ECONOMIC CHALLENGES BEFORE JONATHAN AND HIS MINISTERS
While some people believe that the beautiful credentials of some of the new appointees would translate to quality performance, others do not think so. They pointed at the fuel crisis that paralysed the economy few months back despite the fact that the man in charge of the black gold was a dye in the wool as far as that sector is concerned.
As an adjunct to this, they cited the ongoing bank crisis in the banking sector. They argue that the furore generated by the take-over of eight banks by the Central Bank of Nigeria (CBN) , which is being manned by a banker brandished as a seasoned risk manager , as well as the prosecution of some of their helmsmen by the Economic and Financial Crimes Commission(EFCC) over quality of loan portfolio of the banks have contributed in no small measure to the current cash squeeze.
It is on this basis that the Chairman of Nigeria Economic Summit Group (NESG), Mazi Sam Ohuabunwa, expressed fears that the country faces a rough road to recovery in 2010 with the challenges posed by persistent lack of access to credit, reduced external reserves, volatile exchange rate and mass infrastructure deficits, among others.
The challenges facing the federal cabinet are quite daunting indeed. But they are not insurmountable. First on the list is power problem. As it has been stated several times, the Organised Private Sector (OPS) is seriously concerned on how to reposition industrial sector in 2010. They feel that the critical issue deserving priority attention for the revival of industrial sector is the poor energy situation, especially the epileptic power supply.
The promise to achieve 6,000 mega watts by December 2009 failed to materialise.The President of the Manufacturers Association of Nigeria (MAN) Alhaji Bashir Borodo, wished the government build on whatever progress made in the energy sector. He said the government should decide once and for all whether the oil price would be deregulated or not. 'And there is also the need for an official price on gas.
This is because presently, the price of gas is predicated on black oil, which is deregulated. This should be linked. Why should we link the price of gas to Low Pour Fuel Oil (black oil)?' He queried. Borodo, therefore advised government to decide on the issue so that the nation can keep moving.
Also, the National President of Nigerian Association of Chamber of Commerce , Industries, Mines and Agriculture (NACCIMA), Dr. Simon Chukwuemeka Okolo , said that the Federal Government must support the local industries, adding that the government must focus on improving on capacity utilisation in the real sector through appropriate fiscal and monetary measures as well as intensifying efforts to improve power supply.
The NACCIMA boss said lack of funds and other challenges have made it difficult for firms to operate and as a result, they relocated to Ghana. He wants the government to urgently pursue policies and programmes that would energise the interface of the industry and agriculture, particularly in realising the National Developmental Goals.
On his part, the president of the Nigeria Labour Congress (NLC), Comrade Abdulwaheed Omar, expressed the need for a common platform for genuine development. He prayed that the next eight months would be transformed into a period of prosperity, national rebirth, political renewal and cohesiveness.
To pursue these, the Acting President and his new team face an uphill task
The labour leader therefore called on the Acting President to allow the new Finance Minister, Mr. Olusegun Aganga, do his work, saying that if he wants to liberate the economy, he should not be caged.
The Executive Director of UTRM Limited, Engr. George Uforo, an infrastructural development and maintenance expert , believes that Jonathan's government is in a tight situation, but advised him and the cabinet to focus on short-terms projects. Some of their projects should spill over to next administration.
Hear him: 'They should look at the power situation. They should give incentives to contractors to enable speed up projects completion. The incentives would cause increase in resources and manpower. In the short- term, they should embark on setting up plants that could be completed within six months, such as wind power (fans). They can go into wind farms that could generate 600 MW or less. They could use the coastal areas where the winds are more for setting up of the Wind Farm Power Project. There can be smaller Wind Farms that can generate 2.5MW (single units). This can be sited in small rural communities where there is power or electricity distribution problem.'
He said that thermal engines could be converted to join the national grid to help solve the emergence power need instead of waiting for the big power project, which is long-term.
On the long-term, Uforo said: 'We simply have to build more power stations using all the options like thermal engines, hydro, sun, wind, sea tide etc. We must use the mixture of these for a long-term power solutions. We need to emphasis on gas. We should use gas in all power projects. In Mobil, my experience since 1972; was that Mobil uses gas both on-shore and off-shore projects. Mobil used gas on oil production. They use part of the gas they flare to power the generators. Mobil usually don't use all the power generated, and so they distribute the excess to the surrounding communities.'
Uforo said that the government's long-term power project should include uses of gas. 'We should use all forms of energy that is available to us. Some of these are natural gifts. When the winds are blowing very high, we should use wind and when it reduces, we use gas. Why are we talking about gas flaring when it can be tapped for long term for power generation? The use of these natural gifts of power generation could get us carbon credit because of using natural (green) energy.'
On the medium term, he recommended outright sale of power generation and distribution sectors, while the government should retain transmission. 'There should be a quick evaluation, and bids. The bidding for sales should be done internationally so that foreign investors will have confidence in the processes. The power distributions should be handed over to not less than five firms and not more than six firms.
'In oil industry, if one of our filling stations goes down for whatever reasons, we would begin to count on the number of litres we lost. So the firms that will buy the generation and distribution will surely handle services strictly as a business and will ensure strict sales of the generated power to end-users (consumers).
Uforo recommended immediate increase of electricity tariff by up to 200 per cent, because he believes it will encourage both local and foreign investors to get involved in improving power generation and distribution. He said the generated power must be sold with good incentives to private investors.
Many people may not welcome this recommendation but I believe that some will prefer to pay more to have regular power supply. For example, I pay N5, 000.00 monthly to PHCN for electricity bill, but I spent N95,000 monthly on diesel for my office alone. So, I will prefer to pay N15, 000 PHCN electricity bill monthly to have regular electricity power supply instead of spending N95, 000 monthly on diesel. Foreign investors will only come into power sector when they are sure that there will be good returns on their investments.'
To help stop the regular presence of fuel queues, the Infrastructural development expert recommended outright sale of the three refineries within the next nine months. He said: ' Government should remove the unlimited cap on the cost, let there be a formula to be agreed on between government and the public. It should not be like that of the GSM (phones) in telecom.
There should be fairness both to the operators and consumers .We nationalised the refineries but could not run them. The refinery was initially owned by Shell. So it will be helpful to allow investors to come into oil refining in Nigeria.' He said there is not much to do in short-term to stop queues at our filling stations 'unless the Minister of Petroleum Mrs. Diezani Alison-Madueke decides to use the proceeds from the suggested sales of the three refineries to boost fuel supply.
The time is too short to fashion out an emergence solution.
Uforo thinks that government could go into quick joint ventures with some cheaply managed refineries abroad, and this could be done within six months. For the long-term, the minister could use the Petroleum Industrial Bill (PIB) to ensure that there is fairness. No investor desires to lose his or her capital. The government should forfeit 10 per cent of its investment to the oil producing communities to ensure peaceful environment. Government and investors need peace to succeed.
Everything should be done to ensure peace in the Niger Delta.'
The National President of the National Union of Banks, Insurance and Financial Institutions' Employees (NUBIFIE), Comrade Hassan Adeleke, said that the Governor of Central Bank of Nigeria (CBN), Mallam Sanusi Lamido Sanusi, should take it easy with his banking reforms rush everything at the same time because he cannot fix all the wrongs in one day. 'If it is slow and steady, you win the race,' he said.
He called on both Aganga , the finance minister, and Mr. Remi Babalola, the Minister of State, to continue where the former finance minister stopped, advising them to look into the errors and amendments of the previous minister, and from there, march forward.
He added: 'The CBN governor should work hand in hand with the Finance Minister because I think the CBN is under the supervision of the Ministry of Finance. My belief is that the Acting President has done well to change the cabinet. The former ministers were loyal to Yar'Adua, though he may have some of them who were loyal to him.
The change of cabinet would bring loyalty and stability in government. The same happened in the banking sector, because the new management came and sacked all the staff whose loyalty they doubted and engaged those who they believe would be loyal. The Acting President has done very well. The new ministers will be loyal to him. The new cabinet will be in total control. The beauty of the new cabinet is that it will help the acting president to be in control of the government.
As he is in Power Ministry, so was the former president Olusegun Obasanjo. Now, Jonthan is the pivot of the economy, so he saw the need to oversee and hold on to the Power Ministry. I think he is ready to work. Fourteen months are enough for him to leave behind a legacy. I believe, he has no apology to anybody. He is on the right path. I pray God to be with him and those who are working with him.
The new Minister of Finance, Mr. is an economist to the core. I believe if he wants to liberate the economy, he should not be caged. He should be allowed to do his work. Workers in the oil and gas industry have demanded speedy transformation of the Nigerian National Petroleum Corporation (NNPC) into a world-class state firm that could compete and undertake projects in the global market.'
The Secretary-General of National Union of Petroleum and Natural Gas Workers (NUPENG), Elijah Okougbo and his counterpart in the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), Bayo Olowotile , said Mrs. Allison-Madueke , and the new Group Managing Director of NNPC, Mallam Shehu Ladan, should transform the NNPC to a profit-driven company that delivers prompt services and at the same time competing for projects in the global arena.
The unionists also want more focus and priority given to the maximization of the benefits of crude oil exploitation to reflect in the wellbeing of Nigerians, while greater efforts should be made to raise the percentage of petroleum products refined locally, while the Department of Petroleum Resources (DPR), he saw, should be strengthened to perform its regulatory rule effectively in the industry.
'It is an irony that after almost 50 years of operating as an oil producing country and as one of the world's top 10 oil producers, we don't have a state-owned firm that can speak for us in the international market,' decried Olowotile.
'We have wasted time so much, in the short term, the new minister and GMD of NNPC should start that process immediately so that the NNPC can compete with its counterparts around the world like those in Brazil and Malaysia are doing now.
For Mrs. Allison-Madueke, who is Nigeria's first female petroleum minister, she faces the challenge of implementing the soon- to-be-passed PIB, which seeks among other things, to unbundle the various subsidiaries of the NNPC into distinct and independent firms. The PIB also targets increasing Nigerian content in the industry and more revenue earnings for the country via fresh tax regimes, which have been considered rather unfriendly by the International Oil Companies (IOCs). She has an enormous challenge and the time is short; just over a year. That's the more reason why she should set realistic targets; and one of such is a result oriented NNPC,' said Okougbo.
Okougbo said that whatever targets are set for the industry under the new leadership would be futile if the root cause of the Niger Delta crisis is not properly addressed.
'The new petroleum minister and NNPC GMD will not breathe life into the oil and gas if that is what the government expects them to do, unless there is peace in the Niger Delta. Government should immediately start the rehabilitation and integration of the militants; the infrastructural developments of the Niger Delta region should also start, so the people can see; and with peace in the region, the oil and gas firms must also start to massively employ indigenes - these remain the panacea to the development of the industry.'
Olowotile noted that the citizenry had not realized the maximum potentials of being indigenes of an oil-producing nation and wants government to judiciously use oil earnings to improve on life of the people. He wants to see functional refineries and an end to the regime of importation of petroleum products from the international market.
'Singapore alone has about 32 functional refineries; we have none in Nigeria, rather we are importing. I want this to end; the new minister should change the status-quo.'
The labour scribe also urged the DPR to be strengthened for efficiency
'The DPR is ill-equipped, understaffed and not properly motivated, I will like to see the new minister moving in to change the state of things in the DPR for the better,' said Olowotile. 'It will be very difficult to expect quality results without having a competent regulatory agency.'
President and Chairman of the Council of the Institute of Loss Adjusters of Nigeria (ILAN), Mr. Darlington Mgbojikwe and Managing Director and Chief Executive Officer of Guinea Insurance Plc, Mr. Nicholas Ojinnaka, also called on Jonathan and his cabinets, especially Finance minister , to formulate policies that will revive the econpmy
They advised that government should direct its energy to provide electricity, improve road network, and develop infrastructure that will enhance micro-economic activities.
Ojinnaka who said that 'Nigerians immensely need regular electricity because power supply is the pivot of all economic activities, advised the Acting President to listen to the people, let his administration as short as it may, be known for providing electricity. He should chart a revolution in the power sector and thereby immortalise his name, even if he fails in all other sectors, but let him ensure that electricity supply is regular, his generations to come will be blessed by God.
The regular electricity supplies, improvement of road network and infrastructural development would enhance economic activities,' adding that insurance firms would benefit from that situation.
He expects the new ministers should live up to expectation of the Acting President and the Nigerian people. 'If I were in the shoes of the Acting President, as I had been saying, he should concentrate on two or three major issues, and that should be to provide regular electricity, improvement of the nation's road network and infrastructural development.'
The Insurance guru, who explained that the industry is not isolated from all other sectors of the economy, stated that if the budget can drive all other sectors of the economy, insurance will derive from that. If the economic activities increase, insurance would benefit from the right implementation of the budget.
'Implementation has always been the problem. The people whose responsibility it is to implement the budget do not know or do not have capacity to carry out such budget implementation. I advocate that technocrats be put in the implementation of government policies.
'There should be clear distinction between politicians and technocrats as it applies to government policies and programme implementation are concerned. Technocrats are always preferred.' Ojinnaka advised further that there should be separation between economic budget and political budget because governments used budget in the past to fund electoral campaigns, which he said should not be so.
The ILAN president hoped that the combination of the technocrats in the Ministry of Finance should raise the economy to an enviable level. He said that the economy is on the ground, noting that the situation now is that interest rates are down and banks are not giving credit. 'The political instability has caused unrest in the economy. The bankers are very cautious and are not giving out money for other economic projects. All I am saying is that, now that we have new ministers in Finance Ministry, there should not be another economic team to set up a new agenda that will help restore the economy again. Nothing is going on in the economy. We have lost a quarter of the year for obvious political and economic reasons.'
He said that there is so much money in the banking system that is not being used for any economic development because the bankers are afraid to give out loans. Mgbojikwe said he hopes that the marching orders that Acting President gave to new ministers kickstart the economy. As a stakeholder in insurance sector are pleased to know that Babalola was re-appointed as Minister of State in the Ministry of Finance maybe , he said, because of the innovations he introduced in Insurance industry in the past years supported by National Insurance Commission (NAICOM).
He opined that there should not be any policy summersault in the industry. Talking about the Insurance Laws Review committee report, he complained that the stakeholders were not carried along by the committee in their work, saying that the input of operators made, were not considered. He said that since after the Committee submitted its report, there has been conflicting information, he said to ensure progress, 'what the Minister of Finance should do is to look at how to move the economy forward . We understand that banks are not lending and the economy is not moving. So this should be their primary concern to make the economy pick up again. Now that Acting president has taken executive decision, one hopes that there will be generation of employment and other things to improve.
'We expect that the Minister of State who is supervising the insurance sector should not send that Committee report to National Assembly until when a forum where stakeholders can discuss it and make their own recommendation is held, otherwise the report will be to the detriment of the Insurance industry,' he said.
'The new ministers should always carry operators in the industry along in policy formulation so that professionals can make their input and this will help to avoid killing the insurance industry,' he added.