President Muhammadu Buhari has approved the extension of Nigeria’s border closure with its neighbouring countries to 31 January 2020. According to a memo issued by Victor Dimka, a deputy comptroller of the customs service, “despite the overwhelming success of the operation, particularly the security and economic benefits to the country, a few strategic objectives are yet to be achieved, which informed the extension of the exercise by the President.” The extension came a day after CBN Governor Godwin Emefiele said the country’s security challenges of insurgency, banditry and kidnapping would be totally eradicated if the border closure is sustained for the next two years. Speaking at the first Convocation Lecture of the Edo University, Iyamho, Emefiele said the border closure was capable of tackling all security challenges currently being experienced in the country and assured that the monetary regulator will promote this policy by making sure that Nigeria produces what it consumes and eat what it produces. Finally, in a busy week on the border issue, the Minister of Foreign Affairs, Geoffrey Onyeama, told other ECOWAS countries that goods coming into Nigeria must have 30 per cent local input as part of the conditions to reopen the borders. Urging ECOWAS countries to respect rules of origin, Onyeama insisted that Nigeria will no longer tolerate the repackaging of imported goods.

On Wednesday, 6 November, a tax bill that Senators have not seen, and are not fully aware of its content, passed the second reading at the Senate. The approval is the second in a series of legislative and executive steps on the bill’s journey to becoming law. The bill was read for the first time at the Senate on Tuesday. Two senators, Binos Yaroe (PDP, Adamawa South) and Betty Apiafi (PDP, Rivers West) complained about the development, wondering how they would debate and pass a bill whose content they do not know. However, the Senate President, Ahmad Lawan, overruled both Senators. The Senate then passed the second reading of the Bill that seeks to increase VAT from five per cent to 7.5 per cent without copies of the bill shared to lawmakers to allow for any meaningful contribution before it was debated and passed. President Buhari had, in October, presented the bill to a joint session of the National Assembly for consideration and passage into law. He made the presentation of the Finance Bill alongside the 2020 Appropriation Bill.

President Buhari has signed a bill amending the Deep Offshore and Inland Basin Production Sharing Contract Act of 2004. This development comes after lawmakers passed the bill last month, which amended the law’s provisions. Under the law, which regulates royalty payable on a field basis, oil companies will no longer pay graduated rates for deep offshore production sharing contracts but will now pay a flat rate of 10 per cent for finds in fields deeper than 200 metres. The new law also requires the petroleum minister to call for a review of PSCs by the NNPC every eight years and introduces offences and penalties for violating the law such a minimum fine of ₦500 million or minimum five years jail time or both upon conviction. It also introduces specific price reflective royalty rates. The previous law required a review of royalty rates where crude oil price exceeds $20 per barrel to ensure additional revenue for the government but this was not effected for over two decades. The amended law now provides for review of royalty rates where crude oil and condensate price exceeds $20 per barrel using different rates according to price benchmarks. The President, during the 2020 budget presentation to the National Assembly, noted that amendment of the contracts law is one of the priorities of the FG, as it has the capacity to generate additional revenue of at least $500 million which will aid the government in achieving the proposed 2020 budgeted revenue. However, International Oil Companies (IOCs) have kicked against the amended law saying it will constrain new investment. An oil industry group, The Oil Producers Trade Section, which represents oil companies responsible for 90 per cent of Nigeria’s crude production, said the proposed law change, and the regulatory uncertainty it will create, could significantly undermine profitability for the projects, including large fields such as Shell’s Bonga and Total’s Egina.

Pirates have kidnapped a Norwegian shipping vessel with nine crew members off the coast of the Republic of Benin. The vessel was carrying gypsum, a mineral used as a fertiliser, and was at anchor, owner JJ Ugland said. The International Maritime Bureau had declared the Gulf of Guinea as world’s most dangerous piracy hotspot, where some 62 seafarers have been captured off the coasts of Nigeria, Guinea, Togo, Benin and Cameroon this year. The Norwegian-flagged MV Bonita’s remaining crew notified the local authorities after the attack early on Saturday and the vessel docked in Cotonou, the largest city in Benin, later the same day, JJ Ugland said. Although piracy has decreased worldwide, it continues to rise in the Gulf of Guinea and there are fears that the area could emulate Somalia in terms of the threat to global shipping. Several abductions have been reported in the Gulf of Guinea in recent months, including eight crew members taken from a German-owned vessel off Cameroon in August, and 10 Turkish sailors off the coast of Nigeria in July.

Commentary

  • It has become clear that the government will persist with this strategy regardless of the implications to trade for export-focused Nigerian businesses. Nigerian authorities assume that a border closure works only one way – on the import side. But it bears reiterating that the country is actually a net exporter via the land borders and this closure affects these exporters. A recent report by FSDH Merchant bank showed that some textile firms in Kano have shut down operations with large piles of unsold inventories because their primary customers are in the export market. The toll of this shutdown is increasingly being counted in lost jobs and businesses shut down. Just yesterday, the Customs Service overreached itself and banned the sale of petroleum products in all areas within 20km of the border, theoretically grinding all business to a halt in places like Badagry, Gembu and Jibiya. This, without a moment’s thought of, or consultation with, businesses that have set up in such locations. We at SBM continue to maintain that Nigeria’s porous borders are a symptom of the failure of the Nigerian Customs Service (NCS) and a complete border closure is akin to using a hammer to crush a fly. It is our considered perspective that Nigeria will be forced to reopen its borders eventually after achieving very little, save a significant loss of reputation.

  • The manner in which the 9th Senate has gone about its business under Senate President Ahmed Lawan has effectively robbed the upper chamber of its independence from the Executive. This was apparent from the screening of ministerial nominees where many nominees were simply asked to bow and go. This approach has played out on a number of occasions, from the hasty passing of the tax bill to the screening of the NDDC board, and the speed with which the new laws concerning Petroleum Sharing Contracts were passed. It is of great concern that the Senate President overruled the serious points raised by Senators Apiafi and Yaroe. How we wonder, is it appropriate for Senators to vote on Bills they are yet to study, as demanded by common sense as well as the Senate’s own rules? This portends serious trouble for the country as the Senate will not be able to properly play its oversight role on the Executive if this trend endures.

  • This new law on the Petroleum Sharing Contracts has been long overdue. Nigeria had a clause in the old agreements that was never invoked, where the country was supposed to get a larger share of revenues once oil rose beyond $20, meaning that all the time oil went to $100, Nigeria’s share of oil proceeds was unchanged. The former CBN governor, Sanusi Lamido Sanusi complained about the law in 2010 and attempts to change this in 2007 hit a wall. From a revenue perspective, it represents a good move for Nigeria because, at current oil prices, the country may get more money to shore up falling revenue collections. The flip side, however, is that the law will certainly reduce the profitability of oil companies, and given that Nigeria owes them a lot of money, and is in litigation with the same oil companies over unrelated issues, the incentive for the private sector to invest in Nigerian assets has suffered a serious hit. While this law may provide immediate relief for the country’s coffers, we expect that in the medium to long term, more IOCs will offer their PSC assets for sale, and focus on JV assets instead, which will hurt the country.

  • The Gulf of Guinea remains the highest-risk area in the world for seafarers and shippers. Despite a meeting last month in Abuja by the Gulf of Guinea states to tackle maritime crime, it shows no signs of abating. Interestingly, the conference made the nexus between piracy and a rise in the smuggling of opioid drugs and banned wildlife and forestry products. It is imperative that the states in the region adopt the recommendations of the United Nations Office of Drugs and Crime which include ratifying and fully domesticating the provisions of the United Nations Convention on the Law of the Sea, in particular, Article 101 on piracy and Article 105 on universal jurisdiction; as well as introducing the Non-Conviction Based Forfeiture procedure and where already existent, ensure its application to the proceeds of maritime crime.