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Ashade: Re-enacted Land Use Charge not punitivecent

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Ashade: Re-enacted Land Use Charge not punitivecent

Mr. Akinyemi Ashade is the Commissioner for Finance in Lagos State. Since coming on board, he has been finding it rough convincing the public, especially property owners, real estate investors and business owners, to embrace the re-enacted Land Use Charge Law in the state. In this interaction with journalists, he sheds more light on grey areas of the law with regards to increase in fee and reasons for market value formula for property valuation.DAYO AYEYEMI reports

 

The re-enacted Land Use Charge Law in Lagos State has been causing ripples. What is your take?
I will like to talk about what has happened in implementing the old law, where we are now and the grey areas that we need to clarify so that our citizens are well informed in order to remove wrong perception out there. We are introducing the re-enacted Land Use Charge because Governor Ambode of Lagos believes quite sincerely that Lagosians deserve the best in terms of infrastructure renewal and building of new ones.

The governor is very much concerned about security, infrastructure development and job creation. When we look at infrastructure, for the next five years, we will need to continue to renew them and build new ones, excluding housing, education and health.

We need to spend close to $50 billion yearly. With this, if we had to spend our entire budget without paying salary, but put everything in capital expenditure, it will take us up to 18 or 19 years to be able to fix infrastructure deficit that Lagos has.

Is Lagos State making revenue?
The answer is yes. Are we utilising the one we made in the past for things we need to do? The answer is yes. If we look at what the governor has done in the area of infrastructure renewal along Lekki axis – the traffic gridlock resolution and Ajah flyover, we need to scale up. We also have Abule Egba flyover, building of new bus rapid transit (BRT) lane that would come from the boundary of Ogun State to Oshodi, the Lagos Airport road being turned to 10-lane with different landmarks along the road and also the job creating initiatives. We are setting aside N25 billion as fund to be able to create jobs and help businesses. These are areas we believe quite sincerely that we need to scale up.

For instance, when we look at the deficit, where can we get it? We can borrow, but apparently when we borrow, we borrow at high interest rates and sometimes in the country of ours, at double digit. So, who will eventually pay the borrowed funds? It is all going to come from tax payers. So, what we are now saying is how long do we continue to renew our infrastructure, invest in new ones and still make life meaningful for Lagosians? We just need to go by way of progressive tax regime. That is what the re-enacted Land Use Charge is all about. It is a progressive tax regime because it is a property taxation system relying on property owners.

What is progressive about it?
It is progressive in terms of conception. You have to be a property owner before you pay. If you are not a property owner, you will not pay this tax. It is also progressive because there are different rates along the line. If you are a property owner and you are owner-occupier (you are living in your own property), your rate is quite different and the law provides for 0.076 per cent of the 60 per cent of valuation of your property.

If you are an owner-occupier and you still have tenant in your apartment, the rate is also different. It is 0.256 per cent of 60 per cent of the value of your property. If you are owner of property that you are essentially using for commercial purpose, either for business concerns or renting out completely, you are also liable to pay taxes in a progressive manner. Your rate will be 0.760 per cent of the 60 per cent of the value of your property.

What if this process is manipulated?
Well, I have heard that may be government is just ascribing values and valuation that do not reflect realities. What we just said to ourselves is that the law provides for a regime of self-assessors. All you need to do is to get a property valuer to do valuation of your property. The rates are available and the reliefs attached are also available. We want to bring standardisation to the whole process.

We want to make it easy for people to calculate themselves. If you know the value of your property, you know ab-initio that it is not the 100 per cent of that value that is assessed, it is 60 per cent. So, you enjoy 40 per cent relief and you know the charge rates.

It is far less and that is where we are in terms of how we value some of these properties. The kick-off problem is that the Ministry of Finance wants to implement this with a human face. We have strengthened our help desk and we have our agents in three senatorial districts and local government areas of the state. At the back of your bill, you will see the help desk’s number that you can call if you have a bill you feel you need to talk about and we are ready for dialogue.

Let me say that contrary to what some people may be thinking, the land use charge is not punitive because we don’t want to punish our citizens. We have a situation where people have changed the use of their property, the percentage will be different. If the property owner has been paying the full amount of N1,200 under the old regime, maybe the property has been demolished and now built a mall, he cannot continue to pay same amount on the property because the feature is different. The charge is based on a percentage that reflects the development that has taken place on the property.

How do you explain the situation where the public currently believe and say the charge is a 400 per cent increment? Don’t you think this is much?
People have been saying it is 400 per cent, but the first question to ask them is ‘how much have they been paying?’ People should be able to come out and say I was paying ‘X’ amount. Your property in Ikoyi and Ikorodu, even if they were built the same day, will never attract same amount due to locations and market valuation.

We want people to get to a situation where they can annually, without waiting for their bill, to know what they have to pay Lagos State Government. This is what this new law is trying to institute. We need to be transparent and in terms of ease of doing business, we have to put it out there that land use charge is a consolidation of three taxes: tenement rate, ground rent and neighbourhood improvement charges. All these taxes have been consolidated into one.

The law is now standardised that you now have a situation where you can do it on your own. You can do self-assessment. Once you know your personal identification number (PIN) and property identification number you’ve already been using consistently, you can calculate it on your own. You don’t need to wait for our bill. That is the kind of transparency we want to engender under this present regime.

What should be the age of pensioners qualified for relief under the law?
Let me take you through the regime of reliefs that we have to answer this question. The first relief we have is 40 per cent across board. You don’t need to apply for it. Immediately you have the valuation of your property, 40 per cent of it is off; it is only 60 per cent that is chargeable under the new regime of land use charge.

In addition, if you are a pensioner, the relief moves from 40 per cent to 100 per cent. This is defined under the law. The relief you get is 100 per cent. That is, you are not paying anything at all. That is the safety net that has been provided by the law. Pensioners under this law are people that have been retired at 60 years and above. You have to be in your own property and not rented apartment to enjoy this relief. If your house is more than 25 years, you also enjoy 10 per cent. There is also a regime of five per cent additional relief for people that the law has categorised as having long occupation. There is a general relief that is 40 per cent.

This regime is transparent, as it allows us to engage, it allows us to dialogue so that we get to the right conclusion. Taxation is personal. The law says ‘define who is chargeable?’ They are property owners and holders of long-lease of 10 years and above.

How do you compensate your consultants to prevent them from manipulating the process?
This law recognises that some people are very strategic in determining the market value. These are the professionals. They will be going from house to house for the next six months to do valuation so that we can improve our database and get more property into the database. So, on that basis, we are not going to remunerate them based on the valuation of your property. The valuation expense is going to be borne by government and it is not contingent on the value of any property at all. We have a fix remuneration agreement with them. That is what we are committed to do.

In the event of default by property owners and government’s resolution to seal the property, what happens to the tenants?
The law is not focusing on tenants. The law says that property owner should pay. It is property owners’ responsibility to pay Land Use Charge. So, if we now get to a situation where you have property owners that are not paying and get to situation where we are now sealing or enforcing, we will do it with human face. Government is meant to address people’s concerns and make life easy. It is not as if we are not going to enforce, but the enforcement will not be in a way that our citizens will be worse-off. We are not going to throw our citizens to the streets without recourse to where they can lay their heads. That is not going to happen under this regime.
If the tenant now comes and pays, it can be taken off his/her rent. The law makes provision for that and the Lagos Tenancy Law also made provision for protection of tenants in this arrangement.

Why are you not basing Land Use Charge’s formula on rental income from the property rather than market value?
The law made provision for market value, professionally determined by estate valuers. They are the professionals. I have read it that they have five different ways of determining this. The law specifies one. The law allows us to just determine the market value.

You may ask ‘why the market value? It is just standardisation. For example, you have two properties with same specifications in Ikoyi and Ikorodu at the same cost. If I am using that cost, it is not a full reflection of the valuation of that property. That is why market valuation has come to the rescue.

We even recognise that when you do market valuation, it is not the total market value that is chargeable under the Land Use Charge Law, it is only 60 per cent of it. Market value is a leveler for everybody. It provides standardisation. We are using market value because we want everybody to be armed with nitty-gritty of how to calculate the charge.

Don’t you think the rate is still high?
Well, I just want to put it into perspective so that you can understand this. I will paint a certain scenario using different matrix. The first one I will use is owner-occupier, owner-occupier with third party (you are owner-occupier and still rent part of the property), and then house that is 100 per cent rented out (commercial building).

The first scenario is a property that the value is N15 million, without giving you additional specific relief. Let’s say you enjoy the 40 per cent relief for everybody, the assessable value of the property is N9 million. So, ab initio we have taken our 40 per cent. For the N9 million, if you are owner-occupier, your charge rate is 0.076 per cent. In this hypothetical case now, the amount payable as tax comes to N6,840 per annum – that is N570 per month. That is what the Lagos State Government is asking a property owner with a valuation of N15 million to pay.

The second one is a scenario where you have rented out that N15 million-valued apartment for commercial purpose. The rate is 0.76 per cent. Under this category and at 60 per cent valuation, you enjoy a relief of 40 per cent, you have N9 million left.

You will only pay N68,400 per annum as land use charge, which is N5,700 per month. The third scenario under the same category is that you have N15 million valued property and you are owner-occupier, renting part of the house (you are co-habiting with a tenant), the rate is also quite different. Your charge rate is 0.256 per cent. That will amount to N23,000 per annum, which is N1,920 per month. That is the tax under N15 million valued property put into three categories of use.

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Qatar Airways to take 60% stake in new Rwandan international airport

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Qatar Airways to take 60% stake in new Rwandan international airport

Qatar Airways has agreed to take a 60% stake in a new $1.3 billion international airport in Rwanda, the state-run Rwanda Development Board said on Twitter on Monday.

The board said a first phase of construction would provide facilities for 7 million passengers a year in the Bugesera district, about 25 km south east of the capital Kigali. A second phase, expected to be completed by 2032, would double capacity to 14 million passengers a year.

The country’s infrastructure minister Claver Gatete told a news conference that a construction company was still being sought to build the airport, and that once work starts, the first phase would take five years to complete, reports Reuters.

Qatar Airways declined to immediately comment outside of normal business hours.

The plans for the new airport are a modification of those drawn up in 2017 for a smaller facility with a maximum capacity of 4.5 million passengers a year in the same location.

Company and government officials said at the time that Rwanda had signed a deal with the African division of Portuguese construction firm Mota-Engil (MOTA.LS) to build an international airport at a cost of $818 million.

Gatete said the investment from Qatar Airways would enable it to build the larger airport.

“We are looking for a bigger sized airport. That’s why we are looking for a bigger investor,” he said.

Qatari ruler Sheikh Tamim Bin Hamad Al Thani is currently visiting Kigali for the presentation of the International Anti-Corruption Excellence (ACE) Award.

Gatete said there was also a possibility that Qatar Airways would help state-run carrier RwandAir to expand, but gave no more details.

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Virgin to deploy A350 in Lagos, unfolds 2020 plans

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Virgin to deploy A350 in Lagos, unfolds 2020 plans

Mega carrier, Virgin Atlantic, has concluded plans to deploy some of its new newest airplanes, the fuel efficient, noise compliant A350, on London-Lagos route beginning from August 2020.

This is due to the strategic importance they attach to Lagos route.

The Chief Executive Officer of the airline, Shal Weiss, made the disclosure when he visited Nigeria.

Weiss was in Nigeria as part of the airline’s strategic growth to reposition and consolidate on its lucrative London-Lagos route. which was launched 18 years ago and to hold business meetings with airline strategic partners.

He told New Telegraph that the airline customers were going to enjoy incentives, stressing that Virgin Atlantic had returned to profitability and ready to launch more routes to South America.

The airline, according to him, is already phasing out its iconic B747 and A340 airplanes, which it hitherto deployed on the London-Lagos route.

His words: “The plans are to retire the old planes like B747 and A340 for the new ones that are coming. B747 by the way has been a fantastic plane. Everybody loves the B747. The passengers absolutely love it especially the upper deck but it has been 50 years that it has been flying and there are new technologies, better planes, more efficient, more noise efficient and we are moving to those. We are not saying we have been operating B747 for 50 years. We retired one actually last week.”

Asked if the carrier was looking at expansion into more cities in Nigeria, the airline chief  said his company was in growth mode not only in Nigeria where they have made some strides but expanding to other cities like Tel Aviv, increasing its flights to Mumbai and opening up services to South America.

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Evaluating Nigerians’ low propensity to flying

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Evaluating Nigerians’ low propensity to flying

Nigeria boasts of population many say is almost 200 million. This, however, does not translate to huge traffic due more to prevailing economic situation. WOLE SHADARE writes

 

Nigeria despite a significant increase in domestic passenger traffic in 2018 by almost 30 per cent, there is still a huge gap in travel demand by Nigerians.

No fewer than 15 million air travellers both domestic and international went through Nigeria Airports in 2018, according to figures released by the Consumer Protection Directorate of the Nigerian Civil Aviation Authority (NCAA).

This story is a paradox of sort, given that the geography as well as the demographic profile in Nigeria favours air travel.

The country has a working population of over 80 million, which, in addition to the fact that there are substantial inter-city distances, should favour propensity to travel by air.

The low Gross Domestic Product (GDP) per capita probably provides some explanation for low propensity to fly.

Pakistan has a lower GDP per capita and still manages to record a higher flight propensity than Nigeria. The number of active domestic airlines is also lower in Nigeria than in other countries, again indicating the low level of demand for air travel.

Dubai, a city and emirate in the United Arab Emirates had 3.137 population. The Dubai airport handled 89 million passengers in 2018.

Dubai, Singapore example

Same with Singapore with a population of 5.6 million but handled 65.6 million passengers in 2018. Infrastructure, security and deliberate plan of making their airports hubs has contributed to the success they and others have achieved over the years.

More than one third of the Nigerian passenger traffic is handled by Lagos alone, and almost two-thirds of the total is served by the three airports in Lagos, Abuja and Port-Harcourt.

Air fares are observed to be on the high side. The most trafficked route in the network, Lagos-Abuja, has an average fare of N30,000 per passenger flight hour. Customer confidence in Nigerian airlines is another reason air travel demand is deemed low.

Airlines in Nigeria, as in several places, are mostly passenger movers, hence, the focus on passenger traffic.

Traffic at the 20 nodes shows that over the period 2007–20182 Lagos, Abuja and Port-Harcourt airports accounted for 76 per cent of domestic passenger traffic at the 20 domestic airports.

Abuja and Lagos are Nigeria’s political and commercial capitals respectively, while Port-Harcourt is a major oil producing city. Clearly, the cost of air fares naturally excludes a large share of Nigeria’s travelling public.

Same travelers

Much of the movements recorded in Lagos pertain to corporate travellers in the middle and high income categories; Lagos houses much of this group in Nigeria given its status as a megacity.

In Abuja, passengers are mostly top government and private sector workers, while Port-Harcourt travellers thrive on the oil economy. The lower middle class where a great potential for market exists generally do not find air fares affordable. They therefore resort to corporate road transport services.

The implication of low traffic densities in several nodes is that many city-pair routes are not commercially viable to the degree that active airlines will increase their service frequencies on these sectors.

Consequently, many nodes in the network do not record sufficiently large passenger movements. Nevertheless, city pairs in Nigeria’s network have great potential for air travel as road distances on these corridors range from 200 km to over 1400 km.

Air transport offers the fastest means of covering these distances as long as airlines keep to scheduled departure time.

Low income

Air travel is one of the barometers to gauge the health of a nation. Whenever a country is doing well, it will reflect on the number of people that travel by air. Nigerian aviation is not a stand-alone. It is part of the bigger economy of Nigeria and contributing to the GDP. It is obvious that aviation is the quickest barometer to check any economy.

A frequent traveler and an airline owner, who preferred anonymity, said: “If you check the Nigerian travelling populace, 70 to 80 per cent of those travelling are business people, as compared to the outside world where only 40 per cent are business people, 30 per cent tourists and the other 30 per cent are students and others.

“In Nigeria if you check the flights going to Abuja, 80 to 85 per cent are on business purpose and once these people don’t have business to do, it is obvious that there won’t be any movement because if you are not going to do business, no travelling. So it is a clear quick indication and barometer for the economy.

“So, if the economy is not performing as expected and businessmen are not moving, the airlines will not find the passengers.

“Once the economy begins to jump, business starts to move; then you see movement in our airports. Where 80 to 85 per cent of the passengers are doing business, most of them are not seeing any business to do now. I guess what is happening in Abuja right now is more politics than business. So it is the politicians that are moving.”

The spokesman of the Nigerian Civil Aviation Authority (NCAA), Sam Adurogboye, recently told New Telegraph that the low passenger traffic was a reflection of the prevailing economic situation, noting that the aviation industry cannot be insulated from the rest of the economic mix.

“Air travel and the aviation sector respond to the prevailing economic situation; just like it affects other sectors. In air travel, there is low season and there is also high season. Even on international flights, there are times seats are fully booked and there are also times of flying empty seats. But safety remains our number one priority,” he noted.

Road transport alternative

Since the availability of alternative modes of transportation that are reasonably close substitutes for air transport diminishes with distance travel, it is expected that the demand for air transport will be less elastic for longer flights than for shorter flights.

Furthermore, international travel tends to be spread over more time than domestic travel, so that the airfare is a smaller proportion of overall trip costs, which makes international travel less sensitive to changes in ticket prices.

In addition, leisure travellers are more likely to postpone trips to specific locations in response to higher fares, or to shop around for those locations offering more affordable fares. Consequently, it is expected that the demand for air transport for leisure reasons will be more elastic than business travel.

Last line

This basic concept of own-price elasticity of air travel in different market segments suggests that if air fares are reduced on Nigeria’s domestic routes, demand for air travel is likely to increase, since these routes are short-haul. the prohibitive costs of air travel exclude several potential consumers of the service.

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Seeking permanent solution to housing crisis

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Seeking permanent solution to housing crisis

Stakeholders in housing and mortgage finance sectors  are not leaving any stone unturned in finding solutions to housing  crisis in the country. Dayo Ayeyemi reports

 

Nigeria being the largest economy in Africa is faced with many challenges raging from  over population, high rate of  rural-urban migration and overcrowding, and high rate of insecurity.

Apart from these,  absence of quality accommodation is also one of the biggest challenges with housing deficit of between 17million and 20million units.

As at the last estimate. the country  needed  to produce one million houses every year in the next 20 years to bridge the gap.

Presently, the total number of houses being produced in the country is less than 100,000 units per year.

Inhibitors such as high cost of accessing funds,  absence of long-term fund, high cost of land and building materials,  harsh business environment, inconsistent government policies,  bottleneck in obtaining planning approval and title and poor budgetary allocation to housing sector have been blamed for inability of both government and private investors to provide affordable housing units in Nigeria.

Overwhelmed by these challenges, stakeholders in housing and  mortgage finance  sector of the economy, at different fora, are already seeking alternative  approaches to the issues in order to nib housing deficit in the bud.

While operators in the mortgage sector are calling for a totally new business model, members of the Association of Housing Corporations of Nigeria (AHCN) are speaking with one voice, seeking ways to turn the challenges into opportunities.

Speaking on the sideline of the Mortgage Banking Sub-sector CEOs’ annual retreat organised by Mortgage Bankers Association of Nigeria (MBAN) in Lagos, the Managing Director of Family Homes Funds, Femi Adewole, called for the adoption of a different thinking in addressing housing deficit in Africa’s largest economy.

According to Adewole, the current approach adopted by stakeholders in the housing sector will not deliver the expected results except a change is made to it.

By sticking to the traditional way of doing things, he pointed out that the result that all stakeholders were achieving  in terms of home ownership and access to housing was way off the mark.

He tasked them to look at a total transformation and a totally new business model that will yield the desired results.

He said: “The truth is, in terms of what we need to do, the results we need to get, and the level of home ownership and access to housing that we need to attain, the result that all of us are achieving is way off the mark. We have barely registered a dot. That calls for a different kind of thinking.

“I understand the conversations about improvement. But my little knowledge of business processes and strategies suggest that there are contexts where improvements are inadequate. You must look at a total transformation and a totally new business model.”

Themed: ‘’Critical Success Factors for Continuity and Viability of the Mortgage Banking Sub-Sector in Nigeria: Mortgage Digitization, Human Capacity Development and Management Succession.’’ the Family Homes Funds boss threw a couple of challenges at members of Mortgage Bankers Association of Nigeria on how to make the new approach for housing development possible in Nigeria.

He said: ‘’One of the things Family Home Funds has committed itself to and I think we will like MBAN to be part of that is sponsoring some kind of centre for innovation for housing finance.

“We need to think of a solution that speaks to our context, culture and macro-economic circumstances, which is unlikely to change in the short term.

“If anything, we will probably expect a medium term deterioration and, therefore, the discussion must be about what transformation is needed to achieve the results that we have in the face of urbanisation. I can’t think of any better set of people to address that change agenda than the people at MBAN.”

In his submission, the Managing Director, Nigerian Mortgage Refinance Company (NMRC), Mr. Kehinde Ogundimu, tasked  stakeholders on demand based housing development.

He urged stakeholders, especially those in the mortgage sub-sector, to understudy the needs of customers before rolling out their mortgage plans.

According to him, stakeholders in the mortgage sector should not  always be waiting for houses to be constructed before creating mortgages.

He urged them to  start doing what  he called “reverse engineering,” pointing out that mortgage providers  were the closest to the customers and that they had better understanding of the kind of housing unit they needed

“When we understand what they need, we can now go back to developers to see the things we should build. We don’t have to wait until someone has built a 4-bedroom house before  looking for those who will take mortgage because that is not what the millennials are looking for,” he said.

He also tasked stakeholders on the need for  industry survey  to  be able to find out the demand and how to create the mortgage.

According to him , stakeholders should influence the kind of houses that are being built, which suit the taste of  buyers.

“My challenge to us is to have that introspection and determine what the needs are and have a pipeline of products we can create mortgages for,” he said.

According to Ogundimu, with digitalisation,  stakeholders could disrupt the industry in Nigeria like it was  done in many parts of the world.

Executive Secretary of ACHN, Toye Eniola, noted that establishment of politically motivated parallel housing organisations by governors and inadequate moral support and backing in terms of loan guarantee were limitations to optimal performance of housing corporations to deliver on mandate

Despite these limitations, he said stakeholders should seek opportunity to distinguish themselves and doing something different.

While  tasking them to go the extra mile to think through how to succeed, Eniola stated that   available funding options with Family Homed Fund included funds for development,  rental housing funds,  funds for land bank development and off takers loans

President of MBAN, Akinniyi  Akinlusi, said it had become imperative for the association to digitalise, noting that over 75 per cent  of Nigerians employed or self-employed in the informal sector needed to be reached with  various mortgage products.

“We have a uniform underwriting standard for informal sector and self-employed. We must digitise our services and operations so that we can reach out to them and bring those people whom have been left behind in home ownership back in,” he said.

Last line

Stakeholders should consider all options to deliver cheap and quality houses to the majority of Nigerians.

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Dangote Refinery awards $368m contracts to local firms

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Dangote Refinery awards $368m contracts to local firms

Policy to boost implementation of Nigerian Content Policy, says NCDBM

 

The award of $368 million contracts to 120 local contractors at the site of 650,000 barrels per day capacity Dangote Petroleum Refinery will further boost implementation of local content policy in Nigeria.

Executive Secretary, Nigerian Content Development Monitoring Board, (NCDMB), Simbi Wabote, who was quoted to have said this, maintained that the $12 billion project under construction is expected to be a part of major contributors to Nigeria content development initiative.

This, a statement from Dangote Petroleum Refinery quoted Wabote to have said, is already being done through the award of contracts to Nigerian contractors, thereby building local capacity.

The private refinery owned by Dangote Group is under construction in Lekki Free Trade Zone, Nigeria. When completed, it will have a capacity to process about 650,000 barrels per day of crude oil.

Recall that the company recently announced the award of $368 million contract to 120 local contractors at the site, as part of its contribution to Nigeria content development initiative.

The company revealed that there were several Nigerian content opportunities in the company’s refinery and petrochemical project.

Speaking on the sideline of the 9th Practical Nigerian Content, Wabote said: “First of all, to be able to drive local content you need projects. For the fact that Dangote has been able to site it project in-country is the first step to the actualisation of Local content.

“Dangote might as well had taken the refinery elsewhere, but he decided to execute the project in Nigeria, so that is a plus to the Nigeria investment sector. Secondly, at the peak of the construction of the refinery, about 65, 000 workers are on site, and the majority of those workers in terms of ratio that are providing various services, are Nigerians.

“Also, there is a lot of sub-contract that have been awarded within the projects site, the majority of those contracts are executed by Nigerian companies. To a very large extent, that is an example of believing in your country and trying to do things to enhance the development of your country.

“Although they are sited in the free trade zone, which has its own advantages, and off course he is entitled to enjoy those free trade advantages as enshrined in the law, but in terms of local content, it is a typical example of someone who believes in his country, someone who is patriotic to establish such a monumental projects within the shores of our land.”

He commended the company for training young Nigerians who will eventually take up the management of the refinery, saying “we will all eventually retire one day, and young people will take over from us. Those of us at the industry, at 60 we will all retire and then these engineers will take over from us.”

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Oil sector attracts $38.7m foreign capital

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Oil sector attracts $38.7m foreign capital

Nigeria’s oil sector attracted $38.7 million foreign capital in third quarter of 2019.

The foreign capital importation into the sector, a data released by the National Bureau of Statistics (NBS) showed, appreciated by 28.65 per cent to $38.66 million in the third quarter of 2019.

This, according to the NBS, in its Nigerian Capital Importation Report for the Third Quarter of 2019, is in comparison to the $30.05 million imported into the sector in the second quarter of 2019.

In addition, the NBS disclosed that capital imported into the petroleum industry in the third quarter accounted for 0.72 per cent of total capital imported into the country across all sectors in the period under review.

In addition, the report noted that the value of capital imported into the oil and gas industry in the third quarter of 2019 was 400.13 per cent higher than the $38.66 million capital imported into the sector in the third quarter of 2018.

The value of capital imported in the petroleum industry in the third quarter of 2019, was the highest recorded since the first quarter of 2018 when $85.62 million was imported into the sector.

In general, the NBS stated that the total value of capital imported into Nigeria stood at $5.368 billion in the third quarter of 2019, representing a decline of 7.78 per cent compared to second quarter of 2019 and a 87.99 per cent increase compared to the third quarter of 2018.

It added that the “the largest amount of capital importation by type was received through portfolio investment, which accounted for 55.88 per cent, ($2999.50m) of total capital importation, followed by Other Investment, which accounted for 40.39 per cent ($2.167.98 million) of total capital, and then Foreign Direct Investment FDI, which accounted for 3.73 per cent ($200.08 million) of total capital imported in third quarter 2019.

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Power: FG mulls deployment of effective metering

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Power: FG mulls deployment of effective metering

The Federal Government at the weekend expressed readiness to improve the country’s power sector through effective metering that will meet consumers’ demands and also address liquidity challenges rocking the sector.

Investors in power sector have put the figures of liquidity in the sector at N1.1 trillion. The crisis, the investors including Group Head, Finance, Sahara Group Limited, Aigbe Olotu, argued, was growing by N30 billion per month.

Minister of Power, Mr. Saleh Mamman, who – during facility inspection of Momas Electricity Meters Manufacturing Company (MEMMCOL) factory in Ogun State, declared plans to tackle the power crisis including this liquidity with adequate monitoring, maintained that effective metering of electricity consumers remained the best option to help distribution companies get more money to pay generating companies.

Metering, the minister said, “is one of the things bothering Nigerians particularly the electricity consumers. When I resumed, I took it as my priority as one of the important areas on electricity market liquidity and sustainability.

“I have to produce meters to get more money for the sector. We will get more money from distribution companies to pay GenCos. And, the only way to justify that is to go by metering. That is why I’m here to see it and believe it and to also direct on how to get meters soonest.

“I am here to inspect the factory of MOMAS Meter Manufacturing Company because I don’t believe in sitting in the office and listening to story. I want to see things for myself and today am convinced that we have a Nigerian that has capacity and capability to meet metering gap in the country.

“This has now encouraged me to also tell our local companies has the capacity to produce meter that is expected and required in-country.”

The minister commended the management of MEMMCOL for puting up the gigantic meter manufacturing company that has capacity to meet Meter Assets Providers (MAPs) specification in the country.

“I am very much impressed with the local content driven initiative by MOMAS company. It is good to see a meter manufacturing company, to see a Nigerian producing meter up to 1,000 per day. This, is indeed commendable. Momas is one of the top meter manufactures in Nigeria that we should be proud of.

“We should allow and encourage investors into the country and also gives consideration to our own local manufacturers to grow.”

Chairman of MEMMCOL, Mr. Kola Balogun, said that his company had the capacity to produce above 50,000 smart meters per month if given the support by government and adequate patronage from distributing companies.

Balogun commended the minister for inspecting his meter manufacturing company, while assuring the minister that the company will continue to produce quality and standard meter that meets international best standard.

“I want to tell Nigerians that we have the capacity and the capability to deliver metering solution to also bridged metering requirement in the country. All we need is government interventions to be able to make liquidity available to us to produce for the larger populace that requires metering.

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Refineries’ fraudulent maintenance probe without conviction

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Refineries’ fraudulent maintenance probe without conviction

Pessimism keeps growing among Nigerians about any positive outcome from the plan by the National Assembly to probe the $36.4 billion spent on fuel import and refinery maintenance in four years after several others of such probe were initiated with no effect. Adeola Ysuuf reports

 

The daily injection of about N1.6 billion on fuel subsidy seemed to have angered members of the House of Representatives penultimate weekend. The lower legislative chamber vented its anger within an area of its jurisdiction with the probe of $36.39 billion expended on importation of fuel and refineries maintenance by the Federal Government in four years began.

While $36 billion was said to have been spent on importation of fuel, $396.33 million is allegedly spend on the Turn-Around Maintenance of the petroleum refineries in Port Harcourt, Warri and Kaduna.

The probe

The move by the House followed unanimous adoption of a motion entitled ‘Call for investigation of the $396.33m allegedly spent in four years on turn around maintenance of the nation’s three refineries.’

At the plenary at the weekend, Mr Ifeanyi Momah called for the probe, alleging that the amount spent on maintenance of the facilities had not produced results.

The House, therefore, called on the Federal Government to consider “divesting a certain percentage of its shareholding in the Port Harcourt, Warri and Kaduna refineries to competent investors under a transparent and fair bidding process.”

Also, the House mandated the Committee on Petroleum Resources (Downstream) to conduct an investigative hearing into the maintenance expenses beginning from 2013 till date.

It asked the committee to report back within eight weeks for further legislative action.

Momah said Nigeria had been living with the “derogatory appellation” of being a major oil producing nation that is heavily reliant on importation of refined petroleum products for its domestic consumption as a result of its low refining capacity.

He said this was in spite of the fact that the country has three major refineries with installed capacity to refine 445,000 barrels per day, enough for domestic consumption and export.

The lawmaker said: “This objective has not been realised owing to a combination of factors, including corruption and inefficiency in the running of the refineries.

“The House observes the assertion by the Nigeria National Resource Charter in the report that the NNPC spent a whopping $396.33 millio  between 2013 and 2017 to carry out repair works.

“The House also observes the claim that the NNPC spent N276.872 billion on operating expenses of the refineries between 2015 and 2018, as well as $36 billion on importation of petroleum products between 2013 and 2017.”

According to the lawmaker, the strategic goal of establishing local refining facilities as a socio-economic game-changer has continued to elude the country’s oil and gas industry.

Cynicism from within

The probe, check by New Telegraph showed at the weekend, has been greeted by pessimism expressed by expert who believe that the investigation may go the way of other previous ones before it.

Petroleum Engineer, Adebayo Alamutu, who commended the boldness of House of Representatives to look into the matter of alleged fraud in the refineries’ TAM, maintained that this was not the first time that such probe panel had been instituted.

He said: “The question begging for answer now is that will this move by the House of Representatives not go the way of the previous ones?”

Alamutu’s view was corroborated by Monsurat Oseni-Hamzat, an economist.

According her, “many Nigerians will naturally believe that nothing will come out of the new move by the House of Representatives. The onus is now on the lawmakers to prove them wrong by ensuring that probe is taken to a logical conclusion.”

A history of probe foreclosure

Investigations by this newspaper revealed that the Federal Government had jettisoned any plans to review the investments made between 1999 and 2015 on the refineries, despite ineffectiveness of the contracts.

About N264 billion invested in this respect is likely to be forgotten.

Instead, a former Minister of State for Petroleum Resources, Ibe Kachikwu, said in a podcast that the Federal Government was aggressively pursuing the refineries’ improvement programme to realise its agenda to end fuel importation by 2019.

A senior officer at the Ministry of Petroleum Resources told this newspaper that government would not reopen books on the investments made on maintenance of the installations.

The nation’s three refineries located in Port Harcourt, Warri and Kaduna, documents of the NNPC showed, had gulped up to $1.746 billion or N264 billion using a 16 year average USD/naira exchange rate of N150.99/$1.

The source said: “It is a consensus that we move forward and tread softly on money spent on TAM, especially between 1999 and 2011. Even though the $1.746 billion covers spending up to 2015, we all know that the president had said he was not interested in probing spending during the time of former President Olusegun Obasanjo and Umaru Musa Yar’adua.

“I can assure you that except a miracle happens, no one in this government will open up the investments made on TAM. Instead, the ministry is determined more than before to move away from the approach of quick fixes and undertake a comprehensive revamp of the plants.”

Who spends what?

The four refineries have a combined capacity to refine 445,000 barrels of crude per day.

Inefficiencies of these refineries had worsened the deficit in supply of petroleum products and raised dependence on importation.

The $1.746 billion TAM investments is different from the $308 million reportedly spent for the same purpose by the military governments of late General Sani Abacha ($216 million) and General Abdusalami Abubakar (rtd) $92 million.

A former GMD of NNPC, Funsho Kupolokun, had, according to report, said that over $1 billion was committed to refineries’ repairs between 1999 and 2007.

After the late President Musa Yar’Adua stopped the sale of the refineries in 2007, NNPC reportedly announced it had awarded contract to a Nigerian firm to carry out a comprehensive TAM on all the refineries. The contract sum as revealed by the then NNPC boss, Abubakar Yar’Adua, was $57 million.

In 2009, the then GMD of NNPC, Alhaji Mohammed Sanusi Barkindo, also announced that the Corporation spent $200 million on the maintenance of the Kaduna refinery.

In 2012, NNPC was reported in local media to have planned repair of the refineries with N152 billion.

A former Minister of Petroleum Resources, Alison-Madueke, was quoted to have said $32 million had already been paid for the materials needed for the said repairs.

NNPC, in January 2015, had in a statement, said it took decision in 2011 to rehabilitate all refineries, using the Original Refinery Builder (ORB) of each of the refineries.

Maintaining that government was ready to go ahead with plans to put the refineries back to shape through a transparent bidding process, Kachikwu reiterated that neither Oando nor Agip had been handed over the right of maintenance and running of any of the refineries.

His statement came days after the Senate rejected an earlier announcement that Agip, a subsidiary of the Italian oil giant, Eni, had committed to repairing the Port Harcourt refinery, as part of a $15 billion investment that includes building a 150 thousand barrel per day refinery and a power plant.

Kachikwu had also said Nigeria was facing an emergency situation in the petroleum sector requiring urgent attention.

He said: “When I made the comment that I want to see us exiting fuel importation by 2019, and that I will leave if I don’t accomplish it, it was to energise everybody to the fact that 2019 is not a play game.

“We need to work hard for that to happen. We need the cooperation of everybody, including the National Assembly, Presidency, and other agencies like the Bureau of Public Procurement (BPP), to speed up the process. We are in an emergency situation. We need to plan ahead to ensure that fuel supply continue to be available.”

To sustain the current uninterrupted fuel supply in the country in the last two years, the minister said the government spent about N3.4 trillion on the importation of about 20 million metric tons of petroleum products between January and December last year.

Besides, he said, about 30 per cent of the total foreign exchange allocation from the Central Bank of Nigeria went into importation of petroleum products, apart the logistics of the importation and distribution programme.

Last line

The commencement of probe by members of Femi Gbajabiamila-led House of Representatives is commendable. However, the House will only be seen as courageous if it carries out the probe as promised with a view to bringing those who are found wanting to book.

Also, though the pessimism expressed by some Nigerians over this probe is legitimate due to long years of disappointment from previous probes, it should not discourage them from joining hands with the House of Representatives to ensure that this fresh probe is seen to a logical end.

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Rice ban: Ghanaian farmers seek adoption of Nigerian model

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Rice ban: Ghanaian farmers seek adoption of Nigerian model

Following a resolution by Ghana government to impose ban on imported rice by 2022, farmers under the aegis of Peasant Farmers Association of Ghana (PFAG) have advised the country’s government to adopt the Nigerian model by making the ban immediate instead of waiting for 2022.

The association, in a statement signed by Abdul- Rahman Mohammed, National President and Board Chairman of PFAG, called for a show of commitment and steps to be put in place for immediate ban rather than wait until 2022.

It said adopting Nigeria’s food importation ban concept would not only help to reduce Ghana’s import bill, but create employment opportunities in Ghana and stabilise the cedi.

Recall that the Federal Government of Nigeria had, in August this year, closed the borders to neighbouring countries in order to check smuggling of rice and other contraband goods into the country.

The development has also been supported by Rice Farmers Association of Nigeria (RIFAN), whose effort in local rice production has recently witnessed a boost.

According to PFAG, “concrete measures need, therefore, to be put in place to commence ban on imports such as the reduction in 2020 rice imports.”

The statement commended government for setting aside a day to appreciate the contribution of farmers to the growth and development of the country.

The 35th edition of Farmer’s Day is on the theme: “Enhancing Small Scale Agriculture towards Agribusiness Development.”

The association has, therefore, congratulated all smallholder farmers, especially those who would be awarded prizes at the local level.

It said government should direct for institutional purchase of local rice by as the school feeding programme, free SHS, the Military and Para institutions.

It said government should mandate all banks to increase their loan portfolio with low interest rate on agriculture.

The statement said critical issues on the eve of this year’s celebration have taken the spirit off the theme.

It said smallholder rice farmers, who were keen in agribusiness were apprehensive and despondent as the rice they produced during the last crop season lies waste and possibly to the vagaries of harmattan bush fires.

“Farmers are confronted with lack of access to combine harvesters, lack of storage and exploitation by traders, who have taken advantage of the desperate situation,” he added.

It said the National Food Buffer Stock had announced plans to mop up the surplus rice by providing minimum guaranteed prices to farmers but has not materialised leaving the rice farmers to their fate.

It said Ghanaian farmers have proven their ability to produce enough rice to meet domestic consumption.

The statement said this was manifested by the drastic increase in rice production in 2019 of which greater quantities still remain unharvested due to lack of harvesting equipment and a guaranteed market.

Unfortunately, only 34 per cent of Ghanaians consume Ghana rice, while 680,000 tonnes of rice costing $500 million is imported annually.

The association believes that the high appetite for imported rice has significantly contributed to rice millers lacking market for Ghana rice leading to the current rice glut in Northern Ghana.

“This phenomenon if not addressed with the urgency it deserves, can worsen the poverty situation of smallholder farmers and majority of rural people, who still rank as the poorest in the country and thereby negatively impacting on the successes the nation chalked in recent times on the campaign against poverty and food insecurity,” it added.

The statement has therefore recommended to government to explore new technologies to address aflatoxin and other post-harvest challenges in rice production.

It said government should bring storage facilities closer to rice farming areas by first completing the One District, One Warehouse programme, commission the completed ones and set up temporary cocoons in the communities.

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OML 55: Oil asset security breach threatens 248,000 barrels

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OML 55: Oil asset security breach threatens 248,000 barrels

Four JTF soldiers killed in oil bloc pirate attack

The security of oil assets across the Niger Delta was, at the weekend, breached, threatening the over two million barrels per day production from acreages across the region.

This, checks by this newspaper showed, was buoyed by a fresh attack on Oil Mining Lease (OML) 55 where four soldiers were feared killed.

Belemaoil, operator of the bloc, produced 248,000 barrels from the asset in October 2019.

Nigeria had increased production in recent past due to the relative peace it enjoys at the oil rich Niger Delta region.

The new attack at the Buguma Creek is, however, posing threat to the oil production if not managed in time.

This came as details of how pirates allegedly killed the four soldiers of the Joint Task Force of the Nigerian Army on Belemaoil operated OML 55 emerged at the weekend.

The soldiers were guarding the oil bloc located in Rivers State in the Eastern Niger Delta and a report by Africa Oil + Gas Report showed they were killed when pirates confronted a gunboat on a creek in the licenced area.

“The soldiers were killed on the Buguma Creek,” the African focused oil and gas magazine reported.

Noting that further details “are still sketchy and Belemaoil officials say they are still conducting their own investigations,” the report said: “The perspective that Africa Oil+Gas Report gets from the company is that the confrontation that led to the killings was not targeted at Belemaoil.”

The Nigerian independent oil firm acquired Chevron Nigeria’s 40 per cent of the JV asset in 2014, with the state hydrocarbon company, NNPC, holding 60 per cent.

It is currently ‘carpeting’ the acreage in three dimensional (3D) Seismic Survey.

The BGP/IDSL consortium is acquiring the data, which spans 1,300 square kilometres on the surface, covering the Robertkiri, Idama, Inda and Jokka fields in the acreage as well as some adjoining areas.

“At a time when there’s very little exploration in the country, the OML 55 survey is one of the largest seismic acquisitions in the swamplands of the Niger Delta.

“The surface area of the acreage is 808 square kilometres, and the programmed fold of coverage is 180.  Belemaoil expects to acquire deeper than six to seven seismic seconds, so it can image possible reservoirs as deep as 14,000 feet True Vertical Depth subsea,” the report read.

It is in the nature of seismic acquisitions to survey more than the areal size of the asset, if the desire is to cover the entire acreage, to ensure that every inch of the territory is accounted for in the resulting, processed data set.

Belemaoil’s founder and chief executive, Jack Rich Tein, is reputed to be a community friendly ‘son of the Niger Delta’, but that hasn’t shielded OML 55 from the incipient violence in Rivers State.

Indeed, there has been a spike in kidnappings of oil workers in Rivers State in the last nine months, from the run up to the February-March 2019 elections through the several months in the aftermath.

No other state in Nigeria’s oil rich belt has been as overwhelmed with criminality, in recent times as Rivers.

The OML 55 survey was supposed to take 20-24 months from November 2018, meaning that it would have been completed by November 2020.

Belemaoil produced about 8,000 barrels of oil per day from OML 55 in October 2019 and it is hoping to utilise the seismic data to improve the field development and increase production by at least a factor of three.

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