11 Jan

Daily Watch – States come under the microscope, $14b in gas flare penalties ‘lost’ since 2008

  • Nigeria’s bureau de change operators set their first ever reference exchange rate for the naira at ₦399 to the dollar on Tuesday, saying they wanted to help reduce the gap with the official interbank rate. The government has been pressing retail operators to narrow what it says is a damaging gulf between the naira’s official rate – currently at ₦305 to the dollar – and the parallel rate – as weak as ₦490 in recent days. Bureau de Change association president Aminu Gwadabe, who is due to meet central bank officials later on Tuesday, said his members had agreed to set a weekly reference rate to improve liquidity and help rebuild investors’ confidence in the economy. “Once liquidity improves, the wide margin between the parallel and official market rates will be bridged,” Gwadabe told reporters. He said the naira’s outlook was “promising” as crude prices have started to rise. Low prices have dried up the oil income that makes up 70 percent of government revenues, cutting the dollar supply and pushing Africa’s largest economy into recession. Retail currency operators account for less than 5 percent of total foreign currency trading in Nigeria. But with liquidity poor on the official market due to low oil revenues and the central bank left as the main dollar supplier, the bureau de changes have done more business.
  • The FG has engaged eight audit firms to monitor the states’ compliance with fiscal reforms as part of the condition to access the ₦510 billion budget support facility. The eight accounting firms include KPMG, Ernst & Young, PWC, PKF, Muhtari Dangana & Co, S.S Afemikhe & Co and Ahmed Zakari & Co/Ijewere & Co will monitor and evaluate the implementation of the 22-point Fiscal Sustainability Plan which specified the conditions under which 35 state governments in June 2016 started accessing the budget support facility. A finance ministry statement said the Fiscal Sustainability Plan which commenced in June 2016 has requirements including increasing internally generated revenues, the introduction of biometric payrolls, publication of audited annual financial statements, and reduction of wastage by establishing efficiency units. The Budget Support Facility, a 12-month standby loan facility, was designed to bring immediate financial relief to State Governments and enable them to meet their financial obligations; with a monthly amount of ₦50 billion in the first three months and ₦40 billion available for the remaining nine months to the 35 States.
  • The Senate yesterday confirmed six commissioners for the Nigerian Electricity Regulatory Commission and asked President Buhari to nominate another person for the chairmanship of the commission. Buhari had nominated Professor Akintunde Ibitayo Akinwande, a US-based scholar but he refused to appear before the Senate Committee on Power for screening. Presenting the report of his Committee, Senator Enyinnaya Abaribe (PDP, Abia) said Akinwande was not recommended for confirmation as he failed to appear for screening. All the nominees, namely Sanusi Garba (North West) Vice Chairman, Nathan Rogers Shatti (North East), Moses Arigu (North Central), Dafe Akpedeye (South South), Professor Frank Okafor (South East) and Musilliu O. Oseni (South West) were confirmed.
  • A lack of political will by the FG to enforce its own laws on gas flare penalties has cost the country $14.298 billion between April 2008 and October 2016, according to the Nigerian Extractive Industries Transparency Initiative. International oil companies and other oil companies operating in the country have failed to comply with a regulation stipulating a penalty of $3.5 for every 1,000 Standard Cubic Feet of gas flared in the country. NEITI, in its latest audit report, the 2016 Nigerian Oil and Gas Audit Report, disclosed that in 2008, the FG in its fiscal regime for the petroleum sector had set a penalty of $3.5 per 1,000 SCF of gas flared by the oil companies. It also stated that the FG had over the years, refused to enforce the regulation and is still collecting the old rate of ₦10 per 1,000 SCF which was supposed to run from 1998 to 2008. An analysis of the various Annual Statistics Bulletins of the NNPC showed that from 2008 to October 2016, oil and gas companies operating in the country flared a total of 4.085 trillion SCF of gas which using the old and subsisting penalty regime, translated to ₦40.85 billion accruable to the Federation Account.
  • The inability of a vessel carrying Liquefied Petroleum Gas or cooking gas to berth and discharge in Lagos has caused the price of the product to soar to ₦5,000 per 12.5kg. The price of the product had jumped to ₦4,500 per 12.5kg last week from between ₦3,200 and ₦4,000, even as the scarcity of kerosene, used by many Nigerians for cooking, continues to bite. The Punch reports that Gaz Providence, which is the only vessel delivering LPG in the domestic market, had been stranded in Lagos waters for over 10 days due to lack of berthing space at the North Oil Jetty in Apapa. The vessel could not berth because another vessel discharging aviation fuel had yet to leave the berthing space, as it had not been able to offload the remaining 1,000 metric tonnes of the product for three days. The NNPC has three jetties, namely: Petroleum Wharf, BOP and North Oil Jetty, used by vessels to discharge petroleum products at Apapa. Of these, only the NOJ had facilities to discharge cooking gas, apart from a private Lagos jetty owned by Navgas.
  • Kwara Governor, Alhaji Abdulfatah Ahmed, has directed the immediate release of ₦2 billion to the sixteen local government councils in the state. This follows the receipt of ₦3.773 billion on Monday evening from the Federal Government, being the balance of the 25 percent of the state’s claim as its share of the London-Paris club. The State Commissioner for Finance, Alhaji Demola Banu, who disclosed this in Ilorin, noted that the state government’s account was credited around 5 pm on Monday. Banu explained that following the receipt of the money, Ahmed, who personally coordinated efforts to secure the outstanding balance, directed the immediate release of additional ₦2 billion of the money to the 16 LGs to enable them to pay part of salary and pension arrears. This brings to ₦3.4 billion the total amount of money the State government has released to the LGs as their share of the London-Paris Club refund.