Home Features The Week Ahead – Taming Familiar Vices

The Week Ahead – Taming Familiar Vices


Nigeria’s familiar problems occur in predictable cycles, risk experts of this terrain will agree. Kidnap-for-profit and unabating food prices despite shrinking inflation are some of these problems. Infighting at the ports, insider trading at the stock exchange and a rising debt profile remain constant features in the struggling country.

More insecurity in the South South

Four Britons have been kidnapped in Delta, a police official said on Wednesday. Kidnapping for ransom is a common problem in parts of Nigeria. A number of foreigners have, in the last few years, been victims in the Niger Delta region, which holds most of the country’s crude oil – the country’s economic mainstay. “The abductors have not made any contact, but we are doing our investigations to know the motive and have them rescued without jeopardising their lives,” said Aniamaka, Delta Police spokesperson. “Information available to us shows they are missionaries giving free medical services,” he said, adding that the British nationals had been working in a very rural area. This comes as Maurizio Pallù, an Italian missionary priest who was kidnapped in Benin, the Edo state capital on 13 October regained his freedom after four days. Pallù was kidnapped while driving on the outskirts of Benin. He was with four Nigerians when the incident occurred.

There was an increase in crime in the southern region last year that coincided with a series of attacks on energy facilities. However, there have been no militant attacks on energy installations so far, this year. This points in the direction of kidnapping for profit, rather than militancy. Kidnapping, which began as a means to fund militancy, has become very sophisticated, and organised, spawning crime lords who profit in the billions of naira. This is exemplified by the case of Chukwudumeme Onwuamadike, also known as Evans. The reason this crisis exists is the defective and inefficient nature of the police in Nigeria, and inadequate internal security mechanisms. It is interesting to note the communities’ have nabbed some suspects, which makes a strong case for improving policing in Nigeria via community or state policing. Be that as it may, as the economy continuously fails to generate jobs, we do not see any hope in sight regarding an end to this problem. While there is an urgent need for thorough security reforms which will proffer solutions for the gradual breakdown of law and order, the abduction of citizens, and foreigners, for ransom will not stop as long as the hope of finding jobs remains forlorn for the majority of young Nigerians.

Inflation eases though food prices remain stubborn

Annual inflation in Nigeria slowed for an eighth month in September, easing to 15.98 percent, the National Bureau of Statistics said on Tuesday. This is 0.03 percent lower than the rate in August. A separate food price index showed inflation at 20.32 percent in September, up from 20.25 percent in August. “Food price pressure continued into September as all major food sub-indexes increased,” the NBS said in its report. “The rise in the index was caused by increases in prices of potatoes, yams and other tubers, milk, cheese and eggs, bread and cereals, coffee, tea and cocoa, soft drinks, fish, meat and oil and fats.”

While headline inflation continues to decline gradually, food inflation, which is the component that perhaps hits the man-on-the-street the most, continues to increase. This is because the factors that affect food inflation are more rooted in the real economy, while the policies that have eased headline inflation are at best cosmetic and do not have much of an impact on food. While the CBN has printed record amounts of money, the expectation would have been that this would show up in inflation numbers rising. It appears that the government has found a roundabout way to increase the reserves the banks must hold, effectively holding back inflation. We wonder how long this situation will hold before we again see fast rising headline inflation numbers again.

World Bank’s equivocations aside, important questions about Nigerian debt

The World Bank says it is in support of efforts made by the Nigerian government to achieve economic growth. including securing foreign loans. Rachid Benmessaoud, senior communications officer of the bank, has clarified previous reports that the apex bank is against Nigeria’s planned borrowing. “On October 11, during the launch of Africa’s Pulse, the World Bank’s biannual analysis of African economies, World Bank senior economist for Nigeria, Gloria Joseph-Raji, was asked by a reporter to share her views on the federal government’s plan to increase external borrowing. At no point did she mention that the World Bank and the Federal Government of Nigeria (FGN) disagree on the need to rebalance the country’s debt portfolio. Where expenditures exceed revenue, governments will need to borrow. In doing so, the federal government is trying to rebalance its portfolio towards more external borrowing with lower interest rates and longer maturities,” Benmessaoud explained in a statement.

Upon taking office in 2015, President Muhammadu Buhari promised change and development. With little to show after two years, the government is now in a race against time. Finance minister, Kemi Adeosun, said the country must borrow more in the short term to deliver critical infrastructural projects such as roads, rail and power. Data released by the Debt Management Office shows that as at June 30, 2017 the country’s public debt stock (states inclusive) was about $64.16billion USD, with approximately 24% from external borrowing. Local and international observers have started ringing alarm bells that the borrowing is no longer sustainable despite the relatively low debt to GDP ratio. Yesterday, civic organisation, BudgIT, painted an even worse picture. The alarm is because Nigeria has a serious revenue generation problem, stemming largely from three factors – an over-dependence on oil and gas proceeds as the source of revenues; a failure to develop the non-oil economy; and the neglect of taxation as a source of revenue. In neglecting its role of providing basic infrastructure over the past fifty years, the Nigerian government lost the moral authority to make tax demands of the large informal economy. Now with issues like drought, pollution and insecurity forcing large populations of people to migrate from the traditional farming areas to urban centres, Nigeria’s productivity is taking a nose-dive. The picture of Nigeria’s economic future is looking rather gloomy.

Power grid operator comes under unwelcome spotlight

The House of Representatives will investigate $2 billion of foreign loans which the state-owned national electricity grid operator may have raised without official approval. Nigeria privatised most of its power sector in 2013 but retained control of the dilapidated monopoly grid operator – the Transmission Company of Nigeria. Simon Arabo, a member of the House of Representatives, said in a motion that the TCN had borrowed $1.5 billion from the World Bank and other international lenders without securing the approval of the National Assembly as required. He described the grid operator’s contract processes as opaque and said they may violate procurement laws. Arabo did not name the other lenders but said TCN is currently negotiating another loan of $500 million with the Islamic Development Bank. Lawmakers agreed to investigate the activities of the TCN over the past 10 years in respect of foreign loans and contract awards and to report their findings within eight weeks.

We had, in previous summaries, said that perhaps the biggest issue with the implementation of the power sector privatisation was leaving transmission is the hands of the government. Incidents like this, and the fact that transmission capacity is perhaps the only component of the power sector that has added no capacity since the privatisation process, further strengthen our position. We expect intense drama around these investigations, but do not expect any results until the fundamental issue is addressed: Power transmission needs to be privatised.

Oando enters choppier regulatory waters

The Securities and Exchange Commission said on Wednesday that it had ordered the suspension of Oando shares, citing concerns about possible insider trading and the oil company’s shareholding structure. The SEC ordered the Nigerian Stock Exchange to implement a 48-hour suspension of Oando’s shares after which it would implement a price freeze until further notice. Oando said it had received a communication from regulators on the share suspension, adding that it will state its position as soon as possible. The regulator said it had carried out a comprehensive review of Oando after it received two petitions and found related party transactions were not conducted at arm’s length and discrepancies in its ownership structure. Reuters quoted a company source as saying the petitions centred around the ownership of some Oando shares bought through an investment vehicle at the time the company bought ConocoPhillips’ Nigerian business for $1.65 billion in 2014.

Only recently celebrated as one of Nigeria’s flagship companies, Oando has been hit by series of issues and negative publications following the declaration of its monumental $923 million loss racked up in FY2014. In trying to implement its ambitious strategy of diversifying from an oil marketing company to an upstream exploration and production company, the company purchased ConocoPhillips’ Nigerian business in 2014 just before global crude prices tumbled. The latest petitions around the ownership of those same ConocoPhillips assets are coming at the worst possible time for a company which is still trying to stabilise after returning to profitability following the declaration of a meagre $11.4 million PAT.

A fight over ports regulation reaches new levels

The Federal Internal Revenue Service (FIRS) has accused Integrated Logistics Services (Intels) co-founded by former Vice-President Atiku Abubakar and Gabriele Volpi, an Italian national, of not paying taxes. On Monday, FIRS officials pasted a non-compliance sticker on the headquarters of the company in Onne, Rivers. This comes a week after the company’s pilotage agreement was terminated by the NPA. A FIRS official told online news site, TheCable, that the company had not been sealed but the agency “only pasted a non-compliance sticker on the premises of the company.” He further added that “the non-compliance stickers are routine. We did not seal nor close the company. Intels is free to carry out its operations. It is not a distrain sticker.” The official refused to commence on the size of Intels’ outstanding tax obligations. Intels has publicly contested a decision by the NPA to terminate the agreement between the agency and Intels, a decision subject to the approval of President Muhammadu Buhari, but issued on the recommendation of Attorney-General Abubakar Malami, several months after both parties had disagreements over the company’s operations in Nigerian ports.

This is a weird spat, one that has important consequences. The NPA says Intels has refused to comply with the federal government’s directive on remitting proceeds from its management activities for the ports agency, to the FG’s Treasury Single Account, for more than a year. Intels says the TSA remittances were not part of its agreement with the NPA and the agency’s action will force it to reconsider a multi-billion dollar Badagry deep seaport development. In June, Intels sued the NPA in federal court over an agency directive essentially opening the nation’s ports to all operators – an action Intels says, is a contractual breach. On the one hand, the NPA is legally required to supervise the management of our sea gateways in the country’s best interests; on the other, Intels is easily the best port operator in the land and reportedly employs about 20,000 people. Intels’ insistence on maintaining its near monopoly is, while understandable, ultimately disingenuous. The NPA’s doggedness in bullying an operator despite legal commitments that it made without being under duress, is unlikely to offer anyone looking to do business in this country any comfort. Ultimately, no one emerges from this a winner.


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