- Investments in Nigeria’s Oil Sector Decline to N78b
Capital importation into Nigeria’s oil and gas sector has declined from the $200 million (N90 billion) from the second quarter of 2016 to $172 million (N78 billion) in 3rd quarter, according to the National Bureau of Statistics (NBS).
But this decline has been attributed to uncertainty in the country’s oil and gas sector occasioned by insecurity, delay in the passage of the Petroleum Industry Bill (PIB) and delay in meeting contractual obligations in the services industry.
NBS stated in the report that the oil and gas sector maintained a high level of capital importation; although it decreased by 14.4 per cent relative to the previous quarter; but still elevated relative to previous periods at $171.63 million.
It noted that the sector is characterised by isolated periods of high capital importation, adding that it is therefore unusual that the level has remained high for two consecutive quarters.
This sector, it said, accounted for the third highest amount in the third quarter of 2016.The oil and gas sector, had for the first time, during the second quarter of the year, recorded the largest amount of capital, which accounted for $200.39 million, or 19.23 per cent of the total.
NBS explained that in all previous quarters, the sector that imported the most capital had been banking, financing, production or telecommunications.
It noted that oil and gas is characterised by occasional high levels of capital importation, interspersed with periods in which very little capital is imported. “This sector imported $20.83 million in first quarter and only $4.86 million a year previous,” it added.
Giving reasons for the decline in capital importation to the country’s oil and gas sector, former President, Nigeria Society of Petroleum Engineer, Dr. Emeka Ene, said it was due to increase of uncertainty, which he said repels investors’ interest in the sector.
Ene, also a former Chairman, Petroleum Technology Association of Nigeria (PETAN), and Managing Director of Oil Data Nigeria Limited, noted that some major projects in the oil and gas sector have suffered delays.
He said that there is gap in policy alignment on gas, PIB versus Ministry of Environment and security situation in the country.“Until we have an alignment, there may not be substantial investment in the sector. Majority of the investment end up with the service industry, which executes most of the jobs. Right now, the service industry is in a very comatose state because the contractor’s obligations are not being met. A lot of money is being owed to Nigerian service companies over a very long period of time, which creates uncertainty,” he said.
Ene warned that the effects of the present lack of substantial investments are going to impact negatively on the Nigeria’s oil sector in the future.“We are going to be feeling the effects when the oil industry turns around. It is going to be worse. Some service companies are being owed for over two years. Bear in mind that the companies borrowed from the banks to execute the contracts and they’re not being paid for two years, how will the companies be able to take another loan to service any other business? This is exactly the uncertainty we are talking about.”
Speaking on the possibility of low oil prices having effects on investment inflow into the oil and gas sector, Ene citing Kuwait as an example, said: “Between 2015 and 2020, it planned to spend $50 billion in the oil industry. This is because it recognised that this is the best time to drill and produce and that the pricing issues will definitely be tackled in the future and that prices will rise in the future.
“Nigeria service industry should be encouraged, because they can do the work cheaper, and get people employed for longer, so that when the industry turns around, these people will still be alive to do the work.
“The oil industry is strategic and will continue to be strategic in Nigeria for long time for economic security. We have seen Nigerian government not having the dollars to pay for goods imported and its impact on the wider economy.
“Although the oil industry does not contribute so much to the country’s Gross Domestic Product (GDP) like agriculture, but the impact of the oil industry is definitely much more because we are still part of the global economy. Most of the infrastructural projects being undertaken by government need dollars for execution.
“The service industry is facing severe challenges. We were asked to reduce service charges; we are being owed for two or three years and at the same time, and the government refused to reduce systemic costs. For example, we have some agencies, which have not reduced their fees and licenses running to billions of naira.”
Ene therefore called on the Federal Government to tackle the local challenges confronting on oil sector is make it attractive to more investment.
On his part, PETAN Chairman, Mazi Bank-Anthony Okoroafor, emphasised the need for the Federal Government to reduce contracting cycle from three to four years to six months.
Okoroafor said that there also need to create good image for Nigeria through institutional transparency, well-articulated policy consistency and building of enabling infrastructure.
He said there is need to restructure the country’s oil and gas industry operations by simplifying access to assets, maintaining sanctity of contracts, instilling corporate governance in all our dealings and reducing overall project costs for cost effectiveness.
World Bank Calls on Nigeria to Impose Special Taxes on Alcohol and Tobacco
The World Bank Group has made a call to the Federal Government of Nigeria, urging the government to impose special taxes on alcohol, cigarettes and beverages that are highly sweetened in order to improve primary healthcare conditions in the country.
Shubham Chaudhuri, who is the Country Director for Nigeria in the World Bank Group, said that an improvement in healthcare in Nigeria will come by taxing the things that are “killing us.” He said that the economic rationale for the action is quite strong if lives are to be saved and a healthier Nigeria achieved.
Chaudhuri made the call on Friday, at a special National Council on Health meeting which was organized by the Federal Ministry of Health in Abuja. Chaudhuri stated that placing special taxes on tobacco, sweetened beverages and alcohol would reduce the health risks which come with their consumption and expand the fiscal space for universal health coverage after COVID 19.
The country director also said that investing in stronger health systems for all would make significant contributions to the fight against inequality and the rising poverty situation in the country. He went on to add that increasing health tax would provide an extra advantage of reducing healthcare cost in the future, by hindering the growth of the diseases which are caused by tobacco, alcohol and sugar-sweetened beverages.
The representative of the WHO in Nigeria, Dr Walter Mulombo said that he could confirm the large health needs of Nigerians, as well as the efforts being made to meet those needs. He said this was based on the fact that he had been to over half of Nigeria’s states in less than two years of being in the country.
Mulombo then noted that although the coronavirus exposed weaknesses in the global economy (not excluding health), it could be considered as a unique opportunity for a thorough examination of existing resources and mechanisms to prepare for a more resilient future.
Nigeria’s VAT Revenue Falls to N500 Billion in Q3 2021, Manufacturing Sector in the Lead
In the third quarter of 2021, Nigeria generated a total sum of N500.49 billion as value-added tax which represents a 2.3% decline when compared to the N512.25 billion recorded in the second quarter of the year.
This is as seen in the VAT report which was recently released by the National Bureau of Statistics (NBS). The report revealed that the manufacturing sector was in the lead as it remitted a total of N91.2 billion, representing about 30% of the total local non-import value added taxes in that period.
In spite of the quarter-on-quarter decline of VAT collections in the reviewed period, it grew by a further 17.8% when compared to N424.7 billion generated in the same period of the previous year. The report also shows that an amount of N1.5 trillion has been generated from value added taxes from January 2021 to September 2021.
That is 40.2% higher than the N1.08 trillion recorded in the same period of 2020, and 72.3% higher than what was recorded in the same period of 2019.
To break it down, the Value Added Tax collected in the first, second and third quarter of 2021 was recorded at N496.39 billion, N512.25 billion and N500.49 billion respectively. It is higher than the corresponding figures of 2020, which sat at N324.58 billion, N327.20 billion and N424.71 billion for the first, second and third quarters respectively.
In the third quarter of 2021, the Manufacturing activity accounted for the largest share of total revenue collected across sectors, with a huge 30.87% (N91.2 billion) coming from that sector. The Information & Communication sector came in second with 20.05% (N53.9 billion) contributed, while the Mining & Quarrying sector came in third with 9.62% (N28.4 billion).
Nigeria has continued to ramp up its efforts to increase revenue from non-oil sectors by increasing its tax collection rates, which has recorded largely significant growth since the federal government increased the VAT rate from 5% to 7.5% in the 2019 Finance Act, which was signed and made effective in 2020.
Nigeria’s Economy to Close 2021 at 2.5% Growth Rate
The Lagos Chamber of Commerce and Industry (LCCI) has predicted that the Nigerian economy will close its growth rate for the year at 2.5%.
This was said by the President of the LCCI, Toki Mabogunje at the 133rd Annual General Meeting (AGM) of the chamber in Lagos on Thursday, as reported by the News Agency of Nigeria.
The LCCI leader advised that Nigeria’s monetary and fiscal aspects of the economy should encourage policies that enhance growth and build confidence which would invigorate private capital flows to the economy to achieve the growth. She also encouraged a medium-term recovery plan which is anchored on local productivity, attracting private investment, developing physical and soft infrastructure, and ease of business.
Mabogunje disclosed that Nigeria’s inflation would be maintained at its double digit level within the short to medium term, due to food supply shocks, foreign exchange illiquidity, higher energy cost, social unrest in the Northern region, possible removal of fuel subsidy, and insecurity. She stated that these structural factors will keep on mounting pressure on domestic consumer prices.
She also added that in spite of the non-oil economy’s growth by 5.4%, insecurity problems in some areas of the country may lead to shrinking in production and a disruption of the supply chain. She states that the important drivers of the non-oil sector growth were finance and insurance holding 23.2%, transport and storage 20.6%, trade carrying 11.9% and telecommunications 10.9%.
Others include manufacturing, construction, real estate and agriculture with 4.3%, 4.1%, 2.3% and 1.2% respectively throughout the year.
Speaking on the decision of the Central Bank of Nigeria’s Monetary Policy Committee’s decision to retain policy parameters, she mentioned that although the apex bank has been keen to extend credit to the real economy as a way of supporting it, it is a fact that the provision of credit recently has proven ineffective in improving output growth and stabilizing consumer prices.
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