Bankers’ C’ttee Abolishes Commission on Retail Forex Transactions - THISDAY
- External reserves hit six-year high of $42bn
BY Obinna Chima
The Bankers’ Committee rose from its meeting Tuesday with a consensus that commercial banks in the country should henceforth desist from charging customers commissions on retail foreign exchange (forex) transactions.
Retail forex transactions include the purchase of dollars for personal travel allowance (PTA), business travel allowance (BTA), school fees and medicals.
The chief executive of the FSDH Merchant Bank Limited, Mrs. Hamda Ambah, disclosed this while briefing the media at the end of the meeting in Lagos.
Desirous of alleviating the pains of retail forex consumers, the Central Bank of Nigeria (CBN) in May last year had directed all banks to sell the greenback for BTA, PTA, tuition and medical fees to customers at not more than N360 to dollar, down from N380 to the dollar at which forex was sold previously for retail transactions.
The CBN sells to banks at N357 to the dollar. However, it was learnt that some commercial banks have been charging commissions on such transactions.
To this end, Ambah explained: “One of the things we discussed was a measure that would provide some sort of palliative for all individuals in the country to at least enjoy the benefit.
“It was agreed that the forex that banks sell to their clients for PTA, BTA, school fees and medical bills, that henceforth all banks should charge N360/$ and there would be no commission whatsoever charged by the banks for such sales.
“We want to make sure that this is uniform across all banks. Customers should report any bank that goes outside of this. It has actually been N360 for a while, but some banks in addition to the fee, are charging commissions.”
Earlier, the director, Banking Supervision, CBN, Alhaji Ahmed Abdullahi, who was also at the briefing, put the present value of the country’s external reserves at $42 billion, higher than $40.4 billion last month.
The last time the country’s reserves derived mainly from proceeds of crude oil exports hit $42 billion was in December 2013.
Recent Eurobond issuances have also helped in boosting Nigeria’s reserves position.
Abdullahi also expressed satisfaction with the positive growth of all economic indicators.
Responding to a question on why the modalities on the Agric-SME fund agreed by the committee were yet to be implemented, the CBN director said: “We had detailed discussions on the issues agreed at the last retreat and the modalities for disbursements have been agreed.
“By February, we would see traction in that regard. The modalities are now out and it is left for the customers to come forward.”
Also, the chief executive of Stanbic IBTC Bank, Mr. Demola Shogunle, disclosed that during the meeting, there was a presentation on the Economic Recovery and Growth Plan (ERGP) by one of the special advisers to the president.
According to Shogunle, a major aspect of the presentation was that the federal government had agreed to focus on key selected areas in the ERGP to accelerate investments and job creation.
“The focus areas include power and gas, agriculture and transportation, and manufacturing and processing. The Bankers’ Committee overwhelmingly agreed to be embedded in the programme.
“The banking community will participate actively to the extent that it will lead to job creation and additional investments in the economy,” he said.
In his briefing, the chief executive, Citibank Nigeria, Mr. Akin Dawodu, reiterated plans by the CBN to sanction exporters that fail to repatriate export proceeds.
“Oil export proceeds have to be repatriated within 90 days and non-oil proceeds within 180 days. In the spirit of supporting the reserves position and economic growth, stricter measures were agreed regarding the repatriation of export proceeds, particularly oil export proceeds.
“A 90-day moratorium has been agreed for customers and corporate clients who have not repatriated their export proceeds within the stipulated timeframe for any delays to be cleared.
“After that, the CBN has the right to sanction any customer that defaults. The sanction may include banning people from the forex window or more stringent measures.
“We think this is very important as a body to ensure that the rules are adhered to,” he said.
Iconic Nigerian painting missing for decades is discovered in a north London flat - THE TELEGRAPGH UK
An iconic Nigerian painting missing for decades has been discovered in a north London flat.
The discovery of Ben Enwonwu’s 1974 masterpiece of the Ife princess Adetutu Ademiluyi, known as Tutu, has been touted as the “most significant discovery in contemporary African art in over 50 years”, Nigerian novelist Ben Okri told the Guardian.
The image of the painting became a symbol of national reconciliation in the country, where people hang posters of it on the walls of their homes.
It is not known how the piece came to be in north London, and the family who have it in their possession requested anonymity.
However, it will be sold at Bonhams in London later this month and is expected to go for over £200,000.
Giles Peppiatt, director of modern African art at the auction house, made the discovery when he went round to the house.
Ben Enwonwu’s 1974 masterpiece of the Ife princess Adetutu Ademiluyi, known as Tutu CREDIT:BONHAMS
He said: “Sometimes you go somewhere on a wing and a prayer, you don’t know what you are going to see ... this was an enormous surprise. It is a picture, image-wise, that has been known to me for a long time, so it was a real lightbulb moment; I thought: ‘Oh my god, this is extraordinary.’
Enwonwu was a student at Oxford in the 1940s, but became widely known when he was commissioned to create a bronze sculpture of the Queen during her visit to Nigeria in 1956. He died in 1994.
Nigerian cryptocurrency craze unfazed by bitcoin plunge - PHYS
by Stephanie Findlay
While bitcoin and other cryptocurrencies have suffered precipitous falls in recent weeks, the units remain popular in Nigeria where they make it easier to do business.
On the surface, digital coins may not seem like a good idea in a country where corruption is rampant and stacks of hard cash are often smuggled overseas.
Yet West Africa's biggest economy has the world's third-largest bitcoin holdings as a percentage of gross domestic (GDP), behind Russia and New Zealand, according to Citigroup.
That may be because blockchain technology—public, online ledgers that underpin cryptocurrencies—is liberating Nigerians sidelined by the global financial system as it dramatically improves the ease of doing business.
Olaoluwa Samuel-Biyi, a slight 27-year-old entrepreneur, looks the part of an aspiring corporate disrupter, dressed in skinny jeans with dishevelled hair.
He first considered using cryptocurrency when credit card firms and other established payment providers refused to partner with his global remittance company, deeming the venture too risky.
"They said the markets were too high risk and that people could finance terrorism," he told AFP, laughing. "It's ridiculous."
He realised that the only way he could solve the problem was to use cryptocurrency.
"It's so hard to send money from Nigeria to Zimbabwe, or from the United States to Sudan," he explained. Banks were "very tedious" and payment companies "generally exploitative", he said.
"There's heavy discrimination, definitely. We have to go all around them to succeed."
Samuel-Biyi's company, SureRemit, developed its own virtual token—a kind of custom cryptocurrency like bitcoin or one of the many alternatives such as ether.
The tokens are used to buy vouchers, which may be used to purchase goods and pay bills at participating merchants anywhere in the world, cutting out cumbersome middlemen and eliminating fees.
In January, SureRemit held its "initial coin offering" (ICO), a form of online crowdfunding where people purchase the tokens to be put in circulation for use in eight countries, mostly in Africa and the Middle East.
The 500 million tokens, each worth two US cents, sold out in just two days and were snapped up by major cryptocurrency players, including South Korea's Hashed, raising $7 million for the company.
Cryptocurrencies are a way for Africans to make payments online and abroad when banks or transfer companies won't, or only for high fees
"We were expecting scam allegations," said Samuel-Biyi, referring to Nigeria's unenviable reputation for online financial fraud. "But the world really accepted it."
If the token system works, SureRemit stands to take a chunk of the world's remittance market, which was worth $429 billion in 2016, according to the World Bank.
It's hardly surprising that SureRemit was conceived in Nigeria: remittance flows that year were worth $19 billion—more than four percent of GDP.
Sub-Saharan Africa has some of the highest remittance costs in the world, with the most expensive fees seen within the continent.
To send money from France to Mali incurs a five percent fee, a quarter of how much it costs to send from Nigeria to Mali.
Such high fees have for years forced Nigerians to find alternative, sometimes risky, ways to transfer money.
"I remember back in 2004, e-gold (a defunct digital currency) was the only option anyone in Nigeria had to make online payments," said Tim Akinbo, the founder of Tanjalo, a Nigerian exchange where people can buy bitcoin with the local naira currency.
"There are still African countries cut off from international commerce online. Bitcoin is technology that allows financial inclusion."
The depreciation of the naira, which has sunk to 305 against the US dollar from 169 in 2015, has made cryptocurrencies even more attractive—and the authorities are paying attention.
Nigeria's central bank governor Godwin Emefiele warned recently that "cryptocurrency or bitcoin is like a gamble", though the Senate has launched an investigation into "the viability of bitcoin as a form of investment".
Stern warnings haven't made an impact on trading, said Owenizi Odia, Nigeria spokesman for Luno, another cryptocurrency exchange operating in the country.
"I think there's an acknowledgement that this technology is the future, going beyond bricks and mortar to improve cost efficiency," added Muyiwa Oni, an analyst at Stanbic IBTC Holdings in Lagos.
"For now we're still trying to distinguish who the main players will be."
Samuel-Biyi hopes to be one of them.
"Whether or not the authorities call it gambling, Nigerians are just looking for any opportunity to get ahead of the curve," he said. "It's part of the hustle."
Central banker takes stab at bitcoin ‘bubble’ - THE GUARDIAN
The head of the Bank of International Settlements, the central bank for central banks, on Tuesday lambasted bitcoin as a speculative bubble and said authorities need to be ready to protect public trust in the financial system.
While acknowledging the intention of bitcoin’s developers to create an alternative payment system with no government involvement, “it has become a combination of a bubble, a Ponzi scheme and an environmental disaster”, said BIS’s general manager, Agustin Carstens.
Delivering a lecture co-hosted by Germany’s central bank, Carstens said that authorities need to be vigilant as cryptocurrencies could undermine the public trust in the financial system.
While cryptocurrencies, led by bitcoin, soared in value last year, authorities in most countries stood on the sidelines, while in some countries they embraced the technology that promises to cut the costs of financial transactions.
But as the value of bitcoin — the best-known virtual currency — has tumbled from its December high of nearly $20,000 to less than half that value with wild daily swings, regulators have taken a more critical outlook.
China recently vowed to fully stamp out cryptocurrency trading after cracking down on it late last year. South Korea has also cracked down on cryptocurrency exchanges to reduce the risk of money laundering.
Carstens said the volatility of cryptocurrencies undermined their utility for transactions and a store in value, thus apparently leaving their main use as a means for criminals to move money.
“If the only ‘business case’ is use for illicit or illegal transactions, central banks cannot allow such tokens to rely on much of the same institutional infrastructure that serves the overall financial system and freeload on the trust that it provides.”
He called for particular vigilance in allowing cryptocurrencies to “piggyback” on the financial system with links to regular bank accounts.
A number of leading US and British banks have recently announced bans on purchasing bitcoin and other cryptocurrencies with credit cards.
Bitcoin trading exchanges, which function like brokerages and hold their client balances, have proved targets for hackers, with a Japanese exchange Coincheck hit by a $530 million heist last month.
Carstens, formerly the head of Mexico’s central bank, said that cryptocurrencies may not yet pose a systemic risk.
“But if authorities do not act pre-emptively, cryptocurrencies could become more interconnected with the main financial system and become a threat to financial stability,” he said.
Cryptocurrencies have also come under criticism for using vast amounts of electricity.
DNA shows first modern Briton had dark skin, blue eyes - THE GUARDIAN
A full face reconstruction model made from the skull of a 10,000 year old man, known as ‘Cheddar Man’, Britain’s oldest complete skeleton is pictured during a press preview at the National History Museum in London on February 6, 2018. AFP PHOTO / Justin TALLIS
The first modern Briton had dark skin and blue eyes, London scientists said on Wednesday, following groundbreaking DNA analysis of the remains of a man who lived 10,000 years ago.
Known as “Cheddar Man” after the area in southwest England where his skeleton was discovered in a cave in 1903, the ancient man has been brought to life through the first ever full DNA analysis of his remains.
In a joint project between Britain’s Natural History Museum and University College London, scientists drilled a 2mm hole into the skull and extracted bone powder for analysis.
Their findings transformed the way they had previously seen Cheddar Man, who had been portrayed as having brown eyes and light skin in an earlier model.
“It is very surprising that a Brit 10,000 years ago could have that combination of very blue eyes but really dark skin,” said the museum’s Chris Stringer, who for the past decade has analysed the bones of people found in the cave.
The findings suggest that lighter pigmentation being a feature of populations of northern Europe is more recent than previously thought.
Cheddar Man’s tribe migrated to Britain at the end of the last Ice Age and his DNA has been linked to individuals discovered in modern-day Spain, Hungary and Luxembourg.
Selina Brace, a researcher of ancient DNA at the museum, said the cave environment Cheddar Man was found in helped preserve his remains.
“In the cave you have a really nice, cool, dry, constant environment, and that basically prevents the DNA from breaking down,” she said.
A bust of Cheddar Man, complete with shoulder-length dark hair and short facial hair, was created using 3D printing.
It took close to three months to build the model, with its makers using a high-tech scanner which had been designed for the International Space Station.
Alfons Kennis, who made the bust with his brother Adrie, said the DNA findings were “revolutionary”.
“It’s a story all about migrations throughout history,” he told Channel 4 in a documentary to be aired on February 18.
“It maybe gets rid of the idea that you have to look a certain way to be from somewhere. We are all immigrants,” he added.
Why the stock market plunged Monday - CNBC
- The Dow industrials tumbled more than 1,500 points at one juncture Monday, the worst intraday fall in market history.
- The drop by the Dow was bad enough during most of the trading day, but the dive that happened around 2:40 p.m. ET started to resemble the 2010 flash crash at one point.
The first thing to know about the stock market's eye-watering slide Monday is that it wasn't caused by anything fundamental.
There was no particular piece of news that drove the major averages to capsize, in a move that sent the Dow industrials off more than 1,500 points — a new intraday record — briefly in the final hour of trading.
Instead, the market took on a mind of its own, where sentiment and likely some computer-programmed trading sent Wall Street into a bizarre tizzy. Fear brewed over a number of issues, with the biggest being trepidation about rising interest rates even though government bond yields actually were lower on the day.
"Panic is already starting to set in, which is kind of incredible when you actually think about it," said Michael Yoshikami, CEO of Destination Wealth Management. "The S&P is trading where it was in sometime in December. So it's not like we're retracing an entire 12 months of returns here. I think investors are just understandably nervous. It probably is programmed trading kicking in at this point."
Others blamed the Fed for the market breakdown, or least the mentality that led to the selling climate.
The central bank, following its meeting last week, noted that inflation looked to be on the uptick. That put the market on notice, a point that was echoed when the government Friday said average hourly earnings rose 2.9 percent in January, the fastest move of the recovery.
Investors' minds quickly turned to a more aggressive central bank and the prospect of a faster pace of interest rate hikes.
"I'm not worried about this move. This is all a Fed move," said Joe LaVorgna, chief economist for the Americas as Natixis. "If you don't think there's inflation and you don't think the Fed's going to be as aggressive as the hawks would have you think, this equity sell-off should be bought."
Still, investors could be forgiven for having flashbacks about some of the market's most vicious drops. The Dow fell throughout the morning, but the dive that happened around 2:40 p.m. ET actually resembled the violent 2010 flash crash. However, no trading desks contacted by CNBC reported trading issues in Monday's big sell-off.
Sure enough, markets recovered somewhat just as they did that on that May 6 event nearly eight years ago.
But the damage could be substantial to the collective investor psyche.
"This is scary. A lot of people made a ton of dough over the last nine years," said Stephen Weiss, founder and managing partner at Short Hills Capital Partners. "I think we've got some more to go. There's not a catalyst to step in."
The frightening contraction happened to a market that looked bulletproof.
The Dow had soared more than 40 percent since President Donald Trump's election, a period that included an impressive nearly 20 percent rise in the S&P 500 for 2017 and the fastest start ever to a year in 2018.
"The market simply did not take into account that you can't go up like this that long," Yoshikami said.
"The key thing that I think people keep in mind here is that the market moves a lot very quickly, it doesn't mean fundamentals are changing that quickly," added Richard Bernstein, CEO of Richard Bernstein Advisors. "What you are seeing is the recalibration among investors that we actually are in a late-cycle environment."
—With reporting by CNBC's John Melloy, Bob Pisani, and Michelle Fox.
Bitcoin continues to tumble, briefly breaking below $6,000 - CNBC
- The digital currency briefly falls below $6,000 to its lowest since mid-November, according to CoinDesk.
- The decline follows reports in the last week that have raised worries about increased regulation and potential price manipulation at a major cryptocurrency exchange.
- The heads of the U.S. Securities and Exchange Commission and Commodity Futures Trading Commission are also set to testify before the Senate Banking Committee on Tuesday.
Bitcoin dropped to its lowest in more than two months.
The digital currency fell to a low of $5,947.40, its lowest since mid November, according to CoinDesk, whose bitcoin price index tracks prices from four major exchanges.
At a price of $6,088.02 at 8:56 a.m. London time, the cryptocurrency was down more than 11.9 percent on the day, according to CoinDesk. The site measures bitcoin based on Coordinated Universal Time — currently the same time zone as the U.K.
With that decline, bitcoin has now lost more than 50 percent for the year so far.
Bitcoin 12-month performance
The latest sell-off follows reports in the last week that have raised worries about increased regulation, hackers and potential price manipulation at a major cryptocurrency exchange. On Friday, J.P. Morgan Chase, Bank of America and Citigroup also said they have decided to ban cryptocurrency purchases by their credit card customers.
A report from China's Financial News on Sunday said authorities will increase efforts to restrict virtual currency trading platforms, especially those that may have moved overseas following Beijing's ban on initial coin offerings in September. The South China Morning Post first highlighted the report.
The heads of the U.S. Securities and Exchange Commission and Commodity Futures Trading Commission are also set to testify before the Senate Banking Committee on Tuesday.
In prepared remarks, SEC Chairman Jay Clayton said investors should remain cautious about investing in cryptocurrencies and gave an overview of the commission's efforts so far.
Bitcoin remains several hundred percent higher over the last 12 months, while ethereum and ripple are several thousands of percent higher.
Bitcoin price will crash to zero, Nouriel Roubini says - CNBC
- The noted economist thinks the price of bitcoin is going to zero.
- Roubini, who is also known as "Dr Doom," claimed some people will use a market manipulation tactic known as wash trading to prop up the bitcoin price.
- He called bitcoin the "biggest bubble in human history" last week.
David A. Grogan | CNBC
Noted economist Nouriel Roubini thinks the price of bitcoin is going to zero.
The chairman of Roubini Macro Associates, also known as "Dr Doom" for his pessimistic economic outlooks, called the price crash on Twitter on Tuesday.
Bitcoin crashing now to $6,100. And the US Hearing on cryptoscams is only a day away. So a $5K handle looks highly likely unless the crypto-manipulation gangs starts pumping and dumping or wash trading again. So HODL nuts: be ready for a 75% loss from recent peaks.
As expected Bitcoin now crashes below $6000. Now the $5K handle is reached. And the US Congressional Hearing on Crypto-Scams is still a day away. HODL nuts will hold their melting Bitcoins all the way down to ZERO while scammers and whales dump and run...
Roubini was referencing a Congressional hearing that will see Christopher Giancarlo, chairman of the Commodity Futures Trading Commission (CFTC), and Jay Clayton, chairman of the Securities and Exchange Commission (SEC), testify in front of lawmakers about cryptocurrencies.
The economist also used the term HODL, which stands for "hold on for dear life." Itoriginated in an online forum when someone spelled the word "hold" wrong. It has now become a meme and is often used in times of extreme volatility in the cryptocurrency market for people holding rather than selling.
Roubini said that "HODL nuts" will hold bitcoin until it plummets to zero.
Dr Doom also said that traders will use wash trading to prop up the prices. Wash trading in the crypto world involves someone buying and selling their own order to manipulate markets. Some have feared that wash trading takes place on bitcoin exchanges.
Roubini asked if the authorities will look into this practice.
As Bitcoin crashes to a $5K handle the wash traders move rapidly into action to prop it up...price and quantity action now clearly consistent with criminal wash trades...will the SEC and CFTC start looking into these criminal activities?
His tweets followed comments on Bloomberg last week in which he called bitcoin the "biggest bubble in human history."
Cryptocurrencies have seen a major sell-off in the last few days. Bitcoin fell below $6,000 for the first time since mid-November on Tuesday. Other major cryptocurrencies are all well off of their all-time highs.
Manufacturers spend N66bn on gas, diesel, inverters in 6 months - BUSINESSNESS
Nigeria’s manufacturers are spending more on diesel, gas, inverters, UPS and other alternative energy sources, indicating poor levels of power supply across Nigeria.
Local manufacturers spent N66.03 billion on alternative energy sources between January and June 2017, as against N62.96 billion expenditure made in the same period of 2016, according to a latest report prepared by the Manufacturers Association of Nigeria (MAN), sent to BusinessDay.
The largest chunk of expenditure went to diesel, which occupied 39.4 percent of the total. While N26.02 billion was spent on diesel, N21.35 billion was expended on procuring new generators within the period.
Also, manufacturers spent N17.75 billion on gas, while N906 million was for inverters, UPS, and other power storage and purifying gadgets.
“Energy shared 36 percent of the total cost of production in the manufacturing sector within the period. This accounts for the poor competitiveness of made-in-Nigeria goods,” MAN says.
The report shows that the average daily electricity supply in H1 of 2017 declined to five hours, from seven hours supplied in the corresponding period of 2016 and eight hours in the preceding half.
Poor power supply ranks among the biggest challenges facing Nigerian manufacturers, which also include lack of or limited availability of good transportation systems, water, credit and high taxes.
Diesel is mainly used by small and medium manufacturers, while large enterprises, including conglomerates and multinationals, use gas plants.
Aliko Dangote, president of Dangote Group, installed coal-fired plants for his cement factory in 2016, and urged large enterprises with financial muscles to do the same. Coal is cheaper than gas, diesel and Low-Pour Fuel Oil (LPFO).
Gas is however subject to availability. Early this year, the Escravos-Lagos Pipeline (ELP), a natural gas pipeline, which supplies gas from Escravos region of the Niger Delta area to Lagos, was ravaged by fire, shrinking the levels of gas available for manufacturers.
Gas users contend that dollarising the product is not in the interest of manufacturers who are scrambling for dollars to import inputs.
“There is a need to review the pricing policy of gas companies which prescribe payment in dollars for gas used by industries,” Babatunde Paul Ruwase, president, Lagos Chamber of Commerce and Industry (LCCI), said at the State of the Nation press conference in Lagos on January 24.
“We believe this is not consistent with the objective of promoting industrialisation, economic diversification and job creation. Most manufacturers are producing for the domestic market; it is therefore inappropriate to compel them to pay for gas in dollars,” Ruwase said.
Similarly, manufacturers are increasingly abandoning power distribution companies popularly called DisCos for private companies that can provide 24-hour incremental and quality electricity at cheaper rates.
Already, the Manufacturers Association of Nigeria, through its recently formed MAN Power Development Company, has signed an agreement with Tower Energy Solution & Systems Limited for the supply of six to 10 megawatts (MW) of electricity to Henry Carr Industrial Cluster in Ikeja, Lagos.
MAN has an agreement with Negris Group for the supply of up to 80 MW of electricity to Odogunyan in Ikorodu industrial cluster.
The organisation is also talking with solar power supply firms in the northern Nigeria, where there is limited gas supply, to enable clusters in Kaduna, Kano and other parts of the north to have incremental power at cheaper rates. Similarly, a negotiation is on the pipeline with Sahara Energy, Geogrid LighTec Limited and other companies for the supply of power to industrial clusters, according to Ibrahim Usman, chairman of MAN Power Development Company Limited.
“The idea is to be able to put manufacturers together in clusters and arrange for power, which can be supplied through providers that will engage in power supply through hydro, solar, gas and will remove the cost of manufacturers getting involved in producing their own power, “ said Reginald Odia, chairman of Economic Policy Committee of MAN and director of the MAN Power Development Company.
Nigeria’s petrol price peg distorts West African markets - BUSINESSDAY
Nigeria is not only the biggest country in Africa; it is also the continent’s most foolishly generous. With 20 million litres smuggled out of the country daily, Nigeria’s subsidised petrol is a favourite commodity on West Africa’s black markets.
The sale of illicit Nigerian petrol has become widespread across the West African sub region helping to oil black markets and distorting price mechanisms of these countries. Nigeria’s retail price peg of N145 per litre is not only hurting investments in the downstream sector, it is encouraging smuggling across its porous borders.
On roadsides in Cameroun and other West African countries, vendors fill customer’s car, using the cut-off top of a plastic bottle as a funnel. The fuel is less expensive with a 30 litres of petrol costing FCFA 17,000 in the country rather than FCFA 19,000 at the pump according to a report by African Arguments, a pan-African news platform on issues plaguing Africa. This translates to N382 per litre on the streets and N426 per litre at the pump.
With landing cost of petrol in Nigeria put at N171 per litre, the Nigerian National Petroleum Corporation (NNPC) incurred N37 on each litre of fuel at a depot price of N133.80, leading to a daily subsidy of N2.046billion for 55million litres. The landing cost of petrol has been higher than the pegged retail price of N145 per litre, after crude oil prices rose to $45 per barrel in January 2017.
This puts total subsidy spends since February 2017 to date at N746.79billion, according to BusinessDay calculations. There is no better manual on how to self-destruct an economy.
This figure is higher than budgetary allocation for the ministry of Power, Works and Housing (N555.88bn), transportation (N263.1bn), Agriculture and Rural development (N118.98), Universal Basic education (N109.6bn) and combined capital expenditures for defence (N145bn), health (N71.11bn) and education (N61.7bn) according to an analysis by SBM Intelligence.
On January 24, the Nigerian National Petroleum Corporation (NNPC) raised alarm over the sustained nefarious activities of some cross-border fuel smuggling syndicates that makes it difficult to account for about 20million litres of fuel a day.
Maikanti Baru, Group Managing Director of the state-owned corporation, told the Joint National Assembly Committee on Petroleum Downstream that if the activities of the fuel truck diverters and smugglers were left unchecked, it would constrain local supply.
Worse still, the economies of these neighbouring countries, such as Benin, Ghana and Togo are feeling the squeeze. At the 11th edition of Oil Trading & Logistics Expo that held in Lagos from October 23 – 25, Mohammed Amin Adam, deputy minister of Energy Ghana while delivering the keynote address, said Nigeria’s regulated price is distorting price mechanisms in the region.
Adam said that policy is not only unsustainable but creates problems for its neighbours. Adam argued that since Nigeria constitutes the region’s biggest market, its policies has serious impact for other countries in West Africa.
“On this note, I wish to call on the Nigerian government to make efforts at reaching full price deregulation given that it is the largest market for products on our continent and any failure at reaching full price deregulation will lead to distortion on the sub regional market on the continent,” said Adam.
Petrol smuggled from Nigeria is known as “Funge” or “Zoa Zoa”, in Cameroon’s North West region.
“When police officers raid this area and collect bribes from vendors, they increase prices to make up for what they paid to the police,” someone patronising the roadside fuel sellers told Africa Arguments. In the city, buyers say price is far from the only benefit to buying petrol in this way.
“We don’t only buy because it is cheaper,” he says, “but also because it is available everywhere and at all times.”
Despite the fact that Cameroon is one of Africa’s biggest oil-producers and sold 17 million barrels of crude in 2017, sale of illicit Nigerian petrol has become a common sight across the country. Meanwhile, in Nigeria where, over 1.9million barrels are produced daily, citizen’s continue to sleep in fuel stations to get petrol subsidised in Lagos and Abuja.
A centrally controlled market for petrol which is the most consumed petroleum product in the sub region creates room for smuggling and discourages investments in the downstream sector of the region, stakeholders say.
“At the same time, we must put in place polices that punish domestic anti-competitive behaviours. This will make deregulation polices become effective instruments for increase in public confidence in our markets and prevent us from turning to the days of subsidies and under recoveries which have very negative long-term effect on many economies on our continent,” said Adam.