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PIA: WHEN 3% IS GREATER THAN 30%

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PIA: WHEN 3% IS GREATER THAN 30%
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PIA: WHEN 3% IS GREATER THAN 30%

For a legislation that was about 20 years in the making, the Petroleum Industry Act still strikes many as injudicious at best. While in its long journey as the Petroleum Industry Bill and after it was signed into law by the President, Major-General Muhammadu Buhari (retd), the act has generated headlines that point to another front in Nigeria’s political fissure:

>>Problem may start in Niger Delta if Buhari signs PIB with 3% derivation – Tee Mac

>>New petroleum law, injustice to South-South—(Dan) Orbih

>>New definition of ‘host community’ in passed PIB, a day-break robbery –Rivers Rep, Dagogo

>>PIB: Oil-producing communities short-changed, raped with 3% share, says [Bismarck]Rewane

In an interview with The PUNCH in late July, Dr Tee Mac OmatsholaIsele, the musician-turned-mining executive, put the brewing fissure in the context of Nigeria’s recent history and current distress.

“When the youth were called to the million march of Abacha to Abuja and they saw the level of development, which was funded from money from the Niger Delta oil, they decided to start the war in the Niger Delta, which lasted nearly 10 years and made Nigeria to lose billions of US dollars, which could have been used for developmental projects. They do not mind starting again,” OmatsholaIsele said while commenting on the then pending bill. “But Nigeria, being broke now, cannot afford the Boko Haram problem up North, the Fulani herdsmen palaver all over Nigeria and another war in the Niger Delta.”

As the excerpted headlines above indicate, the bases for the objections are varied. However, a particularly sore issue is that while host communities in the established oil industry will get three per cent, those in the “frontier basins” will get 30 per cent. It just happens that the established industry is in the South and “frontier basins” largely in the North.

To Mele Kyari, the Group Managing Director of the Nigerian National Petroleum Corporation, the seemingly absurd difference is a mathematical illusion.

“The percentages appear very outrageous but 30 per cent of what? Nobody has sat down to look at it,” he said on Tuesday on NTA’s ‘Good Morning Nigeria.’ “When you say profit (from) oil 30 per cent, it probably comes down to less than $400 million per annum. But when you come to the host communities, you have three per cent of our operating expense. We spent about $16 billion in fiscal 2020 in our operating expense across the industry. So when you take three per cent of that number it comes above $500 million far above the budget of NDDC.”

PIA: WHEN 3% IS GREATER THAN 30%

To drive home this point with less heft, let me narrate a recent conversation with a friend and erstwhile colleague. As a recent retiree, he has decided to write and market short fiction, and his target market is highbrow magazines such as the New Yorker. He asked me to be his pre-submission editor and wondered what I would charge.

I told him I couldn’t charge a friend of many years for a service I provide freely to other associates. But he insisted, arguing that he wanted to formalise and routinise the arrangement. So, I counter-offered that he share a percentage that we would agree on.

To which he broke into a loud and sustained laughter. “Bere, you can have 100 per cent,” he eventually said, still laughing. “100 per cent of nothing is nothing.”

You see, my friend wasn’t expecting to earn much from the endeavour. It was more for creative pastime and self-satisfaction. So, the percentage amount meant nothing.

That’s more or less Kyari’s point. Host communities in the established oil industry will get three per cent of a much larger amount than that of the “frontier” communities. That is, three per cent of the NNPC’s operating expense, as opposed to 30 per cent of profits. So, it’s a case where three per cent is actually higher than 30 percent. Well, maybe. It all depends. Let’s get back to my friend’s point about 100 per cent of nothing. It was based on his assumption that his stories might not get published at all (it’s a brutal market) and if published would earn him little. But then there is also the scenario of ultimate optimism: One of his short stories not only gets published but is turned into a movie that grosses tens of millions of dollars. In that scenario, even one per cent could make me a millionaire.

Same logic applies to Kyari’s math. It is based on conservative assumptions of the prospects of the oil explorations in the frontier communities. Yet, it is within reason to conjecture the alternative: that the explorations become so profitable that 30 per cent becomes an even greater bonanza that the figures suggest. In that case, opposition to the act would be vindicated.

PIA: WHEN 3% IS GREATER THAN 30%

The math aside, there is also the issue of attention to political sensitivities and restiveness. Why even legislate and sign into law a bill with stipulations that on the surface seem discriminatory and in reality could be? Why not broaden the stipulations so as to be region- and resource-neutral?

In any case, the discrepancy in percentage figures is but one issue. There is the question of the definition of host communities to include areas where pipelines run through. That would mean that the three per cent would be shared among many more communities beyond the locales of exploration and operations.

“It is very unfortunate. It is a day-break robbery that cannot stand,” said Farah Dagogo, a representative for Degema/Bonny constituency at the federal House of Representatives, in an interview with The PUNCH. “It is … an uncharitable act designed to heat up the polity because the host communities are not ignorant of this fact, and I am sure they may react.”

Certainly, compensation may be due to areas where pipelines run through, but at a much smaller rate and not if the said communities are supplied by the pipelines.

In the larger context, there is always the question of utilisation. It is one thing to get a larger share of the cake, it is another to use it to raise the people’s standard of living. “What is more important for the oil communities is the transparency of the money that is spent and the impact it has rather than having a tea party,” Bismarck Rewane, the Managing Director of Financial Derivatives Company Limited, has said on Channels Television.

The new law is expected to enhance Nigeria’s oil revenue by attracting foreign investors and subjecting the NNPC to corporate standards of operations, among other things. But the expected benefits will be counteracted if the law leads to renewed insurgency in the Niger Delta. And that can be prevented with a quick revision of the problematic.

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Bureaux De Change Join CBN’s Battle Against Illegal FOREX Dealers

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Bureaux De Change Join CBN’s Battle Against Illegal FOREX Dealers

Forex companies share list of suspicious transactions with apex bank
Amid desperate moves by the Central Bank of Nigeria to sanitise the forex market and halt the naira’s free fall, the Association of Bureaux De Change Operators of Nigeria says it has begun sharing suspicious transactions by its members with the apex bank.

This followed the CBN’s vow to clamp down on abokiFX website, its owner and patrons.

The CBN Governor, Godwin Emefiele, had in July announced the end of forex sales to BDCs, saying they abused the privilege of forex allocation to them and that the parallel market had become a conduit for illicit forex flows and funding of terrorism.

With the latest move by the ABCON, there are strong indications that more forex operators may be prosecuted as the association has assured the CBN that it will continue to share such suspicious transactions with the apex bank.

Responding to a question from one of our correspondents, the President, ABCON, Aminu Gwadade, said, “We share suspicious transactions among our members with CBN-BDCs.

“I am not in a position to speak on the allegations. I guess the investigating agencies are at best to share insight on the generalisation of the criminalisation. We in ABCON share suspicious transactions activities with the CBN for their necessary action.”

CBN freezes accounts
Earlier, the CBN had published about 200 names of forex defaulters after obtaining orders from the Federal High Court, Abuja division, to freeze the bank accounts belonging to firms and Bureaux de Change to enable it to conduct investigations into suspicious activities.

The motions ex parte signed on different dates sought the orders of the court to direct the banks to freeze all other bank accounts of the defendants for a period of 180 days, pending the outcome of investigation and inquiry being conducted by the CBN.

A former President, Association of National Accountants of Nigeria, Dr Sam Nzekwe, said stopping forex sales to the BDCs was appropriate because the operators had been doing all sorts of illegal operations and making huge fortune from the country’s reserves.

According to him, the decision to clamp down on abokiFX was also appropriate.

He said, “There is CBN outside CBN. People are transferring money every day from this country. They pay naira here and collect dollars and do whatever they want to do and they don’t go through CBN. It means that anything can happen; you can bring whatever equipment you want to bring in.

“When you prosecute somebody, if he has done nothing wrong, you leave him. But if he has done something bad, he pays for it. A lot of irregularities are going on in the forex market.”

Naira slumps further
Eight weeks after the CBN stopped forex supplies to the BDCs, the naira continued to maintain its downward trend as it exchanged to the dollar for N570.

Before the supply cut, the naira had exchanged to the dollar at N490 at the parallel market.

Reacting to the development, the CBN maintained that “the only recognised exchange rate was the I&E forex window, which was the market that it expected Nigerians needing forex to go to.”

A financial analyst and a Senior Economics Lecturer at the Pan-African University, Olalekan Aworinde, said if AbokiFX had done anything against the law, the law could take its full course but that if the site only speculated and had not done anything wrong, it would be a waste of efforts by the CBN because the problem was not with such websites but with the policies the apex bank had been implementing.

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Bureaux De Change Join CBN’s Battle Against Illegal FOREX Dealers

He added, “Looking at it critically, we can see that it is the CBN that takes the major blame for the current state of the forex market. If they have done well to allow the forces of demand and supply to determine the value of the naira, this naira won’t have such a low value.

“You can see the case of the ban of forex sales to BDCs operators, this decision has negatively affected the value of the naira and so has the other policies they have introduced over the years.”

AbokiFX suspends forex publication
Meanwhile, on Friday, abokiFX suspended its publication of exchange rates between the naira and other currencies on its website following the CBN’s threat to clamp down on its operations.

After the Monetary Policy Committee meeting in Abuja on Friday, the CBN Governor, Godwin Emefiele, vowed to shut the website and prosecute its owner and other patrons for operating illegally.

It accused AbokiFX of manipulating the exchange rates to sabotage the economy.

Reacting to the allegation, AbokiFX disclosed in a statement on its website on Friday evening titled ‘Temporary suspension of rate publication – AbokifX’, that it decided on September 17, 2021, to temporarily suspend rate updates on all its platforms, until it gets better clarity of the situation.

“Final rates have been posted this evening but the abokiFX news section and the Crypto rates section will still be active,” it added.

Pursuing Aboki FX, a waste of efforts – Experts
Some financial experts however disagreed with the decision of the CBN to prosecute the owner of AbokiFX, describing it as a waste of efforts and a deviation from the major problems of the foreign exchange market.

According to the experts who spoke to Sunday PUNCH on the development, the devaluation of the naira was not primarily caused by sites like AbokiFX but policies and impulsive decisions of the apex bank, as well as the failure of agencies saddled with the responsibility of the fiscal aspect of the economy to function effectively and stimulate economic growth.

A former presidential candidate and political economist, Prof Pat Utomi, said he disagreed with the decision.

He said, “As a general principle, I disagree with that approach. Of course, markets need to be regulated and have boundaries, but I think that it is too easy to blame markets when sometimes the problem might be from within.

“I think there is nobody who is knowledgeable that does not know that for a number of years, policymakers were the biggest problem with the forex market.

“Let us not deceive ourselves, the current order has ruined the forex market, so for those who made such decisions to now complain, I think it is uncharitable. If they continue to clamp down on this and that, then the market would collapse and we will return to where we were in the 1980s.”

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Also, a professor of Economics at the Olabisi Onabanjo University, Ogun State, Sheriffdeen Tella, said while AbokiFX might be influencing the forex market, depending on the size of the forex transactions it conducts, the operations of the platform was not the major driver of forex scarcity and naira devaluation.

He said these were driven by the failure of the fiscal segment of the economy to complement the efforts of the monetary aspect in the country.

Tella stated, “It depends on the volume of transactions that abokiFX is conducting. If it carries out large transactions, it can influence the foreign exchange market. If it is true that he has numerous accounts where he is speculating dollar, then he might be influencing the forex market.

“I know that speculation is one of the factors that is causing a devaluation of the naira against foreign currencies. BDCs speculate to pressurise the CBN to start giving them dollar.

“However, I think the problem of forex in Nigeria is not restricted to BDCs or sites like abokiFX, the major problem is that the fiscal part of the economy, the Ministry of Finance and related agencies are not doing what they have to do to support the economy or complement the efforts of the agencies in charge of the monetary aspect of the economy, like the CBN.”

During the briefing after the MPC meeting, the CBN governor, Emefiele, said the apex bank would track and prosecute anyone trying to sabotage the country’s foreign exchange market.

He said, “First, let me make it clear that if you are running a legitimate business and following our rules at the Central Bank for use of financial system, there is nothing to worry about, but for those who think they are smart and they want to sabotage the efforts of the Central Bank in running this economy, we will make life very difficult for you. We will continue to do our jobs in safeguarding the financial system for the betterment of everybody.”

How speculators attacks, affect naira value —CBN ex-deputy gov Moghalu
A former Deputy Governor of the CBN, Kingsley Moghalu, has said currency speculators attack and affect the value of the naira.

Moghalu, who occupied the position from 2009 to 2014, made this known in a thread posted on his Twitter handle on Saturday.

He made the comments just hours after the CBN governor on Friday said the Federal Government would track the owner of AbokiFX and stop the operations of the website in the country.

The apex bank governor had also accused the owner of the website, a London-based Nigerian, Oniwinde Adedotun, of “speculative activities on the naira”, adding that he would have to explain how he obtains his rates.

Following the complaints by the CBN governor, AboxiFX said on Friday that it would no longer provide daily updates on foreign exchange rates for now and hoped that the naira would stabilise.

Commenting on the FX crisis in the country in a Twitter thread, Moghalu listed factors that affect the value of the Naira to include “supply and demand (if too much naira is chasing scarce dollars, the dollar gets stronger relative to the naira, and vice versa).

“Others are inflation (a high inflation economy such as Nigeria’s weakens the value of the legal tender), high government indebtedness ( again, our case especially relative to our revenues and ability to pay which will be stretched the more we borrow on poor revenues, and 90 kobo out of every N1 goes to debt servicing).”

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Though Moghalu did not mention AbokiFX, he said, “Speculation also affects the naira value, as there are currency traders around the world for whom the weakness of a currency is their very good fortune. Such traders “attack” such currencies for profit, especially where the currency is using a fixed, official exchange rate determined by the Central Bank instead of the market.

“As the Naira is effectively pegged officially to a “reserve” currency (dollars, euros, pound sterling), speculators can attack such a currency for profit if the country (Nigeria in this case) is perceived to have insufficient foreign reserves to meet demand. Because our inflation rates at 17 per cent are way higher than those “reserve-currency” countries, again we are exposed to possible currency attacks.”

He explained further that if reserves are weak and demand for dollars massively outstrips supply, currency devaluation is inevitable, adding that currency traders who mount speculative attacks profit from this devaluation.

Bureaux De Change Join CBN’s Battle Against Illegal FOREX Dealers

He added, “Such traders will borrow the Naira from Nigerian banks, convert it to, say, dollars, then buy short-interest paying Nigerian bonds. If, as the speculators anticipate, the Central Bank devalues the naira, the traders sell the bonds in the foreign currency, convert them into naira, and repay their original loan. The steeper the devaluation, the higher the speculator’s profit.”

While proffering solutions, he said, “What should we do about all of this? As I have said before, and say again, we have two options. One is to let the naira find its level in the market. In other words, subsidise the currency.

“While there will likely be an immediate spike in the price of the dollar, this move will have two advantages. The first is that, because Nigeria has a big, profitable economy and market, dollars will likely swamp the market seeking profits for investors.

“When this happens, the laws of demand and supply will work in favour of the naira. Alongside this, maintaining different exchange rates for different kinds of transactions must end. This is called rate convergence.”

The former presidential candidate of the Young Progressive Party in 2019 elections also said that one of the best ways to strengthen the naira was to make the right trade policies to support and create such incentives for massive export of finished, value-added goods from Nigeria.

He added, “The second, and more important benefit is that, since the current practice of the CBN pumping dollars in the FX market (from the reserves, which also depleted them) is essentially a subsidy for imports, which has made Nigeria more and more import-dependent, letting go of the subsidy on the naira will refocus the economy towards exports.

“This will create an incentive for complex production of a quality that can be competitive in the international market. Accompanying this must be the right trade policies to support and create such incentives for massive exports of finished, value-added goods from Nigeria.”

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“Ore Industrial Park to employ not less than 120,000 workforces within twelve years” Femi Akinkuebi

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“Ore Industrial Park to employ not less than 120,000 workforces within twelve years” Femi Akinkuebi

By Amudipe Marcus

The Managing director of the Ore Industrial Park, Femi Akinkuebi has reiterated the commitment of the Akeredolu led administration in Ondo State to avail youths, small and medium scale business owners within and outside the state the platform to thrive by growing and developing their respective business enterprise; Mr. Femi Akinkuebi stated this while updating Newsmen in Akure, with level of progress made at the facility in Ondo State.

The Ore Industrial Park is a Public-Private Partnership[PPP] between Ondo State government and Hessmac Industry Limited, which is established on a massive 1000 hectares of eco-friendly, economic and industrially zoned land.

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According to him, the Ore Industrial Park provides the general public the opportunity to become a master of their destiny by tapping into the numerous benefits that the facility has to offer, the Ore Industrial Park was created by the Akeredolu led administration in order to eradicate poverty, improve the standard of living, boost wealth creation, unleash the nation’s industrial potential, build reputation for Nigeria in technology and industrialization.

Mr. Akinkuebi also revealed that there are about six companies which are currently on ground running(
Allecharis gas, Sulmont Solar, ASB, ATC Globalwide, Euro O&G Continental Ltd etc…) while another more companies will soon start working at the park, he also revealed that the Ore Industrial Park is made accessible to all because the government is more interested in giving opportunities to its people and also business minded thereby gaining more for the state. In the words of the managing director of the Ore Industrial Park.

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“Ore Industrial Park to employ not less than 120,000 workforces within twelve years” Femi Akinkuebi

In the words of Mr. Femi Akinkuebi, “As much as we are interested in foreign investors, we can’t forget our people, this necessitate our approach to encourage both local and international companies”

He further explained that the Akeredolu led administration in Ondo State through the Ore Industrial Park is willing to welcome interested youths and entrepreneurs who have the business skills and expertise to run any business venture, “even those with little or no startup capital are welcome to use our facility, we have a business conducive facility that will give your business the much needed leverage to thrive”

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“The Ore Industrial Park has the capacity to employ not less than 120,000 workforces within twelve years at the park”. he added.

The Ore Industrial Hub is designed to provide a world class infrastructure and ultra-fast operational efficiency, proximity to raw materials and target markets, uninterrupted power supply, easy access to gas with EPL gas pipeline and adequate security. The park has its own installed 30MW trio-fuel independent powecr Plant dedicated to providing power within the park.

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FIRS, not states should collect VAT – Umahi

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FIRS, not states should collect VAT – Umahi

Ebonyi State Governor David Umahi says the state is not in support of Rivers, Lagos and other states in their moves to collect Value Added Tax.

Umahi stated this at a dinner organised in honour of a former Chief of Army Staff and Nigerian Ambassador to the Republic of Benin, Amb. Tukur Buratai, on Monday night.

Umahi said Ebonyi was solidly and would continually throw its weight behind the Federal Inland Revenue Service’s collection of VAT.

Speaking at the dinner held at the Governor’s Lodge, Centenary City, Abakaliki, Umahi reiterated that state would not support any of the states collecting VAT, adding “Evil will continue to thrive if good people keep quiet.”

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He said, “We must make Ebonyi State very exceptional by rising to the challenges. When we shout true federalism, I say, I agree; but it should be administrative restructuring.

“Ebonyi State is not in support of any state collecting VAT. We are in support that FIRS should continue to collect tax and share.”

While urging the country’s leaders to speak up against dissenting voices that were capable of polarising the nation, Umahi stressed he was open to debate with any governor from the stable of the Peoples Democratic Party, who felt he had delivered more democracy dividends to his people than the APC-led administration in Ebonyi State.

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FIRS, not states should collect VAT – Umahi

“People are taking special interest in Ebonyi State and her Governor, positively and negatively; but it is very important to be in the news than for you to say there are 36 states, you will name 35 and say what is the other state?

“We have aborted it; we are now a state to reckon with and we have no apologies.

“When I say I have no apologies, you can talk everything about me but you can not say we have not delivered and so when people open their mouths in PDP to talk about APC, they should know that I belong to APC and if they like, let PDP offer any of their best Governors to come for debate with me and I will defeat any of them; it’s not just to be talking and talking. You don’t sit on people’s sweat and resources and be talking nonsense.

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“We have no regrets taking our people to the centre. We have always played at the centre. We are not playing party politics, we are playing politics that will be an advantage to our people, criticise me; no problems. But we need resources, we need friendship with the centre,” Umahi stated.

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