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Last week, Goodluck
Jonathan signed what has been described as binding memoranda of
understanding (MoUs) with petrochemical companies from Saudi Arabia and
India as well as with Chevron, AGIP, and Oando. According to the
president, this step signalled the start of a Gas Revolution in Nigeria.

Coming a week
before general elections, we cannot fail to note the political
undertones in the timing of the launch. Past governments have made
pronouncements on their determination to halt the heinous acts of gas
flaring over the past decades. These have amounted to nothing but hot
air.

Administrative
measures to curb the menace started in 1969. Ten years after the
initial moves, the 1979 Gas Reinjection decree set 1984 as the
essential date when gas flaring became outlawed in Nigeria. However,
the penalty for flouting the law was a slap on the wrist to the oil
companies so that they continued flaring, poisoning the environment and
maiming the people.

The last set dates
for ending gas flaring were given by the late Yar’Adua in December
2008. Towards that deadline, Odein Ajumogobia, at that time the
minister of state for petroleum, announced that a new flare out formula
was being worked out to end gas flaring without hurting government
revenue.

When an earlier
target date of December 2007 was getting close, the same minister
announced that zero gas flare was a moving target.

The gas revolution
announced by Mr. Jonathan is replete with figures on how much money
would be spent on the various projects, but as far as news reports go,
we have seen very little of the volumes of associated gas currently
being flared that the projects would take up.

The drums are very
loud that foreign direct investments will bring in $10 billion and an
aggregate investment of $25 billion over the next three years, with
activities in fertilizer production, petrochemicals, and methanol
manufacturing.

All these will add
up to create about half a million jobs directly and indirectly. But
statistics can be colourful, especially when they are of the Nigerian
variety.

Except for Chevron,
which says it would start by delivering 175 million cubic feet of gas a
day “once the pipelines and infrastructure are in place”, we don’t see
concrete gas utilisation figures associated with this revolution.

Undoubtedly,
efforts have been made in the past by some oil companies to reduce the
amount of gas flared. For example, the Nigerian National Petroleum
Corporation (NNPC) and Mobil’s East Area Natural Gas-to-Liquid (NGL II)
project initiated in 2006 was completed ahead of schedule in 2008 and
was designed to utilise 950 million standard cubic feet of gas daily.

Chevron also
announced that the West African Gas Pipeline project (WAGP) would
significantly dent the amount of gas being flared in the oil fields.

It turned out that
this was not the case because, according to some estimates, less than
20 per cent of the gas on this pipeline is associated with crude oil
production. The bulk of the gas comes from gas fields, rather than oil
fields.

As for the oil
company AGIP, their notoriety in the area of gas flaring is marked by
their seeking to claim carbon credits for utilising some of the gas
they have been flaring at Kwale in the face of the fact that the
activity has not ceased to be illegal in Nigeria.

The same can be
said of Chevron and their claims of the WAGP as well as of other
companies such as Pan Ocean, which is making strides towards obtaining
carbon credits through this route dotted with ethical and moral
questions.

Nigeria’s huge gas
reserves, easily accessible in new gas fields, have made the stoppage
of gas flaring unattractive to an industry that has admittedly taken
the act as a routine matter since the 1950s, despite public outcry.
Nigeria is said to have proven gas reserves of about 187 trillion cubic
feet.

The 2005 estimates
by the World Bank indicated that Nigeria flares about 812 billion cubic
feet of gas daily. We can argue all we want on whether this figure has
increased or reduced with the passage of time.

Oil companies
sometimes make curious claims about how much reduction they have
achieved in their flaring binge. Some have claimed up to 30 per cent
reduction, but the reality on the ground has not backed up such claims.

The gas revolution
also has an anchor on the stomach, as marked by the proposed fertiliser
plants. Obviously, the existing fertiliser plant in Nigeria has not
made a significant dent on supply of the product in the country and
this has left the field open for above and below board games.

While launching the
gas revolution project, the president declared, “We can only be
successful if our actions impact on the common man in Nigeria. The
agricultural revolution arising from the fertilizer and blending plants
will create affordable food for Nigerians and a lot more for export.
The LPG agenda will touch the lives of many households, as cheaper and
cleaner LPG displaces kerosene. The disposable income that arises from
the savings will result in the purchase of more goods and services,
boosting GDP.”

Good lecture, Mr.
President. However, when it comes to wholesome food provision for the
present and in the future, it has been shown that this will come
through farmers who cultivate using agro-ecological methods, and will
not be dependent on the use of artificial fertilisers that are climate
changers and ultimately harm soils and water bodies.

Let the Gas
Revolution roll, but let it begin by the release of the figures of
associated gas to be used in the project, as well as the schedule for
the environmental and other impact assessments for the project.

And, of course, the
question remains, Mr. President: when will gas flares be quenched? Do
we take that the revolution will begin to snuff some flares out in
three years and continue over indeterminate years into the future?

To cut leakages in
the system and ensure efficiency in the utilisation of capital
expenditure, the federal government will soon sign up to be a member
nation of the Construction Sector Transparency Initiative (CoST).

This is a
multi-stakeholder initiative to increase transparency and
accountability in the construction sector. Finance minister, Olusegun
Aganga, who disclosed this, said the way public construction projects
are handled in Nigeria is inefficient and allows for corruption to
thrive.

Speaking at the
sidelines of the one-day interactive session with the organised private
sector in Lagos on Tuesday, he said the initiative would allow local
communities to monitor projects in the area and help to plug wastage in
the system.

“One other way to
make it transparent is to join the CoST. Only a few countries, United
Kingdom taking the lead, have actually established that process and I
want us to join. That way, we bring public and private sector involved
in how we monitor our project. It introduces accountability and
transparency,” Mr. Aganga said.

He said the
process, when fully established, would allow independent committee to
monitor ongoing government projects across the country.

Constituency monitor

“The projects will
be on the internet so if there is a road construction in Nnewi to
Umuahia, you will know the roads that are being constructed in an area
and the constituents will know when the project is supposed to start
and end, and they will be able to report back at that local level,” he
further said.

He said the
independent committee would investigate and challenge projects which do
not meet the time lines. The minister said this is part of ways of
ensuring fiscal discipline. Observers are however wondering when this
would come into operation when government contracts are shrouded in
mystery.

CoST is already in
operation in seven countries: Ethiopia, Malawi, the Philippines,
Tanzania, United Kingdom, Vietnam, and Zambia.

Explaining the depletion in the foreign reserves, he said government is making effort to reduce the trend in the 2011 budget.

“In overhead, the
proposal which we sent to the National Assembly was reduced by 30 per
cent. The whole of last year we were shouting about borrowing, but we
really should have shouted when the budget was being put together.
Really, when you have an unnecessarily expansionary budget, that
deficit has to be funded and the only way is from your savings or from
borrowing,” the minister said.

Sovereign fund

Mr. Aganga said
there was need to reduce the level of expenditure and the level of
borrowing and the government is ready and prepared to introduce
discipline in how public finances are managed. Part of this, he said,
is the push to establish the Sovereign Wealth Fund to be managed by an
agency of competent professionals, some of whose services would be out
sourced.

“The Sovereign
Wealth Fund will have three boxes. One will be inter-generation fund
for future generation, and that will be invested in fixed income
securities and equities. The second box will be stabilisation box which
will be made available when there is a fall in revenue,” Mr. Aganga
said.

The third component of the fund, he said, is the infrastructure fund
which will invest in local infrastructure such as rail, roads, power,
and ports.

A triumvirate of
reformers – Central Bank governor, Lamido Sanusi, AMCON chief
executive, Mustapha Chike-Obi, and SEC director, Arunma Oteh – has
turned Nigeria’s financial markets inside out over the past 18 months.

A $4 billion
commercial bank bailout in 2009 and the sacking of eight bank chiefs
for reckless lending, engineered by Mr. Sanusi, was thefirst strike,
shocking a corporate elite that was unused to close oversight.

Ms. Oteh, who took
office in January 2010, pursued stockbrokers with equal vigour, taking
260 individuals and entities to a special tribunal over alleged price
fixing and insider trading. AMCON, established last year to soak up
non-performing loans in exchange for government bonds, is hoping to
rebuild commercial banks’ balance sheets after the bailout and deepen
the fledgling debt market as it does so. The reform drive has pleased
foreign investors.

But by demonstrating the importance of a few individuals to
financial reforms, the triumvirate’s success indicates the reforms’
vulnerability. Next month’s national elections could cut the political
support that the reformers enjoy, particularly if a new cabinet is less
willing to give them free rein.

Heineken NV, the
world’s third-largest brewer, said it had bid a total of $163 million
for two breweries in Ethiopia, as it expands in the fast-growing
African market.

Heineken has
clinched deals in Nigeria, Rwanda, and South Africa in recent months,
eyeing rising incomes in Africa’s emerging markets.

“With its large,
growing population, political stability, improving economy and rapidly
growing beer market, Ethiopia is a promising, long-term growth market
for Heineken in Africa,” Heineken said in a statement emailed to
ANP-Reuters.

The Egyptian pound
weakened to a fresh six-year low to the dollar on Wednesday, as the
country’s poor economic outlook and political uncertainty prompted
investors to sell the currency.

It later regained some ground after investors bought pounds to invest in a stock market rally, bankers said.

The pound traded at
5.9640 to the dollar after hitting 5.9765 earlier in the day, a the
lowest since January 2005. It was down 0.29 per cent from Tuesday’s
close.

“The pound has weakened mainly because foreigners are exiting a
market hit by political instability,” said a Cairo-based trader. “Egypt
is getting downgraded, and for foreign investors, this is negative.”

British-based oil
explorer, Tullow Oil, has agreed to sell stakes in its Ugandan
operations to France’s Total and China’s CNOOC for $2.9 billion,
bringing in big partners to develop the oil fields.

Tullow said on
Wednesday it agreed to sell each company a one third interest in fields
around Lake Albert, which Tullow estimates to contain 1 billion barrels
of oil, and potentially as much as 3.5 billion barrels. Tullow will
retain a third share.

The deal leaves
unresolved a massive tax dispute with the government. Uganda’s energy
minister, Hilary Onek, said the country would receive a total of $472
million in taxes from the farm down deal.

Operators in the
oil and gas sector have listed steps that must be taken for the ‘gas
revolution’ project launched by the federal government to make any
meaningful impact. They said the atmosphere for the smooth sail of the
project cannot be laid in the little time the government has left.

President Goodluck
Jonathan had last week launched the project which he said will result
in foreign direct investment of about N410 billion over the next three
years.

According to him,
the full implementation of the entire gas master-plan agenda will
result in about $25 billion worth of investments in gas processing,
transmission, and downstream gas utilisation projects.

Following the
launch, some local companies like Oando have been selected to build
central gas-processing facilities at an estimated cost of beteween $2 –
$3 billion.

However, Dragan
Trajkov, oil and gas sector specialist at Renaissance Capital, an
investment bank, said “While we think it is almost impossible for
anyone to build a $3 billion project by the end of 2012, we understand
that the numbers might be presented optimistically in the light of the
ongoing presidential campaign,” he said in a report published this week.

A few observers
dismissed the launch of the project at the middle of electioneering
campaigns as just another political stunt by the government.

Not so bleak

Despite the
illusions of the revolution, some industry watchers say the
‘revolution’, if well executed, would help stop gas flaring and develop
the nation’s domestic gas market.

“The gas revolution
launched by President Goodluck Jonathan holds the promise of inducing
further development and growth of Nigeria’s domestic gas market,” Fola
Onasanya, oil and gas expert at Ciuci, a consultancy firm, said.

“With the $3
billion Central Gas Processing Facility (CPF) by Nigerian Agip Oil
Company (NAOC) and Oando Nigeria Plc, a huge sink will be created for
storing and utilising natural gas resources which otherwise could have
been flared, thus providing a boost to the economy both in terms of
value generation and job creation,” Mr. Onasanya said.

According to him,
so also will the Memorandum of Understanding (MoU) with Saudi Arabia’s
Xenel Industries Limited to construct a proposed 1.3 million tonnes/p.a
Petrochemical Plant in Warri, Delta State, along with five fertiliser
blending factories by Nagarjuna and Chevron.

“However, for these
moves to deliver their optimal gains and attract foreign investments,
key areas articulated in the Gas Master Plan need to be addressed by
strategic decisions and actions of the government,” Mr. Onasanya
further said.

Mr. Onasanya said
these include the issues relating to the gas pricing policy – which
provides a framework for the minimum price that any purchaser of gas
can be charged.

“This needs to be
tackled in the fair interest of all stakeholders (including the IOCs),
the Domestic Reserves Obligation – which aims to ensure the
availability of gas for domestic consumption in order to stimulate
economic growth – needs to be actualised and the Gas Infrastructure
Blueprint – which provides for the establishment of a network of gas
hubs which would ultimately reduce the cost of supplying gas – should
be implemented in full gear,” he said.

“Overall, the ‘Gas revolution’ is not over-ambitious, provided the government follows through with strategic actions,” he added.

However, a top
official of one of the major oil companies operating in the country,
who would not want to be quoted because he was not authorised to speak,
described the project as rather “ambitious”, adding, “It is a huge
project that would require huge foreign investment because it is
obvious that the government would not be able to do this alone.”

According to him,
there would be need for billions of dollars to cater for professionals
and the investment would be required for the plants that would be
required to carry out the processing and transmission of the gas. This,
he observed, cannot be done in a short term.

Nigeria’s oil
assets have been exploited for more than 50 years. However, while oil
companies have profited from the resource, local communities in the oil
rich but conflict struck areas live with the daily pollution caused by
non-stop gas flaring.

The country has
lost billions of naira on gas flaring, a process of burning off into
the atmosphere, surplus combustible vapours from an oil well, either as
a means of disposal or as a security measure to relieve well pressure.

Inability to solve
the lingering problem has been increasingly recognised as a huge
environmental problem in the Niger Delta region of the nation.

The Federal Inland
Revenue Service (FIRS) yesterday said that the project to computerise
the nation’s tax system is billed to take off with the full
implementation of the Unique Taxpayer Identification Number (UTIN)
system in April.

The computerisation
system, which the service has been championing in conjunction with the
Joint Tax Board (JTB) in the last four years, is expected to become
available for taxpayers’ registration at pilot locations in November,
while nationwide operations are billed for April 2012.

Indications are
that the pilot phase of the system would become operational in eight
locations in the six geopolitical zones of the country, including
Lagos, Rivers, Delta, Adamawa, as well as the Federal Capital Territory
(FCT), Abuja.

Indications towards
the planned take off of the new tax system is coming just as the JTB
has renewed the call on the National Assembly to accelerate the process
towards the passage of Personal Income Tax (PIT) Bill as soon as they
reconvene from recess, to facilitate the realisation of the objectives
of the proposed law.

The PIT Amendment
Bill, which has been pending before the National Assembly for the last
three years, finally sailed through legislative deliberations before
the close of the 6th Legislative Assembly.

The call for the
passage of the law, which was amongst eight-point decisions at the
124th Meeting of the Tax Administrators in Abuja, would give some
relief to taxpayers, as it seeks to reduce the current rate from 20 per
cent to 17.5, even as government is convinced that the amendment would
also improve the tax compliance of taxpayers generally.

On the
administration of the existing PITA provisions, the Board urged all
federal, states and local government Ministries, Departments and
Agencies (MDAs) to ensure that the provisions were strictly adhered to
by deducting adequately all Pay-As-You-Earn (PAYE) taxes of their
employees.

Approved taxes

Ifueko
Omoigui-Okauru, FIRS chairman, in a communiqué after the meeting, said
the members also resolved to sustain their ongoing fight against
multiple taxation by increased public awareness campaigns at all levels
of government, including the publication of the list of approved taxes
and levies on a sustainable basis.

Similarly,
discussions on the proposed Enhanced New Drivers Licence scheme ended
with a resolution that adequate awareness about its take off on April
18 this year, even as the Board commended the initiative of the
Students’ Tax Advisory Initiative (STAI), while urging Nigerian youth
to take active interest in taxation as a fiscal policy option for
building a better Nigeria.

With these
resolutions, some of the member states may have shifted position on
their earlier subtle opposition to the proposed amendment of the Bill
in view of what they believe were its likely negative effects on their
Internally Generated Revenue (IGR) profile.

Some governors,
particularly those with High Internally Generated Revenue (IGR)
profiles, had begun moves to ensure that the proposed amendment to the
PITA was considered simultaneously with the proposed amendment of the
Value Added Tax (VAT) law, which they believed would offset some of the
revenue losses their states might suffer as a result of the amendment
of the former Bill.

The PIT is imposed on the income of all Nigerian employees or residents who derive income in Nigeria and outside Nigeria.