17 out of 36 states in Nigeria are insolvent as their Internally Generated Revenues in 2018 were far below 10 percent of their receipts from the Federation Account Allocations in the same year. The Economic Confidential said in its report on the Annual States Viability Index that these states are unable to meet their financial obligations in the year under review. The index computed by the report shows that without the monthly disbursement from FAAC, many of the states remained unviable and cannot survive without the federally distributed handouts largely from the oil sector. The IGR of the 36 states totalled ₦1.1 trillion in 2018 as compared to N931 billion recorded in 2017. This indicates a ₦172 billion increase. The report further shows that the IGR of Lagos State put at ₦382 billion is higher than that of 30 States put together whose IGR are poor compared to their allocations from the Federation Account. The FCT generated N65 billion IGR against ₦29 billion from the Federation Account in the same period. Lagos State maintained the number one position in IGR with a total revenue generation of ₦382 billion compared to FAA of ₦260 billion, which translate to 146 percent in the 12 months of last year followed by Ogun State which generated IGR of ₦84.55 billion compared to FAA of ₦93 billion representing 90 percent; Rivers with ₦112 billion compared to FAA of ₦237 billion representing 47 percent and Kwara State with a low receipt from the Federation Account has maintained its impressive IGR by generating ₦23 billion compared to FAA of ₦81 billion representing 28 percent. The 10 states with impressive IGR generated ₦808 billion in total, while the remaining states merely generated a total of ₦295 billion in 2018.While the report provides shocking discoveries, the states with less than 10 percent IGR have remained 17 as in the previous year 2017.
The Nigerian government says it can seize assets from citizens who cannot explain the source of their wealth. The Vice President Yemi Osinbajo said this while declaring open an anti-corruption conference organised by the office of the vice president and the Presidential Advisory Committee Against Corruption in Abuja. According to the VP, the Supreme Court in a lead judgment of Akaahs JSC, recently held that forfeiture under Section 17 of the Advanced Fee Fraud and Other Related Offences Act is a civil process which neither requires the criminal conviction of the property owner nor his innocence. This means that there shall be forfeiture of assets that the purported owner cannot explain, whether or not an allegation of corruption is made. The VP said the present administration led by Muhammadu Buhari is poised to deal with the wider problem of systemic corruption; especially where the average person interacts with government, including the process of the issuance of contracts, licenses and other government approvals. For instance, there is no reason any Nigerian should have to give bribes to law enforcement agents for obtaining drivers’ licenses or passports or to clear goods at the ports. Corruption, Osinbajo said, has made Nigeria’s debt and poverty figures double in spite of the highest oil revenues in country’s history.
Nigeria is looking to declare that it has the right to revoke the license for a multibillion-dollar oil block granted to Royal Dutch Shell and Eni, as well as seek damages. In a legal claim filed in April, the Nigerian government sought to “trace and recover the money paid as bribes” and an entitlement “to rescind the grant of the OPL 245 licence”, a prized exploration and production block that Shell and Eni bought in a 2011 deal. Nigerian and Italian prosecutors have alleged that the companies knew that most of the money would be funnelled to corrupt government officials and executives. Both companies, current and former executives deny any wrongdoing.
The Manufacturers Association of Nigeria has listed poor electricity, multiple taxation, high-interest rates, and poor accessibility to ports as parts of challenges affecting the operational capacity of companies in Nigeria. This is according to a quarterly Manufacturers CEOs Confidence Index survey across the six geopolitical zones of the country and the ten Sectoral Groups of the association, conducted by the association to measure the pulse of the manufacturing sector. The report, which covers the manufacturing activities in Q1 2019 shows that the sector was stressed further, even as the confidence level of operators was low, though with high expectation of improvement down the year. The aggregate MCCI for Q1 stood at 51.3 points, slightly above the minimum 50 points threshold of good performance, implying that the sector is still struggling. On Capital Expenditure, the majority of respondents did not agree that government implementation encouraged productivity in the sector. The report put the indexes of Current Business Condition at 45.5 points and Current Employment Condition at 38 points. These were not very encouraging owing to the inability of manufacturers to operate at close to full capacity. However, based on the responses of manufacturers, indexes of Business Condition in the next ‘3’ months is put at 54.5 points; Employment condition in the next ‘3’ months at 52.5 points; and Production Level in the next ‘3’ months at 65.5 points, suggesting that manufacturing CEOs have confidence that the operating environment will improve, leading to an increase in manufacturing employment and production level in the second quarter of the year.
- The argument can also be made that the low IGR of Nigeria’s states stems from the difficulty in taxing the large informal sector and a high poverty rate. However, the encouraging figures from states like Ogun shows that with determination and the right incentives, government revenues can be generated internally. One major factor often overlooked is that some state governments do not bother to drive tax collection as doing so will result in citizens’ demanding value for their taxes. The states can be this lazy and remain in this precarious condition because they have always had the federal government step in to play big brother. Currently, funds come from federal allocations, and in many states, cash is actually shared directly to citizens to meet their daily sustenance rather that the other way. This breeds an endless cycle of poverty and unaccountability. Fortunately, the federal government now has revenue challenges of its own and will be unable to continue to play this big brother role in the medium to long term. We anticipate that as this happens, the clamour for further resource control from states will find new supporters and Nigeria will move along further on what we consider to be the inevitable restructuring journey.
- Nigeria’s government has taken some drastic measures in its fight against corruption, but these actions remain open to accusations of unequal implementation, especially when opposition figures are involved. While the Supreme Court, in Dame Patience Johnathan Ibifaka v Federal Republic of Nigeria Citation (2019) held that forfeiture under Section 17 of the Advanced Fee Fraud and Other Related Offences Act, 2006 is a civil process, which neither requires the criminal conviction of the property owner nor his innocence, what is important from that judgement is that the first burden of proof is on the Prosecution to prove beyond reasonable doubt that the funds were obtained illegally. Shunting that process raises questions about the potential for the government to seize assets without due process and is prone to being abused. Respect for property rights is the backbone of any successful economic system, and this potential for abuse leaves us uncomfortable. Given previous behaviour by the Nigerian government in taking private property, we prefer to stay on the conservative side that requires the government to prove beyond reasonable doubt before seizing private property, that such properties are the proceeds of corruption.
- Nigeria is seeking damages as well as a declaration that it has the right to revoke the licence for a multibillion-dollar oil block granted to Royal Dutch Shell and Eni. In 2011 the companies paid $1.3 billion for the block, but Nigeria now believes the undeveloped deepwater block could be worth at least $3.5 billion and damages should now be calculated on that basis. This same block OPL 245 has been the subject of controversy having been initially awarded in 1998 to Nigerian firm Malabu, owned by former Petroleum Minister Dan Etete. This case just shows how murky the Nigerian oil industry is with its backroom dealings. To proceed to revoke the licence without the judgement of a court in Nigeria, or without a foreign judgement registered in Nigeria, would in our opinion be wrong and will be likely to open Nigeria up to serious litigation. The 2011 agreement is unlikely to be voided on the basis of unverified bribe allegations, so it is in the interest of all concerned that Nigeria proves the allegations first, before making any attempt to revoke the licenses.
- There is a long list of issues faced by all sectors of Nigeria’s economy, particularly manufacturing. Electricity appears to be the most important of these issues as without power machines cannot function. Since President Obasanjo took office in 1999, billions of dollars have been sunk into the sector but the country’s daily power sent out remains around the same level – about 3,500 megawatts, despite having the installed capacity for double that amount. This stems largely from the failure to implement the revised power master plan initiated by the administration of President Goodluck Jonathan. Two key issues must be resolved – the transmission network (which remains in the hands of government) needs to be upgraded to evacuate generated power, and pricing needs to be deregulated so the distribution companies can bill customers for what they consume and pay the generation companies. While it is a positive that the solutions to the issues are known, the current government, like those before it, lacks the political will to tackle the root cause of the issues bedeviling the country’s power sector.