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You are here:Home>>Vincent Ogboi>>Displaying items by tag: Nigeria
Displaying items by tag: Nigeria
Wednesday, 08 February 2012 16:06

Troubles in Nigeria bad for business

 

The past few months have been a rough ride for Nigeria. Various attacks by militant group Boko Haram have killed hundreds of people, while an increase in the fuel price led to widespread protests and financial hardship for consumers.

 

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.”

 

 

 

 

 

 

 

Key Domestic Macroeconomic and Financial Developments : GDP, Interest Rate  and Unemployment

*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

authorities.

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

basis points;

 

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

Governor

Central Bank of Nigeria

January 31, 2012

 

Saturday, 04 February 2012 14:57

Could 2012 be Nigeria’s year of real reform?

 

There are many reasons to be negative about Nigeria’s business environment. Issues such religious conflict, corruption, an inconsistent regulatory environment and poor infrastructure could push any investor to rather look at opportunities in other African countries.

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.”

Charles RobertsonCharles Robertson

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.”

 

Friday, 03 February 2012 11:44

Nigeria: IMF role in fuel subsidy removal?

IMF role in the recent fuel subsidy removal in Nigeria

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.

 

Published in Archive

 

Nigerian Government to Request for Compensation on Bonga Spill from Shell

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.

 

 

 

 

 

 

The Heritage Foundation quantify Nigeria’s economic freedom score at 56.3, making its economy the 116th freest in its  2012 Index of Economic Freedom

For over a decade, The Wall Street Journal and The Heritage Foundation, Washington's preeminent think tank, have tracked the march of economic freedom around the world with the influential Index of Economic Freedom. Since 1995, the Index has brought Smith's theories about liberty, prosperity and economic freedom to life by creating 10 benchmarks that gauge the economic success of 184 countries around the world. With its user-friendly format, readers can see how 18th century theories on prosperity and economic freedom are realities in the 21st century. The Index covers 10 freedoms – from property rights to entrepreneurship – in 184 countries.

NIGERIA

Nigeria’s economic freedom score is 56.3, making its economy the 116th freest in the 2012 Index. Its score is 0.4 point lower than last year, reflecting declines in six of the 10 economic freedoms, including labor freedom, monetary freedom, trade freedom, and freedom from corruption, that overwhelmed a modest gain in business freedom. Nigeria is ranked 19th out of 46 countries in the Sub-Saharan Africa region, and its overall score is below the world average.

 

The Nigerian government has pursued structural reforms centered on enhancing the management of public finance and improving the efficiency of the entrepreneurial environment. With a strong surge in oil production, the economy has achieved an average annual growth rate of around 7 percent over the past five years.

 

Nonetheless, the structural changes that are necessary to develop a more vibrant private sector or achieve more broad-based growth have not emerged. The oil sector continues to dominate the economy. Lingering institutional problems hamper activity elsewhere. With the judicial system susceptible to political interference, corruption is prevalent, and the rule of law is weak throughout the country. Cronyism is pervasive, particularly in connection with the oil and gas sector.

 

QUICK FACTS ON NIGERIA

Population:

156.1 million

GDP (PPP):

$377.9 billion

8.4% growth

6.9% 5-year compound annual growth

$2,422 per capita

Unemployment:

Inflation (CPI):

13.7%

FDI Inflow:

$6.1 billion

 

BACKGROUND

After the death of President Umaru Yar’Adua in May 2010, Vice President Goodluck Jonathan was sworn in as president. He was re-elected in April 2011. Nigeria is Africa’s most populous nation, with an estimated population of over 150 million. It is also Africa’s leading oil producer, although sabotage of oil facilities and pipelines and violent attacks on foreign oil workers in the Niger Delta impede output. Oil and gas account for about 90 percent of export earnings and 80 percent of government revenue. The informal economy is extensive, and a majority of the population is engaged in agriculture. Ethnic, regional, and religious violence has taken a heavy toll in parts of Nigeria, aggravated by the imposition of Islamic law in several states.

Rule of Law

The legal system suffers from political interference, bureaucratic delays, insufficient funding, and the lack of a document-processing system. One of the world’s least efficient property registration systems makes acquiring and maintaining rights to real property difficult. Enforcement of copyrights, patents, and trademarks is deficient. Corruption is endemic at many levels of the public sector.

Limited Government

The top income tax rate is 25 percent, and the top corporate tax rate is 30 percent. Other taxes include a value-added tax (VAT) and a capital gains tax, with the overall tax burden amounting to 6.9 percent of total domestic income. Government spending has increased slightly to a level equivalent to 30.4 percent of total domestic output. The budget deficit has been over 5 percent of GDP, although public debt remains below 20 percent of GDP.

Regulatory Efficiency

The business environment has improved only marginally. The entrepreneurial environment remains burdened by time-consuming and costly regulatory procedures. The minimum capital requirement for starting a business has been eliminated, but completing licensing requirements still costs over five times the level of annual average income. Much of the formal labor force is employed in the public or energy sectors. Inflation has been high.

Open Markets

The trade weighted average tariff rate is quite high at 10.6 percent, and onerous non-tariff barriers further deter dynamic growth in trade. Most sectors are open to private investment, and regulations formally treat foreign and domestic investment equally. However, the investment regime lacks efficiency and transparency. The economy remains largely cash-based, and the state continues to influence the allocation of credit.

 

 

 

 

Geopolitical stakes in Nigeria: Curious role of the IMF

Nigeria, Africa’s most populous nation and its largest oil producer, is from all evidence being systematically thrown into chaos and a state of civil war. The recent surprise decision by the government of Goodluck Jonathan to abruptly lift subsidies on imported gasoline and other fuel has a far more sinister background than mere corruption, and the Washington-based International Monetary Fund (IMF) is playing a key role. China appears to be the likely loser along with Nigeria’s population.

The recent strikes protesting the government’s abrupt elimination of gasoline and other fuel subsidies, that brought Nigeria briefly to a standstill, came as a surprise to most in the country. Months earlier, President Jonathan had promised the major trade union organizations that he would conduct a gradual four-stage lifting of the subsidy to ease the economic burden. Instead, without warning he announced an immediate full removal of subsidies effective January 1, 2012. It was "shock therapy" to put it mildly.

Nigeria today is one of the world’s most important producers of light, sweet crude oil—the same high-quality crude oil that Libya and the British North Sea produce. The country is showing every indication of spiraling downward into deep disorder. Nigeria is the fifth largest supplier of oil to the United States and twelfth largest oil producer in the world on a par with Kuwait and just behind Venezuela with production exceeding two million barrels a day.

The curious timing of IMF subsidy demand

Despite its oil riches, Nigeria remains one of Africa’s poorest countries. The known oilfields are concentrated around the vast Niger Delta roughly between Port Harcourt and extending in the direction of Lagos, with large new finds being developed all along the oil-rich Gulf of Guinea.Nigeria’s oil is exploited and largely exported by the Anglo-American giants—Shell, Mobil, Chevron, Texaco. Italy’s Agip also has a presence and most recently, to no one’s surprise, the Chinese state oil companies began seeking major exploration and oil infrastructure agreements with the Abuja government.

Ironically, despite the fact that Nigeria has abundant oil to earn dollar export revenue to build its domestic infrastructure, government policy has deliberately let its domestic oil refining capacity fall into ruin. The consequence has been that most of the gasoline and other refined petroleum products used to drive transportation and industry, has to be imported, despite the country’s abundant oil. In order to shield the population from the high import costs of gasoline and other refined fuels, the central government has subsidized prices.

Until January 1, 2012, that is. That was the day when, without advance warning President Goodluck Ebele Azikiwe Jonathan announced immediate removal of all fuel subsidies. Prices for gasoline shot up almost threefold in hours from 65 naira (35 cents of a dollar) a liter to 150 naira (93 cents). The impact rippled across the economy to everything including prices of grains and vegetables.

In justifying the move, Central Bank Governor Lamido Sanusi insisted that "The monies will be used in provision of social amenities and infrastructural development that will benefit Nigerians more and save the country from economic rift."President Goodluck Jonathan says he is phasing out the subsidy as a part of a move to "clean up the Nigerian government." If so, how he plans to proceed is anything but apparent.

The huge unexpected price hike for domestic fuel triggered nationwide protests that threatened to bring the economy to a halt by mid-January. The president deftly took the wind out of protester sails by announcing a partial rollback in prices, still leaving prices effectively double that of December. The trade union federation immediately called off the protests. Then, revealingly, Goodluck Jonathan’s government ordered the military to take to the streets to "keep order" and de facto prevent new protests. All that took place during one of the bloodiest waves of bombings and murder rampages by the terrorist Boko Haram sect creating a climate of extreme chaos.

The smoking gun of the IMF

What has been buried from international accounts of the unrest is the explicit role the US-dominated International Monetary Fund (IMF) played in the situation. With suspicious timing IMF Managing Director Christine Lagarde was in Nigeria days before the abrupt subsidy decision of President Jonathan. By all accounts, the IMF and the Nigerian government have been careful this time not to be blatant about openly announcing demands to ends subsidies as they were in Tunisia before food protests became the trigger for that country’s Twitter putsch in 2011.

IMF managing director Christine Lagarde

During her visit to Nigeria Lagarde said President Jonathan's 'Transformation Agenda' for deregulation "is an agenda for Nigeria, driven by Nigerians. The IMF is here to support you and be a better partner for you." Few Nigerians were convinced.On December 29 Reuters wrote, "The IMF has urged countries across West and Central Africa to cut fuel subsidies, which they say are not effective in directly aiding the poor, but do promote corruption and smuggling. The past months have seen governments in Nigeria, Guinea, Cameroon and Chad moving to cut state subsidies on fuel."

Further confirming the role US and IMF pressure on the Nigerian government played, Jeffery Sachs, Special Adviser to the United Nations (UN) Secretary General, during a meeting with President Jonathan in Nigeria in early January days after the subsidy decision, declared Jonathan's decision to withdraw petroleum subsidy "a bold and correct policy."

Sachs, a former Harvard economics professor, became notorious during the early 1990s for prescribing IMF "shock therapy" for Poland, Russia, Ukraine and other former communist states, which opened invaluable state assets for de facto plundering by dollar-rich western multinationals.

Even more suspicious is the manner in which Washington and the IMF are putting pressure on only select countries to end subsidies. Nigeria, whose oil today sells for the equivalent of $1 a liter or roughly $3.78 a US gallon, is far from cheap. Brunei, Oman, Kuwait, Bahrain, Qatar, Saudi Arabia all offer their petrol very cheap to their people. The Saudis sell their oil at 17 cents, Kuwait at 22 cents. In the US gasoline averages 89 cents a liter.

That means the IMF and Washington have forced one of the poorest economies in Africa to impose a huge tax on its citizens on the implausible argument it will help eliminate corruption in the state petroleum sector. The IMF knows well that the elimination of subsidies will do nothing about corruption in high places.

Were the IMF and World Bank genuinely concerned with the health of the domestic Nigerian economy, they would have provided support for rebuilding and expanding a domestic oil refinery industry that has been allowed to rot, so that the country need no longer import refined fuels using precious state budget resources.The easiest way to do that would be to expedite a two-year-old deal between China and the Nigerian government to invest some $28 billion in massive expansion of the oil refinery sector, to eliminate need for importing foreign gasoline and other refined products.

Quite the opposite—the criminal cabal inside the Nigerian National Petroleum Company (NNPC) and the Government making huge profits on the old subsidy system are suddenly making double and potentially triple more to maintain the old corrupt import system, and, of course, to sabotage Chinese refinery construction that could put an end to their gravy train.

Cutting their nose to spite the face…

Rather than benefit ordinary Nigerians as the IMF proclaims to want, the elimination of the subsidies has further pauperized the 90 per cent living on less than $2 a day, according to Mallam Sanusi Lamido Sanusi, the Nigerian Central Bank governor. An estimated 40 million Nigerians are unemployed in the country of 148 million.

Because transport costs are a significant factor in delivery of food to the cities, food price inflation has soared along with costs of public transportation for the majority of poorer Nigerians. According to the Nigerian Leadership Sunday, "prices of commodities which shot up as a fallout of the fuel pump price increase have refused to come down." Everything from street vegetable sellers to carwashes to roadside photographers are feeling the shock of the rise in fuel prices. Unemployment is rising as small businesses fold.

The argument of the IMF and the Jonathan administration is that by freeing fuel prices, funds would be available to more social services and rebuilding Nigeria’s "infrastructure." Both the IMF and the government know it would have been far more economically viable to replace the current corrupt system of importing refined gasoline and fuels with investing in rebuilding Nigeria’s domestic refining capacity.

Son Gyoh of the Nigerian Awareness for Development organization asks, "Would it not be more expedient to pressure government to service the refineries to full production capacity, given the implications on overhead and competitiveness for local industries?"

Gyoh pointed to the source of the problem: "Why have successive governments left the refineries in a state of disrepair while spending huge on subsidy? Is there any chance that the savings from subsidy withdrawal will go directly into rehabilitating the refineries? Does deregulation imply NNPC will no longer operate a monopoly in importation of refined petroleum product, or is this lobby a self-serving lifeline to continue its monopoly? " He concludes, "In any case, there is good reason to doubt subsidy removal will solve the fuel scarcity problem as the cabal will only regroup to change tactics, a fact Nigerians are only too aware of."

After Nigeria partly nationalized its oil sector in the late 1970s, it also took control of Shell Oil’s Port Harcourt I refinery. In 1989, Port Harcourt II refinery was built. Both refineries fell into serious disrepair after 1994, when the Abacha military dictatorship cut the "take" of the Nigerian National Petroleum Company NNPC from domestic sale of refined oil products such as gasoline from 84% to 22%. That caused a cash crisis for NNPC and a halt to refinery maintenance. Today only one of four refineries operates at all.

What developed since was a system of NNPC importing foreign gasoline and other refined products for Nigeria’s domestic needs, naturally at a far more expensive cost. The price subsidies were to relieve that higher import cost, hardly a sensible solution but a very lucrative one for those corrupt elements in the state and private sector making a killing, literally, off the import process.

NNPC criminal enterprise

The IMF is well aware of the real cause of Nigeria’s fuel industry problems. A Nigerian legislative committee examining the sources of the industry’s problems recently released a report documenting that at least $4 billion annually is taken from taxpayers in fuel industry corruption with the state Nigerian National Petroleum Company (NNPC) at the center. According to the commission, "every day, fuel importers drop off 59 million liters of fuel. The country consumes 35 million liters daily. That leaves 24 million liters of oil available for smugglers to export, paid for by government fuel subsidies. This costs the Nigerian people roughly $4 billion yearly, according to Reuters."

Kaduna refinery (photo from nigerianbestforum.com)Kaduna Refinery

The Nigerian government has said that the 7.5 billion dollars spent yearly on fuel subsidies could be used to provide desperately needed infrastructure. But they omit any mention of the rampant siphoning off of $4 billion of oil by black market smugglers, reportedly with connivance of high NNPC government officials, to sell to neighboring countries at a hefty profit. The refined imported fuel is reportedly smuggled into neighboring countries like Cameroon, Chad and Niger where petrol prices are far higher, according to Abdullahi Umar Ganduje, Deputy Governor of Kano State.

China as IMF target?

One major geopolitical factor that is generally ignored in recent discussion of Nigerian oil politics is the growing role of China in the country. In May 2010, only days after President Jonathan was sworn in, China signed an impressive $28.5 billion deal with his government to build three new refineries, something that in no way fits into the plans of either the IMF, or of Washington, or of the Anglo-American oil majors.

China State Construction Engineering Corporation Limited (CSCEC) signed the deal to build three oil refineries with Nigerian National Petroleum Corporation (NNPC), in the biggest deal China has made with Africa. Shehu Ladan, head of NNPC, said at the signing ceremony that the added refineries would reduce the $10 billion spent annually on imported refined products. As of January 2012, the three Chinese refinery projects were still in the planning stage, reportedly blocked by the powerful vested interests gaining from the existing corrupt import system.

A report in China Daily last November quoted Nigeria’s Olusegun Olutoyin Aganga, the minister of trade and investment, that Nigeria was seeking added Chinese investors for its energy, mining and agribusiness industries. Last September on a visit to Beijing, Nigeria central bank governor Lamido Sanusiannounced his country planned to invest 5 per cent to 10 per cent of its foreign exchange reserves in China's currency, the renminbi (RMB) or yuan, noting that he sees the yuan becoming reserve currency. In 2010 China's loans and exports to Nigeria exceeded $7 billion, while Nigeria exported $1 billion of crude oil, Sanusi stated.

Until now Nigeria has held some 79% of her foreign currency reserves in dollars, the rest in Euro or Sterling, all of which look dicey given their financial and debt problems. The move of a major oil producer away from dollars, added to similar moves recently by India, Japan, Russia, Iran and others, augurs bad news for the continued role of the dollar as dominant world reserve currency. Clearly some in Washington would not be happy with that.

The Chinese are also bidding to get a direct stake in Nigeria’s rich oil reserves, until now an Anglo-American domain. In July 2010, China's CNPC (China National Petroleum Corporation) won four prospective oil blocks – two in the Niger Delta and two in the frontier Chad Basin, with plans to become core investor in the Kaduna refinery, and construction of a double track Lagos-Kano railway. China’s oil company, CNOOC Ltd also has a major offshore production area in Nigeria.

The IMF and Washington pressure to lift subsidies on imported fuels is at this point in question, as is the future of China in Nigeria’s energy industry. Clear is that lifting subsidies in no way will benefit Nigerians. More alarming in this context is the orchestration of a major new wave of terror killings and bombings by the mysterious and suspiciously well-armed Boko Haram. This we will look at next in the context of Nigeria’s recent transformation into a major narcotics hub.

F. William Engdahl, author of A Century of War: Anglo-American Oil Politics and the New World Order

Source: RT

 

 

 

 

 

 

 

 

Nigerian authors look West to gain their fame

The chaos of Nigeria's largest city of Lagos gets boiled down to prose as a narrator notes "how unpretty" its sprawl looks, with "its unplanned houses sprouting like weeds." Another author describes the madness of the commute, how six roads meet and "there is no traffic light."

 

These vivid descriptions come from Nigeria's new generation of authors, whose novels and short stories are gaining the international acclaim once reserved for postcolonial literary heavyweights such as Wole Soyinka and Chinua Achebe who earned the West African nation a reputation as a hub of classic African writing.

 

While Nigeria serves as a muse, many of these new authors must live abroad or tap into Western networks to earn a living from their writing. The international attention helps them secure a reputation in Nigeria and allows their books to be published here too.

 

"Unfortunately, no matter how well the book is written, writers who come into prominence, come into prominence because they are recognized by the West," says Nigerian author Adaobi Tricia Nwaubani.

 

After independence from Britain in 1960, Nigeria became one of the continent's top suppliers of literary talent. Soyinka was honored with a Nobel Prize for Literature for his plays, essays and books. Achebe received acclaim for his novel "Things Fall Apart" and other writings examining the failures of post-independence politics.

 

The new generation of Nigerian writers, while examining politics, appear more focused on the feeling of daily life in Nigeria, a multiethnic and religious nation of more than 160 million people where electricity remains scarce and there is a widening gap between rich and poor.

Achebe,  Wole,  Adichie, Funso & Sarah

Those new voices include Chimamanda Ngozi Adichie, whose book "Half of a Yellow Sun" focused on the breakaway Republic of Biafra and the nation's 1960s civil war that saw 1 million people killed. Another book, a collection of short stories titled "The Thing Around Your Neck," recounts the experiences of Nigerian characters living at home and abroad.

 

Like Adichie, who lives part-time in the U.S., most of these Nigerian fiction writers live in Western countries for much of the year, returning home to Nigeria frequently where they also research and observe. Their publishers and most of their readers are also in the West, where industry experts say African writing has in the last decade gained new interest from major publishers. Meanwhile, fiction publishing at home struggles to find its feet.

Kaduna Chapter of Nigerian Authors Association

For many years, self-publishing was the only hope for Nigerian writers to realize their dreams within a country where a long military era had imposed a publishing lull. More than a decade since Nigeria returned to civilian rule, only a handful of local publishers will brave the difficult environment to champion fiction writing.

 

Poor distribution networks and high printing and shipping costs are some of the setbacks bogging down the local publishing industry, forcing most book lovers to search for novels in the thinly stocked second hand bookstands on the edge of busy markets. When booksellers do sell new books, they tend to prefer religious, educational and self-help books to fiction titles considered slow-selling.

Even writers living in Nigeria need the Western seal of approval to make good sales, said writer Nwaubani.

The Nigeria-based author had to get a foreign literary agent before she could publish her satirical novel on Nigerian email scammers titled "I Do Not Come to You By Chance." She said her novel gained the most attention after it was reviewed by the Washington Post and then won the London-based Commonwealth Prize. The book has also been translated and sells more in German, a language she doesn't speak, than it sells in English in Nigeria, she said.

 

"My book is only available in five Nigerian cities and only a handful of bookshops in those cities," Nwaubani said. "In Umuahia, the town where I come from and where my book is set, there isn't any place where my book is sold."

 

Some critics, however, have questioned the reliance on Western recognition and audiences, and the indirect influence it may have on Nigerian literature, saying the authors are often edited to suit Western tastes.

 

"There is nothing wrong with having a publisher that's not here (Nigeria)... because we are aware of the fact that there are limitations to what's happening in Nigeria," said Nigerian-American writer Teju Cole. "But then what's incumbent on us is to try to support the work that's happening here."

 

Cole recently traveled to Lagos for research on a new book about the African megacity. His first published book was set in Nigeria and his second one, set in New York, was listed among The New York Times' 100 most influential books for 2011.

 

Western publishing also overlooks a vast body of non-English writing in a country where more than 150 languages are spoken. Hausa-language literature that is self-published, for instance, has thrived in Nigeria's north, but is unheard of by non-Hausa speakers, said scholar Carmen McCain teaching at Bayero University in Kano.

 

But the oversights of Western publishing perhaps offer a window of opportunity for local publishers.

 

Chinelo Onwualu, the editor at Cassave Republic, a small Abuja-based fiction publishing house, is hopeful for Nigeria's future in publishing.

 

"It's really tough publishing in Nigeria right now, but once somebody discovers that golden formula to make it work in our environment, some very exciting things are going to take place," she said.

 

Thursday, 26 January 2012 04:46

Nigeria's Inspector General of Police Sacked

Hafiz Ringim, Inspector of Police and his six deputies has been sacked by President Jonathan with immediate effect.

 

The Office of the presidency at Aso Rock has announced that President Goodluck Jonathan has sacked the Inspector of Police Mr Hafiz Ringim and his six deputies. The sack of the top police came  a week after the suspect  that was allegedly involved in  December 25th Christmas Day bombing  escaped from the police custody

RINGIM: Fired and  ABUBAKAR: Ready to servevanduard

Accoding to the statement from the presidency (ASO ROCK), "President Goodluck Ebele Jonathan has approved the appointment of Mr Mohammed Abubakar as Acting Inspector General of Police as a first step towards the comprehensive reorganisation and repositioning of the Nigeria Police Force. Mr Abubakar who is currently an Assistant Inspector General of Police replaces Mr Hafiz Ringim who proceeds on terminal leave with effect from today."

 

A committee has been set-up by the presidency to revamp the Police Force and  "To determine the general and specific causes of the collapse of public confidence in the police and recommend ways of restoring public trust in the institution ... examine records of performance of officers of the Nigeria Police Force with a view to identifying those that can no longer fit into the system."

 

The Telegraph reported that, "Police arrested Kabiru Sokoto in connection with a Dec 25 bombing last week and while they were taking him from police headquarters to his house in Abaji, outside Abuja, to conduct a search there, their vehicle came under fire and he escaped. Security sources said it was a "dangerous and suspicious" way to handle a suspect. Boko Haram claimed responsibility for the bombing of St. Theresa Catholic Church in Madalla, on the outskirts of Abuja, which killed 37 people and wounded 57, the deadliest of a series of a attacks on Christmas."

 

Wall street Journal stated, " The militia, Boko Haram, has killed more than 500 people over the past 12 months in campaign of shootings and bombings that has targeted Nigeria's police and soldiers and destroyed government buildings. In the northern city of Kano, terrorist attacks killed at least 185 people on Friday.Public confidence in the police remains low in Nigeria, a country of 167 million people, where the police are widely seen as corrupt, incompetent and often brutal. Many of Nigeria's officers themselves say they are terrified of Boko Haram. In Kano, hundreds of police officers have gone into hiding, abandoning checkpoints and changing into civilian clothes."

 

The new acting police chief  "Abubaker, 53, has been in the police since 1979. Like Ringim, he is a Muslim from the north of Africa's most populous nation, where Boko Haram's violence has mostly been carried out. Jonathan is a Christian from the southern oil-producing Niger Delta," The Telegraph reported.

 

 

 

 

Published in Archive
Tuesday, 24 January 2012 15:35

Nigeria: Attacks in Kano and Bauchi State

 

Press Statement

Victoria Nuland

Department Spokesperson, Office of the Spokesperson

Washington, DC

January 24, 2012

 

The United States strongly condemns the terrorist attacks in the city of Kano and Bauchi state in Nigeria over the past several days. We extend our condolences to the families and loved ones of the victims of this senseless violence. We call for a full investigation of the attacks and for those responsible to be held accountable.

 

This is a time for all Nigerians to stand united against the enemies of civility and peace. Nigeria’s ethnic and religious diversity is a source of strength for the country and those who seek to undermine that strength with divisive tactics cannot succeed.

 

The United States remains strongly committed to working with Nigerian officials to find a way to bring peace to the north through both security and political responses and to work with the Nigerian government and others in the international community to promote greater economic development and long-term growth throughout northern Nigeria. We reiterate the importance of protecting innocent civilians in any law enforcement response to such attacks. These issues are at the center of the regional security cooperation working group meeting taking place in Abuja January 23-24, as a part of the U.S. – Nigeria Binational Commission.

 

 

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