Nigeria Content Online

The claim by Dora
Akunyili, the information minister, and Olusegun Aganga, finance
minister, that Remi Babalola, minister of state for finance, was
misquoted in media reports about the raging controversy over alleged
insolvency of the Nigerian National Petroleum Corporation (NNPC) is a
curious one.

Their argument
flies in the face of rationality, considering that since last year, Mr.
Babalola consistently expressed a conviction supporting the
corporation’s insolvent state.

The 2007 oil and
gas industry audit report by Nigerian Extractive Industries
Transparency Initiative (NEITI) last year, uncovered unwholesome
discrepancies in NNPC’s accounts. About N600 billion was captured as
total unreconciled balances for either unremitted revenues for crude
exports, disbursements for subsidy petroleum products, or expenses
under the joint venture operations for the period.

NNPC’s management
agreed with the Federation Accounts Allocation Committee (FAAC) to
negotiate the figure to about N450 billion, after ignoring several
calls for reconciliation and provision of a payment plan. Last
December, FAAC issued an ultimatum demanding for the plan latest 12
January.

No repayment schedule

But at the end of
the January meeting in Abuja, Mr. Babalola told journalists that the
corporation merely gave a repayment framework without detailing a
repayment schedule, resulting in another ultimatum. However, rather
than respond, the committee was invited to a workshop on ‘Understanding
the Operations of the Oil and Gas Industry in Nigeria.’

At the conference
opening, attended by finance ministry officials, Accountant General of
the Federation (AGF), as well as their counterparts from the 36 states
and the Federal Capital Territory (FCT), Abuja, along with
representatives of revenue agencies, Mr. Babalola told reporters that
the delay in settling the debt was as a result of NNPC’s poor cash flow
situation.

“There are no
lingering contentions. The corporation has since acknowledged that it
owes. We (the FAAC) do not have a problem with the NNPC. There would be
a problem if the debtor did not agree he owes,” he said.

Asked why he
claimed there was no problem when NNPC has consistently refused to
neither pay up nor give a repayment schedule, despite several demands,
Mr. Babalola reiterated the cash flow problem of the corporation.

After the workshop,
nothing was heard about the committee’s effort to get NNPC to pay the
debt, till last May when the FAAC meeting was stalled, following
indications that available revenue in the Federation Account was
inadequate to take care of the budgeted monthly distributable revenue
for April as well as the arrears for augmentation of allocation for the
first quarter of the year.

At the end of the
June meeting, Mr. Babalola, as FAAC chairman, again restated NNPC’s
insolvency, following allegations that the committee may have been
compromised into complacency against pressurising for the debt payment,
more than six months after the December ultimatum.

Bleeding Corporation

“The issue
(payment) has lingered because the corporation is still bleeding as a
result of challenges,” Babalola said, adding, “The Group Managing
Director that took FAAC through all the corporation’s challenges and
promised to come up with a repayment plan, was changed barely after a
month. Another one came, that was also changed for a new one.

“We also know that
NNPC has some challenges, including subsidies on petroleum products
supplies that are not being replenished, making it to be bleeding, and
very difficult for it to meet certain obligations. The issue is not
about decision to pay or not.

“The truth, as we
know in the Federal Ministry of Finance as at today, is that NNPC’s
cash flow warrants that we work with them till it is able to stand on
its own as a business entity. We need to be holistic about these
issues, considering that we need to also look at NNPC’s claim that
government owes it an amount that is in multiples of what it is owing
the Federation Account,” he said.

Denying allegations
that FAAC’s concession to participate in the NNPC’s workshop was
indicative of the existence of a deal to soften its stance on the debt
payment, Mr. Babalola said last month that the exercise was “a training
session to enable members understand some technical issues in the
petroleum industry affecting NNPC’s operations, and not the
corporation’s inability to repay the N450billion.”

Describing FAAC’s
approach on the issue as a display of “unusual maturity and
understanding, considering NNPC’s peculiar operational environment,” he
wondered why he would be accused of complicity, as he was the one that
took NNPC management to the presidency over the indebtedness.

“Certainly, this
(alleged deal) is not correct. One needs to understand the operations
of the NNPC. One cannot be producing a product that costs N60 and
selling at N40, and would not be bleeding. It does not make sense,” he
said.

Curiously, NNPC’s
reasons sounded like a rehash of the arguments often canvassed by Mr.
Babalola, who has always said that the NNPC is insolvent and incapable
of discharging its obligations.

“NNPC’s current liabilities exceed its current assets by N754billion
as at 31 December, 2008. The corporation would not be able to pay the
N450billion owed the Federation Account, unless the Federal Government
reimburses the N1.154trillion it spent on subsidy expenses incurred for
petroleum products supplies and distribution since 2003,” it said.

Nigeria’s
consumer inflation eased to 10.3 percent year-on-year in June from 11.0
percent the previous month, its lowest level for more than two years,
the National Bureau of Statistics said on Friday.

Growth
in food prices, which form the bulk of the inflation index basket in
Africa’s most populous country, also eased, to 12.0 percent
year-on-year from 12.3 percent in May.

The
growth in consumer prices, is the lowest monthly year-on-year increase
since May 2008, when it rose to 9.7 percent, according to figures from
the statistics office.

“Once
again, despite ample domestic liquidity, Nigerian inflation surprises
with a year-on-year fall,” said Razia Khan, head of Africa research at
Standard Chartered.

“For now, it supports an unchanged monetary policy stance, but the central bank will still need to watch future risks closely.”

Nigeria’s
benchmark interest rate has been on hold at 6 percent for more than a
year as the central bank prioritises stimulating growth in sub-Saharan
Africa’s second-largest economy despite the inflationary risks.

The
monetary policy committee noted again at its last meeting just over 10
days ago that inflation remained a potential concern, but this is the
second month in a row that headline inflation has eased.

The statistics bureau said the rise in the food index, was caused
mainly by slight increases in the prices of some staples like yam,
potatoes and meat as well as fruit and beverages.

The Nigeria National Petroleum Corporation (NNPC) and its
partners, China State Engineering Construction Corporation (CSECC), have
commenced the preliminary design of the proposed Greenfield refinery to be
located in Kogi State.

The Nigerian National Petroleum Corporation (NNPC) led a team of
Chinese investors and engineers to appraise the physical environment of the
proposed location of the refinery and kick start preliminary project design
activities on Thursday.

The Chinese investors, the world’s sixth largest engineering
construction company, and China’s biggest, recently signed a memorandum of
understanding (MOU) with the NNPC to finance about 80 per cent of the $23
billion (about N3.45 trillion) plan to construct three Greenfield refineries in
the country, with combined refining capacity of about 750,000 barrels per day
(bpd).

The CSCEC, an arm of the China National Offshore Oil Corporation
(CNOOC), specialising in the construction of nuclear plants, space rockets,
refineries, petrochemical plants, landmark real estates and airports, will
provide technical expertise to the project.

Adebayo Ibirogba, Group General Manager, Greenfield Refineries
of the NNPC, at the weekend presented the graphic detail of the project to
Ibrahim Idris, the Kogi State governor, during a visit to Lokoja, the state
capital.

Mr Ibirogba in his presentation, said that on completion, the
proposed Greenfield refinery would be integrated with an industrial hydrocarbon
park designed to convert natural gas and refined petroleum products into
hydrocarbon derivatives.

New industries

He said that the proposed refinery would attract new industries
to the state, apart from the dredging and maintenance of sufficient navigable
drafts on the River Niger.

He said the commencement of preliminary design activities of the
project would afford the engineering partners the opportunity to appreciate the
physical environment of the proposed location, adding that this would
facilitate the formal take off of pre-construction activities.

Urging the Kogi State government to participate in the
development of the project as a co-investor, assuring that aside financial
returns, he said the facility would help create job opportunities for up to
3,000 workers during the construction phase, and an estimated 2,000 workers to
run the industrial complex on completion.

A Certificate of Occupancy for a 450-hectare stretch of land
across the bank of the River Niger in Itobe village, Ofu Local Government Area
of the state, as a proposed site for the refinery, was presented by the
governor to the visitors during the visit. Mr Idris assured them that the state
government was prepared to provide a conducive environment for the smooth
operation of the refinery, while assuring the security of lives and equipment.

Yu Zhende, the leader of the Chinese delegation and Vice
President of CSECC International division, said the corporation was ready for
the economic partnership, while CSECC will not only assist in sourcing for
funds on competitive terms for the project, but is also expected to ensure that
bona fide Chinese investors take up at least 25 per cent of the equity holding
in the project, in line with the terms of the MOU.

When completed, the Kogi State Refinery is expected to produce
about 300,000 metric tons of Liquefied Petroleum Gas (LPG) per annum.

The NNPC projects that the availability of such a volume of LPG will trigger
a massive increase in the consumption of cooking gas as the preferred domestic
household fuel, replacing firewood, charcoal and kerosene.

Eight
developing economies including Nigeria, Iran and Pakistan aim to reach
a preferential trade agreement by next year to try to double trade and
deepen economic cooperation, government officials said on Thursday.

Heads of state and
ministers from the Developing Eight Countries (D8) — Iran, Nigeria,
Bangladesh, Egypt, Indonesia, Malaysia, Pakistan and Turkey – met in
Nigeria to discuss developing business ties and reducing trade barriers.

“While the role of
government as a catalyst and enabler of economic growth remains
pivotal, the primary driver of this process must be the private
sector,” Nigerian President Goodluck Jonathan told the summit in the
capital Abuja.

Trade between the
member nations of the D8, which was created in 1997 to try to foster
economic cooperation between developing nations, is estimated at around
$68 billion a year, or about three percent of global trade.

Delegates said the
grouping had failed to meet its potential because only Iran and
Malaysia had ratified a trade agreement, the outlines of which were
agreed several years ago. Other nations disagreed on which goods would
be subject to reduced tariffs.

“The trade
statistics among D8 countries may appear positive but this success may
be mainly due to existing bilateral trade initiatives rather than …
the cooperation of the D8 as an organisation,” Malaysian Deputy Prime
Minister Muhyiddin Yassin said.

The main traded
goods within the bloc include petroleum products from Nigeria,
petrochemicals and edible oils from Malaysia, consumer goods, cars and
basic raw materials such as rubber.

“The aim is to
double trade in the next five years,” Abdul Qadir Memon, Pakistan’s
deputy secretary at the commerce ministry, said on the sidelines of the
meeting, attended by Iranian President Mahmoud Ahmadinejad and Turkish
President Abdullah Gul.

“The most important step is the preferential trade agreement which
we are aiming to operationalise by Jan 1, 2011, that is the target date
… We thought that by 2006 we would have been able to implement the
agreement but unfortunately there have been delays,” he said.

The federal government is committed to
provide a conducive legal, social and fiscal environment for the
private sector to invest in the mining sector, with private sector as
key players and attention to be given to the small scale operators.
Minister of Mines and Steel Development, Musa Mohammed Sada, stated
this at the official commissioning of Multiverse Plc, a quarry plant
located in Alagutan village, Abeokuta-Ajebo Road, of Ogun State, at the
weekend. He noted that the availability of mineral resources has
remained a visible feature of the nation’s economy, hence, the arduous
task of mining and transforming them into useful economic values should
be consistently pursued.

More entrepreneurs needed

“Government is
committed to provide a conducive legal, social and fiscal environment
for the private sector to invest in the mining sector, while the
private sector will be the key player, government will pay attention to
the small scale operators,” he said. In view of this, the minister
called for the entrenchment of a broad-based mining culture and the
adoption of a realistic mining strategy whose operational framework is
responsive to the raw-material needs of our economic development. “Such
strategy has provided implementable blue-print in some countries like
China, Ghana and India in the sphere of mineral resources exploitation
and management,” he said. “At this stage of our development, we need
more entrepreneurs to take advantage of the opportunities in the solid
minerals sector.”

The Managing Director of the Multiverse, Ayedun Fasina, said the
commissioning of the 1.2million metric tons per annum ultra-modern
quarry was a dream come true. “We plan to replicate this modern quarry
of 1.2million metric ton per annum in the remaining five geo-political
zones of the country within the next two years,” he said, while
pleading with the federal government to assist in putting in place a
special fund for the mining sector, “which we believe has the same
capacity like the oil sector to contribute significantly to the country
GDP.” He said one of the cardinal objectives of the company is to
generate employment for the teeming youth. “The company has
metamorphosed from one man business to a public quoted company with
over 4,000 shareholders and asset base of N3-7billion within a five
year period,” he said.

As ECOWAS heads of state met in Sal,
Cape Verde, to adopt a West African industrial policy, the issue of
economic integration and establishment of a free trade area looms even
larger over the sub-region. The ECOWAS Trade Liberalization scheme
(ETLS) was designed to facilitate trade in West African agricultural
and industrial goods, so that goods, persons and vehicles, could move
freely within the region. Although rules to make this vision a reality
have been passed by member states, implementing them has been
difficult. The Trade Hub’s research in nine countries in the ECOWAS
sub-region has helped identify solutions.

A two-day joint Trade Hub-ECOWAS
workshop in June brought together more than 40 representatives of the
organizations and the private sector to discuss the gaps in
implementing the ETLS. The World Bank, the West Africa Monetary
Institute, and Ghana’s ministries of Trade and Industry, Transport,
Foreign Affairs, Finance and Customs also participated. Private sectors
representatives included DHL, Bollore, Maersk, Nestlé, and others. In
his welcome address to participants, Alfred Braimah, ECOWAS Director of
Private Sector, called on those present to find solutions to effective
implementation of trade policies in the region. Kola Sofola, Principal
Program Officer at the ECOWAS Trade Directorate, praised the practical
aspect of the study, which involved interviews with both public and
private sector, highlighting its uniqueness by focusing on genuine
responses in addition to legislative analysis.

Trade policy researchers, Ometere
Omoluabi and Jane Owiredu-Yeboah, presented findings from the most
recent ETLS gap analysis country reports, focusing on Burkina Faso,
Côte D’Ivoire, Ghana, Nigeria, and Senegal. Findings compared both
public and private sectors utilization and understanding of the ETLS.
The studies have highlighted limited awareness of protocols, lack of
enforcement and consistency in application at borders, high levels of
harassment due to complexity and duplication of procedures. Several
participants called for practical solutions and accountability as the
vehicle to effectively implement trade policy. Equipped with pertinent
information, key regional players have seized the baton to flesh out
recommendations. “This is the first comprehensive study on ETLS,”
Braimah said. “The gap analysis study is useful, the timing is right.
ECOWAS resolves to work together and deal with next steps to make ETLS
implementation a reality.” “Sometimes we have protocols signed by
government, but what happens on the ground is different,” said Mawuli
Akpenyo of Delata, a Ghanaian exporter of home décor and fashion
accessories, and an agent for American importers.

Time constraints

Mr Akpenyo
collected handcraft orders from Ouagadougou, Burkina Faso, and brought
them to Ghana to consolidate for shipment from Tema port. Getting the
items from Ouagadougou to the Ghana border was easy enough, but his
difficulties began at Paga, on the other side of the border.
Technically this was a transit shipment; no fees should have been
charged and customs should have granted him an escort to the point of
export. However, customs would not confer exempt status and delayed
him. Ultimately, faced with time constraints, Mr Akpenyo opted
reluctantly to pay nearly 30% of the value of the consignment in import
duties, taxes and processing fees.

“On two accounts this should have been a duty free transaction under
ECOWAS rules,” explained Acting Trade Hub Director Nathan van Dusen.
“The goods were in transit and importing handcrafts into Ghana from
member states should be duty free.” Mr Akpenyo advocates a system with
greater transparency and accountability, and would be prepared to pay a
deposit on transit goods, refundable against proof of export. “Customs
should be made aware… that we are trying to increase trade,” he said.
“They are frustrating West African businesses.”

Before 2005, Paully
Appea-Kubi was a local producer of dried pineapple, mango and papaya
for the domestic market. Attending a Fancy Food Show with the Trade Hub
in New York, U.S.’s largest speciality food and beverage marketplace
revolutionized her business strategy. “I realized that almost everybody
was asking for organic products,” said Appea-Kubi, whose company,
Ebenut, is based in Accra, Ghana. “So I thought, ‘If I have the
opportunity, I will go in for the certification so I will also be able
to supply the U.S. market.”

That opportunity
arose two years later when GTZ, the German development corporation,
took her to Berlin for an agricultural products trade show, and
Appea-Kubi joined forces with a buyer looking to export organic
pineapple to Switzerland. The transition was not easy: Organic
certification requires a lot from a company. “You have to be able to
trace the products to the farm, to know where it’s coming from,” said
Appea-Kubi.

“Also, we didn’t
have many organic certified farmers who were ready to supply us with
the quantity of food that we needed. We had to persuade them before we
could go in for the certification because it’s very expensive over
here.”

Nor is
certification the only hurdle to surmount. Post certification,
producers still have to budget for annual certification and strive to
secure continuity of existing markets. Deputy administrator of the USDA
National Organic Program, Miles McEvoy, opined that access to markets
poses the greatest challenge to growers who want to go organic and
emphasized the importance of the market component.

“Marketing
information is your major obstacle,” he said. “Is there a processor I
can sell to? Is there a distributor that wants my product? How do I
find out about these markets? How much product do they need? Growers
will go and get certified, but they won’t have a market. They grow
organic, and then ask “why can’t I sell it?’ Organic is very specific.
You have to line up your buyers and your distribution networks.”

That said, the
rewards for producers in West Africa are increasingly important. The
demand for organic products in international markets has increased
significantly, and, experts say will continue to rise. According to a
2010 industry survey by the Organic Trade Association, U.S. organic
food sales grew from $1 billion in 1990 to $24.8 billion in 2009. The
European organic food market has also increased, by about 12% since
2007.

In attempting to
meet this demand, businesses in West Africa stand to gain considerably,
said Megan Tweed, specialty foods adviser at USAID’s West Africa Trade
Hub.

“Organic agriculture presents a significant opportunity for West African exporters,” she said.

“Several of our
client companies have successfully increased their market shares by
moving into the organic segment. And for certain manufacturers, organic
certification have been the critical success factor.”

Interest from West Africa

West African
companies are taking notice. A workshop held last month in Accra drew
over 100 attendees from the cashew, shea, and speciality foods sectors
who sought to learn how they could take advantage of opportunities in
organic agriculture.

The workshop,
organized by the Washington State University International Research and
Development Program, with support from the United States Department of
Agriculture (USDA), provided in-depth training on how growers can
obtain U.S. organic certification and grower group certification, and
how to navigate the organic marketplace. It also facilitated discussion
on such topics as developing a regional support network for organic
agriculture.

Workshop attendees
hailed mostly from West African countries, namely, Ghana, Benin,
Burkina Faso, Côte d’Ivoire, Niger, Nigeria, Mali and Togo. Some, such
as Brenda Aluda, training officer at Dudutech, a large-scale commercial
crop protection company based in Naivasha, Kenya, travelled from
further afield. Dudutech develops pesticides composed of living,
pest-eating organisms or ‘beneficials’ acceptable for use by organic
farmers, who are prohibited from using synthetic pesticides.

James Cole, owner
of Eloc Farms, which has sites in Nsawam, Kwahu and Kintampo, Ghana
grows pineapple, papaya, mango, and cocoa. Having obtained EU organic
certification in 2002, Cole attested to the complexity and costliness
of the certification process. In addition to certification fees,
organic standards compliance costs include soil testing, record keeping
and fees for export authorization. Mr Cole emphasized that
certification is to be viewed as part of a long term business strategy
and is not to be taken lightly.

Cole asserts that
organic markets cannot behave in the same way as conventional markets.
“We are saying that organic depends on the principle of care: not only
from the farmer’s end but also on the consumer’s end.”

“Organic products are a niche market that is now expanding,” said
Appea-Kubi. “You get premium prices for organic products, if you do it
well. It is satisfying to me to produce something for human consumption
that doesn’t have chemicals at all.”