27 May

The week ahead – Damage is being done in the states

During the week, the Nigerian Governors Forum reached out to the Country Director of the World Bank, Rachid Benmessaoud. Many states in the country, for example, have found it difficult to pay workers’ salaries. The governors’ invitation to Benmessaoud was about a $3.25 billion fund, which is currently lying idle. The money, which was largely set aside for the state governments, has not been accessed because of the cumbersome procedures involved. Added to that, most governors did not know that the fund existed.

The Federation Account Allocation Committee has said the allocations to the three tiers of government for the month of April declined by N18.2 billion to N281.5 billion from the N299.74 billion that was shared in March. The FAAC meeting for the month of April, which was held on Wednesday at the headquarters of the Federal Ministry of Finance in Abuja, confirmed a decline of N18.8 billion in gross statutory revenue from N232.61 billion in March, to N213.81 billion last month. The blame on the drop in allocations is traceable to a huge decline in the prices of crude oil. For instance, the Minister of Finance announced a revenue loss of $45.9 million as a result of the drop in the average price of crude oil from $39.04 in December 2015 to $29.02 in January this year. She also added that a marginal drop in income was recorded from oil and gas royalties as well as import duties. While oil production increased slightly between December 2015 and January 2016 despite explosions at the Escravos export terminal, she implied that the force majeure declared at the Brass terminal, shut-ins and shut down of pipelines at other terminals for repairs and maintenance affected government revenues.

On Tuesday, the CBN announced a flexible exchange rate regime aimed at making foreign currencies more accessible. The CBN took the measure following severe pressures on the external reserves and the ongoing foreign exchange supply crisis. Governor of the CBN, Godwin Emefiele, who spoke at the end of the Monetary Policy Committee Meeting, in Abuja, also said the Monetary Policy Rate, MPR, was retained at 12 per cent; Cash Reserve Ratio, 22.5 per cent; and Liquidity Ratio, 30 per cent. In the face of severe pressures on the external reserves and the foreign exchange supply crises, the  CBN abandoned its fixed rate policy in favour for a flexible and multiple market model, which implied a managed floating exchange rate regime. The details of the operations of this however remain unclear. The apex bank’s Monetary Policy Committee, MPC, which made this decision, chose to retain its Monetary Policy Rate, MPR, at 12 percent, Cash Reserve Ratio, CRR, at 22.5 percent and Liquidity Ratio at 30 percent.

Meanwhile, the CBN disbursed an additional N55.5 billion as part of the Nigerian Electricity Market Stabilization Facility (CBN-NEMSF) aimed at improving power supply and settling legacy gas debt. CBN Governor, Godwin Emefiele, and the Minister of Power, Works and Housing, Babatunde Fashola, announced the disbursement in Lagos The disbursement brings to N120 billion, the total amount so far disbursed to 24 industry participants.

The two-week ultimatum given owners of oil blocs in the Niger Delta by the Niger Delta Avengers group to evacuate their staff and shut down operations ended on Thursday, and the group promptly claimed responsibility for another attack on a gas pipeline belonging to Chevron. The NDA explained that the oil facilities were sabotaged following attempts by Chevron to carry out repairs of main Escravos crude oil pipeline it blew up earlier. Meanwhile, talks between the Federal Government and an intermediary claiming to represent the Niger Delta Avengers have collapsed.

The Nigerian Army Monday has announced the death of a high-ranking terrorist who served as Boko Haram’s chief bomb maker. Army spokesman, Col. Sani Usman, said that the killing of the unnamed bomb maker happened in the early hours of Monday, and was carried out by his own bodyguards because he made an attempt to escape from the sect.

Suggestions

  • Given their track record, we believe that the loan being discussed by the NGF will end up making for a tight future for our states. Nigerian governors have not shown any decency with the handling of finances accrued to the over the years whether during boom or scarcity. Nothing in the manner previous bailout funds have been managed engenders any confidence that these funds will be used judiciously. We caution and advise against this attempt to borrow money for no substantial infrastructure projects other than consumption.
  • It is ironic that the events in the Niger Delta represent one of the undercurrents leading to an upshoot in the price of crude oil in the international market, and yet, Nigeria’s oil output is at its lowest in decades. The FAAC, an anomaly in a federation, should think about creative ways of raising revenues. Unfortunately, we believe the dependent nature of the constituent units will not allow for such creativity.
  • We believe that the current fund disbursed to the power sector by the CBN is likely to go down the drain like the previous fund, which has been not accounted for, with their efforts producing even more darkness.
  • The Federal Government has to move quickly to convene a dialogue with the communities of the Niger Delta, towards an effort to end the current turmoil in the region. We call on President Buhari to lead this effort and ensure that all grievances are quickly resolved because the military option will not solve the festering crisis.
  • We commend the Nigerian army for string of successes against Boko Haram in the Sambisa forest. However, we call for a comprehensive garrison of the liberated areas and the cities in order to prevent recurring raids by Boko Haram on vulnerable communities.