Nigeria Content Online

Higher oil prices
are the main risk to South Africa’s inflation outlook but the Central
Bank will deal with this threat adequately, a senior Reserve Bank
official said on Wednesday.

“We are not pleased
with the current international environment where the oil price has gone
through the roof again,” Johan van den Heever, deputy chief economist
in the research department of the South African Reserve Bank, told
parliament.

“And that is
unfortunately in aAn environment where our institution fights against
inflation, a most unhappy outcome. So that is one of the negative
factors feeding into the inflation process,” Mr. Van den Heever added.

Partly due to
higher prices, the Central Bank raised its inflation forecasts at its
last policy meeting in March to an average 4.7 per cent for this year,
and 5.7 per cent in 2012, but said most risks to inflation are mainly
cost push in nature.

The bank left its
repo rate unchanged at 5.5 per cent in March, for the second time this
year, after reducing it by 650 basis points between December 2008 and
December 2010.

Industries under performing

The bank’s monetary
policy committee statement was cautious, though. It said the key
manufacturing sector was still underperfoming and said although
consumer consumption was recovering, it was unlikely to accelerate in
the near term.

Last week, deputy
governor, Daniel Mminele, said the bank will base its next policy
action on an assessment of second-round effects of oil and food prices
on inflation.

Inflation has been
inside the bank’s target of between 3 and 6 per cent since February
2010, and stood at 3.7 per cent year-on-year in February. The bank said
in its quarterly bulletin in March a sustained rise of $10 per barrel
in the price of oil added about 0.3 percentage points to inflation.

On Wednesday, Van den Heever said the bank would deal with the effect of the higher oil price.

“It is not the end
of the world. We come from a background where other factors have made
inflation slow down quite nicely and we are quite confident this
negative impact from the oil price will be dealt with adequately as
time goes on,” he said.

A relatively strong
rand currency has mainly cushioned South Africa from the impact of high
oil and food prices. The rand hit 3-month highs at 6.6310 last week and
was last trading at 6.75 to the dollar. Reuters

Worried by the
enormous financial pressure they are likely to be saddled with
following the recently approved National Minimum Wage for workers,
states and local governments in the country have renewed their demand
for the immediate review of the revenue allocation formula by the
National Assembly.

Chairman,
Commissioners of Finance Forum, Rebo Usman, said in Abuja that the
approval of a new revenue sharing formula for the country is long
overdue in the face of current socio-economic realities.

He said that the
speed with which the Federal Government and the National Assembly
adopted in passing the National Minimum Wage Bill should also be used
in handling the amendment to the vertical revenue sharing formula.

The Revenue
Mobilisation, Allocation and Fiscal Commission (RMAFC) recently said it
was planning a review of the revenue sharing formula indices,
considering that the basis for the one currently in use has already
been overtaken by reality, since it has been in operation from the
military regime.

Dividends of democracy

However, Mr. Usman,
who is also the Taraba State commissioner for finance, said the huge
responsibility the states and local governments are saddled with in
catering for the people at the grassroots has made it crucial that
something be done urgently to help them deliver democracy dividends to
their people.

“We have a
situation in this country where the federal government takes more than
50 per cent of the total revenue available for distribution to the
three tiers of government every month. Yet, the states and local
governments are under an obligation to still pay the recently approved
minimum wage to workers, because it has now become a law that is
binding on all stakeholders.

“It is common sense
that states and local governments put together spend more, because they
are closest to the grassroots where the bulk of the country’s
population reside. So, one cannot understand what justification the
Federal Government has in taking 50 per cent of the revenue every
month,” Mr. Usman said.

He said the
leadership at all levels of government has a huge responsibility to
resolve this issue, pointing out that though the states and local
governments have agreed to pay the new minimum wage, it would be
difficult to do so under the current revenue allocation, as they cannot
give what they do not have.

“These are issues
the states and local governments expect the NLC to bring to the fore
and demand for a redress. Since we have a source from where everyone
can draw to ensure that all workers in the country can be treated
fairly and equally, the appeal we will like to make to Nigerians,
particularly the leadership of this country, is to look into the source
of funding of these two tiers of government, which also have a
responsibility to deliver democracy dividends to their people,” he said.

On allegations that
states do not generate enough internal revenue, Mr. Usman said that
Internally Generated Revenue (IGR) is a function of economic activity,
which in turn is determined by the existence of infrastructure, like
power, which is supposed to be supplied by the Federal Government,
wondering how many states today have a robust economic activities that
could sustain revenue generation.

The first attempt
at reviewing the nation’s revenue sharing formula was initiated by the
commission in August 2001, when it proposed a formula that gave the
Federal Government 41.3 per cent, states (31 per cent), local
governments (16 per cent) and a total of 11.7 per cent for special
funds, consisting 1.2 per cent allocation to the FCT; one per cent each
to ecology and national reserve fund, agriculture/solid mineral fund,
and 1.5 per cent and Basic Education and Skill Acquisition (BESA), 7
per cent.

In January 2003, a
new draft formula gave the Federal Government 46.63 per cent share;
states, 33 per cent, and local governments, 20.37 per cent.

However, the
Obasanjo administration, in November 2003, unilaterally asked the
National Assembly to withdraw the proposed formula by the commission,
necessitating reliance on the old formula till the end of his
administration.

Nigeria is still
lagging in its use of information and communication technology,
according to an annual study released by World Economic Forum recently.

Nigeria finished
104 in the study’s comparison of 138 countries that make up 99 per cent
of the World’s total gross domestic product.

Mauritius and
South Africa led in the Sub-Saharan Africa region, having placed 47th
and 61st respectively in the global ranking.

The report,
entitled ‘The Global Information Technology Report 2010-2011’, placed
Sweden first followed by Singapore, Finland, and Switzerland.

People who have
suffered the impact of unjust practices and those who have been victims
of abuse from corporate impunity will heave a sigh of relief the day
directors of such companies are brought to court from behind their
corporate shields. The spins and the twists in legal tangos that play
out so impassively will become a thing of the past.

Whereas
corporations do not sweat in the dock, their directors, who are human
like the rest of us, may. It is also possible that pleas from the dock
would be couched in humane terms and that actions and reactions would
become more or less equal as they usually are in physical matters.

In sum, people would sense that justice is reachable in many cases of confrontation between them and corporate entities.

These are some of
the hopes being raised by the possibility of top guns at BP being
charged for manslaughter over the Gulf of Mexico oil spill of April
2010. If this happens, it will send a strong signal to leaders of
companies that expose their workers to extreme personal risks.

It will also send
signals to companies engaged in reckless activities that severely
impact people and degrade their environment. In addition, it will offer
a glimpse to what may become the norm if an international environment
or climate crimes tribunal is set up for cases of ecocide.

It has been
reported that investigators are pawing over documents and emails that
may indicate whether Tony Hayward, former BP chief executive, and other
top management officers made decisions or played key roles in what led
to arguably the most horrendous environmental disaster in US history.
That incident killed 11 workers and spewed yet unknown barrels of crude
oil into the Gulf of Mexico.

The internal
investigation carried out by BP immediately after the disaster showed
that their managers misread pressure data and authorised workers of the
Deep Water Horizon rig to replace drilling fluid in the well with
seawater – one of the moves in cost cutting suspected to have triggered
the disaster.

BP has admitted to having made some mistakes but sticks to the claim that they were not ‘grossly’ negligent.

There is something
quite gross about that word ‘gross’ before the word ‘negligence’. If it
sticks, the possible fines to be slapped on BP may rise from about $5
billion to $21 billion. It will also complicate things for BP in their
dealings with the partners on the rig, as they seek to share the costs
of the clean up expected to reach about $42 billion.

The significance of
this case would also be found in the fact that the directors of BP
would be unable to hide behind the corporate shield, as is often the
case with corporate entities who are persons before the law only for as
much as capacity to earn income is concerned; and are phantoms when it
comes to responsibility for acts of impunity.

Think how
instructive it would have been to line up the directors of Chevron for
the environmental crimes in the Ecuadorian Amazonia or those of Shell,
Exxon, Chevron, Agip and the rest for their human rights and ecocide in
the Niger Delta. If manslaughter charges are pressed against officials
of BP, then the days of companies only being fined and the directors
avoiding the dock will soon become history.

Obviously, BP and
other corporations will not take kindly to this move. Their arsenal is
loaded with tools with which to frustrate legal procedures. Some of
them have batteries of lawyers with whom they harass hapless victims
and keep the wheels of legal suits spinning.

There is no need to
wonder how come corporations have got away with murder all the time.
One fact is that governments have over the years become largely
privatised in the sense that they depend on corporations for revenue
and for monetised solutions to virtually every problem.

While suing
directors of companies may be a daunting prospect, considering their
propensity to keep cases dragging endlessly, it is nevertheless a
necessary step towards giving companies a truly human face and maybe a
human heart.

We cannot avoid
reaching the conclusion that companies behave in a heartless manner
because they are fashioned to be unaccountable and can carry out
inhuman acts without blinking an eyelid.

Are you not struck
by the fact that oil company leaders are ordinarily nice and personable
persons, but that this genial nature changes once they put on their
corporate toga?

As
the Central Bank of Nigeria (CBN) struggles to defend the naira, the
currency is gradually shedding weight at the currency market.

The
naira, which opened 2011 at N149.50 to the dollar, closed yesterday at
the bi-weekly Wholesale Dutch Auction System (WDAS) at N152.58, a
decline of 2.1 per cent.

The CBN has always maintained that the naira would be kept within the +/-3 per cent band.

CBN
governor, Lamido Sanusi, at the last Monetary Policy Committee (MPC)
meeting held in Abuja emphasised stable foreign exchange to curtailing
inflation.

“The
committee urged the CBN to continue to pursue the strategy of
maintaining exchange rate stability to contain inflation,” Mr. Sanusi
said in his statement at the end of the bi-monthly meeting.

Not meeting demand

At
the previous auction on Monday, the CBN was only able to meet about 71
per cent of demand, supplying $250 million out of the $351.12 million
demanded.

At
yesterday’s auction, the CBN sold $300 million, just 67.6 per cent of
actual demand. Dollar demand at the WDAS declined by 9.3 per cent last
week compared to an increase of 11.3 per cent the previous week,
fuelling concerns that apprehension over the general elections
triggered speculative demand for the green back. At yesterday’s
auction, the CBN sold $300 million.

The
naira closed last week at N151.91, its lowest level this year before
firming up at Monday’s auction, due to complementary supplies from
major oil marketers. The value remained unchanged yesterday. The CBN
has sold $1.25 billion in the two weeks in April, compared to $750
million sold in the comparable period of last year.

“It is the elections,” said Suleyman Ghali, a currency dealer in Lagos.

He said the demand for dollar has dropped this week compared to the period before the elections.

“The
politicians are concentrating on the elections now, so demand has
reduced. We do not know what will happen after the election but we are
watching. The naira is a bit stable,” Mr. Ghali said.

He said the naira is fluctuating between N156 and N157 at the parallel market.

Analysts
at Afrinvest West Africa Limited, a Lagos based investment banking
firm, had forecast that the demand will fizzle out this week.

“As
the liquidity continues to tighten in the money market, we do not
expect strong demand for the dollar in the coming week,” it reported in
its weekly report.

Tightening liquidity

The CBN based its decision to tighten liquidity on the need to rein in the expected huge election spending.

“The
members specifically pointed out the rising international food and
energy prices, the impact of import costs on domestic prices, the
challenges that fiscal stance posed to the external value of the naira,
and the likely front-loading of public expenditure in the election
period,” Mr. Sanusi said.

Analysts
at Sterling Capital Market Limited, an investment banking firm,
however, said the ability to continue to defend the naira would depend
on build-up in the foreign reserves.

“Increase
in foreign reserves will further help CBN to defend the naira, while
the sale of $200 million by NNPC will boost supply in the inter-bank
market during the week,” it stated.

Nigeria’s foreign reserves dropped to $34.5 billion on Tuesday from $34.9 billion last week.

After decades of
being challenged by local and foreign industry watchers, the Shell
Petroleum Development Company (SPDC) of Nigeria Limited yesterday
announced that it has signed a contract with Saipem Contracting Nigeria
Limited for a pipeline system that will gather associated gas from
being flared, thus utilising it for use in the domestic gas market.

According to the
firm, some 30MMscf/d of gas from Otumara and Saghara fields in Western
Niger Delta will be gathered, processed, and channelled through the
Escravos – Lagos Pipeline System (ELPS).

“This is an
extremely important project for SPDC in terms of our commitment to
ending routine gas flaring, and consolidating our leadership position
in the domestic gas market. Security and funding permitting, we will
continue to make good progress in bringing on the projects that will
reduce flares and boost gas supply to the domestic market,” the company
said in a statement yesterday.

However, Phillip
Jakpor, media officer of Environmental Rights Action/ Friends of the
Earth Nigeria, doubts the sincerity of the oil company to end gas
flaring.

“Shell cannot be
trusted to tell the truth on matters of flare out. We have heard over
and over again about gas gathering infrastructure that they have been
constructing to harness wasted gas while spokespersons continue to
justify why gas flare cannot stop.

“They have
consistently breached our deadlines since 1984 and even their self
imposed deadlines with impunity, so we do not believe their lies on
ending flares,” Mr. Jakpor said.

The project cost
$101million. In January, the Dutch parliament questioned Shell because
of its activities in Nigeria. A lot of criticism was voiced about the
company’s lack of transparency in its activities in Nigeria, and about
the major pollution in the Niger Delta.

Groups such as
Milieudefensie, Friends of the Earth International, and other
non-governmental organisations want Shell to clean the hundreds of oil
leaks it causes each year and to stop flaring gas, which has been
prohibited by Nigerian law since 1984. The associated gas now simply
burned off emits poisonous gasses and CO2, whereas it could be put to
good use, such as to generate electricity.

Deputy managing
director, Saipem Contracting Nigeria Limited, Davide Rossi, said, “We
are committed to executing the contract job and ensure timely delivery
of the project.”

The 42-kilometre
pipeline is of various sizes, ranging from 2” to 12”, passing through a
swampy terrain with a major river crossing.

Late last year,
SPDC Joint Venture awarded a contract for engineering, procurement, and
construction of the gas compression and processing plant to Daewoo
Nigeria Ltd. and it says this work is progressing.

SPDC Joint Venture
has already invested some $3 billion in Associated Gas Gathering (AGG)
facilities which helped it reduce its flaring significantly between
2002 and 2010.

It said militant
activity and funding issues brought many projects to a halt, but it is
now investing more than $2 billion in completing these projects,
repairing damaged equipment, and building new AGG facilities.

The firm says when
completed, these projects will extend AGG coverage to more than 90 per
cent of the associated gas produced in the Joint Venture operations.
The remaining 10 per cent will be covered by Nigerian investors who
would collect associated gas from flare sites for small-scale local
projects.

Ending gas flaring

Last month, the
Federal Government launched a ‘gas revolution’ project which it says
would, among other benefits, put paid to gas flaring in the country and
utilise natural gas reserves aimed at attracting foreign direct
investment worth $25 billion.

Fola Onasanya, oil
and gas analyst, Ciuci Consulting, a management consultancy firm, said
the gas revolution launched by President Goodluck Jonathan holds the
promise of inducing further development and growth in the country’s
domestic gas market.

“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.

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 ridden 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 oil wells, 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 Nigerian
Accounting Standards Board (NASB) has called for the passage of the
Financial Reporting Council Bill by the National Assembly.

The passage of the
bill would empower the board to implement the International Financial
Reporting Standards (IFRS), which Nigeria has already adopted.

The IFRS is expected to be implemented over a three year period with effect from January next year.

Executive secretary
and chief executive of the NASB, Jim Obazee, said while the board
strives for global relevance in the country’s financial reporting
system, it is handicapped to enforce compliance.

“The right
equipment we need for the implementation of the IFRS in Nigeria
includes the passage of the Financial Reporting Council (FRC) Bill.
Otherwise, we may have to identify every piece of legislation, mostly
in the Companies and Allied Matters Act i1990 that are inconsistent
with the pronouncement of IFRS,” Mr. Obazee said.

Cumbersome process

The FRC Bill, which
was passed by the former National Assembly, was not accented to by
President Olusegun Obasanjo. The failure of the successor, the late
Umaru Yar’Adua to sign the Bill three months after assuming office
meant that the Bill had to go through fresh legislative process.

It was again passed
by the House of Representatives in 2008, while it awaited the Senate to
consider the committee report. Before the recess on March 9, the
committee report was listed thrice in the notice paper by the Senate
but it eventually did not come up for consideration before the
lawmakers vacated.

According to the
NASB, the passage of the Financial Reporting Council Bill will help to
address the current institutional weaknesses in the regulation,
compliance and enforcement of standards, and the development of robust
arrangements for monitoring and enforcing compliance with financial
reporting standards.

Mr. Obazee said
Nigeria stands to receive increased Foreign Direct Investment (FDI)
when the bill is passed. “Nigeria will be included in the list of third
country auditors, as unveiled by the European Union. As such, our
professional accountants shall be allowed to audit companies that have
subsidiaries in the EU without limit,” he added.

According to him,
the desired public sector financial management reforms will be realised
with the development of public sector accounting standards, which shall
be issued by Financial Reporting Council.

Enhancing market discipline

The Central Bank of
Nigeria (CBN) governor, Sanusi Lamido Sanusi, said recently that the
current accounting system by Nigerian institutions was not in line with
global standards, hence the introduction of the IFRS.

“This is expected
to enhance market discipline, and reduce uncertainties which limit the
risk of unwarranted contagion,” Mr. Sanusi had said.

IFRS are
principles-based standards, interpretations, and the framework adopted
by the International Accounting Standards Board (IASB). Nigeria is
implementing an agenda for the adoption of IFRS by all reporting
entities commencing in January 2012 through January 2014.

Senegal will likely
launch a debut sovereign Islamic bond in 2011 of around $200 million,
said the chief operating officer at the Islamic Corporation for the
Development of the Private Sector (ICD).

ICD, a member of
the Islamic Development Bank, has been mandated to work on the Islamic
bond, or sukuk, and while the exact size has not been fixed yet, it
will be around $200 million, Ahmed Khizer Khan told reporters on the
sidelines of a conference in Dubai.

“The mandate has
been signed; you have to work with the government to see when the best
time is. It depends on the government but we’d like to do it the
sooner, the better,” Mr. Khan said.

Sources told Reuters in November Citibank is also serving as an arranger on the planned sukuk.

Senegal is one of a
number of African nations looking to enter the nearly $1 trillion
Islamic finance market. Nations from South Africa to Kenya are
revamping laws to accommodate sukuk transactions in a bid to attract
more Middle Eastern funds.

Angola’s foreign
exchange reserves rose to $17.66 billion in December from $15.5 billion
in November, the Central Bank said in a statement posted on its website
on Tuesday.

Angola, the second
largest oil producer in Africa after Nigeria, depends on oil exports
for over 90 per cent of its foreign exchange earnings.

The Federal
Government has paid 45 per cent of the entitlements of workers of the
Nigerian Telecommunications Limited, the National Union of Postal and
Telecommunications Employees (NUPTE) has said.

Sunday Alhassan,
president of NUPTE, told the News Agency of Nigeria (NAN) in Lagos on
Tuesday that the entitlements included outstanding salaries.

Mr. Alhassan said
that the government had also given an assurance that it would pay the
remaining 55 per cent of the entitlements in May.

He said that the government paid the entitlements in December, 2010,
although some affected workers did not see their money in time due to
the inability of their banks to promptly credit their accounts.