The justices said they would hear an appeal by a group of Nigerians who argue they should be allowed to proceed with their lawsuit accusing the oil company of aiding the Nigerian government in human rights violations between 1992 and 1995.
The plaintiffs, families of seven Nigerians who were executed by a former military government for protesting Shell's exploration and development, sought to hold the company liable under a 1789 U.S. law called the Alien Tort Statute.
A U.S. appeals court in New York dismissed the lawsuit on the grounds that corporations cannot be held liable in this country for violations of international human rights law.
Attorneys for the plaintiffs appealed to the Supreme Court, arguing that review was necessary because appeals courts around the nation have issued conflicting rulings on the issue of corporate liability under the more than 200-year-old law.
The Supreme Court is expected to hear arguments in the Shell case early next year, with a decision likely by June.
Attorneys for the plaintiffs said the case raised a host of issues of national and international importance.
The Alien Tort Statute states that U.S. courts shall have jurisdiction over any civil lawsuit "by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States."
'ONLY OPPORTUNITY' TO DETER UNLAWFUL CONDUCT
"For the victims of human rights violations, such cases often provide the only opportunity to obtain any remedy for their suffering and to deter future unlawful conduct," attorney Paul Hoffman said in the appeal.
He said the ruling created blanket immunity for companies engaged or complicit in universally condemned human rights violations, including torture and executions.
In the Shell case, the lawsuit accused the company of violations related to the 1995 hangings of the activist Ken Saro-Wiwa and eight other protesters by Nigeria's then-military government.
Shell has denied the allegations that it was involved in human rights abuses in Nigeria.
Shell's attorney, Rowan Wilson, told the Supreme Court that the appeals court had been correct in dismissing the lawsuit and that further review of the case was unwarranted.
The Alien Tort Statute allows foreigners to sue in U.S. courts over international law violations.
It has been increasingly used in the last 20 years by plaintiffs to sue corporations for alleged involvement in human rights abuses overseas. There have been a number of recent U.S. appeals court rulings on the issue.
In one case, Indonesia villagers accused Exxon Mobil Corp's security forces of murder, torture and other abuses between 1999 and 2001 while in another case Firestone tire company was accused of using child labour in Liberia.
Many of the lawsuits over the past 20 years have been unsuccessful, though there have been a handful of settlements, attorneys involved in the Shell case said.
The Supreme Court also agreed to hear another case that raised a similar issue. The court will consider whether the Torture Victim Protection Act applied only to persons or also applied to the Palestine Liberation Organization.
The case involved a lawsuit against the PLO by the widow and sons of a U.S. citizen, Azzam Rahim, a Palestinian born and raised in the West Bank, who allegedly was tortured and killed in 1995 at a prison in Jericho. The PLO has denied the allegations.
The Supreme Court cases are Esther Kiobel v. Royal Dutch Petroleum Co, No. 10-1491, and Asid Mohamad v. Jibril Rajoub, No 11-88.
(Reporting by James Vicini, Editing by Gerald E. McCormick, John Wallace, Dave Zimmerman)
Also, the youth wing of the Christian Association of Nigeria has disagreed with the explanation given by the CBN on the donation by the apex bank governor, saying he should be sacked.
The SNG said the CBN governor desecrated his office and violated the laws of the land by manifesting ethnic and religious bias in the discharge of his duties.
It threatened to mobilise Nigerians to the streets if the government failed to sack Sanusi.
Addressing a news conference in Abuja on Thursday, the SNG National Coordinator, Benedict Ezeagu, stated that Sanusi’s actions and utterances portrayed him as “an undisciplined politician instead of a public servant engaging in dangerous brinkmanship and taking advantage of Nigeria’s fault lines and the impunity permeating the public service.”
He said that Sanusi’s donation of money that was not appropriated by the National Assembly was “illegal, provocative, divisive and a display of clannish and ethnic bias.”
Ezeagu, who is also the Coordinator, Lawyers of Conscience, explained that the 1999 Constitution did not authorise the CBN governor to personally give out public fund.
He described the donation as an usurpation of the statutory function of the National Emergency Management Agency.
The SNG activist took Sanusi to task over his statement that the Boko Haram insurgency was caused by the 13 per cent derivation formula, describing this as reckless and a questionable justification of the sect’s activities.
Ezeagu said, “The most provocative of his (Sanusi) actions is his recent questionable diversion of a whopping N100m from the CBN as a donation to the government of his state of origin, Kano, for the victims of the Boko Haram insurgence without the necessary appropriation by the National Assembly and without authorisation from the board of CBN or the President/Federal Executive Council.
“Apart from the illegality of his action, the donation stands out today as the pinnacle of ethnic bias and sectarian favouritism considering the fact that before the Kano incident, there had been civil unrest, bombings and fatalities in Abuja, Plateau, Borno, Yobe, Niger, Adamawa, Nasarawa and Oyo states.”
The SNG accused the CBN governor of illegally donating N500m without appropriation to the University of Benin.
A board member of the CBN, Prof. Sam Olofin, had defended Sanusi’s action, saying the gesture was within the purview of the corporate social responsibility and mandate of the apex bank.
He had said that the donation was not made because Sanusi was from Kano State, but that the huge damage caused by the bomb blasts prompted the apex bank to make the donation.
Quoting from the CBN Act, he had said, “The Act in functions of management said that the governor, or in his absence, the deputy governor nominated by him shall be in charge of the day-to-day management of the bank and shall be accountable to the board for his acts and decisions.
“So, there is no single action that the governor takes to which he is not accountable to the board or does not entail clearance from the board.”
The Public Relations Officer of YOWICAN, Pastor John Pofi, in a statement obtained by our correspondent on Thursday in Abuja, condemned the donation by the CBN to the Kano victims of Boko Haram and called for the immediate sacking of Sanusi.
NIGERIA’S debt profile is set to rise by N1 trillion. President Goodluck Jonathan, who says he is in dire need of funds to execute some critical projects, wants the National Assembly to clear the coast for him to borrow N1.3 trillion from the World Bank, African Development Bank (ADB) and others.
The President in a letter he wrote to the Legislature yesterday, urged it to endorse his bid to borrow N1trillion (about $7,905,690,000) for the execution of the projects. There were also concerns in the Upper House yesterday that the 2012 budget was not properly packaged by the Executive arm of government.
The country’s external and domestic debts as at September 2011 are put at N6.189 trillion. The domestic debt is N5.3 trillion while the external stock is $5.6 billion. The Federal Government owes $3.316 billion while the 36 states of the federation owe $2.317 billion, bringing the total external debt owed by the two tiers of government to $5.633 billion.
If the Legislature approves the N1.3 trillion being sought by the President, Nigeria’s debt stock will rise to N7.489 trillion.
The Senate Committee on Appropriation, which is scrutinising the budget, alleged that Ministries, Departments and Agencies (MDAs) had smuggled N1trillion into the document.
In a statement, the panel’s chairman, Mohammed Maccido, said the MDAs smuggled the funds for various projects and that made the budget presented to the lawmakers different from the one sent by the President to the National Assembly.
Curiously, the alleged figure is the amount Jonathan wants clearance from the National Assembly to borrow.
Also yesterday, the Senate faulted the calls by some prominent Nigerians for the convocation of a Sovereign National Conference (SNC).
In a communication to the Senate and the House of Representatives, the President explained that the fund would be used for Pipeline Projects for the Medium Term (2012-2014) as outlined in the 2012-2014 External Borrowing Plan.
Jonathan further said the plan was designed to create jobs for Nigerians and grow the economy.
The letter read in part: “I wish to inform you that a number of special initiatives were designed to put the economy back on track through growth and employment activities geared towards the implementation of the Transformation Agenda.
“The Pipeline Projects are at various stages of completion. Therefore, I present herewith a total external pipeline borrowing in the amount of $7,690,000 or $2.64 billion a year being cumulative facilities offered by the World Bank, African Development Bank (ADB), Islamic Development Bank, Exim Bank of China and Indian Lines of Credit.”
The President urged the National Assembly to note that the objectives of the projects conformed with the Transformation Agenda of his administration and cut across various sectors of the economy, adding that the initiatives were meant to put the economy on track through growth and employment.
The Senate, which formally reacted to the calls by some Nigerians for a sovereign conference to discuss the state of the nation, declared that the summit was unnecessary.
At a press conference, Chairman of Senate Committee on Information, Media and Publicity, Enyinnaya Abaribe, said individuals, who have suggestions on the matter could forward them to the National Assembly, stressing that it is the Legislature that is constitutionally allowed to decide such issues on behalf of Nigerians.
“We were elected to represent the people of Nigeria. We don’t think there is any matter under the sun that the Senate will shy away from. I don’t know why they insist on having a Sovereign National Conference. We are not against any group meeting to discuss any issue in Nigeria, that is the essence of democracy but we cannot have democracy without democrats. But if we want to change the constitution, there is the National Assembly. All that is required is for them to bring their suggestions through their representatives and it will receive attention.
“Any Nigerian can send any bill or his opinion on anything about the country. If we have anything, we will say is off limit, it is the unity of Nigeria.”
On the plan by the Federal Executive Council (FEC) to borrow from foreign financial outfits, Abaribe said it had nothing to do with Nigeria being broke. He said the issue would be debated and the position of the Senate made public.
Meanwhile, Senate President David Mark has advised the Upper House standing committees to take the budgets of the ministries under them to the Appropriation Committee for final action, noting that ‘’Thursday (tomorrow) is the deadline and any committee that fails to do so will have itself to blame because such ministries will not have funds for 2012.”
But Maccido, who insisted that the MDAs overloaded the budget, said: “The problem is that we are seeing projects that are not in the original version of the budget presented to us by the President and substantial part of these projects are being smuggled into the budget by the MDAs and ministers. Over 40 per cent of the projects in their budgets are not in the original budget. And we are saying no to the items so smuggled into the budget, which are over N1 trillion. So, we are right now comparing the budget as originally presented by the President and the version presented by the MDAs. Unless these projects are there in the original budget, we are going to scrap them. It’s no longer going to be business as usual. These people are just smuggling in projects that are not in the budgets. And we are going to remove them,‘’ he said.
Source: The Guardian
Governor Sanusi Lamido Sanusi of the country’s apex Federal Reserve Institute, the Central Bank of Nigeria and its monetary policy committees retained the benchmark interest rate at 12 percent. The market did not anticipate any change of the monetary interest rate; therefore there was no negative or positive reaction to the outcome. Sanusi's CBN cannot be accuse of not trying its best possible to utilize the tightening of the monetary policy as a tool to rein in the surging inflation, although the result has been mixed. Now CBN can realize that monetary policy alone that rests on the manipulation of the interest rate and supply of money has its limitation. Sanusi promised to hold down interest rate below 10 percent, but the subsequent disinflation was not grounded on fundamentals but on momentum and that's why it is difficult for inflation rate to stick below 10 percent.
Nigeria's economy has a structural problem that cannot be corrected with tinkering of the interest rate. First and foremost the resource derived from oil based economy is not realistic indicator and determinant of a functional economy. The external forces determine the price of oil and make it difficult for Nigeria to plan and implement a realistic budget due to price gyration of oil. The instability deems it necessary that Nigeria should move beyond oil based economy. But the quick, sweet and rush of easy money from oil have not allowed the policy makers to be logical and visionary on the strategic outlook of the economy.
With the regards of controlling inflation, the attention of the executive arm of government must be sought. There should be a coordinated platform to enable CBN and the presidency to work together. The fiscal policy coming from the presidency must be in tune with monetary policy of the apex bank. The point here is that as monetary tool functionality lapsed with regards to checkmating inflationary trends, then the need for putting fiscal policy into action becomes apparent.
Nigerian economy is weak in spite of the robust growth it has registered. The source for the generation of foreign exchange from the economy is limited and the economy is not export orientated. A major problem of the economy; it’s the inability to produce enough jobs to commensurate to the robust economic growth. As for naira even with its recent appreciation, it is also weak and malleable when compares to dollar.
To enhance the value of naira the country's war chest must be strengthened in order to withstand the threat coming from speculators. The country's reserve stood at US$ 32.64 billion in December and the inability to replenish the dwindling reserve in spite of high price of oil was due to the constant defense of the weaken naira. The CBN has eventually restored to the devaluation of naira up to N160 to $1. But the bulwark is not the panacea because it is focusing on the symptoms of the problem not on the root cause. The country does not produce arrays of agricultural and finished products to export in order to raise a quantifiable foreign exchange that can make naira stronger and that can discourage currency speculators.
Central Bank of Nigeria may be happy with partial removal of fuel subsidy but that cannot accomplish the targeted purpose of propping up foreign reserve. There are immediate effects and implications that come with the removal of the fuel subsidies. The first major problem will be higher inflation which may accelerate to 13 percent or more. Then the prices of agricultural products and household products will escalate due to transportation and energy cost. The standard of living will likely to depress and that is not a good trend in a country with 70 percent of the population survives with less than two dollars a day. The increasing poverty does not augur well with the stability of society and that can be translated to higher crimes and poor security. Poverty and insecurity discourage economic development and have the propensity to encourage capital flight and weaker attraction of direct investments in the non-oil sector of the economy.
The economic growth of the Gross Domestic Product at fourth quarter of 2011 was 8. 68 percent while inflation rate was at 10.3 percent in December. The fourth quarter GDP growth was impressive but it did not make a difference on the people due to lack of jobs and increasing poverty.
According to the Domestic Macroeconomic and Financial Developments issued by Sanusi's Central Bank of Nigeria the "real Gross Domestic Product (GDP) grew by 8.68 per cent in the fourth quarter of 2011 up from 6.64, 7.72, and 7.40 per cent in the 1st , 2nd and 3rd quarters, respectively. The overall GDP growth rate in 2011 was estimated by the NBS at 7.69 per cent, marginally lower than the 7.87 per cent recorded in 2010. This projection is based on the estimated Quarter III and Quarter IV growth rate of 7.40 per cent and 8.68 per cent respectively. The 2012 Budget proposal assumed a growth rate of 7.2 per cent." Without doubt the data looks wonderful on piece of paper, how far does it fare in the real world?
Looking at the data the Central Bank of Nigeria should have been excited together with streets and villages of Nigeria of the surging economic growth buttressed by the rosy numbers. But that was not apparent because it did not translate into more jobs. The unemployment rate stood at almost 24 percent (23.9) at the fourth quarter according to National Bureau of Statistics (NBS). But the real unemployment rate is definitely higher when urban joblessness among the youths is factored in and rural unemployment statistic is properly gathered. Due scientific and technological limitations, the unemployment number was not correct.
Faces of poverty in Nigeria
Sanusi Lamido speaking at the lecture he delivered at London School of Economics could not explain succinctly the real reason why the unemployment was escalating despite the rosy economic growth in the country. His words, “Major bottlenecks and supply-side constraints, including enabling legal framework” have “slowed the responsiveness of some CBN reform measures.” And he continues, “The link between major growth drivers, particularly agriculture and manufacturing, continue to be weak and the required costs of the expected infrastructural needs of the economy are daunting and remained a major challenge to financial sector, “the need for a low-cost long-term infrastructure financing requires more than the CBN alone can tackle.” All he was saying that there is no answer for what is happening in the economy with regards to economic growth and higher unemployment.
Sausi's CBN did some good: The Recapitalization and Quantitative Easing (QE) brought back confidence in the banking sector. The down side is that over stimulation and over supply of money may induce higher inflation. The billions of naira that was used to propped up and bail out collapse banks probably overheats the economy and that could trigger higher inflation. That will make the job of controlling inflation more difficult.
Notwithstanding, CBN deserved huge credit for salvaging the failed banks but the banking sector cannot function alone to the exclusion of the whole economy. CBN cannot do it alone; the country's economic problem cannot be resolve by moping of the liquidity and tightening of the monetary tool to rein in inflation. A country with structural problem needs a committed and visionary leadership.
Nigeria's economy needed to be over hauled to make it more productive, not only relying on oil export. The problem of infrastructures must be tackled not with lip service but with pragmatism. The refinery must be built and those ones in progress must be completed to bring down the price of petrol and to meet the local demands. Roads, schools, electricity and most important the security must be improved. Political instability and social unrest are gateway for capital flight and investments repatriation. Nigeriamust reject these ailments that can threaten and deter economic growth.
Just on Tuesday, some notable personalities converged on Lagos to appraise the state of the nation. Their damning verdict was that Nigeria, the most populous black nation and richly-endowed was already gaspimg for breathe. Their mission, according to most of the personalities, was to save the country from an impending catastrophy. Ironically, a handful number of the discussants had played one active role or the other in official capacities during Nigeria’s gradual march to infamy.
Indeed, all of us are in trouble. The reason is that all those virtues that had made us stand out as highly progressive and humane are on the verge of extinction. We have lost our sense of neighbourliness. A lot of people in our midst are no longer their brothers’ keepers.
Instead, they are incredible killers. The Boko Haram vividly captures the ugly phenomenon. It is the greatest height of the degeneration in our values as a people.
We are faced with a spectre of battles across the land. Banditry, militancy, ethnic cleansing and all manner, of bloodbaths underscore the dilemma of country, which at independence, in 1960, held a lot of promises for mankind. Thanks to a capricious section of the economic and political elite, whose actions and inactions have created the current frightening climate in the country.
We do not kill the body alone. The Nigerian system has equally been killing the soul. The kind of serious thing that formed the trademark of the nation’s first generation of political leaders are now in short supply. It has been overshadowed by ego, personal aggrandisement and survival instinct by a few members of the political class left with conscience. Corruption manifests in different shades.
For too long, we have harped on the need to convene a national conference to address the those knotty issues threatening the foundation of the country. The debate has even culminated in producing drafts of the kind of constitution suitable for the close to 500 ethnic groups that make up the federation.
Some made attempts to lobby members of the National Assembly to consider those documents during efforts to rewrite the Nigerian Constitution. Apart from a body of senior citizens called The Patriots, a number of activists also take other steps, such as initiating steps to secure the cooperation of the legislature to pave the way for a national conference.
All these were carried out at the time Nigeria was not faced with the menace of terrorism as we have now. We are back to that period. And how far can we go this time round?
We need a conference. But those forces opposed to it have left the shores of the country. In fact, their ranks may have swelled over time, after building intimidating business empires. Their cronies are many in the political circle, and who believe that current arrangement is the best for the country, because of their narrow interest. I believe that those who constitute a majority in benefiting from the present political arrangement might not give in easily.
The stiffest opposition could come from a section of the country, where those behind the Lagos meeting could ill afford to ignore.
Therefore, the Lagos summit should be seen as the first step in the overall plan to convene a national conference capable of taking Nigeria out of the jaw of the lion. The most crucial step still has to be taken, which is building a national consensus on the subject matter. Except for a few, most of the summiteers had been regular faces at similar gatherings designed to tackle national issues dispassionately in the past. In fact, the Lagos lawyer, Mr Femi Falana apparently inferred this observation during his submission at the meeting.
Again, the political class needs to reassure the people that they would not be let in the renewed quest to reinvent the country. The people laboured hard to enthrone democracy on May 29, 1999, by making sure that the military retired to the barracks.
The general expectation was that the era of “business as usual” was over. It is sad that today, those vestiges that made military rule unpopular and tragic are being replicated by political leaders, a few of who had professed to be democrats. They have not only abandoned the people, but also impoverished them through unpopular economic policies and programmes. A lot of them are dropping the names of nationalists of blessed memories, who did all they could to wrest Nigeria from colonialism.
Besides, the initiators of the Lagos talk must guide against the possibility of their actions of being misconstrued. There is the need to achieve spread in representation. It is by so doing that they can allay the fears of those that might think that the initiators harbour a hidden agenda. In other words, all efforts must be made not to make the current exercise a sort of gang-up against any section of the country, which may cause more harm than the good the leaders have set out to achieve.
It is estimated that Islamic sect Boko Haram has killed 500 people in 2011 and 250 in the first weeks of this year in numerous gun and bomb attacks. Although Boko Haram, which is Hausa for “Western education is sin”, has been in operation for a number of years, its attacks have become more sophisticated and deadly in recent times. Several bombings on Christmas Day claimed dozens of lives. On 20 January, the group launched its most bloody attack yet in the northern city of Kano, killing over 180 people.
To add to the troubles, 1 January 2012 marked the more than doubling of the pump price of petrol, from 65 naira per litre to around 140 naira, due to the Nigerian government’s decision to stop subsidising fuel. This led to a nationwide strike and protests that brought economic activities to a halt in many parts of the country. Although the government initially said the price increase was irreversible, it was forced to reach a compromise by restricting the fuel price to 97 naira.
Negative impact on sales and production
These issues are not only keeping politicians and security chiefs awake at night, but companies are also experiencing pain.
PZ Cussons – a producer of household and personal care products – this week said in a statement that the turmoil in Nigeria is impacting sales and production. “Two events have affected Nigeria … First, social instability over the Christmas period led to a state of emergency being declared in a number of northern states which has impacted sales in those areas. Second, the removal of the fuel duty subsidy led to civil disruption during January and a week-long national strike which affected production in all factories and sales on a national level, during what is a peak trading period. Whilst the strike has now ended and the fuel subsidies have been partially reintroduced, continued social instability in the north together with ongoing fiscal reforms may create further unrest in the balance of year.”
PZ Cussons is based in the UK with operations in Europe, Africa and Asia. Nigeria is its largest single market.
The company said that performance over the coming months partly depend on “the severity of any further disruption in Nigeria as well as any impact on consumer disposable income from removal of the fuel subsidy”.
The higher fuel cost is likely to lead to a rise in prices, affecting consumers’ disposable incomes, which could hurt the sales of companies like PZ Cussons. Renaissance Capital noted in a recent report that “the impact of the petrol price hikes could go beyond simply pushing up transport costs. It is also expected to affect the cost of producing goods and services. In particular, the prices of food, clothing and footwear, furnishings, as well as housing and utility costs may tick up on the back of the scrapping of the petrol price subsidy. In addition to higher petrol prices, the cost of producing electricity from petrol-powered generators is also expected to rise.”
*Unemployment rises to 23%
*Retains MPR at 12%
*Gross Domestic Product (GDP) grew by 8.68
Output and Prices
Provisional data from the National Bureau of Statistics (NBS) indicated that real Gross Domestic Product (GDP) grew by 8.68 per cent in the fourth quarter of 2011 up from 6.64, 7.72, and 7.40 per cent in the 1st , 2nd and 3rd quarters, respectively. The overall GDP growth rate in 2011 was estimated by the NBS at 7.69 per cent, marginally lower than the 7.87 per cent recorded in 2010. This projection is based on the estimated Quarter III and Quarter IV growth rate of 7.40 per cent and 8.68 per cent respectively. The 2012 Budget proposal assumed a growth rate of 7.2 per cent. This is in line with the latest World Bank forecast of 7.1 per cent growth for Nigeria in 2012. The Committee noted with satisfaction, the good 4 performance of non-oil activities including agricultural and services sectors as well as the recovery in crude oil output in 2011, particularly in the fourth quarter. In the Committee‟s view, the opportunity to build on the robust non-oil growth with further investments in infrastructure and manufacturing and processing activities should be utilized in order to mitigate any negative impacts from the likely external shocks during the year.
The Committee also noted the NBS survey data on the rise in the unemployment rate to 23.9 per cent in 2011 from 21.4 per cent in 2010. The latest unemployment rate is considerably higher than the 12.3 per cent recorded in 2006 by the NBS survey, which suggests that the consistently high output growth during this period had failed to create adequate employment for the growing labour force. In view of this, the Committee recommends that in addition to the structural reforms being currently pursued, emphasis should be placed on technical and vocational education in order to produce a labour force that is compatible with the current stage of the country‟s development.
In 2011, the Inflation rate fluctuated within the lower double-digits range during the early part of the year, but moderated thereafter. The year-on-year headline inflation rate, which was 12.1 per cent in 5 January 2011 rose to 12.8 per cent in March, before moderating to 10.2, 10.3, and 10.3 per cent in June, September, and December, respectively. Similarly, food inflation rose from 10.3 per cent in January 2011 to 12.2 per cent in March and thereafter moderated to 9.2, 9.5, and 11.0 per cent in, June, September, and December, respectively. Core inflation also rose from 12.1 per cent in January to 12.8 per cent in March stabilizing at 11.5, 11.6, and 10.8 per cent in June, September and December, respectively.
The headline inflation rate stood at 10.3 per cent in December 2011, by far the lowest since December 2008 and lower than the average of 12.75 per cent during the period 2001-11. Food inflation, at 11.0 per cent in December 2011, was lower than its level in the preceding three years. Similarly, the year-on-year core inflation declined in
2011. At 10.8 per cent in December 2011, core inflation was marginally lower than the 10.9 per cent in December 2010 and 11.2 per cent in December 2009. The Committee noted that both food and core inflation have remained high exerting immense pressure on the headline inflation rate. The Committee was therefore of the view
that while the focus on growth continues to be a key imperative, the containment of inflation equally deserves immediate attention. It noted that the inflation outlook in the short- term will be impacted by the anticipated fiscal injections in relation to the proposed 2012 budget, the recent partial deregulation of pump price of PMS, and 6 new tariff regimes on certain food imports. The Committee has also noted comments indicating possible plans by the National Assembly to revise the budget benchmark price of oil from $ 70 per barrel to $75 or even $80 per barrel. Such a measure would significantly increase expenditures especially given the already high oil output assumptions.
In addition, it would reduce accretion to the Excess Crude Account (ECA) and increase the inflationary pressure already in place on the supply-side. In the event of this happening, the likelihood of further tightening during 2012 increases. The Committee would like to reaffirm its commitment to price and exchange rate stability and its determination not to pursue an accommodative policy stance. The Committee therefore, strongly supports the recommendations of the Executive for a benchmark price of a maximum of $70 per barrel.
External Sector Developments
Foreign exchange reserves amounted to US$ 32.64 billion as at end December 2011, more or less flat relative to the US$32.34 billion as at end December 2010, despite the higher oil price in 2011. Notwithstanding the high prices of Nigeria’s reference crude oil (Bonny Light) which averaged US$106.32 per barrel for the year, the
limited accretion to external reserves was due to the high demand for foreign exchange in the market. The Committee noted that pressure on the exchange rate emanating from the high demand reflected the import-dependent nature of the economy, probably compounded by the activities of speculators. The reduction in
arbitrage opportunities in the oil marketing sectors combined with stronger controls in foreign exchange practices have already led to a noticeable moderation in foreign exchange net demand. The official wDAS rate (inclusive of 1 per cent commission) moved up from N151.62 per US$1 in January 2011 to N154.45/US$1 in June and
further to N158.21/US$1 in December 2011. The volatility in the official rates, however, was limited with the coefficient of variation being 9 1.28 per cent for the year as a whole compared to 0.32 per cent in 2010. The Committee commended the CBN for its efforts at establishing stability in the market. It also urged the CBN to strive to
eliminate speculative demand for foreign exchange. The Committee also noted that as at January 24, 2012, the exchange rate was N158.57/US$1, while the foreign exchange reserves amounted to $34.18 billion on January 27, 2012, which could finance over 6 months of imports of goods and services. The outlook for oil prices in the short-term as well as the forecast demand/supply balance, suggest that the current exchange rate band should be retained while still achieving moderate continuous accretion to reserves
The Committee’s Considerations
The Committee is pleased that ahead of most African countries, Nigeria had been proactive by responding to the threats of inflation induced by fiscal spending and global food, fuel and other commodity prices as well as to the challenges of financial stability. The Committee observed tat the mandate of the Bank was largely
achieved, as inflation was contained within tolerable levels and the exchange rate was generally stable throughout 2011. The resolution of the banking crisis during the year was also commended. Against this background, the Committee welcomed the stated fiscal stance of the Federal Government as part of its programmed movement 10
towards fiscal consolidation. The increased share of capital expenditure in the proposed total expenditure in 2012 is an important signal of the commitment of the Federal Government to improve the productive capacity of the economy. The Committee finds the current environment to be conducive for improved cooperation and coordination between fiscal and monetary
The Committee acknowledged that the decision to remove the fuel subsidy was a major development that took place since its last meeting in November 2011. It commended the Federal Government on the partial removal of subsidy on Premium Motor Spirit (PMS), which it noted will have salutary effects on the external reserves and exchange rate as well as on investment in oil and gas downstream sector. It further commended the Federal Government for the commitment towards the passage of the Petroleum Industry Bill (PIB) which, it believes, would further complement the benefits of the fuel subsidy removal. On the other hand, it recognized the possible
negative impact of the partial removal of fuel subsidy on the general price level and hence inflation in the short run. In this regard, it underscored the need for the speedy implementation of the palliative measures and entrenchment of social safety nets for the more vulnerable groups. However, the long-term benefits far outweigh the likely short term costs as far as inflation is concerned. 11 Furthermore, the Committee commended the fiscal authorities for the benchmark crude oil price of $70 per barrel as proposed in the 2012 budget and advocated for its retention as any upward revision would tend to undermine macroeconomic stability.
The Committee considered the need to sustain the high output growth that the country has seen in recent years partly because of the slowdown in the advanced and other emerging economies and partly because of the need to generate employment in the economy. However, to help generate new jobs, it would be essential for the Federal Government to move quickly with the structural reforms such as (a) power sector reforms, (b) implementing the agricultural sector transformation programmes and the associated value chain, and (c) refocusing attention to the provision of technical and vocational training to bring about skills development that would match the needs of the economy. The Committee underscored the need for maintaining price stability in a manner conducive to the achievement of employmentgenerating growth. In this connection, it observed that the announced increase in import duties on some food items by the end of June 2012 would exert further pressure on food prices which would
compound the effect of increased transportation costs induced by 12 the partial removal of the fuel subsidy on the general price level and the associated inflation expectation.
The Committee noted that historically, upward adjustments in the price of PMS have tended to have a short-term impact on the rate of inflation. A review of previous instances of adjustment in fuel prices shows that without exception, each instance is accompanied by an increase in the rate of inflation followed almost immediately
by a moderation in the short - to - medium term. Staff estimates indicate that inflation in the first two quarters of 2012 would range between 11.0 per cent and 14.5 per cent, and then moderate steadily towards the single digit zone by late 2013. Real interest rates are therefore likely to remain positive on a trend basis, even if the
rate of inflation were to rise briefly above the MPR in the second quarter. Finally, the Committee recognized the current security challenges and Government’s efforts to find a lasting solution through dialogue, economic measures and enhanced intelligence. It expressed confidence on the ability of Government to resolve the problem.13
Decisions In the light of the above, and considering the clear impact of previous tightening on the rate of inflation and exchange rates up to December 2011, the Committee unanimously decided as follows:
1. Retain MPR at 12.0 per cent with interest rate corridor of +/- 200
2. Retain CRR at 8.0 per cent;
3. Retain minimum liquidity Ratio of 30.0 per cent; and 4. Retain the Mid-point of exchange rate at N155/US$1 with a band of +/-3.0 per cent.
The Committee also resolved to watch closely developments with respect to the fiscal stance and to respond appropriately if, and when, the need arises.
Sanusi Lamido Sanusi, CON
Central Bank of Nigeria
January 31, 2012
Charles Robertson, global chief economist at Renaissance Capital is, however, more upbeat about Nigeria’s future. In a recent note to investors, Robertson posed the question whether 2012 could be the start of a radical transformation for Nigeria? “Is this the year when investors should be taking long-term bullish positions in the market? It is beginning to look to us like the answer to both these questions is yes.”
He highlighted three key reform areas for Nigeria: the fuel subsidy, the electricity sector and oil production. “Progress in any one of these areas would justify a more positive approach to the market – while progress on all three would be extremely positive. To our surprise, the latter is happening.”
Robertson offered the following commentary on each of these three areas:
Fuel subsidy: “The reduction of the fuel subsidy has been widely covered in international media. This was costing [the government] perhaps US$7 billion to $8 billion [every year], more than the combined budgets for education, health and agriculture. The compromise, which has seen the retail price of a litre of petrol rise from NGN65 (USc40) to NGN97 (USc60) instead of the targeted NGN140-145 (USc90), will be politically acceptable, we hope, while cutting the scope for corruption and allowing a redirection of funds that should benefit all Nigerians and reduce long-term fiscal risk. We may see further rises in fuel prices in 2013.”
Electricity sector: “The government has just abolished the electricity Power Holding Company of Nigeria (PHCN), which had been a major factor preventing reform of the electricity generation sector, in our view. Nigeria remains woefully underpowered in contrast to other sub-Saharan African countries, as any back-to-back visit to Ghana and Nigeria will demonstrate. The lack of officially generated power means that Nigerian businesses rely on expensive electricity from imported small generators, reducing the efficiency of all sectors of the economy. Note also the possibility of an electricity price hike (with widespread media reports suggesting a rise of 50-100%). We believe any push back on this move by Nigerians is likely to be significantly moderated by the prolonged pain of higher costs associated with generating power from inefficient alternative sources, such as generators.”
Oil production: “The third area of reform progress is the Petroleum Industry Bill (PIB). Over the past few decades, investment throughout the Nigerian oil sector has been governed by a mish-mash of legislation. The PIB aims to unify all the necessary legislation in one bill, providing a clear framework for investment in the energy sector. In January the government promised to put the PIB to parliament by the end of the first quarter of 2012, and a bi-partisan Special PIB Task Force was established on 19 January to help drive this process. The Task Force has been given 30 days from the date of its inauguration to produce a new, harmonised copy of the bill for consideration by the legislature. To some extent, progress is being made in some areas even without the PIB, but its approval would nonetheless improve the energy investment climate.”
In addition, Robertson has high hopes that Nigeria’s new agriculture minister, Akinwunmi Adesina, will boost private sector investment in the sector. He added that a constitutional review might cut down government bureaucracy.
Need for caution?
However, Robertson warned there are risks. “Obviously there is the chance that reform could stall, that the PIB could get stuck in parliament again and that electricity reform could also be delayed. This has happened before.”
According to Robertson there is no guarantee that Nigerians will support all these reforms. “It is sensible for the government to be doing this when oil prices are above $100/barrel, as it can draw on the windfall to ease the pain of reform, but a fall in the oil price would make reform harder to achieve.”
He added that tension between the Muslim north and Christian south could also pose a risk to investors. “We cannot provide a strong conclusion on where Nigeria will head, but we note that the Muslim north is unlikely to want to lose access to the energy resources of the south, and therefore there are strong interests in working to address the country’s challenges on this front.”
No matter how the Nigerian present economic team chooses to shade, equivocate or obfuscate it, International Monetary Fund (IMF) played a significant role, if not an upper hand in the removal of fuel subsidy in the poverty stricken Nigeria. It is no longer news neither is it a surprise that IMF has been interested in the removal of fuel subsidy since 2009. The evidence to this assertion has been littered everywhere especially in the public domain.
British Broadcasting Corporation (BBC) reminded us that “The IMF has long urged Nigeria’s government to remove the subsidy, which costs a reported $8bn (£5.2bn) a year.” IMF has never stopped to meddle in the internal financial and economic affairs of the country in spite of the impression and double talk it has been making lately. Nigeria’s economic team effort to obfuscate the matter is no longer functional.
The America's flagship newspaper, New York Times wrote recently: “In a 2009 report, the International Monetary Fund called the removal of the fuel subsidy “an important first step.” But in a place where experts estimate that $50 billion to $100 billion in oil revenue has been lost through fraud and that 80 percent of the economic benefit from oil production has flowed to 1 percent of the population, the monetary fund’s approval of a step that hits ordinary people so hard looks provocative." The endorsement for the abrupt fuel subsidy removal without adequate palliative measures buttressed that IMF is clueless and at worst indifference on the level of poverty and depravity in Nigeria.
In the rush to appease the masterly IMF the Nigerian leaders failed to make a solid plan; which is to absolutely convince the poor masses before the subsidy removal with realistic and implementable palliative measures. The global news network CNN crisply described the removal of subsidy, “It is the abrupt removal of the fuel subsidy, in what has been described as a callous New Year's Day "gift" that proved unacceptable for many Nigerians. There has been intense speculation in the country that the decision came suddenly because of pressure from the International Monetary Fund. The announcement coincided with a visit to the country by IMF’s head Christine Lagarde weeks earlier."
The economic team of the present administration led by Dr. Okonjo-Iweala went before the country's congress after IMF’s Christine Lagarde visit to reassure them that Nigeria will not implement IMF's neo-liberal policies. But on the first day of January the removal of subsidy came suddenly. Nigerians protested not necessarily because they disliked the administration but for the rejection of the policy. The poor masses could not accept the jumped in price of a gallon of petrol from less than $1 to almost $4 in a country that seventy percent survived with less than $2 a day. The decision for the removal is not logical knowing quite well that the masses are already deprived and barely surviving. It is beginning to look that IMF does not have compassion for the poor struggling masses of Nigeria. IMF history with Nigeria has been a historical annals filled with thorns of suffering and misery.
When IMF Managing Director Christine Lagarde came to Nigeria, instead of the Nigerian leaders and intellectuals to ask her to apologize to Nigerians on behalf of IMF for the austerity measures of 1980s and the subsequent deformation of the country's economy; rather they were busy praising her. She was also given credit for the so-called 18% write-off of the Paris club debt. The praise and credit should go to poor Nigerians on whose back the payment was made to rich syndicates of Paris Club in which the mountainous payment made was based on high interest rate and arrears accumulated by the outstanding debt. The provision of water, electricity, healthcare and roads were abandon in order to make the payment to Paris Club. The credit and heaping of praises should go to Nigerians not to IMF’s head whose highest priority is not on women and children who went to bed hungry.
No one is suggesting that a nation should abandon its financial obligations and deleveraging of its debt. But at same time a logical approach must be taken which is to put people’s welfare on account and not relegated it to the nadir level. Nigerian people should not be thrown aside to satiate international wealthy syndicates. After all, charity should start from home.
The implementation of IMF's Structural Adjustment Program with its austerity measures in Nigeria’s 80s and early 1990s comes with naira devaluation, importation restrictions and slash of social spending, that was too traumatic to be easily forgotten. The negative adjustment in the economic outlook and wellbeing of Nigeria was expressed by Gideon Nylan, a writer on political economy of developing nations at Afripol, on which he painted the situation with this troubling description: "The Nigerian middle class has yet to recover from the IMF devaluation of 1986. Suddenly teachers, lawyers, doctors, and civil servants saw their life savings disappeared. In order to support their families and create a better living for themselves, they left the country for greener pastures in other countries."
In addition Nigerians have not wholly recovered from the aftermath of the implementation of the neo-liberal policies that separated families, worsen the health wellbeing of the country and totally demolish the educational sector that was starved of fund. The manufacturing sector that relied on the importation of raw materials closed down due to lack of import license and foreign exchange. The IMF's austerity measures spiked and induced higher unemployment and together with surging inflation rate made life unbearable for majority of Nigerians. Are Nigerians quick to forget? Probably, the temporary amnesia has made them to be praising the visiting IMF's chief instead of asking IMF for reparation and apology.
A Nigerian government official was suggesting that the removal of subsidy was necessary to save Nigeria from not ending up like the bankrupt Greece. But in reality and joke apart, Nigerians should be envious of Greece because in spite of the so-called debt problem of Greece, their lifestyle have not changed. Last time we checked there is still tap running water, 24 hours electricity and paved roads in Greece. Nigerians will not mind having all the social amenities, social safety nets, security enjoyed by Greeks even together with its debt. Many Nigerians may be willing to trade places with Greece if asked.
Nigeria should work with IMF when she deems it necessary and there is no reason to be genuflecting and kowtowing. Nigeria has produced capable men and women that have the ability, intellect and potential to salvage the sinking country. IMF should not be adding sand to the garri of nation struggling to determine her destiny.
Nigeria is about to ask for Compensation from Royal Dutch Shell Plc (RDSA), for the major hydocarbon (oil) spill at Bonga, River state that ocurred December 21st, 2011. This was reported by Vincent Nwanma of Bloomberg News Network according to the statement e-mailed from African Union (AU) headquarter at Addis Ababa, Ethiopia.
President Jonathan of Nigeria was quoted in a meeting with Ban Ki-Moon at AU headquarter that the request will be "soon" and that will come “with a view to reaching an amicable solution to the problem.” Ban Ki-Moon, the United Nations secretary- general was in Ethiopian capital at Addis Ababa to attend 18th African Union (AU) Ordinary Session of the African heads of state and governments.
"A spill last month from the 200,000 barrel-a-day Bonga field off Nigeria, which produces nearly 10 percent of Nigeria’s crude, led Shell to stop production from the facility, the company said on Dec. 21. The export line at Bonga leaked almost 40,000 barrels of crude during a tanker loading, according to Shell estimates, making it Nigeria’s worst offshore spill in more than a decade," reported Bloomberg.
"It's comparable to what happened in 1998 with the Exxon Mobil spill, in terms of the quantity that has been spilled, it's the biggest since then," Peter Idabor, director of Nigeria's National Oil Spill Detection and Response Agency (NOSDRA), told Reuters last year when the spill occured by telephone from the capital Abuja.