Daily Watch – Oil unions threaten strike, FDI falls further

The latest World Investment Report 2020 of the United Nations Committee for Trade and Development showed that the weak demand for Nigeria’s crude oil in 2019 has led to a decline in foreign direct investment flow into the country. According to the report, the FDI into Nigeria declined by 48 percent to $3.3 billion in 2019 from $6.4 billion in 2018. This, it said, is due to a slowdown in investment in the oil and gas industry even as Africa experienced a general slump in FDI flows in 2019 by 10 percent to $45 billion due to more moderate economic growth and dampened demand for commodities. According to the UN findings, there was reduced investment flow to countries with relatively more diversified FDI inflows such as South Africa, Morocco, and Ethiopia and flows to commodity-exporting economies such as Nigeria and Sudan. The development of a $600 million steel plant in Kaduna state offers some evidence of investment diversification, a long-standing policy objective, the data said, noting that few countries received higher inflows in 2019 with Egypt being the largest recipient of FDI in Africa has received $9 billion from investors. After a significant increase in 2018, FDI flows to Sub-Saharan Africa decreased by 10 percent in 2019 to $32 billion as the FDI to West Africa decreased by 21 percent to $11 billion in 2019. This was largely due to the steep decline in investment in Nigeria, after consecutive increases in 2017 and 2018. The UNCTAD predicted that Africa would see a decline of FDI between 25 and 40 percent in 2020. The immediate impact of the coronavirus on the global economy would be dramatic as it would be a game-changer for FDI, the Secretary-General, UNCTAD, Mukhisa Kituyi, predicted. He added that “the outlook is highly uncertain. Prospects depend on the duration of the health crisis and on the effectiveness of policies mitigating the pandemic’s economic effects.”

The fight against the new coronavirus pandemic has continued to expose Nigeria’s fragile economy as businesses, especially manufacturing firms, have largely been shut down since April this year after the country imposed movement restrictions to curb the spread of COVID-19 infections. Nigeria’s pension fund is a part of the economy that has been affected even as the managers of the fund have seen a sharp decline in the number of new retirement savings accounts while employers cut back on recruitment. The West African country’s economy has also been battered by a drop in crude prices this year, which has in turn affected employment and the creation of new pension accounts. The pension account is mandatory for all employers in Africa’s largest oil producer. Data from the Nigerian Pension Commission showed that new retirement savings accounts grew 85 percent less in April. This is compared to the same period a year earlier, indicating a slowdown in the number of new jobs. Still, total pension fund assets under management in Nigeria was steady at ₦10.6 trillion or $27.3 billion in April, almost the same level as in February. The commission cannot in any way sign people for pension plans if companies are not hiring, the head of investment research at Sigma Pensions Ltd. in Lagos, Wale Okunriboye, said, adding that “Businesses will go through a difficult time and try to manage costs, as a result, we expect unemployment numbers to increase.” Nigeria’s official unemployment rate was 23 percent at the end of 2018 and is expected to rise to 34 percent by the year’s end if urgent steps are not taken, according to a report published this month by a government pandemic committee led by Vice President Yemi Osibanjo. Fund managers are worried that contributors will start requesting money from their retirement accounts if they remain unemployed for at least four months, Okunriboye said. Other pressure on pension assets could come from a reduction and non-payment of salaries by some employers, including Nigeria’s 36 state governments as the earnings from crude sales are expected to plunge 80 percent to ₦1.1 trillion this year, according to the country’s budget office in May, leaving less money for states to pay wages and fund workers’ pensions.

Edo Governor, Godwin Obaseki, has formally joined the People’s Democratic Party after he resigned on Tuesday from the ruling All Progressives Congress. The governor announced Friday that he has joined the PDP after the APC last week declared him unfit to contest for re-election under the party. Obaseki was disqualified by his former party, APC, from seeking re-election allegedly for submitting questionable certificates. The disqualification described as witch-hunt due to the political issues between Obaseki and the party National Chairman Adams Oshiomole has come under huge criticism. The leadership of the PDP had on Wednesday met with Obaseki who is seeking a second term in office. However, the APC national chairman, Adams Oshiomhole, whom Obaseki blames for his travails has now been suspended from office, following an appeal court ruling. Obaseki has said that some governors of the APC are still supporting him despite his defection to the PDP. If he clinches the PDP ticket, he would swap roles with his rival, Osagie Ize-Iyamu, in 2016, whom he defeated in the last governorship election. Ize-Iyamu has crossed over to the APC and he is believed to enjoy the support of the leadership of the party. Oshiomhole is believed to be supporting Ize-Iyamu and he was instrumental in bringing Obaseki to power.

Nigerians may face petrol scarcity if oil workers make good the threat of withdrawing their services should the FG insist on registering oil sector employees on the Integrated Payroll and Personnel Information System. The Petroleum and Natural Gas Senior Staff Association of Nigeria and the Nigeria Union of Petroleum and Natural Gas Workers made the threat in a letter addressed to the junior petroleum minister, Timipre Sylva. The unions kicked against plans by the Office of the Accountant-General of the Federation to register oil workers on the IPPIS platform. The 19 June letter was jointly signed by the General Secretaries of PENGASSAN and NUPENG, Lumumgba Okugbawa and Olawale Afolabi. The unions said their apprehension about the IPPIS platform stemmed from the fact that it discountenanced the peculiarities of the oil and gas sector with regards to collective bargaining agreement and approved pay structure between the unions and the FG. No date has been fixed for such a strike, and both unions stressed that they were counting on Sylva’s understanding in resolving the matter.