REVENUE ALLOCATION:SOUTH-SOUTH STATES DEMAND ECONOMIC ‘TRANSFIGURATION’

BUSINESS NEWS

Written by From Aniete Akpan (Calabar) and Willie Etim (Yenagoa)

• Unite Against Monkey-work-baboon-eat  Formula

• Stand Divided On Percentage Ratio

•Akwa Ibom Propose Vertical, Horizontal Formula For Revenue Sharing

• Bayelsa Urge Quick Passage Of PIB 

All six states of the South South zone are united against the current revenue sharing formula, which, they say, is heavily tilted in favour of the Federal Government. Cross River, Akwa Ibom and Bayelsa made specific demands in this regard but failed to converge opinions on what the ratio for revenue sharing should be among the three tiers of government.   

     Cross River State Governor, Liyel Imoke, at the South South Zonal Conference on National Dialogue in Calabar, at the weekend, called for review of revenue sharing formula in the country and return to true fiscal federalism.

Imoke stated that the formula should be such that states get 45 percent; local governments, 35 percent; while the federal government gets 25 percent of the monthly federal allocations.

   He said Nigeria should return to the true federal structure of the pre-military era when states were encouraged to leverage their comparative advantage to grow regional economies.

T he Cross River governor, who was represented by his deputy, Mr. Efiok Cobham, also aligned with the position of the South-South states that the constitution should be amended to give 50 percent derivation to oil producing states.

  He said: “We want the constitution to be amended to read that a state on whose territory oil is extracted be entitled to not less than 50 percent of the entire proceeds from the exploration and exploitation.

Meanwhile, it was an expression of very strong views by representatives of governors from the South-south at the recent three-day zonal public hearing on review of the Revenue Allocation Formula held in Yenagoa, the Bayelsa State capital. 

   Secretary to the State Government (SSG) in Akwa Ibom, Mr. Udom Emanuel, who represented Governor Godswill Akpabio, canvassed a vertical and horizontal allocation formula.

   Giving a breakdown of the proposed ‘Vertical’formula, Udom said the Federal Government should allocate 40 per cent of the total federal revenue to itself, 36 per cent to states, while 24 per cent should go to local governments.

   By horizontal allocation, according to Udom, 40 per cent should be shared across board to states based on the principle of equality. The remaining 60 per cent, he said, should be disbursed based on the following pattern: land mass, 10 per cent; social development factors, 10 per cent; population, 15 per cent; population density 15 per cent; and internally-generated revenue,10 per cent.

   The proposed review, the SSG insisted, is anchored on the fact the states now assume expanded responsibilities arising from Federal Government’s failure to meet significant aspects of assigned roles, and reduction in its direct duties.

  The assumption of the proposed review in the overall, he said is based on the indication that states and local governments will assume even expanded roles in the provision of basic welfare services, job creation and infrastructural development in their various domains.

   While formally presenting a memorandum at the public hearing on behalf of the Akwa Ibom delegation, Udom explained that the ongoing

nationwide collation of views is to enable the Commission come up with a just, fair and equitable revenue allocation formula for the country, against the background of the changing realities of socio-economic

development.

  The State’s position, according to him, is intended to further expand on, and reinforce earlier memorandum of August 12, 2013, as a state that contributes about 29 percent of the oil revenue that sustains the nation’s economy. Udom said Akwa Ibom has great faith in the review exercise, which is a very good step towards setting the country on the path of fiscal federalism.

   The SSG had explained at the public hearing that their position is derived from the 1960 constitution: Sections 134 (1)-(2) which states

that; (1) there shall be paid by the federation to each region a sum equal to fifty percent- (a) of proceed of any royalty received by the

federation in respect of any minerals extracted in that region (b) any mining rents derived by the Federation during that year from within

the region.

    The 1960 constitution just like the 1963 constitution: sections 140 (1)-(6) recognise 50 percent derivation that was duly paid to the region, he said.

   On onshore/offshore controversy, the position of Akwa Ibom State, as contained in the Memorandum, is that before now

there was no discrimination between onshore/offshore revenue from oil

and gas. But in 1969, dichotomy between onshore and offshore was

introduced with the purported aim of generating more revenue to the federal government for prosecution of the civil war.

   Within the period, revenue from the federation account to states was reduced and derivation component in sharing of revenue to states was removed. 

   The war had ended since 1970 but the situation remains the same to the detriment of the Niger Delta region.

   While insisting on 50 percent derivation, representatives of the six

Geo-political zones, including the Bayelsa State Government, reaffirmed the Akwa Ibom State’s position on the demand of a minimum of 50 percent revenue derivation.

   The Secretary to Bayelsa State Government, Professor Edmond Allison Oguru, in his presentation, demanded upward review of revenue allocation.

   Lamenting the level of environmental degradation occasioned by oil

exploration and exploitation activities in the Niger Delta, he pointed out that the current 13 per cent derivation principle was grossly

inadequate to address the challenges confronting the region.

   Calling for a reduction of money accruing to the Federal Government from the Federation Account, the SSG submitted that such reduction would discourage the struggle for political power at the national level and enhance the capacity of States and Local Governments to accelerate development and make life more meaningful for the people at

the grassroots.

  “The enormous resources at the centre have fostered a do-or-die mentality among the political elite of this country, most of whom go

to the extreme to achieve their political ambitions to control the centre. States favored by the principle of revenue sharing, such as

population and landmass, have grown steadily dependent on allocation from the federation account and have lost initiative and drive in

matters of economic planning and revenue generation,” he said.

   Consequently, Prof Oguru called on the Commission to come up with a more acceptable and equitable revenue formula, just as he urged the national assembly to expedite the passage of the Petroleum Industry

Bill (PIB) into law.

  In his words: “The RMAFC should revisit the era of 100 percent, 50 percent or 30 percent

derivation formula to reflect true federalism. It is a well known fact that the exploration of oil in the Niger Delta region has not only

exploited the people of the area but also made the area toxic resulting into massive pollution of the environment which has in turn

adversely affected the agrarian and subsistence lifestyle of the people.

   “The current 13 percent derivation principle has become increasingly inadequate to surmount the huge developmental challenges confronting the area.

  “That is why it has become imperative for the National Assembly to expedite action on the Petroleum Industry Bill, which I believe when

passed into law, will adequately address the lopsided revenue allocation formula, especially to the oil-producing states and

communities of the Niger Delta.”

   The Chairman of the RMAFC, Engr. Elias Mbam, said the Commission decided to embark on the public hearing in line with the provision of the 1999 Constitution, which empowers it to review the revenue sharing

formula periodically.

   According to him, the exercise will enable Nigerians make their inputs into the review process that will bring about a new sharing

formula that will conform to changing realities in the country.

  Mbam, who described the South-South zone as one that has demonstrated strong commitment to national development, called on the people to avoid utterances and unrealistic demands that could heat up the polity.

My private jet is bigger than yours

BY AZUKA ONWUKA (AZUKA.BRAND@AUGUSTCONSULTING.BIZ)

Azuka Onwuka
| credits: File copy

When Nkem Nwankwo published his novel, My Mercedes Is Bigger than Yours, in 1975, he must have thought that in Nigeria, Mercedes was the height of ostentation. If he were alive today, he would have noticed with sadness how anachronistic his novel had been rendered, for the competition is no longer on who owns the biggest Mercedes Benz, but who owns the biggest private jet and the largest fleet of jets. We are indeed making progress! We are indeed going places!

What is fuelling Nigerians’ obsession with flamboyance and ostentation? Why do we love to flaunt wealth to the point of disgust?

Given the ostentatious lifestyle of Nigerians, it is difficult to believe the report that about 70 per cent of Nigerians live below the poverty line of one dollar per day. A dollar exchanges for about N160, which about the price of one of the lowest available telephone recharge cards. This ostentatious lifestyle cuts across all sectors of the economy and cadres of Nigerians in the urban and rural areas: politicians, civil servants, clergy, professionals, traders, lecturers, students, the unemployed, men, women, youths, adults, etc.

Modesty has become abominable in our land, even among the clergy, which used to be known for modesty, humility, simplicity and selflessness. On the contrary, the fashionable thrust of religious preaching these days is financial success and a life without problems, while the I-am-not-serving-a-poor-God lifestyle reigns among the faithful.

In the political class, it used to be against the Federal Government policy for a civil servant or political office holder to use an SUV as an official car. The official car in the 1980s, when the ruling political party, the National Party of Nigerians, was accused of profligacy was Peugeot 504 saloon. Later, it was upgraded to 505 saloon, especially for some senior officials. Except perhaps for the office of the head of state/president, Mercedes Benz saloon was not allowed as an official car, even if the holder of that office was using a Mercedes before his election or appointment, because a Mercedes was seen as a sign of opulence and ostentation.

Today, however, the regular official car for political office holders is an SUV of a special class. From that Olympian height, the official can literally look down on the people he or she is meant to serve. This cuts across the federal, state or local government levels. An elected or appointed political office holder is the boss of the people, not their steward. He is privileged and favoured. He has been exalted. Others pray and hope that one day their time will come to be like such a political office holder. If a political office holder uses a saloon car, it must be such whose price will put fear into the hearts of the common people.

For example, last week, the Ministry of Aviation confirmed that indeed two bulletproof cars worth N255m were purchased for the Minister of Aviation by the Nigerian Civil Aviation Authority. Not only that, it was alleged that the NCAA used the amount that should be enough to buy about five cars of such class to buy two. If other ministers are investigated, it will be found out that all of them or most of them have such outrageously expensive cars in a country that cannot provide good health care for its citizens. The same goes for the Senate President, the Speaker of the House of Representatives and the state governors, most of whom have private jets and fleet of luxurious cars. These days, every government official uses insecurity to justify this unacceptable lifestyle.

In the corporate world, religious and private circles, it is seen as demeaning for a top executive of a company, the pastor of a church (unless the church is very poor), or a well-to-do individual in private business to be using a saloon car, unless it is a top-of-the-range saloon car that is more expensive and more prestigious than most SUVs. Even regular individuals, in employment or self-employment, ensure that they have an SUV in their fleet of cars, no matter how old the SUV is. The fact that it is an SUV, which elevates him literally and figuratively above other drivers and road users, has an irresistible feel-good sensation in it.

Consequently, in the home of a regular Nigerian who does his private business or receives a salary, you will see about three or four cars: one an SUV that is used for special events like church services, weddings, parties, Christmas-New Year travels to hometowns; a saloon car like a Toyota Camry, Toyota Avalon, or a Mercedes to be alternated with the SUV once in a while; a regular car like a Toyota Corolla or Honda Civic for daily usage; and maybe, another regular car for school runs and other matters.

Even the unemployed and students are not left out of this show-off. Your unemployed relative who asks you for financial support uses a smartphone and a BlackBerry, which are more expensive than your phones. His shoes and shirts are more expensive than yours. Yet, he needs your help. You then wonder: Who should assist the other financially?

Then, there are the different types of parties (birthdays, weddings, burials, child-naming, house-warming, graduation, “freedom,” (by apprentices), thanksgiving, etc), used to make a statement of success and affluence. Many borrow money to host these parties and ensure that they are memorable for the community or nation to talk about for a long time.

Add to that the myriad of overseas holidays, conferences and parties, and you get a good picture of the new Nigerian.

The danger in our ever-rising materialism and flamboyance is that it encourages crime and erodes our social values. The rise in embezzlement of public funds, bribery, drug-trafficking, armed robbery, kidnapping and internet fraud is a sign that more people desperately want to get their own wealth, show it off and be seen to have “arrived”. Questions are no longer asked about the source of wealth, even within the family circles or religious circles, both of which used to be the bastions of moral values. As long as money flows, the person making it happen is celebrated and honoured for his “philanthropy”, and becomes a reference point. The young man who sees this everyday wants also to be celebrated, respected and honoured with titles and awards in his community – social, religious, or national. Having seen that nobody asked questions or cared about the source of wealth of the “big man”, the young man strives to make his own money by any means possible, knowing that nobody will bother to ask questions of him too.

That becomes a vicious cycle that runs ceaselessly and eats into the soul of our nation, destroying the essence of the nation and making it lag behind in all human indexes.

Wealth is good. Money can save life. Money provides food, water, shelter, education, roads and the good things of life. Without money, it is almost impossible to build anything. But placing too much emphasis on wealth is dangerous to any society. Even many of the richest men on earth are not flamboyant or ostentatious.

Our political leaders and religious leaders have the critical task of pulling us back from this precipice with a change of focus, message and lifestyle. We cannot continue to flaunt products made by other nations when we produce nothing. Those who make these products we flaunt don’t even flaunt them the way we do.

Let’s start flaunting our ideas, skills, self-made products and services, as well as our contributions to nation-building rather than our private jets, cars and jewelry. That is what will advance our nation and make other nations respect us.

Nigeria: Aero Contractors to Emerge National Carrier

BY CHINEDU EZE

As the Ministry of Aviation proceeds with plans to set up a national carrier that would operate international, regional and domestic services, it has emerged that Aero Contractors has been designated the nation's flag carrier.

It was gathered that the decision to designate Aero Contractors as the national carrier was supposed to have been announced during the October 1 national broadcast to mark Nigeria's Independence by President Goodluck Jonathan, but it was deferred for another date.

As a national carrier, Aero Contractors is expected to enjoy preferential rights or privileges accorded by the federal government for international operations.

It would hold some lucrative routes in monopoly, negotiate commercial agreements, pools and bilateral agreements with foreign airlines, articulate manpower training for the sector and serve as diplomatic tool for Nigeria.

Designating Aero Contractors as the national carrier would also allow the airline to codeshare with other international airlines, as this would improve Nigeria's ability to take advantage of Bilateral Air Service Agreement (BASA) it has in place with other countries.

Aero Contractors, it was further gathered, was selected for the role because of the 60 per cent stake the Asset Management Corporation of Nigeria (AMCON), a federal government institution, already holds in the airline.

Under the arrangement, the federal government shall retain 60 per cent through AMCON, while Legacy Holdings, a company owned by the Ibru family, will hold 40 per cent in the national carrier.

Also, AMCON would offer some of the assets of the defunct Air Nigeria to Aero Contractors. In this regard, an industry source said AMCON was undertaking a valuation of Air Nigeria assets, which it took over from UBA Capital when the latter assumed the loans of the airline. He said: "AMCON is currently undertaking a valuation of Air Nigeria assets, which would be concluded in the next 30 days, following which they will be offered to Aero Contractors to expand its operations."

The source further revealed that AMCON would only hold on to its 60 per cent shares in Aero Contractor for a limited period, after which they will be sold to the public at some future date.

However, THISDAY gathered that there is also a plan to offload 10 per cent of the designated national carrier to a facilitator suspected to be a top government official in the aviation sector. The facilitator is said to have been responsible for facilitating the transaction.

The facilitator, it was learnt, has set up a Special Purpose Vehicle (SPV) that would acquire 10 per cent of Aero Contractors three years from now.

The source said under the deal, the facilitator would be required to ensure that the airport is modernised and a hub is created to enhance air traffic for the West African region as the conditions precedent for the acquisition of the 10 per cent in three years time.

Although another source said the facilitator is a European low cost airline, it is believed that the low cost carrier is being used as a front for the government official.

Presently, Nigerian airlines do not airlift up to 10 per cent of the estimated six million passengers who travel out of the country annually.

Also, with the failure of domestic airlines to play a significant role, international carriers export huge resources from the country by way of earnings made from ticketing and remuneration for expatriate personnel.

Besides, since the demise of Nigeria Airways, the country has lost competences in different segments of the air transport industry including manpower development.

'Boko Haram' gunmen kill 19 motorists in Nigeria

The BBC's Nigeria correspondent Tomi Oladipo reports

Continue reading the main story

Nigeria under attack

• Afraid to go to school
• Dead or alive
• Vigilante war
• Gunning for Boko Haram

Militants wearing army uniforms have killed 19 people at checkpoints on a road in Nigeria's Borno state.

The armed men reportedly stopped motorists on the road and ordered them out of their cars before shooting them or hacking them to death.

Witnesses told the BBC the men were from Boko Haram, though the Islamist militant group has not yet commented.

North-eastern Nigeria is under a state of emergency as Boko Haram attempts to create an Islamist state there.

The group targets both the military and civilians, including in schools, and frequently clashes with the Nigerian armed forces.

The latest attack happened early on Sunday morning near the town of Logumani, not far from the Cameroon border.

'On the prowl'

Survivors said the gunmen were dressed as soldiers and were riding motorcycles before they ambushed their victims.

"We were asked to get out of our vehicles and lie face down by nine men dressed as soldiers who blocked the road," one man, who gave his name as Buba, told the AFP news agency.

"They shot dead five people and went about slaughtering 14 others before someone called them on the phone that soldiers were heading their way," he said.

Continue reading the main story

Boko Haram at-a-glance

• Founded in 2002
• Official Arabic name, Jama'atu Ahlis Sunna Lidda'awati wal-Jihad, means "People Committed to the Propagation of the Prophet's Teachings and Jihad"
• Initially focused on opposing Western education
• Nicknamed Boko Haram, a phrase in the local Hausa language meaning, "Western education is forbidden"
• Launches military operations in 2009 to create an Islamic state across Nigeria
• Founding leader Mohammed Yusuf killed in same year in police custody
• Succeeded by Abubakar Shekau, who the military wrongly claimed in 2009 had been killed
• Suspected to have split into rival factions in 2012
• Military claims in August 2013 that Mr Shekau and his second-in-command Momodu Bama have been killed in separate attacks; no independent confirmation

• From preachers to slave raiders

He said the attackers then fled into the bush on their motorcycles.

Another survivor, Adamu Mallam, said he had heard the man next to him being killed with a knife.

Buba said he knew the attackers were from Boko Haram because they had beards, which soldiers do not.

"Everyone in this area knows Boko Haram is on the prowl, raiding villages and attacking vehicles. It has become a common occurrence," he said.

The BBC's Nigeria correspondent, Tomi Oladipo, says the army often sets up checkpoints on roads in the troubled region to stop the militants, and it could be that the gunmen copied the tactic to catch their victims unawares.

Boko Haram has waged a deadly insurgency since 2009 in its bid to create an Islamic state in the mainly Muslim north of religiously mixed Nigeria.

It has been blamed for many violent attacks which have claimed the lives of nearly 2,000 people since 2011.

The group's name translates as "Western education is forbidden", and it has carried out several attacks on schools and colleges, seeing them as a symbol of Western culture.

Last month, up to 50 students died when suspected Boko Haram militants attacked an agricultural college in the north-east.

The Nigerian military said in August that it might have killed the group's leader, Abubakar Shekau, in a shoot-out.

However, a video released last week purportedly showed him alive.

Other previous reports of his death later proved to be unfounded.

More on This Story

Nigeria under attack

Militants with a cause

• Afraid to go to school

  Nigerian students live in fear following dormitory massacre

  ---

• Dead or alive

• Vigilante war

• Gunning for Boko Haram

• 'Cut off' under emergency rule

• From preachers to slave raiders

• Going global?

• Fear in Maiduguri

• Who are Boko Haram?

• Who are Ansaru?

• Army 'atrocities'

• 'No-one is safe'

• Boko Haram's shadowy leader

• Christians 'living in fear'

• Fuel on Jos fire

• Need to know: Boko HaramWatch

Background

• Mapping Nigeria's divides

• Key facts, figures and dates

From other news sites

• Yahoo! UK and IrelandBoko Haram kills civilians at roadblock3 hrs ago

• TelegraphMassacre at fake checkpoint as Boko Haram slit throats of travellers8 hrs ago

• France24NIGERIA: Boko Haram slaughters motorists in northeast Nigeria9 hrs ago

• Reuters UKIslamists kill 19 at checkpoint in northeast Nigeria12 hrs ago

• About these results

Jonathan settles for a jamboree

By Ochereome Nnanna

When Senator Ahmed Tinubu came back from his long medical trip abroad and thumbed down President Goodluck Jonathan’s decision to convene a national conference, he drew rapid fire from certain quarters.

People wondered what he really wanted. After canvassing for a conference to address faults in the political system, especially its counterfeit and inequitable federalism, the Asiwaju sounded odd backing away from an opportunity to push for it at a confab. He called it a “Greek gift” and “public deception”, though he promised to discuss with his party before a final position would be reached.

FROM LEFT: FORMER HEAD OF STATE AND CHAIRMAN, BOARD OF CENTENARY CITY, GEN. ABDULSALAMI ABUBAKAR; PRESIDENT GOODLUCK JONTHAN AND VICE-PRESIDENT NAMADI SAMBO, DURING THE VISIT OF THE BOARD TO THE PRESIDENTIAL VILLA IN ABUJA ON MONDAY (7/10/13).

Tinubu was not really being a clairvoyant, because on this forum a fortnight ago, we wrote an article entitled: “Doesn’t This Conversation Stink?” We expressed the fear that it might not be much different from the 2005/2006 offering by former President Olusegun Obasanjo, which ended up a waste of time, energy and national resources.

When President Jonathan constituted the Senator Femi Okunrounmu National Conference Advisory Committee, NCAC, many Nigerians entertained cautious optimism because he seemed to give the Committee a blank cheque to consult with Nigerians and whatever manner of conference they wanted would be all right with him.

He sounded like the ultimate democrat willing to submit to the wishes of the majority. But the President’s recent assertion that the decisions of the conference will be submitted to the National Assembly to take along in its constitution amendment pursuits has changed everything.

The conference will now be exactly what we had feared: an Obasanjo-like jamboree that will not satisfy the yearnings of those hoping it would give Nigeria a new beginning and cure the polity of the ailments responsible for the overall unhappiness of every stakeholder.

It is obvious that the President wants the Constitution amended. But it is not clear (to me, at least) why he wants it amended except his old, discredited idea of a single seven-year tenure for elected executive officers of the federal and state governments.

I have never heard the President offer his perspective on resource control, devolution of powers, creation of states or conversion of the geopolitical zones into tiers of governance, structure of federalism, rotation of the presidency or specific constitutional reforms that would take the country in a definite direction.

For instance, in November 2011, he had set up the Justice Alfa Belgore Presidential Committee on the Review of Outstanding Issues from Recent Constitutional Conferences.

The Committee submitted its report on July 11, 2012, proposing no fewer than 52 alterations to the 1999 Constitution. The President promptly passed most of the Committee’s report to the National Assembly, which commenced a convoluted process of constitution amendment that has virtually hit the rocks.

The difficulty in pushing through this wholesale constitution amendment made commentators to conclude that the 1999 Constitution is simply too flawed to be remedied through amendment. That was why the call for a brand new constitution assumed a new urgency.

A new constitution is imperative for a number of reasons. The first is that the 1999 Constitution, apart from being irretrievably flawed, is not a genuine constitution.

It is still very much a military law (Decree No 24 of May 9, 1999). The General Abdulsalami Abubakar regime put up a panel of unelected individuals who simply upgraded the 1979 presidential constitution with a few inputs taken from the 1995 Draft Constitution derived from the Abacha Constitutional Conference. After the Decree was promulgated, the General Abubakar regime kept it away from Nigerians until the newly elected General Olusegun Obasanjo regime was sworn into power on May 29, 1999. It is an illegitimate constitution apart from being severely faulty.

Secondly, the conference of our dreams was meant to produce a new constitution created by elected delegates of the Nigerian people. Its product is supposed to be drafted by a Constituent Assembly, and once it is passed by Nigerians at a plebiscite, it becomes the new super document regulating the lives and conducts of all Nigerians.

A document that comes out of such process would be free from dictatorial shenanigans and manipulations of colonialists or military authoritarians, both of which served the interests of vested sectional and religious groups while marginalising the others.

This was the basic sources of discontent in the system, which has made it impossible for Nigeria to be united. This is the very source of unending conflicts and inter-group frictions, which manifested in decades of violence, civil war, self-determination militancy (including the Niger Delta armed struggle for resource control and Boko Haram Islamic terrorism).

The President Jonathan “Conversation”, which will not result in a new constitutional document, can not bring any desirable outcome. Even if outstanding resolutions are reached they will never be allowed to see the light of day when filtered through the National Assembly as well as state assemblies, where two-third majorities must approve for them to become new constitutional clauses. I do not see the National Assembly being capable of re-engineering the system because those benefiting from the status quo will use their votes to strike down anything that goes against their interests.

We are living witnesses to what happened during the 2005/2006 Obasanjo-empanelled National Political Reform Conference, NPRC. The Conference resolved that only one state would be created for the South East Zone to bring it up to par with four other zones with six states.

The Senate under Senator Ken Nnamani as presiding officer passed the resolution. But because of Obasanjo’s tenure elongation plot which was factored into the Constitution Amendment Bill, the entire exercise was truncated. Today, there are more than 60 new demands for state creation, and the already agreed extra state for the South East is no longer acknowledged.

We want a genuine conference, not a jamboree. Give us or forget it.

Plea for crash survivor, Mrs Owolabi

I hereby lend my humble voice in the call on the Federal Government, Lagos State Government, churches and any other capable, wealthy individual to urgently come to the aid of the survivors of the Associated Airlines which crashed in Lagos on October 3, 2013.

Two surviving crew members, Mrs Quinneth Owolabi and Miss Toyin Sampson, according to the National President of Nigerian Airlines Crew Association, NACCA, Charles Onuoha, need urgent referrals to medical institutions abroad.

In particular, Mrs Owolabi risks having her fingers and toes amputated due to gangrene infection. Wealthy relations had already flown two other survivors abroad. Let us not abandon these women to a lifetime of disfiguration and abandonment.

PLEASE, HELP! NOW!!!

CBN takes desperate measure on foreign exchange (2)

By Dele Sobowale

“We are not looking for a stronger currency neither are we looking for a weaker one. People want to pay fees and investors want to know if they will have returns on investments.
We will use the reserves, we will use interest rates, we have gone through difficult months; hopefully, the next few months will not be difficult. We will not allow the naira to be weakened and we are committed to that”. Governor of CBN, Sanusi Lamido, in September.

A week after, the Central Bank of Nigeria banned the importation of dollars and other foreign currencies by announcing that no individual, group of persons or investors will be allowed to bring any form of foreign exchange into the country without its approval. Right about now, financial and economic policy watchers are asking the CBN in exasperation: “What then do you want?”

Given the realities facing Nigeria, Lamido and the CBN are playing a risky game. The CBN Governor was right in his observation that that “we have gone through difficult times”, but he is building his policy on the vain hope that “the next few months will not be difficult”. Already, the prospects for the next few months are not better than those for the last few months. What analysts have not heard categorically from the CBN is the answer to an obvious question: “what will happen if the next few months are as difficult, or even worse, than the last few?” The factors responsible for the difficult last few months are generally well-known to most people who take the trouble to monitor these matters.

Nigeria is export-dependent and import-dependent. This nation depends largely on the export of crude oil for a disproportional percentage of our national revenue. When the global crude oil market sneezes, Nigeria catches pneumonia. This year, there had been a chill in global demand for crude on account of slow economic growth in some of our major markets and; competition from other competing sources of oil to the global market. Those two would have been bad enough for the country.

Added to our country’s woes was the unbelievably high level of stolen and spilled crude resulting in revenue shortfall of close to 11% of crude revenue. This has already adversely affected future shipments by legitimate exporters who must compete with the crude thieves for the business. Naturally, the thieves have the advantage – they can sell at deep discounts. Approximately 400,000 barrels of crude are involved and the government has no clue yet concerning how to reduce, let alone, stop the activities of the oil thieves.

Given the combination of global competition and internal sabotage, none of which is under government’s control, Lamido’s optimism has assumed the nature of wishful thinking. The safest assumption can only be that crude revenue until the end of the year and in the short term, defined as twelve months, will remain below budget. The CBN will continue to deplete the external reserves in its vain effort to prevent devaluation officially – even when it is already a fact. In September, CBN drew $1.33 billion and might have to draw more in October. The question is: for how long can the CBN continue?

Although the discussion on revenue shortfall has not been exhausted, let us now turn to the import related problems which will continue to drive down the value of the naira – whether the CBN likes it or not. In virtually every major aspect of our economic life, the nation is import dependent. Three sectors, transport, food, and ICT, will serve to demonstrate the degree of our import dependence, meaning exporting the foreign exchange we earn.

Once upon a time, Nigeria actually had two car assembly plants (Peugeot and Volkswagen), two tyre manufacturers (Dunlop and Michelin) and car battery manufacturers. Today, we have none. Today every nut and bolt in every car, truck or bus in Nigeria now has to be imported with dollars going out. Toyota, Mercedes Benz, Peugeot, KIA, HYUNDAI, FOTON, Susuki, HONDA, etc and their local distributors run all the way to the banks everyday, Nigeria gets deeper into a financial mess whenever our foreign exchange earnings don’t match our import needs.

The story had been told so often, everybody can repeat it. About 70 per cent of Nigerians are engaged in farming. What most people don’t know is that only two per cent of Americans are so engaged. That means 112 million Nigerians are busy doing what only 6.4 million Americans do – feed their people. But while the USA is a net food exporter, Nigeria is the largest net importer of food. Dr Adewunmi, the Federal Minister of Agriculture stretches a lot of truths to the breaking point, but on our food import bill he mainly tells the truth. If the Federal government of Nigeria should ban the importation of rice, wheat, sugar, and frozen fish, uncontrollable riots will break out nationwide. Officially and illegally, Nigeria spends close to 25% of its annual GDP on food imports; meaning more crude oil dollars is shipped back abroad.

When the mind turns to ICT, including the hardware and the GSM networks and the billions Nigerians spend on them, while creating very little value, the dollar export involved is simply staggering. MTN, ETISALAT and AIRTEL are mostly foreign owned; only GLO breaks up the solid line up of foreign ownership. And, while we enjoy the rivalry between SAMSUNG, NOKIA, APPLE, BLACKBERRY etc, few of us stop long enough to think that all we are doing is exporting dollars.

While it is true that the CBN is not responsible for the policies that will force us to stop consuming what we don’t produce, there is very little the CBN can do to stop us from doing what we have always done in the next few months. That explains why most analysts are skeptical that the Central Bank can defend the naira for long. Depletion of the external reserves will continue until the CBN cannot continue and then the inevitable will occur – devaluation of the naira. The CBN can only succeed if its efforts are complemented by appropriate fiscal policies. The Federal government recently announced plans to increase import duties on luxury cars; it also will henceforth purchase cars made in Nigeria in a bid to encourage local manufacturing. Those measures have been tried before – without long term benefits. There is nothing to suggest that this government and its successors will have the will to see it through. Yet without it, nothing will work.

The CBN’s ban on the importation of foreign exchange by individuals and groups, as well as investors, would ordinarily have made no sense under the circumstances. Why stop the importation of dollars when the nation desperately needs them? But, that measure was dictated more by security concerns and the need to stop attempts by global money laundering syndicates, as well as terrorists from using Nigeria as a transit pointy for illegal activities globally and especially in Africa.

Finally, there is also a great deal of concern that the sudden upsurge in the importation of dollars might be related to the 2015 elections. Politicians with money stored abroad might be bringing them in to prepare for the elections. If so, government might simply force those involved to engage in electronic transfers and to use more fronts to launder the funds without stopping the flow of illegal funds.

The CBN would probably have made a greater impact if it had monitored the movement of the illegal transfers, through a “Sting Operation, aimed at uncovering some of the kingpins of what is already a global ring of illegal transfers.

Finally, the Retail Dutch Auction System might not work because success does not depend on the system which had worked elsewhere in the world. It might fail here because banks and customers will still find ways to cheat. The Retail Dutch Auction System was first introduced to our economy after the Structural Adjustment Programme was launched and it became clear that a controlled foreign exchange market cannot serve the economy which was becoming more market-led. Instead of the monthly allocation, via the Form M, the auction system was introduced. But, very quickly it degenerated into round-tripping and money laundering. Banks and their customers were demanding more foreign exchange than they needed. Scarcity of foreign currency was still an underlying factor – then, as it is now. Scarcity drives up prices – including exchange rates. And there is nothing the CBN can do about it.

The question still remains: “What does the CBN want?”. It can’t succeed without a supporting fiscal policy. Right now, the Federal Ministry of Finance has not developed one.