FG Receives Report On 15yrs Dmo-Dfid Partnership On Debt Management
We’re Still Waiting for Response on Economy, House C’ttee Reminds Okonjo-Iweala
The House of Representatives Committee on Finance has responded to a report by the Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, that she needed more time to answer the 50 questions handed to her by the committee on December 19 on the state of the economy.
Last week, Okonjo-Iweala likened the 50 questions on the state of the economy posed to her by the committee as an examination.
The committee chairman, Abdul-Mumini Jibrin (APC Kano), who described the statement of the minister as a vindication of the decision it took last year when it gave her two weeks to answer the questions posed to her, noted that “the minister appears to be taking the memories of Nigerians for granted.
“This was the minister who walked into the meeting with the committee and drew everyone’s sympathy the moment she feebly announced that she was not feeling well.
“Isn’t it curious then that when she was not feeling well, the minister was prepared to address 50 questions in a session that was to last just about two hours, and now that she is fully fit, and hale and hearty, she is saying she would need more time?” he asked.
He said with her recovery, “Nigerians would have expected her to tell them she would tackle the questions in 30 minutes!” pointing out that instead, she had chosen to avoid the committee for 11 months and drops the president’s name at will.
“It is a good thing that Okonjo-Iweala sees the task before her as an examination. The minister is nonetheless reminded that examinations have duration, and they are meant to be passed or flunked. However, we would not neglect to also remind her that there are consequences either way. There is a reward for passing and reward for failure. One way or the other, we would decide how she performs.”
A statement by the clerk of the committee, Farouk Mustapha, also observed that “It is regrettable that while talking to journalists after the presentation of the report of the 15-year strategic partnership on debt management between the United Kingdom and Nigeria, the minister accused critics of the huge domestic debt profile under her stewardship of lacking information. “Interestingly, that is why the committee invited her to share such information with Nigerians. It would also be an opportunity to let her know some of the things we know.”
“The Department for International Development (DFID) whose collaboration with Nigeria she is so enthusiastic about has published a report on the 2014 Medium Term Expenditure Framework. We strongly recommend that the minister enrich her knowledge with that report. We also call on the DFID to present the report to the general public for the good of this country. “Additionally, rather than all the speeches, why has the minister failed to heed our call for her to present an exit plan (timetable) for domestic borrowing three years after taking over as Minister of Finance?
“It is high time the minister realised that we do not need any other country to tell us that our economy is doing well, the least of which is Great Britain with its deep economic problems and huge domestic debt profile. Nigerians will positively feel the impact if their economy is really doing well as the minister claims.
“Nigerians need to be vigilant of an attempt to divert attention from the state of the economy presentation and 50 questions we demanded from the minister.
“We call on well-meaning Nigerians to support this effort by the committee on finance so that we can know the true state of our economy in order for us not to end up like Greece whose genesis of economic problem was the concealment of the true state of her economy.
“The committee seizes this opportunity to remind Nigerians that it remains focused and committed to its legislative responsibilities as it awaits the response of the minister to the 50 questions,” the statement concluded.”
Rising External Debt Pressurises Nigeria’s Economy
Despite assurances by the Debt Management Office (DMO) that the current external debt stock of $6.92 billion is well within sustainable level, the Central Bank of Nigeria (CBN) has raised the alarm, saying it is putting pressure on the economy.
The economy came under intense pressure in the second quarter of the year, as overall balance of payments recorded a 4.1 per cent deficit of the gross domestic product (GDP) amid a 6.1 per cent decline in external reserves and a slide in trade balance from 15.8 per cent in the first quarter to 8.9 per cent.
In addition, total stock of external debt showed signs of significant pressure, with an upward movement to $6.92 billion during the period.
‘Balance of Payments’ is aggregate international monetary transactions by a country, including imports and exports of goods and services with other countries within a specified period of time, while the monetary value of the transactions represents the ‘balance of trade’.
The latest report by the Central Bank of Nigeria, CBN, on Nigeria’s External Sector Development published last month showed that external reserves, which stood at about $47.88 billion in the first quarter of the year, dropped to about $44.96 billion during the period.
It attributed the drop mainly to the sales of foreign exchange to authorised dealers, payments of joint venture companies (JVC) cash calls as well as public sector payments, though it also showed that the ratio of short-term capital flows to external reserves increased from 14.2 per cent in the previous quarter to 14.5 per cent.
The report noted that the significant pressure on the economy as a result of the poor external sector performance has made it necessary that a comprehensive backward integration production strategy be put in place by government to promote domestic manufacturing output and cut down on excessive import bills, particularly on petroleum products.
Apart from taking steps to ensure the rehabilitation of the country’s refineries to function optimally and ensure adequate domestic supply of petroleum products, the report also called for more emphasis to be placed on value-reorientation towards increased patronage for domestically produced goods.
The country’s estimated current account balance, currently at $5.01 billion, the report said, declined by 26.3 per cent from the $6.68billion level attained during the first quarter; a development traced to the higher import bills and lower export earnings arising from the decline in crude oil production from 2.05 million barrels per day, MBPD, at the beginning of the year to 1.93 MBPD due to production shut-ins and crude oil theft.
Details of the report showed that the country’s aggregate imports increased by 21.3 per cent from $11.30 billion recorded in the previous quarter to $13.71 billion, a decline of 11.7 per cent when compared with the level recorded in the corresponding period last year.
Similarly, aggregate exports declined by 6.4 per cent when compared with the preceding quarter, though the report noted that the deficit in the income account narrowed significantly from $4.97 billion recorded in the first quarter to $2.95 billion owing to lower repatriation of dividends and distributed profits by foreign investors.
Estimated capital and financial accounts balance recorded a net liability of $3.54 billion, which was equivalent to 5 per cent of GDP, compared to net asset of $2.19 billion. Total financial asset, representing financial outflows, declined by 46 per cent, following the decline in external reserves.
Again, direct investment abroad during the period under review declined from $0.36 billion to $0.15 billion on account of the sluggish global economic recovery, while portfolio investment abroad recorded significant growth from $1.07 billion to $2.72 billion, reflecting the desire of Nigerians in the Diaspora to take advantage of the cheaper
financial assets abroad.
“Total financial liabilities representing financial inflows increased by 2.8 per cent, when compared with the levels recorded in Q1 2013,” the report said, adding that foreign direct investment, FDI, inflows increased from $1.29 billion recorded previously to $1.47 billion in the review period due to renewed confidence of foreign investors and conducive macroeconomic environment.
In addition, short-term capital inflows declined by 4.4 per cent, while the net FDI for Q2 2013 was $1.32 billion, as against $0.94 billion in Q1 2013, with net portfolio investment dropping from $5.76 billion in Q1 2013 to $3.81 billion during the period under review.
Estimated trade balance declined from $9.80 billion in Q1 2013 to $6.34 billion in Q2 2013 as a result of the decline in aggregate exports proceeds and surge in imports, with aggregate exports down by 6.4 per cent, to $21.16 billion, compared with the levels in the preceding quarter, and aggregate imports increasing by 11.6 per cent from $11.30 billion in Q1 2013 to $13.71 billion in the review period.
Revenue Allocation: Between RMAFC and States
The ongoing agitation for the review of revenue allocation formula has brought to the fore questions on the tangible benefits derived by the people at both State and Local Government levels from the huge monthly revenue allocation to their States from the Federation Account.
The existing global financial crisis which has extended to every part of the world has worsened the regional, national and global economic environments. This has a significant negative consequence on the economic activities of state governments as the economy witnesses, not only drastic fall in standard of livings, but also amplifying the poverty level since governments are financially incapacitated to discharge their mandates.
Following this, states have explored various strategies including imposing multiple taxes on the masses and private entities to augment the Internally Generated Revenue. This in turn has generated a lot of heated debates, controversies and unexpected protests from individuals, civil society groups and local industries.
In recognition of its tireless campaign in the promotion of transparency and accountability towards the nation’s building, Civil Society Legislative Advocacy Centre (CISLAC) recently received an invitation to present a view at two-days North-West Zonal Public Hearing on the Review of the Revenue Allocation Formula organized by the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC) in Kaduna.
As against the State governors, who demand drastic reduction in the current 52.8% allocated to the federal government to augment the States and Local Governments’ quotas, CISLAC recommended 45%, 30% and 25% to federal, state and local government respectively, primarily to achieve a justifiable and transparent vertical review of the formula.
The submission by CISLAC was triggered by the years of rampant over-reliance of the States on allocation from the federation account with no consideration for more realistic and viable means to diversify their economy for effective Internal Generated Revenue (IGR). CISLAC bemoaned the fact that the State governments, except Lagos, Kano and Rivers could hardly depend on their IGR as they heavily rely on the monthly allocation from the federation account for survival.
Every fiscal year, governments at all level earmark high percentage of their budgets to capital expenditure. Conversely, only few have well defined concrete projects to show at the end of their tenure in office. Consider the bad shape of roads in some states regardless of the vast budget voted annually for capital expenditure. Thousands of lives are lost through road accidents. It is certain that Nigeria continues to incur economic losses running into billions of naira every year as a result of bad roads.
Over the years, in spite of the states’ enormous resources and potential, poverty is widespread throughout the nation. For instance, CISLAC noted the aggressive rise in poverty level in the country as 1980, 17.1; 1985, 34.5; 1992, 39.2; 1996, 67.1; 2004, 68.4; and 2010, 112.47. Also, basic indicators have placed Nigeria within the 20 poorest countries of the world. The issue of poverty can be easily traced to underutilization of resources in most states especially in the area of agriculture.
These problems are traceable to gross mismanagement and lack of accountability on the part of governments resulting in diversion of substantial resources from the monthly disbursement from the Federation Account.
Unfortunately, the states clamouring for the review in revenue allocation formula ought to remember that the Federal Government has assumed more responsibilities which were duly those of the states and local governments because of the ineptitude of the states like ecological problem, defence and security matters as well as transportation.
In its submission, CISLAC urged the States to focus more on Internally Generated Revenue (IGR) to avoid over reliance on federation account; there should be accountability and transparency in the utilization of public funds. The Centre called for the responsive inclusive participation on the monitoring of received and disbursed allocation at all level; as well as empowering the office of the auditor general both at national and state levels to guarantee transparency and accountability.
Furthermore, CISLAC encouraged Civil Society Organizations and all relevant stakeholders to engage more in evidence-based advocacy rather than making premature judgments on the proposed revenue allocation formula.
Abubakar Jimoh writes from Civil Society Legislative Advocacy Centre (CISLAC), Abuja.
Unending Probe Into Murky Oil Business
THE standard depiction of oil theft in Nigeria shows a young man, knee-deep in a swamp, with a bucket or wooden canoe full of pilfered thick black sludge. But a besuited banker in Geneva or a slick shipping trader in London might provide an equally apt image. “Oil Theft in Nigeria: A Murky Business”, a report by Chatham House, a London think-tank, unravels a complex network that arranges the theft of oil worth billions of dollars a year.
“Oil theft may cost Nigeria, Africa’s second-biggest economy after South Africa’s, as much as $8 billion a year claims the report. It says an average of 100,000 barrels a day (b/d) was stolen in the first quarter of this year. Politicians, security forces, militants, oil-industry staff, oil traders and members of local communities all profit from “bunkering” of oil, so few have an interest in stopping it. When so many are feeding from the trough, it is doubtful if anyone in Nigeria has the political will to stop it. Profits are laundered abroad in financial hubs, including New York, London, Geneva and Singapore. Money is smuggled in cash via middlemen and deposited in shell companies and tax havens. Bank officials are bribed. Cash is laundered through legitimate businesses. Some of the proceedsand stolen oilend up in the Balkans, Brazil, China, Indonesia, Singapore, Thailand, the United States and other parts of west Africa.
“At the smallest scale, telltale plumes of smoke rise from illegal refineries in the Niger Delta’s labyrinthine creeks. But larger-scale bunkering involves siphoning oil from pipelines on land or under water and loading it onto small barges, from which it is transferred to bigger ships in the Gulf of Guinea that carry the stuff to international refiners who may be unaware it is stolenthough plainly many know it is. The line between legal and illegal oil supplies is easily blurred in a country so rife with corruption. Transactions in Nigeria’s oil industry are infamous for their murkiness. The trade in stolen oil helps other transnational criminal networks to spread across the Gulf of Guinea, creating global links between oil thieves, pirates and traffickers in arms and drugs. The damage caused by thieves also often forces oil companies to shut pipelines down. As a result, Nigeria is producing oil at 400,000 b/d below its capacity of 2.5m b/d. On September 23rd Shell had to close its Trans-Niger pipeline, which should carry 150,000 b/d, because of leaks due to theft, less than a week after it had been reopened.”
For the umpteenth time since the beginning of 2012, members of the National Assembly are to commence yet another round of probe into the highly secretive petroleum industry. In the last one month, fresh allegations have dogged the management of national cash cow. First was the allegation by international watchdog group Berne Declaration that Nigerian and Swiss traders may be complicit in defrauding the Nigerian public of billions of dollars. The group declared Geneva a “haven for Nigerian fraudsters” and accused Swiss traders of involvement in “one of the most massive frauds that the African continent has experienced.”Less than two weeks after this resolution to probe the allegation, another one emerged suggesting that officials of the Nigerian National Petroleum Corporation (NNPC) in connivance with top government functionaries at the Presidency and Ministry of Petroleum Resources could have stolen up to N5 trillion belonging to the nation.
Even with decades of paying lip service to diversification of the economy, oil still accounts for about 90 percent of foreign exchange earnings for the country. A large chunk of taxes collected by the Federal Inland Revenue Service (FIRS) is also derived from petroleum profit tax. 2013 has been particularly bad for the country as various shenanigans in the management of the industry have been cited as excuse for non-implementation of budget and even the failure of the Federal Government to pay states and local governments their legitimate share of the Federation Account. An investigation into the management of oil subsidy conducted by lawmakers last year revealed that between 2009 and 2011, NNPC officials and their partners stole $6.8 billion intended to subsidize the price of fuel.
On Thursday, November 21, members of the House of Representatives again mandated the committees on Petroleum Resources (Upstream and Downstream), National Planning and Finance, to ascertain the volume and value of crude oil sales by the NNPC from January 2013 till date. The House unanimously adopted a motion seeking to verify how much revenue the corporation made during the period and how much it actually remitted to the Federation Account.
According to Section 162 (1) of the 1999 Constitution, money made through oil sales and other national businesses like the Nigerian Customs Service and Federal Inland Revenue Service (FIRS) must be remitted into the Federation Account from where it will then be disbursed. However, the lawmakers alleged massive lack of accountability and the arbitrary management of oil revenue by the NNPC. There were widespread discrepancies between information credited to the NNPC on the status and remittances to the Federation Account and the claim that the total crude oil sales from January to August 2013 were $20 billion, whereas the Corporation remitted only $7 billion to the account leading to a possible shortfall of $13 billion. It was also discovered that from September 2013, no proper accounts have been rendered by the NNPC or records kept to show the actual amount and volume of crude oil sales by it.
Early in the year, the same House of Rep had investigated a $1 billion deal involving Shell, the Federal Government and Malabu Oil and Gas Limited. According to documents filed in the US Supreme Court, Dan Etete, former Nigerian Petroleum Minister was paid more than $1 billion through his company Malabu Oil and Gas. dopting a motion on the matter sponsored by Rep. Robinson Uwak (PDP, Akwa Ibom), the House passed a resolution setting up an ad-hoc committee to probe the matter because, according to them, it has embarrassed Nigeria. “There have been Intense media attention in the last two weeks to the suspicious circumstances surrounding a tripartite transaction involving the Federal government of Nigeria, Shell/Agip companies and Malabu Oil and Gas Limited in respect of an Oil bloc refered to popularly as OPL 245. That there was a purported sale of OPL 245 to the Shell/Agip consortium for the sum of $1,092 billion and immediate transfer of the entire account to Malabu Oil and Gas Limited, an indigenous oil company as compensation for its alleged prior interest in the Oil bloc,” Uwak argued.
On January 8, 2012, the House of Representatives at an emergency session set up an ad hoc committee to probe the management of the fuel subsidy scheme. This resulted from universal lamentation about the management of oil subsidy funds which came about following the removal of subsidies on January I of that year by President Goodluck Jonathan. An eight-member ad hoc committee led by Hon. Farouk Lawan was selected to probe the subsidy regime between 2009 and 2011. Among stakeholders invited by the committee to give testimony were the Nigerian Customs Service (NCS), Petroleum Products Price Regulatory Agency (PPPRA), Nigerian National Petroleum Corporation (NNPC), the Ministries of Finance and Petroleum Resources, and all the relevant agencies of government. The Lawan Committee uncovered how in 2011 the country paid subsidy on 59 million litres of petrol per day when in fact, the daily consumption was about 35 million litres.
After sitting for three months, the committee reported on April 19 that “contrary to statutory requirements and other guidelines under the Petroleum Support Fund (PSF), Scheme mandating agencies in the industry to keep reliable information data base, there seemed to be a deliberate understanding among the agencies not to do so. This lack of record keeping contributed in no small measure to the decadence and rots the committee found in the administration of PSF. …We found out that the subsidy regime, as operated during the period under review (2009 to 2011), were fraught with endemic corruption and entrenched inefficiency. Much of the amount claimed to have been paid as subsidy was actually not actually for consumed PMS. Government officials made nonsense of the PSF Guidelines due mainly to sleaze and in some cases, incompetence.”
Even as the Lawan Committee was busy with its investigations, the executive arm of government drafted Managing Director and Chief Executive Officer of Access Bank Plc who is also member of the Economic Management Team (EMT), Mr. Aigboje Aig-Imoukhuede to lead others from the Central Bank of Nigeria (CBN), Budget Office of the Federation, Debt Management Office, PPPRA, Independent Petroleum Marketers Association of Nigeria (IPMAN), Major Marketers Association of Nigeria (MOMAN), and Office of the Accountant General of the Federation as members in another committee to probe activities in the oil sector. In July of that year, the Committee concluded that petroleum marketers and importers committed 17 infractions that cost the country N422,542,937,668.59 in overpayments.
Many marketers protested their indictment by the Committee and so, President Goodluck Jonathan set up another Presidential Committee on Verification and Reconciliation of Subsidy Payments also in July.
This new committee, which was also headed by Aig-Imoukhuede, was mandated to verify and reconcile the report of the technical committee, also headed by Aig-Imoukhuede, which was set up by the Federal Ministry of Finance. In its report, the verification panel still headed by Aig-Imoukhuede categorised the transactions examined into those it considered legitimate and those, which required investigation and recovery by the law enforcement agencies. The report noted that of 857 transactions valued at 1,112,836,823,380.43 which were examined by the committee, 661 transactions valued at N880,644,248,166.23 were verified as legitimate, while 196 transactions valued at N232,192,575,214.20 were not verified as legitimate. The 197 transactions not verified as legitimate involved 50 oil marketing and trading companies, while the 661 transactions verified as legitimate covered 71 companies.
With mounting public outcry over the management of industry and as revelations of misdemeanours occupying media space in and outside the country, government again set up a Special Task Force on Governance and Controls in the Nigerian National Petroleum Corporation (NNPC) and other parastatals within the ministry. Headed by Mr Dotun Sulaiman, it was mandated to review all management controls within NNPC and its subsidiaries; design a new corporate governance code that would ensure full transparency, good governance and global best practices in the NNPC and to design a blueprint for separating policy from operations in the corporation and its subsidiaries; set key performance indices for the corporation and its subsidiaries, and design a blueprint for eliminating all rent-seeking opportunities and arbitrage in the NNPC operations.
But by far, the most dramatic but most disappointing move by government yet over this issue was the appointment of a 16-member Petroleum Revenue Special Task Force led by Mallam Nuhu Ribadu, former Chairman of the Economic and Financial Crimes Commission (EFCC). The task force was asked to determine and verify all upstream and downstream petroleum revenue taxes and royalties due and payable to the federal government. While presenting his report on November 2, 2012, committee chairman praised the courage of President Goodluck Jonathan in setting up the committee and expressed the hope that he would also display courage in implementing the recommendations. He said all the issues raised in the report were the truth that would set the President and the country free if properly implemented because they would strengthen institutions and increase government revenue. But was the President desirous of being set free? The Committee found that many companies operating in the country fail to pay royalties and that it had become a habit to sell crude through agents rather than sell directly. Nigeria may also have lost $29billion in the sweet-heart gas deals with major oil companies, such as Shell and Total, just as crude oil theft is reaching an alarming level of 250,000 barrels daily at a cost of $6.3billion a year in the last 10 years. The 146-page study covers the year 2002 to 2012 and held that Ministers of Petroleum Resources between 2008 and 2011 handed out seven discretionary oil licences, but that $183m in signature bonuses was missing from the deals. Three of the oil licences were awarded since Alison-Madueke, took up her position in 2011.
There have also been efforts from outside government to clean the Aegean’s table but the Federal Government is obviously not interested in the subject aside paying lip service. The Chatham House report quoted in the beginning of this write-up corroborated the claim also by Ijaw activist and strong supporter of President Jonathan, Asari Dokubo who claimed a few years ago that almost every name on the list of most important Nigerians from the Presidency to military and politicians all took turns to illegally lift crude from the Niger Delta creeks. And like the Chatham Report suggested, could be responsible for why there is no political will to stop the practice.
Yet another report by the Stakeholder Democracy Network (SDN) in October 2013 based on 12 weeks of field research by a team of researchers who visited nine illegal refining operations in Rivers, Bayelsa and Delta States and supplemented with 120 key informants’ interviews with oil companies, government representatives and members of civil society groups accused top military officials and others of colluding with the oil thieves for pecuniary considerations. The report estimated that Nigeria is losing about 150,000 barrels of crude oil daily to the oil thieves and going by the computation by Shell Petroleum Development Corporation (SPDC), Nigeria loses $6 billion annually to oil theft. “This research suggests that a relatively small number of senior officers must have criminal ties to the tap point owners, unions and camps managers, as this is where most profits are made,” and that “a consortium typically made up of at least three key parties (security, technical capacity and operational access) own each tap point. During the tapping process, the JTF ensures the surrounding waterways are clear so workers can install the tap without disturbance,” it said.
But all these efforts would appear to be mere waste of resources as President Jonathan does not believe that corruption in the country is a thing to be worried about. In a much reported interview many months ago, he declared that there was no corruption in his government as is being widely held. According to him, corruption in his government is more of perception than reality. And truly, the administration has intensified a clampdown on anti-corruption crusaders in the country. Two weeks ago, police in Abuja aborted the protest organised by Stop Impunity Nigeria (SIN), and Citizens Wealth Platform (CW)P to raise awareness on the level of mismanagement in the public service. The two groups had assembled protesters at the Millennium Park, close to the Federal Secretariat, only to be ejected by armed policemen who arrived at the venue before it took off. The police officers, who arrived at about 9:14 a.m. in two vehicles with registration numbers NPF 6666 C and NPF 248, reportedly shot at a bus and fired two teargas canisters into one of the buses belonging to the Abuja Urban Mass Transportation Company, AUMTCO, which had been hired to convey the protesters. Recently a protest by former member of the House of Reps, Dino Melaye’s anti corruption group was stopped. Melaye was later arrested. Again a colloquium on FOI organized by Melaye was stopped also in Abuja.