At 3.5 per cent, Nigeria’s Revenue to GDP Lowest in the World

Nigeria’s Gross Domestic Product (GDP ) to revenue has been seen as lacking ambitious being the lowest in the world according the International Monetary Fund (IMF).

The IMF Director, Africa Department, Abebe Selassie, stated this while speaking at the Regional Economic Outlook for Sub Sahara Africa ( SSA ), in Abuja, Tuesday,

He also noted that Nigeria has the poorest performing economy in the world, with a projected growth rate of 2.8% for 2019, compared to her neighbors such as Ghana, Ethiopia, Benin Republic and Senegal are growing at the rate of 7%.

He attributed the current economic challenges to over dependence on oil, and the result of the oil price shock of 2015 and the Niger Delta security crises which reduced oil production from 2.2m barrels per day to less than 800,000 barrels per day.

The IMF Africa region director described the 2.8% growth as “ Well below Nigeria’s potentials” adding that the negative impact of the various crises combined to impact negatively on the economy.

“ This is the economy that should be growing at 6-7%”

The IMF said Nigeria government need to quickly build up its infrastructure,

He said, “Nigeria, Angola and South Africa currently records a weakest economic outlook with an average below 3 percent, and this amounts to nothing compared to the resources in these countries”

“The persistent effects of conflict on economic activity as well as the sharp drop in oil prices and other ongoing adjustment have slowed down the growth of the nation”, he added.

He explained that there is need for the government to prevent and control the effects of conflict by ensuring programs that promote building of social capacity, inclusive growth”

Government also need to focus on policy initiatives that can guarantee growth and economic diversification, according to the IMF Africa Director

“ Government needs to generate resources that are required to invest in the health sector, education and infrastructure. Secondly, you need reforms that will ensure uninterrupted energy supply, but also more important , you need to encourage more private sector investments by improving the business climate which will help in diversifying your economy, away from over reliance in oil”

Siddharth Kothari, Economist African Department, IMF stressed that with economic growth at 1.9 percent in 2018, non-oil revenue mobilization of 3.4 percent of GDP, Nigeria still remain one of the lowest performing economy in the world adding that the current level of growth is insufficient for the government to provide the infrastructural and developmental need of the country.

“The Nigeria economy growth rate is insufficient for the government to meet the infrastructural and developmental need of the people, hence there is need for to introduce more means of revenue generation as well as promote policies to boost economic activities”, he said.

“The Nigeria government should focus on addressing structural challenges in order to boost diversification, business environment, governance, power sector reforms, public investment efficiency, health and education”.

The Minister of Finance, Zainab Ahmed, reacting to the latest World Bank report, putting Nigeria’s population at 201m , disclosed that Nigeria government has no immediate plans to control its population

The Minister who was represented by the Permanent Secretary, Mohammed Kyari Dikwa, said such policy can only be adopted after all stakeholders agree to it.

He however noted that President Muhammadu Buhari has given nod for the setting up of a Presidential Committee on Revenue generation that is working on modalities for strengthening internally generated revenue, including the non tax revenues.

CBN Governor, Godwin Emefiele identified unemployment and underemployment as the major challenges facing the country in the area of human capacity development adding that majority of the “young people are employed but below their capacity “

He revealed that the CBN has embarked on tight monetary policy since the 3rd quarter of 2016.

Emefiele who was represented by Joseph Nnana, Deputy governor, Central bank of Nigeria, said that the identified constraints to the Nigeria economy include high unemployment rate, poverty as well as under-employment among others, adding that a higher segment of the Nigeria population are found in the informal sector which does not allow for optimal performance.

“The informal sector is overwhelmed as it employs a higher number of the nigeria population, the informal sector does not allow the young Nigerians to perform optimally on the job. Also, poor infrastructure affects the governmental policy space for inclusive growth”.

Speaking on the terms of the money market, Nnana assured that the bank will continue to maintain a positive interest rate that will attract external investors, adding that the monetary authority is not in haste to influence the exchange rate.

Source: By Anthony Ailemen

Nigeria Unemployment Rate Hits Record Number As Kano, Taraba, 20 Others Flop Woefully

The inability of 22 Nigerian states to create fresh jobs as they continually devoted more of their meagre funds to recurrent expenditure has impacted negatively on the country’s unemployment rate, BusinessDay analysis shows.

Despite recording larger labour force, latest data from the National Bureau of Statistics (NBS) show that the number of the employed persons in Kano, Taraba, Adamawa, Ogun, Katsina, Zamfara, Edo, Osun, Sokoto, Kwara, Yobe, Anambra, Delta, Gombe, Abia, Borno, Ekiti, Cross River, Niger, Kebbi, Bauchi, and the Federal Capital Territory, Abuja, fell in the third quarter of 2018 compared with the same period a year earlier.

“Nigeria just came out of recession and there is nothing to drive growth in these states,” said Yinka Ademuwagun, a macroeconomic analyst at United Capital, a Lagos-based investment house. “What they earn is small and they don’t have a viable sector to kick-start that growth that they need, especially in the northern side where there is still insecurity.”

Nigeria emerged from recession in Q2 2017 but its unemployment rate continued to soar steadily, reaching an all-time high of 23.1 percent in Q3 2018 from 6.4 percent in Q4 2014. Most states in the country depend on the federal allocation to meet their financial obligations, which are mainly recurrent. This leaves little or nothing for capital projects, thereby affecting their chances of creating new jobs and worsening the nation’s high unemployment rate.

The statistics bureau defines the unemployed as persons within the labour force (aged 15-65) who were actively looking for work but could not find work or did something but not up to 20 hours in a week, and the underemployed as persons within the labour force who work less than full time (40 hours a week) but work for at least 20 hours on average a week.

In addition, persons who work full time but engaged in an activity that underutilises their skills, time and educational qualifications can also be categorised under the unemployed, while the employed are persons within the labour force who work full time, according to the NBS.

In the review period, Taraba recorded the biggest fall of 229,851 in the number of employed persons to 1.78 million. Kano followed with a drop of 185,863 to 2.77 million, while 130,991 people lost their jobs within 12 months in Adamawa, leaving 1.26 million employed persons as of September 2018.

“Economic growth is inclusive for employment; these states don’t have the revenue to drive economic activities and growth,” Ademuwagun said. “Without spending on infrastructure, it becomes difficult to create jobs.”

Unlike these states, Lagos added 574,744 new jobs to record a total number of 6.39 million employed persons. Rivers created 144,533 jobs to increase its employed population to 2.93 million; Kaduna, 233,483 to 2.56 million; Imo, 175,378 to 2.24 million; while Akwa-Ibom’s employed population rose by 154,692 to 2.24 million between Q3 2017 and Q3 2018.

Kogi added 136,400 jobs in the same period to record 1.98 million employed persons. Enugu, 135,365 to 2 million; Ondo, 122,708 to 2.15 million; Nasarawa, 78,115 to 991,996; Bayelsa, 49,705 to 918,576; Oyo, 46,389 to 3.62 million; while Ebonyi created 32,676 jobs, putting its employed population at 1.21 million.

Benue, Plateau and Jigawa added the least jobs of 25,213, 1,755 and 664, increasing their employed population to 2.22 million, 1.46 million and 1.14 million, respectively.

Out of all these states, the first nine which created the most jobs witnessed declines in their unemployment rates in Q3 2018 compared with the same period in the previous year.
“The improvement can be traceable to the relative improvement in security situations in these states,” Ayodeji Ebo, managing director, Afrinvest Securities Limited, said. “This has attracted the setting up of more industries in the states.”

Rivers’ unemployment rate was down by 4.9 percentage points to 36.4 percent, the biggest fall achieved by any state in the country. As a result, Akwa-Ibom, which recorded a marginal decline of 0.2 percentage point to 37.7 percent, overtook Rivers as the Nigerian state with the highest unemployment rate.

According to Ebo, a lot of the companies shut down their operations at the peak of disruptions of oil production by militants.

“Some of these companies have reopened their offices, hence reducing unemployment rate,” he said.

Lagos recorded the second-biggest drop of 3.7 percentage points in unemployment rate to 14.6 percent. Enugu followed closely with 1.8 percentage points to 18.7 percent owing to an improvement in trade activities in the state, according to Ademuwagun, while Nasarawa recorded 1.5 percentage points to 27.4 percent.

Both Imo and Ondo achieved a decline of 1.2 percentage points in their unemployment rates to 28.2 percent and 14.2 percent, respectively. Kaduna’s unemployment rate decreased by 1.1 percentage points to 26.4 percent, while Kogi was 0.9 percentage point lower to 19.4 percent.

Source: By OLUWASEGUN OLAKOYENIKAN & BUNMI BAILEY

South-South states record worst unemployment rate in Nigeria

The National Bureau of Statistics (NBS), on Friday, released the much-anticipated unemployment figures for states in Nigeria. The data lists unemployment rates for every state in the country as at the third quarter of 2018.

According to the data, states in the Southern part of the country recorded the highest unemployment rates in the country. This is despite being some of the richest states in the country in terms of oil revenues and internally generated funds.

Nairametrics Founder Ugodre Obi-Chukwu, first tweeted this on his twitter handle on Saturday.

Bua group

Ugo Obi-Chukwu
@ugodre
Despite all the oil money, see which region came last.

Unemployed people/ unemployment rate

NC – 3.2m/27%
NE. – 2.6m/22%
NW – 3.8m/24%
SE – 2.8m/23%
SS – 5.3m/32%
SW – 2.9m/14%

Nigeria – 20.9m/23%

Nairametrics analysed the data and clustered the states into the 6 geopolitical zones in the country. Nigeria has about 6 geopolitical zones which comprise of 36 states including the FCT.

North Central states comprise of the FCT, Plateau, Niger, Nasarawa, Kwara, Kogi and Benue States respectively.
The North Eastern States includes Yobe, Adamawa, Taraba, Gombe, Bauchi, and Borno States.
North West states include Zamfara, Sokoto, Kebbi, Katsina, Kano, Kaduna, and Jigawa States.
South East states comprise of Abia, Enugu, Ebonyi, Imo and Anambra states.
South Southern states comprise of Akwa Ibom, Delta, Cross Rivers, Rivers, Edo and Bayelsa States.
South West states include Ekiti, Ondo, Ogun, Oyo, Osun and Lagos States.

Worst Geo-Political Zone – The South Southern states of the country, otherwise known as “South-South”, recorded the highest unemployment rate of 32 percent in the quarter under review.

This represents about 5.38m unemployed people in the region which has an estimated labour force of 16.7 million persons.
States in this region collect billions of naira monthly on Federal Allocations yet unemployment rates were the highest in the country.
In fact, Rivers and Akwa Ibom, two of the richest states in the country recorded a whopping 36.4% and 37% respectively in the unemployment rate.
Between them, there were about 3 million unemployed Nigerians.

A contrast to the South West – The situation in the South-South is a sharp contrast when compared to the South West region which recorded the lowest unemployment rate across the geopolitical zones in the country. The South West zone was reported as having an estimated workforce of 21.3 million persons. The number of unemployed persons stood at 2.9 million.

Why this is troubling- The South Southern zone of the country is host to oil wealth and some of the most hardworking people in the country.

However, issues like oil spillage and gas flaring have severely impacted on life especially for people who earn their livelihood via fishing.
This was the trigger for militant activities over the years that have increased insecurity across the region and chased away most industries.
Nevertheless, the state government received billions of money in Federally Allocated Revenues and also generate billions in Internally Generated Revenues. Nairametrics, in an earlier report, had questioned how states in Nigeria spend the billions of naira allocated to them on a monthly basis.
What is Lagos and the South West States doing better? Former Executive Secretary of the Lagos State Employment Trust Fund, Akin Oyebode weighed in on the data via his twitter handle.

Lagos State reduced un/underemployment from 33.7% to 26.9% between Q3 2017 and Q3 2018. I’m going to have a drink to that.

Despite adding 500k people to the workforce, unemployed residents came down by 200k. This one is for you, @AkinwunmiAmbode.

States in the southwest perhaps by virtue of their proximity to the Nations former capital, Lagos State, have created an enabling environment for businesses to thrive. Though most organisations complain of multiple taxations in the regions, industries prefer to start out in this region as it is relatively safe and attracts a higher purchasing power when compared to other zones. These states also have policies that directly target job creation.

The upshots – Unemployment statistics may be questioned, but other indicators point us in the same direction.

Unemployment is one of the developmental indices, and with all the billions of revenue both from FAAC and 13 percent derivation going to the South-South zone, the Governors of this zone should do better.
States in this region cannot rely only on oil revenues to create jobs. These states must have to create the right incentives and operating environments that can attract industries in their regions.
For example, despite being the region where the nation’s crude is pumped most of the oil companies locate their headquarters outside of the regions due to insecurity and militant activities.

Apart from fostering insecurity, high unemployment rate also contributes severely to urban migration. Younger people in these regions will continue to flee for other parts of the country where they feel they can get jobs or even exit the country in general.
Despite South-South woes, Nigeria’s unemployment rate is still very bad across all zones.

The Federal Government must implement policies that aid job creation across the country and it begins by creating an enabling environment for businesses to thrive.
Whatever model the South-West zone adapted to provide jobs and better the lots of the people, the South-South should draw a leeway from it and not compound unemployment woes in the country.

Source: By  Bamidele Samuel Adesoji

Nigeria’s Diaspora remittances exceed oil receipts for 4yrs running

Remittances by Nigerians in the Disapora have for the fourth year running exceeded the country’s receipts from oil. Analysts say this is an indication that the country will do well to tap the potential in its greatest asset – human capital – rather than concentrating on oil that has over time failed to lift its citizens out of the poverty trap. Nigeria currently boasts of a population of about 190 million, with a population growth rate of 2.6 percent.

Since 2015, at the peak of the collapse in oil prices that started a year earlier, the amount of money sent in by Nigerians living overseas through official means has continued to outstrip receipts from oil, considered the country major foreign exchange earner.

While Diaspora remittances into the country surged 20.6 percent to $25.1 billion in 2018, from $20.8 billion in 2014, revenue from oil plunged 57.4 percent to $18 billion in 2018, from as high as $42.7 billion in 2014, according to data obtained from the Central Bank’s quarterly reports and analysed by BusinessDay. These remittances naturally exclude transfers made through unofficial channels.

A similar trend was recorded in the preceding years of 2017, 2016 and 2015 when remittances stood at $22 billion, $19.7 billion and $21.2 billion, respectively, as against oil revenues of $13.4 billion, $10.4 billion and $19.6 billion, respectively, within the same periods.

This is contrary to the situation prior to 2015, when oil prices averaged around $100 per barrel and receipts from crude oil sales stayed well above Diaspora remittances. But with the increasing number of paid Nigerians abroad and a fall in crude prices, remittances overtook revenue from oil, accounting for more than 95 percent of the total transfers.

Analysts argue that Africa’s second-largest economy (in monetary terms supposing the market-determined exchange rate at $1/N362) is a human capital producing country rather than an oil producing one because Diaspora flows far exceed gross oil revenues.

Emeka Ucheaga, CEO at Lagos-based investment and advisory firm, EUA Intelligence, said the growth in remittances can be traced to the rising wages abroad which are products of tax cuts in America and increases in the minimum wage in parts of America and Europe.

“With the increasing number of Nigerians in the Diaspora, I think this was bound to happen at some point. However, the widening gap between remittances and oil revenue is a positive surprise,” Ucheaga said.

“Hence, we should expect remittances to increase as more Nigerians become gainfully employed abroad,” he added.

Analysts at FBN Quest say the ease of making remittances and transaction times have greatly been boosted by an improvement in mobile telephony.

According to Ucheaga, the increase in remittance inflows into the country serves as excellent news for the economy as high dependence on crude oil as a major source of foreign exchange earnings for the country continues to decline.

He explained that the development will mean that the country’s currency and foreign reserves will be less volatile to changes in crude oil prices and gradually become more influenced by variations in remittances.

“And we are already seeing the benefit of this. Despite the huge drop in crude oil prices between September and December, naira remained stable throughout the period, further emphasising that our currency is less dependent on crude oil exports for stability. A well-diversified source of foreign earnings is always required to ensure exchange rate stability over time,” he noted.

But despite increasing inflows from its citizens abroad, Nigeria has continually failed in two of the biggest indices needed in driving its human capital across board.

Data from the United Nations Development Programme (UNDP), a non-governmental agency established in 1990 to measure national achievements in health, education and income or standard of living, show that human development in Nigeria has been low compared with other countries of the world.

Despite recording a relative improvement in HDI, Nigeria ranked 157th position out of the 189 countries surveyed in 2017.

Source: By Michaeal Ani

Bangladesh’s $33bn fabrics industry holds lessons for Nigeria’s textile dreams

For knit products, 80 percent of the yarn requirements is met by domestic supplies because the country has a competitive advantage in that area.
However, only 20 percent of the woven requirements for the garment sector is catered to by local firms.

The country’s parliament passed a bill specifying the level of quality which all export firms must meet in order to beat China to number one in competitiveness. Hence, emphasis was laid on competitiveness, with the government providing market access for companies through trade negotiations targeted at removing international barriers.

Moreover, some of Bangladesh citizens were sent to China and Europe to acquire the skills needed to run the mills.

Again, the country paid closer attention to the use of modern technology to lower costs.
Big global brands such as Walmart, H&M, Benetton, Gap and Zara were partnered with to distribute Bangladeshi ready-made garments.

Stitch Dairy, a local Bangladeshi publication, said that the South Asian country was able to enjoy duty-free advantage to export garments to the European Union, the US and Malaysia.


Experts equally attribute Bangladesh’s success to a convivial business environment with minimal government influence and low taxes, which attracted Chinese and Vietnamese firms to Bangladesh.

Textile Today reported in 2015 that firms from Singapore, Japan, Taiwan and South Korea, which had traditionally relied on low-cost production in China, were shifting out of China and making their way to Bangladesh as a result of well-developed Bangladeshi textile value chain that guarantees three to five years return on investments.

Another key factor in Bangladesh is cheap labour with minimum monthly wage of a garment worker at $197, which makes it have the last but one lowest wage among 21 textile-making countries in the world.

However, Nigeria has even more advantage than Bangladesh in terms of labour cost as its recent minimum wage hike to N30,000 amounts to only $83.3 per worker.

“The government of Bangladesh provides cash incentives as export subsidies, amid other supporting policies, to promote exports in various business sectors. There is no alternative to the export-led growth of the economy to achieve its goal of becoming a middle-income country by 2021,” said two researchers, Afsana Arafin and Belalur Rahman, in a paper entitled ‘Cash Incentives for Export Oriented Industries of Bangladesh: A Critical Evaluation’.

However, the number of full-fledged textile mills in Africa’s most populous country has whittled down to two, from over 180 in 1985. Industry players say the number of players is 24, but findings show that most of them are manufacturers of rugs, handkerchiefs, sweaters, towels and stockings.

“Some of the mills have even gone into receivership as they could not repay their loans. The lesson is that we should deal with the fundamental issues of production competitiveness in our economy. The textile industry needs to be saved from the excruciating burden of high operating and production cost,” Muda Yusuf, director-general of the Lagos Chamber of Commerce and Industry (LCCI), said.

The Central Bank of Nigeria (CBN) recently set up an additional N50 billion intervention fund to facilitate the takeover of existing debt and offer additional long-term loans and working capital to existing companies in the cotton, textile and garment sector.

As of 2016, N3.4 billion had been disbursed to local firms.
Recently, the Central Bank of Nigeria (CBN) placed access to FX for all forms of textile materials on the FX restriction list.

Smuggling has turned textile hubs in the main cities of Kano, Kaduna and Lagos into solitary camps and event centres, the Manufacturers Association of Nigeria (MAN) said.
“The hitherto manufacturing hubs in Kano, Kaduna and Lagos are now solitary camps with most of their factory sheds now used as event centres and warehouses to store smuggled textile materials,” MAN, which is an association of over 2,500 manufacturers in Nigeria, said in its review of 2018 performance of the sector.

Hamma Kwajaffa, director-general of Nigeria Textile, Garment and Tailoring Employers Association (NTGTEA), told BusinessDay that the problem is importation and smuggling.
“The level of importation and smuggling in this country are killing the few surviving companies. They used to run three shifts but they have closed down these shifts,” Kwajaffa said.

“The Executive Order 003, for instance, has been pronounced, but it is not being implemented. So we have low patronage in the industry,” he added.

Executive Order 003 mandates government agencies and departments to patronise local firms by as much as 40 percent during contracts or bids.

Independent checks show that a few Nigerian textile firms are still competing with imports. They include African Textile Mills, Angel Spinning and Dyers Limited, Sunflask, Nichemtex, among others.

Source: By ODINAKA ANUDU & GBEMI FAMINU

What Oil at $100 a barrel would mean for Nigeria, World Economy

Surging crude prices mean another headwind for the world economy after President Donald Trump’s “zero” pledge on Iran oil sales but oil dependent nations like Nigeria will benefit hugely if oil were to attain those heights once again according to analysts.

Brent, the international benchmark crude has risen about 33 percent this year and is close to the highest in six months. While higher prices due to strong demand typically reflects a robust world economy, a shock from constrained supply is a negative.

Much of what happens to Nigeria and the rest of the global economy will depend on how sustained the price spike proves to be. Exporting nations will enjoy a boost to corporate and government revenues, while consuming nations will bear the cost at the pump, potentially fanning inflation and hurting demand. Ultimately, there comes a point where higher prices may be damaging to everyone.

  1. Who wins from higher oil prices?

Emerging economies dominate the list of oil-producing nations which is why they’re affected more than developed ones. The increase in revenues will help to repair budgets and current account deficits, allowing governments to increase spending that will spur investment. Winners include Saudi Arabia, Russia, Norway, Nigeria and Ecuador according to analysis by Nomura.

 

  1. What does it mean for global growth?

The impact will vary. Rising oil prices will hurt household income and spending and it could accelerate inflation. As the world’s biggest importer of oil, China is vulnerable, and many countries in Europe also rely on imported energy. Seasonal effects will also impact. With the Northern Hemisphere summer approaching, consumers can switch energy sources and scale back usage. A slowing world economy will also hurt demand and by extension keep a lid on prices.

  1. How can the world economy absorb oil at $100?

For a sustained hit to growth, economists say oil would need to hold above $100. It also depends on dollar strength or weakness, given crude is priced in greenbacks. Analysis by Oxford Economics found that Brent at $100 per barrel by the end of 2019 means the level of global gross domestic product would be 0.6 percent lower than currently projected by end-2020, with inflation on average 0.7 percentage points higher.

“We see increased risks of significantly higher oil prices,” Oxford economists John Payne and Gabriel Sterne wrote in a note. “In the short-run, it is likely the supply impact will be offset by higher production elsewhere, but the market is tightening and all it would take is one more shock to supply and oil could reach $100.”

 

  1. How will Iran and Trump impact the market?

An upending of global oil trade around the Iran-Trump spat could continue to have a sizable impact on financial markets, as the affected supply is as much as 800,000 barrels a day. Uncertainties around availability have already whipsawed oil markets. And the political sensitivities of these developments have other markets bracing for volatility.

Trump has pledged to help, alongside Saudi Arabia and the U.A.E., those needing to shift orders from Iran to another supplier. But U.S. claims that its domestic supply can help offset the loss are a high bar to meet, given that the daily American output for similar crude is about a quarter of Iran’s.

 

  1. Who loses?

Those emerging economies nursing current account and fiscal deficits run the risk of large capital outflows and weaker currencies, which in turn would spark inflation. That in turn will force governments and central banks to weigh up their options: hike interest rates even as growth slows or ride it out and risk capital flight. Nomura’s losers list includes Turkey, Ukraine and India.

 

  1. What does it mean for the world’s biggest economy?

While U.S. oil producers try to take advantage of any sales boost from customers moving away from Iran, the broader U.S. economy won’t necessarily see benefits with oil price tags as high as $100 a barrel.

It would be a squeeze on American consumers that are the backbone of still-steady economic growth. Prices at the gas pump already have risen more than 7 percent this month to $2.89 a gallon, which could weigh on retail sales that jumped in March by the most since 2017.

And if things go awry in global oil markets, there’s risk that political blame shifts back to the U.S. for the sanctions, which could mean backlash via investment or other channels that threatens economic stability.

 

 

  1. Will it lead to higher inflation around the world?

Because energy features prominently in consumer price gauges, policy makers look to core indexes that remove volatile components. If the run-up in prices proves to be substantial, and sustained, those costs will filter through to transportation and utilities.

 

  1. What does it mean for central banks?

Led by the Federal Reserve, central banks around the world have taken a dovish tilt as the absence of inflation allows policy makers to shift their focus to slowing growth. That’s unlikely to quickly change. The International Monetary Fund this month lowered its global growth forecast and said the world is in a “delicate moment.”

Source: Bloomberg

FG Approves Construction of First Onshore Oil Terminal in 50 Years

Federal Government has granted approval for construction of a one-million-barrel capacity to the onshore terminal operator of Otakikpo marginal field in OML 11, Green Energy International Ltd (GEIL).

Issuance of the approval to construct (ATC) was a sequel to Department of Petroleum Resources (DPR) review of the detailed engineering design for the Onshore Crude Oil Storage facility to be built in the proposed Industrial park in Ikuru Town, Andoni local government area of Rivers state.

“We hereby communicate the approval of the Director of Petroleum Resources to you for the detailed engineering Design of one (1) million Barrels Onshore Crude Oil storage Facility project. You may, therefore, proceed to the construction and installation phase of the project,” FOR wrote in the approval letter.

The proposed Otakikpo Onshore Terminal will be the first indigenous onshore terminal and also the first to be built in the country in the past 50 years.

Construction of the proposed terminal according to Director Corporate Affairs, GEIL, Olusegun Ilori, is expected to start soon by a consortium of internationally reputable EPC contractors.

The project is part of the robust development strategy to expand production and de-risk the evacuation of its crude from the Otakikpo field, thereby reducing drastically the cost of its evacuation from the field.

The proposed Terminal will be strategically located to also benefit several otherwise stranded oil fields in the Eastern Niger Delta axis by providing commercially viable and operationally efficient access to the export market.

Commending the DPR for its prompt approval of its proposed Onshore Terminal project, the Chairman of GEIL, Prof. Anthony Adegbulugbe, said the development of an Onshore Terminal is in synergy with the present administration’s overarching strategy to boost oil production while at the same time reducing the cost of production.

The cost of evacuation using the Onshore Terminal will significantly reduce the export evacuation cost for oil production in the Otakikpo field and other nearby production fields.

Commenting further on the project, Prof Adegbulugbe said the Terminal will provide employment for hundreds of people from the host community, effectively linking the upstream benefits to the local, state and national economy.

The Onshore Terminal will be situated in an Industrial Park being facilitated by the company.

Emphasizing on the safety requirement of the regulators, the Chairman stated that safety considerations was a priority in the engineering design and that the Terminal equipment would be adequately selected and installed in a way to prevent equipment damage and environmental pollution.

He promised that all the terminal operations staff will be adequately trained to ensure operations are managed effectively while complying with all HSE rules and regulations.

The traditional ruler of the community, the His Royal Majesty, Okanma Aaron Ikuru had earlier pledged the support of the community to the project claiming that the company had carried the community along in its development of the Otakikpo Marginal Field.

He said apart from the benefit to the economy, his community and the entire Andoni region would benefit from the establishment of the Terminal.

Meanwhile, the department has also approved the conceptual design for the 40,000 barrels per day flow station for the field.

The flow station was being planned to handle the increased production envisaged in the second phase of the development of the Otakikpo Marginal Field and serve as a processing hub for other oil fields nearby.

Otakikpo Marginal Field which commenced production in 2017 presently produces 6000 barrels of oil per day.

Source: Tribune Online

Kenya’s GDP growth of 6.3% shows what Nigeria can do with Agriculture

GDP performance of Kenya presents Nigeria with an example of how a country can either decide to deliberately leverage its natural resources such as Agriculture to create shared prosperity for citizens or sit back, pay lip service and watch them descend into poverty.

Just like Nigeria, Kenya, East Africa’s richest economy, is one of the fastest growing areas on the continent but its performance is often hit by drought as missed revenue targets, rising public debt and uncontrolled expenditure were main concerns for investors in recent years.

While Nigeria still continues to play to the gallery when it comes to driving Agriculture or boosting its GDP contribution to the economy, for Kenya the reverse is the case as the Agriculture sector, which accounts for close to a third of Kenya’s annual economic output grew by 6.6 percent leading to GDP growth of 6.3 percent.

Data from Kenya’s statistical agency showed Kenya’s economy grew by 6.3 percent in 2018, helped by an impressive growth in agriculture, manufacturing and transport sectors which was a rebound from the 4.7 percent growth in 2017, the slowest growth in five years.

The performance of the Agriculture sector had a multiplier effect on other sectors of the economy as Transport and storage services sector also grew to a five-year high of 8.8 percent while ICT sector posted an increased growth by 11 percent.

Manufacturing sector grew at a faster rate of 4.2 percent in 2018, compared with 0.5 percent in 2017 although new Jobs generated slowed to 840 600 in 2018, compared with 898 000 a year earlier while Inflation was 4.7percent in 2018 from 8 percent a year earlier.

Kenya’s central bank targets price growth of 5percent with a margin of 2.5percent on either side. The deficit on the current account narrowed to $4.1 billion at the end of last year. Also, about 2.02 million tourists visited the country last year while tourism is still the country’s largest source of foreign exchange after agriculture.

Gbolahan Ologunro research analyst at CSL Stockbrokers, a subsidiary of FCMB Group Plc said Kenya’s usage of mechanized farming using modern equipment and agglomeration of farmers rather than individual farming is resulting in improved GDP performance unlike Nigeria.

“Nigeria has not being able to change its system of production as the country still uses crude implement and subsistent farming unlike Kenya, while other problem such as Lack of storage facility, poor road network and security are still major challenges which will need holistic solutions,” Ologunro told us.

Abimbola Omotola, Analyst at Chapel Hill Denham management limited said the reason behind Kenya’s 2018 GDP agricultural sector performance, is because it was coming from a low base which will reverse to the mean after the above normal growth recorded last year, once the base effect clears off.

Adetola Adelu financial Analyst at Fides Capital partners said unlike Kenya, Nigeria agricultural sector is faced with a backlog of peculiar challenges affecting productivity like insecurities and poor infrastructural facilities which is resulting in lower GDP performance.

“Also, corruption and politics are other major challenges facing the sector as there are always concerns on government programs on subsidies or fertilizers getting to the final consumer,” Adelu told us.

Despite the current government’s effort to boost agriculture output and diversify the economy, Nigeria‘s agriculture sector slowed from 4.2 percent in 2017 to 2.1 percent in 2018.

Nigeria’s agricultural potential is evident. The country has highly diversified agro-ecological conditions with total agricultural land of 80 million hectares (of which less than half has been utilized), surface water running into billions of cubic metres, and a large potential irrigable area.
Despite these numbers and the potential of the agricultural sector to change the fortunes of the Nigerian economy, the sector is still plagued with a number of issues as farming still remain subsistent and rain-led despite the prominence of irrigation farming in most countries around the world.

“The problem with agriculture is infrastructure. It is not that we do not grow enough but the infrastructure to move, store and process what is harvested are not there,” said Aboidun Olorundenro, operations manager, Aquashoots Nigeria.

“Without critical infrastructure, agriculture will continue to suffer and our diversification through the sector would only be a dream,” Olorundenro said.

Over the years, government has mouthed support for agriculture, saying it is serious with making agriculture one of the largest employers of labour and foreign exchange earners.

But this is yet to go beyond the talking stage as the sector is still largely limited by lingering issues.

The Anchor Borrowers Programme (ABP) has made considerable progress, without addressing fundamental issues of mechanization, irrigation, seeds, extension service, insurance, research and development, among others.

As a result, yields have continued to remain low and progress made initially is now on a downward trajectory. This is evident in the country’s Gross Domestic Product (GDP) report.

Data from the National Bureau of Statistics (NBS) GDP report shows that growth in the sector has been on the decline since the first quarter 2017, with marginal growth recorded only in the fourth quarter of the same year.

The GDP report shows that growth in the sector contracted from 3.06 percent in q3 2017 to 1.91 percent in q3 2018 year on year.

Similarly, critical infrastructure to aid growth for the agricultural sector is lacking.

Farmers continue to suffer low levels of agricultural productivity due to infrastructure deficit across the country, which reduces their profit and impact their capacity to expand

Source: By Oladipo Oladehinde

The minimum wage swindle

Muhammadu Buhari signed into law the Minimum Wage Bill passed by an equally cynical National Assembly, NASS, whose leaders are still smarting from the shellacking they individually and collectively received from voters in February. It is still a bad dream for one or two of them who had assumed they had their states in the palm of their hands to do as they wished with them.

Suddenly, they discovered too late that going home occasionally to give crumbs from their tables to the masses of hungry fellow Nigerians in exchange for robbing them of billions of naira in corrupt practices was no longer a winning strategy.

They have sought to start rebuilding their ruined political structure by joining with the President to enact a so-called Minimum Wage bill for the “masses.” It was a swindle of which the President and NASS should be ashamed of themselves for several reasons.

We start with Buhari whose scavenging Buhari Support Group declared the signing as “a promise fulfilled”. If it was, it was one promise which should not have been made; let alone being fulfilled. But, just before those who expect to be compensated for hailing what was an ill-advised piece of legislation dismiss my objections as bad belle politics, permit me to draw their attention to the views of one of the earliest supporters of President Buhari.

“My prediction is that the N30,000 Minimum Wage will cause chaos because many state governments that were paying N7500 before N18000 was introduced could not pay them. A lot of them are currently finding it difficult to pay now. They are already saying they can’t pay, and this would lead to strikes. When that happens, the nation will be in trouble— Prince Tony Momoh, former Chairman of Congress for Progressive Change, CPC.

Tony Momoh was with Buhari since the ANPP days and is still a loyal supporter of the President. But, Senior Momoh is also a patriotic Nigerian and if it becomes a choice between party loyalty and being faithful to our country, there is no doubt that he will stand by Nigeria. He has demonstrated it with that publicised warning to Buhari.

The obvious question is: why would Buhari sign a bill which has all the potentials of creating chaos in the country he is now getting ready to govern for four more years given the heightened insecurity in the land? The answer remains the same today as it was last year and will be the same next year – unless a miracle of transformation occurs.

A man cannot gradually enlarge his mind as he does his house —Alexis de Tocqueville, 1805-1859 Even Aisha Buhari must admit that her husband does not understand a word of economics or finance. He cannot comprehend the economic consequences of decisions made now.

He acts on instincts; but they are the instincts of a highly placed economic illiterate. His closest advisers, if they are any better (and most are not), are too afraid to tell him the truth for fear of losing their jobs. So they adopt two postures – “sidon look” (apologies to late Chef Bola Ige) or they pretend that the President is right.

For them none of their unpatriotic positions will jeopardise their advantages within the corridors of power. In Aso Rock, real or pretended ignorance is bliss. Buhari has signed the bill purely with a short-term political advantage in mind. He will, before December, unleash serious upheavals in many of the states which will find it impossible to pay.

In fact, for Osun State, implementation of the new law will mean that whoever is governor will go to Abuja monthly to collect the allocation, hand the funds to the state’s workers and go home. There will be nothing left for any other function of government. In fact, what he receives from Abuja might not cover the new wage bill. He will be called upon to go and borrow to pay public servants.

What happens to the 98 per cent of Osun residents who are not public servants is apparently no concern of President Buhari. Osun State might be an extreme case; but at least thirty states will not be able to pay the new wage and meet any other obligations of government to all residents – young and old. That is invitation to chaos written boldly by Buhari and the irresponsible NASS.

The President, in his infinite misunderstanding of the constitution he swore to uphold even gratuitously ordered that implementation should start immediately. Like all old satraps always fighting the last war, he has conveniently forgotten that every governor must present the Bill to the State House of Assembly for their assent before it can be implemented.

No governor, unless an incorrigible law breaker, can start implementation before the Bill had been domesticated. Deliberately or inadvertently, Buhari has set the governors and workers on several collision courses nationwide by that announcement. Ignorant or mischievous labour leaders, might call the workers out on strike based on Buhari’s unconstitutional directives.

The disturbances might be great or small, but they will increase tension in a country which needs to have it reduced seriously – otherwise, the already over-stretched security forces will have to add restoration of peace at states’ secretariats to their list of concerns. Is this leadership? Every government is run by liars and nothing they say should be believed—I.F. Stone, 1907-1989 Nothing has re-confirmed Stone’s broad condemnation of government officials more than the new Minimum Wage Bill.

The Labour leaders who expressed appreciation for the President’s gesture are living in a paradise inhabited solely by fools. They, like Buhari said the bill was in the interest of the masses. That is a bold-faced lie. Explicitly, the Bill excludes workers employed by Small and Medium Scale Enterprises employing less than twenty-five people. That is the vast majority of workers are discriminated against by this so called “masses bill”.

The millions of Nigerians, female and male working in thousands of filling stations, hotels and guest houses, supermarkets, private nursery schools and clinics, POS stations, pharmacists, etc., are discriminated against by this heartless bill. It is heartless because when the inflationary impact of this bill is felt the favoured few as well as those neglected, who provided Buhari’s winning votes, will suffer the impact.

They all shop in the same markets, pay rent to the same landlords, buy medicine from the same chemists, board the same buses. All workers will be charged the same – the beneficiaries of Buhari’s largesse and those left behind. “Unworthy to be called a Father.”

Title of my article when Obasanjo enacted his own Minimum Wage Bill with groups of workers excluded. What sort of a “Father of the Nation” is that who feeds two children well and leaves 98 to fend for themselves? Buhari is always very quick to want to paint himself as a different President from his PDP predecessors. Yes, in some ways he is different. He took over from a Ph.D holder; who also succeeded somebody with Masters Degree. We are still not sure if he has School Certificate and in what grade. But, the difference on education is clear.

Not even Adesina and Garba Shehu can bluff on that one. By global standards we have a grossly under-educated President. He needs our help to overcome his deficiencies for everybody’s sake. This is one occasion those who really love Buhari should advise him to step down on promoting that bogus bill.

A word is enough…

Source: By Dele Sobowale

CBN issues 5 new banking licences

The Central Bank of Nigeria (CBN) has issued licenses to five new banks, according to three banking sources familiar with the matter, who spoke to us.

Sources say the CBN is being driven by the need to attract new investments into the sector and serve the country’s over 50 million unbanked and under-banked people, even as current banks have struggled to grow loan books since an economic slump in 2016 caused bad loans to surge.

The sources, who say the banks plan to begin operations before August, could only give specific details on two of them.

One of the new banks, “Globus” is said to be spearheaded by Elias Igbinakenzua, a former Executive Director at a Tier One bank.

“The Bank (Globus), whose head office is on Sanusi Fafunwa, Victoria Island, may open by May 2nd,” one of the sources said.

The second bank would go by the name “Titan” and is said to have secured the services of a former Heritage bank executive director.

Another owner of one of the new banks is said to be Indian – the former owner of Chi Limited who recently sold a majority stake to Coca Cola – and the initial strategy would be to target large Indian and Lebanese clients with investments in Nigeria especially in the Manufacturing and other sectors, sources said.

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The other banks remain largely anonymous but would be a mix of micro-finance, Merchant and/or deposit money banks, according to the sources.

CBN spokesperson, Isaac Okarafor, did not respond to calls seeking comment. Three bank CEOs declined to comment, as the CBN is yet to go public on the matter.

We gathered from sources that most of the capital needed to set up the banks were sourced locally in Nigeria.

The minimum capital requirement for a Regional bank is N10 billion, while for National banks its N25 billion and international Banks N50 billion, according to the Banks and Other Financial Institutions Act (BOFIA).

The capital requirement of microfinance banks, which was amended by the CBN in 2018, is as follows: For a Unit Microfinance bank, the requirement is N200 million, while its N1 billion and N5 billion for a State and National Microfinance bank respectively.

For a merchant bank, the minimum paid-up share capital is currently N15 billion.

Attempting to place a finger on the motivation for licensing five new banks almost out of the blue, one of the sources said,

“The CBN will not want to preside over an industry that is shrinking.”

Another said “Nigeria is under-banked and investors are responding, if the CBN wants to grow credit, by N1 trillion, none of the old banks can take it. Banks available are already at capacity, in one way or another.”

The CBN has been somewhat desperate for banks to increase lending to critical sectors but an economy fraught with risks has tamed lending appetite.

Nigerian banks were unable to grow their loan books in the past year, a signal that the macroeconomic environment remains weak and non-supportive for growth.

The 12 largest lenders quoted on the floor of the Nigerian Stock Exchange (NSE) saw combined loans and advances dip by 6.37 percent to N12.34 trillion in December 2018, from N13.18 trillion a year earlier. This compares with a 25.14 percent increase between the 2013 and 2014 financial year.

The CBN is worried about the trend, Governor Godwin Emefiele indicated in the aftermath of the monetary policy committee last March.

To encourage lending to the real sector, the CBN promised to allow banks draw down from their regulatory cash buffers sitting with the apex bank, if the banks gave loans to manufacturers and players in the agriculture sector at single-digit interest rates.

The response has been largely underwhelming, with banks preferring instead to stash cash in double-digit yielding government debt where they take considerably less risk.Even the CBN’s surprise interest rate cut to 13.5 percent after keeping it at 14 percent for over two years, was not able to move the needle on lending.

The banks argue that to increase lending the CBN should instead reduce the Cash Reserve Ratio (CRR) to free up idle funds. The effective CRR in the sector is as high as 40 percent.
Licensing five new banks can pass for the latest strategy by the CBN to boost bank lending, according to a source.

“However, if the problems that hinder the current banks from growing their loan books persist, then even the new ones will struggle,” the third source said.

Total credit to the private sector grew by a meagre 2.2 percent to N24.16 trillion, according to the CBN’s Depository Corporation survey report for February 2019, another indication of weak credit flow in the economy.

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Johnson Chukwu, managing director and CEO of advisory firm, Cowry Asset Management Ltd, said the expansion in credit has been going to the public sector as yields remain attractive at between 13 and 14 percent.

“The economic recovery rate has been slow and financial institutions are cautious of booking new Non Performing Loans (NPLs),” said Chukwu.

Sources tell us that the CBN feels that some of the current banks may be becoming a little bit removed from the needs of the average customer.

“The banking public has very few options. The bigger the bank the more distant the relationship. There is at worst an oligopoly and at best a duopoly,” the first source said.

We learnt that the licensing is a done deal according to the processes involved which may take up to 2 years. This includes sending the name of directors to the Department of State Security (DSS), Assistant General Manager’s and above being vetted by CBN, offices and branches inspection, staff recruitment, printing of checks and software deployment.

The emergence of the new banks is good for staff, good for signalling and will increase competition in the sector our sources said.

“When you realize CBN will not allow any bank to fail, you realize there is nothing to fear. You can go ahead and request a license,” the second source said.

Source: By Lolade Akinmurele

 

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