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FG Urged to Abolish Fuel Subsidy Over Forex Pressure

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Analysts at CSL Stockbrokers Limited, have advised the federal government to end the fuel subsidy, which currently makes up a significant proportion of Nigeria’s import bill. They reasoned that removal of the subbing will help reduce demand for dollars and reduce pressure in the foreign exchange market.

Besides’ they argued that ending the fuel subsidy regime would save the government about N1.2 trillion in expenditure in 2016, the analysts also revealed. The naira has been under pressure in the past few weeks as low crude oil prices continue to hit Nigeria’s external reserves. Presently, the nation’s currency goes for about N270/$1 on the parallel market.

However, a report by the Lagos-based investment and research firm obtained by THISDAY, also pointed out that beyond the short-term, ending the fuel subsidy regime would be positive for the currency, saying that it would likely stimulate refining of domestically- produced oil, which may then substitute imports of petroleum.

“Experience of other emerging markets suggests that removal of fuel subsidies positively impacts the balance of payments. This said, our pre-existing base case is that some currency depreciation will be necessary on a six to nine month time horizon to keep the economy stable and the external accounts on a sustainable footing,” the report stated.

Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, had stated that the federal government would begin a gradual withdrawal of the fuel subsidy in 2016. The comment came months after President Muhammadu Buhari ruled out the need for removal. Kachikwu, citing a shortage of funds, had said the subsidy put at over N1 trillion ($5billion) in 2015 was no longer sustainable.

Crude oil (Brent) which has been hovering around $37.3/bbl, is already below the pessimistic oil price benchmark of $38/bbl assumed in the 2016 budget.

Nigeria’s long-standing fuel subsidies were partially removed in 2012 and consequently, the pump price of petrol was increased to N97 per litre from N65 per litre. This was reduced to N87 per litre earlier this year due to the drastic fall in oil prices but is expected to revert to N97 per litre following subsidy removal during 2016, with full removal due in 2017. The country has however witnessed severe fuel shortages for most of this year. Despite measures by the Nigerian National Petroleum Corporation (NNPC) to ensure adequate petroleum supply nationwide, long queues have persisted in petrol stations across major cities with the result that petrol has been selling for significantly higher than the N87 per litre. The scarcity of petrol has largely been blamed on delayed payment of subsidy claims.

To this end, CSL Stockbrokers argued that the removal of the subsidy was a critical free-market reform, adding that it would be beneficial to the economy and to government finances, “though it will almost certainly put pressure on consumers and small businesses.”

“Apart from augmenting government revenues, the removal of the subsidy removes disincentives to refine petroleum product, and may improve the balance of payments through import substitution. It is widely acknowledged that the subsidy system was open to abuse and that only a relatively small number benefited from it as petroleum has always sold for higher than the pump price in most other states outside Lagos.

“We, however, believe there still remains some political risk in implementing the change. The subsidy on petroleum is widely seen as a form of social security in a country where health and social security provision is limited. Its partial removal provoked negative reactions and street demonstrations in 2012.

“The cost of the subsidy is put at over N1trillion in 2015, in comparison with the N5 trillion budget for 2015 (20% of the 2015 budget). Removing the subsidy should save the government about N1.2trillion in expenditure in 2016. However, it should be noted that, as we state above, it is widely believed that the main beneficiaries of the fuel subsidy were a relatively small number of intermediaries, so eliminating their profits benefits the majority. Therefore, perhaps the most positive impact of this reform will be to introduce clarity into the complicated world of petroleum pricing, and advance this government’s pro- market reform agenda.,” it added.

Furthermore, they argued that the stock market may react positively to subsidy removal, adding that investors would be in favour of the move, with the view that it will curb leakages and enable the government re-allocate the funds possibly to infrastructure development.

“However, removal of subsidies is likely to put more pressure on the hard- pressed consumer, and therefore on consumer product companies and even food manufacturers. To the extent that subsidy removal will lead to increases in infrastructure spending, we expect subsidy removal to benefit cement manufacturers,” they added.

ThisDay

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Government

African Union Holds Global Conference to Accelerate African Vaccine Development and Manufacturing Capacity

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African leaders assembled at a global meeting to discuss the status of local pharmaceutical manufacturing on the continent, underscored the need to increase local production of vaccines and therapeutics to achieve greater public-health security.

“The production of vaccines and access to vaccines is an absolute priority,” Cyril Ramaphosa, President of South Africa, said Monday in opening remarks at the start of the two-day virtual meeting, convened by the African Union.

The meeting was attended by several African heads of state, health, finance and trade ministers from across the continent, as well as officials from global financial institutions, foundations, pharmaceutical manufacturers, business leaders, and the general public. The African Development Bank was represented by Solomon Quaynor, Vice President Private Sector, Infrastructure and Industrialization.

Although Africa consumes approximately one-quarter of global vaccines by volume, it manufactures less than 1% of its routine vaccines, with almost no outbreak vaccine manufacturing in place. The region lags behind in procuring vaccines amid a global scramble for the medicines among wealthier nations. Thus far, only around 2% of the world’s vaccination against Covid-19 has taken place in Africa.

The need for a new public health order in Africa, which promotes domestic vaccine manufacturing, epidemic preparedness and upgraded healthcare systems to meet the needs of the world’s fastest-growing population, was the conference’s main objective.

The African Union and the Africa CDC said they would continue to work with all stakeholders to identify implementable actions, financing needs and timelines to competitively produce vaccines in Africa.

Quaynor noted that the current undertaking would require immense investment. “Vaccine manufacturing, because of its complexity, is not really an entrepreneurial drive but actually an institutional drive,” he added.

The African Development Bank is working with global and African stakeholders, to articulate a 2030 vision for Africa’s Pharmaceutical Industry in response to several calls received from African Heads of State, who have expressed a strong political will. This vision aligns with its “industrialize Africa” priority strategy.

The vision will build on previous efforts to produce a continental plan of action to boost local African pharmaceutical manufacturing capacity, such as the Pharmaceutical Manufacturing Plan for Africa adopted in Abuja in January 2005 and the Pharmaceutical Manufacturing Plan for Africa (PMPA), prepared by the African Union Commission and the United Nations in 2012, to assist local manufacturers with pharmaceutical production.

Quaynor said Africa could count on the African Development Bank’s support to secure Africa’s health defense system. “Leveraging on our comparative advantages, we will both provide upstream support to governments on the enabling environment, as well as provide financing to private sector and PPPs both indirectly through some of our private equity investee funds and directly through lending, and credit and risk guarantees. We will also use the Africa Investment Forum to bring in all relevant stakeholders and partner DFIs into bankable opportunities…”

The 2030 vision for Africa’s pharmaceutical industry would also work with pharmaceutical industry associations in Africa to create capacity development links between universities and industry in Africa, and work with African scientists in the diaspora, Quaynor said in remarks made on behalf of African Development Bank President Akinwumi A. Adesina.

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ITF, Nigerian Air Force, Others, Sign MOU To Advance Research

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The Industrial Training Fund, ITF has signed a tripartite Memorandum of Understanding (MOU) with the Nigerian Air Force, NAF, and Equipment and Protective Application International Limited to establish the framework that will give room for optimal performance as well as enhance productivity.

The Director General, Industrial Training Fund, Sir Joseph Ari while speaking at the NAF headquarters in Abuja, said the MOU will be pursued with vigour and all the seriousness it deserves so that greater success would be the catalyst that will drive their intentions.

He explained that over the years, ITF had redirected its focus on technical, vocational training and education noting that developed nations are where they are today because of the initiative.

According to him, “even here in Abuja, we have a model of a skills training centre and the model was brought in from the Singaporean experience of the institute for technical education and services of Singapore”.

“We brought a semblance of it here to experience with five trade areas, Mechatronics and Autotronics, Computer Networking, ICT, Facility Technology as well as culinary in both African and Western cuisine is right there in the heart of Abuja in the ITF house, it is like a university”.

“The ITF is well positioned to work hand in hand with the Nigerian Air Force,” he said

The ITF boss added; “I must say that the Chief of Air Staff has a lot of foresight with his men to think about this Memorandum of Understanding because I deed, ITF is where you should be”.

“The ITF came into contact with the Nigerian Air Force even though a lot of the officers of the Air Force might have participated in its programmes in the past and since then I have noticed that NAF has not relented in its efforts to equipped it’s workforce and also upgrade and retrain its people,” Sir Ari added.

He also commended the men and officers of the NAF for their sacrifice in keeping the nation safe.

The Chief of Air Staff, Air Marshal, Oladayo Amao said the Nigerian Air Force has a highly technical Service and technology is the bedrock of all its operations.

Represented by the Chief of Standards and Evaluation, Air Vice Marshal, Olusegun Philip, Amao noted that in line with the focus of the Federal Government in promoting indigenous technology, the Nigerian Air Force has been looking inwards to gradually wean itself of overdependence on foreign technology and to become more innovative and resourceful.

“Therefore, in order to advance the Nigerian Air Force’s Research and Development efforts, we have deemed it necessary to formally collaborate with indigenous organizations through the signing of Memorandum of Understanding,” Amao stated.

“These collaborative efforts provide pedestals to leapfrog capability as well as a repertoire of capabilities that can be harnessed”.

“The collaborative efforts also provide platforms to synergise ideas for innovations that are key to achieving meaningful results to solve the technological challenges we currently face in a cost effective manner,” he said.

The Managing Director, Equipment and Protective Application International Limited, Engineer, Kola Balogun however, assured that the MOU entered would be for the overall economic benefit and development of the nation.

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SERAP Urges FG to Slash Politicians’ Allowances

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The Socio-Economic Rights and Accountability Project (SERAP) has urged the Chairman of Revenue Mobilization Allocation and Fiscal Commission (RMAFC), Elias Mbam, to urgently review upward the remuneration, allowances, and conditions of service for Nigerian Judges, and reduce the remuneration of President Muhammadu Buhari and other political office-holders in order to address the persistent poor treatment of Judges, and improve access of victims of corruption to justice.

The appeal came on the heels of a nationwide industrial action by the Judiciary Staff Union of Nigeria (JUSUN) to press home their demand for financial autonomy for the judicial arm of government, and the federal government silence on the judiciary workers’ strike that has grounded court activities across the country.

In a letter dated April 10, 2021, which was signed by SERAP Deputy Director, Kolawole Oluwadare, the organisation said Judges should get all they are reasonably entitled to, and that it is unfair, illegal, unconstitutional, and discriminatory to continue to treat Judges as second-class people, while high-ranking political office holders enjoy lavish salaries and allowances.

SERAP expressed concern that the remuneration and allowances of Judges have fallen substantially behind the average salaries and allowances of political office-holders such as president, vice-president, governors and their deputies, as well as members of the National Assembly.

The letter read in part: “According to our information, the last review of the remuneration, allowances, and conditions of service for political, public and judicial office holders carried out by RMAFC in 2009 shows huge disparity between the remuneration and allowances of judges and those of political office holders.

“Judges’ work is very considerable but they cannot give their entire time to their judicial duties without the RMAFC reviewing upward their remuneration and allowances, and closing the gap and disparity between the salaries of judges and those of political office holders such as the president, vice-president, governors and their deputies, as well as lawmakers.

“We would therefore be grateful if the recommended measures are taken within 14 days of the receipt and/or publication of this letter. If we have not heard from you by then, the Incorporated Trustees of SERAP shall take all appropriate legal actions to compel the RMAFC to comply with our requests.”

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