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Nigeria’s Economy In 2013: Great Outlook, Tame Result

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With a budget bill of N4.987 trillion pending at the National Assembly, coupled with the early appearance of some positive macro economic twinklers in the horizon at the twilight of 2012, there was no doubt that many Nigerians had hoped for a smoother outer for the country’s economy in 2013.

They had probably reckoned with a rising international crude oil price that would expand Excess Crude savings following the stretching of the Executive’s recommended benchmark price from $75 per barrel to $79 per barrel by the National Assembly.

In their outlook for 2013, Nigerians had hoped that the issue of production losses resulting from oil theft and pipeline vandalism would be tackled to a very reassuring level.

All these did not happen. Again, nobody foresaw the global economic effects of a temporary government shutdown in the United States based on bipartisan bickering over the raising of Washington’s borrowing limits.

The overall effect of these and other unforeseen factors was a frightening drop of Nigeria’s Excess Crude Account from about $11.5 billion at the end of 2012 to less than $5 billion in mid-November 2013.

Even so, the International Monetary Fund (IMF) wants Nigerians to believe that the country’s economy performed strongly in the preceding year. Part of a statement issued by Gene Leon, the Fund’s senior resident representative in Nigeria, at the end of a recent visit of IMF officials to the country read as follows:

“Nigeria’s economy has continued to perform strongly in 2013. Real GDP grew by 6.8 per cent in the third quarter of 2013 (compared to third quarter 2012), supported by robust performances in agriculture, service and trade. Oil theft/production losses have adversely impacted export receipts and government revenues, leading to a significant drawdown from the Excess Crude Account. Inflation declined to 7.8 per cent (end-September 2013) from 12 per cent at end 2012, in part owing to lower food prices and monetary policy implemented by the Central Bank of Nigeria (CBN). The exchange rate has been stable, and the banking sector is well capitalised with low levels of non-performing loans…”

It is convenient to classify Nigeria among the world’s fastest growing economies, especially with a gross domestic product (GDP) that is increasingly being driven by the non-oil sector and still targeting 7.5 per cent in 2014. But while a sector-by-sector review of major economic events in 2013 may not alter the figures, it will certainly reveal that there were also some hard knocks here and there.

Agriculture

Nigerians stepped into 2013 with large portions of their farmland still recovered by the massive flood of 2012. Even up to March, water was yet to fully recede from the alluvial banks of some major rivers in the country. Nor had the affected farmers returned from their various refugee camps to fully engage in any meaningful farming activities.

Not much was also heard about the Federal Government’s plan to distribute flood-resistant seeds and the controversial 10 million mobile phones to farmers across the country.

The Nigeria Incentive-based Risk sharing System for Agricultural Lending (NIRSAL) continued to thrive on paper just like its precursor, the Agricultural Credit Guarantee Scheme (ACGS). Banks have consistently refused to finance local farmers in spite of the Central Bank of Nigeria (CBN’s) readiness to underwrite such funds in the event of payment defaults.

The only cheering news from this sector came in the form of some major investments in fertilizer production by companies like Dangote Group, Indorama Eleme Petrochemicals and Notore Chemicals.

Insecurity in the country, especially the Boko Haram insurgency in the North, impacted negatively on the distribution of farm produce. The high cost of some farm produce like yams, cereals, vegetable fruits and livestock was attributed to this ugly development.

Banking/Financial Services

The banking sector remained stable all through the year as the CBN expanded its cashless policy beyond Lagos and Abuja to five states, including Abia, Anambra, Kano, Ogun and Rivers States.

One discovery in the year that was capable of causing panic among the banking public was the finding that 70 per cent of the sector was being controlled by the five biggest banks in terms of asset base and profit earnings. These are First Bank, Zenith Bank, UBA, Access Bank and GTBank.

The N100 Automated Teller Machine (ATM) charge for every interbank withdrawal was abolished during the year, likewise the N10 per SMS charge which was reduced to N4.00 even as complaints abound that the deposit money banks (DMBs) have introduced other hidden charges to augument.

ATM users were also known to have expressed their year-round frustrations with the cash dispensers. In fact, matters got to a head during the Yuletide as customers wandered in their droves from one bank branch to the other searching for functional machines. Of course, this led to overcrowded banking halls in some cities and created room for banks to surcharge those taking cash below the stipulated minimum over-the-counter withdrawals (mostly N20,000).

The CBN also directed that banks increased their cash reserve ratio (CRR) from 12 per cent to 50 per cent, drawing mainly from the balances of government ministries, departments and agencies (MDAs) as a way of mopping up the huge pile of idle funds domiciled with the banks. Apart from this monetary tightening measure, the apex bank had ensured macroeconomic stability by retaining the other monetary policy rates. It had held interest rate at 12 per cent, inflation rate at 7.8 per cent, cash reserve ratio at 12 per cent (except for public funds) and foreign exchange rate at around N157/dollar.

The Asset Management Corporation of Nigeria (AMCON) was not able to conclude the sale of any of the three nationalized banks in spite of claims of growing foreign investors’ interests in the banks. The banks are Mainstreet Bank (formerly Afribank), Keystone Bank (Bank PHB) and Enterprise Bank (Spring Bank).

The Capital Market

The 2013 Federal Government budget was not meant to benefit the Securities and Exchange Commission (SEC) following the refusal of the House of Representatives to approve allocations to the commission on account of its call for the Director General, MS Arunma Oteh, to resign for what the discerning public saw as a veiled vendetta for her attempt to disparage an honourable member of the hallowed chamber.

As indicated by the commission, this unwarranted punishment would naturally affect its demutualization programme for the Nigerian Stock Exchange (NSE) while also hampering the payment of staff salaries and benefits.

Nevertheless, capital market activities were reported to have witnessed an upswing due mainly to improved earnings and investor confidence in the ability of the CBN and other macro-economic managers, coupled with the substantial inflows of foreign investors who took advantage of the steady growth in the country’s domestic business environment.

The equities market provided the lead as the capital market sustained its rally for the most part of the year. The stock market’s main indicator, the All-Share Index (ASI) rose by 34.9 per cent from 28,079 on the last day of 2012 to 37,884 in mid-November 2013. Market capitalization was said to have increased by about the same margin (35 per cent) from N8.97 trillion to a little above N12 trillion in the same period.

Also in the outgone year, the United States made a $50 million direct investment in Nigerian stocks. A senior American envoy in Nigeria was said to have confirmed this during a courtesy visit to the Nigerian bourse in October.

The Power Sector

At last, the long-awaited privatisation of unbundled Poer Holding Company of Nigeria (PHCN) subsidiaries was finalised in 2013. In all, 10 electricity generating companies (GENCOs) built under the National Independent Power Projects (NIPP) scheme by the three tiers of government and 15 distribution companies (DISCOs) were sold to private investors who received their licences and certificates of ownership early October.

Discussions have also been initiated for the sale of an additional 10 GENCOs built by the Niger Delta Power Holding Company of Nigeria (NDPHCN).

It is however sad to note that two months after the handover, Nigerians are yet to notice any difference in power supply, customer relations and operational style.

Industry

This is perhaps one sector where the government seems not to have achieved much on a grand scale. Apart from intervention funds to small and medium enterprises (SMEs) and other subsectoral allocations, not much went the way of the organized private sector firms which have continued to groan under double taxation.

The government’s new auto policy has been described as laudable, but its implementation plan is what analysts are skeptical about.

Telecommunication

The telecommunications sector was a major driver of the 2013 economy even as network subscribers decried the mainly poor services rendered by the telecoms firms all through the year.

Migration via the mobile number portability is yet to bring any relief to those who have attempted. Even mobile banking which this sector is well positioned to serve is still struggling to kick off in the country.

 

Ibelema Jumbo

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Paper Industry’s Economic Contribution Hits N398bn

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The contribution of the paper industry rose to N398.8billion in 2023 from N356billion it recorded in 2022.
Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), Dr. Musa Yusuf, disclosed this in a report released to mark the inauguration of World Envelopes Day in Lagos.
Marking the event, which also commemorated the 50th anniversary of envelope manufacturing firm, FAE Limited, Yusuf stated that the paper industry has a profound economic impact across all sectors of the economy.
He, however, noted that the growth in digital technology had greatly disrupted the sector, especially as a mode of communication.
“As of 2023, the value of the Nigerian paper industry was N398.8billion naira, according to the National Bureau of Statistics.
“The value was N365bn in 2022; N363 billion in 2021; and N255billion in 2020. This is a significant contribution to our GDP. However, when compared to the size of our economy, which is estimated at N230trillion as of 2023, it is still very small”,  the CPPE boss stated.
Yusuf said the paper industry had been largely in recession because of the digital technology disruptions and other macroeconomic headwinds, especially relating to exchange rate depreciation, forex liquidity crisis and high cost of fund and energy cost escalation.
He emphasised that the paper industry had a profound economic impact across all sectors of the economy, which underscored the need for government intervention in the sector.
In her opening remarks, the Managing Director of FAE Limited, Funlayo Bakare, described World Envelopes Day as the brainchild of the company, which sought to set aside April 16 as a day to celebrate the fundamental role envelopes play in daily communication.
“As we celebrate our golden jubilee, we are delighted to announce the inauguration of World Envelopes Day, to be celebrated annually on the 16th day of April.
“This is a pioneering initiative by FAE Ltd in accordance with our leadership position in the sector.
“The establishment of World Envelopes Day is to raise awareness about the importance of envelopes in various aspects of human endeavour, including personal correspondence, business transactions, and creative expressions”, she said.
The Publisher of The Guardian Newspaper, Maiden Ibru, who chaired the occasion, stressed the need to strike a balance between digitalisation and physical paper production, especially due to the indispensable role paper plays in cultural preservation.
Nigeria once had three paper mills: the Nigeria Paper Mill Limited, located in Jebba, Kwara State; the Nigerian Newsprint Manufacturing Company Limited, Oku-Iboku, Akwa Ibom State; and the Nigerian National Paper Manufacturing Company Limited in Ogun State.
The mills are no longer operational, and the country has had to depend on importation to make up for the shortfall.
The Asset Management Company of Nigeria has taken over the management of NNMC over unpaid debts.

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Aviation Union Threatens Strike Over Revenue Deduction

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The Air Transport Services Senior Staff Association of Nigeria (ATSSSAN) has said it would embark on industrial action if the Federal Government refuses to exempt aviation agencies from a directive that seeks to deduct 50 per cent from their Internally Generated Revenue (IGR).
ATSSSAN disclosed this in a communique issued by its National Executive Council (NEC) after its National Economic Council meeting in Ibadan, Oyo State.
The NEC, which had in attendance all 17 affiliates of ATSSSAN comprising all branch Chairmen, Secretaries, and national officers, reiterated calls for the exemption of the aviation agencies from the deduction of 50 per cent  of their IGR under the Fiscal Responsibility Act.
The association said the agencies were not established for profit, hence stifling them of the required funds would jeopardise the effective performance of their safety and security mandates.
ATSSSAN warned that if the Federal Government insist on the deduction, it would compound the current financial state of the agencies, and “we may be forced to direct all aviation workers to down tools until the government reverses itself”.
Last year, the Federal Government directed the Office of the Accountant General of the Federation to immediately commence the presidential directives on a 50 per cent automatic deduction from the IGR of Federal Government-owned enterprises.
The Minister of Finance and Coordinating Minister of the Economy, Wale Edun, had issued a circular titled, “Re: Implementation of the Presidential Directives on 50 per cent Automatic Deduction from Internally Generated Revenue of Federal Government Owned Enterprises (FGOEs)”.
According to the circular, all partially-funded Federal Government agencies and parastatals (receiving capital or overhead allocation from the Federal Government’s budget) should remit 50 per cent of their gross IGR, while all statutory revenues, like tender fees, contractor’s registration, and sales of government assets, among others, should be remitted 100 per cent to the sub-recurrent account.
ATSSSAN stated its apprehension over what it perceives as deliberate efforts by certain private airlines to stop their employees from forming labour unions.
Citing Section 40 of the Nigerian Constitution and international labor norms, the association contends that such actions constitute a violation of workers rights.
The statement, however, did not specify the airline operators suppressing workers from joining unions.
Part of the statement read, “The NEC-in-session calls on all employers in the private sector in the aviation industry to respect collective bargaining agreements in order to avert industrial crises at the workplace.
“NEC-in-session was seriously disturbed by the continuous willful acts by some private airlines towards frustrating the unionization of their employees, contrary to the letters and spirit of Section 40 of the Constitution of the Federal Republic of Nigeria and relevant international conventions and laws”.
The association, therefore, called upon the Federal Ministry of Labour and Employment to uphold and enforce employees’ rights to unionise within the aviation industry.
It urged the Minister of Aviation and Aerospace Development, Festus Keyamo, to orchestrate a dialogue involving all relevant stakeholders, including the non-compliant airlines and labour unions, under the auspices of the Labor Ministry.
At the meeting, other issues affecting workers, especially members’ welfare and working conditions, and the aviation industry at large were discussed, and positions and resolutions were taken.
The aviation group decried what it perceive as a dearth of avenues for career progression within government-owned aviation entities.

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NCDMB Rakes In $1m Return On NEDOGAS Investment

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Management of the Nigerian Content Development and Monitoring Board (NCDMB) says it has received a cheque of $1 million from Nedogas Development Company Limited (NDCL).
A statement made available to newsmen by the Directorate of Corporate Communications and Zonal Coordination of the Board said the sum received was part of the return on investment (ROI) on one of its strategic investments.
The statement added that: “The cheque was presented by the Chairman of the company, Engr. Emeka Ene, when he visited the Nigerian Content Tower in Yenagoa, Bayelsa State, where he was received by the NCDMB’s Executive Secretary, Engr. Felix Omatsola Ogbe, and other members of the Board’s management.
“Nedogas Development Company Limited (NDCL) is a joint venture company between Xenergi Limited and NCDMB Capacity Development Intervention Company.
“As part of the project, Nedogas NDCL constructed and commissioned a 300 MMscfd Capacity Kwale Gas Gathering (KGG) and injection facility located in the Umusam Community, near Kwale in Delta State, Niger Delta, Nigeria.
“The KGG Facility was designed to handle stranded gas resources in Nigeria’s OML56 oil province by providing the opportunity for independent operators in the area to monetize natural gas from their fields through the gas gathering, compression, injection and metering infrastructure of the KGG for quick market access.
“Nedogas is one of the several strategic and successful investments of the NCDMB funded from the Nigerian Content Development Fund (NCDF), in line with the Board’s mandate to build capacity and catalyze local projects in the Nigerian oil and gas industry as enshrined under the Nigeran Oil and Gas Industry Content Development (NOGICD) Act”.
In his remarks, according to the statement, the NCDMB Executive Secretary stated that the success story of NEDOGAS at Kwale, Delta State, could be replicated in other oil and gas producing communities to minimise gas flaring, saying that Ogbe also declared the Board’s readiness to continue collaborating with the company.
“Their model should be extended to other parts of the country where gas flaring is continuing.They have shown that with the modular system, we can quickly remove flaring from our operations in Nigeria.
“The NCDMB had continued to receive briefings from its investment partners. We’re still waiting for them to come back with success stories. Some of them are near completion and have not started operations yet”, the NCDMB’s Executive Secretary said.
In his remarks, Chairman of NEDOGAS, Mr. Emeka Ene, conveyed the company’s excitement in returning part of the credit and profit, adding that it was a proof that the NCDMB’s investment was a success and they are getting back that investment, adding that the firm looks forward to further collaboration with the NCDMB to expand its scope.
Responding, the NCDMB boss said the Board was now doing effectively and practically and tangibly what it was set up for, saying its mandate was to impact the economy by direct interventions.
“That’s the way the economy can grow, improve the gas infrastructure in such a way that’s sustainable despite the tight economic conditions”, he said.
He added that, “the  value propositions of the Nedogas project include total eradication of flared gas and conversation of environmental pollutants into products of value and creation of a strategic gas gathering hub and injection node for quick access to market for gas owners to monetize gas”.
Other benefits, according to Ogbe, include the provision of alternative gas supply to western flank of the OB3 line to add to the volumes of economic sustainability and increase in Nigeria’s Gross Domestic Product (GDP).
“The partnership with NEDOGAS is one of NCDMB’s 15 strategic investments geared towards actualizing the Federal Government’s aspirations in key areas of the oil and gas industry.
“Most of the projects were targeted at actualizing the Federal Government’s Decade of Gas programme.
“Some of NCDMB’s notable third-party investments include Waltermith’s 5000 barrels per day (bpd) modular refinery in Imo State, Azikel Group12,000 bpd hydro-skimming modular refinery in Gbarain, Bayelsa State, and Duport Midstream’s 2,500bpd modular refinery in Edo State.
“Other investments of the Board include Better Gas Energy for LPG terminal and gas distribution, partnership with Rungas Prime Industries Limited to establish a cooking gas cylinders manufacturing plant in Polaku, Bayelsa State, and Alaro City in Lagos and the partnership with Butane Energy to deepen LPG utilization in the North”, he stated.
The Executive Secretary also noted that there was the partnership with BUNORR Integrated Energy Limited in Port Harcourt, Rivers State, to produce 48,000 litres of base oil per day and partnership with the Nigerian National Petroleum Corporation (NNPC) Limited, Brass Fertilizer and Petrochemical Company Limited, and DSV Engineering to establish a 10,000 Ton Methanol Production Plant, Odioama, in the Brass Local Government Area of Bayelsa State.

By: Ariwera Ibibo-Howells, Yenagoa

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