting up a regulator - Nigerian Midstream and Downstream Petroleum Regulatory Authority – LPG must come under a regulator to create an enabling environment for local producers to thrive.
Conclusion
Nigeria is blessed with a huge abundance of human and natural resources. Governments at all levels must work assiduously to unlock value from these resources. A situation where Nigeria is flaring a vital and valuable resource – Gas – and then importing it from other countries is an embarrassment that must not be allowed to fester into the New Year 2022!
References: 1. Cooking gas price up 100% as VAT on LPG import begins (sunnewsonline.com)
2. FG Implements 7.5% Tax On Cooking Gas Imports - Nigeria Business Information (naijabusiness.com.ng)
3. https://www.worldbank.org/en/news/feature/2017/03/10/nigerias-flaring-reduction-target-2020
4. https://guardian.ng/business-services/fg-begins-gas-flare-reduction-with-award-of-45-licences-in-june/
Twitter: @NickAgule
Email: [email protected]
30.11.2021
Introduction
At the beginning of this month November 2021, President Buhari announced at that Nigeria has pledged to eliminate illegal gas flaring (which he said was Nigeria's single greatest contribution to greenhouse emissions) by 2030. The President made the commitment at the UN Climate Change Conference Glasgow 2021 tagged COP26 (26th meeting of the Conference of Parties).
As the President was speaking, the prices of cooking gas also known as Liquified Petroleum Gas (LPG) has been rising in Nigeria and is now up by as much as 100% since the beginning of the year. There are trio of factors largely responsible for the skyrocketing cooking gas prices namely:
1. The Federal Government (FG) implementation of a 7.5 per cent Value Added Tax (VAT) on LPG imports
2. Rising cost of crude oil and gas in the international market where we are buying gas to supply to the domestic market
3. The fall in the exchange rate of the Naira to the dollar which has now depreciated to over N500 to a dollar.
Nigerians are now being forced as a consequence of the skyrocketing LPG prices to resort to alternative sources of fuel including firewood which in turn is harmful to the environment due to deforestation and contribution to greenhouse emissions.
To flare gas and then turn around to import it is akin to a farmer who after harvesting yams, sets fire to the yams and burns them to zero value. This same farmer then looks for money elsewhere to go and buy pounded yam for the family! No matter how this is analysed, this farmer will be condemned as a mental case! No rational human being will set the harvest on fire and then go to another producer to buy the same commodities! But this is exactly the situation of Nigeria. Not only is the country losing value in flaring her produced gas and then going to buy it at high prices, but there is also huge damage to both humans and the environment resultant from the perpetual flares dotted all over the Niger Delta! That more trees will now be felled to provide firewood for cooking exacerbates the environmental damage.
The World Bank projected in 2017 that almost 8 billion cubic meters of gas was flared annually in Nigeria according to satellite data. Nigeria’s oil Minister Chief Timipre Sylva is reported to more recently to have said about 3 billion cubic meters of natural gas was lost to gas flaring in the first five months of 2020. The loss was valued at $230 million. This is even more puzzling why a nation will decide to set fire on about a quarter of a billion dollars’ worth of a commodity annually and then turn around to import same commodity from other countries at high prices!
According to a Survey, despite the presence of the Nigeria Liquefied Natural Gas company (NLNG), which largely produces natural gas and Liquefied gas, Nigeria imports around 70 per cent of LPG for domestic use, with the balance of about 30 per cent sourced locally by dealers. Given that imports constitute such a high percentage of Nigeria’s cooking gas supply, it is unfortunate that there will not be an end in the price escalation of product for so long as the Naira’s exchange rate against the dollar is doing badly!
In his own reaction to the development, the spokesperson of the Nigerian National Petroleum Corporation (NNPC), Garba-Deen Muhammad, is reported to have said the Minister of State for Petroleum Resources, Chief Timipre Sylva, had said the commodity (LPG) was deregulated. Mr Sylva himself is reported to have said a media briefing that “We are not in position to determine gas pricing because gas is not a regulated product. But, of course, we are also very concerned that prices are rising and so I am actually doing something about it in the interest of the ordinary Nigerian.”
But the question that is left to be answered is why the FG is not regulating LPG? If the FG has been regulating the prices of petrol with trillions of Naira paid in subsidies annually, then why leave LPG unregulated?
Recommendations
1. In the short term, the FG must take immediate measures including requesting the NLNG to increase supply to the LPG market. This will ensure more supply to market with consequent fall in prices.
2. In the medium term, the FG must read the riot act to the upstream oil companies in Nigeria to harness and utilise produced gas. One gas is produced, it must be used. This will make more gas available to the Nigerian economy for cooking, electricity generation, fuel for vehicles etc.
3. In the long term, the FG must have a zero gas flares policy and impose punitive duties on imported LPG to make it uneconomical to import. This makes Nigeria self-sufficient in gas supply thus taking off the pressure on the forex market by importers who source the dollar to import gas into Nigeria.
4. The FG must regulate the LPG market. With the Petroleum Industry Act (PIA) setting up a regulator - Nigerian Midstream and Downstream Petroleum Regulatory Authority – LPG must come under a regulator to create an enabling environment for local producers to thrive.
Conclusion
Nigeria is blessed with a huge abundance of human and natural resources. Governments at all levels must work assiduously to unlock value from these resources. A situation where Nigeria is flaring a vital and valuable resource – Gas – and then importing it from other countries is an embarrassment that must not be allowed to fester into the New Year 2022!
References: 1. Cooking gas price up 100% as VAT on LPG import begins (sunnewsonline.com)
2. FG Implements 7.5% Tax On Cooking Gas Imports - Nigeria Business Information (naijabusiness.com.ng)
3. https://www.worldbank.org/en/news/feature/2017/03/10/nigerias-flaring-reduction-target-2020
4. https://guardian.ng/business-services/fg-begins-gas-flare-reduction-with-award-of-45-licences-in-june/
The Killing Fields Of Nigerian Roads
Date: 2024-04-04 Read More
The Killing Fields Of Nigerian Roads
Nick Agule
Twitter: @NickAgule
Email: [email protected]
12.04.2022
Introduction
During the week the news broke of an accident in Benue State that claimed the lives of church women who were travelling in a group on a bus. This incident is not uncommon. Nigerian roads are perhaps one of the deadliest in the world. The quality of Nigerian roads has been rated 2.5 on a scale of 1 (low) and 7 (high) with data drawn from road quality indicator component of the Global Competitiveness Index published annually by the World Economic Forum (WEF). Unsafe roads do not only pose danger to travellers but also damage the economy.
To make the roads safe is a duty of Government. There are three critical aspects of road transportation that the Government must look after:
1. Road conditions – the infrastructure concession regulatory commission (ICRC) provides data that Nigeria has 195,000km road network of which only 60,000km is tarred leaving a whooping 135,000km untarred. This is perhaps the worst record for untarred roads for an economy of 200million people.
2. Vehicle inspection – all vehicles on the roads are expected to be regularly inspected, tested and certified that it meets set vehicle safety, exhaust emissions, and roadworthiness standards. Although vehicle inspection structures are in operation in Nigeria, they are not effective given the quality of junks moving on Nigerian roads.
3. Driver certification – a driver licence system that ensures only trained and tested drivers are permitted to operate on the roads ensures road operators all fully abreast of the highway code, speed management, not to drink and drive, requirement for insurance, not using phone, use of seatbelts etc. In Nigeria the driver licencing system is broken as people obtain licences without ever sitting behind a vehicle wheel to drive.
All the above factors contribute to the terrible road accident, casualty and fatality records in Nigeria.
Recommendations
To minimise the crashes and wanton destruction of lives and properties on Nigerian roads, the Governments at all levels must take the following steps:
1. Concession all the major roads to investors to build and operate to recover their investments through a tolling system. Even rich countries with high employment and income levels like the US, UK etc have tolled roads with the revenue used to maintain the roads and construct new ones.
2. Government must take immediate steps to install a national database of vehicles. Police cars to be mounted with Automatic Number Plate Recognition (ANPR) technology that detects vehicles that do not valid motor vehicle inspection and certification certificates. The system of mounting roadblocks in Nigeria must be discontinued as it does not fit modern day policing.
3. Government must ensure that only trained, tested and certified drivers that are allowed on the roads. Effective use of ANPR to detect vehicles with the registered owner not having a valid driving licence to be implemented.
4. Self help – as Government is slow to respond to the demands of road infrastructure, vehicle testing and driver certification, road users will help themselves by operating a journey management system to look after themselves.
5. Ultimate solution – the best solution to restore sanity on the roads is by Nigerians voting into office in 2023 leaders at all levels who will deliver good governance including the recommendations made above.
Conclusion
Driving is suppose to be fun but not in Nigeria. Elsewhere Governments create sanity on the roads through a strict regime of enforcement which not only puts road users in check but also generates a lot of revenue for Government through the administration of fines. The Nigerian Government needs to give the same priority to the roads as they did to COVID because more Nigerians are dying on the roads than COVID deaths!
References:
1.https://www.theglobaleconomy.com/Nigeria/roads_quality/#:~:text=Nigeria%3A%20Quality%20of%20roads%2C%201,from%202019%20is%202.5%20points
2. https://www.icrc.gov.ng/135000km-road-network-nigeria-un-tarred-icrc/
Twitter: @NickAgule
Email: [email protected]
12.04.2022
Introduction
During the week the news broke of an accident in Benue State that claimed the lives of church women who were travelling in a group on a bus. This incident is not uncommon. Nigerian roads are perhaps one of the deadliest in the world. The quality of Nigerian roads has been rated 2.5 on a scale of 1 (low) and 7 (high) with data drawn from road quality indicator component of the Global Competitiveness Index published annually by the World Economic Forum (WEF). Unsafe roads do not only pose danger to travellers but also damage the economy.
To make the roads safe is a duty of Government. There are three critical aspects of road transportation that the Government must look after:
1. Road conditions – the infrastructure concession regulatory commission (ICRC) provides data that Nigeria has 195,000km road network of which only 60,000km is tarred leaving a whooping 135,000km untarred. This is perhaps the worst record for untarred roads for an economy of 200million people.
2. Vehicle inspection – all vehicles on the roads are expected to be regularly inspected, tested and certified that it meets set vehicle safety, exhaust emissions, and roadworthiness standards. Although vehicle inspection structures are in operation in Nigeria, they are not effective given the quality of junks moving on Nigerian roads.
3. Driver certification – a driver licence system that ensures only trained and tested drivers are permitted to operate on the roads ensures road operators all fully abreast of the highway code, speed management, not to drink and drive, requirement for insurance, not using phone, use of seatbelts etc. In Nigeria the driver licencing system is broken as people obtain licences without ever sitting behind a vehicle wheel to drive.
All the above factors contribute to the terrible road accident, casualty and fatality records in Nigeria.
Recommendations
To minimise the crashes and wanton destruction of lives and properties on Nigerian roads, the Governments at all levels must take the following steps:
1. Concession all the major roads to investors to build and operate to recover their investments through a tolling system. Even rich countries with high employment and income levels like the US, UK etc have tolled roads with the revenue used to maintain the roads and construct new ones.
2. Government must take immediate steps to install a national database of vehicles. Police cars to be mounted with Automatic Number Plate Recognition (ANPR) technology that detects vehicles that do not valid motor vehicle inspection and certification certificates. The system of mounting roadblocks in Nigeria must be discontinued as it does not fit modern day policing.
3. Government must ensure that only trained, tested and certified drivers that are allowed on the roads. Effective use of ANPR to detect vehicles with the registered owner not having a valid driving licence to be implemented.
4. Self help – as Government is slow to respond to the demands of road infrastructure, vehicle testing and driver certification, road users will help themselves by operating a journey management system to look after themselves.
5. Ultimate solution – the best solution to restore sanity on the roads is by Nigerians voting into office in 2023 leaders at all levels who will deliver good governance including the recommendations made above.
Conclusion
Driving is suppose to be fun but not in Nigeria. Elsewhere Governments create sanity on the roads through a strict regime of enforcement which not only puts road users in check but also generates a lot of revenue for Government through the administration of fines. The Nigerian Government needs to give the same priority to the roads as they did to COVID because more Nigerians are dying on the roads than COVID deaths!
References:
1.https://www.theglobaleconomy.com/Nigeria/roads_quality/#:~:text=Nigeria%3A%20Quality%20of%20roads%2C%201,from%202019%20is%202.5%20points
2. https://www.icrc.gov.ng/135000km-road-network-nigeria-un-tarred-icrc/
President Buhari, COP26 Summit and the Fallacy of Gas Economics!
Nick Agule
Twitter: @NickAgule
Email: [email protected]
Facebook: Nick Agule, FCA
23.11.2021
Introdu...
Twitter: @NickAgule
Email: [email protected]
Facebook: Nick Agule, FCA
23.11.2021
Introdu...
Date: 2024-04-04 Read More
President Buhari, COP26 Summit and the Fallacy of Gas Economics!
Nick Agule
Twitter: @NickAgule
Email: [email protected]
Facebook: Nick Agule, FCA
23.11.2021
Introduction
On 2nd November 2021, President Muhammadu Buhari took to the podium at the UN Climate Change Conference Glasgow 2021 tagged COP26 (26th meeting of the Conference of Parties). In what I consider to be President Buhari’s best speech ever, he said:
“Without extra and stable power, we cannot build the factories that will transform Africa from a low-job, extractives-led economy to a high employment middle-income continent. Children cannot learn for longer and better by battery light any more than by candlelight. No more than the Africa of today, the Africa of tomorrow cannot advance using energy production that intermittently delivers” President Buhari further added that, to provide that extra and stable power to Africa’s 1.3 billion people (projected to be 2.5 billion by 2050), there are certain things that can and must be done by transitioning to cleaner energy production through fossil fuel power generation that can be re-tooled greener through carbon capture, the conversion of coal and heavy fuel oil power stations to biomass, installation of new technologies such as mini-hydro power plants and adoption of nuclear energy.
Most significantly, President Buhari announced that Nigeria has pledged to eliminate illegal gas flaring (which he said was Nigeria's single greatest contribution to greenhouse emissions) by 2030—a by-product of Nigeria’s oil industry—and harness it for electricity production.
Electricity the Lifeblood of Modern Society
It is noteworthy that President Buhari recognises that without stable power Nigeria cannot transform from a poverty-stricken to a prosperous nation. Yet he, like all the Nigerian leaders before him have largely given lip service to the power conundrums in Nigeria. No Nigerian leader has elevated power to the status of a critical requirement for nation building and economic growth. It may interest President Buhari to note that in the United Kingdom (UK) where he presented his speech, the economy is supplied with 730GW of electricity daily for a population of 65 million on a landmass 25% the size of Nigeria. If the President takes a moment to reflect that Nigeria with a population of over 200 million (3 times more than the UK) and a landmass 4 times the geographic size of the UK is being supplied with 3GW of electricity, it will jolt him to reality! Even if Nigeria was getting 30GW of electricity daily, the journey out of poverty will have started! At 3GW the use of high emission sources of energy such as firewood is in ascendency which damages the President’s commitment of Nigeria attaining a carbon-neutral status. President Buhari recognised that COVID-19 was a huge threat to Nigeria and her teeming population, and he quickly reacted by setting in motion emergency measures such as the constitution of a presidential taskforce headed by the Secretary to the Government of the Federation (SGF) that meets every weekday and provides regular feedback to the President. President Buhari obviously has not elevated electricity deficit to the status of COVID-19 given his lukewarm attitude to the power question. But unknown to President Buhari, power cuts have killed, are killing and will take far more Nigerian lives and businesses than COVID-19 has and will ever do!
President Buhari must therefore without delay give emergency status and attention the power situation in Nigeria and elevate it to a crisis situation with two low hanging fruits dangling before him to pluck:
1. Privatisation – the power sector in Nigeria is privatised at the generation and distribution phases. Transmission is still in control of the government who budgets less than $1 billion to the minister of power therefore incapacitated to expand the grid. President Buhari must order immediate steps to be taken to release transmission to the private sector who have the capacity, capital and expertise to significantly expand on the transmission network to at least 40GW within 5 years! President Buhari has taken his eyes off the Siemens deal which is now embroiled in power struggles by departments under his government as Senator Gabriel Suswam (Chair of Senate committee on power) recently exposed in a media interview. Further, the President must in the national interest exercise courage to revoke the DISCOs licences which were hijacked by politically exposed persons with no pedigree in the power business and who so far have not invested any significant funds to expand the network but rather keep increasing the tariffs (another round of increase is set for the beginning of 2022) to provide darkness to consumers! The President must then re-award the DISCOs licences to established global power companies.
2. Gas to power – Nigeria is blessed with huge gas resources estimated at 600 trillion cubic feet. The President must give effect to his commitment at COP26 by creating the enabling environment for the utilisation of the huge gas resources to generate power. The President must review downwards the 9-year target for flares-out to at most 5 years to quicken the conversion of flared gas to power! The President must also in a transparent manner create the enabling environment for investments in the gas sector by taking care of basic housekeeping jobs such as enforcement of the rule of law, tackling insecurity and ensuring a fair, speedy and transparent dispensation of justice in Nigeria.
The Fallacy of Gas Economics
The World Bank projected in 2017 that almost 8 billion cubic meters of gas was flared annually in Nigeria according to satellite data. Nigeria’s oil Minister Chief Timipre Sylva is reported to more recently to have said about 3 billion cubic meters of natural gas was lost to gas flaring in the first five months of 2020. The loss was valued at $230 million.
One of the biggest fallacies of all times is the notion by International Oil Companies (IOCs) operating in Nigeria that it is cheaper to flare Nigeria’s gas than to harness it for domestic use for electricity generation and cooking gas (LPG). This fallacy has unfortunately and tragically too been bought hook, line and sinker by Nigerian staff of these IOCs and policy makers and analysts in Nigeria and elsewhere. This fallacy if not slaughtered poses a definite risk to President Buhari’s commitment at COP26 to end gas flares by year 2030! There are three main reasons why this claim by the IOCs falls flat on the altar of empirical evidence:
1. Gas Imports – While the IOCs operating in Nigeria claim that it does not make good economics to harness Nigeria’s flared gas for the domestic market, other operators in as far away as the United States (US) see positive economics of supplying gas to the Nigerian market and are shipping cargoes from 6,000 miles away, landing them at our ports and going through the local hazards (which the IOCs in Nigeria claim are impediments in the domestic market) and selling their gas at a profit. President Buhari must therefore challenge the IOCs in Nigeria to show cause why they prefer to flare Nigeria’s gas but US operators are supplying the same domestic market (they claim is unviable) at a profit. The skyrocketing prices of cooking gas is resultant from the fall in the value of the Naira meaning imports are now more expensive plus the additional cost burden of VAT now levied on gas imports!
2. Tariffs – Shell bills me about £10 and £30 for gas and electricity respectively in the UK for 24/7/365 supply. Nigerian consumers are paying far more than this for epileptic supply! It is astonishing that Shell will come to Bonny in Nigeria and buy gas, ship it to the UK, generate electricity with it and supply both electricity and gas to consumers at cheaper rates than what Nigerians are being forced to pay. And yet the same Shell as other IOCs are saying the Nigerian market does not make good economics when consumers are getting a raw deal!
3. Environment Damage – In strict financial investment terms, the cost of flaring gas which is the installation of a flare stack is far lower than the cost of harnessing the gas which requires building gas plants and distribution networks. But when the cost of environmental damage from the pollution resultant from the flares and the loss of revenue and jobs is injected into the equation, it becomes myopic, foolhardy and sabotaging for any person to say it is cheaper to flare than to harness. The other by-product of oil production is water, but the IOCs do not say it is cheaper to dispose of produced water into our waterways than to treat/clean before disposal. Instead, the IOCs spent significant sums to install water treatment plants to treat produced water before disposal to save the environment. Why then are the IOCs disposing of produced gas by flaring it and polluting of the environment? President Buhari must force the IOCs and local operators’ hands to do to gas what they are doing to produced water because both are polluting our environment if not responsibly managed. The big advantage with the treatment of gas is that unlike water which is disposed of for free, the IOCs will actually make money once they harness, treat and dispose of the gas into the domestic market!
Conclusion
President Buhari had a powerful and beautiful outing at COP26, but his speech will only make meaning if concrete steps are taken to give effect to his words. Urgent steps to end gas flares must be taken, an enabling environment to attract investment in gas as an energy transition fuel must be created and the power sector privatisation must be revisited. It is the only way Nigeria can hope to improve power generation from the current miserly 3GW and also make gas cheaply available as a domestic fuel to all Nigerians.
References:
1. https://www.newsweek.com/climate-crisis-will-not-fixed-causing-energy-crisis-africa-opinion-1644227
2. https://www.nationalgrideso.com/who-we-are/what-we-do
3. https://www.worldbank.org/en/news/feature/2017/03/10/nigerias-flaring-reduction-target-2020
4. https://guardian.ng/business-services/fg-begins-gas-flare-reduction-with-award-of-45-licences-in-june/
Twitter: @NickAgule
Email: [email protected]
Facebook: Nick Agule, FCA
23.11.2021
Introduction
On 2nd November 2021, President Muhammadu Buhari took to the podium at the UN Climate Change Conference Glasgow 2021 tagged COP26 (26th meeting of the Conference of Parties). In what I consider to be President Buhari’s best speech ever, he said:
“Without extra and stable power, we cannot build the factories that will transform Africa from a low-job, extractives-led economy to a high employment middle-income continent. Children cannot learn for longer and better by battery light any more than by candlelight. No more than the Africa of today, the Africa of tomorrow cannot advance using energy production that intermittently delivers” President Buhari further added that, to provide that extra and stable power to Africa’s 1.3 billion people (projected to be 2.5 billion by 2050), there are certain things that can and must be done by transitioning to cleaner energy production through fossil fuel power generation that can be re-tooled greener through carbon capture, the conversion of coal and heavy fuel oil power stations to biomass, installation of new technologies such as mini-hydro power plants and adoption of nuclear energy.
Most significantly, President Buhari announced that Nigeria has pledged to eliminate illegal gas flaring (which he said was Nigeria's single greatest contribution to greenhouse emissions) by 2030—a by-product of Nigeria’s oil industry—and harness it for electricity production.
Electricity the Lifeblood of Modern Society
It is noteworthy that President Buhari recognises that without stable power Nigeria cannot transform from a poverty-stricken to a prosperous nation. Yet he, like all the Nigerian leaders before him have largely given lip service to the power conundrums in Nigeria. No Nigerian leader has elevated power to the status of a critical requirement for nation building and economic growth. It may interest President Buhari to note that in the United Kingdom (UK) where he presented his speech, the economy is supplied with 730GW of electricity daily for a population of 65 million on a landmass 25% the size of Nigeria. If the President takes a moment to reflect that Nigeria with a population of over 200 million (3 times more than the UK) and a landmass 4 times the geographic size of the UK is being supplied with 3GW of electricity, it will jolt him to reality! Even if Nigeria was getting 30GW of electricity daily, the journey out of poverty will have started! At 3GW the use of high emission sources of energy such as firewood is in ascendency which damages the President’s commitment of Nigeria attaining a carbon-neutral status. President Buhari recognised that COVID-19 was a huge threat to Nigeria and her teeming population, and he quickly reacted by setting in motion emergency measures such as the constitution of a presidential taskforce headed by the Secretary to the Government of the Federation (SGF) that meets every weekday and provides regular feedback to the President. President Buhari obviously has not elevated electricity deficit to the status of COVID-19 given his lukewarm attitude to the power question. But unknown to President Buhari, power cuts have killed, are killing and will take far more Nigerian lives and businesses than COVID-19 has and will ever do!
President Buhari must therefore without delay give emergency status and attention the power situation in Nigeria and elevate it to a crisis situation with two low hanging fruits dangling before him to pluck:
1. Privatisation – the power sector in Nigeria is privatised at the generation and distribution phases. Transmission is still in control of the government who budgets less than $1 billion to the minister of power therefore incapacitated to expand the grid. President Buhari must order immediate steps to be taken to release transmission to the private sector who have the capacity, capital and expertise to significantly expand on the transmission network to at least 40GW within 5 years! President Buhari has taken his eyes off the Siemens deal which is now embroiled in power struggles by departments under his government as Senator Gabriel Suswam (Chair of Senate committee on power) recently exposed in a media interview. Further, the President must in the national interest exercise courage to revoke the DISCOs licences which were hijacked by politically exposed persons with no pedigree in the power business and who so far have not invested any significant funds to expand the network but rather keep increasing the tariffs (another round of increase is set for the beginning of 2022) to provide darkness to consumers! The President must then re-award the DISCOs licences to established global power companies.
2. Gas to power – Nigeria is blessed with huge gas resources estimated at 600 trillion cubic feet. The President must give effect to his commitment at COP26 by creating the enabling environment for the utilisation of the huge gas resources to generate power. The President must review downwards the 9-year target for flares-out to at most 5 years to quicken the conversion of flared gas to power! The President must also in a transparent manner create the enabling environment for investments in the gas sector by taking care of basic housekeeping jobs such as enforcement of the rule of law, tackling insecurity and ensuring a fair, speedy and transparent dispensation of justice in Nigeria.
The Fallacy of Gas Economics
The World Bank projected in 2017 that almost 8 billion cubic meters of gas was flared annually in Nigeria according to satellite data. Nigeria’s oil Minister Chief Timipre Sylva is reported to more recently to have said about 3 billion cubic meters of natural gas was lost to gas flaring in the first five months of 2020. The loss was valued at $230 million.
One of the biggest fallacies of all times is the notion by International Oil Companies (IOCs) operating in Nigeria that it is cheaper to flare Nigeria’s gas than to harness it for domestic use for electricity generation and cooking gas (LPG). This fallacy has unfortunately and tragically too been bought hook, line and sinker by Nigerian staff of these IOCs and policy makers and analysts in Nigeria and elsewhere. This fallacy if not slaughtered poses a definite risk to President Buhari’s commitment at COP26 to end gas flares by year 2030! There are three main reasons why this claim by the IOCs falls flat on the altar of empirical evidence:
1. Gas Imports – While the IOCs operating in Nigeria claim that it does not make good economics to harness Nigeria’s flared gas for the domestic market, other operators in as far away as the United States (US) see positive economics of supplying gas to the Nigerian market and are shipping cargoes from 6,000 miles away, landing them at our ports and going through the local hazards (which the IOCs in Nigeria claim are impediments in the domestic market) and selling their gas at a profit. President Buhari must therefore challenge the IOCs in Nigeria to show cause why they prefer to flare Nigeria’s gas but US operators are supplying the same domestic market (they claim is unviable) at a profit. The skyrocketing prices of cooking gas is resultant from the fall in the value of the Naira meaning imports are now more expensive plus the additional cost burden of VAT now levied on gas imports!
2. Tariffs – Shell bills me about £10 and £30 for gas and electricity respectively in the UK for 24/7/365 supply. Nigerian consumers are paying far more than this for epileptic supply! It is astonishing that Shell will come to Bonny in Nigeria and buy gas, ship it to the UK, generate electricity with it and supply both electricity and gas to consumers at cheaper rates than what Nigerians are being forced to pay. And yet the same Shell as other IOCs are saying the Nigerian market does not make good economics when consumers are getting a raw deal!
3. Environment Damage – In strict financial investment terms, the cost of flaring gas which is the installation of a flare stack is far lower than the cost of harnessing the gas which requires building gas plants and distribution networks. But when the cost of environmental damage from the pollution resultant from the flares and the loss of revenue and jobs is injected into the equation, it becomes myopic, foolhardy and sabotaging for any person to say it is cheaper to flare than to harness. The other by-product of oil production is water, but the IOCs do not say it is cheaper to dispose of produced water into our waterways than to treat/clean before disposal. Instead, the IOCs spent significant sums to install water treatment plants to treat produced water before disposal to save the environment. Why then are the IOCs disposing of produced gas by flaring it and polluting of the environment? President Buhari must force the IOCs and local operators’ hands to do to gas what they are doing to produced water because both are polluting our environment if not responsibly managed. The big advantage with the treatment of gas is that unlike water which is disposed of for free, the IOCs will actually make money once they harness, treat and dispose of the gas into the domestic market!
Conclusion
President Buhari had a powerful and beautiful outing at COP26, but his speech will only make meaning if concrete steps are taken to give effect to his words. Urgent steps to end gas flares must be taken, an enabling environment to attract investment in gas as an energy transition fuel must be created and the power sector privatisation must be revisited. It is the only way Nigeria can hope to improve power generation from the current miserly 3GW and also make gas cheaply available as a domestic fuel to all Nigerians.
References:
1. https://www.newsweek.com/climate-crisis-will-not-fixed-causing-energy-crisis-africa-opinion-1644227
2. https://www.nationalgrideso.com/who-we-are/what-we-do
3. https://www.worldbank.org/en/news/feature/2017/03/10/nigerias-flaring-reduction-target-2020
4. https://guardian.ng/business-services/fg-begins-gas-flare-reduction-with-award-of-45-licences-in-june/
eNaira: Nigeria’s New Digital Currency – the Bloom and Gloom!
Date: 2024-04-04 Read More
eNaira: Nigeria’s New Digital Currency – the Bloom and Gloom!
Nick Agule
Twitter: @NickAgule
Email: [email protected]
28.09.2021
Introduction
On Monday, 25th October 2021, President Muhammadu Buhari launched Nigeria’s new digital currency tagged the eNaira. The launch was initially scheduled to coincide with the country’s 61st independence anniversary on 1st October but had to be postponed for indistinct reasons.
The money we hold is comprised of two forms – physical (bank notes and coins) and digital (money stored or exchanged in our electronic bank accounts). With increasing internet penetration, Nigerians have taken to the use of digital money by increasingly effecting transactions online using bank apps or websites or other digital platforms. One can therefore argue that the Naira is already in existence in electronic form. It is against this backdrop that the introduction of eNaira by the Central Bank of Nigeria (CBN) which has been declared to be legal tender, making it unlawful not to accept it as a means of payment becomes curious and debatable.
What is the E-Naira?
On its recently launched website (www.enaira.com), the eNaira is described as a Central Bank of Nigeria-issued digital currency that provides a unique form of money denominated in Naira. eNaira is said to serve as both a medium of exchange and a store of value, offering better payment prospects in retail transactions when compared to cash payments. The website further lists the benefits of the eNaira to foster economic growth; provide a secure, faster and cheaper diaspora remittance option; traceability which limits its use for illicit and fraudulent purposes; enable effective, equitable, and faster distribution of cash assistance to households and communities in the government’s social welfare programmes; accelerate financial inclusion; increase local and international trade; stronger security and aid revenue collection by reducing cash handling costs. To use eNaira you must download the eNaira wallet (from app stores) which is a digital storage that holds the eNaira. To make payment or receive money in eNaira requires access to the eNaira account. Users can also dial a USSD short code and follow the required steps to perform transactions.
The Differences Between the Digital Naira and eNaira
As earlier noted, the Naira is already digital which comprises the money we hold in our online bank accounts. So, what is the difference between the current digital Naira and the eNaira? Based on data collated from information releases by the CBN, the main differences can be summarised as follows:
1. The current digital Naira can be withdrawn in cash, therefore with a debit card, we can withdraw from an ATM the money in our online bank accounts or through other means like cheques, cash withdrawal forms etc. The eNaira however will never be withdrawn in cash as it will only be received digitally and spent digitally.
2. The current digital Naira in our online bank accounts constitute direct liabilities on the balance sheets of the banks and other financial institutions (it is the banks who owe the customers for monies they deposited with them). The eNaira however is a direct liability on the Central Bank of Nigeria.
3. The technology used for the digital Naira is as chosen by the banks and other financial institutions to offer banking services to their customers. For the eNaira the CBN has chosen to hold and manage the eNaira wallets on a distributed ledger (blockchain technology).
4. Currently when we transfer digital Naira held in our online bank accounts, the bank charge transaction fees. For the eNaira, the CBN says all transactions including payments and inter eNaira wallet transfers will be free of any charges.
5. Deposits made in interest-bearing digital accounts currently attract interest payments from the banks. For the eNaira, the CBN says no interest whatsoever will be paid on balances in eNaira wallets!
6. There are intermediaries for the typical online bank transactions for example to transfer money from one customer to another involves going through a bank to effect the transaction. For example, if I hold an account with bank A and I want to transfer money to another person with an account with bank A or bank B, I first transfer the money from bank A to the receiving bank who then credits the recipient’s account (payer – bank – recipient). Whereas for eNaira transactions, there are no intermediaries as you simply transfer money from one eNaira wallet directly to another eNaira wallet with the bank (intermediary) eliminated from the transaction flow!
7. Money can be transferred from digital bank accounts currently held with banks to eNaira wallets. But no money can be transferred from eNaira wallets to a digital bank account! So once money is converted to eNaira, it will be in eNaira and can never be reconverted to the digital Naira that be withdrawn in cash!
Concerns about the E-Naira
There are grave anxieties and apprehensions with the introduction of the eNaira including some unanswered questions as follows:
1. There is fear that the eNaira will provide the CBN a loophole to engage in unchecked PRINTING of money. Printing money as used here does not refer to printing of cash (bank notes and coins) but rather it is a situation where the CBN increases money supply to the economy electronically which is also called Quantitative Easing. Thus, if the government wants to pay salaries, social welfare interventions, contractors etc, the CBN will simply credit the eNaira wallets of the beneficiaries thus increasing money supply. Government will therefore be spending money it did not earn or did not have because payments will not be made from balances held by the government with banks but by simply the CBN will change electronically the balance in the eNaira wallets of the recipients from zero to any amount the CBN wants! The danger with printing money is that it causes negative impact on the economy including rising inflation because money supply is increased without commensurate increase in productive activities.
2. The CBN explains that once users create their eNaira wallets, they will be able to transfer money from their existing bank accounts to fund their wallets. It is not clear if the monies in the wallets will still be with the banks or transferred to the CBN but given that the balances in the wallets are said to become the direct liabilities of the CBN, it means the monies are likely no longer going to be with the banks. The implication is that there will be technically a run on the banks as more and more users create eNaira wallets and move their funds from the banks to their wallets! This will not only impact negatively on the banks’ ability to support the economy by reducing their capacity to grant loans but also impact on their profitability with attendant consequences on the stock market. It is now looking like the CBN is now competing for deposits with the commercial banks!
3. There will be negative consequences on savers who are currently paid interests on their savings by the banks but once they transfer their money to the eNaira wallet, the CBN says they will not pay a kobo in interest on any balances held in the wallets.
4. The banks have so far managed their cybersecurity watertight to keep away largescale data and systems breaches. The CBN says the eNaira system uses a two-factor authentication system in addition to cryptographic encryption to ensure the safety of customers’ wallets and the eNaira holding. It is hoped that this commitment to ensure impregnable security is maintained by the CBN with utmost assurance.
5. It is interesting to note that a nation that truncated the electronic transmission of election results on account of lack of internet penetration now launches e-Naira that runs on the internet and mandates it for use by all. It is left to be seen how an akara and pap seller in a village setting without a smart phone will accept the eNaira which as a legal tender cannot be rejected when tendered in payment for goods and services.
6. An example of how eNaira will facilitate international trade is stated on the eNaira website with the testimony of a business owner as follows: “Even as I had just made purchase for goods in the UK, the reality of eNaira would be that I simply send and the Pounds Sterling equivalent pops up at his UK office, and they process the payment immediately…”
Currently account holders with banks in Nigeria are restricted in the amount of foreign transactions they can conduct on their Naira-denominated bank accounts, for example one cannot spend more than $100 on a Naira debit card on a foreign currency-denominated transaction. It is therefore not clear whether the CBN now wants to lift the ceiling such that regardless of the amount of transaction, any eNaira wallet holder can simply send any amount of Naira and it will be translated into a foreign currency? If so, the question will be that where will the CBN get all the foreign currencies to fund such transactions. Also, from the example above, will the UK supplier (office) also have an eNaira wallet to receive the pounds? because the CBN says monies in eNaira wallets cannot be transferred to bank accounts. There are many unanswered questions with the international trade dimension of the eNaira.
eNaira as legal tender
The CBN has declared eNaira as legal tender and says once offered, a recipient cannot reject it. It is unclear why the CBN has chosen to make such a tautological statement because it is the Naira that is legal tender in Nigeria. eNaira is only a payment channel for the Naira for instance one can pay Naira in cash, bank transfer, POS, cheque/bank draft, online payment etc and now eNaira. So it is strange that the CBN will choose one payment channel for the Naira and declare it as legal tender. It is same as the CBN saying bank transfer is legal tender and once someone offers you bank transfer, you cannot reject it!
However, it is possible that the CBN in declaring eNaira as legal tender is a grand scheme to grant the FG unrestricted access to print money. With this legal tender status granted eNaira, the FG will not start loading the wallets of contractors and staff with eNaira and they cannot reject it. To make it work, the contractors and staff who have been paid in eNaira when they approach merchants to pay for goods and services with eNaira, those merchants will also not be able to reject it! The economy will therefore become awash with eNaira without any productivity backing and this will ruin further an economy that is already groaning under inflationary pressures, high unemployment and exchange rate crisis!
Recommendations
1. The CBN should not mandate the use of eNaira from day 1 but allow the system to operate in parallel with the current payment channels until the system is tested and confirmed to be robust enough before it is mandated in a general rollout.
2. To avoid a run on the banks and to maintain deposit liabilities on the banks’ balance sheets to support their loan assets, the CBN should allow the DMBs to be the custodians of the eNaira wallets. This way, if a user transfers funds from their bank accounts to their eNaira wallets, the funds remain with the banks. This will maintain the financial system stability without creating a parallel deposit system in the economy.
Conclusion
With the widespread acceptance and use of digital Naira, it is not clear the overwhelming benefits that has made the CBN to rush the introduction of the eNaira. The grave concerns expressed above also need to be addressed by the CBN if Nigerians and the business community operating in Nigeria are to gain confidence in the eNaira for it to have wide acceptability.
References:
1. https://enaira.com/
2. https://enaira.com/news/insights/local-and-international-trade-how-the-e-naira-can-cause-positive-shifts
3. https://guardian.ng/business-services/court-okays-enaira-rollout-as-cbn-postpones-launch/
4. https://nairametrics.com/2021/10/01/why-cbn-postponed-the-launch-of-enaira/
Twitter: @NickAgule
Email: [email protected]
28.09.2021
Introduction
On Monday, 25th October 2021, President Muhammadu Buhari launched Nigeria’s new digital currency tagged the eNaira. The launch was initially scheduled to coincide with the country’s 61st independence anniversary on 1st October but had to be postponed for indistinct reasons.
The money we hold is comprised of two forms – physical (bank notes and coins) and digital (money stored or exchanged in our electronic bank accounts). With increasing internet penetration, Nigerians have taken to the use of digital money by increasingly effecting transactions online using bank apps or websites or other digital platforms. One can therefore argue that the Naira is already in existence in electronic form. It is against this backdrop that the introduction of eNaira by the Central Bank of Nigeria (CBN) which has been declared to be legal tender, making it unlawful not to accept it as a means of payment becomes curious and debatable.
What is the E-Naira?
On its recently launched website (www.enaira.com), the eNaira is described as a Central Bank of Nigeria-issued digital currency that provides a unique form of money denominated in Naira. eNaira is said to serve as both a medium of exchange and a store of value, offering better payment prospects in retail transactions when compared to cash payments. The website further lists the benefits of the eNaira to foster economic growth; provide a secure, faster and cheaper diaspora remittance option; traceability which limits its use for illicit and fraudulent purposes; enable effective, equitable, and faster distribution of cash assistance to households and communities in the government’s social welfare programmes; accelerate financial inclusion; increase local and international trade; stronger security and aid revenue collection by reducing cash handling costs. To use eNaira you must download the eNaira wallet (from app stores) which is a digital storage that holds the eNaira. To make payment or receive money in eNaira requires access to the eNaira account. Users can also dial a USSD short code and follow the required steps to perform transactions.
The Differences Between the Digital Naira and eNaira
As earlier noted, the Naira is already digital which comprises the money we hold in our online bank accounts. So, what is the difference between the current digital Naira and the eNaira? Based on data collated from information releases by the CBN, the main differences can be summarised as follows:
1. The current digital Naira can be withdrawn in cash, therefore with a debit card, we can withdraw from an ATM the money in our online bank accounts or through other means like cheques, cash withdrawal forms etc. The eNaira however will never be withdrawn in cash as it will only be received digitally and spent digitally.
2. The current digital Naira in our online bank accounts constitute direct liabilities on the balance sheets of the banks and other financial institutions (it is the banks who owe the customers for monies they deposited with them). The eNaira however is a direct liability on the Central Bank of Nigeria.
3. The technology used for the digital Naira is as chosen by the banks and other financial institutions to offer banking services to their customers. For the eNaira the CBN has chosen to hold and manage the eNaira wallets on a distributed ledger (blockchain technology).
4. Currently when we transfer digital Naira held in our online bank accounts, the bank charge transaction fees. For the eNaira, the CBN says all transactions including payments and inter eNaira wallet transfers will be free of any charges.
5. Deposits made in interest-bearing digital accounts currently attract interest payments from the banks. For the eNaira, the CBN says no interest whatsoever will be paid on balances in eNaira wallets!
6. There are intermediaries for the typical online bank transactions for example to transfer money from one customer to another involves going through a bank to effect the transaction. For example, if I hold an account with bank A and I want to transfer money to another person with an account with bank A or bank B, I first transfer the money from bank A to the receiving bank who then credits the recipient’s account (payer – bank – recipient). Whereas for eNaira transactions, there are no intermediaries as you simply transfer money from one eNaira wallet directly to another eNaira wallet with the bank (intermediary) eliminated from the transaction flow!
7. Money can be transferred from digital bank accounts currently held with banks to eNaira wallets. But no money can be transferred from eNaira wallets to a digital bank account! So once money is converted to eNaira, it will be in eNaira and can never be reconverted to the digital Naira that be withdrawn in cash!
Concerns about the E-Naira
There are grave anxieties and apprehensions with the introduction of the eNaira including some unanswered questions as follows:
1. There is fear that the eNaira will provide the CBN a loophole to engage in unchecked PRINTING of money. Printing money as used here does not refer to printing of cash (bank notes and coins) but rather it is a situation where the CBN increases money supply to the economy electronically which is also called Quantitative Easing. Thus, if the government wants to pay salaries, social welfare interventions, contractors etc, the CBN will simply credit the eNaira wallets of the beneficiaries thus increasing money supply. Government will therefore be spending money it did not earn or did not have because payments will not be made from balances held by the government with banks but by simply the CBN will change electronically the balance in the eNaira wallets of the recipients from zero to any amount the CBN wants! The danger with printing money is that it causes negative impact on the economy including rising inflation because money supply is increased without commensurate increase in productive activities.
2. The CBN explains that once users create their eNaira wallets, they will be able to transfer money from their existing bank accounts to fund their wallets. It is not clear if the monies in the wallets will still be with the banks or transferred to the CBN but given that the balances in the wallets are said to become the direct liabilities of the CBN, it means the monies are likely no longer going to be with the banks. The implication is that there will be technically a run on the banks as more and more users create eNaira wallets and move their funds from the banks to their wallets! This will not only impact negatively on the banks’ ability to support the economy by reducing their capacity to grant loans but also impact on their profitability with attendant consequences on the stock market. It is now looking like the CBN is now competing for deposits with the commercial banks!
3. There will be negative consequences on savers who are currently paid interests on their savings by the banks but once they transfer their money to the eNaira wallet, the CBN says they will not pay a kobo in interest on any balances held in the wallets.
4. The banks have so far managed their cybersecurity watertight to keep away largescale data and systems breaches. The CBN says the eNaira system uses a two-factor authentication system in addition to cryptographic encryption to ensure the safety of customers’ wallets and the eNaira holding. It is hoped that this commitment to ensure impregnable security is maintained by the CBN with utmost assurance.
5. It is interesting to note that a nation that truncated the electronic transmission of election results on account of lack of internet penetration now launches e-Naira that runs on the internet and mandates it for use by all. It is left to be seen how an akara and pap seller in a village setting without a smart phone will accept the eNaira which as a legal tender cannot be rejected when tendered in payment for goods and services.
6. An example of how eNaira will facilitate international trade is stated on the eNaira website with the testimony of a business owner as follows: “Even as I had just made purchase for goods in the UK, the reality of eNaira would be that I simply send and the Pounds Sterling equivalent pops up at his UK office, and they process the payment immediately…”
Currently account holders with banks in Nigeria are restricted in the amount of foreign transactions they can conduct on their Naira-denominated bank accounts, for example one cannot spend more than $100 on a Naira debit card on a foreign currency-denominated transaction. It is therefore not clear whether the CBN now wants to lift the ceiling such that regardless of the amount of transaction, any eNaira wallet holder can simply send any amount of Naira and it will be translated into a foreign currency? If so, the question will be that where will the CBN get all the foreign currencies to fund such transactions. Also, from the example above, will the UK supplier (office) also have an eNaira wallet to receive the pounds? because the CBN says monies in eNaira wallets cannot be transferred to bank accounts. There are many unanswered questions with the international trade dimension of the eNaira.
eNaira as legal tender
The CBN has declared eNaira as legal tender and says once offered, a recipient cannot reject it. It is unclear why the CBN has chosen to make such a tautological statement because it is the Naira that is legal tender in Nigeria. eNaira is only a payment channel for the Naira for instance one can pay Naira in cash, bank transfer, POS, cheque/bank draft, online payment etc and now eNaira. So it is strange that the CBN will choose one payment channel for the Naira and declare it as legal tender. It is same as the CBN saying bank transfer is legal tender and once someone offers you bank transfer, you cannot reject it!
However, it is possible that the CBN in declaring eNaira as legal tender is a grand scheme to grant the FG unrestricted access to print money. With this legal tender status granted eNaira, the FG will not start loading the wallets of contractors and staff with eNaira and they cannot reject it. To make it work, the contractors and staff who have been paid in eNaira when they approach merchants to pay for goods and services with eNaira, those merchants will also not be able to reject it! The economy will therefore become awash with eNaira without any productivity backing and this will ruin further an economy that is already groaning under inflationary pressures, high unemployment and exchange rate crisis!
Recommendations
1. The CBN should not mandate the use of eNaira from day 1 but allow the system to operate in parallel with the current payment channels until the system is tested and confirmed to be robust enough before it is mandated in a general rollout.
2. To avoid a run on the banks and to maintain deposit liabilities on the banks’ balance sheets to support their loan assets, the CBN should allow the DMBs to be the custodians of the eNaira wallets. This way, if a user transfers funds from their bank accounts to their eNaira wallets, the funds remain with the banks. This will maintain the financial system stability without creating a parallel deposit system in the economy.
Conclusion
With the widespread acceptance and use of digital Naira, it is not clear the overwhelming benefits that has made the CBN to rush the introduction of the eNaira. The grave concerns expressed above also need to be addressed by the CBN if Nigerians and the business community operating in Nigeria are to gain confidence in the eNaira for it to have wide acceptability.
References:
1. https://enaira.com/
2. https://enaira.com/news/insights/local-and-international-trade-how-the-e-naira-can-cause-positive-shifts
3. https://guardian.ng/business-services/court-okays-enaira-rollout-as-cbn-postpones-launch/
4. https://nairametrics.com/2021/10/01/why-cbn-postponed-the-launch-of-enaira/
Nigeria: A Nation Boxed into Oil Quagmire!
Date: 2024-04-04 Read More
Nigeria: A Nation Boxed into Oil Quagmire!
Nick Agule
Twitter: @NickAgule
Email: [email protected]
12.10.2021
Introduction
In early October 2021, the Organisation of Petroleum Exporting Countries (OPEC) reported that Nigeria exported $27.73bn worth of petroleum products in 2020 but also that the value of the country’s petroleum imports in the same year was $71.28bn. This resulted to Nigeria’s petroleum imports exceeding its exports by $43.55bn during the year. OPEC further reported that Nigeria’s imports of petroleum products consistently exceeded the nation’s exports for five years running.
Nigeria’s main source of foreign exchange earnings is crude sales, but the country is in an unenviable position where she shrieks if crude oil prices rise and equally feels terror if oil prices go down! This situation has arisen because Nigeria is perhaps the only oil producing country in the world that exports 100% of her crude oil production and imports 100% of her refined petroleum products needs! Thus, when crude oil prices rise, Nigeria experiences a boom in revenues but tragically, a rise in crude oil prices means a rise in the cost of refined petroleum products sending the country’s books into the red! On the other hand, a fall in crude oil prices results in a fall in the cost of imported refined petroleum products but equally tragically it means a crash in the volume of revenues for the country thus ruining budgetary projections! Nigeria has therefore boxed herself into oil quagmire where head or tail she loses sleep!
Inexplicably also, Nigeria flares her produced gas thus earning zero revenues from a valuable resource that is, as at today the biggest source of electricity generation in the world! Nigeria then turns around to import same gas from far flung countries like the US thus expending a chunk of the revenues earned from crude oil sales to buy a product they have set fire on theirs!
The Causes of the Oil Quagmire
There are three principal reasons responsible for the emergence of the oil quagmire that Nigeria boxed herself into resulting in the country spending more than 2.5 times what she earns in oil revenues to import petroleum products:
1. Dead Refineries: Nigeria has four government owned refineries with a combined refining capacity of 445,000 barrels of crude oil per day. But successive governments have allowed the refineries to rot, and the refineries are currently gulping nearly N200 billion annually to refine zero barrels of crude oil!
2. Non-Existent Gas Plants: The World Bank projected in 2017 that almost 8 billion cubic meters of gas was flared annually in Nigeria according to satellite data. Nigeria’s oil Minister Chief Timipre Sylva is reported to more recently to have said about 3 billion cubic meters of natural gas was lost to gas flaring in the first five months of 2020.
3. Petroleum Products and Gas Importation: Nigeria is a major producer of crude oil and gas but with dead refineries and non-existent gas plants, the country largely depends on imported petroleum products and gas that are refined in foreign nations. Nigeria has therefore found herself at the receiving end in the oil business as the equations below depict:
Revenues = Crude Export Sales
Costs of Imports = Cost of Crude (sold by Nigeria) + Refining Costs + Profit Margins + Shipping and Handling Costs + Taxes (to foreign govts) + Insurance Costs etc.
From the equations above, it is clear that Nigeria pays back the entire revenues she earns from crude sales plus much more to import petroleum products into the country.
In every litre of fuel that Nigerians pay for at the pump is included salaries of foreigners who refined the crude for us, taxes paid to foreign governments plus crude, refining and transportation costs etc!
The situation with the manufacturing sector is no different as figures obtained from the National Bureau of Statistics reports that the value of manufactured goods imported into the country exceeded exports by N4.37tn in the second quarter of 2021 alone. With Nigeria flaring gas and thus supplying a miserly 4GW of electricity to an economy that needs 200GW, the manufacturing sector is all but dead resulting in such adverse and negative balance of payment position!
Recommendations
For Nigeria to punch herself out of the oil quagmire, the country must address the reasons for the quagmire as listed above:
1. Resuscitate the Refineries: The Government must as a matter of urgency lease out or outrightly sell off the four dead refineries to investors. The refineries can be sold for $1 each to enable the investors bring in their money, technology and expertise to repair, rehabilitate and turn-around the refineries to begin refining Nigeria’s crude for Nigerians! This will also create millions of additional jobs all along the value chain from crude feed to the refinery to the pump!
2. Build Gas Plants: Nigeria must remove the structural barriers that are hindering investment in the gas sector to enable investors to build gas plants to harness the gas that is now flaring. The harnessed gas will be fed into power generation, domestic and other industrial uses. A sufficiently powered economy will create millions of its own jobs and result into rapid economic growth and development.
3. Invest in Renewable energy: Nigeria is blessed with a huge abundance of renewable energy sources – solar, wind, water, biomass etc. - and the Government must take urgent steps to create the enabling environment for massive investment in the sector. If Nigeria begins to run her economy with renewable energy, she can export 100% of her crude and gas to other nations and earn billions in dollar revenues. Millions of jobs will be created too.
4. End gas flares: The President to sign an executive order ending gas flares by a set deadline of a maximum of 1 year from the effective date of the order. This will force the hands of the oil companies operating in Nigeria to invest to harness produced gas to ensure continuity of crude oil production.
Conclusion
Nigeria’s economy will never prosper and thrive if this imbalance between oil export revenues and costs of petroleum product imports is allowed to fester! It will only amount to robbing Peter (Nigerians) to pay Paul (foreign refineries and their governments) which will further strangulate the economy and inhibit growth. It is not late for the government to make a start to correct the imbalance.
References:
1. https://hallmarknews.com/opec-says-nigerias-petroleum-imports-exceeded-exports-by-43-56bn/
2. https://punchng.com/quarter-2-manufactured-imports-exceeded-exports-by-n4-3tn-nbs/#:~:text=The%20value%20of%20manufactured%20goods,per%20cent%20of%20total%20trade.
Twitter: @NickAgule
Email: [email protected]
12.10.2021
Introduction
In early October 2021, the Organisation of Petroleum Exporting Countries (OPEC) reported that Nigeria exported $27.73bn worth of petroleum products in 2020 but also that the value of the country’s petroleum imports in the same year was $71.28bn. This resulted to Nigeria’s petroleum imports exceeding its exports by $43.55bn during the year. OPEC further reported that Nigeria’s imports of petroleum products consistently exceeded the nation’s exports for five years running.
Nigeria’s main source of foreign exchange earnings is crude sales, but the country is in an unenviable position where she shrieks if crude oil prices rise and equally feels terror if oil prices go down! This situation has arisen because Nigeria is perhaps the only oil producing country in the world that exports 100% of her crude oil production and imports 100% of her refined petroleum products needs! Thus, when crude oil prices rise, Nigeria experiences a boom in revenues but tragically, a rise in crude oil prices means a rise in the cost of refined petroleum products sending the country’s books into the red! On the other hand, a fall in crude oil prices results in a fall in the cost of imported refined petroleum products but equally tragically it means a crash in the volume of revenues for the country thus ruining budgetary projections! Nigeria has therefore boxed herself into oil quagmire where head or tail she loses sleep!
Inexplicably also, Nigeria flares her produced gas thus earning zero revenues from a valuable resource that is, as at today the biggest source of electricity generation in the world! Nigeria then turns around to import same gas from far flung countries like the US thus expending a chunk of the revenues earned from crude oil sales to buy a product they have set fire on theirs!
The Causes of the Oil Quagmire
There are three principal reasons responsible for the emergence of the oil quagmire that Nigeria boxed herself into resulting in the country spending more than 2.5 times what she earns in oil revenues to import petroleum products:
1. Dead Refineries: Nigeria has four government owned refineries with a combined refining capacity of 445,000 barrels of crude oil per day. But successive governments have allowed the refineries to rot, and the refineries are currently gulping nearly N200 billion annually to refine zero barrels of crude oil!
2. Non-Existent Gas Plants: The World Bank projected in 2017 that almost 8 billion cubic meters of gas was flared annually in Nigeria according to satellite data. Nigeria’s oil Minister Chief Timipre Sylva is reported to more recently to have said about 3 billion cubic meters of natural gas was lost to gas flaring in the first five months of 2020.
3. Petroleum Products and Gas Importation: Nigeria is a major producer of crude oil and gas but with dead refineries and non-existent gas plants, the country largely depends on imported petroleum products and gas that are refined in foreign nations. Nigeria has therefore found herself at the receiving end in the oil business as the equations below depict:
Revenues = Crude Export Sales
Costs of Imports = Cost of Crude (sold by Nigeria) + Refining Costs + Profit Margins + Shipping and Handling Costs + Taxes (to foreign govts) + Insurance Costs etc.
From the equations above, it is clear that Nigeria pays back the entire revenues she earns from crude sales plus much more to import petroleum products into the country.
In every litre of fuel that Nigerians pay for at the pump is included salaries of foreigners who refined the crude for us, taxes paid to foreign governments plus crude, refining and transportation costs etc!
The situation with the manufacturing sector is no different as figures obtained from the National Bureau of Statistics reports that the value of manufactured goods imported into the country exceeded exports by N4.37tn in the second quarter of 2021 alone. With Nigeria flaring gas and thus supplying a miserly 4GW of electricity to an economy that needs 200GW, the manufacturing sector is all but dead resulting in such adverse and negative balance of payment position!
Recommendations
For Nigeria to punch herself out of the oil quagmire, the country must address the reasons for the quagmire as listed above:
1. Resuscitate the Refineries: The Government must as a matter of urgency lease out or outrightly sell off the four dead refineries to investors. The refineries can be sold for $1 each to enable the investors bring in their money, technology and expertise to repair, rehabilitate and turn-around the refineries to begin refining Nigeria’s crude for Nigerians! This will also create millions of additional jobs all along the value chain from crude feed to the refinery to the pump!
2. Build Gas Plants: Nigeria must remove the structural barriers that are hindering investment in the gas sector to enable investors to build gas plants to harness the gas that is now flaring. The harnessed gas will be fed into power generation, domestic and other industrial uses. A sufficiently powered economy will create millions of its own jobs and result into rapid economic growth and development.
3. Invest in Renewable energy: Nigeria is blessed with a huge abundance of renewable energy sources – solar, wind, water, biomass etc. - and the Government must take urgent steps to create the enabling environment for massive investment in the sector. If Nigeria begins to run her economy with renewable energy, she can export 100% of her crude and gas to other nations and earn billions in dollar revenues. Millions of jobs will be created too.
4. End gas flares: The President to sign an executive order ending gas flares by a set deadline of a maximum of 1 year from the effective date of the order. This will force the hands of the oil companies operating in Nigeria to invest to harness produced gas to ensure continuity of crude oil production.
Conclusion
Nigeria’s economy will never prosper and thrive if this imbalance between oil export revenues and costs of petroleum product imports is allowed to fester! It will only amount to robbing Peter (Nigerians) to pay Paul (foreign refineries and their governments) which will further strangulate the economy and inhibit growth. It is not late for the government to make a start to correct the imbalance.
References:
1. https://hallmarknews.com/opec-says-nigerias-petroleum-imports-exceeded-exports-by-43-56bn/
2. https://punchng.com/quarter-2-manufactured-imports-exceeded-exports-by-n4-3tn-nbs/#:~:text=The%20value%20of%20manufactured%20goods,per%20cent%20of%20total%20trade.
Nigeria: The VAT imbroglio!
Date: 2024-04-04 Read More
Nigeria: The VAT imbroglio!
Nick Agule
Twitter: @NickAgule
Email: [email protected]
20.09.2021
Introduction
In the month of August 2021, a Federal High Court sitting in Port Harcourt, Rivers State of Nigeria entered judgement that it is the Rivers State Government (RSG) and not the Federal Inland Revenue Services (FIRS) that is constitutionally entitled to impose taxes enforceable or collectable in its territory of the nature of consumption or sales tax, VAT, education and other taxes or levies, other than the taxes and duties specifically reserved for the Federal Government by items 58 and 59 of Part 1 of the Second Schedule of the 1999 Constitution as amended.
The court, presided over by Justice Stephen Dalyop Pam, therefore issued an order of perpetual injunction restraining FIRS and the Attorney General of the Federation, both first and second defendants in the suit, from collecting, demanding, threatening and intimidating residents of Rivers State to pay to FIRS, personnel income tax and VAT.
The RSG quickly enacted and signed into law a bill empowering the state board of inland revenue to begin levying and collecting VAT in the state. But the FIRS filed an application before the same court seeking a stay-of-execution to stop the RSG from collecting VAT in line with the earlier judgement in favour of the state. The application was dismissed by Justice Pam as according to him granting the application would negate the principle of equity and amount to committing murder. The Judge furthered averred that in as much as the law enacted with respect to VAT by the RSG remained valid, the courts were bound to obey such law until it had been set aside by a court of competent jurisdiction.
The FIRS would later approach the Court of Appeal sitting in Abuja praying the appellate court to not only set aside the Federal High Court judgement, but to also stay the execution of the judgement pending the conclusion of the appeal. The Appeal Court granted the reliefs sought by the FIRS and ordered both Rivers and Lagos (which had applied to join the suit as a co-Respondent alongside Rivers State) States to maintain status quo on the collection of VAT, pending the determination of an appeal that was lodged before it by the FIRS. Specifically, the Appeal Court ordered all the parties that have subjected themselves before it to “refrain from taking any action to give effect to the judgement of the Federal High Court”, which gave RSG the right to collect VAT, instead of the FIRS. The Appeal Court then fixed the next hearing in the suit for September 16, 2021. No doubt, this looks pretty much like a case that will end up at the Supreme Court of Nigeria, the highest court in the land.
As the legal brickbats continue, there is no shadow of doubt that this is a monumental judgement that is set to redefine the practice of federalism in Nigeria. I am not a lawyer therefore lack competence and capacity to comment on the legalities of the judgement and appeal processes, however I will analyse the socio-political and economic implications of the judgement if it is allowed to stand.
Nigeria’s Unique Federalism
Nigeria’s official title is the Federal Republic of Nigeria but there is little federalism in the system of governance in the country. A true federalist government according to Britannica has political authority divided between two autonomous sets of governments, one national and the other subnational, both of which operate directly upon the people. Furthermore, of the eight largest countries in the world by area, seven—Russia, Canada, the United States, Brazil, Australia, India, and Argentina—are organised on a federal basis. (China, the third largest, is a unitary state.) It listed Federal countries to also include Austria, Belgium, Ethiopia, Germany, Malaysia, Mexico, Nigeria, Pakistan, Switzerland, the United Arab Emirates, and Venezuela, among others.
One key ingredient of federal systems is that the subnational governments are the ones that fund the national government. I live in the UK and every year my Council (local government equivalent in Nigeria, the UK has no states) sends me a detailed financial statement showing income and expenditure of the Council and the share of the income that was remitted to the national government. Similar systems exist in the US and elsewhere. Nigeria is however operating in the reverse order with the national government superintending over 68 out of 98 items in the exclusive list of the constitution. Even the 30 items left are in the concurrent list where the national government and the subnational governments run them together with the national government taking precedence over the subnational governments. So, in effect the national government has powers over all the 98 items in the constitution which basically covers almost all economic activities in the country!
Nigeria’s federalism therefore has a powerful federal government gathering revenue from almost all economic activities into a pot called the federation account from where it distributes to the subnational governments (states and local governments). This is contrary to the practice of federalism all over the world. It is in this regards that the VAT judgement which hands the states the power to collect local taxes is a welcome development because Nigeria by this judgement has began the journey to true federalism!
The drawbacks of Nigeria’s brand of federalism
1. It makes the subnational governments to be lazy – Governors and local government Chairmen in Nigeria are no interested in unlocking economic value in their jurisdictions because they are assured of billions of Naira from the federal government every month. Every state and local government in Nigeria is endowed with huge resources – fertile land, mineral resources, tourism potential, services etc – which if adequately tapped will assure economic prosperity by the residents.
2. National government is bulky and distracted – a national government focuses on big ticket items such as defence, foreign policy, currency issuance, trade treaties, fiscal/monetary policies etc. When the national government reduces itself to minute roles such as the collection of consumption taxes all over the country, it becomes too big and unmanageable. Imagine a consumer paying for alcohol in a remote village in Rivers State and the federal government is there to collect the VAT!
3. Creates unjust situations – there are states in Nigeria that have banned certain economic activities such as sale of alcohol but share from the proceeds of VAT collected from sale of alcohol into a federal pool.
Recommendations
1. Nigeria has tried the federation account allocation system since 1966 when the regional governments were abolished and has made little progress in economic development. It is time to turn to true federalism for a change because it is said that doing the same thing repeatedly and expecting different results is insanity! The VAT judgement therefore must be allowed to stay to bring a breath of fresh air into the governance process in Nigeria.
2. It is noted the quickness the Rivers and Lagos states governments enacted the VAT laws. This swiftness in legislation should equally apply to other important matters of healthcare, education, agriculture, infrastructure, electoral process etc that governments at national and state levels are wont to drag their feet about.
3. It is sad to note that Lagos state fixed the allocation of VAT revenues at 75% to the state and 25% to the local governments. This is the same injustice that the state is taking issues with the federal government that it is keeping a lion share of revenues at the centre. The Lagos state government will abide with true federalism by reversing the VAT revenue sharing formula by granting 75% to the local governments (which are governments closest to the people) and retaining 25% at the centre at the state level. Other states are to also take this formula if we are to deliver dividends of democracy directly to the people.
4. The states may not have the legal and operational capacity to collect VAT, but this can be quickly implemented which will inevitably create more jobs and enhance the revenue collection as more hands will be recruited for the administration and enforcement of the VAT laws at the state level.
Conclusion
The VAT judgement is a watershed in Nigeria’s political and economic management systems which is hoped will be for the better. It must be allowed to stand!
References: 1. https://www.britannica.com/topic/political-system/Federal-systems
Twitter: @NickAgule
Email: [email protected]
20.09.2021
Introduction
In the month of August 2021, a Federal High Court sitting in Port Harcourt, Rivers State of Nigeria entered judgement that it is the Rivers State Government (RSG) and not the Federal Inland Revenue Services (FIRS) that is constitutionally entitled to impose taxes enforceable or collectable in its territory of the nature of consumption or sales tax, VAT, education and other taxes or levies, other than the taxes and duties specifically reserved for the Federal Government by items 58 and 59 of Part 1 of the Second Schedule of the 1999 Constitution as amended.
The court, presided over by Justice Stephen Dalyop Pam, therefore issued an order of perpetual injunction restraining FIRS and the Attorney General of the Federation, both first and second defendants in the suit, from collecting, demanding, threatening and intimidating residents of Rivers State to pay to FIRS, personnel income tax and VAT.
The RSG quickly enacted and signed into law a bill empowering the state board of inland revenue to begin levying and collecting VAT in the state. But the FIRS filed an application before the same court seeking a stay-of-execution to stop the RSG from collecting VAT in line with the earlier judgement in favour of the state. The application was dismissed by Justice Pam as according to him granting the application would negate the principle of equity and amount to committing murder. The Judge furthered averred that in as much as the law enacted with respect to VAT by the RSG remained valid, the courts were bound to obey such law until it had been set aside by a court of competent jurisdiction.
The FIRS would later approach the Court of Appeal sitting in Abuja praying the appellate court to not only set aside the Federal High Court judgement, but to also stay the execution of the judgement pending the conclusion of the appeal. The Appeal Court granted the reliefs sought by the FIRS and ordered both Rivers and Lagos (which had applied to join the suit as a co-Respondent alongside Rivers State) States to maintain status quo on the collection of VAT, pending the determination of an appeal that was lodged before it by the FIRS. Specifically, the Appeal Court ordered all the parties that have subjected themselves before it to “refrain from taking any action to give effect to the judgement of the Federal High Court”, which gave RSG the right to collect VAT, instead of the FIRS. The Appeal Court then fixed the next hearing in the suit for September 16, 2021. No doubt, this looks pretty much like a case that will end up at the Supreme Court of Nigeria, the highest court in the land.
As the legal brickbats continue, there is no shadow of doubt that this is a monumental judgement that is set to redefine the practice of federalism in Nigeria. I am not a lawyer therefore lack competence and capacity to comment on the legalities of the judgement and appeal processes, however I will analyse the socio-political and economic implications of the judgement if it is allowed to stand.
Nigeria’s Unique Federalism
Nigeria’s official title is the Federal Republic of Nigeria but there is little federalism in the system of governance in the country. A true federalist government according to Britannica has political authority divided between two autonomous sets of governments, one national and the other subnational, both of which operate directly upon the people. Furthermore, of the eight largest countries in the world by area, seven—Russia, Canada, the United States, Brazil, Australia, India, and Argentina—are organised on a federal basis. (China, the third largest, is a unitary state.) It listed Federal countries to also include Austria, Belgium, Ethiopia, Germany, Malaysia, Mexico, Nigeria, Pakistan, Switzerland, the United Arab Emirates, and Venezuela, among others.
One key ingredient of federal systems is that the subnational governments are the ones that fund the national government. I live in the UK and every year my Council (local government equivalent in Nigeria, the UK has no states) sends me a detailed financial statement showing income and expenditure of the Council and the share of the income that was remitted to the national government. Similar systems exist in the US and elsewhere. Nigeria is however operating in the reverse order with the national government superintending over 68 out of 98 items in the exclusive list of the constitution. Even the 30 items left are in the concurrent list where the national government and the subnational governments run them together with the national government taking precedence over the subnational governments. So, in effect the national government has powers over all the 98 items in the constitution which basically covers almost all economic activities in the country!
Nigeria’s federalism therefore has a powerful federal government gathering revenue from almost all economic activities into a pot called the federation account from where it distributes to the subnational governments (states and local governments). This is contrary to the practice of federalism all over the world. It is in this regards that the VAT judgement which hands the states the power to collect local taxes is a welcome development because Nigeria by this judgement has began the journey to true federalism!
The drawbacks of Nigeria’s brand of federalism
1. It makes the subnational governments to be lazy – Governors and local government Chairmen in Nigeria are no interested in unlocking economic value in their jurisdictions because they are assured of billions of Naira from the federal government every month. Every state and local government in Nigeria is endowed with huge resources – fertile land, mineral resources, tourism potential, services etc – which if adequately tapped will assure economic prosperity by the residents.
2. National government is bulky and distracted – a national government focuses on big ticket items such as defence, foreign policy, currency issuance, trade treaties, fiscal/monetary policies etc. When the national government reduces itself to minute roles such as the collection of consumption taxes all over the country, it becomes too big and unmanageable. Imagine a consumer paying for alcohol in a remote village in Rivers State and the federal government is there to collect the VAT!
3. Creates unjust situations – there are states in Nigeria that have banned certain economic activities such as sale of alcohol but share from the proceeds of VAT collected from sale of alcohol into a federal pool.
Recommendations
1. Nigeria has tried the federation account allocation system since 1966 when the regional governments were abolished and has made little progress in economic development. It is time to turn to true federalism for a change because it is said that doing the same thing repeatedly and expecting different results is insanity! The VAT judgement therefore must be allowed to stay to bring a breath of fresh air into the governance process in Nigeria.
2. It is noted the quickness the Rivers and Lagos states governments enacted the VAT laws. This swiftness in legislation should equally apply to other important matters of healthcare, education, agriculture, infrastructure, electoral process etc that governments at national and state levels are wont to drag their feet about.
3. It is sad to note that Lagos state fixed the allocation of VAT revenues at 75% to the state and 25% to the local governments. This is the same injustice that the state is taking issues with the federal government that it is keeping a lion share of revenues at the centre. The Lagos state government will abide with true federalism by reversing the VAT revenue sharing formula by granting 75% to the local governments (which are governments closest to the people) and retaining 25% at the centre at the state level. Other states are to also take this formula if we are to deliver dividends of democracy directly to the people.
4. The states may not have the legal and operational capacity to collect VAT, but this can be quickly implemented which will inevitably create more jobs and enhance the revenue collection as more hands will be recruited for the administration and enforcement of the VAT laws at the state level.
Conclusion
The VAT judgement is a watershed in Nigeria’s political and economic management systems which is hoped will be for the better. It must be allowed to stand!
References: 1. https://www.britannica.com/topic/political-system/Federal-systems
PIB: A Nation that must think the Future!
Nick Agule
Twitter: @NickAgule
Email: [email protected]
INTRODUCTION
About a month ago, this column did a...
Twitter: @NickAgule
Email: [email protected]
INTRODUCTION
About a month ago, this column did a...
Date: 2024-04-04 Read More
PIB: A Nation that must think the Future!
Nick Agule
Twitter: @NickAgule
Email: [email protected]
INTRODUCTION
About a month ago, this column did a critique of the Petroleum Industry Bill (PIB) which had been passed separately by both chambers of Nigeria’s federal legislature – The Senate and House of Representatives (HoR). Both bills were later harmonised and contentious issues such as the Host Community Development Trust Fund was jointly agreed by both chambers of the legislature at 3% after the Senate passed 5% and HoR went for 3%. Monday, 16th August 2021, Nigeria’s President Muhammadu Buhari assented to the harmonised bill thus making it law. It is not clear as yet the timeline for implementation of the bill which includes fundamental changes such as scrapping of the present NNPC and DPR and replacing them with new entities, but it is expected that government departments especially the Ministry of Petroleum Resources will provide details of implementation and timelines in due course.
This week’s column was to be dedicated to Education and the Economy in the light of President Buhari’s recent attendance at the Global Education Summit in London, but given the epochal event of assenting to the PIB, it was thought that this column’s article of a month ago be re-published to refresh the minds of the legislative and executive arms of government that the job is not yet done and Nigeria needs to immediately begin work on the Energy Industry Bill (EIB) as the PIB is thinking in the past!
The PIB is an overarching legal framework for the governance, regulatory and fiscal regimes for the Nigerian Petroleum Industry. A significant aspect of the PIB is the development of Host Communities which is now coded in the laws and no longer left to the Corporate Social Responsibilities (CSR) of the operating companies in the oil and gas sector. The jury is out as expectedly the PIB has attracted wide ranging interest sharply dividing opinions of the stakeholders and industry experts. In this week’s column, we will be examining some of the issues relating to the PIB and making recommendations to add value to the bill.
THE WORLD IS IN ENERGY TRANSITION
The world is rapidly transitioning from fossil fuel energy to renewables a less carbon-intensive and more sustainable energy system, including solar, wind, hydro, biofuels and others. The International Energy Agency (IAE) data shows that the share of renewables in electricity generation is projected to increase to almost 30% in 2021, their highest share since the beginning of the Industrial Revolution and up from less than 27% in 2019. The Word Bank’s data shows that in just a few years, solar and onshore wind have become the cheapest ways of generating new electricity in most countries and that some countries are already producing most of their daily energy needs from renewables with more than 260 GW of renewable energy capacity added globally in 2020, beating the previous record by almost 50%. The Bank further provides data that jobs in the renewable energy sector reached 11.5 million globally in 2019, and projects that a shift to low-carbon, resilient economies could create over 200 million net new jobs by 2030 in 24 major emerging market economies if they focus on green investments this decade. Shell the dominant operator in Nigeria’s oil and gas industry projects that every new passenger car in the world could be electric by 2050 and expects clean energy to make up half of the company’s energy mix somewhere in the next decade.
The data above points clearly to the fact that in 10-20 years’ time, the world would have moved substantially from fossil fuels to renewables, so the overall value and impact of the PIB in a fast-fading fossil fuels in the energy mix is debatable and even questioned. Nigeria is therefore thinking in the past and there is urgent need to begin forward thinking in line with global energy developments. The National Assembly therefore needs to quickly begin work on a new bill – the Energy Industry Bill – to provide a holistic grundnorm for all energy sources with special focus on renewables which is the energy for the future!
GAS FLARING
The PIB provides for penalties on operating companies who flare produced gas. These penalties are not far reaching and punitive enough. For 60 years these operating companies have preferred to pay the penalties and flare produced gas which could have been harnessed for power generation to provide electricity 24/7 to the nation. Nigeria is the only gas producing country in the world with perennial power cuts! A nation that needs 200GW of electricity is only being fed with 4GW and the economy will continue to remain comatose with this highly abysmal power availability levels. The National Assembly needs to amend the PIB to increase the punitive measures for gas flaring to include revocation of operating licences and the filing of criminal charges against the executives of the defaulting companies. Gas flaring does not only cause environmental disaster, but it also impacts negatively on the health and wellbeing of the people who live in the Niger Delta region and elsewhere. Flaring gas is also economic sabotage due to loss of revenue and the power deficit that stunts economic growth and job creation. Gas has many other uses for example if the flared gas is harnessed and piped into homes, it will create huge jobs in the construction sector and in the management and operation of the systems to provide the gas to customers. These are the benefits that Nigeria has been losing for the past 60 years and it is a shame that the National Assembly continues to play with kid gloves with operators who are causing these environmental, health and economic sabotage to the nation!
COMMERCIALISATION OF THE NNPC
The PIB provides that the current National Oil Company (NOC) the Nigerian National Petroleum Corporation (NNPC) be dissolved and in its place a fully commercial limited liability company known as the Nigerian National Petroleum Company Limited (NNPC Limited) be incorporated under the Companies and Allied Matters Act. This is a commendable move which is in line with the recommendations made by this column in our article titled – The NNPC and NLNG: Same Parents, Different Outcomes – published before the passage of the PIB. The NNPC as presently constituted has become a major drainpipe on the nation’s resources and instead of operating profitably and paying dividends to the federation account, the NNPC consumes trillions of Naira every year without delivering results. For example, the NNPC by the published financial statements spent N325 billion between 2018 and 2019 on the four refineries to refine zero barrels of crude oil. The NNPC has been a spoilt brat who has access to the nation’s resources and squanders it without any commercial or business sense! The National Assembly needs to amend the PIB to remove the sale of Nigeria’s crude from the NNPC Limited to pave way for a fully commercialised entity to fund its operations from their revenue generated.
FUNDING OF FRONTIER EXPLORATION
The PIB provides for the establishment of a Frontier Exploration Fund (FEF) which is to be funded with 10% of rents on petroleum prospecting licences and 10% rent on petroleum mining leases and 30% of NNPC Limited’s profit oil and profit gas as in the production sharing, profit sharing and Risk service contracts. The FEF is to be dedicated for the development of frontier acreages only. In line with the earlier recommendation on a new bill to incorporate energy transition, the National Assembly needs to amend the PIB to dedicate the FEF solely for the development of renewable energy. Thus, we will be using the declining fossil fuels to build the structures for the energy for the future. Nigeria is well endowed in renewable energy sources with a guarantee of 8-10 hours of pure sunshine daily (summer all year round – what the temperate countries can only wish for), a network of rivers for hydro, strong winds especially at the coastal areas and massive cultivable arable land for biofuels. If the FEF is committed to the development of renewable energy, Nigeria will become a global player in renewables and even export energy to earn foreign revenue.
HOST COMMUNITIES
One of the most important provisions of the PIB is the provision of a legal and regulatory framework for the development of Host Communities (HCs). The HCs are no longer to depend on the goodwill of the operating companies (settlors) but now have legal backing for their development which must be complied with by all operators (settlors). The PIB provides for the establishment of Host Community Development Trust Fund (HCDTF) for each HC and requires each operator (settlor) to make an annual contribution to the applicable HCDTF of an amount equal to 3% of its actual annual operating expenditure of the preceding financial year in the upstream and 2% in the midstream and downstream in respect of all petroleum operations affecting the HCs for which the applicable HCDTF was established. This is a good development, and it is commendable to give legal backing to the rights of the HCs to benefit from the operations of the oil and gas activities that often impact negatively on their day-to-day lives.
It is a good development to give legal backing to the development of HCs, but the application of the funds is what is key and more important. Currently the Niger Delta (oil producing) states have the following special intervention funds targeted at the region (not applicable to non-oil producing states) - 13% derivation, the Niger Delta Development Commission (NDDC) and the Federal Ministry of Niger Delta Affairs. Additionally, the Niger Delta states share in the Federation Account Allocation and also earn their internally generated revenues. The oil companies also spend massively on CSR in the HCs. Yet despite all these interventions and trillions of Naira funded to the Niger Delta states, the HCs remain pinned down in poverty with little development to show for it. It will serve the HCs better if the energy and gusto that is being applied on debating the differences in the Senate and Reps passage of the amounts to be remitted to the HCDTF be directed to questioning the application of the interventions directed to the development of the HCs as listed above!
RECOMMENDATIONS
1. The National Assembly to begin work on a new bill - the Energy Industry Bill (EIB) – that will cater holistically for all energy sources particularly renewable energy which is the energy for the future as the world transitions away from fossil fuels.
2. The National Assembly to amend the Petroleum Industry Act (PIA) to raise the punitive measures for gas flaring to including revocation of operating licences and the filing of criminal charges on the executives of the defaulting companies.
3. The National Assembly to amend the PIA to remove the sale of Nigeria’s crude from the NNPC Limited. This could be by transferring the National Petroleum Investment Management Services (NAPIMS) the arm of the NNPC that manages the Federal Government’s (FG’s) investment in Joint Ventures (JVs) with International Oil Companies (IOCs) and the Crude Oil Marketing Division of the NNPC that sells the FG’s share of crude oil produced by the JVs from the NNPC Limited and vesting them under the Federal Ministry of Petroleum Resources or even the Federal Ministry of Finance. Currently the NNPC takes the proceeds from Nigeria’s crude sales, spends as much as they want and transfers only what is left to the federation account. Recently the NNPC had the temerity to tell the nation that they will be spending every dollar from crude sales and will deliver zero to the federation account. This profligacy by the NNPC must stop to pave way for a fully commercialised entity to fund its operations from their own generated revenue and save Nigeria the resources currently being haemorrhaged by an inefficient NNPC.
4. The National Assembly to amend the PIA to dedicate the Frontier Exploration Fund solely for the development of renewable energy to position Nigeria to become a global player in the energy for the future by using revenues earned from fossil fuels to fund the energy of tomorrow!
5. The National Assembly to amend the PIA to provide for serious punitive measures for mismanagement of the Host Community Development Trust Funds. This will ensure that the funds are committed to the real beneficiary communities and not the current situation where the host community leadership benefits from the funds leaving their members pinned down in poverty living in damaged environments.
CONCLUSION
The National Assembly has done commendably well and acted courageously by passing the PIB. President Buhari has also done well by giving assent to the bill into an Act. But for the nation to reap from the full benefits, the recommendations above must be speedily acted upon.
References:
1. https://www.iea.org/news/global-carbon-dioxide-emissions-are-set-for-their-second-biggest-increase-in-history
2. https://www.worldbank.org/en/news/feature/2021/05/24/transitions-at-the-heart-of-the-climate-challenge
3. https://www.shell.com/business-customers/lubricants-for-business/news-and-media-releases/2019/future-energy-mix.html
4. https://www.energyvoice.com/renewables-energy-transition/321328/half-of-shells-energy-mix-to-be-clean-next-decade-ceo-says/
5. https://assets.kpmg/content/dam/kpmg/ng/pdf/tax/petroleum-industry-bill-(pib)-2020-%20a-game-changer.pdf
Twitter: @NickAgule
Email: [email protected]
INTRODUCTION
About a month ago, this column did a critique of the Petroleum Industry Bill (PIB) which had been passed separately by both chambers of Nigeria’s federal legislature – The Senate and House of Representatives (HoR). Both bills were later harmonised and contentious issues such as the Host Community Development Trust Fund was jointly agreed by both chambers of the legislature at 3% after the Senate passed 5% and HoR went for 3%. Monday, 16th August 2021, Nigeria’s President Muhammadu Buhari assented to the harmonised bill thus making it law. It is not clear as yet the timeline for implementation of the bill which includes fundamental changes such as scrapping of the present NNPC and DPR and replacing them with new entities, but it is expected that government departments especially the Ministry of Petroleum Resources will provide details of implementation and timelines in due course.
This week’s column was to be dedicated to Education and the Economy in the light of President Buhari’s recent attendance at the Global Education Summit in London, but given the epochal event of assenting to the PIB, it was thought that this column’s article of a month ago be re-published to refresh the minds of the legislative and executive arms of government that the job is not yet done and Nigeria needs to immediately begin work on the Energy Industry Bill (EIB) as the PIB is thinking in the past!
The PIB is an overarching legal framework for the governance, regulatory and fiscal regimes for the Nigerian Petroleum Industry. A significant aspect of the PIB is the development of Host Communities which is now coded in the laws and no longer left to the Corporate Social Responsibilities (CSR) of the operating companies in the oil and gas sector. The jury is out as expectedly the PIB has attracted wide ranging interest sharply dividing opinions of the stakeholders and industry experts. In this week’s column, we will be examining some of the issues relating to the PIB and making recommendations to add value to the bill.
THE WORLD IS IN ENERGY TRANSITION
The world is rapidly transitioning from fossil fuel energy to renewables a less carbon-intensive and more sustainable energy system, including solar, wind, hydro, biofuels and others. The International Energy Agency (IAE) data shows that the share of renewables in electricity generation is projected to increase to almost 30% in 2021, their highest share since the beginning of the Industrial Revolution and up from less than 27% in 2019. The Word Bank’s data shows that in just a few years, solar and onshore wind have become the cheapest ways of generating new electricity in most countries and that some countries are already producing most of their daily energy needs from renewables with more than 260 GW of renewable energy capacity added globally in 2020, beating the previous record by almost 50%. The Bank further provides data that jobs in the renewable energy sector reached 11.5 million globally in 2019, and projects that a shift to low-carbon, resilient economies could create over 200 million net new jobs by 2030 in 24 major emerging market economies if they focus on green investments this decade. Shell the dominant operator in Nigeria’s oil and gas industry projects that every new passenger car in the world could be electric by 2050 and expects clean energy to make up half of the company’s energy mix somewhere in the next decade.
The data above points clearly to the fact that in 10-20 years’ time, the world would have moved substantially from fossil fuels to renewables, so the overall value and impact of the PIB in a fast-fading fossil fuels in the energy mix is debatable and even questioned. Nigeria is therefore thinking in the past and there is urgent need to begin forward thinking in line with global energy developments. The National Assembly therefore needs to quickly begin work on a new bill – the Energy Industry Bill – to provide a holistic grundnorm for all energy sources with special focus on renewables which is the energy for the future!
GAS FLARING
The PIB provides for penalties on operating companies who flare produced gas. These penalties are not far reaching and punitive enough. For 60 years these operating companies have preferred to pay the penalties and flare produced gas which could have been harnessed for power generation to provide electricity 24/7 to the nation. Nigeria is the only gas producing country in the world with perennial power cuts! A nation that needs 200GW of electricity is only being fed with 4GW and the economy will continue to remain comatose with this highly abysmal power availability levels. The National Assembly needs to amend the PIB to increase the punitive measures for gas flaring to include revocation of operating licences and the filing of criminal charges against the executives of the defaulting companies. Gas flaring does not only cause environmental disaster, but it also impacts negatively on the health and wellbeing of the people who live in the Niger Delta region and elsewhere. Flaring gas is also economic sabotage due to loss of revenue and the power deficit that stunts economic growth and job creation. Gas has many other uses for example if the flared gas is harnessed and piped into homes, it will create huge jobs in the construction sector and in the management and operation of the systems to provide the gas to customers. These are the benefits that Nigeria has been losing for the past 60 years and it is a shame that the National Assembly continues to play with kid gloves with operators who are causing these environmental, health and economic sabotage to the nation!
COMMERCIALISATION OF THE NNPC
The PIB provides that the current National Oil Company (NOC) the Nigerian National Petroleum Corporation (NNPC) be dissolved and in its place a fully commercial limited liability company known as the Nigerian National Petroleum Company Limited (NNPC Limited) be incorporated under the Companies and Allied Matters Act. This is a commendable move which is in line with the recommendations made by this column in our article titled – The NNPC and NLNG: Same Parents, Different Outcomes – published before the passage of the PIB. The NNPC as presently constituted has become a major drainpipe on the nation’s resources and instead of operating profitably and paying dividends to the federation account, the NNPC consumes trillions of Naira every year without delivering results. For example, the NNPC by the published financial statements spent N325 billion between 2018 and 2019 on the four refineries to refine zero barrels of crude oil. The NNPC has been a spoilt brat who has access to the nation’s resources and squanders it without any commercial or business sense! The National Assembly needs to amend the PIB to remove the sale of Nigeria’s crude from the NNPC Limited to pave way for a fully commercialised entity to fund its operations from their revenue generated.
FUNDING OF FRONTIER EXPLORATION
The PIB provides for the establishment of a Frontier Exploration Fund (FEF) which is to be funded with 10% of rents on petroleum prospecting licences and 10% rent on petroleum mining leases and 30% of NNPC Limited’s profit oil and profit gas as in the production sharing, profit sharing and Risk service contracts. The FEF is to be dedicated for the development of frontier acreages only. In line with the earlier recommendation on a new bill to incorporate energy transition, the National Assembly needs to amend the PIB to dedicate the FEF solely for the development of renewable energy. Thus, we will be using the declining fossil fuels to build the structures for the energy for the future. Nigeria is well endowed in renewable energy sources with a guarantee of 8-10 hours of pure sunshine daily (summer all year round – what the temperate countries can only wish for), a network of rivers for hydro, strong winds especially at the coastal areas and massive cultivable arable land for biofuels. If the FEF is committed to the development of renewable energy, Nigeria will become a global player in renewables and even export energy to earn foreign revenue.
HOST COMMUNITIES
One of the most important provisions of the PIB is the provision of a legal and regulatory framework for the development of Host Communities (HCs). The HCs are no longer to depend on the goodwill of the operating companies (settlors) but now have legal backing for their development which must be complied with by all operators (settlors). The PIB provides for the establishment of Host Community Development Trust Fund (HCDTF) for each HC and requires each operator (settlor) to make an annual contribution to the applicable HCDTF of an amount equal to 3% of its actual annual operating expenditure of the preceding financial year in the upstream and 2% in the midstream and downstream in respect of all petroleum operations affecting the HCs for which the applicable HCDTF was established. This is a good development, and it is commendable to give legal backing to the rights of the HCs to benefit from the operations of the oil and gas activities that often impact negatively on their day-to-day lives.
It is a good development to give legal backing to the development of HCs, but the application of the funds is what is key and more important. Currently the Niger Delta (oil producing) states have the following special intervention funds targeted at the region (not applicable to non-oil producing states) - 13% derivation, the Niger Delta Development Commission (NDDC) and the Federal Ministry of Niger Delta Affairs. Additionally, the Niger Delta states share in the Federation Account Allocation and also earn their internally generated revenues. The oil companies also spend massively on CSR in the HCs. Yet despite all these interventions and trillions of Naira funded to the Niger Delta states, the HCs remain pinned down in poverty with little development to show for it. It will serve the HCs better if the energy and gusto that is being applied on debating the differences in the Senate and Reps passage of the amounts to be remitted to the HCDTF be directed to questioning the application of the interventions directed to the development of the HCs as listed above!
RECOMMENDATIONS
1. The National Assembly to begin work on a new bill - the Energy Industry Bill (EIB) – that will cater holistically for all energy sources particularly renewable energy which is the energy for the future as the world transitions away from fossil fuels.
2. The National Assembly to amend the Petroleum Industry Act (PIA) to raise the punitive measures for gas flaring to including revocation of operating licences and the filing of criminal charges on the executives of the defaulting companies.
3. The National Assembly to amend the PIA to remove the sale of Nigeria’s crude from the NNPC Limited. This could be by transferring the National Petroleum Investment Management Services (NAPIMS) the arm of the NNPC that manages the Federal Government’s (FG’s) investment in Joint Ventures (JVs) with International Oil Companies (IOCs) and the Crude Oil Marketing Division of the NNPC that sells the FG’s share of crude oil produced by the JVs from the NNPC Limited and vesting them under the Federal Ministry of Petroleum Resources or even the Federal Ministry of Finance. Currently the NNPC takes the proceeds from Nigeria’s crude sales, spends as much as they want and transfers only what is left to the federation account. Recently the NNPC had the temerity to tell the nation that they will be spending every dollar from crude sales and will deliver zero to the federation account. This profligacy by the NNPC must stop to pave way for a fully commercialised entity to fund its operations from their own generated revenue and save Nigeria the resources currently being haemorrhaged by an inefficient NNPC.
4. The National Assembly to amend the PIA to dedicate the Frontier Exploration Fund solely for the development of renewable energy to position Nigeria to become a global player in the energy for the future by using revenues earned from fossil fuels to fund the energy of tomorrow!
5. The National Assembly to amend the PIA to provide for serious punitive measures for mismanagement of the Host Community Development Trust Funds. This will ensure that the funds are committed to the real beneficiary communities and not the current situation where the host community leadership benefits from the funds leaving their members pinned down in poverty living in damaged environments.
CONCLUSION
The National Assembly has done commendably well and acted courageously by passing the PIB. President Buhari has also done well by giving assent to the bill into an Act. But for the nation to reap from the full benefits, the recommendations above must be speedily acted upon.
References:
1. https://www.iea.org/news/global-carbon-dioxide-emissions-are-set-for-their-second-biggest-increase-in-history
2. https://www.worldbank.org/en/news/feature/2021/05/24/transitions-at-the-heart-of-the-climate-challenge
3. https://www.shell.com/business-customers/lubricants-for-business/news-and-media-releases/2019/future-energy-mix.html
4. https://www.energyvoice.com/renewables-energy-transition/321328/half-of-shells-energy-mix-to-be-clean-next-decade-ceo-says/
5. https://assets.kpmg/content/dam/kpmg/ng/pdf/tax/petroleum-industry-bill-(pib)-2020-%20a-game-changer.pdf
Nigeria: A Nation that Flares and Imports Gas!
Date: 2024-04-04 Read More
Nigeria: A Nation that Flares and Imports Gas!
Nick Agule
Twitter: @NickAgule
Email: [email protected]
07.09.2021
Introduction
About a week ago, it was reported that cooking gas prices in Nigeria were up by as much as 100% as the Federal Government (FG) began the implementation of a 7.5 per cent Value Added Tax (VAT) on Liquified Petroleum Gas (LPG) imports. It was reported that Nigerians may be forced as a consequence of the skyrocketing LPG prices also known as cooking gas to resort to alternative sources of fuel including firewood.
This news hit me hard because in all my over 25 years working in the oil and gas industry mostly for international oil companies, I was oblivious that Nigeria imports LPG! Perhaps I never thought this was a possibility given that the country produces and flares gas! How can a country turn around and import a commodity it produces it bountiful and sets fire on? This is the question that agitated my mind since the news broke of the VAT levy on LPG imports. It is common knowledge that Nigeria has been exporting crude oil and importing refined products which is bad business but to flare gas and turn around to import same is insane! If I may use an analogy, when we sell crude and import refined products, it is like a farmer who after harvesting yams, sells the raw yams and then uses the money made to go buy pounded yam for the family at restaurants. Even as bad as this is, we can excuse the farmer because he is making money selling yams before using it to buy pounded yam! But to flare gas and then turn around to import it is akin to a farmer who after harvesting yams, sets fire to the yams and burns them to zero value. This same farmer then looks for money elsewhere to go and buy pounded yam for the family! No matter how this is analysed, this farmer will be condemned as a mental case! No rational human being will set the harvest on fire and then go to another producer to buy the same commodities! But this is exactly the situation of Nigeria. Not only is the country losing value in flaring her produced gas and then going to buy it at high prices, but there is also huge environmental damage to both humans and the environment resultant from the perpetual flares dotted all over the Niger Delta! That more trees will now be felled to provide firewood for cooking exacerbates the environmental damage.
The World Bank projected in 2017 that almost 8 billion cubic meters of gas was flared annually in Nigeria according to satellite data. Nigeria’s oil Minister Chief Timipre Sylva is reported to more recently to have said about 3 billion cubic meters of natural gas was lost to gas flaring in the first five months of 2020. The loss was valued at $230 million. This is even more puzzling why a nation will decide to set fire on about a quarter of a billion dollars’ worth of a commodity annually and then turn around to import same commodity from other countries at high prices!
According to a Survey, despite the presence of the Nigeria Liquefied Natural Gas company (NLNG), which largely produces natural gas and Liquefied gas, Nigeria imports around 70 per cent of LPG for domestic use, with the balance of about 30 per cent sourced locally by dealers.
Global Finance Digest said the price of 12.5 kg cooking gas which sold at around N3,500 eight months ago is now going for N6,500 in Lagos and Ogun states after the FG began implementation of the 7.5 per cent VAT on LPG imports. The Executive Secretary, Nigerian Association of Liquefied Petroleum Gas Marketers, Bassey Essien, said the cost of 12.5kg gas could hit N10,000 in December if the government do not take time to address this surge.
To even think that the FG was levying VAT on locally produced LPG and allowed the imported LPG to be sold VAT-free is inexplicable. One would have expected the FG to levy duty and VAT on the imported LPG instead so that it will create a competitive advantage for local producers over the imported products. This is a big thumps-down on the economic management acumen of the FG to have allowed this situation to happen!
The National Chairman, Liquefied Petroleum Gas Retailers Association of Nigeria, Michael Umudu, said there were three factors that caused the surge in price of LPG: 1. About 70 per cent of the gas we consume in Nigeria is imported and importers have to contend with the high cost of foreign exchange.
2. There is a rise in the price of petroleum products in the international market and because of that, thus the cost of LPG has equally gone up. So importers now pay more on imports.
3. The government added VAT on imported LPG which has exacerbated the price hike of cooking gas.
In his own reaction to the development, the spokesperson of the Nigerian National Petroleum Corporation (NNPC), Garba-Deen Muhammad, is reported to have said the Minister of State for Petroleum Resources, Chief Timipre Sylva, had said the commodity (LPG) was deregulated. Mr Sylva himself is reported to have said a media briefing that “We are not in position to determine gas pricing because gas is not a regulated product. But, of course, we are also very concerned that prices are rising and so I am actually doing something about it in the interest of the ordinary Nigerian.”
But the question that is left to be answered is why the FG is not regulating LPG? If the FG has been regulating the prices of petrol with trillions of Naira paid in subsidies annually, then why leave LPG unregulated?
Recommendations
1. In the short term, the FG must take immediate measures including requesting the NLNG to increase supply to the LPG market. This will ensure more supply to market with consequent fall in prices.
2. In the medium term, the FG must read the riot act to the upstream oil companies in Nigeria to harness and utilise produced gas. One gas is produced, it must be used. This will make more gas available to the Nigerian economy for cooking, electricity generation, fuel for vehicles etc.
3. In the long term, the FG must have a zero gas flares policy and impose punitive duties on imported LPG to make it uneconomical to import. This make Nigeria self sufficient in gas supply thus taking off the pressure on the forex market by importers who source the dollar to import gas into Nigeria.
4. The FG must regulate the LPG market. With the Petroluem Industry Act (PIA) setting up a regulator - Nigerian Midstream and Downstream Petroleum Regulatory Authority – LPG must come under a regulator to create an enabling environment for local producers to thrive.
Conclusion
Nigeria is blessed with a huge abundance of human and natural resources. Governments at all levels must work assiduously to unlock value from these resources. A situation where Nigeria is flaring a vital and valuable resource – Gas – and then importing it from other countries is an embarrassment that must not be allowed to fester into the New Year 2022!
References:
1. Cooking gas price up 100% as VAT on LPG import begins (sunnewsonline.com)
2. FG Implements 7.5% Tax On Cooking Gas Imports - Nigeria Business Information (naijabusiness.com.ng)
3. https://www.worldbank.org/en/news/feature/2017/03/10/nigerias-flaring-reduction-target-2020
4. https://guardian.ng/business-services/fg-begins-gas-flare-reduction-with-award-of-45-licences-in-june/
Twitter: @NickAgule
Email: [email protected]
07.09.2021
Introduction
About a week ago, it was reported that cooking gas prices in Nigeria were up by as much as 100% as the Federal Government (FG) began the implementation of a 7.5 per cent Value Added Tax (VAT) on Liquified Petroleum Gas (LPG) imports. It was reported that Nigerians may be forced as a consequence of the skyrocketing LPG prices also known as cooking gas to resort to alternative sources of fuel including firewood.
This news hit me hard because in all my over 25 years working in the oil and gas industry mostly for international oil companies, I was oblivious that Nigeria imports LPG! Perhaps I never thought this was a possibility given that the country produces and flares gas! How can a country turn around and import a commodity it produces it bountiful and sets fire on? This is the question that agitated my mind since the news broke of the VAT levy on LPG imports. It is common knowledge that Nigeria has been exporting crude oil and importing refined products which is bad business but to flare gas and turn around to import same is insane! If I may use an analogy, when we sell crude and import refined products, it is like a farmer who after harvesting yams, sells the raw yams and then uses the money made to go buy pounded yam for the family at restaurants. Even as bad as this is, we can excuse the farmer because he is making money selling yams before using it to buy pounded yam! But to flare gas and then turn around to import it is akin to a farmer who after harvesting yams, sets fire to the yams and burns them to zero value. This same farmer then looks for money elsewhere to go and buy pounded yam for the family! No matter how this is analysed, this farmer will be condemned as a mental case! No rational human being will set the harvest on fire and then go to another producer to buy the same commodities! But this is exactly the situation of Nigeria. Not only is the country losing value in flaring her produced gas and then going to buy it at high prices, but there is also huge environmental damage to both humans and the environment resultant from the perpetual flares dotted all over the Niger Delta! That more trees will now be felled to provide firewood for cooking exacerbates the environmental damage.
The World Bank projected in 2017 that almost 8 billion cubic meters of gas was flared annually in Nigeria according to satellite data. Nigeria’s oil Minister Chief Timipre Sylva is reported to more recently to have said about 3 billion cubic meters of natural gas was lost to gas flaring in the first five months of 2020. The loss was valued at $230 million. This is even more puzzling why a nation will decide to set fire on about a quarter of a billion dollars’ worth of a commodity annually and then turn around to import same commodity from other countries at high prices!
According to a Survey, despite the presence of the Nigeria Liquefied Natural Gas company (NLNG), which largely produces natural gas and Liquefied gas, Nigeria imports around 70 per cent of LPG for domestic use, with the balance of about 30 per cent sourced locally by dealers.
Global Finance Digest said the price of 12.5 kg cooking gas which sold at around N3,500 eight months ago is now going for N6,500 in Lagos and Ogun states after the FG began implementation of the 7.5 per cent VAT on LPG imports. The Executive Secretary, Nigerian Association of Liquefied Petroleum Gas Marketers, Bassey Essien, said the cost of 12.5kg gas could hit N10,000 in December if the government do not take time to address this surge.
To even think that the FG was levying VAT on locally produced LPG and allowed the imported LPG to be sold VAT-free is inexplicable. One would have expected the FG to levy duty and VAT on the imported LPG instead so that it will create a competitive advantage for local producers over the imported products. This is a big thumps-down on the economic management acumen of the FG to have allowed this situation to happen!
The National Chairman, Liquefied Petroleum Gas Retailers Association of Nigeria, Michael Umudu, said there were three factors that caused the surge in price of LPG: 1. About 70 per cent of the gas we consume in Nigeria is imported and importers have to contend with the high cost of foreign exchange.
2. There is a rise in the price of petroleum products in the international market and because of that, thus the cost of LPG has equally gone up. So importers now pay more on imports.
3. The government added VAT on imported LPG which has exacerbated the price hike of cooking gas.
In his own reaction to the development, the spokesperson of the Nigerian National Petroleum Corporation (NNPC), Garba-Deen Muhammad, is reported to have said the Minister of State for Petroleum Resources, Chief Timipre Sylva, had said the commodity (LPG) was deregulated. Mr Sylva himself is reported to have said a media briefing that “We are not in position to determine gas pricing because gas is not a regulated product. But, of course, we are also very concerned that prices are rising and so I am actually doing something about it in the interest of the ordinary Nigerian.”
But the question that is left to be answered is why the FG is not regulating LPG? If the FG has been regulating the prices of petrol with trillions of Naira paid in subsidies annually, then why leave LPG unregulated?
Recommendations
1. In the short term, the FG must take immediate measures including requesting the NLNG to increase supply to the LPG market. This will ensure more supply to market with consequent fall in prices.
2. In the medium term, the FG must read the riot act to the upstream oil companies in Nigeria to harness and utilise produced gas. One gas is produced, it must be used. This will make more gas available to the Nigerian economy for cooking, electricity generation, fuel for vehicles etc.
3. In the long term, the FG must have a zero gas flares policy and impose punitive duties on imported LPG to make it uneconomical to import. This make Nigeria self sufficient in gas supply thus taking off the pressure on the forex market by importers who source the dollar to import gas into Nigeria.
4. The FG must regulate the LPG market. With the Petroluem Industry Act (PIA) setting up a regulator - Nigerian Midstream and Downstream Petroleum Regulatory Authority – LPG must come under a regulator to create an enabling environment for local producers to thrive.
Conclusion
Nigeria is blessed with a huge abundance of human and natural resources. Governments at all levels must work assiduously to unlock value from these resources. A situation where Nigeria is flaring a vital and valuable resource – Gas – and then importing it from other countries is an embarrassment that must not be allowed to fester into the New Year 2022!
References:
1. Cooking gas price up 100% as VAT on LPG import begins (sunnewsonline.com)
2. FG Implements 7.5% Tax On Cooking Gas Imports - Nigeria Business Information (naijabusiness.com.ng)
3. https://www.worldbank.org/en/news/feature/2017/03/10/nigerias-flaring-reduction-target-2020
4. https://guardian.ng/business-services/fg-begins-gas-flare-reduction-with-award-of-45-licences-in-june/
NIGERIA: A NATION BORROWING TO SERVICE DEBTS
Nick Agule
Twitter: @NickAgule
Email: [email protected]
06.07.2021
Over a week ago, Nigeria’s Senate Pres...
Twitter: @NickAgule
Email: [email protected]
06.07.2021
Over a week ago, Nigeria’s Senate Pres...
Date: 2024-04-04 Read More
NIGERIA: A NATION BORROWING TO SERVICE DEBTS
Nick Agule
Twitter: @NickAgule
Email: [email protected]
06.07.2021
Over a week ago, Nigeria’s Senate President Ahmed Lawan granted an interview to State House Journalists in which he said Nigeria has no choice than to borrow to finance infrastructural development. This week we will x-ray the Senate President’s statement and offer alternative views that Nigeria has other options aside from borrowing and that borrowing is hurting the nation more than doing her any good.
Senate President: Our options are really very limited as a country. We don’t have the necessary revenues. Nigeria is poor. We shouldn’t deceive ourselves, Nigeria is not rich, our resources are so low, our revenues are so low. Therefore, the option of not doing anything, just to sit because we do not have money, we should not go for infrastructural development is not even an option worthy of consideration.
Commentary: The Senate President is indeed right that Nigeria is poor. The State of California in the United States with a population of 40 million people has a total budget for 2021 of $197 billion. Nigeria with a population of 200 million people has the FG budget for 2021 at $35 billion! A single state in the US has a budget that is almost 6 times more than the budget of Africa’s most populous country is a testament to Nigeria’s poverty! California’s 2021 budget for health and human services stands at $54 billion while Nigeria’s is less than $ 1 billion! Total education budget for California in 2021 is $85 billion ($64 billion for junior and $21 billion for higher) whereas Nigeria’s is less than $1 billion. It can be argued that California is spending in dollars, but Nigeria’s case is not different because we are having to import petrol in dollars buying from the same market as California, same for importation of vehicles, armaments, food, medical equipment, computers, construction equipment, travel etc which are all paid for in dollars in the same markets as California buys! So Nigeria is like a father with 10 children living on N10,000 per month in the city of Abuja, no matter the good intentions of this father, even if he is zero corrupt, this father simply does not have the money to lift his family out of poverty no matter how hard he tries! This is unfortunately the sad story of Nigeria!
But the Senate President is totally wrong to say that Nigeria’s resources are so low! While California is richer than Nigeria in budget size, when it comes to resources Nigeria is far more endowed than California. The reason Nigeria is poorer than California is because Nigeria has been unable to unlock the value embedded in her resource rich nation. Nigeria is endowed with huge resources above the ground in the excellent weather (summer all year-round which California can only envy), abundant sunshine and reasonable wind which combine to make agriculture thrive. On the ground Nigeria is richly endowed with fertile soil that will support agriculture everywhere in the country (something California lacks as a huge part of the landmass is desert territory uninhabitable and uncultivable) and freshwater rivers traversing the nation. Nigeria is also abundantly resourced underneath the earth with almost all the mineral and metal resources in the world! Nigeria is therefore undoubtedly resource rich but cash poor!
Senate President: You cannot tax Nigerians further to raise money for infrastructural development.
Commentary: California generates 97% of their budgetary revenues from taxes. Nigeria is generating a meagre 28%! And this is basically down to the small economy exacerbated by poor tax collection because a huge number of citizens (corporate and human) are not yet captured in the tax nets. Those paying taxes in Nigeria are the low-income earners – market women, okada riders, roadside artisans etc – who are raided daily by all sorts of tax collectors. Also, workers who are captured on PAYE are paying a fair share of taxes. But the bourgeoisies in Nigeria are not being raided to pay their fair share of taxes. The Nigerian Government does not even levy import duties on private jets bought by the billionaires whereas vehicles used by the masses are heavily taxed!
Senate President: The other option is Public Private Partnership (PPP), but you need to create the enabling environment to attract investors to come into your country, because of the security challenges we face today, not many investors would like to come into Nigeria, even those inside Nigeria, may not like to invest properly in infrastructural development.
Commentary: The Senate President as the Head of an Arm of Government is an internal force in the Government of the Federation to create the enabling environment, but he chose to lament about the situation instead of speaking about the steps he as the leader of the national assembly is taking to provide the enabling environment. The Senate President presides over the appropriation of humongous funds to the armed forces and other security agencies, yet the security situation is deteriorating instead of improving but no commander or head of a security agency has been made an example of by the Government for not living up to their duties! When the National Security Adviser (NSA) raised the alarm that $ 1 billion of defence budget for arms procurement went missing and cannot be accounted for, the Senate President did not bark talk less of biting! The Senate President has unfortunately turned himself into a wailer!
Senate President: The only option left is for us to borrow responsibly, utilise prudently and economically and ensure that the projects are self-sustaining, that they can pay back the loans, that Nigeria’s economy will benefit from the implementation of such infrastructural development, so that’s the only option we have.
Commentary: The Senate President is fallacious on two counts:
1. Borrowing is certainly not Nigeria’s only option. The case of the telecoms sector is a great example of how government can cause the building of infrastructure without borrowing a single dollar! The telecoms companies have invested over $70 billion to build the infrastructure all over Nigeria including in the remotest villages because the government gave way by fully privatising the sector. The Senate President should show leadership by embarking on a surgical review of the constitution of Nigeria and release majority of the 68 items on the exclusive list which the FG is kneeling on so that the private sector can take them over and invest to build the infrastructure.
2. Nigeria cannot pay back the loans the country has taken. In 2020 the FG earned N3.9 trillion in revenues and paid N3.27 trillion in Debt service. This meant FG paid 84% of total earnings in 2020 to debtors. The FG then borrowed N6.18 trillion to fund the budget! The picture in 2021 did not change as the FG projects to earn N7.99 trillion in revenues while debt service is projected at N3.32 trillion which is over 40% of total revenues. Again, the FG projects to borrow over N6 trillion in 2021 to fund the budget! It is clear from these numbers that the FG’s borrowing is running out of control and the Senate President needed to consider the nation’s ability to service debts before making the statement that continued borrowing remains the only option for Nigeria! In fact, if the total debt owed to workers via unpaid salaries and to contractors is quantified, the FG debt profile will be even much worse than the numbers contained in the budget which are quoted here.
Senate President: Because we don’t refine our petroleum products in Nigeria, when we export, we generate revenue but because we import products at a higher value because of value addition, probably what we gained in the sale of crude will not be sufficient to pay for products.
Commentary: The Senate President is right! Nigeria has boxed herself into a quagmire such that instead of rejoicing at increases in the prices of crude oil, the main export commodity, the nation instead agonises because it means earned revenues from crude sales will be haemorrhaged to import petroleum products at even higher prices as correctly diagnosed by the Senate President. From the published financial statements of the national oil company the NNPC for 2018 & 2019, the corporation spent over N320 billion to refine zero barrels of crude oil and the Senate President presides and approves this expenditure! And because the refineries are refining zero barrels despite the huge expenditure, the Senate President again presides over approval of trillions of naira in payment for subsidies on petrol! It is time the Senate President exercises courage to force the NNPC to sell or lease the refineries to investors to refurbish and operate them at a profit to add value to the FG’s revenues. This will save the FG spending on refineries to refine zero products and stop the painful subsidy regime too!
RECOMMENDATIONS
1. The FG must suspend all further borrowings as the nation’s balance sheet can no longer carry any more debt! Nigeria will become bankrupt if the current appetite for debt is not tamed!
2. The Senate President must immediately begin the process of constitutional amendment to release majority of the 68 items on the exclusive list to the private sector to build the infrastructure to operate and offer services and bill consumers to generate return on their (investors’) investments. This will shore up government’s revenues through the taxes generated from these economic activities.
3. The Senate President to take immediate steps to pass the necessary legislation that will overhaul the tax administration system in Nigeria to enhance tax collection to improve tax revenue from the current 28% of total revenue in the 2021 budget to at least 75% in subsequent years. The Senate must quickly pass legislation to tax private jets and other luxury goods imported by the billionaires.
4. The Senate President to cause legislation to be enacted to limit the interest rate charged by banks on loans to the productive sector of the economy. The Senate can consider pegging the interest on loans based on a fixed basis points system over the interest on savings. So, if a bank is paying 2% interest on savings such a bank cannot charge more than 7% on loans. This will make credit readily and cheaply available to the economy to boost productive activities. No economy grows with loan interest rates at over 20% as currently obtainable in Nigeria!
5. No economy can thrive and prosper without adequate electricity supply. Nigeria’s economy by global standards needs 200GW of electricity but currently being supplied with 4GW. There is no way the economy can grow with this abysmal level of power supply! The Senate President need to provide leadership for the national assembly to pass the necessary legislation to privatise 100% the power sector – generation, transmission & distribution – to energise the economy. The national assembly is also required to revisit the privatisation of the DISCOs as they lack the financial muscle to develop the distribution network which has necessitated the FG to spend heavily in provision of subsidies to the DISCOs. No subsidies are being paid to the telecoms operators because the privatisation was done right with licences issued to companies that had a pedigree and regional scale in the sector unlike the DISCOs who don’t have such leverage.
CONCLUSION
If you don’t look for money you will be poor! It does not matter if you are a father or mother with a family to care for or you are a chief executive of a company or you are a President of a country! You must look for money before you earn it to become rich because money does not fall from the skies! Nigeria needs to take urgent steps to look for money by unbundling and debottlenecking the structural imbalances to free the economy for private sector participation and investment. The Government does not have the financial muscle to build Nigeria. And the Government must not borrow further to build the infrastructure. The Government only needs to give way as it was done in telecoms sector and investors will build the infrastructure with their own money! Only few investors will ignore a market of over 200 million people with over 70% as young people!
References:
1. https://youtu.be/uUiaz5SFcaM
2. http://www.ebudget.ca.gov/2021-22/pdf/Revised/BudgetSummary/SummaryCharts.pdf
3. https://www.budgetoffice.gov.ng/index.php/hmfbnp-public-presentation-of-2021-fgn-approved-budget?task=document.viewdoc&id=909
Twitter: @NickAgule
Email: [email protected]
06.07.2021
Over a week ago, Nigeria’s Senate President Ahmed Lawan granted an interview to State House Journalists in which he said Nigeria has no choice than to borrow to finance infrastructural development. This week we will x-ray the Senate President’s statement and offer alternative views that Nigeria has other options aside from borrowing and that borrowing is hurting the nation more than doing her any good.
Senate President: Our options are really very limited as a country. We don’t have the necessary revenues. Nigeria is poor. We shouldn’t deceive ourselves, Nigeria is not rich, our resources are so low, our revenues are so low. Therefore, the option of not doing anything, just to sit because we do not have money, we should not go for infrastructural development is not even an option worthy of consideration.
Commentary: The Senate President is indeed right that Nigeria is poor. The State of California in the United States with a population of 40 million people has a total budget for 2021 of $197 billion. Nigeria with a population of 200 million people has the FG budget for 2021 at $35 billion! A single state in the US has a budget that is almost 6 times more than the budget of Africa’s most populous country is a testament to Nigeria’s poverty! California’s 2021 budget for health and human services stands at $54 billion while Nigeria’s is less than $ 1 billion! Total education budget for California in 2021 is $85 billion ($64 billion for junior and $21 billion for higher) whereas Nigeria’s is less than $1 billion. It can be argued that California is spending in dollars, but Nigeria’s case is not different because we are having to import petrol in dollars buying from the same market as California, same for importation of vehicles, armaments, food, medical equipment, computers, construction equipment, travel etc which are all paid for in dollars in the same markets as California buys! So Nigeria is like a father with 10 children living on N10,000 per month in the city of Abuja, no matter the good intentions of this father, even if he is zero corrupt, this father simply does not have the money to lift his family out of poverty no matter how hard he tries! This is unfortunately the sad story of Nigeria!
But the Senate President is totally wrong to say that Nigeria’s resources are so low! While California is richer than Nigeria in budget size, when it comes to resources Nigeria is far more endowed than California. The reason Nigeria is poorer than California is because Nigeria has been unable to unlock the value embedded in her resource rich nation. Nigeria is endowed with huge resources above the ground in the excellent weather (summer all year-round which California can only envy), abundant sunshine and reasonable wind which combine to make agriculture thrive. On the ground Nigeria is richly endowed with fertile soil that will support agriculture everywhere in the country (something California lacks as a huge part of the landmass is desert territory uninhabitable and uncultivable) and freshwater rivers traversing the nation. Nigeria is also abundantly resourced underneath the earth with almost all the mineral and metal resources in the world! Nigeria is therefore undoubtedly resource rich but cash poor!
Senate President: You cannot tax Nigerians further to raise money for infrastructural development.
Commentary: California generates 97% of their budgetary revenues from taxes. Nigeria is generating a meagre 28%! And this is basically down to the small economy exacerbated by poor tax collection because a huge number of citizens (corporate and human) are not yet captured in the tax nets. Those paying taxes in Nigeria are the low-income earners – market women, okada riders, roadside artisans etc – who are raided daily by all sorts of tax collectors. Also, workers who are captured on PAYE are paying a fair share of taxes. But the bourgeoisies in Nigeria are not being raided to pay their fair share of taxes. The Nigerian Government does not even levy import duties on private jets bought by the billionaires whereas vehicles used by the masses are heavily taxed!
Senate President: The other option is Public Private Partnership (PPP), but you need to create the enabling environment to attract investors to come into your country, because of the security challenges we face today, not many investors would like to come into Nigeria, even those inside Nigeria, may not like to invest properly in infrastructural development.
Commentary: The Senate President as the Head of an Arm of Government is an internal force in the Government of the Federation to create the enabling environment, but he chose to lament about the situation instead of speaking about the steps he as the leader of the national assembly is taking to provide the enabling environment. The Senate President presides over the appropriation of humongous funds to the armed forces and other security agencies, yet the security situation is deteriorating instead of improving but no commander or head of a security agency has been made an example of by the Government for not living up to their duties! When the National Security Adviser (NSA) raised the alarm that $ 1 billion of defence budget for arms procurement went missing and cannot be accounted for, the Senate President did not bark talk less of biting! The Senate President has unfortunately turned himself into a wailer!
Senate President: The only option left is for us to borrow responsibly, utilise prudently and economically and ensure that the projects are self-sustaining, that they can pay back the loans, that Nigeria’s economy will benefit from the implementation of such infrastructural development, so that’s the only option we have.
Commentary: The Senate President is fallacious on two counts:
1. Borrowing is certainly not Nigeria’s only option. The case of the telecoms sector is a great example of how government can cause the building of infrastructure without borrowing a single dollar! The telecoms companies have invested over $70 billion to build the infrastructure all over Nigeria including in the remotest villages because the government gave way by fully privatising the sector. The Senate President should show leadership by embarking on a surgical review of the constitution of Nigeria and release majority of the 68 items on the exclusive list which the FG is kneeling on so that the private sector can take them over and invest to build the infrastructure.
2. Nigeria cannot pay back the loans the country has taken. In 2020 the FG earned N3.9 trillion in revenues and paid N3.27 trillion in Debt service. This meant FG paid 84% of total earnings in 2020 to debtors. The FG then borrowed N6.18 trillion to fund the budget! The picture in 2021 did not change as the FG projects to earn N7.99 trillion in revenues while debt service is projected at N3.32 trillion which is over 40% of total revenues. Again, the FG projects to borrow over N6 trillion in 2021 to fund the budget! It is clear from these numbers that the FG’s borrowing is running out of control and the Senate President needed to consider the nation’s ability to service debts before making the statement that continued borrowing remains the only option for Nigeria! In fact, if the total debt owed to workers via unpaid salaries and to contractors is quantified, the FG debt profile will be even much worse than the numbers contained in the budget which are quoted here.
Senate President: Because we don’t refine our petroleum products in Nigeria, when we export, we generate revenue but because we import products at a higher value because of value addition, probably what we gained in the sale of crude will not be sufficient to pay for products.
Commentary: The Senate President is right! Nigeria has boxed herself into a quagmire such that instead of rejoicing at increases in the prices of crude oil, the main export commodity, the nation instead agonises because it means earned revenues from crude sales will be haemorrhaged to import petroleum products at even higher prices as correctly diagnosed by the Senate President. From the published financial statements of the national oil company the NNPC for 2018 & 2019, the corporation spent over N320 billion to refine zero barrels of crude oil and the Senate President presides and approves this expenditure! And because the refineries are refining zero barrels despite the huge expenditure, the Senate President again presides over approval of trillions of naira in payment for subsidies on petrol! It is time the Senate President exercises courage to force the NNPC to sell or lease the refineries to investors to refurbish and operate them at a profit to add value to the FG’s revenues. This will save the FG spending on refineries to refine zero products and stop the painful subsidy regime too!
RECOMMENDATIONS
1. The FG must suspend all further borrowings as the nation’s balance sheet can no longer carry any more debt! Nigeria will become bankrupt if the current appetite for debt is not tamed!
2. The Senate President must immediately begin the process of constitutional amendment to release majority of the 68 items on the exclusive list to the private sector to build the infrastructure to operate and offer services and bill consumers to generate return on their (investors’) investments. This will shore up government’s revenues through the taxes generated from these economic activities.
3. The Senate President to take immediate steps to pass the necessary legislation that will overhaul the tax administration system in Nigeria to enhance tax collection to improve tax revenue from the current 28% of total revenue in the 2021 budget to at least 75% in subsequent years. The Senate must quickly pass legislation to tax private jets and other luxury goods imported by the billionaires.
4. The Senate President to cause legislation to be enacted to limit the interest rate charged by banks on loans to the productive sector of the economy. The Senate can consider pegging the interest on loans based on a fixed basis points system over the interest on savings. So, if a bank is paying 2% interest on savings such a bank cannot charge more than 7% on loans. This will make credit readily and cheaply available to the economy to boost productive activities. No economy grows with loan interest rates at over 20% as currently obtainable in Nigeria!
5. No economy can thrive and prosper without adequate electricity supply. Nigeria’s economy by global standards needs 200GW of electricity but currently being supplied with 4GW. There is no way the economy can grow with this abysmal level of power supply! The Senate President need to provide leadership for the national assembly to pass the necessary legislation to privatise 100% the power sector – generation, transmission & distribution – to energise the economy. The national assembly is also required to revisit the privatisation of the DISCOs as they lack the financial muscle to develop the distribution network which has necessitated the FG to spend heavily in provision of subsidies to the DISCOs. No subsidies are being paid to the telecoms operators because the privatisation was done right with licences issued to companies that had a pedigree and regional scale in the sector unlike the DISCOs who don’t have such leverage.
CONCLUSION
If you don’t look for money you will be poor! It does not matter if you are a father or mother with a family to care for or you are a chief executive of a company or you are a President of a country! You must look for money before you earn it to become rich because money does not fall from the skies! Nigeria needs to take urgent steps to look for money by unbundling and debottlenecking the structural imbalances to free the economy for private sector participation and investment. The Government does not have the financial muscle to build Nigeria. And the Government must not borrow further to build the infrastructure. The Government only needs to give way as it was done in telecoms sector and investors will build the infrastructure with their own money! Only few investors will ignore a market of over 200 million people with over 70% as young people!
References:
1. https://youtu.be/uUiaz5SFcaM
2. http://www.ebudget.ca.gov/2021-22/pdf/Revised/BudgetSummary/SummaryCharts.pdf
3. https://www.budgetoffice.gov.ng/index.php/hmfbnp-public-presentation-of-2021-fgn-approved-budget?task=document.viewdoc&id=909
COVID-19: A Pandemic that threatens a Continent!
Date: 2024-04-04 Read More
COVID-19: A Pandemic that threatens a Continent!
Nick Agule
Twitter: @NickAgule
Email: [email protected]
20.07.2021
Introduction
Yesterday, Monday, 19th July 2021 England as most of the UK was celebrating “Freedom Day” with the lifting COVID-19 restrictions of social distancing and mask wearing. This has been made possible with an aggressive vaccination campaign with over 46 million people (nearly 90% of the adult population) taken their first dose of a coronavirus vaccine with over 70% taken a double jab! Though many are apprehensive of the move and even criticised it, but Professor Sir Andrew Pollard, director of the Oxford Vaccine Group, said that death rates will remain low because of the jab and the effectiveness of the vaccines against severe disease and hospitalisation and death remains extremely high against the variants which are around in the UK. Reported deaths from COVID-19 in the UK are currently just one sixteenth of the level seen during similar infection rates in previous Covid waves, the latest figures show.
The effectiveness of the vaccination campaign that has led to the UK lifting the COVID-19 restrictions cannot be said to be same for the African continent, particularly Nigeria. Aside from the widespread apathy to the vaccines no thanks to a well-coordinated and oiled anti-vaccine conspiracy, Nigeria simply has not had enough vaccine doses for the nearly 150 million adult population. Back in March 2021 Nigeria received nearly 4 million her first batch of doses of the AstraZeneca COVID-19 vaccines and nothing more has been received since then. Only last week the regulator - National Agency for Food and Drug Administration and Control (NAFDAC) - approved emergency use of three additional Covid-19 vaccines for Nigeria - the Moderna (Rovi Pharma Madrid, Spain) AstraZeneca AZD1222 [SK Bioscience Co Limited (Republic of Korea)] Sputnik V (Gamaleya National Centre of Epidemiology and Microbiology, Russia). About 41 million doses are expected by September 2021.
Aside from the vaccines, COVID-19 exposed the inadequacies in the healthcare delivery system of African nations particularly Nigeria. Nigeria with a population of over 200 million (the largest black population in the world) has administered 2.4 million COVID-19 tests (about 1% of the population) of which 169,532 tested positive (an infection rate of 7%) with 2,127 deaths (death rate of 1.2%) based on the latest data released by the Nigeria Centre for Disease Control (NCDC). In comparison the UK with a population of about 67 million, there have been about 5.5 million positive tests and over 150,000 deaths (death rate of 2.7% which is double that of Nigeria’s). Even with the smaller rate of infection, Nigeria’s healthcare system was stretched beyond limits. The Chief of Staff to the President had to be flown to Lagos meaning there was no adequate medical facility in the entire federal capital to provide him with the expert medical attention he needed. His boss the President also travels to the UK for even routine medical checks.
Lessons learnt – Looking beyond COVID
If there is anything positive that African countries particularly Nigeria will learn from the COVID-19 pandemic is that it has tested the medical preparedness and adequacy and found it wanting and African nations now have a second chance to get it right. A healthy population is a sine qua non for a healthy economy. Therefore, nations that are building strong economies around the world do not pay lip service or treat with levity matters that relate to the healthcare delivery for their citizens. The UK spent £269 billion ($368 billion) which was 12.8% of GDP on healthcare in the year 2020 alone! In comparison Nigeria’s TOTAL Federal Government budget for all recurrent and capital expenditure is a miserly $35 billion of which less than $1 billion is earmarked for healthcare! Considering that both the UK and Nigeria are buying from the same market healthcare equipment, drugs and other supplies, the current funding of the healthcare system in Nigeria cannot guarantee qualitative and quantitative healthcare delivery to a population of over 200 million people! The lack of priority placed on healthcare delivery in Nigeria is a kneel placed on the neck of the nation’s economy!!! With a budget of $368 billion, the UK provides universal FREE healthcare services at the primary, secondary and tertiary levels to all citizens while Nigeria’s $1 billion simply abandons the citizens to their own peril for even the commonest of ailments.
Recommendations
1. African countries particularly Nigeria with the largest population must learn lessons from countries such as India and Brazil who treated COVID-19 with levity and it came back to hurt them! African countries must immediately begin major funding plan of action for expansive and progressive healthcare delivery across the continent. Enough of lip service, this is the time for action to ensure COVID-19 or any other major health crisis is thwarted from making a landfall resulting in high death toll on the continent.
2. There are basic infrastructures that need to be in place for example an emergency number that mobilises ambulances, fire engines and the police to the aid of citizens who are in crisis. To think that a country such as Nigeria with a high penetration of mobile telephone services does not have as simple as a national emergency dialling code linked to all the mobile networks such that citizens can seek for help with a simple dial of a 3-digit code on the phones is a big shame! This system must be installed immediately for citizens to report emergencies including medical ones for fast-track response by the emergencies services.
3. The emergency number when linked to the ambulance services brings healthcare to the doorsteps of citizens. There is an anomalous situation in Nigeria where ambulances with sirens blaring carry corpses to burial whereas the sick in emergency conditions are ferried on human backs, okadas (motorcycles), back of pickup vans and other unsuitable modes of transport to medical facilities. In countries with more effective healthcare delivery services, it is the other way round with ambulances ferrying those in critical conditions to hospitals while hearses convey corpses to funeral services and cemeteries.
4. Nigeria must shore up her revenues to be equipped to fund the healthcare budget adequately. To do this, Nigeria must take the following steps:
a. Generate new sources of revenue including bringing the rich into the tax net and making them to pay their fair share of taxes! The recent display of wealth at a burial in Anambra state should be the occasions the tax authorities need as triggers to go after the attendees to ensure they pay their fair share of taxes on the incomes they earned and sprayed so extravagantly at the occasion.
b. Eliminate areas of waste by a significant reduction in the cost of running government at all levels. Immediate stoppage of drainpipes such as subsidies on petrol and the dollar to save the money for more essential services such as healthcare and education.
c. The FG to scrap the following ministries and in their place create regulatory agencies to provide oversight on the private sector who are to takeover the activities of these ministries and run them on commercial basis:
o Aviation o Communications o Industries o Petroleum Resources o Power o Solid Minerals o Water Resources o Works
Conclusion
There can be no economy without a comprehensive and efficient healthcare delivery system for all citizens! African governments must be committed to adequate budget provisioning for the healthcare sector if the continent is to escape from another wave of COVID-19 and any other major health crisis that may show up in time to come! There is a maxim that – HEALTH IS WEALTH!!!
References:
1. https://coronavirus.data.gov.uk/
2. https://guardian.ng/news/nigeria/nafdac-approves-emergency-use-of-three-additional-covid-19-vaccines-for-nigeria/
3. https://covid19.ncdc.gov.ng/report/
4. https://coronavirus.data.gov.uk/details/cases
5.https://www.ons.gov.uk/peoplepopulationandcommunity/healthandsocialcare/healthcaresystem/bulletins/healthcareexpenditureukhealthaccountsprovisionalestimates/2020
Twitter: @NickAgule
Email: [email protected]
20.07.2021
Introduction
Yesterday, Monday, 19th July 2021 England as most of the UK was celebrating “Freedom Day” with the lifting COVID-19 restrictions of social distancing and mask wearing. This has been made possible with an aggressive vaccination campaign with over 46 million people (nearly 90% of the adult population) taken their first dose of a coronavirus vaccine with over 70% taken a double jab! Though many are apprehensive of the move and even criticised it, but Professor Sir Andrew Pollard, director of the Oxford Vaccine Group, said that death rates will remain low because of the jab and the effectiveness of the vaccines against severe disease and hospitalisation and death remains extremely high against the variants which are around in the UK. Reported deaths from COVID-19 in the UK are currently just one sixteenth of the level seen during similar infection rates in previous Covid waves, the latest figures show.
The effectiveness of the vaccination campaign that has led to the UK lifting the COVID-19 restrictions cannot be said to be same for the African continent, particularly Nigeria. Aside from the widespread apathy to the vaccines no thanks to a well-coordinated and oiled anti-vaccine conspiracy, Nigeria simply has not had enough vaccine doses for the nearly 150 million adult population. Back in March 2021 Nigeria received nearly 4 million her first batch of doses of the AstraZeneca COVID-19 vaccines and nothing more has been received since then. Only last week the regulator - National Agency for Food and Drug Administration and Control (NAFDAC) - approved emergency use of three additional Covid-19 vaccines for Nigeria - the Moderna (Rovi Pharma Madrid, Spain) AstraZeneca AZD1222 [SK Bioscience Co Limited (Republic of Korea)] Sputnik V (Gamaleya National Centre of Epidemiology and Microbiology, Russia). About 41 million doses are expected by September 2021.
Aside from the vaccines, COVID-19 exposed the inadequacies in the healthcare delivery system of African nations particularly Nigeria. Nigeria with a population of over 200 million (the largest black population in the world) has administered 2.4 million COVID-19 tests (about 1% of the population) of which 169,532 tested positive (an infection rate of 7%) with 2,127 deaths (death rate of 1.2%) based on the latest data released by the Nigeria Centre for Disease Control (NCDC). In comparison the UK with a population of about 67 million, there have been about 5.5 million positive tests and over 150,000 deaths (death rate of 2.7% which is double that of Nigeria’s). Even with the smaller rate of infection, Nigeria’s healthcare system was stretched beyond limits. The Chief of Staff to the President had to be flown to Lagos meaning there was no adequate medical facility in the entire federal capital to provide him with the expert medical attention he needed. His boss the President also travels to the UK for even routine medical checks.
Lessons learnt – Looking beyond COVID
If there is anything positive that African countries particularly Nigeria will learn from the COVID-19 pandemic is that it has tested the medical preparedness and adequacy and found it wanting and African nations now have a second chance to get it right. A healthy population is a sine qua non for a healthy economy. Therefore, nations that are building strong economies around the world do not pay lip service or treat with levity matters that relate to the healthcare delivery for their citizens. The UK spent £269 billion ($368 billion) which was 12.8% of GDP on healthcare in the year 2020 alone! In comparison Nigeria’s TOTAL Federal Government budget for all recurrent and capital expenditure is a miserly $35 billion of which less than $1 billion is earmarked for healthcare! Considering that both the UK and Nigeria are buying from the same market healthcare equipment, drugs and other supplies, the current funding of the healthcare system in Nigeria cannot guarantee qualitative and quantitative healthcare delivery to a population of over 200 million people! The lack of priority placed on healthcare delivery in Nigeria is a kneel placed on the neck of the nation’s economy!!! With a budget of $368 billion, the UK provides universal FREE healthcare services at the primary, secondary and tertiary levels to all citizens while Nigeria’s $1 billion simply abandons the citizens to their own peril for even the commonest of ailments.
Recommendations
1. African countries particularly Nigeria with the largest population must learn lessons from countries such as India and Brazil who treated COVID-19 with levity and it came back to hurt them! African countries must immediately begin major funding plan of action for expansive and progressive healthcare delivery across the continent. Enough of lip service, this is the time for action to ensure COVID-19 or any other major health crisis is thwarted from making a landfall resulting in high death toll on the continent.
2. There are basic infrastructures that need to be in place for example an emergency number that mobilises ambulances, fire engines and the police to the aid of citizens who are in crisis. To think that a country such as Nigeria with a high penetration of mobile telephone services does not have as simple as a national emergency dialling code linked to all the mobile networks such that citizens can seek for help with a simple dial of a 3-digit code on the phones is a big shame! This system must be installed immediately for citizens to report emergencies including medical ones for fast-track response by the emergencies services.
3. The emergency number when linked to the ambulance services brings healthcare to the doorsteps of citizens. There is an anomalous situation in Nigeria where ambulances with sirens blaring carry corpses to burial whereas the sick in emergency conditions are ferried on human backs, okadas (motorcycles), back of pickup vans and other unsuitable modes of transport to medical facilities. In countries with more effective healthcare delivery services, it is the other way round with ambulances ferrying those in critical conditions to hospitals while hearses convey corpses to funeral services and cemeteries.
4. Nigeria must shore up her revenues to be equipped to fund the healthcare budget adequately. To do this, Nigeria must take the following steps:
a. Generate new sources of revenue including bringing the rich into the tax net and making them to pay their fair share of taxes! The recent display of wealth at a burial in Anambra state should be the occasions the tax authorities need as triggers to go after the attendees to ensure they pay their fair share of taxes on the incomes they earned and sprayed so extravagantly at the occasion.
b. Eliminate areas of waste by a significant reduction in the cost of running government at all levels. Immediate stoppage of drainpipes such as subsidies on petrol and the dollar to save the money for more essential services such as healthcare and education.
c. The FG to scrap the following ministries and in their place create regulatory agencies to provide oversight on the private sector who are to takeover the activities of these ministries and run them on commercial basis:
o Aviation o Communications o Industries o Petroleum Resources o Power o Solid Minerals o Water Resources o Works
Conclusion
There can be no economy without a comprehensive and efficient healthcare delivery system for all citizens! African governments must be committed to adequate budget provisioning for the healthcare sector if the continent is to escape from another wave of COVID-19 and any other major health crisis that may show up in time to come! There is a maxim that – HEALTH IS WEALTH!!!
References:
1. https://coronavirus.data.gov.uk/
2. https://guardian.ng/news/nigeria/nafdac-approves-emergency-use-of-three-additional-covid-19-vaccines-for-nigeria/
3. https://covid19.ncdc.gov.ng/report/
4. https://coronavirus.data.gov.uk/details/cases
5.https://www.ons.gov.uk/peoplepopulationandcommunity/healthandsocialcare/healthcaresystem/bulletins/healthcareexpenditureukhealthaccountsprovisionalestimates/2020
Nigeria: A Nation of Uneducated Children!
Date: 2024-04-04 Read More
Nigeria: A Nation of Uneducated Children!
Nick Agule
Twitter: @NickAgule
Email: [email protected]
31.08.2021
Introduction
At the end of July 2021, global leaders gathered in London at the Global Education Summit (GPE) with the theme - Financing GPE 2021-2025. It was a key moment for the global community to come together and support quality education for all children. At the summit, world leaders made 5-year pledges to support GPE's work and help transform education systems in up to 90 countries and territories. In all, the summit ran four thematic sessions – Education’s reset, Financing for Impact, Gender Equality, Ripple Effect.
Some of the key discussions and outcomes of the summit included the fact that business as usual will not suffice to build the workforce of the future; and that urgent action is needed to ensure adequate funding for the education outcomes that will position countries to exploit their demographic dividend and strengthen competitiveness. The summit tackled what can be done to protect and improve domestic financing for education, especially for girls, in the face strained budgets facing competing demands. Intergenerational dialogue to give young people a platform to elevate their concerns about potential cuts to education budgets and the consequences for their generation of high debt burdens also drew the attention of the attendees. It was indeed heart-warming to see Nigeria’s Maryjacob Okwuosa, a GPE Youth Leader, Transform Education/UNGEI, anchor one of the sessions.
Furthermore, the Financing for Impact thematic discussions focused on how the world can leverage disaggregated data and new analysis tools to build mechanisms that allocate financing to ensure quality learning for the most vulnerable and marginalized and making the best possible use of limited resources which challenges conventional wisdom about what works to improve learning outcomes.
Nigeria’s President Muhammadu Buhari and other African leaders attended the summit.
Education not a Priority to Nigeria
When President Buhari sat with other world leaders at the summit, perhaps it did not occur to him how infinitesimal his budgetary allocation to education is as compared to the other leaders he was rubbing shoulders with. For the 2021 federal budget, education was allocated a total of N771.46 billion which is just above 5% of the total budget. In dollar terms this translates to less than $2 billion. This is the lowest budgetary allocation to the education sector in by the federal government of Nigeria 10 years! The global benchmark for funding education is between 15-20% of total budget.
In comparison with the world leaders whom President Buhari sat next to at the summit, they have committed the following percentages of their total budget to education - UK 14.9%, Mexico 17.58%, South Africa 19.45%, Australia 13.61%, Ethiopia 27.1%, Singapore 28.84%, Norway 16.01% etc. Even countries such as Iran and Afghanistan have committed 21.115% and 15.66% respectively which is well above Nigeria’s!
Nigeria is therefore punching far below the weight given a population of 200 million people. This poor funding of the education sector portrays Nigeria as a nation that does not take education as a priority. To make matters worse, Nigeria’s budget implementation is never at 100% so even the budgetary allocation to education may end up not being released in full!
Outcome of Poor Funding of Education in Nigeria
Given the abysmally poor funding of education in Nigeria, the tragic consequences include:
1. Nigeria has the highest number of out-of-school children in the world. UNICEF data indicates that one in every five of the world’s out-of-school children is in Nigeria. About 10.5 million of the country’s children aged 5-14 years are not in school. Only 61 percent of 6-11 year-olds regularly attend primary school and only 35.6 percent of children aged 36-59 months receive early childhood education according to UNICEF’s data. In the north of the country, the picture is even bleaker, with a net attendance rate of 53 percent. UNICEF concludes that getting out-of-school children back into education poses a massive challenge.
2. Teachers who are the backbone of the education system are often away from the classrooms on industrial action. The Academic Staff Union of Universities (ASUU) the premier labour union of university teachers has recently served another notice to embark on an industrial action. There is hardly any academic session that runs unhindered without a strike action by teachers in Nigeria.
3. Infrastructure at all levels of education – primary, secondary and tertiary – has totally decayed. A recent video of a students’ hall of residence at the hitherto prestigious University of Nigeria is sickening.
4. Other factors such as COVID and the massive state of insecurity in Nigeria have also contributed to keeping students away from the classrooms thereby jeopardising an already bad situation.
Recommendations
For Nigeria to unleash the Power of a Healthy, Educated and Safe Child, the country must take immediate steps to implement the following recommendations:
1. Nigeria must make it a policy priority to comply with UNICEF’s charter that all children, no matter where they live or what their circumstances, have the right to quality education.
2. Nigerian governments at all levels – federal, state and local government – must hard-code budgetary allocation to education to the global benchmark of between 15-20%.
3. Nigeria has an abysmally low budget provision. The total federal budget of $35 billion for 200 million people is a far cry from California’s $200 billion for 40 million people. Even if Nigeria commits the entire $35 billion federal budget to education, it will not be sufficient to lift the sector out of the decay experienced for decades in the past. Nigeria must therefore take urgent steps to boost revenue and this column has served a menu of recommendations in the past to help the government in this direction.
4. The cost of running government is extremely high with redundant, duplicitous and non-performing Ministries, Departments and Agencies (MDAs) of government. Government must restructure by scrapping these MDAs to save money to fund education.
5. Government must address the non-payment of salaries and allowances to teachers to forestall industrial actions. A scheme where teachers’ salaries are automatically paid from arranged overdraft facilities with financial institutions should be considered.
6. The state of insecurity in the country has impacted negatively on the educational sector with a spate of school kidnappings and other banditry activities has led to closure of schools. Governments at all levels must intensify efforts at tackling the insecurity situation. Governments must also take steps in securing schools including an installation of an emergency response system to enable schools call for security intervention when they come under attack which will discourage future attacks.
7. The national assembly need to begin legislation to criminalise out-of-school children by putting responsibility on the parents/guardians to enrol children in school failure of which they will be arrested and prosecuted, and the children are handed over to foster parents/carers to be educated. This is what is obtainable in the countries whose leaders President Buhari rubbed shoulders with at the summit!
8. Government at all levels to develop partnerships with countries and other donor organisations to increase volume, efficiency and equity of domestic financing for education. President Buhari’s attendance at the GPE summit was a right step in this direction.
Conclusion
There is no economy without education. Education is serious business and together with healthcare must never be relegated in the pecking order of priorities by any government. Nigerian governments at all levels must step up their game to adequately fund and manage the education of all children. An uneducated child is a time-bomb, and all hands must be on deck to ensure all children receive qualitative and functional education.
References:
1. https://data.worldbank.org/indicator/SE.XPD.TOTL.GD.ZS
2. https://ourworldindata.org/financing-education
3. https://www.premiumtimesng.com/news/headlines/422829-buharis-2021-budget-share-for-education-is-nigerias-lowest-in-10-years.html
4. https://www.premiumtimesng.com/news/headlines/422829-buharis-2021-budget-share-for-education-is-nigerias-lowest-in-10-years.html
Twitter: @NickAgule
Email: [email protected]
31.08.2021
Introduction
At the end of July 2021, global leaders gathered in London at the Global Education Summit (GPE) with the theme - Financing GPE 2021-2025. It was a key moment for the global community to come together and support quality education for all children. At the summit, world leaders made 5-year pledges to support GPE's work and help transform education systems in up to 90 countries and territories. In all, the summit ran four thematic sessions – Education’s reset, Financing for Impact, Gender Equality, Ripple Effect.
Some of the key discussions and outcomes of the summit included the fact that business as usual will not suffice to build the workforce of the future; and that urgent action is needed to ensure adequate funding for the education outcomes that will position countries to exploit their demographic dividend and strengthen competitiveness. The summit tackled what can be done to protect and improve domestic financing for education, especially for girls, in the face strained budgets facing competing demands. Intergenerational dialogue to give young people a platform to elevate their concerns about potential cuts to education budgets and the consequences for their generation of high debt burdens also drew the attention of the attendees. It was indeed heart-warming to see Nigeria’s Maryjacob Okwuosa, a GPE Youth Leader, Transform Education/UNGEI, anchor one of the sessions.
Furthermore, the Financing for Impact thematic discussions focused on how the world can leverage disaggregated data and new analysis tools to build mechanisms that allocate financing to ensure quality learning for the most vulnerable and marginalized and making the best possible use of limited resources which challenges conventional wisdom about what works to improve learning outcomes.
Nigeria’s President Muhammadu Buhari and other African leaders attended the summit.
Education not a Priority to Nigeria
When President Buhari sat with other world leaders at the summit, perhaps it did not occur to him how infinitesimal his budgetary allocation to education is as compared to the other leaders he was rubbing shoulders with. For the 2021 federal budget, education was allocated a total of N771.46 billion which is just above 5% of the total budget. In dollar terms this translates to less than $2 billion. This is the lowest budgetary allocation to the education sector in by the federal government of Nigeria 10 years! The global benchmark for funding education is between 15-20% of total budget.
In comparison with the world leaders whom President Buhari sat next to at the summit, they have committed the following percentages of their total budget to education - UK 14.9%, Mexico 17.58%, South Africa 19.45%, Australia 13.61%, Ethiopia 27.1%, Singapore 28.84%, Norway 16.01% etc. Even countries such as Iran and Afghanistan have committed 21.115% and 15.66% respectively which is well above Nigeria’s!
Nigeria is therefore punching far below the weight given a population of 200 million people. This poor funding of the education sector portrays Nigeria as a nation that does not take education as a priority. To make matters worse, Nigeria’s budget implementation is never at 100% so even the budgetary allocation to education may end up not being released in full!
Outcome of Poor Funding of Education in Nigeria
Given the abysmally poor funding of education in Nigeria, the tragic consequences include:
1. Nigeria has the highest number of out-of-school children in the world. UNICEF data indicates that one in every five of the world’s out-of-school children is in Nigeria. About 10.5 million of the country’s children aged 5-14 years are not in school. Only 61 percent of 6-11 year-olds regularly attend primary school and only 35.6 percent of children aged 36-59 months receive early childhood education according to UNICEF’s data. In the north of the country, the picture is even bleaker, with a net attendance rate of 53 percent. UNICEF concludes that getting out-of-school children back into education poses a massive challenge.
2. Teachers who are the backbone of the education system are often away from the classrooms on industrial action. The Academic Staff Union of Universities (ASUU) the premier labour union of university teachers has recently served another notice to embark on an industrial action. There is hardly any academic session that runs unhindered without a strike action by teachers in Nigeria.
3. Infrastructure at all levels of education – primary, secondary and tertiary – has totally decayed. A recent video of a students’ hall of residence at the hitherto prestigious University of Nigeria is sickening.
4. Other factors such as COVID and the massive state of insecurity in Nigeria have also contributed to keeping students away from the classrooms thereby jeopardising an already bad situation.
Recommendations
For Nigeria to unleash the Power of a Healthy, Educated and Safe Child, the country must take immediate steps to implement the following recommendations:
1. Nigeria must make it a policy priority to comply with UNICEF’s charter that all children, no matter where they live or what their circumstances, have the right to quality education.
2. Nigerian governments at all levels – federal, state and local government – must hard-code budgetary allocation to education to the global benchmark of between 15-20%.
3. Nigeria has an abysmally low budget provision. The total federal budget of $35 billion for 200 million people is a far cry from California’s $200 billion for 40 million people. Even if Nigeria commits the entire $35 billion federal budget to education, it will not be sufficient to lift the sector out of the decay experienced for decades in the past. Nigeria must therefore take urgent steps to boost revenue and this column has served a menu of recommendations in the past to help the government in this direction.
4. The cost of running government is extremely high with redundant, duplicitous and non-performing Ministries, Departments and Agencies (MDAs) of government. Government must restructure by scrapping these MDAs to save money to fund education.
5. Government must address the non-payment of salaries and allowances to teachers to forestall industrial actions. A scheme where teachers’ salaries are automatically paid from arranged overdraft facilities with financial institutions should be considered.
6. The state of insecurity in the country has impacted negatively on the educational sector with a spate of school kidnappings and other banditry activities has led to closure of schools. Governments at all levels must intensify efforts at tackling the insecurity situation. Governments must also take steps in securing schools including an installation of an emergency response system to enable schools call for security intervention when they come under attack which will discourage future attacks.
7. The national assembly need to begin legislation to criminalise out-of-school children by putting responsibility on the parents/guardians to enrol children in school failure of which they will be arrested and prosecuted, and the children are handed over to foster parents/carers to be educated. This is what is obtainable in the countries whose leaders President Buhari rubbed shoulders with at the summit!
8. Government at all levels to develop partnerships with countries and other donor organisations to increase volume, efficiency and equity of domestic financing for education. President Buhari’s attendance at the GPE summit was a right step in this direction.
Conclusion
There is no economy without education. Education is serious business and together with healthcare must never be relegated in the pecking order of priorities by any government. Nigerian governments at all levels must step up their game to adequately fund and manage the education of all children. An uneducated child is a time-bomb, and all hands must be on deck to ensure all children receive qualitative and functional education.
References:
1. https://data.worldbank.org/indicator/SE.XPD.TOTL.GD.ZS
2. https://ourworldindata.org/financing-education
3. https://www.premiumtimesng.com/news/headlines/422829-buharis-2021-budget-share-for-education-is-nigerias-lowest-in-10-years.html
4. https://www.premiumtimesng.com/news/headlines/422829-buharis-2021-budget-share-for-education-is-nigerias-lowest-in-10-years.html
President Tinubu's Speech on the Economy-Tall on Issues Identification, short on Solutions! By NICK AGULE
Twitter: @NickAgule
Email: [email protected]
Introduction
President Bola Tinubu addressed the nation yesterd...
Email: [email protected]
Introduction
President Bola Tinubu addressed the nation yesterd...
Date: 2024-03-22 Read More
President Tinubu's Speech on the Economy-Tall on Issues Identification, short on Solutions! By NICK AGULE
Twitter: @NickAgule
Email: [email protected]
Introduction
President Bola Tinubu addressed the nation yesterday, Monday, 31st July 2023 on the state of the economy which is great and a refreshing departure from the previous government where we hardly heard directly from the President. It is not clear though if the speech was instigated by the impending strike called by the labour unions but either way, we want to be hearing from our President more often. I however score the speech 90% on issues identification but 20% on solutions.
President Bola Ahmed Tinubu President Bola Ahmed Tinubu The President displayed a deep understanding of the issues, but his solutions were cosmetics and superficial, failing to touch on the fundamental factors responsible for the ailing economy. Here is how I arrived at my assessment:
Petrol Subsidy Issue identification: The president was right to recognise that petrol subsidies was a conduit for a handful of people to loot trillions of our commonwealth at the expense of the common good like public transportation, healthcare, education, housing and national security.
The President’s Solution: The President did not mention any specific solution to petrol subsidy removal.
Fundamental Solution: The more fundamental solution to the fuel subsidy saga is the REFINERIES. Even if the President is yet to articulate a solution to the refineries, he should have told the nation he is working on a solution to give Nigerians hope that the subsidy matter will be buried in due course. Just as he has done for the CBN, the President needs to immediately take action by a sell-off of the refineries or lease them out to global refining business operators to revamp them and begin to produce petroleum products in plentiful for both domestic and export markets at far cheaper prices than the currently forced N617 per litre. In the short term the President also needs to totally liberalise/deregulate the downstream sector of the petroleum industry to pave way to any importer to bring in products, pass quality checks and sell at a price that gives them a profit. That all petrol stations in Nigeria are still selling at the same price detected by the NNPC shows the market is not perfect! President Tinubu must take immediate steps to bring true competition to the downstream sector so that Nigerians will be relieved from paying high prices for petrol resultant from the inefficiencies of a behemoth NNPC!
Multiple Exchange Rates Issue Identification: The President was right to identify the multiple exchange rates regime as a highway of currency speculation where our commonwealth was dolled out to a handful of people to become filthily rich at the expense of job creation, factories and businesses.
The President’s Solution: The President was not specific on measures his government has taken or plans to take to shore up the value of the Naira to bring sanity to the forex market.
Fundamental Solution: There are only 2 ways to strengthen the value of the Naira – reduce imports and/or increase exports! Both measures require our economy to be more productive. But Nigeria’s economy can never be more productive than it is now with 3,000MW of electricity! If President Tinubu takes a look at Brazil with a similar population like ours and sees 150,000MW supply of electricity to their economy daily, he will understand why 3,000MW can never deliver the type of economy that he is hoping for. South Africa with a population of 60 million is delivering 50,000MW while India is doing 400,000MW. Nigeria power supply at 3,000MW is too infinitesimal and too abysmal such that no matter President Tinubu’s good wishes for Nigeria, unfortunately it will all be vain as this awfully low power supply simply can’t lift up the economy. President Tinubu needs to unbundle the power sector from generation to transmission to distribution. The President must immediately sell-off or lease the transmission company to global power operators to come in with the capital, technology and expertise to expand the sector. The President must also either terminate the DISCO contracts or force their hands into technical partnerships that will inject the necessary funding into the sector. Once Nigeria’s power supply shifts to even 10,000MW, local production will be re-energised and forex problem will inevitably disappear!
Manufacturing Sector Issue Identification: the President accurately identified that our manufacturing sector holds the key to job creation.
The President’s Solution: The President’s solution to strengthen the manufacturing sector is a buffet of cash incentives to enterprises. But Cash incentives to enterprises have been tried by previous government with little success.
Fundamental Solution: The major issue for manufacturing in Nigeria is low power supply as earlier discussed. 3,000MW is electricity for some industrial parks elsewhere, it is grossly insufficient to power an economy of 200 million people. Qatar with a population of 3 million people supplies nearly 9,000MW (3 times Nigeria’s power) to their economy daily! If the President increases power output to 40,000MW at the end of his 4-year tenure, he would have solved 70% of the problems of the manufacturing sector. Other issues faced by the manufacturing sector are porous borders which result in dumping of goods in Nigeria. Manufacturers are also faced with all sorts of multiple taxes by all the tiers of government. Infrastructure including roads is also hampering the movement of raw materials and goods across the nation. Lack of raw materials arising from low productivity and insecurity is another. These are the issues the President must tackle before manufacturing is strengthened. The President totally missed out on digital economy which today is even bigger than manufacturing globally! The next big issue facing manufacturing is high interest rates! 30% or more interest rates can never support manufacturing. The president indicated he wanted to drive down interest rates to single digits and he better gets on this job very quickly to save the manufacturing sector
Food Prices Issue Identification: The President is again right to identify high cost of food as a real issue as families are progressively facing food insecurity and finding it difficult to feed their children!
The President’s Solution: The President offers to make food more available and affordable by the release 200MT of grains from strategic reserves to households and to provide fertiliser, seedlings and other inputs to farmers. Also, to support the cultivation of 500k hectares of farmlands and all year-round farming plus 200bn to cultivate 150k hectares of rice and maize, and 100k hectares wheat and cassava.
Fundamental Solution: The President’s solutions to tackle food insecurity by all means are commendable and applauded but they are not far reaching enough and miss some fundamentals. First of all, the biggest threat to farming in Nigeria today is insecurity. Large swatches of farm lands in Nigeria have been taken over by all sorts of bandits, terrorists and marauders both indigenous and foreign and millions of farmers driven into IDP camps. The President did not address insecurity and one wonders where he is going to have these hundreds of thousands of hectares of lands he plans to cultivate! The next biggest problem for farmers is manual labour! Our farmers are still mostly tilling the soil with their bare hands using their physical energy! This makes farming very unattractive to our young generation! The President needs to tackle mechanisation by supporting agro-ventures where farmers lease farm machines on credit to cultivate and harvest and pay back from their farm proceeds. With mechanisation, a farmer who is currently harvesting say 5 bags of rice per year (which is inadequate to lift him out of poverty) can harvest 500 bags and is economically and financially made! Another problem militating against farmers is lack of processing leading to huge post-harvest losses and low incomes from harvests that are literally thrown away for cheap with no value addition. This will be resolved with power supply and infrastructure.
Infrastructure Issue Identification: The President judges very correctly that infrastructure is key to national development.
The President’s Solution: The President offers infrastructure support to states to build healthcare, education, rural access roads for market access for farm produce. But the President seems to forget that these same states have been getting trillions in Naira of allocation from the federation account, VAT, excess crude oil, stamp duty, 13% derivation etc plus their own IGRs and yet nothing has been done to boost infrastructure. One therefore wonders how the President hopes that this infrastructure fund will not be similarly mismanaged! What the President needs to do immediately is to open up infrastructural development to the private sector! one of the best roads in Nigeria today is the Keffi-Makurdi road newly built by the Chinese. Imagine if this money was given to the federal ministry of works, of course there will be no road today, but we will only be hearing big grammar from government officials!
Transportation Issue Identification: The President again identifies and correctly so that transportation is a major issue for Nigerians.
The President’s Solution: The President offers 3,000 CNG-fuelled 20-seater mass transit buses to be bought with 100bn in the next 9 months to be shared to major transportation companies in the states. This solution has been tried previously with all sorts of mass transit schemes with minimal success.
Fundamental Solution: The President needs to focus on RAIL as the better, more effective and more efficient mass transit system that is affordable and does no damage to our roads and environment. There are low-hanging fruits in the rail sector the President needs to exploit through the revamping of the existing rail tracks around the nation and dropping of wagons on them to begin moving Nigerians about. It will take about the same time to revamp the existing rail infrastructure than to order buses, have them built and imported! But more fundamentally, the President needs to handover the rail sector to the private sector to build both intercity and intracity railway networks to connect all the cities, towns and village in Nigeria to facilitate movement of goods and people and job creation!
Minimum Wage: The President recognises and correctly so that a 30k minimum wage can no longer take workers home!
The President’s Solution: The President offers a new national minimum wage which is commendable. However, increasing wages in a low productivity economy like Nigeria’s only fuels more inflation!
Fundamental Solution: The President needs to tackle the low productivity of Nigeria’s economy by ensuring adequate power supply through harnessing of the abundance of energy sources (both fossil and renewable) in Nigeria. It was reported recently that Nigeria made N44bn from oil companies who were allowed to waste (flare) our produced gas! President Tinubu must end gas flaring! Why should we be satisficed with N44bn when the gas would have been used to generate electricity to grow our economy in trillions-fold! High productivity will drive down the cost of goods and services and will make the wages of workers fetch them far more value! Wage increases eaten up by inflation will do the workers no good!
Conclusion
I hope that the above assessment is taken in good light as genuine efforts by a citizen to contribute to the quest by the President to better Nigeria’s economy and hence the wellbeing of Nigerians. The argument can be made that the President’s speech dwelt on only short-term palliatives but that will be a missed golden opportunity for the President to have shared with Nigerians and the world his economic agenda! It’s also a lesson for the President’s speech writers to always ensure they give a glimpse of the President’s medium and long-term agenda to avoid a misjudgement of the President’s mind on issues. A better Nigeria is what we all want and will do us all good!
Nick Agule is an oil and gas expert and a public affairs analyst.
Email: [email protected]
Introduction
President Bola Tinubu addressed the nation yesterday, Monday, 31st July 2023 on the state of the economy which is great and a refreshing departure from the previous government where we hardly heard directly from the President. It is not clear though if the speech was instigated by the impending strike called by the labour unions but either way, we want to be hearing from our President more often. I however score the speech 90% on issues identification but 20% on solutions.
President Bola Ahmed Tinubu President Bola Ahmed Tinubu The President displayed a deep understanding of the issues, but his solutions were cosmetics and superficial, failing to touch on the fundamental factors responsible for the ailing economy. Here is how I arrived at my assessment:
Petrol Subsidy Issue identification: The president was right to recognise that petrol subsidies was a conduit for a handful of people to loot trillions of our commonwealth at the expense of the common good like public transportation, healthcare, education, housing and national security.
The President’s Solution: The President did not mention any specific solution to petrol subsidy removal.
Fundamental Solution: The more fundamental solution to the fuel subsidy saga is the REFINERIES. Even if the President is yet to articulate a solution to the refineries, he should have told the nation he is working on a solution to give Nigerians hope that the subsidy matter will be buried in due course. Just as he has done for the CBN, the President needs to immediately take action by a sell-off of the refineries or lease them out to global refining business operators to revamp them and begin to produce petroleum products in plentiful for both domestic and export markets at far cheaper prices than the currently forced N617 per litre. In the short term the President also needs to totally liberalise/deregulate the downstream sector of the petroleum industry to pave way to any importer to bring in products, pass quality checks and sell at a price that gives them a profit. That all petrol stations in Nigeria are still selling at the same price detected by the NNPC shows the market is not perfect! President Tinubu must take immediate steps to bring true competition to the downstream sector so that Nigerians will be relieved from paying high prices for petrol resultant from the inefficiencies of a behemoth NNPC!
Multiple Exchange Rates Issue Identification: The President was right to identify the multiple exchange rates regime as a highway of currency speculation where our commonwealth was dolled out to a handful of people to become filthily rich at the expense of job creation, factories and businesses.
The President’s Solution: The President was not specific on measures his government has taken or plans to take to shore up the value of the Naira to bring sanity to the forex market.
Fundamental Solution: There are only 2 ways to strengthen the value of the Naira – reduce imports and/or increase exports! Both measures require our economy to be more productive. But Nigeria’s economy can never be more productive than it is now with 3,000MW of electricity! If President Tinubu takes a look at Brazil with a similar population like ours and sees 150,000MW supply of electricity to their economy daily, he will understand why 3,000MW can never deliver the type of economy that he is hoping for. South Africa with a population of 60 million is delivering 50,000MW while India is doing 400,000MW. Nigeria power supply at 3,000MW is too infinitesimal and too abysmal such that no matter President Tinubu’s good wishes for Nigeria, unfortunately it will all be vain as this awfully low power supply simply can’t lift up the economy. President Tinubu needs to unbundle the power sector from generation to transmission to distribution. The President must immediately sell-off or lease the transmission company to global power operators to come in with the capital, technology and expertise to expand the sector. The President must also either terminate the DISCO contracts or force their hands into technical partnerships that will inject the necessary funding into the sector. Once Nigeria’s power supply shifts to even 10,000MW, local production will be re-energised and forex problem will inevitably disappear!
Manufacturing Sector Issue Identification: the President accurately identified that our manufacturing sector holds the key to job creation.
The President’s Solution: The President’s solution to strengthen the manufacturing sector is a buffet of cash incentives to enterprises. But Cash incentives to enterprises have been tried by previous government with little success.
Fundamental Solution: The major issue for manufacturing in Nigeria is low power supply as earlier discussed. 3,000MW is electricity for some industrial parks elsewhere, it is grossly insufficient to power an economy of 200 million people. Qatar with a population of 3 million people supplies nearly 9,000MW (3 times Nigeria’s power) to their economy daily! If the President increases power output to 40,000MW at the end of his 4-year tenure, he would have solved 70% of the problems of the manufacturing sector. Other issues faced by the manufacturing sector are porous borders which result in dumping of goods in Nigeria. Manufacturers are also faced with all sorts of multiple taxes by all the tiers of government. Infrastructure including roads is also hampering the movement of raw materials and goods across the nation. Lack of raw materials arising from low productivity and insecurity is another. These are the issues the President must tackle before manufacturing is strengthened. The President totally missed out on digital economy which today is even bigger than manufacturing globally! The next big issue facing manufacturing is high interest rates! 30% or more interest rates can never support manufacturing. The president indicated he wanted to drive down interest rates to single digits and he better gets on this job very quickly to save the manufacturing sector
Food Prices Issue Identification: The President is again right to identify high cost of food as a real issue as families are progressively facing food insecurity and finding it difficult to feed their children!
The President’s Solution: The President offers to make food more available and affordable by the release 200MT of grains from strategic reserves to households and to provide fertiliser, seedlings and other inputs to farmers. Also, to support the cultivation of 500k hectares of farmlands and all year-round farming plus 200bn to cultivate 150k hectares of rice and maize, and 100k hectares wheat and cassava.
Fundamental Solution: The President’s solutions to tackle food insecurity by all means are commendable and applauded but they are not far reaching enough and miss some fundamentals. First of all, the biggest threat to farming in Nigeria today is insecurity. Large swatches of farm lands in Nigeria have been taken over by all sorts of bandits, terrorists and marauders both indigenous and foreign and millions of farmers driven into IDP camps. The President did not address insecurity and one wonders where he is going to have these hundreds of thousands of hectares of lands he plans to cultivate! The next biggest problem for farmers is manual labour! Our farmers are still mostly tilling the soil with their bare hands using their physical energy! This makes farming very unattractive to our young generation! The President needs to tackle mechanisation by supporting agro-ventures where farmers lease farm machines on credit to cultivate and harvest and pay back from their farm proceeds. With mechanisation, a farmer who is currently harvesting say 5 bags of rice per year (which is inadequate to lift him out of poverty) can harvest 500 bags and is economically and financially made! Another problem militating against farmers is lack of processing leading to huge post-harvest losses and low incomes from harvests that are literally thrown away for cheap with no value addition. This will be resolved with power supply and infrastructure.
Infrastructure Issue Identification: The President judges very correctly that infrastructure is key to national development.
The President’s Solution: The President offers infrastructure support to states to build healthcare, education, rural access roads for market access for farm produce. But the President seems to forget that these same states have been getting trillions in Naira of allocation from the federation account, VAT, excess crude oil, stamp duty, 13% derivation etc plus their own IGRs and yet nothing has been done to boost infrastructure. One therefore wonders how the President hopes that this infrastructure fund will not be similarly mismanaged! What the President needs to do immediately is to open up infrastructural development to the private sector! one of the best roads in Nigeria today is the Keffi-Makurdi road newly built by the Chinese. Imagine if this money was given to the federal ministry of works, of course there will be no road today, but we will only be hearing big grammar from government officials!
Transportation Issue Identification: The President again identifies and correctly so that transportation is a major issue for Nigerians.
The President’s Solution: The President offers 3,000 CNG-fuelled 20-seater mass transit buses to be bought with 100bn in the next 9 months to be shared to major transportation companies in the states. This solution has been tried previously with all sorts of mass transit schemes with minimal success.
Fundamental Solution: The President needs to focus on RAIL as the better, more effective and more efficient mass transit system that is affordable and does no damage to our roads and environment. There are low-hanging fruits in the rail sector the President needs to exploit through the revamping of the existing rail tracks around the nation and dropping of wagons on them to begin moving Nigerians about. It will take about the same time to revamp the existing rail infrastructure than to order buses, have them built and imported! But more fundamentally, the President needs to handover the rail sector to the private sector to build both intercity and intracity railway networks to connect all the cities, towns and village in Nigeria to facilitate movement of goods and people and job creation!
Minimum Wage: The President recognises and correctly so that a 30k minimum wage can no longer take workers home!
The President’s Solution: The President offers a new national minimum wage which is commendable. However, increasing wages in a low productivity economy like Nigeria’s only fuels more inflation!
Fundamental Solution: The President needs to tackle the low productivity of Nigeria’s economy by ensuring adequate power supply through harnessing of the abundance of energy sources (both fossil and renewable) in Nigeria. It was reported recently that Nigeria made N44bn from oil companies who were allowed to waste (flare) our produced gas! President Tinubu must end gas flaring! Why should we be satisficed with N44bn when the gas would have been used to generate electricity to grow our economy in trillions-fold! High productivity will drive down the cost of goods and services and will make the wages of workers fetch them far more value! Wage increases eaten up by inflation will do the workers no good!
Conclusion
I hope that the above assessment is taken in good light as genuine efforts by a citizen to contribute to the quest by the President to better Nigeria’s economy and hence the wellbeing of Nigerians. The argument can be made that the President’s speech dwelt on only short-term palliatives but that will be a missed golden opportunity for the President to have shared with Nigerians and the world his economic agenda! It’s also a lesson for the President’s speech writers to always ensure they give a glimpse of the President’s medium and long-term agenda to avoid a misjudgement of the President’s mind on issues. A better Nigeria is what we all want and will do us all good!
Nick Agule is an oil and gas expert and a public affairs analyst.
A CITIZEN'S RIGHT TO RESPOND
Nick Agule a Nigerian citizen responds to Chief Niyi Akintola SAN. Read to the bottom to see his response.
Nick Agule
Email: nic...
Nick Agule
Email: nic...
Date: 2024-03-11 Read More
A CITIZEN'S RIGHT TO RESPOND
Nick Agule a Nigerian citizen responds to Chief Niyi Akintola SAN. Read to the bottom to see his response.
Nick Agule
Email: [email protected]
X: @NickAgule
Facebook: Nick Agule, FCA
*MUSINGS From Chief Niyi Akintola SAN*
It is disheartening to hear that our oil was traded away by barter in this 21st century under our nose and all of us were keeping quiet.
Under Buhari, 21 to 23 trillion naira was borrowed and we conceded to the loan being paid back through oil lifting. 95% of our oil output being lifted daily to offset the indebtedness leaving only 5% of our daily production for 230 million people to manage. Oh my God!
Where were all of us when Emefiele &Co were selling the voodoo economic theory to the economic illiterate Government of Buhari? What is being done to make every participant in that government accountable? Where is the 23 trillion borrowed? Where are the projects executed with the loan borrowed? Where are the roads, refineries, aircrafts, Ships, ports , educational institutions etc built, constructed, executed or commissioned? Were we under a spell moreso after those who brought Buhari had informed Nigerians that the Daura General was only good at instilling discipline but lacks basic Knowledge of economics and Administration?
Obasanjo did warn, Obaseki warned, Soludo warned, former INEC chairman professor Jega warned, Professor Jega warned, AKEREDOLU warned but we all travelled to Afghanistan during the time.What was wrong with all of us then? AREWA leaders warned, Afenifere warned, Ohaneze warned, Southern and Middle Belt Forum warned but the general populace kept quiet..
All these opinion leaders that should serve as our gate keepers lack unity of purpose. They saw the danger coming but out of selfishness and incoherent ideological vision, failed to galvanise the general populace into positive action to stop the undertaker called Buhari.
I googled the various statements and warnings of these individuals and organisations today, and alas, they warned of the then impending danger, which have now become our garments.
Obasanjo was categorical in many of his then unwanted letters. Yes he was one of the leaders who brought Buhari in 2015 but never stopped telling us that other than his Spartan discipline, Buhari is an economic illiterate and an incompetent administrator. We ignored the old Otta farmer and failed to interrogate him as to why he encouraged us to substitute one disaster for another.
This writer was not innocent either. Many of us on this platform alongside our other colleagues across the country provided the legal cover for the See no evil, hear no evil and say no evil General. What a calamity?
Where do we go from here? A Daniel has now come to judgement to whip all of us out of our complacency and we are up in protest against him. What do we expect him to do? Must we continue to observe the terms of the obnoxious loan backed by natural resources that is expensive, deep in corruption deeply untransparent as postulated by Moghalu and Adesina above?
Can't the 10th National Assembly undo what the grossly incompetent 9th National Assembly did? Must all of us ,our children and generations yet unborn remain under the mortgage? Reading through the postulations and cries of the various pressure groups mention above over the last 8 years, I feel sorry for us all.
Yes, mo sorry pupo fun gbogbo yin , apology the iconic musician Lagbaja. Please educate me and get me out of my ignorance.
Which country in the world allows its commercial banks to charge the outrageous interest rates being charged in Nigeria?
Google the dividends declared and the after tax profits declared by our commercial banks in the last 5 years and you'll see how the banks have been killing Nigeria by instalments over the years.
I agree fully that PBAT should go after all the commercial banks and their CEOS living or dead together with their assets, offshore and inshore with immediate effect. They have taken too much for the owners to see.(Apology to Chinua Achebe. The time to act is now. Chief Niyi Akintola SAN
*MY RESPONSE*
I am sorry Chief but this Daniel is performing surgery on us without anaesthesia.
I live in the UK, the Govt subsidises education for our children up to age 18 100%! I mean the Govt pays all the fees and books. We parents pay for uniforms and school lunch. Poorer households pay nothing as the Govt pays for uniforms and meals as well.
The same UK Govt subsidises our healthcare free of charge at the primary, secondary and tertiary levels. I mean the Govt picks up all our healthcare care bills - consultation, tests, admission, surgery, drugs etc - 100% and we pay nothing. Those working pay a token for drugs!
Imagine the UK PM wakes up one morning and says subsidy on education is gone! Subsidy on healthcare is gone! And the UK PM does not announce how we can suddenly begin to pay for education or healthcare, Chief do you know the UK will go up in flames and the UK PM will definitely have to lose his job for peace to reign?
Chief this double whammy policy of removing subsidies on petrol and forex unification has brought untold hardships to the people. This Govt is not showing any sympathy at all! Instead the impoverished people are seeing the savings made from these policies spent on buying exotic cars, renovating residences, foreign trips etc. Before the President took office he was already a billionaire so what if he sacrifices his own wealth instead of using monies taken from the poor to live a lavish lifestyle?
A loaf of bread now costs more than 1k. A family that buys a loaf of bread everyday will pay more than 40k but minimum wage is 30k which not all states are even paying! How do you expect this family to survive. 30k is $20! This Govt's policies have thrown families to live on $20 a month!
There's nothing wrong with subsidies on petrol. What was wrong was the criminality. The President has the powers to have fought (whip) the corruption into line but he rather chose to whip the already impoverished people!
The President made promises to the labour unions including provision of CNG buses, up till now no CNG bus is running to ameliorate the sufferings of the people who have experienced hike in transportation costs in hundreds of percentage points! And yet their incomes have remained the same!
Chief our constitution mandates that Govt policies must be humane! We can't say that of the current Govt.
The President in his inauguration speech promised and rightly so that he'll cut interest rate to single digits. But the CBN just hiked rates to the all-time highest at 22.75% which hurts the productive sector of the economy so badly! This is an economy begging for breath to grow and generate more output! Interest rate hike does great damage to that! And the consequent loss of jobs because as borrowing becomes more expensive some producers will choose to close shops and throw workers into an already choked job market! Those who have the naira and are buying dollars to save, pay foreign fees, foreign medical, maintain families abroad etc will not save that naira even if interest rates rise to 100%! Therefore faced with the twin evil of inflation and low output/unemployment, the CBN tragically chooses to fight inflation at the expense of output/jobs! Whereas what the economy needs is output and jobs, inflation will not kill us if we are producing massively and unemployment is tackled!
As the President nears 1 year in office, he hasn't touched on the big ticket items that will revive the Nigerian economy:
1. Refineries are still in the stranglehold of the NNPC who has mismanaged them for 20 years and counting! The President needed to lease/sell the refineries to more competent operators within 6 months in office!
2. Power supply has remained 3,000MW. The President recently returned from Qatar where 12,000MW is supplied to 2.8 million people! How then can Nigeria's economy of 200 million people survive with 3,000 MW? It's impossible. The big bottleneck in power supply is the transmission company of Nigeria which is in firm control of Govt who lacks funds to expand and maintain the capacity. The President recently appointed a Mgt team for the company when he should have lease/sold to global power operators within 6 months of taking office! Generation cannot generate what transmission cannot carry and distribution cannot distribute what transmission doesn't give them! Lease/sell transmission now and revoke DISCOs licences as you intend Mr President.
3. Agriculture. Insecurity has sent packing a large number of farmers from their farms. The President has not brought the security under control rather things are getting worse as more farming communities are being sacked under his watch. The little food that's been attempted to be produced is eaten up by cows! We are a nation that prioritises the feeding of animals over the feeding of humans. And our agriculture is still by manual labour which produces little. A year in office is enough for the first set of farm machinery to have been deployed to our farms. The President needs to give focus to agriculture.
4. Steel plants needed for our industrialisation are begging for attention. Lease/sell.
5. The railways are begging for attention. The capacity to make transportation to be cheaper and safer and job creation is humongous!
6. Dredging of our waterways to pave the way for inland marine transportation to save our roads, create jobs and provide gateways for exports is begging for attention.
7. Our gas a much valuable resource (transition fuel) is still being flared! 1 year in office is enough time for the President to have read the riot act to the oil companies to harness the gas they produce with crude oil instead of extracting the crude oil and wasting the gas.
When the economy grows, Govt revenues will also grow and important services such as healthcare, education etc will be better provided by the Govts!
Chief the President needs to do better!
8th March 2024
Nick Agule
Email: [email protected]
X: @NickAgule
Facebook: Nick Agule, FCA
*MUSINGS From Chief Niyi Akintola SAN*
It is disheartening to hear that our oil was traded away by barter in this 21st century under our nose and all of us were keeping quiet.
Under Buhari, 21 to 23 trillion naira was borrowed and we conceded to the loan being paid back through oil lifting. 95% of our oil output being lifted daily to offset the indebtedness leaving only 5% of our daily production for 230 million people to manage. Oh my God!
Where were all of us when Emefiele &Co were selling the voodoo economic theory to the economic illiterate Government of Buhari? What is being done to make every participant in that government accountable? Where is the 23 trillion borrowed? Where are the projects executed with the loan borrowed? Where are the roads, refineries, aircrafts, Ships, ports , educational institutions etc built, constructed, executed or commissioned? Were we under a spell moreso after those who brought Buhari had informed Nigerians that the Daura General was only good at instilling discipline but lacks basic Knowledge of economics and Administration?
Obasanjo did warn, Obaseki warned, Soludo warned, former INEC chairman professor Jega warned, Professor Jega warned, AKEREDOLU warned but we all travelled to Afghanistan during the time.What was wrong with all of us then? AREWA leaders warned, Afenifere warned, Ohaneze warned, Southern and Middle Belt Forum warned but the general populace kept quiet..
All these opinion leaders that should serve as our gate keepers lack unity of purpose. They saw the danger coming but out of selfishness and incoherent ideological vision, failed to galvanise the general populace into positive action to stop the undertaker called Buhari.
I googled the various statements and warnings of these individuals and organisations today, and alas, they warned of the then impending danger, which have now become our garments.
Obasanjo was categorical in many of his then unwanted letters. Yes he was one of the leaders who brought Buhari in 2015 but never stopped telling us that other than his Spartan discipline, Buhari is an economic illiterate and an incompetent administrator. We ignored the old Otta farmer and failed to interrogate him as to why he encouraged us to substitute one disaster for another.
This writer was not innocent either. Many of us on this platform alongside our other colleagues across the country provided the legal cover for the See no evil, hear no evil and say no evil General. What a calamity?
Where do we go from here? A Daniel has now come to judgement to whip all of us out of our complacency and we are up in protest against him. What do we expect him to do? Must we continue to observe the terms of the obnoxious loan backed by natural resources that is expensive, deep in corruption deeply untransparent as postulated by Moghalu and Adesina above?
Can't the 10th National Assembly undo what the grossly incompetent 9th National Assembly did? Must all of us ,our children and generations yet unborn remain under the mortgage? Reading through the postulations and cries of the various pressure groups mention above over the last 8 years, I feel sorry for us all.
Yes, mo sorry pupo fun gbogbo yin , apology the iconic musician Lagbaja. Please educate me and get me out of my ignorance.
Which country in the world allows its commercial banks to charge the outrageous interest rates being charged in Nigeria?
Google the dividends declared and the after tax profits declared by our commercial banks in the last 5 years and you'll see how the banks have been killing Nigeria by instalments over the years.
I agree fully that PBAT should go after all the commercial banks and their CEOS living or dead together with their assets, offshore and inshore with immediate effect. They have taken too much for the owners to see.(Apology to Chinua Achebe. The time to act is now. Chief Niyi Akintola SAN
*MY RESPONSE*
I am sorry Chief but this Daniel is performing surgery on us without anaesthesia.
I live in the UK, the Govt subsidises education for our children up to age 18 100%! I mean the Govt pays all the fees and books. We parents pay for uniforms and school lunch. Poorer households pay nothing as the Govt pays for uniforms and meals as well.
The same UK Govt subsidises our healthcare free of charge at the primary, secondary and tertiary levels. I mean the Govt picks up all our healthcare care bills - consultation, tests, admission, surgery, drugs etc - 100% and we pay nothing. Those working pay a token for drugs!
Imagine the UK PM wakes up one morning and says subsidy on education is gone! Subsidy on healthcare is gone! And the UK PM does not announce how we can suddenly begin to pay for education or healthcare, Chief do you know the UK will go up in flames and the UK PM will definitely have to lose his job for peace to reign?
Chief this double whammy policy of removing subsidies on petrol and forex unification has brought untold hardships to the people. This Govt is not showing any sympathy at all! Instead the impoverished people are seeing the savings made from these policies spent on buying exotic cars, renovating residences, foreign trips etc. Before the President took office he was already a billionaire so what if he sacrifices his own wealth instead of using monies taken from the poor to live a lavish lifestyle?
A loaf of bread now costs more than 1k. A family that buys a loaf of bread everyday will pay more than 40k but minimum wage is 30k which not all states are even paying! How do you expect this family to survive. 30k is $20! This Govt's policies have thrown families to live on $20 a month!
There's nothing wrong with subsidies on petrol. What was wrong was the criminality. The President has the powers to have fought (whip) the corruption into line but he rather chose to whip the already impoverished people!
The President made promises to the labour unions including provision of CNG buses, up till now no CNG bus is running to ameliorate the sufferings of the people who have experienced hike in transportation costs in hundreds of percentage points! And yet their incomes have remained the same!
Chief our constitution mandates that Govt policies must be humane! We can't say that of the current Govt.
The President in his inauguration speech promised and rightly so that he'll cut interest rate to single digits. But the CBN just hiked rates to the all-time highest at 22.75% which hurts the productive sector of the economy so badly! This is an economy begging for breath to grow and generate more output! Interest rate hike does great damage to that! And the consequent loss of jobs because as borrowing becomes more expensive some producers will choose to close shops and throw workers into an already choked job market! Those who have the naira and are buying dollars to save, pay foreign fees, foreign medical, maintain families abroad etc will not save that naira even if interest rates rise to 100%! Therefore faced with the twin evil of inflation and low output/unemployment, the CBN tragically chooses to fight inflation at the expense of output/jobs! Whereas what the economy needs is output and jobs, inflation will not kill us if we are producing massively and unemployment is tackled!
As the President nears 1 year in office, he hasn't touched on the big ticket items that will revive the Nigerian economy:
1. Refineries are still in the stranglehold of the NNPC who has mismanaged them for 20 years and counting! The President needed to lease/sell the refineries to more competent operators within 6 months in office!
2. Power supply has remained 3,000MW. The President recently returned from Qatar where 12,000MW is supplied to 2.8 million people! How then can Nigeria's economy of 200 million people survive with 3,000 MW? It's impossible. The big bottleneck in power supply is the transmission company of Nigeria which is in firm control of Govt who lacks funds to expand and maintain the capacity. The President recently appointed a Mgt team for the company when he should have lease/sold to global power operators within 6 months of taking office! Generation cannot generate what transmission cannot carry and distribution cannot distribute what transmission doesn't give them! Lease/sell transmission now and revoke DISCOs licences as you intend Mr President.
3. Agriculture. Insecurity has sent packing a large number of farmers from their farms. The President has not brought the security under control rather things are getting worse as more farming communities are being sacked under his watch. The little food that's been attempted to be produced is eaten up by cows! We are a nation that prioritises the feeding of animals over the feeding of humans. And our agriculture is still by manual labour which produces little. A year in office is enough for the first set of farm machinery to have been deployed to our farms. The President needs to give focus to agriculture.
4. Steel plants needed for our industrialisation are begging for attention. Lease/sell.
5. The railways are begging for attention. The capacity to make transportation to be cheaper and safer and job creation is humongous!
6. Dredging of our waterways to pave the way for inland marine transportation to save our roads, create jobs and provide gateways for exports is begging for attention.
7. Our gas a much valuable resource (transition fuel) is still being flared! 1 year in office is enough time for the President to have read the riot act to the oil companies to harness the gas they produce with crude oil instead of extracting the crude oil and wasting the gas.
When the economy grows, Govt revenues will also grow and important services such as healthcare, education etc will be better provided by the Govts!
Chief the President needs to do better!
8th March 2024