The week ahead – Highway to nowhere

Petrol scarcity has resurfaced across Lagos State as marketers claim that the depots now have limited supply. Petrol marketers told BusinessDay the Nigerian National Petroleum Company Limited, which has returned as the sole importer, was rationing supply. Also, Reuters reported that the NNPC owes around $3 billion to fuel traders for imported petrol. Reuters said that the tumbling naira and rising global fuel prices have increased the effective subsidy the NNPC is paying. Other sources said the NNPC was taking more than 130 days to make the payments instead of within 90 days.

While the Tinubu administration says that subsidies are officially over, it is clear that the only way that the price of petrol has remained at its current level is due to some sort of subsidy arrangement. This shady grey of the subsidy regime gives rise to the current situation, and as with all other grey areas, it provides an incentive for abuse. Last year, following President Tinubu’s declaration on his inauguration day that the petrol subsidy was no more, the NNPC drastically increased the pump price of the product at its stations and independent marketers followed suit. Subsequently, the independent marketers suspended the importation of the product due to cost and exchange rate uncertainty. A week ago, an NNPC official attributed the insufficient supply of petroleum products at certain filling stations in Lagos to a problem at one of its depots in the state. However, it has become evident that the issues are more complex, including delays by the NNPC in making subsidy payments to independent marketers. It is clear that the NNPC cannot fully supply the market as the sole importer at current prices. It is also concerning that the NNPC has not been able to honour its obligations, especially when juxtaposed with the recent naira rebound. This development further reinforces that the President’s pronouncement that “the subsidy is gone” was just lip service. A situation where the NNPC is the sole importer of petrol and other independent oil marketers cannot access forex to import refined crude oil products means that the transaction is not yet transparent. We wonder what would happen to the exchange rate if these independent oil marketers tried to get FX for petrol imports. President Tinubu needs to come clean on subsidies, so they can be paid openly, or insist on no subsidies and let the market determine the fuel prices. Clarification, not lukewarmness, is what is needed now.

Atiku Abubakar, former Vice President, alleges the Lagos-Calabar highway project is handled in secrecy and challenges President Bola Ahmed Tinubu to disclose the project’s cost. The project was announced during Goodluck Jonathan’s presidency and renegotiated under President Muhammadu Buhari but was stalled. Works Minister Dave Umahi announced the project’s award to Hitech Construction Company Limited without competitive bidding, the National Assembly’s approval or FEC decision, saying it would come at zero cost to Nigeria. Atiku said the 700-kilometre could cost ₦15.7 trillion or $12.56 billion, which is higher than previous estimates, and raised concerns that the pilot phase starts and ends in Lagos.

One major takeaway from this is that delays in starting approved projects engender corruption in Nigeria. When the Lagos-Calabar highway project was initially proposed during the Jonathan administration, costs were considerably lower due to the dollar exchange rate at that time. Failure to begin and conclude the project created an opportunity for subsequent governments to get a piece of the pie through extra-legal means. Examining the government’s position on the Lagos-Calabar coastal highway project reveals a series of troubling inconsistencies. For starters, the project is veiled, with little information on critical details such as cost breakdowns and the bidding process. There has been some bypassing of established approval channels like the National Assembly and the Federal Executive Council oversight, and the public has not been allowed to understand and give their input or approval. The decision to opt for sole-source contracting has been particularly criticised, and it is believed that foregoing competitive bidding processes could only have been fostered by favouritism that would leave the public purse burdened with inflated costs. This suspicion is further inflamed rightly or wrongly by the involvement of businessman Gilbert Chagoury and his conglomerate’s role in the Eko Atlantic City project that was initiated with the support of the current President, who was then in political control of Lagos. There is some concern that Mr Chagoury’s known interest in waterfront real estate creates potential conflicts of interest due to his influence on the Lagos-Calabar coastal highway project. Works minister Dave Umahi claimed the project would incur zero cost to Nigeria, but given the lack of documented evidence, it’s hard to believe. Mr Atiku’s estimation of ₦15.7 trillion ($12.56 billion, 18/4/2024) for the 700km project, almost 60% of Nigeria’s 2024 budget, raises doubts about private sector funding. Additionally, the revelation of a ₦1 trillion request for the project initiation adds to the scepticism. Perhaps if this contract had been reopened for public bidding, there is a chance that the controversy surrounding the earmarked demolition of Landmark Beach in Lagos would have been averted. There are several lessons to be learnt from here, and the most poignant is that corruption only festers when the government lacks the will to do better, and the judiciary might no longer be the last hope of the common man.

Gunmen have killed at least 21 people in Kogi State, residents said, in the latest clash between herders and farmers. Edibo Ameh Mark, chairman of Omala Local Government Area, where the violence took place, said the attack was a reprisal by Fulani herders after the villagers killed six of them, including two by beheading on 2 April. A resident, Julius Atabor, said up to 100 herdsmen had attacked the village, adding that 19 bodies were recovered, with an additional 15 found on Friday, 5 April. Atabor said most of the casualties were older people who could not escape the assailants.

Kogi rarely makes the news headlines on the Pastoral Conflicts, but given its location in Nigeria’s Northcentral geopolitical zone—a hotbed of the Pastoral Conflict—it is inconceivable that it is divorced from the more significant socioeconomic problems that plague its neighbours. Attacks and reprisal attacks have been a feature of farmer-herder conflicts in Nigeria, but the Omala incident is the biggest in terms of casualty figures in recent memory. Benue is another state in the Northcentral that suffers to a great degree from this carnage that has not only affected Nigeria’s food inflation due to farmers’ inability to access their farms but has also led to the rising numbers of internally displaced persons. The sheer availability of small arms and light weapons from the proliferation of unlicensed weapons manufacturing hubs has compounded the problem, not just in Kogi, but in neighbouring Edo, where farming communities in Owan West and Ovia North East have been at the receiving end of attacks by militant herders. Nevertheless, addressing insecurity does not appear to be among Aso Rock’s top priorities. Previous government initiatives, such as the National Livestock Transformation Plan and the RUGA settlement scheme, fell through because of poor policy implementation and lack of general buy-in. The current centralised police structure has failed to deliver law, order and a sense of justice across the country effectively. In the Kogi incident, residents reported that the attackers were about 100, yet traditional law enforcement appeared unable to prevent the bloodshed. Proponents of state police argue that state police officers would likely have a deeper understanding of the local communities, including potential flashpoints for conflict like grazing routes in states with them. This could enable preventive measures and mediation efforts. There is now some positive movement on the matter as the National Assembly is actively considering proposals, and Senate Leader Opeyemi Bamidele recently announced the commitment of the National Assembly to developing a legal framework for establishing and regulating state police forces. We hope the National Assembly’s deliberations will unearth a clear plan that addresses funding, recruitment and robust training for state police officers, along with details of how they would work with relevant organisations to solve the country’s insecurity problems.

Ghana’s government said that Ghana has failed to secure a workable debt deal with two bondholder groups in its push to restructure $13 billion of international bonds. The government said formal talks were on hold for now after the International Monetary Fund (IMF) indicated that the deal would not fit its debt sustainability parameters. “We will regroup to continue negotiations until we reach a deal that is consistent with the IMF’s debt sustainability targets,” the office of Finance Minister Mohammed Amin Adam said on X. He said Ghana had reached an “interim deal” with bondholders but that needed to be tweaked to meet IMF targets.

Ghana’s prolonged economic crisis means it must cut about $10.5 billion of external debt, which is above $30 billion. The debt rework headache for Ghana comes in two forms: bilateral and commercial. An agreement in principle with bilateral creditors in January 2024 was enough to meet the needed financing assurance to unlock the second disbursement of $600 million under the $3 billion IMF programme. In fact, Ghana has begun another debt restructuring dance toward securing the third tranche of $360 million after reaching an IMF Staff-Level Agreement. Beyond this agreement, there’s a big hurdle for the West African country to cross. The Fund has stressed that to ensure the timely completion of the second review, Ghana and its official bilateral creditors need to agree on a Memorandum of Understanding for a debt treatment, consistent with the agreement in principle reached in January 2024. Talks have taken a different turn after the IMF indicated that Ghana’s deal with its external bondholders would not fit its debt sustainability parameters. A regrouping was done right after the significant rejection as Accra’s original request of up to 40% haircut on commercial bonds keeps reducing, making it difficult to meet the Fund’s acceptable threshold. Ghana has not secured any concrete deal with specific MoUs, which has complicated talks. However, there seems to be some hope on the horizon for debt crisis veterans like Ghana as the IMF runs into the debt rework ring to save them. The IMF executive board has backed a key change to give it more freedom to support countries in crisis even if debt renegotiations with big creditor governments like China are ongoing. The proposal aims to reform the IMF’s Lending Into Official Arrears (LIOA) policy, which determines when it can lend to a country owing money to another IMF member nation. A significant change will allow lending to a country even if no debt agreement with one or more bilateral creditors has been reached, granting the Fund “additional safeguards.” While this is good news for Ghana in the future, its authorities must secure a deal with external creditors during the ongoing Spring Meeting in Washington if they require financing from the IMF and its partners.