BREAKING NEWS, Cover, Featured
–
Foreign investors are leaving Nigeria because of harsh economic climate in the country, especially the destruction of oil facilities in the Niger Delta, scarcity of foreign exchange and general insecurity in the country among others
| By Anayo Ezugwu | Sep 5, 2016 @ 01:00 GMT |
THE instability in the oil and gas sector in the country is shaking the confidence of international investors in Nigeria’s economy. So also is the scarcity of foreign exchange which is dampening the optimism foreign investors had when they rushed to invest in the country following the 2015 peaceful general elections in the country. This can be seen in the experience of Udo Wolter, a German, who was very optimistic about investing in Nigeria but is now having a rethink. His initial enthusiasm was also buoyed by the peaceful transition from the former government of President Goodluck Jonathan to the President Mohammadu who won the elections.
Wolter’s hope that Nigeria was getting its act together made him and his company, Gauff Power International Co to quickly decide to invest in the country. So, by December 2015, he arrived Nigeria with an investment package of $100 million in the power sector. The project which is situated in Anambra State is to be financed by Commerzbank. However, eight months after, Wolter feels frustrated because of the economic quagmire in Nigeria which is delaying the implementation of the power project.
Wolter, who is the head, Thermal Power Plants Transmission and Distribution, GAUFF Power International Co, told Realnews on Tuesday, August 23, in Lagos, that the project has a timeline of 22 months which been extended once. Already eight months is gone and the company has no idea when the financial deal involving the Central Bank of Nigeria, CBN, Commerzbank and Zenith Bank Plc and UDIPPCO Nigerian Ltd, Lagos, will be completed to allow project implementation to start in earnest. “We will wait for a few months and if nothing shows up we will have to close business,” Wolter told Realnews.
It is not only the delay by the Central Bank in approving for Zenith Bank to get the low interest foreign loan from Commerzbank to fund the project that is worrying Wolter. The activities of the Niger Delta militants is also another source of frustration because his project has to do with power generation which involves gas supply which is affected by militant’s destruction of gas pipelines.
This problem was also echoed by a representative of the Olaf Schmueser, Commerzbank, Lagos, who said that oil production in the country has gone down to about 800,000 barrel per day because of militancy in the Niger Delta and the destruction of oil facilities. Emphasising the impact on scarcity of dollars on businesses in the country, Schmueser said they have no problem with the price of oil in the international market but with production which has been severely disrupted invariably resulting in scarcity of foreign exchange because the country is no longer selling much oil to generate revenue like it used to do.
Wolter and Schmueser are not the only foreign investors that moan the adverse economic environment in Nigeria. The Southern Sun International, a South African company has shipped out of the country on August 22. The company cited “continued setbacks in Nigeria, economic slow growth, low oil prices, the threat from militant groups, Boko Haram and a weakening Naira as well as ongoing shareholder dispute” as reasons for exiting.
In the company of Southern Sun is also the Woolworths Tiger Brands which sold out to Dangote industries.
The harsh economic climate in the country is increasingly becoming a source of worry not only for the investors but Nigerians who are increasingly losing jobs because foreign companies are closing shop. This is why the federal government and CBN have to act quickly to ensure that companies like GAUFF remain in the country. If not GAUFF has just a few more months to watch whether the situation in the country will improve if not “We have a clear statement in our contract papers and within this period if nothing happens then we can say bye to the contract,” Wolter said.
Should this happen, Nigeria and Nigerians are once again the biggest loser.
As Schmueser pointed “oil production in Nigeria has dropped drastically. The production has dropped from 2 million bpd to 1.4 million bpd. With this figure, a percentage goes to China to services loans Nigeria took from the country. The issue now is that the country needs to increase its oil production to enable it come out of recession,”
This statement from Schmueser shows how concerned foreign investor are worried over the activities of the militants in the Niger. But more worrisome is the allegation by the Niger Delta Avengers, NDA, that Nigerian military officers are involved in oil bunkering in the region. This implies that it is not only the militants who are sabotaging Nigeria and investors in the oil and gas sector in the country. According to the avengers, soldiers are the merchants of oil bunkering in the Niger Delta. Mudoch Agbinibo, spokesperson of the militant group, said, “It is a shame that Operations Delta Safe is still employing the old habit of deliberately dining and wining with fake intelligence from political thugs, political paymasters and enemies of the Niger Delta to perpetuate their continuous funding and relevance by leveraging on the hunger in the land.
“One question for the Commander of Operation Delta Safe, is, who are the people perpetuating the ongoing illegal oil bunkering in the Niger Delta at the moment? We have both video and still photographs of the serious involvement of your troops in the pervasive crude oil thefts. We have records of how much profit you collect and make per day from these atrocities in the Niger Delta.
“To set the records straight, we cannot come after your dane guns and ammunition. Since the start of ‘Operation Red Economy,’ our forces have not fired one shot until we have achieved this great success of crippling crude oil productions in the Niger Delta to about 800,000 barrels per day…”
The militants’ allegations notwithstanding, the fact remains that the NDA has attacked oil producing facilities in the region, shutting down oil terminals, leading to a fall in Nigeria’s oil production to its lowest level in twenty years. The attacks caused Nigeria to fall behind Angola as Africa’s largest oil producer. The reduced oil output has hampered the Nigerian economy and destroyed its 2016 budget estimates, since Nigeria depends on the oil industry for nearly all its government revenues.
Kemi Adeosun, minister of finance, on Thursday, July 21, tough on this when she said the country’s economy has entered a recession stage. The minister, who briefed the Senate on the state of the economy, however, asserted that the recession would be a very short one because government was taking a lot of measures to reverse the negative economic trend.
With the economy in recession, the manufacturing sector seems to be worst hit sector in the country. According to Manufacturers Association of Nigeria, MAN, in the last one year, more than 272 firms had been forced out of business in the country, 50 of which were manufacturing companies. While some of the affected manufacturers have relocated to neighbouring countries.
It stated that at least 222 small-scale businesses have closed shops, leading to 180,000 job losses. Ambrose Oruche, director, economics and statistics, MAN, lamented the unavailability of productive inputs, stating that this was the major challenge confronting manufacturers. He attributed the problem largely to the ban by the Central Bank of Nigeria, CBN, on certain items from accessing the official window of the forex market, adding that the current operating environment was too harsh for many manufacturers to continue to operate.
He wondered why the CBN and the federal government kept coming out with what he described as conflicting polices, noting that this was affecting the growth of the manufacturing sector. He said, “Some manufacturers are still producing due to their love for this country. Government’s policy on cement should have been adopted in this case. In the case of cement, Nigeria used to be a net importer of cement, but the government set up a policy over a five-year period, which made it possible that today, we are a net exporter of the commodity.”
The downturn in the economy start way back in 2014 when the Nigerian economy faced huge financial haemorrhage as politicians, corporate bodies and foreign investors moved funds massively out of the country. A survey of payments made by the CBN on behalf of the public then showed a total of $22.1billion went out of the country in five weeks, an average of $4.5 billion a week. This capital flight has resulted in the crash of the Naira exchange rate which had remained stable before the election and the crash of the international crude oil price. But CBN has attributed the collapse of the Naira at the inter-bank to currency speculators who buy and hold currency for them to sell at a future date to make some gain. The movement of funds out of the country comes by way of Nigerian residents buying up dollars with their Naira and moving it offshore. The trend became more noticeable in July 2014 where in fact, in a matter of weeks, several billions of dollars were purchased through the banks and bureaux de change. The movement of funds is noticeable from CBN records of direct remittances, whole Dutch Auction sales of dollars.
Capital flight has led to the depletion of Nigeria’s foreign reserves, thus weakening the Naira. Nigeria’s foreign exchange reserves, which was $5.4 billion in 1999, rose to an overwhelming level of $51.3 billion at the end of 2007 to $53.0 billion in 2008, but owing to the crash in the international price of crude oil in 2008 and the aftermath of the global financial crisis, the reserve declined to $42.4 billion in 2009, further declined from $38.138 billion at the end of April 2014 to $33.04 billion in February 2015.
The Central Bank of Nigeria has tried to conserve the foreign exchange and mapped out a lot of policies to that effect. They range from the ban of certain items from accessing forex to the current flexible exchange rate. The apex bank has also conserved about $3billion that could have been lost to capital flight, in the last few years, with the directive on commercial banks to always confirm the reasonableness of forex request for freight component of their international transactions.
This notwithstanding, Nigeria’s economic woes is heaped on the Niger Delta Avengers, NDA, who began attacks on oil installations on February 10, 2016. On June 16, Ventures Africa compiled the list of attacks by the NDA which so far stood at 40. Describing their mode of operations, the Nigerian President, Muhammadu Buhari said “the technology being deployed by the militants to destroy oil installations is high-tech.” Notably, the Avengers claim that since they started attacking oil installations, they have not killed a single person.
Also, Maikanti Baru, group managing director, Nigeria National Petroleum Corporation, NNPC, on Wednesday, August 24, when he paid a courtesy visit to Abdullahi Muhammadu Gana, Commandant General, Nigeria Security and Civil Defence Corps, NSCDC, said the corporation recorded 1,447 incidents of pipeline vandalism between January and May this year.
The wanton destruction of pipelines, he said, had led to loss of 109 million litres of petroleum products and 560,000 barrels of crude oil to refineries. The government lost over N51.28 billion through deliberate pipeline burst by vandals.
“Domestic natural gas supply to power is equally impacted with estimated drop of about 50 percent resulting in significant power outage. Petroleum products supply and distribution pipelines have also suffered huge products losses with attendant cost of repairs. For example, over 3,000 vandalism incidents were recorded every year from 2010 to 2015. In 2015 alone, pipeline losses of products volume of over 643 million litres amounting to N51.28 billion were incurred. NNPC recognises the importance of the NSCDC being a grassroots paramilitary agency much closer to our facilities than any of the security agencies,” he said.
Prominent Nigerians are also worried over the state of the economy. They have also called on the government to take action to stem the slide. Wole Soyinka, Nobel laureate, on Thursday said he had been contacted to intervene in the Niger Delta crisis, and appealed to the government to respond positively. He, however, appealed to the Nigerian government to hold positive negotiations with the Niger Delta militants in order to solve the crisis in the region. “At the moment they feel that the government of President Buhari is not seriously responding to their own outrage. And I wish to make a personal appeal to the government to respond positively and let us see where it ends us.
“But I’m not part of any international group, I was approached personally and I’ve been responding personally to some of these groups just as I did when President Jonathan was in power and MEND was the umbrella group of the insurgents. So I make that appeal once more to the government please respond to the efforts of these militant groups to arrive at a holistic and comprehensive solution. Please don’t attribute to me things I never said,” he said.
Also, traditional Rulers from the Niger Delta region have listed conditions they want the Nigerian government to meet before dialogue can start. In the statement, the traditional rulers said: “Having acceded to the call for a ceasefire by the Minister of State for Petroleum Resources, Ibe Kachikwu, on August 4, the buck has now been passed to the table of the federal government as driven by the minister of State for Petroleum Resources – a representative of the federal government.
“For the purposes of building confidence in the system, we wish to state here that as a matter of urgency the federal government should appoint/constitute a Federal Government dialogue team; release the 10 innocent school children arrested by the Nigerian Army on the 28th of May, 2016 in Oporoza and others in detention on trumped up charges.
“Return the Golden Sword, being the symbol of authority in the Gbaramatu traditional institution; return the three traditional council speed boats in custody of the Nigerian Army; cessation of hostilities perpetrated by the military in the Niger Delta region; and equally important, the Federal Government should make a categorical statement about the opening of the Maritime University, Okerenkoko Delta State for academic activities in the 2016/2017 session.”
Unfortunately, the Avengers are not the only militant group in the region presently. There are other groups claiming attacks in the region. And there are established link between Avengers and other groups in the region. Prominently, the NDA group has stated that they do not agree with the Movement for the Emancipation of the Niger Delta, MEND. The Avengers accused members of MEND of fighting for their pockets and not for the Niger Delta people. On June 7, in a statement, titled ‘MEND your criminal days are over,’ the Avengers accused them of indulging “in kidnapping, hostage-taking, sea piracy, illegal oil bunkering, bank robberies and social crimes.”
The NDA has also dissociated itself from the Reformed Niger Delta Avengers, RNDA, which local media have reported to be a faction of the former. Disclaiming the RNDA, the NDA stated that “the public and all sane minds should know that the entire household of the Niger Delta Avengers remain intact, we are in good spirit with highest morals and even more dedicated to get the ultimate targets.”
The Avengers have pledged solidarity to the cause of the Biafran agitators many times. An example of this is obvious in a part of their demands where they are requesting for the unconditional release of Nnamdi Kanu who is currently being held in the Kuje Prison.
The Avengers have numerous demands including immediate implementation of the 2014 National Conference reports, opening of Maritime University in Delta state; unconditional release of the Indigenous People of Biafra, IPOB, leader, Nnamdi Kanu, and the reinstatement of the Presidential Amnesty Programme that was suspended at the inception of the current government. Ultimately, the Avengers appear to be fighting for a sovereign ‘Niger Delta Republic.’
Following the realisation that the Niger Delta Avengers is serious the government showed interest in negotiating with the militants. A committee, led by Babagana Munguno, National Security Adviser, NSA, was constituted by the government to conduct peace talks with the militant groups in the region and initiate a ceasefire, especially with the Niger Delta Avengers. Soon after the committee began its duties, the head of the committee claimed he had met with several groups claiming leadership of the Niger Delta Avengers; surprisingly, those groups had been brought to him by either a serving governor, a former one, a serving minister or one that had left office, with assurances that “this group is the one to talk to.”
Similarly, Solomon Dalung, Nigerian Minister of Youth and Sports, reportedly visited Oporoza in the Gbaramatu Kingdom, Delta State, and met with representatives of the Avengers. Before then, Kachickwu, Governor Ifeanyi Okowa of Delta State and some others also claimed to have met with the Avengers. Unfortunately, the NDA dismissed these rumours, stating that the government officials only met with imposters and not with any of its representatives.
Recently, the Nigerian government also alleged that they are in talks with the militants via the multinational oil companies operating in the Niger Delta region, but the NDA group has refuted these claims.
The main reason the Avengers gave for not being involved in the peace talks initiated by the government so far has been that they are not genuine. One consistent and major condition for dialogue they have asserted is that they want international communities to witness any roundtable discussions they have with the federal government of Nigeria. So far, the Nigerian government has not shown any commitment to this condition. A few days ago, the Niger Delta Avengers named a chieftain in the oil region, Edwin Clark, as their negotiator.
The group, in a statement, announced a ceasefire. The Avengers, however, vowed to continue fighting if this opportunity fails. They are still insisting on declaring a Niger Delta Republic on October 1, if the Nigerian government fails heed the calls by several Nigerians and groups asking for the restructuring of the country.
Whatever, the only thing that matters to international investors is for the federal government to do all that is necessary to end the hostilities in the Nigeria, increase oil production, shore up the country’s foreign reserve, restore confidence in the economy and safeguard their investment. That is the way to go to attract foreign investment into the country which will create employment for the teeming unemployed in the country.
– Aug. 26, 2016 @ 11:59 GMT |
Tags:
