Economy: A Mixture of Positive and Negative Results

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Okonjo-Iweala

|  By Maureen Chigbo  |

THE Nigerian economy in 2013 was heavy with a lot of activities which advanced or negated the economic calculations of its minders namely the ministry of finance, the Central Bank of Nigeria and the Nigerian National Petroleum Corporation, NNPC. The year started on a good note when it was forecast that the GDP growth would average seven percent and hit between seven and eight percent by 2015. But so early in the year, one of the major events which threatened to derail that growth and the revenue accruing to the government was crude oil theft. The nation lost about 400,000 barrels per day to crude oil theft.

The intensity of the theft heightened early in the year leading to major international oil companies crying foul. They urged the government to check the ugly trend. Right from February at the Nigeria Oil and Gas conference, major international oil companies seized the opportunity of the forum to complain bitterly about the situation which affected oil production adversely. Major oil companies including Shell Petroleum Development Company, SPDC, and AGIP, at a point, shut down production. Even the nation’s cash cow, the NNPC cried out in April that crude oil theft was wrecking the Nigerian economy. The NNPC said that in the first quarter of 2013, crude oil production dropped due to incessant crude oil theft and vandalism along major pipelines in the Niger Delta. The situation reduced the April and May average to about 2.2 mbpd and further decreased oil revenue by about $554.0 million (N83 billion) that should have accrued to the Federation Account.

Alison-Madueke
Alison-Madueke

Also in April both the Petroleum and Natural Gas Senior Staff Association of Nigeria, PENGASSAN and the Nigerian Union of Petroleum and Natural Gas Workers, NUPENG, threatened to suspend operations if crude oil theft was not checked. The federal government along with state governments and security chiefs, held series of meeting to stem the trend. It even took the matter to the international community when Diezani Alison-Madueke, minister of petroleum resources, drew its attention to the problem at the Offshore Technology Conference, in Houston, in May. She appealed to Nigeria’s international partners to help in the fight against crude oil theft by checking the DNA of the crude oil before buying it.

Apart from the federal government’s attempt to get the international community to stop buying stolen crude, Chatham House, a London think-tank, published a report which unraveled a complex network that arranged the theft of oil worth billions of dollars a year. Oil theft cost Nigeria, Africa’s second-biggest economy after South Africa’s, about $8 billion a year, claims the report. It said an average of 100,000 barrels a day (b/d) were 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, the report said. According to Chatam House, “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 proceeds-and stolen oil-end up in the Balkans, Brazil, China, Indonesia, Singapore, Thailand, the United States and other parts of west Africa.”

It said that 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 stolen-though 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.

Akinwumi Adesina
Adesina

Chatam House said 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 23, 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.

Apart from crude oil theft, the unprecedented level of unemployment in the country undermined the much touted all year GDP growth. Unemployment was above 56 percent with youth unemployment growing at 16 percent per year, according to World Bank figures. But the other economic indices like inflation remained stable in single digit even though by November, the year-on-year inflation figure increased to 7.9 percent, according to National Bureau of Statistics, down from 9.73 percent in 2012.

As the news of the unemployment was weighing heavily on the country, Aliko Dangote, chairman of the Dangote Group, who was also named Africa’s richest man this year, signed a $3.3 billion deal with 12 Nigerian banks to finance the building of an oil refinery in Nigeria. The oil refinery, which will create thousands of jobs in the country, will also be the largest in Africa and will turn Nigeria into a petroleum exporter. “At the completion of these projects we expect Nigeria to become not only self-sufficient in fertiliser and refined petroleum products but, indeed, to become recognised as a leading exporter of these products,” Dangote said at the deal signing. Dangote, through the refinery, will produce 400,000 barrels of oil per day and 2.8 million tons of urea for fertilising crops to produce polypropylene, used to make plastics. The refinery is due to be operational by 2016.

This good economic development was followed by Cowrie Partners inaugural Nigeria Finance and Investment Forum in Abuja in June. The conference is to hold annually to address topical issues pertaining to Nigerian Financial Services industry and developments in the Nigerian economy. The conference brought together policymakers, regulators, bankers, their top customers, major international investors and reputable financiers to draw attention to Nigeria’s non-oil investment opportunities and addressed  how financial institutions could remain a catalyst for the sustainable growth of the economy.

In September, the Nigerian Economic Summit Group, Nigeria’s leading Think-Tank on economic policy and private sector development, hosted its 19 Summit which focused on Nigeria’s agricultural sector which is undergoing massive restructuring and transformation with the goal of turning Nigeria into a global agricultural powerhouse. This year’s summit presented a unique opportunity for major domestic and global leaders to discuss ongoing reforms in Nigeria’s agricultural sector focused on improvements in infrastructure, agro-industrial zones, financing and enabling policy environment that are critical for the full exploitation of the agricultural value chains, attainment of food security, employment generation and wealth creation. The transformation of the agricultural sector in the country has yielded a much desired fruit for the country when in December, Forbes named Adesina Akinwumi, minister of agriculture, its Person of the Year for his reform in the sector.

Babatunde Aliu
Babatunde Aliu

It was not only the agricultural sector that attracted international recognition for Nigeria. In the aviation sector, which recorded another plane crash and scandals involving the alleged purchase of bullet proof cars for the ministry of aviation, salvaged its image when Babatunde Aliu was elected the president of International Civil Aviation Organisation, ICAO, the body responsible for aviation safety. His election gave a stamp of recognition to the reforms and measures the federal government has taken to ensure safety in the Nigerian airspace.

However, throughout the year, the manufacturing sector remained in the doldrums as factors including security challenges, religious conflicts, terrorist activities, flooding in some parts of the country, infrastructural challenges, multiple taxation and dearth of local skills and technology continued to make the sector to contribute about five per cent to the GDP. But with the handing over of the power investors to private sector on November 1, after a successful privatisation, it was hoped that a major headache of the manufacturers – incessant power outage, would have been solved. But power supply has continued to be epileptic throughout the year and even got worse after the privatisation which netted about $3 billion which was used to settle the defunct Power Holding Company of Nigeria, PHCN, workers’ entitlements.

The ended with the controversial letter Sanusi Lamido Sanusi, Central Bank of Nigeria, CBN, governor, wrote to President Goodluck Jonathan dated September 25, 2013, alleging that the NNPC did not remit $49.8 billion being revenue from crude oil sales to the Federation Account. The NNPC denied it saying that it remitted everything to the government as expected. Due to the public outcry the allegation generated, the federal government set up a revenue reconciliation committee comprising officials from federal ministry of finance, CBN, NNPC, Federal Revenue Inland Service, FIRS, and Department of Petroleum Resourses. On December 17, the committee issue a summary of the outcome of its meeting clearing the NNPC. It stated that the money has been accounted for and that the committee was working to reconcile the remaining $10 billion which NNPC claimed to have remitted but was not reflected in the CBN record.

Just as the controversy over the unremitted fund was ending, the federal government through Okonjo-Iweala, finance minister and cordinating minister of the economy, on behalf of the President Goodluck Jonathan presented the much delayed 2014 budget of N4.6 trillion to the National Assembly on December 19. The budget, which is aimed at job creation and inclusive growth targets investments in agriculture mostly. It also  earmarked N1.1 trillion, representing 27 percent to capital expenditure while recurrent expenditure will gulp N3.5 trillion, representing 72 percent of the budget. The expected revenue for 2014 is about N3.73 trillion.

— Jan. 6, 2014 @ 01:00 GMT

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