Nigeria Content Online

Diezani Alison-Madueke, Minister of Petroleum Resources, at the
weekend defended the Nigerian Content Policy of the Federal Government. She
said the policy was not designed to nationalise the assets of multinational oil
and gas companies operating in the country.

The minister, who spoke at the first anniversary of the
commencement of the implementation of the Nigerian Oil and Gas Industry Content
Development Act 2010 in Abuja, said the policy is aimed at promoting increased
participation of Nigerians in the operations of the industry, as is the
practice in industries around the world.

“Nigerian Content Act is not designed to nationalise foreign
assets or to completely indigenise the investment interests of foreigners, as
is erroneously perceived in some quarters. The important thing is that the
implementation of law would be guided by a framework that has been put in place
to help balance the interest of the investors and the country’s national
interest in the oil and gas industry,” Mrs. Alison-Madueke said.

According to her, since the approval of the Act early last year,
it has become clear that the industry needed to work towards building capacity
in critical areas to ensure that requirements of the law do not impede the
growth of the industry, pointing out that the collaboration with all
stakeholders must be sustained to erase the suspicion in some quarters that
there is resistance by multinationals in the implementation of the law.

Targets to be achieved

Some of the targets set by the government for the Nigerian
Content Development Monitoring Board (NCDMB) include retention of $10 billion
out of $20 billion average annual industry expenditure; creation of over 30,000
direct employment and training opportunities; and establishment of three to
four new pipe mills to service the demands of the industry and coating, valves,
fittings and components.

Other targets include the development of one or more dockyards
for maintaining marine vessels operating in Nigeria; transformation of ownership
profile of marine assets supporting industry activities and integration of
indigenes and businesses, as well as capturing 50 to 70 per cent of banking
services, insurance placements, and legal services in the country.

Group managing director, Nigerian National Petroleum Corporation
(NNPC), Austen Oniwon, disclosed that with the recent launching of the ‘gas
revolution’ by President Goodluck Jonathan, about $53 billion is expected to be
spent in the next three to four years on the establishment of strategic
industry infrastructure in the country, including Greenfield refineries, world
class petrochemical plants, fertilizer complexes, methanol plants, gas
processing facilities, and other gas related infrastructures in the country.

The challenge for stakeholders, he explained, hinges on ensuring
that significant percentage of the amount to be spent is in-country, by
supporting the capacity building initiative for local operators through the
Nigerian Content Development programme, to enable them compete with
multinationals, who set up facilities in Nigeria in order to make them take
full advantage of the existing opportunities.

Executive Secretary, NCDMB, Ernest Nwapa, said the take off of
the Act was threatened by the confusion about the necessity to either pass it
separately or be joined with the Petroleum Industry Bill, as it was
increasingly becoming apparent that government was no longer interested in
pursuing the policy of achieving 70 per cent local content in the industry.

Since the take off of the NCDB, Mr. Nwapa said a number of
achievements have been recorded, particularly building its executive and
operational capacity, underscoring the importance of continuous engagement with
stakeholders to reassure them that the Nigerian Content Act is not a punitive
law, but a confirmation of what is done in other jurisdictions they are
operating in.

Standard Bank, South Africa’s largest bank by assets and
earnings, has said ongoing elections in Nigeria will not affect its willingness
to do business with the country. The bank’s director and head, Agricultural Banking,
will be moving to Nigeria to oversee its operations in the sector from next
month.

“Nigeria is currently our biggest investment at the Standard
Bank Group, outside of South Africa. We keep a close eye on elections as with
any African country, but the reality in Africa is business goes on, with or
without elections. I am actually relocating office in Nigeria in May due of
course to the size of the opportunity from an agricultural point of view,”
Jacques Taylor told NEXT at the weekend.

Speaking at a media forum on agricultural banking organised by
the bank in Johannesburg, South Africa, he said the bank expects agriculture to
contribute up to 40% of its asset growth in Africa in 2011.

Priority countries

South Africa’s Standard Bank Group acquired a majority stake in
Nigeria’s IBTC Chartered through a tender offer in August 2007 to become
Stanbic IBTC Bank Limited.

Nigeria is one of six priority countries that Standard Bank sees
as having the biggest opportunities in the agricultural sector in the short
term. The others are Ghana, Kenya, Namibia, Uganda, and Zambia.

“When we identify a country and try to access the market, the
three key things are natural resources, quality of infrastructure, and a stable
macroeconomic and political environment, because that will result in a stable
exchange rate,” Mr. Taylor added.

The group gave Nigeria a political risk rating of 2.2 on a scale
of 5, second only to Kenya, which has a risk rating of 2.1

“We are serious about that business, with a lot of support
coming from the Central Bank of Nigeria,” Mr. Taylor said.

Last year, Stanbic IBTC Chartered grew at the rate of two
branches per week in Nigeria.

“We have about 60 branches; we could be aiming for close to 300.
Nigeria is a big business for us,” Mr. Taylor concluded.

The market capitalisation of equities at the Nigerian Stock
Exchange (NSE) depreciated further by 0.08 percent at the close of trading
session last week, as against a decline of 0.45 percent recorded in the
preceding week.

The NSE market capitalisation of the 194 First-Tier equities
closed last Friday at N7.902tr after opening the week at N7.908tr, reflecting
N6bn losses. Meanwhile, about N36bn was lost in the previous week.

The NSE All-Share Index in the week under review also shed 0.08
percent to close at 24,733.38 basis points as against a decline of 0.45 percent
recorded in the preceding week to close at 24,752.05.

Analysts at Proshare Nigeria Limited, an investment advisory
firm, said equity market turned unstable with “increased volatility due to high
speculative tendency experienced.” They said, “series of indecision positions
witnessed in most sectors, gave support to the unstable market breadth in the
week, indicating the intense battle between the bargain and sell positions
while the outlook further suggests overwhelming sell position as the week
eventually closed negative.” In the mean time, market watchers have advised
investors to maintain value-investing approach in the coming weeks.

Gainers and Losers

The number of gainers in the week closed at 41 stocks compared
with the 26 stocks recorded in the previous week.

Transcorp Plc topped the gainers chart for the week with 19.83
percent appreciations. One the losers’ side, a total of 33 stocks recorded
price decline in the week compared with the 50 stocks that declined in the
previous week. Guaranty Trust Bank topped the losers chart for the week with
24.57 percent depreciation.

The total volume traded in the week closed at 3.92 billion units
valued at N15.25bn compared with 3.98 billion units valued at N16.65bn recorded
in the previous week. The volume transaction in the week when compared with the
previous week data declined by 1.43 percent as against an increase of 242.68
percent recorded the preceding week. Weekly value also went down by 8.42
percent as against positive growth of 68.36 percent recorded in the preceding
week.

The conglomerates sector emerged the most traded sector during
the week in terms of volume with 2.56 billion units of shares valued at
N4.09bn. The volume traded in the sector accounted for 65.30 percent of the
entire market. Transcorp Plc led the market volume for the week to maintain
previous position as top traded stock. The Banking sector was second most
traded sector with 994.67 million units valued at N7.75bn.

Last week, some companies were marked down for dividends and bonuses. Zenith
Bank was marked down for 85k dividend; Guaranty Trust Bank was marked down for
75k dividend and a one for four bonus; while Stanbic IBTC was marked down for
39k dividend.

The consequences of
the process that has made Nigerians poorer as the years have gone by
have been as diverse as they have been disruptive. I try today to buy
stuff off Amazon, and besides books, the standard reply is that Amazon
does not ship the designated items to the destination indicated –
Lagos, Nigeria. The response to attempted purchase of digital stuff is
clearer: copyright worries make it impossible to send the items.
Conversely, of five books bought online, depending on how recent the
titles are, three get through.

It’s of little use
protesting to the post office. Not all online purchases come with
“tracking numbers”. Tell that to the attendant at the post office and
the shrug of shoulders, and the question, “So, how can we look for it?”
settles the matter.

Yet it was not
always this way. I still recall that some of my father’s dress shirts
came off orders from glossy catalogues, and all the way from the UK. In
the 70s, these orders were delivered by the old post office system to
the house. This, incidentally, was not a Lagos thing, for the house was
in Ilorin. Moreover, all deliveries came through on time.

So we were not
always this dodgy. Although we have been poor for a while now, I was
recently impressed by this latter fact, when I tried to prepare my
kids’ favourite cereal with warm milk. Growing up, milk used to be of
the evaporated or fresh variety – either way, it poured out of some
container. And I felt nostalgic enough to try something different, only
to be told by my kids that the milk didn’t quite make the grade. “It
tasted funny”! Admittedly, it tasted somewhat different from the milk
powder they’d been brought up on. But more important was the
realisation that the use of evaporated/fresh milk made sense only if
electricity from the mains is regular, and steady. Otherwise, food
poisoning becomes a real and present danger. Reduced “quality of life”
issues and poverty, handmaidens both.

However, the more
interesting outcome of the gradual impoverishment of the Nigerian has
been the response of product/service providers in the economy. As
disposable incomes have fallen, shoppers have bought in increasingly
smaller quantities. In the fast moving consumer goods sector, the
changing face of shelf-spaces describes this trajectory: large cans of
food long since gave way to the medium- and then to the small-sized
tins. The now predominant sachets came only later. This value
transition has also happened in the faster growing sectors of the
economy. Today, with recharge card values as low as N50, not many
remember that the GSM-licensed telecom companies started business
almost a decade ago, with recharge card values as high as N7,500. The
card makers’ numbers tell a fascinating story. Given that the margin on
each card is the same, irrespective of the recharge value it carries,
small, frequent, discrete purchases return higher net margins than the
lumpier variety.

Unfortunately,
besides the contraction in domestic final demand, domestic businesses
face a plethora of structural impediments to profitable operations. One
of these – access to formal sector credit – so concerns the Central
Bank of Nigeria (CBN) that it has been forced to cross several
firewalls in its bid to give traction to the market for private sector
credit. It would seem, in spite of the CBN’s quasi-fiscal operations,
that the problem with formal credit growth in this economy is the
failure of the banking sector to mirror the trajectory of the economy.

Talk to bankers
about their concerns over the CBN’s efforts to get a grip on monetary
management by tightening policy, and the central worry is the adverse
effects of the CBN’s policy on the main transmission agents, the banks.
Apparently, whereas banks have come under intense cost pressures as
depositors have insisted on matching the yields on their deposits with
the return on the CBN’s standing deposit facility, the banks have not
been able to pass these new costs on to their borrowers. So the
expectation is of shrinking margins over the next nine months.

But isn’t this
because the banks are at the beginning of the curve, and are still
focussed on the big corporate customers? Would they not be better
served by bulk-breaking their loans and re-packaging them in sachets?

African immigrants sent home over $40 billion (N6 trillion) in remittances last year, according to a new joint report by the World Bank and African Development Bank. The figure is down from $41 billion in 2008 and just over US$38 million in 2009, according to a similar report last year.

The report which covers r e m i t t a n c e s f r o m t h e Organisation for Economic Co-operation and Development, known as OECD, which comprises Eastern and Western Europe, advanced Asian and South American economies, and transfers from other African countries such as South Africa, also shows the pattern of disbursement of these transfer of funds. “Data from household surveys reveal that households receiving international remittances from OECD countries have been making productive investments in land, housing, businesses, farm improvements, agricultural equipment, and so on.” The report added that many migrants transfer funds to households in their countries of origin for the purpose of investment – 36 percent in Burkina Faso, 55 percent in Kenya, 57 percent in Nigeria, 15 percent in Senegal, and 20 percent in Uganda.

Investing significantly

According to the report,” households receiving transfers from other African countries are also investing a significant share in business activities, housing, and other investments in Kenya (47 percent), Nigeria (40 percent), Uganda (19.3 percent), and Burkina Faso (19.0 percent).” Education was the second-highest use
of remittances from outside Africa into Nigeria and Uganda, the third highest into Burkina Faso, and the fourth highest into Kenya.

The report, titled ‘Leveraging M i g r a t i o n f o r A f r i c a : Remittances, Skills, and Investments’, added that the annual estimated saving, usually held in foreign countries, by Africans exceeds $50 billion. “African governments need to strengthen ties between Diaspora and home countries, protect migrants, and expand competition in remittance markets,” said Dilip Ratha, main author of the report and lead economist at the World Bank.

The report estimates that Nigerian emigrants saved about $3.5 billion annually, as at 2 0 0 9, a f i g u r e w h i c h represents about 2 per cent of the country’s gross domestic product. “Most of these savings are invested in the host countries of the Diaspora.,” the report added.

Diaspora bonds

According to Ratha¸ Sub- Saharan African countries can potentially raise $5-$10 billion a year in Diaspora bonds. Countries with large diasporas in high-income countries that can potentially issue its bonds include Ethiopia,
Ghana, Kenya, Liberia, Nigeria, Senegal, Uganda, and Zambia in Sub-Saharan Africa and Egypt, Morocco, and Tunisia in North Africa.

“Diaspora bonds can be sold globally through national and international banks and money transfer companies.
They can be marketed through churches, community groups, ethnic newspapers, stores, and hometown associations in countries and cities where large numbers of migrants reside,” according to Ronan McCaughey of the Laferty Group, a United Kingdom-based financial research and advisory services firm, remittances are important determinants of growth in West African countries”

The economic problems of Nigeria are easily identifiable. These are power, decrepit infrastructure, social amenities, agriculture, and absence of conducive environment for businesses to thrive. Not a few citizens believe that once these critical aspects are taken care of, other pieces will begin to fall into place and thus guarantee an improved quality of life. As expected, nearly all the political parties seeking elective positions have highlighted in one way or the other how their parties would tackle these redoubtable issues.

For Muhammadu Buhari, presidential candidate of the Congress for Progressive Change (CPC), his strategy is to build on what is already on ground and to expand the scope further. On the economy, the party promises to make Nigeria one of the fastest growing emerging economies in the world with a real GDP (gross domestic product) growth averaging 10 per cent annually and integrate the informal economy into the mainstream. Nigeria’s GDP currently thrives on an average seven percent annual growth.

The party also promises to embark on export and production diversification including investment in infrastructure; promote manufacturing and balance the economy across regions by the creation of six new Regional Economic Development Agencies (REDAs) to act as champions of sub-regional competitiveness. It plans to put in place a N300 billion regional growth fund (average of N50 billion in each geo-political region) to be managed by the REDAs, encourage private sector enterprise and provide support to help places currently reliant on the public sector, among other lofty plans for the sector.

On agriculture the party says it has plans to modernise the sector and change Nigeria from being a country of subsistence farmers to that of a medium- and commercial-scale farming nation and net producer of food. It also plans to create a nationwide food inspectorate division with a view to improving nutrition and eliminating food-borne hazards as well as inject an extra N30 billion into the agricultural sector to create more agro-allied jobs by way of loans at nominal interest rates for capital investment on medium- and commercial-scale cash crops.

The housing challenge

The party also proposes, without being specific, to amend the Constitution and the Land Use Act to create freehold/leasehold interests in land along with matching grants for states to create a nationwide electronic land title register on a state by state basis. To tackle the housing challenge of the country, it plans to create additional middle-class of at least two million new home owners by 2015 by enacting a national mortgage system that will lend at single digit interest rates for purchase of owner occupier houses. Managing director of Pison Housing Company Limited, a commercial real estate and housing finance advisory firm, Roland Igbinoba believes that successive governments have talked too much about the housing and finance sector and the claim by the CPC may not be different. “The pronunciation smacks of a lack of understanding of the housing and finance sector. They cannot provide two million units of housing by 2015.” According to him, the supply side value chain of housing and the demand side coupled with the absence of a housing policy makes such projections unrealistic. “These politicians need to engage experts who will develop a strategic framework and approach for housing as is being done in other emerging countries. Can they tell us how they will enact a national mortgage system? What procedure will they take to amend the Land Use Act?,” Mr Igbinoba asked.

Agriculture and power

For a country that has already spent N200 billion on the agriculture sector in the last two years, earmarking another N30 billion may just be an overkill. Yinka Odumakin, spokesperson of the Buhari/ Bakare Campaign Organisation said the difference this time is that the full amount would be disbursed judiciously. “PDP (People’s Democratic Party) has spent N200 billion on agriculture but much of this has been wasted. In our case, if we spend N30 billion, there will be a difference because the money will get to the people that actually need it.” On power, the CPC says it will generate, transmit and distribute from the current 5,000 – 6,000 MW to at least 15,000 MW of electricity by 2015, increasing to 50,000 MW by 2019 with a view to achieving 24/7 uninterrupted power supply by 2019 whilst also simultaneously ensuring the development of sustainable/renewable energy sources.

According to Mr. Odumakin, while the current government has spent huge sums on the power sector, the country is yet to record any appreciable progress in that area. “In our case, a contractor will not take government funds and have nothing to show. The major problem in this country is lack of fiscal discipline.” However, many Nigerians are still sceptical about the sincerity of politicians to deliver on their campaign promises. “If you ask me, I can’t see anything different,” said Mr. Igbinoba.

According to Mr Odumakin, with the CPC, Nigerians should expect the desirable change needed to make progress. “Nigerians have been getting promises from politicians who don’t mean well for the country. The difference this time is about trust of leadership, which Mr. Buhari offers. Nigerians know about his track record.” With barely a week to the presidential election, Nigerians would have to rely on the promises made during the campaigns to decide on their choice of candidate.