New data from the Nigeria Extractive Industries Transparency Initiative (NEITI) shows that the remittances of the Nigerian National Petroleum Corporation (NNPC) to the Federation Account dropped by ₦1.59 trillion within a five-year period. The state oil firm remitted ₦2.38 trillion in 2012; this, however, dropped to ₦789 billion in 2016. An analysis of NEITI’s Fiscal Allocation and Statutory Disbursement Audit report for 2012 to 2016 showed that out of ₦18.15 trillion in total mineral revenue, the NNPC remitted ₦8.62 trillion. Other mineral revenue remittances came from the Department of Petroleum Resources (₦3.8 trillion) and the Federal Inland Revenue Service (₦10.46 trillion). The NNPC’s remittances from mineral revenue, according to the report, reached its highest in 2012, while its joint venture cash calls were highest in 2014. On revenues allocation and utilisation by the Nigeria-states, the report showed that Akwa Ibom received the highest total mineral revenue of ₦873.59 billion among the nine states covered by the exercise, closely followed by Delta (₦713.15 billion), while Nasarawa got the lowest mineral revenue (₦145.88 billion), closely followed by Gombe (₦155.22 billion).

Data from the National Pension Commission has shown that the total pension assets under the Contributory Pension Scheme (CPS) stood at ₦9.36 trillion as of the end of July 2019. This announcement comes as the federal government is in talks with PenCom to allow operators of the CPS to provide more funds for infrastructural development in the country. Speaking during the second annual conference of the Nigerian Chartered Institute of Bankers of Nigeria, Vice President Yemi Osinbajo said the FG was discussing with the banks on how to reduce the risks associated with operators providing credit to the real sector. PenCom data showed that Pension Fund Administrators had so far invested ₦30.14 billion in infrastructure bonds while ₦6.62 trillion or 70.77 percent of the funds had been invested in government bonds. The President, Pension Fund Operators Association of Nigeria, Aderonke Adedeji said that the successful mobilisation of pension funds and their contributions to the economic growth of any country were essential policy objectives. The acting Director-General, PenCom, Aisha Dahir-Umar, also agreed that the CPS has been very impactful since the commencement of its implementation in 2004 as long-term domestic capital was slowly changing Nigeria’s financial landscape.

The federal government has announced plans to return toll gates to federal highways in the country. The Minister of Works and Housing, Babatunde Fashola, said that there was no law that stopped the government from having toll gates which were phased out more than a decade ago on the roads. Speaking with journalists on the decisions taken at the Federal Executive Council meeting presided over by President Muhammadu Buhari, the designs and modalities for the toll plazas have already been completed and are under consideration. At the moment, Fashola said the government is considering how to include banks in the project since it may integrate electronic payment options into the toll plaza design.

Dangote Group Chairman, Aliko Dangote, is looking to expand African cement capacity by 29 percent to 62 million tons, entrenching his flagship company’s position as the continent’s biggest producer of the construction material. The billionaire investor told Bloomberg that he plans to add six million tons in Nigeria next year, taking volume in Dangote Cement’s home market to 35 million tons. The rest of the expansion is planned mainly in West Africa, including Niger and Cote d’Ivoire. Dangote, who is building one of the world’s biggest refineries in Lagos, in addition to investments in gas and petrochemical plants, told shareholders in June the company plans to open plants in Nigeria that will allow it export clinker to grinding plants in Cameroon and West Africa. He expects total group revenue to grow to about $30 billion from $4 billion when the plants start operations within the next two years. The billionaire is also planning to invest about 60 percent of profit outside Africa, including in the United States and the United Kingdom. Dangote Cement reported a 6 percent increase in profit for the six months through June to ₦119.5 billion ($331 million), even as revenue fell 3 percent to ₦467.7 billion.

Commentary

    • The NEITI report affirms that rather than seeking to develop new industries or sectors, the federal government is towing the usual line of flogging the golden goose. In his Independence Day broadcast, President Buhari laid down the rule for revenue-generating agencies, warning that “there would be consequences” for failure to meet targets, and on Thursday pictures emerged of an overnight raid at a high-end hotel in Abuja by Customs officials looking to impound luxury vehicles, 564km away from the closest border crossing at Jibia, Katsina. The Customs boss, Hammid Ali was emphatic that the action against car marts is a revenue assurance drive. Another federal agency, the FIRS, faced with elevated criticism from the Presidency, has stepped up its harassment of companies and handed out unwarranted sanctions. In SBM Intelligence’s chart for this week, the Federal Government is only able to generate less than 20% of its annual budgetary requirements from non-oil sources. Yet it stubbornly holds on to subsidies in the name of under-recovery while going after businesses in a clear revenue grab. Essentially, the government is attempting to look in at least two and possibly four directions simultaneously. We will soon be forced to reappraise these positions as the chickens come home to roost. Already, for the first time, the CBN has sold more of its own securities than it has foreign reserves for as shown in this chart. Nigeria will be forced to make serious fiscal adjustments soon. It is now inevitable.

 

    • The CPS was introduced by President Obasanjo in 2004 to replace the legacy defined benefit structure which was riddled with corruption and inefficiency that often left pension accounts unfunded. Whilst the CPS has succeeded in bringing on board formal private sector participants, as well as federal civil servants, many states, local governments and informal workers, are yet to join the scheme. Recent statements from both Aso Rock and the National Assembly indicate government desires for the pension funds to deploy more credit in developing the country’s ailing infrastructure. By buying FG bonds, 70% of the CPS already provides funding to the government for its use. This, therefore, begs the question of what the Vice President means by providing more. Does this mean that more of the balance of 30%, or does he mean that rather than through secure instruments like bonds, the CPS should be deployed directly to the government? If the former, while single obligor concerns are present, the security around the bond market provides protections. However, if the latter, we are unequivocally against such a direct deployment of pensioners’ money.

 

    • On the point of the lack of legal backing for the much-publicised toll phase-out, Fashola is right. But this is only half the story. A government which has consistently failed to make the country’s roads worth the taxes citizens pay, is proceeding to introduce yet another tax. This fits into the government’s recent revenue strategy through which it is determined to extract all kinds of taxes from Nigerians to shore up its precarious fiscal position without making a commensurate commitment to accountability and performance. In fact, authorities do not appear willing to entertain any public debate on the introduction of these measures. We are unsure of how much longer Nigerians will continue to accept this, and advise the government to be more circumspect.

 

    • From our perspective, the main story here is not Dangote’s move to increase his capacity, but his move towards the exits. Coming in a week when Customs officials extrajudicially got in the way of vehicle businesses, the labour minister made it clear to agitated unions that there is no money to meet their wage demands and the President made a discussion on revenues a key point of his National Day speech, the Dangote move is a significant development that confirms some of our most consistent forecasting within the recent past. Dangote’s move to keep his profits abroad in order to put them under economic conditions orchestrated by sensible economic planners is the clearest signal yet that other high-net-worth individuals (HNWIs) and possibly small businesses are contemplating similar moves. These movements have to be interpreted as a tacit repudiation of the government’s monetary policy and anticipatory of a near term devaluation of the naira given the CBN’s current efforts at demand management. The way forward at this point is for the government to urgently change course and pursue the real reforms that Nigeria requires; starting with the removal of costly subsidies, a free float of the naira and a trimming of the bloated public recurrent spending.