- Written by By Geoff Iyatse
IN terms of policies, 2013 will go down in history as just another eventful year. As the economy shifted, albeit aimlessly as usual, the government kept pointing to galaxy of potential breakthroughs that never came while the people miserably watched another golden opportunity slips by.
Perhaps, the endorsement of the new automotive policy by the Federal Executive Council (FEC) is the most far-reaching decision the government made in the year. Yes, conclusion of the privatisation of the Power Holding Company of Nigeria (PHCN), even though the process started several years ago, earns its place as a major move.
But two things speak for the new automotive tariff structure — the swiftness of its approval and the manner it will usher Nigerians into 2014. These distinguish it from other policies. Just when Nigerians were still considering the risk of increasing the cost of importing automobiles amid growing poverty, the government rammed through with an endorsement, giving January 10 as takeoff date in a cruel reminder of the 2012 fuel hike.
Through a letter to the Comptroller General of the Nigeria Customs Services (NCS), chairman of the Federal Inland Revenue Service (IFRS) and private service providers at the country’s ports, coordinating Minister of the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, confirmed the resolve to go ahead with the proposal that might revive the moribund local assemblage (assuming other militating challenges are addressed) but with untoward implications for prices of vehicle components, at least, in the interim.
According to the new tariff structure, fully built units (FBU) passenger cars will attract 35 per cent duty and 35 per cent levy, while FBU commercial vehicles will attract 35 per cent duty and zero levy. Imported tyres of all categories also attract 20 per cent duty and the statutory value added tax (VAT).
Apart from the importation-prohibitive tariffs, prospective manufacturers are also given other incentives. Completely knocked down (CKD) components imported by local assembly plants come with duty-free, while semi-knocked down (SKD) parts are only charged five per cent duty.
The guidelines say all tyre manufacturers in the country are entitled to pioneer status in addition to privilege to import twice their volume of production at five per cent duty for a period of two years starting from the date they start manufacturing. The special consideration also applies to car assembly plants. Unlike other automobile importers, they can import FBUs in equivalent of twice their production figures at 35 per cent duty (for cars) and 20 per cent (for commercial vehicles) without applied levies.
The policy sounds good for a country that gasps for industrial renaissance. But Nigerians have not forgotten how past similar policies pushed up the prices of cement, which have not come down since then. Hence, they are kicking.
Though the tariff is fait accompli as far the promoters are concerned, the people who will pay the duties and levies are complaining. They want equal attention paid to reviving refineries that will bridge the huge supply gap in the synthetic rubber industry; bring back the moribund rubber plantations; stimulate auxiliary component (such as battery) manufacturers companies and fix power.
There are also concerns regarding how government intends to police porous borders to stop smugglers from taking advantage of the new policy. Hitherto, smuggling at the Seme Border is attractive because neighbouring Beninoise government offers lower tariffs and smarter clearing procedure. With a further increase in tariffs, it is obvious smuggling will be more compelling than ever, except more efficient measures are taken to stem the menace. More challenging is the attitude of men of Customs administration.
The Lagos Chamber of Commerce and Industry (LCCI) suggested that the focus of the policy should be on the development of strong supply side capability, especially in the iron and steel, petrochemical, glass and other auxiliary industries.
Of course, the steel industry is in disarray. Political intrigues and corruption have clouded the Ajeokuta Steel Company dream, preventing it from taking off over three decades after it was conceived. The Delta Steel Company (DSC), conceived alongside Ajeokuta, is another dent in the country’s quest for economic freedom.
At a time, it was thought that privatisation was the magic pin needed to revive the gigantic company currently rotting away, it was literally ‘dashed’ to Indians who turned it to a cashcow before the Asset Management Corporation of Nigeria (AMCON) eventually took it over on account of the owners’ inability to repay the loans they used the company to acquire.
Except these fundamentals are addressed, the belief is that the policy will achieve nothing beyond creating more jobs for smugglers. Yet, from January 10, Nigerians will be paying 70 per cent, on a cumulative basis, at seaports to clear imported cars. And this will come with huge multiplier effects on the cost of transportation, food items and essential services.
POWER
IF privatisation is truly the key to the perennial power challenge, the government should get some commendation for completing the much-awaited unbundling and sale of defunct PHCN assets. The decision was achieved after a long and tortuous journey that was fraught with labour issues.
It appeared the industrial strain would last forever, even after the power assets were successfully sold with owners paying the bid values. Assets sold included Ikeja, Eko, Enugu, Port Harcourt, Ibadan, Yola, Jos, Abuja, Benin and Kano distribution companies. Generation companies such as Shiroro Hydro Plant, Ughelli Thermal Plant, Sapele Power Plant, Kainji Hydro Plant and Geregu Power Plant were also sold.
The PHCN employees had insisted on full payment of all outstanding claims before the assets could be transferred. Acting through Secretary-General of the National Union of Electricity Employees (NUEE), Joe Ajuero, the workers insisted they would not leave the premises of the company until all outstanding issues regarding their gratuities, severance packages and pensions were settled.
Government had indicated that “all labour issues” relating to the privatisation process were resolved.
At appoint, an implementation committee, headed by the Permanent Secretary in the Ministry of Power was set up to drive the implementation of an agreement signed between the Federal Government and labour in December 2012. It was followed by a sub-committee with the task of ascertaining the correct number of bona-fide staff and their bio-data. The sub-committee was also asked to determine components of staff entitlements, including severance, gratuity, pension and repatriation.
Notwithstanding a deal struck in December 2012 and fine-tuned last June, NUEE, on July 8, issued a 14-day ultimatum to the Ministry of Power to effect double promotion for staff and pay balance of one-year entitlement that were not part of the original discussion. That raised further debate that would prolong the handing over.
Obviously, government and labour stuck to parallel position during the debate. The government had an idea of who and who were PHCN staff, while labour had another list. Government’s list excluded those termed irregular staff who were not entitled to severance, gratuities and pensions; but the suggestion did not go down well with those affected, who continued to protest their non-inclusion.
Eventually, when the government decided it wanted to end the embarrassment, it announced that bank accounts of the workers were credited (that was when new owners had paid the bid value, but where prevented from commencing shadow management), the ex-employees said the announcement was another fraud; They claimed that they had not received credit alert.
Then, there was another dangerous perspective to the privatisation saga. There was suggestion that the PHCN assets were sold at ‘give-away’ prices. While it was disclosed that government would reap N200 billion from the sale, the labour union hinted that the company was worth over N2 trillion. Ajuero wondered why the government would sell the company for N200 billion when outstanding liabilities to employees alone would gulp about N400 billion.
Describing the scenario as not being economically viable, Ajuero insisted that, apart from the successor companies, PHCN’s buildings across the country were worth N400 billion; electric poles, N200 billion; and transmission facilities, N400 billion.
Interestingly, not many Nigerians who were not staff of the power company gave a hoot whether PHCN went for a kobo or less; they just wanted assurance that power supply would improve. Hence, the assets were handed over amid labour conflict and crisis of confidence in the process, but with a proviso that the old staff would be retained for six months.
A closely related policy that generated much uproar this year had something to do with government’s position on pre-paid meter. In 2012, executive chairman, the Nigerian Electricity Regulatory Commission (NERC), Dr. Sam Amadi, said the cost of meters would be factored into tariff structure passed to consumers.
The announcement worsened the crisis around procurement of pre-paid meter. Alt least, subscribers had some hope they could get units after two or three years on waiting list. But Amadi’s pronouncements changed that status and introduced stalemate into the system — both payment and issuance were stopped with marketers claiming there was not clear communication on the issue.
Amadi shocked Nigerians early this year when he told said the meters were no longer free. He only promised to regulate connection fee of units that were not available anywhere. He had severally promised to end era of estimated billing. But the unclear position on pre-paid metering (which continues till date) rather adds its toll to fraudulent estimated billing.
VISION 20:2020
NIGERIA has pursued the Vision 20:2020 with vigour just as enormous resources had gone to consultants and other service providers. But the commitment towards achieving the goal was dampened early in the year when ousted minister of National Planning Commission (NPC), Dr. Shamsuddeen Usman, said it could was no longer achievable following the poor state of power and other factors hindering economic transformation.
Usman said he would be “a proud man” if the country manages to be among the top 25 economies in 2020, whereas the original vision was to join the biggest 20. The minister noted that the vision document does not say Nigeria must be among the top 2020, but merely specified actions she needs to take if she wants to get there.
The statement infuriated Nigerians for several reasons. First, the same reasons the minister listed as inhibiting factors are among the responsibilities of the government. The contradictions and arrogance that filled Usman’s statement was an issue. Also, informed opinion had suggested that the country could still make commendable impacts without unnecessarily being distracted by ambitious and unrealistic goals. But the advice was ignored.
When it was clear that the government could not carry on with its deceits, Usman told Nigerians that he would not want anybody to meet him in future and say “you were the one who told us that we will achieve the vision.” He added that he would be proud to see the same country, which has failed on several targets in the past, fall below a goal that has gulped enormous public funds.
Besides the press statement issued by the Ministry of National Planning to the effect that the Federal Government was still committed to the goal in response to public condemnation that follow Usman’s statement, not much has be said about the blueprint. The regular workshops and seminars held by ministries, departments and agencies (MDAs) on the subject have also subsided.
MONETARY POLICY
IN harsh response to weakening naira, the Monetary Policy Committee (MPC), in a rather mechanical manner, retained lending rate at 12 per cent throughout last year. For an economy that is held back by credit crunch, many had hoped that a lower Monetary Policy Rate (MPR) — a benchmark that sets standard for commercial lending — would unlock the key to affordable credit and, in extension, job creation. MPR is the rate at which banks borrow from the Central Bank to cover their immediate cash shortfalls. Thus, the higher the MPR, the higher the cost of funds to private borrowers, including the real sector.
Economists and interested groups such as the Lagos Chamber of Commerce and Industry (LCCI) have warned that the threat of unbearable interest rates occasioned partly by higher MPR charged by Nigerian banks is killing private entrepreneurship. But the Central Bank of Nigeria (CBN) has consistently argued that the retention of MPR at 12 per cent as part of its monetary tightening programme is necessary to save naira from free fall.
LCCI argued in one of the occasion that continuation of tightening of monetary regime would have the following outcomes – persistence of high interest rate, deepening of the unemployment crisis, undermining of the financial intermediation role of the banks, sluggish recovery of the real economy, inhibited capacity of enterprises to create jobs and slow stock market recovery.
As debate for and against tightened monetary regime continued in the year, Henry Boyo, famous economist, sustained his call for dollar certification as solution to excess liquidity, which results from monthly allocation to states. He argued that when states receive dollar certificates, there would be less pressure on naira and (eventually) motivation to lend to real sector.
In a particular interview with The Guardian, he noted: “As long as CBN claims there is excess liquidity, MPC will continue to keep MPR at 12 per cent or above. We are caught in our own web. They know that it is necessary to bring down interest rates; but they cannot say that because they don’t want to be contradicting themselves… When there is no excess liquidity because CBN will now be paying in dollar certificates, beneficiaries will go to banks to change them to naira so that the market will not be flooded with naira. Then there will be improvement in naira to dollar rate.
“If a dollar comes down to N80, the country will be saved the N2 trillion it pays on oil subsidy yearly. This is because the landing cost of a litre of fuel will be below its current N97. All the anomalies will be cleared once that happens.”
Similarly, 2013 saw the MPC moving the cash reserve ratio (CRR) by banks on public sector funds from 10 to 50 per cent. The decision, as usual, came with a measure of debate and controversy. There were suggestions that the decision would raise the bar of public sector marketing among banks and perhaps associated unethical practices.
The major fear was that the policy would cripple financial intermediation role, especially in the real sector, since banks rely heavily on the funds. But the banks have managed to sustain operations months after the apparently harsh decision was reached.
TAX HARMONISATION
PERHAPS, the government’s bold decision on tax harmonisation was the most cheering news Nigerians received from the government in 2013. It came as a breather to the business community, even though not much action has been taken to implement the content of the message delivered by Okonjo-Iweala.
Manufacturers Association of Nigeria (MAN) took a hard stance against multiple taxation across the country. Sequel to its official position, MAN asked its state chapters to compile taxes and levies paid in their domains. The report revealed unpleasant tales of taxation across the country just as Rivers State imposed highest number of taxes with 97 collectible levies.
Acting on the findings, FEC banned states from using contractors to collect taxes. It also wrote the President to mandate the Inspector General of Police to dismantle roadblocks mounted for the purpose of collecting sundry levies in different parts of the country. The Federal Government toed the path of the public when she outlined plans to tidy up the taxation system.
Tax collection responsibility, the Finance Minister said, now resides with the states’ Boards of Internal Revenue Services (BIRS). And to streamline collectible taxes, she disclosed that government would soon roll out approved taxes through the Joint Tax Board (JTB). The JTB is to ensure full compliance with the new guidelines on taxes, just as cases of infractions are to be reported to the National Economic Council (NEC).
Months after the exciting promise, there is no signal that the states have complied with the directive, neither has the harmonised list been made public. The presidential approval for disclosing taxation blockages is yet to be given.
CBN Governor, Mallam Sanusi Lamido Sanusi, shocked the country once again in the last quarter of the year when he wrote the President detailing how the Federation Account is being depleted to the tune of $49.8 billion through unremitted or diverted oil sale proceeds. The discussion kept bloggers extremely active throughout the period.
The manner the CBN’s spokesman handled the statement rather rattled Nigerians more. Ugochukwu Okoroafor said the bank could not deny or confirm that CBN wrote such letter, which top officials of the Nigerian National Petroleum Corporation (NNPC) said was targeted at disparaging them.
Behold, Sanusi made a u-turn, in a rather unprofessional, manner to tell the House of Representative that the letter was not a product of conclusive investigation into the transaction. He said the shortfall was only $12 billion (as if the sum was a token), while Okonjo-Iweala, on her part, said the figure was $10.8 billion.
Sanusi attracted condemnation. Bamidele Aturu, a human rights practitioner, noted that the admittance either implied that Sanusi has no adequate knowledge of what his job requires or that he has compromised the integrity of the office of CBN governor. He described the twist as tragic and a signal that people who are ignorant of their jobs manage the country’s economy.
Aso, Liborous Oshoma, a public affair analyst, said the CBN boss displayed “gross incompetence” when he admitted that such sensitive information was erroneously transmitted. He said it was unfortunate that Sanusi, as chief treasurer of the country, fell short of expectations from his office.
AVIATION
THE crisis that has trailed key concessions in the aviation lingered into 2013. The battle between Bi-Courtney and the Federal Aviation Authority of Nigeria (FAAN) stretched over the year as the former won a legal battle against AIC Limited over a proposed site for an hotel on the precinct of the Murtala Mohammed International Airport.
But the battle did not stop there. Both parties continued with wars of words over what was appropriate and who should take the bigger blame in the concession saga.
But the biggest conflict in the sector was the purchase of two bulletproof cars amounting to N255 million for the Minister of Aviation, Stella Odua. There were (and are still) various boxed issues in the bigger picture. First, there was allegation that the contract was inflated; some said the cars were tokunbo, while the most overwhelming concern (which was officially admitted) was that it contravened procurement law. The Oduagate, without doubt, is the most celebrated controversy of the year.
Notwithstanding, the sector, apart the obvious minuses, received a face lifting. Some airports, including Benin, Kano and Lags, were remodeled and commissioned.
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