- Sluggish Economy Haunts Nigerian President at Ballot Box
Timi Soleye returned home to Nigeria from the United States to set up a gas logistics business six years ago, encouraged by predictions of growth and an expanding middle class.
Three years later, Nigeria plunged into its first recession in a generation following a sharp fall in the price of oil, which accounts for 90 percent of its foreign exchange earnings.
Infrastructure projects on which Soleye’s business relied were shelved. He kept afloat by doing consultancy work, but others weren’t so lucky.
“I know lots of people whose companies shut and laid people off,” said Soleye, a 31-year-old Harvard graduate and president of CRYO Gas and Power.
Soleye didn’t bother to vote in 2015. But this year, he says he has a reason to do so: he doesn’t want President Muhammadu Buhari to win a second term on Feb. 16. “Enough is enough,” he said.
Buhari’s critics accuse him of failing on a number of issues, including promises to tackle corruption and defeat an Islamist insurgency that has killed thousands since he took the helm of Africa’s most populous nation. But his handling of the economy could cost Buhari more votes than any other issue.
Although Nigeria returned to growth in 2017, the economy expanded by 1.9 percent in 2018, compared with 5.5 percent when Soleye returned to Nigeria in 2013.
Inflation has been in double digits for the last three years, rising to a seven-month high of 11.4 percent in December. And nearly a quarter of the workforce – 23.1 percent – is unemployed, up from 18.1 percent a year earlier.
“People are still worse off after four years in power,” said Charles Robertson, chief economist at Renaissance Capital.
“It’s not all Buhari’s fault. It’s mainly to do with oil. But nonetheless, it’s made it difficult for people to be positive about the economy.”
For Clement Nweke, who sells electrical appliances in a Lagos street market, the last few years have been hard. Inflation and a weaker currency mean 100,000 naira ($330) will only buy one of his air conditioning units, compared with three back in 2015.
“The purchasing power from the public is lower,” he said. “It affects my own business because I don’t push out the many (units) I used to.”
Buhari’s main rival, businessman and former vice president Atiku Abubakar, has zeroed in on the issue.
“Get Nigeria working again,” is his campaign slogan.
He has vowed to double the size of the economy to $900 billion by 2025, mainly by giving a larger role to the private sector.
Buhari argues that the way to bigger growth is through infrastructure development, touting railway and road construction.
But many business leaders doubt he can fix the economy, saying their companies have been hurt by government efforts to help the poor.
“In their quest for what they call affordability, they have essentially price regulated a huge bevy of things, and they do not see that, ironically, it makes things more expensive,” said Soleye.
He said a decision to fix energy tariffs for three years meant that while customers were getting cheap electricity, crippling debts were piling up in Nigeria’s power sector.
Those debts have held up construction of new plants for which Soleye’s company would have provided gas storage and pipelines.
Another often-cited example is the government’s decision to ban rice imports through its land borders in 2015. Instead, the government subsidised tractors, mills and fertiliser and arranged cheaper loans to boost domestic rice production.
But farmers struggled to meet demand, hampered by poor roads to bring their harvest to market and inadequate power for storage facilities. Prices soared.
The only people who did well were smugglers, said Rotimi Williams, who owns a rice farm in the central state of Nasarawa.
“The cost of production of local rice has increased, which means that people are going for cheaper imported rice,” he said.
He blames protectionist policies for Nigeria’s galloping inflation.
The government says it is trying to wean the economy off its reliance on oil sales by encouraging domestic production of everything from wheat to cars.
Some local businesses have profited. Etop Ikpe, CEO of Cars45, an online marketplace for used vehicles, said a decision to increase a tariff on imported vehicles from 20 to 70 percent in 2015 “provided an opportunity”.
“People couldn’t afford brand new cars or imported used cars,” he said.
But as with rice, the Nigerian ports authority reported a surge in car smuggling from neighbouring Benin, and local assembly did not pick up.
Buhari’s supporters point out that Nigeria rose 24 places to 145 in the World Bank’s ease of doing business ranking in 2017, largely due to government efforts to cut red tape, including issuing visas on arrival and establishing a centralized electronic system to pay federal taxes.
“One good term deserves another,” says an electronic billboard for Buhari in the Lagos business district of Victoria Island.
How voters respond may depend on whether they believe they will be better off with Atiku, who as vice president from 1999 to 2007 oversaw the liberalisation of Nigeria’s telecommunications industry.
Foreign investors have welcomed his pledges to float the naira, overhaul the central bank, privatise the state oil company and create a $25 billion fund to support private sector infrastructure investment.
The central bank, with Buhari’s backing, imposed currency restrictions in 2015 to defend the naira, rejecting bankers’ advice to float the currency as some other oil exporters had done. The following year, the naira lost a third of its value, and many investors fled.
Capital imports into Nigeria, which stood at $21.32 billion in 2013, fell to $5.12 billion in 2016, before rising to $12.2 billion as the country emerged from recession in 2017.
“If we want to see the unemployment rates coming down and certain initiatives that will boost growth, primarily it will be private sector driven,” said Boye Olawoye, group managing director of investment bank Primera Africa.
Oil Slips With Energy Prices in Europe Halts Record Rally
Oil dipped toward $72 a barrel in New York after prices of energy commodities in Europe halted a record-breaking run.
West Texas Intermediate futures fell 0.6%, having reached the highest intraday level since early August on Wednesday. A rally in European gas and power prices to unprecedented levels was set to end as industries were starting to curb consumption. The surge in energy rates could temporarily boost diesel demand by as much as 2 million barrels a day as consumers switch fuels, according to Citigroup Inc.
Still, the bullish signals for oil are continuing to increase. U.S. crude inventories dropped by more than 6 million barrels last week to a two-year low, according to government figures, as coronavirus vaccination programs permit economies to reopen. Chevron Corp. Chief Executive Officer Mike Wirth warned that the world is facing high energy prices for the foreseeable future.
The investor optimism is showing up in key oil time spreads widening. Trading of bullish Brent options also surged to a two-month high on Wednesday.
Prices have been pushed higher in recent days “by supply outages combined with expectations of switching from gas to oil in the power sector,” said Helge Andre Martinsen, a senior oil market analyst at DNB Bank ASA. “We still believe in softer prices toward year-end and early next year as curtailed production returns and OPEC+ continues to increase production.”
Strong prices for gas, liquefied natural gas and oil are expected to last “for a while” as producers resist the urge to drill again, Chevron’s Wirth told Bloomberg News. Norway’s Equinor ASA said Thursday it also expects European gas prices to remain high over winter.
Fuel Scarcity: Petrol Sells N220 Per Litre in Nsukka
Premium Motor Spirit, otherwise called petrol, now sells for between N200 and N220 per liter at the independent marketers’ service stations in Nsukka, Enugu State.
The News Agency of Nigeria is reporting the hike in the price against the official pump price of N162 per liter.
It said it started about a fortnight ago due to the scarcity of the commodity in the town and its environs.
Some residents of the town expressed deep worry over the development in separate interviews with NAN on Wednesday.
A civil servant, Stephen Ozioko, said the situation had further compounded the economic difficulties in the area.
Ozioko said many private car owners had been compelled to park their vehicles at home and move around in public transport.
He said: “Since the scarcity started, I decided to park my car and take public transport to the office and back home. N220 per liter is exorbitant and I cannot afford it considering my salary as a civil servant. I shall continue to use public transport until the situation returns to normal.”
A building material dealer, Timothy Ngwu, said the development had also led to an increase in transport fare in the area.
Ngwu said: “Some people now trek from Nsukka Old Park to Odenigbo Roundabout because of the 100 percent hike in fares from N50 to N100 by tricycle.
“Before now, transport fare from Nsukka to Enugu was N500, but transporters now charge between N800 and N1000.”
Also, a commuter bus driver, Victor Ogbonna, described the scarcity and hike in the price of petrol as “unfortunate and an ugly development”.
Ogbonna added: “Today, only a few filling stations are selling the commodity in Nsukka town, while others are shut.”
He alleged that some filling stations, which claimed to be out-of-stock, were selling to black marketers at night.
He said: “This is why black marketers have sprung up everywhere in the town, selling the commodity for about N300 per liter.”
NAN reports that virtually all the major marketers in the area have stopped the sale of petrol, claiming to be out-of-stock.
The people called on the government to urgently intervene in order to bring the situation under control and also put an end to its harsh economic effects on the messes.
DPR Targets N3.2T Revenue by Year-End
Nigeria’s Department of Petroleum Resources (DPR) will hit the N3.2 trillion revenue target by December 2021, according to its Director/ Chief Executive Officer, Mr Sarki Auwalu.
Auwalu made the disclosure when he led a delegation of the DPR management team to the Executive Secretary of Petroleum Technology Development Fund (PTDF), Mr Bello Gusau, in Abuja on Wednesday.
He said that 70 percent of the revenue projection had already been met. “Last year, we exceed our revenue budget. We were given N1.5 trillion but we were able to generate N2.7trillion.
“This year, our revenue budget was N3.2 trillion. By the end of August 2021, we have generated up to 70 per cent.
“So, we with September, October, November and December, it is only the 30 per cent that we will work over,’’ he said
He noted that the government took advantage of fiscal terms within the old and new legislation, thereby creating a level of increased signature bonuses.
“We reorganise the work programme that is normally being done in the DPR to key into the new operational structure as we see it in the bill, now an act.
“That programme is being handled by the planning and strategic business unit as against what we use to have because the entire work programme is supposed to show not only technical but also commercial and viability of oil fields and to guarantee the return on investment for investors.
“We have also created an economic value and benchmarking unit to key into the new fiscal provisions of the PIA,’’ he said.
Commenting on capacity, Auwalu said the country stands at the advantage of exporting skills to emerging oil and gas countries across Africa with proper implementation of the newly passed Petroleum Industry Act.
This, he said, the DPR was ready to partner with the Fund to continue to build capacity in the oil and gas sector
He noted that the Federal Government was determined to create leeway that would encourage investors and drastically improve the nation’s petroleum industry.
He further noted that no fewer than 300 legal battles in the oil and gas industry in Nigeria, which had been stalled for the past 20 years in courts, had been resolved through alternative dispute resolution.
According to Auwalu, the DPR is strategising well to ensure effective implementation of the PIA.
Responding, Gusau commended the DPR for enabling the industry and enhancing business activities in the oil and gas sector.
He said that DPR remained the head of the oil and gas industry in Nigeria adding that the Fund was grateful to benefit from the wealth of ideas from DPR.
“The last time we visited, we had a good discussion and issues raised are being implemented like tracking the inflow of funds in signature bonus accounts.
“We extended the meeting and involved ministry of Finance, Accountant General office and even the Central Bank of Nigeria (CBN).
“Sitting at field development plans and attending significant meetings, helped us to know where and what the industry is trying to do and it also helps to inform our decisions in training and capacity plans,’’ he said
He urged the DPR to continue on its effort to ensure an efficient and productive petroleum industry in Nigeria
He assured collaboration with all as the head of the implementation committee of the Petroleum Industry Act. (NAN)
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